[Congressional Record Volume 143, Number 91 (Wednesday, June 25, 1997)]
[House]
[Pages H4416-H4606]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page H4416]]
                      BALANCED BUDGET ACT OF 1997

  Mr. KASICH. Mr. Speaker, pursuant to House Resolution 174, I call up 
the bill (H.R. 2015) to provide for reconciliation pursuant to 
subsections (b)(1) and (c) of section 105 of the concurrent resolution 
on the budget for fiscal year 1998, and ask for its immediate 
consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Dreier). Pursuant to House Resolution 
174, the amendment printed in the Congressional Record numbered 1 is 
adopted.
  The text of H.R. 2015, as amended, is as follows:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Balanced Budget Act of 
     1997''.

     SEC. 2. TABLE OF CONTENTS.

Title I--Committee on Agriculture.
Title II--Committee on Banking and Financial Services.
Title III--Committee on Commerce--Nonmedicare.
Title IV--Committee on Commerce--Medicare.
Title V--Committee on Education and the Workforce.
Tittle VI--Committee on Government Reform and Oversight.
Title VII--Committee on Transportation and Infrastructure.
Title VIII--Committee on Veterans' Affairs.
Title IX--Committee on Ways and Means--Nonmedicare.
Title X--Committee on Ways and Means--Medicare.
Title XI--Budget Enforcement.
                   TITLE I--COMMITTEE ON AGRICULTURE

     SEC. 1001. EXEMPTION.

       Section 6(o) of the Food Stamp Act of 1977 (7 U.S.C. 
     2015(o)) is amended--
       (1) in paragraph (2)(D), by striking ``or (5)'' and 
     inserting ``(5), or (6)'';
       (2) by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively; and
       (3) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) 15-percent exemption.--
       ``(A) Definitions.--In this paragraph:
       ``(i) Caseload.--The term `caseload' means the average 
     monthly number of individuals receiving food stamps during 
     the 12-month period ending the preceding June 30.
       ``(ii) Covered individual.--The term `covered individual' 
     means a food stamp recipient, or an individual denied 
     eligibility for food stamp benefits solely due to paragraph 
     (2), who--

       ``(I) is not eligible for an exception under paragraph (3);
       ``(II) does not reside in an area covered by a waiver 
     granted under paragraph (4);
       ``(III) is not complying with subparagraph (A), (B), or (C) 
     of paragraph (2);
       ``(IV) is not in the first 3 months of eligibility under 
     paragraph (2); and
       ``(V) is not receiving benefits under paragraph (6).

       ``(B) General rule.--Subject to subparagraphs (C) through 
     (F), a State agency may provide an exemption from the 
     requirements of paragraph (2) for covered individuals.
       ``(C) Fiscal year 1998.--Subject to subparagraph (E), for 
     fiscal year 1998, a State agency may provide a number of 
     exemptions such that the average monthly number of the 
     exemptions in effect during the fiscal year does not exceed 
     15 percent of the number of covered individuals in the State 
     in fiscal year 1998, as estimated by the Secretary, based on 
     the survey conducted to carry out section 16(c) for fiscal 
     year 1996 and such other factors as the Secretary considers 
     appropriate due to the timing and limitations of the survey.
       ``(D) Subsequent fiscal years.--Subject to subparagraphs 
     (E) and (F), for fiscal year 1999 and each subsequent fiscal 
     year, a State agency may provide a number of exemptions such 
     that the average monthly number of the exemptions in effect 
     during the fiscal year does not exceed 15 percent of the 
     number of covered individuals in the State, as estimated by 
     the Secretary under subparagraph (C), adjusted by the 
     Secretary to reflect changes in the State's caseload and the 
     Secretary's estimate of changes in the proportion of food 
     stamp recipients covered by waivers granted under paragraph 
     (4).
       ``(E) Caseload adjustments.--The Secretary shall adjust the 
     number of individuals estimated for a State under 
     subparagraph (C) or (D) during a fiscal year if the number of 
     food stamp recipients in the State varies by a significant 
     number from the caseload, as determined by the Secretary.
       ``(F) Exemption adjustments.--During fiscal year 1999 and 
     each subsequent fiscal year, the Secretary shall increase or 
     decrease the number of individuals who may be granted an 
     exemption by a State agency to the extent that the average 
     monthly number of exemptions in effect in the State for the 
     preceding fiscal year is greater or less than the average 
     monthly number of exemptions estimated for the State agency 
     during such preceding fiscal year.
       ``(G) Reporting requirement.--A State agency shall submit 
     such reports to the Secretary as the Secretary determines are 
     necessary to ensure compliance with this paragraph.''.

     SEC. 1002. ADDITIONAL FUNDING FOR EMPLOYMENT AND TRAINING.

       (a) In General.--Section 16(h) of the Food Stamp Act of 
     1977 (7 U.S.C. 2025(h)) is amended--
       (1) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) In general.--
       ``(A) Amounts.--To carry out employment and training 
     programs, the Secretary shall reserve for allocation to State 
     agencies, to remain available until expended, from funds made 
     available for each fiscal year under section 18(a)(1) the 
     amount of--
       ``(i) for fiscal year 1996, $75,000,000;
       ``(ii) for fiscal year 1997, $79,000,000;
       ``(iii) for fiscal year 1998, $221,000,000;
       ``(iv) for fiscal year 1999, $224,000,000;
       ``(v) for fiscal year 2000, $226,000,000;
       ``(vi) for fiscal year 2001, $228,000,000; and
       ``(vii) for fiscal year 2002, $210,000,000.
       ``(B) Limitations.--The Secretary shall ensure that--
       ``(i) the funds provided in this subparagraph shall not be 
     used for food stamp recipients who receive benefits under a 
     State program funded under part A of title IV of the Social 
     Security Act (42 U.S.C. 601 et seq.); and
       ``(ii) not less than 80 percent of the funds provided in 
     this subparagraph shall be used by a State agency for 
     employment and training programs under section 6(d)(4), other 
     than job search or job search training programs, for food 
     stamp recipients not excepted by section 6(o)(3).
       ``(C) Allocation.--
       ``(i) Allocation formula.--The Secretary shall allocate the 
     amounts reserved under subparagraph (A) among the State 
     agencies using a reasonable formula, as determined and 
     adjusted by the Secretary each fiscal year, to reflect 
     changes in each State's caseload (as defined in section 
     6(o)(5)(A)) that reflects the proportion of food stamp 
     recipients who reside in each State--

       ``(I) who are not eligible for an exception under section 
     6(o)(3); and
       ``(II) who do not reside in an area subject to the waiver 
     granted by the Secretary under section 6(o)(4), if the State 
     agency does not provide employment and training services in 
     the area to food stamp recipients not excepted by section 
     6(o)(3).

       ``(ii) Reporting requirement.--A State agency shall submit 
     such reports to the Secretary as the Secretary determines are 
     necessary to ensure compliance with this paragraph.''; and
       ``(D) Reallocation.--
       ``(i) Notification.--A State agency shall promptly notify 
     the Secretary if the State agency determines that it will not 
     expend all of the funds allocated to it under subparagraph 
     (B).
       ``(ii) Reallocation.--On notification under clause (i), the 
     Secretary shall reallocate the funds that the State agency 
     will not expend as the Secretary considers appropriate and 
     equitable.
       ``(E) Minimum allocation.--Notwithstanding subparagraphs 
     (A) through (C), the Secretary shall ensure that each State 
     agency operating an employment and training program shall 
     receive not less than $50,000 for each fiscal year.
       ``(F) Maintenance of effort.--To receive the additional 
     funding under subparagraph (A), as provided by the amendment 
     made by section 1002 of the Balanced Budget Act of 1997, a 
     State agency shall maintain the expenditures of the State 
     agency for employment and training programs and workfare 
     programs for any fiscal year under paragraph (2), and 
     administrative expenses under section 20(g)(1), at a level 
     that is not less than the level of the expenditures by the 
     State agency to carry out the programs for fiscal year 
     1996.'';
       (2) by redesignating paragraphs (2) through (5) as 
     paragraphs (3) through (6), respectively;
       (3) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2) Report to congress on additional funding.--Beginning 
     one year after the date of the enactment of this paragraph, 
     the Secretary shall submit an annual report to the Committee 
     on Agriculture of the House of Representatives and the 
     Committee on Agriculture, Nutrition, and Forestry of the 
     Senate regarding whether the additional funding provided 
     under paragraph (1)(A) has been utilized by State agencies to 
     increase the number of work slots in their employment and 
     training programs and workfare for recipients subject to 
     section 6(o) in the most efficient and effective manner.''; 
     and
       (4) in paragraph (3) (as so redesignated), by striking 
     ``paragraph (3)'' and inserting ``paragraph (4)''.
       (b) Conforming Amendments.--(1) Subsection 
     (b)(1)(B)(iv)(III)(hh) of section 17 of the Food Stamp Act of 
     1977 (7 U.S.C. 2026) is amended by striking ``(h)(2), or 
     (h)(3) of section 16'' and inserting ``(h)(3), or (h)(4) of 
     section 16''.
       (2) Subsection (d)(1)(B)(ii) of section 22 of such Act (7 
     U.S.C. 2031) is amended by striking ``(h)(2), and (h)(3) of 
     section 16'' and inserting ``(h)(3), and (h)(4) of section 
     16''.

     SEC. 1003. AUTHORIZING USE OF NONGOVERNMENTAL PERSONNEL IN 
                   MAKING DETERMINATIONS OF ELIGIBILITY FOR 
                   BENEFITS UNDER THE FOOD STAMP PROGRAM.

       (a) In General.--Notwithstanding any other provision of 
     law, no provision of law shall be construed as preventing any 
     State (as defined in section 3(m) of the Food Stamp Act of 
     1977 (7 U.S.C. 2012(m))) from allowing eligibility 
     determinations described in subsection (b) to be made by an 
     entity that is not a State or local government, or by an 
     individual who is not an employee of a State or

[[Page H4417]]

     local government, which meets such qualifications as the 
     State determines. For purposes of any Federal law, such 
     determinations shall be considered to be made by the State 
     and by a State agency.
       (b) Eligibility Determinations.--An eligibility 
     determination described in this subsection is a determination 
     of eligibility of individuals or households to receive 
     benefits under the food stamp program as defined in section 
     3(h) of the Food Stamp Act of 1977 (7 U.S.C. 2012(h)).
       (c) Construction.--Nothing in this section shall be 
     construed as affecting--
       (1) the conditions for eligibility for benefits (including 
     any conditions relating to income or resources);
       (2) the rights to challenge determinations regarding 
     eligibility or rights to benefits; and
       (3) determinations regarding quality control or error 
     rates.
         TITLE II--COMMITTEE ON BANKING AND FINANCIAL SERVICES

     SEC. 2001. TABLE OF CONTENTS.

       The table of contents for this title is as follows:

         TITLE II--COMMITTEE ON BANKING AND FINANCIAL SERVICES

Sec. 2001. Table of contents.
Sec. 2002. Extension of foreclosure avoidance and borrower assistance 
              provisions for FHA single family housing mortgage 
              insurance program.
Sec. 2003. Adjustment of maximum monthly rents for certain dwelling 
              units in new construction and substantial or moderate 
              rehabilitation projects assisted under section 8 rental 
              assistance program.
Sec. 2004. Adjustment of maximum monthly rents for non-turnover 
              dwelling units assisted under section 8 rental assistance 
              program.

     SEC. 2002. EXTENSION OF FORECLOSURE AVOIDANCE AND BORROWER 
                   ASSISTANCE PROVISIONS FOR FHA SINGLE FAMILY 
                   HOUSING MORTGAGE INSURANCE PROGRAM.

       Section 407 of The Balanced Budget Downpayment Act, I (12 
     U.S.C. 1710 note) is amended--
       (1) in subsection (c)--
       (A) by striking ``only''; and
       (B) by inserting ``, on, or after'' after ``before''; and
       (2) by striking subsection (e).

     SEC. 2003. ADJUSTMENT OF MAXIMUM MONTHLY RENTS FOR CERTAIN 
                   DWELLING UNITS IN NEW CONSTRUCTION AND 
                   SUBSTANTIAL OR MODERATE REHABILITATION PROJECTS 
                   ASSISTED UNDER SECTION 8 RENTAL ASSISTANCE 
                   PROGRAM.

       The third sentence of section 8(c)(2)(A) of the United 
     States Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is 
     amended by inserting before the period at the end the 
     following: ``, and during fiscal year 1999 and thereafter''.

     SEC. 2004. ADJUSTMENT OF MAXIMUM MONTHLY RENTS FOR NON-
                   TURNOVER DWELLING UNITS ASSISTED UNDER SECTION 
                   8 RENTAL ASSISTANCE PROGRAM.

       The last sentence of section 8(c)(2)(A) of the United 
     States Housing Act of 1937 is amended by inserting before the 
     period at the end the following: ``, and during fiscal year 
     1999 and thereafter''.
              TITLE III--COMMITTEE ON COMMERCE-NONMEDICARE
        Subtitle A--Nuclear Regulatory Commission Annual Charges

     SEC. 3001. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

       Section 6101(a)(3) of the Omnibus Budget Reconciliation Act 
     of 1990 (42 U.S.C. 2214(a)(3)) is amended by striking 
     ``September 30, 1998'' and inserting ``September 30, 2002''.
    Subtitle B--Lease of Excess Strategic Petroleum Reserve Capacity

     SEC. 3101. LEASE OF EXCESS STRATEGIC PETROLEUM RESERVE 
                   CAPACITY.

       (a) Amendment.--Part B of title I of the Energy Policy and 
     Conservation Act (42 U.S.C. 6231 et seq.) is amended by 
     adding at the end the following:


                   ``USE OF UNDERUTILIZED FACILITIES

       ``Sec. 168. (a) Authority.--Notwithstanding any other 
     provision of this title, the Secretary, by lease or 
     otherwise, for any term and under such other conditions as 
     the Secretary considers necessary or appropriate, may store 
     in underutilized Strategic Petroleum Reserve facilities 
     petroleum product owned by a foreign government or its 
     representative. Petroleum products stored under this section 
     are not part of the Strategic Petroleum Reserve and may be 
     exported without license from the United States.
       ``(b) Protection of Facilities.--All agreements entered 
     into pursuant to subsection (a) shall contain provisions 
     providing for fees to fully compensate the United States for 
     all costs of storage and removals of petroleum products, 
     including the cost of replacement facilities necessitated as 
     a result of any withdrawals.
       ``(c) Access to Stored Oil.--The Secretary shall ensure 
     that agreements to store petroleum products for foreign 
     governments or their representatives do not affect the 
     ability of the United States to withdraw, distribute, or sell 
     petroleum from the Strategic Petroleum Reserve in response to 
     an energy emergency or to the obligations of the United 
     States under the Agreement on an International Energy 
     Program.
       ``(d) Availability of Funds.--Funds collected through the 
     leasing of Strategic Petroleum Reserve facilities authorized 
     by subsection (a) after September 30, 2002, shall be used by 
     the Secretary of Energy without further appropriation for the 
     purchase of oil for, and operation and maintenance costs of, 
     the Strategic Petroleum Reserve.''.
       (b) Table of Contents Amendment.--The table of contents of 
     part B of title I of the Energy Policy and Conservation Act 
     is amended by adding at the end the following:
``Sec. 168. Use of underutilized facilities.''.
                     Subtitle C--Sale of DOE Assets

     SEC. 3201. SALE OF DOE SURPLUS URANIUM ASSETS.

       (a) In General.--The Secretary of Energy shall, during the 
     period fiscal year 1999 through fiscal year 2002, sell 3.2 
     million pounds per year of natural and low-enriched uranium 
     that the President has determined is not necessary for 
     national security needs. Such sales shall be--
       (1) made for delivery after January 1, 1999;
       (2) subject to a determination, for the period fiscal year 
     1999 through fiscal year 2002, by the Secretary under section 
     3112(d)(2)(B) of the USEC Privatization Act (42 U.S.C. 2297h-
     10(d)(2)(B)); and
       (3) made at a price not less than the fair market value of 
     the uranium and in a manner that maximizes proceeds to the 
     Treasury.

     The Secretary shall receive the proceeds from such sale in 
     the period fiscal year 1999 through fiscal year 2002 and 
     shall deposit such proceeds in the General Fund of the 
     Treasury.
       (b) Costs.--The costs of making the sales required by 
     subsection (a) shall be covered by the unobligated balances 
     of appropriations of the Department of Energy.
                       Subtitle D--Communications

     SEC. 3301. SPECTRUM AUCTIONS.

       (a) Extension and Expansion of Auction Authority.--
       (1) Amendments.--Section 309(j) of the Communications Act 
     of 1934 (47 U.S.C. 309(j)) is amended--
       (A) by striking paragraphs (1) and (2) and inserting in 
     lieu thereof the following:
       ``(1) General authority.--If, consistent with the 
     obligations described in paragraph (6)(E), mutually exclusive 
     applications are accepted for any initial license or 
     construction permit which will involve an exclusive use of 
     the electromagnetic spectrum, then the Commission shall grant 
     such license or permit to a qualified applicant through a 
     system of competitive bidding that meets the requirements of 
     this subsection.
       ``(2) Exemptions.--The competitive bidding authority 
     granted by this subsection shall not apply to licenses or 
     construction permits issued by the Commission--
       ``(A) that, as the result of the Commission carrying out 
     the obligations described in paragraph (6)(E), are not 
     mutually exclusive;
       ``(B) for public safety radio services, including private 
     internal radio services used by non-Government entities, 
     that--
       ``(i) protect the safety of life, health, or property; and
       ``(ii) are not made commercially available to the public;
       ``(C) for initial licenses or construction permits assigned 
     by the Commission to existing terrestrial broadcast licensees 
     for new terrestrial digital television services; or
       ``(D) for public telecommunications services, as defined in 
     section 397(14) of the Communications Act of 1934 (47 U.S.C. 
     397(14)), when the license application is for channels 
     reserved for noncommercial use.'';
       (B) in paragraph (3)--
       (i) by inserting after the second sentence the following 
     new sentence: ``The Commission shall, directly or by 
     contract, provide for the design and conduct (for purposes of 
     testing) of competitive bidding using a contingent 
     combinatorial bidding system that permits prospective bidders 
     to bid on combinations or groups of licenses in a single bid 
     and to enter multiple alternative bids within a single 
     bidding round.'';
       (ii) by striking ``and'' at the end of subparagraph (C);
       (iii) by striking the period at the end of subparagraph (D) 
     and inserting ``; and''; and
       (iv) by adding at the end the following new subparagraph:
       ``(E) ensuring that, in the scheduling of any competitive 
     bidding under this subsection, an adequate period is 
     allowed--
       ``(i) before issuance of bidding rules, to permit notice 
     and comment on proposed auction procedures; and
       ``(ii) after issuance of bidding rules, to ensure that 
     interested parties have a sufficient time to develop business 
     plans, assess market conditions, and evaluate the 
     availability of equipment for the relevant services.'';
       (C) in paragraph (4)--
       (i) by striking ``and'' at the end of subparagraph (D);
       (ii) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (iii) by adding at the end the following new subparagraph:
       ``(F) establish methods by which a minimum bid, in an 
     amount that is more than nominal in relation to the value of 
     the public spectrum resource being made available, will be 
     required to obtain any license or permit being assigned 
     pursuant to the competitive bidding.'';
       (D) in paragraph (8)--
       (i) by striking subparagraph (B); and
       (ii) by redesignating subparagraph (C) as subparagraph (B);
       (E) in paragraph (11), by striking ``September 30, 1998'' 
     and inserting ``December 31, 2002''; and

[[Page H4418]]

       (F) in paragraph (13)(F), by striking ``September 30, 
     1998'' and inserting ``the date of enactment of the Balanced 
     Budget Act of 1997''.
       (2) Conforming amendment.--Subsection (i) of section 309 of 
     the Communications Act of 1934 (47 U.S.C. 309(i)) is 
     repealed.
       (3) Effective date.--The amendment made by paragraph (1)(A) 
     shall not apply with respect to any license or permit for 
     which the Federal Communications Commission has accepted 
     mutually exclusive applications on or before the date of 
     enactment of this Act.
       (b) Commission Obligation To Make Additional Spectrum 
     Available by Auction.--
       (1) In general.--The Federal Communications Commission 
     shall complete all actions necessary to permit the 
     assignment, by September 30, 2002, by competitive bidding 
     pursuant to section 309(j) of the Communications Act of 1934 
     (47 U.S.C. 309(j)) of licenses for the use of bands of 
     frequencies that--
       (A) individually span not less than 25 megahertz, unless a 
     combination of smaller bands can, notwithstanding the 
     provisions of paragraph (7) of such section, reasonably be 
     expected to produce greater receipts;
       (B) in the aggregate span not less than 100 megahertz;
       (C) are located below 3 gigahertz;
       (D) have not, as of the date of enactment of this Act--
       (i) been designated by Commission regulation for assignment 
     pursuant to such section;
       (ii) been identified by the Secretary of Commerce pursuant 
     to section 113 of the National Telecommunications and 
     Information Administration Organization Act;
       (iii) been allocated for Federal Government use pursuant to 
     section 305 of the Communications Act of 1934 (47 U.S.C. 
     305);
       (iv) been designated in section 3303 of this Act; or
       (v) been allocated for unlicensed use pursuant to part 15 
     of the Commission's regulations (47 C.F.R. Part 15), if the 
     competitive bidding for licenses would interfere with 
     operation of end-user products permitted under such 
     regulations;
       (E) notwithstanding section 115(b)(1)(B) of the National 
     Telecommunications and Information Administration 
     Organization Act (47 U.S.C. 925(b)(1)(B)) or any proposal 
     pursuant to such section, include frequencies at 1,710-1,755 
     megahertz;
       (F) include frequencies at 2,110-2,150 megahertz; and
       (G) include 15 megahertz from within the bands of 
     frequencies at 1,990-2,110 megahertz.
       (2) Schedule for assignment of 1,710-1,755 megahertz.--The 
     Commission shall commence competitive bidding for the 
     commercial licenses pursuant to paragraph (1)(E) after 
     January 1, 2001. The Commission shall complete the assignment 
     of such commercial licenses, and report to the Congress the 
     total revenues from such competitive bidding, by September 
     30, 2002.
       (3) Use of bands at 2,110-2,150 megahertz.--The Commission 
     shall reallocate spectrum located at 2,110-2,150 megahertz 
     for assignment by competitive bidding unless the Commission 
     determines that auction of other spectrum (A) better serves 
     the public interest, convenience, and necessity, and (B) can 
     reasonably be expected to produce greater receipts. If the 
     Commission makes such a determination, then the Commission 
     shall, within 2 years after the date of enactment of this 
     Act, identify an alternative 40 megahertz, and report to the 
     Congress an identification of such alternative 40 megahertz 
     for assignment by competitive bidding.
       (4) Use of 15 megahertz from bands at 1,990-2,110 
     megahertz.--The Commission shall reallocate 15 megahertz from 
     spectrum located at 1,990-2,110 megahertz for assignment by 
     competitive bidding unless the President determines such 
     spectrum cannot be reallocated due to the need to protect 
     incumbent Federal systems from interference, and that 
     allocation of other spectrum (A) better serves the public 
     interest, convenience, and necessity, and (B) can reasonably 
     be expected to produce greater receipts. If the President 
     makes such a determination, then the President shall, within 
     2 years after the date of enactment of this Act, identify 
     alternative bands of frequencies totalling 15 megahertz, and 
     report to the Congress an identification of such alternative 
     bands for assignment by competitive bidding.
       (5) Criteria for reassignment.--In making available bands 
     of frequencies for competitive bidding pursuant to paragraph 
     (1), the Commission shall--
       (A) seek to promote the most efficient use of the spectrum;
       (B) take into account the cost to incumbent licensees of 
     relocating existing uses to other bands of frequencies or 
     other means of communication; and
       (C) comply with the requirements of international 
     agreements concerning spectrum allocations.
       (6) 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 
     3301(b)(3) of the Balanced Budget Act of 1997, the Secretary 
     shall prepare and submit to the President, the Commission, 
     and the Congress a report recommending for reallocation for 
     use other than by Federal Government stations under section 
     305 of the 1934 Act (47 U.S.C. 305), bands of frequencies 
     that are suitable for the uses identified in the Commission's 
     notice. The Commission shall, not later than one year after 
     receipt of such report, prepare, submit to the President and 
     the Congress, and implement, a plan for the immediate 
     allocation and assignment of such frequencies under the 1934 
     Act to incumbent licencees described in section 3301(b)(3) of 
     the Balanced Budget Act of 1997.''; and
       (2) in section 114(a)(1), by striking ``(a) or (d)(1)'' and 
     inserting ``(a), (d)(1), or (f)''.
       (d) Identification and Reallocation of Auctionable 
     Frequencies.--The National Telecommunications and Information 
     Administration Organization Act (47 U.S.C. 901 et seq.) is 
     amended--
       (1) in section 113(b)--
       (A) by striking the heading of paragraph (1) and inserting 
     ``Initial reallocation report'';
       (B) by inserting ``in the first report required by 
     subsection (a)'' after ``recommend for reallocation'' in 
     paragraph (1);
       (C) by inserting ``or (3)'' after ``paragraph (1)'' each 
     place it appears in paragraph (2); 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 band or bands 
     of frequencies that--
       ``(A) in the aggregate span not less than 20 megahertz;
       ``(B) individually span not less than 20 megahertz, unless 
     a combination of smaller bands can reasonably be expected to 
     produce greater receipts;
       ``(C) are located below 3 gigahertz; and
       ``(D) meet the criteria specified in paragraphs (1) through 
     (5) of subsection (a).''; and
       (2) in section 115--
       (A) in subsection (b), by striking ``the report required by 
     section 113(a)'' and inserting ``the initial reallocation 
     report required by section 113(a)''; and
       (B) by adding at the end the following new subsection:
       ``(c) Allocation and Assignment of Frequencies Identified 
     in the Second Reallocation Report.--With respect to the 
     frequencies made available for reallocation pursuant to 
     section 113(b)(3), the Commission shall, not later than one 
     year after receipt of the second reallocation report required 
     by such section, prepare, submit to the President and the 
     Congress, and implement, a plan for the immediate allocation 
     and assignment under the 1934 Act of all such frequencies in 
     accordance with section 309(j) of such Act.''.

     SEC. 3302. AUCTION OF RECAPTURED BROADCAST TELEVISION 
                   SPECTRUM.

       Section 309(j) of the Communications Act of 1934 (47 U.S.C. 
     309(j)) is amended by adding at the end the following new 
     paragraph:
       ``(14) Auction of recaptured broadcast television 
     spectrum.--
       ``(A) Limitations on terms of terrestrial television 
     broadcast licenses.--A television license that authorizes 
     analog television services may not be renewed to authorize 
     such service for a period that extends beyond December 31, 
     2006. The Commission shall have the authority to grant by 
     regulation an extension of such date to licensees in a market 
     if the Commission determines that more than 5 percent of 
     households in such market continue to rely exclusively on 
     over-the-air terrestrial analog television signals.
       ``(B) Spectrum reversion and resale.--
       ``(i) The Commission shall ensure that, when the authority 
     to broadcast analog television services under a license 
     expires pursuant to subparagraph (A), each licensee shall 
     return spectrum according to the Commission's direction and 
     the Commission shall reclaim such spectrum.
       ``(ii) Licensees for new services occupying spectrum 
     reclaimed pursuant to clause (i) shall be selected in 
     accordance with this subsection. The Commission shall 
     complete the assignment of such licenses, and report to the 
     Congress the total revenues from such competitive bidding, by 
     September 30, 2002.
       ``(C) Certain limitations on qualified bidders 
     prohibited.--In prescribing any regulations relating to the 
     qualification of bidders for spectrum reclaimed pursuant to 
     subparagraph (B)(i), the Commission shall not--
       ``(i) preclude any party from being a qualified bidder for 
     spectrum that is allocated for any use that includes digital 
     television service on the basis of--

       ``(I) the Commission's duopoly rule (47 C.F.R. 73.3555(b)); 
     or
       ``(II) the Commission's newspaper cross-ownership rule (47 
     C.F.R. 73.3555(d)); or

       ``(ii) apply either such rule to preclude such a party that 
     is a successful bidder in a

[[Page H4419]]

     competitive bidding for such spectrum from using such 
     spectrum for digital television service.
       ``(D) Definitions.--As used in this paragraph:
       ``(i) The term `digital television service' means 
     television service provided using digital technology to 
     enhance audio quality and video resolution, as further 
     defined in the Memorandum Opinion, Report, and Order of the 
     Commission entitled `Advanced Television Systems and Their 
     Impact Upon the Existing Television Service', MM Docket No. 
     87-268 and any subsequent Commission proceedings dealing with 
     digital television.
       ``(ii) The term `analog television service' means service 
     provided pursuant to the transmission standards prescribed by 
     the Commission in section 73.682(a) of its regulation (47 CFR 
     73.682(a)).''.

     SEC. 3303. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY AND 
                   COMMERCIAL LICENSES.

       (a) In General.--The Federal Communications Commission 
     shall, not later than January 1, 1998, allocate on a 
     national, regional, or market basis, from radio spectrum 
     between 746 megahertz and 806 megahertz--
       (1) 24 megahertz of that spectrum for public safety 
     services according to the terms and conditions established by 
     the Commission, unless the Commission determines that the 
     needs for public safety services can be met in particular 
     areas with allocations of less than 24 megahertz; and
       (2) the remainder of that spectrum for commercial purposes 
     to be assigned by competitive bidding in accordance with 
     section 309(j).
       (b) Assignment.--The Commission shall--
       (1) assign the licenses for public safety created pursuant 
     to subsection (a) no later than March 31, 1998;
       (2) commence competitive bidding for the commercial 
     licenses created pursuant to subsection (a) after January 1, 
     2001; and
       (3) complete competitive bidding for such commercial 
     licenses, and report to the Congress the total revenues from 
     such competitive bidding, by September 30, 2002.
       (c) Licensing of Unused Frequencies for Public Safety Radio 
     Services.--
       (1) Use of unused channels for public safety.--It shall be 
     the policy of the Commission, notwithstanding any other 
     provision of this Act or any other law, to waive whatever 
     licensee eligibility and other requirements (including 
     bidding requirements) are applicable in order to permit the 
     use of unassigned frequencies for public safety purposes by a 
     State or local governmental agency upon a showing that--
       (A) no other existing satisfactory public safety channel is 
     immediately available to satisfy the requested use;
       (B) the proposed use is technically feasible without 
     causing harmful interference to existing stations in the 
     frequency band entitled to protection from such interference 
     under the rules of the Commission; and
       (C) use of the channel for public safety purposes is 
     consistent with other existing public safety channel 
     allocations in the geographic area of proposed use.
       (2) Applicability.--Paragraph (1) shall apply to any 
     application that is pending before the Federal Communications 
     Commission, or that is not finally determined under either 
     section 402 or 405 of the Communications Act of 1934 (47 
     U.S.C. 402, 405) on May 15, 1997, or that is filed after such 
     date.
       (d) Conditions on Licenses.--With respect to public safety 
     and commercial licenses granted pursuant to this subsection, 
     the Commission shall--
       (1) establish interference limits at the boundaries of the 
     spectrum block and service area;
       (2) establish any additional technical restrictions 
     necessary to protect full-service analog television service 
     and digital television service during a transition to digital 
     television service; and
       (3) permit public safety and commercial licensees--
       (A) to aggregate multiple licenses to create larger 
     spectrum blocks and service areas; and
       (B) to disaggregate or partition licenses to create smaller 
     spectrum blocks or service areas.
       (e) Protection of Qualifying Low-Power Stations.--After 
     making any allocation or assignment under this section the 
     Commission shall seek to assure that each qualifying low-
     power television station is assigned a frequency below 746 
     megahertz to permit the continued operation of such station.
       (f) Definitions.--For purposes of this section:
       (1) Commission.--The term ``Commission'' means the Federal 
     Communications Commission.
       (2) Digital television service.--The term ``digital 
     television service'' means television service provided using 
     digital technology to enhance audio quality and video 
     resolution, as further defined in the Memorandum Opinion, 
     Report, and Order of the Commission entitled `Advanced 
     Television Systems and Their Impact Upon the Existing 
     Television Service', MM Docket No. 87-268 and any subsequent 
     Commission proceedings dealing with digital television.
       (3) Analog television service.--The term ``analog 
     television service'' means services provided pursuant to the 
     transmission standards prescribed by the Commission in 
     section 73.682(a) of its regulation (47 CFR 73.682(a)).
       (4) Public safety services.--The term ``public safety 
     services'' means services--
       (A) the sole or principal purpose of which is to protect 
     the safety of life, health, or property;
       (B) that are provided--
       (i) by State or local government entities; or
       (ii) by nongovernmental, private organizations that are 
     authorized by a governmental entity whose primary mission is 
     the provision of such services; and
       (C) that are not made commercially available to the public 
     by the provider.
       (5) Service area.--The term ``service area'' means the 
     geographic area over which a licensee may provide service and 
     is protected from interference.
       (6) Spectrum block.--The term ``spectrum block'' means the 
     range of frequencies over which the apparatus licensed by the 
     Commission is authorized to transmit signals.
       (7) Qualifying low-power television stations.--A station is 
     a qualifying low-power television station if, during the 90 
     days preceding the date of enactment of this Act--
       (A) such station broadcast a minimum of 18 hours per day;
       (B) such station broadcast an average of at least 3 hours 
     per week of programming that was produced within the 
     community of license of such station; and
       (C) such station was in compliance with the requirements 
     applicable to low-power television stations.

     SEC. 3304. ADMINISTRATIVE PROCEDURES FOR SPECTRUM AUCTIONS.

       (a) Expedited Procedures.--The rules governing competitive 
     bidding under this subtitle shall be effective immediately 
     upon publication in the Federal Register notwithstanding 
     section 553(d), 801(a)(3), and 806(a) of title 5, United 
     States Code. Chapter 6 of such title, and sections 3507 and 
     3512 of title 44, United States Code, shall not apply to such 
     rules and competitive bidding procedures governing 
     frequencies assigned under this subtitle. Notwithstanding 
     section 309(b) of the Communications Act of 1934 (47 U.S.C. 
     309(b)), no application for an instrument of authorization 
     for such frequencies shall be granted by the Commission 
     earlier than 7 days following issuance of public notice by 
     the Commission of the acceptance for filing of such 
     application or of any substantial amendment thereto. 
     Notwithstanding section 309(d)(1) of such Act (47 U.S.C. 
     309(d)(1)), the Commission may specify a period (no less than 
     5 days following issuance of such public notice) for the 
     filing of petitions to deny any application for an instrument 
     of authorization for such frequencies.
       (b) Deadline for Collection.--The Commission shall conduct 
     the competitive bidding under this subtitle in a manner that 
     ensures that all proceeds of the bidding are deposited in 
     accordance with section 309(j)(8) of the Communications Act 
     of 1934 not later September 30, 2002.

     SEC. 3305. UNIVERSAL SERVICE FUND PAYMENT SCHEDULE.

       (a) Acceleration of Payments.--There shall be available in 
     fiscal year 2001 from funds in the Treasury not otherwise 
     appropriated $2,000,000,000 to the universal service fund 
     under part 54 of the Federal Communications Commission's 
     regulations (47 C.F.R. Part 54) in addition to any other 
     revenues required to be collected under such part.
       (b) Limitation on Expenditures.--The outlays of the 
     universal service fund under part 54 of the Federal 
     Communications Commission's regulations (47 C.F.R. Part 54) 
     in fiscal year 2002 shall not exceed the amount of revenue 
     required to be collected in such fiscal year, less 
     $2,000,000,000.

     SEC. 3306. INQUIRY REQUIRED.

       The Federal Communications Commission shall, not later than 
     July 1, 1997, initiate the inquiry required by section 
     309(j)(12) of the Communications Act of 1934 (47 U.S.C. 
     309(j)(12)) for the purposes of collecting the information 
     required for its report under each of subparagraphs (A) 
     through (E) of such section, and shall keep the Congress 
     fully and currently informed with respect to the progress of 
     such inquiry.
                          Subtitle E--Medicaid

     SEC. 3400. TABLE OF CONTENTS OF SUBTITLE; REFERENCES.

       (a) Table of Contents of Subtitle.--The table of contents 
     of this subtitle is as follows:
Sec. 3400. Table of contents of subtitle; references.

                      Chapter 1--State Flexibility


                   SUBCHAPTER A--USE OF MANAGED CARE

Sec. 3401. State options to provide benefits through managed care 
              entities.
Sec. 3402. Elimination of 75:25 restriction on risk contracts.
Sec. 3403. Primary care case management services as State option 
              without need for waiver.
Sec. 3404. Change in threshold amount for contracts requiring 
              Secretary's prior approval.


                   SUBCHAPTER B--PAYMENT METHODOLOGY

Sec. 3411. Flexibility in payment methods for hospital, nursing 
              facility, and ICF/MR services; flexibility for home 
              health.
Sec. 3412. Payment for Federally qualified health center services.
Sec. 3413. Treatment of State taxes imposed on certain hospitals that 
              provide free care.


                       SUBCHAPTER C--ELIGIBILITY

Sec. 3421. State option of continuous eligibility for 12 months; 
              clarification of State option to cover children.

[[Page H4420]]

Sec. 3422. Payment of part or all of Medicare part B premium amount for 
              certain low-income individuals.
Sec. 3423. Penalty for fraudulent eligibility.
Sec. 3424. Treatment of certain settlement payments.


  SUBCHAPTER D--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

Sec. 3431. Establishment of PACE program as medicaid State option.
Sec. 3432. Coverage of PACE under the medicare program.
Sec. 3433. Effective date; transition.
Sec. 3434. Study and reports.


                         SUBCHAPTER E--BENEFITS

Sec. 3441. Elimination of requirement to pay for private insurance.
Sec. 3442. Permitting same copayments in health maintenance 
              organizations as in fee-for-service.
Sec. 3443. Physician qualification requirements.
Sec. 3444. Elimination of requirement of prior institutionalization 
              with respect to habilitation services furnished under a 
              waiver for home or community-based services.
Sec. 3445. Benefits for services of physician assistants.
Sec. 3446. Study and report on actuarial value of EPSDT benefit.


                      SUBCHAPTER F--ADMINISTRATION

Sec. 3451. Elimination of duplicative inspection of care requirements 
              for ICFS/MR and mental hospitals.
Sec. 3452. Alternative sanctions for noncompliant ICFS/MR.
Sec. 3453. Modification of MMIS requirements.
Sec. 3454. Facilitating imposition of State alternative remedies on 
              noncompliant nursing facilities.
Sec. 3455. Medically accepted indication.
Sec. 3456. Continuation of State-wide section 1115 medicaid waivers.
Sec. 3457. Authorizing administrative streamlining and privatizing 
              modifications under the medicaid program.
Sec. 3458. Extension of moratorium.

                      Chapter 2--Quality Assurance

Sec. 3461. Requirements to ensure quality of and access to care under 
              managed care plans.
Sec. 3462. Solvency standards for certain health maintenance 
              organizations.
Sec. 3463. Application of prudent layperson standard for emergency 
              medical condition and prohibition of gag rule 
              restrictions.
Sec. 3464. Additional fraud and abuse protections in managed care.
Sec. 3465. Grievances under managed care plans.
Sec. 3466. Standards relating to access to obstetrical and 
              gynecological services under managed care plans.

                      Chapter 3--Federal Payments

Sec. 3471. Reforming disproportionate share payments under State 
              medicaid programs.
Sec. 3472. Additional funding for State emergency health services 
              furnished to undocumented aliens.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this subtitle an amendment 
     is expressed in terms of an amendment to or repeal of a 
     section or other provision, the reference is considered to be 
     made to that section or other provision of the Social 
     Security Act.

                      CHAPTER 1--STATE FLEXIBILITY

                   Subchapter A--Use of Managed Care

     SEC. 3401. STATE OPTIONS TO PROVIDE BENEFITS THROUGH MANAGED 
                   CARE ENTITIES.

       (a) In General.--Section 1915(a) (42 U.S.C. 1396n(a)) is 
     amended--
       (1) by striking ``or'' at the end of paragraph (1),
       (2) by striking the period at the end of paragraph (2) and 
     inserting ``; or'', and
       (3) by adding at the end the following new paragraph:
       ``(3) requires individuals, other than special needs 
     children (as defined in subsection (i)), eligible for medical 
     assistance for items or services under the State plan to 
     enroll with an entity that provides or arranges for services 
     for enrollees under a contract pursuant to section 1903(m), 
     or with a primary care case manager (as defined in section 
     1905(t)(2)) (or restricts the number of provider agreements 
     with those entities under the State plan, consistent with 
     quality of care), if--
       ``(A) the State permits an individual to choose the manager 
     or managed care entity from among the managed care 
     organizations and primary care case providers who meet the 
     requirements of this title;
       ``(B)(i) individuals are permitted to choose between at 
     least 2 of those entities, or 2 of the managers, or an entity 
     and a manager, each of which has sufficient capacity to 
     provide services to enrollees; or
       ``(ii) with respect to a rural area--
       ``(I) individuals who are required to enroll with a single 
     entity are afforded the option to obtain covered services by 
     an alternative provider; and
       ``(II) an individual who is offered no alternative to a 
     single entity or manager is given a choice between at least 
     two providers within the entity or through the manager;
       ``(C) no individual who is an Indian (as defined in section 
     4 of the Indian Health Care Improvement Act of 1976) is 
     required to enroll in any entity that is not one of the 
     following (and only if such entity is participating under the 
     plan): the Indian Health Service, an Indian health program 
     operated by an Indian tribe or tribal organization pursuant 
     to a contract, grant, cooperative agreement, or compact with 
     the Indian Health Service pursuant to the Indian Self-
     Determination Act (25 U.S.C. 450 et seq.), or an urban Indian 
     health program operated by an urban Indian organization 
     pursuant to a grant or contract with the Indian Health 
     Service pursuant to title V of the Indian Health Care 
     Improvement Act (25 U.S.C. 1601 et seq.);
       ``(D) the State restricts those individuals from changing 
     their enrollment without cause for periods no longer than six 
     months (and permits enrollees to change enrollment for cause 
     at any time);
       ``(E) the restrictions do not apply to providers of family 
     planning services (as defined in section 1905(a)(4)(C)) and 
     are not conditions for payment of medicare cost sharing 
     pursuant to section 1905(p)(3); and
       ``(F) prior to establishing an enrollment requirement under 
     this paragraph, the State agency provides for public notice 
     and comment pursuant to requirements established by the 
     Secretary.''.
       (b) Special Needs Children Defined.--Section 1915 (42 
     U.S.C. 1396n) is amended by adding at the end the following:
       ``(i) For purposes of subsection (a)(3), the term `special 
     needs child' means an individual under 19 years of age who--
       ``(1) is eligible for supplemental security income under 
     title XVI,
       ``(2) is described in section 501(a)(1)(D),
       ``(3) is described in section 1902(e)(3), or
       ``(4) is in foster care or otherwise in an out-of-home 
     placement.''.
       (c) Conforming Amendment to Risk-Based Arrangements.--
     Section 1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended--
       (1) in paragraph (A)(vi)--
       (A) by striking ``(I) except as provided under subparagraph 
     (F),''; and
       (B) by striking all that follows ``to terminate such 
     enrollment'' and inserting ``in accordance with the 
     provisions of subparagraph (F);''; and
       (2) in subparagraph (F)--
       (A) by striking ``In the case of--'' and all that follows 
     through ``a State plan'' and inserting ``A State plan'', and
       (B) by striking ``(A)(vi)(I)'' and inserting ``(A)(vi)''.
       (d) Effective Date.--The amendments made by this section 
     take effect on the date of the enactment of this Act.

     SEC. 3402. ELIMINATION OF 75:25 RESTRICTION ON RISK 
                   CONTRACTS.

       (a) 75 Percent Limit on Medicare and Medicaid Enrollment.--
       (1) In general.--Section 1903(m)(2)(A) (42 U.S.C. 
     1396b(m)(2)(A)) is amended by striking clause (ii).
       (2) Conforming amendments.--Section 1903(m)(2) (42 U.S.C. 
     1396b(m)(2)) is amended--
       (A) by striking subparagraphs (C), (D), and (E); and
       (B) in subparagraph (G), by striking ``clauses (i) and 
     (ii)'' and inserting ``clause (i)''.
       (b) Effective Date.--The amendments made by subsection (a) 
     take effect on the date of the enactment of this Act.

     SEC. 3403. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE 
                   OPTION WITHOUT NEED FOR WAIVER.

       (a) Optional Coverage as Part of Medical Assistance.--
     Section 1905(a) (42 U.S.C. 1396d(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (24);
       (2) by redesignating paragraph (25) as paragraph (26) and 
     by striking the period at the end of such paragraph and 
     inserting a comma; and
       (3) by inserting after paragraph (24) the following new 
     paragraph:
       ``(25) primary care case management services (as defined in 
     subsection (t)); and''.
       (b) Primary Care Case Management Services Defined.--Section 
     1905 (42 U.S.C. 1396d) is amended by adding at the end the 
     following new subsection:
       ``(t)(1) The term `primary care case management services' 
     means case-management related services (including 
     coordination and monitoring of health care services) provided 
     by a primary care case manager under a primary care case 
     management contract.
       ``(2)(A) The term `primary care case manager' means, with 
     respect to a primary care case management contract, a 
     provider described in subparagraph (B).
       ``(B) A provider described in this subparagraph is a 
     provider that provides primary care case management services 
     under contract and is--
       ``(i) a physician, a physician group practice, or an entity 
     employing or having other arrangements with physicians; or
       ``(ii) at State option--
       ``(I) a nurse practitioner (as described in section 
     1905(a)(21));
       ``(II) a certified nurse-midwife (as defined in section 
     1861(gg)); or
       ``(III) a physician assistant (as defined in section 
     1861(aa)(5)).
       ``(3) The term `primary care case management contract' 
     means a contract with a State agency under which a primary 
     care case manager undertakes to locate, coordinate and 
     monitor covered primary care (and

[[Page H4421]]

     such other covered services as may be specified under the 
     contract) to all individuals enrolled with the primary care 
     case manager, and which provides for--
       ``(A) reasonable and adequate hours of operation, including 
     24-hour availability of information, referral, and treatment 
     with respect to medical emergencies;
       ``(B) restriction of enrollment to individuals residing 
     sufficiently near a service delivery site of the entity to be 
     able to reach that site within a reasonable time using 
     available and affordable modes of transportation;
       ``(C) employment of, or contracts or other arrangements 
     with, sufficient numbers of physicians and other appropriate 
     health care professionals to ensure that services under the 
     contract can be furnished to enrollees promptly and without 
     compromise to quality of care;
       ``(D) a prohibition on discrimination on the basis of 
     health status or requirements for health services in 
     enrollment, disenrollment, or reenrollment of individuals 
     eligible for medical assistance under this title; and
       ``(E) a right for an enrollee to terminate enrollment 
     without cause during the first month of each enrollment 
     period, which period shall not exceed six months in duration, 
     and to terminate enrollment at any time for cause.
       ``(4) For purposes of this subsection, the term `primary 
     care' includes all health care services customarily provided 
     in accordance with State licensure and certification laws and 
     regulations, and all laboratory services customarily provided 
     by or through, a general practitioner, family medicine 
     physician, internal medicine physician, obstetrician/
     gynecologist, or pediatrician.''.
       (c) Conforming Amendments.--Section 1902 (42 U.S.C. 1396a) 
     is amended--
       (1) in subsection (a)(10)(C)(iv), by striking ``(24)'' and 
     inserting ``(25)'', and
       (2) in subsection (j), by striking ``(25)'' and inserting 
     ``(26)''.
       (d) Effective Date.--The amendments made by this section 
     apply to primary care case management services furnished on 
     or after October 1, 1997.

     SEC. 3404. CHANGE IN THRESHOLD AMOUNT FOR CONTRACTS REQUIRING 
                   SECRETARY'S PRIOR APPROVAL.

       (a) In General.--Section 1903(m)(2)(A)(iii) (42 U.S.C. 
     1396b(m)(2)(A)(iii)) is amended by striking ``$100,000'' and 
     inserting ``$1,000,000 for 1998 and, for a subsequent year, 
     the amount established under this clause for the previous 
     year increased by the percentage increase in the consumer 
     price index for all urban consumers over the previous year''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to contracts entered into or renewed on or after 
     the date of the enactment of this Act.

                   Subchapter B--Payment Methodology

     SEC. 3411. FLEXIBILITY IN PAYMENT METHODS FOR HOSPITAL, 
                   NURSING FACILITY, AND ICF/MR SERVICES; 
                   FLEXIBILITY FOR HOME HEALTH.

       (a) Repeal of Boren Requirements.--Section 1902(a)(13) (42 
     U.S.C. 1396a(a)) is amended--
       (1) by amending subparagraphs (A) and (B) to read as 
     follows:
       ``(A) for a public process for determination of rates of 
     payment under the plan for hospital services, nursing 
     facility services, and services of intermediate care 
     facilities for the mentally retarded under which--
       ``(i) proposed rates are published, and providers, 
     beneficiaries and their representatives, and other concerned 
     State residents are given a reasonable opportunity for review 
     and comment on the proposed rates;
       ``(ii) final rates are published, together with 
     justifications, and
       ``(iii) in the case of hospitals, take into account (in a 
     manner consistent with section 1923) the situation of 
     hospitals which serve a disproportionate number of low income 
     patients with special needs;
       ``(B) that the State shall provide assurances satisfactory 
     to the Secretary that the average level of payments under the 
     plan for nursing facility services (as determined on an 
     aggregate per resident-day basis) and the level of payments 
     under the plan for inpatient hospital services (as determined 
     on an aggregate hospital payment basis) furnished during the 
     18-month period beginning October 1, 1997, is not less than 
     the average level of payments that would be made under the 
     plan during such 18-month period for such respective services 
     (determined on such basis) based on rates or payment basis in 
     effect as of May 1, 1997;''; and
       (2) by striking subparagraph (C).
       (b) Repeal of Requirements Relating to Home Health 
     Services.--Such section is further amended--
       (1) by adding ``and'' at the end of subparagraph (D),
       (2) by striking ``and'' at the end of subparagraph (E), and
       (3) by striking subparagraph (F).
       (c) Effective Date.--The amendments made by this section 
     shall apply to payment for items and services furnished on or 
     after the date of the enactment of this Act.

     SEC. 3412. PAYMENT FOR CENTER AND CLINIC SERVICES.

       (a) Phase-Out of Payment Based on Reasonable Costs.--
     Section 1902(a)(13)(E) (42 U.S.C. 1396a(a)(13)(E)) is amended 
     by inserting ``(or 95 percent for services furnished during 
     fiscal year 2000, 90 percent for service furnished during 
     fiscal year 2001, and 85 percent for services furnished 
     during fiscal year 2002)'' after ``100 percent''.
       (b) Transitional Supplemental Payment for Services 
     Furnished Under Certain Managed Care Contracts.--
       (1) In general.--Section 1902(a)(13)(E) is further 
     amended--
       (A) by inserting ``(i)'' after ``(E)'', and
       (B) by inserting before the semicolon at the end the 
     following: ``and (ii) in carrying out clause (i) in the case 
     of services furnished by a federally qualified health center 
     or a rural health clinic pursuant to a contract between the 
     center and a health maintenance organization under section 
     1903(m), for payment by the State of a supplemental payment 
     equal to the amount (if any) by which the amount determined 
     under clause (i) exceeds the amount of the payments provided 
     under such contract''.
       (2) Conforming amendment to managed care contract 
     requirement.--Clause (ix) of section 1903(m)(2)(A) (42 U.S.C. 
     1396b(m)(2)(A)) is amended to read as follows:
       ``(ix) such contract provides, in the case of an entity 
     that has entered into a contract for the provision of 
     services with a federally qualified health center or a rural 
     health clinic, that the entity shall provide payment that is 
     not less than the level and amount of payment which the 
     entity would make for the services if the services were 
     furnished by a provider which is not a federally qualified 
     health center or a rural health clinic;''.
       (3) Effective date.--The amendments made by this section 
     shall apply to services furnished on or after October 1, 
     1997.
       (c) End of Transitional Payment Rules.--Effective for 
     services furnished on or after October 1, 2002--
       (1) subparagraph (E) of section 1902(a)(13) (42 U.S.C. 
     1396a(a)(13)) is repealed, and
       (2) clause (ix) of section 1903(m)(2)(A) (42 U.S.C. 
     1396b(m)(2)(A)) is repealed.
       (d) Flexibility in Coverage of Non-Freestanding Look-
     Alikes.--
       (1) In general.--Section 1905(l)(2)(B)(iii) (42 U.S.C. 
     1396d(l)(2)(B)(iii)) is amended by inserting ``and is not 
     other than an entity that is owned, controlled, or operated 
     by another provider'' after ``such a grant''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to service furnished on and after the date of the 
     enactment of this Act.
       (e) GAO Report.--By not later than February 1, 2001, the 
     Comptroller General shall submit to Congress a report on the 
     impact of the amendments made by this section on access to 
     health care for medicaid beneficiaries and the uninsured 
     served at health centers and rural health clinics and the 
     ability of health centers and rural health clinics to become 
     integrated in a managed care system.

     SEC. 3413. TREATMENT OF STATE TAXES IMPOSED ON CERTAIN 
                   HOSPITALS THAT PROVIDE FREE CARE.

       (a) Exception From Tax Does Not Disqualify as Broad-Based 
     Tax.--Section 1903(w)(3) (42 U.S.C. 1396b(w)(3)) is amended--
       (1) in subparagraph (B), by striking ``and (E)'' and 
     inserting ``(E), and (F)'', and
       (2) by adding at the end the following:
       ``(F) In no case shall a tax not qualify as a broad-based 
     health care related tax under this paragraph because it does 
     not apply to a hospital that is exempt from taxation under 
     section 501(c)(3) of the Internal Revenue Code of 1986 and 
     that does not accept payment under the State plan under this 
     title or under title XVIII.''.
       (b) Reduction in Federal Financial Participation in Case of 
     Imposition of Tax.--Section 1903(b) (42 U.S.C. 1396b(b)) is 
     amended by adding at the end the following:
       ``(4) Notwithstanding the preceding provisions of this 
     section, the amount determined under subsection (a)(1) for 
     any State shall be decreased in a quarter by the amount of 
     any health care related taxes (described in section 
     1902(w)(3)(A)) that are imposed on a hospital described in 
     subsection (w)(3)(F) in that quarter.''.
       (c) Effective Date.--The amendments made by subsection (a) 
     shall apply to taxes imposed before, on, or after the date of 
     the enactment of this Act and the amendment made by 
     subsection (b) shall apply to taxes imposed on or after such 
     date.

                       Subchapter C--Eligibility

     SEC. 3421. STATE OPTION OF CONTINUOUS ELIGIBILITY FOR 12 
                   MONTHS; CLARIFICATION OF STATE OPTION TO COVER 
                   CHILDREN.

       (a) Continuous Eligibility Option.--Section 1902(e) (42 
     U.S.C. 1396a(e)) is amended by adding at the end the 
     following new paragraph:
       ``(12) At the option of the State, the plan may provide 
     that an individual who is under an age specified by the State 
     (not to exceed 19 years of age) and who is determined to be 
     eligible for benefits under a State plan approved under this 
     title under subsection (a)(10)(A) shall remain eligible for 
     those benefits until the earlier of--
       ``(A) the end of a period (not to exceed 12 months) 
     following the determination; or
       ``(B) the time that the individual exceeds that age.''.
       (b) Clarification of State Option To Cover All Children 
     Under 19 Years of Age.--Section 1902(l)(1)(D) (42 U.S.C. 
     1396a(l)(1)(D)) is amended by inserting ``(or, at the option 
     of a State, after any earlier date)'' after ``children born 
     after September 30, 1983''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to medical assistance for items and services 
     furnished on or after October 1, 1997.

     SEC. 3422. PAYMENT OF PART OR ALL OF MEDICARE PART B PREMIUM 
                   FOR CERTAIN LOW-INCOME INDIVIDUALS.

       (a) Eligibility.--Section 1902(a)(10)(E) (42 U.S.C. 
     1396a(a)(10)(E)) is amended--

[[Page H4422]]

       (1) by striking ``and'' at the end of clause (ii),
       (2) in clause (iii), by striking ``and 120 percent in 1995 
     and years thereafter'' and inserting ``120 percent in 1995, 
     1996, and 1997, and 135 percent in 1998 and years 
     thereafter''; and
       (3) by inserting after clause (iii) the following:
       ``(iv) subject to section 1905(p)(4), for making medical 
     assistance available for the portion of medicare cost sharing 
     described in section 1905(p)(3)(A)(ii) that is attributable 
     to the application under section 1839(a)(5) of section 
     1833(d)(2) for individuals who would be described in clause 
     (iii) but for the fact that their income exceeds 135 percent, 
     but is less than 175 percent, of the official poverty line 
     (referred to in section 1905(p)(2)) for a family of the size 
     involved; and''.
       (b) 100 Percent Federal Payment.--The third sentence of 
     section 1905(b) (42 U.S.C. 1396d(b)) is amended by inserting 
     ``and with respect to amounts expended for medical assistance 
     described in section 1902(a)(10)(E)(iii) for individuals 
     described in such section whose income is equal to or exceeds 
     120 percent of the official poverty line and with respect to 
     amounts expended for medical assistance described in section 
     1902(a)(10)(E)(iv) for individuals described in such 
     section'' before the period at the end.

     SEC. 3423. PENALTY FOR FRAUDULENT ELIGIBILITY.

       Section 1128B(a) (42 U.S.C. 1320a-7b(a)), as amended by 
     section 217 of the Health Insurance Portability and 
     Accountability Act of 1996, is amended--
       (1) by amending paragraph (6) to read as follows:
       ``(6) for a fee knowingly and willfully counsels or assists 
     an individual to dispose of assets (including by any transfer 
     in trust) in order for the individual to become eligible for 
     medical assistance under a State plan under title XIX, if 
     disposing of the assets results in the imposition of a period 
     of ineligibility for such assistance under section 
     1917(c),''; and
       (2) in clause (ii) of the matter following such paragraph, 
     by striking ``failure, or conversion by any other person'' 
     and inserting ``failure, conversion, or provision of counsel 
     or assistance by any other person''.

     SEC. 3424. TREATMENT OF CERTAIN SETTLEMENT PAYMENTS.

       Notwithstanding any other provision of law, the payments 
     made from any fund established pursuant to the settlement in 
     the case of In re Factor VIII or IX Concentrate Blood 
     Products Litigation, MDL-986, no. 93-C7452 (N.D. Ill.) shall 
     not be considered income or resources in determining 
     eligibility for, or the amount of benefits under, a State 
     plan of medical assistance approved under title XIX of the 
     Social Security Act.

  Subchapter D--Programs of All-inclusive Care for the Elderly (PACE)

     SEC. 3431. ESTABLISHMENT OF PACE PROGRAM AS MEDICAID STATE 
                   OPTION.

       (a) In General.--Title XIX is amended--
       (1) in section 1905(a) (42 U.S.C. 1396d(a)), as amended by 
     section 3403(a)--
       (A) by striking ``and'' at the end of paragraph (25);
       (B) by redesignating paragraph (26) as paragraph (27); and
       (C) by inserting after paragraph (25) the following new 
     paragraph:
       ``(26) services furnished under a PACE program under 
     section 1932 to PACE program eligible individuals enrolled 
     under the program under such section; and'';
       (2) by redesignating section 1932 as section 1933; and
       (3) by inserting after section 1931 the following new 
     section:


         ``program of all-inclusive care for the elderly (pace)

       ``Sec. 1932. (a) Option.--
       ``(1) In general.--A State may elect to provide medical 
     assistance under this section with respect to PACE program 
     services to PACE program eligible individuals who are 
     eligible for medical assistance under the State plan and who 
     are enrolled in a PACE program under a PACE program 
     agreement. Such individuals need not be eligible for benefits 
     under part A, or enrolled under part B, of title XVIII to be 
     eligible to enroll under this section. In the case of an 
     individual enrolled with a PACE program pursuant to such an 
     election--
       ``(A) the individual shall receive benefits under the plan 
     solely through such program, and
       ``(B) the PACE provider shall receive payment in accordance 
     with the PACE program agreement for provision of such 
     benefits.

     A State may limit through its PACE program agreement the 
     number of individuals who may be enrolled in a PACE program 
     under the State plan.
       ``(2) PACE program defined.--For purposes of this section 
     and section 1894, the term `PACE program' means a program of 
     all-inclusive care for the elderly that meets the following 
     requirements:
       ``(A) Operation.--The entity operating the program is a 
     PACE provider (as defined in paragraph (3)).
       ``(B) Comprehensive benefits.--The program provides 
     comprehensive health care services to PACE program eligible 
     individuals in accordance with the PACE program agreement and 
     regulations under this section.
       ``(C) Transition.--In the case of an individual who is 
     enrolled under the program under this section and whose 
     enrollment ceases for any reason (including the individual no 
     longer qualifies as a PACE program eligible individual, the 
     termination of a PACE program agreement, or otherwise), the 
     program provides assistance to the individual in obtaining 
     necessary transitional care through appropriate referrals and 
     making the individual's medical records available to new 
     providers.
       ``(3) PACE provider defined.--
       ``(A) In general.--For purposes of this section, the term 
     `PACE provider' means an entity that--
       ``(i) subject to subparagraph (B), is (or is a distinct 
     part of) a public entity or a private, nonprofit entity 
     organized for charitable purposes under section 501(c)(3) of 
     the Internal Revenue Code of 1986, and
       ``(ii) has entered into a PACE program agreement with 
     respect to its operation of a PACE program.
       ``(B) Treatment of private, for-profit providers.--Clause 
     (i) of subparagraph (A) shall not apply--
       ``(i) to entities subject to a demonstration project waiver 
     under subsection (h); and
       ``(ii) after the date the report under section 4014(b) of 
     the Balanced Budget Act of 1997 is submitted, unless the 
     Secretary determines that any of the findings described in 
     subparagraph (A), (B), (C) or (D) of paragraph (2) of such 
     section are true.
       ``(4) PACE program agreement defined.--For purposes of this 
     section, the term `PACE program agreement' means, with 
     respect to a PACE provider, an agreement, consistent with 
     this section, section 1894 (if applicable), and regulations 
     promulgated to carry out such sections, between the PACE 
     provider, the Secretary, and a State administering agency for 
     the operation of a PACE program by the provider under such 
     sections.
       ``(5) PACE program eligible individual defined.--For 
     purposes of this section, the term `PACE program eligible 
     individual' means, with respect to a PACE program, an 
     individual who--
       ``(A) is 55 years of age or older;
       ``(B) subject to subsection (c)(4), is determined under 
     subsection (c) to require the level of care required under 
     the State medicaid plan for coverage of nursing facility 
     services;
       ``(C) resides in the service area of the PACE program; and
       ``(D) meets such other eligibility conditions as may be 
     imposed under the PACE program agreement for the program 
     under subsection (e)(2)(A)(ii).
       ``(6) PACE protocol.--For purposes of this section, the 
     term `PACE protocol' means the Protocol for the Program of 
     All-inclusive Care for the Elderly (PACE), as published by On 
     Lok, Inc., as of April 14, 1995.
       ``(7) PACE demonstration waiver program defined.--For 
     purposes of this section, the term `PACE demonstration waiver 
     program' means a demonstration program under either of the 
     following sections (as in effect before the date of their 
     repeal):
       ``(A) Section 603(c) of the Social Security Amendments of 
     1983 (Public Law 98-21), as extended by section 9220 of the 
     Consolidated Omnibus Budget Reconciliation Act of 1985 
     (Public Law 99-272).
       ``(B) Section 9412(b) of the Omnibus Budget Reconciliation 
     Act of 1986 (Public Law 99-509).
       ``(8) State administering agency defined.--For purposes of 
     this section, the term `State administering agency' means, 
     with respect to the operation of a PACE program in a State, 
     the agency of that State (which may be the single agency 
     responsible for administration of the State plan under this 
     title in the State) responsible for administering PACE 
     program agreements under this section and section 1894 in the 
     State.
       ``(9) Trial period defined.--
       ``(A) In general.--For purposes of this section, the term 
     `trial period' means, with respect to a PACE program operated 
     by a PACE provider under a PACE program agreement, the first 
     3 contract years under such agreement with respect to such 
     program.
       ``(B) Treatment of entities previously operating pace 
     demonstration waiver programs.--Each contract year (including 
     a year occurring before the effective date of this section) 
     during which an entity has operated a PACE demonstration 
     waiver program shall be counted under subparagraph (A) as a 
     contract year during which the entity operated a PACE program 
     as a PACE provider under a PACE program agreement.
       ``(10) Regulations.--For purposes of this section, the term 
     `regulations' refers to interim final or final regulations 
     promulgated under subsection (f) to carry out this section 
     and section 1894.
       ``(b) Scope of Benefits; Beneficiary Safeguards.--
       ``(1) In general.--Under a PACE program agreement, a PACE 
     provider shall--
       ``(A) provide to PACE program eligible individuals, 
     regardless of source of payment and directly or under 
     contracts with other entities, at a minimum--
       ``(i) all items and services covered under title XVIII (for 
     individuals enrolled under section 1894) and all items and 
     services covered under this title, but without any limitation 
     or condition as to amount, duration, or scope and without 
     application of deductibles, copayments, coinsurance, or other 
     cost-sharing that would otherwise apply under such title or 
     this title, respectively; and
       ``(ii) all additional items and services specified in 
     regulations, based upon those required under the PACE 
     protocol;

[[Page H4423]]

       ``(B) provide such enrollees access to necessary covered 
     items and services 24 hours per day, every day of the year;
       ``(C) provide services to such enrollees through a 
     comprehensive, multidisciplinary health and social services 
     delivery system which integrates acute and long-term care 
     services pursuant to regulations; and
       ``(D) specify the covered items and services that will not 
     be provided directly by the entity, and to arrange for 
     delivery of those items and services through contracts 
     meeting the requirements of regulations.
       ``(2) Quality assurance; patient safeguards.--The PACE 
     program agreement shall require the PACE provider to have in 
     effect at a minimum--
       ``(A) a written plan of quality assurance and improvement, 
     and procedures implementing such plan, in accordance with 
     regulations, and
       ``(B) written safeguards of the rights of enrolled 
     participants (including a patient bill of rights and 
     procedures for grievances and appeals) in accordance with 
     regulations and with other requirements of this title and 
     Federal and State law designed for the protection of 
     patients.
       ``(c) Eligibility Determinations.--
       ``(1) In general.--The determination of whether an 
     individual is a PACE program eligible individual--
       ``(A) shall be made under and in accordance with the PACE 
     program agreement, and
       ``(B) who is entitled to medical assistance under this 
     title, shall be made (or who is not so entitled, may be made) 
     by the State administering agency.
       ``(2) Condition.--An individual is not a PACE program 
     eligible individual (with respect to payment under this 
     section) unless the individual's health status has been 
     determined, in accordance with regulations, to be comparable 
     to the health status of individuals who have participated in 
     the PACE demonstration waiver programs. Such determination 
     shall be based upon information on health status and related 
     indicators (such as medical diagnoses and measures of 
     activities of daily living, instrumental activities of daily 
     living, and cognitive impairment) that are part of a uniform 
     minimum data set collected by PACE providers on potential 
     eligible individuals.
       ``(3) Annual eligibility recertifications.--
       ``(A) In general.--Subject to subparagraph (B), the 
     determination described in subsection (a)(5)(B) for an 
     individual shall be reevaluated at least once a year.
       ``(B) Exception.--The requirement of annual reevaluation 
     under subparagraph (A) may be waived during a period in 
     accordance with regulations in those cases where the State 
     administering agency determines that there is no reasonable 
     expectation of improvement or significant change in an 
     individual's condition during the period because of the 
     advanced age, severity of the advanced age, severity of 
     chronic condition, or degree of impairment of functional 
     capacity of the individual involved.
       ``(4) Continuation of eligibility.--An individual who is a 
     PACE program eligible individual may be deemed to continue to 
     be such an individual notwithstanding a determination that 
     the individual no longer meets the requirement of subsection 
     (a)(5)(B) if, in accordance with regulations, in the absence 
     of continued coverage under a PACE program the individual 
     reasonably would be expected to meet such requirement within 
     the succeeding 6-month period.
       ``(5) Enrollment; disenrollment.--The enrollment and 
     disenrollment of PACE program eligible individuals in a PACE 
     program shall be pursuant to regulations and the PACE program 
     agreement and shall permit enrollees to voluntarily disenroll 
     without cause at any time.
       ``(d) Payments to PACE Providers on a Capitated Basis.--
       ``(1) In general.--In the case of a PACE provider with a 
     PACE program agreement under this section, except as provided 
     in this subsection or by regulations, the State shall make 
     prospective monthly payments of a capitation amount for each 
     PACE program eligible individual enrolled under the agreement 
     under this section.
       ``(2) Capitation amount.--The capitation amount to be 
     applied under this subsection for a provider for a contract 
     year shall be an amount specified in the PACE program 
     agreement for the year. Such amount shall be an amount, 
     specified under the PACE agreement, which is less than the 
     amount that would otherwise have been made under the State 
     plan if the individuals were not so enrolled and shall be 
     adjusted to take into account the comparative frailty of PACE 
     enrollees and such other factors as the Secretary determines 
     to be appropriate. The payment under this section shall be in 
     addition to any payment made under section 1894 for 
     individuals who are enrolled in a PACE program under such 
     section.
       ``(e) PACE Program Agreement.--
       ``(1) Requirement.--
       ``(A) In general.--The Secretary, in close cooperation with 
     the State administering agency, shall establish procedures 
     for entering into, extending, and terminating PACE program 
     agreements for the operation of PACE programs by entities 
     that meet the requirements for a PACE provider under this 
     section, section 1894, and regulations.
       ``(B) Numerical limitation.--
       ``(i) In general.--The Secretary shall not permit the 
     number of PACE providers with which agreements are in effect 
     under this section or under section 9412(b) of the Omnibus 
     Budget Reconciliation Act of 1986 to exceed--

       ``(I) 40 as of the date of the enactment of this section, 
     or
       ``(II) as of each succeeding anniversary of such date, the 
     numerical limitation under this subparagraph for the 
     preceding year plus 20.

     Subclause (II) shall apply without regard to the actual 
     number of agreements in effect as of a previous anniversary 
     date.
       ``(ii) Treatment of certain private, for-profit 
     providers.--The numerical limitation in clause (i) shall not 
     apply to a PACE provider that--

       ``(I) is operating under a demonstration project waiver 
     under subsection (h), or
       ``(II) was operating under such a waiver and subsequently 
     qualifies for PACE provider status pursuant to subsection 
     (a)(3)(B)(ii).

       ``(2) Service area and eligibility.--
       ``(A) In general.--A PACE program agreement for a PACE 
     program--
       ``(i) shall designate the service area of the program;
       ``(ii) may provide additional requirements for individuals 
     to qualify as PACE program eligible individuals with respect 
     to the program;
       ``(iii) shall be effective for a contract year, but may be 
     extended for additional contract years in the absence of a 
     notice by a party to terminate and is subject to termination 
     by the Secretary and the State administering agency at any 
     time for cause (as provided under the agreement);
       ``(iv) shall require a PACE provider to meet all applicable 
     State and local laws and requirements; and
       ``(v) shall have such additional terms and conditions as 
     the parties may agree to consistent with this section and 
     regulations.
       ``(B) Service area overlap.--In designating a service area 
     under a PACE program agreement under subparagraph (A)(i), the 
     Secretary (in consultation with the State administering 
     agency) may exclude from designation an area that is already 
     covered under another PACE program agreement, in order to 
     avoid unnecessary duplication of services and avoid impairing 
     the financial and service viability of an existing program.
       ``(3) Data collection.--
       ``(A) In general.--Under a PACE program agreement, the PACE 
     provider shall--
       ``(i) collect data,
       ``(ii) maintain, and afford the Secretary and the State 
     administering agency access to, the records relating to the 
     program, including pertinent financial, medical, and 
     personnel records, and
       ``(iii) make to the Secretary and the State administering 
     agency reports that the Secretary finds (in consultation with 
     State administering agencies) necessary to monitor the 
     operation, cost, and effectiveness of the PACE program under 
     this title and title XVIII.
       ``(B) Requirements during trial period.--During the first 
     three years of operation of a PACE program (either under this 
     section or under a PACE demonstration waiver program), the 
     PACE provider shall provide such additional data as the 
     Secretary specifies in regulations in order to perform the 
     oversight required under paragraph (4)(A).
       ``(4) Oversight.--
       ``(A) Annual, close oversight during trial period.--During 
     the trial period (as defined in subsection (a)(9)) with 
     respect to a PACE program operated by a PACE provider, the 
     Secretary (in cooperation with the State administering 
     agency) shall conduct a comprehensive annual review of the 
     operation of the PACE program by the provider in order to 
     assure compliance with the requirements of this section and 
     regulations. Such a review shall include--
       ``(i) an on-site visit to the program site;
       ``(ii) comprehensive assessment of a provider's fiscal 
     soundness;
       ``(iii) comprehensive assessment of the provider's capacity 
     to provide all PACE services to all enrolled participants;
       ``(iv) detailed analysis of the entity's substantial 
     compliance with all significant requirements of this section 
     and regulations; and
       ``(v) any other elements the Secretary or State agency 
     considers necessary or appropriate.
       ``(B) Continuing oversight.--After the trial period, the 
     Secretary (in cooperation with the State administering 
     agency) shall continue to conduct such review of the 
     operation of PACE providers and PACE programs as may be 
     appropriate, taking into account the performance level of a 
     provider and compliance of a provider with all significant 
     requirements of this section and regulations.
       ``(C) Disclosure.--The results of reviews under this 
     paragraph shall be reported promptly to the PACE provider, 
     along with any recommendations for changes to the provider's 
     program, and shall be made available to the public upon 
     request.
       ``(5) Termination of pace provider agreements.--
       ``(A) In general.--Under regulations--
       ``(i) the Secretary or a State administering agency may 
     terminate a PACE program agreement for cause, and
       ``(ii) a PACE provider may terminate such an agreement 
     after appropriate notice to the Secretary, the State agency, 
     and enrollees.
       ``(B) Causes for termination.--In accordance with 
     regulations establishing procedures for termination of PACE 
     program

[[Page H4424]]

     agreements, the Secretary or a State administering agency may 
     terminate a PACE program agreement with a PACE provider for, 
     among other reasons, the fact that--
       ``(i) the Secretary or State administering agency 
     determines that--

       ``(I) there are significant deficiencies in the quality of 
     care provided to enrolled participants; or
       ``(II) the provider has failed to comply substantially with 
     conditions for a program or provider under this section or 
     section 1894; and

       ``(ii) the entity has failed to develop and successfully 
     initiate, within 30 days of the date of the receipt of 
     written notice of such a determination, and continue 
     implementation of a plan to correct the deficiencies.
       ``(C) Termination and transition procedures.--An entity 
     whose PACE provider agreement is terminated under this 
     paragraph shall implement the transition procedures required 
     under subsection (a)(2)(C).
       ``(6) Secretary's oversight; enforcement authority.--
       ``(A) In general.--Under regulations, if the Secretary 
     determines (after consultation with the State administering 
     agency) that a PACE provider is failing substantially to 
     comply with the requirements of this section and regulations, 
     the Secretary (and the State administering agency) may take 
     any or all of the following actions:
       ``(i) Condition the continuation of the PACE program 
     agreement upon timely execution of a corrective action plan.
       ``(ii) Withhold some or all further payments under the PACE 
     program agreement under this section or section 1894 with 
     respect to PACE program services furnished by such provider 
     until the deficiencies have been corrected.
       ``(iii) Terminate such agreement.
       ``(B) Application of intermediate sanctions.--Under 
     regulations, the Secretary may provide for the application 
     against a PACE provider of remedies described in section 
     1857(f)(2) (or, for periods before January 1, 1999, section 
     1876(i)(6)(B)) or 1903(m)(6)(B) in the case of violations by 
     the provider of the type described in section 1857(f)(1) (or 
     1876(i)(6)(A) for such periods) or 1903(m)(6)(A), 
     respectively (in relation to agreements, enrollees, and 
     requirements under section 1894 or this section, 
     respectively).
       ``(7) Procedures for termination or imposition of 
     sanctions.--Under regulations, the provisions of section 
     1857(g) (or for periods before January 1, 1999, section 
     1876(i)(9)) shall apply to termination and sanctions 
     respecting a PACE program agreement and PACE provider under 
     this subsection in the same manner as they apply to a 
     termination and sanctions with respect to a contract and a 
     MedicarePlus organization under part C (or for such periods 
     an eligible organization under section 1876).
       ``(8) Timely consideration of applications for pace program 
     provider status.--In considering an application for PACE 
     provider program status, the application shall be deemed 
     approved unless the Secretary, within 90 days after the date 
     of the submission of the application to the Secretary, either 
     denies such request in writing or informs the applicant in 
     writing with respect to any additional information that is 
     needed in order to make a final determination with respect to 
     the application. After the date the Secretary receives such 
     additional information, the application shall be deemed 
     approved unless the Secretary, within 90 days of such date, 
     denies such request.
       ``(f) Regulations.--
       ``(1) In general.--The Secretary shall issue interim final 
     or final regulations to carry out this section and section 
     1894.
       ``(2) Use of pace protocol.--
       ``(A) In general.--In issuing such regulations, the 
     Secretary shall, to the extent consistent with the provisions 
     of this section, incorporate the requirements applied to PACE 
     demonstration waiver programs under the PACE protocol.
       ``(B) Flexibility.--The Secretary (in close consultation 
     with State administering agencies) may modify or waive such 
     provisions of the PACE protocol in order to provide for 
     reasonable flexibility in adapting the PACE service delivery 
     model to the needs of particular organizations (such as those 
     in rural areas or those that may determine it appropriate to 
     use non-staff physicians accordingly to State licensing law 
     requirements) under this section and section 1932 where such 
     flexibility is not inconsistent with and would not impair the 
     essential elements, objectives, and requirements of the this 
     section, including--
       ``(i) the focus on frail elderly qualifying individuals who 
     require the level of care provided in a nursing facility;
       ``(ii) the delivery of comprehensive, integrated acute and 
     long-term care services;
       ``(iii) the interdisciplinary team approach to care 
     management and service delivery;
       ``(iv) capitated, integrated financing that allows the 
     provider to pool payments received from public and private 
     programs and individuals; and
       ``(v) the assumption by the provider over time of full 
     financial risk.
       ``(3) Application of certain additional beneficiary and 
     program protections.--
       ``(A) In general.--In issuing such regulations and subject 
     to subparagraph (B), the Secretary may apply with respect to 
     PACE programs, providers, and agreements such requirements of 
     part C of title XVIII (or, for periods before January 1, 
     1999, section 1876) and section 1903(m) relating to 
     protection of beneficiaries and program integrity as would 
     apply to MedicarePlus organizations under such part C (or for 
     such periods eligible organizations under risk-sharing 
     contracts under section 1876) and to health maintenance 
     organizations under prepaid capitation agreements under 
     section 1903(m).
       ``(B) Considerations.--In issuing such regulations, the 
     Secretary shall--
       ``(i) take into account the differences between populations 
     served and benefits provided under this section and under 
     part C of title XVIII (or, for periods before January 1, 
     1999, section 1876) and section 1903(m);
       ``(ii) not include any requirement that conflicts with 
     carrying out PACE programs under this section; and
       ``(iii) not include any requirement restricting the 
     proportion of enrollees who are eligible for benefits under 
     this title or title XVIII.
       ``(g) Waivers of Requirements.--With respect to carrying 
     out a PACE program under this section, the following 
     requirements of this title (and regulations relating to such 
     requirements) shall not apply:
       ``(1) Section 1902(a)(1), relating to any requirement that 
     PACE programs or PACE program services be provided in all 
     areas of a State.
       ``(2) Section 1902(a)(10), insofar as such section relates 
     to comparability of services among different population 
     groups.
       ``(3) Sections 1902(a)(23) and 1915(b)(4), relating to 
     freedom of choice of providers under a PACE program.
       ``(4) Section 1903(m)(2)(A), insofar as it restricts a PACE 
     provider from receiving prepaid capitation payments.
       ``(h) Demonstration Project for For-Profit Entities.--
       ``(1) In general.--In order to demonstrate the operation of 
     a PACE program by a private, for-profit entity, the Secretary 
     (in close consultation with State administering agencies) 
     shall grant waivers from the requirement under subsection 
     (a)(3) that a PACE provider may not be a for-profit, private 
     entity.
       ``(2) Similar terms and conditions.--
       ``(A) In general.--Except as provided under subparagraph 
     (B), and paragraph (1), the terms and conditions for 
     operation of a PACE program by a provider under this 
     subsection shall be the same as those for PACE providers that 
     are nonprofit, private organizations.
       ``(B) Numerical limitation.--The number of programs for 
     which waivers are granted under this subsection shall not 
     exceed 10. Programs with waivers granted under this 
     subsection shall not be counted against the numerical 
     limitation specified in subsection (e)(1)(B).
       ``(i) Post-Eligibility Treatment of Income.--A State may 
     provide for post-eligibility treatment of income for 
     individuals enrolled in PACE programs under this section in 
     the same manner as a State treats post-eligibility income for 
     individuals receiving services under a waiver under section 
     1915(c).
       ``(j) Miscellaneous Provisions.--
       ``(1) Construction.--Nothing in this section or section 
     1894 shall be construed as preventing a PACE provider from 
     entering into contracts with other governmental or 
     nongovernmental payers for the care of PACE program eligible 
     individuals who are not eligible for benefits under part A, 
     or enrolled under part B, of title XVIII or eligible for 
     medical assistance under this title.''.
       (b) Conforming Amendments.--
       (1) Section 1902 (42 U.S.C. 1396a), as amended by section 
     3403(c), is amended--
       (A) in subsection (a)(10)(C)(iv), by striking ``(25)'' and 
     inserting ``(26)'', and
       (B) in subsection (j), by striking ``(26)'' and inserting 
     ``(27)''.
       (2) Section 1924(a)(5) (42 U.S.C. 1396r-5(a)(5)) is 
     amended--
       (A) in the heading, by striking ``from organizations 
     receiving certain waivers'' and inserting ``under pace 
     programs'', and
       (B) by striking ``from any organization'' and all that 
     follows and inserting ``under a PACE demonstration waiver 
     program (as defined in subsection (a)(7) of section 1932) or 
     under a PACE program under section 1894.''.
       (3) Section 1903(f)(4)(C) (42 U.S.C. 1396b(f)(4)(C)) is 
     amended by inserting ``or who is a PACE program eligible 
     individual enrolled in a PACE program under section 1932,'' 
     after ``section 1902(a)(10)(A),''.

     SEC. 3432. COVERAGE OF PACE UNDER THE MEDICARE PROGRAM.

       Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
     inserting after section 1894 the following new section:


    ``payments to, and coverage of benefits under, programs of all-
                 inclusive care for the elderly (pace)

       ``Sec. 1894. (a) Receipt of Benefits Through Enrollment in 
     PACE Program; Definitions for PACE Program Related Terms.--
       ``(1) Benefits through enrollment in a pace program.--In 
     accordance with this section, in the case of an individual 
     who is entitled to benefits under part A or enrolled under 
     part B and who is a PACE program eligible individual with 
     respect to a PACE program offered by a PACE provider under a 
     PACE program agreement--
       ``(A) the individual may enroll in the program under this 
     section; and
       ``(B) so long as the individual is so enrolled and in 
     accordance with regulations--
       ``(i) the individual shall receive benefits under this 
     title solely through such program, and

[[Page H4425]]

       ``(ii) the PACE provider is entitled to payment under and 
     in accordance with this section and such agreement for 
     provision of such benefits.
       ``(2) Application of definitions.--The definitions of terms 
     under section 1932(a) shall apply under this section in the 
     same manner as they apply under section 1932.
       ``(b) Application of Medicaid Terms and Conditions.--Except 
     as provided in this section, the terms and conditions for the 
     operation and participation of PACE program eligible 
     individuals in PACE programs offered by PACE providers under 
     PACE program agreements under section 1932 shall apply for 
     purposes of this section.
       ``(c) Payment.--
       ``(1) Adjustment in payment amounts.--In the case of 
     individuals enrolled in a PACE program under this section, 
     the amount of payment under this section shall not be the 
     amount calculated under section 1932(d)(2), but shall be an 
     amount, specified under the PACE agreement, based upon 
     payment rates established for purposes of payment under 
     section 1854 (or, for periods before January 1, 1999, for 
     purposes of risk-sharing contracts under section 1876) and 
     shall be adjusted to take into account the comparative 
     frailty of PACE enrollees and such other factors as the 
     Secretary determines to be appropriate. Such amount under 
     such an agreement shall be computed in a manner so that the 
     total payment level for all PACE program eligible individuals 
     enrolled under a program is less than the projected payment 
     under this title for a comparable population not enrolled 
     under a PACE program.
       ``(2) Form.--The Secretary shall make prospective monthly 
     payments of a capitation amount for each PACE program 
     eligible individual enrolled under this section in the same 
     manner and from the same sources as payments are made to a 
     MedicarePlus organization under section 1854 (or, for periods 
     beginning before January 1, 1999, to an eligible organization 
     under a risk-sharing contract under section 1876). Such 
     payments shall be subject to adjustment in the manner 
     described in section 1854(a)(2) or section 1876(a)(1)(E), as 
     the case may be.
       ``(d) Waivers of Requirements.--With respect to carrying 
     out a PACE program under this section, the following 
     requirements of this title (and regulations relating to such 
     requirements) are waived and shall not apply:
       ``(1) Section 1812, insofar as it limits coverage of 
     institutional services.
       ``(2) Sections 1813, 1814, 1833, and 1886, insofar as such 
     sections relate to rules for payment for benefits.
       ``(3) Sections 1814(a)(2)(B), 1814(a)(2)(C), and 
     1835(a)(2)(A), insofar as they limit coverage of extended 
     care services or home health services.
       ``(4) Section 1861(i), insofar as it imposes a 3-day prior 
     hospitalization requirement for coverage of extended care 
     services.
       ``(5) Sections 1862(a)(1) and 1862(a)(9), insofar as they 
     may prevent payment for PACE program services to individuals 
     enrolled under PACE programs.''.

     SEC. 3433. EFFECTIVE DATE; TRANSITION.

       (a) Timely Issuance of Regulations; Effective Date.--The 
     Secretary of Health and Human Services shall promulgate 
     regulations to carry out this subchapter in a timely manner. 
     Such regulations shall be designed so that entities may 
     establish and operate PACE programs under sections 1894 and 
     1932 for periods beginning not later than 1 year after the 
     date of the enactment of this Act.
       (b) Expansion and Transition for PACE Demonstration Project 
     Waivers.--
       (1) Expansion in current number and extension of 
     demonstration projects.--Section 9412(b) of the Omnibus 
     Budget Reconciliation Act of 1986, as amended by section 
     4118(g) of the Omnibus Budget Reconciliation Act of 1987, is 
     amended--
       (A) in paragraph (1), by inserting before the period at the 
     end the following: ``, except that the Secretary shall grant 
     waivers of such requirements to up to the applicable 
     numerical limitation specified in section 1932(e)(1)(B) of 
     the Social Security Act''; and
       (B) in paragraph (2)--
       (i) in subparagraph (A), by striking ``, including 
     permitting the organization to assume progressively (over the 
     initial 3-year period of the waiver) the full financial 
     risk''; and
       (ii) in subparagraph (C), by adding at the end the 
     following: ``In granting further extensions, an organization 
     shall not be required to provide for reporting of information 
     which is only required because of the demonstration nature of 
     the project.''.
       (2) Elimination of replication requirement.--Subparagraph 
     (B) of paragraph (2) of such section shall not apply to 
     waivers granted under such section after the date of the 
     enactment of this Act.
       (3) Timely consideration of applications.--In considering 
     an application for waivers under such section before the 
     effective date of repeals under subsection (c), subject to 
     the numerical limitation under the amendment made by 
     paragraph (1), the application shall be deemed approved 
     unless the Secretary of Health and Human Services, within 90 
     days after the date of its submission to the Secretary, 
     either denies such request in writing or informs the 
     applicant in writing with respect to any additional 
     information which is needed in order to make a final 
     determination with respect to the application. After the date 
     the Secretary receives such additional information, the 
     application shall be deemed approved unless the Secretary, 
     within 90 days of such date, denies such request.
       (c) Priority and Special Consideration in Application.--
     During the 3-year period beginning on the date of the 
     enactment of this Act:
       (1) Provider status.--The Secretary of Health and Human 
     Services shall give priority, in processing applications of 
     entities to qualify as PACE programs under section 1894 or 
     1932 of the Social Security Act--
       (A) first, to entities that are operating a PACE 
     demonstration waiver program (as defined in section 
     1932(a)(7) of such Act), and
       (B) then entities that have applied to operate such a 
     program as of May 1, 1997.
       (2) New waivers.--The Secretary shall give priority, in the 
     awarding of additional waivers under section 9412(b) of the 
     Omnibus Budget Reconciliation Act of 1986--
       (A) to any entities that have applied for such waivers 
     under such section as of May 1, 1997; and
       (B) to any entity that, as of May 1, 1997, has formally 
     contracted with a State to provide services for which payment 
     is made on a capitated basis with an understanding that the 
     entity was seeking to become a PACE provider.
       (3) Special consideration.--The Secretary shall give 
     special consideration, in the processing of applications 
     described in paragraph (1) and the awarding of waivers 
     described in paragraph (2), to an entity which as of May 1, 
     1997 through formal activities (such as entering into 
     contracts for feasibility studies) has indicated a specific 
     intent to become a PACE provider.
       (d) Repeal of Current PACE Demonstration Project Waiver 
     Authority.--
       (1) In general.--Subject to paragraphs (2) and (3), the 
     following provisions of law are repealed:
       (A) Section 603(c) of the Social Security Amendments of 
     1983 (Public Law 98-21).
       (B) Section 9220 of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (Public Law 99-272).
       (C) Section 9412(b) of the Omnibus Budget Reconciliation 
     Act of 1986 (Public Law 99-509).
       (2) Delay in application.--
       (A) In general.--Subject to subparagraph (B), the repeals 
     made by paragraph (1) shall not apply to waivers granted 
     before the initial effective date of regulations described in 
     subsection (a).
       (B) Application to approved waivers.--Such repeals shall 
     apply to waivers granted before such date only after allowing 
     such organizations a transition period (of up to 24 months) 
     in order to permit sufficient time for an orderly transition 
     from demonstration project authority to general authority 
     provided under the amendments made by this subchapter.
       (3) State option.--A State may elect to maintain the PACE 
     program which (as of the date of the enactment of this Act) 
     were operating under the authority described in paragraph (1) 
     without electing to use the authority under section 1932 of 
     the Public Health Service Act.

     SEC. 3434. STUDY AND REPORTS.

       (a) Study.--
       (1) In general.--The Secretary of Health and Human Services 
     (in close consultation with State administering agencies, as 
     defined in section 1932(a)(8) of the Social Security Act) 
     shall conduct a study of the quality and cost of providing 
     PACE program services under the medicare and medicaid 
     programs under the amendments made by this subchapter.
       (2) Study of private, for-profit providers.--Such study 
     shall specifically compare the costs, quality, and access to 
     services by entities that are private, for-profit entities 
     operating under demonstration projects waivers granted under 
     section 1932(h) of the Social Security Act with the costs, 
     quality, and access to services of other PACE providers.
       (b) Report.--
       (1) In general.--Not later than 4 years after the date of 
     the enactment of this Act, the Secretary shall provide for a 
     report to Congress on the impact of such amendments on 
     quality and cost of services. The Secretary shall include in 
     such report such recommendations for changes in the operation 
     of such amendments as the Secretary deems appropriate.
       (2) Treatment of private, for-profit providers.--The report 
     shall include specific findings on whether any of the 
     following findings is true:
       (A) The number of covered lives enrolled with entities 
     operating under demonstration project waivers under section 
     1932(h) of the Social Security Act is fewer than 800 (or such 
     lesser number as the Secretary may find statistically 
     sufficient to make determinations respecting findings 
     described in the succeeding subparagraphs).
       (B) The population enrolled with such entities is less 
     frail than the population enrolled with other PACE providers.
       (C) Access to or quality of care for individuals enrolled 
     with such entities is lower than such access or quality for 
     individuals enrolled with other PACE providers.
       (D) The application of such section has resulted in an 
     increase in expenditures under the medicare or medicaid 
     programs above the expenditures that would have been made if 
     such section did not apply.
       (c) Information Included in Annual Recommendations.--The 
     Medicare Payment Advisory Commission shall include in its 
     annual report under section 1805(b)(1)(B) of the

[[Page H4426]]

     Social Security Act recommendations on the methodology and 
     level of payments made to PACE providers under section 
     1894(d) of such Act and on the treatment of private, for-
     profit entities as PACE providers.

                         Subchapter E--Benefits

     SEC. 3441. ELIMINATION OF REQUIREMENT TO PAY FOR PRIVATE 
                   INSURANCE.

       (a) Repeal of State Plan Provision.--Section 1902(a)(25) 
     (42 U.S.C. 1396a(a)(25)) is amended--
       (1) by striking subparagraph (G); and
       (2) by redesignating subparagraphs (H) and (I) as 
     subparagraphs (G) and (H), respectively.
       (b) Making Provision Optional.--Section 1906 (42 U.S.C. 
     1396e) is amended--
       (1) in subsection (a)--
       (A) by striking ``For purposes of section 1902(a)(25)(G) 
     and subject to subsection (d), each'' and inserting ``Each'',
       (B) in paragraph (1), by striking ``shall'' and inserting 
     ``may'', and
       (C) in paragraph (2), by striking ``shall'' and inserting 
     ``may''; and
       (2) by striking subsection (d).
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 3442. PERMITTING SAME COPAYMENTS IN HEALTH MAINTENANCE 
                   ORGANIZATIONS AS IN FEE-FOR-SERVICE.

       (a) In General.--Section 1916(a)(2)(D) (42 U.S.C. 
     1396o(a)(2)(D)) is amended by inserting ``(at the option of 
     the State)'' after ``section 1905(a)(4)(C), or''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to cost sharing with respect to deductions, cost 
     sharing and similar charges imposed for items and services 
     furnished on or after the date of the enactment of this Act.

     SEC. 3443. PHYSICIAN QUALIFICATION REQUIREMENTS.

       (a) In General.--Section 1903(i) (42 U.S.C. 1396b(i)) is 
     amended by striking paragraph (12)
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to services furnished on or after the date of the 
     enactment of this Act.

     SEC. 3444. ELIMINATION OF REQUIREMENT OF PRIOR 
                   INSTITUTIONALIZATION WITH RESPECT TO 
                   HABILITATION SERVICES FURNISHED UNDER A WAIVER 
                   FOR HOME OR COMMUNITY-BASED SERVICES.

       (a) In General.--Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) 
     is amended, in the matter preceding subparagraph (A), by 
     striking ``, with respect to individuals who receive such 
     services after discharge from a nursing facility or 
     intermediate care facility for the mentally retarded''.
       (b) Effective Date.--The amendment made by subsection (a) 
     apply to services furnished on or after October 1, 1997.

     SEC. 3445. BENEFITS FOR SERVICES OF PHYSICIAN ASSISTANTS.

       (a) In General.--Section 1905(a) (42 U.S.C. 1396d(a)), as 
     amended by sections 3403(a) and 3431(a), is amended--
       (1) by redesignating paragraphs (22) through (27) as 
     paragraphs (23) through (28), and
       (2) by inserting after paragraph (21) the following new 
     paragraph:
       ``(22) services furnished by an physician assistant (as 
     defined in section 1861(aa)(5)) which the assistant is 
     legally authorized to perform under State law and with the 
     supervision of a physician;''.
       (b) Conforming Amendments.--Section 1902 (42 U.S.C. 1396a), 
     as amended by sections 3403(c) and 3431(b)(1), is amended--
       (1) in subsection (a)(10)(C)(iv), by striking ``(26)'' and 
     inserting ``(27)'', and
       (2) in subsection (j), by striking ``(27)'' and inserting 
     ``(28)''.

     SEC. 3446. STUDY AND REPORT ON ACTUARIAL VALUE OF EPSDT 
                   BENEFIT.

       (a) Study.--The Secretary of Health and Human Services 
     shall provide for a study on the actuarial value of the 
     provision of early and periodic screening, diagnostic, and 
     treatment services (as defined in section 1905(r) of the 
     Social Security Act (42 U.S.C. 1396d(r))) under the medicaid 
     program under title XIX of such Act. Such study shall include 
     an examination of the portion of such value that is 
     attributable to paragraph (5) of such section and to the 
     second sentence of such section.
       (b) Report.--By not later than 18 months after the date of 
     the enactment of this Act, the Secretary shall submit a 
     report to Congress on the results of the study under 
     subsection (a).

                      Subchapter F--Administration

     SEC. 3451. ELIMINATION OF DUPLICATIVE INSPECTION OF CARE 
                   REQUIREMENTS FOR ICFS/MR AND MENTAL HOSPITALS.

       (a) Mental Hospitals.--Section 1902(a)(26) (42 U.S.C. 
     1396a(a)(26)) is amended--
       (1) by striking ``provide--
       ``(A) with respect to each patient'' and inserting 
     ``provide, with respect to each patient''; and
       (2) by striking subparagraphs (B) and (C).
       (b) ICFS/MR.--Section 1902(a)(31) (42 U.S.C. 1396a(a)(31)) 
     is amended--
       (1) by striking ``provide--
       ``(A) with respect to each patient'' and inserting 
     ``provide, with respect to each patient''; and
       (2) by striking subparagraphs (B) and (C).
       (c) Effective Date.--The amendments made by this section 
     take effect on the date of the enactment of this Act.

     SEC. 3452. ALTERNATIVE SANCTIONS FOR NONCOMPLIANT ICFS/MR.

       (a) In General.--Section 1902(i)(1)(B) (42 U.S.C. 
     1396a(i)(1)(B)) is amended by striking ``provide'' and 
     inserting ``establish alternative remedies if the State 
     demonstrates to the Secretary's satisfaction that the 
     alternative remedies are effective in deterring noncompliance 
     and correcting deficiencies, and may provide''.
       (b) Effective Date.--The amendments made by subsection (a) 
     takes effect on the date of the enactment of this Act.

     SEC. 3453. MODIFICATION OF MMIS REQUIREMENTS.

       (a) In General.--Section 1903(r) (42 U.S.C. 1396b(r)) is 
     amended--
       (1) by striking all that precedes paragraph (5) and 
     inserting the following:
       ``(r)(1) In order to receive payments under subsection (a) 
     for use of automated data systems in administration of the 
     State plan under this title, a State must have in operation 
     mechanized claims processing and information retrieval 
     systems that meet the requirements of this subsection and 
     that the Secretary has found--
       ``(A) is adequate to provide efficient, economical, and 
     effective administration of such State plan;
       ``(B) is compatible with the claims processing and 
     information retrieval systems used in the administration of 
     title XVIII, and for this purpose--
       ``(i) has a uniform identification coding system for 
     providers, other payees, and beneficiaries under this title 
     or title XVIII;
       ``(ii) provides liaison between States and carriers and 
     intermediaries with agreements under title XVIII to 
     facilitate timely exchange of appropriate data; and
       ``(iii) provides for exchange of data between the States 
     and the Secretary with respect to persons sanctioned under 
     this title or title XVIII;
       ``(C) is capable of providing accurate and timely data;
       ``(D) is complying with the applicable provisions of part C 
     of title XI;
       ``(E) is designed to receive provider claims in standard 
     formats to the extent specified by the Secretary; and
       ``(F) effective for claims filed on or after January 1, 
     1999, provides for electronic transmission of claims data in 
     the format specified by the Secretary and consistent with the 
     Medicaid Statistical Information System (MSIS) (including 
     detailed individual enrollee encounter data and other 
     information that the Secretary may find necessary).''.
       (2) in paragraph (5)--
       (A) by striking subparagraph (B);
       (B) by striking all that precedes clause (i) and inserting 
     the following:
       ``(2) In order to meet the requirements of this paragraph, 
     mechanized claims processing and information retrieval 
     systems must meet the following requirements:'';
       (C) in clause (iii), by striking ``under paragraph (6)''; 
     and
       (D) by redesignating clauses (i) through (iii) as 
     paragraphs (A) through (C); and
       (3) by striking paragraphs (6), (7), and (8).
       (b) Conforming Amendments.--Section 1902(a)(25)(A)(ii) (42 
     U.S.C. 1396a(a)(25)(A)(ii)) is amended by striking all that 
     follows ``shall'' and inserting the following: ``be 
     integrated with, and be monitored as a part of the 
     Secretary's review of, the State's mechanized claims 
     processing and information retrieval system under section 
     1903(r);''.
       (c) Effective Date.--Except as otherwise specifically 
     provided, the amendments made by this section shall take 
     effect on January 1, 1998.

     SEC. 3454. FACILITATING IMPOSITION OF STATE ALTERNATIVE 
                   REMEDIES ON NONCOMPLIANT NURSING FACILITIES.

       (a) In General.--Section 1919(h)(3)(D) (42 U.S.C. 
     1396r(h)(3)(D)) is amended--
       (1) by inserting ``and'' at the end of clause (i);
       (2) by striking ``, and'' at the end of clause (ii) and 
     inserting a period; and
       (3) by striking clause (iii).
       (b) Effective Date.--The amendments made by subsection (a) 
     take effect on the date of the enactment of this Act.

     SEC. 3455. MEDICALLY ACCEPTED INDICATION.

       Section 1927(g)(1)(B)(i) (42 U.S.C. 1396r-8(g)(1)(B)(i)) is 
     amended--
       (1) by striking ``and'' at the end of subclause (II),
       (2) by redesignating subclause (III) as subclause (IV), and
       (3) by inserting after subclause (II) the following:

       ``(III) the DRUGDEX Information System; and''.

     SEC. 3456. CONTINUATION OF STATE-WIDE SECTION 1115 MEDICAID 
                   WAIVERS.

       (a) In General.--Section 1115 (42 U.S.C. 1315) is amended 
     by adding at the end the following new subsection:
       ``(e)(1) The provisions of this subsection shall apply to 
     the extension of State-wide comprehensive demonstration 
     project (in this subsection referred to as `waiver project') 
     for which a waiver of compliance with requirements of title 
     XIX is granted under subsection (a).
       ``(2) Not earlier than 1 year before the date the waiver 
     under subsection (a) with respect to a waiver project would 
     otherwise expire, the chief executive officer of the State 
     which is operating the project may submit to the Secretary a 
     written request for an extension, of up to 3 years, of the 
     project.
       ``(3) If the Secretary fails to respond to the request 
     within 6 months after the date it is submitted, the request 
     is deemed to have been granted.

[[Page H4427]]

       ``(4) If such a request is granted, the deadline for 
     submittal of a final report under the waiver project is 
     deemed to have been extended until the date that is 1 year 
     after the date the waivers under subsection (a) with respect 
     to the project would otherwise have expired.
       ``(5) The Secretary shall release an evaluation of each 
     such project not later than 1 year after the date of receipt 
     of the final report.
       ``(6) Subject to paragraphs (4) and (7), the extension of a 
     waiver project under this subsection shall be on the same 
     terms and conditions (including applicable terms and 
     conditions relating to quality and access of services, budget 
     neutrality, data and reporting requirements, and special 
     population protections) that applied to the project before 
     its extension under this subsection.
       ``(7) If an original condition of approval of a waiver 
     project was that Federal expenditures under the project not 
     exceed the Federal expenditures that would otherwise have 
     been made, the Secretary shall take such steps as may be 
     necessary to assure that, in the extension of the project 
     under this subsection, such condition continues to be met. In 
     applying the previous sentence, the Secretary shall take into 
     account the Secretary's best estimate of rates of change in 
     expenditures at the time of the extension.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to demonstration projects initially approved 
     before, on, or after the date of the enactment of this Act.

     SEC. 3457. AUTHORIZING ADMINISTRATIVE STREAMLINING AND 
                   PRIVATIZING MODIFICATIONS UNDER THE MEDICAID 
                   PROGRAM.

       Section 1902 (42 U.S.C. 1396a) is amended by adding at the 
     end the following:
       ``(aa)(1) Notwithstanding any other provision of law, no 
     provision of law shall be construed as preventing any State 
     from allowing determinations of eligibility to receive 
     medical assistance under this title to be made by an entity 
     that is not a State or local government, or by an individual 
     who is not an employee of a State or local government, which 
     meets such qualifications as the State determines. For 
     purposes of any Federal law, such determinations shall be 
     considered to be made by the State and by a State agency.
       ``(2) Nothing in this subsection shall be construed as 
     affecting--
       ``(A) the conditions for eligibility for benefits 
     (including any conditions relating to income or resources); 
     and
       ``(B) the rights to challenge determinations regarding 
     eligibility or rights to benefits; and
       ``(C) determinations regarding quality control or error 
     rates.''.

     SEC. 3458. EXTENSION OF MORATORIUM.

       Section 6408(a)(3) of the Omnibus Budget Reconciliation Act 
     of 1989, as amended by section 13642 of the Omnibus Budget 
     Reconciliation Act of 1993, is amended by striking ``December 
     31, 1995'' and inserting ``December 31, 2002''.

                      CHAPTER 2--QUALITY ASSURANCE

     SEC. 3461. REQUIREMENTS TO ENSURE QUALITY OF AND ACCESS TO 
                   CARE UNDER MANAGED CARE PLANS.

       (a) State Plan Requirement.--Section 1902(a) (42 U.S.C. 
     1396a(a)) is amended--
       (1) in paragraph (62), by striking ``; and'' at the end and 
     inserting a semicolon;
       (2) by striking the period at the end of paragraph (63) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (63) the following new 
     paragraph:
       ``(64) provide, with respect to all contracts described in 
     section 1903(m)(2)(A) with an organization or provider, 
     that--
       ``(A) the State agency develops and implements a quality 
     assessment and improvement strategy, consistent with 
     standards that the Secretary shall establish, in consultation 
     with the States, and monitor and that do not preempt the 
     application of stricter State standards, which includes--
       ``(i) standards for access to care so that covered services 
     are available within reasonable timeframes and in a manner 
     that ensures continuity of care and adequate primary care 
     and, where applicable, specialized services capacity, 
     including pediatric specialized services for special needs 
     children (as defined in section 1915(i)); and
       ``(ii) procedures for monitoring and evaluating the quality 
     and appropriateness of care and services to beneficiaries 
     that reflect the full spectrum of populations enrolled under 
     the contract and that include--

       ``(I) requirements for provision of quality assurance data 
     to the State using the data and information set that the 
     Secretary shall specify with respect to entities contracting 
     under section 1876 or alternative data requirements approved 
     by the Secretary;
       ``(II) regular and periodic examination of the scope and 
     content of the quality improvement strategy; and
       ``(III) other aspects of care and service directly related 
     to the improvement of quality of care (including grievance 
     procedures and marketing and information standards); and

       ``(B) that adequate provision is made, consistent with 
     standards that the Secretary shall specify and monitor, with 
     respect to financial reporting under the contracts.''.
       (b) Deemed Compliance.--Section 1903(m) (42 U.S.C. 
     1396b(m)) is amended by adding at the end the following:
       ``(7) Deemed compliance.--
       ``(A) Medicare organizations.--At the option of a State, 
     the requirements of the previous provisions of this 
     subsection shall not apply with respect to a health 
     maintenance organization if the organization is an eligible 
     organization with a contract in effect under section 1876 or 
     a MedicarePlus organization with a contract in effect under C 
     of title XVIII.
       ``(B) Private accreditation.--
       ``(i) In general.--At the option of a State, such 
     requirements shall not apply with respect to a health 
     maintenance organization if--
       ``(I) the organization is accredited by an organization 
     meeting the requirements described in subparagraph (C); and
       ``(II) the standards and process under which the 
     organization is accredited meet such requirements as are 
     established under clause (ii), without regard to whether or 
     not the time requirement of such clause is satisfied.
       ``(ii) Standards and process.--Not later than 180 days 
     after the date of the enactment of this paragraph, the 
     Secretary shall specify requirements for the standards and 
     process under which a health maintenance organization is 
     accredited by an organization meeting the requirements of 
     subparagraph (C).
       ``(C) Accrediting organization.--An accrediting 
     organization meets the requirements of this subparagraph if 
     the organization--
       ``(i) is a private, nonprofit organization;
       ``(ii) exists for the primary purpose of accrediting 
     managed care organizations or health care providers; and
       ``(iii) is independent of health care providers or 
     associations of health care providers.''.
       (c) Application to Managed Care Entities.--Section 
     1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is amended--
       (1) by striking ``and'' at the end of clause (x),
       (2) by striking the period at the end of clause (xi) and 
     inserting ``; and'', and
       (3) by adding at the end the following new clause:
       ``(xii) such contract provides for--
       ``(I) submitting to the State agency such information as 
     may be necessary to monitor the care delivered to members,
       ``(II) maintenance of an internal quality assurance program 
     consistent with section 1902(a)(64)(A), and meeting standards 
     that the Secretary shall establish in regulations; and
       ``(III) providing effective procedures for hearing and 
     resolving grievances between the entity and members enrolled 
     with the organization under this subsection.''.
       (d) Application to Primary Care Case Management 
     Contracts.--Section 1905(t)(3), as added by section 3403(b), 
     is amended--
       (1) by striking ``and'' at the end of subparagraph (D),
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and'', and
       (3) by adding at the end the following new subparagraph:
       ``(F) if payment is made to the organization on a prepaid 
     capitated or other risk basis, compliance with the 
     requirements of section 1903(m)(2)(A)(xii) in the same manner 
     such requirements apply to a health maintenance organization 
     under section 1903(m)(2)(A).''.
       (e) Effective Date.--The amendments made by this section 
     apply to agreements between a State agency and an 
     organization entered into or renewed on or after January 1, 
     1999.

     SEC. 3462. SOLVENCY STANDARDS FOR CERTAIN HEALTH MAINTENANCE 
                   ORGANIZATIONS.

       (a) In General.--Section 1903(m)(1) (42 U.S.C. 1396b(m)(1)) 
     is amended--
       (1) in subparagraph (A)(ii), by inserting ``, meets the 
     requirements of subparagraph (C)(i) (if applicable),'' after 
     ``provision is satisfactory to the State'', and
       (2) by adding at the end the following:
       ``(C)(i) Subject to clause (ii), a provision meets the 
     requirements of this subparagraph for an organization if the 
     organization meets solvency standards established by the 
     State for private health maintenance organizations or is 
     licensed or certified by the State as a risk-bearing entity.
       ``(ii) Clause (i) shall not apply to an organization if--
       ``(I) the organization is not responsible for the provision 
     (directly or through arrangements with providers of services) 
     of inpatient hospital services and physicians' services;
       ``(II) the organization is a public entity;
       ``(III) the solvency of the organization is guaranteed by 
     the State; or
       ``(IV) the organization is (or is controlled by) one or 
     more federally-qualified health centers and meets solvency 
     standards established by the State for such an organization.

     For purposes of subclause (IV), the term `control' means the 
     possession, whether direct or indirect, of the power to 
     direct or cause the direction of the management and policies 
     of the organization through membership, board representation, 
     or an ownership interest equal to or greater than 50.1 
     percent.''
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to contracts entered into or renewed on or after 
     October 1, 1998.
       (c) Transition.--In the case of a health maintenance 
     organization that as of the date of the enactment of this Act 
     has entered into a contract with a State for the provision of 
     medical assistance under title XIX under which the 
     organization assumes full financial risk and is receiving 
     capitation payments, the amendment made by subsection

[[Page H4428]]

     (a) shall not apply to such organization until 3 years after 
     the date of the enactment of this Act.

     SEC. 3463. APPLICATION OF PRUDENT LAYPERSON STANDARD FOR 
                   EMERGENCY MEDICAL CONDITION AND PROHIBITION OF 
                   GAG RULE RESTRICTIONS.

       Section 1903(m) (42 U.S.C. 1396b(m)) is amended by adding 
     at the end the following:
       ``(8)(A)(i) Each contract with a health maintenance 
     organization under this subsection shall require the 
     organization--
       ``(I) to provide coverage for emergency services (as 
     defined in subparagraph (B)) without regard to prior 
     authorization or the emergency care provider's contractual 
     relationship with the organization, and
       ``(II) to comply with guidelines established under section 
     1852(d)(2) (respecting coordination of post-stabilization 
     care) in the same manner as such guidelines apply to 
     MedicarePlus plans offered under part C of title XVIII.
       ``(B) In subparagraph (A)(i)(I), the term `emergency 
     services' means, with respect to an individual enrolled with 
     an organization, covered inpatient and outpatient services 
     that--
       ``(i) are furnished by a provider that is qualified to 
     furnish such services under this title, and
       ``(ii) are needed to evaluate or stabilize an emergency 
     medical condition (as defined in subparagraph (C)).
       ``(C) In subparagraph (B)(ii), the term `emergency medical 
     condition' means a medical condition manifesting itself by 
     acute symptoms of sufficient severity such that a prudent 
     layperson, who possesses an average knowledge of health and 
     medicine, could reasonably expect the absence of immediate 
     medical attention to result in--
       ``(i) placing the health of the individual (or, with 
     respect to a pregnant woman, the health of the woman or her 
     unborn child) in serious jeopardy,
       ``(ii) serious impairment to bodily functions, or
       ``(iii) serious dysfunction of any bodily organ or part.
       ``(9)(A) Subject to subparagraphs (B) and (C), under a 
     contract under this subsection a health maintenance 
     organization (in relation to an individual enrolled under the 
     contract) shall not prohibit or otherwise restrict a covered 
     health care professional (as defined in subparagraph (D)) 
     from advising such an individual who is a patient of the 
     professional about the health status of the individual or 
     medical care or treatment for the individual's condition or 
     disease, regardless of whether benefits for such care or 
     treatment are provided under the plan, if the professional is 
     acting within the lawful scope of practice.
       ``(B) Subparagraph (A) shall not be construed as requiring 
     a health maintenance organization to provide, reimburse for, 
     or provide coverage of a counseling or referral service if 
     the organization--
       ``(i) objects to the provision of such service on moral or 
     religious grounds; and
       ``(ii) in the manner and through the written 
     instrumentalities such organization deems appropriate, makes 
     available information on its policies regarding such service 
     to prospective enrollees before or during enrollment and to 
     enrollees within 90 days after the date that the organization 
     or plan adopts a change in policy regarding such a counseling 
     or referral service.
       ``(C) Nothing in subparagraph (B) shall be construed to 
     affect disclosure requirements under State law or under the 
     Employee Retirement Income Security Act of 1974.
       ``(D) For purposes of this paragraph, the term `health care 
     professional' means a physician (as defined in section 
     1861(r)) or other health care professional if coverage for 
     the professional's services is provided under the contract 
     under this subsection for the services of the professional. 
     Such term includes a podiatrist, optometrist, chiropractor, 
     psychologist, dentist, physician assistant, physical or 
     occupational therapist and therapy assistant, speech-language 
     pathologist, audiologist, registered or licensed practical 
     nurse (including nurse practitioner, clinical nurse 
     specialist, certified registered nurse anesthetist, and 
     certified nurse-midwife), licensed certified social worker, 
     registered respiratory therapist, and certified respiratory 
     therapy technician.''.

     SEC. 3464. ADDITIONAL FRAUD AND ABUSE PROTECTIONS IN MANAGED 
                   CARE.

       (a) Protection Against Marketing Abuses.--Section 1903(m) 
     (42 U.S.C. 1396b(m)), as amended by section 3463, is 
     amended--
       (1) in paragraph (2)(A)(viii), by inserting ``and 
     compliance with the requirements of paragraphs (10) and 
     (11)'' after ``of this subsection'', and
       (2) by adding at the end the following:
       ``(10)(A)(i) A health maintenance organization with respect 
     to activities under this subsection may not distribute 
     directly or through any agent or independent contractor 
     marketing materials within any State--
       ``(I) without the prior approval of the State; and
       ``(II) that contain false or materially misleading 
     information.
       ``(ii) In the process of reviewing and approving such 
     materials, the State shall provide for consultation with a 
     medical care advisory committee.
       ``(iii) The State may not enter into or renew a contract 
     with a health maintenance organization for the provision of 
     services to individuals enrolled under the State plan under 
     this title if the State determines that the entity 
     distributed directly or through any agent or independent 
     contractor marketing materials in violation of clause 
     (i)(II).
       ``(B) A health maintenance organization shall distribute 
     marketing materials to the entire service area of such 
     organization.
       ``(C) A health maintenance organization, or any agency of 
     such organization, may not seek to influence an individual's 
     enrollment with the organization in conjunction with the sale 
     of any other insurance.
       ``(D) Each health maintenance organization shall comply 
     with such procedures and conditions as the Secretary 
     prescribes in order to ensure that, before an individual is 
     enrolled with the organization under this title, the 
     individual is provided accurate oral and written and 
     sufficient information to make an informed decision whether 
     or not to enroll.
       ``(E) Each health maintenance organization shall not, 
     directly or indirectly, conduct door-to-door, telephonic, or 
     other `cold call' marketing of enrollment under this 
     title.''.
       (b) Prohibiting Affiliations With Individuals Debarred by 
     Federal Agencies.--Section 1903(m) (42 U.S.C. 1396b(m)), as 
     amended by section 3463 and subsection (a), is further 
     amended by adding at the end the following:
       ``(11)(A) A health maintenance organization may not 
     knowingly--
       ``(i) have a person described in subparagraph (C) as a 
     director, officer, partner, or person with beneficial 
     ownership of more than 5 percent of the organization equity; 
     or
       ``(ii) have an employment, consulting, or other agreement 
     with a person described in such subparagraph for the 
     provision of items and services that are significant and 
     material to the organization's obligations under its contract 
     with the State.
       ``(B) If a State finds that a health maintenance 
     organization is not in compliance with clause (i) or (ii) of 
     subparagraph (A), the State--
       ``(i) shall notify the Secretary of such noncompliance;
       ``(ii) may continue an existing agreement with the 
     organization unless the Secretary (in consultation with the 
     Inspector General of the Department of Health and Human 
     Services) directs otherwise; and
       ``(iii) may not renew or otherwise extend the duration of 
     an existing agreement with the organization unless the 
     Secretary (in consultation with the Inspector General of the 
     Department of Health and Human Services) provides to the 
     State and to the Congress a written statement describing 
     compelling reasons that exist for renewing or extending the 
     agreement.
       ``(C) A person is described in this subparagraph if such 
     person--
       ``(i) is debarred, suspended, or otherwise excluded from 
     participating in procurement activities under the Federal 
     acquisition regulation or from participating in 
     nonprocurement activities under regulations issued pursuant 
     to Executive Order 12549; or
       ``(ii) is an affiliate (within the meaning of the Federal 
     acquisition regulation) of a person described in clause 
     (i).''.
       (c) Application of State Conflict-of-Interest Safeguards.--
     Section 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)), as amended 
     by section 3461(c), is amended--
       (1) by striking ``and'' at the end of clause (xi),
       (2) by striking the period at the end of clause (xii) and 
     inserting ``; and'', and
       (3) by inserting after clause (xi) the following:
       ``(xiii) the State has in effect conflict-of-interest 
     safeguards with respect to officers and employees of the 
     State with responsibilities relating to contracts with such 
     organizations and to any default enrollment process that are 
     at least as effective as the Federal safeguards provided 
     under section 27 of the Office of Federal Procurement Policy 
     Act (41 U.S.C. 423), against conflicts of interest that apply 
     with respect to Federal procurement officials with comparable 
     responsibilities with respect to such contracts.''.
       (d) Limitation on Availability of FFP for Use of Enrollment 
     Brokers.--Section 1903(b) (42 U.S.C. 1396b(b)), as amended by 
     section 3413(b), is amended by adding at the end the 
     following:
       ``(5) Amounts expended by a State for the use an enrollment 
     broker in marketing health maintenance organizations and 
     other managed care entities to eligible individuals under 
     this title shall be considered, for purposes of subsection 
     (a)(7), to be necessary for the proper and efficient 
     administration of the State plan but only if the following 
     conditions are met with respect to the broker:
       ``(A) The broker is independent of any such entity and of 
     any health care providers (whether or not any such provider 
     participates in the State plan under this title) that provide 
     coverage of services in the same State in which the broker is 
     conducting enrollment activities.
       ``(B) No person who is an owner, employee, consultant, or 
     has a contract with the broker either has any direct or 
     indirect financial interest with such an entity or health 
     care provider or has been excluded from participation in the 
     program under this title or title XVIII or debarred by any 
     Federal agency, or subject to a civil money penalty under 
     this Act.''.
       (e) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1998.

     SEC. 3465. GRIEVANCES UNDER MANAGED CARE PLANS.

       Section 1903(m) (42 U.S.C. 1396b(m)) is amended--

[[Page H4429]]

       (1) in paragraph (2)(A), as amended by sections 3461(c) and 
     3464(c),--
       (A) by striking ``and'' at the end of clause (xii),
       (B) by striking the period at the end of clause (xiii) and 
     inserting ``; and'', and
       (C) by inserting after clause (xiii) the following new 
     clause:
       ``(xiv) such contract provides for compliance of the 
     organization with the grievance and appeals requirements 
     described in paragraph (3).''; and
       (2) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3)(A) An eligible organization must provide a meaningful 
     and expedited procedure, which includes notice and hearing 
     requirements, for resolving grievances between the 
     organization (including any entity or individual through 
     which the organization provides health care services) and 
     members enrolled with the organization under this subsection. 
     Under the procedure any member enrolled with the organization 
     may at any time file orally or in writing a complaint to 
     resolve grievances between the member and the organization 
     before a board of appeals established under subparagraph (C).
       ``(B)(i) The organization must provide, in a timely manner, 
     such an enrollee a notice of any denial of services in-
     network or denial of payment for out-of-network care or 
     notice of termination or reduction of services.
       ``(ii) Such notice shall include the following:
       ``(I) A clear statement of the reason for the denial.
       ``(II) An explanation of the complaint process under 
     subparagraph (C) which is available to the enrollee upon 
     request.
       ``(III) An explanation of all other appeal rights available 
     to all enrollees.
       ``(IV) A description of how to obtain supporting evidence 
     for this hearing, including the patient's medical records 
     from the organization, as well as supporting affidavits from 
     the attending health care providers.
       ``(C)(i) Each eligible organization shall establish a board 
     of appeals to hear and make determinations on complaints by 
     enrollees under this subsection concerning denials of 
     coverage or payment for services (whether in-network or out-
     of-network) and the medical necessity and appropriateness of 
     covered items and services.
       ``(ii) A board of appeals of an eligible organization shall 
     consist of--
       ``(I) representatives of the organization, including 
     physicians, nonphysicians, administrators, and enrollees;
       ``(II) consumers who are not enrollees; and
       ``(III) providers with expertise in the field of medicine 
     which necessitates treatment.
       ``(iii) A board of appeals shall hear and resolve 
     complaints within 30 days after the date the complaint is 
     filed with the board.
       ``(D) Nothing in this paragraph may be construed to replace 
     or supersede any appeals mechanism otherwise provided for an 
     individual entitled to benefits under this title.''.

     SEC. 3466. STANDARDS RELATING TO ACCESS TO OBSTETRICAL AND 
                   GYNECOLOGICAL SERVICES UNDER MANAGED CARE 
                   PLANS.

       (a) In General.--Section 1903(m)(2)(A) (42 U.S.C. 
     1396b(m)(2)(A)), as amended by sections 3461(c), 3464(c), and 
     3465(1), is amended--
       (1) by striking ``and'' at the end of clause (xiii),
       (2) by striking the period at the end of clause (xiv) and 
     inserting ``; and'', and
       (3) by inserting after clause (xiv) the following:
       ``(xv) the organization complies with the requirements of 
     paragraph (12).''.
       (b) Requirements.--Section 1903(m) (42 U.S.C. 1396b(m)), as 
     amended by sections 3463, 3464(a), and 3464(b), is amended by 
     adding at the end the following new paragraph:
       ``(12)(A) If a health maintenance organization, under a 
     contract under this subsection, requires or provides for an 
     enrollee to designate a participating primary care provider--
       ``(i) the organization shall permit a female enrollee to 
     designate an obstetrician-gynecologist who has agreed to be 
     designated as such, as the enrollee's primary care provider; 
     and
       ``(ii) if such an enrollee has not designated such a 
     provider as a primary care provider, the organization--
       ``(I) may not require prior authorization by the enrollee's 
     primary care provider or otherwise for coverage of obstetric 
     and gynecologic care provided by a participating 
     obstetrician-gynecologist, or a participating health care 
     professional practicing in collaboration with the 
     obstetrician-gynecologist and in accordance with State law, 
     to the extent such care is otherwise covered, and
       ``(II) shall treat the ordering of other gynecologic care 
     by such a participating physician as the prior authorization 
     of the primary care provider with respect to such care under 
     the contract.
       ``(B) Nothing in subparagraph (A)(ii)(II) shall waive any 
     requirements of coverage relating to medical necessity or 
     appropriateness with respect to coverage of gynecologic care 
     so ordered.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to contracts entered into, renewed, or extended 
     on or after January 1, 1998.

                      CHAPTER 3--FEDERAL PAYMENTS

     SEC. 3471. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER 
                   STATE MEDICAID PROGRAMS.

       (a) Direct Payment by State.--Subsection (a)(1) of section 
     1923 (42 U.S.C. 1396r-4) is amended--
       (1) by striking ``and'' at the end of subparagraph (A),
       (2) by striking the period at the end of subparagraph (B) 
     and inserting ``, and'', and
       (3) by adding at the end the following new subparagraph:
       ``(C) provides that payment adjustments under the plan 
     under this section for services furnished by a hospital on or 
     after October 1, 1997, for individuals entitled to benefits 
     under the plan, and enrolled with an entity described in 
     section 1903(m), under a primary care case management system 
     (described in section 1905(t)), or other managed care plan--
       ``(i) are made directly to the hospital by the State, and
       ``(ii) are not used as part of, and are disregarded in 
     determining the amount of, prepaid capitation paid under the 
     State plan with respect to those services.''.
       (b) Adjustment to State DSH Allocations.--
       (1) In general.--Subsection (f) of such section is 
     amended--
       (A) in paragraph (2)(A), by inserting ``and paragraph (5)'' 
     after ``subparagraph (B)'', and
       (B) by adding at the end the following new paragraph:
       ``(5) Adjustments in dsh allotments.--
       ``(A) Allotment frozen for states with very low dsh 
     expenditures.--In the case of a State for which its State 
     1995 DSH spending did not exceed 1 percent of the total 
     amount expenditures made under the State plan under this 
     title for medical assistance during fiscal year 1995 (as 
     reported by the State no later than January 1, 1997, on HCFA 
     Form 64), the DSH allotment for each of fiscal years 1998 
     through 2002 is equal to its State 1995 DSH spending.
       ``(B) Full reduction for high dsh states.--In the case of a 
     State which was classified under this subsection as a high 
     DSH State for fiscal year 1997, the DSH allotment for each of 
     fiscal years 1998 through 2002 is equal to the State 1995 DSH 
     spending reduced by the full reduction percentage (described 
     in subparagraph (D)) for the fiscal year involved.
       ``(C) Half-reduction for other states.--In the case of a 
     State not described in subparagraph (A) or (B), the DSH 
     allotment for each of fiscal years 1998 through 2002 is equal 
     to the State 1995 DSH spending reduced by \1/2\ of the full 
     reduction percentage for the fiscal year involved.
       ``(D) Full reduction percentage.--For purposes of this 
     paragraph, the `full reduction percentage' for--
       ``(i) fiscal year 1998 is 2 percent,
       ``(ii) fiscal year 1999 is 5 percent,
       ``(iii) fiscal year 2000 is 20 percent,
       ``(iv) fiscal year 2001 is 30 percent, and
       ``(v) fiscal year 2002 is 40 percent.
       ``(E) Definitions.-- In this paragraph:
       ``(i) State.--The term `State' means the 50 States and the 
     District of Columbia.
       ``(ii) State 1995 dsh spending.--The term `State 1995 DSH 
     spending' means, with respect to a State, the total amount of 
     payment adjustments made under subsection (c) under the State 
     plan during fiscal year 1995 as reported by the State no 
     later than January 1, 1997, on HCFA Form 64.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to fiscal years beginning with fiscal year 1998.
       (c) Transition Rule.--Effective July 1, 1997, section 
     1923(g)(2)(A) of the Social Security Act (42 U.S.C. 1396r-
     4(g)(2)(A)) shall be applied to the State of California as 
     though--
       (1) ``or that begins on or after July 1, 1997, and before 
     July 1, 1999'' were inserted in such section after ``January 
     1, 1995''; and
       (2) ``(or 175 percent in the case of a State fiscal year 
     that begins on or after July 1, 1997, and before July 1, 
     1999)'' were inserted in such section after ``200 percent''.

     SEC. 3472. ADDITIONAL FUNDING FOR STATE EMERGENCY HEALTH 
                   SERVICES FURNISHED TO UNDOCUMENTED ALIENS.

       (a) Total Amount Available for Allotment.--There are 
     available for allotments under this section for each of the 5 
     fiscal years (beginning with fiscal year 1998) $20,000,000 
     for payments to certain States under this section.
       (b) State Allotment Amount.--
       (1) In general.--The Secretary of Health and Human Services 
     shall compute an allotment for each fiscal year beginning 
     with fiscal year 1998 and ending with fiscal year 2002 for 
     each of the 12 States with the highest number of undocumented 
     aliens. The amount of such allotment for each such State for 
     a fiscal year shall bear the same ratio to the total amount 
     available for allotments under subsection (a) for the fiscal 
     year as the ratio of the number of undocumented aliens in the 
     State in the fiscal year bears to the total of such numbers 
     for all such States for such fiscal year. The amount of 
     allotment to a State provided under this paragraph for a 
     fiscal year that is not paid out under subsection (c) shall 
     be available for payment during the subsequent fiscal year.
       (2) Determination.--For purposes of paragraph (1), the 
     number of undocumented aliens in a State under this section 
     shall be determined based on estimates of the resident 
     illegal alien population residing in each State prepared by 
     the Statistics Division of the Immigration and Naturalization 
     Service as of October 1992 (or as of such later date if such 
     date is at least 1 year before the beginning of the fiscal 
     year involved),
       (c) Use of Funds.--From the allotments made under 
     subsection (b), the Secretary

[[Page H4430]]

     shall pay to each State amounts the State demonstrates were 
     paid by the State (or by a political subdivision of the 
     State) for emergency health services furnished to 
     undocumented aliens.
       (d) State Defined.--For purposes of this section, the term 
     ``State'' includes the District of Columbia.
       (e) State Entitlement.--This section constitutes budget 
     authority in advance of appropriations Acts and represents 
     the obligation of the Federal Government to provide for the 
     payment to States of amounts provided under subsection (c).
           Subtitle F--Child Health Assistance Program (CHAP)

     SEC. 3501. SHORT TITLE OF SUBTITLE; TABLE OF CONTENTS OF 
                   SUBTITLE.

       (a) Short Title of Subtitle.--This subtitle may be cited as 
     the ``Child Health Assistance Program Act of 1997''.
       (b) Table of Contents of Subtitle.--The table of contents 
     of this subtitle is as follows:
Sec. 3501. Short title of subtitle; table of contents.
Sec. 3502. Establishment of Child Health Assistance Program (CHAP).

              ``TITLE XXI--CHILD HEALTH ASSISTANCE PROGRAM

``Sec. 2101. Purpose; State child health plans.
``Sec. 2102. Contents of State child health plan.
``Sec. 2103. Allotments.
``Sec. 2104. Payments to States.
``Sec. 2105. Process for submission, approval, and amendment of State 
              child health plans.
``Sec. 2106. Strategic objectives and performance goals; plan 
              administration.
``Sec. 2107. Annual reports; evaluations.
``Sec. 2108. Definitions.
Sec. 3503. Optional use of State child health assistance funds for 
              enhanced medicaid match for expanded medicaid 
              eligibility.
Sec. 3504. Medicaid presumptive eligibility for low-income children.
Sec. 3505. State option of continuation of Medicaid eligibility for 
              disabled children who lose SSI benefits.

     SEC. 3502. ESTABLISHMENT OF CHILD HEALTH ASSISTANCE PROGRAM 
                   (CHAP).

       The Social Security Act is amended by adding at the end the 
     following new title:

              ``TITLE XXI--CHILD HEALTH ASSISTANCE PROGRAM

     ``SEC. 2101. PURPOSE; STATE CHILD HEALTH PLANS.

       ``(a) Purpose.--The purpose of this title is to provide 
     funds to States to enable them to implement plans to initiate 
     and expand the provision of child health care assistance to 
     uninsured, low-income children in an effective and efficient 
     manner that is coordinated with other sources of coverage for 
     children. Such assistance may be provided for obtaining 
     creditable health coverage through methods specified in the 
     plan, which may include any or all of the following:
       ``(1) Providing benefits under the State's medicaid plan 
     under title XIX.
       ``(2) Obtaining coverage under group health plans or group 
     or individual health insurance coverage.
       ``(3) Direct purchase of services for targeted low-income 
     children from providers, such as Federally qualified health 
     centers and rural health clinics.
       ``(4) Other methods specified under the plan for the 
     provision of health insurance coverage or medical assistance 
     for targeted low-income children.
       ``(b) State Child Health Plan Required.--A State is not 
     eligible for payment under section 2104 unless the State has 
     submitted to the Secretary under section 2105 a plan that--
       ``(1) sets forth how the State intends to use the funds 
     provided under this title to provide child health assistance 
     to needy children consistent with the provisions of this 
     title, and
       ``(2) is approved under section 2105.
       ``(c) State Entitlement.--This title constitutes budget 
     authority in advance of appropriations Acts and represents 
     the obligation of the Federal Government to provide for the 
     payment to States of amounts provided under section 2104.
       ``(d) Effective Date.--No State is eligible for payments 
     under section 2104 for any calendar quarter beginning before 
     October 1, 1997.

     ``SEC. 2102. CONTENTS OF STATE CHILD HEALTH PLAN.

       ``(a) General Background and Description.--A State child 
     health plan shall include a description, consistent with the 
     requirements of this title, of--
       ``(1) the extent to which, and manner in which, children in 
     the State, including targeted low-income children and other 
     classes of children classified by income and other relevant 
     factors, currently have creditable health coverage (as 
     defined in section 2108(c)(2));
       ``(2) current State efforts to provide or obtain creditable 
     health coverage for uncovered children, including the steps 
     the State is taking to identify and enroll all uncovered 
     children who are eligible to participate in public health 
     insurance programs and health insurance programs that involve 
     public-private partnerships;
       ``(3) how the plan is designed to be coordinated with such 
     efforts to increase coverage of children under creditable 
     health coverage; and
       ``(4) how the plan will comply with subsection (c)(5).
       ``(b) General Description of Eligibility Standards and 
     Methodology.--
       ``(1) Eligibility standards.--
       ``(A) In general.--The plan shall include a description of 
     the standards used to determine the eligibility of targeted 
     low-income children for child health assistance under the 
     plan. Such standards may include (to the extent consistent 
     with this title) those relating to the geographic areas to be 
     served by the plan, age, income and resources (including any 
     standards relating to spenddowns and disposition of 
     resources), residency, disability status, immigration status, 
     access to or coverage under other health coverage, and 
     duration of eligibility. Such standards may not discriminate 
     on the basis of diagnosis.
       ``(B) Limitations on eligibility standards.--Such 
     eligibility standards--
       ``(i) shall, within any defined group of covered targeted 
     low-income children, not cover such children with higher 
     family income without covering children with a lower family 
     income, and
       ``(ii) may not deny eligibility based on a child having a 
     preexisting medical condition.
       ``(2) Methodology.--The plan shall include a description of 
     methods of establishing and continuing eligibility and 
     enrollment, including a methodology for computing family 
     income that is consistent with the methodology used under 
     section 1902(l)(3)(E).
       ``(3) Eligibility screening; coordination with other health 
     coverage programs.--The plan shall include a description of 
     procedures to be used to ensure--
       ``(A) through both intake and followup screening, that only 
     targeted low-income children are furnished child health 
     assistance under the State child health plan;
       ``(B) that children found through the screening to be 
     eligible for medical assistance under the State medicaid plan 
     under title XIX are enrolled for such assistance under such 
     plan;
       ``(C) that the insurance provided under the State child 
     health plan does not substitute for coverage under group 
     health plans; and
       ``(D) coordination with other public and private programs 
     providing creditable coverage for low-income children.
       ``(4) Nonentitlement.--Nothing in this title shall be 
     construed as providing an individual with an entitlement to 
     child health assistance under a State child health plan.
       ``(c) Description of Assistance.--
       ``(1) In general.--A State child health plan shall include 
     a description of the child health assistance provided under 
     the plan for targeted low-income children. The child health 
     assistance provided to a targeted low-income child under the 
     plan in the form described in paragraph (2) of section 
     2101(a) shall include benefits (in an amount, duration, and 
     scope specified under the plan) for at least the following 
     categories of services:
       ``(A) Inpatient and outpatient hospital services.
       ``(B) Physicians' surgical and medical services.
       ``(C) Laboratory and x-ray services.
       ``(D) Well-baby and well-child care, including age-
     appropriate immunizations.

     The previous sentence shall not apply to coverage under a 
     group health plan if the benefits under such coverage for 
     individuals under this title are no less than the benefits 
     for other individuals similarly covered under the plan.
       ``(2) Items.--The description shall include the following:
       ``(A) Cost sharing.--Subject to paragraph (3), the amount 
     (if any) of premiums, deductibles, coinsurance, and other 
     cost sharing imposed.
       ``(B) Delivery method.--The State's approach to delivery of 
     child health assistance, including a general description of--
       ``(i) the use (or intended use) of different delivery 
     methods, which may include the delivery methods used under 
     the medicaid plan under title XIX, fee-for-service, managed 
     care arrangements (such as capitated health care plans, case 
     management, and case coordination), direct provision of 
     health care services (such as through community health 
     centers and disproportionate share hospitals), vouchers, and 
     other delivery methods; and
       ``(ii) utilization control systems.
       ``(3) Limitations on cost sharing.--
       ``(A) No cost sharing on preventive benefits.--The plan may 
     not impose deductibles, coinsurance, or similar cost sharing 
     with respect to benefits for preventive services.
       ``(B) Sliding scale.--To the extent practicable, any 
     premiums imposed under the plan shall be imposed on a sliding 
     scale related to income and the plan may only vary premiums, 
     deductibles, coinsurance, and other cost sharing based on the 
     family income of targeted low-income children only in a 
     manner that does not favor children from families with higher 
     income over children from families with lower income.
       ``(4) Restriction on application of preexisting condition 
     exclusions.--
       ``(A) In general.--Subject to subparagraph (B), the State 
     child health plan shall not permit the imposition of any 
     preexisting condition exclusion for covered benefits under 
     the plan.
       ``(B) Group health plans and group health insurance 
     coverage.--If the State child health plan provides for 
     benefits through payment for, or a contract with, a group 
     health plan or group health insurance coverage, the plan may 
     permit the imposition of a preexisting condition exclusion 
     but

[[Page H4431]]

     only insofar as it is permitted under the applicable 
     provisions of part 7 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 and title XXVII of the 
     Public Health Service Act.
       ``(5) Special protection for children with chronic health 
     conditions and special health care needs.--In the case of a 
     child who has a chronic condition, life-threatening 
     condition, or combination of conditions that warrants medical 
     specialty care and who is eligible for benefits under the 
     plan with respect to such care, the State child health plan 
     shall assure access to such care, including the use of a 
     medical specialist as a primary care provider.
       ``(6) Secondary payment.--Nothing in this section shall be 
     construed as preventing a State from denying benefits to an 
     individual to the extent such benefits are available to the 
     individual under another public or private health care 
     insurance program.
       ``(7) Treatment of cash payments.--Payments in the form of 
     cash or vouchers provided as child health or other assistance 
     under the State child health plan to parents, guardians or 
     other caretakers of a targeted low-income child are not 
     considered income for purpose of eligibility for, or benefits 
     provided under, any means-tested Federal or Federally-
     assisted program.
       ``(d) Outreach and Coordination.--A State child health plan 
     shall include a description of the procedures to be used by 
     the State to accomplish the following:
       ``(1) Outreach.--Outreach to families of children likely to 
     be eligible for child health assistance under the plan or 
     under other public or private health coverage programs to 
     inform these families of the availability of, and to assist 
     them in enrolling their children in, such a program.
       ``(2) Coordination with other health insurance programs.--
     Coordination of the administration of the State program under 
     this subtitle with other public and private health insurance 
     programs.

     ``SEC. 2103. ALLOTMENTS.

       ``(a) Total Allotment.--The total allotment that is 
     available under this title for--
       ``(1) fiscal year 1998 is $2,830,000,000,
       ``(2) fiscal year 1999 is $2,830,000,000,
       ``(3) fiscal year 2000 is $2,830,000,000,
       ``(4) fiscal year 2001 is $2,830,000,000,
       ``(5) fiscal year 2002 is $2,830,000,000,and
       ``(6) fiscal year 2003 and each succeeding fiscal year is 
     $2,850,000,000.
       ``(b) Allotments to 50 States and District of Columbia.--
       ``(1) In general.--Subject to paragraphs (4) and (5), of 
     the total allotment available under subsection (a) for a 
     fiscal year, reduced by the amount of allotments made under 
     subsection (c) for the fiscal year, the Secretary shall allot 
     to each State (other than a State described in such 
     subsection) with a State child health plan approved under 
     this title the same proportion as the ratio of--
       ``(A) the product of (i) the number of uncovered low-income 
     children for the fiscal year in the State (as determined 
     under paragraph (2)) and (ii) the State cost factor for that 
     State (established under paragraph (3)); to
       ``(B) the sum of the products computed under subparagraph 
     (A).
       ``(2) Number of uncovered low-income children.--For the 
     purposes of paragraph (1)(A)(i), the number of uncovered low-
     income children for a fiscal year in a State is equal to the 
     arithmetic average of the number of low-income children (as 
     defined in section 2108(c)(4)) with no health insurance 
     coverage, as reported and defined in the 3 most recent March 
     supplements to the Current Population Survey of the Bureau of 
     the Census before the beginning of the fiscal year.
       ``(3) Adjustment for geographic variations in health 
     costs.--
       ``(A) In general.--For purposes of paragraph (1)(A)(ii), 
     the `State cost factor' for a State for a fiscal year equal 
     to the sum of--
       ``(i) 0.15, and
       ``(ii) 0.85 multiplied by the ratio of--

       ``(I) the annual average wages per employee for the State 
     for such year (as determined under subparagraph (B)), to
       ``(II) the annual average wages per employee for the 50 
     States and the District of Columbia.

       ``(B) Annual average wages per employee.--For purposes of 
     subparagraph (A), the `annual average wages per employee' for 
     a State, or for all the States. for a fiscal year is equal to 
     the average of the annual wages per employee for the State or 
     for the 50 States and the District of Columbia for employees 
     in the health services industry (SIC code 8000), as reported 
     by the Bureau of Labor Statistics of the Department of Labor 
     for each of the for the most recent 3 years before the 
     beginning of the fiscal year involved.
       ``(4) Floor for states.--Subject to paragraph (5), in no 
     case shall the amount of the allotment under this subsection 
     for one of the 50 States or the District of Columbia for a 
     year be less than $2,000,000. To the extent that the 
     application of the previous sentence results in an increase 
     in the allotment to a State above the amount otherwise 
     provided, the allotments for the other States and the 
     District of Columbia under this subsection shall be decreased 
     in a pro rata manner (but not below $2,000,000) so that the 
     total of such allotments in a fiscal year does not exceed the 
     amount otherwise provided for allotment under paragraph (1) 
     for that fiscal year.
       ``(5) Offset for expenditures under medicaid presumptive 
     eligibility.--The amount of the allotment otherwise provided 
     to a State under this subsection for a fiscal year shall be 
     reduced by the amount of the payments made to the State under 
     section 1903(a) for calendar quarters during such fiscal year 
     that are attributable to provision of medical assistance to a 
     child during a presumptive eligibility period under section 
     1920A.
       ``(c) Allotments to Territories.--
       ``(1) In general.--Subject to paragraph (3), of the total 
     allotment under subsection (a) for a fiscal year, the 
     Secretary shall allot 0.5 percent among each of the 
     commonwealths and territories described in paragraph (4) in 
     the same proportion as the percentage specified in paragraph 
     (2) for such commonwealth or territory bears to the sum of 
     such percentages for all such commonwealths or territories so 
     described.
       ``(2) Percentage.--The percentage specified in this 
     paragraph for--
       ``(A) Puerto Rico is 91.6 percent,
       ``(B) Guam is 3.5 percent,
       ``(C) Virgin Islands is 2.6 percent,
       ``(D) American Samoa is 1.2 percent, and
       ``(E) the Northern Mariana Islands is 1.1 percent.
       ``(3) Floor.--In no case shall the amount of the allotment 
     to a commonwealth or territory under paragraph (1) for a 
     fiscal year be less than $100,000. To the extent that the 
     application of the previous sentence results in an increase 
     in the allotment to a commonwealth or territory above the 
     amount otherwise provided, the allotments for the other 
     commonwealths and territories under this subsection for the 
     fiscal year shall be decreased (but not below $100,000) in a 
     pro rata manner so that the total of such allotments does not 
     exceed the total amount otherwise provided for allotment 
     under paragraph (1).
       ``(4) Commonwealths and territories.--A commonwealth or 
     territory described in this paragraph is any of the following 
     if it has a State child health plan approved under this 
     title:
       ``(A) Puerto Rico.
       ``(B) Guam.
       ``(C) the Virgin Islands.
       ``(D) American Samoa.
       ``(E) the Northern Mariana Islands.
       ``(d) Adjustment for States Using Enhanced Medicaid 
     Match.--In the case of a State that elects the increased 
     medicaid matching option under section 1905(t), the amount of 
     the State's allotment under this section shall be reduced by 
     the amount of additional payment made under section 1903 that 
     is attributable to the increase in the Federal medical 
     assistance percentage effected under such option.
       ``(e) 3-Year Availability of Amounts Allotted.--Amounts 
     allotted to a State pursuant to this section for a fiscal 
     year shall remain available for expenditure by the State 
     through the end of the second succeeding fiscal year.

     ``SEC. 2104. PAYMENTS TO STATES.

       ``(a) In General.--Subject to the succeeding provisions of 
     this section, the Secretary shall pay to each State with a 
     program approved under this title, from its allotment under 
     section 2103 (as may be adjusted under section 2103(d)), an 
     amount for each quarter up to 80 percent of expenditures 
     under that program in the quarter for--
       ``(1) child health assistance for targeted low-income 
     children;
       ``(2) health services initiatives for improving the health 
     of children (including targeted low-income children and other 
     low-income children);
       ``(3) expenditures for outreach activities as provided in 
     section 2102(d)(1); and
       ``(4) other reasonable costs incurred by the State to 
     administer the plan.
       ``(b) Limitation on Certain Payments for Certain 
     Expenditures.--
       ``(1) In general.--Funds provided to a State under this 
     title shall only be used to carry out the purposes of this 
     title.
       ``(2) Limitation on expenditures not used for assistance.--
     Payment shall not be made under subsection (a) for 
     expenditures for items described in paragraphs (2), (3), or 
     (4) of subsection to the extent the total of such 
     expenditures exceeds 15 percent of total expenditures under 
     the plan for the period involved (including any in such total 
     additional Federal medical assistance payments under section 
     1903(a)(1) that are attributable to an enhanced State 
     medicaid match under section 1905(t)).
       ``(3) Purchase of family coverage.--The Secretary shall 
     establish rules regarding the extent to which payment may be 
     made under subsection (a)(1) for the purchase of family 
     coverage under a group health plan or health insurance 
     coverage that includes coverage of targeted low-income 
     children. Under such rules such payment may be permitted, 
     notwithstanding that a portion may be considered attributable 
     to purchase of coverage for other family members, if the 
     State demonstrates that purchase of such coverage is cost 
     effective relative to the amounts that the State would have 
     paid to obtain comparable coverage only of the targeted low-
     income children involved. In making such determination, there 
     shall be taken into account the costs of providing coverage 
     for medical assistance for children with similar actuarial 
     characteristics under section 1902(l).
       ``(4) Denial of payment for reduction of medicaid 
     eligibility standards.--No payment may be made under 
     subsection (a) with respect to child health assistance 
     provided under a State child health plan to a targeted low-
     income child if the child would be eligible for medical 
     assistance under the State

[[Page H4432]]

     plan under title XIX (as such plan was in effect as of June 
     1, 1997) but for a change in the income or assets standards 
     or methodology under such plan effected after such date.
       ``(5) Disallowances for excluded providers.--
       ``(A) In general.--Payment shall not be made to a State 
     under subsection (a) for expenditures for items and services 
     furnished--
       ``(i) by a provider who was excluded from participation 
     under title V, XVIII, or XX or under this title pursuant to 
     section 1128, 1128A, 1156, or 1842(j)(2), or
       ``(ii) under the medical direction or on the prescription 
     of a physician who was so excluded, if the provider of the 
     services knew or had reason to know of the exclusion.
       ``(B) Exception for emergency services.--Subparagraph (A) 
     shall not apply to emergency items or services, not including 
     hospital emergency room services.
       ``(6) Use of non-federal funds for state matching 
     requirement.--Amounts provided by the Federal Government, or 
     services assisted or subsidized to any significant extent by 
     the Federal Government, may not be included in determining 
     the amount of non-Federal contributions required under 
     subsection (a).
       ``(7) Treatment of third party liability.--No payment shall 
     be made to a State under this section for expenditures for 
     child health assistance provided for a targeted low-income 
     child under its plan to the extent that a private insurer (as 
     defined by the Secretary by regulation and including a group 
     health plan (as defined in section 607(1) of the Employee 
     Retirement Income Security Act of 1974), a service benefit 
     plan, and a health maintenance organization) would have been 
     obligated to provide such assistance but for a provision of 
     its insurance contract which has the effect of limiting or 
     excluding such obligation because the individual is eligible 
     for or is provided child health assistance under the plan.
       ``(8) Secondary payer provisions.--Except as otherwise 
     provided by law, no payment shall be made to a State under 
     this section for expenditures for child health assistance 
     provided for a targeted low-income child under its plan to 
     the extent that payment has been made or can reasonably be 
     expected to be made promptly (as determined in accordance 
     with regulations) under any other federally operated or 
     financed health care insurance program, other than an 
     insurance program operated or financed by the Indian Health 
     Service, as identified by the Secretary. For purposes of this 
     paragraph, rules similar to the rules for overpayments under 
     section 1903(d)(2) shall apply.
       ``(9) Limitation on payment for abortions.--
       ``(A) In general.--Payment shall not be made to a State 
     under this section for any amount expended under the State 
     plan to pay for any abortion or to assist in the purchase, in 
     whole or in part, of health benefit coverage that includes 
     coverage of abortion.
       ``(B) Exception.--Subparagraph (A) shall not apply to an 
     abortion--
       ``(i) if the pregnancy is the result of an act of rape or 
     incest, or
       ``(ii) in the case where a woman suffers from a physical 
     disorder, illness, or injury that would, as certified by a 
     physician, place the woman in danger of death unless an 
     abortion is performed.
       ``(c) Advance Payment; Retrospective Adjustment.--The 
     Secretary may make payments under this section for each 
     quarter on the basis of advance estimates of expenditures 
     submitted by the State and other investigation the Secretary 
     may find necessary, and may reduce or increase the payments 
     as necessary to adjust for any overpayment or underpayment 
     for prior quarters.

     ``SEC. 2105. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT 
                   OF STATE CHILD HEALTH PLANS.

       ``(a) Initial Plan.--
       ``(1) In general.--As a condition of receiving funding 
     under section 2104, a State shall submit to the Secretary a 
     State child health plan that meets the applicable 
     requirements of this title.
       ``(2) Approval.--Except as the Secretary may provide under 
     subsection (e), a State plan submitted under paragraph (1)--
       ``(A) shall be approved for purposes of this title, and
       ``(B) shall be effective beginning with a calendar quarter 
     that is specified in the plan, but in no case earlier than 
     the first calendar quarter that begins at least 60 days after 
     the date the plan is submitted.
       ``(b) Plan Amendments.--
       ``(1) In general.--A State may amend, in whole or in part, 
     its State child health plan at any time through transmittal 
     of a plan amendment.
       ``(2) Approval.--except as the secretary may provide under 
     subsection (e), an amendment to a state plan submitted under 
     paragraph (1)--
       ``(A) shall be approved for purposes of this title, and
       ``(B) shall be effective as provided in paragraph (3).
       ``(3) Effective dates for amendments.--
       ``(A) In general.--Subject to the succeeding provisions of 
     this paragraph, an amendment to a State plan shall take 
     effect on one or more effective dates specified in the 
     amendment.
       ``(B) Amendments relating to eligibility or benefits.--
       ``(i) Notice requirement.--Any plan amendment that 
     eliminates or restricts eligibility or benefits under the 
     plan may not take effect unless the State certifies that it 
     has provided prior or contemporaneous public notice of the 
     change, in a form and manner provided under applicable State 
     law.
       ``(ii) Timely transmittal.--Any plan amendment that 
     eliminates or restricts eligibility or benefits under the 
     plan shall not be effective for longer than a 60-day period 
     unless the amendment has been transmitted to the Secretary 
     before the end of such period.
       ``(C) Other amendments.--Any plan amendment that is not 
     described in subparagraph (C) becomes effective in a State 
     fiscal year may not remain in effect after the end of such 
     fiscal year (or, if later, the end of the 90-day period on 
     which it becomes effective) unless the amendment has been 
     transmitted to the Secretary.
       ``(c) Disapproval of Plans and Plan Amendments.--
       ``(1) Prompt review of plan submittals.--The Secretary 
     shall promptly review State plans and plan amendments 
     submitted under this section to determine if they 
     substantially comply with the requirements of this title.
       ``(2) 90-day approval deadlines.--A State plan or plan 
     amendment is considered approved unless the Secretary 
     notifies the State in writing, within 90 days after receipt 
     of the plan or amendment, that the plan or amendment is 
     disapproved (and the reasons for disapproval) or that 
     specified additional information is needed.
       ``(3) Correction.--In the case of a disapproval of a plan 
     or plan amendment, the Secretary shall provide a State with a 
     reasonable opportunity for correction before taking financial 
     sanctions against the State on the basis of such disapproval.
       ``(d) Program Operation.--
       ``(1) In general.--The State shall conduct the program in 
     accordance with the plan (and any amendments) approved under 
     subsection (c) and with the requirements of this title.
       ``(2) Violations.--The Secretary shall establish a process 
     for enforcing requirements under this title. Such process 
     shall provide for the withholding of funds in the case of 
     substantial noncompliance with such requirements. In the case 
     of an enforcement action against a State under this 
     paragraph, the Secretary shall provide a State with a 
     reasonable opportunity for correction before taking financial 
     sanctions against the State on the basis of such an action.
       ``(e) Continued Approval.--An approved State child health 
     plan shall continue in effect unless and until the State 
     amends the plan under subsection (b) or the Secretary finds 
     substantial noncompliance of the plan with the requirements 
     of this title under section subsection (d)(2).

     ``SEC. 2106. STRATEGIC OBJECTIVES AND PERFORMANCE GOALS; PLAN 
                   ADMINISTRATION.

       ``(a) Strategic Objectives and Performance Goals.--
       ``(1) Description.--A State child health plan shall include 
     a description of--
       ``(A) the strategic objectives,
       ``(B) the performance goals, and
       ``(C) the performance measures,

     the State has established for providing child health 
     assistance to targeted low-income children under the plan and 
     otherwise for maximizing health coverage for other low-income 
     children and children generally in the State.
       ``(2) Strategic objectives.--Such plan shall identify 
     specific strategic objectives relating to increasing the 
     extent of creditable health coverage among targeted low-
     income children and other low-income children.
       ``(3) Performance goals.--Such plan shall specify one or 
     more performance goals for each such strategic objective so 
     identified.
       ``(4) Performance measures.--Such plan shall describe how 
     performance under the plan will be--
       ``(A) measured through objective, independently verifiable 
     means, and
       ``(B) compared against performance goals, in order to 
     determine the State's performance under this title.
       ``(b) Records, Reports, Audits, and Evaluation.--
       ``(1) Data collection, records, and reports.--A State child 
     health plan shall include an assurance that the State will 
     collect the data, maintain the records, and furnish the 
     reports to the Secretary, at the times and in the 
     standardized format the Secretary may require in order to 
     enable the Secretary to monitor State program administration 
     and compliance and to evaluate and compare the effectiveness 
     of State plans under this title.
       ``(2) State assessment and study.--A State child health 
     plan shall include a description of the State's plan for the 
     annual assessments and reports under section 2107(a) and the 
     evaluation required by section 2107(b).
       ``(3) Audits.--A State child health plan shall include an 
     assurance that the State will afford the Secretary access to 
     any records or information relating to the plan for the 
     purposes of review or audit.
       ``(c) Program Development Process.--A State child health 
     plan shall include a description of the process used to 
     involve the public in the design and implementation of the 
     plan and the method for ensuring ongoing public involvement.
       ``(d) Program Budget.--A State child health plan shall 
     include a description of the budget for the plan. The 
     description shall be updated periodically as necessary and 
     shall include details on the planned use of funds

[[Page H4433]]

     and the sources of the non-Federal share of plan 
     expenditures, including any requirements for cost sharing by 
     beneficiaries.
       ``(e) Application of Certain General Provisions.--The 
     following sections in part A of title XI shall apply to 
     States under this title in the same manner as they applied to 
     a State under title XIX:
       ``(1) Section 1101(a)(1) (relating to definition of State).
       ``(2) Section 1116 (relating to administrative and judicial 
     review), but only insofar as consistent with the provisions 
     of part B.
       ``(3) Section 1124 (relating to disclosure of ownership and 
     related information).
       ``(4) Section 1126 (relating to disclosure of information 
     about certain convicted individuals).
       ``(5) Section 1128B(d) (relating to criminal penalties for 
     certain additional charges).
       ``(6) Section 1132 (relating to periods within which claims 
     must be filed).

     ``SEC. 2107. ANNUAL REPORTS; EVALUATIONS.

       ``(a) Annual Report.--The State shall--
       ``(1) assess the operation of the State plan under this 
     title in each fiscal year, including the progress made in 
     reducing the number of uncovered low-income children; and
       ``(2) report to the Secretary, by January 1 following the 
     end of the fiscal year, on the result of the assessment.
       ``(b) State Evaluations.--
       ``(1) In general.--By March 31, 2000, each State that has a 
     State child health plan shall submit to the Secretary an 
     evaluation that includes each of the following:
       ``(A) An assessment of the effectiveness of the State plan 
     in increasing the number of children with creditable health 
     coverage.;
       ``(B) A description and analysis of the effectiveness of 
     elements of the State plan, including--
       ``(i) the characteristics of the children and families 
     assisted under the State plan including age of the children, 
     family income, and the assisted child's access to or coverage 
     by other health insurance prior to the State plan and after 
     eligibility for the State plan ends,
       ``(ii) the quality of health coverage provided including 
     the types of benefits provided,
       ``(iii) the amount and level (payment of part or all of the 
     premium) of assistance provided by the State,
       ``(iv) the service area of the State plan,
       ``(v) the time limits for coverage of a child under the 
     State plan,
       ``(vi) the State's choice of health insurance plans and 
     other methods used for providing child health assistance , 
     and
       ``(vii) the sources of non-Federal funding used in the 
     State plan;
       ``(C) an assessment of the effectiveness of other public 
     and private programs in the State in increasing the 
     availability of affordable quality individual and family 
     health insurance for children;
       ``(D) a review and assessment of State activities to 
     coordinate the plan under this title with other public and 
     private programs providing health care and health care 
     financing, including Medicaid and maternal and child health 
     services;
       ``(E) an analysis of changes and trends in the State that 
     affect the provision of accessible, affordable, quality 
     health insurance and health care to children;
       ``(F) a description of any plans the State has for 
     improving the availability of health insurance and health 
     care for children;
       ``(G) recommendations for improving the program under this 
     title; and
       ``(H) any other matters the State and the Secretary 
     consider appropriate.
       ``(2) Report of the secretary.--The Secretary shall submit 
     to the Congress and make available to the public by December 
     31, 2000, a report based on the evaluations submitted by 
     States under paragraph (1), containing any conclusions and 
     recommendations the Secretary considers appropriate.

     ``SEC. 2108. DEFINITIONS.

       ``(a) Child Health Assistance.--For purposes of this title, 
     the term `child health assistance' means payment of part or 
     all of the cost of any of the following, or assistance in the 
     purchase, in whole or in part, of health benefit coverage 
     that includes any of the following, for targeted low-income 
     children (as defined in subsection (b)) as specified under 
     the State plan:
       ``(1) Inpatient hospital services.
       ``(2) Outpatient hospital services.
       ``(3) Physician services.
       ``(4) Surgical services.
       ``(5) Clinic services (including health center services) 
     and other ambulatory health care services.
       ``(6) Prescription drugs and biologicals and the 
     administration of such drugs and biologicals, only if such 
     drugs and biologicals are not furnished for the purpose of 
     causing, or assisting in causing, the death, suicide, 
     euthanasia, or mercy killing of a person.
       ``(7) Over-the-counter medications.
       ``(8) Laboratory and radiological services.
       ``(9) Prenatal care and prepregnancy family planning 
     services and supplies.
       ``(10) Inpatient mental health services, including services 
     furnished in a State-operated mental hospital and including 
     residential or other 24-hour therapeutically planned 
     structured services.
       ``(11) Outpatient mental health services, including 
     services furnished in a State-operated mental hospital and 
     including community-based services.
       ``(12) Durable medical equipment and other medically-
     related or remedial devices (such as prosthetic devices, 
     implants, eyeglasses, hearing aids, dental devices, and 
     adaptive devices).
       ``(13) Disposable medical supplies.
       ``(14) Home and community-based health care services and 
     related supportive services (such as home health nursing 
     services, home health aide services, personal care, 
     assistance with activities of daily living, chore services, 
     day care services, respite care services, training for family 
     members, and minor modifications to the home).
       ``(15) Nursing care services (such as nurse practitioner 
     services, nurse midwife services, advanced practice nurse 
     services, private duty nursing care, pediatric nurse 
     services, and respiratory care services) in a home, school, 
     or other setting.
       ``(16) Abortion only if necessary to save the life of the 
     mother or if the pregnancy is the result of an act of rape or 
     incest.
       ``(17) Dental services.
       ``(18) Inpatient substance abuse treatment services and 
     residential substance abuse treatment services.
       ``(19) Outpatient substance abuse treatment services.
       ``(20) Case management services.
       ``(21) Care coordination services.
       ``(22) Physical therapy, occupational therapy, and services 
     for individuals with speech, hearing, and language disorders.
       ``(23) Hospice care.
       ``(24) Any other medical, diagnostic, screening, 
     preventive, restorative, remedial, therapeutic, or 
     rehabilitative services (whether in a facility, home, school, 
     or other setting) if recognized by State law and only if the 
     service is--
       ``(A) prescribed by or furnished by a physician or other 
     licensed or registered practitioner within the scope of 
     practice as defined by State law,
       ``(B) performed under the general supervision or at the 
     direction of a physician, or
       ``(C) furnished by a health care facility that is operated 
     by a State or local government or is licensed under State law 
     and operating within the scope of the license.
       ``(25) Premiums for private health care insurance coverage.
       ``(26) Medical transportation.
       ``(27) Enabling services (such as transportation, 
     translation, and outreach services) only if designed to 
     increase the accessibility of primary and preventive health 
     care services for eligible low-income individuals.
       ``(28) Any other health care services or items specified by 
     the Secretary and not excluded under this section.
       ``(b) Targeted Low-Income Child Defined.--For purposes of 
     this title--
       ``(1) In general.--The term `targeted low-income child' 
     means a child--
       ``(A) who has been determined eligible by the State for 
     child health assistance under the State plan;
       ``(B) whose family income (as determined under the State 
     child health plan)--
       ``(i) exceeds the medicaid applicable income level (as 
     defined in paragraph (2) and expressed as a percentage of the 
     poverty line), but
       ``(ii) but does not exceed an income level that is 75 
     percentage points higher (as so expressed) than the medicaid 
     applicable income level, or, if higher, 133 percent of the 
     poverty line for a family of the size involved; and
       ``(C) who is not found to be eligible for medical 
     assistance under title XIX or covered under a group health 
     plan or under health insurance coverage (as such terms are 
     defined in section 2791 of the Public Health Service Act).

     Such term does not include a child who is an inmate of a 
     public institution.
       ``(2) Medicaid applicable income level.--The term `medicaid 
     applicable income level' means, with respect to a child, the 
     effective income level (expressed as a percent of the poverty 
     line) that has been specified under the State plan under 
     title XIX (including under a waiver authorized by the 
     Secretary or under section 1902(r)(2)), as of June 1, 1997, 
     for the child to be eligible for medical assistance under 
     section 1902(l)(2) for the age of such child. In applying the 
     previous sentence in the case of a child described in section 
     1902(l)(2)(D), such level shall be applied taking into 
     account the expanded coverage effected among such children 
     under such section with the passage of time.
       ``(c) Additional Definitions.--For purposes of this title:
       ``(1) Child.--The term `child' means an individual under 19 
     years of age.
       ``(2) Creditable health coverage.--The term `creditable 
     health coverage' has the meaning given the term `creditable 
     coverage' under section 2701(c) of the Public Health Service 
     Act (42 U.S.C. 300gg(c)) and includes coverage (including the 
     direct provision of services) provided to a targeted low-
     income child under this title.
       ``(3) Group health plan; health insurance coverage; etc.--
     The terms `group health plan', `group health insurance 
     coverage', and `health insurance coverage' have the meanings 
     given such terms in section 2191 of the Public Health Service 
     Act.
       ``(4) Low-income.--The term `low-income child' means a 
     child whose family income is below 300 percent of the poverty 
     line for a family of the size involved.
       ``(5) Poverty line defined.--The term `poverty line' has 
     the meaning given such term in section 673(2) of the 
     Community Services Block Grant Act (42 U.S.C. 9902(2)), 
     including any revision required by such section.

[[Page H4434]]

       ``(6) Preexisting condition exclusion.--The term 
     `preexisting condition exclusion' has the meaning given such 
     term in section 2701(b)(1)(A) of the Public Health Service 
     Act (42 U.S.C. 300gg(b)(1)(A)).
       ``(7) State child health plan; plan.--Unless the context 
     otherwise requires, the terms `State child health plan' and 
     `plan' mean a State child health plan approved under section 
     2105.
       ``(8) Uncovered child.--The term `uncovered child' means a 
     child that does not have creditable health coverage.''.
       (b) Conforming Amendments.--
       (1) Definition of state.--Section 1101(a)(1) is amended--
       (A) by striking ``and XIX'' and inserting ``XIX, and XXI'', 
     and
       (B) by striking ``title XIX'' and inserting ``titles XIX 
     and XXI''.

     SEC. 3503. OPTIONAL USE OF STATE CHILD HEALTH ASSISTANCE 
                   FUNDS FOR ENHANCED MEDICAID MATCH FOR EXPANDED 
                   MEDICAID ELIGIBILITY.

       (a) Increased FMAP for Medical Assistance for Expanded 
     Coverage of Targeted Low-Income Children.--Section 1905 of 
     the Social Security Act (42 U.S.C. 1396d) is amended--
       (1) in subsection (b), by adding at the end the following 
     new sentence: ``Notwithstanding the first sentence of this 
     subsection, in the case of a State plan that meets the 
     condition described in subsection (t)(1), with respect to 
     expenditures for medical assistance for optional targeted 
     low-income children described in subsection (t)(2), the 
     Federal medical assistance percentage is equal to the 
     enhanced medical assistance percentage described in 
     subsection (t)(3).''; and
       (2) by adding at the end the following new subsection:
       ``(t)(1) The conditions described in this paragraph for a 
     State plan are as follows:
       ``(A) The plan is not applying income and resource 
     standards and methodologies for the purpose of determining 
     eligibility of individuals under section 1902(l) that are 
     more restrictive than those applied as of June 1, 1997, for 
     the purpose of determining eligibility of individuals under 
     such section.
       ``(B) The plan provides for such reporting of information 
     about expenditures and payments attributable to the operation 
     of this subsection as the Secretary deems necessary in order 
     to carry out sections 2103(d) and 2104(b)(2).
       ``(C) The amount of the increased payments under section 
     1903(a) resulting from the application of this subsection 
     does not exceed the total amount of any allotment not 
     otherwise expended by the State under section 2103 for the 
     period involved.
       ``(2) For purposes of subsection (b), the term `optional 
     targeted low-income child' means a targeted low-income child 
     described in section 2108(b)(1) who would not qualify for 
     medical assistance under the State plan under this title 
     based on such plan as in effect on June 1, 1997 (taking into 
     account the process of individuals aging into eligibility 
     under section 1902(l)(2)(D)).
       ``(3) The enhanced medical assistance percentage described 
     in this paragraph for a State is equal to the Federal medical 
     assistance percentage (as defined in the first sentence of 
     subsection (b)) for the State increased by a number of 
     percentage points equal to 30 percent of the number of 
     percentage points by which (A) such Federal medical 
     assistance percentage for the State, is less than (B) 100 
     percent.
       ``(4) Notwithstanding any other provision of this title, a 
     State plan under this title may impose a limit on the number 
     of optional targeted low-income children described in 
     paragraph (2).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to medical assistance for items and services 
     furnished on or after October 1, 1997.

     SEC. 3504. MEDICAID PRESUMPTIVE ELIGIBILITY FOR LOW-INCOME 
                   CHILDREN.

       (a) In General.--Title XIX of the Social Security Act is 
     amended by inserting after section 1920 the following new 
     section:


                 ``presumptive eligibility for children

       ``Sec. 1920A. (a) A State plan approved under section 1902 
     may provide for making medical assistance with respect to 
     health care items and services covered under the State plan 
     available to a child during a presumptive eligibility period.
       ``(b) For purposes of this section:
       ``(1) The term `child' means an individual under 19 years 
     of age.
       ``(2) The term `presumptive eligibility period' means, with 
     respect to a child, the period that--
       ``(A) begins with the date on which a qualified entity 
     determines, on the basis of preliminary information, that the 
     family income of the child does not exceed the applicable 
     income level of eligibility under the State plan, and
       ``(B) ends with (and includes) the earlier of--
       ``(i) the day on which a determination is made with respect 
     to the eligibility of the child for medical assistance under 
     the State plan, or
       ``(ii) in the case of a child on whose behalf an 
     application is not filed by the last day of the month 
     following the month during which the entity makes the 
     determination referred to in subparagraph (A), such last day.
       ``(3)(A) Subject to subparagraph (B), the term `qualified 
     entity' means any entity that--
       ``(i)(I) is eligible for payments under a State plan 
     approved under this title and provides items and services 
     described in subsection (a) or (II) is authorized to 
     determine eligibility of a child to participate in a Head 
     Start program under the Head Start Act (42 U.S.C. 9821 et 
     seq.), eligibility of a child to receive child care services 
     for which financial assistance is provided under the Child 
     Care and Development Block Grant Act of 1990 (42 U.S.C. 9858 
     et seq.), eligibility of an infant or child to receive 
     assistance under the special supplemental nutrition program 
     for women, infants, and children (WIC) under section 17 of 
     the Child Nutrition Act of 1966 (42 U.S.C. 1786); and
       ``(ii) is determined by the State agency to be capable of 
     making determinations of the type described in paragraph 
     (1)(A).
       ``(B) The Secretary may issue regulations further limiting 
     those entities that may become qualified entities in order to 
     prevent fraud and abuse and for other reasons.
       ``(C) Nothing in this section shall be construed as 
     preventing a State from limiting the classes of entities that 
     may become qualified entities, consistent with any 
     limitations imposed under subparagraph (B).
       ``(c)(1) The State agency shall provide qualified entities 
     with--
       ``(A) such forms as are necessary for an application to be 
     made on behalf of a child for medical assistance under the 
     State plan, and
       ``(B) information on how to assist parents, guardians, and 
     other persons in completing and filing such forms.
       ``(2) A qualified entity that determines under subsection 
     (b)(1)(A) that a child is presumptively eligible for medical 
     assistance under a State plan shall--
       ``(A) notify the State agency of the determination within 5 
     working days after the date on which determination is made, 
     and
       ``(B) inform the parent or custodian of the child at the 
     time the determination is made that an application for 
     medical assistance under the State plan is required to be 
     made by not later than the last day of the month following 
     the month during which the determination is made.
       ``(3) In the case of a child who is determined by a 
     qualified entity to be presumptively eligible for medical 
     assistance under a State plan, the parent, guardian, or other 
     person shall make application on behalf of the child for 
     medical assistance under such plan by not later than the last 
     day of the month following the month during which the 
     determination is made, which application may be the 
     application used for the receipt of medical assistance by 
     individuals described in section 1902(l)(1).
       ``(d) Notwithstanding any other provision of this title, 
     medical assistance for items and services described in 
     subsection (a) that--
       ``(1) are furnished to a child--
       ``(A) during a presumptive eligibility period,
       ``(B) by a entity that is eligible for payments under the 
     State plan; and
       ``(2) are included in the care and services covered by a 
     State plan;
     shall be treated as medical assistance provided by such plan 
     for purposes of section 1903.''.
       (b) Conforming Amendments.--(1) Section 1902(a)(47) of such 
     Act (42 U.S.C. 1396a(a)(47)) is amended by inserting before 
     the semicolon at the end the following: ``and provide for 
     making medical assistance for items and services described in 
     subsection (a) of section 1920A available to children during 
     a presumptive eligibility period in accordance with such 
     section''.
       (2) Section 1903(u)(1)(D)(v) of such Act (42 U.S.C. 
     1396b(u)(1)(D)(v)) of such Act is amended by inserting before 
     the period at the end the following: ``or for items and 
     services described in subsection (a) of section 1920A 
     provided to a child during a presumptive eligibility period 
     under such section''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 3505. STATE OPTION OF CONTINUATION OF MEDICAID 
                   ELIGIBILITY FOR DISABLED CHILDREN WHO LOSE SSI 
                   BENEFITS.

       Section 1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)) 
     is amended--
       (1) by striking ``or'' at the end of subclause (XI),
       (2) by striking ``or'' at the end of subclause (XII), and
       (3) by adding at the end the following:

       ``(XIII) with respect to whom supplemental security income 
     benefits were being paid under title XVI as of the date of 
     the enactment of section 211(a) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (P.L. 104-193)) and would continue to be paid but for 
     the enactment of that section;''.

               TITLE IV--COMMITTEE ON COMMERCE--MEDICARE

     SEC. 4000. AMENDMENTS TO SOCIAL SECURITY ACT AND REFERENCES 
                   TO OBRA; TABLE OF CONTENTS OF TITLE.

       (a) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this title an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (b) References to OBRA.--In this title, the terms ``OBRA-
     1986'', ``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and 
     ``OBRA-1993'' refer to the Omnibus Budget Reconciliation Act 
     of 1986 (Public Law 99-509), the Omnibus Budget 
     Reconciliation Act of 1987 (Public Law 100-203), the Omnibus 
     Budget

[[Page H4435]]

     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.
       (c) Table of Contents of Title.--The table of contents of 
     this title is as follows:

Sec. 4000. Amendments to Social Security Act and references to OBRA; 
              table of contents of title.

                    Subtitle A--MedicarePlus Program

                    Chapter 1--MedicarePlus Program


                   SUBCHAPTER A--MEDICAREPLUS PROGRAM

Sec. 4001. Establishment of MedicarePlus program.

                     ``Part C--MedicarePlus Program

``Sec. 1851. Eligibility, election, and enrollment.
``Sec. 1852. Benefits and beneficiary protections.
``Sec. 1853. Payments to MedicarePlus organizations.
``Sec. 1854. Premiums.
``Sec. 1855. Organizational and financial requirements for MedicarePlus 
              organizations; provider-sponsored organizations.
``Sec. 1856. Establishment of standards.
``Sec. 1857. Contracts with MedicarePlus organizations.
``Sec. 1859. Definitions; miscellaneous provisions.
Sec. 4002. Transitional rules for current medicare HMO program.
Sec. 4003. Conforming changes in medigap program.


 SUBCHAPTER B--SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS

Sec. 4006. MedicarePlus MSA.


  SUBCHAPTER C--GME, IME, AND DSH PAYMENTS FOR MANAGED CARE ENROLLEES

Sec. 4008. Graduate medical education and indirect medical education 
              payments for managed care enrollees.
Sec. 4009. Disproportionate share hospital payments for managed care 
              enrollees.

             Chapter 2--Integrated Long-term Care Programs


  SUBCHAPTER A--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

Sec. 4011. Reference to coverage of PACE under the medicare program.
Sec. 4012. Reference to establishment of PACE program as medicaid State 
              option.


     SUBCHAPTER B--SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS)

Sec. 4015. Social health maintenance organizations (SHMOs).


                      SUBCHAPTER C--OTHER PROGRAMS

Sec. 4018. Orderly transition of municipal health service demonstration 
              projects.
Sec. 4019. Extension of certain medicare community nursing organization 
              demonstration projects.

            Chapter 3--Medicare Payment Advisory Commission

Sec. 4021. Medicare Payment Advisory Commission.

                     Chapter 4--Medigap Protections

Sec. 4031. Medigap protections.
Sec. 4032. Medicare prepaid competitive pricing demonstration project.

                   Subtitle B--Prevention Initiatives

Sec. 4101. Screening mammography.
Sec. 4102. Screening pap smear and pelvic exams.
Sec. 4103. Prostate cancer screening tests.
Sec. 4104. Coverage of colorectal screening.
Sec. 4105. Diabetes screening tests.
Sec. 4106. Standardization of medicare coverage of bone mass 
              measurements.
Sec. 4107. Vaccines outreach expansion.
Sec. 4108. Study on preventive benefits.

                     Subtitle C--Rural Initiatives

Sec. 4206. Informatics, telemedicine, and education demonstration 
              project.

              Subtitle D--Anti-Fraud and Abuse Provisions

Sec. 4301. Permanent exclusion for those convicted of 3 health care 
              related crimes.
Sec. 4302. Authority to refuse to enter into medicare agreements with 
              individuals or entities convicted of felonies.
Sec. 4303. Inclusion of toll-free number to report medicare waste, 
              fraud, and abuse in explanation of benefits forms.
Sec. 4304. Liability of medicare carriers and fiscal intermediaries for 
              claims submitted by excluded providers.
Sec. 4305. Exclusion of entity controlled by family member of a 
              sanctioned individual.
Sec. 4306. Imposition of civil money penalties.
Sec. 4307. Disclosure of information and surety bonds.
Sec. 4308. Provision of certain identification numbers.
Sec. 4309. Advisory opinions regarding certain physician self-referral 
              provisions.
Sec. 4310. Nondiscrimination in post-hospital referral to home health 
              agencies.
Sec. 4311. Other fraud and abuse related provisions.

                Subtitle E--Prospective Payment Systems

                    Chapter 2--Payment Under Part B


   SUBCHAPTER A--PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES

Sec. 4411. Elimination of formula-driven overpayments (FDO) for certain 
              outpatient hospital services.
Sec. 4412. Extension of reductions in payments for costs of hospital 
              outpatient services.
Sec. 4413. Prospective payment system for hospital outpatient 
              department services.


                 SUBCHAPTER B--REHABILITATION SERVICES

Sec. 4421. Rehabilitation agencies and services.
Sec. 4422. Comprehensive outpatient rehabilitation facilities (corf).


                    SUBCHAPTER C--AMBULANCE SERVICES

Sec. 4431. Payments for ambulance services.
Sec. 4432. Demonstration of coverage of ambulance services under 
              medicare through contracts with units of local 
              government.

                 Chapter 3--Payment Under Parts A and B

Sec. 4441. Prospective payment for home health services.

             Subtitle G--Provisions Relating to Part B Only

                    Chapter 1--Physicians' Services

Sec. 4601. Establishment of single conversion factor for 1998.
Sec. 4602. Establishing update to conversion factor to match spending 
              under sustainable growth rate.
Sec. 4603. Replacement of volume performance standard with sustainable 
              growth rate.
Sec. 4604. Payment rules for anesthesia services.
Sec. 4605. Implementation of resource-based physician practice expense.
Sec. 4606. Dissemination of information on high per admission relative 
              values for in-hospital physicians' services.
Sec. 4607. No X-ray required for chiropractic services.
Sec. 4608. Temporary coverage restoration for portable 
              electrocardiogram transportation.

                  Chapter 2--Other Payment Provisions

Sec. 4611. Payments for durable medical equipment.
Sec. 4612. Oxygen and oxygen equipment.
Sec. 4613. Reduction in updates to payment amounts for clinical 
              diagnostic laboratory tests.
Sec. 4614. Simplification in administration of laboratory services 
              benefit.
Sec. 4615. Updates for ambulatory surgical services.
Sec. 4616. Reimbursement for drugs and biologicals.
Sec. 4617. Coverage of oral anti-nausea drugs under chemotherapeutic 
              regimen.
Sec. 4618. Rural health clinic services.
Sec. 4619. Increased medicare reimbursement for nurse practitioners and 
              clinical nurse specialists.
Sec. 4620. Increased medicare reimbursement for physician assistants.
Sec. 4621. Renal dialysis-related services.
Sec. 4622. Payment for cochlear implants as customized durable medical 
              equipment.

                       Chapter 3--Part B Premium

Sec. 4631. Part B premium.

            Subtitle H--Provisions Relating to Parts A and B

       Chapter 1--Provisions Relating to Medicare Secondary Payer

Sec. 4701. Permanent extension and revision of certain secondary payer 
              provisions.
Sec. 4702. Clarification of time and filing limitations.
Sec. 4703. Permitting recovery against third party administrators.

                    Chapter 2--Home Health Services

Sec. 4711. Recapturing savings resulting from temporary freeze on 
              payment increases for home health services.
Sec. 4712. Interim payments for home health services.
Sec. 4713. Clarification of part-time or intermittent nursing care.
Sec. 4714. Study of definition of homebound.
Sec. 4715. Payment based on location where home health service is 
              furnished.
Sec. 4716. Normative standards for home health claims denials,
Sec. 4717. No home health benefits based solely on drawing blood.
Sec. 4718. Making part B primary payor for certain home health 
              services.

          Chapter 3--Baby Boom Generation Medicare Commission

Sec. 4721. Bipartisan Commission on the Effect of the Baby Boom 
              Generation on the Medicare Program.

  Chapter 4--Provisions Relating to Direct Graduate Medical Education

Sec. 4731. Limitation on payment based on number of residents and 
              implementation of rolling average FTE count.
Sec. 4732. Phased-in limitation on hospital overhead and supervisory 
              physician component of direct medical education costs.
Sec. 4733. Permitting payment to non-hospital providers.

[[Page H4436]]

Sec. 4734. Incentive payments under plans for voluntary reduction in 
              number of residents.
Sec. 4735. Demonstration project on use of consortia.
Sec. 4736. Recommendations on long-term payment policies regarding 
              financing teaching hospitals and graduate medical 
              education.
Sec. 4737. Medicare special reimbursement rule for certain combined 
              residency programs.

                      Chapter 5--Other Provisions

Sec. 4741. Centers of excellence.
Sec. 4742. Medicare part B special enrollment period and waiver of part 
              B late enrollment penalty and medigap special open 
              enrollment period for certain military retirees and 
              dependents.
Sec. 4743. Competitive bidding for certain items and services.

                  Subtitle I--Medical Liability Reform

                     Chapter 1--General Provisions

Sec. 4801. Federal reform of health care liability actions.
Sec. 4802. Definitions.
Sec. 4803. Effective date.

     Chapter 2--Uniform Standards for Health Care Liability Actions

Sec. 4811. Statute of limitations.
Sec. 4812. Calculation and payment of damages.
Sec. 4813. Alternative dispute resolution.
                    Subtitle A--MedicarePlus Program

                    CHAPTER 1--MEDICAREPLUS PROGRAM

                   Subchapter A--MedicarePlus Program

     SEC. 4001. ESTABLISHMENT OF MEDICAREPLUS 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--MedicarePlus Program


                ``eligibility, election, and enrollment

       ``Sec. 1851. (a) Choice of Medicare Benefits Through 
     MedicarePlus Plans.--
       ``(1) In general.--Subject to the provisions of this 
     section, each MedicarePlus eligible individual (as defined in 
     paragraph (3)) is entitled to elect to receive benefits under 
     this title--
       ``(A) through the medicare fee-for-service program under 
     parts A and B, or
       ``(B) through enrollment in a MedicarePlus plan under this 
     part.
       ``(2) Types of medicareplus plans that may be available.--A 
     MedicarePlus plan may be any of the following types of plans 
     of health insurance:
       ``(A) Coordinated care plans.--Coordinated care plans which 
     provide health care services, including health maintenance 
     organization plans and preferred provider organization plans.
       ``(B) Plans offered by provider-sponsored organization.--A 
     MedicarePlus plan offered by a provider-sponsored 
     organization, as defined in section 1855(e).
       ``(C) Combination of msa plan and contributions to 
     medicareplus msa.--An MSA plan, as defined in section 
     1859(b)(2), and a contribution into a MedicarePlus medical 
     savings account (MSA).
       ``(3) MedicarePlus eligible individual.--
       ``(A) In general.--In this title, subject to subparagraph 
     (B), the term `MedicarePlus eligible individual' means an 
     individual who is entitled to benefits under part A and 
     enrolled under part B.
       ``(B) Special rule for end-stage renal disease.--Such term 
     shall not include an individual medically determined to have 
     end-stage renal disease, except that an individual who 
     develops end-stage renal disease while enrolled in a 
     MedicarePlus plan may continue to be enrolled in that plan.
       ``(b) Special Rules.--
       ``(1) Residence requirement.--
       ``(A) In general.--Except as the Secretary may otherwise 
     provide, an individual is eligible to elect a MedicarePlus 
     plan offered by a MedicarePlus organization only if the 
     organization serves the geographic area in which the 
     individual resides.
       ``(B) Continuation of enrollment permitted.--Pursuant to 
     rules specified by the Secretary, the Secretary shall provide 
     that an individual may continue enrollment in a plan, 
     notwithstanding that the individual no longer resides in the 
     service area of the plan, so long as the plan provides 
     benefits for enrollees located in the area in which the 
     individual resides.
       ``(2) Special rule for certain individuals covered under 
     fehbp or eligible for veterans or military health benefits, 
     veterans .--
       ``(A) FEHBP.--An individual who is enrolled in a health 
     benefit plan under chapter 89 of title 5, United States Code, 
     is not eligible to enroll in an MSA plan until such time as 
     the Director of the Office of Management and Budget certifies 
     to the Secretary that the Office of Personnel Management has 
     adopted policies which will ensure that the enrollment of 
     such individuals in such plans will not result in increased 
     expenditures for the Federal Government for health benefit 
     plans under such chapter.
       ``(B) VA and dod.--The Secretary may apply rules similar to 
     the rules described in subparagraph (A) in the case of 
     individuals who are eligible for health care benefits under 
     chapter 55 of title 10, United States Code, or under chapter 
     17 of title 38 of such Code.
       ``(3) Limitation on eligibility of qualified medicare 
     beneficiaries and other medicaid beneficiaries to enroll in 
     an MSA plan.--An individual who is a qualified medicare 
     beneficiary (as defined in section 1905(p)(1)), a qualified 
     disabled and working individual (described in section 
     1905(s)), an individual described in section 
     1902(a)(10)(E)(iii), or otherwise entitled to medicare cost-
     sharing under a State plan under title XIX is not eligible to 
     enroll in an MSA plan.
       ``(4) Coverage under msa plans on a demonstration basis.--
       ``(A) In general.--An individual is not eligible to enroll 
     in an MSA plan under this part--
       ``(i) on or after January 1, 2003, unless the enrollment is 
     the continuation of such an enrollment in effect as of such 
     date; or
       ``(ii) as of any date if the number of such individuals so 
     enrolled as of such date has reached 500,000.

     Under rules established by the Secretary, an individual is 
     not eligible to enroll (or continue enrollment) in an MSA 
     plan for a year unless the individual provides assurances 
     satisfactory to the Secretary that the individual will reside 
     in the United States for at least 183 days during the year.
       ``(B) Evaluation.--The Secretary shall regularly evaluate 
     the impact of permitting enrollment in MSA plans under this 
     part on selection (including adverse selection), use of 
     preventive care, access to care, and the financial status of 
     the Trust Funds under this title.
       ``(C) Reports.--The Secretary shall submit to Congress 
     periodic reports on the numbers of individuals enrolled in 
     such plans and on the evaluation being conducted under 
     subparagraph (B). The Secretary shall submit such a report, 
     by not later than March 1, 2002, on whether the time 
     limitation under subparagraph (A)(i) should be extended or 
     removed and whether to change the numerical limitation under 
     subparagraph (A)(ii).
       ``(c) Process for Exercising Choice.--
       ``(1) In general.--The Secretary shall establish a process 
     through which elections described in subsection (a) are made 
     and changed, including the form and manner in which such 
     elections are made and changed. Such elections shall be made 
     or changed only during coverage election periods specified 
     under subsection (e) and shall become effective as provided 
     in subsection (f).
       ``(2) Coordination through medicareplus organizations.--
       ``(A) Enrollment.--Such process shall permit an individual 
     who wishes to elect a MedicarePlus plan offered by a 
     MedicarePlus organization to make such election through the 
     filing of an appropriate election form with the organization.
       ``(B) Disenrollment.--Such process shall permit an 
     individual, who has elected a MedicarePlus plan offered by a 
     MedicarePlus organization and who wishes to terminate such 
     election, to terminate such election through the filing of an 
     appropriate election form with the organization.
       ``(3) Default.--
       ``(A) Initial election.--
       ``(i) In general.--Subject to clause (ii), an individual 
     who fails to make an election during an initial election 
     period under subsection (e)(1) is deemed to have chosen the 
     medicare fee-for-service program option.
       ``(ii) Seamless continuation of coverage.--The Secretary 
     may establish procedures under which an individual who is 
     enrolled in a health plan (other than MedicarePlus plan) 
     offered by a MedicarePlus organization at the time of the 
     initial election period and who fails to elect to receive 
     coverage other than through the organization is deemed to 
     have elected the MedicarePlus plan offered by the 
     organization (or, if the organization offers more than one 
     such plan, such plan or plans as the Secretary identifies 
     under such procedures).
       ``(B) Continuing periods.--An individual who has made (or 
     is deemed to have made) an election under this section is 
     considered to have continued to make such election until such 
     time as--
       ``(i) the individual changes the election under this 
     section, or
       ``(ii) a MedicarePlus plan is discontinued, if the 
     individual had elected such plan at the time of the 
     discontinuation.
       ``(d) Providing Information To Promote Informed Choice.--
       ``(1) In general.--The Secretary shall provide for 
     activities under this subsection to broadly disseminate 
     information to medicare beneficiaries (and prospective 
     medicare beneficiaries) on the coverage options provided 
     under this section in order to promote an active, informed 
     selection among such options.
       ``(2) Provision of notice.--
       ``(A) Open season notification.--At least 30 days before 
     the beginning of each annual, coordinated election period (as 
     defined in subsection (e)(3)(B)), the Secretary shall mail to 
     each MedicarePlus eligible individual residing in an area the 
     following:
       ``(i) General information.--The general information 
     described in paragraph (3).
       ``(ii) List of plans and comparison of plan options.--A 
     list identifying the MedicarePlus plans that are (or will be) 
     available to residents of the area and information described 
     in paragraph (4) concerning such plans. Such information 
     shall be presented in a comparative form.
       ``(iii) MedicarePlus monthly capitation rate.--The amount 
     of the monthly MedicarePlus capitation rate for the area.
       ``(iv) Additional information.--Any other information that 
     the Secretary determines

[[Page H4437]]

     will assist the individual in making the election under this 
     section.
     The mailing of such information shall be coordinated with the 
     mailing of any annual notice under section 1804.
       ``(B) Notification to newly medicareplus eligible 
     individuals.--To the extent practicable, the Secretary shall, 
     not later than 2 months before the beginning of the initial 
     MedicarePlus enrollment period for an individual described in 
     subsection (e)(1), mail to the individual the information 
     described in subparagraph (A).
       ``(C) Form.--The information disseminated under this 
     paragraph shall be written and formatted using language that 
     is easily understandable by medicare beneficiaries.
       ``(D) Periodic updating.--The information described in 
     subparagraph (A) shall be updated on at least an annual basis 
     to reflect changes in the availability of MedicarePlus plans 
     and the benefits and monthly premiums (and net monthly 
     premiums) for such plans.
       ``(3) General information.--General information under this 
     paragraph, with respect to coverage under this part during a 
     year, shall include the following:
       ``(A) Benefits under fee-for-service program option.--A 
     general description of the benefits covered (and not covered) 
     under the medicare fee-for-service program under parts A and 
     B, including--
       ``(i) covered items and services,
       ``(ii) beneficiary cost sharing, such as deductibles, 
     coinsurance, and copayment amounts, and
       ``(iii) any beneficiary liability for balance billing.
       ``(B) Part b premium.--The part B premium rates that will 
     be charged for part B coverage.
       ``(C) Election procedures.--Information and instructions on 
     how to exercise election options under this section.
       ``(D) Rights.--The general description of procedural rights 
     (including grievance and appeals procedures) of beneficiaries 
     under the medicare fee-for-service program and the 
     MedicarePlus program and right to be protected against 
     discrimination based on health status-related factors under 
     section 1852(b).
       ``(E) Information on medigap and medicare select.--A 
     general description of the benefits, enrollment rights, and 
     other requirements applicable to medicare supplemental 
     policies under section 1882 and provisions relating to 
     medicare select policies described in section 1882(t).
       ``(F) Potential for contract termination.--The fact that a 
     MedicarePlus organization may terminate or refuse to renew 
     its contract under this part and the effect the termination 
     or nonrenewal of its contract may have on individuals 
     enrolled with the MedicarePlus plan under this part.
       ``(4) Information comparing plan options.--Information 
     under this paragraph, with respect to a MedicarePlus plan for 
     a year, shall include the following:
       ``(A) Benefits.--The benefits covered (and not covered) 
     under the plan, including--
       ``(i) covered items and services beyond those provided 
     under the medicare fee-for-service program,
       ``(ii) any beneficiary cost sharing,
       ``(iii) any maximum limitations on out-of-pocket expenses,
       ``(iv) in the case of an MSA plan, differences in cost 
     sharing under such a plan compared to under other 
     MedicarePlus plans,
       ``(v) the use of provider networks and the restriction on 
     payments for services furnished other than by other through 
     the organization,
       ``(vi) the organization's coverage of emergency and 
     urgently needed care,
       ``(vii) the appeal and grievance rights of enrollees,
       ``(viii) number of grievances and appeals, and information 
     on their disposition in the aggregate,
       ``(ix) procedures used by the organization to control 
     utilization of services and expenditures, and
       ``(x) any exclusions in the types of providers 
     participating in the plan's network.
       ``(B) Premiums.--The monthly premium (and net monthly 
     premium), if any, for the plan.
       ``(C) Service area.--The service area of the plan.
       ``(D) Quality and performance.--To the extent available, 
     plan quality and performance indicators for the benefits 
     under the plan (and how they compare to such indicators under 
     the medicare fee-for-service program under parts A and B in 
     the area involved), including--
       ``(i) disenrollment rates for medicare enrollees electing 
     to receive benefits through the plan for the previous 2 years 
     (excluding disenrollment due to death or moving outside the 
     plan's service area),
       ``(ii) information on medicare enrollee satisfaction,
       ``(iii) information on health outcomes, and
       ``(iv) the recent record regarding compliance of the plan 
     with requirements of this part (as determined by the 
     Secretary).
       ``(E) Supplemental benefits options.--Whether the 
     organization offering the plan offers optional supplemental 
     benefits and the terms and conditions (including premiums) 
     for such coverage.
       ``(5) Maintaining a toll-free number and internet site.--
     The Secretary shall maintain a toll-free number for inquiries 
     regarding MedicarePlus options and the operation of this part 
     in all areas in which MedicarePlus plans are offered and an 
     Internet site through which individuals may electronically 
     obtain information on such options and MedicarePlus plans.
       ``(6) Use of nonfederal entities.--The Secretary may enter 
     into contracts with non-Federal entities to carry out 
     activities under this subsection.
       ``(7) Provision of information.--A MedicarePlus 
     organization shall provide the Secretary with such 
     information on the organization and each MedicarePlus plan it 
     offers as may be required for the preparation of the 
     information referred to in paragraph (2)(A).
       ``(e) Coverage Election Periods.--
       ``(1) Initial choice upon eligibility to make election if 
     medicareplus plans available to individual.--If, at the time 
     an individual first becomes entitled to benefits under part A 
     and enrolled under part B, there is one or more MedicarePlus 
     plans offered in the area in which the individual resides, 
     the individual shall make the election under this section 
     during a period (of a duration and beginning at a time 
     specified by the Secretary) at such time. Such period shall 
     be specified in a manner so that, in the case of an 
     individual who elects a MedicarePlus plan during the period, 
     coverage under the plan becomes effective as of the first 
     date on which the individual may receive such coverage.
       ``(2) Open enrollment and disenrollment opportunities.--
     Subject to paragraph (5)--
       ``(A) Continuous open enrollment and disenrollment through 
     2000.--At any time during 1998, 1999, and 2000, a 
     MedicarePlus eligible individual may change the election 
     under subsection (a)(1).
       ``(B) Continuous open enrollment and disenrollment for 
     first 6 months during 2001.--
       ``(i) In general.--Subject to clause (ii), at any time 
     during the first 6 months of 2001, or, if the individual 
     first becomes a MedicarePlus eligible individual during 2001, 
     during the first 6 months during 2001 in which the individual 
     is a MedicarePlus eligible individual, a MedicarePlus 
     eligible individual may change the election under subsection 
     (a)(1).
       ``(ii) Limitation of one change per year.--An individual 
     may exercise the right under clause (i) only once during 
     2001. The limitation under this clause shall not apply to 
     changes in elections effected during an annual, coordinated 
     election period under paragraph (3) or during a special 
     enrollment period under paragraph (4).
       ``(C) Continuous open enrollment and disenrollment for 
     first 3 months in subsequent years.--
       ``(i) In general.--Subject to clause (ii), at any time 
     during the first 3 months of a year after 2001, or, if the 
     individual first becomes a MedicarePlus eligible individual 
     during a year after 2001, during the first 3 months of such 
     year in which the individual is a MedicarePlus eligible 
     individual, a MedicarePlus eligible individual may change the 
     election under subsection (a)(1).
       ``(ii) Limitation of one change per year.--An individual 
     may exercise the right under clause (i) only once a year. The 
     limitation under this clause shall not apply to changes in 
     elections effected during an annual, coordinated election 
     period under paragraph (3) or during a special enrollment 
     period under paragraph (4).
       ``(3) Annual, coordinated election period.--
       ``(A) In general.--Subject to paragraph (5), each 
     individual who is eligible to make an election under this 
     section may change such election during an annual, 
     coordinated election period.
       ``(B) Annual, coordinated election period.--For purposes of 
     this section, the term `annual, coordinated election period' 
     means, with respect to a calendar year (beginning with 2001), 
     the month of October before such year.
       ``(C) MedicarePlus health fairs.--In the month of October 
     of each year (beginning with 1998), the Secretary shall 
     provide for a nationally coordinated educational and 
     publicity campaign to inform MedicarePlus eligible 
     individuals about MedicarePlus plans and the election process 
     provided under this section.
       ``(4) Special election periods.--Effective as of January 1, 
     2001, an individual may discontinue an election of a 
     MedicarePlus plan offered by a MedicarePlus organization 
     other than during an annual, coordinated election period and 
     make a new election under this section if--
       ``(A) the organization's or plan's certification under this 
     part has been terminated or the organization has terminated 
     or otherwise discontinued providing the plan;
       ``(B) the individual is no longer eligible to elect the 
     plan because of a change in the individual's place of 
     residence or other change in circumstances (specified by the 
     Secretary, but not including termination of the individual's 
     enrollment on the basis described in clause (i) or (ii) of 
     subsection (g)(3)(B));
       ``(C) the individual demonstrates (in accordance with 
     guidelines established by the Secretary) that--
       ``(i) the organization offering the plan substantially 
     violated a material provision of the organization's contract 
     under this part in relation to the individual (including the 
     failure to provide an enrollee on a timely basis medically 
     necessary care for which benefits are available under the 
     plan or the failure to provide such covered care in 
     accordance with applicable quality standards); or

[[Page H4438]]

       ``(ii) the organization (or an agent or other entity acting 
     on the organization's behalf) materially misrepresented the 
     plan's provisions in marketing the plan to the individual; or
       ``(D) the individual meets such other exceptional 
     conditions as the Secretary may provide.
       ``(5) Special rules for msa plans.--Notwithstanding the 
     preceding provisions of this subsection, an individual--
       ``(A) may elect an MSA plan only during--
       ``(i) an initial open enrollment period described in 
     paragraph (1),
       ``(ii) an annual, coordinated election period described in 
     paragraph (3)(B), or
       ``(iii) the months of October 1998 and October 1999; and
       ``(B) may not discontinue an election of an MSA plan except 
     during the periods described in clause (ii) or (iii) of 
     subparagraph (A) and under paragraph (4).
       ``(f) Effectiveness of Elections and Changes of 
     Elections.--
       ``(1) During initial coverage election period.--An election 
     of coverage made during the initial coverage election period 
     under subsection (e)(1) shall take effect upon the date the 
     individual becomes entitled to benefits under part A and 
     enrolled under part B, except as the Secretary may provide 
     (consistent with section 1838) in order to prevent 
     retroactive coverage.
       ``(2) During continuous open enrollment periods.--An 
     election or change of coverage made under subsection (e)(2) 
     shall take effect with the first day of the first calendar 
     month following the date on which the election is made.
       ``(3) Annual, coordinated election period.--An election or 
     change of coverage made during an annual, coordinated 
     election period (as defined in subsection (e)(3)(B)) in a 
     year shall take effect as of the first day of the following 
     year.
       ``(4) Other periods.--An election or change of coverage 
     made during any other period under subsection (e)(4) shall 
     take effect in such manner as the Secretary provides in a 
     manner consistent (to the extent practicable) with protecting 
     continuity of health benefit coverage.
       ``(g) Guaranteed Issue and Renewal.--
       ``(1) In general.--Except as provided in this subsection, a 
     MedicarePlus organization shall provide that at any time 
     during which elections are accepted under this section with 
     respect to a MedicarePlus plan offered by the organization, 
     the organization will accept without restrictions individuals 
     who are eligible to make such election.
       ``(2) Priority.--If the Secretary determines that a 
     MedicarePlus organization, in relation to a MedicarePlus plan 
     it offers, has a capacity limit and the number of 
     MedicarePlus eligible individuals who elect the plan under 
     this section exceeds the capacity limit, the organization may 
     limit the election of individuals of the plan under this 
     section but only if priority in election is provided--
       ``(A) first to such individuals as have elected the plan at 
     the time of the determination, and
       ``(B) then to other such individuals in such a manner that 
     does not discriminate, on a basis described in section 
     1852(b), among the individuals (who seek to elect the plan).

     The preceding sentence shall not apply if it would result in 
     the enrollment of enrollees substantially nonrepresentative, 
     as determined in accordance with regulations of the 
     Secretary, of the medicare population in the service area of 
     the plan.
       ``(3) Limitation on termination of election.--
       ``(A) In general.--Subject to subparagraph (B), a 
     MedicarePlus organization may not for any reason terminate 
     the election of any individual under this section for a 
     MedicarePlus plan it offers.
       ``(B) Basis for termination of election.--A MedicarePlus 
     organization may terminate an individual's election under 
     this section with respect to a MedicarePlus plan it offers 
     if--
       ``(i) any net monthly premiums required with respect to 
     such plan are not paid on a timely basis (consistent with 
     standards under section 1856 that provide for a grace period 
     for late payment of net monthly premiums),
       ``(ii) the individual has engaged in disruptive behavior 
     (as specified in such standards), or
       ``(iii) the plan is terminated with respect to all 
     individuals under this part in the area in which the 
     individual resides.
       ``(C) Consequence of termination.--
       ``(i) Terminations for cause.--Any individual whose 
     election is terminated under clause (i) or (ii) of 
     subparagraph (B) is deemed to have elected the medicare fee-
     for-service program option described in subsection (a)(1)(A).
       ``(ii) Termination based on plan termination or service 
     area reduction.--Any individual whose election is terminated 
     under subparagraph (B)(iii) shall have a special election 
     period under subsection (e)(4)(A) in which to change coverage 
     to coverage under another MedicarePlus plan. Such an 
     individual who fails to make an election during such period 
     is deemed to have chosen to change coverage to the medicare 
     fee-for-service program option described in subsection 
     (a)(1)(A).
       ``(D) Organization obligation with respect to election 
     forms.--Pursuant to a contract under section 1857, each 
     MedicarePlus organization receiving an election form under 
     subsection (c)(2) shall transmit to the Secretary (at such 
     time and in such manner as the Secretary may specify) a copy 
     of such form or such other information respecting the 
     election as the Secretary may specify.
       ``(h) Approval of Marketing Material and Application 
     Forms.--
       ``(1) Submission.--No marketing material or application 
     form may be distributed by a MedicarePlus organization to (or 
     for the use of) MedicarePlus eligible individuals unless--
       ``(A) at least 45 days before the date of distribution the 
     organization has submitted the material or form to the 
     Secretary for review, and
       ``(B) the Secretary has not disapproved the distribution of 
     such material or form.
       ``(2) Review.--The standards established under section 1856 
     shall include guidelines for the review of all such material 
     or form submitted and under such guidelines the Secretary 
     shall disapprove (or later require the correction of) such 
     material or form if the material or form is materially 
     inaccurate or misleading or otherwise makes a material 
     misrepresentation.
       ``(3) Deemed approval (1-stop shopping).--In the case of 
     material or form that is submitted under paragraph (1)(A) to 
     the Secretary or a regional office of the Department of 
     Health and Human Services and the Secretary or the office has 
     not disapproved the distribution of marketing material or 
     form under paragraph (1)(B) with respect to a MedicarePlus 
     plan in an area, the Secretary is deemed not to have 
     disapproved such distribution in all other areas covered by 
     the plan and organization except to the extent that such 
     material or form is specific only to an area involved.
       ``(4) Prohibition of certain marketing practices.--Each 
     MedicarePlus organization shall conform to fair marketing 
     standards, in relation to MedicarePlus plans offered under 
     this part, included in the standards established under 
     section 1856. Such standards shall include a prohibition 
     against a MedicarePlus organization (or agent of such an 
     organization) completing any portion of any election form 
     used to carry out elections under this section on behalf of 
     any individual.
       ``(i) Effect of Election of MedicarePlus Plan Option.--
     Subject to sections 1852(a)(5), 1857(f)(2), and 1857(g)--
       ``(1) payments under a contract with a MedicarePlus 
     organization under section 1853(a) with respect to an 
     individual electing a MedicarePlus plan offered by the 
     organization shall be instead of the amounts which (in the 
     absence of the contract) would otherwise be payable under 
     parts A and B for items and services furnished to the 
     individual, and
       ``(2) subject to subsections (e) and (f) of section 1853, 
     only the MedicarePlus organization shall be entitled to 
     receive payments from the Secretary under this title for 
     services furnished to the individual.


                 ``benefits and beneficiary protections

       ``Sec. 1852. (a) Basic Benefits.--
       ``(1) In general.--Except as provided in section 1859(b)(2) 
     for MSA plans, each MedicarePlus plan shall provide to 
     members enrolled under this part, through providers and other 
     persons that meet the applicable requirements of this title 
     and part A of title XI--
       ``(A) those items and services for which benefits are 
     available under parts A and B to individuals residing in the 
     area served by the plan, and
       ``(B) additional benefits required under section 
     1854(f)(1)(A).
       ``(2) Satisfaction of requirement.--A MedicarePlus plan 
     (other than an MSA plan) offered by a MedicarePlus 
     organization satisfies paragraph (1)(A), with respect to 
     benefits for items and services furnished other than through 
     a provider that has a contract with the organization offering 
     the plan, if the plan provides (in addition to any cost 
     sharing provided for under the plan) for at least the total 
     dollar amount of payment for such items and services as would 
     otherwise be authorized under parts A and B (including any 
     balance billing permitted under such parts).
       ``(3) Supplemental benefits.--
       ``(A) Benefits included subject to secretary's approval.--
     Each MedicarePlus organization may provide to individuals 
     enrolled under this part (without affording those individuals 
     an option to decline the coverage) supplemental health care 
     benefits that the Secretary may approve. The Secretary shall 
     approve any such supplemental benefits unless the Secretary 
     determines that including such supplemental benefits would 
     substantially discourage enrollment by MedicarePlus eligible 
     individuals with the organization.
       ``(B) At enrollees' option.--A MedicarePlus organization 
     may provide to individuals enrolled under this part (other 
     than under an MSA plan) supplemental health care benefits 
     that the individuals may elect, at their option, to have 
     covered.
       ``(4) Organization as secondary payer.--Notwithstanding any 
     other provision of law, a MedicarePlus organization may (in 
     the case of the provision of items and services to an 
     individual under a MedicarePlus plan under circumstances in 
     which payment under this title is made secondary pursuant to 
     section 1862(b)(2)) charge or authorize the provider of such 
     services to charge, in accordance with the charges allowed 
     under such a law, plan, or policy--
       ``(A) the insurance carrier, employer, or other entity 
     which under such law, plan, or policy is to pay for the 
     provision of such services, or

[[Page H4439]]

       ``(B) such individual to the extent that the individual has 
     been paid under such law, plan, or policy for such services.
       ``(5) National coverage determinations.--If there is a 
     national coverage determination made in the period beginning 
     on the date of an announcement under section 1853(b) and 
     ending on the date of the next announcement under such 
     section and the Secretary projects that the determination 
     will result in a significant change in the costs to a 
     MedicarePlus organization of providing the benefits that are 
     the subject of such national coverage determination and that 
     such change in costs was not incorporated in the 
     determination of the annual MedicarePlus capitation rate 
     under section 1853 included in the announcement made at the 
     beginning of such period--
       ``(A) such determination shall not apply to contracts under 
     this part until the first contract year that begins after the 
     end of such period, and
       ``(B) if such coverage determination provides for coverage 
     of additional benefits or coverage under additional 
     circumstances, section 1851(i) shall not apply to payment for 
     such additional benefits or benefits provided under such 
     additional circumstances until the first contract year that 
     begins after the end of such period,

     unless otherwise required by law.
       ``(b) Antidiscrimination.--
       ``(1) In general.--A MedicarePlus organization may not 
     deny, limit, or condition the coverage or provision of 
     benefits under this part, for individuals permitted to be 
     enrolled with the organization under this part, based on any 
     health status-related factor described in section 2702(a)(1) 
     of the Public Health Service Act.
       ``(2) Construction.--Paragraph (1) shall not be construed 
     as requiring a MedicarePlus organization to enroll 
     individuals who are determined to have end-stage renal 
     disease, except as provided under section 1851(a)(3)(B).
       ``(c) Detailed Description of Plan Provisions.--A 
     MedicarePlus organization shall disclose, in clear, accurate, 
     and standardized form to each enrollee with a MedicarePlus 
     plan offered by the organization under this part at the time 
     of enrollment and at least annually thereafter, the following 
     information regarding such plan:
       ``(1) Service area.--The plan's service area.
       ``(2) Benefits.--Benefits offered (and not offered) under 
     the plan offered, including information described in section 
     1851(d)(3)(A) and exclusions from coverage and, if it is an 
     MSA plan, a comparison of benefits under such a plan with 
     benefits under other MedicarePlus plans.
       ``(3) Access.--The number, mix, and distribution of plan 
     providers and any point-of-service option (including the 
     supplemental premium for such option).
       ``(4) Out-of-area coverage.--Out-of-area coverage provided 
     by the plan.
       ``(5) Emergency coverage.--Coverage of emergency services 
     and urgently needed care, including--
       ``(A) the appropriate use of emergency services, including 
     use of the 911 telephone system or its local equivalent in 
     emergency situations and an explanation of what constitutes 
     an emergency situation;
       ``(B) the process and procedures of the plan for obtaining 
     emergency services; and
       ``(C) the locations of (i) emergency departments, and (ii) 
     other settings, in which plan physicians and hospitals 
     provide emergency services and post-stabilization care..
       ``(6) Supplemental benefits.--Supplemental benefits 
     available from the organization offering the plan, 
     including--
       ``(A) whether the supplemental benefits are optional,
       ``(B) the supplemental benefits covered, and
       ``(C) the premium price for the supplemental benefits.
       ``(7) Prior authorization rules.--Rules regarding prior 
     authorization or other review requirements that could result 
     in nonpayment.
       ``(8) Plan grievance and appeals procedures.--Any appeal or 
     grievance rights and procedures.
       ``(9) Quality assurance program.--A description of the 
     organization's quality assurance program under subsection 
     (e).
       ``(d) Access to Services.--
       ``(1) In general.--A MedicarePlus organization offering a 
     MedicarePlus plan may select the providers from whom the 
     benefits under the plan are provided so long as--
       ``(A) the organization makes such benefits available and 
     accessible to each individual electing the plan within the 
     plan service area with reasonable promptness and in a manner 
     which assures continuity in the provision of benefits;
       ``(B) when medically necessary in the opinion of the 
     treating health care provider the organization makes such 
     benefits available and accessible 24 hours a day and 7 days a 
     week;
       ``(C) the plan provides for reimbursement with respect to 
     services which are covered under subparagraphs (A) and (B) 
     and which are provided to such an individual other than 
     through the organization, if--
       ``(i) the services were medically necessary in the opinion 
     of the treating health care provider and immediately required 
     because of an unforeseen illness, injury, or condition, and 
     it was not reasonable given the circumstances to obtain the 
     services through the organization,
       ``(ii) the services were renal dialysis services and were 
     provided other than through the organization because the 
     individual was temporarily out of the plan's service area, or
       ``(iii) the services are maintenance care or post-
     stabilization care covered under the guidelines established 
     under paragraph (2);
       ``(D) the organization provides access to appropriate 
     providers, including credentialed specialists, for treatment 
     and services when such treatment and services are determined 
     to be medically necessary in the professional opinion of the 
     treating health care provider, in consultation with the 
     individual; and
       ``(E) coverage is provided for emergency services (as 
     defined in paragraph (3)) without regard to prior 
     authorization or the emergency care provider's contractual 
     relationship with the organization.
       ``(2) Guidelines respecting coordination of post-
     stabilization care.--A MedicarePlus plan shall comply with 
     such guidelines as the Secretary may prescribe relating to 
     promoting efficient and timely coordination of appropriate 
     maintenance and post-stabilization care of an enrollee after 
     the enrollee has been determined to be stable under section 
     1867.
       ``(3) Definition of emergency services.--In this 
     subsection--
       ``(A) In general.--The term `emergency services' means, 
     with respect to an individual enrolled with an organization, 
     covered inpatient and outpatient services that--
       ``(i) are furnished by a provider that is qualified to 
     furnish such services under this title, and
       ``(ii) are needed to evaluate or stabilize an emergency 
     medical condition (as defined in subparagraph (B)).
       ``(B) Emergency medical condition based on prudent 
     layperson.--The term `emergency medical condition' means a 
     medical condition manifesting itself by acute symptoms of 
     sufficient severity such that a prudent layperson, who 
     possesses an average knowledge of health and medicine, could 
     reasonably expect the absence of immediate medical attention 
     to result in--
       ``(i) placing the health of the individual (or, with 
     respect to a pregnant woman, the health of the woman or her 
     unborn child) in serious jeopardy,
       ``(ii) serious impairment to bodily functions, or
       ``(iii) serious dysfunction of any bodily organ or part.
       ``(4) Determination of hospital length of stay.--
       ``(A) In general.--A MedicarePlus organization shall cover 
     the length of an inpatient hospital stay under this part as 
     determined by the attending physician (or other attending 
     health care provider to the extent permitted under State law) 
     in consultation with the patient to be medically appropriate.
       ``(B) Construction.--Nothing in this paragraph shall be 
     construed--
       ``(i) as requiring the provision of inpatient coverage if 
     the attending physician (or other attending health care 
     provider to the extent permitted under State law) and patient 
     determine that a shorter period of hospital stay is medically 
     appropriate, or
       ``(ii) as affecting the application of deductibles and 
     coinsurance.
       ``(e) Quality Assurance Program.--
       ``(1) In general.--Each MedicarePlus organization must have 
     arrangements, consistent with any regulation, for an ongoing 
     quality assurance program for health care services it 
     provides to individuals enrolled with MedicarePlus plans of 
     the organization.
       ``(2) Elements of program.--The quality assurance program 
     shall--
       ``(A) stress health outcomes and provide for the 
     collection, analysis, and reporting of data (in accordance 
     with a quality measurement system that the Secretary 
     recognizes) that will permit measurement of outcomes and 
     other indices of the quality of MedicarePlus plans and 
     organizations;
       ``(B) provide for the establishment of written protocols 
     for utilization review, based on current standards of medical 
     practice;
       ``(C) provide review by physicians and other health care 
     professionals of the process followed in the provision of 
     such health care services;
       ``(D) monitor and evaluate high volume and high risk 
     services and the care of acute and chronic conditions;
       ``(E) evaluate the continuity and coordination of care that 
     enrollees receive;
       ``(F) have mechanisms to detect both underutilization and 
     overutilization of services;
       ``(G) after identifying areas for improvement, establish or 
     alter practice parameters;
       ``(H) take action to improve quality and assesses the 
     effectiveness of such action through systematic followup;
       ``(I) make available information on quality and outcomes 
     measures to facilitate beneficiary comparison and choice of 
     health coverage options (in such form and on such quality and 
     outcomes measures as the Secretary determines to be 
     appropriate);
       ``(J) be evaluated on an ongoing basis as to its 
     effectiveness;
       ``(K) include measures of consumer satisfaction; and
       ``(L) provide the Secretary with such access to information 
     collected as may be appropriate to monitor and ensure the 
     quality of care provided under this part.
       ``(3) External review.--Each MedicarePlus organization 
     shall, for each MedicarePlus plan it operates, have an 
     agreement with an independent quality review and improvement 
     organization approved by the Secretary to perform functions

[[Page H4440]]

     of the type described in sections 1154(a)(4)(B) and 
     1154(a)(14) with respect to services furnished by 
     MedicarePlus plans for which payment is made under this 
     title.
       ``(4) Treatment of accreditation.--The Secretary shall 
     provide that a MedicarePlus organization is deemed to meet 
     requirements of paragraphs (1) through (3) of this subsection 
     and subsection (h) (relating to confidentiality and accuracy 
     of enrollee records) if the organization is accredited (and 
     periodically reaccredited) by a private organization under a 
     process that the Secretary has determined assures that the 
     organization, as a condition of accreditation, applies and 
     enforces standards with respect to the requirements involved 
     that are no less stringent than the standards established 
     under section 1856 to carry out the respective requirements.
       ``(f) Coverage Determinations.--
       ``(1) Decisions on nonemergency care.--A MedicarePlus 
     organization shall make determinations regarding 
     authorization requests for nonemergency care on a timely 
     basis, depending on the urgency of the situation. The 
     organization shall provide notice of any coverage denial, 
     which notice shall include a statement of the reasons for the 
     denial and a description of the grievance and appeals 
     processes available.
       ``(2) Reconsiderations.--
       ``(A) In general.--Subject to subsection (g)(4), a 
     reconsideration of a determination of an organization denying 
     coverage shall be made within 30 days of the date of receipt 
     of medical information, but not later than 60 days after the 
     date of the determination.
       ``(B) Physician decision on certain reconsiderations.--A 
     reconsideration relating to a determination to deny coverage 
     based on a lack of medical necessity shall be made only by a 
     physician with appropriate expertise in the field of medicine 
     which necessitates treatment who is other than a physician 
     involved in the initial determination.
       ``(g) Grievances and Appeals.--
       ``(1) Grievance mechanism.--Each MedicarePlus organization 
     must provide meaningful procedures for hearing and resolving 
     grievances between the organization (including any entity or 
     individual through which the organization provides health 
     care services) and enrollees with MedicarePlus plans of the 
     organization under this part.
       ``(2) Appeals.--An enrollee with a MedicarePlus plan of a 
     MedicarePlus organization under this part who is dissatisfied 
     by reason of the enrollee's failure to receive any health 
     service to which the enrollee believes the enrollee is 
     entitled and at no greater charge than the enrollee believes 
     the enrollee is required to pay is entitled, if the amount in 
     controversy is $100 or more, to a hearing before the 
     Secretary to the same extent as is provided in section 
     205(b), and in any such hearing the Secretary shall make the 
     organization a party. If the amount in controversy is $1,000 
     or more, the individual or organization shall, upon notifying 
     the other party, be entitled to judicial review of the 
     Secretary's final decision as provided in section 205(g), and 
     both the individual and the organization shall be entitled to 
     be parties to that judicial review. In applying sections 
     205(b) and 205(g) as provided in this paragraph, and in 
     applying section 205(l) thereto, any reference therein to the 
     Commissioner of Social Security or the Social Security 
     Administration shall be considered a reference to the 
     Secretary or the Department of Health and Human Services, 
     respectively.
       ``(3) Independent review of coverage denials.--The 
     Secretary shall contract with an independent, outside entity 
     to review and resolve in a timely manner reconsiderations 
     that affirm denial of coverage.
       ``(4) Expedited determinations and reconsiderations.--
       ``(A) Receipt of requests.--An enrollee in a MedicarePlus 
     plan may request, either in writing or orally, an expedited 
     determination or reconsideration by the MedicarePlus 
     organization regarding a matter described in paragraph (2). 
     The organization shall also permit the acceptance of such 
     requests by physicians.
       ``(B) Organization procedures.--
       ``(i) In general.--The MedicarePlus organization shall 
     maintain procedures for expediting organization 
     determinations and reconsiderations when, upon request of an 
     enrollee, the organization determines that the application of 
     normal time frames for making a determination (or a 
     reconsideration involving a determination) could seriously 
     jeopardize the life or health of the enrollee or the 
     enrollee's ability to regain maximum function.
       ``(ii) Timely response.--In an urgent case described in 
     clause (i), the organization shall notify the enrollee (and 
     the physician involved, as appropriate) of the determination 
     (or determination on the reconsideration) as expeditiously as 
     the enrollee's health condition requires, but not later than 
     72 hours (or 24 hours in the case of a reconsideration) of 
     the time of receipt of the request for the determination or 
     reconsideration (or receipt of the information necessary to 
     make the determination or reconsideration), or such longer 
     period as the Secretary may permit in specified cases.
       ``(iii) Secretarial report.--The Secretary shall annually 
     report publicly on the number and disposition of denials and 
     appeals within each MedicarePlus organization, and those 
     reviewed and resolved by the independent entities under this 
     subsection.
       ``(h) Confidentiality and Accuracy of Enrollee Records.--
     Each MedicarePlus organization shall establish procedures--
       ``(1) to safeguard the privacy of individually identifiable 
     enrollee information,
       ``(2) to maintain accurate and timely medical records and 
     other health information for enrollees, and
       ``(3) to assure timely access of enrollees to their medical 
     information.
       ``(i) Information on Advance Directives.--Each MedicarePlus 
     organization shall meet the requirement of section 1866(f) 
     (relating to maintaining written policies and procedures 
     respecting advance directives).
       ``(j) Rules Regarding Physician Participation.--
       ``(1) Procedures.--Each MedicarePlus organization shall 
     establish reasonable procedures relating to the participation 
     (under an agreement between a physician and the organization) 
     of physicians under MedicarePlus plans offered by the 
     organization under this part. Such procedures shall include--
       ``(A) providing notice of the rules regarding 
     participation,
       ``(B) providing written notice of participation decisions 
     that are adverse to physicians, and
       ``(C) providing a process within the organization for 
     appealing such adverse decisions, including the presentation 
     of information and views of the physician regarding such 
     decision.
       ``(2) Consultation in medical policies.--A MedicarePlus 
     organization shall consult with physicians who have entered 
     into participation agreements with the organization regarding 
     the organization's medical policy, quality, and medical 
     management procedures.
       ``(3) Prohibiting interference with provider advice to 
     enrollees.--
       ``(A) In general.--Subject to subparagraphs (B) and (C), a 
     MedicarePlus organization (in relation to an individual 
     enrolled under a MedicarePlus plan offered by the 
     organization under this part) shall not prohibit or otherwise 
     restrict a covered health care professional (as defined in 
     subparagraph (D)) from advising such an individual who is a 
     patient of the professional about the health status of the 
     individual or medical care or treatment for the individual's 
     condition or disease, regardless of whether benefits for such 
     care or treatment are provided under the plan, if the 
     professional is acting within the lawful scope of practice.
       ``(B) Conscience protection.--Subparagraph (A) shall not be 
     construed as requiring a MedicarePlus plan to provide, 
     reimburse for, or provide coverage of a counseling or 
     referral service if the MedicarePlus organization offering 
     the plan--
       ``(i) objects to the provision of such service on moral or 
     religious grounds; and
       ``(ii) in the manner and through the written 
     instrumentalities such MedicarePlus organization deems 
     appropriate, makes available information on its policies 
     regarding such service to prospective enrollees before or 
     during enrollment and to enrollees within 90 days after the 
     date that the organization or plan adopts a change in policy 
     regarding such a counseling or referral service.
       ``(C) Construction.--Nothing in subparagraph (B) shall be 
     construed to affect disclosure requirements under State law 
     or under the Employee Retirement Income Security Act of 1974.
       ``(D) Health care professional defined.--For purposes of 
     this paragraph, the term `health care professional' means a 
     physician (as defined in section 1861(r)) or other health 
     care professional if coverage for the professional's services 
     is provided under the MedicarePlus plan for the services of 
     the professional. Such term includes a podiatrist, 
     optometrist, chiropractor, psychologist, dentist, physician 
     assistant, physical or occupational therapist and therapy 
     assistant, speech-language pathologist, audiologist, 
     registered or licensed practical nurse (including nurse 
     practitioner, clinical nurse specialist, certified registered 
     nurse anesthetist, and certified nurse-midwife), licensed 
     certified social worker, registered respiratory therapist, 
     and certified respiratory therapy technician.
       ``(4) Limitations on health care provider incentive 
     plans.--
       ``(A) In general.--No MedicarePlus organization may operate 
     any health care provider incentive plan (as defined in 
     subparagraph (B)) unless the following requirements are met:
       ``(i) No specific payment is made directly or indirectly 
     under the plan to a health care provider or health care 
     provider group as an inducement to reduce or limit medically 
     necessary services provided with respect to a specific 
     individual enrolled with the organization.
       ``(ii) If the plan places a health care provider or health 
     care provider group at substantial financial risk (as 
     determined by the Secretary) for services not provided by the 
     health care provider or health care provider group, the 
     organization--

       ``(I) provides stop-loss protection for the health care 
     provider or group that is adequate and appropriate, based on 
     standards developed by the Secretary that take into account 
     the number of health care providers placed at such 
     substantial financial risk in the group or under the plan and 
     the number of individuals enrolled with the organization who 
     receive services from the health care provider or group, 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

[[Page H4441]]

     satisfaction with the quality of such services.

       ``(iii) The organization provides the Secretary with 
     descriptive information regarding the plan, sufficient to 
     permit the Secretary to determine whether the plan is in 
     compliance with the requirements of this subparagraph.
       ``(B) Health care provider incentive plan defined.--In this 
     paragraph, the term `health care provider incentive plan' 
     means any compensation arrangement between a MedicarePlus 
     organization and a health care provider or health care 
     provider group that may directly or indirectly have the 
     effect of reducing or limiting services provided with respect 
     to individuals enrolled with the organization under this 
     part.
       ``(C) Health care provider defined.--For the purposes of 
     this paragraph, the term `health care provider' has the 
     meaning given the term `health care professional' in 
     paragraph (3)(D).
       ``(5) Limitation on provider indemnification.--A 
     MedicarePlus organization may not provide (directly or 
     indirectly) for a provider (or group of providers) to 
     indemnify the organization against any liability resulting 
     from a civil action brought for any damage caused to an 
     enrollee with a MedicarePlus plan of the organization under 
     this part by the organization's denial of medically necessary 
     care.
       ``(6) Limitation on non-compete clause.--A MedicarePlus 
     organization may not (directly or indirectly) seek to enforce 
     any contractual provision which prevents a provider whose 
     contractual obligations to the organization for the provision 
     of services through the organization have ended from joining 
     or forming any competing MedicarePlus organization that is a 
     provider-sponsored organization in the same area.
       ``(k) Treatment of Services Furnished by Certain 
     Providers.--A physician or other entity (other than a 
     provider of services) that does not have a contract 
     establishing payment amounts for services furnished to an 
     individual enrolled under this part with a MedicarePlus 
     organization shall accept as payment in full for covered 
     services under this title that are furnished to such an 
     individual the amounts that the physician or other entity 
     could collect if the individual were not so enrolled. Any 
     penalty or other provision of law that applies to such a 
     payment with respect to an individual entitled to benefits 
     under this title (but not enrolled with a MedicarePlus 
     organization under this part) also applies with respect to an 
     individual so enrolled.
       ``(l) Disclosure of Use of DSH and Teaching Hospitals.--
     Each MedicarePlus organization shall provide the Secretary 
     with information on--
       ``(1) the extent to which the organization provides 
     inpatient and outpatient hospital benefits under this part--
       ``(A) through the use of hospitals that are eligible for 
     additional payments under section 1886(d)(5)(F)(i) (relating 
     to so-called DSH hospitals), or
       ``(B) through the use of teaching hospitals that receive 
     payments under section 1886(h); and
       ``(2) the extent to which differences between payment rates 
     to different hospitals reflect the disproportionate share 
     percentage of low-income patients and the presence of medical 
     residency training programs in those hospitals.
       ``(m) Out-of-Network Access.--If an organization offers to 
     members enrolled under this section one plan which provides 
     for coverage of services covered under parts A and B 
     primarily through providers and other persons who are members 
     of a network of providers and other persons who have entered 
     into a contract with the organization to provide such 
     services, nothing in this section shall be construed as 
     preventing the organization from offering such members (at 
     the time of enrollment) another plan which provides for 
     coverage of such items which are not furnished through such 
     network providers.
       ``(n) Non-Preemption of State Law.--A State may establish 
     or enforce requirements with respect to beneficiary 
     protections in this section, but only if such requirements 
     are more stringent than the requirements established under 
     this section.
       ``(o) Nondiscrimination in Selection of Network Health 
     Professionals.--
       ``(1) In general.--A MedicarePlus organization offering a 
     MedicarePlus plan offering network coverage shall not 
     discriminate in selecting the members of its health 
     professional network (or in establishing the terms and 
     conditions for membership in such network) on the basis of 
     the race, national origin, gender, age, or disability (other 
     than a disability that impairs the ability of an individual 
     to provide health care services or that may threaten the 
     health of enrollees) of the health professional.
       ``(2) Appropriate range of services.--A MedicarePlus 
     organization shall not deny any health care professionals, 
     based solely on the license or certification as applicable 
     under State law, the ability to participate in providing 
     covered health care services, or be reimbursed or indemnified 
     by a network plan for providing such services under this 
     part.
       ``(2) Definitions.--For purposes of this subsection:
       ``(A) Network.--The term `network' means, with respect to a 
     MedicarePlus organization offering a MedicarePlus plan, the 
     participating health professionals and providers through whom 
     the organization provides health care items and services to 
     enrollees.
       ``(B) Network coverage.--The term `network coverage' means 
     a MedicarePlus plan offered by a MedicarePlus organization 
     that provides or arranges for the provision of health care 
     items and services to enrollees through participating health 
     professionals and providers.
       ``(C) Participating.--The term `participating' means, with 
     respect to a health professional or provider, a health 
     professional or provider that provides health care items and 
     services to enrollees under network coverage under an 
     agreement with the MedicarePlus organization offering the 
     coverage.
       ``(p) Special Rule for Unrestricted Fee-for-Service MSA 
     Plans.--Subsections (j)(1) and (k) shall not apply to a 
     MedicarePlus organization with respect to an MSA plan it 
     offers if the plan does not limit the providers through whom 
     benefits may be obtained under the plan.


                ``payments to medicareplus organizations

       ``Sec. 1853. (a) Payments to Organizations.--
       ``(1) Monthly payments.--
       ``(A) In general.--Under a contract under section 1857 and 
     subject to subsections (e) and (f), the Secretary shall make 
     monthly payments under this section in advance to each 
     MedicarePlus organization, with respect to coverage of an 
     individual under this part in a MedicarePlus payment area for 
     a month, in an amount equal to \1/12\ of the annual 
     MedicarePlus capitation rate (as calculated under subsection 
     (c)) with respect to that individual for that area, adjusted 
     for such risk factors as age, disability status, gender, 
     institutional status, and such other factors as the Secretary 
     determines to be appropriate, so as to ensure actuarial 
     equivalence. The Secretary may add to, modify, or substitute 
     for such factors, if such changes will improve the 
     determination of actuarial equivalence.
       ``(B) Special rule for end-stage renal disease.--The 
     Secretary shall establish separate rates of payment to a 
     MedicarePlus organization with respect to classes of 
     individuals determined to have end-stage renal disease and 
     enrolled in a MedicarePlus plan of the organization. Such 
     rates of payment shall be actuarially equivalent to rates 
     paid to other enrollees in the MedicarePlus payment area (or 
     such other area as specified by the Secretary). In accordance 
     with regulations, the Secretary shall provide for the 
     application of the seventh sentence of section 1881(b)(7) to 
     payments under this section covering the provision of renal 
     dialysis treatment in the same manner as such sentence 
     applies to composite rate payments described in such 
     sentence.
       ``(2) Adjustment to reflect number of enrollees.--
       ``(A) In general.--The amount of payment under this 
     subsection may be retroactively adjusted to take into account 
     any difference between the actual number of individuals 
     enrolled with an organization under this part and the number 
     of such individuals estimated to be so enrolled in 
     determining the amount of the advance payment.
       ``(B) Special rule for certain enrollees.--
       ``(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 
     MedicarePlus organization under a plan operated, sponsored, 
     or contributed to by the individual's employer or former 
     employer (or the employer or former employer of the 
     individual's spouse) and ending on the date on which the 
     individual is enrolled in the organization under this part, 
     except that for purposes of making such retroactive 
     adjustments under this subparagraph, such period may not 
     exceed 90 days.
       ``(ii) Exception.--No adjustment may be made under clause 
     (i) with respect to any individual who does not certify that 
     the organization provided the individual with the information 
     required to be disclosed under section 1852(c) at the time 
     the individual enrolled with the organization.
       ``(3) Establishment of risk adjustment factors.--
       ``(A) Report.--The Secretary shall develop, and submit to 
     Congress by not later than October 1, 1999, a report on a 
     method of risk adjustment of payment rates under this section 
     that accounts for variations in per capita costs based on 
     health status. Such report shall include an evaluation of 
     such method by an outside, independent actuary of the 
     actuarial soundness of the proposal.
       ``(B) Data collection.--In order to carry out this 
     paragraph, the Secretary shall require MedicarePlus 
     organizations (and eligible organizations with risk-sharing 
     contracts under section 1876) to submit, for periods 
     beginning on or after January 1, 1998, data regarding 
     inpatient hospital services and other services and other 
     information the Secretary deems necessary.
       ``(C) Initial implementation.--The Secretary shall first 
     provide for implementation of a risk adjustment methodology 
     that accounts for variations in per capita costs based on 
     health status and other demographic factors for payments by 
     no later than January 1, 2000.
       ``(b) Annual Announcement of Payment Rates.--
       ``(1) Annual announcement.--The Secretary shall annually 
     determine, and shall announce (in a manner intended to 
     provide notice to interested parties) not later than

[[Page H4442]]

     August 1 before the calendar year concerned--
       ``(A) the annual MedicarePlus capitation rate for each 
     MedicarePlus payment area for the year, and
       ``(B) the risk and other factors to be used in adjusting 
     such rates under subsection (a)(1)(A) for payments for months 
     in that year.
       ``(2) Advance notice of methodological changes.--At least 
     45 days before making the announcement under paragraph (1) 
     for a year, the Secretary shall provide for notice to 
     MedicarePlus organizations of proposed changes to be made in 
     the methodology from the methodology and assumptions used in 
     the previous announcement and shall provide such 
     organizations an opportunity to comment on such proposed 
     changes.
       ``(3) Explanation of assumptions.--In each announcement 
     made under paragraph (1), the Secretary shall include an 
     explanation of the assumptions and changes in methodology 
     used in the announcement in sufficient detail so that 
     MedicarePlus organizations can compute monthly adjusted 
     MedicarePlus capitation rates for individuals in each 
     MedicarePlus payment area which is in whole or in part within 
     the service area of such an organization.
       ``(c) Calculation of Annual MedicarePlus Capitation 
     Rates.--
       ``(1) In General.--For purposes of this part, each annual 
     MedicarePlus capitation rate, for a MedicarePlus payment area 
     for a contract year consisting of a calendar year, is equal 
     to the largest of the amounts specified in the following 
     subparagraphs (A), (B), or (C):
       ``(A) Blended capitation rate.--The sum of--
       ``(i) area-specific percentage for the year (as specified 
     under paragraph (2) for the year) of the annual area-specific 
     MedicarePlus capitation rate for the year for the 
     MedicarePlus payment area, as determined under paragraph (3), 
     and
       ``(ii) national percentage (as specified under paragraph 
     (2) for the year) of the input-price-adjusted annual national 
     MedicarePlus capitation rate for the year, as determined 
     under paragraph (4),

     multiplied by the payment adjustment factors described in 
     subparagraphs (A) and (B) of paragraph (5).
       ``(B) Minimum amount.--12 multiplied by the following 
     amount:
       ``(i) For 1998, $350 (but not to exceed, in the case of an 
     area outside the 50 States and the District of Columbia, 150 
     percent of the annual per capita rate of payment for 1997 
     determined under section 1876(a)(1)(C) for the area).
       ``(ii) For a succeeding year, the minimum amount specified 
     in this clause (or clause (i)) for the preceding year 
     increased by the national per capita MedicarePlus growth 
     percentage, specified under paragraph (6) for that succeeding 
     year.
       ``(C) Minimum percentage increase.--
       ``(i) For 1998, the annual per capita rate of payment for 
     1997 determined under section 1876(a)(1)(C) for the 
     MedicarePlus payment area.
       ``(ii) For 1999 and 2000, 101 percent of the annual 
     MedicarePlus capitation rate under this paragraph for the 
     area for the previous year.
       ``(iii) For a subsequent year, 102 percent of the annual 
     MedicarePlus capitation rate under this paragraph for the 
     area for the previous year.
       ``(2) Area-specific and national percentages.--For purposes 
     of paragraph (1)(A)--
       ``(A) for 1998, the `area-specific percentage' is 90 
     percent and the `national percentage' is 10 percent,
       ``(B) for 1999, the `area-specific percentage' is 85 
     percent and the `national percentage' is 15 percent,
       ``(C) for 2000, the `area-specific percentage' is 80 
     percent and the `national percentage' is 20 percent,
       ``(D) for 2001, the `area-specific percentage' is 75 
     percent and the `national percentage' is 25 percent, and
       ``(E) for a year after 2001, the `area-specific percentage' 
     is 70 percent and the `national percentage' is 30 percent.
       ``(3) Annual area-specific medicareplus capitation rate.--
       ``(A) In general.--For purposes of paragraph (1)(A), 
     subject to subparagraph (B), the annual area-specific 
     MedicarePlus capitation rate for a MedicarePlus payment 
     area--
       ``(i) for 1998 is the annual per capita rate of payment for 
     1997 determined under section 1876(a)(1)(C) for the area, 
     increased by the national per capita MedicarePlus growth 
     percentage for 1998 (as defined in paragraph (6)); or
       ``(ii) for a subsequent year is the annual area-specific 
     MedicarePlus capitation rate for the previous year determined 
     under this paragraph for the area, increased by the national 
     per capita MedicarePlus growth percentage for such subsequent 
     year.
       ``(B) Removal of medical education and disproportionate 
     share hospital payments from calculation of adjusted average 
     per capita cost.--
       ``(i) In general.--In determining the area-specific 
     MedicarePlus capitation rate under subparagraph (A), for a 
     year (beginning with 1998), the annual per capita rate of 
     payment for 1997 determined under section 1876(a)(1)(C) shall 
     be adjusted to exclude from the rate the applicable percent 
     (specified in clause (ii)) of the payment adjustments 
     described in subparagraph (C).
       ``(ii) Applicable percent.--For purposes of clause (i), the 
     applicable percent for--

       ``(I) 1998 is 20 percent,
       ``(II) 1999 is 40 percent,
       ``(III) 2000 is 60 percent,
       ``(IV) 2001 is 80 percent, and
       ``(V) a succeeding year is 100 percent.

       ``(C) Payment adjustment.--The payment adjustments 
     described in this subparagraph are payment adjustments which 
     the Secretary estimates were payable during 1997--
       ``(i) under section 1886(d)(5)(F) for hospitals serving a 
     disproportionate share of low-income patients,
       ``(ii) for the indirect costs of medical education under 
     section 1886(d)(5)(B), and
       ``(iii) for direct graduate medical education costs under 
     section 1886(h),

     multiplied by a ratio (estimated by the Secretary) of total 
     payments under subsection (h) and section 1858 in 1998 to 
     payments under such subsection and payments under such 
     section in such year for hospitals not reimbursed under 
     section 1814(b)(3).
       ``(4) Input-price-adjusted annual national medicareplus 
     capitation rate.--
       ``(A) In general.--For purposes of paragraph (1)(A), the 
     input-price-adjusted annual national MedicarePlus capitation 
     rate for a MedicarePlus payment area for a year is equal to 
     the sum, for all the types of medicare services (as 
     classified by the Secretary), of the product (for each such 
     type of service) of--
       ``(i) the national standardized annual MedicarePlus 
     capitation rate (determined under subparagraph (B)) for the 
     year,
       ``(ii) the proportion of such rate for the year which is 
     attributable to such type of services, and
       ``(iii) an index that reflects (for that year and that type 
     of services) the relative input price 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 annual medicareplus capitation 
     rate.--In subparagraph (A)(i), the `national standardized 
     annual MedicarePlus capitation rate' for a year is equal to--
       ``(i) the sum (for all MedicarePlus payment areas) of the 
     product of--

       ``(I) the annual area-specific MedicarePlus capitation rate 
     for that year for the area under paragraph (3), and
       ``(II) the average number of medicare beneficiaries 
     residing in that area in the year, multiplied by the average 
     of the risk factor weights used to adjust payments under 
     subsection (a)(1)(A) for such beneficiaries in such area; 
     divided by

       ``(ii) the sum of the products described in clause (i)(II) 
     for all areas for that year.
       ``(C) Special rules for 1998.--In applying this paragraph 
     for 1998--
       ``(i) medicare services shall be divided into 2 types of 
     services: part A services and part B services;
       ``(ii) the proportions described in subparagraph (A)(ii)--

       ``(I) for part A services shall be the ratio (expressed as 
     a percentage) of the national average annual per capita rate 
     of payment for part A for 1997 to the total national average 
     annual per capita rate of payment for parts A and B for 1997, 
     and
       ``(II) for part B services shall be 100 percent minus the 
     ratio described in subclause (I);

       ``(iii) for part A services, 70 percent of payments 
     attributable to such services shall be adjusted by the index 
     used under section 1886(d)(3)(E) to adjust payment rates for 
     relative hospital wage levels for hospitals located in the 
     payment area involved;
       ``(iv) for part B services--

       ``(I) 66 percent of payments attributable to such services 
     shall be adjusted by the index of the geographic area factors 
     under section 1848(e) used to adjust payment rates for 
     physicians' services furnished in the payment area, and
       ``(II) of the remaining 34 percent of the amount of such 
     payments, 40 percent shall be adjusted by the index described 
     in clause (iii); and

       ``(v) the index values shall be computed based only on the 
     beneficiary population who are 65 years of age or older and 
     who are not determined to have end stage renal disease.

     The Secretary may continue to apply the rules described in 
     this subparagraph (or similar rules) for 1999.
       ``(5) Payment adjustment budget neutrality factors.--For 
     purposes of paragraph (1)(A)--
       ``(A) Blended rate payment adjustment factor.--For each 
     year, the Secretary shall compute a blended rate payment 
     adjustment factor such that, not taking into account 
     subparagraphs (B) and (C) of paragraph (1) and the 
     application of the payment adjustment factor described in 
     subparagraph (B) but taking into account paragraph (7), the 
     aggregate of the payments that would be made under this part 
     is equal to the aggregate payments that would have been made 
     under this part (not taking into account such subparagraphs 
     and such other adjustment factor) if the area-specific 
     percentage under paragraph (1) for the year had been 100 
     percent and the national percentage had been 0 percent.
       ``(B) Floor-and-minimum-update payment adjustment factor.--
     For each year, the Secretary shall compute a floor-and-
     minimum-update payment adjustment factor so that, taking into 
     account the application of

[[Page H4443]]

     the blended rate payment adjustment factor under subparagraph 
     (A) and subparagraphs (B) and (C) of paragraph (1) and the 
     application of the adjustment factor under this subparagraph, 
     the aggregate of the payments under this part shall not 
     exceed the aggregate payments that would have been made under 
     this part if subparagraphs (B) and (C) of paragraph (1) did 
     not apply and if the floor-and-minimum-update payment 
     adjustment factor under this subparagraph was 1.
       ``(6) National per capita medicareplus growth percentage 
     defined.--
       ``(A) In general.--In this part, the `national per capita 
     MedicarePlus growth percentage' for a year is the percentage 
     determined by the Secretary, by April 30th before the 
     beginning of the year involved, to reflect the Secretary's 
     estimate of the projected per capita rate of growth in 
     expenditures under this title for an individual entitled to 
     benefits under part A and enrolled under part B, reduced by 
     the number of percentage points specified in subparagraph (B) 
     for the year. Separate determinations may be made for aged 
     enrollees, disabled enrollees, and enrollees with end-stage 
     renal disease. Such percentage shall include an adjustment 
     for over or under projection in the growth percentage for 
     previous years.
       ``(B) Adjustment.--The number of percentage points 
     specified in this subparagraph is--
       ``(i) for 1998, 0.5 percentage points,
       ``(ii) for 1999, 0.5 percentage points,
       ``(iii) for 2000, 0.5 percentage points,
       ``(iv) for 2001, 0.5 percentage points,
       ``(v) for 2002, 0.5 percentage points, and
       ``(vi) for a year after 2002, 0 percentage points.
       ``(7) treatment of areas with highly variable payment 
     rates.--In the case of a MedicarePlus payment area for which 
     the annual per capita rate of payment determined under 
     section 1876(a)(1)(C) for 1997 varies by more than 20 percent 
     from such rate for 1996, for purposes of this subsection the 
     Secretary may substitute for such rate for 1997 a rate that 
     is more representative of the costs of the enrollees in the 
     area.
       ``(d) MedicarePlus Payment Area Defined.--
       ``(1) In general.--In this part, except as provided in 
     paragraph (3), the term `MedicarePlus payment area' means a 
     county, or equivalent area specified by the Secretary.
       ``(2) Rule for esrd beneficiaries.--In the case of 
     individuals who are determined to have end stage renal 
     disease, the MedicarePlus payment area shall be a State or 
     such other payment area as the Secretary specifies.
       ``(3) Geographic adjustment.--
       ``(A) In general.--Upon written request of the chief 
     executive officer of a State for a contract year (beginning 
     after 1998) made at least 7 months before the beginning of 
     the year, the Secretary shall make a geographic adjustment to 
     a MedicarePlus payment area in the State otherwise determined 
     under paragraph (1)--
       ``(i) to a single statewide MedicarePlus payment area,
       ``(ii) to the metropolitan based system described in 
     subparagraph (C), or
       ``(iii) to consolidating into a single MedicarePlus payment 
     area noncontiguous counties (or equivalent areas described in 
     paragraph (1)) within a State.

     Such adjustment shall be effective for payments for months 
     beginning with January of the year following the year in 
     which the request is received.
       ``(B) Budget neutrality adjustment.--In the case of a State 
     requesting an adjustment under this paragraph, the Secretary 
     shall adjust the payment rates otherwise established under 
     this section for MedicarePlus payment areas in the State in a 
     manner so that the aggregate of the payments under this 
     section in the State shall not exceed the aggregate payments 
     that would have been made under this section for MedicarePlus 
     payment areas in the State in the absence of the adjustment 
     under this paragraph.
       ``(C) Metropolitan based system.--The metropolitan based 
     system described in this subparagraph is one in which--
       ``(i) all the portions of each metropolitan statistical 
     area in the State or in the case of a consolidated 
     metropolitan statistical area, all of the portions of each 
     primary metropolitan statistical area within the consolidated 
     area within the State, are treated as a single MedicarePlus 
     payment area, and
       ``(ii) all areas in the State that do not fall within a 
     metropolitan statistical area are treated as a single 
     MedicarePlus payment area.
       ``(D) Areas.--In subparagraph (C), the terms `metropolitan 
     statistical area', `consolidated metropolitan statistical 
     area', and `primary metropolitan statistical area' mean any 
     area designated as such by the Secretary of Commerce.
       ``(e) Special Rules for Individuals Electing MSA Plans.--
       ``(1) In general.--If the amount of the monthly premium for 
     an MSA plan for a MedicarePlus payment area for a year is 
     less than \1/12\ of the annual MedicarePlus capitation rate 
     applied under this section for the area and year involved, 
     the Secretary shall deposit an amount equal to 100 percent of 
     such difference in a MedicarePlus MSA established (and, if 
     applicable, designated) by the individual under paragraph 
     (2).
       ``(2) Establishment and designation of medicareplus medical 
     savings account as requirement for payment of contribution.--
     In the case of an individual who has elected coverage under 
     an MSA plan, no payment shall be made under paragraph (1) on 
     behalf of an individual for a month unless the individual--
       ``(A) has established before the beginning of the month (or 
     by such other deadline as the Secretary may specify) a 
     MedicarePlus MSA (as defined in section 138(b)(2) of the 
     Internal Revenue Code of 1986), and
       ``(B) if the individual has established more than one such 
     MedicarePlus MSA, has designated one of such accounts as the 
     individual's MedicarePlus MSA for purposes of this part.

     Under rules under this section, such an individual may change 
     the designation of such account under subparagraph (B) for 
     purposes of this part.
       ``(3) Lump sum deposit of medical savings account 
     contribution.--In the case of an individual electing an MSA 
     plan effective beginning with a month in a year, the amount 
     of the contribution to the MedicarePlus MSA on behalf of the 
     individual for that month and all successive months in the 
     year shall be deposited during that first month. In the case 
     of a termination of such an election as of a month before the 
     end of a year, the Secretary shall provide for a procedure 
     for the recovery of deposits attributable to the remaining 
     months in the year.
       ``(f) Payments From Trust Fund.--The payment to a 
     MedicarePlus organization under this section for individuals 
     enrolled under this part with the organization and payments 
     to a MedicarePlus MSA under subsection (e)(1) shall be made 
     from the Federal Hospital Insurance Trust Fund and the 
     Federal Supplementary Medical Insurance Trust Fund in such 
     proportion as the Secretary determines reflects the relative 
     weight that benefits under part A and under part B represents 
     of the actuarial value of the total benefits under this 
     title. Monthly payments otherwise payable under this section 
     for October 2001 shall be paid on the last business day of 
     September 2001.
       ``(g) Special Rule for Certain Inpatient Hospital Stays.--
     In the case of an individual who is receiving inpatient 
     hospital services from a subsection (d) hospital (as defined 
     in section 1886(d)(1)(B)) as of the effective date of the 
     individual's--
       ``(1) election under this part of a MedicarePlus plan 
     offered by a MedicarePlus organization--
       ``(A) payment for such services until the date of the 
     individual's discharge shall be made under this title through 
     the MedicarePlus plan or the medicare fee-for-service program 
     option described in section 1851(a)(1)(A) (as the case may 
     be) elected before the election with such organization,
       ``(B) the elected organization shall not be financially 
     responsible for payment for such services until the date 
     after the date of the individual's discharge, and
       ``(C) the organization shall nonetheless be paid the full 
     amount otherwise payable to the organization under this part; 
     or
       ``(2) termination of election with respect to a 
     MedicarePlus organization under this part--
       ``(A) the organization shall be financially responsible for 
     payment for such services after such date and until the date 
     of the individual's discharge,
       ``(B) payment for such services during the stay shall not 
     be made under section 1886(d) or by any succeeding 
     MedicarePlus organization, 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.


                               ``premiums

       ``Sec. 1854. (a) Submission and Charging of Premiums.--
       ``(1) In general.--Subject to paragraph (3), each 
     MedicarePlus organization shall file with the Secretary each 
     year, in a form and manner and at a time specified by the 
     Secretary--
       ``(A) the amount of the monthly premium for coverage for 
     services under section 1852(a) under each MedicarePlus plan 
     it offers under this part in each MedicarePlus payment area 
     (as defined in section 1853(d)) in which the plan is being 
     offered; and
       ``(B) the enrollment capacity in relation to the plan in 
     each such area.
       ``(2) Terminology.--In this part--
       ``(A) the term `monthly premium' means, with respect to a 
     MedicarePlus plan offered by a MedicarePlus organization, the 
     monthly premium filed under paragraph (1), not taking into 
     account the amount of any payment made toward the premium 
     under section 1853; and
       ``(B) the term `net monthly premium' means, with respect to 
     such a plan and an individual enrolled with the plan, the 
     premium (as defined in subparagraph (A)) for the plan reduced 
     by the amount of payment made toward such premium under 
     section 1853.
       ``(b) Monthly Premium Charged.--The monthly amount of the 
     premium charged by a MedicarePlus organization for a 
     MedicarePlus plan offered in a MedicarePlus payment area to 
     an individual under this part shall be equal to the net 
     monthly premium plus any monthly premium charged in 
     accordance with subsection (e)(2) for supplemental benefits.
       ``(c) Uniform Premium.--The monthly premium and monthly 
     amount charged under subsection (b) of a MedicarePlus 
     organization under this part may not vary among individuals 
     who reside in the same MedicarePlus payment area.

[[Page H4444]]

       ``(d) Terms and Conditions of Imposing Premiums.--Each 
     MedicarePlus organization shall permit the payment of net 
     monthly premiums on a monthly basis and may terminate 
     election of individuals for a MedicarePlus plan for failure 
     to make premium payments only in accordance with section 
     1851(g)(3)(B)(i). A MedicarePlus organization is not 
     authorized to provide for cash or other monetary rebates as 
     an inducement for enrollment or otherwise.
       ``(e) Limitation on Enrollee Cost-Sharing.--
       ``(1) For basic and additional benefits.--Except as 
     provided in paragraph (2), in no event may--
       ``(A) the net monthly premium (multiplied by 12) and the 
     actuarial value of the deductibles, coinsurance, and 
     copayments applicable on average to individuals enrolled 
     under this part with a MedicarePlus plan of an organization 
     with respect to required benefits described in section 
     1852(a)(1) and additional benefits (if any) required under 
     subsection (f)(1) for a year, exceed
       ``(B) the actuarial value of the deductibles, coinsurance, 
     and copayments that would be applicable on average to 
     individuals entitled to benefits under part A and enrolled 
     under part B if they were not members of a MedicarePlus 
     organization for the year.
       ``(2) For supplemental benefits.--If the MedicarePlus 
     organization provides to its members enrolled under this part 
     supplemental benefits described in section 1852(a)(3), the 
     sum of the monthly premium rate (multiplied by 12) charged 
     for such supplemental benefits and the actuarial value of its 
     deductibles, coinsurance, and copayments charged with respect 
     to such benefits may not exceed the adjusted community rate 
     for such benefits (as defined in subsection (f)(4)).
       ``(3) Exception for msa plans.--Paragraphs (1) and (2) do 
     not apply to an MSA plan.
       ``(4) Determination on other basis.--If the Secretary 
     determines that adequate data are not available to determine 
     the actuarial value under paragraph (1)(A) or (2), the 
     Secretary may determine such amount with respect to all 
     individuals in the MedicarePlus payment area, the State, or 
     in the United States, eligible to enroll in the MedicarePlus 
     plan involved under this part or on the basis of other 
     appropriate data.
       ``(f) Requirement for Additional Benefits.--
       ``(1) Requirement.--
       ``(A) In general.--Each MedicarePlus organization (in 
     relation to a MedicarePlus plan it offers) shall provide that 
     if there is an excess amount (as defined in subparagraph (B)) 
     for the plan for a contract year, subject to the succeeding 
     provisions of this subsection, the organization shall provide 
     to individuals such additional benefits (as the organization 
     may specify) in a value which is at least equal to the 
     adjusted excess amount (as defined in subparagraph (C)).
       ``(B) Excess amount.--For purposes of this paragraph, the 
     `excess amount', for an organization for a plan, is the 
     amount (if any) by which--
       ``(i) the average of the capitation payments made to the 
     organization under section 1853 for the plan at the beginning 
     of contract year, exceeds
       ``(ii) the actuarial value of the required benefits 
     described in section 1852(a)(1) under the plan for 
     individuals under this part, as determined based upon an 
     adjusted community rate described in paragraph (4) (as 
     reduced for the actuarial value of the coinsurance and 
     deductibles under parts A and B).
       ``(C) Adjusted excess amount.--For purposes of this 
     paragraph, the `adjusted excess amount', for an organization 
     for a plan, is the excess amount reduced to reflect any 
     amount withheld and reserved for the organization for the 
     year under paragraph (2).
       ``(D) No application to msa plans.--Subparagraph (A) shall 
     not apply to an MSA plan.
       ``(E) Uniform application.--This paragraph shall be applied 
     uniformly for all enrollees for a plan in a MedicarePlus 
     payment area.
       ``(F) Construction.--Nothing in this subsection shall be 
     construed as preventing a MedicarePlus organization from 
     providing health care benefits that are in addition to the 
     benefits otherwise required to be provided under this 
     paragraph and from imposing a premium for such additional 
     benefits.
       ``(2) Stabilization fund.--A MedicarePlus organization may 
     provide that a part of the value of an excess amount 
     described in paragraph (1) be withheld and reserved in the 
     Federal Hospital Insurance Trust Fund and in the Federal 
     Supplementary Medical Insurance Trust Fund (in such 
     proportions as the Secretary determines to be appropriate) by 
     the Secretary for subsequent annual contract periods, to the 
     extent required to stabilize and prevent undue fluctuations 
     in the additional benefits offered in those subsequent 
     periods by the organization in accordance with such 
     paragraph. Any of such value of the amount reserved which is 
     not provided as additional benefits described in paragraph 
     (1)(A) to individuals electing the MedicarePlus plan of the 
     organization in accordance with such paragraph prior to the 
     end of such periods, shall revert for the use of such trust 
     funds.
       ``(3) Determination based on insufficient data.--For 
     purposes of this subsection, if the Secretary finds that 
     there is insufficient enrollment experience (including no 
     enrollment experience in the case of a provider-sponsored 
     organization) to determine an average of the capitation 
     payments to be made under this part at the beginning of a 
     contract period, the Secretary may determine such an average 
     based on the enrollment experience of other contracts entered 
     into under this part.
       ``(4) 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 MedicarePlus 
     organization, either--
       ``(i) the rate of payment for that service or services 
     which the Secretary annually determines would apply to an 
     individual electing a MedicarePlus plan under this part if 
     the rate of payment were determined under a `community rating 
     system' (as defined in section 1302(8) of the Public Health 
     Service Act, other than subparagraph (C)), or
       ``(ii) such portion of the weighted aggregate premium, 
     which the Secretary annually estimates would apply to such an 
     individual, as the Secretary annually estimates is 
     attributable to that service or services,

     but adjusted for differences between the utilization 
     characteristics of the individuals electing coverage under 
     this part and the utilization characteristics of the other 
     enrollees with the plan (or, if the Secretary finds that 
     adequate data are not available to adjust for those 
     differences, the differences between the utilization 
     characteristics of individuals selecting other MedicarePlus 
     coverage, or MedicarePlus eligible individuals in the area, 
     in the State, or in the United States, eligible to elect 
     MedicarePlus coverage under this part and the utilization 
     characteristics of the rest of the population in the area, in 
     the State, or in the United States, respectively).
       ``(B) Special rule for provider-sponsored organizations.--
     In the case of a MedicarePlus organization that is a 
     provider-sponsored organization, the adjusted community rate 
     under subparagraph (A) for a MedicarePlus plan of the 
     organization may be computed (in a manner specified by the 
     Secretary) using data in the general commercial marketplace 
     or (during a transition period) based on the costs incurred 
     by the organization in providing such a plan.
       ``(g) Periodic Auditing.--The Secretary shall provide for 
     the annual auditing of the financial records (including data 
     relating to medicare utilization, costs, and computation of 
     the adjusted community rate) of at least one-third of the 
     MedicarePlus organizations offering MedicarePlus plans under 
     this part. The Comptroller General shall monitoring auditing 
     activities conducted under this subsection.
       ``(h) Prohibition of State Imposition of Premium Taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     premiums on MedicarePlus plans or the offering of such plans.


     ``organizational and financial requirements for medicareplus 
            organizations; provider-sponsored organizations

       ``Sec. 1855. (a) Organized and Licensed Under State Law.--
       ``(1) In general.--Subject to paragraphs (2) and (3), a 
     MedicarePlus organization shall be organized and licensed 
     under State law as a risk-bearing entity eligible to offer 
     health insurance or health benefits coverage in each State in 
     which it offers a MedicarePlus plan.
       ``(2) Special exception for provider-sponsored 
     organizations.--
       ``(A) In general.--In the case of a provider-sponsored 
     organization that seeks to offer a MedicarePlus plan in a 
     State, the Secretary shall waive the requirement of paragraph 
     (1) that the organization be licensed in that State if--
       ``(i) the organization files an application for such waiver 
     with the Secretary, and
       ``(ii) the Secretary determines, based on the application 
     and other evidence presented to the Secretary, that any of 
     the grounds for approval of the application described in 
     subparagraph (B), (C), or (D) has been met.
       ``(B) Failure to act on licensure application on a timely 
     basis.--A ground for approval of such a waiver application is 
     that the State has failed to complete action on a licensing 
     application of the organization within 90 days of the date of 
     the State's receipt of the application. No period before the 
     date of the enactment of this section shall be included in 
     determining such 90-day period.
       ``(C) Denial of application based on discriminatory 
     treatment.--A ground for approval of such a waiver 
     application is that the State has denied such a licensing 
     application and--
       ``(i) the State has imposed documentation or information 
     requirements not related to solvency requirements that are 
     not generally applicable to other entities engaged in 
     substantially similar business, or
       ``(ii) the standards or review process imposed by the State 
     as a condition of approval of the license imposes any 
     material requirements, procedures, or standards (other than 
     requirements and standards relating to solvency) to such 
     organizations that are not generally applicable to other 
     entities engaged in substantially similar business.
       ``(D) Denial of application based on application of 
     solvency requirements.--A ground for approval of such a 
     waiver application is that the State has denied such a 
     licensing application based (in whole or in part) on the 
     organization's failure to meet applicable solvency 
     requirements and--
       ``(i) such requirements are not the same as the solvency 
     standards established under section 1856(a); or
       ``(ii) the State has imposed as a condition of approval of 
     the license any documentation

[[Page H4445]]

     or information requirements relating to solvency or other 
     material requirements, procedures, or standards relating to 
     solvency that are different from the requirements, 
     procedures, and standards applied by the Secretary under 
     subsection (d)(2).

     For purposes of this subparagraph, the term `solvency 
     requirements' means requirements relating to solvency and 
     other matters covered under the standards established under 
     section 1856(a).
       ``(E) Treatment of waiver.--Subject to section 1852(m), in 
     the case of a waiver granted under this paragraph for a 
     provider-sponsored organization--
       ``(i) the waiver shall be effective for a 36-month period, 
     except it may be renewed based on a subsequent application 
     filed during the last 6 months of such period,
       ``(ii) the waiver is conditioned upon the pendency of the 
     licensure application during the period the waiver is in 
     effect, and
       ``(iii) any provisions of State law which relate to the 
     licensing of the organization and which prohibit the 
     organization from providing coverage pursuant to a contract 
     under this part shall be superseded.

     Nothing in this subparagraph shall be construed as limiting 
     the number of times such a waiver may be renewed. Nothing in 
     clause (iii) shall be construed as waiving any provision of 
     State law which relates to quality of care or consumer 
     protection (and does not relate to solvency standards) and 
     which is imposed on a uniform basis and is generally 
     applicable to other entities engaged in substantially similar 
     business.
       ``(F) Prompt action on application.--The Secretary shall 
     grant or deny such a waiver application within 60 days after 
     the date the Secretary determines that a substantially 
     complete application has been filed. Nothing in this section 
     shall be construed as preventing an organization which has 
     had such a waiver application denied from submitting a 
     subsequent waiver application.
       ``(3) Exception if required to offer more than medicareplus 
     plans.--Paragraph (1) shall not apply to a MedicarePlus 
     organization in a State if the State requires the 
     organization, as a condition of licensure, to offer any 
     product or plan other than a MedicarePlus plan.
       ``(4) Licensure does not substitute for or constitute 
     certification.--The fact that an organization is licensed in 
     accordance with paragraph (1) does not deem the organization 
     to meet other requirements imposed under this part.
       ``(b) Prepaid Payment.--A MedicarePlus organization shall 
     be compensated (except for premiums, deductibles, 
     coinsurance, and copayments) for the provision of health care 
     services to enrolled members under the contract under this 
     part by a payment which is paid on a periodic basis without 
     regard to the date the health care services are provided and 
     which is fixed without regard to the frequency, extent, or 
     kind of health care service actually provided to a member.
       ``(c) Assumption of Full Financial Risk.--The MedicarePlus 
     organization shall assume full financial risk on a 
     prospective basis for the provision of the health care 
     services (except, at the election of the organization, 
     hospice care) for which benefits are required to be provided 
     under section 1852(a)(1), except that the 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.
       ``(d) Certification of Provision Against Risk of Insolvency 
     for Unlicensed PSOs.--
       ``(1) In general.--Each MedicarePlus organization that is a 
     provider-sponsored organization, that is not licensed by a 
     State under subsection (a), and for which a waiver 
     application has been approved under subsection (a)(2), shall 
     meet standards established under section 1856(a) relating to 
     the financial solvency and capital adequacy of the 
     organization.
       ``(2) Certification process for solvency standards for 
     psos.--The Secretary shall establish a process for the 
     receipt and approval of applications of a provider-sponsored 
     organization described in paragraph (1) for certification 
     (and periodic recertification) of the organization as meeting 
     such solvency standards. Under such process, the Secretary 
     shall act upon such an application not later than 60 days 
     after the date the application has been received.
       ``(e) Provider-Sponsored Organization Defined.--
       ``(1) In general.--In this part, the term `provider-
     sponsored organization' means a public or private entity--
       ``(A) that is established or organized by a health care 
     provider, or group of affiliated health care providers,
       ``(B) that provides a substantial proportion (as defined by 
     the Secretary in accordance with paragraph (2)) of the health 
     care items and services under the contract under this part 
     directly through the provider or affiliated group of 
     providers, and
       ``(C) with respect to which those affiliated providers that 
     share, directly or indirectly, substantial financial risk 
     with respect to the provision of such items and services have 
     at least a majority financial interest in the entity.
       ``(2) Substantial proportion.--In defining what is a 
     `substantial proportion' for purposes of paragraph (1)(B), 
     the Secretary--
       ``(A) shall take into account (i) the need for such an 
     organization to assume responsibility for a substantial 
     proportion of services in order to assure financial stability 
     and (ii) the practical difficulties in such an organization 
     integrating a very wide range of service providers; and
       ``(B) may vary such proportion based upon relevant 
     differences among organizations, such as their location in an 
     urban or rural area.
       ``(3) Affiliation.--For purposes of this subsection, a 
     provider is `affiliated' with another provider if, through 
     contract, ownership, or otherwise--
       ``(A) one provider, directly or indirectly, controls, is 
     controlled by, or is under common control with the other,
       ``(B) both providers are part of a controlled group of 
     corporations under section 1563 of the Internal Revenue Code 
     of 1986, or
       ``(C) both providers are part of an affiliated service 
     group under section 414 of such Code.
       ``(4) Control.--For purposes of paragraph (3), control is 
     presumed to exist if one party, directly or indirectly, owns, 
     controls, or holds the power to vote, or proxies for, not 
     less than 51 percent of the voting rights or governance 
     rights of another.
       ``(5) Health care provider defined.--In this subsection, 
     the term `health care provider' means--
       ``(A) any individual who is engaged in the delivery of 
     health care services in a State and who is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State, and
       ``(B) any entity that is engaged in the delivery of health 
     care services in a State and that, if it is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State, is so 
     licensed.
       ``(6) Regulations.--The Secretary shall issue regulations 
     to carry out this subsection.


                      ``establishment of standards

       ``Sec. 1856. (a) Establishment of Solvency Standards for 
     Provider-Sponsored Organizations.--
       ``(1) Establishment.--
       ``(A) In general.--The Secretary shall establish, on an 
     expedited basis and using a negotiated rulemaking process 
     under subchapter III of chapter 5 of title 5, United States 
     Code, standards described in section 1855(d)(1) (relating to 
     the financial solvency and capital adequacy of the 
     organization) that entities must meet to qualify as provider-
     sponsored organizations under this part.
       ``(B) Factors to consider for solvency standards.--In 
     establishing solvency standards under subparagraph (A) for 
     provider-sponsored organizations, the Secretary shall consult 
     with interested parties and shall take into account--
       ``(i) the delivery system assets of such an organization 
     and ability of such an organization to provide services 
     directly to enrollees through affiliated providers, and
       ``(ii) alternative means of protecting against insolvency, 
     including reinsurance, unrestricted surplus, letters of 
     credit, guarantees, organizational insurance coverage, 
     partnerships with other licensed entities, and valuation 
     attributable to the ability of such an organization to meet 
     its service obligations through direct delivery of care.
       ``(C) Enrollee protection against insolvency.--Such 
     standards shall include provisions to prevent enrollees from 
     being held liable to any person or entity for the 
     MedicarePlus organization's debts in the event of the 
     organization's insolvency.
       ``(2) Publication of notice.--In carrying out the 
     rulemaking process under this subsection, the Secretary, 
     after consultation with the National Association of Insurance 
     Commissioners, the American Academy of Actuaries, 
     organizations representative of medicare beneficiaries, and 
     other interested parties, shall publish the notice provided 
     for under section 564(a) of title 5, United States Code, by 
     not later than 45 days after the date of the enactment of 
     this section.
       ``(3) Target date for publication of rule.--As part of the 
     notice under paragraph (2), and for purposes of this 
     subsection, the `target date for publication' (referred to in 
     section 564(a)(5) of such title) shall be April 1, 1998.
       ``(4) Abbreviated period for submission of comments.--In 
     applying section 564(c) of such title under this subsection, 
     `15 days' shall be substituted for `30 days'.
       ``(5) Appointment of negotiated rulemaking committee and 
     facilitator.--The Secretary shall provide for--
       ``(A) the appointment of a negotiated rulemaking committee 
     under section 565(a) of such title by not later than 30 days 
     after the end of the comment period provided for

[[Page H4446]]

     under section 564(c) of such title (as shortened under 
     paragraph (4)), and
       ``(B) the nomination of a facilitator under section 566(c) 
     of such title by not later than 10 days after the date of 
     appointment of the committee.
       ``(6) Preliminary committee report.--The negotiated 
     rulemaking committee appointed under paragraph (5) shall 
     report to the Secretary, by not later than January 1, 1998, 
     regarding the committee's progress on achieving a consensus 
     with regard to the rulemaking proceeding and whether such 
     consensus is likely to occur before one month before the 
     target date for publication of the rule. If the committee 
     reports that the committee has failed to make significant 
     progress towards such consensus or is unlikely to reach such 
     consensus by the target date, the Secretary may terminate 
     such process and provide for the publication of a rule under 
     this subsection through such other methods as the Secretary 
     may provide.
       ``(7) Final committee report.--If the committee is not 
     terminated under paragraph (6), the rulemaking committee 
     shall submit a report containing a proposed rule by not later 
     than one month before the target date of publication.
       ``(8) Interim, final effect.--The Secretary shall publish a 
     rule under this subsection in the Federal Register by not 
     later than the target date of publication. Such rule shall be 
     effective and final immediately on an interim basis, but is 
     subject to change and revision after public notice and 
     opportunity for a period (of not less than 60 days) for 
     public comment. In connection with such rule, the Secretary 
     shall specify the process for the timely review and approval 
     of applications of entities to be certified as provider-
     sponsored organizations pursuant to such rules and consistent 
     with this subsection.
       ``(9) Publication of rule after public comment.--The 
     Secretary shall provide for consideration of such comments 
     and republication of such rule by not later than 1 year after 
     the target date of publication.
       ``(b) Establishment of Other Standards.--
       ``(1) In general.--The Secretary shall establish by 
     regulation other standards (not described in subsection (a)) 
     for MedicarePlus organizations and plans consistent with, and 
     to carry out, this part.
       ``(2) Use of current standards.--Consistent with the 
     requirements of this part, standards established under this 
     subsection shall be based on standards established under 
     section 1876 to carry out analogous provisions of such 
     section. The Secretary shall also consider State model and 
     other standards relating to consumer protection and assuring 
     quality of care.
       ``(3) Use of interim standards.--For the period in which 
     this part is in effect and standards are being developed and 
     established under the preceding provisions of this 
     subsection, the Secretary shall provide by not later than 
     June 1, 1998, for the application of such interim standards 
     (without regard to any requirements for notice and public 
     comment) as may be appropriate to provide for the expedited 
     implementation of this part. Such interim standards shall not 
     apply after the date standards are established under the 
     preceding provisions of this subsection.
       ``(4) Application of new standards to entities with a 
     contract.--In the case of a MedicarePlus organization with a 
     contract in effect under this part at the time standards 
     applicable to the organization under this section are 
     changed, the organization may elect not to have such changes 
     apply to the organization until the end of the current 
     contract year (or, if there is less than 6 months remaining 
     in the contract year, until 1 year after the end of the 
     current contract year).
       ``(5) Relation to state laws.--Subject to section 1852(m), 
     the standards established under this subsection shall 
     supersede any State law or regulation with respect to 
     MedicarePlus plans which are offered by MedicarePlus 
     organizations under this part to the extent such law or 
     regulation is inconsistent with such standards. The previous 
     sentence shall not be construed as superseding a State law or 
     regulation that is not related to solvency, that is applied 
     on a uniform basis and is generally applicable to other 
     entities engaged in substantially similar business, and that 
     provides consumer protections in addition to, or more 
     stringent than, those provided under the standards under this 
     subsection.


              ``contracts with medicareplus organizations

       ``Sec. 1857. (a) In General.--The Secretary shall not 
     permit the election under section 1851 of a MedicarePlus plan 
     offered by a MedicarePlus organization under this part, and 
     no payment shall be made under section 1853 to an 
     organization, unless the Secretary has entered into a 
     contract under this section with the organization with 
     respect to the offering of such plan. Such a contract with an 
     organization may cover more than one MedicarePlus plan. Such 
     contract shall provide that the organization agrees to comply 
     with the applicable requirements and standards of this part 
     and the terms and conditions of payment as provided for in 
     this part.
       ``(b) Minimum Enrollment Requirements.--
       ``(1) In general.--Subject to paragraphs (2) and (3), the 
     Secretary may not enter into a contract under this section 
     with a MedicarePlus organization unless the organization has 
     at least 5,000 individuals (or 1,500 individuals in the case 
     of an organization that is a provider-sponsored organization) 
     who are receiving health benefits through the organization, 
     except that the standards under section 1856 may permit the 
     organization to have a lesser number of beneficiaries (but 
     not less than 500 in the case of an organization that is a 
     provider-sponsored organization) if the organization 
     primarily serves individuals residing outside of urbanized 
     areas.
       ``(2) Exception for msa plan.--Paragraph (1) shall not 
     apply with respect to a contract that relates only to an MSA 
     plan.
       ``(3) Allowing transition.--The Secretary may waive the 
     requirement of paragraph (1) during the first 3 contract 
     years with respect to an organization.
       ``(c) Contract Period and Effectiveness.--
       ``(1) Period.--Each contract under this section shall be 
     for a term of at least one year, as determined by the 
     Secretary, and may be made automatically renewable from term 
     to term in the absence of notice by either party of intention 
     to terminate at the end of the current term.
       ``(2) Termination authority.--In accordance with procedures 
     established under subsection (h), the Secretary may at any 
     time terminate any such contract or may impose the 
     intermediate sanctions described in an applicable paragraph 
     of subsection (g)(3) on the MedicarePlus organization if the 
     Secretary determines that the organization--
       ``(A) has failed substantially to carry out the contract;
       ``(B) is carrying out the contract in a manner inconsistent 
     with the efficient and effective administration of this part; 
     or
       ``(C) no longer substantially meets the applicable 
     conditions of this part.
       ``(3) Effective date of contracts.--The effective date of 
     any contract executed pursuant to this section shall be 
     specified in the contract, except that in no case shall a 
     contract under this section which provides for coverage under 
     an MSA plan be effective before January 1998 with respect to 
     such coverage.
       ``(4) Previous terminations.--The Secretary may not enter 
     into a contract with a MedicarePlus organization if a 
     previous contract with that organization under this section 
     was terminated at the request of the organization within the 
     preceding five-year period, except in circumstances which 
     warrant special consideration, as determined by the 
     Secretary.
       ``(5) Contracting authority.--The authority vested in the 
     Secretary by this part may be performed without regard to 
     such provisions of law or regulations relating to the making, 
     performance, amendment, or modification of contracts of the 
     United States as the Secretary may determine to be 
     inconsistent with the furtherance of the purpose of this 
     title.
       ``(d) Protections Against Fraud and Beneficiary 
     Protections.--
       ``(1) Inspection and audit.--Each contract under this 
     section shall provide that the Secretary, or any person or 
     organization designated by the Secretary--
       ``(A) shall have the right to inspect or otherwise evaluate 
     (i) the quality, appropriateness, and timeliness of services 
     performed under the contract and (ii) the facilities of the 
     organization when there is reasonable evidence of some need 
     for such inspection, and
       ``(B) shall have the right to audit and inspect any books 
     and records of the MedicarePlus organization that pertain (i) 
     to the ability of the organization to bear the risk of 
     potential financial losses, or (ii) to services performed or 
     determinations of amounts payable under the 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 MedicarePlus 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.


[[Page H4447]]



     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 
     MedicarePlus organization, any person who is directly or 
     indirectly the beneficial owner of more than 5 percent of the 
     equity of the organization, any person who is the beneficial 
     owner of a mortgage, deed of trust, note, or other interest 
     secured by, and valuing more than 5 percent of the 
     organization, and, in the case of a MedicarePlus organization 
     organized as a nonprofit corporation, an incorporator or 
     member of such corporation under applicable State corporation 
     law;
       ``(ii) any entity in which a person described in clause 
     (i)--

       ``(I) is an officer or director;
       ``(II) is a partner (if such entity is organized as a 
     partnership);
       ``(III) has directly or indirectly a beneficial interest of 
     more than 5 percent of the equity; or
       ``(IV) has a mortgage, deed of trust, note, or other 
     interest valuing more than 5 percent of the assets of such 
     entity;

       ``(iii) any person directly or indirectly controlling, 
     controlled by, or under common control with an organization; 
     and
       ``(iv) any spouse, child, or parent of an individual 
     described in clause (i).
       ``(C) Access to information.--Each MedicarePlus 
     organization shall make the information reported pursuant to 
     subparagraph (A) available to its enrollees upon reasonable 
     request.
       ``(4) Loan information.--The contract shall require the 
     organization to notify the Secretary of loans and other 
     special financial arrangements which are made between the 
     organization and subcontractors, affiliates, and related 
     parties.
       ``(e) Additional Contract Terms.--
       ``(1) In general.--The contract shall contain such other 
     terms and conditions not inconsistent with this part 
     (including requiring the organization to provide the 
     Secretary with such information) as the Secretary may find 
     necessary and appropriate.
       ``(2) Cost-sharing in enrollment-related costs.--The 
     contract with a MedicarePlus organization shall require the 
     payment to the Secretary for the organization's pro rata 
     share (as determined by the Secretary) of the estimated costs 
     to be incurred by the Secretary in carrying out section 1851 
     (relating to enrollment and dissemination of information) and 
     section 4360 of the Omnibus Budget Reconciliation Act of 1990 
     (relating to the health insurance counseling and assistance 
     program). Such payments are appropriated to defray the costs 
     described in the preceding sentence, to remain available 
     until expended.
       ``(3) Notice to enrollees in case of decertification.--If a 
     contract with a MedicarePlus organization is terminated under 
     this section, the organization shall notify each enrollee 
     with the organization under this part of such termination.
       ``(f) Prompt Payment by MedicarePlus Organization.--
       ``(1) Requirement.--A contract under this part shall 
     require a MedicarePlus organization to provide prompt payment 
     (consistent with the provisions of sections 1816(c)(2) and 
     1842(c)(2)) of claims submitted for services and supplies 
     furnished to individuals pursuant to the contract, if the 
     services or supplies are not furnished under a contract 
     between the organization and the provider or supplier.
       ``(2) Secretary's option to bypass noncomplying 
     organization.--In the case of a MedicarePlus eligible 
     organization which the Secretary determines, after notice and 
     opportunity for a hearing, has failed to make payments of 
     amounts in compliance with paragraph (1), the Secretary may 
     provide for direct payment of the amounts owed to providers 
     and suppliers for covered services and supplies furnished to 
     individuals enrolled under this part under the contract. If 
     the Secretary provides for the direct payments, the Secretary 
     shall provide for an appropriate reduction in the amount of 
     payments otherwise made to the organization under this part 
     to reflect the amount of the Secretary's payments (and the 
     Secretary's costs in making the payments).
       ``(g) Intermediate Sanctions.--
       ``(1) In general.--If the Secretary determines that a 
     MedicarePlus organization with a contract under this 
     section--
       ``(A) fails substantially to provide medically necessary 
     items and services that are required (under law or under the 
     contract) to be provided to an individual covered under the 
     contract, if the failure has adversely affected (or has 
     substantial likelihood of adversely affecting) the 
     individual;
       ``(B) imposes net monthly premiums on individuals enrolled 
     under this part in excess of the net monthly premiums 
     permitted;
       ``(C) acts to expel or to refuse to re-enroll an individual 
     in violation of the provisions of this part;
       ``(D) engages in any practice that would reasonably be 
     expected to have the effect of denying or discouraging 
     enrollment (except as permitted by this part) by eligible 
     individuals with the organization whose medical condition or 
     history indicates a need for substantial future medical 
     services;
       ``(E) misrepresents or falsifies information that is 
     furnished--
       ``(i) to the Secretary under this part, or
       ``(ii) to an individual or to any other entity under this 
     part;
       ``(F) fails to comply with the requirements of section 
     1852(j)(3); or
       ``(G) employs or contracts with any individual or entity 
     that is excluded from participation under this title under 
     section 1128 or 1128A for the provision of health care, 
     utilization review, medical social work, or administrative 
     services or employs or contracts with any entity for the 
     provision (directly or indirectly) through such an excluded 
     individual or entity of such services;

     the Secretary may provide, in addition to any other remedies 
     authorized by law, for any of the remedies described in 
     paragraph (2).
       ``(2) Remedies.--The remedies described in this paragraph 
     are--
       ``(A) civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) or, with respect to a 
     determination under subparagraph (D) or (E)(i) of such 
     paragraph, of not more than $100,000 for each such 
     determination, plus, with respect to a determination under 
     paragraph (1)(B), double the excess amount charged in 
     violation of such paragraph (and the excess amount charged 
     shall be deducted from the penalty and returned to the 
     individual concerned), and plus, with respect to a 
     determination under paragraph (1)(D), $15,000 for each 
     individual not enrolled as a result of the practice involved,
       ``(B) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under paragraph (1) and until the 
     Secretary is satisfied that the basis for such determination 
     has been corrected and is not likely to recur, 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 
     MedicarePlus organization for which the Secretary makes a 
     determination under subsection (c)(2) the basis of which is 
     not described in paragraph (1), the Secretary may apply the 
     following intermediate sanctions:
       ``(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
       ``(B) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under subsection (g) during which the deficiency 
     that is the basis of a determination under subsection (c)(2) 
     exists.
       ``(C) Suspension of enrollment of individuals under 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.
       ``(h) Procedures for Termination.--
       ``(1) In general.--The Secretary may terminate a contract 
     with a MedicarePlus organization under this section in 
     accordance with formal investigation and compliance 
     procedures established by the Secretary under which--
       ``(A) the Secretary provides the organization with the 
     reasonable opportunity to develop and implement a corrective 
     action plan to correct the deficiencies that were the basis 
     of the Secretary's determination under subsection (c)(2);
       ``(B) the Secretary shall impose more severe sanctions on 
     an organization that has a history of deficiencies or that 
     has not taken steps to correct deficiencies the Secretary has 
     brought to the organization's attention;
       ``(C) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(D) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before terminating the 
     contract.
       ``(2) Civil money penalties.--The provisions of section 
     1128A (other than subsections (a) and (b)) shall apply to a 
     civil money penalty under subsection (f) or under paragraph 
     (2) or (3) of subsection (g) in the same manner as they apply 
     to a civil money penalty or proceeding under section 
     1128A(a).
       ``(3) Exception for imminent and serious risk to health.--
     Paragraph (1) shall not apply if the Secretary determines 
     that a delay in termination, resulting from compliance with 
     the procedures specified in such paragraph prior to 
     termination, would pose an imminent and serious risk to the 
     health of individuals enrolled under this part with the 
     organization.


                ``definitions; miscellaneous provisions

       ``Sec. 1859. (a) Definitions Relating to MedicarePlus 
     Organizations.--In this part--
       ``(1) MedicarePlus organization.--The term `MedicarePlus 
     organization' means a public or private entity that is 
     certified under section 1856 as meeting the requirements and 
     standards of this part for such an organization.

[[Page H4448]]

       ``(2) Provider-sponsored organization.--The term `provider-
     sponsored organization' is defined in section 1855(e)(1).
       ``(b) Definitions Relating to MedicarePlus Plans.--
       ``(1) MedicarePlus plan.--The term `MedicarePlus plan' 
     means health benefits coverage offered under a policy, 
     contract, or plan by a MedicarePlus organization pursuant to 
     and in accordance with a contract under section 1857.
       ``(2) MSA plan.--
       ``(A) In general.--The term `MSA plan' means a MedicarePlus 
     plan that--
       ``(i) provides reimbursement for at least the items and 
     services described in section 1852(a)(1) in a year but only 
     after the enrollee incurs countable expenses (as specified 
     under the plan) equal to the amount of an annual deductible 
     (described in subparagraph (B));
       ``(ii) counts as such expenses (for purposes of such 
     deductible) at least all amounts that would have been payable 
     under parts A and B, and that would have been payable by the 
     enrollee as deductibles, coinsurance, or copayments, if the 
     enrollee had elected to receive benefits through the 
     provisions of such parts; and
       ``(iii) provides, after such deductible is met for a year 
     and for all subsequent expenses for items and services 
     referred to in clause (i) in the year, for a level of 
     reimbursement that is not less than--

       ``(I) 100 percent of such expenses, or
       ``(II) 100 percent of the amounts that would have been paid 
     (without regard to any deductibles or coinsurance) under 
     parts A and B with respect to such expenses,

     whichever is less.
       ``(B) Deductible.--The amount of annual deductible under an 
     MSA plan--
       ``(i) for contract year 1999 shall be not more than $6,000; 
     and
       ``(ii) for a subsequent contract year shall be not more 
     than the maximum amount of such deductible for the previous 
     contract year under this subparagraph increased by the 
     national per capita MedicarePlus growth percentage under 
     section 1853(c)(6) for the year.

     If the amount of the deductible under clause (ii) is not a 
     multiple of $50, the amount shall be rounded to the nearest 
     multiple of $50.
       ``(c) Other References to Other Terms.--
       ``(1) MedicarePlus eligible individual.--The term 
     `MedicarePlus eligible individual' is defined in section 
     1851(a)(3).
       ``(2) MedicarePlus payment area.--The term `MedicarePlus 
     payment area' is defined in section 1853(d).
       ``(3) National per capita medicareplus growth percentage.--
     The `national per capita MedicarePlus growth percentage' is 
     defined in section 1853(c)(6).
       ``(4) Monthly premium; net monthly premium.--The terms 
     `monthly premium' and `net monthly premium' are defined in 
     section 1854(a)(2).
       ``(d) Coordinated Acute and Long-term Care Benefits Under a 
     MedicarePlus Plan.--Nothing in this part shall be construed 
     as preventing a State from coordinating benefits under a 
     medicaid plan under title XIX with those provided under a 
     MedicarePlus plan in a manner that assures continuity of a 
     full-range of acute care and long-term care services to poor 
     elderly or disabled individuals eligible for benefits under 
     this title and under such plan.
       ``(e) Restriction on Enrollment for Certain MedicarePlus 
     Plans.--
       ``(1) In general.--In the case of a MedicarePlus religious 
     fraternal benefit society plan described in paragraph (2), 
     notwithstanding any other provision of this part to the 
     contrary and in accordance with regulations of the Secretary, 
     the society offering the plan may restrict the enrollment of 
     individuals under this part to individuals who are members of 
     the church, convention, or group described in paragraph 
     (3)(B) with which the society is affiliated.
       ``(2) Medicareplus religious fraternal benefit society plan 
     described.--For purposes of this subsection, a MedicarePlus 
     religious fraternal benefit society plan described in this 
     paragraph is a MedicarePlus plan described in section 
     1851(a)(2)(A) that--
       ``(A) is offered by a religious fraternal benefit society 
     described in paragraph (3) only to members of the church, 
     convention, or group described in paragraph (3)(B); and
       ``(B) permits all such members to enroll under the plan 
     without regard to health status-related factors.

     Nothing in this subsection shall be construed as waiving any 
     plan requirements relating to financial solvency. In 
     developing solvency standards under section 1856, the 
     Secretary shall take into account open contract and 
     assessment features characteristic of fraternal insurance 
     certificates.
       ``(3) Religious fraternal benefit society defined.--For 
     purposes of paragraph (2)(A), a `religious fraternal benefit 
     society' described in this section is an organization that--
       ``(A) is exempt from Federal income taxation under section 
     501(c)(8) of the Internal Revenue Code of 1986;
       ``(B) is affiliated with, carries out the tenets of, and 
     shares a religious bond with, a church or convention or 
     association of churches or an affiliated group of churches;
       ``(C) offers, in addition to a MedicarePlus religious 
     fraternal benefit society plan, health coverage to 
     individuals not entitled to benefits under this title who are 
     members of such church, convention, or group; and
       ``(D) does not impose any limitation on membership in the 
     society based on any health status-related factor.
       ``(4) Payment adjustment.--Under regulations of the 
     Secretary, in the case of individuals enrolled under this 
     part under a MedicarePlus religious fraternal benefit society 
     plan described in paragraph (2), the Secretary shall provide 
     for such adjustment to the payment amounts otherwise 
     established under section 1854 as may be appropriate to 
     assure an appropriate payment level, taking into account the 
     actuarial characteristics and experience of such 
     individuals.''.
       (b) Report on Coverage of Beneficiaries with End-Stage 
     Renal Disease.--The Secretary of Health and Human Services 
     shall provide for a study on the feasibility and impact of 
     removing the limitation under section 1851(b)(3)(B) of the 
     Social Security Act (as inserted by subsection (a)) on 
     eligibility of most individuals medically determined to have 
     end-stage renal disease to enroll in MedicarePlus plans. By 
     not later than October 1, 1998, the Secretary shall submit to 
     Congress a report on such study and shall include in the 
     report such recommendations regarding removing or restricting 
     the limitation as may be appropriate.
       (c) Report on MedicarePlus Teaching Programs and Use of DSH 
     and Teaching Hospitals.--Based on the information provided to 
     the Secretary of Health and Human Services under section 
     1852(k) of the Social Security Act and such information as 
     the Secretary may obtain, by not later than October 1, 1999, 
     the Secretary shall submit to Congress a report on graduate 
     medical education programs operated by MedicarePlus 
     organizations and the extent to which MedicarePlus 
     organizations are providing for payments to hospitals 
     described in such section.

     SEC. 4002. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO 
                   PROGRAM.

       (a) Authorizing Transitional Waiver of 50:50 Rule.--Section 
     1876(f) (42 U.S.C. 1395mm(f)) is amended--
       (1) in paragraph (2), by striking ``The Secretary'' and 
     inserting ``Subject to paragraph (4), the Secretary'', and
       (2) by adding at the end the following new paragraph:
       ``(4) Effective for contract periods beginning after 
     December 31, 1996, the Secretary may waive or modify the 
     requirement imposed by paragraph (1) to the extent the 
     Secretary finds that it is in the public interest.''.
       (b) Transition.--Section 1876 (42 U.S.C. 1395mm) is amended 
     by adding at the end the following new subsection:
       ``(k)(1) Except as provided in paragraph (3), the Secretary 
     shall not enter into, renew, or continue any risk-sharing 
     contract under this section with an eligible organization for 
     any contract year beginning on or after--
       ``(A) the date standards for MedicarePlus organizations and 
     plans are first established under section 1856 with respect 
     to MedicarePlus organizations that are insurers or health 
     maintenance organizations, or
       ``(B) in the case of such an organization with such a 
     contract in effect as of the date such standards were first 
     established, 1 year after such date.
       ``(2) The Secretary shall not enter into, renew, or 
     continue any risk-sharing contract under this section with an 
     eligible organization for any contract year beginning on or 
     after January 1, 2000.
       ``(3) An individual who is enrolled in part B only and is 
     enrolled in an eligible organization with a risk-sharing 
     contract under this section on December 31, 1998, may 
     continue enrollment in such organization in accordance with 
     regulations issued by not later then July 1, 1998.
       ``(4) Notwithstanding subsection (a), the Secretary shall 
     provide that payment amounts under risk-sharing contracts 
     under this section for months in a year (beginning with 
     January 1998) shall be computed--
       ``(A) with respect to individuals entitled to benefits 
     under both parts A and B, by substituting payment rates under 
     section 1853(a) for the payment rates otherwise established 
     under subsection 1876(a), and
       ``(B) with respect to individuals only entitled to benefits 
     under part B, by substituting an appropriate proportion of 
     such rates (reflecting the relative proportion of payments 
     under this title attributable to such part) for the payment 
     rates otherwise established under subsection (a).

     For purposes of carrying out this paragraph for payments for 
     months in 1998, the Secretary shall compute, announce, and 
     apply the payment rates under section 1853(a) 
     (notwithstanding any deadlines specified in such section) in 
     as timely a manner as possible and may (to the extent 
     necessary) provide for retroactive adjustment in payments 
     made under this section not in accordance with such rates.''.
       (c) Enrollment Transition Rule.--An individual who is 
     enrolled on December 31, 1998, with an eligible organization 
     under section 1876 of the Social Security Act (42 U.S.C. 
     1395mm) shall be considered to be enrolled with that 
     organization on January 1, 1999, under part C of title XVIII 
     of such Act if that organization has a contract under that 
     part for providing services on January 1, 1999 (unless the 
     individual has disenrolled effective on that date).
       (d) Advance Directives.--Section 1866(f) (42 U.S.C. 
     1395c(f)) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``1855(i),'' after ``1833(s),'', and

[[Page H4449]]

       (B) by inserting ``, MedicarePlus organization,'' after 
     ``provider of services''; and
       (2) in paragraph (2)(E), by inserting ``or a MedicarePlus 
     organization'' after ``section 1833(a)(1)(A)''.
       (e) Extension of Provider Requirement.--Section 
     1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended--
       (1) by striking ``in the case of hospitals and skilled 
     nursing facilities,'';
       (2) by striking ``inpatient hospital and extended care'';
       (3) by inserting ``with a MedicarePlus organization under 
     part C or'' after ``any individual enrolled'';
       (4) by striking ``(in the case of hospitals) or limits (in 
     the case of skilled nursing facilities)''; and
       (5) by inserting ``(less any payments under section 1858)'' 
     after ``under this title''.
       (f) Additional Conforming Changes.--
       (1) Conforming references to previous part C.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to part C of title XVIII of the Social Security 
     Act is deemed a reference to part D of such title (as in 
     effect after such date).
       (2) Secretarial submission of legislative proposal.--Not 
     later than 90 days after the date of the enactment of this 
     Act, the Secretary of Health and Human Services shall submit 
     to the appropriate committees of Congress a legislative 
     proposal providing for such technical and conforming 
     amendments in the law as are required by the provisions of 
     this chapter.
       (g) Immediate Effective Date for Certain Requirements for 
     Demonstrations.--Section 1857(e)(2) of the Social Security 
     Act (requiring contribution to certain costs related to the 
     enrollment process comparative materials) applies to 
     demonstrations with respect to which enrollment is effected 
     or coordinated under section 1851 of such Act.
       (h) Use of Interim, Final Regulations.--In order to carry 
     out the amendments made by this chapter in a timely manner, 
     the Secretary of Health and Human Services may promulgate 
     regulations that take effect on an interim basis, after 
     notice and pending opportunity for public comment.
       (i) Transition Rule for PSO Enrollment.--In applying 
     subsection (g)(1) of section 1876 of the Social Security Act 
     (42 U.S.C. 1395mm) to a risk-sharing contract entered into 
     with an eligible organization that is a provider-sponsored 
     organization (as defined in section 1855(e)(1) of such Act, 
     as inserted by section 4001) for a contract year beginning on 
     or after January 1, 1998, there shall be substituted for the 
     minimum number of enrollees provided under such section the 
     minimum number of enrollees permitted under section 
     1857(b)(1) of such Act (as so inserted).

     SEC. 4003. CONFORMING CHANGES IN MEDIGAP PROGRAM.

       (a) Conforming Amendments to MedicarePlus Changes.--
       (1) In general.--Section 1882(d)(3)(A)(i) (42 U.S.C. 
     1395ss(d)(3)(A)(i)) is amended--
       (A) in the matter before subclause (I), by inserting 
     ``(including an individual electing a MedicarePlus plan under 
     section 1851)'' after ``of this title''; and
       (B) in subclause (II)--
       (i) by inserting ``in the case of an individual not 
     electing a MedicarePlus plan'' after ``(II)'', and
       (ii) by inserting before the comma at the end the 
     following: ``or in the case of an individual electing a 
     MedicarePlus plan, a medicare supplemental policy with 
     knowledge that the policy duplicates health benefits to which 
     the individual is otherwise entitled under the MedicarePlus 
     plan or under another medicare supplemental policy''.
       (2) Conforming amendments.--Section 1882(d)(3)(B)(i)(I) (42 
     U.S.C. 1395ss(d)(3)(B)(i)(I)) is amended by inserting 
     ``(including any MedicarePlus plan)'' after ``health 
     insurance policies''.
       (3) MedicarePlus plans not treated as medicare 
     supplementary policies.--Section 1882(g)(1) (42 U.S.C. 
     1395ss(g)(1)) is amended by inserting ``or a MedicarePlus 
     plan or'' after ``does not include''
       (b) Additional Rules Relating to Individuals Enrolled in 
     MSA Plans.--Section 1882 (42 U.S.C. 1395ss) is further 
     amended by adding at the end the following new subsection:
       ``(u)(1) It is unlawful for a person to sell or issue a 
     policy described in paragraph (2) to an individual with 
     knowledge that the individual has in effect under section 
     1851 an election of an MSA plan.
       ``(2) A policy described in this subparagraph is a health 
     insurance policy that provides for coverage of expenses that 
     are otherwise required to be counted toward meeting the 
     annual deductible amount provided under the MSA plan.''.

 Subchapter B--Special Rules for MedicarePlus Medical Savings Accounts

     SEC. 4006. MEDICAREPLUS MSA.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to amounts 
     specifically excluded from gross income) is amended by 
     redesignating section 138 as section 139 and by inserting 
     after section 137 the following new section:

     ``SEC. 138. MEDICAREPLUS MSA.

       ``(a) Exclusion.--Gross income shall not include any 
     payment to the MedicarePlus MSA of an individual by the 
     Secretary of Health and Human Services under part C of title 
     XVIII of the Social Security Act.
       ``(b) MedicarePlus MSA.--For purposes of this section, the 
     term `MedicarePlus MSA' means a medical savings account (as 
     defined in section 220(d))--
       ``(1) which is designated as a MedicarePlus MSA,
       ``(2) with respect to which no contribution may be made 
     other than--
       ``(A) a contribution made by the Secretary of Health and 
     Human Services pursuant to part C of title XVIII of the 
     Social Security Act, or
       ``(B) a trustee-to-trustee transfer described in subsection 
     (c)(4),
       ``(3) the governing instrument of which provides that 
     trustee-to-trustee transfers described in subsection (c)(4) 
     may be made to and from such account, and
       ``(4) which is established in connection with an MSA plan 
     described in section 1859(b)(2) of the Social Security Act.
       ``(c) Special Rules for Distributions.--
       ``(1) Distributions for qualified medical expenses.--In 
     applying section 220 to a MedicarePlus MSA--
       ``(A) qualified medical expenses shall not include amounts 
     paid for medical care for any individual other than the 
     account holder, and
       ``(B) section 220(d)(2)(C) shall not apply.
       ``(2) Penalty for distributions from medicareplus msa not 
     used for qualified medical expenses if minimum balance not 
     maintained.--
       ``(A) In general.--The tax imposed by this chapter for any 
     taxable year in which there is a payment or distribution from 
     a MedicarePlus MSA which is not used exclusively to pay the 
     qualified medical expenses of the account holder shall be 
     increased by 50 percent of the excess (if any) of--
       ``(i) the amount of such payment or distribution, over
       ``(ii) the excess (if any) of--

       ``(I) the fair market value of the assets in such MSA as of 
     the close of the calendar year preceding the calendar year in 
     which the taxable year begins, over
       ``(II) an amount equal to 60 percent of the deductible 
     under the MedicarePlus MSA plan covering the account holder 
     as of January 1 of the calendar year in which the taxable 
     year begins.

     Section 220(f)(2) shall not apply to any payment or 
     distribution from a MedicarePlus MSA.
       ``(B) Exceptions.--Subparagraph (A) shall not apply if the 
     payment or distribution is made on or after the date the 
     account holder--
       ``(i) becomes disabled within the meaning of section 
     72(m)(7), or
       ``(ii) dies.
       ``(C) Special rules.--For purposes of subparagraph (A)--
       ``(i) all MedicarePlus MSAs of the account holder shall be 
     treated as 1 account,
       ``(ii) all payments and distributions not used exclusively 
     to pay the qualified medical expenses of the account holder 
     during any taxable year shall be treated as 1 distribution, 
     and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(3) Withdrawal of erroneous contributions.--Section 
     220(f)(2) and paragraph (2) of this subsection shall not 
     apply to any payment or distribution from a MedicarePlus MSA 
     to the Secretary of Health and Human Services of an erroneous 
     contribution to such MSA and of the net income attributable 
     to such contribution.
       ``(4) Trustee-to-trustee transfers.--Section 220(f)(2) and 
     paragraph (2) of this subsection shall not apply to any 
     trustee-to-trustee transfer from a MedicarePlus MSA of an 
     account holder to another MedicarePlus MSA of such account 
     holder.
       ``(d) Special Rules for Treatment of Account After Death of 
     Account Holder.--In applying section 220(f)(8)(A) to an 
     account which was a MedicarePlus MSA of a decedent, the rules 
     of section 220(f) shall apply in lieu of the rules of 
     subsection (c) of this section with respect to the spouse as 
     the account holder of such MedicarePlus MSA.
       ``(e) Reports.--In the case of a MedicarePlus MSA, the 
     report under section 220(h)--
       ``(1) shall include the fair market value of the assets in 
     such MedicarePlus MSA as of the close of each calendar year, 
     and
       ``(2) shall be furnished to the account holder--
       ``(A) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(B) in such manner as the Secretary prescribes in such 
     regulations.
       ``(f) Coordination With Limitation on Number of Taxpayers 
     Having Medical Savings Accounts.--Subsection (i) of section 
     220 shall not apply to an individual with respect to a 
     MedicarePlus MSA, and MedicarePlus MSA's shall not be taken 
     into account in determining whether the numerical limitations 
     under section 220(j) are exceeded.''
       (b) Technical Amendments.--
       (1) The last sentence of section 4973(d) of such Code is 
     amended by inserting ``or section 138(c)(3)'' after ``section 
     220(f)(3)''.
       (2) Subsection (b) of section 220 of such Code is amended 
     by adding at the end the following new paragraph:
       ``(7) Medicare eligible individuals.--The limitation under 
     this subsection for any month with respect to an individual 
     shall be zero for the first month such individual is entitled 
     to benefits under title XVIII of the Social Security Act and 
     for each month thereafter.''
       (3) The table of sections for part III of subchapter B of 
     chapter 1 of such Code is amended by striking the last item 
     and inserting the following:


[[Page H4450]]


``Sec. 138. MedicarePlus MSA.
``Sec. 139. Cross references to other Acts.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

  Subchapter C--GME, IME, and DSH Payments for Managed Care Enrollees

     SEC. 4008. GRADUATE MEDICAL EDUCATION AND INDIRECT MEDICAL 
                   EDUCATION PAYMENTS FOR MANAGED CARE ENROLLEES.

       (a) Payments to Managed Care Organizations Operating 
     Graduate Medical Education Programs.--Section 1853 (as 
     inserted by section 4001) is amended by adding at the end the 
     following:
       ``(h) Payments for Direct Costs of Graduate Medical 
     Education Programs.--
       ``(1) Additional payment to be made.--Effective January 1, 
     1998, each contract with a MedicarePlus organization under 
     this section (and each risk-sharing contract with an eligible 
     organization under section 1876) shall provide for an 
     additional payment for Medicare's share of allowable direct 
     graduate medical education costs incurred by such an 
     organization for an approved medical residency program.
       ``(2) Allowable costs.--If the organization has an approved 
     medical residency program that incurs all or substantially 
     all of the costs of the program, subject to section 
     1858(a)(3), the allowable costs for such a program shall 
     equal the national average per resident amount times the 
     number of full-time-equivalent residents in the program in 
     non-hospital settings.
       ``(3) Definitions.--As used in this subsection:
       ``(A) The terms `approved medical residency program', 
     `direct graduate medical education costs', and `full-time-
     equivalent residents' have the same meanings as under section 
     1886(h).
       ``(B) The term `Medicare's share' means, with respect to a 
     MedicarePlus or eligible organization, the ratio of the 
     number of individuals enrolled with the organization under 
     this part (or enrolled under a risk-sharing contract under 
     section 1876, respectively) to the total number of 
     individuals enrolled with the organization.
       ``(C) The term `national average per resident amount' means 
     an amount estimated by the Secretary to equal the weighted 
     average amount that would be paid per full-time-equivalent 
     resident under section 1886(h) for the calendar year 
     (determined separately for primary care residency programs as 
     defined under section 1886(h) (including obstetrics and 
     gynecology residency programs) and for other residency 
     programs).''.
       (b) Payments to Hospitals for Direct and Indirect Costs of 
     Graduate Medical Education Programs Attributable to Managed 
     Care Enrollees.--Part C of title XVIII, as amended by section 
     4001, is amended by inserting after section 1857 the 
     following new section:


``payments to hospitals for certain costs attributable to managed care 
                               enrollees

       ``Sec. 1858. (a) Costs of Graduate Medical Education.--
       ``(1) In general.--For portions of cost reporting periods 
     occurring on or after January 1, 1998, the Secretary shall 
     provide for an additional payment amount for each subsection 
     (d) hospital (as defined in section 1886(d)(1)(B)), each PPS-
     exempt hospital described in clause (i) through (v) of such 
     section, and for each hospital reimbursed under a 
     reimbursement system authorized section 1814(b)(3) that--
       ``(A) furnishes services to individuals who are enrolled 
     under a risk-sharing contract with an eligible organization 
     under section 1876 and who are entitled to part A and to 
     individuals who are enrolled with a MedicarePlus organization 
     under part C, and
       ``(B) has an approved medical residency training program.
       ``(2) Payment amount.--
       ``(A) In general.--Subject to paragraph (3)(B), the amount 
     of the payment under this subsection shall be the sum of--
       ``(i) the amount determined under subparagraph (B), and
       ``(ii) the amount determined under subparagraph (C).

     Clause (ii) shall not apply in the case of a hospital that is 
     not a PPS-exempt hospital described in clause (i) through (v) 
     of section 1886(d)(1)(B),
       ``(B) Direct amount.--The amount determined under this 
     subparagraph for a period is equal to the product of--
       ``(i) the aggregate approved amount (as defined in section 
     1886(h)(3)(B)) for that period; and
       ``(ii) the fraction of the total number of inpatient-bed-
     days (as established by the Secretary) during the period 
     which are attributable to individuals described in paragraph 
     (1).
       ``(C) Indirect amount.--The amount determined under this 
     subparagraph is equal to the product of--
       ``(i) the amount of the indirect teaching adjustment factor 
     applicable to the hospital under section 1886(d)(5)(B); and
       ``(ii) the product of--

       ``(I) the number of discharges attributable to individuals 
     described in paragraph (1), and
       ``(II) the estimated average per discharge amount that 
     would otherwise have been paid under section 1886(d)(1)(A) if 
     the individuals had not been enrolled as described in such 
     paragraph.

       ``(D) Special rule.--The Secretary shall establish rules 
     for the application of subparagraph (B) and for the 
     computation of the amounts described in subparagraph (C)(i)) 
     and subparagraph (C)(ii)(I) to a hospital reimbursed under a 
     reimbursement system authorized under section 1814(b)(3) in a 
     manner similar to the manner of applying such subparagraph 
     and computing such amounts as if the hospital were not 
     reimbursed under such section.
       ``(3) Limitation.--
       ``(A) Determinations.--At the beginning of each year, the 
     Secretary shall--
       ``(i) estimate the sum of the amount of the payments under 
     this subsection and the payments under section 1853(h), for 
     services or discharges occurring in the year, and
       ``(ii) determine the amount of the annual payment limit 
     under subparagraph (C) for such year.
       ``(B) Imposition of limit.--If the amount estimated under 
     subparagraph (A)(i) for a year exceeds the amount determined 
     under subparagraph (A)(ii) for the year, then the Secretary 
     shall adjust the amounts of the payments described in 
     subparagraph (A)(i) for the year in a pro rata manner so that 
     the total of such payments in the year do not exceed the 
     annual payment limit determined under subparagraph (A)(ii) 
     for that year.
       ``(C) Annual payment limit.--
       ``(i) In general.--The annual payment limit under this 
     subparagraph for a year is the sum, over all counties or 
     MedicarePlus payment areas, of the product of--

       ``(I) the annual GME per capita payment rate (described in 
     clause (ii)) for the county or area, and
       ``(II) the Secretary's projection of average enrollment of 
     individuals described in paragraph (1) who are residents of 
     that county or area, adjusted to reflect the relative 
     demographic or risk characteristics of such enrollees.

       ``(ii) GME per capita payment rate.--The GME per capita 
     payment rate described in this clause for a particular county 
     or MedicarePlus payment area for a year is the GME proportion 
     (as specified in clause (iii)) of the annual MedicarePlus 
     capitation rate (as calculated under section 1853(c)) for the 
     county or area and year involved.
       ``(iii) GME proportion.--For purposes of clause (ii), the 
     GME proportion for a county or area and a year is equal to 
     the phase-in percentage (specified in clause (vi)) of the 
     ratio of (I) the projected GME payment amount for the county 
     or area (as determined under clause (v)), to (II) the average 
     per capita cost for the county or area for the year 
     (determined under clause (vi)).
       ``(iv) Phase-in percentage.--The phase-in percentage 
     specified in this clause for--

       ``(I) 1998 is 20 percent,
       ``(II) 1999 is 40 percent,
       ``(III) 2000 is 60 percent,
       ``(IV) 2001 is 80 percent, or
       ``(V) any subsequent year is 100 percent.

       ``(v) Projected GME payment amount.--he projected GME 
     payment amount for a county or area--

       ``(I) for 1998, is the amount included in the per capita 
     rate of payment for 1997 determined under section 
     1876(a)(1)(C) for the payment adjustments described in 
     section 1886(d)(5)(B) and section 1886(h) for that county or 
     area, adjusted by the general GME update factor (as defined 
     in clause (vii)) for 1998, or
       ``(II) for a subsequent year, is the projected GME payment 
     amount for the county or area for the previous year, adjusted 
     by the general GME update factor for such subsequent year.

     The Secretary shall determine the amount described in 
     subclause (I) for a county or other area that includes 
     hospitals reimbursed under section 1814(b)(3) as though such 
     hospitals had not been reimbursed under such section.
       ``(vi) Average per capita cost.--The average per capita 
     cost for the county or area determined under this clause 
     for--

       ``(I) 1998 is the annual per capita rate of payment for 
     1997 determined under section 1876(a)(1)(C) for the county or 
     area, increased by the national per capita MedicarePlus 
     growth percentage for 1998 (as defined in section 1853(c)(6), 
     but determined without regard to the adjustment described in 
     subparagraph (B) of such section); or
       ``(II) a subsequent year is the average per capita cost 
     determined under this clause for the previous year increased 
     by the national per capita MedicarePlus growth percentage for 
     the year involved (as defined in section 1853(c)(6), but 
     determined without regard to the adjustment described in 
     subparagraph (B) of such section).

       ``(vii) General gme update factor.--For purposes of clause 
     (v), the `general GME update factor' for a year is equal to 
     the Secretary's estimate of the national average percentage 
     change in average per capita payments under sections 
     1886(d)(5)(B) and 1886(h) from the previous year to the year 
     involved. Such amount takes into account changes in law and 
     regulation affecting payment amounts under such sections.''.

     SEC. 4009. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FOR 
                   MANAGED CARE ENROLLEES.

       Section 1858, as inserted by section 4008(b), is further 
     amended by adding at the end the following new subsection:
       ``(b) Disproportionate Share Hospital Payments.--
       ``(1) In general.--For portions of cost reporting periods 
     occurring on or after January 1, 1998, the Secretary shall 
     provide for an additional payment amount for each subsection 
     (d) hospital (as defined in section

[[Page H4451]]

     1886(d)(1)(B)) and for each hospital reimbursed a 
     demonstration project reimbursement system under section 
     1814(b)(3) that--
       ``(A) furnishes services to individuals who are enrolled 
     under a risk-sharing contract with an eligible organization 
     under section 1876 and who are entitled to part A and to 
     individuals who are enrolled with a MedicarePlus organization 
     under this part, and
       ``(B) is (or, if it were not reimbursed under section 
     1814(b)(3), would qualify as) a disproportionate share 
     hospital described in section 1886(d)(5)(F)(i).
       ``(2) Amount of payment.--Subject to paragraph (3)(B), the 
     amount of the payment under this subsection shall be the 
     product of--
       ``(A) the amount of the disproportionate share adjustment 
     percentage applicable to the hospital under section 
     1886(d)(5)(F); and
       ``(B) the product described in subsection (a)(2)(C)(ii).

     The Secretary shall establish rules for the computation of 
     the amount described in subparagraph (A) for a hospital 
     reimbursed under section 1814(b)(3).
       ``(3) Limit.--
       ``(A) Determination.--At the beginning of each year, the 
     Secretary shall--
       ``(i) estimate the sum of the payments under this 
     subsection for services or discharges occurring in the year, 
     and
       ``(ii) determine the amount of the annual payment limit 
     under subparagraph (C)) for such year.
       ``(B) Imposition of limit.--If the amount estimated under 
     subparagraph (A)(i) for a year exceeds the amount determined 
     under subparagraph (A)(ii) for the year, then the Secretary 
     shall adjust the amounts of the payments under this 
     subsection for the year in a pro rata manner so that the 
     total of such payments in the year do not exceed the annual 
     payment limit determined under subparagraph (A)(ii) for that 
     year.
       ``(C) Annual payment limit.--The annual payment limit under 
     this subparagraph for a year shall be determined in the same 
     manner as the annual payment limit is determined under clause 
     (i) of subsection (a)(3)(C), except that, for purposes of 
     this clause, any reference in clauses (i) through (vii) of 
     such subsection--
       ``(i) to a payment adjustment under subsection (a) is 
     deemed a reference to a payment adjustment under this 
     subsection, or
       ``(ii) to payments or payment adjustments under section 
     1886(d)(5)(B) and 1886(h) is deemed a reference to payments 
     and payment adjustments under section 1886(d)(5)(F).''.

             CHAPTER 2--INTEGRATED LONG-TERM CARE PROGRAMS

  Subchapter A--Programs of All-inclusive Care for the Elderly (PACE)

     SEC. 4011. REFERENCE TO COVERAGE OF PACE UNDER THE MEDICARE 
                   PROGRAM.

       For provision amending title XVIII of the Social Security 
     Act to provide for payments to, and coverage of benefits 
     under, Programs of All-inclusive Care for the Elderly (PACE), 
     see section 3431.

     SEC. 4012. REFERENCE TO ESTABLISHMENT OF PACE PROGRAM AS 
                   MEDICAID STATE OPTION.

       For provision amending title XIX of the Social Security Act 
     to establish the PACE program as a medicaid State option, see 
     section 3432.

         Subchapter B--Social Health Maintenance Organizations

     SEC. 4015. SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS).

       (a) Extension of Demonstration Project Authorities.--
     Section 4018(b) of the Omnibus Budget Reconciliation Act of 
     1987 is amended--
       (1) in paragraph (1), by striking ``1997'' and inserting 
     ``2000'', and
       (2) in paragraph (4), by striking ``1998'' and inserting 
     ``2001''.
       (b) Expansion of Cap.--Section 13567(c) of the Omnibus 
     Budget Reconciliation Act of 1993 is amended by striking 
     ``12,000'' and inserting ``36,000''.
       (b) Report on Integration and Transition.--
       (1) In general.--The Secretary of Health and Human Services 
     shall submit to Congress, by not later than January 1, 1999, 
     a plan for the integration of health plans offered by social 
     health maintenance organizations (including SHMO I and SHMO 
     II sites developed under section 2355 of the Deficit 
     Reduction Act of 1984 and under the amendment made by section 
     4207(b)(3)(B)(i) of OBRA-1990, respectively) and similar 
     plans as an option under the MedicarePlus program under part 
     C of title XVIII of the Social Security Act.
       (2) Provision for transition.--Such plan shall include a 
     transition for social health maintenance organizations 
     operating under demonstration project authority under such 
     section.
       (3) Payment policy.--The report shall also include 
     recommendations on appropriate payment levels for plans 
     offered by such organizations, including an analysis of the 
     application of risk adjustment factors appropriate to the 
     population served by such organizations.

                      Subchapter C--Other Programs

     SEC. 4018. ORDERLY TRANSITION OF MUNICIPAL HEALTH SERVICE 
                   DEMONSTRATION PROJECTS.

       Section 9215 of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985, as amended by section 6135 of 
     OBRA-1989 and section 13557 of OBRA-1993, is further 
     amended--
       (1) by inserting ``(a)'' before ``The Secretary'', and
       (2) by adding at the end the following: ``Subject to 
     subsection (c), the Secretary may further extend such 
     demonstration projects through December 31, 2000, but only 
     with respect to individuals are enrolled with such projects 
     before January 1, 1998.
       ``(b) The Secretary shall work with each such demonstration 
     project to develop a plan, to be submitted to the Committee 
     on Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate by March 31, 1998, for the 
     orderly transition of demonstration projects and the project 
     enrollees to a non-demonstration project health care delivery 
     system, such as through integration with private or public 
     health plan, including a medicaid managed care or 
     MedicarePlus plan.
       ``(c) A demonstration project under subsection (a) which 
     does not develop and submit a transition plan under 
     subsection (b) by March 31, 1998, or, if later, 6 months 
     after the date of the enactment of this Act, shall be 
     discontinued as of December 31, 1998. The Secretary shall 
     provide appropriate technical assistance to assist in the 
     transition so that disruption of medical services to project 
     enrollees may be minimized.''.

     SEC. 4019. EXTENSION OF CERTAIN MEDICARE COMMUNITY NURSING 
                   ORGANIZATION DEMONSTRATION PROJECTS.

       Notwithstanding any other provision of law, demonstration 
     projects conducted under section 4079 of the Omnibus Budget 
     Reconciliation Act of 1987 may be conducted for an additional 
     period of 2 years, and the deadline for any report required 
     relating to the results of such projects shall be not later 
     than 6 months before the end of such additional period.

            CHAPTER 3--MEDICARE PAYMENT ADVISORY COMMISSION

     SEC. 4021. MEDICARE PAYMENT ADVISORY COMMISSION.

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


                 ``medicare payment advisory commission

       ``Sec. 1805. (a) Establishment.--There is hereby 
     established the Medicare Payment Advisory Commission (in this 
     section referred to as the `Commission').
       ``(b) Duties.--
       ``(1) Review of payment policies and annual reports.--The 
     Commission shall--
       ``(A) review payment policies under this title, including 
     the topics described in paragraph (2);
       ``(B) make recommendations to Congress concerning such 
     payment policies; and
       ``(C) by not later than March 1 of each year (beginning 
     with 1998), submit a report to Congress containing the 
     results of such reviews and its recommendations concerning 
     such policies and an examination of issues affecting the 
     medicare program.
       ``(2) Specific topics to be reviewed.--
       ``(A) Medicareplus program.--Specifically, the Commission 
     shall review, with respect to the MedicarePlus program under 
     part C, the following:
       ``(i) The methodology for making payment to plans under 
     such program, including the making of differential payments 
     and the distribution of differential updates among different 
     payment areas.
       ``(ii) The mechanisms used to adjust payments for risk and 
     the need to adjust such mechanisms to take into account 
     health status of beneficiaries.
       ``(iii) The implications of risk selection both among 
     MedicarePlus organizations and between the MedicarePlus 
     option and the medicare fee-for-service option.
       ``(iv) The development and implementation of mechanisms to 
     assure the quality of care for those enrolled with 
     MedicarePlus organizations.
       ``(v) The impact of the MedicarePlus program on access to 
     care for medicare beneficiaries.
       ``(vi) The appropriate role for the medicare program in 
     addressing the needs of individuals with chronic illnesses.
       ``(vii) Other major issues in implementation and further 
     development of the MedicarePlus program.
       ``(B) Fee-for-service system.--Specifically, the Commission 
     shall review payment policies under parts A and B, 
     including--
       ``(i) the factors affecting expenditures for services in 
     different sectors, including the process for updating 
     hospital, skilled nursing facility, physician, and other 
     fees,
       ``(ii) payment methodologies, and
       ``(iii) their relationship to access and quality of care 
     for medicare beneficiaries.
       ``(C) Interaction of medicare payment policies with health 
     care delivery generally.--Specifically, the Commission shall 
     review the effect of payment policies under this title on the 
     delivery of health care services other than under this title 
     and assess the implications of changes in health care 
     delivery in the United States and in the general market for 
     health care services on the medicare program.
       ``(3) Comments on certain secretarial reports.--If the 
     Secretary submits to Congress (or a committee of Congress) a 
     report that is required by law and that relates to payment 
     policies under this title, the Secretary shall transmit a 
     copy of the report to the Commission. The Commission shall 
     review the report and, not later than 6 months after the date 
     of submittal of the Secretary's report to Congress, shall 
     submit to the appropriate

[[Page H4452]]

     committees of Congress written comments on such report. Such 
     comments may include such recommendations as the Commission 
     deems appropriate.
       ``(4) Agenda and additional reviews.--The Commission shall 
     consult periodically with the chairmen and ranking minority 
     members of the appropriate committees of Congress regarding 
     the Commission's agenda and progress towards achieving the 
     agenda. The Commission may conduct additional reviews, and 
     submit additional reports to the appropriate committees of 
     Congress, from time to time on such topics relating to the 
     program under this title as may be requested by such chairmen 
     and members and as the Commission deems appropriate.
       ``(5) Availability of reports.--The Commission shall 
     transmit to the Secretary a copy of each report submitted 
     under this subsection and shall make such reports available 
     to the public.
       ``(6) Appropriate committees.--For purposes of this 
     section, the term `appropriate committees of Congress' means 
     the Committees on Ways and Means and Commerce of the House of 
     Representatives and the Committee on Finance of the Senate.
       ``(c) Membership.--
       ``(1) Number and appointment.--The Commission shall be 
     composed of 11 members appointed by the Comptroller General.
       ``(2) Qualifications.--
       ``(A) In general.--The membership of the Commission shall 
     include individuals with national recognition for their 
     expertise in health finance and economics, actuarial science, 
     health facility management, health plans and integrated 
     delivery systems, reimbursement of health facilities, 
     allopathic and osteopathic physicians, and other providers of 
     health services, and other related fields, who provide a mix 
     of different professionals, broad geographic representation, 
     and a balance between urban and rural representatives.
       ``(B) Inclusion.--The membership of the Commission shall 
     include (but not be limited to) physicians and other health 
     professionals, employers, third party payers, individuals 
     skilled in the conduct and interpretation of biomedical, 
     health services, and health economics research and expertise 
     in outcomes and effectiveness research and technology 
     assessment. Such membership shall also include 
     representatives of consumers and the elderly.
       ``(C) Majority nonproviders.--Individuals who are directly 
     involved in the provision, or management of the delivery, of 
     items and services covered under this title shall not 
     constitute a majority of the membership of the Commission.
       ``(D) Ethical disclosure.--The Comptroller General shall 
     establish a system for public disclosure by members of the 
     Commission of financial and other potential conflicts of 
     interest relating to such members.
       ``(3) Terms.--
       ``(A) In general.--The terms of members of the Commission 
     shall be for 3 years except that the Comptroller General 
     shall designate staggered terms for the members first 
     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.
       ``(4) Compensation.--While serving on the business of the 
     Commission (including traveltime), a member of the Commission 
     shall be entitled to compensation at the per diem equivalent 
     of the rate provided for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code; and while 
     so serving away from home and member's regular place of 
     business, a member may be allowed travel expenses, as 
     authorized by the Chairman of the Commission. Physicians 
     serving as personnel of the Commission may be provided a 
     physician comparability allowance by the Commission in the 
     same manner as Government physicians may be provided such an 
     allowance by an agency under section 5948 of title 5, United 
     States Code, and for such purpose subsection (i) of such 
     section shall apply to the Commission in the same manner as 
     it applies to the Tennessee Valley Authority. For purposes of 
     pay (other than pay of members of the Commission) and 
     employment benefits, rights, and privileges, all personnel of 
     the Commission shall be treated as if they were employees of 
     the United States Senate.
       ``(5) Chairman; vice chairman.--The Comptroller General 
     shall designate a member of the Commission, at the time of 
     appointment of the member, as Chairman and a member as Vice 
     Chairman for that term of appointment.
       ``(6) Meetings.--The Commission shall meet at the call of 
     the Chairman.
       ``(d) Director and Staff; Experts and Consultants.--Subject 
     to such review as the Comptroller General deems necessary to 
     assure the efficient administration of the Commission, the 
     Commission may--
       ``(1) employ and fix the compensation of an Executive 
     Director (subject to the approval of the Comptroller General) 
     and such other personnel as may be necessary to carry out its 
     duties (without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service);
       ``(2) seek such assistance and support as may be required 
     in the performance of its duties from appropriate Federal 
     departments and agencies;
       ``(3) enter into contracts or make other arrangements, as 
     may be necessary for the conduct of the work of the 
     Commission (without regard to section 3709 of the Revised 
     Statutes (41 U.S.C. 5));
       ``(4) make advance, progress, and other payments which 
     relate to the work of the Commission;
       ``(5) provide transportation and subsistence for persons 
     serving without compensation; and
       ``(6) prescribe such rules and regulations as it deems 
     necessary with respect to the internal organization and 
     operation of the Commission.
       ``(e) Powers.--
       ``(1) Obtaining official data.--The Commission may secure 
     directly from any department or agency of the United States 
     information necessary to enable it to carry out this section. 
     Upon request of the Chairman, the head of that department or 
     agency shall furnish that information to the Commission on an 
     agreed upon schedule.
       ``(2) Data collection.--In order to carry out its 
     functions, the Commission shall--
       ``(A) utilize existing information, both published and 
     unpublished, where possible, collected and assessed either by 
     its own staff or under other arrangements made in accordance 
     with this section,
       ``(B) carry out, or award grants or contracts for, original 
     research and experimentation, where existing information is 
     inadequate, and
       ``(C) adopt procedures allowing any interested party to 
     submit information for the Commission's use in making reports 
     and recommendations.
       ``(3) Access of gao to information.--The Comptroller 
     General shall have unrestricted access to all deliberations, 
     records, and nonproprietary data of the Commission, 
     immediately upon request.
       ``(4) Periodic audit.--The Commission shall be subject to 
     periodic audit by the Comptroller General.
       ``(f) Authorization of Appropriations.--
       ``(1) Request for appropriations.--The Commission shall 
     submit requests for appropriations in the same manner as the 
     Comptroller General submits requests for appropriations, but 
     amounts appropriated for the Commission shall be separate 
     from amounts appropriated for the Comptroller General.
       ``(2) Authorization.--There are authorized to be 
     appropriated such sums as may be necessary to carry out the 
     provisions of this section. 60 percent of such appropriation 
     shall be payable from the Federal Hospital Insurance Trust 
     Fund, and 40 percent of such 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 Advisory 
     Commission''.
       (2) PPRC.--
       (A) In general.--Title XVIII is amended by striking section 
     1845 (42 U.S.C. 1395w-1).
       (B) Elimination of certain reports.--Section 1848 (42 
     U.S.C. 1395w-4) is amended by striking subparagraph (B) of 
     subsection (f)(1).
       (C) Conforming amendments.--Section 1848 (42 U.S.C. 1395w-
     4) is amended by striking ``Physician Payment Review 
     Commission'' and inserting ``Medicare Payment Advisory 
     Commission'' each place it appears in subsections 
     (c)(2)(B)(iii), (g)(6)(C), and (g)(7)(C).
       (c) Effective Date; Transition.--
       (1) In general.--The Comptroller General shall first 
     provide for appointment of members to the Medicare Payment 
     Advisory Commission (in this subsection referred to as 
     ``MedPAC'') by not later than September 30, 1997.
       (2) Transition.--As quickly as possible after the date a 
     majority of members of MedPAC are first appointed, the 
     Comptroller General, in consultation with the Prospective 
     Payment Assessment Commission (in this subsection referred to 
     as ``ProPAC'') and the Physician Payment Review Commission 
     (in this subsection referred to as ``PPRC''), shall provide 
     for the termination of the ProPAC and the PPRC. As of the 
     date of termination of the respective Commissions, the 
     amendments made by paragraphs (1) and (2), respectively, of 
     subsection (b) become effective. The Comptroller General, to 
     the extent feasible, shall provide for the transfer to the 
     MedPAC of assets and staff of the ProPAC and the PPRC, 
     without any loss of benefits or seniority by virtue of such 
     transfers. Fund balances available to the ProPAC or the PPRC 
     for any period shall be available to the MedPAC for such 
     period for like purposes.
       (3) Continuing responsibility for reports.--The MedPAC 
     shall be responsible for the preparation and submission of 
     reports required by law to be submitted (and which have not 
     been submitted by the date of establishment of the MedPAC) by 
     the ProPAC and the PPRC, and, for this purpose, any reference 
     in law to either such Commission is deemed, after the 
     appointment of the MedPAC, to refer to the MedPAC.

[[Page H4453]]

                     CHAPTER 4--MEDIGAP PROTECTIONS

     SEC. 4031. MEDIGAP PROTECTIONS.

       (a) Guaranteeing Issue Without Preexisting Conditions for 
     Continuously Covered Individuals.--Section 1882(s) (42 U.S.C. 
     1395ss(s)) is amended--
       (1) in paragraph (3), by striking ``paragraphs (1) and 
     (2)'' and inserting ``this subsection'',
       (2) by redesignating paragraph (3) as paragraph (4), and
       (3) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3)(A) The issuer of a medicare supplemental policy--
       ``(i) may not deny or condition the issuance or 
     effectiveness of a medicare supplemental policy described in 
     subparagraph (C) that is offered and is available for 
     issuance to new enrollees by such issuer;
       ``(ii) may not discriminate in the pricing of such policy, 
     because of health status, claims experience, receipt of 
     health care, or medical condition; and
       ``(iii) may not impose an exclusion of benefits based on a 
     pre-existing condition under such policy,
     in the case of an individual described in subparagraph (B) 
     who seeks to enroll under the policy not later than 63 days 
     after the date of the termination of enrollment described in 
     such subparagraph and who submits evidence of the date of 
     termination or disenrollment along with the application for 
     such medicare supplemental policy.
       ``(B) An individual described in this subparagraph is an 
     individual described in any of the following clauses:
       ``(i) The individual is enrolled under an employee welfare 
     benefit plan that provides health benefits that supplement 
     the benefits under this title and the plan terminates or 
     ceases to provide all such supplemental health benefits to 
     the individual.
       ``(ii) The individual is enrolled with a MedicarePlus 
     organization under a MedicarePlus plan under part C, and 
     there are circumstances permitting discontinuance of the 
     individual's election of the plan under section 1851(e)(4).
       ``(iii) The individual is enrolled with an eligible 
     organization under a contract under section 1876, a similar 
     organization operating under demonstration project authority, 
     with an organization under an agreement under section 
     1833(a)(1)(A), or with an organization under a policy 
     described in subsection (t), and such enrollment ceases under 
     the same circumstances that would permit discontinuance of an 
     individual's election of coverage under section 1851(e)(4) 
     and, in the case of a policy described in subsection (t), 
     there is no provision under applicable State law for the 
     continuation of coverage under such policy.
       ``(iv) The individual is enrolled under a medicare 
     supplemental policy under this section and such enrollment 
     ceases because--
       ``(I) of the bankruptcy or insolvency of the issuer or 
     because of other involuntary termination of coverage or 
     enrollment under such policy and there is no provision under 
     applicable State law for the continuation of such coverage;
       ``(II) the issuer of the policy substantially violated a 
     material provision of the policy; or
       ``(III) the issuer (or an agent or other entity acting on 
     the issuer's behalf) materially misrepresented the policy's 
     provisions in marketing the policy to the individual.
       ``(v) The individual--
       ``(I) was enrolled under a medicare supplemental policy 
     under this section,
       ``(II) subsequently terminates such enrollment and enrolls, 
     for the first time, with any MedicarePlus organization under 
     a MedicarePlus plan under part C, any eligible organization 
     under a contract under section 1876, any similar organization 
     operating under demonstration project authority, any 
     organization under an agreement under section 1833(a)(1)(A), 
     or any policy described in subsection (t), and
       ``(III) the subsequent enrollment under subclause (II) is 
     terminated by the enrollee during the first 6 months (or 3 
     months for terminations occurring on or after January 1, 
     2003) of such enrollment.
       ``(vi) The individual--
       ``(I) was enrolled under a medicare supplemental policy 
     under this section,
       ``(II) subsequently terminates such enrollment and enrolls, 
     for the first time, during or after the annual, coordinated 
     election period under section 1851(e)(3)(B) occurring during 
     2002, with an organization or policy described in clause 
     (v)(II), and
       ``(III) the subsequent enrollment under subclause (II) is 
     terminated by the enrollee during the next annual, 
     coordinated election period under such section.
       ``(C)(i) Subject to clauses (ii) and (iii), a medicare 
     supplemental policy described in this subparagraph has a 
     benefit package classified as `A', `B', `C', or `F' under the 
     standards established under subsection (p)(2).
       ``(ii) Only for purposes of an individual described in 
     subparagraph (B)(v), a medicare supplemental policy described 
     in this subparagraph also includes (if available from the 
     same issuer) the same medicare supplemental policy referred 
     to in such subparagraph in which the individual was most 
     recently previously enrolled.
       ``(iii) For purposes of applying this paragraph in the case 
     of a State that provides for offering of benefit packages 
     other than under the classification referred to in clause 
     (i), the references to benefit packages in such clause are 
     deemed references to comparable benefit packages offered in 
     such State.
       ``(D) At the time of an event described in subparagraph (B) 
     because of which an individual ceases enrollment or loses 
     coverage or benefits under a contract or agreement, policy, 
     or plan, the organization that offers the contract or 
     agreement, the insurer offering the policy, or the 
     administrator of the plan, respectively, shall notify the 
     individual of the rights of the individual, and obligations 
     of issuers of medicare supplemental policies, under 
     subparagraph (A).''.
       (b) Limitation on Imposition of Preexisting Condition 
     Exclusion During Initial Open Enrollment Period.--Section 
     1882(s)(2) (42 U.S.C. 1395ss(s)(2)) is amended--
       (1) in subparagraph (B), by striking ``subparagraph (C)'' 
     and inserting ``subparagraphs (C) and (D)'', and
       (2) by adding at the end the following new subparagraph:
       ``(D) In the case of a policy issued during the 6-month 
     period described in subparagraph (A) to an individual who is 
     65 years of age or older as of the date of issuance and who 
     as of the date of the application for enrollment has a 
     continuous period of creditable coverage (as defined in 
     2701(c) of the Public Health Service Act) of--
       ``(i) at least 6 months, the policy may not exclude 
     benefits based on a pre-existing condition; or
       ``(ii) of less than 6 months, if the policy excludes 
     benefits based on a preexisting condition, the policy shall 
     reduce the period of any preexisting condition exclusion by 
     the aggregate of the periods of creditable coverage (if any, 
     as so defined) applicable to the individual as of the 
     enrollment date.
     The Secretary shall specify the manner of the reduction under 
     clause (ii), based upon the rules used by the Secretary in 
     carrying out section 2701(a)(3) of such Act.''.
       (c) Effective Dates.--
       (1) Guaranteed issue.--The amendment made by subsection (a) 
     shall take effect on July 1, 1998.
       (2) Limit on preexisting condition exclusions.--The 
     amendment made by subsection (b) shall apply to policies 
     issued on or after July 1, 1998.
       (d) Transition Provisions.--
       (1) In general.--If the Secretary of Health and Human 
     Services identifies a State as requiring a change to its 
     statutes or regulations to conform its regulatory program to 
     the changes made by this section, the State regulatory 
     program shall not be considered to be out of compliance with 
     the requirements of section 1882 of the Social Security Act 
     due solely to failure to make such change until the date 
     specified in paragraph (4).
       (2) NAIC standards.--If, within 9 months after the date of 
     the enactment of this Act, the National Association of 
     Insurance Commissioners (in this subsection referred to as 
     the ``NAIC'') modifies its NAIC Model Regulation relating to 
     section 1882 of the Social Security Act (referred to in such 
     section as the 1991 NAIC Model Regulation, as modified 
     pursuant to section 171(m)(2) of the Social Security Act 
     Amendments of 1994 (Public Law 103-432) and as modified 
     pursuant to section 1882(d)(3)(A)(vi)(IV) of the Social 
     Security Act, as added by section 271(a) of the Health 
     Insurance Portability and Accountability Act of 1996 (Public 
     Law 104-191) to conform to the amendments made by this 
     section, such revised regulation incorporating the 
     modifications shall be considered to be the applicable NAIC 
     model regulation (including the revised NAIC model regulation 
     and the 1991 NAIC Model Regulation) for the purposes of such 
     section.
       (3) Secretary standards.--If the NAIC does not make the 
     modifications described in paragraph (2) within the period 
     specified in such paragraph, the Secretary of Health and 
     Human Services shall make the modifications described in such 
     paragraph and such revised regulation incorporating the 
     modifications shall be considered to be the appropriate 
     Regulation for the purposes of such section.
       (4) Date specified.--
       (A) In general.--Subject to subparagraph (B), the date 
     specified in this paragraph for a State is the earlier of--
       (i) the date the State changes its statutes or regulations 
     to conform its regulatory program to the changes made by this 
     section, or
       (ii) 1 year after the date the NAIC or the Secretary first 
     makes the modifications under paragraph (2) or (3), 
     respectively.
       (B) Additional legislative action required.--In the case of 
     a State which the Secretary identifies as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) to conform its regulatory program to the 
     changes made in this section, but
       (ii) having a legislature which is not scheduled to meet in 
     1999 in a legislative session in which such legislation may 
     be considered,
     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after July 1, 1999. For purposes of the previous sentence, 
     in the case of a State that has a 2-year legislative session, 
     each year of such session shall be deemed to be a separate 
     regular session of the State legislature.

     SEC. 4032. MEDICARE PREPAID COMPETITIVE PRICING DEMONSTRATION 
                   PROJECT.

       (a) Establishment of Project.--The Secretary of Health and 
     Human Services shall provide, beginning not later than 1 year 
     after

[[Page H4454]]

     the date of the enactment of this Act, for implementation of 
     a project (in this section referred to as the ``project'') to 
     demonstrate the application of, and the consequences of 
     applying, a market-oriented pricing system for the provision 
     of a full range of medicare benefits in a geographic area.
       (b) Research Design Advisory Committee.--
       (1) In general.--Before implementing the project under this 
     section, the Secretary shall appoint a national advisory 
     committee, including independent actuaries and individuals 
     with expertise in competitive health plan pricing, to make 
     recommendations to the Secretary concerning the appropriate 
     research design for implementing the project.
       (2) Initial recommendations.--The committee initially shall 
     submit recommendations respecting the method for area 
     selection, benefit design among plans offered, structuring 
     choice among health plans offered, methods for setting the 
     price to be paid to plans, collection of plan information 
     (including information concerning quality and access to 
     care), information dissemination, and methods of evaluating 
     the results of the project.
       (3) Advice during implementation.--Upon implementation of 
     the project, the committee shall continue to advise the 
     Secretary on the application of the design in different areas 
     and changes in the project based on experience with its 
     operations.
       (c) Area Selection.--
       (1) In general.--Taking into account the recommendations of 
     the advisory committee submitted under subsection (b), the 
     Secretary shall designate areas in which the project will 
     operate.
       (2) Appointment of area advisory committee.--Upon the 
     designation of an area for inclusion in the project, the 
     Secretary shall appoint an area advisory committee, composed 
     of representatives of health plans, providers, and medicare 
     beneficiaries in the area, to advise the Secretary concerning 
     how the project will actually be implemented in the area. 
     Such advice may include advice concerning the marketing and 
     pricing of plans in the area and other salient factors 
     relating.
       (d) Monitoring and Report.--
       (1) Monitoring impact.--Taking into consideration the 
     recommendations of the general advisory committee (appointed 
     under subsection (b)), the Secretary shall closely monitor 
     the impact of projects in areas on the price and quality of, 
     and access to, medicare covered services, choice of health 
     plan, changes in enrollment, and other relevant factors.
       (2) Report.--The Secretary shall periodically report to 
     Congress on the progress under the project under this 
     section.
       (e) Waiver Authority.--The Secretary of Health and Human 
     Services may waive such requirements of section 1876 (and 
     such requirements of part C of title XVIII, as amended by 
     chapter 1), of the Social Security Act as may be necessary 
     for the purposes of carrying out the project.
       (f) Relationship to Other Authority.--Except pursuant to 
     this section the Secretary of Health and Human Services may 
     not conduct or continue any medicare demonstration project 
     relating to payment of health maintenance organizations, 
     MedicarePlus organizations, or similar prepaid managed care 
     entities on the basis of a competitive bidding process or 
     pricing system described in subsection (a) rather than on the 
     bases described in section 1853 or 1876 of the Social 
     Security Act.
                   Subtitle B--Prevention Initiatives

     SEC. 4101. SCREENING MAMMOGRAPHY.

       (a) Providing Annual Screening Mammography for Women Over 
     Age 39.--Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is 
     amended--
       (1) in clause (iii), to read as follows:
       ``(iii) In the case of a woman over 39 years of age, 
     payment may not be made under this part for screening 
     mammography performed within 11 months following the month in 
     which a previous screening mammography was performed.''; and
       (2) by striking clauses (iv) and (v).
       (b) Waiver of Deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)) is amended--
       (1) by striking ``and'' before ``(4)'', and
       (2) by inserting before the period at the end the 
     following: ``, and (5) such deductible shall not apply with 
     respect to screening mammography (as described in section 
     1861(jj))''.
       (c) Conforming Amendment.--Section 1834(c)(1)(C) of such 
     Act (42 U.S.C. 1395m(c)(1)(C)) is amended by striking ``, 
     subject to the deductible established under section 
     1833(b),''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4102. SCREENING PAP SMEAR AND PELVIC EXAMS.

       (a) Coverage of Pelvic Exam; Increasing Frequency of 
     Coverage of Pap Smear.--Section 1861(nn) (42 U.S.C. 
     1395x(nn)) is amended--
       (1) in the heading, by striking ``Smear'' and inserting 
     ``Smear; Screening Pelvic Exam'';
       (2) by inserting ``or vaginal'' after ``cervical'' each 
     place it appears;
       (3) by striking ``(nn)'' and inserting ``(nn)(1)'';
       (4) by striking ``3 years'' and all that follows and 
     inserting ``3 years, or during the preceding year in the case 
     of a woman described in paragraph (3).''; and
       (5) 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 or 
     vaginal cancer; or
       ``(B) is at high risk of developing cervical or vaginal 
     cancer (as determined pursuant to factors identified by the 
     Secretary).''.
       (b) Waiver of Deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)), as amended by section 4101(b), 
     is amended--
       (1) by striking ``and'' before ``(5)'', and
       (2) by inserting before the period at the end 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))''.
       (c) Conforming Amendments.--Sections 1861(s)(14) and 
     1862(a)(1)(F) (42 U.S.C. 1395x(s)(14), 1395y(a)(1)(F)) are 
     each amended by inserting ``and screening pelvic exam'' after 
     ``screening pap smear''.
       (d) Payment Under Physician Fee Schedule.--Section 
     1848(j)(3)(42 U.S.C. 1395w-4(j)(3)) is amended by striking 
     ``and (4)'' and inserting ``, (4) and (14) (with respect to 
     services described in section 1861(nn)(2))''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.
       (f) Report on Rescreening Pap Smears.--Not later than 6 
     months after the date of the enactment of this Act, the 
     Secretary of Health and Human Services shall submit to 
     Congress a report on the extent to which the use of 
     supplemental computer-assisted diagnostic tests consisting of 
     interactive automated computer-imaging of an exfoliative 
     cytology test, in conjunction with the pap smears, improves 
     the early detection of cervical or vaginal cancer and the 
     costs implications for coverage of such supplemental tests 
     under the medicare program.

     SEC. 4103. PROSTATE CANCER SCREENING TESTS.

       (a) Coverage.--Section 1861 (42 U.S.C. 1395x) is amended--
       (1) in subsection (s)(2)--
       (A) by striking ``and'' at the end of subparagraphs (N) and 
     (O), and
       (B) by inserting after subparagraph (O) the following new 
     subparagraph:
       ``(P) prostate cancer screening tests (as defined in 
     subsection (oo)); and''; and
       (2) by adding at the end the following new subsection:

                   ``Prostate Cancer Screening Tests

       ``(oo)(1) The term `prostate cancer screening test' means a 
     test that consists of any (or all) of the procedures 
     described in paragraph (2) provided for the purpose of early 
     detection of prostate cancer to a man over 50 years of age 
     who has not had such a test during the preceding year.
       ``(2) The procedures described in this paragraph are as 
     follows:
       ``(A) A digital rectal examination.
       ``(B) A prostate-specific antigen blood test.
       ``(C) For years beginning after 2001, such other procedures 
     as the Secretary finds appropriate for the purpose of early 
     detection of prostate cancer, taking into account changes in 
     technology and standards of medical practice, availability, 
     effectiveness, costs, and such other factors as the Secretary 
     considers appropriate.''.
       (b) Payment for Prostate-specific Antigen Blood Test Under 
     Clinical Diagnostic Laboratory Test Fee Schedules.--Section 
     1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amended by 
     inserting after ``laboratory tests'' the following: 
     ``(including prostate cancer screening tests under section 
     1861(oo) consisting of prostate-specific antigen blood 
     tests)''.
       (c) Conforming Amendment.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (E), by striking ``and'' at the end,
       (B) in subparagraph (F), by striking the semicolon at the 
     end and inserting ``, and'', and
       (C) by adding at the end the following new subparagraph:
       ``(G) in the case of prostate cancer screening tests (as 
     defined in section 1861(oo)), which are performed more 
     frequently than is covered under such section;''; and
       (2) in paragraph (7), by striking ``paragraph (1)(B) or 
     under paragraph (1)(F)'' and inserting ``subparagraphs (B), 
     (F), or (G) of paragraph (1)''.
       (d) Payment Under Physician Fee Schedule.--Section 
     1848(j)(3)(42 U.S.C. 1395w-4(j)(3)), as amended by section 
     4102, is amended by inserting ``(2)(P) (with respect to 
     services described in subparagraphs (A) and (C) of section 
     1861(oo),'' after ``(2)(G)''
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4104. COVERAGE OF COLORECTAL SCREENING.

       (a) Coverage.--
       (1) In general.--Section 1861 (42 U.S.C. 1395x), as amended 
     by section 4103(a), is amended--
       (A) in subsection (s)(2)--

[[Page H4455]]

       (i) by striking ``and'' at the end of subparagraph (P);
       (ii) by adding ``and'' at the end of subparagraph (Q); and
       (iii) by adding at the end the following new subparagraph:
       ``(R) colorectal cancer screening tests (as defined in 
     subsection (pp)); and''; and
       (B) by adding at the end the following new subsection:

                  ``Colorectal Cancer Screening Tests

       ``(pp)(1) The term `colorectal cancer screening test' means 
     any of the following procedures furnished to an individual 
     for the purpose of early detection of colorectal cancer:
       ``(A) Screening fecal-occult blood test.
       ``(B) Screening flexible sigmoidoscopy.
       ``(C) In the case of an individual at high risk for 
     colorectal cancer, screening colonoscopy.
       ``(D) Screening barium enema, if found by the Secretary to 
     be an appropriate alternative to screening flexible 
     sigmoidoscopy under subparagraph (B) or screening colonoscopy 
     under subparagraph (C).
       ``(E) For years beginning after 2002, such other procedures 
     as the Secretary finds appropriate for the purpose of early 
     detection of colorectal cancer, taking into account changes 
     in technology and standards of medical practice, 
     availability, effectiveness, costs, and such other factors as 
     the Secretary considers appropriate.
       ``(2) In paragraph (1)(C), an `individual at high risk for 
     colorectal cancer' is an individual who, because of family 
     history, prior experience of cancer or precursor neoplastic 
     polyps, a history of chronic digestive disease condition 
     (including inflammatory bowel disease, Crohn's Disease, or 
     ulcerative colitis), the presence of any appropriate 
     recognized gene markers for colorectal cancer, or other 
     predisposing factors, faces a high risk for colorectal 
     cancer.''.
       (2) Deadline for decision on coverage of screening barium 
     enema.--Not later than 2 years after the date of the 
     enactment of this section, the Secretary of Health and Human 
     Services shall issue and publish a determination on the 
     treatment of screening barium enema as a colorectal cancer 
     screening test under section 1861(pp) (as added by 
     subparagraph (B)) as an alternative procedure to a screening 
     flexible sigmoidoscopy or screening colonoscopy.
       (b) Frequency and Payment Limits.--
       (1) In general.--Section 1834 (42 U.S.C. 1395m) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) Frequency and Payment Limits for Colorectal Cancer 
     Screening Tests.--
       ``(1) Screening fecal-occult blood tests.--
       ``(A) Payment limit.--In establishing fee schedules under 
     section 1833(h) with respect to colorectal cancer screening 
     tests consisting of screening fecal-occult blood tests, 
     except as provided by the Secretary under paragraph (4)(A), 
     the payment amount established for tests performed--
       ``(i) in 1998 shall not exceed $5; and
       ``(ii) in a subsequent year, shall not exceed the limit on 
     the payment amount established under this subsection for such 
     tests for the preceding year, adjusted by the applicable 
     adjustment under section 1833(h) for tests performed in such 
     year.
       ``(B) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4)(B), no payment may be made 
     under this part for colorectal cancer screening test 
     consisting of a screening fecal-occult blood test--
       ``(i) if the individual is under 50 years of age; or
       ``(ii) if the test is performed within the 11 months after 
     a previous screening fecal-occult blood test.
       ``(2) Screening flexible sigmoidoscopies.--
       ``(A) Fee schedule.--The Secretary shall establish a 
     payment amount under section 1848 with respect to colorectal 
     cancer screening tests consisting of screening flexible 
     sigmoidoscopies that is consistent with payment amounts under 
     such section for similar or related services, except that 
     such payment amount shall be established without regard to 
     subsection (a)(2)(A) of such section.
       ``(B) Payment limit.--In the case of screening flexible 
     sigmoidoscopy services--
       ``(i) the payment amount may not exceed such amount as the 
     Secretary specifies, based upon the rates recognized under 
     this part for diagnostic flexible sigmoidoscopy services; and
       ``(ii) that, in accordance with regulations, may be 
     performed in an ambulatory surgical center and for which the 
     Secretary permits ambulatory surgical center payments under 
     this part and that are performed in an ambulatory surgical 
     center or hospital outpatient department, the payment amount 
     under this part may not exceed the lesser of (I) the payment 
     rate that would apply to such services if they were performed 
     in a hospital outpatient department, or (II) the payment rate 
     that would apply to such services if they were performed in 
     an ambulatory surgical center.
       ``(C) Special rule for detected lesions.--If during the 
     course of such screening flexible sigmoidoscopy, a lesion or 
     growth is detected which results in a biopsy or removal of 
     the lesion or growth, payment under this part shall not be 
     made for the screening flexible sigmoidoscopy but shall be 
     made for the procedure classified as a flexible sigmoidoscopy 
     with such biopsy or removal.
       ``(D) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4)(B), no payment may be made 
     under this part for a colorectal cancer screening test 
     consisting of a screening flexible sigmoidoscopy--
       ``(i) if the individual is under 50 years of age; or
       ``(ii) if the procedure is performed within the 47 months 
     after a previous screening flexible sigmoidoscopy.
       ``(3) Screening colonoscopy for individuals at high risk 
     for colorectal cancer.--
       ``(A) Fee schedule.--The Secretary shall establish a 
     payment amount under section 1848 with respect to colorectal 
     cancer screening test consisting of a screening colonoscopy 
     for individuals at high risk for colorectal cancer (as 
     defined in section 1861(pp)(2)) that is consistent with 
     payment amounts under such section for similar or related 
     services, except that such payment amount shall be 
     established without regard to subsection (a)(2)(A) of such 
     section.
       ``(B) Payment limit.--In the case of screening colonoscopy 
     services--
       ``(i) the payment amount may not exceed such amount as the 
     Secretary specifies, based upon the rates recognized under 
     this part for diagnostic colonoscopy services; and
       ``(ii) that are performed in an ambulatory surgical center 
     or hospital outpatient department, the payment amount under 
     this part may not exceed the lesser of (I) the payment rate 
     that would apply to such services if they were performed in a 
     hospital outpatient department, or (II) the payment rate that 
     would apply to such services if they were performed in an 
     ambulatory surgical center.
       ``(C) Special rule for detected lesions.--If during the 
     course of such screening colonoscopy, a lesion or growth is 
     detected which results in a biopsy or removal of the lesion 
     or growth, payment under this part shall not be made for the 
     screening colonoscopy but shall be made for the procedure 
     classified as a colonoscopy with such biopsy or removal.
       ``(D) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4)(B), no payment may be made 
     under this part for a colorectal cancer screening test 
     consisting of a screening colonoscopy for individuals at high 
     risk for colorectal cancer if the procedure is performed 
     within the 23 months after a previous screening colonoscopy.
       ``(4) Reductions in payment limit and revision of 
     frequency.--
       ``(A) Reductions in payment limit for screening fecal-
     occult blood tests.--The Secretary shall review from time to 
     time the appropriateness of the amount of the payment limit 
     established for screening fecal-occult blood tests under 
     paragraph (1)(A). The Secretary may, with respect to tests 
     performed in a year after 2000, reduce the amount of such 
     limit as it applies nationally or in any area to the amount 
     that the Secretary estimates is required to assure that such 
     tests of an appropriate quality are readily and conveniently 
     available during the year.
       ``(B) Revision of frequency.--
       ``(i) Review.--The Secretary shall review periodically the 
     appropriate frequency for performing colorectal cancer 
     screening tests based on age and such other factors as the 
     Secretary believes to be pertinent.
       ``(ii) Revision of frequency.--The Secretary, taking into 
     consideration the review made under clause (i), may revise 
     from time to time the frequency with which such tests may be 
     paid for under this subsection, but no such revision shall 
     apply to tests performed before January 1, 2001.
       ``(5) Limiting charges of nonparticipating physicians.--
       ``(A) In general.--In the case of a colorectal cancer 
     screening test consisting of a screening flexible 
     sigmoidoscopy or a screening colonoscopy provided to an 
     individual at high risk for colorectal cancer for which 
     payment may be made under this part, if a nonparticipating 
     physician provides the procedure to an individual enrolled 
     under this part, the physician may not charge the individual 
     more than the limiting charge (as defined in section 
     1848(g)(2)).
       ``(B) Enforcement.--If a physician or supplier knowing and 
     willfully imposes a charge in violation of subparagraph (A), 
     the Secretary may apply sanctions against such physician or 
     supplier in accordance with section 1842(j)(2).''.
       (2) Special rule for screening barium enema.--If the 
     Secretary of Health and Human Services issues a determination 
     under subsection (a)(2) that screening barium enema should be 
     covered as a colorectal cancer screening test under section 
     1861(pp) (as added by subsection (a)(1)(B)), the Secretary 
     shall establish frequency limits (including revisions of 
     frequency limits) for such procedure consistent with the 
     frequency limits for other colorectal cancer screening tests 
     under section 1834(d) (as added by subsection (b)(1)), and 
     shall establish payment limits (including limits on charges 
     of nonparticipating physicians) for such procedure consistent 
     with the payment limits under part B of title XVIII for 
     diagnostic barium enema procedures.
       (c) Conforming Amendments.--(1) Paragraphs (1)(D) and 
     (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each 
     amended by inserting ``or section 1834(d)(1)'' after 
     ``subsection (h)(1)''.
       (2) Section 1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is 
     amended by striking ``The Secretary'' and inserting ``Subject 
     to paragraphs (1) and (4)(A) of section 1834(d), the 
     Secretary''.
       (3) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 
     U.S.C. 1395w-4(a)(2)(A)) are

[[Page H4456]]

     each amended by inserting after ``a service'' the following: 
     ``(other than a colorectal cancer screening test consisting 
     of a screening colonoscopy provided to an individual at high 
     risk for colorectal cancer or a screening flexible 
     sigmoidoscopy)''.
       (4) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by 
     section 4103(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 colorectal cancer screening tests, 
     which are performed more frequently than is covered under 
     section 1834(d);''; and
       (B) in paragraph (7), by striking ``or (G)'' and inserting 
     ``(G), or (H)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4105. DIABETES SCREENING TESTS.

       (a) Coverage of Diabetes Outpatient Self-management 
     Training Services.--
       (1) In general.--Section 1861 (42 U.S.C. 1395x), as amended 
     by sections 4103(a) and 4104(a), is amended--
       (A) in subsection (s)(2)--
       (i) by striking ``and'' at the end of subparagraph (Q);
       (ii) by adding ``and'' at the end of subparagraph (R); and
       (iii) by adding at the end the following new subparagraph:
       ``(S) diabetes outpatient self-management training services 
     (as defined in subsection (qq)); and''; and
       (B) by adding at the end the following new subsection:

        ``Diabetes Outpatient Self-Management Training Services

       ``(qq)(1) The term `diabetes outpatient self-management 
     training services' means educational and training services 
     furnished to an individual with diabetes by a certified 
     provider (as described in paragraph (2)(A)) in an outpatient 
     setting by an individual or entity who meets the quality 
     standards described in paragraph (2)(B), but only if the 
     physician who is managing the individual's diabetic condition 
     certifies that such services are needed under a comprehensive 
     plan of care related to the individual's diabetic condition 
     to provide the individual with necessary skills and knowledge 
     (including skills related to the self-administration of 
     injectable drugs) to participate in the management of the 
     individual's condition.
       ``(2) In paragraph (1)--
       ``(A) a `certified provider' is a physician, or other 
     individual or entity designated by the Secretary, that, in 
     addition to providing diabetes outpatient self-management 
     training services, provides other items or services for which 
     payment may be made under this title; and
       ``(B) a physician, or such other individual or entity, 
     meets the quality standards described in this paragraph if 
     the physician, or individual or entity, meets quality 
     standards established by the Secretary, except that the 
     physician or other individual or entity shall be deemed to 
     have met such standards if the physician or other individual 
     or entity meets applicable standards originally established 
     by the National Diabetes Advisory Board and subsequently 
     revised by organizations who participated in the 
     establishment of standards by such Board, or is recognized by 
     an organization that represents individuals (including 
     individuals under this title) with diabetes as meeting 
     standards for furnishing the services.''.
       (2) Payment Under Physician Fee Schedule.--Section 
     1848(j)(3)(42 U.S.C. 1395w-4(j)(3)) as amended in sections 
     4102 and 4103, is amended by inserting ``(2)(S),'' before 
     ``(3),''.
       (3) Consultation with organizations in establishing payment 
     amounts for services provided by physicians.--In establishing 
     payment amounts under section 1848 of the Social Security Act 
     for physicians' services consisting of diabetes outpatient 
     self-management training services, the Secretary of Health 
     and Human Services shall consult with appropriate 
     organizations, including such organizations representing 
     individuals or medicare beneficiaries with diabetes, in 
     determining the relative value for such services under 
     section 1848(c)(2) of such Act.
       (b) Blood-testing Strips for Individuals With Diabetes.--
       (1) Including strips and monitors as durable medical 
     equipment.--The first sentence of section 1861(n) (42 U.S.C. 
     1395x(n)) is amended by inserting before the semicolon the 
     following: ``, and includes blood-testing strips and blood 
     glucose monitors for individuals with diabetes without regard 
     to whether the individual has Type I or Type II diabetes or 
     to the individual's use of insulin (as determined under 
     standards established by the Secretary in consultation with 
     the appropriate organizations)''.
       (2) 10 percent reduction in payments for testing strips.--
     Section 1834(a)(2)(B)(iv) (42 U.S.C. 1395m(a)(2)(B)(iv)) is 
     amended by adding before the period the following: ``(reduced 
     by 10 percent, in the case of a blood glucose testing strip 
     furnished after 1997 for an individual with diabetes)''.
       (c) Establishment of Outcome Measures for Beneficiaries 
     With Diabetes.--
       (1) In general.--The Secretary of Health and Human 
     Services, in consultation with appropriate organizations, 
     shall establish outcome measures, including glysolated 
     hemoglobin (past 90-day average blood sugar levels), for 
     purposes of evaluating the improvement of the health status 
     of medicare beneficiaries with diabetes mellitus.
       (2) Recommendations for modifications to screening 
     benefits.--Taking into account information on the health 
     status of medicare beneficiaries with diabetes mellitus as 
     measured under the outcome measures established under 
     subparagraph (A), the Secretary shall from time to time 
     submit recommendations to Congress regarding modifications to 
     the coverage of services for such beneficiaries under the 
     medicare program.
       (d) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4106. STANDARDIZATION OF MEDICARE COVERAGE OF BONE MASS 
                   MEASUREMENTS.

       (a) In General.--Section 1861 (42 U.S.C. 1395x), as amended 
     by sections 4103(a), 4104(a), 4105(a), is amended--
       (1) in subsection (s)--
       (A) in paragraph (12)(C), by striking ``and'' at the end,
       (B) by striking the period at the end of paragraph (14) and 
     inserting ``; and'',
       (C) by redesignating paragraphs (15) and (16) as paragraphs 
     (16) and (17), respectively, and
       (D) by inserting after paragraph (14) the following new 
     paragraph:
       ``(15) bone mass measurement (as defined in subsection 
     (rr)).''; and
       (2) by inserting after subsection (qq) the following new 
     subsection:

                        ``Bone Mass Measurement

       ``(rr)(1) The term `bone mass measurement' means a 
     radiologic or radioisotopic procedure or other procedure 
     approved by the Food and Drug Administration performed on a 
     qualified individual (as defined in paragraph (2)) for the 
     purpose of identifying bone mass or detecting bone loss or 
     determining bone quality, and includes a physician's 
     interpretation of the results of the procedure.
       ``(2) For purposes of this subsection, the term `qualified 
     individual' means an individual who is (in accordance with 
     regulations prescribed by the Secretary)--
       ``(A) an estrogen-deficient woman at clinical risk for 
     osteoporosis;
       ``(B) an individual with vertebral abnormalities;
       ``(C) an individual receiving long-term glucocorticoid 
     steroid therapy;
       ``(D) an individual with primary hyperparathyroidism; or
       ``(E) an individual being monitored to assess the response 
     to or efficacy of an approved osteoporosis drug therapy.
       ``(3) The Secretary shall establish such standards 
     regarding the frequency with which a qualified individual 
     shall be eligible to be provided benefits for bone mass 
     measurement under this title.''.
       (b) Payment under Physician Fee Schedule.--Section 
     1848(j)(3) (42 U.S.C. 1395w-4(j)(3)), as amended by sections 
     4102, 4103, and 4105, is amended--
       (1) by striking ``(4) and (14)'' and inserting ``(4), 
     (14)'' and
       (2) by inserting `` and (15)'' after ``1861(nn)(2))''.
       (c) Conforming Amendments.--Sections 1864(a), 
     1902(a)(9)(C), and 1915(a)(1)(B)(ii)(I) (42 U.S.C. 1395aa(a), 
     1396a(a)(9)(C), and 1396n(a)(1)(B)(ii)(I)) are amended by 
     striking ``paragraphs (15) and (16)'' each place it appears 
     and inserting ``paragraphs (16) and (17)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to bone mass measurements performed on or after 
     July 1, 1998.

     SEC. 4107. VACCINES OUTREACH EXPANSION.

       (a) Extension of Influenza and Pneumococcal Vaccination 
     Campaign.--In order to increase utilization of pneumococcal 
     and influenza vaccines in medicare beneficiaries, the 
     Influenza and Pneumococcal Vaccination Campaign carried out 
     by the Health Care Financing Administration in conjunction 
     with the Centers for Disease Control and Prevention and the 
     National Coalition for Adult Immunization, is extended until 
     the end of fiscal year 2002.
       (b) Appropriation.--There are hereby appropriated for each 
     of fiscal years 1998 through 2002, $8,000,000 to the Campaign 
     described in subsection (a). Of the amount of such 
     appropriation in each fiscal year, 60 percent of such 
     appropriation shall be payable from the Federal Hospital 
     Insurance Trust Fund, and 40 percent shall be payable from 
     the Federal Supplementary Medical Insurance Trust Fund under 
     title XVIII of the Social Security Act (42 U.S.C. 1395i, 
     1395t).

     SEC. 4108. STUDY ON PREVENTIVE BENEFITS.

       (a) Study.--The Secretary of Health and Human Services 
     shall request the National Academy of Sciences, in 
     conjunction with the United States Preventive Services Task 
     Force, to analyze the expansion or modification of preventive 
     benefits provided to medicare beneficiaries under title XVIII 
     of the Social Security Act. The analysis shall consider both 
     the short term and long term benefits, and costs to the 
     medicare program, of such expansion or modification,
       (b) Report.--
       (1) Initial report.--Not later than 2 years after the date 
     of the enactment of this Act, the Secretary shall submit a 
     report on the findings of the analysis conducted under 
     subsection (a) to the Committee on Ways and

[[Page H4457]]

     Means and the Committee on Commerce of the House of 
     Representatives and the Committee on Finance of the Senate.
       (2) Contents.--Such report shall include specific findings 
     with respect to coverage of the following preventive 
     benefits:
       (A) Nutrition therapy, including parenteral and enteral 
     nutrition.
       (B) Skin cancer screening.
       (C) Medically necessary dental care.
       (D) Routine patient care costs for beneficiaries enrolled 
     in approved clinical trial programs.
       (E) Elimination of time limitation for coverage of 
     immunosuppressive drugs for transplant patients.
       (3) Funding.--From funds appropriated to the Department of 
     Health and Human Services for fiscal years 1998 and 1999, the 
     Secretary shall provide for such funding as may be necessary 
     for the conduct of the analysis by the National Academy of 
     Sciences under this section.
                     Subtitle C--Rural Initiatives

     SEC. 4206. INFORMATICS, TELEMEDICINE, AND EDUCATION 
                   DEMONSTRATION PROJECT.

       (a) Purpose and Authorization.--
       (1) In general.--Not later than 9 months after the date of 
     enactment of this section, the Secretary of Health and Human 
     Services shall provide for a demonstration project described 
     in paragraph (2).
       (2) Description of project.--
       (A) In general.--The demonstration project described in 
     this paragraph is a single demonstration project to use 
     eligible health care provider telemedicine networks to apply 
     high-capacity computing and advanced networks to improve 
     primary care (and prevent health care complications) to 
     medicare beneficiaries with diabetes mellitus who are 
     residents of medically underserved rural areas or residents 
     of medically underserved inner-city areas.
       (B) Medically underserved defined.--As used in this 
     paragraph, the term ``medically underserved'' has the meaning 
     given such term in section 330(b)(3) of the Public Health 
     Service Act (42 U.S.C. 254b(b)(3)).
       (3) Waiver.--The Secretary shall waive such provisions of 
     title XVIII of the Social Security Act as may be necessary to 
     provide for payment for services under the project in 
     accordance with subsection (d).
       (4) Duration of project.--The project shall be conducted 
     over a 4-year period.
       (b) Objectives of Project.--The objectives of the project 
     include the following:
       (1) Improving patient access to and compliance with 
     appropriate care guidelines for individuals with diabetes 
     mellitus through direct telecommunications link with 
     information networks in order to improve patient quality-of-
     life and reduce overall health care costs.
       (2) Developing a curriculum to train, and providing 
     standards for credentialing and licensure of, health 
     professionals (particularly primary care health 
     professionals) in the use of medical informatics and 
     telecommunications.
       (3) Demonstrating the application of advanced technologies, 
     such as video-conferencing from a patient's home, remote 
     monitoring of a patient's medical condition, interventional 
     informatics, and applying individualized, automated care 
     guidelines, to assist primary care providers in assisting 
     patients with diabetes in a home setting.
       (4) Application of medical informatics to residents with 
     limited English language skills.
       (5) Developing standards in the application of telemedicine 
     and medical informatics.
       (6) Developing a model for the cost-effective delivery of 
     primary and related care both in a managed care environment 
     and in a fee-for-service environment.
       (c) Eligible Health Care Provider Telemedicine Network 
     Defined.--For purposes of this section, the term ``eligible 
     health care provider telemedicine network'' means a 
     consortium that includes at least one tertiary care hospital 
     (but no more than 2 such hospitals), at least one medical 
     school, no more than 4 facilities in rural or urban areas, 
     and at least one regional telecommunications provider and 
     that meets the following requirements:
       (1) The consortium is located in an area with one of the 
     highest concentrations of medical schools and tertiary care 
     facilities in the United States and has appropriate 
     arrangements (within or outside the consortium) with such 
     schools and facilities, universities, and telecommunications 
     providers, in order to conduct the project.
       (2) The consortium submits to the Secretary an application 
     at such time, in such manner, and containing such information 
     as the Secretary may require, including a description of the 
     use to which the consortium would apply any amounts received 
     under the project and the source and amount of non-Federal 
     funds used in the project.
       (3) The consortium guarantees that it will be responsible 
     for payment for all costs of the project that are not paid 
     under this section and that the maximum amount of payment 
     that may be made to the consortium under this section shall 
     not exceed the amount specified in subsection (d)(3).
       (d) Coverage as Medicare Part B Services.--
       (1) In general.--Subject to the succeeding provisions of 
     this subsection, services related to the treatment or 
     management of (including prevention of complications from) 
     diabetes for medicare beneficiaries furnished under the 
     project shall be considered to be services covered under part 
     B of title XVIII of the Social Security Act.
       (2) Payments.--
       (A) In general.--Subject to paragraph (3), payment for such 
     services shall be made at a rate of 50 percent of the costs 
     that are reasonable and related to the provision of such 
     services. In computing such costs, the Secretary shall 
     include costs described in subparagraph (B), but may not 
     include costs described in subparagraph (C).
       (B) Costs that may be included.--The costs described in 
     this subparagraph are the permissible costs (as recognized by 
     the Secretary) for the following:
       (i) The acquisition of telemedicine equipment for use in 
     patients' homes (but only in the case of patients located in 
     medically underserved areas).
       (ii) Curriculum development and training of health 
     professionals in medical informatics and telemedicine.
       (iii) Payment of telecommunications costs (including 
     salaries and maintenance of equipment), including costs of 
     telecommunications between patients' homes and the eligible 
     network and between the network and other entities under the 
     arrangements described in subsection (c)(1).
       (iv) Payments to practitioners and providers under the 
     medicare programs.
       (C) Costs not included.--The costs described in this 
     subparagraph are costs for any of the following:
       (i) The purchase or installation of transmission equipment 
     (other than such equipment used by health professionals to 
     deliver medical informatics services under the project).
       (ii) The establishment or operation of a telecommunications 
     common carrier network.
       (iii) Construction (except for minor renovations related to 
     the installation of reimbursable equipment) or the 
     acquisition or building of real property.
       (3) Limitation.--The total amount of the payments that may 
     be made under this section shall not exceed $30,000,000.
       (4) Limitation on cost-sharing.--The project may not impose 
     cost sharing on a medicare beneficiary for the receipt of 
     services under the project in excess of 20 percent of the 
     recognized costs of the project attributable to such 
     services.
       (e) Reports.--The Secretary shall submit to the Committees 
     on Ways and Means and Commerce of the House of 
     Representatives and the Committee on Finance of the Senate 
     interim reports on the project and a final report on the 
     project within 6 months after the conclusion of the project. 
     The final report shall include an evaluation of the impact of 
     the use of telemedicine and medical informatics on improving 
     access of medicare beneficiaries to health care services, on 
     reducing the costs of such services, and on improving the 
     quality of life of such beneficiaries.
       (f) Definitions.--For purposes of this section:
       (1) Interventional informatics.--The term ``interventional 
     informatics'' means using information technology and virtual 
     reality technology to intervene in patient care.
       (2) Medical informatics.--The term ``medical informatics'' 
     means the storage, retrieval, and use of biomedical and 
     related information for problem solving and decision-making 
     through computing and communications technologies.
       (3) Project.--The term ``project'' means the demonstration 
     project under this section.
              Subtitle D--Anti-Fraud and Abuse Provisions

     SEC. 4301. PERMANENT EXCLUSION FOR THOSE CONVICTED OF 3 
                   HEALTH CARE RELATED CRIMES.

       Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended--
       (1) in subparagraph (A), by inserting ``or in the case 
     described in subparagraph (G)'' after ``subsection (b)(12)'';
       (2) in subparagraphs (B) and (D), by striking ``In the 
     case'' and inserting ``Subject to subparagraph (G), in the 
     case''; and
       (3) by adding at the end the following new subparagraph:
       ``(G) In the case of an exclusion of an individual under 
     subsection (a) based on a conviction occurring on or after 
     the date of the enactment of this subparagraph, if the 
     individual has (before, on, or after such date and before the 
     date of the conviction for which the exclusion is imposed) 
     been convicted--
       ``(i) on one previous occasion of one or more offenses for 
     which an exclusion may be effected under such subsection, the 
     period of the exclusion shall be not less than 10 years, or
       ``(ii) on 2 or more previous occasions of one or more 
     offenses for which an exclusion may be effected under such 
     subsection, the period of the exclusion shall be 
     permanent.''.

     SEC. 4302. AUTHORITY TO REFUSE TO ENTER INTO MEDICARE 
                   AGREEMENTS WITH INDIVIDUALS OR ENTITIES 
                   CONVICTED OF FELONIES.

       (a) Medicare Part A.--Section 1866(b)(2) (42 U.S.C. 
     1395cc(b)(2)) is amended--
       (1) by striking ``or'' at the end of subparagraph (B);
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``, or''; and
       (3) by adding after subparagraph (C) the following new 
     subparagraph:
       ``(D) has ascertained that the provider has been convicted 
     of a felony under Federal or State law for an offense which 
     the Secretary determines is inconsistent with the best 
     interests of program beneficiaries.''.

[[Page H4458]]

       (b) Medicare Part B.--Section 1842 (42 U.S.C. 1395u) is 
     amended by adding after subsection (r) the following new 
     subsection:
       ``(s) The Secretary may refuse to enter into an agreement 
     with a physician or supplier under subsection (h) or may 
     terminate or refuse to renew such agreement, in the event 
     that such physician or supplier has been convicted of a 
     felony under Federal or State law for an offense which the 
     Secretary determines is inconsistent with the best interests 
     of program beneficiaries.''.
       (c) Medicaid.--Section 1902(a)(23) (42 U.S.C. 1396(a)) is 
     amended--
       (1) by relocating the matter that precedes ``provide that, 
     (A)'' immediately before the semicolon;
       (2) by inserting a semicolon after ``1915'';
       (3) by striking the comma after ``Guam'' and inserting a 
     semicolon; and
       (4) by inserting before the semicolon at the end the 
     following: ``and except that this provision does not require 
     a State to provide medical assistance for such services 
     furnished by a person or entity convicted of a felony under 
     Federal or State law for an offense which the State agency 
     determines is inconsistent with the best interests of 
     beneficiaries under the State plan''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     and apply to the entry and renewal of contracts on or after 
     such date.

     SEC. 4303. INCLUSION OF TOLL-FREE NUMBER TO REPORT MEDICARE 
                   WASTE, FRAUD, AND ABUSE IN EXPLANATION OF 
                   BENEFITS FORMS.

       (a) In General.--Section 1842(h)(7) (42 U.S.C. 1395u(h)(7)) 
     is amended--
       (1) by striking ``and'' at the end of subparagraph (D),
       (2) by striking the period at the end of subparagraph (E), 
     and
       (3) by adding at the end the following new subparagraph:
       ``(E) a toll-free telephone number maintained by the 
     Inspector General in the Department of Health and Human 
     Services for the receipt of complaints and information about 
     waste, fraud, and abuse in the provision or billing of 
     services under this title.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to explanations of benefits provided on or after 
     such date (not later than January 1, 1999) as the Secretary 
     of Health and Human Services shall provide.

     SEC. 4304. LIABILITY OF MEDICARE CARRIERS AND FISCAL 
                   INTERMEDIARIES FOR CLAIMS SUBMITTED BY EXCLUDED 
                   PROVIDERS.

       (a) Reimbursement to the Secretary for Amounts Paid to 
     Excluded Providers.--
       (1) Requirements for fiscal intermediaries.--
       (A) In general.--Section 1816 (42 U.S.C. 1395h) is amended 
     by adding at the end the following new subsection:
       ``(m) An agreement with an agency or organization under 
     this section shall require that such agency or organization 
     reimburse the Secretary for any amounts paid by the agency or 
     organization for a service under this title which is 
     furnished, directed, or prescribed by an individual or entity 
     during any period for which the individual or entity is 
     excluded pursuant to section 1128, 1128A, or 1156, from 
     participation in the program under this title, if the amounts 
     are paid after the Secretary notifies the agency or 
     organization of the exclusion.''.
       (B) Conforming amendment.--Subsection (i) of such section 
     is amended by adding at the end the following new paragraph:
       ``(4) Nothing in this subsection shall be construed to 
     prohibit reimbursement by an agency or organization under 
     subsection (m).''.
       (2) Requirements for carriers.--Section 1842(b)(3) (42 
     U.S.C. 1395u(b)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (I); and
       (B) by inserting after subparagraph (I) the following new 
     subparagraph:
       ``(J) will reimburse the Secretary for any amounts paid by 
     the carrier for an item or service under this part which is 
     furnished, directed, or prescribed by an individual or entity 
     during any period for which the individual or entity is 
     excluded pursuant to section 1128, 1128A, or 1156, from 
     participation in the program under this title, if the amounts 
     are paid after the Secretary notifies the carrier of the 
     exclusion, and''.
       (3) Medicaid Provision.--Section 1902(a)(39) (42 U.S.C. 
     1396a(a)(39)) is amended by inserting before the semicolon at 
     the end the following: ``, and provide further for 
     reimbursement to the Secretary of any payments made under the 
     plan or any item or service furnished, directed, or 
     prescribed by the excluded individual or entity during such 
     period, after the Secretary notifies the State of such 
     exclusion''.
       (b) Conforming Repeal of Mandatory Payment Rule.--Paragraph 
     (2) of section 1862(e) (42 U.S.C. 1395y(e)) is amended to 
     read as follows:
       ``(2) No individual or entity may bill (or collect any 
     amount from) any individual for any item or service for which 
     payment is denied under paragraph (1). No person is liable 
     for payment of any amounts billed for such an item or service 
     in violation of the previous sentence.''.
       (c) Effective Dates.--The amendments made by this section 
     shall apply to contracts and agreements entered into, 
     renewed, or extended after the date of the enactment of this 
     Act, but only with respect to claims submitted on or after 
     the later of January 1, 1998, or the date such entry, 
     renewal, or extension becomes effective.

     SEC. 4305. EXCLUSION OF ENTITY CONTROLLED BY FAMILY MEMBER OF 
                   A SANCTIONED INDIVIDUAL.

       (a) In General.--Section 1128 (42 U.S.C. 1320a-7) is 
     amended--
       (1) in subsection (b)(8)(A)--
       (A) by striking ``or'' at the end of clause (i), and
       (B) by striking the dash at the end of clause (ii) and 
     inserting ``; or'', and
       (C) by inserting after clause (ii) the following:
       ``(iii) who was described in clause (i) but is no longer so 
     described because of a transfer of ownership or control 
     interest, in anticipation of (or following) a conviction, 
     assessment, or exclusion described in subparagraph (B) 
     against the person, to an immediate family member (as defined 
     in subsection (j)(1)) or a member of the household of the 
     person (as defined in subsection (j)(2)) who continues to 
     maintain an interest described in such clause--''; and
       (2) by adding after subsection (i) the following new 
     subsection:
       ``(j) Definition of Immediate Family Member and Member of 
     Household.--For purposes of subsection (b)(8)(A)(iii):
       ``(1) The term `immediate family member' means, with 
     respect to a person--
       ``(A) the husband or wife of the person;
       ``(B) the natural or adoptive parent, child, or sibling of 
     the person;
       ``(C) the stepparent, stepchild, stepbrother, or stepsister 
     of the person;
       ``(D) the father-, mother-, daughter-, son-, brother-, or 
     sister-in-law of the person;
       ``(E) the grandparent or grandchild of the person; and
       ``(F) the spouse of a grandparent or grandchild of the 
     person.
       ``(2) The term `member of the household' means, with 
     respect to an person, any individual sharing a common abode 
     as part of a single family unit with the person, including 
     domestic employees and others who live together as a family 
     unit, but not including a roomer or boarder.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect on the date that is 45 days after the date 
     of the enactment of this Act.

     SEC. 4306. IMPOSITION OF CIVIL MONEY PENALTIES.

       (a) Civil Money Penalties for Persons That Contract With 
     Excluded Individuals.--Section 1128A(a) (42 U.S.C. 1320a-
     7a(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (4);
       (2) by adding ``or'' at the end of paragraph (5); and
       (3) by adding after paragraph (5) the following new 
     paragraph:
       ``(6) arranges or contracts (by employment or otherwise) 
     with an individual or entity that the person knows or should 
     know is excluded from participation in a Federal health care 
     program (as defined in section 1128B(f)), for the provision 
     of items or services for which payment may be made under such 
     a program;''.
       (b) Effective Dates.--The amendments made by subsection (a) 
     shall apply to arrangements and contracts entered into after 
     the date of the enactment of this Act.

     SEC. 4307. DISCLOSURE OF INFORMATION AND SURETY BONDS.

       (a) Disclosure of Information and Surety Bond Requirement 
     for Suppliers of Durable Medical Equipment.--Section 1834(a) 
     (42 U.S.C. 1395m(a)) is amended by inserting after paragraph 
     (15) the following new paragraph:
       ``(16) Conditions for issuance of provider number.--The 
     Secretary shall not provide for the issuance (or renewal) of 
     a provider number for a supplier of durable medical 
     equipment, for purposes of payment under this part for 
     durable medical equipment furnished by the supplier, unless 
     the supplier provides the Secretary on a continuing basis 
     with--
       ``(A)(i) full and complete information as to the identity 
     of each person with an ownership or control interest (as 
     defined in section 1124(a)(3)) in the supplier or in any 
     subcontractor (as defined by the Secretary in regulations) in 
     which the supplier directly or indirectly has a 5 percent or 
     more ownership interest, and
       ``(ii) to the extent determined to be feasible under 
     regulations of the Secretary, the name of any disclosing 
     entity (as defined in section 1124(a)(2)) with respect to 
     which a person with such an ownership or control interest in 
     the supplier is a person with such an ownership or control 
     interest in the disclosing entity; and
       ``(B) a surety bond in a form specified by the Secretary 
     and in an amount that is not less than $50,000.

     The Secretary may waive the requirement of a bond under 
     subparagraph (B) in the case of a supplier that provides a 
     comparable surety bond under State law.''.
       (b) Surety Bond Requirement for Home Health Agencies.--
       (1) In general.--Section 1861(o) (42 U.S.C. 1395x(o)) is 
     amended--
       (A) in paragraph (7), by inserting ``and including 
     providing the Secretary on a continuing basis with a surety 
     bond in a form specified by the Secretary and in an amount 
     that is not less than $50,000,'' after ``financial security 
     of the program'', and
       (B) by adding at the end the following: ``The Secretary may 
     waive the requirement of a bond under paragraph (7) in the 
     case of an agency or organization that provides a comparable 
     surety bond under State law.''.

[[Page H4459]]

       (2) Conforming amendments.--Section 1861(v)(1)(H) (42 
     U.S.C. 1395x(v)(1)(H)) is amended--
       (A) in clause (i), by striking ``the financial security 
     requirement'' and inserting ``the financial security and 
     surety bond requirements''; and
       (B) in clause (ii), by striking ``the financial security 
     requirement described in subsection (o)(7) applies'' and 
     inserting ``the financial security and surety bond 
     requirements described in subsection (o)(7) apply''.
       (3) Reference to current disclosure requirement.--For 
     provision of current law requiring home health agencies to 
     disclose information on ownership and control interests, see 
     section 1124 of the Social Security Act.
       (c) Authorizing Application of Disclosure and Surety Bond 
     Requirements to Ambulance Services and Certain Clinics.--
     Section 1834(a)(16) (42 U.S.C. 1395m(a)(16)), as added by 
     subsection (a), is amended by adding at the end the 
     following: ``The Secretary, in the Secretary's discretion, 
     may impose the requirements of the previous sentence with 
     respect to some or all classes of suppliers of ambulance 
     services described in section 1861(s)(7) and clinics that 
     furnish medical and other health services (other than 
     physicians' services) under this part.''.
       (d) Application to Comprehensive Outpatient Rehabilitation 
     Facilities (CORFs).--Section 1861(cc)(2) (42 U.S.C. 
     1395x(cc)(2)) is amended--
       (1) in subparagraph (I), by inserting before the period at 
     the end the following: ``and providing the Secretary on a 
     continuing basis with a surety bond in a form specified by 
     the Secretary and in an amount that is not less than 
     $50,000'', and
       (2) by adding after and below subparagraph (I) the 
     following:

     ``The Secretary may waive the requirement of a bond under 
     subparagraph (I) in the case of a facility that provides a 
     comparable surety bond under State law.''.
       (e) Application to Rehabilitation Agencies.--Section 
     1861(p) (42 U.S.C. 1395x(p)) is amended--
       (1) in paragraph (4)(A)(v), by inserting after ``as the 
     Secretary may find necessary,'' the following: ``and provides 
     the Secretary, to the extent required by the Secretary, on a 
     continuing basis with a surety bond in a form specified by 
     the Secretary and in an amount that is not less than 
     $50,000'', and
       (2) by adding at the end the following: ``The Secretary may 
     waive the requirement of a bond under paragraph (4)(A)(v) in 
     the case of a clinic or agency that provides a comparable 
     surety bond under State law.''.
       (f) Effective Dates.--(1) The amendment made by subsection 
     (a) shall apply to suppliers of durable medical equipment 
     with respect to such equipment furnished on or after January 
     1, 1998.
       (2) The amendments made by subsection (b) shall apply to 
     home health agencies with respect to services furnished on or 
     after such date. The Secretary of Health and Human Services 
     shall modify participation agreements under section 
     1866(a)(1) of the Social Security Act with respect to home 
     health agencies to provide for implementation of such 
     amendments on a timely basis.
       (3) The amendments made by subsections (c) through (e) 
     shall take effect on the date of the enactment of this Act 
     and may be applied with respect to items and services 
     furnished on or after the date specified in paragraph (1).

     SEC. 4308. PROVISION OF CERTAIN IDENTIFICATION NUMBERS.

       (a) Requirements to Disclose Employer Identification 
     Numbers (EINS) and Social Security Account Numbers (SSNs).--
     Section 1124(a)(1) (42 U.S.C. 1320a-3(a)(1)) is amended by 
     inserting before the period at the end the following: ``and 
     supply the Secretary with the both the employer 
     identification number (assigned pursuant to section 6109 of 
     the Internal Revenue Code of 1986) and social security 
     account number (assigned under section 205(c)(2)(B)) of the 
     disclosing entity, each person with an ownership or control 
     interest (as defined in subsection (a)(3)), and any 
     subcontractor in which the entity directly or indirectly has 
     a 5 percent or more ownership interest. Use of the social 
     security account number under this section shall be limited 
     to identity verification and identity matching purposes only. 
     The social security account number shall not be disclosed to 
     any person or entity other than the Secretary, the Social 
     Security Administration, or the Secretary of the Treasury, In 
     obtaining the social security account numbers of the 
     disclosing entity and other persons described in this 
     section, the Secretary shall comply with section 7 of the 
     Privacy Act of 1974 (5 U.S.C. 552a note)''.
       (b) Other Medicare Providers.--Section 1124A (42 U.S.C. 
     1320a-3a) is amended--
       (1) in subsection (a)--
       (A) by striking ``and'' at the end of paragraph (1);
       (B) by striking the period at the end of paragraph (2) and 
     inserting ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(3) including the employer identification number 
     (assigned pursuant to section 6109 of the Internal Revenue 
     Code of 1986) and social security account number (assigned 
     under section 205(c)(2)(B)) of the disclosing part B provider 
     and any person, managing employee, or other entity identified 
     or described under paragraph (1) or (2).''; and
       (2) in subsection (c) by inserting ``(or, for purposes of 
     subsection (a)(3), any entity receiving payment)'' after ``on 
     an assignment-related basis''.
       (c) Verification by Social Security Administration (SSA).--
     Section 1124A (42 U.S.C. 1320a-3a) is amended--
       (1) by redesignating subsection (c) as subsection (d); and
       (2) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Verification.--
       ``(1) Transmittal by hhs.--The Secretary shall transmit--
       ``(A) to the Commissioner of Social Security information 
     concerning each social security account number (assigned 
     under section 205(c)(2)(B)), and
       ``(B) to the Secretary of the Treasury information 
     concerning each employer identification number (assigned 
     pursuant to section 6109 of the Internal Revenue Code of 
     1986),

     supplied to the Secretary pursuant to subsection (a)(3) or 
     section 1124(c) to the extent necessary for verification of 
     such information in accordance with paragraph (2).
       ``(2) Verification.--The Commissioner of Social Security 
     and the Secretary of the Treasury shall verify the accuracy 
     of, or correct, the information supplied by the Secretary to 
     such official pursuant to paragraph (1), and shall report 
     such verifications or corrections to the Secretary.
       ``(3) Fees for verification.--The Secretary shall reimburse 
     the Commissioner and Secretary of the Treasury, at a rate 
     negotiated between the Secretary and such official, for the 
     costs incurred by such official in performing the 
     verification and correction services described in this 
     subsection.''.
       (d) Report.--Before this subsection shall be effective, the 
     Secretary of Health and Human Services shall submit to 
     Congress a report on steps the Secretary has taken to assure 
     the confidentiality of social security account numbers that 
     will be provided to the Secretary under the amendments made 
     by this section. If Congress determines that the Secretary 
     has not taken adequate steps to assure the confidentiality of 
     social security account numbers to be provided to the 
     Secretary under the amendments made by this section, the 
     amendments made by this section shall not take effect.
       (e) Effective Dates.--Subject to subsection (d)--
       (1) the amendment made by subsection (a) shall apply to the 
     application of conditions of participation, and entering into 
     and renewal of contracts and agreements, occurring more than 
     90 days after the date of submission of the report under 
     subsection (d); and
       (2) the amendments made by subsection (b) shall apply to 
     payment for items and services furnished more than 90 days 
     after the date of submission of such report.

     SEC. 4309. ADVISORY OPINIONS REGARDING CERTAIN PHYSICIAN 
                   SELF-REFERRAL PROVISIONS.

       Section 1877(g) (42 U.S.C. 1395nn(g)) is amended by adding 
     at the end the following new paragraph:
       ``(6) Advisory opinions.--
       ``(A) In general.--The Secretary shall issue written 
     advisory opinions concerning whether a referral relating to 
     designated health services (other than clinical laboratory 
     services) is prohibited under this section.
       ``(B) Binding as to secretary and parties involved.--Each 
     advisory opinion issued by the Secretary shall be binding as 
     to the Secretary and the party or parties requesting the 
     opinion.
       ``(C) Application of certain procedures.--The Secretary 
     shall, to the extent practicable, apply the regulations 
     promulgated under section 1128D(b)(5) to the issuance of 
     advisory opinions under this paragraph.
       ``(D) Applicability.--This paragraph shall apply to 
     requests for advisory opinions made during the period 
     described in section 1128D(b)(6).''.

     SEC. 4310. NONDISCRIMINATION IN POST-HOSPITAL REFERRAL TO 
                   HOME HEALTH AGENCIES.

       (a) Notification of Availability of Home Health Agencies As 
     Part of Discharge Planning Process.--Section 1861(ee)(2) (42 
     U.S.C. 1395x(ee)(2)) is amended--
       (1) in subparagraph (D), by inserting before the period the 
     following: ``, including the availability of home health 
     services through individuals and entities that participate in 
     the program under this title and that serve the area in which 
     the patient resides and that request to be listed by the 
     hospital as available''; and
       (2) by adding at the end the following:
       ``(H) Consistent with section 1802, the discharge plan 
     shall--
       ``(i) not specify or otherwise limit the qualified provider 
     which may provide post-hospital home health services, and
       ``(ii) identify (in a form and manner specified by the 
     Secretary) any home health agency (to whom the individual is 
     referred) in which the hospital has a disclosable financial 
     interest (as specified by the Secretary consistent with 
     section 1866(a)(1)(R)) or which has such an interest in the 
     hospital.''.
       (b) Maintenance and Disclosure of Information on Post-
     Hospital Home Health Agencies.--Section 1866(a)(1) (42 U.S.C. 
     1395cc(a)(1)) is amended--
       (1) by striking ``and'' at the end of subparagraph (Q),
       (2) by striking the period at the end of subparagraph (R), 
     and
       (3) by adding at the end the following:

[[Page H4460]]

       ``(S) in the case of a hospital that has a financial 
     interest (as specified by the Secretary in regulations) in a 
     home health agency, or in which such an agency has such a 
     financial interest, or in which another entity has such a 
     financial interest (directly or indirectly) with such 
     hospital and such an agency, to maintain and disclose to the 
     Secretary (in a form and manner specified by the Secretary) 
     information on--
       ``(i) the nature of such financial interest,
       ``(ii) the number of individuals who were discharged from 
     the hospital and who were identified as requiring home health 
     services, and
       ``(iii) the percentage of such individuals who received 
     such services from such provider (or another such 
     provider).''.
       (c) Disclosure of Information to the Public.--Title XI is 
     amended by inserting after section 1145 the following new 
     section:


   ``public disclosure of certain information on hospital financial 
                     interest and referral patterns

       ``Sec. 1146. The Secretary shall make available to the 
     public, in a form and manner specified by the Secretary, 
     information disclosed to the Secretary pursuant to section 
     1866(a)(1)(R).''.
       (d) Effective Dates.--
       (1) The amendments made by subsection (a) shall apply to 
     discharges occurring on or after 90 days after the date of 
     the enactment of this Act.
       (2) The Secretary of Health and Human Services shall issue 
     regulations by not later than 1 year after the date of the 
     enactment of this Act to carry out the amendments made by 
     subsections (b) and (c) and such amendments shall take effect 
     as of such date (on or after the issuance of such 
     regulations) as the Secretary specifies in such regulations.

     SEC. 4311. OTHER FRAUD AND ABUSE RELATED PROVISIONS.

       (a) Reference Correction.--(1) Section 1128D(b)(2)(D) (42 
     U.S.C. 1320a-7d(b)(2)(D)), as added by section 205 of the 
     Health Insurance Portability and Accountability Act of 1996, 
     is amended by striking ``1128B(b)'' and inserting 
     ``1128A(b)''.
       (2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a-7e(g)(3)(C)) is 
     amended by striking ``Veterans' Administration'' and 
     inserting ``Department of Veterans Affairs''.
       (b) Language in Definition of Conviction.--Section 
     1128E(g)(5) (42 U.S.C. 1320a-7e(g)(5)), as inserted by 
     section 221(a) of the Health Insurance Portability and 
     Accountability Act of 1996, is amended by striking 
     ``paragraph (4)'' and inserting ``paragraphs (1) through 
     (4)''.
       (c) Implementation of Exclusions.--Section 1128 (42 U.S.C. 
     1320a-7) is amended--
       (1) in subsection (a), by striking ``any program under 
     title XVIII and shall direct that the following individuals 
     and entities be excluded from participation in any State 
     health care program (as defined in subsection (h))'' and 
     inserting ``any Federal health care program (as defined in 
     section 1128B(f))''; and
       (2) in subsection (b), by striking ``any program under 
     title XVIII and may direct that the following individuals and 
     entities be excluded from participation in any State health 
     care program'' and inserting ``any Federal health care 
     program (as defined in section 1128B(f))''.
       (d) Sanctions for Failure to Report.--Section 1128E(b) (42 
     U.S.C. 1320a-7e(b)), as inserted by section 221(a) of the 
     Health Insurance Portability and Accountability Act of 1996, 
     is amended by adding at the end the following:
       ``(6) Sanctions for failure to report.--
       ``(A) Health plans.--Any health plan that fails to report 
     information on an adverse action required to be reported 
     under this subsection shall be subject to a civil money 
     penalty of not more than $25,000 for each such adverse action 
     not reported. Such penalty shall be imposed and collected in 
     the same manner as civil money penalties under subsection (a) 
     of section 1128A are imposed and collected under that 
     section.
       ``(B) Governmental agencies.--The Secretary shall provide 
     for a publication of a public report that identifies those 
     Government agencies that have failed to report information on 
     adverse actions as required to be reported under this 
     subsection.''.
       (e) Effective Dates.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by this section shall be effective as if 
     included in the enactment of the Health Insurance Portability 
     and Accountability Act of 1996.
       (2) Federal health program.--The amendments made by 
     subsection (c) shall take effect on the date of the enactment 
     of this Act.
       (3) Sanction for failure to report.--The amendment made by 
     subsection (d) shall apply to failures occurring on or after 
     the date of the enactment of this Act.
                Subtitle E--Prospective Payment Systems

                    CHAPTER 2--PAYMENT UNDER PART B

   Subchapter A--Payment for Hospital Outpatient Department Services

     SEC. 4411. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS (FDO) 
                   FOR CERTAIN OUTPATIENT HOSPITAL SERVICES.

       (a) Elimination of FDO for Ambulatory Surgical Center 
     Procedures.--Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 
     1395l(i)(3)(B)(i)(II)) is amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (b) Elimination of FDO for Radiology Services and 
     Diagnostic Procedures.--Section 1833(n)(1)(B)(i) (42 U.S.C. 
     1395l(n)(1)(B)(i)) is amended--
       (1) by striking ``of 80 percent'', and
       (2) by inserting before the period at the end 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 October 1, 1997.

     SEC. 4412. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF 
                   HOSPITAL OUTPATIENT SERVICES.

       (a) Reduction in Payments for Capital-Related Costs.--
     Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 
     1395x(v)(1)(S)(ii)(I)) is amended by striking ``through 
     1998'' and inserting ``through 1999 and during fiscal year 
     2000 before January 1, 2000''.
       (b) Reduction in Payments for Other Costs.--Section 
     1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is 
     amended by striking ``through 1998'' and inserting ``through 
     1999 and during fiscal year 2000 before January 1, 2000''.

     SEC. 4413. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT 
                   DEPARTMENT SERVICES.

       (a) In General.--Section 1833 (42 U.S.C. 1395l) is amended 
     by adding at the end the following:
       ``(t) Prospective Payment System for Hospital Outpatient 
     Department Services.--
       ``(1) In general.--With respect to hospital outpatient 
     services designated by the Secretary (in this section 
     referred to as `covered OPD services') and furnished during a 
     year beginning with 1999, the amount of payment under this 
     part shall be determined under a prospective payment system 
     established by the Secretary in accordance with this 
     subsection.
       ``(2) System requirements.--Under the payment system--
       ``(A) the Secretary shall develop a classification system 
     for covered OPD services;
       ``(B) the Secretary may establish groups of covered OPD 
     services, within the classification system described in 
     subparagraph (A), so that services classified within each 
     group are comparable clinically and with respect to the use 
     of resources;
       ``(C) the Secretary shall, using data on claims from 1996 
     and using data from the most recent available cost reports, 
     establish relative payment weights for covered OPD services 
     (and any groups of such services described in subparagraph 
     (B)) based on median hospital costs and shall determine 
     projections of the frequency of utilization of each such 
     service (or group of services) in 1999;
       ``(D) the Secretary shall determine a wage adjustment 
     factor to adjust the portion of payment and coinsurance 
     attributable to labor-related costs for relative differences 
     in labor and labor-related costs across geographic regions in 
     a budget neutral manner;
       ``(E) the Secretary shall establish other adjustments, in a 
     budget neutral manner, as determined to be necessary to 
     ensure equitable payments, such as outlier adjustments, 
     adjustments to account for variations in coinsurance payments 
     for procedures with similar resource costs, or adjustments 
     for certain classes of hospitals; and
       ``(F) the Secretary shall develop a method for controlling 
     unnecessary increases in the volume of covered OPD services.
       ``(3) Calculation of base amounts.--
       ``(A) Aggregate amounts that would be payable if 
     deductibles were disregarded.--The Secretary shall estimate 
     the total amounts that would be payable from the Trust Fund 
     under this part for covered OPD services in 1999, determined 
     without regard to this subsection, as though the deductible 
     under section 1833(b) did not apply, and as though the 
     coinsurance described in section 1866(a)(2)(A)(ii) (as in 
     effect before the date of the enactment of this subsection) 
     continued to apply.
       ``(B) Unadjusted copayment amount.--
       ``(i) In general.--For purposes of this subsection, subject 
     to clause (ii), the `unadjusted copayment amount' applicable 
     to a covered OPD service (or group of such services) is 20 
     percent of national median of the charges for the service (or 
     services within the group) furnished during 1996, updated to 
     1999 using the Secretary's estimate of charge growth during 
     the period.
       ``(ii) Adjusted to be 20 percent when fully phased in.--If 
     the pre-deductible payment percentage for a covered OPD 
     service (or group of such services) furnished in a year would 
     be equal to or exceed 80 percent, then the unadjusted 
     copayment amount shall be 25 percent of amount determined 
     under subparagraph (D)(i).
       ``(iii) Rules for new services.--The Secretary shall 
     establish rules for establishment of an unadjusted copayment 
     amount for a covered OPD service not furnished during 1996, 
     based upon its classification within a group of such 
     services.
       ``(C) Calculation of conversion factors.--

       ``(I) In general.--The Secretary shall establish a 1999 
     conversion factor for determining the medicare pre-deductible 
     OPD fee payment amounts for each covered OPD service (or 
     group of such services) furnished in 1999. Such conversion 
     factor shall be established on the basis of the weights and 
     frequencies described in paragraph (2)(C) and in a manner 
     such that the sum for all services and

[[Page H4461]]

     groups of the products (described in subclause (II) for each 
     such service or group) equals the total projected amount 
     described in subparagraph (A).

       ``(II) Product described.--The product described in this 
     subclause, for a service or group, is the product of the 
     medicare pre-deductible OPD fee payment amounts (taking into 
     account appropriate adjustments described in paragraphs 
     (2)(D) and (2)(E)) and the frequencies for such service or 
     group.
       ``(ii) Subsequent years.--Subject to paragraph (8)(B), the 
     Secretary shall establish a conversion factor for covered OPD 
     services furnished in subsequent years in an amount equal to 
     the conversion factor established under this subparagraph and 
     applicable to such services furnished in the previous year 
     increased by the OPD payment increase factor specified under 
     clause (iii) for the year involved.
       ``(iii) OPD payment increase factor.--For purposes of this 
     subparagraph, the `OPD payment increase factor' for services 
     furnished in a year is equal to the sum of--

       ``(I) market basket percentage increase (applicable under 
     section 1886(b)(3)(B)(iii) to hospital discharges occurring 
     during the fiscal year ending in such year, and
       ``(II) in the case of a covered OPD service (or group of 
     such services) furnished in a year in which the pre-
     deductible payment percentage would not exceed 80 percent, 
     3.5 percentage points, but in no case greater than such 
     number of percentage points as will result in the pre-
     deductible payment percentage exceeding 80 percent.

     In applying the previous sentence for years beginning with 
     2000, the Secretary may substitute for the market basket 
     percentage increase under subclause (I) an annual percentage 
     increase that is computed and applied with respect to covered 
     OPD services furnished in a year in the same manner as the 
     market basket percentage increase is determined and applied 
     to inpatient hospital services for discharges occurring in a 
     fiscal year.
       ``(D) Pre-deductible payment percentage.--The pre-
     deductible payment percentage for a covered OPD service (or 
     group of such services) furnished in a year is equal to the 
     ratio of--
       ``(i) the conversion factor established under subparagraph 
     (C) for the year, multiplied by the weighting factor 
     established under paragraph (2)(C) for the service (or 
     group), to
       ``(ii) the sum of the amount determined under clause (i) 
     and the unadjusted copayment amount determined under 
     subparagraph (B) for such service or group.
       ``(E) Calculation of medicare opd fee schedule amounts.--
     The Secretary shall compute a medicare OPD fee schedule 
     amount for each covered OPD service (or group of such 
     services) furnished in a year, in an amount equal to the 
     product of--
       ``(i) the conversion factor computed under subparagraph (C) 
     for the year, and
       ``(ii) the relative payment weight (determined under 
     paragraph (2)(C)) for the service or group.
       ``(4) Medicare payment amount.--The amount of payment made 
     from the Trust Fund under this part for a covered OPD service 
     (and such services classified within a group) furnished in a 
     year is determined as follows:
       ``(A) Fee schedule and copayment amount.--Add (i) the 
     medicare OPD fee schedule amount (computed under paragraph 
     (3)(E)) for the service or group and year, and (ii) the 
     unadjusted copayment amount (determined under paragraph 
     (3)(B)) for the service or group.
       ``(B) Subtract applicable deductible.--Reduce the adjusted 
     sum by the amount of the deductible under section 1833(b), to 
     the extent applicable.
       ``(C) Apply payment proportion to remainder.--Multiply the 
     amount so determined under subparagraph (B) by the pre-
     deductible payment percentage (as determined under paragraph 
     (3)(D)) for the service or group and year involved.
       ``(D) Labor-related adjustment.--The amount of payment is 
     the product determined under subparagraph (C) with the labor-
     related portion of such product adjusted for relative 
     differences in the cost of labor and other factors determined 
     by the Secretary, as computed under paragraph (2)(D).
       ``(5) Copayment amount.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the copayment amount under this subsection is determined as 
     follows:
       ``(i) Unadjusted copayment.--Compute the amount by which 
     the amount described in paragraph (4)(B) exceeds the amount 
     of payment determined under paragraph (4)(C).
       ``(ii) Labor adjustment.--The copayment amount is the 
     difference determined under clause (i) with the labor-related 
     portion of such difference adjusted for relative differences 
     in the cost of labor and other factors determined by the 
     Secretary, as computed under paragraphs (2)(D). The 
     adjustment under this clause shall be made in a manner that 
     does not result in any change in the aggregate copayments 
     made in any year if the adjustment had not been made.
       ``(B) Election to offer reduced copayment amount.--The 
     Secretary shall establish a procedure under which a hospital, 
     before the beginning of a year (beginning with 1999), may 
     elect to reduce the copayment amount otherwise established 
     under subparagraph (A) for some or all covered OPD services 
     to an amount that is not less than 25 percent of the medicare 
     OPD fee schedule amount (computed under paragraph (3)(E)) for 
     the service involved, adjusted for relative differences in 
     the cost of labor and other factors determined by the 
     Secretary, as computed under subparagraphs (D) and (E) of 
     paragraph (2). Under such procedures, such reduced copayment 
     amount may not be further reduced or increased during the 
     year involved and the hospital may disseminate information on 
     the reduction of copayment amount effected under this 
     subparagraph.
       ``(C) No impact on deductibles.--Nothing in this paragraph 
     shall be construed as affecting a hospital's authority to 
     waive the charging of a deductible under section 1833(b).
       ``(6) Periodic review and adjustments components of 
     prospective payment system.--
       ``(A) Periodic review.--The Secretary may periodically 
     review and revise the groups, the relative payment weights, 
     and the wage and other adjustments described in paragraph (2) 
     to take into account changes in medical practice, changes in 
     technology, the addition of new services, new cost data, and 
     other relevant information and factors.
       ``(B) Budget neutrality adjustment.--If the Secretary makes 
     adjustments under subparagraph (A), then the adjustments for 
     a year may not cause the estimated amount of expenditures 
     under this part for the year to increase or decrease from the 
     estimated amount of expenditures under this part that would 
     have been made if the adjustments had not been made.
       ``(C) Update factor.--If the Secretary determines under 
     methodologies described in subparagraph (2)(F) that the 
     volume of services paid for under this subsection increased 
     beyond amounts established through those methodologies, the 
     Secretary may appropriately adjust the update to the 
     conversion factor otherwise applicable in a subsequent year.
       ``(7) Special rule for ambulance services.--The Secretary 
     shall pay for hospital outpatient services that are ambulance 
     services on the basis described in the matter in subsection 
     (a)(1) preceding subparagraph (A).
       ``(8) Special rules for certain hospitals.--In the case of 
     hospitals described in section 1886(d)(1)(B)(v)--
       ``(A) the system under this subsection shall not apply to 
     covered OPD services furnished before January 1, 2000; and
       ``(B) the Secretary may establish a separate conversion 
     factor for such services in a manner that specifically takes 
     into account the unique costs incurred by such hospitals by 
     virtue of their patient population and service intensity.
       ``(9) Limitation on review.--There shall be no 
     administrative or judicial review under section 1869, 1878, 
     or otherwise of--
       ``(A) the development of the classification system under 
     paragraph (2), including the establishment of groups and 
     relative payment weights for covered OPD services, of wage 
     adjustment factors, other adjustments, and methods described 
     in paragraph (2)(F);
       ``(B) the calculation of base amounts under paragraph (3);
       ``(C) periodic adjustments made under paragraph (6); and
       ``(D) the establishment of a separate conversion factor 
     under paragraph (8)(B).''.
       (b) Coinsurance.--Section 1866(a)(2)(A)(ii) (42 U.S.C. 
     1395cc(a)(2)(A)(ii)) is amended by adding at the end the 
     following: ``In the case of items and services for which 
     payment is made under part B under the prospective payment 
     system established under section 1833(t), clause (ii) of the 
     first sentence shall be applied by substituting for 20 
     percent of the reasonable charge, the applicable copayment 
     amount established under section 1833(t)(5).''.
       (c) Treatment of Reduction in Copayment Amount.--Section 
     1128A(i)(6) (42 U.S.C. 1320a-7a(i)(6)) is amended--
       (1) by striking ``or'' at the end of subparagraph (B),
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``; or'', and
       (3) by adding at the end the following new subparagraph:
       ``(D) a reduction in the copayment amount for covered OPD 
     services under section 1833(t)(5)(B).''.
       (d) Conforming Amendments.--
       (1) Approved asc procedures performed in hospital 
     outpatient departments.--
       (A)(i) Section 1833(i)(3)(A) (42 U.S.C. 13951(i)(3)(A)) is 
     amended--
       (I) by inserting ``before January 1, 1999,'' after 
     ``furnished'', and
       (II) by striking ``in a cost reporting period''.
       (ii) The amendment made by clause (i) shall apply to 
     services furnished on or after January 1, 1999.
       (B) Section 1833(a)(4) (42 U.S.C. 13951(a)(4)) is amended 
     by inserting ``or subsection (t)'' before the semicolon.
       (2) Radiology and other diagnostic procedures.--
       (A) Section 1833(n)(1)(A) (42 U.S.C. 1395l(n)(1)(A)) is 
     amended by inserting ``and before January 1, 1999,'' after 
     ``October 1, 1988,'' and after ``October 1, 1989,''.
       (B) Section 1833(a)(2)(E) (42 U.S.C. 1395l(a)(2)(E)) is 
     amended by inserting ``or, for services or procedures 
     performed on or after January 1, 1999, (t)'' before the 
     semicolon.
       (3) Other hospital outpatient services.--Section -
     1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) is amended--
       (A) in clause (i), by inserting ``furnished before January 
     1, 1999,'' after ``(i)'',

[[Page H4462]]

       (B) in clause (ii), by inserting ``before January 1, 
     1999,'' after ``furnished'',
       (C) by redesignating clause (iii) as clause (iv),and
       (D) by inserting after clause (ii), the following new 
     clause:
       ``(iii) if such services are furnished on or after January 
     1, 1999, the amount determined under subsection (t), or''.

                 Subchapter B--Rehabilitation Services

     SEC. 4421. REHABILITATION AGENCIES AND SERVICES.

       (a) Payment Based on Fee Schedule.--
       (1) Special payment rules.--Section 1833(a) (42 U.S.C. 
     1395l(a)) is amended--
       (A) in paragraph (2) in the matter before subparagraph (A), 
     by inserting ``(C),'' before ``(D)'';
       (B) in paragraph (6), by striking ``and'' at the end;
       (C) in paragraph (7), by striking the period at the end and 
     inserting ``; and'';
       (D) by adding at the end the following new paragraph:
       ``(8) in the case of services described in section 
     1832(a)(2)(C) (that are not described in section 
     1832(a)(2)(B)), the amounts described in section 1834(k).''.
       (2) Payment rates.--Section 1834 (42 U.S.C. 1395m) is 
     amended by adding at the end the following new subsection:
       ``(k) Payment for Outpatient Therapy Services.--
       ``(1) In general.--With respect to outpatient physical 
     therapy services (which includes outpatient speech-language 
     pathology services) and outpatient occupational therapy 
     services for which payment is determined under this 
     subsection, the payment basis shall be--
       ``(A) for services furnished during 1998, the amount 
     determined under paragraph (2); or
       ``(B) for services furnished during a subsequent year, 80 
     percent of the lesser of--
       ``(i) the actual charge for the services, or
       ``(ii) the applicable fee schedule amount (as defined in 
     paragraph (3)) for the services.
       ``(2) Payment in 1998 based upon charges or adjusted 
     reasonable costs.--The amount under this paragraph for 
     services is the lesser of--
       ``(A) the charges imposed for the services, or
       ``(B) the adjusted reasonable costs (as defined in 
     paragraph (4)) for the services,
     less 20 percent of the amount of the charges imposed for such 
     services.
       ``(3) Applicable fee schedule amount.--In this paragraph, 
     the term `applicable fee schedule amount' means, with respect 
     to services furnished in a year, the fee schedule amount 
     established under section 1848 for such services furnished 
     during the year or, if there is no such fee schedule amount 
     established for such services, for such comparable services 
     as the Secretary specifies.
       ``(4) Adjusted reasonable costs.--In paragraph (2), the 
     term `adjusted reasonable costs' means reasonable costs 
     determined reduced by--
       ``(A) 5.8 percent of the reasonable costs for operating 
     costs, and
       ``(B) 10 percent of the reasonable costs for capital costs.
       ``(5) Uniform coding.--For claims for services submitted on 
     or after April 1, 1998, for which the amount of payment is 
     determined under this subsection, the claim shall include a 
     code (or codes) under a uniform coding system specified by 
     the Secretary that identifies the services furnished.
       ``(6) Restraint on billing.--The provisions of 
     subparagraphs (A) and (B) of section 1842(b)(18) shall apply 
     to therapy services for which payment is made under this 
     subsection in the same manner as they apply to services 
     provided by a practitioner described in section 
     1842(b)(18)(C).''.
       (b) Application of Standards to Outpatient Occupational and 
     Physical Therapy Services Provided As an Incident to a 
     Physician's Professional Services.--Section 1862(a), as 
     amended by section 4401(b), (42 U.S.C. 1395y(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (16);
       (2) by striking the period at the end of paragraph (17) and 
     inserting ``; or''; and
       (3) by inserting after paragraph (17) the following:
       ``(18) in the case of outpatient occupational therapy 
     services or outpatient physical therapy services furnished as 
     an incident to a physician's professional services (as 
     described in section 1861(s)(2)(A)), that do not meet the 
     standards and conditions under the second sentence of section 
     1861(g) or 1861(p) as such standards and conditions would 
     apply to such therapy services if furnished by a 
     therapist.''.
       (c) Applying Financial Limitation to All Rehabilitation 
     Services.--Section 1833(g) (42 U.S.C. 1395l(g)) is amended--
       (1) in the first sentence, by striking ``services described 
     in the second sentence of section 1861(p)'' and inserting 
     ``physical therapy services of the type described in section 
     1861(p) (regardless of who furnishes the services or whether 
     the services may be covered as physicians' services so long 
     as the services are furnished other than in a hospital 
     setting)'', and
       (2) in the second sentence, by striking ``outpatient 
     occupational therapy services which are described in the 
     second sentence of section 1861(p) through the operation of 
     section 1861(g)'' and inserting ``occupational therapy 
     services (of the type that are described in section 1861(p) 
     through the operation of section 1861(g)), regardless of who 
     furnishes the services or whether the services may be covered 
     as physicians' services so long as the services are furnished 
     other than in a hospital setting''.
       (d) Effective Date.--The amendments made by this section 
     apply to services furnished on or after January 1, 1998; 
     except that the amendments made by subsection (c) apply to 
     services furnished on or after January 1, 1999.

     SEC. 4422. COMPREHENSIVE OUTPATIENT REHABILITATION FACILITIES 
                   (CORF).

       (a) Payment Based on Fee Schedule.--
       (1) Special payment rules.--Section 1833(a) (42 U.S.C. 
     1395l(a)), as amended by section 4421(a), is amended--
       (A) in paragraph (3), by striking ``subparagraphs (D) and 
     (E) of section 1832(a)(2)'' and inserting ``section 
     1832(a)(2)(E)'';
       (B) in paragraph (7), by striking ``and'' at the end;
       (C) in paragraph (8), by striking the period at the end and 
     inserting ``; and'';
       (D) by adding at the end the following new paragraph:
       ``(9) in the case of services described in section 
     1832(a)(2)(E), the amounts described in section 1834(k).''.
       (2) Payment rates.--Section 1834(k) (42 U.S.C. 1395m(k)), 
     as added by section 4421(a), is amended--
       (A) in the heading, by inserting ``and Comprehensive 
     Outpatient Rehabilitation Facility Services'' after ``Therapy 
     Services''; and
       (B) in paragraph (1), by inserting ``and with respect to 
     comprehensive outpatient rehabilitation facility services'' 
     after ``occupational therapy services''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to services furnished on or after January 1, 
     1998, and to portions of cost reporting periods occurring on 
     or after such date.

                    Subchapter C--Ambulance Services

     SEC. 4431. PAYMENTS FOR AMBULANCE SERVICES.

       (a) Interim Reductions.--
       (1) Payments determined on reasonable cost basis.--Section 
     1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at 
     the end the following new subparagraph:
       ``(U) In determining the reasonable cost of ambulance 
     services (as described in subsection (s)(7)) provided during 
     a fiscal year (beginning with fiscal year 1998 and ending 
     with fiscal year 2002), the Secretary shall not recognize the 
     costs per trip in excess of costs recognized as reasonable 
     for ambulance services provided on a per trip basis during 
     the previous fiscal year after application of this 
     subparagraph, increased by the percentage increase in the 
     consumer price index for all urban consumers (U.S. city 
     average) as estimated by the Secretary for the 12-month 
     period ending with the midpoint of the fiscal year involved 
     reduced (in the case of each of fiscal years 1998 and 1999) 
     by 1 percentage point.''.
       (2) Payments determined on reasonable charge basis.--
     Section 1842(b) (42 U.S.C. 1395u(b)) is amended by adding at 
     the end the following new paragraph:
       ``(19) For purposes of section 1833(a)(1), the reasonable 
     charge for ambulance services (as described in section 
     1861(s)(7)) provided during a fiscal year (beginning with 
     fiscal year 1998 and ending with fiscal year 2002) may not 
     exceed the reasonable charge for such services provided 
     during the previous fiscal year after the application of this 
     subparagraph, increased by the percentage increase in the 
     consumer price index for all urban consumers (U.S. city 
     average) as estimated by the Secretary for the 12-month 
     period ending with the midpoint of the year involved reduced 
     (in the case of each of fiscal years 1998 and 1999) by 1 
     percentage point.''.
       (b) Establishment of Prospective Fee Schedule.--
       (1) Payment in accordance with fee schedule.--Section 
     1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by section 
     4619(b)(1), is amended--
       (A) by striking ``and (P)'' and inserting ``(P)''; and
       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (Q) with respect to ambulance service, the 
     amounts paid shall be 80 percent of the lesser of the actual 
     charge for the services or the amount determined by a fee 
     schedule established by the Secretary under section 
     1834(l);''.
       (2) Establishment of schedule.--Section 1834 (42 U.S.C. 
     1395m), as amended by section 4421(a)(2), is amended by 
     adding at the end the following new subsection:
       ``(l) Establishment of Fee Schedule for Ambulance 
     Services.--
       ``(1) In general.--The Secretary shall establish a fee 
     schedule for payment for ambulance services under this part 
     through a negotiated rulemaking process described in title 5, 
     United States Code, and in accordance with the requirements 
     of this subsection.
       ``(2) Considerations.--In establishing such fee schedule 
     the Secretary shall--
       ``(A) establish mechanisms to control increases in 
     expenditures for ambulance services under this part;
       ``(B) establish definitions for ambulance services which 
     link payments to the type of services provided;
       ``(C) consider appropriate regional and operational 
     differences;
       ``(D) consider adjustments to payment rates to account for 
     inflation and other relevant factors; and
       ``(E) phase in the application of the payment rates under 
     the fee schedule in an efficient and fair manner.

[[Page H4463]]

       ``(3) Savings.--In establishing such fee schedule the 
     Secretary shall--
       ``(A) ensure that the aggregate amount of payments made for 
     ambulance services under this part during 2000 does not 
     exceed the aggregate amount of payments which would have been 
     made for such services under this part during such year if 
     the amendments made by section 4431 of the Balanced Budget 
     Act of 1997 had not been made; and
       ``(B) set the payment amounts provided under the fee 
     schedule for services furnished in 2001 and each subsequent 
     year at amounts equal to the payment amounts under the fee 
     schedule for service furnished during the previous year, 
     increased by the percentage increase in the consumer price 
     index for all urban consumers (U.S. city average) for the 12-
     month period ending with June of the previous year.
       ``(4) Consultation.--In establishing the fee schedule for 
     ambulance services under this subsection, the Secretary shall 
     consult with various national organizations representing 
     individuals and entities who furnish and regulate ambulance 
     services and share with such organizations relevant data in 
     establishing such schedule.
       ``(5) Limitation on review.--There shall be no 
     administrative or judicial review under section 1869 or 
     otherwise of the amounts established under the fee schedule 
     for ambulance services under this subsection, including 
     matters described in paragraph (2).
       ``(6) Restraint on billing.--The provisions of 
     subparagraphs (A) and (B) of section 1842(b)(18) shall apply 
     to ambulance services for which payment is made under this 
     subsection in the same manner as they apply to services 
     provided by a practitioner described in section 
     1842(b)(18)(C).''.
       (3) Effective date.--The amendments made by this section 
     apply to ambulance services furnished on or after January 1, 
     2000.
       (c) Authorizing Payment for Paramedic Intercept Service 
     Providers in Rural Communities.--In promulgating regulations 
     to carry out section 1861(s)(7) of the Social Security Act 
     (42 U.S.C. 1395x(s)(7)) with respect to the coverage of 
     ambulance service, the Secretary of Health and Human Services 
     may include coverage of advanced life support services (in 
     this subsection referred to as ``ALS intercept services'') 
     provided by a paramedic intercept service provider in a rural 
     area if the following conditions are met:
       (1) The ALS intercept services are provided under a 
     contract with one or more volunteer ambulance services and 
     are medically necessary based on the health condition of the 
     individual being transported.
       (2) The volunteer ambulance service involved--
       (A) is certified as qualified to provide ambulance service 
     for purposes of such section,
       (B) provides only basic life support services at the time 
     of the intercept, and
       (C) is prohibited by State law from billing for any 
     services.
       (3) The entity supplying the ALS intercept services--
       (A) is certified as qualified to provide such services 
     under the medicare program under title XVIII of the Social 
     Security Act, and
       (B) bills all recipients who receive ALS intercept services 
     from the entity, regardless of whether or not such recipients 
     are medicare beneficiaries.

     SEC. 4432. DEMONSTRATION OF COVERAGE OF AMBULANCE SERVICES 
                   UNDER MEDICARE THROUGH CONTRACTS WITH UNITS OF 
                   LOCAL GOVERNMENT.

       (a) Demonstration Project Contracts with Local 
     Governments.--The Secretary of Health and Human Services 
     shall establish up to 3 demonstration projects under which, 
     at the request of a county or parish, the Secretary enters 
     into a contract with the county or parish under which--
       (1) the county or parish furnishes (or arranges for the 
     furnishing) of ambulance services for which payment may be 
     made under part B of title XVIII of the Social Security Act 
     for individuals residing in the county or parish who are 
     enrolled under such part, except that the county or parish 
     may not enter into the contract unless the contract covers at 
     least 80 percent of the individuals residing in the county or 
     parish who are enrolled under such part;
       (2) any individual or entity furnishing ambulance services 
     under the contract meets the requirements otherwise 
     applicable to individuals and entities furnishing such 
     services under such part; and
       (3) for each month during which the contract is in effect, 
     the Secretary makes a capitated payment to the county or 
     parish in accordance with subsection (b).

     The projects may extend over a period of not to exceed 3 
     years each.
       (b) Amount of Payment.--
       (1) In general.--The amount of the monthly payment made for 
     months occurring during a calendar year to a county or parish 
     under a demonstration project contract under subsection (a) 
     shall be equal to the product of--
       (A) the Secretary's estimate of the number of individuals 
     covered under the contract for the month; and
       (B) \1/12\ of the capitated payment rate for the year 
     established under paragraph (2).
       (2) Capitated payment rate defined.--In this subsection, 
     the ``capitated payment rate'' applicable to a contract under 
     this subsection for a calendar year is equal to 95 percent 
     of--
       (A) for the first calendar year for which the contract is 
     in effect, the average annual per capita payment made under 
     part B of title XVIII of the Social Security Act with respect 
     to ambulance services furnished to such individuals during 
     the 3 most recent calendar years for which data on the amount 
     of such payment is available; and
       (B) for a subsequent year, the amount provided under this 
     paragraph for the previous year increased by the percentage 
     increase in the consumer price index for all urban consumers 
     (U.S. city average) for the 12-month period ending with June 
     of the previous year.
       (c) Other Terms of Contract.--The Secretary and the county 
     or parish may include in a contract under this section such 
     other terms as the parties consider appropriate, including--
       (1) covering individuals residing in additional counties or 
     parishes (under arrangements entered into between such 
     counties or parishes and the county or parish involved);
       (2) permitting the county or parish to transport 
     individuals to non-hospital providers if such providers are 
     able to furnish quality services at a lower cost than 
     hospital providers; or
       (3) implementing such other innovations as the county or 
     parish may propose to improve the quality of ambulance 
     services and control the costs of such services.
       (d) Contract Payments in Lieu of Other Benefits.--Payments 
     under a contract to a county or parish under this section 
     shall be instead of the amounts which (in the absence of the 
     contract) would otherwise be payable under part B of title 
     XVIII of the Social Security Act for the services covered 
     under the contract which are furnished to individuals who 
     reside in the county or parish.
       (e) Report on Effects of Capitated Contracts.--
       (1) Study.--The Secretary shall evaluate the demonstration 
     projects conducted under this section. Such evaluation shall 
     include an analysis of the quality and cost-effectiveness of 
     ambulance services furnished under the projects.
       (2) Report.--Not later than January 1, 2000, the Secretary 
     shall submit a report to Congress on the study conducted 
     under paragraph (1), and shall include in the report such 
     recommendations as the Secretary considers appropriate, 
     including recommendations regarding modifications to the 
     methodology used to determine the amount of payments made 
     under such contracts and extending or expanding such 
     projects.

                 CHAPTER 3--PAYMENT UNDER PARTS A AND B

     SEC. 4441. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as 
     amended by section 4011, is amended by adding at the end the 
     following new section:


             ``prospective payment for home health services

       ``Sec. 1895. (a) In General.--Notwithstanding section 
     1861(v), the Secretary shall provide, for cost reporting 
     periods beginning on or after October 1, 1999, for payments 
     for home health services in accordance with a prospective 
     payment system established by the Secretary under this 
     section.
       ``(b) System of Prospective Payment for Home Health 
     Services.--
       ``(1) In general.--The Secretary shall establish under this 
     subsection a prospective payment system for payment for all 
     costs of home health services. Under the system under this 
     subsection all services covered and paid on a reasonable cost 
     basis under the medicare home health benefit as of the date 
     of the enactment of the this section, including medical 
     supplies, shall be paid for on the basis of a prospective 
     payment amount determined under this subsection and 
     applicable to the services involved. In implementing the 
     system, the Secretary may provide for a transition (of not 
     longer than 4 years) during which a portion of such payment 
     is based on agency-specific costs, but only if such 
     transition does not result in aggregate payments under this 
     title that exceed the aggregate payments that would be made 
     if such a transition did not occur.
       ``(2) Unit of payment.--In defining a prospective payment 
     amount under the system under this subsection, the Secretary 
     shall consider an appropriate unit of service and the number, 
     type, and duration of visits provided within that unit, 
     potential changes in the mix of services provided within that 
     unit and their cost, and a general system design that 
     provides for continued access to quality services.
       ``(3) Payment basis.--
       ``(A) Initial basis.--
       ``(i) In general.--Under such system the Secretary shall 
     provide for computation of a standard prospective payment 
     amount (or amounts). Such amount (or amounts) shall initially 
     be based on the most current audited cost report data 
     available to the Secretary and shall be computed in a manner 
     so that the total amounts payable under the system for fiscal 
     year 2000 shall be equal to the total amount that would have 
     been made if the system had not been in effect but if the 
     reduction in limits described in clause (ii) had been in 
     effect. Such amount shall be standardized in a manner that 
     eliminates the effect of variations in relative case mix and 
     wage levels among different home health agencies in a budget 
     neutral manner consistent with the case mix and wage level 
     adjustments provided under paragraph (4)(A). Under the 
     system, the Secretary may recognize regional differences or 
     differences based

[[Page H4464]]

     upon whether or not the services or agency are in an 
     urbanized area.
       ``(ii) Reduction.--The reduction described in this clause 
     is a reduction by 15 percent in the cost limits and per 
     beneficiary limits described in section 1861(v)(1)(L), as 
     those limits are in effect on September 30, 1999.
       ``(B) Annual update.--
       ``(i) In general.--The standard prospective payment amount 
     (or amounts) shall be adjusted for each fiscal year 
     (beginning with fiscal year 2001) in a prospective manner 
     specified by the Secretary by the home health market basket 
     percentage increase applicable to the fiscal year involved.
       ``(ii) Home health market basket percentage increase.--For 
     purposes of this subsection, the term `home health market 
     basket percentage increase' means, with respect to a fiscal 
     year, a percentage (estimated by the Secretary before the 
     beginning of the fiscal year) determined and applied with 
     respect to the mix of goods and services included in home 
     health services in the same manner as the market basket 
     percentage increase under section 1886(b)(3)(B)(iii) is 
     determined and applied to the mix of goods and services 
     comprising inpatient hospital services for the fiscal year.
       ``(C) Adjustment for outliers.--The Secretary shall reduce 
     the standard prospective payment amount (or amounts) under 
     this paragraph applicable to home health services furnished 
     during a period by such proportion as will result in an 
     aggregate reduction in payments for the period equal to the 
     aggregate increase in payments resulting from the application 
     of paragraph (5) (relating to outliers).
       ``(4) Payment computation.--
       ``(A) In general.--The payment amount for a unit of home 
     health services shall be the applicable standard prospective 
     payment amount adjusted as follows:
       ``(i) Case mix adjustment.--The amount shall be adjusted by 
     an appropriate case mix adjustment factor (established under 
     subparagraph (B)).
       ``(ii) Area wage adjustment.--The portion of such amount 
     that the Secretary estimates to be attributable to wages and 
     wage-related costs shall be adjusted for geographic 
     differences in such costs by an area wage adjustment factor 
     (established under subparagraph (C)) for the area in which 
     the services are furnished or such other area as the 
     Secretary may specify.
       ``(B) Establishment of case mix adjustment factors.--The 
     Secretary shall establish appropriate case mix adjustment 
     factors for home health services in a manner that explains a 
     significant amount of the variation in cost among different 
     units of services.
       ``(C) Establishment of area wage adjustment factors.--The 
     Secretary shall establish area wage adjustment factors that 
     reflect the relative level of wages and wage-related costs 
     applicable to the furnishing of home health services in a 
     geographic area compared to the national average applicable 
     level. Such factors may be the factors used by the Secretary 
     for purposes of section 1886(d)(3)(E).
       ``(5) Outliers.--The Secretary may provide for an addition 
     or adjustment to the payment amount otherwise made in the 
     case of outliers because of unusual variations in the type or 
     amount of medically necessary care. The total amount of the 
     additional payments or payment adjustments made under this 
     paragraph with respect to a fiscal year may not exceed 5 
     percent of the total payments projected or estimated to be 
     made based on the prospective payment system under this 
     subsection in that year.
       ``(6) Proration of prospective payment amounts.--If a 
     beneficiary elects to transfer to, or receive services from, 
     another home health agency within the period covered by the 
     prospective payment amount, the payment shall be prorated 
     between the home health agencies involved.
       ``(c) Requirements for Payment Information.--With respect 
     to home health services furnished on or after October 1, 
     1998, no claim for such a service may be paid under this 
     title unless--
       ``(1) the claim has the unique identifier (provided under 
     section 1842(r)) for the physician who prescribed the 
     services or made the certification described in section 
     1814(a)(2) or 1835(a)(2)(A); and
       ``(2) in the case of a service visit described in paragraph 
     (1), (2), (3), or (4) of section 1861(m), the claim has 
     information (coded in an appropriate manner) on the length of 
     time of the service visit, as measured in 15 minute 
     increments.
       ``(d) Limitation on Review.--There shall be no 
     administrative or judicial review under section 1869, 1878, 
     or otherwise of--
       ``(1) the establishment of a transition period under 
     subsection (b)(1);
       ``(2) the definition and application of payment units under 
     subsection (b)(2);
       ``(3) the computation of initial standard prospective 
     payment amounts under subsection (b)(3)(A) (including the 
     reduction described in clause (ii) of such subsection);
       ``(4) the adjustment for outliers under subsection 
     (b)(3)(C);
       ``(5) case mix and area wage adjustments under subsection 
     (b)(4);
       ``(6) any adjustments for outliers under subsection (b)(5); 
     and
       ``(7) the amounts or types of exceptions or adjustments 
     under subsection (b)(7).''.
       (b) Elimination of Periodic Interim Payments for Home 
     Health Agencies.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
     is amended--
       (1) by inserting ``and'' at the end of subparagraph (C),
       (2) by striking subparagraph (D), and
       (3) by redesignating subparagraph (E) as subparagraph (D).
       (c) Conforming Amendments.--
       (1) Payments under part a.--Section 1814(b) (42 U.S.C. 
     1395f(b)) is amended in the matter preceding paragraph (1) by 
     striking ``and 1886'' and inserting ``1886, and 1895''.
       (2) Treatment of items and services paid under part b.--
       (A) Payments under part b.--Section 1833(a)(2) (42 U.S.C. 
     1395l(a)(2)) is amended--
       (i) by amending subparagraph (A) to read as follows:
       ``(A) with respect to home health services (other than a 
     covered osteoporosis drug) (as defined in section 1861(kk)), 
     the amount determined under the prospective payment system 
     under section 1895;'';
       (ii) by striking ``and'' at the end of subparagraph (E);
       (iii) by adding ``and'' at the end of subparagraph (F); and
       (iv) by adding at the end the following new subparagraph:
       ``(G) with respect to items and services described in 
     section 1861(s)(10)(A), the lesser of--
       ``(i) the reasonable cost of such services, as determined 
     under section 1861(v), or
       ``(ii) the customary charges with respect to such services,
     or, if such services are furnished by a public provider of 
     services, or by another provider which demonstrates to the 
     satisfaction of the Secretary that a significant portion of 
     its patients are low-income (and requests that payment be 
     made under this provision), free of charge or at nominal 
     charges to the public, the amount determined in accordance 
     with section 1814(b)(2);''.
       (B) Requiring payment for all items and services to be made 
     to agency.--
       (i) In general.--The first sentence of section 1842(b)(6) 
     (42 U.S.C. 1395u(b)(6)), as amended by section 4401(b)(2), is 
     amended--

       (I) by striking ``and (E)'' and inserting ``(E)''; and
       (II) by striking the period at the end and inserting the 
     following: ``, and (F) in the case of home health services 
     furnished to an individual who (at the time the item or 
     service is furnished) is under a plan of care of a home 
     health agency, payment shall be made to the agency (without 
     regard to whether or not the item or service was furnished by 
     the agency, by others under arrangement with them made by the 
     agency, or when any other contracting or consulting 
     arrangement, or otherwise).''.

       (ii) Conforming amendment.--Section 1832(a)(1) (42 U.S.C. 
     1395k(a)(1)), as amended by section 4401(b), is amended by 
     striking ``and section 1842(b)(6)(E)'' and inserting ``, 
     section 1842(b)(6)(E), and section 1842(b)(6)(F)''.
       (C) Exclusions from coverage.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by sections 4401(b) and 4421(b), is 
     amended--
       (i) by striking ``or'' at the end of paragraph (17);
       (ii) by striking the period at the end of paragraph (18) 
     and inserting ``; or''; and
       (iii) inserting after paragraph (18) the following new 
     paragraph:
       ``(19) where such expenses are for home health services 
     furnished to an individual who is under a plan of care of the 
     home health agency if the claim for payment for such services 
     is not submitted by the agency.''.
       (d) Effective Date.--Except as otherwise provided, the 
     amendments made by this section shall apply to cost reporting 
     periods beginning on or after October 1, 1999.
             Subtitle G--Provisions Relating to Part B Only

                    CHAPTER 1--PHYSICIANS' SERVICES

     SEC. 4601. ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 
                   1998.

       (a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-
     4(d)(1)) is amended--
       (1) by redesignating subparagraph (C) as subparagraph (D), 
     and
       (2) by inserting after subparagraph (B) the following:
       ``(C) Special rules for 1998.--The single conversion factor 
     for 1998 under this subsection shall be the conversion factor 
     for primary care services for 1997, increased by the 
     Secretary's estimate of the weighted average of the three 
     separate updates that would otherwise occur were it not for 
     the enactment of chapter 1 of subtitle G of title X of the 
     Balanced Budget Act of 1997.''.
       (b) Conforming Amendments.--Section 1848 (42 U.S.C. 1395w-
     4) is amended--
       (1) by striking ``(or factors)'' each place it appears in 
     subsection (d)(1)(A) and (d)(1)(D)(ii) (as redesignated by 
     subsection (a)(1)),
       (2) in subsection (d)(1)(A), by striking ``or updates'',
       (3) in subsection (d)(1)(D) (as redesignated by subsection 
     (a)(1)), by striking ``(or updates)'' each place it appears, 
     and
       (4) in subsection (i)(1)(C), by striking ``conversion 
     factors'' and inserting ``the conversion factor''.

     SEC. 4602. ESTABLISHING UPDATE TO CONVERSION FACTOR TO MATCH 
                   SPENDING UNDER SUSTAINABLE GROWTH RATE.

       (a) Update.--
       (1) In general.--Section 1848(d)(3) (42 U.S.C. 1395w-
     4(d)(3)) is amended to read as follows:
       ``(3) Update.--
       ``(A) In general.--Unless otherwise provided by law, 
     subject to subparagraph (D)

[[Page H4465]]

     and the budget-neutrality factor determined by the Secretary 
     under subsection (c)(2)(B)(ii), the update to the single 
     conversion factor established in paragraph (1)(C) for a year 
     beginning with 1999 is equal to the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     increase in the MEI (as defined in section 1842(i)(3)) for 
     the year (divided by 100), and
       ``(ii) 1 plus the Secretary's estimate of the update 
     adjustment factor for the year (divided by 100),
     minus 1 and multiplied by 100.
       ``(B) Update adjustment factor.--For purposes of 
     subparagraph (A)(ii), the `update adjustment factor' for a 
     year is equal to the quotient (as estimated by the Secretary) 
     of--
       ``(i) the difference between (I) the sum of the allowed 
     expenditures for physicians' services (as determined under 
     subparagraph (C)) during the period beginning July 1, 1997, 
     and ending on June 30 of the year involved, and (II) the sum 
     of the amount of actual expenditures for physicians' services 
     furnished during the period beginning July 1, 1997, and 
     ending on June 30 of the preceding year; divided by
       ``(ii) the actual expenditures for physicians' services for 
     the 12-month period ending on June 30 of the preceding year, 
     increased by the sustainable growth rate under subsection (f) 
     for the fiscal year which begins during such 12-month period.
       ``(C) Determination of allowed expenditures.--For purposes 
     of this paragraph, the allowed expenditures for physicians' 
     services for the 12-month period ending with June 30 of--
       ``(i) 1997 is equal to the actual expenditures for 
     physicians' services furnished during such 12-month period, 
     as estimated by the Secretary; or
       ``(ii) a subsequent year is equal to the allowed 
     expenditures for physicians' services for the previous year, 
     increased by the sustainable growth rate under subsection (f) 
     for the fiscal year which begins during such 12-month period.
       ``(D) Restriction on variation from medicare economic 
     index.--Notwithstanding the amount of the update adjustment 
     factor determined under subparagraph (B) for a year, the 
     update in the conversion factor under this paragraph for the 
     year may not be--
       ``(i) greater than 100 times the following amount: (1.03 + 
     (MEI percentage/100)) -1; or
       ``(ii) less than 100 times the following amount: (0.93 + 
     (MEI percentage/100)) -1,
     where `MEI percentage' means the Secretary's estimate of the 
     percentage increase in the MEI (as defined in section 
     1842(i)(3)) for the year involved.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to the update for years beginning with 1999.
       (b) Elimination of Report.--Section 1848(d) (42 U.S.C. 
     1395w-4(d)) is amended by striking paragraph (2).

     SEC. 4603. REPLACEMENT OF VOLUME PERFORMANCE STANDARD WITH 
                   SUSTAINABLE GROWTH RATE.

       (a) In General.--Section 1848(f) (42 U.S.C. 1395w-4(f)) is 
     amended by striking paragraphs (2) through (5) and inserting 
     the following:
       ``(2) Specification of growth rate.--The sustainable growth 
     rate for all physicians' services for a fiscal year 
     (beginning with fiscal year 1998) shall be equal to the 
     product of--
       ``(A) 1 plus the Secretary's estimate of the weighted 
     average percentage increase (divided by 100) in the fees for 
     all physicians' services in the fiscal year involved,
       ``(B) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than MedicarePlus plan 
     enrollees) from the previous fiscal year to the fiscal year 
     involved,
       ``(C) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from the previous fiscal year to the fiscal 
     year involved, and
       ``(D) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services in the fiscal year (compared with the previous 
     fiscal year) which will result from changes in law and 
     regulations, determined without taking into account estimated 
     changes in expenditures due to changes in the volume and 
     intensity of physicians' services resulting from changes in 
     the update to the conversion factor under subsection (d)(3),
     minus 1 and multiplied by 100.
       ``(3) Definitions.--In this subsection:
       ``(A) Services included in physicians' services.--The term 
     `physicians' services' includes other items and services 
     (such as clinical diagnostic laboratory tests and radiology 
     services), specified by the Secretary, that are commonly 
     performed or furnished by a physician or in a physician's 
     office, but does not include services furnished to a 
     MedicarePlus plan enrollee.
       ``(B) MedicarePlus plan enrollee.--The term `MedicarePlus 
     plan enrollee' means, with respect to a fiscal year, an 
     individual enrolled under this part who has elected to 
     receive benefits under this title for the fiscal year through 
     a MedicarePlus plan offered under part C, and also includes 
     an individual who is receiving benefits under this part 
     through enrollment with an eligible organization with a risk-
     sharing contract under section 1876.''.
       (b) Conforming Amendments.--Section 1848(f) (42 U.S.C. 
     1395w-4(f)) is amended--
       (1) in the heading, by striking ``Volume Performance 
     Standard Rates of Increase'' and inserting ``Sustainable 
     Growth Rate''; and
       (2) in paragraph (1)--
       (A) in the heading, by striking ``volume performance 
     standard rates of increase'' and inserting ``sustainable 
     growth rate'',
       (B) by striking subparagraphs (A) and (B); and
       (C) in paragraph (1)(C)--
       (i) in the heading, by striking ``performance standard 
     rates of increase'' and inserting ``sustainable growth 
     rate'';
       (ii) in the first sentence, by striking ``with 1991), the 
     performance standard rates of increase'' and all that follows 
     through the first period and inserting ``with 1999), the 
     sustainable growth rate for the fiscal year beginning in that 
     year.''; and
       (iii) in the second sentence, by striking ``January 1, 
     1990, the performance standard rate of increase under 
     subparagraph (D) for fiscal year 1990'' and inserting 
     ``January 1, 1999, the sustainable growth rate for fiscal 
     year 1999''.

     SEC. 4604. PAYMENT RULES FOR ANESTHESIA SERVICES.

       (a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-
     4(d)(1)), as amended by section 4601, is amended--
       (A) in subparagraph (C), striking ``The single'' and 
     inserting ``Except as provided in subparagraph (D), the 
     single'';
       (B) by redesignating subparagraph (D) as subparagraph (E); 
     and
       (C) by inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) Special rules for anesthesia services.--The separate 
     conversion factor for anesthesia services for a year shall be 
     equal to 46 percent of the single conversion factor 
     established for other physicians' services, except as 
     adjusted for changes in work, practice expense, or 
     malpractice relative value units. ''.
       (b) Classification of Anesthesia Services.--The first 
     sentence of section 1848(j)(1) (42 U.S.C. 1395w-4(j)(1)) is 
     amended--
       (1) by striking ``and including anesthesia services''; and
       (2) by inserting before the period the following: 
     ``(including anesthesia services)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1998.

     SEC. 4605. IMPLEMENTATION OF RESOURCE-BASED PHYSICIAN 
                   PRACTICE EXPENSE.

       (a) 1-Year Delay in Implementation.--Section 1848(c) (42 
     U.S.C. 1395w-4(c)) is amended--
       (1) in paragraph (2)(C)(ii), in the matter before subclause 
     (I) and after subclause (II), by striking ``1998'' and 
     inserting ``1999'' each place it appears; and
       (2) in paragraph (3)(C)(ii), by striking ``1998'' and 
     inserting ``1999''.
       (b) Phased-in Implementation.--
       (1) In general.--Section 1848(c)(2)(C)(ii) (42 U.S.C. 
     1395w-4(c)(2)(C)(ii)) is further amended--
       (A) by striking the comma at the end of clause (ii) and 
     inserting a period and the following:
     ``For 1999, such number of units shall be determined based 75 
     percent on such product and based 25 percent on the relative 
     practice expense resources involved in furnishing the 
     service. For 2000, such number of units shall be determined 
     based 50 percent on such product and based 50 percent on such 
     relative practice expense resources. For 2001, such number of 
     units shall be determined based 25 percent on such product 
     and based 75 percent on such relative practice expense 
     resources. For a subsequent year, such number of units shall 
     be determined based entirely on such relative practice 
     expense resources.''.
       (2) Conforming amendment.--Section 1848(c)(3)(C)(ii) (42 
     U.S.C. 1395w-4(c)(3)(C)(ii)), as amended by subsection 
     (a)(2), is amended by striking ``1999'' and inserting 
     ``2002''.
       (c) Requirements for Developing New Resource-Based Practice 
     Expense Relative Value Units.--
       (1) Development.--For purposes of section 1848(c)(2)(C) of 
     the Social Security Act, the Secretary of Health and Human 
     Services shall develop new resource-based relative value 
     units. In developing such units the Secretary shall--
       (A) utilize, to the maximum extent practicable, generally 
     accepted accounting principles and standards which (i) 
     recognize all staff, equipment, supplies, and expenses, not 
     just those which can be tied to specific procedures, and (ii) 
     use actual data on equipment utilization and other key 
     assumptions, such as the proportion of costs which are direct 
     versus indirect;
       (B) study whether hospital cost reduction efforts and 
     changing practice patterns may have increased physician 
     practice costs under part B of the medicare program;
       (C) consider potential adverse effects on patient access 
     under the medicare program; and
       (D) consult with organizations representing physicians 
     regarding methodology and data to be used, including data for 
     impact projections, in order to ensure that sufficient input 
     has been received by the affected physician community.
       (2) Report.--The Secretary shall transmit a report by March 
     1, 1998, on the development of resource-based relative value 
     units under paragraph (1) to the Committee on Ways and Means 
     and the Committee on Commerce of the House of Representatives 
     and the Committee on Finance of the Senate. The report shall 
     include a presentation of

[[Page H4466]]

     data to be used in developing the value units and an 
     explanation of the methodology.
       (3) Notice of proposed rulemaking.--The Secretary shall 
     publish a notice of proposed rulemaking with the new 
     resource-based relative value units on or before May 1, 1998, 
     and shall allow for a 90-day public comment period.
       (4) Items included.--The proposed new rule shall include 
     the following:
       (A) Detailed impact projections which compare new proposed 
     payment amounts on data on actual physician practice 
     expenses.
       (B) Impact projections for specialties and subspecialties, 
     geographic payment localities, urban versus rural localities, 
     and academic versus nonacademic medical staffs.
       (C) Impact projections on access to care for medicare 
     patients and physician employment of clinical and 
     administrative staff.

     SEC. 4606. DISSEMINATION OF INFORMATION ON HIGH PER DISCHARGE 
                   RELATIVE VALUES FOR IN-HOSPITAL PHYSICIANS' 
                   SERVICES.

       (a) Determination and Notice Concerning Hospital-Specific 
     Per Discharge Relative Values.--
       (1) In general.--For 1999 and 2001 the Secretary of Health 
     and Human Services shall determine for each hospital--
       (A) the hospital-specific per discharge relative value 
     under subsection (b); and
       (B) whether the hospital-specific relative value is 
     projected to be excessive (as determined based on such value 
     represented as a percentage of the median of hospital-
     specific per discharge relative values determined under 
     subsection (b)).
       (2) Notice to medical staffs and carriers.--The Secretary 
     shall notify the medical executive committee of each hospital 
     identifies under paragraph (1)(B) as having an excessive 
     hospital-specific relative value, of the determinations made 
     with respect to the medical staff under paragraph (1).
       (b) Determination of Hospital-Specific Per Discharge 
     Relative Values.--
       (1) In general.--For purposes of this section, the 
     hospital-specific per discharge relative value for the 
     medical staff of a hospital (other than a teaching hospital) 
     for a year, shall be equal to the average per discharge 
     relative value (as determined under section 1848(c)(2) of the 
     Social Security Act) for physicians' services furnished to 
     inpatients of the hospital by the hospital's medical staff 
     (excluding interns and residents) during the second year 
     preceding that calendar year, adjusted for variations in 
     case-mix and disproportionate share status among hospitals 
     (as determined by the Secretary under paragraph (3)).
       (2) Special rule for teaching hospitals.--The hospital-
     specific relative value projected for a teaching hospital in 
     a year shall be equal to the sum of--
       (A) the average per discharge relative value (as determined 
     under section 1848(c)(2) of such Act) for physicians' 
     services furnished to inpatients of the hospital by the 
     hospital's medical staff (excluding interns and residents) 
     during the second year preceding that calendar year, and
       (B) the equivalent per discharge relative value (as 
     determined under such section) for physicians' services 
     furnished to inpatients of the hospital by interns and 
     residents of the hospital during the second year preceding 
     that calendar year, adjusted for variations in case-mix, 
     disproportionate share status, and teaching status among 
     hospitals (as determined by the Secretary under paragraph 
     (3)).
     The Secretary shall determine the equivalent relative value 
     unit per discharge for interns and residents based on the 
     best available data and may make such adjustment in the 
     aggregate.
       (3) Adjustment for teaching and disproportionate share 
     hospitals.--The Secretary shall adjust the allowable per 
     discharge relative values otherwise determined under this 
     subsection to take into account the needs of teaching 
     hospitals and hospitals receiving additional payments under 
     subparagraphs (F) and (G) of section 1886(d)(5) of the Social 
     Security Act. The adjustment for teaching status or 
     disproportionate share shall not be less than zero.
       (c) Definitions.--For purposes of this section:
       (1) Hospital.--The term ``hospital'' means a subsection (d) 
     hospital as defined in section 1886(d) of the Social Security 
     Act (42 U.S.C. 1395ww(d)).
       (2) Medical staff.--An individual furnishing a physician's 
     service is considered to be on the medical staff of a 
     hospital--
       (A) if (in accordance with requirements for hospitals 
     established by the Joint Commission on Accreditation of 
     Health Organizations)--
       (i) the individual is subject to bylaws, rules, and 
     regulations established by the hospital to provide a 
     framework for the self-governance of medical staff 
     activities,
       (ii) subject to the bylaws, rules, and regulations, the 
     individual has clinical privileges granted by the hospital's 
     governing body, and
       (iii) under the clinical privileges, the individual may 
     provide physicians'' services independently within the scope 
     of the individual's clinical privileges, or
       (B) if the physician provides at least one service to an 
     individual entitled to benefits under this title in that 
     hospital.
       (3) Physicians' services.--The term ``physicians'' 
     services'' means the services described in section 1848(j)(3) 
     of the Social Security Act (42 U.S.C. 1395w-4(j)(3)).
       (4) Rural area; urban area.--The terms ``rural area'' and 
     ``urban area'' have the meaning given those terms under 
     section 1886(d)(2)(D) of such Act (42 U.S.C. 
     1395ww(d)(2)(D)).
       (5) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (6) Teaching hospital.--The term ``teaching hospital'' 
     means a hospital which has a teaching program approved as 
     specified in section 1861(b)(6) of the Social Security Act 
     (42 U.S.C. 1395x(b)(6)).

     SEC. 4607. NO X-RAY REQUIRED FOR CHIROPRACTIC SERVICES.

       (a) In General.--Section 1861(r)(5) (42 U.S.C. 1395x(r)(5)) 
     is amended by striking ``demonstrated by X-ray to exist''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to services furnished on or after January 1, 1998.
       (c) Utilization Guidelines.--The Secretary of Health and 
     Human Services shall develop and implement utilization 
     guidelines relating to the coverage of chiropractic services 
     under part B of title XVIII of the Social Security Act in 
     cases in which a subluxation has not been demonstrated by X-
     ray to exist.

     SEC. 4608. TEMPORARY COVERAGE RESTORATION FOR PORTABLE 
                   ELECTROCARDIOGRAM TRANSPORTATION.

       (a) In General.--Effective for electrocardiogram tests 
     performed during 1998, the Secretary of Health and Human 
     Services shall restore separate payment, under part B of 
     title XVIII of the Social Security Act, for the 
     transportation of electrocardiogram equipment (HCPCS code 
     R0076) based upon the status code and relative value units 
     established for such service as of December 31, 1996.
       (b) Report.--By not later than July 1, 1998, the 
     Comptroller General shall submit to Congress a report on the 
     appropriateness of continuing such payment.

                  CHAPTER 2--OTHER PAYMENT PROVISIONS

     SEC. 4611. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

       (a) Reduction in Payment Amounts for Items of Durable 
     Medical Equipment.--
       (1) Freeze in update for covered items.--Section 
     1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--
       (A) by striking ``and'' at the end of subparagraph (A);
       (B) in subparagraph (B)--
       (i) by striking ``a subsequent year'' and inserting ``1993, 
     1994, 1995, 1996, and 1997'', and
       (ii) by striking the period at the end and inserting a 
     semicolon; and
       (C) by adding at the end the following:
       ``(C) for each of the years 1998 through 2002, 0 percentage 
     points; and
       ``(D) for a subsequent year, the percentage increase in the 
     consumer price index for all urban consumers (U.S. urban 
     average) for the 12-month period ending with June of the 
     previous year.''.
       (2) Update for orthotics and prosthetics.--Section 
     1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
       (A) by striking ``, and'' at the end of clause (iii) and 
     inserting a semicolon;
       (B) in clause (iv), by striking ``a subsequent year'' and 
     inserting ``1996 and 1997'', and
       (C) by adding at the end the following new clauses:
       ``(v) for each of the years 1998 through 2002, 1 percent, 
     and
       ``(vi) for a subsequent year, the percentage increase in 
     the consumer price index for all urban consumers (United 
     States city average) for the 12-month period ending with June 
     of the previous year;''.
       (c) Payment Freeze for Parenteral and Enteral Nutrients, 
     Supplies, and Equipment.--In determining the amount of 
     payment under part B of title XVIII of the Social Security 
     Act with respect to parenteral and enteral nutrients, 
     supplies, and equipment during each of the years 1998 through 
     2002, the charges determined to be reasonable with respect to 
     such nutrients, supplies, and equipment may not exceed the 
     charges determined to be reasonable with respect to such 
     nutrients, supplies, and equipment during 1995.

     SEC. 4612. 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, 1995, 1996, and 1997'', and
       (B) by striking the period at the end and inserting a 
     semicolon; and
       (3) by adding at the end the following new clauses:
       ``(v) in each of the years 1998 through 2002, is 80 percent 
     of the national limited monthly payment rate computed under 
     subparagraph (B) for the item for the year; and
       ``(vi) in a subsequent year, is the national limited 
     monthly payment rate computed under subparagraph (B) for the 
     item for the year.''.

     SEC. 4613. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR 
                   CLINICAL DIAGNOSTIC LABORATORY TESTS.

       (a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 
     U.S.C. 1395l(h)(2)(A)(ii)(IV)) is amended by inserting ``and 
     1998 through 2002'' after ``1995''.
       (b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B) 
     (42 U.S.C. 1395l(h)(4)(B)) is amended--
       (1) in clause (vi), by striking ``and'' at the end;

[[Page H4467]]

       (2) in clause (vii)--
       (A) by inserting ``and before January 1, 1998,'' after 
     ``1995,'', and
       (B) by striking the period at the end and inserting ``, 
     and''; and
       (3) by adding at the end the following new clause:
       ``(viii) after December 31, 1997, is equal to 72 percent of 
     such median.''.

     SEC. 4614. SIMPLIFICATION IN ADMINISTRATION OF LABORATORY 
                   TESTS.

       (a) Selection of Regional Carriers.--
       (1) In general.--The Secretary of Health and Human Services 
     (in this section referred to as the ``Secretary'') shall--
       (A) divide the United States into no more than 5 regions, 
     and
       (B) designate a single carrier for each such region,
     for the purpose of payment of claims under part B of title 
     XVIII of the Social Security Act with respect to clinical 
     diagnostic laboratory tests (other than for tests performed 
     in physician offices) furnished on or after such date (not 
     later than January 1, 1999) as the Secretary specifies.
       (2) Designation.--In designating such carriers, the 
     Secretary shall consider, among other criteria--
       (A) a carrier's timeliness, quality, and experience in 
     claims processing, and
       (B) a carrier's capacity to conduct electronic data 
     interchange with laboratories and data matches with other 
     carriers.
       (3) Single data resource.--The Secretary may select one of 
     the designated carriers to serve as a central statistical 
     resource for all claims information relating to such clinical 
     diagnostic laboratory tests handled by all the designated 
     carriers under such part.
       (4) Allocation of claims.--The allocation of claims for 
     clinical diagnostic laboratory tests to particular designated 
     carriers shall be based on whether a carrier serves the 
     geographic area where the laboratory specimen was collected 
     or other method specified by the Secretary.
       (b) Adoption of Uniform Policies for Clinical Laboratory 
     Tests.--
       (1) In general.--Not later than July 1, 1998, the Secretary 
     shall first adopt, consistent with paragraph (2), uniform 
     coverage, administration, and payment policies for clinical 
     diagnostic laboratory tests under part B of title XVIII of 
     the Social Security Act, using a negotiated rulemaking 
     process under subchapter III of chapter 5 of title 5, United 
     States Code.
       (2) Considerations in design of uniform policies.--The 
     policies under paragraph (1) shall be designed to promote 
     uniformity and program integrity and reduce administrative 
     burdens with respect to clinical diagnostic laboratory tests 
     payable under such part in connection with the following:
       (A) Beneficiary information required to be submitted with 
     each claim or order for laboratory tests.
       (B) Physicians' obligations regarding documentation 
     requirements and recordkeeping.
       (C) Procedures for filing claims and for providing 
     remittances by electronic media.
       (D) The documentation of medical necessity.
       (E) Limitation on frequency of coverage for the same tests 
     performed on the same individual.
       (3) Changes in carrier requirements pending adoption of 
     uniform policy.--During the period that begins on the date of 
     the enactment of this Act and ends on the date the Secretary 
     first implements uniform policies pursuant to regulations 
     promulgated under this subsection, a carrier under such part 
     may implement changes relating to requirements for the 
     submission of a claim for clinical diagnostic laboratory 
     tests.
       (4) Use of interim regional policies.--After the date the 
     Secretary first implements such uniform policies, the 
     Secretary shall permit any carrier to develop and implement 
     interim policies of the type described in paragraph (1), in 
     accordance with guidelines established by the Secretary, in 
     cases in which a uniform national policy has not been 
     established under this subsection and there is a demonstrated 
     need for a policy to respond to aberrant utilization or 
     provision of unnecessary services. Except as the Secretary 
     specifically permits, no policy shall be implemented under 
     this paragraph for a period of longer than 2 years.
       (5) Interim national policies.--After the date the 
     Secretary first designates regional carriers under subsection 
     (a), the Secretary shall establish a process under which 
     designated carriers can collectively develop and implement 
     interim national standards of the type described in paragraph 
     (1). No such policy shall be implemented under this paragraph 
     for a period of longer than 2 years.
       (6) Biennial review process.--Not less often than once 
     every 2 years, the Secretary shall solicit and review 
     comments regarding changes in the uniform policies 
     established under this subsection. As part of such biennial 
     review process, the Secretary shall specifically review and 
     consider whether to incorporate or supersede interim, 
     regional, or national policies developed under paragraph (4) 
     or (5). Based upon such review, the Secretary may provide for 
     appropriate changes in the uniform policies previously 
     adopted under this subsection.
       (7) Notice.-- Before a carrier implements a change or 
     policy under paragraph (3), (4), or (5), the carrier shall 
     provide for advance notice to interested parties and a 45-day 
     period in which such parties may submit comments on the 
     proposed change.
       (c) Inclusion of Laboratory Representative on Carrier 
     Advisory Committees.--The Secretary shall direct that any 
     advisory committee established by such a carrier, to advise 
     with respect to coverage, administration or payment policies 
     under part B of title XVIII of the Social Security Act, shall 
     include an individual to represent the interest and views of 
     independent clinical laboratories and such other laboratories 
     as the Secretary deems appropriate. Such individual shall be 
     selected by such committee from among nominations submitted 
     by national and local organizations that represent 
     independent clinical laboratories.

     SEC. 4615. UPDATES FOR AMBULATORY SURGICAL SERVICES.

       Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended 
     by striking all that follows ``shall be increased'' and 
     inserting the following: ``as follows:
       ``(i) For fiscal years 1996 and 1997, by the percentage 
     increase in the consumer price index for all urban consumers 
     (U.S. city average) as estimated by the Secretary for the 12-
     month period ending with the midpoint of the year involved.
       ``(ii) For each of fiscal years 1998 through 2002 by such 
     percentage increase minus 2.0 percentage points.
       ``(iii) For each succeeding fiscal year by such percentage 
     increase.''.

     SEC. 4616. REIMBURSEMENT FOR DRUGS AND BIOLOGICALS.

       (a) In General.--Section 1842 (42 U.S.C. 1395u) is amended 
     by inserting after subsection (n) the following new 
     subsection:
       ``(o) If a physician's, supplier's, or any other person's 
     bill or request for payment for services includes a charge 
     for a drug or biological for which payment may be made under 
     this part and the drug or biological is not paid on a cost or 
     prospective payment basis as otherwise provided in this part, 
     the amount payable for the drug or biological is equal to 95 
     percent of the average wholesale price.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to drugs and biologicals furnished on or after January 
     1, 1998.

     SEC. 4617. COVERAGE OF ORAL ANTI-NAUSEA DRUGS UNDER 
                   CHEMOTHERAPEUTIC REGIMEN.

       (a) In General.--Section 1861(s)(2) (42 U.S.C. 
     1395x(s)(2)), as amended, is amended by inserting after 
     subparagraph (S) the following new subparagraph:
       ``(T) an oral drug (which is approved by the Federal Food 
     and Drug Administration) prescribed for use as an acute anti-
     emetic used as part of an anticancer chemotherapeutic regimen 
     if the drug is administered by a physician (or as prescribed 
     by a physician)--
       ``(i) for use immediately before, at, or within 48 hours 
     after the time of the administration of the anticancer 
     chemotherapeutic agent; and
       ``(ii) as a full replacement for the anti-emetic therapy 
     which would otherwise be administered intravenously.''.
       (b) Payment Levels.--Section 1834 (42 U.S.C. 1395m), as 
     amended by sections 4421(a)(2) and 4431(b)(2), is amended by 
     adding at the end the following new subsection:
       ``(m) Special Rules for Payment for Oral Anti-Nausea 
     Drugs.--
       ``(1) Limitation on per dose payment basis.--Subject to 
     paragraph (2), the per dose payment basis under this part for 
     oral anti-nausea drugs (as defined in paragraph (3)) 
     administered during a year shall not exceed 90 percent of the 
     average per dose payment basis for the equivalent intravenous 
     anti-emetics administered during the year, as computed based 
     on the payment basis applied during 1996.
       ``(2) Aggregate limit.--The Secretary shall make such 
     adjustment in the coverage of, or payment basis for, oral 
     anti-nausea drugs so that coverage of such drugs under this 
     part does not result in any increase in aggregate payments 
     per capita under this part above the levels of such payments 
     per capita that would otherwise have been made if there were 
     no coverage for such drugs under this part.
       ``(3) Oral anti-nausea drugs defined.--For purposes of this 
     subsection, the term `oral anti-nausea drugs' means drugs for 
     which coverage is provided under this part pursuant to 
     section 1861(s)(2)(P).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4618. RURAL HEALTH CLINIC SERVICES.

       (a) Per-Visit Payment Limits for Provider-Based Clinics.--
       (1) Extension of limit.--
       (A) In general.--The matter in section 1833(f) (42 U.S.C. 
     1395l(f)) preceding paragraph (1) is amended by striking 
     ``independent rural health clinics'' and inserting ``rural 
     health clinics (other than such clinics in rural hospitals 
     with less than 50 beds)''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     applies to services furnished after 1997.
       (2) Technical clarification.--Section 1833(f)(1) (42 U.S.C. 
     1395l(f)(1)) is amended by inserting ``per visit'' after 
     ``$46''.
       (b) Assurance of Quality Services.--
       (1) In general.--Subparagraph (I) of the first sentence of 
     section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended to 
     read as follows:
       ``(I) has a quality assessment and performance improvement 
     program, and appropriate procedures for review of utilization 
     of clinic services, as the Secretary may specify,''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on January 1, 1998.

[[Page H4468]]

       (c) Waiver of Certain Staffing Requirements Limited to 
     Clinics in Program.--
       (1) In general.--Section 1861(aa)(7)(B) (42 U.S.C. 
     1395x(aa)(7)(B)) is amended by inserting before the period at 
     the end the following: ``, or if the facility has not yet 
     been determined to meet the requirements (including 
     subparagraph (J) of the first sentence of paragraph (2)) of a 
     rural health clinic''.
       (2) Effective date.--The amendment made by paragraph (1) 
     applies to waiver requests made after 1997.
       (d) Refinement of Shortage Area Requirements.--
       (1) Designation reviewed triennially.--Section 1861(aa)(2) 
     (42 U.S.C. 1395x(aa)(2)) is amended in the second sentence, 
     in the matter in clause (i) preceding subclause (I)--
       (A) by striking ``and that is designated'' and inserting 
     ``and that, within the previous three-year period, has been 
     designated''; and
       (B) by striking ``or that is designated'' and inserting 
     ``or designated''.
       (2) Area must have shortage of health care practitioners.--
     Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)), as amended by 
     paragraph (1), is further amended in the second sentence, in 
     the matter in clause (i) preceding subclause (I)--
       (A) by striking the comma after ``personal health 
     services''; and
       (B) by inserting ``and in which there are insufficient 
     numbers of needed health care practitioners (as determined by 
     the Secretary),'' after ``Bureau of the Census)''.
       (3) Previously qualifying clinics grandfathered only to 
     prevent shortage.--Section 1861(aa)(2) (42 U.S.C. 
     1395x(aa)(2)) is amended in the third sentence by inserting 
     before the period ``if it is determined, in accordance with 
     criteria established by the Secretary in regulations, to be 
     essential to the delivery of primary care services that would 
     otherwise be unavailable in the geographic area served by the 
     clinic''.
       (4) Effective dates; implementing regulations.--
       (A) In general.--Except as otherwise provided, the 
     amendments made by the preceding paragraphs take effect on 
     January 1 of the first calendar year beginning at least one 
     month after enactment of this Act.
       (B) Current rural health clinics.--The amendments made by 
     the preceding paragraphs take effect, with respect to 
     entities that are rural health clinics under title XVIII of 
     the Social Security Act on the date of enactment of this Act, 
     on January 1 of the second calendar year following the 
     calendar year specified in subparagraph (A).
       (C) Grandfathered clinics.--
       (i) In general.--The amendment made by paragraph (3) shall 
     take effect on the effective date of regulations issued by 
     the Secretary under clause (ii).
       (ii) Regulations.--The Secretary shall issue final 
     regulations implementing paragraph (3) that shall take effect 
     no later than January 1 of the third calendar year beginning 
     at least one month after enactment of this Act.

     SEC. 4619. INCREASED MEDICARE REIMBURSEMENT FOR NURSE 
                   PRACTITIONERS AND CLINICAL NURSE SPECIALISTS.

       (a) Removal of Restrictions on Settings.--
       (1) In general.--Clause (ii) of section 1861(s)(2)(K) (42 
     U.S.C. 1395x(s)(2)(K)) is amended to read as follows:
       ``(ii) services which would be physicians' services if 
     furnished by a physician (as defined in subsection (r)(1)) 
     and which are performed by a nurse practitioner or clinical 
     nurse specialist (as defined in subsection (aa)(5)) working 
     in collaboration (as defined in subsection (aa)(6)) with a 
     physician (as defined in subsection (r)(1)) which the nurse 
     practitioner or clinical nurse specialist is legally 
     authorized to perform by the State in which the services are 
     performed, and such services and supplies furnished as an 
     incident to such services as would be covered under 
     subparagraph (A) if furnished incident to a physician's 
     professional service, but only if no facility or other 
     provider charges or is paid any amounts with respect to the 
     furnishing of such services;''.
       (2) Conforming amendments.--(A) Section 1861(s)(2)(K) of 
     such Act (42 U.S.C. 1395x(s)(2)(K)) is further amended--
       (i) in clause (i), by inserting ``and such services and 
     supplies furnished as incident to such services as would be 
     covered under subparagraph (A) if furnished incident to a 
     physician's professional service; and'' after ``are 
     performed,''; and
       (ii) by striking clauses (iii) and (iv).
       (B) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended 
     by striking ``clauses (i) or (iii) of subsection (s)(2)(K)'' 
     and inserting ``subsection (s)(2)(K)''.
       (C) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
     by striking ``section 1861(s)(2)(K)(i) or 
     1861(s)(2)(K)(iii)'' and inserting ``section 1861(s)(2)(K)''.
       (D) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is 
     amended by striking ``section 1861(s)(2)(K)(i) or 
     1861(s)(2)(K)(iii)'' and inserting ``section 1861(s)(2)(K)''.
       (E) Section 1888(e)(2)(A)(ii) (42 U.S.C. 
     1395yy(e)(2)(A)(ii)), as added by section 10401(a), is 
     amended by striking ``through (iii)'' and inserting ``and 
     (ii)''.
       (b) Increased Payment.--
       (1) Fee schedule amount.--Clause (O) of section 1833(a)(1) 
     (42 U.S.C. 1395l(a)(1)) is amended to read as follows: ``(O) 
     with respect to services described in section 
     1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical 
     nurse specialist services), the amounts paid shall be equal 
     to 80 percent of (i) the lesser of the actual charge or 85 
     percent of the fee schedule amount provided under section 
     1848, or (ii) in the case of services as an assistant at 
     surgery, the lesser of the actual charge or 85 percent of the 
     amount that would otherwise be recognized if performed by a 
     physician who is serving as an assistant at surgery; and''.
       (2) Conforming amendments.--(A) Section 1833(r) (42 U.S.C. 
     1395l(r)) is amended--
       (i) in paragraph (1), by striking ``section 
     1861(s)(2)(K)(iii) (relating to nurse practitioner or 
     clinical nurse specialist services provided in a rural 
     area)'' and inserting ``section 1861(s)(2)(K)(ii) (relating 
     to nurse practitioner or clinical nurse specialist 
     services)'';
       (ii) by striking paragraph (2);
       (iii) in paragraph (3), by striking ``section 
     1861(s)(2)(K)(iii)'' and inserting ``section 
     1861(s)(2)(K)(ii)''; and
       (iv) by redesignating paragraph (3) as paragraph (2).
       (B) Section 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is 
     amended, in the matter preceding clause (i), by striking 
     ``clauses (i), (ii), or (iv) of section 1861(s)(2)(K) 
     (relating to a physician assistants and nurse 
     practitioners)'' and inserting ``section 1861(s)(2)(K)(i) 
     (relating to physician assistants)''.
       (c) Direct Payment for Nurse Practitioners and Clinical 
     Nurse Specialists.--
       (1) In general.--Section 1832(a)(2)(B)(iv) (42 U.S.C. 
     1395k(a)(2)(B)(iv)) is amended by striking ``provided in a 
     rural area (as defined in section 1886(d)(2)(D))'' and 
     inserting ``but only if no facility or other provider charges 
     or is paid any amounts with respect to the furnishing of such 
     services''.
       (2) Conforming amendment.--Section 1842(b)(6)(C) (42 U.S.C. 
     1395u(b)(6)(C)) is amended--
       (A) by striking ``clauses (i), (ii), or (iv)'' and 
     inserting ``clause (i)''; and
       (B) by striking ``or nurse practitioner''.
       (d) Definition of Clinical Nurse Specialist Clarified.--
     Section 1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended--
       (1) by inserting ``(A)'' after ``(5)'';
       (2) by striking ``The term `physician assist-ant' '' and 
     all that follows through ``who performs'' and inserting ``The 
     term `physician assistant' and the term `nurse practitioner' 
     mean, for purposes of this title, a physician assistant or 
     nurse practitioner who performs''; and
       (3) by adding at the end the following new subparagraph:
       ``(B) The term `clinical nurse specialist' means, for 
     purposes of this title, an individual who--
       ``(i) is a registered nurse and is licensed to practice 
     nursing in the State in which the clinical nurse specialist 
     services are performed; and
       ``(ii) holds a master's degree in a defined clinical area 
     of nursing from an accredited educational institution.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply with respect to services furnished and supplies 
     provided on and after January 1, 1998.

     SEC. 4620. INCREASED MEDICARE REIMBURSEMENT FOR PHYSICIAN 
                   ASSISTANTS.

       (a) Removal of Restriction on Settings.--Section 
     1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is amended--
       (1) by striking ``(I) in a hospital'' and all that follows 
     through ``shortage area,'', and
       (2) by adding at the end the following: ``but only if no 
     facility or other provider charges or is paid any amounts 
     with respect to the furnishing of such services,''.
       (b) Increased Payment.--Paragraph (12) of section 1842(b) 
     (42 U.S.C. 1395u(b)), as amended by section 4619(b)(2)(B), is 
     amended to read as follows:
       ``(12) With respect to services described in section 
     1861(s)(2)(K)(i)--
       ``(A) payment under this part may only be made on an 
     assignment-related basis; and
       ``(B) the amounts paid under this part shall be equal to 80 
     percent of (i) the lesser of the actual charge or 85 percent 
     of the fee schedule amount provided under section 1848 for 
     the same service provided by a physician who is not a 
     specialist; or (ii) in the case of services as an assistant 
     at surgery, the lesser of the actual charge or 85 percent of 
     the amount that would otherwise be recognized if performed by 
     a physician who is serving as an assistant at surgery.''.
       (c) Removal of Restriction on Employment Relationship.--
     Section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by 
     adding at the end the following new sentence: ``For purposes 
     of clause (C) of the first sentence of this paragraph, an 
     employment relationship may include any independent 
     contractor arrangement, and employer status shall be 
     determined in accordance with the law of the State in which 
     the services described in such clause are performed.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to services furnished and supplies 
     provided on and after January 1, 1998.

     SEC. 4621. RENAL DIALYSIS-RELATED SERVICES.

       (a) Auditing of Cost Reports.--The Secretary shall audit a 
     sample of cost reports of renal dialysis providers for 1995 
     and for each third year thereafter.
       (b) Implementation of Quality Standards.--The Secretary of 
     Health and Human Services shall develop and implement, by not 
     later than January 1, 1999, a method to measure and report 
     quality of renal dialysis services provided under the 
     medicare program under title XVIII of the Social Security Act 
     in order to reduce payments for inappropriate or low quality 
     care.

[[Page H4469]]

     SEC. 4622. PAYMENT FOR COCHLEAR IMPLANTS AS CUSTOMIZED 
                   DURABLE MEDICAL EQUIPMENT.

       (a) In General.--Section 1834(h)(1)(E) (42 U.S.C. 
     1395m(h)(1)(E)) is amended by adding at the end the 
     following: ``Payment for cochlear implants shall be made in 
     accordance with subsection (a)(4), and, in applying such 
     subsection to cochlear implants, carriers shall take into 
     consideration technological innovations and data on charges 
     to the extent that such charges reflect such innovations.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to implants implanted on or after January 1, 1998.

                       CHAPTER 3--PART B PREMIUM

     SEC. 4631. PART B PREMIUM.

       (a) In General.--The first, second and third sentences of 
     section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are amended to 
     read as follows: ``The Secretary, during September of each 
     year, shall determine and promulgate a monthly premium rate 
     for the succeeding calendar year. That monthly premium rate 
     shall be equal to 50 percent of the monthly actuarial rate 
     for enrollees age 65 and over, determined according to 
     paragraph (1), for that succeeding calendar year.''.
       (b) Conforming and Technical Amendments.--
       (1) Section 1839.--Section 1839 (42 U.S.C. 1395r) is 
     amended--
       (A) in subsection (a)(2), by striking ``(b) and (e)'' and 
     inserting ``(b), (c), and (f)'',
       (B) in the last sentence of subsection (a)(3)--
       (i) by inserting ``rate'' after ``premium'', and
       (ii) by striking ``and the derivation of the dollar amounts 
     specified in this paragraph'',
       (C) by striking subsection (e), and
       (D) by redesignating subsection (g) as subsection (e) and 
     inserting that subsection after subsection (d).
       (2) Section 1844.--Subparagraphs (A)(i) and (B)(i) of 
     section 1844(a)(1) (42 U.S.C. 1395w(a)(1)) are each amended 
     by striking ``or 1839(e), as the case may be''.
            Subtitle H--Provisions Relating to Parts A and B

       CHAPTER 1--PROVISIONS RELATING TO MEDICARE SECONDARY PAYER

     SEC. 4701. PERMANENT EXTENSION AND REVISION OF CERTAIN 
                   SECONDARY PAYER PROVISIONS.

       (a) 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. 1395p(i)) and the second sentence 
     of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by 
     striking ``1862(b)(1)(B)(iv)'' each place it appears and 
     inserting ``1862(b)(1)(B)(iii)''.
       (b) Individuals With End Stage Renal Disease.--
       (1) In general.--Section 1862(b)(1)(C) (42 U.S.C. 
     1395y(b)(1)(C)) is amended--
       (A) in the first sentence, by striking ``12-month'' each 
     place it appears and inserting ``30-month'', and
       (B) by striking the second sentence.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to items and services furnished on or after the 
     date of the enactment of this Act and with respect to periods 
     beginning on or after the date that is 18 months prior to 
     such date.
       (c) IRS-SSA-HCFA Data Match.--
       (1) Social security act.--Section 1862(b)(5)(C) (42 U.S.C. 
     1395y(b)(5)(C)) is amended by striking clause (iii).
       (2) Internal revenue code.--Section 6103(l)(12) of the 
     Internal Revenue Code of 1986 is amended by striking 
     subparagraph (F).

     SEC. 4702. CLARIFICATION OF TIME AND FILING LIMITATIONS.

       (a) Extension of Claims Filing Period.--Section 
     1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by adding 
     at the end the following new clause:
       ``(v) Claims-filing period.--Notwithstanding any other time 
     limits that may exist for filing a claim under an employer 
     group health plan, the United States may seek to recover 
     conditional payments in accordance with this subparagraph 
     where the request for payment is submitted to the entity 
     required or responsible under this subsection to pay with 
     respect to the item or service (or any portion thereof) under 
     a primary plan within the 3-year period beginning on the date 
     on which the item or service was furnished.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to items and services furnished after 1990. The 
     previous sentence shall not be construed as permitting any 
     waiver of the 3-year-period requirement (imposed by such 
     amendment) in the case of items and services furnished more 
     than 3 years before the date of the enactment of this Act.

     SEC. 4703. PERMITTING RECOVERY AGAINST THIRD PARTY 
                   ADMINISTRATORS.

       (a) Permitting Recovery Against Third Party Administrators 
     of Primary Plans.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
     1395y(b)(2)(B)(ii)) is amended--
       (1) by striking ``under this subsection to pay'' and 
     inserting ``(directly, as a third-party administrator, or 
     otherwise) to make payment'', and
       (2) by adding at the end the following: ``The United States 
     may not recover from a third-party administrator under this 
     clause in cases where the third-party administrator would not 
     be able to recover the amount at issue from the employer or 
     group health plan for whom it provides administrative 
     services due to the insolvency or bankruptcy of the employer 
     or plan.''.
       (b) Clarification of Beneficiary Liability.--Section 
     1862(b)(1) (42 U.S.C. 1395y(b)(1)) is amended by adding at 
     the end the following new subparagraph:
       ``(F) Limitation on beneficiary liability.--An individual 
     who is entitled to benefits under this title and is furnished 
     an item or service for which such benefits are incorrectly 
     paid is not liable for repayment of such benefits under this 
     paragraph unless payment of such benefits was made to the 
     individual.''.
       (c) Effective Date.--The amendments made by this section 
     apply to items and services furnished on or after the date of 
     the enactment of this Act.

                    CHAPTER 2--HOME HEALTH SERVICES

     SEC. 4711. RECAPTURING SAVINGS RESULTING FROM TEMPORARY 
                   FREEZE ON PAYMENT INCREASES FOR HOME HEALTH 
                   SERVICES.

       (a) Basing Updates to Per Visit Cost Limits on Limits for 
     Fiscal Year 1993.--Section 1861(v)(1)(L) (42 U.S.C. 
     1395x(v)(1)(L)) is amended by adding at the end the 
     following:
       ``(iv) In establishing limits under this subparagraph for 
     cost reporting periods beginning after September 30, 1997, 
     the Secretary shall not take into account any changes in the 
     home health market basket, as determined by the Secretary, 
     with respect to cost reporting periods which began on or 
     after July 1, 1994, and before July 1, 1996.''.
       (b) No Exceptions Permitted Based on Amendment.--The 
     Secretary of Health and Human Services shall not consider the 
     amendment made by subsection (a) in making any exemptions and 
     exceptions pursuant to section 1861(v)(1)(L)(ii) of the 
     Social Security Act (42 U.S.C. 1395x(v)(1)(L)(ii)).

     SEC. 4712. INTERIM PAYMENTS FOR HOME HEALTH SERVICES.

       (a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(i) 
     (42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
       (1) by moving the indentation of subclauses (I) through 
     (III) 2-ems to the left;
       (2) in subclause (I), by inserting ``of the mean of the 
     labor-related and nonlabor per visit costs for freestanding 
     home health agencies'' before the comma at the end;
       (3) in subclause (II), by striking ``, or'' and inserting 
     ``of such mean,'';
       (4) in subclause (III)--
       (A) by inserting ``and before October 1, 1997,'' after 
     ``July 1, 1987,'', and
       (B) by striking the comma at the end and inserting ``of 
     such mean, or''; and
       (5) by striking the matter following subclause (III) and 
     inserting the following:
       ``(IV) October 1, 1997, 105 percent of the median of the 
     labor-related and nonlabor per visit costs for freestanding 
     home health agencies.''.
       (b) Delay In Updates.--Section 1861(v)(1)(L)(iii) (42 
     U.S.C. 1395x(v)(1)(L)(iii)) is amended by inserting ``, or on 
     or after July 1, 1997, and before October 1, 1997'' after 
     ``July 1, 1996''.
       (c) Additions to Cost Limits.--Section 1861(v)(1)(L) (42 
     U.S.C. 1395x(v)(1)(L)), as amended by section 4711(a), is 
     amended by inserting adding at the end the following new 
     clauses:
       ``(v) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1997, 
     the Secretary shall provide for an interim system of limits. 
     Payment shall not exceed the costs determined under the 
     preceding provisions of this subparagraph or, if lower, the 
     product of--
       ``(I) an agency-specific per beneficiary annual limitation 
     calculated based 75 percent on the reasonable costs 
     (including nonroutine medical supplies) for the agency's 12-
     month cost reporting period ending during 1994, and based 25 
     percent on the standardized regional average of such costs 
     for the agency's region for cost reporting periods ending 
     during 1994, such costs updated by the home health market 
     basket index; and
       ``(II) the agency's unduplicated census count of patients 
     (entitled to benefits under this title) for the cost 
     reporting period subject to the limitation.
       ``(vi) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1997, 
     the following rules apply:
       ``(I) For new providers and those providers without a 12-
     month cost reporting period ending in calendar year 1994, the 
     per beneficiary limitation shall be equal to the median of 
     these limits (or the Secretary's best estimates thereof) 
     applied to other home health agencies as determined by the 
     Secretary. A home health agency that has altered its 
     corporate structure or name shall not be considered a new 
     provider for this purpose.
       ``(II) For beneficiaries who use services furnished by more 
     than one home health agency, the per beneficiary limitations 
     shall be prorated among the agencies.''.
       (d) Development of Case Mix System.--The Secretary of 
     Health and Human Services shall expand research on a 
     prospective payment system for home health agencies under the 
     medicare program that ties prospective payments to a unit of 
     service, including an intensive effort to develop a reliable 
     case

[[Page H4470]]

     mix adjuster that explains a significant amount of the 
     variances in costs.
       (e) Submission of Data for Case Mix System.--Effective for 
     cost reporting periods beginning on or after October 1, 1997, 
     the Secretary of Health and Human Services may require all 
     home health agencies to submit additional information that 
     the Secretary considers necessary for the development of a 
     reliable case mix system.

     SEC. 4713. CLARIFICATION OF PART-TIME OR INTERMITTENT NURSING 
                   CARE.

       (a) In General.--Section 1861(m) (42 U.S.C. 1395x(m)) is 
     amended by adding at the end the following: ``For purposes of 
     paragraphs (1) and (4), the term `part-time or intermittent 
     services' means skilled nursing and home health aide services 
     furnished any number of days per week as long as they are 
     furnished (combined) less than 8 hours each day and 28 or 
     fewer hours each week (or, subject to review on a case-by-
     case basis as to the need for care, less than 8 hours each 
     day and 35 or fewer hours per week). For purposes of sections 
     1814(a)(2)(C) and 1835(a)(2)(A), `intermittent' means skilled 
     nursing care that is either provided or needed on fewer than 
     7 days each week, or less than 8 hours of each day for 
     periods of 21 days or less (with extensions in exceptional 
     circumstances when the need for additional care is finite and 
     predictable).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to services furnished on or after October 1, 1997.

     SEC. 4714. STUDY ON DEFINITION OF HOMEBOUND.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study of the criteria that should be applied, 
     and the method of applying such criteria, in the 
     determination of whether an individual is homebound for 
     purposes of qualifying for receipt of benefits for home 
     health services under the medicare program. Such criteria 
     shall include the extent and circumstances under which a 
     person may be absent from the home but nonetheless qualify.
       (b) Report.--Not later than October 1, 1998, the Secretary 
     shall submit a report to the Congress on the study conducted 
     under subsection (a). The report shall include specific 
     recommendations on such criteria and methods.

     SEC. 4715. PAYMENT BASED ON LOCATION WHERE HOME HEALTH 
                   SERVICE IS FURNISHED.

       (a) Conditions of Participation.--Section 1891 (42 U.S.C. 
     1395bbb) is amended by adding at the end the following:
       ``(g) Payment on Basis of Location of Service.--A home 
     health agency shall submit claims for payment for home health 
     services under this title only on the basis of the geographic 
     location at which the service is furnished, as determined by 
     the Secretary.''.
       (b) Wage Adjustment.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
     1395x(v)(1)(L)(iii)) is amended by striking ``agency is 
     located'' and inserting ``service is furnished''.
       (c) Effective Date.--The amendments made by this section 
     apply to cost reporting periods beginning on or after October 
     1, 1997.

     SEC. 4716. NORMATIVE STANDARDS FOR HOME HEALTH CLAIMS 
                   DENIALS,

       (a) In General.--Section 1862(a)(1) (42 U.S.C. 
     1395y(a)(1)), as amended by section 4103(c), is amended--
       (1) by striking ``and'' at the end of subparagraph (G),
       (2) by striking the semicolon at the end of subparagraph 
     (H) and inserting ``, and'', and
       (3) by inserting after subparagraph (H) the following new 
     subparagraph:
       ``(I) the frequency and duration of home health services 
     which are in excess of normative guidelines that the 
     Secretary shall establish by regulation;''.
       (b) Notification.--The Secretary of Health and Human 
     Services may establish a process for notifying a physician in 
     cases in which the number of home health service visits 
     furnished under the medicare program pursuant to a 
     prescription or certification of the physician significantly 
     exceeds such threshold (or thresholds) as the Secretary 
     specifies. The Secretary may adjust such threshold to reflect 
     demonstrated differences in the need for home health services 
     among different beneficiaries.
       (c) Effective Date.--The amendments made by this section 
     apply to services furnished on or after October 1, 1997.

     SEC. 4717. NO HOME HEALTH BENEFITS BASED SOLELY ON DRAWING 
                   BLOOD.

       (a) In General.--Sections 1814(a)(2)(C) and 1835(a)(2)(A) 
     (42 U.S.C. 1395f(a)(2)(C), 1395n(a)(2)(A)) are each amended 
     by inserting ``(other than solely venipuncture for the 
     purpose of obtaining a blood sample)'' after ``skilled 
     nursing care''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to home health services furnished after the 6-month 
     period beginning after the date of enactment of this Act.

     SEC. 4718. MAKING PART B PRIMARY PAYOR FOR CERTAIN HOME 
                   HEALTH SERVICES.

       (a) In General.--Section 1833(d) (42 U.S.C. 1395l(d)) is 
     amended--
       (1) by striking ``(d) No'' and inserting ``(d)(1) Subject 
     to paragraph (2), no'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Payment shall be made under this part (rather than 
     under part A), for an individual entitled to benefits under 
     part A, for home health services, other than the first 100 
     visits of post-hospital home health services furnished to an 
     individual.''.
       (b) Post-hospital Home Health Services.--Section 1861 (42 
     U.S.C. 1395x) is amended by adding at the end the following:
       ``(ss) Post-Hospital Home Health Services.--The term `post-
     hospital home health services' means home health services 
     furnished to an individual under a plan of treatment 
     established when the individual was an inpatient of a 
     hospital or rural primary care hospital for not less than 3 
     consecutive days before discharge, or during a covered post-
     hospital extended care stay, if home health services are 
     initiated for the individual within 30 days after discharge 
     from the hospital, rural primary care hospital or extended 
     care facility.''.
       (c) Payments Under Part B.--Subparagraph (A) of section 
     1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended to read as 
     follows:
       ``(A) with respect to home health services (other than a 
     covered osteoporosis drug (as defined in section 1861(kk)), 
     and to items and services described in section 
     1861(s)(10)(A), the amounts determined under section 
     1861(v)(1)(L) or section 1893, or, if the services are 
     furnished by a public provider of services, or by another 
     provider which demonstrates to the satisfaction of the 
     Secretary that a significant portion of its patients are low-
     income (and requests that payment be made under this 
     provision), free of charge, or at nominal charges to the 
     public, the amount determined in accordance with section 
     1814(b)(2);''.
       (d) Phase-In of Additional Part B Costs In Determination of 
     Part B Monthly Premium.--Section 1839(a) (42 U.S.C. 1395r(a)) 
     is amended--
       (1) in paragraph (3) in last the sentence inserted by 
     section 4631(a) of this title, by inserting ``(except as 
     provided in paragraph (5)(B))'' before the period, and
       (2) by adding after paragraph (4) the following:
       ``(5)(A) The Secretary shall, at the time of determining 
     the monthly actuarial rate under paragraph (1) for 1998 
     through 2003, shall determine a transitional monthly 
     actuarial rate for enrollees age 65 and over in the same 
     manner as such rate is determined under paragraph (1), except 
     that there shall be excluded from such determination an 
     estimate of any benefits and administrative costs 
     attributable to home health services for which payment would 
     have been made under part A during the year but for paragraph 
     (2) of section 1833(d).
       ``(B) The monthly premium for each individual enrolled 
     under this part for each month for a year (beginning with 
     1998 and ending with 2003) shall be equal to 50 percent of 
     the monthly actuarial rate determined under subparagraph (A) 
     increased by the following proportion of the difference 
     between such premium and the monthly premium otherwise 
     determined under paragraph (3) (without regard to this 
     paragraph):
       ``(i) For a month in 1998, \1/7\.
       ``(ii) For a month in 1999, \2/7\.
       ``(iii) For a month in 2000, \3/7\.
       ``(iv) For a month in 2001, \4/7\.
       ``(v) For a month in 2002, \5/7\.
       ``(vi) For a month in 2003, \6/7\.''.
       (e) Maintaining Appeal Rights for Home Health Services.--
     Section 1869(b)(2)(B) (42 U.S.C. 1395ff(b)(2)(B)) is amended 
     by inserting ``(or $100 in the case of home health 
     services)'' after ``$500''.
       (f) Report.--Not later than October 1, 1999, the Secretary 
     of Health and Human Services shall submit a report to the 
     Committees on Commerce and Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate on 
     the impact on home health utilization and admissions to 
     hospitals and skilled nursing facilities of the amendment 
     made by subsection (b). The Secretary shall further reexamine 
     and submit a report to such Committees on this impact 1 year 
     after the full implementation of the prospective payment 
     system for home health services into the medicare program, 
     effected under the amendments made by section 4441.
       (g) Effective Date.--The amendments made by this section 
     apply to services furnished on or after October 1, 1997.

          CHAPTER 3--BABY BOOM GENERATION MEDICARE COMMISSION

     SEC. 4721. BIPARTISAN 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 Bipartisan Commission on the Effect of the Baby 
     Boom Generation on the Medicare Program (in this section 
     referred to as the ``Commission'').
       (b) Duties.--
       (1) In general.--The Commission shall--
       (A) examine the financial impact on the medicare program of 
     the significant increase in the number of medicare eligible 
     individuals which will occur beginning approximately during 
     2010 and lasting for approximately 25 years, 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) Methods used by other nations to respond to comparable 
     demographic patterns in eligibility for health care benefits 
     for elderly and disabled individuals.

[[Page H4471]]

       (C) Modifying age-based eligibility to correspond to 
     changes in age-based eligibility under the OASDI program.
       (D) Trends in employment-related health care for retirees, 
     including the use of medical savings accounts and similar 
     financing devices.
       (E) The role medicare should play in addressing the needs 
     of persons with chronic illness.
       (c) Membership.--
       (1) Appointment.--The Commission shall be composed of 15 
     voting members as follows:
       (A) The Majority Leader of the Senate shall appoint, after 
     consultation with the minority leader of the Senate, 6 
     members, of whom not more than 4 may be of the same political 
     party.
       (B) The Speaker of the House of Representatives shall 
     appoint, after consultation with the minority leader of the 
     House of Representatives, 6 members, of whom not more than 4 
     may be of the same political party.
       (C) The 3 ex officio members of the Board of Trustees of 
     the Federal Hospital Insurance Trust Fund and of the Federal 
     Supplementary Medical Insurance Trust Fund who are Cabinet 
     level officials.
       (2) Chairman and vice chairman.--As the first item of 
     business at the Commission's first meeting (described in 
     paragraph (5)(B)), the Commission shall elect a Chairman and 
     Vice Chairman from among its members. The individuals elected 
     as Chairman and Vice Chairman may not be of the same 
     political party and may not have been appointed to the 
     Commission by the same appointing authority.
       (3) Vacancies.--Any vacancy in the membership of the 
     Commission shall be filled in the manner in which the 
     original appointment was made and shall not affect the power 
     of the remaining members to execute the duties of the 
     Commission.
       (4) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (f).
       (5) Meetings.--
       (A) The Commission shall meet at the call of its Chairman 
     or a majority of its members.
       (B) The Commission shall hold its first meeting not later 
     than February 1, 1998.
       (6) Compensation and reimbursement of expenses.--Members of 
     the Commission are not entitled to receive compensation for 
     service on the Commission. Members may be reimbursed for 
     travel, subsistence, and other necessary expenses incurred in 
     carrying out the duties of the Commission.
       (d) Advisory Panel.--
       (1) In general.--The Chairman, in consultation with the 
     Vice Chairman, may establish a panel (in this section 
     referred to as the ``Advisory Panel'') consisting of health 
     care experts, consumers, providers, and others to advise and 
     assist the members of the Commission in carrying out the 
     duties described in subsection (b). The panel shall have only 
     those powers that the Chairman, in consultation with the Vice 
     Chairman, determines are necessary and appropriate to assist 
     the Commission in carrying out such duties.
       (2) Compensation.--Members of the Advisory Panel are not 
     entitled to receive compensation for service on the Advisory 
     Panel. Subject to the approval of the chairman of the 
     Commission, members may be reimbursed for travel, 
     subsistence, and other necessary expenses incurred in 
     carrying out the duties of the Advisory Panel.
       (e) Staff and Consultants.--
       (1) Staff.--The Commission may appoint and determine the 
     compensation of such staff as may be necessary to carry out 
     the duties of the Commission. Such appointments and 
     compensation may be made without regard to the provisions of 
     title 5, United States Code, that govern appointments in the 
     competitive services, and the provisions of chapter 51 and 
     subchapter III of chapter 53 of such title that relate to 
     classifications and the General Schedule pay rates.
       (2) Consultants.--The Commission may procure such temporary 
     and intermittent services of consultants under section 
     3109(b) of title 5, United States Code, as the Commission 
     determines to be necessary to carry out the duties of the 
     Commission.
       (f) Powers.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studies by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office.--
       (A) Upon the request of the Commission, the Director of the 
     Congressional Budget Office shall provide to the Commission 
     such cost estimates as the Commission determines to be 
     necessary to carry out its duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under 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) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (g) Report.--Not later than May 1, 1999, the Commission 
     shall submit to Congress a report containing its findings and 
     recommendations regarding how to protect and preserve the 
     medicare program in a financially solvent manner until 2030 
     (or, if later, throughout the period of projected solvency of 
     the Federal Old-Age and Survivors Insurance Trust Fund). The 
     report shall include detailed recommendations for appropriate 
     legislative initiatives respecting how to accomplish this 
     objective.
       (h) Termination.--The Commission shall terminate 30 days 
     after the date of submission of the report required in 
     subsection (g).
       (i) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section. 60 
     percent of such appropriation shall be payable from the 
     Federal Hospital Insurance Trust Fund, and 40 percent of such 
     appropriation shall be payable from the Federal Supplementary 
     Medical Insurance Trust Fund under title XVIII of the Social 
     Security Act (42 U.S.C. 1395i, 1395t).

  CHAPTER 4--PROVISIONS RELATING TO DIRECT GRADUATE MEDICAL EDUCATION

     SEC. 4731. LIMITATION ON PAYMENT BASED ON NUMBER OF RESIDENTS 
                   AND IMPLEMENTATION OF ROLLING AVERAGE FTE 
                   COUNT.

       Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by 
     adding after subparagraph (E) the following:
       ``(F) Limitation on number of residents for certain fiscal 
     years.--Such rules shall provide that for purposes of a cost 
     reporting period beginning on or after October 1, 1997, the 
     total number of full-time equivalent residents before 
     application of weighting factors (as determined under this 
     paragraph) with respect to a hospital's approved medical 
     residency training program may not exceed the number of full-
     time equivalent residents with respect to the hospital's most 
     recent cost reporting period ending on or before December 31, 
     1996.
       ``(G) Counting interns and residents for fy 1998 and 
     subsequent years.--
       ``(i) FY 1998.--For the hospital's first cost reporting 
     period beginning during fiscal year 1998, subject to the 
     limit described in subparagraph (F), the total number of 
     full-time equivalent residents, for determining the 
     hospital's graduate medical education payment, shall equal 
     the average of the full-time equivalent resident counts for 
     the cost reporting period and the preceding cost reporting 
     period.
       ``(ii) Subsequent years.--For each subsequent cost 
     reporting period, subject to the limit described in 
     subparagraph (F), the total number of full-time equivalent 
     residents, for determining the hospital's graduate medical 
     education payment, shall equal the average of the actual 
     full-time equivalent resident counts for the cost reporting 
     period and preceding two cost reporting periods.
       ``(iii) Adjustment for short periods.--If a hospital's cost 
     reporting period beginning on or after October 1, 1997, is 
     not equal to twelve months, the Secretary shall make 
     appropriate modifications to ensure that the average full-
     time equivalent resident counts pursuant to clause (ii) are 
     based on the equivalent of full 12-month cost reporting 
     periods.
       ``(iv) Exclusion of residents in dentistry.--Residents in 
     an approved medical residency training program in dentistry 
     shall not be counted for purposes of this subparagraph and 
     subparagraph (F).''.

     SEC. 4732. PHASED-IN LIMITATION ON HOSPITAL OVERHEAD AND 
                   SUPERVISORY PHYSICIAN COMPONENT OF DIRECT 
                   MEDICAL EDUCATION COSTS.

       (a) In General.--Section 1886(h)(3) (42 U.S.C. 
     1395ww(h)(3)) is amended--
       (1) in subparagraph (B), by inserting ``subject to 
     subparagraph (D),'' after ``subparagraph (A)'', and
       (2) by adding at the end the following:

[[Page H4472]]

       ``(D) Phased-in limitation on hospital overhead and 
     supervisory physician component.--
       ``(i) In general.--In the case of a hospital for which the 
     overhead GME amount (as defined in clause (ii)) for the base 
     period exceeds an amount equal to the 75th percentile of the 
     overhead GME amounts in such period for all hospitals 
     (weighted to reflect the full-time equivalent resident counts 
     for all approved medical residency training programs), 
     subject to clause (iv), the hospital's approved FTE resident 
     amount (for periods beginning on or after October 1, 1997) 
     shall be reduced from the amount otherwise applicable (as 
     previously reduced under this subparagraph) by an overhead 
     reduction amount. The overhead reduction amount is equal to 
     the lesser of--

       ``(I) 20 percent of the reference reduction amount 
     (described in clause (iii)) for the period, or
       ``(II) 15 percent of the hospital's overhead GME amount for 
     the period (as otherwise determined before the reduction 
     provided under this subparagraph for the period involved).

       ``(ii) Overhead gme amount.--For purposes of this 
     subparagraph, the term `overhead GME amount' means, for a 
     hospital for a period, the product of--

       ``(I) the percentage of the hospital's approved FTE 
     resident amount for the base period that is not attributable 
     to resident salaries and fringe benefits, and
       ``(II) the hospital's approved FTE resident amount for the 
     period involved.

       ``(iii) Reference reduction amount.--

       ``(I) In general.--The reference reduction amount described 
     in this clause for a hospital for a cost reporting period is 
     the base difference (described in subclause (II)) updated, in 
     a compounded manner for each period from the base period to 
     the period involved, by the update applied for such period to 
     the hospital's approved FTE resident amount.
       ``(II) Base difference.--The base difference described in 
     this subclause for a hospital is the amount by which the 
     hospital's overhead GME amount in the base period exceeded 
     the 75th percentile of such amounts (as described in clause 
     (i)).

       ``(iv) Maximum reduction to 75th percentile.--In no case 
     shall the reduction under this subparagraph effected for a 
     hospital for a period (below the amount that would otherwise 
     apply for the period if this subparagraph did not apply for 
     any period) exceed the reference reduction amount for the 
     hospital for the period.
       ``(v) Base period.--For purposes of this subparagraph, the 
     term `base period' means the cost reporting period beginning 
     in fiscal year 1984 or the period used to establish the 
     hospital's approved FTE resident amount for hospitals that 
     did not have approved residency training programs in fiscal 
     year 1984.
       ``(vi) Rules for hospitals initiating residency training 
     programs.--The Secretary shall establish rules for the 
     application of this subparagraph in the case of a hospital 
     that initiates medical residency training programs during or 
     after the base period.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to per resident payment amounts attributable to 
     periods beginning on or after October 1, 1997.

     SEC. 4733. PERMITTING PAYMENT TO NON-HOSPITAL PROVIDERS.

       (a) In General.--Section 1886 (42 U.S.C. 1395ww) is amended 
     by adding at the end the following:
       ``(k) Payment to Non-Hospital Providers.--
       ``(1) Report.--The Secretary shall submit to Congress, not 
     later than 18 months after the date of the enactment of this 
     subsection, a proposal for payment to qualified non-hospital 
     providers for their direct costs of medical education, if 
     those costs are incurred in the operation of an approved 
     medical residency training program described in subsection 
     (h). Such proposal shall specify the amounts, form, and 
     manner in which such payments will be made and the portion of 
     such payments that will be made from each of the trust funds 
     under this title.
       ``(2) Effectiveness.--Except as otherwise provided in law, 
     the Secretary may implement such proposal for residency years 
     beginning not earlier than 6 months after the date of 
     submittal of the report under paragraph (1).
       ``(3) Qualified non-hospital providers.--For purposes of 
     this subsection, the term `qualified non-hospital provider' 
     means--
       ``(A) a Federally qualified health center, as defined in 
     section 1861(aa)(4);
       ``(B) a rural health clinic, as defined in section 
     1861(aa)(2); and
       ``(C) such other providers (other than hospitals) as the 
     Secretary determines to be appropriate.''.
       (b) Prohibition on Double Payments; Budget Neutrality 
     Adjustment.--Section 1886(h)(3)(B) (42 U.S.C. 
     1395ww(h)(3)(B)) is amended by adding at the end the 
     following:

     ``The Secretary shall reduce the aggregate approved amount to 
     the extent payment is made under subsection (k) for residents 
     included in the hospital's count of full-time equivalent 
     residents and, in the case of residents not included in any 
     such count, the Secretary shall provide for such a reduction 
     in aggregate approved amounts under this subsection as will 
     assure that the application of subsection (k) does not result 
     in any increase in expenditures under this title in excess of 
     those that would have occurred if subsection (k) were not 
     applicable.''.

     SEC. 4734. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY 
                   REDUCTION IN NUMBER OF RESIDENTS.

       Section 1886(h) (42 U.S.C. 1395ww(h)) is further amended by 
     adding at the end the following new paragraph:
       ``(6) Incentive payment under plans for voluntary reduction 
     in number of residents.--
       ``(A) In general.--In the case of a voluntary residency 
     reduction plan for which an application is approved under 
     subparagraph (B), the qualifying entity submitting the plan 
     shall be paid an applicable hold harmless percentage (as 
     specified in subparagraph (E)) of the sum of--
       ``(i) amount (if any) by which--

       ``(I) the amount of payment which would have been made 
     under this subsection if there had been a 5 percent reduction 
     in the number of full-time equivalent residents in the 
     approved medical education training programs of the 
     qualifying entity as of June 30, 1997, exceeds
       ``(II) the amount of payment which is made under this 
     subsection, taking into account the reduction in such number 
     effected under the reduction plan; and

       ``(ii) the amount of the reduction in payment under 
     1886(d)(5)(B) (for hospitals participating in the qualifying 
     entity) that is attributable to the reduction in number of 
     residents effected under the plan below 95 percent of the 
     number of full-time equivalent residents in such programs of 
     such entity as of June 30, 1997.
       ``(B) Approval of plan applications.--The Secretary may not 
     approve the application of an qualifying entity unless--
       ``(i) the application is submitted in a form and manner 
     specified by the Secretary and by not later than March 1, 
     2000,
       ``(ii) the application provides for the operation of a plan 
     for the reduction in the number of full-time equivalent 
     residents in the approved medical residency training programs 
     of the entity consistent with the requirements of 
     subparagraph (D);
       ``(iii) the entity elects in the application whether such 
     reduction will occur over--

       ``(I) a period of not longer than 5 residency training 
     years, or
       ``(II) a period of 6 residency training years,

     except that a qualifying entity described in subparagraph 
     (C)(i)(III) may not make the election described in subclause 
     (II); and
       ``(iv) the Secretary determines that the application and 
     the entity and such plan meet such other requirements as the 
     Secretary specifies in regulations.
       ``(C) Qualifying entity.--
       ``(i) In general.--For purposes of this paragraph, any of 
     the following may be a qualifying entity:

       ``(I) Individual hospitals operating one or more approved 
     medical residency training programs.
       ``(II) Subject to clause (ii), two or more hospitals that 
     operate such programs and apply for treatment under this 
     paragraph as a single qualifying entity.
       ``(III) Subject to clause (iii), a qualifying consortium 
     (as described in section 4735 of the Balanced Budget Act of 
     1997).

       ``(ii) Additional requirement for joint programs.--In the 
     case of an application by a qualifying entity described in 
     clause (i)(II), the Secretary may not approve the application 
     unless the application represents that the qualifying entity 
     either--

       ``(I) in the case of an entity that meets the requirements 
     of clause (v) of subparagraph (D) will not reduce the number 
     of full-time equivalent residents in primary care during the 
     period of the plan, or
       ``(II) in the case of another entity will not reduce the 
     proportion of its residents in primary care (to the total 
     number of residents) below such proportion as in effect as of 
     the applicable time described in subparagraph (D)(vi).

       ``(iii) Additional requirement for consortia.--In the case 
     of an application by a qualifying entity described in clause 
     (i)(III), the Secretary may not approve the application 
     unless the application represents that the qualifying entity 
     will not reduce the proportion of its residents in primary 
     care (to the total number of residents) below such proportion 
     as in effect as of the applicable time described in 
     subparagraph (D)(vi).
       ``(D) Residency reduction requirements.--
       ``(i) Individual hospital applicants.--In the case of a 
     qualifying entity described in subparagraph (C)(i)(I), the 
     number of full-time equivalent residents in all the approved 
     medical residency training programs operated by or through 
     the entity shall be reduced as follows:

       ``(I) If base number of residents exceeds 750 residents, by 
     a number equal to at least 20 percent of such base number.
       ``(II) Subject to subclause (IV), if base number of 
     residents exceeds 500, but is less than 750, residents, by 
     150 residents.
       ``(III) Subject to subclause (IV), if base number of 
     residents does not exceed 500 residents, by a number equal to 
     at least 25 percent of such base number.
       ``(IV) In the case of a qualifying entity which is 
     described in clause (v) and which elects treatment under this 
     subclause, by a number equal to at least 20 percent of such 
     base number.

       ``(ii) Joint applicants.--In the case of a qualifying 
     entity described in subparagraph (C)(i)(II), the number of 
     full-time equivalent residents in all the approved medical 
     residency training programs operated by or through the entity 
     shall be reduced as follows:

[[Page H4473]]

       ``(I) Subject to subclause (II), by a number equal to at 
     least 25 percent of such base number.
       ``(II) In the case of a qualifying entity which is 
     described in clause (v) and which elects treatment under this 
     subclause, by a number equal to at least 20 percent of such 
     base number.

       ``(iii) Consortia.--In the case of a qualifying entity 
     described in subparagraph (C)(i)(III), the number of full-
     time equivalent residents in all the approved medical 
     residency training programs operated by or through the entity 
     shall be reduced by a number equal to at least 20 percent of 
     such base number.
       ``(iv) Manner of reduction.--The reductions specified under 
     the preceding provisions of this subparagraph for a 
     qualifying entity shall be below the base number of residents 
     for that entity and shall be fully effective not later than--

       ``(I) the 5th residency training year in which the 
     application under subparagraph (B) is effective, in the case 
     of an entity making the election described in subparagraph 
     (B)(iii)(I), or
       ``(II) the 6th such residency training year, in the case of 
     an entity making the election described in subparagraph 
     (B)(iii)(II).

       ``(v) Entities providing assurance of maintenance of 
     primary care residents.--An entity is described in this 
     clause if--

       ``(I) the base number of residents for the entity is less 
     than 750;
       ``(II) the number of full-time equivalent residents in 
     primary care included in the base number of residents for the 
     entity is at least 10 percent of such base number; and
       ``(III) the entity represents in its application under 
     subparagraph (B) that there will be no reduction under the 
     plan in the number of full-time equivalent residents in 
     primary care.

     If a qualifying entity fails to comply with the 
     representation described in subclause (III), the entity shall 
     be subject to repayment of all amounts paid under this 
     paragraph, in accordance with procedures established to carry 
     out subparagraph (F).
       ``(vi) Base number of residents defined.--For purposes of 
     this paragraph, the term `base number of residents' means, 
     with respect to a qualifying entity operating approved 
     medical residency training programs, the number of full-time 
     equivalent residents in such programs (before application of 
     weighting factors) of the entity as of the most recent cost 
     reporting period ending before June 30, 1997, or, if less, 
     for any subsequent cost reporting period that ends before the 
     date the entity makes application under this paragraph.
       ``(E) Applicable hold harmless percentage.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     `applicable hold harmless percentage' is the percentages 
     specified in clause (ii) or clause (iii), as elected by the 
     qualifying entity in the application submitted under 
     subparagraph (B).
       ``(ii) 5-year reduction plan.--In the case of an entity 
     making the election described in subparagraph (B)(iii)(I), 
     the percentages specified in this clause are, for the--

       ``(I) first and second residency training years in which 
     the reduction plan is in effect, 100 percent,
       ``(II) third such year, 75 percent,
       ``(III) fourth such year, 50 percent, and
       ``(IV) fifth such year, 25 percent.

       ``(iii) 6-year reduction plan.--In the case of an entity 
     making the election described in subparagraph (B)(iii)(II), 
     the percentages specified in this clause are, for the--

       ``(I) first residency training year in which the reduction 
     plan is in effect, 100 percent,
       ``(II) second such year, 95 percent,
       ``(III) third such year, 85 percent,
       ``(IV) fourth such year, 70 percent,
       ``(V) fifth such year, 50 percent, and
       ``(VI) sixth such year, 25 percent.

       ``(F) Penalty for increase in number of residents in 
     subsequent years.--If payments are made under this paragraph 
     to a qualifying entity, if the entity (or any hospital 
     operating as part of the entity) increases the number of 
     full-time equivalent residents above the number of such 
     residents permitted under the reduction plan as of the 
     completion of the plan, then, as specified by the Secretary, 
     the entity is liable for repayment to the Secretary of the 
     total amounts paid under this paragraph to the entity.
       ``(G) Treatment of rotating residents.--In applying this 
     paragraph, the Secretary shall establish rules regarding the 
     counting of residents who are assigned to institutions the 
     medical residency training programs in which are not covered 
     under approved applications under this paragraph.''.
       (b) Relation to Demonstration Projects and Authority.--
       (1) Section 1886(h)(6) of the Social Security Act, added by 
     subsection (a), shall not apply to any residency training 
     program with respect to which a demonstration project 
     described in paragraph (3) has been approved by the Health 
     Care Financing Administration as of May 27, 1997. The 
     Secretary of Health and Human Services shall take such 
     actions as may be necessary to assure that (in the manner 
     described in subparagraph (A) of such section) in no case 
     shall payments be made under such a project with respect to 
     the first 5 percent reduction in the base number of full-time 
     equivalent residents otherwise used under the project.
       (2) Effective May 27, 1997, the Secretary of Health and 
     Human Services is not authorized to approve any demonstration 
     project described in paragraph (3) for any residency training 
     year beginning before July 1, 2006.
       (3) A demonstration project described in this paragraph is 
     a project that provides for additional payments under title 
     XVIII of the Social Security Act in connection with reduction 
     in the number of residents in a medical residency training 
     program.
       (c) Interim, Final Regulations.--In order to carry out the 
     amendment made by subsection (a) in a timely manner, the 
     Secretary of Health and Human Services may first promulgate 
     regulations, that take effect on an interim basis, after 
     notice and pending opportunity for public comment, by not 
     later than 6 months after the date of the enactment of this 
     Act.

     SEC. 4735. DEMONSTRATION PROJECT ON USE OF CONSORTIA.

       (a) In General.--The Secretary of Health and Human Services 
     (in this section referred to as the Secretary) shall 
     establish a demonstration project under which, instead of 
     making payments to teaching hospitals pursuant to section 
     1886(h) of the Social Security Act, the Secretary shall make 
     payments under this section to each consortium that meets the 
     requirements of subsection (b).
       (b) Qualifying Consortia.--For purposes of subsection (a), 
     a consortium meets the requirements of this subsection if the 
     consortium is in compliance with the following:
       (1) The consortium consists of an approved medical 
     residency training program in a teaching hospital and one or 
     more of the following entities:
       (A) A school of allopathic medicine or osteopathic 
     medicine.
       (B) Another teaching hospital, which may be a children's 
     hospital.
       (C) Another approved medical residency training program.
       (D) A Federally qualified health center.
       (E) A medical group practice.
       (F) A managed care entity.
       (G) An entity furnishing outpatient services.
       (I) Such other entity as the Secretary determines to be 
     appropriate.
       (2) The members of the consortium have agreed to 
     participate in the programs of graduate medical education 
     that are operated by the entities in the consortium.
       (3) With respect to the receipt by the consortium of 
     payments made pursuant to this section, the members of the 
     consortium have agreed on a method for allocating the 
     payments among the members.
       (4) The consortium meets such additional requirements as 
     the Secretary may establish.
       (c) Amount and Source of Payment.--The total of payments to 
     a qualifying consortium for a fiscal year pursuant to 
     subsection (a) shall not exceed the amount that would have 
     been paid under section 1886(h) of the Social Security Act 
     for the teaching hospital (or hospitals) in the consortium. 
     Such payments shall be made in such proportion from each of 
     the trust funds established under title XVIII of such Act as 
     the Secretary specifies.

     SEC. 4736. RECOMMENDATIONS ON LONG-TERM PAYMENT POLICIES 
                   REGARDING FINANCING TEACHING HOSPITALS AND 
                   GRADUATE MEDICAL EDUCATION.

       (a) In General.--The Medicare Payment Advisory Commission 
     (established under section 1805 of the Social Security Act 
     and in this section referred to as the ``Commission'') shall 
     examine and develop recommendations on whether and to what 
     extent medicare payment policies and other Federal policies 
     regarding teaching hospitals and graduate medical education 
     should be reformed. Such recommendations shall include 
     recommendations regarding each of the following:
       (1) The financing of graduate medical education, including 
     consideration of alternative broad-based sources of funding 
     for such education and models for the distribution of 
     payments under any all-payer financing mechanism.
       (2) The financing of teaching hospitals, including 
     consideration of the difficulties encountered by such 
     hospitals as competition among health care entities 
     increases. Matters considered under this paragraph shall 
     include consideration of the effects on teaching hospitals of 
     the method of financing used for the MedicarePlus program 
     under part C of title XVIII of the Social Security Act.
       (3) Possible methodologies for making payments for graduate 
     medical education and the selection of entities to receive 
     such payments. Matters considered under this paragraph shall 
     include--
       (A) issues regarding children's hospitals and approved 
     medical residency training programs in pediatrics, and
       (B) whether and to what extent payments are being made (or 
     should be made) for training in the various nonphysician 
     health professions, including social workers and 
     psychologists.
       (4) Federal policies regarding international medical 
     graduates.
       (5) The dependence of schools of medicine on service-
     generated income.
       (6) Whether and to what extent the needs of the United 
     States regarding the supply of physicians, in the aggregate 
     and in different specialties, will change during the 10-year 
     period beginning on October 1, 1997, and whether and to what 
     extent any such changes will have significant financial 
     effects on teaching hospitals.
       (7) Methods for promoting an appropriate number, mix, and 
     geographical distribution of health professionals.
       (c) Consultation.--In conducting the study under subsection 
     (a), the Commission

[[Page H4474]]

     shall consult with the Council on Graduate Medical Education 
     and individuals with expertise in the area of graduate 
     medical education, including--
       (1) deans from allopathic and osteopathic schools of 
     medicine;
       (2) chief executive officers (or equivalent administrative 
     heads) from academic health centers, integrated health care 
     systems, approved medical residency training programs, and 
     teaching hospitals that sponsor approved medical residency 
     training programs;
       (3) chairs of departments or divisions from allopathic and 
     osteopathic schools of medicine, schools of dentistry, and 
     approved medical residency training programs in oral surgery;
       (4) individuals with leadership experience from 
     representative fields of non-physician health professionals;
       (5) individuals with substantial experience in the study of 
     issues regarding the composition of the health care workforce 
     of the United States; and
       (6) individuals with expertise on the financing of health 
     care.
       (d) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Commission shall submit to the 
     Congress a report providing its recommendations under this 
     section and the reasons and justifications for such 
     recommendations.

     SEC. 4737. MEDICARE SPECIAL REIMBURSEMENT RULE FOR CERTAIN 
                   COMBINED RESIDENCY PROGRAMS.

       (a) In General.--Section 1886(h)(5)(G) (42 U.S.C. 
     1395ww(h)(5)(G)) is amended--
       (1) in clause (i), by striking ``and (iii)'' and inserting 
     ``, (iii), and (iv)''; and
       (2) by adding at the end the following:
       ``(iv) Special rule for certain combined residency 
     programs.--(I) In the case of a resident enrolled in a 
     combined medical residency training program in which all of 
     the individual programs (that are combined) are for training 
     a primary care resident (as defined in subparagraph (H)), the 
     period of board eligibility shall be the minimum number of 
     years of formal training required to satisfy the requirements 
     for initial board eligibility in the longest of the 
     individual programs plus one additional year.
       ``(II) A resident enrolled in a combined medical residency 
     training program that includes an obstetrics and gynecology 
     program shall qualify for the period of board eligibility 
     under subclause (I) if the other programs such resident 
     combines with such obstetrics and gynecology program are for 
     training a primary care resident.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to combined medical residency programs for residency 
     years beginning on or after July 1, 1998.

                      CHAPTER 5--OTHER PROVISIONS

     SEC. 4741. CENTERS OF EXCELLENCE.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1888 the following:


                        ``centers of excellence

       ``Sec. 1889. (a) In General.--The Secretary shall use a 
     competitive process to contract with specific hospitals or 
     other entities for furnishing services related to surgical 
     procedures, and for furnishing services (unrelated to 
     surgical procedures) to hospital inpatients that the 
     Secretary determines to be appropriate. The services may 
     include any services covered under this title that the 
     Secretary determines to be appropriate, including post-
     hospital services.
       ``(b) Quality Standards.--
       ``(1) In general.--Only entities that meet quality 
     standards established by the Secretary shall be eligible to 
     contract under this section. Contracting entities shall 
     implement a quality improvement plan approved by the 
     Secretary.
       ``(2) Participation decision based on quality.--Subject to 
     subsection (c), the Secretary shall consider quality as the 
     primary factor in selecting hospitals or other entities to 
     enter into contracts under this section.
       ``(c) Payment.--Payment under this section shall be made on 
     the basis of negotiated all-inclusive rates. The amount of 
     payment made by the Secretary to an entity under this title 
     for services covered under a contract shall not exceed the 
     aggregate amount of the payments that the Secretary would 
     have otherwise made for the services.
       ``(d) Contract Period.--A contract period shall be 3 years 
     (subject to renewal), so long as the entity continues to meet 
     quality and other contractual standards.
       ``(e) Incentives for Use of Centers.--Entities under a 
     contract under this section may furnish additional services 
     (at no cost to an individual entitled to benefits under this 
     title) or waive cost-sharing, subject to the approval of the 
     Secretary.
       ``(f) Limit on Number of Centers.--The Secretary shall 
     limit the number of centers in a geographic area to the 
     number needed to meet projected demand for contracted 
     services.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to services furnished on or after October 1, 1997.

     SEC. 4742. MEDICARE PART B SPECIAL ENROLLMENT PERIOD AND 
                   WAIVER OF PART B LATE ENROLLMENT PENALTY AND 
                   MEDIGAP SPECIAL OPEN ENROLLMENT PERIOD FOR 
                   CERTAIN MILITARY RETIREES AND DEPENDENTS.

       (a) Medicare Part B Special Enrollment Period; Waiver of 
     Part B Penalty for Late Enrollment.--
       (1) In general.--In the case of any eligible individual (as 
     defined in subsection (c)), the Secretary of Health and Human 
     Services shall provide for a special enrollment period during 
     which the individual may enroll under part B of title XVIII 
     of the Social Security Act. Such period shall be for a period 
     of 6 months and shall begin with the first month that begins 
     at least 45 days after the date of the enactment of this Act.
       (2) Coverage period.--In the case of an eligible individual 
     who enrolls during the special enrollment period provided 
     under paragraph (1), the coverage period under part B of 
     title XVIII of the Social Security Act shall begin on the 
     first day of the month following the month in which the 
     individual enrolls.
       (3) Waiver of part b late enrollment penalty.--In the case 
     of an eligible individual who enrolls during the special 
     enrollment period provided under paragraph (1), there shall 
     be no increase pursuant to section 1839(b) of the Social 
     Security Act in the monthly premium under part B of title 
     XVIII of such Act.
       (b) Medigap Special Open Enrollment Period.--
     Notwithstanding any other provision of law, an issuer of a 
     medicare supplemental policy (as defined in section 1882(g) 
     of the Social Security Act)--
       (1) may not deny or condition the issuance or effectiveness 
     of a medicare supplemental policy that has a benefit package 
     classified as ``A'', ``B'', ``C'', or ``F'' under the 
     standards established under section 1882(p)(2) of the Social 
     Security Act (42 U.S.C. 1395rr(p)(2)); and
       (2) may not discriminate in the pricing of the policy on 
     the basis of the individual's health status, medical 
     condition (including both physical and mental illnesses), 
     claims experience, receipt of health care, medical history, 
     genetic information, evidence of insurability (including 
     conditions arising out of acts of domestic violence), or 
     disability;

     in the case of an eligible individual who seeks to enroll 
     (and is enrolled) during the 6-month period described in 
     subsection (a)(1).
       (c) Eligible Individual Defined.--In this section, the term 
     ``eligible individual'' means an individual--
       (1) who, as of the date of the enactment of this Act, has 
     attained 65 years of age and was eligible to enroll under 
     part B of title XVIII of the Social Security Act, and
       (2) who at the time the individual first satisfied 
     paragraph (1) or (2) of section 1836 of the Social Security 
     Act--
       (A) was a covered beneficiary (as defined in section 
     1072(5) of title 10, United States Code), and
       (B) did not elect to enroll (or to be deemed enrolled) 
     under section 1837 of the Social Security Act during the 
     individual's initial enrollment period.

     The Secretary of Health and Human Services shall consult with 
     the Secretary of Defense in the identification of eligible 
     individuals.

     SEC. 4743. COMPETITIVE BIDDING FOR CERTAIN ITEMS AND 
                   SERVICES.

       (a) Establishment of Demonstration.--Not later than 1 year 
     after the date of the enactment of this Act, the Secretary of 
     Health and Human Services shall establish and operate over a 
     2-year period a demonstration project in 2 geographic regions 
     selected by the Secretary under which (notwithstanding any 
     provision of title XVIII of the Social Security Act to the 
     contrary) the amount of payment made under the medicare 
     program for a selected item or service furnished in the 
     region shall be equal to the price determined pursuant to a 
     competitive bidding process which meets the requirements of 
     subsection (b).
       (b) Requirements for Competitive Bidding Process.--The 
     competitive bidding process used under the demonstration 
     project under this section shall meet such requirements as 
     the Secretary may impose to ensure the cost-effective 
     delivery to medicare beneficiaries in the project region of 
     items and services of high quality.
       (c) Determination of Selected Items or Services.--The 
     Secretary shall select items and services to be subject to 
     the demonstration project under this section if the Secretary 
     determines that the use of competitive bidding with respect 
     to the item or service under the project will be appropriate 
     and cost-effective. In determining the items or services to 
     be selected, the Secretary shall consult with an advisory 
     taskforce which includes representatives of providers and 
     suppliers of items and services (including small business 
     providers and suppliers) in each geographic region in which 
     the project will be effective.
                  Subtitle I--Medical Liability Reform

                     CHAPTER 1--GENERAL PROVISIONS

     SEC. 4801. FEDERAL REFORM OF HEALTH CARE LIABILITY ACTIONS.

       (a) Applicability.--This subtitle governs any health care 
     liability action brought in any State or Federal court, 
     except that this subtitle shall not apply to an action for 
     damages arising from a vaccine-related injury or death to the 
     extent that title XXI of the Public Health Service Act 
     applies to the action.
       (b) Preemption.--This subtitle shall preempt any State or 
     applicable Federal law to the extent such law is inconsistent 
     with the limitations contained in this subtitle. This 
     subtitle shall not preempt any State or applicable Federal 
     law that provides for defenses or places limitations on a 
     person's liability in addition to those contained in this 
     subtitle or otherwise imposes greater restrictions than those 
     provided in this subtitle.
       (c) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in subsection (b) shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;

[[Page H4475]]

       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (3) affect the applicability of any provision of chapter 97 
     of title 28, United States Code;
       (4) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (5) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum.
       (d) Amount in Controversy.--In an action to which this 
     subtitle applies and which is brought under section 1332 of 
     title 28, United States Code, the amount of noneconomic 
     damages or punitive damages, and attorneys' fees or costs, 
     shall not be included in determining whether the matter in 
     controversy exceeds the sum or value of $50,000.
       (e) Federal Court Jurisdiction Not Established on Federal 
     Question Grounds.--Nothing in this subtitle shall be 
     construed to establish any jurisdiction in the district 
     courts of the United States over health care liability 
     actions on the basis of section 1331 or 1337 of title 28, 
     United States Code.

     SEC. 4802. DEFINITIONS.

       As used in this subtitle:
       (1) Actual damages.--The term ``actual damages'' means 
     damages awarded to pay for economic loss.
       (2) Alternative dispute resolution system; adr.--The term 
     ``alternative dispute resolution system'' or ``ADR'' means a 
     system established under Federal or State law that provides 
     for the resolution of health care liability claims in a 
     manner other than through health care liability actions.
       (3) Claimant.--The term ``claimant'' means any person who 
     brings a health care liability action and any person on whose 
     behalf such an action is brought. If such action is brought 
     through or on behalf of an estate, the term includes the 
     claimant's decedent. If such action is brought through or on 
     behalf of a minor or incompetent, the term includes the 
     claimant's legal guardian.
       (4) Clear and convincing evidence.--The term ``clear and 
     convincing evidence'' is that measure or degree of proof that 
     will produce in the mind of the trier of fact a firm belief 
     or conviction as to the truth of the allegations sought to be 
     established, except that such measure or degree of proof is 
     more than that required under preponderance of the evidence 
     but less than that required for proof beyond a reasonable 
     doubt.
       (5) Collateral source payments.--The term ``collateral 
     source payments'' means any amount paid or reasonably likely 
     to be paid in the future to or on behalf of a claimant, or 
     any service, product, or other benefit provided or reasonably 
     likely to be provided in the future to or on behalf of a 
     claimant, as a result of an injury or wrongful death, 
     pursuant to--
       (A) any State or Federal health, sickness, income-
     disability, accident or workers' compensation Act;
       (B) any health, sickness, income-disability, or accident 
     insurance that provides health benefits or income-disability 
     coverage;
       (C) any contract or agreement of any group, organization, 
     partnership, or corporation to provide, pay for, or reimburse 
     the cost of medical, hospital, dental, or income disability 
     benefits; and
       (D) any other publicly or privately funded program.
       (6) Device.--The term ``device'' has the same meaning given 
     such term in section 201(h) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 321(h)).
       (7) Drug.--The term ``drug'' has the same meaning given 
     such term in section 201(g)(1) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 321(g)(1)).
       (8) Economic loss.--The term ``economic loss'' means any 
     pecuniary loss resulting from harm (including the loss of 
     earnings or other benefits related to employment, medical 
     expense loss, replacement services loss, loss due to death, 
     burial costs, and loss of business or employment 
     opportunities), to the extent recovery for such loss is 
     allowed under applicable State or Federal law.
       (9) Harm.--The term ``harm'' means--
       (A) any physical injury, illness, or death of the claimant, 
     or
       (B) any mental anguish or emotional injury to the claimant 
     caused by or causing the claimant physical injury or illness.
       (10) Health care liability action.--The term ``health care 
     liability action'' means a civil action brought in a State or 
     Federal court against a health care provider, an entity which 
     is obligated to provide or pay for health benefits under any 
     health plan (including any person or entity acting under a 
     contract or arrangement to provide or administer any health 
     benefit), or the manufacturer, distributor, supplier, 
     marketer, promoter, or seller of a medical product, in which 
     the claimant alleges a health care liability claim.
       (11) Health care liability claim.--The term ``health care 
     liability claim'' means a claim in which the claimant alleges 
     that harm was caused by the provision of (or the failure to 
     provide) health care services or the use of a medical 
     product, regardless of the theory of liability on which the 
     claim is based.
       (12) Health care provider.--The term ``health care 
     provider'' means any individual, organization, or institution 
     that is engaged in the delivery of health care services in a 
     State and that is required by the laws or regulations of the 
     State to be licensed or certified by the State to engage in 
     the delivery of such services in the State.
       (13) Manufacturer.--The term ``manufacturer'' means--
       (A) any person who is engaged in a business to produce, 
     create, make, or construct any product (or component part of 
     a product) and who (i) designs or formulates the product (or 
     component part of the product), or (ii) has engaged another 
     person to design or formulate the product (or component part 
     of the product);
       (B) a product seller, but only with respect to those 
     aspects of a product (or component part of a product) which 
     are created or affected when, before placing the product in 
     the stream of commerce, the product seller produces, creates, 
     makes or constructs and designs, or formulates, or has 
     engaged another person to design or formulate, an aspect of 
     the product (or component part of the product) made by 
     another person; or
       (C) any product seller not described in subparagraph (B) 
     which holds itself out as a manufacturer to the user of the 
     product.
       (14) Noneconomic damages.--The term ``noneconomic damages'' 
     means damages paid to an individual for pain and suffering, 
     inconvenience, emotional distress, mental anguish, loss of 
     society and companionship, injury to reputation, humiliation, 
     and other subjective, nonpecuniary losses.
       (15) Person.--The term ``person'' means any individual, 
     corporation, company, association, firm, partnership, 
     society, joint stock company, or any other entity, including 
     any governmental entity.
       (16) Product seller.--
       (A) In general.--The term ``product seller'' means a person 
     who in the course of a business conducted for that purpose--
       (i) sells, distributes, rents, leases, prepares, blends, 
     packages, labels, or otherwise is involved in placing a 
     product in the stream of commerce; or
       (ii) installs, repairs, refurbishes, reconditions, or 
     maintains the harm-causing aspect of the product.
       (B) Exclusion.--The term ``product seller'' does not 
     include--
       (i) a seller or lessor of real property;
       (ii) a provider of professional services in any case in 
     which the sale or use of a product is incidental to the 
     transaction and the essence of the transaction is the 
     furnishing of judgment, skill, or services; or
       (iii) any person who--

       (I) acts in only a financial capacity with respect to the 
     sale of a product; or
       (II) leases a product under a lease arrangement in which 
     the lessor does not initially select the leased product and 
     does not during the lease term ordinarily control the daily 
     operations and maintenance of the product.

       (17) Punitive damages.--The term ``punitive damages'' means 
     damages awarded against any person not to compensate for 
     actual injury suffered, but to punish or deter such person or 
     others from engaging in similar behavior in the future.
       (18) State.--The term ``State'' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the Virgin Islands, Guam, American Samoa, the Northern 
     Mariana Islands, the Trust Territories of the Pacific 
     Islands, and any other territory or possession of the United 
     States or any political subdivision of any of the foregoing.

     SEC. 4803. EFFECTIVE DATE.

       This subtitle will apply to any health care liability 
     action brought in a Federal or State court and to any health 
     care liability claim subject to an alternative dispute 
     resolution system, that is initiated on or after the date of 
     enactment of this subtitle.

     CHAPTER 2--UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS

     SEC. 4811. STATUTE OF LIMITATIONS.

       (a) General Rule.--Except as provided in subsection (b), a 
     health care liability action may be filed not later than 2 
     years after the date on which the claimant discovered or, in 
     the exercise of reasonable care, should have discovered--
       (1) the harm that is the subject of the action; and
       (2) the cause of the harm.
       (b) Exception.--A person with a legal disability (as 
     determined under applicable law) may file a health care 
     liability action not later than 2 years after the date on 
     which the person ceases to have the legal disability.
       (c) Transitional Provision Relating to Extension of Period 
     for Bringing Certain Actions.--If any provision of subsection 
     (a) or (b) shortens the period during which a health care 
     liability action could be otherwise brought pursuant to 
     another provision of law, the claimant may, notwithstanding 
     subsections (a) and (b), bring the health care liability 
     action not later than 2 years after the date of enactment of 
     this Act.

     SEC. 4812. CALCULATION AND PAYMENT OF DAMAGES.

       (a) Treatment of Noneconomic Damages.--
       (1) Limitation on noneconomic damages.--The total amount of 
     noneconomic damages that may be awarded to a claimant for 
     harm which is the subject of a health care liability action 
     may not exceed $250,000, regardless of the number of parties 
     against whom the action is brought or the number of actions 
     brought with respect to the injury.
       (2) Fair share rule for noneconomic damages.--
       (A) General rule.--In a health care liability action, the 
     liability of each defendant for noneconomic damages shall be 
     several only and shall not be joint.

[[Page H4476]]

       (B) Amount of liability.--
       (i) In general.--Each defendant shall be liable only for 
     the amount of noneconomic damages attributable to the 
     defendant in direct proportion to the percentage of 
     responsibility of the defendant (determined in accordance 
     with paragraph (2)) for the harm to the claimant with respect 
     to which the defendant is liable. The court shall render a 
     separate judgment against each defendant in an amount 
     determined pursuant to the preceding sentence.
       (ii) Percentage of responsibility.--For purposes of 
     determining the amount of noneconomic damages attributable to 
     a defendant under this section, the trier of fact shall 
     determine the percentage of responsibility of each person 
     responsible for the claimant's harm, whether or not such 
     person is a party to the action.
       (b) Treatment of Punitive Damages.--
       (1) General rule.--Punitive damages may, to the extent 
     permitted by applicable law, be awarded in a health care 
     liability action against a defendant if the claimant 
     establishes by clear and convincing evidence that the harm 
     suffered was result of conduct manifesting a conscious, 
     flagrant indifference to the rights or safety of others.
       (2) Required proportionality.--The amount of punitive 
     damages that may be awarded in a health care liability action 
     shall not exceed 3 times the amount of damages awarded to the 
     claimant for economic loss, or $250,000, whichever is 
     greater. This subsection shall be applied by the court, and 
     application of this subsection shall not be disclosed to the 
     jury.
       (c) Bifurcation at Request of Any Party.--
       (1) In general.--At the request of any party the trier of 
     fact in any action that is subject to this section shall 
     consider in a separate proceeding, held subsequent to the 
     determination of the amount of compensatory damages, whether 
     punitive damages are to be awarded for the harm that is the 
     subject of the action and the amount of the award.
       (2) Inadmissibility of evidence relative only to a claim of 
     punitive damages in a proceeding concerning compensatory 
     damages.--If any party requests a separate proceeding under 
     paragraph (1), in a proceeding to determine whether the 
     claimant may be awarded compensatory damages, any evidence, 
     argument, or contention that is relevant only to the claim of 
     punitive damages, as determined by applicable law, shall be 
     inadmissible.
       (d) Drugs and Devices.--
       (1)(A) Punitive damages shall not be awarded against a 
     manufacturer or product seller of a drug or device which 
     caused the claimant's harm where--
       (i) such drug or device was subject to premarket approval 
     by the Food and Drug Administration with respect to the 
     safety of the formulation or performance of the aspect of 
     such drug or device which caused the claimant's harm or the 
     adequacy of the packaging or labeling of such drug or device, 
     and such drug or device was approved by the Food and Drug 
     Administration; or
       (ii) the drug or device is generally recognized as safe and 
     effective pursuant to conditions established by the Food and 
     Drug Administration and applicable regulations, including 
     packaging and labeling regulations.
       (B) Subparagraph (A) shall not apply in any case in which 
     the defendant, before or after premarket approval of a drug 
     or device--
       (i) intentionally and wrongfully withheld from or 
     misrepresented to the Food and Drug Administration 
     information concerning such drug or device required to be 
     submitted under the Federal Food, Drug, and Cosmetic Act (21 
     U.S.C. 301 et seq.) or section 351 of the Public Health 
     Service Act (42 U.S.C. 262) that is material and relevant to 
     the harm suffered by 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 health care liability action which is 
     alleged to relate to the adequacy of the packaging (or 
     labeling relating to such packaging) of a drug which is 
     required to have tamper-resistant packaging under regulations 
     of the Secretary of Health and Human Services (including 
     labeling regulations related to such packaging), the 
     manufacturer of the drug shall not be held liable for 
     punitive damages unless the drug is found by the court by 
     clear and convincing evidence to be substantially out of 
     compliance with such regulations.
       (e) Periodic Payments for Future Losses.--
       (1) General rule.--In any health care liability action in 
     which the damages awarded for future economic and noneconomic 
     loss exceed $50,000, a person shall not be required to pay 
     such damages in a single, lump-sum payment, but shall be 
     permitted to make such payments periodically based on when 
     the damages are found likely to occur, with the amount and 
     schedule of such payments determined by the court.
       (2) Finality of judgment.--The judgment of the court 
     awarding periodic payments under this subsection may not, in 
     the absence of fraud, be reopened at any time to contest, 
     amend, or modify the schedule or amount of the payments.
       (3) Lump-sum settlements.--This subsection shall not be 
     construed to preclude a settlement providing for a single, 
     lump-sum payment.
       (f) Treatment of Collateral Source Payments.--
       (1) Introduction into evidence.--In any health care 
     liability action, any defendant may introduce evidence of 
     collateral source payments. If a defendant elects to 
     introduce such evidence, the claimant may introduce evidence 
     of any amount paid or contributed or reasonably likely to be 
     paid or contributed in the future by or on behalf of the 
     claimant to secure the right to such collateral source 
     payments.
       (2) No subrogation.--No provider of collateral source 
     payments shall recover any amount against the claimant or 
     receive any lien or credit against the claimant's recovery or 
     be equitably or legally subrogated the right of the claimant 
     in a health care liability action. This subsection shall 
     apply to an action that is settled as well as an action that 
     is resolved by a fact finder.

     SEC. 4813. ALTERNATIVE DISPUTE RESOLUTION.

       Any ADR used to resolve a health care liability action or 
     claim shall contain provisions relating to statute of 
     limitations, non-economic damages, joint and several 
     liability, punitive damages, collateral source rule, and 
     periodic payments which are identical to the provisions 
     relating to such matters in this subtitle.
           TITLE V--COMMITTEE ON EDUCATION AND THE WORKFORCE
                      Subtitle A--TANF Block Grant

     SEC. 5001. WELFARE-TO-WORK GRANTS.

       (a) Grants to States.--Section 403(a) of the Social 
     Security Act (42 U.S.C. 603(a)) is amended by adding at the 
     end the following:
       ``(5) Welfare-to-work grants.--
       ``(A) Formula grants.--
       ``(i) Entitlement.--A State shall be entitled to receive 
     from the Secretary a grant for each fiscal year specified in 
     subparagraph (H) of this paragraph for which the State is a 
     welfare-to-work State, in an amount that does not exceed the 
     lesser of--

       ``(I) 2 times the total of the expenditures by the State 
     (excluding qualified State expenditures (as defined in 
     section 409(a)(7)(B)(i)) and expenditures described in 
     section 409(a)(7)(B)(iv)) during the fiscal year for 
     activities described in subpargraph (C)(i) of this paragraph; 
     or
       ``(II) the allotment of the State under clause (iii) of 
     this subparagraph for the fiscal year.

       ``(ii) Welfare-to-work state.--A State shall be considered 
     a welfare-to-work State for a fiscal year for purposes of 
     this subparagraph if the Secretary, after consultation (and 
     the sharing of any plan or amendment thereto submitted under 
     this clause) with the Secretary of Health and Human Services 
     and the Secretary of Housing and Urban Development, 
     determines that the State meets the following requirements:

       ``(I) The State has submitted to the Secretary (in the form 
     of an addendum to the State plan submitted under section 402) 
     a plan which--

       ``(aa) describes how, consistent with this subparagraph, 
     the State will use any funds provided under this subparagraph 
     during the fiscal year;
       ``(bb) specifies the formula to be used pursuant to clause 
     (vi) to distribute funds in the State, and describes the 
     process by which the formula was developed; and
       ``(cc) contains evidence that the plan was developed 
     through a collaborative process that, at a minimum, included 
     sub-State areas.

       ``(II) The State has provided the Secretary with an 
     estimate of the amount that the State intends to expend 
     during the fiscal year (excluding expenditures described in 
     section 409(a)(7)(B)(iv)) for activities described in 
     subparagraph (C)(i) of this paragraph.
       ``(III) The State has agreed to negotiate in good faith 
     with the Secretary of Health and Human Services with respect 
     to the substance of any evaluation under section 413(j), and 
     to cooperate with the conduct of any such evaluation.
       ``(IV) The State is an eligible State for the fiscal year.

       ``(iii) Allotments to welfare-to-work states.--The 
     allotment of a welfare-to-work State for a fiscal year shall 
     be the available amount for the fiscal year multiplied by the 
     State percentage for the fiscal year.
       ``(iv) Available amount.--As used in clause (iii), the term 
     `available amount' means, for a fiscal year, 95 percent of--

       ``(I) the amount specified in subparagraph (H) for the 
     fiscal year; minus
       ``(II) the total of the amounts reserved pursuant to 
     subparagraphs (F) and (G) for the fiscal year.
       ``(v) State percentage.--As used in clause (iii), the term 
     `State percentage' means, with respect to a fiscal year, \1/
     2\ of the sum of--

       ``(aa) the percentage represented by the number of 
     individuals in the State whose income is less than the 
     poverty line divided by the number of such individuals in the 
     United States; and
       ``(bb) the percentage represented by the number of 
     individuals who are adult recipients of assistance under the 
     State program funded under this part divided by the number of 
     individuals in the United States who are adult recipients of 
     assistance under any State program funded under this part.
       ``(vi) Distribution of funds within states.--

       ``(I) In general.--A State to which a grant is made under 
     this subparagraph shall distribute not less than 85 percent 
     of the grant funds among the service delivery areas in the 
     State, in accordance with a formula which--

       ``(aa) determines the amount to be distributed for the 
     benefit of a service delivery area

[[Page H4477]]

     in proportion to the number (if any) by which the number of 
     individuals residing in the service delivery area with an 
     income that is less than the poverty line exceeds 5 percent 
     of the population of the service delivery area, relative to 
     such number for the other service delivery areas in the 
     State, and accords a weight of not less than 50 percent to 
     this factor;
       ``(bb) may determine the amount to be distributed for the 
     benefit of a service delivery area in proportion to the 
     number of adults residing in the service delivery area who 
     are recipients of assistance under the State program funded 
     under this part (whether in effect before or after the 
     amendments made by section 103(a) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act first 
     applied to the State) for at least 30 months (whether or not 
     consecutive) relative to the number of such adults residing 
     in the other service delivery areas in the State; and
       ``(cc) may determine the amount to be distributed for the 
     benefit of a service delivery area in proportion to the 
     number of unemployed individuals residing in the service 
     delivery area relative to the number of such individuals 
     residing in the other service delivery areas in the State.

       ``(II) Special rule.--Notwithstanding subclause (I), if the 
     formula used pursuant to subclause (I) would result in the 
     distribution of less than $100,000 during a fiscal year for 
     the benefit of a service delivery area, then in lieu of 
     distributing such sum in accordance with the formula, such 
     sum shall be available for distribution under subclause (III) 
     during the fiscal year.
       ``(III) Projects to help long-term recipients of assistance 
     into the work force.--The Governor of a State to which a 
     grant is made under this subparagraph may distribute not more 
     than 15 percent of the grant funds (plus any amount required 
     to be distributed under this subclause by reason of subclause 
     (II)) to projects that appear likely to help long-term 
     recipients of assistance under the State program funded under 
     this part (whether in effect before or after the amendments 
     made by section 103(a) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act first applied to the 
     State) enter the work force.

       ``(vii) Administration.--

       ``(I) In general.--A grant made under this subparagraph to 
     a State shall be administered by the State agency that is 
     administering, or supervising the administration of, the 
     State program funded under this part, or by another State 
     agency designated by the Governor of the State.
       ``(II) Spending by private industry councils.--The private 
     industry council for a service delivery area shall have sole 
     authority, in coordination with the chief elected official 
     (as described in section 103(c) of the Job Training 
     Partnership Act) of the service delivery area, to expend the 
     amounts provided for a service delivery area under 
     subparagraph (vi)(I).

       ``(B) Demonstration projects.--
       ``(i) In general.--The Secretary, in consultation with the 
     Secretary of Health and Human Services and the Secretary of 
     Housing and Urban Development, shall make grants in 
     accordance with this subparagraph among eligible applicants 
     based on the likelihood that the applicant can successfully 
     make long-term placements of individuals into the work force.
       ``(ii) Eligible applicants.--As used in clause (i), the 
     term `eligible applicant' means a private industry council or 
     a political subdivision of a State.
       ``(iii) Determination of grant amount.--In determining the 
     amount of a grant to be made under this subparagraph for a 
     demonstration project proposed by an applicant, the Secretary 
     shall provide the applicant with an amount sufficient to 
     ensure that the project has a reasonable opportunity to be 
     successful, taking into account the number of long-term 
     recipients of assistance under a State program funded under 
     this part, the level of unemployment, the job opportunities 
     and job growth, the poverty rate, and such other factors as 
     the Secretary deems appropriate, in the area to be served by 
     the project.
       ``(iv) Funding.--For grants under this subparagraph for 
     each fiscal year specified in subparagraph (H), there shall 
     be available to the Secretary an amount equal to the sum of--

       ``(I) 5 percent of--

       ``(aa) the amount specified in subparagraph (H) for the 
     fiscal year; minus
       ``(bb) the total of the amounts reserved pursuant to 
     subparagraphs (F) and (G) for the fiscal year;

       ``(II) any amount available for grants under this paragraph 
     for the immediately preceding fiscal year that has not been 
     obligated;
       ``(III) any amount reserved pursuant to subparagraph (F) 
     for the immediately preceding fiscal year that has not been 
     obligated; and
       ``(IV) any available amount (as defined in subparagraph 
     (A)(iv)) for the immediately preceding fiscal year that has 
     not been obligated by a State or sub-State entity.

       ``(C) Limitations on use of funds.--
       ``(i) Allowable activities.--An entity to which funds are 
     provided under this paragraph may use the funds to move into 
     the work force recipients of assistance under the program 
     funded under this part of the State in which the entity is 
     located, by means of any of the following:

       ``(I) Job creation through public or private sector 
     employment wage subsidies.
       ``(II) On-the-job training.
       ``(III) Contracts with job placement companies or public 
     job placement programs.
       ``(IV) Job vouchers.
       ``(V) Job retention or support services if such services 
     are not otherwise available.

       ``(ii) Required beneficiaries.--An entity that operates a 
     project with funds provided under this paragraph shall expend 
     at least 90 percent of all funds provided to the project for 
     the benefit of recipients of assistance under the program 
     funded under this part of the State in which the entity is 
     located who meet the requirements of any of the following 
     subclauses:

       ``(I) The individual has received assistance under the 
     State program funded under this part (whether in effect 
     before or after the amendments made by section 103 of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 first apply to the State) for at least 30 months 
     (whether or not consecutive).
       ``(II) At least 2 of the following apply to the recipient:

       ``(aa) The individual has not completed secondary school or 
     obtained a certificate of general equivalency, and has low 
     skills in reading and mathematics.
       ``(bb) The individual requires substance abuse treatment 
     for employment.
       ``(cc) The individual has a poor work history.

     The Secretary shall prescribe such regulations as may be 
     necessary to interpret this subclause.
       ``(III) Within 12 months, the individual will become 
     ineligible for assistance under the State program funded 
     under this part by reason of a durational limit on such 
     assistance, without regard to any exemption provided pursuant 
     to section 408(a)(7)(C) that may apply to the individual.

       ``(iii) Limitation on applicability of section 404.--The 
     rules of section 404, other than subsections (b), (f), and 
     (h) of section 404, shall not apply to a grant made under 
     this paragraph.
       ``(iv) Prohibition against provision of services by private 
     industry council.--A private industry council may not 
     directly provide services using funds provided under this 
     paragraph.
       ``(v) Prohibition against use of grant funds for any other 
     fund matching requirement.--An entity to which funds are 
     provided under this paragraph shall not use any part of the 
     funds to fulfill any obligation of any State, political 
     subdivision, or private industry council to contribute funds 
     under other Federal law.
       ``(vi) Deadline for expenditure.--An entity to which funds 
     are provided under this paragraph shall remit to the 
     Secretary any part of the funds that are not expended within 
     3 years after the date the funds are so provided.
       ``(D) Individuals with income less than the poverty line.--
     For purposes of this paragraph, the number of individuals 
     with an income that is less than the poverty line shall be 
     determined based on the methodology used by the Bureau of the 
     Census to produce and publish intercensal poverty data for 
     1993 for States and counties.
       ``(E) Definitions.--As used in this paragraph:
       ``(i) Private industry council.--The term `private industry 
     council' means, with respect to a service delivery area, the 
     private industry council (or successor entity) established 
     for the service delivery area pursuant to the Job Training 
     Partnership Act.
       ``(ii) Secretary.--The term `Secretary' means the Secretary 
     of Labor, except as otherwise expressly provided.
       ``(iii) Service delivery area.--The term `service delivery 
     area' shall have the meaning given such term for purposes of 
     the Job Training Partnership Act (or successor area).
       ``(F) Funding for indian tribes.--1 percent of the amount 
     specified in subparagraph (H) for each fiscal year shall be 
     reserved for grants to Indian tribes under section 412(a)(3).
       ``(G) Evaluations.--0.5 percent of the amount specified in 
     subparagraph (H) for each fiscal year shall be reserved for 
     use by the Secretary of Health and Human Services to carry 
     out section 413(j).
       ``(H) Funding.--The amount specified in this subparagraph 
     is $1,500,000,000 for each of fiscal years 1998 and 1999.
       ``(H) Funding.--The amount specified in this subparagraph 
     is--
       ``(i) $750,000,000 for fiscal year 1998;
       ``(ii) $1,250,000,000 for fiscal year 1999; and
       ``(iii) $1,000,000,000 for fiscal year 2000.
       ``(I) Budget scoring.--Notwithstanding section 457(b)(2) of 
     the Balanced Budget and Emergency Deficit Control Act of 
     1985, the baseline shall assume that no grant shall be made 
     under this paragraph or under section 412(a)(3) after fiscal 
     year 2001.''.
       (b) Grants to Territories.--Section 1108(a) of such Act (42 
     U.S.C. 1308(a)) is amended by inserting ``(except section 
     403(a)(5))'' after ``title IV''.
       (c) Grants to Indian Tribes.--Section 412(a) of such Act 
     (42 U.S.C. 612(a)) is amended by adding at the end the 
     following:
       ``(3) Welfare-to-work grants.--
       ``(A) In general.--The Secretary shall make a grant in 
     accordance with this paragraph to an Indian tribe for each 
     fiscal year specified in section 403(a)(5)(H) for which the 
     Indian tribe is a welfare-to-work tribe, in such amount as 
     the Secretary deems appropriate, subject to subparagraph (B) 
     of this paragraph.

[[Page H4478]]

       ``(B) Welfare-to-work tribe.--An Indian tribe shall be 
     considered a welfare-to-work tribe for a fiscal year for 
     purposes of this paragraph if the Indian tribe meets the 
     following requirements:
       ``(i) The Indian tribe has submitted to the Secretary (in 
     the form of an addendum to the tribal family assistance plan, 
     if any, of the Indian tribe) a plan which describes how, 
     consistent with section 403(a)(5), the Indian tribe will use 
     any funds provided under this paragraph during the fiscal 
     year.
       ``(ii) The Indian tribe has provided the Secretary with an 
     estimate of the amount that the Indian tribe intends to 
     expend during the fiscal year (excluding tribal expenditures 
     described in section 409(a)(7)(B)(iv)) for activities 
     described in section 403(a)(5)(C)(i).
       ``(iii) The Indian tribe has agreed to negotiate in good 
     faith with the Secretary of Health and Human Services with 
     respect to the substance of any evaluation under section 
     413(j), and to cooperate with the conduct of any such 
     evaluation.
       ``(C) Limitations on use of funds.--Section 403(a)(5)(C) 
     shall apply to funds provided to Indian tribes under this 
     paragraph in the same manner in which such section applies to 
     funds provided under section 403(a)(5).''.
       (d) Funds Received From Grants to be Disregarded in 
     Applying Durational Limit on Assistance.--Section 408(a)(7) 
     of such Act (42 U.S.C. 608(a)(7)) is amended by adding at the 
     end the following:
       ``(G) Inapplicability to welfare-to-work grants and 
     assistance.--For purposes of subparagraph (A) of this 
     paragraph, a grant made under section 403(a)(5) shall not be 
     considered a grant made under section 403, and assistance 
     from funds provided under section 403(a)(5) shall not be 
     considered assistance.''.
       (e) Evaluations.--Section 413 of such Act (42 U.S.C. 613) 
     is amended by adding at the end the following:
       ``(j) Evaluation of Welfare-To-Work Programs.--The 
     Secretary--
       ``(1) shall, in consultation with the Secretary of Labor, 
     develop a plan to evaluate how grants made under sections 
     403(a)(5) and 412(a)(3) have been used; and
       ``(2) may evaluate the use of such grants by such grantees 
     as the Secretary deems appropriate, in accordance with an 
     agreement entered into with the grantees after good-faith 
     negotiations.''.

     SEC. 5002. CLARIFICATION OF LIMITATION ON NUMBER OF PERSONS 
                   WHO MAY BE TREATED AS ENGAGED IN WORK BY REASON 
                   OF PARTICIPATION IN EDUCATIONAL ACTIVITIES.

       (a) In General.--Section 407(c)(2)(D) of the Social 
     Security Act (42 U.S.C. 607(c)(2)(D)) is amended to read as 
     follows:
       ``(D) Limitation on number of persons who may be treated as 
     engaged in work by reason of participation in educational 
     activities.--For purposes of determining monthly 
     participation rates under paragraphs (1)(B)(i) and (2)(B) of 
     subsection (b), not more than 20 percent of the number of 
     individuals in all families and in 2-parent families, 
     respectively, in a State who are treated as engaged in work 
     for a month may consist of individuals who are determined to 
     be engaged in work for the month by reason of participation 
     in vocational educational training, or deemed to be engaged 
     in work for the month by reason of subparagraph (C) of this 
     paragraph.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 5003. PENALTY FOR FAILURE OF STATE TO REDUCE ASSISTANCE 
                   FOR RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO 
                   WORK.

       (a) In General.--Section 409(a) of the Social Security Act 
     (42 U.S.C. 609(a)) is amended by adding at the end the 
     following:
       ``(13) Penalty for failure to reduce assistance for 
     recipients refusing without good cause to work.--
       ``(A) In general.--If the Secretary determines that a State 
     to which a grant is made under section 403 in a fiscal year 
     has violated section 407(e) during the fiscal year, the 
     Secretary shall reduce the grant payable to the State under 
     section 403(a)(1) for the immediately succeeding fiscal year 
     by an amount equal to not less than 1 percent and not more 
     than 5 percent of the State family assistance grant.
       ``(B) Penalty based on severity of failure.--The Secretary 
     shall impose reductions under subparagraph (A) with respect 
     to a fiscal year based on the degree of noncompliance.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 5004. RULES GOVERNING EXPENDITURE OF FUNDS FOR WORK 
                   EXPERIENCE AND COMMUNITY SERVICE PROGRAMS.

       (a) In General.--Section 407 of the Social Security Act (42 
     U.S.C. 607) is amended by adding at the end the following:
       ``(j) Rules Governing Expenditure of Funds for Work 
     Experience and Community Service Programs.--
       ``(1) In general.--To the extent that a State to which a 
     grant is made under section 403(a)(5) or any other provision 
     of section 403 uses the grant to establish or operate a work 
     experience or community service program, the State may 
     establish and operate the program in accordance with this 
     subsection.
       ``(2) Purpose.--The purpose of a work experience or 
     community experience program is to provide experience or 
     training for individuals not able to obtain employment in 
     order to assist them to move to regular employment. Such a 
     program shall be designed to improve the employability of 
     participants through actual work experience to enable 
     individuals participating in the program to move promptly 
     into regular public or private employment. Such a program 
     shall not place individuals in private, for-profit entities.
       ``(3) Limitation on projects that may be undertaken.--A 
     work experience or community service program shall be limited 
     to projects which serve a useful public purpose in fields 
     such as health, social service, environmental protection, 
     education, urban and rural development and redevelopment, 
     welfare, recreation, public facilities, public safety, and 
     day care, and other purposes identified by the State.
       ``(4) Maximum hours of participation per month.--A State 
     that elects to establish a work experience or community 
     service program shall operate the program so that each 
     participant participates in the program with the maximum 
     number of hours that any such individual may be required to 
     participate in any month being a number equal to--
       ``(A)(i) the amount of assistance provided during the month 
     to the family of which the individual is a member under the 
     State program funded under this part; plus
       ``(ii) the dollar value equivalent of any benefits provided 
     during the month to the household of which the individual is 
     a member under the food stamp program under the Food Stamp 
     Act of 1977; minus
       ``(iii) any amount collected by the State as child support 
     with respect to the family that is retained by the State; 
     divided by
       ``(B) the greater of the Federal minimum wage or the 
     applicable State minimum wage.
       ``(5) Maximum hours of participation per week.--A State 
     that elects to establish a work experience or community 
     service program may not require any participant in any such 
     program to participate in any such program for a combined 
     total of more than 40 hours per week.
       ``(6) Rule of interpretation.--This subsection shall not be 
     construed as authorizing the provision of assistance under a 
     State program funded under this part as compensation for work 
     performed, nor shall a participant be entitled to a salary or 
     to any other work or training expense provided under any 
     other provision of law by reason of participation in a work 
     experience or community service program described in this 
     subsection.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 5005. STATE OPTION TO TAKE ACCOUNT OF CERTAIN WORK 
                   ACTIVITIES OF RECIPIENTS WITH SUFFICIENT 
                   PARTICIPATION IN WORK EXPERIENCE OR COMMUNITY 
                   SERVICE PROGRAMS.

       (a) In General.--Section 407(c) of the Social Security Act 
     (42 U.S.C. 607(c)) is amended by adding at the end the 
     following:
       ``(3) State option to take account of certain work 
     activities of recipients with sufficient participation in 
     work experience or community service programs.--
     Notwithstanding paragraphs (1) and (2) of this subsection and 
     subsection (d)(8), for purposes of determining monthly 
     participation rates under paragraphs (1)(B)(i) and (2)(B) of 
     subsection (b), an individual who, during a month, has 
     participated in a work experience or community service 
     program operated in accordance with subsection (j), for the 
     maximum number of hours that the individual may be required 
     to participate in such a program during the month shall be 
     treated as engaged in work for the month if, during the 
     month, the individual has participated in any other work 
     activity for a number of hours that is not less than the 
     number of hours required by subsection (c)(1) for the month 
     minus such maximum number of hours.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 5006. WORKER PROTECTIONS.

       Section 407(f) of the Social Security Act (42 U.S.C. 
     607(f)) is amended to read as follows:
       ``(f) Worker Protections.--
       ``(1) Nondisplacement in work activities.--
       ``(A) General prohibition.--Subject to this paragraph, an 
     adult in a family receiving assistance under a State program 
     funded under this part attributable to funds provided by the 
     Federal Government may fill a vacant employment position in 
     order to engage in a work activity.
       ``(B) Prohibition against violation of contracts.--A work 
     activity shall not violate an existing contract for services 
     or collective bargaining agreement.
       ``(C) Other prohibitions.--An adult participant in a work 
     activity shall not be employed or assigned--
       ``(i) when any other individual is on layoff from the same 
     or any substantially equivalent job; or
       ``(ii) if the employer has terminated the employment of any 
     regular employee or otherwise caused an involuntary reduction 
     if its

[[Page H4479]]

     workforce with the intention of filling the vacancy so 
     created with the participant.
       ``(2) Health and safety.--Health and safety standards 
     established under Federal and State law otherwise applicable 
     to working conditions of employees shall be equally 
     applicable to working conditions of participants engaged in a 
     work activity.
       ``(3) Nondiscrimination.--In addition to the protections 
     provided under the provisions of law specified in section 
     408(c), an individual may not be discriminated against with 
     respect to participation in work activities by reason of 
     gender.
       ``(4) Grievance procedure.--
       ``(A) In general.--Each State to which a grant is made 
     under section 403 shall establish and maintain a procedure 
     for grievances or complaints from employees alleging 
     violations of paragraph (1) and participants in work 
     activities alleging violations of paragraph (1), (2), or (3).
       ``(B) Hearing.--The procedure shall include an opportunity 
     for a hearing.
       ``(C) Remedies.--The procedure shall include remedies for 
     violation of paragraph (1), (2), or (3), which may include--
       ``(i) prohibition against placement of a participant with 
     an employer that has violated paragraph (1), (2), or (3);
       ``(ii) where applicable, reinstatement of an employee, 
     payment of lost wages and benefits, and reestablishment of 
     other relevant terms, conditions and privileges of 
     employment; and
       ``(iii) where appropriate, other equitable relief.
       ``(5) Nonpreemption of state nondisplacement laws.--The 
     provisions of this subsection relating to nondisplacement of 
     employees shall not be construed to preempt any provision of 
     State law relating to nondisplacement of employees that 
     affords greater protections to employees than is afforded by 
     such provisions of this subsection.''.
                 Subtitle B--Higher Education Programs

     SEC. 5101. MANAGEMENT AND RECOVERY OF RESERVES.

       (a) Amendment.--Section 422 of the Higher Education Act of 
     1965 (20 U.S.C. 1072) is amended by adding after subsection 
     (g) the following new subsection:
       ``(h) Recall of Reserves; Limitations on Use of Reserve 
     Funds and Assets.--(1) Notwithstanding any other provision of 
     law, the Secretary shall, except as otherwise provided in 
     this subsection, recall $1,000,000,000 from the reserve funds 
     held by guaranty agencies on September 1, 2002.
       ``(2) Funds recalled by the Secretary under this subsection 
     shall be deposited in the Treasury.
       ``(3) The Secretary shall require each guaranty agency to 
     return reserve funds under paragraph (1) based on such 
     agency's required share of recalled reserve funds held by 
     guaranty agencies as of September 30, 1996. For purposes of 
     this paragraph, a guaranty agency's required share of 
     recalled reserve funds shall be determined as follows:
       ``(A) The Secretary shall compute each agency's reserve 
     ratio by dividing (i) the amount held in such agency's 
     reserve funds as of September 30, 1996 (but reflecting later 
     accounting or auditing adjustments approved by the 
     Secretary), by (ii) the original principal amount of all 
     loans for which such agency has an outstanding insurance 
     obligation as of such date.
       ``(B) If the reserve ratio of any agency as computed under 
     subparagraph (A) exceeds 2.0 percent, the agency's required 
     share shall include so much of the amounts held in such 
     agency's reserve fund as exceed a reserve ratio of 2.0 
     percent.
       ``(C) If any additional amount is required to be recalled 
     under paragraph (1) (after deducting the total of the 
     required shares calculated under subparagraph (B)), the 
     agencies' required shares shall include additional amounts--
       ``(i) determined by imposing on each such agency an equal 
     percentage reduction in the amount of each agency's reserve 
     fund remaining after deduction of the amount recalled under 
     subparagraph (B); and
       ``(ii) the total of which equals the additional amount that 
     is required to be recalled under paragraph (1) (after 
     deducting the total of the required shares calculated under 
     subparagraph (B)).
       ``(4) Within 90 days after the beginning of each of fiscal 
     years 1998 through 2002, each guaranty agency shall transfer 
     a portion of each agency's required share determined under 
     paragraph (3) to a restricted account established by the 
     guaranty agency that is of a type selected by the guaranty 
     agency with the approval of the Secretary. Funds transferred 
     to such restricted accounts shall be invested in obligations 
     issued or guaranteed by the United States or in other 
     similarly low-risk securities. A guaranty agency shall not 
     use the funds in such a restricted account for any purpose 
     without the express written permission of the Secretary, 
     except that a guaranty agency may use the earnings from such 
     restricted account to assist in meeting the agency's 
     operational expenses under this part. In each of fiscal years 
     1998 through 2002, each agency shall transfer its required 
     share to such restricted account in 5 equal annual 
     installments, except that--
       ``(A) a guarantee agency that has a reserve ratio (as 
     computed under subparagraph (3)(A)) equal to or less than 
     1.10 percent may transfer its required share to such account 
     in 4 equal installments beginning in fiscal year 1999; and
       ``(B) a guarantee agency may transfer such required share 
     to such account in accordance with such other payment 
     schedules as are approved by the Secretary.
       ``(5) If, on September 1, 2002, the total amount in the 
     restricted accounts described in paragraph (4) is less than 
     the amount the Secretary is required to recall under 
     paragraph (1), the Secretary may require the return of the 
     amount of the shortage from other reserve funds held by 
     guaranty agencies under procedures established by the 
     Secretary.
       ``(6) The Secretary may take such reasonable measures, and 
     require such information, as may be necessary to ensure that 
     guaranty agencies comply with the requirements of this 
     subsection. Notwithstanding any other provision of this part, 
     if the Secretary determines that a guaranty agency is not in 
     compliance with the requirements of this subsection, such 
     agency may not receive any other funds under this part until 
     the Secretary determines that such agency is in compliance.
       ``(7) The Secretary shall not have any authority to direct 
     a guaranty agency to return reserve funds under subsection 
     (g)(1)(A) during the period from the date of enactment of 
     this subsection through September 30, 2002, and any reserve 
     funds otherwise returned under subsection (g)(1) during such 
     period shall be treated as amounts recalled under this 
     subsection and shall not be available under subsection 
     (g)(4).
       ``(8) For purposes of this subsection, the term `reserve 
     funds' when used with respect to a guaranty agency--
       ``(A) includes any cash reserve funds held by the guaranty 
     agency, or held by, or under the control of, any other 
     entity; and
       ``(B) does not include buildings, equipment, or other 
     nonliquid assets.''.
       (b) Conforming Amendment.--Section 428(c)(9)(A) of the 
     Higher Education Act of 1965 (20 U.S.C. 1078(c)(9)(A)) is 
     amended--
       (1) in the first sentence, by striking ``for the fiscal 
     year of the agency that begins in 1993''; and
       (2) by striking the third sentence.

     SEC. 5102. REPEAL OF DIRECT LOAN ORIGINATION FEES TO 
                   INSTITUTIONS OF HIGHER EDUCATION.

       Section 452 of the Higher Education Act of 1965 (20 U.S.C. 
     1087b) is amended--
       (1) by striking subsection (b); and
       (2) by redesignating subsections (c) and (d) as subsections 
     (b) and (c), respectively.

     SEC. 5103. FUNDS FOR ADMINISTRATIVE EXPENSES.

       Subsection (a) of section 458 of the Higher Education Act 
     of 1965 (20 U.S.C. 1087h(a)) is amended to read as follows:
       ``(a) In General.--(1) Each fiscal year, there shall be 
     available to the Secretary from funds not otherwise 
     appropriated, funds to be obligated for--
       ``(A) administrative costs under this part and part B, 
     including the costs of the direct student loan programs under 
     this part, and
       ``(B) administrative cost allowances payable to guaranty 
     agencies under part B and calculated in accordance with 
     paragraph (2),
     not to exceed (from such funds not otherwise appropriated) 
     $532,000,000 in fiscal year 1998, $610,000,000 in fiscal year 
     1999, $705,000,000 in fiscal year 2000, $750,000,000 in 
     fiscal year 2001, and $750,000,000 in fiscal year 2002. 
     Administrative cost allowances under subparagraph (B) of this 
     paragraph shall be paid quarterly and used in accordance with 
     section 428(f). The Secretary may carry over funds available 
     under this section to a subsequent fiscal year.
       ``(2) Administrative cost allowances payable to guaranty 
     agencies under paragraph (1)(B) shall be calculated on the 
     basis of 0.85 percent of the total principal amount of loans 
     upon which insurance is issued on or after the date of 
     enactment of the Balanced Budget Act of 1997, except that 
     such allowances shall not exceed--
       ``(A) $170,000,000 for each of the fiscal years 1998 and 
     1999; or
       ``(B) $150,000,000 for each of the fiscal years 2000, 2001, 
     and 2002.''.

     SEC. 5104. SECRETARY'S EQUITABLE SHARE OF COLLECTIONS ON 
                   CONSOLIDATED DEFAULTED LOANS.

       Section 428(c)(6)(A) of the Higher Education Act of 1965 
     (20 U.S.C. 1078(c)(6)(A)) is amended--
       (1) in the matter preceding clause (i), by striking ``made 
     by the borrower'' and inserting ``made by or on behalf of the 
     borrower, including payments made to discharge loans made 
     under this title to obtain a consolidation loan pursuant to 
     this part or part D,''; and
       (2) in clause (ii), by striking ``(ii) an amount equal to 
     27 percent of such payments (subject to subparagraph (D) of 
     this paragraph) for costs related'' and inserting the 
     following:
       ``(ii) an amount equal to 27 percent of such payments for 
     covered costs, except that the amount determined under this 
     clause for such covered costs shall be (I) 18.5 percent of 
     such payments for defaulted loans consolidated pursuant to 
     this part or part D on or after July 1, 1997; and (II) 18.5 
     percent of such payments for defaulted loans consolidated 
     pursuant to this part or part D on or after the date of 
     enactment of the Higher Education Amendments of 1992 with 
     respect to any guaranty agency that has, after such date, 
     made deductions from such payments under this clause (ii) in 
     an amount equal to 18.5 percent of such payments.
     For purposes of clause (ii) of this subparagraph, the term 
     `covered costs' means costs related''.

[[Page H4480]]

     SEC. 5105. EXTENSION OF STUDENT AID PROGRAMS.

       Title IV of the Higher Education Act of 1965 (20 U.S.C. 
     1070 et seq.) is amended--
       (1) in section 424(a), by striking ``1998.'' and ``2002.'' 
     and inserting ``2002.'' and ``2006.'', respectively;
       (2) in section 428(a)(5), by striking ``1998,'' and 
     ``2002.'' and inserting ``2002,'' and ``2006.'', 
     respectively; and
       (3) in section 428C(e), by striking ``1998.'' and inserting 
     ``2002.''.
      Subtitle C--Repeal of Smith-Hughes Vocational Education Act

     SEC. 5201. REPEAL OF SMITH-HUGHES VOCATIONAL EDUCATION ACT.

       The Act of February 23, 1917 (39 Stat. 929; 20 U.S.C. 11) 
     (commonly known as the ``Smith-Hughes Vocational Education 
     Act'') is repealed.
   Subtitle D--Expansion of Portability and Health Insurance Coverage

     SEC. 5301. SHORT TITLE OF SUBTITLE.

       This subtitle may be cited as the ``Expansion of 
     Portability and Health Insurance Coverage Act of 1997''.

     SEC. 5302. RULES GOVERNING ASSOCIATION HEALTH PLANS.

       (a) In General.--Subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 is amended by adding 
     after part 7 the following new part:

           ``Part 8--Rules Governing Association Health Plans

     ``SEC. 801. ASSOCIATION HEALTH PLANS.

       ``(a) In General.--For purposes of this part, the term 
     `association health plan' means a group health plan--
       ``(1) whose sponsor is (or is deemed under this part to be) 
     described in subsection (b), and
       ``(2) under which at least one option of health insurance 
     coverage offered by a health insurance issuer (which may 
     include, among other options, managed care options, point of 
     service options, and preferred provider options) is provided 
     to participants and beneficiaries.
       ``(b) Sponsorship.--The sponsor of a group health plan is 
     described in this subsection if such sponsor--
       ``(1) is organized and maintained in good faith, with a 
     constitution and bylaws specifically stating its purpose and 
     providing for periodic meetings on at least an annual basis, 
     as a trade association, an industry association (including a 
     rural electric cooperative association or a rural telephone 
     cooperative association), a professional association, or a 
     chamber of commerce (or similar business group, including a 
     corporation or similar organization that operates on a 
     cooperative basis (within the meaning of section 1381 of the 
     Internal Revenue Code of 1986)), for substantial purposes 
     other than that of obtaining or providing medical care,
       ``(2) is established as a permanent entity which receives 
     the active support of its members and collects from its 
     members on a periodic basis dues or payments necessary to 
     maintain eligibility for membership in the sponsor, and
       ``(3) does not condition such dues or payments or coverage 
     under the plan on the basis of health status-related factors 
     with respect to the employees of its members (or affiliated 
     members), or the dependents of such employees, and does not 
     condition such dues or payments on the basis of group health 
     plan participation.
     Any sponsor consisting of an association of entities which 
     meet the requirements of paragraphs (1) and (2) shall be 
     deemed to be a sponsor described in this subsection.

     ``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

       ``(a) In General.--The Secretary shall prescribe by 
     regulation a procedure under which, subject to subsection 
     (b), the Secretary shall certify association health plans 
     which apply for certification as meeting the requirements of 
     this part.
       ``(b) Standards.--Under the procedure prescribed pursuant 
     to subsection (a), the Secretary shall certify an association 
     health plan as meeting the requirements of this part only if 
     the Secretary is satisfied that--
       ``(1) such certification--
       ``(A) is administratively feasible,
       ``(B) is not adverse to the interests of the individuals 
     covered under the plan, and
       ``(C) is protective of the rights and benefits of the 
     individuals covered under the plan, and
       ``(2) the applicable requirements of this part are met (or, 
     upon the date on which the plan is to commence operations, 
     will be met) with respect to the plan.
       ``(c) Requirements Applicable to Certified Plans.--An 
     association health plan with respect to which certification 
     under this part is in effect shall meet the applicable 
     requirements of this part, effective on the date of 
     certification (or, if later, on the date on which the plan is 
     to commence operations).
       ``(d) Requirements for Continued Certification.--The 
     Secretary may provide by regulation for continued 
     certification under this part, including requirements 
     relating to any commencement, by an association health plan 
     which has been certified under this part, of a benefit option 
     which does not consist of health insurance coverage.
       ``(e) Class Certification for Fully-Insured Plans.--The 
     Secretary shall establish a class certification procedure for 
     association health plans under which all benefits consist of 
     health insurance coverage. Under such procedure, the 
     Secretary shall provide for the granting of certification 
     under this part to the plans in each class of such 
     association health plans upon appropriate filing under such 
     procedure in connection with plans in such class and payment 
     of the prescribed fee under section 807(a).

     ``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF 
                   TRUSTEES.

       ``(a) Sponsor.--The requirements of this subsection are met 
     with respect to an association health plan if--
       ``(1) the sponsor (together with its immediate predecessor, 
     if any) has met (or is deemed under this part to have met) 
     for a continuous period of not less than 3 years ending with 
     the date of the application for certification under this 
     part, the requirements of paragraphs (1) and (2) of section 
     801(b), and
       ``(2) the sponsor meets (or is deemed under this part to 
     meet) the requirements of section 801(b)(3).
       ``(b) Board of Trustees.--The requirements of this 
     subsection are met with respect to an association health plan 
     if the following requirements are met:
       ``(1) Fiscal control.--The plan is operated, pursuant to a 
     trust agreement, by a board of trustees which has complete 
     fiscal control over the plan and which is responsible for all 
     operations of the plan.
       ``(2) Rules of operation and financial controls.--The board 
     of trustees has in effect rules of operation and financial 
     controls, based on a 3-year plan of operation, adequate to 
     carry out the terms of the plan and to meet all requirements 
     of this title applicable to the plan.
       ``(3) Rules governing relationship to participating 
     employers and to contractors.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the members of the board of trustees are individuals selected 
     from individuals who are the owners, officers, directors, or 
     employees of the participating employers or who are partners 
     in the participating employers and actively participate in 
     the business.
       ``(B) Limitation.--
       ``(i) General rule.--Except as provided in clauses (ii) and 
     (iii), no such member is an owner, officer, director, or 
     employee of, or partner in, a contract administrator or other 
     service provider to the plan.
       ``(ii) Limited exception for providers of services solely 
     on behalf of the sponsor.--Officers or employees of a sponsor 
     which is a service provider (other than a contract 
     administrator) to the plan may be members of the board if 
     they constitute not more than 25 percent of the membership of 
     the board and they do not provide services to the plan other 
     than on behalf of the sponsor.
       ``(iii) Treatment of providers of medical care.--In the 
     case of a sponsor which is an association whose membership 
     consists primarily of providers of medical care, clause (i) 
     shall not apply in the case of any service provider described 
     in subparagraph (A) who is a provider of medical care under 
     the plan.
       ``(C) Sole authority.--The board has sole authority to 
     approve applications for participation in the plan and to 
     contract with a service provider to administer the day-to-day 
     affairs of the plan.
       ``(c) Treatment of Franchise Networks.--In the case of a 
     group health plan which is established and maintained by a 
     franchiser for a franchise network consisting of its 
     franchisees--
       ``(1) the requirements of subsection (a) and section 
     801(a)(1) shall be deemed met if such requirements would 
     otherwise be met if the franchiser were deemed to be the 
     sponsor referred to in section 801(b), such network were 
     deemed to be an association described in section 801(b), and 
     each franchisee were deemed to be a member (of the 
     association and the sponsor) referred to in section 801(b), 
     and
       ``(2) the requirements of section 804(a)(1) shall be deemed 
     met.
       ``(d) Certain Collectively Bargained Plans.--
       ``(1) In general.--In the case of a group health plan 
     described in paragraph (2)--
       ``(A) the requirements of subsection (a) and section 
     801(a)(1) shall be deemed met,
       ``(B) the joint board of trustees shall be deemed a board 
     of trustees with respect to which the requirements of 
     subsection (b) are met, and
       ``(C) the requirements of section 804 shall be deemed met.
       ``(2) Requirements.--A group health plan is described in 
     this paragraph if--
       ``(A) the plan is a multiemployer plan,
       ``(B) the plan is in existence on April 1, 1997, and would 
     be described in section 3(40)(A)(i) but solely for the 
     failure to meet the requirements of section 3(40)(C)(ii) or 
     (to the extent provided in regulations of the Secretary) 
     solely for the failure to meet the requirements of 
     subparagraph (D) of section 3(40), or
       ``(C)(i) the plan is in existence on April 1, 1997, has 
     been in existence as of such date for at least 3 years, meets 
     the requirements of paragraphs (2) and (3) of section 801(b), 
     and would be described in section 3(40)(A)(i) but solely for 
     the failure to meet the requirements of subparagraph (C)(i) 
     or (C)(ii), and
       ``(ii) individuals who are members of the plan sponsor--
       ``(I) participate by elections in the organizational 
     governance of the plan sponsor,
       ``(II) are eligible for appointment as trustee of the plan 
     or for participation in the appointment of trustees of the 
     plan, and
       ``(III) if covered under the plan, have full rights under 
     the plan of a participant in an employee welfare benefit 
     plan.
       ``(e) Certain Plans Not Meeting Single Employer 
     Requirement.--

[[Page H4481]]

       ``(1) In general.--In any case in which the majority of the 
     employees covered under a group health plan are employees of 
     a single employer (within the meaning of clauses (i) and (ii) 
     of section 3(40)(B)), if all other employees covered under 
     the plan are employed by employers who are related to such 
     single employer--
       ``(A) the requirements of subsection (a) and section 
     801(a)(1) shall not apply if such single employer is the 
     sponsor of the plan, and
       ``(B) the requirements of subsection (b) shall be deemed 
     met if the board of trustees is the named fiduciary in 
     connection with the plan.
       ``(2) Related employers.--For purposes of paragraph (1), 
     employers are `related' if there is among all such employers 
     a common ownership interest or a substantial commonality of 
     business operations based on common suppliers or customers.

     ``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

       ``(a) Covered Employers and Individuals.--The requirements 
     of this subsection are met with respect to an association 
     health plan if, under the terms of the plan--
       ``(1) all participating employers must be members or 
     affiliated members of the sponsor, except that, in the case 
     of a sponsor which is a professional association or other 
     individual-based association, if at least one of the 
     officers, directors, or employees of an employer, or at least 
     one of the individuals who are partners in an employer and 
     who actively participates in the business, is a member or 
     affiliated member of the sponsor, participating employers may 
     also include such employer, and
       ``(2) all individuals commencing coverage under the plan 
     after certification under this part must be--
       ``(A) active or retired owners (including self-employed 
     individuals), officers, directors, or employees of, or 
     partners in, participating employers, or
       ``(B) the beneficiaries of individuals described in 
     subparagraph (A).
       ``(b) Coverage of Previously Uninsured Employees.--The 
     requirements of this subsection are met with respect to an 
     association health plan if, under the terms of the plan, no 
     affiliated member of the sponsor may be offered coverage 
     under the plan as a participating employer unless--
       ``(1) the affiliated member was an affiliated member on the 
     date of certification under this part, or
       ``(2) during the 12-month period preceding the date of the 
     offering of such coverage, the affiliated member has not 
     maintained or contributed to a group health plan with respect 
     to any of its employees who would otherwise be eligible to 
     participate in such association health plan.
       ``(c) Individual Market Unaffected.--The requirements of 
     this subsection are met with respect to an association health 
     plan if, under the terms of the plan, no participating 
     employer may provide health insurance coverage in the 
     individual market for any employee not covered under the plan 
     which is similar to the coverage contemporaneously provided 
     to employees of the employer under the plan, if such 
     exclusion of the employee from coverage under the plan is 
     based on a health status-related factor with respect to the 
     employee and such employee would, but for such exclusion on 
     such basis, be eligible for coverage under the plan.
       ``(d) Prohibition of Discrimination Against Employers and 
     Employees Eligible to Participate.--The requirements of this 
     subsection are met with respect to an association health plan 
     if--
       ``(1) under the terms of the plan, no employer meeting the 
     preceding requirements of this section is excluded as a 
     participating employer, unless--
       ``(A) participation or contribution requirements of the 
     type referred to in section 2711 of the Public Health Service 
     Act are not met with respect to the excluded employer, or
       ``(B) the excluded employer does not satisfy a required 
     minimum level of employment uniformly applicable to 
     participating employers,
       ``(2) the applicable requirements of sections 701, 702, and 
     703 are met with respect to the plan, and
       ``(3) applicable benefit options under the plan are 
     actively marketed to all eligible participating employers.

     ``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, 
                   CONTRIBUTION RATES, AND BENEFIT OPTIONS.

       ``(a) In General.--The requirements of this section are met 
     with respect to an association health plan if the following 
     requirements are met:
       ``(1) Contents of governing instruments.--The instruments 
     governing the plan include a written instrument, meeting the 
     requirements of an instrument required under section 
     402(a)(1), which--
       ``(A) provides that the board of trustees serves as the 
     named fiduciary required for plans under section 402(a)(1) 
     and serves in the capacity of a plan administrator (referred 
     to in section 3(16)(A)),
       ``(B) provides that the sponsor of the plan is to serve as 
     plan sponsor (referred to in section 3(16)(B)), and
       ``(C) incorporates the requirements of section 806.
       ``(2) Contribution rates must be nondiscriminatory.--
       ``(A) The contribution rates for any participating employer 
     do not vary significantly on the basis of the claims 
     experience of such employer and do not vary on the basis of 
     the type of business or industry in which such employer is 
     engaged.
       ``(B) Nothing in this title or any other provision of law 
     shall be construed to preclude an association health plan, or 
     a health insurance issuer offering health insurance coverage 
     in connection with an association health plan, from setting 
     contribution rates based on the claims experience of the 
     plan, to the extent contribution rates under the plan meet 
     the requirements of section 702(b).
       ``(3) Floor for number of covered individuals with respect 
     to certain plans.--If any benefit option under the plan does 
     not consist of health insurance coverage, the plan has as of 
     the beginning of the plan year not fewer than 1,000 
     participants and beneficiaries.
       ``(4) Regulatory requirements.--Such other requirements as 
     the Secretary may prescribe by regulation as necessary to 
     carry out the purposes of this part.
       ``(b) Ability of Association Health Plans to Design Benefit 
     Options.--Nothing in this part or any provision of State law 
     (as defined in section 514(c)(1)) shall be construed to 
     preclude an association health plan, or a health insurance 
     issuer offering health insurance coverage in connection with 
     an association health plan, from exercising its sole 
     discretion in selecting the specific items and services 
     consisting of medical care to be included as benefits under 
     such plan or coverage, except in the case of any law to the 
     extent that it (1) prohibits an exclusion of a specific 
     disease from such coverage, or (2) is not preempted under 
     section 731(a)(1) with respect to matters governed by section 
     711 or 712.

     ``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR 
                   SOLVENCY FOR PLANS PROVIDING HEALTH BENEFITS IN 
                   ADDITION TO HEALTH INSURANCE COVERAGE.

       ``(a) In General.--The requirements of this section are met 
     with respect to an association health plan if--
       ``(1) the benefits under the plan consist solely of health 
     insurance coverage, or
       ``(2) if the plan provides any additional benefit options 
     which do not consist of health insurance coverage, the plan--
       ``(A) establishes and maintains reserves with respect to 
     such additional benefit options, in amounts recommended by 
     the qualified actuary, consisting of--
       ``(i) a reserve sufficient for unearned contributions,
       ``(ii) a reserve sufficient for benefit liabilities which 
     have been incurred, which have not been satisfied, and for 
     which risk of loss has not yet been transferred, and for 
     expected administrative costs with respect to such benefit 
     liabilities,
       ``(iii) a reserve sufficient for any other obligations of 
     the plan, and
       ``(iv) a reserve sufficient for a margin of error and other 
     fluctuations, taking into account the specific circumstances 
     of the plan,
     and
       ``(B) establishes and maintains aggregate excess/stop loss 
     insurance and solvency indemnification, with respect to such 
     additional benefit options for which risk of loss has not yet 
     been transferred, as follows:
       ``(i) The plan shall secure aggregate excess/stop loss 
     insurance for the plan with an attachment point which is not 
     greater than 125 percent of expected gross annual claims. The 
     Secretary may by regulation provide for upward adjustments in 
     the amount of such percentage in specified circumstances in 
     which the plan specifically provides for and maintains 
     reserves in excess of the amounts required under subparagraph 
     (A).
       ``(ii) The plan shall secure a means of indemnification for 
     any claims which the plan is unable to satisfy by reason of a 
     termination pursuant to section 809(b) (relating to mandatory 
     termination).
     Any regulations prescribed by the Secretary pursuant to 
     paragraph (2)(B)(i) may allow for such adjustments in the 
     required levels of excess/stop loss insurance as the 
     qualified actuary may recommend, taking into account the 
     specific circumstances of the plan.
       ``(b) Minimum Surplus in Addition to Claims Reserves.--The 
     requirements of this subsection are met if the plan 
     establishes and maintains surplus in an amount at least equal 
     to the excess of--
       ``(1) the greater of--
       ``(A) 25 percent of expected incurred claims and expenses 
     for the plan year, or
       ``(B) $400,000,
     over
       ``(2) the amount required under subsection (a)(2)(A)(ii).
       ``(c) Additional Requirements.--In the case of any 
     association health plan described in subsection (a)(2), the 
     Secretary may provide such additional requirements relating 
     to reserves and excess/stop loss insurance as the Secretary 
     considers appropriate. Such requirements may be provided, by 
     regulation or otherwise, with respect to any such plan or any 
     class of such plans.
       ``(d) Adjustments for Excess/Stop Loss Insurance.--The 
     Secretary may provide for adjustments to the levels of 
     reserves otherwise required under subsections (a) and (b) 
     with respect to any plan or class of plans to take into 
     account excess/stop loss insurance provided with respect to 
     such plan or plans.
       ``(e) Alternative Means of Compliance.--The Secretary may 
     permit an association health plan described in subsection 
     (a)(2) to substitute, for all or part of the requirements of 
     this section, such security, guarantee, hold-harmless 
     arrangement, or other financial arrangement as the Secretary 
     determines to be adequate to enable the plan to fully meet 
     all its financial obligations on a timely basis and is 
     otherwise no less protective of the interests of participants 
     and beneficiaries than the requirements for which it

[[Page H4482]]

     is substituted. The Secretary may take into account, for 
     purposes of this subsection, evidence provided by the plan or 
     sponsor which demonstrates an assumption of liability with 
     respect to the plan. Such evidence may be in the form of a 
     contract of indemnification, lien, bonding, insurance, letter 
     of credit, recourse under applicable terms of the plan in the 
     form of assessments of participating employers, security, or 
     other financial arrangement.
       ``(f) Excess/Stop Loss Insurance.--For purposes of this 
     section, the term `excess/stop loss insurance' means, in 
     connection with an association health plan, a contract under 
     which an insurer (meeting such minimum standards as may be 
     prescribed in regulations of the Secretary) provides for 
     payment to the plan with respect to claims under the plan in 
     excess of an amount or amounts specified in such contract.

     ``SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED 
                   REQUIREMENTS.

       ``(a) Filing Fee.--Under the procedure prescribed pursuant 
     to section 802(a), an association health plan shall pay to 
     the Secretary at the time of filing an application for 
     certification under this part a filing fee in the amount of 
     $5,000, which shall be available, to the extent provided in 
     appropriation Acts, to the Secretary for the sole purpose of 
     administering the certification procedures applicable with 
     respect to association health plans.
       ``(b) Information To Be Included in Application for 
     Certification.--An application for certification under this 
     part meets the requirements of this section only if it 
     includes, in a manner and form prescribed in regulations of 
     the Secretary, at least the following information:
       ``(1) Identifying information.--The names and addresses 
     of--
       ``(A) the sponsor, and
       ``(B) the members of the board of trustees of the plan.
       ``(2) States in which plan intends to do business.--The 
     States in which participants and beneficiaries under the plan 
     are to be located and the number of them expected to be 
     located in each such State.
       ``(3) Bonding requirements.--Evidence provided by the board 
     of trustees that the bonding requirements of section 412 will 
     be met as of the date of the application or (if later) 
     commencement of operations.
       ``(4) Plan documents.--A copy of the documents governing 
     the plan (including any bylaws and trust agreements), the 
     summary plan description, and other material describing the 
     benefits that will be provided to participants and 
     beneficiaries under the plan.
       ``(5) Agreements with service providers.--A copy of any 
     agreements between the plan and contract administrators and 
     other service providers.
       ``(6) Funding report.--In the case of association health 
     plans providing benefits options in addition to health 
     insurance coverage, a report setting forth information with 
     respect to such additional benefit options determined as of a 
     date within the 120-day period ending with the date of the 
     application, including the following:
       ``(A) Reserves.--A statement, certified by the board of 
     trustees of the plan, and a statement of actuarial opinion, 
     signed by a qualified actuary, that all applicable 
     requirements of section 806 are or will be met in accordance 
     with regulations which the Secretary shall prescribe.
       ``(B) Adequacy of contribution rates.--A statement of 
     actuarial opinion, signed by a qualified actuary, which sets 
     forth a description of the extent to which contribution rates 
     are adequate to provide for the payment of all obligations 
     and the maintenance of required reserves under the plan for 
     the 12-month period beginning with such date within such 120-
     day period, taking into account the expected coverage and 
     experience of the plan. If the contribution rates are not 
     fully adequate, the statement of actuarial opinion shall 
     indicate the extent to which the rates are inadequate and the 
     changes needed to ensure adequacy.
       ``(C) Current and projected value of assets and 
     liabilities.--A statement of actuarial opinion signed by a 
     qualified actuary, which sets forth the current value of the 
     assets and liabilities accumulated under the plan and a 
     projection of the assets, liabilities, income, and expenses 
     of the plan for the 12-month period referred to in 
     subparagraph (B). The income statement shall identify 
     separately the plan's administrative expenses and claims.
       ``(D) Costs of coverage to be charged and other expenses.--
     A statement of the costs of coverage to be charged, including 
     an itemization of amounts for administration, reserves, and 
     other expenses associated with the operation of the plan.
       ``(E) Other information.--Any other information which may 
     be prescribed in regulations of the Secretary as necessary to 
     carry out the purposes of this part.
       ``(c) Filing Notice of Certification With States.--A 
     certification granted under this part to an association 
     health plan shall not be effective unless written notice of 
     such certification is filed with the applicable State 
     authority of each State in which at least 25 percent of the 
     participants and beneficiaries under the plan are located. 
     For purposes of this subsection, an individual shall be 
     considered to be located in the State in which a known 
     address of such individual is located or in which such 
     individual is employed.
       ``(d) Notice of Material Changes.--In the case of any 
     association health plan certified under this part, 
     descriptions of material changes in any information which was 
     required to be submitted with the application for the 
     certification under this part shall be filed in such form and 
     manner as shall be prescribed in regulations of the 
     Secretary. The Secretary may require by regulation prior 
     notice of material changes with respect to specified matters 
     which might serve as the basis for suspension or revocation 
     of the certification.
       ``(e) Reporting Requirements for Certain Association Health 
     Plans.--An association health plan certified under this part 
     which provides benefit options in addition to health 
     insurance coverage for such plan year shall meet the 
     requirements of section 103 by filing an annual report under 
     such section which shall include information described in 
     subsection (b)(6) with respect to the plan year and, 
     notwithstanding section 104(a)(1)(A), shall be filed not 
     later than 90 days after the close of the plan year (or on 
     such later date as may be prescribed by the Secretary).
       ``(f) Engagement of Qualified Actuary.--The board of 
     trustees of each association health plan which provides 
     benefits options in addition to health insurance coverage and 
     which is applying for certification under this part or is 
     certified under this part shall engage, on behalf of all 
     participants and beneficiaries, a qualified actuary who shall 
     be responsible for the preparation of the materials 
     comprising information necessary to be submitted by a 
     qualified actuary under this part. The qualified actuary 
     shall utilize such assumptions and techniques as are 
     necessary to enable such actuary to form an opinion as to 
     whether the contents of the matters reported under this 
     part--
       ``(1) are in the aggregate reasonably related to the 
     experience of the plan and to reasonable expectations, and
       ``(2) represent such actuary's best estimate of anticipated 
     experience under the plan.
     The opinion by the qualified actuary shall be made with 
     respect to, and shall be made a part of, the annual report.

     ``SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

       ``Except as provided in section 809(b), an association 
     health plan which is or has been certified under this part 
     may terminate (upon or at any time after cessation of 
     accruals in benefit liabilities) only if the board of 
     trustees--
       ``(1) not less than 60 days before the proposed termination 
     date, provides to the participants and beneficiaries a 
     written notice of intent to terminate stating that such 
     termination is intended and the proposed termination date,
       ``(2) develops a plan for winding up the affairs of the 
     plan in connection with such termination in a manner which 
     will result in timely payment of all benefits for which the 
     plan is obligated, and
       ``(3) submits such plan in writing to the Secretary.
     Actions required under this section shall be taken in such 
     form and manner as may be prescribed in regulations of the 
     Secretary.

     ``SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

       ``(a) Actions To Avoid Depletion of Reserves.--An 
     association health plan which is certified under this part 
     and which provides benefits other than health insurance 
     coverage shall continue to meet the requirements of section 
     806, irrespective of whether such certification continues in 
     effect. The board of trustees of such plan shall determine 
     quarterly whether the requirements of section 806 are met. In 
     any case in which the board determines that there is reason 
     to believe that there is or will be a failure to meet such 
     requirements, or the Secretary makes such a determination and 
     so notifies the board, the board shall immediately notify the 
     qualified actuary engaged by the plan, and such actuary 
     shall, not later than the end of the next following month, 
     make such recommendations to the board for corrective action 
     as the actuary determines necessary to ensure compliance with 
     section 806. Not later than 30 days after receiving from the 
     actuary recommendations for corrective actions, the board 
     shall notify the Secretary (in such form and manner as the 
     Secretary may prescribe by regulation) of such 
     recommendations of the actuary for corrective action, 
     together with a description of the actions (if any) that the 
     board has taken or plans to take in response to such 
     recommendations. The board shall thereafter report to the 
     Secretary, in such form and frequency as the Secretary may 
     specify to the board, regarding corrective action taken by 
     the board until the requirements of section 806 are met.
       ``(b) Mandatory Termination.--In any case in which--
       ``(1) the Secretary has been notified under subsection (a) 
     of a failure of an association health plan which is or has 
     been certified under this part and is described in section 
     806(a)(2) to meet the requirements of section 806 and has not 
     been notified by the board of trustees of the plan that 
     corrective action has restored compliance with such 
     requirements, and
       ``(2) the Secretary determines that there is a reasonable 
     expectation that the plan will continue to fail to meet the 
     requirements of section 806,
     the board of trustees of the plan shall, at the direction of 
     the Secretary, terminate the plan and, in the course of the 
     termination,

[[Page H4483]]

     take such actions as the Secretary may require, including 
     satisfying any claims referred to in section 806(a)(2)(B)(ii) 
     and recovering for the plan any liability under subsection 
     (a)(2)(B)(ii) or (e) of section 806, as necessary to ensure 
     that the affairs of the plan will be, to the maximum extent 
     possible, wound up in a manner which will result in timely 
     provision of all benefits for which the plan is obligated.

     ``SEC. 810. SPECIAL RULES FOR CHURCH PLANS.

       ``(a) Election for Church Plans.--Notwithstanding section 
     4(b)(2), if a church, a convention or association of 
     churches, or an organization described in section 3(33)(C)(i) 
     maintains a church plan which is a group health plan (as 
     defined in section 733(a)(1)), and such church, convention, 
     association, or organization makes an election with respect 
     to such plan under this subsection (in such form and manner 
     as the Secretary may by regulation prescribe), then the 
     provisions of this section shall apply to such plan, with 
     respect to benefits provided under such plan consisting of 
     medical care, as if section 4(b)(2) did not contain an 
     exclusion for church plans. Nothing in this paragraph shall 
     be construed to render any other section of this title 
     applicable to church plans, except to the extent that such 
     other section is incorporated by reference in this section.
       ``(b) Effect of Election.--
       ``(1) Preemption of state insurance laws regulating covered 
     church plans.--Subject to paragraphs (2) and (3), this 
     section shall supersede any and all State laws which regulate 
     insurance insofar as they may now or hereafter regulate 
     church plans to which this section applies or trusts 
     established under such church plans.
       ``(2) General state insurance regulation unaffected.--
       ``(A) In general.--Except as provided in subparagraph (B) 
     and paragraph (3), nothing in this section shall be construed 
     to exempt or relieve any person from any provision of State 
     law which regulates insurance.
       ``(B) Church plans not to be deemed insurance companies or 
     insurers.--Neither a church plan to which this section 
     applies, nor any trust established under such a church plan, 
     shall be deemed to be an insurance company or other insurer 
     or to be engaged in the business of insurance for purposes of 
     any State law purporting to regulate insurance companies or 
     insurance contracts.
       ``(3) Preemption of certain state laws relating to premium 
     rate regulation and benefit mandates.--The provisions of 
     subsections (a)(2)(B) and (b) of section 805 shall apply with 
     respect to a church plan to which this section applies in the 
     same manner and to the same extent as such provisions apply 
     with respect to association health plans.
       ``(4) Definitions.--For purposes of this subsection--
       ``(A) State law.--The term `State law' includes all laws, 
     decisions, rules, regulations, or other State action having 
     the effect of law, of any State. A law of the United States 
     applicable only to the District of Columbia shall be treated 
     as a State law rather than a law of the United States.
       ``(B) State.--The term `State' includes a State, any 
     political subdivision thereof, or any agency or 
     instrumentality of either, which purports to regulate, 
     directly or indirectly, the terms and conditions of church 
     plans covered by this section.
       ``(c) Requirements for Covered Church Plans.--
       ``(1) Fiduciary rules and exclusive purpose.--A fiduciary 
     shall discharge his duties with respect to a church plan to 
     which this section applies--
       ``(A) for the exclusive purpose of:
       ``(i) providing benefits to participants and their 
     beneficiaries; and
       ``(ii) defraying reasonable expenses of administering the 
     plan;
       ``(B) with the care, skill, prudence and diligence under 
     the circumstances then prevailing that a prudent man acting 
     in a like capacity and familiar with such matters would use 
     in the conduct of an enterprise of a like character and with 
     like aims; and
       ``(C) in accordance with the documents and instruments 
     governing the plan.
     The requirements of this paragraph shall not be treated as 
     not satisfied solely because the plan assets are commingled 
     with other church assets, to the extent that such plan assets 
     are separately accounted for.
       ``(2) Claims procedure.--In accordance with regulations of 
     the Secretary, every church plan to which this section 
     applies shall--
       ``(A) provide adequate notice in writing to any participant 
     or beneficiary whose claim for benefits under the plan has 
     been denied, setting forth the specific reasons for such 
     denial, written in a manner calculated to be understood by 
     the participant;
       ``(B) afford a reasonable opportunity to any participant 
     whose claim for benefits has been denied for a full and fair 
     review by the appropriate fiduciary of the decision denying 
     the claim; and
       ``(C) provide a written statement to each participant 
     describing the procedures established pursuant to this 
     paragraph.
       ``(3) Annual statements.--In accordance with regulations of 
     the Secretary, every church plan to which this section 
     applies shall file with the Secretary an annual statement--
       ``(A) stating the names and addresses of the plan and of 
     the church, convention, or association maintaining the plan 
     (and its principal place of business);
       ``(B) certifying that it is a church plan to which this 
     section applies and that it complies with the requirements of 
     paragraphs (1) and (2);
       ``(C) identifying the States in which participants and 
     beneficiaries under the plan are or likely will be located 
     during the 1-year period covered by the statement; and
       ``(D) containing a copy of a statement of actuarial opinion 
     signed by a qualified actuary that the plan maintains 
     capital, reserves, insurance, other financial arrangements, 
     or any combination thereof adequate to enable the plan to 
     fully meet all of its financial obligations on a timely 
     basis.
       ``(4) Disclosure.--At the time that the annual statement is 
     filed by a church plan with the Secretary pursuant to 
     paragraph (3), a copy of such statement shall be made 
     available by the Secretary to the State insurance 
     commissioner (or similar official) of any State. The name of 
     each church plan and sponsoring organization filing an annual 
     statement in compliance with paragraph (3) shall be published 
     annually in the Federal Register.
       ``(c) Enforcement.--The Secretary may enforce the 
     provisions of this section in a manner consistent with 
     section 502, to the extent applicable with respect to actions 
     under section 502(a)(5), and with section 3(33)(D), except 
     that, other than for the purpose of seeking a temporary 
     restraining order, a civil action may be brought with respect 
     to the plan's failure to meet any requirement of this section 
     only if the plan fails to correct its failure within the 
     correction period described in section 3(33)(D). The other 
     provisions of part 5 (except sections 501(a), 503, 512, 514, 
     and 515) shall apply with respect to the enforcement and 
     administration of this section.
       ``(d) Definitions and Other Rules.--For purposes of this 
     section--
       ``(1) In general.--Except as otherwise provided in this 
     section, any term used in this section which is defined in 
     any provision of this title shall have the definition 
     provided such term by such provision.
       ``(2) Seminary students.--Seminary students who are 
     enrolled in an institution of higher learning described in 
     section 3(33)(C)(iv) and who are treated as participants 
     under the terms of a church plan to which this section 
     applies shall be deemed to be employees as defined in section 
     3(6) if the number of such students constitutes an 
     insignificant portion of the total number of individuals who 
     are treated as participants under the terms of the plan.

     ``SEC. 811. DEFINITIONS AND RULES OF CONSTRUCTION.

       ``(a) Definitions.--For purposes of this part--
       ``(1) Group health plan.--The term `group health plan' has 
     the meaning provided in section 733(a)(1).
       ``(2) Medical care.--The term `medical care' has the 
     meaning provided in section 733(a)(2).
       ``(3) Health insurance coverage.--The term `health 
     insurance coverage' has the meaning provided in section 
     733(b)(1).
       ``(4) Health insurance issuer.--The term `health insurance 
     issuer' has the meaning provided in section 733(b)(2).
       ``(5) Health status-related factor.--The term `health 
     status-related factor' has the meaning provided in section 
     733(d)(2).
       ``(6) Individual market.--
       ``(A) In general.--The term `individual market' means the 
     market for health insurance coverage offered to individuals 
     other than in connection with a group health plan.
       ``(B) Treatment of very small groups.--
       ``(i) In general.--Subject to clause (ii), such term 
     includes coverage offered in connection with a group health 
     plan that has fewer than 2 participants as current employees 
     or participants described in section 732(d)(3) on the first 
     day of the plan year.
       ``(ii) State exception.--Clause (i) shall not apply in the 
     case of health insurance coverage offered in a State if such 
     State regulates the coverage described in such clause in the 
     same manner and to the same extent as coverage in the small 
     group market (as defined in section 2791(e)(5) of the Public 
     Health Service Act) is regulated by such State.
       ``(7) Participating employer.--The term `participating 
     employer' means, in connection with an association health 
     plan, any employer, if any individual who is an employee of 
     such employer, a partner in such employer, or a self-employed 
     individual who is such employer (or any dependent, as defined 
     under the terms of the plan, of such individual) is or was 
     covered under such plan in connection with the status of such 
     individual as such an employee, partner, or self-employed 
     individual in relation to the plan.
       ``(8) Applicable state authority.--The term `applicable 
     State authority' means, with respect to a health insurance 
     issuer in a State, the State insurance commissioner or 
     official or officials designated by the State to enforce the 
     requirements of title XXVII of the Public Health Service Act 
     for the State involved with respect to such issuer.
       ``(9) Qualified actuary.--The term `qualified actuary' 
     means an individual who is a member of the American Academy 
     of Actuaries or meets such reasonable standards and 
     qualifications as the Secretary may provide by regulation.
       ``(10) Affiliated member.--The term `affiliated member' 
     means, in connection with a sponsor, a person eligible to be 
     a member of the sponsor or, in the case of a sponsor with 
     member associations, a person who is a

[[Page H4484]]

     member, or is eligible to be a member, of a member 
     association.
       ``(b) Rules of Construction.--
       ``(1) Employers and employees.--For purposes of determining 
     whether a plan, fund, or program is an employee welfare 
     benefit plan which is an association health plan, and for 
     purposes of applying this title in connection with such plan, 
     fund, or program so determined to be such an employee welfare 
     benefit plan--
       ``(A) in the case of a partnership, the term `employer' (as 
     defined in section (3)(5)) includes the partnership in 
     relation to the partners, and the term `employee' (as defined 
     in section (3)(6)) includes any partner in relation to the 
     partnership, and
       ``(B) in the case of a self-employed individual, the term 
     `employer' (as defined in section 3(5)) and the term 
     `employee' (as defined in section 3(6)) shall include such 
     individual.
       ``(2) Plans, funds, and programs treated as employee 
     welfare benefit plans.--In the case of any plan, fund, or 
     program which was established or is maintained for the 
     purpose of providing medical care (through the purchase of 
     insurance or otherwise) for employees (or their dependents) 
     covered thereunder and which demonstrates to the Secretary 
     that all requirements for certification under this part would 
     be met with respect to such plan, fund, or program if such 
     plan, fund, or program were a group health plan, such plan, 
     fund, or program shall be treated for purposes of this title 
     as an employee welfare benefit plan on and after the date of 
     such demonstration.''.
       (b) Conforming Amendments to Preemption Rules.--
       (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
     amended by adding at the end the following new subparagraph:
       ``(E) The preceding subparagraphs of this paragraph do not 
     apply with respect to any State law in the case of an 
     association health plan which is certified under part 8.''.
       (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
       (A) in subsection (b)(4), by striking ``Subsection (a)'' 
     and inserting ``Subsections (a) and (d)'';
       (B) in subsection (b)(5), by striking ``subsection (a)'' in 
     subparagraph (A) and inserting ``subsection (a) of this 
     section and subsections (a)(2)(B) and (b) of section 805'', 
     and by striking ``subsection (a)'' in subparagraph (B) and 
     inserting ``subsection (a) of this section or subsection 
     (a)(2)(B) or (b) of section 805'';
       (C) by redesignating subsection (d) as subsection (e); and
       (D) by inserting after subsection (c) the following new 
     subsection:
       ``(d)(1) Except as provided in subsection (b)(4), the 
     provisions of this title shall supersede any and all State 
     laws insofar as they may now or hereafter preclude a health 
     insurance issuer from offering health insurance coverage in 
     connection with an association health plan which is certified 
     under part 8.
       ``(2) Except as provided in paragraphs (4) and (5) of 
     subsection (b) of this section--
       ``(A) In any case in which health insurance coverage of any 
     policy type is offered under an association health plan 
     certified under part 8 to a participating employer operating 
     in such State, the provisions of this title shall supersede 
     any and all laws of such State insofar as they may preclude a 
     health insurance issuer from offering health insurance 
     coverage of the same policy type to other employers operating 
     in the State which are eligible for coverage under such 
     association health plan, whether or not such other employers 
     are participating employers in such plan.
       ``(B) In any case in which health insurance coverage of any 
     policy type is offered under an association health plan in a 
     State and the filing, with the applicable State authority, of 
     the policy form in connection with such policy type is 
     approved by such State authority, the provisions of this 
     title shall supersede any and all laws of any other State in 
     which health insurance coverage of such type is offered, 
     insofar as they may preclude, upon the filing in the same 
     form and manner of such policy form with the applicable State 
     authority in such other State, the approval of the filing in 
     such other State.
       ``(3) For additional provisions relating to association 
     health plans, see subsections (a)(2)(B) and (b) of section 
     805.
       ``(4) For purposes of this subsection, the term 
     `association health plan' has the meaning provided in section 
     801(a), and the terms `health insurance coverage', 
     `participating employer', and `health insurance issuer' have 
     the meanings provided such terms in section 811, 
     respectively.''.
       (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
     1144(b)(6)(A)) is amended--
       (A) in clause (i)(II), by striking ``and'' at the end;
       (B) in clause (ii), by inserting ``and which does not 
     provide medical care (within the meaning of section 
     733(a)(2)),'' after ``arrangement,'', and by striking 
     ``title.'' and inserting ``title, and''; and
       (C) by adding at the end the following new clause:
       ``(iii) subject to subparagraph (E), in the case of any 
     other employee welfare benefit plan which is a multiple 
     employer welfare arrangement and which provides medical care 
     (within the meaning of section 733(a)(2)), any law of any 
     State which regulates insurance may apply.''.
       (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
     102(16)(B)) is amended by adding at the end the following new 
     sentence: ``Such term also includes a person serving as the 
     sponsor of an association health plan under part 8.''.
       (d) Savings Clause.--Section 731(c) of such Act is amended 
     by inserting ``or part 8'' after ``this part''.
       (e) Clerical Amendment.--The table of contents in section 1 
     of the Employee Retirement Income Security Act of 1974 is 
     amended by inserting after the item relating to section 734 
     the following new items:

           ``Part 8--Rules Governing Association Health Plans

``Sec. 801. Association health plans.
``Sec. 802. Certification of association health plans.
``Sec. 803. Requirements relating to sponsors and boards of trustees.
``Sec. 804. Participation and coverage requirements.
``Sec. 805. Other requirements relating to plan documents, contribution 
              rates, and benefit options.
``Sec. 806. Maintenance of reserves and provisions for solvency for 
              plans providing health benefits in addition to health 
              insurance coverage.
``Sec. 807. Requirements for application and related requirements.
``Sec. 808. Notice requirements for voluntary termination.
``Sec. 809. Corrective actions and mandatory termination.
``Sec. 810. Special rules for church plans.
``Sec. 811. Definitions and rules of construction.''.

     SEC. 5303. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER 
                   ARRANGEMENTS.

       Section 3(40)(B) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1002(40)(B)) is amended--
       (1) in clause (i), by inserting ``for any plan year of any 
     such plan, or any fiscal year of any such other 
     arrangement;'' after ``single employer'', and by inserting 
     ``during such year or at any time during the preceding 1-year 
     period'' after ``control group'';
       (2) in clause (iii)--
       (A) by striking ``common control shall not be based on an 
     interest of less than 25 percent'' and inserting ``an 
     interest of greater than 25 percent may not be required as 
     the minimum interest necessary for common control''; and
       (B) by striking ``similar to'' and inserting ``consistent 
     and coextensive with'';
       (3) by redesignating clauses (iv) and (v) as clauses (v) 
     and (vi), respectively; and
       (4) by inserting after clause (iii) the following new 
     clause:
       ``(iv) in determining, after the application of clause (i), 
     whether benefits are provided to employees of two or more 
     employers, the arrangement shall be treated as having only 1 
     participating employer if, after the application of clause 
     (i), the number of individuals who are employees and former 
     employees of any one participating employer and who are 
     covered under the arrangement is greater than 75 percent of 
     the aggregate number of all individuals who are employees or 
     former employees of participating employers and who are 
     covered under the arrangement,''.

     SEC. 5304. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY 
                   BARGAINED ARRANGEMENTS.

       (a) In General.--Section 3(40)(A)(i) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(40)(A)(i)) is amended to read as follows:
       ``(i)(I) under or pursuant to one or more collective 
     bargaining agreements which are reached pursuant to 
     collective bargaining described in section 8(d) of the 
     National Labor Relations Act (29 U.S.C. 158(d)) or paragraph 
     Fourth of section 2 of the Railway Labor Act (45 U.S.C. 152, 
     paragraph Fourth) or which are reached pursuant to labor-
     management negotiations under similar provisions of State 
     public employee relations laws, and (II) in accordance with 
     subparagraphs (C), (D), and (E),''.
       (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 
     1002(40)) is amended by adding at the end the following new 
     subparagraphs:
       ``(C) For purposes of subparagraph (A)(i)(II), a plan or 
     other arrangement shall be treated as established or 
     maintained in accordance with this subparagraph only if the 
     following requirements are met:
       ``(i) The plan or other arrangement, and the employee 
     organization or any other entity sponsoring the plan or other 
     arrangement, do not--
       ``(I) utilize the services of any licensed insurance agent 
     or broker for soliciting or enrolling employers or 
     individuals as participating employers or covered individuals 
     under the plan or other arrangement; or
       ``(II) pay a commission or any other type of compensation 
     to a person, other than a full time employee of the employee 
     organization (or a member of the organization to the extent 
     provided in regulations of the Secretary), that is related 
     either to the volume or number of employers or individuals 
     solicited or enrolled as participating employers or covered 
     individuals under the plan or other arrangement, or to the 
     dollar amount or size of the contributions made by 
     participating employers or covered individuals to the plan or 
     other arrangement;
     except to the extent that the services used by the plan, 
     arrangement, organization, or other entity consist solely of 
     preparation of documents necessary for compliance with the 
     reporting and disclosure requirements of

[[Page H4485]]

     part 1 or administrative, investment, or consulting services 
     unrelated to solicitation or enrollment of covered 
     individuals.
       ``(ii) As of the end of the preceding plan year, the number 
     of covered individuals under the plan or other arrangement 
     who are identified to the plan or arrangement and who are 
     neither--
       ``(I) employed within a bargaining unit covered by any of 
     the collective bargaining agreements with a participating 
     employer (nor covered on the basis of an individual's 
     employment in such a bargaining unit); nor
       ``(II) present employees (or former employees who were 
     covered while employed) of the sponsoring employee 
     organization, of an employer who is or was a party to any of 
     the collective bargaining agreements, or of the plan or other 
     arrangement or a related plan or arrangement (nor covered on 
     the basis of such present or former employment);
     does not exceed 15 percent of the total number of individuals 
     who are covered under the plan or arrangement and who are 
     present or former employees who are or were covered under the 
     plan or arrangement pursuant to a collective bargaining 
     agreement with a participating employer. The requirements of 
     the preceding provisions of this clause shall be treated as 
     satisfied if, as of the end of the preceding plan year, such 
     covered individuals are comprised solely of individuals who 
     were covered individuals under the plan or other arrangement 
     as of the date of the enactment of the Expansion of 
     Portability and Health Insurance Coverage Act of 1997 and, as 
     of the end of the preceding plan year, the number of such 
     covered individuals does not exceed 25 percent of the total 
     number of present and former employees enrolled under the 
     plan or other arrangement.
       ``(iii) The employee organization or other entity 
     sponsoring the plan or other arrangement certifies to the 
     Secretary each year, in a form and manner which shall be 
     prescribed in regulations of the Secretary that the plan or 
     other arrangement meets the requirements of clauses (i) and 
     (ii).
       ``(D) For purposes of subparagraph (A)(i)(II), a plan or 
     arrangement shall be treated as established or maintained in 
     accordance with this subparagraph only if--
       ``(i) all of the benefits provided under the plan or 
     arrangement consist of health insurance coverage; or
       ``(ii)(I) the plan or arrangement is a multiemployer plan; 
     and
       ``(II) the requirements of clause (B) of the proviso to 
     clause (5) of section 302(c) of the Labor Management 
     Relations Act, 1947 (29 U.S.C. 186(c)) are met with respect 
     to such plan or other arrangement.
       ``(E) For purposes of subparagraph (A)(i)(II), a plan or 
     arrangement shall be treated as established or maintained in 
     accordance with this subparagraph only if--
       ``(i) the plan or arrangement is in effect as of the date 
     of the enactment of the Expansion of Portability and Health 
     Insurance Coverage Act of 1997, or
       ``(ii) the employee organization or other entity sponsoring 
     the plan or arrangement--
       ``(I) has been in existence for at least 3 years or is 
     affiliated with another employee organization which has been 
     in existence for at least 3 years, or
       ``(II) demonstrates to the satisfaction of the Secretary 
     that the requirements of subparagraphs (C) and (D) are met 
     with respect to the plan or other arrangement.''.
       (c) Conforming Amendments to Definitions of Participant and 
     Beneficiary.--Section 3(7) of such Act (29 U.S.C. 1002(7)) is 
     amended by adding at the end the following new sentence: 
     ``Such term includes an individual who is a covered 
     individual described in paragraph (40)(C)(ii).''.

     SEC. 5305. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION 
                   HEALTH PLANS.

       (a) Criminal Penalties for Certain Willful 
     Misrepresentations.--Section 501 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1131) is amended--
       (1) by inserting ``(a)'' after ``Sec. 501.''; and
       (2) by adding at the end the following new subsection:
       ``(b) Any person who, either willfully or with willful 
     blindness, falsely represents, to any employee, any 
     employee's beneficiary, any employer, the Secretary, or any 
     State, a plan or other arrangement established or maintained 
     for the purpose of offering or providing any benefit 
     described in section 3(1) to employees or their beneficiaries 
     as--
       ``(1) being an association health plan which has been 
     certified under part 8;
       ``(2) having been established or maintained under or 
     pursuant to one or more collective bargaining agreements 
     which are reached pursuant to collective bargaining described 
     in section 8(d) of the National Labor Relations Act (29 
     U.S.C. 158(d)) or paragraph Fourth of section 2 of the 
     Railway Labor Act (45 U.S.C. 152, paragraph Fourth) or which 
     are reached pursuant to labor-management negotiations under 
     similar provisions of State public employee relations laws; 
     or
       ``(3) being a plan or arrangement with respect to which the 
     requirements of subparagraph (C), (D), or (E) of section 
     3(40) are met;
     shall, upon conviction, be imprisoned not more than five 
     years, be fined under title 18, United States Code, or 
     both.''.
       (b) Cease Activities Orders.--Section 502 of such Act (29 
     U.S.C. 1132) is amended by adding at the end the following 
     new subsection:
       ``(n)(1) Subject to paragraph (2), upon application by the 
     Secretary showing the operation, promotion, or marketing of 
     an association health plan (or similar arrangement providing 
     benefits consisting of medical care (as defined in section 
     733(a)(2))) that--
       ``(A) is not certified under part 8, is subject under 
     section 514(b)(6) to the insurance laws of any State in which 
     the plan or arrangement offers or provides benefits, and is 
     not licensed, registered, or otherwise approved under the 
     insurance laws of such State; or
       ``(B) is an association health plan certified under part 8 
     and is not operating in accordance with the requirements 
     under part 8 for such certification,
     a district court of the United States shall enter an order 
     requiring that the plan or arrangement cease activities.
       ``(2) Paragraph (1) shall not apply in the case of an 
     association health plan or other arrangement if the plan or 
     arrangement shows that--
       ``(A) all benefits under it referred to in paragraph (1) 
     consist of health insurance coverage; and
       ``(B) with respect to each State in which the plan or 
     arrangement offers or provides benefits, the plan or 
     arrangement is operating in accordance with applicable State 
     laws that are not superseded under section 514.
       ``(3) The court may grant such additional equitable relief, 
     including any relief available under this title, as it deems 
     necessary to protect the interests of the public and of 
     persons having claims for benefits against the plan.''.
       (c) Responsibility for Claims Procedure.--Section 503 of 
     such Act (29 U.S.C. 1133) is amended by adding at the end 
     (after and below paragraph (2)) the following new sentence:
     ``The terms of each association health plan which is or has 
     been certified under part 8 shall require the board of 
     trustees or the named fiduciary (as applicable) to ensure 
     that the requirements of this section are met in connection 
     with claims filed under the plan.''.

     SEC. 5306. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

       Section 506 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1136) is amended by adding at the end the 
     following new subsection:
       ``(c) Responsibility of States With Respect to Association 
     Health Plans.--
       ``(1) Agreements with states.--A State may enter into an 
     agreement with the Secretary for delegation to the State of 
     some or all of the Secretary's authority under sections 502 
     and 504 to enforce the requirements for certification under 
     part 8. The Secretary shall enter into the agreement if the 
     Secretary determines that the delegation provided for therein 
     would not result in a lower level or quality of enforcement 
     of the provisions of this title.
       ``(2) Delegations.--Any department, agency, or 
     instrumentality of a State to which authority is delegated 
     pursuant to an agreement entered into under this paragraph 
     may, if authorized under State law and to the extent 
     consistent with such agreement, exercise the powers of the 
     Secretary under this title which relate to such authority.
       ``(3) Recognition of primary domicile state.--In entering 
     into any agreement with a State under subparagraph (A), the 
     Secretary shall ensure that, as a result of such agreement 
     and all other agreements entered into under subparagraph (A), 
     only one State will be recognized, with respect to any 
     particular association health plan, as the primary domicile 
     State to which authority has been delegated pursuant to such 
     agreements.''.

     SEC. 5307. EFFECTIVE DATE AND TRANSITIONAL RULES.

       (a) Effective Date.--The amendments made by sections 5302, 
     5305, and 5306 shall take effect on January 1, 1999. The 
     amendments made by sections 5303 and 5304 shall take effect 
     on the date of the enactment of this Act. The Secretary of 
     Labor shall issue all regulations necessary to carry out the 
     amendments made by this Act before January 1, 1999.
       (b) Exception.--Section 801(a)(2) of the Employee 
     Retirement Income Security Act of 1974 (added by section 
     5302) does not apply with respect to group health plans (as 
     defined in section 733(a)(1) of such Act) existing on April 
     1, 1997, which do not provide health insurance coverage (as 
     defined in section 733(b)(1) of such Act) on such date.
         TITLE VI--COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
                       Subtitle A--Postal Service

     SEC. 6001. REPEAL OF AUTHORIZATION OF TRANSITIONAL 
                   APPROPRIATIONS FOR THE UNITED STATES POSTAL 
                   SERVICE.

       (a) Repeal.--
       (1) In general.--Section 2004 of title 39, United States 
     Code, is repealed.
       (2) Technical and conforming amendments.--
       (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

[[Page H4486]]

     before the effective date of this subsection) shall be 
     liabilities of the Postal Service payable out of the Fund.''.
       (c) Effective Date.--
       (1) In general.--This section and the amendments made by 
     this section shall take effect on the date of the enactment 
     of this Act or October 1, 1997, whichever is later.
       (2) Provisions relating to payments for fiscal year 1998.--
       (A) Amounts not yet paid.--No payment may be made to the 
     Postal Service Fund, on or after the date of the enactment of 
     this Act, pursuant to any appropriation for fiscal year 1998 
     authorized by section 2004 of title 39, United States Code 
     (as in effect before the effective date of this section).
       (B) Amounts paid.--If any payment to the Postal Service 
     Fund is or has been made pursuant to an appropriation for 
     fiscal year 1998 authorized by such section 2004, then, an 
     amount equal to the amount of such payment shall be paid from 
     such Fund into the Treasury as miscellaneous receipts before 
     October 1, 1998.
                       Subtitle B--Civil Service

     SEC. 6101. CONTRIBUTIONS UNDER THE CIVIL SERVICE RETIREMENT 
                   SYSTEM.

       (a) Individual Contributions.--
       (1) In General.--Subsection (c) of section 8334 of title 5, 
     United States Code, is amended to read as follows:
       ``(c) Each employee or Member credited with civilian 
     service after July 31, 1920, for which retirement deductions 
     or deposits have not been made, may deposit with interest an 
     amount equal to the following percentages of his basic pay 
     received for that service:

                                                                                                                
                                           ``Percentage of basic                                                
                                                   pay                             Service period               
                                                                                                                
Employee................................  2.50...................  August 1, 1920, to June 30, 1926.            
                                          3.50...................  July 1, 1926, to June 30, 1942.              
                                          5......................  July 1, 1942, to June 30, 1948.              
                                          6......................  July 1, 1948, to October 31, 1956.           
                                          6.50...................  November 1, 1956, to December 31, 1969.      
                                          7......................  January 1, 1970, to December 31, 1998.       
                                          7.25...................  January 1, 1999, to December 31, 1999.       
                                          7.40...................  January 1, 2000, to December 31, 2000.       
                                          7.50...................  January 1, 2001, to December 31, 2002.       
                                          7......................  After December 31, 2002.                     
Member or employee for Congressional      2.50...................  August 1, 1920, to June 30, 1926.            
 employee service.                                                                                              
                                          3.50...................  July 1, 1926, to June 30, 1942.              
                                          5......................  July 1, 1942, to June 30, 1948.              
                                          6......................  July 1, 1948, to October 31, 1956.           
                                          6.50...................  November 1, 1956, to December 31, 1969.      
                                          7.50...................  January 1, 1970, to December 31, 1998.       
                                          7.75...................  January 1, 1999, to December 31, 1999.       
                                          7.90...................  January 1, 2000, to December 31, 2000.       
                                          8......................  January 1, 2001, to December 31, 2002.       
                                          7.50...................  After December 31, 2002.                     
Member for Member service...............  2.50...................  August 1, 1920, to June 30, 1926.            
                                          3.50...................  July 1, 1926, to June 30, 1942.              
                                          5......................  July 1, 1942, to August 1, 1946.             
                                          6......................  August 2, 1946, to October 31, 1956.         
                                          7.50...................  November 1, 1956, to December 31, 1969.      
                                          8......................  January 1, 1970, to December 31, 1998.       
                                          8.25...................  January 1, 1999, to December 31, 1999.       
                                          8.40...................  January 1, 2000, to December 31, 2000.       
                                          8.50...................  January 1, 2001, to December 31, 2002.       
                                          8......................  After December 31, 2002.                     
Law enforcement officer for law           2.50...................  August 1, 1920, to June 30, 1926.            
 enforcement service and firefighter for  3.50...................  July 1, 1926, to June 30, 1942.              
 firefighter service.                                                                                           
                                          5......................  July 1, 1942, to June 30, 1948.              
                                          6......................  July 1, 1948, to October 31, 1956.           
                                          6.50...................  November 1, 1956, to December 31, 1969.      
                                          7......................  January 1, 1970, to December 31, 1974.       
                                          7.50...................  January 1, 1975, to December 31, 1998.       
                                          7.75...................  January 1, 1999, to December 31, 1999.       
                                          7.90...................  January 1, 2000, to December 31, 2000.       
                                          8......................  January 1, 2001, to December 31, 2002.       
                                          7.50...................  After December 31, 2002.                     
Bankruptcy judge........................  2.50...................  August 1, 1920, to June 30, 1926.            
                                          3.50...................  July 3, 1926, to June 30, 1942.              
                                          5......................  July 1, 1942, to June 30, 1948.              
                                          6......................  July 1, 1948, to October 31, 1956.           
                                          6.50...................  November 1, 1956, to December 31, 1969.      
                                          7......................  January 1, 1970, to December 31, 1983.       
                                          8......................  January 1, 1984, to December 31, 1998.       
                                          8.25...................  January 1, 1999, to December 31, 1999.       
                                          8.40...................  January 1, 2000, to December 31, 2000.       
                                          8.50...................  January 1, 2001, to December 31, 2002.       
                                          8......................  After December 31, 2002.                     
Judge of the United States Court of       6......................  May 5, 1950, to October 31, 1956.            
 Appeals for the Armed Forces for         6.50...................  November 1, 1956, to December 31, 1969.      
 service as a judge of that court.                                                                              
                                          7......................  January 1, 1970, to (but not including) the  
                                                                    date of the enactment of the Department of  
                                                                    Defense Authorization Act, 1984.            
                                          8......................  The date of the enactment of the Department  
                                                                    of Defense Authorization Act, 1984, to      
                                                                    December 31, 1998.                          
                                          8.25...................  January 1, 1999, to December 31, 1999.       
                                          8.40...................  January 1, 2000, to December 31, 2000.       
                                          8.50...................  January 1, 2001, to December 31, 2002.       
                                          8......................  After December 31, 2002.                     
United States magistrate................  2.50...................  August 1, 1920, to June 30, 1926.            
                                          3.50...................  July 1, 1926, to June 30, 1942.              
                                          5......................  July 1, 1942, to June 30, 1948.              
                                          6......................  July 1, 1948, to October 31, 1956.           
                                          6.50...................  November 1, 1956, to December 31, 1969.      
                                          7......................  January 1, 1970, to September 30, 1987.      
                                          8......................  October 1, 1987, to December 31, 1998.       
                                          8.25...................  January 1, 1999, to December 31, 1999.       
                                          8.40...................  January 1, 2000, to December 31, 2000.       
                                          8.50...................  January 1, 2001, to December 31, 2002.       
                                          8......................  After December 31, 2002.                     
Claims Court Judge......................  2.50...................  August 1, 1920, to June 30, 1926.            
                                          3.50...................  July 1, 1926, to June 30, 1942.              
                                          5......................  July 1, 1942, to June 30, 1948.              
                                          6......................  July 1, 1948, to October 31, 1956.           
                                          6.50...................  November 1, 1956, to December 31, 1969.      
                                          7......................  January 1, 1970, to September 30, 1988.      
                                          8......................  October 1, 1988, to December 31, 1998.       
                                          8.25...................  January 1, 1999, to December 31, 1999.       
                                          8.40...................  January 1, 2000, to December 31, 2000.       
                                          8.50...................  January 1, 2001, to December 31, 2002.       
                                          8......................  After December 31, 2002.                     
                                                                                                                

     Notwithstanding the preceding provisions of this subsection 
     and any provision of section 206(b)(3) of the Federal 
     Employees' Retirement Contribution Temporary Adjustment Act 
     of 1983, the percentage of basic pay required under this 
     subsection in the case of an individual described in section 
     8402(b)(2) shall, with respect to any covered service (as

[[Page H4487]]

     defined by section 203(a)(3) of such Act) performed by such 
     individual after December 31, 1983, and before January 1, 
     1987, be equal to 1.3 percent, and, with respect to any such 
     service performed after December 31, 1986, be equal to the 
     amount that would have been deducted from the employee's 
     basic pay under subsection (k) of this section if the 
     employee's pay had been subject to that subsection during 
     such period.''.
       (2) Deductions.--The first sentence of section 8334(a)(1) 
     of title 5, United States Code, is amended to read as 
     follows: ``The employing agency shall deduct and withhold 
     from the basic pay of an employee, Member, Congressional 
     employee, law enforcement officer, firefighter, bankruptcy 
     judge, judge of the United States Court of Appeals for the 
     Armed Forces, United States magistrate, or Claims Court 
     judge, as the case may be, the percentage of basic pay 
     applicable under subsection (c).''.
       (3) Other service.--
       (A) Military service.--Section 8334(j) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1)(A) by inserting ``and subject to 
     paragraph (5),'' after ``Except as provided in subparagraph 
     (B),''; and
       (ii) by adding at the end the following:
       ``(5) Effective with respect to any period of military 
     service performed after December 31, 1998, and before January 
     1, 2003, the percentage of basic pay under section 204 of 
     title 37 payable under paragraph (1) shall be equal to the 
     same percentage as would be applicable under section 8334(c) 
     for that same period for service as an `employee', subject to 
     paragraph (1)(B).''.
       (B) Volunteer service.--Section 8334(l) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1) by striking the period at the end and 
     inserting ``, subject to paragraph (4).''; and
       (ii) by adding at the end the following:
       ``(4) Effective with respect to any period of service as a 
     volunteer or volunteer leader performed after December 31, 
     1998, and before January 1, 2003, the percentage of the 
     readjustment allowance or stipend (as the case may be) 
     payable under paragraph (1) shall be equal to the same 
     percentage as would be applicable under section 8334(c) for 
     that same period for service as an `employee'.''.
       (b) Government Contributions.--
       (1) In general.--Section 8334 of title 5, United States 
     Code, is amended by adding at the end the following:
       ``(m)(1) This subsection shall govern for purposes of 
     determining the amount to be contributed under the second 
     sentence of subsection (a)(1) with respect to any service--
       ``(A) which is performed after September 30, 1997, and 
     before January 1, 2003; and
       ``(B) as to which a contribution under such sentence would 
     otherwise be payable.
       ``(2) The amount of the contribution required under the 
     second sentence of subsection (a)(1) with respect to any 
     service described in paragraph (1) shall (instead of the 
     amount which would otherwise apply under such sentence) be 
     equal to the amount of basic pay received for such service by 
     the employee or Member involved, multiplied by the percentage 
     under paragraph (3).
       ``(3)(A) The percentage under this paragraph is, with 
     respect to any service, equal to the sum of--
       ``(i) the percentage which would have been applicable under 
     subsection (c), with respect to such service, if it had been 
     performed in fiscal year 1997, plus
       ``(ii) the applicable percentage under subparagraph (B).
       ``(B) The applicable percentage under this subparagraph is, 
     with respect to service performed--
       ``(i) after September 30, 1997, and before October 1, 2002, 
     1.51 percent; or
       ``(ii) after September 30, 2002, and before January 1, 
     2003, 0 percent.
       ``(4) An amount determined under this subsection with 
     respect to any period of service shall, for purposes of 
     subsection (k)(1)(B) (and any other provision of law which 
     similarly refers to contributions under the second sentence 
     of subsection (a)(1)), be treated as the amount required 
     under such sentence with respect to such service.
       ``(5)(A) Notwithstanding paragraphs (1) through (4), the 
     amount to be contributed by the Postal Service by reason of 
     the second sentence of subsection (a)(1) with respect to any 
     service performed by an officer or employee of the Postal 
     Service during the period described in subparagraph (A) of 
     paragraph (1) shall be determined as if section 6101 of the 
     Balanced Budget Act of 1997 had never been enacted.
       ``(B) For purposes of this paragraph, the term `Postal 
     Service' means the United States Postal Service and the 
     Postal Rate Commission.''.
       (2) Conforming amendment.--The second sentence of section 
     8334(a)(1) of title 5, United States Code, is amended by 
     striking the period and inserting ``, subject to subsection 
     (m).''.

     SEC. 6102. CONTRIBUTIONS UNDER THE FEDERAL EMPLOYEES' 
                   RETIREMENT SYSTEM.

       (a) Individual Contributions.--
       (1) In general.--Subsection (a) of section 8422 of title 5, 
     United States Code, is amended--
       (A) in paragraph (1) by striking ``paragraph (2).'' and 
     inserting ``paragraph (2) or (3), as applicable.'';
       (B) in paragraph (2) by striking ``The applicable'' and 
     inserting ``Subject to paragraph (3), the applicable''; and
       (C) by adding at the end the following:
       ``(3)(A) The applicable percentage under this subsection 
     shall, for purposes of service performed after December 31, 
     1998, and before January 1, 2003, be equal to--
       ``(i) the applicable percentage under subparagraph (B), 
     minus
       ``(ii) the percentage then in effect under section 3101(a) 
     of the Internal Revenue Code of 1986 (relating to rate of tax 
     for old-age, survivors, and disability insurance).
       ``(B) The applicable percentage under this subparagraph 
     shall be as follows:

                                                                                                                
                                           ``Percentage of basic                                                
                                                   pay                             Service period               
                                                                                                                
Employee................................  7.25...................  January 1, 1999, to December 31, 1999.       
                                          7.40...................  January 1, 2000, to December 31, 2000.       
                                          7.50...................  January 1, 2001, to December 31, 2002.       
Congressional employee..................  7.75...................  January 1, 1999, to December 31, 1999.       
                                          7.90...................  January 1, 2000, to December 31, 2000.       
                                          8......................  January 1, 2001, to December 31, 2002.       
Member..................................  7.75...................  January 1, 1999, to December 31, 1999.       
                                          7.90...................  January 1, 2000, to December 31, 2000.       
                                          8......................  January 1, 2001, to December 31, 2002.       
Law enforcement officer.................  7.75...................  January 1, 1999, to December 31, 1999.       
                                          7.90...................  January 1, 2000, to December 31, 2000.       
                                          8......................  January 1, 2001, to December 31, 2002.       
Firefighter.............................  7.75...................  January 1, 1999, to December 31, 1999.       
                                          7.90...................  January 1, 2000, to December 31, 2000.       
                                          8......................  January 1, 2001, to December 31, 2002.       
Air traffic controller..................  7.75...................  January 1, 1999, to December 31, 1999.       
                                          7.90...................  January 1, 2000, to December 31, 2000.       
                                          8......................  January 1, 2001, to December 31, 2002.''.    
                                                                                                                

       (2) Other service.--
       (A) Military service.--Section 8422(e) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1)(A) by inserting ``and subject to 
     paragraph (5),'' after ``Except as provided in subparagraph 
     (B),''; and
       (ii) by adding at the end the following:
       ``(5) Effective with respect to any period of military 
     service performed after December 31, 1998, and before January 
     1, 2003, the percentage of basic pay under section 204 of 
     title 37 payable under paragraph (1) shall be equal to the 
     sum of the percentage specified in paragraph (1), plus--
       ``(A) .25 percent, if performed after December 31, 1998, 
     and before January 1, 2000;
       ``(B) .40 percent, if performed after December 31, 1999, 
     and before January 1, 2001;
       ``(C) .50 percent, if performed after December 31, 2000, 
     and before January 1, 2003.''.
       (B) Volunteer service.--Section 8422(f) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1) by striking the period at the end and 
     inserting ``, subject to paragraph (4).''; and
       (ii) by adding at the end the following:
       ``(4) Effective with respect to any period of service as a 
     volunteer or volunteer leader performed after December 31, 
     1998, and before January 1, 2003, the percentage of the 
     readjustment allowance or stipend (as the case may be) 
     payable under paragraph (1) shall be equal to the sum of the 
     percentage specified in paragraph (1), plus--
       ``(A) .25 percent, if performed after December 31, 1998, 
     and before January 1, 2000;
       ``(B) .40 percent, if performed after December 31, 1999, 
     and before January 1, 2001;
       ``(C) .50 percent, if performed after December 31, 2000, 
     and before January 1, 2003.''.
       (b) Government Contributions.--
       (1) In general.--Section 8423 of title 5, United States 
     Code, is amended by adding at the end the following:
       ``(d)(1) This subsection shall govern for purposes of 
     determining the amount to be contributed by an employing 
     agency for any period (or portion thereof)--
       ``(A) which is occurs after September 30, 1997, and before 
     January 1, 2003; and
       ``(B) as to which a contribution under subsection (a) would 
     otherwise be payable by such agency.
       ``(2) The amount of the contribution required under 
     subsection (a) with respect to any period (or portion 
     thereof) described in paragraph (1) shall (instead of the 
     amount which would otherwise apply) be equal to the amount 
     which would be required under subsection (a) if section 
     6102(a) of the Balanced Budget Act of 1997 had never been 
     enacted.''.

[[Page H4488]]

       (2) Conforming amendment.--Section 8423(a)(1) of title 5, 
     United States Code, is amended by striking ``Each'' and 
     inserting ``Subject to subsection (d), each''.

     SEC. 6103. GOVERNMENT CONTRIBUTION FOR HEALTH BENEFITS.

       (a) In General.--Section 8906 of title 5, United States 
     Code, is amended by striking subsection (a) and all that 
     follows through the end of paragraph (1) of subsection (b) 
     and inserting the following:
       ``(a)(1) The Office of Personnel Management shall, not 
     later than October 1 of each year, determine the weighted 
     average of the subscription charges that will be in effect 
     during the following contract year with respect to--
       ``(A) enrollments under this chapter for self alone; and
       ``(B) enrollments under this chapter for self and family.
       ``(2) In determining each weighted average under paragraph 
     (1), the weight to be given to a particular subscription 
     charge shall, with respect to each plan (and option) to which 
     it is to apply, be commensurate with the number of enrollees 
     enrolled in such plan (and option) as of March 31 of the year 
     in which the determination is being made.
       ``(3) For purposes of paragraph (2), the term `enrollee' 
     means any individual who, during the contract year for which 
     the weighted average is to be used under this section, will 
     be eligible for a Government contribution for health 
     benefits.
       ``(b)(1) Except as provided in paragraphs (2) and (3), the 
     biweekly Government contribution for health benefits for an 
     employee or annuitant enrolled in a health benefits plan 
     under this chapter is adjusted to an amount equal to 72 
     percent of the weighted average under subsection (a)(1)(A) or 
     (B), as applicable. For an employee, the adjustment begins on 
     the first day of the employee's first pay period of each 
     year. For an annuitant, the adjustment begins on the first 
     day of the first period of each year for which an annuity 
     payment is made.''.
       (b) Effective Date.--This section and the amendment made by 
     this section shall take effect on the first day of the 
     contract year that begins in 1999, except that nothing in 
     this subsection shall prevent the Office of Personnel 
     Management from taking any action, before such first day, 
     which it considers necessary in order to ensure the timely 
     implementation of such amendment.

     SEC. 6104. EFFECTIVE DATE.

       (a) In General.--Except as provided in section 6103, this 
     subtitle shall take effect on--
       (1) October 1, 1997; or
       (2) if later, the date of the enactment of this Act.
       (b) Special Rule.--If the date of the enactment of this Act 
     is later than October 1, 1997, then, for purposes of applying 
     the amendments made by sections 6101 and 6102--
       (1) any reference in any such amendment to ``September 30, 
     1997'' shall be treated as referring to the day before the 
     date of the enactment of this Act; and
       (2) any reference in any such amendment to ``October 1, 
     1997'' shall be treated as referring to the date of the 
     enactment of this Act.
       TITLE VII--COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

     SEC. 7001. EXTENSION OF HIGHER VESSEL TONNAGE DUTIES.

       (a) Extension of Duties.--Section 36 of the Act of August 
     5, 1909 (36 Stat. 111; 46 U.S.C. App. 121), is amended by 
     striking ``for fiscal years 1991, 1992, 1993, 1994, 1995, 
     1996, 1997, 1998,'' each place it appears and inserting ``for 
     fiscal years through fiscal year 2002,''.
       (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 U.S.C. 
     App. 132), is amended by striking ``for fiscal years 1991, 
     1992, 1993, 1994, 1995, 1996, 1997, and 1998,'' and inserting 
     ``for fiscal years through fiscal year 2002,''.

     SEC. 7002. SALE OF GOVERNORS ISLAND, NEW YORK.

       (a) In General.--Notwithstanding any other provision of 
     law, no earlier than fiscal year 2002, 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. 7003. 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, 2002, 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, 
     1997, 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, 1998.
               TITLE VIII--COMMITTEE ON VETERANS' AFFAIRS

     SEC. 8001. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the ``Veterans 
     Reconciliation Act of 1997''.
       (b) Table of Contents.--The table of contents for this 
     title is as follows:

Sec. 8001. Short title; table of contents.

             Subtitle A--Extension of Temporary Authorities

Sec. 8011. Authority to require that certain veterans make copayments 
              in exchange for receiving health-care benefits.
Sec. 8012. Medical care cost recovery for non-service-connected 
              disabilities of service-connected veterans.
Sec. 8013. Department of Veterans Affairs medical-care receipts.
Sec. 8014. Income verification authority.
Sec. 8015. Limitation on pension for certain recipients of medicaid-
              covered nursing home care.
Sec. 8016. Home loan fees.
Sec. 8017. Procedures applicable to liquidation sales on defaulted home 
              loans guaranteed by the Secretary of Veterans Affairs.
Sec. 8018. Enhanced loan asset sale authority.

                       Subtitle B--Other Matters

Sec. 8021. Rounding down of cost-of-living adjustments in compensation 
              and DIC rates.
Sec. 8022. Withholding of payments and benefits.
             Subtitle A--Extension of Temporary Authorities

     SEC. 8011. AUTHORITY TO REQUIRE THAT CERTAIN VETERANS MAKE 
                   COPAYMENTS IN EXCHANGE FOR RECEIVING HEALTH-
                   CARE BENEFITS.

       (a) Hospital and Medical Care.--
       (1) Extension.--Section 1710(f)(2)(B) of title 38, United 
     States Code, is amended by inserting ``before September 30, 
     2002,'' after ``(B)''.
       (2) Repeal of superseded provision.--Section 8013(e) of the 
     Omnibus Budget Reconciliation Act of 1990 (38 U.S.C. 1710 
     note) is repealed.
       (b) Outpatient Medications.--Section 1722A(c) of title 38, 
     United States Code, is amended by striking out ``September 
     30, 1998'' and inserting in lieu thereof ``September 30, 
     2002''.

     SEC. 8012. MEDICAL CARE COST RECOVERY FOR NON-SERVICE-
                   CONNECTED DISABILITIES OF SERVICE-CONNECTED 
                   VETERANS.

       Section 1729(a)(2)(E) of title 38, United States Code, is 
     amended by striking out ``before October 1, 1998,'' and 
     inserting ``before October 1, 2002,''.

     SEC. 8013. DEPARTMENT OF VETERANS AFFAIRS MEDICAL-CARE 
                   RECEIPTS.

       (a) Allocation of Receipts.--(1) Chapter 17 of title 38, 
     United States Code, is amended by inserting after section 
     1729 the following new section:

     ``Sec. 1729A. Department of Veterans Affairs Medical Care 
       Collections Fund

       ``(a) There is in the Treasury a fund to be known as the 
     Department of Veterans Affairs Medical Care Collections Fund.
       ``(b) Amounts recovered or collected after September 30, 
     1997, under any of the following provisions of law shall be 
     deposited in the fund:
       ``(1) Section 1710(f) of this title.
       ``(2) Section 1710(g) of this title.
       ``(3) Section 1711 of this title.
       ``(4) Section 1722A of this title.
       ``(5) Section 1729 of this title.
       ``(6) Public Law 87-693, popularly known as the `Federal 
     Medical Care Recovery Act' (42 U.S.C. 2651 et seq.), to the 
     extent that a recovery or collection under that law is based 
     on medical care or services furnished under this chapter.
       ``(c)(1) Subject to the provisions of appropriations Acts, 
     amounts in the fund shall be available, without fiscal year 
     limitation, to the Secretary for the following purposes:
       ``(A) Furnishing medical care and services under this 
     chapter, to be available during any fiscal year for the same 
     purposes and subject to the same limitations (other than with 
     respect to the period of availability for obligation) as 
     apply to amounts appropriated from the general fund of the 
     Treasury for that fiscal year for medical care.
       ``(B) Expenses of the Department for the identification, 
     billing, auditing, and collection of amounts owed the United 
     States by reason of medical care and services furnished under 
     this chapter.
       ``(2) Amounts available under paragraph (1) may not be used 
     for any purpose other than a purpose set forth in 
     subparagraph (A) or (B) of that paragraph.

[[Page H4489]]

       ``(2)(A) If for fiscal year 1998, 1999, or 2000 the 
     Secretary determines that the total amount to be recovered 
     for that fiscal year under the provisions of law specified in 
     subsection (b) will be less than the amount contained in the 
     latest Congressional Budget Office baseline estimate 
     (computed under section 257 of the Balanced Budget and 
     Emergency Deficit Control Act of 1985) for the amount of such 
     recoveries for that fiscal year by at least $25,000,000, the 
     Secretary shall promptly certify to the Secretary of the 
     Treasury the amount of the shortfall (as estimated by the 
     Secretary) that is in excess of $25,000,000. Upon receipt of 
     such a certification, the Secretary of the Treasury shall, 
     not later than 30 days after receiving the certification, 
     deposit in the fund, from any unobligated amounts in the 
     Treasury, an amount equal to the amount certified by the 
     Secretary.
       ``(B) For a fiscal year for which a deposit is made under 
     subparagraph (A), if the Secretary subsequently determines 
     that the actual amount recovered for that fiscal year under 
     the provisions of law specified in subsection (b) is greater 
     than the amount estimated by the Secretary that was used for 
     purposes of the certification by the Secretary under 
     subparagraph (A), the Secretary shall pay into the general 
     fund of the Treasury, from amounts available for medical 
     care, an amount equal to the difference between the amount 
     actually recovered and the amount so estimated (but not in 
     excess of the amount of the deposit under subparagraph (A) 
     pursuant to such certification).
       ``(C) For a fiscal year for which a deposit is made under 
     subparagraph (A), if the Secretary subsequently determines 
     that the actual amount recovered for that fiscal year under 
     the provisions of law specified in subsection (b) is less 
     than the amount estimated by the Secretary that was used for 
     purposes of the certification by the Secretary under 
     subparagraph (A), the Secretary shall promptly certify to the 
     Secretary of the Treasury the amount of the shortfall. Upon 
     receipt of such a certification, the Secretary of the 
     Treasury shall, not later than 30 days after receiving the 
     certification, deposit in the fund, from any unobligated 
     amounts in the Treasury, an amount equal to the amount 
     certified by the Secretary.
       ``(d)(1) The Secretary may allocate amounts available to 
     the Secretary under subsection (c) among components of the 
     Department in such manner as the Secretary considers 
     appropriate.
       ``(2) The Secretary shall establish a policy for the 
     allocation under paragraph (1) of amounts in the fund. Such 
     policy shall be designed so as to facilitate the realization 
     of the maximum feasible collections under the provisions of 
     law specified in subsection (b). In developing the policy, 
     the Secretary shall take into account any factors beyond the 
     control of the Secretary that the Secretary considers may 
     impede such collections.
       ``(e)(1) The Secretary shall submit to the Committees on 
     Veterans' Affairs of the Senate and House of Representatives 
     quarterly reports on the operation of this section for fiscal 
     years 1998, 1999, and 2000 and for the first quarter of 
     fiscal year 2001. Each such report shall specify the amount 
     collected under each of the provisions specified in 
     subsection (b) during the preceding quarter and the amount 
     originally estimated to be collected under each such 
     provision during such quarter.
       ``(2) A report under paragraph (1) for a quarter shall be 
     submitted not later than 45 days after the end of that 
     quarter.''.
       (2) The table of sections at the beginning of such chapter 
     is amended by inserting after the item relating to section 
     1729 the following new item:

``1729A. Department of Veterans Affairs Medical Care Collections 
              Fund.''.

       (b) Conforming Amendments.--Chapter 17 of such title is 
     amended as follows:
       (1) Section 1710(f) is amended by striking out paragraph 
     (4) and redesignating paragraph (5) as paragraph (4).
       (2) Section 1710(g) is amended by striking out paragraph 
     (4).
       (3) Section 1722A(b) is amended by striking out 
     ``Department of Veterans Affairs Medical-Care Cost Recovery 
     Fund'' and inserting in lieu thereof ``Department of Veterans 
     Affairs Medical Care Collections Fund''.
       (4) Section 1729 is amended by striking out subsection (g).
       (c) Termination of Medical-Care Cost Recovery Fund.--The 
     amount of the unobligated balance remaining in the Department 
     of Veterans Affairs Medical-Care Cost Recovery Fund 
     (established pursuant to section 1729(g)(1) of title 38, 
     United States Code), at the close of September 30, 1997, 
     shall be deposited, not later than December 31, 1997, in the 
     Treasury as miscellaneous receipts, and that fund shall be 
     terminated when the deposit occurs.
       (d) Determination of Amounts Subject to Recovery.--Section 
     1729 of title 38, United States Code, is amended--
       (1) in subsection (a)(1), by striking out ``the reasonable 
     cost of'' and inserting in lieu thereof ``reasonable charges 
     for'';
       (2) in subsection (c)(2)--
       (A) by striking out ``the reasonable cost of'' in the first 
     sentence of subparagraph (A) and in subparagraph (B) and 
     inserting in lieu thereof ``reasonable charges for''; and
       (B) by striking out ``cost'' in the second sentence of 
     subparagraph (A) and inserting in lieu thereof ``charges''.
       (e) Technical Amendment.--Paragraph (2) of section 712(b) 
     of title 38, United States Code, is amended--
       (1) by striking out subparagraph (B); and
       (2) by redesignating subparagraph (C) as subparagraph (B).
       (f) Implementation.--(1) Not later than January 1, 1999, 
     the Secretary of Veterans Affairs shall submit to the 
     Committees on Veterans' Affairs of the Senate and House of 
     Representatives a report on the implementation of this 
     section. The report shall describe the collections under each 
     of the provisions specified in section 1729A(b) of title 38, 
     United States Code, as added by subsection (a). Information 
     on such collections shall be shown for each of the health 
     service networks (known as Veterans Integrated Service 
     Networks) and, to the extent practicable for each facility 
     within each such network. The Secretary shall include in the 
     report an analysis of differences among the networks with 
     respect to (A) the market in which the networks operates, (B) 
     the effort expended to achieve collections, (C) the 
     efficiency of such effort, and (D) any other relevant 
     information.
       (2) The Secretary shall adjust the allocation policy 
     established under section 1729A(d)(2) of title 38, United 
     States Code, as added by subsection (a), to take account of 
     differences in collections that the Secretary determines are 
     attributable to the different markets in which networks 
     operate and shall include in the report under paragraph (1) a 
     description of such adjustments.
       (g) Effective Date.--(1) Except as provided in paragraph 
     (2), this section and the amendments made by this section 
     shall take effect on October 1, 1997.
       (2) The amendments made by subsection (d) shall take effect 
     on the date of the enactment of this Act.

     SEC. 8014. INCOME VERIFICATION AUTHORITY.

       (a) Extension.--Section 5317(g) of title 38, United States 
     Code, is amended by striking out ``September 30, 1998'' and 
     inserting in lieu thereof ``September 30, 2002''.
       (b) Social Security and Tax Return Information.--Section 
     6103(l)(7) of the Internal Revenue Code of 1986 is amended by 
     striking out ``Clause (viii) shall not apply after September 
     30, 1998'' and inserting in lieu thereof ``Clause (viii) 
     shall not apply after September 30, 2002''.

     SEC. 8015. LIMITATION ON PENSION FOR CERTAIN RECIPIENTS OF 
                   MEDICAID-COVERED NURSING HOME CARE.

       Section 5503(f)(7) of title 38, United States Code, is 
     amended by striking out ``September 30, 1998'' and inserting 
     in lieu thereof ``September 30, 2002''.

     SEC. 8016. HOME LOAN FEES.

       (a) Increase in Loan Fee Under Property Management 
     Program.--Paragraph (2) of section 3729(a) of title 38, 
     United States Code, is amended--
       (1) in subparagraph (A), by striking out ``or 3733(a)'';
       (2) by striking out ``and'' at the end of subparagraph (D);
       (3) by striking out the period at the end of subparagraph 
     (E) and inserting in lieu thereof ``; and''; and
       (4) by adding at the end the following new subparagraph:
       ``(F) in the case of a loan made under section 3733(a) of 
     this title, the amount of such fee shall be 2.25 percent of 
     the total loan amount.''.
       (b) Extensions.--Such section is further amended--
       (1) in paragraph (4)--
       (A) by striking out ``October 1, 1998'' and inserting in 
     lieu thereof ``October 1, 2002''; and
       (B) by striking out ``or (E)'' and inserting in lieu 
     thereof ``(E), or (F)''; and
       (2) in paragraph (5)(C), by striking out ``October 1, 
     1998'' and inserting in lieu thereof ``October 1, 2002''.

     SEC. 8017. PROCEDURES APPLICABLE TO LIQUIDATION SALES ON 
                   DEFAULTED HOME LOANS GUARANTEED BY THE 
                   SECRETARY OF VETERANS AFFAIRS.

       Section 3732(c)(11) of title 38, United States Code, is 
     amended by striking out ``October 1, 1998'' and inserting 
     ``October 1, 2002''.

     SEC. 8018. ENHANCED LOAN ASSET SALE AUTHORITY.

       Section 3720(h)(2) of title 38, United States Code, is 
     amended by striking out ``December 31, 1997'' and inserting 
     in lieu thereof ``September 30, 2002''.
                       Subtitle B--Other Matters

     SEC. 8021. ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN 
                   COMPENSATION AND DIC RATES.

       (a) Compensation COLAS.--(1) Chapter 11 of title 38, United 
     States Code, is amended by inserting after section 1102 the 
     following new section:

     ``Sec. 1103. Cost-of-living adjustments

       ``(a) In the computation of cost-of-living adjustments for 
     fiscal years 1998 through 2002 in the rates of, and dollar 
     limitations applicable to, compensation payable under this 
     chapter, such adjustments shall be made by a uniform 
     percentage that is no more than the percentage equal to the 
     social security increase for that fiscal year, with all 
     increased monthly rates and limitations (other than increased 
     rates or limitations equal to a whole dollar amount) rounded 
     down to the next lower whole dollar amount.
       ``(b) For purposes of this section, the term `social 
     security increase' means the percentage by which benefit 
     amounts payable under title II of the Social Security Act (42 
     U.S.C. 401 et seq.) are increased for any fiscal year as a 
     result of a determination under section 215(i) of such Act 
     (42 U.S.C. 415(i)).''.
       (2) The table of sections at the beginning of such chapter 
     is amended by inserting after

[[Page H4490]]

     the item relating to section 1102 the following new item:

``1103. Cost-of-living adjustments.''.

       (b) Out-Year DIC COLAs.--(1) Chapter 13 of title 38, United 
     States Code, is amended by inserting after section 1302 the 
     following new section:

     ``Sec. 1303. Cost-of-living adjustments

       ``(a) In the computation of cost-of-living adjustments for 
     fiscal years 1998 through 2002 in the rates of dependency and 
     indemnity compensation payable under this chapter, such 
     adjustments shall be made by a uniform percentage that is no 
     more than the percentage equal to the social security 
     increase for that fiscal year, with all increased monthly 
     rates (other than increased rates equal to a whole dollar 
     amount) rounded down to the next lower whole dollar amount.
       ``(b) For purposes of this section, the term `social 
     security increase' means the percentage by which benefit 
     amounts payable under title II of the Social Security Act (42 
     U.S.C. 401 et seq.) are increased for any fiscal year as a 
     result of a determination under section 215(i) of such Act 
     (42 U.S.C. 415(i)).''.
       (2) The table of sections at the beginning of such chapter 
     is amended by inserting after the item relating to section 
     1302 the following new item:

``1303. Cost-of-living adjustments.''.

     SEC. 8022. 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.
           TITLE IX--COMMITTEE ON WAYS AND MEANS--NONMEDICARE

     SEC. 9000. TABLE OF CONTENTS.

       The table of contents of this title is as follows:

Sec. 9000. Table of contents.

                      Subtitle A--TANF Block Grant

Sec. 9001. Welfare-to-work grants.
Sec. 9002. Limitation on amount of Federal funds transferable to title 
              XX programs.
Sec. 9003. Clarification of limitation on number of persons who may be 
              treated as engaged in work by reason of participation in 
              vocational educational training.
Sec. 9004. Rules governing expenditures of funds for work experience 
              and community service programs.
Sec. 9005. State option to take account of certain work activities of 
              recipients with sufficient participation in work 
              experience or community service programs.
Sec. 9006. Worker protections.
Sec. 9007. Penalty for failure of State to reduce assistance for 
              recipients refusing without good cause to work.

                Subtitle B--Supplemental Security Income

Sec. 9101. Requirement to perform childhood disability redeterminations 
              in missed cases.
Sec. 9102. Repeal of maintenance of effort requirements applicable to 
              optional State programs for supplementation of SSI 
              benefits.
Sec. 9103. Fees for Federal administration of State supplementary 
              payments.

                 Subtitle C--Child Support Enforcement

Sec. 9201. Clarification of authority to permit certain redisclosures 
              of wage and claim information.

     Subtitle D--Restricting Welfare and Public Benefits for Aliens

Sec. 9301. Extension of eligibility period for refugees and certain 
              other qualified aliens from 5 to 7 years for SSI and 
              medicaid.
Sec. 9302. SSI eligibility for aliens receiving SSI on August 22, 1996.
Sec. 9303. SSI eligibility for permanent resident aliens who are 
              members of an Indian tribe.
Sec. 9304. Verification of eligibility for State and local public 
              benefits.
Sec. 9305. Derivative eligibility for benefits.
Sec. 9306. Effective date.

                 Subtitle E--Unemployment Compensation

Sec. 9401. Clarifying provision relating to base periods.
Sec. 9402. Increase in Federal unemployment account ceiling.
Sec. 9403. Special distribution to States from Unemployment Trust Fund.
Sec. 9404. Interest-free advances to State accounts in Unemployment 
              Trust Fund restricted to States which meet funding goals.
Sec. 9405. Exemption of service performed by election workers from the 
              Federal unemployment tax.
Sec. 9406. Treatment of certain services performed by inmates.
Sec. 9407. Exemption of service performed for an elementary or 
              secondary school operated primarily for religious 
              purposes from the Federal unemployment tax.
Sec. 9408. State program integrity activities for unemployment 
              compensation.

               Subtitle F--Increase in Public Debt Limit

Sec. 9501. Increase in public debt limit.
                      Subtitle A--TANF Block Grant

     SEC. 9001. WELFARE-TO-WORK GRANTS.

       (a) Grants to States.--
       (1) In general.--Section 403(a) of the Social Security Act 
     (42 U.S.C. 603(a)) is amended by adding at the end the 
     following:
       ``(5) Welfare-to-work grants.--
       ``(A) Noncompetitive grants.--
       ``(i) Entitlement.--A State shall be entitled to receive 
     from the Secretary a grant for each fiscal year specified in 
     subparagraph (H) of this paragraph for which the State is a 
     welfare-to-work State, in an amount that does not exceed the 
     lesser of----

       ``(I) 2 times the total of the expenditures by the State 
     (excluding qualified State expenditures (as defined in 
     section 409(a)(7)(B)(i)) and any expenditure described in 
     subclause (I), (II), or (IV) of section 409(a)(7)(B)(iv)) 
     during the fiscal year for activities described in 
     subparagraph (C)(i) of this paragraph; or
       ``(II) the allotment of the State under clause (iii) of 
     this subparagraph for the fiscal year.

       ``(ii) Welfare-to-work state.--A State shall be considered 
     a welfare-to-work State for a fiscal year for purposes of 
     this subparagraph if the Secretary, after consultation (and 
     the sharing of any plan or amendment thereto submitted under 
     this clause) with the Secretary of Health and Human Services 
     and the Secretary of Housing and Urban Development, 
     determines that the State meets the following requirements:

       ``(I) The State has submitted to the Secretary (in the form 
     of an addendum to the State plan submitted under section 402) 
     a plan which--

       ``(aa) describes how, consistent with this subparagraph, 
     the State will use any funds provided under this subparagraph 
     during the fiscal year;
       ``(bb) specifies the formula to be used pursuant to clause 
     (vi) to distribute funds in the State, and describes the 
     process by which the formula was developed;
       ``(cc) contains evidence that the plan was developed in 
     consultation and coordination with sub-State areas; and
       ``(dd) is approved by the agency administering the State 
     program funded under this part.

       ``(II) The State has provided the Secretary with an 
     estimate of the amount that the State intends to expend 
     during the fiscal year (excluding expenditures described in 
     section 409(a)(7)(B)(iv)) for activities described in 
     subparagraph (C)(i) of this paragraph.
       ``(III) The State has agreed to negotiate in good faith 
     with the Secretary of Health and Human Services with respect 
     to the substance of any evaluation under section 413(j), and 
     to cooperate with the conduct of any such evaluation.
       ``(IV) The State is an eligible State for the fiscal year.
       ``(V) Qualified State expenditures (within the meaning of 
     section 409(a)(7)) are at least 80 percent of historic State 
     expenditures (within the meaning of such section), with 
     respect to the fiscal year or the immediately preceding 
     fiscal year.

       ``(iii) Allotments to welfare-to-work states.--The 
     allotment of a welfare-to-work State for a fiscal year shall 
     be the available amount for the fiscal year multiplied by the 
     State percentage for the fiscal year.
       ``(iv) Available amount.--As used in this subparagraph, the 
     term `available amount' means, for a fiscal year, the sum 
     of--

       ``(I) 50 percent of the sum of--

       ``(aa) the amount specified in subparagraph (H) for the 
     fiscal year, minus the total of the amounts reserved pursuant 
     to subparagraphs (F) and (G) for the fiscal year; and
       ``(bb) any amount reserved pursuant to subparagraph (F) for 
     the immediately preceding fiscal year that has not been 
     obligated; and

       ``(II) any available amount for the immediately preceding 
     fiscal year that has not been obligated by a State or sub-
     State entity.
       ``(v) State percentage.--As used in clause (iii), the term 
     `State percentage' means, with respect to a fiscal year, \1/
     3\ of the sum of--

       ``(aa) the percentage represented by the number of 
     individuals in the State whose income is less than the 
     poverty line divided by the number of such individuals in the 
     United States;
       ``(bb) the percentage represented by the number of 
     unemployed individuals in the

[[Page H4491]]

     State divided by the number of such individuals in the United 
     States; and
       ``(cc) the percentage represented by the number of 
     individuals who are adult recipients of assistance under the 
     State program funded under this part divided by the number of 
     individuals in the United States who are adult recipients of 
     assistance under any State program funded under this part.
       ``(vi) Distribution of funds within states.--

       ``(I) In general.--A State to which a grant is made under 
     this subparagraph shall distribute not less than 85 percent 
     of the grant funds among the service delivery areas in the 
     State, in accordance with a formula which--

       ``(aa) determines the amount to be distributed for the 
     benefit of a service delivery area in proportion to the 
     number (if any) by which the number of individuals residing 
     in the service delivery area with an income that is less than 
     the poverty line exceeds 5 percent of the population of the 
     service delivery area, relative to such number for the other 
     service delivery areas in the State, and accords a weight of 
     not less than 50 percent to this factor;
       ``(bb) may determine the amount to be distributed for the 
     benefit of a service delivery area in proportion to the 
     number of adults residing in the service delivery area who 
     are recipients of assistance under the State program funded 
     under this part (whether in effect before or after the 
     amendments made by section 103(a) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act first 
     applied to the State) for at least 30 months (whether or not 
     consecutive) relative to the number of such adults residing 
     in the other service delivery areas in the State; and
       ``(cc) may determine the amount to be distributed for the 
     benefit of a service delivery area in proportion to the 
     number of unemployed individuals residing in the service 
     delivery area relative to the number of such individuals 
     residing in the other service delivery areas in the State.

       ``(II) Special rule.--Notwithstanding subclause (I), if the 
     formula used pursuant to subclause (I) would result in the 
     distribution of less than $100,000 during a fiscal year for 
     the benefit of a service delivery area, then in lieu of 
     distributing such sum in accordance with the formula, such 
     sum shall be available for distribution under subclause (III) 
     during the fiscal year.
       ``(III) Projects to help long-term recipients of assistance 
     into the work force.--The Governor of a State to which a 
     grant is made under this subparagraph may distribute not more 
     than 15 percent of the grant funds (plus any amount required 
     to be distributed under this subclause by reason of subclause 
     (II)) to projects that appear likely to help long-term 
     recipients of assistance under the State program funded under 
     this part (whether in effect before or after the amendments 
     made by section 103(a) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act first applied to the 
     State) enter the work force.

       ``(vii) Administration.--

       ``(I) In general.--A grant made under this subparagraph to 
     a State shall be administered by the State agency that is 
     administering, or supervising the administration of, the 
     State program funded under this part, or by another State 
     agency designated by the Governor of the State.
       ``(II) Spending by private industry councils.--The private 
     industry council for a service delivery area shall have sole 
     authority to expend the amounts provided for the benefit of a 
     service delivery area under subparagraph (vi)(I), pursuant to 
     an agreement with the agency that is administering the State 
     program funded under this part in the service delivery area.

       ``(B) Competitive grants.--
       ``(i) In general.--The Secretary, in consultation with the 
     Secretary of Health and Human Services and the Secretary of 
     Housing and Urban Development, shall award grants in 
     accordance with this subparagraph, in fiscal years 1998 and 
     1999, for projects proposed by eligible applicants, based on 
     the following:

       ``(I) The effectiveness of the proposal in--

       ``(aa) expanding the base of knowledge about programs aimed 
     at moving recipients of assistance under State programs 
     funded under this part who are least job ready into the work 
     force.
       ``(bb) moving recipients of assistance under State programs 
     funded under this part who are least job ready into the work 
     force; and
       ``(cc) moving recipients of assistance under State programs 
     funded under this part who are least job ready into the work 
     force, even in labor markets that have a shortage of low-
     skill jobs.

       ``(II) At the discretion of the Secretary, any of the 
     following:

       ``(aa) The history of success of the applicant in moving 
     individuals with multiple barriers into work.
       ``(bb) Evidence of the applicant's ability to leverage 
     private, State, and local resources.
       ``(cc) Use by the applicant of State and local resources 
     beyond those required by subparagraph (A).
       ``(dd) Plans of the applicant to coordiate with other 
     organizations at the local and State level.
       ``(ee) Use by the applicant of current or former recipients 
     of assistance under a State program funded under this part as 
     mentors, case managers, or service providers.
       ``(ii) Eligible applicants.--As used in clause (i), the 
     term `eligible applicant' means a private industry council or 
     a political subdivision of a State that submits a proposal 
     that is approved by the agency administering the State 
     program funded under this part.
       ``(iii) Determination of grant amount.--In determining the 
     amount of a grant to be made under this subparagraph for a 
     project proposed by an applicant, the Secretary shall provide 
     the applicant with an amount sufficient to ensure that the 
     project has a reasonable opportunity to be successful, taking 
     into account the number of long-term recipients of assistance 
     under a State program funded under this part, the level of 
     unemployment, the job opportunities and job growth, the 
     poverty rate, and such other factors as the Secretary deems 
     appropriate, in the area to be served by the project.
       ``(iv) Targeting of funds to certain areas.--

       ``(I) Cities with greatest number of persons with income 
     less than the poverty line.--The Secretary shall use not less 
     than 65 percent of the funds available for grants under this 
     subparagraph for a fiscal year to award grants for 
     expenditures in cities that are among the 100 cities in the 
     United States with the highest number of residents with an 
     income that is less than the poverty line.
       ``(II) Rural areas.--

       ``(aa) In general.--The Secretary shall use not less than 
     25 percent of the funds available for grants under this 
     subparagraph for a fiscal year to award grants for 
     expenditures in rural areas.
       ``(bb) Rural area defined.--As used in item (aa), the term 
     `rural area' means a city, town, or unincorporated area that 
     has a population of 50,000 or fewer inhabitants and that is 
     not an urbanized area immediately adjacent to a city, town, 
     or unincorporated area that has a population of more than 
     50,000 inhabitants.
       ``(v) Funding.--For grants under this subparagraph for each 
     fiscal year specified in subparagraph (H), there shall be 
     available to the Secretary an amount equal to the sum of--

       ``(I) 50 percent of the sum of--

       ``(aa) the amount specified in subparagraph (H) for the 
     fiscal year, minus the total of the amounts reserved pursuant 
     to subparagraphs (F) and (G) for the fiscal year; and
       ``(bb) any amount reserved pursuant to subparagraph (F) for 
     the immediately preceding fiscal year that has not been 
     obligated; and

       ``(II) any amount available for grants under this 
     subparagraph for the immediately preceding fiscal year that 
     has not been obligated.

       ``(C) Limitations on use of funds.--
       ``(i) Allowable activities.--An entity to which funds are 
     provided under this paragraph may use the funds to move into 
     the work force recipients of assistance under the program 
     funded under this part of the State in which the entity is 
     located and the noncustodial parent of any minor who is such 
     a recipient, by means of any of the following:

       ``(I) Job creation through public or private sector 
     employment wage subsidies.
       ``(II) On-the-job training.
       ``(III) Contracts with public or private providers of 
     readiness, placement, and post-employment services.
       ``(IV) Job vouchers for placement, readiness, and 
     postemployment services.
       ``(V) Job support services (excluding child care services) 
     if such services are not otherwise available.

       ``(ii) Required beneficiaries.--An entity that operates a 
     project with funds provided under this paragraph shall expend 
     at least 90 percent of all funds provided to the project for 
     the benefit of recipients of assistance under the program 
     funded under this part of the State in which the entity is 
     located who meet the requirements of each of the following 
     subclauses:

       ``(I) At least 2 of the following apply to the recipient:

       ``(aa) The individual has not completed secondary school or 
     obtained a certificate of general equivalency, and has low 
     skills in reading and mathematics.
       ``(bb) The individual requires substance abuse treatment 
     for employment.
       ``(cc) The individual has a poor work history.

     The Secretary shall prescribe such regulations as may be 
     necessary to interpret this subclause.
       ``(II) The individual--

       ``(aa) has received assistance under the State program 
     funded under this part (whether in effect before or after the 
     amendments made by section 103 of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996 first apply 
     to the State) for at least 30 months (whether or not 
     consecutive); or
       ``(bb) within 12 months, will become ineligible for 
     assistance under the State program funded under this part by 
     reason of a durational limit on such assistance, without 
     regard to any exemption provided pursuant to section 
     408(a)(7)(C) that may apply to the individual.
       ``(iii) Limitation on applicability of section 404.--The 
     rules of section 404, other than subsections (b), (f), and 
     (h) of section 404, shall not apply to a grant made under 
     this paragraph.
       ``(iv) Limitations relating to private industry councils.--

       ``(I) No direct provision of services.--A private industry 
     council may not directly provide services using funds 
     provided under this paragraph.
       ``(II) Cooperation with tanf agency.--On a determination by 
     the Secretary, in consultation with the Secretary of Health 
     and

[[Page H4492]]

     Human Services and the Secretary of Housing and Urban 
     Development, that the private industry council for a service 
     delivery area in a State for which funds are provided under 
     this paragraph and the agency administering the State program 
     funded under this part are not adhering to the agreement 
     referred to in subparagraph (A)(vii)(II) to implement any 
     plan or project for which the funds are provided, the 
     recipient of the funds shall remit the funds to the 
     Secretary.

       ``(v) Prohibition against use of grant funds for any other 
     fund matching requirement.--An entity to which funds are 
     provided under this paragraph shall not use any part of the 
     funds to fulfill any obligation of any State, political 
     subdivision, or private industry council to contribute funds 
     under other Federal law.
       ``(vi) Deadline for expenditure.--An entity to which funds 
     are provided under this paragraph shall remit to the 
     Secretary any part of the funds that are not expended within 
     3 years after the date the funds are so provided.
       ``(D) Individuals with income less than the poverty line.--
     For purposes of this paragraph, the number of individuals 
     with an income that is less than the poverty line shall be 
     determined based on the methodology used by the Bureau of the 
     Census to produce and publish intercensal poverty data for 
     1993 for States and counties.
       ``(E) Definitions.--As used in this paragraph:
       ``(i) Private industry council.--The term `private industry 
     council' means, with respect to a service delivery area, the 
     private industry council (or successor entity) established 
     for the service delivery area pursuant to the Job Training 
     Partnership Act.
       ``(ii) Secretary.--The term `Secretary' means the Secretary 
     of Labor, except as otherwise expressly provided.
       ``(iii) Service delivery area.--The term `service delivery 
     area' shall have the meaning given such term for purposes of 
     the Job Training Partnership Act.
       ``(F) Set-aside for indian tribes.--1 percent of the amount 
     specified in subparagraph (H) for each fiscal year shall be 
     reserved for grants to Indian tribes under section 412(a)(3).
       ``(G) Set-aside for evaluations.--0.5 percent of the amount 
     specified in subparagraph (H) for each fiscal year shall be 
     reserved for use by the Secretary of Health and Human 
     Services to carry out section 413(j).
       ``(H) Funding.--The amount specified in this subparagraph 
     is $1,500,000,000 for each of fiscal years 1998 and 1999.
       ``(I) Budget scoring.--Notwithstanding section 457(b)(2) of 
     the Balanced Budget and Emergency Deficit Control Act of 
     1985, the baseline shall assume that no grant shall be 
     awarded under this paragraph or under section 412(a)(3) after 
     fiscal year 2000.
       (2) Conforming amendment.--Section 409(a)(7)(B)(iv) of such 
     Act (42 U.S.C. 609(a)(7)(B)(iv)) is amended to read as 
     follows:
       ``(iv) Expenditures by the state.--The term `expenditures 
     by the State' does not include--

       ``(I) any expenditure from amounts made available by the 
     Federal Government;
       ``(II) any State funds expended for the medicaid program 
     under title XIX;
       ``(III) any State funds which are used to match Federal 
     funds provided under section 403(a)(5); or

       ``(IV) any State funds which are expended as a condition of 
     recieving Federal funds other than under this part.

     Notwithstanding subclause (IV) of the preceding sentence, 
     such term includes expenditures by a State for child care in 
     a fiscal year to the extent that the total amount of the 
     expenditures does not exceed the amount of State expenditures 
     in fiscal year 1994 or 1995 (whichever is the greater) that 
     equal the non-Federal share for the programs described in 
     section 418(a)(1)(A).''.
       (b) Grants to Outlying Areas.--Section 1108(a) of such Act 
     (42 U.S.C. 1308(a)) is amended by inserting ``(except section 
     403(a)(5))'' after ``title IV''.
       (c) Grants to Indian Tribes.--Section 412(a) of such Act 
     (42 U.S.C. 612(a)) is amended by adding at the end the 
     following:
       ``(3) Welfare-to-work grants.--
       ``(A) In general.--The Secretary shall award a grant in 
     accordance with this paragraph to an Indian tribe for each 
     fiscal year specified in section 403(a)(5)(H) for which the 
     Indian tribe is a welfare-to-work tribe, in such amount as 
     the Secretary deems appropriate, subject to subparagraph (B) 
     of this paragraph.
       ``(B) Welfare-to-work tribe.--An Indian tribe shall be 
     considered a welfare-to-work tribe for a fiscal year for 
     purposes of this paragraph if the Indian tribe meets the 
     following requirements:
       ``(i) The Indian tribe has submitted to the Secretary (in 
     the form of an addendum to the tribal family assistance plan, 
     if any, of the Indian tribe) a plan which describes how, 
     consistent with section 403(a)(5), the Indian tribe will use 
     any funds provided under this paragraph during the fiscal 
     year.
       ``(ii) The Indian tribe has provided the Secretary with an 
     estimate of the amount that the Indian tribe intends to 
     expend during the fiscal year (excluding tribal expenditures 
     described in section 409(a)(7)(B)(iv)) for activities 
     described in section 403(a)(5)(C)(i).
       ``(iii) The Indian tribe has agreed to negotiate in good 
     faith with the Secretary of Health and Human Services with 
     respect to the substance of any evaluation under section 
     413(j), and to cooperate with the conduct of any such 
     evaluation.
       ``(C) Limitations on use of funds.--Section 403(a)(5)(C) 
     shall apply to funds provided to Indian tribes under this 
     paragraph in the same manner in which such section applies to 
     funds provided under section 403(a)(5).''.
       (d) Funds Received From Grants To Be Disregarded in 
     Applying Durational Limit on Assistance.--Section 408(a)(7) 
     of such Act (42 U.S.C. 608(a)(7)) is amended by adding at the 
     end the following:
       ``(G) Inapplicability to welfare-to-work grants and 
     assistance.--For purposes of subparagraph (A) of this 
     paragraph, a grant made under section 403(a)(5) shall not be 
     considered a grant made under section 403, and assistance 
     from funds provided under section 403(a)(5) shall not be 
     considered assistance.''.
       (e) Evaluations.--Section 413 of such Act (42 U.S.C. 613) 
     is amended by adding at the end the following:
       ``(j) Evaluation of Welfare-To-Work Programs.--
       ``(1) Evaluation.--The Secretary--
       ``(A) shall, in consultation with the Secretary of Labor, 
     develop a plan to evaluate how grants made under sections 
     403(a)(5) and 412(a)(3) have been used;
       ``(B) may evaluate the use of such grants by such grantees 
     as the Secretary deems appropriate, in accordance with an 
     agreement entered into with the grantees after good-faith 
     negotiations; and
       ``(C) is urged to include the following outcome measures in 
     the plan developed under subparagraph (A):
       ``(i) Placements in the labor force and placements in the 
     labor force that last for at least 6 months.
       ``(ii) Placements in the private and public sectors.
       ``(iii) Earnings of individuals who obtain employment.
       ``(iv) Average expenditures per placement.
       ``(2) Reports to the congress.--
       ``(A) In general.--Subject to subparagraphs (B) and (C), 
     the Secretary, in consultation with the Secretary of Labor 
     and the Secretary of Housing and Urban Development, shall 
     submit to the Congress reports on the projects funded under 
     section 403(a)(5) and 412(a)(3) and on the evaluations of the 
     projects.
       ``(B) Interim report.--Not later than January 1, 1999, the 
     Secretary shall submit an interim report on the matter 
     described in subparagraph (A).
       ``(C) Final report.--Not later than January 1, 2001, (or at 
     a later date, if the Secretary informs the Committees of the 
     Congress with jurisdiction over the subject matter of the 
     report) the Secretary shall submit a final report on the 
     matter described in subparagraph (A).''.

     SEC. 9002. LIMITATION ON AMOUNT OF FEDERAL FUNDS TRANSFERABLE 
                   TO TITLE XX PROGRAMS.

       (a) In General.--Section 404(d) of the Social Security Act 
     (42 U.S.C. 604(d)) is amended--
       (1) in paragraph (1), by striking ``A State may'' and 
     inserting ``Subject to paragraph (2), a State may''; and
       (2) by amending paragraph (2) to read as follows:
       ``(2) Limitation on amount transferable to title xx 
     programs.--A State may use not more than 10 percent of the 
     amount of any grant made to the State under section 403(a) 
     for a fiscal year to carry out State programs pursuant to 
     title XX.''.
       (b) Retroactivity.--The amendments made by subsection (a) 
     of this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 9003. CLARIFICATION OF LIMITATION ON NUMBER OF PERSONS 
                   WHO MAY BE TREATED AS ENGAGED IN WORK BY REASON 
                   OF PARTICIPATION IN VOCATIONAL EDUCATIONAL 
                   TRAINING.

       (a) In General.--Section 407(c)(2)(D) of the Social 
     Security Act (42 U.S.C. 607(c)(2)(D)) is amended to read as 
     follows:
       ``(D) Limitation on number of persons who may be treated as 
     engaged in work by reason of participation in vocational 
     educational training.--For purposes of determining monthly 
     participation rates under paragraphs (1)(B)(i) and (2)(B) of 
     subsection (b), not more than 30 percent of the number of 
     individuals in all families and in 2-parent families, 
     respectively, in a State who are treated as engaged in work 
     for a month may consist of individuals who are determined to 
     be engaged in work for the month by reason of participation 
     in vocational educational training.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 9004. RULES GOVERNING EXPENDITURE OF FUNDS FOR WORK 
                   EXPERIENCE AND COMMUNITY SERVICE PROGRAMS.

       (a) In General.--Section 407 of the Social Security Act (42 
     U.S.C. 607) is amended by adding at the end the following:
       ``(j) Rules Governing Expenditure of Funds for Work 
     Experience and Community Service Programs.--
       ``(1) In general.--To the extent that a State to which a 
     grant is made under section 403(a)(5) or any other provision 
     of section 403 uses the grant to establish or operate a work 
     experience or community service program, the State may 
     establish and operate the program in accordance with this 
     subsection.

[[Page H4493]]

       ``(2) Purpose.--The purpose of a work experience or 
     community experience program is to provide experience or 
     training for individuals not able to obtain employment in 
     order to assist them to move to regular employment. Such a 
     program shall be designed to improve the employability of 
     participants through actual work experience to enable 
     individuals participating in the program to move promptly 
     into regular public or private employment. Such a program 
     shall not place individuals in private, for-profit entities.
       ``(3) Limitation on projects that may be undertaken.--A 
     work experience or community service program shall be limited 
     to projects which serve a useful public purpose in fields 
     such as health, social service, environmental protection, 
     education, urban and rural development and redevelopment, 
     welfare, recreation, public facilities, public safety, and 
     day care, and other purposes identified by the State.
       ``(4) Maximum hours of participation per month.--A State 
     that elects to establish a work experience or community 
     service program shall operate the program so that each 
     participant participates in the program with the maximum 
     number of hours that any such individual may be required to 
     participate in any month being a number equal to--
       ``(A)(i) the amount of assistance provided during the month 
     to the family of which the individual is a member under the 
     State program funded under this part; plus
       ``(ii) the dollar value equivalent of any benefits provided 
     during the month to the household of which the individual is 
     a member under the food stamp program under the Food Stamp 
     Act of 1977; minus
       ``(iii) any amount collected by the State as child support 
     with respect to the family that is retained by the State; 
     divided by
       ``(B) the greater of the Federal minimum wage or the 
     applicable State minimum wage.
       ``(5) Maximum hours of participation per week.--A State 
     that elects to establish a work experience or community 
     service program may not require any participant in any such 
     program to participate in any such program for a combined 
     total of more than 40 hours per week.
       ``(6) Rule of interpretation.--This subsection shall not be 
     construed as authorizing the provision of assistance under a 
     State program funded under this part as compensation for work 
     performed, nor shall a participant be entitled to a salary or 
     to any other work or training expense provided under any 
     other provision of law by reason of participation in a work 
     experience or community service program described in this 
     subsection.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 9005. STATE OPTION TO TAKE ACCOUNT OF CERTAIN WORK 
                   ACTIVITIES OF RECIPIENTS WITH SUFFICIENT 
                   PARTICIPATION IN WORK EXPERIENCE OR COMMUNITY 
                   SERVICE PROGRAMS.

       (a) In General.--Section 407(c) of the Social Security Act 
     (42 U.S.C. 607(c)) is amended by adding at the end the 
     following:
       ``(3) State option to take account of certain work 
     activities of recipients with sufficient participation in 
     work experience or community service programs.--
     Notwithstanding paragraphs (1) and (2) of this subsection and 
     subsection (d)(8), for purposes of determining monthly 
     participation rates under paragraphs (1)(B)(i) and (2)(B) of 
     subsection (b), an individual who, during a month, has 
     participated in a work experience or community service 
     program operated in accordance with subsection (j), for the 
     maximum number of hours that the individual may be required 
     to participate in such a program during the month shall be 
     treated as engaged in work for the month if, during the 
     month, the individual has participated in any other work 
     activity for a number of hours that is not less than the 
     number of hours required by subsection (c)(1) for the month 
     minus such maximum number of hours.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 9006. WORKER PROTECTIONS.

       Section 407(f) of the Social Security Act (42 U.S.C. 
     607(f)) is amended to read as follows:
       ``(f) Worker Protections.--
       ``(1) Nondisplacement in work activities.--
       ``(A) General prohibition.--Subject to this paragraph, an 
     adult in a family receiving assistance under a State program 
     funded under this part attributable to funds provided by the 
     Federal Government may fill a vacant employment position in 
     order to engage in a work activity.
       ``(B) Prohibition against violation of contracts.--A work 
     activity shall not violate an existing contract for services 
     or collective bargaining agreement.
       ``(C) Other prohibitions.--An adult participant in a work 
     activity shall not be employed or assigned--
       ``(i) when any other individual is on layoff from the same 
     or any substantially equivalent job; or
       ``(ii) if the employer has terminated the employment of any 
     regular employee or otherwise caused an involuntary reduction 
     if its workforce with the intention of filling the vacancy so 
     created with the participant.
       ``(2) Health and safety.--Health and safety standards 
     established under Federal and State law otherwise applicable 
     to working conditions of employees shall be equally 
     applicable to working conditions of participants engaged in a 
     work activity.
       ``(3) Nondiscrimination.--In addition to the protections 
     provided under the provisions of law specified in section 
     408(c), an individual may not be discriminated against with 
     respect to participation in work activities by reason of 
     gender.
       ``(4) Grievance procedure.--
       ``(A) In general.--Each State to which a grant is made 
     under section 403 shall establish and maintain a procedure 
     for grievances or complaints from employees alleging 
     violations of paragraph (1) and participants in work 
     activities alleging violations of paragraph (1), (2), or (3).
       ``(B) Hearing.--The procedure shall include an opportunity 
     for a hearing.
       ``(C) Remedies.--The procedure shall include remedies for 
     violation of paragraph (1), (2), or (3), which may include--
       ``(i) prohibition against placement of a participant with 
     an employer that has violated paragraph (1), (2), or (3);
       ``(ii) where applicable, reinstatement of an employee, 
     payment of lost wages and benefits, and reestablishment of 
     other relevant terms, conditions and privileges of 
     employment; and
       ``(iii) where appropriate, other equitable relief.
       ``(5) Nonpreemption of state nondisplacement laws.--The 
     provisions of this subsection relating to nondisplacement of 
     employees shall not be construed to preempt any provision of 
     State law relating to nondisplacement of employees that 
     affords greater protections to employees than is afforded by 
     such provisions of this subsection.''.

     SEC. 9007. PENALTY FOR FAILURE OF STATE TO REDUCE ASSISTANCE 
                   FOR RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO 
                   WORK.

       (a) In General.--Section 409(a) of the Social Security Act 
     (42 U.S.C. 609(a)) is amended by adding at the end the 
     following:
       ``(13) Penalty for failure to reduce assistance for 
     recipients refusing without good cause to work.--
       ``(A) In general.--If the Secretary determines that a State 
     to which a grant is made under section 403 in a fiscal year 
     has violated section 407(e) during the fiscal year, the 
     Secretary shall reduce the grant payable to the State under 
     section 403(a)(1) for the immediately succeeding fiscal year 
     by an amount equal to not less than 1 percent and not more 
     than 5 percent of the State family assistance grant.
       ``(B) Penalty based on severity of failure.--The Secretary 
     shall impose reductions under subparagraph (A) with respect 
     to a fiscal year based on the degree of noncompliance.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.
                Subtitle B--Supplemental Security Income

     SEC. 9101. REQUIREMENT TO PERFORM CHILDHOOD DISABILITY 
                   REDETERMINATIONS IN MISSED CASES.

       Section 211(d)(2) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (110 Stat. 2190) is 
     amended--
       (1) in subparagraph (A)--
       (A) in the 1st sentence, by striking ``1 year'' and 
     inserting ``18 months''; and
       (B) by inserting after the 1st sentence the following: 
     ``Any redetermination required by the preceding sentence that 
     is not performed before the end of the period described in 
     the preceding sentence shall be performed as soon as is 
     practicable thereafter.''; and
       (2) in subparagraph (C), by adding at the end the 
     following: ``Before commencing a redetermination under the 
     2nd sentence of subparagraph (A), in any case in which the 
     individual involved has not already been notified of the 
     provisions of this paragraph, the Commissioner of Social 
     Security shall notify the individual involved of the 
     provisions of this paragraph.''.

     SEC. 9102. REPEAL OF MAINTENANCE OF EFFORT REQUIREMENTS 
                   APPLICABLE TO OPTIONAL STATE PROGRAMS FOR 
                   SUPPLEMENTATION OF SSI BENEFITS.

       Section 1618 of the Social Security Act (42 U.S.C. 1382g) 
     is repealed.

     SEC. 9103. FEES FOR FEDERAL ADMINISTRATION OF STATE 
                   SUPPLEMENTARY PAYMENTS.

       (a) Fee Schedule.--
       (1) Optional state supplementary payments.--
       (A) In general.--Section 1616(d)(2)(B) of the Social 
     Security Act (42 U.S.C. 1382e(d)(2)(B)) is amended--
       (i) by striking ``and'' at the end of clause (iii); and
       (ii) by striking clause (iv) and inserting the following:
       ``(iv) for fiscal year 1997, $5.00;
       ``(v) for fiscal year 1998, $6.20;
       ``(vi) for fiscal year 1999, $7.60;
       ``(vii) for fiscal year 2000, $7.80;
       ``(viii) for fiscal year 2001, $8.10;
       ``(ix) for fiscal year 2002, $8.50; and
       ``(x) for fiscal year 2003 and each succeeding fiscal 
     year--
       ``(I) the applicable rate in the preceding fiscal year, 
     increased by the percentage, if

[[Page H4494]]

     any, by which the Consumer Price Index for the month of June 
     of the calendar year of the increase exceeds the Consumer 
     Price Index for the month of June of the calendar year 
     preceding the calendar year of the increase, and rounded to 
     the nearest whole cent; or
       ``(II) such different rate as the Commissioner determines 
     is appropriate for the State.''.
       (B) Conforming amendment.--Section 1616(d)(2)(C) of such 
     Act (42 U.S.C. 1382e(d)(2)(C)) is amended by striking 
     ``(B)(iv)'' and inserting ``(B)(x)(II)''.
       (2) Mandatory state supplementary payments.--
       (A) In general.--Section 212(b)(3)(B)(ii) of Public Law 93-
     66 (42 U.S.C. 1382 note) is amended--
       (i) by striking ``and'' at the end of subclause (III); and
       (ii) by striking subclause (IV) and inserting the 
     following:
       ``(IV) for fiscal year 1997, $5.00;
       ``(V) for fiscal year 1998, $6.20;
       ``(VI) for fiscal year 1999, $7.60;
       ``(VII) for fiscal year 2000, $7.80;
       ``(VIII) for fiscal year 2001, $8.10;
       ``(IX) for fiscal year 2002, $8.50; and
       ``(X) for fiscal year 2003 and each succeeding fiscal 
     year--
       ``(aa) the applicable rate in the preceding fiscal year, 
     increased by the percentage, if any, by which the Consumer 
     Price Index for the month of June of the calendar year of the 
     increase exceeds the Consumer Price Index for the month of 
     June of the calendar year preceding the calendar year of the 
     increase, and rounded to the nearest whole cent; or
       ``(bb) such different rate as the Commissioner determines 
     is appropriate for the State.''.
       (B) Conforming amendment.--Section 212(b)(3)(B)(iii) of 
     such Act (42 U.S.C. 1382 note) is amended by striking 
     ``(ii)(IV)'' and inserting ``(ii)(X)(bb)''.
       (b) Use of New Fees To Defray the Social Security 
     Administration's Administrative Expenses.--
       (1) Credit to special fund for fiscal year 1998 and 
     subsequent years.--
       (A) Optional state supplementary payment fees.--Section 
     1616(d)(4) of the Social Security Act (42 U.S.C. 1382e(d)(4)) 
     is amended to read as follows:
       ``(4)(A) The first $5 of each administration fee assessed 
     pursuant to paragraph (2), upon collection, shall be 
     deposited in the general fund of the Treasury of the United 
     States as miscellaneous receipts.
       ``(B) That portion of each administration fee in excess of 
     $5, and 100 percent of each additional services fee charged 
     pursuant to paragraph (3), upon collection for fiscal year 
     1998 and each subsequent fiscal year, shall be credited to a 
     special fund established in the Treasury of the United States 
     for State supplementary payment fees. The amounts so 
     credited, to the extent and in the amounts provided in 
     advance in appropriations Acts, shall be available to defray 
     expenses incurred in carrying out this title and related 
     laws.''.
       (B) Mandatory state supplementary payment fees.--Section 
     212(b)(3)(D) of Public Law 93-66 (42 U.S.C. 1382 note) is 
     amended to read as follows:
       ``(D)(i) The first $5 of each administration fee assessed 
     pursuant to subparagraph (B), upon collection, shall be 
     deposited in the general fund of the Treasury of the United 
     States as miscellaneous receipts.
       ``(ii) The portion of each administration fee in excess of 
     $5, and 100 percent of each additional services fee charged 
     pursuant to subparagraph (C), upon collection for fiscal year 
     1998 and each subsequent fiscal year, shall be credited to a 
     special fund established in the Treasury of the United States 
     for State supplementary payment fees. The amounts so 
     credited, to the extent and in the amounts provided in 
     advance in appropriations Acts, shall be available to defray 
     expenses incurred in carrying out this section and title XVI 
     of the Social Security Act and related laws.''.
       (2) Limitations on authorization of appropriations.--From 
     amounts credited pursuant to section 1616(d)(4)(B) of the 
     Social Security Act and section 212(b)(3)(D)(ii) of Public 
     Law 93-66 to the special fund established in the Treasury of 
     the United States for State supplementary payment fees, there 
     is authorized to be appropriated an amount not to exceed 
     $35,000,000 for fiscal year 1998, and such sums as may be 
     necessary for each fiscal year thereafter.
                 Subtitle C--Child Support Enforcement

     SEC. 9201. CLARIFICATION OF AUTHORITY TO PERMIT CERTAIN 
                   REDISCLOSURES OF WAGE AND CLAIM INFORMATION.

       Section 303(h)(1)(C) of the Social Security Act (42 U.S.C. 
     503(h)(1)(C)) is amended by striking ``section 453(i)(1) in 
     carrying out the child support enforcement program under 
     title IV'' and inserting ``subsections (i)(1), (i)(3), and 
     (j) of section 453''.
     Subtitle D--Restricting Welfare and Public Benefits for Aliens

     SEC. 9301. EXTENSION OF ELIGIBILITY PERIOD FOR REFUGEES AND 
                   CERTAIN OTHER QUALIFIED ALIENS FROM 5 TO 7 
                   YEARS FOR SSI AND MEDICAID.

       (a) SSI.--Section 402(a)(2)(A) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1612(a)(2)(A)) is amended to read as follows:
       ``(A) Time-limited exception for refugees and asylees.--
       ``(i) SSI.--With respect to the specified Federal program 
     described in paragraph (3)(A) paragraph 1 shall not apply to 
     an alien until 7 years after the date--

       ``(I) an alien is admitted to the United States as a 
     refugee under section 207 of the Immigration and Nationality 
     Act;
       ``(II) an alien is granted asylum under section 208 of such 
     Act; or
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act.

       ``(ii) Food stamps.--With respect to the specified Federal 
     program described in paragraph (3)(B), paragraph 1 shall not 
     apply to an alien until 5 years after the date--

       ``(I) an alien is admitted to the United States as a 
     refugee under section 207 of the Immigration and Nationality 
     Act;
       ``(II) an alien is granted asylum under section 208 of such 
     Act; or
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act.''.

       (b) Medicaid.--Section 402(b)(2)(A) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1612(b)(2)(A)) is amended to read as follows:
       ``(A) Time-limited exception for refugees and asylees.--
       ``(i) Medicaid.--With respect to the designated Federal 
     program described in paragraph (3)(C), paragraph 1 shall not 
     apply to an alien until 7 years after the date--

       ``(I) an alien is admitted to the United States as a 
     refugee under section 207 of the Immigration and Nationality 
     Act;
       ``(II) an alien is granted asylum under section 208 of such 
     Act; or
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act.

       ``(ii) Other designated federal programs.--With respect to 
     the designated Federal programs under paragraph (3) (other 
     than subparagraph (C)), paragraph 1 shall not apply to an 
     alien until 5 years after the date--

       ``(I) an alien is admitted to the United States as a 
     refugee under section 207 of the Immigration and Nationality 
     Act;
       ``(II) an alien is granted asylum under section 208 of such 
     Act; or
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act.''.

     SEC. 9302. SSI ELIGIBILITY FOR ALIENS RECEIVING SSI ON AUGUST 
                   22, 1996.

       (a) In General.--Section 402(a)(2) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1612(a)(2)) is amended by adding after 
     subparagraph (D) the following new subparagraph:
       ``(E) Aliens receiving ssi on august 22, 1996.--With 
     respect to eligibility for benefits for the program defined 
     in paragraph (3)(A) (relating to the supplemental security 
     income program), paragraph (1) shall not apply to an alien 
     who was receiving such benefits on August 22, 1996.''.
       (b) Status of Cuban and Haitian Entrants and Amerasian 
     Permanent Resident Aliens.--For purposes of section 
     402(a)(2)(E) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996, the following aliens 
     shall be considered qualified aliens:
       (1) An alien who is a Cuban and Haitian entrant as defined 
     in section 501(e) of the Refugee Education Assistance Act of 
     1980.
       (2) An alien admitted to the United States as an Amerasian 
     immigrant pursuant to section 584 of the Foreign Operations, 
     Export Financing, and Related Programs Appropriations Act, 
     1988, as contained in section 101(e) of Public Law 100-202, 
     (other than an alien admitted pursuant to section 
     584(b)(1)(C)).
       (c) Conforming Amendments.--Section 402(a)(2)(D) of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (8 U.S.C. 1612(a)(D)) is amended--
       (1) by striking clause (i);
       (2) in the subparagraph heading by striking ``benefits'' 
     and inserting ``food stamps'';
       (3) by striking ``(ii) Food stamps'.--';
       (3) by redesignating subclauses (I), (II), and (III) as 
     clauses (i), (ii), and (iii).

     SEC. 9303. SSI ELIGIBILITY FOR PERMANENT RESIDENT ALIENS WHO 
                   ARE MEMBERS OF AN INDIAN TRIBE.

       Section 402(a)(2) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 1612(a)(2)) 
     (as amended by section 9302) is amended by adding after 
     subparagraph (E) the following new subparagraph:
       ``(F) Permanent resident aliens who are members of an 
     indian tribe.--With respect to eligibility for benefits for 
     the program defined in paragraph (3)(A) (relating to the 
     supplemental security income program), paragraph (1) shall 
     not apply to an alien who--
       ``(i) is lawfully admitted for permanent residence under 
     the Immigration and Nationality Act; and
       ``(ii) is a member of an Indian tribe (as defined in 
     section 4(e) of the Indian Self-Determination and Education 
     Assistance Act).''.

     SEC. 9304. VERIFICATION OF ELIGIBILITY FOR STATE AND LOCAL 
                   PUBLIC BENEFITS.

       (a) In General.--The Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 is amended by adding 
     after section 412 the following new section:

     ``SEC. 413. AUTHORIZATION FOR VERIFICATION OF ELIGIBILITY FOR 
                   STATE AND LOCAL PUBLIC BENEFITS.

       ``A State or political subdivision of a State is authorized 
     to require an applicant for State and local public benefits 
     (as defined in section 411(c)) to provide proof of 
     eligibility.''.
       (b) Clerical Amendment.--Section 2 of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 is amended

[[Page H4495]]

     by adding after the item related to section 412 the 
     following:

``Sec. 413. Authorization for verification of eligibility for state and 
              local public benefits.''.

     SEC. 9305. DERIVATIVE ELIGIBILITY FOR BENEFITS.

       (a) In General.--The Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 is amended by adding 
     after section 435 the following new section:

     ``SEC. 436. DERIVATIVE ELIGIBILITY FOR BENEFITS.

       ``(a) Food Stamps.--Notwithstanding any other provision of 
     law, an alien who under the provisions of this title is 
     ineligible for benefits under the food stamp program (as 
     defined in section 402(a)(3)(A)) shall not be eligible for 
     such benefits because the alien receives benefits under the 
     supplemental security income program (as defined in section 
     402(a)(3)(B)).
       ``(b) Medicaid.--Notwithstanding any other provision of 
     this title, an alien who under the provisions of this title 
     is ineligible for benefits under the medicaid program (as 
     defined in section 402(b)(3)(C)) shall be eligible for such 
     benefits if the alien is receiving benefits under the 
     supplemental security income program and title XIX of the 
     Social Security Act provides for such derivative 
     eligibility.''.
       (b) Clerical Amendment.--Section 2 of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 is amended by adding after the item related to section 
     435 the following:

``Sec. 436. Derivative eligibility for benefits.''.

     SEC. 9306. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     subtitle shall be effective as if included in the enactment 
     of title IV of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996.
                 Subtitle E--Unemployment Compensation

     SEC. 9401. CLARIFYING PROVISION RELATING TO BASE PERIODS.

       (a) In General.--No provision of a State law under which 
     the base period for such State is defined or otherwise 
     determined shall, for purposes of section 303(a)(1) of the 
     Social Security Act (42 U.S.C. 503(a)(1)), be considered a 
     provision for a method of administration.
       (b) Definitions.--For purposes of this section, the terms 
     ``State law'', ``base period'', and ``State'' shall have the 
     meanings given them under section 205 of the Federal-State 
     Extended Unemployment Compensation Act of 1970 (26 U.S.C. 
     3304 note).
       (c) Effective Date.--This section shall apply for purposes 
     of any period beginning before, on, or after the date of the 
     enactment of this Act.

     SEC. 9402. INCREASE IN FEDERAL UNEMPLOYMENT ACCOUNT CEILING.

       (a) In General.--Section 902(a)(2) of the Social Security 
     Act (42 U.S.C. 1102(a)(2)) is amended by striking ``0.25 
     percent'' and inserting ``0.5 percent''.
       (b) Effective Date.--This section and the amendment made by 
     this section--
       (1) shall take effect on October 1, 2001, and
       (2) shall apply to fiscal years beginning on or after that 
     date.

     SEC. 9403. SPECIAL DISTRIBUTION TO STATES FROM UNEMPLOYMENT 
                   TRUST FUND.

       (a) In General.--Subsection (a) of section 903 of the 
     Social Security Act (42 U.S.C. 1103(a)) is amended by adding 
     at the end the following new paragraph:
       ``(3)(A) Notwithstanding any other provision of this 
     section, for purposes of carrying out this subsection with 
     respect to any excess amount (referred to in paragraph (1)) 
     remaining in the employment security administration account 
     as of the close of fiscal year 1999, 2000, or 2001, such 
     amount shall--
       ``(i) to the extent of any amounts not in excess of 
     $100,000,000, be subject to subparagraph (B), and
       ``(ii) to the extent of any amounts in excess of 
     $100,000,000, be subject to subparagraph (C).
       ``(B) Paragraphs (1) and (2) shall apply with respect to 
     any amounts described in subparagraph (A)(i), except that--
       ``(i) in carrying out the provisions of paragraph (2)(B) 
     with respect to such amounts (to determine the portion of 
     such amounts which is to be allocated to a State for a 
     succeeding fiscal year), the ratio to be applied under such 
     provisions shall be the same as the ratio that--
       ``(I) the amount of funds to be allocated to such State for 
     such fiscal year pursuant to title III, bears to
       ``(II) the total amount of funds to be allocated to all 
     States for such fiscal year pursuant to title III,

     as determined by the Secretary of Labor, and
       ``(ii) the amounts allocated to a State pursuant to this 
     subparagraph shall be available to such State, subject to the 
     last sentence of subsection (c)(2).

     Nothing in this paragraph shall preclude the application of 
     subsection (b) with respect to any allocation determined 
     under this subparagraph.
       ``(C) Any amounts described in clause (ii) of subparagraph 
     (A) (remaining in the employment security administration 
     account as of the close of any fiscal year specified in such 
     subparagraph) shall, as of the beginning of the succeeding 
     fiscal year, accrue to the Federal unemployment account, 
     without regard to the limit provided in section 902(a).''
       (b) Conforming Amendment.--Paragraph (2) of section 903(c) 
     of the Social Security Act is amended by adding at the end, 
     as a flush left sentence, the following:
     ``Any amount allocated to a State under this section for 
     fiscal year 2000, 2001, or 2002 may be used by such State 
     only to pay expenses incurred by it for the administration of 
     its unemployment compensation law, and may be so used by it 
     without regard to any of the conditions prescribed in any of 
     the preceding provisions of this paragraph.''

     SEC. 9404. INTEREST-FREE ADVANCES TO STATE ACCOUNTS IN 
                   UNEMPLOYMENT TRUST FUND RESTRICTED TO STATES 
                   WHICH MEET FUNDING GOALS.

       (a) In General.--Paragraph (2) of section 1202(b) of the 
     Social Security Act (42 U.S.C. 1322(b)) is amended--
       (1) by striking ``and'' at the end of subparagraph (A),
       (2) by striking the period at the end of subparagraph (B) 
     and inserting ``, and'', and
       (3) by adding at the end the following new subparagraph:
       ``(C) the average daily balance in the account of such 
     State in the Unemployment Trust Fund for each of 4 of the 5 
     calendar quarters preceding the calendar quarter in which 
     such advances were made exceeds the funding goal of such 
     State (as defined in subsection (d)).''
       (b) Funding Goal Defined.--Section 1202 of the Social 
     Security Act is amended by adding at the end the following 
     new subsection:
       ``(d) For purposes of subsection (b)(2)(C), the term 
     `funding goal' means, for any State for any calendar quarter, 
     the average of the unemployment insurance benefits paid by 
     such State during each of the 3 years, in the 20-year period 
     ending with the calendar year containing such calendar 
     quarter, during which the State paid the greatest amount of 
     unemployment benefits.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years beginning after the date of the 
     enactment of this Act.

     SEC. 9405. EXEMPTION OF SERVICE PERFORMED BY ELECTION WORKERS 
                   FROM THE FEDERAL UNEMPLOYMENT TAX.

       (a) In General.--Paragraph (3) of section 3309(b) of the 
     Internal Revenue Code of 1986 (relating to exemption for 
     certain services) is amended--
       (1) by striking ``or'' at the end of subparagraph (D),
       (2) by adding ``or'' at the end of subparagraph (E), and
       (3) by inserting after subparagraph (E) the following new 
     subparagraph:
       ``(F) as an election official or election worker if the 
     amount of remuneration received by the individual during the 
     calendar year for services as an election official or 
     election worker is less than $1,000;''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to service performed after the date 
     of the enactment of this Act.

     SEC. 9406. TREATMENT OF CERTAIN SERVICES PERFORMED BY 
                   INMATES.

       (a) In General.--Subsection (c) of section 3306 of the 
     Internal Revenue Code of 1986 (defining employment) is 
     amended--
       (1) by striking ``or'' at the end of paragraph (19),
       (2) by striking the period at the end of paragraph (20) and 
     inserting ``; or'', and
       (3) by adding at the end the following new paragraph:
       ``(21) service performed by a person committed to a penal 
     institution.''
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to service performed after March 26, 
     1996.

     SEC. 9407. EXEMPTION OF SERVICE PERFORMED FOR AN ELEMENTARY 
                   OR SECONDARY SCHOOL OPERATED PRIMARILY FOR 
                   RELIGIOUS PURPOSES FROM THE FEDERAL 
                   UNEMPLOYMENT TAX.

       (a) In General.--Paragraph (1) of section 3309(b) of the 
     Internal Revenue Code of 1986 (relating to exemption for 
     certain services) is amended--
       (1) by striking ``or'' at the end of subparagraph (A), and
       (2) by inserting before the semicolon at the end the 
     following: ``, or (C) an elementary or secondary school which 
     is operated primarily for religious purposes, which is 
     described in section 501(c)(3), and which is exempt from tax 
     under section 501(a)''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to service performed after the date 
     of the enactment of this Act.

     SEC. 9408. STATE PROGRAM INTEGRITY ACTIVITIES FOR 
                   UNEMPLOYMENT COMPENSATION.

       Section 901(c) of the Social Security Act (42 U.S.C. 
     1101(c)) is amended by adding at the end the following new 
     paragraph:
       ``(5)(A) There are authorized to be appropriated out of the 
     employment security administration account to carry out 
     program integrity activities, in addition to any amounts 
     available under paragraph (1)(A)(i)--
       ``(i) $89,000,000 for fiscal year 1998;
       ``(ii) $91,000,000 for fiscal year 1999;
       ``(iii) $93,000,000 fiscal year 2000;
       ``(iv) $96,000,000 for fiscal year 2001; and
       ``(v) $98,000,000 for fiscal year 2002.
       ``(B) In any fiscal year in which a State receives funds 
     appropriated pursuant to this paragraph, the State shall 
     expend a proportion of the funds appropriated pursuant to 
     paragraph (1)(A)(i) to carry out program integrity activities 
     that is not less than the

[[Page H4496]]

     proportion of the funds appropriated under such paragraph 
     that was expended by the State to carry out program integrity 
     activities in fiscal year 1997.
       ``(C) For purposes of this paragraph, the term `program 
     integrity activities' means initial claims review activities, 
     eligibility review activities, benefit payments control 
     activities, and employer liability auditing activities.''.
               Subtitle F--Increase in Public Debt Limit

     SEC. 9501. INCREASE IN PUBLIC DEBT LIMIT.

       Subsection (b) of section 3101 of title 31, United States 
     Code, is amended by striking the dollar amount contained 
     therein and inserting ``$5,950,000,000,000''.
             TITLE X--COMMITTEE ON WAYS AND MEANS--MEDICARE

     SEC. 10000. AMENDMENTS TO SOCIAL SECURITY ACT AND REFERENCES 
                   TO OBRA; TABLE OF CONTENTS OF TITLE.

       (a) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this title an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (b) References to OBRA.--In this title, the terms ``OBRA-
     1986'', ``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and 
     ``OBRA-1993'' refer to the Omnibus Budget Reconciliation Act 
     of 1986 (Public Law 99-509), the Omnibus Budget 
     Reconciliation Act of 1987 (Public Law 100-203), the Omnibus 
     Budget Reconciliation Act of 1989 (Public Law 101-239), the 
     Omnibus Budget Reconciliation Act of 1990 (Public Law 101-
     508), and the Omnibus Budget Reconciliation Act of 1993 
     (Public Law 103-66), respectively.
       (c) Table of Contents of Title.--The table of contents of 
     this title is as follows:

Sec. 10000. Amendments to Social Security Act and references to OBRA; 
              table of contents of title.

                    Subtitle A--MedicarePlus Program

                    Chapter 1--MedicarePlus Program


                   SUBCHAPTER A--MEDICAREPLUS PROGRAM

Sec. 10001. Establishment of MedicarePlus program.

                     ``Part C--MedicarePlus Program

``Sec. 1851. Eligibility, election, and enrollment.
``Sec. 1852. Benefits and beneficiary protections.
``Sec. 1853. Payments to MedicarePlus organizations.
``Sec. 1854. Premiums.
``Sec. 1855. Organizational and financial requirements for MedicarePlus 
              organizations; provider-sponsored organizations.
``Sec. 1856. Establishment of standards.
``Sec. 1857. Contracts with MedicarePlus organizations.
``Sec. 1859. Definitions; miscellaneous provisions.
Sec. 10002. Transitional rules for current medicare HMO program.
Sec. 10003. Conforming changes in medigap program.


 SUBCHAPTER B--SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS

Sec. 10006. MedicarePlus MSA.

             Chapter 2--Integrated Long-term Care Programs


  SUBCHAPTER A--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

Sec. 10011. Coverage of PACE under the medicare program.
Sec. 10012. Establishment of PACE program as medicaid State option.
Sec. 10013. Effective date; transition.
Sec. 10014. Study and reports.


         SUBCHAPTER B--SOCIAL HEALTH MAINTENANCE ORGANIZATIONS

Sec. 10015. Social health maintenance organizations (SHMOs).


                      SUBCHAPTER C--OTHER PROGRAMS

Sec. 10018. Orderly transition of municipal health service 
              demonstration projects.
Sec. 10019. Extension of certain medicare community nursing 
              organization demonstration projects.

            Chapter 3--Medicare Payment Advisory Commission

Sec. 10021. Medicare Payment Advisory Commission.

                     Chapter 4--Medigap Protections

Sec. 10031. Medigap protections.
Sec. 10032. Medicare prepaid competitive pricing demonstration project.

    Chapter 5--Tax Treatment of Hospitals Participating in Provider-
                        sponsored Organizations

Sec. 10041. Tax treatment of hospitals which participate in provider-
              sponsored organizations.

                   Subtitle B--Prevention Initiatives

Sec. 10101. Screening mammography.
Sec. 10102. Screening pap smear and pelvic exams.
Sec. 10103. Prostate cancer screening tests.
Sec. 10104. Coverage of colorectal screening.
Sec. 10105. Diabetes screening tests.
Sec. 10106. Standardization of medicare coverage of bone mass 
              measurements.
Sec. 10107. Vaccines outreach expansion.
Sec. 10108. Study on preventive benefits.

                     Subtitle C--Rural Initiatives

Sec. 10201. Rural primary care hospital program.
Sec. 10202. Prohibiting denial of request by rural referral centers for 
              reclassification on basis of comparability of wages.
Sec. 10203. Hospital geographic reclassification permitted for purposes 
              of disproportionate share payment adjustments.
Sec. 10204. Medicare-dependent, small rural hospital payment extension.
Sec. 10205. Geographic reclassification for certain disproportionately 
              large hospitals.
Sec. 10206. Floor on area wage index.
Sec. 10207. Informatics, telemedicine, and education demonstration 
              project.

              Subtitle D--Anti-Fraud and Abuse Provisions

Sec. 10301. Permanent exclusion for those convicted of 3 health care 
              related crimes.
Sec. 10302. Authority to refuse to enter into medicare agreements with 
              individuals or entities convicted of felonies.
Sec. 10303. Inclusion of toll-free number to report medicare waste, 
              fraud, and abuse in explanation of benefits forms.
Sec. 10304. Liability of medicare carriers and fiscal intermediaries 
              for claims submitted by excluded providers.
Sec. 10305. Exclusion of entity controlled by family member of a 
              sanctioned individual.
Sec. 10306. Imposition of civil money penalties.
Sec. 10307. Disclosure of information and surety bonds.
Sec. 10308. Provision of certain identification numbers.
Sec. 10309. Advisory opinions regarding certain physician self-referral 
              provisions.
Sec. 10310. Other fraud and abuse related provisions.

                Subtitle E--Prospective Payment Systems

                    Chapter 1--Payment Under Part A

Sec. 10401. Prospective payment for skilled nursing facility services.
Sec. 10402. Prospective payment for inpatient rehabilitation hospital 
              services.

                    Chapter 2--Payment Under Part B


   SUBCHAPTER A--PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES

Sec. 10411. Elimination of formula-driven overpayments (FDO) for 
              certain outpatient hospital services.
Sec. 10412. Extension of reductions in payments for costs of hospital 
              outpatient services.
Sec. 10413. Prospective payment system for hospital outpatient 
              department services.


                 SUBCHAPTER B--REHABILITATION SERVICES

Sec. 10421. Rehabilitation agencies and services.
Sec. 10422. Comprehensive outpatient rehabilitation facilities (corf).


                    SUBCHAPTER C--AMBULANCE SERVICES

Sec. 10431. Payments for ambulance services.
Sec. 10432. Demonstration of coverage of ambulance services under 
              medicare through contracts with units of local 
              government.

                 Chapter 3--Payment Under Parts A and B

Sec. 10441. Prospective payment for home health services.

               Subtitle F--Provisions Relating to Part A

                  Chapter 1--Payment Of PPS Hospitals

Sec. 10501. PPS hospital payment update.
Sec. 10502. Capital payments for PPS hospitals.
Sec. 10503. Freeze in disproportionate share.
Sec. 10504. Medicare capital asset sales price equal to book value.
Sec. 10505. Elimination of IME and DSH payments attributable to outlier 
              payments.
Sec. 10506. Reduction in adjustment for indirect medical education.
Sec. 10507. Treatment of transfer cases.
Sec. 10508. Increase base payment rate to Puerto Rico hospitals.

               Chapter 2--Payment Of PPS Exempt Hospitals

Sec. 10511. Payment update.
Sec. 10512. Reductions to capital payments for certain PPS-exempt 
              hospitals and units.
Sec. 10513. Cap on TEFRA limits.
Sec. 10514. Change in bonus and relief payments.
Sec. 10515. Change in payment and target amount for new providers.
Sec. 10516. Rebasing.
Sec. 10517. Treatment of certain long-term care hospitals.
Sec. 10518. Elimination of exemptions; report on exceptions and 
              adjustments.

           Chapter 3--Provisions Related to Hospice Services

Sec. 10521. Payments for hospice services.
Sec. 10522. Payment for home hospice care based on location where care 
              is furnished.
Sec. 10523. Hospice care benefits periods.
Sec. 10524. Other items and services included in hospice care.
Sec. 10525. Contracting with independent physicians or physician groups 
              for hospice care services permitted.
Sec. 10526. Waiver of certain staffing requirements for hospice care 
              programs in non-urbanized areas.

[[Page H4497]]

Sec. 10527. Limitation on liability of beneficiaries for certain 
              hospice coverage denials.
Sec. 10528. Extending the period for physician certification of an 
              individual's terminal illness.
Sec. 10529. Effective date.

         Chapter 4--Modification of Part A Home Health Benefit

Sec. 10531. Modification of part A home health benefit for individuals 
              enrolled under part B.

                  Chapter 5--Other Payment Provisions

Sec. 10541. Reductions in payments for enrollee bad debt.
Sec. 10542. Permanent extension of hemophilia pass-through.
Sec. 10543. Reduction in part A medicare premium for certain public 
              retirees.

             Subtitle G--Provisions Relating to Part B Only

                    Chapter 1--Physicians' Services

Sec. 10601. Establishment of single conversion factor for 1998.
Sec. 10602. Establishing update to conversion factor to match spending 
              under sustainable growth rate.
Sec. 10603. Replacement of volume performance standard with sustainable 
              growth rate.
Sec. 10604. Payment rules for anesthesia services.
Sec. 10605. Implementation of resource-based physician practice 
              expense.
Sec. 10606. Dissemination of information on high per discharge relative 
              values for in-hospital physicians' services.
Sec. 10607. No X-ray required for chiropractic services.
Sec. 10608. Temporary coverage restoration for portable 
              electrocardiogram transportation.

                  Chapter 2--Other Payment Provisions

Sec. 10611. Payments for durable medical equipment.
Sec. 10612. Oxygen and oxygen equipment.
Sec. 10613. Reduction in updates to payment amounts for clinical 
              diagnostic laboratory tests.
Sec. 10614. Simplification in administration of laboratory tests.
Sec. 10615. Updates for ambulatory surgical services.
Sec. 10616. Reimbursement for drugs and biologicals.
Sec. 10617. Coverage of oral anti-nausea drugs under chemotherapeutic 
              regimen.
Sec. 10618. Rural health clinic services.
Sec. 10619. Increased medicare reimbursement for nurse practitioners 
              and clinical nurse specialists.
Sec. 10620. Increased medicare reimbursement for physician assistants.
Sec. 10621. Renal dialysis-related services.

                       Chapter 3--Part B Premium

Sec. 10631. Part B premium.

            Subtitle H--Provisions Relating to Parts A and B

       Chapter 1--Provisions Relating to Medicare Secondary Payer

Sec. 10701. Permanent extension and revision of certain secondary payer 
              provisions.
Sec. 10702. Clarification of time and filing limitations.
Sec. 10703. Permitting recovery against third party administrators.

                    Chapter 2--Home Health Services

Sec. 10711. Recapturing savings resulting from temporary freeze on 
              payment increases for home health services.
Sec. 10712. Interim payments for home health services.
Sec. 10713. Clarification of part-time or intermittent nursing care.
Sec. 10714. Study of definition of homebound.
Sec. 10715. Payment based on location where home health service is 
              furnished.
Sec. 10716. Normative standards for home health claims denials,
Sec. 10717. No home health benefits based solely on drawing blood.

          Chapter 3--Baby Boom Generation Medicare Commission

Sec. 10721. Bipartisan Commission on the Effect of the Baby Boom 
              Generation on the Medicare Program.

  Chapter 4--Provisions Relating to Direct Graduate Medical Education

Sec. 10731. Limitation on payment based on number of residents and 
              implementation of rolling average FTE count.
Sec. 10732. Phased-in limitation on hospital overhead and supervisory 
              physician component of direct medical education costs.
Sec. 10733. Permitting payment to non-hospital providers.
Sec. 10734. Incentive payments under plans for voluntary reduction in 
              number of residents.
Sec. 10735. Demonstration project on use of consortia.
Sec. 10736. Recommendations on long-term payment policies regarding 
              financing teaching hospitals and graduate medical 
              education.
Sec. 10737. Medicare special reimbursement rule for certain combined 
              residency programs.

                      Chapter 5--Other Provisions

Sec. 10741. Centers of excellence.
Sec. 10742. Medicare part B special enrollment period and waiver of 
              part B late enrollment penalty and medigap special open 
              enrollment period for certain military retirees and 
              dependents.
Sec. 10743. Protections under the medicare program for disabled workers 
              who lose benefits under a group health plan.
Sec. 10744. Placement of advance directive in medical record.

                  Subtitle I--Medical Liability Reform

                     Chapter 1--General Provisions

Sec. 10801. Federal reform of health care liability actions.
Sec. 10802. Definitions.
Sec. 10803. Effective date.

     Chapter 2--Uniform Standards for Health Care Liability Actions

Sec. 10811. Statute of limitations.
Sec. 10812. Calculation and payment of damages.
Sec. 10813. Alternative dispute resolution.
                    Subtitle A--MedicarePlus Program

                    CHAPTER 1--MEDICAREPLUS PROGRAM

                   Subchapter A--MedicarePlus Program

     SEC. 10001. ESTABLISHMENT OF MEDICAREPLUS 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--MedicarePlus Program


                ``eligibility, election, and enrollment

       ``Sec. 1851. (a) Choice of Medicare Benefits Through 
     MedicarePlus Plans.--
       ``(1) In general.--Subject to the provisions of this 
     section, each MedicarePlus eligible individual (as defined in 
     paragraph (3)) is entitled to elect to receive benefits under 
     this title--
       ``(A) through the medicare fee-for-service program under 
     parts A and B, or
       ``(B) through enrollment in a MedicarePlus plan under this 
     part.
       ``(2) Types of medicareplus plans that may be available.--A 
     MedicarePlus plan may be any of the following types of plans 
     of health insurance:
       ``(A) Coordinated care plans.--Coordinated care plans which 
     provide health care services, including health maintenance 
     organization plans and preferred provider organization plans.
       ``(B) Plans offered by provider-sponsored organization.--A 
     MedicarePlus plan offered by a provider-sponsored 
     organization, as defined in section 1855(e).
       ``(C) Combination of msa plan and contributions to 
     medicareplus msa.--An MSA plan, as defined in section 
     1859(b)(2), and a contribution into a MedicarePlus medical 
     savings account (MSA).
       ``(3) MedicarePlus eligible individual.--
       ``(A) In general.--In this title, subject to subparagraph 
     (B), the term `MedicarePlus eligible individual' means an 
     individual who is entitled to benefits under part A and 
     enrolled under part B.
       ``(B) Special rule for end-stage renal disease.--Such term 
     shall not include an individual medically determined to have 
     end-stage renal disease, except that an individual who 
     develops end-stage renal disease while enrolled in a 
     MedicarePlus plan may continue to be enrolled in that plan.
       ``(b) Special Rules.--
       ``(1) Residence requirement.--
       ``(A) In general.--Except as the Secretary may otherwise 
     provide, an individual is eligible to elect a MedicarePlus 
     plan offered by a MedicarePlus organization only if the 
     organization serves the geographic area in which the 
     individual resides.
       ``(B) Continuation of enrollment permitted.--Pursuant to 
     rules specified by the Secretary, the Secretary shall provide 
     that an individual may continue enrollment in a plan, 
     notwithstanding that the individual no longer resides in the 
     service area of the plan, so long as the plan provides 
     benefits for enrollees located in the area in which the 
     individual resides.
       ``(2) Special rule for certain individuals covered under 
     fehbp or eligible for veterans or military health benefits, 
     veterans .--
       ``(A) FEHBP.--An individual who is enrolled in a health 
     benefit plan under chapter 89 of title 5, United States Code, 
     is not eligible to enroll in an MSA plan until such time as 
     the Director of the Office of Management and Budget certifies 
     to the Secretary that the Office of Personnel Management has 
     adopted policies which will ensure that the enrollment of 
     such individuals in such plans will not result in increased 
     expenditures for the Federal Government for health benefit 
     plans under such chapter.
       ``(B) VA and dod.--The Secretary may apply rules similar to 
     the rules described in subparagraph (A) in the case of 
     individuals who are eligible for health care benefits under 
     chapter 55 of title 10, United States Code, or under chapter 
     17 of title 38 of such Code.
       ``(3) Limitation on eligibility of qualified medicare 
     beneficiaries and other medicaid beneficiaries to enroll in 
     an MSA plan.--An individual who is a qualified medicare 
     beneficiary (as defined in section 1905(p)(1)), a qualified 
     disabled and working individual (described in section 
     1905(s)), an individual described in section 
     1902(a)(10)(E)(iii), or otherwise entitled to medicare cost-
     sharing under a State plan

[[Page H4498]]

     under title XIX is not eligible to enroll in an MSA plan.
       ``(4) Coverage under msa plans on a demonstration basis.--
       ``(A) In general.--An individual is not eligible to enroll 
     in an MSA plan under this part--
       ``(i) on or after January 1, 2003, unless the enrollment is 
     the continuation of such an enrollment in effect as of such 
     date; or
       ``(ii) as of any date if the number of such individuals so 
     enrolled as of such date has reached 500,000.

     Under rules established by the Secretary, an individual is 
     not eligible to enroll (or continue enrollment) in an MSA 
     plan for a year unless the individual provides assurances 
     satisfactory to the Secretary that the individual will reside 
     in the United States for at least 183 days during the year.
       ``(B) Evaluation.--The Secretary shall regularly evaluate 
     the impact of permitting enrollment in MSA plans under this 
     part on selection (including adverse selection), use of 
     preventive care, access to care, and the financial status of 
     the Trust Funds under this title.
       ``(C) Reports.--The Secretary shall submit to Congress 
     periodic reports on the numbers of individuals enrolled in 
     such plans and on the evaluation being conducted under 
     subparagraph (B). The Secretary shall submit such a report, 
     by not later than March 1, 2002, on whether the time 
     limitation under subparagraph (A)(i) should be extended or 
     removed and whether to change the numerical limitation under 
     subparagraph (A)(ii).
       ``(c) Process for Exercising Choice.--
       ``(1) In general.--The Secretary shall establish a process 
     through which elections described in subsection (a) are made 
     and changed, including the form and manner in which such 
     elections are made and changed. Such elections shall be made 
     or changed only during coverage election periods specified 
     under subsection (e) and shall become effective as provided 
     in subsection (f).
       ``(2) Coordination through medicareplus organizations.--
       ``(A) Enrollment.--Such process shall permit an individual 
     who wishes to elect a MedicarePlus plan offered by a 
     MedicarePlus organization to make such election through the 
     filing of an appropriate election form with the organization.
       ``(B) Disenrollment.--Such process shall permit an 
     individual, who has elected a MedicarePlus plan offered by a 
     MedicarePlus organization and who wishes to terminate such 
     election, to terminate such election through the filing of an 
     appropriate election form with the organization.
       ``(3) Default.--
       ``(A) Initial election.--
       ``(i) In general.--Subject to clause (ii), an individual 
     who fails to make an election during an initial election 
     period under subsection (e)(1) is deemed to have chosen the 
     medicare fee-for-service program option.
       ``(ii) Seamless continuation of coverage.--The Secretary 
     may establish procedures under which an individual who is 
     enrolled in a health plan (other than MedicarePlus plan) 
     offered by a MedicarePlus organization at the time of the 
     initial election period and who fails to elect to receive 
     coverage other than through the organization is deemed to 
     have elected the MedicarePlus plan offered by the 
     organization (or, if the organization offers more than one 
     such plan, such plan or plans as the Secretary identifies 
     under such procedures).
       ``(B) Continuing periods.--An individual who has made (or 
     is deemed to have made) an election under this section is 
     considered to have continued to make such election until such 
     time as--
       ``(i) the individual changes the election under this 
     section, or
       ``(ii) a MedicarePlus plan is discontinued, if the 
     individual had elected such plan at the time of the 
     discontinuation.
       ``(d) Providing Information To Promote Informed Choice.--
       ``(1) In general.--The Secretary shall provide for 
     activities under this subsection to broadly disseminate 
     information to medicare beneficiaries (and prospective 
     medicare beneficiaries) on the coverage options provided 
     under this section in order to promote an active, informed 
     selection among such options.
       ``(2) Provision of notice.--
       ``(A) Open season notification.--At least 30 days before 
     the beginning of each annual, coordinated election period (as 
     defined in subsection (e)(3)(B)), the Secretary shall mail to 
     each MedicarePlus eligible individual residing in an area the 
     following:
       ``(i) General information.--The general information 
     described in paragraph (3).
       ``(ii) List of plans and comparison of plan options.--A 
     list identifying the MedicarePlus plans that are (or will be) 
     available to residents of the area and information described 
     in paragraph (4) concerning such plans. Such information 
     shall be presented in a comparative form.
       ``(iii) MedicarePlus monthly capitation rate.--The amount 
     of the monthly MedicarePlus capitation rate for the area.
       ``(iv) Additional information.--Any other information that 
     the Secretary determines will assist the individual in making 
     the election under this section.

     The mailing of such information shall be coordinated with the 
     mailing of any annual notice under section 1804.
       ``(B) Notification to newly medicareplus eligible 
     individuals.--To the extent practicable, the Secretary shall, 
     not later than 2 months before the beginning of the initial 
     MedicarePlus enrollment period for an individual described in 
     subsection (e)(1), mail to the individual the information 
     described in subparagraph (A).
       ``(C) Form.--The information disseminated under this 
     paragraph shall be written and formatted using language that 
     is easily understandable by medicare beneficiaries.
       ``(D) Periodic updating.--The information described in 
     subparagraph (A) shall be updated on at least an annual basis 
     to reflect changes in the availability of MedicarePlus plans 
     and the benefits and monthly premiums (and net monthly 
     premiums) for such plans.
       ``(3) General information.--General information under this 
     paragraph, with respect to coverage under this part during a 
     year, shall include the following:
       ``(A) Benefits under fee-for-service program option.--A 
     general description of the benefits covered (and not covered) 
     under the medicare fee-for-service program under parts A and 
     B, including--
       ``(i) covered items and services,
       ``(ii) beneficiary cost sharing, such as deductibles, 
     coinsurance, and copayment amounts, and
       ``(iii) any beneficiary liability for balance billing.
       ``(B) Part b premium.--The part B premium rates that will 
     be charged for part B coverage.
       ``(C) Election procedures.--Information and instructions on 
     how to exercise election options under this section.
       ``(D) Rights.--The general description of procedural rights 
     (including grievance and appeals procedures) of beneficiaries 
     under the medicare fee-for-service program and the 
     MedicarePlus program and right to be protected against 
     discrimination based on health status-related factors under 
     section 1852(b).
       ``(E) Information on medigap and medicare select.--A 
     general description of the benefits, enrollment rights, and 
     other requirements applicable to medicare supplemental 
     policies under section 1882 and provisions relating to 
     medicare select policies described in section 1882(t).
       ``(F) Potential for contract termination.--The fact that a 
     MedicarePlus organization may terminate or refuse to renew 
     its contract under this part and the effect the termination 
     or nonrenewal of its contract may have on individuals 
     enrolled with the MedicarePlus plan under this part.
       ``(4) Information comparing plan options.--Information 
     under this paragraph, with respect to a MedicarePlus plan for 
     a year, shall include the following:
       ``(A) Benefits.--The benefits covered (and not covered) 
     under the plan, including--
       ``(i) covered items and services beyond those provided 
     under the medicare fee-for-service program,
       ``(ii) any beneficiary cost sharing,
       ``(iii) any maximum limitations on out-of-pocket expenses, 
     and
       ``(iv) in the case of an MSA plan, differences in cost 
     sharing and balance billing under such a plan compared to 
     under other MedicarePlus plans.
       ``(B) Premiums.--The monthly premium (and net monthly 
     premium), if any, for the plan.
       ``(C) Service area.--The service area of the plan.
       ``(D) Quality and performance.--To the extent available, 
     plan quality and performance indicators for the benefits 
     under the plan (and how they compare to such indicators under 
     the medicare fee-for-service program under parts A and B in 
     the area involved), including--
       ``(i) disenrollment rates for medicare enrollees electing 
     to receive benefits through the plan for the previous 2 years 
     (excluding disenrollment due to death or moving outside the 
     plan's service area),
       ``(ii) information on medicare enrollee satisfaction,
       ``(iii) information on health outcomes, and
       ``(iv) the recent record regarding compliance of the plan 
     with requirements of this part (as determined by the 
     Secretary).
       ``(E) Supplemental benefits options.--Whether the 
     organization offering the plan offers optional supplemental 
     benefits and the terms and conditions (including premiums) 
     for such coverage.
       ``(5) Maintaining a toll-free number and internet site.--
     The Secretary shall maintain a toll-free number for inquiries 
     regarding MedicarePlus options and the operation of this part 
     in all areas in which MedicarePlus plans are offered and an 
     Internet site through which individuals may electronically 
     obtain information on such options and MedicarePlus plans.
       ``(6) Use of nonfederal entities.--The Secretary may enter 
     into contracts with non-Federal entities to carry out 
     activities under this subsection.
       ``(7) Provision of information.--A MedicarePlus 
     organization shall provide the Secretary with such 
     information on the organization and each MedicarePlus plan it 
     offers as may be required for the preparation of the 
     information referred to in paragraph (2)(A).
       ``(e) Coverage Election Periods.--
       ``(1) Initial choice upon eligibility to make election if 
     medicareplus plans available to individual.--If, at the time 
     an individual first becomes entitled to benefits under part A 
     and enrolled under part B,

[[Page H4499]]

     there is one or more MedicarePlus plans offered in the area 
     in which the individual resides, the individual shall make 
     the election under this section during a period (of a 
     duration and beginning at a time specified by the Secretary) 
     at such time. Such period shall be specified in a manner so 
     that, in the case of an individual who elects a MedicarePlus 
     plan during the period, coverage under the plan becomes 
     effective as of the first date on which the individual may 
     receive such coverage.
       ``(2) Open enrollment and disenrollment opportunities.--
     Subject to paragraph (5)--
       ``(A) Continuous open enrollment and disenrollment through 
     2000.--At any time during 1998, 1999, and 2000, a 
     MedicarePlus eligible individual may change the election 
     under subsection (a)(1).
       ``(B) Continuous open enrollment and disenrollment for 
     first 6 months during 2001.--
       ``(i) In general.--Subject to clause (ii), at any time 
     during the first 6 months of 2001, or, if the individual 
     first becomes a MedicarePlus eligible individual during 2001, 
     during the first 6 months during 2001 in which the individual 
     is a MedicarePlus eligible individual, a MedicarePlus 
     eligible individual may change the election under subsection 
     (a)(1).
       ``(ii) Limitation of one change per year.--An individual 
     may exercise the right under clause (i) only once during 
     2001. The limitation under this clause shall not apply to 
     changes in elections effected during an annual, coordinated 
     election period under paragraph (3) or during a special 
     enrollment period under paragraph (4).
       ``(C) Continuous open enrollment and disenrollment for 
     first 3 months in subsequent years.--
       ``(i) In general.--Subject to clause (ii), at any time 
     during the first 3 months of a year after 2001, or, if the 
     individual first becomes a MedicarePlus eligible individual 
     during a year after 2001, during the first 3 months of such 
     year in which the individual is a MedicarePlus eligible 
     individual, a MedicarePlus eligible individual may change the 
     election under subsection (a)(1).
       ``(ii) Limitation of one change per year.--An individual 
     may exercise the right under clause (i) only once a year. The 
     limitation under this clause shall not apply to changes in 
     elections effected during an annual, coordinated election 
     period under paragraph (3) or during a special enrollment 
     period under paragraph (4).
       ``(3) Annual, coordinated election period.--
       ``(A) In general.--Subject to paragraph (5), each 
     individual who is eligible to make an election under this 
     section may change such election during an annual, 
     coordinated election period.
       ``(B) Annual, coordinated election period.--For purposes of 
     this section, the term `annual, coordinated election period' 
     means, with respect to a calendar year (beginning with 2001), 
     the month of October before such year.
       ``(C) MedicarePlus health fairs.--In the month of October 
     of each year (beginning with 1998), the Secretary shall 
     provide for a nationally coordinated educational and 
     publicity campaign to inform MedicarePlus eligible 
     individuals about MedicarePlus plans and the election process 
     provided under this section.
       ``(4) Special election periods.--Effective as of January 1, 
     2001, an individual may discontinue an election of a 
     MedicarePlus plan offered by a MedicarePlus organization 
     other than during an annual, coordinated election period and 
     make a new election under this section if--
       ``(A) the organization's or plan's certification under this 
     part has been terminated or the organization has terminated 
     or otherwise discontinued providing the plan;
       ``(B) the individual is no longer eligible to elect the 
     plan because of a change in the individual's place of 
     residence or other change in circumstances (specified by the 
     Secretary, but not including termination of the individual's 
     enrollment on the basis described in clause (i) or (ii) of 
     subsection (g)(3)(B));
       ``(C) the individual demonstrates (in accordance with 
     guidelines established by the Secretary) that--
       ``(i) the organization offering the plan substantially 
     violated a material provision of the organization's contract 
     under this part in relation to the individual (including the 
     failure to provide an enrollee on a timely basis medically 
     necessary care for which benefits are available under the 
     plan or the failure to provide such covered care in 
     accordance with applicable quality standards); or
       ``(ii) the organization (or an agent or other entity acting 
     on the organization's behalf) materially misrepresented the 
     plan's provisions in marketing the plan to the individual; or
       ``(D) the individual meets such other exceptional 
     conditions as the Secretary may provide.
       ``(5) Special rules for msa plans.--Notwithstanding the 
     preceding provisions of this subsection, an individual--
       ``(A) may elect an MSA plan only during--
       ``(i) an initial open enrollment period described in 
     paragraph (1),
       ``(ii) an annual, coordinated election period described in 
     paragraph (3)(B), or
       ``(iii) the months of October 1998 and October 1999; and
       ``(B) may not discontinue an election of an MSA plan except 
     during the periods described in clause (ii) or (iii) of 
     subparagraph (A) and under paragraph (4).
       ``(f) Effectiveness of Elections and Changes of 
     Elections.--
       ``(1) During initial coverage election period.--An election 
     of coverage made during the initial coverage election period 
     under subsection (e)(1) shall take effect upon the date the 
     individual becomes entitled to benefits under part A and 
     enrolled under part B, except as the Secretary may provide 
     (consistent with section 1838) in order to prevent 
     retroactive coverage.
       ``(2) During continuous open enrollment periods.--An 
     election or change of coverage made under subsection (e)(2) 
     shall take effect with the first day of the first calendar 
     month following the date on which the election is made.
       ``(3) Annual, coordinated election period.--An election or 
     change of coverage made during an annual, coordinated 
     election period (as defined in subsection (e)(3)(B)) in a 
     year shall take effect as of the first day of the following 
     year.
       ``(4) Other periods.--An election or change of coverage 
     made during any other period under subsection (e)(4) shall 
     take effect in such manner as the Secretary provides in a 
     manner consistent (to the extent practicable) with protecting 
     continuity of health benefit coverage.
       ``(g) Guaranteed Issue and Renewal.--
       ``(1) In general.--Except as provided in this subsection, a 
     MedicarePlus organization shall provide that at any time 
     during which elections are accepted under this section with 
     respect to a MedicarePlus plan offered by the organization, 
     the organization will accept without restrictions individuals 
     who are eligible to make such election.
       ``(2) Priority.--If the Secretary determines that a 
     MedicarePlus organization, in relation to a MedicarePlus plan 
     it offers, has a capacity limit and the number of 
     MedicarePlus eligible individuals who elect the plan under 
     this section exceeds the capacity limit, the organization may 
     limit the election of individuals of the plan under this 
     section but only if priority in election is provided--
       ``(A) first to such individuals as have elected the plan at 
     the time of the determination, and
       ``(B) then to other such individuals in such a manner that 
     does not discriminate, on a basis described in section 
     1852(b), among the individuals (who seek to elect the plan).

     The preceding sentence shall not apply if it would result in 
     the enrollment of enrollees substantially nonrepresentative, 
     as determined in accordance with regulations of the 
     Secretary, of the medicare population in the service area of 
     the plan.
       ``(3) Limitation on termination of election.--
       ``(A) In general.--Subject to subparagraph (B), a 
     MedicarePlus organization may not for any reason terminate 
     the election of any individual under this section for a 
     MedicarePlus plan it offers.
       ``(B) Basis for termination of election.--A MedicarePlus 
     organization may terminate an individual's election under 
     this section with respect to a MedicarePlus plan it offers 
     if--
       ``(i) any net monthly premiums required with respect to 
     such plan are not paid on a timely basis (consistent with 
     standards under section 1856 that provide for a grace period 
     for late payment of net monthly premiums),
       ``(ii) the individual has engaged in disruptive behavior 
     (as specified in such standards), or
       ``(iii) the plan is terminated with respect to all 
     individuals under this part in the area in which the 
     individual resides.
       ``(C) Consequence of termination.--
       ``(i) Terminations for cause.--Any individual whose 
     election is terminated under clause (i) or (ii) of 
     subparagraph (B) is deemed to have elected the medicare fee-
     for-service program option described in subsection (a)(1)(A).
       ``(ii) Termination based on plan termination or service 
     area reduction.--Any individual whose election is terminated 
     under subparagraph (B)(iii) shall have a special election 
     period under subsection (e)(4)(A) in which to change coverage 
     to coverage under another MedicarePlus plan. Such an 
     individual who fails to make an election during such period 
     is deemed to have chosen to change coverage to the medicare 
     fee-for-service program option described in subsection 
     (a)(1)(A).
       ``(D) Organization obligation with respect to election 
     forms.--Pursuant to a contract under section 1857, each 
     MedicarePlus organization receiving an election form under 
     subsection (c)(2) shall transmit to the Secretary (at such 
     time and in such manner as the Secretary may specify) a copy 
     of such form or such other information respecting the 
     election as the Secretary may specify.
       ``(h) Approval of Marketing Material and Application 
     Forms.--
       ``(1) Submission.--No marketing material or application 
     form may be distributed by a MedicarePlus organization to (or 
     for the use of) MedicarePlus eligible individuals unless--
       ``(A) at least 45 days before the date of distribution the 
     organization has submitted the material or form to the 
     Secretary for review, and
       ``(B) the Secretary has not disapproved the distribution of 
     such material or form.
       ``(2) Review.--The standards established under section 1856 
     shall include guidelines

[[Page H4500]]

     for the review of all such material or form submitted and 
     under such guidelines the Secretary shall disapprove (or 
     later require the correction of) such material or form if the 
     material or form is materially inaccurate or misleading or 
     otherwise makes a material misrepresentation.
       ``(3) Deemed approval (1-stop shopping).--In the case of 
     material or form that is submitted under paragraph (1)(A) to 
     the Secretary or a regional office of the Department of 
     Health and Human Services and the Secretary or the office has 
     not disapproved the distribution of marketing material or 
     form under paragraph (1)(B) with respect to a MedicarePlus 
     plan in an area, the Secretary is deemed not to have 
     disapproved such distribution in all other areas covered by 
     the plan and organization except to the extent that such 
     material or form is specific only to an area involved.
       ``(4) Prohibition of certain marketing practices.--Each 
     MedicarePlus organization shall conform to fair marketing 
     standards, in relation to MedicarePlus plans offered under 
     this part, included in the standards established under 
     section 1856. Such standards shall include a prohibition 
     against a MedicarePlus organization (or agent of such an 
     organization) completing any portion of any election form 
     used to carry out elections under this section on behalf of 
     any individual.
       ``(i) Effect of Election of MedicarePlus Plan Option.--
     Subject to sections 1852(a)(5), 1857(f)(2), and 1857(g)--
       ``(1) payments under a contract with a MedicarePlus 
     organization under section 1853(a) with respect to an 
     individual electing a MedicarePlus plan offered by the 
     organization shall be instead of the amounts which (in the 
     absence of the contract) would otherwise be payable under 
     parts A and B for items and services furnished to the 
     individual, and
       ``(2) subject to subsections (e) and (f) of section 1853, 
     only the MedicarePlus organization shall be entitled to 
     receive payments from the Secretary under this title for 
     services furnished to the individual.


                 ``benefits and beneficiary protections

       ``Sec. 1852. (a) Basic Benefits.--
       ``(1) In general.--Except as provided in section 1859(b)(2) 
     for MSA plans, each MedicarePlus plan shall provide to 
     members enrolled under this part, through providers and other 
     persons that meet the applicable requirements of this title 
     and part A of title XI--
       ``(A) those items and services for which benefits are 
     available under parts A and B to individuals residing in the 
     area served by the plan, and
       ``(B) additional benefits required under section 
     1854(f)(1)(A).
       ``(2) Satisfaction of requirement.--A MedicarePlus plan 
     (other than an MSA plan) offered by a MedicarePlus 
     organization satisfies paragraph (1)(A), with respect to 
     benefits for items and services furnished other than through 
     a provider that has a contract with the organization offering 
     the plan, if the plan provides (in addition to any cost 
     sharing provided for under the plan) for at least the total 
     dollar amount of payment for such items and services as would 
     otherwise be authorized under parts A and B (including any 
     balance billing permitted under such parts).
       ``(3) Supplemental benefits.--
       ``(A) Benefits included subject to secretary's approval.--
     Each MedicarePlus organization may provide to individuals 
     enrolled under this part, other than under an MSA plan, 
     (without affording those individuals an option to decline the 
     coverage) supplemental health care benefits that the 
     Secretary may approve. The Secretary shall approve any such 
     supplemental benefits unless the Secretary determines that 
     including such supplemental benefits would substantially 
     discourage enrollment by MedicarePlus eligible individuals 
     with the organization.
       ``(B) At enrollees' option.--A MedicarePlus organization 
     may provide to individuals enrolled under this part, other 
     than under an MSA plan, supplemental health care benefits 
     that the individuals may elect, at their option, to have 
     covered.
       ``(4) Organization as secondary payer.--Notwithstanding any 
     other provision of law, a MedicarePlus organization may (in 
     the case of the provision of items and services to an 
     individual under a MedicarePlus plan under circumstances in 
     which payment under this title is made secondary pursuant to 
     section 1862(b)(2)) charge or authorize the provider of such 
     services to charge, in accordance with the charges allowed 
     under such a law, plan, or policy--
       ``(A) the insurance carrier, employer, or other entity 
     which under such law, plan, or policy is to pay for the 
     provision of such services, or
       ``(B) such individual to the extent that the individual has 
     been paid under such law, plan, or policy for such services.
       ``(5) National coverage determinations.--If there is a 
     national coverage determination made in the period beginning 
     on the date of an announcement under section 1853(b) and 
     ending on the date of the next announcement under such 
     section and the Secretary projects that the determination 
     will result in a significant change in the costs to a 
     MedicarePlus organization of providing the benefits that are 
     the subject of such national coverage determination and that 
     such change in costs was not incorporated in the 
     determination of the annual MedicarePlus capitation rate 
     under section 1853 included in the announcement made at the 
     beginning of such period--
       ``(A) such determination shall not apply to contracts under 
     this part until the first contract year that begins after the 
     end of such period, and
       ``(B) if such coverage determination provides for coverage 
     of additional benefits or coverage under additional 
     circumstances, section 1851(i) shall not apply to payment for 
     such additional benefits or benefits provided under such 
     additional circumstances until the first contract year that 
     begins after the end of such period,
     unless otherwise required by law.
       ``(b) Antidiscrimination.--
       ``(1) In general.--A MedicarePlus organization may not 
     deny, limit, or condition the coverage or provision of 
     benefits under this part, for individuals permitted to be 
     enrolled with the organization under this part, based on any 
     health status-related factor described in section 2702(a)(1) 
     of the Public Health Service Act.
       ``(2) Construction.--Paragraph (1) shall not be construed 
     as requiring a MedicarePlus organization to enroll 
     individuals who are determined to have end-stage renal 
     disease, except as provided under section 1851(a)(3)(B).
       ``(c) Detailed Description of Plan Provisions.--A 
     MedicarePlus organization shall disclose, in clear, accurate, 
     and standardized form to each enrollee with a MedicarePlus 
     plan offered by the organization under this part at the time 
     of enrollment and at least annually thereafter, the following 
     information regarding such plan:
       ``(1) Service area.--The plan's service area.
       ``(2) Benefits.--Benefits offered (and not offered) under 
     the plan offered, including information described in section 
     1851(d)(3)(A) and exclusions from coverage and, if it is an 
     MSA plan, a comparison of benefits under such a plan with 
     benefits under other MedicarePlus plans.
       ``(3) Access.--The number, mix, and distribution of plan 
     providers.
       ``(4) Out-of-area coverage.--Out-of-area coverage provided 
     by the plan.
       ``(5) Emergency coverage.--Coverage of emergency services 
     and urgently needed care, including--
       ``(A) the appropriate use of emergency services, including 
     use of the 911 telephone system or its local equivalent in 
     emergency situations and an explanation of what constitutes 
     an emergency situation;
       ``(B) the process and procedures of the plan for obtaining 
     emergency services; and
       ``(C) the locations of (i) emergency departments, and (ii) 
     other settings, in which plan physicians and hospitals 
     provide emergency services and post-stabilization care.
       ``(6) Supplemental benefits.--Supplemental benefits 
     available from the organization offering the plan, 
     including--
       ``(A) whether the supplemental benefits are optional,
       ``(B) the supplemental benefits covered, and
       ``(C) the premium price for the supplemental benefits.
       ``(7) Prior authorization rules.--Rules regarding prior 
     authorization or other review requirements that could result 
     in nonpayment.
       ``(8) Plan grievance and appeals procedures.--Any appeal or 
     grievance rights and procedures.
       ``(9) Quality assurance program.--A description of the 
     organization's quality assurance program under subsection 
     (e).
       ``(d) Access to Services.--
       ``(1) In general.--A MedicarePlus organization offering a 
     MedicarePlus plan may select the providers from whom the 
     benefits under the plan are provided so long as--
       ``(A) the organization makes such benefits available and 
     accessible to each individual electing the plan within the 
     plan service area with reasonable promptness and in a manner 
     which assures continuity in the provision of benefits;
       ``(B) when medically necessary the organization makes such 
     benefits available and accessible 24 hours a day and 7 days a 
     week;
       ``(C) the plan provides for reimbursement with respect to 
     services which are covered under subparagraphs (A) and (B) 
     and which are provided to such an individual other than 
     through the organization, if--
       ``(i) the services were medically necessary and immediately 
     required because of an unforeseen illness, injury, or 
     condition, and it was not reasonable given the circumstances 
     to obtain the services through the organization,
       ``(ii) the services were renal dialysis services and were 
     provided other than through the organization because the 
     individual was temporarily out of the plan's service area, or
       ``(iii) the services are maintenance care or post-
     stabilization care covered under the guidelines established 
     under paragraph (2);
       ``(D) the organization provides access to appropriate 
     providers, including credentialed specialists, for medically 
     necessary treatment and services; and
       ``(E) coverage is provided for emergency services (as 
     defined in paragraph (3)) without regard to prior 
     authorization or the emergency care provider's contractual 
     relationship with the organization.
       ``(2) Guidelines respecting coordination of post-
     stabilization care.--A MedicarePlus plan shall comply with 
     such guidelines as the Secretary may prescribe relating to 
     promoting efficient and timely coordination of appropriate 
     maintenance and post-stabilization care of an enrollee after

[[Page H4501]]

     the enrollee has been determined to be stable under section 
     1867.
       ``(3) Definition of emergency services.--In this 
     subsection--
       ``(A) In general.--The term `emergency services' means, 
     with respect to an individual enrolled with an organization, 
     covered inpatient and outpatient services that--
       ``(i) are furnished by a provider that is qualified to 
     furnish such services under this title, and
       ``(ii) are needed to evaluate or stabilize an emergency 
     medical condition (as defined in subparagraph (B)).
       ``(B) Emergency medical condition based on prudent 
     layperson.--The term `emergency medical condition' means a 
     medical condition manifesting itself by acute symptoms of 
     sufficient severity such that a prudent layperson, who 
     possesses an average knowledge of health and medicine, could 
     reasonably expect the absence of immediate medical attention 
     to result in--
       ``(i) placing the health of the individual (or, with 
     respect to a pregnant woman, the health of the woman or her 
     unborn child) in serious jeopardy,
       ``(ii) serious impairment to bodily functions, or
       ``(iii) serious dysfunction of any bodily organ or part.
       ``(e) Quality Assurance Program.--
       ``(1) In general.--Each MedicarePlus organization must have 
     arrangements, consistent with any regulation, for an ongoing 
     quality assurance program for health care services it 
     provides to individuals enrolled with MedicarePlus plans of 
     the organization.
       ``(2) Elements of program.--The quality assurance program 
     shall--
       ``(A) stress health outcomes and provide for the 
     collection, analysis, and reporting of data (in accordance 
     with a quality measurement system that the Secretary 
     recognizes) that will permit measurement of outcomes and 
     other indices of the quality of MedicarePlus plans and 
     organizations;
       ``(B) provide for the establishment of written protocols 
     for utilization review, based on current standards of medical 
     practice;
       ``(C) provide review by physicians and other health care 
     professionals of the process followed in the provision of 
     such health care services;
       ``(D) monitor and evaluate high volume and high risk 
     services and the care of acute and chronic conditions;
       ``(E) evaluate the continuity and coordination of care that 
     enrollees receive;
       ``(F) have mechanisms to detect both underutilization and 
     overutilization of services;
       ``(G) after identifying areas for improvement, establish or 
     alter practice parameters;
       ``(H) take action to improve quality and assesses the 
     effectiveness of such action through systematic followup;
       ``(I) make available information on quality and outcomes 
     measures to facilitate beneficiary comparison and choice of 
     health coverage options (in such form and on such quality and 
     outcomes measures as the Secretary determines to be 
     appropriate);
       ``(J) be evaluated on an ongoing basis as to its 
     effectiveness;
       ``(K) include measures of consumer satisfaction; and
       ``(L) provide the Secretary with such access to information 
     collected as may be appropriate to monitor and ensure the 
     quality of care provided under this part.
       ``(3) External review.--Each MedicarePlus organization 
     shall, for each MedicarePlus plan it operates, have an 
     agreement with an independent quality review and improvement 
     organization approved by the Secretary to perform functions 
     of the type described in sections 1154(a)(4)(B) and 
     1154(a)(14) with respect to services furnished by 
     MedicarePlus plans for which payment is made under this 
     title.
       ``(4) Treatment of accreditation.--The Secretary shall 
     provide that a MedicarePlus organization is deemed to meet 
     requirements of paragraphs (1) through (3) of this subsection 
     and subsection (h) (relating to confidentiality and accuracy 
     of enrollee records) if the organization is accredited (and 
     periodically reaccredited) by a private organization under a 
     process that the Secretary has determined assures that the 
     organization, as a condition of accreditation, applies and 
     enforces standards with respect to the requirements involved 
     that are no less stringent than the standards established 
     under section 1856 to carry out the respective requirements.
       ``(f) Coverage Determinations.--
       ``(1) Decisions on nonemergency care.--A MedicarePlus 
     organization shall make determinations regarding 
     authorization requests for nonemergency care on a timely 
     basis, depending on the urgency of the situation.
       ``(2) Reconsiderations.--
       ``(A) In general.--Subject to subsection (g)(4), a 
     reconsideration of a determination of an organization denying 
     coverage shall be made within 30 days of the date of receipt 
     of medical information, but not later than 60 days after the 
     date of the determination.
       ``(B) Physician decision on certain reconsiderations.--A 
     reconsideration relating to a determination to deny coverage 
     based on a lack of medical necessity shall be made only by a 
     physician other than a physician involved in the initial 
     determination.
       ``(g) Grievances and Appeals.--
       ``(1) Grievance mechanism.--Each MedicarePlus 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 with MedicarePlus plans of the 
     organization under this part.
       ``(2) Appeals.--An enrollee with a MedicarePlus plan of a 
     MedicarePlus organization under this part who is dissatisfied 
     by reason of the enrollee's failure to receive any health 
     service to which the enrollee believes the enrollee is 
     entitled and at no greater charge than the enrollee believes 
     the enrollee is required to pay is entitled, if the amount in 
     controversy is $100 or more, to a hearing before the 
     Secretary to the same extent as is provided in section 
     205(b), and in any such hearing the Secretary shall make the 
     organization a party. If the amount in controversy is $1,000 
     or more, the individual or organization shall, upon notifying 
     the other party, be entitled to judicial review of the 
     Secretary's final decision as provided in section 205(g), and 
     both the individual and the organization shall be entitled to 
     be parties to that judicial review. In applying sections 
     205(b) and 205(g) as provided in this paragraph, and in 
     applying section 205(l) thereto, any reference therein to the 
     Commissioner of Social Security or the Social Security 
     Administration shall be considered a reference to the 
     Secretary or the Department of Health and Human Services, 
     respectively.
       ``(3) Independent review of certain coverage denials.--The 
     Secretary shall contract with an independent, outside entity 
     to review and resolve reconsiderations that affirm denial of 
     coverage.
       ``(4) Expedited determinations and reconsiderations.--
       ``(A) Receipt of requests.--An enrollee in a MedicarePlus 
     plan may request, either in writing or orally, an expedited 
     determination or reconsideration by the MedicarePlus 
     organization regarding a matter described in paragraph (2). 
     The organization shall also permit the acceptance of such 
     requests by physicians.
       ``(B) Organization procedures.--
       ``(i) In general.--The MedicarePlus organization shall 
     maintain procedures for expediting organization 
     determinations and reconsiderations when, upon request of an 
     enrollee, the organization determines that the application of 
     normal time frames for making a determination (or a 
     reconsideration involving a determination) could seriously 
     jeopardize the life or health of the enrollee or the 
     enrollee's ability to regain maximum function.
       ``(ii) Timely response.--In an urgent case described in 
     clause (i), the organization shall notify the enrollee (and 
     the physician involved, as appropriate) of the determination 
     (or determination on the reconsideration) as expeditiously as 
     the enrollee's health condition requires, but not later than 
     72 hours (or 24 hours in the case of a reconsideration) of 
     the time of receipt of the request for the determination or 
     reconsideration (or receipt of the information necessary to 
     make the determination or reconsideration), or such longer 
     period as the Secretary may permit in specified cases.
       ``(h) Confidentiality and Accuracy of Enrollee Records.--
     Each MedicarePlus organization shall establish procedures--
       ``(1) to safeguard the privacy of individually identifiable 
     enrollee information,
       ``(2) to maintain accurate and timely medical records and 
     other health information for enrollees, and
       ``(3) to assure timely access of enrollees to their medical 
     information.
       ``(i) Information on Advance Directives.--Each MedicarePlus 
     organization shall meet the requirement of section 1866(f) 
     (relating to maintaining written policies and procedures 
     respecting advance directives).
       ``(j) Rules Regarding Physician Participation.--
       ``(1) Procedures.--Each MedicarePlus organization shall 
     establish reasonable procedures relating to the participation 
     (under an agreement between a physician and the organization) 
     of physicians under MedicarePlus plans offered by the 
     organization under this part. Such procedures shall include--
       ``(A) providing notice of the rules regarding 
     participation,
       ``(B) providing written notice of participation decisions 
     that are adverse to physicians, and
       ``(C) providing a process within the organization for 
     appealing such adverse decisions, including the presentation 
     of information and views of the physician regarding such 
     decision.
       ``(2) Consultation in medical policies.--A MedicarePlus 
     organization shall consult with physicians who have entered 
     into participation agreements with the organization regarding 
     the organization's medical policy, quality, and medical 
     management procedures.
       ``(3) Prohibiting interference with provider advice to 
     enrollees.--
       ``(A) In general.--Subject to subparagraphs (B) and (C), a 
     MedicarePlus organization (in relation to an individual 
     enrolled under a MedicarePlus plan offered by the 
     organization under this part) shall not prohibit or otherwise 
     restrict a covered health care professional (as defined in 
     subparagraph (D)) from advising such an individual who is a 
     patient of the professional about the health status of the 
     individual or medical care or treatment for the individual's 
     condition or disease, regardless of whether benefits for such 
     care or treatment are provided under the plan, if the 
     professional is acting within the lawful scope of practice.
       ``(B) Conscience protection.--Subparagraph (A) shall not be 
     construed as requiring

[[Page H4502]]

     a MedicarePlus plan to provide, reimburse for, or provide 
     coverage of a counseling or referral service if the 
     MedicarePlus organization offering the plan--
       ``(i) objects to the provision of such service on moral or 
     religious grounds; and
       ``(ii) in the manner and through the written 
     instrumentalities such MedicarePlus organization deems 
     appropriate, makes available information on its policies 
     regarding such service to prospective enrollees before or 
     during enrollment and to enrollees within 90 days after the 
     date that the organization or plan adopts a change in policy 
     regarding such a counseling or referral service.
       ``(C) Construction.--Nothing in subparagraph (B) shall be 
     construed to affect disclosure requirements under State law 
     or under the Employee Retirement Income Security Act of 1974.
       ``(D) Health care professional defined.--For purposes of 
     this paragraph, the term `health care professional' means a 
     physician (as defined in section 1861(r)) or other health 
     care professional if coverage for the professional's services 
     is provided under the MedicarePlus plan for the services of 
     the professional. Such term includes a podiatrist, 
     optometrist, chiropractor, psychologist, dentist, physician 
     assistant, physical or occupational therapist and therapy 
     assistant, speech-language pathologist, audiologist, 
     registered or licensed practical nurse (including nurse 
     practitioner, clinical nurse specialist, certified registered 
     nurse anesthetist, and certified nurse-midwife), licensed 
     certified social worker, registered respiratory therapist, 
     and certified respiratory therapy technician.
       ``(4) Limitations on physician incentive plans.--
       ``(A) In general.--No MedicarePlus organization may 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 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 MedicarePlus 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.
       ``(5) Limitation on provider indemnification.--A 
     MedicarePlus organization may not provide (directly or 
     indirectly) for a provider (or group of providers) to 
     indemnify the organization against any liability resulting 
     from a civil action brought for any damage caused to an 
     enrollee with a MedicarePlus plan of the organization under 
     this part by the organization's denial of medically necessary 
     care.
       ``(k) Treatment of Services Furnished by Certain 
     Providers.--A physician or other entity (other than a 
     provider of services) that does not have a contract 
     establishing payment amounts for services furnished to an 
     individual enrolled under this part with a MedicarePlus 
     organization (other than under an MSA plan) shall accept as 
     payment in full for covered services under this title that 
     are furnished to such an individual the amounts that the 
     physician or other entity could collect if the individual 
     were not so enrolled. Any penalty or other provision of law 
     that applies to such a payment with respect to an individual 
     entitled to benefits under this title (but not enrolled with 
     a MedicarePlus organization under this part) also applies 
     with respect to an individual so enrolled.
       ``(l) Disclosure of Use of DSH and Teaching Hospitals.--
     Each MedicarePlus organization shall provide the Secretary 
     with information on--
       ``(1) the extent to which the organization provides 
     inpatient and outpatient hospital benefits under this part--
       ``(A) through the use of hospitals that are eligible for 
     additional payments under section 1886(d)(5)(F)(i) (relating 
     to so-called DSH hospitals), or
       ``(B) through the use of teaching hospitals that receive 
     payments under section 1886(h); and
       ``(2) the extent to which differences between payment rates 
     to different hospitals reflect the disproportionate share 
     percentage of low-income patients and the presence of medical 
     residency training programs in those hospitals.


                ``payments to medicareplus organizations

       ``Sec. 1853. (a) Payments to Organizations.--
       ``(1) Monthly payments.--
       ``(A) In general.--Under a contract under section 1857 and 
     subject to subsections (e) and (f), the Secretary shall make 
     monthly payments under this section in advance to each 
     MedicarePlus organization, with respect to coverage of an 
     individual under this part in a MedicarePlus payment area for 
     a month, in an amount equal to \1/12\ of the annual 
     MedicarePlus capitation rate (as calculated under subsection 
     (c)) with respect to that individual for that area, adjusted 
     for such risk factors as age, disability status, gender, 
     institutional status, and such other factors as the Secretary 
     determines to be appropriate, so as to ensure actuarial 
     equivalence. The Secretary may add to, modify, or substitute 
     for such factors, if such changes will improve the 
     determination of actuarial equivalence.
       ``(B) Special rule for end-stage renal disease.--The 
     Secretary shall establish separate rates of payment to a 
     MedicarePlus organization with respect to classes of 
     individuals determined to have end-stage renal disease and 
     enrolled in a MedicarePlus plan of the organization. Such 
     rates of payment shall be actuarially equivalent to rates 
     paid to other enrollees in the MedicarePlus payment area (or 
     such other area as specified by the Secretary). In accordance 
     with regulations, the Secretary shall provide for the 
     application of the seventh sentence of section 1881(b)(7) to 
     payments under this section covering the provision of renal 
     dialysis treatment in the same manner as such sentence 
     applies to composite rate payments described in such 
     sentence.
       ``(2) Adjustment to reflect number of enrollees.--
       ``(A) In general.--The amount of payment under this 
     subsection may be retroactively adjusted to take into account 
     any difference between the actual number of individuals 
     enrolled with an organization under this part and the number 
     of such individuals estimated to be so enrolled in 
     determining the amount of the advance payment.
       ``(B) Special rule for certain enrollees.--
       ``(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 
     MedicarePlus organization under a plan operated, sponsored, 
     or contributed to by the individual's employer or former 
     employer (or the employer or former employer of the 
     individual's spouse) and ending on the date on which the 
     individual is enrolled in the organization under this part, 
     except that for purposes of making such retroactive 
     adjustments under this subparagraph, such period may not 
     exceed 90 days.
       ``(ii) Exception.--No adjustment may be made under clause 
     (i) with respect to any individual who does not certify that 
     the organization provided the individual with the information 
     required to be disclosed under section 1852(c) at the time 
     the individual enrolled with the organization.
       ``(3) Establishment of risk adjustment factors.--
       ``(A) Report.--The Secretary shall develop, and submit to 
     Congress by not later than October 1, 1999, a report on a 
     method of risk adjustment of payment rates under this section 
     that accounts for variations in per capita costs based on 
     health status. Such report shall include an evaluation of 
     such method by an outside, independent actuary of the 
     actuarial soundness of the proposal.
       ``(B) Data collection.--In order to carry out this 
     paragraph, the Secretary shall require MedicarePlus 
     organizations (and eligible organizations with risk-sharing 
     contracts under section 1876) to submit, for periods 
     beginning on or after January 1, 1998, data regarding 
     inpatient hospital services and other services and other 
     information the Secretary deems necessary.
       ``(C) Initial implementation.--The Secretary shall first 
     provide for implementation of a risk adjustment methodology 
     that accounts for variations in per capita costs based on 
     health status and other demographic factors for payments by 
     no later than January 1, 2000.
       ``(b) Annual Announcement of Payment Rates.--
       ``(1) Annual announcement.--The Secretary shall annually 
     determine, and shall announce (in a manner intended to 
     provide notice to interested parties) not later than August 1 
     before the calendar year concerned--
       ``(A) the annual MedicarePlus capitation rate for each 
     MedicarePlus payment area for the year, and
       ``(B) the risk and other factors to be used in adjusting 
     such rates under subsection (a)(1)(A) for payments for months 
     in that year.
       ``(2) Advance notice of methodological changes.--At least 
     45 days before making the announcement under paragraph (1) 
     for a year, the Secretary shall provide for notice to 
     MedicarePlus organizations of proposed changes to be made in 
     the methodology from the methodology and assumptions used in 
     the previous announcement and shall provide

[[Page H4503]]

     such organizations an opportunity to comment on such proposed 
     changes.
       ``(3) Explanation of assumptions.--In each announcement 
     made under paragraph (1), the Secretary shall include an 
     explanation of the assumptions and changes in methodology 
     used in the announcement in sufficient detail so that 
     MedicarePlus organizations can compute monthly adjusted 
     MedicarePlus capitation rates for individuals in each 
     MedicarePlus payment area which is in whole or in part within 
     the service area of such an organization.
       ``(c) Calculation of Annual MedicarePlus Capitation 
     Rates.--
       ``(1) In general.--For purposes of this part, each annual 
     MedicarePlus capitation rate, for a MedicarePlus payment area 
     for a contract year consisting of a calendar year, is equal 
     to the largest of the amounts specified in the following 
     subparagraphs (A), (B), or (C):
       ``(A) Blended capitation rate.--The sum of--
       ``(i) area-specific percentage for the year (as specified 
     under paragraph (2) for the year) of the annual area-specific 
     MedicarePlus capitation rate for the year for the 
     MedicarePlus payment area, as determined under paragraph (3), 
     and
       ``(ii) national percentage (as specified under paragraph 
     (2) for the year) of the input-price-adjusted annual national 
     MedicarePlus capitation rate for the year, as determined 
     under paragraph (4),
     multiplied by the payment adjustment factors described in 
     subparagraphs (A) and (B) of paragraph (5).
       ``(B) Minimum amount.--12 multiplied by the following 
     amount:
       ``(i) For 1998, $350 (but not to exceed, in the case of an 
     area outside the 50 States and the District of Columbia, 150 
     percent of the annual per capita rate of payment for 1997 
     determined under section 1876(a)(1)(C) for the area).
       ``(ii) For a succeeding year, the minimum amount specified 
     in this clause (or clause (i)) for the preceding year 
     increased by the national per capita MedicarePlus growth 
     percentage, specified under paragraph (6) for that succeeding 
     year.
       ``(C) Minimum percentage increase.--
       ``(i) For 1998, 102 percent of the annual per capita rate 
     of payment for 1997 determined under section 1876(a)(1)(C) 
     for the MedicarePlus payment area.
       ``(ii) For a subsequent year, 102 percent of the annual 
     MedicarePlus capitation rate under this paragraph for the 
     area for the previous year.
       ``(2) Area-specific and national percentages.--For purposes 
     of paragraph (1)(A)--
       ``(A) for 1998, the `area-specific percentage' is 90 
     percent and the `national percentage' is 10 percent,
       ``(B) for 1999, the `area-specific percentage' is 80 
     percent and the `national percentage' is 20 percent,
       ``(C) for 2000, the `area-specific percentage' is 70 
     percent and the `national percentage' is 30 percent,
       ``(D) for 2001, the `area-specific percentage' is 60 
     percent and the `national percentage' is 40 percent, and
       ``(E) for a year after 2001, the `area-specific percentage' 
     is 50 percent and the `national percentage' is 50 percent.
       ``(3) Annual area-specific medicareplus capitation rate.--
     For purposes of paragraph (1)(A), the annual area-specific 
     MedicarePlus capitation rate for a MedicarePlus payment 
     area--
       ``(A) for 1998 is the annual per capita rate of payment for 
     1997 determined under section 1876(a)(1)(C) for the area, 
     increased by the national per capita MedicarePlus growth 
     percentage for 1998 (as defined in paragraph (6)); or
       ``(B) for a subsequent year is the annual area-specific 
     MedicarePlus capitation rate for the previous year determined 
     under this paragraph for the area, increased by the national 
     per capita MedicarePlus growth percentage for such subsequent 
     year.
       ``(4) Input-price-adjusted annual national medicareplus 
     capitation rate.--
       ``(A) In general.--For purposes of paragraph (1)(A), the 
     input-price-adjusted annual national MedicarePlus capitation 
     rate for a MedicarePlus payment area for a year is equal to 
     the sum, for all the types of medicare services (as 
     classified by the Secretary), of the product (for each such 
     type of service) of--
       ``(i) the national standardized annual MedicarePlus 
     capitation rate (determined under subparagraph (B)) for the 
     year,
       ``(ii) the proportion of such rate for the year which is 
     attributable to such type of services, and
       ``(iii) an index that reflects (for that year and that type 
     of services) the relative input price 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 annual medicareplus capitation 
     rate.--In subparagraph (A)(i), the `national standardized 
     annual MedicarePlus capitation rate' for a year is equal to--
       ``(i) the sum (for all MedicarePlus payment areas) of the 
     product of--

       ``(I) the annual area-specific MedicarePlus capitation rate 
     for that year for the area under paragraph (3), and
       ``(II) the average number of medicare beneficiaries 
     residing in that area in the year, multiplied by the average 
     of the risk factor weights used to adjust payments under 
     subsection (a)(1)(A) for such beneficiaries in such area; 
     divided by

       ``(ii) the sum of the products described in clause (i)(II) 
     for all areas for that year.
       ``(C) Special rules for 1998.--In applying this paragraph 
     for 1998--
       ``(i) medicare services shall be divided into 2 types of 
     services: part A services and part B services;
       ``(ii) the proportions described in subparagraph (A)(ii)--

       ``(I) for part A services shall be the ratio (expressed as 
     a percentage) of the national average annual per capita rate 
     of payment for part A for 1997 to the total national average 
     annual per capita rate of payment for parts A and B for 1997, 
     and
       ``(II) for part B services shall be 100 percent minus the 
     ratio described in subclause (I);

       ``(iii) for part A services, 70 percent of payments 
     attributable to such services shall be adjusted by the index 
     used under section 1886(d)(3)(E) to adjust payment rates for 
     relative hospital wage levels for hospitals located in the 
     payment area involved;
       ``(iv) for part B services--

       ``(I) 66 percent of payments attributable to such services 
     shall be adjusted by the index of the geographic area factors 
     under section 1848(e) used to adjust payment rates for 
     physicians' services furnished in the payment area, and
       ``(II) of the remaining 34 percent of the amount of such 
     payments, 40 percent shall be adjusted by the index described 
     in clause (iii); and

       ``(v) the index values shall be computed based only on the 
     beneficiary population who are 65 years of age or older and 
     who are not determined to have end stage renal disease.

     The Secretary may continue to apply the rules described in 
     this subparagraph (or similar rules) for 1999.
       ``(5) Payment adjustment budget neutrality factors.--For 
     purposes of paragraph (1)(A)--
       ``(A) Blended rate payment adjustment factor.--For each 
     year, the Secretary shall compute a blended rate payment 
     adjustment factor such that, not taking into account 
     subparagraphs (B) and (C) of paragraph (1) and the 
     application of the payment adjustment factor described in 
     subparagraph (B), the aggregate of the payments that would be 
     made under this part is equal to the aggregate payments that 
     would have been made under this part (not taking into account 
     such subparagraphs and such other adjustment factor) if the 
     area-specific percentage under paragraph (1) for the year had 
     been 100 percent and the national percentage had been 0 
     percent.
       ``(B) Floor-and-minimum-update payment adjustment factor.--
     For each year, the Secretary shall compute a floor-and-
     minimum-update payment adjustment factor so that, taking into 
     account the application of the blended rate payment 
     adjustment factor under subparagraph (A) and subparagraphs 
     (B) and (C) of paragraph (1) and the application of the 
     adjustment factor under this subparagraph, the aggregate of 
     the payments under this part shall not exceed the aggregate 
     payments that would have been made under this part if 
     subparagraphs (B) and (C) of paragraph (1) did not apply and 
     if the floor-and-minimum-update payment adjustment factor 
     under this subparagraph was 1.
       ``(6) National per capita medicareplus growth percentage 
     defined.--
       ``(A) In general.--In this part, the `national per capita 
     MedicarePlus growth percentage' for a year is the percentage 
     determined by the Secretary, by April 30th before the 
     beginning of the year involved, to reflect the Secretary's 
     estimate of the projected per capita rate of growth in 
     expenditures under this title for an individual entitled to 
     benefits under part A and enrolled under part B, reduced by 
     the number of percentage points specified in subparagraph (B) 
     for the year. Separate determinations may be made for aged 
     enrollees, disabled enrollees, and enrollees with end-stage 
     renal disease. Such percentage shall include an adjustment 
     for over or under projection in the growth percentage for 
     previous years.
       ``(B) Adjustment.--The number of percentage points 
     specified in this subparagraph is--
       ``(i) for 1998, 0.5 percentage points,
       ``(ii) for 1999, 0.5 percentage points,
       ``(iii) for 2000, 0.5 percentage points,
       ``(iv) for 2001, 0.5 percentage points,
       ``(v) for 2002, 0.5 percentage points, and
       ``(vi) for a year after 2002, 0 percentage points.
       ``(d) MedicarePlus Payment Area Defined.--
       ``(1) In general.--In this part, except as provided in 
     paragraph (3), the term `MedicarePlus payment area' means a 
     county, or equivalent area specified by the Secretary.
       ``(2) Rule for esrd beneficiaries.--In the case of 
     individuals who are determined to have end stage renal 
     disease, the MedicarePlus payment area shall be a State or 
     such other payment area as the Secretary specifies.
       ``(3) Geographic adjustment.--
       ``(A) In general.--Upon written request of the chief 
     executive officer of a State for a contract year (beginning 
     after 1998) made at least 7 months before the beginning of 
     the year, the Secretary shall make a geographic adjustment to 
     a MedicarePlus payment area in the State otherwise determined 
     under paragraph (1)--

[[Page H4504]]

       ``(i) to a single statewide MedicarePlus payment area,
       ``(ii) to the metropolitan based system described in 
     subparagraph (C), or
       ``(iii) to consolidating into a single MedicarePlus payment 
     area noncontiguous counties (or equivalent areas described in 
     paragraph (1)) within a State.

     Such adjustment shall be effective for payments for months 
     beginning with January of the year following the year in 
     which the request is received.
       ``(B) Budget neutrality adjustment.--In the case of a State 
     requesting an adjustment under this paragraph, the Secretary 
     shall adjust the payment rates otherwise established under 
     this section for MedicarePlus payment areas in the State in a 
     manner so that the aggregate of the payments under this 
     section in the State shall not exceed the aggregate payments 
     that would have been made under this section for MedicarePlus 
     payment areas in the State in the absence of the adjustment 
     under this paragraph.
       ``(C) Metropolitan based system.--The metropolitan based 
     system described in this subparagraph is one in which--
       ``(i) all the portions of each metropolitan statistical 
     area in the State or in the case of a consolidated 
     metropolitan statistical area, all of the portions of each 
     primary metropolitan statistical area within the consolidated 
     area within the State, are treated as a single MedicarePlus 
     payment area, and
       ``(ii) all areas in the State that do not fall within a 
     metropolitan statistical area are treated as a single 
     MedicarePlus payment area.
       ``(D) Areas.--In subparagraph (C), the terms `metropolitan 
     statistical area', `consolidated metropolitan statistical 
     area', and `primary metropolitan statistical area' mean any 
     area designated as such by the Secretary of Commerce.
       ``(e) Special Rules for Individuals Electing MSA Plans.--
       ``(1) In general.--If the amount of the monthly premium for 
     an MSA plan for a MedicarePlus payment area for a year is 
     less than \1/12\ of the annual MedicarePlus capitation rate 
     applied under this section for the area and year involved, 
     the Secretary shall deposit an amount equal to 100 percent of 
     such difference in a MedicarePlus MSA established (and, if 
     applicable, designated) by the individual under paragraph 
     (2).
       ``(2) Establishment and designation of medicareplus medical 
     savings account as requirement for payment of contribution.--
     In the case of an individual who has elected coverage under 
     an MSA plan, no payment shall be made under paragraph (1) on 
     behalf of an individual for a month unless the individual--
       ``(A) has established before the beginning of the month (or 
     by such other deadline as the Secretary may specify) a 
     MedicarePlus MSA (as defined in section 138(b)(2) of the 
     Internal Revenue Code of 1986), and
       ``(B) if the individual has established more than one such 
     MedicarePlus MSA, has designated one of such accounts as the 
     individual's MedicarePlus MSA for purposes of this part.

     Under rules under this section, such an individual may change 
     the designation of such account under subparagraph (B) for 
     purposes of this part.
       ``(3) Lump sum deposit of medical savings account 
     contribution.--In the case of an individual electing an MSA 
     plan effective beginning with a month in a year, the amount 
     of the contribution to the MedicarePlus MSA on behalf of the 
     individual for that month and all successive months in the 
     year shall be deposited during that first month. In the case 
     of a termination of such an election as of a month before the 
     end of a year, the Secretary shall provide for a procedure 
     for the recovery of deposits attributable to the remaining 
     months in the year.
       ``(f) Payments From Trust Fund.--The payment to a 
     MedicarePlus organization under this section for individuals 
     enrolled under this part with the organization and payments 
     to a MedicarePlus MSA under subsection (e)(1) shall be made 
     from the Federal Hospital Insurance Trust Fund and the 
     Federal Supplementary Medical Insurance Trust Fund in such 
     proportion as the Secretary determines reflects the relative 
     weight that benefits under part A and under part B represents 
     of the actuarial value of the total benefits under this 
     title. Monthly payments otherwise payable under this section 
     for October 2001 shall be paid on the last business day of 
     September 2001.
       ``(g) Special Rule for Certain Inpatient Hospital Stays.--
     In the case of an individual who is receiving inpatient 
     hospital services from a subsection (d) hospital (as defined 
     in section 1886(d)(1)(B)) as of the effective date of the 
     individual's--
       ``(1) election under this part of a MedicarePlus plan 
     offered by a MedicarePlus organization--
       ``(A) payment for such services until the date of the 
     individual's discharge shall be made under this title through 
     the MedicarePlus plan or the medicare fee-for-service program 
     option described in section 1851(a)(1)(A) (as the case may 
     be) elected before the election with such organization,
       ``(B) the elected organization shall not be financially 
     responsible for payment for such services until the date 
     after the date of the individual's discharge, and
       ``(C) the organization shall nonetheless be paid the full 
     amount otherwise payable to the organization under this part; 
     or
       ``(2) termination of election with respect to a 
     MedicarePlus organization under this part--
       ``(A) the organization shall be financially responsible for 
     payment for such services after such date and until the date 
     of the individual's discharge,
       ``(B) payment for such services during the stay shall not 
     be made under section 1886(d) or by any succeeding 
     MedicarePlus organization, 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.


                               ``premiums

       ``Sec. 1854. (a) Submission and Charging of Premiums.--
       ``(1) In general.--Subject to paragraph (3), each 
     MedicarePlus organization shall file with the Secretary each 
     year, in a form and manner and at a time specified by the 
     Secretary--
       ``(A) the amount of the monthly premium for coverage for 
     services under section 1852(a) under each MedicarePlus plan 
     it offers under this part in each MedicarePlus payment area 
     (as defined in section 1853(d)) in which the plan is being 
     offered; and
       ``(B) the enrollment capacity in relation to the plan in 
     each such area.
       ``(2) Terminology.--In this part--
       ``(A) the term `monthly premium' means, with respect to a 
     MedicarePlus plan offered by a MedicarePlus organization, the 
     monthly premium filed under paragraph (1), not taking into 
     account the amount of any payment made toward the premium 
     under section 1853; and
       ``(B) the term `net monthly premium' means, with respect to 
     such a plan and an individual enrolled with the plan, the 
     premium (as defined in subparagraph (A)) for the plan reduced 
     by the amount of payment made toward such premium under 
     section 1853.
       ``(b) Monthly Premium Charged.--The monthly amount of the 
     premium charged by a MedicarePlus organization for a 
     MedicarePlus plan offered in a MedicarePlus payment area to 
     an individual under this part shall be equal to the net 
     monthly premium plus any monthly premium charged in 
     accordance with subsection (e)(2) for supplemental benefits.
       ``(c) Uniform Premium.--The monthly premium and monthly 
     amount charged under subsection (b) of a MedicarePlus 
     organization under this part may not vary among individuals 
     who reside in the same MedicarePlus payment area.
       ``(d) Terms and Conditions of Imposing Premiums.--Each 
     MedicarePlus organization shall permit the payment of net 
     monthly premiums on a monthly basis and may terminate 
     election of individuals for a MedicarePlus plan for failure 
     to make premium payments only in accordance with section 
     1851(g)(3)(B)(i). A MedicarePlus organization is not 
     authorized to provide for cash or other monetary rebates as 
     an inducement for enrollment or otherwise.
       ``(e) Limitation on Enrollee Cost-Sharing.--
       ``(1) For basic and additional benefits.--Except as 
     provided in paragraph (2), in no event may--
       ``(A) the net monthly premium (multiplied by 12) and the 
     actuarial value of the deductibles, coinsurance, and 
     copayments applicable on average to individuals enrolled 
     under this part with a MedicarePlus plan of an organization 
     with respect to required benefits described in section 
     1852(a)(1) and additional benefits (if any) required under 
     subsection (f)(1) for a year, exceed
       ``(B) the actuarial value of the deductibles, coinsurance, 
     and copayments that would be applicable on average to 
     individuals entitled to benefits under part A and enrolled 
     under part B if they were not members of a MedicarePlus 
     organization for the year.
       ``(2) For supplemental benefits.--If the MedicarePlus 
     organization provides to its members enrolled under this part 
     supplemental benefits described in section 1852(a)(3), the 
     sum of the monthly premium rate (multiplied by 12) charged 
     for such supplemental benefits and the actuarial value of its 
     deductibles, coinsurance, and copayments charged with respect 
     to such benefits may not exceed the adjusted community rate 
     for such benefits (as defined in subsection (f)(4)).
       ``(3) Exception for msa plans.--Paragraphs (1) and (2) do 
     not apply to an MSA plan.
       ``(4) Determination on other basis.--If the Secretary 
     determines that adequate data are not available to determine 
     the actuarial value under paragraph (1)(A) or (2), the 
     Secretary may determine such amount with respect to all 
     individuals in the MedicarePlus payment area, the State, or 
     in the United States, eligible to enroll in the MedicarePlus 
     plan involved under this part or on the basis of other 
     appropriate data.
       ``(f) Requirement for Additional Benefits.--
       ``(1) Requirement.--
       ``(A) In general.--Each MedicarePlus organization (in 
     relation to a MedicarePlus plan it offers) shall provide that 
     if there is an excess amount (as defined in subparagraph (B)) 
     for the plan for a contract year, subject to the succeeding 
     provisions of this subsection, the organization shall provide 
     to individuals such additional benefits (as the organization 
     may specify) in a value which is at least equal to the 
     adjusted excess amount (as defined in subparagraph (C)).
       ``(B) Excess amount.--For purposes of this paragraph, the 
     `excess amount', for an organization for a plan, is the 
     amount (if any) by which--

[[Page H4505]]

       ``(i) the average of the capitation payments made to the 
     organization under section 1853 for the plan at the beginning 
     of contract year, exceeds
       ``(ii) the actuarial value of the required benefits 
     described in section 1852(a)(1) under the plan for 
     individuals under this part, as determined based upon an 
     adjusted community rate described in paragraph (4) (as 
     reduced for the actuarial value of the coinsurance and 
     deductibles under parts A and B).
       ``(C) Adjusted excess amount.--For purposes of this 
     paragraph, the `adjusted excess amount', for an organization 
     for a plan, is the excess amount reduced to reflect any 
     amount withheld and reserved for the organization for the 
     year under paragraph (2).
       ``(D) No application to msa plans.--Subparagraph (A) shall 
     not apply to an MSA plan.
       ``(E) Uniform application.--This paragraph shall be applied 
     uniformly for all enrollees for a plan in a MedicarePlus 
     payment area.
       ``(F) Construction.--Nothing in this subsection shall be 
     construed as preventing a MedicarePlus organization from 
     providing health care benefits that are in addition to the 
     benefits otherwise required to be provided under this 
     paragraph and from imposing a premium for such additional 
     benefits.
       ``(2) Stabilization fund.--A MedicarePlus organization may 
     provide that a part of the value of an excess amount 
     described in paragraph (1) be withheld and reserved in the 
     Federal Hospital Insurance Trust Fund and in the Federal 
     Supplementary Medical Insurance Trust Fund (in such 
     proportions as the Secretary determines to be appropriate) by 
     the Secretary for subsequent annual contract periods, to the 
     extent required to stabilize and prevent undue fluctuations 
     in the additional benefits offered in those subsequent 
     periods by the organization in accordance with such 
     paragraph. Any of such value of the amount reserved which is 
     not provided as additional benefits described in paragraph 
     (1)(A) to individuals electing the MedicarePlus plan of the 
     organization in accordance with such paragraph prior to the 
     end of such periods, shall revert for the use of such trust 
     funds.
       ``(3) Determination based on insufficient data.--For 
     purposes of this subsection, if the Secretary finds that 
     there is insufficient enrollment experience (including no 
     enrollment experience in the case of a provider-sponsored 
     organization) to determine an average of the capitation 
     payments to be made under this part at the beginning of a 
     contract period, the Secretary may determine such an average 
     based on the enrollment experience of other contracts entered 
     into under this part.
       ``(4) 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 MedicarePlus 
     organization, either--
       ``(i) the rate of payment for that service or services 
     which the Secretary annually determines would apply to an 
     individual electing a MedicarePlus plan under this part if 
     the rate of payment were determined under a `community rating 
     system' (as defined in section 1302(8) of the Public Health 
     Service Act, other than subparagraph (C)), or
       ``(ii) such portion of the weighted aggregate premium, 
     which the Secretary annually estimates would apply to such an 
     individual, as the Secretary annually estimates is 
     attributable to that service or services,

     but adjusted for differences between the utilization 
     characteristics of the individuals electing coverage under 
     this part and the utilization characteristics of the other 
     enrollees with the plan (or, if the Secretary finds that 
     adequate data are not available to adjust for those 
     differences, the differences between the utilization 
     characteristics of individuals selecting other MedicarePlus 
     coverage, or MedicarePlus eligible individuals in the area, 
     in the State, or in the United States, eligible to elect 
     MedicarePlus coverage under this part and the utilization 
     characteristics of the rest of the population in the area, in 
     the State, or in the United States, respectively).
       ``(B) Special rule for provider-sponsored organizations.--
     In the case of a MedicarePlus organization that is a 
     provider-sponsored organization, the adjusted community rate 
     under subparagraph (A) for a MedicarePlus plan of the 
     organization may be computed (in a manner specified by the 
     Secretary) using data in the general commercial marketplace 
     or (during a transition period) based on the costs incurred 
     by the organization in providing such a plan.
       ``(g) Periodic Auditing.--The Secretary shall provide for 
     the annual auditing of the financial records (including data 
     relating to medicare utilization, costs, and computation of 
     the adjusted community rate) of at least one-third of the 
     MedicarePlus organizations offering MedicarePlus plans under 
     this part. The Comptroller General shall monitoring auditing 
     activities conducted under this subsection.
       ``(h) Prohibition of State Imposition of Premium Taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     premiums on MedicarePlus plans or the offering of such plans.


     ``organizational and financial requirements for medicareplus 
            organizations; provider-sponsored organizations

       ``Sec. 1855. (a) Organized and Licensed Under State Law.--
       ``(1) In general.--Subject to paragraphs (2) and (3), a 
     MedicarePlus organization shall be organized and licensed 
     under State law as a risk-bearing entity eligible to offer 
     health insurance or health benefits coverage in each State in 
     which it offers a MedicarePlus plan.
       ``(2) Special exception for provider-sponsored 
     organizations.--
       ``(A) In general.--In the case of a provider-sponsored 
     organization that seeks to offer a MedicarePlus plan in a 
     State, the Secretary shall waive the requirement of paragraph 
     (1) that the organization be licensed in that State if--
       ``(i) the organization files an application for such waiver 
     with the Secretary, and
       ``(ii) the Secretary determines, based on the application 
     and other evidence presented to the Secretary, that any of 
     the grounds for approval of the application described in 
     subparagraph (B), (C), or (D) has been met.
       ``(B) Failure to act on licensure application on a timely 
     basis.--A ground for approval of such a waiver application is 
     that the State has failed to complete action on a licensing 
     application of the organization within 90 days of the date of 
     the State's receipt of the completed application. No period 
     before the date of the enactment of this section shall be 
     included in determining such 90-day period.
       ``(C) Denial of application based on discriminatory 
     treatment.--A ground for approval of such a waiver 
     application is that the State has denied such a licensing 
     application and--
       ``(i) the State has imposed documentation or information 
     requirements not related to solvency requirements that are 
     not generally applicable to other entities engaged in 
     substantially similar business, or
       ``(ii) the standards or review process imposed by the State 
     as a condition of approval of the license imposes any 
     material requirements, procedures, or standards (other than 
     requirements and standards relating to solvency) to such 
     organizations that are not generally applicable to other 
     entities engaged in substantially similar business.
       ``(D) Denial of application based on application of 
     solvency requirements.--A ground for approval of such a 
     waiver application is that the State has denied such a 
     licensing application based (in whole or in part) on the 
     organization's failure to meet applicable solvency 
     requirements and--
       ``(i) such requirements are not the same as the solvency 
     standards established under section 1856(a); or
       ``(ii) the State has imposed as a condition of approval of 
     the license any documentation or information requirements 
     relating to solvency or other material requirements, 
     procedures, or standards relating to solvency that are 
     different from the requirements, procedures, and standards 
     applied by the Secretary under subsection (d)(2).

     For purposes of this subparagraph, the term `solvency 
     requirements' means requirements relating to solvency and 
     other matters covered under the standards established under 
     section 1856(a).
       ``(E) Treatment of waiver.--In the case of a waiver granted 
     under this paragraph for a provider-sponsored organization--
       ``(i) the waiver shall be effective for a 36-month period, 
     except it may be renewed based on a subsequent application 
     filed during the last 6 months of such period, and
       ``(ii) any provisions of State law which relate to the 
     licensing of the organization and which prohibit the 
     organization from providing coverage pursuant to a contract 
     under this part shall be superseded.

     Nothing in this subparagraph shall be construed as limiting 
     the number of times such a waiver may be renewed.
       ``(F) Prompt action on application.--The Secretary shall 
     grant or deny such a waiver application within 60 days after 
     the date the Secretary determines that a substantially 
     complete application has been filed. Nothing in this section 
     shall be construed as preventing an organization which has 
     had such a waiver application denied from submitting a 
     subsequent waiver application.
       ``(3) Exception if required to offer more than medicareplus 
     plans.--Paragraph (1) shall not apply to a MedicarePlus 
     organization in a State if the State requires the 
     organization, as a condition of licensure, to offer any 
     product or plan other than a MedicarePlus plan.
       ``(4) Licensure does not substitute for or constitute 
     certification.--The fact that an organization is licensed in 
     accordance with paragraph (1) does not deem the organization 
     to meet other requirements imposed under this part.
       ``(b) Prepaid Payment.--A MedicarePlus organization shall 
     be compensated (except for premiums, deductibles, 
     coinsurance, and copayments) for the provision of health care 
     services to enrolled members under the contract under this 
     part by a payment which is paid on a periodic basis without 
     regard to the date the health care services are provided and 
     which is fixed without regard to the frequency, extent, or 
     kind of health care service actually provided to a member.
       ``(c) Assumption of Full Financial Risk.--The MedicarePlus 
     organization shall assume full financial risk on a 
     prospective basis for the provision of the health care 
     services (except, at the election of the organization, 
     hospice care) for which benefits are required to be provided 
     under section 1852(a)(1), except that the organization--
       ``(1) may obtain insurance or make other arrangements for 
     the cost of providing to

[[Page H4506]]

     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.
       ``(d) Certification of Provision Against Risk of Insolvency 
     for Unlicensed PSOs.--
       ``(1) In general.--Each MedicarePlus organization that is a 
     provider-sponsored organization, that is not licensed by a 
     State under subsection (a), and for which a waiver 
     application has been approved under subsection (a)(2), shall 
     meet standards established under section 1856(a) relating to 
     the financial solvency and capital adequacy of the 
     organization.
       ``(2) Certification process for solvency standards for 
     psos.--The Secretary shall establish a process for the 
     receipt and approval of applications of a provider-sponsored 
     organization described in paragraph (1) for certification 
     (and periodic recertification) of the organization as meeting 
     such solvency standards. Under such process, the Secretary 
     shall act upon such an application not later than 60 days 
     after the date the application has been received.
       ``(e) Provider-Sponsored Organization Defined.--
       ``(1) In general.--In this part, the term `provider-
     sponsored organization' means a public or private entity--
       ``(A) that is established or organized by a health care 
     provider, or group of affiliated health care providers,
       ``(B) that provides a substantial proportion (as defined by 
     the Secretary in accordance with paragraph (2)) of the health 
     care items and services under the contract under this part 
     directly through the provider or affiliated group of 
     providers, and
       ``(C) with respect to which those affiliated providers that 
     share, directly or indirectly, substantial financial risk 
     with respect to the provision of such items and services have 
     at least a majority financial interest in the entity.
       ``(2) Substantial proportion.--In defining what is a 
     `substantial proportion' for purposes of paragraph (1)(B), 
     the Secretary--
       ``(A) shall take into account (i) the need for such an 
     organization to assume responsibility for a substantial 
     proportion of services in order to assure financial stability 
     and (ii) the practical difficulties in such an organization 
     integrating a very wide range of service providers; and
       ``(B) may vary such proportion based upon relevant 
     differences among organizations, such as their location in an 
     urban or rural area.
       ``(3) Affiliation.--For purposes of this subsection, a 
     provider is `affiliated' with another provider if, through 
     contract, ownership, or otherwise--
       ``(A) one provider, directly or indirectly, controls, is 
     controlled by, or is under common control with the other,
       ``(B) both providers are part of a controlled group of 
     corporations under section 1563 of the Internal Revenue Code 
     of 1986, or
       ``(C) both providers are part of an affiliated service 
     group under section 414 of such Code.
       ``(4) Control.--For purposes of paragraph (3), control is 
     presumed to exist if one party, directly or indirectly, owns, 
     controls, or holds the power to vote, or proxies for, not 
     less than 51 percent of the voting rights or governance 
     rights of another.
       ``(5) Health care provider defined.--In this subsection, 
     the term `health care provider' means--
       ``(A) any individual who is engaged in the delivery of 
     health care services in a State and who is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State, and
       ``(B) any entity that is engaged in the delivery of health 
     care services in a State and that, if it is required by State 
     law or regulation to be licensed or certified by the State to 
     engage in the delivery of such services in the State, is so 
     licensed.
       ``(6) Regulations.--The Secretary shall issue regulations 
     to carry out this subsection.


                      ``establishment of standards

       ``Sec. 1856. (a) Establishment of Solvency Standards for 
     Provider-Sponsored Organizations.--
       ``(1) Establishment.--
       ``(A) In general.--The Secretary shall establish, on an 
     expedited basis and using a negotiated rulemaking process 
     under subchapter III of chapter 5 of title 5, United States 
     Code, standards described in section 1855(d)(1) (relating to 
     the financial solvency and capital adequacy of the 
     organization) that entities must meet to qualify as provider-
     sponsored organizations under this part.
       ``(B) Factors to consider for solvency standards.--In 
     establishing solvency standards under subparagraph (A) for 
     provider-sponsored organizations, the Secretary shall consult 
     with interested parties and shall take into account--
       ``(i) the delivery system assets of such an organization 
     and ability of such an organization to provide services 
     directly to enrollees through affiliated providers, and
       ``(ii) alternative means of protecting against insolvency, 
     including reinsurance, unrestricted surplus, letters of 
     credit, guarantees, organizational insurance coverage, 
     partnerships with other licensed entities, and valuation 
     attributable to the ability of such an organization to meet 
     its service obligations through direct delivery of care.
       ``(C) Enrollee protection against insolvency.--Such 
     standards shall include provisions to prevent enrollees from 
     being held liable to any person or entity for the 
     MedicarePlus organization's debts in the event of the 
     organization's insolvency.
       ``(2) Publication of notice.--In carrying out the 
     rulemaking process under this subsection, the Secretary, 
     after consultation with the National Association of Insurance 
     Commissioners, the American Academy of Actuaries, 
     organizations representative of medicare beneficiaries, and 
     other interested parties, shall publish the notice provided 
     for under section 564(a) of title 5, United States Code, by 
     not later than 45 days after the date of the enactment of 
     this section.
       ``(3) Target date for publication of rule.--As part of the 
     notice under paragraph (2), and for purposes of this 
     subsection, the `target date for publication' (referred to in 
     section 564(a)(5) of such title) shall be April 1, 1998.
       ``(4) Abbreviated period for submission of comments.--In 
     applying section 564(c) of such title under this subsection, 
     `15 days' shall be substituted for `30 days'.
       ``(5) Appointment of negotiated rulemaking committee and 
     facilitator.--The Secretary shall provide for--
       ``(A) the appointment of a negotiated rulemaking committee 
     under section 565(a) of such title by not later than 30 days 
     after the end of the comment period provided for under 
     section 564(c) of such title (as shortened under paragraph 
     (4)), and
       ``(B) the nomination of a facilitator under section 566(c) 
     of such title by not later than 10 days after the date of 
     appointment of the committee.
       ``(6) Preliminary committee report.--The negotiated 
     rulemaking committee appointed under paragraph (5) shall 
     report to the Secretary, by not later than January 1, 1998, 
     regarding the committee's progress on achieving a consensus 
     with regard to the rulemaking proceeding and whether such 
     consensus is likely to occur before one month before the 
     target date for publication of the rule. If the committee 
     reports that the committee has failed to make significant 
     progress towards such consensus or is unlikely to reach such 
     consensus by the target date, the Secretary may terminate 
     such process and provide for the publication of a rule under 
     this subsection through such other methods as the Secretary 
     may provide.
       ``(7) Final committee report.--If the committee is not 
     terminated under paragraph (6), the rulemaking committee 
     shall submit a report containing a proposed rule by not later 
     than one month before the target date of publication.
       ``(8) Interim, final effect.--The Secretary shall publish a 
     rule under this subsection in the Federal Register by not 
     later than the target date of publication. Such rule shall be 
     effective and final immediately on an interim basis, but is 
     subject to change and revision after public notice and 
     opportunity for a period (of not less than 60 days) for 
     public comment. In connection with such rule, the Secretary 
     shall specify the process for the timely review and approval 
     of applications of entities to be certified as provider-
     sponsored organizations pursuant to such rules and consistent 
     with this subsection.
       ``(9) Publication of rule after public comment.--The 
     Secretary shall provide for consideration of such comments 
     and republication of such rule by not later than 1 year after 
     the target date of publication.
       ``(b) Establishment of Other Standards.--
       ``(1) In general.--The Secretary shall establish by 
     regulation other standards (not described in subsection (a)) 
     for MedicarePlus organizations and plans consistent with, and 
     to carry out, this part.
       ``(2) Use of current standards.--Consistent with the 
     requirements of this part, standards established under this 
     subsection shall be based on standards established under 
     section 1876 to carry out analogous provisions of such 
     section.
       ``(3) Use of interim standards.--For the period in which 
     this part is in effect and standards are being developed and 
     established under the preceding provisions of this 
     subsection, the Secretary shall provide by not later than 
     June 1, 1998, for the application of such interim standards 
     (without regard to any requirements for notice and public 
     comment) as may be appropriate to provide for the expedited 
     implementation of this part. Such interim standards shall not 
     apply after the date standards are established under the 
     preceding provisions of this subsection.
       ``(4) Application of new standards to entities with a 
     contract.--In the case of a MedicarePlus organization with a 
     contract

[[Page H4507]]

     in effect under this part at the time standards applicable to 
     the organization under this section are changed, the 
     organization may elect not to have such changes apply to the 
     organization until the end of the current contract year (or, 
     if there is less than 6 months remaining in the contract 
     year, until 1 year after the end of the current contract 
     year).
       ``(5) Relation to state laws.--The standards established 
     under this subsection shall supersede any State law or 
     regulation with respect to MedicarePlus plans which are 
     offered by MedicarePlus organizations under this part to the 
     extent such law or regulation is inconsistent with such 
     standards.


              ``contracts with medicareplus organizations

       ``Sec. 1857. (a) In General.--The Secretary shall not 
     permit the election under section 1851 of a MedicarePlus plan 
     offered by a MedicarePlus organization under this part, and 
     no payment shall be made under section 1853 to an 
     organization, unless the Secretary has entered into a 
     contract under this section with the organization with 
     respect to the offering of such plan. Such a contract with an 
     organization may cover more than one MedicarePlus plan. Such 
     contract shall provide that the organization agrees to comply 
     with the applicable requirements and standards of this part 
     and the terms and conditions of payment as provided for in 
     this part.
       ``(b) Minimum Enrollment Requirements.--
       ``(1) In general.--Subject to paragraphs (2) and (3), the 
     Secretary may not enter into a contract under this section 
     with a MedicarePlus organization unless the organization has 
     at least 5,000 individuals (or 1,500 individuals in the case 
     of an organization that is a provider-sponsored organization) 
     who are receiving health benefits through the organization, 
     except that the standards under section 1856 may permit the 
     organization to have a lesser number of beneficiaries (but 
     not less than 500 in the case of an organization that is a 
     provider-sponsored organization) if the organization 
     primarily serves individuals residing outside of urbanized 
     areas.
       ``(2) Exception for msa plan.--Paragraph (1) shall not 
     apply with respect to a contract that relates only to an MSA 
     plan.
       ``(3) Allowing transition.--The Secretary may waive the 
     requirement of paragraph (1) during the first 3 contract 
     years with respect to an organization.
       ``(c) Contract Period and Effectiveness.--
       ``(1) Period.--Each contract under this section shall be 
     for a term of at least one year, as determined by the 
     Secretary, and may be made automatically renewable from term 
     to term in the absence of notice by either party of intention 
     to terminate at the end of the current term.
       ``(2) Termination authority.--In accordance with procedures 
     established under subsection (h), the Secretary may at any 
     time terminate any such contract if the Secretary determines 
     that the organization--
       ``(A) has failed substantially to carry out the contract;
       ``(B) is carrying out the contract in a manner inconsistent 
     with the efficient and effective administration of this part; 
     or
       ``(C) no longer substantially meets the applicable 
     conditions of this part.
       ``(3) Effective date of contracts.--The effective date of 
     any contract executed pursuant to this section shall be 
     specified in the contract, except that in no case shall a 
     contract under this section which provides for coverage under 
     an MSA plan be effective before January 1999 with respect to 
     such coverage.
       ``(4) Previous terminations.--The Secretary may not enter 
     into a contract with a MedicarePlus organization if a 
     previous contract with that organization under this section 
     was terminated at the request of the organization within the 
     preceding five-year period, except in circumstances which 
     warrant special consideration, as determined by the 
     Secretary.
       ``(5) Contracting authority.--The authority vested in the 
     Secretary by this part may be performed without regard to 
     such provisions of law or regulations relating to the making, 
     performance, amendment, or modification of contracts of the 
     United States as the Secretary may determine to be 
     inconsistent with the furtherance of the purpose of this 
     title.
       ``(d) Protections Against Fraud and Beneficiary 
     Protections.--
       ``(1) Inspection and audit.--Each contract under this 
     section shall provide that the Secretary, or any person or 
     organization designated by the Secretary--
       ``(A) shall have the right to inspect or otherwise evaluate 
     (i) the quality, appropriateness, and timeliness of services 
     performed under the contract and (ii) the facilities of the 
     organization when there is reasonable evidence of some need 
     for such inspection, and
       ``(B) shall have the right to audit and inspect any books 
     and records of the MedicarePlus organization that pertain (i) 
     to the ability of the organization to bear the risk of 
     potential financial losses, or (ii) to services performed or 
     determinations of amounts payable under the 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 MedicarePlus 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 
     MedicarePlus organization, any person who is directly or 
     indirectly the beneficial owner of more than 5 percent of the 
     equity of the organization, any person who is the beneficial 
     owner of a mortgage, deed of trust, note, or other interest 
     secured by, and valuing more than 5 percent of the 
     organization, and, in the case of a MedicarePlus organization 
     organized as a nonprofit corporation, an incorporator or 
     member of such corporation under applicable State corporation 
     law;
       ``(ii) any entity in which a person described in clause 
     (i)--

       ``(I) is an officer or director;
       ``(II) is a partner (if such entity is organized as a 
     partnership);
       ``(III) has directly or indirectly a beneficial interest of 
     more than 5 percent of the equity; or
       ``(IV) has a mortgage, deed of trust, note, or other 
     interest valuing more than 5 percent of the assets of such 
     entity;

       ``(iii) any person directly or indirectly controlling, 
     controlled by, or under common control with an organization; 
     and
       ``(iv) any spouse, child, or parent of an individual 
     described in clause (i).
       ``(C) Access to information.--Each MedicarePlus 
     organization shall make the information reported pursuant to 
     subparagraph (A) available to its enrollees upon reasonable 
     request.
       ``(4) Loan information.--The contract shall require the 
     organization to notify the Secretary of loans and other 
     special financial arrangements which are made between the 
     organization and subcontractors, affiliates, and related 
     parties.
       ``(e) Additional Contract Terms.--
       ``(1) In general.--The contract shall contain such other 
     terms and conditions not inconsistent with this part 
     (including requiring the organization to provide the 
     Secretary with such information) as the Secretary may find 
     necessary and appropriate.
       ``(2) Cost-sharing in enrollment-related costs.--The 
     contract with a MedicarePlus organization shall require the 
     payment to the Secretary for the organization's pro rata 
     share (as determined by the Secretary) of the estimated costs 
     to be incurred by the Secretary in carrying out section 1851 
     (relating to enrollment and dissemination of information). 
     Such payments are appropriated to defray the costs described 
     in the preceding sentence, to remain available until 
     expended.
       ``(f) Prompt Payment by MedicarePlus Organization.--
       ``(1) Requirement.--A contract under this part shall 
     require a MedicarePlus organization to provide prompt payment 
     (consistent with the provisions of sections 1816(c)(2) and 
     1842(c)(2)) of claims submitted for services and supplies 
     furnished to individuals pursuant to the contract, if the 
     services or supplies are not furnished under a contract 
     between the organization and the provider or supplier.
       ``(2) Secretary's option to bypass noncomplying 
     organization.--In the case of a MedicarePlus eligible 
     organization which the Secretary determines, after notice and 
     opportunity for a hearing, has failed to make payments of 
     amounts in compliance with paragraph (1), the Secretary may 
     provide for direct payment of the amounts owed to providers 
     and suppliers for covered services and supplies furnished to 
     individuals enrolled under this part under the contract. If 
     the Secretary provides for the direct payments, the Secretary 
     shall provide for an appropriate reduction in the amount of 
     payments

[[Page H4508]]

     otherwise made to the organization under this part to reflect 
     the amount of the Secretary's payments (and the Secretary's 
     costs in making the payments).
       ``(g) Intermediate Sanctions.--
       ``(1) In general.--If the Secretary determines that a 
     MedicarePlus organization with a contract under this 
     section--
       ``(A) fails substantially to provide medically necessary 
     items and services that are required (under law or under the 
     contract) to be provided to an individual covered under the 
     contract, if the failure has adversely affected (or has 
     substantial likelihood of adversely affecting) the 
     individual;
       ``(B) imposes net monthly premiums on individuals enrolled 
     under this part in excess of the net monthly premiums 
     permitted;
       ``(C) acts to expel or to refuse to re-enroll an individual 
     in violation of the provisions of this part;
       ``(D) engages in any practice that would reasonably be 
     expected to have the effect of denying or discouraging 
     enrollment (except as permitted by this part) by eligible 
     individuals with the organization whose medical condition or 
     history indicates a need for substantial future medical 
     services;
       ``(E) misrepresents or falsifies information that is 
     furnished--
       ``(i) to the Secretary under this part, or
       ``(ii) to an individual or to any other entity under this 
     part;
       ``(F) fails to comply with the requirements of section 
     1852(j)(3); or
       ``(G) employs or contracts with any individual or entity 
     that is excluded from participation under this title under 
     section 1128 or 1128A for the provision of health care, 
     utilization review, medical social work, or administrative 
     services or employs or contracts with any entity for the 
     provision (directly or indirectly) through such an excluded 
     individual or entity of such services;

     the Secretary may provide, in addition to any other remedies 
     authorized by law, for any of the remedies described in 
     paragraph (2).
       ``(2) Remedies.--The remedies described in this paragraph 
     are--
       ``(A) civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) or, with respect to a 
     determination under subparagraph (D) or (E)(i) of such 
     paragraph, of not more than $100,000 for each such 
     determination, plus, with respect to a determination under 
     paragraph (1)(B), double the excess amount charged in 
     violation of such paragraph (and the excess amount charged 
     shall be deducted from the penalty and returned to the 
     individual concerned), and plus, with respect to a 
     determination under paragraph (1)(D), $15,000 for each 
     individual not enrolled as a result of the practice involved,
       ``(B) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under paragraph (1) and until the 
     Secretary is satisfied that the basis for such determination 
     has been corrected and is not likely to recur, 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 
     MedicarePlus organization for which the Secretary makes a 
     determination under subsection (c)(2) the basis of which is 
     not described in paragraph (1), the Secretary may apply the 
     following intermediate sanctions:
       ``(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
       ``(B) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under subsection (g) during which the deficiency 
     that is the basis of a determination under subsection (c)(2) 
     exists.
       ``(C) Suspension of enrollment of individuals under 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.
       ``(h) Procedures for Termination.--
       ``(1) In general.--The Secretary may terminate a contract 
     with a MedicarePlus organization under this section in 
     accordance with formal investigation and compliance 
     procedures established by the Secretary under which--
       ``(A) the Secretary provides the organization with the 
     reasonable opportunity to develop and implement a corrective 
     action plan to correct the deficiencies that were the basis 
     of the Secretary's determination under subsection (c)(2);
       ``(B) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before terminating the 
     contract.
       ``(2) Civil money penalties.--The provisions of section 
     1128A (other than subsections (a) and (b)) shall apply to a 
     civil money penalty under subsection (f) or under paragraph 
     (2) or (3) of subsection (g) in the same manner as they apply 
     to a civil money penalty or proceeding under section 
     1128A(a).
       ``(3) Exception for imminent and serious risk to health.--
     Paragraph (1) shall not apply if the Secretary determines 
     that a delay in termination, resulting from compliance with 
     the procedures specified in such paragraph prior to 
     termination, would pose an imminent and serious risk to the 
     health of individuals enrolled under this part with the 
     organization.


                ``definitions; miscellaneous provisions

       ``Sec. 1859. (a) Definitions Relating to MedicarePlus 
     Organizations.--In this part--
       ``(1) MedicarePlus organization.--The term `MedicarePlus 
     organization' means a public or private entity that is 
     certified under section 1856 as meeting the requirements and 
     standards of this part for such an organization.
       ``(2) Provider-sponsored organization.--The term `provider-
     sponsored organization' is defined in section 1855(e)(1).
       ``(b) Definitions Relating to MedicarePlus Plans.--
       ``(1) MedicarePlus plan.--The term `MedicarePlus plan' 
     means health benefits coverage offered under a policy, 
     contract, or plan by a MedicarePlus organization pursuant to 
     and in accordance with a contract under section 1857.
       ``(2) MSA plan.--
       ``(A) In general.--The term `MSA plan' means a MedicarePlus 
     plan that--
       ``(i) provides reimbursement for at least the items and 
     services described in section 1852(a)(1) in a year but only 
     after the enrollee incurs countable expenses (as specified 
     under the plan) equal to the amount of an annual deductible 
     (described in subparagraph (B));
       ``(ii) counts as such expenses (for purposes of such 
     deductible) at least all amounts that would have been payable 
     under parts A and B, and that would have been payable by the 
     enrollee as deductibles, coinsurance, or copayments, if the 
     enrollee had elected to receive benefits through the 
     provisions of such parts; and
       ``(iii) provides, after such deductible is met for a year 
     and for all subsequent expenses for items and services 
     referred to in clause (i) in the year, for a level of 
     reimbursement that is not less than--

       ``(I) 100 percent of such expenses, or
       ``(II) 100 percent of the amounts that would have been paid 
     (without regard to any deductibles or coinsurance) under 
     parts A and B with respect to such expenses,

     whichever is less.
       ``(B) Deductible.--The amount of annual deductible under an 
     MSA plan--
       ``(i) for contract year 1999 shall be not more than $6,000; 
     and
       ``(ii) for a subsequent contract year shall be not more 
     than the maximum amount of such deductible for the previous 
     contract year under this subparagraph increased by the 
     national per capita MedicarePlus growth percentage under 
     section 1853(c)(6) for the year.

     If the amount of the deductible under clause (ii) is not a 
     multiple of $50, the amount shall be rounded to the nearest 
     multiple of $50.
       ``(c) Other References to Other Terms.--
       ``(1) MedicarePlus eligible individual.--The term 
     `MedicarePlus eligible individual' is defined in section 
     1851(a)(3).
       ``(2) MedicarePlus payment area.--The term `MedicarePlus 
     payment area' is defined in section 1853(d).
       ``(3) National per capita medicareplus growth percentage.--
     The `national per capita MedicarePlus growth percentage' is 
     defined in section 1853(c)(6).
       ``(4) Monthly premium; net monthly premium.--The terms 
     `monthly premium' and `net monthly premium' are defined in 
     section 1854(a)(2).
       ``(d) Coordinated Acute and Long-term Care Benefits Under a 
     MedicarePlus Plan.--Nothing in this part shall be construed 
     as preventing a State from coordinating benefits under a 
     medicaid plan under title XIX with those provided under a 
     MedicarePlus plan in a manner that assures continuity of a 
     full-range of acute care and long-term care services to poor 
     elderly or disabled individuals eligible for benefits under 
     this title and under such plan.
       ``(e) Restriction on Enrollment for Certain MedicarePlus 
     Plans.--
       ``(1) In general.--In the case of a MedicarePlus religious 
     fraternal benefit society plan described in paragraph (2), 
     notwithstanding any other provision of this part to the 
     contrary and in accordance with regulations of the Secretary, 
     the society offering the plan may restrict the enrollment of 
     individuals under this part to individuals who are members of 
     the church, convention, or group described in paragraph 
     (3)(B) with which the society is affiliated.
       ``(2) Medicareplus religious fraternal benefit society plan 
     described.--For purposes of this subsection, a MedicarePlus 
     religious fraternal benefit society plan described in this 
     paragraph is a MedicarePlus plan described in section 
     1851(a)(2)(A) that--
       ``(A) is offered by a religious fraternal benefit society 
     described in paragraph (3) only to members of the church, 
     convention, or group described in paragraph (3)(B); and
       ``(B) permits all such members to enroll under the plan 
     without regard to health status-related factors.

     Nothing in this subsection shall be construed as waiving any 
     plan requirements relating to financial solvency. In 
     developing solvency standards under section 1856, the 
     Secretary shall take into account open contract and 
     assessment features characteristic of fraternal insurance 
     certificates.

[[Page H4509]]

       ``(3) Religious fraternal benefit society defined.--For 
     purposes of paragraph (2)(A), a `religious fraternal benefit 
     society' described in this section is an organization that--
       ``(A) is exempt from Federal income taxation under section 
     501(c)(8) of the Internal Revenue Code of 1986;
       ``(B) is affiliated with, carries out the tenets of, and 
     shares a religious bond with, a church or convention or 
     association of churches or an affiliated group of churches;
       ``(C) offers, in addition to a MedicarePlus religious 
     fraternal benefit society plan, health coverage to 
     individuals not entitled to benefits under this title who are 
     members of such church, convention, or group; and
       ``(D) does not impose any limitation on membership in the 
     society based on any health status-related factor.
       ``(4) Payment adjustment.--Under regulations of the 
     Secretary, in the case of individuals enrolled under this 
     part under a MedicarePlus religious fraternal benefit society 
     plan described in paragraph (2), the Secretary shall provide 
     for such adjustment to the payment amounts otherwise 
     established under section 1854 as may be appropriate to 
     assure an appropriate payment level, taking into account the 
     actuarial characteristics and experience of such 
     individuals.''.
       (b) Report on Coverage of Beneficiaries with End-Stage 
     Renal Disease.--The Secretary of Health and Human Services 
     shall provide for a study on the feasibility and impact of 
     removing the limitation under section 1851(b)(3)(B) of the 
     Social Security Act (as inserted by subsection (a)) on 
     eligibility of most individuals medically determined to have 
     end-stage renal disease to enroll in MedicarePlus plans. By 
     not later than October 1, 1998, the Secretary shall submit to 
     Congress a report on such study and shall include in the 
     report such recommendations regarding removing or restricting 
     the limitation as may be appropriate.
       (c) Report on MedicarePlus Teaching Programs and Use of DSH 
     and Teaching Hospitals.--Based on the information provided to 
     the Secretary of Health and Human Services under section 
     1852(k) of the Social Security Act and such information as 
     the Secretary may obtain, by not later than October 1, 1999, 
     the Secretary shall submit to Congress a report on graduate 
     medical education programs operated by MedicarePlus 
     organizations and the extent to which MedicarePlus 
     organizations are providing for payments to hospitals 
     described in such section.

     SEC. 10002. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO 
                   PROGRAM.

       (a) Authorizing Transitional Waiver of 50:50 Rule.--Section 
     1876(f) (42 U.S.C. 1395mm(f)) is amended--
       (1) in paragraph (2), by striking ``The Secretary'' and 
     inserting ``Subject to paragraph (4), the Secretary'', and
       (2) by adding at the end the following new paragraph:
       ``(4) Effective for contract periods beginning after 
     December 31, 1996, the Secretary may waive or modify the 
     requirement imposed by paragraph (1) to the extent the 
     Secretary finds that it is in the public interest.''.
       (b) Transition.--Section 1876 (42 U.S.C. 1395mm) is amended 
     by adding at the end the following new subsection:
       ``(k)(1) Except as provided in paragraph (3), the Secretary 
     shall not enter into, renew, or continue any risk-sharing 
     contract under this section with an eligible organization for 
     any contract year beginning on or after--
       ``(A) the date standards for MedicarePlus organizations and 
     plans are first established under section 1856 with respect 
     to MedicarePlus organizations that are insurers or health 
     maintenance organizations, or
       ``(B) in the case of such an organization with such a 
     contract in effect as of the date such standards were first 
     established, 1 year after such date.
       ``(2) The Secretary shall not enter into, renew, or 
     continue any risk-sharing contract under this section with an 
     eligible organization for any contract year beginning on or 
     after January 1, 2000.
       ``(3) An individual who is enrolled in part B only and is 
     enrolled in an eligible organization with a risk-sharing 
     contract under this section on December 31, 1998, may 
     continue enrollment in such organization in accordance with 
     regulations issued by not later then July 1, 1998.
       ``(4) Notwithstanding subsection (a), the Secretary shall 
     provide that payment amounts under risk-sharing contracts 
     under this section for months in a year (beginning with 
     January 1998) shall be computed--
       ``(A) with respect to individuals entitled to benefits 
     under both parts A and B, by substituting payment rates under 
     section 1853(a) for the payment rates otherwise established 
     under subsection 1876(a), and
       ``(B) with respect to individuals only entitled to benefits 
     under part B, by substituting an appropriate proportion of 
     such rates (reflecting the relative proportion of payments 
     under this title attributable to such part) for the payment 
     rates otherwise established under subsection (a).

     For purposes of carrying out this paragraph for payments for 
     months in 1998, the Secretary shall compute, announce, and 
     apply the payment rates under section 1853(a) 
     (notwithstanding any deadlines specified in such section) in 
     as timely a manner as possible and may (to the extent 
     necessary) provide for retroactive adjustment in payments 
     made under this section not in accordance with such rates.''.
       (c) Enrollment Transition Rule.--An individual who is 
     enrolled on December 31, 1998, with an eligible organization 
     under section 1876 of the Social Security Act (42 U.S.C. 
     1395mm) shall be considered to be enrolled with that 
     organization on January 1, 1999, under part C of title XVIII 
     of such Act if that organization has a contract under that 
     part for providing services on January 1, 1999 (unless the 
     individual has disenrolled effective on that date).
       (d) Advance Directives.--Section 1866(f) (42 U.S.C. 
     1395cc(f)) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``1855(i),'' after ``1833(s),'', and
       (B) by inserting ``, MedicarePlus organization,'' after 
     ``provider of services''; and
       (2) in paragraph (2)(E), by inserting ``or a MedicarePlus 
     organization'' after ``section 1833(a)(1)(A)''.
       (e) Extension of Provider Requirement.--Section 
     1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended--
       (1) by striking ``in the case of hospitals and skilled 
     nursing facilities,'';
       (2) by striking ``inpatient hospital and extended care'';
       (3) by inserting ``with a MedicarePlus organization under 
     part C or'' after ``any individual enrolled''; and
       (4) by striking ``(in the case of hospitals) or limits (in 
     the case of skilled nursing facilities)''.
       (f) Additional Conforming Changes.--
       (1) Conforming references to previous part C.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to part C of title XVIII of the Social Security 
     Act is deemed a reference to part D of such title (as in 
     effect after such date).
       (2) Secretarial submission of legislative proposal.--Not 
     later than 90 days after the date of the enactment of this 
     Act, the Secretary of Health and Human Services shall submit 
     to the appropriate committees of Congress a legislative 
     proposal providing for such technical and conforming 
     amendments in the law as are required by the provisions of 
     this chapter.
       (g) Immediate Effective Date for Certain Requirements for 
     Demonstrations.--Section 1857(e)(2) of the Social Security 
     Act (requiring contribution to certain costs related to the 
     enrollment process comparative materials) applies to 
     demonstrations with respect to which enrollment is effected 
     or coordinated under section 1851 of such Act.
       (h) Use of Interim, Final Regulations.--In order to carry 
     out the amendments made by this chapter in a timely manner, 
     the Secretary of Health and Human Services may promulgate 
     regulations that take effect on an interim basis, after 
     notice and pending opportunity for public comment.
       (i) Transition Rule for PSO Enrollment.--In applying 
     subsection (g)(1) of section 1876 of the Social Security Act 
     (42 U.S.C. 1395mm) to a risk-sharing contract entered into 
     with an eligible organization that is a provider-sponsored 
     organization (as defined in section 1855(e)(1) of such Act, 
     as inserted by section 10001) for a contract year beginning 
     on or after January 1, 1998, there shall be substituted for 
     the minimum number of enrollees provided under such section 
     the minimum number of enrollees permitted under section 
     1857(b)(1) of such Act (as so inserted).

     SEC. 10003. CONFORMING CHANGES IN MEDIGAP PROGRAM.

       (a) Conforming Amendments to MedicarePlus Changes.--
       (1) In general.--Section 1882(d)(3)(A)(i) (42 U.S.C. 
     1395ss(d)(3)(A)(i)) is amended--
       (A) in the matter before subclause (I), by inserting 
     ``(including an individual electing a MedicarePlus plan under 
     section 1851)'' after ``of this title''; and
       (B) in subclause (II)--
       (i) by inserting ``in the case of an individual not 
     electing a MedicarePlus plan'' after ``(II)'', and
       (ii) by inserting before the comma at the end the 
     following: ``or in the case of an individual electing a 
     MedicarePlus plan, a medicare supplemental policy with 
     knowledge that the policy duplicates health benefits to which 
     the individual is otherwise entitled under the MedicarePlus 
     plan or under another medicare supplemental policy''.
       (2) Conforming amendments.--Section 1882(d)(3)(B)(i)(I) (42 
     U.S.C. 1395ss(d)(3)(B)(i)(I)) is amended by inserting 
     ``(including any MedicarePlus plan)'' after ``health 
     insurance policies''.
       (3) MedicarePlus plans not treated as medicare 
     supplementary policies.--Section 1882(g)(1) (42 U.S.C. 
     1395ss(g)(1)) is amended by inserting ``or a MedicarePlus 
     plan or'' after ``does not include''
       (b) Additional Rules Relating to Individuals Enrolled in 
     MSA Plans.--Section 1882 (42 U.S.C. 1395ss) is further 
     amended by adding at the end the following new subsection:
       ``(u)(1) It is unlawful for a person to sell or issue a 
     policy described in paragraph (2) to an individual with 
     knowledge that the individual has in effect under section 
     1851 an election of an MSA plan.
       ``(2) A policy described in this subparagraph is a health 
     insurance policy that provides for coverage of expenses that 
     are otherwise required to be counted toward meeting the 
     annual deductible amount provided under the MSA plan.''.

 Subchapter B--Special Rules for MedicarePlus Medical Savings Accounts

     SEC. 10006. MEDICAREPLUS MSA.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of

[[Page H4510]]

     1986 (relating to amounts specifically excluded from gross 
     income) is amended by redesignating section 138 as section 
     139 and by inserting after section 137 the following new 
     section:

     ``SEC. 138. MEDICAREPLUS MSA.

       ``(a) Exclusion.--Gross income shall not include any 
     payment to the MedicarePlus MSA of an individual by the 
     Secretary of Health and Human Services under part C of title 
     XVIII of the Social Security Act.
       ``(b) MedicarePlus MSA.--For purposes of this section, the 
     term `MedicarePlus MSA' means a medical savings account (as 
     defined in section 220(d))--
       ``(1) which is designated as a MedicarePlus MSA,
       ``(2) with respect to which no contribution may be made 
     other than--
       ``(A) a contribution made by the Secretary of Health and 
     Human Services pursuant to part C of title XVIII of the 
     Social Security Act, or
       ``(B) a trustee-to-trustee transfer described in subsection 
     (c)(4),
       ``(3) the governing instrument of which provides that 
     trustee-to-trustee transfers described in subsection (c)(4) 
     may be made to and from such account, and
       ``(4) which is established in connection with an MSA plan 
     described in section 1859(b)(2) of the Social Security Act.
       ``(c) Special Rules for Distributions.--
       ``(1) Distributions for qualified medical expenses.--In 
     applying section 220 to a MedicarePlus MSA--
       ``(A) qualified medical expenses shall not include amounts 
     paid for medical care for any individual other than the 
     account holder, and
       ``(B) section 220(d)(2)(C) shall not apply.
       ``(2) Penalty for distributions from medicareplus msa not 
     used for qualified medical expenses if minimum balance not 
     maintained.--
       ``(A) In general.--The tax imposed by this chapter for any 
     taxable year in which there is a payment or distribution from 
     a MedicarePlus MSA which is not used exclusively to pay the 
     qualified medical expenses of the account holder shall be 
     increased by 50 percent of the excess (if any) of--
       ``(i) the amount of such payment or distribution, over
       ``(ii) the excess (if any) of--

       ``(I) the fair market value of the assets in such MSA as of 
     the close of the calendar year preceding the calendar year in 
     which the taxable year begins, over
       ``(II) an amount equal to 60 percent of the deductible 
     under the MedicarePlus MSA plan covering the account holder 
     as of January 1 of the calendar year in which the taxable 
     year begins.

     Section 220(f)(2) shall not apply to any payment or 
     distribution from a MedicarePlus MSA.
       ``(B) Exceptions.--Subparagraph (A) shall not apply if the 
     payment or distribution is made on or after the date the 
     account holder--
       ``(i) becomes disabled within the meaning of section 
     72(m)(7), or
       ``(ii) dies.
       ``(C) Special rules.--For purposes of subparagraph (A)--
       ``(i) all MedicarePlus MSAs of the account holder shall be 
     treated as 1 account,
       ``(ii) all payments and distributions not used exclusively 
     to pay the qualified medical expenses of the account holder 
     during any taxable year shall be treated as 1 distribution, 
     and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(3) Withdrawal of erroneous contributions.--Section 
     220(f)(2) and paragraph (2) of this subsection shall not 
     apply to any payment or distribution from a MedicarePlus MSA 
     to the Secretary of Health and Human Services of an erroneous 
     contribution to such MSA and of the net income attributable 
     to such contribution.
       ``(4) Trustee-to-trustee transfers.--Section 220(f)(2) and 
     paragraph (2) of this subsection shall not apply to any 
     trustee-to-trustee transfer from a MedicarePlus MSA of an 
     account holder to another MedicarePlus MSA of such account 
     holder.
       ``(d) Special Rules for Treatment of Account After Death of 
     Account Holder.--In applying section 220(f)(8)(A) to an 
     account which was a MedicarePlus MSA of a decedent, the rules 
     of section 220(f) shall apply in lieu of the rules of 
     subsection (c) of this section with respect to the spouse as 
     the account holder of such MedicarePlus MSA.
       ``(e) Reports.--In the case of a MedicarePlus MSA, the 
     report under section 220(h)--
       ``(1) shall include the fair market value of the assets in 
     such MedicarePlus MSA as of the close of each calendar year, 
     and
       ``(2) shall be furnished to the account holder--
       ``(A) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(B) in such manner as the Secretary prescribes in such 
     regulations.
       ``(f) Coordination With Limitation on Number of Taxpayers 
     Having Medical Savings Accounts.--Subsection (i) of section 
     220 shall not apply to an individual with respect to a 
     MedicarePlus MSA, and MedicarePlus MSA's shall not be taken 
     into account in determining whether the numerical limitations 
     under section 220(j) are exceeded.''
       (b) Technical Amendments.--
       (1) The last sentence of section 4973(d) of such Code is 
     amended by inserting ``or section 138(c)(3)'' after ``section 
     220(f)(3)''.
       (2) Subsection (b) of section 220 of such Code is amended 
     by adding at the end the following new paragraph:
       ``(7) Medicare eligible individuals.--The limitation under 
     this subsection for any month with respect to an individual 
     shall be zero for the first month such individual is entitled 
     to benefits under title XVIII of the Social Security Act and 
     for each month thereafter.''
       (3) The table of sections for part III of subchapter B of 
     chapter 1 of such Code is amended by striking the last item 
     and inserting the following:

``Sec. 138. MedicarePlus MSA.
``Sec. 139. Cross references to other Acts.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

             CHAPTER 2--INTEGRATED LONG-TERM CARE PROGRAMS

  Subchapter A--Programs of All-inclusive Care for the Elderly (PACE)

     SEC. 10011. COVERAGE OF PACE UNDER THE MEDICARE PROGRAM.

       Title XVIII (42 U.S.C. 1395 et seq.) is amended by adding 
     at the end the following new section:


    ``payments to, and coverage of benefits under, programs of all-
                 inclusive care for the elderly (pace)

       ``Sec. 1894. (a) Receipt of Benefits Through Enrollment in 
     PACE Program; Definitions for PACE Program Related Terms.--
       ``(1) Benefits through enrollment in a pace program.--In 
     accordance with this section, in the case of an individual 
     who is entitled to benefits under part A or enrolled under 
     part B and who is a PACE program eligible individual (as 
     defined in paragraph (5)) with respect to a PACE program 
     offered by a PACE provider under a PACE program agreement--
       ``(A) the individual may enroll in the program under this 
     section; and
       ``(B) so long as the individual is so enrolled and in 
     accordance with regulations--
       ``(i) the individual shall receive benefits under this 
     title solely through such program, and
       ``(ii) the PACE provider is entitled to payment under and 
     in accordance with this section and such agreement for 
     provision of such benefits.
       ``(2) PACE program defined.--For purposes of this section 
     and section 1932, the term `PACE program' means a program of 
     all-inclusive care for the elderly that meets the following 
     requirements:
       ``(A) Operation.--The entity operating the program is a 
     PACE provider (as defined in paragraph (3)).
       ``(B) Comprehensive benefits.--The program provides 
     comprehensive health care services to PACE program eligible 
     individuals in accordance with the PACE program agreement and 
     regulations under this section.
       ``(C) Transition.--In the case of an individual who is 
     enrolled under the program under this section and whose 
     enrollment ceases for any reason (including the individual no 
     longer qualifies as a PACE program eligible individual, the 
     termination of a PACE program agreement, or otherwise), the 
     program provides assistance to the individual in obtaining 
     necessary transitional care through appropriate referrals and 
     making the individual's medical records available to new 
     providers.
       ``(3) PACE provider defined.--
       ``(A) In general.--For purposes of this section, the term 
     `PACE provider' means an entity that--
       ``(i) subject to subparagraph (B), is (or is a distinct 
     part of) a public entity or a private, nonprofit entity 
     organized for charitable purposes under section 501(c)(3) of 
     the Internal Revenue Code of 1986, and
       ``(ii) has entered into a PACE program agreement with 
     respect to its operation of a PACE program.
       ``(B) Treatment of private, for-profit providers.--Clause 
     (i) of subparagraph (A) shall not apply--
       ``(i) to entities subject to a demonstration project waiver 
     under subsection (h); and
       ``(ii) after the date the report under section 10014(b) of 
     the Balanced Budget Act of 1997 is submitted, unless the 
     Secretary determines that any of the findings described in 
     subparagraph (A), (B), (C) or (D) of paragraph (2) of such 
     section are true.
       ``(4) PACE program agreement defined.--For purposes of this 
     section, the term `PACE program agreement' means, with 
     respect to a PACE provider, an agreement, consistent with 
     this section, section 1932 (if applicable), and regulations 
     promulgated to carry out such sections, between the PACE 
     provider and the Secretary, or an agreement between the PACE 
     provider and a State administering agency for the operation 
     of a PACE program by the provider under such sections.
       ``(5) PACE program eligible individual defined.--For 
     purposes of this section, the term `PACE program eligible 
     individual' means, with respect to a PACE program, an 
     individual who--
       ``(A) is 55 years of age or older;
       ``(B) subject to subsection (c)(4), is determined under 
     subsection (c) to require the level of care required under 
     the State medicaid plan for coverage of nursing facility 
     services;
       ``(C) resides in the service area of the PACE program; and

[[Page H4511]]

       ``(D) meets such other eligibility conditions as may be 
     imposed under the PACE program agreement for the program 
     under subsection (e)(2)(A)(ii).
       ``(6) PACE protocol.--For purposes of this section, the 
     term `PACE protocol' means the Protocol for the Program of 
     All-inclusive Care for the Elderly (PACE), as published by On 
     Lok, Inc., as of April 14, 1995.
       ``(7) PACE demonstration waiver program defined.--For 
     purposes of this section, the term `PACE demonstration waiver 
     program' means a demonstration program under either of the 
     following sections (as in effect before the date of their 
     repeal):
       ``(A) Section 603(c) of the Social Security Amendments of 
     1983 (Public Law 98-21), as extended by section 9220 of the 
     Consolidated Omnibus Budget Reconciliation Act of 1985 
     (Public Law 99-272).
       ``(B) Section 9412(b) of the Omnibus Budget Reconciliation 
     Act of 1986 (Public Law 99-509).
       ``(8) State administering agency defined.--For purposes of 
     this section, the term `State administering agency' means, 
     with respect to the operation of a PACE program in a State, 
     the agency of that State (which may be the single agency 
     responsible for administration of the State plan under title 
     XIX in the State) responsible for administering PACE program 
     agreements under this section and section 1932 in the State.
       ``(9) Trial period defined.--
       ``(A) In general.--For purposes of this section, the term 
     `trial period' means, with respect to a PACE program operated 
     by a PACE provider under a PACE program agreement, the first 
     3 contract years under such agreement with respect to such 
     program.
       ``(B) Treatment of entities previously operating pace 
     demonstration waiver programs.--Each contract year (including 
     a year occurring before the effective date of this section) 
     during which an entity has operated a PACE demonstration 
     waiver program shall be counted under subparagraph (A) as a 
     contract year during which the entity operated a PACE program 
     as a PACE provider under a PACE program agreement.
       ``(10) Regulations.--For purposes of this section, the term 
     `regulations' refers to interim final or final regulations 
     promulgated under subsection (f) to carry out this section 
     and section 1932.
       ``(b) Scope of Benefits; Beneficiary Safeguards.--
       ``(1) In general.--Under a PACE program agreement, a PACE 
     provider shall--
       ``(A) provide to PACE program eligible individuals, 
     regardless of source of payment and directly or under 
     contracts with other entities, at a minimum--
       ``(i) all items and services covered under this title (for 
     individuals enrolled under this section) and all items and 
     services covered under title XIX, but without any limitation 
     or condition as to amount, duration, or scope and without 
     application of deductibles, copayments, coinsurance, or other 
     cost-sharing that would otherwise apply under this title or 
     such title, respectively; and
       ``(ii) all additional items and services specified in 
     regulations, based upon those required under the PACE 
     protocol;
       ``(B) provide such enrollees access to necessary covered 
     items and services 24 hours per day, every day of the year;
       ``(C) provide services to such enrollees through a 
     comprehensive, multidisciplinary health and social services 
     delivery system which integrates acute and long-term care 
     services pursuant to regulations; and
       ``(D) specify the covered items and services that will not 
     be provided directly by the entity, and to arrange for 
     delivery of those items and services through contracts 
     meeting the requirements of regulations.
       ``(2) Quality assurance; patient safeguards.--The PACE 
     program agreement shall require the PACE provider to have in 
     effect at a minimum--
       ``(A) a written plan of quality assurance and improvement, 
     and procedures implementing such plan, in accordance with 
     regulations, and
       ``(B) written safeguards of the rights of enrolled 
     participants (including a patient bill of rights and 
     procedures for grievances and appeals) in accordance with 
     regulations and with other requirements of this title and 
     Federal and State law designed for the protection of 
     patients.
       ``(c) Eligibility Determinations.--
       ``(1) In general.--The determination of whether an 
     individual is a PACE program eligible individual--
       ``(A) shall be made under and in accordance with the PACE 
     program agreement, and
       ``(B) who is entitled to medical assistance under title 
     XIX, shall be made (or who is not so entitled, may be made) 
     by the State administering agency.
       ``(2) Condition.--An individual is not a PACE program 
     eligible individual (with respect to payment under this 
     section) unless the individual's health status has been 
     determined, in accordance with regulations, to be comparable 
     to the health status of individuals who have participated in 
     the PACE demonstration waiver programs. Such determination 
     shall be based upon information on health status and related 
     indicators (such as medical diagnoses and measures of 
     activities of daily living, instrumental activities of daily 
     living, and cognitive impairment) that are part of a uniform 
     minimum data set collected by PACE providers on potential 
     eligible individuals.
       ``(3) Annual eligibility recertifications.--
       ``(A) In general.--Subject to subparagraph (B), the 
     determination described in subsection (a)(5)(B) for an 
     individual shall be reevaluated at least once a year.
       ``(B) Exception.--The requirement of annual reevaluation 
     under subparagraph (A) may be waived during a period in 
     accordance with regulations in those cases where the State 
     administering agency determines that there is no reasonable 
     expectation of improvement or significant change in an 
     individual's condition during the period because of the 
     advanced age, severity of the advanced age, severity of 
     chronic condition, or degree of impairment of functional 
     capacity of the individual involved.
       ``(4) Continuation of eligibility.--An individual who is a 
     PACE program eligible individual may be deemed to continue to 
     be such an individual notwithstanding a determination that 
     the individual no longer meets the requirement of subsection 
     (a)(5)(B) if, in accordance with regulations, in the absence 
     of continued coverage under a PACE program the individual 
     reasonably would be expected to meet such requirement within 
     the succeeding 6-month period.
       ``(5) Enrollment; disenrollment.--The enrollment and 
     disenrollment of PACE program eligible individuals in a PACE 
     program shall be pursuant to regulations and the PACE program 
     agreement and shall permit enrollees to voluntarily disenroll 
     without cause at any time.
       ``(d) Payments to PACE Providers on a Capitated Basis.--
       ``(1) In general.--In the case of a PACE provider with a 
     PACE program agreement under this section, except as provided 
     in this subsection or by regulations, the Secretary shall 
     make prospective monthly payments of a capitation amount for 
     each PACE program eligible individual enrolled under the 
     agreement under this section in the same manner and from the 
     same sources as payments are made to a MedicarePlus 
     organization under section 1854 (or, for periods beginning 
     before January 1, 1999, to an eligible organization under a 
     risk-sharing contract under section 1876). Such payments 
     shall be subject to adjustment in the manner described in 
     section 1854(a)(2) or section 1876(a)(1)(E), as the case may 
     be.
       ``(2) Capitation amount.--The capitation amount to be 
     applied under this subsection for a provider for a contract 
     year shall be an amount specified in the PACE program 
     agreement for the year. Such amount shall be based upon 
     payment rates established for purposes of payment under 
     section 1854 (or, for periods before January 1, 1999, for 
     purposes of risk-sharing contracts under section 1876) and 
     shall be adjusted to take into account the comparative 
     frailty of PACE enrollees and such other factors as the 
     Secretary determines to be appropriate. Such amount under 
     such an agreement shall be computed in a manner so that the 
     total payment level for all PACE program eligible individuals 
     enrolled under a program is less than the projected payment 
     under this title for a comparable population not enrolled 
     under a PACE program.
       ``(e) PACE Program Agreement.--
       ``(1) Requirement.--
       ``(A) In general.--The Secretary, in close cooperation with 
     the State administering agency, shall establish procedures 
     for entering into, extending, and terminating PACE program 
     agreements for the operation of PACE programs by entities 
     that meet the requirements for a PACE provider under this 
     section, section 1932, and regulations.
       ``(B) Numerical limitation.--
       ``(i) In general.--The Secretary shall not permit the 
     number of PACE providers with which agreements are in effect 
     under this section or under section 9412(b) of the Omnibus 
     Budget Reconciliation Act of 1986 to exceed--

       ``(I) 40 as of the date of the enactment of this section, 
     or
       ``(II) as of each succeeding anniversary of such date, the 
     numerical limitation under this subparagraph for the 
     preceding year plus 20.

     Subclause (II) shall apply without regard to the actual 
     number of agreements in effect as of a previous anniversary 
     date.
       ``(ii) Treatment of certain private, for-profit 
     providers.--The numerical limitation in clause (i) shall not 
     apply to a PACE provider that--

       ``(I) is operating under a demonstration project waiver 
     under subsection (h), or
       ``(II) was operating under such a waiver and subsequently 
     qualifies for PACE provider status pursuant to subsection 
     (a)(3)(B)(ii).

       ``(2) Service area and eligibility.--
       ``(A) In general.--A PACE program agreement for a PACE 
     program--
       ``(i) shall designate the service area of the program;
       ``(ii) may provide additional requirements for individuals 
     to qualify as PACE program eligible individuals with respect 
     to the program;
       ``(iii) shall be effective for a contract year, but may be 
     extended for additional contract years in the absence of a 
     notice by a party to terminate and is subject to termination 
     by the Secretary and the State administering agency at any 
     time for cause (as provided under the agreement);
       ``(iv) shall require a PACE provider to meet all applicable 
     State and local laws and requirements; and
       ``(v) shall have such additional terms and conditions as 
     the parties may agree to consistent with this section and 
     regulations.
       ``(B) Service area overlap.--In designating a service area 
     under a PACE program

[[Page H4512]]

     agreement under subparagraph (A)(i), the Secretary (in 
     consultation with the State administering agency) may exclude 
     from designation an area that is already covered under 
     another PACE program agreement, in order to avoid unnecessary 
     duplication of services and avoid impairing the financial and 
     service viability of an existing program.
       ``(3) Data collection.--
       ``(A) In general.--Under a PACE program agreement, the PACE 
     provider shall--
       ``(i) collect data,
       ``(ii) maintain, and afford the Secretary and the State 
     administering agency access to, the records relating to the 
     program, including pertinent financial, medical, and 
     personnel records, and
       ``(iii) make to the Secretary and the State administering 
     agency reports that the Secretary finds (in consultation with 
     State administering agencies) necessary to monitor the 
     operation, cost, and effectiveness of the PACE program under 
     this title and title XIX.
       ``(B) Requirements during trial period.--During the first 
     three years of operation of a PACE program (either under this 
     section or under a PACE demonstration waiver program), the 
     PACE provider shall provide such additional data as the 
     Secretary specifies in regulations in order to perform the 
     oversight required under paragraph (4)(A).
       ``(4) Oversight.--
       ``(A) Annual, close oversight during trial period.--During 
     the trial period (as defined in subsection (a)(9)) with 
     respect to a PACE program operated by a PACE provider, the 
     Secretary (in cooperation with the State administering 
     agency) shall conduct a comprehensive annual review of the 
     operation of the PACE program by the provider in order to 
     assure compliance with the requirements of this section and 
     regulations. Such a review shall include--
       ``(i) an on-site visit to the program site;
       ``(ii) comprehensive assessment of a provider's fiscal 
     soundness;
       ``(iii) comprehensive assessment of the provider's capacity 
     to provide all PACE services to all enrolled participants;
       ``(iv) detailed analysis of the entity's substantial 
     compliance with all significant requirements of this section 
     and regulations; and
       ``(v) any other elements the Secretary or State agency 
     considers necessary or appropriate.
       ``(B) Continuing oversight.--After the trial period, the 
     Secretary (in cooperation with the State administering 
     agency) shall continue to conduct such review of the 
     operation of PACE providers and PACE programs as may be 
     appropriate, taking into account the performance level of a 
     provider and compliance of a provider with all significant 
     requirements of this section and regulations.
       ``(C) Disclosure.--The results of reviews under this 
     paragraph shall be reported promptly to the PACE provider, 
     along with any recommendations for changes to the provider's 
     program, and shall be made available to the public upon 
     request.
       ``(5) Termination of pace provider agreements.--
       ``(A) In general.--Under regulations--
       ``(i) the Secretary or a State administering agency may 
     terminate a PACE program agreement for cause, and
       ``(ii) a PACE provider may terminate such an agreement 
     after appropriate notice to the Secretary, the State agency, 
     and enrollees.
       ``(B) Causes for termination.--In accordance with 
     regulations establishing procedures for termination of PACE 
     program agreements, the Secretary or a State administering 
     agency may terminate a PACE program agreement with a PACE 
     provider for, among other reasons, the fact that--
       ``(i) the Secretary or State administering agency 
     determines that--

       ``(I) there are significant deficiencies in the quality of 
     care provided to enrolled participants; or
       ``(II) the provider has failed to comply substantially with 
     conditions for a program or provider under this section or 
     section 1932; and

       ``(ii) the entity has failed to develop and successfully 
     initiate, within 30 days of the date of the receipt of 
     written notice of such a determination, and continue 
     implementation of a plan to correct the deficiencies.
       ``(C) Termination and transition procedures.--An entity 
     whose PACE provider agreement is terminated under this 
     paragraph shall implement the transition procedures required 
     under subsection (a)(2)(C).
       ``(6) Secretary's oversight; enforcement authority.--
       ``(A) In general.--Under regulations, if the Secretary 
     determines (after consultation with the State administering 
     agency) that a PACE provider is failing substantially to 
     comply with the requirements of this section and regulations, 
     the Secretary (and the State administering agency) may take 
     any or all of the following actions:
       ``(i) Condition the continuation of the PACE program 
     agreement upon timely execution of a corrective action plan.
       ``(ii) Withhold some or all further payments under the PACE 
     program agreement under this section or section 1932 with 
     respect to PACE program services furnished by such provider 
     until the deficiencies have been corrected.
       ``(iii) Terminate such agreement.
       ``(B) Application of intermediate sanctions.--Under 
     regulations, the Secretary may provide for the application 
     against a PACE provider of remedies described in section 
     1857(f)(2) (or, for periods before January 1, 1999, section 
     1876(i)(6)(B)) or 1903(m)(5)(B) in the case of violations by 
     the provider of the type described in section 1857(f)(1) (or 
     1876(i)(6)(A) for such periods) or 1903(m)(5)(A), 
     respectively (in relation to agreements, enrollees, and 
     requirements under this section or section 1932, 
     respectively).
       ``(7) Procedures for termination or imposition of 
     sanctions.--Under regulations, the provisions of section 
     1857(g) (or for periods before January 1, 1999, section 
     1876(i)(9)) shall apply to termination and sanctions 
     respecting a PACE program agreement and PACE provider under 
     this subsection in the same manner as they apply to a 
     termination and sanctions with respect to a contract and a 
     MedicarePlus organization under part C (or for such periods 
     an eligible organization under section 1876).
       ``(8) Timely consideration of applications for pace program 
     provider status.--In considering an application for PACE 
     provider program status, the application shall be deemed 
     approved unless the Secretary, within 90 days after the date 
     of the submission of the application to the Secretary, either 
     denies such request in writing or informs the applicant in 
     writing with respect to any additional information that is 
     needed in order to make a final determination with respect to 
     the application. After the date the Secretary receives such 
     additional information, the application shall be deemed 
     approved unless the Secretary, within 90 days of such date, 
     denies such request.
       ``(f) Regulations.--
       ``(1) In general.--The Secretary shall issue interim final 
     or final regulations to carry out this section and section 
     1932.
       ``(2) Use of pace protocol.--
       ``(A) In general.--In issuing such regulations, the 
     Secretary shall, to the extent consistent with the provisions 
     of this section, incorporate the requirements applied to PACE 
     demonstration waiver programs under the PACE protocol.
       ``(B) Flexibility.--The Secretary (in close consultation 
     with State administering agencies) may modify or waive such 
     provisions of the PACE protocol in order to provide for 
     reasonable flexibility in adapting the PACE service delivery 
     model to the needs of particular organizations (such as those 
     in rural areas or those that may determine it appropriate to 
     use non-staff physicians accordingly to State licensing law 
     requirements) under this section and section 1932 where such 
     flexibility is not inconsistent with and would not impair the 
     essential elements, objectives, and requirements of the this 
     section, including--
       ``(i) the focus on frail elderly qualifying individuals who 
     require the level of care provided in a nursing facility;
       ``(ii) the delivery of comprehensive, integrated acute and 
     long-term care services;
       ``(iii) the interdisciplinary team approach to care 
     management and service delivery;
       ``(iv) capitated, integrated financing that allows the 
     provider to pool payments received from public and private 
     programs and individuals; and
       ``(v) the assumption by the provider over time of full 
     financial risk.
       ``(3) Application of certain additional beneficiary and 
     program protections.--
       ``(A) In general.--In issuing such regulations and subject 
     to subparagraph (B), the Secretary may apply with respect to 
     PACE programs, providers, and agreements such requirements of 
     part C (or, for periods before January 1, 1999, section 1876) 
     and section 1903(m) relating to protection of beneficiaries 
     and program integrity as would apply to MedicarePlus 
     organizations under part C (or for such periods eligible 
     organizations under risk-sharing contracts under section 
     1876) and to health maintenance organizations under prepaid 
     capitation agreements under section 1903(m).
       ``(B) Considerations.--In issuing such regulations, the 
     Secretary shall--
       ``(i) take into account the differences between populations 
     served and benefits provided under this section and under 
     part C (or, for periods before January 1, 1999, section 1876) 
     and section 1903(m);
       ``(ii) not include any requirement that conflicts with 
     carrying out PACE programs under this section; and
       ``(iii) not include any requirement restricting the 
     proportion of enrollees who are eligible for benefits under 
     this title or title XIX.
       ``(g) Waivers of Requirements.--With respect to carrying 
     out a PACE program under this section, the following 
     requirements of this title (and regulations relating to such 
     requirements) are waived and shall not apply:
       ``(1) Section 1812, insofar as it limits coverage of 
     institutional services.
       ``(2) Sections 1813, 1814, 1833, and 1886, insofar as such 
     sections relate to rules for payment for benefits.
       ``(3) Sections 1814(a)(2)(B), 1814(a)(2)(C), and 
     1835(a)(2)(A), insofar as they limit coverage of extended 
     care services or home health services.
       ``(4) Section 1861(i), insofar as it imposes a 3-day prior 
     hospitalization requirement for coverage of extended care 
     services.
       ``(5) Sections 1862(a)(1) and 1862(a)(9), insofar as they 
     may prevent payment for PACE program services to individuals 
     enrolled under PACE programs.
       ``(h) Demonstration Project for For-Profit Entities.--
       ``(1) In general.--In order to demonstrate the operation of 
     a PACE program by a private, for-profit entity, the Secretary 
     (in close consultation with State administering

[[Page H4513]]

     agencies) shall grant waivers from the requirement under 
     subsection (a)(3) that a PACE provider may not be a for-
     profit, private entity.
       ``(2) Similar terms and conditions.--
       ``(A) In general.--Except as provided under subparagraph 
     (B), and paragraph (1), the terms and conditions for 
     operation of a PACE program by a provider under this 
     subsection shall be the same as those for PACE providers that 
     are nonprofit, private organizations.
       ``(B) Numerical limitation.--The number of programs for 
     which waivers are granted under this subsection shall not 
     exceed 10. Programs with waivers granted under this 
     subsection shall not be counted against the numerical 
     limitation specified in subsection (e)(1)(B).
       ``(i) Construction.--Nothing in this section or section 
     1932 shall be construed as preventing a PACE provider from 
     entering into contracts with other governmental or 
     nongovernmental payers for the care of PACE program eligible 
     individuals who are not eligible for benefits under part A, 
     or enrolled under part B, or eligible for medical assistance 
     under title XIX.''.

     SEC. 10012. ESTABLISHMENT OF PACE PROGRAM AS MEDICAID STATE 
                   OPTION.

       (a) In General.--Title XIX is amended--
       (1) in section 1905(a) (42 U.S.C. 1396d(a))--
       (A) by striking ``and'' at the end of paragraph (24);
       (B) by redesignating paragraph (25) as paragraph (26); and
       (C) by inserting after paragraph (24) the following new 
     paragraph:
       ``(25) services furnished under a PACE program under 
     section 1932 to PACE program eligible individuals enrolled 
     under the program under such section; and'';
       (2) by redesignating section 1932, as redesignated by 
     section 114(a) of Public Law 104-193, as section 1933, and
       (3) by inserting after section 1931 the following new 
     section:

     ``SEC. 1932. PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY 
                   (PACE).

       ``(a) Option.--
       ``(1) In general.--A State may elect to provide medical 
     assistance under this section with respect to PACE program 
     services to PACE program eligible individuals who are 
     eligible for medical assistance under the State plan and who 
     are enrolled in a PACE program under a PACE program 
     agreement. Such individuals need not be eligible for benefits 
     under part A, or enrolled under part B, of title XVIII to be 
     eligible to enroll under this section.
       ``(2) Benefits through enrollment in pace program.--In the 
     case of an individual enrolled with a PACE program pursuant 
     to such an election--
       ``(A) the individual shall receive benefits under the plan 
     solely through such program, and
       ``(B) the PACE provider shall receive payment in accordance 
     with the PACE program agreement for provision of such 
     benefits.
       ``(3) Application of definitions.--The definitions of terms 
     under section 1894(a) shall apply under this section in the 
     same manner as they apply under section 1894.
       ``(b) Application of Medicare Terms and Conditions.--Except 
     as provided in this section, the terms and conditions for the 
     operation and participation of PACE program eligible 
     individuals in PACE programs offered by PACE providers under 
     PACE program agreements under section 1894 shall apply for 
     purposes of this section.
       ``(c) Adjustment in Payment Amounts.--In the case of 
     individuals enrolled in a PACE program under this section, 
     the amount of payment under this section shall not be the 
     amount calculated under section 1894(d), but shall be an 
     amount, specified under the PACE agreement, which is less 
     than the amount that would otherwise have been made under the 
     State plan if the individuals were not so enrolled. The 
     payment under this section shall be in addition to any 
     payment made under section 1894 for individuals who are 
     enrolled in a PACE program under such section.
       ``(d) Waivers of Requirements.--With respect to carrying 
     out a PACE program under this section, the following 
     requirements of this title (and regulations relating to such 
     requirements) shall not apply:
       ``(1) Section 1902(a)(1), relating to any requirement that 
     PACE programs or PACE program services be provided in all 
     areas of a State.
       ``(2) Section 1902(a)(10), insofar as such section relates 
     to comparability of services among different population 
     groups.
       ``(3) Sections 1902(a)(23) and 1915(b)(4), relating to 
     freedom of choice of providers under a PACE program.
       ``(4) Section 1903(m)(2)(A), insofar as it restricts a PACE 
     provider from receiving prepaid capitation payments.
       ``(e) Post-Eligibility Treatment of Income.--A State may 
     provide for post-eligibility treatment of income for 
     individuals enrolled in PACE programs under this section in 
     the same manner as a State treats post-eligibility income for 
     individuals receiving services under a waiver under section 
     1915(c).''.
       (b) Conforming Amendments.--
       (1) Section 1902(j) (42 U.S.C. 1396a(j)) is amended by 
     striking ``(25)'' and inserting ``(26)''.
       (2) Section 1924(a)(5) (42 U.S.C. 1396r-5(a)(5)) is 
     amended--
       (A) in the heading, by striking ``from organizations 
     receiving certain waivers'' and inserting ``under pace 
     programs'', and
       (B) by striking ``from any organization'' and all that 
     follows and inserting ``under a PACE demonstration waiver 
     program (as defined in subsection (a)(7) of section 1894) or 
     under a PACE program under section 1932.''.
       (3) Section 1903(f)(4)(C) (42 U.S.C. 1396b(f)(4)(C)) is 
     amended by inserting ``or who is a PACE program eligible 
     individual enrolled in a PACE program under section 1932,'' 
     after ``section 1902(a)(10)(A),''.

     SEC. 10013. EFFECTIVE DATE; TRANSITION.

       (a) Timely Issuance of Regulations; Effective Date.--The 
     Secretary of Health and Human Services shall promulgate 
     regulations to carry out this subchapter in a timely manner. 
     Such regulations shall be designed so that entities may 
     establish and operate PACE programs under sections 1894 and 
     1932 for periods beginning not later than 1 year after the 
     date of the enactment of this Act.
       (b) Expansion and Transition for PACE Demonstration Project 
     Waivers.--
       (1) Expansion in current number and extension of 
     demonstration projects.--Section 9412(b) of the Omnibus 
     Budget Reconciliation Act of 1986, as amended by section 
     4118(g) of the Omnibus Budget Reconciliation Act of 1987, is 
     amended--
       (A) in paragraph (1), by inserting before the period at the 
     end the following: ``, except that the Secretary shall grant 
     waivers of such requirements to up to the applicable 
     numerical limitation specified in section 1894(e)(1)(B) of 
     the Social Security Act''; and
       (B) in paragraph (2)--
       (i) in subparagraph (A), by striking ``, including 
     permitting the organization to assume progressively (over the 
     initial 3-year period of the waiver) the full financial 
     risk''; and
       (ii) in subparagraph (C), by adding at the end the 
     following: ``In granting further extensions, an organization 
     shall not be required to provide for reporting of information 
     which is only required because of the demonstration nature of 
     the project.''.
       (2) Elimination of replication requirement.--Subparagraph 
     (B) of paragraph (2) of such section shall not apply to 
     waivers granted under such section after the date of the 
     enactment of this Act.
       (3) Timely consideration of applications.--In considering 
     an application for waivers under such section before the 
     effective date of repeals under subsection (c), subject to 
     the numerical limitation under the amendment made by 
     paragraph (1), the application shall be deemed approved 
     unless the Secretary of Health and Human Services, within 90 
     days after the date of its submission to the Secretary, 
     either denies such request in writing or informs the 
     applicant in writing with respect to any additional 
     information which is needed in order to make a final 
     determination with respect to the application. After the date 
     the Secretary receives such additional information, the 
     application shall be deemed approved unless the Secretary, 
     within 90 days of such date, denies such request.
       (c) Priority and Special Consideration in Application.--
     During the 3-year period beginning on the date of the 
     enactment of this Act:
       (1) Provider status.--The Secretary of Health and Human 
     Services shall give priority, in processing applications of 
     entities to qualify as PACE programs under section 1894 or 
     1932 of the Social Security Act--
       (A) first, to entities that are operating a PACE 
     demonstration waiver program (as defined in section 
     1894(a)(7) of such Act), and
       (B) then entities that have applied to operate such a 
     program as of May 1, 1997.
       (2) New waivers.--The Secretary shall give priority, in the 
     awarding of additional waivers under section 9412(b) of the 
     Omnibus Budget Reconciliation Act of 1986--
       (A) to any entities that have applied for such waivers 
     under such section as of May 1, 1997; and
       (B) to any entity that, as of May 1, 1997, has formally 
     contracted with a State to provide services for which payment 
     is made on a capitated basis with an understanding that the 
     entity was seeking to become a PACE provider.
       (3) Special consideration.--The Secretary shall give 
     special consideration, in the processing of applications 
     described in paragraph (1) and the awarding of waivers 
     described in paragraph (2), to an entity which as of May 1, 
     1997 through formal activities (such as entering into 
     contracts for feasibility studies) has indicated a specific 
     intent to become a PACE provider.
       (d) Repeal of Current PACE Demonstration Project Waiver 
     Authority.--
       (1) In general.--Subject to paragraph (2), the following 
     provisions of law are repealed:
       (A) Section 603(c) of the Social Security Amendments of 
     1983 (Public Law 98-21).
       (B) Section 9220 of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (Public Law 99-272).
       (C) Section 9412(b) of the Omnibus Budget Reconciliation 
     Act of 1986 (Public Law 99-509).
       (2) Delay in application.--
       (A) In general.--Subject to subparagraph (B), the repeals 
     made by paragraph (1) shall not apply to waivers granted 
     before the initial effective date of regulations described in 
     subsection (a).
       (B) Application to approved waivers.--Such repeals shall 
     apply to waivers granted before such date only after allowing 
     such organizations a transition period (of up to 24 months) 
     in order to permit sufficient time for an orderly transition 
     from demonstration

[[Page H4514]]

     project authority to general authority provided under the 
     amendments made by this subchapter.

     SEC. 10014. STUDY AND REPORTS.

       (a) Study.--
       (1) In general.--The Secretary of Health and Human Services 
     (in close consultation with State administering agencies, as 
     defined in section 1894(a)(8) of the Social Security Act) 
     shall conduct a study of the quality and cost of providing 
     PACE program services under the medicare and medicaid 
     programs under the amendments made by this subchapter.
       (2) Study of private, for-profit providers.--Such study 
     shall specifically compare the costs, quality, and access to 
     services by entities that are private, for-profit entities 
     operating under demonstration projects waivers granted under 
     section 1894(h) of the Social Security Act with the costs, 
     quality, and access to services of other PACE providers.
       (b) Report.--
       (1) In general.--Not later than 4 years after the date of 
     the enactment of this Act, the Secretary shall provide for a 
     report to Congress on the impact of such amendments on 
     quality and cost of services. The Secretary shall include in 
     such report such recommendations for changes in the operation 
     of such amendments as the Secretary deems appropriate.
       (2) Treatment of private, for-profit providers.--The report 
     shall include specific findings on whether any of the 
     following findings is true:
       (A) The number of covered lives enrolled with entities 
     operating under demonstration project waivers under section 
     1894(h) of the Social Security Act is fewer than 800 (or such 
     lesser number as the Secretary may find statistically 
     sufficient to make determinations respecting findings 
     described in the succeeding subparagraphs).
       (B) The population enrolled with such entities is less 
     frail than the population enrolled with other PACE providers.
       (C) Access to or quality of care for individuals enrolled 
     with such entities is lower than such access or quality for 
     individuals enrolled with other PACE providers.
       (D) The application of such section has resulted in an 
     increase in expenditures under the medicare or medicaid 
     programs above the expenditures that would have been made if 
     such section did not apply.
       (c) Information Included in Annual Recommendations.--The 
     Medicare Payment Advisory Commission shall include in its 
     annual report under section 1805(b)(1)(B) of the Social 
     Security Act recommendations on the methodology and level of 
     payments made to PACE providers under section 1894(d) of such 
     Act and on the treatment of private, for-profit entities as 
     PACE providers.

         Subchapter B--Social Health Maintenance Organizations

     SEC. 10015. SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS).

       (a) Extension of Demonstration Project Authorities.--
     Section 4018(b) of the Omnibus Budget Reconciliation Act of 
     1987 is amended--
       (1) in paragraph (1), by striking ``1997'' and inserting 
     ``2000'', and
       (2) in paragraph (4), by striking ``1998'' and inserting 
     ``2001''.
       (b) Expansion of Cap.--Section 13567(c) of the Omnibus 
     Budget Reconciliation Act of 1993 is amended by striking 
     ``12,000'' and inserting ``36,000''.
       (b) Report on Integration and Transition.--
       (1) In general.--The Secretary of Health and Human Services 
     shall submit to Congress, by not later than January 1, 1999, 
     a plan for the integration of health plans offered by social 
     health maintenance organizations (including SHMO I and SHMO 
     II sites developed under section 2355 of the Deficit 
     Reduction Act of 1984 and under the amendment made by section 
     4207(b)(3)(B)(i) of OBRA-1990, respectively) and similar 
     plans as an option under the MedicarePlus program under part 
     C of title XVIII of the Social Security Act.
       (2) Provision for transition.--Such plan shall include a 
     transition for social health maintenance organizations 
     operating under demonstration project authority under such 
     section.
       (3) Payment policy.--The report shall also include 
     recommendations on appropriate payment levels for plans 
     offered by such organizations, including an analysis of the 
     application of risk adjustment factors appropriate to the 
     population served by such organizations.

                      Subchapter C--Other Programs

     SEC. 10018. ORDERLY TRANSITION OF MUNICIPAL HEALTH SERVICE 
                   DEMONSTRATION PROJECTS.

       Section 9215 of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985, as amended by section 6135 of 
     OBRA-1989 and section 13557 of OBRA-1993, is further 
     amended--
       (1) by inserting ``(a)'' before ``The Secretary'', and
       (2) by adding at the end the following: ``Subject to 
     subsection (c), the Secretary may further extend such 
     demonstration projects through December 31, 2000, but only 
     with respect to individuals are enrolled with such projects 
     before January 1, 1998.
       ``(b) The Secretary shall work with each such demonstration 
     project to develop a plan, to be submitted to the Committee 
     on Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate by March 31, 1998, for the 
     orderly transition of demonstration projects and the project 
     enrollees to a non-demonstration project health care delivery 
     system, such as through integration with private or public 
     health plan, including a medicaid managed care or 
     MedicarePlus plan.
       ``(c) A demonstration project under subsection (a) which 
     does not develop and submit a transition plan under 
     subsection (b) by March 31, 1998, or, if later, 6 months 
     after the date of the enactment of this Act, shall be 
     discontinued as of December 31, 1998. The Secretary shall 
     provide appropriate technical assistance to assist in the 
     transition so that disruption of medical services to project 
     enrollees may be minimized.''.

     SEC. 10019. EXTENSION OF CERTAIN MEDICARE COMMUNITY NURSING 
                   ORGANIZATION DEMONSTRATION PROJECTS.

       Notwithstanding any other provision of law, demonstration 
     projects conducted under section 4079 of the Omnibus Budget 
     Reconciliation Act of 1987 may be conducted for an additional 
     period of 2 years, and the deadline for any report required 
     relating to the results of such projects shall be not later 
     than 6 months before the end of such additional period.

            CHAPTER 3--MEDICARE PAYMENT ADVISORY COMMISSION

     SEC. 10021. MEDICARE PAYMENT ADVISORY COMMISSION.

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


                 ``medicare payment advisory commission

       ``Sec. 1805. (a) Establishment.--There is hereby 
     established the Medicare Payment Advisory Commission (in this 
     section referred to as the `Commission').
       ``(b) Duties.--
       ``(1) Review of payment policies and annual reports.--The 
     Commission shall--
       ``(A) review payment policies under this title, including 
     the topics described in paragraph (2);
       ``(B) make recommendations to Congress concerning such 
     payment policies;
       ``(C) by not later than March 1 of each year (beginning 
     with 1998), submit a report to Congress containing the 
     results of such reviews and its recommendations concerning 
     such policies; and
       ``(D) by not later than June 1 of each year (beginning with 
     1998), 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.
       ``(2) Specific topics to be reviewed.--
       ``(A) Medicareplus program.--Specifically, the Commission 
     shall review, with respect to the MedicarePlus program under 
     part C, the following:
       ``(i) The methodology for making payment to plans under 
     such program, including the making of differential payments 
     and the distribution of differential updates among different 
     payment areas.
       ``(ii) The mechanisms used to adjust payments for risk and 
     the need to adjust such mechanisms to take into account 
     health status of beneficiaries.
       ``(iii) The implications of risk selection both among 
     MedicarePlus organizations and between the MedicarePlus 
     option and the medicare fee-for-service option.
       ``(iv) The development and implementation of mechanisms to 
     assure the quality of care for those enrolled with 
     MedicarePlus organizations.
       ``(v) The impact of the MedicarePlus program on access to 
     care for medicare beneficiaries.
       ``(vi) Other major issues in implementation and further 
     development of the MedicarePlus program.
       ``(B) Fee-for-service system.--Specifically, the Commission 
     shall review payment policies under parts A and B, 
     including--
       ``(i) the factors affecting expenditures for services in 
     different sectors, including the process for updating 
     hospital, skilled nursing facility, physician, and other 
     fees,
       ``(ii) payment methodologies, and
       ``(iii) their relationship to access and quality of care 
     for medicare beneficiaries.
       ``(C) Interaction of medicare payment policies with health 
     care delivery generally.--Specifically, the Commission shall 
     review the effect of payment policies under this title on the 
     delivery of health care services other than under this title 
     and assess the implications of changes in health care 
     delivery in the United States and in the general market for 
     health care services on the medicare program.
       ``(3) Comments on certain secretarial reports.--If the 
     Secretary submits to Congress (or a committee of Congress) a 
     report that is required by law and that relates to payment 
     policies under this title, the Secretary shall transmit a 
     copy of the report to the Commission. The Commission shall 
     review the report and, not later than 6 months after the date 
     of submittal of the Secretary's report to Congress, shall 
     submit to the appropriate committees of Congress written 
     comments on such report. Such comments may include such 
     recommendations as the Commission deems appropriate.
       ``(4) Agenda and additional reviews.--The Commission shall 
     consult periodically with the chairmen and ranking minority 
     members of the appropriate committees of Congress regarding 
     the Commission's agenda and progress towards achieving the 
     agenda. The Commission may conduct additional reviews,

[[Page H4515]]

     and submit additional reports to the appropriate committees 
     of Congress, from time to time on such topics relating to the 
     program under this title as may be requested by such chairmen 
     and members and as the Commission deems appropriate.
       ``(5) Availability of reports.--The Commission shall 
     transmit to the Secretary a copy of each report submitted 
     under this subsection and shall make such reports available 
     to the public.
       ``(6) Appropriate committees.--For purposes of this 
     section, the term `appropriate committees of Congress' means 
     the Committees on Ways and Means and Commerce of the House of 
     Representatives and the Committee on Finance of the Senate.
       ``(c) Membership.--
       ``(1) Number and appointment.--The Commission shall be 
     composed of 19 members appointed by the Comptroller General.
       ``(2) Qualifications.--
       ``(A) In general.--The membership of the Commission shall 
     include individuals with national recognition for their 
     expertise in health finance and economics, actuarial science, 
     health facility management, health plans and integrated 
     delivery systems, reimbursement of health facilities, 
     allopathic and osteopathic physicians, and other providers of 
     health services, and other related fields, who provide a mix 
     of different professionals, broad geographic representation, 
     and a balance between urban and rural representatives.
       ``(B) Inclusion.--The membership of the Commission shall 
     include (but not be limited to) physicians and other health 
     professionals, employers, third party payers, individuals 
     skilled in the conduct and interpretation of biomedical, 
     health services, and health economics research and expertise 
     in outcomes and effectiveness research and technology 
     assessment. Such membership shall also include 
     representatives of consumers and the elderly.
       ``(C) Majority nonproviders.--Individuals who are directly 
     involved in the provision, or management of the delivery, of 
     items and services covered under this title shall not 
     constitute a majority of the membership of the Commission.
       ``(D) Ethical disclosure.--The Comptroller General shall 
     establish a system for public disclosure by members of the 
     Commission of financial and other potential conflicts of 
     interest relating to such members.
       ``(3) Terms.--
       ``(A) In general.--The terms of members of the Commission 
     shall be for 3 years except that the Comptroller General 
     shall designate staggered terms for the members first 
     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.
       ``(4) Compensation.--While serving on the business of the 
     Commission (including traveltime), a member of the Commission 
     shall be entitled to compensation at the per diem equivalent 
     of the rate provided for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code; and while 
     so serving away from home and member's regular place of 
     business, a member may be allowed travel expenses, as 
     authorized by the Chairman of the Commission. Physicians 
     serving as personnel of the Commission may be provided a 
     physician comparability allowance by the Commission in the 
     same manner as Government physicians may be provided such an 
     allowance by an agency under section 5948 of title 5, United 
     States Code, and for such purpose subsection (i) of such 
     section shall apply to the Commission in the same manner as 
     it applies to the Tennessee Valley Authority. For purposes of 
     pay (other than pay of members of the Commission) and 
     employment benefits, rights, and privileges, all personnel of 
     the Commission shall be treated as if they were employees of 
     the United States Senate.
       ``(5) Chairman; vice chairman.--The Comptroller General 
     shall designate a member of the Commission, at the time of 
     appointment of the member, as Chairman and a member as Vice 
     Chairman for that term of appointment.
       ``(6) Meetings.--The Commission shall meet at the call of 
     the Chairman.
       ``(d) Director and Staff; Experts and Consultants.--Subject 
     to such review as the Comptroller General deems necessary to 
     assure the efficient administration of the Commission, the 
     Commission may--
       ``(1) employ and fix the compensation of an Executive 
     Director (subject to the approval of the Comptroller General) 
     and such other personnel as may be necessary to carry out its 
     duties (without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service);
       ``(2) seek such assistance and support as may be required 
     in the performance of its duties from appropriate Federal 
     departments and agencies;
       ``(3) enter into contracts or make other arrangements, as 
     may be necessary for the conduct of the work of the 
     Commission (without regard to section 3709 of the Revised 
     Statutes (41 U.S.C. 5));
       ``(4) make advance, progress, and other payments which 
     relate to the work of the Commission;
       ``(5) provide transportation and subsistence for persons 
     serving without compensation; and
       ``(6) prescribe such rules and regulations as it deems 
     necessary with respect to the internal organization and 
     operation of the Commission.
       ``(e) Powers.--
       ``(1) Obtaining official data.--The Commission may secure 
     directly from any department or agency of the United States 
     information necessary to enable it to carry out this section. 
     Upon request of the Chairman, the head of that department or 
     agency shall furnish that information to the Commission on an 
     agreed upon schedule.
       ``(2) Data collection.--In order to carry out its 
     functions, the Commission shall--
       ``(A) utilize existing information, both published and 
     unpublished, where possible, collected and assessed either by 
     its own staff or under other arrangements made in accordance 
     with this section,
       ``(B) carry out, or award grants or contracts for, original 
     research and experimentation, where existing information is 
     inadequate, and
       ``(C) adopt procedures allowing any interested party to 
     submit information for the Commission's use in making reports 
     and recommendations.
       ``(3) Access of gao to information.--The Comptroller 
     General shall have unrestricted access to all deliberations, 
     records, and nonproprietary data of the Commission, 
     immediately upon request.
       ``(4) Periodic audit.--The Commission shall be subject to 
     periodic audit by the Comptroller General.
       ``(f) Authorization of Appropriations.--
       ``(1) Request for appropriations.--The Commission shall 
     submit requests for appropriations in the same manner as the 
     Comptroller General submits requests for appropriations, but 
     amounts appropriated for the Commission shall be separate 
     from amounts appropriated for the Comptroller General.
       ``(2) Authorization.--There are authorized to be 
     appropriated such sums as may be necessary to carry out the 
     provisions of this section. 60 percent of such appropriation 
     shall be payable from the Federal Hospital Insurance Trust 
     Fund, and 40 percent of such 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 Advisory 
     Commission''.
       (2) PPRC.--
       (A) In general.--Title XVIII is amended by striking section 
     1845 (42 U.S.C. 1395w-1).
       (B) Elimination of certain reports.--Section 1848 (42 
     U.S.C. 1395w-4) is amended--
       (i) by striking subparagraph (F) of subsection (d)(2),
       (ii) by striking subparagraph (B) of subsection (f)(1), and
       (iii) in subsection (f)(3), by striking ``Physician Payment 
     Review Commission,''.
       (C) Conforming amendments.--Section 1848 (42 U.S.C. 1395w-
     4) is amended by striking ``Physician Payment Review 
     Commission'' and inserting ``Medicare Payment Advisory 
     Commission'' each place it appears in subsections 
     (c)(2)(B)(iii), (g)(6)(C), and (g)(7)(C).
       (c) Effective Date; Transition.--
       (1) In general.--The Comptroller General shall first 
     provide for appointment of members to the Medicare Payment 
     Advisory Commission (in this subsection referred to as 
     ``MedPAC'') by not later than September 30, 1997.
       (2) Transition.--As quickly as possible after the date a 
     majority of members of MedPAC are first appointed, the 
     Comptroller General, in consultation with the Prospective 
     Payment Assessment Commission (in this subsection referred to 
     as ``ProPAC'') and the Physician Payment Review Commission 
     (in this subsection referred to as ``PPRC''), shall provide 
     for the termination of the ProPAC and the PPRC. As of the 
     date of termination of the respective Commissions, the 
     amendments made by paragraphs (1) and (2), respectively, of 
     subsection (b) become effective. The Comptroller General, to 
     the extent feasible, shall provide for the transfer to the 
     MedPAC of assets and staff of the ProPAC and the PPRC, 
     without any loss of benefits or seniority by virtue of such 
     transfers. Fund balances available to the ProPAC or the PPRC 
     for any period shall be available to the MedPAC for such 
     period for like purposes.
       (3) Continuing responsibility for reports.--The MedPAC 
     shall be responsible for the preparation and submission of 
     reports required by law to be submitted (and which have not 
     been submitted by the date of establishment of the MedPAC) by 
     the ProPAC and the PPRC, and, for this purpose, any reference 
     in law to either such Commission is deemed, after the 
     appointment of the MedPAC, to refer to the MedPAC.

                     CHAPTER 4--MEDIGAP PROTECTIONS

     SEC. 10031. MEDIGAP PROTECTIONS.

       (a) Guaranteeing Issue Without Preexisting Conditions for 
     Continuously Covered Individuals.--Section 1882(s) (42 U.S.C. 
     1395ss(s)) is amended--

[[Page H4516]]

       (1) in paragraph (3), by striking ``paragraphs (1) and 
     (2)'' and inserting ``this subsection'',
       (2) by redesignating paragraph (3) as paragraph (4), and
       (3) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3)(A) The issuer of a medicare supplemental policy--
       ``(i) may not deny or condition the issuance or 
     effectiveness of a medicare supplemental policy described in 
     subparagraph (C) that is offered and is available for 
     issuance to new enrollees by such issuer;
       ``(ii) may not discriminate in the pricing of such policy, 
     because of health status, claims experience, receipt of 
     health care, or medical condition; and
       ``(iii) may not impose an exclusion of benefits based on a 
     pre-existing condition under such policy,

     in the case of an individual described in subparagraph (B) 
     who seeks to enroll under the policy not later than 63 days 
     after the date of the termination of enrollment described in 
     such subparagraph and who submits evidence of the date of 
     termination or disenrollment along with the application for 
     such medicare supplemental policy.
       ``(B) An individual described in this subparagraph is an 
     individual described in any of the following clauses:
       ``(i) The individual is enrolled under an employee welfare 
     benefit plan that provides health benefits that supplement 
     the benefits under this title and the plan terminates or 
     ceases to provide all such supplemental health benefits to 
     the individual.
       ``(ii) The individual is enrolled with a MedicarePlus 
     organization under a MedicarePlus plan under part C, and 
     there are circumstances permitting discontinuance of the 
     individual's election of the plan under section 1851(c)(4).
       ``(iii) The individual is enrolled with an eligible 
     organization under a contract under section 1876, a similar 
     organization operating under demonstration project authority, 
     with an organization under an agreement under section 
     1833(a)(1)(A), or with an organization under a policy 
     described in subsection (t), and such enrollment ceases under 
     the same circumstances that would permit discontinuance of an 
     individual's election of coverage under section 1851(c)(4) 
     and, in the case of a policy described in subsection (t), 
     there is no provision under applicable State law for the 
     continuation of coverage under such policy.
       ``(iv) The individual is enrolled under a medicare 
     supplemental policy under this section and such enrollment 
     ceases because--
       ``(I) of the bankruptcy or insolvency of the issuer or 
     because of other involuntary termination of coverage or 
     enrollment under such policy and there is no provision under 
     applicable State law for the continuation of such coverage;
       ``(II) the issuer of the policy substantially violated a 
     material provision of the policy; or
       ``(III) the issuer (or an agent or other entity acting on 
     the issuer's behalf) materially misrepresented the policy's 
     provisions in marketing the policy to the individual.
       ``(v) The individual--
       ``(I) was enrolled under a medicare supplemental policy 
     under this section,
       ``(II) subsequently terminates such enrollment and enrolls, 
     for the first time, with any MedicarePlus organization under 
     a MedicarePlus plan under part C, any eligible organization 
     under a contract under section 1876, any similar organization 
     operating under demonstration project authority, any 
     organization under an agreement under section 1833(a)(1)(A), 
     or any policy described in subsection (t), and
       ``(III) the subsequent enrollment under subclause (II) is 
     terminated by the enrollee during the first 6 months (or 3 
     months for terminations occurring on or after January 1, 
     2003) of such enrollment.
       ``(C)(i) Subject to clauses (ii) and (iii), a medicare 
     supplemental policy described in this subparagraph has a 
     benefit package classified as `A', `B', `C', or `F' under the 
     standards established under subsection (p)(2).
       ``(ii) Only for purposes of an individual described in 
     subparagraph (B)(v), a medicare supplemental policy described 
     in this subparagraph also includes (if available from the 
     same issuer) the same medicare supplemental policy referred 
     to in such subparagraph in which the individual was most 
     recently previously enrolled.
       ``(iii) For purposes of applying this paragraph in the case 
     of a State that provides for offering of benefit packages 
     other than under the classification referred to in clause 
     (i), the references to benefit packages in such clause are 
     deemed references to comparable benefit packages offered in 
     such State.
       ``(D) At the time of an event described in subparagraph (B) 
     because of which an individual ceases enrollment or loses 
     coverage or benefits under a contract or agreement, policy, 
     or plan, the organization that offers the contract or 
     agreement, the insurer offering the policy, or the 
     administrator of the plan, respectively, shall notify the 
     individual of the rights of the individual, and obligations 
     of issuers of medicare supplemental policies, under 
     subparagraph (A).''.
       (b) Limitation on Imposition of Preexisting Condition 
     Exclusion During Initial Open Enrollment Period.--Section 
     1882(s)(2) (42 U.S.C. 1395ss(s)(2)) is amended--
       (1) in subparagraph (B), by striking ``subparagraph (C)'' 
     and inserting ``subparagraphs (C) and (D)'', and
       (2) by adding at the end the following new subparagraph:
       ``(D) In the case of a policy issued during the 6-month 
     period described in subparagraph (A) to an individual who is 
     65 years of age or older as of the date of issuance and who 
     as of the date of the application for enrollment has a 
     continuous period of creditable coverage (as defined in 
     2701(c) of the Public Health Service Act) of--
       ``(i) at least 6 months, the policy may not exclude 
     benefits based on a pre-existing condition; or
       ``(ii) of less than 6 months, if the policy excludes 
     benefits based on a preexisting condition, the policy shall 
     reduce the period of any preexisting condition exclusion by 
     the aggregate of the periods of creditable coverage (if any, 
     as so defined) applicable to the individual as of the 
     enrollment date.

     The Secretary shall specify the manner of the reduction under 
     clause (ii), based upon the rules used by the Secretary in 
     carrying out section 2701(a)(3) of such Act.''.
       (c) Effective Dates.--
       (1) Guaranteed issue.--The amendment made by subsection (a) 
     shall take effect on July 1, 1998.
       (2) Limit on preexisting condition exclusions.--The 
     amendment made by subsection (b) shall apply to policies 
     issued on or after July 1, 1998.
       (d) Transition Provisions.--
       (1) In general.--If the Secretary of Health and Human 
     Services identifies a State as requiring a change to its 
     statutes or regulations to conform its regulatory program to 
     the changes made by this section, the State regulatory 
     program shall not be considered to be out of compliance with 
     the requirements of section 1882 of the Social Security Act 
     due solely to failure to make such change until the date 
     specified in paragraph (4).
       (2) NAIC standards.--If, within 9 months after the date of 
     the enactment of this Act, the National Association of 
     Insurance Commissioners (in this subsection referred to as 
     the ``NAIC'') modifies its NAIC Model Regulation relating to 
     section 1882 of the Social Security Act (referred to in such 
     section as the 1991 NAIC Model Regulation, as modified 
     pursuant to section 171(m)(2) of the Social Security Act 
     Amendments of 1994 (Public Law 103-432) and as modified 
     pursuant to section 1882(d)(3)(A)(vi)(IV) of the Social 
     Security Act, as added by section 271(a) of the Health 
     Insurance Portability and Accountability Act of 1996 (Public 
     Law 104-191) to conform to the amendments made by this 
     section, such revised regulation incorporating the 
     modifications shall be considered to be the applicable NAIC 
     model regulation (including the revised NAIC model regulation 
     and the 1991 NAIC Model Regulation) for the purposes of such 
     section.
       (3) Secretary standards.--If the NAIC does not make the 
     modifications described in paragraph (2) within the period 
     specified in such paragraph, the Secretary of Health and 
     Human Services shall make the modifications described in such 
     paragraph and such revised regulation incorporating the 
     modifications shall be considered to be the appropriate 
     Regulation for the purposes of such section.
       (4) Date specified.--
       (A) In general.--Subject to subparagraph (B), the date 
     specified in this paragraph for a State is the earlier of--
       (i) the date the State changes its statutes or regulations 
     to conform its regulatory program to the changes made by this 
     section, or
       (ii) 1 year after the date the NAIC or the Secretary first 
     makes the modifications under paragraph (2) or (3), 
     respectively.
       (B) Additional legislative action required.--In the case of 
     a State which the Secretary identifies as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) to conform its regulatory program to the 
     changes made in this section, but
       (ii) having a legislature which is not scheduled to meet in 
     1999 in a legislative session in which such legislation may 
     be considered,

     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after July 1, 1999. For purposes of the previous sentence, 
     in the case of a State that has a 2-year legislative session, 
     each year of such session shall be deemed to be a separate 
     regular session of the State legislature.

     SEC. 10032. MEDICARE PREPAID COMPETITIVE PRICING 
                   DEMONSTRATION PROJECT.

       (a) Establishment of Project.--The Secretary of Health and 
     Human Services shall provide, beginning not later than 1 year 
     after the date of the enactment of this Act, for 
     implementation of a project (in this section referred to as 
     the ``project'') to demonstrate the application of, and the 
     consequences of applying, a market-oriented pricing system 
     for the provision of a full range of medicare benefits in a 
     geographic area.
       (b) Research Design Advisory Committee.--
       (1) In general.--Before implementing the project under this 
     section, the Secretary shall appoint a national advisory 
     committee, including independent actuaries and individuals 
     with expertise in competitive health plan pricing, to make 
     recommendations to the Secretary concerning the appropriate 
     research design for implementing the project.
       (2) Initial recommendations.--The committee initially shall 
     submit recommendations respecting the method for area 
     selection, benefit design among plans offered,

[[Page H4517]]

     structuring choice among health plans offered, methods for 
     setting the price to be paid to plans, collection of plan 
     information (including information concerning quality and 
     access to care), information dissemination, and methods of 
     evaluating the results of the project.
       (3) Advice during implementation.--Upon implementation of 
     the project, the committee shall continue to advise the 
     Secretary on the application of the design in different areas 
     and changes in the project based on experience with its 
     operations.
       (c) Area Selection.--
       (1) In general.--Taking into account the recommendations of 
     the advisory committee submitted under subsection (b), the 
     Secretary shall designate areas in which the project will 
     operate.
       (2) Appointment of area advisory committee.--Upon the 
     designation of an area for inclusion in the project, the 
     Secretary shall appoint an area advisory committee, composed 
     of representatives of health plans, providers, and medicare 
     beneficiaries in the area, to advise the Secretary concerning 
     how the project will actually be implemented in the area. 
     Such advice may include advice concerning the marketing and 
     pricing of plans in the area and other salient factors 
     relating.
       (d) Monitoring and Report.--
       (1) Monitoring impact.--Taking into consideration the 
     recommendations of the general advisory committee (appointed 
     under subsection (b)), the Secretary shall closely monitor 
     the impact of projects in areas on the price and quality of, 
     and access to, medicare covered services, choice of health 
     plan, changes in enrollment, and other relevant factors.
       (2) Report.--The Secretary shall periodically report to 
     Congress on the progress under the project under this 
     section.
       (e) Waiver Authority.--The Secretary of Health and Human 
     Services may waive such requirements of section 1876 (and 
     such requirements of part C of title XVIII, as amended by 
     chapter 1), of the Social Security Act as may be necessary 
     for the purposes of carrying out the project.

    CHAPTER 5--TAX TREATMENT OF HOSPITALS PARTICIPATING IN PROVIDER-
                        SPONSORED ORGANIZATIONS

     SEC. 10041. TAX TREATMENT OF HOSPITALS WHICH PARTICIPATE IN 
                   PROVIDER-SPONSORED ORGANIZATIONS.

       (a) In General.--Section 501 of the Internal Revenue Code 
     of 1986 (relating to exemption from tax on corporations, 
     certain trusts, etc.) is amended by redesignating subsection 
     (o) as subsection (p) and by inserting after subsection (n) 
     the following new subsection:
       ``(o) Treatment of Hospitals Participating in Provider-
     Sponsored Organizations.--An organization shall not fail to 
     be treated as organized and operated exclusively for a 
     charitable purpose for purposes of subsection (c)(3) solely 
     because a hospital which is owned and operated by such 
     organization participates in a provider-sponsored 
     organization (as defined in section 1853(e) of the Social 
     Security Act), whether or not the provider-sponsored 
     organization is exempt from tax. For purposes of subsection 
     (c)(3), any person with a material financial interest in such 
     a provider-sponsored organization shall be treated as a 
     private shareholder or individual with respect to the 
     hospital.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.
                   Subtitle B--Prevention Initiatives

     SEC. 10101. SCREENING MAMMOGRAPHY.

       (a) Providing Annual Screening Mammography for Women Over 
     Age 39.--Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is 
     amended--
       (1) in clause (iii), to read as follows:
       ``(iii) In the case of a woman over 39 years of age, 
     payment may not be made under this part for screening 
     mammography performed within 11 months following the month in 
     which a previous screening mammography was performed.''; and
       (2) by striking clauses (iv) and (v).
       (b) Waiver of Deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)) is amended--
       (1) by striking ``and'' before ``(4)'', and
       (2) by inserting before the period at the end the 
     following: ``, and (5) such deductible shall not apply with 
     respect to screening mammography (as described in section 
     1861(jj))''.
       (c) Conforming Amendment.--Section 1834(c)(1)(C) of such 
     Act (42 U.S.C. 1395m(c)(1)(C)) is amended by striking ``, 
     subject to the deductible established under section 
     1833(b),''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 10102. SCREENING PAP SMEAR AND PELVIC EXAMS.

       (a) Coverage of Pelvic Exam; Increasing Frequency of 
     Coverage of Pap Smear.--Section 1861(nn) (42 U.S.C. 
     1395x(nn)) is amended--
       (1) in the heading, by striking ``Smear'' and inserting 
     ``Smear; Screening Pelvic Exam'';
       (2) by inserting ``or vaginal'' after ``cervical'' each 
     place it appears;
       (3) by striking ``(nn)'' and inserting ``(nn)(1)'';
       (4) by striking ``3 years'' and all that follows and 
     inserting ``3 years, or during the preceding year in the case 
     of a woman described in paragraph (3).''; and
       (5) 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 or 
     vaginal cancer; or
       ``(B) is at high risk of developing cervical or vaginal 
     cancer (as determined pursuant to factors identified by the 
     Secretary).''.
       (b) Waiver of Deductible.--The first sentence of section 
     1833(b) (42 U.S.C. 1395l(b)), as amended by section 10101(b), 
     is amended--
       (1) by striking ``and'' before ``(5)'', and
       (2) by inserting before the period at the end 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))''.
       (c) Conforming Amendments.--Sections 1861(s)(14) and 
     1862(a)(1)(F) (42 U.S.C. 1395x(s)(14), 1395y(a)(1)(F)) are 
     each amended by inserting ``and screening pelvic exam'' after 
     ``screening pap smear''.
       (d) Payment Under Physician Fee Schedule.--Section 
     1848(j)(3)(42 U.S.C. 1395w-4(j)(3)) is amended by striking 
     ``and (4)'' and inserting ``(4) and (14) (with respect to 
     services described in section 1861(nn)(2))''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 10103. PROSTATE CANCER SCREENING TESTS.

       (a) Coverage.--Section 1861 (42 U.S.C. 1395x) is amended--
       (1) in subsection (s)(2)--
       (A) by striking ``and'' at the end of subparagraphs (N) and 
     (O), and
       (B) by inserting after subparagraph (O) the following new 
     subparagraph:
       ``(P) prostate cancer screening tests (as defined in 
     subsection (oo)); and''; and
       (2) by adding at the end the following new subsection:

                   ``Prostate Cancer Screening Tests

       ``(oo)(1) The term `prostate cancer screening test' means a 
     test that consists of any (or all) of the procedures 
     described in paragraph (2) provided for the purpose of early 
     detection of prostate cancer to a man over 50 years of age 
     who has not had such a test during the preceding year.
       ``(2) The procedures described in this paragraph are as 
     follows:
       ``(A) A digital rectal examination.
       ``(B) A prostate-specific antigen blood test.
       ``(C) For years beginning after 2001, such other procedures 
     as the Secretary finds appropriate for the purpose of early 
     detection of prostate cancer, taking into account changes in 
     technology and standards of medical practice, availability, 
     effectiveness, costs, and such other factors as the Secretary 
     considers appropriate.''.
       (b) Payment for Prostate-specific Antigen Blood Test Under 
     Clinical Diagnostic Laboratory Test Fee Schedules.--Section 
     1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amended by 
     inserting after ``laboratory tests'' the following: 
     ``(including prostate cancer screening tests under section 
     1861(oo) consisting of prostate-specific antigen blood 
     tests)''.
       (c) Conforming Amendment.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (E), by striking ``and'' at the end,
       (B) in subparagraph (F), by striking the semicolon at the 
     end and inserting ``, and'', and
       (C) by adding at the end the following new subparagraph:
       ``(G) in the case of prostate cancer screening tests (as 
     defined in section 1861(oo)), which are performed more 
     frequently than is covered under such section;''; and
       (2) in paragraph (7), by striking ``paragraph (1)(B) or 
     under paragraph (1)(F)'' and inserting ``subparagraphs (B), 
     (F), or (G) of paragraph (1)''.
       (d) Payment Under Physician Fee Schedule.--Section 
     1848(j)(3)(42 U.S.C. 1395w-4(j)(3)), as amended by section 
     10102, is amended by inserting ``, (2)(P) (with respect to 
     services described in subparagraphs (A) and (C) of section 
     1861(oo)'' after ``(2)(G)''
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 10104. COVERAGE OF COLORECTAL SCREENING.

       (a) Coverage.--
       (1) In general.--Section 1861 (42 U.S.C. 1395x), as amended 
     by section 10103(a), is amended--
       (A) in subsection (s)(2)--
       (i) by striking ``and'' at the end of subparagraph (P);
       (ii) by adding ``and'' at the end of subparagraph (Q); and
       (iii) by adding at the end the following new subparagraph:
       ``(R) colorectal cancer screening tests (as defined in 
     subsection (pp)); and''; and
       (B) by adding at the end the following new subsection:

[[Page H4518]]

                  ``Colorectal Cancer Screening Tests

       ``(pp)(1) The term `colorectal cancer screening test' means 
     any of the following procedures furnished to an individual 
     for the purpose of early detection of colorectal cancer:
       ``(A) Screening fecal-occult blood test.
       ``(B) Screening flexible sigmoidoscopy.
       ``(C) In the case of an individual at high risk for 
     colorectal cancer, screening colonoscopy.
       ``(D) Screening barium enema, if found by the Secretary to 
     be an appropriate alternative to screening flexible 
     sigmoidoscopy under subparagraph (B) or screening colonoscopy 
     under subparagraph (C).
       ``(E) For years beginning after 2002, such other procedures 
     as the Secretary finds appropriate for the purpose of early 
     detection of colorectal cancer, taking into account changes 
     in technology and standards of medical practice, 
     availability, effectiveness, costs, and such other factors as 
     the Secretary considers appropriate.
       ``(2) In paragraph (1)(C), an `individual at high risk for 
     colorectal cancer' is an individual who, because of family 
     history, prior experience of cancer or precursor neoplastic 
     polyps, a history of chronic digestive disease condition 
     (including inflammatory bowel disease, Crohn's Disease, or 
     ulcerative colitis), the presence of any appropriate 
     recognized gene markers for colorectal cancer, or other 
     predisposing factors, faces a high risk for colorectal 
     cancer.''.
       (2) Deadline for decision on coverage of screening barium 
     enema.--Not later than 2 years after the date of the 
     enactment of this section, the Secretary of Health and Human 
     Services shall issue and publish a determination on the 
     treatment of screening barium enema as a colorectal cancer 
     screening test under section 1861(pp) (as added by 
     subparagraph (B)) as an alternative procedure to a screening 
     flexible sigmoidoscopy or screening colonoscopy.
       (b) Frequency and Payment Limits.--
       (1) In general.--Section 1834 (42 U.S.C. 1395m) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) Frequency and Payment Limits for Colorectal Cancer 
     Screening Tests.--
       ``(1) Screening fecal-occult blood tests.--
       ``(A) Payment limit.--In establishing fee schedules under 
     section 1833(h) with respect to colorectal cancer screening 
     tests consisting of screening fecal-occult blood tests, 
     except as provided by the Secretary under paragraph (4)(A), 
     the payment amount established for tests performed--
       ``(i) in 1998 shall not exceed $5; and
       ``(ii) in a subsequent year, shall not exceed the limit on 
     the payment amount established under this subsection for such 
     tests for the preceding year, adjusted by the applicable 
     adjustment under section 1833(h) for tests performed in such 
     year.
       ``(B) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4)(B), no payment may be made 
     under this part for colorectal cancer screening test 
     consisting of a screening fecal-occult blood test--
       ``(i) if the individual is under 50 years of age; or
       ``(ii) if the test is performed within the 11 months after 
     a previous screening fecal-occult blood test.
       ``(2) Screening flexible sigmoidoscopies.--
       ``(A) Fee schedule.--The Secretary shall establish a 
     payment amount under section 1848 with respect to colorectal 
     cancer screening tests consisting of screening flexible 
     sigmoidoscopies that is consistent with payment amounts under 
     such section for similar or related services, except that 
     such payment amount shall be established without regard to 
     subsection (a)(2)(A) of such section.
       ``(B) Payment limit.--In the case of screening flexible 
     sigmoidoscopy services--
       ``(i) the payment amount may not exceed such amount as the 
     Secretary specifies, based upon the rates recognized under 
     this part for diagnostic flexible sigmoidoscopy services; and
       ``(ii) that, in accordance with regulations, may be 
     performed in an ambulatory surgical center and for which the 
     Secretary permits ambulatory surgical center payments under 
     this part and that are performed in an ambulatory surgical 
     center or hospital outpatient department, the payment amount 
     under this part may not exceed the lesser of (I) the payment 
     rate that would apply to such services if they were performed 
     in a hospital outpatient department, or (II) the payment rate 
     that would apply to such services if they were performed in 
     an ambulatory surgical center.
       ``(C) Special rule for detected lesions.--If during the 
     course of such screening flexible sigmoidoscopy, a lesion or 
     growth is detected which results in a biopsy or removal of 
     the lesion or growth, payment under this part shall not be 
     made for the screening flexible sigmoidoscopy but shall be 
     made for the procedure classified as a flexible sigmoidoscopy 
     with such biopsy or removal.
       ``(D) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4)(B), no payment may be made 
     under this part for a colorectal cancer screening test 
     consisting of a screening flexible sigmoidoscopy--
       ``(i) if the individual is under 50 years of age; or
       ``(ii) if the procedure is performed within the 47 months 
     after a previous screening flexible sigmoidoscopy.
       ``(3) Screening colonoscopy for individuals at high risk 
     for colorectal cancer.--
       ``(A) Fee schedule.--The Secretary shall establish a 
     payment amount under section 1848 with respect to colorectal 
     cancer screening test consisting of a screening colonoscopy 
     for individuals at high risk for colorectal cancer (as 
     defined in section 1861(pp)(2)) that is consistent with 
     payment amounts under such section for similar or related 
     services, except that such payment amount shall be 
     established without regard to subsection (a)(2)(A) of such 
     section.
       ``(B) Payment limit.--In the case of screening colonoscopy 
     services--
       ``(i) the payment amount may not exceed such amount as the 
     Secretary specifies, based upon the rates recognized under 
     this part for diagnostic colonoscopy services; and
       ``(ii) that are performed in an ambulatory surgical center 
     or hospital outpatient department, the payment amount under 
     this part may not exceed the lesser of (I) the payment rate 
     that would apply to such services if they were performed in a 
     hospital outpatient department, or (II) the payment rate that 
     would apply to such services if they were performed in an 
     ambulatory surgical center.
       ``(C) Special rule for detected lesions.--If during the 
     course of such screening colonoscopy, a lesion or growth is 
     detected which results in a biopsy or removal of the lesion 
     or growth, payment under this part shall not be made for the 
     screening colonoscopy but shall be made for the procedure 
     classified as a colonoscopy with such biopsy or removal.
       ``(D) Frequency limit.--Subject to revision by the 
     Secretary under paragraph (4)(B), no payment may be made 
     under this part for a colorectal cancer screening test 
     consisting of a screening colonoscopy for individuals at high 
     risk for colorectal cancer if the procedure is performed 
     within the 23 months after a previous screening colonoscopy.
       ``(4) Reductions in payment limit and revision of 
     frequency.--
       ``(A) Reductions in payment limit for screening fecal-
     occult blood tests.--The Secretary shall review from time to 
     time the appropriateness of the amount of the payment limit 
     established for screening fecal-occult blood tests under 
     paragraph (1)(A). The Secretary may, with respect to tests 
     performed in a year after 2000, reduce the amount of such 
     limit as it applies nationally or in any area to the amount 
     that the Secretary estimates is required to assure that such 
     tests of an appropriate quality are readily and conveniently 
     available during the year.
       ``(B) Revision of frequency.--
       ``(i) Review.--The Secretary shall review periodically the 
     appropriate frequency for performing colorectal cancer 
     screening tests based on age and such other factors as the 
     Secretary believes to be pertinent.
       ``(ii) Revision of frequency.--The Secretary, taking into 
     consideration the review made under clause (i), may revise 
     from time to time the frequency with which such tests may be 
     paid for under this subsection, but no such revision shall 
     apply to tests performed before January 1, 2001.
       ``(5) Limiting charges of nonparticipating physicians.--
       ``(A) In general.--In the case of a colorectal cancer 
     screening test consisting of a screening flexible 
     sigmoidoscopy or a screening colonoscopy provided to an 
     individual at high risk for colorectal cancer for which 
     payment may be made under this part, if a nonparticipating 
     physician provides the procedure to an individual enrolled 
     under this part, the physician may not charge the individual 
     more than the limiting charge (as defined in section 
     1848(g)(2)).
       ``(B) Enforcement.--If a physician or supplier knowing and 
     willfully imposes a charge in violation of subparagraph (A), 
     the Secretary may apply sanctions against such physician or 
     supplier in accordance with section 1842(j)(2).''.
       (2) Special rule for screening barium enema.--If the 
     Secretary of Health and Human Services issues a determination 
     under subsection (a)(2) that screening barium enema should be 
     covered as a colorectal cancer screening test under section 
     1861(pp) (as added by subsection (a)(1)(B)), the Secretary 
     shall establish frequency limits (including revisions of 
     frequency limits) for such procedure consistent with the 
     frequency limits for other colorectal cancer screening tests 
     under section 1834(d) (as added by subsection (b)(1)), and 
     shall establish payment limits (including limits on charges 
     of nonparticipating physicians) for such procedure consistent 
     with the payment limits under part B of title XVIII for 
     diagnostic barium enema procedures.
       (c) Conforming Amendments.--(1) Paragraphs (1)(D) and 
     (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each 
     amended by inserting ``or section 1834(d)(1)'' after 
     ``subsection (h)(1)''.
       (2) Section 1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is 
     amended by striking ``The Secretary'' and inserting ``Subject 
     to paragraphs (1) and (4)(A) of section 1834(d), the 
     Secretary''.
       (3) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 
     U.S.C. 1395w-4(a)(2)(A)) are each amended by inserting after 
     ``a service'' the following: ``(other than a colorectal 
     cancer screening test consisting of a screening colonoscopy 
     provided to an individual at high risk for colorectal cancer 
     or a screening flexible sigmoidoscopy)''.
       (4) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by 
     section 10103(c), is amended--
       (A) in paragraph (1)--

[[Page H4519]]

       (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 colorectal cancer screening tests, 
     which are performed more frequently than is covered under 
     section 1834(d);''; and
       (B) in paragraph (7), by striking ``or (G)'' and inserting 
     ``(G), or (H)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 10105. DIABETES SCREENING TESTS.

       (a) Coverage of Diabetes Outpatient Self-management 
     Training Services.--
       (1) In general.--Section 1861 (42 U.S.C. 1395x), as amended 
     by sections 10103(a) and 10104(a), is amended--
       (A) in subsection (s)(2)--
       (i) by striking ``and'' at the end of subparagraph (Q);
       (ii) by adding ``and'' at the end of subparagraph (R); and
       (iii) by adding at the end the following new subparagraph:
       ``(S) diabetes outpatient self-management training services 
     (as defined in subsection (qq)); and''; and
       (B) by adding at the end the following new subsection:

        ``Diabetes Outpatient Self-Management Training Services

       ``(qq)(1) The term `diabetes outpatient self-management 
     training services' means educational and training services 
     furnished to an individual with diabetes by a certified 
     provider (as described in paragraph (2)(A)) in an outpatient 
     setting by an individual or entity who meets the quality 
     standards described in paragraph (2)(B), but only if the 
     physician who is managing the individual's diabetic condition 
     certifies that such services are needed under a comprehensive 
     plan of care related to the individual's diabetic condition 
     to provide the individual with necessary skills and knowledge 
     (including skills related to the self-administration of 
     injectable drugs) to participate in the management of the 
     individual's condition.
       ``(2) In paragraph (1)--
       ``(A) a `certified provider' is a physician, or other 
     individual or entity designated by the Secretary, that, in 
     addition to providing diabetes outpatient self-management 
     training services, provides other items or services for which 
     payment may be made under this title; and
       ``(B) a physician, or such other individual or entity, 
     meets the quality standards described in this paragraph if 
     the physician, or individual or entity, meets quality 
     standards established by the Secretary, except that the 
     physician or other individual or entity shall be deemed to 
     have met such standards if the physician or other individual 
     or entity meets applicable standards originally established 
     by the National Diabetes Advisory Board and subsequently 
     revised by organizations who participated in the 
     establishment of standards by such Board, or is recognized by 
     an organization that represents individuals (including 
     individuals under this title) with diabetes as meeting 
     standards for furnishing the services.''.
       (2) Payment Under Physician Fee Schedule.--Section 
     1848(j)(3)(42 U.S.C. 1395w-4(j)(3)) as amended in sections 
     10102 and 10103, is amended by inserting ``(2)(S),'' before 
     ``(3),''.
       (3) Consultation with organizations in establishing payment 
     amounts for services provided by physicians.--In establishing 
     payment amounts under section 1848 of the Social Security Act 
     for physicians' services consisting of diabetes outpatient 
     self-management training services, the Secretary of Health 
     and Human Services shall consult with appropriate 
     organizations, including such organizations representing 
     individuals or medicare beneficiaries with diabetes, in 
     determining the relative value for such services under 
     section 1848(c)(2) of such Act.
       (b) Blood-testing Strips for Individuals With Diabetes.--
       (1) Including strips and monitors as durable medical 
     equipment.--The first sentence of section 1861(n) (42 U.S.C. 
     1395x(n)) is amended by inserting before the semicolon the 
     following: ``, and includes blood-testing strips and blood 
     glucose monitors for individuals with diabetes without regard 
     to whether the individual has Type I or Type II diabetes or 
     to the individual's use of insulin (as determined under 
     standards established by the Secretary in consultation with 
     the appropriate organizations)''.
       (2) 10 percent reduction in payments for testing strips.--
     Section 1834(a)(2)(B)(iv) (42 U.S.C. 1395m(a)(2)(B)(iv)) is 
     amended by adding before the period the following: ``(reduced 
     by 10 percent, in the case of a blood glucose testing strip 
     furnished after 1997 for an individual with diabetes)''.
       (c) Establishment of Outcome Measures for Beneficiaries 
     With Diabetes.--
       (1) In general.--The Secretary of Health and Human 
     Services, in consultation with appropriate organizations, 
     shall establish outcome measures, including glysolated 
     hemoglobin (past 90-day average blood sugar levels), for 
     purposes of evaluating the improvement of the health status 
     of medicare beneficiaries with diabetes mellitus.
       (2) Recommendations for modifications to screening 
     benefits.--Taking into account information on the health 
     status of medicare beneficiaries with diabetes mellitus as 
     measured under the outcome measures established under 
     subparagraph (A), the Secretary shall from time to time 
     submit recommendations to Congress regarding modifications to 
     the coverage of services for such beneficiaries under the 
     medicare program.
       (d) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 10106. STANDARDIZATION OF MEDICARE COVERAGE OF BONE MASS 
                   MEASUREMENTS.

       (a) In General.--Section 1861 (42 U.S.C. 1395x), as amended 
     by sections 10103(a), 10104(a), 10105(a), is amended--
       (1) in subsection (s)--
       (A) in paragraph (12)(C), by striking ``and'' at the end,
       (B) by striking the period at the end of paragraph (14) and 
     inserting ``; and'',
       (C) by redesignating paragraphs (15) and (16) as paragraphs 
     (16) and (17), respectively, and
       (D) by inserting after paragraph (14) the following new 
     paragraph:
       ``(15) bone mass measurement (as defined in subsection 
     (rr)).''; and
       (2) by inserting after subsection (qq) the following new 
     subsection:

                        ``Bone Mass Measurement

       ``(rr)(1) The term `bone mass measurement' means a 
     radiologic or radioisotopic procedure or other procedure 
     approved by the Food and Drug Administration performed on a 
     qualified individual (as defined in paragraph (2)) for the 
     purpose of identifying bone mass or detecting bone loss or 
     determining bone quality, and includes a physician's 
     interpretation of the results of the procedure.
       ``(2) For purposes of this subsection, the term `qualified 
     individual' means an individual who is (in accordance with 
     regulations prescribed by the Secretary)--
       ``(A) an estrogen-deficient woman at clinical risk for 
     osteoporosis;
       ``(B) an individual with vertebral abnormalities;
       ``(C) an individual receiving long-term glucocorticoid 
     steroid therapy;
       ``(D) an individual with primary hyperparathyroidism; or
       ``(E) an individual being monitored to assess the response 
     to or efficacy of an approved osteoporosis drug therapy.
       ``(3) The Secretary shall establish such standards 
     regarding the frequency with which a qualified individual 
     shall be eligible to be provided benefits for bone mass 
     measurement under this title.''.
       (b) Payment under Physician Fee Schedule.--Section 
     1848(j)(3) (42 U.S.C. 1395w-4(j)(3)), as amended by sections 
     10102, 10103, and 10105, is amended--
       (1) by striking ``(4) and (14)'' and inserting ``(4), 
     (14)'' and
       (2) by inserting `` and (15)'' after ``1861(nn)(2))''.
       (c) Conforming Amendments.--Sections 1864(a), 
     1902(a)(9)(C), and 1915(a)(1)(B)(ii)(I) (42 U.S.C. 1395aa(a), 
     1396a(a)(9)(C), and 1396n(a)(1)(B)(ii)(I)) are amended by 
     striking ``paragraphs (15) and (16)'' each place it appears 
     and inserting ``paragraphs (16) and (17)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to bone mass measurements performed on or after 
     July 1, 1998.

     SEC. 10107. VACCINES OUTREACH EXPANSION.

       (a) Extension of Influenza and Pneumococcal Vaccination 
     Campaign.--In order to increase utilization of pneumococcal 
     and influenza vaccines in medicare beneficiaries, the 
     Influenza and Pneumococcal Vaccination Campaign carried out 
     by the Health Care Financing Administration in conjunction 
     with the Centers for Disease Control and Prevention and the 
     National Coalition for Adult Immunization, is extended until 
     the end of fiscal year 2002.
       (b) Authorization of Appropriation.--There are hereby 
     authorized to be appropriated for each of fiscal years 1998 
     through 2002, $8,000,000 for the Campaign described in 
     subsection (a). Of the amount so authorized to be 
     appropriated in each fiscal year, 60 percent of the amount so 
     appropriated shall be payable from the Federal Hospital 
     Insurance Trust Fund, and 40 percent shall be payable from 
     the Federal Supplementary Medical Insurance Trust Fund.

     SEC. 10108. STUDY ON PREVENTIVE BENEFITS.

       (a) Study.--The Secretary of Health and Human Services 
     shall request the National Academy of Sciences, in 
     conjunction with the United States Preventive Services Task 
     Force, to analyze the expansion or modification of preventive 
     benefits provided to medicare beneficiaries under title XVIII 
     of the Social Security Act. The analysis shall consider both 
     the short term and long term benefits, and costs to the 
     medicare program, of such expansion or modification,
       (b) Report.--
       (1) Initial report.--Not later than 2 years after the date 
     of the enactment of this Act, the Secretary shall submit a 
     report on the findings of the analysis conducted under 
     subsection (a) to the Committee on Ways and Means and the 
     Committee on Commerce of the House of Representatives and the 
     Committee on Finance of the Senate.
       (2) Contents.--Such report shall include specific findings 
     with respect to coverage of the following preventive 
     benefits:
       (A) Nutrition therapy, including parenteral and enteral 
     nutrition.
       (B) Medically necessary dental care.

[[Page H4520]]

       (C) Routine patient care costs for beneficiaries enrolled 
     in approved clinical trial programs.
       (D) Elimination of time limitation for coverage of 
     immunosuppressive drugs for transplant patients.
       (3) Funding.--From funds appropriated to the Department of 
     Health and Human Services for fiscal years 1998 and 1999, the 
     Secretary shall provide for such funding as may be necessary 
     for the conduct of the analysis by the National Academy of 
     Sciences under this section.
                     Subtitle C--Rural Initiatives

     SEC. 10201. RURAL PRIMARY CARE HOSPITAL PROGRAM.

       (a) Rural Primary Care Hospital Program.--Section 1820 (42 
     U.S.C. 1395i-4) is amended to read as follows:


             ``medicare rural primary care hospital program

       ``Sec. 1820. (a) State Designation of Facilities.--
       ``(1) In general.--A State may designate one or more 
     facilities as a rural primary care hospital in accordance 
     with paragraph (2).
       ``(2) Criteria for designation as rural primary care 
     hospital.--A State may designate a facility as a rural 
     primary care hospital if the facility--
       ``(A) is a nonprofit or public hospital, and is located in 
     a county (or equivalent unit of local government) in a rural 
     area (as defined in section 1886(d)(2)(D)) that--
       ``(i) is located a distance that corresponds to a travel 
     time of greater than 30 minutes (using the guidelines 
     specified under part IB1(b) of Appendix A to part 5 of title 
     42, Code of Federal Regulations, as in effect on October 1, 
     1996), from a hospital, or another facility described in this 
     subsection, or
       ``(ii) is certified by the State as being a necessary 
     provider of health care services to residents in the area 
     because of local geography or service patterns;
       ``(B) makes available 24-hour emergency care services;
       ``(C) provides at any time not more than 15 acute care 
     inpatient beds (meeting such standards as the Secretary may 
     establish) for providing inpatient care for a period not to 
     exceed 96 hours (unless a longer period is required because 
     transfer to a hospital is precluded because of inclement 
     weather or other emergency conditions), except that a peer 
     review organization or equivalent entity may, on request, 
     waive the 96-hour restriction on a case-by-case basis;
       ``(D) 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 and fully staffed, 
     except insofar as the facility is required to make available 
     emergency care services as determined under subparagraph (B) 
     and must have nursing services available on a 24-hour basis, 
     but need not otherwise staff the facility except when an 
     inpatient is present,
       ``(ii) the facility may provide any services otherwise 
     required to be provided by a full-time, on-site dietitian, 
     pharmacist, laboratory technician, medical technologist, and 
     radiological technologist on a part-time, off-site basis 
     under arrangements as defined in section 1861(w)(1), and
       ``(iii) the inpatient care described in subparagraph (C) 
     may be provided by a physician's assistant, nurse 
     practitioner, or clinical nurse specialist subject to the 
     oversight of a physician who need not be present in the 
     facility;
       ``(E) meets the requirements of subparagraph (I) of 
     paragraph (2) of section 1861(aa); and
       ``(F) has executed and in effect an agreement described in 
     subsection (b)(1).
       ``(b) Agreements.--
       ``(1) In general.--Each rural primary care hospital shall 
     have an agreement with respect to each item described in 
     paragraph (2) with at least 1 hospital (as defined in section 
     1861(e)).
       ``(2) Items described.--The items described in this 
     paragraph are the following:
       ``(A) Patient referral and transfer.
       ``(B) The development and use of communications systems 
     including (where feasible)--
       ``(i) telemetry systems, and
       ``(ii) systems for electronic sharing of patient data.
       ``(C) The provision of emergency and non-emergency 
     transportation between the facility and the hospital.
       ``(3) Credentialing and quality assurance.--Each rural 
     primary care hospital shall have an agreement with respect to 
     credentialing and quality assurance with at least 1--
       ``(A) hospital,
       ``(B) peer review organization or equivalent entity, or
       ``(C) other appropriate and qualified entity identified by 
     the State.
       ``(c) Certification by the Secretary.--The Secretary shall 
     certify a facility as a rural primary care hospital if the 
     facility--
       ``(1) is designated as a rural primary care hospital by the 
     State in which it is located; and
       ``(2) meets such other criteria as the Secretary may 
     require.
       ``(d) Permitting Maintenance of Swing Beds.--Nothing in 
     this section shall be construed to prohibit a State from 
     designating or the Secretary from certifying a facility as a 
     rural primary care hospital solely because, at the time the 
     facility applies to the State for designation as a rural 
     primary care hospital, there is in effect an agreement 
     between the facility and the Secretary under section 1883 
     under which the facility's inpatient hospital facilities are 
     used for the provision of extended care services, so long as 
     the total number of beds that may be used at any time for the 
     furnishing of either such services or acute care inpatient 
     services does not exceed 25 beds and the number of beds used 
     at any time for acute care inpatient services does not exceed 
     15 beds. For purposes of the previous sentence, any bed of a 
     unit of the facility that is licensed as a distinct-part 
     skilled nursing facility at the time the facility applies to 
     the State for designation as a rural primary care hospital 
     shall not be counted.
       ``(e) Waiver of Conflicting Part A Provisions.--The 
     Secretary is authorized to waive such provisions of this part 
     and part C as are necessary to conduct the program 
     established under this section.''.
       (b) Payment on a Reasonable Cost Basis.--
       (1) Medicare part a.--Section 1814(l) (42 U.S.C. 1395f(l)) 
     is amended to read as follows:
       ``(l) Payment for Inpatient Rural Primary Care Hospital 
     Services.--The amount of payment under this part for 
     inpatient rural primary care hospital services is the 
     reasonable costs of the rural primary care hospital in 
     providing such services.''.
       (2) Medicare part b.--Section 1834(g) (42 U.S.C. 1395m(g)) 
     is amended to read as follows:
       ``(g) Payment for Outpatient Rural Primary Care Hospital 
     Services.--The amount of payment under this part for 
     outpatient rural primary care hospital services is the 
     reasonable costs of the rural primary care hospital in 
     providing such services.''.
       (c) Lengthening Maximum Period of Permitted Inpatient 
     Stay.--Section 1814(a)(8) (42 U.S.C. 1395f(a)(8)) is amended 
     by striking ``72 hours'' and inserting ``96 hours''.
       (d) Payment Continued to Designated Essential Access 
     Community Hospitals and Designated Rural Primary Care 
     Hospitals.--
       (1) Essential access community hospitals.--Section 
     1886(d)(5)(D) (42 U.S.C. 1395ww(d)(5)(D)) is amended--
       (A) in clause (iii)(III), by inserting ``as in effect on 
     September 30, 1997'' before the period at the end; and
       (B) in clause (v), by inserting ``as in effect on September 
     30, 1997'' after ``1820(i)(1)'' and after ``1820(g)''.
       (2) Rural primary care hospitals.--Section 1861(mm)(1) (42 
     U.S.C. 1395x(mm)(1)) is amended by striking ``1820(i)(2).'' 
     and inserting ``1820(c), and includes a facility designated 
     by the Secretary under section 1820(i)(2) as in effect on 
     September 30, 1997.''.
       (3) Medical assistance facility.--Any facility that, as of 
     March 1, 1997, operated as a limited service rural hospital 
     under a demonstration described in section 4008(i)(1) of the 
     Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 1395b-1 
     note) shall be treated as a rural primary care hospital for 
     the purposes of title XVIII of the Social Security Act so 
     long as it continues to meet the requirements of the 
     demonstration protocol relating to staffing, services, 
     quality assurance, and related factors.
       (e) Conforming Amendment.--Section 1883(a)(1) (42 U.S.C. 
     1395tt(a)(1)) is amended by inserting ``or rural primary care 
     hospital'' after ``Any hospital''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to services furnished in cost reporting periods 
     beginning on or after October 1, 1997.

     SEC. 10202. PROHIBITING DENIAL OF REQUEST BY RURAL REFERRAL 
                   CENTERS FOR RECLASSIFICATION ON BASIS OF 
                   COMPARABILITY OF WAGES.

       (a) In General.--Section 1886(d)(10)(D) (42 U.S.C. 
     1395ww(d)(10)(D)) is amended--
       (1) by redesignating clause (iii) as clause (iv); and
       (2) 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 has ever 
     been 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.''.
       (b) Continuing Treatment of Previously Designated 
     Centers.--
       (1) In general.--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 1991 shall be classified as such a rural referral 
     center for fiscal year 1998 and each subsequent fiscal year.
       (2) Budget neutrality.--The provisions of section 
     1886(d)(8)(D) of the Social Security Act shall apply to 
     reclassifications made pursuant to paragraph (1) in the same 
     manner as such provisions apply to a reclassification under 
     section 1886(d)(10) of such Act.

     SEC. 10203. HOSPITAL GEOGRAPHIC RECLASSIFICATION PERMITTED 
                   FOR PURPOSES OF DISPROPORTIONATE SHARE PAYMENT 
                   ADJUSTMENTS.

       (a) In General.--Section 1886(d)(10)(C)(i) (42 U.S.C. 
     1395ww(d)(10)(C)(i)) is amended--
       (1) by striking ``or'' at the end of subclause (I);
       (2) by striking the period at the end of subclause (II) and 
     inserting ``, or''; and

[[Page H4521]]

       (3) by inserting after subclause (II) the following:
       ``(III) eligibility for and amount of additional payment 
     amounts under paragraph (5)(F).''.
       (b) Applicable Guidelines.--Such Board shall apply the 
     guidelines established for reclassification under subclause 
     (I) of section 1886(d)(10)(C)(i) of such Act to 
     reclassification under subclause (III) of such section until 
     the Secretary of Health and Human Services promulgates 
     separate guidelines for reclassification under such subclause 
     (III).

     SEC. 10204. MEDICARE-DEPENDENT, SMALL RURAL HOSPITAL PAYMENT 
                   EXTENSION.

       (a) Special Treatment Extended.--
       (1) Payment methodology.--Section 1886(d)(5)(G) (42 U.S.C. 
     1395ww(d)(5)(G)) is amended--
       (A) in clause (i), by striking ``October 1, 1994,'' and 
     inserting ``October 1, 1994, or beginning on or after October 
     1, 1997, and before October 1, 2001,''; and
       (B) in clause (ii)(II), by striking ``October 1, 1994,'' 
     and inserting ``October 1, 1994, or beginning on or after 
     October 1, 1997, and before October 1, 2001,''.
       (2) Extension of target amount.--Section 1886(b)(3)(D) (42 
     U.S.C. 1395ww(b)(3)(D)) is amended--
       (A) in the matter preceding clause (i), by striking 
     ``September 30, 1994,'' and inserting ``September 30, 1994, 
     and for cost reporting periods beginning on or after October 
     1, 1997, and before October 1, 2001,'';
       (B) in clause (ii), by striking ``and'' at the end;
       (C) in clause (iii), by striking the period at the end and 
     inserting ``, and''; and
       (D) by adding after clause (iii) the following new clause:
       ``(iv) with respect to discharges occurring during fiscal 
     year 1998 through fiscal year 2000, the target amount for the 
     preceding year increased by the applicable percentage 
     increase under subparagraph (B)(iv).''.
       (3) Permitting hospitals to decline reclassification.--
     Section 13501(e)(2) of OBRA-93 (42 U.S.C. 1395ww note) is 
     amended by striking ``or fiscal year 1994'' and inserting ``, 
     fiscal year 1994, fiscal year 1998, fiscal year 1999, or 
     fiscal year 2000''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply with respect to discharges occurring on or after 
     October 1, 1997.

     SEC. 10205. GEOGRAPHIC RECLASSIFICATION FOR CERTAIN 
                   DISPROPORTIONATELY LARGE HOSPITALS.

       (a) New Guidelines for Reclassification.--Notwithstanding 
     the guidelines published under subparagraph (D)(i)(I) of 
     section 1886(d)(10) of the Social Security Act (42 U.S.C. 
     1395ww(d)(10)), the Secretary of Health and Human Services 
     shall publish and use alternative guidelines under which a 
     hospital described in subsection (b) qualifies for geographic 
     reclassification under such section for a fiscal year 
     beginning with fiscal year 1998.
       (b) Hospitals Covered.--A hospital described in this 
     subsection is a hospital that demonstrates that--
       (1) the average hourly wage paid by the hospital is not 
     less than 108 percent of the average hourly wage paid by all 
     other hospitals located in the Metropolitan Statistical Area 
     (or the New England County Metropolitan Area) in which the 
     hospital is located; and
       (2) not less than 40 percent of the adjusted uninflated 
     wages paid by all hospitals located in such Area is 
     attributable to wages paid by the hospital.

     SEC. 10206. 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, 1997, 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 area wage indices applicable under such section 
     to hospitals located in rural areas in the State in which the 
     hospital is located.
       (b) Implementation.--The Secretary of Health and Human 
     Services shall adjust the area wage indices referred to in 
     subsection (a) for hospitals not described in such subsection 
     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 if this section did not apply.

     SEC. 10207. INFORMATICS, TELEMEDICINE, AND EDUCATION 
                   DEMONSTRATION PROJECT.

       (a) Purpose and Authorization.--
       (1) In general.--Not later than 9 months after the date of 
     enactment of this section, the Secretary of Health and Human 
     Services shall provide for a demonstration project described 
     in paragraph (2).
       (2) Description of project.--
       (A) In general.--The demonstration project described in 
     this paragraph is a single demonstration project to use 
     eligible health care provider telemedicine networks to apply 
     high-capacity computing and advanced networks to improve 
     primary care (and prevent health care complications) to 
     medicare beneficiaries with diabetes mellitus who are 
     residents of medically underserved rural areas or residents 
     of medically underserved inner-city areas.
       (B) Medically underserved defined.--As used in this 
     paragraph, the term ``medically underserved'' has the meaning 
     given such term in section 330(b)(3) of the Public Health 
     Service Act (42 U.S.C. 254b(b)(3)).
       (3) Waiver.--The Secretary shall waive such provisions of 
     title XVIII of the Social Security Act as may be necessary to 
     provide for payment for services under the project in 
     accordance with subsection (d).
       (4) Duration of project.--The project shall be conducted 
     over a 4-year period.
       (b) Objectives of Project.--The objectives of the project 
     include the following:
       (1) Improving patient access to and compliance with 
     appropriate care guidelines for individuals with diabetes 
     mellitus through direct telecommunications link with 
     information networks in order to improve patient quality-of-
     life and reduce overall health care costs.
       (2) Developing a curriculum to train, and providing 
     standards for credentialing and licensure of, health 
     professionals (particularly primary care health 
     professionals) in the use of medical informatics and 
     telecommunications.
       (3) Demonstrating the application of advanced technologies, 
     such as video-conferencing from a patient's home, remote 
     monitoring of a patient's medical condition, interventional 
     informatics, and applying individualized, automated care 
     guidelines, to assist primary care providers in assisting 
     patients with diabetes in a home setting.
       (4) Application of medical informatics to residents with 
     limited English language skills.
       (5) Developing standards in the application of telemedicine 
     and medical informatics.
       (6) Developing a model for the cost-effective delivery of 
     primary and related care both in a managed care environment 
     and in a fee-for-service environment.
       (c) Eligible Health Care Provider Telemedicine Network 
     Defined.--For purposes of this section, the term ``eligible 
     health care provider telemedicine network'' means a 
     consortium that includes at least one tertiary care hospital 
     (but no more than 2 such hospitals), at least one medical 
     school, no more than 4 facilities in rural or urban areas, 
     and at least one regional telecommunications provider and 
     that meets the following requirements:
       (1) The consortium is located in an area with one of the 
     highest concentrations of medical schools and tertiary care 
     facilities in the United States and has appropriate 
     arrangements (within or outside the consortium) with such 
     schools and facilities, universities, and telecommunications 
     providers, in order to conduct the project.
       (2) The consortium submits to the Secretary an application 
     at such time, in such manner, and containing such information 
     as the Secretary may require, including a description of the 
     use to which the consortium would apply any amounts received 
     under the project and the source and amount of non-Federal 
     funds used in the project.
       (3) The consortium guarantees that it will be responsible 
     for payment for all costs of the project that are not paid 
     under this section and that the maximum amount of payment 
     that may be made to the consortium under this section shall 
     not exceed the amount specified in subsection (d)(3).
       (d) Coverage as Medicare Part B Services.--
       (1) In general.--Subject to the succeeding provisions of 
     this subsection, services related to the treatment or 
     management of (including prevention of complications from) 
     diabetes for medicare beneficiaries furnished under the 
     project shall be considered to be services covered under part 
     B of title XVIII of the Social Security Act.
       (2) Payments.--
       (A) In general.--Subject to paragraph (3), payment for such 
     services shall be made at a rate of 50 percent of the costs 
     that are reasonable and related to the provision of such 
     services. In computing such costs, the Secretary shall 
     include costs described in subparagraph (B), but may not 
     include costs described in subparagraph (C).
       (B) Costs that may be included.--The costs described in 
     this subparagraph are the permissible costs (as recognized by 
     the Secretary) for the following:
       (i) The acquisition of telemedicine equipment for use in 
     patients' homes (but only in the case of patients located in 
     medically underserved areas).
       (ii) Curriculum development and training of health 
     professionals in medical informatics and telemedicine.
       (iii) Payment of telecommunications costs (including 
     salaries and maintenance of equipment), including costs of 
     telecommunications between patients' homes and the eligible 
     network and between the network and other entities under the 
     arrangements described in subsection (c)(1).
       (iv) Payments to practitioners and providers under the 
     medicare programs.
       (C) Costs not included.--The costs described in this 
     subparagraph are costs for any of the following:
       (i) The purchase or installation of transmission equipment 
     (other than such equipment used by health professionals to 
     deliver medical informatics services under the project).
       (ii) The establishment or operation of a telecommunications 
     common carrier network.
       (iii) Construction (except for minor renovations related to 
     the installation of reimbursable equipment) or the 
     acquisition or building of real property.
       (3) Limitation.--The total amount of the payments that may 
     be made under this section shall not exceed $30,000,000.

[[Page H4522]]

       (4) Limitation on cost-sharing.--The project may not impose 
     cost sharing on a medicare beneficiary for the receipt of 
     services under the project in excess of 20 percent of the 
     recognized costs of the project attributable to such 
     services.
       (e) Reports.--The Secretary shall submit to the Committees 
     on Ways and Means and Commerce of the House of 
     Representatives and the Committee on Finance of the Senate 
     interim reports on the project and a final report on the 
     project within 6 months after the conclusion of the project. 
     The final report shall include an evaluation of the impact of 
     the use of telemedicine and medical informatics on improving 
     access of medicare beneficiaries to health care services, on 
     reducing the costs of such services, and on improving the 
     quality of life of such beneficiaries.
       (f) Definitions.--For purposes of this section:
       (1) Interventional informatics.--The term ``interventional 
     informatics'' means using information technology and virtual 
     reality technology to intervene in patient care.
       (2) Medical informatics.--The term ``medical informatics'' 
     means the storage, retrieval, and use of biomedical and 
     related information for problem solving and decision-making 
     through computing and communications technologies.
       (3) Project.--The term ``project'' means the demonstration 
     project under this section.
              Subtitle D--Anti-Fraud and Abuse Provisions

     SEC. 10301. PERMANENT EXCLUSION FOR THOSE CONVICTED OF 3 
                   HEALTH CARE RELATED CRIMES.

       Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended--
       (1) in subparagraph (A), by inserting ``or in the case 
     described in subparagraph (G)'' after ``subsection (b)(12)'';
       (2) in subparagraphs (B) and (D), by striking ``In the 
     case'' and inserting ``Subject to subparagraph (G), in the 
     case''; and
       (3) by adding at the end the following new subparagraph:
       ``(G) In the case of an exclusion of an individual under 
     subsection (a) based on a conviction occurring on or after 
     the date of the enactment of this subparagraph, if the 
     individual has (before, on, or after such date and before the 
     date of the conviction for which the exclusion is imposed) 
     been convicted--
       ``(i) on one previous occasion of one or more offenses for 
     which an exclusion may be effected under such subsection, the 
     period of the exclusion shall be not less than 10 years, or
       ``(ii) on 2 or more previous occasions of one or more 
     offenses for which an exclusion may be effected under such 
     subsection, the period of the exclusion shall be 
     permanent.''.

     SEC. 10302. AUTHORITY TO REFUSE TO ENTER INTO MEDICARE 
                   AGREEMENTS WITH INDIVIDUALS OR ENTITIES 
                   CONVICTED OF FELONIES.

       (a) Medicare Part A.--Section 1866(b)(2) (42 U.S.C. 
     1395cc(b)(2)) is amended--
       (1) by striking ``or'' at the end of subparagraph (B);
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``, or''; and
       (3) by adding after subparagraph (C) the following new 
     subparagraph:
       ``(D) has ascertained that the provider has been convicted 
     of a felony under Federal or State law for an offense which 
     the Secretary determines is inconsistent with the best 
     interests of program beneficiaries.''.
       (b) Medicare Part B.--Section 1842 (42 U.S.C. 1395u) is 
     amended by adding after subsection (r) the following new 
     subsection:
       ``(s) The Secretary may refuse to enter into an agreement 
     with a physician or supplier under subsection (h) or may 
     terminate or refuse to renew such agreement, in the event 
     that such physician or supplier has been convicted of a 
     felony under Federal or State law for an offense which the 
     Secretary determines is inconsistent with the best interests 
     of program beneficiaries.''.
       (c) Medicaid.--For provisions amending title XIX of the 
     Social Security Act to provide similar treatment under the 
     medicaid program, see section ____.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     and apply to the entry and renewal of contracts on or after 
     such date.

     SEC. 10303. INCLUSION OF TOLL-FREE NUMBER TO REPORT MEDICARE 
                   WASTE, FRAUD, AND ABUSE IN EXPLANATION OF 
                   BENEFITS FORMS.

       (a) In General.--Section 1842(h)(7) (42 U.S.C. 1395u(h)(7)) 
     is amended--
       (1) by striking ``and'' at the end of subparagraph (C),
       (2) by striking the period at the end of subparagraph (D) 
     and inserting ``; and'', and
       (3) by adding at the end the following new subparagraph:
       ``(E) a toll-free telephone number maintained by the 
     Inspector General in the Department of Health and Human 
     Services for the receipt of complaints and information about 
     waste, fraud, and abuse in the provision or billing of 
     services under this title.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to explanations of benefits provided on or after 
     such date (not later than January 1, 1999) as the Secretary 
     of Health and Human Services shall provide.

     SEC. 10304. LIABILITY OF MEDICARE CARRIERS AND FISCAL 
                   INTERMEDIARIES FOR CLAIMS SUBMITTED BY EXCLUDED 
                   PROVIDERS.

       (a) Reimbursement to the Secretary for Amounts Paid to 
     Excluded Providers.--
       (1) Requirements for fiscal intermediaries.--
       (A) In general.--Section 1816 (42 U.S.C. 1395h) is amended 
     by adding at the end the following new subsection:
       ``(m) An agreement with an agency or organization under 
     this section shall require that such agency or organization 
     reimburse the Secretary for any amounts paid by the agency or 
     organization for a service under this title which is 
     furnished, directed, or prescribed by an individual or entity 
     during any period for which the individual or entity is 
     excluded pursuant to section 1128, 1128A, or 1156, from 
     participation in the program under this title, if the amounts 
     are paid after the Secretary notifies the agency or 
     organization of the exclusion.''.
       (B) Conforming amendment.--Subsection (i) of such section 
     is amended by adding at the end the following new paragraph:
       ``(4) Nothing in this subsection shall be construed to 
     prohibit reimbursement by an agency or organization under 
     subsection (m).''.
       (2) Requirements for carriers.--Section 1842(b)(3) (42 
     U.S.C. 1395u(b)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (I); and
       (B) by inserting after subparagraph (I) the following new 
     subparagraph:
       ``(J) will reimburse the Secretary for any amounts paid by 
     the carrier for an item or service under this part which is 
     furnished, directed, or prescribed by an individual or entity 
     during any period for which the individual or entity is 
     excluded pursuant to section 1128, 1128A, or 1156, from 
     participation in the program under this title, if the amounts 
     are paid after the Secretary notifies the carrier of the 
     exclusion, and''.
       (3) Reference to medicaid provision.--For provision 
     imposing similar restrictions on States under the medicaid 
     program under title XIX of the Social Security Act, see 
     section ____.
       (b) Conforming Repeal of Mandatory Payment Rule.--Paragraph 
     (2) of section 1862(e) (42 U.S.C. 1395y(e)) is amended to 
     read as follows:
       ``(2) No individual or entity may bill (or collect any 
     amount from) any individual for any item or service for which 
     payment is denied under paragraph (1). No person is liable 
     for payment of any amounts billed for such an item or service 
     in violation of the previous sentence.''.
       (c) Effective Dates.--The amendments made by this section 
     shall apply to contracts and agreements entered into, 
     renewed, or extended after the date of the enactment of this 
     Act, but only with respect to claims submitted on or after 
     the later of January 1, 1998, or the date such entry, 
     renewal, or extension becomes effective.

     SEC. 10305. EXCLUSION OF ENTITY CONTROLLED BY FAMILY MEMBER 
                   OF A SANCTIONED INDIVIDUAL.

       (a) In General.--Section 1128 (42 U.S.C. 1320a-7) is 
     amended--
       (1) in subsection (b)(8)(A)--
       (A) by striking ``or'' at the end of clause (i), and
       (B) by striking the dash at the end of clause (ii) and 
     inserting ``; or'', and
       (C) by inserting after clause (ii) the following:
       ``(iii) who was described in clause (i) but is no longer so 
     described because of a transfer of ownership or control 
     interest, in anticipation of (or following) a conviction, 
     assessment, or exclusion described in subparagraph (B) 
     against the person, to an immediate family member (as defined 
     in subsection (j)(1)) or a member of the household of the 
     person (as defined in subsection (j)(2)) who continues to 
     maintain an interest described in such clause--''; and
       (2) by adding after subsection (i) the following new 
     subsection:
       ``(j) Definition of Immediate Family Member and Member of 
     Household.--For purposes of subsection (b)(8)(A)(iii):
       ``(1) The term `immediate family member' means, with 
     respect to a person--
       ``(A) the husband or wife of the person;
       ``(B) the natural or adoptive parent, child, or sibling of 
     the person;
       ``(C) the stepparent, stepchild, stepbrother, or stepsister 
     of the person;
       ``(D) the father-, mother-, daughter-, son-, brother-, or 
     sister-in-law of the person;
       ``(E) the grandparent or grandchild of the person; and
       ``(F) the spouse of a grandparent or grandchild of the 
     person.
       ``(2) The term `member of the household' means, with 
     respect to an person, any individual sharing a common abode 
     as part of a single family unit with the person, including 
     domestic employees and others who live together as a family 
     unit, but not including a roomer or boarder.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect on the date that is 45 days after the date 
     of the enactment of this Act.

     SEC. 10306. IMPOSITION OF CIVIL MONEY PENALTIES.

       (a) Civil Money Penalties for Persons That Contract With 
     Excluded Individuals.--Section 1128A(a) (42 U.S.C. 1320a-
     7a(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (4);
       (2) by adding ``or'' at the end of paragraph (5); and
       (3) by adding after paragraph (5) the following new 
     paragraph:
       ``(6) arranges or contracts (by employment or otherwise) 
     with an individual or entity

[[Page H4523]]

     that the person knows or should know is excluded from 
     participation in a Federal health care program (as defined in 
     section 1128B(f)), for the provision of items or services for 
     which payment may be made under such a program;''.
       (b) Civil Money Penalties for Services Ordered or 
     Prescribed by an Excluded Individual or Entity.--Section 
     1128A(a)(1) (42 U.S.C. 1320a-7a(a)(1)) is amended--
       (1) in subparagraph (D)--
       (A) by inserting ``, ordered, or prescribed by such 
     person'' after ``other item or service furnished'';
       (B) by inserting ``(pursuant to this title or title 
     XVIII)'' after ``period in which the person was excluded''; 
     and
       (C) by striking ``pursuant to a determination by the 
     Secretary'' and all that follows through ``the provisions of 
     section 1842(j)(2)''; and
       (D) by striking ``or'' at the end;
       (2) by redesignating subparagraph (E) as subparagraph (F); 
     and
       (3) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) is for a medical or other item or service ordered or 
     prescribed by a person excluded (pursuant to this title or 
     title XVIII) from the program under which the claim was made, 
     and the person furnishing such item or service knows or 
     should know of such exclusion, or''.
       (c) Effective Dates.--
       (1) Contracts with excluded persons.--The amendments made 
     by subsection (a) shall apply to arrangements and contracts 
     entered into after the date of the enactment of this Act.
       (2) Services ordered or prescribed.--The amendments made by 
     subsection (b) shall apply to items and services furnished 
     ordered or prescribed after the date of the enactment of this 
     Act.

     SEC. 10307. DISCLOSURE OF INFORMATION AND SURETY BONDS.

       (a) Disclosure of Information and Surety Bond Requirement 
     for Suppliers of Durable Medical Equipment.--Section 1834(a) 
     (42 U.S.C. 1395m(a)) is amended by inserting after paragraph 
     (15) the following new paragraph:
       ``(16) Conditions for issuance of provider number.--The 
     Secretary shall not provide for the issuance (or renewal) of 
     a provider number for a supplier of durable medical 
     equipment, for purposes of payment under this part for 
     durable medical equipment furnished by the supplier, unless 
     the supplier provides the Secretary on a continuing basis 
     with--
       ``(A)(i) full and complete information as to the identity 
     of each person with an ownership or control interest (as 
     defined in section 1124(a)(3)) in the supplier or in any 
     subcontractor (as defined by the Secretary in regulations) in 
     which the supplier directly or indirectly has a 5 percent or 
     more ownership interest, and
       ``(ii) to the extent determined to be feasible under 
     regulations of the Secretary, the name of any disclosing 
     entity (as defined in section 1124(a)(2)) with respect to 
     which a person with such an ownership or control interest in 
     the supplier is a person with such an ownership or control 
     interest in the disclosing entity; and
       ``(B) a surety bond in a form specified by the Secretary 
     and in an amount that is not less than $50,000.

     The Secretary may waive the requirement of a bond under 
     subparagraph (B) in the case of a supplier that provides a 
     comparable surety bond under State law.''.
       (b) Surety Bond Requirement for Home Health Agencies.--
       (1) In general.--Section 1861(o) (42 U.S.C. 1395x(o)) is 
     amended--
       (A) in paragraph (7), by inserting ``and including 
     providing the Secretary on a continuing basis with a surety 
     bond in a form specified by the Secretary and in an amount 
     that is not less than $50,000'' after ``financial security of 
     the program'', and
       (B) by adding at the end the following: ``The Secretary may 
     waive the requirement of a bond under paragraph (7) in the 
     case of an agency or organization that provides a comparable 
     surety bond under State law.''.
       (2) Conforming amendments.--Section 1861(v)(1)(H) (42 
     U.S.C. 1395x(v)(1)(H)) is amended--
       (A) in clause (i), by striking ``the financial security 
     requirement'' and inserting ``the financial security and 
     surety bond requirements''; and
       (B) in clause (ii), by striking ``the financial security 
     requirement described in subsection (o)(7) applies'' and 
     inserting ``the financial security and surety bond 
     requirements described in subsection (o)(7) apply''.
       (3) Reference to current disclosure requirement.--For 
     provision of current law requiring home health agencies to 
     disclose information on ownership and control interests, see 
     section 1124 of the Social Security Act.
       (c) Authorizing Application of Disclosure and Surety Bond 
     Requirements to Ambulance Services and Certain Clinics.--
     Section 1834(a)(16) (42 U.S.C. 1395m(a)(16)), as added by 
     subsection (a), is amended by adding at the end the 
     following: ``The Secretary, in the Secretary's discretion, 
     may impose the requirements of the previous sentence with 
     respect to some or all classes of suppliers of ambulance 
     services described in section 1861(s)(7) and clinics that 
     furnish medical and other health services (other than 
     physicians' services) under this part.''.
       (d) Application to Comprehensive Outpatient Rehabilitation 
     Facilities (CORFs).--Section 1861(cc)(2) (42 U.S.C. 
     1395x(cc)(2)) is amended--
       (1) in subparagraph (I), by inserting before the period at 
     the end the following: ``and providing the Secretary on a 
     continuing basis with a surety bond in a form specified by 
     the Secretary and in an amount that is not less than 
     $50,000'', and
       (2) by adding after and below subparagraph (I) the 
     following:
     ``The Secretary may waive the requirement of a bond under 
     subparagraph (I) in the case of a facility that provides a 
     comparable surety bond under State law.''.
       (e) Application to Rehabilitation Agencies.--Section 
     1861(p) (42 U.S.C. 1395x(p)) is amended--
       (1) in paragraph (4)(A)(v), by inserting after ``as the 
     Secretary may find necessary,'' the following: ``and provides 
     the Secretary, to the extent required by the Secretary, on a 
     continuing basis with a surety bond in a form specified by 
     the Secretary and in an amount that is not less than 
     $50,000,'', and
       (2) by adding at the end the following: ``The Secretary may 
     waive the requirement of a bond under paragraph (4)(A)(v) in 
     the case of a clinic or agency that provides a comparable 
     surety bond under State law.''.
       (f) Effective Dates.--(1) The amendment made by subsection 
     (a) shall apply to suppliers of durable medical equipment 
     with respect to such equipment furnished on or after January 
     1, 1998.
       (2) The amendments made by subsection (b) shall apply to 
     home health agencies with respect to services furnished on or 
     after such date. The Secretary of Health and Human Services 
     shall modify participation agreements under section 
     1866(a)(1) of the Social Security Act with respect to home 
     health agencies to provide for implementation of such 
     amendments on a timely basis.
       (3) The amendments made by subsections (c) through (e) 
     shall take effect on the date of the enactment of this Act 
     and may be applied with respect to items and services 
     furnished on or after the date specified in paragraph (1).

     SEC. 10308. PROVISION OF CERTAIN IDENTIFICATION NUMBERS.

       (a) Requirements to Disclose Employer Identification 
     Numbers (EINS) and Social Security Account Numbers (SSNs).--
     Section 1124(a)(1) (42 U.S.C. 1320a-3(a)(1)) is amended by 
     inserting before the period at the end the following: ``and 
     supply the Secretary with the both the employer 
     identification number (assigned pursuant to section 6109 of 
     the Internal Revenue Code of 1986) and social security 
     account number (assigned under section 205(c)(2)(B)) of the 
     disclosing entity, each person with an ownership or control 
     interest (as defined in subsection (a)(3)), and any 
     subcontractor in which the entity directly or indirectly has 
     a 5 percent or more ownership interest''.
       (b) Other Medicare Providers.--Section 1124A (42 U.S.C. 
     1320a-3a) is amended--
       (1) in subsection (a)--
       (A) by striking ``and'' at the end of paragraph (1);
       (B) by striking the period at the end of paragraph (2) and 
     inserting ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(3) including the employer identification number 
     (assigned pursuant to section 6109 of the Internal Revenue 
     Code of 1986) and social security account number (assigned 
     under section 205(c)(2)(B)) of the disclosing part B provider 
     and any person, managing employee, or other entity identified 
     or described under paragraph (1) or (2).''; and
       (2) in subsection (c) by inserting ``(or, for purposes of 
     subsection (a)(3), any entity receiving payment)'' after ``on 
     an assignment-related basis''.
       (c) Verification by Social Security Administration (ssa).--
     Section 1124A (42 U.S.C. 1320a-3a) is amended--
       (1) by redesignating subsection (c) as subsection (d); and
       (2) by inserting after subsection (b) the following new 
     subsection:
       ``(c) Verification.--
       ``(1) Transmittal by hhs.--The Secretary shall transmit--
       ``(A) to the Commissioner of Social Security information 
     concerning each social security account number (assigned 
     under section 205(c)(2)(B)), and
       ``(B) to the Secretary of the Treasury information 
     concerning each employer identification number (assigned 
     pursuant to section 6109 of the Internal Revenue Code of 
     1986),

     supplied to the Secretary pursuant to subsection (a)(3) or 
     section 1124(c) to the extent necessary for verification of 
     such information in accordance with paragraph (2).
       ``(2) Verification.--The Commissioner of Social Security 
     and the Secretary of the Treasury shall verify the accuracy 
     of, or correct, the information supplied by the Secretary to 
     such official pursuant to paragraph (1), and shall report 
     such verifications or corrections to the Secretary.
       ``(3) Fees for verification.--The Secretary shall reimburse 
     the Commissioner and Secretary of the Treasury, at a rate 
     negotiated between the Secretary and such official, for the 
     costs incurred by such official in performing the 
     verification and correction services described in this 
     subsection.''.
       (d) Report.--The Secretary of Health and Human Services 
     shall submit to Congress a report on steps the Secretary has 
     taken to assure the confidentiality of social security 
     account numbers that will be provided to the Secretary under 
     the amendments made by this section.

[[Page H4524]]

       (e) Effective Dates.--
       (1) The amendment made by subsection (a) shall apply to the 
     application of conditions of participation, and entering into 
     and renewal of contracts and agreements, occurring more than 
     90 days after the date of submission of the report under 
     subsection (d).
       (2) The amendments made by subsection (b) shall apply to 
     payment for items and services furnished more than 90 days 
     after the date of submission of such report.

     SEC. 10309. ADVISORY OPINIONS REGARDING CERTAIN PHYSICIAN 
                   SELF-REFERRAL PROVISIONS.

       Section 1877(g) (42 U.S.C. 1395nn(g)) is amended by adding 
     at the end the following new paragraph:
       ``(6) Advisory opinions.--
       ``(A) In general.--The Secretary shall issue written 
     advisory opinions concerning whether a referral relating to 
     designated health services (other than clinical laboratory 
     services) is prohibited under this section.
       ``(B) Binding as to secretary and parties involved.--Each 
     advisory opinion issued by the Secretary shall be binding as 
     to the Secretary and the party or parties requesting the 
     opinion.
       ``(C) Application of certain procedures.--The Secretary 
     shall, to the extent practicable, apply the regulations 
     promulgated under section 1128D(b)(5) to the issuance of 
     advisory opinions under this paragraph.
       ``(D) Applicability.--This paragraph shall apply to 
     requests for advisory opinions made during the period 
     described in section 1128D(b)(6).''.

     SEC. 10310. OTHER FRAUD AND ABUSE RELATED PROVISIONS.

       (a) Reference Correction.--(1) Section 1128D(b)(2)(D) (42 
     U.S.C. 1320a-7d(b)(2)(D)), as added by section 205 of the 
     Health Insurance Portability and Accountability Act of 1996, 
     is amended by striking ``1128B(b)'' and inserting 
     ``1128A(b)''.
       (2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a-7e(g)(3)(C)) is 
     amended by striking ``Veterans' Administration'' and 
     inserting ``Department of Veterans Affairs''.
       (b) Language in Definition of Conviction.--Section 
     1128E(g)(5) (42 U.S.C. 1320a-7e(g)(5)), as inserted by 
     section 221(a) of the Health Insurance Portability and 
     Accountability Act of 1996, is amended by striking 
     ``paragraph (4)'' and inserting ``paragraphs (1) through 
     (4)''.
       (c) Implementation of Exclusions.--Section 1128 (42 U.S.C. 
     1320a-7) is amended--
       (1) in subsection (a), by striking ``any program under 
     title XVIII and shall direct that the following individuals 
     and entities be excluded from participation in any State 
     health care program (as defined in subsection (h))'' and 
     inserting ``any Federal health care program (as defined in 
     section 1128B(f))''; and
       (2) in subsection (b), by striking ``any program under 
     title XVIII and may direct that the following individuals and 
     entities be excluded from participation in any State health 
     care program'' and inserting ``any Federal health care 
     program (as defined in section 1128B(f))''.
       (d) Sanctions for Failure to Report.--Section 1128E(b) (42 
     U.S.C. 1320a-7e(b)), as inserted by section 221(a) of the 
     Health Insurance Portability and Accountability Act of 1996, 
     is amended by adding at the end the following:
       ``(6) Sanctions for failure to report.--
       ``(A) Health plans.--Any health plan that fails to report 
     information on an adverse action required to be reported 
     under this subsection shall be subject to a civil money 
     penalty of not more than $25,000 for each such adverse action 
     not reported. Such penalty shall be imposed and collected in 
     the same manner as civil money penalties under subsection (a) 
     of section 1128A are imposed and collected under that 
     section.
       ``(B) Governmental agencies.--The Secretary shall provide 
     for a publication of a public report that identifies those 
     Government agencies that have failed to report information on 
     adverse actions as required to be reported under this 
     subsection.''.
       (e) Effective Dates.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by this section shall be effective as if 
     included in the enactment of the Health Insurance Portability 
     and Accountability Act of 1996.
       (2) Federal health program.--The amendments made by 
     subsection (c) shall take effect on the date of the enactment 
     of this Act.
       (3) Sanction for failure to report.--The amendment made by 
     subsection (d) shall apply to failures occurring on or after 
     the date of the enactment of this Act.
                Subtitle E--Prospective Payment Systems

                    CHAPTER 1--PAYMENT UNDER PART A

     SEC. 10401. PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITY 
                   SERVICES.

       (a) In General.--Section 1888 (42 U.S.C. 1395yy) is amended 
     by adding at the end the following new subsection:
       ``(e) Prospective Payment.--
       ``(1) Payment provision.--Notwithstanding any other 
     provision of this title, subject to paragraph (7), the amount 
     of the payment for all costs (as defined in paragraph (2)(B)) 
     of covered skilled nursing facility services (as defined in 
     paragraph (2)(A)) for each day of such services furnished--
       ``(A) in a cost reporting period during the transition 
     period (as defined in paragraph (2)(E)), is equal to the sum 
     of--
       ``(i) the non-Federal percentage of the facility-specific 
     per diem rate (computed under paragraph (3)), and
       ``(ii) the Federal percentage of the adjusted Federal per 
     diem rate (determined under paragraph (4)) applicable to the 
     facility; and
       ``(B) after the transition period is equal to the adjusted 
     Federal per diem rate applicable to the facility.
       ``(2) Definitions.--For purposes of this subsection:
       ``(A) Covered skilled nursing facility services.--
       ``(i) In general.--The term `covered skilled nursing 
     facility services'--

       ``(I) means post-hospital extended care services as defined 
     in section 1861(i) for which benefits are provided under part 
     A; and
       ``(II) includes all items and services (other than services 
     described in clause (ii)) for which payment may be made under 
     part B and which are furnished to an individual who is a 
     resident of a skilled nursing facility during the period in 
     which the individual is provided covered post-hospital 
     extended care services.

       ``(ii) Services excluded.--Services described in this 
     clause are physicians' services, services described by 
     clauses (i) through (iii) of section 1861(s)(2)(K), certified 
     nurse-midwife services, qualified psychologist services, 
     services of a certified registered nurse anesthetist, items 
     and services described in subparagraphs in (F) and (O) of 
     section 1861(s)(2), and, only with respect to services 
     furnished during 1998, the transportation costs of 
     electrocardiagram equipment for electrocardiogram tests 
     services (HCPCS Code R0076). Services described in this 
     clause do not include any physical, occupational, or speech-
     language therapy services regardless of whether or not the 
     services are furnished by, or under the supervision of, a 
     physician or other health care professional.
       ``(B) All costs.--The term `all costs' means routine 
     service costs, ancillary costs, and capital-related costs of 
     covered skilled nursing facility services, but does not 
     include costs associated with approved educational 
     activities.
       ``(C) Non-federal percentage; federal percentage.--For--
       ``(i) the first cost reporting period (as defined in 
     subparagraph (D)) of a facility, the `non-Federal percentage' 
     is 75 percent and the `Federal percentage' is 25 percent;
       ``(ii) the next cost reporting period of such facility, the 
     `non-Federal percentage' is 50 percent and the `Federal 
     percentage' is 50 percent; and
       ``(iii) the subsequent cost reporting period of such 
     facility, the `non-Federal percentage' is 25 percent and the 
     `Federal percentage' is 75 percent.
       ``(D) First cost reporting period.--The term `first cost 
     reporting period' means, with respect to a skilled nursing 
     facility, the first cost reporting period of the facility 
     beginning on or after July 1, 1998.
       ``(E) Transition period.--
       ``(i) In general.--The term `transition period' means, with 
     respect to a skilled nursing facility, the 3 cost reporting 
     periods of the facility beginning with the first cost 
     reporting period.
       ``(ii) Treatment of new skilled nursing facilities.--In the 
     case of a skilled nursing facility that does not have a 
     settled cost report for a cost reporting period before July 
     1, 1998, payment for such services shall be made under this 
     subsection as if all services were furnished after the 
     transition period.
       ``(3) Determination of facility specific per diem rates.--
     The Secretary shall determine a facility-specific per diem 
     rate for each skilled nursing facility for a cost reporting 
     period as follows:
       ``(A) Determining base payments.--The Secretary shall 
     determine, on a per diem basis, the total of--
       ``(i) the allowable costs of extended care services for the 
     facility for cost reporting periods beginning in 1995 with 
     appropriate adjustments (as determined by the Secretary) to 
     non-settled cost reports, and
       ``(ii) an estimate of the amounts that would be payable 
     under part B (disregarding any applicable deductibles, 
     coinsurance and copayments) for covered skilled nursing 
     facility services described in paragraph (2)(A)(i)(II) 
     furnished during such period to an individual who is a 
     resident of the facility, regardless of whether or not the 
     payment was made to the facility or to another entity.
       ``(B) Update to cost reporting period before first cost 
     reporting period.--The Secretary shall update the amount 
     determined under subparagraph (A), for each cost reporting 
     period after the cost reporting period described in 
     subparagraph (A)(i) and up to the cost reporting period 
     immediately preceding the first cost reporting period, by the 
     skilled nursing facility historical trend factor.
       ``(C) Updating to applicable cost reporting period.--The 
     Secretary shall further update such amount for each cost 
     reporting period beginning with the first cost reporting 
     period and up to and including the cost reporting period 
     involved by a factor equal to the skilled nursing facility 
     market basket percentage increase.
       ``(4) Federal per diem rate.--
       ``(A) Determination of historical per diem for freestanding 
     facilities.--For each freestanding skilled nursing facility 
     that received payments for post-hospital extended care 
     services during a cost reporting period beginning in fiscal 
     year 1995 and that was subject to (and not exempted from) the 
     per diem limits referred to in paragraph (1)

[[Page H4525]]

     or (2) of subsection (a) (and facilities described in 
     subsection (d), if appropriate), the Secretary shall 
     estimate, on a per diem basis for such cost reporting period, 
     the total of--
       ``(i) the allowable costs of extended care services for the 
     facility for cost reporting periods beginning in 1995 with 
     appropriate adjustments (as determined by the Secretary) to 
     non-settled cost reports, and
       ``(ii) an estimate of the amounts that would be payable 
     under part B (disregarding any applicable deductibles, 
     coinsurance and copayments) for covered skilled nursing 
     facility services described in paragraph (2)(A)(i)(II) 
     furnished during such period to an individual who is a 
     resident of the facility, regardless of whether or not the 
     payment was made to the facility or to another entity.
       ``(B) Update to fiscal year 1998.--The Secretary shall 
     update the amount determined under subparagraph (A), for each 
     cost reporting period after the cost reporting period 
     described in subparagraph (A)(i) and up to the cost reporting 
     period immediately preceding the first cost reporting period, 
     by the skilled nursing facility historical trend factor for 
     such period.
       ``(C) Computation of standardized per diem rate.--The 
     Secretary shall standardize the amount updated under 
     subparagraph (B) for each facility by--
       ``(i) adjusting for variations among facility by area in 
     the average facility wage level per diem, and
       ``(ii) adjusting for variations in case mix per diem among 
     facilities.
       ``(D) Computation of weighted average per diem rate.--The 
     Secretary shall compute a weighted average per diem rate by 
     computing an average of the standardized amounts computed 
     under subparagraph (C), weighted for each facility by number 
     of days of extended care services furnished during the cost 
     reporting period referred to in subparagraph (A). The 
     Secretary may compute and apply such average separately for 
     facilities located in urban and rural areas (as defined in 
     section 1886(d)(2)(D)).
       ``(E) Updating.--
       ``(i) Fiscal year 1998.--For fiscal year 1998, the 
     Secretary shall compute for each skilled nursing facility an 
     unadjusted Federal per diem rate equal to the weighted 
     average per diem rate computed under subparagraph (D) and 
     applicable to the facility increased by skilled nursing 
     facility market basket percentage change for the fiscal year 
     involved.
       ``(ii) Subsequent fiscal years.--For each subsequent fiscal 
     year the Secretary shall compute for each skilled nursing 
     facility an unadjusted Federal per diem rate equal to the 
     Federal per diem rate computed under this subparagraph for 
     the previous fiscal year and applicable to the facility 
     increased by the skilled nursing facility market basket 
     percentage change for the fiscal year involved.
       ``(F) Adjustment for case mix creep.--Insofar as the 
     Secretary determines that such adjustments under subparagraph 
     (G)(i) for a previous fiscal year (or estimates that such 
     adjustments for a future fiscal year) did (or are likely to) 
     result in a change in aggregate payments under this 
     subsection during the fiscal year that are a result of 
     changes in the coding or classification of residents that do 
     not reflect real changes in case mix, the Secretary may 
     adjust unadjusted Federal per diem rates for subsequent years 
     so as to discount the effect of such coding or classification 
     changes.
       ``(G) Application to specific facilities.--The Secretary 
     shall compute for each skilled nursing facility for each 
     fiscal year (beginning with fiscal year 1998) an adjusted 
     Federal per diem rate equal to the unadjusted Federal per 
     diem rate determined under subparagraph (E), as adjusted 
     under subparagraph (F), and as further adjusted as follows:
       ``(i) Adjustment for case mix.--The Secretary shall provide 
     for an appropriate adjustment to account for case mix. Such 
     adjustment shall be based on a resident classification 
     system, established by the Secretary, that accounts for the 
     relative resource utilization of different patient types. The 
     case mix adjustment shall be based on resident assessment 
     data and other data that the Secretary considers appropriate.
       ``(ii) Adjustment for geographic variations in labor 
     costs.--The Secretary shall adjust the portion of such per 
     diem rate attributable to wages and wage-related costs for 
     the area in which the facility is located compared to the 
     national average of such costs using an appropriate wage 
     index as determined by the Secretary. Such adjustment shall 
     be done in a manner that does not result in aggregate 
     payments under this subsection that are greater or less than 
     those that would otherwise be made if such adjustment had not 
     been made.
       ``(H) Publication of information on per diem rates.--The 
     Secretary shall provide for publication in the Federal 
     Register, before the July 1 preceding each fiscal year 
     (beginning with fiscal year 1999), of--
       ``(i) the unadjusted Federal per diem rates to be applied 
     to days of covered skilled nursing facility services 
     furnished during the fiscal year,
       ``(ii) the case mix classification system to be applied 
     under subparagraph (G)(i) with respect to such services 
     during the fiscal year, and
       ``(iii) the factors to be applied in making the area wage 
     adjustment under subparagraph (G)(ii) with respect to such 
     services.
       ``(5) Skilled nursing facility market basket index, 
     percentage, and historical trend factor.--For purposes of 
     this subsection:
       ``(A) Skilled nursing facility market basket index.--The 
     Secretary shall establish a skilled nursing facility market 
     basket index that reflects changes over time in the prices of 
     an appropriate mix of goods and services included in covered 
     skilled nursing facility services.
       ``(B) Skilled nursing facility market basket percentage.--
     The term `skilled nursing facility market basket percentage' 
     means, for a fiscal year or other annual period and as 
     calculated by the Secretary, the percentage change in the 
     skilled nursing facility market basket index (established 
     under subparagraph (A)) from the midpoint of the prior fiscal 
     year (or period) to the midpoint of the fiscal year (or other 
     period) involved.
       ``(C) Skilled nursing facility historical trend factor.--
     The term `skilled nursing facility historical trend factor' 
     means, for a fiscal year or other annual period and as 
     calculated by the Secretary, the percentage change in the 
     skilled nursing facility routine cost index (used in applying 
     per diem routine cost limits under subsection (a)) from the 
     midpoint of the prior fiscal year (or period) to the midpoint 
     of the fiscal year (or other period) involved, reduced (on an 
     annualized basis) by 1 percentage point.
       ``(6) Submission of resident assessment data.--A skilled 
     nursing facility shall provide the Secretary, in a manner and 
     within the timeframes prescribed by the Secretary, the 
     resident assessment data necessary to develop and implement 
     the rates under this subsection. For purposes of meeting such 
     requirement, a skilled nursing facility may submit the 
     resident assessment data required under section 1819(b)(3), 
     using the standard instrument designated by the State under 
     section 1819(e)(5).
       ``(7) Transition for medicare low volume skilled nursing 
     facilities and swing bed hospitals.--
       ``(A) In general.--The Secretary shall determine an 
     appropriate manner in which to apply this subsection to the 
     facilities described in subparagraph (B), taking into account 
     the purposes of this subsection, and shall provide that at 
     the end of the transition period (as defined in paragraph 
     (2)(E)) such facilities shall be paid only under this 
     subsection. Payment shall not be made under this subsection 
     to such facilities for cost reporting periods beginning 
     before such date (not earlier than July 1, 1999) as the 
     Secretary specifies.
       ``(B) Facilities described.--The facilities described in 
     this subparagraph are--
       ``(i) skilled nursing facilities for which payment is made 
     for routine service costs during a cost reporting period, 
     ending prior to the date of the implementation of this 
     paragraph, on the basis of prospective payments under section 
     1888(d), or
       ``(ii) facilities that have in effect an agreement 
     described in section 1883, for which payment is made for the 
     furnishing of extended care services on a reasonable cost 
     basis under section 1814(l) (as in effect on and after such 
     date).
       ``(8) Limitation on review.--There shall be no 
     administrative or judicial review under section 1869, 1878, 
     or otherwise of--
       ``(A) the establishment of facility specific per diem rates 
     under paragraph (3);
       ``(B) the establishment of Federal per diem rates under 
     paragraph (4), including the computation of the standardized 
     per diem rates under paragraph (4)(C), adjustments and 
     corrections for case mix under paragraphs (4)(F) and 
     (4)(G)(i), and adjustments for variations in labor-related 
     costs under paragraph (4)(G)(ii); and
       ``(C) the establishment of transitional amounts under 
     paragraph (7).''.
       (b) Consolidated Billing.--
       (1) For snf services.--Section 1862(a) (42 U.S.C. 1395y(a)) 
     is amended--
       (A) by striking ``or'' at the end of paragraph (15),
       (B) by striking the period at the end of paragraph (16) and 
     inserting ``; or'', and
       (C) by inserting after paragraph (16) the following new 
     paragraph:
       ``(17) which are covered skilled nursing facility services 
     described in section 1888(e)(2)(A)(i) and which are furnished 
     to an individual who is a resident of a skilled nursing 
     facility by an entity other than the skilled nursing 
     facility, unless the services are furnished under 
     arrangements (as defined in section 1861(w)(1)) with the 
     entity made by the skilled nursing facility.''.
       (2) Requiring payment for all part b items and services to 
     be made to facility.--The first sentence of section 
     1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended--
       (A) by striking ``and (D)'' and inserting ``(D)''; and
       (B) by striking the period at the end and inserting the 
     following: ``, and (E) in the case of an item or service 
     (other than services described in section 1888(e)(2)(A)(ii)) 
     furnished to an individual who (at the time the item or 
     service is furnished) is a resident of a skilled nursing 
     facility, payment shall be made to the facility (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).''.
       (3) Payment rules.--Section 1888(e) (42 U.S.C. 1395yy(e)), 
     as added by subsection (a), is amended by adding at the end 
     the following:
       ``(9) Payment for certain services.--In the case of an item 
     or service furnished by a

[[Page H4526]]

     skilled nursing facility (or by others under arrangement with 
     them made by a skilled nursing facility or under any other 
     contracting or consulting arrangement or otherwise) for which 
     payment would otherwise (but for this paragraph) be made 
     under part B in an amount determined in accordance with 
     section 1833(a)(2)(B), the amount of the payment under such 
     part shall be based on such existing or other fee schedules 
     as the Secretary establishes.
       ``(10) Required coding.--No payment may be made under part 
     B for items and services (other than services described in 
     paragraph (2)(A)(ii)) furnished to an individual who is a 
     resident of a skilled nursing facility unless the claim for 
     such payment includes a code (or codes) under a uniform 
     coding system specified by the Secretary that identifies the 
     items or services delivered.''.
       (4) Conforming amendments.--
       (A) Section 1819(b)(3)(C)(i) (42 U.S.C. 1395i-
     3(b)(3)(C)(i)) is amended by striking ``Such'' and inserting 
     ``Subject to the timeframes prescribed by the Secretary under 
     section 1888(t)(6), such''.
       (B) Section 1832(a)(1) (42 U.S.C. 1395k(a)(1)) is amended 
     by striking ``(2);'' and inserting ``(2) and section 
     1842(b)(6)(E);''.
       (C) Section 1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) is 
     amended by inserting ``or section 1888(e)(9)'' after 
     ``section 1886''.
       (D) Section 1861(h) (42 U.S.C 1395x(h)) is amended--
       (i) in the opening paragraph, by striking ``paragraphs (3) 
     and (6)'' and inserting ``paragraphs (3), (6), and (7)'', and
       (ii) in paragraph (7), after ``skilled nursing 
     facilities'', by inserting ``, or by others under 
     arrangements with them made by the facility''.
       (E) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is 
     amended--
       (i) by redesignating clauses (i) and (ii) as subclauses (I) 
     and (II) respectively,
       (ii) by inserting ``(i)'' after ``(H)'', and
       (iii) by adding after clause (i), as so redesignated, the 
     following new clause:
       ``(ii) in the case of skilled nursing facilities which 
     provide covered skilled nursing facility services--
       ``(I) that are furnished to an individual who is a resident 
     of the skilled nursing facility, and
       ``(II) for which the individual is entitled to have payment 
     made under this title,
     to have items and services (other than services described in 
     section 1888(e)(2)(A)(ii)) furnished by the skilled nursing 
     facility or otherwise under arrangements (as defined in 
     section 1861(w)(1)) made by the skilled nursing facility,''.
       (c) Medical Review Process.--In order to ensure that 
     medicare beneficiaries are furnished appropriate services in 
     skilled nursing facilities, the Secretary of Health and Human 
     Services shall establish and implement a thorough medical 
     review process to examine the effects of the amendments made 
     by this section on the quality of covered skilled nursing 
     facility services furnished to medicare beneficiaries. In 
     developing such a medical review process, the Secretary shall 
     place a particular emphasis on the quality of non-routine 
     covered services and physicians' services for which payment 
     is made under title XVIII of the Social Security Act for 
     which payment is made under section 1848 of such Act.
       (d) Effective Date.--The amendments made by this section 
     are effective for cost reporting periods beginning on or 
     after July 1, 1998; except that the amendments made by 
     subsection (b) shall apply to items and services furnished on 
     or after July 1, 1998.

     SEC. 10402. PROSPECTIVE PAYMENT FOR INPATIENT REHABILITATION 
                   HOSPITAL SERVICES.

       (a) In General.--Section 1886 (42 U.S.C. 1395ww) is amended 
     by adding at the end the following new subsection:
       ``(j) Prospective Payment for Inpatient Rehabilitation 
     Services.--
       ``(1) Payment during transition period.--
       ``(A) In general.--Notwithstanding section 1814(b), but 
     subject to the provisions of section 1813, the amount of the 
     payment with respect to the operating and capital costs of 
     inpatient hospital services of a rehabilitation hospital or a 
     rehabilitation unit (in this subsection referred to as a 
     `rehabilitation facility'), in a cost reporting period 
     beginning on or after October 1, 2000, and before October 1, 
     2003, is equal to the sum of--
       ``(i) the TEFRA percentage (as defined in subparagraph (C)) 
     of the amount that would have been paid under part A with 
     respect to such costs if this subsection did not apply, and
       ``(ii) the prospective payment percentage (as defined in 
     subparagraph (C)) of the product of (I) the per unit payment 
     rate established under this subsection for the fiscal year in 
     which the payment unit of service occurs, and (II) the number 
     of such payment units occurring in the cost reporting period.
       ``(B) Fully implemented system.--Notwithstanding section 
     1814(b), but subject to the provisions of section 1813, the 
     amount of the payment with respect to the operating and 
     capital costs of inpatient hospital services of a 
     rehabilitation facility for a payment unit in a cost 
     reporting period beginning on or after October 1, 2003, is 
     equal to the per unit payment rate established under this 
     subsection for the fiscal year in which the payment unit of 
     service occurs.
       ``(C) TEFRA and prospective payment percentages 
     specified.--For purposes of subparagraph (A), for a cost 
     reporting period beginning--
       ``(i) on or after October 1, 2000, and before October 1, 
     2001, the `TEFRA percentage' is 75 percent and the 
     `prospective payment percentage' is 25 percent;
       ``(ii) on or after October 1, 2001, and before October 1, 
     2002, the `TEFRA percentage' is 50 percent and the 
     `prospective payment percentage' is 50 percent; and
       ``(iii) on or after October 1, 2002, and before October 1, 
     2003, the `TEFRA percentage' is 25 percent and the 
     `prospective payment percentage' is 75 percent.
       ``(D) Payment unit.--For purposes of this subsection, the 
     term `payment unit' means a discharge, day of inpatient 
     hospital services, or other unit of payment defined by the 
     Secretary.
       ``(2) Patient case mix groups.--
       ``(A) Establishment.--The Secretary shall establish--
       ``(i) classes of patients of rehabilitation facilities 
     (each in this subsection referred to as a `case mix group'), 
     based on such factors as the Secretary deems appropriate, 
     which may include impairment, age, related prior 
     hospitalization, comorbidities, and functional capability of 
     the patient; and
       ``(ii) a method of classifying specific patients in 
     rehabilitation facilities within these groups.
       ``(B) Weighting factors.--For each case mix group the 
     Secretary shall assign an appropriate weighting which 
     reflects the relative facility resources used with respect to 
     patients classified within that group compared to patients 
     classified within other groups.
       ``(C) Adjustments for case mix.--
       ``(i) In general.--The Secretary shall from time to time 
     adjust the classifications and weighting factors established 
     under this paragraph as appropriate to reflect changes in 
     treatment patterns, technology, case mix, number of payment 
     units for which payment is made under this title, and other 
     factors which may affect the relative use of resources. Such 
     adjustments shall be made in a manner so that changes in 
     aggregate payments under the classification system are a 
     result of real changes and are not a result of changes in 
     coding that are unrelated to real changes in case mix.
       ``(ii) Adjustment.--Insofar as the Secretary determines 
     that such adjustments for a previous fiscal year (or 
     estimates that such adjustments for a future fiscal year) did 
     (or are likely to) result in a change in aggregate payments 
     under the classification system during the fiscal year that 
     are a result of changes in the coding or classification of 
     patients that do not reflect real changes in case mix, the 
     Secretary shall adjust the per payment unit payment rate for 
     subsequent years so as to discount the effect of such coding 
     or classification changes.
       ``(D) Data collection.--The Secretary is authorized to 
     require rehabilitation facilities that provide inpatient 
     hospital services to submit such data as the Secretary deems 
     necessary to establish and administer the prospective payment 
     system under this subsection.
       ``(3) Payment rate.--
       ``(A) In general.--The Secretary shall determine a 
     prospective payment rate for each payment unit for which such 
     rehabilitation facility is entitled to receive payment under 
     this title. Subject to subparagraph (B), such rate for 
     payment units occurring during a fiscal year shall be based 
     on the average payment per payment unit under this title for 
     inpatient operating and capital costs of rehabilitation 
     facilities using the most recent data available (as estimated 
     by the Secretary as of the date of establishment of the 
     system) adjusted--
       ``(i) by updating such per-payment-unit amount to the 
     fiscal year involved by the weighted average of the 
     applicable percentage increases provided under subsection 
     (b)(3)(B)(ii) (for cost reporting periods beginning during 
     the fiscal year) covering the period from the midpoint of the 
     period for such data through the midpoint of fiscal year 2000 
     and by an increase factor (described in subparagraph (C)) 
     specified by the Secretary for subsequent fiscal years up to 
     the fiscal year involved;
       ``(ii) by reducing such rates by a factor equal to the 
     proportion of payments under this subsection (as estimated by 
     the Secretary) based on prospective payment amounts which are 
     additional payments described in paragraph (4) (relating to 
     outlier and related payments) or paragraph (7);
       ``(iii) for variations among rehabilitation facilities by 
     area under paragraph (6);
       ``(iv) by the weighting factors established under paragraph 
     (2)(B); and
       ``(v) by such other factors as the Secretary determines are 
     necessary to properly reflect variations in necessary costs 
     of treatment among rehabilitation facilities.
       ``(B) Budget neutral rates.--The Secretary shall establish 
     the prospective payment amounts under this subsection for 
     payment units during fiscal years 2001 through 2004 at levels 
     such that, in the Secretary's estimation, the amount of total 
     payments under this subsection for such fiscal years 
     (including any payment adjustments pursuant to paragraphs 
     (4), (6), and (7)) shall be equal to 99 percent of the amount 
     of payments that would have been made under this title during 
     the fiscal years for operating and capital costs of 
     rehabilitation facilities had this subsection not been 
     enacted. In establishing such payment amounts, the Secretary 
     shall consider the effects of the prospective payment system 
     established under

[[Page H4527]]

     this subsection on the total number of payment units from 
     rehabilitation facilities and other factors described in 
     subparagraph (A).
       ``(C) Increase factor.--For purposes of this subsection for 
     payment units in each fiscal year (beginning with fiscal year 
     2001), the Secretary shall establish an increase factor. Such 
     factor shall be based on an appropriate percentage increase 
     in a market basket of goods and services comprising services 
     for which payment is made under this subsection, which may be 
     the market basket percentage increase described in subsection 
     (b)(3)(B)(iii).
       ``(4) Outlier and special payments.--
       ``(A) Outliers.--
       ``(i) In general.--The Secretary may provide for an 
     additional payment to a rehabilitation facility for patients 
     in a case mix group, based upon the patient being classified 
     as an outlier based on an unusual length of stay, costs, or 
     other factors specified by the Secretary.
       ``(ii) Payment based on marginal cost of care.--The amount 
     of such additional payment under clause (i) shall be 
     determined by the Secretary and shall approximate the 
     marginal cost of care beyond the cutoff point applicable 
     under clause (i).
       ``(iii) Total payments.--The total amount of the additional 
     payments made under this subparagraph for payment units in a 
     fiscal year may not exceed 5 percent of the total payments 
     projected or estimated to be made based on prospective 
     payment rates for payment units in that year.
       ``(B) Adjustment.--The Secretary may provide for such 
     adjustments to the payment amounts under this subsection as 
     the Secretary deems appropriate to take into account the 
     unique circumstances of rehabilitation facilities located in 
     Alaska and Hawaii.
       ``(5) Publication.--The Secretary shall provide for 
     publication in the Federal Register, on or before September 1 
     before each fiscal year (beginning with fiscal year 2001, of 
     the classification and weighting factors for case mix groups 
     under paragraph (2) for such fiscal year and a description of 
     the methodology and data used in computing the prospective 
     payment rates under this subsection for that fiscal year.
       ``(6) Area wage adjustment.--The Secretary shall adjust the 
     proportion, (as estimated by the Secretary from time to time) 
     of rehabilitation facilities' costs which are attributable to 
     wages and wage-related costs, of the prospective payment 
     rates computed under paragraph (3) for area differences in 
     wage levels by a factor (established by the Secretary) 
     reflecting the relative hospital wage level in the geographic 
     area of the rehabilitation facility compared to the national 
     average wage level for such facilities. Not later than 
     October 1, 2001 (and at least every 36 months thereafter), 
     the Secretary shall update the factor under the preceding 
     sentence on the basis of a survey conducted by the Secretary 
     (and updated as appropriate) of the wages and wage-related 
     costs incurred in furnishing rehabilitation services. Any 
     adjustments or updates made under this paragraph for a fiscal 
     year shall be made in a manner that assures that the 
     aggregated payments under this subsection in the fiscal year 
     are not greater or less than those that would have been made 
     in the year without such adjustment.
       ``(7) Additional adjustments.--The Secretary may provide by 
     regulation for--
       ``(A) an additional payment to take into account indirect 
     costs of medical education and the special circumstances of 
     hospitals that serve a significantly disproportionate number 
     of low-income patients in a manner similar to that provided 
     under subparagraphs (B) and (F), respectively, of subsection 
     (d)(5); and
       ``(B) such other exceptions and adjustments to payment 
     amounts under this subsection in a manner similar to that 
     provided under subsection (d)(5)(I) in relation to payments 
     under subsection (d).
       ``(8) Limitation on review.--There shall be no 
     administrative or judicial review under section 1869, 1878, 
     or otherwise of--
       ``(A) the establishment of case mix groups, of the 
     methodology for the classification of patients within such 
     groups, and of the appropriate weighting factors thereof 
     under paragraph (2),
       ``(B) the establishment of the prospective payment rates 
     under paragraph (3),
       ``(C) the establishment of outlier and special payments 
     under paragraph (4),
       ``(D) the establishment of area wage adjustments under 
     paragraph (6), and
       ``(E) the establishment of additional adjustments under 
     paragraph (7).''.
       (b) Conforming Amendments.--Section 1886(b) of such Act (42 
     U.S.C. 1395ww(b)) is amended--
       (1) in paragraph (1), by inserting ``and other than a 
     rehabilitation facility described in subsection (j)(1)'' 
     after ``subsection (d)(1)(B)'', and
       (2) in paragraph (3)(B)(i), by inserting ``and subsection 
     (j)'' after ``For purposes of subsection (d)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to cost reporting periods beginning on or after 
     October 1, 2000, except that the Secretary of Health and 
     Human Services may require the submission of data under 
     section 1886(j)(2)(D) of the Social Security Act (as added by 
     subsection (a)) on and after the date of the enactment of 
     this section.

                    CHAPTER 2--PAYMENT UNDER PART B

   Subchapter A--Payment for Hospital Outpatient Department Services

     SEC. 10411. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS (FDO) 
                   FOR CERTAIN OUTPATIENT HOSPITAL SERVICES.

       (a) Elimination of FDO for Ambulatory Surgical Center 
     Procedures.--Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 
     1395l(i)(3)(B)(i)(II)) is amended--
       (1) by striking ``of 80 percent''; and
       (2) by striking the period at the end and inserting the 
     following: ``, less the amount a provider may charge as 
     described in clause (ii) of section 1866(a)(2)(A).''.
       (b) Elimination of FDO for Radiology Services and 
     Diagnostic Procedures.--Section 1833(n)(1)(B)(i) (42 U.S.C. 
     1395l(n)(1)(B)(i)) is amended--
       (1) by striking ``of 80 percent'', and
       (2) by inserting before the period at the end 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 October 1, 1997.

     SEC. 10412. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF 
                   HOSPITAL OUTPATIENT SERVICES.

       (a) Reduction in Payments for Capital-Related Costs.--
     Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 
     1395x(v)(1)(S)(ii)(I)) is amended by striking ``through 
     1998'' and inserting ``through 1999 and during fiscal year 
     2000 before January 1, 2000''.
       (b) Reduction in Payments for Other Costs.--Section 
     1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is 
     amended by striking ``through 1998'' and inserting ``through 
     1999 and during fiscal year 2000 before January 1, 2000''.

     SEC. 10413. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL 
                   OUTPATIENT DEPARTMENT SERVICES.

       (a) In General.--Section 1833 (42 U.S.C. 1395l) is amended 
     by adding at the end the following:
       ``(t) Prospective Payment System for Hospital Outpatient 
     Department Services.--
       ``(1) In general.--With respect to hospital outpatient 
     services designated by the Secretary (in this section 
     referred to as `covered OPD services') and furnished during a 
     year beginning with 1999, the amount of payment under this 
     part shall be determined under a prospective payment system 
     established by the Secretary in accordance with this 
     subsection.
       ``(2) System requirements.--Under the payment system--
       ``(A) the Secretary shall develop a classification system 
     for covered OPD services;
       ``(B) the Secretary may establish groups of covered OPD 
     services, within the classification system described in 
     subparagraph (A), so that services classified within each 
     group are comparable clinically and with respect to the use 
     of resources;
       ``(C) the Secretary shall, using data on claims from 1996 
     and using data from the most recent available cost reports, 
     establish relative payment weights for covered OPD services 
     (and any groups of such services described in subparagraph 
     (B)) based on median hospital costs and shall determine 
     projections of the frequency of utilization of each such 
     service (or group of services) in 1999;
       ``(D) the Secretary shall determine a wage adjustment 
     factor to adjust the portion of payment and coinsurance 
     attributable to labor-related costs for relative differences 
     in labor and labor-related costs across geographic regions in 
     a budget neutral manner;
       ``(E) the Secretary shall establish other adjustments, in a 
     budget neutral manner, as determined to be necessary to 
     ensure equitable payments, such as outlier adjustments, 
     adjustments to account for variations in coinsurance payments 
     for procedures with similar resource costs, or adjustments 
     for certain classes of hospitals; and
       ``(F) the Secretary shall develop a method for controlling 
     unnecessary increases in the volume of covered OPD services.
       ``(3) Calculation of base amounts.--
       ``(A) Aggregate amounts that would be payable if 
     deductibles were disregarded.--The Secretary shall estimate 
     the total amounts that would be payable from the Trust Fund 
     under this part for covered OPD services in 1999, determined 
     without regard to this subsection, as though the deductible 
     under section 1833(b) did not apply, and as though the 
     coinsurance described in section 1866(a)(2)(A)(ii) (as in 
     effect before the date of the enactment of this subsection) 
     continued to apply.
       ``(B) Unadjusted copayment amount.--
       ``(i) In general.--For purposes of this subsection, subject 
     to clause (ii), the `unadjusted copayment amount' applicable 
     to a covered OPD service (or group of such services) is 20 
     percent of national median of the charges for the service (or 
     services within the group) furnished during 1996, updated to 
     1999 using the Secretary's estimate of charge growth during 
     the period.
       ``(ii) Adjusted to be 20 percent when fully phased in.--If 
     the pre-deductible payment percentage for a covered OPD 
     service (or group of such services) furnished in a year would 
     be equal to or exceed 80 percent, then the unadjusted 
     copayment amount shall be 25 percent of amount determined 
     under subparagraph (D)(i).
       ``(iii) Rules for new services.--The Secretary shall 
     establish rules for establishment of an unadjusted copayment 
     amount for a

[[Page H4528]]

     covered OPD service not furnished during 1996, based upon its 
     classification within a group of such services.
       ``(C) Calculation of conversion factors.--
       ``(i) For 1999.--

       ``(I) In general.--The Secretary shall establish a 1999 
     conversion factor for determining the medicare pre-deductible 
     OPD fee payment amounts for each covered OPD service (or 
     group of such services) furnished in 1999. Such conversion 
     factor shall be established on the basis of the weights and 
     frequencies described in paragraph (2)(C) and in a manner 
     such that the sum for all services and groups of the products 
     (described in subclause (II) for each such service or group) 
     equals the total projected amount described in subparagraph 
     (A).

       ``(II) Product described.--The product described in this 
     subclause, for a service or group, is the product of the 
     medicare pre-deductible OPD fee payment amounts (taking into 
     account appropriate adjustments described in paragraphs 
     (2)(D) and (2)(E)) and the frequencies for such service or 
     group.
       ``(ii) Subsequent years.--Subject to paragraph (8)(B), the 
     Secretary shall establish a conversion factor for covered OPD 
     services furnished in subsequent years in an amount equal to 
     the conversion factor established under this subparagraph and 
     applicable to such services furnished in the previous year 
     increased by the OPD payment increase factor specified under 
     clause (iii) for the year involved.
       ``(iii) OPD payment increase factor.--For purposes of this 
     subparagraph, the `OPD payment increase factor' for services 
     furnished in a year is equal to the sum of--

       ``(I) market basket percentage increase (applicable under 
     section 1886(b)(3)(B)(iii) to hospital discharges occurring 
     during the fiscal year ending in such year, and
       ``(II) in the case of a covered OPD service (or group of 
     such services) furnished in a year in which the pre-
     deductible payment percentage would not exceed 80 percent, 
     3.5 percentage points, but in no case greater than such 
     number of percentage points as will result in the pre-
     deductible payment percentage exceeding 80 percent.

     In applying the previous sentence for years beginning with 
     2000, the Secretary may substitute for the market basket 
     percentage increase under subclause (I) an annual percentage 
     increase that is computed and applied with respect to covered 
     OPD services furnished in a year in the same manner as the 
     market basket percentage increase is determined and applied 
     to inpatient hospital services for discharges occurring in a 
     fiscal year.
       ``(D) Pre-deductible payment percentage.--The pre-
     deductible payment percentage for a covered OPD service (or 
     group of such services) furnished in a year is equal to the 
     ratio of--
       ``(i) the conversion factor established under subparagraph 
     (C) for the year, multiplied by the weighting factor 
     established under paragraph (2)(C) for the service (or 
     group), to
       ``(ii) the sum of the amount determined under clause (i) 
     and the unadjusted copayment amount determined under 
     subparagraph (B) for such service or group.
       ``(E) Calculation of medicare opd fee schedule amounts.--
     The Secretary shall compute a medicare OPD fee schedule 
     amount for each covered OPD service (or group of such 
     services) furnished in a year, in an amount equal to the 
     product of--
       ``(i) the conversion factor computed under subparagraph (C) 
     for the year, and
       ``(ii) the relative payment weight (determined under 
     paragraph (2)(C)) for the service or group.
       ``(4) Medicare payment amount.--The amount of payment made 
     from the Trust Fund under this part for a covered OPD service 
     (and such services classified within a group) furnished in a 
     year is determined as follows:
       ``(A) Fee schedule and copayment amount.--Add (i) the 
     medicare OPD fee schedule amount (computed under paragraph 
     (3)(E)) for the service or group and year, and (ii) the 
     unadjusted copayment amount (determined under paragraph 
     (3)(B)) for the service or group.
       ``(B) Subtract applicable deductible.--Reduce the sum 
     determined under subparagraph (A) by the amount of the 
     deductible under section 1833(b), to the extent applicable.
       ``(C) Apply payment proportion to remainder.--Multiply the 
     amount so determined under subparagraph (B) by the pre-
     deductible payment percentage (as determined under paragraph 
     (3)(D)) for the service or group and year involved.
       ``(D) Labor-related adjustment.--The amount of payment is 
     the product determined under subparagraph (C) with the labor-
     related portion of such product adjusted for relative 
     differences in the cost of labor and other factors determined 
     by the Secretary, as computed under paragraph (2)(D).
       ``(5) Copayment amount.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the copayment amount under this subsection is determined as 
     follows:
       ``(i) Unadjusted copayment.--Compute the amount by which 
     the amount described in paragraph (4)(B) exceeds the amount 
     of payment determined under paragraph (4)(C).
       ``(ii) Labor adjustment.--The copayment amount is the 
     difference determined under clause (i) with the labor-related 
     portion of such difference adjusted for relative differences 
     in the cost of labor and other factors determined by the 
     Secretary, as computed under paragraphs (2)(D). The 
     adjustment under this clause shall be made in a manner that 
     does not result in any change in the aggregate copayments 
     made in any year if the adjustment had not been made.
       ``(B) Election to offer reduced copayment amount.--The 
     Secretary shall establish a procedure under which a hospital, 
     before the beginning of a year (beginning with 1999), may 
     elect to reduce the copayment amount otherwise established 
     under subparagraph (A) for some or all covered OPD services 
     to an amount that is not less than 25 percent of the medicare 
     OPD fee schedule amount (computed under paragraph (3)(E)) for 
     the service involved, adjusted for relative differences in 
     the cost of labor and other factors determined by the 
     Secretary, as computed under subparagraphs (D) and (E) of 
     paragraph (2). Under such procedures, such reduced copayment 
     amount may not be further reduced or increased during the 
     year involved and the hospital may disseminate information on 
     the reduction of copayment amount effected under this 
     subparagraph.
       ``(C) No impact on deductibles.--Nothing in this paragraph 
     shall be construed as affecting a hospital's authority to 
     waive the charging of a deductible under section 1833(b).
       ``(6) Periodic review and adjustments components of 
     prospective payment system.--
       ``(A) Periodic review.--The Secretary may periodically 
     review and revise the groups, the relative payment weights, 
     and the wage and other adjustments described in paragraph (2) 
     to take into account changes in medical practice, changes in 
     technology, the addition of new services, new cost data, and 
     other relevant information and factors.
       ``(B) Budget neutrality adjustment.--If the Secretary makes 
     adjustments under subparagraph (A), then the adjustments for 
     a year may not cause the estimated amount of expenditures 
     under this part for the year to increase or decrease from the 
     estimated amount of expenditures under this part that would 
     have been made if the adjustments had not been made.
       ``(C) Update factor.--If the Secretary determines under 
     methodologies described in subparagraph (2)(F) that the 
     volume of services paid for under this subsection increased 
     beyond amounts established through those methodologies, the 
     Secretary may appropriately adjust the update to the 
     conversion factor otherwise applicable in a subsequent year.
       ``(7) Special rule for ambulance services.--The Secretary 
     shall pay for hospital outpatient services that are ambulance 
     services on the basis described in the matter in subsection 
     (a)(1) preceding subparagraph (A).
       ``(8) Special rules for certain hospitals.--In the case of 
     hospitals described in section 1886(d)(1)(B)(v)--
       ``(A) the system under this subsection shall not apply to 
     covered OPD services furnished before January 1, 2000; and
       ``(B) the Secretary may establish a separate conversion 
     factor for such services in a manner that specifically takes 
     into account the unique costs incurred by such hospitals by 
     virtue of their patient population and service intensity.
       ``(9) Limitation on review.--There shall be no 
     administrative or judicial review under section 1869, 1878, 
     or otherwise of--
       ``(A) the development of the classification system under 
     paragraph (2), including the establishment of groups and 
     relative payment weights for covered OPD services, of wage 
     adjustment factors, other adjustments, and methods described 
     in paragraph (2)(F);
       ``(B) the calculation of base amounts under paragraph (3);
       ``(C) periodic adjustments made under paragraph (6); and
       ``(D) the establishment of a separate conversion factor 
     under paragraph (8)(B).''.
       (b) Coinsurance.--Section 1866(a)(2)(A)(ii) (42 U.S.C. 
     1395cc(a)(2)(A)(ii)) is amended by adding at the end the 
     following: ``In the case of items and services for which 
     payment is made under part B under the prospective payment 
     system established under section 1833(t), clause (ii) of the 
     first sentence shall be applied by substituting for 20 
     percent of the reasonable charge, the applicable copayment 
     amount established under section 1833(t)(5).''.
       (c) Treatment of Reduction in Copayment Amount.--Section 
     1128A(i)(6) (42 U.S.C. 1320a-7a(i)(6)) is amended--
       (1) by striking ``or'' at the end of subparagraph (B),
       (2) by striking the period at the end of subparagraph (C) 
     and inserting ``; or'', and
       (3) by adding at the end the following new subparagraph:
       ``(D) a reduction in the copayment amount for covered OPD 
     services under section 1833(t)(5)(B).''.
       (d) Conforming Amendments.--
       (1) Approved asc procedures performed in hospital 
     outpatient departments.--
       (A)(i) Section 1833(i)(3)(A) (42 U.S.C. 13951(i)(3)(A)) is 
     amended--
       (I) by inserting ``before January 1, 1999,'' after 
     ``furnished'', and
       (II) by striking ``in a cost reporting period''.
       (ii) The amendment made by clause (i) shall apply to 
     services furnished on or after January 1, 1999.
       (B) Section 1833(a)(4) (42 U.S.C. 13951(a)(4)) is amended 
     by inserting ``or subsection (t)'' before the semicolon.

[[Page H4529]]

       (2) Radiology and other diagnostic procedures.--
       (A) Section 1833(n)(1)(A) (42 U.S.C. 1395l(n)(1)(A)) is 
     amended by inserting ``and before January 1, 1999,'' after 
     ``October 1, 1988,'' and after ``October 1, 1989,''.
       (B) Section 1833(a)(2)(E) (42 U.S.C. 1395l(a)(2)(E)) is 
     amended by inserting ``or, for services or procedures 
     performed on or after January 1, 1999, (t)'' before the 
     semicolon.
       (3) Other hospital outpatient services.--Section -
     1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) is amended--
       (A) in clause (i), by inserting ``furnished before January 
     1, 1999,'' after ``(i)'',
       (B) in clause (ii), by inserting ``before January 1, 
     1999,'' after ``furnished'',
       (C) by redesignating clause (iii) as clause (iv), and
       (D) by inserting after clause (ii), the following new 
     clause:
       ``(iii) if such services are furnished on or after January 
     1, 1999, the amount determined under subsection (t), or''.

                 Subchapter B--Rehabilitation Services

     SEC. 10421. REHABILITATION AGENCIES AND SERVICES.

       (a) Payment Based on Fee Schedule.--
       (1) Special payment rules.--Section 1833(a) (42 U.S.C. 
     1395l(a)) is amended--
       (A) in paragraph (2) in the matter before subparagraph (A), 
     by inserting ``(C),'' before ``(D)'';
       (B) in paragraph (6), by striking ``and'' at the end;
       (C) in paragraph (7), by striking the period at the end and 
     inserting ``; and'';
       (D) by adding at the end the following new paragraph:
       ``(8) in the case of services described in section 
     1832(a)(2)(C) (that are not described in section 
     1832(a)(2)(B)), the amounts described in section 1834(k).''.
       (2) Payment rates.--Section 1834 (42 U.S.C. 1395m) is 
     amended by adding at the end the following new subsection:
       ``(k) Payment for Outpatient Therapy Services.--
       ``(1) In general.--With respect to outpatient physical 
     therapy services (which includes outpatient speech-language 
     pathology services) and outpatient occupational therapy 
     services for which payment is determined under this 
     subsection, the payment basis shall be--
       ``(A) for services furnished during 1998, the amount 
     determined under paragraph (2); or
       ``(B) for services furnished during a subsequent year, 80 
     percent of the lesser of--
       ``(i) the actual charge for the services, or
       ``(ii) the applicable fee schedule amount (as defined in 
     paragraph (3)) for the services.
       ``(2) Payment in 1998 based upon adjusted reasonable 
     costs.--The amount under this paragraph for services is the 
     lesser of--
       ``(A) the charges imposed for the services, or
       ``(B) the adjusted reasonable costs (as defined in 
     paragraph (4)) for the services,

     less 20 percent of the amount of the charges imposed for such 
     services.
       ``(3) Applicable fee schedule amount.--In this paragraph, 
     the term `applicable fee schedule amount' means, with respect 
     to services furnished in a year, the fee schedule amount 
     established under section 1848 for such services furnished 
     during the year or, if there is no such fee schedule amount 
     established for such services, for such comparable services 
     as the Secretary specifies.
       ``(4) Adjusted reasonable costs.--In paragraph (2), the 
     term `adjusted reasonable costs' means reasonable costs 
     determined reduced by--
       ``(A) 5.8 percent of the reasonable costs for operating 
     costs, and
       ``(B) 10 percent of the reasonable costs for capital costs.
       ``(5) Uniform coding.--For claims for services submitted on 
     or after April 1, 1998, for which the amount of payment is 
     determined under this subsection, the claim shall include a 
     code (or codes) under a uniform coding system specified by 
     the Secretary that identifies the services furnished.
       ``(6) Restraint on billing.--The provisions of 
     subparagraphs (A) and (B) of section 1842(b)(18) shall apply 
     to therapy services for which payment is made under this 
     subsection in the same manner as they apply to services 
     provided by a practitioner described in section 
     1842(b)(18)(C).''.
       (b) Application of Standards to Outpatient Occupational and 
     Physical Therapy Services Provided As an Incident to a 
     Physician's Professional Services.--Section 1862(a), as 
     amended by section 10401(b), (42 U.S.C. 1395y(a)) is 
     amended--
       (1) by striking ``or'' at the end of paragraph (16);
       (2) by striking the period at the end of paragraph (17) and 
     inserting ``; or''; and
       (3) by inserting after paragraph (17) the following:
       ``(18) in the case of outpatient occupational therapy 
     services or outpatient physical therapy services furnished as 
     an incident to a physician's professional services (as 
     described in section 1861(s)(2)(A)), that do not meet the 
     standards and conditions under the second sentence of section 
     1861(g) or 1861(p) as such standards and conditions would 
     apply to such therapy services if furnished by a 
     therapist.''.
       (c) Applying Financial Limitation to All Rehabilitation 
     Services.--Section 1833(g) (42 U.S.C. 1395l(g)) is amended--
       (1) in the first sentence, by striking ``services described 
     in the second sentence of section 1861(p)'' and inserting 
     ``physical therapy services of the type described in section 
     1861(p) (regardless of who furnishes the services or whether 
     the services may be covered as physicians' services so long 
     as the services are furnished other than in a hospital 
     setting)'', and
       (2) in the second sentence, by striking ``outpatient 
     occupational therapy services which are described in the 
     second sentence of section 1861(p) through the operation of 
     section 1861(g)'' and inserting ``occupational therapy 
     services (of the type that are described in section 1861(p) 
     through the operation of section 1861(g)), regardless of who 
     furnishes the services or whether the services may be covered 
     as physicians' services so long as the services are furnished 
     other than in a hospital setting''.
       (d) Indexing Limitation.--Section 1833(g) (42 U.S.C. 
     1395l(g)), as amended by subsection (c), is further amended--
       (1) by striking ``$900'' each place it appears and 
     inserting ``the amount specified in paragraph (2) for the 
     year'',
       (2) by inserting ``(1)'' after ``(g)'',
       (3) by designating the last sentence as a paragraph (3), 
     and
       (4) by inserting before paragraph (3), as so designated, 
     the following:
       ``(2) The amount specified in this paragraph--
       ``(A) for 1999, and each preceding year, is $900, and
       ``(B) for a subsequent year is the amount specified in this 
     paragraph for the preceding year increased by the Secretary's 
     estimate of the projected percentage growth in real gross 
     domestic product per capita from the fiscal year ending in 
     the preceding year to the fiscal year ending in such 
     subsequent year.''.
       (e) Effective Date.--The amendments made by this section 
     apply to services furnished on or after January 1, 1998; 
     except that the amendments made by subsection (c) apply to 
     services furnished on or after January 1, 1999.

     SEC. 10422. COMPREHENSIVE OUTPATIENT REHABILITATION 
                   FACILITIES (CORF).

       (a) Payment Based on Fee Schedule.--
       (1) Special payment rules.--Section 1833(a) (42 U.S.C. 
     1395l(a)), as amended by section 10421(a), is amended--
       (A) in paragraph (3), by striking ``subparagraphs (D) and 
     (E) of section 1832(a)(2)'' and inserting ``section 
     1832(a)(2)(E)'';
       (B) in paragraph (7), by striking ``and'' at the end;
       (C) in paragraph (8), by striking the period at the end and 
     inserting ``; and'';
       (D) by adding at the end the following new paragraph:
       ``(9) in the case of services described in section 
     1832(a)(2)(E), the amounts described in section 1834(k).''.
       (2) Payment rates.--Section 1834(k) (42 U.S.C. 1395m(k)), 
     as added by section 10421(a), is amended--
       (A) in the heading, by inserting ``and Comprehensive 
     Outpatient Rehabilitation Facility Services'' after ``Therapy 
     Services''; and
       (B) in paragraph (1), by inserting ``and with respect to 
     comprehensive outpatient rehabilitation facility services'' 
     after ``occupational therapy services''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to services furnished on or after January 1, 
     1998, and to portions of cost reporting periods occurring on 
     or after such date.

                    Subchapter C--Ambulance Services

     SEC. 10431. PAYMENTS FOR AMBULANCE SERVICES.

       (a) Interim Reductions.--
       (1) Payments determined on reasonable cost basis.--Section 
     1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at 
     the end the following new subparagraph:
       ``(U) In determining the reasonable cost of ambulance 
     services (as described in subsection (s)(7)) provided during 
     a fiscal year (beginning with fiscal year 1998 and ending 
     with fiscal year 2002), the Secretary shall not recognize any 
     costs in excess of costs recognized as reasonable for 
     ambulance services provided during the previous fiscal year 
     after application of this subparagraph, increased by the 
     percentage increase in the consumer price index for all urban 
     consumers (U.S. city average) as estimated by the Secretary 
     for the 12-month period ending with the midpoint of the 
     fiscal year involved reduced (in the case of each of fiscal 
     years 1998 and 1999) by 1 percentage point.''.
       (2) Payments determined on reasonable charge basis.--
     Section 1842(b) (42 U.S.C. 1395u(b)) is amended by adding at 
     the end the following new paragraph:
       ``(19) For purposes of section 1833(a)(1), the reasonable 
     charge for ambulance services (as described in section 
     1861(s)(7)) provided during a fiscal year (beginning with 
     fiscal year 1998 and ending with fiscal year 2002) may not 
     exceed the reasonable charge for such services provided 
     during the previous fiscal year after the application of this 
     paragraph, increased by the percentage increase in the 
     consumer price index for all urban consumers (U.S. city 
     average) as estimated by the Secretary for the 12-month 
     period ending with the midpoint of the year involved reduced 
     (in the case of each of fiscal years 1998 and 1999) by 1 
     percentage point.''.
       (b) Establishment of Prospective Fee Schedule.--
       (1) Payment in accordance with fee schedule.--Section 
     1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by section 
     10619(b)(1), is amended--
       (A) by striking ``and (P)'' and inserting ``(P)''; and

[[Page H4530]]

       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (Q) with respect to ambulance service, the 
     amounts paid shall be 80 percent of the lesser of the actual 
     charge for the services or the amount determined by a fee 
     schedule established by the Secretary under section 
     1834(l);''.
       (2) Establishment of schedule.--Section 1834 (42 U.S.C. 
     1395m), as amended by section 10421(a)(2), is amended by 
     adding at the end the following new subsection:
       ``(l) Establishment of Fee Schedule for Ambulance 
     Services.--
       ``(1) In general.--The Secretary shall establish a fee 
     schedule for payment for ambulance services under this part 
     through a negotiated rulemaking process described in title 5, 
     United States Code, and in accordance with the requirements 
     of this subsection.
       ``(2) Considerations.--In establishing such fee schedule 
     the Secretary shall--
       ``(A) establish mechanisms to control increases in 
     expenditures for ambulance services under this part;
       ``(B) establish definitions for ambulance services which 
     link payments to the type of services provided;
       ``(C) consider appropriate regional and operational 
     differences;
       ``(D) consider adjustments to payment rates to account for 
     inflation and other relevant factors; and
       ``(E) phase in the application of the payment rates under 
     the fee schedule in an efficient and fair manner.
       ``(3) Savings.--In establishing such fee schedule the 
     Secretary shall--
       ``(A) ensure that the aggregate amount of payments made for 
     ambulance services under this part during 2000 does not 
     exceed the aggregate amount of payments which would have been 
     made for such services under this part during such year if 
     the amendments made by section 10431 of the Balanced Budget 
     Act of 1997 had not been made; and
       ``(B) set the payment amounts provided under the fee 
     schedule for services furnished in 2001 and each subsequent 
     year at amounts equal to the payment amounts under the fee 
     schedule for service furnished during the previous year, 
     increased by the percentage increase in the consumer price 
     index for all urban consumers (U.S. city average) for the 12-
     month period ending with June of the previous year.
       ``(4) Consultation.--In establishing the fee schedule for 
     ambulance services under this subsection, the Secretary shall 
     consult with various national organizations representing 
     individuals and entities who furnish and regulate ambulance 
     services and share with such organizations relevant data in 
     establishing such schedule.
       ``(5) Limitation on review.--There shall be no 
     administrative or judicial review under section 1869 or 
     otherwise of the amounts established under the fee schedule 
     for ambulance services under this subsection, including 
     matters described in paragraph (2).
       ``(6) Restraint on billing.--The provisions of 
     subparagraphs (A) and (B) of section 1842(b)(18) shall apply 
     to ambulance services for which payment is made under this 
     subsection in the same manner as they apply to services 
     provided by a practitioner described in section 
     1842(b)(18)(C).''.
       (3) Effective date.--The amendments made by this section 
     apply to ambulance services furnished on or after January 1, 
     2000.
       (c) Authorizing Payment for Paramedic Intercept Service 
     Providers in Rural Communities.--In promulgating regulations 
     to carry out section 1861(s)(7) of the Social Security Act 
     (42 U.S.C. 1395x(s)(7)) with respect to the coverage of 
     ambulance service, the Secretary of Health and Human Services 
     may include coverage of advanced life support services (in 
     this subsection referred to as ``ALS intercept services'') 
     provided by a paramedic intercept service provider in a rural 
     area if the following conditions are met:
       (1) The ALS intercept services are provided under a 
     contract with one or more volunteer ambulance services and 
     are medically necessary based on the health condition of the 
     individual being transported.
       (2) The volunteer ambulance service involved--
       (A) is certified as qualified to provide ambulance service 
     for purposes of such section,
       (B) provides only basic life support services at the time 
     of the intercept, and
       (C) is prohibited by State law from billing for any 
     services.
       (3) The entity supplying the ALS intercept services--
       (A) is certified as qualified to provide such services 
     under the medicare program under title XVIII of the Social 
     Security Act, and
       (B) bills all recipients who receive ALS intercept services 
     from the entity, regardless of whether or not such recipients 
     are medicare beneficiaries.

     SEC. 10432. DEMONSTRATION OF COVERAGE OF AMBULANCE SERVICES 
                   UNDER MEDICARE THROUGH CONTRACTS WITH UNITS OF 
                   LOCAL GOVERNMENT.

       (a) Demonstration Project Contracts with Local 
     Governments.--The Secretary of Health and Human Services 
     shall establish up to 3 demonstration projects under which, 
     at the request of a county or parish, the Secretary enters 
     into a contract with the county or parish under which--
       (1) the county or parish furnishes (or arranges for the 
     furnishing) of ambulance services for which payment may be 
     made under part B of title XVIII of the Social Security Act 
     for individuals residing in the county or parish who are 
     enrolled under such part, except that the county or parish 
     may not enter into the contract unless the contract covers at 
     least 80 percent of the individuals residing in the county or 
     parish who are enrolled under such part;
       (2) any individual or entity furnishing ambulance services 
     under the contract meets the requirements otherwise 
     applicable to individuals and entities furnishing such 
     services under such part; and
       (3) for each month during which the contract is in effect, 
     the Secretary makes a capitated payment to the county or 
     parish in accordance with subsection (b).

     The projects may extend over a period of not to exceed 3 
     years each.
       (b) Amount of Payment.--
       (1) In general.--The amount of the monthly payment made for 
     months occurring during a calendar year to a county or parish 
     under a demonstration project contract under subsection (a) 
     shall be equal to the product of--
       (A) the Secretary's estimate of the number of individuals 
     covered under the contract for the month; and
       (B) \1/12\ of the capitated payment rate for the year 
     established under paragraph (2).
       (2) Capitated payment rate defined.--In this subsection, 
     the ``capitated payment rate'' applicable to a contract under 
     this subsection for a calendar year is equal to 95 percent 
     of--
       (A) for the first calendar year for which the contract is 
     in effect, the average annual per capita payment made under 
     part B of title XVIII of the Social Security Act with respect 
     to ambulance services furnished to such individuals during 
     the 3 most recent calendar years for which data on the amount 
     of such payment is available; and
       (B) for a subsequent year, the amount provided under this 
     paragraph for the previous year increased by the percentage 
     increase in the consumer price index for all urban consumers 
     (U.S. city average) for the 12-month period ending with June 
     of the previous year.
       (c) Other Terms of Contract.--The Secretary and the county 
     or parish may include in a contract under this section such 
     other terms as the parties consider appropriate, including--
       (1) covering individuals residing in additional counties or 
     parishes (under arrangements entered into between such 
     counties or parishes and the county or parish involved);
       (2) permitting the county or parish to transport 
     individuals to non-hospital providers if such providers are 
     able to furnish quality services at a lower cost than 
     hospital providers; or
       (3) implementing such other innovations as the county or 
     parish may propose to improve the quality of ambulance 
     services and control the costs of such services.
       (d) Contract Payments in Lieu of Other Benefits.--Payments 
     under a contract to a county or parish under this section 
     shall be instead of the amounts which (in the absence of the 
     contract) would otherwise be payable under part B of title 
     XVIII of the Social Security Act for the services covered 
     under the contract which are furnished to individuals who 
     reside in the county or parish.
       (e) Report on Effects of Capitated Contracts.--
       (1) Study.--The Secretary shall evaluate the demonstration 
     projects conducted under this section. Such evaluation shall 
     include an analysis of the quality and cost-effectiveness of 
     ambulance services furnished under the projects.
       (2) Report.--Not later than January 1, 2000, the Secretary 
     shall submit a report to Congress on the study conducted 
     under paragraph (1), and shall include in the report such 
     recommendations as the Secretary considers appropriate, 
     including recommendations regarding modifications to the 
     methodology used to determine the amount of payments made 
     under such contracts and extending or expanding such 
     projects.

                 CHAPTER 3--PAYMENT UNDER PARTS A AND B

     SEC. 10441. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as 
     amended by section 10011, is amended by adding at the end the 
     following new section:


             ``prospective payment for home health services

       ``Sec. 1895. (a) In General.--Notwithstanding section 
     1861(v), the Secretary shall provide, for cost reporting 
     periods beginning on or after October 1, 1999, for payments 
     for home health services in accordance with a prospective 
     payment system established by the Secretary under this 
     section.
       ``(b) System of Prospective Payment for Home Health 
     Services.--
       ``(1) In general.--The Secretary shall establish under this 
     subsection a prospective payment system for payment for all 
     costs of home health services. Under the system under this 
     subsection all services covered and paid on a reasonable cost 
     basis under the medicare home health benefit as of the date 
     of the enactment of the this section, including medical 
     supplies, shall be paid for on the basis of a prospective 
     payment amount determined under this subsection and 
     applicable to the services involved. In implementing the 
     system, the Secretary may provide for a transition (of not 
     longer than 4 years) during which a portion of such payment 
     is based on agency-specific costs, but only if such 
     transition does not result in aggregate payments under this 
     title that exceed the aggregate payments that would be made 
     if such a transition did not occur.

[[Page H4531]]

       ``(2) Unit of payment.--In defining a prospective payment 
     amount under the system under this subsection, the Secretary 
     shall consider an appropriate unit of service and the number, 
     type, and duration of visits provided within that unit, 
     potential changes in the mix of services provided within that 
     unit and their cost, and a general system design that 
     provides for continued access to quality services.
       ``(3) Payment basis.--
       ``(A) Initial basis.--
       ``(i) In general.--Under such system the Secretary shall 
     provide for computation of a standard prospective payment 
     amount (or amounts). Such amount (or amounts) shall initially 
     be based on the most current audited cost report data 
     available to the Secretary and shall be computed in a manner 
     so that the total amounts payable under the system for fiscal 
     year 2000 shall be equal to the total amount that would have 
     been made if the system had not been in effect but if the 
     reduction in limits described in clause (ii) had been in 
     effect. Such amount shall be standardized in a manner that 
     eliminates the effect of variations in relative case mix and 
     wage levels among different home health agencies in a budget 
     neutral manner consistent with the case mix and wage level 
     adjustments provided under paragraph (4)(A). Under the 
     system, the Secretary may recognize regional differences or 
     differences based upon whether or not the services or agency 
     are in an urbanized area.
       ``(ii) Reduction.--The reduction described in this clause 
     is a reduction by 15 percent in the cost limits and per 
     beneficiary limits described in section 1861(v)(1)(L), as 
     those limits are in effect on September 30, 1999.
       ``(B) Annual update.--
       ``(i) In general.--The standard prospective payment amount 
     (or amounts) shall be adjusted for each fiscal year 
     (beginning with fiscal year 2001) in a prospective manner 
     specified by the Secretary by the home health market basket 
     percentage increase applicable to the fiscal year involved.
       ``(ii) Home health market basket percentage increase.--For 
     purposes of this subsection, the term `home health market 
     basket percentage increase' means, with respect to a fiscal 
     year, a percentage (estimated by the Secretary before the 
     beginning of the fiscal year) determined and applied with 
     respect to the mix of goods and services included in home 
     health services in the same manner as the market basket 
     percentage increase under section 1886(b)(3)(B)(iii) is 
     determined and applied to the mix of goods and services 
     comprising inpatient hospital services for the fiscal year.
       ``(C) Adjustment for outliers.--The Secretary shall reduce 
     the standard prospective payment amount (or amounts) under 
     this paragraph applicable to home health services furnished 
     during a period by such proportion as will result in an 
     aggregate reduction in payments for the period equal to the 
     aggregate increase in payments resulting from the application 
     of paragraph (5) (relating to outliers).
       ``(4) Payment computation.--
       ``(A) In general.--The payment amount for a unit of home 
     health services shall be the applicable standard prospective 
     payment amount adjusted as follows:
       ``(i) Case mix adjustment.--The amount shall be adjusted by 
     an appropriate case mix adjustment factor (established under 
     subparagraph (B)).
       ``(ii) Area wage adjustment.--The portion of such amount 
     that the Secretary estimates to be attributable to wages and 
     wage-related costs shall be adjusted for geographic 
     differences in such costs by an area wage adjustment factor 
     (established under subparagraph (C)) for the area in which 
     the services are furnished or such other area as the 
     Secretary may specify.
       ``(B) Establishment of case mix adjustment factors.--The 
     Secretary shall establish appropriate case mix adjustment 
     factors for home health services in a manner that explains a 
     significant amount of the variation in cost among different 
     units of services.
       ``(C) Establishment of area wage adjustment factors.--The 
     Secretary shall establish area wage adjustment factors that 
     reflect the relative level of wages and wage-related costs 
     applicable to the furnishing of home health services in a 
     geographic area compared to the national average applicable 
     level. Such factors may be the factors used by the Secretary 
     for purposes of section 1886(d)(3)(E).
       ``(5) Outliers.--The Secretary may provide for an addition 
     or adjustment to the payment amount otherwise made in the 
     case of outliers because of unusual variations in the type or 
     amount of medically necessary care. The total amount of the 
     additional payments or payment adjustments made under this 
     paragraph with respect to a fiscal year may not exceed 5 
     percent of the total payments projected or estimated to be 
     made based on the prospective payment system under this 
     subsection in that year.
       ``(6) Proration of prospective payment amounts.--If a 
     beneficiary elects to transfer to, or receive services from, 
     another home health agency within the period covered by the 
     prospective payment amount, the payment shall be prorated 
     between the home health agencies involved.
       ``(c) Requirements for Payment Information.--With respect 
     to home health services furnished on or after October 1, 
     1998, no claim for such a service may be paid under this 
     title unless--
       ``(1) the claim has the unique identifier (provided under 
     section 1842(r)) for the physician who prescribed the 
     services or made the certification described in section 
     1814(a)(2) or 1835(a)(2)(A); and
       ``(2) in the case of a service visit described in paragraph 
     (1), (2), (3), or (4) of section 1861(m), the claim has 
     information (coded in an appropriate manner) on the length of 
     time of the service visit, as measured in 15 minute 
     increments.
       ``(d) Limitation on Review.--There shall be no 
     administrative or judicial review under section 1869, 1878, 
     or otherwise of--
       ``(1) the establishment of a transition period under 
     subsection (b)(1);
       ``(2) the definition and application of payment units under 
     subsection (b)(2);
       ``(3) the computation of initial standard prospective 
     payment amounts under subsection (b)(3)(A) (including the 
     reduction described in clause (ii) of such subsection);
       ``(4) the establishment of the adjustment for outliers 
     under subsection (b)(3)(C);
       ``(5) the establishment of case mix and area wage 
     adjustments under subsection (b)(4);
       ``(6) the establishment of any adjustments for outliers 
     under subsection (b)(5); and
       ``(7) the amounts or types of adjustments under subsection 
     (b)(7).''.
       (b) Elimination of Periodic Interim Payments for Home 
     Health Agencies.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
     is amended--
       (1) by inserting ``and'' at the end of subparagraph (C),
       (2) by striking subparagraph (D), and
       (3) by redesignating subparagraph (E) as subparagraph (D).
       (c) Conforming Amendments.--
       (1) Payments under part a.--Section 1814(b) (42 U.S.C. 
     1395f(b)) is amended in the matter preceding paragraph (1) by 
     striking ``and 1886'' and inserting ``1886, and 1895''.
       (2) Treatment of items and services paid under part b.--
       (A) Payments under part b.--Section 1833(a)(2) (42 U.S.C. 
     1395l(a)(2)) is amended--
       (i) by amending subparagraph (A) to read as follows:
       ``(A) with respect to home health services (other than a 
     covered osteoporosis drug) (as defined in section 1861(kk)), 
     the amount determined under the prospective payment system 
     under section 1895;'';
       (ii) by striking ``and'' at the end of subparagraph (E);
       (iii) by adding ``and'' at the end of subparagraph (F); and
       (iv) by adding at the end the following new subparagraph:
       ``(G) with respect to items and services described in 
     section 1861(s)(10)(A), the lesser of--
       ``(i) the reasonable cost of such services, as determined 
     under section 1861(v), or
       ``(ii) the customary charges with respect to such services,

     or, if such services are furnished by a public provider of 
     services, or by another provider which demonstrates to the 
     satisfaction of the Secretary that a significant portion of 
     its patients are low-income (and requests that payment be 
     made under this provision), free of charge or at nominal 
     charges to the public, the amount determined in accordance 
     with section 1814(b)(2);''.
       (B) Requiring payment for all items and services to be made 
     to agency.--
       (i) In general.--The first sentence of section 1842(b)(6) 
     (42 U.S.C. 1395u(b)(6)), as amended by section 10401(b)(2), 
     is amended--

       (I) by striking ``and (E)'' and inserting ``(E)''; and
       (II) by striking the period at the end and inserting the 
     following: ``, and (F) in the case of home health services 
     furnished to an individual who (at the time the item or 
     service is furnished) is under a plan of care of a home 
     health agency, payment shall be made to the agency (without 
     regard to whether or not the item or service was furnished by 
     the agency, by others under arrangement with them made by the 
     agency, or when any other contracting or consulting 
     arrangement, or otherwise).''.

       (ii) Conforming amendment.--Section 1832(a)(1) (42 U.S.C. 
     1395k(a)(1)), as amended by section 10401(b), is amended by 
     striking ``and section 1842(b)(6)(E)'' and inserting ``, 
     section 1842(b)(6)(E), and section 1842(b)(6)(F)''.
       (C) Exclusions from coverage.--Section 1862(a) (42 U.S.C. 
     1395y(a)), as amended by sections 10401(b) and 10421(b), is 
     amended--
       (i) by striking ``or'' at the end of paragraph (17);
       (ii) by striking the period at the end of paragraph (18) 
     and inserting ``; or''; and
       (iii) inserting after paragraph (18) the following new 
     paragraph:
       ``(19) where such expenses are for home health services 
     furnished to an individual who is under a plan of care of the 
     home health agency if the claim for payment for such services 
     is not submitted by the agency.''.
       (d) Effective Date.--Except as otherwise provided, the 
     amendments made by this section shall apply to cost reporting 
     periods beginning on or after October 1, 1999.
               Subtitle F--Provisions Relating to Part A

                  CHAPTER 1--PAYMENT OF PPS HOSPITALS

     SEC. 10501. PPS HOSPITAL PAYMENT UPDATE.

       Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
     amended--
       (1) by striking ``and'' at the end of subclause (XII), and
       (2) by striking subclause (XIII) and inserting the 
     following:
       ``(XIII) for fiscal year 1998, 0 percent,

[[Page H4532]]

       ``(XIV) for each of the fiscal years 1999 through 2002, the 
     market basket percentage increase minus 1.0 percentage point 
     for hospitals in all areas, and
       ``(XV) for fiscal year 2003 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.

     SEC. 10502. CAPITAL PAYMENTS FOR PPS HOSPITALS.

       (a) Maintaining Savings From Temporary Reduction in PPS 
     Capital Rates.--Section 1886(g)(1)(A) (42 U.S.C. 
     1395ww(g)(1)(A)) is amended by adding at the end the 
     following: ``In addition to the reduction described in the 
     preceding sentence, for discharges occurring on or after 
     October 1, 1997, the Secretary shall apply the budget 
     neutrality adjustment factor used to determine the Federal 
     capital payment rate in effect on September 30, 1995 (as 
     described in section 412.352 of title 42 of the Code of 
     Federal Regulations), to (i) the unadjusted standard Federal 
     capital payment rate (as described in section 412.308(c) of 
     that title, as in effect on September 30, 1997), and (ii) the 
     unadjusted hospital-specific rate (as described in section 
     412.328(e)(1) of that title, as in effect on September 30, 
     1997).''.
       (b) Revision of Exceptions Process Under Prospective 
     Payment System for Certain Projects.--
       (1) In general.--Section 1886(g)(1) (42 U.S.C. 
     1395ww(g)(1)) is amended--
       (A) by redesignating subparagraph (C) as subparagraph (F), 
     and
       (B) by inserting after subparagraph (B) the following 
     subparagraphs:
       ``(C) The exceptions under the system provided by the 
     Secretary under subparagraph (B)(iii) shall include the 
     provision of exception payments under the special exceptions 
     process provided under section 412.348(g) of title 42, Code 
     of Federal Regulations (as in effect on September 1, 1995), 
     except that the Secretary shall revise such process, 
     effective for discharges occurring after September 30, 1997, 
     as follows:
       ``(i) A hospital with at least 100 beds which is located in 
     an urban area shall be eligible under such process without 
     regard to its disproportionate patient percentage under 
     subsection (d)(5)(F) or whether it qualifies for additional 
     payment amounts under such subsection.
       ``(ii) The minimum payment level for qualifying hospitals 
     shall be 85 percent (or such lower percentage, but no lower 
     than 75 percent, as the Secretary may provide to comply with 
     subparagraph (D)).
       ``(iii) A hospital shall be considered to meet the 
     requirement that it complete the project involved no later 
     than the end of the hospital's last cost reporting period 
     beginning before October 1, 2001, if--
       ``(I) the hospital has obtained a certificate of need for 
     the project approved by the State or a local planning 
     authority by September 1, 1995, and
       ``(II) by September 1, 1995, the hospital has expended on 
     the project at least $750,000 or 10 percent of the estimated 
     cost of the project.
       ``(iv) Offsetting amounts, as described in section 
     412.348(g)(8)(ii) of title 42, Code of Federal Regulations, 
     shall apply except that subparagraph (B) of such section 
     shall be revised to require that the additional payment that 
     would otherwise be payable for the cost reporting period 
     shall be reduced by the amount (if any) by which the 
     hospital's current year medicare capital payments (excluding, 
     if applicable, 75 percent of the hospital's capital-related 
     disproportionate share payments) exceeds its medicare capital 
     costs for such year.
       ``(D) The Secretary may reduce the percent specified under 
     subparagraph (C)(ii) (but not below 75 percent) and shall 
     reduce the Federal capital rate for a fiscal year by such 
     percentage as the Secretary determines to be necessary to 
     ensure that the application of subparagraph (C) does not 
     result in an increase in the total amount that would have 
     been paid under this subsection in the fiscal year if such 
     subparagraph did not apply.
       ``(E) The Secretary shall provide for publication in the 
     Federal Register each year (beginning with 1999) a 
     description of the distributional impact of the application 
     of subparagraph (C) on hospitals which receive, and do not 
     receive, an exception payment under such subparagraph.''.
       (2) Conforming amendment.--Section 1886(g)(1)(B)(iii) (42 
     U.S.C. 1395ww(g)(1)(B)(iii)) is amended by striking ``may 
     provide'' and inserting ``shall provide (in accordance with 
     subparagraph (C))''.

     SEC. 10503. FREEZE IN DISPROPORTIONATE SHARE.

       (a) No Update in Disproportionate Share for Fiscal Years 
     1998 and 1999.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended in clause (ii) by adding at the 
     end the following new sentence: ``For discharges occurring on 
     or after October 1, 1997, the sum described in subclause (I) 
     shall be determined as if the applicable percentage increase 
     described in subsection (b)(3)(B)(i) for discharges for 
     fiscal years 1998 and 1999 were zero percent.''.
       (b) Development of Revised Qualifying Criteria and Payment 
     Methodology for Hospitals That Serve a Disproportionate Share 
     of Low-Income Patients.--
       (1) Development of proposal.--The Secretary of Health and 
     Human Services shall develop a proposal to modify the current 
     qualifying criteria and payment methodology under which 
     hospitals that are paid under section 1886(d) of the Social 
     Security Act (42 U.S.C. 1395ww(d)) receive an additional 
     payment because they serve a disproportionate share of low-
     income patients.
       (2) Report.--Not later than April 1, 1999, the Secretary 
     shall transmit the proposal developed under paragraph (1) to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate.

     SEC. 10504. MEDICARE CAPITAL ASSET SALES PRICE EQUAL TO BOOK 
                   VALUE.

       (a) In General.--Section 1861(v)(1)(O) (42 U.S.C. 
     1395x(v)(1)(O)) is amended--
       (1) in clause (i)--
       (A) by striking ``and (if applicable) a return on equity 
     capital'';
       (B) by striking ``hospital or skilled nursing facility'' 
     and inserting ``provider of services'';
       (C) by striking ``clause (iv)'' and inserting ``clause 
     (iii)''; and
       (D) by striking ``the lesser of the allowable acquisition 
     cost'' and all that follows and inserting ``the historical 
     cost of the asset, as recognized under this title, less 
     depreciation allowed, to the owner of record as of the date 
     of enactment of the Balanced Budget Act of 1997 (or, in the 
     case of an asset not in existence as of that date, the first 
     owner of record of the asset after that date).'';
       (2) by striking clause (ii); and
       (3) by redesignating clauses (iii) and (iv) as clauses (ii) 
     and (iii), respectively.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to changes of ownership that occur after the third 
     month beginning after the date of enactment of this section.

     SEC. 10505. ELIMINATION OF IME AND DSH PAYMENTS ATTRIBUTABLE 
                   TO OUTLIER PAYMENTS.

       (a) Indirect Medical Education.--Section 
     1886(d)(5)(B)(i)(I) (42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is 
     amended by inserting ``, for cases qualifying for additional 
     payment under subparagraph (A)(i),'' before ``the amount paid 
     to the hospital under subparagraph (A)''.
       (b) Disproportionate Share Adjustments.--Section 
     1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is 
     amended by inserting ``, for cases qualifying for additional 
     payment under subparagraph (A)(i),'' before ``the amount paid 
     to the hospital under subparagraph (A)''.
       (c) Cost Outlier Payments.--Section 1886(d)(5)(A)(ii) (42 
     U.S.C. 1395ww(d)(5)(A)(ii)) is amended by striking ``exceed 
     the applicable DRG prospective payment rate'' and inserting 
     ``exceed the sum of the applicable DRG prospective payment 
     rate plus any amounts payable under paragraphs (d)(5)(B) and 
     (d)(5)(F)''.
       (d) Effective Date.--The amendments made by this section 
     apply to discharges occurring after September 30, 1997.

     SEC. 10506. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL 
                   EDUCATION.

       (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
     1395ww(d)(5)(B)(ii)) is amended to read as follows:
       ``(ii) For purposes of clause (i)(II), the indirect 
     teaching adjustment factor for discharges occurring--
       ``(I) on or after October 1, 1988 and before October 1, 
     1997, is equal to 1.89 (((1+r) to the nth power) -1),
       ``(II) during fiscal year 1998, is equal to 1.62 (((1+r) to 
     the nth power) -1), and
       ``(III) during or after fiscal year 1999, is equal to 1.35 
     (((1+r) to the nth power) -1),
     where `r' is the ratio of the hospital's full-time equivalent 
     interns and residents to beds and `n' equals 0.405, subject 
     to clause (vi).''.
       (b) Conforming Amendment Relating to Determination of 
     Standardized Amounts.--Section 1886(d)(2)(C)(i) (42 U.S.C. 
     1395ww(d)(2)(C)(i)) is amended by adding at the end the 
     following: ``except that the Secretary shall not take into 
     account any reductions in the amount of additional payments 
     under paragraph (5)(B)(ii) resulting from the amendments made 
     by section 10506(a) of the Balanced Budget Act of 1997,''.
       (c) Limitation on Number of Residents for Certain Fiscal 
     Years.--Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)), as 
     amended by subsection (a), is amended by adding at the end 
     the following new clauses:
       ``(v) In determining the adjustment with respect to a 
     hospital for discharges occurring on or after October 1, 
     1997, the total number of interns and residents in either a 
     hospital or non-hospital setting may not exceed the number of 
     interns and residents in the hospital with respect to the 
     hospital's cost reporting period beginning on or before 
     December 31, 1996.
       ``(vi) For purposes of clause (ii)--
       ``(I) `r' may not exceed the ratio of the number of interns 
     and residents as determined under clause (v) with respect to 
     the hospital for its most recent cost reporting period, to 
     the hospital's available beds (as defined by the Secretary) 
     during that cost reporting period,
       ``(II) for the hospital's first cost reporting period 
     beginning on or after October 1, 1997, subject to the limits 
     described in clauses (iv) and (v), the total number of full-
     time equivalent residents for payment purposes shall equal 
     the average of the actual full-time equivalent resident count 
     for the hospital's most recent cost reporting period and the 
     preceding cost reporting period, and
       ``(III) for the cost reporting period beginning on or after 
     October 1, 1998, and each subsequent cost reporting period, 
     subject to the limits described in clauses (iv) and (v), the 
     total number of full-time equivalent residents for payment 
     purposes shall equal the average of the actual full-time 
     equivalent resident count for the cost reporting period and 
     the preceding two cost reporting periods.

[[Page H4533]]

       ``(vii) If the hospital's fiscal year 1998 or later cost 
     reporting period is not equal to twelve months, the Secretary 
     shall make appropriate modifications to ensure that the 
     average full-time equivalent residency count pursuant to 
     subclauses (II) and (III) of clause (vi) is based on the 
     equivalent of full twelve month cost reporting periods.
       ``(viii) The Secretary may establish rules, consistent with 
     the policies in clauses (v) through (vii) and in subsection 
     (h)(6)(A)(ii), with respect to the application of clauses (v) 
     through (vii) in the case of medical residency training 
     programs established on or after January 1, 1997.''.

     SEC. 10507. TREATMENT OF TRANSFER CASES.

       (a) Transfers to PPS Exempt Hospitals and Skilled Nursing 
     Facilities.--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 carrying out this subparagraph, the Secretary 
     shall treat the term `transfer case' as including the case of 
     an individual who, upon discharge from a subsection (d) 
     hospital--
       ``(I) is admitted as an inpatient to a hospital or hospital 
     unit that is not a subsection (d) hospital for the receipt of 
     inpatient hospital services; or
       ``(II) is admitted to a skilled nursing facility or 
     facility described in section 1861(y)(1) for the receipt of 
     extended care services.''.
       (b) Transfers for Purposes of Home Health Services.--
     Section 1886(d)(5)(I)(iii) (42 U.S.C. 1395ww(d)(5)(I)(iii)), 
     as amended by subsection (a), is amended--
       (1) in subclause (I), by striking ``or'';
       (2) in subclause (II), by striking the period at the end 
     and inserting ``; or'' and
       (2) by adding at the end the following new subclause:
       ``(III) receives home health services from a home health 
     agency, if such services relate to the condition or diagnosis 
     for which such individual received inpatient hospital 
     services from the subsection (d) hospital, and if such 
     services are provided within an appropriate period as 
     determined by the Secretary in regulations promulgated not 
     later than September 1, 1998.''.
       (c) Effective Dates.--
       (1) The amendment made by subsection (a) shall apply with 
     respect to discharges occurring on or after October 1, 1997.
       (2) The amendment made by subsection (b) shall apply with 
     respect to discharges occurring on or after October 1, 1998.

     SEC. 10508. INCREASE BASE PAYMENT RATE TO PUERTO RICO 
                   HOSPITALS.

       Section 1886(d)(9)(A) (42 U.S.C. 1395ww(d)(9)(A)) is 
     amended--
       (1) in the matter preceding clause (i), by striking ``in a 
     fiscal year beginning on or after October 1, 1987,'',
       (2) in clause (i), by striking ``75 percent'' and 
     inserting, ``for discharges beginning on or after October 1, 
     1997, 50 percent (and for discharges between October 1, 1987, 
     and September 30, 1997, 75 percent)'', and
       (3) in clause (ii), by striking ``25 percent'' and 
     inserting, ``for discharges beginning in a fiscal year 
     beginning on or after October 1, 1997, 50 percent (and for 
     discharges between October 1, 1987 and September 30, 1997, 25 
     percent)''.

               CHAPTER 2--PAYMENT OF PPS EXEMPT HOSPITALS

     SEC. 10511. PAYMENT UPDATE.

       (a) In General.--Section 1886(b)(3)(B) (42 U.S.C. 
     1395ww(b)(3)(B)) is amended--
       (1) in clause (ii)--
       (A) by striking ``and'' at the end of subclause (V),
       (B) by redesignating subclause (VI) as subclause (VIII); 
     and
       (C) by inserting after subclause (V), the following 
     subclauses:
       ``(VI) for fiscal year 1998, is 0 percent;
       ``(VII) for fiscal years 1999 through 2002, is the 
     applicable update factor specified under clause (vi) for the 
     fiscal year; and''; and
       (2) by adding at the end the following new clause:
       ``(vi) For purposes of clause (ii)(VII) for a fiscal year, 
     if a hospital's allowable operating costs of inpatient 
     hospital services recognized under this title for the most 
     recent cost reporting period for which information is 
     available--
       ``(I) is equal to, or exceeds, 110 percent of the 
     hospital's target amount (as determined under subparagraph 
     (A)) for such cost reporting period, the applicable update 
     factor specified under this clause is the market basket 
     percentage;
       ``(II) exceeds 100 percent, but is less than 110 percent, 
     of such target amount for the hospital, the applicable update 
     factor specified under this clause is 0 percent or, if 
     greater, the market basket percentage minus 0.25 percentage 
     points for each percentage point by which such allowable 
     operating costs (expressed as a percentage of such target 
     amount) is less than 110 percent of such target amount;
       ``(III) is equal to, or less than 100 percent, but exceeds 
     \2/3\ of such target amount for the hospital, the applicable 
     update factor specified under this clause is 0 percent or, if 
     greater, the market basket percentage minus 2.5 percentage 
     points; or
       ``(IV) does not exceed \2/3\ of such target amount for the 
     hospital, the applicable update factor specified under this 
     clause is 0 percent.''.
       (b) No Effect of Payment Reduction on Exceptions and 
     Adjustments.--Section 1886(b)(4)(A)(ii) (42 U.S.C. 
     1395ww(b)(4)(A)(ii)) is amended by adding at the end the 
     following new sentence: ``In making such reductions, the 
     Secretary shall treat the applicable update factor described 
     in paragraph (3)(B)(vi) for a fiscal year as being equal to 
     the market basket percentage for that year.''.

     SEC. 10512. REDUCTIONS TO CAPITAL PAYMENTS FOR CERTAIN PPS-
                   EXEMPT HOSPITALS AND UNITS.

       Section 1886(g) (42 U.S.C. 1395ww(g)) is amended by adding 
     at the end the following new paragraph:
       ``(4) In determining the amount of the payments that are 
     attributable to portions of cost reporting periods occurring 
     during fiscal years 1998 through 2002 and that may be made 
     under this title with respect to capital-related costs of 
     inpatient hospital services of a hospital which is described 
     in clause (i), (ii), or (iv) of subsection (d)(1)(B) or a 
     unit described in the matter after clause (v) of such 
     subsection, the Secretary shall reduce the amounts of such 
     payments otherwise determined under this title by 10 
     percent.''.

     SEC. 10513. CAP ON TEFRA LIMITS.

       Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)) is amended--
       (1) in subparagraph (A) by striking ``subparagraphs (C), 
     (D), and (E)'' and inserting ``subparagraph (C) and 
     succeeding subparagraphs'', and
       (2) by adding at the end the following:
       ``(F)(i) In the case of a hospital or unit that is within a 
     class of hospital described in clause (ii), for cost 
     reporting periods beginning on or after October 1, 1997, and 
     before October 1, 2002, such target amount may not be greater 
     than the 90th percentile of the target amounts for such 
     hospitals within such class for cost reporting periods 
     beginning during that fiscal year.
       ``(ii) For purposes of this subparagraph, each of the 
     following shall be treated as a separate class of hospital:
       ``(I) Hospitals described in clause (i) of subsection 
     (d)(1)(B) and psychiatric units described in the matter 
     following clause (v) of such subsection.
       ``(II) Hospitals described in clause (ii) of such 
     subsection and rehabilitation units described in the matter 
     following clause (v) of such subsection.
       ``(III) Hospitals described in clause (iv) of such 
     subsection.''.

     SEC. 10514. CHANGE IN BONUS AND RELIEF PAYMENTS.

       (a) Change in Bonus Payment.--Section 1886(b)(1)(A) (42 
     U.S.C. 1395ww(b)(1)(A)) is amended by striking all that 
     follows ``plus--'' and inserting the following:
       ``(i) 10 percent of the amount by which the target amount 
     exceeds the amount of the operating costs, or
       ``(ii) 1 percent of the operating costs,
     whichever is less;''.
       (b) Change in Relief Payments.--Section 1886(b)(1) (42 
     U.S.C. 1395ww(b)(1)) is amended--
       (1) in subparagraph (B)--
       (A) by striking ``greater than the target amount'' and 
     inserting ``greater than 110 percent of the target amount'',
       (B) by striking ``exceed the target amount'' and inserting 
     ``exceed 110 percent of the target amount'',
       (C) by striking ``10 percent'' and inserting ``20 
     percent'', and
       (D) by redesignating such subparagraph as subparagraph (C); 
     and
       (2) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) are greater than the target amount but do not exceed 
     110 percent of the target amount, the amount of the payment 
     with respect to those operating costs payable under part A on 
     a per discharge basis shall equal the target amount; or''.

     SEC. 10515. CHANGE IN PAYMENT AND TARGET AMOUNT FOR NEW 
                   PROVIDERS.

       Section 1886(b) (42 U.S.C. 1395ww(b)) is amended--
       (1) by inserting after paragraph (1) the following new 
     paragraph:
       ``(2)(A) Notwithstanding paragraph (1), in the case of a 
     hospital or unit that is within a class of hospital described 
     in subparagraph (B) which first receives payments under this 
     section on or after October 1, 1997--
       ``(i) for each of the first 2 full or partial cost 
     reporting periods, the amount of the payment with respect to 
     operating costs described in paragraph (1) under part A on a 
     per discharge or per admission basis (as the case may be) is 
     equal to the lesser of--
       ``(I) the amount of operating costs for such respective 
     period, or
       ``(II) 150 percent of the national median of the operating 
     costs for hospitals in the same class as the hospital for 
     cost reporting periods beginning during the same fiscal year, 
     as adjusted under subparagraph (C); and
       ``(ii) for purposes of computing the target amount for the 
     subsequent cost reporting period, the target amount for the 
     preceding cost reporting period is equal to the amount 
     determined under clause (i) for such preceding period.
       ``(B) For purposes of this paragraph, each of the following 
     shall be treated as a separate class of hospital:
       ``(i) Hospitals described in clause (i) of subsection 
     (d)(1)(B) and psychiatric units described in the matter 
     following clause (v) of such subsection.
       ``(ii) Hospitals described in clause (ii) of such 
     subsection and rehabilitation units described in the matter 
     following clause (v) of such subsection.
       ``(iii) A class of hospitals described in subsection 
     (d)(1)(B)(iv) that the Secretary shall establish based upon a 
     measure of case mix that takes into account acuity.

[[Page H4534]]

       ``(iv) Hospitals described in subsection (d)(1)(B)(iv) that 
     are not within the class described in clause (iii).
       ``(C) In applying subparagraph (A)(i)(II) in the case of a 
     hospital or unit, the Secretary shall provide for an 
     appropriate adjustment to the labor-related portion of the 
     amount determined under such subparagraph to take into 
     account differences between average wage-related costs in the 
     area of the hospital and the national average of such costs 
     within the same class of hospital.''; and
       (2) in paragraph (3)(A), as amended in section 10513, by 
     inserting ``and in paragraph (2)(A)(ii),'' before ``for 
     purposes of''.

     SEC. 10516. REBASING.

       (a) Option of Rebasing for Hospitals In Operation Before 
     1990.--Section 1886(b)(3)(42 U.S.C. 1395ww(b)(3)), as amended 
     in section 10513, is amended by adding at the end the 
     following new subparagraph:
       ``(G)(i) In the case of a hospital (or unit described in 
     the matter following clause (v) of subsection (d)(1)(B)) that 
     received payment under this subsection for inpatient hospital 
     services furnished during cost reporting periods before 
     October 1, 1990, that is within a class of hospital described 
     in clause (iii), and that elects (in a form and manner 
     determined by the Secretary) this subparagraph to apply to 
     the hospital, the target amount for the hospital's 12-month 
     cost reporting period beginning during fiscal year 1998 is 
     equal to the average described in clause (ii).
       ``(ii) The average described in this clause for a hospital 
     or unit shall be determined by the Secretary as follows:
       ``(I) The Secretary shall determine the allowable operating 
     costs for inpatient hospital services for the hospital or 
     unit for each of the 5 cost reporting periods for which the 
     Secretary has the most recent settled cost reports as of the 
     date of the enactment of this subparagraph.
       ``(II) The Secretary shall increase the amount determined 
     under subclause (I) for each cost reporting period by the 
     applicable percentage increase under subparagraph (B)(ii) for 
     each subsequent cost reporting period up to the cost 
     reporting period described in clause (i).
       ``(III) The Secretary shall identify among such 5 cost 
     reporting periods the cost reporting periods for which the 
     amount determined under subclause (II) is the highest, and 
     the lowest.
       ``(IV) The Secretary shall compute the averages of the 
     amounts determined under subclause (II) for the 3 cost 
     reporting periods not identified under subclause (III).
       ``(iii) For purposes of this subparagraph, each of the 
     following shall be treated as a separate class of hospital:
       ``(I) Hospitals described in clause (i) of subsection 
     (d)(1)(B) and psychiatric units described in the matter 
     following clause (v) of such subsection.
       ``(II) Hospitals described in clause (ii) of such 
     subsection and rehabilitation units described in the matter 
     following clause (v) of such subsection.
       ``(III) Hospitals described in clause (iii) of such 
     subsection.
       ``(IV) Hospitals described in clause (iv) of such 
     subsection.
       ``(V) Hospitals described in clause (v) of such 
     subsection.''.
       (b) Certain Long-Term Care Hospitals.--Section 1886(b)(3) 
     (42 U.S.C. 1395ww(b)(3)), as amended by subsection (a), is 
     amended by adding at the end the following new subparagraph:
       ``(H)(i) In the case of a qualified long-term care hospital 
     (as defined in clause (ii)) that elects (in a form and manner 
     determined by the Secretary) this subparagraph to apply to 
     the hospital, the target amount for the hospital's 12-month 
     cost reporting period beginning during fiscal year 1998 is 
     equal to the allowable operating costs of inpatient hospital 
     services (as defined in subsection (a)(4)) recognized under 
     this title for the hospital for the 12-month cost reporting 
     period beginning during fiscal year 1996, increased by the 
     applicable percentage increase for the cost reporting period 
     beginning during fiscal year 1997.
       ``(ii) In clause (i), a `qualified long-term care hospital' 
     means, with respect to a cost reporting period, a hospital 
     described in clause (iv) of subsection (d)(1)(B) during each 
     of the 2 cost reporting periods for which the Secretary has 
     the most recent settled cost reports as of the date of the 
     enactment of this subparagraph for each of which--
       ``(I) the hospital's allowable operating costs of inpatient 
     hospital services recognized under this title exceeded 115 
     percent of the hospital's target amount, and
       ``(II) the hospital would have a disproportionate patient 
     percentage of at least 70 percent (as determined by the 
     Secretary under subsection (d)(5)(F)(vi)) if the hospital 
     were a subsection (d) hospital.''.
       (c) Certain Long-Term Care Cancer Hospitals.--
       (1) In general.--Section 1886(d)(1)(B)(iv) (42 U.S.C. 
     1395ww(d)(1)(B)(iv)) is amended by adding at the end the 
     following: ``a hospital that first received payment under 
     this subsection in 1986 which has an average inpatient length 
     of stay (as determined by the Secretary) of greater than 20 
     days and that has 80 percent or more of its annual total 
     inpatient discharges with a principal diagnosis that reflects 
     a finding of neoplastic disease, or''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to cost reporting periods beginning on or after 
     the date of the enactment of this Act.

     SEC. 10517. TREATMENT OF CERTAIN LONG-TERM CARE HOSPITALS.

       (a) In General.--Section 1886(d)(1)(B) (42 U.S.C. 
     1395ww(d)(1)(B)) is amended by adding at the end the 
     following new sentence: ``A hospital that was classified by 
     the Secretary on or before September 30, 1995, as a hospital 
     described in clause (iv) shall continue to be so classified 
     notwithstanding that it is located in the same building as, 
     or on the same campus as, another hospital.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to discharges occurring on or after October 1, 
     1995.

     SEC. 10518. ELIMINATION OF EXEMPTIONS; REPORT ON EXCEPTIONS 
                   AND ADJUSTMENTS.

       (a) Elimination of Exemptions.--
       (1) In general.--Section 1886(b)(4)(A)(i) (42 U.S.C. 
     1395ww(b)(4)(A)(i)) is amended by striking ``exemption from, 
     or an exception and adjustment to,'' and inserting ``an 
     exception and adjustment to'' each place it appears.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to hospitals or units that first qualify as a 
     hospital or unit described in section 1886(d)(1)(B) (42 
     U.S.C. 1395ww(d)(1)(B)) on or after October 1, 1997.
       (b) Report.--The Secretary of Health and Human Services 
     shall publish annually in the Federal Register a report 
     describing the total amount of payments made to hospitals by 
     reason of section 1886(b)(4) of the Social Security Act (42 
     U.S.C. 1395ww(b)(4)), as amended by subsection (a), for cost 
     reporting periods ending during the previous fiscal year.

           CHAPTER 3--PROVISIONS RELATED TO HOSPICE SERVICES

     SEC. 10521. PAYMENTS FOR HOSPICE SERVICES.

       (a) Payment Update.--Section 1814(i)(1)(C)(ii) (42 U.S.C. 
     1395f(i)(1)(C)(ii)) is amended--
       (1) in subclause (V), by striking ``and'' at the end;
       (2) by redesignating subclause (VI) as subclause (VII); and
       (3) by inserting after subclause (V) the following new 
     subclause:
       ``(VI) for each of fiscal years 1998 through 2002, the 
     market basket percentage increase for the fiscal year 
     involved minus 1.0 percentage points; and''.
       (b) Report.--Section 1814(i) (42 U.S.C. 1395f(i)) is 
     amended by adding at the end the following new paragraph:
       ``(3) The Secretary shall provide for the collection of 
     data, from hospice programs providing hospice care for which 
     payment is made under this subsection, with respect to the 
     costs for providing such care for each fiscal year beginning 
     with fiscal year 1999.''.

     SEC. 10522. PAYMENT FOR HOME HOSPICE CARE BASED ON LOCATION 
                   WHERE CARE IS FURNISHED.

       (a) In General.--Section 1814(i)(2) (42 U.S.C. 1395f(i)(2)) 
     is amended by adding at the end the following:
       ``(D) A hospice program shall submit claims for payment for 
     hospice care furnished in an individual's home under this 
     title only on the basis of the geographic location at which 
     the service is furnished, as determined by the Secretary.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to cost reporting periods beginning on or after 
     October 1, 1997.

     SEC. 10523. HOSPICE CARE BENEFITS PERIODS.

       (a) Restructuring of Benefit Period.--Section 1812 (42 
     U.S.C. 1395d) is amended, in subsections (a)(4) and (d)(1), 
     by striking ``, a subsequent period of 30 days, and a 
     subsequent extension period'' and inserting ``and an 
     unlimited number of subsequent periods of 60 days each''.
       (b) Conforming Amendments.--(1) Section 1812 (42 U.S.C. 
     1395d) is amended in subsection (d)(2)(B) by striking ``90- 
     or 30-day period or a subsequent extension period'' and 
     inserting ``90-day period or a subsequent 60-day period''.
       (2) Section 1814(a)(7)(A) (42 U.S.C. 1395f(a)(7)(A)) is 
     amended--
       (A) in clause (i), by inserting ``and'' at the end;
       (B) in clause (ii)--
       (i) by striking ``30-day'' and inserting ``60-day''; and
       (ii) by striking ``, and'' at the end and inserting a 
     period; and
       (C) by striking clause (iii).

     SEC. 10524. OTHER ITEMS AND SERVICES INCLUDED IN HOSPICE 
                   CARE.

       Section 1861(dd)(1) (42 U.S.C. 1395x(dd)(1)) is amended--
       (1) in subparagraph (G), by striking ``and'' at the end;
       (2) in subparagraph (H), by striking the period at the end 
     and inserting ``, and''; and
       (3) by inserting after subparagraph (H) the following:
       ``(I) any other item or service which is specified in the 
     plan and for which payment may otherwise be made under this 
     title.''.

     SEC. 10525. CONTRACTING WITH INDEPENDENT PHYSICIANS OR 
                   PHYSICIAN GROUPS FOR HOSPICE CARE SERVICES 
                   PERMITTED.

       Section 1861(dd)(2) (42 U.S.C. 1395x(dd)(2)) is amended--
       (1) in subparagraph (A)(ii)(I), by striking ``(F),''; and
       (2) in subparagraph (B)(i), by inserting ``or, in the case 
     of a physician described in subclause (I), under contract 
     with'' after ``employed by''.

     SEC. 10526. WAIVER OF CERTAIN STAFFING REQUIREMENTS FOR 
                   HOSPICE CARE PROGRAMS IN NON-URBANIZED AREAS.

       Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is amended--

[[Page H4535]]

       (1) in subparagraph (B), by inserting ``or (C)'' after 
     ``subparagraph (A)'' each place it appears; and
       (2) by adding at the end the following:
       ``(C) The Secretary may waive the requirements of paragraph 
     (2)(A)(i) and (2)(A)(ii) for an agency or organization with 
     respect to the services described in paragraph (1)(B) and, 
     with respect to dietary counseling, paragraph (1)(H), if such 
     agency or organization--
       ``(i) is located in an area which is not an urbanized area 
     (as defined by the Bureau of Census), and
       ``(ii) demonstrates to the satisfaction of the Secretary 
     that the agency or organization has been unable, despite 
     diligent efforts, to recruit appropriate personnel.''.

     SEC. 10527. LIMITATION ON LIABILITY OF BENEFICIARIES FOR 
                   CERTAIN HOSPICE COVERAGE DENIALS.

       Section 1879(g) (42 U.S.C. 1395pp(g)) is amended--
       (1) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively, and moving such 
     subparagraphs 2 ems to the right;
       (2) by striking ``is,'' and inserting ``is--'';
       (3) by making the remaining text of subsection (g), as 
     amended, that follows ``is--'' a new paragraph (1) and 
     indenting such paragraph 2 ems to the right;
       (4) by striking the period at the end and inserting ``; 
     and''; and
       (5) by adding at the end the following new paragraph:
       ``(2) with respect to the provision of hospice care to an 
     individual, a determination that the individual is not 
     terminally ill.''.

     SEC. 10528. EXTENDING THE PERIOD FOR PHYSICIAN CERTIFICATION 
                   OF AN INDIVIDUAL'S TERMINAL ILLNESS.

       Section 1814(a)(7)(A)(i) (42 U.S.C. 1395f(a)(7)(A)(i)) is 
     amended, in the matter following subclause (II), by striking 
     ``, not later than 2 days after hospice care is initiated 
     (or, if each certify verbally not later than 2 days after 
     hospice care is initiated, not later than 8 days after such 
     care is initiated)'' and inserting ``at the beginning of the 
     period''.

     SEC. 10529. EFFECTIVE DATE.

       Except as otherwise provided in this chapter, the 
     amendments made by this chapter apply to benefits provided on 
     or after the date of the enactment of this chapter, 
     regardless of whether or not an individual has made an 
     election under section 1812(d) of the Social Security Act (42 
     U.S.C. 1395d(d)) before such date.

         CHAPTER 4--MODIFICATION OF PART A HOME HEALTH BENEFIT

     SEC. 10531. MODIFICATION OF PART A HOME HEALTH BENEFIT FOR 
                   INDIVIDUALS ENROLLED UNDER PART B.

       (a) In General.--Section 1812 (42 U.S.C. 1395d) is 
     amended--
       (1) in subsection (a)(3), by striking ``home health 
     services'' and inserting ``for individuals not enrolled in 
     part B, home health services, and for individuals so 
     enrolled, part A home health services (as defined in 
     subsection (g))'';
       (2) by redesignating subsection (g) as subsection (h); and
       (3) by inserting after subsection (f) the following new 
     subsection:
       ``(g)(1) For purposes of this section, the term `part A 
     home health services' means--
       ``(A) for services furnished during each year beginning 
     with 1998 and ending with 2002, home health services subject 
     to the transition reduction applied under paragraph (2)(C) 
     for services furnished during the year, and
       ``(B) for services furnished on or after January 1, 2003, 
     post-institutional home health services for up to 100 visits 
     during a home health spell of illness.
       ``(2) For purposes of paragraph (1)(B), the Secretary shall 
     specify, before the beginning of each year beginning with 
     1998 and ending with 2002, a transition reduction in the home 
     health services benefit under this part as follows:
       ``(A) The Secretary first shall estimate the amount of 
     payments that would have been made under this part for home 
     health services furnished during the year if--
       ``(i) part A home health services were all home health 
     services, and
       ``(ii) part A home health services were limited to services 
     described in paragraph (1)(B).
       ``(B)(i) The Secretary next shall compute a transfer 
     reduction amount equal to the appropriate proportion 
     (specified under clause (ii)) of the amount by which the 
     amount estimated under subparagraph (A)(i) for the year 
     exceeds the amount estimated under subparagraph (A)(ii) for 
     the year.
       ``(ii) For purposes of clause (i), the `appropriate 
     proportion' is equal to--
       ``(I) \1/6\ for 1998,
       ``(II) \2/6\ for 1999,
       ``(III) \3/6\ for 2000,
       ``(IV) \4/6\ for 2001, and
       ``(V) \5/6\ for 2002.
       ``(C) The Secretary shall establish a transition reduction 
     by specifying such a visit limit (during a home health spell 
     of illness) or such a post-institutional limitation on home 
     health services furnished under this part during the year as 
     the Secretary estimates will result in a reduction in the 
     amount of payments that would otherwise be made under this 
     part for home health services furnished during the year equal 
     to the transfer amount computed under subparagraph (B)(i) for 
     the year.
       ``(3) Payment under this part for home health services 
     furnished an individual enrolled under part B--
       ``(A) during a year beginning with 1998 and ending with 
     2003, may not be made for services that are not within the 
     visit limit or other limitation specified by the Secretary 
     under the transition reduction under paragraph (3)(C) for 
     services furnished during the year; or
       ``(B) on or after January 1, 2004, may not be made for home 
     health services that are not post-institutional home health 
     services or for post-institutional furnished to the 
     individual after such services have been furnished to the 
     individual for a total of 100 visits during a home health 
     spell of illness.
       ``(4) With respect to computing the monthly actuarial rate 
     for enrollees age 65 and over for purposes of applying 
     section 1839, such rate shall be computed as though any 
     reference in a previous provision of this subsection to 2002 
     or 2003 is a reference to the succeeding year and as through 
     the appropriate proportion described in paragraph (3)(B)(ii) 
     were equal to--
       ``(A) \1/7\ for 1998,
       ``(B) \2/7\ for 1999,
       ``(C) \3/7\ for 2000,
       ``(D) \4/7\ for 2001,
       ``(E) \5/7\ for 2002, and
       ``(F) \6/7\ for 2003.''.
       (b) Post-institutional Home Health Services Defined.--
     Section 1861 (42 U.S.C. 1395x), as amended by section 
     10105(a)(1)(B) is amended by adding at the end the following:

``Post-Institutional Home Health Services; Home Health Spell of Illness

       ``(rr)(1) The term `post-institutional home health 
     services' means home health services furnished to an 
     individual--
       ``(A) after discharge from a hospital or rural primary care 
     hospital in which the individual was an inpatient for not 
     less than 3 consecutive days before such discharge if such 
     home health services were initiated within 14 days after the 
     date of such discharge; or
       ``(B) after discharge from a skilled nursing facility in 
     which the individual was provided post-hospital extended care 
     services if such home health services were initiated within 
     14 days after the date of such discharge.
       ``(2) The term `home health spell of illness' with respect 
     to any individual means a period of consecutive days--
       ``(A) beginning with the first day (not included in a 
     previous home health spell of illness) (i) on which such 
     individual is furnished post-institutional home health 
     services, and (B) which occurs in a month for which the 
     individual is entitled to benefits under part A, and
       ``(B) ending with the close of the first period of 60 
     consecutive days thereafter on each of which the individual 
     is neither an inpatient of a hospital or rural primary care 
     hospital nor an inpatient of a facility described in section 
     1819(a)(1) or subsection (y)(1) nor provided home health 
     services.''.
       (c) Maintaining Appeal Rights for Home Health Services.--
     Section 1869(b)(2)(B) (42 U.S.C. 1395ff(b)(2)(B)) is amended 
     by inserting ``(or $100 in the case of home health 
     services)'' after ``$500''.
       (d) Maintaining Seamless Administration Through Fiscal 
     Intermediaries.--Section 1842(b)(2) (42 U.S.C. 1395u(b)(2)) 
     is amended by adding at the end the following:
       ``(E) With respect to the payment of claims for home health 
     services under this part that, but for the amendments made by 
     section 10531 of the Balanced Budget Act of 1997, would be 
     payable under part A instead of under this part, the 
     Secretary shall continue administration of such claims 
     through fiscal intermediaries under section 1816.''.
       (e) Effective Date.--The amendments made by this section 
     apply to services furnished on or after January 1, 1998. For 
     purpose of applying such amendments, any home health spell of 
     illness that began, but not end, before such date shall be 
     considered to have begun as of such date.

                  CHAPTER 5--OTHER PAYMENT PROVISIONS

     SEC. 10541. REDUCTIONS IN PAYMENTS FOR ENROLLEE BAD DEBT.

       Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by 
     adding at the end the following new subparagraph:
       ``(T) In determining such reasonable costs for hospitals, 
     the amount of bad debts otherwise treated as allowable costs 
     which are attributable to the deductibles and coinsurance 
     amounts under this title shall be reduced--
       ``(i) for cost reporting periods beginning during fiscal 
     year 1998, by 25 percent of such amount otherwise allowable,
       ``(ii) for cost reporting periods beginning during fiscal 
     year 1999, by 40 percent of such amount otherwise allowable, 
     and
       ``(iii) for cost reporting periods beginning during a 
     subsequent fiscal year, by 50 percent of such amount 
     otherwise allowable.''.

     SEC. 10542. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH.

       Effective October 1, 1997, section 6011(d) of OBRA-1989 (as 
     amended by section 13505 of OBRA-1993) is amended by striking 
     ``and shall expire September 30, 1994''.

     SEC. 10543. REDUCTION IN PART A MEDICARE PREMIUM FOR CERTAIN 
                   PUBLIC RETIREES.

       (a) In General.--Section 1818(d) (42 U.S.C. 1395i-2(d)) is 
     amended--
       (1) in paragraph (2), by striking ``paragraph (4)'' and 
     inserting ``paragraphs (4) and (5)''; and
       (2) by adding at the end the following new paragraph:

[[Page H4536]]

       ``(5)(A) The amount of the monthly premium shall be zero in 
     the case of an individual who is a person described in 
     subparagraph (B) for a month, if--
       ``(i) the individual's premium under this section for the 
     month is not (and will not be) paid for, in whole or in part, 
     by a State (under title XIX or otherwise), a political 
     subdivision of a State, or an agency or instrumentality of 
     one or more States or political subdivisions thereof; and
       ``(ii) in each of 60 months before such month, the 
     individual was enrolled in this part under this section and 
     the payment of the individual's premium under this section 
     for the month was not paid for, in whole or in part, by a 
     State (under title XIX or otherwise), a political subdivision 
     of a State, or an agency or instrumentality of one or more 
     States or political subdivisions thereof.
       ``(B) A person described in this subparagraph for an month 
     is a person who establishes to the satisfaction of the 
     Secretary that, as of the last day of the previous month--
       ``(i)(I) the person was receiving cash benefits under a 
     qualified State or local government retirement system (as 
     defined in subparagraph (C)) on the basis of the person's 
     employment in one or more positions covered under any such 
     system, and (II) the person would have at least 40 quarters 
     of coverage under title II if remuneration for medicare 
     qualified government employment (as defined in paragraph (1) 
     of section 210(p), but determined without regard to paragraph 
     (3) of such section) paid to such person were treated as 
     wages paid to such person and credited for purposes of 
     determining quarters of coverage under section 213;
       ``(ii)(I) the person was married (and had been married for 
     the previous 1-year period) to an individual who is described 
     in clause (i), or (II) the person met the requirement of 
     clause (i)(II) and was married (and had been married for the 
     previous 1-year period) to an individual described in clause 
     (i)(I);
       ``(iii) the person had been married to an individual for a 
     period of at least 1 year (at the time of such individual's 
     death) if (I) the individual was described in clause (i) at 
     the time of the individual's death, or (II) the person met 
     the requirement of clause (i)(II) and the individual was 
     described in clause (i)(I) at the time of the individual's 
     death; or
       ``(iv) the person is divorced from an individual and had 
     been married to the individual for a period of at least 10 
     years (at the time of the divorce) if (I) the individual was 
     described in clause (i) at the time of the divorce, or (II) 
     the person met the requirement of clause (i)(II) and the 
     individual was described in clause (i)(I) at the time of the 
     divorce.
       ``(C) For purposes of subparagraph (B)(i)(I), the term 
     `qualified State or local government retirement system' means 
     a retirement system that--
       ``(i) is established or maintained by a State or political 
     subdivision thereof, or an agency or instrumentality of one 
     or more States or political subdivisions thereof;
       ``(ii) covers positions of some or all employees of such a 
     State, subdivision, agency, or instrumentality; and
       ``(iii) does not adjust cash retirement benefits based on 
     eligibility for a reduction in premium under this 
     paragraph.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to premiums for months beginning with January 
     1998, and months before such month may be taken into account 
     for purposes of meeting the requirement of section 
     1818(d)(5)(B)(iii) of the Social Security Act, as added by 
     subsection (a).
             Subtitle G--Provisions Relating to Part B Only

                    CHAPTER 1--PHYSICIANS' SERVICES

     SEC. 10601. ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 
                   1998.

       (a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-
     4(d)(1)) is amended--
       (1) by redesignating subparagraph (C) as subparagraph (D), 
     and
       (2) by inserting after subparagraph (B) the following:
       ``(C) Special rules for 1998.--The single conversion factor 
     for 1998 under this subsection shall be the conversion factor 
     for primary care services for 1997, increased by the 
     Secretary's estimate of the weighted average of the three 
     separate updates that would otherwise occur were it not for 
     the enactment of chapter 1 of subtitle G of title X of the 
     Balanced Budget Act of 1997.''.
       (b) Conforming Amendments.--Section 1848 (42 U.S.C. 1395w-
     4) is amended--
       (1) by striking ``(or factors)'' each place it appears in 
     subsection (d)(1)(A) and (d)(1)(D)(ii) (as redesignated by 
     subsection (a)(1)),
       (2) in subsection (d)(1)(A), by striking ``or updates'',
       (3) in subsection (d)(1)(D) (as redesignated by subsection 
     (a)(1)), by striking ``(or updates)'' each place it appears, 
     and
       (4) in subsection (i)(1)(C), by striking ``conversion 
     factors'' and inserting ``the conversion factor''.

     SEC. 10602. ESTABLISHING UPDATE TO CONVERSION FACTOR TO MATCH 
                   SPENDING UNDER SUSTAINABLE GROWTH RATE.

       (a) Update.--
       (1) In general.--Section 1848(d)(3) (42 U.S.C. 1395w-
     4(d)(3)) is amended to read as follows:
       ``(3) Update.--
       ``(A) In general.--Unless otherwise provided by law, 
     subject to subparagraph (D) and the budget-neutrality factor 
     determined by the Secretary under subsection (c)(2)(B)(ii), 
     the update to the single conversion factor established in 
     paragraph (1)(C) for a year beginning with 1999 is equal to 
     the product of--
       ``(i) 1 plus the Secretary's estimate of the percentage 
     increase in the MEI (as defined in section 1842(i)(3)) for 
     the year (divided by 100), and
       ``(ii) 1 plus the Secretary's estimate of the update 
     adjustment factor for the year (divided by 100),
     minus 1 and multiplied by 100.
       ``(B) Update adjustment factor.--For purposes of 
     subparagraph (A)(ii), the `update adjustment factor' for a 
     year is equal to the quotient (as estimated by the Secretary) 
     of--
       ``(i) the difference between (I) the sum of the allowed 
     expenditures for physicians' services (as determined under 
     subparagraph (C)) during the period beginning July 1, 1997, 
     and ending on June 30 of the year involved, and (II) the sum 
     of the amount of actual expenditures for physicians' services 
     furnished during the period beginning July 1, 1997, and 
     ending on June 30 of the preceding year; divided by
       ``(ii) the actual expenditures for physicians' services for 
     the 12-month period ending on June 30 of the preceding year, 
     increased by the sustainable growth rate under subsection (f) 
     for the fiscal year which begins during such 12-month period.
       ``(C) Determination of allowed expenditures.--For purposes 
     of this paragraph, the allowed expenditures for physicians' 
     services for the 12-month period ending with June 30 of--
       ``(i) 1997 is equal to the actual expenditures for 
     physicians' services furnished during such 12-month period, 
     as estimated by the Secretary; or
       ``(ii) a subsequent year is equal to the allowed 
     expenditures for physicians' services for the previous year, 
     increased by the sustainable growth rate under subsection (f) 
     for the fiscal year which begins during such 12-month period.
       ``(D) Restriction on variation from medicare economic 
     index.--Notwithstanding the amount of the update adjustment 
     factor determined under subparagraph (B) for a year, the 
     update in the conversion factor under this paragraph for the 
     year may not be--
       ``(i) greater than 100 times the following amount: (1.03 + 
     (MEI percentage/100)) - 1; or
       ``(ii) less than 100 times the following amount: (0.93 + 
     (MEI percentage/100)) -1,
     where `MEI percentage' means the Secretary's estimate of the 
     percentage increase in the MEI (as defined in section 
     1842(i)(3)) for the year involved.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to the update for years beginning with 1999.
       (b) Elimination of Report.--Section 1848(d) (42 U.S.C. 
     1395w-4(d)) is amended by striking paragraph (2).

     SEC. 10603. REPLACEMENT OF VOLUME PERFORMANCE STANDARD WITH 
                   SUSTAINABLE GROWTH RATE.

       (a) In General.--Section 1848(f) (42 U.S.C. 1395w-4(f)) is 
     amended by striking paragraphs (2) through (5) and inserting 
     the following:
       ``(2) Specification of growth rate.--The sustainable growth 
     rate for all physicians' services for a fiscal year 
     (beginning with fiscal year 1998) shall be equal to the 
     product of--
       ``(A) 1 plus the Secretary's estimate of the weighted 
     average percentage increase (divided by 100) in the fees for 
     all physicians' services in the fiscal year involved,
       ``(B) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in the average number of individuals 
     enrolled under this part (other than MedicarePlus plan 
     enrollees) from the previous fiscal year to the fiscal year 
     involved,
       ``(C) 1 plus the Secretary's estimate of the projected 
     percentage growth in real gross domestic product per capita 
     (divided by 100) from the previous fiscal year to the fiscal 
     year involved, and
       ``(D) 1 plus the Secretary's estimate of the percentage 
     change (divided by 100) in expenditures for all physicians' 
     services in the fiscal year (compared with the previous 
     fiscal year) which will result from changes in law and 
     regulations, determined without taking into account estimated 
     changes in expenditures due to changes in the volume and 
     intensity of physicians' services resulting from changes in 
     the update to the conversion factor under subsection (d)(3),

     minus 1 and multiplied by 100.
       ``(3) Definitions.--In this subsection:
       ``(A) Services included in physicians' services.--The term 
     `physicians' services' includes other items and services 
     (such as clinical diagnostic laboratory tests and radiology 
     services), specified by the Secretary, that are commonly 
     performed or furnished by a physician or in a physician's 
     office, but does not include services furnished to a 
     MedicarePlus plan enrollee.
       ``(B) MedicarePlus plan enrollee.--The term `MedicarePlus 
     plan enrollee' means, with respect to a fiscal year, an 
     individual enrolled under this part who has elected to 
     receive benefits under this title for the fiscal year through 
     a MedicarePlus plan offered under part C, and also includes 
     an individual who is receiving benefits under this part 
     through enrollment with an eligible organization with a risk-
     sharing contract under section 1876.''.
       (b) Conforming Amendments.--Section 1848(f) (42 U.S.C. 
     1395w-4(f)) is amended--

[[Page H4537]]

       (1) in the heading, by striking ``Volume Performance 
     Standard Rates of Increase'' and inserting ``Sustainable 
     Growth Rate''; and
       (2) in paragraph (1)--
       (A) in the heading, by striking ``volume performance 
     standard rates of increase'' and inserting ``sustainable 
     growth rate'',
       (B) by striking subparagraphs (A) and (B); and
       (C) in paragraph (1)(C)--
       (i) in the heading, by striking ``performance standard 
     rates of increase'' and inserting ``sustainable growth 
     rate'';
       (ii) in the first sentence, by striking ``with 1991), the 
     performance standard rates of increase'' and all that follows 
     through the first period and inserting ``with 1999), the 
     sustainable growth rate for the fiscal year beginning in that 
     year.''; and
       (iii) in the second sentence, by striking ``January 1, 
     1990, the performance standard rate of increase under 
     subparagraph (D) for fiscal year 1990'' and inserting 
     ``January 1, 1999, the sustainable growth rate for fiscal 
     year 1999''.

     SEC. 10604. PAYMENT RULES FOR ANESTHESIA SERVICES.

       (a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-
     4(d)(1)), as amended by section 10601(a), is amended--
       (1) in subparagraph (C), striking ``The single'' and 
     inserting ``Except as provided in subparagraph (D), the 
     single'';
       (2) by redesignating subparagraph (D) as subparagraph (E); 
     and
       (3) by inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) Special rules for anesthesia services.--The separate 
     conversion factor for anesthesia services for a year shall be 
     equal to 46 percent of the single conversion factor 
     established for other physicians' services, except as 
     adjusted for changes in work, practice expense, or 
     malpractice relative value units. ''.
       (b) Classification of Anesthesia Services.--The first 
     sentence of section 1848(j)(1) (42 U.S.C. 1395w-4(j)(1)) is 
     amended--
       (1) by striking ``and including anesthesia services''; and
       (2) by inserting before the period the following: 
     ``(including anesthesia services)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     1998.

     SEC. 10605. IMPLEMENTATION OF RESOURCE-BASED PHYSICIAN 
                   PRACTICE EXPENSE.

       (a) 1-Year Delay in Implementation.--Section 1848(c) (42 
     U.S.C. 1395w-4(c)) is amended--
       (1) in paragraph (2)(C)(ii), in the matter before subclause 
     (I) and after subclause (II), by striking ``1998'' and 
     inserting ``1999'' each place it appears; and
       (2) in paragraph (3)(C)(ii), by striking ``1998'' and 
     inserting ``1999''.
       (b) Phased-in Implementation.--Section 1848(c)(2)(C)(ii) 
     (42 U.S.C. 1395w-4(c)(2)(C)(ii)) is further amended--
       (1) in subparagraph (C)(ii), in the matter following 
     subclause (II), by inserting ``, to the extent provided under 
     subparagraph (G),'' after ``based'', and
       (2) by adding at the end the following new subparagraph:
       ``(G) Transitional rule for resource-based practice expense 
     units.--In applying subparagraph (C)(ii) for 1999, 2000, 
     2001, and any subsequent year, the number of units under such 
     subparagraph shall be based 75 percent, 50 percent, 25 
     percent, and 0 percent, respectively, on the practice expense 
     relative value units in effect in 1998 (or the Secretary's 
     imputation of such units for new or revised codes) and the 
     remainder on the relative value expense resources involved in 
     furnishing the service.''.

     SEC. 10606. DISSEMINATION OF INFORMATION ON HIGH PER 
                   DISCHARGE RELATIVE VALUES FOR IN-HOSPITAL 
                   PHYSICIANS' SERVICES.

       (a) Determination and Notice Concerning Hospital-Specific 
     Per Discharge Relative Values.--
       (1) In general.--For 1999 and 2001 the Secretary of Health 
     and Human Services shall determine for each hospital--
       (A) the hospital-specific per discharge relative value 
     under subsection (b); and
       (B) whether the hospital-specific relative value is 
     projected to be excessive (as determined based on such value 
     represented as a percentage of the median of hospital-
     specific per discharge relative values determined under 
     subsection (b)).
       (2) Notice to medical staffs and carriers.--The Secretary 
     shall notify the medical executive committee of each hospital 
     identifies under paragraph (1)(B) as having an excessive 
     hospital-specific relative value, of the determinations made 
     with respect to the medical staff under paragraph (1).
       (b) Determination of Hospital-Specific Per Discharge 
     Relative Values.--
       (1) In general.--For purposes of this section, the 
     hospital-specific per discharge relative value for the 
     medical staff of a hospital (other than a teaching hospital) 
     for a year, shall be equal to the average per discharge 
     relative value (as determined under section 1848(c)(2) of the 
     Social Security Act) for physicians' services furnished to 
     inpatients of the hospital by the hospital's medical staff 
     (excluding interns and residents) during the second year 
     preceding that calendar year, adjusted for variations in 
     case-mix and disproportionate share status among hospitals 
     (as determined by the Secretary under paragraph (3)).
       (2) Special rule for teaching hospitals.--The hospital-
     specific relative value projected for a teaching hospital in 
     a year shall be equal to the sum of--
       (A) the average per discharge relative value (as determined 
     under section 1848(c)(2) of such Act) for physicians' 
     services furnished to inpatients of the hospital by the 
     hospital's medical staff (excluding interns and residents) 
     during the second year preceding that calendar year, and
       (B) the equivalent per discharge relative value (as 
     determined under such section) for physicians' services 
     furnished to inpatients of the hospital by interns and 
     residents of the hospital during the second year preceding 
     that calendar year, adjusted for variations in case-mix, 
     disproportionate share status, and teaching status among 
     hospitals (as determined by the Secretary under paragraph 
     (3)).
     The Secretary shall determine the equivalent relative value 
     unit per discharge for interns and residents based on the 
     best available data and may make such adjustment in the 
     aggregate.
       (3) Adjustment for teaching and disproportionate share 
     hospitals.--The Secretary shall adjust the allowable per 
     discharge relative values otherwise determined under this 
     subsection to take into account the needs of teaching 
     hospitals and hospitals receiving additional payments under 
     subparagraphs (F) and (G) of section 1886(d)(5) of the Social 
     Security Act. The adjustment for teaching status or 
     disproportionate share shall not be less than zero.
       (c) Definitions.--For purposes of this section:
       (1) Hospital.--The term ``hospital'' means a subsection (d) 
     hospital as defined in section 1886(d) of the Social Security 
     Act (42 U.S.C. 1395ww(d)) .
       (2) Medical staff.--An individual furnishing a physician's 
     service is considered to be on the medical staff of a 
     hospital--
       (A) if (in accordance with requirements for hospitals 
     established by the Joint Commission on Accreditation of 
     Health Organizations)--
       (i) the individual is subject to bylaws, rules, and 
     regulations established by the hospital to provide a 
     framework for the self-governance of medical staff 
     activities,
       (ii) subject to the bylaws, rules, and regulations, the 
     individual has clinical privileges granted by the hospital's 
     governing body, and
       (iii) under the clinical privileges, the individual may 
     provide physicians'' services independently within the scope 
     of the individual's clinical privileges, or
       (B) if the physician provides at least one service to an 
     individual entitled to benefits under this title in that 
     hospital.
       (3) Physicians' services.--The term ``physicians'' 
     services'' means the services described in section 1848(j)(3) 
     of the Social Security Act (42 U.S.C. 1395w-4(j)(3)).
       (4) Rural area; urban area.--The terms ``rural area'' and 
     ``urban area'' have the meaning given those terms under 
     section 1886(d)(2)(D) of such Act (42 U.S.C. 
     1395ww(d)(2)(D)).
       (5) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services .
       (6) Teaching hospital.--The term ``teaching hospital'' 
     means a hospital which has a teaching program approved as 
     specified in section 1861(b)(6) of the Social Security Act 
     (42 U.S.C. 1395x(b)(6)).

     SEC. 10607. NO X-RAY REQUIRED FOR CHIROPRACTIC SERVICES.

       (a) In General.--Section 1861(r)(5) (42 U.S.C. 1395x(r)(5)) 
     is amended by striking ``demonstrated by X-ray to exist''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to services furnished on or after January 1, 1998.

     SEC. 10608. TEMPORARY COVERAGE RESTORATION FOR PORTABLE 
                   ELECTROCARDIOGRAM TRANSPORTATION.

       (a) In General.--Effective for electrocardiogram tests 
     furnished during 1998, the Secretary of Health and Human 
     Services shall restore separate payment, under part B of 
     title XVIII of the Social Security Act, for the 
     transportation of electrocardiogram equipment (HCPCS code 
     R0076) based upon the status code and relative value units 
     established for such service as of December 31, 1996.
       (b) Determination.--By not later than July 1, 1998, the 
     Secretary of Health and Human Services shall determine, 
     taking into account the study of coverage of portable 
     electrocardiogram transportation conducted by the Comptroller 
     General and other relevant information, including information 
     submitted by interested parties, whether coverage of portable 
     electrocardiogram transportation should be provided under 
     part B of title XVIII of the Social Security Act.

                  CHAPTER 2--OTHER PAYMENT PROVISIONS

     SEC. 10611. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

       (a) Reduction in Payment Amounts for Items of Durable 
     Medical Equipment.--
       (1) Freeze in update for covered items.--Section 
     1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--
       (A) by striking ``and'' at the end of subparagraph (A);
       (B) in subparagraph (B)--
       (i) by striking ``a subsequent year'' and inserting ``1993, 
     1994, 1995, 1996, and 1997'', and
       (ii) by striking the period at the end and inserting a 
     semicolon; and

[[Page H4538]]

       (C) by adding at the end the following:
       ``(C) for each of the years 1998 through 2002, 0 percentage 
     points; and
       ``(D) for a subsequent year, the percentage increase in the 
     consumer price index for all urban consumers (U.S. urban 
     average) for the 12-month period ending with June of the 
     previous year.''.
       (2) Update for orthotics and prosthetics.--Section 
     1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
       (A) by striking ``, and'' at the end of clause (iii) and 
     inserting a semicolon;
       (B) in clause (iv), by striking ``a subsequent year'' and 
     inserting ``1996 and 1997'', and
       (C) by adding at the end the following new clauses:
       ``(v) for each of the years 1998 through 2002, 1 percent, 
     and
       ``(vi) for a subsequent year, the percentage increase in 
     the consumer price index for all urban consumers (United 
     States city average) for the 12-month period ending with June 
     of the previous year;''.
       (c) Payment Freeze for Parenteral and Enteral Nutrients, 
     Supplies, and Equipment.--In determining the amount of 
     payment under part B of title XVIII of the Social Security 
     Act with respect to parenteral and enteral nutrients, 
     supplies, and equipment during each of the years 1998 through 
     2002, the charges determined to be reasonable with respect to 
     such nutrients, supplies, and equipment may not exceed the 
     charges determined to be reasonable with respect to such 
     nutrients, supplies, and equipment during 1995.

     SEC. 10612. 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, 1995, 1996, and 1997'', and
       (B) by striking the period at the end and inserting a 
     semicolon; and
       (3) by adding at the end the following new clauses:
       ``(v) in each of the years 1998 through 2002, is 80 percent 
     of the national limited monthly payment rate computed under 
     subparagraph (B) for the item for the year; and
       ``(vi) in a subsequent year, is the national limited 
     monthly payment rate computed under subparagraph (B) for the 
     item for the year.''.

     SEC. 10613. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR 
                   CLINICAL DIAGNOSTIC LABORATORY TESTS.

       (a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 
     U.S.C. 1395l(h)(2)(A)(ii)(IV)) is amended by inserting ``and 
     1998 through 2002'' after ``1995''.
       (b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B) 
     (42 U.S.C. 1395l(h)(4)(B)) is amended--
       (1) in clause (vi), by striking ``and'' at the end;
       (2) in clause (vii)--
       (A) by inserting ``and before January 1, 1998,'' after 
     ``1995,'', and
       (B) by striking the period at the end and inserting ``, 
     and''; and
       (3) by adding at the end the following new clause:
       ``(viii) after December 31, 1997, is equal to 72 percent of 
     such median.''.

     SEC. 10614. SIMPLIFICATION IN ADMINISTRATION OF LABORATORY 
                   TESTS.

       (a) Selection of Regional Carriers.--
       (1) In general.--The Secretary of Health and Human Services 
     (in this section referred to as the ``Secretary'') shall--
       (A) divide the United States into no more than 5 regions, 
     and
       (B) designate a single carrier for each such region,
     for the purpose of payment of claims under part B of title 
     XVIII of the Social Security Act with respect to clinical 
     diagnostic laboratory tests (other than for independent 
     physician offices) furnished on or after such date (not later 
     than January 1, 1999) as the Secretary specifies.
       (2) Designation.--In designating such carriers, the 
     Secretary shall consider, among other criteria--
       (A) a carrier's timeliness, quality, and experience in 
     claims processing, and
       (B) a carrier's capacity to conduct electronic data 
     interchange with laboratories and data matches with other 
     carriers.
       (3) Single data resource.--The Secretary may select one of 
     the designated carriers to serve as a central statistical 
     resource for all claims information relating to such clinical 
     diagnostic laboratory tests handled by all the designated 
     carriers under such part.
       (4) Allocation of claims.--The allocation of claims for 
     clinical diagnostic laboratory tests to particular designated 
     carriers shall be based on whether a carrier serves the 
     geographic area where the laboratory specimen was collected 
     or other method specified by the Secretary.
       (b) Adoption of Uniform Policies for Clinical Laboratory 
     Tests.--
       (1) In general.--Not later than July 1, 1998, the Secretary 
     shall first adopt, consistent with paragraph (2), uniform 
     coverage, administration, and payment policies for clinical 
     diagnostic laboratory tests under part B of title XVIII of 
     the Social Security Act, using a negotiated rulemaking 
     process under subchapter III of chapter 5 of title 5, United 
     States Code.
       (2) Considerations in design of uniform policies.--The 
     policies under paragraph (1) shall be designed to promote 
     uniformity and program integrity and reduce administrative 
     burdens with respect to clinical diagnostic laboratory tests 
     payable under such part in connection with the following:
       (A) Beneficiary information required to be submitted with 
     each claim or order for laboratory tests.
       (B) Physicians' obligations regarding documentation 
     requirements and recordkeeping.
       (C) Procedures for filing claims and for providing 
     remittances by electronic media.
       (D) The documentation of medical necessity.
       (E) Limitation on frequency of coverage for the same tests 
     performed on the same individual.
       (3) Changes in carrier requirements pending adoption of 
     uniform policy.--During the period that begins on the date of 
     the enactment of this Act and ends on the date the Secretary 
     first implements uniform policies pursuant to regulations 
     promulgated under this subsection, a carrier under such part 
     may implement changes relating to requirements for the 
     submission of a claim for clinical diagnostic laboratory 
     tests.
       (4) Use of interim regional policies.--After the date the 
     Secretary first implements such uniform policies, the 
     Secretary shall permit any carrier to develop and implement 
     interim policies of the type described in paragraph (1), in 
     accordance with guidelines established by the Secretary, in 
     cases in which a uniform national policy has not been 
     established under this subsection and there is a demonstrated 
     need for a policy to respond to aberrant utilization or 
     provision of unnecessary services. Except as the Secretary 
     specifically permits, no policy shall be implemented under 
     this paragraph for a period of longer than 2 years.
       (5) Interim national policies.--After the date the 
     Secretary first designates regional carriers under subsection 
     (a), the Secretary shall establish a process under which 
     designated carriers can collectively develop and implement 
     interim national standards of the type described in paragraph 
     (1). No such policy shall be implemented under this paragraph 
     for a period of longer than 2 years.
       (6) Biennial review process.--Not less often than once 
     every 2 years, the Secretary shall solicit and review 
     comments regarding changes in the uniform policies 
     established under this subsection. As part of such biennial 
     review process, the Secretary shall specifically review and 
     consider whether to incorporate or supersede interim, 
     regional, or national policies developed under paragraph (4) 
     or (5). Based upon such review, the Secretary may provide for 
     appropriate changes in the uniform policies previously 
     adopted under this subsection.
       (7) Notice.-- Before a carrier implements a change or 
     policy under paragraph (3), (4), or (5), the carrier shall 
     provide for advance notice to interested parties and a 45-day 
     period in which such parties may submit comments on the 
     proposed change.
       (c) Inclusion of Laboratory Representative on Carrier 
     Advisory Committees.--The Secretary shall direct that any 
     advisory committee established by such a carrier, to advise 
     with respect to coverage, administration or payment policies 
     under part B of title XVIII of the Social Security Act, shall 
     include an individual to represent the interest and views of 
     independent clinical laboratories and such other laboratories 
     as the Secretary deems appropriate. Such individual shall be 
     selected by such committee from among nominations submitted 
     by national and local organizations that represent 
     independent clinical laboratories.

     SEC. 10615. UPDATES FOR AMBULATORY SURGICAL SERVICES.

       Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended 
     by striking all that follows ``shall be increased'' and 
     inserting the following: ``as follows:
       ``(i) For fiscal years 1996 and 1997, by the percentage 
     increase in the consumer price index for all urban consumers 
     (U.S. city average) as estimated by the Secretary for the 12-
     month period ending with the midpoint of the year involved.
       ``(ii) For each of fiscal years 1998 through 2002 by such 
     percentage increase minus 2.0 percentage points.
       ``(iii) For each succeeding fiscal year by such percentage 
     increase.''.

     SEC. 10616. REIMBURSEMENT FOR DRUGS AND BIOLOGICALS.

       (a) In General.--Section 1842 (42 U.S.C. 1395u) is amended 
     by inserting after subsection (n) the following new 
     subsection:
       ``(o) If a physician's, supplier's, or any other person's 
     bill or request for payment for services includes a charge 
     for a drug or biological for which payment may be made under 
     this part and the drug or biological is not paid on a cost or 
     prospective payment basis as otherwise provided in this part, 
     the amount payable for the drug or biological is equal to 95 
     percent of the average wholesale price.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to drugs and biologicals furnished on or after January 
     1, 1998.

     SEC. 10617. COVERAGE OF ORAL ANTI-NAUSEA DRUGS UNDER 
                   CHEMOTHERAPEUTIC REGIMEN.

       (a) In General.--Section 1861(s)(2) (42 U.S.C. 
     1395x(s)(2)), as amended, is further amended--
       (1) by striking ``and'' at the end of subparagraph (R); and
       (2) by inserting after subparagraph (S) the following new 
     subparagraph:
       ``(T) an oral drug (which is approved by the Federal Food 
     and Drug Administration) prescribed for use as an acute anti-
     emetic used

[[Page H4539]]

     as part of an anticancer chemotherapeutic regimen if the drug 
     is administered by a physician (or as prescribed by a 
     physician)--
       ``(i) for use immediately before, at, or within 48 hours 
     after the time of the administration of the anticancer 
     chemotherapeutic agent; and
       ``(ii) as a full replacement for the anti-emetic therapy 
     which would otherwise be administered intravenously.''.
       (b) Payment Levels.--Section 1834 (42 U.S.C. 1395m), as 
     amended by sections 10421(a)(2) and 10431(b)(2), is amended 
     by adding at the end the following new subsection:
       ``(m) Special Rules for Payment for Oral Anti-Nausea 
     Drugs.--
       ``(1) Limitation on per dose payment basis.--Subject to 
     paragraph (2), the per dose payment basis under this part for 
     oral anti-nausea drugs (as defined in paragraph (3)) 
     administered during a year shall not exceed 90 percent of the 
     average per dose payment basis for the equivalent intravenous 
     anti-emetics administered during the year, as computed based 
     on the payment basis applied during 1996.
       ``(2) Aggregate limit.--The Secretary shall make such 
     adjustment in the coverage of, or payment basis for, oral 
     anti-nausea drugs so that coverage of such drugs under this 
     part does not result in any increase in aggregate payments 
     per capita under this part above the levels of such payments 
     per capita that would otherwise have been made if there were 
     no coverage for such drugs under this part.
       ``(3) Oral anti-nausea drugs defined.--For purposes of this 
     subsection, the term `oral anti-nausea drugs' means drugs for 
     which coverage is provided under this part pursuant to 
     section 1861(s)(2)(P).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 10618. RURAL HEALTH CLINIC SERVICES.

       (a) Per-Visit Payment Limits for Provider-Based Clinics.--
       (1) Extension of limit.--
       (A) In general.--The matter in section 1833(f) (42 U.S.C. 
     1395l(f)) preceding paragraph (1) is amended by striking 
     ``independent rural health clinics'' and inserting ``rural 
     health clinics (other than such clinics in rural hospitals 
     with less than 50 beds)''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     applies to services furnished after 1997.
       (2) Technical clarification.--Section 1833(f)(1) (42 U.S.C. 
     1395l(f)(1)) is amended by inserting ``per visit'' after 
     ``$46''.
       (b) Assurance of Quality Services.--
       (1) In general.--Subparagraph (I) of the first sentence of 
     section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended to 
     read as follows:
       ``(I) has a quality assessment and performance improvement 
     program, and appropriate procedures for review of utilization 
     of clinic services, as the Secretary may specify,''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on January 1, 1998.
       (c) Waiver of Certain Staffing Requirements Limited to 
     Clinics in Program.--
       (1) In general.--Section 1861(aa)(7)(B) (42 U.S.C. 
     1395x(aa)(7)(B)) is amended by inserting before the period at 
     the end the following: ``, or if the facility has not yet 
     been determined to meet the requirements (including 
     subparagraph (J) of the first sentence of paragraph (2)) of a 
     rural health clinic''.
       (2) Effective date.--The amendment made by paragraph (1) 
     applies to waiver requests made after 1997.
       (d) Refinement of Shortage Area Requirements.--
       (1) Designation reviewed triennially.--Section 1861(aa)(2) 
     (42 U.S.C. 1395x(aa)(2)) is amended in the second sentence, 
     in the matter in clause (i) preceding subclause (I)--
       (A) by striking ``and that is designated'' and inserting 
     ``and that, within the previous three-year period, has been 
     designated''; and
       (B) by striking ``or that is designated'' and inserting 
     ``or designated''.
       (2) Area must have shortage of health care practitioners.--
     Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)), as amended by 
     paragraph (1), is further amended in the second sentence, in 
     the matter in clause (i) preceding subclause (I)--
       (A) by striking the comma after ``personal health 
     services''; and
       (B) by inserting ``and in which there are insufficient 
     numbers of needed health care practitioners (as determined by 
     the Secretary),'' after ``Bureau of the Census)''.
       (3) Previously qualifying clinics grandfathered only to 
     prevent shortage.--Section 1861(aa)(2) (42 U.S.C. 
     1395x(aa)(2)) is amended in the third sentence by inserting 
     before the period ``if it is determined, in accordance with 
     criteria established by the Secretary in regulations, to be 
     essential to the delivery of primary care services that would 
     otherwise be unavailable in the geographic area served by the 
     clinic''.
       (4) Effective dates; implementing regulations.--
       (A) In general.--Except as otherwise provided, the 
     amendments made by the preceding paragraphs take effect on 
     January 1 of the first calendar year beginning at least one 
     month after enactment of this Act.
       (B) Current rural health clinics.--The amendments made by 
     the preceding paragraphs take effect, with respect to 
     entities that are rural health clinics under title XVIII of 
     the Social Security Act on the date of enactment of this Act, 
     on January 1 of the second calendar year following the 
     calendar year specified in subparagraph (A).
       (C) Grandfathered clinics.--
       (i) In general.--The amendment made by paragraph (3) shall 
     take effect on the effective date of regulations issued by 
     the Secretary under clause (ii).
       (ii) Regulations.--The Secretary shall issue final 
     regulations implementing paragraph (3) that shall take effect 
     no later than January 1 of the third calendar year beginning 
     at least one month after enactment of this Act.

     SEC. 10619. INCREASED MEDICARE REIMBURSEMENT FOR NURSE 
                   PRACTITIONERS AND CLINICAL NURSE SPECIALISTS.

       (a) Removal of Restrictions on Settings.--
       (1) In general.--Clause (ii) of section 1861(s)(2)(K) (42 
     U.S.C. 1395x(s)(2)(K)) is amended to read as follows:
       ``(ii) services which would be physicians' services if 
     furnished by a physician (as defined in subsection (r)(1)) 
     and which are performed by a nurse practitioner or clinical 
     nurse specialist (as defined in subsection (aa)(5)) working 
     in collaboration (as defined in subsection (aa)(6)) with a 
     physician (as defined in subsection (r)(1)) which the nurse 
     practitioner or clinical nurse specialist is legally 
     authorized to perform by the State in which the services are 
     performed, and such services and supplies furnished as an 
     incident to such services as would be covered under 
     subparagraph (A) if furnished incident to a physician's 
     professional service, but only if no facility or other 
     provider charges or is paid any amounts with respect to the 
     furnishing of such services;''.
       (2) Conforming amendments.--(A) Section 1861(s)(2)(K) of 
     such Act (42 U.S.C. 1395x(s)(2)(K)) is further amended--
       (i) in clause (i), by inserting ``and such services and 
     supplies furnished as incident to such services as would be 
     covered under subparagraph (A) if furnished incident to a 
     physician's professional service,'' after ``are performed,''; 
     and
       (ii) by striking clauses (iii) and (iv).
       (B) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended 
     by striking ``clauses (i) or (iii) of subsection (s)(2)(K)'' 
     and inserting ``subsection (s)(2)(K)''.
       (C) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
     by striking ``section 1861(s)(2)(K)(i) or 
     1861(s)(2)(K)(iii)'' and inserting ``section 1861(s)(2)(K)''.
       (D) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is 
     amended by striking ``section 1861(s)(2)(K)(i) or 
     1861(s)(2)(K)(iii)'' and inserting ``section 1861(s)(2)(K)''.
       (E) Section 1888(e)(2)(A)(ii) (42 U.S.C. 
     1395yy(e)(2)(A)(ii)), as added by section 10401(a), is 
     amended by striking ``through (iii)'' and inserting ``and 
     (ii)''.
       (b) Increased Payment.--
       (1) Fee schedule amount.--Clause (O) of section 1833(a)(1) 
     (42 U.S.C. 1395l(a)(1)) is amended to read as follows: ``(O) 
     with respect to services described in section 
     1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical 
     nurse specialist services), the amounts paid shall be equal 
     to 80 percent of (i) the lesser of the actual charge or 85 
     percent of the fee schedule amount provided under section 
     1848, or (ii) in the case of services as an assistant at 
     surgery, the lesser of the actual charge or 85 percent of the 
     amount that would otherwise be recognized if performed by a 
     physician who is serving as an assistant at surgery; and''.
       (2) Conforming amendments.--(A) Section 1833(r) (42 U.S.C. 
     1395l(r)) is amended--
       (i) in paragraph (1), by striking ``section 
     1861(s)(2)(K)(iii) (relating to nurse practitioner or 
     clinical nurse specialist services provided in a rural 
     area)'' and inserting ``section 1861(s)(2)(K)(ii) (relating 
     to nurse practitioner or clinical nurse specialist 
     services)'';
       (ii) by striking paragraph (2);
       (iii) in paragraph (3), by striking ``section 
     1861(s)(2)(K)(iii)'' and inserting ``section 
     1861(s)(2)(K)(ii)''; and
       (iv) by redesignating paragraph (3) as paragraph (2).
       (B) Section 1842(b)(12)(A) (42 U.S.C. 1395u(b)(12)(A)) is 
     amended, in the matter preceding clause (i), by striking 
     ``clauses (i), (ii), or (iv) of section 1861(s)(2)(K) 
     (relating to a physician assistants and nurse 
     practitioners)'' and inserting ``section 1861(s)(2)(K)(i) 
     (relating to physician assistants),''.
       (c) Direct Payment for Nurse Practitioners and Clinical 
     Nurse Specialists.--
       (1) In general.--Section 1832(a)(2)(B)(iv) (42 U.S.C. 
     1395k(a)(2)(B)(iv)) is amended by striking ``provided in a 
     rural area (as defined in section 1886(d)(2)(D))'' and 
     inserting ``but only if no facility or other provider charges 
     or is paid any amounts with respect to the furnishing of such 
     services''.
       (2) Conforming amendment.--Section 1842(b)(6)(C) (42 U.S.C. 
     1395u(b)(6)(C)) is amended--
       (A) by striking ``clauses (i), (ii), or (iv)'' and 
     inserting ``clause (i)''; and
       (B) by striking ``or nurse practitioner''.
       (d) Definition of Clinical Nurse Specialist Clarified.-- 
     Section 1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended--
       (1) by inserting ``(A)'' after ``(5)'';
       (2) by striking ``The term `physician assistant' '' and all 
     that follows through ``who performs'' and inserting ``The 
     term `physician assistant' and the term `nurse practitioner' 
     mean, for purposes of this title, a physician assistant or 
     nurse practitioner who performs''; and
       (3) by adding at the end the following new subparagraph:
       ``(B) The term `clinical nurse specialist' means, for 
     purposes of this title, an individual who--

[[Page H4540]]

       ``(i) is a registered nurse and is licensed to practice 
     nursing in the State in which the clinical nurse specialist 
     services are performed; and
       ``(ii) holds a master's degree in a defined clinical area 
     of nursing from an accredited educational institution.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply with respect to services furnished and supplies 
     provided on and after January 1, 1998.

     SEC. 10620. INCREASED MEDICARE REIMBURSEMENT FOR PHYSICIAN 
                   ASSISTANTS.

       (a) Removal of Restriction on Settings.--Section 
     1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is amended--
       (1) by striking ``(I) in a hospital'' and all that follows 
     through ``shortage area,'', and
       (2) by adding at the end the following: ``but only if no 
     facility or other provider charges or is paid any amounts 
     with respect to the furnishing of such services,''.
       (b) Increased Payment.--Paragraph (12) of section 1842(b) 
     (42 U.S.C. 1395u(b)), as amended by section 10619(b)(2)(B), 
     is amended to read as follows:
       ``(12) With respect to services described in section 
     1861(s)(2)(K)(i)--
       ``(A) payment under this part may only be made on an 
     assignment-related basis; and
       ``(B) the amounts paid under this part shall be equal to 80 
     percent of (i) the lesser of the actual charge or 85 percent 
     of the fee schedule amount provided under section 1848 for 
     the same service provided by a physician who is not a 
     specialist; or (ii) in the case of services as an assistant 
     at surgery, the lesser of the actual charge or 85 percent of 
     the amount that would otherwise be recognized if performed by 
     a physician who is serving as an assistant at surgery.''.
       (c) Removal of Restriction on Employment Relationship.--
     Section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by 
     adding at the end the following new sentence: ``For purposes 
     of clause (C) of the first sentence of this paragraph, an 
     employment relationship may include any independent 
     contractor arrangement, and employer status shall be 
     determined in accordance with the law of the State in which 
     the services described in such clause are performed.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to services furnished and supplies 
     provided on and after January 1, 1998.

     SEC. 10621. RENAL DIALYSIS-RELATED SERVICES.

       (a) Auditing of Cost Reports.--The Secretary shall audit a 
     sample of cost reports of renal dialysis providers for 1995 
     and for each third year thereafter.
       (b) Implementation of Quality Standards.--The Secretary of 
     Health and Human Services shall develop and implement, by not 
     later than January 1, 1999, a method to measure and report 
     quality of renal dialysis services provided under the 
     medicare program under title XVIII of the Social Security Act 
     in order to reduce payments for inappropriate or low quality 
     care.

                       CHAPTER 3--PART B PREMIUM

     SEC. 10631. PART B PREMIUM.

       (a) In General.--The first, second and third sentences of 
     section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are amended to 
     read as follows: ``The Secretary, during September of each 
     year, shall determine and promulgate a monthly premium rate 
     for the succeeding calendar year. That monthly premium rate 
     shall be equal to 50 percent of the monthly actuarial rate 
     for enrollees age 65 and over, determined according to 
     paragraph (1), for that succeeding calendar year.''.
       (b) Conforming and Technical Amendments.--
       (1) Section 1839.--Section 1839 (42 U.S.C. 1395r) is 
     amended--
       (A) in subsection (a)(2), by striking ``(b) and (e)'' and 
     inserting ``(b), (c), and (f)'',
       (B) in the last sentence of subsection (a)(3)--
       (i) by inserting ``rate'' after ``premium'', and
       (ii) by striking ``and the derivation of the dollar amounts 
     specified in this paragraph'',
       (C) by striking subsection (e), and
       (D) by redesignating subsection (g) as subsection (e) and 
     inserting that subsection after subsection (d).
       (2) Section 1844.--Subparagraphs (A)(i) and (B)(i) of 
     section 1844(a)(1) (42 U.S.C. 1395w(a)(1)) are each amended 
     by striking ``or 1839(e), as the case may be''.
            Subtitle H--Provisions Relating to Parts A and B

       CHAPTER 1--PROVISIONS RELATING TO MEDICARE SECONDARY PAYER

     SEC. 10701. PERMANENT EXTENSION AND REVISION OF CERTAIN 
                   SECONDARY PAYER PROVISIONS.

       (a) 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. 1395p(i)) and the second sentence 
     of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by 
     striking ``1862(b)(1)(B)(iv)'' each place it appears and 
     inserting ``1862(b)(1)(B)(iii)''.
       (b) Individuals With End Stage Renal Disease.--
       (1) In general.--Section 1862(b)(1)(C) (42 U.S.C. 
     1395y(b)(1)(C)) is amended--
       (A) in the first sentence, by striking ``12-month'' each 
     place it appears and inserting ``30-month'', and
       (B) by striking the second sentence.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to items and services furnished on or after the 
     date of the enactment of this Act and with respect to periods 
     beginning on or after the date that is 18 months prior to 
     such date.
       (c) IRS-SSA-HCFA Data Match.--
       (1) Social security act.--Section 1862(b)(5)(C) (42 U.S.C. 
     1395y(b)(5)(C)) is amended by striking clause (iii).
       (2) Internal revenue code.--Section 6103(l)(12) of the 
     Internal Revenue Code of 1986 is amended by striking 
     subparagraph (F).

     SEC. 10702. CLARIFICATION OF TIME AND FILING LIMITATIONS.

       (a) Extension of Claims Filing Period.--Section 
     1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by adding 
     at the end the following new clause:
       ``(v) Claims-filing period.--Notwithstanding any other time 
     limits that may exist for filing a claim under an employer 
     group health plan, the United States may seek to recover 
     conditional payments in accordance with this subparagraph 
     where the request for payment is submitted to the entity 
     required or responsible under this subsection to pay with 
     respect to the item or service (or any portion thereof) under 
     a primary plan within the 3-year period beginning on the date 
     on which the item or service was furnished.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to items and services furnished after 1990. The 
     previous sentence shall not be construed as permitting any 
     waiver of the 3-year-period requirement (imposed by such 
     amendment) in the case of items and services furnished more 
     than 3 years before the date of the enactment of this Act.

     SEC. 10703. PERMITTING RECOVERY AGAINST THIRD PARTY 
                   ADMINISTRATORS.

       (a) Permitting Recovery Against Third Party Administrators 
     of Primary Plans.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
     1395y(b)(2)(B)(ii)) is amended--
       (1) by striking ``under this subsection to pay'' and 
     inserting ``(directly, as a third-party administrator, or 
     otherwise) to make payment'', and
       (2) by adding at the end the following: ``The United States 
     may not recover from a third-party administrator under this 
     clause in cases where the third-party administrator would not 
     be able to recover the amount at issue from the employer or 
     group health plan for whom it provides administrative 
     services due to the insolvency or bankruptcy of the employer 
     or plan.''.
       (b) Clarification of Beneficiary Liability.--Section 
     1862(b)(1) (42 U.S.C. 1395y(b)(1)) is amended by adding at 
     the end the following new subparagraph:
       ``(F) Limitation on beneficiary liability.--An individual 
     who is entitled to benefits under this title and is furnished 
     an item or service for which such benefits are incorrectly 
     paid is not liable for repayment of such benefits under this 
     paragraph unless payment of such benefits was made to the 
     individual.''.
       (c) Effective Date.--The amendments made by this section 
     apply to items and services furnished on or after the date of 
     the enactment of this Act.

                    CHAPTER 2--HOME HEALTH SERVICES

     SEC. 10711. RECAPTURING SAVINGS RESULTING FROM TEMPORARY 
                   FREEZE ON PAYMENT INCREASES FOR HOME HEALTH 
                   SERVICES.

       (a) Basing Updates to Per Visit Cost Limits on Limits for 
     Fiscal Year 1993.--Section 1861(v)(1)(L) (42 U.S.C. 
     1395x(v)(1)(L)) is amended by adding at the end the 
     following:
       ``(iv) In establishing limits under this subparagraph for 
     cost reporting periods beginning after September 30, 1997, 
     the Secretary shall not take into account any changes in the 
     home health market basket, as determined by the Secretary, 
     with respect to cost reporting periods which began on or 
     after July 1, 1994, and before July 1, 1996.''.
       (b) No Exceptions Permitted Based on Amendment.--The 
     Secretary of Health and Human Services shall not consider the 
     amendment made by subsection (a) in making any exemptions and 
     exceptions pursuant to section 1861(v)(1)(L)(ii) of the 
     Social Security Act (42 U.S.C. 1395x(v)(1)(L)(ii)).

     SEC. 10712. INTERIM PAYMENTS FOR HOME HEALTH SERVICES.

       (a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(i) 
     (42 U.S.C. 1395x(v)(1)(L)(i)) is amended--
       (1) by moving the indentation of subclauses (I) through 
     (III) 2-ems to the left;
       (2) in subclause (I), by inserting ``of the mean of the 
     labor-related and nonlabor per visit costs for freestanding 
     home health agencies'' before the comma at the end;
       (3) in subclause (II), by striking ``, or'' and inserting 
     ``of such mean,'';
       (4) in subclause (III)--
       (A) by inserting ``and before October 1, 1997,'' after 
     ``July 1, 1987,'', and
       (B) by striking the comma at the end and inserting ``of 
     such mean, or''; and
       (5) by striking the matter following subclause (III) and 
     inserting the following:
       ``(IV) October 1, 1997, 105 percent of the median of the 
     labor-related and nonlabor per visit costs for freestanding 
     home health agencies.''.
       (b) Delay In Updates.--Section 1861(v)(1)(L)(iii) (42 
     U.S.C. 1395x(v)(1)(L)(iii)) is amended by inserting ``, or on 
     or after

[[Page H4541]]

     July 1, 1997, and before October 1, 1997'' after ``July 1, 
     1996''.
       (c) Additions to Cost Limits.--Section 1861(v)(1)(L) (42 
     U.S.C. 1395x(v)(1)(L)), as amended by section 10711(a), is 
     amended by adding at the end the following new clauses:
       ``(v) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1997, 
     the Secretary shall provide for an interim system of limits. 
     Payment shall not exceed the costs determined under the 
     preceding provisions of this subparagraph or, if lower, the 
     product of--
       ``(I) an agency-specific per beneficiary annual limitation 
     calculated based 75 percent on the reasonable costs 
     (including nonroutine medical supplies) for the agency's 12-
     month cost reporting period ending during 1994, and based 25 
     percent on the standardized regional average of such costs 
     for the agency's region, as applied to such agency, for cost 
     reporting periods ending during 1994, such costs updated by 
     the home health market basket index; and
       ``(II) the agency's unduplicated census count of patients 
     (entitled to benefits under this title) for the cost 
     reporting period subject to the limitation.
       ``(vi) For services furnished by home health agencies for 
     cost reporting periods beginning on or after October 1, 1997, 
     the following rules apply:
       ``(I) For new providers and those providers without a 12-
     month cost reporting period ending in calendar year 1994, the 
     per beneficiary limitation shall be equal to the median of 
     these limits (or the Secretary's best estimates thereof) 
     applied to other home health agencies as determined by the 
     Secretary. A home health agency that has altered its 
     corporate structure or name shall not be considered a new 
     provider for this purpose.
       ``(II) For beneficiaries who use services furnished by more 
     than one home health agency, the per beneficiary limitations 
     shall be prorated among the agencies.''.
       (d) Development of Case Mix System.--The Secretary of 
     Health and Human Services shall expand research on a 
     prospective payment system for home health agencies under the 
     medicare program that ties prospective payments to a unit of 
     service, including an intensive effort to develop a reliable 
     case mix adjuster that explains a significant amount of the 
     variances in costs.
       (e) Submission of Data for Case Mix System.--Effective for 
     cost reporting periods beginning on or after October 1, 1997, 
     the Secretary of Health and Human Services may require all 
     home health agencies to submit additional information that 
     the Secretary considers necessary for the development of a 
     reliable case mix system.

     SEC. 10713. CLARIFICATION OF PART-TIME OR INTERMITTENT 
                   NURSING CARE.

       (a) In General.--Section 1861(m) (42 U.S.C. 1395x(m)) is 
     amended by adding at the end the following: ``For purposes of 
     paragraphs (1) and (4), the term `part-time or intermittent 
     services' means skilled nursing and home health aide services 
     furnished any number of days per week as long as they are 
     furnished (combined) less than 8 hours each day and 28 or 
     fewer hours each week (or, subject to review on a case-by-
     case basis as to the need for care, less than 8 hours each 
     day and 35 or fewer hours per week). For purposes of sections 
     1814(a)(2)(C) and 1835(a)(2)(A), `intermittent' means skilled 
     nursing care that is either provided or needed on fewer than 
     7 days each week, or less than 8 hours of each day for 
     periods of 21 days or less (with extensions in exceptional 
     circumstances when the need for additional care is finite and 
     predictable).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to services furnished on or after October 1, 1997.

     SEC. 10714. STUDY ON DEFINITION OF HOMEBOUND.

       (a) Study.--The Secretary of Health and Human Services 
     shall conduct a study of the criteria that should be applied, 
     and the method of applying such criteria, in the 
     determination of whether an individual is homebound for 
     purposes of qualifying for receipt of benefits for home 
     health services under the medicare program. Such criteria 
     shall include the extent and circumstances under which a 
     person may be absent from the home but nonetheless qualify.
       (b) Report.--Not later than October 1, 1998, the Secretary 
     shall submit a report to the Congress on the study conducted 
     under subsection (a). The report shall include specific 
     recommendations on such criteria and methods.

     SEC. 10715. PAYMENT BASED ON LOCATION WHERE HOME HEALTH 
                   SERVICE IS FURNISHED.

       (a) Conditions of Participation.--Section 1891 (42 U.S.C. 
     1395bbb) is amended by adding at the end the following:
       ``(g) Payment on Basis of Location of Service.--A home 
     health agency shall submit claims for payment for home health 
     services under this title only on the basis of the geographic 
     location at which the service is furnished, as determined by 
     the Secretary.''.
       (b) Wage Adjustment.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
     1395x(v)(1)(L)(iii)) is amended by striking ``agency is 
     located'' and inserting ``service is furnished''.
       (c) Effective Date.--The amendments made by this section 
     apply to cost reporting periods beginning on or after October 
     1, 1997.

     SEC. 10716. NORMATIVE STANDARDS FOR HOME HEALTH CLAIMS 
                   DENIALS,

       (a) In General.--Section 1862(a)(1) (42 U.S.C. 
     1395y(a)(1)), as amended by section 10616(c), is amended--
       (1) by striking ``and'' at the end of subparagraph (G),
       (2) by striking the semicolon at the end of subparagraph 
     (H) and inserting ``, and'', and
       (3) by inserting after subparagraph (H) the following new 
     subparagraph:
       ``(I) the frequency and duration of home health services 
     which are in excess of normative guidelines that the 
     Secretary shall establish by regulation;''.
       (b) Notification.--The Secretary of Health and Human 
     Services may establish a process for notifying a physician in 
     cases in which the number of home health service visits 
     furnished under the medicare program pursuant to a 
     prescription or certification of the physician significantly 
     exceeds such threshold (or thresholds) as the Secretary 
     specifies. The Secretary may adjust such threshold to reflect 
     demonstrated differences in the need for home health services 
     among different beneficiaries.
       (c) Effective Date.--The amendments made by this section 
     apply to services furnished on or after October 1, 1997.

     SEC. 10717. NO HOME HEALTH BENEFITS BASED SOLELY ON DRAWING 
                   BLOOD.

       (a) In General.--Sections 1814(a)(2)(C) and 1835(a)(2)(A) 
     (42 U.S.C. 1395f(a)(2)(C), 1395n(a)(2)(A)) are each amended 
     by inserting ``(other than solely venipuncture for the 
     purpose of obtaining a blood sample)'' after ``skilled 
     nursing care''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to home health services furnished after the 6-month 
     period beginning after the date of enactment of this Act.

          CHAPTER 3--BABY BOOM GENERATION MEDICARE COMMISSION

     SEC. 10721. BIPARTISAN 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 Bipartisan Commission on the Effect of the Baby 
     Boom Generation on the Medicare Program (in this section 
     referred to as the ``Commission'').
       (b) Duties.--
       (1) In general.--The Commission shall--
       (A) examine the financial impact on the medicare program of 
     the significant increase in the number of medicare eligible 
     individuals which will occur beginning approximately during 
     2010 and lasting for approximately 25 years,
       (B) make specific recommendations to the Congress 
     respecting a comprehensive approach to preserve the medicare 
     program for the period during which such individuals are 
     eligible for medicare, and
       (C) study the feasibility and desirability of 
     establishing--
       (i) an independent commission on medicare to make 
     recommendations annually on how best to match the structure 
     of the medicare program to available funding for the program,
       (ii) an expedited process for consideration of such 
     recommendations by Congress, and
       (iii) a default mechanism to enforce Congressional spending 
     targets for the program if Congress fails to approve such 
     recommendations.
       (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) Methods used by other nations to respond to comparable 
     demographic patterns in eligibility for health care benefits 
     for elderly and disabled individuals.
       (C) Modifying age-based eligibility to correspond to 
     changes in age-based eligibility under the OASDI program.
       (D) Trends in employment-related health care for retirees, 
     including the use of medical savings accounts and similar 
     financing devices.
       (c) Membership.--
       (1) Appointment.--The Commission shall be composed of 15 
     voting members as follows:
       (A) The Majority Leader of the Senate shall appoint, after 
     consultation with the minority leader of the Senate, 6 
     members, of whom not more than 4 may be of the same political 
     party.
       (B) The Speaker of the House of Representatives shall 
     appoint, after consultation with the minority leader of the 
     House of Representatives, 6 members, of whom not more than 4 
     may be of the same political party.
       (C) The 3 ex officio members of the Board of Trustees of 
     the Federal Hospital Insurance Trust Fund and of the Federal 
     Supplementary Medical Insurance Trust Fund who are Cabinet 
     level officials.
       (2) Chairman and vice chairman.--As the first item of 
     business at the Commission's first meeting (described in 
     paragraph (5)(B)), the Commission shall elect a Chairman and 
     Vice Chairman from among its members. The individuals elected 
     as Chairman and Vice Chairman may not be of the same 
     political party and may not have been appointed to the 
     Commission by the same appointing authority.
       (3) Vacancies.--Any vacancy in the membership of the 
     Commission shall be filled in the manner in which the 
     original appointment was made and shall not affect the power 
     of the remaining members to execute the duties of the 
     Commission.
       (4) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (f).
       (5) Meetings.--

[[Page H4542]]

       (A) The Commission shall meet at the call of its Chairman 
     or a majority of its members.
       (B) The Commission shall hold its first meeting not later 
     than February 1, 1998.
       (6) Compensation and reimbursement of expenses.--Members of 
     the Commission are not entitled to receive compensation for 
     service on the Commission. Members may be reimbursed for 
     travel, subsistence, and other necessary expenses incurred in 
     carrying out the duties of the Commission.
       (d) Advisory Panel.--
       (1) In general.--The Chairman, in consultation with the 
     Vice Chairman, may establish a panel (in this section 
     referred to as the ``Advisory Panel'') consisting of health 
     care experts, consumers, providers, and others to advise and 
     assist the members of the Commission in carrying out the 
     duties described in subsection (b). The panel shall have only 
     those powers that the Chairman, in consultation with the Vice 
     Chairman, determines are necessary and appropriate to assist 
     the Commission in carrying out such duties.
       (2) Compensation.--Members of the Advisory Panel are not 
     entitled to receive compensation for service on the Advisory 
     Panel. Subject to the approval of the chairman of the 
     Commission, members may be reimbursed for travel, 
     subsistence, and other necessary expenses incurred in 
     carrying out the duties of the Advisory Panel.
       (e) Staff and Consultants.--
       (1) Staff.--The Commission may appoint and determine the 
     compensation of such staff as may be necessary to carry out 
     the duties of the Commission. Such appointments and 
     compensation may be made without regard to the provisions of 
     title 5, United States Code, that govern appointments in the 
     competitive services, and the provisions of chapter 51 and 
     subchapter III of chapter 53 of such title that relate to 
     classifications and the General Schedule pay rates.
       (2) Consultants.--The Commission may procure such temporary 
     and intermittent services of consultants under section 
     3109(b) of title 5, United States Code, as the Commission 
     determines to be necessary to carry out the duties of the 
     Commission.
       (f) Powers.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studies by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office.--
       (A) Upon the request of the Commission, the Director of the 
     Congressional Budget Office shall provide to the Commission 
     such cost estimates as the Commission determines to be 
     necessary to carry out its duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under 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) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (g) Report.--(1) Not later than May 1, 1999, the Commission 
     shall submit to Congress a report containing its findings and 
     recommendations regarding how to protect and preserve the 
     medicare program in a financially solvent manner until 2030 
     (or, if later, throughout the period of projected solvency of 
     the Federal Old-Age and Survivors Insurance Trust Fund). The 
     report shall include detailed recommendations for appropriate 
     legislative initiatives respecting how to accomplish this 
     objective.
       (2) Not later than 12 months after the date of the 
     enactment of this Act, the Commission shall report to the 
     Congress on the matters specified in subsection (b)(1)(C). If 
     the Commission determines that it is feasible and desirable 
     to establish the processes described in such subsection, the 
     report under this paragraph shall include specific 
     recommendations on changes in law (such as changes in the 
     Congressional Budget Act of 1974 and the Balanced Budget and 
     Emergency Deficit Control Act of 1985) as are needed to 
     implement its recommendations.
       (h) Termination.--The Commission shall terminate 30 days 
     after the date of submission of the report required in 
     subsection (g).
       (i) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section. 60 
     percent of such appropriation shall be payable from the 
     Federal Hospital Insurance Trust Fund, and 40 percent of such 
     appropriation shall be payable from the Federal Supplementary 
     Medical Insurance Trust Fund under title XVIII of the Social 
     Security Act (42 U.S.C. 1395i, 1395t).

  CHAPTER 4--PROVISIONS RELATING TO DIRECT GRADUATE MEDICAL EDUCATION

     SEC. 10731. LIMITATION ON PAYMENT BASED ON NUMBER OF 
                   RESIDENTS AND IMPLEMENTATION OF ROLLING AVERAGE 
                   FTE COUNT.

       Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by 
     adding after subparagraph (E) the following:
       ``(F) Limitation on number of residents for certain fiscal 
     years.--Such rules shall provide that for purposes of a cost 
     reporting period beginning on or after October 1, 1997, the 
     total number of full-time equivalent residents before 
     application of weighting factors (as determined under this 
     paragraph) with respect to a hospital's approved medical 
     residency training program may not exceed the number of full-
     time equivalent residents with respect to the hospital's most 
     recent cost reporting period ending on or before December 31, 
     1996. The Secretary may establish rules, consistent with the 
     policies in the previous sentence and paragraph (6), with 
     respect to the application of the previous sentence in the 
     case of medical residency training programs established on or 
     after January 1, 1997.
       ``(G) Counting interns and residents for fy 1998 and 
     subsequent years.--
       ``(i) FY 1998.--For the hospital's first cost reporting 
     period beginning during fiscal year 1998, subject to the 
     limit described in subparagraph (F), the total number of 
     full-time equivalent residents, for determining the 
     hospital's graduate medical education payment, shall equal 
     the average of the full-time equivalent resident counts for 
     the cost reporting period and the preceding cost reporting 
     period.
       ``(ii) Subsequent years.--For each subsequent cost 
     reporting period, subject to the limit described in 
     subparagraph (F), the total number of full-time equivalent 
     residents, for determining the hospital's graduate medical 
     education payment, shall equal the average of the actual 
     full-time equivalent resident counts for the cost reporting 
     period and preceding two cost reporting periods.
       ``(iii) Adjustment for short periods.--If a hospital's cost 
     reporting period beginning on or after October 1, 1997, is 
     not equal to twelve months, the Secretary shall make 
     appropriate modifications to ensure that the average full-
     time equivalent resident counts pursuant to clause (ii) are 
     based on the equivalent of full 12-month cost reporting 
     periods.''.

     SEC. 10732. PHASED-IN LIMITATION ON HOSPITAL OVERHEAD AND 
                   SUPERVISORY PHYSICIAN COMPONENT OF DIRECT 
                   MEDICAL EDUCATION COSTS.

       (a) In General.--Section 1886(h)(3) (42 U.S.C. 
     1395ww(h)(3)) is amended--
       (1) in subparagraph (B), by inserting ``subject to 
     subparagraph (D),'' after ``subparagraph (A)'', and
       (2) by adding at the end the following:
       ``(D) Phased-in limitation on hospital overhead and 
     supervisory physician component.--
       ``(i) In general.--In the case of a hospital for which the 
     overhead GME amount (as defined in clause (ii)) for the base 
     period exceeds an amount equal to the 75th percentile of the 
     overhead GME amounts in such period for all hospitals 
     (weighted to reflect the full-time equivalent resident counts 
     for all approved medical residency training programs), 
     subject to clause (iv), the hospital's approved FTE resident 
     amount (for periods beginning on or after October 1, 1997) 
     shall be reduced from the amount otherwise applicable (as 
     previously reduced under this subparagraph) by an overhead 
     reduction amount. The overhead reduction amount is equal to 
     the lesser of--

       ``(I) 20 percent of the reference reduction amount 
     (described in clause (iii)) for the period, or
       ``(II) 15 percent of the hospital's overhead GME amount for 
     the period (as otherwise determined before the reduction 
     provided under this subparagraph for the period involved).

       ``(ii) Overhead gme amount.--For purposes of this 
     subparagraph, the term `overhead GME amount' means, for a 
     hospital for a period, the product of--

[[Page H4543]]

       ``(I) the percentage of the hospital's approved FTE 
     resident amount for the base period that is not attributable 
     to resident salaries and fringe benefits, and
       ``(II) the hospital's approved FTE resident amount for the 
     period involved.

       ``(iii) Reference reduction amount.--

       ``(I) In general.--The reference reduction amount described 
     in this clause for a hospital for a cost reporting period is 
     the base difference (described in subclause (II)) updated, in 
     a compounded manner for each period from the base period to 
     the period involved, by the update applied for such period to 
     the hospital's approved FTE resident amount.
       ``(II) Base difference.--The base difference described in 
     this subclause for a hospital is the amount by which the 
     hospital's overhead GME amount in the base period exceeded 
     the 75th percentile of such amounts (as described in clause 
     (i)).

       ``(iv) Maximum reduction to 75th percentile.--In no case 
     shall the reduction under this subparagraph effected for a 
     hospital for a period (below the amount that would otherwise 
     apply for the period if this subparagraph did not apply for 
     any period) exceed the reference reduction amount for the 
     hospital for the period.
       ``(v) Base period.--For purposes of this subparagraph, the 
     term `base period' means the cost reporting period beginning 
     in fiscal year 1984 or the period used to establish the 
     hospital's approved FTE resident amount for hospitals that 
     did not have approved residency training programs in fiscal 
     year 1984.
       ``(vi) Rules for hospitals initiating residency training 
     programs.--The Secretary shall establish rules for the 
     application of this subparagraph in the case of a hospital 
     that initiates medical residency training programs during or 
     after the base period.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to per resident payment amounts attributable to 
     periods beginning on or after October 1, 1997.

     SEC. 10733. PERMITTING PAYMENT TO NON-HOSPITAL PROVIDERS.

       (a) In General.-- Section 1886 (42 U.S.C. 1395ww) is 
     amended by adding at the end the following:
       ``(k) Payment to Non-Hospital Providers.--
       ``(1) Report.--The Secretary shall submit to Congress, not 
     later than 18 months after the date of the enactment of this 
     subsection, a proposal for payment to qualified non-hospital 
     providers for their direct costs of medical education, if 
     those costs are incurred in the operation of an approved 
     medical residency training program described in subsection 
     (h). Such proposal shall specify the amounts, form, and 
     manner in which such payments will be made and the portion of 
     such payments that will be made from each of the trust funds 
     under this title.
       ``(2) Effectiveness.--Except as otherwise provided in law, 
     the Secretary may implement such proposal for residency years 
     beginning not earlier than 6 months after the date of 
     submittal of the report under paragraph (1).
       ``(3) Qualified non-hospital providers.--For purposes of 
     this subsection, the term `qualified non-hospital provider' 
     means--
       ``(A) a Federally qualified health center, as defined in 
     section 1861(aa)(4);
       ``(B) a rural health clinic, as defined in section 
     1861(aa)(2);
       ``(C) MedicarePlus organizations; and
       ``(D) such other providers (other than hospitals) as the 
     Secretary determines to be appropriate.''.
       (b) Prohibition on Double Payments; Budget Neutrality 
     Adjustment.--Section 1886(h)(3)(B) (42 U.S.C. 
     1395ww(h)(3)(B)) is amended by adding at the end the 
     following:
     ``The Secretary shall reduce the aggregate approved amount to 
     the extent payment is made under subsection (k) for residents 
     included in the hospital's count of full-time equivalent 
     residents and, in the case of residents not included in any 
     such count, the Secretary shall provide for such a reduction 
     in aggregate approved amounts under this subsection as will 
     assure that the application of subsection (k) does not result 
     in any increase in expenditures under this title in excess of 
     those that would have occurred if subsection (k) were not 
     applicable.''.

     SEC. 10734. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY 
                   REDUCTION IN NUMBER OF RESIDENTS.

       (a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)) is 
     further amended by adding at the end the following new 
     paragraph:
       ``(6) Incentive payment under plans for voluntary reduction 
     in number of residents.--
       ``(A) In general.--In the case of a voluntary residency 
     reduction plan for which an application is approved under 
     subparagraph (B), the qualifying entity submitting the plan 
     shall be paid an applicable hold harmless percentage (as 
     specified in subparagraph (E)) of the sum of--
       ``(i) amount (if any) by which--

       ``(I) the amount of payment which would have been made 
     under this subsection if there had been a 5 percent reduction 
     in the number of full-time equivalent residents in the 
     approved medical education training programs of the 
     qualifying entity as of June 30, 1997, exceeds
       ``(II) the amount of payment which is made under this 
     subsection, taking into account the reduction in such number 
     effected under the reduction plan; and

       ``(ii) the amount of the reduction in payment under 
     1886(d)(5)(B) (for hospitals participating in the qualifying 
     entity) that is attributable to the reduction in number of 
     residents effected under the plan below 95 percent of the 
     number of full-time equivalent residents in such programs of 
     such entity as of June 30, 1997.
       ``(B) Approval of plan applications.--The Secretary may not 
     approve the application of an qualifying entity unless--
       ``(i) the application is submitted in a form and manner 
     specified by the Secretary and by not later than March 1, 
     2000,
       ``(ii) the application provides for the operation of a plan 
     for the reduction in the number of full-time equivalent 
     residents in the approved medical residency training programs 
     of the entity consistent with the requirements of 
     subparagraph (D);
       ``(iii) the entity elects in the application whether such 
     reduction will occur over--

       ``(I) a period of not longer than 5 residency training 
     years, or
       ``(II) a period of 6 residency training years,

     except that a qualifying entity described in subparagraph 
     (C)(i)(III) may not make the election described in subclause 
     (II); and
       ``(iv) the Secretary determines that the application and 
     the entity and such plan meet such other requirements as the 
     Secretary specifies in regulations.
       ``(C) Qualifying entity.--
       ``(i) In general.--For purposes of this paragraph, any of 
     the following may be a qualifying entity:

       ``(I) Individual hospitals operating one or more approved 
     medical residency training programs.
       ``(II) Subject to clause (ii), two or more hospitals that 
     operate such programs and apply for treatment under this 
     paragraph as a single qualifying entity.
       ``(III) Subject to clause (iii), a qualifying consortium 
     (as described in section 10735 of the Balanced Budget Act of 
     1997).

       ``(ii) Additional requirement for joint programs.--In the 
     case of an application by a qualifying entity described in 
     clause (i)(II), the Secretary may not approve the application 
     unless the application represents that the qualifying entity 
     either--

       ``(I) in the case of an entity that meets the requirements 
     of clause (v) of subparagraph (D) will not reduce the number 
     of full-time equivalent residents in primary care during the 
     period of the plan, or
       ``(II) in the case of another entity will not reduce the 
     proportion of its residents in primary care (to the total 
     number of residents) below such proportion as in effect as of 
     the applicable time described in subparagraph (D)(vi).

       ``(iii) Additional requirement for consortia.--In the case 
     of an application by a qualifying entity described in clause 
     (i)(III), the Secretary may not approve the application 
     unless the application represents that the qualifying entity 
     will not reduce the proportion of its residents in primary 
     care (to the total number of residents) below such proportion 
     as in effect as of the applicable time described in 
     subparagraph (D)(vi).
       ``(D) Residency reduction requirements.--
       ``(i) Individual hospital applicants.--In the case of a 
     qualifying entity described in subparagraph (C)(i)(I), the 
     number of full-time equivalent residents in all the approved 
     medical residency training programs operated by or through 
     the entity shall be reduced as follows:

       ``(I) If base number of residents exceeds 750 residents, by 
     a number equal to at least 20 percent of such base number.
       ``(II) Subject to subclause (IV), if base number of 
     residents exceeds 500, but is less than 750, residents, by 
     150 residents.
       ``(III) Subject to subclause (IV), if base number of 
     residents does not exceed 500 residents, by a number equal to 
     at least 25 percent of such base number.
       ``(IV) In the case of a qualifying entity which is 
     described in clause (v) and which elects treatment under this 
     subclause, by a number equal to at least 20 percent of such 
     base number.

       ``(ii) Joint applicants.--In the case of a qualifying 
     entity described in subparagraph (C)(i)(II), the number of 
     full-time equivalent residents in all the approved medical 
     residency training programs operated by or through the entity 
     shall be reduced as follows:

       ``(I) Subject to subclause (II), by a number equal to at 
     least 25 percent of such base number.
       ``(II) In the case of a qualifying entity which is 
     described in clause (v) and which elects treatment under this 
     subclause, by a number equal to at least 20 percent of such 
     base number.

       ``(iii) Consortia.--In the case of a qualifying entity 
     described in subparagraph (C)(i)(III), the number of full-
     time equivalent residents in all the approved medical 
     residency training programs operated by or through the entity 
     shall be reduced by a number equal to at least 20 percent of 
     such base number.
       ``(iv) Manner of reduction.--The reductions specified under 
     the preceding provisions of this subparagraph for a 
     qualifying entity shall be below the base number of residents 
     for that entity and shall be fully effective not later than--

       ``(I) the 5th residency training year in which the 
     application under subparagraph (B) is effective, in the case 
     of an entity making the election described in subparagraph 
     (B)(iii)(I), or
       ``(II) the 6th such residency training year, in the case of 
     an entity making the election described in subparagraph 
     (B)(iii)(II).

[[Page H4544]]

       ``(v) Entities providing assurance of maintenance of 
     primary care residents.--An entity is described in this 
     clause if--

       ``(I) the base number of residents for the entity is less 
     than 750;
       ``(II) the number of full-time equivalent residents in 
     primary care included in the base number of residents for the 
     entity is at least 10 percent of such base number; and
       ``(III) the entity represents in its application under 
     subparagraph (B) that there will be no reduction under the 
     plan in the number of full-time equivalent residents in 
     primary care.

     If a qualifying entity fails to comply with the 
     representation described in subclause (III), the entity shall 
     be subject to repayment of all amounts paid under this 
     paragraph, in accordance with procedures established to carry 
     out subparagraph (F).
       ``(vi) Base number of residents defined.--For purposes of 
     this paragraph, the term `base number of residents' means, 
     with respect to a qualifying entity operating approved 
     medical residency training programs, the number of full-time 
     equivalent residents in such programs (before application of 
     weighting factors) of the entity as of the most recent cost 
     reporting period ending before June 30, 1997, or, if less, 
     for any subsequent cost reporting period that ends before the 
     date the entity makes application under this paragraph.
       ``(E) Applicable hold harmless percentage.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     `applicable hold harmless percentage' is the percentages 
     specified in clause (ii) or clause (iii), as elected by the 
     qualifying entity in the application submitted under 
     subparagraph (B).
       ``(ii) 5-year reduction plan.--In the case of an entity 
     making the election described in subparagraph (B)(iii)(I), 
     the percentages specified in this clause are, for the--

       ``(I) first and second residency training years in which 
     the reduction plan is in effect, 100 percent,
       ``(II) third such year, 75 percent,
       ``(III) fourth such year, 50 percent, and
       ``(IV) fifth such year, 25 percent.

       ``(iii) 6-year reduction plan.--In the case of an entity 
     making the election described in subparagraph (B)(iii)(II), 
     the percentages specified in this clause are, for the--

       ``(I) first residency training year in which the reduction 
     plan is in effect, 100 percent,
       ``(II) second such year, 95 percent,
       ``(III) third such year, 85 percent,
       ``(IV) fourth such year, 70 percent,
       ``(V) fifth such year, 50 percent, and
       ``(VI) sixth such year, 25 percent.

       ``(F) Penalty for increase in number of residents in 
     subsequent years.--If payments are made under this paragraph 
     to a qualifying entity, if the entity (or any hospital 
     operating as part of the entity) increases the number of 
     full-time equivalent residents above the number of such 
     residents permitted under the reduction plan as of the 
     completion of the plan, then, as specified by the Secretary, 
     the entity is liable for repayment to the Secretary of the 
     total amounts paid under this paragraph to the entity.
       ``(G) Treatment of rotating residents.--In applying this 
     paragraph, the Secretary shall establish rules regarding the 
     counting of residents who are assigned to institutions the 
     medical residency training programs in which are not covered 
     under approved applications under this paragraph.''.
       (b) Relation to Demonstration Projects and Authority.--
       (1) Section 1886(h)(6) of the Social Security Act, added by 
     subsection (a), shall not apply to any residency training 
     program with respect to which a demonstration project 
     described in paragraph (3) has been approved by the Health 
     Care Financing Administration as of May 27, 1997. The 
     Secretary of Health and Human Services shall take such 
     actions as may be necessary to assure that (in the manner 
     described in subparagraph (A) of such section) in no case 
     shall payments be made under such a project with respect to 
     the first 5 percent reduction in the base number of full-time 
     equivalent residents otherwise used under the project.
       (2) Effective May 27, 1997, the Secretary of Health and 
     Human Services is not authorized to approve any demonstration 
     project described in paragraph (3) for any residency training 
     year beginning before July 1, 2006.
       (3) A demonstration project described in this paragraph is 
     a project that provides for additional payments under title 
     XVIII of the Social Security Act in connection with reduction 
     in the number of residents in a medical residency training 
     program.
       (c) Interim, Final Regulations.--In order to carry out the 
     amendment made by subsection (a) in a timely manner, the 
     Secretary of Health and Human Services may first promulgate 
     regulations, that take effect on an interim basis, after 
     notice and pending opportunity for public comment, by not 
     later than 6 months after the date of the enactment of this 
     Act.

     SEC. 10735. DEMONSTRATION PROJECT ON USE OF CONSORTIA.

       (a) In General.--The Secretary of Health and Human Services 
     (in this section referred to as the Secretary) shall 
     establish a demonstration project under which, instead of 
     making payments to teaching hospitals pursuant to section 
     1886(h) of the Social Security Act, the Secretary shall make 
     payments under this section to each consortium that meets the 
     requirements of subsection (b).
       (b) Qualifying Consortia.--For purposes of subsection (a), 
     a consortium meets the requirements of this subsection if the 
     consortium is in compliance with the following:
       (1) The consortium consists of an approved medical 
     residency training program in a teaching hospital and one or 
     more of the following entities:
       (A) A school of allopathic medicine or osteopathic 
     medicine.
       (B) Another teaching hospital, which may be a children's 
     hospital.
       (C) Another approved medical residency training program.
       (D) A Federally qualified health center.
       (E) A medical group practice.
       (F) A managed care entity.
       (G) An entity furnishing outpatient services.
       (H) Such other entity as the Secretary determines to be 
     appropriate.
       (2) The members of the consortium have agreed to 
     participate in the programs of graduate medical education 
     that are operated by the entities in the consortium.
       (3) With respect to the receipt by the consortium of 
     payments made pursuant to this section, the members of the 
     consortium have agreed on a method for allocating the 
     payments among the members.
       (4) The consortium meets such additional requirements as 
     the Secretary may establish.
       (c) Amount and Source of Payment.--The total of payments to 
     a qualifying consortium for a fiscal year pursuant to 
     subsection (a) shall not exceed the amount that would have 
     been paid under section 1886(h) of the Social Security Act 
     for the teaching hospital (or hospitals) in the consortium. 
     Such payments shall be made in such proportion from each of 
     the trust funds established under title XVIII of such Act as 
     the Secretary specifies.

     SEC. 10736. RECOMMENDATIONS ON LONG-TERM PAYMENT POLICIES 
                   REGARDING FINANCING TEACHING HOSPITALS AND 
                   GRADUATE MEDICAL EDUCATION.

       (a) In General.--The Medicare Payment Advisory Commission 
     (established under section 1805 of the Social Security Act 
     and in this section referred to as the ``Commission'') shall 
     examine and develop recommendations on whether and to what 
     extent medicare payment policies and other Federal policies 
     regarding teaching hospitals and graduate medical education 
     should be reformed. Such recommendations shall include 
     recommendations regarding each of the following:
       (1) The financing of graduate medical education, including 
     consideration of alternative broad-based sources of funding 
     for such education and models for the distribution of 
     payments under any all-payer financing mechanism.
       (2) The financing of teaching hospitals, including 
     consideration of the difficulties encountered by such 
     hospitals as competition among health care entities 
     increases. Matters considered under this paragraph shall 
     include consideration of the effects on teaching hospitals of 
     the method of financing used for the MedicarePlus program 
     under part C of title XVIII of the Social Security Act.
       (3) Possible methodologies for making payments for graduate 
     medical education and the selection of entities to receive 
     such payments. Matters considered under this paragraph shall 
     include--
       (A) issues regarding children's hospitals and approved 
     medical residency training programs in pediatrics, and
       (B) whether and to what extent payments are being made (or 
     should be made) for training in the various nonphysician 
     health professions.
       (4) Federal policies regarding international medical 
     graduates.
       (5) The dependence of schools of medicine on service-
     generated income.
       (6) Whether and to what extent the needs of the United 
     States regarding the supply of physicians, in the aggregate 
     and in different specialties, will change during the 10-year 
     period beginning on October 1, 1997, and whether and to what 
     extent any such changes will have significant financial 
     effects on teaching hospitals.
       (7) Methods for promoting an appropriate number, mix, and 
     geographical distribution of health professionals.
       (c) Consultation.--In conducting the study under subsection 
     (a), the Commission shall consult with the Council on 
     Graduate Medical Education and individuals with expertise in 
     the area of graduate medical education, including--
       (1) deans from allopathic and osteopathic schools of 
     medicine;
       (2) chief executive officers (or equivalent administrative 
     heads) from academic health centers, integrated health care 
     systems, approved medical residency training programs, and 
     teaching hospitals that sponsor approved medical residency 
     training programs;
       (3) chairs of departments or divisions from allopathic and 
     osteopathic schools of medicine, schools of dentistry, and 
     approved medical residency training programs in oral surgery;
       (4) individuals with leadership experience from 
     representative fields of non-physician health professionals;
       (5) individuals with substantial experience in the study of 
     issues regarding the composition of the health care workforce 
     of the United States; and
       (6) individuals with expertise on the financing of health 
     care.
       (d) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the

[[Page H4545]]

     Commission shall submit to the Congress a report providing 
     its recommendations under this section and the reasons and 
     justifications for such recommendations.

     SEC. 10737. MEDICARE SPECIAL REIMBURSEMENT RULE FOR CERTAIN 
                   COMBINED RESIDENCY PROGRAMS.

       (a) In General.--Section 1886(h)(5)(G) (42 U.S.C. 
     1395ww(h)(5)(G)) is amended--
       (1) in clause (i), by striking ``and (iii)'' and inserting 
     ``, (iii), and (iv)''; and
       (2) by adding at the end the following:
       ``(iv) Special rule for certain combined residency 
     programs.--(I) In the case of a resident enrolled in a 
     combined medical residency training program in which all of 
     the individual programs (that are combined) are for training 
     a primary care resident (as defined in subparagraph (H)), the 
     period of board eligibility shall be the minimum number of 
     years of formal training required to satisfy the requirements 
     for initial board eligibility in the longest of the 
     individual programs plus one additional year.
       ``(II) A resident enrolled in a combined medical residency 
     training program that includes an obstetrics and gynecology 
     program shall qualify for the period of board eligibility 
     under subclause (I) if the other programs such resident 
     combines with such obstetrics and gynecology program are for 
     training a primary care resident.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     apply to combined medical residency programs for residency 
     years beginning on or after July 1, 1998.

                      CHAPTER 5--OTHER PROVISIONS

     SEC. 10741. CENTERS OF EXCELLENCE.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1888 the following:


                        ``centers of excellence

       ``Sec. 1889. (a) In General.--The Secretary shall use a 
     competitive process to contract with specific hospitals or 
     other entities for furnishing services related to surgical 
     procedures, and for furnishing services (unrelated to 
     surgical procedures) to hospital inpatients that the 
     Secretary determines to be appropriate. The services may 
     include any services covered under this title that the 
     Secretary determines to be appropriate, including post-
     hospital services.
       ``(b) Quality Standards.--Only entities that meet quality 
     standards established by the Secretary shall be eligible to 
     contract under this section. Contracting entities shall 
     implement a quality improvement plan approved by the 
     Secretary.
       ``(c) Payment.--Payment under this section shall be made on 
     the basis of negotiated all-inclusive rates. The amount of 
     payment made by the Secretary to an entity under this title 
     for services covered under a contract shall be less than the 
     aggregate amount of the payments that the Secretary would 
     have otherwise made for the services.
       ``(d) Contract Period.--A contract period shall be 3 years 
     (subject to renewal), so long as the entity continues to meet 
     quality and other contractual standards.
       ``(e) Incentives for Use of Centers.--Entities under a 
     contract under this section may furnish additional services 
     (at no cost to an individual entitled to benefits under this 
     title) or waive cost-sharing, subject to the approval of the 
     Secretary.
       ``(f) Limit on Number of Centers.--The Secretary shall 
     limit the number of centers in a geographic area to the 
     number needed to meet projected demand for contracted 
     services.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to services furnished on or after October 1, 1997.

     SEC. 10742. MEDICARE PART B SPECIAL ENROLLMENT PERIOD AND 
                   WAIVER OF PART B LATE ENROLLMENT PENALTY AND 
                   MEDIGAP SPECIAL OPEN ENROLLMENT PERIOD FOR 
                   CERTAIN MILITARY RETIREES AND DEPENDENTS.

       (a) Medicare Part B Special Enrollment Period; Waiver of 
     Part B Penalty for Late Enrollment.--
       (1) In general.--In the case of any eligible individual (as 
     defined in subsection (c)), the Secretary of Health and Human 
     Services shall provide for a special enrollment period during 
     which the individual may enroll under part B of title XVIII 
     of the Social Security Act. Such period shall be for a period 
     of 6 months and shall begin with the first month that begins 
     at least 45 days after the date of the enactment of this Act.
       (2) Coverage period.--In the case of an eligible individual 
     who enrolls during the special enrollment period provided 
     under paragraph (1), the coverage period under part B of 
     title XVIII of the Social Security Act shall begin on the 
     first day of the month following the month in which the 
     individual enrolls.
       (3) Waiver of part b late enrollment penalty.--In the case 
     of an eligible individual who enrolls during the special 
     enrollment period provided under paragraph (1), there shall 
     be no increase pursuant to section 1839(b) of the Social 
     Security Act in the monthly premium under part B of title 
     XVIII of such Act.
       (b) Medigap Special Open Enrollment Period.--
     Notwithstanding any other provision of law, an issuer of a 
     medicare supplemental policy (as defined in section 1882(g) 
     of the Social Security Act)--
       (1) may not deny or condition the issuance or effectiveness 
     of a medicare supplemental policy that has a benefit package 
     classified as ``A'', ``B'', ``C'', or ``F'' under the 
     standards established under section 1882(p)(2) of the Social 
     Security Act (42 U.S.C. 1395rr(p)(2)); and
       (2) may not discriminate in the pricing of the policy on 
     the basis of the individual's health status, medical 
     condition (including both physical and mental illnesses), 
     claims experience, receipt of health care, medical history, 
     genetic information, evidence of insurability (including 
     conditions arising out of acts of domestic violence), or 
     disability;
     in the case of an eligible individual who seeks to enroll 
     (and is enrolled) during the 6-month period described in 
     subsection (a)(1).
       (c) Eligible Individual Defined.--In this section, the term 
     ``eligible individual'' means an individual--
       (1) who, as of the date of the enactment of this Act, has 
     attained 65 years of age and was eligible to enroll under 
     part B of title XVIII of the Social Security Act, and
       (2) who at the time the individual first satisfied 
     paragraph (1) or (2) of section 1836 of the Social Security 
     Act--
       (A) was a covered beneficiary (as defined in section 
     1072(5) of title 10, United States Code), and
       (B) did not elect to enroll (or to be deemed enrolled) 
     under section 1837 of the Social Security Act during the 
     individual's initial enrollment period.
     The Secretary of Health and Human Services shall consult with 
     the Secretary of Defense in the identification of eligible 
     individuals.

     SEC. 10743. PROTECTIONS UNDER THE MEDICARE PROGRAM FOR 
                   DISABLED WORKERS WHO LOSE BENEFITS UNDER A 
                   GROUP HEALTH PLAN.

       (a) No Premium Penalty for Late Enrollment.--The second 
     sentence of section 1839(b) (42 U.S.C. 1395r(b)) is amended 
     by inserting ``and not pursuant to a special enrollment 
     period under section 1837(i)(4)'' after ``section 1837)''.
       (b) Special Medicare Enrollment Period.--
       (1) In general.--Section 1837(i) (42 U.S.C. 1395p(i)) is 
     amended by adding at the end the following new paragraph:
       ``(4)(A) In the case of an individual who is entitled to 
     benefits under part A pursuant to section 226(b) and--
       ``(i) who at the time the individual first satisfies 
     paragraph (1) or (2) of section 1836--
       ``(I) is enrolled in a group health plan described in 
     section 1862(b)(1)(A)(v) by reason of the individual's (or 
     the individual's spouse's) current employment or otherwise, 
     and
       ``(II) has elected not to enroll (or to be deemed enrolled) 
     under this section during the individual's initial enrollment 
     period; and
       ``(ii) whose continuous enrollment under such group health 
     plan is involuntarily terminated at a time when the 
     enrollment under the plan is not by reason of the 
     individual's (or the individual's spouse's) current 
     employment,
     there shall be a special enrollment period described in 
     subparagraph (B).
       ``(B) The special enrollment period referred to in 
     subparagraph (A) is the 6-month period beginning on the date 
     of the enrollment termination described in subparagraph 
     (A)(ii).''.
       (2) Coverage period.--Section 1838(e) (42 U.S.C. 1395q(e)) 
     is amended--
       (A) by inserting ``or 1837(i)(4)(B)'' after ``1837(i)(3)'' 
     the first place it appears, and
       (B) by inserting ``or specified in section 
     1837(i)(4)(A)(i)'' after ``1837(i)(3)'' the second place it 
     appears''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to involuntary terminations of coverage under a 
     group health plan occurring on or after the date of the 
     enactment of this Act.

     SEC. 10744. PLACEMENT OF ADVANCE DIRECTIVE IN MEDICAL RECORD.

       (a) In General.--Section 1866(f)(1)(B) (42 U.S.C. 
     1395cc(f)(1)(B)) is amended by striking ``in the individual's 
     medical record'' and inserting ``in a prominent part of the 
     individual's current medical record''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to provider agreements entered into, renewed, or 
     extended on or after such date (not later than 1 year after 
     the date of the enactment of this Act) as the Secretary of 
     Health and Human Services specifies.
                  Subtitle I--Medical Liability Reform

                     CHAPTER 1--GENERAL PROVISIONS

     SEC. 10801. FEDERAL REFORM OF HEALTH CARE LIABILITY ACTIONS.

       (a) Applicability.--This subtitle shall apply with respect 
     to any health care liability action brought in any State or 
     Federal court, except that this subtitle shall not apply to--
       (1) an action for damages arising from a vaccine-related 
     injury or death to the extent that title XXI of the Public 
     Health Service Act applies to the action, or
       (2) an action under the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1001 et seq.).
       (b) Preemption.--This subtitle shall preempt any State law 
     to the extent such law is inconsistent with the limitations 
     contained in this subtitle. This subtitle 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 subtitle or otherwise imposes greater 
     restrictions than those provided in this subtitle.
       (c) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in subsection (b) shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;

[[Page H4546]]

       (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 or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum.
       (d) Amount in Controversy.--In an action to which this 
     subtitle applies and which is brought under section 1332 of 
     title 28, United States Code, the amount of noneconomic 
     damages or punitive damages, and attorneys' fees or costs, 
     shall not be included in determining whether the matter in 
     controversy exceeds the sum or value of $50,000.
       (e) Federal Court Jurisdiction Not Established on Federal 
     Question Grounds.--Nothing in this subtitle shall be 
     construed to establish any jurisdiction in the district 
     courts of the United States over health care liability 
     actions on the basis of section 1331 or 1337 of title 28, 
     United States Code.

     SEC. 10802. DEFINITIONS.

       As used in this subtitle:
       (1) Actual damages.--The term ``actual damages'' means 
     damages awarded to pay for economic loss.
       (2) Alternative dispute resolution system; adr.--The term 
     ``alternative dispute resolution system'' or ``ADR'' means a 
     system established under Federal or State law that provides 
     for the resolution of health care liability claims in a 
     manner other than through health care liability actions.
       (3) Claimant.--The term ``claimant'' means any person who 
     brings a health care liability action and any person on whose 
     behalf such an action is brought. If such action is brought 
     through or on behalf of an estate, the term includes the 
     claimant's decedent. If such action is brought through or on 
     behalf of a minor or incompetent, the term includes the 
     claimant's legal guardian.
       (4) Clear and convincing evidence.--The term ``clear and 
     convincing evidence'' is that measure or degree of proof that 
     will produce in the mind of the trier of fact a firm belief 
     or conviction as to the truth of the allegations sought to be 
     established. Such measure or degree of proof is more than 
     that required under preponderance of the evidence but less 
     than that required for proof beyond a reasonable doubt.
       (5) Collateral source payments.--The term ``collateral 
     source payments'' means any amount paid or reasonably likely 
     to be paid in the future to or on behalf of a claimant, or 
     any service, product, or other benefit provided or reasonably 
     likely to be provided in the future to or on behalf of a 
     claimant, as a result of an injury or wrongful death, 
     pursuant to--
       (A) any State or Federal health, sickness, income-
     disability, accident or workers' compensation Act;
       (B) any health, sickness, income-disability, or accident 
     insurance that provides health benefits or income-disability 
     coverage;
       (C) any contract or agreement of any group, organization, 
     partnership, or corporation to provide, pay for, or reimburse 
     the cost of medical, hospital, dental, or income disability 
     benefits; and
       (D) any other publicly or privately funded program.
       (6) Drug.--The term ``drug'' has the meaning given such 
     term in section 201(g)(1) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 321(g)(1)).
       (7) Economic loss.--The term ``economic loss'' means any 
     pecuniary loss resulting from injury (including the loss of 
     earnings or other benefits related to employment, medical 
     expense loss, replacement services loss, loss due to death, 
     burial costs, and loss of business or employment 
     opportunities), to the extent recovery for such loss is 
     allowed under applicable State law.
       (8) Harm.--The term ``harm'' means any legally cognizable 
     wrong or injury for which punitive damages may be imposed.
       (9) Health benefit plan.--The term ``health benefit plan'' 
     means--
       (A) a hospital or medical expense incurred policy or 
     certificate,
       (B) a hospital or medical service plan contract,
       (C) a health maintenance subscriber contract, or
       (D) a MedicarePlus product (offered under part C of title 
     XVIII of the Social Security Act),
     that provides benefits with respect to health care services.
       (10) Health care liability action.--The term ``health care 
     liability action'' means a civil action brought in a State or 
     Federal court against a health care provider, an entity which 
     is obligated to provide or pay for health benefits under any 
     health benefit plan (including any person or entity acting 
     under a contract or arrangement to provide or administer any 
     health benefit), or the manufacturer, distributor, supplier, 
     marketer, promoter, or seller of a medical product, in which 
     the claimant alleges a claim (including third party claims, 
     cross claims, counter claims, or distribution claims) based 
     upon the provision of (or the failure to provide or pay for) 
     health care services or the use of a medical product, 
     regardless of the theory of liability on which the claim is 
     based or the number of plaintiffs, defendants, or causes of 
     action.
       (11) Health care liability claim.--The term ``health care 
     liability claim'' means a claim in which the claimant alleges 
     that injury was caused by the provision of (or the failure to 
     provide) health care services.
       (12) Health care provider.--The term ``health care 
     provider'' means any person that is engaged in the delivery 
     of health care services in a State and that is required by 
     the laws or regulations of the State to be licensed or 
     certified by the State to engage in the delivery of such 
     services in the State.
       (13) Health care service.--The term ``health care service'' 
     means any service for which payment may be made under a 
     health benefit plan including services related to the 
     delivery or administration of such service.
       (14) Medical device.--The term ``medical device'' has the 
     meaning given such term in section 201(h) of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)).
       (15) Noneconomic damages.--The term ``noneconomic damages'' 
     means damages paid to an individual for pain and suffering, 
     inconvenience, emotional distress, mental anguish, loss of 
     consortium, injury to reputation, humiliation, and other 
     nonpecuniary losses.
       (16) Person.--The term ``person'' means any individual, 
     corporation, company, association, firm, partnership, 
     society, joint stock company, or any other entity, including 
     any governmental entity.
       (17) Product seller.--
       (A) In general.--Subject to subparagraph (B), the term 
     ``product seller'' means a person who, in the course of a 
     business conducted for that purpose--
       (i) sells, distributes, rents, leases, prepares, blends, 
     packages, labels, or is otherwise involved in placing, a 
     product in the stream of commerce, or
       (ii) installs, repairs, or maintains the harm-causing 
     aspect of a product.
       (B) Exclusion.--Such term does not include--
       (i) a seller or lessor of real property;
       (ii) a provider of professional services in any case in 
     which the sale or use of a product is incidental to the 
     transaction and the essence of the transaction is the 
     furnishing of judgment, skill, or services; or
       (iii) any person who--

       (I) acts in only a financial capacity with respect to the 
     sale of a product; or
       (II) leases a product under a lease arrangement in which 
     the selection, possession, maintenance, and operation of the 
     product are controlled by a person other than the lessor.

       (18) Punitive damages.--The term ``punitive damages'' means 
     damages awarded against any person not to compensate for 
     actual injury suffered, but to punish or deter such person or 
     others from engaging in similar behavior in the future.
       (19) State.--The term ``State'' means each of the several 
     States, the District of Columbia, Puerto Rico, the Virgin 
     Islands, Guam, American Samoa, the Northern Mariana Islands, 
     and any other territory or possession of the United States.

     SEC. 10803. EFFECTIVE DATE.

       This subtitle will apply to any health care liability 
     action brought in a Federal or State court and to any health 
     care liability claim subject to an alternative dispute 
     resolution system, that is initiated on or after the date of 
     enactment of this subtitle, except that any health care 
     liability claim or action arising from an injury occurring 
     prior to the date of enactment of this subtitle shall be 
     governed by the applicable statute of limitations provisions 
     in effect at the time the injury occurred.

     CHAPTER 2--UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS

     SEC. 10811. STATUTE OF LIMITATIONS.

       A health care liability action may not be brought after the 
     expiration of the 2-year period that begins on the date on 
     which the alleged injury that is the subject of the action 
     was discovered or should reasonably have been discovered, but 
     in no case after the expiration of the 5-year period that 
     begins on the date the alleged injury occurred.

     SEC. 10812. CALCULATION AND PAYMENT OF DAMAGES.

       (a) Treatment of Noneconomic Damages.--
       (1) Limitation on noneconomic damages.--The total amount of 
     noneconomic damages that may be awarded to a claimant for 
     losses resulting from the injury which is the subject of a 
     health care liability action may not exceed $250,000, 
     regardless of the number of parties against whom the action 
     is brought or the number of actions brought with respect to 
     the injury.
       (2) Joint and several liability.--In any health care 
     liability action brought in State or Federal court, a 
     defendant shall be liable only for the amount of noneconomic 
     damages attributable to such defendant in direct proportion 
     to such defendant's share of fault or responsibility for the 
     claimant's actual damages, as determined by the trier of 
     fact. In all such cases, the liability of a defendant for 
     noneconomic damages shall be several and not joint.
       (b) Treatment of Punitive Damages.--
       (1) General rule.--Punitive damages may, to the extent 
     permitted by applicable State law, be awarded in any health 
     care liability action for harm in any Federal or State court 
     against a defendant if the claimant establishes by clear and 
     convincing evidence that the harm suffered was the result of 
     conduct--
       (A) specifically intended to cause harm, or
       (B) conduct manifesting a conscious, flagrant indifference 
     to the rights or safety of others.
       (2) Proportional awards.--The amount of punitive damages 
     that may be awarded in

[[Page H4547]]

     any health care liability action subject to this subtitle 
     shall not exceed 3 times the amount of damages awarded to the 
     claimant for economic loss, or $250,000, whichever is 
     greater. This paragraph shall be applied by the court and 
     shall not be disclosed to the jury.
       (3) Applicability.--This subsection shall apply to any 
     health care liability action brought in any Federal or State 
     court on any theory where punitive damages are sought. This 
     subsection does not create a cause of action for punitive 
     damages. This subsection does not preempt or supersede any 
     State or Federal law to the extent that such law would 
     further limit the award of punitive damages.
       (4) Bifurcation.--At the request of any party, the trier of 
     fact shall consider in a separate proceeding whether punitive 
     damages are to be awarded and the amount of such award. If a 
     separate proceeding is requested, evidence relevant only to 
     the claim of punitive damages, as determined by applicable 
     State law, shall be inadmissible in any proceeding to 
     determine whether actual damages are to be awarded.
       (5) Drugs and devices.--
       (A) In general.--(i) Punitive damages shall not be awarded 
     against a manufacturer or product seller of a drug or medical 
     device which caused the claimant's harm where--
       (I) such drug or device was subject to premarket approval 
     by the Food and Drug Administration with respect to the 
     safety of the formulation or performance of the aspect of 
     such drug or device which caused the claimant's harm, or the 
     adequacy of the packaging or labeling of such drug or device 
     which caused the harm, and such drug, device, packaging, or 
     labeling 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.
       (ii) Clause (i) 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.
       (B) Packaging.--In a health care liability action for harm 
     which is alleged to relate to the adequacy of the packaging 
     or labeling 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 or product 
     seller of the drug shall not be held liable for punitive 
     damages unless such packaging or labeling is found by the 
     court by clear and convincing evidence to be substantially 
     out of compliance with such regulations.
       (c) Periodic Payments for Future Losses.--
       (1) General rule.--In any health care liability action in 
     which the damages awarded for future economic and noneconomic 
     loss exceeds $50,000, a person shall not be required to pay 
     such damages in a single, lump-sum payment, but shall be 
     permitted to make such payments periodically based on when 
     the damages are found likely to occur, as such payments are 
     determined by the court.
       (2) Finality of judgment.--The judgment of the court 
     awarding periodic payments under this subsection may not, in 
     the absence of fraud, be reopened at any time to contest, 
     amend, or modify the schedule or amount of the payments.
       (3) Lump-sum settlements.--This subsection shall not be 
     construed to preclude a settlement providing for a single, 
     lump-sum payment.
       (d) Treatment of Collateral Source Payments.--
       (1) Introduction into evidence.--In any health care 
     liability action, any defendant may introduce evidence of 
     collateral source payments. If any defendant elects to 
     introduce such evidence, the claimant may introduce evidence 
     of any amount paid or contributed or reasonably likely to be 
     paid or contributed in the future by or on behalf of the 
     claimant to secure the right to such collateral source 
     payments.
       (2) No subrogation.--No provider of collateral source 
     payments shall recover any amount against the claimant or 
     receive any lien or credit against the claimant's recovery or 
     be equitably or legally subrogated the right of the claimant 
     in a health care liability action.
       (3) Application to settlements.--This subsection shall 
     apply to an action that is settled as well as an action that 
     is resolved by a fact finder.

     SEC. 10813. ALTERNATIVE DISPUTE RESOLUTION.

       Any ADR used to resolve a health care liability action or 
     claim shall contain provisions relating to statute of 
     limitations, non-economic damages, joint and several 
     liability, punitive damages, collateral source rule, and 
     periodic payments which are identical to the provisions 
     relating to such matters in this subtitle.
                      TITLE XI--BUDGET ENFORCEMENT

     SEC. 11001. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Budget 
     Enforcement Act of 1997''.
       (b) Table of Contents.--

                      TITLE XI--BUDGET ENFORCEMENT

Sec. 11001. Short title; table of contents.

  Subtitle A--Amendments to the Congressional Budget and Impoundment 
                          Control Act of 1974

Sec. 11101. Amendments to section 3.
Sec. 11102. Amendments to section 201.
Sec. 11103. Amendments to section 202.
Sec. 11104. Amendment to section 300.
Sec. 11105. Amendments to section 301.
Sec. 11106. Amendments to section 302.
Sec. 11107. Amendments to section 303.
Sec. 11108. Amendment to section 305.
Sec. 11109. Amendments to section 308.
Sec. 11110. Amendments to section 310.
Sec. 11111. Amendments to section 311.
Sec. 11112. Amendment to section 312.
Sec. 11113. Adjustments and Budget Committee determinations.
Sec. 11114. Effect of self-executing amendments on points of order in 
              the House of Representatives.
Sec. 11115. Amendment of section 401 and repeal of section 402.
Sec. 11116. Repeal of title VI.
Sec. 11117. Amendments to section 904.
Sec. 11118. Repeal of sections 905 and 906.
Sec. 11119. Amendments to sections 1022 and 1024.
Sec. 11120. Amendment to section 1026.

  Subtitle B--Amendments to the Balanced Budget and Emergency Deficit 
                          Control Act of 1985

Sec. 11201. Purpose.
Sec. 11202. General statement and definitions.
Sec. 11203. Enforcing discretionary spending limits.
Sec. 11204. Violent crime reduction trust fund.
Sec. 11205. Enforcing pay-as-you-go.
Sec. 11206. Reports and orders.
Sec. 11207. Exempt programs and activities.
Sec. 11208. General and special sequestration rules.
Sec. 11209. The baseline.
Sec. 11210. Technical correction.
Sec. 11211. Judicial review.
Sec. 11212. Effective date.
Sec. 11213. Reduction of preexisting balances and exclusion of effects 
              of this Act from paygo scorecard.
  Subtitle A--Amendments to the Congressional Budget and Impoundment 
                          Control Act of 1974

     SEC. 11101. AMENDMENTS TO SECTION 3.

       Section 3 of the Congressional Budget and Impoundment 
     Control Act of 1974 (2 U.S.C. 622) is amended--
       (1) in paragraph (2)(A), by striking ``and'' at the end of 
     clause (iii), by striking the period and inserting ``; and'' 
     at the end of clause (iv), and by adding at the end the 
     following:
       ``(v) entitlement authority and the food stamp program.''; 
     and
       (2) in paragraph (9), by inserting ``, but such term does 
     not include salary or basic pay funded through an 
     appropriation Act'' before the period.

     SEC. 11102. AMENDMENTS TO SECTION 201.

       (a) Term of Office.--The first sentence of section 
     201(a)(3) of the Congressional Budget Act of 1974 is amended 
     to read as follows: ``The term of office of the Director 
     shall be four years and shall expire on January 3 of the year 
     preceding a Presidential election.''.
       (b) Redesignation of Executed Provision.--Section 201 of 
     the Congressional Budget Act of 1974 is amended by 
     redesignating subsection (g) (relating to revenue estimates) 
     as subsection (f).

     SEC. 11103. AMENDMENTS TO SECTION 202.

       (a) Assistance to Budget Committees.--The first sentence of 
     section 202(a) of the Congressional Budget Act of 1974 is 
     amended by inserting ``primary'' before ``duty''.
       (b) Elimination of Executed Provision.--Section 202 of the 
     Congressional Budget Act of 1974 is amended by striking 
     subsection (e) and by redesignating subsections (f), (g), and 
     (h) as subsections (e), (f), and (g), respectively.

     SEC. 11104. AMENDMENT TO SECTION 300.

       The item relating to February 25 in the timetable set forth 
     in section 300 of the Congressional Budget Act of 1974 is 
     amended by striking ``February 25'' and inserting ``Within 6 
     weeks after President submits budget''.

     SEC. 11105. AMENDMENTS TO SECTION 301.

       (a) Terms of Budget Resolutions.--Section 301(a) of the 
     Congressional Budget Act of 1974 is amended by striking ``, 
     and planning levels for each of the two ensuing fiscal 
     years,'' and inserting ``and for at least each of the 4 
     ensuing fiscal years''.
       (b) Contents of Budget Resolutions.--Paragraphs (1) and (4) 
     of section 301(a) of the Congressional Budget Act of 1974 are 
     amended by striking ``, budget outlays, direct loan 
     obligations, and primary loan guarantee commitments'' each 
     place it appears and inserting ``and budget outlays''.
       (c) Additional Matters.--Section 301(b) of the 
     Congressional Budget Act of 1974 is amended by amending 
     paragraph (7) to read as follows--
       ``(7) set forth pay-as-you-go procedures in the Senate 
     whereby committee allocations, aggregates, and other levels 
     can be revised for legislation within a committee's 
     jurisdiction if such legislation would not increase the 
     deficit for the first year covered by the resolution and will 
     not increase the deficit

[[Page H4548]]

     for the period of 5 fiscal years covered by the 
     resolution;''.
       (d) Views and Estimates.--The first sentence of section 
     301(d) of the Congressional Budget Act of 1974 is amended by 
     inserting ``or at such time as may be requested by the 
     Committee on the Budget,'' after ``Code,''.
       (e) Hearings and Report.--Section 301(e)(2) of the 
     Congressional Budget Act of 1974 is amended by striking 
     ``total direct loan obligations, total primary loan guarantee 
     commitments,''.
       (f) Social Security Corrections.--Section 301(i) of the 
     Congressional Budget Act of 1974 is amended by--
       (1) inserting ``Social security point of order.--'' after 
     ``(i)''; and
       (2) striking ``as reported to the Senate'' and inserting 
     ``(or amendment, motion, or conference report on such a 
     resolution)''.

     SEC. 11106. AMENDMENTS TO SECTION 302.

       (a) Allocations and Suballocations.--Subsections (a) and 
     (b) of section 302 of the Congressional Budget Act of 1974 
     are amended to read as follows:
       ``(a) Committee Spending Allocations.--
       ``(1) Allocation among committees.--The joint explanatory 
     statement accompanying a conference report on a budget 
     resolution shall include allocations, consistent with the 
     resolution recommended in the conference report, of the 
     appropriate levels (for each fiscal year covered by that 
     resolution and a total for all such years, except in the case 
     of the Committee on Appropriations only for the first such 
     fiscal year) of--
       ``(A) total new budget authority;
       ``(B) total outlays; and
       ``(C) in the Senate, social security outlays;
     among each committee of the House of Representatives or the 
     Senate that has jurisdiction over legislation providing or 
     creating such amounts.
       ``(2) No double counting.--In the House of Representatives, 
     any item allocated to one committee may not be allocated to 
     another such committee.
       ``(3) Further division of amounts.--In the House of 
     Representatives, the amounts allocated to each committee for 
     each fiscal year, other than the Committee on Appropriations, 
     shall be further divided between amounts provided or required 
     by law on the date of filing of that conference report and 
     amounts not so provided or required. The amounts allocated to 
     the Committee on Appropriations for each fiscal year shall be 
     further divided between discretionary and mandatory amounts 
     or programs, as appropriate.
       ``(4) Amounts not allocated.--(A) In the House of 
     Representatives, if a committee receives no allocation of new 
     budget authority or outlays, that committee shall be deemed 
     to have received an allocation equal to zero for new budget 
     authority or outlays.
       ``(B) In the Senate, if a committee receives no allocation 
     of new budget authority, outlays, or social security outlays, 
     that committee shall be deemed to have received an allocation 
     equal to zero for new budget authority, outlays, or social 
     security outlays.
       ``(5) Social security levels in the Senate.--
       ``(A) In general.--For purposes of paragraph (1)(C), social 
     security surpluses equal the excess of social security 
     revenues over social security outlays in a fiscal year or 
     years with such an excess and social security deficits equal 
     the excess of social security outlays over social security 
     revenues in a fiscal year or years with such an excess.
       ``(B) Tax treatment.--For purposes of paragraph (1)(C), no 
     provision of any legislation involving a change in chapter 1 
     of the Internal Revenue Code of 1986 shall be treated as 
     affecting the amount of social security revenues or outlays 
     unless such provision changes the income tax treatment of 
     social security benefits.
       ``(6) Adjusting Allocation of Discretionary Spending in the 
     House of Representatives.--(A) If a concurrent resolution on 
     the budget is not adopted by April 15, the chairman of the 
     Committee on the Budget of the House of Representatives shall 
     submit to the House, as soon as practicable, an allocation 
     under paragraph (1) to the Committee on Appropriations 
     consistent with the discretionary spending limits contained 
     in the most recently agreed to concurrent resolution on the 
     budget for the second fiscal year covered by that resolution.
       ``(B) As soon as practicable after an allocation under 
     paragraph (1) is submitted under this section, the Committee 
     on Appropriations shall make suballocations and promptly 
     report those suballocations to the House of Representatives.
       ``(b) Suballocations by Appropriation Committees.--As soon 
     as practicable after a concurrent resolution on the budget is 
     agreed to, the Committee on Appropriations of each House 
     (after consulting with the Committee on Appropriations of the 
     other House) shall suballocate each amount allocated to it 
     for the budget year under subsection (a) among its 
     subcommittees. Each Committee on Appropriations shall 
     promptly report to its House suballocations made or revised 
     under this paragraph.''.
       (b) Point of Order.--Section 302(c) of the Congressional 
     Budget Act of 1974 is amended to read as follows:
       ``(c) Point of Order.--After the Committee on 
     Appropriations has received an allocation pursuant to 
     subsection (a) for a fiscal year, it shall not be in order in 
     the House of Representatives or the Senate to consider any 
     bill, joint resolution, amendment, motion, or conference 
     report providing new budget authority for that fiscal year 
     within the jurisdiction of that committee, until such 
     committee makes the suballocations required by subsection 
     (b).''.
       (c) Enforcement of Point of Order.--(1) Section 302(f)(1) 
     of the Congressional Budget Act of 1974 is amended by--
       (A) striking ``providing new budget authority for such 
     fiscal year or new entitlement authority effective during 
     such fiscal year'' and inserting ``providing new budget 
     authority for any fiscal year covered by the concurrent 
     resolution'';
       (B) striking ``appropriate allocation made pursuant to 
     subsection (b) for such fiscal year'' and inserting 
     ``appropriate allocation made under subsection (a) or any 
     suballocation made under subsection (b), as applicable, for 
     the fiscal year of the concurrent resolution or for the total 
     of all fiscal years covered by the concurrent resolution''; 
     and
       (C) striking ``of new discretionary budget authority or new 
     entitlement authority to be exceeded'' and inserting ``of new 
     discretionary budget authority to be exceeded''.
       (2) Section 302(f)(2) of the Congressional Budget Act of 
     1974 is amended to read as follows:
       ``(2) Enforcement of committee allocations and 
     suballocations in the Senate.--After a concurrent resolution 
     on the budget is agreed to, it shall not be in order in the 
     Senate to consider any bill, joint resolution, amendment, 
     motion, or conference report that would cause--
       ``(A) in the case of any committee except the Committee on 
     Appropriations, the appropriate allocation of new budget 
     authority or outlays under subsection (a) to be exceeded; or
       ``(B) in the case of the Committee on Appropriations, the 
     appropriate suballocation of new budget authority or outlays 
     under subsection (b) to be exceeded.''.
       (d) Separate Allocations.--Section 302(g) of the 
     Congressional Budget Act of 1974 is amended to read as 
     follows:
       ``(g) Separate Allocations.--The Committees on 
     Appropriations and the Budget shall make separate allocations 
     and suballocations under this section consistent with the 
     categories in section 251(c) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985.''

     SEC. 11107. AMENDMENTS TO SECTION 303.

       (a) In General.--Section 303 of the Congressional Budget 
     Act of 1974 is amended to read as follows:


     ``concurrent resolution on the budget must be adopted before 
legislation providing new budget authority, new spending authority, or 
       changes in revenues or the public debt limit is considered

       ``Sec. 303. (a) In General.--It shall not be in order in 
     either the House of Representatives or the Senate to consider 
     any bill, joint resolution, amendment, motion, or conference 
     report as reported to the House or Senate which provides--
       ``(1) new budget authority for a fiscal year;
       ``(2) an increase or decrease in revenues to become 
     effective during a fiscal year;
       ``(3) an increase or decrease in the public debt limit to 
     become effective during a fiscal year;
       ``(4) in the Senate only, new spending authority (as 
     defined in section 401(c)(2)) for a fiscal year; or
       ``(5) in the Senate only, outlays,
     until the concurrent resolution on the budget for such fiscal 
     year (or, in the Senate, a concurrent resolution on the 
     budget covering such fiscal year) has been agreed to pursuant 
     to section 301.
       ``(b) Exceptions.--(1) In the House of Representatives, 
     subsection (a) does not apply to any bill or resolution--
       ``(A) providing advance discretionary new budget authority 
     which first becomes available in a fiscal year following the 
     fiscal year to which the concurrent resolution applies; or
       ``(B) increasing or decreasing revenues which first become 
     effective in a fiscal year following the fiscal year to which 
     the concurrent resolution applies.
     After May 15 of any calendar year, subsection (a) does not 
     apply in the House of Representatives to any general 
     appropriation bill, or amendment thereto, which provides new 
     budget authority for the fiscal year beginning in such 
     calendar year.
       ``(2) In the Senate, subsection (a) does not apply to any 
     bill or resolution making advance appropriations for the 
     fiscal year to which the concurrent resolution applies and 
     the two succeeding fiscal years.
       (b) Conforming Amendment.--The item relating to section 303 
     in the table of contents set forth in section 1(b) of the 
     Congressional Budget and Impoundment Control Act of 1974 is 
     amended by striking ``new credit authority,''.

     SEC. 11108. AMENDMENT TO SECTION 305.

       Section 305(a)(1) of the Congressional Budget Act of 1974 
     is amended by inserting ``when the House is not in session'' 
     after ``holidays'' each place it appears.

     SEC. 11109. AMENDMENTS TO SECTION 308.

       Section 308 of the Congressional Budget Act of 1974 is 
     amended--
       (1)(A) in the side heading of subsection (a), by striking 
     ``OR NEW CREDIT AUTHORITY,'' and by striking the first comma 
     and inserting ``OR'';
       (B) in paragraphs (1) and (2) of subsection (a), by 
     striking ``or new credit authority,'' each place it appears 
     and by striking the comma before ``new spending authority'' 
     each place it appears and inserting ``or'';

[[Page H4549]]

       (2) in subsection (b)(1), by striking ``or new credit 
     authority,'' and by striking the comma before ``new spending 
     authority'' and inserting ``or'';
       (3) in subsection (c), by inserting ``and'' after the 
     semicolon at the end of paragraph (3), by striking ``; and'' 
     at the end of paragraph (4) and inserting a period; and by 
     striking paragraph (5); and
       (4) by inserting ``joint'' before ``resolution'' each place 
     it appears and, in subsection (b)(1), by inserting ``joint'' 
     before ``resolutions''.

     SEC. 11110. AMENDMENTS TO SECTION 310.

       Section 310 of the Congressional Budget Act of 1974 is 
     amended by--
       (1) in subsection (a)(1), by inserting ``and'' after the 
     semicolon at the end of subparagraph (B), by striking 
     ``subparagraphs (C) and (D), and by inserting after 
     subparagraph (B) the following new subparagraph:
       ``(C) direct spending (as defined in section 250(c)(8) of 
     the Balanced Budget and Emergency Deficit Control Act of 
     1985),''; and
       (2) in subsection (c)(1)(A), by inserting ``of the absolute 
     value'' after ``20 percent'' each place it appears.

     SEC. 11111. AMENDMENTS TO SECTION 311.

       Section 311 of the Congressional Budget Act of 1974 is 
     amended to read as follows:


``NEW BUDGET AUTHORITY, NEW SPENDING AUTHORITY, AND REVENUE LEGISLATION 
                   MUST BE WITHIN APPROPRIATE LEVELS

       ``Sec. 311. (a) Enforcement of Budget Aggregates.--
       ``(1) In the house of representatives.--Except as provided 
     by subsection (c), after the Congress has completed action on 
     a concurrent resolution on the budget for a fiscal year, it 
     shall not be in order in the House of Representatives to 
     consider any bill, joint resolution, amendment, motion, or 
     conference report providing new budget authority for such 
     fiscal year or reducing revenues for such fiscal year, if--
       ``(A) the enactment of such bill or resolution as reported;
       ``(B) the adoption and enactment of such amendment; or
       ``(C) the enactment of such bill or resolution in the form 
     recommended in such conference report;
     would cause the appropriate level of total new budget 
     authority or total budget outlays set forth in the most 
     recently agreed to concurrent resolution on the budget for 
     such fiscal year to be exceeded, or would cause revenues to 
     be less than the appropriate level of total revenues set 
     forth in such concurrent resolution such fiscal year or for 
     the total of all fiscal years covered by the concurrent 
     resolution, except in the case that a declaration of war by 
     the Congress is in effect.
       ``(2) In the senate.--After a concurrent resolution on the 
     budget is agreed to, it shall not be in order in the Senate 
     to consider any bill, resolution, amendment, motion, or 
     conference report that--
       ``(A) would cause the appropriate level of total new budget 
     authority or total outlays set forth for the first fiscal 
     year in such resolution to be exceeded; or
       ``(B) would cause revenues to be less than the appropriate 
     level of total revenues set forth for the first fiscal year 
     covered by such resolution or for the period including the 
     first fiscal year plus the following 4 fiscal years in such 
     resolution.
       ``(3) Enforcement of social security levels in the 
     senate.--After a concurrent resolution on the budget is 
     agreed to, it shall not be in order in the Senate to consider 
     any bill, resolution, amendment, motion, or conference report 
     that would cause a decrease in social security surpluses or 
     an increase in social security deficits derived from the 
     levels of social security revenues and social security 
     outlays set forth for the first fiscal year covered by the 
     resolution and for the period including the first fiscal year 
     plus the following 4 fiscal years in such resolution.
       ``(b) Social Security Levels.--
       ``(1) In general.--For the purposes of subsection (a)(3), 
     social security surpluses equal the excess of social security 
     revenues over social security outlays in a fiscal year or 
     years with such an excess and social security deficits equal 
     the excess of social security outlays over social security 
     revenues in a fiscal year or years with such an excess.
       ``(2) Tax treatment.--For the purposes of this section, no 
     provision of any legislation involving a change in chapter 1 
     of the Internal Revenue Code of 1986 shall be treated as 
     affecting the amount of social security revenues or outlays 
     unless such provision changes the income tax treatment of 
     social security benefits.
       ``(c) Exception in the House of Representatives.--
     Subsection (a)(1) shall not apply in the House of 
     Representatives to any bill, resolution, or amendment that 
     provides new budget authority for a fiscal year or to any 
     conference report on any such bill or resolution, if--
       ``(1) the enactment of such bill or resolution as reported;
       ``(2) the adoption and enactment of such amendment; or
       ``(3) the enactment of such bill or resolution in the form 
     recommended in such conference report;
     would not cause the appropriate allocation of new budget 
     authority made pursuant to section 302(a) for such fiscal 
     year, for the committee within whose jurisdiction such bill, 
     resolution, or amendment falls, to be exceeded.''.

     SEC. 11112. AMENDMENT TO SECTION 312.

       (a) In General.--Section 312 of the Congressional Budget 
     Act of 1974 is amended to read as follows:


                           ``points of order

       ``Sec. 312. (a) Budget Committee Determinations.--For 
     purposes of this title and title IV, the levels of new budget 
     authority, budget outlays, spending authority as described in 
     section 401(c)(2), direct spending, new entitlement 
     authority, and revenues for a fiscal year shall be determined 
     on the basis of estimates made by the Committee on the Budget 
     of the House of Representatives or the Senate, as the case 
     may be.
       ``(b) Discretionary Spending Point of Order in the 
     Senate.--
       ``(1) Except as otherwise provided in this subsection, it 
     shall not be in order in the Senate to consider any 
     concurrent resolution on the budget (or amendment, motion, or 
     conference report on such a resolution) that would exceed any 
     of the discretionary spending limits in section 251(c) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985.
       ``(2) This subsection shall not apply if a declaration of 
     war by the Congress is in effect or if a joint resolution 
     pursuant to section 258 of the Balanced Budget and Emergency 
     Deficit Control Act of 1985 has been enacted.
       ``(c) Maximum Deficit Amount Point of Order in the 
     Senate.--It shall not be in order in the Senate to consider 
     any concurrent resolution on the budget for a fiscal year 
     under section 301, or to consider any amendment to that 
     concurrent resolution, or to consider a conference report on 
     that concurrent resolution--
       ``(1) if the level of total budget outlays for the first 
     fiscal year that is set forth in that concurrent resolution 
     or conference report exceeds the recommended level of Federal 
     revenues set forth for that year by an amount that is greater 
     than the maximum deficit amount, if any, specified in the 
     Balanced Budget and Emergency Deficit Control Act of 1985 for 
     such fiscal year; or
       ``(2) if the adoption of such amendment would result in a 
     level of total budget outlays for that fiscal year which 
     exceeds the recommended level of Federal revenues for that 
     fiscal year, by an amount that is greater than the maximum 
     deficit amount, if any, specified in the Balanced Budget and 
     Emergency Deficit Control Act of 1985 for such fiscal year.
       ``(d) Timing of Points of Order in the Senate.--A point of 
     order under this Act may not be raised against a bill, 
     resolution, amendment, motion, or conference report while an 
     amendment or motion, the adoption of which would remedy the 
     violation of this Act, is pending before the Senate.
       ``(e) Points of Order in the Senate Against Amendments 
     Between the Houses.--Each provision of this Act that 
     establishes a point of order against an amendment also 
     establishes a point of order in the Senate against an 
     amendment between the Houses. If a point of order under this 
     Act is raised in the Senate against an amendment between the 
     Houses, and the Presiding Officer sustains the point of 
     order, the effect shall be the same as if the Senate had 
     disagreed to the amendment.
       ``(f) Effect of a Point of Order on a Bill in the Senate.--
     In the Senate, if the Chair sustains a point of order under 
     this Act against a bill, the Chair shall then send the bill 
     to the committee of appropriate jurisdiction for further 
     consideration.''.
       (b) Conforming Amendment.--The item relating to section 312 
     in the table of contents set forth in section 1(b) of the 
     Congressional Budget and Impoundment Control Act of 1974 is 
     amended by striking ``Effect of point'' and inserting 
     ``Point''.

     SEC. 11113. ADJUSTMENTS AND BUDGET COMMITTEE DETERMINATIONS.

       (a) In General.--Title III of the Congressional Budget Act 
     of 1974 is amended by adding at the end the following new 
     section:


                             ``adjustments

       ``Sec. 314. (a) Adjustments.--When--
       ``(1)(A) the Committee on Appropriations reports an 
     appropriation measure for fiscal year 1998, 1999, 2000, 2001, 
     or 2002 that specifies an amount for emergencies pursuant to 
     section 251(b)(2)(A) of the Balanced Budget and Emergency 
     Deficit Control Act of 1985 or for continuing disability 
     reviews pursuant to section 251(b)(2)(C) of that Act;
       ``(B) any other committee reports emergency legislation 
     described in section 252(e) of that Act;
       ``(C) the Committee on Appropriations reports an 
     appropriation measure for fiscal year 1998, 1999, 2000, 2001, 
     or 2002 that includes an appropriation with respect to clause 
     (i) or (ii), the adjustment shall be the amount of budget 
     authority in the measure that is the dollar equivalent, in 
     terms of Special Drawing Rights, of--
       ``(i) increases the United States quota as part of the 
     International Monetary Fund Eleventh General Review of Quotas 
     (United States Quota); or
       ``(ii) increases the maximum amount available to the 
     Secretary of the Treasury pursuant to section 17 of the 
     Bretton Woods Agreement Act, as amended from time to time 
     (New Arrangements to Borrow); or
       ``(D) the Committee on Appropriations reports an 
     appropriation measure for fiscal year 1998, 1999, or 2000 
     that includes an appropriation for arrearages for 
     international organizations, international peacekeeping, and 
     multilateral development banks during that fiscal year, and 
     the sum of the appropriations for the period of fiscal years 
     1998

[[Page H4550]]

     through 2000 do not exceed $1,884,000,000 in budget 
     authority; or
       ``(2) a conference committee submits a conference report 
     thereon;
     the chairman of the Committee on the Budget of the Senate or 
     House of Representatives shall make the adjustments referred 
     to in subsection (c) to reflect the additional new budget 
     authority for such matter provided in that measure or 
     conference report and the additional outlays flowing in all 
     fiscal years from such amounts for such matter.
       ``(b) Application of Adjustments.--The adjustments and 
     revisions to allocations, aggregates, and limits made by the 
     Chairman of the Committee on the Budget pursuant to 
     subsection (a) for legislation shall only apply while such 
     legislation is under consideration and shall only permanently 
     take effect upon the enactment of that legislation.
       ``(c) Content of Adjustments.--The adjustments referred to 
     in subsection (a) shall consist of adjustments, as 
     appropriate, to--
       ``(1) the discretionary spending limits as set forth in the 
     most recently agreed to concurrent resolution on the budget;
       ``(2) the allocations made pursuant to the most recently 
     adopted concurrent resolution on the budget pursuant to 
     section 302(a); and
       ``(3) the budgetary aggregates as set forth in the most 
     recently adopted concurrent resolution on the budget.
       ``(d) Reporting Revised Suballocations.--Following the 
     adjustments made under subsection (a), the Committees on 
     Appropriations of the Senate and the House of Representatives 
     may report appropriately revised suballocations pursuant to 
     section 302(b) to carry out this subsection.
       ``(e) Definitions.--As used in subsection (a)(1)(A), when 
     referring to continuing disability reviews, the terms 
     `continuing disability reviews', `additional new budget 
     authority', and `additional outlays' shall have the same 
     meanings as provided in section 251(b)(2)(C)(ii) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985.''.
       (b) Conforming Amendments.--(1) Sections 302(g), 311(c), 
     and 313(e) of the Congressional Budget Act of 1974 are 
     repealed.
       (2) The table of contents set forth in section 1(b) of the 
     Congressional Budget and Impoundment Control Act of 1974 is 
     amended by adding after the item relating to section 313 the 
     following new item:

``Sec. 314. Adjustments.''.

     SEC. 11114. EFFECT OF SELF-EXECUTING AMENDMENTS ON POINTS OF 
                   ORDER IN THE HOUSE OF REPRESENTATIVES.

       (a) Effect of Points of Order.--Title III of the 
     Congressional Budget Act of 1974 is amended by adding after 
     section 314 the following new section:


 ``Effect of self-executing amendments on points of order in the house 
                           of representatives

       ``Sec. 315. In the House of Representatives, if a provision 
     of a bill, as reported, violates a section of this title or 
     title IV and a self-executing rule providing for 
     consideration of that bill modifies that provision to 
     eliminate such violation, then such point of order shall not 
     lie against consideration of that bill.''.
       (b) Conforming Amendment.--The table of contents set forth 
     in section 1(b) of the Congressional Budget and Impoundment 
     Control Act of 1974 is amended by adding after the item 
     relating to section 314 the following new item:

``Sec. 315. Effect of self-executing amendments on points of order in 
              the house of representatives.''.

     SEC. 11115. AMENDMENT OF SECTION 401 AND REPEAL OF SECTION 
                   402.

       (a) Section 401.--Subsections (a) and (b) of section 401 of 
     the Congressional Budget Act of 1974 are amended to read as 
     follows:


    ``bills providing new spending authority or new credit authority

       ``Sec. 401. (a) Controls on Legislation Providing Spending 
     Authority or Credit Authority.--It shall not be in order in 
     either the House of Representatives or the Senate to consider 
     any bill, joint resolution, amendment, motion, or conference 
     report, as reported to its House which provides new spending 
     authority described in subsection (c)(2)(A) or (B) or new 
     credit authority, unless that bill, resolution, conference 
     report, or amendment also provides that such new spending 
     authority as described in subsection (c)(2) (A) or (B) or new 
     credit authority is to be effective for any fiscal year only 
     to such extent or in such amounts as are provided in 
     appropriation Acts.
       ``(b) Legislation Providing Entitlement Authority.--It 
     shall not be in order in either the House of Representatives 
     or the Senate to consider any bill, joint resolution, 
     amendment, motion, or conference report, as reported to its 
     House which provides new spending authority described in 
     subsection (c)(2)(C) which is to become effective before the 
     first day of the fiscal year which begins during the calendar 
     year in which such bill or resolution is reported.''.
       (b) Repealer of Section 402.--(1) Section 402 of the 
     Congressional Budget Act of 1974 is repealed.
       (2) Conforming Amendments.--(1) Sections 403 through 407 of 
     the Congressional Budget Act of 1974 are redesignated as 
     sections 402 through 406, respectively.
       (2) The table of contents set forth in section 1(b) of the 
     Congressional Budget and Impoundment Control Act of 1974 is 
     amended by deleting the item relating to section 402 and by 
     redesignating the items relating to sections 403 through 407 
     as the items relating to sections 402 through 406, 
     respectively.

     SEC. 11116. REPEAL OF TITLE VI.

       (a) Repealer.--Title VI of the Congressional Budget Act of 
     1974 is repealed.
       (b) Conforming Amendments.--The items relating to title VI 
     of the table of contents set forth in section 1(b) of the 
     Congressional Budget and Impoundment Control Act of 1974 are 
     repealed.

     SEC. 11117. AMENDMENTS TO SECTION 904.

       (a) Conforming Amendment.--Section 904(a) of the 
     Congressional Budget Act of 1974 is amended by striking 
     ``(except section 905)'' and by striking ``V, and VI (except 
     section 601(a))'' and inserting ``and V''.
       (b) Waivers.--Section 904(c) of the Congressional Budget 
     Act of 1974 is amended to read as follows:
       ``(c) Waivers.--
       ``(1) Sections 305(b)(2), 305(c)(4), 306, 310(d)(2), 313, 
     904(c), and 904(d) of this Act may be waived or suspended in 
     the Senate only by the affirmative vote of three-fifths of 
     the Members, duly chosen and sworn.
       ``(2) Sections 301(i), 302(c), 302(f), 310(g), 311(a), and 
     315 of this Act and sections 258(a)(4)(C), 
     258(A)(b)(3)(C)(I), 258(B)(f)(1), 258B(h)(1), 258(h)(3), 
     258C(a)(5), and 258(C)(b)(1) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 may be waived or 
     suspended in the Senate only by the affirmative vote of 
     three-fifths of the Members, duly chosen and sworn.''.
       (c) Appeals.--Section 904(d) of the Congressional Budget 
     Act of 1974 is amended to read as follows:
       ``(d) Appeals.--
       ``(1) Appeals in the Senate from the decisions of the Chair 
     relating to any provision of title III or IV of section 1017 
     shall, except as otherwise provided therein, be limited to 1 
     hour, to be equally divided between, and controlled by, the 
     mover and the manager of the resolution, concurrent 
     resolution, reconciliation bill, or rescission bill, as the 
     case may be.
       ``(2) An affirmative vote of three-fifths of the Members, 
     duly chosen and sworn, shall be required in the Senate to 
     sustain an appeal of the ruling of the Chair on a point of 
     order raised under sections 305(b)(2), 305(c)(4), 306, 
     310(d)(2), 313, 904(c), and 904(d) of this Act.
       ``(3) An affirmative vote of three-fifths of the Members, 
     duly chosen and sworn, shall be required in the Senate to 
     sustain an appeal of the ruling of the Chair on a point of 
     order raised under sections 301(i), 302(c), 302(f), 310(g), 
     311(a), and 315 of this Act and sections 258(a)(4)(C), 
     258(A)(b)(3)(C)(I), 258(B)(f)(1), 258B(h)(1), 258(h)(3), 
     258C(a)(5), and 258(C)(b)(1) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985.''.
       (d) Expiration of Supermajority Voting Requirements.--
     Section 904 of the Congressional Budget Act of 1974 is 
     amended by adding at the end the following:
       ``(e) Expiration of Certain Supermajority Voting 
     Requirements.--Subsections (c)(2) and (d)(3) shall expire on 
     September 30, 2002.''.

     SEC. 11118. REPEAL OF SECTIONS 905 AND 906.

       (a) Repealer.--Sections 905 and 906 of the Congressional 
     Budget and Impoundment Control Act of 1974 are repealed.
       (b) Conforming Amendments.--The table of contents set forth 
     in section 1(b) of the Congressional Budget and Impoundment 
     Control Act of 1974 is amended by striking the items relating 
     to sections 905 and 906.

     SEC. 11119. AMENDMENTS TO SECTIONS 1022 AND 1024.

       (a) Section 1022.--Section 1022(b)(1)(F) of Congressional 
     Budget and Impoundment Control Act of 1974 is amended by 
     striking ``section 601'' and inserting ``section 251(c) the 
     Balanced Budget and Emergency Deficit Control Act of 1985''.
       (b) Section 1024.--Section 1024(a)(1)(B) of Congressional 
     Budget and Impoundment Control Act of 1974 is amended by 
     striking ``section 601(a)(2)'' and inserting ``section 251(c) 
     the Balanced Budget and Emergency Deficit Control Act of 
     1985''.

     SEC. 11120. AMENDMENT TO SECTION 1026.

       Section 1026(7)(A)(iv) of the Congressional Budget and 
     Impoundment Control Act of 1974 is amended by striking 
     ``and'' and inserting ``or''.
  Subtitle B--Amendments to the Balanced Budget and Emergency Deficit 
                          Control Act of 1985

     SEC. 11201. PURPOSE.

       This subtitle extends discretionary spending limits and 
     pay-as-you-go requirements.

     SEC. 11202. GENERAL STATEMENT AND DEFINITIONS.

       (a) General Statement.--Section 250(b) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 
     900(b)) is amended by striking the first two sentences and 
     inserting the following: ``This part provides for the 
     enforcement of a balanced budget by fiscal year 2002 as 
     called for in House Concurrent Resolution 84 (105th Congress, 
     1st session).''.
       (b) Definitions.--Section 250(c) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 is amended--
       (1) by striking paragraph (4) and inserting the following:
       ``(4) The term `category' means defense, nondefense, and 
     violent crime reduction discretionary appropriations as 
     specified in the joint explanatory statement accompanying a 
     conference report on the Balanced Budget Act of 1997.'';
       (2) by striking paragraph (6) and inserting the following:
       ``(6) The term `budgetary resources' means new budget 
     authority, unobligated balances, direct spending authority, 
     and obligation limitations.'';

[[Page H4551]]

       (3) in paragraph (9), by striking ``submission of the 
     fiscal year 1992 budget that are not included with a budget 
     submission'' and inserting ``that budget submission that are 
     not included with it'';
       (4) in paragraph (14), by inserting ``first 4'' before 
     ``fiscal years'' and by striking ``1995'' and inserting 
     ``2006'';
       (5) by striking paragraphs (17) and (20) and by 
     redesignating paragraphs (18), (19), and (21) as paragraphs 
     (17), (18), and (19), respectively;
       (6) in paragraph (17) (as redesignated), by striking 
     ``Omnibus Budgtet Reconciliation Act of 1990'' and inserting 
     ``Balanced Budget Act of 1997'';
       (7) in paragraph (20) (as redesignated), by striking the 
     second sentence; and
       (8) by adding at the end the following new paragraph:
       ``(20) The term `consultation', when applied to the 
     Committee on the Budget of either the House of 
     Representatives or of the Senate, means written communication 
     with that committee that affords that committee an 
     opportunity to comment on the matter that is the subject of 
     the consultation before official action is taken on such 
     matter.''.

     SEC. 11203. ENFORCING DISCRETIONARY SPENDING LIMITS.

       (a) Extension Through Fiscal Year 2002.--Section 251 of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 is 
     amended--
       (1) in the side heading of subsection (a), by striking 
     ``1991-1998'' and inserting ``1997-2002'';
       (2) in subsection (a)(7) by inserting ``(excluding 
     Saturdays, Sundays, or legal holidays)'' after ``5 calendar 
     days'';
       (3) in the first sentence of subsection (b)(1), by striking 
     ``1992, 1993, 1994, 1995, 1996, 1997 or 1998'' and inserting 
     ``1997 or any fiscal year thereafter through 2002'' and by 
     striking ``through 1998'' and inserting ``through 2002'';
       (4) in subsection (b)(1), by striking ``the following:'' 
     and all that follows through ``in concepts and definitions'' 
     the first place it appears and inserting ``the following: the 
     adjustments'' and by striking subparagraphs (B) and (C);
       (5) in subsection (b)(2), by striking ``1991, 1992, 1993, 
     1994, 1995, 1996, 1997, or 1998'' and inserting ``1997 or any 
     fiscal year thereafter through 2002'', by striking ``through 
     1998'' and inserting ``through 2002'', and by striking 
     subparagraphs (A), (B), (C), (E), and (G), and by 
     redesignating subparagraphs (D), (F), and (H) as 
     subparagraphs (A), (B), and (C), respectively;
       (6) in subsection (b)(2)(A) (as redesignated), by striking 
     ``(i)'', by striking clause (ii), and by inserting ``fiscal'' 
     before ``years'';
       (7) in subsection (b)(2)(B) (as redesignated), by striking 
     everything after ``the adjustment in outlays'' and inserting 
     ``for a fiscal year is the amount of the excess but not to 
     exceed 0.5 percent of the adjusted discretionary spending 
     limit on outlays for that fiscal year in fiscal year 1997 or 
     any fiscal year thereafter through 2002; and
       (8) by adding at the end of subsection (b)(2) the following 
     new subparagraphs:
       ``(D) Allowance for IMF.--If an appropriations bill or 
     joint resolution is enacted for fiscal year 1998, 1999, 2000, 
     2001, or 2002 that includes an appropriation with respect to 
     clause (i) or (ii), the adjustment shall be the amount of 
     budget authority in the measure that is the dollar 
     equivalent, in terms of Special Drawing Rights, of--
       ``(i) an increase in the United States quota as part of the 
     International Monetary Fund Eleventh General Review of Quotas 
     (United States Quota); or
       ``(ii) any increase in the maximum amount available to the 
     Secretary of the Treasury pursuant to section 17 of the 
     Bretton Woods Agreement Act, as amended from time to time 
     (New Arrangements to Borrow).
       ``(E) Allowance for international arrearages.--
       ``(i) Adjustments.--If an appropriations bill or joint 
     resolution is enacted for fiscal year 1998, 1999, or 2000 
     that includes an appropriation for arrearages for 
     international organizations, international peacekeeping, and 
     multilateral banks for that fiscal year, the adjustment shall 
     be the amount of budget authority in such measure and the 
     outlays flowing in all fiscal years from such budget 
     authority.
       ``(ii) Limitations.--The total amount of adjustments made 
     pursuant to this subparagraph for the period of fiscla years 
     1998 through 2000 shall not exceed $1,884,000,000 in budget 
     authority.''.
       (b) Shifting of Discretionary Spending Limits into the 
     Balanced Budget and Emergency Deficit Control Act of 1985.--
     Section 251 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 is amended by adding at the end the 
     following new subsection:
       ``(c) Discretionary Spending Limit.--As used in this part, 
     the term `discretionary spending limit' means--
       ``(1) with respect to fiscal year 1997, for the 
     discretionary category, the current adjusted amount of new 
     budget authority and outlays;
       ``(2) with respect to fiscal year 1998--
       ``(A) for the defense category: $269,000,000,000 in new 
     budget authority and $266,823,000,000 in outlays;
       ``(B) for the nondefense category: $252,357,000,000 in new 
     budget authority and $282,853,000,000 in outlays; and
       ``(C) for the violent crime reduction category: 
     $5,500,000,000 in new budget authority and $3,592,000,000 in 
     outlays;
       ``(3) with respect to fiscal year 1999--
       ``(A) for the defense category: $271,500,000,000 in new 
     budget authority and $266,518,000,000 in outlays; and
       ``(B) for the nondefense category: $261,499,000,000 in new 
     budget authority and $292,803,000,000 in outlays;
       ``(4) with respect to fiscal year 2000, for the 
     discretionary category: $537,193,000,000 in new budget 
     authority and $564,265,000,000 in outlays;
       ``(5) with respect to fiscal year 2001, for the 
     discretionary category: $542,032,000,000 in new budget 
     authority and $564,396,000,000 in outlays; and
       ``(6) with respect to fiscal year 2002, for the 
     discretionary category: $551,074,000,000 in new budget 
     authority and $560,799,000,000 in outlays;
     as adjusted in strict conformance with subsection (b).''.

     SEC. 11204. VIOLENT CRIME REDUCTION TRUST FUND.

       (a) Sequestration Regarding Violent Crime Reduction Trust 
     Fund.--Section 251A of the Balanced Budget and Emergency 
     Deficit Control Act of 1985 is repealed.
       (b) Conforming Amendment.--Section 310002 of Public Law 
     103-322 (42 U.S.C. 14212) is repealed.

     SEC. 11205. ENFORCING PAY-AS-YOU-GO.

       (a) Extension.--Section 252 (2 U.S.C. 902) is amended--
       (1) by striking subsections (a) and (b) and inserting the 
     following:
       ``(a) Purpose.--The purpose of this section is to assure 
     that any legislation enacted prior to September 30, 2002, 
     affecting direct spending or receipts that increases the 
     deficit will trigger an offsetting sequestration.
       ``(b) Sequestration.--
       ``(1) Timing.--Within 15 calendar days after Congress 
     adjourns to end a session and on the same day as a 
     sequestration (if any) under sections 251 and 253, there 
     shall be a sequestration to offset the amount of any net 
     deficit increase in the budget year caused by all direct 
     spending and receipts legislation (after adjusting for any 
     prior sequestration as provided by paragraph (2)) plus any 
     net deficit increase in the prior fiscal year caused by all 
     direct spending and receipts legislation not reflected in the 
     final OMB sequestration report for that year.
       ``(2) Calculation of deficit increase.--OMB shall calculate 
     the amount of deficit increase, if any, in the budget year by 
     adding--
       ``(A) all applicable estimates of direct spending and 
     receipts legislation transmitted under subsection (d) 
     applicable to the budget year, other than any amounts 
     included in such estimates resulting from--
       ``(i) full funding of, and continuation of, the deposit 
     insurance guarantee commitment in effect on the date of 
     enactment of this section; and
       ``(ii) emergency provisions as designated under subsection 
     (e); and
       ``(B) the estimated amount of savings in direct spending 
     programs applicable to the budget year resulting from the 
     prior year's sequestration under this section or section 253, 
     if any (except for any amounts sequestered as a result of any 
     deficit increase in the fiscal year immediately preceding the 
     prior fiscal year), as published in OMB's final sequestration 
     report for that prior year; and
       ``(C) all applicable estimates of direct spending and 
     receipts legislation transmitted under subsection (d) for the 
     current year that are not reflected in the final OMB 
     sequestration report for that year, other than any amounts 
     included in such estimates resulting from emergency 
     provisions as designated under subsection (e).'';
       (2) by amending subsection (c)(1)(B), by inserting ``and 
     direct'' after ``guaranteed'';
       (3) by amending subsection (d) to read as follows:
       ``(d) Estimates.--
       ``(1) CBO estimates.--As soon as practicable after Congress 
     completes action on any direct spending or receipts 
     legislation, CBO shall provide an estimate of the budgetary 
     effects of that legislation.
       ``(2) OMB estimates.--Not later than 5 calendar days 
     (excluding Saturdays, Sundays, or legal holidays) after the 
     enactment of any direct spending or receipts legislation, OMB 
     shall transmit a report to the House of Representatives and 
     to the Senate containing--
       ``(A) the CBO estimate of the budgetary effects of that 
     legislation;
       ``(B) an OMB estimate of the budgetary effects of that 
     legislation using current economic and technical assumptions; 
     and
       ``(C) an explanation of any difference between the two 
     estimates.
       ``(3) Scope of estimates.--The estimates under this section 
     shall include the amount of change in outlays or receipts, as 
     the case may be, for the current year (if applicable), the 
     budget year, and each outyear.
       ``(4) Scorekeeping Guidelines.--OMB and CBO, after 
     consultation with each other and the Committees on the Budget 
     of the House of Representatives and the Senate, shall--
       ``(A) determine common scorekeeping guidelines; and
       ``(B) in conformance with such guidelines, prepare 
     estimates under this section.''; and
       (4) in subsection (e), by striking ``, for any fiscal year 
     from 1991 through 1998,'' and by striking ``through 1995''.

     SEC. 11206. REPORTS AND ORDERS.

       Section 254 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 is amended--
       (1) by striking subsection (c) and redesignating 
     subsections (d) through (k) as (c) through (j), respectively;

[[Page H4552]]

       (2) in subsection (c)(2) (as redesignated), by striking 
     ``1998'' and inserting ``2002''; and
       (3)(A) in subsection (f)(2)(A) (as redesignated), by 
     striking ``1998'' and inserting ``2002''; and
       (B) in subsection (f)(3) (as redesignated), by striking 
     ``through 1998''.

     SEC. 11207. EXEMPT PROGRAMS AND ACTIVITIES.

       (a) Veterans Programs.--Section 255(b) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 is amended 
     as follows:
       (1) In the item relating to Veterans Insurance and 
     Indemnity, strike ``Indemnity'' and insert ``Indemnities''.
       (2) In the item relating to Veterans' Canteen Service 
     Revolving Fund, strike ``Veterans'''.
       (3) In the item relating to Benefits under chapter 21 of 
     title 38, strike ``(36-0137-0-1-702)'' and insert ``(36-0120-
     0-1-701)''.
       (4) In the item relating to Veterans' compensation, strike 
     ``Veterans' compensation'' and insert ``Compensation''.
       (5) In the item relating to Veterans' pensions, strike 
     ``Veterans' pensions'' and insert ``Pensions''.
       (6) After the last item, insert the following new items:
       ``Benefits under chapter 35 of title 38, United States 
     Code, related to educational assistance for survivors and 
     dependents of certain veterans with service-connected 
     disabilities (36-0137-0-1-702);
       ``Assistance and services under chapter 31 of title 38, 
     United States Code, relating to training and rehabilitation 
     for certain veterans with service-connected disabilities (36-
     0137-0-1-702);
       ``Benefits under subchapters I, II, and III of chapter 37 
     of title 38, United States Code, relating to housing loans 
     for certain veterans and for the spouses and surviving 
     spouses of certain veterans Guaranty and Indemnity Program 
     Account (36-1119-0-1-704);
       ``Loan Guaranty Program Account (36-1025-0-1-704); and
       ``Direct Loan Program Account (36-1024-0-1-704).''.
       (b) Certain Program Bases.--Section 255(f) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 is amended 
     to read as follows:
       ``(f) Optional Exemption of Military Personnel.--
       ``(1) The President may, with respect to any military 
     personnel account, exempt that account from sequestration or 
     provide for a lower uniform percentage reduction than would 
     otherwise apply.
       ``(2) The President may not use the authority provided by 
     paragraph (1) unless he notifies the Congress of the manner 
     in which such authority will be exercised on or before the 
     date specified in section 254(a) for the budget year.''.
       (c) Other Programs and Activities.--(1) Section 
     255(g)(1)(A) of the Balanced Budget Emergency Deficit Control 
     Act of 1985 is amended as follows:
       (A) After the first item, insert the following new item:
       ``Activities financed by voluntary payments to the 
     Government for goods or services to be provided for such 
     payments;''.
       (B) Strike ``Thrift Savings Fund (26-8141-0-7-602);''.
       (C) In the first item relating to the Bureau of Indian 
     Affairs, insert ``Indian land and water claims settlements 
     and'' after the comma.
       (D) In the second item relating to the Bureau of Indian 
     Affairs, strike ``miscellaneous'' and insert 
     ``Miscellaneous'' and strike ``, tribal trust funds''.
       (E) Strike ``Claims, defense (97-0102-0-1-051);''.
       (F) In the item relating to Claims, judgments, and relief 
     acts, strike ``806'' and insert ``808''.
       (G) Strike ``Coinage profit fund (20-5811-0-2-803)''.
       (H) Insert ``Compact of Free Association (14-0415-0-1-
     808);'' after the item relating to the Claims, judgments, and 
     relief acts.
       (I) Insert ``Conservation Reserve Program (12-2319-0-1-
     302);'' after the item relating to the Compensation of the 
     President.
       (J) In the item relating to the Customs Service, strike 
     ``852'' and insert ``806''.
       (K) In the item relating to the Comptroller of the 
     Currency, insert ``, Assessment funds (20-8413-0-8-373)'' 
     before the semicolon.
       (L) Strike ``Director of the Office of Thrift 
     Supervision;''.
       (M) Strike ``Eastern Indian land claims settlement fund 
     (14-2202-0-1-806);''.
       (N) After the item relating to the Exchange stabilization 
     fund, insert the following new items:
       ``Farm Credit Administration, Limitation on Administrative 
     Expenses (78-4131-0-3-351);
       ``Farm Credit System Financial Assistance Corporation, 
     interest payment (20-1850-0-1-908);''.
       (O) Strike ``Federal Deposit Insurance Corporation;''.
       (P) In the first item relating to the Federal Deposit 
     Insurance Corporation, insert ``(51-4064-0-3-373)'' before 
     the semicolon.
       (Q) In the second item relating to the Federal Deposit 
     Insurance Corporation, insert ``(51-4065-0-3-373)'' before 
     the semicolon.
       (R) In the third item relating to the Federal Deposit 
     Insurance Corporation, insert ``(51-4066-0-3-373)'' before 
     the semicolon.
       (S) In the item relating to the Federal Housing Finance 
     Board, insert ``(95-4039-0-3-371)'' before the semicolon.
       (T) In the item relating to the Federal payment to the 
     railroad retirement account, strike ``account'' and insert 
     ``accounts''.
       (U) In the item relating to the health professions graduate 
     student loan insurance fund, insert ``program account'' after 
     ``fund'' and strike ``(Health Education Assistance Loan 
     Program) (75-4305-0-3-553)'' and insert ``(75-0340-0-1-
     552)''.
       (V) In the item relating to Higher education facilities, 
     strike ``and insurance''.
       (W) In the item relating to Internal revenue collections 
     for Puerto Rico, strike ``852'' and insert ``806''.
       (X) Amend the item relating to the Panama Canal Commission 
     to read as follows:
       ``Panama Canal Commission, Panama Canal Revolving Fund (95-
     4061-0-3-403);''.
       (Y) In the item relating to the Medical facilities 
     guarantee and loan fund, strike ``(75-4430-0-3-551)'' and 
     insert ``(75-9931-0-3-550)''.
       (Z) In the first item relating to the National Credit Union 
     Administration, insert ``operating fund (25-4056-0-3-373)'' 
     before the semicolon.
       (AA) In the second item relating to the National Credit 
     Union Administration, strike ``central'' and insert 
     ``Central'' and insert ``(25-4470-0-3-373)'' before the 
     semicolon.
       (BB) In the third item relating to the National Credit 
     Union Administration, strike ``credit'' and insert ``Credit'' 
     and insert ``(25-4468-0-3-373)'' before the semicolon.
       (CC) After the third item relating to the National Credit 
     Union Administration, insert the following new item:
       ``Office of Thrift Supervision (20-4108-0-3-373);''.
       (DD) In the item relating to Payments to health care trust 
     funds, strike ``572'' and insert ``571''.
       (EE) Strike ``Compact of Free Association, economic 
     assistance pursuant to Public Law 99-658 (14-0415-0-1-
     806);''.
       (FF) In the item relating to Payments to social security 
     trust funds, strike ``571'' and insert ``651''.
       (GG) Strike ``Payments to state and local government fiscal 
     assistance trust fund (20-2111-0-1-851);''.
       (HH) In the item relating to Payments to the United States 
     territories, strike ``852'' and insert ``806''.
       (II) Strike ``Resolution Funding Corporation;''.
       (JJ) In the item relating to the Resolution Trust 
     Corporation, insert ``Revolving Fund (22-4055-0-3-373)'' 
     before the semicolon.
       (KK) After the item relating to the Tennessee Valley 
     Authority funds, insert the following new items:
       ``Thrift Savings Fund;
       ``United States Enrichment Corporation (95-4054-0-3-271);
       ``Vaccine Injury Compensation (75-0320-0-1-551);
       ``Vaccine Injury Compensation Program Trust Fund (20-8175-
     0-7-551);''.
       (2) Section 255(g)(1)(B) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 is amended as follows:
       (A) Strike ``The following budget'' and insert ``The 
     following Federal retirement and disability''.
       (B) In the item relating to Black lung benefits, strike 
     ``lung benefits'' and insert ``Lung Disability Trust Fund''.
       (C) In the item relating to the Court of Federal Claims 
     Court Judges' Retirement Fund, strike ``Court of Federal''.
       (D) In the item relating to Longshoremen's compensation 
     benefits, insert ``Special workers compensation expenses,'' 
     before ``Longshoremen's''.
       (E) In the item relating to Railroad retirement tier II, 
     strike ``retirement tier II'' and insert ``Industry Pension 
     Fund''.
       (3) Section 255(g)(2) of the Balanced Budget and Emergency 
     Deficit Control Act of 1985 is amended as follows:
       (A) Strike the following items:
       ``Agency for International Development, Housing, and other 
     credit guarantee programs (72-4340-0-3-151);
       ``Agricultural credit insurance fund (12-4140-0-1-351);''.
       (B) In the item relating to Check forgery, strike ``Check'' 
     and insert ``United States Treasury check''.
       (C) Strike ``Community development grant loan guarantees 
     (86-0162-0-1-451);''.
       (D) After the item relating to the United States Treasury 
     Check forgery insurance fund, insert the following new item:
       ``Credit liquidating accounts;''.
       (E) Strike the following items:
       ``Credit union share insurance fund (25-4468-0-3-371);
       ``Economic development revolving fund (13-4406-0-3);
       ``Export-Import Bank of the United States, Limitation of 
     program activity (83-4027-0-1-155);
       ``Federal deposit Insurance Corporation (51-8419-0-8-371);
       ``Federal Housing Administration fund (86-4070-0-3-371);
       ``Federal ship financing fund (69-4301-0-3-403);
       ``Federal ship financing fund, fishing vessels (13-4417-0-
     3-376);
       ``Government National Mortgage Association, Guarantees of 
     mortgage-backed securities (86-4238-0-3-371);
       ``Health education loans (75-4307-0-3-553);
       ``Indian loan guarantee and insurance fund (14-4410-0-3-
     452);
       ``Railroad rehabilitation and improvement financing fund 
     (69-4411-0-3-401);
       ``Rural development insurance fund (12-4155-0-3-452);

[[Page H4553]]

       ``Rural electric and telephone revolving fund (12-4230-8-3-
     271);
       ``Rural housing insurance fund (12-4141-0-3-371);
       ``Small Business Administration, Business loan and 
     investment fund (73-4154-0-3-376);
       ``Small Business Administration, Lease guarantees revolving 
     fund (73-4157-0-3-376);
       ``Small Business Administration, Pollution control 
     equipment contract guarantee revolving fund (73-4147-0-3-
     376);
       ``Small Business Administration, Surety bond guarantees 
     revolving fund (73-4156-0-3-376);
       ``Department of Veterans Affairs Loan guaranty revolving 
     fund (36-4025-0-3-704);''.
       (d) Low-Income Programs.--Section 255(h) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 is amended 
     as follows:
       (1) Amend the item relating to Child nutrition to read as 
     follows:
       ``State child nutrition programs (with the exception of 
     special milk programs) (12-3539-0-1-605);''.
       (2) Amend the item relating to the Women, infants, and 
     children program to read as follows:
       ``Special supplemental nutrition program for women, 
     infants, and children (WIC) (12-3510-0-1-605).''.
       (e) Identification of Programs.--Section 255(i) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 is 
     amended to read as follows:
       ``(i) Identification of Programs.--For purposes of 
     subsections (b), (g), and (h), each account is identified by 
     the designated budget account identification code number set 
     forth in the Budget of the United States Government 1996-
     Appendix, and an activity within an account is designated by 
     the name of the activity and the identification code number 
     of the account.''.
       (f) Optional Exemption of Military Personnel.--Section 
     255(h) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985 (relating to optional exemption of military 
     personnel) is repealed.

     SEC. 11208. GENERAL AND SPECIAL SEQUESTRATION RULES.

       (a) Section Heading.--(1) The section heading of section 
     256 of the Balanced Budget and Emergency Deficit Control Act 
     of 1985 is amended by striking ``exceptions, limitations, and 
     special rules'' and inserting ``general and special 
     sequestration rules''.
       (2) The item relating to section 256 in the table contents 
     set forth in section 250(a) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 is amended to read as 
     follows:

``Sec. 256. General and special sequestration rules.''.
       (b) Automatic Spending Increases.--Section 256(a) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 is 
     amended by striking paragraph (1) and redesignating 
     paragraphs (2) and (3) as paragraphs (1) and (2), 
     respectively.
       (c) Guaranteed and Direct Student Loan Programs.--Section 
     256(b) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985 is amended to read as follows:
       ``(b) Student Loans.--(1) For all student loans under part 
     B or D of title IV of the Higher Education Act of 1965 made 
     during the period when a sequestration order under section 
     254 is in effect, origination fees under sections 438(c)(2) 
     and 455(c) of that Act shall be increased by a uniform 
     percentage sufficient to produce the dollar savings in 
     student loan programs (as a result of that sequestration 
     order) required by section 252 or 253, as applicable.
       ``(2) For any loan made during the period beginning on the 
     date that an order issued under section 254 takes effect with 
     respect to a fiscal year and ending at the close of such 
     fiscal year, the origination fees which are authorized to be 
     collected pursuant to sections 438(c)(2) and 455(c) of such 
     Act shall be increased by 0.50 percent.''.
       (d) Health Centers.--Section 256(e)(1) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 is amended 
     by striking the dash and all that follows thereafter and 
     inserting ``2 percent.''.
       (e) Federal Pay.--Section 256(g)(1) of the Balanced Budget 
     and Emergency Deficit Control Act of 1985 is amended by 
     inserting ``(including any amount payable under section 5303 
     or 5304 of title 5, United States Code)'' after ``such 
     statutory pay system''.
       (f) Treatment of Federal Administrative Expenses.--Section 
     256(h)(4) of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 is amended by striking subparagraphs (D) 
     and (H), by redesignating subparagraphs (E), (F), (G), and 
     (I), as subparagraphs (D), (E), (F), and (G), respectively, 
     and by adding at the end the following new subparagraph:
       ``(H) Farm Credit Administration.''.
       (g) Commodity Credit Corporation.--Section 256(j)(5) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 is 
     amended to read as follows:
       ``(5) Dairy program.--Notwithstanding other provisions of 
     this subsection, as the sole means of achieving any reduction 
     in outlays under the milk price support program, the 
     Secretary of Agriculture shall provide for a reduction to be 
     made in the price received by producers for all milk produced 
     in the United States and marketed by producers for commercial 
     use. That price reduction (measured in cents per hundred 
     weight of milk marketed) shall occur under section 
     201(d)(2)(A) of the Agricultural Act of 1949 (7 U.S.C. 
     1446(d)(2)(A)), shall begin on the day any sequestration 
     order is issued under section 254, and shall not exceed the 
     aggregate amount of the reduction in outlays under the milk 
     price support program that otherwise would have been achieved 
     by reducing payments for the purchase of milk or the products 
     of milk under this subsection during the applicable fiscal 
     year.''.
       (h) Effects of Sequestration.--Section 256(k) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 is 
     amended as follows:
       (1) In paragraph (1), strike ``other than a trust or 
     special fund account'' and insert ``, except as provided in 
     paragraph (5)'' before the period.
       (2) Strike paragraph (4), redesignate paragraphs (5) and 
     (6) as paragraphs (4) and (5), respectively, and amend 
     paragraph (5) (as redesignated) to read as follows:
       ``(5) Budgetary resources sequestered in revolving, trust, 
     and special fund accounts, and offsetting collections 
     sequestered in appropriation accounts shall not be available 
     for obligation during the fiscal year in which the 
     sequestration occurs, but shall be available in subsequent 
     years to the extent otherwise provided in law.''.

     SEC. 11209. THE BASELINE.

       Section 257 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 is amended--
       (1) in subsection (b)(2) by amending subparagraph (A) to 
     read as follows:
       ``(A)(i) Except as provided in clause (ii), no program with 
     estimated current year outlays greater than $50,000,000 shall 
     be assumed to expire in the budget year or the outyears.
       ``(ii) Clause (i) shall not apply to a program if 
     legislation establishing or modifying that program contains a 
     provision stating `Section 257(b)(2) of the Balanced Budget 
     and Emergency Deficit Control Act of 1985 shall not apply to 
     the program specified in ____ of this Act.', the blank space 
     being filled in with the appropriate section or sections of 
     that legislation.
       ``(iii) No bill, resolution, amendment, motion, or 
     conference report shall be subject to a point of order under 
     section 306 of the Congressional Budget Act of 1974 solely 
     because it includes the provision specified in clause (ii).
       ``(iv) Upon the expiration of the suspensions contained in 
     section 171 of Public Law 104-193 with regard to a program in 
     such Act with estimated fiscal year outlays greater than 
     $50,000,000, that program shall be assumed to operate under 
     that Act as in effect immediately before reversion to the 
     laws suspended by such Act.''
       (2) by adding the end of subsection (b)(2) the following 
     new subparagraph:
       ``(D) If any law expires before the budget year or any 
     outyear, then any program with estimated current year outlays 
     greater than $50 million which operates under that law shall 
     be assumed to continue to operate under that law as in effect 
     immediately before its expiration.'';
       (3) in the second sentence of subsection (c)(5), by 
     striking ``national product fixed-weight price index'' and 
     inserting ``domestic product chain-type price index''; and
       (4) by striking subsection (e) and inserting the following:
       ``(e) Asset Sales.--Amounts realized from the sale of an 
     asset other than a loan asset shall not be counted against 
     legislation if that sale would result in a financial cost to 
     the Federal Government.''.

     SEC. 11210. TECHNICAL CORRECTION.

       Section 258 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985, entitled ``Modification of Presidential 
     Order'', is repealed.

     SEC. 11211. JUDICIAL REVIEW.

       Section 274 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 is amended as follows:
       (1) Strike ``252'' or ``252(b)'' each place it occurs and 
     insert ``254''.
       (2) In subsection (d)(1)(A), strike ``257(l) to the extent 
     that'' and insert ``256(a) if'', strike the parenthetical 
     phrase, and at the end insert ``or''.
       (3) In subsection (d)(1)(B), strike ``new budget'' and all 
     that follows through ``spending authority'' and insert 
     ``budgetary resources'' and strike ``or'' after the comma.
       (4) Strike subsection (d)(1)(C).
       (5) Strike subsection (f) and redesignate subsections (g) 
     and (h) as subsections (f) and (g), respectively.
       (6) In subsection (g) (as redesignated), strike ``base 
     levels of total revenues and total budget outlays, as'' and 
     insert ``figures'', and ``251(a)(2)(B) or (c)(2),'' and 
     insert ``254''.

     SEC. 11212. EFFECTIVE DATE.

       (a) Expiration.--Section 275(b) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 is amended--
       (1) by striking ``Part C of this title, section'' and 
     inserting ``Sections 251, 253, 258B, and'';
       (2) by striking ``1995'' and inserting ``2002''; and
       (3) by adding at the end the following new sentence: ``The 
     remaining sections of part C of this title shall expire 
     September 30, 2006.''.
       (b) Expiration.--Section 14002(c)(3) of the Omnibus Budget 
     Reconciliation Act of 1993 (2 U.S.C. 900 note) is repealed.

     SEC. 11213. REDUCTION OF PREEXISTING BALANCES AND EXCLUSION 
                   OF EFFECTS OF THIS ACT FROM PAYGO SCORECARD.

       Upon the enactment of this Act, the Director of the Office 
     of Management and Budget shall--
       (1) reduce any balances of direct spending and receipts 
     legislation for any fiscal year

[[Page H4554]]

     under section 252 of the Balanced Budget and Emergency 
     Deficit Control Act of 1985 to zero; and
       (2) not make any estimates of changes in direct spending 
     outlays and receipts under subsection (d) of such section 252 
     for any fiscal year resulting from the enactment of this Act 
     or the Revenue Reconciliation Act of 1997.
  The SPEAKER pro tempore. The gentleman from Ohio [Mr. Kasich] and the 
gentleman from South Carolina [Mr. Spratt] each will be recognized for 
90 minutes.
  The Chair recognizes the gentleman from Ohio [Mr. Kasich].
  Mr. KASICH. Mr. Speaker, I yield myself as much time as I may 
consume, and hopefully it will be short.
  Let me just open the debate my making it very clear what we are about 
to do here today.
  For those people who have watched the efforts to balance the budget 
over the course of the last 10 to 12 years, and I want to direct my 
remarks to a degree to my friend from Indiana, there has been great 
skepticism about any plan to balance the budget because what is 
involved is saying we will make the savings later in exchange for some 
increases or some tax increases today, and we will get around to it 
later.
  What we are about to do today is to enact in permanent law the 
changes that are necessary in the entitlement programs that will 
accumulate the savings that will allow us to balance the budget over 
the course of the next 5 years, and so what I want everyone in this 
Chamber to understand is, as we enact the changes in permanent law, for 
example, that affect Medicare, we will accumulate savings as long as 
those changes in the law remain intact. In order for us to lose those 
savings, we would have to change the law again. We are not going to do 
that. We are not only going to do this in regard to Medicare in an 
effort to save Medicare and extend the life of Medicare for 10 years, 
but we are doing it in all the entitlement programs.
  So what we are about today is to enact into permanent law those 
changes that will result in the savings of billions upon billions of 
dollars; over the course of the next 10 years, approximately a savings 
of $700 billion in mandatory savings, the largest in history.
  At the same time, in this bill we are putting in place spending caps 
for the operations of Government. These spending caps mean that, if we 
spend more than what we have budgeted for, then we have the Sword of 
Damocles come down, and it just cuts all spending above those caps. 
Those caps are enforceable. Real savings will result from limiting the 
growth of the programs which operate the Government to a growth of 
about half a percent as compared to 6 percent over the last 10 years.
  So what we are about doing today is to pass the first real bill that 
will enact the permanent changes into law that will result in a 
balanced budget by 2002. It is not a wish, a prayer, a hope, a dream; 
it is reality.
  Mr. ROEMER. Mr. Speaker, will the gentleman yield?
  Mr. KASICH. I yield to the gentleman from the Hoosier State.
  Mr. ROEMER. Mr. Speaker, I appreciate the gentleman directing his 
events across the aisle in a bipartisan way because I intend to vote 
for this reconciliation package.
  I would say that it is not only important to work in a bipartisan way 
to balance the budget, but this is a defining vote for the Democratic 
Party. It is a vote that, while working with our Democratic President 
and the majority Republican Party who control the House and the Senate, 
we have been able to save over $700 billion that we will not have to 
borrow over the next 10 years, and at the same time that many of us 
Democrats believe in balancing the budget, we believe in doing it in a 
fair, equitable and just manner.
  Spending money on a brand-new initiative for children's health, $16 
billion over 5 years for uninsured children; that would not have 
happened without our input into this process.
  The largest Pell grant increase in the history of the Pell grant 
program to help our struggling families get their children a college 
education; that would not have happened without the President and the 
Democratic minorities in the Senate and the House working with the 
Republican majority.
  There are lots of things that we believe very firmly will benefit the 
hard-working people of this country in this balanced budget proposal 
that we hope will receive a number of Democratic votes here on the 
floor, and I appreciate the hard work. And next door in the Buckeye 
State, with the gentleman from Ohio [Mr. Kasich], we oftentimes work 
together on some of the budgetary matters, and I am very anxious to 
work with the President and with the Senate, the other body, and 
improve this bill even further in conference.
  Mr. KASICH. Mr. Speaker, I reclaim my time and suggest that I think 
what everyone should be very happy about today is that what we are 
about to do here again, so that there can be no confusion with our 
colleagues or the people who advise our colleagues, we are about 
enacting the real savings that will accumulate to balance the budget. 
It is not based on some targets, it is not based on some jerry-rigged 
mechanism. It is based on controlling the growth of entitlement 
programs in a variety of areas, and I want to commend the gentleman for 
being here and supporting this effort today.
  Let me also spend a few minutes talking about the Medicare portion of 
this. We have not only enacted the savings that will preserve Medicare 
for 10 years, but at the same time we have also been able to offer a 
program that will give our senior citizens more choice on health care.
  Furthermore, it will permit physicians to group together to compete 
against insurance companies. We think that allowing physicians to be 
able to group together to compete against insurance companies will 
result in consumers having a leg up on the current process. I am 
delighted it happened.
  Furthermore, included in this is something that is controversial, but 
I want to commend the minority for not doing somersaults over this; it 
is the program to allow our senior citizens to have more choice by 
being able to purchase medical savings accounts in this product.
  In addition to that, we have also got some control in the area of the 
home health care and skilled nursing facilities, which have been the 
most rapidly growing portion of Medicare. We are now going to have an 
item called prospective payments where we do not just turn the faucet 
on and let all the dollars run out. We want to hold people accountable 
who deliver these services.
  So we have a variety of things in this program that, in fact, will 
empower seniors, give them more choices, we believe improve the quality 
of care, and at the same time save $115 billion over the next 5 years 
which is very similar to what we had proposed 2 years ago.
  So I think this is just a terrific accomplishment. In the area of 
Medicaid we have released the States from a number of provisions 
designed by the Federal Government to tell States how to regulate the 
Medicaid program. We have decided that there are some reasonable 
provisions where the Governors of our country ought to be given 
flexibility to manage their program better so that they can provide 
more care to those who are in need of it without micromanaging the 
program from Washington. We think it is terrific.
  And we did make a few reforms in welfare where we took a look at what 
we did last year, and we said if there are some areas where perhaps we 
could improve the bill, make it more compassionate, we agreed to do it. 
But we did not walk away from the basic commitment that we made to the 
American people to end the entitlement program, to make sure that able-
bodied people go to work and to make sure that this program will be run 
at the State level.
  Now I want to just suggest today that the ability to enact these 
programs is really a huge step forward in beginning to address the 
problem of what can be generational warfare in this country. We are by 
no means at an end. No one who watches this debate should think that 
everything is now copasetic. It is not.
  We are, in fact, going to have to come back and give people more 
power, more flexibility, more control of the resources that they earn 
in their lifetime to invest in their own retirement, in a retirement 
program called Social Security where hopefully we can preserve that 
program and yet let people have more flexibility to earn more money 
based on their earnings. We know that there has to be a major overhaul 
of the Social Security program that will preserve, protect and

[[Page H4555]]

enhance Social Security. We are going to have to work on a bipartisan 
basis in order to guarantee that our children are not consigned to 
spending all of their life working to pay our benefits. I think we can 
achieve it, and we are going to have to do it together because Social 
Security is as American as the flag and apple pie, and we are going to 
stand behind it, but we are going to have to improve it, and we are 
going to have to innovate it.
  In the area of Medicare it is very clear that we are going to have to 
move toward a greater voucher system where senior citizens are going to 
hold a check and the health care providers in this country are going to 
have to compete for the right to provide quality care to our senior 
citizens.

                              {time}  1345

  It is one of the answers that I believe will help us be able to deal 
with the tremendous influx into the retirement programs of our baby 
boomers, and in the area of Medicaid, a lot more reform needs to be 
done in Medicaid. Frankly, we have to wonder why we do not create a 
system where the baby boomers begin to provide for their own long-term 
care.
  The gentlewoman from Connecticut is intimately involved in trying to 
create a program to really move Medicaid to be a program for the 
disabled and the children, and that we need to encourage the baby 
boomers in this country to buy long-term care insurance so that we do 
not become a burden on our children.
  The fact is, we cannot afford a generational war in this country. 
What we have done is to take the first step to show the country that we 
can, in a responsible way, begin to get a handle on entitlement 
programs, balance the budget, transfer power from this city into the 
hands of individuals who are the recipients of these programs, bringing 
greater innovation, bringing greater imagination to the effectiveness 
of these programs by transferring them out of a Washington model and 
putting them into the hands of people across the country.
  I think that if we can be successful here, we will gain some of the 
confidence of the American people that all of us know we must take to 
deal with the problems of the next generation; we will gain confidence 
and credibility from the public when we take that next difficult, but 
clearly exciting step to preserve many of these programs for the 
American people.
  So today we have so many things that we can be proud of, so many 
things that we can be excited about. But this is that step that will 
provide for a balanced budget in the year 2002 in a real way.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SPRATT. Mr. Speaker, I ask unanimous consent to yield 45 minutes 
to the gentlewoman from Connecticut [Ms. DeLauro], and that she be 
allowed to control and yield that time.
  The SPEAKER pro tempore (Mr. Dreier). Is there objection to the 
request of the gentleman from South Carolina?
  There was no objection.
  Mr. SPRATT. Mr. Speaker, I yield myself such time as I may consume.
  I cannot pass up the opportunity to observe, as I have before, why it 
is we are here at this moment. Five years ago, the date I always pick 
as January 13, 1993, just before George Bush left office, his Economic 
Report of the President came to the Congress and it indicated, 
projected, that the deficit for that year, fiscal year 1993, would be 
$332 billion. Within a few months, we passed in the House and in the 
Senate and sent to the President a deficit reduction plan, only with 
Democratic votes, passed by the skin of its teeth, which sought to cut 
that deficit in half over the next 5 fiscal years. The results are a 
matter of record.
  The deficit fell in fiscal year 1993 to $255 billion, in fiscal 1994 
to $203 billion, in fiscal year 1995 to $164 billion, and last year, 
September 30, 1996, the deficit was $107.8 billion. Both OMB and CBO 
projected that the deficit will be well below $75 billion on September 
30, 1997, when we close the books on this fiscal year.
  So we can credibly say that we are within reach of a balanced budget 
because of what we did at some political expense in 1993. This could be 
for many of us, a sweet occasion, a very satisfying moment. Instead, it 
is a little bittersweet.
  Mr. Speaker, less than a month ago, we passed a budget agreement here 
in the House, sent it to the other body and they passed it as well, 
that deserved the name bipartisan. Mr. Speaker, 132 Democrats voted for 
that agreement, and today, 132 or more would come back to the well of 
the House and vote for it again if the budget agreement we made a few 
weeks ago were simply carried out, straightforwardly implemented in the 
bill that is before us.
  Unfortunately, it is not. This bill does not fully realize the goals 
that we set out in the balanced budget agreement. It is still a work in 
process, very much something that is yet to be realized. That is why 
the administration requested us in a letter they sent today to pass a 
bill to move the process, not that they are endorsing this bill, but 
they endorse the process, because their expectation is that it can be 
perfected in conference, which remains to be seen.
  Here are just a few of the ways that we have fallen short. The 
philosophy of our negotiation was that each side, Democrats and 
Republicans, would come out of the negotiation with something that each 
of us could claim we had won, some distinct victory. For our part we 
chose as a victory education, the President's request for education, 
and an initiative in the area of children's health care, another step 
toward providing health care for the millions of Americans who do not 
have it.
  The goal we set for ourselves was to get at least 5 million children 
of the 10.5 million children in working poor families who do not have 
coverage covered with health insurance. We set aside an earmark $16 
billion of new spending resources in this bill in order to accomplish 
that.
  Unfortunately, the committee of jurisdiction in its mark of this bill 
gave us a block grant that provides us no assurance that this $16 
billion will reach the children for whom it was intended. CBO has cast 
grave doubt as to whether we will even get a fraction of those 
children. So we have fallen short of a goal that we all ostensibly 
shared and should share, and that is, get at least half of that 10 
million children covered. That is why I say this bill needs 
improvement.
  Next, provisions were added to the bill that were never contemplated, 
never discussed in the course of the budget negotiations. In dealing 
with welfare to work and with workfare participants, provisions were 
added that would deny workfare participants the protections of the 
Federal Labor Standards Act, deny them the right to be called employees 
and all the rights, benefits and privileges pertinent thereto under 
Federal law.
  In dealing with the food stamp provision which now requires able-
bodied food stamp beneficiaries between the ages of 18 and 50 to work 
in order to get their food stamps, we have provided $1 billion in order 
to see to it that 350,000 workfare slots would be available so that 
these food stamp participants, if they could not find a job, could at 
least get workfare and continue to get their food stamps. We have not 
realized that goal in the bill before us.
  Then in this bill, which is a must-pass piece of legislation, 
everybody knows it is a moving vehicle and it is going on a fast track, 
some bitter pills were added by people who are ardent proponents of 
various projects that have nothing to do with reconciliation. This bill 
contains a new medical malpractice code, a far-reaching innovation for 
the Federal Government. I voted for that before. I have actually 
written the title, the Rowland-Bilirakis bill that dealt with it, but 
there are many Members on my side for whom this is a bitter pill to 
swallow. The same goes for the Hyde amendment, which I voted for 
before, but many Members on my side simply think it has made the kids' 
care bill something that they cannot support until it is removed.
  Go down the list; 500,000 MSA's, medical savings accounts, never 
discussed in our agreement, never contemplated, and scored by the 
Congressional Budget Office not to save money in a bill where we are 
trying to shore up and restore solvency to Medicare or shore up and 
eradicate the deficit; this will cost the Medicare Program $2 billion 
over the next 5 years, an expensive experiment.
  So all of this is hard to swallow for Democrats. Some Democrats 
today, as

[[Page H4556]]

a consequence, who could be counted on to come to the floor as they did 
in 1993, as they did just a few weeks ago, and vote to eradicate the 
deficit and balance the budget will be forced to vote no today. It is 
not because they do not want to balance the budget, it is because they 
think the deal that they supported just a few weeks ago has not been 
upheld and has been actually breached.
  Some, like me, will vote for the budget reconciliation bill before 
us. I vote for it for two strong and substantial reasons. First of all, 
as the bill began to emerge from the pipeline of the different 
authorizing committees, and we began to note its problems that had to 
be corrected and cleaned up, the gentleman from Ohio [Mr. Kasich] 
worked in earnest and in good faith with me to work off a list of 
things that I thought we could correct here in the House between the 
reporting of the budget resolution and the rule that was considered 
today. Much of that was accomplished in the self-implementing, self-
executing rule that we passed just a few minutes ago.
  In that same spirit of good faith, I am betting that that same 
cooperation will continue into conference so that we can, through one 
means or another, negotiations with the Senate, the President's veto 
threat, whatever the device may be, we can take this work in progress 
and bring it back to what it was just a few weeks ago, a bill that we 
could call a balanced bill to balance the budget, a bill that is truly 
bipartisan, one that we can all vote for.
  It is in the hope that we can obtain that objective that I will 
support this bill, but I say to all Members of the House, Democrats and 
Republicans alike, it is still very much a work in progress and it 
needs and requires a lot of work before final passage.
  Mr. Speaker, I reserve the balance of my time.
  The SPEAKER pro tempore. Without objection, the gentleman from 
Connecticut [Mr. Shays] will control the time of the gentleman from 
Ohio [Mr. Kasich].
  There was no objection.
  Mr. SHAYS. Mr. Speaker, I yield 4 minutes to the gentlewoman from 
Texas [Ms. Granger].
  Ms. GRANGER. Mr. Speaker, I rise in strong support of the first 
balanced budget since 1969, the year that Neil Armstrong walked on the 
moon. Neil Armstrong's giant leap for mankind is the second thing I 
remember about 1969. Mr. Speaker, 1969, the last year the budget was 
balanced, was also the year my first child was born. I proudly watched 
that young man walk down the aisle to receive his doctor of 
jurisprudence just 3 weeks ago. That means my oldest son has not seen a 
balanced budget since the year he was born. My twins, born 2 years 
later, have never seen a balanced budget in their lifetimes.
  Today we can change that. The legislation we consider today will 
balance the budget by 2002, if not sooner. Our plan will put the 
Federal budget into surplus through the year 2007. This is the most 
important thing we can do for our children's future.
  But this plan does much more. In addition to helping our children, 
this balanced budget downsizes Washington to return power, money, and 
decisions back to families, neighborhoods, and communities. As the 
mayor of Fort Worth, TX, I learned that local communities need more 
power and less mandates from Washington. The balanced budget we will 
continue today will reduce Washington spending as a percentage of our 
economy to the lowest level since 1974.
  This plan keeps our commitment to our parents and grandparents by 
preserving Medicare. This balanced budget adds 10 years to the life of 
Medicare; it provides our parents with more health care choices, the 
same health care choices as their children and grandchildren.
  This plan keeps our commitment to education. I taught school for 9 
years as a public school teacher, and I learned that there is nothing 
more important than education. By eliminating the deficit, a balanced 
budget will lower the cost of a typical student loan by nearly $9,000. 
College education will be more affordable to young men and women across 
this country.
  This budget agreement keeps our commitment to future generations by 
balancing the budget; to our parents and grandparents by preserving 
Medicare; and to America's future by making education for our children 
more affordable and available. Let us stand up for America's children, 
its seniors and its students and its future and support this balanced 
budget agreement.
  Ms. DeLAURO. Mr. Speaker, I yield 16 minutes to the gentleman from 
Michigan [Mr. Bonior].
  Mr. BONIOR. Mr. Speaker, I thank my distinguished colleague from 
Connecticut for yielding me this time.
  Mr. Speaker, this budget bill that we have on the floor breaks the 
deal, and it does so not in one or two places, it does so in about 12 
different areas, major areas of law.

                              {time}  1400

  What it also does, this bill and the tax bill we will consider 
tomorrow that the Republicans are rushing through this Congress will 
spawn the worst economic inequality that Americans have experienced in 
the past century. We are experiencing in this country today a situation 
in which those at the top are moving further and further away from the 
rest of the country.
  We can see it. We used to be first in wages and benefits. Now we are 
13th among Western developing countries. Eighty percent of the American 
people have not had a raise in wages since 1979. The top 20 percent are 
doing very well. The difference between the CEO in 1960 and the average 
worker was about 12 times difference in salaries. Today it is 209 
times. They make 209 times more than the average worker. Now we are 
codifying all of that into law today and tomorrow.
  The Republican tax bill we are going to deal with tomorrow gives more 
benefits to the richest 1 percent of Americans than to the bottom 60 
percent combined. The top 1 percent get more than the 60 percent. 
Rollbacks in the corporate minimum tax is a $232 billion giveaway. Look 
at the chart here. Back in the early 1960's the corporations paid 
roughly close to 25 percent of the taxes in this country. It got down 
to about 7 percent in 1982.
  It was so embarrassing to the Republicans and the rest of the 
country, because companies like Texaco and AT&T and Boeing were not 
paying any Federal taxes, so we put together a corporate minimum tax. 
It started to go up just a little bit since then.
  This bill sends us this back down by giving them a $22 billion break; 
when we add all of the breaks on capital gains through inflation, $650 
billion costs over the period of outyears.
  Another point I would like to make is that the Republican tax bill 
actually raises taxes on the bottom 40 percent of Americans. It gives 
all these breaks to the people at the top, raises taxes on the bottom 
40 percent. If the Republicans were not writing this into law, I would 
call it robbery.
  The second point, the tax and spending bills give giant corporations 
the power to create second-class citizens who do not have the same 
rights as the rest of us. I ask the Members, is it fair to deny some 
Americans their rights under the Family and Medical Leave Act that we 
all worked so hard for here, the Equal Pay Act, the Civil Rights 
Protection Act, OSHA safety standards?
  Is it right to deny a person the ability to defend themselves against 
sexual harassment? Is it fair to pay workers on a contract basis, 
denying them the minimum wage, health benefits, pension benefits? This 
country was founded on the basic principle that we are created equal, 
but these bills today and tomorrow say that some people, mostly 
families struggling to raise their children, are less than equal, that 
they do not deserve the same rights as other Americans. That is not 
just a slippery slope, that is a jagged cliff. If all Americans do not 
share the same rights, then none of us have them.
  The third point, the Republican tax and spending bills violate the 
bipartisan budget agreement. Three of the most important violations are 
that it reneges on a third of the promised funding for education, 
shortchanging particularly students from working families. It also 
reneges on health care coverage for 90 percent of the children who will 
be covered under the original agreement, and gives this funding to 
States with no guarantee that they are going to spend it on kids for 
their health insurance.
  The agreement called for covering 5 million children, but the 
spending bill

[[Page H4557]]

covers only about 500,000, and leaves out 4.5 million children. It also 
effectively slashes funding for children's hospitals serving children 
from poor and working class families perhaps causing some of these 
vital hospitals to shut down.
  These bills punish working families and reward the wealthiest and big 
nationals. More benefits to the richest 1 percent, and 60 percent of 
the rest of the folks, from zero to 60 percent, those benefits equal 
the top 1 percent. Is that just? Is that fair? We believe in a balanced 
budget, tax cuts for working families, and fairness. We will fight for 
that.
  Tomorrow, with our tax bill that targets ours to working families, 
not the very wealthy in this country, we will fight that, and we will 
fight that today when we take on what the Republicans have proposed 
here with respect to what we believe is breaking the agreement.
  Ms. DeLAURO. Mr. Speaker, will the gentleman yield?
  Mr. BONIOR. I yield to the gentlewoman from Connecticut.
  Ms. DeLAURO. Mr. Speaker, I thank the gentleman from Michigan for 
yielding to me, and want to pick up a couple of points he has laid out 
here.
  I urge my colleagues to vote against this bill, because in fact it 
does violate the bipartisan budget we passed earlier this month. In 
particular one of the areas where it is an outrage is what they have 
done in the whole issue of health care for children in this country. It 
denies working families the help they need to provide health care for 
their children. They have violated that very basic tenet of this 
agreement. There is no assurance of coverage for at least half of the 
10 million children in the Nation today who do not have access to 
health insurance.
  Children living without health care coverage are hurt in so many ways 
in this country. They are less likely to have a family doctor, to 
receive preventive care, and they are less likely to have treatment for 
serious illnesses. They are less likely to grow up healthy and 
productive. The problem is not going away because every day in this 
country another 3,300 kids lose their health insurance.
  Mr. BONIOR. That bears repeating; every day in this country 3,300 
kids in this country lose health insurance because employers are 
cutting back these benefits. Where are the kids going to go? This plan 
does nothing, nothing for them.
  Ms. DeLAURO. I might just add, Mr. Speaker, that the agreement 
clearly states $16 billion would be spent to cover half the kids. It 
has been estimated by the Congressional Budget Office that the bill 
would cover only 520,000 of those 10 million kids. That is coverage of 
less than 20 percent of the children who do not have access to health 
care today.
  I might add that the children who do not have access to health care 
today are the sons and the daughters of working families. These are 
people whose fathers and mothers are working every single day in order 
to protect their kids, and they are without health insurance.
  This bill offers no assurance that even one additional child will 
receive health care insurance. But what my Republican colleagues have 
done is instead they are going to send this money to the States with no 
requirement at all that the funds be used to give kids the health care 
that they need. There is nothing that says that this money needs to be 
used to pay for health insurance for kids today.
  The Republicans in fact are turning their back on working middle 
class families today. They are going to not allow our youngsters to 
grow up healthy and strong.
  Mr. DOGGETT. Mr. Speaker, will the gentleman yield?
  Mr. BONIOR. I yield to the gentleman from Texas.
  Mr. DOGGETT. Mr. Speaker, I voted for this balanced budget agreement.
  Mr. BONIOR. I did, too. So did the gentlewoman from Connecticut [Ms. 
DeLauro].
  Mr. DOGGETT. Really, is not the measure what one would properly call 
a wreckonciliation bill, in that it wrecks the balanced budget 
agreement?
  Mr. BONIOR. I agree 100 percent, in that it wrecks it on a number of 
fronts, some of which we have just talked about.
  Mr. DOGGETT. Indeed, when we talked about getting a balanced budget 
agreement that has true balance, I always thought the idea was that 
there would be shared sacrifice, shared burden, but it would appear 
that those at the top of the economic ladder now get to share, and 
those that are trying to climb up, they just get the burden. Does it 
appear that way to the gentleman?
  Mr. BONIOR. Mr. Speaker, I think the gentleman is absolutely correct. 
We can tell from this graph on the tax piece that the multinational 
corporations and giant corporations get a $22 billion break. We are 
talking about, as I said earlier, the top 1 percent getting as much in 
benefits as 60 percent of the American people, working Americans in 
this country. Where is the justice? Where is the fairness there?
  Mr. DOGGETT. If there is a family out there, maybe both parents 
having to try to work just to make ends meet and at the same time 
trying to create a good family environment for their kids. If they work 
for someone that does not provide health insurance, this bill, this 
wreckonciliation bill, says to them, you have to go forward with no 
health insurance, but it says to a giant multinational corporation, can 
we cut your taxes a little bit more?
  Mr. BONIOR. Mr. Speaker, the gentleman is right, he has got it. That 
is exactly where we are headed on this bill here. It is reneging on the 
promise that was made over the agreement. It is inequitable, it is 
unfair, and puts the burden on those who can least afford to bear it.
  Mr. DOGGETT. Indeed, for the ordinary young working families, does 
this reconciliation bill really offer them much of anything?
  Mr. BONIOR. It offers them virtually nothing.
  In terms of the budget, let me just tell my Republican colleagues and 
those Members on the floor here, it was in 1993, if we are talking 
about offering people a balanced budget, it was Democrats on every 
single one of the votes that passed that bill that reduced the deficit 
from $300 billion.
  It was in 1993 that we passed the balanced budget in this country. 
The budget was at about $300 billion. That bill, that was supported by 
Democrats only, not a Republican in the House and Senate supported that 
bill, brought the deficit down from an annual $300 billion deficit all 
the way down to roughly $60 billion this year.
  What we are trying to do is maintain that, maintain that progress, 
and make it equitable in terms of working Americans. This bill does not 
do it. It moves us back in the opposite direction, with huge outyears, 
deficits in the outyears, because of what we will see tomorrow in the 
Republican bill on taxes by indexing capital gains. It does not 
distribute the benefits fairly in this particular bill, as we have 
discussed with children's health care, as we have discussed with a 
variety of other issues in terms of the workplace.
  Mr. DeFAZIO. Mr. Speaker, will the gentleman yield?
  Mr. BONIOR. I yield to the gentleman from Oregon.
  Mr. DeFAZIO. Mr. Speaker, the gentleman just made the most salient 
point there. The cuts today are designed to cut taxes for the largest 
corporations in America and the wealthiest. Some of these cuts are 
extraordinarily cruel. They cannot be denied by my friends who will 
stand on the other side of the aisle: a 20-percent cut in home health 
oxygen benefits for seniors, and a freeze to the year 2002.
  Let me just read from one constituent, of the many letters I got: 
Dixie McNutt, Springfield, OR, my hometown. Dixie says, ``Having oxygen 
allows people like me to enjoy the comforts of home and to feel as 
though we are still an active part of the family. Without this benefit, 
the choice seems to be living at home without breathing, or spending 
our remaining days in the hospital, which would cost both Medicare and 
the patient much more.''
  So today, Congress will cut $2 billion out of home health oxygen 
benefits for seniors and the disabled to pay for one-tenth of the 
repeal and the gutting of the alternative minimum tax for corporations, 
because it will be too much, too much to ask the largest corporations 
in America to just pay maybe 5 or 10 percent of their profits in taxes, 
a fraction of what working Americans

[[Page H4558]]

pay out of their paycheck every month. This is a travesty. It should 
not pass. I stand against this bill.
  Mr. BONIOR. I thank my colleague.
  Mr. Speaker, what we have here is a replay, really, of the last 
Congress. They are taking dollars out of children's hospitals, they are 
taking dollars that were intended for children's health insurance 
benefits, they are taking benefits away from workers all over this 
country, and where are they putting it? They are putting it into taking 
care of the biggest corporations in this country and the wealthiest 
individuals in this country. It is indeed one of the biggest transfers 
of wealth we will see here in many a moon.
  Mr. KENNEDY of Rhode Island. Mr. Speaker, will the gentleman yield?
  Mr. BONIOR. I yield to the gentleman from Rhode Island.
  Mr. KENNEDY of Rhode Island. Mr. Speaker, I think what this 
reconciliation bill really does is it shows where the majority party, 
the Republican party's, true priorities are. Clearly, their priorities 
are not with our Nation's senior citizens, who are now going to get the 
cold shoulder because of the MSA accounts that are provided for in this 
bill, which basically allows the skimming to be done by insurance 
companies, so they can get the healthiest and wealthiest who do not 
have to pay the deductible, and be able to target those very healthy 
and wealthy people, leaving the poorest elderly, the most frail 
elderly, the ones that have the most costs to bear with respect to 
that.
  In addition to that, the bill also, as the gentleman said, makes sure 
that we do not provide the needed investment for health insurance for 
children, making sure that all the children in this country get the 
necessary health care that they need.
  Finally, as the gentleman mentioned, all this does is shift the 
burden of our taxes from the top 1 percent of this country to the 
bottom 60 percent. I think the gentleman pointed out correctly that, is 
it not correct that the tax cut that this reconciliation bill provides 
for, including the tax bill, has a tax cut larger for the top 1 percent 
than for the aggregate of the bottom 60 percent?
  Mr. BONIOR. The gentleman has stated it correctly. The top 1 percent 
gets as much as the bottom 60 percent in this country.
  Mr. KENNEDY of Rhode Island. While the senior citizens do not get the 
necessary health insurance, as my colleague, the gentleman from Oregon, 
just mentioned; while children do not get the necessary health 
insurance they need, and while legal immigrants still go without SSI, 
based upon the Republican discriminatory bill with respect to our legal 
immigrants not being provided adequate SSI coverage.
  Mr. SANDERS. Mr. Speaker, will the gentleman yield?
  Mr. BONIOR. I yield to the gentleman from Vermont.
  Mr. SANDERS. Mr. Speaker, let us put this bill into the context of 
what is happening in America today. Everybody knows what is happening. 
The richest people are becoming richer, the middle class is being 
squeezed, and most of the new jobs being created are low-wage jobs.
  Given that context, what sense is it that we have legislation under 
which 58 percent of the benefits go to the top 5 percent, corporations 
see a reduction in their tax burden, while the bottom 40 percent of 
income earners see no benefits at all? In other words, we have got this 
thing completely backwards. We are helping those people who do not need 
help, and we are not helping those people who are in desperate need of 
help. Furthermore, under this legislation, Medicare will be cut $115 
billion over a 5-year period.
  The Vermont Association of Hospitals estimates that will be a $75 
million cut from hospitals, rural hospitals all over America who will 
be hurt, meaning there will be lower quality health care for our senior 
citizens.

                              {time}  1415

  Tax breaks for the rich and the people who do not need it, cuts in 
Medicare and a reduction in the quality of health care for our senior 
citizens, those people who do need help, I urge a ``no'' vote on this 
absurd piece of legislation.
  Mr. SHAYS. Mr. Speaker, I yield myself 1 minute, to say that tomorrow 
we will be debating the tax bill. As the bipartisan joint tax committee 
of Congress estimates, 76 percent of all the benefit goes to people who 
make less than $75,000, totally contrary to the facts that have been 
shouted out in the last 20 minutes. Ninety-two percent of the benefits 
go to people making under $100,000.
  We will be debating the tax bill tomorrow. It will be very, very 
clear who benefits. We will realize the people who benefit are the 
middle class in this country. Today we are debating a spending bill, a 
spending bill that allows spending to go up 3 percent a year, that 
allows Medicare to go up at 7 percent a year each year, not a cut, a 
significant increase.
  Mr. Speaker, I yield 2 minutes to the gentleman from Florida [Mr. 
Shaw].
  Mr. SHAW. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  It is not necessary to stand here and yell when we have the facts 
with us. We definitely have the facts with us.
  That is that 76 percent of the tax cuts that we are going to be 
talking about tomorrow, tax relief for American families, goes to 
families earning less than $70,000.
  Now, people listening to this debate would wonder, where in the world 
are these figures coming from that are being screamed and yelled on the 
floor and all of these graphs and all of this yelling and signs that 
are going up? I can tell my colleagues where they came from. Treasury 
came up with an archaic formula in which they determine somebody's 
wealth by taking the rental value of the home that they own and add it 
to their income, the earnings of corporations in which they might own a 
few shares of stocks and putting that upon them, the economic value of 
their resources such as their automobile. Come on.
  Unless the Democrats are going to come out and try to tax that, then 
this is an absolutely absurd argument. So let us get some truth here on 
the floor. Let us get to the situation where we are not yelling at each 
other, that we are simply talking facts. If we are putting that type of 
income on top of somebody when we start to try to come up with all 
these figures that simply are not true, I think that at that time we 
owe it to the American people, we certainly owe it to our colleagues to 
get up and say how did we determine that income. We do it by simple 
math and by the amount of earnings that people have. The facts are very 
clear.
  This is the first tax relief the American people are getting in the 
last 16 years. There are some Members that are here on the floor 
debating that just cannot stand that idea. But I can tell my 
colleagues, Democrats and Republicans alike are going to carry this day 
and we are going to get the first tax relief for the American families 
in 16 years. That will vindicate this debate.
  Mr. SHAYS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Arizona [Mr. Hayworth], who will point out that taxes went up in 1993 
and are going down in 1997.
  Mr. HAYWORTH. Mr. Speaker, I thank the gentleman from Connecticut for 
yielding me this time.
  I am pleased to follow my chairman of the Subcommittee on Human 
Resources of the Committee on Ways and Means. I have been listening, 
Mr. Speaker, with great interest to the cavalier fashion in which fear 
replaces facts on the other side. It is sad to see that happen.
  I do not think the point can be made often enough that when you cook 
the books, as the liberal minority has done, in the process you 
fricassee the facts.
  Mr. Speaker, I do not know of anyone, including my friends on the 
minority side, I do not know of anyone who pays themselves rent to live 
in a house they own. Only in Washington, DC in the desperation of 
trying to concoct fear rather than new ideas, rather than joining with 
us to decrease the tax burden on working Americans, decrease the size 
of government, have a limited and effective government, only in 
Washington do we see this kind of math.
  To hear the minority whip come up and talk about the balanced budget 
taking shape in 1993, I was a private citizen. I know exactly what 
happened in 1993, the largest tax increase in American history. It took 
a new Congress cutting spending, it took a new Congress coming in and 
saying, let us

[[Page H4559]]

reverse the culture of tax-and-spend to take the first fledgling steps 
in reducing by $50 billion the size of government to make it limited 
and effective.
  And the truth of this tax cut, Mr. Speaker, is the following: 76 
percent of the tax cuts go to benefit middle-income families, families 
making between $20,000 and $75,000 a year for, Mr. Speaker, we realize 
that those middle-income taxpayers are exactly that. They are not rich. 
They are working Americans. They deserve a break. They will get one.
  Mr. SHAYS. Mr. Speaker, I yield 3 minutes to the gentleman from 
Florida [Mr. Miller].
  Mr. MILLER of Florida. Mr. Speaker, let us get clear what we are 
voting on today in the Balanced Budget Act. We are talking about the 
spending side of the equation. Tomorrow we are going to talk about the 
tax side of the equation. Because tomorrow we are going to vote on 
massive amounts of middle-class tax relief. But today we are talking 
about the spending side of the equation.
  What we are talking about today is reining in the fiscal 
irresponsibility and spending that takes place here in Washington. When 
I first ran in 1992, I ran because it was a moral issue to me that this 
Government was building up an obscene and immoral debt that we were 
going to pass on to our children and grandchildren. It was wrong to 
build up a debt that today is over $19,000 for every man, woman, and 
child in the United States because we just overspend in Washington. The 
way we go about solving that problem is reining in the Federal 
Government.
  I was pleased to be able to serve on the Committee on the Budget with 
the gentleman from Ohio [Mr. Kasich] back in 1993 and 1994. As a 
minority back then, we introduced a budget resolution that was called 
cut spending first because we recognized that is where the problem is. 
It is not that we tax too little in this country. It is because we 
spend too much. And what this bill is today is $700 billion of 
entitlement savings over the next 10 years. It needs to be done in a 
bipartisan fashion.
  That is the reason I congratulate the gentleman from South Carolina 
[Mr. Spratt] and the gentleman from Indiana [Mr. Roemer] earlier who 
have always spoken in favor of this bill as a step in the direction for 
the final passage ultimately next month. So we have support on the 
other side of the aisle. It is too bad that the very liberal wing of 
the Democratic Party feels so adamant they need to demagogue that issue 
because what we are doing is the right thing for America's children and 
grandchildren of future generations to get the spending under control.
  One of the very things I feel very positive about in this bill is 
Medicare. What we have is a Medicare Program that is going bankrupt. It 
will be bankrupt in 4 more years. We need to address this in a 
bipartisan fashion, which is exactly what has been done in this 
committee. In fact, the Committee on Ways and Means passed it with a 36 
to 3 vote. Only three Democrats voted against it. The majority of 
Democrats voted for the Medicare position of this bill, because 
Medicare has to be preserved, has to be protected, has to be saved for 
our senior citizens.
  In my district in Florida, Sarasota-Bradenton, Florida area, we have 
more seniors than any district in the country. So it is important to me 
for all the seniors in my district, I have an 87-year-old mother that 
is dependent on Medicare. So we need it for the seniors. But it is also 
a big jobs issue in my district with the hospitals and home care 
agencies and the doctors' offices, all needing their jobs, depending on 
this. So we need to preserve that program and save that program.
  How do we go about doing that in this bill? What we do basically is 
we slow the rate of spending in Medicare. We slow the rate of spending 
so we are going to spend more money every year in Medicare. Right now 
we are spending about $5,200 per person on Medicare. In 5 years we will 
be spending $6,900 per person on Medicare. What we are going to do is 
go after waste, fraud, and abuse and we are going to give more choices 
to senior citizens.
  It is a good program. I encourage my colleagues to support this. I 
hope we get strong support on the other side of the aisle.
  Ms. DeLAURO. Mr. Speaker, how much time remains of my time?
  The SPEAKER pro tempore [Mr. Dreier]. The gentlewoman from 
Connecticut [Ms. DeLauro] has 29 minutes remaining, the gentleman from 
South Carolina [Mr. Spratt] has 36 minutes remaining, and the gentleman 
from Connecticut [Mr. Shays] has 68 minutes remaining.
  Ms. DeLAURO. Mr. Speaker, I yield 1 minute to the gentleman from 
Michigan [Mr. Levin].
  Mr. LEVIN. Mr. Speaker, three points on taxes. I hope the Republicans 
will listen. The 76 percent for families less than $70,000 is based on 
5 years, apparently. We have never seen the analysis. I challenge them, 
give us a 10-year analysis. They leave out the tax breaks the second 5 
years. Give it to us.
  Second, Treasury, using the same methods used by the Reagan Treasury 
and the Bush Treasury, say two-thirds of the tax cuts under your bill 
go to the wealthy, the same method that was used by previous 
administrations.
  Third, they bust the budget in the outyears. They bust it. So come 
here not with phony figures. Come here with the facts and we will 
debate them.
  Mr. SHAYS. Mr. Speaker, I yield 3 minutes to the gentleman from 
Kentucky [Mr. Bunning], who is a member of both the Committee on Ways 
and Means and the Committee on the Budget.
  Mr. BUNNING. Mr. Speaker, I would like to say to my good friend from 
Michigan, he knows full well that the numbers we use are adjusted gross 
income numbers and they are factual. And just because Ronald Reagan and 
George Bush's Treasury Departments made a mistake, it is no sign that 
the Clinton administration has to continue making the same mistakes.
  Mr. Speaker, I rise in strong support of the Balanced Budget Act of 
1997. I am especially proud of the Medicare reforms in this bill, about 
a 7-percent increase over the 5 years, each year. Since Republicans 
took control of Congress, we have been working very hard to preserve 
and strengthen and protect Medicare.
  The bill before us today does save Medicare from bankruptcy for at 
least the next 10 years and gives us time to figure out a long-term fix 
for the problem. But I think the most exciting part of this package is 
that it gives seniors more choices in picking the health care plan that 
best fits their needs.
  I know some of the seniors like what they have right now. They do not 
want to change a thing. Fine. They do not have to move off Medicare 
part A or part B. They can simply do what they have been doing. But if 
they want to change, seniors will now be able to shop around for a PPO, 
an HMO, a medical savings account, another health care plan that covers 
something that Medicare does not cover right now like prescription 
drugs or eye glasses. And it will be paid for by Medicare. They might 
even be able to choose a new policy that allows them to get rid of 
Medigap supplemental plans that they are paying extra for right now.
  In rural States like Kentucky, where folks sometimes do not have as 
many health options, this bill enables doctors and hospitals and other 
providers to band together to set up provider service networks to give 
seniors even more choices. Letting seniors choose, forcing health care 
providers to compete for their business are the keys in this Medicare 
reform package. This holds down the cost and saves enough money to keep 
Medicare going for years.
  Of course, we also save a lot of money by making other important 
changes like reforming the medical malpractice rules and cracking down 
on waste, fraud and abuse.

                              {time}  1430

  But by empowering seniors, by giving them more choices, we take the 
biggest strides towards reforming and saving Medicare. By exercising 
the power to choose, seniors themselves will do most towards saving 
Medicare; they, not the Washington bureaucrats, will control their own 
futures.
  I urge support of this bill and all the good things in it.
  Ms. DeLAURO. Mr. Speaker, I yield myself 10 seconds. I think it bears 
merit to remember that it was the Republican majority in this House 
that wanted to cut the Medicare Program by $270 billion to pay for a 
tax break, $245 billion for the richest people in this country. It was 
the President and the people of this country that said no.

[[Page H4560]]

  Mr. Speaker, I yield 2 minutes to the gentlewoman from New York [Mrs. 
Lowey].
  Mrs. LOWEY. Mr. Speaker, I voted for the budget agreement approved 
last month because I do believe that our Nation must have a balanced 
budget that protects our priorities and respects our values. But, 
unfortunately, the Republican leadership did not even wait for the ink 
to dry on the deal before changing it.
  In fact, the bill before us violates the budget deal in several 
critical ways. First, it fails to provide basic assistance to legal 
immigrants, which means that 16,000 elderly and disabled legal 
immigrants in New York will have the safety net cut out from under 
them.
  The bill cuts more than $12 billion from hospitals and other health 
care providers in New York, and the children's health program fails to 
provide coverage for more than 4 million children. It denies American 
workers basic workplace protections, and it will hurt seniors and their 
families who depend on quality nursing care.
  And this bill violates the basic reproductive rights of American 
women. Tucked away in the fine print of this legislation is an extreme 
provision, the Hyde amendment, that would permanently, for the first 
time, prohibit the use of Federal funds for abortion. This punitive 
prohibition would prevent millions of lower income women from obtaining 
vital reproductive health services and would personally create a two-
tiered health care system.
  We must not allow this to occur. Federal health programs must cover 
the full range of reproductive health care services, including 
abortion. This abortion restriction was not in the budget deal, and it 
should not be in the budget bill. We must not allow the Republicans to 
use the budget process to enact their radical anti-choice agenda. 
Again, the abortion restriction was not in the budget deal; and, 
therefore, it should not be in this budget bill.
  I urge a ``no'' vote on this legislation.
  Mr. SHAYS. Mr. Speaker, it is my pleasure to yield 3 minutes to the 
gentleman from Oklahoma, [Mr. J.C. Watts].
  Mr. WATTS of Oklahoma. Mr. Speaker, I rise in support of the Balanced 
Budget Act of 1997. We have a historic opportunity to come together in 
a bipartisan fashion and deliver on our promise to the American people 
to have a balanced budget by the year 2002.
  As we debate this today, there are going to be people on the left and 
right arguing and bickering about programs that they want added or 
taken out, but we cannot allow this to divert our attention from the 
big picture. This is the first balanced budget in over 30 years. And it 
is interesting, it is the first tax cut in 16 years; and it is even 
more interesting that Tiger Woods was 5 years old the last time we had 
a tax cut.
  We always hear, and we will continue to hear today, that the rich are 
getting the tax breaks. Let me tell my colleagues, as it has been said: 
76 percent of our tax cut goes to people making from $25,000 to $75,000 
a year. Let me tell my colleagues: Somebody making $75,000 a year in 
America that has two kids, they are working from paycheck to paycheck, 
trying to meet their monthly responsibilities.
  We keep hearing that we are getting tax cuts for the wealthy 
industries, wealthy businesses in America. Over 90 percent of the 
businesses in the Fourth District of Oklahoma employ six people or 
less. These people are raving about this budget deal because they know 
they are going to get some relief from the ridiculous tax policies, 
these repressive and aggressive tax policies that we passed over the 
last 25 or 30 years.
  When I came to Congress, I promised the people of the Fourth District 
of Oklahoma I would work to make Government live within its means, just 
like all the working families in Oklahoma and across the Nation must do 
every month.
  I have five kids who I am trying to teach how to be responsible, and 
I know they are always watching their dad to try to see if he practices 
what he preaches. So today, when I cast my vote for fiscal 
responsibility and balancing the budget, I am showing my kids that I am 
serious.
  Balancing the budget is the right thing to do. And if every Member in 
this Chamber does not vote to balance the budget because it is the 
responsible thing to do, then do it for your children so they will not 
have to inherit an America as pathetic as it is today, where you have 
got working families paying from 48 to 52 cents of every dollar they 
make in some Government tax or Government fee. Do it so the 5- and 6-
year-olds out there will not have to spend 80 to 84 cents of every 
dollar they make in some type of Government tax or Government fee by 
the time they are 25 years of age.
  My father taught me at an early age that you cannot spend out more 
money than you take in, and he said this: If your outgo exceeds your 
income, then your uplift will come to a downfall. That is pretty good 
advice to remember as we debate the balanced budget here today. It is 
advice I must follow in teaching my kids.
  Friends, I urge everyone to support this balanced budget. It helps 
control runaway Washington spending, saves Medicare. Only in 
Washington, DC could an increase be a cut. It saves Medicare. We 
increase Medicare spending and provide much-needed tax relief for 
working families.
  Ms. DeLAURO. Mr. Speaker, I yield 3 minutes to the gentleman from 
Missouri [Mr. Clay].
  Mr. CLAY. Mr. Speaker, I am not sure that there is a term in the 
vocabulary adequate to describe my level of disgust with this bill. The 
Republican majority began this process with proposals reported out of 
the Committee on Ways and Means and the Committee on Education and the 
Workforce that represented the most pernicious assault on the working 
poor I have witnessed as a 29-year Member of this body.
  In response to the chorus of outrage that rang out against those 
proposals, the majority fabricated window dressing to make their 
proposals seem more moderate. But this new manager's amendment, 
rewritten by the Committee on Rules late last night, remains unfair, 
immoral and unconscionable.
  Mr. Speaker, I have three fundamental objections to this bill. First, 
it establishes a new class of workers who would be treated like 
indentured servants without coverage under the landmark worker 
protection and civil rights laws. Second, it concocts a scheme of 
watered-down grievance procedures and remedies that would render 
millions of workers unprotected from discrimination and exploitation. 
And finally, Mr. Speaker, it endangers the job security and financial 
well-being of millions of current public sector employees by 
establishing a weak set of nondisplacement protections.
  Here is why this proposal treats poor workers like second-class 
Americans. It denies so-called community service participants employee 
status and purports to use the old CWEP Program as precedent. But that 
program was quite different from the workfare program established in 
this proposal. Whereas that program had a strong training element, the 
community service program established by this proposal is work, pure 
and simple.
  Community service workers will be employees in every sense of the 
term. They will sweat like other workers, their children will get sick 
just like the children of other workers. And these workers have dreams 
and aspirations for their families just like other workers.
  But this proposal says no, they are not the same and they do not 
deserve full respect and dignity. Although they will be employed to 
perform the same tasks performed by other workers, these welfare 
workers will be denied the protection of the Fair Labor Standards Act, 
the Occupational Safety and Health Act, the Family and Medical Leave 
Act and the many other important Federal laws. And those employed by 
nonprofit private sector employers will be denied the right to organize 
or bargain collectively.
  The grievance procedures established in the rewritten proposal are a 
house of courts, substantially weaker than protections adopted by the 
Republicans on the Committee on Education and the Workforce. There is 
no provision to ensure that the grievances will be fairly heard and 
adjudicated. In a real blow against due process, there is no appeal 
from what may well turn out to be a kangaroo court.
  Here is an example of how outrageous these grievance procedures are. 
A woman who has been sexually harassed may be required to seek redress 
from the very agency

[[Page H4561]]

where the harassment occurred. Under this proposal that woman would not 
be entitled to a fair hearing, or the right to appeal an adverse 
decision. What have poor women done to deserve such indignity?
  Finally, protections that were included in the education and work 
force proposal to ensure that community service workers are not used as 
pawns in a ploy to displace existing workers have been gutted by the 
manager's amendment. As reported by the Committee on Education and the 
Workforce, a welfare worker could not be assigned to an equivalent job 
if another individual was on layoff status. That protection has now 
been effectively stripped. As reported by committee, a welfare worker 
could not be assigned to a job if a consequence of that assignment was 
the partial displacement of an existing worker. Those protections have 
also been deleted.
  Mr. Speaker, this legislation is nothing short of a bill of 
exploitation that will leave workers more vulnerable to racism, sexism, 
and unsafe workplaces. Rather than encouraging work, these provisions 
demean workers. I urge its resounding defeat.
  Mr. SHAYS. Mr. Speaker, I yield 3 minutes to the gentleman from Texas 
[Mr. Archer], chairman of the Committee on Ways and Means.
  Mr. ARCHER. Mr. Speaker, I thank the gentleman from Connecticut [Mr. 
Shays] for yielding me the time.
  Mr. Speaker, today marks a great and a historic day. We are poised to 
vote on a matter that unites Americans from all generations. We stand 
ready to vote on a bill that brings the American people together like 
no other legislation before us.
  With this vote, we can balance the budget to save the next generation 
from the crushing burden of debt, and we can save Medicare from 
bankruptcy so this generation of seniors can live their retirement 
years in peace, comfort, and security. It is high time that Washington 
put the needs of the American people first, and that is what we will do 
with this vote.
  This legislation is bipartisan. Our plan to save Medicare was 
supported in the Committee on Ways and Means by a 36 to 3 vote. We came 
together, like the American people want us to do. We will save Medicare 
by giving seniors choices, by fighting fraud and abuse, and we even 
expand Medicare's benefits to include new preventive programs that 
seniors, particularly women, need and deserve.
  We help people move from welfare to work by reinforcing the central 
message of last year's welfare reform law: If you are able to work, you 
should work. Welfare should not be a way of life. Yes, we made changes 
in last year's law. Many of the changes were requested by the 
President. But I am proud to say we uphold our Nation's values by 
helping people earn a paycheck instead of a welfare check.
  I am particularly pleased that with this bill we will finally have a 
balanced budget. My 12th grandson was born last year, a little 2-pound 
premature baby. And when I looked at him in that incubator, I realized 
that when he grows up, his pro rata share on the national debt would be 
$189,000 during his lifetime.
  It is unconscionable for our generation to leave that to our children 
and our grandchildren. And, for once, we will finally move toward a 
balanced budget and stop this continued increase in debt service 
charges for future generations.
  Mr. Speaker, I yield back the balance of my time.
  Ms. DeLAURO. Mr. Speaker, I yield myself 10 seconds.
  Mr. Speaker, the fact of the matter is that this spending bill takes 
away hospitals and nursing homes, reasonable and adequate 
reimbursement. Medicare solvency comes up 2 years short of the budget 
agreement. And there are deep cuts in the disproportionate share which 
adversely affect hospitals across this country. We are not improving 
the health of people in this country.
  Mr. Speaker, I yield 2 minutes to the gentlewoman from New York [Ms. 
Velazquez].
  (Ms. Velazquez asked and was given permission to revise and extend 
her remarks.)
  Ms. VELAZQUEZ. Mr. Speaker, today we will vote on the Republican 
spending bill. The Republicans will say that this is a middle-class 
budget. Do not believe it for a minute.
  In fact, the Republicans are financing tax cuts for the rich by 
waging war on working families and legal immigrants. And when they talk 
about a balanced budget, they do not finish the sentence. They should 
add that they are balancing the budget on the backs of legal immigrants 
and working families in our country. Not only that, but they are 
violating the terms of an agreement that they made to the President, 
the Democrats, and to the American people.
  The Republican tax plan will give $27,000 in tax breaks to the 
wealthiest 1 percent. At the same time, they want to eliminate benefits 
to legal immigrants who become disabled in the future. These are people 
who have worked hard, raised families, and paid taxes. These are 
American values and they are values that immigrants to this country 
hold dear to their hearts.
  Disability benefits are not handouts. How many times do we have to 
say this?

                              {time}  1445

  This is an issue of basic fairness. This budget agreement creates a 
huge double standard that will permit immigrants to be treated like 
second-class citizens. Why? To pay for huge tax breaks for the wealthy. 
Is that what this country is all about? Is that how a just society 
treats its elderly who become disabled? Is that the message to send to 
the rest of the world?
  Mr. Speaker, this budget is really a disaster. It is cruel, it is 
unfair, and the American people will not stand for it.
  Mr. SHAYS. Mr. Speaker, I ask unanimous consent to allow the 
gentleman from California [Mr. Thomas] to control and yield as he may 
choose the next 12 minutes of our time.
  The SPEAKER pro tempore [Mr. Dreier]. Is there objection to the 
request of the gentleman from Connecticut?
  There was no objection.
  Mr. THOMAS. Mr. Speaker, I yield myself 2 minutes.
  Mr. Speaker, as we carry on what I guess passes for normal debate 
around here, I think we probably ought to pause for just a moment and 
not let our partisan juices flow quite as freely as they do sometimes, 
because quite frankly, the Medicare provision in this bill is 
remarkable. It is remarkable for a number of reasons, but I think 
primarily because it sets a standard for what I believe ought to be the 
way in which we work public policy.
  The Medicare Program is as important as any policy that the Federal 
Government has. It is more important than cheap partisan shots. Trying 
to resolve one of the more difficult problems that faces all of us and, 
more importantly, the seniors in this country is important.
  I think we have all come to the general agreement that people will 
consume as much health care as other people are willing to pay for. If 
in fact that is true, and I think we believe it is, our Medicare 
Program is clearly in trouble. Bankruptcy was facing it: With an 
antiquated and out-of-date delivery system, especially with the rapid 
changes that are occurring in the private sector health care delivery 
system and the fact that some of the programs that we offer are as old 
as the bureaucracy that structured it; that is, we wait until people 
are sick before we deal with the problem instead of moving aggressively 
into preventive care and wellness.
  This measure, passed by the Committee on Ways and Means and by the 
Subcommittee on Health, unanimously by the Subcommittee on Health, 
moves, I think, aggressively in the area of prevention, aggressively in 
the area of wellness, aggressively to address the question of 
bankruptcy, and aggressively to open up the system to a choice for 
seniors.
  Mr. Speaker, I yield 2 minutes to the gentleman from California [Mr. 
Stark]), the ranking member of the Subcommittee on Health.
  (Mr. STARK asked and was given permission to revise and extend his 
remarks.)
  Mr. STARK. Mr. Speaker, I want to say on behalf of myself and many of 
the committee's Democrats that we would like to commend the gentleman 
from California [Mr. Thomas], the full committee, and the Subcommittee 
on Health's staff director Chip Kahn for an open and consultative and 
bipartisan approach to the Medicare legislation. It is really a model, 
I suspect, of how the legislation should be written.
  I am not sure I can quite make myself say that it is a model of 
legislation, but it was done in a tradition of

[[Page H4562]]

past Medicare bills. It extends the life of the Medicare trust fund to 
2007, it makes reforms in the way we pay providers, and it indeed adds 
some beneficiary improvements. I do not intend to vote for the budget 
bill, but it is not because of the Medicare portion. If anybody was 
thinking of that, I would dissuade them otherwise.
  There are some things we should strongly oppose and do differently. 
We should oppose the Senate's provision to raise the age to 67, which 
causes more problems I think than it solves. I think we should oppose 
the Senate's copay provisions because we already charge Tiger Woods on 
$10 million, $300,000 a year for the same premium that somebody at 
$10,000 a year would pay $300 for and get the same benefit. Why punish 
Tiger Woods twice?
  The managed care provisions need consumer protections on emergency 
appeals, and there are some antifraud provisions that we should add. We 
are going to see a report in the next few weeks that we are spending 
$20 billion, I think, on fraud. That needs to be improved. We can do 
that.
  Mr. Speaker, I would urge my colleagues to applaud the work that was 
done. I would not have picked $115 billion as a cut, but that was the 
number given to our subcommittee and, considering that, they did a fair 
job of spreading those cuts to do the least amount of harm. Nobody 
liked it. If anybody had been smiling in the room, we probably would 
have had the wrong bill. But it was a good job, and I commend the 
chairman of the subcommittee for his work.
  Mr. THOMAS. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Connecticut [Mrs. Johnson], a valuable member of the subcommittee.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, let me commend the 
gentleman from California [Mr. Thomas] for bringing forth a very 
thoughtful, constructive and bipartisan bill out of the subcommittee. 
It meets the goals of the budget resolution of extending the life of 
the Medicare Trust Fund until 2007, but it also makes sound structural 
changes to better control costs in the Medicare Program which will be 
especially important when the baby boomer generation begins to retire 
in 2010.
  It increases spending per Medicare beneficiary from $5,480 this year 
to $6,911 in 2002. Most importantly, it gives Medicare recipients 
better choices of the kind of insurance coverage they want to select. 
It gives better choices and it gives better benefits. It has a good, 
solid preventive package, annual mammograms, comprehensive testing 
opportunities for prostate cancer, and adopts the prudent layperson's 
standard for emergency room care. So it guarantees access to emergency 
room care.
  It also guarantees seniors who want to try a managed care plan that 
they can go back to not only Medicare but to their MediGap policy, 
thereby guaranteeing them the opportunity to try the kinds of plans 
that will provide far more benefits for the Medicare dollar.
  Finally, it strengthens the protection for those who choose Medicare 
by strengthening the consumer protection package that governs Medicare 
managed care plans, providing more timely appeals procedures and in 
other ways strengthening those benefits. Equally importantly, it 
provides the opportunity for direct providers of services, doctors and 
hospitals, to get together and provide a managed care plan for the 
seniors in their area, a plan in which the medical decision will be 
totally controlled by the medical providers. This will guarantee better 
quality in all managed care systems, whether they are provider 
sponsored or whether they are insurance company sponsored. This is a 
giant step forward for health care for seniors in America.
  Mr. SPRATT. Mr. Speaker, I yield 3 minutes to the gentleman from New 
York [Mr. Rangel], the ranking member of the Committee on Ways and 
Means.
  (Mr. RANGEL asked and was given permission to revise and extend his 
remarks.)
  Mr. RANGEL. Mr. Speaker, this is one of the most important periods, I 
think, in our Nation's history, because it gives us an opportunity to 
reflect who we are and what made this Nation so great. I think the test 
is, how do we who are newcomers to this continent treat those who are 
even more new? As we move into world trade, our greatest asset is the 
diversity, because with the exception of the Native American, we have 
the benefit of all of the cultures of the entire world in this great 
country, and I am fortunate to have a lot of it in my great city of New 
York.
  How many of my colleagues just enjoy thinking about how generations 
ago, from whatever country, whether it was in Europe or some other 
country, we had relatives who came to this country, many not with a lot 
of education or a lot of wealth but they came with a lot of hope. Many 
of them came illegally because we did not have the sophisticated way of 
checking. But we are not looking for them. Because those who came had 
on the docks people who came before them waving and screaming saying 
that these people are going to make a contribution to this great 
country. Even those of us who came in chains are saying, ``This is a 
great country.'' Even the Native Americans are not asking to leave. It 
is a great country.
  But with each wave that came, there was some group of people that 
wanted to hurt them. Ask the Jews, ask the Polish, ask the Irish. Ask 
the Italians. There was some group that came here that said the next 
group was not good enough. Because we Americans are so good in our 
thinking, we do not ask who was that group that was stamping the hands 
of those people who were climbing into America to become great 
citizens, but today the other side has put for the record who they are.
  We are now saying if you come to this country, play by the rules, 
come in and you were working, coming in you had a sponsor, you did 
everything right, the sponsor died, you got old, you had an accident, 
we are saying, ``You didn't come when our parents or grandparents came, 
so now we're changing the rules.''
  My colleagues are not changing the rules by this Congress for the 
United States of America, and my President, who represents Republicans 
and Democrats, today's history and tomorrow's history, is going to say, 
``We're not going to change these rules to save a couple of dollars to 
throw into capital gains indexing.'' What we are going to do is to make 
certain that anyone who wants to come to this great country will be 
able to come with the same rules and the same protections as for those 
who came and made this Nation so great.
  Mr. THOMAS. Mr. Speaker, I yield myself 15 seconds. For the record, I 
would like to indicate that the gentleman from New York [Mr. Rangel] 
did support the Medicare section of the provision coming out of the 
Committee on Ways and Means and his remarks were focused on other 
portions of the bill. I am sure Members understood that.
  Mr. Speaker, I yield 2 minutes to the gentleman from Nevada [Mr. 
Ensign], a very valuable member of the subcommittee.
  (Mr. ENSIGN asked and was given permission to revise and extend his 
remarks.)
  Mr. ENSIGN. Mr. Speaker, I especially want to compliment the 
gentleman from California [Mr. Thomas], the chairman of the 
subcommittee, for all the great work that he has done, as well as the 
staff for the work that they have done on this Medicare bill.
  I think that this is truly an historic moment in health care in the 
United States, because what we are doing with this Medicare bill is to 
try and begin to change our current sick care system. Yes, I said sick 
care system, because right now if you get sick, we will pay providers 
to get you better, but we will not pay providers very often to keep you 
healthy.
  This Medicare bill, by providing the bill that I sponsored in the 
House of Representatives, the annual mammogram screening for women over 
65, begins to say, we are going to catch breast cancer early in women 
over 65. Right now Medicare only pays for every other year mammograms. 
This is an important first step. But we also cover prostate screening, 
colorectal screening, and we begin to do some things about keeping 
diabetics healthier.
  I also have a bill, it is called the Medical Nutrition Therapy Act, 
which we are going to study. We think that dieticians counseling people 
on nutrition will be able to keep diabetics, cancer patients, heart 
patients and many others healthier in the years to come

[[Page H4563]]

to truly make this a true health care system.
  Another portion of the bill that I am extremely proud of is the 
portion that deals with military retirees. Military retirees in the 
past have had access to great quality military medical care across the 
country, but because of base closure commissions that have locked 
military retirees out of facilities all over the country, military 
retirees are now being locked out of good quality medical care. And 
because when they turned 65 they had to choose whether to go into 
Medicare or not, many of them were promised lifetime health care and 
that promise has been taken back. Now if they choose to go into 
Medicare, there is a 10 percent penalty per year for them to go into 
Medicare. This bill will give them a 6-month window to get into 
Medicare. This is going to affect 100,000 of the people that so richly 
deserve a good quality health care system in this country.
  Ms. DeLAURO. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Jersey [Mr. Menendez].
  (Mr. MENENDEZ asked and was given permission to revise and extend his 
remarks.)
  Mr. MENENDEZ. Mr. Speaker, I voted for the bipartisan balanced budget 
agreement. I had great hopes of transcending pointless ideological 
bickering and producing a model of consensus. But this bill is not the 
deal Republicans made with the President. The Republican budget bill 
weakens protection for workfare workers against race, sex, ethnic, and 
religious discrimination. It creates a two-tiered workplace with a 
permanently disadvantaged underclass. It does not protect legal 
residents. It endangers children's hospitals and those serving a 
disproportionate share of the poor and uninsured.

                              {time}  1500

  It slashes support for 2.7 million disabled people, and it destroys 
individual rights to recovery for medical malpractice.
  These are radical changes. These adventures in radicalism were never 
in the bipartisan budget agreement, and they are not needed.
  I hope my New Jersey colleagues know that this legislation will 
devastate New Jersey hospitals who have continued with their mission to 
treat all who enter their hospitals' emergency rooms or clinics 
including the indigent and uninsured. And it would send some of them 
into bankruptcy.
  New Jersey is prepared to accept its share of the national burden in 
the name of a balanced budget, but this bill treats New Jersey and its 
hospitals in an inequitable manner. It punishes New Jersey for 
demonstrating a commitment to providing a lifesaving safety net for its 
most vulnerable residents.
  As my colleagues know, according to the National Center for Children 
in Poverty, over 120,000 children under 6 years of age in New Jersey, 
17 percent live in families with incomes at or below the poverty level, 
and yet under this agreement New Jersey is one of the States that 
receives a disproportionately smaller share of the block grant.
  Finally, this proposal leaves out a legal immigrant who has a stroke, 
becomes paralyzed, contracts Alzheimer's disease after August of last 
year. It eliminates the safety net for law-abiding, hard-working, 
taxpaying elderly legal immigrants.
  Mr. Speaker, it is a deal breaker. Let us not have a deal for the 
sake of a deal. Let us have a deal that is also balanced on the 
principles.
  Mr. THOMAS. Mr. Speaker, I yield myself 30 seconds.
  I tell the gentleman from New Jersey [Mr. Menendez] that we have sat 
down with the Members from New Jersey. We believe we have addressed 
that problem. We have solved that problem just as we solved other 
problems, in concert with the gentleman from California [Mr. Stark], 
the gentleman from Maryland [Mr. Cardin], the gentleman from Wisconsin 
[Mr. Kleczka], the gentleman from Georgia [Mr. Lewis] and the gentleman 
from California [Mr. Becerra]. Those are the Democratic members of the 
Subcommittee on Health who voted unanimously in support of the work 
product in front of us.
  Mr. Speaker, I yield 1 minute to the gentleman from Minnesota [Mr. 
Ramstad], a member of the Committee on Ways and Means.
  (Mr. RAMSTAD asked and was given permission to revise and extend his 
remarks.)
  Mr. RAMSTAD. Mr. Speaker, as a member of the Committee on Ways and 
Means I am grateful for the bipartisan pragmatic way in which we put 
together the Medicare portion of this bill before us today. Not only do 
we save Medicare from bankruptcy today, we preserve it for tomorrow's 
seniors.
  I would like to focus briefly on the two specific reforms in the 
bill. One is a reform to make the AAPCC reimbursement formula, the 
Medicare reimbursement formula, more equitable to States like 
Minnesota. This is a major reform in the formula. It will mean more 
equity for States with rural populations and more health care options 
for Medicare beneficiaries in those States. For the first time there 
will be a payment floor and a blended formula to bring more fairness 
and equity to seniors in States like ours.
  We also continue to develop new and innovative ways to provide health 
care to seniors by extending for 2 years the community nursing 
organization demonstration project. These are very, very important 
projects again to let seniors live in their own homes longer and also 
to save important Medicare dollars. This is a vital program for 
seniors.
  Mr. Speaker, I urge all members to support this important 
legislation.
  Ms. DeLAURO. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Michigan [Ms. Stabenow].
  Ms. STABENOW. Mr. Speaker, I rise having voted for the balanced 
budget agreement and I intend to support a balanced budget agreement on 
spending and tax cuts that reflects that agreement. Unfortunately, that 
is not what we have in front of us today.
  There are good provisions, there has been good work done, and 
description has been made of bipartisan efforts in the area of Medicare 
and other important areas where work had been done and been done well. 
But this reminds me of the flood bill that was in front of us not long 
ago where we set down a road to solve a problem, to help people who had 
been afflicted by floods, and there was good work in the bill. Then 
piece after piece other things that were added that had nothing to do 
with the flood bill slowed down the process and almost stopped our 
ability to achieve the goal.
  We have today something in front of us that has all kinds of extra 
provisions in it that were not in the balanced budget agreement. They 
take away from our ability to step forward and meet that agreement, and 
they do not include those things that were promised in that agreement 
such as making sure that children of working families, 5 million 
children, have adequate health care. But they do include all kinds of 
other provisions that have been thrown in and all kinds of other 
subjects.
  So once again the public expects us to step up and solve the problem 
and to work together, and then one after another things get thrown in, 
and we are right back to where we started from without having the 
support needed to be able to solve the problem.
  In voting ``no'' today I am very hopeful that a message will be sent 
to those working in the conference committee to take out those things 
that were not part of the balanced budget agreement, make sure that the 
provisions that are in there make sense for families, and then let us 
in a bipartisan way do what it is the American people ask us to do.
  Mr. THOMAS. Mr. Speaker, I yield myself 15 seconds, and I tell the 
gentlewoman who just spoke that as a matter of fact, if she will 
examine the budget agreement in the area of children's insurance, the 
16 billion which was required is part of the agreement; we met the 
agreement in that area.
  Mr. Speaker, I yield 1 minute to the gentleman from Illinois [Mr. 
Weller], a valued member of the committee.
  (Mr. WELLER asked and was given permission to revise and extend his 
remarks.)
  Mr. WELLER. Mr. Speaker, I rise in support of this important 
legislation.
  First, I want to commend the gentleman from California [Mr. Thomas] 
and the ranking member, the gentleman from California [Mr. Stark] for 
their bipartisan effort. The bottom line is this legislation saves 
Medicare, and if my colleagues care about Medicare and if they want 
Medicare to be around for the next generation of seniors, they will 
vote ``yes'' for this legislation.

[[Page H4564]]

  I am proud that the Committee on Ways and Means under the leadership 
of the gentleman from California [Mr. Thomas] has worked closely with 
the President, with Members of both parties, to fashion a bipartisan 
solution to extending the life of Medicare. This legislation gives 
seniors more choices, protects the rights of seniors to choose their 
own physician and, frankly, offers many new options, new types of 
coverage, strictly in the area of breast cancer, mammograms for 
seniors, for women, as well as prostate cancer screening for men, 
important health care initiatives.
  But there is also something that every senior brings up every time I 
have a senior meeting in my district: this issue of going after waste, 
fraud, and abuse in Medicare, and frankly I believe it is time that we 
go after the Medicare kings, those who abuse Medicare, with the same 
vengeance we have the welfare queens in the past. This legislation 
toughens penalties, provides ``three strikes, you're out,'' and 
increases funding for Medicare.
  I urge an ``aye'' vote.
  Ms. DeLAURO. Mr. Speaker, I yield myself 10 seconds.
  I would like to mention that with regard to health care for children, 
what we find out from the Congressional Budget Office is that the 
estimate of that $16 billion, is that only 520,000 kids of the 10 
million will be covered. The rest are not covered, that 20 percent of 
the children who do not have access to health care today.
  Mr. Speaker, I yield 2 minutes to the gentleman from New York [Mr. 
Hinchey].
  Mr. HINCHEY. Mr. Speaker, I must say that there is no balance in this 
plan that we are being asked to vote on this afternoon, nor does it 
balance the budget because it has to be seen in the context of the 
taxing bill that follows hard on its heels. These two bills in concert 
increase the budget deficit; they do not decrease it.
  In fact, shortly into the next century the budget deficit will once 
again be approaching $100 billion under the Republican plan. Now is 
this being done by accident? I doubt it. They are doing it 
intentionally in order to create a circumstance where this Government 
can no longer afford to pay for the social programs like Medicare and 
Medicaid and Social Security, just as they tried to do in the 1981 tax 
cut. That will be the effect of it. Just when the baby boom generation 
reaches its retirement age, that is when the big deficits kick in under 
this plan.
  The fact of the matter is that the budget today is almost in balance. 
We have reduced it over the last year some $290 billion, down now to 
about $50 billion, and if we left the present policies in place, the 
budget would be in balance shortly.
  This bill that we are asked to vote on today is a bill that creates 
class warfare. It does so by creating those big budget deficits, and it 
also repeals the social contract for a large number of Americans. It 
destroys the dignity of work, and it creates a new under class for the 
first time. That is the extent to which this bill goes in its class 
warfare by actually creating a new under class of people, people who 
will be denied the rights of other workers.
  Protection under the Fair Labor Standards Act, they will not have 
that protection. They will not have the protection of equal pay, they 
will not have protection under the civil rights law, they will not have 
the protection under OSHA, and they will not have protection from 
sexual harassment in the workplace.
  Finally, what does it do for health care for children, as we have 
heard so often this afternoon? It does not provide care for 5 million, 
only for 500,000.
  This is a bad bill and has bad implications now and for the future.
  The SPEAKER pro tempore. Before the gentlewoman proceeds, the Chair 
wishes to inform the managers of the bill that the gentleman from 
Connecticut [Mr. Shays] has 47\1/2\ minutes remaining, the gentleman 
from South Carolina [Mr. Spratt] has 30\1/2\ minutes remaining, the 
gentlewoman from Connecticut [Ms. DeLauro] has 17\1/4\ minutes 
remaining, and the gentleman from California [Mr. Thomas] has 1 minute 
remaining.
  Ms. DeLAURO. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Oregon [Ms. Furse].
  Ms. FURSE. Mr. Speaker, I supported the budget agreement, and the 
bill that is on the floor does not contain some of the provisions which 
I thought were very good and which led me to support the legislation in 
the Committee on Commerce. And those good provisions are, it extends 
preventive benefits for Medicare beneficiaries, including diabetes 
self-management training and blood strips, very important. It increases 
services and benefits in rural areas, and there is an extension here 
for States which are operating Medicaid demonstration projects under 
section 1115 waivers.
  However it seems to me that we live by a rule which is that a deal is 
a deal and fair is fair, and there are things in the bill today which 
were not in the budget agreement, and I do not think that they are fair 
for all of our citizens.
  One of the things it does is it sets up a two-tiered class of workers 
by defining that workers who receive welfare are not protected against 
race, sex, national origin, and religious discrimination, and that is 
just not fair. It undermines a woman's right to choose by taking the 
right to choose from poor women, those on Medicaid, and taking from 
them rights that other women have in this country. I do not think that 
is fair either.
  Then it fails to protect legal immigrants who may become disabled 
after the welfare bill was signed into law. Mr. Speaker, that is not 
fair either.
  It is my hope that the conference committee will strike the unfair 
provisions and ensure that the budget agreement is honored so that 
those of us who supported the budget agreement can indeed support a 
balanced budget and one which is fair and where the deal stays a deal.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
California [Ms. Roybal-Allard].
  Ms. ROYBAL-ALLARD. Mr. Speaker, today we are debating a budget 
spending bill that violates the budget agreement and takes away some of 
the hope and promise built into the original agreement. First, the 
President and congressional leaders guaranteed $16 billion in health 
care coverage for 5 million uninsured children in our Nation.

                              {time}  1515

  The bill before us takes away that guarantee and creates a large 
block grant that could result in untargeted revenue sharing. In other 
words, the money does not have to be used to cover uninsured children.
  Second, welfare reform was to provide a way for able-bodied adults to 
earn a living and free themselves from the dependency of welfare. 
Instead, this bill stigmatizes them and strips them of their self-
esteem by eliminating workplace protections enjoyed by other American 
workers, protections such as overtime pay, OSHA, and the Civil Rights 
Act that protects working Americans from employment discrimination and 
sexual harassment.
  This is a frightening thought when we consider that the majority of 
welfare-to-work recipients will be women, the most vulnerable to this 
type of discrimination. At a time when we are encouraging people to 
choose work over welfare, it is unconscionable to create a hostile work 
environment for these welfare-to-work recipients by undermining 
workplace standards.
  Finally, the negotiators of the original budget agreement recognize 
that restoring aid to legal immigrants living in the country prior to 
August 23, 1996, and later become disabled is good policy and a needed 
improvement to last year's welfare bill.
  This budget bill violates this promise to over 75,000 perspective 
elderly and disabled immigrants, 30,000 of which live in California. In 
essence, the majority is saying to these legal immigrants who have 
worked hard and played by the rules, you can work here and pay taxes 
into our system, but if you become disabled, we will abandon you.
  I urge a ``no'' vote on this budget reconciliation bill.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Maryland [Mr. Cardin].
  Mr. CARDIN. Mr. Speaker, first let me thank the ranking member for 
yielding me this time.
  Mr. Speaker, in regards to the Medicare provisions, I want to applaud 
the process that was used. It was a true bipartisan process. I want to 
congratulate the gentleman from California

[[Page H4565]]

[Mr. Thomas], the chairman of the Subcommittee on Health, and the 
gentleman from California [Mr. Stark], the ranking member. Working 
together, we were able to modernize the Medicare system and extend the 
solvency of the trust fund for another decade, and we did that 
protecting the beneficiaries.
  Unlike the other body that looked at ways that will affect the 
beneficiaries by dealing with eligibility and age and means testing and 
home care copayments, we were able to modernize the Medicare system and 
extend benefits to our seniors because we worked together, Democrats 
and Republicans. We improved the process.
  I am particularly pleased that we were able to add for the first time 
preventive health care benefits to Medicare so that it is not just a 
program for people who get sick, but that we keep our seniors healthy; 
that we provide for colorectal screening and mammography and diabetes 
self-management and prostate cancer screenings. We have provided 
improvements in the Medicare system that will help our seniors.
  I am particularly pleased that we were also able to include the 
prudent layperson's standards for access to emergency care, another 
issue that we were concerned about in a bipartisan way; that we 
modernized the hospice benefits, and I could go on and on and on. We 
were able to do that because every member of the committee was 
respected for his or her views and we worked together as the process 
should work together.
  Mr. Speaker, on Medicare, the system worked. There are other aspects 
of the budget where we have not had that same degree of cooperation, 
and I would hope that we would use the model that the committee was 
able to do on Medicare in working together to deal with the problems 
that we have and to improve the programs for our seniors. We could do 
that in more aspects of the budget agreement, and I hope we will as we 
move forward on the budget and work together in a bipartisan manner.
  Mr. THOMAS. Mr. Speaker, I yield myself the balance of my time.
  The SPEAKER pro tempore (Mr. Dreier). The gentleman from California 
is recognized for 1 minute.
  Mr. THOMAS. Mr. Speaker, I thank the gentleman from Maryland. It was 
a pleasure working with him. My hope is that I will have an opportunity 
to work with him again on important legislation. He may deny me that 
chance by a decision he may make in another political arena. But the 
thing I admire most about the gentleman from Maryland is that he deals 
from a basis of fact.
  We have heard a number of people repeat the $16 billion for 5 million 
children. For the last time, unchallenged, the Congressional Budget 
Office said the President's plan in his budget, $21.9 billion would 
produce only 830,000 children covered. If anyone stands up and says, 
there was a promise of 5 million children and someone reneged, they are 
playing fast and loose with the facts. The reason we were able to build 
the consensus was because members of Ways and Means did not do that. 
Shame on Members if they do it on the floor.
  I would like to say, Mr. Speaker, that the Medicare provisions in 
this mark are outstanding because of the cooperation on both sides of 
the aisle, and I want to thank all of the members and staff for helping 
put this magnificent product together.
  Ms. DeLAURO. Mr. Speaker, I yield myself 25 seconds.
  This bill does not help working middle-class American families. My 
colleagues on the other side of the aisle accuse us of waging class 
warfare. It is they, in fact, who have declared war on the middle-class 
and those people who strive to make their way into the middle-class. 
This bill makes deep cuts in programs for working families who depend 
on us for what they need to get done. It provides tax breaks for the 
wealthiest people in this country. I urge my colleagues to vote against 
it.
  Mr. Speaker, I ask unanimous consent that the balance of my time be 
controlled by the gentleman from New Jersey [Mr. Pallone].
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from Connecticut?
  There was no objection.
  Mr. SHAYS. Mr. Speaker, I yield myself 20 seconds to point out that 
next year, if one has four children, one will have returned in taxes 
$1,200. If one makes $40,000, one will get back $1,200. That is a 
middle-class family, and I think they will be happy to get that.
  Mr. Speaker, I yield 3 minutes to the gentleman from Florida [Mr. 
Bilirakis], who is the chairman of the Subcommittee on Health and the 
Environment of the Committee on Commerce.
  (Mr. BILIRAKIS asked and was given permission to revise and extend 
his remarks.)
  Mr. BILIRAKIS. Mr. Speaker, I thank the gentleman for yielding.
  Almost 2 weeks ago, Mr. Speaker, the Committee on Commerce forwarded 
to the House a budget reconciliation bill which reflects the hard work 
of many Members. I want to stress that all Members were given the 
opportunity to share their suggestions on improving this legislation, 
and many of their interests were incorporated into the bill and the 
chairman's mark or by the amendment process. The Democratic process was 
allowed to work.
  Regarding Medicare, as a Member from a district that has a large 
number of seniors, I set as a major personal goal the protection of 
Medicare beneficiaries. And make no mistake about it, Medicare 
beneficiaries will be protected. In fact, our legislation contains many 
consumer protections that were not even considered by any of the prior 
Congresses. It addresses fraud and abuse within the Medicare program 
and ensures that the Medicare Trust Fund will remain solvent until the 
year 2008.
  The legislation contains many worthwhile policy changes which would 
greatly benefit the elderly. All Medicare beneficiaries will be given a 
choice of coverage through a new Medicare Plus program. Medicare Plus 
would allow beneficiaries to decide whether they want to receive their 
Medicare coverage through traditional Medicare fee-for-service, or 
through a newly-created Medicare Plus plan, with the option, I repeat, 
with the option to return to traditional Medicare.
  Regarding Medicaid, this legislation eliminates some of the lengthy 
waiver processes so States will obtain relief from burdensome Federal 
regulations. As a result, a State will have more time and more money to 
improve the quality of health care. Our committee was required by the 
budget agreement, if you will, to find savings in the States' 
disproportionate share programs. Our legislation accomplishes this task 
in as equitable a manner as is possible considering the parameters 
placed upon us.
  Finally, our package establishes a new child health assistance 
program which provides grants to States in order to expand health 
access for currently uninsured children, a plan which received an 18 to 
3, an 18 to 3 approval vote from the Democrats on the committee.
  In conclusion, Mr. Speaker, I truly believe that this bill must be 
judged through the prism of our shared responsibility to our 
constituents and the Nation as a whole, and when our common interests 
are considered, it is important to bear in mind our ultimate goal: To 
deliver a balanced budget to the President's desk while at the same 
time reforming and saving Medicare and Medicaid without in any way 
hurting the beneficiaries.
  Finally, I want to personally thank the majority and minority staff 
for their hard work. They have put in many hours over the past month, 
and I want them to know how much we all appreciate their efforts. I 
especially want to recognize Howard Cohen, Eric Berger, Kay Holcombe, 
Bridgett Taylor, and Ed Grossman.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Michigan [Ms. Rivers].
  Ms. RIVERS. Mr. Speaker, I find much to criticize in this particular 
proposal, but I rise today to raise concerns about one particular 
element, that of medical savings accounts within the Medicare 
proposals.
  The medical savings accounts were not part of the original budget 
deal and they represent a $2 billion burden on a Medicare system that 
is struggling to make it into the next century. I am concerned, Mr. 
Speaker, that only those who are relatively young and healthy may well 
make this choice and leave the rest of Medicare to treat those who are 
older, sicker, poorer, and therefore more expensive to care for.

[[Page H4566]]

  Companies that currently offer MSA's do not want to enroll people 
with health problems and in fact are not required to do so under the 
law. As a matter of fact, I would share with my colleagues a 
communication between a would-be subscriber and Golden Rule Insurance 
Company in which Golden Rule responds, ``Thank you for your interest in 
our company. We do currently market health insurance, including the 
medical savings accounts in your State. However, your medical condition 
of diabetes would not be one that would fall within our underwriting 
guidelines. Therefore, we would not be able to consider your 
coverage.''
  They go on to explain that their underwriting standards are very 
strict and this allows them to charge the lowest rates.
  Mr. Speaker, my concern is that the wealthy and the healthy will 
leave Medicare, leaving the system to deal with those who are much 
sicker. We will see costs rise in a way that we cannot afford.
  In addition, the MSA's in this bill are not just health plans, they 
are additional government checks written to those who have sufficient 
resources to take a risk on a high deductible plan. It is important for 
people to realize that MSA's can be used for nonmedical expenses as 
long as the balance of an account stays at 60 percent of the 
deductible. Moreover, if someone elects to take the money out of their 
medical savings accounts, up to 40 percent, they are not penalized, as 
long as they keep that balance.
  This is not a health care option, this is just free money. Then, when 
the large medical expenses begin to loom in the future of the person, 
MSA holders can then game the system, go back to the main Medicare 
program and avoid personal responsibility for deductibles of up to 
$6,000, all the while demanding that the pool that they left behind, 
that they abandoned, now cover all of their costs.
  It is not fair, and it is a good reason to vote no.
  Mr. SHAYS. Mr. Speaker, I yield myself 5 seconds to point out that 
under the Medicare plan they have to take all; they cannot 
discriminate.
  Mr. Speaker, I ask unanimous consent to yield 12 minutes to the 
gentleman from Florida [Mr. Shaw], who chairs the Subcommittee on Human 
Resources of the Committee on Ways and Means, the expert on welfare 
reform, and that he be allowed to control that time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Connecticut?
  There was no objection.
  Mr. SPRATT. Mr. Speaker, I yield 3 minutes to the gentleman from 
Minnesota [Mr. Sabo], former chairman of the Committee on the Budget.
  (Mr. SABO asked and was given permission to revise and extend his 
remarks.)
  Mr. SABO. Mr. Speaker, I thank my friend, the ranking member, for 
yielding. Let me say to him, I admire the work that he has done in 
behalf of this House and our caucus. It has been truly outstanding.
  Mr. Speaker, I wish I could be here today to say that I could vote 
for this bill. I cannot, and I hope I will be able to when it comes 
back from conference committee.
  Mr. Speaker, let me focus on one program that I think has the 
potential to be a great positive, but is a long way from achieving its 
goal. That is the program to expand coverage of uninsured children in 
this country.

                              {time}  1530

  There are many problems with the program as it is structured in the 
bill today. But let me focus on one that has not been subject to much 
discussion. The reality is that, however we resolve the various 
disputes that relate to the structure of children's health care, the 
States will play a vital role. The other reality is that many States 
have already acted in a very aggressive fashion through Medicaid or 
through other plans to expand and cover kids with health insurance, 
sometimes in the public sector and sometimes in the private sector.
  Unfortunately, the way the bill is structured today, either by design 
or by accident, it is structured so it penalizes every State that has 
acted and rewards the States that have done nothing, or done very 
little. I think that is both unfair and bad public policy. It sends a 
totally wrong message to every State in this country that we ask to be 
aggressive and to be creative in dealing with problems in our country.
  How does it happen? The question is, Do we measure the distribution 
from the Federal Government to the States on the basis of kids in need? 
I think we should. Unfortunately, the bill simply does it by the number 
of uninsured kids, which guarantees that every State that has acted is 
penalized. I would hope, as this bill goes to conference, that we 
resolve some of the definition of benefits and the scope of coverage in 
an adequate way, but let us also not penalize States for having acted.
  Mr. SHAW. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, there have been several speakers who have come to the 
floor on the other side of the aisle who have, I am sure 
unintentionally, misstated what this bill says. I would like to say to 
them in the area of discrimination that people coming off of welfare 
certainly are not discriminated against. In fact, they are protected by 
title VI of the civil rights bill, which reads, and which is 
incorporated into the law, that ``No person in the United States shall, 
on the ground of race, color, or national origin, be excluded from 
participation in, be denied the benefits of, or be subjected to 
discrimination under any program or activity receiving Federal 
financial assistance.''
  Mr. Speaker, I yield 3 minutes to the gentlewoman from Washington 
[Ms. Dunn], a member of the Committee on Ways and Means.
  Ms. DUNN. Mr. Speaker, I am pleased to speak in support of the 
provisions in the Balanced Budget Act that strengthen the welfare 
reform law signed into law last August by our President. We have made 
several improvements to our new welfare system, improvements that 
reinforce the value of work, not the dependence on welfare.
  These changes also reflect a good-faith compromise that was made with 
the President on the transition from welfare to work for noncitizens. 
Our new bill maintains our basic policy on the matter of welfare and 
workfare for noncitizens as a policy that is based on the belief that 
taxpayer-funded assistance should be reserved for people who are 
citizens of the United States.
  The budget reaffirms that people who come to America will be welcome 
to pursue the opportunities of our great Nation, but not to go on 
welfare. We encourage those individuals to seek support not from the 
taxpayer but from their relatives and their sponsors, as has long been 
the law in this Nation.
  We came to a compromise, Mr. Speaker, on the issue of benefits for 
elderly and for disabled noncitizens who were already receiving 
assistance before the welfare reform bill was passed last August. To 
them this bill says: You will not be asked to play by different rules. 
The rules of the game will be the same. If you were in a nursing home 
on August 22, 1996, you will retain that benefit. If you were receiving 
SSI last August 22, you will continue to receive that assistance.
  We have set $9 billion aside, and I will make that loud and clear; 
noncitizens getting benefits on August 22, 1996, are grandfathered, 
period.
  In the era of the minimum wage, we guarantee that those on workfare 
will receive the minimum wage, but we also believe in calculating this 
minimum wage that food stamps as well as cash be considered. That total 
will determine how many hours of work a person will work.
  The bill also includes a $3 billion welfare-to-work grant which 
specifically is targeted to the hardest hit. This money will be 
provided to areas with the highest concentrations of poverty, 
unemployment, and people on welfare. This grant truly will focus 
resources on the areas most in need. This is new money since last 
year's bill was signed, and it is another effort to get welfare money 
to people who truly need these dollars.
  Mr. Speaker, I urge my colleagues to support this budget.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida [Mr. Davis].
  Mr. DAVIS of Florida. Mr. Speaker, I rise in qualified support of the 
budget resolution. As a member of the Committee on the Budget, I have 
worked hard with the gentleman from South

[[Page H4567]]

Carolina [Mr. Spratt] and others to try to conform the budget 
resolution to the budget agreement, and to strike the balance between 
protecting our Nation's priorities and securing a reasonable approach 
toward a balanced budget. The budget agreement in fact did do that.
  Unfortunately, the agreement just barely does that now. It still 
continues to balance the budget, and I will vote for it today for that 
reason, because it also protects our most important priorities. We are 
dangerously close to unraveling this agreement because of many 
extraneous matters that have been inserted in it, including some of 
which were specifically agreed not to be pursued as part of the budget 
agreement.
  Let me share with the Members two of the more egregious examples. One 
is the alterations to the Federal Labor Standards Act that have been 
discussed, that have the effect of reducing people who are moving from 
welfare into work to second-class citizens in terms of some of the 
protections we otherwise afford to employees.
  The second provision, which was specifically agreed not to be 
included in the budget agreement, was to treat legal immigrants 
differently with respect to eligibility for disability benefits. These 
are two provisions that must be fixed in the conference committee in 
order for this budget agreement, in order for the Budget Reconciliation 
Act, to pass.
  I will vote for it today, but let us not repeat the same mistakes we 
made on flood relief. Let us not load up what otherwise could be a good 
bill with unrelated matters that will have the effect of forcing a veto 
and taking us off track.
  Mr. Speaker, I rise in qualified support of H.R. 2015, the 
entitlement reform portion of the budget reconciliation package. I 
strongly supported the budget agreement and the resolution we passed 
last month. I believe that agreement represented a fair compromise and 
a good first step in restoring fiscal sanity to our Federal budget 
process. Now, a little over a month later, with the details of the plan 
filled in, there are serious questions whether certain provisions in 
the bill before us today violate both the spirit and the letter of the 
agreement.
  Last Friday, I voted for this bill, in committee, with the clear 
understanding that a manager's amendment would be offered to fix many 
of the most egregious shortcomings in the bill. Some of them, such as 
the protection of low-income Medicare beneficiaries, the expansion of 
children's health coverage, and the minimum wage security for 
participants in workfare, have been modified. Unfortunately, critical 
differences have not yet been resolved on a range of issues including 
the restoration of benefits for legal immigrants--which was explicitly 
included in the agreement--and the application of all Fair Labor 
Standards Act protections to workfare participants.
  I am concerned that we are again set to play politics and 
brinkmanship on an issue of vital importance to the American people. 
Last month, Congress loaded up the disaster supplemental appropriations 
bill with extraneous provisions the President was certain to veto. 
After weeks of delays, causing serious problems for the flood victims, 
we finally stopped the wars of rhetoric and posturing, and sent an 
appropriate bill to the President.
  Now I am concerned that a similar mistake will be made on the 
balanced budget agreement--trying to push the President into a corner 
by adding extraneous items which have no place in a deficit reduction 
package. For example, medical malpractice reform is a serious issue 
which warrants serious consideration outside of this reconciliation 
bill but which only jeopardizes the chances that this package will 
ultimately be enacted into law.
  Ultimately, I believe these issues will be addressed in the 
conference committee, the next step for this bill, and I will support 
the package today as a recommitment to the goals of the bipartisan 
budget agreement and in an effort to move this process forward to 
conference. My hope is that by the end of the conference, we will all 
be able to enthusiastically support the reconciliation bill 
representing both the letter and the spirit of the historic bipartisan 
agreement.
  Mr. SHAW. Mr. Speaker, I yield 2 minutes to the gentleman from 
Pennsylvania [Mr. English], a very valuable member of the committee.
  Mr. ENGLISH of Pennsylvania. Mr. Speaker, I thank the gentleman for 
yielding time to me.
  Mr. Speaker, I rise in strong support of the Balanced Budget Act, in 
part because this legislation contains a vital $3 billion welfare-to-
work grant program to create a path for long-term welfare recipients to 
enter the work force. For welfare reform to work, we have to give the 
States and the localities the flexible tools they need to provide a 
transition for people to leave welfare, to escape the poverty trap, and 
to enter the mainstream of the American economy. This program, 
developed in the Committee on Ways and Means, does just that.
  Mr. Speaker, the focus of this funding is on areas with the highest 
concentrations of poverty, unemployment, and welfare enrollment, so 
resources will be available to those areas with the greatest need. We 
know we do not have sufficient programs for incentives currently to 
help welfare recipients with little work experience successfully enter 
the work force. This program, coupled with the expanded work 
opportunity tax credit and the new welfare-to-work credit contained in 
the tax section of our budget, create real opportunities for the able-
bodied poor to participate in the productive economy. It will encourage 
State policy creativity in developing local solutions to move people 
from welfare to work.
  There is also a strong workfare provision in this bill. Just to 
remind the folks on the other side of the aisle, it contains 
protections for minimum wage. It contains protections for the 40-hour 
work week, for antidiscrimination legislation, protections for health 
and safety, protections for nondisplacement and a grievance procedure. 
To listen to the speeches on the floor this morning, we would think 
they have not read the bill.
  Mr. Speaker, I urge all of my colleagues on both sides of the aisle, 
especially those representing depressed urban communities, to support 
this legislation and provide the assistance their constituents need to 
get out of the welfare trap.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentleman from 
North Dakota [Mr. Pomeroy].
  Mr. POMEROY. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, I intend to support the bill before us, although I find 
it to be a disappointingly close call. We are early in the legislative 
process on actually carrying through this historic balanced budget 
agreement reached earlier between congressional leaders and the 
President, and affirmed earlier by this Chamber in the budget 
resolution. Now that we get down to the actual business of the 
legislating language, I find that the package before us substantially 
carries forward the agreement and the resolution, getting us on a 
balanced budget footing. Unfortunately, it falls short of the 
guarantees explicitly that are part of the agreement, like the 
commitment to extend coverage to children.
  In other areas, totally nonbudget items are jammed onto this bill, 
much like the nondisaster aid items that bedeviled us so in trying to 
get relief to the flood-stricken areas for weeks.
  An area here that I find most disturbing is the expansion of 
portability and health insurance coverage Act, known as EPHIC. It is 
the old multiple employer welfare arrangement rejected in the last 
Congress, that has again been jammed into this bill. This provision, if 
ultimately enacted, would deprive ultimately millions of people in the 
workplace from their State-provided consumer protections in dealing 
with health insurance. Do we think that is a good idea? I certainly do 
not. But it is an important concept that, at least, would warrant 
debate.
  When I went to the Committee on Rules to seek, along with a 
Republican colleague, a stand-alone debate on this nonbudget item, in 
the context of this act, we were not allowed it. It is a classic case 
of taking a policy nugget unrelated to the budget and jamming it into 
the bill. As far as I am concerned, this is a deal-breaker, and I will 
vote against the bill coming out of conference committee if it looks 
like the bill before us.
  But we are not at that point in time. It is important to keep the 
process moving, and therefore, I urge a ``yes'' vote.
  Mr. SPRATT. Mr. Speaker, I yield 1 minute to the gentleman from 
Minnesota [Mr. Minge].
  Mr. MINGE. Mr. Speaker, the legislation now moving through this body 
is unsettling to most of us. It is marketed by many as the path to 
balance the budget. Indeed, it appears we are more likely to balance 
the budget with this legislation than without it. However, I would like 
to emphasize, it is a close

[[Page H4568]]

call. We should be humble when we talk about the legislation.
  To move the process ahead to conference, to show support for the 
President, to demonstrate bipartisanship, I will vote for the bill. But 
let me add some caveats.
  First, we need strong enforcement mechanisms in all legislation that 
affects the budget. Second, we must stop using the Social Security 
trust fund to mask the size of the deficit, and recognize the long-term 
train wreck that awaits us with the Social Security system if we do not 
aggressively move to fix it.
  Finally, we must try harder. We must avoid exploding tax cuts, we 
must not give blank checks to programs, we must limit our appetite for 
weapons systems. This legislation is one small step in the political 
process. Let us move the process ahead.
  Mr. SHAW. Mr. Speaker, I yield 3 minutes to the gentleman from 
Arizona [Mr. Hayworth], a valuable member of the Committee on Ways and 
Means, and a member of the Subcommittee on Human Resources.

                              {time}  1545

  Mr. Speaker, I thank the subcommittee chairman for yielding me the 
time.
  Mr. Speaker, I would invite those who control the television cameras 
which broadcast these proceedings from coast to coast and around the 
world to take the proper perspective as I address in this well one of 
the dangers we face from those who would oppose this reconciliation 
act, one of the dangers we face from those who continue to distort what 
is at stake for the American people.
  Mr. Speaker, I hold here H.R. 3734, one of the crowning achievements 
of the 104th Congress. Mr. Speaker, it is this bill that took the 
important steps in the 104th Congress to change welfare as we knew it, 
to move people from welfare to work.
  Mr. Speaker, the danger in opposing the provisions that the new 
majority offers in this act would have the effect of taking this 
important piece of legislation and throwing it away, dropping it into 
the trash can, radically changing the intent of what transpires.
  Good people can disagree. I will offer a perspective that needs to be 
heard, Mr. Speaker, by the American people and especially those who 
continue to champion the endless expansion of benefits and the 
destruction of welfare reform. Let me offer a real story from a real 
State, the 48th State in this Nation, the one that I represent, 
Arizona.
  Let me quote to my colleagues the perspective of the Arizona 
Department of Economic Security director, Linda Blessing, in talking 
about the old welfare programs, ``The status quo was not cutting it,'' 
and to further quote from her statement, ``We handcuffed people into 
dependency.''
  Mr. Speaker, the facts are that we have moved in a successful, 
deliberate, commonsense fashion to move people from welfare to work. 
More than 38,000 welfare recipients have dropped off the roles in 
Arizona since 1994, when the height of the enrollment in our State in 
that year was 195,000. The taxpayer-supported welfare program in 
Arizona has helped 23,000 recipients find needed employment training, 
placed 6,800 recipients in jobs, that is an increase of 1,000 
recipients from last year.
  We need to continue the successful trend, allow States like my home 
State of Arizona to work with the $3 billion welfare-to-work grant to 
move yet more families from welfare to work. What we provide for this, 
this legislation does so because we have listened to the Governors. We 
have improved the legislation. We have expanded educational benefits. 
We have taken a commonsense approach. The Federal Government, along 
with State governments, both made great strides with the welfare 
reforms passed last year. Now is the time to provide those State and 
local governments with flexibility. Do not trash welfare reform; build 
on it. Adopt the resolution.
  Mr. SPRATT. Mr. Speaker, I yield 30 seconds to the gentlewoman from 
Texas [Ms. Jackson-Lee].
  Ms. JACKSON LEE of Texas. Mr. Speaker, what my good friend from 
Arizona fails to acknowledge is that welfare reform in its best sense 
was bipartisan of Democrats and Republicans. What this spending bill 
does is takes the rights away from working welfare people, does not 
provide them with protections of fair labor standards laws, does not 
provide them with protection against sexual harassment, does not treat 
them as workers who get equal pay for equal work. That is why we are 
against this spending bill, because it dishes the welfare reform that 
we put together in a bipartisan Congress. I am ashamed of what is 
coming about in this pending bill.
  Mr. SPRATT. Mr. Speaker, I yield 3 minutes to the gentleman from 
Michigan [Mr. Dingell], ranking member of the Committee on Commerce.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. Mr. Speaker, I commend my good friend for the fine work 
which he has done on this very important subject. I had voted for the 
prior resolutions on this matter. I regret I will not be able to do so.
  This budget suffers from a number of fatal defects, the most 
important of which, it breaches agreements contained in the earlier 
budget resolution and it will not achieve a balanced budget. There are 
a number of defects with regard to medical savings, with regard to 
moneys which should better be spent for preventive care such as 
mammographies, prostate cancer screening, and more. The bill treats the 
young people of this country poorly. It will not achieve a balanced 
budget. The Committee on Rules put in sweeping amendments to the 
section on spectrum auctions that have completely gutted taxpayer 
protections that were included in the Committee on Commerce's 
recommendations.
  Our committee made sure that the public's assets would not be sold at 
fire sale prices by permitting spectrum auctions to be canceled if they 
did not raise a minimum amount of revenue. The policy changes included 
in this bill were rejected by the Committee on Commerce members, and 
for good reason; they do not protect American taxpayers. Indeed they do 
great harm to them.
  My colleagues need to know one issue of permanent and paramount 
importance. A sizable portion of this budget bill is held together by 
sham and fraud consisting of phony revenue assumptions about the value 
of spectrum auctions. We know that the revenue assumptions here are 
phony. We have seen them before.
  Last September Congress ordered a spectrum auction for the sole 
purpose of plugging a revenue gap. CBO estimated that the auction would 
raise $1.8 billion. Instead the auction produced just $13 million, less 
than one penny on the dollar. One speculator won the right to serve 
four States for a total of $4. It appears that the Committee on the 
Budget, like the Bourbons of France, have learned nothing from this and 
forget nothing also.
  The evidence shows that the market for radio spectrum is saturated 
and demand is at an all-time low. Yet we are, under the aegis of the 
Committee on the Budget, proceeding to rush forward to sell out 
spectrum for pennies on the dollar under a pretense that it will 
balance the budget. In fact, it will not. The money is not there and we 
are looking at further deficits because of the fact that we have lied 
to ourselves, lied to each other, and lied to the American people.
  Even the FCC chairman says his engineers cannot identify where at 
least half the spectrum will come from and that they have no idea how 
this will be accomplished. We have also learned that some of the 
spectrum identified for auction in this bill is currently used by the 
FAA. We can be sure then that this proposal will jeopardize the health 
and the safety of the flying public.
  Beyond this, the GAO report says operations like Desert Storm could 
be severely impaired by the auction of radio frequencies. Can the 
Committee on the Budget or the Committee on Rules assure members of 
this committee that the bill will not have a disastrous effect on the 
viability of the Nation's military operations? Put your expertise 
against the GAO, which says that this puts our national defense effort 
at severe risk.
  The losers here are going to be the American taxpayers who are not 
only being misled but who will continue to face a continued mounting 
budgetary deficit because of a phony set of assumptions and a doomed-
to-fail policy on spectrum auctions.

[[Page H4569]]

  Mr. SHAW. Mr. Speaker, I yield myself such time as I have remaining.
  The SPEAKER pro tempore (Mr. Dreier). The gentleman from Florida [Mr. 
Shaw] is recognized for 4 minutes.
  Mr. SHAW. Mr. Speaker, a year ago, approximately a year ago, I stood 
at this microphone in support of welfare reform, a most historic bill.
  The gentlewoman from Texas a few moments ago said that she supported 
it. If we look at the voting records, she did not. She voted against 
it.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, will the gentleman yield?
  Mr. SHAW. No, I will not, Mr. Speaker.
  But I would like to give her the good news, that since welfare 
reform, since 1995, in the State of Texas the welfare rolls are down 24 
percent. That is unheard of. It is unprecedented in the history of this 
country. Welfare reform has done more for the poor, the needy, than any 
piece of legislation that has ever come out of this Congress. And let 
there be no mistake about it. Those figures are out there and they are 
nationwide. Nationwide. It has been a tremendous success.
  When I stood here a year ago I said there was still much work to be 
done. There were corrections to be made. I want to do away with some of 
the rhetoric and some of the misinformation that has been on this floor 
today. We do not provide or allow for in this bill any discrimination 
about people coming off of welfare. On unemployment, the people that 
are going into the private sector, they have all of the protection that 
any of the workers in this country have. Those that are working for 
their benefits, they have the protection against discrimination. 
However, there are a few protections they do not have. When their 
benefits run out, they cannot start collecting unemployment 
compensation. They do not have the FICA contributions. Those are things 
that there is disagreement in this conference about. I recognize that, 
but I must say to the Speaker and to my colleagues that once they get 
into the private sector, there is no difference between them and any 
other worker.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, will the gentleman yield?
  Mr. SHAW. No, I will not.
  Mr. Speaker, I would ask the Chair to admonish the gentlewoman from 
Texas not to interrupt me.
  The SPEAKER pro tempore. The gentleman from Florida [Mr. Shaw] 
controls the time.
  Mr. SHAW. Mr. Speaker, there is also another area that I think that 
there is great misunderstanding, there is the part referring to SSI for 
noncitizens. We have a genuine disagreement with the President. We 
thought we came up with a better solution. The President's plan would 
call for 60 percent of noncitizens, the elderly, to come off of SSI. We 
did not want to do that. So what we did, we grandfathered in all of the 
noncitizens that were receiving SSI on August 22, when the welfare bill 
was signed. We thought that was much fairer than pushing them out and 
then having them come back and prove that they were disabled, knowing 
that roughly half of them would never get back on and they would lose 
their Medicaid as well as their SSI payments.
  This is very important. We thought ours was the more humane way to 
go. The President thought it was best to take the elderly off and 
exchange their benefits to allow people that were here on August 22 
that might become disabled, most of them will not, but those that did 
become disabled sometime in the future could get onto SSI. It is a 
disagreement we have, but it I might say in the full committee, after 
we made our argument, no one even offered the President's plan. No one 
offered the President's plan in the Committee on Ways and Means. Why? 
Because they did not want to hear the argument that they were throwing 
the elderly off. I do not blame them. I would not have offered it 
either.
  Another area that I would like to discuss is the area of minimum 
wage. In this bill, in a very bipartisan manner, we adopted the 
President's definition of minimum wage. We say in determination of 
minimum wage when working for your benefits that the only thing that 
will be included is the cash payments and the food stamps.
  This is what the President wanted. This is what we gave to the 
President. This is a bipartisan bill and we have taken a bipartisan 
attitude in working with many of the Democrats. I hope that we get a 
good vote. Vote ``yes'' on the bill.
  The SPEAKER pro tempore. The time of the gentleman from Florida [Mr. 
Shaw] has expired.
  Mr. PALLONE. Mr. Speaker, I yield 2 minutes to the gentleman from 
Michigan [Mr. Levin].
  (Mr. LEVIN asked and was given permission to revise and extend his 
remarks.)
  Mr. LEVIN. Mr. Speaker, I speak as someone who supported the reform 
of AFDC and I very much continue to support it. Let me address two 
issues.
  The Fair Labor Standards Act. I favor moving people off of welfare to 
work. They should not be treated as second-class citizens, and you do 
that. You take away the protection of the Fair Labor Standards Act, and 
then you go back in, the States must pay a minimum wage. They do not 
have the protection of Federal law. There is no clear enforcement, and 
you take away the protection against sexual harassment. Why? What do 
you do that for?
  People should move from welfare to work. They should not be second-
class citizens. Period.
  In fact, our hope is the opposite, to maintain the dignity and the 
integrity of work. Legal immigrants; look, we did not offer the 
President's proposal. We offered something that built on that. It was 
turned down by one vote, even though there was the money there to pay 
for it. The gentlewoman from Washington said, well, everybody should 
play by the same rules. No, you are asking people who were here August 
of 1996, who became injured after that, to play by different rules. 
They are out in the cold. That is an irrational, inhumane line. We 
should not be drawing it.
  I am going to vote against this bill in part because I am hoping that 
we will indeed have Mr. Shaw, whom I very much respect, in a bipartisan 
effort to work out these problems in conference committee. Do not treat 
anybody in this institution as a second-class citizen and do not renege 
on the budget agreement regarding legal immigrants. They were here 
legally. We should not differentiate people according to when they were 
disabled.
  Mr. SHAYS. Mr. Speaker, I ask unanimous consent that the 
distinguished chairman of the Committee on Commerce, the gentleman from 
Virginia [Mr. Bliley], control 12 minutes of the time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Connecticut?
  There was no objection.
  The Chair recognizes the gentleman from Virginia [Mr. Bliley].
  Mr. BLILEY. Mr. Speaker, I yield myself 2\1/2\ minutes.
  Mr. Speaker, we are at a historic point for this Congress. For the 
first time in 32 years, we have the ability to balance the Federal 
budget by the year 2002. The bipartisan agreement set forth by the 
administration and this Congress allows each of us the opportunity to 
address the most serious and immediate issues facing our Nation today. 
In particular, the Committee on Commerce labored long and hard to meet 
its shared goals of balancing the budget.

                              {time}  1600

  We strengthened and preserved the Medicare Program. Today's 
beneficiaries will have access to a wide variety of coverage choices 
and a broader package of preventive benefits. They will be served by 
stronger antifraud measures and beneficiary protections. Tomorrow's 
Medicare beneficiaries are also served by this legislation which 
establishes a baby boom commission to identify solutions to the long-
term fiscal threats facing the Medicare Program.
  We adopted flexibility reforms under the Medicaid Program long sought 
by the States and proposed by the administration in its 1998 budget. It 
establishes new coverage options, including 12-month continuous 
coverage of children and enhanced managed care quality assurance 
standards.
  Finally, the committee approved legislation that targets $16 billion 
to expand coverage and services to low-income uninsured children. Most 
of this fund is made available to the States through the Child Health 
Assistance Program, a matched mandatory grant program for low-income 
uninsured

[[Page H4570]]

children. The program provides coverage and services such as 
immunizations and other medications that will expand coverage and 
provide much needed services to low-income uninsured children.
  It is no small task to produce a package which extends the solvency 
of the Medicare Program, improves benefits for Medicare beneficiaries, 
and provides coverage and services for low-income uninsured children. 
But that is exactly what we have done. I am proud of the work that the 
Committee on Commerce has done, and I believe that every member of the 
committee and every Member of this House should be proud of supporting 
this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Texas [Mr. Doggett].
  Mr. DOGGETT. Mr. Speaker, as a member of the Committee on the Budget 
who has supported this balanced budget agreement, I view this 
reconciliation bill to implement it as most unfortunate. In fact, I 
think it should go under the title ``wreckconciliation'' because it 
really wrecks this balanced budget agreement. It lacks in enforcement 
provisions.
  My colleagues will recall that we got a balanced budget agreement 
only at the last minute with some strange assumptions, a gyration that 
generated a spare $225 billion, or there would be a hole that big in 
the balanced budget agreement.
  Well, yesterday the same thing happened. They were about $11 billion 
short yesterday; and instead of trimming spending or adjusting the tax 
breaks, they felt the best thing to do was to speculate on a spectrum 
auction that will occur over the next 5 years and manipulate the 
numbers to add $11 billion so that it would work out just right.
  You see, this agreement is based on many questionable assumptions 
that we hope will come true. It represents promises. It represents a 
hope and a prayer. It represents a firm ``maybe''. But it certainly is 
not a guarantee that we will ever have a balanced budget. And that is 
why it is so important to have meaningful enforcement provisions, not 
some day in the future but right here in this agreement. It lacks them; 
and, therefore, I say it is a wreck of that budget agreement.
  Well, if it is a wreck for our fiscal health, what about our physical 
health? For the 10 million American children who have no health 
insurance, growing by 3,000 children a day, it is truly a wreck because 
not one of them is guaranteed access to health insurance under this 
bill. And for Texans, it means almost $1 billion less for Texas 
hospitals.
  This is a step backward. It is a step away from this budget 
agreement. And now is no time to avoid the need for enforcement of the 
budget agreement and for addressing the real health care concerns of 
working American families
  Mr. BLILEY. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Illinois [Mr. Hastert].
  Mr. HASTERT. Mr. Speaker, I thank the gentleman from Virginia [Mr. 
Bliley] for yielding me the time, and I want to congratulate him on the 
work he has done.
  Mr. Speaker, we hear a lot of speeches here. Some are pretty 
informational, and some really border on demagoguery, just plain 
demagoguery. But let us look at the facts.
  The facts are, if KidCare services are dropped, at least 2.6 million 
low-income uninsured kids will lose. The analysis by CBO and CRS 
estimated that KidCare services will insure an additional 2.595 million 
children. Preserving the services of KidCare insures a grand total of 5 
million currently uninsured children.
  So what we saw a few minutes ago is not what we get. What we really 
get are kids that do not have insurance today being covered, being able 
to go to the doctor, being able to go to the emergency room, being able 
to be taken care of and get the inoculations they need.
  The budget agreement calls for KidCare services, and not only 
services but the expanded coverage low-income and uninsured kids do not 
have today. The KidCare agreement provides children's health services. 
It helps hospitals and community health centers. That is where the 
entities are that can best help our children, the most unserved 
children today.
  The budget agreement also provides and allows services to make 
support for our Nation's 70 Children's Hospitals possible. I thank the 
gentleman from Virginia [Mr. Bliley], the chairman, for the fine work 
he has done.
  Mr. SPRATT. Mr. Speaker, I yield 2\1/4\ minutes to the gentleman from 
Texas [Mr. Bentsen].
  (Mr. BENTSEN asked and was given permission to revise and extend his 
remarks.)
  Mr. BENTSEN. Mr. Speaker, first of all I want to thank the gentleman 
from South Carolina [Mr. Spratt], the ranking Democrat, for recognizing 
me and thank him for the work he has done on this bill.
  My colleagues, this is a very difficult bill. On the one hand, there 
are some things in this bill that are really quite good. I commend the 
Committee on Commerce for the work that they did with respect to 
medical education and the carve-out of the AAPCC so the that managed-
care companies will once and for all begin to share in the cost of 
medical education because they also share in the benefit. That is a 
very important issue. I hope that survives the conference, should this 
bill move through and pass today.
  It also includes another provision which I have sponsored, as I have 
sponsored legislation dealing with medical education, dealing with 
Medigap or supplemental insurance, in providing for annual coverage and 
the ability for our senior citizens to really have a choice between 
managed care and fee-for-service by being able to move back and forth 
and not lose their right to that Medigap insurance.
  It includes the PSO for providers such as hospitals and physicians to 
compete effectively with managed care in this new health care world 
that we have. Those are good things, and I hope they survive. And, of 
course, it does extend the Medicare Program and it does balance the 
budget, and that is good as well.
  But, my colleagues, I still have great concerns about the Committee 
on Commerce portion dealing with disproportionate share under the 
Medicaid part of the bill. That would treat 13 States, including my 
home State of Texas, much differently than it would treat the other 37 
States.
  Those 13 States would receive a 40 percent cut in their 
disproportionate share in the year 2002, twice as much as the next 
nearest State under the formula that is used. And the formula is flawed 
because the formula uses as the baseline the fiscal year 1995 numbers, 
but it determines the State by using fiscal year 1997 numbers. The 
problem with this is they are using two different types of data. They 
are using data from fiscal year 1995 and data from fiscal year 1997. It 
is highly inequitable to the 13 States, including the State of Texas.
  This matter absolutely must be fixed by the administration and by the 
conferees if this bill is going to be forwarded to all the States of 
the Union.
  Mr. Speaker, I am voting for this legislation today to continue our 
process toward enacting a fair plan that balances the Federal budget 
for the first time since 1969. But I do so only after receiving the 
strong commitment of the Clinton administration and Budget Committee 
Chairman John Kasich to correct a Medicaid cut formula that is unfair 
to Texas and 12 other States dependent on the Disproportionate Share 
Hospital [DSH] Program.
  My future support for this legislation is contingent on the 
conference committee correcting the DSH formula so that it is fair to 
Texas. If that does not happen, I will not vote for the conference 
report.
  I am pleased that, during debate on the rule for this legislation, 
Chairman Kasich repeated the pledge he made in the Budget Committee to 
change the DSH formula to make it more reasonable and fair. I am also 
pleased that Office of Management and Budget Director Franklin Raines 
has written me a letter stating:

       We will make correcting the DSH formula as it relates to 
     high DSH states a priority in conference, and I look forward 
     to developing an equitable solution to this problem.

  I will enter the full text of this letter in the Record after my 
remarks.
  I want to emphasize that I strongly support balancing the Federal 
budget. I supported the bipartisan balanced budget agreement between 
the President and the congressional leadership, and I voted for the 
budget resolution.
  There are many things in this legislation that I support and applaud. 
I commend the Rules

[[Page H4571]]

Committee for improvements it has made to ensure that this legislation 
does provide $16 billion to expand health insurance for children and 
protect low-income senior citizens from increases in Medicare premiums. 
I strongly support two provisions in the Medicare reform section that I 
have advocated and that would greatly benefit our Nation's health care 
system. These provisions, which are similar to legislation I have 
introduced, would help ensure that senior citizens have real choice 
under Medicare and our Nation continues to invest properly in medical 
education at teaching hospitals. Both of these provisions were included 
in the Commerce Committee version of Medicare reform, and I strongly 
urge that they be included in the final legislation.
  The first provision would give senior citizens who transfer into a 
managed care plan the right to buy supplemental insurance, Medigap, 
which pays for prescriptions and other vital services, if they return 
to traditional fee-for-service Medicare. Seniors currently lack this 
right, and this is a tremendous obstacle to real choice in Medicare.
  The second provision would ensure that Medicare managed care plans 
help fund medical education in the same as fee-for-service Medicare. 
The Commerce Committee proposal would carve out graduate medical 
education [GME], as well as disproportionate share hospital DSH, 
amounts from the average adjusted per capita cost [AAPCC] payment to 
Medicare managed care plans. This approach would ensure that this 
funding is used as intended to fund GME and DSH. This plan would not 
increase Federal spending; rather, it would recapture funds from the 
current Medicare managed care reimbursement formula so that all 
Medicare plans help pay for the cost of graduate medical education.
  These provisions represent important progress. Nevertheless, I am 
strongly opposed to the Medicaid provisions of this bill that would so 
unfairly devastate the efforts of my State and many other States to 
provide necessary health care to the poorest patients. There is 
bipartisan agreement in Congress that we need to reform the 
disproportionate share hospital [DSH] program to contain costs and 
prevent abuse of the program. But these reforms must be fair and 
reasonable, not arbitrary and punitive as they are in this legislation.
  Under this legislation, Texas and 12 other so-called high-DSH States 
would have their funding cut by twice the percentage of other States. 
In the year 2002, funding for high-DSH States would be cut by 40 
percent, while funding for other States would be cut by 20 percent or 
not at all. As a result, 13 States contribute 57 percent of the savings 
required, while some States bear no cuts at all. These States are 
Alabama, Colorado, Connecticut, Kansas, Louisiana, Maine, Missouri, 
Nevada, New Hampshire, New Jersey, South Carolina, Tennessee, and 
Texas. These States would face the closure of rural and urban public 
hospitals and substantial reductions in necessary health care for 
uninsured or indigent patients, particularly children.
  Additionally, the Nation's children's hospitals would inherit an 
unsustainable financial burden as their caseload is often mainly 
Medicaid or indigent care.
  I had sought to offer an amendment that would take a more fair 
approach that cuts each State's DSH funding by the same percentage. 
High-DSH States still would be cut by larger dollar amounts, but the 
cuts would be proportional and all States would contribute. This would 
not have increased total expenditures. Unfortunately, this amendment 
was not allowed.
  I am also concerned about provisions in this legislation that do not 
adequately protect the right of participants in welfare-to-work 
programs; that privatize the determination of eligibility agreement to 
use the full $16 billion to extend insurance coverage to uninsured 
children. These and other areas in which this legislation falls short 
of the budget agreement must be corrected by the conference committee.
  I look forward to working with the administration and the conferees 
to address these issues and especially to ensure a more fair and 
responsible formula for cutting Medicaid DSH funding. The Medicaid DSH 
issue is vital to my State and many others, and I will not vote for a 
conference report that does not fairly resolve this issue.
         Executive Office of the President, Office of Management 
           and Budget,
                                    Washington, DC, June 25, 1997.
     Hon. Ken Bentsen,
     U.S. House of Representatives,
     Washington, DC.
       Dear Representative Bentsen: Thank you for sharing with me 
     your concerns about the impact of the disproportionate share 
     hospital (DSH) payment reductions on the State of Texas in 
     the House reconciliation bill.
       The DSH savings proposal in the President's 1998 budget was 
     designed to ensure that States with the highest DSH spending 
     do not unfairly bear the impact of the savings policy. The 
     Administration remains committed to this policy.
       As Congress recognized in OBRA 1993, a DSH savings policy 
     that did not take account of which States rely most heavily 
     on DSH financing could have too harsh an impact on certain 
     States and could likely affect their ability to cover 
     services. Thus far, the DSH savings proposal in the House 
     reconciliation bill does not fairly target the remaining DSH 
     funds to States with the greatest need, and the 
     Administration has urged the House to revisit the proposal in 
     the President's budget.
       We will make correcting the DSH formula as it relates to 
     high DSH States a priority in conference, and I look forward 
     to working with you to develop an equitable solution to this 
     problem.
       Thank you again for your call.
           Sincerely,
                                               Franklin D. Raines.

  Mr. BLILEY. Mr. Speaker, I yield 1 minute to the gentleman from Iowa 
[Mr. Ganske], a member of the committee.
  Mr. GANSKE. Mr. Speaker, I rise in support of the Medicare reform 
provisions before us. In large part, the bills produced by the 
Committee on Commerce and the Committee on Ways and Means are very 
similar, but there are some important differences.
  Unlike the Ways and Means bill, the Commerce provisions carve out 
graduate medical education and disproportionate share hospital payments 
from the monthly rate paid to Medicare plans. This is an important 
provision that should be enacted into law.
  Currently, GME and DSH payments are included in the rate paid to 
Medicare HMO's. That money is supposed to be passed on to those 
hospitals which need additional support to train the next generation of 
health care providers and provide a safety net for the poorest and 
sickest Americans.
  But there is much evidence that Medicare managed care plans fail to 
pass these funds through as intended. Supporters of the carve-out 
include the Physician Payment Review Commission and the Prospective 
Payment Assessment Commission. The impact on teaching and safety net 
hospitals is evident. The accounting firm of Deloitte and Touche wrote 
that ``without some means to modify the AAPCC, support for education 
and patient care-related missions and care for the low-income poor will 
be diminished.''
  Mr. Speaker, it would be irresponsible for Congress not to ensure 
that these payments actively support specified missions.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
California [Ms. Woolsey].
  (Ms. WOOLSEY asked and was given permission to revise and extend her 
remarks.)
  Ms. WOOLSEY. Mr. Speaker, I ask my colleagues, why is it when the 
majority proposes spending cuts, it is women and children first?
  I voted for the balanced budget agreement because I was really 
hopeful that roughneck politics had been passed aside to reach a 
grander goal. Democrats and Republicans were willing to give some to 
gain a lot. It was a textbook example of the art of compromise, 
actually. But somewhere between the House floor and the committee 
rooms, the deal unraveled and this unacceptable bill emerged, a bill 
that undermines the budget agreement and adds new provisions that were 
never even discussed and, in fact, have little to do with balancing the 
budget in the first place.
  The bill sends funds that we targeted for child health coverage to 
States as block grants. This means Governors can spend the money for 
programs that have nothing to do with providing children with basic 
health care. Under this plan, less than half a million kids will get 
coverage. Talk about a sellout.
  But that is not even the worst of it. The same leadership who shut 
down the Government and held flood victims hostage has once again 
included an extraneous, divisive issue in its must-pass legislation. 
The majority is using this bill to codify into law the Hyde amendment.
  The Hyde amendment takes away reproductive rights for hundreds of 
thousands of poor women. Roe versus. Wade does not exist when you 
cannot afford to pay the bill. This bill also takes away other rights 
from poor women. It drops women who are in welfare-to-work programs 
into a new under class of employees not entitled to protections, 
protections against sexual harassment, discrimination, unsafe 
workplaces, and unfair labor practices. I cannot support this bill.

[[Page H4572]]

  Mr. BLILEY. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from New Jersey [Mrs. Roukema].
  (Mrs. ROUKEMA asked and was given permission to revise and extend her 
remarks.)
  Mrs. ROUKEMA. Mr. Speaker, I acknowledge the commitment of the 
gentleman from Ohio, Chairman Kasich, to working out the DSH payments 
in this bill.
  Mr. Speaker, I rise in support of H.R. 2015, the Balanced Budget Act 
with reservations.
  We are on the verge of passing legislation that, for the first time 
in more than a generation, will set us on the trail toward a balanced 
budget. This goal of a balanced budget is not an abstract exercise that 
some economists or ``green-eyed shade types'' thought-up in some ivory 
tower. It is an essential economic tool to get the savings and capital 
investment we desperately need for research and development, and new 
plant and equipment to rebuild the American economy; keep us 
competitive in the global economy and create the good jobs at good 
wages we need for this generation and those to come. For these reasons 
I believe we must keep this progress going with the full expectations 
that the final conference report will get strong endorsement.
  Tomorrow, we will take up the legislation that will implement a 
genuine ``Save and Invest'' in America program. Today, we fulfill the 
promise we made to our children and grandchildren to make this 
Government live within its means.
  So this debate today is about priorities. While I will support this 
legislation in order to keep this important legislative process moving 
forward, I want the people of New Jersey to know of my priorities and 
the improvements I believe we need.
  Mr. Speaker, there is much to be proud about in this bill. In 
addition to the real spending cuts that will move our budget into 
balance, this legislation contains a new $16-billion initiative on 
children's health.
  We are right to target $16 billion to help insure children who are 
not insured. The only question remains over what will be done with this 
money to achieve the goal of providing health care to children.
  I rise today to remind you not to forget children's mental health as 
well as their physical health. Both are components of children's health 
that cannot be ignored.
  Any health initiative must have parity treatment of mental health 
coverage. Yesterday, in the other body, an amendment passed that would 
require that any plan that included mental health benefits would 
provide those benefits in a nondiscriminatory manner. This should 
remain a part of this budget package.
  On the negative side, I recognize that we must have genuine 
entitlement reform. Medicare is going bankrupt and this bill restores 
its solvency for another 10 years while we debate a long-term solution 
to this pressing problem.
  This legislation moves in that direction. But without question, this 
area of savings raises the most concern, and I must state my healthy 
skepticism about how much can, or should, be accomplished in the near-
term.
  I am deeply concerned about the Commerce Committee provision of this 
bill that cuts $16 billion in Federal Medicaid matching funds from the 
disproportionate share hospital [DSH] payments. This could amount to a 
17-percent cut in New Jersey in a vitally important program that serves 
our neediest patients. I am encouraged by the statement made during 
debate on the rule on this legislation by the chairman of the Budget 
Committee [Mr. Kasich], that this formula is unfair to New Jersey and 
other States and should be revised. I am looking forward to reviewing 
those revisions when this House considers the conference report on this 
bill.
  We in New Jersey are also deeply concerned about the reductions in 
Medicare payments for high Medicare hospitals--many of which can be 
found in New Jersey--and the prospective payment system freeze for next 
year. These two provisions present serious burdens for New Jersey 
health care providers and could significantly affect the quality of 
care in our State.
  Mr. Speaker, there is very little long-term Medicare reform in this 
bill. I, for one, support the establishment of a Bi-Partisan Blue 
Ribbon Medicare Commission--modeled after the very successful Greenspan 
Commission on Social Security in the mid-1980's--to make 
recommendations for preserving and protecting this vital program, which 
the Congress should enact confident that there is not any hidden 
``political agenda'' to the recommendations.
  Mr. Speaker, I am very troubled that this reconciliation package 
includes provision that allows associations to offer health care 
plans--the provision added in the Education Committee by my friend from 
Illinois, Mr. Fawell.
  This section of the reconciliation package raises two concerns. The 
first concern is the fact that budget reconciliation is a totally 
inappropriate forum for bringing forth such expansive legislation 
without proper analysis and open discussion of such important concerns 
as fiduciary standards.
  This provision does not offer sufficient protection against fraud and 
abuse and contains solvency standards that are substantially weaker 
than most State standards. This poses the risk of significant losses 
for both plan participants and providers when plans fail.
  We are being grossly irresponsible by including a major revision of 
ERISA law in this massive reconciliation bill.
  My second concern is that this proposal does not help the health care 
situation in this country, but actually damages the integrity and 
health of group insurance coverage while reducing protections for 
patients.
  We must carefully weigh the benefits of allowing associations the 
protections of being covered by national laws with the benefits of 
allowing State laws to determine consumer protections. While we do want 
to encourage companies to provide health care benefits to their 
employees and enlarge the prospects for small businesses to pool for 
insurance purposes, we must respect the right of each of the States to 
regulate the insurance industry within their boundaries. This proposal 
will drive us inextricably to national managed health insurance 
standards.
  In other words, this legislation is significant, complex and perhaps 
one whose time has come but not in a reconciliation budget package.
  This is no way to run a railroad or a legislative body. I will make 
every effort to ensure that this provision will be dropped in 
conference.
  I am equally concerned that this legislation does not contain the 
strong budget enforcement mechanism introduced by Congressmen Barton 
and Minge. However, I will rely on the commitment from the Republican 
leadership that we will have a vote on this important legislation in 
July and that, if successful, this legislation will become part of the 
reconciliation process.
  That process will not be without difficulty, but as we prepare to 
enact legislation that balances the Federal budget we should not kid 
ourselves into thinking that it will be easy to do. At the same time, 
we should acknowledge the terrible cost to our Nation if we do nothing.
  Balancing the Federal budget is essential to protect our Nation's 
long-term financial health, and to ensure that the country our children 
and grandchildren inherit is as great as the one our parents gave us.
  Mr. BLILEY. Mr. Speaker, I yield 1 minute to the gentleman from 
Pennsylvania [Mr. Greenwood].
  Mr. GREENWOOD. Mr. Speaker, I thank the gentleman from Virginia [Mr. 
Bliley] for yielding me the time.
  Mr. Speaker, I rise with great enthusiasm to support this 
reconciliation package. This is why I came to Congress, to balance the 
budget. Today is a historic day for this Congress. But I want to 
specifically refer to the children's health care package.
  The previous speaker somehow argued that children will be left 
uncovered by this bill as we in the Committee on Commerce have crafted 
it. To the contrary, what we have done is created the flexibility that 
the States need to provide Medicaid coverage, to provide direct health 
insurance purchases, and to provide direct services. And for those who 
criticize the provision of direct services, we must remember that if we 
did not provide children with direct health care services, those 
children would get no health care whatsoever.
  We need to trust our Governors, we need to trust our State 
legislators and allow them to meet the health care needs of their 
children in the way that best suits their States' realities. I support 
this package enthusiastically and encourage my colleagues to do so, as 
well.

                              {time}  1615

  Mr. SPRATT. Mr. Speaker, I yield such time as he may consume to the 
gentleman from New York [Mr. Engel].
  (Mr. ENGEL asked and was given permission to revise and extend his 
remarks.)
  Mr. ENGEL. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, I rise to oppose the Budget Reconciliation Spending Act.
  While this bill contains fewer cuts than the drastic social spending 
reductions the Republicans have demanded in recent years, it still 
gives short shrift to America's seniors, workers, and immigrants.
  Further, it violates several of the provisions of the budget 
agreement we passed only a few weeks ago.
  First, the legislation misguidedly permits States to turn over 
Medicaid and Food Stamp

[[Page H4573]]

Programs to private companies, many of which have demonstrated that 
they have not been able to efficiently administer other Government 
contracts.
  An amendment in the Commerce Committee would have fixed this problem, 
but it was unwisely rejected by the Republican majority.
  Second, the Medicare cuts are not as onerous as those of the 104th 
Congress. Still, the impact of reduced payments to providers will, in 
the end, be absorbed by needy seniors, resulting in poorer health care 
and diminished access to physicians.
  I am further dismayed by the incorporation of the risky medical 
savings account proposal in the Medicare portion of the package.
  This proposal will undermine the integrity of the Medicare Program by 
transferring critical funding away from the most needy beneficiaries to 
the healthiest, wealthiest senior citizens.
  Third, I am pleased that the bill restores SSI and Medicaid to those 
legal immigrants who were receiving them when the welfare reform 
legislation was enacted last August.
  Unfortunately, the budget agreement does not go far enough. Those 
immigrants who were here last August who only subsequently qualified 
for assistance, remain barred from receiving benefits. This is terribly 
unfair to those who had a reasonable expectation that the U.S. 
Government would assist them.
  Finally, the budget reconciliation spending bill guts much of the 
minimum-wage increase which Congress passed last year, by exempting 
those in workfare jobs from the minimum-wage protection.
  This is outrageous. Not only will this proposal take good jobs away 
from workers making as little as the minimum wage, but it will defeat 
the entire purpose behind workfare because program participants will 
not be able to earn a living wage in their jobs.
  Mr. Speaker, once again, this bill represents an improvement over 
previous Republican budget cutting efforts. Unfortunately, it still 
cuts too much and helps too few.
  I urge my colleagues to vote against the budget reconciliation 
spending bill.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
North Carolina [Mrs. Clayton].
  Mrs. CLAYTON. Mr. Speaker, I thank the ranking member for yielding me 
this time.
  Mr. Speaker, I really wanted to vote for this bill. In fact, I voted 
for the balanced budget agreement in the Committee on the Budget and 
voted for it on the floor with reservations. I knew there were things 
in there I had problems with. One of the things I had problems with, 
there was not enough food and nutrition. There are great needs in terms 
of hunger. It was not there. But in spite of that, it did have some 
good things in it.
  Some of those good things were around children's health, around 
educational opportunities and tax provisions that are in there. On 
balance it was good to move for a balanced budget. But now we have an 
agreement that does not conform to all of those agreements. Although I 
knew I had some reservation, I do not ever expect that everything I 
want will be in the bill.
  I can tell my colleagues, I am still looking forward to voting for a 
balanced budget, but I am unable to do that now. I want to tell my 
colleagues what I hope will be cleaned up after the conference. I hope 
indeed my colleagues find the compassion, or the reasonableness of at 
least giving people the work opportunity so they can have food stamps, 
so they are not thrown off the food stamp rolls. At least this rich 
country should be above that. I hope we will find in our hearts, and 
with all due respect and I know the gentleman from Florida [Mr. Shaw] 
is well-intending, I think when we are protecting welfare to work, age 
discrimination, sex discrimination generically and do not apply the 
same labor standards that are codified already in law, we are supposing 
to create a new set of protections for this group of people. It would 
be so much easier if we would just simply say the law that is already 
on the books and we would apply it to these people just as we apply it 
to everyone else. I think that is a gross error, and I think we have 
made a tragic mistake to create new provisions to speak to the same 
issues.
  For those reasons, Mr. Speaker, I cannot support this bill as it is. 
I hope we will come back from the conference with an improved bill.
  Mr. BLILEY. Mr. Speaker, I yield 1 minute to the gentleman from 
Georgia [Mr. Norwood], a member of the committee.
  Mr. NORWOOD. Mr. Speaker, I am very pleased to support this bill for 
many reasons, but one of which is that the Committee on Commerce has 
done a marvelous job in trying to protect patients in the health care 
field as we move more and more from fee-for-service health care to 
managed care. I am extremely grateful to this committee for doing the 
right things for Medicare and Medicaid, those things that we want to do 
indeed for all the people of this country, but at this point we did get 
things into Medicare and Medicaid.
  For example, for the first time we are actually going to allow the 
health care giver, the physician and the patient, to determine if they 
need a specialist, or the physician and the patient will actually 
determine if they need to be in the hospital, not a health care 
bureaucrat or an accountant.
  With that, I thank the gentleman from Florida [Mr. Bilirakis], the 
chairman. I think we have a great bill, and I urge all Members to 
support it.
  Mr. SPRATT. Mr. Speaker, I believe the provision the gentleman 
referred to was dropped in the manager's amendment.
  Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from Illinois 
[Mr. Evans].
  Mr. EVANS. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, H.R. 2015 would kill the efforts of the Department of 
Veterans Affairs from obtaining the resources it needs to meet the 
health care needs of our Nation's veterans.
  Earlier this year the administration proposed that appropriations for 
VA health care remain constant at $17 billion a year for 5 years. 
Clearly the ability of the VA to provide needed health care service to 
the Nation's veterans could be seriously jeopardized if the resources 
required to provide that care were fixed, while the costs of providing 
care increased.
  To offset the possible dire consequences of an appropriation freeze, 
the administration also proposed that VA retain funds it collects from 
third party payers, insurance companies for example, for some treatment 
provided by VA to certain veterans. The VA is attempting to collect 
funds for third party payments, but today those recovered funds are 
simply deposited by the VA into the General Treasury.
  On a bipartisan basis the House Committee on Veterans' Affairs 
rejected this proposal. Our committee believed it jeopardized VA's 
ability to meet veterans' health care needs and we said so. We told the 
Committee on the Budget that Congress should continue to fully fund 
health care through the appropriations process. The Committee on the 
Budget, however, rejected our committee's views and our 
recommendations.
  Under the Committee on the Budget's plan, appropriations for VA 
health care would not increase for 5 years and third party collections 
would be retained by the VA to provide veterans' health care. But now 
under H.R. 2015, the ability of the VA to provide veterans' health care 
has been further undermined, again ignoring the service provisions in 
the bill. This bill now makes VA's third party collections subject to 
appropriations.
  Mr. BLILEY. Mr. Speaker, I yield 1 minute to the gentleman from 
California [Mr. Bilbray], a member of the committee.
  (Mr. BILBRAY asked and was given permission to revise and extend his 
remarks.)
  Mr. BILBRAY. Mr. Speaker, this afternoon we are hearing much talk 
about what is not in this bill and why they are finding excuses to vote 
against this bill. Let me give Members a major reason to vote for this 
bill for people who say they want to protect the most needy, the most 
disadvantaged in our society.
  Mr. Speaker, for decades this Federal Government has mandated that we 
provide certain services across this country, and over the last few 
years we have mandated that poor working-class hospitals provide free 
emergency health care to illegal aliens. At the same time this Congress 
and other Congresses have mandated that, they have walked away from the 
responsibility to pay the bill for the emergency health care to illegal 
aliens. This bill, Mr. Speaker, has in it a fund set aside to finally 
reimburse those working-class hospitals that have been denied the 
reimbursement that they have deserved for so long.
  I hope my colleagues who claim to represent the poor, the needy, the 
disadvantaged, the people that are not

[[Page H4574]]

getting their fair share of health care and coverage, will stand up and 
say at least, look, this bill does include something that has been 
denied for much too long. Support this bill and finally start paying 
for the health care of the illegal aliens that we mandate to be 
serviced. Quit being a deadbeat dad.
  Mr. SPRATT. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Hawaii [Mrs. Mink].
  (Mrs. MINK of Hawaii asked and was given permission to revise and 
extend her remarks.)
  Mrs. MINK of Hawaii. I thank the ranking member for yielding me this 
time.
  Mr. Speaker, I rise in opposition to this bill. This is not a 
reconciliation bill. It contains many things which are extremely 
irrelevant to the budget process. Many people have said, ``Let's not 
try to meddle with a welfare reform bill that was only enacted last 
August. Let's see if it's going to work.''
  Yet here we are today in a budget reconciliation bill that severely 
cuts back on what I believe was intended when we passed the Welfare 
Reform Act. We said welfare to work, because work was an ethic we 
wanted to encourage. Everybody who goes to work gets paid. Yet here in 
the Budget Reconciliation Act, we have a work requirement where there 
is no additional compensation. We are going to take their cash welfare 
check, we are going to take their food stamps and we are going to add 
it together and say divide that up to the minimum wage and that is the 
amount of workfare you must do for the Government or for a nonprofit 
agency, without one penny of additional money.
  Where is the work incentive that we are trying to build in the people 
that we were so-called trying to change their mode of life, getting 
them to go out and understanding the joy of earning additional money. 
That is absolutely taken away from them. The protections of being a 
worker are denied. Many of the protections, such as occupational health 
and safety, sex discrimination, all the things that ordinary workers 
would have. Family medical leave. These people who are on welfare that 
are being forced to go to work, forced to take workfare with no 
additional compensation will not have the protections of employees. 
They are not workers. They are second-class citizens in America.
  We apologized for slavery over 100 years ago. Who is going to stand 
up and apologize for the slavery that is incorporated in this budget 
reconciliation bill? This is really degrading. I stood in defense of 
some of the rhetoric we heard in this Chamber about the importance of 
work. If my colleagues are going to require work, pay the people what 
they are entitled to receive.
  Mr. Speaker, I rise to oppose the budget reconciliation bill because 
it establishes priorities that ignore the needs and interests of the 
most vulnerable of our constituents--the poor, the disabled, the 
elderly, the young, and, yes, our legal immigrants.


                     benefits for legal immigrants

  I am happy to note that the reconciliation bill exempts refugees and 
asylees from the SSI and Medicaid bans for 7 years.
  Similarly, it is a positive sign that the House and Senate are making 
an attempt to restore SSI and Medicaid benefits to legal immigrants who 
were already on the rolls when the welfare law was enacted August 22, 
1996.
  However, this effort falls far short of restoring coverage in a 
meaningful way to elderly and disabled noncitizens.
  Much has been said about how the reconciliation bill fails to live up 
to the bipartisan budget agreement. The budget agreement pledged to 
restore SSI and Medicaid for all legal immigrants ion the country 
before August 23, 1996, and who are now or later become disabled. 
Neither the House nor the Senate meet this test.
  The House plan ``grandfathered'' in healthy, elderly noncitizens, but 
it fails to help legal immigrants who are healthy today but who later 
develop disabling conditions. It covers 75,000 fewer people than the 
bipartisan budget agreement.
  The Senate budget plan was a little bit better, since it would let 
disabled noncitizens file for SSI through the end of this fiscal year. 
Nevertheless, it still covers 55,000 fewer people than the budget 
agreement does.
  We could do more to help this population, but we are failing to do 
so. During its deliberations, the House Ways and means Committee found 
it had $2.3 billion left over. My colleague Mr. Becerra  proposed a 
$2.4 billion plan to cover all elderly and disabled legal immigrants in 
the country, even those not already on the SSI rolls. The committee had 
a rare chance to do the right thing, but they let it slip away. Now it 
appears that they saved this money simply to cut the taxes of affluent 
Americans who need it the least.
  It is reprehensible to cut taxes for the rich, while leaving disabled 
and elderly legal immigrants destitute. We should restore SSI and 
Medicaid benefits to all legal immigrants, not merely those who were 
covered by the bipartisan budget agreement.


                               healthcare

  The budget contains numerous cuts and policy changes that will have a 
devastating impact on the health of our most vulnerable populations. 
Medicare and Medicaid will be cut by almost $130 billion over 5 years, 
while individual rights to justice and State authority over the health 
plans of small employers are eliminated.
  The budget targets the most vulnerable populations cutting Medicare 
by $115 billion over the next 5 years. Those in support of this 
legislation, both in the majority and minority, must constantly 
reassure themselves that these cuts are acceptable because most of the 
cuts are achieved through ``reduced payments to doctors and 
hospitals.'' Despite their reassurances, there can be no denying that 
payment reductions to doctors and hospitals are passed on to Medicare 
beneficiaries. Medicare beneficiaries pay in decreased access to care 
and decreased quality of care. Medicare beneficiaries are the losers.
  How many Members of Congress have received letters from constituents 
protesting extended waits for doctor's appointments because their 
physician can only see a limited number of Medicare beneficiaries each 
month, or that their doctor has dropped Medicare patients entirely 
because they lose money every time they see a Medicare patient? Do we 
expect more physicians to accept Medicare patients when payments are 
cut even further? Do we expect hospitals to make more room for Medicare 
patients when we are reducing payments to hospitals? How do these cuts 
improve access to care? Have we improved quality of care by turning 
physicians and hospitals into assembly line health care drive through 
windows?
  The budget includes a demonstration project to test how medical 
savings accounts would work in the Medicare Program. We just passed a 
medical savings account demonstration project last year and we don't 
even know if that will be a success. Why are we now implementing a MSA 
demonstration project in Medicare?
  Medicare should be the last place we should be testing MSA's. Medical 
savings accounts will attract the healthiest and least expensive to 
cover while the more expensive high risk individuals remain in 
traditional health insurance programs. With a greater density of high 
risk individuals in the traditional health plans, costs will rise 
creating additional strain on Medicare. Savings produced by medical 
savings accounts will be meager compared to the higher costs to cover 
individuals in traditional plans.
  Meanwhile, Medicaid will be cut by $13.6 billion. These cuts will 
predominantly come from reductions in payments to hospitals that serve 
a disproportionate share of low income patients. Cuts to 
disproportionate share hospitals [DSH] will place enormous burdens on 
rural hospitals and hospitals in low-income areas. Why are we cutting 
from these areas when these are the populations that need access to 
care the most. Many facilities in low-income or rural areas will not be 
able to survive.
  Also concerning Medicaid, the budget repeals the Boren amendment 
which requires State Medicaid Programs to pay a reasonable and adequate 
rate for facilities and services provided by hospitals and nursing 
homes. Once again, do we expect quality of care and access to care to 
improve by permitting State Medicaid Programs to shortchange hospitals 
and nursing homes? Beneficiaries will feel the cuts and beneficiaries 
will end up paying.
  The budget bill attacks the rights of individuals in medical 
malpractice cases and attacks the authority of States to regulate the 
health plans of small employers.
  This budget weakens individual protections from medical malpractice 
by capping noneconomic damages in medical malpractice cases at 
$250,000. This is an egregious injustice. No matter how severe the harm 
caused by medical malpractice, noneconomic compensation is limited to 
$250,000. To place an arbitrary limitation on the damages an individual 
can receive due to medical malpractice is an atrocity. This cap 
abolishes the rights from every American to receive just compensation 
from medical malpractice.
  To top this off, this legislation puts a 2-year statute of limitation 
on medical liability cases, beginning on the date the injury occurred 
or should have reasonably been discovered, and no legal action could 
begin more than 5 years after the date of the alleged injury. 
Absolutely absurd.
  Another disturbing provision included in the budget is the Expansion 
of Portability and

[[Page H4575]]

Health Insurance Coverage [EPHIC] Act of 1997, which contrary to a 
popular theme that has dominated the direction of this Congress, 
removes State authority to regulate the health insurance plans of small 
employers and transfers regulatory authority to the Federal Government 
without adequate provisions and preparations to manage the additional 
responsibility. States have spent years crafting laws and regulations 
to govern the health insurance plans of small employers. This bill will 
preempt many carefully devised State provisions and assign authority to 
an unprepared Federal Government. Not only is this irresponsible but it 
is also a blatant disregard for the years of work done by State 
governments.
  The budget agreement abandons the budget agreement with the President 
on children's health care. The budget fails to guarantee coverage for 
children and gives excessively generous authority to States. We must 
set minimum standards and requirements to insure that this funding is 
used efficiently and effectively.
  Additionally, the children's health State allocation formula is based 
on the State's share of uninsured children. States that have worked the 
hardest on covering their children and have had the most success will 
get the least amount of funding while States that have done little will 
get a windfall. This allocation system rewards States that have done 
nothing while penalizing States that have made an extra effort to cover 
children.
  Moreover, this legislation permanently enacts the Hyde amendment 
which in effect denies poor women their constitutional right to 
reproductive choice, and could jeopardize their access to health 
services.
  This budget exemplifies how this Congress's priorities have deviated 
from fundamental principles and is a dishonorable failure of our 
responsibility to care for America's elderly and disabled.


                                welfare

  Furthermore, Mr. Speaker, the most egregious provisions of this bill 
will allow States to place welfare recipients in indentured servitude 
by enacting a separate set of rules for welfare recipients working in 
public and nonprofit organizations.
  These provisions were not part of the original budget agreement and 
they are not necessary to reach the budget savings called for in the 
budget resolution. It is simply another attempt to cast scorn on the 
poor of this country and denigrate their status in our society.
  Under the bill before us today, welfare recipients who are forced to 
go to work in public service agencies and nonprofit organizations to 
work off their welfare benefits will not be treated as employees. The 
compensation they receive will not be considered wages or salary and 
they will not be afforded the same rights and protections under labor 
laws as other employees in this Nation. Furthermore, States will be 
able to count the combined TANF, formerly AFDC, and food stamps 
benefits in calculating whether welfare workers in workfare or 
community service jobs are receiving minimum wage.
  What happened to equal work for equal pay, or does that just apply to 
the well-off in the Nation--and not the poor?
  I am frankly astounded that the majority has advocated these changes 
to the welfare law because they are directly contrary to the emphasis 
of last year's bill, which was to empower welfare recipients with jobs, 
to promote the value of work, and to promote self-sufficiency through 
experiencing the dignity of work.
  How can one experience the dignity of work if they are treated 
differently than every other employee, not paid a wage, not protected 
by labor laws, and relegated to a position most vulnerable to 
discrimination and abuse?
  Under this legislation, welfare recipients, virtually all of whom are 
women, will not be protected against sexual harassment and sex 
discrimination as in title VII of the Civil Rights Act. They will not 
be protected under OSHA, the Fair Labor Standards Act, nor the Family 
and Medical Leave Act.
  In short, welfare workers will be denied the most basic rights 
afforded every other person in the workplace. This is shameful, and a 
tragic step backward to a time when indentured servitude and slavery 
was condoned in this country.
  Mr. BLILEY. Mr. Speaker, I yield 1 minute to the gentleman from 
Michigan [Mr. Upton], a member of the committee.
  (Mr. UPTON asked and was given permission to revise and extend his 
remarks.)
  Mr. UPTON. Mr. Speaker, I would like to talk a little bit about why 
Congress should retain the States' option to provide services as well 
as insurance coverage with their child health assistance program 
grants.
  The children's health provisions of this budget agreement state that 
``the resources will be used in the most cost-effective manner to 
expand coverage and services for low-income and uninsured children with 
a goal of up to 5 million currently uninsured children being served.''
  Simply having a Medicaid card or private insurance plan is no 
guarantee of access to health care services in the many medically 
underserved rural and inner-city areas of this country. Community 
health centers are located in medically underserved rural and urban 
areas and may be the only source of care in many of those areas. These 
centers serve one out of every six low-income American children and one 
out of every seven uninsured children in the United States. In addition 
to providing health care services, community health centers are 
experienced in dealing with barriers to health care for children, such 
as transportation and language and cultural differences.
  Mr. BLILEY. Mr. Speaker, I yield 3 minutes to the gentleman from 
Louisiana [Mr. Tauzin], chairman of the Subcommittee on 
Telecommunications, Trade, and Consumer Protection.
  Mr. TAUZIN. Mr. Speaker, let me first tell my colleagues that the 
Committee on Commerce had an awesome task. Assigned to us in the budget 
agreement was $2.2 trillion of budget savings over the period of time 
that this budget agreement is to operate. That was a huge undertaking. 
I think the gentleman has correctly pointed with pride to the work of 
every member of our committee in developing for the Committee on Rules 
in this package with the help of the Committee on the Budget a package 
of reforms that does in fact honorably meet those goals.
  On the Subcommittee on Telecommunications, Trade, and Consumer 
Protection, we had a particularly arduous task of writing a section 
that would meet the Committee on the Budget's requirements of spectrum 
auctions and revenues to the government over the next 5 years in the 
face of some very disturbing recent trends, the most recent of which 
was an auction in April that yielded only one-half of 1 percent of the 
amount of money that the Committee on the Budget had earlier predicted 
that auction would yield for the Treasury.
  Let me at first compliment the gentleman from Ohio [Mr. Kasich] and 
the members of the Committee on the Budget for working so carefully 
with the members of the Subcommittee on Telecommunications, Trade, and 
Consumer Protection in trying to resolve that arduous task and those 
numbers. What has been accomplished in the course of the last few days 
through negotiations with the Committee on Rules are provisions to help 
ensure that the next round of spectrum auctions are conducted much more 
responsibly.
  Number one, it is clear from the language that we are going to vote 
on today that spectrum auctions of additional spectrum made available 
over the next 5 years for public use will be conducted with several new 
directions: No. 1, those spectrum auctions will be conducted after a 
time has been allowed for the current round of spectrum sales to clear 
the financial markets. As my colleagues know in the last successful 
auction, whereas we received bids of $23 billion, only about $11 
billion was actually paid in because of difficulties in getting that 
spectrum out.
  The new bill provides, in effect, that the new auctions will give 
enough time for bidders to know what is coming down the pike and will 
give enough time for the market to clear. The new provisions require in 
fact the FCC to examine new computer models for auctioning, such as the 
ones carried out in California where block auctioning is actually 
attempted to yield higher results for the Treasury. In short, those 
improvements have been added to the bill.
  We have retained in this bill the committee's mark that specifies 
that the FCC can permit the continued analog broadcast as long as more 
than 5 percent of a community have not yet switched over to digital as 
this digital transformation occurs.

                              {time}  1630

  We have retained the committee language that there must be minimum 
bids in these auctions. No more should we have bids on auction of a 
dollar at the marketplace.
  In short this is a good package. I urge its adoption and commend the 
committee for its fine work.

[[Page H4576]]

  Mr. PALLONE. Mr. Speaker, based on what was said before, it appears 
that the Republicans have significantly more time, so I reserve the 
balance of my time.
  Mr. SHAYS. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Michigan [Mr. Smith].
  (Mr. SMITH of Michigan asked and was given permission to revise and 
extend his remarks.)
  Mr. SMITH of Michigan. Mr. Speaker, my vote will be in favor of 
passage of this bill, and H.R. 2037, the budget enforcement provisions, 
have been made part of this bill that will help us make sure that we 
enforce the provisions of our intent to balance the budget and make 
these spending cuts.


         Congressional Budget & Impoundment Control Act of 1974

       Permanently extends the requirement that budget resolutions 
     cover a five-year period.
       Similarly, extends indefinitely the enforcement of the 
     five-year spending and revenue levels set forth in budget 
     resolutions through points of order.
       Simplifies and updates points of order that are used to 
     enforce the budget resolution's spending and revenue levels.
       Provides for adjustments in the budget resolution levels 
     for legislation appropriating funds for designated 
     emergencies, arrearages and the International Monetary Fund.
       Eliminates the need to waive the Budget Act for a reported 
     bill that violates the Act but is cured by a self-executing 
     rule. In such cases, the point of order no longer lies 
     against the bill.


amendments to the balanced budget and emergency deficit control act of 
                                  1985

       Adjusts and extends statutory discretionary spending 
     limits, which are enforced through sequestration, through 
     fiscal year 2002.
       Provides for adjustments in the discretionary spending 
     limits for appropriations for emergencies, arrearages, and 
     the International Monetary Fund.
       Extends pay-as-you-go requirements, which provide that 
     entitlement and tax legislation must be fully offset, through 
     fiscal year 2002.
       Modifies baseline that is used to ``score'' legislation so 
     that committees get credit for eliminating entitlement 
     programs.
       Eliminates accrued paygo balance and savings from 
     reconciliation to ensure that all savings are used for 
     deficit reduction.
  Mr. SHAYS. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
Illinois [Mr. Fawell].
  (Mr. FAWELL asked and was given permission to revise and extend his 
remarks.)
  Mr. FAWELL. Mr. Speaker, I rise in support of the balanced budget 
bill and in particular the provision of the bill that will expand 
affordable health insurance to millions of workers, their spouses and 
their children. By including the Expanded Portability and Health 
Insurance Coverage Act, known as EPHIC, in this reconciliation, we 
advance bipartisan legislation which will make insurance available to 
millions of uninsured Americans.
  The EPHIC legislation is consistent with the budget agreement's goal 
of expanding coverage to uninsured children.
  The problem of the uninsured, both children and adults, is 
predominantly a problem of small businesses lacking affordable health 
coverage. Over 80 percent of the 40 million uninsured Americans live in 
families headed by a worker, most often in a small business. And over 
80 percent of uninsured children are in a family headed by a worker, 
again, usually in a small business.
  EPHIC addresses this problem by giving franchise networks, union 
plans, and bona fide trade, business and professional associations the 
ability to form group health plans. EPHIC gives retailers, wholesalers, 
printers, agricultural workers, grocers, churches, organizations such 
as the chambers of commerce and NFIB, the National Federation of 
Independent Business, the economies of scale and affordable coverage 
that large businesses have had for 23 years under the Federal ERISA 
law. In other words, finally the little guys will have what the big 
guys have had for decades, and I refer to the economies of scale to be 
able to have affordable health insurance for their employees.
  In hearings before my subcommittee, witnesses estimated that small 
businesses could save between 30 and 60 percent in overhead costs and 
that up to one-half of the 40 million uninsured Americans would find 
affordable coverage in the private market under EPHIC.
  Mr. Speaker, this tremendous expansion of coverage can be realized 
without spending one single tax dollar, without any government 
subsidies or any government mandates.
  EPHIC is supported by nearly 100 organizations representing small 
businesses, large businesses, the self-employed, churches, hospitals, 
medical groups, agricultural, and rural interests and insurance 
companies. The bill currently has 152 cosponsors, including 23 
Democrats.
  Mr. Speaker, I think this is a sound idea whose time has come.
  Mr. PALLONE. Mr. Speaker, I yield myself 5 minutes.
  Mr. Speaker, the best way for me to illustrate the flaws that are 
contained in this bill is to focus on the harm it does to our Nation's 
children. Beginning with children's health care, a majority of this 
House, myself included, voted for the balanced budget resolution which 
promised $16 billion to cover five million of the 10 million uninsured 
children in America today. But even though most of us wanted to cover 
all 10 million, we felt that acting in good faith we could get to 5 
million now and then address the remaining later on. Well, guess what, 
Mr. Speaker, this bill does not even cover 1 million children. 
According to the Congressional Budget Office, the Republican 
leadership's proposal would provide coverage for about half a million 
children. The CBO assumes that much of the 16 billion will be passed on 
to hospitals and other providers who get shafted under this plan and 
basically not to purchase health insurance for children.
  The Republican leadership, in effect, which is purporting to be the 
party of fiscal conservatism, takes $16 billion and, in my opinion, 
throws it away. The Democrats offered several alternatives to this 
impotent policy. First we sought to plug up the so-called direct 
services loophole that lets a State spend its money on purposes other 
than insuring kids. The Republicans defeated that amendment in the 
Committee on Commerce. Then Democrats proposed to expand Medicaid and 
outreach to cover more kids with an existing health insurance program 
that already works. We know that Medicaid works, but the Republicans 
said no to that too in the Committee on Commerce.
  And finally we put forward a proposal by the Democratic Caucus Health 
Care Task Force, a comprehensive approach to expand Medicaid, give 
States matching grants to cover kids above the income levels that 
qualify for Medicaid and require private insurance companies to provide 
kids only policies at reasonable costs, and the Republicans shot that 
down too in the Committee on Commerce and again in the Committee on 
Rules when we proposed it the other day.
  We are considering a bill today which violates the balanced budget 
agreement and which I supported as did most of my colleagues here. The 
bill we are considering today takes health care money away from 
children, it does not expand health care, it takes it away from 
children. This is not what we intended when we supported the balanced 
budget agreement, so we will not support this bill today. It is just 
another Republican attempt to cost shift, and unfortunately, Mr. 
Speaker, the cost shift is right on the backs of our Nation's children.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Massachusetts [Mr. Kennedy].
  Mr. KENNEDY of Massachusetts. First of all, Mr. Speaker, I appreciate 
the gentleman from New Jersey yielding this time to me. I think we all 
ought to recognize the fine work that the gentleman from New Jersey 
[Mr. Pallone] and others in the caucus have done in trying to bring 
attention to the fact that we have so many children in this country who 
still do not have basic health insurance.
  Most people think that health insurance is provided as a matter of 
right to kids in America. The truth of the matter is that amongst the 
very poor children, that is true under the Medicaid Program. But again, 
working families, the children of taxicab drivers, the children of 
waiters and waitresses, working families simply do not have health 
insurance; and that is where this bill, I think, has had some dramatic 
failures.
  I wanted to point out to my friend from New Jersey, Mr. Pallone, that 
there is an additional problem with this language that is contained in 
this bill. The way the actual funding for the

[[Page H4577]]

program would operate would allow the money to go to States where there 
are larger numbers of uninsured children. As a result, States like 
Massachusetts and Pennsylvania, States like Florida and Tennessee would 
be dramatically hurt under this proposal because in those States they 
have already taken action to insure large numbers of uninsured 
children. As a result, where States have chosen to step in and take 
responsibility for those kids, those States would actually be penalized 
under the formula that was passed by our Republican colleagues.
  So I think that it is important that we have an opportunity to change 
this, and I was surprised that the Committee on Rules, particularly as 
the chairman comes from New York, where they have a significant 
program, did not allow us to offer an amendment to change that funding 
formula.
  Mr. PALLONE. Mr. Speaker, I appreciate the comments of the gentleman 
from Massachusetts [Mr. Kennedy].
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Ohio [Mr. Brown].
  Mr. BROWN of Ohio. Mr. Speaker, I appreciate too, as the gentleman 
from Massachusetts [Mr. Kennedy] said, the work the gentleman from New 
Jersey [Mr. Pallone] has done on children's health. I am concerned in 
what has happened with Republican efforts to, quote unquote, cover some 
of these 10 million children that do not now have health insurance. 
Pretty clearly, the Democratic idea of using Medicaid, a program that 
is in place where administrative costs are low, a program that has a 
couple of decades of working effectively and efficiently to insure poor 
and near-poor children; it is in place, it works, it makes sense to do 
that.
  I am concerned with the Republican plan for a bunch of reasons:
  First, there was talk earlier of using all kinds of tax schemes. I am 
concerned about the tax schemes that the Republicans tried. Now I am 
concerned about this whole block grant effort that the Republicans want 
to use to just turn money over to the States, when it is clear from all 
kinds of analyses, whether it is the legislative budget office or other 
analyses, that show that in fact this money likely will not be there to 
insure children. It is more likely to be frittered away by Governors, 
and this is sort of something the Governors want because they want to 
play with this money.
  We should have learned this in the last 5 years of what happened to 
something called disproportionate share, where all kinds of money went 
to the States that was not used for health care. Some cases it was used 
for things like highways, and we want to make sure this money, $16 
billion goes to insure millions, not a few hundred thousand, but 
millions of children that now do not have health insurance directly 
through a Medicaid program, not frittered away so the Governors have 
some kind of slush fund to plug holes in their budgets. It simply does 
not make sense that way.
  The SPEAKER pro tempore. The time of the gentleman from New Jersey 
[Mr. Pallone] has expired.
  Mr. SHAYS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Delaware [Mr. Castle], the former Governor of Delaware.
  Mr. CASTLE. Mr. Speaker, I thank the gentleman for yielding this time 
to me, and I rise in strongest support possible of H.R. 2015, the 
Balanced Budget Act of 1997.
  This budget deal explicitly outlines the parameters by which this 
Congress will balance the Federal budget and reduce the deficit to zero 
by the year 2002. This is a truly historic achievement which 
demonstrates that, when we work in a bipartisan fashion, we can achieve 
the mission of fiscal restraint our constituents elected us to achieve. 
Our constituents have become increasingly cynical about government, and 
agreement will help restore confidence in the institutions and 
processes of government. It represents a triumph of the political 
system and a fulfillment of the voters' 1996 command to Congress to 
help solve our budget problems in a bipartisan fashion.
  Passing the first balanced budget since man walked on the moon is a 
solid and constructive beginning. We need to look no further than the 
States which started this process about 25 years ago and in that time 
has started to balance their budgets, improve their economies and 
receive ratings of excellent or very good for all their budgetary 
restraints and have done a superior job. Our constituents will benefit 
from this.
  It has been said by Alan Greenspan that interest rates may lower by 2 
percent, and that is tremendous when we look at investment returns, 
lowering credit card and car loan rates, reducing mortgage payments, 
lowering consumer products' cost and creating more jobs and of course 
producing a better environment in which to provide tax relief.
  With this 5-year budget we begin a long-distance marathon which will 
require us to remain steadfast in our desire to ensure that this budget 
agreement translates into a budget that delivers on its promise of less 
spending, a smaller government and tax relief for all Americans even 
after the year 2002. While I am concerned that stronger budget 
enforcement mechanisms were not included to ensure the deficit revenue 
and spending targets will be met, I am pleased that the Republican 
leadership has agreed to address this issue in July. This is a solid 
step forward and will help show the American people that now more than 
ever the Congress is engaged and committed to achieving a balanced 
budget.
  Mr. PALLONE. Mr. Speaker, I reserve the balance of my time.
  Mr. SHAYS. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Virginia [Mr. Moran].
  Mr. MORAN of Virginia. Mr. Speaker, I actually rise in support of 
this budget agreement, but I particularly want to emphasize one aspect 
of it that has not gotten sufficient attention. All of us are concerned 
about the fact that there are about 41 million people who are uninsured 
in this country who cannot get the health care that they need. Now 80 
percent of them are working, they are working; that is the main point, 
and they are working for small employers. But we cannot figure a way to 
get affordable, accessible health insurance to them.
  The Fawell bill, which is included in the reconciliation bill, is the 
way to do that. It enables them to pool their employees so that they 
have leverage with insurance companies and they can purchase insurance 
for the first time for a large part of these 41 million uninsured 
people. Most of them are children.

                              {time}  1645

  So I would hope that we would do this. It helps labor unions, it 
helps small businesses, it helps trade associations, it helps the 
American people who desperately need affordable health insurance.
  Let me say, Mr. Speaker, I do not disagree with almost all of the 
objections that have been raised. I do object to the conclusion. I do 
think we ought to vote for this budget agreement. It moves us forward. 
I think we have made a major step in moving from an annual bookkeeping 
exercise to one where we debate real national priorities. We are going 
to have an opportunity to improve it on the Senate side, in the 
conference agreement, and certainly the President is going to insist 
that many of the Democrats' most serious objections are taken care of 
in the conference agreement.
  I think that we ought to vote for this budget agreement, for this 
reconciliation package, and we certainly need to include the Fawell 
amendment in it if we want to really address people who need help with 
their affordable health insurance.
  Mr. SHAYS. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
Missouri [Mr. Talent], a member of the Committee on Education and the 
Workforce, but also the chairman of the Committee on Small Business.
  Mr. TALENT. Mr. Speaker, I thank the gentleman for yielding me this 
time. I want to congratulate him on his outstanding work. I look 
forward to supporting this afternoon a historic bill that will provide 
a balanced budget for the American people, and then tomorrow, to 
support a bill that will provide tax relief within that framework. It 
is a historic and outstanding and bipartisan achievement and all of 
those behind it deserve congratulations.
  I want to talk just a moment about a very important part of this 
bill. It is a part of the bill designed to preserve the integrity of 
the works provisions in last year's welfare bill, a bill that is 
working around the country. For the

[[Page H4578]]

first time, welfare caseloads around the country are dropping. People 
are substituting paychecks for welfare checks, and that is so good for 
them and so good for their children and so good for their communities, 
but there is a danger here.
  There are some folks in this body and some at the other end of 
Pennsylvania Avenue who want to adopt a provision that would make the 
work provisions unworkable, unaffordable to the States and unworkable 
in terms of their purpose.
  Let me describe it with an illustration. Right now the work 
provisions require that certain parts of the able-bodied people on 
welfare have to go to work and if they cannot get a job in the private 
sector, they have to provide community service, and that is good. Let 
us suppose that they are helping out as a clerk, as a part-time clerk 
in some Government office 20 hours a week.
  What these people are talking about doing would require that these 
individuals be paid comparable wages with people who are clerks in the 
area, maybe, $7, $8, $9 an hour. Plus they continue to get Medicaid, 
subsidized housing, food stamps, and they get all the other web of 
protections that we provide employees in this country: Unemployment 
compensation, workers' compensation, Family and Medical Leave Act, thus 
increasing the cost of this program, making it unaffordable to the 
States and turning it into a program that sucks people onto welfare. 
Because how unfair would that be to the individual who does not go on 
welfare and just gets a job as a clerk? All they have is their pay and 
the protections that we give employees. They do not get Medicaid or 
subsidized housing or food stamps.
  The work provisions are designed to create a bridge from welfare to 
work, and by making it unaffordable we would knock down that bridge so 
that people would never get from welfare to employment. It was not 
intended in last year's bill, we should not do it now, it is the wrong 
thing to do.
  What we provide in our bill is that individuals have to be paid the 
minimum wage; the FDC and their food stamps have to constitute the 
minimum wage. We provide them protection from discrimination, from 
unhealthy or unsafe conditions, and they can continue to enjoy their 
other welfare benefits. That is the way to go. Keep the workfare 
provision strong. Support this bill.
  Mr. SHAYS. Mr. Speaker, I yield myself 30 seconds to point out to the 
gentlewoman from Hawaii who spoke earlier that in the State of Hawaii, 
the benefit that a welfare recipient receives is $13.65 an hour just 
for the cash payment and the food stamps. That is what they are 
required to pay off in a 20-hour work period. In the State of 
Connecticut, it is $10 an hour.
  The kindest thing we can do for someone is to move them off welfare 
and into work, and this is what our legislation does.
  Mr. Speaker, I reserve the balance of my time.
  Mr. PALLONE. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from Arkansas [Mr. Berry], one of my colleagues on the Democratic 
Health Care Task Force which put together a very comprehensive program 
to reach and cover the 10 million children that are uninsured.
  Mr. BERRY. Mr. Speaker, I rise today in reluctant opposition to this 
budget package. I am a strong believer in the need to balance the 
Federal budget. I cosponsored legislation that would require a 
constitutional amendment to balance the budget.
  Three weeks ago I supported the spending goals laid out in the budget 
resolution. Today, however, I cannot support the policies that have 
been crafted to stand behind those numbers.
  One of the most troubling policies contained in this budget is the 
children's health reform package. Fiscally irresponsible, $16 billion, 
no strings attached, giveaway of the taxpayers' dollars. I am a strong 
supporter of ensuring that every child in America has access to 
affordable health care. However, this proposal does nothing to ensure 
that the $16 billion will go to those who need it most, the children. 
In fact, the Congressional Budget Office estimates that the $16 billion 
we are spending will cover only 520,000 children.
  Let us do the math. Mr. Speaker, 520,000 children, $16 billion, 
$31,000 per child, $6,000 per child per year. Surely our hardworking 
taxpayers deserve a more cost-effective approach than this. Our 
approach allows States to expand the Medicaid Program, outreach to the 
children, and do a better job with the $16 billion. Our plan is more 
prudent. I urge my colleagues to support this alternative.
  Mr. PALLONE. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Oregon [Ms. Furse].
  Ms. FURSE. Mr. Speaker, what I would like to do is just sort of 
explain in simple terms what this Democratic alternative is. What we 
felt was that we needed a private-public partnership, that Government 
cannot do everything, private industry cannot do everything, but 
together we can attempt to reach those 10 million children. It is a 
disgrace, it is a disgrace that 10 million children have no health 
insurance.
  So our package says, reach out to the kids who are eligible for 
Medicaid, bring them in. Provide a plan that will increase the Medicaid 
opportunities, and then do some insurance reform, simple insurance 
reform that will say, insurance companies, you have to provide a kids-
only policy, one that will not be denied to children. So if a family 
has no health insurance, maybe they are not eligible for Medicaid, but 
they cannot afford $400, $500 a month, there will be a policy available 
for them, a kids-only policy. Can it be done? Absolutely. In the State 
of Oregon we have a kids-only policy, $35 a month. I ask my colleagues 
to support this alternative because it reaches out to all the children.
  Mr. SHAYS. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Georgia [Mr. Kingston].
  Mr. KINGSTON. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, 1969: The Vietnam war, Woodstock, Neil Armstrong was on 
the Moon, Jimi Hendrix experience, Mod Squad, Walt Disney was not even 
controversial yet, Richard Nixon was President and the budget was 
balanced, but that was the last time.
  Today our national debt is over $5 trillion. That is an inconceivable 
amount of money.
  Let me illustrate. One million seconds equals 12 days. One billion 
seconds equals 32 years. One trillion seconds equals 32,000 years. This 
is not acceptable to America's children.
  If we balance the budget through this bill, we will lower interest 
rates. Lowering interest rates 2 percent on a $75,000 home mortgage 
over 30 years will mean middle-class taxpayers pay $37,000 less on 
their home mortgage. If we balance the budget with this bill, we can 
create more jobs because we will have more economic growth, more 
opportunities for Americans, minorities, and middle-class citizens.
  Finally, we can have lower taxes, because the burden of a huge 
Federal debt and interest on that debt will not be as great.
  Mr. Speaker, this bill is good for the middle class, it is good for 
the children, it is good for the United States of America, and I urge 
my colleagues to join me in supporting the balanced budget.
  Mr. SHAYS. Mr. Speaker, I yield 2 minutes to the gentleman from Ohio 
[Mr. Boehner], our conference chairman.
  Mr. BOEHNER. Mr. Speaker, the House is voting today on a plan to make 
the government smaller, less costly, and more responsible and 
accountable to the people that it serves. Members from both sides of 
the aisle have crafted it, and appropriately so. There is no single 
issue that should unite us more than eliminating the Federal budget 
deficit, because when the Government fails to balance its budget, it is 
not just being irresponsible, it is restricting the freedom of ordinary 
Americans to realize the American dream.
  More than perhaps any other quality, Americans cherish the notion of 
freedom. But Americans recognize that with freedom comes 
responsibility, a responsibility to live within our means, to realize 
that our actions today will impact the lives of our children tomorrow. 
They live within those rules and they expect no less from their 
Government.

[[Page H4579]]

  The plan we are voting on today is evidence that Washington is at 
last beginning to take its responsibility seriously. It reduces the 
growth of Government spending by nearly $1 trillion over the next 10 
years, reversing the legacy of bankruptcy that we are handing off to 
our children. It saves Medicare from bankruptcy, ensuring that seniors 
of today, and tomorrow, will continue to have this vital program well 
into the next century. It allows tax relief for families, and 
individuals, at every stage of their life so they will have the freedom 
to save and plan for their future.
  Mr. Speaker, the American people are the real winners in this plan. 
By taking this next step toward balancing the budget for the first time 
in a generation, we take another giant leap toward restoring their 
freedom to chase the American dream. It is our responsibility to follow 
through on our promises that we have made to them.
  Mr. SHAYS. Mr. Speaker, I yield 1 minute to the gentlewoman from New 
Jersey [Mrs. Roukema].
  (Mrs. ROUKEMA asked and was given permission to revise and extend her 
remarks.)
  Mrs. ROUKEMA. Mr. Speaker, I would say that I do believe that we 
should pass this program. Balancing the Federal budget is absolutely 
essential to protect the Nation's short-term, and long-term financial 
health and certainly to ensure our children and grandchildren a greater 
tomorrow.
  I want to especially thank the chairman of the committee for his work 
that he is going to do, specifically mentioning the needs of New Jersey 
with respect to the Medicaid needs and the DSH formula.
  I do want to say that I have a question and a reservation with 
respect to the Small Business Association ERISA reforms of the bill. I 
will be moving to correct those reforms. In my opinion, they do not 
belong in this bill, they really should be separated out, and I would 
hope that we could work on that in conference. But without reservation, 
we must support this as an ongoing program and assure that we are 
keeping our promise to the American people.
  Mr. PALLONE. Mr. Speaker, I yield 1\1/4\ minutes to the gentlewoman 
from California [Ms. Eshoo].

                              {time}  1700

  Ms. ESHOO. Mr. Speaker, as the American people listen to us this 
afternoon as we engage in this great and important debate about our 
Nation's budget, it really is a statement of our values. The President 
came to the Congress, and in his State of the Union Message delivered 
part of the message, there were 10 million uninsured children relative 
to health care in our country.
  The parties came together and said, this is a priority. We then went 
to write in, to fill in the blank, of how we would plan to insure the 
10 million uninsured children in our country. There is only one plan 
that has been advanced that actually works and reaches out to the 
majority of the children in our country. It has not created a new 
entitlement, there are no unfunded mandates, but neither is it a 
giveaway to our Nation's Governors. It puts children first by building 
on the public system; by saying to the insurance companies, it says to 
the insurance companies that you can indeed offer children-only 
insurance policies. It rewards States that are doing even more for 
children, and it is the only plan, according to the CBO. The CBO says 
that the Republican plan will cover only 520,000. That is a deficit for 
our Nation.
  I urge that we support this plan. I will not support the budget plan 
contingent upon this.
  Mr. PALLONE. Mr. Speaker, I yield 1 minute to the gentleman from 
California [Mr. Waxman].
  Mr. WAXMAN. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, I will put a longer statement in the Record on the 
health aspects of this budget reconciliation bill, but I do want to 
point out that we are missing an opportunity to cover children as fully 
as we might in the most certain and effective way we can.
  What we have in the bill is a good start. What we have in the budget 
is $16 billion, but it would be most effective if we were certain that 
the money would be spent to buy guaranteed coverage with the benefits 
that children need.
  We have a model for this and it works. It is called Medicaid. We 
ought to help States do a better job with that program, and with the 
block grant money, we ought to be sure it is spent on what we intend, 
to buy health insurance coverage for uninsured children. It is not 
supposed to be a pot of money for States to refinance their own health 
services facilities. It is not supposed to be a replacement for DSH, it 
is supposed to help kids.
  We can do better. In Medicaid and Medicare, while there are some 
positive steps, it seems to me on balance I cannot endorse this 
legislation.
  Mr. Speaker, we are missing an opportunity today to assure that we 
are extending coverage to millions of uninsured children in the most 
certain and effective way we can.
  We have $16 billion to spend here. This is not enough to cover all 
the uninsured children, but it is a good start.
  And it will be most effective if we are certain that the money is 
being spent to buy guaranteed coverage, with the benefits that children 
need.
  We've got a model for this--and it works. It's called Medicaid. We 
ought to help States do a better job with that program.
  And with the block grant money, we ought to be sure it's spent on 
what we intend: to buy health insurance coverage for uninsured 
children. It's not supposed to be a pot of funds for States to 
refinance their own health service facilities. It's not supposed to be 
a replacement for DSH. It's supposed to help kids.
  We can do better.
  And the changes this bill makes in Medicaid and Medicare are not 
acceptable.
  I recognize that these provisions are dramatically improved from 
those brought before this House in the last Congress. But being better 
than something that was totally unacceptable is not good enough.
  I also recognize that there are some things in this bill, 
particularly related to Medicare, that are very positive. The 
preventive care benefits added to Medicare are long overdue, and will 
be very helpful to Medicare beneficiaries.
  But on balance, I cannot endorse this legislation.
  I cannot vote in support of the establishment of medical savings 
accounts [MSA's] in the Medicare Program. I know this is a 
demonstration--but it is a massive one. And it is a bad one.
  MSA's cost Medicare money. They cost $2 billion. This is money that 
should be left in the Medicare Trust Fund or spent on benefits that all 
Medicare beneficiaries need. Instead, we're spending $2 billion to 
benefit people who are healthier and wealthier. They leave the many 
Medicare beneficiaries of moderate income, the ones whose health is 
more precarious, bearing the cost. That is wrong.
  The changes in how managed care organizations will be paid by 
Medicare are also extreme. They will cause severe problems in higher 
cost urban areas. An initial attempt to rationalize payments became a 
free-for-all in which HMO's in urban areas, and the beneficiaries who 
are enrolled in them, are the losers.
  And while this bill is better as a result of the amendment approved 
by rules in its protection for low-income Medicare beneficiaries, it 
does not meet the budget agreement terms of full payment of the 
Medicare premium for people below 150 percent of poverty.
  Many of the changes this bill makes in Medicaid are also not ones I 
can support. Put simply, the cuts in the disproportionate share program 
are too large, and they are not designed to protect either the 
hospitals that serve very large populations of low-income people, or 
States which have spent all of their DSH moneys on these kinds of 
hospitals.
  I cannot vote for a proposal that will result in a 20 percent cut of 
DSH dollars in my own State of California by 2002. I cannot endorse a 
policy that leaves large public hospitals, children's hospitals and 
hospitals with low-income utilization rates of 25 percent or 30 percent 
without first call on the funds available.
  I cannot support legislation that undermines a poor woman's right to 
choose.
  Finally, I look at the bill currently being debated by our colleagues 
in the Senate, and I see a number of provisions that will be brought 
into conference that would make this bill considerably worse.
  It is not good enough now. It should be made better. It must be made 
better before it will have my support.
  Mr. PALLONE. Mr. Speaker, I yield 30 seconds to the gentlewoman from 
Texas [Ms. Jackson-Lee].
  (Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.)
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I acknowledge to the gentleman 
from Florida [Mr. Shaw], just as a correction, that I voted for the

[[Page H4580]]

Deal amendment on welfare reform, which really worked, but I rise today 
because I do not want to pit children against my hospitals in Texas. I 
do not want to give a windfall to those Governors who may not focus on 
the need to insure the 10 million children who are uninsured.
  We have a real health plan that does not pit hospitals against 
children. It is extremely valuable that we move forward on a budget 
reconciliation that protects workers, protects children, and provides 
for the hospitals in the State of Texas.
  Mr. Speaker, I rise today to express my vehement opposition to H.R. 
2015, the Budget Reconciliation Act. The problems with this bill are 
almost too numerous to list. However, I am compelled to report to the 
American people some of the most dismal aspects of this legislation.
  First, H.R. 2015 contains a provision which reduces Medicaid spending 
by $11.4 billion, primarily by reducing payments to hospitals that 
serve a disproportionate share of low-income patients. The 
Disproportionate Share Hospital [DSH] program was created to ensure 
health care for the elderly, the indigent and the Nation's young 
people. It was specifically designed to reimburse hospitals that serve 
a disproportionate number of uninsured or indigent persons.
  The DSH program is an integral part of the Medicaid Program in my 
home State of Texas. DSH is critical in providing quality health care 
to Texans who cannot otherwise afford it. A reduction in payments to 
these hospitals, therefore, discriminates against Texas because it 
singles out high-DSH States for cuts.
  Without DSH funding, many of Texas' rural hospitals cannot continue 
to operate. Many counties will lose access to a medical center for 
hospital, outpatient and physician-based care. When those hospitals 
which serve the largest proportions of poor, low-income seniors and 
young persons suffer severe cuts in Federal funds, tens of thousands of 
low-income Americans will feel the pain.
  Also included in this bill is a troubling provision commonly referred 
to as the Hyde amendment. This discriminatory provision would 
permanently prohibit the use of funds to pay for any abortion or to pay 
for any health plan that covers abortion, except if the life of the 
woman would be endangered, or if the pregnancy was the result of rape 
or incest. The inclusion of this language in the budget reconciliation 
bill would permanently write into Federal law a ban on abortion funding 
for low-income women and thus deny them access to vital reproductive 
health services that are available to others. This places disadvantaged 
and poor women in a substandard health environment which says to them 
that we do not care. This ban could force some women to resort to 
unsafe alternatives and others could suffer delays resulting in more 
risky procedures. One way or another, society will have to bear the 
costs of providing medical and support services for the eligible 
recipients under this block grant who are not able to terminate crisis 
pregnancies.

  Let me now turn my attention to our Nation's immigrants. H.R. 2015 
restores benefits to those low-income legal immigrants who were 
receiving SSI benefits when the welfare reform legislation was enacted 
last August and lost those benefits. However, this is nothing more than 
a Trojan Horse because the bill does not provide SSI benefits to legal 
immigrants who were in the country as of last August, were not 
receiving benefits in August, but who later became disabled despite the 
fact that this was part of the budget agreement. The President has 
threatened to veto the bill because of the absence of these benefits. 
We should not allow this Trojan Horse to leave the floor of the House.
  Finally, the funding in H.R. 2015 for a children's health care 
initiative is turned into a block grant which even the Congressional 
Budget Office estimates may only cover 500,000 additional children--not 
the 5 million goal children agreed to in the budget negotiations. This 
seems to me to be obvious evidence that the concern some Republicans 
have expressed for the 10 million children without health care in our 
country, is little more than lip service. If their concern was deeply-
felt we would find that H.R. 2015 provided a sincere effort to reach as 
many of these children as possible. It does not.
  Mr. Speaker, I, like many of my colleagues would like nothing more 
than to vote for legislation that is a step toward bringing the 
national budget into balance and eliminating the deficit. I believe, 
however, that it is possible to do this in a manner that is balanced 
and compassionate. H.R. 2015 is neither and for this reason I oppose it 
and urge my colleagues to do the same.
  Mr. SPRATT. Mr. Speaker, I yield the balance of my time to the 
gentleman from Texas [Mr. Stenholm].
  The SPEAKER pro tempore [Mr. Dreier]. The gentleman from Texas [Mr. 
Stenholm] is recognized for 1\3/4\ minutes.
  Mr. STENHOLM. Mr. Speaker, I rise in support of this reconciliation 
bill. This bill takes another important step toward achieving a 
balanced budget. As one who believes that enactment of a fair and 
responsible plan to balance the budget by 2002 and beyond is critical 
to the future of our country, I believe it is extremely important that 
the House vote today to send this bill to conference and keep the 
process moving.
  The efforts of President Clinton and Congress have resulted in 5 
consecutive years of declining deficits and the lowest deficit since 
the Carter administration. The agreement builds on this tremendous 
achievement, and continues the glidepath to a balanced budget.
  I am gratified that in numerous instances this reconciliation bill 
reflects the influence of Blue Dog budgets. The savings levels and the 
policies for Medicare and Medicaid and other programs are quite close 
to the savings levels and policies we predicted would comprise a 
reasonable compromise.
  Anyone who has ever tried to lead knows there are a dozen attacks on 
why a plan is bad for every one suggestion of how it might be improved. 
I remain solidly in the camp of those who will work for a constructive 
compromise.
  In that vein, I congratulate the President and his staff, the 
gentleman from Ohio [Mr. Kasich], the gentleman from South Carolina 
[Mr. Spratt], and all of their staff for their hard labors which have 
brought us to this point. This has been a good-faith effort to work out 
the countless policy issues that need to be resolved for the budget 
agreement to achieve a savings in a fair and equitable manner.
  I remain concerned about the impact of some of the policies of this 
reconciliation bill, and particularly I am very concerned about the 
impact that the policies for achieving the savings in the Medicaid 
Disproportionate Share Program will have a harmful effect on small 
rural and inner-city hospitals.
  However, we need to remember that this bill has a long way to go 
before it is enacted into law. The administration will continue to work 
with Republicans and Democrats to work out these remaining problems. My 
primary concern is the lack of meaningful enforcement, but we will yet 
have another attempt at making that correction.
  Mr. PALLONE. Mr. Speaker, I yield the balance of my time to the 
gentleman from California [Mr. Fazio].
  The SPEAKER pro tempore. The gentleman from California [Mr. Fazio] is 
recognized for 1\1/2\ minutes.
  Mr. FAZIO of California. Mr. Speaker, I am very disappointed at this 
point. I voted for the budget resolution, and I looked forward to the 
bipartisan cooperation we saw then put in place so we could vote today 
to send this bill to conference in the same bipartisan manner.
  But the bill comes up short. We do not need a provision to take the 
Hyde language on abortion and make it permanent law. We need to pay 
more attention, for example, to the way in which we try to extend 
health care to the 10 million kids in our society that are not covered 
by insurance today.
  First of all, we need an outreach program, because we know there are 
3 million of them that are currently eligible for Medicaid who are not 
part of it. We need to expand the Medicaid program to try to broaden 
coverage throughout our States. On top of that, we need insurance 
reforms that will make it possible for parents to buy insurance for 
their children if the children do not get it where they work, or if the 
children are not covered.
  Most of all, we need to work with the States to go after the kids of 
the working-poor families who are not covered, but simply, to make a 
grant to the States and tell them they can use it for almost any 
purpose is going to do nothing more than supplant existing State funds. 
We need to expand affordable insurance coverage and not simply go 
through a shell game with State and Federal dollars.
  There are ways we can make this a better bill. I hope I can support 
it when it comes back from conference. I am optimistic I can. I want to 
give credit to the gentleman from Ohio [Mr. Kasich], my good friend, 
and the gentleman from South Carolina [Mr. Spratt]. They have resolved 
a number of problems before they came here

[[Page H4581]]

today. They have not gone as far as they must go.
  The process should go forward, but those of us who remain unhappy 
with the progress we have made today need to keep before the President 
and this Congress the pressure to do a better job. I look forward to 
voting for a better job, and I hope it can be accomplished.
  Mr. SHAYS. Mr. Speaker, I yield the balance of my time to the 
chairman, the gentleman from Ohio, [Mr. John Kasich], the gentleman who 
began this long march toward a balanced budget in 1989.
  Mr. KASICH. Mr. Speaker, let me first of all compliment my colleague 
and friend, the gentleman from South Carolina [Mr. Spratt]. He has been 
obviously in a difficult position with some of his very top leadership 
aggressively opposing the agreement. He has also been a party on a day-
to-day basis to the difficulty of being able to write this whole 
agreement, which has taken a period now of about 6 months. I want to 
thank him for his support. But I think the gentleman from South 
Carolina really is in a position to be able to understand what we have 
gone through on this, and to understand the good-faith efforts that 
have been made by all sides.
  First of all, if we want to have an excuse to vote no, Members can 
come up with anything they want. I am very disappointed to see some of 
my friends and colleagues on the other side of the aisle coming up with 
nothing more than excuses to oppose this bill that is before us today, 
because the White House supports it. The reason why the White House 
supports it is because we have kept the spirit of this agreement.
  Imagine this: about 4 or 5 months ago we started negotiating the 
entire operation of the Federal Government in an effort to balance the 
budget and come up with tax cuts. We ended up reaching an agreement. We 
kept our word to obviously let this House vote on two separate bills, 
the bills to cut spending to balance the budget, and tomorrow a bill to 
reduce the taxes and give some more power back to the American people.
  We took this agreement, which was laid out in many, many pages, and 
we went to our committee chairmen, all of whom felt very strongly about 
the fact that they wanted to design some policies the way they thought 
made more sense.
  I will just give the Members one example. The gentleman from Florida 
[Mr. Shaw] decided that he thought it was essential that we cover those 
people who are currently disabled who might find themselves off the 
rolls in a review process, our noncitizens. He decided it was more 
compassionate to help those people than to help a group of people who 
were here before the welfare bill was passed who might become disabled.
  This was just an honest difference in terms of how we can spend money 
to be compassionate for people. It would be wrong, it would be unfair, 
and it would be unjust to accuse the gentleman from Florida [Mr. Shaw] 
of trying to violate the agreement. It was an honest difference in 
terms of how we would best help people who were in need.
  Furthermore, the gentleman from Florida is the chairman of a 
subcommittee. He has the right to carry out some legislation, and at 
times the Speaker and I had to sit in rooms and we had to direct a 
whole panoply of activity across our conference under the grounds of 
making sure that this agreement was carried out in terms of its spirit.
  Frankly, if Members take a look at the efforts that have been made 
contained in this reconciliation bill, we have done a job that is 
unparalleled in this House in modern times. The committee chairmen, 
constructively, to meet the agreement, they worked aggressively and 
with great bipartisan effort to bring the other side to this agreement, 
and at the end of the day I think we are pretty well there.
  Let me just suggest one other thing that I would like Members to 
think about as they are in their offices, if they are a Democrat, when 
they want to come over here. Think about the House, for once. This is a 
terrific opportunity to join together to do something that we have not 
done in 30 years. We have a realistic chance. I predict, I believe, we 
will in fact have a bill. It will be signed into law. We will have a 
tax bill, it will pass, it will ultimately be signed into law. We are 
going to have a balanced budget. We are going to have tax cuts.
  I think it represents a new opportunity for this House to push aside 
this partisan wrangling that we have been involved in over the period 
of the last several years and come together on something. This is just 
a matter of common sense. Mr. Speaker, if we had not lived up to the 
spirit of this accord, the administration would not be supporting the 
passage of this bill.
  I ask Members to listen to their hearts and listen to their people. 
Do not listen to a bunch of people who want to find an excuse to keep 
this House divided, who want to find an excuse to nitpick, who want to 
find an excuse to downgrade the actions of our chairman, who tried to 
reach across the aisle and bring a document out here that really made 
sense and could really represent bipartisan spirit.
  Let us just get out here today, come over here, give us a ``yes'' 
vote, move this bill into conference. There will be additional changes 
that will occur. But I would like to say to the rest of the Members in 
this House and to their staff and the people who watch this debate, it 
is a terrific day. We are going to balance the budget. The Berlin Wall 
of big government has fallen. There will be tax cuts. It is all going 
to happen because we stuck to principle. We believe in less government, 
we believe in shifting power, money, and influence from this city, and 
it is no longer rhetoric, Mr. Speaker, it is reality.
  We are going to vote here today and we are going to move this process 
along, and at the end of the day, with the process of further give and 
take, not deviating from our principles, we will have signed into law 
before the end of this year the first balanced budget since man walked 
on the moon.
  I think it gives the American people a little bit of hope that maybe 
some of us can get it right here in town, but let us not be confused. 
There is a proper role for the Federal Government, but into the future 
it will not be about the power of Government. It will be about the 
power of every man and every woman and every boy and every girl in this 
country to live their dreams, to be creative, innovative, be rewarded 
for their action, and to really, frankly, as we head into this third 
millennium, be able to gain speed in terms of the power of the United 
States to influence not just our hemisphere but the entire world, and 
to make a stand on which all of mankind can be proud.
  Mr. OWENS. Mr. Speaker, I rise in strong opposition to the Budget 
Reconciliation Spending Act (H.R. 2015). Nothing is more important than 
the discussion of the budget. Our Nation's values are all locked up 
into the way it proceeds with its budget. What we really care about we 
should discover by watching what is included in the budget and 
understanding that what is really important to this Nation should be 
reflected in its budget. H.R. 2015 contains numerous modifications to 
entitlement programs--programs that are the last resort for many of 
America's children, women, and families.
  While Congress is moving forward in the budget process, my colleagues 
must be reminded that our starting point--the White House-Republican 
budget agreement--was insufficient, especially in the area of 
education. We should have a budget which is not apologizing for the 
amount of money in it for education. It is crucial that we bring 21st 
century technology into our 19th century schools. The GAO estimates 
that we need $135 billion to rebuild our Nation's schools. My colleague 
from New York, Representative Lowey, introduced a bill to forward the 
President's $5 billion initiative to stimulate funding to rebuild 
America's schools. These funds were not included in the White House-
Republican agreement. Without the school construction initiative 
proposed by the President, many of the schools that have the greatest 
needs will not have the buildings to provide a safe and decent place 
for children to learn. The second area, is Head Start. There are an 
estimated 2.1 million children eligible for the Head Start Program. 
According to an analysis by the National Education Association, $11 
billion is required to ensure that all of these children have access to 
early childhood learning, a crucial component in their developmental 
process. The funding necessary to serve these future American taxpayers 
again was not a part of the historic agreement. What message are we 
sending to the Nation by not funding this vital program for children 4 
years old and under?
  Today, we enter the stage in the budget process where permanent 
spending priorities are being proposed under H.R. 2015. The entitlement 
programs with the largest reduction

[[Page H4582]]

in this bill are Medicare--$115 billion--and Medicaid--$11 billion. Why 
do we continue to cut Medicare and Medicaid? We do need to address 
Medicare and Medicaid in a new way, and stop the assumption that these 
programs are where most of the money is, and therefore justify 
proposals to cut Medicare and Medicaid. The savings that Medicare will 
yield will come from cutting payments to providers, $102 billion, 
mainly hospitals and health care plans, as well as $12.9 billion in 
increased premiums in Medicare part B to be paid by the Medicare 
beneficiaries.
  That was yesterday's language. Today, the Republicans tell us that 
the increased premiums will be paid by some beneficiaries. These 
beneficiaries are described by their income percentage of the poverty 
level. For example, beneficiaries with incomes between 100 percent and 
135 percent of the poverty level will not have Medicare part B premium 
increases; but, for those with incomes between 135 percent and 175 
percent of the poverty level, the measure will cover that portion of 
the premium that is attributable to the transfer of home health 
services from Medicare part A to part B. Who will decide whether those 
with income at the 135 percent of poverty level be considered in the 
free category or premium increased category? Why are we being forced to 
move in a way which will penalize our elderly and our poor people?

  The bill includes $16 billion over 5 years for a new child health 
assistance block grant. While $16 billion is better than nothing, it is 
estimated that the plan is far short of reaching one-half of the 10 
million children who are without health coverage. Why has this funding 
for children's health care been changed to a block grant? Under the 
block grant concept, funds would be distributed to States based on the 
State's share of uninsured children, and then adjusted for the average 
cost of health. This appears to be a ball of confusion to me. We were 
grateful for the small step forward when we asked for funds to insure 
one-half of the uncovered children. Yet, the Congressional Budget 
Office recently released figures that indicate as few as 500,000 
children would benefit from the block grant proposal. 500,000 is a mere 
drop in the bucket and embarrassingly short of the dramatic health care 
needs of this country's children.
  Just a week ago, I welcomed the joint resolution celebrating the end 
of slavery in the United States. I thought that it was a small gesture. 
However, it is an important one for a lot of Americans, both black and 
white, and I was pleased to see that not a single Member of the House 
of Representatives voted against this joint resolution introduced by 
the gentleman from Oklahoma [Mr. Watts]. But today, when I see certain 
provisions included in the Welfare-to-Work Program, my pleasure is 
gone. The resolution that passed last week was simply a nonbinding, 
politically correct bill. Yet, today we are considering a bill that 
could become permanent law and would resort to a declassification of 
workers in the Workfare Program. I see benefits that every American in 
the workplace share not included in the welfare program. These workers, 
because they receive temporary assistance for needy families, would not 
be considered employees and would be deprived of protections under the 
Fair Labor Standards Act. These workers, both white and black, would be 
treated as second-class citizens. They would not be covered by the 
Equal Pay Act, title VII civil rights protection's SHA, or the family 
leave laws. Because they receive temporary assistance for needy 
families they are not protected against sexual harassment as other 
workers. This regulation states that ``women subject to sexual 
harassment on a welfare-to-work assignment could be required to seek 
redress from the very agency that employed them.'' H.R. 2015 contains 
no appeals rights, and no court redress for workfare participants. 
Where is this Nation going? Where are our values? We have laws that 
protect all other workers from sexual harassment in the workplace. Are 
we sending the message that it is alright to sexually harass poor or 
needy women? This sounds like slavery all over again.
  In direct breach of the so-called budget agreement, H.R. 2015 would 
sanction the discrimination and gross mistreatment of workfare 
participants. Yesterday, the New York Times documented a tragedy in 
which a 50-year-old Workfare participant in New York died on her job. 
Apparently, this individual suffered from coronary heart disease and 
was not able to work. Yet, the individual's well-documented medical 
history was allegedly ignored. The Times revealed that many workfare 
workers have complained about genuine health problems, and were still 
forced to work in conditions inimical to their health. And Congress' 
unconscionable answer to this is to ensure that wronged workfare 
workers have no Federal protections.
  Moreover, H.R. 2015 reneges on the White House-Republican budget 
agreement's promise to restore benefits to legal, disabled immigrants 
who face termination from the SSI program in October. H.R. 2015 would 
ensure that those immigrants who received SSI before the date of the 
welfare reform bill's enactment, August 22, 1996, will continue to 
receive them. However, no provisions are made for those elderly, legal 
immigrants who were in the country by August 22 and became disabled 
after this date. At best, the omission of this protection reveals a 
distorted understanding of an agreement. At worst, it indicates a 
careless, despicable disregard for our legal immigrants who lack the 
ability to secure the resources needed to sustain a minimum standard of 
living.
  Undoubtedly, this bill still needs more work. This Nation's budget 
must reflect our values. Our values do not rob the poor and our 
children to provide for the rich. We must educate our children, all 
ages. We must build new schools. We must provide child health care for 
all needy children. We must keep freedom alive for all citizens. And we 
must do all of this without cutting Medicare and Medicaid, thereby, 
penalizing our elderly and our poor. I urge my colleagues to reject 
this shameful budget bill and vote ``no'' against H.R. 2015.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, today I rise in support of 
the Balanced Budget Act of 1997. Specifically, I strongly support the 
provision that will allow any permanent resident who was receiving 
supplemental security income [SSI] as of the enactment of last year's 
welfare bill, August 22, 1996, to continue to do so.
  I believe the noncitizen provisions in the Balanced Budget Act are 
compassionate and fair. By grandfathering everyone currently on SSI, it 
does not require anyone to undergo an eligibility redetermination 
process. I consider this to be essential, since those on SSI are some 
of our most vulnerable members of society--poor, elderly, and disabled. 
Imagine telling an 85-year-old widow who qualified for SSI under the 
elderly category that she may, or may not, lose her benefits based on 
whether the SSI employees determine her to be disabled as well as 
elderly. The disability determination process can be lengthy, detailed, 
and often full of uncertainties, especially for those with a limited 
command of English. I did not support eliminating SSI for those 
noncitizens already on the rolls last year, and I continue to oppose 
any efforts to take away benefits for this group of people. Subjecting 
300,000 poor, elderly aliens to the SSI redetermination process is 
unjust.
  I have been working closely with the Polish and Hispanic communities 
in my district to restore what I view as harmful cuts in benefits 
passed as part of the welfare bill. I cannot think of one group of 
people more vulnerable than the elderly and disabled dependent on 
supplementary security income. In addition to grandfathering all 
noncitizens on SSI as of last August, I support efforts to provide a 
bridge to those noncitizens who become disabled in the future. Legal 
permanent residents need to be aware of their options in the future, 
before they become disabled. If they work, or their spouse works, for 
40 quarters, serve in the military, or become a U.S. citizen, legal 
residents will qualify for SSI. I am optimistic that most permanent 
residents will be prepared to meet at least one of these criteria and 
so protect themselves in case of a disabling accident.
  As a bridge, for legal residents not qualified for SSI but who are 
borderline, I support a transition period so that noncitizens who came 
to the United States under the old rules and who are already borderline 
disabled or disabled but supported by family would be able to receive 
help.
  I urge my colleagues to join me in support of the noncitizens 
provisions of the Balanced Budget Act of 1997.
  Ms. CHRISTIAN-GREEN. Mr. Speaker, I rise in strong opposition to the 
budget reconciliation bill because it will hurt everyone from children 
to low income workers to legal immigrants.
  Over 1 month ago, my colleagues on the other side of the aisle 
heralded the reaching an agreement with the President to balance the 
Federal budget by the year 2002. However, in an almost complete 
turnaround, this spending bill before the House today reflects a near 
complete repudiation of that agreement.
  In addition to refusing to honor the budget agreement on health-care 
coverage for low-income elderly and uninsured children, the bill before 
us today makes deep cuts in the very important Disproportionate Share 
Hospital Program and the SSI State maintenance-of-effort.
  Of particular concern to me and my colleagues who represent the over 
4 million U.S. citizens in the U.S. territories and commonwealths, this 
spending bill completely eliminates all of the increments for inflation 
adjustments to the Medicaid Programs in these areas, that was provided 
in the balanced budget agreement. My constituents and those of my 
fellow congressional Delegates whose health care costs we cannot 
adequately meet at our present capped funding levels, were counting on 
even this small increase in our Medicaid payments.

[[Page H4583]]

  The territories are capped under current law in the amount of 
Medicaid payments we can receive and as a result, our current funding 
level does not permit DSH payments to our already struggling hospitals. 
This very punitive decision not to provide this very needed increase in 
Medicaid payments for the territories will severely undermine the 
already fragile health-care delivery system and impact severely on 
children and the poor in the U.S. offshore areas.
  This reconciliation bill defiantly turns its back on a hard fought 
bipartisan balanced budget agreement that reflected a compromise on 
many important and controversial issues. We must insist that the 
majority live up to the agreement they reached with the President by 
voting no on this deeply flawed bill.
  Mr. VENTO. Mr. Speaker, I rise in opposition to this spending 
reconciliation bill. I supported the budget agreement worked out by 
President Clinton and Congress which mapped an outline for a plan to 
lead to a balanced budget by the year 2002. However, this 
reconciliation bill breaks the promises of that plan in numerous ways 
and includes several negative provisions that are unrelated to the 
budget or savings. This measure turns this budget bill into a ``Where's 
Waldo'' game. The majority has loaded the bill with so many 
distractions that I can scarcely notice the real budget deal anywhere.
  The budget plan which we passed last month was a package of important 
compromises. Each of us would have changed certain priorities of that 
compromise package and adjusted the spending cuts and taxes 
differently, but we had, for the moment, found common ground in order 
to make progress. The resulting package was a sign that we as 
policymakers were willing to work together to compromise and 
collaborate in finding common ground, moving forward and doing what is 
possible in the next 18 months to achieve a socially and fiscally sound 
Federal Government. I voted for the plan last month even though certain 
provisions were imperfect.
  The Republican majority is not standing by the promises, obligations, 
and good faith of that budget agreement. They are mauling and 
manipulating key provisions of the agreement in order to advance a 
different agenda which hurts working families, seniors, and legal 
immigrants. By breaking and reneging on the budget deal, the majority 
is risking a return to the political stalemate and the Government 
shutdown which we experienced during 1995-96, and more recently, the 
congressional disaster on the flood relief bill.
  The Republicans have belatedly backtracked on a couple of their 
negative policy proposals. For instance, they are now agreeing to abide 
by the budget agreement and set aside $1.5 billion to help low-income 
seniors with rising Medicare premiums. The original bill, before it was 
changed yesterday in the Rules Committee, would have negated the budget 
agreement and set aside only one-third of that amount for low-income 
seniors.
  But while they have changed a few provisions, many serious problems 
remain. The Republican majority is playing a pea and shell game with 
protections for legal immigrants. The budget agreement said that we 
would restore benefits for all legal immigrants who were in the country 
prior to August 23, 1996, and who are or later become disabled. This 
was but a partial solution to the problems legal immigrants face under 
the 1996 welfare reform law. Today's bill, however, does not follow 
through on that commitment and would deny any assistance to a legal 
tax-paying immigrant who suffers a tragedy and becomes disabled after 
August 1996. This was not the intent or the spirit of the budget 
agreement and no amount of Republican rhetoric will change that fact.
  There are a host of other provisions which go against the budget 
agreement. A major point in the agreement was to provide health 
insurance coverage for 5 million of the 10 million uninsured children 
in America. However, this has been manipulated to provide so much 
flexibility to States that the money will not be spent on new 
children's health coverage. Instead, it will be substituted for 
existing State effort on a host of unrelated health care needs.
  Also in the area of health insurance, Republicans have added several 
unrelated and negative provisions, which were not part of the budget 
agreement. First, the Republicans have added changes to medical 
liability laws to cap malpractice damages, a provision which may very 
well attract a Presidential veto. Republicans have also decided to try 
to add medical savings accounts to Medicare, which will drain money 
from the trust fund to primarily benefit healthier and wealthier 
seniors. In addition, the bill will allow States to privatize, or 
contract out the eligibility and enrollment functions of the Medicaid 
Program.
  The bill allows for the creation of Multiple Employer Welfare 
Arrangements [MEWA's], or health insurance sponsored by associations. 
While those who attempt to put the best face on this describe it as 
another option for people to obtain health insurance, the effect of 
this bill would actually exempt such MEWA's from State regulation, 
meaning that they would not be subject to solvency requirements and 
consumer protections. This provision would have a very negative impact 
on Minnesota, undermining key Minnesota proactive health care reform 
efforts and would prevent other States from utilizing such initiatives.
  Finally, the bill takes an antiworker stance by undermining basic 
employment protections for people on welfare. Those on welfare in the 
world of work must be accorded the same treatment as other workers. 
They are not second class workers or citizens.
  All of these provisions are made worse by the fact that the companion 
budget tax break bill, which is to be considered tomorrow, 
overwhelmingly skews tax benefits to wealthier individuals and 
corporations. The people who will be impacted by the cutbacks and 
negative policy proposals we are voting on today, will not see the 
benefits of the tax package we are voting on tomorrow. In fact, in the 
GOP version of the tax breaks, 70 percent of the tax breaks will go to 
those with the top 20 percent of incomes. Because of the way the tax 
breaks are structured, working American families will not see the full 
benefit of the HOPE education credit or the child credit, not to 
mention the capital gains tax breaks.
  It is unfortunate that the Republicans have chosen to add so many 
things to this budget bill, because the basic framework which was 
agreed upon in the budget deal was a positive framework. The budget 
deal which we agreed upon last month would have extended the Medicare 
trust fund, even while adding crucial preventive benefits to Medicare; 
preserved the Federal guarantee to Medicaid; strengthened environmental 
protection and enforcement; truly expanded health coverage for 5 
million uninsured children; and increased investment in education, 
including increasing the amount and number of Pell grants, increases 
for Head Start, and key targeted tax breaks for higher education 
investments. The Clinton/congressional budget deal demonstrates that 
our country does not need to renege on basic commitments to the 
American people in order to balance the budget. We can invest in our 
Nation's future through health care, education, infrastructure, and the 
environment and still achieve sound budget goals.
  However, the GOP majority, with this budget deal, is writing the law 
as if anything goes, irregardless of the commitments made in that 
budget agreement, and is trying to push through antiworker and 
antifamily proposals. I regret that the majority has taken this 
approach. I would have been supportive of a fair bill which followed 
through on the budget agreement in a reasonable manner, but this bill 
does not do that. Therefore, I regrettably, but forcefully urge my 
colleagues to vote against this measure which is unfair and reneges on 
the basic agreement.
  Mr. MATSUI. Mr. Speaker, the Medicare proposal under consideration 
today was created using an open, bipartisan process. This process 
created a package with many provisions deserving of praise. It 
includes, for example, a proposal that helps military retirees in 
obtaining Medicare benefits by waiving a late enrollment penalty for 
those individuals who have traditionally relied on health care services 
on military bases. These men and women, who have dedicated their lives 
to serving the Armed Forces, now often find that the military base on 
which they have depended for health care is closing. This provision 
will help the honorable military retirees of Sacramento, CA, who will 
lose meaningful use of military health facilities when McClellan Air 
Force Base closes in 2001. I have previously introduced legislation to 
address this problem, and am pleased to see a solution in the package 
currently under consideration.
  There are, however, a number of problems in the Medicare proposal 
approved in the Ways and Means Committee. First, unlike the Commerce 
Committee proposal, the Ways & Means plan fails to allocate graduate 
medical education expenses [GME], indirect medical education expenses 
[IME] and disproportionate share medical education expenses [IME] and 
disproportionate share hospital payments [DSH] directly to the 
hospitals which they are intended.
  Congress legislated GME, IME, and DSH payments to help teaching 
hospitals and hospitals serving a disproportionately large share of 
low-income patients. When a Medicare beneficiary selects to enroll in 
managed care, however, these payments follow the Medicare managed care 
recipient directly to the managed care entity. Although the intention 
is that the payments will be passed through to hospitals, this is not 
always the case. Rather, money intended for these hospitals is often 
kept by the Managed care entities as profit or spent on other services.
  This problem grows more severe as more enrollees enter managed care. 
In Sacramento, almost 45 percent of the Medicare population is in 
managed care. When these payments are not passed on to hospitals, the 
impact is

[[Page H4584]]

felt. Carving out GME, IME, and DSH from managed care payments would 
enable teaching and DSH hospitals to receive the same types of 
subsidies under Medicare risk-contract arrangements that they do under 
fee-for-service Medicare. It would ensure that money intended for these 
hospitals is actually delivered.
  There is a second proposal in the Ways and Means Committee Medicare 
bill that is unduly punitive to hospitals. Under current law, payments 
for inpatient hospital services are made under a prospective payment 
system [PPS], in which a predetermined rate is paid for each inpatient 
stay based on the patient's admitting diagnosis. PPS payment rates are 
updated annually. This Medicare proposal, however, would freeze the PPS 
update factor for the 1998 fiscal year.

  The PPS freeze is not necessary to accomplish the goal of achieving a 
balanced budget. There are alternatives that would achieve the same 
level of savings with a less immediate impact on patient care and 
market dynamics.
  In addition, any claim that the freeze will not harm hospitals 
contemplates a national average--but not specific areas or types of 
hospitals. We cannot ignore patients in our teaching hospitals and 
other hospitals with high Medicare caseloads simply because more 
financially secure hospitals will be able to weather this storm. 
Although the PPS update will freeze, no other aspect of hospital 
expenditures will remain stagnant. Wages, which represent a large part 
of hospital expenses, will still need to be paid, as will utilities and 
capital costs.
  This measure is especially punitive to hospitals that are achieving 
the goals sought by the PPS method of payment. They have achieved 
savings because they provide the most efficient patient care. Now that 
hospitals have achieved a level of efficiency, it is fair for the 
Medicare Program to share in this success by reducing updates. Yet it 
is not necessary to do it all at once.
  Finally, I must add my voice to the chorus of concern in opposition 
to medical savings accounts [MSA's] MSA's are not in need of a 
demonstration project. We already know that MSA's cannot work and, in 
fact, they would cause harm.
  The demonstration project in this proposal would drain over $2 
billion from the Medicare trust fund. These costs represent money being 
channeled directly to the savings accounts of healthy seniors at the 
expense of those who are not as fortunate. MSA's defy the very nature 
of insurance by establishing private accounts for healthy individuals 
rather than using those funds to balance the risk of all Medicare 
recipients.
  The MSA proposal also lacks fundamental consumer protections. We know 
from experience that consumer protections are necessary when selling 
policies to the elderly and disabled. We do not need to demonstrate 
this again. There is a long history of seniors being victimized by 
unscrupulous insurance agents when being sold health insurance. This 
unfortunate practice led to the necessary strengthening of MediGap 
protections in 1990.
  We face a new round of abuse under the current provision--seniors and 
the disabled will be sold MSA plans without full disclosure of the risk 
of high out-of-pocket costs they will face. Salespeople will focus on 
the potential for building up large savings accounts, and will hide 
details of the high $6,000 deductible and huge doctor bills above the 
Medicare approved rate. Over 80 percent of Medicare beneficiaries have 
incomes under $25,000 and cannot face deductibles of $6,000 or the 
potential for unlimited balance billing contained in this package.
  I am pleased with a number of provisions in the current Medicare 
package. It is, however, not perfect. It is my hope that these 
imperfections will be corrected before it is enacted into law.
  Mr. SISISKY. Mr. Speaker, I rise today to express my qualified 
support for the prevention initiatives in the Budget Reconciliation 
Spending Act.
  H.R. 2015 extends Medicare coverage for several preventive tests, 
including colorectal cancer screening. This is a tremendous step 
forward. This is a better bill because of it.
  Under budget rules, this prevention initiative has to be scored as 
costing the Treasury money. But, in reality, nothing could be further 
from the truth. In the long run, screening saves money. It saves 
Medicare the expense of months or years of costly care. Much more 
importantly, it saves lives.
  Some of you may know that I am a colon cancer survivor. After having 
surgery to remove my cancer, I made a commitment to do everything I can 
to help others beat this terrible disease. This bill is a downpayment 
on that commitment.
  There is one way this legislation could be improved, however. 
Unfortunately, H.R. 2015 limits the screening tests available to 
patients and doctors. It provides Medicare coverage for some tests, but 
denies coverage for a test called the barium enema.
  I have had all these tests. Take my word for it--there is nothing 
pleasant about any of them. Cancer patients will not be demanding to 
have these tests unless their doctors think it's absolutely necessary.
  And doctors are in the best position to decide whether these tests 
are necessary. Congress is not. It makes no sense for Congress to be 
legislating against specific screening tests. It makes no sense for us 
to dictate which of these tests should or should not be used.
  On this issue, the experts have spoken loud and clear. The American 
Cancer Society, the Office of Technology Assessment, and the Agency for 
Health Care Policy and Research all agree that the barium enema is 
effective in detecting colorectal cancer.
  Some of you may be aware of the controversy among advocates of the 
various colorectal cancer screening procedures. This dispute is 
unfortunate. But it is not a dispute that we should have to referee in 
this bill.
  There is a fair and reasonable alternative. We can and should ask the 
Secretary of Health and Human Services to make coverage decisions based 
on the recommendations of experts.
  I understand this is the solution adopted in the Senate Finance bill. 
I would hope that the House conferees will recognize the wisdom of this 
approach and recede to the Senate provision.
  Nevertheless, I do strongly support this bill and its prevention 
initiatives. But I think we can make a good bill even better. We can 
follow the Senate's lead and let the experts decide which screening 
tests should be available.
  Mr. STARK. Mr. Speaker, I am voting against the spending provisions 
of the budget resolution today for several reasons.
  The Ways and Means Committee approved the Medicare title of the 
budget bill in a bipartisan manner. We were given a number--$115 
billion--by the Budget Committee. $115 billion is a higher number than 
I would have liked, but it was what we were given. We've successfully 
made all the groups and lobbyists in town equally unhappy--a sure sign 
that we've done something right.
  But there are still many unacceptable provisions in the Medicare 
title.
  Medical savings accounts have no place in the Medicare Program. They 
are a terrible scam to rip off Medicare for the sake of insurance 
companies and healthy, wealthy beneficiaries. Every legitimate health 
care policy expert has concluded that MSA's would create extra costs, 
resulting in a weakened trust fund. The Congressional Budget Office 
estimates that the extra cost to Medicare for each person who signs up 
for an MSA will be $1,000 in 1999, rising to an extra $1,650 by 2007. 
These costs are far too great to bear when we are trying to cut 
Medicare spending in order to preserve the program for future 
generations.
  We could have--and should have--done more to fight fraud and abuse in 
the Medicare Program. The administration proposed at least a half 
billion dollars worth of antifraud changes which the committee did not 
accept. The press reports that the Medicare Office of Inspector General 
will soon release an audit of Medicare that shows a fraud, waste and 
abuse rate of 14 percent. That means about $23 billion in Medicare 
payments should not be made each year. Over 5 years, that equals $115 
billion--the same amount we are cutting in this bill. We will never 
stop every last dollar of fraud and error, but we should certainly be 
doing better. To leave any antifraud proposals on the table when so 
much is being lost is not fair to the taxpayer or to the beneficiary.
  Tomorrow's tax bill is a great wasted opportunity for the Medicare 
Program. Consider this: If we did not pass a tax cut bill tomorrow, but 
kept the amount of money that is going to be given away--largely to the 
rich--in savings bonds for Medicare, we could extend the life of the 
Medicare trust fund past 2021. The public should ask politicians who 
talk about the need to restructure Medicare and cut back its benefits, 
why they voted for a tax break for the rich, instead of saving that 
money for Medicare.
  As we move to conference on the Medicare provisions, I challenge my 
colleagues to fully consider the devastating effects of Medicare 
structural changes proposed by the Senate.
  We must defeat the Senate's idea of raising the age of Medicare 
eligibility from 65 to 67. This proposal is certain to increase the 
number of uninsured when early retirees and those retiring at age 65 
are unable to afford private insurance policies to bridge the gap until 
Medicare eligibility. We should be expanding health insurance coverage 
in America--not shrinking it.
  The Senate has proposed increasing the part B premiums and even the 
deductible on the basis of one's income. Others are talking about 
forcing seniors into managed care plans, and turning the program into a 
defined contribution plan that will not keep pace with inflation.
  The Republican spending bill is flawed in other areas as well.

[[Page H4585]]

  The Republican health proposal for children's health falls far short 
of providing health insurance for 5 million children as called for 
under the balanced budget agreement. Instead, the Congressional Budget 
Office estimates it will cover only half a million children. The bill 
proposes an unaccountable block grant which would allow States to: 
supplant rather than supplement, existing health funds for children; 
provide health care providers with additional funding even if they 
don't add new services for children; and use funds in a manner that 
would catalyze State fiscal gamesmanship. There is no requirement that 
a single child receive health insurance coverage under the proposal.
  In terms of welfare, the Republican bill makes a group of Americans, 
who must rely on welfare to support their children, second-class 
citizens. These citizens, who must work off their benefits, will have 
no clear protections from sexual harassment or employment 
discrimination, and will be deprived of other crucial worker 
protections. There is no requirement that workfare workers get the same 
benefits and working conditions as others working a similar length of 
time and doing the same type of work. This is simply not fair.
  Additionally, the Republican bill restores SSI and Medicaid to 
125,000 fewer legal immigrants than the bipartisan budget agreement by 
the year 2007. The budget proposal would allow States to cut benefits 
to elderly, blind, and disabled Americans.
  I did not support the welfare reform bill that passed last Congress 
because it needlessly and cruelly throws over 1 million children into 
poverty, and I do not support the Republican proposals today. The 
Republican attempts to reform welfare will end in destitution and 
misery for many innocent children.
  For these reasons, I urge my colleagues to vote against the spending 
portions of the Budget Reconciliation Act and to carefully scrutinize 
the Senate restructuring proposals as we move toward conference.
  Mrs. MORELLA. Mr. Speaker, I rise in support of the Balanced Budget 
Act. This bill begins the process of implementing the historic balanced 
budget agreement between the President and Congress. While I will be 
working to improve this bill, I urge my colleagues to vote for it and 
move the process forward. We cannot afford to lose this opportunity to 
bring the budget into balance.
  I am very pleased that this bill contains an amendment I offered in 
the Government Reform and Oversight Committee to provide the 
legislative fix necessary to ensure that the Federal Employees Health 
Benefits Program continues to deliver high quality health care at 
reasonable costs well into the future.
  FEHBP is an outstanding program. It is the country's largest 
employer-based health insurance program, serving the health care needs 
of almost 10 million Federal employees, retirees, and their families. 
It enjoys high customer satisfaction--over 85 percent. In fact, when 
Congress considered health care reform in 1994, FEHBP was touted as a 
model.
  Without the FEHBP provision contained in this legislation, however, 
FEHBP's success could come to a grinding halt. The ``Big Six'' formula 
that is currently used to compute the premiums for FEHBP expires in 
1999. Seven years ago, one of the six plans used to compute the current 
formula, Aetna, dropped out. Since then, the Aetna proxy has been used 
in the calculation. Under current law set in OBRA 1993, the formula is 
set to revert to a ``Big Five'' formula--without the Aetna proxy. This 
would cause employee premiums to rise, on average, $276 per year. 
Federal employees and retirees simply cannot absorb such huge 
increases, nor should they.
  Back in February, I requested OPM's technical assistance to compute a 
new FEHBP formula. In a meeting in my office, OPM presented a plan 
based on their actuarial analysis of FEHBP data. I made several 
changes, but we agreed on establishing a new formula that will be 
derived from taking a weighted average of all the plans and setting the 
maximum government contribution at 72 percent. This new weighted 
average computation will ensure that Federal employee premiums do not 
rise. Thus the Government's share and employees' share will remain the 
same.
  This approach makes sense. It is fair, it is stable, and does not 
depend on carriers that may or may not drop out of the program. It will 
not result in distributional changes nor will it create winners and 
losers. CBO recognizes the problem caused by the ``Big Six'' formula's 
expiration and assumes that Congress will enact a legislative fix, 
keeping government and employee contributions the same. CBO estimates 
that this fix would actually save $28 million over 5 years. I want to 
thank my colleagues who helped me to move this amendment through the 
Government Reform and Oversight Committee; Mr. Mica, Mr. Davis, Mr. 
Cummings, Mr. Burton and Mr. Hoyer. This provision will make a critical 
difference in the lives of the nearly 10 million Federal employees, 
retirees, and dependents covered by FEHBP.
  This legislation's Civil Service provisions save $4.762 billion, 
derived from increased agency and employee contributions to retirement. 
Over the last several years, Federal retirees and employees have been 
asked to bear a disproportionate share of deficit reduction, and I 
oppose deriving savings of $4.762 billion from Federal employees. But 
despite my strong protests, the Budget Committee assigned the Committee 
on Government Reform and Oversight a target of $4.762 billion in 
savings. This target was derived from the President's original budget, 
where he actually proposed to save $6.5 billion from Federal employees 
and retirees. Clearly, I am not pleased that the budget agreement has 
presented us with such a dilemma, but to ignore the committee's 
instructions would have been abdicating our responsibility to the 
Committee on the Budget, which could have redistributed the cuts in a 
way that would inflict even more pain. There is no easy way to get to 
$4.7 billion in savings, but the proposal agreed upon by the Government 
Reform and Oversight Committee is the fairest. In the Civil Service 
Subcommittee, I helped to defeat an amendment that would have singled 
out one group of employees--CSRS emloyees--for increased employee 
contributions. The savings we are approving today would increase agency 
contributions by 1.51 percent and would increase employee contributions 
by .50 percent, phased in through 2002. These are not painless spending 
cuts. Federal retirement contributions are paid out of agencies' 
salaries and expense accounts--accounts that are already constricted 
from past budget reductions. Increasing agency contributions at this 
time will further tighten agency accounts and could lead to further 
reductions-in-force or furloughs. This increase amounts to an across-
the-board spending cut that will affect every agency and program in the 
Federal Government.

  I am pleased, however, that this legislation does not delay Federal 
retiree COLA's. President Clinton's original budget also contained a 
three-month delay in Federal civilian retiree cost-of-living 
adjustments [COLA's] through 2002. The President's budget, however, 
would have subjected neither Social Security beneficiaries nor military 
retirees to this delay, imposing an unfair burden on only one group of 
retirees. I am very pleased that there will be no COLA delay--and that 
the savings coming from the proposed delay were dropped. Furthermore, 
as the sponsor of the resolution against COLA delays, House Concurrent 
Resolution 13, I am pleased that 250 Members are now on record in 
opposition to COLA delays.
  Medicare is among our most important Federal programs. It provides 
health insurance for over 37 million seniors and has dramatically 
reduced poverty among our senior population. Unless we make changes to 
ensure its solvency, however, it is in danger of going bankrupt in just 
4 short years. Growing at the rate of 10 percent a year, Medicare is 
one of the fastest growing programs in the budget. According to the 
Medicare trustees, the Medicare part A Trust Fund will be bankrupt by 
2001, and it pays out $40 million more than it takes in every day. One 
of the most important charges we face as a Congress is to preserve 
Medicare for today's seniors and for our future seniors. I thank my 
colleagues on the Ways and Means and Commerce committees for 
responsibly addressing Medicare's solvency crisis. By slowing its rate 
of growth and offering beneficiaries more choices, this legislation 
will extend the life of the part A Trust Fund for 10 years. This 
legislation also offers beneficiaries more consumer protections, 
particularly important as more and more seniors choose Medicare HMO's.
  I am pleased that the bill includes the provisions of H.R. 1002, 
legislation to standardize Medicare coverage for bone density testing 
for the diagnosis and prevention of osteoporosis. I am the sponsor of 
this bill, along with Congresswoman Nancy Johnson, who championed this 
bill in the Ways and Means Committee, and Congresswomen Nita Lowey and 
Eddie Bernice Johnson. I want to commend Ways and Means Health 
Subcommittee Chairman Bill Thomas for his strong support; members of 
the Health Subcommittee, many of whom were cosponsors and strong 
advocates, and Commerce Subcommittee on Health and Environment Chairman 
Mike Bilirakis, and members of the subcommittee who also worked on 
behalf of this provision. I also want to thank the staff of both 
subcommittees and their members for their hard work as well.
  Osteoporosis is a major health problem affecting 28 million 
Americans, who either have the disease or are at risk due to low bone 
mass; 80 percent are women. The disease causes 1.5 million fractures 
annually at a cost of $13.8 billion--$38 million per day--in direct 
medical expenses, and osteoporotic fractures cost the Medicare Program 
3 percent of its overall costs. In their lifetimes, one in two women 
and one in eight men over the age of 50 will fracture a bone due to 
osteoporosis. A woman's risk of a hip fracture is equal to her combined 
risk of contracting breast, uterine, and ovarian cancer.

[[Page H4586]]

  Osteoporosis is largely preventable and thousands of fractures could 
be avoided if low bone mass was detected early and treated. We now have 
drugs that promise to reduce fractures by 50 percent. However, 
identification of risk factors alone cannot predict how much bone a 
person has and how strong bone is. Experts estimate that without bone 
density tests, up to 40 percent of women with low bone mass could be 
missed.
  Unfortunately, Medicare's coverage of bone density tests is 
inconsistent. Instead of national coverage of scientifically approved 
types of bone density tests, Medicare leaves decisions to local 
Medicare insurance carriers. The definition of who is qualified to 
receive a bone mass measurement varies from carrier to carrier. Some 
carriers require beneficiaries to have suffered substantial bone loss 
before allowing coverage for a bone density test. For example, in about 
20 States, the carriers require x ray proof of low bone mass or other 
abnormalities. Unfortunately, standard x ray tests do not reveal 
osteoporosis until 25 to 40 percent of bone mass has been lost.

  One carrier allows a premenopausal woman to have a DXA test to 
determine whether hormone replacement therapy [HRT] is indicated. 
However, it does not allow the test to determine treatment for the 
postmenopausal women--the majority of Medicare beneficiaries. Other 
carriers have no specific rules to guide reimbursement and cover the 
tests on a haphazard case-by-case basis.
  Inconsistency of bone mass measurement coverage policy is confusing 
and unfair to beneficiaries. The provisions embodying H.R. 1002 
included in this bill will eliminate the confusion and standardize 
Medicare's coverage of bone mass measurement tests in order to avoid 
some of the 1.5 million fractures caused annually by osteoporosis.
  I also commend Ways and Means Subcommittee on Health Chairman Bill 
Thomas, Congressman Ben Cardin, and Commerce Health Subcommittee 
Chairman Bilirakis for their sponsorship of H.R. 15, the Medicare 
preventive package in the bill providing for expanded coverage of 
mammography screening, pap smears, and pelvic exams, prostate and 
colorectal screening, and diabetes screening. I am pleased to be a 
cosponsor of H.R. 15, and I believe this expansion of preventive 
benefits will improve the detection and early treatment of these 
diseases. I also congratulate Congresswoman Barbara Kennelly and 
Congresswoman Elizabeth Furse, among others, with whom I have worked to 
expand coverage for mammography and diabetes screening.
  I urge my colleagues to vote for the Balanced Budget Act. This bill 
combines the work of a number of committees, and implements the 
critical spending provisions of the balanced budget agreement. Without 
approval of this portion of the agreement, there will be no balanced 
budget. I am confident that further changes can be made in conference 
to improve the bill and gain the approval of a solid majority of 
Members and the President.
  Mr. DEUTSCH. Mr. Speaker, I have been a longtime supporter of a 
balanced budget and I voted in support of the balanced budget 
agreement, but I cannot vote for H.R. 2015 because it veers too far 
from the agreement and includes some major policy changes that I cannot 
support.
  One of the most important goals behind this legislation is to ensure 
the long-term solvency of the Medicare Program by containing the growth 
of program costs. One of the most successful ways we can do this, and 
have been doing this, is through managed care. However, Medicare 
managed care providers have been unfairly and dangerously targeted in 
this bill. The reality is that seniors join HMO's and are happy with 
their HMO's because these health plans provide seniors with extra 
benefits--like coverage of prescription drugs--that they would 
otherwise have to purchase Medigap supplemental insurance to cover. By 
radically reducing Medicare managed care payment rates, this bill will 
force Medicare HMO's to cut back services and limit the options 
available to seniors who might consider enrolling in HMO's. This is a 
horrible strategy for modernizing the Medicare Program.
  This bill also cuts payment rates for critical services like home 
oxygen and assisted living devices, but it is these very home services 
that help seniors to stay out of hospitals and nursing homes. This is 
clearly inconsistent with a budget that seeks to control health care 
costs in the long run.
  This bill also adds $2 billion in Medicare costs by adding medical 
savings accounts to the program. I supported the demonstration project 
for MSA's in the private market, but I do not think it is right for the 
Medicare Program. Instead of simply paying for the services that 
beneficiaries actually use, Medicare MSA's will pay healthy seniors 
when they do not use services. CBO has estimated that this will 
increase Medicare costs by $2 billion over 5 years. Why are we adding 
unnecessary costs like this when we are making such significant cuts to 
the program and increasing costs to beneficiaries?
  This bill also makes the mistake of repealing quality assurances like 
the Boren amendment that have been put in place to protect seniors from 
the nursing home horrors that we saw before the Boren amendment was in 
place. It is just not necessary to lessen the quality of these programs 
to be cost-effective.
  And then there's medical malpractice reform. Under this legislation, 
medical malpractice liability--in State and Federal courts--would limit 
noneconomic damages to $250,000. That means that retirees, homemakers, 
and the disabled who would not be able to demonstrate future economic 
loss would be capped at $250,000 in noneconomic damages no matter how 
grievous the injury is that they have suffered. Something as important 
as medical malpractice reform should not be tucked into this bill 
without complete hearings that would permit the public to express their 
views on medical malpractice reform.
  I am very hopeful that these and other serious problems with this 
bill can be remedied in conference. I certainly support many of the 
provisions in this bill that I think will improve the Medicare Program, 
like the inclusion of preventive services such as mammography screening 
and colorectal cancer screening, and the expansion of beneficiary 
choice by adding options like provider sponsored networks to the 
program. But I cannot support the bill as it now stands when many of 
these provisions will actually hurt the very seniors these programs 
were designed to protect.
  Mr. CONYERS. Mr. Speaker, I would like to bring to the Members' 
attention the provisions in the bill which would for the first time 
ever federalize the medical malpractice system. The proposals represent 
the most radical and one-sided liability limitations that have ever 
been considered by this legislative body. And why shouldn't they be--
they were written by the AMA as part of a back room deal to obtain 
their support for Republican agenda, including their support for the 
proposed partial birth abortion ban.
  The $250,000 cap on pain and is perhaps the most inequitable 
provision in the entire bill. Although harder to scientifically 
measure, noneconomic damages compensate real victims for real losses--
including loss of sight, disfigurement, inability to bear children, 
incontinence, inability to feed or bathe oneself, or loss of a limb--
that are simply not accounted for by lost wages or medical bills. This 
means that a woman or child facing excruciating pain and suffering for 
the rest of their life as a result of medical malpractice would have 
their right to compensation capped, but a CEO who couldn't perform his 
job because of the same exact injury would face no such cap.
  The draconian new limitations on punitive damages will also penalize 
victims and protect wrongdoers. Under the Republican proposal, a doctor 
who fell asleep in the operating room or operated on the wrong patient 
could be completely insulated from punitive damages. The language goes 
so far as to cap the liability of a doctor who rapes his patient. Very 
often, punitive damages are the only way to truly deter such outrageous 
conduct, but this bill protects such people.
  The new statute of limitations provision prohibits all victims from 
bringing any legal action more than 5 years after the negligence first 
occurred. It takes absolutely no account of the fact that many injuries 
caused by medical malpractice or faulty drugs take years or even 
decades to manifest themselves. Yet under the proposal, a patient who 
is negligently inflicted with HIV-infected blood and develops AIDS 6 
years later would be forever barred from filing a medical malpractice 
or product liability claim.
  The so-called periodic payment provisions are also blatantly 
antivictim. The bill would allow hospitals teetering on the verge of 
bankruptcy to delay and then completely avoid future financial 
obligations. And wrongdoers would have no obligation to pay any 
interest on any amount they owe to their victims.
  The bill goes on and on, limiting injured victim's State law rights 
while protecting the most blatant possible malpractice one can imagine. 
The proponents of these measures couldn't care in the least how they 
effect the rights of the American people or the quality of medical care 
in this country--that's why they decided they didn't need to waste any 
time with committee markup or process.
  A section-by-section itemization of my concerns regarding the medical 
malpractice provisions follows:

       A. Statute of Limitations--Prohibits victims from bringing 
     any state health care liability action more than two years 
     after an injury is discovered or five years after the 
     negligent conduct that caused the injury first occurred. Such 
     a proposed new federal statute of limitations takes no 
     account of the fact that many injuries caused by medical 
     malpractice or faulty drugs often take years to manifest 
     themselves. Thus under the proposal, a patient who is 
     negligently inflicted with HIV-infected blood and develops 
     AIDs six years later would be forever barred from filing a 
     medical malpractice or product liability claim.

[[Page H4587]]

       B. $250,000 Cap on Non-economic Damages--Caps the award of 
     non-economic damages in medical malpractice actions at 
     $250,000. The bulk of data indicates that dollar caps do not 
     provide significant savings. Using information derived from a 
     1992 GAO study, the ABA's Special Committee on Medical 
     Professional Liability found that state tort reform proposals 
     ``have not had any measurable impact on overall health [care] 
     costs'' and that personal health care spending had doubled 
     between 1982 and 1990, regardless of the type of ``reforms'' 
     adopted. A 1986 GAO study on the impact of specific tort 
     changes on medical malpractice claims revealed that claims 
     and insurance costs continue to rise despite state-adopted 
     limits on victim compensation.
       Even the total elimination of malpractice costs would 
     provide only negligible savings to the health care system. 
     According to separate reviews by the U.S. Department of 
     Health and Human Services and CBO, the total amount of all 
     liability premiums paid in the United States represents less 
     than 1% of the Nation's health care costs. And factoring in 
     the costs of so-called ``defensive medicine'' would not 
     result in any significant additional savings to the health 
     care system, according to both the CBO and the Congressional 
     Office of Technology Assessment.
       An additional concern with caps on non-economic damages is 
     that they could unfairly penalize those victims who suffer 
     the most severe injury and are most in need of financial 
     security. Although harder to scientifically measure, non-
     economic damages compensate victims for real losses--such as 
     loss of sight, disfigurement, inability to bear children, 
     incontinence, inability to feed or bathe oneself, or loss of 
     a limb--that are not accounted for in lost wages. And non-
     economic damage caps have been found to have a 
     disproportionately negative impact on women, minorities, the 
     poor, the young, and the unemployed; since they generally 
     have less wages, a greater proportion of their losses is non-
     economic.
       C. Joint and Several Liability--Eliminates the state 
     doctrine of joint and several liability for non-economic 
     damages. This will allow wrongdoers to profit at the expense 
     of innocent victims, rather than forcing tortfeasors to 
     allocate liability among themselves, as has traditionally 
     been the case under state law. And since women, 
     minorities, and the poor generally earn less wages, such 
     limitations on non-economic damages could have a 
     disproportionately negative impact on these groups.
       D. Limits on Punitive Damages--Caps punitive damage awards 
     at the greater of $250,000 or three times economic damages; 
     limit the state law standard for the award of punitive 
     damages to intentional or ``consciously indifferent'' 
     conduct; allow a bifurcated proceeding to determine issues 
     relating to punitive damages; and completely ban punitive 
     damages in the case of drugs or other devices that have been 
     approved by the FDA or any other drug ``generally recognized 
     as safe and effective'' pursuant to FDA-established 
     conditions.
       These proposed limitations raise a number of concerns. 
     Arbitrary caps on punitive damages may provide unjustified 
     windfalls to the few tortfeasons responsible for blatant and 
     wanton medical misconduct. (In fact, studies have shown that 
     only 265 medical malpractice punitive awards were awarded in 
     the United States in the 30 years between 1963 and 1993.) By 
     insulating grossly negligent conduct, the proposed new 
     federal standard for establishing punitive damages comes 
     close to criminalizing tort law. Permitting defendants to 
     bifurcate proceedings concerning the award of punitive 
     damages may well lead to far more costly and time-consuming 
     proceedings, again working to the disadvantage of injured 
     victims. And banning punitive damages for FDA-approved 
     products is likely to have a disproportionate impact on 
     women, since they make up the largest class of victims of 
     medical products.
       E. Periodic Payments--Grants wrongdoers the option of 
     paying damage awards in excess of $50,000 on a periodic 
     basis. This provision would apply not only to future economic 
     damages realized over time, such as lost wages, but to non-
     economic losses, like the loss of a limb, that are realized 
     all at once. Also, in contrast to many state law periodic 
     payment provisions, the Republican proposal does not seek to 
     protect the victim from the risk of nonpayment resulting from 
     future insolvency by the wrongdoer or to specify that future 
     payments should be increased to account for inflation or to 
     reflect change circumstances.
       F. Collateral Source and Subrogation--In most states under 
     the collateral source rule, a victim is able to obtain 
     compensation for the full amount of damages incurred, and his 
     or her health insurance provider is able to seek subrogation 
     in respect of its own payments to the victim. This ensures 
     that the true cost of damages lies with the wrongdoer while 
     eliminating the possibility of double recovery by the victim. 
     The Republican proposal would turn this system on its head by 
     allowing tortfeasons to introduce evidence of potential 
     collateral payments owing from the insurer to the victim. 
     This could have the effect of shifting costs from negligent 
     doctors to the health insurance system in general and 
     taxpayers in particular, resulting in increased health 
     premiums paid by workers and businesses.
       Another problematic feature of Republican malpractice 
     proposals has been their one-sided, anti-victim nature. For 
     example, their proposal allows States to enact more 
     restrictive caps and damage limitations, but not permit the 
     states freedom to grant victims any greater legal rights. 
     Their proposals also ignore a number of complex legal issues. 
     For example, in the state law context, various damage caps 
     have been held to violate state constitutional guarantees 
     relating to equal protection, due process, and rights of 
     trial by jury and access to the courts; and these very same 
     concerns are likely to be present at the federal level. And 
     by layering a system of federal rules on top of a two-century 
     old system of state common law, the Republican proposals will 
     inevitably lead to confusing conflicts, not only within the 
     federal and state courts, but between federal and state 
     courts.

  Finally, I would like to note several other concerns I have with the 
legislation relating to judiciary's jurisdiction concerning civil 
rights and immigration. I am strongly opposed to provisions from the 
Economic and Educational Opportunities Committee print and the Ways and 
Means Committee print providing that participants in the workfare 
program will not be considered employees for purposes of Federal law. 
As a result, these workers may not be covered under many laws that have 
helped working people over the years, including title VII of the Civil 
Rights Act of 1964 and other laws designed to protect working people 
from unsafe workplaces, racial and sexual harassment, and unfair wages.
  It is wrong and patently unfair to require people to go to work and 
at the same time, deny them legal protections against discrimination. 
Title VII provides for a broad set of remedies for employees that are 
discriminated against on thesis of race, color, religion, sex or 
national origin. Unless this provision is fixed, it could make former 
welfare recipients second class citizens and punish people who leave 
welfare by taking away their basic, fundamental rights.
  The legislation also continues to restrict Social Security income and 
Medicaid eligibility to those immigrants who were receiving such 
benefits as of August 22, 1996. This is a blatant violation of, and 
retreat from the bipartisan budget agreement which had promised to 
restore these benefits to legal residents who subsequently become 
disabled. Legal residents pay taxes and contribute to our society in 
the same way citizens do, and there is no moral justification for 
excluding them from our Nation's safety net.
  I urge the Members to join me in opposing this legislation.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I rise today with concern 
about the reductions made in this legislation for Medicaid 
disproportionate share hospital [DSH] funding. The reductions made to 
DSH funding in this legislation will have a dramatic effect on Medicaid 
funding going to Connecticut, and 12 other States in similar 
situations: Alabama, Colorado, Kansas, Louisiana, Maine, Missouri, 
Nevada, New Hampshire, New Jersey, South Carolina, Tennessee, and 
Texas. My home State of Connecticut is a high-DSH State, meaning that 
we have a number of low-income people who lack health insurance use 
Federal and State Medicaid funding to assist our hospitals that treat. 
Connecticut is acting responsibly by using available Federal funds to 
address the problem of people lacking health insurance. The DSH program 
is an integral part of Connecticut's overall Medicaid Program, 
involving over $400 million in combined Federal and State funding.
  The DSH formula in this legislation is unfair and disproportionately 
impacts a handful of states, including Connecticut, who have invested 
in DSH programs. These States are legitimately accessing funds through 
the Medicaid Program, which is designed to enhance the health care 
coverage of low-income people. We must recognize that DSH is not 
separate from Medicaid, but a critical component of providing quality 
health care to those who cannot otherwise afford it. During the fiscal 
year, Connecticut is receiving $204 million in DSH funding from the 
Federal Government. Under this proposal, DSH funding would drop 
dramatically by 40 percent over the next 5 years, with the most 
dramatic decreases in the out years, going from $204 million to $123 
million by 2002. A reduction of this magnitude would likely force 
States to drastically reduce their commitment to helping hospitals 
treat the uninsured, and this at a time when I and many colleagues 
believe Congress must ensure access to affordable health insurance for 
the uninsured.
  I am very pleased that Budget Committee Chairman Kasich has expressed 
a commitment today to look at the DSH formula more closely as the bill 
moves into the conference committee process. Any cuts in the DSH 
program must be imposed equitably on all States, regardless of their 
percentage of DSH spending.
  Mr. GREEN. Mr. Speaker, I strongly oppose the inclusion of provisions 
authorizing private companies to determine eligibility and to verify 
income for the Medicaid and Food Stamp Programs. These items have 
nothing to do with the Federal budget, except to potentially make it 
worse in the years ahead, and it represents

[[Page H4588]]

a significant policy change with broad-ranging implications.
  These public policy changes deserve extensive debate based on the 
actual merits and risks--not on inflated claims and misinformation. We 
need to spend real time considering the implications of allowing 
private, for-profit companies to determine who is or is not eligible 
for services under Medicaid and food stamps.
  There are no assurances in these provisions that the contractors will 
be required to comply with the most basic requirements and procedures 
which public agencies routinely follow, especially those relating to 
accountability of funds. Recent privatization arrangements indicate 
that private contractors do not believe they have a comply with 
procedures taken for granted in the public sector. For example, the 
private industry in Philadelphia had to be sued several years ago in 
order to get information about its federally funded training and job 
placement activities. Similarly, the private one-stop centers in 
Massachusetts have failed to provide any placement information 
necessary to measure their effectiveness.
  The privatization provisions make no assurances of any actual savings 
or efficiencies. Experience suggests that the opposite could occur 
under privatization. In the case of California, Lockheed Martin 
Information Management Services promised to build an automated child-
support enforcement system by 1995. The total price promised was $99 
million.
  Today, its $304 million, with major cost overruns. A consulting firm 
recently told State officials that it found 1,400 errors caused by 
Lockheed Martin, and a recent legislative report said that there is no 
guarantee that the system will ever work statewide.
  The most amazing feature of these provisions is that while 
responsibility for administration of the Medicaid and Food Stamp 
Programs can be privatized, the amendment has insured that legal 
liability for constitutional torts remains with the state. It does this 
by including the following: ``For purposed of any Federal law, such 
determination shall be considered to be made by the State and by a 
State agency.''
  The legal effect of this sentence is two-fold. First, it permits a 
private company to make a binding legal determination as to who is 
eligible for benefits and who is not. Historically, only government 
officials have granted or denied public welfare benefits to needy 
citizens. The second effect is that for the purpose of Federal laws 
protecting civil rights, the determinations made by private contractors 
shall be considered to be made by the State. In short, the State will 
remain liable for constitutional torts even if they are committed by 
private contractors.
  This policy will greatly benefit the private contractors who will 
have an asset rich codefendant. It is only the States--who will retain 
liability while surrendering control--that will suffer. If these 
provisions are enacted, it will be appropriate to call if the Unfunded 
Mandate Act of 1997. The States will be left holding the bag for the 
mistakes made by the private entities.
  There are no compelling reasons to go forward with wholesale 
privatization of the Medicaid and food stamp eligibility systems. In 
fact, we have not heard how access to services will be improved. And 
the public policy concerns, in particular public accountability, client 
privacy and the role of profit-making in serving the needy are 
overwhelming.
  If we move forward with this idea, we will be neglecting our duty to 
our constituents to ensure the proper administration of the Medicaid 
and Food Stamps Programs. Substantial modifications to these programs 
deserve the full consideration of the Congress and should move through 
the regular legislative process. Privatization has nothing to do with 
balancing the budget and could place the agreement in jeopardy. In 
fact, the Office of Management and Budget has indicated its opposition 
to these provisions in a letter to the Rules Committee.
  If you liked $100 hammers and $600 toilet seats, then you will like 
wholesale Medicaid and food stamp privatization. However, if you 
believe in public accountability of public funds, and providing care 
for our most vulnerable, then you will help me oppose these provisions.
  Mr. GOODLING. Mr. Speaker, I rise in support of the Balanced Budget 
Act of 1997. This bill fulfills our promise to the American people: To 
balance the budget and make the Federal Government live within its 
means for the first time in over 30 years.
  This bill puts into effect the bipartisan budget agreement negotiated 
last month. It proves that Congress and the administration can work 
together to find solutions that make sense.
  The provisions marked up by the Committee on Education and the 
Workforce, which I chair, helps more people move from welfare into the 
work force; protects student loan programs, and helps millions of 
uninsured workers provide health insurance coverage to their families.
  Mr. Speaker, consistent with the Budget Agreement, the bill before us 
today provides $3 billion of new funds to assist long-term welfare 
recipients into work.
  Included under this part are provisions which ensure these funds will 
be directed through existing State and local employment and training 
systems as opposed to being used to establish a duplicative delivery 
system. This ensures that welfare to work programs will be part of 
local employment networks that include the private sector, elected 
officials, and local welfare agencies.
  In addition, we have ensured that a vast majority of these welfare-
to-work funds will be highly targeted to those areas with the highest 
concentration of long-term welfare recipients--allowing States and 
localities to make the best decisions on how best to assist these 
recipients into meaningful employment.
  Let me also mention here the related labor provisions that are 
included as part of this welfare-to-work funding, because I can predict 
that we are going to continue to hear a lot of exaggerations and 
misstatements about what the bill actually says.
  The bill has several important labor provisions. First, we apply 
Federal or State health and safety standards to any welfare recipient 
who is working with an employee who is covered by those standards. 
Second, we extend nondiscrimination laws to all participants in 
welfare-to-work activities; and third, we add provisions consistent 
with the administration with respect to providing minimum wage for 
workfare participants. Let me also clarify that if welfare recipients 
are hired as employees by a public or private employer, they are 
covered by the labor laws just as any other employee--including the 
minimum wage law.
  Let's not lose sight of the reason for all of this: Welfare reform is 
premised largely on the belief that work is good, that even if one 
cannot be immediately employed that there are a lot of needs in our 
communities that people who receive welfare benefits can help attend 
to, and doing so helps both them and their communities.
  It is clear what many on the other side of the aisle really want to 
do--end workfare as we know it. They didn't like it in 1988 welfare 
reform, they didn't like it under welfare reform last year, and they 
are trying again to kill it as part of the budget agreement.
  Mr. Speaker, welfare reform is working because workfare is working--
let's not stop success.
  Mr. Speaker, let me briefly mention that this bill also helps ensure 
that students will continue to have access to funds for postsecondary 
education. The provisions we included will protect the student loan 
programs by making changes in the administration of both the guaranteed 
and the direct lending programs so that both will operate more 
efficiently.
  Finally, Mr. Speaker, one other key component of our committee's 
budget reconciliation package is the legislation to expand health 
insurance coverage, through association health plans, to millions of 
employees of small businesses and the self-employed. By including in 
reconciliation the provisions of the Expanded Portability and Health 
Insurance Coverage Act of 1997, [EPHIC], we will empower millions of 
workers, their spouses and children to obtain more affordable health 
insurance through market-based reforms.
  We are enabling small businesses to extend health care coverage to 
millions of American families who have no coverage at all today and are 
creating greater portability of coverage for many of those who already 
do.
  EPHIC is consistent with the budget agreement, since it will expand 
health coverage to children at no additional Federal cost and give 
States more affordable coverage options to expand children's coverage 
under the $16 billion block grant in the bill.
  The problem of the uninsured, both children and adults, is 
predominantly a problem of small businesses lacking access to 
affordable coverage. Over 80 percent of the 40 million uninsured are in 
families with at least 1 employed worker, the vast majority of whom are 
employed by small businesses or are self-employed. Small business 
experts testified, both last Congress and again at a hearing on EPHIC 
in May, that 20 million Americans who now lack coverage might gain it 
under the pools created by this bill. Moreover, over 80 percent of all 
uninsured children are in families with working parents.
  Small businesses pay substantially more for insurance than do large 
corporations--that is why many cannot afford to offer coverage to their 
workers, even though they want to. EPHIC would expand the advantages 
that larger employers now enjoy to small- and medium-size employers by 
allowing such businesses to pool together, thus expanding coverage 
through the private market--without new taxes or costly mandates.
  Mr. Speaker, I am confident that this bill will help more Americans 
achieve the American Dream by taking the first steps toward balancing 
our Federal budget and I urge my colleagues to join me in supporting 
it.

[[Page H4589]]

  Mr. HOBSON. Mr. Speaker, I rise today to urge my colleagues to vote 
for the Balanced Budget Act.
  This bill today is where the rubber meets the road. We promised to 
balance the budget, we reached an agreement with the White House to do 
it, and now that agreement is being enacted with this legislation.
  This budget achieves a Federal spending level below 20 percent of GDP 
for the first time since 1974. It slows the growth of all Federal 
spending to just 3 percent for the next 5 years--that's a savings of 
$289 billion.
  We also promised to save Medicare from bankruptcy and expand health 
care options for seniors, and we're doing that with this legislation.
  Though I'm sure there might be some who disagree with small portions 
of this legislation, after all it is a very large bill, but we worked 
together across the aisle to get it done. This demonstrates that 
Congress and the administration can work together constructively--as 
they should--to solve problems.
  There's one group of people that is getting everything it wants from 
this bill, and that's the generation of Americans who will take the 
mantle of leadership in the years to come.
  Without the fundamental changes to Medicare and entitlement programs 
that we're enacting here, none of these valuable programs will be 
around for the next generation to enjoy. By acting now with this bill 
to save Medicare from bankruptcy and rein in the out-of-control costs 
of Medicaid, the next generation will inherit functioning, solvent 
programs and a national economy that is thriving and secure. That's the 
legacy I intend on leaving to my children, and it's the legacy the 
American people want us to leave to their children also. This bill 
makes it possible.
  Join me today in standing up for responsible spending, for seniors, 
for our children and grandchildren's future, and voting to approve the 
Balanced Budget Act.
  Mr. PACKARD. Mr. Speaker, I rise today in support of an issue that is 
of importance to families and workers across the nation--the Balanced 
Budget Act. Our budget proposal would give Americans the first balanced 
budget in 30 years, while providing tax relief for American families 
and shifting power, money and influence out of Washington and back to 
Americans at home.
  Passage of the Balanced Budget Act will be a great victory for the 
American people. It will show the American people that we are on target 
and committed to balancing the budget by 2002. Budgets are about much 
more than numbers. They are about priorities and people. This budget is 
about replacing Washington values with real America's values. People 
know that one-size-fits all policies from Washington don't work. Our 
budget returns power back home where people know how to solve their 
problems best.
  Furthermore, this budget proposal addresses the real concerns 
Americans have about stagnant wages and job security through tax relief 
and policies that will increase savings and investment. Greater savings 
and investment will provide our workers with the high-tech tools they 
need to compete successfully in the global marketplace--and that means 
more jobs and better pay.
  By preparing our country to meet the challenges of the next century, 
our budget ensures that the American Dream--that our children will 
enjoy a future with more and better opportunities than we now enjoy--
will live on for generations to come.
  Mr. PAUL. Mr. Speaker, I rise today in opposition to the Balanced 
Budget Act (H.R. 2015), authorizing the expenditure of an additional $3 
billion in taxpayer dollars on ``Welfare to Work'' programs as the 
Federal Government has no constitutional authority to spend taxpayer 
dollars on welfare-to-work programs.
  Congress is once again engaging in the tired ritual of the 5-year 
balanced budget plan. Repeatedly over the past 25 years there have been 
lofty proclamations that the budget would be balanced in 5 years 
because of government forecasts of continued growth. Each 5 year plan 
was announced with great fanfare and happy feelings of bipartisanship, 
yet, each plan fails to balance the budget because the economic 
forecasting upon which they were based never reflect actual economic 
circumstances.
  The Federal Government cannot predict exactly how the economy--the 
aggregate spending and saving habits of every individual in the 
nation--will behave over the course of the next 5 years. Because the 
economic situation in the future will be based upon the actions of 
individuals acting on their subjective preferences, these preferences 
are impossible to predict. The failure of every socialist government, 
whether totalitarian or democratic, to fulfill its leaders' promises of 
unlimited economic prosperity demonstrates the futility of government 
planning based upon the economic forecasts of government officials.
  It is, however, only a matter of time before the burden of taxes, 
spending, debt, and inflation catapult America's economy into yet 
another recession. When the optimistic projects of growth prove to be 
based more in hope than reality, the budget figures will be ``revised'' 
and a future Congress will once again confront the questions of 
balancing the budget.
  Even if the budget being considered by this Congress were guaranteed 
to balance the budget within 5 years, it should still be rejected 
because it fails to eliminate even one unconstitutional function of the 
Federal Government. Despite proclamations that ``the era of Big 
Government is over'', this budget actually increases taxpayer spending 
for many unconstitutional programs. The main problem with government 
policy today is not that the government cannot balance its books, but 
that the Federal Government is performing too many functions for which 
it lacks any constitutional authority.
  Mr. Speaker, the authorization of an additional three billion dollars 
for a welfare-to-work program, is a perfect example of how the budget 
proposal fails to address the basic question of how the welfare state 
exceeds the constitutional limitations on the power of the Federal 
Government. Under the tenth amendment to the United States 
Constitution, the Federal Government has no authority to take money 
from the people of Texas to spend on welfare programs for the people of 
New York. Welfare and job training programs are strictly the province 
of the individual States.
  The reconciliation proposal not only unconstitutionally spends 
Federal taxpayer funds on welfare programs, it dictates to the States 
how they must run their welfare-to-work programs. For example, States 
are required to spend 1 dollar of their own money for every 3 dollars 
of Federal money they receive, and they must distribute the funds 
according to a pre-determined Federal formula.
  Short of defunding all welfare programs and transferring 
responsibility for those programs back to the States and the people, 
Congress should provide maximum flexibility to the States to manage 
these programs as State officials see fit. For example, the amendment 
offered and later withdrawn by Mr. Johnson to allow State governments 
to use nongovernmental personnel in the determination of eligibility 
under the Medicaid, Food Stamp, and special supplemental nutrition 
programs for Women, Infants, and Children, is a step toward restoring 
federalism in welfare policy. It is not for Washington to determine the 
strengths and weaknesses of such a plan, these decisions are solely the 
responsibility of the States.
  In the name of transferring citizens from welfare to work, this bill 
provides millions of taxpayer dollars to move businesses onto the 
welfare rolls. Under this proposal, State governments may hand over 
taxpayer dollars to businesses for private sector job creation, 
employment, wage subsidies, on-the-job training, contacts with job 
placement companies, and job vouchers. By providing payments to private 
businesses who place and hire welfare recipients, Congress is creating 
a dangerous and powerful new constituency for welfare programs and, in 
effect, making it more difficult for future Congresses to reduce 
welfare expenditures.
  The welfare-to-work proposal also creates powerful disincentives for 
businesses to give welfare recipients a chance at a new life through an 
entry-level job. If this proposal becomes law, welfare recipients in 
entry-level jobs will be entitled to receive the minimum wage and be 
covered by certain health and safety regulations. Because mandating 
wages and benefits increases the costs to businesses of hiring new 
workers, any wage, safety, or health regulations discourage the hiring 
of new employees. This is especially true in the case of marginal 
employees who lack well-developed job skills. This bill restricts 
welfare recipients' ability to find gainful employment; the very 
population this bill is allegedly targeted to benefit.
  It is time to return to the most effective job creation machine in 
history--the free market. Any alternative necessarily results in 
suboptimal employment. Government is institutionally incapable of 
creating bonafide jobs. Private citizens acting freely are more than 
capable of caring for the needs of the less fortunate if the Federal 
Government stops appropriating so many of their resources for wasteful, 
bureaucratic, federal programs.
  In conclusion, Mr. Speaker, I urge Congress to reject the phony 
balanced budget plan before us today as that plan rests on two dubious 
notions: 1. Government can predict the economic future of the country; 
2. The burden of taxes and spending placed on the economy by government 
will not cause America to experience an economic downturn.
  Furthermore, this proposal continues the Federal Government's 
unconstitutional micro-managing of State welfare programs. This bill 
extends corporate welfare in the form of subsidies to businesses which 
hire current welfare recipients thus creating a new client group for 
the welfare State.
  Mr. Speaker, the only way to permanently balance the budget and end 
welfare as we

[[Page H4590]]

know it is to cease all federal expenditures for redistributionist 
programs not authorized under the United States Constitution. 
Therefore, all Members of the House of Representatives sincerely 
committed to limited government must oppose this proposal and instead 
work to defund all unconstitutional programs and return the authority 
for welfare programs to those best able to manage them.
  Mr. EVERETT. Mr. Speaker, While I support the vast majority of the 
provisions of this legislation to implement the balanced budget 
agreement, I must express my strong opposition to the dramatic cuts in 
the Medicaid Disproportionate Share Program (DSH) as recommended by the 
Commerce Committee.
  Mr. Speaker, this provision proposes a 40 percent cut in DSH payments 
to 13 so-called ``high DSH'' States. This drastic cut unfairly and 
punitively targets Alabama and 12 other States with unfortunately high 
levels of women, children, elderly, disabled and indigent living in 
poverty. Simply put, a 40 percent reduction in DSH payments over 5 
years will cause irreparable harm to Alabama's safety net hospitals, 
major urban teaching institutions and rural hospitals throughout the 
State. These hospitals, to a one, meet the highest standards of 
quality, access and compassion year after year.
  Mr. Speaker, we have a responsibility to address and fulfill the 
health care needs of our large number of Medicaid and indigent 
patients. Governor Fob James and the Alabama Medicaid Commission are 
actively seeking savings, program improvements and increased state 
participation. While other provisions contained in HR 2015 would assist 
their efforts, the DSH reductions would devastate the Alabama Medicaid 
Program and endanger the health and well-being of Alabama's poor, 
elderly and disabled, who suffer enough living in poverty.
  Mr. Speaker, I understand that the motion to recomit may address this 
matter, but I do not believe the motion is an appropriate avenue for 
resolution. The Leadership is aware of my concerns and has agreed to 
revisit this issue in conference. Hopefully, an agreement will be 
reached to change the formula to reflect a reasonable and compassionate 
funding allocation within the bonds of the budget plan.
  Mr. KLECZKA. Mr. Speaker, included in this budget package is a 
provision which severely threatens every American who seeks medical 
treatment. Under the Ways and Means Medicare Title we are considering 
today, noneconomic damages in medical malpractice suits will be limited 
to $250,000 per case--regardless of the number of persons or the number 
of actions brought. This, Mr. Speaker, is a terrible mistake.
  Mr. Speaker, we simply cannot afford to weaken our current medical 
malpractice laws. In this age of managed care, the financial incentives 
of medicine have been completely turned around. In today's managed care 
world, doctors make more money by ``managing care'', by not practicing 
good medicine, by not ordering tests, by not doing surgeries.
  The Republicans argue that the threat of malpractice suits is driving 
up medical costs unnecessarily. They argue that physicians are being 
forced to practice defensive medicine--forced to order additional 
unnecessary tests and procedures to cover themselves in case they might 
be sued. Mr. Speaker, this simply is not the case. In fact, a study 
conducted by the Office of Technology Assessment concluded that less 
than 8 percent of all diagnostic procedures are likely to be caused by 
conscious concern about malpractice.
  The Office of Technology Assessment and the Congressional Budget 
Office who have thoroughly studied this issue have never found any 
evidence that defensive medicine is a significant health care cost. In 
fact, many times this so-called defensive medicine is, in reality, 
medically appropriate. Even the most liberal estimate of the cost of 
defensive medicine amounts to only 0.07 percent of total annual health 
care costs.
  Furthermore, Mr. Speaker, a Harvard University Study indicated that 
of the 40 million hospital admission each year, 400,000 patients or 1% 
suffer preventable injuries from substandard care. 50,000 of these 
patients die from that care. The other 350,000 suffer non-fatal 
injuries resulting in 30 days disability or longer. Only 2 percent of 
these incidents--or, 8000 cases--actually make it to a malpractice 
trial. Clearly, malpractice, itself, is the true cost in today's health 
care system, not malpractice suits.
  By weakening malpractice laws we are likely to encourage more 
careless--not more careful--medical care. Let's not take this dangerous 
step. The real victims in the medical malpractice debate are not the 
physicians--the real victims are the thousands of patients who are 
killed or injured each year due to medical negligence. We absolutely 
cannot afford to abandon the protections provided by our judicial 
system. Let's maintain the protections that our current malpractice 
laws provide.
  Mr. BERRY. Mr. Speaker, I rise today in reluctant opposition to this 
budget package. I truly respect and admire those who worked long and 
hard to prepare this carefully crafted compromise. Both sides--the 
White House and Republican leaders--put aside many of their differences 
to agree to a budget that goes a long way toward putting our nation on 
healthy economic footing.
  I am a strong believer in our need to balance the Federal budget. I 
am a co-sponsor of legislation that would require a constitutional 
amendment to balance the budget, and I supported the spending cuts 
contained in the original outline of this proposal.
  Mr. Speaker, three weeks ago I voted in favor of the numbers. 
However, today, I cannot support the policies that have been crafted to 
stand behind those numbers.
  I cannot, for example, support the package's Medicare legislation. 
While I believe that we all need to work together to ensure Medicare's 
solvency, this proposal increases beneficiary premiums by an amount 
that I cannot support. It cuts payments to the hospitals in my rural 
district at a rate that will be difficult to absorb. Rural hospitals 
already operate at much lower margins than their urban counterparts and 
will be disproportionally impacted by this proposal. Every single 
hospital administrator in my district has written me in opposition to 
this proposal.
  In addition, it does not provide an adequate cushion against premium 
increases for the lowest-income. We can ensure Medicare's solvency for 
the long term without harming our seniors, and I think we must put some 
more thought into how to do that.
  The bill also does not have an adequate enforcement mechanism, 
something that I believe is crucial if we really are committed to 
balancing the budget. It's one thing to tell America that we're going 
to put our fiscal checkbook in order, but it's another thing if we 
don't provide any incentive to do so. As this budget now stands, the 
federal budget will increase during the first 2 years, requiring that 
all cuts to Federal programs take place in the last 3 years. I don't 
believe that putting off until tomorrow what we rightly ought to have 
the political courage to do today will balance the budget. If anything, 
this package could make our federal deficit even worse.
  In addition, the bill's plan to auction the broadcast spectrum may be 
too much, too fast. Counting on the revenues from this sale, without 
adequate protections for rural broadcasters, may jeopardize service in 
rural areas.
  Likewise, the bill's children's health program, instead of being 
modeled after the successful initiatives being implemented in Arkansas 
and other States, is fiscally irresponsible, $16 billion no-strings-
attached give-away that does not ensure that the funding will go to 
those who need it most--the children.
  In fact, the Congressional Budget Office estimates that this $16 
billion will cover less than 520,000 children of the 10 million now 
without health insurance. The average children's health insurance 
policy today costs about $800 a year--spending $16 billion for only 
520,000 policies is a waste of our taxpayer's hard earned money. This 
proposal, in effect, costs taxpayers $6,000 per policy, per year. More 
cost-effective children's health insurance legislation, such as a plan 
I developed as co-chairman of the House Democratic Caucus' Health Task 
Force, is needed. Our plan, with a more prudent and responsible use of 
the $16 billion in the budget agreement, would cover an estimated 5 
million children.
  Also of note is the fact that this budget does not provide adequate 
safeguards to our senior citizens who rely on the Medicaid Program for 
their care. I will continue to oppose any budget, any legislation or 
any law that in any way endangers the health care of our senior 
citizens. I also oppose the bill's repeal of adequate payments to 
hospitals under the Medicaid Program and its repeal of important 
consumer protections, which could result in reduced services to those 
who rely on this important program in Arkansas.
  Lastly, this budget repeals important labor and civil rights 
protections for those seeking to move from welfare to work. Last year, 
Congress voted to end the entitlement status of public assistance and 
we all agree that the cycle of welfare dependency should be stopped and 
that our citizens should be given the opportunity to obtain economic 
self-sufficiency. However, in doing so, we cannot expect former welfare 
recipients to work without the guaranteed protection granted to every 
other employee under the Fair Labor Standards Act.
  While I support many of the concepts contained in this budget, I 
cannot in good conscience support it today. I believe, however, that 
other opportunities will exist in the near future to support a more 
reasonable and effective budget. The House's consideration of this 
proposal today is just the first step in what will be a long political 
process. The final version of the proposal, following a House-Senate 
conference committee, may be something I can support.
  But today, with great regret, I must vote with my conscience and vote 
against this proposal.

[[Page H4591]]

  Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Speaker, I rise today to 
speak in opposition to this year's budget reconciliation bill. As the 
House considers this bill, I recall the words of the great Senator from 
Minnesota, Hubert Humprehy when he said:

     . . . that the moral test of government is how that 
     government treats those who are in the dawn of life, the 
     children; those who are in the twilight of life, the elderly; 
     and those who are in the shadows of life--the sick, the needy 
     and the handicapped.

  Mr. Speaker, this reconciliation bill fails that crucial test of 
government's compassion for all those individuals. When this Republican 
package fails to provide welfare workers the leave to care for their 
children and parents under the Family Medical Leave Act, it fails the 
moral test of government. A Republican bill that backs away from the 
commitment between GOP leaders and the President to restore Federal aid 
to disabled legal immigrants fails the test of how the Government 
should treat those in the shadows of life, the people with 
disabilities--who pay their taxes.
  Mr. Speaker, last week, certain members of the majority were behind 
the effort to issue an apology for slavery in this country. Less than a 
week later, their reconciliation bill states that benefits provided to 
welfare workers are not to be considered wages or compensation. Simply 
stated, this is an underhanded effort to deny welfare workers the labor 
and nondiscrimination protections that all other workers enjoy. In 
essence, this is confining the welfare worker to a modern day life of 
slavery. Mr. Speaker, how long will it take for the majority to 
apologize for this?
  Mr. Speaker, just yesterday, we heard many colleagues on the other 
side of the aisle speak in grandiose tones about human rights 
violations in China when we voted on MFN. They opposed granting MFN 
because they believed that it would not help stop human rights and 
civil liberty abuses. Unfortunately, they are quick to ignore the human 
rights of our own people with a bill that restricts access to health 
care insurance, fair pay protections for welfare workers, weak sexual 
harassment protections and the rights and benefits of legal immigrants.
  This bill continues to further the benefits of the rich while eroding 
the opportunities for the poor, the children, and those with 
disabilities. Mr. Speaker, I sincerely hope that any colleagues who 
voted for the budget resolution hoping that it would balance the budget 
while helping the unprotected, will now vote against this 
reconciliation bill as it falls tremendously short in helping those who 
need help the most.
  Mr. Speaker, I ask my colleagues to oppose this bill and have our 
Government live up to its moral test of how it treats the most 
vulnerable and disadvantaged in our country.
  Ms. McCARTHY of Missouri. Mr. Speaker, I rise to support passage of 
H.R. 2015, the Balanced Budget Act. Balancing the budget is one of the 
most important actions we can take to keep the economy strong, provide 
jobs, and keep the American dream alive for future generations. I offer 
my support to move the process forward because I see this bill as a 
work in progress. The measure has several problems that I hope will be 
resolved as the details are worked out in the Conference Committee. 
These are provisions that go beyond being characterized as difficult 
decisions; they are important issues that must be addressed or we will 
create problems larger than those we are trying to solve with this 
legislation.
  One of the most serious issues for my home State of Missouri is the 
method by which we achieve the Medicaid savings called for in the 
budget agreement. All of the savings for Medicaid are targeted to come 
from the Disproportionate Share Hospital Program, and in particular, 
the formula that was reported out of the Commerce Committee targeted 
the greatest amount of cuts from the States that use the 
Disproportionate Share Program the most. While there may have been 
problems associated with the program in other States, Missouri runs a 
very efficient program and has always used the Disproportionate Share 
funds to compensate hospitals for the cost of providing care to the 
indigent and uninsured. The formula should be changed by the Conference 
Committee to better distribute the savings from the Disproprionate 
Share Program among all States that use those funds.
  Another of the more serious problems with this bill is its complete 
disregard for sound spectrum policy. Once again, common sense has taken 
a back seat to budgetary needs, and another spectrum auction has been 
ordered that will not raise the funds that are expected. For the past 5 
years, spectrum space has been sold to pay for our budget needs, yet 
each year the financial return on these auctions has decreased. The 
future market is uncertain since the current market is saturated with 
spectrum. In addition, the spectrum market devaluation affects minority 
and women-owned businesses who have been allowed to make a longer 
payment schedule for their previous spectrum investments.
  A third item that must be improved is the provision relating to 
expanding health care coverage for uninsured children. As a member of 
the Democratic Children's Health Care Task Force, I support efforts to 
provide assistance to the estimated 10 million children in this country 
that currently are not insured. The Democratic alternative builds on 
the Medicaid Program, with an enhanced match which would provide 
children in need with the greatest chance for appropriate care and an 
adequate benefits package. The provisions of this bill use a block 
grant approach which, according to CBO, may only cover 500,000 
additional children, not the 5 million goal outlined in the budget 
negotiations.
  I commend all negotiators who have worked tirelessly on this 
legislation. The task of balancing the budget is not an easy one. We 
have to be prepared to make tough choices that may be difficult for our 
constituencies back home. The bill achieves an important goal that I 
have worked toward during my entire tenure in Congress, a balanced 
Federal budget. I therefore support efforts to send H.R. 2015 to the 
conference committee in the hope of further improvements prior to final 
passage.
  Mr. POSHARD. Mr. Speaker, it is with great regret that I rise today 
in opposition to the budget reconciliation bill. During my tenure in 
Congress, I have championed balancing the budget and eliminating our 
deficit. I have proudly supported a balanced budget constitutional 
amendment, and I voted in favor of the balanced budget agreement 
reached by President Clinton and Members of Congress. In the past, I 
have voted for the budget alternative offered by the Blue Dog Coalition 
of conservative Democrats because it followed a formula that foregoes 
large tax cuts until our budget is balanced. The Blue Dog budget 
thereby avoided deep cuts in programs that benefit our most vulnerable 
citizens, postponing the rewards associated with a balanced budget 
until we have all made the sacrifices necessary to achieve this goal.
  Mr. Speaker, I would like very much to be able to support the budget 
reconciliation before us today. I realize that it represents a huge 
step towards a goal that I have endorsed for years, and I appreciate 
the hard work and difficult choices of my colleagues that have allowed 
us to come this far. But I cannot vote for a budget that forces certain 
members of our society to bear such a tremendous burden while allowing 
others to enjoy the fruits of a balanced budget before one even exists. 
Those that will suffer under this bill are the same citizens that have 
already suffered too much. We cannot require sacrifice from some but 
not from others, and it is this conviction which will force me to vote 
against this bill, and to oppose the tax bill which will come before 
this House tomorrow.
  I have no doubt that the up-front tax cuts in the reconciliation 
legislation will, in time, cause the deficit to explode, creating a 
situation where we respond by taking more money away from programs 
which help the neediest people in this country. Why should we work this 
hard and this long to arrive at a plan to balance the budget, only to 
have the course reverse a few years from now, forcing our colleagues 
and successors to solve the same problems all over again?
  Among the specific provisions of this spending bill which cause me 
great concern is that which would permit privatization of 
administrative operations within the Food Stamp Program. I do not 
believe that private entities should be engaged in eligibility 
determinations for this or any other benefits program. In addition, I 
feel that this spending bill does a great disservice to our Nation's 
veterans, who have provided an invaluable contribution. Slashing their 
benefits is certainly not the way I want to demonstrate my gratitude. 
Furthermore, I must express my deep concern for the bill's piecemeal 
restoration of SSI benefits to legal immigrants. While I applaud 
provisions which return SSI and Medicaid benefits to those legal 
immigrants who were receiving them as of last August, I believe we must 
go further and guarantee benefits to those legal immigrants who were 
living in our country last summer but who unfortunately have become 
disabled since that time.
  No. Mr. Speaker, this bill is not perfect. When I voted to support 
the balanced budget agreement, I knew that there was still work to be 
done, but I was confident that resulting reconciliation bills would 
address the major problems, and I would be able to support them in good 
conscience. Sadly, it appears I was wrong, and now I must make yet 
another of the tough choices that such a process always requires, and 
vote against this legislation. I care deeply about balancing our 
Federal budget and have worked as hard as anyone in this body to reach 
this goal. But as important as this end may be, I cannot support the 
means that my colleagues have decided to employ in order to reach it. 
It is simply not right to ask those who can least afford it to bear the 
burdens of our compromises. Until we agree that sacrifices must be made 
across

[[Page H4592]]

the board, and until we agree that the rewards should be similarly 
enjoyed, I urge my colleagues to join me in opposing this budget 
legislation and in continuing to work to find equitable solutions. The 
goal of a balanced budget is well within our reach, but we are not 
quite there. Let's take the time and put in the effort to do this 
right, so that we can be proud of our contribution to the American 
people.
  Mr. KLECZKA. Mr. Speaker, today we are debating a budget 
reconciliation bill that contains a Medical Savings Account, or MSA, 
demonstration project. We have seen this Medical Savings Account 
demonstration project debated on this floor before. Last Congress, we 
passed a law establishing MSA's for the under 65 population. This 
budget bill takes the MSA idea one dangerous step further by opening up 
an MSA option for 500,000 seniors enrolled in the Medicare Program. Mr. 
Speaker, MSAs may sound like a good thing, but in reality they are very 
risky.
  Countless health care policy experts have concluded that MSA's will 
create extra costs for the Medicare Program and weaken the already 
compromised trust fund. The Congressional Budget Office estimated that 
the Republican demonstration included in this bill will cost the 
Federal Government over 5 years--$2.2 billion. In these times of 
budgetary austerity, when the Medicare trust fund is on the verge of 
collapse, I ask my colleagues: is this really where we ought to be 
targeting our precious resources?
  Supporters of the MSA demonstration project argue that MSA's will 
enable seniors to take responsibility for their own health care because 
they will be more aware of what their health care choices really cost. 
In reality, Mr. Speaker, MSA's will give the bank accounts of wealthier 
and healthier people, who now cost Medicare very little, Federal money 
every year to spend as they see fit. MSA's will allow these individuals 
to leave the larger insurance pool and the shared risk that the large 
insurance pool provides. And, as a result, the Medicare Program will be 
left with only the poorer and the sicker individuals who are more 
costly to treat. Mr. Speaker, MSA's will undermine the very purpose of 
insurance--shared risk. A shared risk that spreads the high medical 
costs of the few, among the many other individuals who have low medical 
costs.
  Mr. Speaker, adding MSA's to the Medicare Program is a terrible 
mistake. While we all support expanding seniors choices, we simply 
cannot afford the risks that the MSA's in this bill pose to the long-
term financial stability of the Medicare Program.
  Mr. MARKEY. Mr. Speaker, is it just me, or have we gone ``Back to the 
Future.'' My colleagues on the other side of the aisle are once again 
presenting the American people with a false choice--slashing Medicare 
to provide huge tax breaks for the wealthiest Americans. The Republican 
leadership seems caught in a playback loop--putting on a straight face 
and arguing here on the floor and in committee that cutting $115 
billion in Medicare spending will somehow save the program, despite the 
fact that not one dime of these savings goes to the trust fund, and 
despite the fact that the budget plan also includes an $85 billion tax 
break for the wealthy. That's nearly a dollar for dollar tradeoff.
  And what would the Republicans have us trade off--health care for 
seniors versus health clubs for the wealthy--Medicare for maid service. 
Is this any way to make public policy?
  Is it sensible to construct a public policy that sends 87 percent of 
the benefits of tax and entitlement changes to people in the top 20 
percent of income levels in our country? Is it sensible to construct 
public policy that sends a measly 4 percent of the benefits to people 
in the bottom 60 percent of income levels?
  ``Holy hatchet job, Mr. Speaker'' the Republican Party's dynamic duo 
of proposals for this week is a double-barreled attack on working 
families. Piled on top of last year's policy changes, the Republican 
tax scheme will actually reduce the after-tax income of the poorest 20 
percent of our people by $420 per year. The top 20 percent in our 
country will get an after-tax raise of $2,500, and the top 1 percent 
get a whopping after-tax raise of $27,000.
  ``Riddle me this, Mr. Speaker:'' What piece of legislation expands 
tax subsidies for IRA's, nearly doubles the maximums for estate taxes, 
and reduces the alternative minimum tax on huge corporations? Why, it's 
the so-called Taxpayer Relief Act that we will take up tomorrow.
  Who would launch such a dastardly scheme?
  Our colleagues on the other side of the aisle like to claim that 
Democrats are waging class warfare on tax and entitlement issues. Well, 
Mr. Speaker, the facts speak for themselves. The Republicans have 
launched an all-out attack on seniors and working families. When the 
top 20 percent in our country are getting 87 percent of the benefits of 
this supply-side scheme, and when the scheme actually increases taxes 
for the 40 percent of Americans who earn less than $27,000 per year, 
who is making war on whom?
  This budget legislation makes the rich more comfortable and the poor 
more miserable. Only Mr. Freeze could produce a colder plan for 
seniors.
  Mr. Speaker, we're not in Gotham City. We should be more focused on 
tax and entitlement equity, than on turning a cold shoulder to seniors 
and the less fortunate. But that's not what Republican tax-cut 
crusaders have proposed.
  Republicans have voted to spend $2 billion on medical savings 
accounts [MSA's] to benefit the healthiest and wealthiest of our 
seniors. It's an experiment no less--and it comes at the same time that 
Republicans are proposing $115 billion in Medicare cuts to save the 
program.
  The $115 billion that the budget resolution slashes from Medicare has 
little or nothing to do with saving the program. And, if we're not 
actually saving the program, why are we being asked to make cuts--why 
are we being asked to raise premiums for seniors and cut payments to 
hospitals, doctors, community health centers, and home health care?
  Because Medicare once again has become the piggy bank to pay for tax 
breaks for the rich.
  This budget not only protects corporate welfare and shields big 
defense contractors, it shamelessly sacrifices seniors for CEO's. The 
budget ax is being sharpened and Medicare is back on the chopping 
block--all because Republicans need to come up with the cash to balance 
the budget and give huge tax breaks to the wealthy. Now, we all applaud 
those who have had the good fortune to be wealthy and successful--but 
let's not make the rich richer at the expense of quality health care 
for seniors.
  And make no mistake, the rich will get richer under the Republican 
plan--87 percent of the benefits of these tax and entitlement programs 
go to the top 20 percent in our country. On the tax cut alone, over 57 
percent of this tax cut flows to families with incomes of more than 
$250,000, just 5 percent of all Americans. At the same time, this plan 
hikes taxes on the 40 percent of Americans who earn less than $27,000 
per year.
  Who will really pay the price for this Republican largesse? Who pays, 
our parents and grandparents that's who. These proud men and women have 
fought for this country, sacrificed for this country, and many survived 
the Great Depression and turned this country around and made it such an 
economic success.
  Our seniors understand sacrifice. They struggled so that their 
children and grandchildren would have a better life, a more prosperous 
nation, and a more hopeful future.
  But what will happen when Medicare and Medicaid are cut for working 
families. What additional burdens will middle-aged Americans have to 
bear? If seniors are unable to cover the cost of their health care, 
whom will they turn to? their adult children, of course. And in each of 
these families the $64,000 question will be, do we pay for mom and 
dad's health care or do we pay to send the kids to college. No middle-
aged parent should have to make that choice.
  We should not insult our seniors' legacy of sacrifice by allowing the 
leadership of this Congress to sacrifice them--our parents and 
grandparents--just to give a tax cut to the rich and super rich.
  It was wrong in 1980. It was wrong in 1995. And it is wrong today.
  We can do better than this. Join me in standing up for fairness. Vote 
against this proposal. Let's not cut Medicare for seniors just to give 
huge tax breaks to the wealthiest Americans.


                   spectrum provisions of the budget

  We should be highly concerned about the increasing emphasis placed 
upon spectrum auction revenue to assist in balancing the Federal 
budget.
  Placing budgetary priorities foremost in FCC licensing decisions 
ultimately shortchanges the American public because spectrum allocation 
and licensing decisions must encompass a broad interpretation of the 
public interest, of which taxpayer interests are but one part.
  A short-term, temporary injection of cash into the Federal Treasury 
for the purpose of achieving revenue goals for an arbitrary 5-year 
budget target serves budgetary interests, but it does not necessarily 
serve the broader public interest.
  This auction is not going to raise the money that the CBO and OMB 
believe it will. Moreover, we will not see all of the rest of the money 
that has already been bid in previous auctions because we are flooding 
the market and making it awash with spectrum.
  There are literally billions that have to be collected from small 
businesses, women-owned firms and minority-owned firms who bid for 
spectrum at the FCC believing that they were bidding on a scarce 
resource. These are entities who historically have had difficulty in 
gaining access to capital. What will happen to their hopes of raising 
the funds necessary to

[[Page H4593]]

get into the marketplace and compete if the Federal Government rushes 
to make more frequencies available for bidding to some of the largest 
companies on the planet.
  This spectrum auction proposal represents a departure from the 
principles of diversity that we built into the spectrum authority we 
granted the FCC as part of the 1993 budget. In 1993, we said that we 
wanted to see a democratization and diversity in the holding of FCC 
licenses. In this budget, after we finally saw minorities and women-
owned businesses beginning to get access to this public resource, 
diversity and entrepreneurship is getting trumped by an increasing 
emphasis to simply let the deepest pockets bid on the spectrum. This is 
in direct contradiction to the message President Clinton delivered in 
California last week where he said that:

       We must continue to expand opportunity. Full participation 
     in our strong and growing economy is the best antidote to 
     envy, despair, and racism. We must press forward to move 
     millions more from poverty and welfare to work; to bring the 
     spark of enterprise to inner cities * * * We should not stop 
     trying to equalize economic opportunity.

  Further, the idea that an auction in the year 2001 for spectrum from 
the broadcasters that will not be returned to the Government in 2007 is 
a very dubious way to raise money. I offered an amendment in committee 
to make this return of spectrum more likely by requiring after 2001 
that all new TV's be digital capable. That amendment was not agreed to.


                  changes from commerce committee bill

  The bill before us allows the FCC the discretion--rather than 
mandatory based upon a 95 percent digital TV household penetration 
test--an extension of the date by which TV broadcasters must return 
their so-called ``analog'' spectrum from 2007 to some later date.
  The bill, however, takes away a Commerce Committee requirement for 
minimum bids for FCC auctions. A few weeks ago, licenses for wireless 
communications services [WCS] in 4 states sold at auction for a total 
of $4. This WCS auction was estimated by CBO to raise $1.8 billion and 
yet raised only $13 million. Why should we condone a firesale on the 
public's assets.

                  [From the CQ's House Action Reports]

               Changes to H.R. 2015, Balanced Budget Act

                   (By Joe Nyitray and Chuck Conlon)

       The recommended rule automatically incorporates several 
     changes into H.R. 2015, Balanced Budget Act, as reported by 
     the Budget Committee.


                          Spectrum Provisions

       The rule modifies the bill's spectrum auction provisions to 
     increase from $9.7 billion to $20.3 billion over five years 
     the revenues that would be generated through sales of the 
     radio broadcast spectrum. The increased revenue are accounted 
     for by striking or relaxing numerous restrictions included in 
     the bill on the FCC's ability to auction spectrum.
       Among other changes, the rule strikes the bill's 
     requirements that minimum bids equal two-thirds of previous 
     CBO estimates, and that the FCC void spectrum auctions that 
     fail to meet such minimums. It makes discretionary (rather 
     than mandatory) FCC authority to extend the deadline of 2006 
     for referring the analog spectrum for television stations 
     where more than 5% of the station's viewers continue to rely 
     exclusively on over-the-air analog television signals; it 
     requires the FCC to complete by the end of FY 2002 the 
     bidding and assignment of licenses for returned analog 
     television spectrum and spectrum used for UHF channels 60 
     through 69 (the bill only requires that bidding for such 
     spectrum commence by July 1, 2001); it requires the FCC to 
     ``seek to assure'' that low-power TV stations currently 
     assigned to channels 60 through 69 be reassigned to a lower 
     channel (the bill prohibits the auctioning of that spectrum 
     unless such TV stations are reassigned to lower channels 
     prior to such auctions); and it eliminates provisions that 
     prohibit the reallocation of spectrum used by NASA for space 
     research.


                 Low-Income Medicare Premium Protection

       The recommended rule adds an additional $1 billion to the 
     $500 million already in the bill for Medicaid to help pay the 
     Medicare Part B premium for low-income beneficiaries, thereby 
     bringing the total up to $1.5 billion, the amount called for 
     in the balanced budget agreement between the President and 
     congressional leaders.
  Mr. FRELINGHUYSEN. Mr. Speaker, I rise today in support of H.R. 2015, 
the Fiscal Year 1998 Balanced Budget Act.
  My priority as a Member of Congress has been to work toward 
implementation of a balanced Federal budget. Over the course of the 
past 3 years, the Republican Congress has reduced the deficit and cut 
Government spending by $43 billion. We have also raised the level of 
debate on this issue to the point that we are at today. It took 
Republican leadership to get it to this point in history as we are 
about to vote on a proposal to balance the Federal budget by 2002--the 
first balanced Federal budget since 1969.
  I am pleased to stand in support of taking the next step forward 
towards securing a better future for our children and for our country. 
This budget sets reasonable priorities for Federal Government spending. 
And, later this week, we will vote on another proposal to return money 
to the pockets of hard-working American citizens.
  This agreement balances our country's economic needs with our 
commitment to our veterans, seniors, students, and hard-working 
taxpayers, and allows generous spending on programs that are important 
to them.
  The package also contains important reforms to the Medicare program, 
that serves so many older Americans in my District and millions of 
Americans across the country. Under this agreement, the Medicare part A 
trust fund will be preserved and protected for at least 10 years. We 
make these reforms while increasing spending on the program each year.
  Seniors will be given greater choices in their health care coverage. 
For the first time, beneficiaries will have the option of enrolling in 
medical savings accounts. The range of preventive benefits will be 
expanded to include mammography, diabetes, and prostate and colorectal 
cancer screenings.
  The budget reconciliation package makes other important changes to 
the delivery of health care. States will be provided with greater 
flexibility to manage the Medicaid Program and in turn, Federal outlays 
on Medicaid will be reduced by approximately $11.4 billion over the 
next 5 years. At the same time, States will share a $16 billion block 
grant to provide health insurance for currently uninsured children from 
low-income families.
  H.R. 2015 also makes reasonable changes to existing welfare and 
immigration laws that were enacted in the 104th Congress. It maintains 
the core reforms to welfare, SSI, and food stamps, yet restores 
benefits to a vulnerable group of legal immigrants, the aged and 
disabled, who were receiving SSI at the time the laws were signed.
  As more and more Americans enroll in managed care, it is critical to 
address some concerns that have been raised about the management of 
these programs. H.R. 2015 includes a number of important consumer 
protections for Medicare and Medicaid recipients enrolled in managed 
care. Included are proposals to prohibit a managed care plan from 
preventing a physician from advising a patient, and requires that the 
length of a Medicaid recipients hospital stay be determined by the 
patient and doctor, instead of a health management organization.
  For these, and many other reasons, I am pleased to support this 
budget that makes commonsense spending decisions, sets priorities, 
continues adequate levels of spending on important Federal programs to 
protect our health, safety, seniors, families, and children. This 
budget resolution is true to our commitment to balance the Federal 
budget and live within our means. It assures fiscal discipline and it 
takes power out of Washington and returns it to New Jersey and our 
neighborhoods.
  The SPEAKER pro tempore. All time for debate has expired.
  Pursuant to House Resolution 174, the bill is considered as read for 
amendment, and the previous question is ordered.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.

                              {time}  1715


            Motion to Recommit Offered by Mr. Brown of Ohio

  Mr. BROWN of Ohio. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore (Mr. Dreier). Is the gentleman opposed to the 
bill?
  Mr. BROWN of Ohio. In its current form, I am, Mr. Speaker.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

             Motion to Recommit H.R. 2015 with Instructions

                      Offered by Mr. Brown of Ohio

       Mr. Brown of Ohio moves to recommit the bill H.R. 2015 to 
     the Committee on the Budget with instructions to report the 
     same back to the House forthwith with the following 
     amendment:
       Strike subtitle F of title III and insert the following:
       Subtitle F--Child Health Insurance Initiative Act of 1997

     SEC. 3500. SHORT TITLE OF SUBTITLE.

       This subtitle may be cited as the ``Child Health Insurance 
     Initiative Act of 1997''.

                      CHAPTER 1--IMPROVED OUTREACH

     SEC. 3501. GRANT PROGRAM TO PROMOTE OUTREACH EFFORTS.

       (a) Authorization of Appropriations.--There are authorized 
     to be appropriated, for each fiscal year beginning with 
     fiscal year 1998 to the Secretary of Health and Human 
     Services, $25,000,000 for grants to States, localities, and 
     nonprofit entities to promote outreach efforts to enroll 
     eligible children under the medicaid program under title XIX

[[Page H4594]]

     of the Social Security Act (42 U.S.C. 1396 et seq.) and 
     related programs.
       (b) Use of Funds.--Funds under this section may be used to 
     reimburse States, localities, and nonprofit entities for 
     additional training and administrative costs associated with 
     outreach activities. Such activities include the following:
       (1) Use of a common application form for federal child 
     assistance programs.--Implementing use of a single 
     application form (established by the Secretary and based on 
     the model application forms developed under subsections (a) 
     and (b) of section 6506 of the Omnibus Budget Reconciliation 
     Act of 1989 (42 U.S.C. 701 note; 1396a note)) to determine 
     the eligibility of a child or the child's family (as 
     applicable) for assistance or benefits under the medicaid 
     program and under other Federal child assistance programs 
     (such as the temporary assistance for needy families program 
     under part A of title IV of the Social Security Act (42 
     U.S.C. 601 et seq.), the food stamp program, as defined in 
     section 3(h) of the Food Stamp Act of 1977 (7 U.S.C. 
     2012(h)), and the State program for foster care maintenance 
     payments and adoption assistance payments under part E of 
     title IV of the Social Security Act (42 U.S.C. 670 et seq.)).
       (2) Expanding outstationing of eligibility personnel.--
     Providing for the stationing of eligibility workers at sites, 
     such as hospitals and health clinics, at which children 
     receive health care or related services.
       (c) Application, Etc.--Funding shall be made available 
     under this section only upon the approval of an application 
     by a State, locality, or nonprofit entity for such funding 
     and only upon such terms and conditions as the Secretary 
     specifies.
       (d) Administration.--The Secretary may administer the grant 
     program under this section through the identifiable 
     administrative unit designated under section 509(a) of the 
     Social Security Act (42 U.S.C. 709(a)) to promote 
     coordination of medicaid and maternal and child health 
     activities and other child health related activities.

                      CHAPTER 2--MEDIKIDS PROGRAM

     SEC. 3521. STATE ENTITLEMENT TO PAYMENT FOR MEDIKIDS PROGRAM.

       (a) In General.--Each State that has a plan for a child 
     health insurance program, or MediKids program, approved by 
     the Secretary is entitled to receive, from amounts in the 
     Treasury not otherwise appropriated and for each fiscal year 
     beginning with fiscal year 1998, payment of the amounts 
     provided under section 3523.
       (b) Application.--The Secretary shall establish a procedure 
     for the submittal and approval of plans for MediKids programs 
     under this chapter. The Secretary shall approve the plan of a 
     State for such a program if the Secretary determines that--
       (1) the State is meeting the medicaid coverage requirements 
     of section 3522(a), and
       (2) the plan provides assurances satisfactory to the 
     Secretary that the MediKids program will be conducted 
     consistent with the applicable requirements of section 3522.

     SEC. 3522. REQUIREMENTS FOR APPROVAL OF MEDIKIDS PROGRAM.

       (a) Adequate Medicaid Coverage.--The medicaid coverage 
     requirements of this subsection are the following:
       (1) Coverage of pregnant women and children and infants up 
     to 185 percent of poverty.--The State has established 185 
     percent of the poverty line as the applicable percentage 
     under section 1902(l)(2)(A) of the Social Security Act (42 
     U.S.C. 1396a(l)(2)(A)).
       (2) Coverage of children up to 19 years of age.--The State 
     provides, either through exercise of the option under section 
     1902(l)(1)(D) of such Act (42 U.S.C. 1396a(l)(1)(D)) or 
     authority under section 1902(r)(2) of such Act (42 U.S.C. 
     1396a(r)(2)) for coverage under section 1902(l)(1)(D) of such 
     Act of individuals under 19 years of age, regardless of date 
     of birth.
       (3) Maintenance of effort.--
       (A) Medicaid.--Subject to subparagraph (B), the State--
       (i) has not modified the eligibility requirements for 
     children under the State medicaid plan, as in effect on 
     January 1, 1997 in any manner that would have the effect of 
     reducing the eligibility of children for coverage under such 
     plan, and
       (ii) will use the funds provided under this chapter to 
     supplement and not supplant other Federal and State funds.
       (B) Waiver exception.--Subparagraph (A) shall not apply to 
     modifications made pursuant to an application for a waiver 
     under section 1115 of the Social Security Act (42 U.S.C. 
     1315) submitted before January 1, 1997.
       (b) Coverage of Uninsured Children.--
       (1) In general.--A MediKids program shall not provide 
     benefits for children who are otherwise covered for such 
     benefits under a medicaid plan or under a group health plan, 
     health insurance coverage, or other health benefits coverage, 
     but may expend funds for outreach and other activities in 
     order to promote coverage under such plans.
       (2) Construction.--Nothing in this subsection shall be 
     construed as requiring a MediKids plan of a State to provide 
     coverage for all near poverty level children described in 
     paragraph (1) who are residing in the State.
       (c) Medicaid-Equivalent Benefits.--Subject to subsection 
     (d), a MediKids program shall provide benefits to eligible 
     children for the equivalent items and services for which 
     medical assistance is available (other than cost sharing) to 
     children under the State's medicaid plan.
       (d) Premiums and Cost-Sharing.--
       (1) In general.--Subject to paragraphs (2) and (3), a 
     MediKids program may--
       (A) require the payment of premiums as a condition for 
     coverage, but only for a covered child whose family income 
     exceeds the poverty line;
       (B) impose deductibles, coinsurance, copayments, and other 
     forms of cost-sharing with respect to benefits under the 
     program; and
       (C) vary the levels of premiums, deductibles, coinsurance, 
     copayments, and other cost-sharing based on a sliding scale 
     related to the family income of the covered child.
       (2) Limits on premiums and cost-sharing.--The Secretary 
     shall establish limits on the amount of cost-sharing expenses 
     (including premiums, deductibles, coinsurance, copayments, 
     and any other required financial contribution) that may be 
     applied under the program. Such limits shall assure that 
     total cost sharing expenses for children participating in 
     such program are reasonable in relation to the income of 
     their family (and taking into account the other types of 
     expenses generally incurred by such families and family size) 
     and that such cost sharing expenses do not unreasonably 
     reduce access to the coverage or covered services provided 
     under such program.
       (3) No cost sharing for preventive services.--A MediKids 
     program may not impose deductibles, coinsurance, copayments, 
     or similar cost sharing for preventive services.

     SEC. 3523. PAYMENT AMOUNTS.

       (a) Total Amount Available.--
       (1) In general.--The total amount of funds that is 
     available for payments under this chapter in any fiscal year 
     is the base amount specified in paragraph (2) for the fiscal 
     year reduced by the amount specified under paragraph (3) for 
     the fiscal year.
       (2) Base amount.--The base amount specified under this 
     paragraph for fiscal year 1998 and any subsequent fiscal year 
     is $2,805,000,000.
       (3) Offset for certain increased medicaid expenditures.--
       (A) In general.--Subject to subparagraph (B), the amount 
     specified under this paragraph for a fiscal year is the 
     amount of aggregate additional Federal expenditures under 
     made title XIX of the Social Security Act during the fiscal 
     year that the Secretary estimates, before the beginning of 
     the fiscal year, is attributable to imposition of the 
     conditions described in section 3522(a). For purposes of 
     applying the previous sentence, any Federal expenditures that 
     result from an increase in the applicable percentage under 
     section 1902(l)(2)(A) of the Social Security Act above the 
     percentage in effect as of June 25, 1997, or from any 
     exercise of an option described in section 3522(a)(2) 
     effected on or after such date, shall be treated as 
     additional Federal expenditures attributable to the 
     imposition of the conditions described in section 3522(a).
       (B) Adjustment to reflect actual expenditures.--After the 
     end of each fiscal year, the Secretary shall determine the 
     actual amount of the additional Federal expenditures 
     described in subparagraph (A) for the fiscal year. The 
     Secretary shall adjust the amount otherwise specified under 
     subparagraph (A) for subsequent years to take into account 
     the amount by which the amounts estimated for previous fiscal 
     years under such subparagraph were greater, or less than, the 
     actual amount of the expenditures for such years.
       (b) Allotment Among States.--
       (1) In general.--The Secretary shall establish a formula 
     for the allotment of the total amount of funds available 
     under subsection (a) among the qualifying States for each 
     fiscal year.
       (2) Basis.--The formula shall be based upon the Secretary's 
     estimate of the number of near poverty level children in the 
     State as a proportion of the total of such numbers for all 
     the qualifying States.
       (3) Carryforward.--If the Secretary does not pay to a State 
     under subsection (c) in a fiscal year the amount of its 
     allotment in that fiscal year under this subsection, the 
     amount of its allotment under this subsection for the 
     succeeding fiscal year shall be increased by the amount of 
     such shortfall.
       (c) Payments.--
       (1) In general.--From the allotment of each qualifying 
     State under subsection (b) for a fiscal year, the Secretary 
     shall pay to the State for each quarter in the fiscal year an 
     amount equal to 75 percent of the total amount expended 
     during such quarter to carry out the State's MediKids 
     program.
       (2) Not counting cost sharing.--For purposes of paragraph 
     (1), if a MediKids program imposes premiums for coverage or 
     requires payment of deductibles, coinsurance, copayments, or 
     other cost sharing, under rules of the Secretary, 
     expenditures attributable to such premiums or cost sharing 
     shall not be taken into account under paragraph (1).
       (d) State Entitlement.--This chapter constitutes budget 
     authority in advance of appropriations Acts, and represents 
     the obligation of the Federal Government to provide for the 
     payment to qualifying States of amounts provided under this 
     section.

     SEC. 3529. DEFINITIONS.

       For purposes of this chapter:
       (1) The term ``child'' means an individual under 19 years 
     of age.
       (2) The term ``medicaid plan'' means the plan of medical 
     assistance of a State under title XIX of the Social Security 
     Act.

[[Page H4595]]

       (3) The term ``MediKids program'' means a child health 
     insurance program of a State under this title.
       (4) The term ``near poverty level child'' means a child the 
     family income of which (as defined by the Secretary) is at 
     least 100 percent, but less than 300 percent, of the poverty 
     line.
       (5) The term ``poverty line'' has the meaning given such 
     term in section 673(2) of the Community Services Block Grant 
     Act (42 U.S.C. 9902(2)), including any revision required by 
     such section.
       (6) The term ``qualifying State'' means a State with a 
     MediKids program for which a plan is submitted and approved 
     under this title.
       (7) The term ``Secretary'' means the Secretary of Health 
     and Human Services .
       (8) The term ``State'' means the 50 States, the District of 
     Columbia, Puerto Rico, the Virgin Islands, Guam, American 
     Samoa, and the Northern Mariana Islands.

 CHAPTER 3--CONTINUATION OF MEDICAID ELIGIBILITY FOR DISABLED CHILDREN 
                         WHO LOSE SSI BENEFITS

     SEC. 3531. CONTINUATION OF MEDICAID ELIGIBILITY FOR DISABLED 
                   CHILDREN WHO LOSE SSI BENEFITS.

       (a) In General.--Section 1902(a)(10)(A)(i)(II) of the 
     Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(II)) is 
     amended by inserting ``(or were being paid as of the date of 
     enactment of section 211(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996 (P.L. 104-
     193)) and would continue to be paid but for the enactment of 
     that section'' after ``title XVI''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to medical assistance furnished on or after July 1, 
     1997.

       CHAPTER 4--ASSURING CHILDREN'S ACCESS TO HEALTH INSURANCE

     SEC. 3541. GUARANTEED AVAILABILITY OF INDIVIDUAL HEALTH 
                   INSURANCE COVERAGE TO UNINSURED CHILDREN.

       (a) In General.--Title XXVII of the Public Health Service 
     Act, as added by section 111(a) of the Health Insurance 
     Portability and Accountability Act of 1996, is amended by 
     inserting after section 2741 the following new section:

     ``SEC. 2741A. GUARANTEED AVAILABILITY OF INDIVIDUAL HEALTH 
                   INSURANCE COVERAGE TO UNINSURED CHILDREN.

       ``(a) Guaranteed Availability.--
       ``(1) In general.--Subject to the succeeding subsections of 
     this section, each health insurance issuer that offers health 
     insurance coverage (as defined in section 2791(b)(1)) in the 
     individual market in a State, in the case of an eligible 
     child (as defined in subsection (b)) desiring to enroll in 
     individual health insurance coverage--
       ``(A) may not decline to offer such coverage to, or deny 
     enrollment of, such child;
       ``(B) either (i) does not impose any preexisting condition 
     exclusion (as defined in section 2701(b)(1)(A)) with respect 
     to such coverage, or (ii) imposes such a preexisting 
     condition exclusion only to the extent such an exclusion may 
     be imposed under section 2701(a) in the case of an individual 
     who is not a late enrollee; and
       ``(C) shall provide that the premium for the coverage is 
     determined in a manner so that the ratio of the premium for 
     such eligible children to the premium for eligible 
     individuals described in section 2741(b) does not exceed the 
     ratio of the actuarial value of such coverage (calculated 
     based on a standardized population and a set of standardized 
     utilization and cost factors) for children to such actuarial 
     value for such coverage for such eligible individuals.
       ``(2) Substitution by state of acceptable alternative 
     mechanism.--The requirement of paragraph (1) shall not apply 
     to health insurance coverage offered in the individual market 
     in a State in which the State is implementing an acceptable 
     alternative mechanism under section 2744.
       ``(b) Eligible Child Defined.--In this part, the term 
     `eligible child' means an individual born after September 30, 
     1983, who has not attained 19 years of age and--
       ``(1) who is a citizen or national of the United States, an 
     alien lawfully admitted for permanent residence, or an alien 
     otherwise permanently residing in the United States under 
     color of law;
       ``(2) who is not eligible for coverage under (A) a group 
     health plan, (B) part A or part B of title XVIII of the 
     Social Security Act, or (C) a State plan under title XIX of 
     such Act (or any successor program), and does not have other 
     health insurance coverage; and
       ``(3) with respect to whom the most recent coverage (if 
     any, within the 1-year period ending on the date coverage is 
     sought under this section) was not terminated based on a 
     factor described in paragraph (1) or (2) of section 2712(b) 
     (relating to nonpayment of premiums or fraud).

     For purposes of paragraph (2)(A), the term `group health 
     plan' does not include COBRA continuation coverage.
       ``(c) Incorporation of Certain Provisions.--
       ``(1) In general.--Subject to paragraph (2), the provisions 
     of subsections (c), (d), (e) and (f) (other than paragraph 
     (1)) of section 2741 and section 2744 shall apply in relation 
     to eligible children under subsection (a) in the same manner 
     as they apply in relation to eligible individuals under 
     section 2741(a).
       ``(2) Special rules for acceptable alternative 
     mechanisms.--With respect to applying section 2744 under 
     paragraph (1)--
       ``(A) the requirement in subsection (a)(1)(B) shall be 
     applied instead of the requirement of section 2744(a)(1)(B);
       ``(B) the requirement in subsection (a)(1)(C) shall be 
     applied instead of the requirement of section 2744(a)(1)(D); 
     and
       ``(C) any deadline specified in such section shall be 1 
     year after the deadline otherwise specified.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take apply 1 year after the effective date for section 
     2741 of the Public Health Service Act (as provided under 
     section 111(b)(1) of the Health Insurance Portability and 
     Accountability Act of 1996).

                   Amendment to H.R. --. as Reported

                     Offered by Mr. Barton of Texas

       At the end of the bill, add the following new title:
                  TITLE XI--BUDGET PROCESS ENFORCEMENT

     SEC. 11001. SHORT TITLE AND TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the ``Balanced 
     Budget Assurance Act of 1997''.
       (b) Table of Contents.--

                  TITLE XI--BUDGET PROCESS ENFORCEMENT

Sec. 11001. Short title and table of contents.
Sec. 11002. Definitions.

  Subtitle A--Ensure That the Bipartisan Balanced Budget Agreement of 
                         1997 Achieves Its Goal

Sec. 11101. Timetable.
Sec. 11102. Procedures to avoid sequestration or delay of new revenue 
              reductions.
Sec. 11103. Effect on Presidents' budget submissions; point of order.
Sec. 11104. Deficit and revenue targets.
Sec. 11105. Direct spending caps.
Sec. 11106. Economic assumptions.
Sec. 11107. Revisions to deficit and revenue targets and to the caps 
              for entitlements and other mandatory spending.

                   Subtitle B--Enforcement Provisions

Sec. 11201. Reporting excess spending.
Sec. 11202. Enforcing direct spending caps.
Sec. 11203. Sequestration rules.
Sec. 11204. Enforcing revenue targets.
Sec. 11205. Exempt programs and activities.
Sec. 11206. Special rules.
Sec. 11207. The current law baseline.
Sec. 11208. Limitations on emergency spending.

     SEC. 11002. DEFINITIONS.

       For purposes of this title:
       (1) Eligible population.--The term ``eligible population'' 
     shall mean those individuals to whom the United States is 
     obligated to make a payment under the provisions of a law 
     creating entitlement authority. Such term shall not include 
     States, localities, corporations or other nonliving entities.
       (2) Sequester and sequestration.--The terms ``sequester'' 
     and ``sequestration'' refer to or mean the cancellation of 
     budgetary resources provided by discretionary appropriations 
     or direct spending law.
       (3) Breach.--The term ``breach'' means, for any fiscal 
     year, the amount (if any) by which outlays for that year 
     (within a category of direct spending) is above that 
     category's direct spending cap for that year.
       (4) Baseline.--The term ``baseline'' means the projection 
     (described in section 11207) of current levels of new budget 
     authority, outlays, receipts, and the surplus or deficit into 
     the budget year and the outyears.
       (5) Budgetary resources.--The term ``budgetary resources'' 
     means new budget authority, unobligated balances, direct 
     spending authority, and obligation limitations.
       (6) Discretionary appropriations.--The term ``discretionary 
     appropriations'' means budgetary resources (except to fund 
     direct spending programs) provided in appropriation Acts. If 
     an appropriation Act alters the level of direct spending or 
     offsetting collections, that effect shall be treated as 
     direct spending. Classifications of new accounts or 
     activities and changes in classifications shall be made in 
     consultation with the Committees on Appropriations and the 
     Budget of the House of Representatives and the Senate and 
     with CBO and OMB.
       (7) Direct spending.--The term ``direct spending'' means--
       (A) budget authority provided by law other than 
     appropriation Acts, including entitlement authority;
       (B) entitlement authority; and
       (C) the food stamp program.
     If a law other than an appropriation Act alters the level of 
     discretionary appropriations or offsetting collections, that 
     effect shall be treated as direct spending.
       (8) Entitlement authority.--The term ``entitlement 
     authority'' means authority (whether temporary or permanent) 
     to make payments (including loans and grants), the budget 
     authority for which is not provided for in advance by 
     appropriation Acts, to any person or government if, under the 
     provisions of the law containing such authority, the United 
     States is obligated to make such payments to persons or 
     governments who meet the requirements established by such 
     law.
       (9) Current.--The term ``current'' means, with respect to 
     OMB estimates included with a budget submission under section 
     1105(a) of title 31 U.S.C., the estimates consistent with the 
     economic and technical assumptions underlying that budget.

[[Page H4596]]

       (10) Account.--The term ``account'' means an item for which 
     there is a designated budget account designation number in 
     the President's budget.
       (11) Budget year.--The term ``budget year'' means the 
     fiscal year of the Government that starts on the next October 
     1.
       (12) Current year.--The term ``current year'' means, with 
     respect to a budget year, the fiscal year that immediately 
     precedes that budget year.
       (13) Outyear.--The term ``outyear'' means, with respect to 
     a budget year, any of the fiscal years that follow the budget 
     year.
       (14) OMB.--The term ``OMB'' means the Director of the 
     Office of Management and Budget.
       (15) CBO.--The term ``CBO'' means the Director of the 
     Congressional Budget Office.
       (16) Budget outlays and outlays.--The terms ``budget 
     outlays'' and ``outlays'' mean, with respect to any fiscal 
     year, expenditures of funds under budget authority during 
     such year.
       (17) Budget authority and new budget authority.--The terms 
     ``budget authority'' and ``new budget authority'' have the 
     meanings given to them in section 3 of the Congressional 
     Budget and Impoundment Control Act of 1974.
       (18) Appropriation act.--The term ``appropriation Act'' 
     means an Act referred to in section 105 of title 1 of the 
     United States Code.
       (19) Consolidated Deficit.--The term ``consolidated 
     deficit'' means, with respect to a fiscal year, the amount by 
     which total outlays exceed total receipts during that year.
       (20) Surplus.--The term ``surplus'' means, with respect to 
     a fiscal year, the amount by which total receipts exceed 
     total outlays during that year.
       (21) Direct spending caps.--The term ``direct spending 
     caps'' means the nominal dollar limits for entitlements and 
     other mandatory spending pursuant to section 11105 (as 
     modified by any revisions provided for in this Act).
  Subtitle A--Ensure That the Bipartisan Balanced Budget Agreement of 
                         1997 Achieves Its Goal

     SEC. 11101. TIMETABLE.

Action to be completed:
CBO economic and budget update.........................................
President's budget update based on new assumptions.....................
CBO and OMB updates....................................................
Preview report.........................................................
Not later than November 1 (and as soon as practical after the end of 
OMB and CBO Analyses of Deficits, Revenues and Spending Levels and ....
  Projections for the Upcoming Year.
Congressional action to avoid sequestration............................
OMB issues final (look back) report for prior year and preview for ....
  current year.
Presidential sequester order or order delaying new/additional revenues 
  reductions scheduled to take effect pursuant to reconciliation 
  legislation enacted in calendar year 1997.

     SEC. 11102. PROCEDURES TO AVOID SEQUESTRATION OR DELAY OF NEW 
                   REVENUE REDUCTIONS.

       (a) Special Message.--If the OMB Analysis of Actual 
     Spending Levels and Projections for the Upcoming Year 
     indicates that--
       (1) deficits in the most recently completed fiscal year 
     exceeded, or the deficits in the budget year are projected to 
     exceed, the deficit targets in section 11104;
       (2) revenues in the most recently completed fiscal year 
     were less than, or revenues in the current year are projected 
     to be less than, the revenue targets in section 11104; or
       (3) outlays in the most recently completed fiscal year 
     exceeded, or outlays in the current year are projected to 
     exceed, the caps in section 11104;
     the President shall submit to Congress with the OMB Analysis 
     of Actual Spending Levels and Projections for the Upcoming 
     Year a special message that includes proposed legislative 
     changes to--
       (A) offset the net deficit or outlay excess;
       (B) offset any revenue shortfall; or
       (C) revise the deficit or revenue targets or the outlay 
     caps contained in this Act;
     through any combination of--
       (i) reductions in outlays;
       (ii) increases in revenues; or
       (iii) increases in the deficit targets or expenditure caps, 
     or reductions in the revenue targets, if the President 
     submits a written determination that, because of economic or 
     programmatic reasons, none of the variances from the balanced 
     budget plan should be offset.
       (b) Introduction of the President's Package.--Not later 
     than November 15, the message from the President required 
     pursuant to subsection (a) shall be introduced as a joint 
     resolution in the House of Representatives or the Senate by 
     the chairman of its Committee on the Budget. If the chairman 
     fails to do so, after November 15, the joint resolution may 
     be introduced by any Member of that House of Congress and 
     shall be referred to the Committee on the Budget of that 
     House.
       (c) House Budget Committee Action.--The Committee on the 
     Budget of the House of Representatives shall, by November 15, 
     report a joint resolution containing--
       (1) the recommendations in the President's message, or 
     different policies and proposed legislative changes than 
     those contained in the message of the President, to 
     ameliorate or eliminate any excess deficits or expenditures 
     or any revenue shortfalls, or
       (2) any changes to the deficit or revenue targets or 
     expenditure caps contained in this Act, except that any 
     changes to the deficit or revenue targets or expenditure caps 
     cannot be greater than the changes recommended in the message 
     submitted by the President.
       (d) Procedure if the Committees on the Budget of the House 
     of Representatives or Senate Fails To Report Required 
     Resolution.--
       (1) Automatic discharge of committees on the budget of the 
     house.--If the Committee on the Budget of the House of 
     Representatives fails, by November 20, to report a resolution 
     meeting the requirements of subsection (c), the committee 
     shall be automatically discharged from further consideration 
     of the joint resolution reflecting the President's 
     recommendations introduced pursuant to subsection (a), and 
     the joint resolution shall be placed on the appropriate 
     calendar.
       (2) Consideration of discharge resolution in the house.--If 
     the Committee has been discharged under paragraph (1) above, 
     any Member may move that the House of Representatives 
     consider the resolution. Such motion shall be highly 
     privileged and not debatable. It shall not be in order to 
     consider any amendment to the resolution except amendments 
     which are germane and which do not change the net deficit 
     impact of the resolution.
       (e) Consideration of joint resolution in the house.--
     Consideration of resolution reported pursuant to subsection 
     (c) or (d) shall be pursuant to the procedures set forth in 
     section 305 of the Congressional Budget Act of 1974 and 
     subsection (d).
       (f) Transmittal to Senate.--If a joint resolution passes 
     the House of Representatives pursuant to subsection (e), the 
     Clerk of the House of Representatives shall cause the 
     resolution to be engrossed, certified, and transmitted to the 
     Senate within 1 calendar day of the day on which the 
     resolution is passed. The resolution shall be referred to the 
     Senate Committee on the Budget.
       (g) Requirements for Special Joint Resolution in the 
     Senate.--The Committee on the Budget of the Senate shall 
     report not later than December 1--
       (1) a joint resolution reflecting the message of the 
     President; or
       (2) the joint resolution passed by the House of 
     Representatives, with or without amendment; or
       (3) a joint resolution containing different policies and 
     proposed legislative changes than those contained in either 
     the message of the President or the resolution passed by the 
     House of Representatives, to eliminate all or part of any 
     excess deficits or expenditures or any revenue shortfalls, or
       (4) any changes to the deficit or revenue targets, or to 
     the expenditure caps, contained in this Act, except that any 
     changes to the deficit or revenue targets or expenditure caps 
     cannot be greater than the changes recommended in the message 
     submitted by the President.
       (h) Procedure if the Senate Budget Committee Fails To 
     Report Required Resolution.--
       (1) Automatic discharge of senate budget committee.--In the 
     event that the Committee on the Budget of the Senate fails, 
     by December 1, to report a resolution meeting the 
     requirements of subsection (g), the committee shall be 
     automatically discharged from further consideration of the 
     joint resolution reflecting the President's recommendations 
     introduced pursuant to subsection (a) and of the resolution 
     passed by the House of Representatives, and both joint 
     resolutions shall be placed on the appropriate calendar.
       (2) Consideration of discharge resolution in the senate.--
     (A) If the Committee has been discharged under paragraph (1), 
     any member may move that the Senate consider the resolution. 
     Such motion shall be highly privileged and not debatable. It 
     shall not be in order to consider any amendment to the 
     resolution except amendments which are germane and which do 
     not change the net deficit impact of the resolution.
       (B) Consideration of resolutions reported pursuant to 
     subsections (c) or (d) shall be pursuant to the procedures 
     set forth in section 305 of the Congressional Budget Act of 
     1974 and subsection (d).
       (C) If the joint resolution reported by the Committees on 
     the Budget pursuant to subsection (c) or (g) or a joint 
     resolution discharged in the House of Representatives or the 
     Senate pursuant to subsection (d)(1) or (h)(1) would 
     eliminate less than--
       (i) the entire amount by which actual or projected deficits 
     exceed, or revenues fall short of, the targets in this Act; 
     or
       (ii) the entire amount by which actual or projected outlays 
     exceed the caps contained in this Act;
     then the Committee on the Budget of the Senate shall report a 
     joint resolution, raising the deficit targets or outlay caps, 
     or reducing the revenue targets for any year in which actual 
     or projected spending, revenues or deficits would not conform 
     to the deficit and revenue targets or expenditure caps in 
     this Act.
       (k)  Conference Reports Shall Fully Address Deficit 
     Excess.--It shall not be in order in the House of 
     Representatives or the Senate to consider a conference report 
     on a joint resolution to eliminate all or part of

[[Page H4597]]

     any excess deficits or outlays or to eliminate all or part of 
     any revenue shortfall compared to the deficit and revenue 
     targets and the expenditure caps contained in this Act, 
     unless--
       (1) the joint resolution offsets the entire amount of any 
     overage or shortfall; or
       (2) the House of Representatives and Senate both pass the 
     joint resolution reported pursuant to subsection (j)(2).
     The vote on any resolution reported pursuant to subsection 
     (j)(2) shall be solely on the subject of changing the deficit 
     or revenue targets or the expenditure limits in this Act.

     SEC. 11103. EFFECT ON PRESIDENTS' BUDGET SUBMISSIONS; POINT 
                   OF ORDER.

       (a) Budget Submission.--Any budget submitted by the 
     President pursuant to section 1105(a) of title 31, United 
     States Code, for each of fiscal years 1998 through 2007 shall 
     be consistent with the spending, revenue, and deficit levels 
     established in sections 11104 and 11105 or it shall recommend 
     changes to those levels
       (b) Point of Order.--It shall not be in order in the House 
     of Representatives or the Senate to consider any concurrent 
     resolution on the budget unless it is consistent with the 
     spending, revenue, and deficit levels established in sections 
     11104 and 11105.

     SEC. 11104. DEFICIT AND REVENUE TARGETS.

       (a) Consolidated Deficit (or Surplus) Targets.--For 
     purposes of sections 11102 and 11107, the consolidated 
     deficit targets shall be--
       (1) for fiscal year 1998, $90,500,000,000;
       (2) for fiscal year 1999, $89,700,000,000;
       (3) for fiscal year 2000, $83,000,000,000;
       (4) for fiscal year 2001, $53,300,000,000; and
       (5) for fiscal year 2002, there shall be a surplus of not 
     less than $1,400,000,000.
       (b) Consolidated Revenue Targets.--For purposes of sections 
     11102, 11107, 11201, and 11204, the consolidated revenue 
     targets shall be--
       (1) for fiscal year 1998, $1,601,800,000,000;
       (2) for fiscal year 1999, $1,664,200,000,000;
       (3) for fiscal year 2000, $1,728,100,000,000;
       (4) for fiscal year 2001, $1,805,100,000,000; and
       (5) for fiscal year 2002, $1,890,400,000,000.

     SEC. 11105. DIRECT SPENDING CAPS.

       (a) In General.--Effective upon submission of the report by 
     OMB pursuant to subsection (c), direct spending caps shall 
     apply to all entitlement authority except for undistributed 
     offsetting receipts and net interest outlays. For purposes of 
     enforcing direct spending caps under this Act, each separate 
     program shown in the table set forth in subsection (d) shall 
     be deemed to be a category.
       (b) Budget Committee Reports.--Within 30 days after 
     enactment of this Act, the Budget Committees of the House of 
     Representatives and the Senate shall file with their 
     respective Houses identical reports containing account 
     numbers and spending levels for each specific category.
       (c) Report by OMB.--Within 30 days after enactment of this 
     Act, OMB shall submit to the President and each House of 
     Congress a report containing account numbers and spending 
     limits for each specific category.
       (d) Contents of Reports.--All direct spending accounts not 
     included in these reports under separate categories shall be 
     included under the heading ``Other Entitlements and Mandatory 
     Spending''. These reports may include adjustments among the 
     caps set forth in this Act as required below, however the 
     aggregate amount available under the ``Total Entitlements and 
     Other Mandatory Spending'' cap shall be identical in each 
     such report and in this Act and shall be deemed to have been 
     adopted as part of this Act. Each such report shall include 
     the actual amounts of the caps for each year of fiscal years 
     1998 through 2002 consistent with the concurrent resolution 
     on the budget for FY 1998 for each of the following 
     categories:
       Earned Income Tax Credit,
       Family Support,
       Federal retirement:
       Civilian/other,
       Military,
       Medicaid,
       Medicare,
       Social security,
       Supplemental security income,
       Unemployment compensation,
       Veterans' benefits,
       Medicare,
       Other entitlements and mandatory spending, and
       Aggregate entitlements and other mandatory spending.
     (e) Additional Spending Limits.--Legislation enacted 
     subsequent to this Act may include additional caps to limit 
     spending for specific programs, activities, or accounts with 
     these categories. Those additional caps (if any) shall be 
     enforced in the same manner as the limits set forth in such 
     joint explanatory statement.

     SEC. 11106. ECONOMIC ASSUMPTIONS.

       Subject to periodic reestimation based on changed economic 
     conditions or changes in eligible population, determinations 
     of the direct spending caps under section 11105, any breaches 
     of such caps, and actions necessary to remedy such breaches 
     shall be based upon the economic assumptions set forth in the 
     joint explanatory statement of managers accompanying the 
     concurrent resolution on the budget for fiscal year 1998 
     (House Concurrent Resolution 84, 105th Congress).

     SEC. 11107. REVISIONS TO DEFICIT AND REVENUE TARGETS AND TO 
                   THE CAPS FOR ENTITLEMENTS AND OTHER MANDATORY 
                   SPENDING.

       (a) Automatic Adjustments to Deficit and Revenue Targets 
     and to Caps for Entitlements and Other Mandatory Spending.--
     When the President submits the budget under section 1105(a) 
     of title 31, United States Code, for any year, OMB shall 
     calculate (in the order set forth below), and the budget and 
     reports shall include, adjustments to the deficit and revenue 
     targets, and to the direct spending caps (and those limits as 
     cumulatively adjusted) for the current year, the budget year, 
     and each outyear, to reflect the following:
       (1) Changes to revenue targets.--
       (A) Changes in growth.--For Federal revenues and deficits 
     under laws and policies enacted or effective before July 1, 
     1997, growth adjustment factors shall equal the ratio between 
     the level of year-over-year growth measured for the fiscal 
     year most recently completed and the applicable estimated 
     level for that year as described in section 11105.
       (B) Changes in inflation.--For Federal revenues and 
     deficits under laws and policies enacted or effective before 
     July 1, 1997, inflation adjustment factors shall equal the 
     ratio between the level of year-over-year growth measured for 
     the fiscal year most recently completed and the applicable 
     estimated level for that year as described in section 11105.
       (2) Adjustments to direct spending caps.--
       (A) Changes in concepts and definitions.--The adjustments 
     produced by changes in concepts and definitions shall equal 
     the baseline levels of new budget authority and outlays using 
     up-to-date concepts and definitions minus those levels using 
     the concepts and definitions in effect before such changes. 
     Such changes in concepts and definitions may only be made in 
     consultation with the Committees on Appropriations, the 
     Budget, and Government Reform and Oversight and Governmental 
     Affairs of the House of Representatives and the Senate.
       (B) Changes in net outlays.--Changes in net outlays for all 
     programs and activities exempt from sequestration under 
     section 11204.
       (C) Changes in inflation.--For direct spending under laws 
     and policies enacted or effective on or before July 1, 1997, 
     inflation adjustment factors shall equal the ratio between 
     the level of year-over-year inflation measured for the fiscal 
     year most recently completed and the applicable estimated 
     level for that years as described in section 11105 (relating 
     to economic assumptions). For direct spending under laws and 
     policies enacted or effective after July 1, 1997, there shall 
     be no adjustment to the direct spending caps (for changes in 
     economic conditions including inflation, nor for changes in 
     numbers of eligible beneficiaries) unless--
       (i) the Act or the joint explanatory statement of managers 
     accompanying such Act providing new direct spending includes 
     economic projections and projections of numbers of 
     beneficiaries; and
       (ii) such Act specifically provides for automatic 
     adjustments to the direct spending caps in section 11105 
     based on those projections.
       (D) Changes in eligible populations.--For direct spending 
     under laws and policies enacted or effective on or before 
     July 1, 1997, the basis for adjustments under this section 
     shall be the same as the projections underlying Table A-4, 
     CBO Baseline Projections of Mandatory Spending, Including 
     Deposit Insurance (by fiscal year, in billions of dollars), 
     published in An Analysis of the President's Budgetary 
     Proposals for Fiscal Year 1998, March 1997, page 53. For 
     direct spending under laws and policies enacted or effective 
     after July 1, 1997, there shall be no adjustment to the 
     direct spending caps for changes in numbers of eligible 
     beneficiaries unless--
       (i) the Act or the joint explanatory statement of managers 
     accompanying such Act providing new direct spending includes 
     economic projections and projections of numbers of 
     beneficiaries; and
       (ii) such Act specifically provides for automatic 
     adjustments to the direct spending caps in section 11105 
     based on those projections.
       (E) Intra-budgetary payments.--From discretionary accounts 
     to mandatory accounts. The baseline and the discretionary 
     spending caps shall be adjusted to reflect those changes.
       (c) Changes to Deficit Targets.--The deficit targets in 
     section 11104 shall be adjusted to reflect changes to the 
     revenue targets or changes to the caps for entitlements and 
     other mandatory spending pursuant to subsection (a).
       (d) Permissible Revisions to Deficit and Revenue Targets 
     and Direct Spending Caps.--Deficit and revenue targets and 
     direct spending caps as enacted pursuant to sections 11104 
     and 11105 may be revised as follows: Except as required 
     pursuant to section 11105(a), direct spending caps may only 
     be amended by recorded vote. It shall be a matter of highest 
     privilege in the House of Representatives and the Senate for 
     a Member of the House of Representatives or the Senate to 
     insist on a recorded vote solely on the question of amending 
     such caps. It shall not be in order for the Committee on 
     Rules of the House of Representatives to report a resolution 
     waiving the provisions of this subsection. This subsection 
     may be waived in the Senate only by an affirmative vote of 
     three-fifths of the Members duly chosen and sworn.

[[Page H4598]]

                   Subtitle B--Enforcement Provisions

     SEC. 11201. REPORTING EXCESS SPENDING.

       (a) Analysis of Actual Deficit, Revenue, and Spending 
     Levels.--As soon as practicable after any fiscal year, OMB 
     shall compile a statement of actual deficits, revenues, and 
     direct spending for that year. The statement shall identify 
     such spending by categories contained in section 11105.
       (b) Estimate of Necessary Spending Reduction.--Based on the 
     statement provided under subsection (a), the OMB shall issue 
     a report to the President and the Congress on December 15 of 
     any year in which such statement identifies actual or 
     projected deficits, revenues, or spending in the current or 
     immediately preceding fiscal years in violation of the 
     revenue targets or direct spending caps in section 11104 or 
     11105, by more than one percent of the applicable total 
     revenues or direct spending for such year. The report shall 
     include:
       (1) All instances in which actual direct spending has 
     exceeded the applicable direct spending cap.
       (2) The difference between the amount of spending available 
     under the direct spending caps for the current year and 
     estimated actual spending for the categories associated with 
     such caps.
       (3) The amounts by which direct spending shall be reduced 
     in the current fiscal year so that total actual and estimated 
     direct spending for all cap categories for the current and 
     immediately preceding fiscal years shall not exceed the 
     amounts available under the direct spending caps for such 
     fiscal years.
       (4) The amount of excess spending attributable solely to 
     changes in inflation or eligible populations.

     SEC. 11202. ENFORCING DIRECT SPENDING CAPS.

       (a) Purpose.--This subtitle provides enforcement of the 
     direct spending caps on categories of spending established 
     pursuant to section 11105. This section shall apply for any 
     fiscal year in which direct spending exceeds the applicable 
     direct spending cap.
       (b) General Rules.--
       (1) Eliminating a breach.--Each non-exempt account within a 
     category shall be reduced by a dollar amount calculated by 
     multiplying the baseline level of sequestrable budgetary 
     resources in that account at that time by the uniform 
     percentage necessary to eliminate a breach within that 
     category.
       (2) Programs, projects, or activities.--Except as otherwise 
     provided, the same percentage sequestration shall apply to 
     all programs, projects and activities within a budget 
     account.
       (3) Indefinite authority.--Except as otherwise provided, 
     sequestration in accounts for which obligations are 
     indefinite shall be taken in a manner to ensure that 
     obligations in the fiscal year of a sequestration and 
     succeeding fiscal years are reduced, from the level that 
     would actually have occurred, by the applicable sequestration 
     percentage or percentages.
       (4) Cancellation of budgetary resources.--Budgetary 
     resources sequestered from any account other than an trust, 
     special or revolving fund shall revert to the Treasury and be 
     permanently canceled.
       (5) Implementing regulations.--Notwithstanding any other 
     provision of law, administrative rules or similar actions 
     implementing any sequestration shall take effect within 30 
     days after that sequestration.

     SEC. 11203. SEQUESTRATION RULES.

       (a) General Rules.--For programs subject to direct spending 
     caps:
       (1) Triggering of Sequestration.--Sequestration is 
     triggered if total direct spending subject to the caps 
     exceeds or is projected to exceed the aggregate cap for 
     direct spending for the current or immediately preceding 
     fiscal year.
       (2) Calculation of reductions.--Sequestration shall reduce 
     spending under each separate direct spending cap in 
     proportion to the amounts each category of direct spending 
     exceeded the applicable cap.
       (3) Uniform percentages.--In calculating the uniform 
     percentage applicable to the sequestration of all spending 
     programs or activities within each category, or the uniform 
     percentage applicable to the sequestration of nonexempt 
     direct spending programs or activities, the sequestrable base 
     for direct spending programs and activities is the total 
     level of outlays for the fiscal year for those programs or 
     activities in the current law baseline.
       (4) Permanent sequestration of direct spending.--
     Obligations in sequestered direct spending accounts shall be 
     reduced in the fiscal year in which a sequestration occurs 
     and in all succeeding fiscal years. Notwithstanding any other 
     provision of this section, after the first direct spending 
     sequestration, any later sequestration shall reduce direct 
     spending by an amount in addition to, rather than in lieu of, 
     the reduction in direct spending in place under the existing 
     sequestration or sequestrations.
       (5) Special rule.--For any direct spending program in 
     which--
       (A) outlays pay for entitlement benefits;
       (B) a current-year sequestration takes effect after the 1st 
     day of the budget year;
       (C) that delay reduces the amount of entitlement authority 
     that is subject to sequestration in the budget; and
       (D) the uniform percentage otherwise applicable to the 
     budget-year sequestration of a program or activity is 
     increased due to the delay;
     then the uniform percentage shall revert to the uniform 
     percentage calculated under paragraph (3) when the budget 
     year is completed.
       (6) Indexed benefit payments.--If, under any entitlement 
     program--
       (A) benefit payments are made to persons or governments 
     more frequently than once a year; and
       (B) the amount of entitlement authority is periodically 
     adjusted under existing law to reflect changes in a price 
     index (commonly called ``cost of living adjustments'');
     sequestration shall first be applied to the cost of living 
     adjustment before reductions are made to the base benefit. 
     For the first fiscal year to which a sequestration applies, 
     the benefit payment reductions in such programs accomplished 
     by the order shall take effect starting with the payment made 
     at the beginning of January following a final sequester. For 
     the purposes of this subsection, veterans' compensation shall 
     be considered a program that meets the conditions of the 
     preceding sentence.
       (7) Loan programs.--For all loans made, extended, or 
     otherwise modified on or after any sequestration under loan 
     programs subject to direct spending caps--
       (A) the sequestrable base shall be total fees associated 
     with all loans made extended or otherwise modified on or 
     after the date of sequestration; and
       (B) the fees paid by borrowers shall be increased by a 
     uniform percentage sufficient to produce the dollar savings 
     in such loan programs for the fiscal year or years of the 
     sequestrations required by this section.
     Notwithstanding any other provision of law, in any year in 
     which a sequestration is in effect, all subsequent fees shall 
     be increased by the uniform percentage and all proceeds from 
     such fees shall be paid into the general fund of the 
     Treasury.
       (8) Insurance programs.--Any sequestration of a Federal 
     program that sells insurance contracts to the public 
     (including the Federal Crop Insurance Fund, the National 
     Insurance Development Fund, the National Flood Insurance 
     fund, insurance activities of the Overseas Private Insurance 
     Corporation, and Veterans' Life insurance programs) shall be 
     accomplished by increasing premiums on contracts entered into 
     extended or otherwise modified, after the date a 
     sequestration order takes effect by the uniform sequestration 
     percentage. Notwithstanding any other provision of law, for 
     any year in which a sequestration affecting such programs is 
     in effect, subsequent premiums shall be increased by the 
     uniform percentage and all proceeds from the premium increase 
     shall be paid from the insurance fund or account to the 
     general fund of the Treasury.
       (9) State grant formulas.--For all State grant programs 
     subject to direct spending caps--
       (A) the total amount of funds available for all States 
     shall be reduced by the amount required to be sequestered; 
     and
       (B) if States are projected to receive increased funding in 
     the budget year compared to the immediately preceding fiscal 
     year, sequestration shall first be applied to the estimated 
     increases before reductions are made compared to actual 
     payments to States in the previous year--
       (i) the reductions shall be applied first to the total 
     estimated increases for all States; then
       (ii) the uniform reduction shall be made from each State's 
     grant; and
       (iii) the uniform reduction shall apply to the base funding 
     levels available to states in the immediately preceding 
     fiscal year only to the extent necessary to eliminate any 
     remaining excess over the applicable direct spending cap.
       (10) Special rule for certain programs.--Except matters 
     exempted under section 11204 and programs subject to special 
     rules set forth under section 11205 and notwithstanding any 
     other provisions of law, any sequestration required under 
     this Act shall reduce benefit levels by an amount sufficient 
     to eliminate all excess spending identified in the report 
     issued pursuant to section 11201, while maintaining the same 
     uniform percentage reduction in the monetary value of 
     benefits subject to reduction under this subsection.
       (b) Within-Session Sequester.--If a bill or resolution 
     providing direct spending for the current year is enacted 
     before July 1 of that fiscal year and causes a breach within 
     any direct spending cap for that fiscal year, 15 days later 
     there shall be a sequestration to eliminate that breach 
     within that cap.

     SEC. 11204. ENFORCING REVENUE TARGETS.

       (a) Purpose.--This section enforces the revenue targets 
     established pursuant to section 11104. This section shall 
     apply for any year in which actual revenues were less than 
     the applicable revenue target in the preceding fiscal year or 
     are projected to be less than the applicable revenue target 
     in the current year.
       (b) Estimate of Necessity To Suspend New Revenue 
     Reductions.--Based on the statement provided under section 
     11201(a), OMB shall issue a report to the President and the 
     Congress on December 15 of any year in which such statement 
     identifies actual or projected revenues in the current or 
     immediately preceding fiscal years lower than the applicable 
     revenue target in section 11104, as adjusted pursuant to 
     section 11106, by more than 1 percent of the applicable total 
     revenue target for such year. The report shall include--
       (1) all laws and policies described in subsection (c) which 
     would cause revenues to decline in the calendar year which 
     begins January 1 compared to the provisions of law in effect 
     on December 15;

[[Page H4599]]

       (2) the amounts by which revenues would be reduced by 
     implementation of the provisions of law described in 
     paragraph (1) compared to provisions of law in effect on 
     December 15; and
       (3) whether delaying implementation of the provisions of 
     law described in paragraph (1) would cause the total for 
     revenues in the projected revenues in the current fiscal year 
     and actual revenues in the immediately preceding fiscal year 
     to equal or exceed the total of the targets for the 
     applicable years.
       (c) No Credits, Deductions, Exclusions, Preferential Rate 
     of Tax, Etc.--If any provision of the Internal Revenue Code 
     of 1986 added by the Revenue Reconciliation Act of 1997 would 
     (but for this section) first take effect in a tax benefit 
     suspension year, such provision shall not take effect until 
     the first calendar year which is not a tax benefit suspension 
     year.
       End of Suspension.--If the OMB report issued under section 
     (a) following a tax benefit suspension your indicates that 
     the total of revenues projected in the current fiscal year 
     and actual revenues in he immediately proceeding year will 
     equal or exceed the applicable targets the President shall 
     sign an order ending the delayed phase-in of new tax cuts 
     effective January 1. Such order shall provide that the new 
     tax cuts shall take effect as if the provisions of this 
     section had not taken effect.
       (e) Suspension of Benefits Being Phased In.--If, under any 
     provision of the Internal Revenue Code of 1986, there is an 
     increase in any benefit which would (but for this section) 
     take effect with respect to a tax benefit suspension year, in 
     lieu of applying subsection (c)--
       (1) any increase in the benefit under such section with 
     respect to such year and each subsequent calendar year shall 
     be delayed 1 calendar year, and
       (2) the level of benefit under such section with respect to 
     the prior calendar year shall apply to such tax benefit 
     suspension year.
       (f) Percentage Suspension Where Full Suspension Unnecessary 
     To Achieve Revenue Target.--If the application of subsections 
     (c), (d), and (e) to any tax benefit suspension year would 
     (but for this subsection) (1) all laws and policies described 
     in subsection (c) which would cause revenues to decline in 
     the calendar year which begins January 1 compared to the 
     provisions of law in effect on December 15; subsections (c), 
     (d), and (e) shall be applied such that the amount of each 
     benefit which is denied is only the percentage of such 
     benefit which is necessary to result in revenues equal to 
     such target. Such percentage shall be determined by OMB, and 
     the same percentage shall apply to such benefits.
       (g) Tax Benefit Suspension Year.--For purposes of this 
     section, the term ``tax benefit suspension year'' means any 
     calendar year if the statement issued under subsection (b) 
     during the preceding calendar year indicates that--
       (1) for the fiscal year ending in such preceding calendar 
     year, actual revenues were lower than the applicable revenue 
     target in section 11104, as adjusted pursuant to section 
     11106, for such fiscal year by more than 1 percent of such 
     target, or
       (2) for the fiscal year beginning in such preceding 
     calendar year, projected revenues (determined without regard 
     to this section) are estimated to be lower than the 
     applicable revenue target in section 11104, as adjusted 
     pursuant to section 11106, for such fiscal year by more than 
     1 percent of such target.

     SEC. 11205. EXEMPT PROGRAMS AND ACTIVITIES.

       The following budget accounts, activities within accounts, 
     or income shall be exempt from sequestration--
       (1) net interest;
       (2) all payments to trust funds from excise taxes or other 
     receipts or collections properly creditable to those trust 
     funds;
       (3) offsetting receipts and collections;
       (4) all payments from one Federal direct spending budget 
     account to another Federal budget account;
       (5) all intragovernmental funds including those from which 
     funding is derived primarily from other Government accounts;
       (6) expenses to the extent they result from private 
     donations, bequests, or voluntary contributions to the 
     Government;
       (7) nonbudgetary activities, including but not limited to--
       (A) credit liquidating and financing accounts;
       (B) the Pension Benefit Guarantee Corporation Trust Funds;
       (C) the Thrift Savings Fund;
       (D) the Federal Reserve System; and
       (E) appropriations for the District of Columbia to the 
     extent they are appropriations of locally raised funds;
       (8) payments resulting from Government insurance, 
     Government guarantees, or any other form of contingent 
     liability, to the extent those payments result from 
     contractual or other legally binding commitments of the 
     Government at the time of any sequestration;
       (9) the following accounts, which largely fulfill 
     requirements of the Constitution or otherwise make payments 
     to which the Government is committed--
       Bureau of Indian Affairs, miscellaneous trust funds, tribal 
     trust funds (14-9973-0-7-999);
       Claims, defense;
       Claims, judgments and relief act (20-1895-0-1-806);
       Compact of Free Association, economic assistance pursuant 
     to Public Law 99-658 (14-0415-0-1-806);
       Compensation of the President (11-0001-0-1-802);
       Customs Service, miscellaneous permanent appropriations 
     (20-9992-0-2-852);
       Eastern Indian land claims settlement fund (14-2202-0-1-
     806);
       Farm Credit System Financial Assistance Corporation, 
     interest payments (20-1850-0-1-351);
       Internal Revenue collections of Puerto Rico (20-5737-0-2-
     852);
       Payments of Vietnam and USS Pueblo prisoner-of-war claims 
     (15-0104-0-1-153):
       Payments to copyright owners (03-5175-0-2-376);
       Salaries of Article III judges (not including cost of 
     living adjustments);
       Soldier's and Airman's Home, payment of claims (84-8930-0-
     7-705);
       Washington Metropolitan Area Transit Authority, interest 
     payments (46-0300-0-1-401);
       (10) the following noncredit special, revolving, or trust-
     revolving funds--
       Exchange Stabilization Fund (20-4444-0-3-155); and
       Foreign Military Sales trust fund (11-82232-0-7-155).
       (j) Optional Exemption of Military Personnel.--
       (1) The President may, with respect to any military 
     personnel account, exempt that account from sequestration or 
     provide for a lower uniform percentage reduction that would 
     otherwise apply.
       (2) The President may not use the authority provided by 
     paragraph (1) unless he notifies the Congress of the manner 
     in which such authority will be exercised on or before the 
     initial snapshot date for the budget year.

     SEC. 11206. SPECIAL RULES.

       (a) Child Support Enforcement Program.--Any sequestration 
     order shall accomplish the full amount of any required 
     reduction in payments under sections 455 and 458 of the 
     Social Security Act by reducing the Federal matching rate for 
     State administrative costs under the program, as specified 
     (for the fiscal year involved) in section 455(a) of such Act, 
     to the extent necessary to reduce such expenditures by that 
     amount.
       (b) Commodity Credit Corporation.--
       (1) Effective date.--For the Commodity Credit Corporation, 
     the date on which a sequestration order takes effect in a 
     fiscal year shall vary for each crop of a commodity. In 
     general, the sequestration order shall take effect when 
     issued, but for each crop of a commodity for which 1-year 
     contracts are issued as an entitlement, the sequestration 
     order shall take effect with the start of the sign-up period 
     for that crop that begins after the sequestration order is 
     issued. Payments for each contract in such a crop shall be 
     reduced under the same terms and conditions.
       (2) Dairy program.--
       (A) As the sole means of achieving any reduction in outlays 
     under the milk price-support program, the Secretary of 
     Agriculture shall provide for a reduction to be made in the 
     price received by producers for all milk in the United States 
     and marketed by producers for commercial use.
       (B) That price reduction (measured in cents per hundred-
     weight of milk marketed) shall occur under subparagraph (A) 
     of section 201(d)(2) of the Agricultural Act of 1949 (7 
     U.S.C. 1446(d)(2)(A)), shall begin on the day any 
     sequestration order is issued, and shall not exceed the 
     aggregate amount of the reduction in outlays under the milk 
     price-support program, that otherwise would have been 
     achieved by reducing payments made for the purchase of milk 
     or the products of milk under this subsection during that 
     fiscal year.
       (3) Effect of delay.--For purposes of subsection (b)(1), 
     the sequestrable base for Commodity Credit Corporation is the 
     current-year level of gross outlays resulting from new budget 
     authority that is subject to reduction under paragraphs (1) 
     and (2).
       (4) Certain authority not to be limited.--Nothing in this 
     Act shall restrict the Corporation in the discharge of its 
     authority and responsibility as a corporation to buy and sell 
     commodities in world trade, or limit or reduce in any way any 
     appropriation that provides the Corporation with funds to 
     cover its realized losses.
       (c) Earned Income Tax Credit.--
       (1) The sequestrable base for earned income tax credit 
     program is the dollar value of all current year benefits to 
     the entire eligible population.
       (2) In the event sequestration is triggered to reduce 
     earned income tax credits, all earned income tax credits 
     shall be reduced, whether or not such credits otherwise would 
     result in cash payments to beneficiaries, by a uniform 
     percentage sufficient to produce the dollar savings required 
     by the sequestration.
       (d) Regular and Extended Unemployment Compensation.--
       (1) A State may reduce each weekly benefit payment made 
     under the regular and extended unemployment benefit programs 
     for any week of unemployment occurring during any period with 
     respect to which payments are reduced under any sequestration 
     order by a percentage not to exceed the percentage by

[[Page H4600]]

     which the Federal payment to the State is to be reduced for 
     such week as a result of such order.
       (2) A reduction by a State in accordance with paragraph (1) 
     shall not be considered as a failure to fulfill the 
     requirements of section 3304(a)(11) of the Internal Revenue 
     Code of 1986.
       (e) Federal Employees Health Benefits Fund.-- For the 
     Federal Employees Health Benefits Fund, a sequestration order 
     shall take effect with the next open season. The 
     sequestration shall be accomplished by annual payments from 
     that Fund to the General Fund of the Treasury. Those annual 
     payments shall be financed solely by charging higher 
     premiums. The sequestrable base for the Fund is the current-
     year level of gross outlays resulting from claims paid after 
     the sequestration order takes effect.
       (f) Federal Housing Finance Board.-- Any sequestration of 
     the Federal Housing Board shall be accomplished by annual 
     payments (by the end of each fiscal year) from that Board to 
     the general fund of the Treasury, in amounts equal to the 
     uniform sequestration percentage for that year times the 
     gross obligations of the Board in that year.
       (g) Federal Pay.--
       (1) In general.-- New budget authority to pay Federal 
     personnel from direct spending accounts shall be reduced by 
     the uniform percentage calculated under section 11203(c)(3), 
     as applicable, but no sequestration order may reduce or have 
     the effect of reducing the rate of pay to which any 
     individual is entitled under any statutory pay system (as 
     increased by any amount payable under section 5304 of title 
     5, United States Code, or any increase in rates of pay which 
     is scheduled to take effect under section 5303 of title 5, 
     United States Code, section 1109 of title 37, United States 
     Code, or any other provision of law.
       (2) Definitions.--For purposes of this subsection--
       (A) the term ``statutory pay system'' shall have the 
     meaning given that term in section 5302(1) of title 5, United 
     States Code;
      term ``elements of military pay'' means--
       (i) the elements of compensation of members of the 
     uniformed services specified in section 1009 of title 37, 
     United States Code;
       (ii) allowances provided members of the uniformed services 
     under sections 403(a) and 405 of such title; and
       (iii) cadet pay and midshipman pay under section 203(c) of 
     such title; and
       (C) the term ``uniformed services'' shall have the same 
     meaning given that term in section 101(3) of title 37, United 
     States Code.
       (h) Medicare.--
       (1) Timing of application of reductions.--
       (A) In general.-- Except as provided in subparagraph (B), 
     if a reduction is made in payment amounts pursuant to 
     sequestration order, the reduction shall be applied to 
     payment for services furnished after the effective date of 
     the order. For purposes of the previous sentence, in the case 
     of inpatient services furnished for an individual, the 
     services shall be considered to be furnished on the date of 
     the individual's discharge from the inpatient facility.
       (B) Payment on the basis of cost reporting periods.-- In 
     the case in which payment for services of a provider of 
     services is made under title XVIII of the Social Security Act 
     on a basis relating to the reasonable cost incurred for the 
     services during a cost reporting period of the provider, if a 
     reduction is made in payment amounts pursuant to a 
     sequestration order, the reduction shall be applied to 
     payment for costs for such services incurred at any time 
     during each cost reporting period of the provider any part of 
     which occurs after the effective date of order, but only (for 
     each such cost reporting period) in the same proportion as 
     the fraction of the cost reporting period that occurs after 
     the effective date of the order.
       (2) No increase in beneficiary charges in assignment-
     related cases.--If a reduction in payment amounts is made 
     pursuant to a sequestration order for services for which 
     payment under part B of title XVIII of the Social Security 
     Act is made on the basis of an assignment described in 
     section 1842(b)(3)(B)(ii), in accordance with section 
     1842(b)(6)(B), or under the procedure described in section 
     1870(f)(1) of such Act, the person furnishing the services 
     shall be considered to have accepted payment of the 
     reasonable charge for the services, less any reduction in 
     payment amount made pursuant to a sequestration order, as 
     payment in full.
       (3) Part b premiums.--In computing the amount and method of 
     sequestration from part B of title XVIII of the Social 
     Security Act--
       (A) the amount of sequestration shall be calculated by 
     multiplying the total amount by which Medicare spending 
     exceeds the appropriate spending cap by a percentage that 
     reflects the ratio of total spending under Part B to total 
     Medicare spending; and
       (B) sequestration in the Part B program shall be 
     accomplished by increasing premiums to beneficiaries.
       (4) No effect on computation of aapcc.--In computing the 
     adjusted average per capita cost for purposes of section 
     1876(a)(4) of the Social Security Act, the Secretary of 
     Health and Human Services shall not take into account any 
     reductions in payment amounts which have been or may be 
     effected under this part.
       (i) Postal Service Fund.-- Any sequestration of the Postal 
     Service Fund shall be accomplished by annual payments from 
     that Fund to the General Fund of the Treasury, and the 
     Postmaster General of the United States and shall have the 
     duty to make those payments during the first fiscal year to 
     which the sequestration order applies and each succeeding 
     fiscal year. The amount of each annual payment shall be--
       (1) the uniform sequestration percentage, times
       (2) the estimated gross obligations of the Postal Service 
     Fund in that year other than those obligations financed with 
     an appropriation for revenue forgone that year.
     Any such payment for a fiscal year shall be made as soon as 
     possible during the fiscal year, except that it may be made 
     in installments within that year if the payment schedule is 
     approved by the Secretary of the Treasury. Within 30 days 
     after the sequestration order is issued, the Postmaster 
     General shall submit to the Postal Rate Commission a plan for 
     financing the annual payment for that fiscal year and publish 
     that plan in the Federal Register. The plan may assume 
     efficiencies in the operation of the Postal Service, 
     reductions in capital expenditures, increases in the prices 
     of services, or any combination, but may not assume a lower 
     Fund surplus or higher Fund deficit and shall follow the 
     requirements of existing law governing the Postal Service in 
     all other respects. Within 30 days of the receipt of that 
     plan, the Postal Rate Commission shall approve the plan or 
     modify it in the manner that modifications are allowed under 
     current law. If the Postal Rate Commission does not respond 
     to the plan within 30 days, the plan submitted by the 
     Postmaster General shall go into effect. Any plan may be 
     later revised by the submission of a new plan to the Postal 
     Rate Commission, which may approve or modify it.
       (j) Power Marketing Administrations and T.V.A.-- Any 
     sequestration of the Department of Energy power marketing 
     administration funds or the Tennessee Valley Authority fund 
     shall be accomplished by annual payments from those funds to 
     the General Fund of the Treasury, and the administrators of 
     those funds shall have the duty to make those payments during 
     the fiscal year to which the sequestration order applies and 
     each succeeding fiscal year. The amount of each payment by a 
     fund shall be--
       (1) the direct spending uniform sequestration percentage, 
     times
       (2) the estimated gross obligations of the fund in that 
     year other than those obligations financed from discretionary 
     appropriations for that year.
     Any such payment for a fiscal year shall be made as soon as 
     possible during the fiscal year, except that it may be made 
     in installments within that year if the payment schedule is 
     approved by the Secretary of the Treasury. Annual payments by 
     a fund may be financed by reductions in costs required to 
     produce the pre-sequester amount of power (but those 
     reductions shall not include reductions in the amount of 
     power supplied by the fund), by reductions in capital 
     expenditures, by increases in tax rates, or by any 
     combination, but may not be financed by a lower fund surplus, 
     a higher fund deficit, additional borrowing, delay in 
     repayment of principal on outstanding debt and shall follow 
     the requirements of existing law governing the fund in all 
     other respects. The administrator of a fund or the TVA Board 
     is authorized to take the actions specified in this 
     subsection in order to make the annual payments to the 
     Treasury.
       (k) Business-like Transactions.--Notwithstanding any other 
     provision of law, for programs which provide a business-like 
     service in exchange for a fee, sequestration shall be 
     accomplished through a uniform increase in fees (sufficient 
     to produce the dollar savings in such programs for the fiscal 
     year of the sequestration required by section 11201(a)(2), 
     all subsequent fees shall be increased by the same 
     percentage, and all proceeds from such fees shall be paid 
     into the general fund of the Treasury, in any year for which 
     a sequester affecting such programs are in effect.

     SEC. 11207. THE CURRENT LAW BASELINE.

       (a) Submission of Reports.--CBO and OMB shall submit to the 
     President and the Congress reports setting forth the budget 
     baselines for the budget year and the next nine fiscal years. 
     The CBO report shall be submitted on or before January 15. 
     The OMB report shall accompany the President's budget.
       (b) Determination of the Budget Baseline.--(1) The budget 
     baseline shall be based on the common economic assumptions 
     set forth in section 11106, adjusted to reflect revisions 
     pursuant to subsection (c).
       (2) The budget baseline shall consist of a projection of 
     current year levels of budget authority, outlays, revenues 
     and the surplus or deficit into the budget year and the 
     relevant outyears based on current enacted laws as of the 
     date of the projection.
       (3) For discretionary spending items, the baseline shall be 
     the spending caps in effect pursuant to section 601(a)(2) of 
     the Congressional Budget Act of 1974. For years for which 
     there are no caps, the baseline for discretionary spending 
     shall be the same as the last year for which there were 
     statutory caps.
       (4) For all other expenditures and for revenues, the 
     baseline shall be adjusted by comparing unemployment, 
     inflation, interest rates, growth and other economic 
     indicators-and changes ineligible population-for the most 
     recent period for which actual data are available, compared 
     to the assumptions contained in section 11106.
       (c) Revisions to the Baseline.--The baseline shall be 
     adjusted for up-to-date economic assumptions when CBO submits 
     its

[[Page H4601]]

     Economic and Budget Update and when OMB submits its budget 
     update, and by August 1 each year, when CBO and OBM submit 
     their midyear reviews.

     SEC. 11208. LIMITATIONS ON EMERGENCY SPENDING.

       (a) In General.--(1) Within the discretionary caps for each 
     fiscal year contained in this Act, an amount shall be 
     withheld from allocation to the appropriate committees of the 
     House of Representatives and of the Senate and reserved for 
     natural disasters and other emergency purposes.
       (2) Such amount for each such fiscal year shall not be less 
     than 1 percent of total budget authority and outlays 
     available within those caps for that fiscal year.
       (3) The amounts reserved pursuant to this subsection shall 
     be made available for allocation to such committees only if--
       (A) the President has made a request for such disaster 
     funds;
       (B) the programs to be funded are included in such request; 
     and
       (C) the projected obligations for unforeseen emergency 
     needs exceed the 10-year rolling average annual expenditures 
     for existing programs included in the Presidential request 
     for the applicable fiscal year.
       (4) Notwithstanding any other provision of law--
       (A) States and localities shall be required to maintain 
     effort and ensure that Federal assistance payments do not 
     replace, subvert or otherwise have the effect of reducing 
     regularly budgeted State and local expenditures for law 
     enforcement, refighting, road construction and maintenance, 
     building construction and maintenance or any other category 
     of regular government expenditure (to ensure that Federal 
     disaster payments are made only for incremental costs 
     directly attributable to unforeseen disasters, and do not 
     replace or reduce regular State and local expenditures for 
     the same purposes);
       (B) the President may not take administrative action to 
     waive any requirement for States or localities to make 
     minimum matching payments as a condition or receiving Federal 
     disaster assistance and prohibit the President from taking 
     administrative action to waive all or part of any repayment 
     of Federal loans for the State or local matching share 
     required as a condition of receiving Federal disaster 
     assistance, and this clause shall apply to all matching share 
     requirements and loans to meet matching share requirements 
     under the Robert T. Stafford Disaster Relief and Emergency 
     Assistance Act (42 U.S.C. 5121 et seq.) and any other Acts 
     pursuant to which the President may declare a disaster or 
     disasters and States and localities otherwise qualify for 
     Federal disaster assistance; and
       (C) a two-thirds vote in each House of Congress shall be 
     required for each emergency to reduce or waive the State 
     matching requirement of to forgive all or part of loans for 
     the State matching share as required under the Robert T. 
     Stafford Disaster Relief and Emergency Assistance Act.
       (b) Effect Budget Resolutions.--(1) All concurrent 
     resolutions on the budget (including revisions) shall specify 
     the amount of new budget authority and outlays within the 
     discretionary spending cap that shall be withheld from 
     allocation to the committees and reserved for natural 
     disasters, and a procedure for releasing such funds for 
     allocation to the appropriate committee. The amount withheld 
     shall be equal to 1 percent of the total discretionary 
     spending cap for fiscal year covered by the resolution, 
     unless additional amounts are specified.
       (2) The procedure for allocation of the amounts pursuant to 
     paragraph (1) shall ensure that the funds are released for 
     allocation only pursuant to the conditions contained in 
     subsection (a)(3)(A) through (C).
       (c) Restriction on Use of Funds.--Notwithstanding any other 
     provision of law, the amount reserved pursuant to subsection 
     (a) shall not be available for other than emergency funding 
     requirements for particular natural disasters or national 
     security emergencies so designated by Acts of Congress.
       (d) New Point of Order.--(1) Title IV of the Congressional 
     Budget Act of 1974 is amended by adding at the end the 
     following new section:


                 ``point of order regarding emergencies

       ``Sec. 408. It shall not be in order in the House of 
     Representatives or the Senate to consider any bill or joint 
     resolution, or amendment thereto or conference report 
     thereon, containing an emergency designation for purposes of 
     section 251(b)(2)(D) or 252(e) of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 or of section 11207 of 
     the Balanced Budget Assurance Act of 1997 if it also provides 
     an appropriation or direct spending for any other item or 
     contains any other matter, but that bill or joint resolution, 
     amendment, or conference report may contain rescissions of 
     budget authority or reductions of direct spending, or that 
     amendment may reduce amounts for that emergency.''.
       (2) The table of contents set forth in section 1(b) of the 
     Congressional Budget and Impoundment Control Act of 1974 is 
     amended by inserting after the item relating to section 407 
     the following new item:
``Sec. 408. Point of order regarding emergencies.''.
  Mr. BROWN of Ohio (during the reading). Mr. Speaker, I ask unanimous 
consent that the motion to recommit be considered as read and printed 
in the Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.


                             Point of Order

  Mr. THOMAS. Mr. Speaker, I rise to a point of order that the 
amendment is not germane to the bill.
  The SPEAKER pro tempore. The gentleman will state his point of order.
  Mr. THOMAS. Mr. Speaker, the budget process provisions prospectively 
amend another bill; that is, H.R. 2014, the Revenue Reconciliation Act 
of 1997, specifically section 11204(c). It suspends provisions in the 
Internal Revenue Code that are added by H.R. 2014 and is, therefore, 
beyond the scope.
  The SPEAKER pro tempore. Does the gentleman from Texas [Mr. Stenholm] 
wish to be heard on the point of order?
  Mr. STENHOLM. Yes, Mr. Speaker.
  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Texas [Mr. Stenholm].
  Mr. STENHOLM. Mr. Speaker, in rising to speak to the point of order, 
I will couple it with a parliamentary inquiry. It was my understanding, 
since the item in question is the enforcement mechanisms of the budget, 
what this motion to recommit includes is the entire Minge-Barton 
amendment that was denied an opportunity to be on the floor under the 
rule.
  In the colloquy that occurred this morning, it was my understanding, 
and at least my friends on the other side of the aisle who acceded to 
this, that this would eventually be heard in a separate bill on the 
floor by July 24. In so doing, it would then be coupled, assuming it 
passes, would be coupled with the reconciliation bill so that the final 
conference report would include, if the House chooses to include this 
in the language of the bill, would be voted upon.
  My question, Mr. Speaker, if that is the case, how can it be out of 
order for us to consider this amendment today when it will be in order 
to consider it on July 24?
  The SPEAKER pro tempore. The Chair would respond by saying that he 
cannot make a determination as to what the legislative situation would 
be at some future date 3 weeks from now.
  Mr. STENHOLM. Continuing my question as to the point of order, if it 
is the parliamentary judgment today that this is not in order to be 
heard as a motion to recommit, under what circumstance could it be 
possible for us to consider this at a later date?
  The SPEAKER pro tempore. The Chair cannot anticipate what the 
conferees on this bill might do. That is something that will be 
considered at a future date.
  Mr. STENHOLM. So the judgment of the Speaker is that today it is out 
of order but it might be in order at a later date?
  The SPEAKER pro tempore. The Chair is not going to engage in some 
sort of hypothetical consideration as to what might take place several 
weeks from now.
  Does the gentleman wish to be heard further on the point of order?
  Mr. STENHOLM. Mr. Speaker, I would say this is a very curious 
circumstance, but I hope the entire House is listening because this is 
a very important matter for a lot of us who are supporting this entire 
budget process. I am very worried to have this amendment as part of the 
recommittal be held out of order and then have hope that perhaps in the 
future it will be in order. That bothers me, but I respect the Chair's 
decision today.
  The SPEAKER pro tempore. Does the gentleman from Ohio [Mr. Brown] 
wish to be heard on the point of order?
  Mr. BROWN of Ohio. No, Mr. Speaker. We concede the point of order.
  The SPEAKER pro tempore. The gentleman concedes the point of order?
  Mr. BROWN of Ohio. We await the ruling of the Chair, Mr. Speaker.
  The SPEAKER pro tempore. The gentleman from California makes a point 
of order that the amendment contained in the motion to recommit with 
instructions is not germane to the bill. While the test of germaneness 
in this instance is measured against the bill as whole, the Chair notes 
that a portion of the amendment makes provisions of another bill not 
presently before the House, namely, the Revenue Reconciliation Act of 
1997, contingent on achieving revenue targets in future fiscal years.
  As such, the amendment is a prospective indirect change in a bill not 
yet

[[Page H4602]]

considered by the House. The Chair holds that the amendment is thus not 
germane to the bill, H.R. 2015, and sustains the point of order.


            Motion to Recommit Offered by Mr. Brown of Ohio

  Mr. BROWN of Ohio. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. Is the gentleman still opposed to the bill?
  Mr. BROWN of Ohio. Yes, Mr. Speaker, I am, more so than when the 
Chair asked the last time.
  The SPEAKER pro tempore. The Clerk will report the motion.
  The Clerk read as follows:
       Mr. Brown of Ohio moves to recommit the bill H.R. 2015 to 
     the Committee on the Budget with instructions to report the 
     same back to the House forthwith with the following 
     amendment:
       Strike subtitle F of title III and insert the following:
       Subtitle F--Child Health Insurance Initiative Act of 1997

     SEC. 3500. SHORT TITLE OF SUBTITLE.

       This subtitle may be cited as the ``Child Health Insurance 
     Initiative Act of 1997''.

                      CHAPTER 1--IMPROVED OUTREACH

     SEC. 3501. GRANT PROGRAM TO PROMOTE OUTREACH EFFORTS.

       (a) Authorization of Appropriations.--There are authorized 
     to be appropriated, for each fiscal year beginning with 
     fiscal year 1998 to the Secretary of Health and Human 
     Services, $25,000,000 for grants to States, localities, and 
     nonprofit entities to promote outreach efforts to enroll 
     eligible children under the medicaid program under title XIX 
     of the Social Security Act (42 U.S.C. 1396 et seq.) and 
     related programs.
       (b) Use of Funds.--Funds under this section may be used to 
     reimburse States, localities, and nonprofit entities for 
     additional training and administrative costs associated with 
     outreach activities. Such activities include the following:
       (1) Use of a common application form for federal child 
     assistance programs.--Implementing use of a single 
     application form (established by the Secretary and based on 
     the model application forms developed under subsections (a) 
     and (b) of section 6506 of the Omnibus Budget Reconciliation 
     Act of 1989 (42 U.S.C. 701 note; 1396a note)) to determine 
     the eligibility of a child or the child's family (as 
     applicable) for assistance or benefits under the medicaid 
     program and under other Federal child assistance programs 
     (such as the temporary assistance for needy families program 
     under part A of title IV of the Social Security Act (42 
     U.S.C. 601 et seq.), the food stamp program, as defined in 
     section 3(h) of the Food Stamp Act of 1977 (7 U.S.C. 
     2012(h)), and the State program for foster care maintenance 
     payments and adoption assistance payments under part E of 
     title IV of the Social Security Act (42 U.S.C. 670 et seq.)).
       (2) Expanding outstationing of eligibility personnel.--
     Providing for the stationing of eligibility workers at sites, 
     such as hospitals and health clinics, at which children 
     receive health care or related services.
       (c) Application, Etc.--Funding shall be made available 
     under this section only upon the approval of an application 
     by a State, locality, or nonprofit entity for such funding 
     and only upon such terms and conditions as the Secretary 
     specifies.
       (d) Administration.--The Secretary may administer the grant 
     program under this section through the identifiable 
     administrative unit designated under section 509(a) of the 
     Social Security Act (42 U.S.C. 709(a)) to promote 
     coordination of medicaid and maternal and child health 
     activities and other child health related activities.

                      CHAPTER 2--MEDIKIDS PROGRAM

     SEC. 3521. STATE ENTITLEMENT TO PAYMENT FOR MEDIKIDS PROGRAM.

       (a) In General.--Each State that has a plan for a child 
     health insurance program, or MediKids program, approved by 
     the Secretary is entitled to receive, from amounts in the 
     Treasury not otherwise appropriated and for each fiscal year 
     beginning with fiscal year 1998, payment of the amounts 
     provided under section 3523.
       (b) Application.--The Secretary shall establish a procedure 
     for the submittal and approval of plans for MediKids programs 
     under this chapter. The Secretary shall approve the plan of a 
     State for such a program if the Secretary determines that--
       (1) the State is meeting the medicaid coverage requirements 
     of section 3522(a), and
       (2) the plan provides assurances satisfactory to the 
     Secretary that the MediKids program will be conducted 
     consistent with the applicable requirements of section 3522.

     SEC. 3522. REQUIREMENTS FOR APPROVAL OF MEDIKIDS PROGRAM.

       (a) Adequate Medicaid Coverage.--The medicaid coverage 
     requirements of this subsection are the following:
       (1) Coverage of pregnant women and children and infants up 
     to 185 percent of poverty.--The State has established 185 
     percent of the poverty line as the applicable percentage 
     under section 1902(l)(2)(A) of the Social Security Act (42 
     U.S.C. 1396a(l)(2)(A)).
       (2) Coverage of children up to 19 years of age.--The State 
     provides, either through exercise of the option under section 
     1902(l)(1)(D) of such Act (42 U.S.C. 1396a(l)(1)(D)) or 
     authority under section 1902(r)(2) of such Act (42 U.S.C. 
     1396a(r)(2)) for coverage under section 1902(l)(1)(D) of such 
     Act of individuals under 19 years of age, regardless of date 
     of birth.
       (3) Maintenance of effort.--
       (A) Medicaid.--Subject to subparagraph (B), the State--
       (i) has not modified the eligibility requirements for 
     children under the State medicaid plan, as in effect on 
     January 1, 1997 in any manner that would have the effect of 
     reducing the eligibility of children for coverage under such 
     plan, and
       (ii) will use the funds provided under this chapter to 
     supplement and not supplant other Federal and State funds.
       (B) Waiver exception.--Subparagraph (A) shall not apply to 
     modifications made pursuant to an application for a waiver 
     under section 1115 of the Social Security Act (42 U.S.C. 
     1315) submitted before January 1, 1997.
       (b) Coverage of Uninsured Children.--
       (1) In general.--A MediKids program shall not provide 
     benefits for children who are otherwise covered for such 
     benefits under a medicaid plan or under a group health plan, 
     health insurance coverage, or other health benefits coverage, 
     but may expend funds for outreach and other activities in 
     order to promote coverage under such plans.
       (2) Construction.--Nothing in this subsection shall be 
     construed as requiring a MediKids plan of a State to provide 
     coverage for all near poverty level children described in 
     paragraph (1) who are residing in the State.
       (c) Medicaid-Equivalent Benefits.--Subject to subsection 
     (d), a MediKids program shall provide benefits to eligible 
     children for the equivalent items and services for which 
     medical assistance is available (other than cost sharing) to 
     children under the State's medicaid plan.
       (d) Premiums and Cost-Sharing.--
       (1) In general.--Subject to paragraphs (2) and (3), a 
     MediKids program may--
       (A) require the payment of premiums as a condition for 
     coverage, but only for a covered child whose family income 
     exceeds the poverty line;
       (B) impose deductibles, coinsurance, copayments, and other 
     forms of cost-sharing with respect to benefits under the 
     program; and
       (C) vary the levels of premiums, deductibles, coinsurance, 
     copayments, and other cost-sharing based on a sliding scale 
     related to the family income of the covered child.
       (2) Limits on premiums and cost-sharing.--The Secretary 
     shall establish limits on the amount of cost-sharing expenses 
     (including premiums, deductibles, coinsurance, copayments, 
     and any other required financial contribution) that may be 
     applied under the program. Such limits shall assure that 
     total cost sharing expenses for children participating in 
     such program are reasonable in relation to the income of 
     their family (and taking into account the other types of 
     expenses generally incurred by such families and family size) 
     and that such cost sharing expenses do not unreasonably 
     reduce access to the coverage or covered services provided 
     under such program.
       (3) No cost sharing for preventive services.--A MediKids 
     program may not impose deductibles, coinsurance, copayments, 
     or similar cost sharing for preventive services.

     SEC. 3523. PAYMENT AMOUNTS.

       (a) Total Amount Available.--
       (1) In general.--The total amount of funds that is 
     available for payments under this chapter in any fiscal year 
     is the base amount specified in paragraph (2) for the fiscal 
     year reduced by the amount specified under paragraph (3) for 
     the fiscal year.
       (2) Base amount.--The base amount specified under this 
     paragraph for fiscal year 1998 and any subsequent fiscal year 
     is $2,805,000,000.
       (3) Offset for certain increased medicaid expenditures.--
       (A) In general.--Subject to subparagraph (B), the amount 
     specified under this paragraph for a fiscal year is the 
     amount of aggregate additional Federal expenditures under 
     made title XIX of the Social Security Act during the fiscal 
     year that the Secretary estimates, before the beginning of 
     the fiscal year, is attributable to imposition of the 
     conditions described in section 3522(a). For purposes of 
     applying the previous sentence, any Federal expenditures that 
     result from an increase in the applicable percentage under 
     section 1902(l)(2)(A) of the Social Security Act above the 
     percentage in effect as of June 25, 1997, or from any 
     exercise of an option described in section 3522(a)(2) 
     effected on or after such date, shall be treated as 
     additional Federal expenditures attributable to the 
     imposition of the conditions described in section 3522(a).
       (B) Adjustment to reflect actual expenditures.--After the 
     end of each fiscal year, the Secretary shall determine the 
     actual amount of the additional Federal expenditures 
     described in subparagraph (A) for the fiscal year. The 
     Secretary shall adjust the amount otherwise specified under 
     subparagraph (A) for subsequent years to take into account 
     the amount by which the amounts estimated for previous fiscal 
     years under such subparagraph were greater, or less than, the 
     actual amount of the expenditures for such years.
       (b) Allotment Among States.--
       (1) In general.--The Secretary shall establish a formula 
     for the allotment of the total amount of funds available 
     under subsection (a) among the qualifying States for each 
     fiscal year.

[[Page H4603]]

       (2) Basis.--The formula shall be based upon the Secretary's 
     estimate of the number of near poverty level children in the 
     State as a proportion of the total of such numbers for all 
     the qualifying States.
       (3) Carryforward.--If the Secretary does not pay to a State 
     under subsection (c) in a fiscal year the amount of its 
     allotment in that fiscal year under this subsection, the 
     amount of its allotment under this subsection for the 
     succeeding fiscal year shall be increased by the amount of 
     such shortfall.
       (c) Payments.--
       (1) In general.--From the allotment of each qualifying 
     State under subsection (b) for a fiscal year, the Secretary 
     shall pay to the State for each quarter in the fiscal year an 
     amount equal to 75 percent of the total amount expended 
     during such quarter to carry out the State's MediKids 
     program.
       (2) Not counting cost sharing.--For purposes of paragraph 
     (1), if a MediKids program imposes premiums for coverage or 
     requires payment of deductibles, coinsurance, copayments, or 
     other cost sharing, under rules of the Secretary, 
     expenditures attributable to such premiums or cost sharing 
     shall not be taken into account under paragraph (1).
       (d) State Entitlement.--This chapter constitutes budget 
     authority in advance of appropriations Acts, and represents 
     the obligation of the Federal Government to provide for the 
     payment to qualifying States of amounts provided under this 
     section.

     SEC. 3529. DEFINITIONS.

       For purposes of this chapter:
       (1) The term ``child'' means an individual under 19 years 
     of age.
       (2) The term ``medicaid plan'' means the plan of medical 
     assistance of a State under title XIX of the Social Security 
     Act.
       (3) The term ``MediKids program'' means a child health 
     insurance program of a State under this title.
       (4) The term ``near poverty level child'' means a child the 
     family income of which (as defined by the Secretary) is at 
     least 100 percent, but less than 300 percent, of the poverty 
     line.
       (5) The term ``poverty line'' has the meaning given such 
     term in section 673(2) of the Community Services Block Grant 
     Act (42 U.S.C. 9902(2)), including any revision required by 
     such section.
       (6) The term ``qualifying State'' means a State with a 
     MediKids program for which a plan is submitted and approved 
     under this title.
       (7) The term ``Secretary'' means the Secretary of Health 
     and Human Services .
       (8) The term ``State'' means the 50 States, the District of 
     Columbia, Puerto Rico, the Virgin Islands, Guam, American 
     Samoa, and the Northern Mariana Islands.

 CHAPTER 3--CONTINUATION OF MEDICAID ELIGIBILITY FOR DISABLED CHILDREN 
                         WHO LOSE SSI BENEFITS

     SEC. 3531. CONTINUATION OF MEDICAID ELIGIBILITY FOR DISABLED 
                   CHILDREN WHO LOSE SSI BENEFITS.

       (a) In General.--Section 1902(a)(10)(A)(i)(II) of the 
     Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(II)) is 
     amended by inserting ``(or were being paid as of the date of 
     enactment of section 211(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996 (P.L. 104-
     193)) and would continue to be paid but for the enactment of 
     that section'' after ``title XVI''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to medical assistance furnished on or after July 1, 
     1997.

       CHAPTER 4--ASSURING CHILDREN'S ACCESS TO HEALTH INSURANCE

     SEC. 3541. GUARANTEED AVAILABILITY OF INDIVIDUAL HEALTH 
                   INSURANCE COVERAGE TO UNINSURED CHILDREN.

       (a) In General.--Title XXVII of the Public Health Service 
     Act, as added by section 111(a) of the Health Insurance 
     Portability and Accountability Act of 1996, is amended by 
     inserting after section 2741 the following new section:

     ``SEC. 2741A. GUARANTEED AVAILABILITY OF INDIVIDUAL HEALTH 
                   INSURANCE COVERAGE TO UNINSURED CHILDREN.

       ``(a) Guaranteed Availability.--
       ``(1) In general.--Subject to the succeeding subsections of 
     this section, each health insurance issuer that offers health 
     insurance coverage (as defined in section 2791(b)(1)) in the 
     individual market in a State, in the case of an eligible 
     child (as defined in subsection (b)) desiring to enroll in 
     individual health insurance coverage--
       ``(A) may not decline to offer such coverage to, or deny 
     enrollment of, such child;
       ``(B) either (i) does not impose any preexisting condition 
     exclusion (as defined in section 2701(b)(1)(A)) with respect 
     to such coverage, or (ii) imposes such a preexisting 
     condition exclusion only to the extent such an exclusion may 
     be imposed under section 2701(a) in the case of an individual 
     who is not a late enrollee; and
       ``(C) shall provide that the premium for the coverage is 
     determined in a manner so that the ratio of the premium for 
     such eligible children to the premium for eligible 
     individuals described in section 2741(b) does not exceed the 
     ratio of the actuarial value of such coverage (calculated 
     based on a standardized population and a set of standardized 
     utilization and cost factors) for children to such actuarial 
     value for such coverage for such eligible individuals.
       ``(2) Substitution by state of acceptable alternative 
     mechanism.--The requirement of paragraph (1) shall not apply 
     to health insurance coverage offered in the individual market 
     in a State in which the State is implementing an acceptable 
     alternative mechanism under section 2744.
       ``(b) Eligible Child Defined.--In this part, the term 
     `eligible child' means an individual born after September 30, 
     1983, who has not attained 19 years of age and--
       ``(1) who is a citizen or national of the United States, an 
     alien lawfully admitted for permanent residence, or an alien 
     otherwise permanently residing in the United States under 
     color of law;
       ``(2) who is not eligible for coverage under (A) a group 
     health plan, (B) part A or part B of title XVIII of the 
     Social Security Act, or (C) a State plan under title XIX of 
     such Act (or any successor program), and does not have other 
     health insurance coverage; and
       ``(3) with respect to whom the most recent coverage (if 
     any, within the 1-year period ending on the date coverage is 
     sought under this section) was not terminated based on a 
     factor described in paragraph (1) or (2) of section 2712(b) 
     (relating to nonpayment of premiums or fraud).

     For purposes of paragraph (2)(A), the term `group health 
     plan' does not include COBRA continuation coverage.
       ``(c) Incorporation of Certain Provisions.--
       ``(1) In general.--Subject to paragraph (2), the provisions 
     of subsections (c), (d), (e) and (f) (other than paragraph 
     (1)) of section 2741 and section 2744 shall apply in relation 
     to eligible children under subsection (a) in the same manner 
     as they apply in relation to eligible individuals under 
     section 2741(a).
       ``(2) Special rules for acceptable alternative 
     mechanisms.--With respect to applying section 2744 under 
     paragraph (1)--
       ``(A) the requirement in subsection (a)(1)(B) shall be 
     applied instead of the requirement of section 2744(a)(1)(B);
       ``(B) the requirement in subsection (a)(1)(C) shall be 
     applied instead of the requirement of section 2744(a)(1)(D); 
     and
       ``(C) any deadline specified in such section shall be 1 
     year after the deadline otherwise specified.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take apply 1 year after the effective date for section 
     2741 of the Public Health Service Act (as provided under 
     section 111(b)(1) of the Health Insurance Portability and 
     Accountability Act of 1996).

  Mr. BROWN of Ohio (during the reading). Mr. Speaker, I ask unanimous 
consent that the motion to recommit be considered as read and printed 
in the Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.
  Mr. BROWN of Ohio. Mr. Speaker, the Republican children's health care 
expansion proposal in the Budget Reconciliation Act before us today 
will not ensure real health insurance coverage for the maximum number 
of children in the most cost-effective manner. I am deeply concerned 
because the Republican plan does not offer a real guarantee of health 
care coverage for children or a real benefits package.
  The Republican block grant contains a so-called direct services 
loophole which could mean that not a single taxpayer penny is used to 
provide health insurance for our Nation's 10 million uninsured 
children.
  States would be free to divert Federal children's health care 
expansion funds from directly providing health care coverage for 
uninsured children to instead providing direct payments to hospitals 
who will suffer under the disproportionate share cuts in this bill. 
Just as many States misused the DSH program in the early 1990s to pay 
for highway repairs and other related programs, I fear that States will 
use these Federal funds to plug holes in shrinking State budgets. We 
surely should have learn our lesson.
  I believe there are several superior programs to help extend coverage 
for uninsured children. Bipartisan legislation introduced by the 
gentleman from Michigan [Mr. Dingell], the gentlewoman from New Jersey 
[Mrs. Roukema], me, and others would provide children with a 
guaranteed, real health care benefits package which includes preventive 
care, hearing and vision services, and routine doctor visits.
  The Democratic Caucus proposal, another plan which is part of this 
motion to recommit, would promote more effective outreach for Medicaid-
eligible children who are not enrolled, allow for voluntary expansion 
of Medicaid coverage, establish a State grant program to fund 
innovative kids' health initiatives and require the issuance of 
affordable kids-only health insurance policies.
  The Republican plan, Mr. Speaker, will cost too much, waste too many 
tax

[[Page H4604]]

dollars, and fail to insure America's 10 million uninsured children.
  Mr. Speaker, I yield to the gentleman from New Jersey [Mr. Pallone].
  Mr. PALLONE. Mr. Speaker, I want to commend my colleague for what he 
said about the reason we need to propose this Democratic alternative is 
because the Republicans have offered just a straight block grant. It 
does not mandate that these funds go to the children who need it. It 
gives too much discretion to the Governors who might use this money to 
fund other huge gaps created by this bill, like the unfair cuts to 
disproportionate share hospitals also known as DSH hospitals.
  The Democratic Health Care Task Force has a plan, an alternative that 
contains four elements:
  First, incentives for States to cover children under 19 years of age 
in families with less than $24,000 in income and pregnant women and 
infants in families with incomes up to $30,000 through an enhanced 
Medicaid match.
  Second, we have a Medikids grant for States to help middle- and low-
income families to purchase private insurance or participate in a 
State-sponsored expanded Medicaid package.
  Third, we improve outreach efforts to ensure that nearly 3 million 
children eligible for Medicaid that are not enrolled in the program 
sign up for health insurance coverage.
  And, fourth, insurance reforms to require private insurance companies 
to provide health care policies for children at reasonable premiums.
  This four-pronged approach takes what we feel are the most positive 
aspects in Medicaid matching grants and private insurance reforms. It 
assists middle- and low-income families by providing affordable health 
insurance for their children. It assures that children are covered by 
an adequate benefits package and it provides that proper balance of 
State flexibility with public accountability.
  I urge my colleagues to support the motion to recommit so that this 
House has a real opportunity to address the needs of the 10 million 
uninsured children in our country.
  The SPEAKER pro tempore. Does any Member rise in opposition to the 
motion to recommit?
  Mr. THOMAS. Mr. Speaker, I rise in opposition to the motion to 
recommit.
  Mr. Speaker, we heard all day, speaker after speaker on the other 
side of the aisle go into the well and say that the provisions that the 
Republicans had structured were outside the scope of the budget 
agreement, that we had not lived up to the budget agreement, that oh, 
my goodness, how could you not live up to the budget agreement.
  Mr. Speaker, this motion to recommit, guess what, does not live up to 
the budget agreement. It clearly states in the budget agreement that 
there are two areas where money can be spent for children's health 
care. One is in Medicaid. The other one is in block grants. Other 
possibilities are available if mutually agreeable. Mutually agreeable.
  The fact of the matter is, this motion to recommit has mandatory 
language requiring private insurers to carry out the wish, yes, the 
demands of the Democrats. It is clearly beyond the budget agreement. 
How in the world can you folks spend all day telling us that provision 
after provision is unacceptable because it is outside the budget 
agreement and yet you offer a motion to recommit which is one, subject 
to a point of order, it is not germane, and, two, the entire rest of 
the context is outside of the budget agreement? Why do you not live up 
to what you preach.
  I would simply tell my colleagues, the simple answer is to vote no on 
the motion to recommit.
  Mr. Speaker, I yield to the gentleman from Virginia [Mr. Bliley], 
chairman of the Committee on Commerce, who has the specific 
jurisdiction of this matter, which is outside the scope of the budget 
agreement.
  Mr. BLILEY. Mr. Speaker, I thank the gentleman for yielding to me.
  Here we go again. All day, speaker after speaker on this side of the 
aisle complaining about their Governors getting cut with the DSH 
payments and not going to be able to meet the targets. Well, in the 
Committee on Commerce we gave $16 billion for kid care and we said to 
the Governors, you furnish the health and you furnish the services and 
we did not restrict it and they are made pretty much whole for their 
Medicare budgets.
  But what this recommit motion would do would require States to phase 
in all children up to age 19 in the Medicaid Program and would require 
States to increase their mandatory levels of eligibility for certain 
eligibility groups. These are costly changes. Many States do not have 
the budgetary resources to do them. That means these States will not be 
eligible or able to participate in kid care and the uninsured children 
in those States would be denied the coverage and services they need. It 
would require States to provide only the Medicaid benefits packages to 
children served by kid care.
  This package is so expensive that States would not be able to afford 
to cover millions of children who would otherwise receive coverage 
under our plan. It would eliminate the ability of States to provide 
uninsured children the health services they need. This is a violation 
of the budget agreement, as the distinguished chairman of the 
Subcommittee on Health of the Committee on Ways and Means pointed out, 
which provided for coverage and services to uninsured low-income 
children.
  In addition, it would mean that services would be denied to the 2.6 
million children that CBO estimates would receive health care services 
under our plan.
  Mr. THOMAS. Mr. Speaker, I yield to the gentleman from Illinois [Mr. 
Hastert].
  Mr. HASTERT. Mr. Speaker, bigger government, more bureaucrats, more 
restrictions on the States. As a matter of fact, we create more 
loopholes for the States to jump through and what we do is deny the 
States providing kid care for kids. So those 2.6 million children who 
were going to benefit from this program all of a sudden will not have 
States providing health care for them.

                              {time}  1730

  Too much bureaucracy, too much extra cost, too many new hoops to jump 
through. The States are not going to do it. The States are not going to 
follow this. And I think it is a bad idea at a bad time.
  The SPEAKER pro tempore (Mr. Dreier). All time has expired.


                         Parliamentary Inquiry

  Mr. BROWN of Ohio. Mr. Speaker, parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state his parliamentary 
inquiry.
  Mr. BROWN of Ohio. Mr. Speaker, is the language to which the 
gentleman from California [Mr. Thomas] and the gentleman from Illinois 
[Mr. Hastert] and the gentleman from Virginia [Mr. Bliley] are 
referring the State optional program on the----
  The SPEAKER pro tempore. The gentleman is not presenting a 
parliamentary inquiry.
  Without objection, the previous question is ordered on the motion to 
recommit.
  There was no objection.
  The SPEAKER pro tempore. The question is on the motion to recommit.
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.
  Mr. BROWN of Ohio. Mr. Speaker, I object to the vote on the ground 
that a quorum is not present and make the point of order that a quorum 
is not present.
  The SPEAKER pro tempore. Evidently a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  The vote was taken by electronic device, and there were--yeas 207, 
nays 223, not voting 4, as follows:

                             [Roll No. 240]

                               YEAS--207

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baesler
     Baldacci
     Barcia
     Barrett (WI)
     Becerra
     Bentsen
     Berman
     Berry
     Bishop
     Blagojevich
     Blumenauer
     Bonior
     Borski
     Boswell
     Boucher
     Boyd
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Capps
     Cardin
     Carson
     Clay
     Clayton
     Clement
     Clyburn
     Condit
     Conyers
     Costello
     Coyne
     Cramer
     Cummings
     Danner
     Davis (FL)
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Dooley
     Doyle
     Edwards
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Fazio
     Filner
     Flake
     Foglietta
     Ford

[[Page H4605]]


     Frank (MA)
     Frost
     Furse
     Gejdenson
     Gephardt
     Gonzalez
     Goode
     Gordon
     Green
     Gutierrez
     Hall (OH)
     Hall (TX)
     Hamilton
     Harman
     Hastings (FL)
     Hefner
     Hilliard
     Hinchey
     Hinojosa
     Holden
     Hooley
     Hoyer
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson (WI)
     Johnson, E. B.
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kennelly
     Kildee
     Kilpatrick
     Kind (WI)
     Kleczka
     Klink
     Kucinich
     LaFalce
     Lampson
     Lantos
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Luther
     Maloney (CT)
     Maloney (NY)
     Manton
     Markey
     Martinez
     Mascara
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McDermott
     McGovern
     McHale
     McIntyre
     McKinney
     McNulty
     Meehan
     Meek
     Menendez
     Millender-McDonald
     Miller (CA)
     Minge
     Mink
     Moakley
     Mollohan
     Moran (VA)
     Murtha
     Nadler
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pickett
     Pomeroy
     Poshard
     Price (NC)
     Rahall
     Rangel
     Reyes
     Riggs
     Rivers
     Rodriguez
     Roemer
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Sanchez
     Sanders
     Sandlin
     Sawyer
     Schumer
     Scott
     Serrano
     Sherman
     Sisisky
     Skaggs
     Skelton
     Slaughter
     Smith, Adam
     Snyder
     Spratt
     Stabenow
     Stark
     Stenholm
     Stokes
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson
     Thurman
     Tierney
     Torres
     Towns
     Traficant
     Turner
     Velazquez
     Vento
     Visclosky
     Waters
     Watt (NC)
     Waxman
     Wexler
     Weygand
     Wise
     Woolsey
     Wynn

                               NAYS--223

     Aderholt
     Archer
     Armey
     Bachus
     Baker
     Ballenger
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Bilbray
     Bilirakis
     Bliley
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Brady
     Bryant
     Bunning
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Campbell
     Canady
     Cannon
     Castle
     Chabot
     Chambliss
     Christensen
     Coble
     Coburn
     Collins
     Combest
     Cook
     Cooksey
     Crane
     Crapo
     Cubin
     Cunningham
     Davis (VA)
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Everett
     Ewing
     Fawell
     Foley
     Forbes
     Fowler
     Fox
     Franks (NJ)
     Frelinghuysen
     Gallegly
     Ganske
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Goodlatte
     Goodling
     Goss
     Graham
     Granger
     Greenwood
     Gutknecht
     Hansen
     Hastert
     Hastings (WA)
     Hayworth
     Hefley
     Herger
     Hill
     Hilleary
     Hobson
     Hoekstra
     Horn
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Jenkins
     Johnson (CT)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kim
     King (NY)
     Kingston
     Klug
     Knollenberg
     Kolbe
     LaHood
     Largent
     Latham
     LaTourette
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     Livingston
     LoBiondo
     Lucas
     Manzullo
     McCollum
     McCrery
     McDade
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Mica
     Miller (FL)
     Molinari
     Moran (KS)
     Morella
     Myrick
     Nethercutt
     Neumann
     Ney
     Northup
     Norwood
     Nussle
     Oxley
     Packard
     Pappas
     Parker
     Paul
     Paxon
     Pease
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Quinn
     Radanovich
     Ramstad
     Redmond
     Regula
     Riley
     Rogan
     Rogers
     Rohrabacher
     Ros-Lehtinen
     Roukema
     Royce
     Ryun
     Salmon
     Sanford
     Saxton
     Scarborough
     Schaefer, Dan
     Schaffer, Bob
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Shimkus
     Shuster
     Skeen
     Smith (MI)
     Smith (NJ)
     Smith (OR)
     Smith (TX)
     Smith, Linda
     Snowbarger
     Solomon
     Souder
     Spence
     Stearns
     Stump
     Sununu
     Talent
     Tauzin
     Taylor (NC)
     Thomas
     Thornberry
     Thune
     Tiahrt
     Upton
     Walsh
     Wamp
     Watkins
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     White
     Whitfield
     Wicker
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--4

     Chenoweth
     Cox
     Schiff
     Yates

                              {time}  1748

  Mr. HOSTETTLER and Mr. LARGENT changed their vote from ``yea'' to 
``nay.''
  Mr. LIPINSKI and Ms. WOOLSEY changed their vote from ``nay'' to 
``yea.''
  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore (Mr. Dreier). The question is on the passage 
of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             Recorded vote

  Mr. BONIOR. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 270, 
noes 162, not voting 3, as follows:

                             [Roll No. 241]

                               AYES--270

     Aderholt
     Archer
     Armey
     Bachus
     Baesler
     Baker
     Ballenger
     Barcia
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bentsen
     Bereuter
     Bilbray
     Bilirakis
     Bishop
     Bliley
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Boswell
     Boyd
     Brady
     Bryant
     Bunning
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Campbell
     Canady
     Cannon
     Capps
     Castle
     Chabot
     Chambliss
     Chenoweth
     Christensen
     Clement
     Coble
     Coburn
     Collins
     Combest
     Condit
     Cook
     Cooksey
     Cramer
     Crane
     Crapo
     Cubin
     Cunningham
     Danner
     Davis (FL)
     Davis (VA)
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Dooley
     Doolittle
     Doyle
     Dreier
     Duncan
     Dunn
     Edwards
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Etheridge
     Everett
     Ewing
     Fawell
     Foley
     Forbes
     Fowler
     Fox
     Franks (NJ)
     Frelinghuysen
     Gallegly
     Ganske
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Gingrich
     Goode
     Goodlatte
     Goodling
     Gordon
     Goss
     Graham
     Granger
     Greenwood
     Gutknecht
     Hall (OH)
     Hamilton
     Hansen
     Harman
     Hastert
     Hastings (WA)
     Hayworth
     Hefley
     Herger
     Hill
     Hilleary
     Hobson
     Hoekstra
     Holden
     Hooley
     Horn
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Jenkins
     John
     Johnson (CT)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kennelly
     Kim
     Kingston
     Kleczka
     Klug
     Knollenberg
     Kolbe
     LaHood
     Lampson
     Largent
     Latham
     LaTourette
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     Livingston
     LoBiondo
     Lucas
     Luther
     Maloney (CT)
     Manzullo
     Martinez
     McCarthy (MO)
     McCollum
     McCrery
     McDade
     McHale
     McHugh
     McInnis
     McIntyre
     McKeon
     Mica
     Miller (FL)
     Minge
     Molinari
     Moran (VA)
     Morella
     Myrick
     Nethercutt
     Neumann
     Ney
     Northup
     Norwood
     Nussle
     Oxley
     Packard
     Pappas
     Parker
     Paxon
     Pease
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Pombo
     Pomeroy
     Porter
     Portman
     Pryce (OH)
     Quinn
     Radanovich
     Ramstad
     Redmond
     Regula
     Riggs
     Riley
     Roemer
     Rogan
     Rogers
     Rohrabacher
     Ros-Lehtinen
     Roukema
     Royce
     Ryun
     Sanchez
     Sanford
     Saxton
     Scarborough
     Schaefer, Dan
     Schaffer, Bob
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Shimkus
     Shuster
     Sisisky
     Skeen
     Skelton
     Smith (MI)
     Smith (NJ)
     Smith (OR)
     Smith (TX)
     Smith, Adam
     Smith, Linda
     Snowbarger
     Snyder
     Solomon
     Souder
     Spence
     Spratt
     Stenholm
     Stump
     Sununu
     Talent
     Tanner
     Tauscher
     Tauzin
     Taylor (MS)
     Taylor (NC)
     Thomas
     Thornberry
     Thune
     Thurman
     Tiahrt
     Traficant
     Turner
     Upton
     Visclosky
     Walsh
     Wamp
     Watkins
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     White
     Whitfield
     Wicker
     Wolf
     Young (AK)
     Young (FL)

                               NOES--162

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baldacci
     Barrett (WI)
     Becerra
     Berman
     Berry
     Blagojevich
     Blumenauer
     Bonior
     Borski
     Boucher
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Cardin
     Carson
     Clay
     Clayton
     Clyburn
     Conyers
     Costello
     Coyne
     Cummings
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Engel
     Eshoo
     Evans
     Farr
     Fattah
     Fazio
     Filner
     Flake
     Foglietta
     Ford
     Frank (MA)
     Frost
     Furse
     Gejdenson
     Gephardt
     Gonzalez
     Green
     Gutierrez
     Hall (TX)
     Hastings (FL)
     Hefner
     Hilliard
     Hinchey
     Hinojosa
     Hoyer
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Johnson (WI)
     Johnson, E. B.
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind (WI)
     King (NY)
     Klink
     Kucinich
     LaFalce
     Lantos
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Maloney (NY)
     Manton
     Markey
     Mascara
     Matsui
     McCarthy (NY)
     McDermott
     McGovern
     McIntosh
     McKinney
     McNulty
     Meehan
     Meek
     Menendez
     Metcalf
     Millender-McDonald
     Miller (CA)
     Mink
     Moakley
     Mollohan
     Moran (KS)
     Murtha
     Nadler
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Paul
     Payne

[[Page H4606]]


     Pelosi
     Peterson (MN)
     Pickett
     Poshard
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rivers
     Rodriguez
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Salmon
     Sanders
     Sandlin
     Sawyer
     Schumer
     Scott
     Serrano
     Sherman
     Skaggs
     Slaughter
     Stabenow
     Stark
     Stearns
     Stokes
     Strickland
     Stupak
     Thompson
     Tierney
     Torres
     Towns
     Velazquez
     Vento
     Waters
     Watt (NC)
     Waxman
     Wexler
     Weygand
     Wise
     Woolsey
     Wynn

                             NOT VOTING--3

     Cox
     Schiff
     Yates

                             {time}   1809

  The Clerk announced the following pairs: on this vote:

       Mr. Schiff for, with Mr. Yates against.

  Messrs. GORDON, WELDON of Florida, and BARR of Georgia changed their 
vote from ``no'' to ``aye.''
  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________