[Congressional Record Volume 143, Number 109 (Tuesday, July 29, 1997)]
[House]
[Pages H6029-H6298]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      CONFERENCE REPORT ON H.R. 2015, BALANCED BUDGET ACT OF 1997

  Mr. HOBSON submitted the following conference report and statement of 
the bill (H.R. 2015) to provide for reconciliation pursuant to section 
104(a) of the concurrent resolution on the budget for fiscal year 1998:

                  Conference Report (H. Rept. 105-217)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to the bill (H.R. 
     2015), to provide for reconciliation pursuant to section 
     104(a) of the concurrent resolution on the budget for fiscal 
     year 1998, having met, after full and free conference, have 
     agreed to recommend and do recommend to their respective 
     Houses as follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment, insert the following:

     SECTION 1. SHORT TITLE.

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

     SEC. 2. TABLE OF TITLES.

       This Act is organized into titles as follows:
     Title I--Food Stamp Provisions
     Title II--Housing and Related Provisions
     Title III--Communications and Spectrum Allocation Provisions
     Title IV--Medicare, Medicaid, and Children's Health 
         Provisions
     Title V--Welfare and Related Provisions
     Title VI--Education and Related Provisions
     Title VII--Civil Service Retirement and Related Provisions
     Title VIII--Veterans and Related Provisions
     Title IX--Asset Sales, User Fees, and Miscellaneous 
         Provisions
     Title X--Budget Enforcement and Process Provisions
     Title XI--District of Columbia Revitalization
                     TITLE I--FOOD STAMP PROVISIONS

     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 paragraph (6) as paragraph (7); and
       (3) by inserting after paragraph (5) the following:
       ``(6) 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 receiving food stamp benefits during the 3 
     months of eligibility provided under paragraph (2); and
       ``(V) is not receiving food stamp benefits under paragraph 
     (5).

       ``(B) General rule.--Subject to subparagraphs (C) through 
     (G), a State agency may provide an exemption from the 
     requirements of paragraph (2) for covered individuals.
       ``(C) Fiscal year 1998.--Subject to subparagraphs (E) and 
     (G), 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) through (G), 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 from the State's 
     caseload by more than 10 percent, 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 under this paragraph to the 
     extent that the average monthly number of exemptions in 
     effect in the State for the preceding fiscal year under this 
     paragraph is lesser or greater than the average monthly 
     number of exemptions estimated for the State agency for such 
     preceding fiscal year under this paragraph.
       ``(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 by striking paragraph (1) 
     and inserting the following:
       ``(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--

       ``(I) $81,000,000; and
       ``(II) an additional amount of $131,000,000;

       ``(iv) for fiscal year 1999--

       ``(I) $84,000,000; and
       ``(II) an additional amount of $131,000,000;

       ``(v) for fiscal year 2000--

       ``(I) $86,000,000; and
       ``(II) an additional amount of $131,000,000;

       ``(vi) for fiscal year 2001--

       ``(I) $88,000,000; and
       ``(II) an additional amount of $131,000,000; and

       ``(vii) for fiscal year 2002--

       ``(I) $90,000,000; and
       ``(II) an additional amount of $75,000,000.

       ``(B) 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--

       ``(I) changes in each State's caseload (as defined in 
     section 6(o)(6)(A));
       ``(II) for fiscal year 1998, the portion of food stamp 
     recipients who reside in each State who are not eligible for 
     an exception under section 6(o)(3); and

[[Page H6030]]

       ``(III) for each of fiscal years 1999 through 2002, the 
     portion of food stamp recipients who reside in each State who 
     are not eligible for an exception under section 6(o)(3) and 
     who--

       ``(aa) do not reside in an area subject to a waiver granted 
     by the Secretary under section 6(o)(4); or
       ``(bb) do reside in an area subject to a waiver granted by 
     the Secretary under section 6(o)(4), if the State agency 
     provides employment and training services in the area to food 
     stamp recipients who are not eligible for an exception under 
     section 6(o)(3).
       ``(ii) Estimated factors.--The Secretary shall estimate the 
     portion of food stamp recipients who reside in each State who 
     are not eligible for an exception under section 6(o)(3) based 
     on the survey conducted to carry out subsection (c) for 
     fiscal year 1996 and such other factors as the Secretary 
     considers appropriate due to the timing and limitations of 
     the survey.
       ``(iii) Reporting requirement.--A State agency shall submit 
     such reports to the Secretary as the Secretary determines are 
     necessary to ensure compliance with this paragraph.
       ``(C) Reallocation.--If a State agency will not expend all 
     of the funds allocated to the State agency for a fiscal year 
     under subparagraph (B), the Secretary shall reallocate the 
     unexpended funds to other States (during the fiscal year or 
     the subsequent fiscal year) as the Secretary considers 
     appropriate and equitable.
       ``(D) Minimum allocation.--Notwithstanding subparagraph 
     (B), 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.
       ``(E) Use of funds.--Of the amount of funds a State agency 
     receives under subparagraphs (A) through (D) for a fiscal 
     year, not less than 80 percent of the funds shall be used by 
     the State agency during the fiscal year to serve food stamp 
     recipients who--
       ``(i) are not eligible for an exception under section 
     6(o)(3); and
       ``(ii) are placed in and comply with a program described in 
     subparagraph (B) or (C) of section 6(o)(2).
       ``(F) Maintenance of effort.--To receive an allocation of 
     an additional amount made available under subclause (II) of 
     each of clauses (iii) through (vii) of subparagraph (A), 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 described in 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 and such expenses 
     for fiscal year 1996.
       ``(G) Component costs.--The Secretary shall monitor State 
     agencies' expenditure of funds for employment and training 
     programs provided under this paragraph, including the costs 
     of individual components of State agencies' programs. The 
     Secretary may determine the reimbursable costs of employment 
     and training components, and, if the Secretary makes such a 
     determination, the Secretary shall determine that the amounts 
     spent or planned to be spent on the components reflect the 
     reasonable cost of efficiently and economically providing 
     components appropriate to recipient employment and training 
     needs, taking into account, as the Secretary deems 
     appropriate, prior expenditures on the components, the 
     variability of costs among State agencies' components, the 
     characteristics of the recipients to be served, and such 
     other factors as the Secretary considers necessary.''.
       (b) Report to Congress.--Not later than 30 months after the 
     date of enactment of this Act, the Secretary of Agriculture 
     shall submit to the Committee on Agriculture of the House of 
     Representatives and the Committee on Agriculture, Nutrition, 
     and Forestry of the Senate a report regarding whether the 
     amounts made available under section 16(h)(1)(A) of the Food 
     Stamp Act of 1977 (as a result of the amendment made by 
     subsection (a)) have been used by State agencies to increase 
     the number of work slots for recipients subject to section 
     6(o) of the Food Stamp Act of 1977 (7 U.S.C. 2015(o)) in 
     employment and training programs and workfare in the most 
     efficient and effective manner practicable.

     SEC. 1003. DENIAL OF FOOD STAMPS FOR PRISONERS.

       (a) State Plans.--
       (1) In General.--Section 11(e) of the Food Stamp Act of 
     1977 (7 U.S.C. 2020(e)) is amended by striking paragraph (20) 
     and inserting the following:
       ``(20) that the State agency shall establish a system and 
     take action on a periodic basis--
       ``(A) to verify and otherwise ensure that an individual 
     does not receive coupons in more than 1 jurisdiction within 
     the State; and
       ``(B) to verify and otherwise ensure that an individual who 
     is placed under detention in a Federal, State, or local 
     penal, correctional, or other detention facility for more 
     than 30 days shall not be eligible to participate in the food 
     stamp program as a member of any household, except that--
       ``(i) the Secretary may determine that extraordinary 
     circumstances make it impracticable for the State agency to 
     obtain information necessary to discontinue inclusion of the 
     individual; and
       ``(ii) a State agency that obtains information collected 
     under section 1611(e)(1)(I)(i)(I) of the Social Security Act 
     (42 U.S.C. 1382(e)(1)(I)(i)(I)) pursuant to section 
     1611(e)(1)(I)(ii)(II) of that Act (42 U.S.C. 
     1382(e)(1)(I)(ii)(II)), or under another program determined 
     by the Secretary to be comparable to the program carried out 
     under that section, shall be considered in compliance with 
     this subparagraph.''.
       (2) Limits on disclosure and use of information.--Section 
     11(e)(8)(E) of the Food Stamp Act of 1977 (7 U.S.C. 
     2020(e)(8)(E)) is amended by striking ``paragraph (16)'' and 
     inserting ``paragraph (16) or (20)(B)''.
       (3) Effective Date.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall take effect on 
     the date that is 1 year after the date of enactment of this 
     Act.
       (B) Extension.--The Secretary of Agriculture may grant a 
     State an extension of time to comply with the amendments made 
     by this subsection, not to exceed beyond the date that is 2 
     years after the date of enactment of this Act, if the chief 
     executive officer of the State submits a request for the 
     extension to the Secretary--
       (i) stating the reasons why the State is not able to comply 
     with the amendments made by this subsection by the date that 
     is 1 year after the date of enactment of this Act;
       (ii) providing evidence that the State is making a good 
     faith effort to comply with the amendments made by this 
     subsection as soon as practicable; and
       (iii) detailing a plan to bring the State into compliance 
     with the amendments made by this subsection as soon as 
     practicable but not later than the date of the requested 
     extension.
       (b) Information Sharing.--Section 11 of the Food Stamp Act 
     of 1977 (7 U.S.C. 2020) is amended by adding at the end the 
     following:
       ``(q) Denial of Food Stamps for Prisoners.--The Secretary 
     shall assist States, to the maximum extent practicable, in 
     implementing a system to conduct computer matches or other 
     systems to prevent prisoners described in section 
     11(e)(20)(B) from participating in the food stamp program as 
     a member of any household.''.

     SEC. 1004. NUTRITION EDUCATION.

       Section 11(f) of the Food Stamp Act of 1977 (7 U.S.C. 
     2020(f)) is amended--
       (1) by striking ``(f) To encourage'' and inserting the 
     following:
       ``(f) Nutrition Education.--
       ``(1) In general.--To encourage''; and
       (2) by adding at the end the following:
       ``(2) Grants.--
       ``(A) In general.--The Secretary shall make available not 
     more than $600,000 for each of fiscal years 1998 through 2001 
     to pay the Federal share of grants made to eligible private 
     nonprofit organizations and State agencies to carry out 
     subparagraph (B).
       ``(B) Eligibility.--A private nonprofit organization or 
     State agency shall be eligible to receive a grant under 
     subparagraph (A) if the organization or agency agrees--
       ``(i) to use the funds to direct a collaborative effort to 
     coordinate and integrate nutrition education into health, 
     nutrition, social service, and food distribution programs for 
     food stamp participants and other low-income households; and
       ``(ii) to design the collaborative effort to reach large 
     numbers of food stamp participants and other low-income 
     households through a network of organizations, including 
     schools, child care centers, farmers' markets, health 
     clinics, and outpatient education services.
       ``(C) Preference.--In deciding between 2 or more private 
     nonprofit organizations or State agencies that are eligible 
     to receive a grant under subparagraph (B), the Secretary 
     shall give a preference to an organization or agency that 
     conducted a collaborative effort described in subparagraph 
     (B) and received funding for the collaborative effort from 
     the Secretary before the date of enactment of this paragraph.
       ``(D) Federal share.--
       ``(i) In general.--Subject to subparagraph (E), the Federal 
     share of a grant under this paragraph shall be 50 percent.
       ``(ii) No in-kind contributions.--The non-Federal share of 
     a grant under this paragraph shall be in cash.
       ``(iii) Private funds.--The non-Federal share of a grant 
     under this paragraph may include amounts from private 
     nongovernmental sources.
       ``(E) Limit on individual grant.--The Federal share of a 
     grant under subparagraph (A) may not exceed $200,000 for a 
     fiscal year.''.

     SEC. 1005. REGULATIONS; EFFECTIVE DATE.

       (a) Regulations.--Not later than 1 year after the date of 
     enactment of this Act, the Secretary of Agriculture shall 
     promulgate such regulations as are necessary to implement the 
     amendments made by this title.
       (b) Effective Date.--The amendments made by sections 1001 
     and 1002 take effect on October 1, 1997, without regard to 
     whether regulations have been promulgated to implement the 
     amendments made by such sections.
                TITLE II--HOUSING AND RELATED PROVISIONS

     SEC. 2001. TABLE OF CONTENTS.

       The table of contents for this title is as follows:

                TITLE II--HOUSING AND RELATED PROVISIONS

       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

[[Page H6031]]

       (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 (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''.
      TITLE III--COMMUNICATIONS AND SPECTRUM ALLOCATION PROVISIONS

     SEC. 3001. DEFINITIONS.

       (a) Common Terminology.--Except as otherwise provided in 
     this title, the terms used in this title have the meanings 
     provided in section 3 of the Communications Act of 1934 (47 
     U.S.C. 153), as amended by this section.
       (b) Additional Definitions.--Section 3 of the 
     Communications Act of 1934 (47 U.S.C. 153) is amended--
       (1) by redesignating paragraphs (49) through (51) as 
     paragraphs (50) through (52), respectively; and
       (2) by inserting after paragraph (48) the following new 
     paragraph:
       ``(49) Television service.--
       ``(A) Analog television service.--The term `analog 
     television service' means television service provided 
     pursuant to the transmission standards prescribed by the 
     Commission in section 73.682(a) of its regulations (47 C.F.R. 
     73.682(a)).
       ``(B) Digital television service.--The term `digital 
     television service' means television service provided 
     pursuant to the transmission standards prescribed by the 
     Commission in section 73.682(d) of its regulations (47 C.F.R. 
     73.682(d)).''.

     SEC. 3002. SPECTRUM AUCTIONS.

       (a) Extension and Expansion of Auction Authority.--
       (1) In general.--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, then, except as provided in paragraph 
     (2), the Commission shall grant the 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) for public safety radio services, including private 
     internal radio services used by State and local governments 
     and non-government entities and including emergency road 
     services provided by not-for-profit organizations, that--
       ``(i) are used to protect the safety of life, health, or 
     property; and
       ``(ii) are not made commercially available to the public;
       ``(B) for initial licenses or construction permits for 
     digital television service given to existing terrestrial 
     broadcast licensees to replace their analog television 
     service licenses; or
       ``(C) for stations described in section 397(6) of this 
     Act.'';
       (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) ensure 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) prescribe methods by which a reasonable reserve price 
     will be required, or a minimum bid will be established, to 
     obtain any license or permit being assigned pursuant to the 
     competitive bidding, unless the Commission determines that 
     such a reserve price or minimum bid is not in the public 
     interest.'';
       (D) in paragraph (8)(B)--
       (i) by striking the third sentence; and
       (ii) by adding at the end the following new sentence: ``No 
     sums may be retained under this subparagraph during any 
     fiscal year beginning after September 30, 1998, if the annual 
     report of the Commission under section 4(k) for the second 
     preceding fiscal year fails to include in the itemized 
     statement required by paragraph (3) of such section a 
     statement of each expenditure made for purposes of conducting 
     competitive bidding under this subsection during such second 
     preceding fiscal year.'';
       (E) in paragraph (11), by striking ``1998'' and inserting 
     ``2007''; and
       (F) in paragraph (13)(F), by striking ``September 30, 
     1998'' and inserting ``the date of enactment of the Balanced 
     Budget Act of 1997''.
       (2) Termination of Lottery Authority.--Section 309(i) of 
     the Communications Act of 1934 (47 U.S.C. 309(i)) is 
     amended--
       (A) by striking paragraph (1) and inserting the following:
       ``(1) General authority.--Except as provided in paragraph 
     (5), if there is more than one application for any initial 
     license or construction permit, then the Commission shall 
     have the authority to grant such license or permit to a 
     qualified applicant through the use of a system of random 
     selection.''; and
       (B) by adding at the end the following new paragraph:
       ``(5) Termination of authority.--(A) Except as provided in 
     subparagraph (B), the Commission shall not issue any license 
     or permit using a system of random selection under this 
     subsection after July 1, 1997.
       ``(B) Subparagraph (A) of this paragraph shall not apply 
     with respect to licenses or permits for stations described in 
     section 397(6) of this Act.''.
       (3) Resolution of pending comparative licensing cases.--
     Section 309 of the Communications Act of 1934 (47 U.S.C. 309) 
     is further amended by adding at the end the following new 
     subsection:
       ``(l) Applicability of Competitive Bidding to Pending 
     Comparative Licensing Cases.--With respect to competing 
     applications for initial licenses or construction permits for 
     commercial radio or television stations that were filed with 
     the Commission before July 1, 1997, the Commission shall--
       ``(1) have the authority to conduct a competitive bidding 
     proceeding pursuant to subsection (j) to assign such license 
     or permit;
       ``(2) treat the persons filing such applications as the 
     only persons eligible to be qualified bidders for purposes of 
     such proceeding; and
       ``(3) waive any provisions of its regulations necessary to 
     permit such persons to enter an agreement to procure the 
     removal of a conflict between their applications during the 
     180-day period beginning on the date of enactment of the 
     Balanced Budget Act of 1997.''.
       (4) Conforming amendment.--Section 6002 of the Omnibus 
     Budget Reconciliation Act of 1993 is amended by striking 
     subsection (e).
       (5) Effective Date.--Except as otherwise provided therein, 
     the amendments made by this subsection are effective on July 
     1, 1997.
       (b) Accelerated Availability for Auction of 1,710-1,755 
     Megahertz from Initial Reallocation Report.--The band of 
     frequencies located at 1,710-1,755 megahertz identified in 
     the initial reallocation report under section 113(a) of the 
     National Telecommunications and Information Administration 
     Act (47 U.S.C. 923(a)) shall, notwithstanding the timetable 
     recommended under section 113(e) of such Act and section 
     115(b)(1) of such Act, be available in accordance with this 
     subsection for assignment for commercial use. The Commission 
     shall assign licenses for such use by competitive bidding 
     commenced after January 1, 2001, pursuant to section 309(j) 
     of the Communications Act of 1934 (47 U.S.C. 309(j)).
       (c) Commission Obligation To Make Additional Spectrum 
     Available by Auction.--
       (1) In general.--The 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) in the aggregate span not less than 55 megahertz;
       (B) are located below 3 gigahertz;
       (C) 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 (47 U.S.C. 923);
       (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 for reallocation under section 337 of 
     the Communications Act of 1934 (as added by this Act); or
       (v) been allocated or authorized for unlicensed use 
     pursuant to part 15 of the Commission's regulations (47 
     C.F.R. Part 15), if the operation of services 
     licensed pursuant to competitive bidding would interfere 
     with operation of end-user products permitted under such 
     regulations;
       (D) include frequencies at 2,110-2,150 megahertz; and
       (E) include 15 megahertz from within the bands of 
     frequencies at 1,990-2,110 megahertz.
       (2) Criteria for Reassignment.--In making available bands 
     of frequencies for competitive bidding pursuant to paragraph 
     (1), the Commission shall--
       (A) seek to promote the most efficient use of the 
     electromagnetic spectrum;
       (B) consider the cost of relocating existing uses to other 
     bands of frequencies or other means of communication;
       (C) consider the needs of existing public safety radio 
     services (as such services are described in section 
     309(j)(2)(A) of the Communications Act of 1934, as amended by 
     this Act);
       (D) comply with the requirements of international 
     agreements concerning spectrum allocations; and

[[Page H6032]]

       (E) coordinate with the Secretary of Commerce when there is 
     any impact on Federal Government spectrum use.
       (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 comparable 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) Notification to the Secretary of Commerce.--The 
     Commission shall attempt to accommodate incumbent licensees 
     displaced under this section by relocating them to other 
     frequencies available for allocation by the Commission. The 
     Commission shall notify the Secretary of Commerce whenever 
     the Commission is not able to provide for the effective 
     relocation of an incumbent licensee to a band of frequencies 
     available to the Commission for assignment. The notification 
     shall include--
       (A) specific information on the incumbent licensee;
       (B) the bands the Commission considered for relocation of 
     the licensee;
       (C) the reasons the licensee cannot be accommodated in such 
     bands; and
       (D) the bands of frequencies identified by the Commission 
     that are--
       (i) suitable for the relocation of such licensee; 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).
       (d) Identification and Reallocation of Frequencies.--
       (1) In general.--Section 113 of the National 
     Telecommunications and Information Administration 
     Organization Act (47 U.S.C. 923) is amended by adding at the 
     end thereof the following:
       ``(f) Additional Reallocation Report.--If the Secretary 
     receives a notice from the Commission pursuant to section 
     3002(c)(5) 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 licensees 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 licensees described in the 
     Commission's notice.
       ``(g) Relocation of Federal Government Stations.--
       ``(1) In general.--In order to expedite the commercial use 
     of the electromagnetic spectrum and notwithstanding section 
     3302(b) of title 31, United States Code, any Federal entity 
     which operates a Federal Government station may accept from 
     any person payment of the expenses of relocating the Federal 
     entity's operations from one or more frequencies to another 
     frequency or frequencies, including the costs of any 
     modification, replacement, or reissuance of equipment, 
     facilities, operating manuals, or regulations incurred by 
     that entity. Such payments may be in advance of relocation 
     and may be in cash or in kind. Any such payment in cash shall 
     be deposited in the account of such Federal entity in the 
     Treasury of the United States or in a separate account 
     authorized by law. Funds deposited according to this 
     paragraph shall be available, without appropriation or fiscal 
     year limitation, only for such expenses of the Federal entity 
     for which such funds were deposited under this paragraph.
       ``(2) Process for relocation.--Any person seeking to 
     relocate a Federal Government station that has been assigned 
     a frequency within a band that has been allocated for mixed 
     Federal and non-Federal use, or that has been scheduled for 
     reallocation to non-Federal use, may submit a petition for 
     such relocation to NTIA. The NTIA shall limit or terminate 
     the Federal Government station's operating license within 6 
     months after receiving the petition if the following 
     requirements are met:
       ``(A) the person seeking relocation of the Federal 
     Government station has guaranteed to pay all relocation costs 
     incurred by the Federal entity, including all engineering, 
     equipment, site acquisition and construction, and regulatory 
     fee costs;
       ``(B) all activities necessary for implementing the 
     relocation have been completed, including construction of 
     replacement facilities (if necessary and appropriate) and 
     identifying and obtaining new frequencies for use by the 
     relocated Federal Government station (where such station 
     is not relocating to spectrum reserved exclusively for 
     Federal use);
       ``(C) any necessary replacement facilities, equipment 
     modifications, or other changes have been implemented and 
     tested to ensure that the Federal Government station is able 
     to successfully accomplish its purposes; and
       ``(D) NTIA has determined that the proposed use of the 
     spectrum frequency band to which the Federal entity will 
     relocate its operations is--
       ``(i) consistent with obligations undertaken by the United 
     States in international agreements and with United States 
     national security and public safety interests; and
       ``(ii) suitable for the technical characteristics of the 
     band and consistent with other uses of the band.
     In exercising its authority under clause (i) of this 
     subparagraph, NTIA shall consult with the Secretary of 
     Defense, the Secretary of State, or other appropriate 
     officers of the Federal Government.
       ``(3) Right to reclaim.--If within one year after the 
     relocation the Federal entity demonstrates to the Commission 
     that the new facilities or spectrum are not comparable to the 
     facilities or spectrum from which the Federal Government 
     station was relocated, the person who filed the petition 
     under paragraph (2) for such relocation shall take reasonable 
     steps to remedy any defects or pay the Federal entity for the 
     expenses incurred in returning the Federal Government station 
     to the spectrum from which such station was relocated.
       ``(h) Federal Action To Expedite Spectrum Transfer.--Any 
     Federal Government station which operates on electromagnetic 
     spectrum that has been identified in any reallocation report 
     under this section shall, to the maximum extent practicable 
     through the use of the authority granted under subsection (g) 
     and any other applicable provision of law, take action to 
     relocate its spectrum use to other frequencies that are 
     reserved for Federal use or to consolidate its spectrum use 
     with other Federal Government stations in a manner that 
     maximizes the spectrum available for non-Federal use.
       ``(i) Definition.--For purposes of this section, the term 
     `Federal entity' means any department, agency, or other 
     instrumentality of the Federal Government that utilizes a 
     Government station license obtained under section 305 of the 
     1934 Act (47 U.S.C. 305).''.
       (2) Section 114(a) of such Act (47 U.S.C. 924(a)) is 
     amended--
       (A) in paragraph (1), by striking ``(a) or (d)(1)'' and 
     inserting ``(a), (d)(1), or (f)''; and
       (B) in paragraph (2), by striking ``either'' and inserting 
     ``any''.
       (e) Identification and Reallocation of Auctionable 
     Frequencies.--
       (1) Second report required.--Section 113(a) of the National 
     Telecommunications and Information Administration 
     Organization Act (47 U.S.C. 923(a)) is amended by inserting 
     ``and within 6 months after the date of enactment of the 
     Balanced Budget Act of 1997'' after ``Act of 1993''.
       (2) In general.--Section 113(b) of such Act (47 U.S.C. 
     923(b)) is amended--
       (A) by striking the caption of paragraph (1) and inserting 
     ``Initial reallocation report.--'';
       (B) by inserting ``in the initial 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 adding at the end thereof the following:
       ``(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) are located below 3 gigahertz; and
       ``(C) meet the criteria specified in paragraphs (1) through 
     (5) of subsection (a).''.
       (3) Conforming amendment.--Section 113(d) of such Act (47 
     U.S.C. 923(d)) is amended by striking ``final report'' and 
     inserting ``initial report''.
       (4) Allocation and assignment.--Section 115 of such Act (47 
     U.S.C. 925) is amended--
       (A) by striking ``the report required by section 113(a)'' 
     in subsection (b) and inserting ``the initial reallocation 
     report required by section 113(a)''; and
       (B) by adding at the end thereof the following:
       ``(c) Allocation and Assignment of Frequencies Identified 
     in the Second Reallocation Report.--
       ``(1) Plan and implementation.--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 section 113(a), 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.
       ``(2) Contents.--The plan prepared by the Commission under 
     paragraph (1) shall consist of a schedule of allocation and 
     assignment of those frequencies in accordance with section 
     309(j) of the 1934 Act in time for the assignment of those 
     licenses or permits by September 30, 2002.''.

     SEC. 3003. 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

[[Page H6033]]

     broadcast license that authorizes analog television service 
     may not be renewed to authorize such service for a period 
     that extends beyond December 31, 2006.
       ``(B) Extension.--The Commission shall extend the date 
     described in subparagraph (A) for any station that requests 
     such extension in any television market if the Commission 
     finds that--
       ``(i) one or more of the stations in such market that are 
     licensed to or affiliated with one of the four largest 
     national television networks are not broadcasting a digital 
     television service signal, and the Commission finds that each 
     such station has exercised due diligence and satisfies the 
     conditions for an extension of the Commission's applicable 
     construction deadlines for digital television service in that 
     market;
       ``(ii) digital-to-analog converter technology is not 
     generally available in such market; or
       ``(iii) in any market in which an extension is not 
     available under clause (i) or (ii), 15 percent or more of the 
     television households in such market--

       ``(I) do not subscribe to a multichannel video programming 
     distributor (as defined in section 602) that carries one of 
     the digital television service programming channels of each 
     of the television stations broadcasting such a channel in 
     such market; and
       ``(II) do not have either--

       ``(a) at least one television receiver capable of receiving 
     the digital television service signals of the television 
     stations licensed in such market; or
       ``(b) at least one television receiver of analog television 
     service signals equipped with digital-to-analog converter 
     technology capable of receiving the digital television 
     service signals of the television stations licensed in such 
     market.
       ``(C) Spectrum reversion and resale.--
       ``(i) The Commission shall--

       ``(I) ensure that, as licenses for analog television 
     service expire pursuant to subparagraph (A) or (B), each 
     licensee shall cease using electromagnetic spectrum assigned 
     to such service according to the Commission's direction; and
       ``(II) reclaim and organize the electromagnetic spectrum in 
     a manner consistent with the objectives described in 
     paragraph (3) of this subsection.

       ``(ii) Licensees for new services occupying spectrum 
     reclaimed pursuant to clause (i) shall be assigned 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.
       ``(D) Certain limitations on qualified bidders 
     prohibited.--In prescribing any regulations relating to the 
     qualification of bidders for spectrum reclaimed pursuant to 
     subparagraph (C)(i), the Commission, for any license that may 
     be used for any digital television service where the grade A 
     contour of the station is projected to encompass the entirety 
     of a city with a population in excess of 400,000 (as 
     determined using the 1990 decennial census), shall not--
       ``(i) preclude any party from being a qualified bidder for 
     such spectrum 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 winning bidder in a competitive bidding for such 
     spectrum from using such spectrum for digital television 
     service.''.

     SEC. 3004. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY 
                   SERVICES LICENSES AND COMMERCIAL LICENSES.

       Title III of the Communications Act of 1934 is amended by 
     inserting after section 336 (47 U.S.C. 336) the following new 
     section:

     ``SEC. 337. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY 
                   SERVICES LICENSES AND COMMERCIAL LICENSES.

       ``(a) In General.--Not later than January 1, 1998, the 
     Commission shall allocate the electromagnetic spectrum 
     between 746 megahertz and 806 megahertz, inclusive, as 
     follows:
       ``(1) 24 megahertz of that spectrum for public safety 
     services according to the terms and conditions established by 
     the Commission, in consultation with the Secretary of 
     Commerce and the Attorney General; and
       ``(2) 36 megahertz of that spectrum for commercial use to 
     be assigned by competitive bidding pursuant to section 
     309(j).
       ``(b) Assignment.--The Commission shall--
       ``(1) commence assignment of the licenses for public safety 
     services created pursuant to subsection (a) no later than 
     September 30, 1998; and
       ``(2) commence competitive bidding for the commercial 
     licenses created pursuant to subsection (a) after January 1, 
     2001.
       ``(c) Licensing of Unused Frequencies for Public Safety 
     Services.--
       ``(1) Use of unused channels for public safety services.--
     Upon application by an entity seeking to provide public 
     safety services, the Commission shall waive any requirement 
     of this Act or its regulations implementing this Act (other 
     than its regulations regarding harmful interference) to the 
     extent necessary to permit the use of unassigned frequencies 
     for the provision of public safety services by such entity. 
     An application shall be granted under this subsection if the 
     Commission finds that--
       ``(A) no other spectrum allocated to public safety services 
     is immediately available to satisfy the requested public 
     safety service use;
       ``(B) the requested use is technically feasible without 
     causing harmful interference to other spectrum users entitled 
     to protection from such interference under the Commission's 
     regulations;
       ``(C) the use of the unassigned frequency for the provision 
     of public safety services is consistent with other 
     allocations for the provision of such services in the 
     geographic area for which the application is made;
       ``(D) the unassigned frequency was allocated for its 
     present use not less than 2 years prior to the date on which 
     the application is granted; and
       ``(E) granting such application is consistent with the 
     public interest.
       ``(2) Applicability.--Paragraph (1) shall apply to any 
     application to provide public safety services that is pending 
     or filed on or after the date of enactment of the Balanced 
     Budget Act of 1997.
       ``(d) Conditions on Licenses.--In establishing service 
     rules with respect to licenses granted pursuant to this 
     section, the Commission--
       ``(1) shall establish interference limits at the boundaries 
     of the spectrum block and service area;
       ``(2) shall establish any additional technical restrictions 
     necessary to protect full-service analog television service 
     and digital television service during a transition to digital 
     television service;
       ``(3) may permit public safety services licensees 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; and
       ``(4) shall establish rules insuring that public safety 
     services licensees using spectrum reallocated pursuant to 
     subsection (a)(1) shall not be subject to harmful 
     interference from television broadcast licensees.
       ``(e) Removal and Relocation of Incumbent Broadcast 
     Licensees.--
       ``(1) Channels 60 to 69.--Any person who holds a television 
     broadcast license to operate between 746 and 806 megahertz 
     may not operate at that frequency after the date on which the 
     digital television service transition period terminates, as 
     determined by the Commission.
       ``(2) Incumbent qualifying low-power stations.--After 
     making any allocation or assignment under this section, the 
     Commission shall seek to assure, consistent with the 
     Commission's plan for allotments for digital television 
     service, 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) 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 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.
       ``(2) 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 the Balanced 
     Budget Act of 1997--
       ``(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 market 
     area served by such station; and
       ``(C) such station was in compliance with the requirements 
     applicable to low-power television stations.''.

     SEC. 3005. FLEXIBLE USE OF ELECTROMAGNETIC SPECTRUM.

       Section 303 of the Communications Act of 1934 (47 U.S.C. 
     303) is amended by adding at the end thereof the following:
       ``(y) Have authority to allocate electromagnetic spectrum 
     so as to provide flexibility of use, if--
       ``(1) such use is consistent with international agreements 
     to which the United States is a party; and
       ``(2) the Commission finds, after notice and an opportunity 
     for public comment, that--
       ``(A) such an allocation would be in the public interest;
       ``(B) such use would not deter investment in communications 
     services and systems, or technology development; and
       ``(C) such use would not result in harmful interference 
     among users.''.

     SEC. 3006. UNIVERSAL SERVICE FUND PAYMENT SCHEDULE.

       (a) Appropriations to the Universal Service Fund.--
       (1) Appropriation.--There is hereby appropriated to the 
     Commission $3,000,000,000 in fiscal year 2001, which shall be 
     disbursed on October 1, 2000, to the Administrator of the 
     Federal universal service support programs established 
     pursuant to section 254 of the Communications Act of 1934 (47 
     U.S.C. 254), and which may be expended by the Administrator 
     in support of such programs as provided pursuant to the rules 
     implementing that section.
       (2) Return to treasury.--The Administrator shall transfer 
     $3,000,000,000 from the funds collected for such support 
     programs to the General Fund of the Treasury on October 1, 
     2001.
       (b) Fee Adjustments.--The Commission shall direct the 
     Administrator to adjust payments by telecommunications 
     carriers and other providers of interstate telecommunications 
     so that the $3,000,000,000 of the total payments by such 
     carriers or providers to the Administrator for fiscal year 
     2001 shall be deferred until October 1, 2001.
       (c) Preservation of Authority.--Nothing in this section 
     shall affect the Administrator's authority to determine the 
     amounts that should be expended for universal service support 
     programs pursuant to section 254 of the Communications Act of 
     1934 and the rules implementing that section.

[[Page H6034]]

       (d) Definition.--For purposes of this section, the term 
     ``Administrator'' means the Administrator designated by the 
     Federal Communications Commission to administer Federal 
     universal service support programs pursuant to section 254 of 
     the Communications Act of 1934.

     SEC. 3007. DEADLINE FOR COLLECTION.

       The Commission shall conduct the competitive bidding 
     required under this title or the amendments made by this 
     title in a manner that ensures that all proceeds of such 
     bidding are deposited in accordance with section 309(j)(8) of 
     the Communications Act of 1934 not later than September 30, 
     2002.

     SEC. 3008. ADMINISTRATIVE PROCEDURES FOR SPECTRUM AUCTIONS.

       Notwithstanding section 309(b) of the Communications Act of 
     1934 (47 U.S.C. 309(b)), no application for an instrument of 
     authorization for frequencies assigned under this title (or 
     amendments made by this title) 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.
     TITLE IV--MEDICARE, MEDICAID, AND CHILDREN'S HEALTH PROVISIONS

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

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

                   Chapter 1--Medicare+Choice Program


                  Subchapter A--Medicare+Choice Program

Sec. 4001. Establishment of Medicare+Choice Program.

                   ``Part C--Medicare+Choice Program

``Sec. 1851. Eligibility, election, and enrollment.
``Sec. 1852. Benefits and beneficiary protections.
``Sec. 1853. Payments to Medicare+Choice organizations.
``Sec. 1854. Premiums.
``Sec. 1855. Organizational and financial requirements for 
              Medicare+Choice organizations; provider-sponsored 
              organizations.
``Sec. 1856. Establishment of standards.
``Sec. 1857. Contracts with Medicare+Choice 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 Medicare+Choice Medical Savings 
                                Accounts

Sec. 4006. Medicare+Choice MSA.

                       Chapter 2--Demonstrations


     Subchapter A--Medicare+Choice Competitive Pricing Demonstration 
                                Project

``Sec. 4011. Medicare prepaid competitive pricing demonstration 
              project.
``Sec. 4012. Administration through the Office of Competition; advisory 
              committee.
``Sec. 4013. Project design based on FEHBP competitive bidding model.


          Subchapter B--Social Health Maintenance Organizations

``Sec. 4014. Social health maintenance organizations (SHMOs.)


  Subchapter C--Medicare Subdivision Demonstration Project for Military 
                                Retirees

``Sec. 4015. Medicare subvention demonstration project for military 
              retirees.


                       Subchapter D--Other Projects

``Sec. 4016. Medicare coordinated care demonstration project.
``Sec. 4017. Orderly transition of municipal health service 
              demonstration projects.
``Sec. 4018. Medicare enrollment demonstration project.
``Sec. 4019. Extension of certain medicare community nursing 
              organization demonstration projects.

                         Chapter 3--Commissions

``Sec. 4021. National Bipartisan Commission on the Future of Medicare.
``Sec. 4022. Medicare Payment Advisory Commission.

                     Chapter 4--Medigap Protections

``Sec. 4031. Medigap protections.
``Sec. 4032. Addition of high deductible medigap policies.

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

``Sec. 4041. Tax treatment of hospitals which participate in provider-
              sponsored organizations.

                   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 self-management benefits.
``Sec. 4106. Standardization of medicare coverage of bone mass 
              measurements.
``Sec. 4107. Vaccines outreach expansion.
``Sec. 4108. Study on preventive and enhanced benefits.

                     Subtitle C--Rural Initiatives

``Sec. 4201. Medicare rural hospital flexibility program.
``Sec. 4202. Prohibiting denial of request by rural referral centers 
              for reclassification on basis of comparability of wages.
``Sec. 4203. Hospital geographic reclassification permitted for 
              purposes of disproportionate share payment adjustments.
``Sec. 4204. Medicare-dependent, small rural hospital payment 
              extension.
Sec. 4205. Rural health clinic services.
Sec. 4206. Medicare reimbursement for telehealth services.
Sec. 4207. Informatics, telemedicine, and education demonstration 
              project.

    Subtitle D--Anti-Fraud and Abuse Provisions and Improvements in 
                      Protecting Program Integrity

         Chapter 1--Revisions To Sanctions for Fraud and Abuse

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. Exclusion of entity controlled by family member of a 
              sanctioned individual.
Sec. 4304. Imposition of civil money penalties.

        Chapter 2--Improvements In Protecting Program Integrity

Sec. 4311. Improving information to medicare beneficiaries.
Sec. 4312. Disclosure of information and surety bonds.
Sec. 4313. Provision of certain identification numbers.
Sec. 4314. Advisory opinions regarding certain physician self-referral 
              provisions.
Sec. 4315. Replacement of reasonable charge methodology by fee 
              schedules.
Sec. 4316. Application of inherent reasonableness to all part B 
              services other than physicians' services.
Sec. 4317. Requirement to furnish diagnostic information.
Sec. 4318. Report by GAO on operation of fraud and abuse control 
              program.
Sec. 4319. Competitive bidding demonstration projects.
Sec. 4320. Prohibiting unnecessary and wasteful medicare payments for 
              certain items.
Sec. 4321. Nondiscrimination in post-hospital referral to home health 
              agencies and other entities.

            Chapter 3--Clarifications and Technical Changes

Sec. 4331. Other fraud and abuse related provisions.

             Subtitle E--Provisions Relating to Part A Only

                  Chapter 1--Payment of PPS Hospitals

Sec. 4401. PPS hospital payment update.
Sec. 4402. Maintaining savings from temporary reduction in capital 
              payments for PPS hospitals.
Sec. 4403. Disproportionate share.
Sec. 4404. Medicare capital asset sales price equal to book value.
Sec. 4405. Elimination of IME and DSH payments attributable to outlier 
              payments.
Sec. 4406. Increase base payment rate to Puerto Rico hospitals.
Sec. 4407. Certain hospital discharges to post acute care.
Sec. 4408. Reclassification of certain counties as large urban areas 
              under medicare program.
Sec. 4409. Geographic reclassification for certain disproportionately 
              large hospitals.
Sec. 4410. Floor on area wage index.

               Chapter 2--Payment of PPS-Exempt Hospitals


                 subchapter a--general payment provisions

Sec. 4411. Payment update.
Sec. 4412. Reductions to capital payments for certain PPS-exempt 
              hospitals and units.
Sec. 4413. Rebasing.
Sec. 4414. Cap on TEFRA limits.
Sec. 4415. Bonus and relief payments.
Sec. 4416. Change in payment and target amount for new providers.
Sec. 4417. Treatment of certain long-term care hospitals.
Sec. 4418. Treatment of certain cancer hospitals.
Sec. 4419. Elimination of exemptions for certain hospitals.


    subchapter b--prospective payment system for pps-exempt hospitals

Sec. 4421. Prospective payment for inpatient rehabilitation hospital 
              services.
Sec. 4422. Development of proposal on payments for long-term care 
              hospitals.

           Chapter 3--Payment for Skilled Nursing Facilities

Sec. 4431. Extension of cost limits.
Sec. 4432. Prospective payment for skilled nursing facility services.

[[Page H6035]]

           Chapter 4--Provisions Related to Hospice Services

Sec. 4441. Payments for hospice services.
Sec. 4442. Payment for home hospice care based on location where care 
              is furnished.
Sec. 4443. Hospice care benefits periods.
Sec. 4444. Other items and services included in hospice care.
Sec. 4445. Contracting with independent physicians or physician groups 
              for hospice care services permitted.
Sec. 4446. Wavier of certain staffing requirements for hospice care 
              programs in nonurbanized areas.
Sec. 4447. Limitation on liability of beneficiaries for certain hospice 
              coverage denials.
Sec. 4448. Extending the period for physician certification of an 
              individual's terminal illness.
Sec. 4449. Effective date.

                  Chapter 5--Other Payment Provisions

Sec. 4451. Reductions in payments for enrollee bad debt.
Sec. 4452. Permanent extension of hemophilia pass-through payment.
Sec. 4453. Reduction in part A medicare premium for certain public 
              retirees.
Sec. 4454. Coverage of services in religious nonmedical health care 
              institutions under the medicare and medicaid programs.

             Subtitle F--Provisions Relating to Part B Only

              Chapter 1--Services of Health Professionals


                    subchapter a--physicians' services

Sec. 4501. Establishment of single conversion factor for 1998.
Sec. 4502. Establishing update to conversion factor to match spending 
              under sustainable growth rate.
Sec. 4503. Replacement of volume performance standard with sustainable 
              growth rate.
Sec. 4504. Payment rules for anesthesia services.
Sec. 4505. Implementation of resource-based methodologies.
Sec. 4506. Dissemination of information on high per discharge relative 
              values for in-hopsital physicians' services.
Sec. 4507.  Use of private contracts by medicare beneficiaries.


              SUBCHAPTER B--OTHER HEALTH CARE PROFESSIONALS

Sec. 4511.  Increased medicare reimbursement For nurse practitioners 
              and clinical nurse specialists.
Sec. 4512.  Increase medicare reimbursement for physician assistants.
Sec. 4513.  No x-ray required for chiropractic services.

     Chapter 2--Payment for Hospital Outpatient Department Services

Sec. 4521.  Elimination of formula-driven overpayments (FDO) for 
              certain out patient hospital services.
Sec. 4522.  Extension of reductions in payments for costs of hospital 
              outpatient services.
Sec. 4523.  Prospective payment system for hospital outpatient 
              department services.

                     Chapter 3--Ambulance Services

Sec. 4531.  Payments for ambulance services.
Sec. 4532.  Demonstration of coverage of ambulance services under 
              medicare through contracts with units of local 
              government.

 Chapter 4--Prospective Payment for Outpatient Rehabilitation Services

Sec. 4541.  Prospective payment for outpatient rehabilitation services.

                  Chapter 5--Other Payment Provisions

Sec. 4551.  Payments for durable medical equipment.
Sec. 4552.  Oxygen and oxygen equipment.
Sec. 4553.  Reduction in updates to payment amounts for clinical 
              diagnostic laboratory tests; study on laboratory tests.
Sec. 4554.  Improvements in administration of laboratory tests benefit.
Sec. 4555.  Updates for ambulatory surgical services.
Sec. 4556.  Reimbursement for drugs and biologicals.
Sec. 4557.  Coverage of oral anti-nausea drugs under chemotherapeutic 
              regimen.
Sec. 4558.  Renal dialysis-related services.
Sec. 4559.  Temporary coverage restoration for portable 
              electrocardiogram transportation.

            Chapter 6--Part B Premium and Related Provisions


           SUBCHAPTER A--DETERMINATION OF PART B PREMIUM AMOUNT

Sec. 4571.  Part B premium.


         SUBCHAPTER B--OTHER PROVISIONS RELATED TO PART B PREMIUM

Sec. 4581.  Protection under the medicare program for disabled workers 
              who lost benefits under a group health plan.
Sec. 4582.  Government entities eligible to elect to pay part B 
              premiums for eligible individuals.

            Subtitle G--Provisions Relating to Parts A and B

              Chapter 1--Home Health Services and Benefits


              SUBCHAPER A--PAYMENTS FOR HOME HEALTH SERVICES

Sec. 4601.  Recapturing savings resulting from temporary freeze on 
              payment increases for home health services.
Sec. 4602.  Interim payments for home health services.
Sec. 4603.  Prospective payment for home health services.
Sec. 4604.  Payment based on location where home health service is 
              furnished.


                    SUBCHAPTER B--HOME HEALTH BENEFITS

Sec. 4611.  Modification of part A home health benefit for individuals 
              enrolled under part B.
Sec. 4612.  Clarification of part-time or intermittent nursing care.
Sec. 4613.  Study on definition of homebound.
Sec. 4614.  Normative standards for home health claims denials.
Sec. 4615.  No home health benefits based solely on drawing blood.
Sec. 4616.  Reports to Congress regarding home health cost containment.

                 Chapter 2--Graduate Medical Education


                 SUBCHAPTER A--INDIRECT MEDICAL EDUCATION

Sec. 4621.  Indirect graduate medical education payments.
Sec. 4622.  Payment to hospitals of indirect medical education costs 
              for Medicare+Choice enrollees.


             SUBCHAPTER B--DIRECT GRADUATE MEDICAL EDUCATION

Sec. 4623.  Limitation on number of residents and rolling average FTE 
              count.
Sec. 4624.  Payments to hospitals for direct costs of graduate medical 
              education of Medicare+Choice enrollees.
Sec. 4625.  Permitting payment to nonhospital providers.
Sec. 4626.  Incentive payments under plans for voluntary reduction in 
              number of residents.
Sec. 4627.  Medicare special reimbursement rule for primary care 
              combined residency programs.
Sec. 4628.  Demonstration project on use of consortia.
Sec. 4629.  Recommendations on long-term policies regarding teaching 
              hospitals and graduate medical education.
Sec. 4630.  Study of hospital overhead and supervisory physician 
              components of direct medical education costs.

       Chapter 3--Provisions Relating to Medicare Secondary Payer

Sec. 4631.  Permanent extension and revision of certain secondary payer 
              provisions.
Sec. 4632.  Clarification of time and filing limitations.
Sec. 4633.  Permitting recovery against third party administrators.

                      Chapter 4--Other Provisions

Sec. 4641.  Placement of advance directive in medical record.
Sec. 4642.  Increased certification period for certain organ 
              procurement organizations.
Sec. 4643.  Office of the Chief Actuary in the Health Care Financing 
              Administration.
Sec. 4644.  Conforming amendments to comply with congressional review 
              of agency rulemaking.

                          Subtitle H--Medicaid

                        Chapter 1--Managed Care

Sec. 4701.  State option of using managed care; change in terminology.
Sec. 4702.  Primary care case management services at State option 
              without need for waiver.
Sec. 4703.  Elimination of 75:25 restriction on risk contracts.
Sec. 4704  Increased beneficiary protections.
Sec. 4705.  Quality assurance standards.
Sec. 4706.  Solvency standards.
Sec. 4707.  Projections against fraud and abuse.
Sec. 4708.  Improve administration.
Sec. 4709.  6-month guaranteed eligibility for all individuals enrolled 
              in managed care.
Sec. 4710.  Effective dates.

             Chapter 2--Flexibility In Payment of Providers

Sec. 4711.  Flexibility in payment methods for hospital, nursing 
              facility, ICF/MR, and home health services.
Sec. 4712.  Payment for center and clinic services.
Sec. 4713.  Elimination of obstetrical and pediatric payment rate 
              requirements.
Sec. 4714.  Medicaid payment rates for certain medicare cost-sharing.
Sec. 4715.  Treatment of veterans' pensions under medicaid.

                 Chapter 3--Federal Payments to States

Sec. 4721.  Reforming disproportionate share payments under State 
              medicaid programs.
Sec. 4722.  Treatment of State taxes imposed on certain hospitals.
Sec. 4723.  Additional funding for State emergency health services 
              furnished to undocumented aliens.
Sec. 4724.  Elimination of waste, fraud, and abuse.
Sec. 4725.  Increased FMAPs.
Sec. 4726.  Increase in payment limitation for territories.

                         Chapter 4--Eligibility

Sec. 4731.  State option of continuous eligibility for 12 months; 
              clarification of State option to cover children.
Sec. 4732.  Payment of part B premiums.
Sec. 4733.  State option to permit workers with disabilities to buy 
              into medicaid.
Sec. 4734.  Penalty for fraudulent eligibility.
Sec. 4735.  Treatment of certain settlement payments.

                          Chapter 5--Benefits

Sec. 4741.  Elimination of requirement to pay for private insurance.

[[Page H6036]]

Sec. 4742.  Physician qualification requirements.
Sec. 4743.  Elimination of requirement of prior institutionalization 
              with respect to habilitation services furnished under a 
              waiver for home or community-based services.
Sec. 4744.  Study and report on EPSDT benefit.

              Chapter 6--Administration and Miscellaneous

Sec. 4751.  Elimination of duplicative inspection of care requirements 
              for ICFS/MR and mental hospitals.
Sec. 4752.  Alternative sanctions for noncompliant ICFS/MR.
Sec. 4753.  Modification of MMIS requirements.
Sec. 4754.  Facilitating imposition of State alternative remedies on 
              non-compliant nursing facilities.
Sec. 4755.  Removal of name from nurse aide registry.
Sec. 4756.  Medically accepted indication.
Sec. 4757.  Continuation of State-wide section 1115 medicaid waivers.
Sec. 4758.  Extension of moratorium.
Sec. 4759.  Extension of effective date for State law amendment.

   Subtitle I--Programs of All-Inclusive Care for the Elderly (PACE)

Sec. 4801.  Coverage of PACE under the medicare program.
Sec. 4802.  Establishment of PACE program as medicaid State option.
Sec. 4803.  Effective date; transition.
Sec. 4804.  Study and reports.

         Subtitle J--State Children's Health Insurance Program

          Chapter 1--State Children's Health Insurance Program

Sec. 4901.  Establishment of program.

         ``TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE PROGRAM

Sec. 2101.  Purpose; State child health plans.
Sec. 2102.  General contents of State child health plan; eligibility; 
              outreach.
Sec. 2103.  Coverage requirements for children's health insurance.
Sec. 2104.  Allotments.
Sec. 2105.  Payments to States.
Sec. 2106.  Process for submission, approval, and amendment of State 
              child health plans.
Sec. 2107.  Strategic objectives and performance goals; plan 
              administration.
Sec. 2108.  Annual reports; evaluations.
Sec. 2109.  Miscellaneous provisions.
Sec. 2110.  Definitions.

        Chapter 2--Expanded Coverage of Children Under Medicaid

Sec. 4911.  Optional use of State child health assistance funds for 
              enhanced medicaid match for expanded medicaid 
              eligibility.
Sec. 4912.  Medicaid presumptive eligibility for low-income children.
Sec. 4913.  Continuation of medicaid eligibility for disabled children 
              who lose SSI benefits.

                   Chapter 3--Diabetes Grant Programs

Sec. 4921.  Special diabetes programs for children with Type I 
              diabetes.
Sec. 4922.  Special diabetes programs for Indians.
Sec. 4923.  Report on diabetes grant programs.
                  Subtitle A--Medicare+Choice Program

                   CHAPTER 1--MEDICARE+CHOICE PROGRAM

                 Subchapter A--Medicare+ Choice Program

     SEC. 4001. ESTABLISHMENT OF MEDICARE+ CHOICE PROGRAM.

       Title XVIII is amended by redesignating part C as part D 
     and by inserting after part B the following new part:

                   ``Part C--Medicare+Choice Program


                ``eligibility, election, and enrollment

       ``Sec. 1851. (a) Choice of Medicare Benefits Through 
     Medicare+Choice Plans.--
       ``(1) In general.--Subject to the provisions of this 
     section, each Medicare+Choice eligible individual (as defined 
     in paragraph (3)) is entitled to elect to receive benefits 
     under this title--
       ``(A) through the original medicare fee-for-service program 
     under parts A and B, or
       ``(B) through enrollment in a Medicare+ Choice plan under 
     this part.
       ``(2) Types of medicare+choice plans that may be 
     available.--A Medicare+Choice 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 but not limited to 
     health maintenance organization plans (with or without point 
     of service options), plans offered by provider-sponsored 
     organizations (as defined in section 1855(d)), and preferred 
     provider organization plans.
       ``(B) Combination of msa plan and contributions to 
     medicare+choice msa.--An MSA plan, as defined in section 
     1859(b)(3), and a contribution into a Medicare+Choice medical 
     savings account (MSA).
       ``(C) Private fee-for-service plans.--A Medicare+Choice 
     private fee-for-service plan, as defined in section 
     1859(b)(2).
       ``(3) Medicare+choice eligible individual.--
       ``(A) In general.--In this title, subject to subparagraph 
     (B), the term `Medicare+Choice 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 
     Medicare+Choice 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 Medicare+Choice 
     plan offered by a Medicare+Choice organization only if the 
     plan 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 a plan may offer to all individuals residing in a 
     geographic area the option to continue enrollment in the 
     plan, notwithstanding that the individual no longer resides 
     in the service area of the plan, so long as the plan provides 
     that individuals exercising this option have, as part of the 
     basic benefits described in section 1852(a)(1)(A), reasonable 
     access within that geographic area to the full range of basic 
     benefits, subject to reasonable cost sharing liability in 
     obtaining such benefits.
       ``(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 390,000.

     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 medicare+choice organizations.--
       ``(A) Enrollment.--Such process shall permit an individual 
     who wishes to elect a Medicare+Choice plan offered by a 
     Medicare+Choice organization to make such election through 
     the filing of an appropriate election form with the 
     organization.
       ``(B) Disenrollment.--Such process shall permit an 
     individual, who has elected a Medicare+Choice plan offered by 
     a Medicare+Choice organization and who wishes to 
     terminate such election, to terminate such election 
     through the filing of an appropriate election form with 
     the organization.
       ``(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 
     original 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 Medicare+Choice plan) 
     offered by a Medicare+Choice 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 Medicare+Choice 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).

[[Page H6037]]

       ``(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) the Medicare+Choice plan with respect to which such 
     election is in effect is discontinued or, subject to 
     subsection (b)(1)(B), no longer serves the area in which the 
     individual resides.
       ``(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 15 days before 
     the beginning of each annual, coordinated election period (as 
     defined in subsection (e)(3)(B)), the Secretary shall mail to 
     each Medicare+Choice 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 Medicare+Choice 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) 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, to the 
     extent practicable, with the mailing of any annual notice 
     under section 1804.
       ``(B) Notification to newly eligible medicare+choice 
     eligible individuals.--To the extent practicable, the 
     Secretary shall, not later than 30 days before the beginning 
     of the initial Medicare+Choice 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 Medicare+Choice 
     plans and the benefits and Medicare+Choice monthly basic 
     and supplemental beneficiary 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 original medicare fee-for-service 
     program option.--A general description of the benefits 
     covered under the original 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) Election procedures.--Information and instructions on 
     how to exercise election options under this section.
       ``(C) Rights.--A general description of procedural rights 
     (including grievance and appeals procedures) of beneficiaries 
     under the original medicare fee-for-service program and the 
     Medicare+Choice program and the right to be protected against 
     discrimination based on health status-related factors under 
     section 1852(b).
       ``(D) 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).
       ``(E) Potential for contract termination.--The fact that a 
     Medicare+Choice organization may terminate its contract, 
     refuse to renew its contract, or reduce the service area 
     included in its contract, under this part, and the effect of 
     such a termination, nonrenewal, or service area reduction may 
     have on individuals enrolled with the Medicare+Choice plan 
     under this part.
       ``(4) Information comparing plan options.--Information 
     under this paragraph, with respect to a Medicare+Choice plan 
     for a year, shall include the following:
       ``(A) Benefits.--The benefits covered under the plan, 
     including the following:
       ``(i) Covered items and services beyond those provided 
     under the original 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, premiums, and balance billing under such a plan 
     compared to under other Medicare+Choice plans.
       ``(v) In the case of a Medicare+Choice private fee-for-
     service plan, differences in cost sharing, premiums, and 
     balance billing under such a plan compared to under other 
     Medicare+Choice plans.
       ``(vi) The extent to which an enrollee may obtain benefits 
     through out-of-network health care providers.
       ``(vii) The extent to which an enrollee may select among 
     in-network providers and the types of providers participating 
     in the plan's network.
       ``(viii) The organization's coverage of emergency and 
     urgently needed care.
       ``(B) Premiums.--The Medicare+Choice monthly basic 
     beneficiary premium and Medicare+Choice monthly supplemental 
     beneficiary premium, if any, for the plan or, in the case of 
     an MSA plan, the Medicare+Choice monthly MSA premium.
       ``(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 original 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.--Whether the organization 
     offering the plan includes mandatory supplemental benefits in 
     its base benefit package or 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 Medicare+Choice options and the operation of this 
     part in all areas in which Medicare+Choice plans are offered 
     and an Internet site through which individuals may 
     electronically obtain information on such options and 
     Medicare+Choice plans.
       ``(6) Use of non-federal entities.--The Secretary may enter 
     into contracts with non-Federal entities to carry out 
     activities under this subsection.
       ``(7) Provision of information.--A Medicare+Choice 
     organization shall provide the Secretary with such 
     information on the organization and each Medicare+Choice 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 
     medicare+choice 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 
     Medicare+Choice plans offered in the area in which the 
     individual resides, the individual shall make the election 
     under this section during a period specified by the Secretary 
     such that if the individual elects a Medicare+Choice 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 
     2001.--At any time during 1998, 1999, 2000, and 2001, a 
     Medicare+Choice eligible individual may change the election 
     under subsection (a)(1).
       ``(B) Continuous open enrollment and disenrollment for 
     first 6 months during 2002.--
       ``(i) In general.--Subject to clause (ii), at any time 
     during the first 6 months of 2002, or, if the individual 
     first becomes a Medicare+Choice eligible individual during 
     2002, during the first 6 months during 2002 in which the 
     individual is a Medicare+Choice eligible individual, a 
     Medicare+Choice eligible individual may change the election 
     under subsection (a)(1).
       ``(ii) Limitation of one change.--An individual may 
     exercise the right under clause (i) only once. 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 the 
     first sentence of 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 2002, or, if the 
     individual first becomes a Medicare+Choice eligible 
     individual during a year after 2002, during the first 3 
     months of such year in which the individual is a 
     Medicare+Choice eligible individual, a Medicare+Choice 
     eligible individual may change the election under subsection 
     (a)(1).
       ``(ii) Limitation of one change during open enrollment 
     period each year.--An individual may exercise the right under 
     clause (i) only once during the applicable 3-month period 
     described in such clause in each 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 2000), 
     the month of November before such year.
       ``(C) Medicare+choice health information fairs.--In the 
     month of November of each year (beginning with 1999), in 
     conjunction with the annual coordinated election period 
     defined in subparagraph (B), the Secretary shall provide for 
     a nationally coordinated educational and publicity campaign 
     to inform Medicare+Choice eligible individuals about 
     Medicare+Choice

[[Page H6038]]

     plans and the election process provided under this section.
       ``(D) Special information campaign in 1998.--During 
     November 1998 the Secretary shall provide for an educational 
     and publicity campaign to inform Medicare+Choice eligible 
     individuals about the availability of Medicare+Choice plans, 
     and eligible organizations with risk-sharing contracts under 
     section 1876, offered in different areas and the election 
     process provided under this section.
       ``(4) Special election periods.--Effective as of January 1, 
     2002, an individual may discontinue an election of a 
     Medicare+Choice plan offered by a Medicare+Choice 
     organization other than during an annual, coordinated 
     election period and make a new election under this section 
     if--
       ``(A) the organization's or plan's certification under this 
     part has been terminated or the organization has terminated 
     or otherwise discontinued providing the plan in the area in 
     which the individual resides;
       ``(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.
     Effective as of January 1, 2002, an individual who, upon 
     first becoming eligible for benefits under part A at age 65, 
     enrolls in a Medicare+Choice plan under this part, the 
     individual may discontinue the election of such plan, and 
     elect coverage under the original fee-for-service plan, at 
     any time during the 12-month period beginning on the 
     effective date of such enrollment.
       ``(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 month of November 1998;
       ``(B) subject to subparagraph (C), may not discontinue an 
     election of an MSA plan except during the periods described 
     in clause (ii) or (iii) of subparagraph (A) and under the 
     first sentence of paragraph (4); and
       ``(C) who elects an MSA plan during an annual, coordinated 
     election period, and who never previously had elected such a 
     plan, may revoke such election, in a manner determined by the 
     Secretary, by not later than December 15 following the date 
     of the election.
       ``(6) Open enrollment periods.--Subject to paragraph (5), a 
     Medicare+Choice organization--
       ``(A) shall accept elections or changes to elections during 
     the initial enrollment periods described in paragraph (1), 
     during the month of November 1998 and each subsequent year 
     (as provided in paragraph (3)), and during special election 
     periods described in the first sentence of paragraph (4); and
       ``(B) may accept other changes to elections at such other 
     times as the organization provides.
       ``(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)(A) shall take effect upon the date 
     the individual becomes entitled to benefits under part A and 
     enrolled under part B, except as the Secretary may provide 
     (consistent with section 1838) in order to prevent 
     retroactive coverage.
       ``(2) During 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 
     Medicare+Choice organization shall provide that at any time 
     during which elections are accepted under this section with 
     respect to a Medicare+Choice 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 
     Medicare+Choice organization, in relation to a 
     Medicare+Choice plan it offers, has a capacity limit and the 
     number of Medicare+Choice 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 
     Medicare+Choice organization may not for any reason terminate 
     the election of any individual under this section for a 
     Medicare+Choice plan it offers.
       ``(B) Basis for termination of election.--A Medicare+Choice 
     organization may terminate an individual's election under 
     this section with respect to a Medicare+Choice plan it offers 
     if--
       ``(i) any Medicare+Choice monthly basic and supplemental 
     beneficiary 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 such 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 original 
     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 Medicare+Choice plan. Such an 
     individual who fails to make an election during such period 
     is deemed to have chosen to change coverage to the original 
     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 
     Medicare+Choice 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 Medicare+Choice organization to 
     (or for the use of) Medicare+Choice 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 any 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 Medicare+Choice 
     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 with regard to that portion 
     of such material or form that is specific only to an area 
     involved.
       ``(4) Prohibition of certain marketing practices.--Each 
     Medicare+Choice organization shall conform to fair marketing 
     standards, in relation to Medicare+Choice plans offered under 
     this part, included in the standards established under 
     section 1856. Such standards--
       ``(A) shall not permit a Medicare+Choice organization to 
     provide for cash or other monetary rebates as an inducement 
     for enrollment or otherwise, and
       ``(B) may include a prohibition against a Medicare+Choice 
     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 Medicare+Choice Plan Option.--
       ``(1) Payments to organizations.--Subject to sections 
     1852(a)(5), 1853(g), 1853(h), 1886(d)(11), and 1886(h)(3)(D), 
     payments under a contract with a Medicare+Choice organization 
     under section 1853(a) with respect to an individual electing 
     a Medicare+Choice 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.
       ``(2) Only organization entitled to payment.--Subject to 
     sections 1853(e), 1853(g), 1853(h), 1857(f)(2), and 
     1886(d)(11), and 1886(h)(3)(D), only the Medicare+Choice 
     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.--

[[Page H6039]]

       ``(1) In general.--Except as provided in section 1859(b)(3) 
     for MSA plans, each Medicare+Choice 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 (other than hospice care) 
     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) In general.--A Medicare+Choice plan (other than an 
     MSA plan) offered by a Medicare+Choice organization satisfies 
     paragraph (1)(A), with respect to benefits for items and 
     services furnished other than through a provider or other 
     person that has a contract with the organization offering the 
     plan, if the plan provides payment in an amount so that--
       ``(i) the sum of such payment amount and any cost sharing 
     provided for under the plan, is equal to at least
       ``(ii) 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).
       ``(B) Reference to related provisions.--For provision 
     relating to--
       ``(i) limitations on balance billing against 
     Medicare+Choice organizations for non-contract providers, see 
     sections 1852(k) and 1866(a)(1)(O), and
       ``(ii) limiting actuarial value of enrollee liability for 
     covered benefits, see section 1854(e).
       ``(3) Supplemental benefits.--
       ``(A) Benefits included subject to secretary's approval.--
     Each Medicare+Choice organization may provide to individuals 
     enrolled under this part, other than under a 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 Medicare+Choice eligible individuals 
     with the organization.
       ``(B) At enrollees' option.--
       ``(i) In general.--Subject to clause (ii), a 
     Medicare+Choice organization may provide to individuals 
     enrolled under this part supplemental health care benefits 
     that the individuals may elect, at their option, to have 
     covered.
       ``(ii) Special rule for msa plans.--A Medicare+Choice 
     organization may not provide, under an MSA plan, supplemental 
     health care benefits that cover the deductible described in 
     section 1859(b)(2)(B). In applying the previous sentence, 
     health benefits described in section 1882(u)(2)(B) shall not 
     be treated as covering such deductible.
       ``(C) Application to Medicare+Choice private fee-for-
     service plans.--Nothing in this paragraph shall be construed 
     as preventing a Medicare+Choice private fee-for-service plan 
     from offering supplemental benefits that include payment for 
     some or all of the balance billing amounts permitted 
     consistent with section 1852(k) and coverage of additional 
     services that the plan finds to be medically necessary.
       ``(4) Organization as secondary payer.--Notwithstanding any 
     other provision of law, a Medicare+Choice organization may 
     (in the case of the provision of items and services to an 
     individual under a Medicare+Choice 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 a law, plan, or policy described in such 
     section--
       ``(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 
     Medicare+Choice 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 Medicare+Choice capitation rate 
     under section 1853 included in the announcement made at 
     the beginning of such period, then, unless otherwise 
     required by law--
       ``(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)(1) 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.
       ``(b) Antidiscrimination.--
       ``(1) Beneficiaries.--
       ``(A) In general.--A Medicare+Choice 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.
       ``(B) Construction.--Subparagraph (A) shall not be 
     construed as requiring a Medicare+Choice organization to 
     enroll individuals who are determined to have end-stage renal 
     disease, except as provided under section 1851(a)(3)(B).
       ``(2) Providers.--A Medicare+Choice organization shall not 
     discriminate with respect to participation, reimbursement, or 
     indemnification as to any provider who is acting within the 
     scope of the provider's license or certification under 
     applicable State law, solely on the basis of such license or 
     certification. This paragraph shall not be construed to 
     prohibit a plan from including providers only to the extent 
     necessary to meet the needs of the plan's enrollees or from 
     establishing any measure designed to maintain quality and 
     control costs consistent with the responsibilities of the 
     plan.
       ``(c) Disclosure Requirements.--
       ``(1) Detailed description of plan provisions.--A 
     Medicare+Choice organization shall disclose, in clear, 
     accurate, and standardized form to each enrollee with a 
     Medicare+Choice plan offered by the organization under this 
     part at the time of enrollment and at least annually 
     thereafter, the following information regarding such plan:
       ``(A) Service area.--The plan's service area.
       ``(B) Benefits.--Benefits offered under the plan, 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 
     Medicare+Choice plans.
       ``(C) Access.--The number, mix, and distribution of plan 
     providers, out-of-network coverage (if any) provided by the 
     plan, and any point-of-service option (including the 
     supplemental premium for such option).
       ``(D) Out-of-area coverage.--Out-of-area coverage provided 
     by the plan.
       ``(E) Emergency coverage.--Coverage of emergency services, 
     including--
       ``(i) 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;
       ``(ii) the process and procedures of the plan for obtaining 
     emergency services; and
       ``(iii) the locations of (I) emergency departments, and 
     (II) other settings, in which plan physicians and hospitals 
     provide emergency services and post-stabilization care.
       ``(F) Supplemental benefits.--Supplemental benefits 
     available from the organization offering the plan, 
     including--
       ``(i) whether the supplemental benefits are optional,
       ``(ii) the supplemental benefits covered, and
       ``(iii) the Medicare+Choice monthly supplemental 
     beneficiary premium for the supplemental benefits.
       ``(G) Prior authorization rules.--Rules regarding prior 
     authorization or other review requirements that could result 
     in nonpayment.
       ``(H) Plan grievance and appeals procedures.--All plan 
     appeal or grievance rights and procedures.
       ``(I) Quality assurance program.--A description of the 
     organization's quality assurance program under subsection 
     (e).
       ``(2) Disclosure upon request.--Upon request of a 
     Medicare+Choice eligible individual, a Medicare+Choice 
     organization must provide the following information to such 
     individual:
       ``(A) The general coverage information and general 
     comparative plan information made available under clauses (i) 
     and (ii) of section 1851(d)(2)(A).
       ``(B) Information on procedures used by the organization to 
     control utilization of services and expenditures.
       ``(C) Information on the number of grievances, 
     redeterminations, and appeals and on the disposition in the 
     aggregate of such matters.
       ``(D) An overall summary description as to the method of 
     compensation of participating physicians.
       ``(d) Access to Services.--
       ``(1) In general.--A Medicare+Choice organization offering 
     a Medicare+Choice 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 not emergency services (as defined 
     in paragraph (3)), but (I) the services were medically 
     necessary and immediately required because of an unforeseen 
     illness, injury, or condition, and (II) it was not reasonable 
     given the circumstances to obtain the services through the 
     organization,
       ``(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 Medicare+Choice plan shall comply with 
     such guidelines as the Secretary may prescribe relating to 
     promoting efficient and timely coordination of appropriate

[[Page H6040]]

     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 (including severe pain) 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) Assuring access to services in medicare+choice 
     private fee-for-service plans.--In addition to any other 
     requirements under this part, in the case of a 
     Medicare+Choice private fee-for-service plan, the 
     organization offering the plan must demonstrate to the 
     Secretary that the organization has sufficient number and 
     range of health care professionals and providers willing to 
     provide services under the terms of the plan. The Secretary 
     shall find that an organization has met such requirement with 
     respect to any category of health care professional or 
     provider if, with respect to that category of provider--
       ``(A) the plan has established payment rates for covered 
     services furnished by that category of provider that are not 
     less than the payment rates provided for under part A, part 
     B, or both, for such services, or
       ``(B) the plan has contracts or agreements with a 
     sufficient number and range of providers within such category 
     to provide covered services under the terms of the plan, or a 
     combination of both.

     The previous sentence shall not be construed as restricting 
     the persons from whom enrollees under such a plan may obtain 
     covered benefits.
       ``(e) Quality Assurance Program.--
       ``(1) In general.--Each Medicare+Choice organization must 
     have arrangements, consistent with any regulation, for an 
     ongoing quality assurance program for health care services it 
     provides to individuals enrolled with Medicare+Choice plans 
     of the organization.
       ``(2) Elements of program.--
       ``(A) In general.--The quality assurance program of an 
     organization with respect to a Medicare+Choice plan (other 
     than a Medicare+Choice private fee-for-service plan or a non-
     network MSA plan) it offers shall--
       ``(i) 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 Medicare+Choice plans and 
     organizations;
       ``(ii) monitor and evaluate high volume and high risk 
     services and the care of acute and chronic conditions;
       ``(iii) evaluate the continuity and coordination of care 
     that enrollees receive;
       ``(iv) be evaluated on an ongoing basis as to its 
     effectiveness;
       ``(v) include measures of consumer satisfaction;
       ``(vi) 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;
       ``(vii) provide review by physicians and other health care 
     professionals of the process followed in the provision of 
     such health care services;
       ``(viii) provide for the establishment of written protocols 
     for utilization review, based on current standards of medical 
     practice;
       ``(ix) have mechanisms to detect both underutilization and 
     overutilization of services;
       ``(x) after identifying areas for improvement, establish or 
     alter practice parameters;
       ``(xi) take action to improve quality and assesses the 
     effectiveness of such action through systematic followup; and
       ``(xii) 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).
       ``(B) Elements of program for organizations offering 
     medicare+choice private fee-for-service plans and non-network 
     msa plans.--The quality assurance program of an organization 
     with respect to a Medicare+Choice private fee-for-service 
     plan or a non-network MSA plan it offers shall--
       ``(i) meet the requirements of clauses (i) through (vi) of 
     subparagraph (A);
       ``(ii) insofar as it provides for the establishment of 
     written protocols for utilization review, base such protocols 
     on current standards of medical practice; and
       ``(iii) have mechanisms to evaluate utilization of services 
     and inform providers and enrollees of the results of such 
     evaluation.
       ``(C) Definition of non-network msa plan.--In this 
     subsection, the term `non-network MSA plan' means an MSA plan 
     offered by a Medicare+Choice organization that does not 
     provide benefits required to be provided by this part, in 
     whole or in part, through a defined set of providers under 
     contract, or under another arrangement, with the 
     organization.
       ``(3) External review.--
       ``(A) In general.--Each Medicare+Choice organization shall, 
     for each Medicare+Choice 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 
     Medicare+Choice plans for which payment is made under this 
     title. The previous sentence shall not apply to a 
     Medicare+Choice private fee-for-service plan or a non-network 
     MSA plan that does not employ utilization review.
       ``(B) Nonduplication of accreditation.--Except in the case 
     of the review of quality complaints, and consistent with 
     subparagraph (C), the Secretary shall ensure that the 
     external review activities conducted under subparagraph (A) 
     are not duplicative of review activities conducted as part of 
     the accreditation process.
       ``(C) Waiver authority.--The Secretary may waive the 
     requirement described in subparagraph (A) in the case of an 
     organization if the Secretary determines that the 
     organization has consistently maintained an excellent record 
     of quality assurance and compliance with other requirements 
     under this part.
       ``(4) Treatment of accreditation.--The Secretary shall 
     provide that a Medicare+Choice organization is deemed to meet 
     requirements of paragraphs (1) and (2) 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) Grievance Mechanism.--Each Medicare+Choice 
     organization must provide meaningful procedures for hearing 
     and resolving grievances between the organization (including 
     any entity or individual through which the organization 
     provides health care services) and enrollees with 
     Medicare+Choice plans of the organization under this part.
       ``(g) Coverage Determinations, Reconsiderations, and 
     Appeals.--
       ``(1) Determinations by organization.--
       ``(A) In general.--A Medicare+Choice organization shall 
     have a procedure for making determinations regarding whether 
     an individual enrolled with the plan of the organization 
     under this part is entitled to receive a health service under 
     this section and the amount (if any) that the individual is 
     required to pay with respect to such service. Subject to 
     paragraph (3), such procedures shall provide for such 
     determination to be made on a timely basis.
       ``(B) Explanation of determination.--Such a determination 
     that denies coverage, in whole in part, shall be in writing 
     and shall include a statement in understandable language of 
     the reasons for the denial and a description of the 
     reconsideration and appeals processes.
       ``(2) Reconsiderations.--
       ``(A) In general.--The organization shall provide for 
     reconsideration of a determination described in paragraph 
     (1)(B) upon request by the enrollee involved. The 
     reconsideration shall be within a time period specified by 
     the Secretary, but shall be made, subject to paragraph (3), 
     not later than 60 days after the date of the receipt of the 
     request for reconsideration.
       ``(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.
       ``(3) Expedited determinations and reconsiderations.--
       ``(A) Receipt of requests.--
       ``(i) Enrollee requests.--An enrollee in a Medicare+Choice 
     plan may request, either in writing or orally, an expedited 
     determination under paragraph (1) or an expedited 
     reconsideration under paragraph (2) by the Medicare+Choice 
     organization.
       ``(ii) Physician requests.--A physician, regardless whether 
     the physician is affiliated with the organization or not, may 
     request, either in writing or orally, such an expedited 
     determination or reconsideration.
       ``(B) Organization procedures.--
       ``(i) In general.--The Medicare+Choice organization shall 
     maintain procedures for expediting organization 
     determinations and reconsiderations when, upon request of an 
     enrollee, the organization determines that the application of 
     the normal time frame 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) Expedition required for physician requests.--In the 
     case of a request for an expedited determination or 
     reconsideration made under subparagraph (A)(ii), the 
     organization shall expedite the determination or 
     reconsideration if the request indicates that the application 
     of the normal time frame 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.
       ``(iii) Timely response.--In cases described in clauses (i) 
     and (ii), the organization shall notify the enrollee (and the 
     physician involved, as appropriate) of the determination or 
     reconsideration under time limitations established by the 
     Secretary, but not later than 72 hours of the time of receipt 
     of the request for the determination or reconsideration (or 
     receipt of the information necessary to make the 
     determination or

[[Page H6041]]

     reconsideration), or such longer period as the Secretary may 
     permit in specified cases.
       ``(4) Independent review of certain 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, in whole or in part.
       ``(5) Appeals.--An enrollee with a Medicare+Choice plan of 
     a Medicare+Choice 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 subsections (b) and (g) of 
     section 205 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.
       ``(h) Confidentiality and Accuracy of Enrollee Records.--
     Insofar as a Medicare+Choice organization maintains medical 
     records or other health information regarding enrollees under 
     this part, the Medicare+Choice organization shall establish 
     procedures--
       ``(1) to safeguard the privacy of any individually 
     identifiable enrollee information;
       ``(2) to maintain such records and information in a manner 
     that is accurate and timely, and
       ``(3) to assure timely access of enrollees to such records 
     and information.
       ``(i) Information on Advance Directives.--Each 
     Medicare+Choice organization shall meet the requirement of 
     section 1866(f) (relating to maintaining written policies and 
     procedures respecting advance directives).
       ``(j) Rules Regarding Provider Participation.--
       ``(1) Procedures.--Insofar as a Medicare+Choice 
     organization offers benefits under a Medicare+Choice 
     plan through agreements with physicians, the organization 
     shall establish reasonable procedures relating to the 
     participation (under an agreement between a physician and 
     the organization) of physicians under such a plan. 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 Medicare+Choice 
     organization shall consult with physicians who have entered 
     into participation agreements with the organization regarding 
     the organization's medical policy, quality, and medical 
     management procedures.
       ``(3) Prohibiting interference with provider advice to 
     enrollees.--
       ``(A) In general.--Subject to subparagraphs (B) and (C), a 
     Medicare+Choice organization (in relation to an individual 
     enrolled under a Medicare+Choice 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 Medicare+Choice plan to provide, 
     reimburse for, or provide coverage of a counseling or 
     referral service if the Medicare+Choice 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 Medicare+Choice 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 Medicare+Choice 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 Medicare+Choice 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 Medicare+Choice organization and a 
     physician or physician group that may directly or indirectly 
     have the effect of reducing or limiting services provided 
     with respect to individuals enrolled with the organization 
     under this part.
       ``(5) Limitation on provider indemnification.--A 
     Medicare+Choice organization may not provide (directly or 
     indirectly) for a health care professional, provider of 
     services, or other entity providing health care services (or 
     group of such professionals, providers, or entities) to 
     indemnify the organization against any liability resulting 
     from a civil action brought for any damage caused to an 
     enrollee with a Medicare+Choice plan of the organization 
     under this part by the organization's denial of medically 
     necessary care.
       ``(6) Special rules for medicare+choice private fee-for-
     service plans.--For purposes of applying this part (including 
     subsection (k)(1)) and section 1866(a)(1)(O), a hospital (or 
     other provider of services), a physician or other health care 
     professional, or other entity furnishing health care services 
     is treated as having an agreement or contract in effect with 
     a Medicare+Choice organization (with respect to an individual 
     enrolled in a Medicare+Choice private fee-for-service plan it 
     offers), if--
       ``(A) the provider, professional, or other entity furnishes 
     services that are covered under the plan to such an enrollee; 
     and
       ``(B) before providing such services, the provider, 
     professional, or other entity --
       ``(i) has been informed of the individual's enrollment 
     under the plan, and
       ``(ii) either--

       ``(I) has been informed of the terms and conditions of 
     payment for such services under the plan, or
       ``(II) is given a reasonable opportunity to obtain 
     information concerning such terms and conditions, in a manner 
     reasonably designed to effect informed agreement by a 
     provider.

     The previous sentence shall only apply in the absence of an 
     explicit agreement between such a provider, professional, or 
     other entity and the Medicare+Choice organization.
       ``(k) Treatment of Services Furnished by Certain 
     Providers.--
       ``(1) In general.--Except as provided in paragraph (2), 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 Medicare+Choice organization described in section 
     1851(a)(2)(A) 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 Medicare+Choice 
     organization under this part) also applies with respect to an 
     individual so enrolled.
       ``(2) Application to medicare+choice private fee-for-
     service plans.--
       ``(A) Balance billing limits under medicare+choice private 
     fee-for-service plans in case of contract providers.--
       ``(i) In general.--In the case of an individual enrolled in 
     a Medicare+Choice private fee-for-service plan under this 
     part, a physician, provider of services, or other entity that 
     has a contract (including through the operation of subsection 
     (j)(6)) establishing a payment rate for services furnished to 
     the enrollee shall accept as payment in full for covered 
     services under this title that are furnished to such an 
     individual an amount not to exceed (including any 
     deductibles, coinsurance, copayments, or balance billing 
     otherwise permitted under the plan) an amount equal to 115 
     percent of such payment rate.
       ``(ii) Procedures to enforce limits.--The Medicare+Choice 
     organization that offers such a plan shall establish 
     procedures, similar to the procedures described in section 
     1848(g)(1)(A), in order to carry out the previous sentence.
       ``(iii) Assuring enforcement.--If the Medicare+Choice 
     organization fails to establish

[[Page H6042]]

     and enforce procedures required under clause (ii), the 
     organization is subject to intermediate sanctions under 
     section 1857(g).
       ``(B) Enrollee liability for noncontract providers.--For 
     provision--
       ``(i) establishing minimum payment rate in the case of 
     noncontract providers under a Medicare+Choice private fee-
     for-service plan, see section 1852(a)(2); or
       ``(ii) limiting enrollee liability in the case of covered 
     services furnished by such providers, see paragraph (1) and 
     section 1866(a)(1)(O).
       ``(C) Information on beneficiary liability.--
       ``(i) In general.--Each Medicare+Choice organization that 
     offers a Medicare+Choice private fee-for-service plan shall 
     provide that enrollees under the plan who are furnished 
     services for which payment is sought under the plan are 
     provided an appropriate explanation of benefits (consistent 
     with that provided under parts A and B and, if applicable, 
     under medicare supplemental policies) that includes a clear 
     statement of the amount of the enrollee's liability 
     (including any liability for balance billing consistent with 
     this subsection) with respect to payments for such services.
       ``(ii) Advance notice before receipt of inpatient hospital 
     services and certain other services.--In addition, such 
     organization shall, in its terms and conditions of payments 
     to hospitals for inpatient hospital services and for other 
     services identified by the Secretary for which the amount of 
     the balancing billing under subparagraph (A) could be 
     substantial, require the hospital to provide to the enrollee, 
     before furnishing such services and if the hospital imposes 
     balance billing under subparagraph (A)--

       ``(I) notice of the fact that balance billing is permitted 
     under such subparagraph for such services, and
       ``(II) a good faith estimate of the likely amount of such 
     balance billing (if any), with respect to such services, 
     based upon the presenting condition of the enrollee.


              ``payments to medicare+choice 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) and section 1859(e)(4), 
     the Secretary shall make monthly payments under this section 
     in advance to each Medicare+Choice organization, with respect 
     to coverage of an individual under this part in a 
     Medicare+Choice payment area for a month, in an amount equal 
     to \1/12\ of the annual Medicare+Choice 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 
     Medicare+Choice organization with respect to classes of 
     individuals determined to have end-stage renal disease and 
     enrolled in a Medicare+Choice plan of the organization. Such 
     rates of payment shall be actuarially equivalent to rates 
     paid to other enrollees in the Medicare+Choice 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 
     Medicare+Choice 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 disclosure 
     statement described in 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 March 1, 1999, a report on the 
     method of risk adjustment of payment rates under this 
     section, to be implemented under subparagraph (C), 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 Medicare+Choice 
     organizations (and eligible organizations with risk-sharing 
     contracts under section 1876) to submit data regarding 
     inpatient hospital services for periods beginning on or after 
     July 1, 1997, and data regarding other services and other 
     information as the Secretary deems necessary for periods 
     beginning on or after July 1, 1998. The Secretary may not 
     require an organization to submit such data before January 1, 
     1998.
       ``(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.
       ``(D) Uniform application to all types of plans.--Subject 
     to section 1859(e)(4), the methodology shall be applied 
     uniformly without regard to the type of plan.
       ``(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 March 1 
     before the calendar year concerned--
       ``(A) the annual Medicare+Choice capitation rate for each 
     Medicare+Choice 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 
     Medicare+Choice 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 
     Medicare+Choice organizations can compute monthly adjusted 
     Medicare+Choice capitation rates for individuals in each 
     Medicare+Choice payment area which is in whole or in part 
     within the service area of such an organization.
       ``(c) Calculation of Annual Medicare+Choice Capitation 
     Rates.--
       ``(1) In general.--For purposes of this part, subject to 
     paragraphs (6)(C) and (7), each annual Medicare+Choice 
     capitation rate, for a Medicare+Choice payment area for a 
     contract year consisting of a calendar year, is equal to the 
     largest of the amounts specified in the following 
     subparagraph (A), (B), or (C):
       ``(A) Blended capitation rate.--The sum of--
       ``(i) the area-specific percentage (as specified under 
     paragraph (2) for the year) of the annual area-specific 
     Medicare+Choice capitation rate for the Medicare+Choice 
     payment area, as determined under paragraph (3) for the year, 
     and
       ``(ii) the national percentage (as specified under 
     paragraph (2) for the year) of the input-price-adjusted 
     annual national Medicare+Choice capitation rate, as 
     determined under paragraph (4) for the year,
     multiplied by the budget neutrality adjustment factor 
     determined under paragraph (5).
       ``(B) Minimum amount.--12 multiplied by the following 
     amount:
       ``(i) For 1998, $367 (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 Medicare+Choice growth 
     percentage, described in paragraph (6)(A) 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 Medicare+Choice payment area.
       ``(ii) For a subsequent year, 102 percent of the annual 
     Medicare+Choice 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 82 
     percent and the `national percentage' is 18 percent,
       ``(C) for 2000, the `area-specific percentage' is 74 
     percent and the `national percentage' is 26 percent,
       ``(D) for 2001, the `area-specific percentage' is 66 
     percent and the `national percentage' is 34 percent,
       ``(E) for 2002, the `area-specific percentage' is 58 
     percent and the `national percentage' is 42 percent, and
       ``(F) for a year after 2002, the `area-specific percentage' 
     is 50 percent and the `national percentage' is 50 percent.
       ``(3) Annual area-specific medicare+choice capitation 
     rate.--
       ``(A) In general.--For purposes of paragraph (1)(A), 
     subject to subparagraph (B), the annual area-specific 
     Medicare+Choice capitation rate for a Medicare+Choice payment 
     area--
       ``(i) for 1998 is, subject to subparagraph (D), 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 Medicare+Choice growth percentage for 1998 (described 
     in paragraph (6)(A)); or
       ``(ii) for a subsequent year is the annual area-specific 
     Medicare+Choice capitation rate for the previous year 
     determined under this paragraph

[[Page H6043]]

     for the area, increased by the national per capita 
     Medicare+Choice growth percentage for such subsequent year.
       ``(B) Removal of medical education from calculation of 
     adjusted average per capita cost.--
       ``(i) In general.--In determining the area-specific 
     Medicare+Choice 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.--
       ``(i) In general.--Subject to clause (ii), the payment 
     adjustments described in this subparagraph are payment 
     adjustments which the Secretary estimates were payable during 
     1997--

       ``(I) for the indirect costs of medical education under 
     section 1886(d)(5)(B), and
       ``(II) for direct graduate medical education costs under 
     section 1886(h).

       ``(ii) Treatment of payments covered under state hospital 
     reimbursement system.--To the extent that the Secretary 
     estimates that an annual per capita rate of payment for 1997 
     described in clause (i) reflects payments to hospitals 
     reimbursed under section 1814(b)(3), the Secretary shall 
     estimate a payment adjustment that is comparable to the 
     payment adjustment that would have been made under clause (i) 
     if the hospitals had not been reimbursed under such section.
       ``(D) Treatment of areas with highly variable payment 
     rates.--In the case of a Medicare+Choice 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.
       ``(4) Input-price-adjusted annual national medicare+choice 
     capitation rate.--
       ``(A) In general.--For purposes of paragraph (1)(A), the 
     input-price-adjusted annual national Medicare+Choice 
     capitation rate for a Medicare+Choice 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 Medicare+Choice 
     capitation rate (determined under subparagraph (B)) for the 
     year,
       ``(ii) the proportion of such rate for the year which is 
     attributable to such type of services, and
       ``(iii) an index that reflects (for that year and that type 
     of services) the relative input price of such services in the 
     area compared to the national average input price of such 
     services.

     In applying clause (iii), the Secretary may, 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 medicare+choice 
     capitation rate.--In subparagraph (A)(i), the `national 
     standardized annual Medicare+Choice capitation rate' for a 
     year is equal to--
       ``(i) the sum (for all Medicare+Choice payment areas) of 
     the product of--

       ``(I) the annual area-specific Medicare+Choice 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 factor.--For 
     purposes of paragraph (1)(A), for each year, the Secretary 
     shall determine a budget neutrality adjustment factor so that 
     the aggregate of the payments under this part shall equal the 
     aggregate payments that would have been made under this part 
     if payment were based entirely on area-specific capitation 
     rates.
       ``(6) National per capita medicare+choice growth percentage 
     defined.--
       ``(A) In general.--In this part, the `national per capita 
     Medicare+Choice growth percentage' for a year is the 
     percentage determined by the Secretary, by March 1st 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.
       ``(B) Adjustment.--The number of percentage points 
     specified in this subparagraph is--
       ``(i) for 1998, 0.8 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.
       ``(C) Adjustment for over or under projection of national 
     per capita medicare+choice growth percentage.--Beginning with 
     rates calculated for 1999, before computing rates for a year 
     as described in paragraph (1), the Secretary shall adjust all 
     area-specific and national Medicare+Choice capitation rates 
     (and beginning in 2000, the minimum amount) for the previous 
     year for the differences between the projections of the 
     national per capita Medicare+Choice growth percentage for 
     that year and previous years and the current estimate of such 
     percentage for such years.
       ``(7) Adjustment for national coverage determinations.--If 
     the Secretary makes a determination with respect to coverage 
     under this title that the Secretary projects will result in a 
     significant increase in the costs to Medicare+Choice of 
     providing benefits under contracts under this part (for 
     periods after any period described in section 1852(a)(5)), 
     the Secretary shall adjust appropriately the payments to such 
     organizations under this part.
       ``(d) Medicare+Choice Payment Area Defined.--
       ``(1) In general.--In this part, except as provided in 
     paragraph (3), the term `Medicare+Choice 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 Medicare+Choice 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 by not later than February 1 of the previous 
     year, the Secretary shall make a geographic adjustment to a 
     Medicare+Choice payment area in the State otherwise 
     determined under paragraph (1)--
       ``(i) to a single statewide Medicare+Choice payment area,
       ``(ii) to the metropolitan based system described in 
     subparagraph (C), or
       ``(iii) to consolidating into a single Medicare+Choice 
     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 initially (and annually thereafter) adjust the payment 
     rates otherwise established under this section for 
     Medicare+Choice 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 Medicare+Choice 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 
     Medicare+Choice payment area, and
       ``(ii) all areas in the State that do not fall within a 
     metropolitan statistical area are treated as a single 
     Medicare+Choice 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 Medicare+Choice 
     monthly MSA premium (as defined in section 1854(b)(2)(C)) for 
     an MSA plan for a year is less than \1/12\ of the annual 
     Medicare+Choice 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 
     Medicare+Choice MSA established (and, if applicable, 
     designated) by the individual under paragraph (2).
       ``(2) Establishment and designation of medicare+choice 
     medical savings account as

[[Page H6044]]

     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 
     Medicare+Choice 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 
     Medicare+Choice MSA, has designated one of such accounts as 
     the individual's Medicare+Choice MSA for purposes of this 
     part.

     Under rules under this section, such an individual may change 
     the designation of such account under subparagraph (B) for 
     purposes of this part.
       ``(3) Lump-sum deposit of medical savings account 
     contribution.--In the case of an individual electing an MSA 
     plan effective beginning with a month in a year, the amount 
     of the contribution to the Medicare+Choice MSA on behalf of 
     the individual for that month and all successive months in 
     the year shall be deposited during that first month. In the 
     case of a termination of such an election as of a month 
     before the end of a year, the Secretary shall provide for a 
     procedure for the recovery of deposits attributable to the 
     remaining months in the year.
       ``(f) Payments From Trust Fund.--The payment to a 
     Medicare+Choice organization under this section for 
     individuals enrolled under this part with the organization 
     and payments to a Medicare+Choice MSA under subsection (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 2000 shall be paid on the first business 
     day of such month. Monthly payments otherwise payable under 
     this section for October 2001 shall be paid on the last 
     business day of September 2001. Monthly payments otherwise 
     payable under this section for October 2006 shall be paid on 
     the first business day of October 2006.
       ``(g) Special Rule for Certain Inpatient Hospital Stays.--
     In the case of an individual who is receiving inpatient 
     hospital services from a subsection (d) hospital (as defined 
     in section 1886(d)(1)(B)) as of the effective date of the 
     individual's--
       ``(1) election under this part of a Medicare+Choice plan 
     offered by a Medicare+Choice organization--
       ``(A) payment for such services until the date of the 
     individual's discharge shall be made under this title through 
     the Medicare+Choice plan or the original 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 
     Medicare+Choice organization under this part--
       ``(A) the organization shall be financially responsible for 
     payment for such services after such date and until the date 
     of the individual's discharge,
       ``(B) payment for such services during the stay shall not 
     be made under section 1886(d) or by any succeeding 
     Medicare+Choice organization, and
       ``(C) the terminated organization shall not receive any 
     payment with respect to the individual under this part during 
     the period the individual is not enrolled.
       ``(h) Special Rule for Hospice Care.--
       ``(1) Information.--A contract under this part shall 
     require the Medicare+Choice organization to inform each 
     individual enrolled under this part with a Medicare+Choice 
     plan offered by the organization about the availability of 
     hospice care if--
       ``(A) a hospice program participating under this title is 
     located within the organization's service area; or
       ``(B) it is common practice to refer patients to hospice 
     programs outside such service area.
       ``(2) Payment.--If an individual who is enrolled with a 
     Medicare+Choice organization under this part makes an 
     election under section 1812(d)(1) to receive hospice care 
     from a particular hospice program--
       ``(A) payment for the hospice care furnished to the 
     individual shall be made to the hospice program elected by 
     the individual by the Secretary;
       ``(B) payment for other services for which the individual 
     is eligible notwithstanding the individual's election of 
     hospice care under section 1812(d)(1), including services not 
     related to the individual's terminal illness, shall be made 
     by the Secretary to the Medicare+Choice organization or the 
     provider or supplier of the service instead of payments 
     calculated under subsection (a); and
       ``(C) the Secretary shall continue to make monthly payments 
     to the Medicare+Choice organization in an amount equal to the 
     value of the additional benefits required under section 
     1854(f)(1)(A).


                               ``premiums

       ``Sec. 1854. (a) Submission of Proposed Premiums and 
     Related Information.--
       (1) In general.--Not later than May 1 of each year, each 
     Medicare+Choice organization shall submit to the Secretary, 
     in a form and manner specified by the Secretary and for each 
     Medicare+Choice plan for the service area in which it intends 
     to be offered in the following year--
       ``(A) the information described in paragraph (2), (3), or 
     (4) for the type of plan involved; and
       ``(B) the enrollment capacity (if any) in relation to the 
     plan and area.
       ``(2) Information required for coordinated care plans.--For 
     a Medicare+Choice plan described in section 1851(a)(2)(A), 
     the information described in this paragraph is as follows:
       ``(A) Basic (and additional) benefits.--For benefits 
     described in 1852(a)(1)(A)--
       ``(i) the adjusted community rate (as defined in subsection 
     (f)(3));
       ``(ii) the Medicare+Choice monthly basic beneficiary 
     premium (as defined in subsection (b)(2)(A));
       ``(iii) a description of deductibles, coinsurance, and 
     copayments applicable under the plan and the actuarial value 
     of such deductibles, coinsurance, and copayments, described 
     in subsection (e)(1)(A); and
       ``(iv) if required under subsection (f)(1), a description 
     of the additional benefits to be provided pursuant to such 
     subsection and the value determined for such proposed 
     benefits under such subsection.
       ``(B) Supplemental benefits.--For benefits described in 
     1852(a)(3)--
       ``(i) the adjusted community rate (as defined in subsection 
     (f)(3));
       ``(ii) the Medicare+Choice monthly supplemental beneficiary 
     premium (as defined in subsection (b)(2)(B)); and
       ``(iii) a description of deductibles, coinsurance, and 
     copayments applicable under the plan and the actuarial value 
     of such deductibles, coinsurance, and copayments, described 
     in subsection (e)(2).
       ``(3) Requirements for msa plans.--For an MSA plan 
     described, the information described in this paragraph is as 
     follows:
       ``(A) Basic (and additional) benefits.--For benefits 
     described in 1852(a)(1)(A), the amount of the Medicare+Choice 
     monthly MSA premium.
       ``(B) Supplemental benefits.--For benefits described in 
     1852(a)(3), the amount of the Medicare+Choice monthly 
     supplementary beneficiary premium.
       ``(4) Requirements for private fee-for-service plans.--For 
     a Medicare+Choice plan described in section 1851(a)(2)(C) for 
     benefits described in 1852(a)(1)(A), the information 
     described in this paragraph is as follows:--
       ``(A) Basic (and additional) benefits.--For benefits 
     described in 1852(a)(1)(A)--
       ``(i) the adjusted community rate (as defined in subsection 
     (f)(3));
       ``(ii) the amount of the Medicare+Choice monthly basic 
     beneficiary premium;
       ``(iii) a description of the deductibles, coinsurance, and 
     copayments applicable under the plan, and the actuarial value 
     of such deductibles, coinsurance, and copayments, as 
     described in subsection (e)(4)(A); and
       ``(iv) if required under subsection (f)(1), a description 
     of the additional benefits to be provided pursuant to such 
     subsection and the value determined for such proposed 
     benefits under such subsection.
       ``(B) Supplemental benefits.--For benefits described in 
     1852(a)(3), the amount of the Medicare+Choice monthly 
     supplemental beneficiary premium (as defined in subsection 
     (b)(2)(B)).
       ``(5) Review.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Secretary shall review the adjusted community rates, the 
     amounts of the basic and supplemental premiums, and values 
     filed under this subsection and shall approve or disapprove 
     such rates, amounts, and value so submitted.
       ``(B) Exception.--The Secretary shall not review, approve, 
     or disapprove the amounts submitted under paragraph (3) or 
     subparagraphs (A)(ii) and (B) of paragraph (4).
       ``(b) Monthly Premium Charged.--
       ``(1) In general.--
       ``(A) Rule for other than msa plans.--The monthly amount of 
     the premium charged to an individual enrolled in a 
     Medicare+Choice plan (other than an MSA plan) offered by a 
     Medicare+Choice organization shall be equal to the sum of the 
     Medicare+Choice monthly basic beneficiary premium and the 
     Medicare+Choice monthly supplementary beneficiary premium (if 
     any).
       ``(B) MSA plans.--The monthly amount of the premium charged 
     to an individual enrolled in an MSA plan offered by a 
     Medicare+Choice organization shall be equal to the 
     Medicare+Choice monthly supplemental beneficiary premium (if 
     any).
       ``(2) Premium terminology defined.--For purposes of this 
     part:
       ``(A) The Medicare+Choice monthly basic beneficiary 
     premium.--The term `Medicare+Choice monthly basic beneficiary 
     premium' means, with respect to a Medicare+Choice plan, the 
     amount authorized to be charged under subsection (e)(1) for 
     the plan, or, in the case of a Medicare+Choice private fee-
     for-service plan, the amount filed under subsection 
     (a)(4)(A)(ii).
       ``(B) Medicare+Choice monthly supplemental beneficiary 
     premium.--The term `Medicare+Choice monthly supplemental 
     beneficiary premium' means, with respect to a Medicare+Choice 
     plan, the amount authorized to be charged under subsection 
     (e)(2) for the plan or, in the case of a MSA plan or 
     Medicare+Choice private fee-for-service plan, the amount 
     filed under paragraph (3)(B) or (4)(B) of subsection (a).
       ``(C) Medicare+Choice monthly MSA premium.--The term 
     `Medicare+Choice monthly MSA premium' means, with respect to 
     a Medicare+Choice plan, the amount of such premium filed 
     under subsection (a)(3)(A) for the plan.
       ``(c) Uniform Premium.--The Medicare+Choice monthly basic 
     and supplemental beneficiary premium, the

[[Page H6045]]

     Medicare+Choice monthly MSA premium charged under subsection 
     (b) of a Medicare+Choice organization under this part may not 
     vary among individuals enrolled in the plan.
       ``(d) Terms and Conditions of Imposing Premiums.--Each 
     Medicare+Choice organization shall permit the payment of 
     Medicare+Choice monthly basic and supplemental beneficiary 
     premiums on a monthly basis, may terminate election of 
     individuals for a Medicare+Choice plan for failure to make 
     premium payments only in accordance with section 
     1851(g)(3)(B)(i), and may not provide for cash or other 
     monetary rebates as an inducement for enrollment or 
     otherwise.
       ``(e) Limitation on Enrollee Liability.--
       ``(1) For basic and additional benefits.--In no event may--
       ``(A) the Medicare+Choice monthly basic beneficiary 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 
     Medicare+Choice plan described in section 1851(a)(2)(A) of an 
     organization with respect to required benefits described in 
     section 1852(a)(1)(A) and additional benefits (if any) 
     required under subsection (f)(1)(A) 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 Medicare+Choice 
     organization for the year.
       ``(2) For supplemental benefits.--If the Medicare+Choice 
     organization provides to its members enrolled under this part 
     in a Medicare+Choice plan described in section 1851(a)(2)(A) 
     with respect to supplemental benefits described in section 
     1852(a)(3), the sum of the Medicare+Choice monthly 
     supplemental beneficiary premium (multiplied by 12) charged 
     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)(3)).
       ``(3) 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 same geographic area, the State, or in the 
     United States, eligible to enroll in the Medicare+Choice 
     plan involved under this part or on the basis of other 
     appropriate data.
       ``(4) Special rule for private fee-for-service plans.--With 
     respect to a Medicare+Choice private fee-for-service plan 
     (other than a plan that is an MSA plan), in no event may--
       ``(A) the actuarial value of the deductibles, coinsurance, 
     and copayments applicable on average to individuals enrolled 
     under this part with such a plan of an organization with 
     respect to required benefits described in section 1852(a)(1), 
     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 Medicare+Choice 
     organization for the year.
       ``(f) Requirement for Additional Benefits.--
       ``(1) Requirement.--
       ``(A) In general.--Each Medicare+Choice organization (in 
     relation to a Medicare+Choice plan, other than an MSA 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 the Secretary determines 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)(A) under the plan for 
     individuals under this part, as determined based upon an 
     adjusted community rate described in paragraph (3) (as 
     reduced for the actuarial value of the coinsurance, 
     copayments, 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) Uniform application.--This paragraph shall be applied 
     uniformly for all enrollees for a plan.
       ``(E) Construction.--Nothing in this subsection shall be 
     construed as preventing a Medicare+Choice organization from 
     providing supplemental benefits (described in section 
     1852(a)(3)) that are in addition to the health care benefits 
     otherwise required to be provided under this paragraph and 
     from imposing a premium for such supplemental benefits.
       ``(2) Stabilization fund.--A Medicare+Choice 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 Medicare+Choice 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) Adjusted community rate.--For purposes of this 
     subsection, subject to paragraph (4), the term `adjusted 
     community rate' for a service or services means, at the 
     election of a Medicare+Choice organization, either--
       ``(A) the rate of payment for that service or services 
     which the Secretary annually determines would apply to an 
     individual electing a Medicare+Choice 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
       ``(B) 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 
     Medicare+Choice coverage, or Medicare+Choice eligible 
     individuals in the area, in the State, or in the United 
     States, eligible to elect Medicare+Choice coverage under this 
     part and the utilization characteristics of the rest of the 
     population in the area, in the State, or in the United 
     States, respectively).
       ``(4) Determination based on insufficient data.--For 
     purposes of this subsection, if the Secretary finds that 
     there is insufficient enrollment experience to determine an 
     average of the capitation payments to be made under this part 
     at the beginning of a contract period or to determine (in the 
     case of a newly operated provider-sponsored organization or 
     other new organization) the adjusted community rate for the 
     organization, the Secretary may determine such an average 
     based on the enrollment experience of other contracts entered 
     into under this part and may determine such a rate using data 
     in the general commercial marketplace.
       ``(g) Prohibition of State Imposition of Premium Taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     payments to Medicare+Choice organizations under section 1853.


    ``organizational and financial requirements for medicare+choice 
            organizations; provider-sponsored organizations

       ``Sec. 1855. (a) Organized and Licensed Under State Law.--
       ``(1) In general.--Subject to paragraphs (2) and (3), a 
     Medicare+Choice 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 Medicare+Choice plan.
       ``(2) Special exception for provider-sponsored 
     organizations.--
       ``(A) In general.--In the case of a provider-sponsored 
     organization that seeks to offer a Medicare+Choice 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 by not later than November 1, 2002, 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.--The ground for approval of such a waiver application 
     described in this subparagraph 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 a substantially complete 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.--The ground for approval of such a waiver 
     application described in this subparagraph is that the State 
     has denied such a licensing application and--
       ``(i) 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 
     solvency requirements) to such organizations that are not 
     generally applicable to other entities engaged in a 
     substantially similar business, or
       ``(ii) the State requires the organization, as a condition 
     of licensure, to offer any product or plan other than a 
     Medicare+Choice plan.
       ``(D) Denial of application based on application of 
     solvency requirements.--With respect to waiver applications 
     filed on or after the date of publication of solvency 
     standards under section 1856(a), the ground for approval of 
     such a waiver application described in this subparagraph 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 documentation or information requirements 
     relating to solvency or other material requirements, 
     procedures, or standards relating to solvency that are 
     different

[[Page H6046]]

     from the requirements, procedures, and standards applied by 
     the Secretary under subsection (d)(2).

     For purposes of this paragraph, 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 
     with respect to a State--
       ``(i) Limitation to state.--The waiver shall be effective 
     only with respect to that State and does not apply to any 
     other State.
       ``(ii) Limitation to 36-month period.--The waiver shall be 
     effective only for a 36-month period and may not be renewed.
       ``(iii) Conditioned on compliance with consumer protection 
     and quality standards.--The continuation of the waiver is 
     conditioned upon the organization's compliance with the 
     requirements described in subparagraph (G).
       ``(iv) Preemption of state law.--Any provisions of law of 
     that State 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.
       ``(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 waiver 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.
       ``(G) Application and enforcement of state consumer 
     protection and quality standards.--
       ``(i) In general.--A waiver granted under this paragraph to 
     an organization with respect to licensing under State law is 
     conditioned upon the organization's compliance with all 
     consumer protection and quality standards insofar as such 
     standards--

       ``(I) would apply in the State to the organization if it 
     were licensed under State law;
       ``(II) are generally applicable to other Medicare+Choice 
     organizations and plans in the State; and
       ``(III) are consistent with the standards established under 
     this part.

     Such standards shall not include any standard preempted under 
     section 1856(b)(3)(B).
       ``(ii) Incorporation into contract.--In the case of such a 
     waiver granted to an organization with respect to a State, 
     the Secretary shall incorporate the requirement that the 
     organization (and Medicare+Choice plans it offers) comply 
     with standards under clause (i) as part of the contract 
     between the Secretary and the organization under section 
     1857.
       ``(iii) Enforcement.--In the case of such a waiver granted 
     to an organization with respect to a State, the Secretary may 
     enter into an agreement with the State under which the State 
     agrees to provide for monitoring and enforcement activities 
     with respect to compliance of such an organization and its 
     Medicare+Choice plans with such standards. Such monitoring 
     and enforcement shall be conducted by the State in the same 
     manner as the State enforces such standards with respect to 
     other Medicare+Choice organizations and plans, without 
     discrimination based on the type of organization to which the 
     standards apply. Such an agreement shall specify or establish 
     mechanisms by which compliance activities are undertaken, 
     while not lengthening the time required to review and process 
     applications for waivers under this paragraph.
       ``(H) Report.--By not later than December 31, 2001, the 
     Secretary shall submit 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 a report regarding 
     whether the waiver process under this paragraph should be 
     continued after December 31, 2002. In making such 
     recommendation, the Secretary shall consider, among other 
     factors, the impact of such process on beneficiaries and on 
     the long-term solvency of the program under this title.
       ``(3) 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) Assumption of Full Financial Risk.--The 
     Medicare+Choice organization shall assume full financial risk 
     on a prospective basis for the provision of the health care 
     services 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 such aggregate level as 
     the Secretary specifies from time to time,
       ``(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 
     care 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.
       ``(c) Certification of Provision Against Risk of Insolvency 
     for Unlicensed PSOs.--
       ``(1) In general.--Each Medicare+Choice 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 a certification application not later 
     than 60 days after the date the application has been 
     received.
       ``(d) 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, and operated, 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 the affiliated providers share, 
     directly or indirectly, substantial financial risk with 
     respect to the provision of such items and services and 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 the need for such an 
     organization to assume responsibility for providing--
       ``(i) significantly more than the majority of the items and 
     services under the contract under this section through its 
     own affiliated providers; and
       ``(ii) most of the remainder of the items and services 
     under the contract through providers with which the 
     organization has an agreement to provide such items and 
     services,
     in order to assure financial stability and to address the 
     practical considerations involved in integrating the delivery 
     of a wide range of service providers;
       ``(B) shall take into account the need for such an 
     organization to provide a limited proportion of the items and 
     services under the contract through providers that are 
     neither affiliated with nor have an agreement with the 
     organization; and
       ``(C) may allow for variation in the definition of 
     substantial proportion among such organizations based on 
     relevant differences among the 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,
       ``(C) each provider is a participant in a lawful 
     combination under which each provider shares substantial 
     financial risk in connection with the organization's 
     operations, or
       ``(D) both providers are part of an affiliated service 
     group under section 414 of such Code.
       ``(4) Control.--For purposes of paragraph (3), control is 
     presumed to exist if one party, directly or indirectly, owns, 
     controls, or holds the power to vote, or proxies for, not 
     less than 51 percent of the voting rights or governance 
     rights of another.
       ``(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(c)(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,
       ``(ii) alternative means of protecting against insolvency, 
     including reinsurance, unrestricted surplus, letters of 
     credit, guarantees, organizational insurance coverage, 
     partnerships with

[[Page H6047]]

     other licensed entities, and valuation attributable to the 
     ability of such an organization to meet its service 
     obligations through direct delivery of care, and
       ``(iii) any standards developed by the National Association 
     of Insurance Commissioners specifically for risk-based health 
     care delivery organizations.
       ``(C) Enrollee protection against insolvency.--Such 
     standards shall include provisions to prevent enrollees from 
     being held liable to any person or entity for the 
     Medicare+Choice 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 1 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 1 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 Medicare+Choice organizations and plans consistent with, 
     and to carry out, this part. The Secretary shall publish such 
     regulations by June 1, 1998. In order to carry out this 
     requirement in a timely manner, the Secretary may promulgate 
     regulations that take effect on an interim basis, after 
     notice and pending opportunity for public comment.
       ``(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) Relation to state laws.--
       ``(A) In general.--The standards established under this 
     subsection shall supersede any State law or regulation 
     (including standards described in subparagraph (B)) with 
     respect to Medicare+Choice plans which are offered by 
     Medicare+Choice organizations under this part to the extent 
     such law or regulation is inconsistent with such standards.
       ``(B) Standards specifically superseded.--State standards 
     relating to the following are superseded under this 
     paragraph:
       ``(i) Benefit requirements.
       ``(ii) Requirements relating to inclusion or treatment of 
     providers.
       ``(iii) Coverage determinations (including related appeals 
     and grievance processes).


             ``contracts with medicare+choice organizations

       ``Sec. 1857. (a) In General.--The Secretary shall not 
     permit the election under section 1851 of a Medicare+Choice 
     plan offered by a Medicare+Choice 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 1 Medicare+Choice 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 paragraph (2), the Secretary 
     may not enter into a contract under this section with a 
     Medicare+Choice organization unless the organization has--
       ``(A) 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, or
       ``(B) at least 1,500 individuals (or 500 individuals in the 
     case of an organization that is a provider-sponsored 
     organization) who are receiving health benefits through the 
     organization if the organization primarily serves individuals 
     residing outside of urbanized areas.
       ``(2) Application to msa plans.--In applying paragraph (1) 
     in the case of a Medicare+Choice organization that is 
     offering an MSA plan, paragraph (1) shall be applied by 
     substituting covered lives for individuals.
       ``(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 1 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 Medicare+Choice organization if a 
     previous contract with that organization under this section 
     was terminated at the request of the organization within the 
     preceding 5-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) 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 
     Medicare+Choice organizations offering Medicare+Choice plans 
     under this part. The Comptroller General shall monitor 
     auditing activities conducted under this subsection.
       ``(2) Inspection and audit.--Each contract under this 
     section shall provide that the Secretary, or any person or 
     organization designated by the Secretary--
       ``(A) shall have the right to inspect or otherwise evaluate 
     (i) the quality, appropriateness, and timeliness of services 
     performed under the contract, and (ii) the facilities of the 
     organization when there is reasonable evidence of some need 
     for such inspection, and
       ``(B) shall have the right to audit and inspect any books 
     and records of the Medicare+Choice organization that pertain 
     (i) to the ability of the organization to bear the risk of 
     potential financial losses, or (ii) to services performed or 
     determinations of amounts payable under the contract.
       ``(3) 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.
       ``(4) Disclosure.--
       ``(A) In general.--Each Medicare+Choice organization shall, 
     in accordance with regulations of the Secretary, report to 
     the Secretary financial information which shall include the 
     following:
       ``(i) Such information as the Secretary may require 
     demonstrating that the organization has a fiscally sound 
     operation.
       ``(ii) A copy of the report, if any, filed with the Health 
     Care Financing Administration containing the information 
     required to be reported under section 1124 by disclosing 
     entities.
       ``(iii) A description of transactions, as specified by the 
     Secretary, between the organization and a party in interest. 
     Such transactions shall include--

       ``(I) any sale or exchange, or leasing of any property 
     between the organization and a party in interest;
       ``(II) any furnishing for consideration of goods, services 
     (including management services), or facilities between the 
     organization and a party in interest, but not including 
     salaries paid to employees for services provided in the 
     normal course of their employment and health services 
     provided to members by hospitals and other providers and by 
     staff, medical group (or groups),

[[Page H6048]]

     individual practice association (or associations), or any 
     combination thereof; and
       ``(III) any lending of money or other extension of credit 
     between an organization and a party in interest.

     The Secretary may require that information reported 
     respecting an organization which controls, is controlled by, 
     or is under common control with, another entity be in the 
     form of a consolidated financial statement for the 
     organization and such entity.
       ``(B) Party in interest defined.--For the purposes of this 
     paragraph, the term `party in interest' means--
       ``(i) any director, officer, partner, or employee 
     responsible for management or administration of a 
     Medicare+Choice organization, any person who is directly or 
     indirectly the beneficial owner of more than 5 percent of the 
     equity of the organization, any person who is the beneficial 
     owner of a mortgage, deed of trust, note, or other interest 
     secured by, and valuing more than 5 percent of the 
     organization, and, in the case of a Medicare+Choice 
     organization organized as a nonprofit corporation, an 
     incorporator or member of such corporation under applicable 
     State corporation law;
       ``(ii) any entity in which a person described in clause 
     (i)--

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

       ``(iii) any person directly or indirectly controlling, 
     controlled by, or under common control with an organization; 
     and
       ``(iv) any spouse, child, or parent of an individual 
     described in clause (i).
       ``(C) Access to information.--Each Medicare+Choice 
     organization shall make the information reported pursuant to 
     subparagraph (A) available to its enrollees upon reasonable 
     request.
       ``(5) 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.--
       ``(A) In general.--A Medicare+Choice organization shall pay 
     the fee established by the Secretary under subparagraph (B).
       ``(B) Authorization.--The Secretary is authorized to charge 
     a fee to each Medicare+Choice organization with a contract 
     under this part that is equal to the organization's pro rata 
     share (as determined by the Secretary) of the aggregate 
     amount of fees which the Secretary is directed to collect in 
     a fiscal year. Any amounts collected are authorized to be 
     appropriated only for the purpose of 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).
       ``(C) Contingency.--For any fiscal year, the fees 
     authorized under subparagraph (B) are contingent upon 
     enactment in an appropriations act of a provision specifying 
     the aggregate amount of fees the Secretary is directed to 
     collect in a fiscal year. Fees collected during any fiscal 
     year under this paragraph shall be deposited and credited as 
     offsetting collections.
       ``(D) Limitation.--In any fiscal year the fees collected by 
     the Secretary under subparagraph (B) shall not exceed the 
     lesser of--
       ``(i) the estimated costs to be incurred by the Secretary 
     in the fiscal year in carrying out the activities described 
     in section 1851 and section 4360 of the Omnibus Budget 
     Reconciliation Act of 1990; or
       ``(ii)(I) $200,000,000 in fiscal year 1998;
       ``(II) $150,000,000 in fiscal year 1999; and
       ``(III) $100,000,000 in fiscal year 2000 and each 
     subsequent fiscal year.
       ``(f) Prompt Payment by Medicare+Choice Organization.--
       ``(1) Requirement.--A contract under this part shall 
     require a Medicare+Choice 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 enrollees pursuant to the contract, 
     if the services or supplies are not furnished under a 
     contract between the organization and the provider or 
     supplier (or in the case of a Medicare+Choice private fee-
     for-service plan, if a claim is submitted to such 
     organization by an enrollee).
       ``(2) Secretary's option to bypass noncomplying 
     organization.--In the case of a Medicare+Choice 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 (or, in the case of a Medicare+Choice private 
     fee-for-service plan, amounts owed to the enrollees) 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 
     Medicare+Choice organization with a contract under this 
     section--
       ``(A) fails substantially to provide medically necessary 
     items and services that are required (under law or under the 
     contract) to be provided to an individual covered under the 
     contract, if the failure has adversely affected (or has 
     substantial likelihood of adversely affecting) the 
     individual;
       ``(B) imposes premiums on individuals enrolled under this 
     part in excess of the amount of the Medicare+Choice monthly 
     basic and supplemental beneficiary premiums permitted under 
     section 1854;
       ``(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 applicable requirements of 
     section 1852(j)(3) or 1852(k)(2)(A)(ii); or
       ``(G) employs or contracts with any individual or entity 
     that is excluded from participation under this title under 
     section 1128 or 1128A for the provision of health care, 
     utilization review, medical social work, or administrative 
     services or employs or contracts with any entity for the 
     provision (directly or indirectly) through such an excluded 
     individual or entity of such services;

     the Secretary may provide, in addition to any other remedies 
     authorized by law, for any of the remedies described in 
     paragraph (2).
       ``(2) Remedies.--The remedies described in this paragraph 
     are--
       ``(A) civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) or, with respect to a 
     determination under subparagraph (D) or (E)(i) of such 
     paragraph, of not more than $100,000 for each such 
     determination, plus, with respect to a determination under 
     paragraph (1)(B), double the excess amount charged in 
     violation of such paragraph (and the excess amount charged 
     shall be deducted from the penalty and returned to the 
     individual concerned), and plus, with respect to a 
     determination under paragraph (1)(D), $15,000 for each 
     individual not enrolled as a result of the practice involved,
       ``(B) suspension of enrollment of individuals under this 
     part after the date the Secretary notifies the organization 
     of a determination under paragraph (1) and until the 
     Secretary is satisfied that the basis for such determination 
     has been corrected and is not likely to recur, or
       ``(C) suspension of payment to the organization under this 
     part for individuals enrolled after the date the Secretary 
     notifies the organization of a determination under paragraph 
     (1) and until the Secretary is satisfied that the basis for 
     such determination has been corrected and is not likely to 
     recur.
       ``(3) Other intermediate sanctions.--In the case of a 
     Medicare+Choice organization for which the Secretary makes a 
     determination under subsection (c)(2) the basis of which is 
     not described in paragraph (1), the Secretary may apply the 
     following intermediate sanctions:
       ``(A) Civil money penalties of not more than $25,000 for 
     each determination under subsection (c)(2) if the deficiency 
     that is the basis of the determination has directly adversely 
     affected (or has the substantial likelihood of adversely 
     affecting) an individual covered under the organization's 
     contract.
       ``(B) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of civil money 
     penalty procedures by the Secretary 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.
       ``(4) Civil money penalties.--The provisions of section 
     1128A (other than subsections (a) and (b)) shall apply to a 
     civil money penalty under paragraph (2) or (3) in the same 
     manner as they apply to a civil money penalty or proceeding 
     under section 1128A(a).
       ``(h) Procedures for Termination.--
       ``(1) In general.--The Secretary may terminate a contract 
     with a Medicare+Choice 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); and
       ``(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) 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.

[[Page H6049]]

                ``definitions; miscellaneous provisions

       ``Sec. 1859. (a) Definitions Relating to Medicare+Choice 
     Organizations.--In this part--
       ``(1) Medicare+choice organization.--The term 
     `Medicare+Choice 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(d)(1).
       ``(b) Definitions Relating to Medicare+Choice Plans.--
       ``(1) Medicare+choice plan.--The term `Medicare+Choice 
     plan' means health benefits coverage offered under a policy, 
     contract, or plan by a Medicare+Choice organization pursuant 
     to and in accordance with a contract under section 1857.
       ``(2) Medicare+Choice private fee-for-service plan.--The 
     term `Medicare+Choice private fee-for-service plan' means a 
     Medicare+Choice plan that--
       ``(A) reimburses hospitals, physicians, and other providers 
     at a rate determined by the plan on a fee-for-service basis 
     without placing the provider at financial risk;
       ``(B) does not vary such rates for such a provider based on 
     utilization relating to such provider; and
       ``(C) does not restrict the selection of providers among 
     those who are lawfully authorized to provide the covered 
     services and agree to accept the terms and conditions of 
     payment established by the plan.
       ``(3) MSA plan.--
       ``(A) In general.--The term `MSA plan' means a 
     Medicare+Choice 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 Medicare+Choice 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) Medicare+choice eligible individual.--The term 
     `Medicare+Choice eligible individual' is defined in section 
     1851(a)(3).
       ``(2) Medicare+choice payment area.--The term 
     `Medicare+Choice payment area' is defined in section 1853(d).
       ``(3) National per capita medicare+choice growth 
     percentage.--The `national per capita Medicare+Choice growth 
     percentage' is defined in section 1853(c)(6).
       ``(4) Medicare+choice monthly basic beneficiary premium; 
     medicare+choice monthly supplemental beneficiary premium.--
     The terms `Medicare+Choice monthly basic beneficiary premium' 
     and `Medicare+Choice monthly supplemental beneficiary 
     premium' are defined in section 1854(a)(2).
       ``(d) Coordinated Acute and Long-Term Care Benefits Under a 
     Medicare+Choice 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 Medicare+Choice 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 Medicare+Choice 
     Plans.--
       ``(1) In general.--In the case of a Medicare+Choice 
     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) Medicare+choice religious fraternal benefit society 
     plan described.--For purposes of this subsection, a 
     Medicare+Choice religious fraternal benefit society plan 
     described in this paragraph is a Medicare+Choice 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.
       ``(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 described in section 501(c)(8) of the Internal 
     Revenue Code of 1986 and is exempt from taxation under 
     section 501(a) of such Act;
       ``(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 Medicare+Choice 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 Medicare+Choice 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.''.

     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 (1)--
       (A) by striking ``Each'' and inserting ``For contract 
     periods beginning before January 1, 1999, each''; and
       (B) by striking ``or under a State plan approved under 
     title XIX'';
       (2) in paragraph (2), by striking ``The Secretary'' and 
     inserting ``Subject to paragraph (4), the Secretary'', and
       (3) by adding at the end the following:
       ``(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.--
       (1) Risk-sharing contracts.--Section 1876 (42 U.S.C. 
     1395mm) is amended by adding at the end the following new 
     subsections:
       ``(k)(1) Except as provided in paragraph (2)--
       ``(A) on or after the date standards for Medicare+Choice 
     organizations and plans are first established under section 
     1856(b)(1), the Secretary shall not enter into any risk-
     sharing contract under this section with an eligible 
     organization; and
       ``(B) for any contract year beginning on or after January 
     1, 1999, the Secretary shall not renew any such contract.
       ``(2) 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 described in section 1856(b)(1).
       ``(3) 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 section 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).
       ``(4) The following requirements shall apply to eligible 
     organizations with risk-sharing contracts under this section 
     in the same manner as they apply to Medicare+Choice 
     organizations under part C:
       ``(A) Data collection requirements under section 
     1853(a)(3)(B).
       ``(B) Restrictions on imposition of premium taxes under 
     section 1854(g) in relating to payments to such organizations 
     under this section.
       ``(C) The requirement to accept enrollment of new enrollees 
     during November 1998 under section 1851(e)(6).
       ``(D) Payments under section 1857(e)(2).''.
       (2) Reasonable cost contracts.--
       (A) Phase out of contracts.--Section 1876(h) (42 U.S.C. 
     1395mm(h)) is amended by adding at the end the following:
       ``(5)(A) After the date of the enactment of this paragraph, 
     the Secretary may not enter into a reasonable cost 
     reimbursement contract under this subsection (if the contract 
     is not in effect as of such date), except for a contract with 
     an eligible organization which, immediately previous to 
     entering into such contract, had an agreement in effect under 
     section 1833(a)(1)(A).
       ``(B) The Secretary may not extend or renew a reasonable 
     cost reimbursement contract under this subsection for any 
     period beyond December 31, 2002.''.
       (B) Report on impact.--By not later than January 1, 2001, 
     the Secretary of Health and Human Services shall submit to 
     Congress a report that analyzes the potential impact of 
     termination of reasonable cost reimbursement contracts, 
     pursuant to the amendment made by subparagraph (A), on 
     medicare beneficiaries enrolled under such contracts and on 
     the medicare program. The report shall include such 
     recommendations regarding any extension or transition with 
     respect to such contracts as the Secretary deems appropriate.
       (c) Enrollment Transition Rule.--An individual who is 
     enrolled on December 31, 1998,

[[Page H6050]]

     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 ``, Medicare+Choice organization,'' after 
     ``provider of services''; and
       (2) in paragraph (2)(E), by inserting ``or a 
     Medicare+Choice 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 Medicare+Choice 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 sections 
     1886(d)(11) and 1886(h)(3)(D))'' 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 6 months 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) 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(d)(1) of such Act, 
     as inserted by section 5001) 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).
       (i) Publication of New Capitation Rates.--Not later than 4 
     weeks after the date of the enactment of this Act, the 
     Secretary of Health and Human Services shall announce the 
     annual Medicare+Choice capitation rates for 1998 under 
     section 1853(b) of the Social Security Act.
       (j) Elimination of Health Care Prepayment Plan Option for 
     Entities Eligible to Participate As Managed Care 
     Organization.--
       (1) Elimination of option.--
       (A) In general.--Section 1833(a)(1)(A) (42 U.S.C. 
     1395l(a)(1)(A)) is amended by inserting ``(and either is 
     sponsored by a union or employer, or does not provide, or 
     arrange for the provision of, any inpatient hospital 
     services)'' after ``prepayment basis''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     applies to new contracts entered into after the date of 
     enactment of this Act and, with respect to contracts in 
     effect as of such date, shall apply to payment for services 
     furnished after December 31, 1998.
       (2) Medigap conforming amendment.--Effective January 1, 
     1999, section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended 
     by striking ``, during the period beginning on the date 
     specified in subsection (p)(1)(C) and ending on December 31, 
     1995,''.

     SEC. 4003. CONFORMING CHANGES IN MEDIGAP PROGRAM.

       (a) Conforming Amendments to Medicare+Choice 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 Medicare+Choice 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 Medicare+Choice plan'' after ``(II)'', and
       (ii) by inserting before the comma at the end the 
     following: ``or in the case of an individual electing a 
     Medicare+Choice plan, a medicare supplemental policy with 
     knowledge that the policy duplicates health benefits to which 
     the individual is otherwise entitled under the 
     Medicare+Choice 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 Medicare+Choice plan)'' after ``health 
     insurance policies''.
       (3) Medicare+choice plans not treated as medicare 
     supplementary policies.--Section 1882(g)(1) (42 U.S.C. 
     1395ss(g)(1)) is amended by inserting ``or a Medicare+Choice 
     plan or'' after ``does not include''.
       (b) Additional Rules Relating to Individuals Enrolled in 
     MSA Plans and Private Fee-for-Service 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 or a Medicare+Choice private 
     fee-for-service plan.
       ``(2)(A) A policy described in this subparagraph is a 
     health insurance policy (other than a policy described in 
     subparagraph (B)) that provides for coverage of expenses that 
     are otherwise required to be counted toward meeting the 
     annual deductible amount provided under the MSA plan.
       ``(B) A policy described in this subparagraph is any of the 
     following:
       ``(i) A policy that provides coverage (whether through 
     insurance or otherwise) for accidents, disability, dental 
     care, vision care, or long-term care.
       ``(ii) A policy of insurance to which substantially all of 
     the coverage relates to--
       ``(I) liabilities incurred under workers' compensation 
     laws,
       ``(II) tort liabilities,
       ``(III) liabilities relating to ownership or use of 
     property, or
       ``(IV) such other similar liabilities as the Secretary may 
     specify by regulations.
       ``(iii) A policy of insurance that provides coverage for a 
     specified disease or illness.
       ``(iv) A policy of insurance that pays a fixed amount per 
     day (or other period) of hospitalization.''.

    Subchapter B--Special Rules for Medicare+Choice Medical Savings 
                                Accounts

     SEC. 4006. MEDICARE+CHOICE 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. MEDICARE+CHOICE MSA.

       ``(a) Exclusion.--Gross income shall not include any 
     payment to the Medicare+Choice MSA of an individual by the 
     Secretary of Health and Human Services under part C of title 
     XVIII of the Social Security Act.
       ``(b) Medicare+Choice MSA.--For purposes of this section, 
     the term `Medicare+Choice MSA' means a medical savings 
     account (as defined in section 220(d))--
       ``(1) which is designated as a Medicare+Choice 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)(3) of the Social Security Act.
       ``(c) Special Rules for Distributions.--
       ``(1) Distributions for qualified medical expenses.--In 
     applying section 220 to a Medicare+Choice 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 medicare+choice 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 Medicare+Choice MSA which is not used exclusively to pay 
     the qualified medical expenses of the account holder shall be 
     increased by 50 percent of the excess (if any) of--
       ``(i) the amount of such payment or distribution, over
       ``(ii) the excess (if any) of--

       ``(I) the fair market value of the assets in 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 Medicare+Choice MSA plan covering the account 
     holder as of January 1 of the calendar year in which the 
     taxable year begins.

     Section 220(f)(4) shall not apply to any payment or 
     distribution from a Medicare+Choice 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 Medicare+Choice 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 Medicare+Choice 
     MSA to the Secretary of Health and Human Services of an 
     erroneous contribution to such MSA and of the net income 
     attributable to such contribution.
       ``(4) Trustee-to-trustee transfers.--Section 220(f)(2) and 
     paragraph (2) of this subsection shall not apply to any 
     trustee-to-trustee

[[Page H6051]]

     transfer from a Medicare+Choice MSA of an account holder to 
     another Medicare+Choice 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 Medicare+Choice 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 Medicare+Choice MSA.
       ``(e) Reports.--In the case of a Medicare+Choice MSA, the 
     report under section 220(h)--
       ``(1) shall include the fair market value of the assets in 
     such Medicare+Choice 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 
     Medicare+Choice MSA, and Medicare+Choice 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. Medicare+Choice 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--DEMONSTRATIONS

Subchapter A--Medicare+Choice Competitive Pricing Demonstration Project

     SEC. 4011. MEDICARE PREPAID COMPETITIVE PRICING DEMONSTRATION 
                   PROJECT.

       (a) Establishment of Project.--The Secretary of Health and 
     Human Services (in this subchapter referred to as the 
     ``Secretary'') shall establish a demonstration project (in 
     this subchapter referred to as the ``project'') under which 
     payments to Medicare+Choice organizations in medicare payment 
     areas in which the project is being conducted are determined 
     in accordance with a competitive pricing methodology 
     established under this subchapter.
       (b) Designation of 7 Medicare Payment Areas Covered by 
     Project.--
       (1) In general.--The Secretary shall designate, in 
     accordance with the recommendations of the Competitive 
     Pricing Advisory Committee under paragraphs (2) and (3), 
     medicare payment areas as areas in which the project under 
     this subchapter will be conducted. In this section, the term 
     ``Competitive Pricing Advisory Committee'' means the 
     Competitive Pricing Advisory Committee established under 
     section 4012(a).
       (2) Initial designation of 4 areas.--
       (A) In general.--The Competitive Pricing Advisory Committee 
     shall recommend to the Secretary, consistent with 
     subparagraph (B), the designation of 4 specific areas as 
     medicare payment areas to be included in the project. Such 
     recommendations shall be made in a manner so as to ensure 
     that payments under the project in 2 such areas will begin on 
     January 1, 1999, and in 2 such areas will begin on January 1, 
     2000.
       (B) Location of designation.--Of the 4 areas recommended 
     under subparagraph (A), 3 shall be in urban areas and 1 shall 
     be in a rural area.
       (3) Designation of additional 3 areas.--Not later than 
     December 31, 2001, the Competitive Pricing Advisory Committee 
     may recommend to the Secretary the designation of up to 3 
     additional, specific medicare payment areas to be included in 
     the project.
       (c) Project Implementation.--
       (1) In general.--Subject to paragraph (2), the Secretary 
     shall for each medicare payment area designated under 
     subsection (b)--
       (A) in accordance with the recommendations of the 
     Competitive Pricing Advisory Committee--
       (i) establish the benefit design among plans offered in 
     such area, and
       (ii) structure the method for selecting plans offered in 
     such area; and
       (B) in consultation with such Committee--
       (i) establish methods for setting the price to be paid to 
     plans, including, if the Secretaries determines appropriate, 
     the rewarding and penalizing of Medicare+Choice plans in the 
     area on the basis of the attainment of, or failure to attain, 
     applicable quality standards, and
       (ii) provide for the collection of plan information 
     (including information concerning quality and access to 
     care), the dissemination of information, and the methods of 
     evaluating the results of the project.
       (2) Consultation.--The Secretary shall take into account 
     the recommendations of the area advisory committee 
     established in section 4012(b), in implementing a project 
     design for any area, except that no modifications may be made 
     in the project design without consultation with the 
     Competitive Pricing Advisory Committee. In no case may the 
     Secretary change the designation of an area based on 
     recommendations of any area advisory committee.
       (d) Monitoring and Report.--
       (1) Monitoring impact.--Taking into consideration the 
     recommendations of the Competitive Pricing Advisory Committee 
     and the area advisory committees, the Secretary shall closely 
     monitor and measure the impact of the project in the 
     different areas on the price and quality of, and access to, 
     medicare covered services, choice of health plans, changes in 
     enrollment, and other relevant factors.
       (2) Report.--Not later than December 31, 2002, the 
     Secretary shall submit to Congress a report on the progress 
     under the project under this subchapter, including a 
     comparison of the matters monitored under paragraph (1) among 
     the different designated areas. The report may include any 
     legislative recommendations for extending the project to the 
     entire medicare population.
       (e) Waiver Authority.--The Secretary of Health and Human 
     Services may waive such requirements of title XVIII of the 
     Social Security Act (as amended by this Act) as may be 
     necessary for the purposes of carrying out the project.
       (f) Relationship to Other Authority.--Except pursuant to 
     this subchapter, the Secretary of Health and Human Services 
     may not conduct or continue any medicare demonstration 
     project relating to payment of health maintenance 
     organizations, Medicare+Choice organizations, or similar 
     prepaid managed care entities on the basis of a competitive 
     bidding process or pricing system described in subsection 
     (a).
       (g) No Additional Costs to Medicare Program.--The aggregate 
     payments to Medicare+Choice organizations under the project 
     for any designated area for a fiscal year may not exceed the 
     aggregate payments to such organizations that would have been 
     made under title XVIII of the Social Security Act (42 U.S.C. 
     1395 et seq.), as amended by section 4001, if the project had 
     not been conducted.
       (h) Definitions.--Any term used in this subchapter which is 
     also used in part C of title XVIII of the Social Security 
     Act, as amended by section 4001, shall have the same meaning 
     as when used in such part.

     SEC. 4012. ADVISORY COMMITTEES.

       (a) Competitive Pricing Advisory Committee.--
       (1) In general.--Before implementing the project under this 
     subchapter, the Secretary shall appoint the Competitive 
     Pricing Advisory Committee, including independent actuaries, 
     individuals with expertise in competitive health plan 
     pricing, and an employee of the Office of Personnel 
     Management with expertise in the administration of the 
     Federal Employees Health Benefit Program, to make 
     recommendations to the Secretary concerning the designation 
     of areas for inclusion in the project and appropriate 
     research design for implementing the project.
       (2) Initial recommendations.--The Competitive Pricing 
     Advisory Committee initially shall submit recommendations 
     regarding the 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) Quality recommendation.--The Competitive Pricing 
     Advisory Committee shall study and make recommendations 
     regarding the feasibility of providing financial incentives 
     and penalties to plans operating under the project that meet, 
     or fail to meet, applicable quality standards.
       (4) Advice during implementation.--Upon implementation of 
     the project, the Competitive Pricing Advisory 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.
       (5) Sunset.--The Competitive Pricing Advisory Committee 
     shall terminate on December 31, 2004.
       (b) 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 be implemented in the area. Such advice 
     may include advice concerning the marketing and pricing of 
     plans in the area and other salient factors. The duration of 
     such a committee for an area shall be for the duration of the 
     operation of the project in the area.
       (c) Special application.--Notwithstanding section 9(c) of 
     the Federal Advisory Committee Act (5 U.S.C. App.), the 
     Competitive Pricing Advisory Commission and any area advisory 
     committee (described in subsection (b)) may meet as soon as 
     the members of the commission or committee, respectively, are 
     appointed.

         Subchapter B--Social Health Maintenance Organizations

     SEC. 4014. 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''.
       (c) 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

[[Page H6052]]

     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 Medicare+Choice 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--Medicare Subvention Demonstration Project for Military 
                                Retirees

     SEC. 4015. MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR 
                   MILITARY RETIREES.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) (as 
     amended by sections 4603 and 4801) is amended by adding at 
     the end the following:


   ``MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR MILITARY RETIREES

       ``Sec. 1896. (a) Definitions.--In this section:
       ``(1) Administering secretaries.--The term `administering 
     Secretaries' means the Secretary and the Secretary of Defense 
     acting jointly.
       ``(2) Demonstration project; project.--The terms 
     `demonstration project' and `project' mean the demonstration 
     project carried out under this section.
       ``(3) Designated provider.--The term `designated provider' 
     has the meaning given that term in section 721(5) of the 
     National Defense Authorization Act For Fiscal Year 1997 
     (Public Law 104-201; 110 Stat. 2593; 10 U.S.C. 1073 note).
       ``(4) Medicare-eligible military retiree or dependent.--The 
     term `medicare-eligible military retiree or dependent' means 
     an individual described in section 1074(b) or 1076(b) of 
     title 10, United States Code, who--
       ``(A) would be eligible for health benefits under section 
     1086 of such title by reason of subsection (c)(1) of such 
     section 1086 but for the operation of subsection (d) of such 
     section 1086;
       ``(B)(i) is entitled to benefits under part A of this 
     title; and
       ``(ii) if the individual was entitled to such benefits 
     before July 1, 1997, received health care items or services 
     from a health care facility of the uniformed services before 
     that date, but after becoming entitled to benefits under part 
     A of this title;
       ``(C) is enrolled for benefits under part B of this title; 
     and
       ``(D) has attained age 65.
       ``(5) Medicare health care services.--The term `medicare 
     health care services' means items or services covered under 
     part A or B of this title.
       ``(6) Military treatment facility.--The term `military 
     treatment facility' means a facility referred to in section 
     1074(a) of title 10, United States Code.
       ``(7) TRICARE.--The term `TRICARE' has the same meaning as 
     the term `TRICARE program' under section 711 of the National 
     Defense Authorization Act for Fiscal Year 1996 (10 U.S.C. 
     1073 note).
       ``(8) Trust funds.--The term `trust funds' means the 
     Federal Hospital Insurance Trust Fund established in section 
     1817 and the Federal Supplementary Medical Insurance Trust 
     Fund established in section 1841.
       ``(b) Demonstration Project.--
       ``(1) In general.--
       ``(A) Establishment.--The administering Secretaries are 
     authorized to establish a demonstration project (under an 
     agreement entered into by the administering Secretaries) 
     under which the Secretary shall reimburse the Secretary of 
     Defense, from the trust funds, for medicare health care 
     services furnished to certain medicare-eligible military 
     retirees or dependents in a military treatment facility or by 
     a designated provider.
       ``(B) Agreement.--The agreement entered into under 
     subparagraph (A) shall include at a minimum--
       ``(i) a description of the benefits to be provided to the 
     participants of the demonstration project established under 
     this section;
       ``(ii) a description of the eligibility rules for 
     participation in the demonstration project, including any 
     cost sharing requirements;
       ``(iii) a description of how the demonstration project will 
     satisfy the requirements under this title;
       ``(iv) a description of the sites selected under paragraph 
     (2);
       ``(v) a description of how reimbursement requirements under 
     subsection (i) and maintenance of effort requirements under 
     subsection (j) will be implemented in the demonstration 
     project;
       ``(vi) a statement that the Secretary shall have access to 
     all data of the Department of Defense that the Secretary 
     determines is necessary to conduct independent estimates and 
     audits of the maintenance of effort requirement, the annual 
     reconciliation, and related matters required under the 
     demonstration project;
       ``(vii) a description of any requirement that the Secretary 
     waives pursuant to subsection (d); and
       ``(viii) a certification, provided after review by the 
     administering Secretaries, that any entity that is receiving 
     payments by reason of the demonstration project has 
     sufficient--

       ``(I) resources and expertise to provide, consistent with 
     payments under subsection (i), the full range of benefits 
     required to be provided to beneficiaries under the project; 
     and
       ``(II) information and billing systems in place to ensure 
     the accurate and timely submission of claims for benefits and 
     to ensure that providers of services, physicians, and other 
     health care professionals are reimbursed by the entity in a 
     timely and accurate manner.

       ``(2) Number of sites.--The project established under this 
     section shall be conducted in no more than 6 sites, 
     designated jointly by the administering Secretaries after 
     review of all TRICARE regions.
       ``(3) Restriction.--No new military treatment facilities 
     will be built or expanded with funds from the demonstration 
     project.
       ``(4) Duration.--The administering Secretaries shall 
     conduct the demonstration project during the 3-year period 
     beginning on January 1, 1998.
       ``(5) Report.--At least 60 days prior to the commencement 
     of the demonstration project, the administering Secretaries 
     shall submit a copy of the agreement entered into under 
     paragraph (1) to the committees of jurisdiction under this 
     title.
       ``(c) Crediting of Payments.--A payment received by the 
     Secretary of Defense under the demonstration project shall be 
     credited to the applicable Department of Defense medical 
     appropriation (and within that appropriation). Any such 
     payment received during a fiscal year for services provided 
     during a prior fiscal year may be obligated by the Secretary 
     of Defense during the fiscal year during which the payment is 
     received.
       ``(d) Waiver of Certain Medicare Requirements.--
       ``(1) Authority.--
       ``(A) In general.--Except as provided under subparagraph 
     (B), the demonstration project shall meet all requirements of 
     Medicare+Choice plans under part C of this title and 
     regulations pertaining thereto, and other requirements for 
     receiving medicare payments, except that the prohibition of 
     payments to Federal providers of services under sections 
     1814(c) and 1835(d), and paragraphs (2) and (3) of section 
     1862(a) shall not apply.
       ``(B) Waiver.--Except as provided in paragraph (2), the 
     Secretary is authorized to waive any requirement described 
     under subparagraph (A), or approve equivalent or alternative 
     ways of meeting such a requirement, but only if such waiver 
     or approval--
       ``(i) reflects the unique status of the Department of 
     Defense as an agency of the Federal Government; and
       ``(ii) is necessary to carry out the demonstration project.
       ``(2) Beneficiary protections and other matters.--The 
     demonstration project shall comply with the requirements of 
     part C of this title that relate to beneficiary protections 
     and other matters, including such requirements relating to 
     the following areas:
       ``(A) Enrollment and disenrollment.
       ``(B) Nondiscrimination.
       ``(C) Information provided to beneficiaries.
       ``(D) Cost-sharing limitations.
       ``(E) Appeal and grievance procedures.
       ``(F) Provider participation.
       ``(G) Access to services.
       ``(H) Quality assurance and external review.
       ``(I) Advance directives.
       ``(J) Other areas of beneficiary protections that the 
     Secretary determines are applicable to such project.
       ``(e) Inspector General.--Nothing in the agreement entered 
     into under subsection (b) shall limit the Inspector General 
     of the Department of Health and Human Services from 
     investigating any matters regarding the expenditure of funds 
     under this title for the demonstration project, including 
     compliance with the provisions of this title and all other 
     relevant laws.
       ``(f) Voluntary Participation.--Participation of medicare-
     eligible military retirees or dependents in the demonstration 
     project shall be voluntary.
       ``(g) TRICARE Health Care Plans.--
       ``(1) Modification of tricare contracts.--In carrying out 
     the demonstration project, the Secretary of Defense is 
     authorized to amend existing TRICARE contracts (including 
     contracts with designated providers) in order to provide the 
     medicare health care services to the medicare-eligible 
     military retirees and dependents enrolled in the 
     demonstration project consistent with part C of this title.
       ``(2) Health care benefits.--The administering Secretaries 
     shall prescribe the minimum health care benefits to be 
     provided under such a plan to medicare-eligible military 
     retirees or dependents enrolled in the plan. Those benefits 
     shall include at least all medicare health care services 
     covered under this title.
       ``(h) Additional Plans.--Notwithstanding any provisions of 
     title 10, United States Code, the administering Secretaries 
     may agree to include in the demonstration project any of the 
     Medicare+Choice plans described in section 1851(a)(2)(A), and 
     such agreement may include an agreement between the Secretary 
     of Defense and the Medicare+Choice organization offering such 
     plan to provide medicare health care services to medicare-
     eligible military retirees or dependents and for such 
     Secretary to receive payments from such organization for the 
     provision of such services.
       ``(i) Payments Based on Regular Medicare Payment Rates.--
       ``(1) In general.--Subject to the succeeding provisions of 
     this subsection, the Secretary shall reimburse the Secretary 
     of Defense for services provided under the demonstration 
     project at a rate equal to 95 percent of the amount paid to a 
     Medicare+Choice organization under part C of this title with 
     respect to such an enrollee. In cases in which a payment 
     amount may not otherwise be readily computed, the Secretary 
     shall establish rules for computing equivalent or comparable 
     payment amounts.
       ``(2) Exclusion of certain amounts.--In computing the 
     amount of payment under paragraph (1), the following shall be 
     excluded:
       ``(A) Special payments.--Any amount attributable to an 
     adjustment under subparagraphs (B) and (F) of section 
     1886(d)(5) and subsection (h) of such section.

[[Page H6053]]

       ``(B) Percentage of capital payments.--An amount determined 
     by the administering Secretaries for amounts attributable to 
     payments for capital-related costs under subsection (g) of 
     such section.
       ``(3) Periodic payments from medicare trust funds.--
     Payments under this subsection shall be made--
       ``(A) on a periodic basis consistent with the periodicity 
     of payments under this title; and
       ``(B) in appropriate part, as determined by the Secretary, 
     from the trust funds.
       ``(4) Cap on amount.--The aggregate amount to be reimbursed 
     under this subsection pursuant to the agreement entered into 
     between the administering Secretaries under subsection (b) 
     shall not exceed a total of--
       ``(A) $50,000,000 for calendar year 1998;
       ``(B) $60,000,000 for calendar year 1999; and
       ``(C) $65,000,000 for calendar year 2000.
       ``(j) Maintenance of Effort.--
       ``(1) Monitoring effect of demonstration program on costs 
     to medicare program.--
       ``(A) In general.--The administering Secretaries, in 
     consultation with the Comptroller General, shall closely 
     monitor the expenditures made under the medicare program for 
     medicare-eligible military retirees or dependents during the 
     period of the demonstration project compared to the 
     expenditures that would have been made for such medicare-
     eligible military retirees or dependents during that period 
     if the demonstration project had not been conducted. The 
     agreement entered into by the administering Secretaries under 
     subsection (b) shall require any participating military 
     treatment facility to maintain the level of effort for space 
     available care to medicare-eligible military retirees or 
     dependents.
       ``(B) Annual report by the comptroller general.--Not later 
     than December 31 of each year during which the demonstration 
     project is conducted, the Comptroller General shall submit to 
     the administering Secretaries and the appropriate committees 
     of Congress a report on the extent, if any, to which the 
     costs of the Secretary under the medicare program under this 
     title increased during the preceding fiscal year as a result 
     of the demonstration project.
       ``(2) Required response in case of increase in costs.--
       ``(A) In general.--If the administering Secretaries find, 
     based on paragraph (1), that the expenditures under the 
     medicare program under this title increased (or are expected 
     to increase) during a fiscal year because of the 
     demonstration project, the administering Secretaries shall 
     take such steps as may be needed--
       ``(i) to recoup for the medicare program the amount of such 
     increase in expenditures; and
       ``(ii) to prevent any such increase in the future.
       ``(B) Steps.--Such steps--
       ``(i) under subparagraph (A)(i) shall include payment of 
     the amount of such increased expenditures by the Secretary of 
     Defense from the current medical care appropriation of the 
     Department of Defense to the trust funds; and
       ``(ii) under subparagraph (A)(ii) shall include suspending 
     or terminating the demonstration project (in whole or in 
     part) or lowering the amount of payment under subsection 
     (i)(1).
       ``(k) Evaluation and Reports.--
       ``(1) Independent evaluation.--The Comptroller General of 
     the United States shall conduct an evaluation of the 
     demonstration project, and shall submit annual reports on the 
     demonstration project to the administering Secretaries and to 
     the committees of jurisdiction in the Congress. The first 
     report shall be submitted not later than 12 months after the 
     date on which the demonstration project begins operation, and 
     the final report not later than 3\1/2\ years after that date. 
     The evaluation and reports shall include an assessment, based 
     on the agreement entered into under subsection (b), of the 
     following:
       ``(A) Any savings or costs to the medicare program under 
     this title resulting from the demonstration project.
       ``(B) The cost to the Department of Defense of providing 
     care to medicare-eligible military retirees and dependents 
     under the demonstration project.
       ``(C) A description of the effects of the demonstration 
     project on military treatment facility readiness and training 
     and the probable effects of the project on overall Department 
     of Defense medical readiness and training.
       ``(D) Any impact of the demonstration project on access to 
     care for active duty military personnel and their dependents.
       ``(E) An analysis of how the demonstration project affects 
     the overall accessibility of the uniformed services treatment 
     system and the amount of space available for point-of-service 
     care, and a description of the unintended effects (if any) 
     upon the normal treatment priority system.
       ``(F) Compliance by the Department of Defense with the 
     requirements under this title.
       ``(G) The number of medicare-eligible military retirees and 
     dependents opting to participate in the demonstration project 
     instead of receiving health benefits through another health 
     insurance plan (including benefits under this title).
       ``(H) A list of the health insurance plans and programs 
     that were the primary payers for medicare-eligible military 
     retirees and dependents during the year prior to their 
     participation in the demonstration project and the 
     distribution of their previous enrollment in such plans and 
     programs.
       ``(I) Any impact of the demonstration project on private 
     health care providers and beneficiaries under this title that 
     are not enrolled in the demonstration project.
       ``(J) An assessment of the access to care and quality of 
     care for medicare-eligible military retirees and dependents 
     under the demonstration project.
       ``(K) An analysis of whether, and in what manner, easier 
     access to the uniformed services treatment system affects the 
     number of medicare-eligible military retirees and dependents 
     receiving medicare health care services.
       ``(L) Any impact of the demonstration project on the access 
     to care for medicare-eligible military retirees and 
     dependents who did not enroll in the demonstration project 
     and for other individuals entitled to benefits under this 
     title.
       ``(M) A description of the difficulties (if any) 
     experienced by the Department of Defense in managing the 
     demonstration project and TRICARE contracts.
       ``(N) Any additional elements specified in the agreement 
     entered into under subsection (b).
       ``(O) Any additional elements that the Comptroller General 
     of the United States determines is appropriate to assess 
     regarding the demonstration project.
       ``(2) Report on extension and expansion of demonstration 
     project.--Not later than 6 months after the date of the 
     submission of the final report by the Comptroller General of 
     the United States under paragraph (1), the administering 
     Secretaries shall submit to Congress a report containing 
     their recommendation as to--
       ``(A) whether there is a cost to the health care program 
     under this title in conducting the demonstration project, and 
     whether the demonstration project could be expanded without 
     there being a cost to such health care program or to the 
     Federal Government;
       ``(B) whether to extend the demonstration project or make 
     the project permanent; and
       ``(C) whether the terms and conditions of the project 
     should be continued (or modified) if the project is extended 
     or expanded.''.
       (b) Implementation Plan for Veterans Subvention.--Not later 
     than 12 months after the start of the demonstration project, 
     the Secretary of Health and Human Services and the Secretary 
     of Veterans Affairs shall jointly submit to Congress a 
     detailed implementation plan for a subvention demonstration 
     project (that follows the model of the demonstration project 
     conducted under section 1896 of the Social Security Act (as 
     added by subsection (a)) to begin in 1999 for veterans (as 
     defined in section 101 of title 38, United States Code) that 
     are eligible for benefits under title XVIII of the Social 
     Security Act.

                      Subchapter D--Other Projects

     SEC. 4016. MEDICARE COORDINATED CARE DEMONSTRATION PROJECT.

       (a) Demonstration Projects.--
       (1) In general.--The Secretary of Health and Human Services 
     (in this section referred to as the ``Secretary'') shall 
     conduct demonstration projects for the purpose of evaluating 
     methods, such as case management and other models of 
     coordinated care, that--
       (A) improve the quality of items and services provided to 
     target individuals; and
       (B) reduce expenditures under the medicare program under 
     title XVIII of the Social Security Act (42 U.S.C. 1395 et 
     seq.) for items and services provided to target individuals.
       (2) Target individual defined.--In this section, the term 
     ``target individual'' means an individual that has a chronic 
     illness, as defined and identified by the Secretary, and is 
     enrolled under the fee-for-service program under parts A and 
     B of title XVIII of the Social Security Act (42 U.S.C. 1395c 
     et seq.; 1395j et seq.).
       (b) Program Design.--
       (1) Initial design.--The Secretary shall evaluate best 
     practices in the private sector of methods of coordinated 
     care for a period of 1 year and design the demonstration 
     project based on such evaluation.
       (2) Number and project areas.--Not later than 2 years after 
     the date of enactment of this Act, the Secretary shall 
     implement at least 9 demonstration projects, including--
       (A) 5 projects in urban areas;
       (B) 3 projects in rural areas; and
       (C) 1 project within the District of Columbia which is 
     operated by a nonprofit academic medical center that 
     maintains a National Cancer Institute certified comprehensive 
     cancer center.
       (3) Expansion of projects; implementation of demonstration 
     project results.--
       (A) Expansion of projects.--If the initial report under 
     subsection (c) contains an evaluation that demonstration 
     projects--
       (i) reduce expenditures under the medicare program; or
       (ii) do not increase expenditures under the medicare 
     program and increase the quality of health care services 
     provided to target individuals and satisfaction of 
     beneficiaries and health care providers;

     the Secretary shall continue the existing demonstration 
     projects and may expand the number of demonstration projects.
       (B) Implementation of demonstration project results.--If a 
     report under subsection (c) contains an evaluation as 
     described in subparagraph (A), the Secretary may issue 
     regulations to implement, on a permanent basis, the 
     components of the demonstration project that are beneficial 
     to the medicare program.
       (c) Report to Congress.--
       (1) In general.--Not later than 2 years after the Secretary 
     implements the initial demonstration projects under this 
     section, and biannually thereafter, the Secretary shall 
submit to Congress a report regarding the demonstration projects 
conducted under this section.

       (2) Contents of report.--The report in paragraph (1) shall 
     include the following:
       (A) A description of the demonstration projects conducted 
     under this section.
       (B) An evaluation of--
       (i) the cost-effectiveness of the demonstration projects;
       (ii) the quality of the health care services provided to 
     target individuals under the demonstration projects; and
       (iii) beneficiary and health care provider satisfaction 
     under the demonstration project.
       (C) Any other information regarding the demonstration 
     projects conducted under this section that the Secretary 
     determines to be appropriate.

[[Page H6054]]

       (d) Waiver Authority.--The Secretary shall waive compliance 
     with the requirements of title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.) to such extent and for such 
     period as the Secretary determines is necessary to conduct 
     demonstration projects.
       (e) Funding.--
       (1) Demonstration projects.--
       (A) In general.--
       (i) State projects.--Except as provided in clause (ii), the 
     Secretary shall provide for the transfer from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Insurance Trust Fund under title XVIII of the Social Security 
     Act (42 U.S.C. 1395i, 1395t), in such proportions as the 
     Secretary determines to be appropriate, of such funds as are 
     necessary for the costs of carrying out the demonstration 
     projects under this section.
       (ii) Cancer hospital.--In the case of the project described 
     in subsection (b)(2)(C), amounts shall be available only as 
     provided in any Federal law making appropriations for the 
     District of Columbia.
       (B) Limitation.--In conducting the demonstration project 
     under this section, the Secretary shall ensure that the 
     aggregate payments made by the Secretary do not exceed the 
     amount which the Secretary would have paid if the 
     demonstration projects under this section were not 
     implemented.
       (2) Evaluation and report.--There are authorized to be 
     appropriated such sums as are necessary for the purpose of 
     developing and submitting the report to Congress under 
     subsection (c).

     SEC. 4017. 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 who received at least one service 
     during the period beginning on January 1, 1996, and ending on 
     the date of the enactment of the Balanced Budget Act of 1997.
       ``(b) The Secretary shall work with each such demonstration 
     project to develop a plan, to be submitted 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 
     by March 31, 1998, for the orderly transition of 
     demonstration projects and the project participants to a non-
     demonstration project health care delivery system, such as 
     through integration with a private or public health plan, 
     including a medicaid managed care or Medicare+Choice 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 the Balanced Budget Act of 
     1997, 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 participants may be minimized.''.

     SEC. 4018. MEDICARE ENROLLMENT DEMONSTRATION PROJECT.

       (a) Demonstration Project.--
       (1) Establishment.--The Secretary shall implement a 
     demonstration project (in this section referred to as the 
     ``project'') for the purpose of evaluating the use of a 
     third-party contractor to conduct the Medicare+Choice plan 
     enrollment and disenrollment functions, as described in part 
     C of title XVIII of the Social Security Act (as added by 
     section 4001 of this Act), in an area.
       (2) Consultation.--Before implementing the project under 
     this section, the Secretary shall consult with affected 
     parties on--
       (A) the design of the project;
       (B) the selection criteria for the third-party contractor; 
     and
       (C) the establishment of performance standards, as 
     described in paragraph (3).
       (3) Performance standards.--
       (A) In general.--The Secretary shall establish performance 
     standards for the accuracy and timeliness of the 
     Medicare+Choice plan enrollment and disenrollment functions 
     performed by the third-party contractor.
       (B) Noncompliance.--In the event that the third-party 
     contractor is not in substantial compliance with the 
     performance standards established under subparagraph (A), 
     such enrollment and disenrollment functions shall be 
     performed by the Medicare+Choice plan until the Secretary 
     appoints a new third-party contractor.
       (b) Report to Congress.--The Secretary shall periodically 
     report to Congress on the progress of the project conducted 
     pursuant to this section.
       (c) Waiver Authority.--The Secretary shall waive compliance 
     with the requirements of part C of title XVIII of the Social 
     Security Act (as amended by section 4001 of this Act) to such 
     extent and for such period as the Secretary determines is 
     necessary to conduct the project.
       (d) Duration.--A demonstration project under this section 
     shall be conducted for a 3-year period.
       (e) Separate From Other Demonstration Projects.--A project 
     implemented by the Secretary under this section shall not be 
     conducted in conjunction with any other demonstration 
     project.

     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--COMMISSIONS

     SEC. 4021. NATIONAL BIPARTISAN COMMISSION ON THE FUTURE OF 
                   MEDICARE.

       (a) Establishment.--There is established a commission to be 
     known as the National Bipartisan Commission on the Future of 
     Medicare (in this section referred to as the ``Commission'').
       (b) Duties of the Commission.--The Commission shall--
       (1) review and analyze the long-term financial condition of 
     the medicare program under title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.);
       (2) identify problems that threaten the financial integrity 
     of the Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund established under 
     that title (42 U.S.C. 1395i, 1395t), including--
       (A) 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) the extent to which current medicare update indexes do 
     not accurately reflect inflation;
       (3) analyze potential solutions to the problems identified 
     under paragraph (2) that will ensure both the financial 
     integrity of the medicare program and the provision of 
     appropriate benefits under such program, including methods 
     used by other nations to respond to comparable demographic 
     patterns in eligibility for health care benefits for elderly 
     and disabled individuals and trends in employment-related 
     health care for retirees;
       (4) make recommendations to restore the solvency of the 
     Federal Hospital Insurance Trust Fund and the financial 
     integrity of the Federal Supplementary Medical Insurance 
     Trust Fund;
       (5) make recommendations for establishing the appropriate 
     financial structure of the medicare program as a whole;
       (6) make recommendations for establishing the appropriate 
     balance of benefits covered and beneficiary contributions to 
     the medicare program;
       (7) make recommendations for the time periods during which 
     the recommendations described in paragraphs (4), (5), and (6) 
     should be implemented;
       (8) make recommendations regarding the financing of 
     graduate medical education (GME), including consideration of 
     alternative broad-based sources of funding for such education 
     and funding for institutions not currently eligible for such 
     GME support that conduct approved graduate medical residency 
     programs, such as children's hospitals;
       (9) make recommendations on modifying age-based eligibility 
     to correspond to changes in age-based eligibility under the 
     OASDI program and on the feasibility of allowing individuals 
     between the age of 62 and the medicare eligibility age to buy 
     into the medicare program;
       (10) make recommendations on the impact of chronic disease 
     and disability trends on future costs and quality of services 
     under the current benefit, financing, and delivery system 
     structure of the medicare program;
       (11) make recommendations regarding a comprehensive 
     approach to preserve the program; and
       (12) review and analyze such other matters as the 
     Commission deems appropriate.
       (c) Membership.--
       (1) Number and appointment.--The Commission shall be 
     composed of 17 members, of whom--
       (A) four shall be appointed by the President;
       (B) six shall be appointed by the Majority Leader of the 
     Senate, in consultation with the Minority Leader of the 
     Senate, of whom not more than 4 shall be of the same 
     political party;
       (C) six shall be appointed by the Speaker of the House of 
     Representatives, in consultation with the Minority Leader of 
     the House of Representatives, of whom not more than 4 shall 
     be of the same political party; and
       (D) one, who shall serve as Chairman of the Commission, 
     appointed jointly by the President, Majority Leader of the 
     Senate, and the Speaker of the House of Representatives.
       (2) Deadline for appointment.--Members of the Commission 
     shall be appointed by not later than December 1, 1997.
       (3) Terms of appointment.--The term of any appointment 
     under paragraph (1) to the Commission shall be for the life 
     of the Commission.
       (4) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (5) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (e).
       (6) Vacancies.--A vacancy on the Commission shall be filled 
     in the same manner in which the original appointment was made 
     not later than 30 days after the Commission is given notice 
     of the vacancy and shall not affect the power of the 
     remaining members to execute the duties of the Commission.
       (7) Compensation.--Members of the Commission shall receive 
     no additional pay, allowances, or benefits by reason of their 
     service on the Commission.
       (8) Expenses.--Each member of the Commission shall receive 
     travel expenses and per diem in lieu of subsistence in 
     accordance with sections 5702 and 5703 of title 5, United 
     States Code.
       (d) Staff and Support Services.--
       (1) Executive director.--
       (A) Appointment.--The Chairman shall appoint an executive 
     director of the Commission.
       (B) Compensation.--The executive director shall be paid the 
     rate of basic pay for level V of the Executive Schedule.

[[Page H6055]]

       (2) Staff.--With the approval of the Commission, the 
     executive director may appoint such personnel as the 
     executive director considers appropriate.
       (3) Applicability of civil service laws.--The staff of the 
     Commission shall be appointed without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service, and shall be paid 
     without regard to the provisions of chapter 51 and subchapter 
     III of chapter 53 of such title (relating to classification 
     and General Schedule pay rates).
       (4) Experts and consultants.--With the approval of the 
     Commission, the executive director may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       (5) Physical facilities.--The Administrator of the General 
     Services Administration shall locate suitable office space 
     for the operation of the Commission. The facilities shall 
     serve as the headquarters of the Commission and shall include 
     all necessary equipment and incidentals required for the 
     proper functioning of the Commission.
       (e) Powers of Commission.--
       (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 and 
     office of the chief actuary of hcfa.--
       (A) The Director of the Congressional Budget Office or the 
     Chief Actuary of the Health Care Financing Administration, or 
     both, shall provide to the Commission, upon the request of 
     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.
       (f) Report.--Not later than March 1, 1999, the Commission 
     shall submit a report to the President and Congress which 
     shall contain a detailed statement of only those 
     recommendations, findings, and conclusions of the Commission 
     that receive the approval of at least 11 members of the 
     Commission.
       (g) Termination.--The Commission shall terminate 30 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section. 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).

     SEC. 4022. 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) Medicare+choice program.--Specifically, the 
     Commission shall review, with respect to the Medicare+Choice 
     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 
     Medicare+Choice organizations and between the Medicare+Choice 
     option and the original medicare fee-for-service option.
       ``(iv) The development and implementation of mechanisms to 
     assure the quality of care for those enrolled with 
     Medicare+Choice organizations.
       ``(v) The impact of the Medicare+Choice program on access 
     to care for medicare beneficiaries.
       ``(vi) Other major issues in implementation and further 
     development of the Medicare+Choice program.
       ``(B) Original medicare 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, 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 of congress.--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 15 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

[[Page H6056]]

     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 the 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, except that in the 
     case of vacancy of the Chairmanship or Vice Chairmanship, the 
     Comptroller General may designate another member for the 
     remainder of that member's term.
       ``(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. Sixty 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. 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 Medicare+Choice 
     organization under a Medicare+Choice plan under part C, and 
     there are circumstances permitting discontinuance of the 
     individual's election of the plan under the first sentence of 
     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, 
     effective for periods before April 1, 1999, 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 the first sentence of 
     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 or conversion 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 or conversion of 
     such coverage;
       ``(II) the issuer of the policy substantially violated a 
     material provision of the policy; or

[[Page H6057]]

       ``(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 Medicare+Choice organization 
     under a Medicare+Choice plan under part C, any eligible 
     organization under a contract under section 1876, any similar 
     organization operating under demonstration project authority, 
     or any policy described in subsection (t), and
       ``(III) the subsequent enrollment under subclause (II) is 
     terminated by the enrollee during any period within the first 
     12 months of such enrollment (during which the enrollee is 
     permitted to terminate such subsequent enrollment under 
     section 1851(e)).
       ``(vi) The individual, upon first becoming eligible for 
     benefits under part A at age 65, enrolls in a Medicare+Choice 
     plan under part C, and disenrolls from such plan by not later 
     than 12 months after the effective date of such enrollment.
       ``(C)(i) Subject to clauses (ii) and (iii), a medicare 
     supplemental policy described in this subparagraph is a 
     medicare supplemental policy which 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 is the same medicare supplemental policy 
     referred to in such subparagraph in which the individual was 
     most recently previously enrolled, if available from the same 
     issuer, or, if not so available, a policy described in clause 
     (i).
       ``(iii) Only for purposes of an individual described in 
     subparagraph (B)(vi), a medicare supplemental policy 
     described in this subparagraph shall include any medicare 
     supplemental policy.
       ``(iv) 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 under this 
     paragraph, 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) 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) Conforming Amendment.--Section 1882(d)(3)(A)(vi)(III) 
     (42 U.S.C. 1395ss(d)(2)(A)(vi)(III)) is amended by inserting 
     ``, a policy described in clause (v),'' after ``Medicare 
     supplemental policy''.
       (d) 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.
       (3) Conforming amendment.--The amendment made by subsection 
     (c) shall be effective as if included in the enactment of the 
     Health Insurance Portability and Accountability Act of 1996.
       (e) 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.
       (f) Conforming Benefits to Changes in Terminology for 
     Hospital Outpatient Department Cost Sharing.--For purposes of 
     apply section 1882 of the Social Security Act (42 U.S.C. 
     1395ss) and regulations referred to in subsection (e), 
     copayment amounts provided under section 1833(t)(5) of such 
     Act with respect to hospital outpatient department services 
     shall be treated under medicare supplemental policies in the 
     same manner as coinsurance with respect to such services.

     SEC. 4032. ADDITION OF HIGH DEDUCTIBLE MEDIGAP POLICIES.

       (a) In General.--Section 1882(p) (42 U.S.C. 1395ss(p)) is 
     amended--
       (1) in paragraph (2)(C), by inserting ``plus the 2 plans 
     described in paragraph (11)(A)'' after ``exceed 10''; and
       (2) by adding at the end the following:
       ``(11)(A) For purposes of paragraph (2), the benefit 
     packages described in this subparagraph are as follows:
       ``(i) The benefit package classified as `F' under the 
     standards established by such paragraph, except that it has a 
     high deductible feature.
       ``(ii) The benefit package classified as `J' under the 
     standards established by such paragraph, except that it has a 
     high deductible feature.
       ``(B) For purposes of subparagraph (A), a high deductible 
     feature is one which--
       ``(i) requires the beneficiary of the policy to pay annual 
     out-of-pocket expenses (other than premiums) in the amount 
     specified in subparagraph (C) before the policy begins 
     payment of benefits, and
       ``(ii) covers 100 percent of covered out-of-pocket expenses 
     once such deductible has been satisfied in a year.
       ``(C) The amount specified in this subparagraph--
       ``(i) for 1998 and 1999 is $1,500, and
       ``(ii) for a subsequent year, is the amount specified in 
     this subparagraph for the previous year increased by the 
     percentage increase in the Consumer Price Index for all urban 
     consumers (all items; U.S. city average) for the 12-month 
     period ending with August of the preceding year.

     If any amount determined under clause (ii) is not a multiple 
     of $10, it shall be rounded to the nearest multiple of 
     $10.''.
       (b) Effective Date.--
       (1) In general.--The amendments made by subsection (a) 
     shall take effect the date of the enactment of this Act.
       (2) Transition.--The provisions of section 4031(e) shall 
     apply with respect to this section in the same manner as they 
     apply to section 4031.

    CHAPTER 5--TAX TREATMENT OF HOSPITALS PARTICIPATING IN PROVIDER-
                        SPONSORED ORGANIZATIONS

     SEC. 4041. 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),

[[Page H6058]]

     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. 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) (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 a pelvic 
     examination provided to a woman if the woman involved has not 
     had such an examination during the preceding 3 years, or 
     during the preceding year in the case of a woman described in 
     paragraph (3), and includes a clinical breast examination.
       ``(3) A woman described in this paragraph is a woman who--
       ``(A) is of childbearing age and has had a test described 
     in this subsection during any of the preceding 3 years that 
     indicated the presence of cervical or vaginal cancer or other 
     abnormality; 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.

     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 2002, 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)(2),'' after ``(2)(G)''
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 2000.

     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)--
       (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) Such other tests or procedures, and modifications to 
     tests and procedures under this subsection, with such 
     frequency and payment limits, as the Secretary determines 
     appropriate, in consultation with appropriate organizations.
       ``(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 publication of determination on coverage 
     of screening barium enema.--Not later than the earlier of the 
     date that is January 1, 1998, or 90 days after the date of 
     the enactment of this Act, the Secretary of Health and Human 
     Services shall publish notice in the Federal Register with 
     respect to the determination under paragraph (1)(D) of 
     section 1861(pp) of the Social Security Act (42 U.S.C. 
     1395x(pp)), as added by paragraph (1), on the coverage of a 
     screening barium enema as a colorectal cancer screening test 
     under such section.
       (b) Frequency Limits and Payment.--
       (1) In general.--Section 1834 (42 U.S.C. 1395m) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) Frequency Limits and Payment for Colorectal Cancer 
     Screening Tests.--
       ``(1) Screening fecal-occult blood tests.--
       ``(A) Payment amount.--The payment amount for colorectal 
     cancer screening tests consisting of screening fecal-occult 
     blood tests is equal to the payment amount established for 
     diagnostic fecal-occult blood tests under section 1833(h).
       ``(B) Frequency limit.--No payment may be made under this 
     part for a 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.--With respect to colorectal cancer 
     screening tests consisting of screening flexible 
     sigmoidoscopies, payment under section 1848 shall be 
     consistent with payment under such section for similar or 
     related services.
       ``(B) Payment limit.--In the case of screening flexible 
     sigmoidoscopy services, payment under this part shall not 
     exceed such amount as the Secretary specifies, based upon the 
     rates recognized for diagnostic flexible sigmoidoscopy 
     services.
       ``(C) Facility payment limit.--
       ``(i) In general.--Notwithstanding subsections (i)(2)(A) 
     and (t) of section 1833, in the case of screening flexible 
     sigmoidoscopy services furnished on or after January 1, 1999, 
     that--

       ``(I) 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

       ``(II) are performed in an ambulatory surgical center or 
     hospital outpatient department,

     payment under this part shall be based on the lesser of the 
     amount under the fee schedule that would apply to such 
     services if they were performed in a hospital outpatient 
     department in

[[Page H6059]]

     an area or the amount under the fee schedule that would apply 
     to such services if they were performed in an ambulatory 
     surgical center in the same area.
       ``(ii) Limitation on deductible and coinsurance.--
     Notwithstanding any other provision of this title, in the 
     case of a beneficiary who receives the services described in 
     clause (i)--

       ``(I) in computing the amount of any applicable deductible 
     or copayment, the computation of such deductible or 
     coinsurance shall be based upon the fee schedule under which 
     payment is made for the services, and
       ``(II) the amount of such coinsurance is equal to 25 
     percent of the payment amount under the fee schedule 
     described in subclause (I).

       ``(D) 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.
       ``(E) Frequency limit.--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.--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)), payment under section 1848 shall be 
     consistent with payment amounts under such section for 
     similar or related services.
       ``(B) Payment limit.--In the case of screening colonoscopy 
     services, payment under this part shall not exceed such 
     amount as the Secretary specifies, based upon the rates 
     recognized for diagnostic colonoscopy services.
       ``(C) Facility payment limit.--
       ``(i) In general.--Notwithstanding subsections (i)(2)(A) 
     and (t) of section 1833, in the case of screening colonoscopy 
     services furnished on or after January 1, 1999, that are 
     performed in an ambulatory surgical center or a hospital 
     outpatient department, payment under this part shall be based 
     on the lesser of the amount under the fee schedule that would 
     apply to such services if they were performed in a hospital 
     outpatient department in an area or the amount under the fee 
     schedule that would apply to such services if they were 
     performed in an ambulatory surgical center in the same area.
       ``(ii) Limitation on deductible and coinsurance.--
     Notwithstanding any other provision of this title, in the 
     case of a beneficiary who receives the services described in 
     clause (i)--

       ``(I) in computing the amount of any applicable deductible 
     or coinsurance, the computation of such deductible or 
     coinsurance shall be based upon the fee schedule under which 
     payment is made for the services, and
       ``(II) the amount of such coinsurance is equal to 25 
     percent of the payment amount under the fee schedule 
     described in subclause (I).

       ``(D) 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.
       ``(E) Frequency limit.--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.''.
       (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 section 1834(d)(1), the Secretary''.
       (3) 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) Payment Under Physician Fee Schedule.--Section 
     1848(j)(3) (42 U.S.C. 1395w-4(j)(3)), as amended by sections 
     4102 and 4103, is amended by inserting ``(2)(R) (with respect 
     to services described in subparagraphs (B) , (C), and (D) of 
     section 1861(pp)(1)),'' before ``(3)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4105. DIABETES SELF-MANAGEMENT BENEFITS.

       (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 (at such times as the Secretary determines 
     appropriate) 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 ensure therapy compliance or 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, 4103, and 4104, 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.
       (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 
     paragraph (1), 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.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to items and 
     services furnished on or after July 1, 1998.
       (2) Testing strips.--The amendment made by subsection 
     (b)(2) shall apply with respect to blood glucose testing 
     strips 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), and 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:

[[Page H6060]]

                        ``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, 4104 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) 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. 4108. STUDY ON PREVENTIVE AND ENHANCED BENEFITS.

       (a) Study.--The Secretary of Health and Human Services 
     shall request the National Academy of Sciences, and as 
     appropriate in conjunction with the United States Preventive 
     Services Task Force, to analyze the expansion or modification 
     of preventive or other 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 at least the following benefits:
       (A) Nutrition therapy services, including parenteral and 
     enteral nutrition and including the provision of such 
     services by a registered dietitian.
       (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 the Secretary 
     determines necessary for the conduct of the study by the 
     National Academy of Sciences under this section.
                     Subtitle C--Rural Initiatives

     SEC. 4201. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.

       (a) Medicare Rural Hospital Flexibility Program.--Section 
     1820 (42 U.S.C. 1395i-4) is amended to read as follows:


             ``medicare rural hospital flexibility program

       ``Sec. 1820. (a) Establishment.--Any State that submits an 
     application in accordance with subsection (b) may establish a 
     medicare rural hospital flexibility program described in 
     subsection (c).
       ``(b) Application.--A State may establish a medicare rural 
     hospital flexibility program described in subsection (c) if 
     the State submits to the Secretary at such time and in such 
     form as the Secretary may require an application containing--
       ``(1) assurances that the State--
       ``(A) has developed, or is in the process of developing, a 
     State rural health care plan that--
       ``(i) provides for the creation of 1 or more rural health 
     networks (as defined in subsection (d)) in the State;
       ``(ii) promotes regionalization of rural health services in 
     the State; and
       ``(iii) improves access to hospital and other health 
     services for rural residents of the State; and
       ``(B) has developed the rural health care plan described in 
     subparagraph (A) in consultation with the hospital 
     association of the State, rural hospitals located in the 
     State, and the State Office of Rural Health (or, in the case 
     of a State in the process of developing such plan, that 
     assures the Secretary that the State will consult with its 
     State hospital association, rural hospitals located in the 
     State, and the State Office of Rural Health in developing 
     such plan);
       ``(2) assurances that the State has designated (consistent 
     with the rural health care plan described in paragraph 
     (1)(A)), or is in the process of so designating, rural 
     nonprofit or public hospitals or facilities located in the 
     State as critical access hospitals; and
       ``(3) such other information and assurances as the 
     Secretary may require.
       ``(c) Medicare Rural Hospital Flexibility Program 
     Described.--
       ``(1) In general.--A State that has submitted an 
     application in accordance with subsection (b), may establish 
     a medicare rural hospital flexibility program that provides 
     that--
       ``(A) the State shall develop at least 1 rural health 
     network (as defined in subsection (d)) in the State; and
       ``(B) at least 1 facility in the State shall be designated 
     as a critical access hospital in accordance with paragraph 
     (2).
       ``(2) State designation of facilities.--
       ``(A) In general.--A State may designate 1 or more 
     facilities as a critical access hospital in accordance with 
     subparagraph (B).
       ``(B) Criteria for designation as critical access 
     hospital.--A State may designate a facility as a critical 
     access hospital if the facility--
       ``(i) 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 more than a 35-mile drive (or, in the case 
     of mountainous terrain or in areas with only secondary roads 
     available, a 15-mile drive) 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;

       ``(ii) makes available 24-hour emergency care services that 
     a State determines are necessary for ensuring access to 
     emergency care services in each area served by a critical 
     access hospital;
       ``(iii) provides not more than 15 (or, in the case of a 
     facility under an agreement described in subsection (f), 25) 
     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;
       ``(iv) 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 clause (ii) 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 clause (iii) may be 
     provided by a physician assistant, nurse practitioner, or 
     clinical nurse specialist subject to the oversight of a 
     physician who need not be present in the facility; and

       ``(v) meets the requirements of section 1861(aa)(2)(I).
       ``(d) Definition of Rural Health Network.--
       ``(1) In general.--In this section, the term `rural health 
     network' means, with respect to a State, an organization 
     consisting of--
       ``(A) at least 1 facility that the State has designated or 
     plans to designate as a critical access hospital; and
       ``(B) at least 1 hospital that furnishes acute care 
     services.
       ``(2) Agreements.--
       ``(A) In general.--Each critical access hospital that is a 
     member of a rural health network shall have an agreement with 
     respect to each item described in subparagraph (B) with at 
     least 1 hospital that is a member of the network.
       ``(B) Items described.--The items described in this 
     subparagraph are the following:
       ``(i) Patient referral and transfer.
       ``(ii) The development and use of communications systems 
     including (where feasible)--

       ``(I) telemetry systems; and
       ``(II) systems for electronic sharing of patient data.

       ``(iii) The provision of emergency and non-emergency 
     transportation among the facility and the hospital.
       ``(C) Credentialing and quality assurance.--Each critical 
     access hospital that is a

[[Page H6061]]

     member of a rural health network shall have an agreement with 
     respect to credentialing and quality assurance with at 
     least--
       ``(i) 1 hospital that is a member of the network;
       ``(ii) 1 peer review organization or equivalent entity; or
       ``(iii) 1 other appropriate and qualified entity identified 
     in the State rural health care plan.
       ``(e) Certification by the Secretary.--The Secretary shall 
     certify a facility as a critical access hospital if the 
     facility--
       ``(1) is located in a State that has established a medicare 
     rural hospital flexibility program in accordance with 
     subsection (c);
       ``(2) is designated as a critical access hospital by the 
     State in which it is located; and
       ``(3) meets such other criteria as the Secretary may 
     require.
       ``(f) 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 
     critical access hospital solely because, at the time the 
     facility applies to the State for designation as a critical 
     access 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 critical access hospital shall 
     not be counted.
       ``(g) Grants.--
       ``(1) Medicare rural hospital flexibility program.--The 
     Secretary may award grants to States that have submitted 
     applications in accordance with subsection (b) for--
       ``(A) engaging in activities relating to planning and 
     implementing a rural health care plan;
       ``(B) engaging in activities relating to planning and 
     implementing rural health networks; and
       ``(C) designating facilities as critical access hospitals.
       ``(2) Rural emergency medical services.--
       ``(A) In general.--The Secretary may award grants to States 
     that have submitted applications in accordance with 
     subparagraph (B) for the establishment or expansion of a 
     program for the provision of rural emergency medical 
     services.
       ``(B) Application.--An application is in accordance with 
     this subparagraph if the State submits to the Secretary at 
     such time and in such form as the Secretary may require an 
     application containing the assurances described in 
     subparagraphs (A)(ii), (A)(iii), and (B) of subsection (b)(1) 
     and paragraph (3) of that subsection.
       ``(h) Grandfathering of Certain Facilities.--
       ``(1) In general.--Any medical assistance facility 
     operating in Montana and any rural primary care hospital 
     designated by the Secretary under this section prior to the 
     date of the enactment of the Balanced Budget Act of 1997 
     shall be deemed to have been certified by the Secretary under 
     subsection (e) as a critical access hospital if such facility 
     or hospital is otherwise eligible to be designated by the 
     State as a critical access hospital under subsection (c).
       ``(2) Continuation of medical assistance facility and rural 
     primary care hospital terms.--Notwithstanding any other 
     provision of this title, with respect to any medical 
     assistance facility or rural primary care hospital described 
     in paragraph (1), any reference in this title to a `critical 
     access hospital' shall be deemed to be a reference to a 
     `medical assistance facility' or `rural primary care 
     hospital'.
       ``(i) Waiver of Conflicting Part A Provisions.--The 
     Secretary is authorized to waive such provisions of this part 
     and part D as are necessary to conduct the program 
     established under this section.
       ``(j) Authorization of Appropriations.--There are 
     authorized to be appropriated from the Federal Hospital 
     Insurance Trust Fund for making grants to all States under 
     subsection (g), $25,000,000 in each of the fiscal years 1998 
     through 2002.''.
       (b) Report on Alternative to 96-Hour Rule.--Not later than 
     June 1, 1998, the Secretary of Health and Human Services 
     shall submit to Congress a report on the feasibility of, and 
     administrative requirements necessary to establish an 
     alternative for certain medical diagnoses (as determined by 
     the Secretary) to the 96-hour limitation for inpatient care 
     in critical access hospitals required by section 
     1820(c)(2)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395i-4(c)(2)(B)(iii)), as added by subsection (a) of this 
     section.
       (c) Conforming Amendments Relating to Rural Primary Care 
     Hospitals and Critical Access Hospitals.--
       (1) In general.--Title XI of the Social Security Act (42 
     U.S.C. 1301 et seq.) and title XVIII of that Act (42 U.S.C. 
     1395 et seq.) are each amended by striking ``rural primary 
     care'' each place it appears and inserting ``critical 
     access''.
       (2) Definitions.--Section 1861(mm) of the Social Security 
     Act (42 U.S.C. 1395x(mm)) is amended to read as follows:


     ``critical access hospital; critical access hospital services

       ``(mm)(1) The term `critical access hospital' means a 
     facility certified by the Secretary as a critical access 
     hospital under section 1820(e).
       ``(2) The term `inpatient critical access hospital 
     services' means items and services, furnished to an inpatient 
     of a critical access hospital by such facility, that would be 
     inpatient hospital services if furnished to an inpatient of a 
     hospital by a hospital.
       ``(3) The term `outpatient critical access hospital 
     services' means medical and other health services furnished 
     by a critical access hospital on an outpatient basis.''.
       (3) Part a payment.--Section 1814 of the Social Security 
     Act (42 U.S.C. 1395f) is amended--
       (A) in subsection (a)(8), by striking ``72'' and inserting 
     ``96''; and
       (B) by amending subsection (l) to read as follows:

       ``Payment for Inpatient Critical Access Hospital Services

       ``(l) The amount of payment under this part for inpatient 
     critical access hospital services is the reasonable costs of 
     the critical access hospital in providing such services.''.
       (4) Payment continued to designated eachs.--Section 
     1886(d)(5)(D) of the Social Security Act (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)--
       (i) by inserting ``as in effect on September 30, 1997'' 
     after ``1820(i)(1)''; and
       (ii) by striking ``1820(g)'' and inserting ``1820(d)''.
       (5) Part b payment.--Section 1834(g) of the Social Security 
     Act (42 U.S.C. 1395m(g)) is amended to read as follows:
       ``(g) Payment for Outpatient Critical Access Hospital 
     Services.--The amount of payment under this part for 
     outpatient critical access hospital services is the 
     reasonable costs of the critical access hospital in providing 
     such services.''.
       (6) Transition for MAF.--
       (A) In general.--The Secretary of Health and Human Services 
     shall provide for an appropriate transition for a facility 
     that, as of the date of the enactment of this Act, 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) from such 
     demonstration to the program established under subsection 
     (a). At the conclusion of the transition period described in 
     subparagraph (B), the Secretary shall end such demonstration.
       (B) Transition period described.--
       (i) Initial period.--Subject to clause (ii), the transition 
     period described in this subparagraph is the period beginning 
     on the date of the enactment of this Act and ending on 
     October 1, 1998.
       (ii) Extension.--If the Secretary determines that the 
     transition is not complete as of October 1, 1998, the 
     Secretary shall provide for an appropriate extension of the 
     transition period.
       (d) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after October 1, 
     1997.

     SEC. 4202. 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. 4203. HOSPITAL GEOGRAPHIC RECLASSIFICATION PERMITTED FOR 
                   PURPOSES OF DISPROPORTIONATE SHARE PAYMENT 
                   ADJUSTMENTS.

       (a) In General.--For the period described in subsection 
     (c), the Medicare Geographic Classification Review Board 
     shall consider the application under section 
     1886(d)(10)(C)(i) of the Social Security Act (42 U.S.C. 
     1395ww(d)(10)(C)(i)) of a hospital described in 1886(d)(1)(B) 
     of such Act (42 U.S.C. 1395ww(d)(1)(B)) to change the 
     hospital's geographic classification for purposes of 
     determining for a fiscal year eligibility for and amount of 
     additional payment amounts under section 1886(d)(5)(F) of 
     such Act (42 U.S.C. 1395ww(d)(5)(F)).
       (b) Applicable Guidelines.--The Medicare Geographic 
     Classification Review Board shall apply the guidelines 
     established for reclassification under subclause (I) of 
     section 1886(d)(10)(C)(i) of such Act to reclassification by 
     reason of subsection (a) until the Secretary of Health and 
     Human Services promulgates separate guidelines for such 
     reclassification.
       (c) Period Described.--The period described in this 
     subsection is the period beginning on the date of the 
     enactment of this Act and ending 30 months after such date.

     SEC. 4204. 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--

[[Page H6062]]

       (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. 4205. 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 on or after January 1, 1998.
       (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 
     ``, 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 on or after January 1, 1998.
       (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 3-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.--
       (A) In General.--Section 1861(aa)(2) of the Social Security 
     Act (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''.
       (B) Payment for certain physician assistant services.--
     Section 1842(b)(6)(C) (42 U.S.C. 1395u(b)(6)(C)) is amended 
     to read as follows: ``(C) in the case of services described 
     in clause (i) of section 1861(s)(2)(K), payment shall be made 
     to either (i) the employer of the physician assistant 
     involved, or (ii) with respect to a physician assistant who 
     was the owner of a rural health clinic (as described in 
     section 1861(aa)(2)) for a continuous period beginning prior 
     to the date of the enactment of the Balanced Budget Act of 
     1997 and ending on the date that the Secretary determines 
     such rural health clinic no longer meets the requirements of 
     section 1861(aa)(2), for such services provided before 
     January 1, 2003, payment may be made directly to the 
     physician assistant; and''.
       (4) Effective dates; implementing regulations.--
       (A) In general.--Except as otherwise provided, the 
     amendments made by the preceding paragraphs take effect on 
     the date of the 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 (42 U.S.C. 1395 et seq.) on the date 
     of the enactment of this Act.
       (C) Grandfathered clinics.--
       (i) In general.--The amendment made by paragraph (3)(A) 
     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)(A) that shall take 
     effect no later than January 1, 1999.

     SEC. 4206. MEDICARE REIMBURSEMENT FOR TELEHEALTH SERVICES.

       (a) In General.--Not later than January 1, 1999, the 
     Secretary of Health and Human Services shall make payments 
     from the Federal Supplementary Medical Insurance Trust Fund 
     under part B of title XVIII of the Social Security Act (42 
     U.S.C. 1395j et seq.) in accordance with the methodology 
     described in subsection (b) for professional consultation via 
     telecommunications systems with a physician (as defined in 
     section 1861(r) of such Act (42 U.S.C. 1395x(r)) or a 
     practitioner (described in section 1842(b)(18)(C) of such Act 
     (42 U.S.C. 1395u(b)(18)(C)) furnishing a service for which 
     payment may be made under such part to a beneficiary under 
     the medicare program residing in a county in a rural area (as 
     defined in section 1886(d)(2)(D) of such Act (42 U.S.C. 
     1395ww(d)(2)(D))) that is designated as a health 
     professional shortage area under section 332(a)(1)(A) of 
     the Public Health Service Act (42 U.S.C. 254e(a)(1)(A)), 
     notwithstanding that the individual physician or 
     practitioner providing the professional consultation is 
     not at the same location as the physician or practitioner 
     furnishing the service to that beneficiary.
       (b) Methodology for Determining Amount of Payments.--Taking 
     into account the findings of the report required under 
     section 192 of the Health Insurance Portability and 
     Accountability Act of 1996 (Public Law 104-191; 110 Stat. 
     1988), the findings of the report required under paragraph 
     (c), and any other findings related to the clinical efficacy 
     and cost-effectiveness of telehealth applications, the 
     Secretary shall be establish a methodology for determining 
     the amount of payments made under subsection (a) within the 
     following parameters:
       (1) The payment shall be shared between the referring 
     physician or practitioner and the consulting physician or 
     practitioner. The amount of such payment shall not be greater 
     than the current fee schedule of the consulting physician or 
     practitioner for the health care services provided.
       (2) The payment shall not include any reimbursement for any 
     telephone line charges or any facility fees, and a 
     beneficiary may not be billed for any such charges or fees.
       (3) The payment shall be made subject to the coinsurance 
     and deductible requirements under subsections (a)(1) and (b) 
     of section 1833 of the Social Security Act (42 U.S.C. 1395l).
       (4) The payment differential of section 1848(a)(3) of such 
     Act (42 U.S.C. 1395w-4(a)(3)) shall apply to services 
     furnished by non-participating physicians. The provisions of 
     section 1848(g) of such Act (42 U.S.C. 1395w-4(g)) and 
     section 1842(b)(18) of such Act (42 U.S.C. 1395u(b)(18)) 
     shall apply. Payment for such service shall be increased 
     annually by the update factor for physicians' services 
     determined under section 1848(d) of such Act (42 U.S.C. 
     1395w-4(d)).
       (c) Supplemental Report.--Not later than January 1, 1999, 
     the Secretary shall submit a report to Congress which shall 
     contain a detailed analysis of--
       (1) how telemedicine and telehealth systems are expanding 
     access to health care services;
       (2) the clinical efficacy and cost-effectiveness of 
     telemedicine and telehealth applications;
       (3) the quality of telemedicine and telehealth services 
     delivered; and
       (4) the reasonable cost of telecommunications charges 
     incurred in practicing telemedicine and telehealth in rural, 
     frontier, and underserved areas.
       (d) Expansion of Telehealth Services for Certain Medicare 
     Beneficiaries.--
       (1) In general.--Not later than January 1, 1999, the 
     Secretary shall submit a report to Congress that examines the 
     possibility of making payments from the Federal Supplementary 
     Medical Insurance Trust Fund under part B of title XVIII of 
     the Social Security Act (42 U.S.C. 1395j et seq.) for 
     professional consultation via telecommunications systems with 
     such a physician or practitioner furnishing a service for 
     which payment may be made under such part to a beneficiary 
     described in paragraph (2), notwithstanding that the 
     individual physician or practitioner providing the 
     professional consultation is not at the same location as the 
     physician or practitioner furnishing the service to that 
     beneficiary.
       (2) Beneficiary described.--A beneficiary described in this 
     paragraph is a beneficiary under the medicare program under 
     title XVIII of the Social Security Act (42 U.S.C. 1395 et 
     seq.) who does not reside in a rural area (as so defined) 
     that is designated as a health professional shortage area 
     under section 332(a)(1)(A) of the Public Health Service Act 
     (42 U.S.C. 254e(a)(1)(A)), who is homebound or nursing 
     homebound, and for whom being transferred for health care 
     services imposes a serious hardship.
       (3) Report.--The report described in paragraph (1) shall 
     contain a detailed statement of the potential costs and 
     savings to the medicare program of making the payments 
     described in that paragraph using various reimbursement 
     schemes.

     SEC. 4207. INFORMATICS, TELEMEDICINE, AND EDUCATION 
                   DEMONSTRATION PROJECT.

       (a) Purpose and Authorization.--

[[Page H6063]]

       (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 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 a high 
     concentration 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 for 
     the period of the project (described in subsection (a)(4)).
       (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 
     costs that are reasonable and related to the provision of 
     such services.
       (e) Reports.--The Secretary shall submit to the Committee 
     on Ways and Means and the Committee 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 and Improvements in 
                      Protecting Program Integrity

         CHAPTER 1--REVISIONS TO SANCTIONS FOR FRAUD AND ABUSE

     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) 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) in subparagraph (B), by striking ``or'' at the end;
       (2) in subparagraph (C), by striking the period at the end 
     and inserting ``, or''; and
       (3) by adding at the end 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 detrimental to the best interests 
     of the program or program beneficiaries.''.
       (b) Medicare Part B.--Section 1842(h) (42 U.S.C. 1395u(h)) 
     is amended by adding at the end the following new paragraph:
       ``(8) The Secretary may refuse to enter into an agreement 
     with a physician or supplier under this subsection, 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 detrimental to the best interests of 
     the program or program beneficiaries.''.
       (c) 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. 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) in clause (i), by striking ``or'' at the end;
       (B) in clause (ii), by striking the dash at the end 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 at the end the following new subsection:
       ``(j) Definition of Immediate Family Member and Member of 
     Household.--For purposes of subsection (b)(8)(A)(iii):

[[Page H6064]]

       ``(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 any 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 this section 
     shall take effect on the date that is 45 days after the date 
     of the enactment of this Act.

     SEC. 4304. 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) in paragraph (4), by striking ``or'' at the end;
       (2) in paragraph (5), by adding ``or'' at the end; and
       (3) by inserting 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) Civil Money Penalties for Kickbacks.--
       (1) Permitting secretary to impose civil money penalty.--
     Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by 
     subsection (a), is amended--
       (A) in paragraph (5), by striking ``or'' at the end;
       (B) in paragraph (6), by adding ``or'' at the end; and
       (C) by adding after paragraph (6) the following new 
     paragraph:
       ``(7) commits an act described in paragraph (1) or (2) of 
     section 1128B(b);''.
       (2) Description of civil money penalty applicable.--Section 
     1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by paragraph 
     (1), is amended in the matter following paragraph (7)--
       (A) by striking ``occurs).'' and inserting ``occurs; or in 
     cases under paragraph (7), $50,000 for each such act).''; and
       (B) by inserting after ``of such claim'' the following: 
     ``(or, in cases under paragraph (7), damages of not more than 
     3 times the total amount of remuneration offered, paid, 
     solicited, or received, without regard to whether a portion 
     of such remuneration was offered, paid, solicited, or 
     received for a lawful purpose)''.
       (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) Kickbacks.--The amendments made by subsection (b) shall 
     apply to acts committed after the date of the enactment of 
     this Act.

        CHAPTER 2--IMPROVEMENTS IN PROTECTING PROGRAM INTEGRITY

     SEC. 4311. IMPROVING INFORMATION TO MEDICARE BENEFICIARIES.

       (a) Inclusion of Information Regarding Medicare Waste, 
     Fraud, and Abuse in Annual Notice.--
       (1) In General.--Section 1804 (42 U.S.C. 1395b-2) is 
     amended by adding at the end the following new subsection:
       ``(c) The notice provided under subsection (a) shall 
     include--
       ``(1) a statement which indicates that because errors do 
     occur and because medicare fraud, waste, and abuse is a 
     significant problem, beneficiaries should carefully check any 
     explanation of benefits or itemized statement furnished 
     pursuant to section 1806 for accuracy and report any errors 
     or questionable charges by calling the toll-free phone number 
     described in paragraph (4);
       ``(2) a statement of the beneficiary's right to request an 
     itemized statement for medicare items and services (as 
     provided in section 1806(b));
       ``(3) a description of the program to collect information 
     on medicare fraud and abuse established under section 203(b) 
     of the Health Insurance Portability and Accountability Act of 
     1996; and
       ``(4) 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.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to notices provided on or after January 1, 1998.
       (b) Clarification of Requirement To Provide Explanation of 
     Medicare Benefits.--
       (1) In general.--Title XVIII is amended by inserting after 
     section 1805 (as added by section 4022) the following new 
     section:


                   ``explanation of medicare benefits

       ``Sec. 1806. (a) In General.--The Secretary shall furnish 
     to each individual for whom payment has been made under this 
     title (or would be made without regard to any deductible) a 
     statement which--
       ``(1) lists the item or service for which payment has been 
     made and the amount of such payment for each item or service; 
     and
       ``(2) includes a notice of the individual's right to 
     request an itemized statement (as provided in subsection 
     (b)).
       ``(b) Request for Itemized Statement for Medicare Items and 
     Services.--
       ``(1) In general.--An individual may submit a written 
     request to any physician, provider, supplier, or any other 
     person (including an organization, agency, or other entity) 
     for an itemized statement for any item or service provided to 
     such individual by such person with respect to which payment 
     has been made under this title.
       ``(2) 30-day period to furnish statement.--
       ``(A) In general.--Not later than 30 days after the date on 
     which a request under paragraph (1) has been made, a person 
     described in such paragraph shall furnish an itemized 
     statement describing each item or service provided to the 
     individual requesting the itemized statement.
       ``(B) Penalty.--Whoever knowingly fails to furnish an 
     itemized statement in accordance with subparagraph (A) shall 
     be subject to a civil money penalty of not more than $100 for 
     each such failure. 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.
       ``(3) Review of itemized statement.--
       ``(A) In general.--Not later than 90 days after the receipt 
     of an itemized statement furnished under paragraph (1), an 
     individual may submit a written request for a review of the 
     itemized statement to the Secretary.
       ``(B) Specific allegations.--A request for a review of the 
     itemized statement shall identify--
       ``(i) specific items or services that the individual 
     believes were not provided as claimed, or
       ``(ii) any other billing irregularity (including duplicate 
     billing).
       ``(4) Findings of secretary.--The Secretary shall, with 
     respect to each written request submitted under paragraph 
     (3), determine whether the itemized statement identifies 
     specific items or services that were not provided as claimed 
     or any other billing irregularity (including duplicate 
     billing) that has resulted in unnecessary payments under this 
     title.
       ``(5) Recovery of amounts.--The Secretary shall take all 
     appropriate measures to recover amounts unnecessarily paid 
     under this title with respect to a statement described in 
     paragraph (4).''.
       (2) Conforming amendment.--Subsection (a) of section 203 of 
     the Health Insurance Portability and Accountability Act of 
     1996 is repealed.
       (3) Effective dates.--
       (A) Statement by secretary.--Paragraph (1) of section 
     1806(a) of the Social Security Act, as added by paragraph 
     (1), and the repeal made by paragraph (2) shall take effect 
     on the date of the enactment of this Act.
       (B) Itemized statement.--Paragraph (2) of section 1806(a) 
     and section 1806(b) of the Social Security Act, as so added, 
     shall take effect not later than January 1, 1999.

     SEC. 4312. 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) Disclosure of information and surety bond.--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--
       ``(A) with--
       ``(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) with 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 (6), by striking ``and'' at the end;
       (B) by redesignating paragraph (7) as paragraph (8);
       (C) by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) provides 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''; and
       (D) by adding at the end the following: ``The Secretary may 
     waive the requirement of a surety 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 described in subsection (o)(7)'' and inserting 
     ``the surety bond requirement described in subsection (o)(7) 
     and the financial security requirement described in 
     subsection (o)(8)''; and

[[Page H6065]]

       (B) in clause (ii), by striking ``the financial security 
     requirement described in subsection (o)(7) applies'' and 
     inserting ``the surety bond requirement described in 
     subsection (o)(7) and the financial security requirement 
     described in subsection (o)(8) apply''.
       (3) Reference to current disclosure requirement.--For 
     additional provisions requiring home health agencies to 
     disclose information on ownership and control interests, see 
     section 1124 of the Social Security Act (42 U.S.C. 1320a-3).
       (c) Authorizing Application of Disclosure and Surety Bond 
     Requirements to Other Health Care Providers.--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, at the Secretary's discretion, may impose the 
     requirements of the first sentence with respect to some or 
     all providers of items or services under part A or some or 
     all suppliers or other persons (other than physicians or 
     other practitioners, as defined in section 1842(b)(18)(C)) 
     who furnish items or 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 (H), by striking ``and'' at the end;
       (2) by redesignating subparagraph (I) as subparagraph (J);
       (3) by inserting after subparagraph (H) the following new 
     subparagraph:
       ``(I) provides 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''; and
       (4) by adding at the end the following flush sentence:

     ``The Secretary may waive the requirement of a surety 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 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 surety 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) Suppliers of durable medical equipment.--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) Home health agencies.--The amendments made by 
     subsection (b) shall apply to home health agencies with 
     respect to services furnished on or after January 1, 1998. 
     The Secretary of Health and Human Services shall modify 
     participation agreements under section 1866(a)(1) of the 
     Social Security Act (42 U.S.C. 1395cc(a)(1)) with respect to 
     home health agencies to provide for implementation of such 
     amendments on a timely basis.
       (3) Other amendments.--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 January 1, 1998.

     SEC. 4313. 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) in paragraph (1), by striking ``and'' at the end;
       (B) in paragraph (2), by striking the period at the end 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)(1), 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), as amended by subsection 
     (b), 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 the amendments made by this section may 
     become 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 
     such amendments.
       (e) Effective Dates.--
       (1) Disclosure requirements.--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) Other providers.--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. 4314. 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. Each advisory 
     opinion issued by the Secretary shall be binding as to the 
     Secretary and the party or parties requesting the opinion.
       ``(B) Application of certain rules.--The Secretary shall, 
     to the extent practicable, apply the rules under subsections 
     (b)(3) and (b)(4) and take into account the regulations 
     promulgated under subsection (b)(5) of section 1128D in the 
     issuance of advisory opinions under this paragraph.
       ``(C) Regulations.--In order to implement this paragraph in 
     a timely manner, the Secretary may promulgate regulations 
     that take effect on an interim basis, after notice and 
     pending opportunity for public comment.
       ``(D) Applicability.--This paragraph shall apply to 
     requests for advisory opinions made after the date which is 
     90 days after the date of the enactment of this paragraph and 
     before the close of the period described in section 
     1128D(b)(6).''.

     SEC. 4315. REPLACEMENT OF REASONABLE CHARGE METHODOLOGY BY 
                   FEE SCHEDULES.

       (a) Application of Fee Schedule.--Section 1842 (42 U.S.C. 
     1395u) is amended by adding at the end the following new 
     subsection:
       ``(s)(1) The Secretary may implement a statewide or other 
     areawide fee schedule to be used for payment of any item or 
     service described in paragraph (2) which is paid on a 
     reasonable charge basis. Any fee schedule established under 
     this paragraph for such item or service shall be updated each 
     year by 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 preceding year, 
     except that in no event shall a fee schedule for an item 
     described in paragraph (2)(D) be updated before 2003.
       ``(2) The items and services described in this paragraph 
     are as follows:
       ``(A) Medical supplies.
       ``(B) Home dialysis supplies and equipment (as defined in 
     section 1881(b)(8)).
       ``(C) Therapeutic shoes.
       ``(D) Parenteral and enteral nutrients, equipment, and 
     supplies.
       ``(E) Electromyogram devices
       ``(F) Salivation devices.
       ``(G) Blood products.
       ``(H) Transfusion medicine.''.
       (b) Conforming Amendment.--Section 1833(a)(1) (42 U.S.C. 
     1395l(a)(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 items or services for 
     which fee schedules are established pursuant to section 
     1842(s), the amounts paid shall be 80 percent of the lesser 
     of the actual charge or the fee schedule established in such 
     section;''.
       (c) Effective Dates.--The amendments made by this section 
     to the extent such amendments substitute fee schedules for 
     reasonable charges, shall apply to particular services as of 
     the date specified by the Secretary of Health and Human 
     Services.
       (d) Initial Budget Neutrality.--The Secretary, in 
     developing a fee schedule for particular services (under the 
     amendments made by this section), shall set amounts for the 
     first year period to which the fee schedule applies at a 
     level so that the total payments under title XVIII of the 
     Social Security Act (42 U.S.C. 1395 et seq.)

[[Page H6066]]

     for those services for that year period shall be 
     approximately equal to the estimated total payments if such 
     fee schedule had not been implemented.

     SEC. 4316. APPLICATION OF INHERENT REASONABLENESS TO ALL PART 
                   B SERVICES OTHER THAN PHYSICIANS' SERVICES.

       (a) In General.--Paragraphs (8) and (9) of section 1842(b) 
     (42 U.S.C. 1395u(b)) are amended to read as follows:
       ``(8)(A)(i) The Secretary shall by regulation--
       ``(I) describe the factors to be used in determining the 
     cases (of particular items or services) in which the 
     application of this part (other than to physicians' services 
     paid under section 1848) results in the determination of an 
     amount that, because of its being grossly excessive or 
     grossly deficient, is not inherently reasonable, and
       ``(II) provide in those cases for the factors to be 
     considered in determining an amount that is realistic and 
     equitable.
       ``(ii) Notwithstanding the determination made in clause 
     (i), the Secretary may not apply factors that would increase 
     or decrease the payment under this part during any year for 
     any particular item or service by more than 15 percent from 
     such payment during the preceding year except as provided in 
     subparagraph (B).
       ``(B) The Secretary may make a determination under this 
     subparagraph that would result in an increase or decrease 
     under subparagraph (A) of more than 15 percent of the payment 
     amount for a year, but only if--
       ``(i) the Secretary's determination takes into account the 
     factors described in subparagraph (C) and any additional 
     factors the Secretary determines appropriate,
       ``(ii) the Secretary's determination takes into account the 
     potential impacts described in subparagraph (D), and
       ``(iii) the Secretary complies with the procedural 
     requirements of paragraph (9).
       ``(C) The factors described in this subparagraph are as 
     follows:
       ``(i) The programs established under this title and title 
     XIX are the sole or primary sources of payment for an item or 
     service.
       ``(ii) The payment amount does not reflect changing 
     technology, increased facility with that technology, or 
     reductions in acquisition or production costs.
       ``(iii) The payment amount for an item or service under 
     this part is substantially higher or lower than the payment 
     made for the item or service by other purchasers.
       ``(D) The potential impacts of a determination under 
     subparagraph (B) on quality, access, and beneficiary 
     liability, including the likely effects on assignment rates 
     and participation rates.
       ``(9)(A) The Secretary shall consult with representatives 
     of suppliers or other individuals who furnish an item or 
     service before making a determination under paragraph (8)(B) 
     with regard to that item or service.
       ``(B) The Secretary shall publish notice of a proposed 
     determination under paragraph (8)(B) in the Federal 
     Register--
       ``(i) specifying the payment amount proposed to be 
     established with respect to an item or service,
       ``(ii) explaining the factors and data that the Secretary 
     took into account in determining the payment amount so 
     specified, and
       ``(iii) explaining the potential impacts described in 
     paragraph (8)(D).
       ``(C) After publication of the notice required by 
     subparagraph (B), the Secretary shall allow not less than 60 
     days for public comment on the proposed determination.
       ``(D)(i) Taking into consideration the comments made by the 
     public, the Secretary shall publish in the Federal Register a 
     final determination under paragraph (8)(B) with respect to 
     the payment amount to be established with respect to the item 
     or service.
       ``(ii) A final determination published pursuant to clause 
     (i) shall explain the factors and data that the Secretary 
     took into consideration in making the final determination.''.
       (b) Conforming Amendment.--Section 1834(a)(10)(B) (42 
     U.S.C. 1395m(a)(10)(B)) is amended--
       (1) by striking ``For covered items furnished on or after 
     January 1, 1991, the'' and inserting ``The'';
       (2) by striking ``(other than subparagraph (D))''; and
       (3) by striking all that follows ``payments under this 
     subsection'' and inserting a period.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 4317. REQUIREMENT TO FURNISH DIAGNOSTIC INFORMATION.

       (a) Inclusion of Non-Physician Practitioners in Requirement 
     To Provide Diagnostic Codes for Physician Services.--
     Paragraphs (1) and (2) of section 1842(p) (42 U.S.C. 
     1395u(p)) are each amended by inserting ``or practitioner 
     specified in subsection (b)(18)(C)'' after ``by a 
     physician''.
       (b) Requirement To Provide Diagnostic Information When 
     Ordering Certain Items or Services Furnished by Another 
     Entity.--Section 1842(p) (42 U.S.C. 1395u(p)), is amended by 
     adding at the end the following new paragraph:
       ``(4) In the case of an item or service defined in 
     paragraph (3), (6), (8), or (9) of subsection 1861(s) ordered 
     by a physician or a practitioner specified in subsection 
     (b)(18)(C), but furnished by another entity, if the Secretary 
     (or fiscal agent of the Secretary) requires the entity 
     furnishing the item or service to provide diagnostic or other 
     medical information in order for payment to be made to the 
     entity, the physician or practitioner shall provide that 
     information to the entity at the time that the item or 
     service is ordered by the physician or practitioner.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4318. REPORT BY GAO ON OPERATION OF FRAUD AND ABUSE 
                   CONTROL PROGRAM.

       Section 1817(k)(6) (42 U.S.C. 1395i(k)(6)) is amended by 
     inserting ``June 1, 1998, and'' after ``Not later than''.

     SEC. 4319. COMPETITIVE BIDDING DEMONSTRATION PROJECTS.

       (a) General Rule.--Part B of title XVIII (42 U.S.C. 1395j 
     et seq.) is amended by inserting after section 1846 the 
     following new section:

     ``SEC. 1847. DEMONSTRATION PROJECTS FOR COMPETITIVE 
                   ACQUISITION OF ITEMS AND SERVICES.

       ``(a) Establishment of Demonstration Project Bidding 
     Areas.--
       ``(1) In general.--The Secretary shall implement not more 
     than 5 demonstration projects under which competitive 
     acquisition areas are established for contract award purposes 
     for the furnishing under this part of the items and services 
     described in subsection (d).
       ``(2) Project requirements.--Each demonstration project 
     under paragraph (1)--
       ``(A) shall include such group of items and services as the 
     Secretary may prescribe,
       ``(B) shall be conducted in not more than 3 competitive 
     acquisition areas, and
       ``(C) shall be operated over a 3-year period.
       ``(3) Criteria for establishment of competitive acquisition 
     areas.--Each competitive acquisition area established under a 
     demonstration project implemented under paragraph (1)--
       ``(A) shall be, or shall be within, a metropolitan 
     statistical area (as defined by the Secretary of Commerce), 
     and
       ``(B) shall be chosen based on the availability and 
     accessibility of entities able to furnish items and services, 
     and the probable savings to be realized by the use of 
     competitive bidding in the furnishing of items and services 
     in such area.
       ``(b) Awarding of Contracts in Areas.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among individuals and entities supplying items 
     and services described in subsection (c) for each competitive 
     acquisition area established under a demonstration project 
     implemented under subsection (a).
       ``(2) Conditions for awarding contract.--The Secretary may 
     not award a contract to any entity under the competition 
     conducted pursuant to paragraph (1) to furnish an item or 
     service unless the Secretary finds that the entity meets 
     quality standards specified by the Secretary that the total 
     amounts to be paid under the contract are expected to be less 
     than the total amounts that would otherwise be paid.
       ``(3) Contents of contract.--A contract entered into with 
     an entity under the competition conducted pursuant to 
     paragraph (1) is subject to terms and conditions that the 
     Secretary may specify.
       ``(4) Limit on number of contractors.--The Secretary may 
     limit the number of contractors in a competitive acquisition 
     area to the number needed to meet projected demand for items 
     and services covered under the contracts.
       ``(c) Expansion of Projects.--
       ``(1) Evaluations.--The Secretary shall evaluate the impact 
     of the implementation of the demonstration projects on 
     medicare program payments, access, diversity of product 
     selection, and quality. The Secretary shall make annual 
     reports to the Committees on Ways and Means and Commerce of 
     the House of Representatives and the Committee on Finance of 
     the Senate on the results of the evaluation described in the 
     preceding sentence and a final report not later than 6 months 
     after the termination date specified in subsection (e).
       ``(2) Expansion.--If the Secretary determines from the 
     evaluations under paragraph (1) that there is clear evidence 
     that any demonstration project--
       ``(A) results in a decrease in Federal expenditures under 
     this title, and
       ``(B) does not reduce program access, diversity of product 
     selection, and quality under this title,

     the Secretary may expand the project to additional 
     competitive acquisition areas.
       ``(d) Services described.--The items and services to which 
     this section applies are all items and services covered under 
     this part (except for physicians' services as defined in 
     section 1861(s)(1)) that the Secretary may specify. At least 
     one demonstration project shall include oxygen and oxygen 
     equipment.
       ``(e) Termination.--Notwithstanding any other provision of 
     this section, all projects under this section shall terminate 
     not later than December 31, 2002.''.
       (b) Items and Services To Be Furnished Only Through 
     Competitive Acquisition.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (15),
       (2) by striking the period at the end of paragraph (16) and 
     inserting ``; or'', and
       (3) by inserting after paragraph (16) the following new 
     paragraph:
       ``(17) where the expenses are for an item or service 
     furnished in a competitive acquisition area (as established 
     by the Secretary under section 1847(a)) by an entity other 
     than an entity with which the Secretary has entered into a 
     contract under section 1847(b) for the furnishing of such an 
     item or service in that area, unless the Secretary finds that 
     the expenses were incurred in a case of urgent need, or in 
     other circumstances specified by the Secretary.''.
       (c) Study by GAO.--The Comptroller of the United States 
     shall study the effectiveness of the establishment of 
     competitive acquisition areas under section 1847(a) of the 
     Social Security Act, as added by this section.

     SEC. 4320. PROHIBITING UNNECESSARY AND WASTEFUL MEDICARE 
                   PAYMENTS FOR CERTAIN ITEMS.

       Section 1861(v) (42 U.S.C. 1395x(v)) is amended by adding 
     at the end the following new paragraph:

[[Page H6067]]

       ``(8) Items unrelated to patient care.--Reasonable costs do 
     not include costs for the following--
       ``(i) entertainment, including tickets to sporting and 
     other entertainment events;
       ``(ii) gifts or donations;
       ``(iii) personal use of motor vehicles;
       ``(iv) costs for fines and penalties resulting from 
     violations of Federal, State, or local laws; and
       ``(iv) education expenses for spouses or other dependents 
     of providers of services, their employees or contractors.''.

     SEC. 4321. NONDISCRIMINATION IN POST-HOSPITAL REFERRAL TO 
                   HOME HEALTH AGENCIES AND OTHER ENTITIES.

       (a) Notification of Availability of Home Health Agencies 
     and Other Entities 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 new subparagraph:
       ``(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 entity 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)(S)) or which has such an interest in the 
     hospital.''.
       (b) Maintenance and Disclosure of Information on Post-
     Hospital Home Health Agencies and Other Entities.--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 new subparagraph:
       ``(S) in the case of a hospital that has a financial 
     interest (as specified by the Secretary in regulations) in an 
     entity to which individuals are referred as described in 
     section 1861(ee)(2)(H)(ii), or in which such an entity has 
     such a financial interest, or in which another entity has 
     such a financial interest (directly or indirectly) with such 
     hospital and such an entity, 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)(S).''.
       (d) Effective Dates.--
       (1) The amendments made by subsection (a) shall apply to 
     discharges occurring on or after the date which is 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 the date which is 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.

            CHAPTER 3--CLARIFICATIONS AND TECHNICAL CHANGES

     SEC. 4331. 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) Clarification of Treatment of Certain Waivers and 
     Payments of Premiums.--Section 1128A(i)(6) (42 U.S.C. 1320a-
     7a(i)(6)) is amended--
       (1) in subparagraph (A)(iii)--
       (A) in subclause (I), by adding ``or'' at the end;
       (B) in subclause (II), by striking ``or'' at the end; and
       (C) by striking subclause (III);
       (2) by redesignating subparagraphs (B) and (C) as 
     subparagraphs (C) and (D); and
       (3) by inserting after subparagraph (A) the following:
       ``(B) any permissible waiver as specified in section 
     1128B(b)(3) or in regulations issued by the Secretary;''.
       (f) 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--Provisions Relating to Part A Only

                  CHAPTER 1--PAYMENT OF PPS HOSPITALS

     SEC. 4401. PPS HOSPITAL PAYMENT UPDATE.

       (a) In General.--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,
       ``(XIV) for fiscal year 1999, the market basket percentage 
     increase minus 1.9 percentage points for hospitals in all 
     areas,
       ``(XV) for fiscal year 2000, the market basket percentage 
     increase minus 1.8 percentage points for hospitals in all 
     areas,
       ``(XVI) for each of fiscal years 2001 and 2002, the market 
     basket percentage increase minus 1.1 percentage point for 
     hospitals in all areas, and
       ``(XVII) for fiscal year 2003 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.
       (b) Temporary Relief for Certain Non-Teaching, Non-DSH 
     Hospitals.--
       (1) In general.--In the case of a hospital described in 
     paragraph (2) for its cost reporting period--
       (A) beginning in fiscal year 1998 the amount of payment 
     made to the hospital under section 1886(d) of the Social 
     Security Act for discharges occurring during such fiscal year 
     only shall be increased as though the applicable percentage 
     increase (otherwise applicable to discharges occurring during 
     fiscal year 1998 under section 1886(b)(3)(B)(i)(XIII) of the 
     Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)(XIII))) had 
     been increased by 0.5 percentage points; and
       (B) beginning in fiscal year 1999 the amount of payment 
     made to the hospital under section 1886(d) of the Social 
     Security Act for discharges occurring during such fiscal year 
     only shall be increased as though the applicable percentage 
     increase (otherwise applicable to discharges occurring during 
     fiscal year 1999 under section 1886(b)(3)(B)(i)(XIII) of the 
     Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)(XIII))) had 
     been increased by 0.3 percentage points.

     Subparagraph (A) shall not apply in computing the increase 
     under subparagraph (B) and neither subparagraph shall affect 
     payment for discharges for any hospital occurring during a 
     fiscal year after fiscal year 1999. Payment increases under 
     this subsection for discharges occurring during a fiscal year 
     are subject to settlement after the close of the fiscal year.
       (2) Hospitals covered.--A hospital described in this 
     paragraph for a cost reporting period is a hospital--
       (A) that is described in paragraph (3) for such period;
       (B) that is located in a State in which the amount of the 
     aggregate payments under section 1886(d) of such Act for 
     hospitals located in the State and described in paragraph (3) 
     for their cost reporting periods beginning during fiscal year 
     1995 is less than the aggregate allowable operating costs of 
     inpatient hospital services (as defined in section 1886(a)(4) 
     of such Act) for all such hospitals in such State with 
     respect to such cost reporting periods; and
       (C) with respect to which the payments under section 
     1886(d) of such Act (42 U.S.C. 1395ww(d)) for discharges 
     occurring in the cost reporting period involved, as estimated 
     by the Secretary, is less than the allowable operating costs 
     of inpatient hospital services (as defined in section 
     1886(a)(4) of such Act (42 U.S.C. 1395ww(a)(4)) for such 
     hospital for such period, as estimated by the Secretary.
       (3) Non-teaching, non-DSH hospitals described.--A hospital 
     described in this paragraph for a cost reporting period is a 
     subsection

[[Page H6068]]

     (d) hospital (as defined in section 1886(d)(1)(B) of such Act 
     (42 U.S.C. 1395ww(d)(1)(B))) that--
       (A) is not receiving any additional payment amount 
     described in section 1886(d)(5)(F) of such Act (42 U.S.C. 
     1395ww(d)(5)(F)) for discharges occurring during the period;
       (B) is not receiving any additional payment under section 
     1886(d)(5)(B) of such Act (42 U.S.C. 1395ww(d)(5)(B)) or a 
     payment under section 1886(h) of such Act (42 U.S.C. 
     1395ww(h)) for discharges occurring during the period; and
       (C) does not qualify for payment under section 
     1886(d)(5)(G) of such Act (42 U.S.C. 1395ww(d)(5)(G)) for the 
     period.

     SEC. 4402. MAINTAINING SAVINGS FROM TEMPORARY REDUCTION IN 
                   CAPITAL PAYMENTS FOR PPS HOSPITALS.

       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), and, for 
     discharges occurring on or after October 1, 1997, and before 
     September 30, 2002, reduce the rates described in clauses (i) 
     and (ii) by 2.1 percent.''.

     SEC. 4403. DISPROPORTIONATE SHARE.

       (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended--
       (1) in clause (i) by inserting ``and before October 1, 
     1997'' after ``May 1, 1986'';
       (2) in clause (ii), by striking ``The amount'' and 
     inserting ``Subject to clause (ix), the amount''; and
       (3) by adding at the end the following new clause:
       ``(ix) In the case of discharges occurring--
       ``(I) during fiscal year 1998, the additional payment 
     amount otherwise determined under clause (ii) shall be 
     reduced by 1 percent;
       ``(II) during fiscal year 1999, such additional payment 
     amount shall be reduced by 2 percent;
       ``(III) during fiscal year 2000, such additional payment 
     amount shall be reduced by 3 percent;
       ``(IV) during fiscal year 2001, such additional payment 
     amount shall be reduced by 4 percent;
       ``(V) during fiscal year 2002, such additional payment 
     amount shall be reduced by 5 percent; and
       ``(VI) during fiscal year 2003 and each subsequent fiscal 
     year, such additional payment amount shall be reduced by 0 
     percent.''.
       (b) Report on New Payment Formula.--
       (1) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall submit to the Committee on Ways and Means of 
     the House of Representatives and the Committee on Finance of 
     the Senate a report that contains a formula for determining 
     additional payment amounts to hospitals under section 
     1886(d)(5)(F) of the Social Security Act (42 U.S.C. 
     1395ww(d)(5)(F)).
       (2) Factors in Determination of Formula.--In determining 
     such formula the Secretary shall--
       (A) establish a single threshold for costs incurred by 
     hospitals in serving low-income patients, and
       (B) consider the costs described in paragraph (3).
       (3) The costs described in this paragraph are as follows:
       (A) The costs incurred by the hospital during a period (as 
     determined by the Secretary) of furnishing hospital services 
     to individuals who are entitled to benefits under part A of 
     title XVIII of the Social Security Act and who receive 
     supplemental security income benefits under title XVI of such 
     Act (excluding any supplementation of those benefits by a 
     State under section 1616 of such Act (42 U.S.C. 1382e)).
       (B) The costs incurred by the hospital during a period (as 
     so determined) of furnishing hospital services to individuals 
     who receive medical assistance under the State plan under 
     title XIX of such Act and are not entitled to benefits under 
     part A of title XVIII of such Act (including individuals 
     enrolled in a managed care organization (as defined in 
     section 1903(m)(1)(A) of such Act (42 U.S.C. 1396b(m)(1)(A)) 
     or any other managed care plan under such title and 
     individuals who receive medical assistance under such title 
     pursuant to a waiver approved by the Secretary under section 
     1115 of such Act (42 U.S.C. 1315)).
       (c) Data Collection.--In developing the formula described 
     in subsection (b), the Secretary of Health and Human Services 
     may require any subsection (d) hospital (as defined in 
     section 1886(d)(1)(B) of the Social Security Act (42 U.S.C. 
     1395ww(d)(1)(B))) receiving additional payments by reason of 
     section 1886(d)(5)(F) of such Act (42 U.S.C. 1395ww(d)(5)(F)) 
     to submit to the Secretary any information that the Secretary 
     determines is necessary to develop such formula.

     SEC. 4404. 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. 4405. 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 subparagraphs (B) and 
     (F)''.
       (d) Effective Date.--The amendments made by this section 
     apply to discharges occurring after September 30, 1997.

     SEC. 4406. 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)''.

     SEC. 4407. CERTAIN HOSPITAL DISCHARGES TO POST ACUTE CARE.

       Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended--
       (1) in subparagraph (I)(ii) by inserting ``not taking in 
     account the effect of subparagraph (J),'' after ``in a fiscal 
     year, ''; and
       (2) by adding at the end the following new subparagraph:
       ``(J)(i) The Secretary shall treat the term `transfer case' 
     (as defined in subparagraph (I)(ii)) as including the case of 
     a qualified discharge (as defined in clause (ii)), which is 
     classified within a diagnosis-related group described in 
     clause (iii), and which occurs on or after October 1, 1998. 
     In the case of a qualified discharge for which a substantial 
     portion of the costs of care are incurred in the early days 
     of the inpatient stay (as defined by the Secretary), in no 
     case may the payment amount otherwise provided under this 
     subsection exceed an amount equal to the sum of--
       ``(I) 50 percent of the amount of payment under this 
     subsection for transfer cases (as established under 
     subparagraph (I)(i)), and
       ``(II) 50 percent of the amount of payment which would have 
     been made under this subsection with respect to the qualified 
     discharge if no transfer were involved.
       ``(ii) For purposes of clause (i), subject to clause (iii), 
     the term `qualified discharge' means a discharge classified 
     with a diagnosis-related group (described in clause (iii)) of 
     an individual from a subsection (d) hospital, if upon such 
     discharge the individual--
       ``(I) is admitted as an inpatient to a hospital or hospital 
     unit that is not a subsection (d) hospital for the provision 
     of inpatient hospital services;
       ``(II) is admitted to a skilled nursing facility;
       ``(III) is provided 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); or
       ``(IV) for discharges occurring on or after October 1, 
     2000, the individual receives post discharge services 
     described in clause (iv)(I).
       ``(iii) Subject to clause (iv), a diagnosis-related group 
     described in this clause is--
       ``(I) 1 of 10 diagnosis-related groups selected by the 
     Secretary based upon a high volume of discharges classified 
     within such groups and a disproportionate use of post 
     discharge services described in clause (ii); and
       ``(II) a diagnosis-related group specified by the Secretary 
     under clause (iv)(II).
       ``(iv) The Secretary shall include in the proposed rule 
     published under subsection (e)(5)(A) for fiscal year 2001, a 
     description of the effect of this subparagraph. The Secretary 
     may include in the proposed rule (and in the final rule 
     published under paragraph (6)) for fiscal year 2001 or a 
     subsequent fiscal year, a description of--
       ``(I) post-discharge services not described in subclauses 
     (I), (II), and (III) of clause (ii), the receipt of which 
     results in a qualified discharge; and
       ``(II) diagnosis-related groups described in clause 
     (iii)(I) in addition to the 10 selected under such clause.''.

[[Page H6069]]

     SEC. 4408. RECLASSIFICATION OF CERTAIN COUNTIES AS LARGE 
                   URBAN AREAS UNDER MEDICARE PROGRAM.

       (a) In General.--For purposes of section 1886(d) of the 
     Social Security Act (42 U.S.C. 1395ww(d)), the large urban 
     area of Charlotte-Gastonia-Rock Hill-North Carolina-South 
     Carolina may be deemed to include Stanly County, North 
     Carolina.
       (b) Effective Date.--This section shall apply with respect 
     to discharges occurring on or after October 1, 1997.

     SEC. 4409. GEOGRAPHIC RECLASSIFICATION FOR CERTAIN 
                   DISPROPORTIONATELY LARGE HOSPITALS.

       (a) New Guidelines for Reclassification.--Notwithstanding 
     the guidelines published under section 1886(d)(10)(D)(i)(I) 
     of the Social Security Act (42 U.S.C. 
     1395ww(d)(10)(D)(i)(I)), 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;
       (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; and
       (3) the hospital submitted an application requesting 
     reclassification for purposes of wage index under section 
     1886(d)(10)(C) of such Act (42 U.S.C. 1395ww(d)(10)(C)) in 
     each of fiscal years 1992 through 1997 and that such request 
     was approved for each of such fiscal years.

     SEC. 4410. FLOOR ON AREA WAGE INDEX.

       (a) In General.--For purposes of section 1886(d)(3)(E) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(3)(E)) 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 (42 U.S.C. 1395ww(d)(2)(D)) may not 
     be less than the area wage index 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 index 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 (42 U.S.C. 
     1395ww(d)) 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.
       (c) Exclusion of Certain Wages.--In the case of a hospital 
     that is owned by a municipality and that was reclassified as 
     an urban hospital under section 1886(d)(10) of the Social 
     Security Act for fiscal year 1996, in calculating the 
     hospital's average hourly wage for purposes of geographic 
     reclassification under such section for fiscal year 1998, the 
     Secretary of Health and Human Services shall exclude the 
     general service wages and hours of personnel associated with 
     a skilled nursing facility that is owned by the hospital of 
     the same municipality and that is physically separated from 
     the hospital to the extent that such wages and hours of such 
     personnel are not shared with the hospital and are separately 
     documented. A hospital that applied for and was denied 
     reclassification as an urban hospital for fiscal year 
     1998, but that would have received reclassification had 
     the exclusion required by this section been applied to it, 
     shall be reclassified as an urban hospital for fiscal year 
     1998.

               CHAPTER 2--PAYMENT OF PPS-EXEMPT HOSPITALS

                Subchapter A--General Payment Provisions

     SEC. 4411. 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. 4412. 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 15 
     percent.''.

     SEC. 4413. REBASING.

       (a) Option of Rebasing for Hospitals In Operation Before 
     1990.--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 new subparagraph:
       ``(F)(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 beginning 
     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:
       ``(G)(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.''.

     SEC. 4414. CAP ON TEFRA LIMITS.

       Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by 
     section 4413, is amended by adding at the end the following 
     new subparagraph:

[[Page H6070]]

       ``(H)(i) In the case of a hospital or unit that is within a 
     class of hospital described in clause (iv), the Secretary 
     shall estimate the 75th percentile of the target amounts for 
     such hospitals within such class for cost reporting periods 
     ending during fiscal year 1996.
       ``(ii) The Secretary shall update the amount determined 
     under clause (i), for each cost reporting period after the 
     cost reporting period described in such clause and up to the 
     first cost reporting period beginning on or after October 1, 
     1997, by a factor equal to the market basket percentage 
     increase.
       ``(iii) For cost reporting periods beginning during each of 
     fiscal years 1999 through 2002, the Secretary shall update 
     such amount by a factor equal to the market basket percentage 
     increase.
       ``(iv) 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. 4415. BONUS AND RELIEF PAYMENTS.

       (a) Change in Bonus Payment.--Section 1886(b)(1) (42 U.S.C. 
     1395ww(b)(1)) is amended in subparagraph (A) by striking all 
     that follows ``plus--'' and inserting the following:
       ``(i) 15 percent of the amount by which the target amount 
     exceeds the amount of the operating costs, or
       ``(ii) 2 percent of the target amount,
     whichever is less;''.
       (b) Continuous Improvement Bonus Payments.--Section 1886(b) 
     (42 U.S.C. 1395ww(b)) is amended--
       (1) in paragraph (1), by inserting ``plus the amount, if 
     any, provided under paragraph (2)'' before ``except that in 
     no case''; and
       (2) by inserting after paragraph (1), the following new 
     paragraph:
       ``(2)(A) In addition to the payment computed under 
     paragraph (1), in the case of an eligible hospital (described 
     in subparagraph (B)) for a cost reporting period beginning on 
     or after October 1, 1997, the amount of payment on a per 
     discharge basis under paragraph (1) shall be increased by the 
     lesser of--
       ``(i) 50 percent of the amount by which the operating costs 
     are less than the expected costs (as defined in subparagraph 
     (D)) for the period; or
       ``(ii) 1 percent of the target amount for the period.
       ``(B) For purposes of this paragraph, an `eligible 
     hospital' means with respect to a cost reporting period, a 
     hospital--
       ``(i) that has received payments under this subsection for 
     at least 3 full cost reporting periods before that cost 
     reporting period, and
       ``(ii) whose operating costs for the period are less than 
     the least of its target amount, its trended costs (as defined 
     in subparagraph (C)), or its expected costs (as defined in 
     subparagraph (D)) for the period.
       ``(C) For purposes of subparagraph (B)(ii), the term 
     `trended costs' means for a hospital cost reporting period 
     ending in a fiscal year--
       ``(i) in the case of a hospital for which its cost 
     reporting period ending in fiscal year 1996 was its third or 
     subsequent full cost reporting period for which it receives 
     payments under this subsection, the lesser of the 
     operating costs or target amount for that hospital for its 
     cost reporting period ending in fiscal year 1996, or
       ``(ii) in the case of any other hospital, the operating 
     costs for that hospital for its third full cost reporting 
     period for which it receives payments under this subsection,

     increased (in a compounded manner) for each succeeding fiscal 
     year (through the fiscal year involved) by the market basket 
     percentage increase for the fiscal year.
       ``(D) For purposes of this paragraph, the term `expected 
     costs', with respect to the cost reporting period ending in a 
     fiscal year, means the lesser of the operating costs of 
     inpatient hospital services or target amount per discharge 
     for the previous cost reporting period updated by the market 
     basket percentage increase (as defined in paragraph 
     (3)(B)(iii)) for the fiscal year.''.
       (c) Change in Relief Payments.--Section 1886(b)(1) (42 
     U.S.C. 1395ww(b)(1)), as amended in subsections (a) and (b), 
     is further amended--
       (1) by redesignating subparagraph (B) as subparagraph (C)
       (2) in subparagraph (C), as so redesignated--
       (A) by striking ``greater than the target amount'' and 
     inserting ``greater than 110 percent of the target amount'', 
     and
       (B) by striking ``exceed the target amount'' and inserting 
     ``exceed 110 percent of the target amount'', and
       (3) 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''.
       (d) Report.--Not later than October 1, 1999, the Secretary 
     of Health and Human Services shall submit to the Committee on 
     Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate a report that describes 
     the effect of the amendments to section 1886(b)(1) of the 
     Social Security Act (42 U.S.C. 1395ww(b)(1)), made under this 
     section, on psychiatric hospitals (as defined in section 
     1886(d)(1)(B)(i) of such Act (42 U.S.C. 1395ww(d)(1)(B)(i)) 
     that have approved medical residency training programs under 
     title XVIII of such Act (42 U.S.C. 1395 et seq.)).
       (e) Effective Date.--The amendments made by subsections (a) 
     and (c) shall apply with respect to cost reporting periods 
     beginning on or after October 1, 1997.

     SEC. 4416. CHANGE IN PAYMENT AND TARGET AMOUNT FOR NEW 
                   PROVIDERS.

       Section 1886(b) (42 U.S.C. 1395ww(b)) is amended--
       (1) by adding at the end the following new paragraph:
       ``(7)(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 cost reporting periods for 
     which the hospital has a settled cost report, 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) 110 percent of the national median of the target 
     amount for hospitals in the same class as the hospital for 
     cost reporting periods ending during fiscal year 1996, 
     updated by the hospital market basket increase percentage to 
     the fiscal year in which the hospital first received payments 
     under this section, 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) Hospitals described in clause (iv) of such 
     subsection.
       ``(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 sections 4413 and 
     4414, by inserting ``and in paragraph (7)(A)(ii),'' before 
     ``for purposes of''.

     SEC. 4417. TREATMENT OF CERTAIN LONG-TERM CARE HOSPITALS.

       (a) In General.--(1) 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.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to discharges occurring on or after October 1, 
     1995.
       (b) Certain Long-Term Care Hospitals That Treat Cancer 
     Patients.--(1) Section 1886(d)(1)(B)(iv) (42 U.S.C. 
     1395ww(d)(1)(B)(iv)) is amended--
       (A) by inserting ``(I)'' after ``(iv)''; and
       (B) by adding at the end the following:
       ``(II) 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 medicare 
     inpatient discharges with a principal diagnosis that reflects 
     a finding of neoplastic disease in the 12-month cost 
     reporting period ending in fiscal year 1997, 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. 4418. TREATMENT OF CERTAIN CANCER HOSPITALS.

       (a) In General.--Section 1886(d)(1) (42 U.S.C. 
     1395ww(d)(1)) is amended--
       (1) in subparagraph (B)(v)--
       (A) by inserting ``(I)'' after ``(v)'';
       (B) by striking the semicolon at the end and inserting ``, 
     or''; and
       (C) by adding at the end the following:
       ``(II) a hospital that was recognized as a comprehensive 
     cancer center or clinical cancer research center by the 
     National Cancer Institute of the National Institutes of 
     Health as of April 20, 1983, that is located in a State 
     which, as of December 19, 1989, was not operating a 
     demonstration project under section 1814(b), that applied and 
     was denied, on or before December 31, 1990, for 
     classification as a hospital involved extensively in 
     treatment for or research on cancer under this clause (as in 
     effect on the day before the date of the enactment of this 
     subclause), that as of the date of the enactment of this 
     subclause, is licensed for less than 50 acute care beds, and 
     that demonstrates for the 4-year period ending on December 
     31, 1996, that at least 50 percent of its total discharges 
     have a principal finding of neoplastic disease, as defined in 
     subparagraph (E);'' and
       (2) by adding at the end the following:
       ``(E) For purposes of subparagraph (B)(v)(II) only, the 
     term `principal finding of neoplastic disease' means the 
     condition established after study to be chiefly responsible 
     for occasioning the admission of a patient to a hospital, 
     except that only discharges with ICD-9-CM principal diagnosis 
     codes of 140 through 239, V58.0, V58.1, V66.1, V66.2, or 990 
     will be considered to reflect such a principal diagnosis.''.

[[Page H6071]]

       (b) Payment.--
       (1) Application to cost reporting periods.--Any 
     classification by reason of section 1886(d)(1)(B)(v)(II) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)(v)(II)) 
     (as added by subsection (a)) shall apply to all cost 
     reporting periods beginning on or after January 1, 1991.
       (2) Base year.--Notwithstanding the provisions of section 
     1886(b)(3)(E) of such Act (42 U.S.C. 1395ww(b)(3)(E)) or 
     other provisions to the contrary, the base cost reporting 
     period for purposes of determining the target amount for any 
     hospital classified by reason of section 1886(d)(1)(B)(v)(II) 
     of such Act shall be either--
       (A) the hospital's cost reporting period beginning during 
     fiscal year 1990, or
       (B) pursuant to an election under 1886(b)(3)(G) of such Act 
     (42 U.S.C. 1395ww(b)(3)(G)), as added in section 4413(b), the 
     period provided for under such section.
       (3) Deadline for payments.--Any payments owed to a hospital 
     by reason of this subsection shall be made expeditiously, but 
     in no event later than 1 year after the date of the enactment 
     of this Act.

     SEC. 4419. ELIMINATION OF EXEMPTIONS FOR CERTAIN HOSPITALS.

       (a) Reduction of Exemptions.--
       (1) In general.--Section 1886(b)(4)(A)(i) (42 U.S.C. 
     1395ww(b)(4)(A)(i)) is amended in the first sentence by 
     striking ``The Secretary shall provide for an exemption from, 
     or an exception and adjustment to, '' and inserting ``The 
     Secretary shall provide for an exception and adjustment to 
     (and in the case of a hospital or unit described in 
     subsection (d)(1)(B)(iii), may provide an exemption from)''.
       (2) Effective date.--The amendment 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)) for cost reporting periods beginning 
     on or after October 1, 1997.
       (b) Report on Exceptions.--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), ending during the previous fiscal year.

   Subchapter B--Prospective Payment System for PPS-Exempt Hospitals

     SEC. 4421. 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, 
     2002, 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, 2002, 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 66\2/3\ percent and the 
     `prospective payment percentage' is 33\1/3\ percent; and
       ``(ii) on or after October 1, 2001, and before October 1, 
     2002, the `TEFRA percentage' is 33\1/3\ percent and the 
     `prospective payment percentage' is 66\2/3\ 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 eliminate 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);
       ``(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 and 2002 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) 
     and (6)) shall be equal to 98 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 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 August 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

[[Page H6072]]

     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 
     information available to 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) Limitation on review.--There shall be no 
     administrative or judicial review under section 1869, 1878, 
     or otherwise of the establishment of--
       ``(A) 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 prospective payment rates under paragraph (3),
       ``(C) outlier and special payments under paragraph (4), and
       ``(D) area wage adjustments under paragraph (6).''.
       (b) Conforming Amendments.--Section 1886(b) (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.

     SEC. 4422. DEVELOPMENT OF PROPOSAL ON PAYMENTS FOR LONG-TERM 
                   CARE HOSPITALS.

       (a) In General.--
       (1) Legislative proposal.--The Secretary of Health and 
     Human Services shall develop a legislative proposal for 
     establishing a case-mix adjusted prospective payment system 
     for payment of long-term care hospitals described in section 
     1886(d)(1)(B)(iv) of the Social Security Act (42 U.S.C. 
     1395ww(d)(1)(B)(iv)) under the medicare program. Such system 
     shall include an adequate patient classification system that 
     reflects the differences in patient resource use and costs 
     among such hospitals.
       (2) Collection of data and evaluation.--In developing the 
     legislative proposal described in paragraph (1), the 
     Secretary--
       (A) may require such long-term care hospitals to submit 
     such information to the Secretary as the Secretary may 
     require to develop the proposal; and
       (B) shall consider several payment methodologies, including 
     the feasibility of expanding the current diagnosis-related 
     groups and prospective payment system established under 
     section 1886(d) of the Social Security Act to apply to 
     payments under the medicare program to long-term care 
     hospitals.
       (b) Report.--Not later than October 1, 1999, the Secretary 
     shall submit to the appropriate committees of Congress a 
     report that includes the legislative proposal developed under 
     subsection (a)(1).

           CHAPTER 3--PAYMENT FOR SKILLED NURSING FACILITIES

     SEC. 4431. EXTENSION OF COST LIMITS.

       The last sentence of section 1888(a) (42 U.S.C. 1395yy(a)) 
     is amended by striking ``subsection'' the last place it 
     appears and all that follows and inserting ``subsection, 
     except that the limits effective for cost reporting periods 
     beginning on or after October 1, 1997, shall be based on the 
     limits effective for cost reporting periods beginning on or 
     after October 1, 1996.''.

     SEC. 4432. 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 (F) and (O) of 
     section 1861(s)(2), and, only with respect to services 
     furnished during 1998, the transportation costs of 
     electrocardiogram equipment for electrocardiogram test 
     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 first received 
     payment for services under this title on or after October 1, 
     1995, 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 not described in 
     paragraph (2)(E)(ii) 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 fiscal year 
     1995, including costs associated with facilities described in 
     subsection (d), 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.

     In making appropriate adjustments under clause (i), the 
     Secretary shall take into account exceptions and shall take 
     into account exemptions but, with respect to exemptions, only 
     to the extent that routine costs do not exceed 150 percent of 
     the routine cost limits otherwise applicable but for the 
     exemption.
       ``(B) Update to first cost reporting period.--
       ``(i) In general.--Subject to clause (ii), 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 first 
     cost reporting period by a factor equal to the skilled 
     nursing facility market basket percentage increase minus 1 
     percentage point.
       ``(ii) Certain demonstration projects.--In the case of a 
     facility participating in the Nursing Home Case-Mix and 
     Quality Demonstration (RUGS-III), there shall be substituted 
     for the amount described in clause (i) the RUGS-III rate 
     received by the facility for 1997.
       ``(C) Updating to applicable cost reporting period.--The 
     Secretary shall update the amount determined under 
     subparagraph (B) 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 
     facility-specific update factor.
       ``(D) Facility-specific update factor.--For purposes of 
     this paragraph, the `facility-specific update factor' for 
     cost reporting periods beginning during--
       ``(i) during each of fiscal years 1998 and 1999, is equal 
     to the skilled nursing facility market basket percentage 
     increase for such fiscal year minus 1 percentage point, and
       ``(ii) during each subsequent fiscal year is equal to the 
     skilled nursing facility market basket percentage increase 
     for such fiscal year.
       ``(4) Federal per diem rate.--
       ``(A) Determination of historical per diem for 
     facilities.--For each 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

[[Page H6073]]

     subject to (and not exempted from) the per diem limits 
     referred to in paragraph (1) or (2) of subsection (a) (and 
     facilities described in subsection (d)), 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 
     (excluding exceptions payments) 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 first fiscal year.--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 first cost 
     reporting period by a factor equal to the skilled nursing 
     facility market basket percentage increase reduced (on an 
     annualized basis) by 1 percentage point.
       ``(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 facilities 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 rates.--
       ``(i) All facilities.--The Secretary shall compute a 
     weighted average per diem rate for all facilities by 
     computing an average of the standardized amounts computed 
     under subparagraph (C), weighted for each facility by the 
     number of days of extended care services furnished during the 
     cost reporting period referred to in subparagraph (A).
       ``(ii) Freestanding facilities.--The Secretary shall 
     compute a weighted average per diem rate for freestanding 
     facilities by computing an average of the standardized 
     amounts computed under subparagraph (C) only for such 
     facilities, weighted for each facility by the number of days 
     of extended care services furnished during the cost reporting 
     period referred to in subparagraph (A).
       ``(iii) Separate computation.--The Secretary may compute 
     and apply such averages separately for facilities located in 
     urban and rural areas (as defined in section 1886(d)(2)(D)).
       ``(E) Updating.--
       ``(i) Initial period.--For the initial period beginning on 
     July 1, 1998, and ending on September 30, 1999, the Secretary 
     shall compute for skilled nursing facilities an unadjusted 
     federal per diem rate equal to the average of the weighted 
     average per diem rates computed under clauses (i) and (ii) of 
     subparagraph (D), increased by skilled nursing facility 
     market basket percentage change for such period minus 1 
     percentage point.
       ``(ii) Subsequent fiscal years.--The Secretary shall 
     compute an unadjusted federal per diem rate equal to the 
     federal per diem rate computed under this subparagraph--

       ``(I) for fiscal year 2000, the rate computed for the 
     initial period described in clause (i), increased by the 
     skilled nursing facility market basket percentage change for 
     the initial period minus 1 percentage point;
       ``(II) for each of fiscal years 2001 and 2002, the rate 
     computed for the previous fiscal year increased by the 
     skilled nursing facility market basket percentage change for 
     the fiscal year involved minus 1 percentage point; and
       ``(III) for each subsequent fiscal year, the rate computed 
     for the previous fiscal year 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 the 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 
     fiscal years so as to eliminate the effect of such coding or 
     classification changes.
       ``(G) Determination of federal rate.--The Secretary shall 
     compute for each skilled nursing facility for each fiscal 
     year (beginning with the initial period described in 
     subparagraph (E)(i)) 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 May 1, 1998 (with respect to fiscal period 
     described in subparagraph (E)(i)) and before the August 1 
     preceding each succeeding fiscal year (with respect to that 
     succeeding fiscal year), 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 and 
     percentage.--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.
       ``(6) Submission of resident assessment data.--A skilled 
     nursing facility, or a facility described in paragraph 
     (7)(B), 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, or a facility 
     described in paragraph (7), 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 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 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 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);
       ``(B) the establishment of facility specific rates before 
     January 1, 1999, (except any determination of costs paid 
     under part A of this title); 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)), as amended by 4319(b), is amended--
       (A) by striking ``or'' at the end of paragraph (16),
       (B) by striking the period at the end of paragraph (17) and 
     inserting ``; or'', and
       (C) by inserting after paragraph (17) the following new 
     paragraph:
       ``(18) 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 or of a part of a facility that includes a skilled 
     nursing facility (as determined under regulations), 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 or of a part of a facility that includes a skilled 
     nursing facility (as determined under regulations), 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 to a resident of a skilled nursing 
     facility or a part of a facility that includes a skilled 
     nursing facility (as

[[Page H6074]]

     determined under regulations) for which payment would (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 the amount 
     provided under the fee schedule for such item or service.
       ``(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 or of a part of a 
     facility that includes a skilled nursing facility (as 
     determined under regulations), 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 furnished.''
       (4) Facility provider number required on claims submitted 
     by physicians.--Section 1842 (42 U.S.C. 1395u) is amended by 
     adding at the end the following new section:
       ``(t) Each request for payment, or bill submitted, for an 
     item or service furnished by a physician to an individual who 
     is a resident of a skilled nursing facility or of a part of a 
     facility that includes a skilled nursing facility (as 
     determined under regulations), for which payment may be made 
     under this part shall include the facility's medicare 
     provider number.''
       (5) 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(e)(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 1861(v)(7)(D) (42 U.S.C. 1395x(v)(7)(D)) is 
     amended by inserting ``subsections (a) through (c) of'' 
     before ``section 1888.''.
       (F) 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,''.
       (G) Section 1883(a)(2)(B)(ii)(II) (42 U.S.C. 
     1395tt(a)(2)(B)(ii)(II)) is amended by inserting 
     ``subsections (a) through (d) of'' before ``section 1888''.
       (H) Section 1888(d)(1) (42 U.S.C. 1395yy(d)(1)) is amended 
     by striking ``Any skilled nursing facility'' and inserting 
     ``Subject to subsection (e), any 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.
       (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.

           CHAPTER 4--PROVISIONS RELATED TO HOSPICE SERVICES

     SEC. 4441. 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) Collection of Data.--Section 1814(i) (42 U.S.C. 
     1395f(i)) is amended by adding at the end the following new 
     paragraph:
       ``(3) Hospice programs providing hospice care for which 
     payment is made under this subsection shall submit to the 
     Secretary such data with respect to the costs for providing 
     such care for each fiscal year, beginning with fiscal year 
     1999, as the Secretary determines necessary.''.

     SEC. 4442. 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. 4443. 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. 4444. OTHER ITEMS AND SERVICES INCLUDED IN HOSPICE CARE.

       (a) In General.--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.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to items or services furnished on or 
     after April 1, 1998.

     SEC. 4445. 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. 4446. WAIVER OF CERTAIN STAFFING REQUIREMENTS FOR 
                   HOSPICE CARE PROGRAMS IN NONURBANIZED AREAS.

       Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is amended--
       (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. 4447. 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. 4448. 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. 4449. 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 5--OTHER PAYMENT PROVISIONS

     SEC. 4451. 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, 
     no reduction in copayments under section 1833(t)(5)(B) shall 
     be treated as a bad

[[Page H6075]]

     debt and 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 45 percent of such amount 
     otherwise allowable.''.

     SEC. 4452. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH 
                   PAYMENT.

       Section 6011(d) of OBRA-1989 (as amended by section 13505 
     of OBRA-1993) is amended by striking ``and shall expire 
     September 30, 1994.'' and inserting ``and on or before 
     September 30, 1994, and on or after October 1, 1997.''.

     SEC. 4453. 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:
       ``(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 84 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 a 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).

     SEC. 4454. COVERAGE OF SERVICES IN RELIGIOUS NONMEDICAL 
                   HEALTH CARE INSTITUTIONS UNDER THE MEDICARE AND 
                   MEDICAID PROGRAMS.

       (a) Medicare Coverage.--
       (1) In general.--Section 1861 (42 U.S.C. 1395x) (as amended 
     by sections 4103 and 4106) is amended--
       (A) in the sixth sentence of subsection (e)--
       (i) by striking ``includes'' and all that follows up to 
     ``but only'' and inserting ``includes a religious nonmedical 
     health care institution (as defined in subsection 
     (ss)(1)),'', and
       (ii) by inserting ``consistent with section 1821'' before 
     the period;
       (B) in subsection (y)--
       (i) by amending the heading to read as follows:

  ``Extended Care in Religious Nonmedical Health Care Institutions'',

       (ii) in paragraph (1), by striking ``includes'' and all 
     that follows up to ``but only'' and inserting ``includes a 
     religious nonmedical health care institution (as defined in 
     subsection (ss)(1)),'', and
       (iii) by inserting ``consistent with section 1821'' before 
     the period; and
       (C) by adding at the end the following:

             ``Religious Nonmedical Health Care Institution

       ``(ss)(1) The term `religious nonmedical health care 
     institution' means an institution that--
       ``(A) is described in subsection (c)(3) of section 501 of 
     the Internal Revenue Code of 1986 and is exempt from taxes 
     under subsection (a) of such section;
       ``(B) is lawfully operated under all applicable Federal, 
     State, and local laws and regulations;
       ``(C) provides only nonmedical nursing items and services 
     exclusively to patients who choose to rely solely upon a 
     religious method of healing and for whom the acceptance of 
     medical health services would be inconsistent with their 
     religious beliefs;
       ``(D) provides such nonmedical items and services 
     exclusively through nonmedical nursing personnel who are 
     experienced in caring for the physical needs of such 
     patients;
       ``(E) provides such nonmedical items and services to 
     inpatients on a 24-hour basis;
       ``(F) on the basis of its religious beliefs, does not 
     provide through its personnel or otherwise medical items and 
     services (including any medical screening, examination, 
     diagnosis, prognosis, treatment, or the administration of 
     drugs) for its patients;
       ``(G)(i) is not owed by, under common ownership with, or 
     has an ownership interest in, a provider of medical treatment 
     of services;
       ``(ii) is not affiliated with--
       ``(I) a provider of medical treatment or services, or
       ``(II) an individual who has an ownership interest in a 
     provider of medical treatment or services;
       ``(H) has in effect a utilization review plan which--
       ``(i) provides for the review of admissions to the 
     institution, of the duration of stays therein, of cases of 
     continuous extended duration, and of the items and services 
     furnished by the institution,
       ``(ii) requires that such reviews be made by an appropriate 
     committee of the institution that includes the individuals 
     responsible for overall administration and for supervision of 
     nursing personnel at the institution,
       ``(iii) provides that records be maintained of the 
     meetings, decisions, and actions of such committee, and
       ``(iv) meets such other requirements as the Secretary finds 
     necessary to establish an effective utilization review plan;
       ``(I) provides the Secretary with such information as the 
     Secretary may require to implement section 1821, including 
     information relating to quality of care and coverage 
     determinations; and
       ``(J) meets such other requirements as the Secretary finds 
     necessary in the interest of the health and safety of 
     individuals who are furnished services in the institution.
       ``(2) To the extent that the Secretary finds that the 
     accreditation of an institution by a State, regional, or 
     national agency or association provides reasonable assurances 
     that any or all of the requirements of paragraph (1) are met 
     or exceeded, the Secretary may treat such institution as 
     meeting the condition or conditions with respect to which the 
     Secretary made such finding.
       ``(3)(A)(i) In administering this subsection and section 
     1821, the Secretary shall not require any patient of a 
     religious nonmedical health care institution to undergo 
     medical screening, examination, diagnosis, prognosis, or 
     treatment or to accept any other medical health care service, 
     if such patient (or legal representative of the patient) 
     objects thereto on religious grounds.
       ``(ii) Clause (i) shall not be construed as preventing the 
     Secretary from requiring under section 1821(a)(2) the 
     provision of sufficient information regarding an individual's 
     condition as a condition for receipt of benefits under part A 
     for services provided in such an institution.
       ``(B)(i) In administering this subsection and section 1821, 
     the Secretary shall not subject a religious nonmedical health 
     care institution or its personnel to any medical supervision, 
     regulation, or control, insofar as such supervision, 
     regulation, or control would be contrary to the religious 
     beliefs observed by the institution or such personnel.
       ``(ii) Clause (i) shall not be construed as preventing the 
     Secretary from reviewing items and services billed by the 
     institution to the extent the Secretary determines such 
     review to be necessary to determine whether such items and 
     services were not covered under part A, are excessive, or are 
     fraudulent.
       ``(4)(A) For purposes of paragraph (1)(G)(i), an ownership 
     interest of less than 5 percent shall not be taken into 
     account.
       ``(B) For purposes of paragraph (1)(G)(ii), none of the 
     following shall be considered to create an affiliation:
       ``(i) An individual serving as an uncompensated director, 
     trustee, officer, or other member of the governing body of a 
     religious nonmedical health care institution.
       ``(ii) An individual who is a director, trustee, officer, 
     employee, or staff member of a religious nonmedical health 
     care institution having a family relationship with an 
     individual who is affiliated with (or has an ownership 
     interest in) a provider of medical treatment or services.
       ``(iii) An individual or entity furnishing goods or 
     services as a vendor to both providers of medical treatment 
     or services and religious nonmedical health care 
     institutions.''.
       (2) Conditions of coverage.--Part A of title XVIII is 
     amended by adding at the end the following new section:

[[Page H6076]]

     ``conditions for coverage of religious nonmedical health care 
                         institutional services

       ``Sec. 1821. (a) In General.--Subject to subsections (c) 
     and (d), payment under this part may be made for inpatient 
     hospital services or post-hospital extended care services 
     furnished an individual in a religious nonmedical health care 
     institution only if--
       ``(1) the individual has an election in effect for such 
     benefits under subsection (b); and
       ``(2) the individual has a condition such that the 
     individual would qualify for benefits under this part for 
     inpatient hospital services or extended care services, 
     respectively, if the individual were an inpatient or resident 
     in a hospital or skilled nursing facility that was not such 
     an institution.
       ``(b) Election.--
       ``(1) In general.--An individual may make an election under 
     this subsection in a form and manner specified by the 
     Secretary consistent with this subsection. Unless otherwise 
     provided, such an election shall take effect immediately upon 
     its execution. Such an election, once made, shall continue in 
     effect until revoked.
       ``(2) Form.--The election form under this subsection shall 
     include the following:
       ``(A) A written statement, signed by the individual (or 
     such individual's legal representative), that--
       ``(i) the individual is conscientiously opposed to 
     acceptance of nonexcepted medical treatment; and
       ``(ii) the individual's acceptance of nonexcepted medical 
     treatment would be inconsistent with the individual's sincere 
     religious beliefs.
       ``(B) A statement that the receipt of nonexcepted medical 
     services shall constitute a revocation of the election and 
     may limit further receipt of services described in subsection 
     (a).
       ``(3) Revocation.--An election under this subsection by an 
     individual may be revoked by voluntarily notifying the 
     Secretary in writing of such revocation and shall be deemed 
     to be revoked if the individual receives nonexcepted medical 
     treatment for which reimbursement is made under this title.
       ``(4) Limitation on subsequent elections.--Once an 
     individual's election under this subsection has been made and 
     revoked twice--
       ``(A) the next election may not become effective until the 
     date that is 1 year after the date of most recent previous 
     revocation, and
       ``(B) any succeeding election may not become effective 
     until the date that is 5 years after the date of the most 
     recent previous revocation.
       ``(5) Excepted medical treatment.--For purposes of this 
     subsection:
       ``(A) Excepted medical treatment.--The term `excepted 
     medical treatment' means medical care or treatment (including 
     medical and other health services)--
       ``(i) received involuntarily, or
       ``(ii) required under Federal or State law or law of a 
     political subdivision of a State.
       ``(B) Nonexcepted medical treatment.--The term `nonexcepted 
     medical treatment' means medical care or treatment (including 
     medical and other health services) other than excepted 
     medical treatment.
       ``(c) Monitoring and Safeguard Against Excessive 
     Expenditures.--
       ``(1) Estimate of expenditures.--Before the beginning of 
     each fiscal year (beginning with fiscal year 2000), the 
     Secretary shall estimate the level of expenditures under this 
     part for services described in subsection (a) for that fiscal 
     year.
       ``(2) Adjustment in payments.--
       ``(A) Proportional adjustment.--If the Secretary determines 
     that the level estimated under paragraph (1) for a fiscal 
     year will exceed the trigger level (as defined in 
     subparagraph (C)) for that fiscal year, the Secretary shall, 
     subject to subparagraph (B), provide for such a proportional 
     reduction in payment amounts under this part for services 
     described in subsection (a) for the fiscal year involved as 
     will assure that such level (taking into account any 
     adjustment under subparagraph (B)) does not exceed the 
     trigger level for that fiscal year.
       ``(B) Alternative adjustments.--The Secretary may, instead 
     of making some or all of the reduction described in 
     subparagraph (A), impose such other conditions or limitations 
     with respect to the coverage of covered services (including 
     limitations on new elections of coverage and new facilities) 
     as may be appropriate to reduce the level of expenditures 
     described in paragraph (1) to the trigger level.
       ``(C) Trigger level.--For purposes of this subsection--
       ``(i) In general.--Subject to adjustment under paragraph 
     (3)(B), the `trigger level' for a year is the unadjusted 
     trigger level described in clause (ii).
       ``(ii) Unadjusted trigger level.--The `unadjusted trigger 
     level' for--

       ``(I) fiscal year 1998, is $20,000,000, or
       ``(II) a succeeding fiscal year is the amount specified 
     under this clause for the previous fiscal year increased by 
     the percentage increase in the consumer price index for all 
     urban consumers (all items; United States city average) for 
     the 12-month period ending with July preceding the 
     beginning of the fiscal year.
       ``(D) Prohibition of administrative and judicial review.--
     There shall be no administrative or judicial review under 
     section 1869, 1878, or otherwise of the estimation of 
     expenditures under subparagraph (A) or the application of 
     reduction amounts under subparagraph (B).
       ``(E) Effect on billing.--Notwithstanding any other 
     provision of this title, in the case of a reduction in 
     payment provided under this subsection for services of a 
     religious nonmedical health care institution provided to an 
     individual, the amount that the institution is otherwise 
     permitted to charge the individual for such services is 
     increased by the amount of such reduction.
       ``(3) Monitoring expenditure level.--
       ``(A) In general.--The Secretary shall monitor the 
     expenditure level described in paragraph (2)(A) for each 
     fiscal year (beginning with fiscal year 1999).
       ``(B) Adjustment in trigger level.--
       ``(i) In general.--If the Secretary determines that such 
     level for a fiscal year exceeded, or was less than, the 
     trigger level for that fiscal year, then, subject to clause 
     (ii), the trigger level for the succeeding fiscal year shall 
     be reduced, or increased, respectively, by the amount of such 
     excess or deficit.
       ``(ii) Limitation on carryforward.--In no case may the 
     increase effected under clause (i) for a fiscal year exceed 
     $50,000,000.
       ``(d) Sunset.--If the Secretary determines that the level 
     of expenditures described in subsection (c)(1) for 3 
     consecutive fiscal years (with the first such year being not 
     earlier than fiscal year 2002) exceeds the trigger level for 
     such expenditures for such years (as determined under 
     subsection (c)(2)), benefits shall be paid under this part 
     for services described in subsection (a) and furnished on or 
     after the first January 1 that occurs after such 3 
     consecutive years only with respect to an individual who has 
     an election in effect under subsection (b) as of such January 
     1 and only during the duration of such election.
       ``(e) Annual Report.--At the beginning of each fiscal year 
     (beginning with fiscal year 1999), the Secretary shall submit 
     to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate an 
     annual report on coverage and expenditures for services 
     described in subsection (a) under this part and under State 
     plans under title XIX. Such report shall include--
       ``(1) level of expenditures described in subsection (c)(1) 
     for the previous fiscal year and estimated for the fiscal 
     year involved;
       ``(2) trends in such level; and
       ``(3) facts and circumstances of any significant change in 
     such level from the level in previous fiscal years.''.
       (b) Medicaid.--
       (1) The third sentence of section 1902(a) (42 U.S.C. 
     1396a(a)) is amended by striking all that follows ``shall not 
     apply'' and inserting ``to a religious nonmedical health care 
     institution (as defined in section 1861(ss)(1)).''.
       (2) Section 1908(e)(1) (42 U.S.C. 1396g-1(e)(1)) is amended 
     by striking all that follows ``does not include'' and 
     inserting ``a religious nonmedical health care institution 
     (as defined in section 1861(ss)(1)).''.
       (c) Conforming Amendments.--
       (1) Section 1122(h) (42 U.S.C. 1320a-1(h)) is amended by 
     striking all that follows ``shall not apply to'' and 
     inserting ``a religious nonmedical health care institution 
     (as defined in section 1861(ss)(1)).''.
       (2) Section 1162 (42 U.S.C. 1320c-11) is amended--
       (A) by amending the heading to read as follows:

 ``exemptions for religious nonmedical health care institutions''; and

       (B) by striking all that follows ``shall not apply with 
     respect to a'' and inserting ``religious nonmedical health 
     care institution (as defined in section 1861(ss)(1)).''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     and shall apply to items and services furnished on or after 
     such date. By not later than July 1, 1998, the Secretary of 
     Health and Human Services shall first issue regulations to 
     carry out such amendments. Such regulations may be issued so 
     they are effective on an interim basis pending notice and 
     opportunity for public comment. For periods before the 
     effective date of such regulations, such regulations shall 
     recognize elections entered into in good faith in order to 
     comply with the requirements of section 1821(b) of the Social 
     Security Act.
             Subtitle F--Provisions Relating to Part B Only

              CHAPTER 1--SERVICES OF HEALTH PROFESSIONALS

                   Subchapter A--Physicians' Services

     SEC. 4501. 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 F of title IV 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 (j)(1), by striking ``The term'' and 
     inserting ``For services furnished before January 1, 1998, 
     the term''..

     SEC. 4502. 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:

[[Page H6077]]

       ``(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 (as estimated by the Secretary) to--
       ``(i) the difference between (I) the sum of the allowed 
     expenditures for physicians' services (as determined under 
     subparagraph (C)) for the period beginning April 1, 1997, and 
     ending on March 31 of the year involved, and (II) the amount 
     of actual expenditures for physicians' services furnished 
     during the period beginning April 1, 1997, and ending on 
     March 31 of the preceding year; divided by
       ``(ii) the actual expenditures for physicians' services for 
     the 12-month period ending on March 31 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 March 31 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 this subsection 
     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. 4503. 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 Medicare+Choice 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 resulting from the update adjustment 
     factor determined under subsection (d)(3)(B),
     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 
     Medicare+Choice plan enrollee.
       ``(B) Medicare+choice plan enrollee.--The term 
     `Medicare+Choice 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 Medicare+Choice 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 Amendment.--So much of section 1848(f) (42 
     U.S.C. 1395w-4(f)) as precedes paragraph (2) is amended to 
     read as follows:
       ``(f) Sustainable Growth Rate.--
       ``(1) Publication.--The Secretary shall cause to have 
     published in the Federal Register the sustainable growth rate 
     for each fiscal year beginning with fiscal year 1998. Such 
     publication shall occur by not later than August 1 before 
     each fiscal year, except that such rate for fiscal year 1998 
     shall be published not later than November 1, 1997.''.

     SEC. 4504. PAYMENT RULES FOR ANESTHESIA SERVICES.

       (a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-
     4(d)(1)), as amended by section 4501(a), is amended--
       (1) in subparagraph (C), by 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) Effective Date.--The amendments made by subsection (a) 
     shall apply to services furnished on or after January 1, 
     1998.

     SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES.

       (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) Review by Comptroller General.--The Comptroller General 
     of the United States shall review and evaluate the proposed 
     rule on resource-based methodology for practice expenses 
     issued by the Secretary of Health and Human Services. The 
     Comptroller General shall, within 6 months of the date of the 
     enactment of this Act, report to the Committees on Commerce 
     and Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate the results of its 
     evaluation, including an analysis of--
       (1) the adequacy of the data used in preparing the rule,
       (2) categories of allowable costs,
       (3) methods for allocating direct and indirect expenses,
       (4) the potential impact of the rule on beneficiary access 
     to services, and
       (5) any other matters related to the appropriateness of 
     resource-based methodology for practice expenses.
     The Comptroller General shall consult with representatives of 
     physicians' organizations with respect to matters of both 
     data and methodology.
       (d) Requirements for Developing New Resource-Based Practice 
     Expense Relative Value Units.--
       (1) Development.--For purposes of section 1848(c)(2)(C)(ii) 
     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 cost accounting principles 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;
       (B) consult with organizations representing physicians 
     regarding methodology and data to be used; and
       (C) develop a refinement process to be used during each of 
     the 4 years of the transition period.
       (2) Report.--The Secretary shall transmit a report by March 
     1, 1998, on the development of resource-based relative value 
     units under paragraph (1) to the Committee on Ways and Means 
     and the Committee on Commerce of the House of Representatives 
     and the Committee on Finance of the Senate. The report shall 
     include a presentation of data to be used in developing the 
     value units and an explanation of the methodology.
       (3) Notice of proposed rulemaking.--The Secretary shall 
     publish a notice of proposed rulemaking with the new 
     resource-based relative value units on or before May 1, 1998, 
     and shall allow for a 90-day public comment period.
       (4) Items included.--The new proposed rule shall consider 
     the following:
       (A) Impact projections which compare new proposed payment 
     amounts on data on actual physician practice expenses.
       (B) Impact projections for hospital-based and other 
     specialties, geographic payment localities, and urban versus 
     rural localities.
       (e) Adjustments to Relative Value Units for 1998.--Section 
     1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is amended by adding at 
     the end the following new subparagraph:
       ``(G) Adjustments in relative value units for 1998.--

[[Page H6078]]

       ``(i) In general.--The Secretary shall--

       ``(I) subject to clauses (iv) and (v), reduce the practice 
     expense relative value units applied to any services 
     described in clause (ii) furnished in 1998 to a number equal 
     to 110 percent of the number of work relative value units, 
     and
       ``(II) increase the practice expense relative value units 
     for office visit procedure codes during 1998 by a uniform 
     percentage which the Secretary estimates will result in an 
     aggregate increase in payments for such services equal to the 
     aggregate decrease in payments by reason of subclause (I).

       ``(ii) Services covered.--For purposes of clause (i), the 
     services described in this clause are physicians' services 
     that are not described in clause (iii) and for which--

       ``(I) there are work relative value units, and
       ``(II) the number of practice expense relative value units 
     (determined for 1998) exceeds 110 percent of the number of 
     work relative value units (determined for such year).

       ``(iii) Excluded services.--For purposes of clause (ii), 
     the services described in this clause are services which the 
     Secretary determines at least 75 percent of which are 
     provided under this title in an office setting.
       ``(iv) Limitation on aggregate reallocation.--If the 
     application of clause (i)(I) would result in an aggregate 
     amount of reductions under such clause in excess of 
     $390,000,000, such clause shall be applied by substituting 
     for 110 percent such greater percentage as the Secretary 
     estimates will result in the aggregate amount of such 
     reductions equaling $390,000,000.
       ``(v) No reduction for certain services.--Practice expense 
     relative value units for a procedure performed in an office 
     or in a setting out of an office shall not be reduced under 
     clause (i) if the in-office or out-of-office practice expense 
     relative value, respectively, for the procedure would 
     increase under the proposed rule on resource-based practice 
     expenses issued by the Secretary on June 18, 1997 (62 Federal 
     Register 33158 et seq.).''.
       (f) Application of Resource-Based Methodology to 
     Malpractice Relative Value Units.--
       (1) In general.--Section 1848(c)(2)(C)(iii) (42 U.S.C. 
     1395w-4(c)(2)(C)(iii)) is amended--
       (A) in paragraph (2)(C)(iii)--
       (i) by inserting ``for the service for years before 2000'' 
     before ``equal'', and
       (ii) by striking the period at the end and inserting a 
     comma and by adding at the end the following flush matter:
     ``and for years beginning with 2000 based on the malpractice 
     expense resources involved in furnishing the service.''; and
       (B) in paragraph (3)(C)(iii), by striking ``The 
     malpractice'' and inserting ``For years before 1999, the 
     malpractice''.
       (2) Application of certain budget neutrality provisions.--
     In implementing the amendment made by paragraph (1)(A)(ii), 
     the provisions of clauses (ii)(II) and (iii) of section 
     1848(c)(2)(B) of the Social Security Act (42 U.S.C. 1395w-
     4(c)(2)(B)) shall apply in the same manner as they apply to 
     adjustments under clause (ii)(I) of such section.

     SEC. 4506. 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 subset of medical staffs; evaluation of 
     responses.--The Secretary shall notify the medical executive 
     committee of a subset of the hospitals identified 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). The Secretary shall 
     evaluate the responses of the hospitals so notified with 
     the responses of other hospitals so identified that were 
     not so notified.
       (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 (42 U.S.C. 1395w-4(c)(2)) 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 among hospitals and 
     disproportionate share status and teaching 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 among 
     hospitals, and in 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 (42 U.S.C. 1395ww(d)(5)). 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. 4507. USE OF PRIVATE CONTRACTS BY MEDICARE 
                   BENEFICIARIES.

       (a) Items or Services Provided Through Private Contracts.--
       (1) In general.--Section 1802 (42 U.S.C. 1395a) is amended 
     by adding at the end the following new subsection:
       ``(b) Use of Private Contracts by Medicare Beneficiaries.--
       ``(1) In general.--Subject to the provisions of this 
     subsection, nothing in this title shall prohibit a physician 
     or practitioner from entering into a private contract with a 
     medicare beneficiary for any item or service--
       ``(A) for which no claim for payment is to be submitted 
     under this title, and
       ``(B) for which the physician or practitioner receives--
       ``(i) no reimbursement under this title directly or on a 
     capitated basis, and
       ``(ii) receives no amount for such item or service from an 
     organization which receives reimbursement for such item or 
     service under this title directly or on a capitated basis.
       ``(2) Beneficiary protections.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     contract unless--
       ``(i) the contract is in writing and is signed by the 
     medicare beneficiary before any item or service is provided 
     pursuant to the contract;
       ``(ii) the contract contains the items described in 
     subparagraph (B); and
       ``(iii) the contract is not entered into at a time when the 
     medicare beneficiary is facing an emergency or urgent health 
     care situation.
       ``(B) Items required to be included in contract.--Any 
     contract to provide items and services to which paragraph (1) 
     applies shall clearly indicate to the medicare beneficiary 
     that by signing such contract the beneficiary--
       ``(i) agrees not to submit a claim (or to request that the 
     physician or practitioner submit a claim) under this title 
     for such items or services even if such items or services are 
     otherwise covered by this title;
       ``(ii) agrees to be responsible, whether through insurance 
     or otherwise, for payment of such items or services and 
     understands that no reimbursement will be provided under this 
     title for such items or services;
       ``(iii) acknowledges that no limits under this title 
     (including the limits under section 1848(g)) apply to amounts 
     that may be charged for such items or services;
       ``(iv) acknowledges that Medigap plans under section 1882 
     do not, and other supplemental insurance plans may elect not 
     to, make payments for such items and services because payment 
     is not made under this title; and
       ``(v) acknowledges that the medicare beneficiary has the 
     right to have such items or services provided by other 
     physicians or practitioners for whom payment would be made 
     under this title.
     Such contract shall also clearly indicate whether the 
     physician or practitioner is excluded from participation 
     under the medicare program under section 1128.
       ``(3) Physician or practitioner requirements.--
       ``(A) In general.--Paragraph (1) shall not apply to any 
     contract entered into by a physician or practitioner unless 
     an affidavit described in subparagraph (B) is in effect 
     during the period any item or service is to be provided 
     pursuant to the contract.

[[Page H6079]]

       ``(B) Affidavit.--An affidavit is described in this 
     subparagraph if--
       ``(i) the affidavit identifies the physician or 
     practitioner and is in writing and is signed by the physician 
     or practitioner;
       ``(ii) the affidavit provides that the physician or 
     practitioner will not submit any claim under this title for 
     any item or service provided to any medicare beneficiary (and 
     will not receive any reimbursement or amount described in 
     paragraph (1)(B) for any such item or service) during the 2-
     year period beginning on the date the affidavit is signed; 
     and
       ``(iii) a copy of the affidavit is filed with the Secretary 
     no later than 10 days after the first contract to which such 
     affidavit applies is entered into.
       ``(C) Enforcement.--If a physician or practitioner signing 
     an affidavit under subparagraph (B) knowingly and willfully 
     submits a claim under this title for any item or service 
     provided during the 2-year period described in subparagraph 
     (B)(ii) (or receives any reimbursement or amount described in 
     paragraph (1)(B) for any such item or service) with respect 
     to such affidavit--
       ``(i) this subsection shall not apply with respect to any 
     items and services provided by the physician or practitioner 
     pursuant to any contract on and after the date of such 
     submission and before the end of such period; and
       ``(ii) no payment shall be made under this title for any 
     item or service furnished by the physician or practitioner 
     during the period described in clause (i) (and no 
     reimbursement or payment of any amount described in paragraph 
     (1)(B) shall be made for any such item or service).
       ``(4) Limitation on actual charge and claim submission 
     requirement not applicable.--Section 1848(g) shall not apply 
     with respect to any item or service provided to a medicare 
     beneficiary under a contract described in paragraph (1).
       ``(5) Definitions.--In this subsection:
       ``(A) Medicare beneficiary.--The term `medicare 
     beneficiary' means an individual who is entitled to benefits 
     under part A or enrolled under part B.
       ``(B) Physician.--The term `physician' has the meaning 
     given such term by section 1861(r)(1).
       ``(C) Practitioner.--The term `practitioner' has the 
     meaning given such term by section 1842(b)(18)(C).''
       (2) Conforming amendments.--
       (A) Section 1802 (42 U.S.C. 1395a) is amended by striking 
     ``Any'' and inserting ``(a) Basic Freedom of Choice.--Any''.
       (B) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by 
     sections 4319(b) and 4432, is amended by striking ``or'' at 
     the end of paragraph (17), by striking the period at the end 
     of paragraph (18) and inserting ``; or'', and by adding after 
     paragraph (18) the following new paragraph:
       ``(19) which are for items or services which are furnished 
     pursuant to a private contract described in section 
     1802(b).''
       (b) Report.--Not later than October 1, 2001, the Secretary 
     of Health and Human Services shall submit a report to 
     Congress on the effect on the program under this title of 
     private contracts entered into under the amendment made by 
     subsection (a). Such report shall include--
       (1) analyses regarding--
       (A) the fiscal impact of such contracts on total Federal 
     expenditures under title XVIII of the Social Security Act and 
     on out-of-pocket expenditures by medicare beneficiaries for 
     health services under such title; and
       (B) the quality of the health services provided under such 
     contracts; and
       (2) recommendations as to whether medicare beneficiaries 
     should continue to be able to enter private contracts under 
     section 1802(b) of such Act (as added by subsection (a)) and 
     if so, what legislative changes, if any should be made to 
     improve such contracts.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to contracts entered into on and 
     after January 1, 1998.

             Subchapter B--Other Health Care Professionals

     SEC. 4511. 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) (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 4432(a) (relating 
     to prospective payment system for rehabilitation hospitals), 
     is amended by striking ``through (iii)'' and inserting ``and 
     (ii)''.
       (b) Increased Payment.--
       (1) Fee schedule amount.--Subparagraph (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.--Section 1833(r) (42 U.S.C. 
     1395l(r)) is amended--
       (A) 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)'';
       (B) by striking paragraph (2);
       (C) in paragraph (3), by striking ``section 
     1861(s)(2)(K)(iii)'' and inserting ``section 
     1861(s)(2)(K)(ii)''; and
       (D) by redesignating paragraph (3) as paragraph (2).
       (c) Direct Payment for Nurse Practitioners and Clinical 
     Nurse Specialists.--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''.
       (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--
       ``(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. 4512. 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)), as amended by 
     section 4511, 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.--
       (1) Fee schedule amount.--Section 1833(a)(1)(O) (42 U.S.C. 
     1395l(a)(1)(O)), as amended by section 4511, is further 
     amended--
       (A) by striking ``section 1861(s)(2)(K)(ii)'' and inserting 
     ``1861(s)(2)(K)'', and
       (B) by striking ``nurse practitioner or clinical nurse 
     specialist services'' and inserting ``services furnished by 
     physician assistants, nurse practitioners, or clinic nurse 
     specialists''.
       (2) Conforming amendment.--Paragraph (12) of section 
     1842(b) (42 U.S.C. 1395u(b)) is repealed.
       (c) Removal of Restriction on Employment Relationship.--
     Section 1842(b)(6) (42 U.S.C. 1395u(b)(6)), as amended by 
     section 4205, is amended by adding at the end the following 
     new sentence: ``For purposes of subparagraph (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. 4513. 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, 2000.
       (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.

[[Page H6080]]

     CHAPTER 2--PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES

     SEC. 4521. 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. 4522. 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. 4523. 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) Amount of payment.--
       ``(A) In general.--With respect to covered OPD services (as 
     defined in subparagraph (B)) 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.
       ``(B) Definition of covered opd services.--For purposes of 
     this subsection, the term `covered OPD services'--
       ``(i) means hospital outpatient services designated by the 
     Secretary;
       ``(ii) subject to clause (iii), includes inpatient hospital 
     services designated by the Secretary that are covered under 
     this part and furnished to a hospital inpatient who (I) is 
     entitled to benefits under part A but has exhausted benefits 
     for inpatient hospital services during a spell of illness, or 
     (II) is not so entitled; but
       ``(iii) does not include any therapy services described in 
     subsection (a)(8) or ambulance services, for which payment is 
     made under a fee schedule described in section 1834(k) or 
     section 1834(l).
       ``(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 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 sum of--
       ``(i) 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
       ``(ii) the total amounts of copayments estimated to be paid 
     under this subsection by beneficiaries to hospitals for 
     covered OPD services in 1999, as though the deductible under 
     section 1833(b) did not 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 the 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 20 percent of amount determined 
     under subparagraph (D).
       ``(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) For 1999.--

       ``(I) In general.--The Secretary shall establish a 1999 
     conversion factor for determining the medicare OPD fee 
     schedule 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 such a 
     manner 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 Secretary shall determine 
     for each service or group the product of the medicare OPD fee 
     schedule amounts (taking into account appropriate adjustments 
     described in paragraphs (2)(D) and (2)(E)) and the estimated 
     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 fee schedule increase factor specified 
     under clause (iii) for the year involved.
       ``(iii) OPD fee schedule increase factor.--For purposes of 
     this subparagraph, the `OPD fee schedule increase factor' for 
     services furnished in a year is equal to the market basket 
     percentage increase applicable under section 
     1886(b)(3)(B)(iii) to hospital discharges occurring during 
     the fiscal year ending in such year, reduced by 1 percentage 
     point for such factor for services furnished in each of 2000, 
     2001, and 2002. In applying the previous sentence for years 
     beginning with 2000, the Secretary may substitute for the 
     market basket percentage increase 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) 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.
       ``(E) 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 medicare OPD fee schedule amount established 
     under subparagraph (D) for the year, minus the unadjusted 
     copayment amount determined under subparagraph (B) for the 
     service or group, to
       ``(ii) the medicare OPD fee schedule amount determined 
     under subparagraph (D) for the year for such 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 adjustments.--The medicare OPD fee 
     schedule amount (computed under paragraph (3)(D)) for the 
     service or group and year is adjusted for relative 
     differences in the cost of labor and other factors determined 
     by the Secretary, as computed under paragraphs (2)(D) and 
     (2)(E).
       ``(B) Subtract applicable deductible.--Reduce the adjusted 
     amount determined under subparagraph (A) by the amount of the 
     deductible under section 1833(b), to the extent applicable.
       ``(C) Apply payment proportion to remainder.--The amount of 
     payment is the amount so determined under subparagraph (B) 
     multiplied by the pre-deductible payment percentage (as 
     determined under paragraph (3)(E)) for the service or group 
     and year involved.
       ``(5) Copayment amount.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the copayment amount under this subsection is the amount by 
     which the amount described in paragraph (4)(B) exceeds the 
     amount of payment determined under paragraph (4)(C).
       ``(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 20 percent of the medicare 
     OPD fee schedule amount (computed under paragraph (3)(D)) for 
     the service involved. 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.

[[Page H6081]]

       ``(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 paragraph (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), or, if applicable, the fee 
     schedule established under section 1834(l).
       ``(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. 1395l(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. 1395l(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, subsection (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''.

                     CHAPTER 3--AMBULANCE SERVICES

     SEC. 4531. 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)), as amended by section 
     4451, 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 
     fiscal year 1998, during fiscal year 1999, and during so much 
     of fiscal year 2000 as precedes January 1, 2000, 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 by 1.0 percentage point. For 
     ambulance services provided after June 30, 1998, the 
     Secretary may provide that claims for such services must 
     include a code (or codes) under a uniform coding system 
     specified by the Secretary that identifies the services 
     furnished.''.
       (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 calendar year 1998 and calendar 
     year 1999 may not exceed the reasonable charge for such 
     services provided during the previous calendar year (after 
     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 by 1.0 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 
     4315(b), is amended--
       (A) by striking ``and (Q)'' and inserting ``(Q)''; and
       (B) by striking the semicolon at the end and inserting the 
     following: ``, and (R) 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 4541, 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 whether provided 
     directly by a supplier or provider or under arrangement with 
     a provider 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 4531(a) of the Balanced Budget 
     Act of 1997 continued in effect, except that in making such 
     determination the Secretary shall assume an update in such 
     payments for 2002 equal to 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 reduced in the case of 2001 and 2002 by 1.0 
     percentage points; 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 services 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 reduced in 
     the case of 2001 and 2002 by 1.0 percentage points.
       ``(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).
       ``(7) Coding system.--The Secretary may require the claim 
     for any services for which the

[[Page H6082]]

     amount of payment is determined under this subsection to 
     include a code (or codes) under a uniform coding system 
     specified by the Secretary that identifies the services 
     furnished.''
       (3) Effective date.--The amendments made by this subsection 
     shall apply to 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. 4532. 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 unit of local government, the Secretary 
     enters into a contract with the unit of local government 
     under which--
       (1) the unit of local government 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 unit of local government 
     who are enrolled under such part, except that the unit of 
     local government may not enter into the contract unless the 
     contract covers at least 80 percent of the individuals 
     residing in the unit of local government who are enrolled 
     under such part but not in a Medicare+Choice plan;
       (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 unit of local 
     government 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 unit of local 
     government 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 unit of 
     local government may include in a contract under this section 
     such other terms as the parties consider appropriate, 
     including--
       (1) covering individuals residing in additional units of 
     local government (under arrangements entered into between 
     such units and the unit of local government involved);
       (2) permitting the unit of local government 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 unit of 
     local government 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 unit of local government 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 unit of local government.
       (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 4--PROSPECTIVE PAYMENT FOR OUTPATIENT REHABILITATION SERVICES

     SEC. 4541. PROSPECTIVE PAYMENT FOR OUTPATIENT REHABILITATION 
                   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 (3), by striking ``subparagraphs (D) and 
     (E) of section 1832(a)(2)'' and inserting ``section 
     1832(a)(2)(D)'';
       (C) in paragraph (6), by striking ``and'' at the end;
       (D) in paragraph (7), by striking the period at the end and 
     inserting a semicolon; and
       (E) by adding at the end the following new paragraphs:
       ``(8) in the case of--
       ``(A) outpatient physical therapy services (which includes 
     outpatient speech-language pathology services) and outpatient 
     occupational therapy services furnished--
       ``(i) by a rehabilitation agency, public health agency, 
     clinic, comprehensive outpatient rehabilitation facility, or 
     skilled nursing facility,
       ``(ii) by a home health agency to an individual who is not 
     homebound, or
       ``(iii) by another entity under an arrangement with an 
     entity described in clause (i) or (ii); and
       ``(B) outpatient physical therapy services (which includes 
     outpatient speech-language pathology services) and outpatient 
     occupational therapy services furnished--
       ``(i) by a hospital to an outpatient or to a hospital 
     inpatient who is entitled to benefits under part A but has 
     exhausted benefits for inpatient hospital services during a 
     spell of illness or is not so entitled to benefits under part 
     A, or
       ``(ii) by another entity under an arrangement with a 
     hospital described in clause (i),
     the amounts described in section 1834(k); and
       ``(9) in the case of services described in section 
     1832(a)(2)(E) that are not described in paragraph (8), 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 and 
     Comprehensive Outpatient Rehabilitation Services.--
       ``(1) In general.--With respect to services described in 
     section 1833(a)(8) or 1833(a)(9) 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 subsection, 
     the term `applicable fee schedule amount' means, with respect 
     to services furnished in a year, the amount determined under 
     the fee schedule established under section 1848 for such 
     services furnished during the year or, if there is no such 
     fee schedule established for such services, the amount 
     determined under the fee schedule established for such 
     comparable services as the Secretary specifies.
       ``(4) Adjusted reasonable costs.--In paragraph (2), the 
     term `adjusted reasonable costs' means, with respect to any 
     services, reasonable costs determined for such services, 
     reduced by 10 percent. The 10-percent reduction shall not 
     apply to services described in section 1833(a)(8)(B) 
     (relating to services provided by hospitals).
       ``(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).''.
       (3) Conforming change in billing.--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 services 
     described in section 1833(a)(8) or section 1833(a)(9) for 
     which payment is made under part B under section 1834(k), 
     clause (ii) of the first sentence shall be applied by 
     substituting for 20 percent of the reasonable charge for such 
     services 20 percent of the lesser of the actual charge or the 
     applicable fee schedule amount (as defined in such section) 
     for such services.''.

[[Page H6083]]

       (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 sections 4319(b), 4432(b), and 4507(a)(2)(B), (42 
     U.S.C. 1395y(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (18);
       (2) by striking the period at the end of paragraph (19) and 
     inserting ``; or''; and
       (3) by inserting after paragraph (19) the following:
       ``(20) 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 (other than any licensing 
     requirement specified by the Secretary) under the second 
     sentence of section 1861(p) (or under such sentence through 
     the operation of section 1861(g)) 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), but not described in section 1833(a)(8)(B), and 
     physical therapy services of such type which are furnished by 
     a physician or as incident to physicians' services'', 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) 
     (but not described in section 1833(a)(8)(B)) through the 
     operation of section 1861(g) and of such type which are 
     furnished by a physician or as incident to physicians' 
     services)''.
       (d) Indexing Limitation.--
       (1) In general.--Section 1833(g) (42 U.S.C. 1395l(g)), as 
     amended by subsection (c), is further amended--
       (A) by striking ``$900'' each place it appears and 
     inserting ``the amount specified in paragraph (2) for the 
     year'',
       (B) by inserting ``(1)'' after ``(g)'',
       (C) by designating the last sentence as a paragraph (3), 
     and
       (D) by inserting before paragraph (3), as so designated, 
     the following:
       ``(2) The amount specified in this paragraph--
       ``(A) for 1999, 2000, and 2001, is $1,500, and
       ``(B) for a subsequent year is the amount specified in this 
     paragraph for the preceding year increased by the percentage 
     increase in the MEI (as defined in section 1842(i)(3)) for 
     such subsequent year;

     except that if an increase under subparagraph (B) for a year 
     is not a multiple of $10, it shall be rounded to the nearest 
     multiple of $10.''.
       (2) Report.--By not later than January 1, 2001, the 
     Secretary of Health and Human Services shall submit to 
     Congress a report that includes recommendations on the 
     establishment of a revised coverage policy of outpatient 
     physical therapy services and outpatient occupational therapy 
     services under the Social Security Act based on 
     classification of individuals by diagnostic category and 
     prior use of services, in both inpatient and outpatient 
     settings, in place of the uniform dollar limitations 
     specified in section 1833(g) of such Act, as amended by 
     paragraph (1). The recommendations shall include how such a 
     system of durational limits by diagnostic category might be 
     implemented in a budget-neutral manner.
       (e) Effective Dates.--
       (1) The amendments made by subsections (a)(1), (a)(2), and 
     (b) apply to services furnished on or after January 1, 1998, 
     including portions of cost reporting periods occurring on or 
     after such date, except that section 1834(k) of the Social 
     Security Act (as added by subsection (a)(2)) shall not apply 
     to services described in section 1833(a)(8)(B) of such Act 
     (as added by subsection (a)(1)) that are furnished during 
     1998.
       (2) The amendments made by subsections (a)(3) and (c) apply 
     to services furnished on or after January 1, 1999.
       (3) The amendments made by subsection (d)(1) apply to 
     expenses incurred on or after January 1, 1999.

                  CHAPTER 5--OTHER PAYMENT PROVISIONS

     SEC. 4551. 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) in subparagraph (A), by striking ``and'' at the end;
       (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 new subparagraphs:
       ``(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) in clause (iii), by striking ``, and'' at the end 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;''.
       (b) Payment Freeze for Parenteral and Enteral Nutrients, 
     Supplies, and Equipment.--In determining the amount of 
     payment under part B of title XVIII of the Social Security 
     Act with respect to parenteral and enteral nutrients, 
     supplies, and equipment during each of the years 1998 through 
     2002, the charges determined to be reasonable with respect to 
     such nutrients, supplies, and equipment may not exceed the 
     charges determined to be reasonable with respect to such 
     nutrients, supplies, and equipment during 1995.
       (c) Upgraded Durable Medical Equipment.--
       (1) In general.--Section 1834(a) (42 U.S.C. 1395m(a)), as 
     amended by section 4312(a), is amended by inserting after 
     paragraph (16) the following new paragraph:
       ``(17) Certain upgraded items.--
       ``(A) Individual's right to choose upgraded item.--
     Notwithstanding any other provision of this title, the 
     Secretary may issue regulations under which an individual may 
     purchase or rent from a supplier an item of upgraded durable 
     medical equipment for which payment would be made under this 
     subsection if the item were a standard item.
       ``(B) Payments to supplier.--In the case of the purchase or 
     rental of an upgraded item under subparagraph (A)--
       ``(i) the supplier shall receive payment under this 
     subsection with respect to such item as if such item were a 
     standard item; and
       ``(ii) the individual purchasing or renting the item shall 
     pay the supplier an amount equal to the difference between 
     the supplier's charge and the amount under clause (i).

     In no event may the supplier's charge for an upgraded item 
     exceed the applicable fee schedule amount (if any) for such 
     item.
       ``(C) Consumer protection safeguards.--Any regulations 
     under subparagraph (A) shall provide for consumer protection 
     standards with respect to the furnishing of upgraded 
     equipment under subparagraph (A). Such regulations shall 
     provide for--
       ``(i) determination of fair market prices with respect to 
     an upgraded item;
       ``(ii) full disclosure of the availability and price of 
     standard items and proof of receipt of such disclosure 
     information by the beneficiary before the furnishing of the 
     upgraded item;
       ``(iii) conditions of participation for suppliers in the 
     billing arrangement;
       ``(iv) sanctions of suppliers who are determined to engage 
     in coercive or abusive practices, including exclusion; and
       ``(v) such other safeguards as the Secretary determines are 
     necessary.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to purchases or rentals after the effective date 
     of any regulations issued pursuant to such amendment.

     SEC. 4552. OXYGEN AND OXYGEN EQUIPMENT.

       (a) In General.--Section 1834(a)(9)(B) (42 U.S.C. 
     1395m(a)(9)(B)) is amended--
       (1) in clause (iii), by striking ``and'' at the end;
       (2) in clause (iv)--
       (A) by striking ``each subsequent year'' and inserting 
     ``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) for 1998, 75 percent of the amount determined under 
     this subparagraph for 1997; and
       ``(vi) for 1999 and each subsequent year, 70 percent of the 
     amount determined under this subparagraph for 1997.''.
       (b) Establishment of Classes for Payment.--Section 
     1848(a)(9) (42 U.S.C. 1395m(a)(9)) is amended by adding at 
     the end the following new subparagraph:
       ``(D) Authority to create classes.--
       ``(i) In general.--Subject to clause (ii), the Secretary 
     may establish separate classes for any item of oxygen and 
     oxygen equipment and separate national limited monthly 
     payment rates for each of such classes.
       ``(ii) Budget neutrality.--The Secretary may take actions 
     under clause (i) only to the extent such actions do not 
     result in expenditures for any year to be more or less than 
     the expenditures which would have been made if such actions 
     had not been taken.''.
       (c) Standards.--The Secretary shall as soon as practicable 
     establish service standards for persons seeking payment under 
     part B of title XVIII of the Social Security Act for the 
     providing of oxygen and oxygen equipment to beneficiaries 
     within their homes.
       (d) Access to Home Oxygen Equipment.--
       (1) Study.--The Comptroller General of the United States 
     shall study issues relating to access to home oxygen 
     equipment and shall, within 18 months after the date of the 
     enactment of this Act, report to the Committees on Commerce 
     and Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate the results of the study, 
     including recommendations (if any) for legislation.
       (2) Peer review evaluation.--The Secretary of Health and 
     Human Services shall arrange for peer review organizations 
     established under section 1154 of the Social Security Act to 
     evaluate access to, and quality of, home oxygen equipment.
       (e) Effective Date.--
       (1) Oxygen.--The amendments made by subsection (a) shall 
     apply to items furnished on and after January 1, 1998.

[[Page H6084]]

       (2) Other provisions.--The amendments made by this section 
     other than subsection (a) shall take effect on the date of 
     the enactment of this Act.

     SEC. 4553. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR 
                   CLINICAL DIAGNOSTIC LABORATORY TESTS; STUDY ON 
                   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 74 percent of 
     such median.''.
       (c) Study and Report on Clinical Laboratory Tests.--
       (1) In general.--The Secretary shall request the Institute 
     of Medicine of the National Academy of Sciences to conduct a 
     study of payments under part B of title XVIII of the Social 
     Security Act for clinical laboratory tests. The study shall 
     include a review of the adequacy of the current methodology 
     and recommendations regarding alternative payment systems. 
     The study shall also analyze and discuss the relationship 
     between such payment systems and access to high quality 
     laboratory tests for medicare beneficiaries, including 
     availability and access to new testing methodologies.
       (2) Report to congress.--The Secretary shall, not later 
     than 2 years after the date of enactment of this section, 
     report to the Committees on Ways and Means and Commerce of 
     the House of Representatives and the Committee on Finance of 
     the Senate the results of the study described in paragraph 
     (1), including any recommendations for legislation.

     SEC. 4554. IMPROVEMENTS IN ADMINISTRATION OF LABORATORY TESTS 
                   BENEFIT.

       (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 furnished on or after such date 
     (not later than July 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 shall 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.
       (5) Secretarial exclusion.--Paragraph (1) shall not apply 
     with respect to clinical diagnostic laboratory tests 
     furnished by physician office laboratories if the Secretary 
     determines that such offices would be unduly burdened by the 
     application of billing responsibilities with respect to more 
     than one carrier.
       (b) Adoption of National Policies for Clinical Laboratory 
     Tests Benefit.--
       (1) In general.--Not later than January 1, 1999, the 
     Secretary shall first adopt, consistent with paragraph (2), 
     national coverage and administrative 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 national policies.--The 
     policies under paragraph (1) shall be designed to promote 
     program integrity and national uniformity and simplify 
     administrative requirements 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) The medical conditions for which a laboratory test is 
     reasonable and necessary (within the meaning of section 
     1862(a)(1)(A) of the Social Security Act).
       (C) The appropriate use of procedure codes in billing for a 
     laboratory test, including the unbundling of laboratory 
     services.
       (D) The medical documentation that is required by a 
     medicare contractor at the time a claim is submitted for a 
     laboratory test in accordance with section 1833(e) of the 
     Social Security Act.
       (E) Recordkeeping requirements in addition to any 
     information required to be submitted with a claim, including 
     physicians' obligations regarding such requirements.
       (F) Procedures for filing claims and for providing 
     remittances by electronic media.
       (G) Limitation on frequency of coverage for the same tests 
     performed on the same individual.
       (3) Changes in laboratory policies pending adoption of 
     national policy.--During the period that begins on the date 
     of the enactment of this Act and ends on the date the 
     Secretary first implements national 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 policies.--After the date the Secretary 
     first implements such national 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 
     tests. 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 policies 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 national 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 policies 
     developed under paragraph (4) or (5). Based upon such review, 
     the Secretary may provide for appropriate changes in the 
     national policies previously adopted under this 
     subsection.
       (7) Requirement and notice.--The Secretary shall ensure 
     that any policies adopted under paragraph (3), (4), or (5) 
     shall apply to all laboratory claims payable under part B of 
     title XVIII of the Social Security Act, and 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 a carrier to advise such 
     carrier with respect to coverage and administrative policies 
     under part B of title XVIII of the Social Security Act shall 
     include an individual to represent the independent clinical 
     laboratories and such other laboratories as the Secretary 
     deems appropriate. The Secretary shall consider 
     recommendations from national and local organizations that 
     represent independent clinical laboratories in such 
     selection.

     SEC. 4555. UPDATES FOR AMBULATORY SURGICAL SERVICES.

       Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended 
     by inserting at the end the following new sentence: ``In each 
     of the fiscal years 1998 through 2002, the increase under 
     this subparagraph shall be reduced (but not below zero) by 
     2.0 percentage points.''.

     SEC. 4556. 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)(1) 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.
       ``(2) If payment for a drug or biological is made to a 
     licensed pharmacy approved to dispense drugs or biologicals 
     under this part, the Secretary may pay a dispensing fee (less 
     the applicable deductible and coinsurance amounts) to the 
     pharmacy.''.
       (b) Conforming Amendment.--Section 1833(a)(1) (42 U.S.C. 
     1395l(a)(1)), as amended by sections 4315(b) and 4531(b)(1), 
     is amended--
       (1) by striking ``and (R)'' and inserting ``(R)''; and
       (2) by striking the semicolon at the end and inserting the 
     following: ``, and (S) with respect to drugs and biologicals 
     not paid on a cost or prospective payment basis as otherwise 
     provided in this part (other than items and services 
     described in subparagraph (B)), the amounts paid shall be 80 
     percent of the lesser of the actual charge or the payment 
     amount established in section 1842(o);''.
       (c) Study and Report.--The Secretary of Health and Human 
     Services shall study the effect on the average wholesale 
     price of drugs and biologicals of the amendments made by 
     subsection (a) and shall report to the Committees on Ways and 
     Means and Commerce of the House of Representatives and the 
     Committee on Finance of the Senate the result of such study 
     not later than July 1, 1999.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to drugs and biologicals furnished on or 
     after January 1, 1998.

     SEC. 4557. 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 by sections 4104 and 4105, is 
     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 as

[[Page H6085]]

     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) Effective Date.--The amendments made by subsection (a) 
     shall apply to items and services furnished on or after 
     January 1, 1998.

     SEC. 4558. RENAL DIALYSIS-RELATED SERVICES.

       (a) Auditing of Cost Reports.--Beginning with cost reports 
     for 1996, the Secretary shall audit cost reports of each 
     renal dialysis provider at least once every 3 years.
       (b) Implementation of Quality Standards.--The Secretary of 
     Health and Human Services shall develop, by not later than 
     January 1, 1999, and implement, by not later than January 1, 
     2000, a method to measure and report quality of renal 
     dialysis services provided under the medicare program under 
     title XVIII of the Social Security Act.

     SEC. 4559. TEMPORARY COVERAGE RESTORATION FOR PORTABLE 
                   ELECTROCARDIOGRAM TRANSPORTATION.

       (a) In General.--Effective only 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 payment methods in effect 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 make a 
     recommendation to the Committees on Commerce and Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate as to whether coverage of portable 
     electrocardiogram transportation should be provided under 
     part B of title XVIII of the Social Security Act. In making 
     such recommendation, the Secretary shall take into account 
     the study of coverage of portable electrocardiogram 
     transportation conducted by the Comptroller General of the 
     United States and other relevant information, including 
     information submitted by interested parties.

            CHAPTER 6--PART B PREMIUM AND RELATED PROVISIONS

          Subchapter A--Determination of Part B Premium Amount

     SEC. 4571. PART B PREMIUM.

       (a) In General.--Section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) 
     is amended by striking the first 3 sentences and inserting 
     the following: ``The Secretary, during September of each 
     year, shall determine and promulgate a monthly premium rate 
     for the succeeding calendar year that is 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) in the first sentence of subsection (b), by striking 
     ``or (e)'';
       (D) by striking subsection (e); and
       (E) 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''.

        Subchapter B--Other Provisions Related to Part B Premium

     SEC. 4581. PROTECTIONS UNDER THE MEDICARE PROGRAM FOR 
                   DISABLED WORKERS WHO LOSE BENEFITS UNDER A 
                   GROUP HEALTH PLAN.

       (a) No Premium Penalty for Late Enrollment.--The first 
     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) 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 
     current or former employment or by reason of the current or 
     former employment status of a member of the individual's 
     family, 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 current employment or by reason of the current 
     employment of a member of the individual's family,
     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 first 
     day of the month which includes 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. 4582. GOVERNMENTAL ENTITIES ELIGIBLE TO ELECT TO PAY 
                   PART B PREMIUMS FOR ELIGIBLE INDIVIDUALS.

       Section 1839(e)(1) (as amended by section 4571(b)) is 
     amended--
       (1) by inserting ``(or any appropriate State or local 
     governmental entity specified by the Secretary)'' after 
     ``State'' the first place it appears, and
       (2) by inserting ``(or such entity)'' after ``State'' the 
     second and third place it appears.
            Subtitle G--Provisions Relating to Parts A and B

              CHAPTER 1--HOME HEALTH SERVICES AND BENEFITS

            Subchapter A--Payments For Home Health Services

     SEC. 4601. 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. 4602. 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 4601(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 98 percent of the reasonable 
     costs (including nonroutine medical supplies) for the 
     agency's 12-month cost reporting period ending during fiscal 
     year 1994, and based 25 percent on 98 percent of the 
     standardized regional average of such costs for the agency's 
     census division, as applied to such agency, for cost 
     reporting periods ending during fiscal year 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 fiscal 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.
       ``(vii)(I) Not later than January 1, 1998, the Secretary 
     shall establish per visit limits applicable for fiscal year 
     1998, and not later than April 1, 1998, the Secretary shall 
     establish per beneficiary limits under clause (v)(I) for 
     fiscal year 1998.
       ``(II) Not later than August 1 of each year (beginning in 
     1998) the Secretary shall establish the limits applicable 
     under this subparagraph for services furnished during the 
     fiscal year beginning October 1 of the year.''.

[[Page H6086]]

       (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. 4603. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) (as 
     amended by section 4801) is amended by adding at the end the 
     following:


             ``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 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 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 contains 
     a code (or codes) specified by the Secretary that identifies 
     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); and
       ``(6) the establishment of any adjustments for outliers 
     under subsection (b)(5).''.
       (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 4432(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

[[Page H6087]]

     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 4432(b)(5)(B)) is amended 
     by striking ``section 1842(b)(6)(E);'' and inserting 
     ``subparagraphs (E) and (F) of section 1842(b)(6);''.
       (C) Exclusions from coverage.--Section 1862(a) (42 U.S.C. 
     1395y(a)) (as amended by sections 4319(b), 4432(b), 
     4507(a)(2)(B) and 4541(b)) is amended--
       (i) by striking ``or'' at the end of paragraph (19);
       (ii) by striking the period at the end of paragraph (20) 
     and inserting ``; or''; and
       (iii) by inserting after paragraph (20) the following:
       ``(21) 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.
       (e) Contingency.--If the Secretary of Health and Human 
     Services for any reason does not establish and implement the 
     prospective payment system for home health services described 
     in section 1895(b) of the Social Security Act (as added by 
     subsection (a)) for cost reporting periods described in 
     subsection (d), for such cost reporting periods the Secretary 
     shall provide for a reduction by 15 percent in the cost 
     limits and per beneficiary limits described in section 
     1861(v)(1)(L) of such Act, as those limits would otherwise be 
     in effect on September 30, 1999.

     SEC. 4604. 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.

                   Subchapter B--Home Health Benefits

     SEC. 4611. 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, post-institutional home health services furnished 
     during a home health spell of illness for up to 100 visits 
     during such spell of illness''; and
       (2) in subsection (b), by adding after and below paragraph 
     (3) the following:

     ``Payment under this part for post-institutional home health 
     services furnished an individual during a home health spell 
     of illness may not be made for such services beginning after 
     such services have been furnished for a total of 100 visits 
     such spell.''.
       (b) Post-Institutional Home Health Services Defined.--
     Section 1861 (42 U.S.C. 1395x), as amended by sections 
     4103(a), 4104(a), 4105(a), 4106(a), and 4454, is amended by 
     adding at the end the following:

``Post-Institutional Home Health Services; Home Health Spell of Illness

       ``(tt)(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 (ii) 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 4611 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) Transition.--
       (1) In general.--Notwithstanding any provision of title 
     XVIII of the Social Security Act, the Secretary of Health and 
     Human Services shall establish a transition for the aggregate 
     amount of expenditures that are transferred from part A, to 
     part B, of title XVIII of the Social Security Act, as a 
     result of the amendments made by this section, during each of 
     the years during the period beginning with 1998 and ending 
     with 2002 according to this subsection. Under the transition 
     for each such year, the Secretary shall effect such transfer, 
     between the trust funds under such parts, as will result in 
     only the proportion (specified in paragraph (2)) of such 
     aggregate expenditures for the year being transferred from 
     such part A to such part B.
       (2) Proportion specified.--The proportion specified in this 
     paragraph for--
       (A) 1998 is \1/6\,
       (B) 1999 is \1/3\,
       (C) 2000 is \1/2\,
       (D) 2001 is \2/3\, and
       (E) 2002 is \5/6\.
       (3) Application in establishing monthly premiums for 1998 
     through 2003.--
       (A) In general.--For purposes only of computing the monthly 
     premium under section 1839 of the Social Security Act (42 
     U.S.C. 1395r), the monthly actuarial rate for enrollees age 
     65 and over shall be computed as though any reference in 
     paragraph (1) of this subsection to 2002 were a reference to 
     2003 and as if the following proportions were substituted for 
     the proportions specified in paragraph (2):
       (i) For 1998, \1/7\.
       (ii) For 1999, \2/7\.
       (iii) For 2000, \3/7\.
       (iv) For 2001, \4/7\.
       (v) For 2002, \5/7\.
       (vi) For 2003, \6/7\.
       (B) No impact on government contribution.--Subparagraph (A) 
     does not apply in determining the amount of the Government 
     contribution under section 1844 of the Social Security Act 
     (42 U.S.C. 1395w).
       (f) 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 did not end, before such date shall 
     be considered to have begun as of such date.

     SEC. 4612. 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. 4613. 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 Congress on the study conducted 
     under subsection (a). The report shall include specific 
     recommendations on such criteria and methods.

     SEC. 4614. 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 4104(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 visits, furnished 
     under title XVIII of the Social Security Act 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. 4615. 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),

[[Page H6088]]

     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. 4616. REPORTS TO CONGRESS REGARDING HOME HEALTH COST 
                   CONTAINMENT.

       (a) Estimate.--Not later than October 1, 1997, the 
     Secretary of Health and Human Services shall submit to the 
     Committees on Commerce and Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     report that includes an estimate of the outlays that will be 
     made under parts A and B of title XVIII of the Social 
     Security Act for the provision of home health services during 
     each of fiscal years 1998 through 2002.
       (b) Annual Report.--Not later than the end of each of years 
     1999 through 2002, the Secretary shall submit to such 
     Committees a report that compares the actual outlays under 
     such parts for such services during the fiscal year ending in 
     the year, to the outlays estimated under subsection (a) for 
     such fiscal year. If the Secretary finds that such actual 
     outlays were greater than such estimated outlays for the 
     fiscal year, the Secretary shall include in the report 
     recommendations regarding beneficiary copayments for home 
     health services provided under the medicare program or such 
     other methods as will reduce the growth in outlays for home 
     health services under the medicare program.

                 CHAPTER 2--GRADUATE MEDICAL EDUCATION

                Subchapter A--Indirect Medical Education

     SEC. 4621. INDIRECT GRADUATE MEDICAL EDUCATION PAYMENTS.

       (a) Multiyear Transition Regarding Percentages.--
       (1) 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 is equal to c (((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 
     .405. For discharges occurring--
       ``(I) on or after October 1, 1988, and before October 1, 
     1997, `c' is equal to 1.89;
       ``(II) during fiscal year 1998, `c' is equal to 1.72;
       ``(III) during fiscal year 1999, `c' is equal to 1.6;
       ``(IV) during fiscal year 2000, `c' is equal to 1.47; and
       ``(V) on or after October 1, 2000, `c' is equal to 1.35.''.
       (2) Conforming amendment relating to determination of 
     standardized amount.--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 reduction in the amount of additional payments 
     under paragraph (5)(B)(ii) resulting from the amendment made 
     by section 4621(a)(1) of the Balanced Budget Act of 1997,''.
       (b) Limitation on Number of Residents for Certain Fiscal 
     Years.--
       (1) In general.--Section 1886(d)(5)(B) (42 U.S.C. 
     1395ww(d)(5)(B)) is amended by adding after clause (iv) the 
     following:
       ``(v) In determining the adjustment with respect to a 
     hospital for discharges occurring on or after October 1, 
     1997, the total number of full-time equivalent interns and 
     residents in the fields of allopathic and osteopathic 
     medicine in either a hospital or nonhospital setting may not 
     exceed the number of such full-time equivalent interns and 
     residents in the hospital with respect to the hospital's most 
     recent cost reporting period ending 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, subject to the limit 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, and
       ``(II) for the hospital's cost reporting periods 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 cost reporting period and the preceding two cost 
     reporting periods.

     In the case of the first cost reporting period beginning on 
     or after October 1, 1997, subclause (II) shall be applied by 
     using the average for such period and the preceding cost 
     reporting period.
       ``(vii) If any 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 residency count pursuant to 
     subclause (II) of clause (vi) is based on the equivalent of 
     full twelve-month cost reporting periods.
       ``(viii) Rules similar to the rules of subsection (h)(4)(H) 
     shall apply for purposes of clauses (v) and (vi).''.
       (2) Payment for interns and residents providing off-site 
     services.--Section 1886(d)(5)(B)(iv) (42 U.S.C. 
     1395ww(d)(5)(B)(iv)) is amended to read as follows:
       ``(iv) Effective for discharges occurring on or after 
     October 1, 1997, all the time spent by an intern or resident 
     in patient care activities under an approved medical 
     residency training program at an entity in a nonhospital 
     setting shall be counted towards the determination of full-
     time equivalency if the hospital incurs all, or substantially 
     all, of the costs for the training program in that 
     setting.''.

     SEC. 4622. PAYMENT TO HOSPITALS OF INDIRECT MEDICAL EDUCATION 
                   COSTS FOR MEDICARE+CHOICE ENROLLEES.

       Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by adding 
     at the end the following:
       ``(11) Additional payments for managed care enrollees.--
       ``(A) 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 applicable 
     discharge of any subsection (d) hospital that has an approved 
     medical residency training program.
       ``(B) Applicable discharge.--For purposes of this 
     paragraph, the term `applicable discharge' means the 
     discharge of any individual who is enrolled under a risk-
     sharing contract with an eligible organization under section 
     1876 and who is entitled to benefits under part A or any 
     individual who is enrolled with a Medicare+Choice 
     organization under part C.
       ``(C) Determination of amount.--The amount of the payment 
     under this paragraph with respect to any applicable discharge 
     shall be equal to the applicable percentage (as defined in 
     subsection (h)(3)(D)(ii)) of the estimated average per 
     discharge amount that would otherwise have been paid under 
     paragraph (5)(B) if the individuals had not been enrolled as 
     described in subparagraph (B).
       ``(D) Special rule for hospitals under reimbursement 
     system.--The Secretary shall establish rules for the 
     application of this paragraph to a hospital reimbursed under 
     a reimbursement system authorized under section 1814(b)(3) in 
     the same manner as it would apply to the hospital if it were 
     not reimbursed under such section.''.

            Subchapter B--Direct Graduate Medical Education

     SEC. 4623. LIMITATION ON NUMBER OF RESIDENTS AND 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 in allopathic and 
     osteopathic medicine.--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 in the fields of 
     allopathic medicine and osteopathic medicine may not exceed 
     the number of such full-time equivalent residents for 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) In general.--For cost reporting periods beginning 
     during fiscal years beginning on or after October 1, 1997, 
     subject to the limit described in subparagraph (F), the total 
     number of full-time equivalent residents for determining a 
     hospital's graduate medical education payment shall equal the 
     average of the actual full-time equivalent resident counts 
     for the cost reporting period and the preceding two cost 
     reporting periods.
       ``(ii) Adjustment for short periods.--If any 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 (i) are based on the 
     equivalent of full twelve-month cost reporting periods.
       ``(iii) Transition rule for 1998.--In the case of a 
     hospital's first cost reporting period beginning on or after 
     October 1, 1997, clause (i) shall be applied by using the 
     average for such period and the preceding cost reporting 
     period.
       ``(H) Special rules for application of subparagraphs (f) 
     and (g).--
       ``(i) New facilities.--The Secretary shall, consistent with 
     the principles of subparagraphs (F) and (G), prescribe rules 
     for the application of such subparagraphs in the case of 
     medical residency training programs established on or after 
     January 1, 1995. In promulgating such rules for purposes of 
     subparagraph (F), the Secretary shall give special 
     consideration to facilities that meet the needs of 
     underserved rural areas.
       ``(ii) Aggregation.--The Secretary may prescribe rules 
     which allow institutions which are members of the same 
     affiliated group (as defined by the Secretary) to elect to 
     apply the limitation of subparagraph (F) on an aggregate 
     basis.
       ``(iii) Data collection.--The Secretary may require any 
     entity that operates a medical residency training program and 
     to which subparagraphs (F) and (G) apply to submit to the 
     Secretary such additional information as the Secretary 
     considers necessary to carry out such subparagraphs.''

     SEC. 4624. PAYMENTS TO HOSPITALS FOR DIRECT COSTS OF GRADUATE 
                   MEDICAL EDUCATION OF MEDICARE+CHOICE ENROLLEES.

       Section 1886(h)(3) (42 U.S.C. 1395ww(h)(3)) is amended by 
     adding after subparagraph (C) the following:
       ``(D) Payment for managed care enrollees.--
       ``(i) In general.--For portions of cost reporting periods 
     occurring on or after January 1, 1998, the Secretary shall 
     provide for an additional payment amount under this 
     subsection for services furnished to individuals who are 
     enrolled under a risk-sharing contract with an eligible 
     organization under section 1876 and who are entitled to part 
     A or with a

[[Page H6089]]

     Medicare+Choice organization under part C. The amount of such 
     a payment shall equal the applicable percentage of the 
     product of--

       ``(I) the aggregate approved amount (as defined in 
     subparagraph (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 such enrolled individuals.

       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage is--

       ``(I) 20 percent in 1998,
       ``(II) 40 percent in 1999,
       ``(III) 60 percent in 2000,
       ``(IV) 80 percent in 2001, and
       ``(V) 100 percent in 2002 and subsequent years.

       ``(iii) Special rule for hospitals under reimbursement 
     system.--The Secretary shall establish rules for the 
     application of this subparagraph to a hospital reimbursed 
     under a reimbursement system authorized under section 
     1814(b)(3) in the same manner as it would apply to the 
     hospital if it were not reimbursed under such section.''.

     SEC. 4625. PERMITTING PAYMENT TO NONHOSPITAL PROVIDERS.

       (a) In General.--Section 1886 (42 U.S.C. 1395ww), as 
     amended by section 4421(a), is amended by adding at the end 
     the following:
       ``(k) Payment to Nonhospital Providers.--
       ``(1) In general.--For cost reporting periods beginning on 
     or after October 1, 1997, the Secretary may establish rules 
     for payment to qualified nonhospital 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 rules 
     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) Qualified nonhospital providers.--For purposes of 
     this subsection, the term `qualified nonhospital providers' 
     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) Medicare+Choice organizations; and
       ``(D) such other providers (other than hospitals) as the 
     Secretary determines to be appropriate.''.
       (b) Prohibition on Double Payments.--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.''.

     SEC. 4626. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY 
                   REDUCTION IN NUMBER OF RESIDENTS.

       (a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)) is 
     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), subject to subparagraph (F), each hospital 
     which is part of the qualifying entity submitting the plan 
     shall be paid an applicable hold harmless percentage (as 
     specified in subparagraph (E)) of the sum of--
       ``(i) the 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 hospital 
     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 
     subsection (d)(5)(B) for the hospital 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 the hospital as of June 30, 
     1997.

     The determination of the amounts under clauses (i) and (ii) 
     for any year shall be made on the basis of the provisions of 
     this title in effect on the application deadline date for the 
     first calendar year to which the reduction plan applies.
       ``(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 November 1, 
     1999,
       ``(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 the period of 
     residency training years (not greater than 5) over which the 
     reduction will occur;
       ``(iv) the 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)(v); and
       ``(v) 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.--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) Two or more hospitals that operate such programs and 
     apply for treatment under this paragraph as a single 
     qualifying entity.
       ``(iii) A qualifying consortium (as described in section 
     4628 of the Balanced Budget Act of 1997).
       ``(D) Residency reduction requirements.--
       ``(i) Individual hospital applicants.--In the case of a 
     qualifying entity described in subparagraph (C)(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 the 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 the base number of 
     residents exceeds 600 but is less than 750 residents, by 150 
     residents.
       ``(III) Subject to subclause (IV), if the base number of 
     residents does not exceed 600 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 the 
     base number.

       ``(ii) Joint applicants.--In the case of a qualifying 
     entity described in subparagraph (C)(ii), the number of full-
     time equivalent residents in the aggregate for 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 the base number.
       ``(II) In the case of such 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 the 
     base number.

       ``(iii) Consortia.--In the case of a qualifying entity 
     described in subparagraph (C)(iii), the number of full-time 
     equivalent residents in the aggregate for 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 the 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 
     the 5th residency training year in which the application 
     under subparagraph (B) is effective.
       ``(v) Entities providing assurance of increase in primary 
     care residents.--An entity is described in this clause if--

       ``(I) the base number of residents for the entity is less 
     than 750 or the entity is described in subparagraph (C)(ii); 
     and
       ``(II) the entity represents in its application under 
     subparagraph (B) that it will increase the number of full-
     time equivalent residents in primary care by at least 20 
     percent (from such number included in the base number of 
     residents) by not later than the 5th residency training year 
     in which the application under subparagraph (B) is effective.

     If a qualifying entity fails to comply with the 
     representation described in subclause (II) by the end of such 
     5th residency training year, 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 (or its participating 
     hospitals) 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 residency training year 
     ending before June 30, 1997, or, if less, for any subsequent 
     residency training year that ends before the date the entity 
     makes application under this paragraph.
       ``(E) Applicable hold harmless percentage.--For purposes of 
     subparagraph (A), the `applicable hold harmless percentage' 
     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.
       ``(F) Penalty for noncompliance.--
       ``(i) In general.--No payment may be made under this 
     paragraph to a hospital for a residency training year if the 
     hospital has failed to reduce the number of full-time 
     equivalent residents (in the manner required under 
     subparagraph (D)) to the number agreed to by the Secretary 
     and the qualifying entity in approving the application under 
     this paragraph with respect to such year.
       ``(ii) Increase in number of residents in subsequent 
     years.--If payments are made under this paragraph to a 
     hospital, and if the hospital 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), other than subparagraph (F)(ii) thereof, 
     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.

[[Page H6090]]

       (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 primarily provides for additional payments 
     under title XVIII of the Social Security Act in connection 
     with a 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. 4627. MEDICARE SPECIAL REIMBURSEMENT RULE FOR PRIMARY 
                   CARE COMBINED RESIDENCY PROGRAMS.

       (a) In General.--Section 1886(h)(5)(G) of the Social 
     Security Act (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 primary care 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 training programs in 
     effect for residency years beginning on or after July 1, 
     1997.

     SEC. 4628. 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) and that applies to be 
     included under the project.
       (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 a teaching hospital with one 
     or more approved medical residency training programs 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) A Federally qualified health center.
       (D) A medical group practice.
       (E) A managed care entity.
       (F) An entity furnishing outpatient services.
       (G) 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) or (k) 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. 4629. RECOMMENDATIONS ON LONG-TERM POLICIES REGARDING 
                   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 changed. Such recommendations shall include 
     recommendations regarding each of the following:
       (1) 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 nursing and other allied 
     health professions.
       (2) Federal policies regarding international medical 
     graduates.
       (3) The dependence of schools of medicine on service-
     generated income.
       (4) 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.
       (5) Methods for promoting an appropriate number, mix, and 
     geographical distribution of health professionals.
       (b) 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 in health care payment 
     policies.
       (c) 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. 4630. STUDY OF HOSPITAL OVERHEAD AND SUPERVISORY 
                   PHYSICIAN COMPONENTS OF DIRECT MEDICAL 
                   EDUCATION COSTS.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a study with respect to--
       (1) variations among hospitals in the hospital overhead and 
     supervisory physician components of their direct medical 
     education costs taken into account under section 1886(h) of 
     the Social Security Act, and
       (2) the reasons for such variations.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall report the results 
     of the study conducted under subsection (a) to the 
     appropriate committees of Congress, including recommendations 
     for legislation reducing variations described in subsection 
     (a) that the Secretary finds inappropriate.

       CHAPTER 3--PROVISIONS RELATING TO MEDICARE SECONDARY PAYER

     SEC. 4631. 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.--Section 
     1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended--
       (1) in the last sentence by striking ``October 1, 1998'' 
     and inserting ``the date of enactment of the Balanced Budget 
     Act of 1997''; and
       (2) by adding at the end the following: ``Effective for 
     items and services furnished on or after the date of 
     enactment of the Balanced Budget Act of 1997, (with respect 
     to periods beginning on or after the date that is 18 months 
     prior to such date), clauses (i) and (ii) shall be applied by 
     substituting `30-month' for `12-month' each place it 
     appears.''.
       (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. 4632. 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 amendments made by this section 
     apply to items and services furnished on or after the date of 
     the enactment of this Act.

     SEC. 4633. PERMITTING RECOVERY AGAINST THIRD PARTY 
                   ADMINISTRATORS.

       (a) Permitting Recovery Against Third Party Administrators 
     of Primary Plans.--

[[Page H6091]]

     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 and is not employed by or under contract 
     with the employer or group health plan at the time the action 
     for recovery is initiated by the United States or 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 4--OTHER PROVISIONS

     SEC. 4641. 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.

     SEC. 4642. INCREASED CERTIFICATION PERIOD FOR CERTAIN ORGAN 
                   PROCUREMENT ORGANIZATIONS.

       Section 1138(b)(1)(A)(ii) (42 U.S.C. 1320b-8(b)(1)(A)(ii)) 
     is amended by striking ``two years'' and inserting ``2 years 
     (4 years if the Secretary determines appropriate for an 
     organization on the basis of its past practices)''.

     SEC. 4643. OFFICE OF THE CHIEF ACTUARY IN THE HEALTH CARE 
                   FINANCING ADMINISTRATION.

       Section 1117 (42 U.S.C. 1317) is amended--
       (1) in the heading, by inserting ``and chief actuary'' 
     after ``the administrator'';
       (2) by inserting ``(a)'' before ``The Administrator''; and
       (3) by adding at the end the following:
       ``(b)(1) There is established in the Health Care Financing 
     Administration the position of Chief Actuary. The Chief 
     Actuary shall be appointed by, and in direct line of 
     authority to, the Administrator of such Administration. The 
     Chief Actuary shall be appointed from among individuals who 
     have demonstrated, by their education and experience, 
     superior expertise in the actuarial sciences. The Chief 
     Actuary shall exercise such duties as are appropriate for the 
     office of the Chief Actuary and in accordance with 
     professional standards of actuarial independence. The Chief 
     Actuary may be removed only for cause.
       ``(2) The Chief Actuary shall be compensated at the highest 
     rate of basic pay for the Senior Executive Service under 
     section 5382(b) of title 5, United States Code.''.

     SEC. 4644. CONFORMING AMENDMENTS TO COMPLY WITH CONGRESSIONAL 
                   REVIEW OF AGENCY RULEMAKING.

       (a) DRG Prospective Payment Rate Methodology.--
       (1) In general.--Section 1886(d)(6) (42 U.S.C. 
     1395ww(d)(6)) is amended by striking ``September 1'' and 
     inserting ``August 1''.
       (2) Transition rule for fiscal year 1998.--With respect to 
     the publication in the Federal Register of the DRG 
     prospective payment rate methodology under such section for 
     fiscal year 1998, the term ``60 days'' in section 
     801(a)(3)(A) and section 802(a) of title 5, United States 
     Code, is deemed to be a reference to ``30 days''.
       (b) Hospital Payment Updates.--
       (1) In general.--Section 1886(e) (42 U.S.C. 1395ww(e) is 
     amended--
       (A) in paragraph (5)(A) by striking ``May 1'' and inserting 
     ``April 1''; and
       (B) in paragraph (5)(B) by striking ``September 1'' and 
     inserting ``August 1''.
       (2) Transition rule for fiscal year 1998.--With respect to 
     the publication in the Federal Register of the appropriate 
     change factor for inpatient hospital services for discharges 
     in fiscal year 1998 under section 1886(e)(5)(B) (42 U.S.C. 
     1395ww(e)(5)(B)), the term ``60 days'' in section 
     801(a)(3)(A) and section 802(a) of title 5, United States 
     Code, is deemed to be a reference to ``30 days''.
       (c) Applications for Geographic Reclassification.--
       (1) In general.--Section 1886(d)(10)(C) (42 U.S.C. 
     1395ww(d)(10)(C)) is amended in clause (ii), by striking 
     ``the first day of the preceding fiscal year.'' and inserting 
     ``the first day of the 13-month period ending on September 30 
     of the preceding fiscal year.''
       (2) Special rule for applications received in fiscal year 
     1997.--In the case of an application for a change in 
     geographic classification under such section for fiscal year 
     1999, the Secretary of Health and Human Services shall 
     shorten the deadlines under such section so as to permit 
     completion of a final decision by the Secretary by June 15, 
     1998.
       (d) Physician Fee Schedule.--Section 1848(b)(1) (42 U.S.C. 
     1395w-4(b)(1)) is amended by striking ``Before January 1 of 
     each year beginning with 1992'' and inserting ``Before 
     November 1 of the preceding year, for each year beginning 
     with 1998''.
                          Subtitle H--Medicaid

                        CHAPTER 1--MANAGED CARE

     SEC. 4701. STATE OPTION OF USING MANAGED CARE; CHANGE IN 
                   TERMINOLOGY.

       (a) Use of Managed Care Generally.--Title XIX is amended by 
     redesignating section 1932 as section 1933 and by inserting 
     after section 1931 the following new section:


                 ``provisions relating to managed care

       ``Sec. 1932. (a) State Option To Use Managed Care.--
       ``(1) Use of medicaid managed care organizations and 
     primary care case managers.--
       ``(A) In general.--Subject to the succeeding provisions of 
     this section, and notwithstanding paragraph (1), (10)(B), or 
     (23)(A) of section 1902(a), a State--
       ``(i) may require an individual who is eligible for medical 
     assistance under the State plan under this title to enroll 
     with a managed care entity as a condition of receiving such 
     assistance (and, with respect to assistance furnished by or 
     under arrangements with such entity, to receive such 
     assistance through the entity), if--

       ``(I) the entity and the contract with the State meet the 
     applicable requirements of this section and section 1903(m) 
     or section 1905(t), and
       ``(II) the requirements described in the succeeding 
     paragraphs of this subsection are met; and

       ``(ii) may restrict the number of provider agreements with 
     managed care entities under the State plan if such 
     restriction does not substantially impair access to services.
       ``(B) Definition of managed care entity.--In this section, 
     the term `managed care entity' means--
       ``(i) a medicaid managed care organization, as defined in 
     section 1903(m)(1)(A), that provides or arranges for services 
     for enrollees under a contract pursuant to section 1903(m); 
     and
       ``(ii) a primary care case manager, as defined in section 
     1905(t)(2).
       ``(2) Special rules.--
       ``(A) Exemption of certain children with special needs.--A 
     State may not require under paragraph (1) the enrollment in a 
     managed care entity of an individual under 19 years of age 
     who--
       ``(i) is eligible for supplemental security income under 
     title XVI;
       ``(ii) is described in section 501(a)(1)(D);
       ``(iii) is described in section 1902(e)(3);
       ``(iv) is receiving foster care or adoption assistance 
     under part E of title IV; or
       ``(v) is in foster care or otherwise in an out-of-home 
     placement.
       ``(B) Exemption of medicare beneficiaries.--A State may not 
     require under paragraph (1) the enrollment in a managed care 
     entity of an individual who is a qualified medicare 
     beneficiary (as defined in section 1905(p)(1)) or an 
     individual otherwise eligible for benefits under title XVIII.
       ``(C) Indian enrollment.--A State may not require under 
     paragraph (1) the enrollment in a managed care entity of an 
     individual who is an Indian (as defined in section 4(c) of 
     the Indian Health Care Improvement Act of 1976 (25 U.S.C. 
     1603(c)) unless the entity is one of the following (and only 
     if such entity is participating under the plan):
       ``(i) The Indian Health Service.
       ``(ii) 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.).
       ``(iii) 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.).
       ``(3) Choice of coverage.--
       ``(A) In general.--A State must permit an individual to 
     choose a managed care entity from not less than two such 
     entities that meet the applicable requirements of this 
     section, and of section 1903(m) or section 1905(t).
       ``(B) State option.--At the option of the State, a State 
     shall be considered to meet the requirements of subparagraph 
     (A) in the case of an individual residing in a rural area, if 
     the State requires the individual to enroll with a managed 
     care entity if such entity--
       ``(i) permits the individual to receive such assistance 
     through not less than two physicians or case managers (to the 
     extent that at least two physicians or case managers are 
     available to provide such assistance in the area), and
       (ii) permits the individual to obtain such assistance from 
     any other provider in appropriate circumstances (as 
     established by the State under regulations of the Secretary).
       ``(C) Treatment of certain county-operated health insuring 
     organizations.--A State shall be considered to meet the 
     requirement of subparagraph (A) if--
       ``(i) the managed care entity in which the individual is 
     enrolled is a health-insuring organization which--

       ``(I) first became operational prior to January 1, 1986, or
       ``(II) is described in section 9517(c)(3) of the Omnibus 
     Budget Reconciliation Act of 1985 (as added by section 
     4734(2) of the Omnibus Budget Reconciliation Act of 1990), 
     and

       ``(ii) the individual is given a choice between at least 
     two providers within such entity.
       ``(4) Process for enrollment and termination and change of 
     enrollment.--As conditions under paragraph (1)(A)--
       ``(A) In general.--The State, enrollment broker (if any), 
     and managed care entity shall permit an individual eligible 
     for medical assistance under the State plan under this title 
     who

[[Page H6092]]

     is enrolled with the entity under this title to terminate (or 
     change) such enrollment--
       ``(i) for cause at any time (consistent with section 
     1903(m)(2)(A)(vi)), and
       ``(ii) without cause--

       ``(I) during the 90-day period beginning on the date the 
     individual receives notice of such enrollment, and
       ``(II) at least every 12 months thereafter.

       ``(B) Notice of termination rights.--The State shall 
     provide for notice to each such individual of the opportunity 
     to terminate (or change) enrollment under such conditions. 
     Such notice shall be provided at least 60 days before each 
     annual enrollment opportunity described in subparagraph 
     (A)(ii)(II).
       ``(C) Enrollment priorities.--In carrying out paragraph 
     (1)(A), the State shall establish a method for establishing 
     enrollment priorities in the case of a managed care entity 
     that does not have sufficient capacity to enroll all such 
     individuals seeking enrollment under which individuals 
     already enrolled with the entity are given priority in 
     continuing enrollment with the entity.
       ``(D) Default enrollment process.--In carrying out 
     paragraph (1)(A), the State shall establish a default 
     enrollment process--
       ``(i) under which any such individual who does not enroll 
     with a managed care entity during the enrollment period 
     specified by the State shall be enrolled by the State with 
     such an entity which has not been found to be out of 
     substantial compliance with the applicable requirements of 
     this section and of section 1903(m) or section 1905(t); and
       ``(ii) that takes into consideration--

       ``(I) maintaining existing provider-individual 
     relationships or relationships with providers that have 
     traditionally served beneficiaries under this title; and
       ``(II) if maintaining such provider relationships is not 
     possible, the equitable distribution of such individuals 
     among qualified managed care entities available to enroll 
     such individuals, consistent with the enrollment capacities 
     of the entities.

       ``(5) Provision of information.--
       ``(A) Information in easily understood form.--Each State, 
     enrollment broker, or managed care entity shall provide all 
     enrollment notices and informational and instructional 
     materials relating to such an entity under this title in a 
     manner and form which may be easily understood by enrollees 
     and potential enrollees of the entity who are eligible for 
     medical assistance under the State plan under this title.
       ``(B) Information to enrollees and potential enrollees.--
     Each managed care entity that is a medicaid managed care 
     organization shall, upon request, make available to enrollees 
     and potential enrollees in the organization's service area 
     information concerning the following:
       ``(i) Providers.--The identity, locations, qualifications, 
     and availability of health care providers that participate 
     with the organization.
       ``(ii) Enrollee rights and responsibilities.--The rights 
     and responsibilities of enrollees.
       ``(iii) Grievance and appeal procedures.--The procedures 
     available to an enrollee and a health care provider to 
     challenge or appeal the failure of the organization to cover 
     a service.
       ``(iv) Information on covered items and services.--All 
     items and services that are available to enrollees under the 
     contract between the State and the organization that are 
     covered either directly or through a method of referral and 
     prior authorization. Each managed care entity that is a 
     primary care case manager shall, upon request, make available 
     to enrollees and potential enrollees in the organization's 
     service area the information described in clause (iii).
       ``(C) Comparative information.--A State that requires 
     individuals to enroll with managed care entities under 
     paragraph (1)(A) shall annually (and upon request) provide, 
     directly or through the managed care entity, to such 
     individuals a list identifying the managed care entities that 
     are (or will be) available and information (presented in a 
     comparative, chart-like form) relating to the following for 
     each such entity offered:
       ``(i) Benefits and cost-sharing.--The benefits covered and 
     cost-sharing imposed by the entity.
       ``(ii) Service area.--The service area of the entity.
       ``(iii) Quality and performance.--To the extent available, 
     quality and performance indicators for the benefits under the 
     entity.
       ``(D) Information on benefits not covered under managed 
     care arrangement.--A State, directly or through managed care 
     entities, shall, on or before an individual enrolls with such 
     an entity under this title, inform the enrollee in a written 
     and prominent manner of any benefits to which the enrollee 
     may be entitled to under this title but which are not made 
     available to the enrollee through the entity. Such 
     information shall include information on where and how 
     such enrollees may access benefits not made available to 
     the enrollee through the entity.''.
       (b) Change in Terminology.--
       (1) In general.--Section 1903(m)(1)(A) (42 U.S.C. 1396b(m)) 
     is amended--
       (A) by striking ``The term'' and all that follows through 
     ``and--'' and inserting ``The term `medicaid managed care 
     organization' means a health maintenance organization, an 
     eligible organization with a contract under section 1876 or a 
     Medicare+Choice organization with a contract under part C of 
     title XVIII, a provider sponsored organization, or any other 
     public or private organization, which meets the requirement 
     of section 1902(w) and--''; and
       (B) by adding after and below clause (ii) the following:

     ``An organization that is a qualified health maintenance 
     organization (as defined in section 1310(d) of the Public 
     Health Service Act) is deemed to meet the requirements of 
     clauses (i) and (ii).''.
       (2) Conforming changes in terminology.--(A) Each of the 
     following provisions is amended by striking ``health 
     maintenance organization'' and inserting ``medicaid managed 
     care organization'':
       (i) Section 1902(a)(23) (42 U.S.C. 1396a(a)(23)).
       (ii) Section 1902(a)(57) (42 U.S.C. 1396a(a)(57)).
       (iii) Section 1902(p)(2) (42 U.S.C. 1396a(p)(2)).
       (iv) Section 1902(w)(2)(E) (42 U.S.C. 1396a(w)(2)(E)).
       (v) Section 1903(k) (42 U.S.C. 1396b(k)).
       (vi) In section 1903(m)(1)(B).
       (vii) In subparagraphs (A)(i) and (H)(i) of section 
     1903(m)(2) (42 U.S.C. 1396b(m)(2)).
       (viii) Section 1903(m)(4)(A) (42 U.S.C. 1396b(m)(4)(A)), 
     the first place it appears.
       (ix) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-
     6(b)(4)(D)(iv)).
       (x) Section 1927(j)(1) (42 U.S.C. 1396r-8(j)(1)) is amended 
     by striking ``***Health Maintenance Organizations, including 
     those organizations'' and inserting ``health maintenance 
     organizations, including medicaid managed care 
     organizations''.
       (B) Section 1903(m)(2)(H) (42 U.S.C. 1396b(m)(2)(H)) is 
     amended, in the matter following clause (iii), by striking 
     ``health maintenance''.
       (C) Clause (viii) of section 1903(w)(7)(A) (42 U.S.C. 
     1396b(w)(7)(A)) is amended to read as follows:
       ``(viii) Services of a medicaid managed care organization 
     with a contract under section 1903(m).''.
       (D) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-
     6(b)(4)(D)(iv)) is amended--
       (i) in the heading, by striking ``hmo'' and inserting 
     ``medicaid managed care organization''; and
       (ii) by inserting ``and the applicable requirements of 
     section 1932'' before the period at the end.
       (c) Compliance of Contract With New Requirements.--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:
       ``(xi) such contract, and the entity complies with the 
     applicable requirements of section 1932.''.
       (d) Conforming Amendments to Freedom-of-Choice and 
     Termination of Enrollment Requirements.--
       (1) Section 1902(a)(23) (42 U.S.C. 1396a(a)(23)), as 
     amended by section 4724(d), is amended by striking ``and in 
     section 1915'' and inserting ``, in section 1915, and in 
     section 1932(a)''.
       (2) Section 1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended--
       (A) in paragraph (A)(vi)--
       (i) by striking ``except as provided under subparagraph 
     (F),'',
       (ii) by striking ``without cause'' and all that follows 
     through ``for such termination'' and inserting ``in 
     accordance with section 1932(a)(4);'',
       (iii) by inserting ``in accordance with such section'' 
     after ``provides for notification''; and
       (B) by striking subparagraph (F).

     SEC. 4702. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE 
                   OPTION WITHOUT NEED FOR WAIVER.

       (a) In General.--Section 1905 (42 U.S.C. 1396d) is 
     amended--
       (1) in subsection (a)--
       (A) by striking ``and'' at the end of paragraph (24);
       (B) by redesignating paragraph (25) as paragraph (26) and 
     by striking the period at the end of such paragraph and 
     inserting a comma; and
       (C) by inserting after paragraph (24) the following new 
     paragraph:
       ``(25) primary care case management services (as defined in 
     subsection (t)); and''; and
       (2) by adding at the end the following new subsection:
       ``(t)(1) The term `primary care case management services' 
     means case-management related services (including locating, 
     coordinating, and monitoring of health care services) 
     provided by a primary care case manager under a primary care 
     case management contract.
       ``(2) The term `primary care case manager' means any of the 
     following that provides services of the type described in 
     paragraph (1) under a contract referred to in such paragraph:
       ``(A) A physician, a physician group practice, or an entity 
     employing or having other arrangements with physicians to 
     provide such services.
       ``(B) 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 between a primary care case manager and a 
     State under which the manager undertakes to locate, 
     coordinate, and monitor covered primary care (and such other 
     covered services as may be specified under the contract) to 
     all individuals enrolled with the manager, and which--
       ``(A) provides for reasonable and adequate hours of 
     operation, including 24-hour availability of information, 
     referral, and treatment with respect to medical emergencies;
       ``(B) restricts enrollment to individuals residing 
     sufficiently near a service delivery site of the manager to 
     be able to reach that site within a reasonable time using 
     available and affordable modes of transportation;
       ``(C) provides for arrangements with, or referrals to, 
     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;

[[Page H6093]]

       ``(D) prohibits discrimination on the basis of health 
     status or requirements for health care services in 
     enrollment, disenrollment, or reenrollment of individuals 
     eligible for medical assistance under this title;
       ``(E) provides for a right for an enrollee to terminate 
     enrollment in accordance with section 1932(a)(4); and
       ``(F) complies with the other applicable provisions of 
     section 1932.
       ``(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.''.
       (b) Conforming Amendments.--
       (1) Application of reenrollment provisions to pccms.--
     Section 1903(m)(2)(H) (42 U.S.C. 1396b(m)(2)(H)) is amended--
       (A) in clause (i), by inserting before the comma the 
     following: ``or with a primary care case manager with a 
     contract described in section 1905(t)(3)''; and
       (B) by inserting before the period at the end the 
     following: ``or with the manager described in such clause if 
     the manager continues to have a contract described in section 
     1905(t)(3) with the State''.
       (2) Conforming cross-reference.--Section 1902(j) (42 U.S.C. 
     1396a(j)) is amended by striking ``paragraphs (1) through 
     (25)'' and inserting ``a numbered paragraph of''.

     SEC. 4703. ELIMINATION OF 75:25 RESTRICTION ON RISK 
                   CONTRACTS.

       (a) In General.--Section 1903(m)(2)(A) (42 U.S.C. 
     1396b(m)(2)(A)) is amended by striking clause (ii).
       (b) Conforming Amendments.--
       (1) 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)''.
       (2) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-
     6(b)(4)(D)(iv)) is amended by striking ``less than 50 
     percent'' and all that follows up to the period at the end.

     SEC. 4704. INCREASED BENEFICIARY PROTECTIONS.

       (a) In General.--Section 1932, as added by section 4701(a), 
     is amended by adding at the end the following:
       ``(b) Beneficiary Protections.--
       ``(1) Specification of benefits.--Each contract with a 
     managed care entity under section 1903(m) or under section 
     1905(t)(3) shall specify the benefits the provision (or 
     arrangement) for which the entity is responsible.
       ``(2) Assuring coverage to emergency services.--
       ``(A) In general.--Each contract with a medicaid managed 
     care organization under section 1903(m) and each contract 
     with a primary care case manager under section 1905(t)(3) 
     shall require the organization or manager--
       ``(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 or manager, 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 
     Medicare+Choice plans offered under part C of title XVIII.

     The requirement under clause (ii) shall first apply 30 days 
     after the date of promulgation of the guidelines referred to 
     in such clause.
       ``(B) Emergency services defined.--In subparagraph (A)(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) Emergency medical condition defined.--In subparagraph 
     (B)(ii), the term `emergency medical condition' means a 
     medical condition manifesting itself by acute symptoms of 
     sufficient severity (including severe pain) 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.
       ``(3) Protection of enrollee-provider communications.--
       ``(A) In general.--Subject to subparagraphs (B) and (C), 
     under a contract under section 1903(m) a medicaid managed 
     care 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 contract, if the 
     professional is acting within the lawful scope of practice.
       ``(B) Construction.--Subparagraph (A) shall not be 
     construed as requiring a medicaid managed care 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 
     adopts a change in policy regarding such a counseling or 
     referral service.

     Nothing in this subparagraph shall be construed to affect 
     disclosure requirements under State law or under the Employee 
     Retirement Income Security Act of 1974.
       ``(C) 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 contract referred to in subparagraph 
     (A) 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) Grievance procedures.--Each medicaid managed care 
     organization shall establish an internal grievance procedure 
     under which an enrollee who is eligible for medical 
     assistance under the State plan under this title, or a 
     provider on behalf of such an enrollee, may challenge the 
     denial of coverage of or payment for such assistance.
       ``(5) Demonstration of adequate capacity and services.--
     Each medicaid managed care organization shall provide the 
     State and the Secretary with adequate assurances (in a 
     time and manner determined by the Secretary) that the 
     organization, with respect to a service area, has the 
     capacity to serve the expected enrollment in such service 
     area, including assurances that the organization--
       ``(A) offers an appropriate range of services and access to 
     preventive and primary care services for the population 
     expected to be enrolled in such service area, and
       ``(B) maintains a sufficient number, mix, and geographic 
     distribution of providers of services.
       ``(6) Protecting enrollees against liability for payment.--
     Each medicaid managed care organization shall provide that an 
     individual eligible for medical assistance under the State 
     plan under this title who is enrolled with the organization 
     may not be held liable--
       ``(A) for the debts of the organization, in the event of 
     the organization's insolvency,
       ``(B) for services provided to the individual--
       ``(i) in the event of the organization failing to receive 
     payment from the State for such services; or
       ``(ii) in the event of a health care provider with a 
     contractual, referral, or other arrangement with the 
     organization failing to receive payment from the State or the 
     organization for such services, or
       ``(C) for payments to a provider that furnishes covered 
     services under a contractual, referral, or other arrangement 
     with the organization in excess of the amount that would be 
     owed by the individual if the organization had directly 
     provided the services.
       ``(7) Antidiscrimination.--A medicaid managed care 
     organization shall not discriminate with respect to 
     participation, reimbursement, or indemnification as to any 
     provider who is acting within the scope of the provider's 
     license or certification under applicable State law, solely 
     on the basis of such license or certification. This paragraph 
     shall not be construed to prohibit an organization from 
     including providers only to the extent necessary to meet the 
     needs of the organization's enrollees or from establishing 
     any measure designed to maintain quality and control costs 
     consistent with the responsibilities of the organization.
       ``(8) Compliance with certain maternity and mental health 
     requirements.--Each medicaid managed care organization shall 
     comply with the requirements of subpart 2 of part A of title 
     XXVII of the Public Health Service Act insofar as such 
     requirements apply and are effective with respect to a health 
     insurance issuer that offers group health insurance 
     coverage.''.
       (b) Protection of Enrollees Against Balance Billing Through 
     Subcontractors.--Section 1128B(d)(1) (42 U.S.C. 1320a-
     7b(d)(1)) is amended by inserting ``(or, in the case of 
     services provided to an individual enrolled with a medicaid 
     managed care organization under title XIX under a contract 
     under section 1903(m) or under a contractual, referral, or 
     other arrangement under such contract, at a rate in excess of 
     the rate permitted under such contract)'' before the comma at 
     the end.

     SEC. 4705. QUALITY ASSURANCE STANDARDS.

       (a) In General.--Section 1932 is further amended by adding 
     at the end the following:
       ``(c) Quality Assurance Standards.--
       ``(1) Quality assessment and improvement strategy.--
       ``(A) In general.--If a State provides for contracts with 
     medicaid managed care organizations under section 1903(m), 
     the State shall develop and implement a quality assessment 
     and improvement strategy consistent with this paragraph. Such 
     strategy shall include the following:
       ``(i) Access standards.--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 specialized services 
     capacity.
       ``(ii) Other measures.--Examination of other aspects of 
     care and service directly related to

[[Page H6094]]

     the improvement of quality of care (including grievance 
     procedures and marketing and information standards).
       ``(iii) Monitoring procedures.--Procedures for monitoring 
     and evaluating the quality and appropriateness of care and 
     services to enrollees that reflect the full spectrum of 
     populations enrolled under the contract and that includes 
     requirements for provision of quality assurance data to the 
     State using the data and information set that the Secretary 
     has specified for use under part C of title XVIII or such 
     alternative data as the Secretary approves, in consultation 
     with the State.
       ``(iv) Periodic review.--Regular, periodic examinations of 
     the scope and content of the strategy.
       ``(B) Standards.--The strategy developed under subparagraph 
     (A) shall be consistent with standards that the Secretary 
     first establishes within 1 year after the date of the 
     enactment of this section. Such standards shall not preempt 
     any State standards that are more stringent than such 
     standards. Guidelines relating to quality assurance that are 
     applied under section 1915(b)(1) shall apply under this 
     subsection until the effective date of standards for quality 
     assurance established under this subparagraph.
       ``(C) Monitoring.--The Secretary shall monitor the 
     development and implementation of strategies under 
     subparagraph (A).
       ``(D) Consultation.--The Secretary shall conduct activities 
     under subparagraphs (B) and (C) in consultation with the 
     States.
       ``(2) External independent review of managed care 
     activities.--
       ``(A) Review of contracts.--
       ``(i) In general.--Each contract under section 1903(m) with 
     a medicaid managed care organization shall provide for an 
     annual (as appropriate) external independent review conducted 
     by a qualified independent entity of the quality outcomes and 
     timeliness of, and access to, the items and services for 
     which the organization is responsible under the contract. The 
     requirement for such a review shall not apply until after the 
     date that the Secretary establishes the identification method 
     described in clause (ii).
       ``(ii) Qualifications of reviewer.--The Secretary, in 
     consultation with the States, shall establish a method for 
     the identification of entities that are qualified to conduct 
     reviews under clause (i).
       ``(iii) Use of protocols.--The Secretary, in coordination 
     with the National Governors' Association, shall contract with 
     an independent quality review organization (such as the 
     National Committee for Quality Assurance) to develop the 
     protocols to be used in external independent reviews 
     conducted under this paragraph on and after January 1, 1999.
       ``(iv) Availability of results.--The results of each 
     external independent review conducted under this subparagraph 
     shall be available to participating health care providers, 
     enrollees, and potential enrollees of the organization, 
     except that the results may not be made available in a manner 
     that discloses the identity of any individual patient.
       ``(B) Nonduplication of accreditation.--A State may provide 
     that, in the case of a medicaid managed care organization 
     that is accredited by a private independent entity (such as 
     those described in section 1852(e)(4)) or that has an 
     external review conducted under section 1852(e)(3), the 
     external review activities conducted under subparagraph 
     (A) with respect to the organization shall not be 
     duplicative of review activities conducted as part of the 
     accreditation process or the external review conducted 
     under such section.
       ``(C) Deemed compliance for medicare managed care 
     organizations.--At the option of a State, the requirements of 
     subparagraph (A) shall not apply with respect to a medicaid 
     managed care organization if the organization is an eligible 
     organization with a contract in effect under section 1876 or 
     a Medicare+Choice organization with a contract in effect 
     under C of title XVIII and the organization has had a 
     contract in effect under section 1903(m) at least during the 
     previous 2-year period.
       (b) Increased FFP for External Quality Review 
     Organizations.--Section 1903(a)(3)(C) (42 U.S.C. 
     1396b(a)(3)(C)) is amended--
       (1) by inserting ``(i)'' after ``(C)'', and
       (2) by adding at the end the following new clause:
       ``(ii) 75 percent of the sums expended with respect to 
     costs incurred during such quarter (as found necessary by the 
     Secretary for the proper and efficient administration of the 
     State plan) as are attributable to the performance of 
     independent external reviews conducted under section 
     1932(c)(2); and''.
       (c) Studies and Reports.--
       (1) GAO study and report on quality assurance and 
     accreditation standards.--
       (A) Study.--The Comptroller General of the United States 
     shall conduct a study and analysis of the quality assurance 
     programs and accreditation standards applicable to managed 
     care entities operating in the private sector, or to such 
     entities that operate under contracts under the medicare 
     program under title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.). Such study shall determine--
       (i) if such programs and standards include consideration of 
     the accessibility and quality of the health care items and 
     services delivered under such contracts to low-income 
     individuals; and
       (ii) the appropriateness of applying such programs and 
     standards to medicaid managed care organizations under 
     section 1932(c) of such Act.
       (B) Report.--The Comptroller General shall submit a report 
     to the Committee on Commerce of the House of Representatives 
     and the Committee on Finance of the Senate on the study 
     conducted under subparagraph (A).
       (2) Study and report on services provided to individuals 
     with special health care needs.--
       (A) Study.--The Secretary of Health and Human Services, in 
     consultation with States, managed care organizations, the 
     National Academy of State Health Policy, representatives of 
     beneficiaries with special health care needs, experts in 
     specialized health care, and others, shall conduct a study 
     concerning safeguards (if any) that may be needed to ensure 
     that the health care needs of individuals with special health 
     care needs and chronic conditions who are enrolled with 
     medicaid managed care organizations are adequately met.
       (B) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Secretary shall submit to 
     Committees described in paragraph (1)(B) a report on such 
     study.

     SEC. 4706. SOLVENCY STANDARDS.

       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.''.

     SEC. 4707. PROTECTIONS AGAINST FRAUD AND ABUSE.

       (a) In General.--Section 1932 (42 U.S.C. 1396v) is further 
     amended by adding at the end the following:
       ``(d) Protections Against Fraud and Abuse.--
       ``(1) Prohibiting affiliations with individuals debarred by 
     Federal agencies.--
       ``(A) In general.--A managed care entity 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 entity's 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 entity's obligations under its contract with 
     the State.
       ``(B) Effect of noncompliance.--If a State finds that a 
     managed care entity 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 entity 
     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 entity unless the Secretary 
     (in consultation with the Inspector General of the Department 
     of Health and Human Services) provides to the State and to 
     Congress a written statement describing compelling reasons 
     that exist for renewing or extending the agreement.
       ``(C) Persons described.--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 No. 12549 or under guidelines implementing 
     such order; or
       ``(ii) is an affiliate (as defined in such Act) of a person 
     described in clause (i).
       ``(2) Restrictions on marketing.--
       ``(A) Distribution of materials.--
       ``(i) In general.--A managed care entity, with respect to 
     activities under this title, 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.

     The requirement of subclause (I) shall not apply with respect 
     to a State until such date as the Secretary specifies in 
     consultation with such State.
       ``(ii) Consultation in review of market materials.--In the 
     process of reviewing and approving such materials, the State 
     shall provide for consultation with a medical care advisory 
     committee.
       ``(B) Service market.--A managed care entity shall 
     distribute marketing materials to the entire service area of 
     such entity covered under the contract under section 1903(m) 
     or section 1903(t)(3).
       ``(C) Prohibition of tie-ins.--A managed care entity, or 
     any agency of such entity, may not seek to influence an 
     individual's enrollment with the entity in conjunction with 
     the sale of any other insurance.

[[Page H6095]]

       ``(D) Prohibiting marketing fraud.--Each managed care 
     entity shall comply with such procedures and conditions as 
     the Secretary prescribes in order to ensure that, before an 
     individual is enrolled with the entity, the individual is 
     provided accurate oral and written information sufficient to 
     make an informed decision whether or not to enroll.
       ``(E) Prohibition of `cold-call' marketing.--Each managed 
     care entity shall not, directly or indirectly, conduct door-
     to-door, telephonic, or other `cold-call' marketing of 
     enrollment under this title.
       ``(3) State conflict-of-interest safeguards in medicaid 
     risk contracting.--A medicaid managed care organization may 
     not enter into a contract with any State under section 
     1903(m) unless the State has in effect conflict-of-interest 
     safeguards with respect to officers and employees of the 
     State with responsibilities relating to contracts with such 
     organizations or to the default enrollment process described 
     in subsection (a)(4)(C)(ii) 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.
       ``(4) Use of unique physician identifier for participating 
     physicians.--Each medicaid managed care organization shall 
     require each physician providing services to enrollees 
     eligible for medical assistance under the State plan under 
     this title to have a unique identifier in accordance with the 
     system established under section 1173(b).
       ``(e) Sanctions for Noncompliance.--
       ``(1) Use of intermediate sanctions by the state to enforce 
     requirements.--
       ``(A) In general.--A State may not enter into or renew a 
     contract under section 1903(m) unless the State has 
     established intermediate sanctions, which may include any of 
     the types described in paragraph (2), other than the 
     termination of a contract with a medicaid managed care 
     organization, which the State may impose against a medicaid 
     managed care organization with such a contract, if the 
     organization--
       ``(i) fails substantially to provide medically necessary 
     items and services that are required (under law or under such 
     organization's contract with the State) to be provided to an 
     enrollee covered under the contract;
       ``(ii) imposes premiums or charges on enrollees in excess 
     of the premiums or charges permitted under this title;
       ``(iii) acts to discriminate among enrollees on the basis 
     of their health status or requirements for health care 
     services, including expulsion or refusal to reenroll an 
     individual, except as permitted by this title, or engaging in 
     any practice that would reasonably be expected to have the 
     effect of denying or discouraging enrollment with the 
     organization by eligible individuals whose medical 
     condition or history indicates a need for substantial 
     future medical services;
       ``(iv) misrepresents or falsifies information that is 
     furnished--

       ``(I) to the Secretary or the State under this title; or
       ``(II) to an enrollee, potential enrollee, or a health care 
     provider under such title; or

       ``(v) fails to comply with the applicable requirements of 
     section 1903(m)(2)(A)(x).

     The State may also impose such intermediate sanction against 
     a managed care entity if the State determines that the entity 
     distributed directly or through any agent or independent 
     contractor marketing materials in violation of subsection 
     (d)(2)(A)(i)(II)..
       ``(B) Rule of construction.--Clause (i) of subparagraph (A) 
     shall not apply to the provision of abortion services, except 
     that a State may impose a sanction on any medicaid managed 
     care organization that has a contract to provide abortion 
     services if the organization does not provide such services 
     as provided for under the contract.
       ``(2) Intermediate sanctions.--The sanctions described in 
     this paragraph are as follows:
       ``(A) Civil money penalties as follows:
       ``(i) Except as provided in clause (ii), (iii), or (iv), 
     not more than $25,000 for each determination under paragraph 
     (1)(A).
       ``(ii) With respect to a determination under clause (iii) 
     or (iv)(I) of paragraph (1)(A), not more than $100,000 for 
     each such determination.
       ``(iii) With respect to a determination under paragraph 
     (1)(A)(ii), double the excess amount charged in violation of 
     such subsection (and the excess amount charged shall be 
     deducted from the penalty and returned to the individual 
     concerned).
       ``(iv) Subject to clause (ii), with respect to a 
     determination under paragraph (1)(A)(iii), $15,000 for each 
     individual not enrolled as a result of a practice described 
     in such subsection.
       ``(B) The appointment of temporary management--
       ``(i) to oversee the operation of the medicaid managed care 
     organization upon a finding by the State that there is 
     continued egregious behavior by the organization or there is 
     a substantial risk to the health of enrollees; or
       ``(ii) to assure the health of the organization's 
     enrollees, if there is a need for temporary management 
     while--

       ``(I) there is an orderly termination or reorganization of 
     the organization; or
       ``(II) improvements are made to remedy the violations found 
     under paragraph (1),

     except that temporary management under this subparagraph may 
     not be terminated until the State has determined that the 
     medicaid managed care organization has the capability to 
     ensure that the violations shall not recur.
       ``(C) Permitting individuals enrolled with the managed care 
     entity to terminate enrollment without cause, and notifying 
     such individuals of such right to terminate enrollment.
       ``(D) Suspension or default of all enrollment of 
     individuals under this title after the date the Secretary or 
     the State notifies the entity of a determination of a 
     violation of any requirement of section 1903(m) or this 
     section.
       ``(E) Suspension of payment to the entity under this title 
     for individuals enrolled after the date the Secretary or 
     State notifies the entity of such a determination and until 
     the Secretary or State is satisfied that the basis for such 
     determination has been corrected and is not likely to recur.
       ``(3) Treatment of chronic substandard entities.--In the 
     case of a medicaid managed care organization which has 
     repeatedly failed to meet the requirements of section 1903(m) 
     and this section, the State shall (regardless of what other 
     sanctions are provided) impose the sanctions described in 
     subparagraphs (B) and (C) of paragraph (2).
       ``(4) Authority to terminate contract.--
       ``(A) In general.--In the case of a managed care entity 
     which has failed to meet the requirements of this part or a 
     contract under section 1903(m) or 1905(t)(3), the State shall 
     have the authority to terminate such contract with the entity 
     and to enroll such entity's enrollees with other managed care 
     entities (or to permit such enrollees to receive medical 
     assistance under the State plan under this title other than 
     through a managed care entity).
       ``(B) Availability of hearing prior to termination of 
     contract.--A State may not terminate a contract with a 
     managed care entity under subparagraph (A) unless the entity 
     is provided with a hearing prior to the termination.
       ``(C) Notice and right to disenroll in cases of termination 
     hearing.--A State may--
       ``(i) notify individuals enrolled with a managed care 
     entity which is the subject of a hearing to terminate the 
     entity's contract with the State of the hearing, and
       ``(ii) in the case of such an entity, permit such enrollees 
     to disenroll immediately with the entity without cause.
       ``(5) Other protections for managed care entities against 
     sanctions imposed by state.--Before imposing any sanction 
     against a managed care entity other than termination of the 
     entity's contract, the State shall provide the entity with 
     notice and such other due process protections as the State 
     may provide, except that a State may not provide a managed 
     care entity with a pre-termination hearing before imposing 
     the sanction described in paragraph (2)(B).''.
       (b) Limitation on Availability of FFP for Use of Enrollment 
     Brokers.--Section 1903(b) (42 U.S.C. 1396b(b)) is amended by 
     adding at the end the following:
       ``(4) Amounts expended by a State for the use an enrollment 
     broker in marketing medicaid managed care 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.''.
       (c) Application of Disclosure Requirements to Managed Care 
     Entities.--Section 1124(a)(2)(A) (42 U.S.C. 1320a-3(a)(2)(A)) 
     is amended by inserting ``a managed care entity, as defined 
     in section 1932(a)(1)(B),'' after ``renal disease 
     facility,''.

     SEC. 4708. IMPROVED ADMINISTRATION.

       (a) Change in Threshold Amount for Contracts Requiring 
     Secretary's Prior Approval.--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) Permitting Same Copayments in Health Maintenance 
     Organizations as in Fee-for-Service.--Section 1916 (42 U.S.C. 
     1396o) is amended--
       (1) in subsection (a)(2)(D), by striking ``or services 
     furnished'' and all that follows through ``enrolled,''; and
       (2) in subsection (b)(2)(D), by striking ``or (at the 
     option'' and all that follows through ``enrolled,''.
       (c) Assuring Timeliness of Provider Payments.--Section 1932 
     is further amended by adding at the end the following:
       ``(f) Timeliness of Payment.--A contract under section 
     1903(m) with a medicaid managed care organization shall 
     provide that the organization shall make payment to health 
     care providers for items and services which are subject to 
     the contract and that are furnished to individuals eligible 
     for medical assistance under the State plan under this title 
     who are enrolled with the organization on a timely basis 
     consistent with the claims payment procedures described in 
     section 1902(a)(37)(A), unless the health care provider and 
     the organization agree to an alternate payment schedule.''.
       (d) Clarification of Application of FFP Denial Rules to 
     Payments Made Pursuant to Managed Care Entities.--Section 
     1903(i) (42 U.S.C. 1396b(i)) is amended by adding at the end 
     the following new sentence: ``Paragraphs (1), (2), (16), 
     (17), and (18) shall apply with respect

[[Page H6096]]

     to items or services furnished and amounts expended by or 
     through a managed care entity (as defined in section 
     1932(a)(1)(B)) in the same manner as such paragraphs apply to 
     items or services furnished and amounts expended directly by 
     the State.''.

     SEC. 4709. 6-MONTH GUARANTEED ELIGIBILITY FOR ALL INDIVIDUALS 
                   ENROLLED IN MANAGED CARE.

       Section 1902(e)(2) (42 U.S.C. 1396a(e)(2)) is amended--
       (1) by striking ``who is enrolled'' and all that follows 
     through ``section 1903(m)(2)(A)'' and inserting ``who is 
     enrolled with a medicaid managed care organization (as 
     defined in section 1903(m)(1)(A)), with a primary care case 
     manager (as defined in section 1905(t)),''; and
       (2) by inserting before the period ``or by or through the 
     case manager''.

     SEC. 4710. EFFECTIVE DATES.

       (a) General Effective Date.--Except as otherwise provided 
     in this chapter and section 4759, the amendments made by this 
     chapter shall take effect on the date of the enactment of 
     this Act and shall apply to contracts entered into or renewed 
     on or after October 1, 1997.
       (b) Specific Effective Dates.--Subject to subsection (c) 
     and section 4759--
       (1) PCCM option.--The amendments made by section 4702 shall 
     apply to primary care case management services furnished on 
     or after October 1, 1997.
       (2) 75:25 rule.--The amendments made by section 4703 apply 
     to contracts under section 1903(m) of the Social Security Act 
     (42 U.S.C. 1396b(m)) on and after June 20, 1997.
       (3) Quality standards.--Section 1932(c)(1) of the Social 
     Security Act, as added by section 4705(a), shall take effect 
     on January 1, 1999.
       (4) Solvency standards.--
       (A) In general.--The amendments made by section 4706 shall 
     apply to contracts entered into or renewed on or after 
     October 1, 1998.
       (B) Transition rule.--In the case of an organization that 
     as of the date of the enactment of this Act has entered into 
     a contract under section 1903(m) of the Social Security Act 
     with a State for the provision of medical assistance under 
     title XIX of such Act under which the organization assumes 
     full financial risk and is receiving capitation payments, the 
     amendment made by section 4706 shall not apply to such 
     organization until 3 years after the date of the enactment of 
     this Act.
       (5) Sanctions for noncompliance.--Section 1932(e) of the 
     Social Security Act, as added by section 4707(a), shall apply 
     to contracts entered into or renewed on or after April 1, 
     1998.
       (6) Limitation on ffp for enrollment brokers.--The 
     amendment made by section 4707(b) shall apply to amounts 
     expended on or after October 1, 1997.
       (7) 6-month guaranteed eligibility.--The amendments made by 
     section 4709 shall take effect on October 1, 1997.
       (c) Nonapplication to Waivers.--Nothing in this chapter (or 
     the amendments made by this chapter) shall be construed as 
     affecting the terms and conditions of any waiver, or the 
     authority of the Secretary of Health and Human Services with 
     respect to any such waiver, under section 1115 or 1915 of the 
     Social Security Act (42 U.S.C. 1315, 1396n).

             CHAPTER 2--FLEXIBILITY IN PAYMENT OF PROVIDERS

     SEC. 4711. FLEXIBILITY IN PAYMENT METHODS FOR HOSPITAL, 
                   NURSING FACILITY, ICF/MR, AND HOME HEALTH 
                   SERVICES.

       (a) Repeal of Boren Requirements.--Section 1902(a)(13) (42 
     U.S.C. 1396a(a)(13)) is amended--
       (1) by striking all that precedes subparagraph (D) and 
     inserting the following:
       ``(13) provide--
       ``(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, the methodologies underlying the 
     establishment of such rates, and justifications for the 
     proposed rates are published,
       ``(ii) providers, beneficiaries and their representatives, 
     and other concerned State residents are given a reasonable 
     opportunity for review and comment on the proposed rates, 
     methodologies, and justifications,
       ``(iii) final rates, the methodologies underlying the 
     establishment of such rates, and justifications for such 
     final rates are published, and
       ``(iv) in the case of hospitals, such rates 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;'';
       (2) by redesignating subparagraphs (D) and (E) as 
     subparagraphs (B) and (C), respectively;
       (3) in subparagraph (B), as so redesignated, by adding 
     ``and'' at the end;
       (4) in subparagraph (C), as so redesignated, by striking 
     ``and'' at the end; and
       (5) by striking subparagraph (F).
       (b) Study and Report.--
       (1) Study.--The Secretary of Health and Human Services 
     shall study the effect on access to, and the quality of, 
     services provided to beneficiaries of the rate-setting 
     methods used by States pursuant to section 1902(a)(13)(A) of 
     the Social Security Act (42 U.S.C. 1396a(a)(13)(A)), as 
     amended by subsection (a).
       (2) Report.--Not later than 4 years after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall submit a report to the appropriate committees 
     of Congress on the conclusions of the study conducted under 
     paragraph (1), together with any recommendations for 
     legislation as a result of such conclusions.
       (c) Conforming Amendments.--
       (1) Section 1905(o)(3) (42 U.S.C. 1396d(o)(3)) is amended 
     by striking ``amount described in section 1902(a)(13)(D)'' 
     and inserting ``amount determined in section 
     1902(a)(13)(B)''.
       (2) Section 1923 (42 U.S.C. 1396r-4) is amended, in 
     subsections (a)(1) and (e)(1), by striking ``1902(a)(13)(A)'' 
     each place it appears and inserting ``1902(a)(13)(A)(iv)''.
       (d) Effective Date.--This section shall take effect on the 
     date of the enactment of this Act and the amendments made by 
     subsections (a) and (c) shall apply to payment for items and 
     services furnished on or after October 1, 1997.

     SEC. 4712. PAYMENT FOR CENTER AND CLINIC SERVICES.

       (a) Phase-Out of Payment Based on Reasonable Costs.--
     Section 1902(a)(13)(C) (42 U.S.C. 1396a(a)(13)(C)), as 
     redesignated by section 4711(a)(2), is amended by inserting 
     ``(or 95 percent for services furnished during fiscal year 
     2000, 90 percent for services furnished during fiscal year 
     2001, 85 percent for services furnished during fiscal year 
     2002, or 70 percent for services furnished during fiscal year 
     2003)'' after ``100 percent''.
       (b) Transitional Supplemental Payment for Services 
     Furnished Under Certain Managed Care Contracts.--
       (1) In general.--Section 1902(a)(13)(C) (42 U.S.C. 
     1396a(a)(13)(C)), as so redesignated, is further amended--
       (A) by inserting ``(i)'' after ``(C)'', 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 an organization under section 1903(m), for payment 
     to the center or clinic at least quarterly 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 subsection 
     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, 2003--
       (1) subparagraph (C) of section 1902(a)(13) (42 U.S.C. 
     1396a(a)(13)), as so redesignated, 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 ``including 
     requirements of the Secretary that an entity may not be 
     owned, controlled, or operated by another entity,'' after 
     ``such a grant,''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after the date of the 
     enactment of this Act.

     SEC. 4713. ELIMINATION OF OBSTETRICAL AND PEDIATRIC PAYMENT 
                   RATE REQUIREMENTS.

       (a) In General.--Section 1926 (42 U.S.C. 1396r-7) is 
     repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to services furnished on or after October 1, 
     1997.

     SEC. 4714. MEDICAID PAYMENT RATES FOR CERTAIN MEDICARE COST-
                   SHARING.

       (a) Clarification Regarding State Liability for Medicare 
     Cost-Sharing.--
       (1) In general.--Section 1902(n) (42 U.S.C. 1396a(n)) is 
     amended--
       (A) by inserting ``(1)'' after ``(n)'', and
       (B) by adding at the end the following:
       ``(2) In carrying out paragraph (1), a State is not 
     required to provide any payment for any expenses incurred 
     relating to payment for deductibles, coinsurance, or 
     copayments for medicare cost-sharing to the extent that 
     payment under title XVIII for the service would exceed the 
     payment amount that otherwise would be made under the State 
     plan under this title for such service if provided to an 
     eligible recipient other than a medicare beneficiary.
       ``(3) In the case in which a State's payment for medicare 
     cost-sharing for a qualified medicare beneficiary with 
     respect to an item or service is reduced or eliminated 
     through the application of paragraph (2)--
       ``(A) for purposes of applying any limitation under title 
     XVIII on the amount that the beneficiary may be billed or 
     charged for the service, the amount of payment made under 
     title XVIII plus the amount of payment (if any) under the 
     State plan shall be considered to be payment in full for the 
     service;
       ``(B) the beneficiary shall not have any legal liability to 
     make payment to a provider or to an organization described in 
     section 1903(m)(1)(A) for the service; and
       ``(C) any lawful sanction that may be imposed upon a 
     provider or such an organization for excess charges under 
     this title or title XVIII shall apply to the imposition of 
     any charge imposed upon the individual in such case.

     This paragraph shall not be construed as preventing payment 
     of any medicare cost-sharing by a medicare supplemental 
     policy or an employer retiree health plan on behalf of an 
     individual.''.

[[Page H6097]]

       (2) Conforming clarification.--Section 1905(p)(3) (42 
     U.S.C. 1396d(p)(3)) is amended by inserting ``(subject to 
     section 1902(n)(2))'' after ``means''.
       (b) Limitation on Medicare Providers.--
       (1) Provider agreements.--Section 1866(a)(1)(A) (42 U.S.C. 
     1395cc(a)(1)(A)) is amended--
       (A) by inserting ``(i)'' after ``(A)'', and
       (B) by inserting before the comma at the end the following: 
     ``, and (ii) not to impose any charge that is prohibited 
     under section 1902(n)(3)''.
       (2) Nonparticipating providers.--Section 1848(g)(3)(A) (42 
     U.S.C. 1395w-4(g)(3)(A)) is amended by inserting before the 
     period at the end the following: ``and the provisions of 
     section 1902(n)(3)(A) apply to further limit permissible 
     charges under this section''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payment for (and with respect to provider 
     agreements with respect to) items and services furnished on 
     or after the date of the enactment of this Act. The 
     amendments made by subsection (a) shall also apply to payment 
     by a State for items and services furnished before such date 
     if such payment is the subject of a law suit that is based on 
     the provisions of sections 1902(n) and 1905(p) of the Social 
     Security Act and that is pending as of, or is initiated 
     after, the date of the enactment of this Act.

     SEC. 4715. TREATMENT OF VETERANS' PENSIONS UNDER MEDICAID.

       (a) Post-Eligibility Treatment.--Section 1902(r)(1) (42 
     U.S.C. 1396a(r)(1)) is amended--
       (1) by inserting ``(A)'' after ``(r)(1)'',
       (2) by inserting ``, the treatment described in 
     subparagraph (B) shall apply,'' after ``under such a 
     waiver'';
       (3) by striking ``and,'' and inserting ``, and''; and
       (4) by adding at the end the following:
       ``(B)(i) In the case of a veteran who does not have a 
     spouse or a child, if the veteran--
       ``(I) receives, after the veteran has been determined to be 
     eligible for medical assistance under the State plan under 
     this title, a veteran's pension in excess of $90 per month, 
     and
       ``(II) resides in a State veterans home with respect to 
     which the Secretary of Veterans Affairs makes per diem 
     payments for nursing home care pursuant to section 1741(a) of 
     title 38, United States Code,
     any such pension payment, including any payment made due to 
     the need for aid and attendance, or for unreimbursed medical 
     expenses, that is in excess of $90 per month shall be counted 
     as income only for the purpose of applying such excess 
     payment to the State veterans home's cost of providing 
     nursing home care to the veteran.
       ``(ii) The provisions of clause (i) shall apply with 
     respect to a surviving spouse of a veteran who does not have 
     a child in the same manner as they apply to a veteran 
     described in such clause.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply on and after October 1, 1997.

                 CHAPTER 3--FEDERAL PAYMENTS TO STATES

     SEC. 4721. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER 
                   STATE MEDICAID PROGRAMS.

       (a) Adjustment of State DSH Allotments.--
       (1) In general.--Section 1923(f) (42 U.S.C. 1396r-4(f)) is 
     amended to read as follows:
       ``(f) Limitation on Federal Financial Participation.--
       ``(1) In general.--Payment under section 1903(a) shall not 
     be made to a State with respect to any payment adjustment 
     made under this section for hospitals in a State for quarters 
     in a fiscal year in excess of the disproportionate share 
     hospital (in this subsection referred to as `DSH') allotment 
     for the State for the fiscal year, as specified in paragraphs 
     (2) and (3).
       ``(2) State dsh allotments for fiscal years 1998 through 
     2002.--The DSH allotment for a State for each fiscal year 
     during the period beginning with fiscal year 1998 and ending 
     with fiscal year 2002 is determined in accordance with the 
     following table:


----------------------------------------------------------------------------------------------------------------
                                                                     DSH Allotment (in millions of dollars)     
                       State or District                       -------------------------------------------------
                                                                  FY 98     FY 99     FY 00     FY 01     FY 02 
----------------------------------------------------------------------------------------------------------------
 Alabama                                                             293       269       248       246       246
                                                                                                                
 Alaska                                                               10        10        10         9         9
                                                                                                                
 Arizona                                                              81        81        81        81        81
                                                                                                                
 Arkansas                                                              2         2         2         2         2
                                                                                                                
 California                                                        1,085     1,068       986       931       877
                                                                                                                
 Colorado                                                             93        85        79        74        74
                                                                                                                
 Connecticut                                                         200       194       164       160       160
                                                                                                                
 Delaware                                                              4         4         4         4         4
                                                                                                                
 District of                                                                                                    
    Columbia                                                          23        23        23        23        23
                                                                                                                
 Florida                                                             207       203       197       188       160
                                                                                                                
 Georgia                                                             253       248       241       228       215
                                                                                                                
 Hawaii                                                                0         0         0         0         0
                                                                                                                
 Idaho                                                                 1         1         1         1         1
                                                                                                                
 Illinois                                                            203       199       193       182       172
                                                                                                                
 Indiana                                                             201       197       191       181       171
                                                                                                                
 Iowa                                                                  8         8         8         8         8
                                                                                                                
 Kansas                                                               51        49        42        36        33
                                                                                                                
 Kentucky                                                            137       134       130       123       116
                                                                                                                
 Louisiana                                                           880       795       713       658       631
                                                                                                                
 Maine                                                               103        99        84        84        84
                                                                                                                
 Maryland                                                             72        70        68        64        61
                                                                                                                
 Massachusetts                                                       288       282       273       259       244
                                                                                                                
 Michigan                                                            249       244       237       224       212
                                                                                                                
 Minnesota                                                            16        16        16        16        16
                                                                                                                
 Mississippi                                                         143       141       136       129       122
                                                                                                                
 Missouri                                                            436       423       379       379       379
                                                                                                                
 Montana                                                             0.2       0.2       0.2       0.2       0.2
                                                                                                                
 Nebraska                                                              5         5         5         5         5
                                                                                                                
 Nevada                                                               37        37        37        37        37
                                                                                                                
 New Hampshire                                                       140       136       130       130       130
                                                                                                                
 New Jersey                                                          600       582       515       515       515
                                                                                                                
 New Mexico                                                            5         5         5         5         5
                                                                                                                
 New York                                                          1,512     1,482     1,436     1,361     1,285
                                                                                                                
 North Carolina                                                      278       272       264       250       236
                                                                                                                
 North Dakota                                                          1         1         1         1         1
                                                                                                                
 Ohio                                                                382       374       363       344       325
                                                                                                                
 Oklahoma                                                             16        16        16        16        16
                                                                                                                
 Oregon                                                               20        20        20        20        20
                                                                                                                
 Pennsylvania                                                        529       518       502       476       449
                                                                                                                
 Rhode Island                                                         62        60        58        55        52
                                                                                                                
 South Carolina                                                      313       303       262       262       262
                                                                                                                
 South Dakota                                                          1         1         1         1         1
                                                                                                                
 Tennessee                                                             0         0         0         0         0
                                                                                                                
 Texas                                                               979       950       806       765       765
                                                                                                                
 Utah                                                                  3         3         3         3         3
                                                                                                                
 Vermont                                                              18        18        18        18        18
                                                                                                                
 Virginia                                                             70        68        66        63        59
                                                                                                                
 Washington                                                          174       171       166       157       148
                                                                                                                
 West Virginia                                                        64        63        61        58        54
                                                                                                                
 Wisconsin                                                             7         7         7         7         7
                                                                                                                

[[Page H6098]]

                                                                                                                
 Wyoming                                                               0         0         0         0        0.
                                                                                                                
----------------------------------------------------------------------------------------------------------------

       ``(3) State dsh allotments for fiscal year 2003 and 
     thereafter.--
       ``(A) In general.--The DSH allotment for any State for 
     fiscal year 2003 and each succeeding fiscal year is equal to 
     the DSH allotment for the State for the preceding fiscal year 
     under paragraph (2) or this paragraph, increased, subject to 
     subparagraph (B), by the percentage change in the consumer 
     price index for all urban consumers (all items; U.S. city 
     average), for the previous fiscal year.
       ``(B) Limitation.--The DSH allotment for a State shall not 
     be increased under subparagraph (A) for a fiscal year to the 
     extent that such an increase would result in the DSH 
     allotment for the year exceeding the greater of--
       ``(i) the DSH allotment for the previous year, or
       ``(ii) 12 percent of the total amount of expenditures under 
     the State plan for medical assistance during the fiscal year.
       ``(4) Definition of state.-- In this subsection, the term 
     `State' means the 50 States and the District of Columbia.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to payment adjustments attributable to DSH 
     allotments for fiscal years beginning with fiscal year 1998.
       (b) Limitation on Payments to Institutions For Mental 
     Diseases.--Section 1923 of the Social Security Act (42 U.S.C. 
     1396r-4) is amended by adding at the end the following:
       ``(h) Limitation on Certain State DSH Expenditures.--
       ``(1) In general.--Payment under section 1903(a) shall not 
     be made to a State with respect to any payment adjustments 
     made under this section for quarters in a fiscal year 
     (beginning with fiscal year 1998) to institutions for mental 
     diseases or other mental health facilities, to the extent the 
     aggregate of such adjustments in the fiscal year exceeds the 
     lesser of the following:
       ``(A) 1995 imd dsh payment adjustments.--The total State 
     DSH expenditures that are attributable to fiscal year 1995 
     for payments to institutions for mental diseases and other 
     mental health facilities (based on reporting data specified 
     by the State on HCFA Form 64 as mental health DSH, and as 
     approved by the Secretary).
       ``(B) Applicable percentage of 1995 total dsh payment 
     allotment.--The amount of such payment adjustments which are 
     equal to the applicable percentage of the Federal share of 
     payment adjustments made to hospitals in the State under 
     subsection (c) that are attributable to the 1995 DSH 
     allotment for the State for payments to institutions for 
     mental diseases and other mental health facilities (based on 
     reporting data specified by the State on HCFA Form 64 as 
     mental health DSH, and as approved by the Secretary).
       ``(2) Applicable percentage.--
       ``(A) In general.--For purposes of paragraph (1), the 
     applicable percentage with respect to--
       ``(i) each of fiscal years 1998, 1999, and 2000, is the 
     percentage determined under subparagraph (B); or
       ``(ii) a succeeding fiscal year is the lesser of the 
     percentage determined under subparagraph (B) or the following 
     percentage:

       ``(I) For fiscal year 2001, 50 percent.
       ``(II) For fiscal year 2002, 40 percent.
       ``(III) For each succeeding fiscal year, 33 percent.

       ``(B) 1995 percentage.--The percentage determined under 
     this subparagraph is the ratio (determined as a percentage) 
     of--
       ``(i) the Federal share of payment adjustments made to 
     hospitals in the State under subsection (c) that are 
     attributable to the 1995 DSH allotment for the State (as 
     reported by the State not later than January 1, 1997, on HCFA 
     Form 64, and as approved by the Secretary) for payments to 
     institutions for mental diseases and other mental health 
     facilities, to
       ``(ii) the State 1995 DSH spending amount.
       ``(C) State 1995 dsh spending amount.--For purposes of 
     subparagraph (B)(ii), the `State 1995 DSH spending amount', 
     with respect to a State, is the Federal medical assistance 
     percentage (for fiscal year 1995) of the payment adjustments 
     made under subsection (c) under the State plan that are 
     attributable to the fiscal year 1995 DSH allotment for the 
     State (as reported by the State not later than January 1, 
     1997, on HCFA Form 64, and as approved by the Secretary).''.
       (c) Description of Targeting Payments.--Section 1923(a)(2) 
     (42 U.S.C. 1396r-4(a)(2)) is amended by adding at the end the 
     following:
       ``(D) A State plan under this title shall not be considered 
     to meet the requirements of section 1902(a)(13)(A)(iv) 
     (insofar as it requires payments to hospitals to take into 
     account the situation of hospitals that serve a 
     disproportionate number of low-income patients with special 
     needs), as of October 1, 1998, unless the State has submitted 
     to the Secretary by such date a description of the 
     methodology used by the State to identify and to make 
     payments to disproportionate share hospitals, including 
     children's hospitals, on the basis of the proportion of low-
     income and medicaid patients served by such hospitals. The 
     State shall provide an annual report to the Secretary 
     describing the disproportionate share payments to each such 
     disproportionate share hospital.''.
       (d) Direct Payment by State for Managed Care Enrollees.--
     Section 1923 (42 U.S.C. 1396r-4) is amended by adding at the 
     end the following:
       ``(i) Requirement for Direct Payment.--
       ``(1) In general.--No payment may be made under section 
     1903(a)(1) with respect to a payment adjustment made under 
     this section, for services furnished by a hospital on or 
     after October 1, 1997, with respect to individuals 
     eligible for medical assistance under the State plan who 
     are enrolled with a managed care entity (as defined in 
     section 1932(a)(1)(B)) or under any other managed care 
     arrangement unless a payment, equal to the amount of the 
     payment adjustment--
       ``(A) is made directly to the hospital by the State; and
       ``(B) is not used to determine the amount of a prepaid 
     capitation payment under the State plan to the entity or 
     arrangement with respect to such individuals.
       ``(2) Exception for current arrangements.--Paragraph (1) 
     shall not apply to a payment adjustment provided pursuant to 
     a payment arrangement in effect on July 1, 1997.''.
       (e) 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. 4722. TREATMENT OF STATE TAXES IMPOSED ON CERTAIN 
                   HOSPITALS.

       (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 described in section 
     501(c)(3) of the Internal Revenue Code of 1986 and exempt 
     from taxation under section 501(a) of such Code 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)), as 
     amended by section 4707(b), is amended by adding at the end 
     the following:
       ``(5) 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) Waiver of Certain Provider Tax Provisions.--
     Notwithstanding any other provision of law, taxes, fees, or 
     assessments, as defined in section 1903(w)(3)(A) of the 
     Social Security Act (42 U.S.C. 1396b(w)(3)(A)), that were 
     collected by the State of New York from a health care 
     provider before June 1, 1997, and for which a waiver of the 
     provisions of subparagraph (B) or (C) of section 1903(w)(3) 
     of such Act has been applied for, or that would, but for this 
     subsection require that such a waiver be applied for, in 
     accordance with subparagraph (E) of such section, and (if so 
     applied for) upon which action by the Secretary of Health and 
     Human Services (including any judicial review of any such 
     proceeding) has not been completed as of July 23, 1997, are 
     deemed to be permissible health care related taxes and in 
     compliance with the requirements of subparagraphs (B) and (C) 
     of section 1903(w)(3) of such Act.
       (d) 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.

     SEC. 4723. 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 4 
     consecutive fiscal years (beginning with fiscal year 1998) 
     $25,000,000 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 2001 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)

[[Page H6099]]

     shall be available for payment during the subsequent fiscal 
     year.
       (2) Determination.--For purposes of paragraph (1), the 
     number of undocumented aliens in a State under this section 
     shall be determined based on estimates of the resident 
     illegal alien population residing in each State prepared by 
     the Statistics Division of the Immigration and Naturalization 
     Service as of October 1992 (or as of such later date if such 
     date is at least 1 year before the beginning of the fiscal 
     year involved).
       (c) Use of Funds.--From the allotments made under 
     subsection (b), the Secretary shall pay to each State amounts 
     the State demonstrates were paid by the State (or by a 
     political subdivision of the State) for emergency health 
     services 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 this section.

     SEC. 4724. ELIMINATION OF WASTE, FRAUD, AND ABUSE.

       (a) Ban on Spending for Nonhealth Related Items.--Section 
     1903(i) (42 U.S.C. 1396b(i)) is amended--
       (1) in paragraphs (2) and (16), by striking the period at 
     the end and inserting ``; or'';
       (2) in paragraphs (10)(B), (11), and (13), by adding ``or'' 
     at the end; and
       (3) by inserting after paragraph (16), the following:
       ``(17) with respect to any amount expended for roads, 
     bridges, stadiums, or any other item or service not covered 
     under a State plan under this title.''.
       (b) Surety Bond Requirement for Home Health Agencies.--
       (1) In general.--Section 1903(i) (42 U.S.C. 1396b(i)), as 
     amended by subsection (a), is amended--
       (1) in paragraph (17), by striking the period at the end 
     and inserting ``; or''; and
       (2) by inserting after paragraph (17), the following:
       ``(18) with respect to any amount expended for home health 
     care services provided by an agency or organization unless 
     the agency or organization provides the State agency on a 
     continuing basis a surety bond in a form specified by the 
     Secretary under paragraph (7) of section 1861(o) and in an 
     amount that is not less than $50,000 or such comparable 
     surety bond as the Secretary may permit under the last 
     sentence of such section.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to home health care services furnished on or 
     after January 1, 1998.
       (c) Conflict of Interest Safeguards.--
       (1) In general.--Section 1902(a)(4)(C) (42 U.S.C. 
     1396a(a)(4)(C)) is amended--
       (A) by striking ``and (C)'' and inserting ``(C)'';
       (B) by striking ``local officer or employee'' and inserting 
     ``local officer, employee, or independent contractor'';
       (C) by striking ``such an officer or employee'' the first 2 
     places it appears and inserting ``such an officer, employee, 
     or contractor''; and
       (D) by inserting before the semicolon the following: ``, 
     and (D) that each State or local officer, employee, or 
     independent contractor who is responsible for selecting, 
     awarding, or otherwise obtaining items and services under the 
     State plan shall be subject to safeguards against conflicts 
     of interest that are at least as stringent as the safeguards 
     that apply under section 27 of the Office of Federal 
     Procurement Policy Act (41 U.S.C. 423) to persons described 
     in subsection (a)(2) of such section of that Act''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall take effect on January 1, 1998.
       (d) Authority To Refuse To Enter Into Medicaid Agreements 
     With Individuals or Entities Convicted of Felonies.--Section 
     1902(a)(23) (42 U.S.C. 1396(a)) is amended--
       (1) by striking ``except as provided in subsection (g) and 
     in section 1915 and except in the case of Puerto Rico, the 
     Virgin Islands, and Guam,''; and
       (2) by inserting before the semicolon at the end the 
     following: ``, except as provided in subsection (g) and in 
     section 1915, except that this paragraph shall not apply in 
     the case of Puerto Rico, the Virgin Islands, and Guam, and 
     except that nothing in this paragraph shall be construed as 
     requiring 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''.
       (e) Monitoring Payments for Dual Eligibles.--The 
     Administrator of the Health Care Financing Administration 
     shall develop mechanisms to improve the monitoring of, and to 
     prevent, inappropriate payments under the medicaid program 
     under title XIX of the Social Security Act (42 U.S.C. 1396 et 
     seq.) in the case of individuals who are dually eligible for 
     benefits under such program and under the medicare program 
     under title XVIII of such Act (42 U.S.C. 1395 et seq.).
       (f) Beneficiary and Program Protection Against Waste, 
     Fraud, and Abuse.--Section 1902(a) (42 U.S.C. 1396a(a)) is 
     amended--
       (1) by striking ``and'' at the end of paragraph (62);
       (2) by striking the period at the end of paragraph (63) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (63) the following:
       ``(64) provide, not later than 1 year after the date of the 
     enactment of this paragraph, a mechanism to receive reports 
     from beneficiaries and others and compile data concerning 
     alleged instances of waste, fraud, and abuse relating to the 
     operation of this title;''.
       (g) Disclosure of Information and Surety Bond Requirement 
     for Suppliers of Durable Medical Equipment.--
       (1) Requirement.--Section 1902(a) (42 U.S.C. 1396a(a)), as 
     amended by subsection (f), is amended--
       (A) by striking ``and'' at the end of paragraph (63);
       (B) by striking the period at the end of paragraph (64) and 
     inserting ``; and''; and
       (C) by inserting after paragraph (64) the following:
       ``(65) provide that the State shall issue provider numbers 
     for all suppliers of medical assistance consisting of durable 
     medical equipment, as defined in section 1861(n), and the 
     State shall not issue or renew such a supplier number for any 
     such supplier unless--
       ``(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 
     under section 1834(a)(16)(B) and in an amount that is not 
     less than $50,000 or such comparable surety bond as the 
     Secretary may permit under the second sentence of such 
     section.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to suppliers of medical assistance consisting of 
     durable medical equipment furnished on or after January 1, 
     1998.

     SEC. 4725. INCREASED FMAPS.

       (a) Alaska.--Notwithstanding the first sentence of section 
     1905(b) of the Social Security Act (42 U.S.C. 1396d(b)), the 
     Federal medical assistance percentage determined under such 
     sentence for Alaska shall be 59.8 percent but only with 
     respect to--
       (1) items and services furnished under a State plan under 
     title XIX or under a State child health plan under title XXI 
     of such Act during fiscal years 1998, 1999, and 2000;
       (2) payments made on a capitation or other risk-basis under 
     such titles for coverage occurring during such period; and
       (3) payments under title XIX of such Act attributable to 
     DSH allotments for such State determined under section 
     1923(f) of such Act (42 U.S.C. 1396r-4(f)) for such fiscal 
     years.
       (b) District of Columbia.--
       (1) In general.--The first sentence of section 1905(b) (42 
     U.S.C. 1396d(b)) is amended--
       (A) by striking ``and (2)'' and inserting ``, (2)'', and
       (B) by inserting before the period at the end the 
     following: ``, and (3) for purposes of this title and title 
     XXI, the Federal medical assistance percentage for the 
     District of Columbia shall be 70 percent''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to--
       (A) items and services furnished on or after October 1, 
     1997;
       (B) payments made on a capitation or other risk-basis for 
     coverage occurring on or after such date; and
       (C) payments attributable to DSH allotments for such States 
     determined under section 1923(f) of such Act (42 U.S.C. 
     1396r-4(f)) for fiscal years beginning with fiscal year 1998.

     SEC. 4726. INCREASE IN PAYMENT LIMITATION FOR TERRITORIES.

       Section 1108 (42 U.S.C. 1308) is amended--
       (1) in subsection (f), by striking ``The'' and inserting 
     ``Subject to subsection (g), the''; and
       (2) by adding at the end the following:
       ``(g) Medicaid Payments to Territories for Fiscal Year 1998 
     and Thereafter.--
       ``(1) Fiscal year 1998.--With respect to fiscal year 1998, 
     the amounts otherwise determined for Puerto Rico, the Virgin 
     Islands, Guam, the Northern Mariana Islands, and American 
     Samoa under subsection (f) for such fiscal year shall be 
     increased by the following amounts:
       ``(A) For Puerto Rico, $30,000,000.
       ``(B) For the Virgin Islands, $750,000.
       ``(C) For Guam, $750,000.
       ``(D) For the Northern Mariana Islands, $500,000.
       ``(E) For American Samoa, $500,000.
       ``(2) Fiscal year 1999 and thereafter.--Notwithstanding 
     subsection (f), with respect to fiscal year 1999 and any 
     fiscal year thereafter, the total amount certified by the 
     Secretary under title XIX for payment to--
       ``(A) Puerto Rico shall not exceed the sum of the amount 
     provided in this subsection for the preceding fiscal year 
     increased by the percentage increase in the medical care 
     component of the Consumer Price Index for all urban consumers 
     (as published by the Bureau of Labor Statistics) for the 12-
     month period ending in March preceding the beginning of the 
     fiscal year, rounded to the nearest $100,000;
       ``(B) the Virgin Islands shall not exceed the sum of the 
     amount provided in this subsection for the preceding fiscal 
     year increased by the percentage increase referred to in 
     subparagraph (A), rounded to the nearest $10,000;
       ``(C) Guam shall not exceed the sum of the amount provided 
     in this subsection for the preceding fiscal year increased by 
     the percentage increase referred to in subparagraph (A), 
     rounded to the nearest $10,000;
       ``(D) the Northern Mariana Islands shall not exceed the sum 
     of the amount provided in this subsection for the preceding 
     fiscal year increased by the percentage increase referred to 
     in subparagraph (A), rounded to the nearest $10,000; and

[[Page H6100]]

       ``(E) American Samoa shall not exceed the sum of the amount 
     provided in this subsection for the preceding fiscal year 
     increased by the percentage increase referred to in 
     subparagraph (A), rounded to the nearest $10,000.''.

                         CHAPTER 4--ELIGIBILITY

     SEC. 4731. 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. 4732. PAYMENT OF PART B PREMIUMS.

       (a) Eligibility.--Section 1902(a)(10)(E) (42 U.S.C. 
     1396a(a)(10)(E)) is amended--
       (1) by striking ``and'' at the end of clause (ii); and
       (2) by inserting after clause (iii) the following:
       ``(iv) subject to sections 1933 and 1905(p)(4), for making 
     medical assistance available (but only for premiums payable 
     with respect to months during the period beginning with 
     January 1998, and ending with December 2002)--
       ``(I) for medicare cost-sharing described in section 
     1905(p)(3)(A)(ii) for individuals who would be qualified 
     medicare beneficiaries described in section 1905(p)(1) but 
     for the fact that their income exceeds the income level 
     established by the State under section 1905(p)(2) and is at 
     least 120 percent, but less than 135 percent, of the official 
     poverty line (referred to in such section) for a family of 
     the size involved and who are not otherwise eligible for 
     medical assistance under the State plan, and
       ``(II) for the portion of medicare cost-sharing described 
     in section 1905(p)(3)(A)(ii) that is attributable to the 
     operation of the amendments made by (and subsection (e)(3) 
     of) section 4611 of the Balanced Budget Act of 1997 for 
     individuals who would be described in subclause (I) if `135 
     percent' and `175 percent' were substituted for `120 percent' 
     and `135 percent' respectively; and''.
       (b) Conforming Amendment.--Section 1905(b) (42 U.S.C. 
     1396d(b)) is amended by striking ``The term'' and inserting 
     ``Subject to section 1933(d), the term''.
       (c) Terms and Conditions of Coverage.--Title XIX (42 U.S.C. 
     1395 et seq.), as amended by section 4701(a), is amended by 
     redesignating section 1933 as section 1934 and by inserting 
     after section 1932 the following new section:


  ``state coverage of medicare cost-sharing for additional low-income 
                         medicare beneficiaries

       ``Sec. 1933. (a) In General.--A State plan under this title 
     shall provide, under section 1902(a)(10)(E)(iv) and subject 
     to the succeeding provisions of this section and through a 
     plan amendment, for medical assistance for payment of the 
     cost of medicare cost-sharing described in such section on 
     behalf of all individuals described in such section (in this 
     section referred to as `qualifying individuals') who are 
     selected to receive such assistance under subsection (b).
       ``(b) Selection of Qualifying Individuals.--A State shall 
     select qualifying individuals, and provide such individuals 
     with assistance, under this section consistent with the 
     following:
       ``(1) All qualifying individuals may apply.--The State 
     shall permit all qualifying individuals to apply for 
     assistance during a calendar year.
       ``(2) Selection on first-come, first-served basis.--
       ``(A) In general.--For each calendar year (beginning with 
     1998), from (and to the extent of) the amount of the 
     allocation under subsection (c) for the State for the fiscal 
     year ending in such calendar year, the State shall select 
     qualifying individuals who apply for the assistance in the 
     order in which they apply.
       ``(B) Carryover.--For calendar years after 1998, the State 
     shall give preference to individuals who were provided such 
     assistance (or other assistance described in section 
     1902(a)(10)(E)) in the last month of the previous year and 
     who continue to be (or become) qualifying individuals.
       ``(3) Limit on number of individuals based on allocation.--
     The State shall limit the number of qualifying individuals 
     selected with respect to assistance in a calendar year so 
     that the aggregate amount of such assistance provided to such 
     individuals in such year is estimated to be equal to (but not 
     exceed) the State's allocation under subsection (c) for the 
     fiscal year ending in such calendar year.
       ``(4) Receipt of assistance during duration of year.--If a 
     qualifying individual is selected to receive assistance under 
     this section for a month in year, the individual is entitled 
     to receive such assistance for the remainder of the year if 
     the individual continues to be a qualifying individual. The 
     fact that an individual is selected to receive assistance 
     under this section at any time during a year does not entitle 
     the individual to continued assistance for any succeeding 
     year.
       ``(c) Allocation.--
       ``(1) Total allocation.--The total amount available for 
     allocation under this section for--
       ``(A) fiscal year 1998 is $200,000,000;
       ``(B) fiscal year 1999 is $250,000,000;
       ``(C) fiscal year 2000 is $300,000,000;
       ``(D) fiscal year 2001 is $350,000,000; and
       ``(E) fiscal year 2002 is $400,000,000.
       ``(2) Allocation to states.--The Secretary shall provide 
     for the allocation of the total amount described in paragraph 
     (1) for a fiscal year, among the States that executed a plan 
     amendment in accordance with subsection (a), based upon the 
     Secretary's estimate of the ratio of--
       ``(A) an amount equal to the sum of--
       ``(i) twice the total number of individuals described in 
     section 1902(a)(10)(E)(iv)(I) in the State, and
       ``(ii) the total number of individuals described in section 
     1902(a)(10)(E)(iv)(II) in the State; to
       ``(B) the sum of the amounts computed under subparagraph 
     (A) for all eligible States.
       ``(d) Applicable FMAP.--With respect to assistance 
     described in section 1902(a)(10)(E)(iv) furnished in a State 
     for calendar quarters in a calendar year --
       ``(1) to the extent that such assistance does not exceed 
     the State's allocation under subsection (c) for the fiscal 
     year ending in the calendar year, the Federal medical 
     assistance percentage shall be equal to 100 percent; and
       ``(2) to the extent that such assistance exceeds such 
     allocation, the Federal medical assistance percentage is 0 
     percent.
       ``(e) Limitation on Entitlement.--Except as specifically 
     provided under this section, nothing in this title shall be 
     construed as establishing any entitlement of individuals 
     described in section 1902(a)(10)(E)(iv) to assistance 
     described in such section.
       ``(f) Coverage of Costs Through Part B of the Medicare 
     Program.--For each fiscal year, the Secretary shall provide 
     for the transfer from the Federal Supplementary Medical 
     Insurance Trust Fund under section 1841 to the appropriate 
     account in the Treasury that provides for payments under 
     section 1903(a) with respect to medical assistance 
     provided under this section, of an amount equivalent to 
     the total of the amount of payments made under such 
     section that is attributable to this section and such 
     transfer shall be treated as an expenditure from such 
     Trust Fund for purposes of section 1839.''.

     SEC. 4733. STATE OPTION TO PERMIT WORKERS WITH DISABILITIES 
                   TO BUY INTO MEDICAID.

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

       ``(XIII) who are in families whose income is less than 250 
     percent of the income official poverty line (as defined by 
     the Office of Management and Budget, and revised annually in 
     accordance with section 673(2) of the Omnibus Budget 
     Reconciliation Act of 1981) applicable to a family of the 
     size involved, and who but for earnings in excess of the 
     limit established under section 1905(q)(2)(B), would be 
     considered to be receiving supplemental security income 
     (subject, notwithstanding section 1916, to payment of 
     premiums or other cost-sharing charges (set on a sliding 
     scale based on income) that the State may determine);''.

     SEC. 4734. 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 (Public Law 104-191; 110 Stat. 
     2008), is amended--
       (1) by striking paragraph (6) and inserting the following:
       ``(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. 4735. TREATMENT OF CERTAIN SETTLEMENT PAYMENTS.

       (a) In General.--Notwithstanding any other provision of 
     law, the payments described in subsection (b) 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.
       (b) Payments Described.--The payments described in this 
     subsection are--
       (1) payments made from any fund established pursuant to a 
     class settlement in the case of Susan Walker v. Bayer 
     Corporation, et al., 96-C-5024 (N.D. Ill.); and
       (2) payments made pursuant to a release of all claims in a 
     case--
       (A) that is entered into in lieu of the class settlement 
     referred to in paragraph (1); and
       (B) that is signed by all affected parties in such case on 
     or before the later of--
       (i) December 31, 1997, or
       (ii) the date that is 270 days after the date on which such 
     release is first sent to the persons (or the legal 
     representative of such persons) to whom the payment is to be 
     made.

                          CHAPTER 5--BENEFITS

     SEC. 4741. 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--

[[Page H6101]]

       (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. 4742. 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. 4743. 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. 4744. STUDY AND REPORT ON EPSDT BENEFIT.

       (a) Study.--
       (1) In general.--The Secretary of Health and Human 
     Services, in consultation with Governors, directors of State 
     medicaid programs, the American Academy of Actuaries, and 
     representatives of appropriate provider and beneficiary 
     organizations, shall conduct a study of the provision of 
     early and periodic screening, diagnostic, and treatment 
     services under the medicaid program under title XIX of the 
     Social Security Act in accordance with the requirements of 
     section 1905(r) of such Act (42 U.S.C. 1396d(r)).
       (2) Required contents.--The study conducted under paragraph 
     (1) shall include examination of the actuarial value of the 
     provision of such services under the medicaid program and an 
     examination of the portions of such actuarial value that are 
     attributable to paragraph (5) of section 1905(r) of such Act 
     and to the second sentence of such section.
       (b) Report.--Not later than 12 months after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall submit a report to Congress on the results of 
     the study conducted under subsection (a).

              CHAPTER 6--ADMINISTRATION AND MISCELLANEOUS

     SEC. 4751. 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. 4752. 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 amendment made by subsection (a) 
     takes effect on the date of the enactment of this Act.

     SEC. 4753. 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) are adequate to provide efficient, economical, and 
     effective administration of such State plan;
       ``(B) are compatible with the claims processing and 
     information retrieval systems used in the administration of 
     title XVIII, and for this purpose--
       ``(i) have a uniform identification coding system for 
     providers, other payees, and beneficiaries under this title 
     or title XVIII;
       ``(ii) provide liaison between States and carriers and 
     intermediaries with agreements under title XVIII to 
     facilitate timely exchange of appropriate data; and
       ``(iii) provide for exchange of data between the States and 
     the Secretary with respect to persons sanctioned under this 
     title or title XVIII;
       ``(C) are capable of providing accurate and timely data;
       ``(D) are complying with the applicable provisions of part 
     C of title XI;
       ``(E) are 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, provide 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 systems required 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. 4754. 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. 4755. REMOVAL OF NAME FROM NURSE AIDE REGISTRY.

       (a) Medicare.--Section 1819(g)(1) (42 U.S.C. 1395i-3(g)(1)) 
     is amended--
       (1) by redesignating subparagraph (D) as subparagraph (E), 
     and
       (2) by inserting after subparagraph (C) the following:
       ``(D) Removal of name from nurse aide registry.--
       ``(i) In general.--In the case of a finding of neglect 
     under subparagraph (C), the State shall establish a procedure 
     to permit a nurse aide to petition the State to have his or 
     her name removed from the registry upon a determination by 
     the State that--

       ``(I) the employment and personal history of the nurse aide 
     does not reflect a pattern of abusive behavior or neglect; 
     and
       ``(II) the neglect involved in the original finding was a 
     singular occurrence.

       ``(ii) Timing of determination.--In no case shall a 
     determination on a petition submitted under clause (i) be 
     made prior to the expiration of the 1-year period beginning 
     on the date on which the name of the petitioner was added to 
     the registry under subparagraph (C).''.
       (b) Medicaid.--Section 1919(g)(1) (42 U.S.C. 1396r(g)(1)) 
     is amended--
       (1) by redesignating subparagraph (D) as subparagraph (E), 
     and
       (2) by inserting after subparagraph (C) the following:
       ``(D) Removal of name from nurse aide registry.--
       ``(i) In general.--In the case of a finding of neglect 
     under subparagraph (C), the State shall establish a procedure 
     to permit a nurse aide to petition the State to have his or 
     her name removed from the registry upon a determination by 
     the State that--

       ``(I) the employment and personal history of the nurse aide 
     does not reflect a pattern of abusive behavior or neglect; 
     and
       ``(II) the neglect involved in the original finding was a 
     singular occurrence.

       ``(ii) Timing of determination.--In no case shall a 
     determination on a petition submitted under clause (i) be 
     made prior to the expiration of the 1-year period beginning 
     on the date on which the name of the petitioner was added to 
     the registry under subparagraph (C).''.
       (c) Retroactive Review.--The procedures developed by a 
     State under the amendments made by subsection (a) and (b) 
     shall permit an individual to petition for a review of any 
     finding made by a State under section 1819(g)(1)(C) or 
     1919(g)(1)(C) of the Social Security Act (42 U.S.C. 1395i-
     3(g)(1)(C) or 1396r(g)(1)(C)) after January 1, 1995.

     SEC. 4756. 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. 4757. 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 any 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) During the 6-month period ending 1 year before the 
     date the waiver under subsection (a)

[[Page H6102]]

     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.
       ``(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 waiver 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 ensure 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. 4758. 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''.

     SEC. 4759. EXTENSION OF EFFECTIVE DATE FOR STATE LAW 
                   AMENDMENT.

       In the case of a State plan under title XIX of the Social 
     Security Act which the Secretary of Health and Human Services 
     determines requires State legislation in order for the plan 
     to meet the additional requirements imposed by the amendments 
     made by a provision of this subtitle, the State plan shall 
     not be regarded as failing to comply with the requirements of 
     such title solely on the basis of its failure to meet these 
     additional requirements before the first day of the first 
     calendar quarter beginning after the close of the first 
     regular session of the State legislature that begins after 
     the date of the enactment of this Act. For purposes of the 
     previous sentence, in the case of a State that has a 2-year 
     legislative session, each year of the session is considered 
     to be a separate regular session of the State legislature.
   Subtitle I--Programs of All-Inclusive Care for the Elderly (PACE)

     SEC. 4801. COVERAGE OF PACE UNDER THE MEDICARE PROGRAM.

       Title XVIII of the Social Security Act (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, 
     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 that 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 4804(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 1934 (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
       ``(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, or any successor protocol 
     that may be agreed upon between the Secretary and On Lok, 
     Inc.
       ``(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 1934 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 1934.
       ``(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 enrolled 
     with the provider, 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

[[Page H6103]]

       ``(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 that are 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 by the Secretary or the State administering 
     agency, 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 
     PACE program 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 annually.
       ``(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 
     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.--
       ``(A) Voluntary disenrollment at any time.--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.
       ``(B) Limitations on disenrollment.--
       ``(i) In general.--Regulations promulgated by the Secretary 
     under this section and section 1934, and the PACE program 
     agreement, shall provide that the PACE program may not 
     disenroll a PACE program eligible individual except--

       ``(I) for nonpayment of premiums (if applicable) on a 
     timely basis; or
       ``(II) for engaging in disruptive or threatening behavior, 
     as defined in such regulations (developed in close 
     consultation with State administering agencies).

       ``(ii) No disenrollment for noncompliant behavior.--Except 
     as allowed under regulations promulgated to carry out clause 
     (i)(II), a PACE program may not disenroll a PACE program 
     eligible individual on the ground that the individual has 
     engaged in noncompliant behavior if such behavior is related 
     to a mental or physical condition of the individual. For 
     purposes of the preceding sentence, the term `noncompliant 
     behavior' includes repeated noncompliance with medical advice 
     and repeated failure to appear for appointments.
       ``(iii) Timely review of proposed nonvoluntary 
     disenrollment.--A proposed disenrollment, other than a 
     voluntary disenrollment, shall be subject to timely review 
     and final determination by the Secretary or by the State 
     administering agency (as applicable), prior to the 
     proposed disenrollment becoming effective.
       ``(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 Medicare+Choice 
     organization under section 1853 (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 1853(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 1853 (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 1934, 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 contain such additional terms and conditions as 
     the parties may agree to, so long as such terms and 
     conditions are 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; development of outcome measures.--
       ``(A) Data collection.--
       ``(i) 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 available 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 section and section 1934 .

       ``(ii) Requirements during trial period.--During the first 
     3 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).
       ``(B) Development of outcome measures.--Under a PACE 
     program agreement, the PACE provider, the Secretary, and the 
     State administering agency shall jointly cooperate in the 
     development and implementation of health status and quality 
     of life outcome measures with respect to PACE program 
     eligible individuals.
       ``(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 
     administering 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

[[Page H6104]]

     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 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 1934; 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, a plan to correct the 
     deficiencies, or has failed to continue implementation of 
     such a plan.
       ``(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 1934 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(g)(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(g)(1) (or section 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 1934, respectively).
       ``(7) Procedures for termination or imposition of 
     sanctions.--Under regulations, the provisions of section 
     1857(h) (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 
     Medicare+Choice 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 
     1934.
       ``(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.--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 
     nonstaff physicians according to State licensing law 
     requirements) under this section and section 1934, the 
     Secretary (in close consultation with State administering 
     agencies) may modify or waive provisions of the PACE protocol 
     so long as any such modification or waiver is not 
     inconsistent with and would not impair the essential 
     elements, objectives, and requirements of this section, but 
     may not modify or waive any of the following provisions:
       ``(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.
       ``(v) The assumption by the provider 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 sections 1903(m) and 1932 relating to protection of 
     beneficiaries and program integrity as would apply to 
     Medicare+Choice organizations under part C (or for such 
     periods eligible organizations under risk-sharing 
     contracts under section 1876) and to medicaid managed care 
     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.
       ``(4) Construction.--Nothing in this subsection shall be 
     construed as preventing the Secretary from including in 
     regulations provisions to ensure the health and safety of 
     individuals enrolled in a PACE program under this section 
     that are in addition to those otherwise provided under 
     paragraphs (2) and (3).
       ``(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) Paragraphs (1) and (9) of section 1862(a), 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 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) Miscellaneous Provisions.--Nothing in this section or 
     section 1934 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. 4802. 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 4702(a)(1)--
       (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 1934 to PACE program eligible individuals enrolled 
     under the program under such section; and'';
       (2) by redesignating section 1934, as redesignated by 
     section 4732, as section 1935; and
       (3) by inserting after section 1933, as added by such 
     section, the following new section:


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

       ``Sec. 1934. (a) State 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 establish a numerical limit on the number of 
     individuals who may be enrolled in a PACE program under a 
     PACE program agreement.

[[Page H6105]]

       ``(2) PACE program defined.--For purposes of this section, 
     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 that 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 4804(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, among 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, or any successor protocol 
     that may be agreed upon between the Secretary and On Lok, 
     Inc.
       ``(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;
       ``(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--
       ``(A) whether an individual is a PACE program eligible 
     individual 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 by the Secretary or the State administering 
     agency, 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 annually.
       ``(B) Exception.--The requirement of annual reevaluation 
     under subparagraph (A) may be waived during a period in 
     accordance with regulations in those cases in which 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 
     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.--
       ``(A) Voluntary disenrollment at any time.--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.
       ``(B) Limitations on disenrollment.--
       ``(i) In general.--Regulations promulgated by the Secretary 
     under this section and section 1894, and the PACE program 
     agreement, shall provide that the PACE program may not 
     disenroll a PACE program eligible individual except--

       ``(I) for nonpayment of premiums (if applicable) on a 
     timely basis; or
       ``(II) for engaging in disruptive or threatening behavior, 
     as defined in such regulations (developed in close 
     consultation with State administering agencies).

       ``(ii) No disenrollment for noncompliant behavior.--Except 
     as allowed under regulations promulgated to carry out clause 
     (i)(II), a PACE program may not disenroll a PACE program 
     eligible individual on the ground that the individual has 
     engaged in noncompliant behavior if such behavior is related 
     to a mental or physical condition of the individual. For 
     purposes of the preceding sentence, the term `noncompliant 
     behavior' includes repeated noncompliance with medical advice 
     and repeated failure to appear for appointments.
       ``(iii) Timely review of proposed nonvoluntary 
     disenrollment.--A proposed disenrollment, other than a 
     voluntary disenrollment, shall be subject to timely review 
     and final determination by the Secretary or by the State 
     administering agency (as applicable), prior to the proposed 
     disenrollment becoming effective.
       ``(d) Payments to PACE Providers on a Capitated Basis.--

[[Page H6106]]

       ``(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 contain such additional terms and conditions as 
     the parties may agree to, so long as such terms and 
     conditions are 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; development of outcome measures.--
       ``(A) Data collection.--
       ``(i) 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) submit to the Secretary and the State administering 
     agency such reports as the Secretary finds (in consultation 
     with State administering agencies) necessary to monitor the 
     operation, cost, and effectiveness of the PACE program.

       ``(ii) Requirements during trial period.--During the first 
     3 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).
       ``(B) Development of outcome measures.--Under a PACE 
     program agreement, the PACE provider, the Secretary, and the 
     State administering agency shall jointly cooperate in the 
     development and implementation of health status and quality 
     of life outcome measures with respect to PACE program 
     eligible individuals.
       ``(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 onsite 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 the State 
     administering 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 
     administering agency, and enrollees.
       ``(B) Causes for termination.--In accordance with 
     regulations establishing procedures for termination of PACE 
     program agreements, the Secretary or a State administering 
     agency may terminate a PACE program agreement with a PACE 
     provider for, among other reasons, the fact that--
       ``(i) the Secretary or State administering agency 
     determines that--

       ``(I) there are significant deficiencies in the quality of 
     care provided to enrolled participants; or
       ``(II) the provider has failed to comply substantially with 
     conditions for a program or provider under this section or 
     section 1894; and
       ``(ii) the entity has failed to develop and successfully 
     initiate, within 30 days of the date of the receipt of 
     written notice of such a determination, a plan to correct the 
     deficiencies, or has failed to continue implementation of 
     such a plan.
       ``(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(g)(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(g)(1) (or 
     1876(i)(6)(A) for such periods) or 1903(m)(5)(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(h) (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 
     Medicare+Choice organization under part C of title XVIII (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.--In order to provide for reasonable 
     flexibility in adapting the PACE service delivery model to 
     the needs of particular

[[Page H6107]]

     organizations (such as those in rural areas or those that may 
     determine it appropriate to use nonstaff physicians according 
     to State licensing law requirements) under this section and 
     section 1894, the Secretary (in close consultation with State 
     administering agencies) may modify or waive provisions of the 
     PACE protocol so long as any such modification or waiver is 
     not inconsistent with and would not impair the essential 
     elements, objectives, and requirements of this section, but 
     may not modify or waive any of the following provisions:
       ``(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.
       ``(v) The assumption by the provider 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 sections 1903(m) and 1932 relating to 
     protection of beneficiaries and program integrity as would 
     apply to Medicare+Choice organizations under such part C (or 
     for such periods eligible organizations under risk-sharing 
     contracts under section 1876) and to medicaid managed care 
     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.
       ``(4) Construction.--Nothing in this subsection shall be 
     construed as preventing the Secretary from including in 
     regulations provisions to ensure the health and safety of 
     individuals enrolled in a PACE program under this section 
     that are in addition to those otherwise provided under 
     paragraphs (2) and (3).
       ``(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.
       ``(5) Such other provisions of this title that, as added or 
     amended by the Balanced Budget Act of 1997, the Secretary 
     determines are inapplicable to carrying out a PACE program 
     under this section.
       ``(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.--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 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 section 1934(a)(7)) or under a PACE 
     program under section 1934 or 1894.''.
       (2) 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 1934,'' 
     after ``section 1902(a)(10)(A),''.

     SEC. 4803. EFFECTIVE DATE; TRANSITION.

       (a) Timely Issuance of Regulations; Effective Date.--The 
     Secretary of Health and Human Services shall promulgate 
     regulations to carry out this subtitle in a timely manner. 
     Such regulations shall be designed so that entities may 
     establish and operate PACE programs under sections 1894 and 
     1934 of the Social Security Act (as added by sections 4801 
     and 4802 of this subtitle) 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 sections 1894(e)(1)(B) and 
     1934(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.--Section 
     9412(b)(2)(B) of such Act, as so amended, 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 the repeals under subsection (d), 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 
     1934 of the Social Security Act--
       (A) first, to entities that are operating a PACE 
     demonstration waiver program (as defined in sections 
     1894(a)(7) and 1934(a)(7) of such Act); and
       (B) then to 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 to current waivers.--
       (A) In general.--Subject to subparagraph (B), in the case 
     of waivers granted with respect to a PACE program before the 
     initial effective date of regulations described in subsection 
     (a), the repeals made by paragraph (1) shall not apply until 
     the end of a transition period (of up to 24 months) that 
     begins on the initial effective date of such regulations, and 
     that allows sufficient time for an orderly transition from 
     demonstration project authority to general authority provided 
     under the amendments made by this subtitle.
       (B) State option to seek extension of current period.--A 
     State may elect to maintain the PACE programs which (as of 
     the date of the enactment of this Act) were operating in the 
     State under the authority described in paragraph (1) until a 
     date (specified by the State) that is not later than 3 years 
     after the initial effective date of regulations described in 
     subsection (a). If a State makes such an election,

[[Page H6108]]

     the repeals made by paragraph (1) shall not apply to the 
     programs until the date so specified, but only so long as 
     such programs continue to operate under the same terms and 
     conditions as apply to such programs as of the date of the 
     enactment of this Act, and subparagraph (A) shall not apply 
     to such programs.

     SEC. 4804. 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 sections 1894(a)(8) and 1934(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 subtitle.
       (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 
     sections 1894(h) and 1934(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 sections 
     1894(h) and 1934(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 sections 1894(d) and 
     1934(d) of such Act and on the treatment of private, for-
     profit entities as PACE providers.
         Subtitle J--State Children's Health Insurance Program

          CHAPTER 1--STATE CHILDREN'S HEALTH INSURANCE PROGRAM

     SEC. 4901. ESTABLISHMENT OF PROGRAM.

       (a) Establishment.--The Social Security Act is amended by 
     adding at the end the following new title:

         ``TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE 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 initiate and expand the 
     provision of child health assistance to uninsured, low-income 
     children in an effective and efficient manner that is 
     coordinated with other sources of health benefits coverage 
     for children. Such assistance shall be provided primarily for 
     obtaining health benefits coverage through--
       ``(1) obtaining coverage that meets the requirements of 
     section 2103, or
       ``(2) providing benefits under the State's medicaid plan 
     under title XIX,
     or a combination of both.
       ``(b) State Child Health Plan Required.--A State is not 
     eligible for payment under section 2105 unless the State has 
     submitted to the Secretary under section 2106 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) has been approved under section 2106.
       ``(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 2105 for child health assistance for coverage 
     provided for periods beginning before October 1, 1997.

     ``SEC. 2102. GENERAL CONTENTS OF STATE CHILD HEALTH PLAN; 
                   ELIGIBILITY; OUTREACH.

       ``(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 2110(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;
       ``(4) the child health assistance provided under the plan 
     for targeted low-income children, including the proposed 
     methods of delivery, and utilization control systems;
       ``(5) eligibility standards consistent with subsection (b);
       ``(6) outreach activities consistent with subsection (c); 
     and
       ``(7) methods (including monitoring) used--
       ``(A) to assure the quality and appropriateness of care, 
     particularly with respect to well-baby care, well-child care, 
     and immunizations provided under the plan, and
       ``(B) to assure access to covered services, including 
     emergency services.
       ``(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 (so long as any 
     standard relating to such status does not restrict 
     eligibility), 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.
       ``(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;
       ``(D) the provision of child health assistance to targeted 
     low-income children in the State who are Indians (as defined 
     in section 4(c) of the Indian Health Care Improvement Act, 25 
     U.S.C. 1603(c)); and
       ``(E) 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) 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 title with other public and private health insurance 
     programs.

     ``SEC. 2103. COVERAGE REQUIREMENTS FOR CHILDREN'S HEALTH 
                   INSURANCE.

       ``(a) Required Scope of Health Insurance Coverage.--The 
     child health assistance provided to a targeted low-income 
     child under the plan in the form described in paragraph (1) 
     of section 2101(a) shall consist, consistent with subsection 
     (c)(5), of any of the following:
       ``(1) Benchmark coverage.--Health benefits coverage that is 
     equivalent to the benefits coverage in a benchmark benefit 
     package described in subsection (b).
       ``(2) Benchmark-equivalent coverage.--Health benefits 
     coverage that meets the following requirements:
       ``(A) Inclusion of basic services.--The coverage includes 
     benefits for items and services within each of the categories 
     of basic services described in subsection (c)(1).
       ``(B) Aggregate actuarial value equivalent to benchmark 
     package.--The coverage has an aggregate actuarial value that 
     is at least actuarially equivalent to one of the benchmark 
     benefit packages.
       ``(C) Substantial actuarial value for additional services 
     included in benchmark package.--With respect to each of the 
     categories of additional services described in subsection 
     (c)(2) for which coverage is provided under the benchmark 
     benefit package used under subparagraph (B), the coverage has 
     an actuarial value that is equal to at least 75 percent of 
     the actuarial value of the coverage of that category of 
     services in such package.
       ``(3) Existing comprehensive state-based coverage.--Health 
     benefits coverage under an existing comprehensive State-based 
     program, described in subsection (d)(1).
       ``(4) Secretary-approved coverage.--Any other health 
     benefits coverage that the Secretary determines, upon 
     application by a State,

[[Page H6109]]

     provides appropriate coverage for the population of targeted 
     low-income children proposed to be provided such coverage.
       ``(b) Benchmark Benefit Packages.--The benchmark benefit 
     packages are as follows:
       ``(1) FEHBP-equivalent children's health insurance 
     coverage.--The standard Blue Cross/Blue Shield preferred 
     provider option service benefit plan, described in and 
     offered under section 8903(1) of title 5, United States Code.
       ``(2) State employee coverage.--A health benefits coverage 
     plan that is offered and generally available to State 
     employees in the State involved.
       ``(3) Coverage offered through hmo.--The health insurance 
     coverage plan that--
       ``(A) is offered by a health maintenance organization (as 
     defined in section 2791(b)(3) of the Public Health Service 
     Act), and
       ``(B) has the largest insured commercial, non-medicaid 
     enrollment of covered lives of such coverage plans offered by 
     such a health maintenance organization in the State involved.
       ``(c) Categories of Services; Determination of Actuarial 
     Value of Coverage.--
       ``(1) Categories of basic services.--For purposes of this 
     section, the categories of basic services described in this 
     paragraph are as follows:
       ``(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.
       ``(2) Categories of additional services.--For purposes of 
     this section, the categories of additional services described 
     in this paragraph are as follows:
       ``(A) Coverage of prescription drugs.
       ``(B) Mental health services.
       ``(C) Vision services.
       ``(D) Hearing services.
       ``(3) Treatment of other categories.--Nothing in this 
     subsection shall be construed as preventing a State child 
     health plan from providing coverage of benefits that are not 
     within a category of services described in paragraph (1) or 
     (2).
       ``(4) Determination of actuarial value.--The actuarial 
     value of coverage of benchmark benefit packages, coverage 
     offered under the State child health plan, and coverage of 
     any categories of additional services under benchmark benefit 
     packages and under coverage offered by such a plan, shall be 
     set forth in an actuarial opinion in an actuarial report that 
     has been prepared--
       ``(A) by an individual who is a member of the American 
     Academy of Actuaries;
       ``(B) using generally accepted actuarial principles and 
     methodologies;
       ``(C) using a standardized set of utilization and price 
     factors;
       ``(D) using a standardized population that is 
     representative of privately insured children of the age of 
     children who are expected to be covered under the State child 
     health plan;
       ``(E) applying the same principles and factors in comparing 
     the value of different coverage (or categories of services);
       ``(F) without taking into account any differences in 
     coverage based on the method of delivery or means of cost 
     control or utilization used; and
       ``(G) taking into account the ability of a State to reduce 
     benefits by taking into account the increase in actuarial 
     value of benefits coverage offered under the State child 
     health plan that results from the limitations on cost sharing 
     under such coverage.

     The actuary preparing the opinion shall select and specify in 
     the memorandum the standardized set and population to be used 
     under subparagraphs (C) and (D).
       ``(5) Construction on prohibited coverage.--Nothing in this 
     section shall be construed as requiring any health benefits 
     coverage offered under the plan to provide coverage for items 
     or services for which payment is prohibited under this title, 
     notwithstanding that any benchmark benefit package includes 
     coverage for such an item or service.
       ``(d) Description of Existing Comprehensive State-Based 
     Coverage.--
       ``(1) In general.--A program described in this paragraph is 
     a child health coverage program that--
       ``(A) includes coverage of a range of benefits;
       ``(B) is administered or overseen by the State and receives 
     funds from the State;
       ``(C) is offered in New York, Florida, or Pennsylvania; and
       ``(D) was offered as of the date of the enactment of this 
     title.
       ``(2) Modifications.--A State may modify a program 
     described in paragraph (1) from time to time so long as it 
     continues to meet the requirement of subparagraph (A) and 
     does not reduce the actuarial value of the coverage under the 
     program below the lower of--
       ``(A) the actuarial value of the coverage under the program 
     as of the date of the enactment of this title, or
       ``(B) the actuarial value described in subsection 
     (a)(2)(B),

     evaluated as of the time of the modification.
       ``(e) Cost-Sharing.--
       ``(1) Description; general conditions.--
       ``(A) Description.--A State child health plan shall include 
     a description, consistent with this subsection, of the amount 
     (if any) of premiums, deductibles, coinsurance, and other 
     cost sharing imposed. Any such charges shall be imposed 
     pursuant to a public schedule.
       ``(B) Protection for lower income children.--The State 
     child health plan may only vary premiums, deductibles, 
     coinsurance, and other cost sharing based on the family 
     income of targeted low-income children in a manner that does 
     not favor children from families with higher income over 
     children from families with lower income.
       ``(2) No cost sharing on benefits for preventive 
     services.--The State child health plan may not impose 
     deductibles, coinsurance, or other cost sharing with respect 
     to benefits for services within the category of services 
     described in subsection (c)(1)(D).
       ``(3) Limitations on premiums and cost-sharing.--
       ``(A) Children in families with income below 150 percent of 
     poverty line.--In the case of a targeted low-income child 
     whose family income is at or below 150 percent of the poverty 
     line, the State child health plan may not impose--
       ``(i) an enrollment fee, premium, or similar charge that 
     exceeds the maximum monthly charge permitted consistent with 
     standards established to carry out section 1916(b)(1) (with 
     respect to individuals described in such section); and
       ``(ii) a deductible, cost sharing, or similar charge that 
     exceeds an amount that is nominal (as determined consistent 
     with regulations referred to in section 1916(a)(3), with such 
     appropriate adjustment for inflation or other reasons as the 
     Secretary determines to be reasonable).
       ``(B) Other children.--For children not described in 
     subparagraph (A), subject to paragraphs (1)(B) and (2), any 
     premiums, deductibles, cost sharing or similar charges 
     imposed under the State child health plan may be imposed on a 
     sliding scale related to income, except that the total annual 
     aggregate cost-sharing with respect to all targeted low-
     income children in a family under this title may not exceed 5 
     percent of such family's income for the year involved.
       ``(4) Relation to medicaid requirements.--Nothing in this 
     subsection shall be construed as affecting the rules relating 
     to the use of enrollment fees, premiums, deductions, cost 
     sharing, and similar charges in the case of targeted low-
     income children who are provided child health assistance in 
     the form of coverage under a medicaid program under section 
     2101(a)(2).
       ``(f) Application of Certain Requirements.--
       ``(1) 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 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.
       ``(2) Compliance with other requirements.--Coverage offered 
     under this section shall comply with the requirements of 
     subpart 2 of part A of title XXVII of the Public Health 
     Service Act insofar as such requirements apply with respect 
     to a health insurance issuer that offers group health 
     insurance coverage.

     ``SEC. 2104. ALLOTMENTS.

       ``(a) Appropriation; Total Allotment.--For the purpose of 
     providing allotments to States under this section, there is 
     appropriated, out of any money in the Treasury not otherwise 
     appropriated--
       ``(1) for fiscal year 1998, $4,275,000,000;
       ``(2) for fiscal year 1999, $4,275,000,000;
       ``(3) for fiscal year 2000, $4,275,000,000;
       ``(4) for fiscal year 2001, $4,275,000,000;
       ``(5) for fiscal year 2002, $3,150,000,000;
       ``(6) for fiscal year 2003, $3,150,000,000;
       ``(7) for fiscal year 2004, $3,150,000,000;
       ``(8) for fiscal year 2005, $4,050,000,000;
       ``(9) for fiscal year 2006, $4,050,000,000; and
       ``(10) for fiscal year 2007, $5,000,000,000.
       ``(b) Allotments to 50 States and District of Columbia.--
       ``(1) In general.--Subject to paragraph (4) and subsection 
     (d), of the amount available for allotment 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 children described 
     in paragraph (2) for the State for the fiscal year 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 children.--
       ``(A) In general.--The number of children described in this 
     paragraph for a State for--
       ``(i) each of fiscal years 1998 through 2000 is equal to 
     the number of low-income children in the State with no health 
     insurance coverage for the fiscal year;
       ``(ii) fiscal year 2001 is equal to--

       ``(I) 75 percent of the number of low-income children in 
     the State for the fiscal year with no health insurance 
     coverage, plus
       ``(II) 25 percent of the number of low-income children in 
     the State for the fiscal year; and

       ``(iii) each succeeding fiscal year is equal to--

       ``(I) 50 percent of the number of low-income children in 
     the State for the fiscal year with no health insurance 
     coverage, plus
       ``(II) 50 percent of the number of low-income children in 
     the State for the fiscal year.

       ``(B) Determination of number of children.--For purposes of 
     subparagraph (A), a determination of the number of low-income 
     children (and of such children who have no health insurance 
     coverage) for a State for a fiscal year

[[Page H6110]]

     shall be made on the basis of the arithmetic average of the 
     number of such children, 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 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 reduced 
     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.
       ``(c) Allotments to Territories.--
       ``(1) In general.--Of the amount available for allotment 
     under subsection (a) for a fiscal year, subject to subsection 
     (d), the Secretary shall allot 0.25 percent among each of the 
     commonwealths and territories described in paragraph (3) 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) 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) Certain Medicaid Expenditures Counted Against 
     Individual State Allotments.--The amount of the allotment 
     otherwise provided to a State under subsection (b) or (c) for 
     a fiscal year shall be reduced by the sum of--
       ``(1) the amount (if any) of the payments made to that 
     State under section 1903(a) for calendar quarters during such 
     fiscal year that is attributable to the provision of medical 
     assistance to a child during a presumptive eligibility period 
     under section 1920A, and
       ``(2) the amount of payments under such section during such 
     period that is attributable to the provision of medical 
     assistance to a child for which payment is made under section 
     1903(a)(1) on the basis of an enhanced FMAP under section 
     1905(b).
       ``(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; except 
     that amounts reallotted to a State under subsection (f) shall 
     be available for expenditure by the State through the end of 
     the fiscal year in which they are reallotted.
       ``(f) Procedure for Redistribution of Unused Allotments.--
     The Secretary shall determine an appropriate procedure for 
     redistribution of allotments from States that were provided 
     allotments under this section for a fiscal year but that do 
     not expend all of the amount of such allotments during the 
     period in which such allotments are available for expenditure 
     under subsection (e), to States that have fully expended the 
     amount of their allotments under this section.

     ``SEC. 2105. PAYMENTS TO STATES.

       ``(a) In General.--Subject to the succeeding provisions of 
     this section, the Secretary shall pay to each State with a 
     plan approved under this title, from its allotment under 
     section 2104 (taking into account any adjustment under 
     section 2104(d)), an amount for each quarter equal to the 
     enhanced FMAP of expenditures in the quarter--
       ``(1) for child health assistance under the plan for 
     targeted low-income children in the form of providing health 
     benefits coverage that meets the requirements of section 
     2103; and
       ``(2) only to the extent permitted consistent with 
     subsection (c)--
       ``(A) for payment for other child health assistance for 
     targeted low-income children;
       ``(B) for expenditures for health services initiatives 
     under the plan for improving the health of children 
     (including targeted low-income children and other low-income 
     children);
       ``(C) for expenditures for outreach activities as provided 
     in section 2102(c)(1) under the plan; and
       ``(D) for other reasonable costs incurred by the State to 
     administer the plan.
       ``(b) Enhanced FMAP.--For purposes of subsection (a), the 
     `enhanced FMAP', for a State for a fiscal year, is equal to 
     the Federal medical assistance percentage (as defined in the 
     first sentence of section 1905(b)) for the State increased by 
     a number of percentage points equal to 30 percent of the 
     number of percentage points by which (1) such Federal medical 
     assistance percentage for the State, is less than (2) 100 
     percent; but in no case shall the enhanced FMAP for a State 
     exceed 85 percent.
       ``(c) Limitation on Certain Payments for Certain 
     Expenditures.--
       ``(1) General limitations.--Funds provided to a State under 
     this title shall only be used to carry out the purposes of 
     this title (as described in section 2101), and any health 
     insurance coverage provided with such funds may include 
     coverage of 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.
       ``(2) Limitation on expenditures not used for medicaid or 
     health insurance assistance.--
       ``(A) In general.--Except as provided in this paragraph, 
     payment shall not be made under subsection (a) for 
     expenditures for items described in subsection (a) (other 
     than paragraph (1)) for a quarter in a fiscal year to the 
     extent the total of such expenditures exceeds 10 percent of 
     the sum of--
       ``(i) the total Federal payments made under subsection (a) 
     for such quarter in the fiscal year, and
       ``(ii) the total Federal payments made under section 
     1903(a)(1) based on an enhanced FMAP described in section 
     1905(u)(2) for such quarter.
       ``(B) Waiver authorized for cost-effective alternative.--
     The limitation under subparagraph (A) on expenditures for 
     items described in subsection (a)(2) shall not apply to the 
     extent that a State establishes to the satisfaction of the 
     Secretary that--
       ``(i) coverage provided to targeted low-income children 
     through such expenditures meets the requirements of section 
     2103;
       ``(ii) the cost of such coverage is not greater, on an 
     average per child basis, than the cost of coverage that would 
     otherwise be provided under section 2103; and
       ``(iii) such coverage is provided through the use of a 
     community-based health delivery system, such as through 
     contracts with health centers receiving funds under section 
     330 of the Public Health Service Act or with hospitals such 
     as those that receive disproportionate share payment 
     adjustments under section 1886(d)(5)(F) or 1923.
       ``(3) Waiver for purchase of family coverage.--Payment may 
     be made to a State 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 only if the State establishes to the 
     satisfaction of the Secretary that--
       ``(A) 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, and
       ``(B) such coverage shall not be provided if it would 
     otherwise substitute for health insurance coverage that would 
     be provided to such children but for the purchase of family 
     coverage.
       ``(4) 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).
       ``(5) Offset of receipts attributable to premiums and other 
     cost-sharing.--For purposes of subsection (a), the amount of 
     the expenditures under the plan shall be reduced by the 
     amount of any premiums and other cost-sharing received by the 
     State.
       ``(6) Prevention of duplicative payments.--
       ``(A) Other health plans.--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.
       ``(B) Other federal governmental programs.--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.
       ``(7) 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

[[Page H6111]]

     or in part, of health benefit coverage that includes coverage 
     of abortion.
       ``(B) Exception.--Subparagraph (A) shall not apply to an 
     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.
       ``(C) Rule of construction.--Nothing in this section shall 
     be construed as affecting the expenditure by a State, 
     locality, or private person or entity of State, local, or 
     private funds (other than funds expended under the State 
     plan) for any abortion or for health benefits coverage that 
     includes coverage of abortion.
       ``(d) Maintenance of Effort.--
       ``(1) In medicaid eligibility standards.--No payment may be 
     made under subsection (a) with respect to child health 
     assistance provided under a State child health plan if the 
     State adopts income and resource standards and methodologies 
     for purposes of determining a child's eligibility for medical 
     assistance under the State plan under title XIX that are more 
     restrictive than those applied as of June 1, 1997.
       ``(2) In amounts of payment expended for certain state-
     funded health insurance programs for children.--
       ``(A) In general.--The amount of the allotment for a State 
     in a fiscal year (beginning with fiscal year 1999) shall be 
     reduced by the amount by which--
       ``(i) the total of the State children's health insurance 
     expenditures in the preceding fiscal year, is less than
       ``(ii) the total of such expenditures in fiscal year 1996.
       ``(B) State children's health insurance expenditures.--The 
     term `State children's health insurance expenditures' means 
     the following:
       ``(i) The State share of expenditures under this title.
       ``(ii) The State share of expenditures under title XIX that 
     are attributable to an enhanced FMAP under section 1905(u).
       ``(iii) State expenditures under health benefits coverage 
     under an existing comprehensive State-based program, 
     described section 2103(d).
       ``(e) 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 such other investigation as 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. 2106. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT 
                   OF STATE CHILD HEALTH PLANS.

       ``(a) Initial Plan.--
       ``(1) In general.--As a condition of receiving payment 
     under section 2105, 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 
     October 1, 1997.
       ``(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 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 (B) and that 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, 
     under subsection (d), substantial noncompliance of the plan 
     with the requirements of this title.

     ``SEC. 2107. 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 benefits 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 2108(a) and the 
     evaluation required by section 2108(b).
       ``(3) Audits.--A State child health plan shall include an 
     assurance that the State will afford the Secretary access to 
     any records or information relating to the plan for the 
     purposes of review or audit.
       ``(c) Program Development Process.--A State child health 
     plan shall include a description of the process used to 
     involve the public in the design and implementation of the 
     plan and the method for ensuring ongoing public involvement.
       ``(d) Program Budget.--A State child health plan shall 
     include a description of the budget for the plan. The 
     description shall be updated periodically as necessary and 
     shall include details on the planned use of funds and the 
     sources of the non-Federal share of plan expenditures, 
     including any requirements for cost-sharing by beneficiaries.
       ``(e) Application of Certain General Provisions.--The 
     following sections of this Act shall apply to States under 
     this title in the same manner as they apply to a State under 
     title XIX:
       ``(1) Title xix provisions.--
       ``(A) Section 1902(a)(4)(C) (relating to conflict of 
     interest standards).
       ``(B) Paragraphs (2), (16), and (17) of section 1903(i) 
     (relating to limitations on payment).
       ``(C) Section 1903(w) (relating to limitations on provider 
     taxes and donations).
       ``(2) Title xi provisions.--
       ``(A) Section 1115 (relating to waiver authority).
       ``(B) Section 1116 (relating to administrative and judicial 
     review), but only insofar as consistent with this title.
       ``(C) Section 1124 (relating to disclosure of ownership and 
     related information).
       ``(D) Section 1126 (relating to disclosure of information 
     about certain convicted individuals).
       ``(E) Section 1128A (relating to civil monetary penalties).
       ``(F) Section 1128B(d) (relating to criminal penalties for 
     certain additional charges).
       ``(G) Section 1132 (relating to periods within which claims 
     must be filed).

     ``SEC. 2108. 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--

[[Page H6112]]

       ``(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 (including payment of part or 
     all of any 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 benefits coverage 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.
       ``(H) Any other matters the State and the Secretary 
     consider appropriate.
       ``(2) Report of the secretary.--The Secretary shall submit 
     to Congress and make available to the public by December 31, 
     2001, a report based on the evaluations submitted by States 
     under paragraph (1), containing any conclusions and 
     recommendations the Secretary considers appropriate.

     ``SEC. 2109. MISCELLANEOUS PROVISIONS.

       ``(a) Relation to Other Laws.--
       ``(1) HIPAA.--Health benefits coverage provided under 
     section 2101(a)(1) (and coverage provided under a waiver 
     under section 2105(c)(2)(B)) shall be treated as creditable 
     coverage for purposes of part 7 of subtitle B of title II of 
     the Employee Retirement Income Security Act of 1974, title 
     XXVII of the Public Health Service Act, and subtitle K of the 
     Internal Revenue Code of 1986.
       ``(2) ERISA.--Nothing in this title shall be construed as 
     affecting or modifying section 514 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1144) with respect to 
     a group health plan (as defined in section 2791(a)(1) of the 
     Public Health Service Act (42 U.S.C. 300gg-91(a)(1)).

     ``SEC. 2110. DEFINITIONS.

       ``(a) Child Health Assistance.--For purposes of this title, 
     the term `child health assistance' means payment for part or 
     all of the cost of health benefits coverage for targeted low-
     income children that includes any of the following (and 
     includes, in the case described in section 2105(a)(2)(A), 
     payment for part or all of the cost of providing any of the 
     following), 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, other than 
     services described in paragraph (18) but 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, other than 
     services described in paragraph (19) but 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.--Subject to paragraph (2), 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)(i) who is a low-income child, or
       ``(ii) is a child whose family income (as determined under 
     the State child health plan) exceeds the medicaid applicable 
     income level (as defined in paragraph (4)), but does not 
     exceed 50 percentage points above the medicaid applicable 
     income level; 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).
       ``(2) Children excluded.--Such term does not include--
       ``(A) a child who is an inmate of a public institution or a 
     patient in an institution for mental diseases; or
       ``(B) a child who is a member of a family that is eligible 
     for health benefits coverage under a State health benefits 
     plan on the basis of a family member's employment with a 
     public agency in the State.
       ``(3) Special rule.--A child shall not be considered to be 
     described in paragraph (1)(C) notwithstanding that the child 
     is covered under a health insurance coverage program that has 
     been in operation since before July 1, 1997, and that is 
     offered by a State which receives no Federal funds for the 
     program's operation.
       ``(4) 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.
       ``(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 that meets the 
     requirements of section 2103 provided to a targeted low-
     income child under this title or under a waiver approved 
     under section 2105(c)(2)(B) (relating to a direct service 
     waiver).
       ``(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 at or below 200 percent of the 
     poverty line for a family of the size involved.
       ``(5) Poverty line defined.--The term `poverty line' has 
     the meaning given such term in section 673(2) of the 
     Community Services Block Grant Act (42 U.S.C. 9902(2)), 
     including any revision required by such section.
       ``(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 
     2106.
       ``(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''.
       (2) Treatment as state health care program.--Section 
     1128(h) (42 U.S.C. 1320a-7(h)) is amended by--
       (A) in paragraph (2), by striking ``or'' at the end;

[[Page H6113]]

       (B) in paragraph (3), by striking the period and inserting 
     ``, or''; and
       (C) by adding at the end the following:
       ``(4) a State child health plan approved under title 
     XXI.''.

        CHAPTER 2--EXPANDED COVERAGE OF CHILDREN UNDER MEDICAID

     SEC. 4911. 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), as amended by 
     section 4702(a)(2), 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 (u)(1), with respect to 
     expenditures described in subsection (u)(2)(A) or subsection 
     (u)(3) the Federal medical assistance percentage is equal to 
     the enhanced FMAP described in section 2105(b).''; and
       (2) by adding at the end the following new subsection:
       ``(u)(1) The conditions described in this paragraph for a 
     State plan are as follows:
       ``(A) The State is complying with the requirement of 
     section 2105(d)(1).
       ``(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 paragraph (2) and section 2104(d).
       ``(2)(A) For purposes of subsection (b), the expenditures 
     described in this subparagraph are expenditures for medical 
     assistance for optional targeted low-income children 
     described in subparagraph (C), but not in excess, for a State 
     for a fiscal year, of the amount described in subparagraph 
     (B) for the State and fiscal year.
       ``(B) The amount described in this subparagraph, for a 
     State for a fiscal year, is the amount of the State's 
     allotment under section 2104 (not taking into account 
     reductions under section 2104(d)(2)) for the fiscal year 
     reduced by the amount of any payments made under section 2105 
     to the State from such allotment for such fiscal year.
       ``(C) For purposes of this paragraph, the term `optional 
     targeted low-income child' means a targeted low-income child 
     as defined in section 2110(b)(1) who would not qualify for 
     medical assistance under the State plan under this title 
     based on such plan as in effect on April 15, 1997 (but taking 
     into account the expansion of age of eligibility effected 
     through the operation of section 1902(l)(2)(D)).
       ``(3) For purposes of subsection (b), the expenditures 
     described in this subparagraph are expenditures for medical 
     assistance for children who are born before October 1, 1983, 
     and who would be described in section 1902(l)(1)(D) if they 
     had been born on or after such date, and who are not eligible 
     for such assistance under the State plan under this title 
     based on such State plan as in effect as of April 15, 
     1997.''.
       (b) Establishment of Optional Eligibility Category.--
     Section 1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)), 
     as amended by section 4733, is amended--
       (1) in subclause (XII), by striking ``or'' at the end;
       (2) in subclause (XIII), by adding ``or'' at the end; and
       (3) by adding at the end the following:

       ``(XIV) who are optional targeted low-income children 
     described in section 1905(u)(2)(C);''.

       (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. 4912. 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) (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) (42 U.S.C. 1396b(u)(1)(D)(v)) 
     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. 4913. CONTINUATION OF MEDICAID ELIGIBILITY FOR DISABLED 
                   CHILDREN WHO LOSE SSI BENEFITS.

       (a) In General.--Section 1902(a)(10)(A)(i)(II) (42 U.S.C. 
     1396a(a)(10)(A)(i)(II)) is amended by inserting ``(or were 
     being paid 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'' after 
     ``title XVI''.
       (b) Effective Date.--The amendment made by subsection (a) 
     applies to medical assistance furnished on or after July 1, 
     1997.

                   CHAPTER 3--DIABETES GRANT PROGRAMS

     SEC. 4921. SPECIAL DIABETES PROGRAMS FOR CHILDREN WITH TYPE I 
                   DIABETES.

       Subpart I of part D of title III of the Public Health 
     Service Act (42 U.S.C. 254b et seq.) is amended by adding at 
     the end the following section:

     ``SEC. 330B. SPECIAL DIABETES PROGRAMS FOR CHILDREN WITH TYPE 
                   I DIABETES.

       ``(a) Type I Diabetes in Children.--The Secretary shall 
     make grants for services for the prevention and treatment of 
     type I diabetes in children, and for research in innovative 
     approaches to such services. Such grants may be made to 
     children's hospitals; grantees under section 330 and other 
     federally qualified health centers; State and local health 
     departments; and other appropriate public or nonprofit 
     private entities.
       ``(b) Funding.--Notwithstanding section 2104(a) of the 
     Social Security Act, from the amounts appropriated in such 
     section for each of fiscal years 1998 through 2002, 
     $30,000,000 is hereby transferred and made available in such 
     fiscal year for grants under this section.''.

     SEC. 4922. SPECIAL DIABETES PROGRAMS FOR INDIANS.

       Subpart I of part D of title III of the Public Health 
     Service Act (42 U.S.C. 254b et seq.), as amended by section 
     4921, is further amended by adding at the end the following 
     section:

     ``SEC. 330C. SPECIAL DIABETES PROGRAMS FOR INDIANS.

       ``(a) In General.--The Secretary shall make grants for 
     providing services for the prevention and treatment of 
     diabetes in accordance with subsection (b).
       ``(b) Services Through Indian Health Facilities.--For 
     purposes of subsection (a), services under such subsection 
     are provided in accordance with this subsection if the 
     services are provided through any of the following entities:
       ``(1) The Indian Health Service.
       ``(2) 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.
       ``(3) An urban Indian health program operated by an urban 
     Indian organization pursuant

[[Page H6114]]

     to a grant or contract with the Indian Health Service 
     pursuant to title V of the Indian Health Care Improvement 
     Act.
       ``(c) Funding.--Notwithstanding section 2104(a) of the 
     Social Security Act, from the amounts appropriated in such 
     section for each of fiscal years 1998 through 2002, 
     $30,000,000 is hereby transferred and made available in such 
     fiscal year for grants under this section.''.

     SEC. 4923. REPORT ON DIABETES GRANT PROGRAMS.

       (a) Evaluation.--The Secretary of Health and Human Services 
     shall conduct an evaluation of the diabetes grant programs 
     established under the amendments made by this chapter.
       (b) Reports.--The Secretary shall submit to the appropriate 
     committees of Congress--
       (1) an interim report on the evaluation conducted under 
     subsection (a) not later than January 1, 2000, and
       (2) a final report on such evaluation not later than 
     January 1, 2002.
                TITLE V--WELFARE AND RELATED PROVISIONS

     SEC. 5000. TABLE OF CONTENTS; REFERENCES.

       (a) Table of Contents.--The table of contents of this title 
     is as follows:
Sec. 5000. Table of contents; references.

                      Subtitle A--TANF Block Grant

Sec. 5001. Welfare-to-work grants.
Sec. 5002. Limitation on amount of Federal funds transferable to title 
              XX programs.
Sec. 5003. Limitation on number of persons who may be treated as 
              engaged in work by reason of participation in educational 
              activities.
Sec. 5004. Penalty for failure of State to reduce assistance for 
              recipients refusing without good cause to work.

                Subtitle B--Supplemental Security Income

Sec. 5101. Extension of deadline to perform childhood disability 
              redeterminations.
Sec. 5102. Fees for Federal administration of State supplementary 
              payments.

                 Subtitle C--Child Support Enforcement

Sec. 5201. Clarification of authority to permit certain redisclosures 
              of wage and claim information.

     Subtitle D--Restricting Welfare and Public Benefits for Aliens

Sec. 5301. SSI eligibility for aliens receiving SSI on August 22, 1996, 
              and disabled aliens lawfully residing in the United 
              States on August 22, 1996.
Sec. 5302. Extension of eligibility period for refugees and certain 
              other qualified aliens from 5 to 7 years for SSI and 
              medicaid; status of Cuban and Haitian entrants.
Sec. 5303. Exceptions for certain Indians from limitation on 
              eligibility for supplemental security income and medicaid 
              benefits.
Sec. 5304. Exemption from restriction on supplemental security income 
              program participation by certain recipients eligible on 
              the basis of very old applications.
Sec. 5305. Reinstatement of eligibility for benefits.
Sec. 5306. Treatment of certain Amerasian immigrants as refugees.
Sec. 5307. Verification of eligibility for State and local public 
              benefits.
Sec. 5308. Effective date.

                 Subtitle E--Unemployment Compensation

Sec. 5401. Clarifying provision relating to base periods.
Sec. 5402. Increase in Federal unemployment account ceiling.
Sec. 5403. Special distribution to States from Unemployment Trust Fund.
Sec. 5404. Interest-free advances to State accounts in Unemployment 
              Trust Fund restricted to States which meet funding goals.
Sec. 5405. Exemption of service performed by election workers from the 
              Federal unemployment tax.
Sec. 5406. Treatment of certain services performed by inmates.
Sec. 5407. Exemption of service performed for an elementary or 
              secondary school operated primarily for religious 
              purposes from the Federal unemployment tax.
Sec. 5408. State program integrity activities for unemployment 
              compensation.

            Subtitle F--Welfare Reform Technical Corrections

   Chapter 1--Block Grants for Temporary Assistance to Needy Families

Sec. 5501. Eligible States; State plan.
Sec. 5502. Grants to States.
Sec. 5503. Use of grants.
Sec. 5504. Mandatory work requirements.
Sec. 5505. Prohibitions; requirements.
Sec. 5506. Penalties.
Sec. 5507. Data collection and reporting.
Sec. 5508. Direct funding and administration by Indian Tribes.
Sec. 5509. Research, evaluations, and national studies.
Sec. 5510. Report on data processing.
Sec. 5511. Study on alternative outcomes measures.
Sec. 5512. Limitation on payments to the territories.
Sec. 5513. Conforming amendments to the Social Security Act.
Sec. 5514. Other conforming amendments.
Sec. 5515. Modifications to the job opportunities for certain low-
              income individuals program.
Sec. 5516. Denial of assistance and benefits for drug-related 
              convictions.
Sec. 5517. Transition rule.
Sec. 5518. Effective dates.

                Chapter 2--Supplemental Security Income

Sec. 5521. Conforming and technical amendments relating to eligibility 
              restrictions.
Sec. 5522. Conforming and technical amendments relating to benefits for 
              disabled children.
Sec. 5523. Additional technical amendments to title XVI.
Sec. 5524. Additional technical amendments relating to title XVI.
Sec. 5525. Technical amendments relating to drug addicts and 
              alcoholics.
Sec. 5526. Advisory board personnel.
Sec. 5527. Timing of delivery of October 1, 2000, SSI benefit payments.
Sec. 5528. Effective dates.

                        Chapter 3--Child Support

Sec. 5531. State obligation to provide child support enforcement 
              services.
Sec. 5532. Distribution of collected support.
Sec. 5533. Civil penalties relating to State Directory of New Hires.
Sec. 5534. Federal Parent Locator Service.
Sec. 5535. Access to registry data for research purposes.
Sec. 5536. Collection and use of social security numbers for use in 
              child support enforcement.
Sec. 5537. Adoption of uniform State laws.
Sec. 5538. State laws providing expedited procedures.
Sec. 5539. Voluntary paternity acknowledgement.
Sec. 5540. Calculation of paternity establishment percentage.
Sec. 5541. Means available for provision of technical assistance and 
              operation of Federal Parent Locator Service.
Sec. 5542. Authority to collect support from Federal employees.
Sec. 5543. Definition of support order.
Sec. 5544. State law authorizing suspension of licenses.
Sec. 5545. International support enforcement.
Sec. 5546. Child support enforcement for Indian tribes.
Sec. 5547. Continuation of rules for distribution of support in the 
              case of a title IV-E child.
Sec. 5548. Good cause in foster care and food stamp cases.
Sec. 5549. Date of collection of support.
Sec. 5550. Administrative enforcement in interstate cases.
Sec. 5551. Work orders for arrearages.
Sec. 5552. Additional technical State plan amendments.
Sec. 5553. Federal Case Registry of Child Support Orders.
Sec. 5554. Full faith and credit for child support orders.
Sec. 5555. Development costs of automated systems.
Sec. 5556. Additional technical amendments.
Sec. 5557. Effective date.

     Chapter 4--Restricting Welfare and Public Benefits for Aliens


              SUBCHAPTER A--ELIGIBILITY FOR FEDERAL BENEFITS

Sec. 5561. Alien eligibility for Federal benefits: limited application 
              to medicare and benefits under the Railroad Retirement 
              Act.
Sec. 5562. Exceptions to benefit limitations: corrections to reference 
              concerning aliens whose deportation is withheld.
Sec. 5563. Veterans exception: application of minimum active duty 
              service requirement; extension to unremarried surviving 
              spouse; expanded definition of veteran.
Sec. 5564. Notification concerning aliens not lawfully present: 
              correction of terminology.
Sec. 5565. Freely associated States: contracts and licenses.
Sec. 5566. Congressional statement regarding benefits for Hmong and 
              other Highland Lao veterans.


                     SUBCHAPTER B--GENERAL PROVISIONS

Sec. 5571. Determination of treatment of battered aliens as qualified 
              aliens; inclusion of alien child of battered parent as 
              qualified alien.
Sec. 5572. Verification of eligibility for benefits.
Sec. 5573. Qualifying quarters: disclosure of quarters of coverage 
              information; correction to assure that crediting applies 
              to all quarters earned by parents before child is 18.
Sec. 5574. Statutory construction: benefit eligibility limitations 
              applicable only with respect to aliens present in the 
              United States.


     SUBCHAPTER C--MISCELLANEOUS CLERICAL AND TECHNICAL AMENDMENTS; 
                             EFFECTIVE DATE

Sec. 5581. Correcting miscellaneous clerical and technical errors.
Sec. 5582. Effective date.

                      Chapter 5--Child Protection

Sec. 5591. Conforming and technical amendments relating to child 
              protection.
Sec. 5592. Additional technical amendments relating to child 
              protection.
Sec. 5593. Effective date.

                         Chapter 6--Child Care

Sec. 5601. Conforming and technical amendments relating to child care.
Sec. 5602. Additional conforming and technical amendments.
Sec. 5603. Effective dates.

  Chapter 7--ERISA Amendments Relating to Medical Child Support Orders

Sec. 5611. Amendments relating to section 303 of the Personal 
              Responsibility and Work Opportunity Reconciliation Act of 
              1996.

[[Page H6115]]

Sec. 5612. Amendment relating to section 381 of the Personal 
              Responsibility and Work Opportunity Reconciliation Act of 
              1996.
Sec. 5613. Amendments relating to section 382 of the Personal 
              Responsibility and Work Opportunity Reconciliation Act of 
              1996.

                       Subtitle G--Miscellaneous

Sec. 5701. Increase in public debt limit.
Sec. 5702. Authorization of appropriations for enforcement initiatives 
              related to the earned income tax credit.
       (b) References.--Except as otherwise expressly provided, 
     wherever in this title an amendment or repeal is expressed in 
     terms of an amendment to, or repeal of a section or other 
     provision, the reference shall be considered to be made to a 
     section or other provision of the Social Security Act.
                      Subtitle A--TANF Block Grant

     SEC. 5001. WELFARE-TO-WORK GRANTS.

       (a) Grants to States.--
       (1) In general.--Section 403(a) (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 of Labor a grant for each fiscal year 
     specified in subparagraph (I) 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 paragraph if the Secretary of Labor determines that the 
     State meets the following requirements:

       ``(I) The State has submitted to the Secretary of Labor and 
     the Secretary of Health and Human Services (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 appropriate entitites in 
     sub-State areas;
       ``(dd) contains assurances by the Governor of the State 
     that the private industry council (and any alternate agency 
     designated by the Governor under item (ee)) for a service 
     delivery area in the State will coordinate the expenditure of 
     any funds provided under this subparagraph for the benefit of 
     the service delivery area with the expenditure of the funds 
     provided to the State under section 403(a)(1); and
       ``(ee) if the Governor of the State desires to have an 
     agency other than a private industry council administer the 
     funds provided under this subparagraph for the benefit of 1 
     or more service delivery areas in the State, contains an 
     application to the Secretary of Labor for a waiver of clause 
     (vii)(I) with respect to the area or areas in order to permit 
     an alternate agency designated by the Governor to so 
     administer the funds.

       ``(II) The State has provided to the Secretary of Labor 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) (other than subclause (III) 
     thereof)) pursuant to 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 and funding 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) The State certifies that qualified State expenditures 
     (within the meaning of section 409(a)(7)) for the fiscal year 
     will be not less than the applicable percentage of historic 
     State expenditures (within the meaning of section 409(a)(7)) 
     with respect to the fiscal year.

       ``(iii) Allotments to welfare-to-work states.--

       ``(I) In general.--Subject to this clause, 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.
       ``(II) Minimum allotment.--The allotment of a welfare-to-
     work State (other than Guam, the Virgin Islands, or American 
     Samoa) for a fiscal year shall not be less than 0.25 percent 
     of the available amount for the fiscal year.
       ``(III) Pro rata reduction.--Subject to subclause (II), the 
     Secretary of Labor shall make pro rata reductions in the 
     allotments to States under this clause for a fiscal year as 
     necessary to ensure that the total of the allotments does not 
     exceed the available amount 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) 75 percent of the sum of--

       ``(aa) the amount specified in subparagraph (I) for the 
     fiscal year, minus the total of the amounts reserved pursuant 
     to subparagraphs (E), (F), (G), and (H) 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/
     2\ of the sum of--

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

       ``(II) the percentage represented by the number of adults 
     who are recipients of assistance under the State program 
     funded under this part divided by the number of adults in the 
     United States who are recipients of assistance under any 
     State program funded under this part.

       ``(vi) Procedure for distribution of funds within states.--

       ``(I) Allocation formula.--A State to which a grant is made 
     under this subparagraph shall devise a formula for allocating 
     not less than 85 percent of the amount of the grant among the 
     service delivery areas in the State, which--

       ``(aa) determines the amount to be allocated for the 
     benefit of a service delivery area in proportion to the 
     number (if any) by which the population of the area with an 
     income that is less than the poverty line exceeds 7.5 percent 
     of the total population of the area, relative to such number 
     for all such areas in the State with such an excess, and 
     accords a weight of not less than 50 percent to this factor;
       ``(bb) may determine the amount to be allocated for the 
     benefit of such an area in proportion to the number of adults 
     residing in the area who have been 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 of 1996 first applied to the State) for at 
     least 30 months (whether or not consecutive) relative to the 
     number of such adults residing in the State; and
       ``(cc) may determine the amount to be allocated for the 
     benefit of such an area in proportion to the number of 
     unemployed individuals residing in the area relative to the 
     number of such individuals residing in the State.

       ``(II) Distribution of funds.--

       ``(aa) In general.--If the amount allocated by the formula 
     to a service delivery area is at least $100,000, the State 
     shall distribute the amount to the entity administering the 
     grant in the area.
       ``(bb) Special rule.--If the amount allocated by the 
     formula to a service delivery area is less than $100,000, the 
     sum shall be available for distribution in the State under 
     subclause (III) during the fiscal year.

       ``(III) Projects to help long-term recipients of assistance 
     enter unsubsidized jobs.--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)(bb)) 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 of 1996 first applied to 
     the State) enter unsubsidized employment.
       ``(vii) Administration.--

       ``(I) Private industry councils.--The private industry 
     council for a service delivery area in a State 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 area, to expend the amounts 
     distributed under clause (vi)(II)(aa) for the benefit of the 
     service delivery area, in accordance with the assurances 
     described in clause (ii)(I)(dd) provided by the Governor of 
     the State.
       ``(II) Enforcement of coordination of expenditures with 
     other expenditures under this part.--Notwithstanding 
     subclause (I) of this clause, on a determination by the 
     Governor of a State that a private industry council (or an 
     alternate agency described in clause (ii)(I)(dd)) has used 
     funds provided under this subparagraph in a manner 
     inconsistent with the assurances described in clause 
     (ii)(I)(dd)--

       ``(aa) the private industry council (or such alternate 
     agency) shall remit the funds to the Governor; and
       ``(bb) the Governor shall apply to the Secretary of Labor 
     for a waiver of subclause (I) of this clause with respect to 
     the service delivery area or areas involved in order to 
     permit an alternate agency designated by the Governor to 
     administer the funds in accordance with the assurances.

       ``(III) Authority to permit use of alternate administering 
     agency.--The Secretary of Labor shall approve an application 
     submitted under clause (ii)(I)(ee) or subclause (II)(bb) of 
     this clause to waive subclause (I) of this clause with 
     respect to 1 or more service delivery areas if the Secretary 
     determines that the alternate agency designated in the 
     application would improve the effectiveness or efficiency of 
     the administration of amounts distributed under clause 
     (vi)(II)(aa) for the benefit of the area or areas.

       ``(viii) Data to be used in determining the number of adult 
     tanf recipients.--For purposes of this subparagraph, the 
     number of adult recipients of assistance under a State 
     program funded under this part for a fiscal year shall be 
     determined using data for the most recent 12-month period for 
     which such data is available before the beginning of the 
     fiscal year.
       ``(B) Competitive grants.--
       ``(i) In general.--The Secretary of Labor shall award 
     grants in accordance with this subparagraph, in fiscal years 
     1998 and 1999, for

[[Page H6116]]

     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 
     unsubsidized employment.
       ``(bb) moving recipients of assistance under State programs 
     funded under this part who are least job ready into 
     unsubsidized employment; and
       ``(cc) moving recipients of assistance under State programs 
     funded under this part who are least job ready into 
     unsubsidized employment, even in labor markets that have a 
     shortage of low-skill jobs.

       ``(II) At the discretion of the Secretary of Labor, 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 coordinate 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 
     for a service delivery area in a State, a political 
     subdivision of a State, or a private entity applying in 
     conjunction with the private industry council for such a 
     service delivery area or with such a political subdivision, 
     that submits a proposal developed in consultation with the 
     Governor of the State.
       ``(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 of Labor 
     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 of Labor deems appropriate, in the area to be 
     served by the project.
       ``(iv) Consideration of needs of rural areas and cities 
     with large concentrations of poverty.--In making grants under 
     this subparagraph, the Secretary of Labor shall consider the 
     needs of rural areas and cities with large concentrations of 
     residents with an income that is less than the poverty line.
       ``(v) Funding.--For grants under this subparagraph for each 
     fiscal year specified in subparagraph (I), there shall be 
     available to the Secretary of Labor an amount equal to the 
     sum of--

       ``(I) 25 percent of the sum of--

       ``(aa) the amount specified in subparagraph (I) for the 
     fiscal year, minus the total of the amounts reserved pursuant 
     to subparagraphs (E), (F), (G), and (H) 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 shall use the funds to move 
     individuals into and keep individuals in lasting unsubsidized 
     employment by means of any of the following:

       ``(I) The conduct and administration of community service 
     or work experience programs.
       ``(II) Job creation through public or private sector 
     employment wage subsidies.
       ``(III) On-the-job training.
       ``(IV) Contracts with public or private providers of 
     readiness, placement, and post-employment services.
       ``(V) Job vouchers for placement, readiness, and 
     postemployment services.
       ``(VI) Job retention or support services if such services 
     are not otherwise available.

     Contracts or vouchers for job placement services supported by 
     such funds must require that at least \1/2\ of the payment 
     occur after an eligible individual placed into the workforce 
     has been in the workforce for 6 months.
       ``(ii) Required beneficiaries.--An entity that operates a 
     project with funds provided under this paragraph shall expend 
     at least 70 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, or for the benefit of noncustodial parents of minors 
     whose custodial parent is such a recipient, 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 or mathematics.
       ``(bb) The individual requires substance abuse treatment 
     for employment.
       ``(cc) The individual has a poor work history.

       ``(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) Targeting of individuals with characteristics 
     associated with long-term welfare dependence.--An entity that 
     operates a project with funds provided under this paragraph 
     may expend not more than 30 percent of all funds provided to 
     the project for programs that provide assistance in a form 
     described in clause (i)--

       ``(I) to recipients of assistance under the program funded 
     under this part of the State in which the entity is located 
     who have characteristics associated with long-term welfare 
     dependence (such as school dropout, teen pregnancy, or poor 
     work history), including, at the option of the State, by 
     providing assistance in such form as a condition of 
     receiving assistance under the State program funded under 
     this part; or

       ``(II) to individuals--

       ``(aa) who are noncustodial parents of minors whose 
     custodial parent is such a recipient; and
       ``(bb) who have such characteristics.
     To the extent that the entity does not expend such funds in 
     accordance with the preceding sentence, the entity shall 
     expend such funds in accordance with clause (ii).
       ``(iv) Authority to provide work-related services to 
     individuals who have reached the 5 year limit.--An entity 
     that operates a project with funds provided under this 
     paragraph may use the funds to provide assistance in a form 
     described in clause (i) of this subparagraph to, or for the 
     benefit of, individuals who (but for section 408(a)(7)) would 
     be eligible for assistance under the program funded under 
     this part of the State in which the entity is located.
       ``(v) Relationship to other provisions of this part.--

       ``(I) Rules governing use of funds.--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.
       ``(II) Rules governing payments to states.--The Secretary 
     of Labor shall carry out the functions otherwise assigned by 
     section 405 to the Secretary of Health and Human Services 
     with respect to the grants payable under this paragraph.
       ``(III) Administration.--Section 416 shall not apply to the 
     programs under this paragraph.

       ``(vi) 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, nor any part of State expenditures made to match the 
     funds, to fulfill any obligation of any State, political 
     subdivision, or private industry council to contribute funds 
     under section 403(b) or 418 or any other provision of this 
     Act or other Federal law.
       ``(vii) Deadline for expenditure.--An entity to which funds 
     are provided under this paragraph shall remit to the 
     Secretary of Labor any part of the funds that are not 
     expended within 3 years after the date the funds are so 
     provided.
       ``(viii) Regulations.--Within 90 days after the date of the 
     enactment of this paragraph, the Secretary of Labor, after 
     consultation with the Secretary of Health and Human Services 
     and the Secretary of Housing and Urban Development, shall 
     prescribe such regulations as may be necessary to implement 
     this paragraph.
       ``(D) Definitions.--
       ``(i) 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 for a fiscal year--

       ``(I) based on the methodology used by the Bureau of the 
     Census to produce and publish intercensal poverty data for 
     States and counties (or, in the case of Puerto Rico, the 
     Virgin Islands, Guam, and American Samoa, other poverty 
     data selected by the Secretary of Labor); and

       ``(II) using data for the most recent year for which such 
     data is available before the beginning of the fiscal year.

       ``(ii) Private industry council.--As used in this 
     paragraph, 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.
       ``(iii) Service delivery area.--As used in this paragraph, 
     the term `service delivery area' shall have the meaning given 
     such term (or the successor to such term) for purposes of the 
     Job Training Partnership Act.
       ``(E) Set-aside for successful performance bonus.--
       ``(i) In general.--The Secretary of Labor shall make a 
     grant in accordance with this subparagraph to each successful 
     performance State in fiscal year 2000.
       ``(ii) Amount of grant.--The Secretary of Labor shall 
     determine the amount of the grant payable under this 
     subparagraph to a successful performance State, which shall 
     be based on the score assigned to the State under clause 
     (iv)(I)(aa) for such prior period as the Secretary of Labor 
     deems appropriate.
       ``(iii) Formula for measuring state performance.--Not later 
     than 1 year after the date of the enactment of this 
     paragraph, the Secretary of Labor, in consultation with the 
     Secretary of Health and Human Services, the National 
     Governors' Association, and the American Public Welfare 
     Association, shall develop a formula for measuring--

       ``(I) the success of States in placing individuals in 
     private sector employment or in any kind of employment, 
     through programs operated with funds provided under 
     subparagraph (A);
       ``(II) the duration of such placements;
       ``(III) any increase in the earnings of such individuals; 
     and

[[Page H6117]]

       ``(IV) such other factors as the Secretary of Labor deems 
     appropriate concerning the activities of the States with 
     respect to such individuals.

     The formula may take into account general economic conditions 
     on a State-by-State basis.
       ``(iv) Scoring of state performance; setting of performance 
     thresholds.--

       ``(I) In general.--The Secretary of Labor shall--

       ``(aa) use the formula developed under clause (iii) to 
     assign a score to each State that was a welfare-to-work State 
     for fiscal years 1998 and 1999; and
       ``(bb) prescribe a performance threshold in such a manner 
     so as to ensure that the total amount of grants to be made 
     under this paragraph equals $100,000,000.

       ``(II) Availability of welfare-to-work data submitted to 
     the secretary of hhs.--The Secretary of Health and Human 
     Services shall provide the Secretary of Labor with the data 
     reported by States under this part with respect to programs 
     operated with funds provided under subparagraph (A).

       ``(v) Successful performance state defined.--As used in 
     this subparagraph, the term `successful performance State' 
     means a State whose score assigned pursuant to clause 
     (iv)(I)(aa) equals or exceeds the performance threshold 
     prescribed under clause (iv)(I)(bb).
       ``(vi) Set-aside.--$100,000,000 of the amount specified in 
     subparagraph (I) for fiscal year 1999 shall be reserved for 
     grants under this subparagraph.
       ``(F) Funding for indian tribes.--1 percent of the amount 
     specified in subparagraph (I) for fiscal year 1998 and of the 
     amount so specified for fiscal year 1999 shall be reserved 
     for grants to Indian tribes under section 412(a)(3).
       ``(G) Funding for evaluations of welfare-to-work 
     programs.--0.6 percent of the amount specified in 
     subparagraph (I) for fiscal year 1998 and of the amount so 
     specified for fiscal year 1999 shall be reserved for use by 
     the Secretary to carry out section 413(j).
       ``(H) Funding for evaluation of abstinence education 
     programs.--
       ``(i) In general.--0.2 percent of the amount specified in 
     subparagraph (I) for fiscal year 1998 and of the amount so 
     specified for fiscal year 1999 shall be reserved for use by 
     the Secretary to evaluate programs under section 510, 
     directly or through grants, contracts, or interagency 
     agreements.
       ``(ii) Authority to use funds for evaluations of welfare-
     to-work programs.--Any such amount not required for such 
     evaluations shall be available for use by the Secretary to 
     carry out section 413(j).
       ``(iii) Deadline for outlays.--Outlays from funds used 
     pursuant to clause (i) for evaluation of programs under 
     section 510 shall not be made after fiscal year 2001.
       ``(I) Appropriations.--
       ``(i) In general.--Out of any money in the Treasury of the 
     United States not otherwise appropriated, there are 
     appropriated $1,500,000,000 for each of fiscal years 1998 and 
     1999 for grants under this paragraph.
       ``(ii) Availability.--The amounts made available pursuant 
     to clause (i) shall remain available for such period as is 
     necessary to make the grants provided for in this paragraph.
       ``(J) Worker protections.--
       ``(i) Nondisplacement in work activities.--

       ``(I) General prohibition.--Subject to this clause, an 
     adult in a family receiving assistance attributable to funds 
     provided under this paragraph may fill a vacant employment 
     position in order to engage in a work activity.
       ``(II) Prohibition against violation of contracts.--A work 
     activity engaged in under a program operated with funds 
     provided under this paragraph shall not violate an existing 
     contract for services or a collective bargaining agreement, 
     and such a work activity that would violate a collective 
     bargaining agreement shall not be undertaken without the 
     written concurrence of the labor organization and employer 
     concerned.
       ``(III) Other prohibitions.--An adult participant in a work 
     activity engaged in under a program operated with funds 
     provided under this paragraph shall not be employed or 
     assigned--
       ``(aa) when any other individual is on layoff from the same 
     or any substantially equivalent job;
       ``(bb) if the employer has terminated the employment of any 
     regular employee or otherwise caused an involuntary reduction 
     in its workforce with the intention of filling the vacancy so 
     created with the participant; or
       ``(cc) if the employer has caused an involuntary reduction 
     to less than full time in hours of any employee in the same 
     or a substantially equivalent job.
       ``(ii) 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 other participants 
     engaged in a work activity under a program operated with 
     funds provided under this paragraph.
       ``(iii) Nondiscrimination.--In addition to the protections 
     provided under the provisions of law specified in section 
     408(c), an individual may not be discriminated against by 
     reason of gender with respect to participation in work 
     activities engaged in under a program operated with funds 
     provided under this paragraph.
       ``(iv) Grievance procedure.--

       ``(I) In general.--Each State to which a grant is made 
     under this paragraph shall establish and maintain a procedure 
     for grievances or complaints from employees alleging 
     violations of clause (i) and participants in work activities 
     alleging violations of clause (i), (ii), or (iii).
       ``(II) Hearing.--The procedure shall include an opportunity 
     for a hearing.
       ``(III) Remedies.--The procedure shall include remedies for 
     violation of clause (i), (ii), or (iii), which may continue 
     during the pendency of the procedure, and which may include--

       ``(aa) suspension or termination of payments from funds 
     provided under this paragraph;
       ``(bb) prohibition of placement of a participant with an 
     employer that has violated clause (i), (ii), or (iii);
       ``(cc) where applicable, reinstatement of an employee, 
     payment of lost wages and benefits, and reestablishment of 
     other relevant terms, conditions and privileges of 
     employment; and
       ``(dd) where appropriate, other equitable relief.

       ``(IV) Appeals.--

       ``(aa) Filing.--Not later than 30 days after a grievant or 
     complainant receives an adverse decision under the procedure 
     established pursuant to subclause (I), the grievant or 
     complainant may appeal the decision to a State agency 
     designated by the State which shall be independent of the 
     State or local agency that is administering the programs 
     operated with funds provided under this paragraph and the 
     State agency administering, or supervising the administration 
     of, the State program funded under this part.
       ``(bb) Final determination.--Not later than 120 days after 
     the State agency designated under item (aa) receives a 
     grievance or complaint made under the procedure established 
     by a State pursuant to subclause (I), the State agency shall 
     make a final determination on the appeal.
       ``(v) Rule of interpretation.--This subparagraph shall not 
     be construed to affect the authority of a State to provide or 
     require workers' compensation.
       ``(vi) Nonpreemption of state law.--The provisions of this 
     subparagraph shall not be construed to preempt any provision 
     of State law that affords greater protections to employees or 
     to other participants engaged in work activities under a 
     program funded under this part than is afforded by such 
     provisions of this subparagraph.''.
       (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 
     receiving 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)(2) (42 
     U.S.C. 1308(a)(2)), as amended by section 5512(a) of this 
     Act, is amended by inserting ``403(a)(5),'' after 
     ``403(a)(4),''.
       (c) Grants to Indian Tribes.--Section 412(a) (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 of Labor shall award a 
     grant in accordance with this paragraph to an Indian tribe 
     for each fiscal year specified in section 403(a)(5)(I) for 
     which the Indian tribe is a welfare-to-work tribe, in such 
     amount as the Secretary of Labor 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 of 
     Labor 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. If the Indian tribe 
     has a tribal family assistance plan, the plan referred to in 
     the preceding sentence shall be in the form of an addendum to 
     the tribal family assistance plan.
       ``(ii) The Indian tribe is operating a program under a 
     tribal family assistance plan approved by the Secretary of 
     Health and Human Services, a program described in paragraph 
     (2)(C), or an employment program funded through other sources 
     under which substantial services are provided to recipients 
     of assistance under a program funded under this part.
       ``(iii) The Indian tribe has provided the Secretary of 
     Labor 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) (other 
     than subclause (III) thereof)) pursuant to this paragraph.
       ``(iv) The Indian tribe has agreed to negotiate in good 
     faith with the Secretary of Health and Human Services with 
     respect to the substance and funding of any evaluation under 
     section 413(j), and to cooperate with the conduct of any such 
     evaluation.
       ``(C) Limitations on use of funds.--
       ``(i) In general.--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).
       ``(ii) Waiver authority.--The Secretary of Labor may waive 
     or modify the application of a provision of section 
     403(a)(5)(C) (other than clause (vii) thereof) with respect 
     to an Indian tribe to the extent necessary to enable the 
     Indian tribe to operate a more efficient or effective program 
     with the funds provided under this paragraph.

[[Page H6118]]

       ``(iii) Regulations.--Within 90 days after the date of the 
     enactment of this paragraph, the Secretary of Labor, after 
     consultation with the Secretary of Health and Human Services 
     and the Secretary of Housing and Urban Development, shall 
     prescribe such regulations as may be necessary to implement 
     this paragraph.''.
       (d) Funds Received From Grants to be Disregarded in 
     Applying Durational Limit on Assistance.--Section 408(a)(7) 
     (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 noncash 
     assistance from funds provided under section 403(a)(5) shall 
     not be considered assistance.''.
       (e) Data Collection and Reporting.--Section 411(a) (42 
     U.S.C. 611(a)(1)(A)), as amended by section 5507 of this Act, 
     is amended--
       (1) in paragraph (1)(A), by adding at the end the 
     following:
       ``(xviii) With respect to families participating in a 
     program operated with funds provided under section 
     403(a)(5)--

       ``(I) any activity described in section 403(a)(5)(C)(i) 
     engaged in by a family member;
       ``(II) the total amount expended during the month on the 
     family member for each such activity;
       ``(III) if the family member is engaged in subsidized 
     employment or on-the-job training under the program, the wage 
     paid to the family member and the amount of any wage subsidy 
     provided to the family member from Federal or State funds; 
     and
       ``(IV) if the participation of a family member in the 
     program was ended during a month due to the family member 
     obtaining employment, the wage of the family member in the 
     employment and whether the participation was ended due to the 
     family member obtaining unsubsidized employment, obtaining 
     subsidized employment, receiving an increased wage, engaging 
     in a work training activity funded under a program funded 
     other than under section 403(a)(5), or for other 
     reasons.'';
       (2) in paragraph (2), by inserting ``, with a separate 
     statement of the percentage of such funds that are used to 
     cover administrative costs or overhead incurred for programs 
     operated with funds provided under section 403(a)(5)'' before 
     the period;
       (3) in paragraph (3), by inserting ``, with a separate 
     statement of the total amount expended by the State during 
     the quarter on programs operated with funds provided under 
     section 403(a)(5)'' before the period;
       (4) in paragraph (4), by inserting ``, with a separate 
     statement of the number of such parents who participated in 
     programs operated with funds provided under section 
     403(a)(5)'' before the period;
       (5) in paragraph (6)--
       (A) by striking ``and'' at the end of subparagraph (A);
       (B) by striking the period at the end of subparagraph (B) 
     and inserting ``; and''; and
       (C) by adding at the end the following:
       ``(C) with respect to families and individuals 
     participating in a program operated with funds provided under 
     section 403(a)(5)--
       ``(i) the total number of such families and individuals; 
     and
       ``(ii) the number of such families and individuals whose 
     participation in such a program was terminated during a 
     month.'' and
       (6) in paragraph (7), by inserting ``, and shall consult 
     with the Secretary of Labor in defining the data elements 
     with respect to programs operated with funds provided under 
     section 403(a)(5)'' before the period.
       (f) Evaluations.--Section 413 (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, in consultation with the 
     Secretary of Labor and the Secretary of Housing and Urban 
     Development--
       ``(A) shall 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 unsubsidized employment, and placements 
     in unsubsidized employment 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).''.
       (g) Penalties.--
       (1) Penalty for failure of state to maintain historic 
     effort during year in which welfare-to-work grant is 
     received.--
       (A) In general.--Section 409(a) (42 U.S.C. 609(a)) is 
     amended by adding at the end the following:
       ``(13) Penalty for failure of state to maintain historic 
     effort during year in which welfare-to-work grant is 
     received.--If a grant is made to a State under section 
     403(a)(5)(A) for a fiscal year and paragraph (7) of this 
     subsection requires the grant payable to the State under 
     section 403(a)(1) to be reduced for the immediately 
     succeeding fiscal year, then the Secretary shall reduce the 
     grant payable to the State under section 403(a)(1) for such 
     succeeding fiscal year by the amount of the grant made to the 
     State under section 403(a)(5)(A) for the fiscal year.''.
       (B) Inapplicability of good cause exception.--Section 
     409(b)(2) of such Act (42 U.S.C. 609(b)(2)), as amended by 
     section 5506(k) of this Act, is amended by striking ``or 
     (12)'' and inserting ``(12), or (13)''.
       (C) Inapplicability of corrective compliance plan.--Section 
     409(c)(4) of such Act (42 U.S.C. 609(c)(4)), as amended by 
     section 5506(m) of this Act, is amended by striking ``or 
     (12)'' and inserting ``(12), or (13)''.
       (2) Penalty for misuse of competitive welfare-to-work 
     funds.--Section 409(a)(1) of such Act (42 U.S.C. 609(a)(1)) 
     is amended by adding at the end the following:
       ``(C) Penalty for misuse of competitive welfare-to-work 
     funds.--If the Secretary of Labor finds that an amount paid 
     to an entity under section 403(a)(5)(B) has been used in 
     violation of subparagraph (B) or (C) of section 403(a)(5), 
     the entity shall remit to the Secretary of Labor an amount 
     equal to the amount so used.''.
       (h) Clarification That Sanctions Against Recipients Under 
     TANF Program are not Wage Reductions.--
       (1) In general.--Section 408 (42 U.S.C. 608) is amended--
       (A) by redesignating subsections (c) and (d) as subsections 
     (d) and (e), respectively; and
       (B) by inserting after subsection (b) the following:
       ``(c) Sanctions Against Recipients Not Considered Wage 
     Reductions.--A penalty imposed by a State against the family 
     of an individual by reason of the failure of the individual 
     to comply with a requirement under the State program funded 
     under this part shall not be construed to be a reduction in 
     any wage paid to the individual.''.
       (2) Retroactivity.--The amendments made by paragraph (1) 
     shall take effect as if included in the enactment of section 
     103(a) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996.
       (i) GAO Study of Effect of Family Violence on Need for 
     Public Assistance.--
       (1) Study.--The Comptroller General shall conduct a study 
     of the effect of family violence on the use of public 
     assistance programs, and in particular the extent to which 
     family violence prolongs or increases the need for public 
     assistance.
       (2) Report.--Within 1 year after the date of the enactment 
     of this Act, the Comptroller General shall submit to the 
     Committees on Ways and Means and Education and the Workforce 
     of the House of Representatives and the Committee on Finance 
     of the Senate a report that contains the findings of the 
     study required by paragraph (1).

     SEC. 5002. LIMITATION ON AMOUNT OF FEDERAL FUNDS TRANSFERABLE 
                   TO TITLE XX PROGRAMS.

       (a) In General.--Section 404(d) (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. 5003. 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) (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 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, or (if the month is in 
     fiscal year 2000 or thereafter) deemed to be engaged in work 
     for the month by reason of subparagraph (C) of this 
     paragraph.''.
       (b) Retroactivity.--The amendment made by subsection (a) of 
     this section shall take effect as if included in the 
     enactment of section 103(a) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

     SEC. 5004. PENALTY FOR FAILURE OF STATE TO REDUCE ASSISTANCE 
                   FOR RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO 
                   WORK.

       (a) In General.--Section 409(a) (42 U.S.C. 609(a)), as 
     amended by section 5001(f)(1)(A) of this Act, is amended by 
     adding at the end the following:

[[Page H6119]]

       ``(14) 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. 5101. EXTENSION OF DEADLINE TO PERFORM CHILDHOOD 
                   DISABILITY REDETERMINATIONS.

       Section 211(d)(2) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     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. 5102. FEES FOR FEDERAL ADMINISTRATION OF STATE 
                   SUPPLEMENTARY PAYMENTS.

       (a) Fee Schedule.--
       (1) Optional state supplementary payments.--
       (A) In general.--Section 1616(d)(2)(B) (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 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) (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. The amounts so credited shall not be scored as receipts 
     under section 252 of the Balanced Budget and Emergency 
     Deficit Control Act of 1985, and the amounts so credited 
     shall be credited as a discretionary offset to discretionary 
     spending to the extent that the amounts so credited are made 
     available for expenditure in appropriations Acts.''.
       (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. The amounts so 
     credited shall not be scored as receipts under section 252 of 
     the Balanced Budget and Emergency Deficit Control Act of 
     1985, and the amounts so credited shall be credited as a 
     discretionary offset to discretionary spending to the extent 
     that the amounts so credited are made available for 
     expenditure in appropriations Acts.''.
       (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. 5201. CLARIFICATION OF AUTHORITY TO PERMIT CERTAIN 
                   REDISCLOSURES OF WAGE AND CLAIM INFORMATION.

       Section 303(h)(1)(C) (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. 5301. SSI ELIGIBILITY FOR ALIENS RECEIVING SSI ON AUGUST 
                   22, 1996 AND DISABLED ALIENS LAWFULLY RESIDING 
                   IN THE UNITED STATES ON AUGUST 22, 1996.

       (a) SSI Eligibility for Aliens Receiving SSI on August 22, 
     1996.--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 is lawfully residing in the United States and who was 
     receiving such benefits on August 22, 1996.''.
       (b) SSI Eligibility for Disabled Aliens Lawfully Residing 
     in the United States on August 22, 1996.--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 at the end the following:
       ``(F) Disabled aliens lawfully residing in the united 
     states 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--
       ``(i) was lawfully residing in the United States on August 
     22, 1996; and
       ``(ii) is blind or disabled, as defined in section 
     1614(a)(2) or 1614(a)(3) of the Social Security Act (42 
     U.S.C. 1382c(a)(3)).''.
       (c) Extension of Grandfather Provision Relating to SSI 
     Eligibility.--Section 402(a)(2)(D)(i) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1612(a)(2)(D)(i)) is amended--
       (1) in subclause (I), by striking ``September 30, 1997,'' 
     and inserting ``September 30, 1998,''; and
       (2) in subclause (III), by striking ``September 30, 1997,'' 
     and inserting ``September 30, 1998''.

     SEC. 5302. EXTENSION OF ELIGIBILITY PERIOD FOR REFUGEES AND 
                   CERTAIN OTHER QUALIFIED ALIENS FROM 5 TO 7 
                   YEARS FOR SSI AND MEDICAID; STATUS OF CUBAN AND 
                   HAITIAN ENTRANTS.

       (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;
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act; or

       ``(IV) an alien is granted status as a Cuban and Haitian 
     entrant (as defined in section 501(e)

[[Page H6120]]

     of the Refugee Education Assistance Act of 1980).

       ``(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;
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act; or
       ``(IV) an alien is granted status as a Cuban and Haitian 
     entrant (as defined in section 501(e) of the Refugee 
     Education Assistance Act of 1980).''.

       (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;
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act; or
       ``(IV) an alien is granted status as a Cuban and Haitian 
     entrant (as defined in section 501(e) of the Refugee 
     Education Assistance Act of 1980).

       ``(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;
       ``(III) an alien's deportation is withheld under section 
     243(h) of such Act; or
       ``(IV) an alien is granted status as a Cuban and Haitian 
     entrant (as defined in section 501(e) of the Refugee 
     Education Assistance Act of 1980).''.

       (c) Status of Cuban and Haitian Entrants.--
       (1) Federal means-tested public benefits.--
       (A) Section 403(b)(1) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1613(b)(1)) is amended by adding at the end the following new 
     subparagraph:
       ``(D) An alien who is a Cuban and Haitian entrant as 
     defined in section 501(e) of the Refugee Education Assistance 
     Act of 1980.''.
       (B) Section 403 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 1613) is 
     amended by striking subsection (d).
       (2) State public benefits.--Section 412(b)(1) of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (8 U.S.C. 1622(b)(1)) is amended by adding at the 
     end the following new subparagraph:
       ``(D) An alien who is a Cuban and Haitian entrant as 
     defined in section 501(e) of the Refugee Education Assistance 
     Act of 1980 until 5 years after the alien is granted such 
     status.''.
       (3) Qualified alien defined.--Section 431(b) of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (8 U.S.C. 1641(b)) is amended--
       (A) in paragraph (5) by striking ``or'';
       (B) in paragraph (6) by striking the period and inserting 
     ``; or''; and
       (C) by adding at the end the following new paragraph:
       ``(7) an alien who is a Cuban and Haitian entrant (as 
     defined in section 501(e) of the Refugee Education Assistance 
     Act of 1980).''.

     SEC. 5303. EXCEPTIONS FOR CERTAIN INDIANS FROM LIMITATION ON 
                   ELIGIBILITY FOR SUPPLEMENTAL SECURITY INCOME 
                   AND MEDICAID BENEFITS.

       (a) Exception from Limitation on SSI Eligibility.--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 at the end the following:
       ``(G) SSI exception for certain indians.--With respect to 
     eligibility for benefits for the program defined in paragraph 
     (3)(A) (relating to the supplemental security income 
     program), section 401(a) and paragraph (1) shall not apply to 
     any individual--
       ``(i) who is an American Indian born in Canada to whom the 
     provisions of section 289 of the Immigration and Nationality 
     Act (8 U.S.C. 1359) apply; or
       ``(ii) who is a member of an Indian tribe (as defined in 
     section 4(e) of the Indian Self-Determination and Education 
     Assistance Act (25 U.S.C. 450b(e))).''.
       (b) Exception from Limitation on Medicaid Eligibility.--
     Section 402(b)(2) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 1612(b)(2)) 
     is amended by inserting at the end the following:
       ``(E) Medicaid exception for certain indians.--With respect 
     to eligibility for benefits for the program defined in 
     paragraph (3)(C) (relating to the medicaid program), section 
     401(a) and paragraph (1) shall not apply to any individual 
     described in subsection (a)(2)(G).''.
       (c) SSI and Medicaid Exceptions from Limitation on 
     Eligibility of New Entrants.--Section 403 of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1613) is amended by adding after subsection 
     (c) the following new subsection:
       ``(d) SSI and Medicaid Benefits for Certain Indians.--
     Notwithstanding any other provision of law, the limitations 
     under section 401(a) and subsection (a) shall not apply to an 
     individual described in section 402(a)(2)(G), but only with 
     respect to the programs specified in subsections (a)(3)(A) 
     and (b)(3)(C) of section 402.''.

     SEC. 5304. EXEMPTION FROM RESTRICTION ON SUPPLEMENTAL 
                   SECURITY INCOME PROGRAM PARTICIPATION BY 
                   CERTAIN RECIPIENTS ELIGIBLE ON THE BASIS OF 
                   VERY OLD APPLICATIONS.

       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 at the end the following:
       ``(H) SSI exception for certain recipients on the basis of 
     very old applications.--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 any individual--
       ``(i) who is receiving benefits under such program for 
     months after July 1996 on the basis of an application filed 
     before January 1, 1979; and
       ``(ii) with respect to whom the Commissioner of Social 
     Security lacks clear and convincing evidence that such 
     individual is an alien ineligible for such benefits as a 
     result of the application of this section.''.

     SEC. 5305. REINSTATEMENT OF ELIGIBILITY FOR BENEFITS.

       (a) Food Stamps.--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.

       ``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)(B)) 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)(A)).''.
       (b) Medicaid.--Section 402(b)(2) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1612(b)(2)) is amended by adding at the end 
     the following:
       ``(F) Medicaid exception for aliens receiving ssi.--An 
     alien who is receiving benefits under the program defined in 
     subsection (a)(3)(A) (relating to the supplemental security 
     income program) shall be eligible for medical assistance 
     under a State plan under title XIX of the Social Security Act 
     (42 U.S.C. 1396 et seq.) under the same terms and conditions 
     that apply to other recipients of benefits under the program 
     defined in such subsection.''.
       (c) Clerical Amendment.--The table of sections as contained 
     in section 2 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 is amended by adding 
     after the item relating to section 435 the following:
       ``Sec. 436. Derivative eligibility for benefits.''.

     SEC. 5306. TREATMENT OF CERTAIN AMERASIAN IMMIGRANTS AS 
                   REFUGEES.

       (a) For Purposes of SSI and Food Stamps.--Section 
     402(a)(2)(A) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1612(a)(2)(A)) as amended by section 5302 is amended--
       (1) in clause (i)--
       (A) by striking ``or'' at the end of subclause (III);
       (B) by striking the period at the end of subclause (IV) and 
     inserting ``; or''; and
       (C) by adding at the end the following:

       ``(V) an alien is 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 and amended by the 9th proviso under 
     migration and refugee assistance in title II of the Foreign 
     Operations, Export Financing, and Related Programs 
     Appropriations Act, 1989, Public Law 100-461, as amended).''; 
     and

       (2) in clause (ii)--
       (A) by striking ``or'' at the end of subclause (III);
       (B) by striking the period at the end of subclause (IV) and 
     inserting ``; or''; and
       (C) by adding at the end the following:

       ``(V) an alien is admitted to the United States as an 
     Amerasian immigrant as described in clause (i)(V).''.

       (b) For Purposes of TANF, SSBG, and 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)) as amended by section 5302 is amended--
       (1) in clause (i)--
       (A) by striking ``or'' at the end of subclause (III);
       (B) by striking the period at the end of subclause (IV) and 
     inserting ``; or''; and
       (C) by adding at the end the following:
       ``(V) an alien admitted to the United States as an 
     Amerasian immigrant as described in subsection 
     (a)(2)(A)(i)(V) until 5 years after the date of such alien's 
     entry into the United States.''; and
       (2) in clause (ii)--
       (A) by striking ``or'' at the end of subclause (III);
       (B) by striking the period at the end of subclause (IV) and 
     inserting ``; or''; and
       (C) by adding at the end the following:
       ``(V) an alien admitted to the United States as an 
     Amerasian immigrant as described in subsection 
     (a)(2)(A)(i)(V) until 5 years after the date of such alien's 
     entry into the United States.''.
       (c) For Purposes of Exception from 5-Year Limited 
     Eligibility of Qualified Aliens.--Section 403(b)(1) of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (8 U.S.C. 1613(b)(1)) is amended by adding at the 
     end the following:

[[Page H6121]]

       ``(E) An alien admitted to the United States as an 
     Amerasian immigrant as described in section 
     402(a)(2)(A)(i)(V).''.
       (d) For Purposes of Certain State Programs.--Section 
     412(b)(1) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (8 U.S.C. 1622(b)(1)) is amended 
     by adding at the end the following new subparagraph:
       ``(E) An alien admitted to the United States as an 
     Amerasian immigrant as described in section 
     402(a)(2)(A)(i)(V).''.

     SEC. 5307. 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.--The table of sections as contained 
     in section 2 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 is amended by adding 
     after the item relating to section 412 the following:
       ``Sec. 413. Authorization for verification of eligibility 
           for state and local public benefits.''.

     SEC. 5308. 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. 5401. 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. 5402. INCREASE IN FEDERAL UNEMPLOYMENT ACCOUNT CEILING.

       (a) In General.--Section 902(a)(2) (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. 5403. SPECIAL DISTRIBUTION TO STATES FROM UNEMPLOYMENT 
                   TRUST FUND.

       (a) In General.--Subsection (a) of section 903 (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 the base allocation formula 
     under title III, bears to
       ``(II) the total amount of funds to be allocated to all 
     States for such fiscal year pursuant to the base allocation 
     formula under 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. 5404. 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) (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) such State meets funding goals, established under 
     regulations issued by the Secretary of Labor, relating to the 
     accounts of the States in the Unemployment Trust Fund.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to calendar years beginning after the date of the 
     enactment of this Act.

     SEC. 5405. 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. 5406. 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 January 
     1, 1994.

     SEC. 5407. 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. 5408. STATE PROGRAM INTEGRITY ACTIVITIES FOR 
                   UNEMPLOYMENT COMPENSATION.

       Section 901(c) (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 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--Welfare Reform Technical Corrections

   CHAPTER 1--BLOCK GRANTS FOR TEMPORARY ASSISTANCE TO NEEDY FAMILIES

     SEC. 5501. ELIGIBLE STATES; STATE PLAN.

       (a) Later Deadline for Submission of State Plans.--Section 
     402(a) (42 U.S.C. 602(a)) is amended by striking ``2-year 
     period immediately preceding'' and inserting ``27-month 
     period ending with the close of the 1st quarter of''.
       (b) Clarification of Scope of Work Provisions.--Section 
     402(a)(1)(A)(ii) (42 U.S.C. 602(a)(1)(A)(ii)) is amended by 
     inserting ``, consistent with section 407(e)(2)'' before the 
     period.
       (c) Correction of Cross-Reference.--Section 402(a)(1)(A)(v) 
     (42 U.S.C. 602(a)(1)(A)(v)) is amended by striking 
     ``403(a)(2)(B)'' and inserting ``403(a)(2)(C)(iii)''.
       (d) Notification of Plan Amendments.--Section 402 (42 
     U.S.C. 602) is amended--
       (1) by redesignating subsection (b) as subsection (c) and 
     inserting after subsection (a) the following:
       ``(b) Plan Amendments.--Within 30 days after a State amends 
     a plan submitted pursuant

[[Page H6122]]

     to subsection (a), the State shall notify the Secretary of 
     the amendment.''; and
       (2) in subsection (c) (as so redesignated), by inserting 
     ``or plan amendment'' after ``plan''.

     SEC. 5502. GRANTS TO STATES.

       (a) Bonus for Decrease in Illegitimacy Modified To Take 
     Account of Certain Territories.--
       (1) In general.--Section 403(a)(2)(B) (42 U.S.C. 
     603(a)(2)(B)) is amended to read as follows:
       ``(B) Amount of grant.--
       ``(i) In general.--If, for a bonus year, none of the 
     eligible States is Guam, the Virgin Islands, or American 
     Samoa, then the amount of the grant shall be--

       ``(I) $20,000,000 if there are 5 eligible States; or
       ``(II) $25,000,000 if there are fewer than 5 eligible 
     States.

       ``(ii) Amount if certain territories are eligible.--If, for 
     a bonus year, Guam, the Virgin Islands, or American Samoa is 
     an eligible State, then the amount of the grant shall be--

       ``(I) in the case of such a territory, 25 percent of the 
     mandatory ceiling amount (as defined in section 1108(c)(4)) 
     with respect to the territory; and
       ``(II) in the case of a State that is not such a 
     territory--

       ``(aa) if there are 5 eligible States other than such 
     territories, $20,000,000, minus \1/5\ of the total amount of 
     the grants payable under this paragraph to such territories 
     for the bonus year; or
       ``(bb) if there are fewer than 5 such eligible States, 
     $25,000,000, or such lesser amount as may be necessary to 
     ensure that the total amount of grants payable under this 
     paragraph for the bonus year does not exceed $100,000,000.''.
       (2) Certain territories to be ignored in ranking other 
     states.--Section 403(a)(2)(C)(i)(I)(aa) (42 U.S.C. 
     603(a)(2)(C)(i)(I)(aa)) is amended by adding at the end the 
     following: ``In the case of a State that is not a territory 
     specified in subparagraph (B), the comparative magnitude of 
     the decrease for the State shall be determined without regard 
     to the magnitude of the corresponding decrease for any such 
     territory.''.
       (b) Computation of Bonus Based on Ratios of Out-of-Wedlock 
     Births to All Births Instead of Numbers of Out-of-Wedlock 
     Births.--Section 403(a)(2) (42 U.S.C. 603(a)(2)) is amended--
       (1) in the paragraph heading, by inserting ``ratio'' before 
     the period;
       (2) in subparagraph (A), by striking all that follows 
     ``bonus year'' and inserting a period; and
       (3) in subparagraph (C)--
       (A) in clause (i)--
       (i) in subclause (I)(aa)--

       (I) by striking ``number of out-of-wedlock births that 
     occurred in the State during'' and inserting ``illegitimacy 
     ratio of the State for''; and
       (II) by striking ``number of such births that occurred 
     during'' and inserting ``illegitimacy ratio of the State 
     for''; and

       (ii) in subclause (II)(aa)--

       (I) by striking ``number of out-of-wedlock births that 
     occurred in'' each place such term appears and inserting 
     ``illegitimacy ratio of''; and
       (II) by striking ``calculate the number of out-of-wedlock 
     births'' and inserting ``calculate the illegitimacy ratio''; 
     and

       (B) by adding at the end the following:
       ``(iii) Illegitimacy ratio.--The term `illegitimacy ratio' 
     means, with respect to a State and a period--

       ``(I) the number of out-of-wedlock births to mothers 
     residing in the State that occurred during the period; 
     divided by
       ``(II) the number of births to mothers residing in the 
     State that occurred during the period.''.

       (c) Use of Calendar Year Data Instead of Fiscal Year Data 
     in Calculating Bonus for Decrease in Illegitimacy Ratio.--
     Section 403(a)(2)(C) (42 U.S.C. 603(a)(2)(C)) is amended--
       (1) in clause (i)--
       (A) in subclause (I)(bb)--
       (i) by striking ``the fiscal year'' and inserting ``the 
     calendar year for which the most recent data are available''; 
     and
       (ii) by striking ``fiscal year 1995'' and inserting 
     ``calendar year 1995'';
       (B) in subclause (II), by striking ``fiscal'' each place 
     such term appears and inserting ``calendar''; and
       (2) in clause (ii), by striking ``fiscal years'' and 
     inserting ``calendar years''.
       (d) Correction of Heading.--Section 403(a)(3)(C)(ii) (42 
     U.S.C. 603(a)(3)(C)(ii)) is amended in the heading by 
     striking ``1997'' and inserting ``1998''.
       (e) Clarification of Contingency Fund Provision.--Section 
     403(b) (42 U.S.C. 603(b)) is amended--
       (1) in paragraph (6), by striking ``(5)'' and inserting 
     ``(4)'';
       (2) by striking paragraph (4) and redesignating paragraphs 
     (5) and (6) as paragraphs (4) and (5), respectively; and
       (3) by inserting after paragraph (5) the following:
       ``(6) Annual reconciliation.--
       ``(A) In general.--Notwithstanding paragraph (3), if the 
     Secretary makes a payment to a State under this subsection in 
     a fiscal year, then the State shall remit to the Secretary, 
     within 1 year after the end of the first subsequent period of 
     3 consecutive months for which the State is not a needy 
     State, an amount equal to the amount (if any) by which--
       ``(i) the total amount paid to the State under paragraph 
     (3) of this subsection in the fiscal year; exceeds
       ``(ii) the product of--

       ``(I) the Federal medical assistance percentage for the 
     State (as defined in section 1905(b), as such section was in 
     effect on September 30, 1995);
       ``(II) the State's reimbursable expenditures for the fiscal 
     year; and
       ``(III) \1/12\ times the number of months during the fiscal 
     year for which the Secretary made a payment to the State 
     under such paragraph (3).

       ``(B) Definitions.--As used in subparagraph (A):
       ``(i) Reimbursable expenditures.--The term `reimbursable 
     expenditures' means, with respect to a State and a fiscal 
     year, the amount (if any) by which--

       ``(I) countable State expenditures for the fiscal year; 
     exceeds
       ``(II) historic State expenditures (as defined in section 
     409(a)(7)(B)(iii)), excluding any amount expended by the 
     State for child care under subsection (g) or (i) of section 
     402 (as in effect during fiscal year 1994) for fiscal year 
     1994.

       ``(ii) Countable state expenditures.--The term `countable 
     expenditures' means, with respect to a State and a fiscal 
     year--

       ``(I) the qualified State expenditures (as defined in 
     section 409(a)(7)(B)(i) (other than the expenditures 
     described in subclause (I)(bb) of such section)) under the 
     State program funded under this part for the fiscal year; 
     plus
       ``(II) any amount paid to the State under paragraph (3) 
     during the fiscal year that is expended by the State under 
     the State program funded under this part.''.

       (f) Administration of Contingency Fund Transferred to the 
     Secretary of HHS.--Section 403(b)(7) (42 U.S.C. 603(b)(7)) is 
     amended to read as follows:
       ``(7) State defined.--As used in this subsection, the term 
     `State' means each of the 50 States and the District of 
     Columbia.''.

     SEC. 5503. USE OF GRANTS.

        Section 404(a)(2) (42 U.S.C. 604(a)(2)) is amended by 
     inserting ``, or (at the option of the State) August 21, 
     1996'' before the period.

     SEC. 5504. MANDATORY WORK REQUIREMENTS.

       (a) Family With a Disabled Parent Not Treated as a 2-Parent 
     Family.--Section 407(b)(2) (42 U.S.C. 607(b)(2)) is amended 
     by adding at the end the following:
       ``(C) Family with a disabled parent not treated as a 2-
     parent family.--A family that includes a disabled parent 
     shall not be considered a 2-parent family for purposes of 
     subsections (a) and (b) of this section.''.
       (b) Correction of Heading.--Section 407(b)(3) (42 U.S.C. 
     607(b)(3)) is amended in the heading by inserting ``and not 
     resulting from changes in state eligibility criteria'' before 
     the period.
       (c) State Option To Include Individuals Receiving 
     Assistance Under a Tribal Work Program in Participation Rate 
     Calculation.--Section 407(b)(4) (42 U.S.C. 607(b)(4)) is 
     amended--
       (1) in the heading, by inserting ``or tribal work program'' 
     before the period; and
       (2) by inserting ``or under a tribal work program to which 
     funds are provided under this part'' before the period.
       (d) Sharing of 35-Hour Work Requirement Between Parents in 
     2-Parent Families.--Section 407(c)(1)(B) (42 U.S.C. 
     607(c)(1)(B)) is amended--
       (1) in clause (i)--
       (A) by striking ``is'' and inserting ``and the other parent 
     in the family are''; and
       (B) by inserting ``a total of'' before ``at least''; and
       (2) in clause (ii)--
       (A) by striking ``individual's spouse is'' and inserting 
     ``individual and the other parent in the family are'';
       (B) by inserting ``for a total of at least 55 hours per 
     week'' before ``during the month'';
       (C) by striking ``20'' and inserting ``50''; and
       (D) by striking ``or (7)'' and inserting ``(6), (7), (8), 
     or (12)''.
       (e) Clarification of Effort Required in Work Activities.--
     Section 407(c)(1)(B) (42 U.S.C. 607(c)(1)(B)) is amended by 
     striking ``making progress'' each place such term appears and 
     inserting ``participating''.
       (f) Additional Condition Under Which 12 Weeks of Job Search 
     May Count as Work.--Section 407(c)(2)(A)(i) (42 U.S.C. 
     607(c)(2)(A)(i)) is amended by inserting ``or the State is a 
     needy State (within the meaning of section 403(b)(6))'' after 
     ``United States''.
       (g) Caretaker Relative of Child Under Age 6 Deemed To Be 
     Meeting Work Requirements if Engaged in Work for 20 Hours Per 
     Week.--Section 407(c)(2)(B) (42 U.S.C. 607(c)(2)(B)) is 
     amended--
       (1) in the heading, by inserting ``or relative'' after 
     ``parent'' each place such term appears; and
       (2) by striking ``in a 1-parent family who is the parent'' 
     and inserting ``who is the only parent or caretaker relative 
     in the family''.
       (h) Extension to Married Teens of Rule That Receipt of 
     Sufficient Education Is Enough To Meet Work Participation 
     Requirements.--Section 407(c)(2)(C) (42 U.S.C. 607(c)(2)(C)) 
     is amended--
       (1) in the heading, by striking ``Teen head of household'' 
     and inserting ``Single teen head of household or married 
     teen'';
       (2) by striking ``a single'' and inserting ``married or 
     a''; and
       (3) by striking ``, subject to subparagraph (D) of this 
     paragraph,''.
       (i) Clarification of Number of Hours of Participation in 
     Education Directly Related to Employment That Are Required in 
     Order for Single Teen Head of Household or Married Teen To Be 
     Deemed To Be Engaged in Work.--Section 407(c)(2)(C)(ii) (42 
     U.S.C. 607(c)(2)(C)(ii)) is amended by striking ``at least'' 
     and all that follows through ``subsection'' and inserting 
     ``an average of at least 20 hours per week during the 
     month''.
       (j) Clarification of Refusal To Work for Purposes of Work 
     Penalties for Individuals.--Section 407(e)(2) (42 U.S.C. 
     607(e)(2)) is

[[Page H6123]]

     amended by striking ``work'' and inserting ``engage in work 
     required in accordance with this section''.

     SEC. 5505. PROHIBITIONS; REQUIREMENTS.

       (a) Elimination of Redundant Language; Clarification of 
     Home Residence Requirement.--Section 408(a)(1) (42 U.S.C. 
     608(a)(1)) is amended to read as follows:
       ``(1) No assistance for families without a minor child.--A 
     State to which a grant is made under section 403 shall not 
     use any part of the grant to provide assistance to a family, 
     unless the family includes a minor child who resides with the 
     family (consistent with paragraph (10)) or a pregnant 
     individual.''.
       (b) Clarification of Terminology.--Section 408(a)(3) (42 
     U.S.C. 608(a)(3)) is amended--
       (1) by striking ``leaves'' the 1st, 3rd, and 4th places 
     such term appears and inserting ``ceases to receive 
     assistance under''; and
       (2) by striking ``the date the family leaves the program'' 
     the 2nd place such term appears and inserting ``such date''.
       (c) Elimination of Space.--Section 408(a)(5)(A)(ii) (42 
     U.S.C. 608(a)(5)(A)(ii)) is amended by striking 
     ``described.-- For'' and inserting ``described.--For''.
       (d) Corrections to 5-Year Limit on Assistance.--
       (1) Clarification of limitation on hardship exemption.--
     Section 408(a)(7)(C)(ii) (42 U.S.C. 608(a)(7)(C)(ii)) is 
     amended--
       (A) by striking ``The number'' and inserting ``The average 
     monthly number''; and
       (B) by inserting ``during the fiscal year or the 
     immediately preceding fiscal year (but not both), as the 
     State may elect'' before the period.
       (2) Residence exception made more uniform and easier to 
     administer.--Section 408(a)(7)(D) (42 U.S.C. 608(a)(7)(D)) is 
     amended to read as follows:
       ``(D) Disregard of months of assistance received by adult 
     while living in indian country or an alaskan native village 
     with 50 percent unemployment.--
       ``(i) In general.--In determining the number of months for 
     which an adult has received assistance under a State or 
     tribal program funded under this part, the State or tribe 
     shall disregard any month during which the adult lived in 
     Indian country or an Alaskan Native village if the most 
     reliable data available with respect to the month (or a 
     period including the month) indicate that at least 50 percent 
     of the adults living in Indian country or in the village were 
     not employed.
       ``(ii) Indian country defined.--As used in clause (i), the 
     term `Indian country' has the meaning given such term in 
     section 1151 of title 18, United States Code.''.
       (e) Reinstatement of Deeming and Other Rules Applicable to 
     Aliens Who Entered the United States Under Affidavits of 
     Support Formerly Used.--Section 408 (42 U.S.C. 608), as 
     amended by section 5001(h)(1) of this Act, is amended by 
     striking subsection (e) and inserting the following:
       ``(e) Special Rules Relating to Treatment of Certain 
     Aliens.--For special rules relating to the treatment of 
     certain aliens, see title IV of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.
       ``(f) Special Rules Relating to the Treatment of Non-213A 
     Aliens.--The following rules shall apply if a State elects to 
     take the income or resources of any sponsor of a non-213A 
     alien into account in determining whether the alien is 
     eligible for assistance under the State program funded under 
     this part, or in determining the amount or types of such 
     assistance to be provided to the alien:
       ``(1) Deeming of sponsor's income and resources.--For a 
     period of 3 years after a non-213A alien enters the United 
     States:
       ``(A) Income deeming rule.--The income of any sponsor of 
     the alien and of any spouse of the sponsor is deemed to be 
     income of the alien, to the extent that the total amount of 
     the income exceeds the sum of--
       ``(i) the lesser of--

       ``(I) 20 percent of the total of any amounts received by 
     the sponsor or any such spouse in the month as wages or 
     salary or as net earnings from self-employment, plus the full 
     amount of any costs incurred by the sponsor and any such 
     spouse in producing self-employment income in such month; or
       ``(II) $175;

       ``(ii) the cash needs standard established by the State for 
     purposes of determining eligibility for assistance under the 
     State program funded under this part for a family of the same 
     size and composition as the sponsor and any other individuals 
     living in the same household as the sponsor who are claimed 
     by the sponsor as dependents for purposes of determining the 
     sponsor's Federal personal income tax liability but whose 
     needs are not taken into account in determining whether the 
     sponsor's family has met the cash needs standard;
       ``(iii) any amounts paid by the sponsor or any such spouse 
     to individuals not living in the household who are claimed by 
     the sponsor as dependents for purposes of determining the 
     sponsor's Federal personal income tax liability; and
       ``(iv) any payments of alimony or child support with 
     respect to individuals not living in the household.
       ``(B) Resource deeming rule.--The resources of a sponsor of 
     the alien and of any spouse of the sponsor are deemed to be 
     resources of the alien to the extent that the aggregate value 
     of the resources exceeds $1,500.
       ``(C) Sponsors of multiple non-213a aliens.--If a person is 
     a sponsor of 2 or more non-213A aliens who are living in the 
     same home, the income and resources of the sponsor and any 
     spouse of the sponsor that would be deemed income and 
     resources of any such alien under subparagraph (A) shall be 
     divided into a number of equal shares equal to the number of 
     such aliens, and the State shall deem the income and 
     resources of each such alien to include 1 such share.
       ``(2) Ineligibility of non-213a aliens sponsored by 
     agencies; exception.--A non-213A alien whose sponsor is or 
     was a public or private agency shall be ineligible for 
     assistance under a State program funded under this part, 
     during a period of 3 years after the alien enters the United 
     States, unless the State agency administering the program 
     determines that the sponsor either no longer exists or has 
     become unable to meet the alien's needs.
       ``(3) Information provisions.--
       ``(A) Duties of non-213a aliens.--A non-213A alien, as a 
     condition of eligibility for assistance under a State program 
     funded under this part during the period of 3 years after the 
     alien enters the United States, shall be required to provide 
     to the State agency administering the program--
       ``(i) such information and documentation with respect to 
     the alien's sponsor as may be necessary in order for the 
     State agency to make any determination required under this 
     subsection, and to obtain any cooperation from the sponsor 
     necessary for any such determination; and
       ``(ii) such information and documentation as the State 
     agency may request and which the alien or the alien's sponsor 
     provided in support of the alien's immigration application.
       ``(B) Duties of federal agencies.--The Secretary shall 
     enter into agreements with the Secretary of State and the 
     Attorney General under which any information available to 
     them and required in order to make any determination under 
     this subsection will be provided by them to the Secretary 
     (who may, in turn, make the information available, upon 
     request, to a concerned State agency).
       ``(4) Non-213a alien defined.--An alien is a non-213A alien 
     for purposes of this subsection if the affidavit of support 
     or similar agreement with respect to the alien that was 
     executed by the sponsor of the alien's entry into the United 
     States was executed other than pursuant to section 213A of 
     the Immigration and Nationality Act.
       ``(5) Inapplicability to alien minor sponsored by a 
     parent.--This subsection shall not apply to an alien who is a 
     minor child if the sponsor of the alien or any spouse of the 
     sponsor is a parent of the alien.
       ``(6) Inapplicability to certain categories of aliens.--
     This subsection shall not apply to an alien who is--
       ``(A) admitted to the United States as a refugee under 
     section 207 of the Immigration and Nationality Act;
       ``(B) paroled into the United States under section 
     212(d)(5) of such Act for a period of at least 1 year; or
       ``(C) granted political asylum by the Attorney General 
     under section 208 of such Act.''.

     SEC. 5506. PENALTIES.

       (a) States Given More Time To File Quarterly Reports.--
     Section 409(a)(2)(A) (42 U.S.C. 609(a)(2)(A)) is amended by 
     striking ``1 month'' and inserting ``45 days''.
       (b) Treatment of Support Payments Passed Through to 
     Families as Qualified State Expenditures.--Section 
     409(a)(7)(B)(i)(I)(aa) (42 U.S.C. 609(a)(7)(B)(i)(I)(aa)) is 
     amended by inserting ``, including any amount collected by 
     the State as support pursuant to a plan approved under part 
     D, on behalf of a family receiving assistance under the State 
     program funded under this part, that is distributed to the 
     family under section 457(a)(1)(B) and disregarded in 
     determining the eligibility of the family for, and the amount 
     of, such assistance'' before the period.
       (c) Disregard of Expenditures Made To Replace Penalty Grant 
     Reductions.--Section 409(a)(7)(B)(i) (42 U.S.C. 
     609(a)(7)(B)(i)) is amended by redesignating subclause (III) 
     as subclause (IV) and by inserting after subclause (II) the 
     following:

       ``(III) Exclusion of amounts expended to replace penalty 
     grant reductions.--Such term does not include any amount 
     expended in order to comply with paragraph (12).''.

       (d) Treatment of Families of Certain Aliens as Eligible 
     Families.--Section 409(a)(7)(B)(i)(IV) (42 U.S.C. 
     609(a)(7)(B)(i)(IV)), as so redesignated by subsection (c) of 
     this section, is amended--
       (1) by striking ``and families'' and inserting 
     ``families''; and
       (2) by striking ``Act or section 402'' and inserting ``Act, 
     and families of aliens lawfully present in the United States 
     that would be eligible for such assistance but for the 
     application of title IV''.
       (e) Elimination of Meaningless Language.--Section 
     409(a)(7)(B)(ii) (42 U.S.C. 609(a)(7)(B)(ii)) is amended by 
     striking ``reduced (if appropriate) in accordance with 
     subparagraph (C)(ii)''.
       (f) Clarification of Source of Data To Be Used in 
     Determining Historic State Expenditures.--Section 
     409(a)(7)(B) (42 U.S.C. 609(a)(7)(B)) is amended by adding at 
     the end the following:
       ``(v) Source of data.--In determining expenditures by a 
     State for fiscal years 1994 and 1995, the Secretary shall use 
     information which was reported by the State on ACF Form 231 
     or (in the case of expenditures under part F) ACF Form 331, 
     available as of the dates specified in clauses (ii) and 
     (iii) of section 403(a)(1)(D).''.
       (g) Conforming Title IV-A Penalties to Title IV-D 
     Performance-Based Standards.--Section 409(a)(8) (42 U.S.C. 
     609(a)(8)) is amended to read as follows:
       ``(8) Noncompliance of state child support enforcement 
     program with requirements of part d.--
       ``(A) In general.--If the Secretary finds, with respect to 
     a State's program under part D, in a fiscal year beginning on 
     or after October 1, 1997--

[[Page H6124]]

       ``(i)(I) on the basis of data submitted by a State pursuant 
     to section 454(15)(B), or on the basis of the results of a 
     review conducted under section 452(a)(4), that the State 
     program failed to achieve the paternity establishment 
     percentages (as defined in section 452(g)(2)), or to meet 
     other performance measures that may be established by the 
     Secretary;
       ``(II) on the basis of the results of an audit or audits 
     conducted under section 452(a)(4)(C)(i) that the State data 
     submitted pursuant to section 454(15)(B) is incomplete or 
     unreliable; or
       ``(III) on the basis of the results of an audit or audits 
     conducted under section 452(a)(4)(C) that a State failed to 
     substantially comply with 1 or more of the requirements of 
     part D; and
       ``(ii) that, with respect to the succeeding fiscal year--

       ``(I) the State failed to take sufficient corrective action 
     to achieve the appropriate performance levels or compliance 
     as described in subparagraph (A)(i); or
       ``(II) the data submitted by the State pursuant to section 
     454(15)(B) is incomplete or unreliable;

     the amounts otherwise payable to the State under this part 
     for quarters following the end of such succeeding fiscal 
     year, prior to quarters following the end of the first 
     quarter throughout which the State program has achieved the 
     paternity establishment percentages or other performance 
     measures as described in subparagraph (A)(i)(I), or is in 
     substantial compliance with 1 or more of the requirements of 
     part D as described in subparagraph (A)(i)(III), as 
     appropriate, shall be reduced by the percentage specified in 
     subparagraph (B).
       ``(B) Amount of reductions.--The reductions required under 
     subparagraph (A) shall be--
       ``(i) not less than 1 nor more than 2 percent;
       ``(ii) not less than 2 nor more than 3 percent, if the 
     finding is the 2nd consecutive finding made pursuant to 
     subparagraph (A); or
       ``(iii) not less than 3 nor more than 5 percent, if the 
     finding is the 3rd or a subsequent consecutive such finding.
       ``(C) Disregard of noncompliance which is of a technical 
     nature.--For purposes of this section and section 452(a)(4), 
     a State determined as a result of an audit--
       ``(i) to have failed to have substantially complied with 1 
     or more of the requirements of part D shall be determined to 
     have achieved substantial compliance only if the Secretary 
     determines that the extent of the noncompliance is of a 
     technical nature which does not adversely affect the 
     performance of the State's program under part D; or
       ``(ii) to have submitted incomplete or unreliable data 
     pursuant to section 454(15)(B) shall be determined to have 
     submitted adequate data only if the Secretary determines that 
     the extent of the incompleteness or unreliability of the data 
     is of a technical nature which does not adversely affect 
     the determination of the level of the State's paternity 
     establishment percentages (as defined under section 
     452(g)(2)) or other performance measures that may be 
     established by the Secretary.''.
       (h) Correction of Reference to 5-Year Limit on 
     Assistance.--Section 409(a)(9) (42 U.S.C. 609(a)(9)) is 
     amended by striking ``408(a)(1)(B)'' and inserting 
     ``408(a)(7)''.
       (i) Correction of Errors in Penalty for Failure To Meet 
     Maintenance of Effort Requirement Applicable to the 
     Contingency Fund.--Section 409(a)(10) (42 U.S.C. 609(a)(10)) 
     is amended--
       (1) by striking ``the expenditures under the State program 
     funded under this part for the fiscal year (excluding any 
     amounts made available by the Federal Government)'' and 
     inserting ``the qualified State expenditures (as defined in 
     paragraph (7)(B)(i) (other than the expenditures described in 
     subclause (I)(bb) of that paragraph)) under the State program 
     funded under this part for the fiscal year'';
       (2) by inserting ``excluding any amount expended by the 
     State for child care under subsection (g) or (i) of section 
     402 (as in effect during fiscal year 1994) for fiscal year 
     1994,'' after ``(as defined in paragraph (7)(B)(iii) of this 
     subsection),''; and
       (3) by inserting ``that the State has not remitted under 
     section 403(b)(6)'' before the period.
       (j) Penalty for State Failure to Expend Additional State 
     Funds To Replace Grant Reductions.--Section 409(a)(12) (42 
     U.S.C. 609(a)(12)) is amended--
       (1) in the heading--
       (A) by striking ``Failure'' and inserting ``Requirement''; 
     and
       (B) by striking ``reductions'' and inserting ``reductions; 
     penalty for failure to do so''; and
       (2) by adding at the end the following: ``If the State 
     fails during such succeeding fiscal year to make the 
     expenditure required by the preceding sentence from its own 
     funds, the Secretary may reduce the grant payable to the 
     State under section 403(a)(1) for the fiscal year that 
     follows such succeeding fiscal year by an amount equal to the 
     sum of--
       ``(A) not more than 2 percent of the State family 
     assistance grant; and
       ``(B) the amount of the expenditure required by the 
     preceding sentence.''.
       (k) Elimination of Certain Reasonable Cause Exceptions.--
     Section 409(b)(2) (42 U.S.C. 609(b)(2)) is amended by 
     striking ``(7) or (8)'' and inserting ``(6), (7), (8), (10), 
     or (12)''.
       (l) Clarification of What It Means To Correct a 
     Violation.--Section 409(c) (42 U.S.C. 609(c)) is amended--
       (1) in each of subparagraphs (A) and (B) of paragraph (1), 
     by inserting ``or discontinue, as appropriate,'' after 
     ``correct'';
       (2) in paragraph (2)--
       (A) in the heading, by inserting ``or discontinuing'' after 
     ``correcting''; and
       (B) by inserting ``or discontinues, as appropriate'' after 
     ``corrects''; and
       (3) in paragraph (3)--
       (A) in the heading, by inserting ``or discontinue'' after 
     ``correct''; and
       (B) by inserting ``or discontinue, as appropriate,'' before 
     ``the violation''.
       (m) Certain Penalties Not Avoidable Through Corrective 
     Compliance Plans.--Section 409(c)(4) (42 U.S.C. 609(c)(4)) is 
     amended to read as follows:
       ``(4) Inapplicability to certain penalties.--This 
     subsection shall not apply to the imposition of a penalty 
     against a State under paragraph (6), (7), (8), (10), or (12) 
     of subsection (a).''.
       (n) Failure to Satisfy Minimum Participation Rates.--
     Section 409(a)(3) (42 U.S.C. 609(a)(3)) is amended--
       (1) in subparagraph (A), by striking ``not more than''; and
       (2) in subparagraph (C), by inserting before the period the 
     following: ``or if the noncompliance is due to extraordinary 
     circumstances such as a natural disaster or regional 
     recession. The Secretary shall provide a written report to 
     Congress to justify any waiver or penalty reduction due to 
     such extraordinary circumstances''.

     SEC. 5507. DATA COLLECTION AND REPORTING.

       Section 411(a) (42 U.S.C. 611(a)) is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (A)--
       (i) by striking clause (ii) and inserting the following:
       ``(ii) Whether a child receiving such assistance or an 
     adult in the family is receiving--

       ``(I) Federal disability insurance benefits;
       ``(II) benefits based on Federal disability status;
       ``(III) aid under a State plan approved under title XIV (as 
     in effect without regard to the amendment made by section 301 
     of the Social Security Amendments of 1972));
       ``(IV) aid or assistance under a State plan approved under 
     title XVI (as in effect without regard to such amendment) by 
     reason of being permanently and totally disabled; or
       ``(V) supplemental security income benefits under title XVI 
     (as in effect pursuant to such amendment) by reason of 
     disability.'';

       (ii) in clause (iv), by striking ``youngest child in'' and 
     inserting ``head of'';
       (iii) in each of clauses (vii) and (viii), by striking 
     ``status'' and inserting ``level''; and
       (iv) by adding at the end the following:
       ``(xvii) With respect to each individual in the family who 
     has not attained 20 years of age, whether the individual is a 
     parent of a child in the family.''; and
       (B) in subparagraph (B)--
       (i) in the heading, by striking ``estimates'' and inserting 
     ``samples''; and
       (ii) in clause (i), by striking ``an estimate which is 
     obtained'' and inserting ``disaggregated case record 
     information on a sample of families selected''; and
       (2) by redesignating paragraph (6) as paragraph (7) and 
     inserting after paragraph (5) the following:
       ``(6) Report on families receiving assistance.--The report 
     required by paragraph (1) for a fiscal quarter shall include 
     for each month in the quarter--
       ``(A) the number of families and individuals receiving 
     assistance under the State program funded under this part 
     (including the number of 2-parent and 1-parent families); and
       ``(B) the total dollar value of such assistance received by 
     all families.''.

     SEC. 5508. DIRECT FUNDING AND ADMINISTRATION BY INDIAN 
                   TRIBES.

       (a) Prorating of Tribal Family Assistance Grants.--Section 
     412(a)(1)(A) (42 U.S.C. 612(a)(1)(A)) is amended by inserting 
     ``which shall be reduced for a fiscal year, on a pro rata 
     basis for each quarter, in the case of a tribal family 
     assistance plan approved during a fiscal year for which the 
     plan is to be in effect,'' before ``and shall''.
       (b) Tribal Option To Operate Work Activities Program.--
     Section 412(a)(2)(A) (42 U.S.C. 612(a)(2)(A)) is amended by 
     striking ``The Secretary'' and all that follows through 
     ``2002'' and inserting ``For each of fiscal years 1997, 
     1998, 1999, 2000, 2001, and 2002, the Secretary shall pay 
     to each eligible Indian tribe that proposes to operate a 
     program described in subparagraph (C)''.
       (c) Discretion of Tribes To Select Population To Be Served 
     by Tribal Work Activities Program.--Section 412(a)(2)(C) (42 
     U.S.C. 612(a)(2)(C)) is amended by striking ``members of the 
     Indian tribe'' and inserting ``such population and such 
     service area or areas as the tribe specifies''.
       (d) Reduction of Appropriation for Tribal Work Activities 
     Programs.--Section 412(a)(2)(D) (42 U.S.C. 612(a)(2)(D)) is 
     amended by striking ``$7,638,474'' and inserting 
     ``$7,633,287''.
       (e) Availability of Corrective Compliance Plans to Indian 
     Tribes.--Section 412(f)(1) (42 U.S.C. 612(f)(1)) is amended 
     by striking ``and (b)'' and inserting ``(b), and (c)''.
       (f) Eligibility of Tribes for Federal Loans for Welfare 
     Programs.--Section 412 (42 U.S.C. 612) is amended by 
     redesignating subsections (f), (g), and (h) as subsections 
     (g), (h), and (i), respectively, and by inserting after 
     subsection (e) the following:
       ``(f) Eligibility for Federal Loans.--Section 406 shall 
     apply to an Indian tribe with an approved tribal assistance 
     plan in the same manner as such section applies to a State, 
     except that section 406(c) shall be applied by substituting 
     `section 412(a)' for `section 403(a)'.''.

     SEC. 5509. RESEARCH, EVALUATIONS, AND NATIONAL STUDIES.

       (a) Research.--
       (1) Methods.--Section 413(a) (42 U.S.C. 613(a)) is amended 
     by inserting ``, directly or through grants, contracts, or 
     interagency agreements,'' before ``shall conduct''.

[[Page H6125]]

       (2) Correction of cross reference.--Section 413(a) (42 
     U.S.C. 613(a)) is amended by striking ``409'' and inserting 
     ``407''.
       (b) Correction of Erroneously Indented Paragraph.--Section 
     413(e)(1) (42 U.S.C. 613(e)(1)) is amended to read as 
     follows:
       ``(1) In general.--The Secretary shall annually rank States 
     to which grants are made under section 403 based on the 
     following ranking factors:
       ``(A) Absolute out-of-wedlock ratios.--The ratio 
     represented by--
       ``(i) the total number of out-of-wedlock births in families 
     receiving assistance under the State program under this part 
     in the State for the most recent year for which information 
     is available; over
       ``(ii) the total number of births in families receiving 
     assistance under the State program under this part in the 
     State for the year.
       ``(B) Net changes in the out-of-wedlock ratio.--The 
     difference between the ratio described in subparagraph (A) 
     with respect to a State for the most recent year for which 
     such information is available and the ratio with respect to 
     the State for the immediately preceding year.''.
       (c) Funding of Prior Authorized Demonstrations.--Section 
     413(h)(1)(D) (42 U.S.C. 613(h)(1)(D)) is amended by striking 
     ``September 30, 1995'' and inserting ``August 22, 1996''.
       (d) Child Poverty Reports.--
       (1) Delayed due date for initial report.--Section 413(i)(1) 
     (42 U.S.C. 613(i)(1)) is amended by striking ``90 days after 
     the date of the enactment of this part'' and inserting ``May 
     31, 1998''.
       (2) Modification of factors to be used in establishing 
     methodology for use in determining child poverty rates.--
     Section 413(i)(5) (42 U.S.C. 613(i)(5)) is amended by 
     striking ``the county-by-county'' and inserting ``, to the 
     extent available, county-by-county''.

     SEC. 5510. REPORT ON DATA PROCESSING.

       Section 106(a)(1) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2164) is amended by striking ``(whether in effect 
     before or after October 1, 1995)''.

     SEC. 5511. STUDY ON ALTERNATIVE OUTCOMES MEASURES.

       Section 107(a) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2164) is amended by striking ``409(a)(7)(C)'' and 
     inserting ``408(a)(7)(C)''.

     SEC. 5512. LIMITATION ON PAYMENTS TO THE TERRITORIES.

       (a) Certain Payments To Be Disregarded in Determining 
     Limitation.--Section 1108(a) (42 U.S.C. 1308) is amended to 
     read as follows:
       ``(a) Limitation on Total Payments to Each Territory.--
       ``(1) In general.--Notwithstanding any other provision of 
     this Act (except for paragraph (2) of this subsection), the 
     total amount certified by the Secretary of Health and Human 
     Services under titles I, X, XIV, and XVI, under parts A and E 
     of title IV, and under subsection (b) of this section, for 
     payment to any territory for a fiscal year shall not exceed 
     the ceiling amount for the territory for the fiscal year.
       ``(2) Certain payments disregarded.--Paragraph (1) of this 
     subsection shall be applied without regard to any payment 
     made under section 403(a)(2), 403(a)(4), 406, or 413(f).''.
       (b) Certain Child Care and Social Services Expenditures by 
     Territories Treated as IV-A Expenditures for Purposes of 
     Matching Grant.--Section 1108(b)(1)(A) (42 U.S.C. 
     1308(b)(1)(A)) is amended by inserting ``, including any 
     amount paid to the State under part A of title IV that is 
     transferred in accordance with section 404(d) and expended 
     under the program to which transferred'' before the 
     semicolon.
       (c) Elimination of Duplicative Maintenance of Effort 
     Requirement.--Section 1108 (42 U.S.C. 1308) is amended by 
     striking subsection (e).

     SEC. 5513. CONFORMING AMENDMENTS TO THE SOCIAL SECURITY ACT.

       (a) Amendments to Part D of Title IV.--
       (1) Corrections to determination of paternity establishment 
     percentages.--Section 452 (42 U.S.C. 652) is amended--
       (A) in subsection (d)(3)(A), by striking all that follows 
     ``for purposes of'' and inserting ``section 409(a)(8), to 
     achieve the paternity establishment percentages (as defined 
     under section 452(g)(2)) and other performance measures that 
     may be established by the Secretary, and to submit data under 
     section 454(15)(B) that is complete and reliable, and to 
     substantially comply with the requirements of this part; 
     and''; and
       (B) in subsection (g)(1), by striking ``section 403(h)'' 
     and inserting ``section 409(a)(8)''.
       (2) Elimination of obsolete language.--Section 108(c)(8)(C) 
     of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2165) is amended by inserting ``and all that follows through 
     `the best interests of such child to do so' '' before ``and 
     inserting''.
       (3) Insertion of language inadvertently omitted.--Section 
     108(c)(13) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2166) is amended by inserting ``and inserting 
     `pursuant to section 408(a)(3)' '' before the period.
       (4) Elimination of obsolete cross reference.--Section 
     464(a)(1) (42 U.S.C. 664(a)(1)) is amended by striking 
     ``section 402(a)(26)'' and inserting ``section 
     408(a)(3)''.
       (b) Amendments to Part E of Title IV.--Each of the 
     following is amended by striking ``June 1, 1995'' each place 
     such term appears and inserting ``July 16, 1996'':
       (1) Section 472(a) (42 U.S.C. 672(a)).
       (2) Section 472(h) (42 U.S.C. 672(h)).
       (3) Section 473(a)(2) (42 U.S.C. 673(a)(2)).
       (4) Section 473(b) (42 U.S.C. 673(b)).

     SEC. 5514. OTHER CONFORMING AMENDMENTS.

       (a) Elimination of Amendments Included Inadvertently.--
     Section 110(l) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2173) is amended--
       (1) by striking paragraphs (1), (4), (5), and (7);
       (2) by redesignating paragraphs (2), (3), (6), and (8) as 
     paragraphs (1), (2), (3), and (4), respectively; and
       (3) by adding ``and'' at the end of paragraph (3), as so 
     redesignated.
       (b) Correction of Citation.--Section 109(f) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (Public Law 104-193; 110 Stat. 2177) is amended by 
     striking ``93-186'' and inserting ``93-86''.
       (c) Correction of Internal Cross Reference.--Section 
     103(a)(1) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2112) is amended by striking ``603(b)(2)'' and inserting 
     ``603(b)''.
       (d) Correction of References.--Section 416 (42 U.S.C. 616) 
     is amended by striking ``amendment made by section 2103 of 
     the Personal Responsibility and Work Opportunity'' and 
     inserting ``amendments made by section 103 of the Personal 
     Responsibility and Work Opportunity Reconciliation''.

     SEC. 5515. MODIFICATIONS TO THE JOB OPPORTUNITIES FOR CERTAIN 
                   LOW-INCOME INDIVIDUALS PROGRAM.

       Section 112(5) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2177) is amended in each of subparagraphs (A) and 
     (B) by inserting ``under'' after ``funded''.

     SEC. 5516. DENIAL OF ASSISTANCE AND BENEFITS FOR DRUG-RELATED 
                   CONVICTIONS.

       (a) Extension of Certain Requirements Coordinated With 
     Delayed Effective Date for Successor Provisions.--Section 
     115(d)(2) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2181) is amended by striking ``convictions'' and inserting 
     ``a conviction if the conviction is for conduct''.
       (b) Immediate Effectiveness of Provisions Relating to 
     Research, Evaluations, and National Studies.--Section 116(a) 
     of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2181) is amended by adding at the end the following:
       ``(6) Research, evaluations, and national studies.--Section 
     413 of the Social Security Act, as added by the amendment 
     made by section 103(a) of this Act, shall take effect on the 
     date of the enactment of this Act.''.

     SEC. 5517. TRANSITION RULE.

       Section 116 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2181) is amended--
       (1) in subsection (a)(2), by inserting ``(but subject to 
     subsection (b)(1)(A)(ii))'' after ``this section''; and
       (2) in subsection (b)(1)(A)(ii), by striking ``June 30, 
     1997'' and inserting ``the later of June 30, 1997, or the day 
     before the date described in subsection (a)(2)(B) of this 
     section''.

     SEC. 5518. EFFECTIVE DATES.

       (a) Amendments to Part A of Title IV of the Social Security 
     Act.--The amendments made by this chapter to a provision of 
     part A of title IV of the Social Security Act shall take 
     effect as if the amendments had been included in section 
     103(a) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 at the time such section became 
     law.
       (b) Amendments to Parts D and E of Title IV of the Social 
     Security Act.--The amendments made by section 5513 of this 
     Act shall take effect as if the amendments had been included 
     in section 108 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 at the time such 
     section 108 became law.
       (c) Amendments to Other Amendatory Provisions.--The 
     amendments made by section 5514(a) of this Act shall take 
     effect as if the amendments had been included in section 110 
     of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 at the time such section 110 
     became law.
       (d) Amendments to Freestanding Provisions of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996.--The amendments made by this chapter to a provision of 
     the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 that have not become part of 
     another statute shall take effect as if the amendments had 
     been included in the provision at the time the provision 
     became law.

                CHAPTER 2--SUPPLEMENTAL SECURITY INCOME

     SEC. 5521. CONFORMING AND TECHNICAL AMENDMENTS RELATING TO 
                   ELIGIBILITY RESTRICTIONS.

       (a) Denial of SSI Benefits for Fugitive Felons and 
     Probation and Parole Violators.--Section 1611(e)(6) (42 
     U.S.C. 1382(e)(6)) is amended by inserting ``and section 
     1106(c) of this Act'' after ``of 1986''.
       (b) Treatment of Prisoners.--Section 1611(e)(1)(I)(i)(II) 
     (42 U.S.C. 1382(e)(1)(I)(i)(II)) is amended by striking 
     ``inmate of the institution'' and all that follows through 
     ``this subparagraph'' and inserting ``individual who receives 
     in the month preceding the first month throughout which such 
     individual is an inmate of the jail, prison, penal 
     institution, or correctional facility that furnishes 
     information respecting such individual pursuant to subclause 
     (I), or is confined in the institution (that so furnishes 
     such information) as described in section 202(x)(1)(A)(ii), a 
     benefit under this title for such preceding month, and who is 
     determined

[[Page H6126]]

     by the Commissioner to be ineligible for benefits under this 
     title by reason of confinement based on the information 
     provided by such institution''.
       (c) Correction of Reference.--Section 1611(e)(1)(I)(i)(I) 
     (42 U.S.C. 1382(e)(1)(I)(i)(I)) is amended by striking 
     ``paragraph (1)'' and inserting ``this paragraph''.

     SEC. 5522. CONFORMING AND TECHNICAL AMENDMENTS RELATING TO 
                   BENEFITS FOR DISABLED CHILDREN.

       (a) Eligibility Redeterminations and Continuing Disability 
     Reviews.--
       (1) Disability eligibility redeterminations required for 
     ssi recipients who attain 18 years of age.--Section 
     1614(a)(3)(H)(iii) (42 U.S.C. 1382c(a)(3)(H)(iii)) is amended 
     by striking subclauses (I) and (II) and all that follows and 
     inserting the following:
       ``(I) by applying the criteria used in determining initial 
     eligibility for individuals who are age 18 or older; and
       ``(II) either during the 1-year period beginning on the 
     individual's 18th birthday or, in lieu of a continuing 
     disability review, whenever the Commissioner determines that 
     an individual's case is subject to a redetermination under 
     this clause.

     With respect to any redetermination under this clause, 
     paragraph (4) shall not apply.''.
       (2) Continuing disability review required for low birth 
     weight babies.--Section 1614(a)(3)(H)(iv) (42 U.S.C. 
     1382c(a)(3)(H)(iv)) is amended--
       (A) in subclause (I), by striking ``Not'' and inserting 
     ``Except as provided in subclause (VI), not''; and
       (B) by adding at the end the following:
       ``(VI) Subclause (I) shall not apply in the case of an 
     individual described in that subclause who, at the time of 
     the individual's initial disability determination, the 
     Commissioner determines has an impairment that is not 
     expected to improve within 12 months after the birth of that 
     individual, and who the Commissioner schedules for a 
     continuing disability review at a date that is after the 
     individual attains 1 year of age.''.
       (b) Additional Accountability Requirements.--Section 
     1631(a)(2)(F) (42 U.S.C. 1383(a)(2)(F)) is amended--
       (1) in clause (ii)(III)(bb), by striking ``the total 
     amount'' and all that follows through ``1613(c)'' and 
     inserting ``in any case in which the individual knowingly 
     misapplies benefits from such an account, the Commissioner 
     shall reduce future benefits payable to such individual (or 
     to such individual and his spouse) by an amount equal to the 
     total amount of such benefits so misapplied''; and
       (2) by striking clause (iii) and inserting the following:
       ``(iii) The representative payee may deposit into the 
     account established under clause (i) any other funds 
     representing past due benefits under this title to the 
     eligible individual, provided that the amount of such past 
     due benefits is equal to or exceeds the maximum monthly 
     benefit payable under this title to an eligible individual 
     (including State supplementary payments made by the 
     Commissioner pursuant to an agreement under section 1616 or 
     section 212(b) of Public Law 93-66).''.
       (c) Reduction in Cash Benefits Payable to Institutionalized 
     Individuals Whose Medical Costs Are Covered by Private 
     Insurance.--Section 1611(e) (42 U.S.C. 1382(e)) is amended--
       (1) in paragraph (1)(B)--
       (A) in the matter preceding clause (i), by striking 
     ``hospital, extended care facility, nursing home, or 
     intermediate care facility'' and inserting ``medical 
     treatment facility'';
       (B) in clause (ii)--
       (i) in the matter preceding subclause (I), by striking 
     ``hospital, home or''; and
       (ii) in subclause (I), by striking ``hospital, home, or'';
       (C) in clause (iii), by striking ``hospital, home, or''; 
     and
       (D) in the matter following clause (iii), by striking 
     ``hospital, extended care facility, nursing home, or 
     intermediate care facility which is a `medical institution or 
     nursing facility' within the meaning of section 1917(c)'' and 
     inserting ``medical treatment facility that provides services 
     described in section 1917(c)(1)(C)'';
       (2) in paragraph (1)(E)--
       (A) in clause (i)(II), by striking ``hospital, extended 
     care facility, nursing home, or intermediate care facility'' 
     and inserting ``medical treatment facility''; and
       (B) in clause (iii), by striking ``hospital, extended care 
     facility, nursing home, or intermediate care facility'' and 
     inserting ``medical treatment facility'';
       (3) in paragraph (1)(G), in the matter preceding clause 
     (i)--
       (A) by striking ``or which is a hospital, extended care 
     facility, nursing home, or intermediate care'' and inserting 
     ``or is in a medical treatment''; and
       (B) by inserting ``or, in the case of an individual who is 
     a child under the age of 18, under any health insurance 
     policy issued by a private provider of such insurance'' after 
     ``title XIX''; and
       (4) in paragraph (3)--
       (A) by striking ``same hospital, home, or facility'' and 
     inserting ``same medical treatment facility''; and
       (B) by striking ``same such hospital, home, or facility'' 
     and inserting ``same such facility''.
       (d) Correction of U.S.C. Citation.--Section 211(c) of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (Public Law 104-193; 110 Stat. 2189) is amended 
     by striking ``1382(a)(4)'' and inserting ``1382c(a)(4)''.

     SEC. 5523. ADDITIONAL TECHNICAL AMENDMENTS TO TITLE XVI.

       Section 1615(d) (42 U.S.C. 1382d(d)) is amended--
       (1) in the first sentence, by inserting a comma after 
     ``subsection (a)(1)''; and
       (2) in the last sentence, by striking ``him'' and inserting 
     ``the Commissioner''.

     SEC. 5524. ADDITIONAL TECHNICAL AMENDMENTS RELATING TO TITLE 
                   XVI.

       Section 1110(a)(3) (42 U.S.C. 1310(a)(3)) is amended--
       (1) by inserting ``(or the Commissioner, with respect to 
     any jointly financed cooperative agreement or grant 
     concerning title XVI)'' after ``Secretary'' the first place 
     it appears; and
       (2) by inserting ``(or the Commissioner, as applicable)'' 
     after ``Secretary'' the second place it appears.

     SEC. 5525. TECHNICAL AMENDMENTS RELATING TO DRUG ADDICTS AND 
                   ALCOHOLICS.

       (a) Clarification Relating to the Effective Date of the 
     Denial of SSI Disability Benefits to Drug Addicts and 
     Alcoholics.--Section 105(b)(5) of the Contract with America 
     Advancement Act of 1996 (Public Law 104-121; 110 Stat. 853) 
     is amended--
       (1) in subparagraph (A), by striking ``by the Commissioner 
     of Social Security'' and ``by the Commissioner''; and
       (2) by redesignating subparagraph (D) as subparagraph (F) 
     and by inserting after subparagraph (C) the following new 
     subparagraphs:
       ``(D) For purposes of this paragraph, an individual's 
     claim, with respect to supplemental security income benefits 
     under title XVI of the Social Security Act based on 
     disability, which has been denied in whole before the date of 
     the enactment of this Act, may not be considered to be 
     finally adjudicated before such date if, on or after such 
     date--
       ``(i) there is pending a request for either administrative 
     or judicial review with respect to such claim, or
       ``(ii) there is pending, with respect to such claim, a 
     readjudication by the Commissioner of Social Security 
     pursuant to relief in a class action or implementation by the 
     Commissioner of a court remand order.
       ``(E) Notwithstanding the provisions of this paragraph, 
     with respect to any individual for whom the Commissioner does 
     not perform the eligibility redetermination before the date 
     prescribed in subparagraph (C), the Commissioner shall 
     perform such eligibility redetermination in lieu of a 
     continuing disability review whenever the Commissioner 
     determines that the individual's eligibility is subject to 
     redetermination based on the preceding provisions of this 
     paragraph, and the provisions of section 1614(a)(4) of the 
     Social Security Act shall not apply to such 
     redetermination.''.
       (b) Corrections to Effective Date of Provisions Concerning 
     Representative Payees and Treatment Referrals of SSI 
     Beneficiaries Who Are Drug Addicts and Alcoholics.--Section 
     105(b)(5)(B) of such Act (Public Law 104-121; 110 Stat. 853) 
     is amended to read as follows:
       ``(B) The amendments made by paragraphs (2) and (3) shall 
     take effect on July 1, 1996, with respect to any individual--
       ``(i) whose claim for benefits is finally adjudicated on or 
     after the date of the enactment of this Act, or
       ``(ii) whose eligibility for benefits is based upon an 
     eligibility redetermination made pursuant to subparagraph 
     (C).''.
       (c) Repeal of Obsolete Reporting Requirements.--Subsections 
     (a)(3)(B) and (b)(3)(B)(ii) of section 201 of the Social 
     Security Independence and Program Improvements Act of 1994 
     (Public Law 103-296; 108 Stat. 1497, 1504) are repealed.

     SEC. 5526. ADVISORY BOARD PERSONNEL.

       Section 703(i) (42 U.S.C. 903(i)) is amended--
       (1) in the first sentence, by striking ``, and three'' and 
     all that follows through ``Board,''; and
       (2) in the last sentence, by striking ``clerical''.

     SEC. 5527. TIMING OF DELIVERY OF OCTOBER 1, 2000, SSI BENEFIT 
                   PAYMENTS.

       Notwithstanding the provisions of section 708(a) of the 
     Social Security Act (42 U.S.C. 908(a)), the day designated 
     for delivery of benefit payments under title XVI of such Act 
     for October 2000 shall be the second day of such month.

     SEC. 5528. EFFECTIVE DATES.

       (a) In General.--Except as provided in this section, the 
     amendments made by this chapter shall take effect as if 
     included in the enactment of title II of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (Public Law 104-193; 110 Stat. 2185).
       (b) Section 5524 Amendments.--The amendments made by 
     section 5524 of this Act shall take effect as if included in 
     the enactment of the Social Security Independence and Program 
     Improvements Act of 1994 (Public Law 103-296; 108 Stat. 
     1464).
       (c) Section 5525 Amendments.--
       (1) In general.--The amendments made by subsections (a) and 
     (b) of section 5525 of this Act shall take effect as if 
     included in the enactment of section 105 of the Contract with 
     America Advancement Act of 1996 (Public Law 104-121; 110 
     Stat. 852 et seq.).
       (2) Repeals.--The repeals made by section 5525(c) shall 
     take effect on the date of the enactment of this Act.
       (d) Section 5526 Amendments.--The amendments made by 
     section 5526 of this Act shall take effect as if included in 
     the enactment of section 108 of the Contract with America 
     Advancement Act of 1996 (Public Law 104-121; 110 Stat. 857).
       (e) Section 5227.--Section 5227 shall take effect on the 
     date of the enactment of this Act.

                        CHAPTER 3--CHILD SUPPORT

     SEC. 5531. STATE OBLIGATION TO PROVIDE CHILD SUPPORT 
                   ENFORCEMENT SERVICES.

       (a) Individuals Subject to Fee For Child Support 
     Enforcement Services.--Section

[[Page H6127]]

     454(6)(B) (42 U.S.C. 654(6)(B)) is amended by striking 
     ``individuals not receiving assistance under any State 
     program funded under part A, which'' and inserting ``an 
     individual, other than an individual receiving assistance 
     under a State program funded under part A or E, or under a 
     State plan approved under title XIX, or who is required by 
     the State to cooperate with the State agency administering 
     the program under this part pursuant to subsection (l) or (m) 
     of section 6 of the Food Stamp Act of 1977, and''.
       (b) Correction of Reference.--Section 464(a)(2)(A) (42 
     U.S.C. 654(a)(2)(A)) is amended in the first sentence by 
     striking ``section 454(6)'' and inserting ``section 
     454(4)(A)(ii)''.

     SEC. 5532. DISTRIBUTION OF COLLECTED SUPPORT.

       (a) Continuation of Assignments.--Section 457(b) (42 U.S.C. 
     657(b)) is amended--
       (1) by striking ``which were assigned'' and inserting 
     ``assigned''; and
       (2) by striking ``and which were in effect'' and all that 
     follows and inserting ``and in effect on September 30, 
     1997 (or such earlier date, on or after August 22, 1996, 
     as the State may choose), shall remain assigned after such 
     date.''.
       (b) State Option for Applicability.--
       (1) In general.--Section 457(a) (42 U.S.C. 657(a)) is 
     amended by adding at the end the following:
       ``(6) State option for applicability.--Notwithstanding any 
     other provision of this subsection, a State may elect to 
     apply the rules described in clauses (i)(II), (ii)(II), and 
     (v) of paragraph (2)(B) to support arrearages collected on 
     and after October 1, 1998, and, if the State makes such an 
     election, shall apply the provisions of this section, as in 
     effect and applied on the day before the date of enactment of 
     section 302 of the Personal Responsibility and Work 
     Opportunity Act of 1996 (Public Law 104-193, 110 Stat. 2200), 
     other than subsection (b)(1) (as so in effect), to amounts 
     collected before October 1, 1998.''.
       (2) Conforming amendments.--Section 408(a)(3)(A) (42 U.S.C. 
     608(a)(3)(A)) is amended--
       (A) in clause (i), by inserting ``(I)'' after ``(i)'';
       (B) in clause (ii)--
       (i) by striking ``(ii)'' and inserting ``(II)''; and
       (ii) by striking the period and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(ii) if the State elects to distribute collections under 
     section 457(a)(6), the date the family ceases to receive 
     assistance under the program, if the assignment is executed 
     on or after October 1, 1998.''.
       (c) Distribution of Collections With Respect to Families 
     Receiving Assistance.--Section 457(a)(1) (42 U.S.C. 
     657(a)(1)) is amended by adding at the end the following 
     flush language:

     ``In no event shall the total of the amounts paid to the 
     Federal Government and retained by the State exceed the total 
     of the amounts that have been paid to the family as 
     assistance by the State.''.
       (d) Families Under Certain Agreements.--Section 457(a)(4) 
     (42 U.S.C. 657(a)(4)) is amended to read as follows:
       ``(4) Families under certain agreements.--In the case of an 
     amount collected for a family in accordance with a 
     cooperative agreement under section 454(33), distribute the 
     amount so collected pursuant to the terms of the 
     agreement.''.
       (e) Study and Report.--Section 457(a)(5) (42 U.S.C. 
     657(a)(5)) is amended by striking ``1998'' and inserting 
     ``1999''.
       (f) Corrections of References.--Section 457(a)(2)(B) (42 
     U.S.C. 657(a)(2)(B)) is amended--
       (1) in clauses (i)(I) and (ii)(I)--
       (A) by striking ``(other than subsection (b)(1))'' each 
     place it appears; and
       (B) by inserting ``(other than subsection (b)(1) (as so in 
     effect))'' after ``1996'' each place it appears; and
       (2) in clause (ii)(II), by striking ``paragraph (4)'' and 
     inserting ``paragraph (5)''.
       (g) Correction of Territorial Match.--Section 457(c)(3)(A) 
     (42 U.S.C. 657(c)(3)(A)) is amended by striking ``the Federal 
     medical assistance percentage (as defined in section 1118)'' 
     and inserting ``75 percent''.
       (h) Definitions.--
       (1) Federal share.--Section 457(c)(2) (42 U.S.C. 657(c)(2)) 
     is amended by striking ``collected'' the second place it 
     appears and inserting ``distributed''.
       (2) Federal medical assistance percentage.--Section 
     457(c)(3)(B) (42 U.S.C. 657(c)(3)(B)) is amended by striking 
     ``as in effect on September 30, 1996'' and inserting ``as 
     such section was in effect on September 30, 1995''.
       (i) Conforming Amendments.--
       (1) Section 464(a)(2)(A) (42 U.S.C. 664(a)(2)(A)) is 
     amended, in the penultimate sentence, by inserting ``in 
     accordance with section 457'' after ``owed''.
       (2) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
     amended by striking ``457(b)(4) or (d)(3)'' and inserting 
     ``457''.

     SEC. 5533. CIVIL PENALTIES RELATING TO STATE DIRECTORY OF NEW 
                   HIRES.

       Section 453A (42 U.S.C. 653a) is amended--
       (1) in subsection (d)--
       (A) in the matter preceding paragraph (1), by striking 
     ``shall be less than'' and inserting ``shall not exceed''; 
     and
       (B) in paragraph (1), by striking ``$25'' and inserting 
     ``$25 per failure to meet the requirements of this section 
     with respect to a newly hired employee''; and
       (2) in subsection (g)(2)(B), by striking ``extracts'' and 
     all that follows through ``Labor'' and inserting 
     ``information''.

     SEC. 5534. FEDERAL PARENT LOCATOR SERVICE.

       (a) In General.--Section 453 (42 U.S.C. 653) is amended--
       (1) in subsection (a)--
       (A) by inserting ``(1)'' after ``(a)''; and
       (B) by striking ``to obtain'' and all that follows through 
     the period and inserting ``for the purposes specified in 
     paragraphs (2) and (3).
       ``(2) For the purpose of establishing parentage, 
     establishing, setting the amount of, modifying, or enforcing 
     child support obligations, the Federal Parent Locator Service 
     shall obtain and transmit to any authorized person specified 
     in subsection (c)--
       ``(A) information on, or facilitating the discovery of, the 
     location of any individual--
       ``(i) who is under an obligation to pay child support;
       ``(ii) against whom such an obligation is sought; or
       ``(iii) to whom such an obligation is owed,

     including the individual's social security number (or 
     numbers), most recent address, and the name, address, and 
     employer identification number of the individual's employer;
       ``(B) information on the individual's wages (or other 
     income) from, and benefits of, employment (including rights 
     to or enrollment in group health care coverage); and
       ``(C) information on the type, status, location, and amount 
     of any assets of, or debts owed by or to, any such 
     individual.
       ``(3) For the purpose of enforcing any Federal or State law 
     with respect to the unlawful taking or restraint of a child, 
     or making or enforcing a child custody or visitation 
     determination, as defined in section 463(d)(1), the Federal 
     Parent Locator Service shall be used to obtain and transmit 
     the information specified in section 463(c) to the authorized 
     persons specified in section 463(d)(2).'';
       (2) by striking subsection (b) and inserting the following:
       ``(b)(1) Upon request, filed in accordance with subsection 
     (d), of any authorized person, as defined in subsection (c) 
     for the information described in subsection (a)(2), or of any 
     authorized person, as defined in section 463(d)(2) for the 
     information described in section 463(c), the Secretary shall, 
     notwithstanding any other provision of law, provide through 
     the Federal Parent Locator Service such information to such 
     person, if such information--
       ``(A) is contained in any files or records maintained by 
     the Secretary or by the Department of Health and Human 
     Services; or
       ``(B) is not contained in such files or records, but can be 
     obtained by the Secretary, under the authority conferred by 
     subsection (e), from any other department, agency, or 
     instrumentality of the United States or of any State,

     and is not prohibited from disclosure under paragraph (2).
       ``(2) No information shall be disclosed to any person if 
     the disclosure of such information would contravene the 
     national policy or security interests of the United States or 
     the confidentiality of census data. The Secretary shall 
     give priority to requests made by any authorized person 
     described in subsection (c)(1). No information shall be 
     disclosed to any person if the State has notified the 
     Secretary that the State has reasonable evidence of 
     domestic violence or child abuse and the disclosure of 
     such information could be harmful to the custodial parent 
     or the child of such parent, provided that--
       ``(A) in response to a request from an authorized person 
     (as defined in subsection (c) of this section and section 
     463(d)(2)), the Secretary shall advise the authorized person 
     that the Secretary has been notified that there is reasonable 
     evidence of domestic violence or child abuse and that 
     information can only be disclosed to a court or an agent of a 
     court pursuant to subparagraph (B); and
       ``(B) information may be disclosed to a court or an agent 
     of a court described in subsection (c)(2) of this section or 
     section 463(d)(2)(B), if--
       ``(i) upon receipt of information from the Secretary, the 
     court determines whether disclosure to any other person of 
     that information could be harmful to the parent or the child; 
     and
       ``(ii) if the court determines that disclosure of such 
     information to any other person could be harmful, the court 
     and its agents shall not make any such disclosure.
       ``(3) Information received or transmitted pursuant to this 
     section shall be subject to the safeguard provisions 
     contained in section 454(26).''; and
       (3) in subsection (c)--
       (A) in paragraph (1), by striking ``or to seek to enforce 
     orders providing child custody or visitation rights''; and
       (B) in paragraph (2)--
       (i) by inserting ``or to serve as the initiating court in 
     an action to seek an order'' after ``issue an order''; and
       (ii) by striking ``or to issue an order against a resident 
     parent for child custody or visitation rights''.
       (b) Use of the Federal Parent Locator Service.--Section 463 
     (42 U.S.C. 663) is amended--
       (1) in subsection (a)--
       (A) in the matter preceding paragraph (1)--
       (i) by striking ``any State which is able and willing to do 
     so,'' and inserting ``every State''; and
       (ii) by striking ``such State'' and inserting ``each 
     State''; and
       (B) in paragraph (2), by inserting ``or visitation'' after 
     ``custody'';
       (2) in subsection (b)(2), by inserting ``or visitation'' 
     after ``custody'';
       (3) in subsection (d)--
       (A) in paragraph (1), by inserting ``or visitation'' after 
     ``custody''; and
       (B) in subparagraphs (A) and (B) of paragraph (2), by 
     inserting ``or visitation'' after ``custody'' each place it 
     appears;
       (4) in subsection (f)(2), by inserting ``or visitation'' 
     after ``custody''; and
       (5) by striking ``noncustodial'' each place it appears.

[[Page H6128]]

     SEC. 5535. ACCESS TO REGISTRY DATA FOR RESEARCH PURPOSES.

       (a) In General.--Section 453(j)(5) (42 U.S.C. 653(j)(5)) is 
     amended by inserting ``data in each component of the Federal 
     Parent Locator Service maintained under this section and to'' 
     before ``information''.
       (b) Conforming Amendments.--Section 453 (42 U.S.C. 653) is 
     amended--
       (1) in subsection (j)(3)(B), by striking ``registries'' and 
     inserting ``components''; and
       (2) in subsection (k)(2), by striking ``subsection (j)(3)'' 
     and inserting ``section 453A(g)(2)''.

     SEC. 5536. COLLECTION AND USE OF SOCIAL SECURITY NUMBERS FOR 
                   USE IN CHILD SUPPORT ENFORCEMENT.

       Section 466(a)(13) (42 U.S.C. 666(a)(13)) is amended--
       (1) in subparagraph (A)--
       (A) by striking ``commercial''; and
       (B) by inserting ``recreational license,'' after 
     ``occupational license,''; and
       (2) in the matter following subparagraph (C), by inserting 
     ``to be used on the face of the document while the social 
     security number is kept on file at the agency'' after ``other 
     than the social security number''.

     SEC. 5537. ADOPTION OF UNIFORM STATE LAWS.

       Section 466(f) (42 U.S.C. 666(f)) is amended by striking 
     ``together'' and all that follows and inserting ``and as in 
     effect on August 22, 1996, including any amendments 
     officially adopted as of such date by the National Conference 
     of Commissioners on Uniform State Laws.''.

     SEC. 5538. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

       Section 466(c) (42 U.S.C. 666(c)) is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (E), by inserting ``, part E,'' after 
     ``part A''; and
       (B) in subparagraph (G), by inserting ``any current support 
     obligation and'' after ``to satisfy''; and
       (2) in paragraph (2)(A)--
       (A) in clause (i), by striking ``the tribunal and''; and
       (B) in clause (ii)--
       (i) by striking ``tribunal may'' and inserting ``court or 
     administrative agency of competent jurisdiction shall''; and
       (ii) by striking ``filed with the tribunal'' and inserting 
     ``filed with the State case registry''.

     SEC. 5539. VOLUNTARY PATERNITY ACKNOWLEDGEMENT.

       Section 466(a)(5)(C)(i) (42 U.S.C. 666(a)(5)(C)(i)) is 
     amended by inserting ``, or through the use of video or audio 
     equipment,'' after ``orally''.

     SEC. 5540. CALCULATION OF PATERNITY ESTABLISHMENT PERCENTAGE.

       Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended, in the 
     matter following subparagraph (C), by striking ``subparagraph 
     (A)'' and inserting ``subparagraphs (A) and (B)''.

     SEC. 5541. MEANS AVAILABLE FOR PROVISION OF TECHNICAL 
                   ASSISTANCE AND OPERATION OF FEDERAL PARENT 
                   LOCATOR SERVICE.

       (a) Technical Assistance.--Section 452(j) (42 U.S.C. 
     652(j)) is amended, in the matter preceding paragraph (1), by 
     striking ``to cover costs incurred by the Secretary'' and 
     inserting ``which shall be available for use by the 
     Secretary, either directly or through grants, contracts, or 
     interagency agreements,''.
       (b) Operation of Federal Parent Locator Service.--
       (1) Means available.--Section 453(o) (42 U.S.C. 653(o)) is 
     amended--
       (A) in the heading, by striking ``Recovery of Costs'' and 
     inserting ``Use of Set-Aside Funds''; and
       (B) by striking ``to cover costs incurred by the 
     Secretary'' and inserting ``which shall be available for use 
     by the Secretary, either directly or through grants, 
     contracts, or interagency agreements,''.
       (2) Availability of funds.--Section 453(o) (42 U.S.C. 
     653(o)) is amended by adding at the end the following: 
     ``Amounts appropriated under this subsection for each of 
     fiscal years 1997 through 2001 shall remain available until 
     expended.''.

     SEC. 5542. AUTHORITY TO COLLECT SUPPORT FROM FEDERAL 
                   EMPLOYEES.

       (a) Response to Notice or Process.--Section 459(c)(2)(C) 
     (42 U.S.C. 659(c)(2)(C)) is amended by striking ``respond to 
     the order, process, or interrogatory'' and inserting 
     ``withhold available sums in response to the order or 
     process, or answer the interrogatory''.
       (b) Moneys Subject to Process.--Section 459(h)(1) (42 
     U.S.C. 659(h)(1)) is amended--
       (1) in the matter preceding subparagraph (A) and in 
     subparagraph (A)(i), by striking ``paid or'' each place it 
     appears;
       (2) in subparagraph (A)--
       (A) in clause (ii)(V), by striking ``and'' at the end;
       (B) in clause (iii)--
       (i) by inserting ``or payable'' after ``paid''; and
       (ii) by striking ``but'' and inserting ``; and''; and
       (C) by inserting after clause (iii), the following:
       ``(iv) benefits paid or payable under the Railroad 
     Retirement System, but''; and
       (3) in subparagraph (B)--
       (A) in clause (i), by striking ``or'' at the end;
       (B) in clause (ii), by striking the period and inserting 
     ``; or''; and
       (C) by adding at the end the following:
       ``(iii) of periodic benefits under title 38, United States 
     Code, except as provided in subparagraph (A)(ii)(V).''.
       (c) Conforming Amendment.--Section 454(19)(B)(ii) (42 
     U.S.C. 654(19)(B)(ii)) is amended by striking ``section 
     462(e)'' and inserting ``section 459(i)(5)''.

     SEC. 5543. DEFINITION OF SUPPORT ORDER.

       Section 453(p) (42 U.S.C. 653(p)), is amended by striking 
     ``a child and'' and inserting ``of''.

     SEC. 5544. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

       Section 466(a)(16) (42 U.S.C. 666(a)(16)) is amended by 
     inserting ``and sporting'' after ``recreational''.

     SEC. 5545. INTERNATIONAL SUPPORT ENFORCEMENT.

       Section 454(32)(A) (42 U.S.C. 654(32)(A)) is amended by 
     striking ``section 459A(d)(2)'' and inserting ``section 
     459A(d)''.

     SEC. 5546. CHILD SUPPORT ENFORCEMENT FOR INDIAN TRIBES.

       (a) Cooperative Agreements by Indian Tribes and States for 
     Child Support Enforcement.--Section 454(33) (42 U.S.C. 
     654(33)) is amended--
       (1) by striking ``and enforce support orders, and'' and 
     inserting ``or enforce support orders, or'';
       (2) by striking ``guidelines established by such tribe or 
     organization'' and inserting ``guidelines established or 
     adopted by such tribe or organization'';
       (3) by striking ``funding collected'' and inserting 
     ``collections''; and
       (4) by striking ``such funding'' and inserting ``such 
     collections''.
       (b) Correction of Subsection Designation.--Section 455 (42 
     U.S.C. 655) is amended by redesignating subsection (b), as 
     added by section 375(b) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996 (Public Law 104-
     193, 110 Stat. 2256), as subsection (f).
       (c) Direct Grants to Tribes.--Section 455(f) (42 U.S.C. 
     655(f)), as so redesignated by subsection (b) of this 
     section, is amended to read as follows:
       ``(f) The Secretary may make direct payments under this 
     part to an Indian tribe or tribal organization that 
     demonstrates to the satisfaction of the Secretary that it has 
     the capacity to operate a child support enforcement program 
     meeting the objectives of this part, including establishment 
     of paternity, establishment, modification, and enforcement of 
     support orders, and location of absent parents. The Secretary 
     shall promulgate regulations establishing the requirements 
     which must be met by an Indian tribe or tribal organization 
     to be eligible for a grant under this subsection.''.

     SEC. 5547. CONTINUATION OF RULES FOR DISTRIBUTION OF SUPPORT 
                   IN THE CASE OF A TITLE IV-E CHILD.

       Section 457 (42 U.S.C. 657) is amended--
       (1) in subsection (a), in the matter preceding paragraph 
     (1), by striking ``subsection (e)'' and inserting 
     ``subsections (e) and (f)''; and
       (2) by adding at the end the following:
       ``(f) Notwithstanding the preceding provisions of this 
     section, amounts collected by a State as child support for 
     months in any period on behalf of a child for whom a public 
     agency is making foster care maintenance payments under part 
     E--
       ``(1) shall be retained by the State to the extent 
     necessary to reimburse it for the foster care maintenance 
     payments made with respect to the child during such period 
     (with appropriate reimbursement of the Federal Government to 
     the extent of its participation in the financing);
       ``(2) shall be paid to the public agency responsible for 
     supervising the placement of the child to the extent that the 
     amounts collected exceed the foster care maintenance payments 
     made with respect to the child during such period but not the 
     amounts required by a court or administrative order to be 
     paid as support on behalf of the child during such period; 
     and the responsible agency may use the payments in the manner 
     it determines will serve the best interests of the child, 
     including setting such payments aside for the child's future 
     needs or making all or a part thereof available to the person 
     responsible for meeting the child's day-to-day needs; and
       ``(3) shall be retained by the State, if any portion of the 
     amounts collected remains after making the payments required 
     under paragraphs (1) and (2), to the extent that such portion 
     is necessary to reimburse the State (with appropriate 
     reimbursement to the Federal Government to the extent of its 
     participation in the financing) for any past foster care 
     maintenance payments (or payments of assistance under the 
     State program funded under part A) which were made with 
     respect to the child (and with respect to which past 
     collections have not previously been retained);

     and any balance shall be paid to the State agency responsible 
     for supervising the placement of the child, for use by such 
     agency in accordance with paragraph (2).''.

     SEC. 5548. GOOD CAUSE IN FOSTER CARE AND FOOD STAMP CASES.

       (a) State Plan.--Section 454(4)(A)(i) (42 U.S.C. 
     654(4)(A)(i)) is amended--
       (1) by striking ``or'' before ``(III)''; and
       (2) by inserting ``or (IV) cooperation is required pursuant 
     to section 6(l)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
     2015(l)(1)),'' after ``title XIX,''.
       (b) Conforming Amendments.--Section 454(29) (42 U.S.C. 
     654(29)) is amended--
       (1) in subparagraph (A)--
       (A) in the matter preceding clause (i), by striking ``part 
     A of this title or the State program under title XIX'' and 
     inserting ``part A, the State program under part E, the State 
     program under title XIX, or the food stamp program, as 
     defined under section 3(h) of the Food Stamp Act of 1977 (7 
     U.S.C. 2012(h)),''; and
       (B) by striking clauses (i) and (ii) and all that follows 
     through the semicolon and inserting the following:
       ``(i) in the case of the State program funded under part A, 
     the State program under part E, or the State program under 
     title XIX shall, at the option of the State, be defined, 
     taking into account the best interests of the child, and 
     applied in each case, by the State agency administering such 
     program; and

[[Page H6129]]

       ``(ii) in the case of the food stamp program, as defined 
     under section 3(h) of the Food Stamp Act of 1977 (7 U.S.C. 
     2012(h)), shall be defined and applied in each case under 
     that program in accordance with section 6(l)(2) of the Food 
     Stamp Act of 1977 (7 U.S.C. 2015(l)(2));'';
       (2) in subparagraph (D), by striking ``or the State program 
     under title XIX'' and inserting ``the State program under 
     part E, the State program under title XIX, or the food stamp 
     program, as defined under section 3(h) of the Food Stamp Act 
     of 1977 (7 U.S.C. 2012(h))''; and
       (3) in subparagraph (E), by striking ``individual,'' and 
     all that follows through ``XIX,'' and inserting ``individual 
     and the State agency administering the State program funded 
     under part A, the State agency administering the State 
     program under part E, the State agency administering the 
     State program under title XIX, or the State agency 
     administering the food stamp program, as defined under 
     section 3(h) of the Food Stamp Act of 1977 (7 U.S.C. 
     2012(h)),''.

     SEC. 5549. DATE OF COLLECTION OF SUPPORT.

       Section 454B(c)(1) (42 U.S.C. 654B(c)(1)) is amended by 
     adding at the end the following: ``The date of collection for 
     amounts collected and distributed under this part is the date 
     of receipt by the State disbursement unit, except that if 
     current support is withheld by an employer in the month when 
     due and is received by the State disbursement unit in a month 
     other than the month when due, the date of withholding may be 
     deemed to be the date of collection.''.

     SEC. 5550. ADMINISTRATIVE ENFORCEMENT IN INTERSTATE CASES.

       (a) Procedures.--Section 466(a)(14) (42 U.S.C. 666(a)(14)) 
     is amended to read as follows:
       ``(14) High-volume, automated administrative enforcement in 
     interstate cases.--
       ``(A) In general.--Procedures under which--
       ``(i) the State shall use high-volume automated 
     administrative enforcement, to the same extent as used for 
     intrastate cases, in response to a request made by another 
     State to enforce support orders, and shall promptly report 
     the results of such enforcement procedure to the requesting 
     State;
       ``(ii) the State may, by electronic or other means, 
     transmit to another State a request for assistance in 
     enforcing support orders through high-volume, automated 
     administrative enforcement, which request--

       ``(I) shall include such information as will enable the 
     State to which the request is transmitted to compare the 
     information about the cases to the information in the data 
     bases of the State; and
       ``(II) shall constitute a certification by the requesting 
     State--

       ``(aa) of the amount of support under an order the payment 
     of which is in arrears; and
       ``(bb) that the requesting State has complied with all 
     procedural due process requirements applicable to each case;
       ``(iii) if the State provides assistance to another State 
     pursuant to this paragraph with respect to a case, neither 
     State shall consider the case to be transferred to the 
     caseload of such other State; and
       ``(iv) the State shall maintain records of--

       ``(I) the number of such requests for assistance received 
     by the State;
       ``(II) the number of cases for which the State collected 
     support in response to such a request; and
       ``(III) the amount of such collected support.

       ``(B) High-volume automated administrative enforcement.--In 
     this part, the term `high-volume automated administrative 
     enforcement' means the use of automatic data processing to 
     search various State data bases, including license records, 
     employment service data, and State new hire registries, to 
     determine whether information is available regarding a parent 
     who owes a child support obligation.''.
       (b) Incentive Payments.--Section 458(d) (42 U.S.C. 658(d)) 
     is amended by inserting ``, including amounts collected under 
     section 466(a)(14),'' after ``another State''.

     SEC. 5551. WORK ORDERS FOR ARREARAGES.

       Section 466(a)(15) (42 U.S.C. 666(a)(15)) is amended to 
     read as follows:
       ``(15) Procedures to ensure that persons owing overdue 
     support work or have a plan for payment of such support.--
     Procedures under which the State has the authority, in any 
     case in which an individual owes overdue support with respect 
     to a child receiving assistance under a State program funded 
     under part A, to issue an order or to request that a court or 
     an administrative process established pursuant to State law 
     issue an order that requires the individual to--
       ``(A) pay such support in accordance with a plan approved 
     by the court, or, at the option of the State, a plan approved 
     by the State agency administering the State program under 
     this part; or
       ``(B) if the individual is subject to such a plan and is 
     not incapacitated, participate in such work activities (as 
     defined in section 407(d)) as the court, or, at the option of 
     the State, the State agency administering the State program 
     under this part, deems appropriate.''.

     SEC. 5552. ADDITIONAL TECHNICAL STATE PLAN AMENDMENTS.

       Section 454 (42 U.S.C. 654) is amended--
       (1) in paragraph (8)--
       (A) in the matter preceding subparagraph (A)--
       (i) by striking ``noncustodial''; and
       (ii) by inserting ``, for the purpose of establishing 
     parentage, establishing, setting the amount of, modifying, or 
     enforcing child support obligations, or making or enforcing a 
     child custody or visitation determination, as defined in 
     section 463(d)(1)'' after ``provide that'';
       (B) in subparagraph (A), by striking the comma and 
     inserting a semicolon;
       (C) in subparagraph (B), by striking the semicolon and 
     inserting a comma; and
       (D) by inserting after subparagraph (B), the following 
     flush language:

     ``and shall, subject to the privacy safeguards required under 
     paragraph (26), disclose only the information described in 
     sections 453 and 463 to the authorized persons specified in 
     such sections for the purposes specified in such sections;'';
       (2) in paragraph (17)--
       (A) by striking ``in the case of a State which has'' and 
     inserting ``provide that the State will have''; and
       (B) by inserting ``and'' after ``section 453,''; and
       (3) in paragraph (26)--
       (A) in the matter preceding subparagraph (A), by striking 
     ``will'';
       (B) in subparagraph (A)--
       (i) by inserting ``, modify,'' after ``establish'', the 
     second place it appears; and
       (ii) by inserting ``, or to make or enforce a child custody 
     determination'' after ``support'';
       (C) in subparagraph (B)--
       (i) by inserting ``or the child'' after ``1 party'';
       (ii) by inserting ``or the child'' after ``former party''; 
     and
       (iii) by striking ``and'' at the end;
       (D) in subparagraph (C)--
       (i) by inserting ``or the child'' after ``1 party'';
       (ii) by striking ``another party'' and inserting ``another 
     person'';
       (iii) by inserting ``to that person'' after ``release of 
     the information''; and
       (iv) by striking ``former party'' and inserting ``party or 
     the child''; and
       (E) by adding at the end the following:
       ``(D) in cases in which the prohibitions under 
     subparagraphs (B) and (C) apply, the requirement to notify 
     the Secretary, for purposes of section 453(b)(2), that the 
     State has reasonable evidence of domestic violence or child 
     abuse against a party or the child and that the disclosure of 
     such information could be harmful to the party or the child; 
     and
       ``(E) procedures providing that when the Secretary 
     discloses information about a parent or child to a State 
     court or an agent of a State court described in section 
     453(c)(2) or 463(d)(2)(B), and advises that court or agent 
     that the Secretary has been notified that there is reasonable 
     evidence of domestic violence or child abuse pursuant to 
     section 453(b)(2), the court shall determine whether 
     disclosure to any other person of information received from 
     the Secretary could be harmful to the parent or child and, if 
     the court determines that disclosure to any other person 
     could be harmful, the court and its agents shall not make any 
     such disclosure;''.

     SEC. 5553. FEDERAL CASE REGISTRY OF CHILD SUPPORT ORDERS.

       Section 453(h) (42 U.S.C. 653(h)) is amended--
       (1) in paragraph (1), by inserting ``and order'' after 
     ``with respect to each case''; and
       (2) in paragraph (2)--
       (A) in the heading, by inserting ``and order'' after 
     ``Case'';
       (B) by inserting ``or an order'' after ``with respect to a 
     case'' and
       (C) by inserting ``or order'' after ``and the State or 
     States which have the case''.

     SEC. 5554. FULL FAITH AND CREDIT FOR CHILD SUPPORT ORDERS.

       Section 1738B(f) of title 28, United States Code, is 
     amended--
       (1) in paragraph (4), by striking ``a court may'' and all 
     that follows and inserting ``a court having jurisdiction over 
     the parties shall issue a child support order, which must be 
     recognized.''; and
       (2) in paragraph (5), by inserting ``under subsection (d)'' 
     after ``jurisdiction''.

     SEC. 5555. DEVELOPMENT COSTS OF AUTOMATED SYSTEMS.

       (a) Definition of State.--Section 455(a)(3)(B) (42 U.S.C. 
     655(a)(3)(B)) is amended--
       (1) in clause (i)--
       (A) by inserting ``or system described in clause (iii)'' 
     after ``each State''; and
       (B) by inserting ``or system'' after ``the State''; and
       (2) by adding at the end the following:
       ``(iii) For purposes of clause (i), a system described in 
     this clause is a system that has been approved by the 
     Secretary to receive enhanced funding pursuant to the Family 
     Support Act of 1988 (Public Law 100-485; 102 Stat. 2343) for 
     the purpose of developing a system that meets the 
     requirements of sections 454(16) (as in effect on and after 
     September 30, 1995) and 454A, including systems that have 
     received funding for such purpose pursuant to a waiver under 
     section 1115(a).''.
       (b) Temporary Limitation On Payments.--Section 344(b)(2) of 
     the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (42 U.S.C. 655 note) is amended--
       (1) in subparagraph (B)--
       (A) by inserting ``or a system described in subparagraph 
     (C)'' after ``to a State''; and
       (B) by inserting ``or system'' after ``for the State''; and
       (2) in subparagraph (C), by striking ``Act,'' and all that 
     follows and inserting ``Act, and among systems that have been 
     approved by the Secretary to receive enhanced funding 
     pursuant to the Family Support Act of 1988 (Public Law 100-
     485; 102 Stat. 2343) for the purpose of developing a system 
     that meets the requirements of sections 454(16) (as in effect 
     on and after September 30, 1995) and 454A, including systems 
     that have received funding for such purpose pursuant to a 
     waiver under section 1115(a), which shall take into account--
       ``(i) the relative size of such State and system caseloads 
     under part D of title IV of the Social Security Act; and
       ``(ii) the level of automation needed to meet the automated 
     data processing requirements of such part.''.

[[Page H6130]]

     SEC. 5556. ADDITIONAL TECHNICAL AMENDMENTS.

       (a) Elimination of Surplusage.--Section 466(c)(1)(F) (42 
     U.S.C. 666(c)(1)(F)) is amended by striking ``of section 
     466''.
       (b) Correction of Ambiguous Amendment.--Section 
     344(a)(1)(F) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2234) is amended by inserting ``the first place 
     such term appears'' before ``and all that follows''.
       (c) Correction of Erroneously Drafted Provision.--Section 
     215 of the Department of Health and Human Services 
     Appropriations Act, 1997, (as contained in section 101(e) of 
     the Omnibus Consolidated Appropriations Act, 1997) is amended 
     to read as follows:
       ``Sec. 215. Sections 452(j) and 453(o) of the Social 
     Security Act (42 U.S.C. 652(j) and 653(o)), as amended by 
     section 345 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2237) are each amended by striking `section 457(a)' 
     and inserting `a plan approved under this part'. Amounts 
     available under such sections 452(j) and 453(o) shall be 
     calculated as though the amendments made by this section were 
     effective October 1, 1995.''.
       (d) Elimination of Surplusage.--Section 456(a)(2)(B) (42 
     U.S.C. 656(a)(2)(B)) is amended by striking ``, and'' and 
     inserting a period.
       (e) Correction of Date.--Section 466(a)(1)(B) (42 U.S.C. 
     666(a)(1)(B)) is amended by striking ``October 1, 1996'' and 
     inserting ``January 1, 1994''.

     SEC. 5557. EFFECTIVE DATE.

       (a) In General.--Except as provided in subsection (b), the 
     amendments made by this chapter shall take effect as if 
     included in the enactment of title III of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (Public Law 104-193; 110 Stat. 2105).
       (b) Exception.--The amendments made by section 5532(b)(2) 
     of this Act shall take effect as if the amendments had been 
     included in the enactment of section 103(a) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (Public Law 104-193; 110 Stat. 2112).

     CHAPTER 4--RESTRICTING WELFARE AND PUBLIC BENEFITS FOR ALIENS

             Subchapter A--Eligibility for Federal Benefits

     SEC. 5561. ALIEN ELIGIBILITY FOR FEDERAL BENEFITS: LIMITED 
                   APPLICATION TO MEDICARE AND BENEFITS UNDER THE 
                   RAILROAD RETIREMENT ACT.

       (a) Limited Application to Medicare.--Section 401(b) of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (8 U.S.C. 1611(b)) is amended by adding at the 
     end the following:
       ``(3) Subsection (a) shall not apply to any benefit payable 
     under title XVIII of the Social Security Act (relating to the 
     medicare program) to an alien who is lawfully present in the 
     United States as determined by the Attorney General and, with 
     respect to benefits payable under part A of such title, who 
     was authorized to be employed with respect to any wages 
     attributable to employment which are counted for purposes of 
     eligibility for such benefits.''.
       (b) Limited Application to Benefits Under the Railroad 
     Retirement Act.--Section 401(b) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1611(b)) (as amended by subsection (a)) is 
     amended by inserting at the end the following:
       ``(4) Subsection (a) shall not apply to any benefit payable 
     under the Railroad Retirement Act of 1974 or the Railroad 
     Unemployment Insurance Act to an alien who is lawfully 
     present in the United States as determined by the Attorney 
     General or to an alien residing outside the United States.''.

     SEC. 5562. EXCEPTIONS TO BENEFIT LIMITATIONS: CORRECTIONS TO 
                   REFERENCE CONCERNING ALIENS WHOSE DEPORTATION 
                   IS WITHHELD.

       Sections 402(a)(2)(A), 402(b)(2)(A), 403(b)(1)(C), 
     412(b)(1)(C), and 431(b)(5) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1612(a)(2)(A), 1612(b)(2)(A), 1613(b)(1)(C), 1622(b)(1)(C), 
     and 1641(b)(5)) as amended by this Act are each amended by 
     striking ``section 243(h) of such Act'' each place it appears 
     and inserting ``section 243(h) of such Act (as in effect 
     immediately before the effective date of section 307 of 
     division C of Public Law 104-208) or section 241(b)(3) of 
     such Act (as amended by section 305(a) of division C of 
     Public Law 104-208)''.

     SEC. 5563. VETERANS EXCEPTION: APPLICATION OF MINIMUM ACTIVE 
                   DUTY SERVICE REQUIREMENT; EXTENSION TO 
                   UNREMARRIED SURVIVING SPOUSE; EXPANDED 
                   DEFINITION OF VETERAN.

       (a) Application of Minimum Active Duty Service 
     Requirement.--Sections 402(a)(2)(C)(i), 402(b)(2)(C)(i), 
     403(b)(2)(A), and 412(b)(3)(A) of the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1612(a)(2)(C)(i), 1612(b)(2)(C)(i), 1613(b)(2)(A), and 
     1622(b)(3)(A)) are each amended by inserting ``and who 
     fulfills the minimum active-duty service requirements of 
     section 5303A(d) of title 38, United States Code'' after 
     ``alienage''.
       (b) Exception Applicable to Unremarried Surviving Spouse.--
     Sections 402(a)(2)(C)(iii), 402(b)(2)(C)(iii), 403(b)(2)(C), 
     and 412(b)(3)(C) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1612(a)(2)(C)(iii), 1612(b)(2)(C)(iii), 1613(b)(2)(C), and 
     1622(b)(3)(C)) are each amended by inserting before the 
     period ``or the unremarried surviving spouse of an individual 
     described in clause (i) or (ii) who is deceased if the 
     marriage fulfills the requirements of section 1304 of title 
     38, United States Code''.
       (c) Expanded Definition of Veteran.--Sections 
     402(a)(2)(C)(i), 402(b)(2)(C)(i), 403(b)(2)(A), and 
     412(b)(3)(A) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1612(a)(2)(C)(i), 1612(b)(2)(C)(i), 1613(b)(2)(A), and 
     1622(b)(3)(A)) are each amended by inserting ``, 1101, or 
     1301, or as described in section 107'' after ``section 101''.

     SEC. 5564. NOTIFICATION CONCERNING ALIENS NOT LAWFULLY 
                   PRESENT: CORRECTION OF TERMINOLOGY.

       Section 1631(e)(9) of the Social Security Act (42 U.S.C. 
     1383(e)(9)) and section 27 of the United States Housing Act 
     of 1937, as added by section 404 of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996, are each amended by striking ``unlawfully in the United 
     States'' each place it appears and inserting ``not 
     lawfully present in the United States''.

     SEC. 5565. FREELY ASSOCIATED STATES: CONTRACTS AND LICENSES.

       Sections 401(c)(2)(A) and 411(c)(2)(A) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1611(c)(2)(A) and 1621(c)(2)(A)) are each 
     amended by inserting before the semicolon at the end ``, or 
     to a citizen of a freely associated state, if section 141 of 
     the applicable compact of free association approved in Public 
     Law 99-239 or 99-658 (or a successor provision) is in 
     effect''.

     SEC. 5566. CONGRESSIONAL STATEMENT REGARDING BENEFITS FOR 
                   HMONG AND OTHER HIGHLAND LAO VETERANS.

       (a) Findings.--The Congress makes the following findings:
       (1) Hmong and other Highland Lao tribal peoples were 
     recruited, armed, trained, and funded for military operations 
     by the United States Department of Defense, Central 
     Intelligence Agency, Department of State, and Agency for 
     International Development to further United States national 
     security interests during the Vietnam conflict.
       (2) Hmong and other Highland Lao tribal forces sacrificed 
     their own lives and saved the lives of American military 
     personnel by rescuing downed American pilots and aircrews and 
     by engaging and successfully fighting North Vietnamese 
     troops.
       (3) Thousands of Hmong and other Highland Lao veterans who 
     fought in special guerilla units on behalf of the United 
     States during the Vietnam conflict, along with their 
     families, have been lawfully admitted to the United States in 
     recent years.
       (4) The Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193), the new 
     national welfare reform law, restricts certain welfare 
     benefits for noncitizens of the United States and the 
     exceptions for noncitizen veterans of the Armed Forces of the 
     United States do not extend to Hmong veterans of the Vietnam 
     conflict era, making Hmong veterans and their families 
     receiving certain welfare benefits subject to restrictions 
     despite their military service on behalf of the United 
     States.
       (b) Congressional Statement.--It is the sense of the 
     Congress that Hmong and other Highland Lao veterans who 
     fought on behalf of the Armed Forces of the United States 
     during the Vietnam conflict and have lawfully been admitted 
     to the United States for permanent residence should be 
     considered veterans for purposes of continuing certain 
     welfare benefits consistent with the exceptions provided 
     other noncitizen veterans under the Personal Responsibility 
     and Work Opportunity Reconciliation Act of 1996.

                    Subchapter B--General Provisions

     SEC. 5571. DETERMINATION OF TREATMENT OF BATTERED ALIENS AS 
                   QUALIFIED ALIENS; INCLUSION OF ALIEN CHILD OF 
                   BATTERED PARENT AS QUALIFIED ALIEN.

       (a) Determination of Status by Agency Providing Benefits.--
     Section 431 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641) is 
     amended in subsections (c)(1)(A) and (c)(2)(A) by striking 
     ``Attorney General, which opinion is not subject to review by 
     any court)'' each place it appears and inserting ``agency 
     providing such benefits)''.
       (b) Guidance Issued by Attorney General.--Section 431(c) of 
     the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (8 U.S.C. 1641(c)) is amended by 
     adding at the end the following new undesignated paragraph:
        ``After consultation with the Secretaries of Health and 
     Human Services, Agriculture, and Housing and Urban 
     Development, the Commissioner of Social Security, and with 
     the heads of such Federal agencies administering benefits as 
     the Attorney General considers appropriate, the Attorney 
     General shall issue guidance (in the Attorney General's sole 
     and unreviewable discretion) for purposes of this 
     subsection and section 421(f), concerning the meaning of 
     the terms `battery' and `extreme cruelty', and the 
     standards and methods to be used for determining whether a 
     substantial connection exists between battery or cruelty 
     suffered and an individual's need for benefits under a 
     specific Federal, State, or local program.''.
       (c) Inclusion of Alien Child of Battered Parent as 
     Qualified Alien.--Section 431(c) of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996 (8 U.S.C. 1641(c)) is amended--
       (1) at the end of paragraph (1)(B)(iv) by striking ``or'';
       (2) at the end of paragraph (2)(B) by striking the period 
     and inserting ``; or''; and
       (3) by inserting after paragraph (2)(B) and before the last 
     sentence of such subsection the following new paragraph:

[[Page H6131]]

       ``(3) an alien child who--
       ``(A) resides in the same household as a parent who has 
     been battered or subjected to extreme cruelty in the United 
     States by that parent's spouse or by a member of the spouse's 
     family residing in the same household as the parent and the 
     spouse consented or acquiesced to such battery or cruelty, 
     but only if (in the opinion of the agency providing such 
     benefits) there is a substantial connection between such 
     battery or cruelty and the need for the benefits to be 
     provided; and
       ``(B) who meets the requirement of subparagraph (B) of 
     paragraph (1).''.
       (d) Inclusion of Alien Child of Battered Parent Under 
     Special Rule for Attribution of Income.--Section 421(f)(1)(A) 
     of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (8 U.S.C. 1631(f)(1)(A)) is 
     amended--
       (1) at the end of clause (i) by striking ``or''; and
       (2) by striking ``and the battery or cruelty described in 
     clause (i) or (ii)'' and inserting ``or (iii) the alien is a 
     child whose parent (who resides in the same household as the 
     alien child) has been battered or subjected to extreme 
     cruelty in the United States by that parent's spouse, or by a 
     member of the spouse's family residing in the same household 
     as the parent and the spouse consented to, or acquiesced in, 
     such battery or cruelty, and the battery or cruelty described 
     in clause (i), (ii), or (iii)''.

     SEC. 5572. VERIFICATION OF ELIGIBILITY FOR BENEFITS.

       (a) Regulations and Guidance.--Section 432(a) of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (8 U.S.C. 1642(a)) is amended--
       (1) by inserting at the end of paragraph (1) the following: 
     ``Not later than 90 days after the date of the enactment of 
     the Balanced Budget Act of 1997, the Attorney General of the 
     United States, after consultation with the Secretary of 
     Health and Human Services, shall issue interim verification 
     guidance.''; and
       (2) by adding after paragraph (2) the following new 
     paragraph:
       ``(3) Not later than 90 days after the date of the 
     enactment of the Balanced Budget Act of 1997, the Attorney 
     General shall promulgate regulations which set forth the 
     procedures by which a State or local government can verify 
     whether an alien applying for a State or local public benefit 
     is a qualified alien, a nonimmigrant under the Immigration 
     and Nationality Act, or an alien paroled into the United 
     States under section 212(d)(5) of the Immigration and 
     Nationality Act for less than 1 year, for purposes of 
     determining whether the alien is ineligible for benefits 
     under section 411 of this Act.''.
       (b) Disclosure of Information for Verification.--Section 
     384(b) of the Illegal Immigration Reform and Immigrant 
     Responsibility Act of 1996 (division C of Public Law 104-208) 
     is amended by adding after paragraph (4) the following new 
     paragraph:
       ``(5) The Attorney General is authorized to disclose 
     information, to Federal, State, and local public and private 
     agencies providing benefits, to be used solely in making 
     determinations of eligibility for benefits pursuant to 
     section 431(c) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996.''.

     SEC. 5573. QUALIFYING QUARTERS: DISCLOSURE OF QUARTERS OF 
                   COVERAGE INFORMATION; CORRECTION TO ASSURE THAT 
                   CREDITING APPLIES TO ALL QUARTERS EARNED BY 
                   PARENTS BEFORE CHILD IS 18.

       (a) Disclosure of Quarters of Coverage Information.--
     Section 435 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 1645) is 
     amended by adding at the end the following: ``Notwithstanding 
     section 6103 of the Internal Revenue Code of 1986, the 
     Commissioner of Social Security is authorized to disclose 
     quarters of coverage information concerning an alien and an 
     alien's spouse or parents to a government agency for the 
     purposes of this title.''.
       (b) Correction To Assure That Crediting Applies to All 
     Quarters Earned by Parents Before Child is 18.--Section 
     435(1) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (8 U.S.C. 1645(1)) is amended by 
     striking ``while the alien was under age 18,'' and inserting 
     ``before the date on which the alien attains age 18,''.

     SEC. 5574. STATUTORY CONSTRUCTION: BENEFIT ELIGIBILITY 
                   LIMITATIONS APPLICABLE ONLY WITH RESPECT TO 
                   ALIENS PRESENT IN THE UNITED STATES.

       Section 433 of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 1643) is 
     amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (c) and (d); and
       (2) by adding after subsection (a) the following new 
     subsection:
       ``(b) Benefit Eligibility Limitations Applicable Only With 
     Respect to Aliens Present in the United States.--
     Notwithstanding any other provision of this title, the 
     limitations on eligibility for benefits under this title 
     shall not apply to eligibility for benefits of aliens who are 
     not residing, or present, in the United States with respect 
     to--
       ``(1) wages, pensions, annuities, and other earned payments 
     to which an alien is entitled resulting from employment by, 
     or on behalf of, a Federal, State, or local government agency 
     which was not prohibited during the period of such employment 
     or service under section 274A or other applicable provision 
     of the Immigration and Nationality Act; or
       ``(2) benefits under laws administered by the Secretary of 
     Veterans Affairs.''.

    Subchapter C--Miscellaneous Clerical and Technical Amendments; 
                             Effective Date

     SEC. 5581. CORRECTING MISCELLANEOUS CLERICAL AND TECHNICAL 
                   ERRORS.

       (a) Information Reporting Under Title IV of the Social 
     Security Act.--Effective July 1, 1997, section 408 (42 U.S.C. 
     608), as amended by sections 5001(h)(1) and 5505(e) of this 
     Act, is amended by adding at the end the following new 
     subsection:
       ``(g) State Required To Provide Certain Information.--Each 
     State to which a grant is made under section 403 shall, at 
     least 4 times annually and upon request of the Immigration 
     and Naturalization Service, furnish the Immigration and 
     Naturalization Service with the name and address of, and 
     other identifying information on, any individual who the 
     State knows is not lawfully present in the United States.''.
       (b) Miscellaneous Clerical and Technical Corrections.--
       (1) Section 411(c)(3) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1621(c)(3)) is amended by striking ``4001(c)'' and inserting 
     ``401(c)''.
       (2) Section 422(a) of the Personal Responsibility and Work 
     Opportunity Reconciliation Act of 1996 (8 U.S.C. 1632(a)) is 
     amended by striking ``benefits (as defined in section 
     412(c)),'' and inserting ``benefits,''.
       (3) Section 412(b)(1)(C) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1622(b)(1)(C)) is amended by striking ``with-holding'' and 
     inserting ``withholding''.
       (4) The subtitle heading for subtitle D of title IV of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 is amended to read as follows:
                  ``Subtitle D--General Provisions''.
       (5) The subtitle heading for subtitle F of title IV of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 is amended to read as follows:
 ``Subtitle F--Earned Income Credit Denied to Unauthorized Employees''.
       (6) Section 431(c)(2)(B) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1641(c)(2)(B)) is amended by striking ``clause (ii) of 
     subparagraph (A)'' and inserting ``subparagraph (B) of 
     paragraph (1)''.
       (7) Section 431(c)(1)(B) of the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
     1641(c)(1)(B)) is amended--
       (A) in clause (iii) by striking ``, or'' and inserting 
     ``(as in effect prior to April 1, 1997),''; and
       (B) by adding after clause (iv) the following new clause:
       ``(v) cancellation of removal pursuant to section 
     240A(b)(2) of such Act;''.

     SEC. 5582. EFFECTIVE DATE.

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

                      CHAPTER 5--CHILD PROTECTION

     SEC. 5591. CONFORMING AND TECHNICAL AMENDMENTS RELATING TO 
                   CHILD PROTECTION.

       (a) Methods Permitted for Conduct of Study of Child 
     Welfare.--Section 429A(a) (42 U.S.C. 628b(a)) is amended by 
     inserting ``(directly, or by grant, contract, or interagency 
     agreement)'' after ``conduct''.
       (b) Redesignation of Paragraph.--Section 471(a) (42 U.S.C. 
     671(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (17);
       (2) by striking the period at the end of paragraph (18) (as 
     added by section 1808(a) of the Small Business Job Protection 
     Act of 1996 (Public Law 104-188; 110 Stat. 1903)) and 
     inserting ``; and''; and
       (3) by redesignating paragraph (18) (as added by section 
     505(3) of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2278)) as paragraph (19).

     SEC. 5592. ADDITIONAL TECHNICAL AMENDMENTS RELATING TO CHILD 
                   PROTECTION.

       (a) Part B Amendments.--
       (1) In general.--Part B of title IV (42 U.S.C. 620-635) is 
     amended--
       (A) in section 422(b)--
       (i) by striking the period at the end of the paragraph (9) 
     (as added by section 554(3) of the Improving America's 
     Schools Act of 1994 (Public Law 103-382; 108 Stat. 4057)) and 
     inserting a semicolon;
       (ii) by redesignating paragraph (10) as paragraph (11); and
       (iii) by redesignating paragraph (9), as added by section 
     202(a)(3) of the Social Security Act Amendments of 1994 
     (Public Law 103-432, 108 Stat. 4453), as paragraph (10);
       (B) in sections 424(b) and 425(a), by striking 
     ``422(b)(9)'' each place it appears and inserting 
     ``422(b)(10)''; and
       (C) by transferring section 429A (as added by section 503 
     of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2277)) to the end of subpart 1.
       (2) Clarification of Conflicting Amendments.--Section 
     204(a)(2) of the Social Security Act Amendments of 1994 
     (Public Law 103-432; 108 Stat. 4456) is amended by inserting 
     ``(as added by such section 202(a))'' before ``and 
     inserting''.
       (b) Part E Amendments.--Section 472(d) (42 U.S.C. 672(d)) 
     is amended by striking ``422(b)(9)'' and inserting 
     ``422(b)(10)''.

     SEC. 5593. EFFECTIVE DATE.

       The amendments made by this chapter shall take effect as if 
     included in the enactment of title V of the Personal 
     Responsibility and Work

[[Page H6132]]

     Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
     110 Stat. 2277).

                         CHAPTER 6--CHILD CARE

     SEC. 5601. CONFORMING AND TECHNICAL AMENDMENTS RELATING TO 
                   CHILD CARE.

       (a) Funding.--Section 418(a) (42 U.S.C. 618(a)) is 
     amended--
       (1) in paragraph (1)--
       (A) in the matter preceding subparagraph (A), by inserting 
     ``the greater of'' after ``equal to'';
       (B) in subparagraph (A)--
       (i) by striking ``the sum of'';
       (ii) by striking ``amounts expended'' and inserting 
     ``expenditures''; and
       (iii) by striking ``section--'' and all that follows and 
     inserting ``subsections (g) and (i) of section 402 (as in 
     effect before October 1, 1995); or'';
       (C) in subparagraph (B)--
       (i) by striking ``sections'' and inserting ``subsections''; 
     and
       (ii) by striking the semicolon at the end and inserting a 
     period; and
       (D) in the matter following subparagraph (B), by striking 
     ``whichever is greater.''; and
       (2) in paragraph (2)--
       (A) by striking subparagraph (B) and inserting the 
     following:
       ``(B) Allotments to states.--The total amount available for 
     payments to States under this paragraph, as determined under 
     subparagraph (A), shall be allotted among the States based on 
     the formula used for determining the amount of Federal 
     payments to each State under section 403(n) (as in effect 
     before October 1, 1995).'';
       (B) by striking subparagraph (C) and inserting the 
     following:
       ``(C) Federal matching of state expenditures exceeding 
     historical expenditures.--The Secretary shall pay to each 
     eligible State for a fiscal year an amount equal to the 
     lesser of the State's allotment under subparagraph (B) or the 
     Federal medical assistance percentage for the State for the 
     fiscal year (as defined in section 1905(b), as such section 
     was in effect on September 30, 1995) of so much of the 
     State's expenditures for child care in that fiscal year as 
     exceed the total amount of expenditures by the State 
     (including expenditures from amounts made available from 
     Federal funds) in fiscal year 1994 or 1995 (whichever is 
     greater) for the programs described in paragraph (1)(A).''; 
     and
       (C) in subparagraph (D)(i)--
       (i) by striking ``amounts under any grant awarded'' and 
     inserting ``any amounts allotted''; and
       (ii) by striking ``the grant is made'' and inserting ``such 
     amounts are allotted''.
       (b) Data Used To Determine Historic State Expenditures.--
     Section 418(a) (42 U.S.C. 618(a)) is amended by adding at the 
     end the following:
       ``(5) Data used to determine state and federal shares of 
     expenditures.--In making the determinations concerning 
     expenditures required under paragraphs (1) and (2)(C), the 
     Secretary shall use information that was reported by the 
     State on ACF Form 231 and available as of the applicable 
     dates specified in clauses (i)(I), (ii), and (iii)(III) of 
     section 403(a)(1)(D).''.
       (c) Definition of State.--Section 418(d) (42 U.S.C. 618(d)) 
     is amended by striking ``or'' and inserting ``and''.

     SEC. 5602. ADDITIONAL CONFORMING AND TECHNICAL AMENDMENTS.

       The Child Care and Development Block Grant Act of 1990 (42 
     U.S.C. 9858 et seq.) is amended--
       (1) in section 658E(c)(2)(E)(ii), by striking ``tribal 
     organization'' and inserting ``tribal organizations'';
       (2) in section 658K(a)--
       (A) in paragraph (1)--
       (i) in subparagraph (B)--

       (I) by striking clause (iv) and inserting the following:

       ``(iv) whether the head of the family unit is a single 
     parent;'';

       (II) in clause (v)--

       (aa) in the matter preceding subclause (I), by striking 
     ``including the amount obtained from (and separately 
     identified)--'' and inserting ``including--''; and
       (bb) by striking subclause (II) and inserting the 
     following:

       ``(II) cash or other assistance under--

       ``(aa) 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.); and
       ``(bb) a State program for which State spending is counted 
     toward the maintenance of effort requirement under section 
     409(a)(7) of the Social Security Act (42 U.S.C. 
     609(a)(7));''; and

       (III) in clause (x), by striking ``week'' and inserting 
     ``month''; and

       (ii) by striking subparagraph (D) and inserting the 
     following:
       ``(D) Use of samples.--
       ``(i) Authority.--A State may comply with the requirement 
     to collect the information described in subparagraph (B) 
     through the use of disaggregated case record information on a 
     sample of families selected through the use of scientifically 
     acceptable sampling methods approved by the Secretary.
       ``(ii) Sampling and other methods.--The Secretary shall 
     provide the States with such case sampling plans and data 
     collection procedures as the Secretary deems necessary to 
     produce statistically valid samples of the information 
     described in subparagraph (B). The Secretary may develop and 
     implement procedures for verifying the quality of data 
     submitted by the States.''; and
       (B) in paragraph (2)--
       (i) in the heading, by striking ``Biannual'' and inserting 
     ``Annual''; and
       (ii) by striking ``6'' and inserting ``12'';
       (3) in section 658L, by striking ``1997'' and inserting 
     ``1998'';
       (4) in section 658O(c)(6)(C), by striking ``(A)'' and 
     inserting ``(B)''; and
       (5) in section 658P(13), by striking ``or'' and inserting 
     ``and''.

     SEC. 5603. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsection (b), this 
     chapter and the amendments made by this chapter shall take 
     effect as if included in the enactment of title VI of the 
     Personal Responsibility and Work Opportunity Reconciliation 
     Act of 1996 (Public Law 104-193; 110 Stat. 2278).
       (b) Exceptions.--The amendment made by section 
     5601(a)(2)(B) shall take effect on October 1, 1997.

  CHAPTER 7--ERISA AMENDMENTS RELATING TO MEDICAL CHILD SUPPORT ORDERS

     SEC. 5611. AMENDMENTS RELATING TO SECTION 303 OF THE PERSONAL 
                   RESPONSIBILITY AND WORK OPPORTUNITY 
                   RECONCILIATION ACT OF 1996.

       (a) Privacy Safeguards for Medical Child Support Orders.--
     Section 609(a)(3)(A) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1169(a)(3)(A)) is amended by 
     adding at the end the following: ``except that, to the extent 
     provided in the order, the name and mailing address of an 
     official of a State or a political subdivision thereof may be 
     substituted for the mailing address of any such alternate 
     recipient,''.
       (b) Payment to State Official Treated as Satisfaction of 
     Plan's Obligation.--Section 609(a) of such Act (29 U.S.C. 
     1169(a)) is amended by adding at the end the following new 
     paragraph:
       ``(9) Payment to state official treated as satisfaction of 
     plan's obligation to make payment to alternate recipient.--
     Payment of benefits by a group health plan to an official of 
     a State or a political subdivision thereof whose name and 
     address have been substituted for the name and address of an 
     alternate recipient in a qualified medical child support 
     order, pursuant to paragraph (3)(A), shall be treated, for 
     purposes of this title, as payment of benefits to the 
     alternate recipient.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to medical child support orders 
     issued on or after the date of the enactment of this Act.

     SEC. 5612. AMENDMENT RELATING TO SECTION 381 OF THE PERSONAL 
                   RESPONSIBILITY AND WORK OPPORTUNITY 
                   RECONCILIATION ACT OF 1996.

       (a) Clarification of Effect of Administrative Notices.--
     Section 609(a)(2)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1169(a)(2)(B)) is amended by 
     adding at the end the following new sentence: ``For purposes 
     of this subparagraph, an administrative notice which is 
     issued pursuant to an administrative process referred to in 
     subclause (II) of the preceding sentence and which has the 
     effect of an order described in clause (i) or (ii) of the 
     preceding sentence shall be treated as such an order.''.
       (b) Effective Date.--The amendment made by this section 
     shall be effective as if included in the enactment of section 
     381 of the Personal Responsibility and Work Opportunity 
     Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
     2257).

     SEC. 5613. AMENDMENTS RELATING TO SECTION 382 OF THE PERSONAL 
                   RESPONSIBILITY AND WORK OPPORTUNITY 
                   RECONCILIATION ACT OF 1996.

       (a) Elimination of Requirement That Orders Specify Affected 
     Plans.--Section 609(a)(3) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1169(a)(3)) is amended--
       (1) in subparagraph (B), by striking ``by the plan'';
       (2) by adding ``and'' at the end of subparagraph (B);
       (3) in subparagraph (C), by striking ``, and'' and 
     inserting a period; and
       (4) by striking subparagraph (D).
       (b) Clarification of Applicability of Orders.--Section 
     609(a)(1) of such Act (29 U.S.C. 1169(a)(1)) is amended by 
     adding at the end the following new sentence: ``A qualified 
     medical child support order with respect to any participant 
     or beneficiary shall be deemed to apply to each group health 
     plan which has received such order, from which the 
     participant or beneficiary is eligible to receive benefits, 
     and with respect to which the requirements of paragraph (4) 
     are met.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to medical child support orders 
     issued on or after the date of the enactment of this Act.
                       Subtitle G--Miscellaneous

     SEC. 5701. 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''.

     SEC. 5702. AUTHORIZATION OF APPROPRIATIONS FOR ENFORCEMENT 
                   INITIATIVES RELATED TO THE EARNED INCOME TAX 
                   CREDIT.

       In addition to any other funds available therefor, there 
     are authorized to be appropriated to the Secretary of the 
     Treasury, for improved application of the earned income 
     credit under section 32 of the Internal Revenue Code of 1986, 
     not more than--
       (1) $138,000,000 for fiscal year 1998;
       (2) $143,000,000 for fiscal year 1999;
       (3) $144,000,000 for fiscal year 2000;
       (4) $145,000,000 for fiscal year 2001; and
       (5) $146,000,000 for fiscal year 2002.

[[Page H6133]]

               TITLE VI--EDUCATION AND RELATED PROVISIONS
                      Subtitle A--Higher Education

     SEC. 6101. 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) In general.--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) Deposit.--Funds recalled by the Secretary under this 
     subsection shall be deposited in the Treasury.
       ``(3) Required share.--The Secretary shall require each 
     guaranty agency to return reserve funds under paragraph (1) 
     based on the 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 guaranty agency's 
     reserve ratio by dividing (i) the amount held in the 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 the agency has an outstanding insurance 
     obligation as of such date, including amounts of outstanding 
     loans transferred to the agency from another guaranty agency.
       ``(B) If the reserve ratio of any guaranty agency as 
     computed under subparagraph (A) exceeds 2.0 percent, the 
     agency's required share shall include so much of the amounts 
     held in the agency's reserve funds 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)), such 
     additional amount shall be obtained by imposing on each 
     guaranty agency an equal percentage reduction in the amount 
     of the agency's reserve funds remaining after deduction of 
     the amount recalled under subparagraph (B), except that such 
     percentage reduction under this subparagraph shall not result 
     in the agency's reserve ratio being reduced below 0.58 
     percent. The equal percentage reduction shall be the 
     percentage obtained by dividing--
       ``(i) the additional amount required to be recalled (after 
     deducting the total of the required shares calculated under 
     subparagraph (B)), by
       ``(ii) the total amount of all such agencies' reserve funds 
     remaining (after deduction of the required shares calculated 
     under such subparagraph).
       ``(D) If any additional amount is required to be recalled 
     under paragraph (1) (after deducting the total of the 
     required shares calculated under subparagraphs (B) and (C)), 
     such additional amount shall be obtained by imposing on each 
     guaranty agency with a reserve ratio (after deducting the 
     required shares calculated under such subparagraphs) in 
     excess of 0.58 percent an equal percentage reduction in the 
     amount of the agency's reserve funds remaining (after such 
     deduction) that exceed a reserve ratio of 0.58 percent. The 
     equal percentage reduction shall be the percentage 
     obtained by dividing--
       ``(i) the additional amount to be recalled under paragraph 
     (1) (after deducting the amount recalled under subparagraphs 
     (B) and (C)), by
       ``(ii) the total amount of all such agencies' reserve funds 
     remaining (after deduction of the required shares calculated 
     under such subparagraphs) that exceed a reserve ratio of 0.58 
     percent.
       ``(4) Restricted accounts required.--
       ``(A) In general.--Within 90 days after the beginning of 
     each of the fiscal years 1998 through 2002, each guaranty 
     agency shall transfer a portion of the agency's required 
     share determined under paragraph (3) to a restricted account 
     established by the agency that is of a type selected by the 
     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.
       ``(B) Requirement.--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 for default reduction activities.
       ``(C) Installments.--In each of fiscal years 1998 through 
     2002, each guaranty agency shall transfer the agency's 
     required share to such restricted account in 5 equal annual 
     installments, except that--
       ``(i) a guaranty agency that has a reserve ratio (as 
     computed under subparagraph (3)(A)) equal to or less than 
     1.10 percent may transfer the agency's required share to such 
     account in 4 equal installments beginning in fiscal year 
     1999; and
       ``(ii) a guaranty agency may transfer such required share 
     to such account in accordance with such other payment 
     schedules as are approved by the Secretary.
       ``(5) Shortage.--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 shall require the return of the 
     amount of the shortage from other reserve funds held by 
     guaranty agencies under procedures established by the 
     Secretary. The Secretary shall first attempt to obtain the 
     amount of such shortage from each guaranty agency that failed 
     to transfer the agency's required share to the agency's 
     restricted account in accordance with paragraph (4).
       ``(6) Enforcement.--
       ``(A) In general.--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.
       ``(B) Prohibition.--If the Secretary determines that a 
     guaranty agency has failed to transfer to a restricted 
     account any portion of the agency's required share under this 
     subsection, the agency may not receive any other funds under 
     this part until the Secretary determines that the agency has 
     so transferred the agency's required share.
       ``(C) Waiver.--The Secretary may waive the requirements of 
     subparagraph (B) for a guaranty agency described in such 
     subparagraph if the Secretary determines that there are 
     extenuating circumstances beyond the control of the agency 
     that justify such waiver.
       ``(7) Limitation.--
       ``(A) Restriction on other authority.--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 the Balanced Budget Act of 1997 
     through September 30, 2002.
       ``(B) Use of termination collections.--Any reserve funds 
     directed by the Secretary to be returned to the Secretary 
     under subsection (g)(1)(B) during such period that do not 
     exceed a guaranty agency's required share of recalled reserve 
     funds under paragraph (3)--
       ``(i) shall be used to satisfy the agency's required share 
     of recalled reserve funds; and
       ``(ii) shall be deposited in the restricted account 
     established by the agency under paragraph (4), without regard 
     to whether such funds exceed the next installment required 
     under such paragraph.
       ``(C) Use of sanctions collections.--Any reserve funds 
     directed by the Secretary to be returned to the Secretary 
     under subsection (g)(1)(C) during such period that do not 
     exceed a guaranty agency's next installment under paragraph 
     (4)--
       ``(i) shall be used to satisfy the agency's next 
     installment; and
       ``(ii) shall be deposited in the restricted account 
     established by the agency under paragraph (4).
       ``(D) Balance available to secretary.--Any reserve funds 
     directed by the Secretary to be returned to the Secretary 
     under subparagraph (B) or (C) of subsection (g)(1) that 
     remain after satisfaction of the requirements of 
     subparagraphs (B) and (C) of this paragraph shall be 
     deposited in the Treasury.
       ``(8) Definitions.--For the purposes of this subsection:
       ``(A) Default reduction activities.--The term `default 
     reduction activities' means activities to reduce student loan 
     defaults that improve, strengthen, and expand default 
     prevention activities, such as--
       ``(i) establishing a program of partial loan cancellation 
     to reward disadvantaged borrowers for good repayment 
     histories with their lenders;
       ``(ii) establishing a financial and debt management 
     counseling program for high-risk borrowers that provides 
     long-term training (beginning prior to the first disbursement 
     of the borrower's first student loan and continuing through 
     the completion of the borrower's program of education or 
     training) in budgeting and other aspects of financial 
     management, including debt management;
       ``(iii) establishing a program of placement counseling to 
     assist high-risk borrowers in identifying employment or 
     additional training opportunities; and
       ``(iv) developing public service announcements that would 
     detail consequences of student loan default and provide 
     information regarding a toll-free telephone number 
     established by the guaranty agency for use by borrowers 
     seeking assistance in avoiding default.
       ``(B) Reserve funds.--The term `reserve funds' when used 
     with respect to a guaranty agency--
       ``(i) includes any reserve funds in cash or liquid assets 
     held by the guaranty agency, or held by, or under the control 
     of, any other entity; and
       ``(ii) 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. 6102. 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. 6103. 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) Administrative Expenses.--
       ``(1) In general.--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,

[[Page H6134]]

     $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) Calculation basis.--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 was issued in 
     excess of $8,200,000,000 in fiscal year 1997 and upon which 
     insurance is issued on or after October 1, 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. 6104. 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 B--Repeal of Smith-Hughes Vocational Education Act

     SEC. 6201. REPEAL OF SMITH-HUGHES VOCATIONAL EDUCATION ACT.

       The Act of February 23, 1917 (39 Stat. 929, chapter 114; 20 
     U.S.C. 11 et seq.) (commonly known as the ``Smith-Hughes 
     Vocational Education Act''), is repealed.
       TITLE VII--CIVIL SERVICE RETIREMENT AND RELATED PROVISIONS

     SEC. 7001. INCREASED CONTRIBUTIONS TO FEDERAL CIVILIAN 
                   RETIREMENT SYSTEMS.

       (a) Civil Service Retirement System.--
       (1) Agency contributions.--
       (A) In general.-- Notwithstanding section 8334 (a)(1) or 
     (k)(1) of title 5, United States Code, during the period 
     beginning on October 1, 1997, through September 30, 2002, 
     each employing agency (other than the United States Postal 
     Service or the Metropolitan Washington Airports Authority) 
     shall contribute--
       (i) 8.51 percent of the basic pay of an employee;
       (ii) 9.01 percent of the basic pay of a congressional 
     employee, a law enforcement officer, a member of the Capitol 
     police, or a firefighter; and
       (iii) 9.51 percent of the basic pay of a Member of 
     Congress, a Court of Federal Claims judge, a United States 
     magistrate, a judge of the United States Court of Appeals for 
     the Armed Forces, or a bankruptcy judge;

     in lieu of the agency contributions otherwise required under 
     section 8334(a)(1) of title 5, United States Code.
       (B) Application.--For purposes of subparagraph (A) and 
     notwithstanding the amendments made by paragraph (3), during 
     the period beginning on January 1, 1999 through December 31, 
     2002, with respect to the United States Postal Service and 
     the Metropolitan Washington Airports Authority, the agency 
     contribution shall be determined as though those amendments 
     had not been made.
       (2) No reduction in agency contributions by the postal 
     service.--Contributions by the Treasury of the United States 
     or the United States Postal Service under section 8348 (g), 
     (h), or (m) of title 5, United States Code--
       (A) shall not be reduced as a result of the amendments made 
     under paragraph (3) of this subsection; and
       (B) shall be computed as though such amendments had not 
     been enacted.
       (3) Individual deductions, withholdings, and deposits.--
       (A) 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, Court of Federal 
     Claims judge, or member of the Capitol Police, as the case 
     may be, the percentage of basic pay applicable under 
     subsection (c).''.
       (B) Deposits.--The table under section 8334(c) of title 5, 
     United States Code, is amended--
       (i) in the matter relating to an employee by striking:

``7.......................................  After December 31, 1969.''; 
                                                                        

     and inserting the following:

``7.......................................  January 1, 1970, to December
                                             31, 1998.                  
7.25......................................  January 1, 1999, to December
                                             31, 1999.                  
7.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
7.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
7.........................................  After December 31, 2002.''; 
                                                                        

       (ii) in the matter relating to a Member or employee for 
     congressional employee service by striking:

``7\1/2\..................................  After December 31, 1969.''; 
                                                                        

     and inserting the following:

``7.5.....................................  January 1, 1970, to December
                                             31, 1998.                  
7.75......................................  January 1, 1999, to December
                                             31, 1999.                  
7.9.......................................  January 1, 2000, to December
                                             31, 2000.                  
8.........................................  January 1, 2001, to December
                                             31, 2002.                  
7.5.......................................  After December 31, 2002.''; 
                                                                        

       (iii) in the matter relating to a Member for Member service 
     by striking:

``8.......................................  After December 31, 1969.''; 
                                                                        

     and inserting the following:

``8.......................................  January 1, 1970, to December
                                             31, 1998.                  
8.25......................................  January 1, 1999, to December
                                             31, 1999.                  
8.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
8.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
8.........................................  After December 31, 2002.''; 
                                                                        

       (iv) in the matter relating to a law enforcement officer 
     for law enforcement service and firefighter for firefighter 
     service by striking:

``7\1/2\..................................  After December 31, 1974.''; 
                                                                        

     and inserting the following:

``7.5.....................................  January 1, 1975, to December
                                             31, 1998.                  
7.75......................................  January 1, 1999, to December
                                             31, 1999.                  
7.9.......................................  January 1, 2000, to December
                                             31, 2000.                  
8.........................................  January 1, 2001, to December
                                             31, 2002.                  
7.5.......................................  After December 31, 2002.''; 
                                                                        

       (v) in the matter relating to a bankruptcy judge by 
     striking:

``8.......................................  After December 31, 1983.''; 
                                                                        

     and inserting the following:

``8.......................................  January 1, 1984, to December
                                             31, 1998.                  
8.25......................................  January 1, 1999, to December
                                             31, 1999.                  
8.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
8.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
8.........................................  After December 31, 2002.''; 
                                                                        

       (vi) in the matter relating to a judge of the United States 
     Court of Appeals for the Armed Forces for service as a judge 
     of that court by striking:

``8.......................................  On and after the date of the
                                             enactment of the Department
                                             of Defense Authorization   
                                             Act, 1984.'';              
                                                                        

     and inserting the following:

``8.......................................  The date of enactment of the
                                             Department of Defense      
                                             Authorization Act, 1984, to
                                             December 31, 1998.         
8.25......................................  January 1, 1999, to December
                                             31, 1999.                  
8.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
8.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
8.........................................  After December 31, 2002.''; 
                                                                        

       (vii) in the matter relating to a United States magistrate 
     by striking:

``8.......................................  After September 30, 1987.'';
                                                                        

     and inserting the following:

``8.......................................  October 1, 1987, to December
                                             31, 1998.                  
 8.25.....................................  January 1, 1999, to December
                                             31, 1999.                  
 8.4......................................  January 1, 2000, to December
                                             31, 2000.                  
 8.5......................................  January 1, 2001, to December
                                             31, 2002.                  
 8........................................  After December 31, 2002.''; 
                                                                        

       (viii) in the matter relating to a Court of Federal Claims 
     judge by striking:

``8.......................................  After September 30, 1988.'';
                                                                        

     and insert the following:

``8.......................................  October 1, 1988, to December
                                             31, 1998.                  
8.25......................................  January 1, 1999, to December
                                             31, 1999.                  
8.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
8.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
8.........................................  After December 31, 2002.''; 
                                                                        

     and
       (ix) by inserting after the matter relating to a Court of 
     Federal Claims judge the following:

``Member of the Capitol Police....  2.5...........  August 1, 1920, to  
                                                     June 30, 1926.     
                                    3.5...........  July 1, 1926, to    
                                                     June 30, 1942.     
                                    5.............  July 1, 1942, to    
                                                     June 30, 1948.     
                                    6.............  July 1, 1948, to    
                                                     October 31, 1956.  
                                    6.5...........  November 1, 1956, to
                                                     December 31, 1969. 
                                    7.5...........  January 1, 1970, to 
                                                     December 31, 1998. 
                                    7.75..........  January 1, 1999, to 
                                                     December 31, 1999. 
                                    7.9...........  January 1, 2000, to 
                                                     December 31, 2000. 
                                    8.............  January 1, 2001, to 
                                                     December 31, 2002. 
                                    7.5...........  After December 31,  
                                                     2002.''.           
                                                                        

       (4) 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 new paragraph:

[[Page H6135]]

       ``(5) Effective with respect to any period of military 
     service after December 31, 1998, 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 subsection (c) of this section 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 adding at the end the following: 
     ``This paragraph shall be subject to paragraph (4).''; and
       (ii) by adding at the end the following new paragraph:
       ``(4) Effective with respect to any period of service after 
     December 31, 1998, 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 subsection (c) of this section for the 
     same period for service as an employee.''.
       (b) Federal Employees' Retirement System.--
       (1) Individual deductions and withholdings.--
       (A) In general.--Section 8422(a) of title 5, United States 
     Code, is amended by striking paragraph (2) and inserting the 
     following:
       ``(2) The percentage to be deducted and withheld from basic 
     pay for any pay period shall be equal to--
       ``(A) the applicable percentage under paragraph (3), minus
       ``(B) 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).
       ``(3) The applicable percentage under this paragraph for 
     civilian service shall be as follows:
       

``Employee........................  7.............  January 1, 1987, to 
                                                     December 31, 1998. 
                                    7.25..........  January 1, 1999, to 
                                                     December 31, 1999. 
                                    7.4...........  January 1, 2000, to 
                                                     December 31, 2000. 
                                    7.5...........  January 1, 2001, to 
                                                     December 31, 2002. 
                                    7.............  After December 31,  
                                                     2002.              
Congressional employee............  7.5...........  January 1, 1987, to 
                                                     December 31, 1998. 
                                    7.75..........  January 1, 1999, to 
                                                     December 31, 1999. 
                                    7.9...........  January 1, 2000, to 
                                                     December 31, 2000. 
                                    8.............  January 1, 2001, to 
                                                     December 31, 2002. 
                                    7.5...........  After December 31,  
                                                     2002.              
Member............................  7.5...........  January 1, 1987, to 
                                                     December 31, 1998. 
                                    7.75..........  January 1, 1999, to 
                                                     December 31, 1999. 
                                    7.9...........  January 1, 2000, to 
                                                     December 31, 2000. 
                                    8.............  January 1, 2001, to 
                                                     December 31, 2002. 
                                    7.5...........  After December 31,  
                                                     2002.              
Law enforcement officer,            7.5...........  January 1, 1987, to 
 firefighter, member of the                          December 31, 1998. 
 Capitol Police, or air traffic                                         
 controller.                                                            
                                    7.75..........  January 1, 1999, to 
                                                     December 31, 1999. 
                                    7.9...........  January 1, 2000, to 
                                                     December 31, 2000. 
                                    8.............  January 1, 2001, to 
                                                     December 31, 2002. 
                                    7.5...........  After December 31,  
                                                     2002.''.           
                                                                        

       (B) Military service.--Section 8422(e) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1)(A) by inserting ``and subject to 
     paragraph (6),'' after ``Except as provided in subparagraph 
     (B),''; and
       (ii) by adding at the end the following:
       ``(6) The percentage of basic pay under section 204 of 
     title 37 payable under paragraph (1), with respect to any 
     period of military service performed during--
       ``(A) January 1, 1999, through December 31, 1999, shall be 
     3.25 percent;
       ``(B) January 1, 2000, through December 31, 2000, shall be 
     3.4 percent; and
       ``(C) January 1, 2001, through December 31, 2002, shall be 
     3.5 percent.''.
       (C) Volunteer service.--Section 8422(f) of title 5, United 
     States Code, is amended--
       (i) in paragraph (1) by adding at the end the following: 
     ``This paragraph shall be subject to paragraph (4).''; and
       (ii) by adding at the end the following:
       ``(4) The percentage of the readjustment allowance or 
     stipend (as the case may be) payable under paragraph (1), 
     with respect to any period of volunteer service performed 
     during--
       ``(A) January 1, 1999, through December 31, 1999, shall be 
     3.25 percent;
       ``(B) January 1, 2000, through December 31, 2000, shall be 
     3.4 percent; and
       ``(C) January 1, 2001, through December 31, 2002, shall be 
     3.5 percent.''.
       (2) No reduction in agency contributions.--Contributions 
     under section 8423 (a) and (b) of title 5, United States 
     Code, shall not be reduced as a result of the amendments made 
     under paragraph (1) of this subsection.
       (c) Central Intelligence Agency Retirement and Disability 
     System.--
       (1) Agency contributions.--Notwithstanding section 
     211(a)(2) of the Central Intelligence Agency Retirement Act 
     (50 U.S.C. 2021(a)(2)), during the period beginning on 
     October 1, 1997, through September 30, 2002, the Central 
     Intelligence Agency shall contribute 8.51 percent of the 
     basic pay of an employee participating in the Central 
     Intelligence Agency Retirement and Disability System in lieu 
     of the agency contribution otherwise required under section 
     211(a)(2) of such Act.
       (2) Individual deductions, withholdings, and deposits.--
     Notwithstanding section 211(a)(1) of the Central Intelligence 
     Agency Retirement Act (50 U.S.C. 2021(a)(1)) beginning on 
     January 1, 1999, through December 31, 2002, the percentage 
     deducted and withheld from the basic pay of an employee 
     participating in the Central Intelligence Agency Retirement 
     and Disability System shall be as follows:
       

7.25......................................  January 1, 1999, to December
                                             31, 1999.                  
7.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
7.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
                                                                        

       (3) Military service.--Section 252(h)(1) of the Central 
     Intelligence Agency Retirement Act (50 U.S.C. 2082(h)(1)), is 
     amended to read as follows:
       ``(h)(1)(A) Each participant who has performed military 
     service before the date of separation on which entitlement to 
     an annuity under this title is based may pay to the Agency an 
     amount equal to 7 percent of the amount of basic pay paid 
     under section 204 of title 37, United States Code, to the 
     participant for each period of military service after 
     December 1956; except, the amount to be paid for military 
     service performed beginning on January 1, 1999, through 
     December 31, 2002, shall be as follows:
       

``7.25 percent of basic pay...............  January 1, 1999, to December
                                             31, 1999.                  
7.4 percent of basic pay..................  January 1, 2000, to December
                                             31, 2000.                  
7.5 percent of basic pay..................  January 1, 2001, to December
                                             31, 2002.                  
                                                                        

       ``(B) The amount of such payments shall be based on such 
     evidence of basic pay for military service as the participant 
     may provide or, if the Director determines sufficient 
     evidence has not been provided to adequately determine basic 
     pay for military service, such payment shall be based upon 
     estimates of such basic pay provided to the Director under 
     paragraph (4).''.
       (d) Foreign Service Retirement and Disability System.--
       (1) Agency contributions.--Notwithstanding section 805(a) 
     (1) and (2) of the Foreign Service Act of 1980 (22 U.S.C. 
     4045(a) (1) and (2)), during the period beginning on October 
     1, 1997, through September 30, 2002, each agency employing a 
     participant in the Foreign Service Retirement and Disability 
     System shall contribute to the Foreign Service Retirement and 
     Disability Fund--
       (A) 8.51 percent of the basic pay of each participant 
     covered under section 805(a)(1) of such Act participating in 
     the Foreign Service Retirement and Disability System; and
       (B) 9.01 percent of the basic pay of each participant 
     covered under section 805(a)(2) of such Act participating in 
     the Foreign Service Retirement and Disability System;

     in lieu of the agency contribution otherwise required under 
     section 805(a) (1) and (2) of such Act.
       (2) Individual deductions, withholdings, and deposits.--
       (A) In general.--Notwithstanding section 805(a)(1) of the 
     Foreign Service Act of 1980 (22 U.S.C. 4045(a)(1)), beginning 
     on January 1, 1999, through December 31, 2002, the amount 
     withheld and deducted from the basic pay of a participant in 
     the Foreign Service Retirement and Disability System shall be 
     as follows:
       

7.25......................................  January 1, 1999, to December
                                             31, 1999.                  
7.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
7.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
                                                                        

       (B) Foreign service criminal investigators/inspectors of 
     the office of the inspector general, agency for international 
     development.--Notwithstanding section 805(a)(2) of the 
     Foreign Service Act of 1980 (22 U.S.C. 4045(a)(2)), beginning 
     on January 1, 1999, through December 31, 2002, the amount 
     withheld and deducted from the basic pay of an eligible 
     Foreign Service criminal investigator/inspector of the Office 
     of the Inspector General, Agency for International 
     Development participating in the Foreign Service Retirement 
     and Disability System shall be as follows:
       

7.75......................................  January 1, 1999, to December
                                             31, 1999.                  
7.9.......................................  January 1, 2000, to December
                                             31, 2000.                  
8.........................................  January 1, 2001, to December
                                             31, 2002.                  
                                                                        

       (C) Conforming amendment.--Section 805(d)(1) of the Foreign 
     Service Act of 1980 (22 U.S.C. 4045(d)(1)) is amended in the 
     table in the matter following subparagraph (B) by striking:
       

``On and after January 1, 1970.................................     7'';
                                                                        

     and inserting the following:
       

``January 1, 1970, through December 31, 1998, inclusive........        7
January 1, 1999, through December 31, 1999, inclusive..........     7.25
January 1, 2000, through December 31, 2000, inclusive..........      7.4
January 1, 2001, through December 31, 2002, inclusive..........      7.5
After December 31, 2002........................................     7''.
                                                                        

       (D) Military service.--Section 805(e) of the Foreign 
     Service Act of 1980 (22 U.S.C. 4045(e)) is amended--
       (i) in subsection (e)(1) by striking ``Each'' and inserting 
     ``Subject to paragraph (5), each''; and
       (ii) by adding after paragraph (4) the following new 
     paragraph:
       ``(5) Effective with respect to any period of military or 
     naval service after December 31, 1998, the percentage of 
     basic pay under section 204 of title 37, United States Code, 
     payable under paragraph (1) shall be equal to the same 
     percentage as would be applicable under section 8334(c) of 
     title 5, United States Code, for that same period for service 
     as an employee.''.
       (e) Foreign Service Pension System.--
       (1) Individual deductions and withholdings from pay.--
       (A) In general.--Section 856(a) of the Foreign Service Act 
     of 1980 (22 U.S.C. 4071e(a)) is amended to read as follows:

[[Page H6136]]

       ``(a)(1) The employing agency shall deduct and withhold 
     from the basic pay of each participant the applicable 
     percentage of basic pay specified in paragraph (2) of this 
     subsection minus the percentage then in effect under section 
     3101(a) of the Internal Revenue Code of 1986 (26 U.S.C. 
     3101(a)) (relating to the rate of tax for old age, survivors, 
     and disability insurance).
       ``(2) The applicable percentage under this subsection shall 
     be as follows:
       

``7.5.....................................  Before January 1, 1999.     
7.75......................................  January 1, 1999, to December
                                             31, 1999.                  
 7.9......................................  January 1, 2000, to December
                                             31, 2000.                  
8.........................................  January 1, 2001, to December
                                             31, 2002.                  
7.5.......................................  After December 31, 2002.''. 
                                                                        

       (B) Volunteer service.--Subsection 854(c) of the Foreign 
     Service Act of 1980 (22 U.S.C. 4071c(c)) is amended to read 
     as follows:
       ``(c)(1) Credit shall be given under this System to a 
     participant for a period of prior satisfactory service as--
       ``(A) a volunteer or volunteer leader under the Peace Corps 
     Act (22 U.S.C. 2501 et seq.),

       ``(B) a volunteer under part A of title VIII of the 
     Economic Opportunity Act of 1964, or
       ``(C) a full-time volunteer for a period of service of at 
     least 1 year's duration under part A, B, or C of title I of 
     the Domestic Volunteer Service Act of 1973 (42 U.S.C. 4951 et 
     seq.),
     if the participant makes a payment to the Fund equal to 3 
     percent of pay received for the volunteer service; except, 
     the amount to be paid for volunteer service beginning on 
     January 1, 1999, through December 31, 2002, shall be as 
     follows:
       

``3.25....................................  January 1, 1999, to December
                                             31, 1999.                  
3.4.......................................  January 1, 2000, to December
                                             31, 2000.                  
3.5.......................................  January 1, 2001, to December
                                             31, 2002.                  
                                                                        

       ``(2) The amount of such payments shall be determined in 
     accordance with regulations of the Secretary of State 
     consistent with regulations for making corresponding 
     determinations under chapter 83, title 5, United States Code, 
     together with interest determined under regulations issued by 
     the Secretary of State.''.
       (2) No reduction in agency contributions.--Agency 
     contributions under section 857 of the Foreign Service Act of 
     1980 (22 U.S.C. 4071f) shall not be reduced as a result of 
     the amendments made under paragraph (1) of this subsection.
       (f) Effective Date.--
       (1) In general.--This section shall take effect on--
       (A) October 1, 1997; or
       (B) if later, the date of enactment of this Act.
       (2) Special rule.--If the date of enactment of this Act is 
     later than October 1, 1997, then any reference to October 1, 
     1997, in subsection (a)(1), (c)(1), or (d)(1) shall be 
     treated as a reference to the date of enactment of this Act.

     SEC. 7002. GOVERNMENT CONTRIBUTIONS UNDER THE FEDERAL 
                   EMPLOYEES HEALTH BENEFITS PROGRAM.

       (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) Not later than October 1 of each year, the Office 
     of Personnel Management shall 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 shall take effect on the 
     first day of the contract year that begins in 1999. 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 this section.

     SEC. 7003. 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 
     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.
                TITLE VIII--VETERANS AND RELATED MATTERS

     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. Enhanced loan asset sale authority.
Sec. 8012. Home loan fees.
Sec. 8013. Procedures applicable to liquidation sales on defaulted home 
              loans guaranteed by the Department of Veterans Affairs.
Sec. 8014. Income verification authority.
Sec. 8015. Limitation on pension for certain recipients of medicaid-
              covered nursing home care.

         Subtitle B--Copayments and Medical Care Cost Recovery

Sec. 8021. Authority to require that certain veterans make copayments 
              in exchange for receiving health care benefits.
Sec. 8022. Medical care cost recovery authority.
Sec. 8023. Department of Veterans Affairs medical-care receipts.

                       Subtitle C--Other Matters

Sec. 8031. Rounding down of cost-of-living adjustments in compensation 
              and DIC rates for fiscal years 1998 through 2002.
Sec. 8032. Increase in amount of home loan fees for the purchase of 
              repossessed homes from the Department of Veterans 
              Affairs.
Sec. 8033. Withholding of payments and benefits.
             Subtitle A--Extension of Temporary Authorities

     SEC. 8011. 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 ``December 31, 2002''.

     SEC. 8012. HOME LOAN FEES.

       Section 3729(a) of title 38, United States Code, is 
     amended--
       (1) in paragraph (4), by striking out ``October 1, 1998'' 
     and inserting in lieu thereof ``October 1, 2002''; and
       (2) in paragraph (5)(C), by striking out ``October 1, 
     1998'' and inserting in lieu thereof ``October 1, 2002''.

     SEC. 8013. PROCEDURES APPLICABLE TO LIQUIDATION SALES ON 
                   DEFAULTED HOME LOANS GUARANTEED BY THE 
                   DEPARTMENT OF VETERANS AFFAIRS.

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

     SEC. 8014. INCOME VERIFICATION AUTHORITY.

       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''.

     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''.
         Subtitle B--Copayments and Medical Care Cost Recovery

     SEC. 8021. 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. 8022. MEDICAL CARE COST RECOVERY AUTHORITY.

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

[[Page H6137]]

     SEC. 8023. 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 June 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.
       ``(3)(A) If for fiscal year 1998 the Secretary determines 
     that the total amount to be recovered 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 fiscal year 1998 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) If for fiscal year 1998 a deposit is made under 
     subparagraph (A) and 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) If for fiscal year 1998 a deposit is made under 
     subparagraph (A) and 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) Of the total amount recovered or collected by the 
     Department during a fiscal year under the provisions of law 
     referred to in subsection (b) and made available from the 
     fund, the Secretary shall make available to each designated 
     health care region of the Department an amount that bears the 
     same ratio to the total amount so made available as the 
     amount recovered or collected by such region during that 
     fiscal year under such provisions of law bears to such total 
     amount recovered or collected during that fiscal year. The 
     Secretary shall make available to each region the entirety of 
     the amount specified to be made available to such region by 
     the preceding sentence.
       ``(2) In this subsection, the term `designated health care 
     regions of the Department' means the geographic areas 
     designated by the Secretary for purposes of the management 
     of, and allocation of resources for, health care services 
     provided by the Department.
       ``(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.
       ``(f) Amounts recovered or collected under the provisions 
     of law referred to in subsection (b) shall be treated for the 
     purposes of sections 251 and 252 of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 (2 U.S.C. 901, 902) as 
     offsets to discretionary appropriations (rather than as 
     offsets to direct spending) to the extent that such amounts 
     are made available for expenditure in appropriations Acts for 
     the purposes specified in subsection (c).''.
       (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) Disposition of Funds in 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 June 30, 1997, shall be 
     deposited, not later than December 31, 1997, in the Treasury 
     as miscellaneous receipts, and the Department of Veterans 
     Affairs Medical-Care Cost Recovery Fund shall be terminated 
     when the deposit is made.
       (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''; and
       (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.--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.
       (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.
                       Subtitle C--Other Matters

     SEC. 8031. ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN 
                   COMPENSATION AND DIC RATES FOR FISCAL YEARS 
                   1998 THROUGH 2002.

       (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 the item relating to section 
     1102 the following new item:
``1103. Cost-of-living adjustments.''.

       (b) 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 (except as provided in subsection (b)) 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

[[Page H6138]]

     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. 8032. INCREASE IN AMOUNT OF HOME LOAN FEES FOR THE 
                   PURCHASE OF REPOSSESSED HOMES FROM THE 
                   DEPARTMENT OF VETERANS AFFAIRS.

       Section 3729(a) of title 38, United States Code, is 
     amended--
       (1) in paragraph (2)--
       (A) in subparagraph (A), by striking out ``or 3733(a)'';
       (B) in subparagraph (D), by striking out ``and'' at the 
     end;
       (C) in subparagraph (E), by striking out the period at the 
     end and inserting in lieu thereof ``; and''; and
       (D) by adding at the end the following:
       ``(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.''; and
       (2) in paragraph (4), as amended by section 8012(1) of this 
     Act, by striking out ``or (E)'' and inserting in lieu thereof 
     ``(E), or (F)''.

     SEC. 8033. 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--
       (1) by inserting ``(a)'' before ``No officer''; and
       (2) 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.''; and
       (3) by adding at the end the following new subsections:
       ``(b) 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.
       ``(c) 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 enactment of 
     this Act.
     TITLE IX--ASSET SALES, USER FEES, AND MISCELLANEOUS PROVISIONS

     SEC. 9000. TABLE OF CONTENTS.

       The table of contents for this title is as follows:

     TITLE IX--ASSET SALES, USER FEES, AND MISCELLANEOUS PROVISIONS

Sec. 9000. Table of contents.

                        Subtitle A--Asset Sales

Sec. 9101. Sale of Governors Island, New York.
Sec. 9102. Sale of air rights.

                         Subtitle B--User Fees

Sec. 9201. Extension of higher vessel tonnage duties.

                  Subtitle C--Miscellaneous Provisions

Sec. 9301. Temporary Federal share formula adjustment.
Sec. 9302. Increase in excise taxes on tobacco products.
Sec. 9303. Lease of excess strategic petroleum reserve capacity.
                        Subtitle A--Asset Sales

     SEC. 9101. SALE OF GOVERNORS ISLAND, NEW YORK.

       (a) In General.--Notwithstanding any other provision of 
     law, the Administrator of General Services shall, no earlier 
     than fiscal year 2002, 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 Offer.--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 
     offer to purchase all or part of Governors Island at fair 
     market value as determined by the Administrator of General 
     Services. Not later than 90 days after notification by the 
     Administrator of General Services, 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. 9102. 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.
                         Subtitle B--User Fees

     SEC. 9201. 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 1991 through 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, 1998,'' and inserting 
     ``for fiscal years 1991 through 2002,''.
                  Subtitle C--Miscellaneous Provisions

     SEC. 9301. TEMPORARY FEDERAL SHARE FORMULA ADJUSTMENT.

       The Federal share of the cost of assistance provided under 
     the Robert T. Stafford Disaster Relief and Emergency 
     Assistance Act (42 U.S.C. 5121 et seq.) for damages suffered 
     in Kittson, Marshall, Polk, Norman, Clay, and Wilkin 
     Counties, Minnesota, as a result of the 1997 floods in the 
     Red River Valley in Minnesota and North Dakota shall be at 
     least 90 percent.

     SEC. 9302. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS.

       (a) Cigarettes.--Subsection (b) of section 5701 of the 
     Internal Revenue Code of 1986 is amended--
       (1) by striking ``$12 per thousand ($10 per thousand on 
     cigarettes removed during 1991 or 1992)'' in paragraph (1) 
     and inserting ``$19.50 per thousand ($17 per thousand on 
     cigarettes removed during 2000 or 2001)'', and
       (2) by striking ``$25.20 per thousand ($21 per thousand on 
     cigarettes removed during 1991 or 1992)'' in paragraph (2) 
     and inserting ``$40.95 per thousand ($35.70 per thousand on 
     cigarettes removed during 2000 or 2001)''.
       (b) Cigars.--Subsection (a) of section 5701 of such Code is 
     amended--
       (1) by striking ``$1.125 cents per thousand (93.75 cents 
     per thousand on cigars removed during 1991 or 1992)'' in 
     paragraph (1) and inserting ``$1.828 cents per thousand 
     ($1.594 cents per thousand on cigars removed during 2000 or 
     2001)'', and
       (2) by striking ``equal to'' and all that follows in 
     paragraph (2) and inserting ``equal to 20.719 percent (18.063 
     percent on cigars removed during 2000 or 2001) of the price 
     for which sold but not more than $48.75 per thousand ($42.50 
     per thousand on cigars removed during 2000 or 2001).''.
       (c) Cigarette Papers.--Subsection (c) of section 5701 of 
     such Code is amended by striking ``0.75 cent (0.625 cent on 
     cigarette papers removed during 1991 or 1992)'' and inserting 
     ``1.22 cents (1.06 cents on cigarette papers removed during 
     2000 or 2001)''.
       (d) Cigarette Tubes.--Subsection (d) of section 5701 of 
     such Code is amended by striking ``1.5 cents (1.25 cents on 
     cigarette tubes removed during 1991 or 1992)'' and inserting 
     ``2.44 cents (2.13 cents on cigarette tubes removed during 
     2000 or 2001)''.
       (e) Smokeless Tobacco.--Subsection (e) of section 5701 of 
     such Code is amended--
       (1) by striking ``36 cents (30 cents on snuff removed 
     during 1991 or 1992)'' in paragraph (1) and inserting ``58.5 
     cents (51 cents on snuff removed during 2000 or 2001)'', and
       (2) by striking ``12 cents (10 cents on chewing tobacco 
     removed during 1991 or 1992)'' in paragraph (2) and inserting 
     ``19.5 cents (17 cents on chewing tobacco removed during 2000 
     or 2001)''.
       (f) Pipe Tobacco.--Subsection (f) of section 5701 of such 
     Code is amended by striking ``67.5 cents (56.25 cents on pipe 
     tobacco removed during 1991 or 1992)'' and inserting 
     ``$1.0969 cents (95.67 cents on pipe tobacco removed during 
     2000 or 2001)''.
       (g) Imposition of Excise Tax on Manufacture or Importation 
     of Roll-Your-Own Tobacco.--
       (1) In general.--Section 5701 of such Code (relating to 
     rate of tax) is amended by redesignating subsection (g) as 
     subsection (h) and by inserting after subsection (f) the 
     following new subsection:
       ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco, 
     manufactured in or imported into the United States, there 
     shall be imposed a tax of $1.0969 cents (95.67 cents on roll-
     your-own tobacco removed during 2000 or 2001) per pound (and 
     a proportionate tax at the like rate on all fractional parts 
     of a pound).''.
       (2) Roll-your-own tobacco.--Section 5702 of such Code 
     (relating to definitions) is amended by adding at the end the 
     following new subsection:
       ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own 
     tobacco' means any tobacco which, because of its appearance, 
     type, packaging, or labeling, is suitable for use and likely 
     to be offered to, or purchased by, consumers as tobacco for 
     making cigarettes.''.

[[Page H6139]]

       (3) Technical amendments.--
       (A) Subsection (c) of section 5702 of such Code is amended 
     by striking ``and pipe tobacco'' and inserting ``pipe 
     tobacco, and roll-your-own tobacco''.
       (B) Subsection (d) of section 5702 of such Code is 
     amended--
       (i) in the material preceding paragraph (1), by striking 
     ``or pipe tobacco'' and inserting ``pipe tobacco, or roll-
     your-own tobacco'', and
       (ii) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) a person who produces cigars, cigarettes, smokeless 
     tobacco, pipe tobacco, or roll-your-own tobacco solely for 
     the person's own personal consumption or use, and''.
       (C) The chapter heading for chapter 52 of such Code is 
     amended to read as follows:

    ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

       (D) The table of chapters for subtitle E of such Code is 
     amended by striking the item relating to chapter 52 and 
     inserting the following new item:

``Chapter 52. Tobacco products and cigarette papers and tubes.''.

       (h) Modifications of Certain Tobacco Tax Provisions.--
       (1) Exemption for exported tobacco products and cigarette 
     papers and tubes to apply only to articles marked for 
     export.--
       (A) Subsection (b) of section 5704 of such Code is amended 
     by adding at the end the following new sentence: ``Tobacco 
     products and cigarette papers and tubes may not be 
     transferred or removed under this subsection unless such 
     products or papers and tubes bear such marks, labels, or 
     notices as the Secretary shall by regulations prescribe.''.
       (B) Section 5761 of such Code is amended by redesignating 
     subsections (c) and (d) as subsections (d) and (e), 
     respectively, and by inserting after subsection (b) the 
     following new subsection:
       ``(c) Sale of Tobacco Products and Cigarette Papers and 
     Tubes for Export.--Except as provided in subsections (b) and 
     (d) of section 5704--
       ``(1) every person who sells, relands, or receives within 
     the jurisdiction of the United States any tobacco products or 
     cigarette papers or tubes which have been labeled or shipped 
     for exportation under this chapter,
       ``(2) every person who sells or receives such relanded 
     tobacco products or cigarette papers or tubes, and
       ``(3) every person who aids or abets in such selling, 
     relanding, or receiving,

     shall, in addition to the tax and any other penalty provided 
     in this title, be liable for a penalty equal to the greater 
     of $1,000 or 5 times the amount of the tax imposed by this 
     chapter. All tobacco products and cigarette papers and tubes 
     relanded within the jurisdiction of the United States, and 
     all vessels, vehicles, and aircraft used in such relanding or 
     in removing such products, papers, and tubes from the place 
     where relanded, shall be forfeited to the United States.''.
       (C) Subsection (a) of section 5761 of such Code is amended 
     by striking ``subsection (b)'' and inserting ``subsection (b) 
     or (c)''.
       (D) Subsection (d) of section 5761 of such Code, as 
     redesignated by subparagraph (B), is amended by striking 
     ``The penalty imposed by subsection (b)'' and inserting ``The 
     penalties imposed by subsections (b) and (c)''.
       (E)(i) Subpart F of chapter 52 of such Code is amended by 
     adding at the end the following new section:

     ``SEC. 5754. RESTRICTION ON IMPORTATION OF PREVIOUSLY 
                   EXPORTED TOBACCO PRODUCTS.

       ``(a) In General.--Tobacco products and cigarette papers 
     and tubes previously exported from the United States may be 
     imported or brought into the United States only as provided 
     in section 5704(d). For purposes of this section, section 
     5704(d), section 5761, and such other provisions as the 
     Secretary may specify by regulations, references to 
     exportation shall be treated as including a reference to 
     shipment to the Commonwealth of Puerto Rico.
       ``(b) Cross Reference.--

  ``For penalty for the sale of tobacco products and cigarette papers 
and tubes in the United States which are labeled for export, see 
section 5761(c).''.

       (ii) The table of sections for subpart F of chapter 52 of 
     such Code is amended by adding at the end the following new 
     item:

``Sec. 5754. Restriction on importation of previously exported tobacco 
              products.''.

       (2) Importers required to be qualified.--
       (A) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 
     5763 (b) and (c) of such Code are each amended by inserting 
     ``or importer'' after ``manufacturer''.
       (B) The heading of subsection (b) of section 5763 of such 
     Code is amended by inserting ``Qualified Importers,'' after 
     ``Manufacturers,''.
       (C) The heading for subchapter B of chapter 52 of such Code 
     is amended by inserting ``and Importers'' after 
     ``Manufacturers''.
       (D) The item relating to subchapter B in the table of 
     subchapters for chapter 52 of such Code is amended by 
     inserting ``and importers'' after ``manufacturers''.
       (3) Books of 25 or fewer cigarette papers subject to tax.--
     Subsection (c) of section 5701 of such Code is amended by 
     striking ``On each book or set of cigarette papers containing 
     more than 25 papers,'' and inserting ``On cigarette 
     papers,''.
       (4) Storage of tobacco products.--Subsection (k) of section 
     5702 of such Code is amended by inserting ``under section 
     5704'' after ``internal revenue bond''.
       (5) Authority to prescribe minimum manufacturing activity 
     requirements.--Section 5712 of such Code is amended by 
     striking ``or'' at the end of paragraph (1), by redesignating 
     paragraph (2) as paragraph (3), and by inserting after 
     paragraph (1) the following new paragraph:
       ``(2) the activity proposed to be carried out at such 
     premises does not meet such minimum capacity or activity 
     requirements as the Secretary may prescribe, or''.
       (i) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to articles removed (as defined in section 5702(k) of 
     the Internal Revenue Code of 1986, as amended by this 
     section) after December 31, 1999.
       (2) Transitional rule.--Any person who--
       (A) on the date of the enactment of this Act is engaged in 
     business as a manufacturer of roll-your-own tobacco or as an 
     importer of tobacco products or cigarette papers and tubes, 
     and
       (B) before January 1, 2000, submits an application under 
     subchapter B of chapter 52 of such Code to engage in such 
     business,

     may, notwithstanding such subchapter B, continue to engage in 
     such business pending final action on such application. 
     Pending such final action, all provisions of such chapter 52 
     shall apply to such applicant in the same manner and to the 
     same extent as if such applicant were a holder of a permit 
     under such chapter 52 to engage in such business.
       (j) Floor Stocks Taxes.--
       (1) Imposition of tax.--On tobacco products and cigarette 
     papers and tubes manufactured in or imported into the United 
     States which are removed before any tax increase date, and 
     held on such date for sale by any person, there is hereby 
     imposed a tax in an amount equal to the excess of--
       (A) the tax which would be imposed under section 5701 of 
     the Internal Revenue Code of 1986 on the article if the 
     article had been removed on such date, over
       (B) the prior tax (if any) imposed under section 5701 of 
     such Code on such article.
       (2) Authority to exempt cigarettes held in vending 
     machines.--To the extent provided in regulations prescribed 
     by the Secretary, no tax shall be imposed by paragraph (1) on 
     cigarettes held for retail sale on any tax increase date, by 
     any person in any vending machine. If the Secretary provides 
     such a benefit with respect to any person, the Secretary may 
     reduce the $500 amount in paragraph (3) with respect to such 
     person.
       (3) Credit against tax.--Each person shall be allowed as a 
     credit against the taxes imposed by paragraph (1) an amount 
     equal to $500. Such credit shall not exceed the amount of 
     taxes imposed by paragraph (1) on any tax increase date, for 
     which such person is liable.
       (4) Liability for tax and method of payment.--
       (A) Liability for tax.--A person holding cigarettes on any 
     tax increase date, to which any tax imposed by paragraph (1) 
     applies shall be liable for such tax.
       (B) Method of payment.--The tax imposed by paragraph (1) 
     shall be paid in such manner as the Secretary shall prescribe 
     by regulations.
       (C) Time for payment.--The tax imposed by paragraph (1) 
     shall be paid on or before April 1 following any tax increase 
     date.
       (5) Articles in foreign trade zones.--Notwithstanding the 
     Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
     other provision of law, any article which is located in a 
     foreign trade zone on any tax increase date, shall be subject 
     to the tax imposed by paragraph (1) if--
       (A) internal revenue taxes have been determined, or customs 
     duties liquidated, with respect to such article before such 
     date pursuant to a request made under the 1st proviso of 
     section 3(a) of such Act, or
       (B) such article is held on such date under the supervision 
     of a customs officer pursuant to the 2d proviso of such 
     section 3(a).
       (6) Definitions.--For purposes of this subsection--
       (A) In general.--Terms used in this subsection which are 
     also used in section 5702 of the Internal Revenue Code of 
     1986 shall have the respective meanings such terms have in 
     such section, as amended by this Act.
       (B) Tax increase date.--The term ``tax increase date'' 
     means January 1, 2000, and January 1, 2002.
       (C) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury or the Secretary's delegate.
       (7) Controlled groups.--Rules similar to the rules of 
     section 5061(e)(3) of such Code shall apply for purposes of 
     this subsection.
       (8) Other laws applicable.--All provisions of law, 
     including penalties, applicable with respect to the taxes 
     imposed by section 5701 of such Code shall, insofar as 
     applicable and not inconsistent with the provisions of this 
     subsection, apply to the floor stocks taxes imposed by 
     paragraph (1), to the same extent as if such taxes were 
     imposed by such section 5701. The Secretary may treat any 
     person who bore the ultimate burden of the tax imposed by 
     paragraph (1) as the person to whom a credit or refund under 
     such provisions may be allowed or made.

     SEC. 9303. 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

[[Page H6140]]

     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 related costs of storage and removals of petroleum 
     products (including the proportionate cost of replacement 
     facilities necessitated as a result of any withdrawals) 
     incurred by the United States on behalf of the foreign 
     government or its representative.
       ``(c) Access to Stored Oil.--The Secretary shall ensure 
     that agreements to store petroleum products for foreign 
     governments or their representatives do not impair the 
     ability of the United States to withdraw, distribute, or 
     sell petroleum products 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, 2007, shall be used by 
     the Secretary of Energy without further appropriation for the 
     purchase of petroleum products for 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.''.

     SEC. 9304. IDENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO 
                   LINE ITEM VETO.

       Section 1021(a)(3) of the Congressional Budget Act of 1974 
     shall only apply to 3306(c)(21) of the Internal Revenue Code 
     of 1986 (as added by section 5406 of this Act).

     SEC. 9305. PAYMENT OF BENEFITS IN APPROPRIATE FISCAL YEAR.

       Section 5120(e) of title 38, United States Code, shall not 
     apply to benefit payments otherwise payable on October 1, 
     2000.
           TITLE X--BUDGET ENFORCEMENT AND PROCESS PROVISIONS

     SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 10001. Short title; table of contents.

  Subtitle A--Amendments to the Congressional Budget and Impoundment 
                          Control Act of 1974

Sec. 10101. Amendment to section 3.
Sec. 10102. Amendments to section 201.
Sec. 10103. Amendments to section 202.
Sec. 10104. Amendment to section 300.
Sec. 10105. Amendments to section 301.
Sec. 10106. Amendments to section 302.
Sec. 10107. Amendments to section 303.
Sec. 10108. Amendment to section 304.
Sec. 10109. Amendment to section 305.
Sec. 10110. Amendments to section 308.
Sec. 10111. Amendments to section 310.
Sec. 10112. Amendments to section 311.
Sec. 10113. Amendment to section 312.
Sec. 10114. Adjustments.
Sec. 10115. Effect of adoption of a special order of business in the 
              House of Representatives.
Sec. 10116. Amendment to section 401 and repeal of section 402.
Sec. 10117. Amendments to title V.
Sec. 10118. Repeal of title VI.
Sec. 10119. Amendments to section 904.
Sec. 10120. Repeal of sections 905 and 906.
Sec. 10121. Amendments to sections 1022 and 1024.
Sec. 10122. Amendment to section 1026.
Sec. 10123. Senate task force on consideration of budget measures.

  Subtitle B--Amendments to the Balanced Budget and Emergency Deficit 
                          Control Act of 1985

Sec. 10201. Purpose.
Sec. 10202. General statement and definitions.
Sec. 10203. Enforcing discretionary spending limits.
Sec. 10204. Violent crime reduction spending.
Sec. 10205. Enforcing pay-as-you-go.
Sec. 10206. Reports and orders.
Sec. 10207. Exempt programs and activities.
Sec. 10208. General and special sequestration rules.
Sec. 10209. The baseline.
Sec. 10210. Technical correction.
Sec. 10211. Judicial review.
Sec. 10212. Effective date.
Sec. 10213. 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. 10101. AMENDMENT TO SECTION 3.

       Section 3(9) of the Congressional Budget and Impoundment 
     Control Act of 1974 is amended to read as follows:
       ``(9) The term `entitlement authority' means--
       ``(A) the authority 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 that 
     authority, the United States is obligated to make such 
     payments to persons or governments who meet the requirements 
     established by that law; and
       ``(B) the food stamp program.''.

     SEC. 10102. 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 4 years and shall expire on January 3 of the year 
     preceding each Presidential election.''.
       (b) Conforming Change.--Section 201(e) of the Congressional 
     Budget Act of 1974 is amended by inserting ``and'' before 
     ``the Library'', by striking ``and the Office of Technology 
     Assessment,'', by inserting ``and'' before ``the Librarian'', 
     and by striking ``, and the Technology Assessment Board''.
       (c) 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. 10103. 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.
       (c) Reporting Requirement.--The first sentence of section 
     202(e)(1) of the Congressional Budget Act of 1974 (as 
     redesignated) is amended by--
       (1) striking ``and'' before ``(B)''; and
       (2) inserting before the period the following: ``, and (C) 
     a statement of the levels of budget authority and outlays for 
     each program assumed to be extended in the baseline, as 
     provided in section 257(b)(2)(A) and for excise taxes assumed 
     to be extended under section 257(b)(2)(C) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985''.

     SEC. 10104. AMENDMENT TO SECTION 300.

       (a) Timetable.--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 ``Not later than 6 weeks after President submits 
     budget''.
       (b) Conforming Amendments.--(1) Clause 4(g) of rule X of 
     the Rules of the House of Representatives is amended by 
     striking ``on or before February 25 of each year'' and 
     inserting ``not later than 6 weeks after the President 
     submits his budget''.
       (2) Clause 3(c) of rule XLVIII of the Rules of the House of 
     Representatives is amended by striking ``On or before March 
     15 of each year'' and inserting ``Within 6 weeks after the 
     President submits a budget under section 1105(a) of title 31, 
     United States Code'' and by striking ``section 301(c)'' and 
     inserting ``section 301(d)''.

     SEC. 10105. 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 outlays''.
       (c) Additional Matters.--Section 301(b) of the 
     Congressional Budget Act of 1974 is amended by--
       (1) striking paragraph (7) and inserting the following:
       ``(7) set forth procedures in the Senate whereby committee 
     allocations, aggregates, and other levels can be revised for 
     legislation if that legislation would not increase the 
     deficit, or would not increase the deficit when taken with 
     other legislation enacted after the adoption of the 
     resolution, for the first fiscal year or the total period 
     of fiscal years covered by the resolution;'';
       (2) in paragraph 8, striking the period and inserting ``; 
     and''; and
       (3) adding the following new paragraph:
       ``(9) set forth direct loan obligation and primary loan 
     guarantee commitment levels.''.
       (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) of the 
     Congressional Budget Act of 1974 is amended--
       (1) by striking ``In developing'' and inserting the 
     following:
       ``(1) In general.--In developing''; and
       (2) by striking the sentence beginning with ``The report 
     accompanying'' and all that follows through the end of the 
     subsection and inserting the following:
       ``(2) Required contents of report.--The report accompanying 
     the resolution shall include--
       ``(A) a comparison of the levels of total new budget 
     authority, total outlays, total revenues, and the surplus or 
     deficit for each fiscal year set forth in the resolution with 
     those requested in the budget submitted by the President;
       ``(B) with respect to each major functional category, an 
     estimate of total new budget authority and total outlays, 
     with the estimates divided between discretionary and 
     mandatory amounts;
       ``(C) the economic assumptions that underlie each of the 
     matters set forth in the resolution and any alternative 
     economic assumptions and objectives the committee considered;
       ``(D) information, data, and comparisons indicating the 
     manner in which, and the basis on which, the committee 
     determined each of the matters set forth in the resolution;
       ``(E) the estimated levels of tax expenditures (the tax 
     expenditures budget) by major items and functional categories 
     for the President's budget and in the resolution; and
       ``(F) allocations described in section 302(a).

[[Page H6141]]

       ``(3) Additional contents of report.--The report 
     accompanying the resolution may include--
       ``(A) a statement of any significant changes in the 
     proposed levels of Federal assistance to State and local 
     governments;
       ``(B) an allocation of the level of Federal revenues 
     recommended in the resolution among the major sources of such 
     revenues;
       ``(C) information, data, and comparisons on the share of 
     total Federal budget outlays and of gross domestic product 
     devoted to investment in the budget submitted by the 
     President and in the resolution;
       ``(D) the assumed levels of budget authority and outlays 
     for public buildings, with a division between amounts for 
     construction and repair and for rental payments; and
       ``(E) other matters, relating to the budget and to fiscal 
     policy, that the committee deems appropriate.''.
       (f) Social Security Corrections.--(1) Section 301(i) of the 
     Congressional Budget Act of 1974 is amended by--
       (A) inserting ``Social Security Point of Order.--'' after 
     ``(i)''; and
       (B) striking ``as reported to the Senate'' and inserting 
     ``(or amendment, motion, or conference report on the 
     resolution)''; and
       (2) Section 22 of House Concurrent Resolution 218 (103d 
     Congress) is repealed.

     SEC. 10106. AMENDMENTS TO SECTION 302.

       (a) Allocations and Suballocations.--Section 302 of the 
     Congressional Budget Act of 1974 is amended by striking 
     subsections (a) and (b) and inserting the following:
       ``(a) Committee Spending Allocations.--
       ``(1) Allocation among committees.--The joint explanatory 
     statement accompanying a conference report on a concurrent 
     resolution on the budget shall include an allocation, 
     consistent with the resolution recommended in the conference 
     report, of the levels for the first fiscal year of the 
     resolution, for at least each of the ensuing 4 fiscal years, 
     and a total for that period of fiscal years (except in the 
     case of the Committee on Appropriations only for the fiscal 
     year of that resolution) of--
       ``(A) total new budget authority; and
       ``(B) total 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 committee.
       ``(3) Further division of amounts.--
       ``(A) In the senate.--In the Senate, the amount allocated 
     to the Committee on Appropriations shall be further divided 
     among the categories specified in section 250(c)(4) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 and 
     shall not exceed the limits for each category set forth in 
     section 251(c) of that Act.
       ``(B) In the house.--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 shall be further divided--
       ``(i) between discretionary and mandatory amounts or 
     programs, as appropriate; and
       ``(ii) consistent with the categories specified in section 
     250(c)(4) of the Balanced Budget and Emergency Deficit 
     Control Act of 1985.
       ``(4) Amounts not allocated.--In the House of 
     Representatives or the Senate, 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.
       ``(5) 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 levels in the most 
     recently agreed to concurrent resolution on the budget for 
     the appropriate 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 report those 
     suballocations to the House of Representatives.
       ``(b) Suballocations by Appropriations 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 subsection. The Committee on Appropriations of the 
     House of Representatives shall further divide among its 
     subcommittees the divisions made under subsection (a)(3)(B) 
     and promptly report those divisions to the House.''.
       (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 within the jurisdiction of that committee providing 
     new budget authority for that fiscal year, until that 
     committee makes the suballocations required by subsection 
     (b).''.
       (c) Enforcement of Point of Order.--
       (1) In the house.--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''; and
       (B) striking ``appropriate allocation made pursuant to 
     subsection (b)'' and all that follows through ``exceeded.'' 
     and inserting ``applicable allocation of new budget authority 
     made under subsection (a) or (b) for the first fiscal year or 
     the total of fiscal years to be exceeded.''.
       (2) In the senate.--Section 302(f)(2) of the Congressional 
     Budget Act of 1974 is amended to read as follows:
       ``(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, joint resolution, amendment, motion, or 
     conference report that would cause--
       ``(A) in the case of any committee except the Committee on 
     Appropriations, the applicable allocation of new budget 
     authority or outlays under subsection (a) for the first 
     fiscal year or the total of fiscal years to be exceeded; or
       ``(B) in the case of the Committee on Appropriations, the 
     applicable suballocation of new budget authority or outlays 
     under subsection (b) to be exceeded.''.
       (d) Pay-As-You-Go Exception in the House.--Section 302(g) 
     of the Congressional Budget Act of 1974 is amended to read as 
     follows:
       ``(g) Pay-as-You-Go Exception in the House.--
       ``(1) In general.--(A) Subsection (f)(1) and, after April 
     15, section 303(a) shall not apply to any bill or joint 
     resolution, as reported, amendment thereto, or conference 
     report thereon if, for each fiscal year covered by the most 
     recently agreed to concurrent resolution on the budget--
       ``(i) the enactment of that bill or resolution as reported;
       ``(ii) the adoption and enactment of that amendment; or
       ``(iii) the enactment of that bill or resolution in the 
     form recommended in that conference report,

     would not increase the deficit, and, if the sum of any 
     revenue increases provided in legislation already enacted 
     during the current session (when added to revenue increases, 
     if any, in excess of any outlay increase provided by the 
     legislation proposed for consideration) is at least as great 
     as the sum of the amount, if any, by which the aggregate 
     level of Federal revenues should be increased as set forth in 
     that concurrent resolution and the amount, if any, by which 
     revenues are to be increased pursuant to pay-as-you-go 
     procedures under section 301(b)(8), if included in that 
     concurrent resolution.
       ``(B) Section 311(a), as that section applies to revenues, 
     shall not apply to any bill, joint resolution, amendment 
     thereto, or conference report thereon if, for each fiscal 
     year covered by the most recently agreed to concurrent 
     resolution on the budget--
       ``(i) the enactment of that bill or resolution as reported;
       ``(ii) the adoption and enactment of that amendment; or
       ``(iii) the enactment of that bill or resolution in the 
     form recommended in that conference report,

     would not increase the deficit, and, if the sum of any outlay 
     reductions provided in legislation already enacted during the 
     current session (when added to outlay reductions, if any, in 
     excess of any revenue reduction provided by the legislation 
     proposed for consideration) is at least as great as the sum 
     of the amount, if any, by which the aggregate level of 
     Federal outlays should be reduced as required by that 
     concurrent resolution and the amount, if any, by which 
     outlays are to be reduced pursuant to pay-as-you-go 
     procedures under section 301(b)(8), if included in that 
     concurrent resolution.
       ``(2) Revised allocations.--(A) As soon as practicable 
     after Congress agrees to a bill or joint resolution that 
     would have been subject to a point of order under subsection 
     (f)(1) but for the exception provided in paragraph (1)(A) or 
     would have been subject to a point of order under section 
     311(a) but for the exception provided in paragraph (1)(B), 
     the chairman of the committee on the Budget of the House of 
     Representatives shall file with the House appropriately 
     revised allocations under section 302(a) and revised 
     functional levels and budget aggregates to reflect that bill.
       ``(B) Such revised allocations, functional levels, and 
     budget aggregates shall be considered for the purposes of 
     this Act as allocations, functional levels, and budget 
     aggregates contained in the most recently agreed to 
     concurrent resolution on the budget.''.

     SEC. 10107. 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 budget-
                   related legislation is considered

       ``Sec. 303. (a) In General.--Until the concurrent 
     resolution on the budget for a fiscal year has been agreed 
     to, it shall not be in order in the House of Representatives, 
     with respect to the first fiscal year covered by that 
     resolution, or the Senate, with respect to any fiscal year 
     covered by that resolution, to consider any bill or joint 
     resolution, amendment or motion thereto, or conference report 
     thereon that--
       ``(1) first provides new budget authority for that fiscal 
     year;
       ``(2) first provides an increase or decrease in revenues 
     during that fiscal year;

[[Page H6142]]

       ``(3) provides an increase or decrease in the public debt 
     limit to become effective during that fiscal year;
       ``(4) in the Senate only, first provides new entitlement 
     authority for that fiscal year; or
       ``(5) in the Senate only, first provides for an increase or 
     decrease in outlays for that fiscal year.
       ``(b) Exceptions in the House.-- In the House of 
     Representatives, subsection (a) does not apply--
       ``(1)(A) to any bill or joint resolution, as reported, 
     providing advance discretionary new budget authority that 
     first becomes available for the first or second fiscal year 
     after the budget year; or
       ``(B) to any bill or joint resolution, as reported, first 
     increasing or decreasing revenues in a fiscal year following 
     the fiscal year to which the concurrent resolution applies;
       ``(2) after May 15, to any general appropriation bill or 
     amendment thereto; or
       ``(3) to any bill or joint resolution unless it is reported 
     by a committee.
       ``(c) Application to Appropriation Measures in the 
     Senate.--
       ``(1) In general.--Until the concurrent resolution on the 
     budget for a fiscal year has been agreed to and an allocation 
     has been made to the Committee on Appropriations of the 
     Senate under section 302(a) for that year, it shall not be in 
     order in the Senate to consider any appropriation bill or 
     joint resolution, amendment or motion thereto, or conference 
     report thereon for that year or any subsequent year.
       ``(2) Exception.--Paragraph (1) does not apply to 
     appropriations legislation making advance appropriations for 
     the first or second fiscal year after the year the allocation 
     referred to in that paragraph is made.''.
       (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 to read as follows:

``Sec. 303. Concurrent resolution on the budget must be adopted before 
              budget-related legislation is considered.''.

     SEC. 10108. AMENDMENT TO SECTION 304.

       Section 304 of the Congressional Budget Act of 1974 is 
     amended by--
       (1) striking ``(a) In General.--''; and
       (2) striking subsection (b).

     SEC. 10109. AMENDMENT TO SECTION 305.

       (a) Budget Act.--Section 305(a)(1) of the Congressional 
     Budget Act of 1974 is amended to read as follows:
       ``(1) When a concurrent resolution on the budget has been 
     reported by the Committee on the Budget of the House of 
     Representatives and has been referred to the appropriate 
     calendar of the House, it shall be in order on any day 
     thereafter, subject to clause 2(l)(6) of rule XI of the Rules 
     of the House of Representatives, to move to proceed to the 
     consideration of the concurrent resolution. The motion is 
     highly privileged and is not debatable. An amendment to the 
     motion is not in order and it is not in order to move to 
     reconsider the vote by which the motion is agreed to or 
     disagreed to.''.
       (b) Conforming Amendment in the House.--The first sentence 
     of clause 2(l)(6) of rule XI of the Rules of the House of 
     Representatives is amended by striking ``, or as provided by 
     section 305(a)(1)'' and all that follows thereafter through 
     ``under that section)''.

     SEC. 10110. AMENDMENTS TO SECTION 308.

       Section 308 of the Congressional Budget Act of 1974 is 
     amended--
       (1)(A) in the heading of subsection (a), by striking ``, 
     New Spending Authority, or New Credit Authority,'';
       (B) in subsection (a)(1), by striking subparagraph (B) and 
     by redesignating subparagraphs (C) and (D) as subparagraphs 
     (B) and (C), respectively;
       (C) in subsection (a)(1)(B) (as redesignated), by striking 
     ``spending authority'' through ``commitments'' and inserting 
     ``revenues, or tax expenditures''; and
       (D) in paragraphs (1) and (2) of subsection (a), by 
     striking ``, new spending authority described in section 
     401(c)(2), or new credit authority,'' each place it appears;
       (2) in subsection (b)(1), by striking ``, new spending 
     authority described in section 401(c)(2), or new credit 
     authority,'';
       (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 except when ``concurrent'', ``such'', or 
     ``reconciliation'' precedes ``resolution'' and, in subsection 
     (b)(1), by inserting ``joint'' before ``resolutions'' each 
     place it appears.

     SEC. 10111. AMENDMENTS TO SECTION 310.

       Section 310(c)(1)(A) of the Congressional Budget Act of 
     1974 is amended--
       (1) by striking ``20 percent'' the first place it appears 
     and all that follows thereafter through ``, and'' and 
     inserting the following:
        ``(I) in the Senate, 20 percent of the total of the 
     amounts of the changes such committee was directed to make 
     under paragraphs (1) and (2) of such subsection; or
       ``(II) in the House of Representatives, 20 percent of the 
     sum of the absolute value of the changes the committee was 
     directed to make under paragraph (1) and the absolute value 
     of the changes the committee was directed to make under 
     paragraph (2); and''; and
       (2) by striking ``20 percent'' the second place it appears 
     and all that follows thereafter through ``; and'' and 
     inserting the following:
        ``(I) in the Senate, 20 percent of the total of the 
     amounts of the changes such committee was directed to make 
     under paragraphs (1) and (2) of such subsection; or
       ``(II) in the House of Representatives, 20 percent of the 
     sum of the absolute value of the changes the committee was 
     directed to make under paragraph (1) and the absolute value 
     of the changes the committee was directed to make under 
     paragraph (2); and''.

     SEC. 10112. AMENDMENTS TO SECTION 311.

       (a) In General.--Section 311 of the Congressional Budget 
     Act of 1974 is amended to read as follows:


     ``BUDGET-RELATED 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 or reducing 
     revenues, if--
       ``(A) the enactment of that bill or resolution as reported;
       ``(B) the adoption and enactment of that amendment; or
       ``(C) the enactment of that bill or resolution in the form 
     recommended in that conference report;

     would cause the level of total new budget authority or total 
     outlays set forth in the applicable concurrent resolution on 
     the budget for the first fiscal year to be exceeded, or would 
     cause revenues to be less than the level of total revenues 
     set forth in that concurrent resolution for the first fiscal 
     year or for the total of that first fiscal year and the 
     ensuing fiscal years for which allocations are provided under 
     section 302(a), except when 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, joint resolution, amendment, motion, or 
     conference report that--
       ``(A) would cause the level of total new budget authority 
     or total outlays set forth for the first fiscal year in the 
     applicable resolution to be exceeded; or
       ``(B) would cause revenues to be less than the level of 
     total revenues set forth for that first fiscal year or for 
     the total of that first fiscal year and the ensuing fiscal 
     years in the applicable resolution for which allocations are 
     provided under section 302(a).
       ``(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, joint resolution, amendment, motion, or conference 
     report that would cause a decrease in social security 
     surpluses or an increase in social security deficits relative 
     to the levels set forth in the applicable resolution for the 
     first fiscal year or for the total of that fiscal year and 
     the ensuing fiscal years for which allocations are provided 
     under section 302(a).
       ``(b) Social Security Levels.--
       ``(1) In general.--For 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 purposes of subsection (a)(3), 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 that 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, joint 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 that bill or resolution as reported;
       ``(2) the adoption and enactment of that amendment; or
       ``(3) the enactment of that bill or resolution in the form 
     recommended in that conference report;

     would not cause the appropriate allocation of new budget 
     authority made pursuant to section 302(a) for that fiscal 
     year to be exceeded.''.
       (b) Table of Contents.--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 item relating 
     to section 311 and inserting the following:

``Sec. 311. Budget-related legislation must be within appropriate 
              levels.''.

     SEC. 10113. AMENDMENT TO SECTION 312.

       (a) In General.--Section 312 of the Congressional Budget 
     Act of 1974 is amended to read as follows:


                  ``determinations and points of order

       ``Sec. 312. (a) Budget Committee Determinations.--For 
     purposes of this title and title IV, the levels of new budget 
     authority, outlays, 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 applicable.
       ``(b) Discretionary Spending Point of Order in the 
     Senate.--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, it shall not be in order in the Senate to 
     consider any bill or resolution (or amendment, motion, or 
     conference report on that bill or 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) Exceptions.--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.

[[Page H6143]]

       ``(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, or 
     to consider any amendment to that concurrent resolution, or 
     to consider a conference report on that concurrent 
     resolution, if--
       ``(1) the level of total outlays for the first fiscal year 
     set forth in that concurrent resolution or conference report 
     exceeds; or
       ``(2) the adoption of that amendment would result in a 
     level of total outlays for that fiscal year that 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 that 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 point of order is sustained, the effect shall 
     be the same as if the Senate had disagreed to the amendment.
       ``(f) Effect of a Point of Order in the Senate.--In the 
     Senate, if a point of order under this Act against a bill or 
     resolution is sustained, the Presiding Officer shall then 
     recommit the bill or resolution to the committee of 
     appropriate jurisdiction for further consideration.''.
       (b) Technical and Conforming Amendments.--
       (1) In general.--Section 313 of the Congressional Budget 
     Act of 1974 is amended--
       (A) by striking ``(c) When'' and inserting ``(d) Conference 
     Reports.--When''; and
       (B) by striking subsection (e) and redesignating subsection 
     (d) as subsection (e).
       (2) Table of contents.--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 points'' and inserting 
     ``Determinations and points''.

     SEC. 10114. ADJUSTMENTS.

       (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.--
       ``(1) In general.--After the reporting of a bill or joint 
     resolution, the offering of an amendment thereto, or the 
     submission of a conference report thereon, the chairman of 
     the Committee on the Budget of the House of Representatives 
     or the Senate shall make the adjustments set forth in 
     paragraph (2) for the amount of new budget authority in that 
     measure (if that measure meets the requirements set forth in 
     subsection (b)) and the outlays flowing from that budget 
     authority.
       ``(2) Matters to be adjusted.--The adjustments referred to 
     in paragraph (1) are to be made to--
       ``(A) the discretionary spending limits, if any, set forth 
     in the appropriate concurrent resolution on the budget;
       ``(B) the allocations made pursuant to the appropriate 
     concurrent resolution on the budget pursuant to section 
     302(a); and
       ``(C) the budgetary aggregates as set forth in the 
     appropriate concurrent resolution on the budget.
       ``(b) Amounts of Adjustments.--The adjustment referred to 
     in subsection (a) shall be--
       ``(1) an amount provided and designated as an emergency 
     requirement pursuant to section 251(b)(2)(A) or 252(e) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985;
       ``(2) an amount provided for continuing disability reviews 
     subject to the limitations in section 251(b)(2)(C) of that 
     Act;
       ``(3) for any fiscal year through 2002, an amount provided 
     that is the dollar equivalent of the Special Drawing Rights 
     with respect to--
       ``(A) an increase in the United States quota as part of the 
     International Monetary Fund Eleventh General Review of Quotas 
     (United States Quota); or
       ``(B) any increase in the maximum amount available to the 
     Secretary of the Treasury pursuant to section 17 of the 
     Bretton Woods Agreements Act, as amended from time to time 
     (New Arrangements to Borrow);
       ``(4) an amount provided not to exceed $1,884,000,000 for 
     the period of fiscal years 1998 through 2000 for arrearages 
     for international organizations, international peacekeeping, 
     and multilateral development banks; or
       ``(5) an amount provided for an earned income tax credit 
     compliance initiative but not to exceed--
       ``(A) with respect to fiscal year 1998, $138,000,000 in new 
     budget authority;
       ``(B) with respect to fiscal year 1999, $143,000,000 in new 
     budget authority;
       ``(C) with respect to fiscal year 2000, $144,000,000 in new 
     budget authority;
       ``(D) with respect to fiscal year 2001, $145,000,000 in new 
     budget authority; and
       ``(E) with respect to fiscal year 2002, $146,000,000 in new 
     budget authority.
       ``(c) Application of Adjustments.--The adjustments made 
     pursuant to subsection (a) for legislation shall--
       ``(1) apply while that legislation is under consideration;
       ``(2) take effect upon the enactment of that legislation; 
     and
       ``(3) be published in the Congressional Record as soon as 
     practicable.
       ``(d) Reporting Revised Suballocations.--Following any 
     adjustment made under subsection (a), the Committees on 
     Appropriations of the Senate and the House of Representatives 
     may report appropriately revised suballocations under section 
     302(b) to carry out this section.
       ``(e) Definitions for CDRs.--As used in subsection (b)(2)--
       ``(1) the term `continuing disability reviews' shall have 
     the same meaning as provided in section 251(b)(2)(C)(ii) of 
     the Balanced Budget and Emergency Deficit Control Act of 
     1985; and
       ``(2) the term `new budget authority' shall have the same 
     meaning as the term `additional new budget authority' and the 
     term `outlays' shall have the same meaning as `additional 
     outlays' in that section.''.
       (b) Table of Contents.--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. 10115. EFFECT OF ADOPTION OF A SPECIAL ORDER OF BUSINESS 
                   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 adoption of a special order of business in the house of 
                            representatives

       ``Sec. 315. For purposes of a reported bill or joint 
     resolution considered in the House of Representatives 
     pursuant to a special order of business, the term `as 
     reported' in this title or title IV shall be considered to 
     refer to the text made in order as an original bill or joint 
     resolution for the purpose of amendment or to the text on 
     which the previous question is ordered directly to passage, 
     as the case may be.''.
       (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 adoption of a special order of business in the 
              House of Representatives.''.

     SEC. 10116. AMENDMENT TO SECTION 401 AND REPEAL OF SECTION 
                   402.

       (a) Section 401.--
       (1) Controls.--Section 401 of the Congressional Budget Act 
     of 1974 is amended by--
       (A) striking the heading and inserting the following:


   ``budget-related legislation not subject to appropriations''; and

       (B) striking subsection (a) and inserting the following:
       ``(a) Controls on Certain Budget-related Legislation Not 
     Subject to Appropriations.--It shall not be in order in 
     either the House of Representatives or the Senate to consider 
     any bill or joint resolution (in the House of Representatives 
     only, as reported), amendment, motion, or conference report 
     that provides--
       ``(1) new authority to enter into contracts under which the 
     United States is obligated to make outlays;
       ``(2) new authority to incur indebtedness (other than 
     indebtedness incurred under chapter 31 of title 31 of the 
     United States Code) for the repayment of which the United 
     States is liable; or
       ``(3) new credit authority;
     unless that bill, joint resolution, amendment, motion, or 
     conference report also provides that the new authority is to 
     be effective for any fiscal year only to the extent or in the 
     amounts provided in advance in appropriation Acts.''.
       (2) Point of order.--Section 401(b) of the Congressional 
     Budget Act of 1974 is amended--
       (A) by inserting ``new'' before ``entitlement'' in the 
     heading;
       (B) by striking paragraph (1) and inserting the following:
       ``(1) Point of order.--It shall not be in order in either 
     the House of Representatives or the Senate to consider any 
     bill or joint resolution (in the House of Representatives 
     only, as reported), amendment, motion, or conference report 
     that provides new entitlement authority that is to become 
     effective during the current fiscal year.''; and
       (C) in paragraph (2)--
       (i) by striking ``new spending authority described in 
     subsection (c)(2)(C)'' and inserting ``new entitlement 
     authority''; and
       (ii) by striking ``of that House'' and inserting ``of the 
     Senate or may then be referred to the Committee on 
     Appropriations of the House, as the case may be,''.
       (3) Definitions.--Section 401 of the Congressional Budget 
     Act of 1974 is amended by striking subsection (c).
       (4) Exceptions.--Section 401(d) of the Congressional Budget 
     Act of 1974 is amended--
       (A) in paragraph (1), by striking ``new spending authority 
     if the budget authority for outlays which result from such 
     new spending authority is derived'' and inserting ``new 
     authority described in those subsections if outlays from that 
     new authority will flow'';
       (B) by striking paragraph (2) and redesignating paragraph 
     (3) as paragraph (2); and
       (C) in paragraph (2), as redesignated, by striking ``new 
     spending authority'' and inserting ``new authority described 
     in those subsections''.
       (5) Redesignation.--Subsection (d) of section 401 of the 
     Congressional Budget Act of 1974 is redesignated as 
     subsection (c).
       (6) Conforming Amendments.--(A) Clause 1(b)(4) of rule X of 
     the Rules of the House of Representatives is amended to read 
     as follows:
       ``(4) The amount of new authority to enter into contracts 
     under which the United States is

[[Page H6144]]

     obligated to make outlays, the budget authority for which is 
     not provided in advance by appropriation Acts; new authority 
     to incur indebtedness (other than indebtedness incurred under 
     chapter 31 of title 31 of the United States Code) for the 
     repayment of which the United States is liable, the budget 
     authority for which is not provided in advance by 
     appropriation Acts; new entitlement authority as defined in 
     section 3(9) of the Congressional Budget Act of 1974, 
     including bills and resolutions (reported by other 
     committees) which provide new entitlement authority as 
     defined in section 3(9) of the Congressional Budget Act of 
     1974 and are referred to the committee under clause 4(a); 
     authority to forego the collection by the United States of 
     proprietary offsetting receipts, the budget authority for 
     which is not provided in advance by appropriation Acts to 
     offset such foregone receipts; and authority to make 
     payments by the United States (including loans, grants, 
     and payments from revolving funds) other than those 
     covered by this subparagraph, the budget authority for 
     which is not provided in advance by appropriation Acts.''.
       (B) Clause 4(a)(2) of rule X of the Rules of the House of 
     Representatives is amended by striking ``new spending 
     authority described in section 401(c)(2)(C)'' and inserting 
     ``new entitlement authority as defined in section 3(9)'' and 
     by striking ``total amount of new spending authority'' and 
     inserting ``total amount of new entitlement authority''.
       (C) Clause 2(l)(3) of rule XI of the Rules of the House of 
     Representatives is amended by striking ``new spending 
     authority as described in section 401(c)(2)'' and by 
     inserting ``new entitlement authority as defined in section 
     3(9)''.
       (b) Repealer of Section 402.--Section 402 of the 
     Congressional Budget Act of 1974 is repealed.
       (c) Conforming Amendments.--
       (1) Redesignation.--Sections 403 through 407 of the 
     Congressional Budget Act of 1974 are redesignated as sections 
     402 through 406, respectively.
       (2) GAO analysis.--Section 404 (as redesignated) of the 
     Congressional Budget Act of 1974 is amended by striking 
     ``spending authority as described by section 401(c)(2) and 
     which provide permanent appropriations,'' and inserting 
     ``mandatory spending''.
       (3) Table of contents.--The table of contents set forth in 
     section 1(b) of the Congressional Budget and Impoundment 
     Control Act of 1974 is amended by--
       (A) striking the item for section 401 and inserting the 
     following:

``Sec. 401. Budget-related legislation not subject to 
              appropriations.''; and
       (B) striking the item relating to section 402 and 
     redesignating the items relating to sections 403 through 407 
     as the items relating to sections 402 through 406, 
     respectively.
       (4) Conforming amendments.--(A) Clause 2(l)(3) of rule XI 
     of the Rules of the House of Representatives is amended by 
     striking ``section 403'' and inserting ``section 402''.
       (B) Clause 7(d) of rule XIII of the Rules of the House of 
     Representatives is amended by striking ``section 403'' and 
     inserting ``section 402''.

     SEC. 10117. AMENDMENTS TO TITLE V.

       (a) Section 502.--Section 502 of the Federal Credit Reform 
     Act of 1990 is amended as follows:
       (1) In the second sentence of paragraph (1), insert ``and 
     financing arrangements that defer payment for more than 90 
     days, including the sale of a government asset on credit 
     terms'' before the period.
       (2) In paragraph (5)(A), insert ``or modification thereof'' 
     before the first comma.
       (3) In paragraph (5), strike subparagraphs (B) and (C) and 
     insert the following:
       ``(B) The cost of a direct loan shall be the net present 
     value, at the time when the direct loan is disbursed, of the 
     following estimated cash flows:
       ``(i) loan disbursements;
       ``(ii) repayments of principal; and
       ``(iii) payments of interest and other payments by or to 
     the Government over the life of the loan after adjusting for 
     estimated defaults, prepayments, fees, penalties, and other 
     recoveries;
     including the effects of changes in loan terms resulting from 
     the exercise by the borrower of an option included in the 
     loan contract.
       ``(C) The cost of a loan guarantee shall be the net present 
     value, at the time when the guaranteed loan is disbursed, of 
     the following estimated cash flows:
       ``(i) payments by the Government to cover defaults and 
     delinquencies, interest subsidies, or other payments; and
       ``(ii) payments to the Government including origination and 
     other fees, penalties and recoveries;

     including the effects of changes in loan terms resulting from 
     the exercise by the guaranteed lender of an option included 
     in the loan guarantee contract, or by the borrower of an 
     option included in the guaranteed loan contract.''.
       (4) In paragraph (5), amend subparagraph (D) to read as 
     follows:
       ``(D) The cost of a modification is the difference between 
     the current estimate of the net present value of the 
     remaining cash flows under the terms of a direct loan or loan 
     guarantee contract, and the current estimate of the net 
     present value of the remaining cash flows under the terms of 
     the contract, as modified.''.
       (5) In paragraph (5)(E), insert ``the cash flows of'' after 
     ``to''.
       (6) In paragraph (5), by adding at the end the following:
       ``(F) When funds are obligated for a direct loan or loan 
     guarantee, the estimated cost shall be based on the current 
     assumptions, adjusted to incorporate the terms of the loan 
     contract, for the fiscal year in which the funds are 
     obligated.''.
       (7) Redesignate paragraph (9) as paragraph (11) and after 
     paragraph (8) add the following new paragraphs:
       ``(9) The term `modification' means any Government action 
     that alters the estimated cost of an outstanding direct loan 
     (or direct loan obligation) or an outstanding loan guarantee 
     (or loan guarantee commitment) from the current estimate of 
     cash flows. This includes the sale of loan assets, with or 
     without recourse, and the purchase of guaranteed loans. This 
     also includes any action resulting from new legislation, or 
     from the exercise of administrative discretion under existing 
     law, that directly or indirectly alters the estimated cost of 
     outstanding direct loans (or direct loan obligations) or loan 
     guarantees (or loan guarantee commitments) such as a change 
     in collection procedures.
       ``(10) The term `current' has the same meaning as in 
     section 250(c)(9) of the Balanced Budget and Emergency 
     Deficit Control Act of 1985.''.
       (b) Section 504.--Section 504 of the Federal Credit Reform 
     Act of 1990 is amended as follows:
       (1) Amend subsection (b)(1) to read as follows:
       ``(1) new budget authority to cover their costs is provided 
     in advance in an appropriations Act;''.
       (2) In subsection (b)(2), strike ``is enacted'' and insert 
     ``has been provided in advance in an appropriations Act''.
       (3) In subsection (c), strike ``Subsection (b)'' and insert 
     ``Subsections (b) and (e)''.
       (4) In subsection (d)(1), strike ``directly or indirectly 
     alter the costs of outstanding direct loans and loan 
     guarantees'' and insert ``modify outstanding direct loans (or 
     direct loan obligations) or loan guarantees (or loan 
     guarantee commitments)''.
       (5) Amend subsection (e) to read as follows:
       ``(e) Modifications.--An outstanding direct loan (or direct 
     loan obligation) or loan guarantee (or loan guarantee 
     commitment) shall not be modified in a manner that increases 
     its costs unless budget authority for the additional cost 
     has been provided in advance in an appropriations Act.''.
       (c) Section 505.--Section 505 of the Federal Credit Reform 
     Act of 1990 is amended as follows:
       (1) In subsection (c), by inserting before the period at 
     the end of the second sentence the following: ``, except that 
     the rate of interest charged by the Secretary on lending to 
     financing accounts (including amounts treated as lending to 
     financing accounts by the Federal Financing Bank (hereinafter 
     in this subsection referred to as the `Bank') pursuant to 
     section 406(b)) and the rate of interest paid to financing 
     accounts on uninvested balances in financing accounts shall 
     be the same as the rate determined pursuant to section 
     502(5)(E). For guaranteed loans financed by the Bank and 
     treated as direct loans by a Federal agency pursuant to 
     section 406(b), any fee or interest surcharge (the amount by 
     which the interest rate charged exceeds the rate determined 
     pursuant to section 502(5)(E)) that the Bank charges to a 
     private borrower pursuant to section 6(c) of the Federal 
     Financing Bank Act of 1973 shall be considered a cash flow to 
     the Government for the purposes of determining the cost of 
     the direct loan pursuant to section 502(5). All such amounts 
     shall be credited to the appropriate financing account. The 
     Bank is authorized to require reimbursement from a Federal 
     agency to cover the administrative expenses of the Bank that 
     are attributable to the direct loans financed for that 
     agency. All such payments by an agency shall be considered 
     administrative expenses subject to section 504(g). This 
     subsection shall apply to transactions related to direct loan 
     obligations or loan guarantee commitments made on or after 
     October 1, 1991''.
       (2) In subsection (c), by striking ``supercede'' and 
     inserting ``supersede''.
       (3) By amending subsection (d) to read as follows:
       ``(d) Authorization for Liquidating Accounts.--(1) Amounts 
     in liquidating accounts shall be available only for payments 
     resulting from direct loan obligations or loan guarantee 
     commitments made prior to October 1, 1991, for--
       ``(A) interest payments and principal repayments to the 
     Treasury or the Federal Financing Bank for amounts borrowed;
       ``(B) disbursements of loans;
       ``(C) default and other guarantee claim payments;
       ``(D) interest supplement payments;
       ``(E) payments for the costs of foreclosing, managing, and 
     selling collateral that are capitalized or routinely deducted 
     from the proceeds of sales;
       ``(F) payments to financing accounts when required for 
     modifications;
       ``(G) administrative expenses, if--
       ``(i) amounts credited to the liquidating account would 
     have been available for administrative expenses under a 
     provision of law in effect prior to October 1, 1991; and
       ``(ii) no direct loan obligation or loan guarantee 
     commitment has been made, or any modification of a direct 
     loan or loan guarantee has been made, since September 30, 
     1991; or
       ``(H) such other payments as are necessary for the 
     liquidation of such direct loan obligations and loan 
     guarantee commitments.
       ``(2) Amounts credited to liquidating accounts in any year 
     shall be available only for payments required in that year. 
     Any unobligated balances in liquidating accounts at the end 
     of a fiscal year shall be transferred to 
     miscellaneous receipts as soon as practicable after the 
     end of the fiscal year.
         ``(3) If funds in liquidating accounts are insufficient 
     to satisfy obligations and commitments of such accounts, 
     there is hereby provided permanent, indefinite authority to 
     make any payments required to be made on such obligations and 
     commitments.''.
       (d) Section 506.--Section 506 of the Federal Credit Reform 
     Act of 1990 is amended--
       (1) by striking ``(a) In General.--'';

[[Page H6145]]

       (2) by striking ``(1)'' and inserting the following:
       ``(a) In General.--'';
       (3) by striking ``(2) The'' and inserting the following:
       ``(b) Study.--The'';
       (4) by striking ``(3)'' and inserting the following:
       ``(c) Access to Data.--''; and
       (5) in subsection (c) (as redesignated) by striking 
     ``paragraph (2)'' and inserting ``subsection (b)''.

     SEC. 10118. REPEAL OF TITLE VI.

       (a) Repealer.--Title VI of the Congressional Budget Act of 
     1974 is repealed.
       (b) Conforming Amendments.--(1) 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.
       (2) Clause 4(h) of rule X of the Rules of the House of 
     Representatives is amended by striking ``section 302 or 
     section 602 (in the case of fiscal years 1991 through 1995)'' 
     and inserting ``section 302''.

     SEC. 10119. 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) Permanent.--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) Temporary.--Sections 301(i), 302(c), 302(f), 310(g), 
     311(a), 312(b), and 312(c) of this Act and sections 
     258(a)(4)(C), 258A(b)(3)(C)(I), 258B(f)(1), 258B(h)(1), 
     258(h)(3), 258C(a)(5), and 258C(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) Procedure.--Appeals in the Senate from the decisions 
     of the Chair relating to any provision of title III or IV or 
     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) Permanent.--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) Temporary.--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), 312(b), and 312(c) of this Act and 
     sections 258(a)(4)(C), 258A(b)(3)(C)(I), 258B(f)(1), 
     258B(h)(1), 258(h)(3), 258C(a)(5), and 258C(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. 10120. REPEAL OF SECTIONS 905 AND 906.

       (a) Repealer.--Sections 905 and 906 of the Congressional 
     Budget 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. 10121. AMENDMENTS TO SECTIONS 1022 AND 1024.

       (a) Section 1022.--Section 1022(b)(1)(F) of the 
     Congressional Budget and Impoundment Control Act of 1974 is 
     amended by striking ``section 601'' and inserting ``section 
     251(c) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985''.
       (b) Section 1024.--Section 1024(a)(1)(B) of the 
     Congressional Budget and Impoundment Control Act of 1974 is 
     amended by striking ``section 601(a)(2)'' and inserting 
     ``section 251(c) of the Balanced Budget and Emergency Deficit 
     Control Act of 1985''.

     SEC. 10122. 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''.

     SEC. 10123. SENATE TASK FORCE ON CONSIDERATION OF BUDGET 
                   MEASURES.

       (a) Appointment of Members.--The Majority Leader and 
     Minority Leader of the Senate shall each appoint 3 Senators 
     to serve on a bipartisan task force to study the floor 
     procedures for the consideration of budget resolutions and 
     reconciliation bills in the Senate as provided in sections 
     305(b) and 310(e) of the Congressional Budget Act of 1974.
       (b) Report of the Task Force.--The task force shall submit 
     its report to the Senate not later than October 8, 1997.
  Subtitle B--Amendments to the Balanced Budget and Emergency Deficit 
                          Control Act of 1985

     SEC. 10201. PURPOSE.

       The purpose of this subtitle is to extend discretionary 
     spending limits and pay-as-you-go requirements.

     SEC. 10202. GENERAL STATEMENT AND DEFINITIONS.

       (a) General Statement.--Section 250(b) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 is amended 
     by striking the first 2 sentences and inserting the 
     following: ``This part provides for budget enforcement 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) in paragraph (1)--
       (A) by striking ``(but including'' through ``amount' ''; 
     and
       (B) by striking ``section 601 of that Act as adjusted under 
     sections 251 and 253'' and inserting ``section 251'';
       (2) by striking paragraph (4) and inserting the following:
       ``(4) The term `category' means the subsets of 
     discretionary appropriations in section 251(c). Discretionary 
     appropriations in each of the categories shall be those 
     designated in the joint explanatory statement accompanying 
     the conference report on the Balanced Budget Act of 1997. New 
     accounts or activities shall be categorized only after 
     consultation with the committees on Appropriations and the 
     Budget of the House of Representatives and the Senate and 
     that consultation shall, to the extent practicable, include 
     written communication to such committees that affords such 
     committees the opportunity to comment before official action 
     is taken with respect to new accounts or activities.'';
       (3) 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.'';
       (4) 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'';
       (5) in paragraph (14), by inserting ``first 4'' before 
     ``fiscal years'' and by striking ``through fiscal year 
     1995'';
       (6) by striking paragraphs (17) and (20) and by 
     redesignating paragraphs (18), (19), and (21) as paragraphs 
     (17), (18), and (19), respectively;
       (7) in paragraph (17) (as redesignated), by striking 
     ``Omnibus Budget Reconciliation Act of 1990'' and inserting 
     ``Balanced Budget Act of 1997'';
       (8) in paragraph (18) (as redesignated), by striking all 
     after ``expenses'' and inserting ``the Federal deposit 
     insurance agencies, and other Federal agencies supervising 
     insured depository institutions, resulting from full funding 
     of, and continuation of, the deposit insurance guarantee 
     commitment in effect under current estimates.''; and
       (9) by striking paragraph (19) (as redesignated) and 
     inserting the following:
       ``(19) The term `asset sale' means the sale to the public 
     of any asset (except for those assets covered by title V of 
     the Congressional Budget Act of 1974), whether physical or 
     financial, owned in whole or in part by the United States.''.

     SEC. 10203. 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 heading of subsection (a), by striking ``Fiscal 
     Years 1991-1998'';
       (2) in subsection (a)(3), by striking ``(h)'' both places 
     it appears and inserting ``(f)'';
       (3) by striking subsection (a)(7) and inserting the 
     following:
       ``(7) Estimates.--
       ``(A) CBO estimates.--As soon as practicable after Congress 
     completes action on any discretionary appropriation, CBO, 
     after consultation with the Committees on the Budget of the 
     House of Representatives and the Senate, shall provide OMB 
     with an estimate of the amount of discretionary new budget 
     authority and outlays for the current year (if any) and the 
     budget year provided by that legislation.
       ``(B) OMB estimates and explanation of differences.--Not 
     later than 7 calendar days (excluding Saturdays, Sundays, and 
     legal holidays) after the date of enactment of any 
     discretionary appropriation, OMB shall transmit a report to 
     the House of Representatives and to the Senate containing 
     the CBO estimate of that legislation, an OMB estimate of 
     the amount of discretionary new budget authority and 
     outlays for the current year (if any) and the budget year 
     provided by that legislation, and an explanation of any 
     difference between the 2 estimates. If during the 
     preparation of the report OMB determines that there is a 
     significant difference between OMB and CBO, OMB shall 
     consult with the Committees on the Budget of the House of 
     Representatives and the Senate regarding that difference 
     and that consultation shall include, to extent 
     practicable, written communication to those committees 
     that affords such committees the opportunity to comment 
     before the issuance of the report.
       ``(C) Assumptions and guidelines.--OMB estimates under this 
     paragraph shall be made using current economic and technical 
     assumptions. OMB shall use the OMB estimates transmitted to 
     the Congress under this paragraph. OMB and CBO shall prepare 
     estimates under this paragraph in conformance with 
     scorekeeping guidelines determined after consultation among 
     the House and Senate Committees on the Budget, CBO, and OMB.
       ``(D) Annual appropriations.--For purposes of this 
     paragraph, amounts provided by annual appropriations shall 
     include any new budget authority and outlays for the current 
     year (if

[[Page H6146]]

     any) and the budget year in accounts for which funding is 
     provided in that legislation that result from previously 
     enacted legislation.'';
       (4) by striking subsection (b) and inserting the following:
       ``(b) Adjustments to Discretionary Spending Limits.--
       ``(1) Preview Report.--When the President submits the 
     budget under section 1105 of title 31, United States Code, 
     OMB shall calculate and the budget shall include adjustments 
     to discretionary spending limits (and those limits as 
     cumulatively adjusted) for the budget year and each outyear 
     to reflect changes in concepts and definitions. Such changes 
     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 may only be made after 
     consultation with the committees on Appropriations and the 
     Budget of the House of Representatives and the Senate and 
     that consultation shall include written communication to such 
     committees that affords such committees the opportunity to 
     comment before official action is taken with respect to such 
     changes.
       ``(2) Sequestration reports.--When OMB submits a 
     sequestration report under section 254(e), (f), or (g) for a 
     fiscal year, OMB shall calculate, and the sequestration 
     report and subsequent budgets submitted by the President 
     under section 1105(a) of title 31, United States Code, shall 
     include adjustments to discretionary spending limits (and 
     those limits as adjusted) for the fiscal year and each 
     succeeding year through 2002, as follows:
       ``(A) Emergency appropriations.--If, for any fiscal year, 
     appropriations for discretionary accounts are enacted that 
     the President designates as emergency requirements and that 
     the Congress so designates in statute, the adjustment shall 
     be the total of such appropriations in discretionary accounts 
     designated as emergency requirements and the outlays flowing 
     in all fiscal years from such appropriations. This 
     subparagraph shall not apply to appropriations to cover 
     agricultural crop disaster assistance.
       ``(B) Special outlay allowance.--If, in any fiscal year, 
     outlays for a category exceed the discretionary spending 
     limit for that category but new budget authority does not 
     exceed its limit for that category (after application of the 
     first step of a sequestration described in subsection (a)(2), 
     if necessary), the adjustment in outlays for a fiscal year is 
     the amount of the excess but not to exceed 0.5 percent of the 
     sum of the adjusted discretionary spending limits on outlays 
     for that fiscal year.
       ``(C) Continuing disability reviews.--(i) If a bill or 
     joint resolution making appropriations for a fiscal year is 
     enacted that specifies an amount for continuing disability 
     reviews under the heading `Limitation on Administrative 
     Expenses' for the Social Security Administration, the 
     adjustments for that fiscal year shall be the additional new 
     budget authority provided in that Act for such reviews for 
     that fiscal year and the additional outlays flowing from such 
     amounts, but shall not exceed--
       ``(I) for fiscal year 1998, $290,000,000 in additional new 
     budget authority and $338,000,000 in additional outlays;
       ``(II) for fiscal year 1999, $520,000,000 in additional new 
     budget authority and $520,000,000 in additional outlays;
       ``(III) for fiscal year 2000, $520,000,000 in additional 
     new budget authority and $520,000,000 in additional outlays;
       ``(IV) for fiscal year 2001, $520,000,000 in additional new 
     budget authority and $520,000,000 in additional outlays; and
       ``(V) for fiscal year 2002, $520,000,000 in additional new 
     budget authority and $520,000,000 in additional outlays.
       ``(ii) As used in this subparagraph--
       ``(I) the term `continuing disability reviews' means 
     reviews or redeterminations as defined under section 
     201(g)(1)(A) of the Social Security Act and reviews and 
     redeterminations authorized under section 211 of the Personal 
     Responsibility and Work Opportunity Reconciliation Act of 
     1996;
       ``(II) the term `additional new budget authority' means the 
     amount provided for a fiscal year, in excess of $200,000,000, 
     in an appropriations Act and specified to pay for the costs 
     of continuing disability reviews under the heading 
     `Limitation on Administrative Expenses' for the Social 
     Security Administration; and
       ``(III) the term `additional outlays' means outlays, in 
     excess of $200,000,000 in a fiscal year, flowing from the 
     amounts specified for continuing disability reviews under the 
     heading `Limitation on Administrative Expenses' for the 
     Social Security Administration, including outlays in that 
     fiscal year flowing from amounts specified in Acts enacted 
     for prior fiscal years (but not before 1996).
       ``(D) Allowance for imf.--If an appropriation bill or joint 
     resolution is enacted for a fiscal year through 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 of the Special Drawing 
     Rights with respect to--
       ``(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 Agreements Act, as amended from time to time 
     (New Arrangements to Borrow).
       ``(E) Allowance for international arrearages.--
       ``(i) Adjustments.--If an appropriation 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 development banks for that fiscal year, the 
     adjustment shall be the amount of budget authority in that 
     measure and the outlays flowing in all fiscal years from 
     that budget authority.
       ``(ii) Limitations.--The total amount of adjustments made 
     pursuant to this subparagraph for the period of fiscal years 
     1998 through 2000 shall not exceed $1,884,000,000 in budget 
     authority.
       ``(F) EITC compliance initiative.--If an appropriation bill 
     or joint resolution is enacted for a fiscal year that 
     includes an appropriation for an earned income tax credit 
     compliance initiative, the adjustment shall be the amount of 
     budget authority in that measure for that initiative and the 
     outlays flowing in all fiscal years from that budget 
     authority, but not to exceed--
       ``(i) with respect to fiscal year 1998, $138,000,000 in new 
     budget authority and $131,000,000 in outlays;
       ``(ii) with respect to fiscal year 1999, $143,000,000 in 
     new budget authority and $143,000,000 in outlays;
       ``(iii) with respect to fiscal year 2000, $144,000,000 in 
     new budget authority and $144,000,000 in outlays;
       ``(iv) with respect to fiscal year 2001, $145,000,000 in 
     new budget authority and $145,000,000 in outlays; and
       ``(v) with respect to fiscal year 2002, $146,000,000 in new 
     budget authority and $146,000,000 in outlays.''.
       (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 limits 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;
       ``(B) for the nondefense category: $255,699,000,000 in new 
     budget authority and $287,850,000,000 in outlays; and
       ``(C) for the violent crime reduction category: 
     $5,800,000,000 in new budget authority and $4,953,000,000 in 
     outlays;
       ``(4) with respect to fiscal year 2000--
       ``(A) for the discretionary category: $532,693,000,000 in 
     new budget authority and $558,711,000,000 in outlays; and
       ``(B) for the violent crime reduction category: 
     $4,500,000,000 in new budget authority and $5,554,000,000 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).''.
       (c) Repeal of Duplicative Provisions.--Sections 201, 202, 
     204(b), 206, and 211 of House Concurrent Resolution 84 (105th 
     Congress) are repealed.

     SEC. 10204. VIOLENT CRIME REDUCTION SPENDING.

       (a) Sequestration Regarding Violent Crime Reduction 
     Spending.--
       (1) Repeal.--Section 251A of the Balanced Budget and 
     Emergency Deficit Control Act of 1985 is repealed.
       (2) Table of contents.--The item relating to section 251A 
     in the table contents set forth in section 250(a) 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. 10205. ENFORCING PAY-AS-YOU-GO.

       Section 252 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 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 before October 1, 2002, 
     affecting direct spending or receipts that increases the 
     deficit will trigger an offsetting sequestration.
       ``(b) Sequestration.--
       ``(1) Timing.--Not later than 15 calendar days after the 
     date Congress adjourns to end a session and on the same day 
     as a sequestration (if any) under section 251 or 253, there 
     shall be a sequestration to offset the amount of any net 
     deficit increase caused by all direct spending and receipts 
     legislation enacted before October 1, 2002, as calculated 
     under paragraph (2).
       ``(2) Calculation of deficit increase.--OMB shall calculate 
     the amount of deficit increase or decrease by adding--
       ``(A) all OMB estimates for the budget year of direct 
     spending and receipts legislation transmitted under 
     subsection (d);
       ``(B) the estimated amount of savings in direct spending 
     programs applicable to budget year resulting from the prior 
     year's sequestration under this section or section 253, if 
     any, as published in OMB's final sequestration report for 
     that prior year; and

[[Page H6147]]

       ``(C) any net deficit increase or decrease in the current 
     year resulting from all OMB estimates for the current year of 
     direct spending and receipts legislation transmitted under 
     subsection (d) that were not reflected in the final OMB 
     sequestration report for the current year.'';
       (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 to OMB of that 
     legislation.
       ``(2) OMB estimates.--Not later than 7 calendar days 
     (excluding Saturdays, Sundays, and legal holidays) after the 
     date of 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 that legislation;
       ``(B) an OMB estimate of that legislation using current 
     economic and technical assumptions; and
       ``(C) an explanation of any difference between the 2 
     estimates.
       ``(3) Significant differences.--If during the preparation 
     of the report under paragraph (2) OMB determines that there 
     is a significant difference between the OMB and CBO 
     estimates, OMB shall consult with the Committees on the 
     Budget of the House of Representatives and the Senate 
     regarding that difference and that consultation, to the 
     extent practicable, shall include written communication to 
     such committees that affords such committees the opportunity 
     to comment before the issuance of that report.
       ``(4) Scope of estimates.--The estimates under this section 
     shall include the amount of change in outlays or receipts for 
     the current year (if applicable), the budget year, and each 
     outyear excluding any amounts resulting from--
       ``(A) full funding of, and continuation of, the deposit 
     insurance guarantee commitment in effect under current 
     estimates; and
       ``(B) emergency provisions as designated under subsection 
     (e).
       ``(5) 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. 10206. 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;
       (2) in subsection (c) (as redesignated), by striking 
     ``1998'' and inserting ``2002'';
       (3) in subsection (d) (as redesignated), by striking 
     ``(h)'' and inserting ``(f)'';
       (4)(A) in subsection (f)(2)(A) (as redesignated), by 
     striking ``1998'' and inserting ``2002'';
       (B) in subsection (f)(3) (as redesignated), by striking 
     ``through 1998''; and
       (C) by striking subsection (f)(4) (as redesignated) and by 
     redesignating paragraphs (5) and (6) of that subsection as 
     paragraphs (4) and (5), respectively; and
       (5) in subsection (g) (as redesignated), by striking 
     ``(g)'' each place it appears and inserting ``(f)''.

     SEC. 10207. 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) In general.--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) Limitation.--The President may not use the authority 
     provided by paragraph (1) unless the President 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);''.

[[Page H6148]]

       (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 (13-4406-0-3-452);''.
       ``Export-Import Bank of the United States, Limitation of 
     program activity (83-4027-0-3-155);''.
       ``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);''.
       ``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:
       ``Child nutrition programs (with the exception of special 
     milk programs) (12-3539-0-1-605);''.
       (2) After the second item insert the following new items:
       ``Temporary assistance for needy families (75-1552-0-1-
     609);
       ``Contingency fund (75-1522-0-1-609);''
       ``Child care entitlement to States (75-1550-0-1-609);
       (3) Amend the item relating to Women, infants, and children 
     program to read as follows:
       ``Special supplemental nutrition program for women, 
     infants, and children (WIC) (12-3510-0-1-605);''.
       (4) After the last item add the following new item:
       ``Family support payments to States (75-1501-0-1-609);''.
       (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 1998-
     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. 10208. GENERAL AND SPECIAL SEQUESTRATION RULES.

       (a) Headings.--
       (1) Section.--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) Table of contents.--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.--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 as required by section 252 or 253, origination fees 
     under sections 438(c)(2) and 455(c) of that Act shall each be 
     increased by 0.50 percentage point.''.
       (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) Treatment of Federal Administrative Expenses.--Section 
     256(h) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985 is amended--
       (1) in paragraph (2), by striking ``joint resolution'' and 
     inserting ``part''; and
       (2) in paragraph (4), 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.''.
       (f) Commodity Credit Corporation.--Section 256(j) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985 is 
     amended by striking paragraphs (2) through (5) and inserting 
     the following:
       ``(2) Reduction in payments made under contracts.--(A) Loan 
     eligibility under any contract entered into with a person by 
     the Commodity Credit Corporation prior to the time an order 
     has been issued under section 254 shall not be reduced by an 
     order subsequently issued. Subject to subparagraph (B), after 
     an order is issued under such section for a fiscal year, any 
     cash payments for loans or loan deficiencies made by the 
     Commodity Credit Corporation shall be subject to reduction 
     under the order.
       ``(B) Each loan contract entered into with producers or 
     producer cooperatives with respect to a particular crop of a 
     commodity and subject to reduction under subparagraph (A) 
     shall be reduced in accordance with the same terms and 
     conditions. If some, but not all, contracts applicable to a 
     crop of a commodity have been entered into prior to the 
     issuance of an order under section 254, the order shall 
     provide that the necessary reduction in payments under 
     contracts applicable to the commodity be uniformly applied to 
     all contracts for the next succeeding crop of the commodity, 
     under the authority provided in paragraph (3).
       ``(3) Delayed reduction in outlays permissible.--
     Notwithstanding any other provision of this title, if an 
     order under section 254 is issued with respect to a fiscal 
     year, any reduction under the order applicable to contracts 
     described in paragraph (1) may provide for reductions in 
     outlays for the account involved to occur in the fiscal year 
     following the fiscal year to which the order applies.
       ``(4) Uniform percentage rate of reduction and other 
     limitations.--All reductions described in paragraph (2) which 
     are required to be made in connection with an order issued 
     under section 254 with respect to a fiscal year shall be made 
     so as to ensure that outlays for each program, project, 
     activity, or account involved are reduced by a percentage 
     rate that is uniform for all such programs, projects, 
     activities, and accounts, and may not be made so as to 
     achieve a percentage rate of reduction in any such item 
     exceeding the rate specified in the order.
       ``(5) Dairy program.--Notwithstanding any other provision 
     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.''.
       (g) 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) Amend paragraph (6) to read as follows:
       ``(6) 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. 10209. THE BASELINE.

       (a) In General.--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:

[[Page H6149]]

       ``(A)(i) No program established by a law enacted on or 
     before the date of enactment of the Balanced Budget Act of 
     1997 with estimated current year outlays greater than 
     $50,000,000 shall be assumed to expire in the budget year or 
     the outyears. The scoring of new programs with estimated 
     outlays greater than $50,000,000 a year shall be based on 
     scoring by the Committees on Budget or OMB, as applicable. 
     OMB, CBO, and the Budget Committees shall consult on the 
     scoring of such programs where there are differenes between 
     CBO and OMB.
       ``(ii) On the expiration of the suspension of a provision 
     of law that is suspended under section 171 of Public Law 104-
     127 and that authorizes a program with estimated fiscal year 
     outlays that are greater than $50,000,000, for purposes of 
     clause (i), the program shall be assumed to continue to 
     operate in the same manner as the program operated 
     immediately before the expiration of the suspension.'';
       (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 $50,000,000 that 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 shall not be included in estimates under section 251, 
     252, or 253 if that sale would result in a financial cost to 
     the Federal Government as determined pursuant to scorekeeping 
     guidelines.''.
       (b) President's Budget.--Section 1105(a) of title 31, 
     United States Code, is amended by adding at the end the 
     following:
       ``(32) a statement of the levels of budget authority and 
     outlays for each program assumed to be extended in the 
     baseline as provided in section 257(b)(2)(A) and for excise 
     taxes assumed to be extended under section 257(b)(2)(C) of 
     the Balanced Budget and Emergency Deficit Control Act of 
     1985.''.
       (c) Budgetary Treatment of Certain Trust Fund Operations.--
     Section 710 of the Social Security Act (42 U.S.C. 911) is 
     amended to read as follows:

             ``budgetary treatment of trust fund operations

       ``Sec. 710. (a) The receipts and disbursements of the 
     Federal Old-Age and Survivors Insurance Trust Fund and the 
     Federal Disability Insurance Trust Fund and the taxes imposed 
     under sections 1401 and 3101 of the Internal Revenue Code of 
     1986 shall not be included in the totals of the budget of the 
     United States Government as submitted by the President or of 
     the congressional budget and shall be exempt from any general 
     budget limitation imposed by statute on expenditures and net 
     lending (budget outlays) of the United States Government.
       ``(b) No provision of law enacted after the date of 
     enactment of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 (other than a provision of an 
     appropriation Act that appropriated funds authorized under 
     the Social Security Act as in effect on the date of the 
     enactment of the Balanced Budget and Emergency Deficit 
     control Act of 1985) may provide for payments from the 
     general fund of the Treasury to any Trust Fund specified in 
     subsection (a) or for payments from any such Trust Fund to 
     the general fund of the Treasury.''.

     SEC. 10210. TECHNICAL CORRECTION.

       Section 258 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985, entitled ``Modification of Presidential 
     Order'', is repealed.

     SEC. 10211. 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'' 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 strike ``251(a)(2)(B) or (c)(2),'' 
     and insert ``254''.

     SEC. 10212. 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. 10213. 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 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 that section for 
     any fiscal year resulting from the enactment of this Act or 
     of the Taxpayer Relief Act of 1997.
             TITLE XI--DISTRICT OF COLUMBIA REVITALIZATION

     SECTION 11000. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the ``National 
     Capital Revitalization and Self-Government Improvement Act of 
     1997''.
       (b) Table of Contents.--The table of contents of this title 
     is as follows:

Sec. 11000. Short title; table of contents.

           Subtitle A--District of Columbia Retirement Funds

             Chapter 1--Short Title; Findings; Definitions

Sec. 11001. Short title.
Sec. 11002. Findings and declaration of policy.
Sec. 11003. Definitions.

 Chapter 2--Federal Benefit Payments Under District Retirement Programs

Sec. 11011. Obligation of Federal government to make benefit payments.
Sec. 11012. Federal benefit payments described.
Sec. 11013. Establishment of single annual cost-of-living adjustment 
              under District Retirement Program.

   Chapter 3--Determinations And Review of Eligibility and Payments; 
                          Information Sharing

Sec. 11021. Determination of eligibility for and amount of Federal 
              benefit payments made by Trustee.
Sec. 11022. Procedures for resolving claims arising from denied benefit 
              payments.
Sec. 11023. Transfer of and access to records of District Government.
Sec. 11024. Federal information sharing for verification of benefit 
              determinations.

  Chapter 4--District Of Columbia Federal Pension Liability Trust Fund

Sec. 11031. Creation of Trust Fund.
Sec. 11032. Uses of amounts in Trust Fund.
Sec. 11033. Transfer of assets and obligations of District Retirement 
              Funds.
Sec. 11034. Treatment of Trust Fund under certain laws.
Sec. 11035. Administration through Trustee.

           Chapter 5--Responsibilities Of District Government

Sec. 11041. Interim administration.
Sec. 11042. Replacement plan.

 Chapter 6--Financing Of Benefit Payments After Depletion of Trust Fund

Sec. 11051. Creation of Federal Supplemental Fund.
Sec. 11052. Uses of amounts in Fund.
Sec. 11053. Determination of annual payment into Federal Supplemental 
              Fund.
Sec. 11054. Determination of methodology for making payments.
Sec. 11055. Special requirements upon discontinuation of Trust Fund.

                           Chapter 7--Reports

Sec. 11061. Annual valuations and reports by enrolled actuary.
Sec. 11062. Reports by Comptroller General.

                    Chapter 8--Judicial Enforcement

Sec. 11071. Judicial review.
Sec. 11072. Jurisdiction and venue.
Sec. 11073. Statute of limitations.
Sec. 11074. Treatment of misappropriation of fund amounts as Federal 
              crime.

                        Chapter 9--Miscellaneous

Sec. 11081. Coordination between Secretary, Trustee, and District 
              Government.
Sec. 11082. Study of alternatives for financing Federal obligations.
Sec. 11083. Issuance of regulations by Secretary.
Sec. 11084. Effect on Reform Act and other laws.
Sec. 11085. Reference to new Federal program for retirement of judges 
              of District of Columbia courts.
Sec. 11086. Full faith and credit.
Sec. 11087. Severability of provisions.

                  Subtitle B--Management Reform Plans

Sec. 11101. Short title.
Sec. 11102. Management reform plans for District Government.
Sec. 11103. Procedures for development of plans.
Sec. 11104. Implementation of plans.
Sec. 11105. Reform of powers and duties of department heads.
Sec. 11106. No effect on powers of Financial Responsibility and 
              Management Assistance Authority.

                      Subtitle C--Criminal Justice

                         Chapter 1--Corrections

Sec. 11201. Bureau of Prisons.
Sec. 11202. Corrections Trustee.
Sec. 11203. Priority consideration for employees of the District of 
              Columbia.
Sec. 11204. Amendments related to persons with a mental disease or 
              defect.
Sec. 11205. Liability for and litigation authority of Corrections 
              Trustee.
Sec. 11206. Permitting expenditure of funds to carry out certain sewer 
              agreement.

                         Chapter 2--Sentencing

Sec. 11211. Truth-in-Sentencing Commission.
Sec. 11212. General duties, powers, and goals of Commission.
Sec. 11213. Data collection.
Sec. 11214. Enactment of amendments to District of Columbia Code.

               Chapter 3--Offender Supervision and Parole

Sec. 11231. Parole.

[[Page H6150]]

Sec. 11232. Pretrial Services, Defense Services, Parole, Adult 
              Probation and Offender Supervision Trustee.
Sec. 11233. Offender Supervision, Defender and Courts Services Agency.
Sec. 11234. Authorization of appropriations.

                 Chapter 4--District Of Columbia Courts


   SUBCHAPTER A--TRANSFER OF ADMINISTRATION AND FINANCING OF COURTS TO 
                           FEDERAL GOVERNMENT

Sec. 11241. Authorization of appropriations.
Sec. 11242. Administration of courts under District of Columbia Code.
Sec. 11243. Budgeting and financing requirements for courts under Home 
              Rule Act.
Sec. 11244. Auditing of accounts of court system.
Sec. 11245. Miscellaneous budgeting and financing requirements for 
              courts under District law.
Sec. 11246. Other provisions relating to administration of District of 
              Columbia courts.


                SUBCHAPTER B--JUDICIAL RETIREMENT PROGRAM

Sec. 11251. Judicial Retirement and Survivors Annuity Fund.
Sec. 11252. Termination of current fund and program.
Sec. 11253. Conforming amendments.


   SUBCHAPTER C--MISCELLANEOUS CONFORMING AND ADMINISTRATIVE PROVISIONS

Sec. 11261. Treatment of courts under miscellaneous District laws.
Sec. 11262. Representation of indigents in criminal cases.

    Chapter 5--Pretrial Services Agency and Public Defender Service

Sec. 11271. Amendments affecting Pretrial Services Agency.
Sec. 11272. Amendments affecting Public Defender Service.

                  Chapter 6--Miscellaneous Provisions

Sec. 11281. Technical assistance and research.
Sec. 11282. Exemption from personnel and budget ceilings for Trustees 
              and related agencies.

     Subtitle D--Privatization of Tax Collection and Administration

Sec. 11301. Findings.
Sec. 11302. Authorizing Chief Financial Officer to privatize tax 
              administration and collection.

   Subtitle E--Financing of District of Columbia Accumulated Deficit

Sec. 11401. Findings.
Sec. 11402. Authorization for intermediate-term advances of funds by 
              the Secretary of the Treasury to liquidate the 
              accumulated general fund deficit of the District of 
              Columbia.
Sec. 11403. Conforming amendments.
Sec. 11404. Technical corrections.
Sec. 11405. Authorization for issuance of general obligation bonds by 
              the District of Columbia to finance or refund its 
              accumulated general fund deficit.

      Subtitle F--District of Columbia Bond Financing Improvements

Sec. 11501. Short title.
Sec. 11502. Findings.
Sec. 11503. Amendment to Section 462 (relating to contents of borrowing 
              legislation and elections on issuing general obligation 
              bonds).
Sec. 11504. Amendment to Section 466 (relating to public or negotiated 
              sale of general obligation bonds).
Sec. 11505. Amendment to Section 467 (relating to authority to create 
              security interests in District revenues).
Sec. 11506. Amendment to Section 472 (relating to borrowing in 
              anticipation of revenues).
Sec. 11507. Addition of new Section 475 (relating to general obligation 
              bond anticipation notes).
Sec. 11508. Amendment to Section 490 (relating to revenue bonds and 
              other obligations).
Sec. 11509. Conforming amendment.

           Subtitle G--District of Columbia Government Budget

Sec. 11601. Elimination of the annual Federal payment to the District 
              of Columbia.
Sec. 11602. Requirement that the District of Columbia balance its 
              budget in FY 1998.
Sec. 11603. Permitting expedited submission and approval of consensus 
              budget and financial plan.
Sec. 11604. Increase in maximum amount of permitted District borrowing.

                  Subtitle H--Miscellaneous Provisions

        Chapter 1--Regulatory Reform in the District of Columbia

Sec. 11701. Review and revision of regulations and permit and 
              application processes.
Sec. 11702. Repeal of Clean Air Compliance Fee Act of 1994.
Sec. 11703. Repeal requirement for Congressional authorization of 
              certain mergers involving District of Columbia public 
              utility corporations.
Sec. 11704. Exemption of certain contracts from Council review.

               Chapter 2--Other Miscellaneous Provisions

Sec. 11711. Revisions to Financial Responsibility and Management 
              Assistance Act.
Sec. 11712. Cooperative agreements between Federal agencies and 
              Metropolitan Police Department.
Sec. 11713. Permitting garnishment of wages of officers and employees 
              of District of Columbia government.
Sec. 11714. Permitting excess appropriations by Water and Sewer 
              Authority for capital projects.
Sec. 11715. Requiring certain Federal officials to provide notice 
              before carrying out activities affecting real property 
              located in District of Columbia.
Sec. 11716. Repeal term of deed of conveyance to certain hospital.
Sec. 11717. Short title of Home Rule Act.

             Chapter 3--Effective Date; General Provisions

Sec. 11721. Effective date.
Sec. 11722. Technical assistance.
Sec. 11723. Liability.
           Subtitle A--District of Columbia Retirement Funds

             CHAPTER 1--SHORT TITLE; FINDINGS; DEFINITIONS

     SEC. 11001. SHORT TITLE.

       This subtitle may be cited as the ``District of Columbia 
     Retirement Protection Act of 1997''.

     SEC. 11002. FINDINGS AND DECLARATION OF POLICY.

       (a) Findings.--The Congress finds that--
       (1) State and municipal retirement programs should be 
     funded on an actuarially sound basis;
       (2) the retirement programs for the police officers and 
     firefighters, teachers and judges of the District of Columbia 
     had significant unfunded liabilities totaling approximately 
     $1,900,000,000 when the Federal government transferred those 
     programs to the District of Columbia, and those liabilities 
     have since increased to nearly $4,800,000,000, an increase 
     which is almost entirely attributable to the accumulation of 
     interest on the value which existed at the time of transfer;
       (3) the District of Columbia has fully met its financial 
     obligations under the District of Columbia Retirement Reform 
     Act of 1979 (Public Law 96-122);
       (4) the growth of the unfunded liabilities of the three 
     pension funds listed above did not occur because of any 
     action taken or any failure to act that lay within the power 
     of the District of Columbia government or the District of 
     Columbia Retirement Board;
       (5) the presence of the unfunded pension liability is 
     having and will continue to have a negative impact on the 
     District of Columbia's credit rating as it is a legal 
     obligation and the total unfunded liability exceeds the total 
     General Obligation debt of the District, and the costs 
     associated with this liability are a contributing cause of 
     the District's ongoing financial crisis;
       (6) the obligations of the District associated with these 
     pension programs in fiscal year 1997 represents nearly 10 
     percent of the District's revenue;
       (7) the annual Federal contribution toward these costs 
     under the District of Columbia Retirement Reform Act has 
     remained $52,000,000;
       (8) if the unfunded pension liability situation is not 
     resolved, in 2004 the District of Columbia would be 
     responsible for annual costs exceeding $800,000,000, a figure 
     which would be impossible to meet without catastrophic impact 
     on the District government's resources and programs;
       (9) the financial resources of the District of Columbia are 
     not adequate to discharge the unfunded liabilities of the 
     retirement programs; and
       (10) the level of benefits and funding of the current 
     retirement programs were authorized by various Acts of 
     Congress.
       (b) Policy.--It is the policy of this subtitle--
       (1) to relieve the District of Columbia government of the 
     responsibility for the unfunded pension liabilities 
     transferred to it by the Federal government;
       (2) for the Federal government to assume the legal 
     responsibility for paying certain pension benefits (including 
     certain unfunded pension liabilities which existed as of the 
     day prior to introduction of this legislation) for the 
     retirement plans of teachers, police, and firefighters;
       (3) to provide for a responsible Federal system for payment 
     of benefits accrued prior to the date of introduction of this 
     legislation; and
       (4) to require the establishment of replacement plans by 
     the District of Columbia government for the current 
     retirement plans for teachers, and police and 
     firefighters.

     SEC. 11003. DEFINITIONS.

       For purposes of this subtitle, the following definitions 
     shall apply:
       (1) The term ``contract'' means the contract under section 
     11035 between the Secretary and the Trustee.
       (2) The term ``covered District employee'' means a teacher 
     of the District of Columbia public schools, or a member of 
     the Metropolitan Police Force or the Fire Department of the 
     District of Columbia, as defined under the District 
     Retirement Program.
       (3) The term ``District Government'' means any entity 
     treated as part of the District government under section 
     305(5) of the District of Columbia Financial Responsibility 
     and Management Assistance Act of 1995, including the District 
     of Columbia Retirement Board (as defined in section 102(5) of 
     the Reform Act).
       (4) The term ``District Retirement Fund'' means the 
     District of Columbia Police Officers and Fire Fighters 
     Retirement Fund and the District of Columbia Teachers 
     Retirement Fund, as defined in the Reform Act.
       (5) The term ``District Retirement Program'' means any of 
     the retirement programs for teachers and members of the 
     Metropolitan Police Force and Fire Department, as described 
     in section 102(7) of the Reform Act as in effect on the day 
     before the freeze date (except as amended by section 11013).
       (6) The term ``enrolled actuary'' means the enrolled 
     actuary engaged by the Trustee under section 11061(a).

[[Page H6151]]

       (7) The term ``Federal benefit payment'' means a payment 
     described in section 11012.
       (8) The term ``Federal Supplemental Fund'' means the 
     Federal Supplemental District of Columbia Pension Fund 
     created under section 11051.
       (9) The term ``freeze date'' means June 30, 1997.
       (10) The term ``person'' means an individual, partnership, 
     joint venture, corporation, mutual company, joint-stock 
     company, trust, estate, unincorporated organization, 
     association, or employee organization.
       (11) The term ``Reform Act'' means the District of Columbia 
     Retirement Reform Act (Public Law 96-122).
       (12) The term ``replacement plan'' means the plan described 
     in section 11042.
       (13) The term ``replacement plan adoption date'' means the 
     date upon which the legislation establishing the replacement 
     plan becomes effective, or the first day after the expiration 
     of the 1-year period which begins on the date of the 
     enactment of this Act, whichever occurs first.
       (14) The term ``Trust Fund'' means the District of Columbia 
     Federal Pension Liability Trust Fund established under 
     section 11031.
       (15) The term ``Secretary'' means the Secretary of the 
     Treasury or the Secretary's designee.
       (16) The term ``Trustee'' means the person or persons 
     selected by the Secretary under section 11035.

 CHAPTER 2--FEDERAL BENEFIT PAYMENTS UNDER DISTRICT RETIREMENT PROGRAMS

     SEC. 11011. OBLIGATION OF FEDERAL GOVERNMENT TO MAKE BENEFIT 
                   PAYMENTS.

       (a) In General.--In accordance with the provisions of this 
     subtitle, the Federal Government shall make Federal benefit 
     payments associated with the pension plans for police 
     officers, firefighters, and teachers of the District of 
     Columbia.
       (b) No Reversion of Federal Responsibility to District.--At 
     no point after the effective date of this subtitle may the 
     responsibility or any part thereof assigned to the Federal 
     Government under subsection (a) for making Federal benefit 
     payments revert to the District of Columbia.

     SEC. 11012. FEDERAL BENEFIT PAYMENTS DESCRIBED.

       (a) In General.--Subject to the succeeding provisions of 
     this subtitle, a ``Federal benefit payment'' is any benefit 
     payment to which an individual is entitled under a District 
     Retirement Program, in such amount and under such terms and 
     conditions as may apply under such Program.
       (b) Treatment of Service Occurring After Freeze Date.--
     Service after the freeze date shall not be credited for 
     purposes of determining the amount of any Federal benefit 
     payment. Nothing in this subsection shall be construed to 
     affect the crediting of such service for any other purpose 
     under the District Retirement Program.
       (c) Special Rule Regarding Disability Benefits.--To the 
     extent that any portion of a benefit payment to which an 
     individual is entitled under a District Retirement Program is 
     based on a determination of disability made by the District 
     of Columbia Retirement Board or the Trustee after the freeze 
     date, the Federal benefit payment determined with respect to 
     the individual shall be an amount equal to the deferred 
     retirement benefit or normal retirement benefit the 
     individual would receive if the individual left service on 
     the day before the commencement of disability retirement 
     benefits.
       (d) Special Rule Regarding Certain Death Benefits.--
       (1) In general.--In the case of a benefit payment to which 
     an individual is entitled under a District Retirement Program 
     which is payable on the death of a covered District employee 
     or former covered District employee and which is not 
     determined by the length of service of the employee or former 
     employee, the Federal benefit payment determined with respect 
     to the individual shall be equal to the pre-freeze date 
     percentage of the amount otherwise payable.
       (2) Pre-freeze date percentage defined.--In paragraph (1), 
     the ``pre-freeze date percentage'' with respect to a covered 
     District employee or former covered District employee is the 
     amount (expressed as a percentage) equal to the quotient of--
       (A) the number of months of the covered District employee's 
     or former covered District employee's service prior to the 
     freeze date; divided by
       (B) the total number of months of the covered District 
     employee's or former covered District employee's service.

     SEC. 11013. ESTABLISHMENT OF SINGLE ANNUAL COST-OF-LIVING 
                   ADJUSTMENT UNDER DISTRICT RETIREMENT PROGRAM.

       (a) Program for Police and Fire Fighters.--Subsection (m) 
     of the Policemen and Firemen's Retirement and Disability Act 
     (DC Code, sec. 4-624) is amended--
       (1) in paragraph (2), by striking ``the Mayor shall'' and 
     all that follows and inserting the following: ``on January 1 
     of each year (or within a reasonable time thereafter), the 
     Mayor shall determine the per centum change in the price 
     index for the preceding year by determining the difference 
     between the index published for December of the preceding 
     year and the index published for December of the second 
     preceding year.''; and
       (2) by amending paragraph (3) to read as follows:
       ``(3)(A) If (in accordance with paragraph (2)) the Mayor 
     determines in a year (beginning with 1999) that the per 
     centum change in the price index for the preceding year 
     indicates a rise in the price index, each annuity having a 
     commencing date on or before March 1 of the year shall, 
     effective March 1 of the year, be increased by an amount 
     equal to--
       ``(i) in the case of an annuity having a commencing date on 
     or before March 1 of such preceding year, the per centum 
     change computed under paragraph (1), adjusted to the 
     nearest \1/10\ of 1 per centum; or
       ``(ii) in the case of an annuity having a commencing date 
     after March 1 of such preceding year, a pro rata increase 
     equal to the product of--
       ``(I) \1/12\ of the per centum change computed under 
     paragraph (1), multiplied by
       ``(II) the number of months (not to exceed 12 months, 
     counting any portion of a month as an entire month) for which 
     the annuity was payable before the effective date of the 
     increase,
     adjusted to the nearest \1/10\ of 1 per centum.
       ``(B) On January 1, 1998 (or within a reasonable time 
     thereafter), the Mayor shall determine the per centum change 
     in the price index published for December 1997 over the price 
     index published for June 1997. If such per centum change 
     indicates a rise in the price index, effective March 1, 
     1998--
       ``(i) each annuity having a commencing date on or before 
     September 1, 1997, shall be increased by an amount equal to 
     such per centum change, adjusted to the nearest \1/10\ of 1 
     per centum; and
       ``(ii) each annuity having a commencing date after 
     September 1, 1997, and on or before March 1, 1998, shall be 
     increased by a pro rata increase equal to the product of--
       ``(I) \1/6\ of such per centum change, multiplied by
       ``(II) the number of months (not to exceed 6 months, 
     counting any portion of a month as an entire month) for which 
     the annuity was payable before the effective date of the 
     increase,
     adjusted to the nearest \1/10\ of 1 per centum.''.
       (b) Program for Teachers.--Section 21(b) of the Act 
     entitled ``An Act for the retirement of public-school 
     teachers in the District of Columbia'', approved August 7, 
     1946 (DC Code, sec. 31-1241(b)) is amended--
       (1) in paragraph (1), by striking ``The Mayor shall--'' and 
     all that follows and inserting the following: ``On January 1 
     of each year (or within a reasonable time thereafter), the 
     Mayor shall determine the per centum change in the price 
     index for the preceding year by determining the difference 
     between the index published for December of the preceding 
     year and the index published for December of the second 
     preceding year.''; and
       (2) by amending paragraph (2) to read as follows:
       ``(2)(A) If (in accordance with paragraph (1)) the Mayor 
     determines in a year (beginning with 1999) that the per 
     centum change in the price index for the preceding year 
     indicates a rise in the price index, each annuity having a 
     commencing date on or before March 1 of the year shall, 
     effective March 1 of the year, be increased by an amount 
     equal to--
       ``(i) in the case of an annuity having a commencing date on 
     or before March 1 of such preceding year, the per centum 
     change computed under paragraph (1), adjusted to the nearest 
     \1/10\ of 1 per centum; or
       ``(ii) in the case of an annuity having a commencing date 
     after March 1 of such preceding year, a pro rata increase 
     equal to the product of--
       ``(I) \1/12\ of the per centum change computed under 
     paragraph (1), multiplied by
       ``(II) the number of months (not to exceed 12 months, 
     counting any portion of a month as an entire month) for which 
     the annuity was payable before the effective date of the 
     increase,
     adjusted to the nearest \1/10\ of 1 per centum.
       ``(B) On January 1, 1998 (or within a reasonable time 
     thereafter), the Mayor shall determine the per centum change 
     in the price index published for December 1997 over the price 
     index published for June 1997. If such per centum change 
     indicates a rise in the price index, effective March 1, 
     1998--
       ``(i) each annuity having a commencing date on or before 
     September 1, 1997, shall be increased by an amount equal to 
     such per centum change, adjusted to the nearest \1/10\ of 1 
     per centum; and
       ``(ii) each annuity having a commencing date after 
     September 1, 1997, and on or before March 1, 1998, shall be 
     increased by a pro rata increase equal to the product of--
       ``(I) \1/6\ of such per centum change, multiplied by
       ``(II) the number of months (not to exceed 6 months, 
     counting any portion of a month as an entire month) for which 
     the annuity was payable before the effective date of the 
     increase,
     adjusted to the nearest \1/10\ of 1 per centum.''.

   CHAPTER 3--DETERMINATIONS AND REVIEW OF ELIGIBILITY AND PAYMENTS; 
                          INFORMATION SHARING

     SEC. 11021. DETERMINATION OF ELIGIBILITY FOR AND AMOUNT OF 
                   FEDERAL BENEFIT PAYMENTS MADE BY TRUSTEE.

       Notwithstanding any provision of a District Retirement 
     Program or any other law, rule, or regulation, the Trustee--
       (1) shall determine whether an individual is eligible to 
     receive a Federal benefit payment under this subtitle;
       (2) shall determine the amount and form of an individual's 
     Federal benefit payment under this subtitle; and
       (3) may recoup or recover any amounts paid under this 
     subtitle as a result of errors or omissions by the Trustee, 
     the District Government, or any other person.

     SEC. 11022. PROCEDURES FOR RESOLVING CLAIMS ARISING FROM 
                   DENIED BENEFIT PAYMENTS.

       (a) Requiring Notice and Opportunity for Review.--In 
     accordance with procedures approved by the Secretary, the 
     Trustee shall provide to any individual whose claim for a 
     Federal

[[Page H6152]]

     benefit payment under this subtitle has been denied in whole 
     or in part--
       (1) adequate written notice of such denial, setting forth 
     the specific reasons for the denial in a manner calculated to 
     be understood by the average participant in the District 
     Retirement Program; and
       (2) a reasonable opportunity for a full and fair review of 
     the decision denying such claim.
       (b) Standard for Review.--Any factual determination made by 
     the Trustee shall be presumed correct unless rebutted by 
     clear and convincing evidence. The Trustee's interpretation 
     and construction of the benefit provisions of the District 
     Retirement Program and this subtitle shall be entitled to 
     great deference.

     SEC. 11023. TRANSFER OF AND ACCESS TO RECORDS OF DISTRICT 
                   GOVERNMENT.

       (a) In General.--Within 30 days after the Secretary or the 
     Trustee requests, the District Government shall furnish 
     copies of all records, documents, information, or data the 
     Secretary or the Trustee deems necessary to carry out 
     responsibilities under this subtitle and the contract. Upon 
     request, the District Government shall grant the Secretary or 
     the Trustee direct access to such information systems, 
     records, documents, information or data as the Secretary or 
     Trustee requires to carry out responsibilities under this 
     subtitle or the contract.
       (b) Repayment by District Government.--The District 
     Government shall reimburse the Trust Fund for all costs, 
     including benefit costs, that are attributable to errors or 
     omissions in the transferred records that are identified 
     within 3 years after such records are transferred.

     SEC. 11024. FEDERAL INFORMATION SHARING FOR VERIFICATION OF 
                   BENEFIT DETERMINATIONS.

       (a) In General.--Except with respect to taxpayer returns 
     and return information subject to section 6103 of the 
     Internal Revenue Code of 1986, the Secretary may--
       (1) secure directly from any department or agency of the 
     United States information necessary to enable the Secretary 
     to verify or confirm benefit determinations under this 
     subtitle; and
       (2) by regulation authorize the Trustee to review such 
     information for purposes of administering this subtitle and 
     the contract.
       (b) Amendments to Internal Revenue Code.--The Internal 
     Revenue Code of 1986 is amended as follows:
       (1) In section 6103(l), as amended by section 1206(a) of 
     the Taxpayer Bill of Rights 2, by adding at the end the 
     following new paragraph:
       ``(16) Disclosure of return information for purposes of 
     administering the district of columbia retirement protection 
     act of 1997.--
       ``(A) In general.--Upon written request available return 
     information (including such information disclosed to the 
     Social Security Administration under paragraph (1) or (5) of 
     this subsection), relating to the amount of wage income (as 
     defined in section 3121(a) or 3401(a)), the name, address, 
     and identifying number assigned under section 6109, of payors 
     of wage income, taxpayer identity (as defined in subsection 
     6103(b)(6)), and the occupational status reflected on any 
     return filed by, or with respect to, any individual with 
     respect to whom eligibility for, or the correct amount of, 
     benefits under the District of Columbia Retirement Protection 
     Act of 1997, is sought to be determined, shall be disclosed 
     by the Commissioner of Social Security, or to the extent not 
     available from the Social Security Administration, by the 
     Secretary, to any duly authorized officer or employee of the 
     Department of the Treasury, or a Trustee or any designated 
     officer or employee of a Trustee (as defined in the District 
     of Columbia Retirement Protection Act of 1997), or any 
     actuary engaged by a Trustee under the terms of the District 
     of Columbia Retirement Protection Act of 1997, whose official 
     duties require such disclosure, solely for the purpose of, 
     and to the extent necessary in, determining an individual's 
     eligibility for, or the correct amount of, benefits under the 
     District of Columbia Retirement Protection Act of 1997.
       ``(B) Disclosure for use in judicial or administrative 
     proceedings.--Return information disclosed to any person 
     under this paragraph may be disclosed in a judicial or 
     administrative proceeding relating to the determination of an 
     individual's eligibility for, or the correct amount of, 
     benefits under the District of Columbia Retirement 
     Protection Act of 1997.''.
       (2) In section 6103(a)(3), by striking ``(6) or (12)'' and 
     inserting ``(6), (12), or (16)'';
       (3) In section 6103(i)(7)(B)(i), by inserting after 
     ``(other than an agency referred to in subparagraph (A))'' 
     and before the word ``for'' the words ``or by a Trustee as 
     defined in the District of Columbia Retirement Protection Act 
     of 1997,''.
       (4) In section 6103(p)(3)(A), by striking ``or (15)'' and 
     inserting ``(15), or (16)''.
       (5) In section 6103(p)(4) in the matter preceding 
     subparagraph (A), by striking ``or (12)'' and inserting 
     ``(12), or (16), or any other person described in subsection 
     (l)(16)''.
       (6) In section 6103(p)(4)(F)(i), by striking ``or (9),'' 
     and inserting ``(9), or (16), or any other person described 
     in subsection (1)(16)''.
       (7) In section 6103(p)(4)(F) in the matter following clause 
     (iii)--
       (A) by inserting after ``any such agency, body or 
     commission'' and before the words ``for the General 
     Accounting Office'' the words ``, including an agency or any 
     other person described in subsection (l)(16),'';
       (B) by striking ``to such agency, body, or commission'' and 
     inserting ``to such agency, body, or commission, including an 
     agency or any other person described in subsection 
     (l)(16),'';
       (C) by striking ``or (12)(B)'' and inserting ``, (12)(B), 
     or (16)'';
       (D) by inserting after the words ``any agent,'' and before 
     the words ``this paragraph shall'' the words ``or any person 
     including an agent described in subsection (l)(16),'';
       (E) by inserting after the words ``such agent'' and before 
     ``(except that'' the words ``or other person''; and
       (F) by inserting after the words ``an agent,'' and before 
     the words ``any report'' the words ``or any person including 
     an agent described in subsection (l)(16),''.
       (8) In section 7213(a)(2), by striking ``or (15),'' and 
     inserting ``(15), or (16)''.
       (c) Confidentiality.--The Secretary may issue regulations 
     governing the confidentiality of the information obtained 
     pursuant to subsection (a) and the provisions of law amended 
     by subsection (b).

  CHAPTER 4--DISTRICT OF COLUMBIA FEDERAL PENSION LIABILITY TRUST FUND

     SEC. 11031. CREATION OF TRUST FUND.

       (a) Establishment.--There is established on the books of 
     the Treasury the District of Columbia Federal Pension 
     Liability Trust Fund, consisting of the assets transferred 
     pursuant to section 11033 and any income earned on the 
     investment of such assets pursuant to subsection (b).
       (b) Investment of Assets.--The Trustee may invest the 
     assets of the Trust Fund in private securities and any other 
     form of investment deemed appropriate by the Secretary.

     SEC. 11032. USES OF AMOUNTS IN TRUST FUND.

       (a) In General.--Amounts in the Trust Fund shall be used--
       (1) to make Federal benefit payments under this subtitle;
       (2) subject to subsection (b), to cover the reasonable and 
     necessary expenses of administering the Trust Fund under the 
     contract entered into pursuant to section 11035(b); and
       (3) for such other purposes as are specified in this 
     subtitle.
       (b) Special Rules Regarding Administrative Expenses.--
       (1) Budgeting; certification and approval.--The 
     administrative expenses of the Trust Fund shall be paid in 
     accordance with an annual budget set forth by the Trustee 
     which shall be subject to certification and approval by the 
     Secretary.
       (2) Use of District retirement fund for interim 
     administration.--The Secretary is authorized to requisition 
     from the District Retirement Fund such sums as are necessary 
     to administer the Trust Fund until assets are transferred to 
     the Trust Fund pursuant to section 11033.

     SEC. 11033. TRANSFER OF ASSETS AND OBLIGATIONS OF DISTRICT 
                   RETIREMENT FUNDS.

       (a) In General.--As of the replacement plan adoption date, 
     all obligations to make Federal benefit payments and all 
     assets of the District Retirement Fund as of the replacement 
     plan adoption date (except as provided in subsections (b) and 
     (c)) shall be transferred to the Trust Fund.
       (b) Designation of Assets to be Retained by District 
     Retirement Fund.--The Secretary shall designate assets with a 
     value of $1.275 billion that shall not be transferred from 
     the District Retirement Fund under subsection (a). The 
     Secretary's designation and valuation of the assets shall be 
     final and binding.
       (c) Exception for Certain Employee Contributions.--
       (1) In general.--Subsection (a) shall not apply to assets 
     consisting of the District Retirement Fund consisting of any 
     employee contributions deducted and withheld after the freeze 
     date or any interest thereon (computed at a rate and in a 
     manner determined by the Secretary).
       (2) Employee contributions defined.--In paragraph (1), the 
     term ``employee contributions'' means amounts deducted and 
     withheld from the salaries of covered District employees and 
     paid to the District Retirement Fund (and, in the case of 
     teachers, amounts of additional deposits paid to the District 
     Retirement Fund), pursuant to the District Retirement 
     Program.
       (d) Responsibilities of District Government.--
       (1) In general.--The transfer of assets from the District 
     Retirement Fund under this section shall be made in 
     accordance with the direction of the Secretary. The District 
     Government shall promptly take all steps, and execute all 
     documents, that the Secretary deems necessary to effect the 
     transfer.
       (2) Final reconciliation of accounts.--As soon as 
     practicable after the replacement plan adoption date, the 
     District Government shall furnish the Trustee a final 
     reconciliation of accounts in connection with the transfer of 
     assets and obligations to the Trust Fund. The allocation of 
     assets under this section shall be adjusted in accordance 
     with this reconciliation.

     SEC. 11034. TREATMENT OF TRUST FUND UNDER CERTAIN LAWS.

       (a) Internal Revenue Code.--For purposes of the Internal 
     Revenue Code of 1986--
       (1) the Trust Fund shall be treated as a trust described in 
     section 401(a) of the Code which is exempt from taxation 
     under section 501(a) of the Code;
       (2) any transfer to or distribution from the Trust Fund 
     shall be treated in the same manner as a transfer to or 
     distribution from a trust described in section 401(a) of the 
     Code; and
       (3) the benefits provided by the Trust Fund shall be 
     treated as benefits provided under a governmental plan 
     maintained by the District of Columbia.
       (b) ERISA.--For purposes of the Employee Retirement Income 
     Security Act of 1974, the benefits provided by the Trust Fund 
     shall be treated as benefits provided under a governmental 
     plan maintained by the District of Columbia.
       (c) Application of Certain Future Amendments to Internal 
     Revenue Code.--To the extent that any provision of subpart A 
     of part I of subchapter D of chapter 1 of the Internal 
     Revenue Code of 1986 (26 U.S.C. 401 et seq.) is amended after 
     the date of the enactment of this

[[Page H6153]]

     Act, such provision as amended shall apply to the Trust Fund 
     only to the extent the Secretary determines that application 
     of the provision as amended is consistent with the 
     administration of this subtitle.

     SEC. 11035. ADMINISTRATION THROUGH TRUSTEE.

       (a) In General.--As soon as practicable after the enactment 
     of this subtitle, the Secretary shall select a Trustee to 
     administer the Trust Fund and otherwise carry out the 
     responsibilities and duties specified in this subtitle in 
     accordance with the contract described in subsection (b).
       (b) Contract.--The Secretary shall enter into a contract 
     with the Trustee to provide for the management, investment, 
     control and auditing of Trust Fund assets, the making of 
     Federal benefit payments under this subtitle from the Trust 
     Fund, and such other matters as the Secretary deems 
     appropriate. The Secretary shall enforce the provisions of 
     the contract and otherwise monitor the administration of the 
     Trust Fund.
       (c) Reports.--The Trustee shall report to the Secretary, in 
     a form and manner and at such intervals as the Secretary may 
     prescribe, on any matters or transactions relating to the 
     Trust Fund, including financial matters, as the Secretary may 
     require.

           CHAPTER 5--RESPONSIBILITIES OF DISTRICT GOVERNMENT

     SEC. 11041. INTERIM ADMINISTRATION.

       (a) Administration of Benefits Until Appointment of 
     Trustee.--Notwithstanding chapter 2, after the enactment of 
     this subtitle the District Government shall continue to 
     discharge its duties and responsibilities under the District 
     Retirement Program and the District Retirement Fund (as such 
     duties and responsibilities are modified by this subtitle), 
     including the responsibility for Federal benefit payments, 
     until such time as the Secretary notifies the District 
     Government that the Secretary has directed the Trustee to 
     carry out the duties and responsibilities required under the 
     contract.
       (b) Reimbursement From Trust Fund.--The Trustee shall 
     reimburse the District Government for any administrative 
     expenses incurred by the District Government in carrying out 
     subsection (a)--
       (1) if the Trustee finds such expenses to be reasonable and 
     necessary; and
       (2) to the extent that the District Government is not 
     reimbursed for such expenses from other sources.
       (c) Making District Retirement Fund Whole.--The District 
     Government shall reimburse the District Retirement Fund for 
     any benefits paid inconsistent with this subtitle from the 
     District Retirement Fund between the freeze date and the 
     replacement plan adoption date.

     SEC. 11042. REPLACEMENT PLAN.

       (a) Adoption by District Government.--Not later than one 
     year after the date of the enactment of this subtitle, the 
     District Government shall adopt a replacement plan for 
     pension benefits for covered District employees, effective as 
     of the freeze date.
       (b) Replacement Plan Imposed If District Government Fails 
     to Adopt Plan.--If the District Government fails to adopt a 
     replacement plan within the period prescribed in 
     subsection (a), the retirement program applicable to 
     police, firefighters, and teachers under the laws of the 
     District of Columbia in effect as of June 1, 1997 (except 
     as otherwise amended by this Act), including all 
     requirements of the program regarding benefits, 
     contributions, and cost-of-living adjustments, shall be 
     treated as the replacement plan for purposes of this 
     subtitle.
       (c) No Payment of Amounts Paid as Federal Benefit 
     Payment.--Notwithstanding any provision of the Reform Act or 
     any other law, rule, or regulation, the District Government 
     is not required to pay any amount under any replacement plan 
     under this subtitle if the amount is paid as a Federal 
     benefit payment under this subtitle.

 CHAPTER 6--FINANCING OF BENEFIT PAYMENTS AFTER DEPLETION OF TRUST FUND

     SEC. 11051. CREATION OF FEDERAL SUPPLEMENTAL FUND.

       (a) Establishment.--There is established on the books of 
     the Treasury the Federal Supplemental District of Columbia 
     Pension Fund, which shall be administered by the Secretary 
     and shall consist of the following assets:
       (1) Amounts deposited into such Fund under the provisions 
     of this subtitle.
       (2) Any amount otherwise appropriated to such Fund.
       (3) Any income earned on the investment of the assets of 
     such Fund pursuant to subsection (b).
       (b) Investment of Assets.--The Secretary shall invest such 
     portion of the Federal Supplemental Fund as is not in the 
     judgment of the Secretary required to meet current 
     withdrawals. Such investments shall be in public debt 
     securities with maturities suitable to the needs of the 
     Federal Supplemental Fund, as determined by the Secretary, 
     and bearing interest at rates determined by the Secretary, 
     taking into consideration current market yields on 
     outstanding marketable obligations of the United States of 
     comparable maturities.
       (c) Recordkeeping for Actuarial Status.--The Secretary 
     shall provide for the keeping of such records as are 
     necessary for determining the actuarial status of the Federal 
     Supplemental Fund.

     SEC. 11052. USES OF AMOUNTS IN FUND.

       Amounts in the Federal Supplemental Fund shall be used for 
     the accumulation of funds in order to finance obligations of 
     the Federal Government for benefits and necessary 
     administrative expenses under the provisions of this 
     subtitle, in accordance with the methodology selected by the 
     Secretary under section 11054(b), except that payments from 
     the Fund for administrative expenses may be made only the 
     extent and in such amounts as are provided in advance in 
     appropriations acts.

     SEC. 11053. DETERMINATION OF ANNUAL PAYMENT INTO FEDERAL 
                   SUPPLEMENTAL FUND.

       (a) In General.--At the end of each applicable fiscal year 
     the Secretary shall promptly pay into the Federal 
     Supplemental Fund from the General Fund of the Treasury an 
     amount equal to the sum of--
       (1) the annual amortization amount for the year (which may 
     not be less than zero); and
       (2) the covered administrative expenses for the year.
       (b) Determination of Amounts.--For purposes of this 
     section:
       (1) The ``original unfunded liability'' is the amount that 
     is the present value as of the freeze date of future benefits 
     payable from the Federal Supplemental Fund.
       (2) The ``annual amortization amount'' is the amount 
     determined by the enrolled actuary to be necessary to 
     amortize in equal annual installments (until fully 
     amortized)--
       (A) the original unfunded liability over a 30-year period;
       (B) a net experience gain or loss over a 10-year period; 
     and
       (C) any other changes in actuarial liability over a 20-year 
     period.
       (3) The ``covered administrative expenses'' are the 
     expenses determined by the Secretary (on an annual basis) to 
     be necessary to administer the Federal Supplemental Fund.
       (c) Timing.--The first applicable fiscal year under 
     subsection (a) is the first fiscal year that ends more than 
     six months after the replacement plan adoption date.

     SEC. 11054. DETERMINATION OF METHODOLOGY FOR MAKING PAYMENTS.

       (a) Notice to President and Congress.--Not later than 18 
     months before the time that assets remaining in the Trust 
     Fund are projected to be insufficient for making Federal 
     benefit payments and covering necessary administrative 
     expenses when due, the Secretary shall so advise the 
     President and the Congress.
       (b) Selection of Methodology.--Before all available assets 
     of the Trust Fund have been depleted, the Secretary shall 
     determine whether Federal benefit payments and necessary 
     administrative expenses under this subtitle shall be made by 
     one of the following methods:
       (1) Continuation of the Trust Fund using payments from the 
     Federal Supplemental Fund.
       (2) Discontinuation of the Trust Fund, with payments made--
       (A) by direct payment by the Secretary from the Federal 
     Supplemental Fund; or
       (B) from the Federal Supplemental Fund through another 
     department or agency of the United States.
       (c) Arrangements by Secretary.--The Secretary shall make 
     appropriate arrangements to implement the determinations made 
     in this subsection.

     SEC. 11055. SPECIAL REQUIREMENTS UPON DISCONTINUATION OF 
                   TRUST FUND.

       (a) Successor to Trustee.--If the Secretary determines that 
     the Trust Fund shall be discontinued after it has been 
     depleted of assets, the Secretary shall appoint a successor 
     to the Trustee to administer the requirements of this 
     subtitle, with the same powers and subject to the same 
     conditions as were applicable to the Trustee.
       (b) Continuing Application of Terms and Conditions.--The 
     methodology selected by the Secretary under section 11054(b), 
     and the payment of benefits pursuant to such methodology, 
     shall be subject to the same arrangements, terms, and 
     conditions as were applicable under this subtitle to the 
     Trust Fund and the benefits paid under the Trust Fund 
     (including provisions relating to the treatment of the Trust 
     Fund under certain laws).

                           CHAPTER 7--REPORTS

     SEC. 11061. ANNUAL VALUATIONS AND REPORTS BY ENROLLED 
                   ACTUARY.

       (a) Determination of Actuarial Valuations.--The Trustee 
     shall engage an enrolled actuary (as defined in section 
     7701(a)(35) of the Internal Revenue Code of 1986) who is a 
     member of the American Academy of Actuaries to perform an 
     annual actuarial valuation (in a manner and form determined 
     by the Secretary) of the Trust Fund and the Federal 
     Supplemental Fund for obligations assumed by the Federal 
     Government under this subtitle.
       (b) Annual Report on Status of Funds.--The enrolled actuary 
     shall prepare and submit to the Secretary and the Trustee an 
     annual report on the actuarial status of the Trust Fund and 
     the Federal Supplemental Fund, and shall include in the 
     report--
       (1) a projection of when assets in the Trust Fund will be 
     insufficient to pay benefits and necessary administrative 
     expenses when due; and
       (2) a determination of the annual payment to the Federal 
     Supplemental Fund under section 11053.

     SEC. 11062. REPORTS BY COMPTROLLER GENERAL.

       (a) In General.--The Comptroller General is authorized to 
     conduct evaluations of the administration of this subtitle to 
     ensure that the Trust Fund and Federal Supplemental Fund are 
     being properly administered and shall report the findings of 
     such evaluations to the Secretary and the Congress.
       (b) Access to Information.--For the purpose of evaluations 
     under subsection (a) the Comptroller General, subject to 
     section 6103 of the Internal Revenue Code of 1986, shall have 
     access to and the right to copy any books, accounts, records, 
     correspondence or other pertinent documents that are in the 
     possession of the Secretary or the Trustee, or any contractor 
     or subcontractor of the Secretary or the Trustee.

[[Page H6154]]

                    CHAPTER 8--JUDICIAL ENFORCEMENT

     SEC. 11071. JUDICIAL REVIEW.

       (a) In General.--A civil action may be brought--
       (1) by a participant or beneficiary to enforce or clarify 
     rights to benefits from the Trust Fund or Federal 
     Supplemental Fund under this subtitle;
       (2) by the Trustee--
       (A) to enforce any claim arising (in whole or in part) 
     under this subtitle or the contract; or
       (B) to recover benefits improperly paid from the Trust Fund 
     or Federal Supplemental Fund or to clarify a participant's or 
     beneficiary's rights to benefits from the Trust Fund or 
     Federal Supplemental Fund; and
       (3) by the Secretary to enforce any provision of this 
     subtitle or the contract.
       (b) Treatment of Trust Fund.--The Trust Fund may sue and be 
     sued as an entity.
       (c) Exclusive Remedy.--This chapter shall be the exclusive 
     means for bringing actions against the Trust Fund, the 
     Trustee or the Secretary under this subtitle.

     SEC. 11072. JURISDICTION AND VENUE.

       (a) In General.--The United States District Court for the 
     District of Columbia shall have exclusive jurisdiction and 
     venue, regardless of the amount in controversy, of--
       (1) civil actions brought by participants or beneficiaries 
     pursuant to this subtitle, and
       (2) any other action otherwise arising (in whole or part) 
     under this subtitle or the contract.
       (b) Review by Court of Appeals.--Notwithstanding any other 
     provision of law, any order of the United States District 
     Court for the District of Columbia issued pursuant to an 
     action described in subsection (a) that concerns the validity 
     or enforceability of any provision of this subtitle or seeks 
     injunctive relief against the Secretary or Trustee under this 
     subtitle shall be reviewable only pursuant to a notice of 
     appeal to the United States Court of Appeals for the District 
     of Columbia Circuit.
       (c) Review by Supreme Court.--Notwithstanding any other 
     provision of law, review by the Supreme Court of the United 
     States of a decision of the Court of Appeals that is issued 
     pursuant to subsection (b) may be had only if the petition 
     for relief is filed within 20 calendar days after the entry 
     of such decision.
       (d) Restrictions on Declaratory or Injunctive Relief.--No 
     order of any court granting declaratory or injunctive relief 
     against the Secretary or the Trustee shall take effect during 
     the pendency of the action before such court, during the time 
     an appeal may be taken, or (if an appeal is taken or petition 
     for certiorari filed) during the period before the court has 
     entered its final order disposing of the action.

     SEC. 11073. STATUTE OF LIMITATIONS.

       (a) Action for Benefits.--Any civil action by an individual 
     with respect to a Federal benefit payment under this subtitle 
     shall be commenced within 180 days of a final benefit 
     determination.
       (b) Action for Breach of Contract or Other Violations.--
     Except as provided in subsection (c), any civil action for 
     breach of the contract or any other violation of this 
     subtitle shall be commenced within the later of--
       (1) six years after the last act that constituted the 
     alleged breach or violation or, in the case of an omission, 
     six years after the last date on which the alleged breach or 
     violation could have been cured; or
       (2) three years after the earliest date on which the 
     plaintiff knew or could have reasonably been expected to have 
     known of the act or omission on which the action is based.
       (c) Special Rule for Actions Against Secretary.--
     Notwithstanding subsection (b), any action against the 
     Secretary arising (in whole or part) under this subtitle or 
     the contract shall be commenced within one year of the events 
     giving rise to the cause of action.

     SEC. 11074. TREATMENT OF MISAPPROPRIATION OF FUND AMOUNTS AS 
                   FEDERAL CRIME.

       The provisions of section 664 of title 18, United States 
     Code (relating to theft or embezzlement from employee benefit 
     plans), shall apply to the Trust Fund and the Federal 
     Supplemental Fund.

                        CHAPTER 9--MISCELLANEOUS

     SEC. 11081. COORDINATION BETWEEN SECRETARY, TRUSTEE, AND 
                   DISTRICT GOVERNMENT.

       The Secretary, Trustee, and District Government shall carry 
     out responsibilities under this subtitle and under the 
     contract in a manner which promotes the cost-effective and 
     efficient administration of benefit payments under the 
     District Retirement Programs, and in a manner which avoids 
     unnecessary interruptions and delays in paying individuals 
     the full benefits to which they are entitled under such 
     Programs.

     SEC. 11082. STUDY OF ALTERNATIVES FOR FINANCING FEDERAL 
                   OBLIGATIONS.

       (a) In General.--As soon as practicable after the date of 
     the enactment of this subtitle, the Secretary shall enter 
     into a contract with an independent consultant to conduct a 
     study of actuarial alternatives for financing the federal 
     obligations assumed under this subtitle, together with an 
     analysis of the impact of each alternative on the federal 
     budget. The Secretary and the District Government shall 
     cooperate with the consultant and shall provide direct access 
     to such information systems, records, documents, information, 
     or data as will enable the consultant to conduct the study.
       (b) Deadline.--The contract entered into under subsection 
     (a) shall require the consultant to report the results of the 
     study not later than 12 months after the date of enactment of 
     this Act.
       (c) No Effect on Federal Obligations.--Nothing in this 
     section may be construed to affect any obligation of the 
     Federal Government to make payments under this subtitle.

     SEC. 11083. ISSUANCE OF REGULATIONS BY SECRETARY.

       The Secretary is authorized to issue regulations to 
     implement, interpret, administer and carry out the purposes 
     of this subtitle, and, in the Secretary's discretion, those 
     regulations may have retroactive effect.

     SEC. 11084. EFFECT ON REFORM ACT AND OTHER LAWS.

       (a) Reform Act.--
       (1) In general.--This subtitle supersedes any provision of 
     the Reform Act inconsistent with this subtitle and the 
     regulations thereunder.
       (2) Termination of payments to district retirement funds.--
     Section 144 of the Reform Act (DC Code, sec. 1-724) is 
     amended by adding at the end the following new subsection:
       ``(f) Notwithstanding any other provision of this Act, no 
     Federal payments may be made to any Fund established by this 
     title for any fiscal year after fiscal year 1997.''.
       (b) No Effect on Tax Treatment of Benefits.--Except as 
     otherwise specifically provided, nothing in this subtitle may 
     be construed to affect the application of any provision of 
     the Internal Revenue Code of 1986 to any annuity or other 
     benefit provided to or on behalf of any individual, including 
     any disability benefit or any portion of a retirement benefit 
     attributable to an individual's disability status.
       (c) No Effect on Benefits for Park Police and Secret 
     Service.--Nothing in this subtitle shall be deemed to alter 
     or amend in any way the provisions of existing law (including 
     the Reform Act) relating to the program of annuities, other 
     retirement benefits, or medical benefits for members and 
     officers, retired members and officers, and survivors 
     thereof, of the United States Park Police force, the United 
     States Secret Service, or the United States Secret Service 
     Uniformed Division.

     SEC. 11085. REFERENCE TO NEW FEDERAL PROGRAM FOR RETIREMENT 
                   OF JUDGES OF DISTRICT OF COLUMBIA COURTS.

       For provisions describing the retirement program for judges 
     and judicial personnel of the District of Columbia, see 
     subchapter B of chapter 4 of subtitle C.

     SEC. 11086. FULL FAITH AND CREDIT.

       Federal obligations for benefits under this subtitle are 
     backed by the full faith and credit of the United States.

     SEC. 11087. SEVERABILITY OF PROVISIONS.

       If any provision of this subtitle, or the application of 
     such provision to any person or circumstances, shall be held 
     invalid, the remainder of this subtitle, or the application 
     of such provision to persons or circumstances other than 
     those as to which it is held invalid, shall not be affected 
     thereby.
                  Subtitle B--Management Reform Plans

     SEC. 11101. SHORT TITLE.

       This subtitle may be cited as the ``District of Columbia 
     Management Reform Act of 1997''.

     SEC. 11102. MANAGEMENT REFORM PLANS FOR DISTRICT GOVERNMENT.

       (a) In General.--In accordance with the provisions of this 
     subtitle, the District of Columbia Financial Responsibility 
     and Management Assistance Authority (hereafter in this 
     subtitle referred to as the ``Authority'') and the government 
     of the District of Columbia shall develop and implement 
     management reform plans--
       (1) for each of the departments of the government of the 
     District of Columbia described in paragraph (1) of subsection 
     (b); and
       (2) for all entities of the government of the District of 
     Columbia with respect to the items described in paragraph (2) 
     of subsection (b).
       (b) Departments and Items Subject to Plans.--
       (1) Departments described.--The departments referred to in 
     this paragraph are as follows:
       (A) The Department of Administrative Services.
       (B) The Department of Consumer and Regulatory Affairs.
       (C) The Department of Corrections.
       (D) The Department of Employment Services.
       (E) The Department of Fire and Emergency Medical Services.
       (F) The Department of Housing and Community Development.
       (G) The Department of Human Services.
       (H) The Department of Public Works.
       (I) The Public Health Department.
       (2) Items described.--The items referred to in this 
     paragraph are as follows:
       (A) Asset management.
       (B) Information resources management.
       (C) Personnel.
       (D) Procurement.

     SEC. 11103. PROCEDURES FOR DEVELOPMENT OF PLANS.

       (a) Contracts With Consultants.--Not later than 30 days 
     after the date of the enactment of this Act (or, at the 
     option of the Authority and upon notification to Congress, 
     not later than 60 days after such date), the Authority shall 
     enter into contracts with consultants to develop the 
     management reform plans under this subtitle.
       (b) Deadline for Submission of Plans.--Under a contract 
     entered into with the Authority under subsection (a), a 
     consultant shall submit a completed management reform plan 
     for the department or item involved within 90 days (or, at 
     the option of the Authority, within 120 days).
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Authority such sums as may be 
     necessary to carry out the contracts entered into under this 
     section.

     SEC. 11104. IMPLEMENTATION OF PLANS.

       (a) Establishment of Management Reform Teams.--With respect 
     to each management reform plan developed under this subtitle, 
     there

[[Page H6155]]

     shall be a management reform team consisting of the 
     following:
       (1) The Chair of the Authority (or the Chair's designee).
       (2) The Chair of the Council of the District of Columbia 
     (or the Chair's designee).
       (3) The Mayor of the District of Columbia (or the Mayor's 
     designee).
       (4) In the case of a management reform plan for a 
     department of the government of the District of Columbia, the 
     head of the department involved.
       (b) Responsibility for Implementation of Plans.--
       (1) Plans for specific departments.--In the case of a 
     management reform plan for a department of the government of 
     the District of Columbia, the head of the department involved 
     shall take any and all steps within his or her authority to 
     implement the terms of the plan, in consultation and 
     coordination with the other members of the management reform 
     team.
       (2) Plans for items covering entire district government.--
     In the case of a management reform plan for an item described 
     in section 11102(b)(2), each member of the management reform 
     team shall take any and all steps within the member's 
     authority to implement the terms of the plan, under the 
     direction and subject to the instructions of the Chair of the 
     Authority (or the Chair's designee).
       (3) Report to authority.--In carrying out any of the 
     management reform plans under this section, the member of the 
     management reform team described in subsection (a)(4) shall 
     report to the Authority.

     SEC. 11105. REFORM OF POWERS AND DUTIES OF DEPARTMENT HEADS.

       (a) Appointment and Removal.--
       (1) Appointment.--
       (A) In general.--During a control year, the head of each 
     department of the government of the District of Columbia 
     described in section 11102(b)(1) shall be appointed by the 
     Mayor as follows:
       (i) Prior to appointment, the Authority may submit 
     recommendations for the appointment to the Mayor.
       (ii) In consultation with the Authority and the Council, 
     the Mayor shall nominate an individual for appointment and 
     notify the Council of the nomination.
       (iii) After the expiration of the 7-day period which begins 
     on the date the Mayor notifies the Council of the nomination 
     under clause (ii), the Mayor shall notify the Authority of 
     the nomination.
       (iv) The nomination shall be effective subject to approval 
     by a majority vote of the Authority.
       (B) Appointment by authority if no nomination made within 
     30 days.--During a control year, if the Mayor fails to 
     nominate an individual to fill a vacancy in the position of 
     the head of any of the departments described in section 
     11102(b)(1) during the 30-day period which begins on the date 
     the vacancy begins (or during such longer period as the 
     Authority may establish, upon notification to Congress), the 
     Authority shall appoint an individual to fill the vacancy.
       (C) Positions deemed vacant upon enactment.--For purposes 
     of this paragraph, a vacancy shall be deemed to exist in the 
     position of the head of each of the departments described in 
     section 11102(b)(1) upon the date of the enactment of this 
     Act. Nothing in this subparagraph shall be deemed to affect 
     any of the powers and duties of any individual serving as the 
     head of such a department as of such date.
       (2) Removal.--During a control year, the head of any of the 
     departments of the government of the District of Columbia 
     described in section 11102(b)(1) may be removed by the 
     Authority or by the Mayor with the approval of the Authority.
       (3) Control year defined.--In this subsection, the term 
     ``control year'' has the meaning given such term in section 
     305(4) of the District of Columbia Financial Responsibility 
     and Management Assistance Act of 1995.
       (b) Control Over Personnel.--
       (1) In general.--Notwithstanding any other provision of law 
     and except as provided in paragraph (3), all personnel of the 
     departments of the government of the District of Columbia 
     described in section 11102(b)(1) shall be appointed by and 
     shall act under the direction and control of the head of the 
     department involved.
       (2) Reassignment of personnel.--The head of each of the 
     departments described in section 11102(b)(1) may reassign any 
     personnel of the department in such manner as the head 
     considers appropriate.
       (3) Requirements for adverse actions.--The head of each of 
     the departments described in section 11102(b)(1) may take 
     corrective or adverse action against any personnel of the 
     department pursuant to rules (promulgated consistent with the 
     publication and comment provisions of the District of 
     Columbia Administrative Procedure Act) which--
       (A) provide that adverse actions may only be taken for 
     cause;
       (B) define the causes for which a corrective or adverse 
     action may be taken;
       (C) require prior written notice of the grounds on which 
     the action is proposed to be taken;
       (D) require an opportunity to be heard (which may be in 
     writing only) before the action becomes effective, unless the 
     head of the department finds that taking action prior to the 
     exercise of such opportunity is necessary to protect the 
     integrity of government operations, in which case a hearing 
     shall be afforded within a reasonable time after the action 
     becomes effective; and
       (E) provide that the head of the department shall be the 
     final administrative authority with respect to the action, 
     subject to judicial review of the record of the 
     administrative proceeding in an action against the District 
     of Columbia to be brought only in the Superior Court for the 
     District of Columbia.

     SEC. 11106. NO EFFECT ON POWERS OF FINANCIAL RESPONSIBILITY 
                   AND MANAGEMENT ASSISTANCE AUTHORITY.

       Nothing in this subtitle may be construed to affect the 
     authority of the District of Columbia Financial 
     Responsibility and Management Assistance Authority to carry 
     out any of its powers under the District of Columbia 
     Financial Responsibility and Management Assistance Act of 
     1995.
                      Subtitle C--Criminal Justice

                         CHAPTER 1--CORRECTIONS

     SEC. 11201. BUREAU OF PRISONS.

       (a) Felons Sentenced Pursuant to the Truth-In-Sentencing 
     Requirements.--Not later than October 1, 2001, any person who 
     has been sentenced to incarceration pursuant to the District 
     of Columbia Code or the truth-in-sentencing system as 
     described in section 11211 shall be designated by the Bureau 
     of Prisons to a penal or correctional facility operated or 
     contracted for by the Bureau of Prisons, for such term of 
     imprisonment as the court may direct. Such persons shall be 
     subject to any law or regulation applicable to persons 
     committed for violations of laws of the United States 
     consistent with the sentence imposed.
       (b) Felons Sentenced Pursuant to the D.C. Code.--
     Notwithstanding any other provision of law, not later than 
     December 31, 2001, the Lorton Correctional Complex shall be 
     closed and the felony population sentenced pursuant to the 
     District of Columbia Code residing at the Lorton Correctional 
     Complex shall be transferred to a penal or correctional 
     facility operated or contracted for by the Bureau of Prisons. 
     Such persons shall be subject to any law or regulation 
     applicable to persons committed for violations of laws of the 
     United States consistent with the sentence imposed, and the 
     Bureau of Prisons shall be responsible for the custody, care, 
     subsistence, education, treatment and training of such 
     persons.
       (c) Privatization.--
       (1) Transition of inmates from lorton.--The Bureau of 
     Prisons shall house, in private contract facilities--
       (A) at least 2000 District of Columbia sentenced felons by 
     December 31, 1999; and
       (B) at least 50 percent of the District of Columbia 
     sentenced felony population by September 30, 2003.
       (2) Duties of deputy attorney general.--The Deputy Attorney 
     General shall--
       (A) be responsible for overseeing Bureau of Prisons 
     privatization activities; and
       (B) submit a report to Congress on October 1 of each year 
     detailing the progress and status of compliance with 
     privatization requirements.
       (3) Duties of attorney general.--The Attorney General 
     shall--
       (A) conduct a study of correctional privatization, 
     including a review of relevant research and related legal 
     issues, and comparative analysis of the cost effectiveness 
     and feasibility of private sector and Federal, State, and 
     local governmental operation of prisons and corrections 
     programs at all security levels; and
       (B) submit a report to Congress no later than one year 
     after the date of enactment of this Act.
       (d) Site Acquisition and Construction.--In order to house 
     the District of Columbia felony inmate population the Bureau 
     of Prisons shall acquire land, construct and build new 
     facilities at sites selected by the Bureau of Prisons, or 
     contract for appropriate bed space, but no facilities may be 
     built on the grounds of the Lorton Reservation.
       (e) National Capital Planning.--Notwithstanding any other 
     provision of law, the requirements of the National Capital 
     Planning Act of 1952 (40 U.S.C. 71 et seq.) shall not apply 
     to any actions taken by the Bureau of Prisons or its agents 
     or employees.
       (f) Department of Corrections Authority.--The District of 
     Columbia Department of Corrections shall remain responsible 
     for the custody, care, subsistence, education, treatment, and 
     training of any person convicted of a felony offense pursuant 
     to the District of Columbia Code and housed at the Lorton 
     Correctional Complex until December 31, 2001, or the date on 
     which the last inmate housed at the Lorton Correctional 
     Complex is designated by the Bureau of Prisons, whichever 
     is earlier.
       (g) Lorton Correctional Complex.--
       (1) Transfer of functions.--Notwithstanding any other 
     provision of law, to the extent the Bureau of Prisons assumes 
     functions of the Department of Corrections under this 
     subtitle, the Department is no longer responsible for such 
     functions and the provisions of ``An Act to create a 
     Department of Corrections in the District of Columbia'', 
     approved June 27, 1946 (D.C. Code 24-441, 442), that apply 
     with respect to such functions are no longer applicable. 
     Except as provided in paragraph (2), any property on which 
     the Lorton Correctional Complex is located shall be 
     transferred to the Department of the Interior.
       (2) Transfer of land.--
       (A) In general.--
       (i) Fairfax county water authority.--150 acres of parcel 
     106-4-001-54 located west of Ox Road (State Route 123) on 
     which the Lorton Correctional Complex is located shall be 
     transferred, without consideration, to the Fairfax County 
     Water Authority of Fairfax, Virginia.
       (ii) Fairfax county department of parks and recreation.--
     Any acres of parcel 106-4-001-54 located west of Ox Road 
     (State Route 123) on which the Lorton Correctional Complex is 
     located not transferred under clause (i) shall be assigned to 
     the Department of the Interior, National Park Service, for 
     conveyance to the Fairfax County Department of Parks and 
     Recreation for recreational purposes pursuant to the section 
     203(k)(2) of the Federal Property and Administrative Services 
     Act of 1949 (40 U.S.C. 484(k)(2)).
       (B) Condition of transfer.--

[[Page H6156]]

       (i) Water services.--The United States Government shall not 
     transfer any parcels under this paragraph unless the Fairfax 
     County Water Authority certifies that it will continue to 
     provide water services to the Lorton Correctional Complex at 
     the rate it provided water services prior to the transfer.
       (ii) Restriction on transfer.--No Federal agency may 
     transfer the property under this paragraph until the 
     prospective recipient of the property provides to such 
     agency--

       (I) a land description survey suitable for transferring 
     property under Virginia law; and
       (II) any necessary surveys to determine the presence of any 
     hazardous substances, contaminants or pollutants.

       (iii) Lorton Correctional Complex.--The Lorton Correctional 
     Complex shall remain available for the District of Columbia 
     Department of Corrections to house District of Columbia 
     felony inmates until the last inmate at the Complex has been 
     designated by the Bureau of Prisons or until December 31, 
     2003, whichever is earlier.
       (C) Authorization.--The General Services Administration and 
     the National Park Service is authorized to expend any funds 
     necessary to ensure that the transfer or conveyance under 
     subparagraph (A) complies with all applicable environmental 
     and historic preservation laws.
       (3) Water mains.--Any water mains located on or across the 
     Lorton Correctional Complex on the date of the transfers 
     under paragraph (2), that are owned by the Fairfax County 
     Water Authority and provide water to the public, shall be 
     permitted to remain in place, and shall be operated, 
     maintained, repaired, and replaced by the Fairfax County 
     Water Authority or a successor agency furnishing water to the 
     public in Fairfax County or adjacent jurisdictions, but shall 
     not interfere with operations of the Lorton Correctional 
     Complex.
       (g) District of Columbia Corrections Information Council.--
       (1) Establishment.--There is established a council to be 
     known as the District of Columbia Correction Information 
     Council (hereafter referred to as ``Council'').
       (2) Membership.--The Council shall be composed of 3 members 
     appointed as follows:
       (A) 2 individuals appointed by the mayor of the District of 
     Columbia.
       (B) 1 individual appointed by the Council of the District 
     of Columbia.
       (3) Compensation.--Members of the Council may not receive 
     pay, allowances, or benefits by reason of their service on 
     the Council.
       (4) Duties.--The Council shall report to the Director of 
     the Bureau of Prisons with advice and information regarding 
     matters affecting the District of Columbia sentenced felon 
     population.
       (h) Timing of Inmate Transfers.--As soon as practicable 
     after the date of the enactment of this Act, the Director of 
     the Bureau of Prisons shall begin the transferring of inmates 
     to Bureau of Prison or private contract facilities required 
     by this section.

     SEC. 11202. CORRECTIONS TRUSTEE.

       (a) Appointment and Removal of Trustee.--
       (1) Appointment.--Pursuant to the Federal Government's 
     assumption of responsibility for persons convicted of a 
     felony offense under the District of Columbia Code, the 
     Attorney General, in consultation with the Chairman of the 
     District of Columbia Financial Responsibility and Management 
     Assistance Authority (hereafter in this chapter referred to 
     as the ``D.C. Control Board''), the Mayor of the District of 
     Columbia, the District of Columbia Council, and the District 
     of Columbia judiciary, shall select a Corrections Trustee, 
     who shall be an independent officer of the government of 
     the District of Columbia, to oversee financial operations 
     of the District of Columbia Department of Corrections 
     until the Bureau of Prisons has designated all felony 
     offenders sentenced under the District of Columbia Code to 
     a penal or correctional facility operated or contracted 
     for by the Bureau of Prisons under section 11201.
       (2) Removal.--The Corrections Trustee may be removed by the 
     Mayor with the concurrence of the Attorney General. The 
     Attorney General shall have the authority to remove the 
     Corrections Trustee for misfeasance or malfeasance in office. 
     At the request of the Corrections Trustee, the District of 
     Columbia Financial Responsibility and Management Assistance 
     Authority may exercise any of its powers and authorities on 
     behalf of the Corrections Trustee.
       (b) Duties of Trustee.--Beginning on the date of 
     appointment and continuing until the felony population 
     sentenced pursuant to the District of Columbia Code residing 
     at the Lorton Correctional Complex is transferred to a penal 
     or correctional facility operated or contracted for by the 
     Bureau of Prisons, the Corrections Trustee shall carry out 
     the following responsibilities (notwithstanding any law of 
     the District of Columbia to the contrary):
       (1) Exercise financial oversight over the District of 
     Columbia Department of Corrections and allocate funds as 
     enacted in law or as otherwise allocated, including funds for 
     short term improvements which are necessary for the safety 
     and security of staff, inmates and the community.
       (2) Purchase any necessary goods or services on behalf of 
     the District of Columbia Department of Corrections consistent 
     with Federal procurement regulations as they apply to the 
     Bureau of Prisons.
       (c) Funding.--
       (1) In general.--Funds available for the Corrections 
     Trustee, staff and all necessary and appropriate operations 
     shall be made available to the extent provided in 
     appropriations acts to the Corrections Trustee. Funding 
     requests shall be proposed by the Corrections Trustee to the 
     President and Congress for each Fiscal Year.
       (2) Reimbursement to bureau of prisons.--Upon receipt of 
     Federal funds, the Corrections Trustee shall immediately 
     provide an advance reimbursement to the Bureau of Prisons of 
     all funds identified by the Congress for construction of new 
     prisons and major renovations, which shall remain available 
     until expended. The Bureau of Prisons shall be responsible 
     and accountable for determining how these funds shall be used 
     for renovation and construction, including type, security 
     level, and location of new facilities.
       (3) Accountability and reports.--The District of Columbia 
     Department of Corrections and the Bureau of Prisons shall 
     maintain accountability for funds reimbursed from the 
     Corrections Trustee, and shall provide expense reports by 
     project at the request of the Corrections Trustee.
       (d) Compensation and Detailees.--The Corrections Trustee 
     shall be compensated at a rate not to exceed the basic pay 
     payable for Level IV of the Executive Schedule. The 
     Corrections Trustee may appoint and fix the pay of additional 
     staff without regard to the provisions of the District of 
     Columbia Code governing appointments and salaries, without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service, and 
     without regard to the provisions of chapter 51 and subchapter 
     III of chapter 53 of title 5, United States Code, relating to 
     classification and General Schedule pay rates. Upon request 
     of the Corrections Trustee, the head of any Federal 
     department or agency may, on a reimbursable or non 
     reimbursable basis, provide services and detail any 
     personnel of that department or agency to the Corrections 
     Trustee to assist in carrying out his duties.
       (e) Procurement and Judicial Review.--The provisions of the 
     District of Columbia Code governing procurement shall not 
     apply to the Corrections Trustee. The Corrections Trustee may 
     seek judicial enforcement of his authority to carry out his 
     duties.
       (f) Preservation of Retirement and Certain Other Rights of 
     Federal Employees Who Become Employed by the Corrections 
     Trustee.--
       (1) In general.--A Federal employee who, within 3 days 
     after separating from the Federal Government, is appointed 
     Corrections Trustee or becomes employed by the Corrections 
     Trustee--
       (A) shall be treated as an employee of the Federal 
     Government for purposes of chapters 83, 84, 87, and 89 of 
     title 5 of the United States Code; and
       (B) if, after serving with the Trustee, such employee 
     becomes reemployed by the Federal Government, shall be 
     entitled to credit for the full period of such individual's 
     service with the Trustee, for purposes of determining the 
     applicable leave accrual rate.
       (2) Regulations.--The Office of Personnel Management shall 
     prescribe such regulations as may be necessary to carry out 
     this subsection.

     SEC. 11203. PRIORITY CONSIDERATION FOR EMPLOYEES OF THE 
                   DISTRICT OF COLUMBIA.

       (a) Establishment.--As soon as practicable after 
     appointment, the Bureau of Prisons, working with the 
     Corrections Trustee, shall establish a priority consideration 
     program to facilitate employment placement for employees of 
     the District of Columbia Department of Corrections who are 
     scheduled to be separated from service as a result of closing 
     the Lorton Correctional Complex.
       (b) Provisions.--The priority consideration program shall 
     include provisions under which a vacant federal correctional 
     institution position established as a result of this Act and 
     identified for external hiring shall not be filled by the 
     appointment of any individual from outside of the District of 
     Columbia Department of Corrections if there is available any 
     interested applicant within the District of Columbia 
     Department of Corrections who meets all qualification and 
     suitability requirements for Bureau of Prisons law 
     enforcement positions, including those related to criminal 
     history, educational experience and level of functions, drug 
     use, and work-related misconduct. The priority consideration 
     program shall also include provisions under which an employee 
     described in subsection (a) who does not meet the 
     qualification and suitability requirements for Bureau of 
     Prisons law enforcement positions shall receive priority 
     consideration for other Federal positions, and any such 
     employee who is found to be well qualified for such a 
     position may be appointed without regard to the provisions of 
     title 5, United States Code, governing appointments in the 
     competitive service. Such program shall terminate one year 
     after the closing of the Lorton Correctional Complex.

     SEC. 11204. AMENDMENTS RELATED TO PERSONS WITH A MENTAL 
                   DISEASE OR DEFECT.

       Title 18, United States Code, is amended as follows:
       (1) Section 4246 is amended--
       (A) in subsection (a) by inserting ``in the custody of the 
     Bureau of Prisons'' after ``certifies that a person''; and
       (B) by adding at the end the following new subsection:
       ``(h) Definition.--As used in this chapter the term 
     ``State'' includes the District of Columbia.''.
       (2) Section 4247(a) is amended--
       (A) in paragraph (1)(D) by striking ``and'' after the semi-
     colon;
       (B) in paragraph (2) by striking the period and inserting 
     ``; and''; and
       (C) by adding at the end the following new paragraph:
       ``(3) `State' includes the District of Columbia.''.
       (3) Section 4247(j) of title 18, United States Code, is 
     amended by striking ``This chapter does'' and inserting 
     ``Sections 4241, 4242, 4243, and 4244 do'.

[[Page H6157]]

     SEC. 11205. LIABILITY FOR AND LITIGATION AUTHORITY OF 
                   CORRECTIONS TRUSTEE.

       (a) Liability.--The District of Columbia shall defend any 
     civil action or proceeding brought in any court or other 
     official Federal, state, or municipal forum against the 
     Corrections Trustee, or against the District of Columbia or 
     it officers, employees, or agents, and shall assume any 
     liability resulting from such an action or proceeding, if the 
     action or proceeding arises from--
       (1) an inmate's confinement with the District of Columbia 
     Department of Corrections;
       (2) the District of Columbia's operation or management of 
     the buildings, facilities, or lands comprising the Lorton 
     property; or
       (3) the District of Columbia's operations or activities 
     occurring on any property not specifically transferred to the 
     administrative control of the Federal Government pursuant to 
     this Act.
       (b) Litigation.--
       (1) Corporation Counsel.--Subject to paragraph (2), the 
     Corporation Counsel of the District of Columbia shall provide 
     litigation services to the Corrections Trustee, except that 
     the Trustee may instead elect, either generally or in 
     relation to particular cases or classes of cases, to hire 
     necessary staff and personnel or enter into contracts for the 
     provision of litigation services at the Trustee's expense.
       (2) Attorney General.--
       (A) In general.--Notwithstanding paragraph (1), with 
     respect to any litigation involving the Corrections Trustee, 
     the Attorney General may--
       (i) direct the litigation of the Trustee, and of the 
     District of Columbia on behalf of the Trustee; and
       (ii) provide on a reimbursable or non-reimbursable basis 
     litigation services for the Trustee at the Trustee's request 
     or on the Attorney General's own initiative.
       (B) Approval of settlement.--With respect to any litigation 
     involving the Corrections Trustee, the Trustee may not agree 
     to any settlement involving any form of equitable relief 
     without the approval of the Attorney General. The Trustee 
     shall provide to the Attorney General such notice and reports 
     concerning litigation as the Attorney General may direct.
       (C) Discretion.--Any decision to exercise any authority of 
     the Attorney General under this subsection shall be in the 
     sole discretion of the Attorney General and shall not be 
     reviewable in any court.
       (c) Limitations.--Nothing in this section shall be 
     construed--
       (1) as a waiver of sovereign immunity, or as limiting any 
     other defense or immunity that would otherwise be available 
     to the United States, the District of Columbia, their 
     agencies, officers, employees, or agents; or
       (2) to obligate the District of Columbia to represent or 
     indemnify the Corrections Trustee or any officer, employee, 
     or agent where the Trustee (or any person employed by or 
     acting under the authority of the Trustee) acts beyond the 
     scope of his authority.

     SEC. 11206. PERMITTING EXPENDITURE OF FUNDS TO CARRY OUT 
                   CERTAIN SEWER AGREEMENT.

       Notwithstanding the fourth sentence of section 446 of the 
     District of Columbia Self-Government and Governmental 
     Reorganization Act, the District of Columbia is authorized to 
     obligate or expend such funds as may be necessary during a 
     fiscal year (beginning with fiscal year 1997) to carry out 
     the Sewage Delivery System and Capacity Purchase Agreement 
     between Fairfax County and the District of Columbia with 
     respect to Project Number K00301, without regard to the 
     amount appropriated for such purpose in the budget of the 
     District of Columbia for the fiscal year.

                         CHAPTER 2--SENTENCING

     SEC. 11211. TRUTH IN SENTENCING COMMISSION.

       (a) Establishment.--There is established as an independent 
     agency of the District of Columbia a District of Columbia 
     Truth in Sentencing Commission (hereafter in this chapter 
     referred to as ``the Commission''), which shall consist of 7 
     voting members. The Attorney General, or the Attorney 
     General's designee, shall be the chairperson of the 
     Commission and shall have the duty to convene meetings of the 
     Commission to ensure that it fulfills its responsibilities 
     under this Act. The members shall serve for the life of the 
     Commission and shall be subject to removal only for neglect 
     of duty, malfeasance in office, or other good cause shown.
       (b) Membership.--The members of the Commission shall have 
     knowledge and responsibility with respect to criminal justice 
     matters. Two members of the Commission shall be judges of the 
     Superior Court of the District of Columbia, and shall be 
     appointed by the chief judge of that court; one member shall 
     be a representative of the District of Columbia Council and 
     shall be appointed by the chairperson or chairperson pro temp 
     of the Council; one member shall be a representative of the 
     executive branch of the District of Columbia government with 
     official responsibilities for criminal justice matters in the 
     District of Columbia and shall be appointed by the Mayor of 
     the District of Columbia; one member shall be a 
     representative of the District of Columbia Public Defender 
     Service and shall be appointed by the Director of such 
     Service; and one member shall be a representative of the 
     United States Attorney for the District of Columbia and shall 
     be appointed by the United States Attorney. A representative 
     of the Federal Bureau of Prisons and a representative of the 
     office of Corporation Counsel of the District of Columbia 
     shall each serve as a non-voting, ex officio member.
       (c) Vacancy.--Any vacancy in the Commission shall be filled 
     in the same manner as the original appointment. Members of 
     the Commission shall receive no compensation for their 
     services, but shall be reimbursed for travel, subsistence, 
     and other necessary expenses incurred in the performance of 
     duties vested in the Commission, but not in excess of the 
     maximum amounts authorized under section 456 of title 28, 
     United States Code.

     SEC. 11212. GENERAL DUTIES, POWERS, AND GOALS OF COMMISSION.

       (a) Recommendations.--The Commission shall, within 180 days 
     after the enactment of this Act, make recommendations to the 
     District of Columbia Council for amendments to the District 
     of Columbia Code with respect to the sentences to be imposed 
     for all felonies committed on or after 3 years after the date 
     of enactment of this Act.
       (b) Contents of Recommendations.--Such recommendations 
     shall--
       (1) as to all felonies described in paragraph (h), meet the 
     truth in sentencing standards of 20104(a)(1) of the Violent 
     Crime Control and Law Enforcement Act of 1994;
       (2) as to all felonies ensure that--
       (A) an offender will have a sentence imposed that--
       (i) reflects the seriousness of the offense and the 
     criminal history of the offender; and
       (ii) provides for just punishment, affords adequate 
     deterrence to potential future criminal conduct of the 
     offender and others, and provides the offender with needed 
     educational or vocational training, medical care, and other 
     correctional treatment;
       (B) good time shall be calculated pursuant to section 3624 
     of title 18, United States Code; and
       (C) an adequate period of supervision will be imposed to 
     follow release from the imprisonment.
       (c) Death Penalty.--The Commission shall not have the power 
     to recommend a sentence of death for any offense nor for any 
     offense a term of imprisonment less than that prescribed by 
     the D.C. Code as a mandatory minimum sentence.
       (d) Other Features of Recommendations.--The Commission 
     shall ensure that its recommendations--
       (1) will be neutral as to the race, sex, marital status, 
     ethnic origin, religious affiliation, national origin, creed, 
     socioeconomic status, and sexual orientation of offenders;
       (2) will include provisions designed to maximize the 
     effectiveness of the drug court of the Superior Court of the 
     District of Columbia; and
       (3) will be fully consistent with all other provisions of 
     this Act, including provisions relating to the administration 
     of probation, parole, and supervised release for District of 
     Columbia Code offenders.
       (e) Vote; Termination.--The recommendations of the 
     Commission required under subsections (a)-(d) shall be 
     adopted by a vote of not less than 6 of the members and when 
     made shall be transmitted forthwith to the District of 
     Columbia Council. The Commission shall cease to exist 90 days 
     after the transmittal of recommendations to the Council or on 
     the last date on which timely recommendations may be made if 
     the Commission is unable to agree on such recommendations.
       (f) Recommendations for Implementation.--In fulfilling its 
     responsibilities, the Commission may adopt by a vote of not 
     less than 6 of the members and transmit to the Superior Court 
     of the District of Columbia recommended rules and principles 
     for determining the sentence to be imposed, including--
       (1) whether to impose a sentence of probation, a term of 
     imprisonment and/or a fine, and the amount or length thereof, 
     and including intermediate sanctions in appropriate cases; 
     and
       (2) whether multiple sentences of terms of imprisonment 
     should run concurrently or consecutively.
       (g) Powers.--The Commission is authorized--
       (1) to hold hearings and call witnesses that might assist 
     the Commission in the exercise of its powers;
       (2) to perform such other functions as may be necessary to 
     carry out the purposes of this section; and
       (3) except as otherwise provided, to conduct business, 
     exercise powers, and fulfill duties by the vote of a majority 
     of the members present at any meeting.
       (h) Felonies Described.--The felonies described in this 
     subsection are violations of any of the following provisions 
     of law:
       (1) The following provisions relating to arson:
       (A) Section 820 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-401).
       (B) Section 821 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-402).
       (2) The following provisions relating to felony assault:
       (A) Section 803 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-501).
       (B) Section 804 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-502).
       (C) Section 805 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-503).
       (D) Section 806a of the Act entitled ``An Act to establish 
     a code of law for the District of Columbia,'' approved March 
     3, 1901 (DC Code, sec. 22-504.1).
       (E) Section 432 of the Revised Statutes, relating to the 
     District of Columbia (DC Code, sec. 22-505).
       (F) Section 807 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-506).
       (3) Section 502 of the District of Columbia Theft and White 
     Collar Crimes Act of 1982 (DC Code, sec. 22-722) (relating to 
     obstruction of justice).
       (4) Section 3 of the Act of February 13, 1885 (chapter 58; 
     23 Stat. 303) (DC Code, sec. 22-901) (relating to cruelty to 
     children).

[[Page H6158]]

       (5) Section 823 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-1801) (relating to first degree 
     burglary).
       (6) Section 812 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-2101) (relating to kidnapping).
       (7) The following provisions relating to murder and 
     manslaughter:
       (A) Section 798 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-2401).
       (B) Section 799 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-2402).
       (C) Section 800 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-2403).
       (D) Section 801 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-2404).
       (E) Section 802 of the Act entitled ``An Act to establish a 
     code of law for the District of Columbia,'' approved March 3, 
     1901 (DC Code, sec. 22-2405).
       (F) Section 802a of the Act entitled ``An Act to establish 
     a code of law for the District of Columbia,'' approved March 
     3, 1901 (DC Code, sec. 22-2406).
       (8) Section 8 of the Act of July 15, 1932 (chapter 492; 47 
     Stat. 698) (DC Code, sec. 22-2601) (relating to prison 
     breach).
       (9) The Act entitled ``An Act to prohibit the introduction 
     of contraband into the District of Columbia penal 
     institutions,'' approved December 15, 1941 (DC Code, sec. 22-
     2603).
       (10) Section 810 of the Act entitled ``An Act to establish 
     a code of law for the District of Columbia,'' approved March 
     3, 1901 (DC Code, sec. 22-2901) (relating to robbery).
       (11) Section 811a of the Act entitled ``An Act to establish 
     a code of law for the District of Columbia,'' approved March 
     3, 1901 (DC Code, sec. 22-2903) (relating to carjacking).
       (12) The Dangerous Weapons Act (DC Code, sec. 22-3201 et 
     seq.).
       (13) The following provisions relating to sex offenses:
       (A) Section 201 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4102).
       (B) Section 202 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4103).
       (C) Section 203 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4104).
       (D) Section 204 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4105).
       (E) Section 207 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4108).
       (F) Section 208 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4109).
       (G) Section 209 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4110).
       (H) Section 212 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4113).
       (I) Section 213 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4114).
       (J) Section 214 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4115).
       (K) Section 215 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4116).
       (L) Section 217 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4118).
       (M) Section 219 of the Anti-Sexual Abuse Act of 1994 (DC 
     Code, sec. 22-4120).
       (14) Section 401 of the District of Columbia Uniform 
     Controlled Substances Act of 1981 (D.C. Code, sec. 33-541) 
     (relating to recidivist drug offenders), but only in the case 
     of a second or subsequent violation.

     SEC. 11213. DATA COLLECTION.

       (a) Data for Attorney General.--The Commission, the 
     Superior Court of the District of Columbia, the District of 
     Columbia Department of Corrections, and other agencies as 
     necessary shall provide to the Attorney General such data as 
     are requested in furtherance of this Act.
       (b) Superior Court.--The Superior Court of the District of 
     Columbia, in connection with defendants sentenced in such 
     Court, shall provide to the Commission and the Attorney 
     General such data as are requested for planning, statistical 
     analysis or projecting future prison population levels.

     SEC. 11214. ENACTMENT OF AMENDMENTS TO DISTRICT OF COLUMBIA 
                   CODE.

       If, within 270 days after the date of the enactment of this 
     Act, the Council of the District of Columbia has failed to 
     amend the District of Columbia Code to enact in whole the 
     recommendations of the Commission under this chapter, or if 
     the Commission fails to make such recommendations within the 
     deadline established under such section, the Attorney General 
     (after consultation with the Commission) shall promulgate 
     within 90 days amendments to the District of Columbia Code 
     with respect to the sentences to be imposed for all 
     offenses committed on or after 3 years after the date of 
     the enactment of this Act. Such amendments shall be 
     consistent with the standards of subsections (a) through 
     (d) of section 11212. Such amendments shall take effect 30 
     days after the Attorney General transmits the 
     recommendations to Congress.

               CHAPTER 3--OFFENDER SUPERVISION AND PAROLE

     SEC. 11231. PAROLE.

       (a) Paroling Jurisdiction.--
       (1) Jurisdiction of parole commission to grant or deny 
     parole and to impose conditions.--Not later than one year 
     after date of the enactment of this Act, the United States 
     Parole Commission shall assume the jurisdiction and authority 
     of the Board of Parole of the District of Columbia to grant 
     and deny parole, and to impose conditions upon an order of 
     parole, in the case of any imprisoned felon who is eligible 
     for parole or reparole under the District of Columbia Code. 
     The Parole Commission shall have exclusive authority to amend 
     or supplement any regulation interpreting or implementing the 
     parole laws of the District of Columbia with respect to 
     felons, provided that the Commission adheres to the 
     rulemaking procedures set forth in section 4218 of title 18, 
     United States Code.
       (2) Jurisdiction of parole commission to revoke parole or 
     modify conditions.--On the date in which the District of 
     Columbia Offender Supervision, Defender, and Courts Services 
     Agency is established under section 11233, the United States 
     Parole Commission shall assume any remaining powers, duties, 
     and jurisdiction of the Board of Parole of the District of 
     Columbia, including jurisdiction to revoke parole and to 
     modify the conditions of parole, with respect to felons.
       (3) Jurisdiction of superior court.--On the date on which 
     the District of Columbia Offender Supervision, Defender, and 
     Courts Services Agency is established under section 11233, 
     the Superior Court of the District of Columbia shall assume 
     the jurisdiction and authority of the Board of Parole of the 
     District of Columbia to grant, deny, and revoke parole, and 
     to impose and modify conditions of parole, with respect to 
     misdemeanants.
       (b) Abolition of the Board of Parole.--On the date on which 
     the District of Columbia Offender Supervision, Defender, and 
     Courts Services Agency is established under section 11233, 
     the Board of Parole established in the District of Columbia 
     Board of Parole Amendment Act of 1987 shall be abolished.
       (c) Rulemaking and Legislative Responsibility for Parole 
     Matters.--The Parole Commission shall exercise the authority 
     vested in it by this section pursuant to the parole laws and 
     regulations of the District of Columbia, except that the 
     Council of the District of Columbia and the Board of Parole 
     of the District of Columbia may not revise any such laws or 
     regulations (as in effect on the date of the enactment of 
     this Act) without the concurrence of the Attorney General.
       (d) Increase in the Authorized Number of United States 
     Parole Commissioners.--Section 2(c) of the Parole Commission 
     Phaseout Act of 1996 (Public Law 104-232) is amended to read 
     as follows:
       ``(c) The United States Parole Commission shall have no 
     more than five members.''.

     SEC. 11232. PRETRIAL SERVICES, DEFENSE SERVICES, PAROLE, 
                   ADULT PROBATION AND OFFENDER SUPERVISION 
                   TRUSTEE.

       (a) Appointment and Removal.--
       (1) Appointment.--The Attorney General, in consultation 
     with the Chairman of the District of Columbia Financial 
     Responsibility and Management Assistance Authority (hereafter 
     in this section referred to as the ``D.C. Control Board'') 
     and the Mayor of the District of Columbia, shall appoint a 
     Pretrial Services, Defense Services, Parole, Adult 
     Probation and Offender Supervision Trustee, who shall be 
     an independent officer of the government of the District 
     of Columbia, to effectuate the reorganization and 
     transition of functions and funding relating to pretrial 
     services, defense services, parole, adult probation and 
     offender supervision.
       (2) Removal.--The Trustee may be removed by the Mayor with 
     the concurrence of the Attorney General. The Attorney General 
     shall have the authority to remove the Trustee for 
     misfeasance or malfeasance in office. At the request of the 
     Trustee, the District of Columbia Financial Responsibility 
     and Management Assistance Authority may exercise any of its 
     powers and authorities on behalf of the Trustee.
       (b) Authority.--Beginning on the date of appointment, and 
     continuing until the District of Columbia Offender 
     Supervision, Defender, and Courts Services Agency is 
     established under section 11233, the Trustee shall--
       (1) have the authority to exercise all powers and functions 
     authorized for the Director of the District of Columbia 
     Offender Supervision, Defender and Courts Services Agency;
       (2) have the authority to direct the actions of all 
     agencies of the District of Columbia whose functions will be 
     assumed by or within the District of Columbia Offender 
     Supervision, Defender and Courts Services Agency, and of the 
     Board of Parole of the District of Columbia, including the 
     authority to discharge or replace any officers or employees 
     of these agencies, except that the Trustee may not direct the 
     conduct of particular cases by the District of Columbia 
     Public Defender Service;
       (3) exercise financial oversight over all agencies of the 
     District of Columbia whose functions will be assumed by or 
     within the District of Columbia Offender Supervision, 
     Defender and Courts Services Agency, and over the Board of 
     Parole of the District of Columbia, and allocate funds to 
     these agencies as appropriated by Congress and allocated by 
     the President;
       (4) receive and transmit to the District of Columbia 
     Pretrial Services Agency all funds appropriated for such 
     agency; and
       (5) receive and transmit to the District of Columbia Public 
     Defender Service all funds appropriated for such agency.
       (c) Compensation.--The Trustee shall be compensated at a 
     rate not to exceed the basic pay payable for Level IV of the 
     Executive Schedule. The Trustee may appoint and fix the pay 
     of additional staff without regard to the provisions of the 
     District of Columbia Code governing appointments and 
     salaries, without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service, and without regard to the provisions of chapter 51 
     and subchapter III of Chapter 53 of title 5, United States 
     Code, relating to classification and General Schedule pay 
     rates. Upon request of the Trustee, the head of any Federal 
     department or agency may, on a reimbursable or non-
     reimbursable basis, provide services and/or detail any

[[Page H6159]]

     personnel of that department or agency to the Trusteeship to 
     assist in carrying out its duties.
       (d) Procurement and Judicial Review.--The provisions of the 
     District of Columbia Code governing procurement shall not 
     apply to the Trustee. The Trustee may enter into such 
     contracts as the Trustee considers appropriate to carry out 
     the Trustee's duties. The Trustee may seek judicial 
     enforcement of the Trustee's authority to carry out the 
     Trustee's duties.
       (e) Preservation of Retirement and Certain Other Rights of 
     Federal Employee Who Becomes the Trustee or Federal Employees 
     Who Become Employed by the Trustee.--
       (1) In general.--A Federal employee who, within 3 days 
     after separating from the Federal Government, is appointed 
     Trustee or becomes employed by the Trustee--
       (A) shall be treated as an employee of the Federal 
     Government for purposes of chapters 83, 84, 87, and 89 of 
     title 5 of the United States Code; and
       (B) if, after serving with the Trustee, such employee 
     becomes reemployed by the Federal Government, shall be 
     entitled to credit for the full period of such individual's 
     service with the Trustee, for purposes of determining the 
     applicable leave accrual rate.
       (2) Regulations.--The Office of Personnel Management shall 
     prescribe such regulations as may be necessary to carry out 
     this subsection.
       (f) Funding.--Funds available for operations of the Trustee 
     shall be made available to the extent provided in 
     appropriations acts to the Trustee, through the State Justice 
     Institute. Funding requests shall be proposed by the Trustee 
     to the President and Congress for each Fiscal Year.
       (g) Liability and Litigation Authority.--
       (1) Liability.--The District of Columbia shall defend any 
     civil action or proceeding brought in any court or other 
     official Federal, state, or municipal forum against the 
     Trustee, or against the District of Columbia or its officers, 
     employees, or agents, and shall assume any liability 
     resulting from such an action or proceeding, if the action or 
     proceeding arises from the--
       (A) supervision of offenders on probation, parole, or 
     supervised release;
       (B) provision of pretrial services by the District of 
     Columbia; or
       (C) activities of the District of Columbia Board of Parole.
       (2) Litigation.--
       (A) Corporation counsel.--Subject to subparagraph (B), the 
     Corporation Counsel of the District of Columbia shall provide 
     litigation services to the Trustee, except that the Trustee 
     may instead elect, either generally or in relation to 
     particular cases or classes of cases, to hire necessary staff 
     and personnel or enter into contracts for the provision of 
     litigation services at the Trustee's expense.
       (B) Attorney general.--
       (i) In general.--Notwithstanding subparagraph (A), with 
     respect to any litigation involving the Trustee, the Attorney 
     General may--

       (I) direct the litigation of the Trustee, and of the 
     District of Columbia on behalf of the Trustee; and
       (II) provide on a reimbursable or non-reimbursable basis 
     litigation services for the Trustee at the Trustee's request 
     or on the Attorney General's own initiative.

       (ii) Approval of settlement.--With respect to any 
     litigation involving the Trustee, the Trustee may not agree 
     to any settlement involving any form of equitable relief 
     without the approval of the Attorney General. The Trustee 
     shall provide to the Attorney General such notice and 
     reports concerning litigation as the Attorney General may 
     direct.
       (iii) Discretion.--Any decision to exercise any authority 
     of the Attorney General under this paragraph shall be in the 
     sole discretion of the Attorney General and shall not be 
     reviewable in any court.
       (3) Limitations.--Nothing in this section shall be 
     construed--
       (1) as a waiver of sovereign immunity, or as limiting any 
     other defense or immunity that would otherwise be available 
     to the United States, the District of Columbia, their 
     agencies, officers, employees, or agents; or
       (2) to obligate the District of Columbia to represent or 
     indemnify the Corrections Trustee or any officer, employee, 
     or agent where the Trustee (or any person employed by or 
     acting under the authority of the Trustee) acts beyond the 
     scope of his authority.
       (h) Certification.--The District of Columbia Offender 
     Supervision, Defender, and Courts Services Agency shall 
     assume its duties pursuant to section 11233 when, within the 
     period beginning one year after the date of the enactment of 
     this subtitle and ending three years after the date of the 
     enactment of this subtitle, the Trustee certifies to the 
     Attorney General and the Attorney General concurs that the 
     Agency can carry out the functions described in section 11233 
     and the United States Parole Commission can carry out the 
     functions described in section 11231.

     SEC. 11233. OFFENDER SUPERVISION, DEFENDER AND COURTS 
                   SERVICES AGENCY.

       (a) Establishment.--There is established within the 
     executive branch of the Federal Government the District of 
     Columbia Offender Supervision, Defender, and Courts Services 
     Agency (hereafter in this section referred to as the 
     ``Agency'') which shall assume its duties not less than one 
     year or more than three years after the enactment of this 
     Act.
       (b) Director.--
       (1) Appointment and compensation.--The Agency shall be 
     headed by a Director appointed by the President, by and with 
     the advice and consent of the Senate, for a term of six 
     years. The Director shall be compensated at the rate 
     prescribed for Level IV of the Executive Schedule, and may be 
     removed from office prior to the expiration of term only for 
     neglect of duty, malfeasance in office, or other good cause 
     shown.
       (2) Powers and duties of director.--The Director shall--
       (A) submit annual appropriation requests for the Agency to 
     the Office of Management and Budget;
       (B) determine, in consultation with the Chief Judge of the 
     United States District Court for the District of Columbia, 
     the Chief Judge of the Superior Court of the District of 
     Columbia, and the Chairman of the United States Parole 
     Commission, uniform supervision and reporting practices for 
     the Agency;
       (C) hire and supervise supervision officers and support 
     staff for the Agency;
       (D) direct the use of funds made available to the Agency;
       (E) enter into such contracts, leases, and cooperative 
     agreements as may be necessary for the performance of the 
     Agency's functions, including contracts for substance abuse 
     and other treatment and rehabilitative programs;
       (F) develop and operate intermediate sanctions programs for 
     sentenced offenders; and
       (G) arrange for the supervision of District of Columbia 
     paroled offenders in jurisdictions outside the District of 
     Columbia.
       (c) Functions.--
       (1) In general.--The Agency shall provide supervision, 
     through qualified supervision officers, for offenders on 
     probation, parole, and supervised release pursuant to the 
     District of Columbia Code. The Agency shall carry out its 
     responsibilities on behalf of the court or agency having 
     jurisdiction over the offender being supervised.
       (2) Supervision of released offenders.--The Agency shall 
     supervise any offender who is released from imprisonment for 
     any term of supervised release imposed by the Superior Court 
     of the District of Columbia. Such offender shall be subject 
     to the authority of the United States Parole Commission until 
     completion of the term of supervised release. The United 
     States Parole Commission shall have and exercise the same 
     authority as is vested in the United States district courts 
     by paragraphs (d) through (i) of section 3583 of title 18, 
     United States Code, except that--
       (A) the procedures followed by the Commission in exercising 
     such authority shall be those set forth in chapter 311 of 
     title 18, United States Code; and
       (B) an extension of a term of supervised release under 
     subsection (e)(2) of section 3583 may only be ordered by the 
     Superior Court upon motion from the Commission.
       (3) Supervision of probationers.--Subject to appropriations 
     and program availability, the Agency shall supervise all 
     offenders placed on probation by the Superior Court of the 
     District of Columbia. The Agency shall carry out the 
     conditions of release imposed by the Superior Court 
     (including conditions that probationers undergo training, 
     education, therapy, counseling, drug testing, or drug 
     treatment), and shall make such reports to the Superior Court 
     with respect to an individual on probation as the Superior 
     Court may require.
       (4) Supervision of district of columbia parolees.--The 
     Agency shall supervise all individuals on parole pursuant to 
     the District of Columbia Code. The Agency shall carry out the 
     conditions of release imposed by the United States Parole 
     Commission or, with respect to a misdemeanant, by the 
     Superior Court of the District of Columbia, and shall make 
     such reports to the Commission or Court with respect to an 
     individual on parole supervision as the Commission or Court 
     may require.
       (d) Authority of Officers.--The supervision officers of the 
     Agency shall have and exercise the same powers and authority 
     as are granted by law to United States Probation and Pretrial 
     Officers.
       (e) Pretrial Services Agency and Public Defender Service.--
       (1) Independent entities.--The District of Columbia 
     Pretrial Services Agency established by subchapter I of 
     chapter 13 title 23, District of Columbia Code, and the 
     District of Columbia Public Defender Service established by 
     title III of the District of Columbia Court Reform and 
     Criminal Procedure Act of 1970 (D.C. Code, sec. 1-2701 et 
     seq.) shall function as independent entities within the 
     Agency.
       (2) Submission on behalf of pretrial services.--The 
     Director of the Agency shall submit, on behalf of the 
     District of Columbia Pretrial Services Agency and with the 
     approval of the Director of the Pretrial Services Agency, an 
     annual appropriation request to the Office of Management and 
     Budget. Such request shall be separate from the request 
     submitted for the Agency.
       (3) Submission on behalf of public defender service.--The 
     Director of the Agency shall submit, on behalf of the 
     District of Columbia Public Defender Service and with the 
     approval of the Director of the Public Defender Service, an 
     annual appropriation request to the Office of Management and 
     Budget. Such request shall be separate from that submitted 
     for the Agency.
       (4) Liability of District of Columbia.--The District of 
     Columbia shall defend any civil action or proceeding brought 
     in any court or other official Federal, state, or municipal 
     forum against the District of Columbia Pretrial Services 
     Agency, the District of Columbia Public Defender Service, or 
     the District of Columbia or its officers, employees, or 
     agents, and shall assume any liability resulting from such an 
     action or proceeding, if the action or proceeding arises from 
     the activities of the District of Columbia Pretrial Services 
     Agency or the District of Columbia Public Defender Service 
     prior to the date on which the Offender Supervision, Defender 
     and Courts Services Agency assumes its duties.
       (5) Litigation.--
       (A) Corporation counsel.--Subject to subparagraph (B), the 
     Corporation Counsel of the

[[Page H6160]]

     District of Columbia shall provide litigation services to the 
     District of Columbia Pretrial Services Agency and the 
     District of Columbia Public Defender Service, except that the 
     District of Columbia Pretrial Services Agency and the 
     District of Columbia Public Defender Service may instead 
     elect, either generally or in relation to particular cases or 
     classes of cases, to hire necessary staff and personnel or 
     enter into contracts for the provision of litigation services 
     at such agency's expense.
       (B) Attorney general.--
       (i) In general.--Notwithstanding subparagraph (A), with 
     respect to any litigation involving the District of Columbia 
     Pretrial Services Agency, the Attorney General may--

       (I) direct the litigation of the agency, and of the 
     District of Columbia on behalf of the agency; and
       (II) provide on a reimbursable or non-reimbursable basis 
     litigation services for the agency at the agency's request or 
     on the Attorney General's own initiative.

       (ii) Approval of settlement.--With respect to any 
     litigation involving the District of Columbia Pretrial 
     Services Agency, the agency may not agree to any settlement 
     involving any form of equitable relief without the approval 
     of the Attorney General. The agency shall provide to the 
     Attorney General such notice and reports concerning 
     litigation as the Attorney General may direct.
       (iii) Discretion.--Any decision to exercise any authority 
     of the Attorney General under this paragraph shall be in the 
     sole discretion of the Attorney General and shall not be 
     reviewable in any court.

     SEC. 11234. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated through the State 
     Justice Institute in each fiscal year such sums as may be 
     necessary for the following:
       (1) District of Columbia Pretrial Services Agency.
       (2) District of Columbia Public Defender Service.
       (3) Supervision of offenders on probation, parole, or 
     supervised release for offenses under the District of 
     Columbia Code.
       (4) Operation of the parole system for offenders convicted 
     of offenses under the District of Columbia Code.
       (5) Operation of the Trusteeship described in section 
     11232.

                 CHAPTER 4--DISTRICT OF COLUMBIA COURTS

  Subchapter A--Transfer of Administration and Financing of Courts to 
                           Federal Government

     SEC. 11241. AUTHORIZATION OF APPROPRIATIONS.

       (a) Authorizations.--There are authorized to be 
     appropriated through the State Justice Institute in each 
     fiscal year such sums as may be necessary for the following:
       (1) The Superior Court of the District of Columbia.
       (2) The District of Columbia Court of Appeals.
       (3) The District of Columbia Court System.
       (b) Submission to OMB.--The Joint Committee on Judicial 
     Administration in the District of Columbia shall include in 
     its submissions to the Office of Management and Budget and 
     the Congress, the budget and appropriations requests of the 
     Superior Court for the District of Columbia, the District of 
     Columbia Court of Appeals, and the District of Columbia Court 
     System.

     SEC. 11242. ADMINISTRATION OF COURTS UNDER DISTRICT OF 
                   COLUMBIA CODE.

       (a) Submission of Annual Budget Requests by Joint Committee 
     on Judicial Administration.--Section 11-1701(b)(4), District 
     of Columbia Code, is amended to read as follows:
       ``(4) Submission of the annual budget requests of the 
     District of Columbia Court of Appeals, the Superior Court of 
     the District of Columbia, and the District of Columbia Court 
     System as the integrated budget of the District of Columbia 
     courts, except that such requests may be modified upon the 
     concurrence of four of the five members of the Joint 
     Committee.''.
       (b) Audit of Accounts of Courts.--Section 11-1723(a)(3), 
     District of Columbia Code, is amended to read as follows:
       ``(3) The Fiscal Officer shall be responsible for the 
     approval of vouchers and the internal auditing of the 
     accounts of the courts and shall arrange for an annual 
     independent audit of the accounts of the courts.''.
       (c) Appointment and Removal of Court Personnel.--Section 
     11-1725(b) of the District of Columbia Code is amended to 
     read as follows:
       ``(b) The Executive Officer shall appoint, and may remove, 
     the Director of Social Services, the clerks of the courts, 
     the Auditor-Master, and all other nonjudicial personnel for 
     the courts (other than the Register of Wills and personal law 
     clerks and secretaries of the judges) as may be necessary, 
     subject to--
       ``(1) regulations approved by the Joint Committee; and
       ``(2) the approval of the chief judge of the court to which 
     the personnel are or will be assigned.
       ``Appointments and removals of court personnel shall not be 
     subject to the laws, rules, and limitations applicable to 
     District of Columbia employees.''.
       (d) Procurement of Equipment and Supplies.--Section 11-
     1742(b), District of Columbia Code, is amended to read as 
     follows:
       ``(b) The Executive Officer shall be responsible for the 
     procurement of necessary equipment, supplies, and services 
     for the courts and shall have power, subject to applicable 
     law, to reimburse the District of Columbia government for 
     services provided and to contract for such equipment, 
     supplies, and services as may be necessary.''.
       (e) Budget and Expenditures.--
       (1) In general.--Section 11-1743, District of Columbia 
     Code, is amended to read as follows:

     ``Sec. 11-1743. Annual Budget and Expenditures.

       ``(a) The Joint Committee shall prepare and submit to the 
     Mayor and the Council of the District of Columbia annual 
     estimates of the expenditures and appropriations necessary 
     for the maintenance and operations of the District of 
     Columbia courts, and shall submit such estimates to Congress 
     and the Director of the Office of Management and Budget after 
     submitting them to the Mayor and the Council. All such 
     estimates shall be included in the budget without revision by 
     the President but subject to the President's recommendations.
       ``(b) The District of Columbia Courts may make such 
     expenditures as may be necessary to execute efficiently the 
     functions vested in the Courts.
       ``(c) All expenditures of the Courts shall be allowed and 
     paid upon presentation of itemized vouchers signed by the 
     certifying officer designated by the Joint Committee. All 
     such expenditures shall be paid out of moneys appropriated 
     for purposes of the Courts.''.
       (2) Clerical amendment.--The item relating to section 11-
     1743 in the table of sections for subchapter III of chapter 
     17 of title 11, District of Columbia Code, is amended to read 
     as follows:

``11-1743. Annual budget and expenditures.''.

     SEC. 11243. BUDGETING AND FINANCING REQUIREMENTS FOR COURTS 
                   UNDER HOME RULE ACT.

       (a) Budget of Courts.--Section 445 of the District of 
     Columbia Self-Government and Governmental Reorganization Act 
     (DC Code, Title 11 App.) is amended to read as follows:
       ``Sec. 445. The District of Columbia courts shall prepare 
     and annually submit to the Director of the Office of 
     Management and Budget, for inclusion in the annual budget, 
     annual estimates of the expenditures and appropriations 
     necessary for the maintenance and operation of the District 
     of Columbia court system. The courts shall submit as part of 
     their budgets both a multiyear plan and a multiyear capital 
     improvements plan and shall submit a statement presenting 
     qualitative and quantitative descriptions of court activities 
     and the status of efforts to comply with reports of the 
     Comptroller General of the United States.''.
       (b) Financial Duties of the Mayor.--Section 448(a)(6) of 
     such Act (DC Code, sec. 47-310(a)(6)) is amended to read as 
     follows:
       ``(6) supervise and be responsible for the levying and 
     collection of all taxes, special assessments, license fees, 
     and other revenues of the District, as required by law, and 
     receive all moneys receivable by the District from the 
     Federal Government or from any agency or instrumentality of 
     the District, except that this paragraph shall not apply to 
     moneys from the District of Columbia Courts.''.
       (c) Funds of the District.--Section 450 of such Act (DC 
     Code, sec. 47-130) is amended to read as follows:
       ``Sec. 450. The General Fund of the District shall be 
     composed of those District revenues which on the effective 
     date of this title are paid into the Treasury of the United 
     States and credited either to the General Fund of the 
     District or its miscellaneous receipts, but shall not include 
     any revenues which are applied by law to any special fund 
     existing on the date of enactment of this title. The Council 
     may from time to time establish such additional special funds 
     as may be necessary for the efficient operation of the 
     government of the District. All money received by any agency, 
     officer, or employee of the District in its or his official 
     capacity shall belong to the District government and shall be 
     paid promptly to the Mayor for deposit in the appropriate 
     fund, except that all money received by the District of 
     Columbia Courts shall be deposited in the Treasury of the 
     United States or the Crime Victims Fund.''.
       (d) Reductions in Budgets of Independent Agencies.--Section 
     453(c) of such Act (DC Code, sec. 47-304.1(c)) is amended to 
     read as follows:
       ``(c) Subsection (a) shall not apply to amounts 
     appropriated or otherwise made available to the Council or to 
     the District of Columbia Financial Responsibility and 
     Management Assistance Authority established under section 
     101(a) of the District of Columbia Financial Responsibility 
     and Management Assistance Act of 1995.''.
       (e) Treatment of Court Fees in Calculation of Limits on 
     District Borrowing.--Section 603 of such Act (DC Code, sec. 
     47-313) is amended--
       (1) in subsection (b)--
       (A) in paragraph (1)--
       (i) in the first sentence, by striking ``less court fees, 
     any fees'' and inserting ``less any fees''; and
       (ii) in the second sentence, by striking ``section 2501, 
     title 47 of the District of Columbia Code, as amended'' and 
     inserting ``title VI of the District of Columbia Revenue Act 
     of 1939'';
       (B) in paragraph (3)(A), by striking ``less court fees, any 
     fees'' and inserting ``less any fees''; and
       (2) in subsection (c), by striking the last sentence 
     (relating to budget estimates of the District of Columbia 
     courts).

     SEC. 11244. AUDITING OF ACCOUNTS OF COURT SYSTEM.

       (a) Powers of District of Columbia Auditor.--Section 455 of 
     the District of Columbia Self-Government and Governmental 
     Reorganization Act (DC Code, sec. 47-117) is amended by 
     adding at the end the following new subsection:
       ``(g) This section shall not apply to the District of 
     Columbia Courts or the accounts and operations thereof.''
       (b) Submission of GAO Audit Reports to Mayor and Council.--
     Section 715(b) of title 31, United States Code (DC Code, sec. 
     47-118.1(b)), is amended by striking ``and the Mayor'' and

[[Page H6161]]

     inserting ``and (other than the audit reports of the District 
     of Columbia Courts) the Mayor''.
       (c) Independent Annual Audit.--Section 4 of Public Law 94-
     399 (DC Code, sec. 47-119) is amended by adding at the end 
     the following new subsection:
       ``(d) This section shall not apply to the District of 
     Columbia Courts or the financial operations thereof.''

     SEC. 11245. MISCELLANEOUS BUDGETING AND FINANCING 
                   REQUIREMENTS FOR COURTS UNDER DISTRICT LAW.

       (a) Deposit of Public Funds.--Section 2(21) of the District 
     of Columbia Depository Act of 1977 (DC Code, sec. 47-341(21)) 
     is amended by striking ``a court, agency'' and inserting ``an 
     agency''.
       (b) Reprogramming of Budget Amounts.--Section 4(h) of D.C. 
     Law 3-100 (DC Code, sec. 47-363(h)) is amended by striking 
     ``the District of Columbia courts,''.
       (c) Control of Grant Funds.--(1) Section 3(1) of D.C. Law 
     3-104 (DC Code, sec. 47-382(1)) is amended to read as 
     follows:
       ``(1) `Agency' means the highest organizational structure 
     of the District at which budgeting data is aggregated, but 
     shall not include the District of Columbia Courts.''
       (2) Section 4(b) of D.C. Law 3-104 (DC Code, sec. 47-
     383(b)) is amended to read at follows:
       ``(b) The Trustees of the University of the District of 
     Columbia, the Board of Education, and the D.C. General 
     Hospital Commission shall submit to the Mayor two copies of 
     the application and completed approval form, as an advisory 
     notice, concurrent with submitting the application and 
     completed approval form to a grant-making agency in 
     accordance with rules and regulations issued pursuant to 
     subsection (c) of this section.''.

     SEC. 11246. OTHER PROVISIONS RELATING TO ADMINISTRATION OF 
                   DISTRICT OF COLUMBIA COURTS.

       (a) Juror Fees.--Section 11-1912(a), District of Columbia 
     Code, is amended to read as follows:
       ``(a) Notwithstanding section 602(a) of the District of 
     Columbia Self-Government and Governmental Reorganization Act, 
     grand and petit jurors serving in the Superior Court shall 
     receive fees and expenses at rates established by the Board 
     of Judges of the Superior Court'', except that such fees and 
     expenses may not exceed the respective rates paid to such 
     jurors in the Federal system.''.
       (b) Compensation and Benefits for Court Personnel.--
       (1) In general.--Section 11-1726, District of Columbia 
     Code, is amended to read as follows:

     ``Sec. 11-1726. Compensation and benefits for court 
       personnel.

       ``(a) In the case of nonjudicial employees of the District 
     of Columbia courts whose compensation is not otherwise fixed 
     by this title, the Executive Officer shall fix the rates of 
     compensation of such employees without regard to chapter 51 
     and subchapter III of chapter 53 of title 5, United States 
     Code. Any rates so established shall be subject to the 
     limitation on pay fixed by administrative action in section 
     5373 of such title. In fixing the rates of compensation of 
     nonjudicial employees under this section, the Executive 
     Officer may be guided by the rates of compensation fixed for 
     employees in the executive and judicial branches of the 
     Federal Government or State or local governments occupying 
     the same or similar positions or occupying positions of 
     similar responsibility, duty, and difficulty.
       ``(b)(1) Nonjudicial employees of the District of Columbia 
     courts shall be treated as employees of the Federal 
     Government solely for purposes of any of the following 
     provisions of title 5, United States Code:
       ``(A) Subchapter 1 of chapter 81 (relating to compensation 
     for work injuries).
       ``(B) Chapter 83 (relating to retirement).
       ``(C) Chapter 84 (relating to the Federal Employees' 
     Retirement System).
       ``(D) Chapter 87 (relating to life insurance).
       ``(E) Chapter 89 (relating to health insurance).
       ``(2) The employing agency shall make contributions under 
     the provisions referred to paragraph (1) at the same rates 
     applicable to agencies of the Federal Government.
       ``(3) An individual who is a nonjudicial employee of the 
     District of Columbia courts on the date of the enactment of 
     the Balanced Budget Act of 1997 may make, within 60 days 
     after such date, an election under section 8351 or section 
     8432 of title 5, United States Code, to participate in the 
     Thrift Savings Plan for Federal employees.
       ``(c)(1) Judicial employees of the District of Columbia 
     courts shall be treated as employees of the Federal 
     Government for purposes of any of the following provisions of 
     title 5, United States Code:
       ``(A) Subchapter 1 of chapter 81 (relating to compensation 
     for work injuries).
       ``(B) Chapter 87 (relating to life insurance).
       ``(C) Chapter 89 (relating to health insurance).
       ``(2) The employing agency shall make contributions under 
     the provisions referred to paragraph (1) at the same rates 
     applicable to agencies of the Federal Government.
       ``(3) For purposes of section 8706(b) and section 
     8901(3)(B) of title 5, United States Code, benefits paid from 
     the retirement system for judicial employees of the District 
     of Columbia courts or from the system providing benefits to 
     survivors of such employees shall be considered an annuity.
       ``(4) For purposes of section 8901(3)(A) of title 5, United 
     States Code, the retirement system for judicial employees of 
     the District of Columbia courts shall be considered a 
     retirement system for employees of the Government.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter II of chapter 15 of title 11, District of Columbia 
     Code, is amended by amending the item relating to section 11-
     1726 to read as follows:
``11-1726. Compensation and benefits for court personnel.''.

       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to all months beginning after the 
     date on which the Director of the Office of Personnel 
     Management issues regulations to carry out section 11-1726, 
     District of Columbia Code (as amended by paragraph (1)).
       (c) Retirement Period for Executive Officer.--Section 11-
     1703(d), District of Columbia Code, is amended by striking 
     the period at the end and inserting the following: ``, except 
     that the Executive Officer (if initially hired after October 
     1, 1997) shall be eligible for retirement under subchapter 
     III of chapter 15 when the Executive Officer has completed 7 
     years of service as Executive Officer, whether continuous or 
     not.''.

               Subchapter B--Judicial Retirement Program

     SEC. 11251. JUDICIAL RETIREMENT AND SURVIVORS ANNUITY FUND.

       (a) Establishment of Fund.--Section 11-1570, District of 
     Columbia Code, is amended to read as follows:

     ``Sec. 11-1570. The District of Columbia Judicial Retirement 
       and Survivors Annuity Fund.

       ``(a) There is established in the Treasury a fund known as 
     the District of Columbia Judicial Retirement and Survivors 
     Annuity Fund (hereafter in this section referred to as the 
     `Fund'), which shall consist of the following assets:
       ``(1) Amounts deposited by, or deducted and withheld from 
     the salary and retired pay of, a judge under section 1563 or 
     1567 of this title, which shall be credited to an individual 
     account of the judge.
       ``(2) Amounts transferred from the District of Columbia 
     Judges' Retirement Fund under section 124(c)(1) of the 
     District of Columbia Retirement Reform Act, as amended by 
     section 11252 of the Balanced Budget Act of 1997.
       ``(3) Amounts deposited under subsection (d).
       ``(4) Any return on investment of the assets of the Fund.
       ``(b)(1) The Secretary of the Treasury (hereafter in this 
     section referred to as the `Secretary') shall be responsible 
     for the administration of the Fund. The Secretary may carry 
     out such responsibilities through an agreement with a Trustee 
     or contractor (who may be the Trustee or contractor appointed 
     to carry out responsibilities relating to Federal benefit 
     payments under title I of the National Capital Revitalization 
     and Self-Government Improvement Act of 1997) and an enrolled 
     actuary (as defined in section 7701(a)(35) of the Internal 
     Revenue Code of 1986) who is a member of the American Academy 
     of Actuaries (who may be the enrolled actuary engaged under 
     such Act).
       ``(2) The chief judges of the District of Columbia Court of 
     Appeals and Superior Court of the District of Columbia shall 
     submit to the President and the Secretary an annual estimate 
     of the expenditures and appropriations necessary for the 
     maintenance and operation of the Fund, and such supplemental 
     and deficiency estimates as may be required from time to time 
     for the same purposes, according to law.
       ``(3) The Secretary may cause periodic examinations of the 
     Fund to be made by an enrolled actuary (as defined in section 
     7701(a)(35) of the Internal Revenue Code of 1986) who is a 
     member of the American Academy of Actuaries.
       ``(c)(1) Amounts in the Fund are available for the payment 
     of judges' retirement pay, annuities, refunds, and allowances 
     under this subchapter.
       ``(2) Notwithstanding any other provision of District law 
     or any other law, rule, or regulation, the Secretary may 
     review benefit determinations under this subchapter made 
     prior to the date of the enactment of the National Capital 
     Revitalization and Self-Government Improvement Act of 1997, 
     and shall make initial benefit determinations after such 
     date.
       ``(d)(1) Subject to the availability of appropriations, 
     there shall be deposited in the Fund, not later than the 
     close of each fiscal year (beginning with the first fiscal 
     year which ends more than 6 months after the replacement plan 
     adoption date described in section 103(13) of the National 
     Capital Revitalization and Self-Government Improvement Act of 
     1997), an amount equal to the sum of--
       ``(A) the normal cost for the year;
       ``(B) the annual amortization amount for the year (which 
     may not be less than zero); and
       ``(C) the covered administrative expenses for the year.
       ``(2) For purposes of this subsection:
       ``(A) The `original unfunded liability' is the amount that 
     is the present value as of June 30, 1997, of future benefits 
     payable from the Fund (net the sum of future normal cost and 
     plan assets as of such date).
       ``(B) The `annual amortization amount' is the amount 
     determined by the enrolled actuary to be necessary to 
     amortize in equal annual installments (until fully 
     amortized)--
       ``(i) the original unfunded liability over a 30-year 
     period;
       ``(ii) a net experience gain or loss over a 10-year period; 
     and
       ``(iii) any other changes in actuarial liability over a 20-
     year period.
       ``(C) The `covered administrative expenses' are the 
     expenses determined by the Secretary (on an annual basis) to 
     be necessary to administer the Fund.
       ``(3) Deposits made under this subsection shall be taken 
     from sums available for that fiscal year for the payment of 
     the expenses of the Court, and shall not be credited to the 
     account of any individual.
       ``(e) The Secretary shall invest such portion of the Fund 
     as is not in the judgment of the Secretary required to meet 
     current withdrawals.

[[Page H6162]]

     Such investments shall be in public debt securities with 
     maturities suitable to the needs of the Fund, as 
     determined by the Secretary, and bearing interest at rates 
     determined by the Secretary, taking into consideration 
     current market yields on outstanding marketable 
     obligations of the United States of comparable maturities.
       ``(f) None of the moneys mentioned in this subchapter shall 
     be assignable, either in law or in equity, or be subject to 
     execution, levy, attachment, garnishment, or other legal 
     process (except to the extent permitted pursuant to the 
     District of Columbia Spouse Equity Act of 1988).
       ``(g) Notwithstanding any other provision of District law, 
     rule, or regulation, any civil action brought--
       ``(1) by an individual to enforce or clarify rights to 
     benefits from the Fund; or
       ``(2) by the Secretary--
       ``(A) to enforce any claim arising (in whole or in part) 
     under this section or any contract entered into to carry out 
     this section,
       ``(B) to recover benefits improperly paid from the Fund or 
     to clarify an individual's rights to benefits from the Fund, 
     or
       ``(C) to enforce any provision of this section or any 
     contract entered into to carry out this section,
     shall be brought in the United States District Court for the 
     District of Columbia.''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter III of chapter 15 of title 11, District of 
     Columbia Code, is amended by amending the item relating to 
     section 11-1570 to read as follows:

``11-1570. The District of Columbia Judicial Retirement and Survivors 
              Annuity Fund.''.

     SEC. 11252. TERMINATION OF CURRENT FUND AND PROGRAM.

       (a) Termination of Judges' Retirement Fund.--Section 124 of 
     the District of Columbia Retirement Reform Act (DC Code, sec. 
     1-714) is amended by striking subsection (c) and inserting 
     the following:
       ``(c)(1) Notwithstanding any other provision of this Act or 
     the amendments made by this Act, upon the date the assets of 
     the Retirement Fund described in title I of the National 
     Capital Revitalization and Self-Government Improvement Act of 
     1997 are transferred, the assets of the District of Columbia 
     Judges' Retirement Fund established under subsection (a) 
     shall be transferred to the District of Columbia Judicial 
     Retirement and Survivors Annuity Fund under section 11-1570, 
     District of Columbia Code, and no amounts shall be deposited 
     into the District of Columbia Judges' Retirement Fund after 
     the date on which the assets are so transferred.
       ``(2) The District of Columbia Judges' Retirement Fund 
     established under subsection (a) shall be continued in the 
     Treasury and appropriated for the purposes provided in this 
     Act until such time as all amounts in such Fund have been 
     expended or transferred to the District of Columbia Judicial 
     Retirement and Survivors Annuity Fund pursuant to paragraph 
     (1). Thereafter any payments of retirement pay, annuities, 
     refunds, and allowances for judicial personnel of the 
     District of Columbia shall be paid from the District of 
     Columbia Judicial Retirement and Survivors Annuity Fund in 
     accordance with subchapter III of chapter 15 of title 11, 
     District of Columbia Code.''.
       (b) Removal of Judges From Retirement Board.--Section 
     121(b)(1)(A) of the District of Columbia Retirement Reform 
     Act (DC Code, sec. 1-711(b)(1)(A)) is amended--
       (1) in the matter preceding clause (i), by striking ``13'' 
     and inserting ``11'';
       (2) by striking clause (vii); and
       (3) by redesignating clauses (viii) and (ix) as clauses 
     (vii) and (viii).

     SEC. 11253. CONFORMING AMENDMENTS.

       (a) Transfer of Authority Over Fund to Secretary of the 
     Treasury.--Title 11, District of Columbia Code, is amended as 
     follows:
       (1) In sections 11-1561(8)(C), 11-1562(c), 11-1563(b), 11-
     1563(c), 11-1564(d)(6), 11-1564(d)(7), 11-1566(a), and 11-
     1570(c), by striking ``Commissioner [Mayor]'' each place it 
     appears and inserting ``Secretary of the Treasury''.
       (2) In sections 11-1566(b)(2), 11-1567(a), 11-1567(b), by 
     striking ``Mayor'' each place it appears and inserting 
     ``Secretary of the Treasury''.
       (3) In sections 11-1564(d)(2)(A) and 11-1568.1(1)(B), by 
     striking ``Mayor of the District of Columbia'' each place it 
     appears and inserting ``Secretary of the Treasury''.
       (4) In section 11-1563(a), by striking ``paid to the 
     Custodian of Retirement Funds (as defined in section 102(6) 
     of the District of Columbia Retirement Reform Act)'' and 
     inserting ``paid to the Secretary of the Treasury''.
       (b) Definition of fund.--Section 11-1561(4), District of 
     Columbia Code, is amended to read as follows:
       ``(4) The term `fund' means the District of Columbia 
     Judicial Retirement and Survivors Annuity Fund established by 
     sections 11-1570.''.
       (c) Treatment of Federal Service of Judges.--Section 11-
     1564(d)(4), District of Columbia Code, is amended by striking 
     ``Judges' Retirement Fund established by section 124(a) of 
     the District of Columbia Retirement Reform Act'' and 
     inserting ``Judicial Retirement and Survivors Annuity Fund 
     under section 11-1570''.

  Subchapter C--Miscellaneous Conforming and Administrative Provisions

     SEC. 11261. TREATMENT OF COURTS UNDER MISCELLANEOUS DISTRICT 
                   LAWS.

       (a) Financial Responsibility and Management Assistance 
     Act.--Paragraph (5) of section 305 of the District of 
     Columbia Financial Responsibility and Management Assistance 
     Act of 1995 (DC Code, sec. 47-393(5)) is amended to read as 
     follows:
       ``(5) The term `District government' means the government 
     of the District of Columbia, including any department, agency 
     or instrumentality of the government of the District of 
     Columbia; any independent agency of the District of Columbia 
     established under part F of title IV of the District of 
     Columbia Self-Government and Governmental Reorganization Act 
     or any other agency, board, or commission established by the 
     Mayor or the Council; the Council of the District of 
     Columbia; and any other agency, public authority, or public 
     benefit corporation which has the authority to receive monies 
     directly or indirectly from the District of Columbia (other 
     than monies received from the sale of goods, the provision of 
     services, or the loaning of funds to the District of 
     Columbia), except that such term does not include the 
     Authority.''.
       (b) Merit Personnel Act.--(1) Section 201 of the District 
     of Columbia Comprehensive Merit Personnel Act of 1978 (DC 
     Code, sec. 1-602.1) is amended--
       (A) by striking ``(a) Except as provided in subsection (b) 
     or unless'' and inserting ``Unless''; and
       (B) by striking subsection (b).
       (2) Section 301(13) of the District of Columbia 
     Comprehensive Merit Personnel Act of 1978 (DC Code, sec. 1-
     603.1(13)) is amended by striking ``, the Superior Court of 
     the District of Columbia, and the District of Columbia Court 
     of Appeals shall be considered independent agencies'' and 
     inserting ``shall be considered an independent agency''.

     SEC. 11262. REPRESENTATION OF INDIGENTS IN CRIMINAL CASES.

       (a) Budget.--Section 11-2607, District of Columbia Code, is 
     amended to read as follows:

     ``Sec. 11-2607. Preparation of Budget

       ``The joint committee shall prepare and include in its 
     annual budget requests for the District of Columbia court 
     system estimates of the expenditures and appropriations 
     necessary for furnishing representation by private attorneys 
     to persons entitled to representation in accordance with 
     section 2601 of this title.''.
       (b) Authorization of Appropriations.--Section 11-2608 of 
     the District of Columbia Code is amended to read as follows:

     ``Sec. 11-2608. Authorization of appropriations

       ``There are authorized to be appropriated through the State 
     Justice Institute such sums as may be necessary to pay for 
     representation by private attorneys and related services 
     under this chapter. When so specified in appropriation Acts, 
     such appropriations shall remain available until expended.''.
       (c) Repeal Authority of Council.--
       (1) In general.--Section 11-2609, District of Columbia 
     Code, is repealed.
       (2) Clerical amendment.--The table of sections for chapter 
     26 of title 11, District of Columbia Code, is amended by 
     striking the item relating to section 11-2609.

    CHAPTER 5--PRETRIAL SERVICES AGENCY AND PUBLIC DEFENDER SERVICE

     SEC. 11271. AMENDMENTS AFFECTING PRETRIAL SERVICES AGENCY.

       (a) In General.--Sections 23-1304 through 23-1308 of the 
     District of Columbia Code are amended to read as follows:

     ``Sec. 23-1304. Executive committee; composition; appointment 
       and qualifications of Director

       ``(a) The agency shall be advised by an executive committee 
     of seven members, of which four members shall constitute a 
     quorum. The Executive Committee shall be composed of the 
     following persons or their designees: the Chief Judge of the 
     United States Court of Appeals for the District of Columbia 
     Circuit, the Chief Judge of the United States District Court 
     for the District of Columbia, the Chief Judge of the District 
     of the Columbia Court of Appeals, the Chief Judge of the 
     Superior Court of the District of Columbia, the United States 
     Attorney for the District of Columbia, the Director of the 
     District of Columbia Public Defender Service, and the 
     Director of the District of Columbia Offender Supervision, 
     Defender and Courts Services Agency.
       ``(b) The Chief Judge of the United States Court of Appeals 
     for the District of Columbia Circuit and the Chief Judge of 
     the United States District Court for the District of 
     Columbia, in consultation with the other members of the 
     executive committee, shall appoint a Director of the agency 
     who shall be a member of the bar of the District of Columbia.

     ``Sec. 23-1305. Duties of director; compensation

       ``(a) The Director of the agency shall be responsible for 
     the supervision and execution of the duties of the agency. 
     The Director shall be compensated as a member of the Senior 
     Executive Service pursuant to subchapter VIII of chapter 53 
     of title 5, United States Code.

     ``Sec. 23-1306. Chief assistant and other agency personnel; 
       compensation

       ``The Director shall employ a chief assistant who shall be 
     compensated as a member of the Senior Executive Service 
     pursuant to section 5382 of title 5, United States Code. The 
     Director shall employ such agency personnel as may be 
     necessary properly to conduct the business of the agency. All 
     employees other than the chief assistant shall receive 
     compensation that is comparable to levels of compensation 
     established for Federal pretrial services agencies.

     ``Sec. 23-1307. Annual reports

       ``(a) The Director shall each year submit to the executive 
     committee and to the Director of the District of Columbia 
     Offender Supervision, Defender and Courts Services Agency 
     a report as to the Pretrial Services Agency's 
     administration of its responsibilities for the previous 
     fiscal year. The Director shall include in the report a 
     statement of financial condition, revenues, and expenses 
     for the past fiscal year.

     ``Sec. 23-1308. Appropriation; budget

       ``There are authorized to be appropriated through the State 
     Justice Institute in each fiscal year such sums as may be 
     necessary to carry out

[[Page H6163]]

     the provisions of this subchapter. Funds appropriated by 
     Congress for the District of Columbia Pretrial Services 
     Agency shall be received by the Director of the District of 
     Columbia Offender Supervision, Defender and Courts Services 
     Agency, and shall be disbursed by that Director to and on 
     behalf of the District of Columbia Pretrial Services Agency. 
     The District of Columbia Pretrial Services Agency shall 
     submit to the Director of the District of Columbia Offender 
     Supervision, Defender and Courts Services Agency at the time 
     and in the form prescribed by that Director, reports of its 
     activities and financial position and its proposed budget.''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter I of chapter 13 of title 23, District of Columbia 
     Code, is amended by striking the items relating to sections 
     23-1304 through 23-1308 and inserting the following:

``23-1304. Executive committee; composition; appointment and 
              qualifications of Director.
``23-1305. Duties of director; compensation.
``23-1306. Chief assistant and other agency personnel; compensation.
``23-1307. Annual reports.
``23-1308. Appropriation; budget.''

     SEC. 11272. AMENDMENTS AFFECTING PUBLIC DEFENDER SERVICE.

       (a) Board of Trustees.--Section 303(a) of the District of 
     Columbia Court Reform and Criminal Procedure Act of 1970 (DC 
     Code, sec. 1-2703(a)) is amended to read as follows:
       ``(a) The Service shall be advised on matters of general 
     policy by a Board of Trustees.''.
       (b) Appointment of Director and Deputy Director.--Section 
     304 of such Act (DC Code, sec. 1-2704) is amended to read as 
     follows:

     ``SEC. 304. DIRECTOR AND DEPUTY DIRECTOR; APPOINTMENT; 
                   DUTIES; MEMBERSHIP IN BAR REQUIRED.

       ``The Chief Judge of the United States Court of Appeals for 
     the District of Columbia Circuit and the Chief Judge of the 
     United States District Court for the District of Columbia, in 
     consultation with the persons described in subparagraphs (B) 
     through (D) of section 303(b)(1) and the Board of Trustees, 
     shall appoint a Director and Deputy Director of the Service. 
     The Director shall be responsible for the supervision and 
     execution of the duties of the Service. The Deputy Director 
     shall assist the Director and shall perform such duties as 
     the Director may prescribe. The Director and Deputy Director 
     shall be members of the bar of the District of Columbia. The 
     Director of the District of Columbia Offender Supervision, 
     Defender and Courts Services Agency shall fix the 
     compensation of the Director and the Deputy Director, but the 
     compensation of the Director shall not exceed the 
     compensation received by the United States Attorney for the 
     District of Columbia.''.
       (c) Annual Report and Audit.--Section 306 of such Act (DC 
     Code, sec. 1-2706) is amended--
       (1) in subsection (a)--
       (A) by striking ``Board of Trustees'' and inserting 
     ``Director'', and
       (B) by striking ``and to the Mayor of the District of 
     Columbia'' and inserting ``to the Director of the District of 
     Columbia Offender Supervision, Defender and Courts Services 
     Agency, and to the Office of Management and Budget''; and
       (2) in subsection (b)--
       (A) by striking ``Board of Trustees'' and inserting 
     ``Director''; and
       (B) by striking ``the Administrative Office of the United 
     States Courts'' and inserting ``the Director of the District 
     of Columbia Offender Supervision, Defender and Courts 
     Services Agency''.
       (d) Appropriations.--Section 307 of such Act (DC Code, sec. 
     1-2707) is amended--
       (1) by amending subsection (a) to read as follows:
       ``(a) There are authorized to be appropriated through the 
     State Justice Institute in each fiscal year such sums as may 
     be necessary to carry out the provisions of this chapter. 
     Funds appropriated by Congress for the District of Columbia 
     Public Defender Service shall be received by the Director of 
     the District of Columbia Offender Supervision, Defender and 
     Courts Services Agency, and shall be disbursed by that 
     Director to and on behalf of the Service. The Service shall 
     submit to the Director of the District of Columbia Offender 
     Supervision, Defender and Courts Services Agency, at the time 
     and in the form prescribed by that Director, reports of its 
     activities and financial position and its proposed budget.''; 
     and
       (2) in subsection (b), by striking ``Upon approval of the 
     Board of Trustees, the'' and inserting ``The'' .

                  CHAPTER 6--MISCELLANEOUS PROVISIONS

     SEC. 11281. TECHNICAL ASSISTANCE AND RESEARCH.

       There are authorized to be appropriated to the National 
     Institute of Justice in each fiscal year (beginning with 
     fiscal year 1998) such sums as may be necessary for the 
     following activities:
       (1) Research and demonstration projects, evaluations, and 
     technical assistance to assess and analyze the crime problem 
     in the District of Columbia, and to improve the ability of 
     the criminal justice and other systems and entities in the 
     District of Columbia to prevent, solve, and punish crimes.
       (2) The establishment of a locally-based corporation or 
     institute in the District of Columbia supporting research and 
     demonstration projects relating to the prevention, solution, 
     or punishment of crimes in the District of Columbia, 
     including the provision of related technical assistance.

     SEC. 11282. EXEMPTION FROM PERSONNEL AND BUDGET CEILINGS FOR 
                   TRUSTEES AND RELATED AGENCIES.

       The Trustees described in sections 11202 and 11232 and the 
     activities and personnel of, and the funds allocated or 
     otherwise available to, the Trustees and the agencies over 
     which the Trustees exercise financial oversight pursuant to 
     those sections, shall not be subject to any general personnel 
     or budget limitations which otherwise apply to the District 
     of Columbia government or its agencies in any appropriations 
     act.
     Subtitle D--Privatization of Tax Collection and Administration

     SEC. 11301. FINDINGS.

       Congress finds as follows:
       (1) The District of Columbia government has historically 
     had a poor record of determining and collecting all revenue 
     it is due under its revenue code.
       (2) The impact on the District's financial condition of 
     poor administration and collection is significant and has 
     contributed both to the size of its accumulated operating 
     deficit and to the difficulty in balancing the budget going 
     forward.
       (3) More complete collection of taxes would not only 
     increase District of Columbia revenues, but would give 
     residents and businesses a sense of equity and that all were 
     paying their fair share.
       (4) Once District tax processing and collection is 
     competently managed it will be possible for the District 
     government to accurately assess the true value of its many 
     taxes and determine that some may be reduced or eliminated 
     without a significant negative impact on revenues.
       (5) Any reduction or elimination of non-productive or 
     counterproductive taxes or taxes which cost more to 
     administer than they produce in revenue would significantly 
     improve the negative atmosphere surrounding the District of 
     Columbia tax system and its enforcement.

     SEC. 11302. AUTHORIZING CHIEF FINANCIAL OFFICER TO PRIVATIZE 
                   TAX ADMINISTRATION AND COLLECTION.

       The Chief Financial Officer of the District of Columbia may 
     enter into contracts with a private entity for the 
     administration and collection of taxes of the District of 
     Columbia.
   Subtitle E--Financing of District of Columbia Accumulated Deficit

     SEC. 11401. FINDINGS.

       Congress finds as follows:
       (1) The District of Columbia government sold accumulated 
     deficit financing bonds in 1991.
       (2) Between 1991 and the end of fiscal year 1997 the 
     District of Columbia government is expected to accumulate an 
     operating deficit in excess of $500,000,000.
       (3) Requiring the District of Columbia budget for fiscal 
     year 1998 to be balanced will ensure that no further addition 
     is made to the accumulated operating deficit.
       (4) In every other example of an American city in financial 
     crisis, a vital and necessary component of recovery was to 
     finance the accumulated operating deficit.
       (5) Carrying forward an accumualted operating deficit of 
     more than $500,000,000 has a significant negative impact on 
     the District of Columbia's cash flow and financial condition 
     and on its ability to improve its credit rating.
       (6) It is not feasible to carry forward such a debt with an 
     expectation of paying it off gradually from future budget 
     surpluses.
       (7) Financing the accumulated deficit would improve the 
     District's cash management position and allow more normal 
     cash management techniques.

     SEC. 11402. AUTHORIZATION FOR INTERMEDIATE-TERM ADVANCES OF 
                   FUNDS BY THE SECRETARY OF THE TREASURY TO 
                   LIQUIDATE THE ACCUMULATED GENERAL FUND DEFICIT 
                   OF THE DISTRICT OF COLUMBIA.

       Title VI of the District of Columbia Revenue Act of 1939 
     (DC Code, sec. 47-3401 et seq.) is amended--
       (1) by redesignating sections 602 through 605 as sections 
     603 through 606, respectively; and
       (2) by inserting after section 601 the following:

     ``SEC. 602. INTERMEDIATE-TERM ADVANCES FOR LIQUIDATION OF 
                   DEFICIT.

       ``(a) In General.--If the conditions in subsection (b) are 
     satisfied, the Secretary shall make an advance of funds from 
     time to time, out of any money in the Treasury not otherwise 
     appropriated and to the extent provided in advance in annual 
     appropriations Acts, for the purpose of assisting the 
     District government in liquidating the outstanding 
     accumulated operating deficit of the general fund of the 
     District government existing as of September 30, 1997.
       ``(b) Conditions to Making Any Intermediate-Term Advance.--
     The Secretary shall make an advance under this section if--
       ``(1) the Mayor delivers to the Secretary the following 
     instruments, in form and substance satisfactory to the 
     Secretary--
       ``(A) a financing agreement in which the Mayor agrees to 
     procedures for requisitioning advances;
       ``(B) a requisition for an advance under this section; and
       ``(C) a promissory note evidencing the District 
     government's obligation to reimburse the Treasury for the 
     requisitioned advance, which note may be a general obligation 
     bond issued under section 461(a) of the District of Columbia 
     Self-Government and Governmental Reorganization Act by the 
     District government to the Secretary if the Secretary 
     determines that such a bond is satisfactory;
       ``(2) the date on which the requisitioned advance is 
     requested to be made is not later than 3 years from the date 
     of enactment of the Balanced Budget Act of 1997;
       ``(3) the District government delivers to the Secretary--
       ``(A) evidence demonstrating to the satisfaction of the 
     Secretary that, at the time of the Mayor's requisition for an 
     advance, the District government is effectively unable to 
     obtain credit in the public credit markets or elsewhere in 
     sufficient amounts and on sufficiently reasonable

[[Page H6164]]

     terms to meet the District government's need for financing to 
     accomplish the purpose described in subsection (a); and
       ``(B) a schedule setting out the anticipated timing and 
     amounts of requisitions for advances under this section;
       ``(4) the Authority certifies to the Secretary that--
       ``(A) there is an approved financial plan and budget in 
     effect under the District of Columbia Financial 
     Responsibility and Management Assistance Act of 1995 for the 
     fiscal year in which the requisition is to be made;
       ``(B) at the time that the Mayor's requisition for an 
     advance is delivered to the Secretary, the District 
     government is in compliance with the approved financial 
     plan and budget;
       ``(C) both the receipt of funds from such advance and the 
     reimbursement of Treasury for such advance are consistent 
     with the approved financial plan and budget for the year;
       ``(D) such advance will not adversely affect the financial 
     stability of the District government; and
       ``(E) at the time that the Mayor's requisition for an 
     advance is delivered to the Secretary, the District 
     government is effectively unable to obtain credit in the 
     public credit markets or elsewhere in sufficient amounts and 
     on sufficiently reasonable terms to meet the District 
     government's need for financing to accomplish the purpose 
     described in subsection (a);
       ``(5) the Inspector General of the District of Columbia 
     certifies to the Secretary the information described in 
     subparagraphs (A) through (D) of paragraph (4), and in making 
     this certification, the Inspector General may rely upon an 
     audit conducted by an outside auditor engaged by the 
     Inspector General under section 208(a)(4) of the District of 
     Columbia Procurement Practices Act of 1985 if, after 
     reasonable inquiry, the Inspector General concurs in the 
     findings of such audit;
       ``(6) the Secretary determines that--
       ``(A) there is reasonable assurance of reimbursement for 
     the requisitioned advance; and
       ``(B) the debt owed by the District government to the 
     Treasury on account of the requisitioned advance will not be 
     subordinate to any other debt owed by the District or to any 
     other claims against the District; and
       ``(7) the Secretary receives from such persons as the 
     Secretary determines to be appropriate such additional 
     certifications and opinions relating to such matters as the 
     Secretary determines to be appropriate.
       ``(c) Amount of Any Intermediate-Term Advance.--
       ``(1) In general.--Except as provided in paragraph (3), if 
     the conditions in paragraph (2) are satisfied, each advance 
     made under this section shall be in the amount designated by 
     the Mayor in the Mayor's requisition for such advance.
       ``(2) Conditions applicable to designated amount.--
     Paragraph (1) applies if--
       ``(A) the Mayor certifies that the amount designated in the 
     Mayor's requisition for such advance is needed to accomplish 
     the purpose described in subsection (a) within 30 days of the 
     time that the Mayor's requisition is delivered to the 
     Secretary; and
       ``(B) the Authority concurs in the Mayor's certification 
     under subparagraph (A).
       ``(3) Maximum amount.--Notwithstanding paragraph (1), the 
     aggregate amount of all advances made under this section 
     shall not be greater than $300,000,000.
       ``(d) Maturity of Any Intermediate-Term Advance.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), each advance made under this section shall mature on the 
     date designated by the Mayor in the Mayor's requisition for 
     such advance.
       ``(2) Latest permissible maturity date.--Notwithstanding 
     paragraph (1), the maturity date for any advance made under 
     this section shall not be later than 10 years from the date 
     on which the first advance under this section is made.
       ``(4) Secretary's right to require early reimbursement.--
     Notwithstanding paragraph (1), if the Secretary determines, 
     at any time while any advance made under this section has 
     not been fully reimbursed, that the District is able to 
     obtain credit in the public credit markets or elsewhere in 
     sufficient amounts and on sufficiently reasonable terms, 
     in the judgment of the Secretary, to refinance all or a 
     portion of the unpaid balance of such advance in the 
     public credit markets or elsewhere without adversely 
     affecting the financial stability of the District 
     government, the Secretary may require reimbursement for 
     all or a portion of the unpaid balance of such advance at 
     any time after the Secretary makes the determination.
       ``(e) Interest Rate.--Each advance made under this section 
     shall bear interest at an annual rate equal to a rate 
     determined by the Secretary at the time that the Secretary 
     makes such advance taking into consideration the prevailing 
     yield on outstanding marketable obligations of the United 
     States with remaining periods to maturity comparable to the 
     repayment schedule of such advance, plus \1/8\ of 1 percent.
       ``(f) Other Terms and Conditions.--Each advance made under 
     this section shall be on such other terms and conditions, 
     including repayment schedule, as the Secretary determines to 
     be appropriate.
       ``(g) Deposit of Advances.--As provided in section 204(b) 
     of the District of Columbia Financial Responsibility and 
     Management Assistance Act of 1995, advances made under this 
     section for the account of the District government shall be 
     deposited by the Secretary into an escrow account held by the 
     Authority.''.

     SEC. 11403. CONFORMING AMENDMENTS.

       (a) Amendment to Section 601.--Section 601 of the District 
     of Columbia Revenue Act of 1939 (DC Code, sec. 47-3401) is 
     amended--
       (1) in subsection (c)(2)(B)(i)(IV), by striking ``602(b)'' 
     and inserting ``603(b)''; and
       (2) in subsection (d)(2)(B)(iii), by striking ``602(b)'' 
     and inserting ``603(b)''.
       (b) Amendment to Section 604.--Section 604 of the District 
     of Columbia Revenue Act of 1939 (DC Code, sec. 47-3401.3) is 
     amended--
       (1) in subsection (a)(2)(A)(i), by striking ``602'' and 
     inserting ``603''; and
       (2) in subsection (a)(2)(B)(i), by striking ``602'' and 
     inserting ``603''.

     SEC. 11404. TECHNICAL CORRECTIONS.

       Section 601 of the District of Columbia Revenue Act of 1939 
     (DC Code, sec. 47-3401) is amended--
       (1) in subsection (a)(3)(D), by striking ``September 30, 
     1995'' and inserting ``September 30, 1996'';
       (2) in subsection (b)(2)(E), by striking ``September 30, 
     1996'' and inserting ``September 30, 1997'';
       (3) in subsection (c)(2)(B)(i), by striking ``October 1, 
     1995'' and inserting ``September 30, 1995'';
       (4) in subsection (d)(2)(B)(i)(II), by striking ``September 
     30, 1997'' and inserting ``September 30, 1998'';
       (5) in subsection (d)(2)(B)(ii)--
       (A) by striking ``September 30, 1995'' and inserting 
     ``October 1, 1995''; and
       (B) by striking ``September 30, 1997'' and inserting 
     ``October 1, 1997''; and
       (6) in subsection (d)(2)(C)(iv), by striking ``September 
     30, 1997'' and inserting ``September 30, 1998''.

     SEC. 11405. AUTHORIZATION FOR ISSUANCE OF GENERAL OBLIGATION 
                   BONDS BY THE DISTRICT OF COLUMBIA TO FINANCE OR 
                   REFUND ITS ACCUMULATED GENERAL FUND DEFICIT.

       Section 461(a) of the District of Columbia Self-Government 
     and Governmental Reorganization Act (DC Code, sec. 47-321(a)) 
     is amended--
       (1) in paragraph (1), by inserting ``to finance or refund 
     the outstanding accumulated operating deficit of the general 
     fund of the District of $500,000,000, existing as of 
     September 30, 1997,'' after ``existing as of September 30, 
     1990,''; and
       (2) in paragraph (2), by inserting ``existing as of 
     September 30, 1990'' after ``operating deficit''.
      Subtitle F--District of Columbia Bond Financing Improvements

     SEC. 11501. SHORT TITLE.

       This subtitle may be cited as the ``District of Columbia 
     Bond Financing Improvements Act of 1997''.

     SEC. 11502. FINDINGS.

       Congress finds as follows:
       (1) The bond authorization provision of the District of 
     Columbia Self-Government and Governmental Reorganization Act 
     (commonly known as the ``Home Rule Act'') have not been 
     updated to conform with changes in the municipal securities 
     marketplace.
       (2) The Home Rule Act unduly limits the ability of the 
     District to take advantage of cost savings, investment 
     opportunities, and other efficiencies generally available to 
     municipal securities issuers.
       (3) Section 461 of the Home Rule Act limits the ability of 
     the District government to implement cost-effective capital 
     planning to the extent that it does not permit the District 
     access to interim capital financing in anticipation of its 
     periodic long-term borrowings.
       (4) Section 462 of the Home Rule Act prevents the 
     reprogramming of unused bond proceeds from dormant projects 
     to other pending, authorized, and viable projects.
       (5) Section 466 of the Home Rule Act requires that the 
     District undertake competitive bond sales even under 
     circumstances in which greater efficiencies can be achieved 
     through negotiated sales.
       (6) Section 490 of the Home Rule Act does not permit the 
     issuance and sale of taxable and tax-exempt bonds for the 
     full range of economic development and governmental purposes 
     permitted the States and their political subdivisions.

     SEC. 11503. AMENDMENT TO SECTION 462 (RELATING TO CONTENTS OF 
                   BORROWING LEGISLATION AND ELECTIONS ON ISSUING 
                   GENERAL OBLIGATION BONDS).

       Section 462(a) of the District of Columbia Self-Government 
     and Governmental Reorganization Act (DC Code, sec. 47-322(a)) 
     is amended to read as follows:
       ``(a) The Council may by act authorize the issuance of 
     general obligation bonds for the purposes specified in 
     section 461. Such an Act shall contain, at least, 
     provisions--
       ``(1) briefly describing the projects or categories of 
     projects to be financed by the Act;
       ``(2) identifying the act authorizing each such project or 
     category of projects;
       ``(3) setting forth the maximum amount of the principal of 
     the indebtedness which may be incurred for the projects to be 
     financed;
       ``(4) setting forth the maximum rate of interest to be paid 
     on such indebtedness;
       ``(5) setting forth the maximum allowable maturity for the 
     issue and the maximum debt service payable in any year; and
       ``(6) setting forth, in the event that the Council 
     determines in its discretion to submit the question of 
     issuing such bonds to a vote of the qualified voters of the 
     District, the manner of holding such election, the date of 
     such election, the manner of voting for or against the 
     incurring of such indebtedness, and the form of ballot to be 
     used at such election.''.

     SEC. 11504. AMENDMENT TO SECTION 466 (RELATING TO PUBLIC OR 
                   NEGOTIATED SALE OF GENERAL OBLIGATION BONDS).

       Section 466 of the District of Columbia Self-Government and 
     Governmental Reorganization Act (DC Code, sec. 47-326) is 
     amended by striking all after the heading and inserting the 
     following:
       ``Sec. 466. General obligation bonds issued under this part 
     may be sold at a private sale on

[[Page H6165]]

     a negotiated basis (in such manner as the Mayor may determine 
     to be in the public interest), or may be sold at public sale 
     upon sealed proposals after publication of a notice of such 
     public sale at least once not less than 10 days prior to the 
     date fixed for sale in a daily newspaper carrying municipal 
     bond notices and devoted primarily to financial news or to 
     the subject of State and municipal bonds published in the 
     city of New York, New York, and in 1 or more newspapers of 
     general circulation published in the District. Such notice of 
     public sale shall state, among other things, that no proposal 
     shall be considered unless there is deposited with the 
     District as a down payment a certified check, cashier's 
     check, or surety for an amount equal to at least 2 percent of 
     the par amount of general obligation bonds bid for, and the 
     Mayor shall reserve the right to reject any and all bids.''

     SEC. 11505. AMENDMENT TO SECTION 467 (RELATING TO AUTHORITY 
                   TO CREATE SECURITY INTERESTS IN DISTRICT 
                   REVENUES).

       Section 467 of the District of Columbia Self-Government and 
     Governmental Reorganization Act (D.C. Code Sec. 47-326.1.) is 
     amended by striking all after the heading and inserting the 
     following:
       ``Sec. 467. (a) In general.--An act of the Council 
     authorizing the issuance of general obligation bonds or notes 
     under section 461(a), section 471(a), section 472(a), or 
     section 475(a) may create a security interest in any District 
     revenues as additional security for the payment of the bonds 
     or notes authorized by such act.
       ``(b) Contents of Acts.--Any such act creating a security 
     interest in District revenues may contain provisions (which 
     may be part of the contract with the holders of such bonds or 
     notes)--
       ``(1) describing the particular District revenues which are 
     subject to such security interest;
       ``(2) creating a reasonably required debt service reserve 
     fund or any other special fund;
       ``(3) authorizing the Mayor of the District to execute a 
     trust indenture securing the bonds or notes;
       ``(4) vesting in the trustee under such a trust indenture 
     such properties, rights, powers, and duties in trust as may 
     be necessary, convenient, or desirable;
       ``(5) authorizing the Mayor of the District to enter into 
     and amend agreements concerning--
       ``(A) the custody, collection, use, disposition, security, 
     investment, and payment of the proceeds of the bonds or notes 
     and the District revenues which are subject to such 
     security interest; and
       ``(B) the doing of any act (or the refraining from doing 
     any act) that the District would have the right to do in the 
     absence of such an agreement;
       ``(6) prescribing the remedies of the holders of the bonds 
     or notes in the event of a default; and
       ``(7) authorizing the Mayor to take any other actions in 
     connection with the issuance, sale, delivery, security, and 
     payment of the bonds or notes.
       ``(c) Timing and Perfection of Security Interests.--
     Notwithstanding article 9 of title 28 of the District of 
     Columbia Code, any security interest in District revenues 
     created under subsection (a) shall be valid, binding, and 
     perfected from the time such security interest is created, 
     with or without the physical delivery of any funds or any 
     other property and with or without any further action. Such 
     security interest shall be valid, binding, and perfected 
     whether or not any statement, document, or instrument 
     relating to such security interest is recorded or filed. The 
     lien created by such security interest is valid, binding, and 
     perfected with respect to any individual or legal entity 
     having claims against the District, whether or not such 
     individual or legal entity has notice of such lien.
       ``(d) Obligations and Expenditures Not Subject to 
     Appropriation.--The fourth sentence of section 446 shall not 
     apply to any obligation or expenditure of any District 
     revenues to secure any general obligation bond or note under 
     subsection (a).''.

     SEC. 11506. AMENDMENT TO SECTION 472 (RELATING TO BORROWING 
                   IN ANTICIPATION OF REVENUES).

       Section 472 of the District of Columbia Self-Government and 
     Governmental Reorganization Act (DC Code, sec. 47-328) is 
     amended by striking all after the heading and inserting the 
     following:
       ``Sec. 472. (a) In General.--In anticipation of the 
     collection or receipt of revenues for a fiscal year, the 
     Council may by act authorize the issuance of general 
     obligation notes for such fiscal year, to be known as revenue 
     anticipation notes.
       ``(b) Limit on Aggregate Notes Outstanding.--The total 
     amount of all revenue anticipation notes issued under 
     subsection (a) outstanding at any time during a fiscal year 
     shall not exceed 20 percent of the total anticipated revenue 
     of the District for such fiscal year, as certified by the 
     Mayor under this subsection. The Mayor shall certify, as of a 
     date which occurs not more than 15 days before each original 
     issuance of such revenue anticipation notes, the total 
     anticipated revenue of the District for such fiscal year.
       ``(c) Permitted Outstanding Duration.--Any revenue 
     anticipation note issued under subsection (a) may be renewed. 
     Any such note, including any renewal note, shall be due and 
     payable not later than the last day of the fiscal year during 
     which the note was originally issued.
       ``(d) Effective Date of Authorization Acts; Payments Not 
     Subject to Appropriation.--
       ``(1) Effective date.--Notwithstanding section 602(c)(1), 
     any act of the Council authorizing the issuance of revenue 
     anticipation notes under subsection (a) shall take effect--
       ``(A) if such act is enacted during a control year (as 
     defined in section 305(4) of the District of Columbia 
     Financial Responsibility and Management Assistance Act of 
     1995), on the date of approval by the District of Columbia 
     Financial Responsibility and Management Assistance Authority; 
     or
       ``(B) if such act is enacted during any other year, on the 
     date of enactment of such act.
       ``(2) Payments not subject to appropriation.--The fourth 
     sentence of section 446 shall not apply to any amount 
     obligated or expended by the District for the payment of the 
     principal of, interest on, or redemption premium for any 
     revenue anticipation note issued under subsection (a).''.

     SEC. 11507. ADDITION OF NEW SECTION 475 (RELATING TO GENERAL 
                   OBLIGATION BOND ANTICIPATION NOTES).

       (a) In General.--Subpart 2 of part E of title IV of the 
     District of Columbia Self-Government and Governmental 
     Reorganization Act is amended by adding at the end the 
     following new section:


                       ``bond anticipation notes

       ``Sec. 475. (a) Authorizing Issuance.--
       ``(1) In general.--In anticipation of the issuance of 
     general obligation bonds, the Council may by act authorize 
     the issuance of general obligation notes to be known as bond 
     anticipation notes in accordance with this section.
       ``(2) Purposes; permitting issuance of general obligation 
     bonds to cover indebtedness.--The proceeds of bond 
     anticipation notes issued under this section shall be used 
     for the purposes for which general obligation bonds may be 
     issued under section 461, and such notes shall constitute 
     indebtedness which may be refunded through the issuance of 
     general obligation bonds under such section.
       ``(b) Maximum Annual Debt Service Amount.--The Act of the 
     Council authorizing the issuance of bond anticipation notes 
     shall set forth for the bonds anticipated by such notes an 
     estimated maximum annual debt service amount based on an 
     estimated schedule of annual principal payments and an 
     estimated schedule of annual interest payments (based on an 
     estimated maximum average annual interest rate for such bonds 
     over a period of 30 years from the earlier of the date of 
     issuance of the notes or the date of original issuance of 
     prior notes in anticipation of those bonds). Such estimated 
     maximum annual debt service amount as estimated at the time 
     of issuance of the original bond anticipation notes shall be 
     included in the calculation required by section 603(b) while 
     such notes or renewal notes are outstanding.
       ``(c) Permitted Outstanding Duration.--Any bond 
     anticipation note, including any renewal note, shall be due 
     and payable not later than the last day of the third fiscal 
     year following the fiscal year during which the note was 
     originally issued.
       ``(d) General Authority of Council.--If provided for in Act 
     of the Council authorizing such an issue of bond anticipation 
     notes, bond anticipation notes may be issued in succession, 
     in such amounts, at such times, and bearing interest rates 
     within the permitted maximum authorized by such Act.
       ``(e) Effective Date of Authorization Acts; Payments Not 
     Subject to Appropriation.--
       ``(1) Effective date.--Notwithstanding section 602(c)(1), 
     any act of the Council authorizing the renewal of bond 
     anticipation notes under subsection (c) or the issuance of 
     general obligation bonds under section 461(a) to refund any 
     bond anticipation notes shall take effect--
       ``(A) if such act is enacted during a control year (as 
     defined in section 305(4) of the District of Columbia 
     Financial Responsibility and Management Assistance Act of 
     1995), on the date of approval by the District of Columbia 
     Financial Responsibility and Management Assistance Authority; 
     or
       ``(B) if such act is enacted during any other year, on the 
     date of enactment of such act.
       ``(2) Payment not subject to appropriation.--The fourth 
     sentence of 446 shall not apply to any amount obligated or 
     expended by the District for the payment of the principal of, 
     interest on, or redemption premium for any bond 
     anticipation note issued under this section.''.
       (b) Clerical Amendment.--The table of contents for the 
     District of Columbia Self-Government and Governmental 
     Reorganization Act is amended by adding at the end of the 
     items relating to subpart 2 of part E of title IV the 
     following new item:

``Sec. 475. Bond anticipation notes.''.

     SEC. 11508. AMENDMENT TO SECTION 490 (RELATING TO REVENUE 
                   BONDS AND OTHER OBLIGATIONS).

       Section 490 of the District of Columbia Self-Government and 
     Governmental Reorganization Act (DC Code, sec. 47-334), as 
     amended by section 2 of the District of Columbia Water and 
     Sewer Authority Act of 1996, is amended--
       (1) in subsection (a)--
       (A) by amending paragraphs (1) through (3) to read as 
     follows:
       ``(a)(1) Subject to paragraph (2), the Council may by act 
     or by resolution authorize the issuance of taxable and tax-
     exempt revenue bonds, notes, or other obligations to borrow 
     money to finance, refinance, or reimburse and to assist in 
     the financing, refinancing, or reimbursing of or for capital 
     projects and other undertakings by the District or by any 
     District instrumentality, or on behalf of any qualified 
     applicant, including capital projects or undertakings in the 
     areas of housing; health facilities; transit and utility 
     facilities; manufacturing; sports, convention, and 
     entertainment facilities; recreation, tourism and hospitality 
     facilities; facilities to house and equip operations of the 
     District government or its instrumentalities; public 
     infrastructure development and redevelopment; elementary, 
     secondary and college and university facilities; educational 
     programs which provide loans for the

[[Page H6166]]

     payment of educational expenses for or on behalf of students; 
     facilities used to house and equip operations related to the 
     study, development, application, or production of innovative 
     commercial or industrial technologies and social services; 
     water and sewer facilities (as defined in paragraph (5)); 
     pollution control facilities; solid and hazardous waste 
     disposal facilities; parking facilities, industrial and 
     commercial development; authorized capital expenditures of 
     the District; and any other property or project that will, as 
     determined by the Council, contribute to the health, 
     education, safety, or welfare, of, or the creation or 
     preservation of jobs for, residents of the District, or to 
     economic development of the District, and any facilities or 
     property, real or personal, used in connection with or 
     supplementing any of the foregoing; lease-purchase financing 
     of any of the foregoing facilities or property; and any costs 
     related to the issuance, carrying, security, liquidity or 
     credit enhancement of or for revenue bonds, notes, or other 
     obligations, including, capitalized interest and reserves, 
     and the costs of bond insurance, letters of credit, and 
     guaranteed investment, forward purchase, remarketing, 
     auction, and swap agreements. Any such financing, 
     refinancing, or reimbursement may be effected by loans made 
     directly or indirectly to any individual or legal entity, by 
     the purchase of any mortgage, note, or other security, or by 
     the purchase, lease, or sale of any property.
       ``(2) Any revenue bond, note, or other obligation issued 
     under paragraph (1) shall be a special obligation of the 
     District and shall be a negotiable instrument, whether or not 
     such revenue bond, note, or other obligation is a security as 
     defined in section 28:8-102(1)(a) of title 28 of the District 
     of Columbia Code.
       ``(3) Any revenue bond, note, or other obligation issued 
     under paragraph (1) shall be paid and secured (as to 
     principal, interest, and any premium) as provided by the act 
     or resolution of the Council authorizing the issuance of such 
     revenue bond, note, or other obligation. Any act or 
     resolution of the Council, or any delegation of Council 
     authority under subsection (a)(6), authorizing the issuance 
     of revenue bonds, notes, or other obligations may provide for 
     (A) the payment of such revenue bonds, notes, or other 
     obligations from any available revenues, assets, property 
     (including water and sewer enterprise fund revenues, 
     assets, or other property in the case of bonds, notes, or 
     obligations issued with respect to water and sewer 
     facilities), and (B) the securing of such revenue bond, 
     note, or other obligation by the mortgage of real property 
     or the creation of a security interest in available 
     revenues, assets, or other property (including water and 
     sewer enterprise fund revenues, assets, or other property 
     in the case of bonds, notes, or obligations issued with 
     respect to water and sewer facilities).'',
       (B) by amending paragraph (4)(A) to read as follows:
       ``(4)(A) In authorizing the issuance of any revenue bond, 
     note, or other obligation under paragraph (1), the Council 
     may enter into, or authorize the Mayor to enter into, any 
     agreement concerning the acquisition, use, or disposition of 
     any available revenues, assets, or property. Any such 
     agreement may create a security interest in any available 
     revenues, assets, or property, may provide for the custody, 
     collection, security, investment, and payment of any 
     available revenues (including any funds held in trust) for 
     the payment of such revenue bond, note, or other obligation, 
     may mortgage any property, may provide for the acquisition, 
     construction, maintenance, and disposition of the undertaking 
     financed or refinanced using the proceeds of such revenue 
     bond, note, or other obligation, and may provide for the 
     doing of any act (or the refraining from doing of any act) 
     which the District has the right to do in the absence of such 
     agreement. Any such agreement may be assigned for the benefit 
     of, or made a part of any contract with, any holder of such 
     revenue bond, note, or other obligation issued under 
     paragraph (1).'', and
       (C) by adding at the end the following new paragraph:
       ``(6)(A) The Council may by act delegate to any District 
     instrumentality the authority of the Council under subsection 
     (a)(1) to issue taxable or tax-exempt revenue bonds, notes, 
     or other obligations to borrow money for the purposes 
     specified in this subsection. For purposes of this paragraph, 
     the Council shall specify for what undertakings revenue 
     bonds, notes, or other obligations may be issued under each 
     delegation made pursuant to this paragraph. Any District 
     instrumentality may exercise the authority and the powers 
     incident thereto delegated to it by the Council as described 
     in the first sentence of this paragraph only in accordance 
     with this paragraph and shall be consistent with this 
     paragraph and the terms of the delegation.
       ``(B) Revenue bonds, notes, or other obligations issued by 
     a District instrumentality under a delegation of authority 
     described in subparagraph (A) shall be issued by resolution 
     of that instrumentality, and any such resolution shall not be 
     considered to be an act of the Council.
       ``(C) Nothing in this paragraph shall be construed as 
     restricting, impairing, or superseding the authority 
     otherwise vested by law in any District instrumentality.'';
       (2) by amending subsection (b) to read as follows:
       ``(b) No property owned by the United States may be 
     mortgaged or made subject to any security interest to secure 
     any revenue bond, note, or other obligation issued under 
     subsection (a)(1).'';
       (3) by amending subsection (c) to read as follows:
       ``(c) Any and all such revenue bonds, notes, or other 
     obligations issued under subsection (a)(1) shall not be 
     general obligations of the District, shall not be a pledge of 
     or involve the faith and credit or taxing power of 
     the District (other than with respect to any dedicated 
     taxes) and shall not constitute a debt of the District, 
     and shall not constitute lending of the public credit for 
     private undertakings for purposes of section 602(a)(2).'';
       (4) by amending subsection (f) to read as follows:
       ``(f) The fourth sentence of section 446 shall not apply 
     to--
       ``(1) any amount (including the amount of any accrued 
     interest or premium) obligated or expended from the proceeds 
     of the sale of any revenue bond, note, or other obligations 
     issued under subsection (a)(1);
       ``(2) any amount obligated or expended for the payment of 
     the principal of, interest on, or any premium for any revenue 
     bond, note, or other obligation issued under subsection 
     (a)(1);
       ``(3) any amount obligated or expended pursuant to 
     provisions made to secure any revenue bond, note, or other 
     obligations issued under subsection (a)(1); and
       ``(4) any amount obligated or expended pursuant to 
     commitments made in connection with the issuance of revenue 
     bonds, notes, or other obligations for repair, maintenance, 
     and capital improvements relating to undertakings financed 
     through any revenue bond, note, or other obligation issued 
     under subsection (a)(1).''; and
       (5) by adding at the end the following new subsections:
       ``(i) The revenue bonds, notes, or other obligations issued 
     under subsection (a)(1) are not general obligation bonds of 
     the District government and shall not be included in 
     determining the aggregate amount of all outstanding 
     obligations subject to the limitation specified in section 
     603(b).
       ``(j) The issuance of revenue bonds, notes, or other 
     obligations by the District where the ultimate obligation to 
     repay such revenue bonds, notes, or other obligations is that 
     of one or more non-governmental persons or entities may be 
     authorized by resolution of the Council. The issuance of all 
     other revenue bonds, notes, or other obligations by the 
     District shall be authorized by act of the Council.
       ``(k) During any control period (as defined in section 209 
     of the District of Columbia Financial Responsibility and 
     Management Assistance Act of 1995), any act or resolution of 
     the Council authorizing the issuance of revenue bonds, notes, 
     or other obligations under subsection (a)(1) shall be 
     submitted to the District of Columbia Financial 
     Responsibility and Management Assistance Authority for 
     certification in accordance with section 204 of that Act. Any 
     certification issued by the Authority during a control period 
     shall be effective for purposes of this subsection for 
     revenue bonds, notes, or other obligations issued pursuant to 
     such act or resolution of the Council whether the revenue 
     bonds, notes, or other obligations are issued during or 
     subsequent to that control period.
       ``(l) The following provisions of law shall not apply with 
     respect to property acquired, held, and disposed of by the 
     District in accordance with the terms of any lease-purchase 
     financing authorized pursuant to subsection (a)(1):
       ``(1) The Act entitled `An Act authorizing the sale of 
     certain real estate in the District of Columbia no longer 
     required for public purposes', approved August 5, 1939 (53 
     Stat. 1211; DC Code sec. 9-401 et seq.).
       ``(2) Subchapter III of chapter 13 of title 16, District of 
     Columbia Code.
       ``(3) Any other provision of District of Columbia law that 
     prohibits or restricts lease-purchase financing.
       ``(m) For purposes of this section, the following 
     definitions shall apply:
       ``(1) The term `revenue bonds, notes, or other obligations' 
     means special fund bonds, notes, or other obligations 
     (including refunding bonds, notes, or other obligations) used 
     to borrow money to finance, assist in financing, refinance, 
     or repay, restore or reimburse moneys used for purposes 
     referred to in subsection (a)(1) the principal of and 
     interest, if any, on which are to be paid and secured in the 
     manner described in this section and which are special 
     obligations and to which the full faith and credit of the 
     District of Columbia is not pledged.
       ``(2) The term `District instrumentality' means any agency 
     or instrumentality (including an independent agency or 
     instrumentality), authority, commission, board, department, 
     division, office, body, or officer of the District of 
     Columbia government duly established by an act of the Council 
     or by the laws of the United States, whether established 
     before or after the date of enactment of the District of 
     Columbia Bond Financing Improvements Act of 1997.
       ``(3) The term `available revenues' means gross revenues 
     and receipts, other than general fund tax receipts, lawfully 
     available for the purpose and not otherwise exclusively 
     committed to another purpose, including enterprise funds, 
     grants, subsidies, contributions, fees, dedicated taxes and 
     fees, investment income and proceeds of revenue bonds, notes, 
     or other obligations issued under this section.
       ``(4) The term `enterprise fund' means a fund or account 
     for operations that are financed or operated in a manner 
     similar to private business enterprises, or established so 
     that separate determinations may more readily be made 
     periodically of revenues earned, expenses incurred, or net 
     income for management control, accountability, capital 
     maintenance, public policy, or other purposes.
       ``(5) The term `dedicated taxes and fees' means taxes and 
     surtaxes, portions thereof, tax increments, or payments in 
     lieu of taxes, and fees that are dedicated pursuant to law to 
     the payment of the debt service on revenue bonds, notes, or 
     other obligations authorized under this section, the 
     provision and maintenance of reserves for that purpose, or 
     the provision of working capital for or the maintenance, 
     repair, reconstruction or improvement of the undertaking to 
     which the revenue bonds, notes, or other obligations relate.

[[Page H6167]]

       ``(6) The term `tax increments' means taxes, other than the 
     special tax provided for in section 481 and pledged to the 
     payment of general obligation indebtedness of the District, 
     allocable to the increase in taxable value of real property 
     or the increase in sales tax receipts, each from a certain 
     date or dates, in prescribed areas, to the extent that such 
     increases are not otherwise exclusively committed to another 
     purpose and as further provided for pursuant to an act of the 
     Council.''.

     SEC. 11509. CONFORMING AMENDMENT.

       The fourth sentence of section 446 of the District of 
     Columbia Self-Government and Governmental Reorganization Act 
     (DC Code, sec. 47-304) is amended to read as follows: 
     ``Except as provided in section 467(d), section 471(c), 
     section 472(d)(2), section 475(e)(2), section 483(d), and 
     section 490(f), (g), and (h)(3), no amount may be obligated 
     or expended by any officer or employee of the District of 
     Columbia government unless such amount has been approved by 
     Act of Congress, and then only according to such Act.''.
           Subtitle G--District of Columbia Government Budget

     SEC. 11601. ELIMINATION OF THE ANNUAL FEDERAL PAYMENT TO THE 
                   DISTRICT OF COLUMBIA.

       (a) Elimination of Payment.--
       (1) In general.--Title V of the District of Columbia Self-
     Government and Governmental Reorganization Act (DC Code, sec. 
     47-3406 et seq.) is hereby repealed.
       (2) Clerical amendment.--The table of contents of such Act 
     is amended by striking the items relating to title V.
       (b) Conforming Amendments.--
       (1) Home rule act.--The District of Columbia Self-
     Government and Governmental Reorganization Act is amended as 
     follows:
       (A) In section 103(10) (DC Code, sec. 1-202(10)), by 
     striking ``the annual Federal payment to the District 
     authorized under title V,''.
       (B) In section 483 (DC Code, sec. 47-331.2), by striking 
     subsection (c).
       (C) In section 603(c) (DC Code, sec. 47-313(c)), by 
     striking the fourth sentence.
       (D) In section 603(f)(1) (DC Code, sec. 47-313(f)(1)), by 
     striking ``(other than the fourth sentence)''.
       (2) Financial responsibility and management assistance 
     act.--The District of Columbia Financial Responsibility and 
     Management Assistance Act of 1995 is amended--
       (A) by striking section 205 (DC Code, sec. 47-392.5); and
       (B) in the table of contents for such Act, by striking the 
     item relating to section 205.
       (3) Procurement practices act.--Section 208(a)(2) of the 
     District of Columbia Procurement Practices Act of 1985 (DC 
     Code, sec. 1-1182.8(a)(2)) is amended--
       (1) by striking subparagraph (B);
       (2) by redesignating subparagraph (C) as subparagraph (B); 
     and
       (3) in subparagraph (B), as so redesignated, by striking 
     ``Amounts deposited in the dedicated fund described in 
     subparagraph (B)'' and inserting ``Amounts appropriated for 
     the Inspector General''.
       (4) District of columbia revenue act of 1939.--The District 
     of Columbia Revenue Act of 1939 (DC Code, sec. 47-3401 et 
     seq.) is amended as follows:
       (A) In section 603(b) (as redesignated by section 11402)--
       (i) in paragraph (5), by adding ``and'' at the end;
       (ii) in paragraph (6), by striking ``; and'' and inserting 
     a period; and
       (iii) by striking paragraph (7).
       (B) In section 603(c) (as redesignated by section 11402), 
     by amending subparagraph (C) to read as follows:
       ``(C) Applicable limit defined.--In this paragraph, the 
     `applicable limit' for a fiscal year is equal to 15 percent 
     of the total anticipated revenues of the District government 
     for such fiscal year, as certified by the Mayor at the time 
     of the Mayor's requisition for an advance.''.
       (C) In section 605(b) (as redesignated by section 11402)--
       (i) by striking paragraph (1) and redesignating paragraphs 
     (2) through (4) as paragraphs (1) through (3);
       (ii) in paragraph (1) (as so redesignated), by striking 
     ``other'' in the heading;
       (iii) in paragraph (1) (as so redesignated), by striking 
     ``If, after'' and all that follows through ``the Secretary'' 
     and inserting ``The Secretary'';
       (iv) in paragraph (1) (as so redesignated), by striking 
     ``to individuals,'' and inserting ``to individuals (including 
     any Federal contribution authorized to be appropriated 
     pursuant to section 11601(c)(2) of the Balanced Budget Act of 
     1997),'';
       (v) in paragraph (2) (as so redesignated), by striking 
     ``paragraphs (1) and (2)'' and inserting ``paragraph (1)''; 
     and
       (vi) in paragraph (3) (as so redesignated), by striking 
     ``(1) through (3)'' and inserting ``(1) and (2)''.
       (c) Federal Contribution to Operations of Government of 
     Nation's Capital.--
       (1) Findings.--Congress finds as follows:
       (A) Congress has restricted the overall size of the 
     District of Columbia's economy by limiting the height of 
     buildings in the District and imposing other limitations 
     relating to the Federal presence in the District.
       (B) Congress has imposed limitations on the District's 
     ability to tax income earned in the District of Columbia.
       (C) The unique status of the District of Columbia as the 
     seat of the government of the United States imposes unusual 
     costs and requirements which are not imposed on other 
     jurisdictions and many of which are not directly reimbursed 
     by the Federal government.
       (D) These factors play a significant role in causing the 
     relative tax burden on District residents to be greater than 
     the burden on residents in other jurisdictions in the 
     Washington, D.C. metropolitan area and in other cities of 
     comparable size.
       (2) Federal contribution.--There is authorized to be 
     appropriated a Federal contribution towards the costs of the 
     operation of the government of the Nation's capital--
       (A) for fiscal year 1998, $190,000,000; and
       (B) for each subsequent fiscal year, such amount as may be 
     necessary for such contribution.

     In determining the amount appropriated pursuant to the 
     authorization under this paragraph, Congress shall take into 
     account the findings described in paragraph (1).

     SEC. 11602. REQUIREMENT THAT THE DISTRICT OF COLUMBIA BALANCE 
                   ITS BUDGET IN FY 1998.

       (a) In General.--Section 201(c)(1) of the District of 
     Columbia Financial Responsibility and Management Assistance 
     Act of 1995 is amended--
       (1) in subparagraph (A), by striking ``1999'' and inserting 
     ``1998''; and
       (2) in subparagraph (B), by striking ``1996, 1997, and 
     1998,'' and inserting ``1996 and 1997,''.
       (b) Conforming Amendment.--Section 603(f) of the District 
     of Columbia Self-Government and Governmental Reorganization 
     Act (DC Code, sec. 47-313(f)) is amended by striking ``Act of 
     1995)--'' and all that follows through ``(2) the Council'' 
     and inserting ``Act of 1995), the Council''.

     SEC. 11603. PERMITTING EXPEDITED SUBMISSION AND APPROVAL OF 
                   CONSENSUS BUDGET AND FINANCIAL PLAN.

       (a) Findings.--Congress finds the following:
       (1) The District of Columbia Financial Responsibility and 
     Management Assistance Act (hereafter in this subsection 
     referred to as the ``Act'') was structured as to preserve the 
     maximum prerogatives of each branch of elected self-
     government consistent with returning the District of Columbia 
     to full financial stability and health.
       (2) The Act was intended to eliminate unnecessary 
     bureaucratic barriers and procedures throughout the District 
     government, including the budget process.
       (3) Preservation of home rule and self-government are 
     consistent with cooperation between elected officials and the 
     Authority in drawing the annual budget and other matters 
     affecting the District of Columbia government, and are 
     preferable to achieve greater efficiency, communication among 
     the parties, and avoidance of conflict and delay.
       (b) In General.--Section 202 of the District of Columbia 
     Financial Responsibility and Management Assistance Act of 
     1995 is amended by adding at the end the following new 
     subsection:
       ``(i) Expedited Submission and Approval of Consensus Budget 
     and Financial Plan.--Notwithstanding any other provision of 
     this section, if the Mayor, the Council, and the Authority 
     jointly develop a financial plan and budget for the fiscal 
     year which meets the requirements applicable under section 
     201 and which the Mayor, Council, and Authority certify 
     reflects a consensus among them--
       ``(1) such financial plan and budget shall serve as the 
     budget of the District government for the fiscal year adopted 
     by the Council under section 446 of the District of Columbia 
     Self-Government and Governmental Reorganization Act; and
       ``(2) the Mayor shall transmit the financial plan and 
     budget to the President and Congress under such section.''.
       (c) Effective Date.--The amendment made by subsection (b) 
     shall apply with respect to fiscal years beginning with 
     fiscal year 1998.

     SEC. 11604. INCREASE IN MAXIMUM AMOUNT OF PERMITTED DISTRICT 
                   BORROWING.

       Section 603(b) of the District of Columbia Self-Government 
     and Governmental Reorganization Act (DC Code, sec. 47-313(b)) 
     is amended by striking ``14 per centum'' each place it 
     appears in paragraph (1) and paragraph (3) and inserting ``17 
     percent''.
                  Subtitle H--Miscellaneous Provisions

        CHAPTER 1--REGULATORY REFORM IN THE DISTRICT OF COLUMBIA

     SEC. 11701. REVIEW AND REVISION OF REGULATIONS AND PERMIT AND 
                   APPLICATION PROCESSES.

       (a) Review of Current Regulations by Authority.--
       (1) In general.--Not later than 6 months after the date of 
     the enactment of this title, the District of Columbia 
     Financial Responsibility and Management Assistance Authority 
     shall complete a review of regulations of the District of 
     Columbia in effect as of the date of the enactment of this 
     title and analyze the extent to which such regulations 
     unnecessarily and inappropriately impair economic development 
     in the District of Columbia and the financial stability and 
     management efficiency of the District of Columbia government. 
     To the greatest extent possible, such review shall take into 
     account the work and recommendations of the Business 
     Regulatory Reform Commission pursuant to the Business 
     Regulatory Reform Commission Act of 1994 (DC Code, sec. 2-
     4101 et seq.) and other existing and ongoing public and 
     private regulatory reform efforts. The Authority shall 
     transmit the findings of its review to the Mayor, Council, 
     and Congress.
       (2) Revision.--Based on the review conducted under 
     paragraph (1) and taking into account actions by the Council 
     and the Executive Branch of the District of Columbia 
     government, the Authority shall take such additional actions 
     as it considers appropriate to repeal or revise the 
     regulations of the District of Columbia, in accordance with 
     (and subject to the terms and

[[Page H6168]]

     conditions described in) section 207 of the District of 
     Columbia Financial Responsibility and Management Assistance 
     Act of 1995.
       (b) Survey and Revision of Permit and Application 
     Processes.--
       (1) In general.--Not later than 6 months after the date of 
     the enactment of this title, the Authority shall complete a 
     review of the current processes of the District of Columbia 
     for obtaining permits and applications of all types and 
     analyze the extent to which such processes and their 
     completion times vary from the processes applicable in other 
     jurisdictions. To the greatest extent possible, such review 
     shall take into account the work and recommendations of the 
     Business Regulatory Reform Commission pursuant to the 
     Business Regulatory Reform Commission Act of 1994 (DC Code, 
     sec. 2-4101 et seq.) and other existing and ongoing public 
     and private regulatory reform efforts. The Authority shall 
     transmit the findings of its review to the Mayor, Council, 
     and Congress.
       (2) Revision.--Based on the review conducted under 
     paragraph (1) and taking into account actions by the Council 
     and the Executive Branch of the District of Columbia 
     government, the Authority shall take such additional actions 
     as it considers appropriate to repeal or revise the permit 
     and application processes (and their completion times) of the 
     District of Columbia, in accordance with (and subject to the 
     terms and conditions described in) section 207 of the 
     District of Columbia Financial Responsibility and Management 
     Assistance Act of 1995. In carrying out such repeals or 
     revisions, the Authority shall seek to ensure that the 
     average time required to obtain a permit or application from 
     the District of Columbia is consistent with the average time 
     for other similar jurisdictions in the United States.
       (c) Reports to Congress.--Upon the expiration of the 6-
     month period which begins on the date of the enactment of 
     this title and on a quarterly basis thereafter, the Authority 
     shall submit a report to Congress describing the steps taken 
     to carry out the requirements of this section and the 
     effectiveness of the regulatory, permit, and application 
     processes of the District of Columbia.

     SEC. 11702. REPEAL OF CLEAN AIR COMPLIANCE FEE ACT OF 1994.

       (a) Repeal.--
       (1) In general.--Effective March 21, 1995, the Clean Air 
     Compliance Fee Act of 1994 is hereby repealed (DC Code, sec. 
     47-2731 et seq.), except as provided in subsection (b).
       (2) Conforming amendment.--Section 2(b)(2) of the Stable 
     and Reliable Source of Revenues for WMATA Act of 1982 (DC 
     Code, sec. 1-2466(b)(2)) is amended by striking subparagraph 
     (H).
       (b) Exception for Provisions Exempting Delivery of 
     Newspapers From Application of Certain Taxes.--Subsection (a) 
     shall not apply to section 14 of the Clean Air Compliance Fee 
     Act of 1994.

     SEC. 11703. REPEAL REQUIREMENT FOR CONGRESSIONAL 
                   AUTHORIZATION OF CERTAIN MERGERS INVOLVING 
                   DISTRICT OF COLUMBIA PUBLIC UTILITY 
                   CORPORATIONS.

       Section 11 of the Act of March 4, 1913 (37 Stat. 1006; DC 
     Code, sec. 43-802) is hereby repealed.

     SEC. 11704. EXEMPTION OF CERTAIN CONTRACTS FROM COUNCIL 
                   REVIEW.

       (a) In General.--Section 451 of the District of Columbia 
     Self-Government and Governmental Reorganization Act (sec. 1-
     1130, D.C. Code) is amended by adding at the end the 
     following new subsection:
       ``(d) Exemption for Certain Contracts.--The requirements of 
     this section shall not apply with respect to any of the 
     following contracts:
       ``(1) Any contract entered into by the Washington 
     Convention Center Authority for preconstruction activities, 
     project management, design, or construction.
       ``(2) Any contract entered into by the District of Columbia 
     Water and Sewer Authority established pursuant to the Water 
     and Sewer Authority Establishment and Department of Public 
     Works Reorganization Act of 1996, other than contracts for 
     the sale or lease of the Blue Plains Wastewater Treatment 
     Plant.
       ``(3) At the option of the Council, any contract for a 
     highway improvement project carried out under title 23, 
     United States Code.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to contracts entered into on or 
     after the date of the enactment of this title.

               CHAPTER 2--OTHER MISCELLANEOUS PROVISIONS

     SEC. 11711. REVISIONS TO FINANCIAL RESPONSIBILITY AND 
                   MANAGEMENT ASSISTANCE ACT.

       (a) Use of Interest on Accounts of Authority for Benefit of 
     District.--Section 106 of the District of Columbia Financial 
     Responsibility and Management Assistance Act of 1995 (DC 
     Code, sec. 47-391.6) is amended by adding at the end the 
     following new subsection:
       ``(d) Use of Interest on Accounts for District.--
       ``(1) In general.--Notwithstanding any other provision of 
     this Act, the Authority may transfer or otherwise expend any 
     amounts derived from interest earned on accounts held by the 
     Authority on behalf of the District of Columbia for such 
     purposes as it considers appropriate to promote the economic 
     stability and management efficiency of the District 
     government.
       ``(2) Spending not subject to appropriation by congress.--
     Notwithstanding subsection (a)(3), any amounts transferred or 
     otherwise expended pursuant to paragraph (1) may be obligated 
     or expended without approval by Act of Congress.''.
       (b) Appointment of Inspector General.--Section 303(e)(1) of 
     such Act (DC Code, sec. 1-1182.8 note) is amended by striking 
     ``the Authority'' and inserting ``the Mayor''.

     SEC. 11712. COOPERATIVE AGREEMENTS BETWEEN FEDERAL AGENCIES 
                   AND METROPOLITAN POLICE DEPARTMENT.

       (a) Agreements.--Each covered Federal law enforcement 
     agency may enter into a cooperative agreement with the 
     Metropolitan Police Department of the District of Columbia to 
     assist the Department in carrying out crime prevention and 
     law enforcement activities in the District of Columbia, 
     including taking appropriate action to enforce subsection (e) 
     (except that nothing in such an agreement may be construed to 
     grant authority to the United States to prosecute violations 
     of subsection (e)).
       (b) Contents of Agreement.--An agreement entered into 
     between a covered Federal law enforcement agency and the 
     Metropolitan Police Department pursuant to this section may 
     include agreements relating to--
       (1) sending personnel of the agency on patrol in areas of 
     the District of Columbia which immediately surround the area 
     of the agency's jurisdiction, and granting personnel of the 
     agency the power to arrest in such areas;
       (2) sharing and donating equipment and supplies with the 
     Metropolitan Police Department;
       (3) operating on shared radio frequencies with the 
     Metropolitan Police Department;
       (4) permitting personnel of the agency to carry out 
     processing and papering of suspects they arrest in the 
     District of Columbia; and
       (5) such other items as the agency and the Metropolitan 
     Police Department may agree to include in the agreement.
       (c) Coordination With U.S. Attorney's Office.--Agreements 
     entered into pursuant to this section shall be coordinated in 
     advance with the United States Attorney for the District of 
     Columbia.
       (d) Covered Federal Law Enforcement Agencies Described.--In 
     this section, the term ``covered Federal law enforcement 
     agency'' means any of the following:
       (1) United States Capitol Police.
       (2) United States Marshals Service.
       (3) Library of Congress Police.
       (4) Bureau of Engraving and Printing Police Force.
       (5) Supreme Court Police.
       (6) Amtrak Police Department.
       (7) Department of Protective Services, United States 
     Holocaust Museum.
       (8) Government Printing Office Police.
       (9) United States Park Police.
       (10) Bureau of Alcohol, Tobacco, and Firearms.
       (11) Drug Enforcement Administration.
       (12) Federal Bureau of Investigation.
       (13) Criminal Investigation Division, Internal Revenue 
     Service.
       (14) Department of the Navy Police Division, Naval District 
     Washington.
       (15) Naval Criminal Investigative Service.
       (16) 11th Security Police Squadron, Bolling Air Force Base.
       (17) United States Army Military District of Washington.
       (18) United States Customs Service.
       (19) Immigration and Naturalization Service.
       (20) Postal Inspection Service, United States Postal 
     Service.
       (21) Uniformed Division, United States Secret Service.
       (22) United States Secret Service.
       (23) National Zoological Park Police.
       (24) Federal Protective Service, General Services 
     Administration, National Capital Region.
       (25) Defense Protective Service, Department of Defense 
     Washington Headquarters Services.
       (26) Office of Protective Services, Smithsonian 
     Institution.
       (27) Office of Protective Services, National Gallery of 
     Art.
       (28) United States Army Criminal Investigation Command, 
     Department of the Army Washington District, 3rd Military 
     Police Group.
       (29) Marine Corps Law Enforcement.
       (30) Department of State Diplomatic Security.
       (31) United States Coast Guard.
       (32) United States Postal Police.
       (e) Certain Prohibited Activity.--Effective with respect to 
     conduct occurring on or after the date of the enactment of 
     this title, whoever in the District of Columbia knowingly and 
     willfully obstructs any bridge connecting the District of 
     Columbia and the Commonwealth of Virginia--
       (1) shall be fined not less than $1,000 and not more than 
     $5,000, and in addition may be imprisoned not more than 30 
     days; or
       (2) if applicable, shall be subject to prosecution by the 
     District of Columbia under the provisions of District law and 
     regulation amended by the Safe Streets Anti-Prostitution 
     Amendment Act of 1996 (D.C. Law 11-130).

     SEC. 11713. PERMITTING GARNISHMENT OF WAGES OF OFFICERS AND 
                   EMPLOYEES OF DISTRICT OF COLUMBIA GOVERNMENT.

       Section 2 of D.C. Law 2-14 (DC Code, sec. 1-516) is 
     amended--
       (1) by striking ``After July 25'' and inserting ``(a) After 
     July 25''; and
       (2) by adding at the end the following new subsection:
       ``(b) After October 1, 1997, wages salaries, annuities, 
     retirement and disability benefits, and other remuneration 
     based upon employment, or other income owed by, due from, and 
     payable by the government of the District of Columbia to any 
     individual shall be subject to attachment, garnishment, 
     assignment, or withholding in accordance with subchapter III 
     of chapter 5 of title 16 of the District of Columbia Code in 
     the same manner and to the same extent as if the government 
     of the District of Columbia were a private person.''.

     SEC. 11714. PERMITTING EXCESS APPROPRIATIONS BY WATER AND 
                   SEWER AUTHORITY FOR CAPITAL PROJECTS.

       (a) In General.--Section 445A of the District of Columbia 
     Self-Government and Governmental

[[Page H6169]]

     Reorganization Act (DC Code, sec. 43-1691), as added by 
     section 4(a) of the District of Columbia Water and Sewer 
     Authority Act of 1996, is amended--
       (1) by striking ``The District'' and inserting ``(a) In 
     General.--The District''; and
       (2) by adding at the end the following new subsection:
       ``(b) Permitting Expenditure of Excess Revenues for Capital 
     Projects in Excess of Budget.--Notwithstanding the amount 
     appropriated for the District of Columbia Water and Sewer 
     Authority for capital projects for a fiscal year, if the 
     revenues of the Authority for the year exceed the estimated 
     revenues of the Authority provided in the annual budget of 
     the District of Columbia for the fiscal year, the Authority 
     may obligate or expend an additional amount for capital 
     projects during the year equal to the amount of such excess 
     revenues.''.
       (b) Conforming Amendment.--The fourth sentence of section 
     446 of such Act (DC Code, sec. 47-304), as amended by section 
     2(c)(2) of the District of Columbia Water and Sewer Authority 
     Act of 1996, is amended by striking ``in section 467(d)'' and 
     inserting ``in section 445A(b), section 467(d)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to fiscal years beginning on or 
     after October 1, 1996.

     SEC. 11715. REQUIRING CERTAIN FEDERAL OFFICIALS TO PROVIDE 
                   NOTICE BEFORE CARRYING OUT ACTIVITIES AFFECTING 
                   REAL PROPERTY LOCATED IN DISTRICT OF COLUMBIA.

       (a) Heads of Federal Agencies.--
       (1) In general.--Except as provided in subsection (d), the 
     head of any Federal agency may not carry out any activity 
     that affects real property located in the District of 
     Columbia unless--
       (A) not later than 60 days before carrying out such 
     activity, the head of the agency provides a notice describing 
     such activity and the property affected to the Administrator 
     of General Services and the Administrator of General Services 
     transmits such notice to the individuals described in 
     subsection (c); and
       (B) the head of the agency provides the individuals 
     described in subsection (c) with the opportunity to present 
     oral or written comments on the activity to a representative 
     of the head of the agency before the head of the agency 
     carries out the activity.
       (2) Federal agency defined.--In subsection (a), the term 
     ``Federal agency'' means an executive department (as defined 
     in section 101 of title 5, United States Code).
       (b) Architect of the Capitol.--Except as provided in 
     subsection (d), the Architect of the Capitol may not carry 
     out any activity that affects real property located in the 
     District of Columbia unless--
       (1) not later than 60 days before carrying out such 
     activity, the Architect provides a notice describing such 
     activity and the property affected to the Committee on 
     Transportation and Infrastructure of the House of 
     Representatives and the Committee on Environment and Public 
     Works of the Senate and such Committees transmit such notice 
     to the individuals described in subsection (c); and
       (2) the Architect provides the individuals described in 
     subsection (c) with the opportunity to present oral or 
     written comments on the activity to a representative of the 
     Architect before the Architect carries out the activity.
       (c) Individuals Described.--The individuals described in 
     this paragraph (with respect to the activity and the real 
     property involved) are the Mayor of the District of Columbia, 
     the Chair of the Council of the District of Columbia, and the 
     Chair of the Advisory Neighborhood Commission (as established 
     pursuant to section 738 of the District of Columbia Self-
     Government and Governmental Reorganization Act) in whose 
     neighborhood such property is located.
       (d) Exception for Emergencies.--The head of a Federal 
     agency or the Architect of the Capitol may waive the 
     requirements of subsection (a) if the head of the agency or 
     the Architect finds that compliance with the requirements 
     would jeopardize the public safety or the national security 
     interests of the United States, but only if the head of the 
     agency or the Architect--
       (1) certifies such finding and the reasons for such finding 
     to the individuals described in subsection (c) and to 
     Congress; and
       (2) at the earliest time practicable, provides such 
     individuals with the notice described in paragraph (1) of 
     subsection (a) or (b) (whichever is applicable) and the 
     opportunity to present comments described in paragraph (2) of 
     subsection (a) or (b).
       (e) Effective Date.--Section 1 shall apply to activities 
     carried out after the expiration of the 60-day period that 
     begins on the date of the enactment of this title.

     SEC. 11716. REPEAL TERM OF DEED OF CONVEYANCE TO CERTAIN 
                   HOSPITAL.

       Secton 2 of the Act of June 6, 1952 (chapter 486; 66 Stat. 
     288) (DC Code, sec. 32-121) is hereby repealed.

     SEC. 11717. SHORT TITLE OF HOME RULE ACT.

       (a) In General.--Section 101 of the District of Columbia 
     Self-Government and Governmental Reorganization Act is 
     amended by striking ``District of Columbia Self-Government 
     and Governmental Reorganization Act'' and inserting 
     ``District of Columbia Home Rule Act''.
       (b) References in Law.--Any reference in law or regulation 
     to the District of Columbia Self-Government and Governmental 
     Reorganization Act shall be deemed to be a reference to the 
     District of Columbia Home Rule Act.

             CHAPTER 3--EFFECTIVE DATE; GENERAL PROVISIONS

     SEC. 11721. EFFECTIVE DATE.

       Except as otherwise provided in this title, the provisions 
     of this title shall take effect on the later of October 1, 
     1997, or the day the District of Columbia Financial 
     Responsibility and Management Assistance Authority certifies 
     that the financial plan and budget for the District 
     government for fiscal year 1998 meet the requirements of 
     section 201(c)(1) of the District of Columbia Financial 
     Responsibility and Management Assistance Act of 1995, as 
     amended by this title.

     SEC. 11722. TECHNICAL ASSISTANCE

       Any Federal agency (as defined in section 101 of title 31, 
     United States Code) may provide, at the discretion of the 
     head of the agency, technical assistance to, and training 
     for, personnel of the Government of the District of Columbia. 
     Such assistance shall be limited to assistance that does not 
     interfere with the mission of the agency. The authority 
     provided by this section shall expire three years from the 
     date of enactment of this statute.

     SEC. 11723. LIABILITY.

       (a) District of Columbia.--The District of Columbia shall 
     defend any civil action or proceeding pending on the 
     effective date of this title in any court or other official 
     municipal, state, or federal forum against the District of 
     Columbia or its officers, employees, or agents, and shall 
     assume any liability resulting from such an action or 
     proceeding.
       (b) State Justice Institute.--The State Justice Institute 
     shall not be liable for damages or equitable relief on the 
     basis of the activities or operations of any federal or 
     District of Columbia agency which receives funds through the 
     State Justice Institute pursuant to this title.
       (c) United States.--The United States, its officers, 
     employees, and agents, and its agencies shall not--
       (1) be responsible for the payment of any judgments, 
     liabilities or costs resulting from any action or proceeding 
     against the District of Columbia or its agencies, officers, 
     employees, or agents;
       (2) be subject to liability in any case on the basis of the 
     activities of the District of Columbia or its agencies, 
     officers, employees, or agents; or
       (3) be subject to liability in any case under section 1979 
     of the Revised Statutes (42 U.S.C. 1983).
       (d) Limitations.--Nothing in this section shall be 
     construed as a waiver of sovereign immunity, or as limiting 
     any other defense or immunity that would otherwise be 
     available to the United States, the District of Columbia, 
     their agencies, officers, employees, or agents.
       And the Senate agree to the same.
     For consideration of the House bill, and the Senate 
     amendment, and modifications committed to conference:
     John R. Kasich,
     David L. Hobson,
     Richard K. Armey,
     Tom DeLay,
     J. Dennis Hastert,
     John M. Spratt, Jr.,
     David E. Bonior,
     Vic Fazio.
     As additional conferees from the Committee on Agriculture, 
     for consideration of title I of the House bill, and title I 
     of the Senate amendment, and modifications committed to 
     conference:
     Robert Smith,
     Bob Goodlatte,
     Charles W. Stenholm.
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of title II of the 
     House bill, and title II of the Senate amendment, and 
     modifications committed to conference:
     James A. Leach,
     Rick Lazio.
     As additional conferees from the Committee on Commerce, for 
     consideration of subtitles A-C of title III of the House 
     bill, and title IV of the Senate amendment, and modifications 
     committed to conference:
     Tom Bliley,
     Dan Schaefer,
     John D. Dingell.
     As additional conferees from the Committee on Commerce, for 
     consideration of subtitle D of title III of the House bill, 
     and subtitle A of title III of the Senate amendment, and 
     modifications committed to conference:
     Tom Bliley,
     Billy Tauzin.
     As additional conferees from the Committee on Commerce, for 
     consideration of subtitles E and F of title III, titles IV 
     and X of the House bill, and divisions 1 and 2 of title V of 
     the Senate amendment, and modifications committed to 
     conference:
     Tom Bliley,
     Michael Bilirakis.
     As additional conferees from the Committee on Education and 
     the Workforce, for consideration of subtitle A of title V and 
     subtitle A of title IX of the House bill, and chapter 2 of 
     division 3 of title V of the Senate amendment, and 
     modifications committed to conference:
     Bill Goodling,
     Jim Talent.
     As additional conferees from the Committee on Education and 
     the Workforce, for consideration of subtitles B and C of 
     title V of the House bill, and title VII of the Senate 
     amendment, and modifications committed to conference:
     Bill Goodling,
     Howard ``Buck'' McKeon,
     Dale E. Kildee.
     As additional conferees from the Committee on Education and 
     the Workforce, for consideration of subtitle D of title V of 
     the House bill, and chapter 7 of division 4 of title V of the 
     Senate amendment, and modifications committed to conference:
     Donald M. Payne.
     As additional conferees from the Committee on Government 
     Reform and Oversight, for

[[Page H6170]]

     consideration of title VI of the House bill, and subtitle A 
     of title VI of the Senate amendment, and modifications 
     committed to conference:
     Dan Burton,
     John L. Mica.
     As additional conferees from the Committee on Transportation 
     and Infrastructure, for consideration of title VII of the 
     House bill, and subtitle B of title III and subtitle B of 
     title VI of the Senate amendment, and modifications committed 
     to conference:
     Bud Shuster,
     Wayne T. Gilchrest,
     James L. Oberstar.
     As additional conferees from the Committee on Veterans' 
     Affairs, for consideration of title VIII of the House bill, 
     and title VIII of the Senate amendment, and modifications 
     committed to conference:
     Bob Stump,
     Christopher H. Smith,
     Lane Evans.
     As additional conferees from the Committee on Ways and Means, 
     for consideration of subtitle A of title V and title IX of 
     the House bill, and divisions 3 and 4 of title V of the 
     Senate amendment, and modifications committed to conference:
     Bill Archer,
     E. Clay Shaw, Jr.,
     Dave Camp,
     Charles B. Rangel,
     Sander M. Levin.
     As additional conferees from the Committee on Ways and Means, 
     for consideration of titles IV and X of the House bill, and 
     division 1 of title V of the Senate amendment, and 
     modifications committed to conference:
     Bill Archer,
     William Thomas.
                                Managers on the part of the House.
     From the Committee on the Budget:
     Pete Domenici,
     Chuck Grassley,
     Don Nickles,
     Phil Gramm,
     Frank Lautenberg.
     From the Committee on Agriculture, Nutrition, and Forestry:
     Dick Lugar.
     From the Committee on Banking, Housing, and Urban Affairs:
     Alfonse D'Amato,
     Richard Shelby,
     Paul Sarbanes.
     From the Committee on Commerce, Science and Transportation:
     John McCain,
     Ted Stevens,
       (Except for provisions in universal service fund).
     From the Committee on Energy and Natural Resources:
     Frank H. Murkowski,
     Larry E. Craig.
     From the Committee on Finance:
     Bill Roth,
     Trent Lott,
     Daniel P. Moynihan.
     From the Committee on Governmental Affairs:
     Fred Thompson,
     Ms. Susan Collins.
     From the Committee on Veterans' Affairs:
     Arlen Specter,
     Strom Thurmond,
     John Rockefeller.
                               Managers on the part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to the bill (H.R. 2015) to provide 
     for reconciliation pursuant to sections 104 to 105 of the 
     concurrent resolution on the budget for fiscal year 1997, 
     submit the following joint statement to the House and the 
     Senate in explanation of the effect of the action agreed upon 
     by the managers and recommended in the accompanying 
     conference report:

                          TITLE I--AGRICULTURE

 Exemption From the Work Requirement of Section 6(o) of the Food Stamp 
                                  Act


                              current law

       Section 6(o) of the Food Stamp Act generally provides that 
     able-bodied adults between 18 and 50 years of age (and 
     without dependents) are ineligible if, during the prior 36 
     months, they received food stamps for 3 months while not 
     working at least 20 hours a week or participating in an 
     approved work/training activity. If they re-establish 
     eligibility by working or participating in a work/training 
     activity, and then become unemployed or leave work/training, 
     they are eligible for one extra 3-month period--for a 
     potential total of 6 months of eligibility (without working 
     or participating in a work/training program) in any 36-month 
     period.
       [Sec. 6(o)(1), (2), (5), & (6).]
       Individual excepted from the section 6(o) work requirement 
     include: Those under 18 or over 50; those medically certified 
     as unfit for employment; parents/caretakers with 
     responsibility for a dependent child; pregnant women; and 
     those otherwise exempt under food stamp employment and 
     training rules (e.g., caretakers of incapacitated persons, 
     participants in substance abuse treatment programs, those 
     subject to unemployment compensation work registration 
     rules).
       [Sec. 6(o)(3).]
       At a state agency's request, the Secretary may waive 
     application of the section 6(o) work requirement for areas 
     that: (1) have an unemployment rate over 10% or (2) lack ``a 
     sufficient number of jobs.''
       [Sec. 6(o)(4).]


                               house bill

     Exemption
       In addition to current-law exceptions and waiver authority, 
     permits state agencies to exempt from the section 6(o) work 
     requirement up to 15% of those to whom the requirement 
     applies. [Section 1001]
       Inserts a new sec. 6(o)(5), entitled ``15-Percent 
     Exemption''.
     Definitions
       ``Caseload'' is defined as the average monthly number of 
     individuals receiving food stamps during the 12-month period 
     ending the preceding June 20.
       ``Covered Individual'' is defined as a food stamp recipient 
     (or person denied eligibility solely because of the section 
     6(o) work requirement) who: (1) is not excepted from the 
     requirements of section 6(o), (2) does not reside in an area 
     covered by a waiver of the requirements of section 6(o), (3) 
     is not complying with the work or work/training activity 
     requirements of section 6(o), (4) is not in the first 3 
     months of eligibility under section 6(o), and (5) is not in 
     the second 3 months of eligibility under section 6(o).
     Fiscal year 1998
       Provides that the number of exemptions from the section 
     6(o) work requirement granted by state agencies must be such 
     that the average monthly number of exemptions in effect 
     during the year does not exceed 15% of the number of 
     ``covered individuals'' in the state. The number of covered 
     individuals for each state is to be estimated by the 
     Secretary based on the food stamp program's ``quality 
     control'' survey for fiscal year 1996 and other factors the 
     Secretary considers appropriate because of the timing and 
     limitations of the survey.
     Each subsequent fiscal year
       As with fiscal year 1998, provides that the number of 
     exemptions granted by state agencies in subsequent years must 
     be such that the average monthly number of exemptions of 
     effect during the year does not exceed 15% of the number of 
     ``covered individuals'' in the state. The number of covered 
     individuals for each state is to be estimated by the 
     Secretary using the number estimated for fiscal year 1998--
     adjusted to reflect changes in the state's ``caseload'' and 
     the Secretary's estimate of changes in the proportion of food 
     stamp recipient covered by waivers.
     Caseload adjustments
       Provides that the Secretary must adjust estimates of 
     covered individuals for a state during any fiscal year if the 
     number of food stamp recipients varies by a significant 
     number from the caseload during the 12 months ending June 30 
     of the preceding fiscal year--as determined by the Secretary.
     Exemption adjustments
       During fiscal year 1999 and each subsequent year, provides 
     that the Secretary must 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 during the preceding fiscal year was smaller or 
     greater than the state agency's 15% allowance.
     Reporting requirement
       Requires that state agencies submit such reports as the 
     Secretary determines necessary to ensure compliance with the 
     15% exemption rule.


                            senate amendment

       Same as the House Bill, with minor and technical 
     differences, noted below. [Section 1001.]
       Inserts a new sec. 6(o)(6), entitled ``15-Percent Hardship 
     Exemption''.
       Technical drafting difference in the fourth condition of 
     the definition of ``covered individual''.
       Caseload adjustments are the same as the House bill except 
     that an adjustment must be made if the number of food stamp 
     recipients varies from the caseload during the 12 months 
     ending June 30 of the preceding fiscal year by more than 10%.
       Exemption adjustments are the same as the House bill except 
     for a technical difference.


                          conference agreement

       Senate recedes on all references to ``hardship'' exemption.
       House recedesion technical difference in the fourth 
     condition of ``covered individual''.
       House recedes on caseload adjustment.
       Senate recedes on technical drafting difference in the 
     exemption adjustment.
       [Section 1001.]

             Additional Funding for Employment and Training

                        1. Added Federal Funding


                              Current Law

       The Secretary is required to reserve the following amounts 
     to allocate to state agencies for employment and training 
     programs for food stamp recipients: For fiscal year 1998, $81 
     million; for fiscal year 1999, $84 million; for fiscal year 
     2000, $86 million; for fiscal year 2001, $88 million; and for 
     fiscal year 2002, $90 million.
       No state matching is required to receive these funds. 
     Minimum state allocations are set at $50,000.
       [Sec. 16(h)(1).]


                               house bill

       Increases the amounts required to be reserved for 
     employment and training programs to: For fiscal year 1998, 
     $221 million;

[[Page H6171]]

     for fiscal year 1999, $224 million; for fiscal year 2000, 
     $226 million; for fiscal year 2001, $228 million; and for 
     fiscal year 2002, $210 million.
       Unlike current law, the amounts reserved are to remain 
     available until expended. Retains minimum state allocations 
     of $50,000.
       [Sec. 1002(a); new sec. 16(h)(1)(A)&(E).]


                            senate amendment

       Same as the House Bill, except that the amount to be 
     reserved for fiscal year 2002 is less--$170 million.
       [Sec. 1002; new sec. 16(h)(1)(A)&(D).]


                          conference agreement

       Senate recedes with an amendment to increase the amounts 
     required to be reserved for employment and training programs 
     as follows: For fiscal year 1998, $81 million, with an 
     additional amount of $131 million; for fiscal year 1999, $84 
     million, with an additional amount of $131 million; for 
     fiscal year 2000, $86 million, with an additional amount of 
     $131 million; for fiscal year 2001, $88 million, with an 
     additional amount of $131 million; and for fiscal year 2002, 
     $90 million, with an additional amount of $75 million.
       [Sec. 1002(a); new sec. 16(h)(1)(A)&(D).]

              2. Limit on use of funds for TANF recipients


                              current law

       The amount of employment and training funding a state 
     agency may use for its Temporary Assistance for Needy 
     Families (TANF) recipients may not exceed the amount used for 
     Aid to Families with Dependent Children (AFDC) recipients in 
     fiscal year 1995.
       [Sec. 6(d)(4)(K).]


                               house bill

       Prohibts the use of unmatched federal funds for TANF 
     recipients.
       [Sec. 1002(a); new sec. 16(h)(1)(B)(i).]


                            senate amendment

       No comparable provision.


                          conference agreement

       House recedes.
     3. Use of funds for recipients not excepted from the section 
         6(o) work requirement.


                              current law

       No provision.


                               house bill

       Requires that not less than 80% of unmatched federal 
     funding be used for employment and training programs--other 
     than job search or job search training--for recipients not 
     excepted from the section 6(o) work requirement (not 
     categorically excepted on the basis of age, fitness to work, 
     etc.).
       [Sec. 1002(a); new sec. 16(h)(1)(B)(ii).]


                            senate amendment

       Requires that not less than 75% of unmatched federal 
     funding be used to serve recipients who: (1) are not excepted 
     from the section 6(o) work requirement and (2) are placed in 
     and comply with a work program--other than Job Training 
     Partnership Act or Trade Adjustment Assistance programs--
     that meets the eligibility standards of section 6(o) 
     (e.g., participation in a workfare program or a work/
     training program for 20 hours a week).
       [Sec. 1002; new sec. 16(h)(1)(F).]


                          Conference Agreement

       House recedes with an amendment to require 80% of unmatched 
     federal funding to be used to serve recipients who: (1) are 
     not excepted from the section 6(o) work requirement; and (2) 
     are placed in and comply with a work program including Job 
     Training Partnership Act and the Trade Adjustment Assistance 
     programs, that meets the eligibility standards of section 
     6(o) (e.g. participation in a workfare program or a work/
     training program for 20 hours per week.)
       [Sec. 1002(a); new sec. 16(h)(1)(E).]

            4. Allocation and re-allocation of federal funds


                              Current Law

       The Secretary must allocate unmatched federal funds among 
     state agencies using a reasonable formula--determined by the 
     Secretary--that gives consideration to the population in each 
     state affected by the section 6(o) work requirement.
       State agencies must notify the Secretary if they determine 
     that they will not expend all of the unmatched federal funds 
     allocated to them. On notification, the Secretary must 
     reallocate these unexpended funds as the Secretary considers 
     appropriate and equitable.
       [Sec. 16(h)(1)(C).]


                               House Bill

       Requires the Secretary to allocate unmatched federal funds 
     using a reasonable formula set by the Secretary that reflects 
     each state's proportion of food stamp recipients who (1) are 
     not excepted from the section 6(o) work requirement and (2) 
     do not reside in an area subject to a waiver from the section 
     6(o) work requirement. However, if a state agency provides 
     employment and training services to non-excepted recipients 
     in an area subject to a waiver, recipients in that area would 
     be counted in determining a state's allocation.
       States' proportions of non-excepted recipients would be 
     adjusted each fiscal year for changes in the state's caseload 
     (in the 12 months ending the preceding June 30).
       Requires state agencies to submit such reports as the 
     Secretary determines are necessary to ensure compliance with 
     funding allocation and reallocation rules.
       No change from current law regarding the reallocation of 
     federal unmatched funds.
       [Sec. 1002(a); new sec. 16(h)(1)(C) &(D).]


                            Senate Amendment

       Requires the Secretary to allocate unmatched federal funds 
     using a reasonable formula set by the Secretary that reflects 
     each state's proportion of food stamp recipients who are not 
     excepted from the section 6(o) work requirement.
       States' proportions of non-excepted recipients would be 
     estimated by the Secretary based on the fiscal year 1996 
     ``quality control'' survey and other factors the Secretary 
     considers appropriate because of the timing and limitations 
     of the survey and adjusted each fiscal year for changes in 
     each state's caseload (in the 12 months ending the preceding 
     June 30).
       No comparable reporting requirement.
       If a state agency will not expend all of the unmatched 
     federal funds allocated to it for a fiscal year, requires the 
     Secretary to reallocate the unexpended funds--during the 
     fiscal year or the subsequent fiscal year --as the Secretary 
     considers appropriate and equitable.
       [Sec. 1002; new sec. 16(h)(1)(B) & (C).]


                          Conference Agreement

       Senate recedes on the allocation of unmatched funds with an 
     amendment that for fiscal year 1998, the Secretary would 
     allocate funds according to the Senate amendment.
       House recedes on the Secretary's estimate of states' 
     proportions of non-excepted recipients based on the ``quality 
     control'' survey.
       Senate recedes on reporting requirement.
       House recedes on reallocation of unexpended funds.
       [Sec. 1002(a); new sec. 16(h)(1)(B)&(C).]

                             5. Placements


                              Current Law

       No provisions.


                               House Bill

       No comparable provisions.


                            Senate Amendment

       Provides that state agencies are eligible to receive 
     unmatched federal funds (up to the amount of their 
     allocation, including any reallocations) in an amount equal 
     to the sum of:
       (1) the average monthly number of non-excepted recipients 
     placed in and complying with a work program--other than a Job 
     Training Partnership Act or Trade Adjustment Assistance 
     program--that meets the eligibility standards of section 6(o) 
     (e.g., participation in a workfare program or a work/training 
     program for 20 hours a week), multiplied by an amount 
     determined by the Secretary (and periodically adjusted) to 
     reflect the reasonable cost of efficiently and economically 
     providing services that meet the eligibility standards of 
     section 6(o); plus
       (2) the average monthly number of non-excepted recipients 
     in employment and training activities that do not meet the 
     eligibility standards of section 6(o), multiplied by a lesser 
     amount determined by the Secretary (and periodically 
     adjusted) to reflect the reasonable cost of efficiently and 
     economically providing services that do not meet the 
     eligibility standards of section 6(o).
       [Sec. 1002; new sec. 16(h)(1)(E).]


                          Conference Agreement

       House recedes with an amendment to require the Secretary to 
     monitor state agencies' expenditure of funds for employment 
     training programs provided under this paragraph, including 
     the costs of individual components of state agencies' 
     programs. The Secretary may determine the reimbursable costs 
     of employment and training components, and, if the Secretary 
     makes such a determination, the Secretary shall determine 
     that the amounts spent or planned to be spent on the 
     components reflect the reasonable cost of efficiently and 
     economically providing components appropriate to recipient 
     employment and training needs, taking into account, as the 
     Secretary deems appropriate, prior expenditures on the 
     components, the variability of costs among state agencies' 
     components, the characteristics of the recipients to be 
     served, and such other factors as the Secretary considers 
     necessary.
       The conferees intend that the Secretary will exercise the 
     authority to determine employment and training costs so that 
     state agencies have reasonable flexibility in designing 
     employment and training programs for those covered by the 
     work requirement for 18-50 year olds. This authority should 
     not be used to effectively restrict state agencies' choices 
     to one employment and training component, such as providing 
     only workfare or only training positions. However, it also is 
     intended to allow the Secretary to circumscribe the makeup 
     and costs of state agencies' employment and training 
     components for 18-50 year olds so that costs are reasonable 
     and are not excessive and the components are commensurate 
     with participants' employment and training requirements. The 
     Secretary may issue guidelines that allow a mix of components 
     and costs that the Secretary determines to be reasonable.
       [Sec. 1002(a); new sec. 16(h)(1)(G).]

                        6. Maintenance of Effort


                              Current Law

       No provision.


                               House Bill

       In order to receive additional unmatched federal funding 
     (above the amounts set in current law), state agencies must 
     maintain their expenditures for employment and training and 
     workfare programs for food stamp recipients at a level not 
     less than their expenditures for fiscal year 1996.
       [Sec. 1002(a); new sec. 16(h)(1)(F).]

[[Page H6172]]

                            Senate Amendment

       In order to receive any unmatched federal funding, state 
     agencies must maintain their expenditures for employment and 
     training and workfare programs for food stamp recipients at a 
     level not less than 75% of their expenditures for fiscal year 
     1996.
       [Sec. 1002; new sec. 16(h)(1)(G).]


                          Conference Agreement

       Senate recedes with a technical amendment.
       [Sec. 1002(a); new sec. 16(h)(1)(F).]

                    7. Additional payments to states


                              Current Law

       If a state agency incurs costs that exceed the unmatched 
     federal funds allocated to it for employment and training 
     programs, the Secretary is required to pay 50% of additional 
     costs.
       [Sec. 16(h)(2).]


                               House Bill

       No change to current law.


                            Senate Amendment

       If a state agency incurs costs to place individuals in 
     employment and training programs and does not use unmatched 
     federal funds to defray those costs, requires the Secretary 
     to pay 50% of the costs incurred.
       [Sec. 1002; new sec. 16(h)(2).]


                          Conference Agreement

       Senate recedes.

                         8. Report to Congress


                              Current Law

       No provision.


                               House Bill

       Requires the Secretary to submit annual reports to the 
     Agriculture Committees regarding whether the additional 
     employment and training funding provided in this measure has 
     been used by state agencies to increase the number of work/
     training slots for recipients subject to the section 6(o) 
     work requirement in the most efficient and effective manner.
       [Sec. 1002(a); new sec. 16(h)(2).]


                            Senate Amendment

       No comparable provision.


                          Conference Agreement

       Senate recedes with an amendment to require the Secretary 
     to submit one report not later than 30 months after the date 
     of enactment.
       [Section 1002(b).]

      Authorizing the Use of Nongovernmental Personnel in Making 
Determinations of Eligibility for Benefits Under the Food Stamp Program


                              Current Law

       State agencies must certify eligibility in accordance with 
     general procedures set by the Secretary in regulations, and 
     state agency personnel must be employed in accordance with 
     current federal ``merit system'' standards.
       [Sec. 11(e)(6).]


                               House Bill

       Provides that no provision of law be construed as 
     preventing any state from allowing eligibility determinations 
     to be made by an entity that is not a state or local 
     government (or by an individual who is not a state or local 
     government employee)--so long as state-set qualifications are 
     met. Determinations made by the non-governmental entity or 
     individual would be considered as made by the state agency.
       Provides that this authority not be construed as affecting 
     conditions of eligibility, rights to challenge eligibility 
     determinations, and ``quality control'' determinations.
       [Sec. 1003.]


                            Senate Amendment

       No comparable provisions.


                          Conference Agreement

       House recedes. The Managers understand that this issue is 
     addressed in another section of the Conference Report.

                  Denial of food stamps for prisoners


                              Current Law

       No provisions.


                               House Bill

       [Note: The House Bill does not contain an amendment dealing 
     with food stamps and prisoners. However, H.R. 1000 (approved 
     by the House on April 8, 1997) requires state agencies to 
     establish a system and take action on a periodic basis to 
     verify and otherwise assure that an individual who is 
     officially detained in a correctional, detention, or penal 
     facility administered under federal or state law is not 
     considered to be part of any food stamp household--except to 
     the extent that the Secretary determines that extraordinary 
     circumstances have made it impracticable for the state agency 
     to obtain the necessary information.]


                            Senate Amendment

       Requires state agencies to establish a system and take 
     action on a periodic basis to verify and otherwise ensure 
     that an individual placed under detention in a federal, 
     state, or local penal, correctional, or other detention 
     facility (for more than 30 days) is not eligible to 
     participate as a member of any food stamp household--except 
     that (1) the Secretary may determine that extraordinary 
     circumstances make it impracticable for a state agency to 
     obtain the necessary information and (2) state agencies 
     obtaining information collected under the Social Security 
     Administration's system for identifying prisoner recipients 
     (or a comparable system) will be judged to be in compliance.
       Provides that this new requirement will take effect 1 year 
     after enactment--except that the Secretary may grant an 
     extension (not to exceed 2 years after enactment) if a 
     request is submitted stating the reasons for noncompliance, 
     providing evidence of a good faith effort, and detailing a 
     plan for bringing the state into compliance.
       Requires the Secretary to assist states ' to the maximum 
     extent practicable--in implementing systems to carry out the 
     new requirement regarding prisoners.
       [Sec. 1003.]


                          Conference Agreement

       House recedes.
       [Section 1003.]

                          Nutrition Education


                              Current Law

       No provisions. [Note: Nutrition education funds provided 
     under the Food Stamp Act cannot typically be matched with 
     specifically earmarked non-governmental funds.]


                               House Bill

       No comparable provisions.


                            Senate Amendment

       Requires the Secretary to make available up to $600,000 a 
     year (for fiscal years 1998-2001) for special nutrition 
     education grants to private nonprofit organizations and state 
     agencies.
       Provides that eligible organizations and agencies will be 
     those that agree to (1) use the funds to 'direct a 
     collaborative effort to coordinate and integrate nutrition 
     education into health, nutrition, social service, and food 
     distribution programs for food stamp participants and other 
     low-income households,' and (2) design the collaborative 
     effort 'to reach large number of food stamp participants and 
     other low-income households through a network of 
     organizations, including schools, child care centers, 
     farmers' markets, health clinics, and outpatient education 
     services.'
       Requires the Secretary to give preference to organizations 
     and state agencies that conducted 'collaborative efforts' and 
     received funding for them from the Secretary prior to 
     enactment.
       Limits the federal contribution to 50%, bars in-kind 
     matching contributions, and allows the non- federal share to 
     include private nongovernmental funds. No grant may exceed 
     $200,000 a year. [Sec. 1004.]


                          Conference Agreement

       House recedes with an amendment to clarify that the federal 
     share of a grant can not exceed $200,000; and the amendments 
     in sections 1001 and 1002 of this title dealing with 
     exemptions and additional funding for employment and training 
     programs shall be effective on October 1, 1997, without 
     regard to whether regulations have been issued to implement 
     such amendments. Within one year after the date of enactment 
     of this Act, the Secretary shall prescribe such regulations 
     as may be necessary to implement the amendments made by this 
     title.
       [Sections 1004 and 1005.]

                TITLE II--HOUSING, AND RELATED PROGRAMS

     Section 2002--Extension of Foreclosure Avoidance and Borrower 
Assistance Provisions for FHA Single Family Housing Mortgage Insurance 
                                Program


                               House bill

       The House bill would extend permanently the FHA Assignment 
     Reforms from Section 407 of the Balanced Budget Downpayment 
     Act, I. Section 407 amended Sections 204(a) and 230 of the 
     National Housing Act to authorize HUD, under the replacement 
     assignment program, to pay mortgagees for undertaking loss 
     mitigation measures and to restrict HUD's ability to accept 
     assignments of mortgages. It reforms the assignment process 
     to achieve cost savings comparable to those achieved in the 
     private sector by working out delinquent loans to avoid 
     foreclosure and minimizing losses to the mortgage insurer.


                            Senate amendment

       The Senate language is identical.


                          Conference Agreement

       The Conference agreement includes this language.

Section 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


                               House bill

       The House bill would provide limitations on the application 
     of the annual adjustment factor (AAF) for FY 1999, and 
     subsequent years, for Section 8 New Construction, Substantial 
     Rehabilitation, or Moderate Rehabilitation projects where the 
     rents are adjusted using the AAF and the rents are in excess 
     of the fair market rents (``FMRs'') for that housing area. 
     For such projects, the Secretary may adjust rents, but only 
     to the extent that the owner demonstrates that the adjusted 
     rent would not exceed the rent for a similar unassisted unit. 
     For FY 1998, it is expected that the HUD appropriations Act 
     will continue this same policy, which has been in effect 
     during FY 1996, FY 1996 prior to April 26, 1996, and FY 1997.


                            Senate amendment

        The Senate language is identical.


                          Conference Agreement

       The conference agreement includes this language.

[[Page H6173]]

       Section 2004--Adjustment of Maximum Monthly Rents for Non-
     Turnover Dwelling Units Assisted Under Section 8 Rental 
     Assistance Program


                               House bill

       The House provision would reduce the Annual Adjustment 
     Factor (AAF) by one percentage point, for FY 1999 and 
     subsequent fiscal years, for those Section 8 units in which 
     there has been no turnover since the preceding annual rental 
     adjustment, except that the AAF shall not be reduced to less 
     than 1.0% (so rents will not be reduced because of the one 
     percentage point reduction). For FY 1998, it is expected that 
     the HUD appropriations Act will continue this same policy, 
     which has been in effect during FY 1996, FY 1996 prior to 
     April 26, 1996, and FY 1997.


                            Senate amendment

       The Senate language is identical.


                          Conference Agreement

       The conference agreement includes this language.

                 Subtitle B--Multifamily Housing Reform


                               House bill

       There is no comparable provision in the House bill.


                            Senate amendment

       Provides a FHA-Insured multifamily housing mortgage and 
     housing assistance restructuring program, and other 
     multifamily housing reform measures.


                          Conference Agreement

       Senate recedes to the House.

      TITLE III--COMMUNICATIONS AND SPECTRUM ALLOCATION PROVISIONS

                         Sec. 3001. Definitions


                               House bill

       Sections 3302 and 3303(f) of the House bill define both 
     ``digital television service'' and ``analog television 
     service.''


                            Senate amendment

       Sections 3002 and 3003(h) of the Senate amendment have 
     similar definitions of ``digital television service'' and 
     ``analog television service.''


                          Conference agreement

       Section 3001 of the conference agreement states that, 
     unless otherwise specified, terms used in this title have the 
     same meaning as those terms have in the Communications Act of 
     1934. The section also amends the Communications Act of 1934 
     (hereinafter the Communications Act) to add the definitions 
     of ``analog television service'' and ``digital television 
     service'' to section 3 of that Act. The conference agreement 
     adopts the House definition of analog television service, and 
     adopts the House definition of digital television service 
     with a modification that ties the definition to the 
     Commission's rules.

                      Sec. 3002. Spectrum auctions


                               House Bill

       The House bill extended and expanded the Federal 
     Communication Commission's authority to use competitive 
     bidding to assign licenses for the use of the electromagnetic 
     spectrum until December 31, 2002, required the Commission to 
     make available through competitive bidding 100 megahertz 
     (MHz) of additional spectrum by September 30, 2002, specified 
     the specific bands of frequencies from which the 100 MHz was 
     to be obtained, required the National Telecommunications and 
     Information Administration (NTIA) to submit a report 
     identifying additional government spectrum that can be made 
     available for non-government use upon submission of a report 
     by the Commission, and required the NTIA to identify and 
     reallocate for non-government use an additional 20 MHz of 
     government use spectrum. The House bill included an effective 
     date for the expanded competitive bidding authority that 
     precluded its application to licenses or permits for which 
     the Commission had accepted mutually exclusive applications 
     on or before the date of enactment.


                            Senate Amendment

       The Senate amendment contained provisions similar to the 
     House bill, but differed in three respects. The Senate 
     amendment extended the Commission's competitive bidding 
     authority until 2007, did not identify specific bands of 
     frequencies for 55 of the 100 MHz required to be made 
     available by the Commission, and included a provision that 
     required winning bidders for former government-use spectrum 
     to pay the costs of relocating federal users from the 
     bidder's licensed band to other frequency bands. The Senate 
     amendment did not specify an effective date for the expansion 
     of the Commission's auction authority.


                          Conference Agreement

     Section 3002(a)--extension and expansion of auction authority

       The Senate recedes to the House with amendments on the 
     extension and expansion of the Commission's competitive 
     bidding authority. First, the conferees emphasize that, 
     notwithstanding its expanded auction authority, the 
     Commission must still ensure that its determinations 
     regarding mutual exclusivity are consistent with the 
     Commission's obligations under section 309(j)(6)(E). The 
     conferees are particularly concerned that the Commission 
     might interpret its expanded competitive bidding authority in 
     a manner that minimizes its obligations under section 
     309(j)(6)(E), thus overlooking engineering solutions, 
     negotiations, or other tools that avoid mutual exclusivity.
       Second, the exemption from competitive bidding authority 
     for ``public safety radio services'' includes ``private 
     internal radio services'' used by utilities, railroads, 
     metropolitan transit systems, pipelines, private ambulances, 
     and volunteer fire departments. Though private in nature, the 
     services offered by these entities protect the safety of 
     life, health, or property and are not made commercially 
     available to the public. This service exemption also includes 
     radio services used by not-for-profit organizations that 
     offer emergency road services, such as the American 
     Automobile Association (AAA). The Senate included this 
     particular exemption in recognition of the valuable public 
     safety service provided by emergency road services. The 
     conferees do not intend this exemption to include internal 
     radio services used by automobile manufacturers and oil 
     companies to support emergency road services provided by 
     those parties as part of the competitive marketing of their 
     products. The conferees note that the public safety radio 
     services exemption described herein is much broader than the 
     explicit definition for ``public safety services'' contained 
     in section 3004 of this title (adding new section 337(f)(1) 
     to the Communications Act).
       The Senate recedes to the House on the omission of an 
     auction exemption for licenses to offer global satellite 
     services. The conferees note that this omission should not be 
     construed as a Congressional endorsement of auctions for 
     licenses to offer global satellite services. The treatment of 
     global satellite systems raises numerous public policy 
     questions beyond the issue of spectrum auctions. These issues 
     are not germane to budget legislation and are better handled 
     in the context of substantive legislation.
       The Senate recedes to the House with regard to the 
     provision that requires the Commission to conduct a test of 
     combinatorial bidding. The conferees expect that the 
     Commission will conduct the contingent combinatorial auction 
     required by this section as soon as possible. The Commission 
     should, consistent with non-discriminatory procedures for 
     government procurement of goods and services, test methods 
     available in the private sector which may assist the 
     Commission in successfully conducting competitive bidding. 
     The conferees also expect that the Commission will provide a 
     report to the Congress on the outcome of that test. Such 
     report shall include a detailed analysis of the impact of 
     such bidding on the ability of small businesses and new 
     entrants to participate effectively in the bidding process.
       The Senate recedes to the House on two provisions relating 
     to the design of the Commission's auction rules. First, to 
     ensure that scarce spectrum is put to its highest and best 
     use, the Commission is now required to allow an adequate 
     period of time before each auction (1) to permit parties to 
     comment on proposed auction rules, and (2) after the issuance 
     of such rules, to ensure that interested parties have 
     sufficient time to develop business plans, assess market 
     conditions, and evaluate the availability of equipment. 
     Second, the Commission must also prescribe methods by which a 
     reasonable reserve price will be required, or a minimum bid 
     will be established, for any license or permit assigned by 
     means of auction.
       The House recedes to the Senate with an amendment regarding 
     the Commission's authority to retain competitive bidding 
     receipts to offset its costs of conducting competitive 
     bidding from the proceeds of such bidding. The amendment 
     provides that the Commission may retain no auction receipts 
     in any fiscal year in which the Commission's annual report 
     for the second preceding fiscal year does not contain an 
     itemized statement of each expenditure made with receipts 
     retained in that year. For example, if the Commission's 
     annual report for fiscal year 1997 does not contain such an 
     itemized statement, then the Commission would be unable to 
     retain any receipts from competitive bidding to offset its 
     costs for competitive bidding in fiscal year 1999. The 
     conferees intend that the Commission will comply with both 
     the letter and the spirit of this amendment.
       The House recedes to the Senate on the extension of the 
     Commission's auction authority until September 30, 2007. The 
     Senate recedes to the House on the acceleration of the 
     termination date of the Commission's program that provides 
     for preferential treatment in licensing (i.e., ``pioneer's 
     preference'').
       The conferees adopted a provision that repeals the 
     Commission's lottery authority for all applications other 
     than for licenses for non-commercial educational and public 
     broadcast stations as defined in section 397(6) of the 
     Communications Act. This provision does not prevent the 
     Commission from awarding licenses for such stations through 
     the competitive bidding process.
       The conferees adopted a new provision with respect to the 
     applicability of competitive bidding to pending comparative 
     licensing cases. New section 309(l) of the Communications Act 
     requires the Commission to use competitive bidding to resolve 
     any mutually exclusive applications for radio or television 
     broadcast licenses that were filed with the Commission prior 
     to July 1, 1997. The Commission shall limit the class of 
     eligible applicants who may be considered qualified bidders 
     (provided such applicants otherwise qualify under the 
     Commission's rules) to the persons who filed applications 
     with the Commission before that date. The Commission shall 
     also waive its rules to permit competing applicants to 
     procure the removal of conflict between their applications 
     during the 180 days following enactment of this title.

[[Page H6174]]

       Any mutually exclusive applications for radio or television 
     broadcast licenses received after June 30, 1997, shall be 
     subject to the Commission's rules regarding competitive 
     bidding, including applications for secondary broadcast 
     services such as low power television, television 
     translators, and television booster stations. The conferees 
     recognize that there are instances where a single application 
     for a radio or television broadcast license has been filed 
     with the Commission, but that no competing applications have 
     been filed because the Commission has yet to open a filing 
     window. In these instances, the conferees expect that, 
     regardless of whether the application was filed before, on or 
     after July 1, 1997, the Commission will provide an 
     opportunity for competing applications to be filed, 
     consistent with the Commission's procedures. Furthermore, if 
     and when competing applications are filed, the Commission 
     shall assign such licenses using the competitive bidding 
     procedures developed under section 309(j) as amended.

         Section 3002(b)--accelerated availability of spectrum

       The conference agreement modifies the language in the House 
     bill and Senate amendment to accelerate the planned 
     competitive bidding for 45 MHz of spectrum in the 1710 to 
     1755 MHz frequency band from government to non-government 
     use. The conferees intend that government station use of the 
     frequencies to be reallocated pursuant to this section shall 
     be terminated or modified in accordance with the plan 
     outlined in the February 1995 Spectrum Reallocation Final 
     Report by the NTIA. The conferees note that Appendix F of the 
     NTIA report identifies sites at which certain Federal fixed 
     microwave, tactical radio relay, and aeronautical mobile 
     stations in the 1710 to 1755 MHz band will be retained 
     indefinitely. Nothing in the accelerated timetable specified 
     in this section shall be construed to require the 
     reallocation of frequencies within the 1710 to 1755 MHz band 
     that the NTIA report recommends for continued exclusive use 
     by the government.

   Section 3002(c)--obligation to make additional spectrum available

       The conference agreement adopts with clarifying amendments 
     the House provision requiring the Commission to allocate an 
     additional 55 MHz of spectrum for assignment to licensees 
     using competitive bidding under section 309(j) of the 
     Communications Act. Specifically, under the conference 
     agreement, 40 MHz in the 2110 to 2150 MHz band, and 15 MHz in 
     the 1990 to 2110 MHz band, are identified for assignment by 
     competitive bidding. The Commission or the President, as the 
     case may be, are given the authority to substitute other 
     bands of frequencies for those identified under certain 
     conditions. As to the 15 MHz located between 1990 to 2110 
     MHz, the conferees expect that the President will carefully 
     consider the taxpayers clear interest in continued government 
     use of the 1990 to 2110 MHz band for space research and 
     exploration activities. The President is permitted to 
     identify other frequencies for reallocation whenever such 
     frequencies can be expected to result in comparable 
     receipts through competitive bidding.
       The Commission is directed to accommodate incumbent 
     licensees who may be displaced under this section in whatever 
     suitable frequencies the Commission has available to it for 
     reallocation. To the extent the Commission cannot find any 
     such frequencies, the Commission is directed to notify the 
     Secretary of Commerce and recommend bands of frequencies 
     reserved for government use that could be used to accommodate 
     the displaced incumbents.

    Section 3002(d)--Identification and reallocation of frequencies

       The House recedes to the Senate with modifications to the 
     amendments made to the NTIA Organization Act. New section 
     113(f) of the NTIA Organization Act requires the Secretary of 
     Commerce to respond in a timely fashion to a notice from the 
     Commission requesting government spectrum to accommodate 
     displaced incumbent licensees.
       New section 113(g) of the NTIA Organization Act permits 
     Federal entities to receive reimbursement for their costs of 
     relocating from government spectrum that is reallocated to 
     mixed or non-government use. The conference agreement adopts 
     language that was passed by both Houses of Congress in 1995, 
     with minor modifications. The modified language permits 
     private parties to reimburse Federal entities for the costs 
     of relocation to facilitate the private party's use of the 
     spectrum. The conferees intend that each federal entity will 
     keep an itemized accounting of all of its costs for each 
     relocation, and will provide such accounting to the 
     appropriate committees of Congress as an addendum to that 
     entity's budget submission for the next fiscal year.
       This amendment puts Federal entities in the same position 
     as private parties when winning bidders seek to relocate 
     incumbent private parties from their existing frequency 
     allocation. The conferees expect that, where a winning bidder 
     decides it is in its financial interest to do so, this 
     authority will provide a mechanism for the expeditious 
     relocation of Federal entities from spectrum reallocated to 
     non-government use or allocated to mixed government and non-
     government use.
       The conference agreement also adds new sections 113(h) and 
     113(i) of the NTIA Organization Act. Section 113(h) requires 
     Federal entities to make every effort to relocate their 
     licensed use to other frequencies reserved for government 
     use. Section 113(i) defines ``Federal entity.'' The conferees 
     note that the United States Postal Service qualifies as a 
     federal entity under this definition.

    Section 3002(e)--Identification and reallocation of auctionable 
                              frequencies

       The conference agreement combines the provisions of the 
     House bill and Senate amendment to require the Secretary of 
     Commerce to identify 20 MHz of spectrum currently reserved 
     for government use for reallocation to commercial uses. The 
     reallocated spectrum is to be assigned using competitive 
     bidding pursuant to section 309(j) of the Communications Act. 
     The Commission is required to submit and implement a plan, in 
     a timely fashion, for the reallocation and assignment of the 
     20 MHz identified in this section. Finally, this section 
     amends sections 113 and 115 of the NTIA Organization Act in 
     several places so that the identification and reallocation 
     are accomplished through a second reallocation report under 
     that Act.
       The conferees considered expanding the total reallocation 
     under section 3002(e) to allow for additional allocations for 
     private wireless users, but were unable to do so within the 
     context of the Reconciliation process. Nevertheless, the 
     conferees expect the Commission and the NTIA to consider the 
     need to allocate additional spectrum for shared or exclusive 
     use by private wireless services in a timely manner.

     Sec. 3003. Auction of recaptured broadcast television spectrum


                               House bill

       Section 3302 of the House bill adds a new section 
     309(j)(14) to the Communications Act of 1934 to require the 
     Commission to reclaim the 6 MHz broadcasters now use for 
     analog transmission by no later than December 31, 2006. The 
     House bill also required Commission to grant extensions to 
     broadcasters in those markets where more than five percent of 
     the households continue to rely exclusively on an over-the-
     air, analog broadcast signal.
       Section 3302 of the House bill directs the Commission to 
     assign by means of competitive bidding the 78 MHz that is 
     reclaimed from incumbent broadcast licensees. The Commission 
     would be required to complete assignment of licenses for new 
     uses of the reclaimed spectrum by September 30, 2002. To the 
     extent that the Commission reallocates the reclaimed spectrum 
     for services that include digital television service, section 
     3302 precludes the Commission from disqualifying a potential 
     bidder due to the Commission's duopoly or newspaper cross-
     ownership rules.


                            Senate amendment

       Section 3002 of the Senate amendment adds a new section 
     309(j)(15) to the Communications Act of 1934 to require the 
     Commission to reclaim the 6 MHz broadcasters now use for 
     analog transmission by no later than December 31, 2006. Under 
     the Senate amendment the Commission is required to extend or 
     waive this date for any television station in any television 
     market unless 95 percent of the households have access to 
     digital television signals, either by direct off-air 
     reception or by other means.
       The Senate amendment requires the Commission to report to 
     Congress by December 31, 2001 and biennially thereafter on 
     consumer purchases of analog and digital television 
     receivers, the costs of digital televisions, and the 
     percentage of television households in each market that has 
     access to digital local television signals. Section 3002 of 
     the Senate amendment also requires the Commission to assign 
     by means of competitive bidding the 78 MHz that is reclaimed 
     from incumbent broadcast licensees. The Commission would be 
     required to commence the competitive bidding procedures by 
     July 1, 2001 and complete assignment of licenses for new uses 
     of the reclaimed spectrum by September 30, 2002.


                          Conference agreement

       The conference agreement adopts modified provisions from 
     both the House bill and the Senate amendment. Section 3003 of 
     the conference agreement adds a new section 309(j)(14)(A) to 
     the Communications Act to require the Commission to reclaim 
     the 6 MHz each broadcaster now uses for transmission of 
     analog television service signals by no later than December 
     31, 2006.
       The conferees recognize that not all consumers and 
     broadcast stations will convert to the new digital television 
     service format at the same time. Thus, to ensure that a 
     significant number of consumers in any given market are not 
     left without broadcast television service as of January 1, 
     2007, the conference agreement includes new section 
     309(j)(14)(B) of the Communications Act which requires the 
     Commission to grant extensions to any station in any 
     television market if any one of the following three 
     conditions exist.
       First, the Commission is required to grant an extension at 
     the request of any television station in a market if one or 
     more of the television stations licenses to or affiliated 
     with the four largest national television networks in that 
     market are not broadcasting a digital television service 
     signal. Before granting an extension for this reason, the 
     Commission must ensure that each of the network stations that 
     are not broadcasting a digital television signal have 
     exercised due diligence and have satisfied the conditions for 
     an extension of the Commission's applicable construction 
     deadlines for digital television service in that market.
       Second, the Commission is required to grant an extension if 
     it finds that digital-to-

[[Page H6175]]

     analog converter technology is not generally available in the 
     market served by the television broadcast licensee requesting 
     the extension. The conferees are hopeful that, in light of 
     section 304 of the Telecommunications Act of 1996 (which 
     requires the Commission to issue rules allowing for the 
     competitive availability of navigation devices) and current 
     industry projections, converter technology should be 
     generally available as of December 31, 2006.
       Lastly, the Commission is required to grant an extension if 
     at least fifteen (15) percent or more of the television 
     households in the market served by the television station 
     requesting the extension (1) do not subscribe to a 
     multichannel video programming distributor (MVPD) that 
     carries one or more of the digital television service 
     programming channels of each of the television stations 
     broadcasting such a channel in such market, and (2) do not 
     have either one or more digital television sets or one or 
     more analog television sets equipped with a digital-to-analog 
     converter technology that are capable of receiving the 
     digital television service signals of local broadcast 
     stations.
       The conferees emphasize that, with regard to the inquiry 
     required by section 309(j)(14)(B)(iii)(I) into MVPD carriage 
     of local digital television service programming, Congress is 
     not attempting to define the scope of any MVPD's ``must 
     carry'' obligations for digital television signals. The 
     conferees recognize that the Commission has not yet addressed 
     the ``must carry'' obligations with respect to digital 
     television service signals, and the conferees are leaving 
     that decision for the Commission to make at some point in the 
     future. However, for purposes of the inquiry under this 
     section, a television household must receive at least one 
     programming signal from each local television station 
     broadcasting a digital television service signal in order not 
     to be counted toward the 15 percent threshold. In addition, 
     the conferees recognize that this analysis will impose 
     additional burdens on the Commission. Consequently, the 
     conferees expect that the Commission will pursue this 
     analysis only if it first concludes that a station does not 
     qualify for an extension under the network digital television 
     broadcast test or the converter technology test.
       In establishing the requirements for the 15 percent test, 
     the conferees sought to establish objective criteria that 
     could be determined by ``yes'' or ``no'' answers obtained 
     from consumers surveyed in the relevant market. The conferees 
     expect that the Commission will perform its own analysis, and 
     that it will base this analysis of both the converter 
     technology test and the 15 percent test on statistically 
     reliable sampling techniques. A broadcast television licensee 
     requesting the extension and other interested parties are to 
     be afforded an opportunity to submit information and comment 
     on the Commission's analysis with respect to those tests.
       New section 309(j)(14)(C) requires the Commission to ensure 
     that the spectrum now used for analog television service is 
     returned as required by Commission direction and that the 
     Commission must reclaim and reorganize the spectrum, 
     consistent with the objectives of section 309(j)(3) of the 
     Communications Act. It also requires the Commission to assign 
     by means of competitive bidding the 78 MHz that is reclaimed 
     from incumbent broadcast licensees and to complete assignment 
     of licenses for new uses of the reclaimed spectrum by 
     September 30, 2002.
       The conference agreement adopts, with modification, the 
     provision of the House bill prohibiting the Commission from 
     disqualifying potential bidders for reclaimed spectrum that 
     is allocated to a use that includes digital television 
     service due to the Commission's duopoly or newspaper cross-
     ownership rules. The conferees expect that, by limiting the 
     application of these ownership rules, winning bids for the 
     recaptured analog spectrum will be higher than they otherwise 
     would be. Specifically, if the pool of bidders for the 
     recaptured analog spectrum is expanded to include broadcast 
     station owners and newspaper owners, then other auction 
     participants may be forced to raise their bids if they expect 
     to prevail.
       Thus, under new section 309(j)(14)(D) of the Communications 
     Act, a waiver of these ownership rules would apply whenever 
     the grade A contour is projected to encompass the entirety of 
     a city that has a population greater than 400,000 (as 
     determined by the 1990 decennial census). The conferees do 
     not intend that the duopoly and television-newspaper cross-
     ownership relief provided herein should have any bearing upon 
     the Commission's current proceedings, which concerns more 
     immediate relief. The conferees expect that the Commission 
     will proceed with its own independent examination in these 
     matters. Specifically, the conferees expect that the 
     Commission will provide additional relief (e.g., VHF/UHF 
     combinations) that it finds to be in the public interest, and 
     will implement the permanent grandfather requirement for 
     local marketing agreements as provided in the 
     Telecommunications Act of 1996.

   Sec. 3004. Allocation and assignment of new public safety services


                               House bill

       The House bill directs the Commission to reallocate on a 
     national, regional, or market basis 24 MHz of spectrum 
     between 746 and 806 MHz (inclusive) to public safety 
     services, unless the Commission finds that the needs of 
     public safety can be met in particular areas with allocations 
     of less than 24 MHz. The Commission must allocate the 
     remainder of the spectrum located between 746 and 806 MHz for 
     commercial use, and to assign these commercial licenses by 
     means of competitive bidding.
       In the event the immediate need for public safety spectrum 
     cannot be met due to the unavailability of spectrum between 
     746 and 806 MHz, the House bill requires the Commission to 
     permit public safety licensees to use unassigned frequencies 
     outside those channels. The House bill also directs the 
     Commission to make its best efforts to accommodate certain 
     qualifying low-power television stations once it completes 
     its reallocation and assignment responsibilities under this 
     section.


                            Senate amendment

       The Senate amendment directs the Commission, in 
     consultation with the Secretary of Commerce and the Attorney 
     General, to reallocate 24 MHz of spectrum between 746 and 806 
     MHz (inclusive) for public safety services. The Commission 
     must allocate 36 MHz of spectrum between 746 and 806 MHz for 
     commercial use, and assign these commercial licenses by means 
     of competitive bidding.
       In the event the immediate need public safety spectrum 
     cannot be met due to the unavailability of spectrum between 
     746 and 806 MHz, the Senate bill requires the Commission to 
     permit public safety licensees to use unassigned frequencies 
     outside those channels.


                          Conference agreement

       The House recedes to the Senate with a modification. A new 
     section 337 is added to the Communications Act which requires 
     the Commission to reallocate 24 MHz of spectrum between 746 
     and 806 MHz (inclusive) for public safety services. In doing 
     so, the Commission must consult with the Secretary of 
     Commerce and the Attorney General. Section 337(a) requires 
     the Commission to allocate 36 MHz in that same band for 
     commercial use, with the licenses to be assigned by 
     competitive bidding.
       New section 337(b) of the Communications Act directs the 
     Commission to commence assignment of the public safety 
     licenses no later than September 30, 1998. In addition, the 
     Commission must begin assignment of the commercial licenses 
     by competitive bidding after January 1, 2001.
       New section 337(c) requires the Commission to waive any 
     provisions of the Communications Act or the Commission's 
     rules (other than those relating to harmful interference) to 
     the extent necessary to permit the use of unassigned 
     frequencies available to the Commission for the provision of 
     public safety services. The conferees recognize that, in 
     heavily congested markets, sufficient spectrum may not be 
     available between 746 and 806 MHz for public safety services. 
     The intent of the conferees is that public safety agencies 
     that demonstrate a need for spectrum are not denied the use 
     of unassigned frequencies that have lain fallow for an 
     extended period of time.
       Before granting applications under this subsection, the 
     Commission must make five specific findings. First, spectrum 
     must not be immediately available on a frequency already 
     allocated to public safety services. Second, the public 
     safety service use for which the unassigned frequency is 
     requested must not interfere with uses of that spectrum by 
     other co-primary users already licensed to use that frequency 
     band. Third, the use of the unassigned frequency must be 
     consistent with other public safety services in that 
     geographic area, in order to ensure that interoperability of 
     public safety services is not retarded by the allocation of 
     that frequency for such use. Fourth, the unassigned frequency 
     must have been allocated to the use for which it has not yet 
     been assigned at least two years prior to the date on which 
     the application for public safety service use is granted. 
     This fourth requirement will ensure that the Commission is 
     given ample time to assign licenses for recently allocated 
     spectrum before that spectrum can be assigned to public 
     safety services. And fifth, the Commission must determine 
     that granting the application is consistent with the public 
     interest.
       New section 337(d) establishes certain conditions on those 
     licensees that will operate between 746 and 806 MHz both 
     during and after the transition to digital television 
     service. The conferees expect that, for the period during the 
     transition, the Commission will ensure that full-power analog 
     and digital television licensees will operate free of 
     interference from public safety service licensees, and 
     conversely, that public safety service licensees will operate 
     free of interference from analog and digital television 
     licensees. The conferees also expect that the Commission will 
     ensure that public safety service licensees continue to 
     operate free of interference from any new commercial 
     licensees.
       New section 337(e) requires the Commission to clear all 
     broadcast television licensees from the spectrum located 
     between 746 and 806 MHz at the end of the transition to 
     digital television. The conferees recognize that in clearing 
     this band, the Commission will displace not only full-power 
     licensees but also secondary broadcast services, including 
     low-power licensees and television translator licensees. 
     Consequently, the conferees expect that the Commission will 
     seek to assure, consistent with its digital television table 
     of allotments, that certain qualifying low-power licensees 
     (as defined in new section 337(f)(2)) are assigned 
     frequencies below 746

[[Page H6176]]

     MHz. The conferees also urge the Commission to accommodate 
     television translator stations to the maximum extent 
     practicable, consistent with the digital television table of 
     allotments and the requirement to accommodate low power 
     television stations pursuant to section 337(e)(2)

        Sec. 3005. Flexible use of the electromagnetic spectrum


                               House bill

       The House bill contains no comparable provision.


                            Senate amendment

       Section 3004 of the Senate amendment added a new section 
     303(y) regarding spectrum flexibility. Specifically, the 
     Commission is required to allocate spectrum to provide for 
     flexibility of use if flexible use (1) is consistent with 
     international agreements, (2) is required by public safety 
     allocations, (3) is in the public interest, (4) will not 
     deter investment in services and technology, or (5) will not 
     result in harmful interference among users.


                          Conference agreement

       The House recedes to the Senate with modifications. The 
     conferees find that, while flexible allocation of spectrum 
     can, under the right circumstances, result in more innovative 
     and productive use of the spectrum, unlimited flexibility can 
     introduce a level of entrepreneurial uncertainty that could 
     ultimately retard the development of new services and 
     technology. These modifications are intended to permit the 
     Commission to allocate spectrum for flexible use under 
     procedures and pursuant to conditions designed to avoid the 
     problems unlimited flexibility can cause. Specifically, new 
     section 303(y) of the Communications Act provides that the 
     Commission is permitted, but not required, to allocate 
     spectrum for flexible use if the Commission finds that such 
     use is in the public interest, will not deter investment in 
     telecommunications services and technology, and will not 
     produce harmful interference, and is consistent with 
     international agreements to which the United States is a 
     party.
       The conferees do not intend to require the Commission to 
     initiate a separate notice seeking comment on these issues 
     prior to proposing to allocate spectrum for flexible use. New 
     section 303(y) only requires that the Commission specifically 
     seek comment in the allocation proceeding itself on whether 
     any proposed flexible allocation meets the criteria 
     enumerated in section 303(y), and make appropriate findings 
     in the context of issuing a final decision in the allocation 
     proceeding.

           Sec. 3006. Universal service fund payment schedule


                               House bill

       Section 3305 of the House bill requires the Treasury, for 
     fiscal year 2001, to appropriate 2 billion dollars to the 
     universal service fund established under part 54 of the 
     Commission's rules, in addition to any other revenues 
     required to be collected under such part. The House bill 
     further provides that expenditures from the universal service 
     fund, for fiscal year 2002, shall not exceed the amount of 
     revenue to be collected for that fiscal year, less 2 billion 
     dollars.


                            senate amendment

       The Senate amendment has no comparable provision.


                          conference agreement

       The Senate recedes to the House with modifications. Section 
     3006(a) of this title provides for an appropriation of $3 
     billion to the universal service fund for fiscal year 2001, 
     to be repaid in fiscal year 2002 from the amounts collected 
     by the fund. Section 3006(b) further provides for a deferral, 
     from 2001 to 2002, of $3 billion of the amounts paid into the 
     fund by interstate telecommunications carriers or providers. 
     Section 3006(c) states that the purposes for which amounts 
     are expended from the fund should not be affected, whether 
     the amounts come from the appropriation or payments into the 
     fund. The conferees for this title are concerned about the 
     precedent set by this section and its possible impacts on 
     universal service in the United States.

                   Sec. 3007. Deadline for collection


                               House bill

       Section 3304(b) of the House bill requires the Commission 
     to conduct any competitive bidding required by the House bill 
     in a manner that ensures that the proceeds from the auctions 
     are deposited in accordance with section 309(j)(8) of the 
     Communications Act of 1934 by September 30, 2002.


                            senate amendment

       The Senate amendment contains no comparable provision.


                          conference agreement

       The Senate recedes to the House, with the modification that 
     the deadline applies to all competitive bidding provisions in 
     this title of the conference agreement and any amendments to 
     other law made in this title.

       Sec. 3008. Administrative procedures for spectrum auctions


                               house bill

       Section 3304(a) of the House bill either waives or limits 
     several requirements of existing law to expedite the 
     commencement and completion of the competitive bidding 
     required under the House bill. The waivers and limitations 
     affected by procedures that apply both before and after the 
     competitive bidding occurs.


                            senate amendment

       The Senate amendment contains no comparable provision.


                          conference agreement

       The Senate recedes to the House, with a modification. 
     Specifically, section 3008 of this title prohibits the 
     Commission from granting a license under this title earlier 
     than 7 days after the Commission releases a public notice 
     announcing that the application for such license has been 
     accepted for filing. This section also requires the 
     Commission to provide at least 5 days following the public 
     notice for the filing of petitions to deny such application.

         Establishment of MedicarePlus/Medicare Choice Program

   Sections 10001 and 4001 of House bill and Section 5001 of Senate 
                               amendment


                              current law

       Persons enrolling in Medicare have two basic coverage 
     options. They may elect to obtain services through the 
     traditional fee-for-service system under which program 
     payments are made for each service rendered. Under Section 
     1876 of the Social Security Act, they may also elect to 
     enroll with a managed care organization which has entered 
     into a payment agreement with Medicare. Three types of 
     managed care organizations are authorized to contract with 
     Medicare: an entity that has a risk contract with Medicare, 
     an entity that has a cost contract with Medicare, or a health 
     care prepayment plan (HCPP) that has a cost contract to 
     provide Medicare Part B services. Risk-contracts are 
     frequently referred to as TEFRA risk contracts and cost 
     contracts are frequently referred to as TEFRA cost contracts. 
     TEFRA refers to the 1982 legislation, the Tax Equity and 
     Fiscal Responsibility Act of 1982, which established the 
     rules governing these types of contracts.
       A beneficiary in an area served by a health maintenance 
     organization (HMO) or competitive medical plan (CMP) with a 
     Medicare risk contract may voluntarily choose to enroll in 
     the organization. (A CMP is a health plan that is not a 
     federally qualified HMO but that meets specific Medicare 
     requirements.) Medicare makes a single monthly capitation 
     payment for each of its enrollees. In return, the entity 
     agrees to provide or arrange for the full range of Medicare 
     services through an organized system of affiliated 
     physicians, hospitals and other providers. The beneficiary 
     must obtain all covered services through the HMO or CMP, 
     except in emergencies. The beneficiary may be charged the 
     usual cost-sharing charges or pay the equivalent in the form 
     of a monthly premium to the organization. Beneficiaries are 
     expected to share in any of the HMO's/CMP's projected cost 
     savings between Medicare's capitation payment and what it 
     would cost the organization to provide Medicare benefits to 
     its commercial enrollees through the provision of additional 
     benefits. (It could also return the ``savings'' to Medicare.)
       Beneficiaries may also enroll in organizations with TEFRA 
     cost contracts. These entities must meet essentially the same 
     conditions of participation as risk contractors; however they 
     may have as few as 1,500 enrollees (rather than 5,000) to 
     qualify. Under a cost contract, Medicare pays the actual cost 
     the entity incurs in furnishing covered services (less the 
     estimated value of beneficiary cost-sharing). Enrollees 
     obtain supplemental benefits by paying a monthly premium. The 
     entity must offer a basic package (which covers all or a 
     portion of Medicare cost-sharing charges); any additional 
     benefits must be priced separately. (Conversely, a risk-
     contractor may offer just one package.) Enrollees in TEFRA 
     cost-contract entities may obtain services outside the 
     entity's network; however, the entity has no obligation to 
     cover the beneficiary's cost-sharing in this case.
       A third type of managed care arrangement is the HCPP. A 
     HCPP arrangement is similar to a TEFRA cost contract except 
     that it provides only Part B services. Further, there are no 
     specific statutory conditions to qualify for a HCPP contract. 
     Some HCPPs are private market HMOs, while others are union or 
     employer plans. HCPPs have no minimum enrollment 
     requirements, no requirement that the plan have non-Medicare 
     enrollees, or a requirement for an open enrollment period. 
     Unlike TEFRA cost contractors (but like risk contractors), 
     HCPPs may offer a single supplemental package that includes 
     both Part B cost-sharing and other benefits; cost-sharing 
     benefits need not be priced separately.
       Any Medicare beneficiary residing in the area served by an 
     HMO/CMP may enroll, with two exceptions. The first exception 
     applies to beneficiaries not enrolled in Part B. The second 
     exception applies to persons qualifying for Medicare on the 
     basis of end-stage renal disease (ESRD); however, persons 
     already enrolled who later develop ESRD may remain enrolled 
     in the entity.
       The HMO/CMP must have an annual open enrollment period of 
     at least 30 days duration. During this period, it must accept 
     beneficiaries in the order in which they apply up to the 
     limits of its capacity, unless to do so would lead to 
     violation of the 50% Medicare-Medicaid maximum or to an 
     enrolled population unrepresentative of the population in the 
     area served by the HMO.
       TEFRA risk contractors are required to hold an additional 
     open enrollment period if any other risk-based entity serving 
     part of the same geographic area does not renew its

[[Page H6177]]

     Medicare contract, has its contract terminated, or has 
     reduced its service area to exclude any portion of the 
     service area previously served by both contractors. In such 
     cases, the Secretary must establish a single coordinated open 
     enrollment period for the remaining contractors. These 
     remaining HMOs/CMPs must then accept its enrollees during an 
     enrollment period of 30 days.
       An enrollee may request termination of his or her 
     enrollment at any time. An individual may file disenrollment 
     requests directly with the HMO or at the local social 
     security office. Disenrollment takes effect on the first day 
     of the month following the month during which the request is 
     filed. The HMO may not disenroll or refuse to re-enroll a 
     beneficiary on the basis of health status or need for health 
     services.
       The requirement for an open enrollment period does not 
     apply to HCPPs. These entities may deny enrollment or 
     terminate enrollment on medical or other grounds, if in doing 
     so they use the same criteria for Medicare and non-Medicare 
     enrollees. As a result, employer or union plans may restrict 
     enrollment to covered retirees.
       The Secretary is authorized to prescribe procedures and 
     conditions under which eligible organizations contracting 
     with Medicare may inform beneficiaries about the 
     organization. Brochures, applications forms, or other 
     promotional or informational material may be distributed only 
     after review and approval by the Secretary of HHS. HMOs may 
     not disenroll or refuse to re-enroll a beneficiary because of 
     health status or need for health care services. HMOs must 
     provide enrollees, at the time of enrollment and annually 
     thereafter, an explanation of rights to benefits, 
     restrictions on services provided through nonaffiliated 
     providers, out-of-area coverage, coverage of emergency and 
     urgently needed services, and appeal rights. A terminating 
     HMO must arrange for supplementary coverage for Medicare 
     enrollees for the duration of any preexisting condition 
     exclusion under their successor coverage for the lesser of 6 
     months or the duration of the exclusion period.


                               house bill

       Section 10001 (new section 1851). The Social Security Act 
     would be amended to insert a new Part C, MedicarePlus 
     Program. New section 1851 of Part C of the Social Security 
     Act would specify requirements related to eligibility, 
     election of coverage, and enrollment.
       Section 4001 (new section 1851). Identical provision.


                            senate amendment

       Identical except the new program of choices would be called 
     Medicare Choice.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment except that 
     the new program of choices would be called Medicare+Choice.
       Except for the addition of HMOs, modest benefit changes, 
     and episodic reforms in provider payment methods, the 
     Medicare program has remained essentially unchanged since the 
     program's inception in 1965. This contrasts starkly with the 
     health benefit design, delivery, and cost containment 
     innovations that have occurred in the private sector and, to 
     a great extent, have been captured by the Federal Employee 
     Health Benefit Program (FEHBP). The creation of 
     Medicare+Choice will allow beneficiaries to have access to a 
     wide array of private health plan choices in addition to 
     traditional fee-for-service Medicare. In addition, it will 
     enable the Medicare program to utilize innovations that have 
     helped the private market contain costs and expand health 
     care delivery options.
       The Conferees believe that one of the most significant 
     innovations is the Medical Savings Account (MSA). MSAs can 
     give the elderly genuine catastrophic protection, which the 
     traditional Medicare program does not guarantee. Well over 
     400,000 Medicare beneficiaries experience out-of-pocket costs 
     in excess of $5,000 every year, causing financial ruin in 
     many cases. In contrast, MSA plans could significantly limit 
     such costs--even for chronically ill beneficiaries. In 
     addition, Medical Savings Accounts can help discourage 
     overutilization and can give seniors more control over their 
     health care dollars.
       Building upon the private market MSA demonstration program 
     available to small employers and the self-employed under the 
     recently-enacted bipartisan Health Insurance Portability and 
     Accountability Act (HIPAA), the conference agreement would 
     authorize a demonstration of Medicare MSAs available to 
     390,000 of the 33 million senior citizens eligible for 
     Medicare. The Conferees note that this demonstration is 
     smaller relative to the size of the eligible population than 
     the HIPAA demonstration program, reaching less than 2 percent 
     of Medicare beneficiaries. Nevertheless, it is the hope and 
     intent of the Conferees that this number will allow a true 
     test of the potential benefits to the program and to 
     beneficiaries of the MSA concept. In addition, the Conferees 
     note that the private fee-for-service Medicare+Choice option 
     authorized by this agreement represents the first defined 
     contribution plan in which beneficiaries may enroll in the 
     history of the program.
       In addition to ensuring more health care delivery options 
     for Medicare beneficiaries, the conference agreement also 
     ensures that these options will be available to beneficiaries 
     nationwide, not just to those in select geographic areas. By 
     blending local and national payment rates and by instituting 
     a minimum payment amount, the agreement significantly narrows 
     the range in capitated payments to Medicare risk plans. At 
     the same time, the Conferees have ensured that each county- 
     level payment rate will be increased by at least 2 percent a 
     year, in order to ensure that beneficiaries who are currently 
     choosing to enroll in private plans will continue to have 
     this option. It is the intent of the Conferees that these 
     payment reforms will provide incentives for health care 
     organizations to broaden and multiply their service areas 
     beyond their current areas of concentration to reach all 
     Medicare beneficiaries, including those in rural America. -
     (a) Types of choices


                               house bill

       Section 10001 (new section 1851(a)). Provides that every 
     individual entitled to Medicare Part A and enrolled under 
     Part B could elect to receive benefits through two options: 
     (I) the existing Medicare fee-for-service program (Medicare 
     FFS) or (ii) through a MedicarePlus plan. The exception to 
     this would be individuals medically determined to have ESRD. 
     They would not be able to elect MedicarePlus. Individuals who 
     developed ESRD while enrolled in a plan could continue in 
     that plan. A MedicarePlus plan could be offered by: (I) a 
     coordinated care plan (including an HMO or preferred provider 
     organization ( PPO)), (ii) a provider sponsored organization 
     (PSO); and (iii) a combination of a medical savings account 
     (MSA) and contributions to a MedicarePlus MSA.
       Section 4001 (new section 1851(a)). Identical provision.


                            senate amendment

       Similar but provides for additional private plan options: 
     unrestricted fee-for-service private plans and any other 
     private plan for the delivery of health care items and 
     services. (HMOs, PPOs, and POS plans are specified in lieu of 
     ``coordinated care'' plans.)


                          conference agreement

       The conference agreement includes the House provision with 
     a modification specifying that the Medicare fee-for-service 
     program is the original fee-for-service program, that 
     coordinated care plans are defined as including but not 
     limited to HMO plans (with or without point of service 
     options), and that a Medicare+Choice plan includes a fee-for-
     service plan, defined as a plan that reimburses hospitals, 
     physicians, and other providers at a rate determined by the 
     plan on a fee-for-service basis without placing the provider 
     at financial risk; does not vary such rates for such provider 
     based on the utilization relating to such provider; and does 
     not restrict the selection of providers among those who are 
     lawfully authorized to provide the covered services and agree 
     to accept the terms and conditions of payment established by 
     the plan. (This option is also referred to as a ``private 
     fee-for-service'' plan.)
       The Conferees note that the GAO has recently attempted to 
     measure the quality of care provided to ESRD patients in 
     managed care organizations relative to original Medicare, but 
     that HCFA did not have adequate data on these patients to 
     enable a comparison. HCFA is now working with the GAO to 
     provide a data base that will permit quality comparisons. 
     It is important that HCFA be able to measure ESRD quality 
     and establish standards for care, as provided in Section 
     4558, before individuals with ESRD are permitted to join 
     managed care organizations
     (b) Special rules


                               House Bill

       Section 10001 (new section 1851(b)). In general, an 
     individual would be eligible to elect a MedicarePlus plan 
     offered by a MedicarePlus organization only if the 
     organization served the geographic area in which the 
     individual resided. Enrollment could continue if the plan 
     provided benefits for enrollees located in the area to which 
     the individual moved. An individual eligible for an annuity 
     under the Federal Employee Health Benefits Program would not 
     be eligible for an MSA plan until the Office of Management 
     and Budget adopted policies to ensure that such enrollment 
     did not result in increased expenditures for the federal 
     government for FEHBP plans. The Secretary could apply similar 
     rules in the case of individuals who are eligible for 
     Departments of Defense or Veterans' Affairs health care. An 
     individual who is a qualified Medicare beneficiary (QMB), a 
     qualified disabled and working individual, a specified low-
     income Medicare beneficiary (SLMB), or otherwise entitled to 
     Medicare cost-sharing assistance under a state Medicaid 
     program, would not be eligible to enroll in an MSA plan.
       In addition, individuals would not be eligible to enroll in 
     an MSA plan on or after January 1, 2003, or as of any date if 
     the number of individuals enrolled in MSA plans reached 
     500,000. Under rules established by the Secretary, an 
     individual would not be eligible to enroll or continue 
     enrollment in an MSA unless the individual would be residing 
     in the U.S. for at least 183 days during the year. 
     Individuals enrolling in MSA plans prior to either of those 
     two events would be allowed to continue such enrollment. The 
     Secretary would be required to regularly evaluate and report 
     to Congress on the impact of permitting enrollment of MSA 
     plans on selection (including adverse selection), use of 
     preventive care, access to care, and the financial status of 
     the Trust Funds. In addition, the Secretary would be required 
     to submit to Congress periodic reports on the number of

[[Page H6178]]

     individuals enrolled in MSA plans and to submit a report to 
     Congress by no later than March 1, 2002 on whether the time 
     limitation should be extended or removed, and whether any 
     change should be made to the number of individuals permitted 
     to enroll in Medicare MSAs.
       Section 4001 (new section 1851(b)). Identical provision.


                            Senate Amendment

       Similar, except that enrollment in MSAs would be capped at 
     100,000.


                          Conference Agreement

       The conference agreement includes the House provision with 
     modifications relating to continuation of enrollment and to 
     the size of the MSA demonstration. Plans would have to 
     provide that individuals exercising the Medicare+Choice 
     option who no longer reside in the service area of such plan 
     have, as part of the basic benefit package, reasonable access 
     within the geographic area of the plan to the full range of 
     services covered under the contract, subject to reasonable 
     cost sharing liability in obtaining such benefits.
       The enrollment in MSAs would be capped at 390,000.
     (c) Process for exercising choice


                               House Bill

       Section 10001 (new section 1851(c)). The Secretary would be 
     required to establish a process for elections (and changing 
     elections) of Medicare FFS and MedicarePlus options. 
     Elections would be made (or changed) only during specified 
     coverage election periods. An individual who wished to elect 
     a MedicarePlus plan could do so by filing an election form 
     with the organization. Disenrollment would be accomplished 
     the same way. An individual failing to make an election 
     during the initial election period would be deemed to have 
     chosen the Medicare FFS option. The Secretary would be 
     required to establish procedures under which individuals 
     enrolled with a MedicarePlus organization at the time of the 
     initial election period and who failed to elect to receive 
     coverage other than through the organization would be deemed 
     to have elected the MedicarePlus plan offered by the 
     organization (or, if the organization offered more than one 
     such plan, such plan as the Secretary provided for under such 
     procedures). An individual who made (or was deemed to have 
     made) an election would be considered to have continued such 
     election until the individual changed the election or the 
     plan was discontinued.
       Section 4001 (new section 1851(c)). Identical provision.


                            Senate Amendment

       Similar except election into the Medicare fee-for-service 
     program is referred to as ``traditional Medicare'' to 
     distinguish it from the private fee-for-service plan option.


                          Conference Agreement

       The conference agreement includes the House provision with 
     a clarification that an individual election would continue 
     until, in the case of an individual in a Medicare+Choice 
     plan, such election was discontinued or (subject to the 
     provision relating to continuation of enrollment) when the 
     plan no longer served the area in which the individual 
     resided.
     (d) Providing information to promote informed choice


                               House Bill

       Section 10001 (new section 1851(d)). Requires the Secretary 
     to provide for activities to disseminate broadly information 
     to current and prospective Medicare beneficiaries on the 
     coverage options available in order to promote an active, 
     informed selection among such options. At least 30 days 
     before each annual, coordinated election period, the 
     Secretary would send to each MedicarePlus eligible person a 
     notice containing the information specified below in order to 
     assist the individual in making an election. This would 
     include general information, a list of plan options and 
     comparative plan option information, the MedicarePlus monthly 
     capitation rate, and other information determined by the 
     Secretary to be helpful in making elections. This 
     information would have to be written in language easily 
     understood by Medicare beneficiaries. The Secretary would 
     be required to coordinate the mailing of this information 
     with the annual mailing of other Medicare information 
     required under current law. To the extent practicable, the 
     Secretary would provide such information to new 
     MedicarePlus individuals at least two months prior to 
     their initial enrollment period.
       The required general election information would include 
     information on: (I) services covered and not covered by 
     Medicare FFS (including benefits, cost-sharing, and 
     beneficiary liability for balance billing); (ii) the Part B 
     premium amount, (iii) election procedures, (iv) rights 
     including grievance and appeals procedures and the right to 
     be protected against discrimination, (v) information on 
     Medigap and Medicare Select policies, and (vi) the right of 
     the organization to terminate the contract and what this 
     would mean for enrollees.
       Comparative plan option information would have to include: 
     (I) a description of benefits including any benefits covered 
     beyond Medicare FFS, any reductions in cost-sharing and any 
     maximum limits on out-of-pocket costs, and in the case of MSA 
     plans, the differences in their cost sharing compared to 
     other MedicarePlus plans; (ii) the monthly premium (and net 
     monthly premium) for the plan; (iii) to the extent available, 
     quality indicators (compared with indicators for Medicare 
     FFS) including disenrollment rates, enrollee satisfaction and 
     health outcomes, and whether the plan is out of compliance 
     with any federal requirements; and (iv) information on any 
     supplemental coverage. The required information would be 
     updated at least annually.
       The Secretary would be required to maintain a toll-free 
     number and Internet site for inquiries regarding MedicarePlus 
     options and plans. A MedicarePlus organization would be 
     required to provide the Secretary with such information on 
     the organization and its plans as the Secretary needed to 
     prepare the information described above for Medicare 
     beneficiaries. The Secretary could enter into contracts with 
     appropriate non-Federal entities to carry out these 
     information activities.
       Section 4001 (new section 1851(d)). Similar except requires 
     additional elements to provided relating to comparative plan 
     information: (I) whether provider networks are used and 
     related payment policies, (ii) information on coverage of 
     emergency and urgently needed care, (iii) grievance and 
     appeals procedures, (iv) utilization review procedures, and 
     (v) exclusions in types of providers participating in the 
     plan's network.-


                            Senate Amendment

       Similar except: (I) information must be provided to 
     beneficiaries at least 15 days (instead of 30 days) before 
     each annual coordinated election period; (ii) specifies that 
     comparative information be in chart-like form; (iii) does not 
     require provision of the area's monthly capitation rate in 
     information sent to beneficiaries; (iv) information to newly 
     Medicare Choice eligible beneficiaries would have to be sent 
     no later than 30 days (instead of 2 months) before their 
     initial enrollment period; (v) the required quality and 
     performance information would have to include the extent to 
     which an enrollee may select the provider of their choice and 
     whether the plan covers out-of-network services, and an 
     indication of the enrollee's exposure to balance billing and 
     restriction on coverage of items and services provided to 
     enrollees by an out-of-network health care provider; (vi) 
     plan information would have to include an overall summary of 
     the method of physician compensation used for participating 
     physicians; and (vii) the Secretary would be required to 
     coordinate with states to the maximum extent feasible in 
     developing and distributing information provided to 
     beneficiaries. The required quality information does not 
     include the requirement in section 10001 to include the 
     plan's recent record of compliance. (For information on 
     utilization review, see 1852(c)).


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     modifications. The open season information that has to be 
     updated annually would have to include changes in the monthly 
     basic and supplemental beneficiary premiums. The general 
     information to be provided (such as covered items and 
     services and beneficiary cost-sharing) would not have to 
     include the amount of the Part B premium.
       Comparative plan information (not required to be ``chart-
     like form'') would have to include in the case of a private 
     fee-for-service plan, differences in cost sharing and balance 
     billing compared to such under other Medicare+Choice plans; 
     the extent to which an enrollee could obtain benefits through 
     in-network or out-of-network health care providers and could 
     select among such providers and the types of providers 
     participating in the plan's network; and the organization's 
     coverage of emergency and urgently needed care. A description 
     of the differences between the MSA plans and other plans and 
     differences between fee-for-service plans and other plans 
     would have to include premium information.
       Information on the potential for contract termination would 
     have to include the fact that a Medicare+Choice organization 
     could reduce the service area included in its contract and 
     the effect of such a reduction on enrollees.
       The agreement modifies the Senate requirements relating to 
     information on quality and performance by requiring 
     information on the plan's record of compliance. (Other Senate 
     quality requirements are moved to general comparative plan 
     information.) The conference agreement does not include the 
     Senate requirement that there be coordination with the states 
     on the development and distribution of information. However, 
     in providing information in this section, it is the 
     conferees' intent that the Secretary shall coordinate with 
     States to the maximum extent feasible and practicable in 
     carrying out this section. The agreement does not include the 
     Senate requirement that there be an overall summary 
     description of the method of compensating physicians. (See 
     item (c) under section 1852 below.)
       The Conferees intend that the Secretary take all steps 
     necessary to ensure that all seniors are provided the 
     information they need to make informed choices about health 
     coverage. Therefore, beneficiaries will for the first time 
     have access to accurate information, including comparative 
     information, about health plan choices. According to the 1990 
     Census, there are nearly 4 million people over the age of 65 
     who report that a language other than English is spoken in 
     their home. The Conferees believe that all beneficiaries,

[[Page H6179]]

     including those who are limited in their English proficiency, 
     should have access to accurate and timely information about 
     the array of private health plan options available under 
     Medicare+Choice. Therefore, the Conferees intend that the 
     language requiring the Secretary to promote ``active, 
     informed selection among'' Medicare+Choice plans and to 
     provide information ``using language that is easily 
     understandable by Medicare beneficiaries'' include such 
     information as may be necessary to help all individuals 
     eligible to enroll in Medicare+Choice plans, including those 
     with limited English proficiency.
     (e) Coverage election periods


                               House Bill

       Section 10001 (new section 1851(e)). Provides that 
     individuals would first have a choice (``initial election'') 
     between Medicare FFS and MedicarePlus plans (if there were 
     one or more MedicarePlus plans to choose from in their area) 
     upon eligibility for Medicare. The Secretary would designate 
     a time for the election such that coverage would become 
     effective when the individual was eligible to begin coverage.
       From 1998 through 2000, there would be continuous open 
     enrollment and disenrollment, when eligible individuals could 
     switch MedicarePlus plans or move into or out of the Medicare 
     FFS program option. For the first 6 months during 2001, there 
     would also be continuous open enrollment and disenrollment, 
     but individuals could only change their election once during 
     2001 (except during the annual coordinated open enrollment 
     period or a special enrollment period (as described below)). 
     During subsequent years, individuals would be able to enroll 
     in a MedicarePlus option and disenroll from it at any time 
     during the first 3 months of a year (or during the first 3 
     months after an individual became eligible to enroll in a 
     MedicarePlus plan). Such changes could be made only once a 
     year except during annual coordinated election and special 
     enrollment periods.
       Beginning in October 2000, there would be an annual, 
     coordinated election period during which individuals could 
     change elections for the following calendar year. The 
     Secretary would be required to hold MedicarePlus health fairs 
     in October of each year, beginning with 1998. Such fairs 
     would provide for nationally, coordinated educational and 
     publicity campaigns to inform MedicarePlus eligibles about 
     MedicarePlus plans and the election process, including the 
     annual, coordinated election periods.
       Starting January 1, 2001, special election periods would be 
     provided in which an individual could discontinue an election 
     of a MedicarePlus plan and make a new election if: (I) the 
     organization's or plan's certification was terminated or the 
     organization terminated or otherwise discontinued providing 
     the plan; (ii) the person who elected a MedicarePlus plan was 
     no longer eligible because of a change in residence or 
     certain other changes in circumstances; (iii) the individual 
     demonstrated that the organization offering the plan violated 
     its contract with Medicare (including the failure to provide 
     the enrollee on a timely basis medically necessary care or to 
     provide such care in accordance with applicable quality 
     standards), or misrepresented the plan in its marketing; or 
     (4) the individual encountered other exceptional conditions 
     specified by the Secretary.
       Special rules would apply for MSA plans. Individuals could 
     elect an MSA plan only during: (I) an initial open enrollment 
     period; (ii) an annual, coordinated election period, or (iii) 
     October 1998 and October 1999. Such individuals could not 
     discontinue an election of an MSA plan except during an 
     annual, coordinated election period, October 1998 and October 
     1999, or if the MSA plan had been decertified or terminated.
       Section 4001 (new section 1851(e)). Identical provision.


                           Senate Amendment-

       Similar with exceptions: (I) individuals would permanently 
     be allowed to enroll at any time a plan was open to 
     enrollment and during the annual coordinated election period; 
     (ii) individuals could disenroll at any time; (iii) the 
     coordinated election period would take place in November and 
     would begin in 1998; (iv) health fairs would be held for the 
     first time in November 1997 and would be conducted annually 
     in the month of November; (v) the special election periods 
     would apply effective in 1998 (and not 2001); MSA plans could 
     be elected during an initial open enrollment period and a 
     coordinated annual election period (i.e., not limited to 
     October 1998 and 1999).


                          Conference Agreement

       The conference agreement includes the House bill with an 
     amendment. Continuous open enrollment and disenrollment would 
     last through the end of 2001. The transition period, when 
     there would be open enrollment and disenrollment but a 
     limitation of one change of election, would be for the first 
     6 months of 2002. This would be followed by full 
     implementation of the annual enrollment/disenrollment 
     election process in which there would be a limitation of one 
     change during a three-month annual open enrollment period 
     each year.
       Even after 2003, individuals age 65 and older who enroll in 
     a Medicare+Choice plan when they first become eligible for 
     Medicare would be able to disenroll from Medicare+Choice into 
     original fee-for-service Medicare at any time during their 
     first 12 months of enrollment in the Medicare program not 
     withstanding the general open enrollment rules. During this 
     period, they would have an extended period of guaranteed 
     access to Medigap plans under corresponding provisions of the 
     conference agreement. In addition, individuals electing to 
     enroll in an MSA plan for the first time during an annual 
     coordinated election period would have an additional period, 
     until December 15, to disenroll from enrollment in such plan.
       For the risk adjustment methods authorized by the Act to 
     work to their full potential and to provide organizations 
     offering Medicare+Choice plans with incentives to keep 
     beneficiaries healthy, the Conferees believe that it is 
     important to move away from a system where beneficiaries can 
     enroll and disenroll from HMOs at virtually any time. 
     Therefore, the Conference Agreement provides a transition to 
     a system of annual open enrollment periods based on the FEHBP 
     choice model. This model balances promotion of active 
     competition with protections for beneficiaries who wish to 
     test the broad array of private health plan choices made 
     available by the Act without losing their right to return to 
     fee-for-service Medicare.
       The annual coordinated election period would take place in 
     November, beginning with November 1999. The Medicare+Choice 
     health information fair would be held in November, beginning 
     with 1999. A special educational and publicity campaign would 
     be conducted during November 1998 by the Secretary to inform 
     Medicare+Choice individuals about the Medicare+Choice plans 
     and risk contract plans offered in different areas and the 
     election process. A Medicare+Choice organization would be 
     required to provide for open enrollment periods during the 
     initial enrollment period, during the month of November of 
     1998 and each subsequent year, and during special election 
     periods. Special election periods would start January 1, 
     2002. An individual could elect an MSA only during an initial 
     open enrollment period, annual coordinated election period or 
     the month of November, 1998.
     (f) Effectiveness of elections and changes of elections


                               House Bill

       Section 10001 (new section 1851(f)). An election made 
     during the initial election period would become effective 
     when the individual became entitled to Medicare benefits, 
     except as the Secretary might provide in order to prevent 
     retroactive coverage. During continuous open enrollment 
     periods, an election or change of elections would take effect 
     with the first calendar month after the election was made. An 
     election or change of coverage made during a coordinated 
     election period would take effect as of the first day of the 
     following year. Elections during other periods would take 
     effect in the manner specified by the Secretary to protect 
     continuity of coverage.
       Section 4001 (new section 1851(f)). Identical provision.


                            Senate Amendment

       Similar but an election or change of coverage during an 
     annual, coordinated election period could, at the 
     individual's option, take effect on December 1 of the 
     election year.


                          Conference Agreement

       The conference agreement includes the House provision.
     (g) Guaranteed issue and renewal


                               House Bill

       Section 10001 (new section 1851(g)). Requires MedicarePlus 
     organizations to accept MedicarePlus eligibles without 
     restriction during election periods. If the organization had 
     a capacity limit, it could limit enrollment but only if 
     priority were given to those who had already elected the plan 
     and then to other persons in a manner that did not 
     discriminate on the basis of health-status related factors 
     (which include 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) and disability). These 
     restrictions would not apply if they would result in 
     enrollment substantially misrepresentative of the Medicare 
     population in the service area.
       MedicarePlus organizations could not terminate an 
     enrollee's election except for failure to pay premiums on a 
     timely basis, disruptive behavior, or because of plan 
     termination of all MedicarePlus individuals. Individuals 
     terminated for cause would be deemed to have elected Medicare 
     FFS. An individual whose plan was terminated would have a 
     special election period to change into another MedicarePlus 
     plan. If the individual failed to make an election, he or she 
     would be deemed to be Medicare FFS. Plans would have to 
     transmit to the Secretary a copy of each enrollee's election 
     form.
       Section 4001 (new section 1851(g)). Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with 
     conforming changes and a modification clarifying that the 
     premium, for purposes of terminating an election because of 
     failure to pay premiums, is the basic premium or supplemental 
     premiums.

[[Page H6180]]

     (h) Approval of marketing material and application forms


                               House Bill

       Section 10001 (new section 1851(h)). Requires MedicarePlus 
     plans to submit marketing material to the Secretary at least 
     45 days before distribution. The material could then be 
     distributed if not disapproved by the Secretary. Medicare's 
     new standards for plans (established under new section 1856) 
     would have to include guidelines for the review of all 
     marketing material submitted. Under these guidelines, the 
     Secretary would have to disapprove marketing materials if 
     they were materially inaccurate or misleading.
       Each MedicarePlus organization would have to conform to 
     fair marketing standards, including a prohibition on a 
     MedicarePlus organization (or its agent) completing any 
     portion of any election form on behalf of any individual.
       Section 4001 (new section 1851(h)). Identical provision.


                            Senate Amendment

       Identical except that the provision does not include a 
     prohibition against an organization or its agent completing 
     any portion of any election form used to carry out elections.


                          Conference Agreement

       The conference agreement includes the House provision with 
     a modification changing the requirement on the Secretary to 
     prohibit an organization or its agent from completing any 
     portion of an election form used to carry out elections to an 
     authorization of the Secretary to prohibit such an activity. 
     It also adds a provision prohibiting Medicare+Choice 
     organizations from providing for cash or other monetary 
     rebates as an inducement for enrollment.
     (i) Effect of election of MedicarePlus plan option
       Section 10001 (new section 1851(I)). Payments under a 
     contract with a MedicarePlus organization with respect to an 
     individual electing a MedicarePlus plan offered by an 
     organization would be instead of the amounts which otherwise 
     would have been payable under Medicare Parts A and B.
       Section 4001 (new section 1851(I)). Identical provision.
       Effective date.
       Section 10001. Unless otherwise provided, the provision is 
     generally effective upon enactment.
       Section 4001. Identical.-


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with 
     technical modifications.

                  Benefits and Beneficiary Protections

                           New section 1852-


                              Current Law

       Section 1876 provides for requirements relating to 
     benefits, payment to the plans by Medicare, and payments to 
     the plans by beneficiaries. In addition, it specifies 
     standards for patient protection and quality assurance.
       A Medicare beneficiary enrolled in an HMO/CMP is entitled 
     to receive all services and supplies covered under Medicare 
     Parts A and B (or Part B only, if only enrolled in Part B). 
     These services must be provided directly by the organization 
     or under arrangements with the organization. Enrollees in 
     risk-based organizations are required to receive all services 
     from the HMO/CMP except in emergencies. (Exceptions apply to 
     risk plans that offer a point-of-service (POS) option in 
     which enrollees are permitted to use non-network providers 
     but typically at higher enrollee cost-sharing levels.)
       In general, HMOs/CMPs offer benefits in addition to those 
     provided under Medicare's benefit package. In certain cases, 
     the beneficiary has the option of selecting the additional 
     benefits, while in other cases some or all of the 
     supplementary benefits are mandatory.
       Some entities may require members to accept additional 
     benefits (and pay extra for them in some cases). These 
     required additional services may be approved by the Secretary 
     if it is determined that the provision of such additional 
     services will not discourage enrollment in the organization 
     by other Medicare beneficiaries.
       Medicare HMOs/CMPs must provide enrollees, at the time of 
     enrollment and annually thereafter, an explanation of: rights 
     to benefits, restrictions on services provided through 
     nonaffiliated providers, out-of-area coverage, coverage of 
     emergency and urgently needed services, and appeal rights.
       Medicare HMOs/CMPs must make all Medicare-covered services 
     and all other services contracted for available and 
     accessible within their service areas, with reasonable 
     promptness and in a manner that assures continuity of care. 
     Urgent care must be available and accessible 24 hours a day 
     and 7 days a week. HMOs must also pay for services provided 
     by nonaffiliated providers when services are medically 
     necessary and immediately required because of an unforeseen 
     illness, injury, or condition and it is not reasonable, given 
     the circumstances, to obtain the services through the HMO.
       HMOs/CMPs are required to have arrangements for an ongoing 
     quality assurance program that stresses health outcomes and 
     provides review by physicians and other health care 
     professionals of the process followed in the provision of 
     health services. External review is conducted by a peer 
     review organization (PRO), one of the groups that has 
     contracted with the Secretary for review of the quality and 
     appropriateness of hospital services. PRO reviews of HMOs/
     CMPs covers both inpatient and outpatient care. The Secretary 
     also has the right to inspect or otherwise evaluate the 
     quality, appropriateness, and timeliness of services provided 
     and the facilities of the organization when there is 
     reasonable evidence of some need for inspection.
       In up to 25 states, the Secretary is authorized to 
     designate another external agency, known as a quality review 
     organization or QRO to perform reviews. QROs must meet many 
     of the same standards as PROs, but have not contracted with 
     the Department of HHS for the review of services other than 
     those provided by an HMO/CMP.
       HMOs/CMPs must have meaningful grievance procedures for the 
     resolution of individual enrollee complaints about such 
     problems as failure to receive covered services or unpaid 
     bills. In addition, an enrollee who believes that the HMO has 
     improperly denied a service or imposed an excessive charge 
     has the right to a hearing before the Secretary if the amount 
     involved is greater than $100. If the amount is greater than 
     $1,000, either the enrollee or the HMO may seek judicial 
     review. On April 30, 1997, HCFA issued final rules for 
     establishing an expedited review process for Medicare 
     beneficiaries enrolled in HMOs and CMPs.
       Hospitals and other providers are required under Medicare 
     as a condition of participation to ask whether an individual 
     has an advance directive and make a notice of such in the 
     patient's record. Such hospitals and other providers also 
     have to provide upon admission and at other specified times 
     written information to adult patients: on applicable advance 
     directive laws of the relevant state and of the advance 
     directive policies of the provider.
       Payments to Medicare HMOs/CMPs include amounts that reflect 
     Medicare's fee-for-service payments to hospitals in an area 
     for indirect and direct medical education costs and 
     disproportionate share adjustments.
       Penalties apply for violations of limits on the use of 
     ``physician incentive plans,'' i.e., compensation 
     arrangements between HMOs and physicians that might induce 
     physicians to withhold services. An HMO may not make a 
     specific payment to a physician as an inducement to reduce or 
     limit services to a specific enrollee. In addition, if 
     physicians or physician groups are placed at substantial 
     financial risk for services other than their own, the HMO 
     must provide adequate stop-loss protection to limit the 
     physicians' potential liability and must periodically survey 
     enrollee satisfaction.
       There are no provisions in current law equivalent to the 
     provider protections required in these provisions. HCFA has 
     indicated that Medicare managed care beneficiaries are 
     entitled to physicians' advice and counsel and are therefore 
     protected by law from contractual provisions placing 
     limits on such communications (i.e., ``gag'' clauses). 
     There is no provision in current law for medical savings 
     account plans for Medicare beneficiaries.


                               House Bill

       Section 10001 (new section 1852). The provision establishes 
     a new Section 1852 specifying federal requirements related to 
     MedicarePlus plan benefits and beneficiary protections.
       Section 4001 (new section 1852). Identical provision.


                            Senate Amendment

       Identical provision except applies to Medicare Choice.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment, except that 
     the provisions apply to Medicare+Choice organizations and 
     plans.
     (a) Basic benefits


                               House Bill

       Section 10001 (new section 1852(a)). Each MedicarePlus 
     plan, except an MSA plan, would be required to provide 
     benefits for at least the items and services for which 
     benefits are available under Parts A and B of Medicare and 
     any additional health services as the Secretary may approve 
     under section 1854 of this provision (see below). A 
     MedicarePlus plan would meet this requirement if, for items 
     and services furnished other than through a provider that has 
     a contract with the organization offering the plan, the plan 
     provides (in addition to any cost sharing provided for under 
     the plan) for at least the dollar amount of payment as would 
     otherwise be authorized under Medicare FFS (including any 
     balance billing permitted under Medicare FFS). These cost-
     sharing limitations would not apply to an individual enrolled 
     under an MSA plan.
       MedicarePlus organizations could offer under their 
     MedicarePlus plans supplemental benefits. Supplemental 
     benefits approved by the Secretary could be offered without 
     affording enrollees an option to decline them. Alternatively, 
     a MedicarePlus organization could provide to enrollees (other 
     than those in an MSA plan) optional supplemental benefits. A 
     MedicarePlus plan could seek payment from other payers, such 
     as insurers or employer plans, in circumstances where 
     secondary payer rules apply.

[[Page H6181]]

       The provision would establish a policy relating to a 
     national coverage determination made between the annual 
     announcements of MedicarePlus payment rates. The application 
     of the determination would be delayed if the determination 
     would result in a significant change in costs to the 
     MedicarePlus plan, and such change was not incorporated in 
     the MedicarePlus payment rate established for that period. In 
     such cases, the national coverage determination would apply 
     to the first contract year beginning after such period. If 
     the determination provided for coverage of additional 
     benefits or benefits under additional circumstances, it would 
     also apply to the first contract year beginning after such 
     period, unless otherwise required by law.
       Section 4001 (new section 1852(a)). Identical provision.


                            Senate Amendment

       Similar except the provision that a Medicare Choice plan 
     pay at least the dollar amount of payment as would otherwise 
     be authorized under Medicare FFS (including any balance 
     billing permitted) does not apply to unrestricted fee-for-
     service as well as MSA plans.


                          Conference Agreement

       The conference agreement includes the House provision with 
     modifications. A plan would not have to provide for hospice 
     care. A plan, including a private fee-for-service plan, would 
     have to pay for items and services furnished through non-
     contract providers in an amount so that the sum of such 
     payment and any cost sharing required under the plan was 
     equal to at least the dollar amount of payment as would 
     otherwise be authorized under Medicare fee-for-service 
     (including any balanced billing permitted under parts A and 
     B). (The conference agreement includes a cross-reference to 
     other sections of the bill related to limitations on balance 
     billing and on enrollee liabilities.) The agreement also 
     includes a provision specifying that a Medicare+Choice 
     organization could not provide an MSA plan supplemental 
     health care benefit that covered the plan deductible. Health 
     benefits sold as accident, disability, workers compensation, 
     dread disease and other specified types of plans would not be 
     considered as covering the deductible. (See Medigap 
     conforming amendments). A private fee-for-service plan could 
     offer supplemental benefits that include payment for some or 
     all of the balance billing amounts permitted consistent with 
     section 1852(k) (as described below and relating to treatment 
     by non-contracting providers) and coverage of additional 
     services that the plan finds to be medically necessary.
     (b) Antidiscrimination


                               House Bill

       Section 10001 (new section 1852(b)). A MedicarePlus 
     organization could not deny, limit, or condition the coverage 
     or provision of benefits under this part based on any health-
     status related factor (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) and disability). 
     This requirement should not be construed to mean that a 
     MedicarePlus organization had to enroll individuals 
     determined to have ESRD.
       Section 4001 (new section 1852(b)). Identical provision. 
     (See section 1852(k) on provider nondiscrimination.)-


                            Senate Amendment

       Similar but also includes anti-discrimination protection 
     for providers. Provides that a Medicare Choice organization 
     could not discriminate with respect to participation, 
     reimbursement, or indemnification as to any provider who is 
     acting within the scope of the provider's license or 
     certification under applicable state law, solely on the basis 
     of such license or certification. This provision should not 
     be construed to prohibit a plan from including providers only 
     to the extent needed to meet the needs of the plan's 
     enrollees or from establishing any measure designed to 
     maintain quality and control costs consistent with the 
     responsibilities of the plan.


                          Conference Agreement

       The conference agreement includes the Senate amendment.
     (c) Disclosure/detailed description of plan provisions


                               House Bill

       Section 10001 (new section 1852 (c)). The provision would 
     require each MedicarePlus plan to disclose in clear, 
     accurate, and standardized form to each enrollee at the time 
     of enrollment and annually thereafter, the following 
     information about the plan: (I) its service area; (ii) its 
     benefits and exclusions from coverage (and, in the case of an 
     MSA plan, a comparison with other MedicarePlus plans); (iii) 
     the number, mix, and distribution of participating providers, 
     (iv) permitted out-of-area coverage; (v) coverage of and 
     procedures for obtaining emergency services (including the 
     appropriate use of 911 or local equivalent); (vi) any 
     optional supplemental coverage, including the benefits and 
     premium price; (vii) any prior authorization or other rules 
     that could result in nonpayment; (viii) any plan-specific 
     grievance and appeals procedures; and (ix) its quality 
     assurance program.
       Section 4001 (new section 1852(c)). Similar but also 
     requires that the detailed description of the plan provisions 
     include whether there is a point-of-service option and, if 
     so, the premium for it.-


                            Senate Amendment

       Similar except in the detailed description of plan 
     provisions, the plan would not have to describe benefits that 
     are not offered. The organization would have to describe any 
     out-of-network coverage provided under the plan. Also upon 
     request of an Medicare Choice eligible individual, an 
     organization would have to provide: general information on 
     Medicare and Medicare Choice and comparative plan information 
     as well as information on utilization review procedures.


                         Conference Agreement -

       The conference agreement includes the Senate provision with 
     an amendment to require that organizations provide 
     information on out-of-network coverage (if any) provided by 
     the plan, and any point-of-service option (including the 
     supplemental premium for such option). Organizations also 
     would have to disclose upon request information on procedures 
     used to control expenditures, information on the number of 
     grievances, reconsideration, and appeals and on the 
     disposition in the aggregate of such matters, and an overall 
     summary description as to the method of compensation of 
     participating physicians.
     (d) Access to services


                               House Bill

       Section 10001 (new section 1852(d)). Permits a MedicarePlus 
     organization offering a MedicarePlus plan to restrict the 
     providers from whom benefits could be provided so long as: 
     (I) the organization makes the benefits available and 
     accessible to each individual electing the plan within the 
     service area with reasonable promptness and in a manner which 
     assures continuity in the provision of benefits; (ii) when 
     medically necessary, the organization makes benefits 
     available and accessible 24 hours a day, 7 days a week; (iii) 
     the plan provides reimbursement for covered out-of-network 
     services if the services are medically necessary and 
     immediately required because of unforeseen illness, injury, 
     or condition and it is not reasonable to provide the services 
     through the organization or met other conditions; (iv) the 
     organization provides access to appropriate providers, 
     including credentialed specialists, for medically necessary 
     treatment and services; and (v) coverage is provided for 
     emergency services without regard to either prior 
     authorization requirements or the emergency care entity's 
     contractual relationship with the organization.
       A MedicarePlus organization would be required to comply 
     with such guidelines as the Secretary might prescribe 
     relating to promoting efficiency and timely coordination of 
     appropriate maintenance and post-stabilization care provided 
     to an enrollee determined to be stable by a medical screening 
     examination required under the Examination and Treatment 
     under Emergency Medical Conditions and Women in Labor 
     requirements of the Social Security Act (Section 1867).
       Emergency services mean covered inpatient and outpatient 
     services that are furnished to an enrollee of a MedicarePlus 
     organization by a provider qualified to provide services 
     under Medicare, and are needed to evaluate or stabilize an 
     emergency medical condition.
       An emergency medical condition is one 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 in serious jeopardy (and in case of a pregnant 
     women, her health or that of her unborn child; (ii) serious 
     impairment to bodily functions, or (iii) serious dysfunction 
     of any bodily organ or part.
       Section 4001 (new section 1852(d)). Similar except it adds 
     "in the opinion of the treating health care provider" to the 
     requirement that services be available and accessible 24 
     hours a day/7 days a week when medically necessary. Under the 
     provision to require access to appropriate providers, 
     specifies 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.
       Also, includes a provision to require a MedicarePlus 
     organization to ensure that the length of an inpatient 
     hospital stay covered under Medicare be determined by the 
     attending physician (or other attending health care provider 
     to the extent permitted under state law) and the patient to 
     be medically appropriate. Provides that this requirement not 
     be construed as requiring the provision of inpatient coverage 
     if the attending physician or provider and patient determine 
     that a shorter stay is medically appropriate or as affecting 
     the application of deductibles and coinsurance.


                            Senate Amendment

       Similar but also requires that, except as provided by the 
     Secretary on a case-by-case basis, the organization provide 
     primary care services within 30 minutes or 30 miles from an 
     enrollee's place of residence if the enrollee resides in a 
     rural area. Specifies the content of the guidelines to be 
     used respecting coordination of post-stabilization care. 
     Includes "including severe pain" in the prudent layperson 
     definition of emergency medical condition.


                          Conference Agreement

       The conference agreement includes section 10001 of the 
     House provision with a modification to clarify that a plan 
     must provide for

[[Page H6182]]

     reimbursement for services provided to an individual other 
     than through the organization if the services were not 
     emergency services but met the conditions described above. 
     The conference agreement also includes severe pain in the 
     definition of an emergency medical condition.
       In the case of a private fee-for-service plan, the 
     organization offering the plan would have to demonstrate to 
     the Secretary that the organization had a sufficient number 
     and range of providers with such agreements to provide 
     services under the terms of the plan. The Secretary would be 
     required to find that an organization met this requirement 
     if, with respect to any category of health care professional 
     or provider, the plan established payment rates for covered 
     services furnished by that category of provider that were not 
     less than the payment rates provided for under part A, part 
     B, or both, for such services or the plan had contracts or 
     agreements with a sufficient number and range of providers 
     within such category to provide covered services under the 
     plan, or a combination of both. This requirement does not 
     restrict the persons from whom enrollees in a fee-for-service 
     plan may obtain covered benefits.
       The conference agreement allows plans to select the 
     providers from whom benefits are provided only if the plan 
     provides adequate access to services to its enrollees. The 
     Conferees believe that access to primary care services for 
     Medicare beneficiaries residing in rural areas can be judged 
     as adequate if those primary care services are no more than 
     30 minutes or 30 miles from an enrollee's place of residence.
     (e) Quality assurance program


                               House Bill

       Section 10001 (new section 1852(e)). The provision would 
     require a MedicarePlus organization to have arrangements 
     (established in accordance with regulations of the Secretary) 
     for an ongoing quality assurance program for services 
     provided to its MedicarePlus enrollees. The program has to: 
     (I) stress health outcomes and provide for the collection, 
     analysis, and reporting of data that will permit measurement 
     of outcomes and other indices of MedicarePlus plans and 
     organizations; (ii) provide for written protocols for 
     utilization review; (ii) provide review by physicians and 
     other health care professionals of the process followed in 
     the provision of health services; (iv) monitor and evaluate 
     high volume and high risk services and the care of acute and 
     chronic conditions; (v) evaluate the continuity and 
     coordination of care; (vi) have mechanisms in place to detect 
     both underutilization and overutilization; (vii) after 
     identifying areas for improvement, establish or alter 
     practice parameters; (viii) take action to improve quality 
     and assess effectiveness of such actions; (ix) make available 
     information on quality and outcomes measures to facilitate 
     beneficiary comparison and choice; (x) be evaluated on an 
     ongoing basis; (xi) include measures of consumer 
     satisfaction; and (xii) provide the Secretary with such 
     access to information collected as may be appropriate to 
     monitor and ensure quality.
       Each organization would be required to have an agreement 
     with an independent quality review and improvement 
     organization, approved by the Secretary, for each plan it 
     operates, to perform functions such as quality review, review 
     for the appropriateness of setting of care, adequacy of 
     access, beneficiary outreach, and review of complaints about 
     poor quality of care. A MedicarePlus organization would be 
     deemed to meet the requirements for quality assurance 
     external review if it is accredited by a private organization 
     under a process that the Secretary has determined assures 
     that the organization applies and enforces standards that are 
     no less stringent than those specified under the plan 
     standards requirements established by this provision (see new 
     Section 1856 as described below).
       Section 4001 (new section 1852(e)). Identical provision.


                            Senate Amendment

       Identical except provides that the quality assurance 
     provisions (including the external review requirements) and 
     the requirement below (item ``h'') relating to maintaining 
     medical records, would not apply to the case of a Medicare 
     Choice organization in relation to a Medicare Choice 
     unrestricted fee-for-service plan. In addition, the external 
     review requirements are not included in those for which an 
     organization could obtain deemed approval as a result of 
     being accredited by a private organization.
       Requires that each Medicare Choice organization report 
     annually (at the request of the enrollee) a statement 
     disclosing the proportion of premiums and revenues received 
     by the organization that are expended for non-health care 
     items and services.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     a clarification that, except in the case of the review of 
     quality complaints and consistent with the disclosure 
     requirements in this part, the Secretary would be required to 
     ensure that the external review activities not be duplicative 
     of the review activities conducted as part of the 
     accreditation process. The Secretary would be authorized to 
     waive the external review requirement if he or she determined 
     that the organization consistently maintained an excellent 
     record of quality assurance and compliance with other 
     requirements under this part. The conference agreement does 
     not include the Senate requirement requiring organizations to 
     provide annual reports on non-health expenditures to 
     enrollees at their request.
       The conference agreement further provides for specific 
     quality assurance elements for Medicare+Choice private fee-
     for-service plans and Medicare+Choice MSA non-network plans. 
     (The quality assurance elements for plans are reordered.) 
     Such plans would have to have a program that (I) stresses 
     health outcomes and provides for data permitting measurement 
     of outcomes and other indices of quality, (ii) monitors and 
     evaluates high volume and high risk services and the care of 
     acute and chronic conditions, (iii) evaluates the continuity 
     and coordination of care that enrollees receive; (iv) is 
     evaluated on an ongoing basis as to its effectiveness; (v) 
     includes measures of consumer satisfaction, and (vi) provides 
     the Secretary with certain information to monitor and 
     evaluate the plan's quality. In addition, insofar as such 
     plans provided for written protocols of utilization review, 
     they would have to base them on current standards of medical 
     practice. Finally, they would have to have mechanisms to 
     evaluate utilization of services and inform providers and 
     enrolles of the results of such an evaluation.
     (f) Coverage determinations


                               House Bill

       Section 10001 (new section 1852(f)). A MedicarePlus 
     organization would be required to make determinations 
     regarding authorization requests for nonemergency care on a 
     timely basis. Reconsideration of denials would generally have 
     to be decided within 30 days of receiving medical 
     information, but not later than 60 days after the coverage 
     determination. Physicians, other than a physician involved in 
     the initial determination, would be the only individuals 
     permitted to make decisions to deny coverage based on medical 
     necessity.
       Section 4001 (new section 1852 (f)). Similar but adds a 
     requirement that the organization provide notice of any 
     denial and the reasons for it, and to provide an explanation 
     of the grievance and appeals process. Also, the physician 
     acting on a reconsideration would have to be one with 
     appropriate expertise in the field of medicine which needs 
     treatment.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes section 4001 of the House 
     provision with modifications which incorporate into the 
     section provisions relating to reconsideration and appeals. A 
     Medicare+Choice organization would have to have a procedure 
     for making determinations regarding whether an individual 
     enrolled within the plan was entitled to receive a health 
     service and the amount (if any) that the individual was 
     required to pay with respect to the service. Subject to the 
     provision related to expedited determinations and 
     reconsideration, such a procedure would have to provide for 
     the determination to be made on timely basis, depending on 
     the urgency of the situation. The explanation of the 
     determination would have to be in understandable language, 
     state the reasons for the denial, and provide a description 
     of the reconsideration and appeals processes. The 
     organization generally would have to provide for 
     reconsideration of a determination upon request by the 
     enrollee. The reconsideration would have to be within a time 
     period specified by the Secretary but (except for those 
     falling under expedited determinations and reconsideration) 
     would have to be made within 60 days after the date of the 
     receipt of the request for reconsideration. A reconsideration 
     relating to a determination to deny coverage based on lack of 
     medical necessity would have to be made only by a physician 
     with appropriate expertise in the field of medicine which 
     relates to the condition necessitating treatment who is other 
     than a physician involved in the initial determination. It is 
     not the Conferee's intent to require that a physician 
     involved in the reconsideration process in all cases be of 
     the same specialty or sub-speciality as the treating 
     physician.
       The conference agreement further modifies the provision 
     relating to expedited determinations and reconsideration. An 
     enrollee in a Medicare+Choice plan could request an expedited 
     determination or an expedited reconsideration. A physician, 
     regardless of whether the physician was affiliated with the 
     organization, could request such an expedited determination 
     or reconsideration.
       The conference agreement modifies the provision relating to 
     organizational procedures to require that in the case of a 
     request for an expedited determination or reconsideration 
     made by a physician, the organization expedite the 
     determination or reconsideration if the request indicated 
     that the application of the normal time frame 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. The time limitations for the organization to 
     respond to the request would be established by the Secretary, 
     but could not be later than 72 hours of the time of receipt 
     of the request for determination or reconsideration, or such 
     longer period as the Secretary might permit in specified 
     cases.
       The bill includes maximum time frames for the processing of 
     reconsideration and expedited determinations and 
     reconsideration. These time frames codify existing 
     regulations and, in some instances, provide additional 
     protections to beneficiaries beyond current law or 
     regulation. These time frames

[[Page H6183]]

     were included to assure through a statutory provision a 
     minimum level of protection consistent with current 
     regulation under the Medicare program. They do not represent 
     a judgment by the Conferees in regard to time frames that 
     would be optimum in the future. In fact, the Conferees 
     understand that HCFA is currently developing proposed 
     regulations that would reduce certain time frames included in 
     current regulations. These efforts will now be superseded by 
     the need to develop regulations to implement Part C. The 
     Conferees assume that the Secretary will address the issue of 
     time frames in the Part C regulations and intend through 
     these provisions to provide her sufficient flexibility to 
     adopt time frames that are shorter than the maximum time 
     frames included in this agreement.
     (g) Grievances and appeals


                               House Bill

       Section 10001 (new section 1852(g)). The provision would 
     require each MedicarePlus organization to provide meaningful 
     procedures for hearing and resolving grievances. An enrollee 
     dissatisfied by reason of the enrollee's failure to receive 
     health services would be entitled, if the amount in 
     controversy was $100 or more, to a hearing before the 
     Secretary. If the amount in controversy was $1,000 or more, 
     the individual or organization, upon notifying the other 
     party, would be entitled to judicial review. The Secretary 
     would be required to contract with an independent, outside 
     entity to review and resolve appeals of denials of coverage 
     related to urgent or emergency services.
       An enrollee in a MedicarePlus plan could request an 
     expedited determination by the organization regarding an 
     appeal. Such requests could also come from physicians. The 
     organization would have to maintain procedures for expediting 
     organization determinations when, upon request of an 
     enrollee, the organization determined that the application of 
     a normal time frame for making a determination or a 
     reconsideration could seriously jeopardize the life or health 
     of an enrollee or the enrollee's ability to regain maximum 
     function. In an urgent case, the organization would have to 
     notify the enrollee (and physician involved) of the 
     determination as expeditiously as the enrollee's condition 
     requires, but not later than 72 hours (or 24 hours in the 
     case of a reconsideration), or such longer period as the 
     Secretary may permit in specified cases.
       Section 4001 (new Section 1852(h)). Identical except adds a 
     requirement that the Secretary annually report publicly on 
     the number and disposition of denials and appeals within each 
     organization, and those resolved by the independent entity.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes section 10001 of the 
     House bill with modifications to reflect the changes made in 
     the prior provision relating to coverage determinations and 
     reconsideration. (The grievance mechanism to be established 
     by each organization is treated as a distinct item in the 
     conference agreement.)
     (h) Confidentiality and accuracy of enrollee records


                               House Bill

       Section 10001 (new section 1852(h)). Each MedicarePlus 
     organization would be required to establish procedures to 
     safeguard the privacy of individually identifiable enrollee 
     information, to maintain accurate and timely medical records 
     and other health information, and to assure timely access of 
     enrollees to their medical records.
       Section 4001 (new section 1852(h)). Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with some 
     changes in wording.
     (i) Information on advance directives


                               House Bill

       Section 10001 (new section 1852(I)). Each MedicarePlus 
     organization would be required to maintain written policies 
     and procedures respecting advance directives.
       Section 4001 (new section 1852(I)). Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (j) Rules requiring physician participation


                               House Bill

       Section 10001 (new section 1852(j)). Each MedicarePlus 
     organization would be required to establish reasonable 
     procedures relating to the participation of physicians under 
     a MedicarePlus plan offered by the organization. The 
     procedures would include: (I) providing notice of the rules 
     regarding participation; (ii) providing written notice of 
     adverse participation decisions; and (iii) providing a 
     process for appealing adverse decisions. The organization 
     would be required to consult with physicians who have entered 
     into participation agreements regarding the organization's 
     medical policy, quality, and medical management procedures.
       The provision would prohibit interference with physician 
     advice to enrollees. A MedicarePlus organization could not 
     prohibit a covered health professional from advising a 
     patient about the patient's health status or about medical 
     care or treatment for the patient'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. ``Health care provider'' is 
     defined to include physicians and other health care 
     professionals (as specified). This provision should 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 objects to the provision of such service on moral or 
     religious grounds, and, in the manner and through the written 
     instrumentalities the MedicarePlus organization deems 
     appropriate, makes available information on its policies 
     regarding such service to prospective enrollees before or 
     during enrollment. For those beneficiaries enrolled in the 
     plan at any time a policy is adopted by the MedicarePlus 
     organization or MedicarePlus plan regarding coverage of a 
     counseling or referral service, the MedicarePlus organization 
     offering such plan would have to notify enrollees of such 
     policy within 90 days.
       The provision also would limit the use of physician 
     incentive plans. The provision would define a physician 
     incentive plan as any compensation arrangement between a 
     MedicarePlus organization and a physician group that has the 
     effect, directly or indirectly, of reducing or limiting 
     services provided. The provision would prohibit MedicarePlus 
     plans from operating such a physician incentive plan unless 
     the following conditions were met. No specific payment could 
     be made, directly or indirectly, to a physician group as an 
     inducement to reduce or limit medically necessary services 
     provided with respect to a specific individual. If the plan 
     placed a physician or physician group at substantial 
     financial risk, the organization would be required to provide 
     adequate and appropriate stop-loss protection and to conduct 
     periodic surveys of currently and previously enrolled 
     individuals to determine the degree of access to and 
     satisfaction with the quality of services. Further, the 
     organization would be required to provide the Secretary with 
     sufficient descriptive information for the Secretary to 
     determine compliance with these requirements.
       A MedicarePlus organization would not be able to provide 
     (directly or indirectly) for a provider (or group of 
     providers) to indemnify the organization against any 
     liability resulting from a civil action brought by or on 
     behalf of an enrollee for any damage caused to the enrollee 
     by the organization's denial of medically necessary care.
       Section 4001 (new section 1852 (j)). Similar except 
     regulation of incentive plans applies for health care 
     providers (and not just physicians). Also, the provision 
     includes a limitation on non-compete clauses. This prohibits 
     a MedicarePlus organization from directly or indirectly 
     seeking to enforce any 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 PSO in the same area.-


                            Senate Amendment

       Similar but does not include the prohibition on 
     restrictions on physician communications.


                          Conference Agreement

       The conference agreement includes section 10001 of the 
     House bill with a clarification that the rules regarding 
     provider participation relate to organizations that offer 
     benefits under a Medicare+Choice plan through agreements with 
     physicians, and that the limitation on provider 
     indemnification applies to a health care professional or 
     other entity providing health care services in addition to a 
     provider of services.
       The conference agreement further provides for special rules 
     for Medicare+Choice private fee-for-service plans. The 
     following would apply to this provision and to item ``k'' 
     below (as well as to section 1866(a)(1)(O) related to 
     hospitals and SNFs that do not have contracts with managed 
     care plans that establish payment amounts or payment limits 
     that would be made as payment in full). A hospital (or other 
     provider of services), a physician or other health care 
     professional, or other entity furnishing health care services 
     would be treated as having a contract in effect with a 
     Medicare+Choice organization (with respect to enrollees in a 
     Medicare+Choice fee-for-service plan it offers) if: (I) the 
     provider, professional, or other entity furnished services 
     that were covered under the plan to such an enrollee and (ii) 
     before providing such services, the provider, professional or 
     other entity was informed of the individual's enrollment and 
     either was informed of the terms and conditions of payments 
     for such services under the plan or was given a reasonable 
     opportunity to obtain information concerning such terms and 
     conditions, in a manner reasonably designed to effect 
     informed agreement by a provider. This would only apply in 
     the absence of an explicit agreement between the provider, 
     professional, or other entity and the Medicare+Choice 
     organization.
       This provision of the conference agreement also permits 
     organizations offering Medicare+Choice plans that object to 
     the coverage or provision of counseling or referral services 
     on moral or religious grounds to

[[Page H6184]]

     make information on these policies available in the manner 
     and through the written instrumentalities the organization 
     deems appropriate. This limitation was included primarily to 
     remove discretion from the Secretary or other governmental 
     entities that may seek to impose burdensome regulatory, 
     legal, or stylistic requirements with respect to this notice 
     requirement. This limitation is not intended to allow 
     Medicare+Choice organizations to intentionally obfuscate or 
     seek to deceive prospective or current enrollees about their 
     coverage policies. Rather, the Conferees intend for such 
     notice to be provided in a manner that would be meaningful 
     to beneficiaries and reasonably inform them of any plan 
     restrictions.
     (k) Treatment of services furnished by certain providers


                               House Bill

       Section 10001 (new section 1852(k)). Requires 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 with a MedicarePlus 
     organization to accept as payment in full for covered 
     services the amounts that the physician or other entity could 
     collect if the individual were in Medicare FFS. Any penalty 
     or other provision of law that applies to such a payment 
     under Medicare FFS would also apply with respect to an 
     individual covered under a MedicarePlus plan.
       Section 4001 (new section 1852(k)). Identical provision. 
     (See ``p'' below for exemption of requirement for Medicare 
     MSA plans.)


                            Senate Amendment

       Similar provision except that it excepts from the 
     requirement an unrestricted fee-for-service plan as well as 
     an MSA plan.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     an amendment to provide for application of the provision to 
     Medicare+Choice private fee-for-service plans as follows:
       (A) Balance Billing Limits.--In the case of an individual 
     enrolled in such a plan, a physician, provider, or other 
     entity that has a contract (including one assumed under item 
     ``j'' above) establishing a payment rate for services 
     furnished to the enrollee would have to accept as payment in 
     full for covered Medicare services an amount not to exceed 
     (including any deductibles, coinsurance, copayments, or 
     balance billing otherwise permitted under the plan) an amount 
     equal to 115% of such payment rate. The plan would have to 
     establish procedures similar those in section 1848(g)(1)(A) 
     (relating to Medicare's limitation on actual charges) to 
     carry out this requirement. An organization's failure to 
     establish and enforce these procedures would be subject to 
     intermediate sanctions (as established under new section 
     1857(g).
       (B) Enrollee Liability for Noncontract Providers.--In the 
     case of an enrollee who is provided covered services by a 
     noncontract provider, the plan would have to pay for items 
     and services in an amount so that the sum of such payment and 
     any cost sharing required under the plan was equal to at 
     least the dollar amount of payment as would otherwise be 
     authorized under Medicare fee-for-service (including any 
     balanced billing permitted under parts A and B). Enrollee 
     liability would be limited in the same way as it is for other 
     plans. Providers would have to accept as payment in full for 
     covered services the amounts that the physician or other 
     entity could collect if the individual were in Medicare FFS. 
     (Section 1866(a)(1)(O) related to hospitals and SNFs that do 
     not have contracts with managed care plans that establish 
     payment amounts or payment limits that would be made as 
     payment in full would apply where appropriate.)
       (C) Information on Beneficiary Liability.--Each 
     Medicare+Choice organization that offered a private fee-for-
     service plan would have to provide that enrollees were 
     provided an appropriate explanation of benefits (consistent 
     with that provided under Medicare FFS and, if applicable, 
     under Medicare supplemental policies) that included a clear 
     statement of the amount of the enrollee's liability 
     (including any for balance billing). The organization would 
     also have to provide that the hospital provide enrollees 
     prior notice before receipt of inpatient hospital services 
     and certain other services when the amount of balance billing 
     could be substantial. Such notice would have to include a 
     good faith estimate of the likely amount of balance billing 
     (if any) with respect to such services, based upon the 
     presenting condition of the enrollee.
     (l) Disclosure of use of DSH and teaching hospitals


                               House Bill

       Section 10001 (new section 1852(l)). Each MedicarePlus 
     organization would have to provide the Secretary with 
     information on (I) the extent to which it provides inpatient 
     and outpatient hospital benefits under MedicarePlus through 
     the use of hospitals that are eligible for disproportionate 
     share hospital adjustments or through the use of teaching 
     hospitals that receive indirect and direct graduate medical 
     education payments, and (ii) 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.
       Section 4001 (new section 1852 (l)). Identical provision.-


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.
     (m) Out-of-network access


                               House Bill

       Section 10001. No provision.
       Section 4001 (new section 1852(m)). Requires that if a 
     MedicarePlus organization offers one plan which provides for 
     coverage primarily through network providers, that it also be 
     allowed to offer individuals (at the time of enrollment) 
     another plan which provides for coverage through non-network 
     providers.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.
     (n) Non-preemption of state law


                               House Bill

       Section 10001. No provision.
       Section 4001 (new section 1852(n)). A state could establish 
     or enforce requirements with respect to beneficiary 
     protections in this section but only if such requirements 
     were more stringent.-


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.
     (o) Nondiscrimination in selection of network health 
         professionals


                               House Bill

       Section 10001. No provision.
       Section 4001 (new section 1852(o)). Prohibits a 
     MedicarePlus plan offering network coverage from 
     discriminating in selecting the members of its health 
     professional network (or in establishing the terms and 
     conditions for membership in the 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 of that may threaten the health 
     of enrollees) of the health professional. A MedicarePlus 
     organization could 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 to be reimbursed or 
     indemnified for providing such services.


                            Senate Amendment

       No provision. (See section 1852(b) above regarding 
     restrictions on organizations denying participation solely on 
     the basis of license or certification.)


                          Conference Agreement

       The conference agreement does not include the House 
     provision in this section, but includes similar language on 
     prohibiting plans from denying health care professionals the 
     ability to participate solely on the license or 
     certification--from the Senate bill in section 1852(b).
     (p) Special rule for private fee-for-service MSA plan


                               House Bill

       Section 10001. No provision.
       Section 4001 (new section 1852(p)). Provides that a 
     MedicarePlus MSA plan that is a fee-for-service plan would 
     not be subject to the requirements described above relating 
     to procedures for establishing physician participation in the 
     plan or the limitations on balance billing.
       Effective date
       Section 10001. Unless otherwise provided, the provision is 
     generally applicable to contracts entered into or renewed on 
     or after January 1, 1998.
       Section 4001. Identical.-


                            Senate Amendment

       See 1852(k) above.
       Effective date. Identical-


                          Conference Agreement

       The conference agreement includes the House bill.

  Payments to MedicarePlus/Medicare Choice Organizations (New Section 
                                 1853)-


                              Current Law

       Under a Medicare risk contract, an HMO agrees to provide or 
     arrange for the full scope of covered Medicare services in 
     return for a single monthly capitation payment issued by 
     Medicare for each enrolled beneficiary. One of the numbers 
     used to determine this payment is the adjusted average per 
     capita cost, or AAPCC. The other, the adjusted community rate 
     or ACR, is discussed below (see new Section 1854).
       The AAPCC is Medicare's estimate of the average per capita 
     amount it would spend for a given beneficiary (classified by 
     certain demographic characteristics and county of residence) 
     who was not enrolled in an HMO and who obtained services on 
     the usual fee-for-service basis. Separate AAPCCs are 
     established for enrollees on the basis of age, sex, whether 
     they are in a nursing home or other institution, whether they 
     are also eligible for Medicaid, whether they are working and 
     being covered under an employer plan, and the county of their 
     residence. These AAPCC values are calculated in three 
     basic steps:
       Medicare national average calendar year per capita costs 
     are projected for the future year under consideration. These 
     numbers are known as the U.S. per capita costs (USPCCs) and 
     are estimated average incurred benefit

[[Page H6185]]

     costs per Medicare enrollee and adjusted to include program 
     administration costs. USPCCs are developed separately for 
     Parts A and B of Medicare, and for costs incurred by the 
     aged, disabled, and those with ESRD in those two parts of the 
     program.
       Geographic adjustment factors that reflect the historical 
     relationships between the county's and the Nation's per 
     capita costs are used to convert the national average per 
     capita costs to the county level. Expected Medicare per 
     capita costs for the county are calculated only for fee-for-
     service beneficiaries by removing both reimbursement and 
     enrollment attributable to Medicare beneficiaries in prepaid 
     plans.
       Once the county AAPCC is calculated, it is then adjusted 
     for the demographic variables described above, such as age, 
     sex, and Medicaid status.
       For each Medicare beneficiary enrolled under a risk 
     contract, Medicare will pay the HMO 95% of the rate 
     corresponding to the demographic class to which the 
     beneficiary is assigned.
       Medicare payments to risk-contract HMOs include amounts 
     that reflect Medicare's fee-for-service payments to hospitals 
     in an area for disproportionate share adjustment.-


                               House Bill

       Section 10001 (new section 1853). Establishes a new section 
     1853 specifying the methodology for determining payment to 
     MedicarePlus plans and the procedures for announcing rates 
     and paying plans.
       Section 4001 (new section 1853). Identical provision.


                            Senate Amendment

       Similarly establishes new section 1853 but all references 
     are to Medicare Choice, such as Medicare Choice capitation 
     payments.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment except that 
     the requirements apply to Medicare+Choice organizations and 
     plans.
     (a) In general


                               House Bill

       Section 10001 (new section 1853(a)). Provides that under a 
     MedicarePlus contract, the Secretary would be required to 
     make monthly payments in advance to each MedicarePlus 
     organization for each covered individual in a payment area in 
     an amount equal to \1/12\ of the annual MedicarePlus 
     capitation rate with respect to that individual for that 
     area. The payment would be adjusted for such risk factors as 
     age, disability status, gender, institutional status, and 
     other such factors as the Secretary determined to be 
     appropriate, so as to ensure actuarial equivalence.
       The Secretary could add to, modify, or substitute for such 
     factors, if such changes would improve the determination of 
     actuarial equivalence. The Secretary would be required to 
     establish separate rates of payment with respect to 
     individuals with end stage renal disease (ESRD).
       Payments to organizations could be retroactively adjusted 
     for (I) actual versus the estimated enrollment used to 
     determine the amount of advance payment; and (ii) 
     individuals' change of enrollment from a MedicarePlus 
     organization sponsored or contributed to by an employer to a 
     MedicarePlus organization.
       Risk Adjustment. The Secretary would be required to develop 
     and submit to Congress by no later than October 1, 1999, a 
     report on a method of risk adjustment of payment rates that 
     accounts for variations in per capita costs based on health 
     status. This report would have to include an evaluation of 
     the proposal by an independent actuary of the actuarial 
     soundness of the proposal. The Secretary would have to 
     require MedicarePlus organizations (and risk-contract plans) 
     to submit, for periods beginning on or after January 1, 1998, 
     data regarding inpatient hospital and other services and 
     other information the Secretary deems necessary. The 
     Secretary would have to provide for implementation of a risk 
     adjustment methodology that accounts for variations in per 
     capita costs based on health status by no later than January 
     1, 2000.
       Section 4001 (new section 1853(a)). Identical provision.


                            Senate Amendment

       Identical except with respect to risk adjustment.
       Risk Adjustment. Prohibits the Secretary from implementing 
     a risk adjustment methodology until the Secretary receives an 
     evaluation by an outside, independent actuary of the 
     actuarial soundness of the method. (Does not specify a date 
     by which the risk adjustment method has to be implemented.)
       Interim Risk Adjustment. Provides for an interim risk 
     adjustment: For each enrollee in a Medicare Choice plan (one 
     that had not been enrolled in Medicare Choice plans or risk 
     contract plans for an aggregate number of months greater than 
     60), the payment to the organization would be reduced by an 
     amount equal to the following applicable percentage:

Months enrolled in a
  Medicare Choice plan:                                      Percentage
                                                              reduction
    1-12..............................................................5
    13-24.............................................................4
    25-36.............................................................3
    37-48.............................................................2
    49-60.............................................................1

       The interim risk adjustment would not apply to an enrollee 
     in a Medicare Choice plan offered by a Medicare Choice 
     organization if the enrollee was in a health plan (other than 
     a Medicare Choice plan) offered by the organization at the 
     time of the individual's initial election period and had been 
     continuously enrolled in that plan or another plan offered by 
     the same organization since the initial election period. The 
     adjustment would also not apply to new plans in the first 12 
     months during which they enrolled individuals provided the 
     Medicare Choice capitation rate for such area for the 
     preceding calendar year was less than the annual national 
     capitation rate (or, for 1998, the 1997 AAPCC). This interim 
     adjustment would terminate once the new risk adjustment 
     methodology (to be developed by the Secretary) was applied.


                          Conference Agreement

       The conference agreement includes section 10001 of the 
     House provision with a modification specifying that the 
     Secretary develop and submit to Congress by not later than 
     March 1, 1999 a report of the method of risk adjustment to be 
     implemented. In addition, Medicare+Choice organizations and 
     risk contract plans would have to submit data for inpatient 
     hospital services beginning on or after July 1, 1997 and data 
     for other services for periods beginning on or after July 1, 
     1998. The Secretary could not require an organization to 
     submit data before January 1, 1998. It also requires that the 
     payment methodology be applied uniformly without regard to 
     the type of plan.
     (b) Annual announcement of payment rates


                               House Bill

       Section 10001 (new section 1853(b)). Payments to plans 
     would be calculated based on the annual MedicarePlus 
     capitation rate. The Secretary would be required to annually 
     determine, and announce no later than August 1 before the 
     calendar year concerned: (I) the annual MedicarePlus 
     capitation rate for each MedicarePlus payment area for the 
     year, and (ii) the risk and other factors to be used in 
     adjusting such rates for payments for months in that year. An 
     explanation of the assumptions and changes in methodology 
     would have to be included in sufficient detail so that 
     organizations could compute monthly adjusted MedicarePlus 
     capitation rates. The Secretary would be required to provide 
     advance notice (at least 45 days prior to the announcement) 
     of the proposed changes in the methodology and assumptions 
     used to develop the rates, and give organizations an 
     opportunity to comment.
       Section 4001 (new section 1853(b)). Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment except that 
     the date for announcing the payment rates is changed to March 
     1 before the calendar year concerned.
     (c) Calculation of annual Medicare plus capitation rates


                               House Bill

       Section 10001 (new section 1853(c)). Provides that the 
     annual MedicarePlus capitation rate, for a payment area (for 
     a contract for a calendar year) would be equal to the 
     greatest of the following:
       (A) A blended capitation rate, defined as the sum of:
       (1) the area-specific percentage (as defined below) of the 
     annual area-specific MedicarePlus capitation rate for the 
     year for the payment area, and
       (2) the national percentage (as defined below) of the 
     input-price adjusted annual national MedicarePlus capitation 
     rate for the year. This sum is multiplied by the budget 
     neutrality adjustment factors (described below);
       (B) A minimum (i.e. ``floor'') monthly payment amount set 
     at $350 for 1998 (but not to exceed, in the case of an area 
     outside the 50 states and the District of Columbia, 150% of 
     the 1997 AAPCC). For a subsequent year, this payment amount 
     would be increased by the national per capita MedicarePlus 
     growth percentage for that year.
       (c) A minimum percentage increase (i.e., ``hold harmless'' 
     amount). In 1998, the payment area would receive a rate that 
     is 102% of its 1997 AAPCC. For a subsequent year, it would be 
     102% of the annual MedicarePlus capitation rate for the 
     previous year.
       There are four elements in the blended capitation rate 
     referred to in ``A'' above: First, the area-specific and 
     national percentages are as follows:
       1998--the area-specific percentage is 90% and the national 
     percentage is 10%.
       1999--the area-specific percentage is 80% and the national 
     percentage is 20%.
       2000--the area-specific percentage is 70% and the national 
     percentage is 30%
       2001--the area-specific percentage is 60% and the national 
     percentage is 40%
       After 2001--the area-specific percentage is 50% and the 
     national percentage is 50%.
       Second, the annual area-specific MedicarePlus capitation 
     rate for a MedicarePlus payment area would be:
       For 1998, the annual per capita rate of payment for 1997 
     (as determined under the current law calculation to derive 
     the AAPCC), increased by the national average per capita 
     growth percentage for 1998 (as defined below), or
       For a subsequent year, the annual area-specific 
     MedicarePlus capitation rate for the

[[Page H6186]]

     previous year, increased by the national per capita 
     MedicarePlus growth percentage for such subsequent year.
       Third, the input-price-adjusted annual national 
     MedicarePlus capitation rate for a MedicarePlus payment area 
     for a year would be equal to the sum, for all types of 
     Medicare services, of the product of three amounts: (I) the 
     national standardized annual MedicarePlus capitation rate for 
     the year (defined as the weighted average of area-specific 
     MedicarePlus capitation rates), (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 service) the relative input price of such 
     services in the area as compared to the national average 
     input price of such services. (In applying (iii), the 
     Secretary would use those indices that are used in applying 
     (or updating) national payment rates for specific areas and 
     localities.) Special rules specified in the provision would 
     apply for 1998 (and optionally for 1999) in providing for the 
     input price adjustment.
       Fourth, in calculating the payment rates, the Secretary 
     would be required to apply a budget neutrality adjustment to 
     the blended rate payments. This adjustment would ensure that 
     the aggregate of payments equals that which would have been 
     made if the payment was based on 100% of the area-specific 
     MedicarePlus capitation rates for each payment area. In doing 
     this, the budget neutral amount for all counties would be 
     equal to the sum of the area-specific rates used to compute 
     the blended rates multiplied by the product of the update 
     factor and the number of enrollees in that county.
       With respect to the blended and the minimum payment rate 
     categories described in ``A'' and ``B'' above, the national 
     per capita MedicarePlus growth percentage 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 Medicare parts A and B, reduced by 0.5 
     percentage points for 1998-2002, and by 0 percentage points 
     for years thereafter.
       Separate determinations would have to be made for aged 
     enrollees, disabled enrollees, and enrollees with ESRD. The 
     percentage adjustment would have to reflect an adjustment for 
     over or under projecting the percentage growth for previous 
     years.
       Section 4001 (new section 1853(c)). Differs with respect to 
     several major elements:
       Plans would get the greatest of the blended rate, minimum 
     (floor) or minimum percentage increase (hold harmless). The 
     minimum percentage increase is treated differently as 
     follows: In 1998, the payment area would receive a 
     MedicarePlus capitation rate that is 100% of its 1997 AAPCC. 
     For 1999 and 2000, it would be 101% of the previous year's 
     rate. For 2001 and subsequent years, it would be 102% of the 
     previous year's rate.
       There are five (instead of four) elements in the blended 
     capitation rate: First, the area-specific and national 
     percentages are as follows:
       1998--the area-specific percentage is 90% and the national 
     percentage is 10%
       1999--the area-specific percentage is 85% and the national 
     percentage is 15%
       2000--the area-specific percentage is 80% and the national 
     percentage is 20%
       2001--the area-specific percentage is 75% and the national 
     percentage is 25%
       After 2001--the area-specific percentage is 70% and the 
     national percentage is 30%.
       Second, the annual area-specific MedicarePlus capitation 
     rate for a MedicarePlus payment area would be calculated as 
     follows, after removing certain amounts from historical 
     payment amounts (as described below):
       For 1998--the annual per capita rate of payment for 1997 
     (as determined under the current law calculation to derive 
     the AAPCC), increased by the national average per capita 
     growth percentage for 1998 (as defined below), or
       For a subsequent year--the annual area-specific 
     MedicarePlus capitation rate for the previous year, increased 
     by the national per capita MedicarePlus growth percentage for 
     such subsequent year.
       Third, in determining the area-specific MedicarePlus 
     capitation rate, amounts attributable to payments for 
     hospitals serving a disproportionate share of low-income 
     patients, payments for the indirect costs of medical 
     education, and payments for direct graduate medical education 
     costs, should be deducted from the 1997 payment amount as 
     follows:
       1998--20% of such payments
       1999--40% of such payments
       2000--60% of such payments
       2001--80% of such payments
       2002--100% of such payments
       Fourth, the input-price-adjusted annual national 
     MedicarePlus capitation rate for a MedicarePlus payment area 
     for a year would be determined. This is done in the same way 
     as in section 10001.
       Fifth, in calculating the payment rates, the Secretary 
     would be required to apply a budget neutrality adjustment to 
     the blended rate payments. This is done in the same way as in 
     section 10001.
       Treatment of areas with highly variable payment rates. Adds 
     a provision requiring that in the case of a MedicarePlus 
     payment area for which the AAPCC for 1997 varies by more than 
     20% from such rate for 1996, the Secretary, where 
     appropriate, could substitute for the 1997 rate a rate that 
     is more representative of the cost of the enrollees in the 
     area.


                            Senate Amendment

       Similar but varies with respect to specific parameters, as 
     follows. The annual Medicare Choice capitation rate (for a 
     contract year) would be the greatest of the:
       (A) A blended capitation rate, defined as the a sum of the 
     :
       (1) the area-specific percentage of the annual area-
     specific Medicare Choice capitation rate for the year for the 
     payment area, and the (2) national percentage of the annual 
     national Medicare choice capitation rate for the year (not 
     adjusted for input prices). This sum is multiplied by the 
     budget neutrality adjustment factors (described below);
       (B) A minimum (i.e., ``floor'') monthly payment amount set 
     at $4,200 for 1998 (which is $350 per month) (but not to 
     exceed, in the case of an area outside the 50 states and the 
     District of Columbia, 150% of the 1997 AAPCC). This floor 
     would then be raised to no more than 85% of the national 
     average payment. The amount it would be raised would depend 
     on the amount of dollars saved by lowering the minimum update 
     (see below).
       (c) A minimum percentage increase (i.e., ``hold harmless'' 
     amount). In 1998, the payment area would receive a rate equal 
     to 101% of the 1997 AAPCC. This amount would be lowered to 
     100% of the previous year's rate to pay for the higher floor 
     amounts.
       There are five elements in the blended capitation rate. 
     First the phase in of area-specific and national percentages 
     are the same as for section 10001: The blend starts at 90% 
     local and 10% national in 1998 and phases down to 50% local 
     and 50% national in 2002.
       Second, the annual area-specific Medicare Choice capitation 
     rate for a Medicare Choice payment area would be calculated 
     as follows, after removing amounts for certain historical 
     payments:
       For 1998, the modified 1997 AAPCC, increased by the 
     national average per capita growth percentage for 1998 (see 
     below), or
       For a subsequent year, the annual area-specific Medicare 
     Choice capitation rate for the previous year increased by the 
     national average per capita growth percentage for such 
     subsequent year.
       Third, in determining the area-specific Medicare Choice 
     capitation rate, amounts attributable to payments for 
     hospitals serving a disproportionate share of low-income 
     patients, payments for the indirect costs of medical 
     education, and payments for direct graduate medical education 
     costs, should be deducted from the 1997 payment amount as 
     follows:
       1998--25% of such payments
       1999--50% of such payments
       2000--75% of such payments
       2001--100% of such payments.
       Fourth, the annual national Medicare Choice capitation rate 
     for a Medicare Choice payment area for a payment year would 
     be equal to the sum, for all Medicare Choice payment areas, 
     of the product of: (I) the annual area-specific Medicare 
     Choice capitation rate, and (ii) the average number of 
     Medicare beneficiaries residing in that area divided by the 
     number of Medicare beneficiaries for all Medicare Choice 
     payment areas for that year.
       Fifth, in calculating payment rates, the Secretary would be 
     required to apply a budget neutrality adjustment to blended 
     rate payments. This is identical to the provision in section 
     10001.
       With respect to the blended payment rate categories 
     described in ``A'' above, the national per capita Medicare 
     choice growth percentage for any year beginning with 1998 is 
     the percentage increase in the gross domestic product (GDP) 
     per capita for the preceding year plus 0.5 percentage points.
       Treatment of areas with highly variable payment rates. 
     Identical to section 4001.
       Study of local price indicators. The Secretary and the 
     Medicare Payment Advisory Commission would be required to 
     conduct a study with respect to appropriate measures for 
     adjusting the annual Medicare Choice capitation rates 
     determined under this section to reflect local price 
     indicators, including the medical hospital wage index and the 
     case mix of a geographic region. The Secretary and the 
     Commission would be required to report the study results to 
     the appropriate committees of Congress, including 
     recommendations (if any) for legislation.


                          Conference Agreement

       The conference agreement includes provisions from section 
     10001 of the House bill with modifications. These are as 
     follows:
       Calculations of the annual capitation rates for each 
     payment area would have to take into account any adjustment 
     for over or under projecting the national per capita 
     Medicare+Choice growth percentage and any adjustment for 
     national coverage determinations. (These adjustments are 
     described in greater detail below.)
       The minimum (``floor'') amount in 1998 would be $367 (but 
     not to exceed, in the case of areas outside the 50 states and 
     Washington, D.C., 150% of the 1997 AAPCC). For a succeeding 
     year, the payment would be increased by the national per 
     capita Medicare+Choice growth percentage (see below). (The 
     floor for the territories would be updated by the national 
     per capita Medicare+Choice growth percentage from the 150% 
     amount.)
       The area-specific and national percentages used to 
     calculate the rates for the blended counties would be as 
     follows:
       1998--the area-specific percentage is 90% and the national 
     percentage is 10%

[[Page H6187]]

       1999--the area-specific percentage is 82% and the national 
     percentage is 18%
       2000--the area-specific percentage is 74% and the national 
     percentage is 26%
       2001--the area-specific percentage is 66% and the national 
     percentage is 34%
       2002--the area-specific percentage is 58% and the national 
     percentage is 42%
       After 2002--the area-specific percentage is 50% and the 
     national percentage is 50%.
       Calculation of the area-specific rates would have to take 
     into account the substituted rates for areas with highly 
     variable payment rates. (Such areas are those for which the 
     annual per capita rate of payment for risk contract plans for 
     1997 varied by more than 20% for such rate for 1996. 
     The Secretary would be authorized to substitute for the 
     1997 rate one that was more representative of the costs of 
     the enrollees in the area.)
       Payments (direct and indirect) for graduate medical 
     education would be ``carved out'' of the payments to the 
     Medicare+Choice plans over 5 years. Specifically, in 
     determining the area-specific Medicare+Choice capitation 
     rate, amounts attributable to payments for the indirect costs 
     of medical education, and payments for direct graduate 
     medical education costs, would be deducted from the 1997 
     payment amount as follows:
       1998--20% of such payments
       1999--40% of such payments
       2000--60% of such payments
       2001--80% of such payments
       2002--100% of such payments
       Payments for DSH would not be carved out. The conference 
     agreement includes technical drafting changes to the 
     provision specifying the treatment of payments covered under 
     state hospital reimbursement systems.
       The conference agreement includes clarifying changes to the 
     budget neutrality requirement. Based on the modeling of the 
     rates that was done while developing the payment provisions 
     included in the conference agreement, the Conferees 
     understand that the application of the budget neutrality 
     factor to the blended rates may require that all rates be 
     calculated for a given year through an iterative process. For 
     example, the application of the budget neutrality factor in a 
     given year may result in the reduction, for some counties, of 
     the blended rate below the level provided under the minimum 
     increase provision. Since the rate for any county is based on 
     the greatest of the three payment rate amounts, payments 
     would then be recalculated with these counties now being paid 
     based on the minimum increase or floor provision. Budget 
     neutrality would then be achieved through the application of 
     a different budget neutrality factor to the remaining blend 
     counties. The rate calculation is completed when the 
     application of the budget neutrality factor does not result 
     in any additional county payment rates falling below the 
     minimum increase or floor amounts.
       The national per capita Medicare+Choice growth percentage 
     would be the growth in per capita Medicare fee-for-service 
     expenditures minus 0.8 percentage points in 1998, minus 0.5 
     percentage points for 1999 through 2002 and minus 0 
     percentage points for 2003 and thereafter. Beginning with 
     rates calculated for 1999, before computing rates for a year, 
     the Secretary would adjust all area-specific and national 
     rates (and beginning in 2000, minimum payment rates) for the 
     previous year for the differences between the projections of 
     the national per capita Medicare+Choice percentage for that 
     year and previous years and the current estimate of such 
     percentage for such years.
       National coverage determination adjustment. If the 
     Secretary made a determination with respect to coverage that 
     he or she projected would result in a significant increase in 
     the costs to Medicare+Choice of providing benefits under 
     contracts under this part, the Secretary would have to adjust 
     appropriately the payments to Medicare+Choice organizations.
     (d) Medicare plus payment area defined


                               house bill

       Section 10001 (new section 1853(d)). Defines a MedicarePlus 
     payment area as a county or equivalent area specified by the 
     Secretary. In the case of individuals determined to have 
     ESRD, the MedicarePlus payment area would be each state, or 
     other payment areas as the Secretary specified.
       Upon request of a state for a contract year (beginning 
     after 1998) made at least 7 months before the beginning of 
     the year, the Secretary would redefine MedicarePlus payment 
     areas in the state to: (1) a single statewide MedicarePlus 
     payment area; (2) a metropolitan system (described in the 
     provision); or (3) a single MedicarePlus payment area 
     consolidating noncontiguous counties (or equivalent areas) 
     within a state. This adjustment would be effective for 
     payments for months beginning with January of the year 
     following the year in which the request was received. The 
     Secretary would be required to make an adjustment to payment 
     areas in the state to ensure budget neutrality.
       Section 4001 (new section 1853(d)). Identical provision.-


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.-
     (e) Special rules for individuals electing MSA plans


                               house bill

       Section 10001 (new section 1853(e)). Provides that if the 
     monthly premium for an MSA plan for a MedicarePlus payment 
     area was less than 1/12 of the annual MedicarePlus capitation 
     rate for the area and year involved, the Secretary would 
     deposit the difference in a MedicarePlus MSA established by 
     the individual. No payment would be made unless the 
     individual had established the MedicarePlus MSA before the 
     beginning of the month or by such other deadline the 
     Secretary specifies. If the individual had more than one 
     account, he or she would designate one to the receive the 
     payment. The payment for the first month for which an MSA 
     plan was effective for a year would also include amounts for 
     successive months in the year. For cases when an MSA election 
     was terminated before the end of the year, the Secretary 
     would establish a procedure to recover deposits attributable 
     to the remaining months.
       Section 4001 (new section 1853(e)). Identical provision. -


                            senate amendment

       Similar provision except deposit would be subject, if 
     applicable, to the new enrollee risk adjustment reduction.


                          conference agreement

       The conference agreement includes the House bill.
     (f) Payments from trust fund


                               house bill

       Section 10001 (new section 1853(f)). Payments to 
     MedicarePlus organizations and payments to MedicarePlus MSAs, 
     would be made from the HI and SMI trust funds in such 
     proportion as the Secretary determined reflected the relative 
     weights that benefits under Parts A and B represented 
     Medicare's actuarial value of the total benefits. Monthly 
     payments otherwise payable for October 2001 would be paid on 
     the last business day of September 2001.
       Section 4001 (new section 1853(f)). Identical provision.


                            senate amendment

       Identical except adds that monthly payments otherwise 
     payable for October 2006 would be paid on the first business 
     day of October 2006.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     modifications. Monthly payments otherwise payable under this 
     section for October 2000 would be paid on the first business 
     day of such month. Monthly payments otherwise payable under 
     this section for October 2001 would be paid on the last 
     business day of September 20001. Monthly payments otherwise 
     payable under this section for October 20006 would be paid on 
     the first business day of October 2006.
     (g) Special rule for certain inpatient hospital stays


                               house bill

       Section 10001 (new section 1853(g)). Provides that in the 
     case of an individual receiving inpatient hospital services 
     from a hospital covered under Medicare's prospective payment 
     system as of the effective date of the (1) individual's 
     election of a MedicarePlus plan: (a) payment for such 
     services until the date of the individual's discharge would 
     be made as if the individual did not elect coverage under the 
     MedicarePlus plan; (b) the elected organization would not be 
     financially responsible for payment for such services until 
     the date of the individual's discharge; and (c) the 
     organization would nevertheless be paid the full amount 
     otherwise payable to the organization; or (2) termination of 
     enrollment with a MedicarePlus organization: (a) the 
     organization would be financially responsible for payment for 
     such services after the date of termination and until the 
     date of discharge; (b) payment for such services during the 
     stay would not be made under Medicare's PPS system; and (c) 
     the terminated organization would not receive any payment 
     with respect to the individual during the period in which the 
     individual was not enrolled.
       Section 4001 (new section 1853g)). Identical provision.
       Effective date.--
       Section 10001. Effective upon enactment and would be 
     applied for contracting periods beginning on or after January 
     1, 1998.
       Section 4001. Identical.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with an 
     amendment providing for a special rule for hospice care. A 
     contract under this part would have to require a 
     Medicare+Choice organization to inform each individual 
     enrollee in a Medicare+Choice plan about the availability of 
     hospice care if (I) a hospice program participating under 
     Medicare was located within the organization's service area 
     or (ii) it was common practice to refer patients to hospice 
     programs outside the service area. If an enrollee elected to 
     receive hospice care from a particular hospice program, 
     payment for the hospice care would have to be made by the 
     Secretary. In addition, payment for other services for which 
     the individual was eligible, notwithstanding the hospice 
     election, would be made by the Secretary to the 
     Medicare+Choice organization or provider or supplier of the 
     service instead of payments

[[Page H6188]]

     to the plan. The Secretary would continue to make monthly 
     payments to the organization equal to the value of any 
     additional benefits calculated under section 1854.
     Premiums (new section 1854)


                              Current Law

       Section 1876 of the Social Security Act provides for 
     requirements relating to benefits, payment to the plans by 
     Medicare, and payments to the plans by beneficiaries. A 
     Medicare beneficiary enrolled in an HMO/CMP is entitled to 
     receive all services and supplies covered under Medicare 
     Parts A and B (or Part B only, if only enrolled in Part B). 
     These services must be provided directly by the organization 
     or under arrangements with the organization. Enrollees in 
     risk-based organizations are required to receive all services 
     from the HMO/CMP except in emergencies.
       In general, HMOs/CMPs offer benefits in addition to those 
     provided under Medicare's benefit package. In certain cases, 
     the beneficiary has the option of selecting the additional 
     benefits, while in other cases some or all of the 
     supplementary benefits are mandatory.
       Some entities may require members to accept additional 
     benefits (and pay extra for them in some cases). These 
     required additional services may be approved by the Secretary 
     if it is determined that the provision of such additional 
     services will not discourage enrollment in the organization 
     by other Medicare beneficiaries.
       The amount an HMO/CMP may charge for additional benefits is 
     based on a comparison of the entity's adjusted community rate 
     (ACR, essentially the estimated market price) for the 
     Medicare package and the average of the Medicare per capita 
     payment rate. A risk-based organization is required to offer 
     ``additional benefits'' at no additional charge if the 
     organization achieves a savings from Medicare. This 
     ``savings'' occurs if the ACR for the Medicare package is 
     less than the average of the per capita Medicare payment 
     rates. The difference between the two is the amount available 
     to pay additional benefits to enrollees. These may include 
     types of services not covered, such as outpatient 
     prescription drugs, or waivers of coverage limits, such as 
     Medicare's lifetime limit on reserve days for inpatient 
     hospital care. The organization might also waive some or all 
     of the Medicare's cost-sharing requirements.
       The entity may elect to have a portion of its ``savings'' 
     placed in a benefit stabilization fund. The purpose of this 
     fund is to permit the entity to continue to offer the same 
     set of benefits in future years even if the revenues 
     available to finance those benefits diminish. Any amounts not 
     provided as additional benefits or placed in a stabilization 
     fund would be offset by a reduction in Medicare's payment 
     rate.
       If the difference between the average Medicare payment rate 
     and the adjusted ACR is insufficient to cover the cost of 
     additional benefits, the HMO/CMP may charge a supplemental 
     premium or impose additional cost-sharing charges. If, on the 
     other hand, the HMO does not offer additional benefits equal 
     in value to the difference between the ACR and the average 
     Medicare payment, the Medicare payments are reduced until the 
     average payment is equal to the sum of the ACR and the value 
     of the additional benefits.
       For the basic Medicare covered services, premiums and the 
     projected average amount of any other cost-sharing may not 
     exceed what would have been paid by the average enrollee 
     under Medicare rules if she or he had not joined the HMO. For 
     supplementary services, premiums and projected average cost-
     sharing may not exceed what the HMO would have charged for 
     the same set of services in the private market.


                               house bill

       Section 10001 (new section 1854). The provision creates a 
     new Section 1854 specifying requirements for the 
     determination of premiums charged by MedicarePlus 
     organizations to MedicarePlus enrollees.
       Section 4001 (new section 1854). Identical provision.


                            Senate Amendment

       Similar but applies to Medicare Choice.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment but applies 
     to Medicare+Choice organizations and plans.
     (a) Submission and charging of premiums


                               House Bill

       Section 10001 (new section 1854(a)). Requires each 
     MedicarePlus organization to file annually with the Secretary 
     the amount of the monthly premium for coverage under each of 
     the plans it would be offering in each payment area, and the 
     enrollment capacity in relation to the plan in each such 
     area. The net monthly premium is the premium for covered 
     services reduced by the monthly MedicarePlus capitation 
     payment.
       Section 4001 (new section 1854 (a)). Identical provision.-


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement provides that in general, no later 
     than May 1 of each year, each Medicare+Choice organization 
     submit to the Secretary, in a form and manner specified by 
     the Secretary, and for each Medicare+Choice plan for the 
     service area in which it intends to be offered in the 
     following year, specific information and the enrollment 
     capacity (if any) in relation to the plan and the area. For 
     coordinated care plans, the following information would be 
     required:
       (1) For basic (and) additional benefits, the adjusted 
     community rate (ACR), the Medicare+Choice monthly basic 
     beneficiary premium, a description of deductibles, 
     coinsurance, and copayments applicable under the plan and the 
     actuarial value of such, and (if applicable) a description of 
     the additional benefits to be provided and value for such 
     proposed benefits.
       (2) For supplemental benefits, the ACR, the supplemental 
     beneficiary premium, and a description of deductibles, 
     coinsurance, and copayments applicable under the plan and the 
     actuarial value of such.
       For MSA plans, the required information would include the 
     monthly MSA premium for the basic (and additional) benefits 
     and the amount of the supplementary beneficiary premium. For 
     private fee-for-service plans, the required information would 
     include for the basic (and additional) benefits, the ACR, the 
     amount of the Medicare+Choice monthly basic beneficiary 
     premium, and (if applicable) a description of the additional 
     benefits to be provided and value for such proposed benefits. 
     In addition, they would have to include the amount of the 
     monthly supplementary premium.
       In general, the Secretary would be required to review the 
     ACRs, the amounts of the premiums, and the values filed under 
     this provision and approve or disapprove such fates, amounts, 
     and values. The Secretary could not review the MSA premiums 
     or the premiums for the private fee-for-service plans.
     (b) Monthly premium charged


                               House Bill

       Section 10001 (new section 1854(b)). Provides that the 
     monthly amount of premium charged in a payment area to an 
     enrollee would equal the net monthly premium plus any monthly 
     premium charged (in accordance with (e) below) for 
     supplemental benefits.
       Section 4001 (new section 1854 (b)). Identical provision.-


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement provides that the monthly premium, 
     for other than MSA plans, would be equal to the sum of the 
     Medicare+Choice monthly basic beneficiary premium and the 
     Medicare+Choice monthly supplementary beneficiary premium (if 
     any). For MSA plans, the monthly amount of the premium 
     charged to an enrollee would be equal to the Medicare+Choice 
     monthly supplemental beneficiary premium (if any).
       The Medicare+Choice monthly basic premium is defined to 
     mean the amount authorized to be charged for basic and 
     additional benefits for the plan (see below), or, in the case 
     of a private fee-for-service plan, the amount filed with the 
     Secretary.
       The Medicare+Choice monthly supplemental beneficiary 
     premium is defined to mean the amount authorized to be 
     charged for supplemental benefits or, in the case of a MSA 
     plan or a fee-for-service plan, the amount filed with the 
     Secretary.
       The Medicare+Choice MSA premium is defined at the amount of 
     such premium filed with the Secretary.
     (c) Uniform premium


                               House Bill

       Section 10001 (new section 1854(c)). Premiums could not 
     vary among individuals who resided in the same payment area.
       Section 4001 (new section 1854(c)). Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with a 
     modification to specify that the monthly basic and 
     supplemental premium could not vary among individuals 
     enrolled in the plan and to conform with the definitional 
     changes noted above.
     (d) Terms and conditions of imposing premiums


                               House Bill

       Section 10001 (new section 1854(d)). Each MedicarePlus 
     organization would have to permit monthly payment of 
     premiums. An organization could terminate election of 
     individuals for a MedicarePlus plan for failure to make 
     premium payments but only under specified conditions. A 
     MedicarePlus organization could not provide for cash or other 
     monetary rebates as an inducement for enrollment or 
     otherwise.
       Section 4001 (new section 1854(d)). Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with 
     conforming changes reflecting the definitional changes noted 
     above.
     (e) Limitation on enrollee cost-sharing


                               House Bill

       Section 10001 (new section 1854(e)). In no case could the 
     actuarial value of the net monthly premium rate, deductibles, 
     coinsurance, and copayments applicable on average to 
     individuals enrolled with a MedicarePlus plan with respect to 
     required benefits exceed

[[Page H6189]]

     the actuarial value of the deductibles, coinsurance, and 
     copayments applicable on average to individuals in Medicare 
     FFS. For supplemental benefits, the premium for such benefits 
     and the actuarial value of its deductibles, coinsurance, and 
     copayments could not exceed the adjusted community rate for 
     such benefits. These provisions would not apply to an MSA 
     plan. If the Secretary determined that adequate data were not 
     available to determine the actuarial value of the cost-
     sharing elements of the plan, the Secretary could determine 
     the amount.
       Section 4001 (new section 1854(e)). Identical provision.


                            senate amendment

       Identical except provides for exception to the limitations 
     on enrollee cost-sharing to unrestricted fee-for-service 
     plans as well as MSA plans.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     conforming changes and an amendment providing for a special 
     rule for Medicare+Choice private fee-for-service plans that 
     are not MSA plans. In no event could the actuarial value of 
     the deductibles, coinsurance, and copayments applicable on 
     average to individuals enrolled with such a plan with respect 
     to required Medicare benefits exceed 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 of Medicare if they 
     were not members of a Medicare+Choice organization for the 
     year.
     (f) Requirement for additional benefits


                               house bill

       Section 10001 (new section 1854(f)). Provides that the 
     extent to which a MedicarePlus plan (other than a MSA plan) 
     would have to provide additional benefits would depend on 
     whether the plan's adjusted community rate (ACR) was lower 
     than its average capitation payments. The ACR would mean, at 
     the election of the MedicarePlus organization, either: (i) 
     the rate of payment for services which the Secretary annually 
     determined would apply to the individuals electing a 
     MedicarePlus plan if the payment were determined under a 
     community rating system, or (ii) the portion of the weighted 
     aggregate premium which the Secretary annually estimated 
     would apply to the individual but adjusted for differences 
     between the utilization of individuals under Medicare and the 
     utilization of other enrollees (or through another specified 
     manner). For PSOs, the ACR could be computed 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.
       If the actuarial value of the benefits under the 
     MedicarePlus plan (as determined based upon the ACR) for 
     individuals was less than the average of the capitation 
     payments made to the organization for the plan at the 
     beginning of a contract year, the organization would have to 
     provide additional benefits in a value which was at least as 
     much as the amount by which the capitation payment exceeded 
     the ACR. These benefits would have to be uniform for all 
     enrollees in a plan area. (The excess amount could, however, 
     be lower if the organization elected to withhold some of it 
     for a stabilization fund.) A MedicarePlus organization could 
     provide additional benefits (over and above those required to 
     be added as a result of the excess payment), and could impose 
     a premium for such additional benefits.
       Section 4001 (new section 1854(f)). Identical provision.


                            senate amendment

       Identical provision except does not include the lack of 
     enrollment experience in the case of a PSO under the 
     provision related to determinations based on insufficient 
     data.


                          conference agreement

       The conference agreement includes the House provision with 
     a modification relating to the determination when 
     insufficient data on enrollment experience exists or to 
     determine the adjusted community rate for a newly established 
     organization. It would permit the Secretary to determine a 
     rate using data in the general commercial marketplace.
     (g) Periodic auditing


                               house bill

       Section 10001 (new section 1854(g)). Requires the Secretary 
     to provide annually for the auditing of the financial records 
     (including data relating to utilization and computation of 
     the ACR) of at least one-third of the MedicarePlus 
     organizations offering MedicarePlus plans. The General 
     Accounting Office would be required to monitor such auditing 
     activities.
       Section 4001 (new section 1854(g)). Identical provision.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement does not include the House or 
     Senate provisions (but see item (a) above).
     (h) Prohibition of State imposition of premium taxes


                               house bill

       Section 10001 (new section 1854(h)). No state could impose 
     a premium tax or similar tax on the premiums of MedicarePlus 
     plans or the offering of such plans.
       Section 4001 (new section 1854(h)). Identical provision.
       Effective date.
       Section 10001. Unless otherwise provided, generally 
     applicable to contracts entered into or renewed on or after 
     January 1, 1998.
       Section 4001. Identical provision.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with a 
     clarification to provide that no state could impose a premium 
     tax or similar tax with respect to payments to 
     Medicare+Choice organizations under section 1853 (which 
     provides for payments to Medicare+Choice plans).

  Organizational and Financial Requirements for MedicarePlus/Medicare 
  Choice Organizations; Provider Sponsored Organizations (PSOs) (New 
                             section 1855)-


                              current law

       Under Section 1876 of the Social Security Act, Medicare 
     specifies requirements to be met by an organization seeking 
     to become a managed care contractor with Medicare. In 
     general, these include the following: (1) the entity must be 
     organized under the laws of the state and be a federally 
     qualified HMO or a competitive medical plan (CMP) which is an 
     organizations that meets specified requirements (it provides 
     physician, inpatient, laboratory, and other services, and 
     provides out-of-area coverage); (2) the organization is paid 
     a predetermined amount without regard to the frequency, 
     extent, or kind of services actually delivered to a member; 
     (3) the entity provides physicians' services primarily 
     through physicians who are either employees or partners of 
     the organization or through contracts with individual 
     physicians or physician groups; (4) the entity assumes full 
     financial risk on a prospective basis for the provision of 
     covered services, except that it may obtain stop-loss 
     coverage and other insurance for catastrophic and other 
     specified costs; and (5) the entity has made adequate 
     provision for protection against the risk of insolvency.
       Provider Sponsored Organizations (PSOs) that are not 
     organized under the laws of a state and are neither a 
     federally qualified HMO or CMP are not eligible to contract 
     with Medicare under the risk contract program. A PSO is a 
     term generally used to describe a cooperative venture of a 
     group of providers who control its health service delivery 
     and financial arrangements.


                               house bill

       Section 10001 (new section 1855). Adds a new Section 1855 
     to the Social Security Act providing organizational and 
     financial requirements for MedicarePlus organizations, 
     including PSOs.
       Section 4001 (new section 1855). Identical provision.-


                            senate amendment

       Similar but applies to Medicare Choice Organizations.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment except that 
     the provisions apply to Medicare+Choice organizations and 
     plans.
     (a) Organized and licensed under state law


                               house bill

       Section 10001 (new section 1855(a)). Requires a 
     MedicarePlus organization to 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.
       A special exception would apply, however, for PSOs. In 
     general, a PSO seeking to offer a MedicarePlus plan could 
     apply to the Secretary for a waiver of the state licensing 
     requirement. The Secretary would be required to grant or deny 
     a waiver application within 60 days of a completed 
     application.
       The Secretary could grant a waiver of the state licensing 
     requirement for an organization that is a PSO if the 
     Secretary determined that: (i) the state had failed to 
     substantially complete action on a licensing application 
     within 90 days of the receipt of a completed application (not 
     including any period before the date of enactment); or (ii) 
     the state denied such a licensing application and (a) the 
     state had imposed documentation or information requirements 
     not related to solvency requirements that were not generally 
     applicable to other entities engaged in substantially similar 
     business, or (b) the state's standards or review process 
     imposed any material requirements, procedures, or standards 
     (other than requirements relating to solvency) on such 
     organizations that were not generally applicable to other 
     entities engaged in substantially similar business; or (iii) 
     the state used its own solvency requirements which were not 
     the same as the federal requirements to deny the licensing 
     application, or the state had imposed as a condition of 
     licensure approval any documentation requirements relating to 
     solvency or other material requirements, procedures, or 
     standards that were different from the requirements, 
     procedures, or standards applied by the Secretary.
       In the case of a waiver granted under this paragraph for a 
     PSO: (i) the waiver would be effective for a 36-month period, 
     except it could be renewed based on a subsequent application 
     filed during the last 6 months of such period; and (ii) any 
     provision of state law related to the licensing of the 
     organization which prohibited the organization from providing 
     coverage pursuant to a

[[Page H6190]]

     MedicarePlus contract would be preempted. Waivers could be 
     renewed more than once.
       The state licensing requirement would not apply to a 
     MedicarePlus organization in a state if the state required 
     the organization, as a condition of licensure, to offer any 
     plan other than a MedicarePlus plan. The fact that an 
     organization was licensed under state law would not 
     substitute for or constitute certification.
       Section 4001 (new section 1855(a)). Identical except: (i) 
     the waiver application from the PSO to the state would not 
     have to be a completed application; the waiver would be 
     conditioned upon the pendency of the licensure application 
     during the period the waiver was in effect; and (ii) the 
     preemption of state laws would not be construed as waiving 
     any provision of state law which related to quality of care 
     or consumer protection standards) and which was imposed on a 
     uniform basis and was generally applicable to other entities 
     engaged in substantially similar business.


                            senate amendment

       In general, organizations would have to be licensed under 
     state law as risk-bearing entities eligible to offer health 
     insurance or benefits coverage in each state in which it 
     offered a Medicare Choice plan. The provision establishes, 
     however, a different exceptions process for PSOs. Prior to 
     2001, the Secretary would be required to waive the state 
     licensure requirement for a PSO if: (i) the organization 
     filed an application for a waiver with the Secretary, and 
     (ii) the contract with the organization with Medicare under 
     new section 1857 (see below) required the organization to 
     meet all requirements of state law which related to the 
     licensing of the organization (other than solvency 
     requirements or a prohibition on licensure for the 
     organization). The waiver would be effective for the years 
     specified in the waiver but could be renewed based on a 
     subsequent application, and (ii) (subject to the provision 
     described above), any provision of state law which would 
     otherwise prohibit the organization from providing coverage 
     pursuant to a Medicare Choice contract would be superseded. 
     No waiver would extend beyond the earlier of December 31, 
     2000 or the date on which the Secretary determined that the 
     state had in effect federal solvency standards (as 
     established through the process described for new section 
     1856 below).
       The Secretary would be required to grant or deny the waiver 
     application within 60 days after the date the Secretary 
     determined that a substantially completed application had 
     been filed.
       The Secretary would be required to enter into agreements 
     with states subject to a waiver to ensure the adequate 
     enforcement of standards incorporated into the contract with 
     the organization. Such agreements would have to provide 
     methods by which states could notify the Secretary of any 
     failure by an organization to comply with such standards. If 
     the Secretary determined that an organization was not in 
     compliance, he/she would be required to take appropriate 
     actions with respect to civil penalties and termination of 
     the contract. The Secretary would be required to allow an 
     organization 60 days to comply with the standards after 
     notification.
       The Secretary would be required to report to Congress, no 
     later than December 31, 1998, on the PSO waiver procedure. 
     The report would have to include an analysis of state efforts 
     to adopt regulatory standards that take into account health 
     plan sponsors that provide services directly to enrollees 
     through affiliated providers.
       Includes the same provision relating to: (i) exceptions if 
     the organization is required to offer more than Medicare 
     Choice plans and (ii) licensure not substituting or 
     constituting certification.


                          Conference agreement

       The conference agreement includes section 10001 of the 
     House bill with an amendment. PSOs could seek a waiver of 
     state law by filing an application with the Secretary by no 
     later than November 1, 2002. The waiver would be effective 
     for 3 years, would not apply to any other state, and could 
     not be renewed. The agreement clarifies that with respect to 
     waiver applications filed on or after the date of publication 
     of solvency standards (required under new section 1856 as 
     described below), the ground for approval of a waiver 
     application would be that the state had denied a licensing 
     application based (in whole or in part) on the organization's 
     failure to meet applicable solvency requirements and such 
     requirements were not the same as those established under 
     section 1856 as described below, or the state imposed as a 
     condition of approval procedures or standards regarding 
     solvency that were different from those applied by the 
     Secretary as required under this section (see below).
       The Conferees intend that such reasonable grounds for 
     approval of a federal waiver when a state has denied a 
     licensing application or delayed in granting an application 
     include the imposition of documentation or information 
     requirements that are dilatory or unduly burdensome and that 
     are not generally applied to other entities engaged in a 
     substantially similar business.
       A waiver granted to a PSO with respect to licensing under 
     state law would depend upon the organization's compliance 
     with all consumer protection and quality standards insofar as 
     such standards: (i) would apply in the state to the 
     organization if it were licensed under state law; (ii) were 
     generally applicable to other Medicare+Choice organizations 
     and plans in the state; and (iii) were consistent with the 
     standards established under this part. Such standards would 
     not include those preempted under section 1856 relating to 
     non-solvency standards established by the Secretary.
       In the case of a waiver granted to an organization with 
     respect to a state, the Secretary would be required to 
     incorporate the requirement that the organization (and 
     Medicare+Choice plans it offers) comply with state consumer 
     protection and quality standards as part of the contract with 
     Medicare.
       In the case of a waiver granted to a PSO with respect to a 
     state, the Secretary could enter into an agreement with the 
     state in which the state agreed to provide for monitoring and 
     enforcement activities with respect to compliance of an 
     organization and its Medicare+Choice plans with the consumer 
     protection and quality standards. Such monitoring and 
     enforcement would have to be done in the same way as the 
     state enforced such standards with respect to other 
     Medicare+Choice organizations and plans. Such state 
     monitoring and enforcement could not be discriminatory with 
     respect to types of organizations. The agreement would have 
     to specify or establish mechanisms by which compliance 
     activities were undertaken, while not lengthening the time 
     required to review and process applications for waivers.
       By December 31, 2001, the Secretary would have to submit to 
     the House Committees on Ways and Means and Commerce and the 
     Senate Committee on Finance a report regarding whether the 
     waiver process should be continued after December 31, 2002. 
     In making this recommendation, the Secretary would have to 
     consider, among other factors, the impact on beneficiaries 
     and on the long-term solvency of the Medicare program.
     (b) Prepaid payment


                               house bill

       Section 10001 (new section 1855(b)). Provides that a 
     MedicarePlus organization would have to be compensated 
     (except for deductibles, coinsurance, and copayments) by a 
     fixed payment paid on a periodic basis and without regard to 
     the frequency, extent, or kind of health care services 
     actually provided to an enrollee.
       Section 4001 (new section 1855(b)). Identical provision.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement does not include the House or 
     Senate provision.
     (c) Assumption of full financial risk


                               house bill

       Section 10001 (new section 1855(c)). Requires the 
     MedicarePlus organization to assume full financial risk on a 
     prospective basis for the provision of health services (other 
     than hospice care) except the organization could obtain 
     insurance or make other arrangements for costs in excess of 
     $5,000, services needing to be provided other than through 
     the organization; and obtain insurance or make other 
     arrangements for not more than 90 percent of the amount by 
     which its fiscal year costs exceed 115 percent of its income 
     for such year. It could also make arrangements with providers 
     or health institutions to assume all or part of the risk on a 
     prospective basis for the provision of basic services.
       Section 4001 (new section 1855(c)). Identical provision.


                            Senate Amendment

       Identical except also provides that the applicable amount 
     of insurance for 1998 is the amount established by the 
     Secretary and for 1999 and any succeeding year, is the amount 
     in effect for the previous year increased by the percentage 
     change in the CPI-urban for the 12-month period ending with 
     June of the previous year.


                          Conference Agreement

       The conference agreement includes the House bill with a 
     modification specifying that, in lieu of specifying excess 
     costs of $5,000, provides that the Secretary establish the 
     amount from time to time.
     (d) Certification of provision against risk of insolvency for 
         unlicenced PSOs


                               House Bill

       Section 10001 (new section 1855(d)). Requires each 
     MedicarePlus PSO that is not licensed by a state and for 
     which a waiver of state law has been approved by the 
     Secretary to meet federal financial solvency and capital 
     adequacy standards (see new section 1856 as described below). 
     The Secretary would be required to establish a process for 
     the receipt and approval of applications of entities for 
     certification (and periodic recertification) of a PSO as 
     meeting the federal solvency standards. The Secretary would 
     be required to act upon the PSO's certification application 
     within 60 days of its receipt.
       Section 4001 (new section 1855(d)). Identical provision.


                            Senate Amendment

       Similar. Requires each Medicare Choice organization that is 
     a PSO with a waiver of the state licensure requirement to 
     meet standards established under new section 1856 relating to 
     financial solvency and capital adequacy.


                          Conference Agreement

       The conference agreement includes the House bill.

[[Page H6191]]

     (e) Provider sponsored organization defined


                               House Bill

       Section 10001 (new section 1855(e)). Defines a PSO as a 
     public or private entity that is a provider or group of 
     affiliated providers that provides a substantial portion of 
     the required services under the contract directly through the 
     provider or affiliated group of providers, and with respect 
     to those affiliated providers that share, directly or 
     indirectly, substantial financial risk, have at least a 
     majority interest in the entity. In defining substantial 
     proportion, the Secretary would be required to consider the 
     need for such an organization to assume responsibility for a 
     substantial portion of required services in order to assure 
     financial stability and other factors.
       A provider meets the ``affiliation'' requirement 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 (IRC); or (C) both providers are 
     part of an affiliated service group under section 44 of the 
     IRC.
       ``Control,'' and ``health care provider'' are specifically 
     defined. The Secretary would be required to issue regulations 
     to carry out this provision.
       Section 4001 (new section 1855(e)). Identical provision.
       Effective date.
       Section 10001. Unless otherwise provided, generally 
     effective upon enactment.
       Section 4001. Identical.


                            Senate Amendment

       Similar but includes in the definition of a PSO an entity 
     that is established or organized and operated by a local 
     provider or group of providers.
       ``Substantial proportion'' is defined differently. The 
     Secretary would be required to: (A) take into account the 
     need for a PSO to assume: (I) significantly more than the 
     majority of the items and services under the Medicare Choice 
     contract through its own affiliated providers; and (ii) most 
     of the remainder of the items and services under the contract 
     through providers with which the organization has an 
     agreement to provide such items and services, in order to 
     assure financial stability and to address the practical 
     considerations involved in integrating the delivery of a wide 
     range of service providers, (B) take into account the need 
     for a PSO to provide a limited proportion of the items and 
     services under the Medicare Choice contract through providers 
     that are neither affiliated or have an agreement with the 
     organization, and (C) may allow for variation in the 
     definition of substantial proportion among PSOs based on 
     relevant differences among them, such as their local in an 
     urban or rural area.
       Includes the additional requirement for ``affiliation'' 
     that each provider be a participant in a lawful combination 
     under which each provider shares substantial financial risk 
     in connection with the organization's operations.
       Identical definitions of ``control'' and ``health care 
     provider.''
       Effective date. Identical.-


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     a modification removing local from the definition of a PSO. 
     Accordingly, a PSO is a public or private entity that is 
     established or organized and operated by a health care 
     provider, or group of affiliated health care providers.

              Establishment of Standards new section 1856-


                              Current Law

       Under Section 1876 of the Social Security Act, Medicare 
     specifies requirements to be met by an organization seeking 
     to become a managed care contractor with Medicare. There is 
     no provision for Provider Sponsored Organizations (PSOs).


                               House Bill

       Section 10001 (new section 1856). The provision would add a 
     new Section 1856 providing for the establishment of federal 
     standards for MedicarePlus plans, including solvency 
     standards or PSOs.
       Section 4001 (new section 1856). Identical provision.


                            Senate Amendment

       Similar provision but applies to Medicare Choice 
     organizations and plans.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment except that 
     the provisions apply to Medicare+Choice organizations and 
     plans.
     (a) Establishment of solvency standards for PSOs


                               House Bill

       Section 10001 (new section 1856(a)). Requires the Secretary 
     of HHS to establish, on an expedited basis and using a 
     negotiated rule-making process, final standards related to 
     financial solvency and capital adequacy of organizations 
     seeking to qualify as PSOs. The target date for publication 
     of the resulting rules would be April 1, 1998. The Secretary 
     would be required to consult with interested parties and to 
     take into account: (I) the delivery system assets of such an 
     organization and its ability to provide services directly to 
     enrollees through affiliated providers; and (ii) alternative 
     means of protection against insolvency, including 
     reinsurance, unrestricted surplus, letters of credit, 
     guarantees, organizational insurance coverage, etc. Requires 
     the solvency standards to include provisions to prevent 
     enrollees from being held liable to any person or entity for 
     the MedicarePlus's organization's debts in the event of the 
     organization's insolvency. The negotiated rule-making 
     committee would be appointed by the Secretary. If the 
     committee reported by January 1, 1998 that it had failed to 
     make significant progress toward consensus or was unlikely to 
     reach consensus by a target date, the Secretary could 
     terminate the process and provide for the publication of a 
     rule. If the committee was not terminated, it would have to 
     report with the proposed rule by March 1, 1998. The Secretary 
     would then publish the rule on an interim final basis, but it 
     would be subject to change after public notice and comment. 
     In connection with the rule, the Secretary would specify the 
     process for timely review and approval of applications of 
     entities to be certified as PSOs, consistent with this 
     subsection. The Secretary would be required to provide for 
     consideration of such comments and republication of the rule 
     within one year of its publication.
       Section 4001 (new section 1856(a)). Identical provision.-


                            Senate Amendment

       Identical except also requires that, in establishing the 
     standards for PSO solvency, the Secretary take into 
     consideration in any standards developed by the National 
     Association of Insurance Commissioners specifically for risk-
     based health care delivery organizations.


                          Conference Agreement

       The conference agreement includes the Senate amendment.
     (b) Establishment of other standards
       Section 10001 (new section 1856(b)). Requires the Secretary 
     to establish by regulation other standards (not included in 
     (a)) for MedicarePlus organizations and plans consistent 
     with, and to carry out, this part. By June 1, 1998, the 
     Secretary would be required to issue interim standards based 
     on currently applicable standards for Medicare HMOs/CMPs. The 
     new standards established under this provision would 
     supersede any state law or regulation with respect to 
     MedicarePlus plans offered by Medicare contractors to the 
     extent that such state law or regulations was inconsistent 
     with such standards.
       Section 4001 (new section 1856(b)). Identical except with 
     respect to preemption of state law. Provides that subject to 
     section 1852(n) (related to non-preemption of state law), the 
     MedicarePlus standards to be established by the Secretary 
     would supersede any state law or regulation to the extent 
     such law or regulation was inconsistent. Provides that this 
     should 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 this subsection.
     Effective date.
       Section 10001. Unless otherwise provided, generally 
     effective upon enactment.
       Section 4001. Identical.


                            Senate Amendment

       Identical provision to section 10001.


                          Conference Agreement

       The conference agreement includes section 10001 of the 
     House bill with modifications. The Secretary would be 
     required to publish regulations implementing the standards by 
     June 1, 1998. To carry out this requirement in a timely 
     manner, the Secretary would be authorized to promulgate 
     regulations that would take effect on an interim basis, after 
     notice and pending opportunity for public comment.
       The conference agreement clarifies that the federal non-
     solvency standards would preempt any state law or regulation 
     (including those about to be described) with respect to 
     Medicare+Choice plans which are offered by Medicare+Choice 
     organizations to the extent such law or regulation was 
     inconsistent with the federal standards. State standards 
     relating to the following would be preempted: (I) benefit 
     requirements, (ii) requirements relating to inclusion or 
     treatment by providers, and (iii) coverage determinations 
     (including related appeals and grievance processes).
       The Conferees believe that the Medicare+Choice program will 
     continue to grow and eventually eclipse original fee-for-
     service Medicare as the predominant form of enrollment under 
     the Medicare program. Under original fee-for-service, the 
     Federal government alone set legislative requirements 
     regarding reimbursement, covered providers, covered benefits 
     and services, and mechanisms for resolving coverage disputes. 
     Therefore, the Conferees intend that this legislation provide 
     a clear statement extending the same treatment to private 
     Medicare+Choice plans providing Medicare benefits to Medicare 
     beneficiaries.

              Contracts with Medicare+Choice Organizations

                          (new section 1857)-

     (a) In general


                              current law

       No provision.-


                               house bill

       Section 10001 (new section 1857(a)). The Secretary would 
     not permit the election of a Medicare+Choice plan and no 
     payment would

[[Page H6192]]

     be made to an organization unless the Secretary had entered 
     into a contract with the organization with respect to the 
     plan. A contract with an organization could cover more than 
     one Medicare+Choice plan. Contracts would provide that 
     organizations agree to comply with applicable requirements 
     and standards.
       Section 4001 (new section 1857(a)). Identical provision.-


                            senate amendment

       Identical provision except applies to Medicare Choice 
     organization.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment except 
     plans are called Medicare+Choice plans.
     (b) Minimum enrollment requirements


                              current law

       To be eligible as a risk contractor, HMOs/CMPs generally 
     must have at least 5,000 members. However, if HMOs/CMPs 
     primarily serve members outside urbanized areas, they may 
     have fewer members (regulations specify at least 1,500). 
     Organizations eligible for Medicare cost contracts also may 
     have fewer than 5,000 members (regulations specify at least 
     1,500).


                               house bill

       Section 10001 (new section 1857(b)). The Secretary would be 
     prohibited from entering into a contract with a 
     Medicare+Choice organization unless the organization had at 
     least 5,000 individuals (or 1,500 individuals in the case of 
     a PSO) who were receiving health benefits through the 
     organization. An exception would apply if the Medicare+Choice 
     standards (as established in new section 1856 described 
     above) permitted the organization to have a lesser number of 
     beneficiaries (but not less than 500 for a PSO) if the 
     organization primarily served individuals residing outside of 
     urbanized areas. These lower minimum enrollment requirements 
     relating to PSOs are effective January 1, 1998. In addition, 
     the Secretary could waive this requirement during an 
     organization's first 3 contract years. Minimum enrollment 
     requirements would not apply to a contract that related only 
     to an MSA plan.
       Section 4001 (new section 1857(b)). Identical provision.-


                            senate amendment

       The Secretary would be prohibited from entering into a 
     contract with a Medicare Choice organization unless the 
     organization had at least 1,500 individuals who were 
     receiving health benefits through the organization (500 if 
     the organization primarily serves individuals residing 
     outside of urbanized areas). The Secretary may waive this 
     provision during the first 2 contract years with an 
     organization.
       In the case of a PSO, the provision would be applied by 
     taking into account individuals for whom the organization had 
     assumed substantial financial risk.


                          conference agreement

       The conference agreement includes the House provision with 
     clarification that the organization would have at least 1,500 
     individuals (or 500 individuals in the case of a PSO) if the 
     organization primarily serves individuals residing outside of 
     urban areas. The agreement provides that in applying the 
     minimum enrollment requirements to a Medicare+Choice 
     organization that is offering an MSA plan, covered lives 
     would be substituted for individuals. The Secretary has the 
     authority to waive the minimum enrollment during the first 
     three contract years for any organization.
     (c) Contract period and effectiveness


                              current law

       Contracts with HMOs are for 1 year, and may be made 
     automatically renewable. However, the contract may be 
     terminated by the Secretary at any time (after reasonable 
     notice and opportunity for a hearing) in the event that the 
     organization fails substantially to carry out the contract, 
     carries out the contract in a manner inconsistent with the 
     efficient and effective administration of Medicare HMO law, 
     or no longer meets the requirements specified for Medicare 
     HMOs. The Secretary also has authority to impose lesser 
     sanctions.


                               house bill

       Section 10001 (new section 1857(c)). Contracts would be for 
     at least one year, and could be made automatically renewable 
     in the absence of notice by either party of intention to 
     terminate. The Secretary could terminate a contract at any 
     time if the Secretary determined that the organization: (i) 
     had failed substantially to carry out the contract; (ii) was 
     carrying it out in a manner substantially inconsistent with 
     the efficient and effective administration of 
     Medicare+Choice; or (iii) no longer substantially met 
     Medicare+Choice conditions. Contracts would specify their 
     effective date, but contracts providing coverage under an MSA 
     plan could not take effect before January 1999. The Secretary 
     would not contract with an organization that had terminated 
     its Medicare+Choice contract within the previous 5 years, 
     except in special circumstances as determined by the 
     Secretary. The authority of the Secretary with respect to 
     Medicare+Choice plans could be performed without regard to 
     laws or regulations relating to contracts of the United 
     States that the Secretary determined were inconsistent 
     with the purposes of Medicare.
       Section 4001 (new section 1857(c)). Similar provision 
     except that the Secretary may impose intermediate sanctions 
     described below. Contracts providing coverage under an MSA 
     plan could not take effect before January 1998.


                            senate amendment

       Similar provision except that the Secretary may impose 
     intermediate sanctions described in subsection (g) below to 
     Medicare Choice organization.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment except 
     that there is no reference to intermediate sanctions and 
     contacts providing coverage under an MSA plan could not take 
     effect before January 1999.
     (d) Protections against fraud and beneficiary protections


                              current law

       Under section 1856, the Secretary has the right to inspect 
     or otherwise evaluate the quality, appropriateness and 
     timeliness of services, as well as the organization's 
     facilities if there were reasonable evidence of need for such 
     inspection. In addition, the Secretary has the right to audit 
     and inspect any books and records that pertain either to the 
     ability of the organization to bear the risk of potential 
     financial loss or to services performed or determinations of 
     amounts payable under the contract. Contractors may be 
     required to provide and pay for advance written notice to 
     each enrollee of a termination, along with a description of 
     alternatives for obtaining benefits. Organizations must also 
     notify the Secretary of loans and other special financial 
     arrangements made with subcontractors, affiliates, and 
     related parties. -


                               house bill

       Section 10001 (new section 1857(d)). Contracts would 
     provide that the Secretary or his or her designee would have 
     the right to inspect or otherwise evaluate the quality, 
     appropriateness and timeliness of services, as well as the 
     organization's facilities if there were reasonable evidence 
     of need for such inspection; in addition, the Secretary would 
     have the right to audit and inspect any books and records 
     that pertain either to the ability of the organization to 
     bear the risk of potential financial loss or to services 
     performed or determinations of amounts payable under the 
     contract. Contracts would also require the organization to 
     provide and pay for advance written notice to each enrollee 
     of a termination, along with a description of alternatives 
     for obtaining benefits. They would also require that 
     organizations notify the Secretary of loans and other special 
     financial arrangements made with subcontractors, affiliates, 
     and related parties.
       Medicare+Choice organizations would be required to report 
     financial information to the Secretary, including information 
     demonstrating that the organization was fiscally sound, a 
     copy of the financial report filed with HCFA containing 
     information required under section 1124 of the Social 
     Security Act, and a description of transactions between the 
     organization and parties in interest. These transactions 
     would include: (I) any sale, exchange, or leasing of 
     property; (ii) any furnishing for consideration of goods, 
     services, and facilities (but generally not including 
     employees' salaries or health services provided to members); 
     and (iii) any lending of money or other extension of credit. 
     Financial information would be available to enrollees upon 
     reasonable request. Consolidated financial statements could 
     be required when the organization controls, is controlled by, 
     or is under common control with another entity.
       With respect to financial information, the term ``party in 
     interest'' means: (I) any director, officer, partner, or 
     employee responsible for management or administration of a 
     Medicare+Choice organization; any person who directly or 
     indirectly is a beneficial owner of more than 5 percent of 
     its equity; any person who is the beneficial owner of a 
     mortgage, deed of trust, note, or other interest secured by, 
     and valuing more than 5% of the organization; and in the case 
     of a nonprofit Medicare+Choice organization, an incorporator 
     or member of such corporation; (ii) any entity in which a 
     person described in (I) is an officer or director; a partner; 
     has directly or indirectly a beneficial interest in more than 
     5 percent of the equity; or has a mortgage, deed of trust, 
     note, or other interest valuing more than 5 percent of the 
     assets of the 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 (I).
       Section 4001 (new section 1857(d)). Identical provision.-


                            senate amendment

       Identical provision except applies to Medicare Choice 
     organization.-


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment with a 
     modification that the Secretary would provide for annual 
     auditing of financial records (including data relating to 
     Medicare utilization, costs, and computation of the adjusted 
     community rate) of at least one-third of the Medicare+Choice 
     organizations offering Medicare+Choice plans. The Comptroller 
     General would monitor these auditing activities.
     (e) Additional contract terms


                              current law

       No provision.

[[Page H6193]]

                               House Bill

       Section 10001 (new section 1857(e)). Contracts would 
     contain other terms and conditions (including requirements 
     for information) as the Secretary found necessary and 
     appropriate. Contracts would require payments to the 
     Secretary for the organization's pro rata share of the 
     estimated costs to be incurred by the Secretary relating to 
     enrollment and dissemination of information. These payments 
     would be appropriated to defray such costs and would remain 
     available until expended.
       Section 4001 (new section 1857(e)). Similar provision 
     except required payments to the Secretary would include pro 
     rate share of estimated costs for certain counseling and 
     assistance programs. If a contract with a Medicare+Choice 
     organization were terminated, the organization would have to 
     notify each enrollee.


                            Senate Amendment

       Similar provision except if a contract with a Medicare 
     Choice organization were terminated, the organization would 
     have to notify each enrollee.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment, with a 
     modification. The conference agreement authorizes the 
     Secretary to collect user fees on a pro rata basis from 
     Medicare+Choice organizations to offset administrative costs 
     associated with additional requirements relating to 
     enrollment and dissemination of information required by the 
     agreement. The conference agreement also requires 
     Medicare+Choice organizations to make payments to the 
     Secretary for the pro rata share of estimated costs for 
     certain counseling and assistance programs. The fees 
     collected under this section are limited to $200 million in 
     fiscal year 1998, $150 million in fiscal year 1999, and $100 
     million in fiscal year 2000 and beyond.
       The agreement does not include a requirement that the 
     organization would have to notify each enrollee if a contract 
     with a Medicare+Choice organization were terminated.
     (f) Prompt payment by Medicare+Choice Organization


                              Current Law

       Section 1856 of the Social Security Act requires managed 
     care contractors to provide prompt payment of covered 
     services if the services are not furnished by a contract 
     provider.


                               House Bill

       Section 10001 (new section 1857(f)). Contracts would 
     require a Medicare+Choice organization to provide prompt 
     payment of claims submitted for services and supplies 
     furnished to individuals pursuant to the contract, if they 
     are not furnished under a contract between the organization 
     and the provider or supplier. If the Secretary determined 
     (after notice and opportunity for a hearing) that the 
     organization had failed to pay claims promptly, the Secretary 
     could provide for direct payment of the amounts owed 
     providers and suppliers. In these cases, the Secretary would 
     reduce Medicare+Choice payments otherwise made to the 
     organization to reflect the amount of the payments and the 
     Secretary's cost in making them.
       Section 4001 (new section 1857(f)). Identical provision.


                            Senate Amendment

       Identical provision except applies to Medicare Choice 
     organization.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (g) Intermediate sanctions


                              Current Law

       The Secretary has authority to impose lesser sanctions, 
     including suspension of enrollment or payment and imposition 
     of civil monetary penalties. These sanctions may be applied 
     for denial of medically necessary services, overcharging, 
     enrollment violations, misrepresentation, failure to pay 
     promptly for services, or employment of providers barred from 
     Medicare participation.


                               House Bill

       Section 10001 (new section 1857(g)). The Secretary would be 
     authorized to carry out specific remedies in the event that a 
     Medicare+Choice organization: (I) failed substantially to 
     provide medically necessary items and services required to be 
     provided, if the failure adversely affected (or had the 
     substantial likelihood of adversely affecting) the 
     individual; (ii) imposed net monthly premiums on individuals 
     that were in excess of the net monthly premiums permitted; 
     (iii) acted to expel or refused to re-enroll an individual in 
     violation of Medicare+Choice requirements; (iv) engaged in 
     any practice that would reasonably be expected to have the 
     effect of denying or discouraging enrollment (except as 
     permitted by Medicare+Choice) of eligible individuals whose 
     medical condition or history indicates a need for substantial 
     future medical services; (v) misrepresented or falsified 
     information to the Secretary or others; (vi) failed to comply 
     with rules regarding physician participation; or (vii) 
     employed or contracted with any individual or entity that was 
     excluded from participation in Medicare under section 1128 or 
     1128A of the Social Security Act (relating to sanctions for 
     program violations) for the provision of health care, 
     utilization review, medical social work, or administrative 
     services, or employed or contracted with any entity for the 
     provision (directly or indirectly) through such an excluded 
     individual or entity.
       The remedies would include civil money penalties of not 
     more than $25,000 for each determination of a failure 
     described above or not more than $100,000 with respect to 
     misrepresenting information furnished to the Secretary or 
     denying enrollment to persons with a preexisting medical 
     condition. In cases of the latter failure, the Secretary 
     could also levy a $15,000 fine for each individual not 
     enrolled. In cases of excess premium charges, the Secretary 
     could also recover twice the excess amount and return the 
     excess amount to the affected individual. In addition, the 
     Secretary could suspend enrollment of individuals and payment 
     for them after notifying the organization of an adverse 
     determination, until the Secretary was satisfied that the 
     failure had been corrected and would not likely recur.
       Other intermediate sanctions could be imposed if the 
     Secretary determined that a failure had occurred other than 
     those described above. These include: (I) civil money 
     penalties up to $25,000 if the deficiency directly adversely 
     affected (or had the likelihood of adversely affecting) an 
     individual under the organization's contract; (ii) civil 
     money penalties of not more $10,000 for each week after the 
     Secretary initiated procedures for imposing sanctions; and 
     (iii) suspension of enrollment until the Secretary is 
     satisfied the deficiency had been corrected and would not 
     likely recur.
       Section 4001 (new section 1857(g)). Identical provision.


                            Senate Amendment

       Similar provision except applies to Medicare Choice 
     organization. The provisions of section 1128A (other than 
     subsections (a) and (b)) would apply to a civil money penalty 
     in the same manner as they apply to a civil money penalty or 
     proceeding under that section.


                          Conference Agreement

       The conference agreement includes identical provisions in 
     the House bill and the Senate amendment, including provisions 
     relating to civil money penalties that are under termination 
     procedures in the House bill.
     (h) Procedures for termination


                              Current Law

       Under section 1856 of the Social Security Act, the 
     Secretary may terminate a contract with an organization for 
     noncompliance with the law's requirements after reasonable 
     notice and opportunity for hearings.


                               House Bill

       Section 10001 (new section 1857(h)). The Secretary could 
     terminate a contract in accordance with formal investigation 
     and compliance procedures under which the Secretary (1) 
     provides the organization with an opportunity to develop and 
     implement a corrective action plan, and (ii) provides 
     reasonable notice and opportunity for a hearing, including 
     the right to appeal an initial decision, before imposing any 
     sanction or terminating the contract. The provisions of 
     section 1128A (other than subsections (a) and (b)) would 
     apply to a civil money penalty in the same manner as they 
     apply to a civil money penalty or proceeding under that 
     section. The Secretary would be authorized not to delay 
     termination of a contract (resulting from the formal 
     investigation and compliance procedures) if such termination 
     would pose an imminent and serious risk to enrollees' health.
       Section 4001 (new section 1857(h)). Similar provision 
     except the compliance procedures also provide (1) the 
     Secretary imposes more severe sanctions on organizations that 
     have a history of deficiencies or have not taken steps to 
     correct those the Secretary brought to their attention, and 
     (ii) there are no unreasonable or unnecessary delays between 
     finding a deficiency and imposing sanctions.
       Effective date.
       Section 10001 (new section 1857). Effective generally 
     starting January 1,1999 but applies to PSO enrollment January 
     1, 1998.
       Section 4001 (new section 1857). Identical.-


                            Senate Amendment

       Similar provision except that the compliance procedures 
     also provide (1) the Secretary imposes more severe sanctions 
     on Medicare Choice organizations that have a history of 
     deficiencies or have not taken steps to correct those the 
     Secretary brought to their attention, and (ii) there are no 
     unreasonable or unnecessary delays between finding a 
     deficiency and imposing sanctions. Provision regarding 
     section 1128A is in (g), above.
       Effective date. Identical.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment except 
     that provisions relating to civil money penalties in the 
     House bill are included above under intermediate sanctions. 
     The agreement does not include provisions relating to 
     sanctions on an organization with a history of deficiencies 
     and to unreasonable and unnecessary delays between finding a 
     deficiency and imposing sanctions.

                 Definitions; Miscellaneous Provisions

                            New section 1859

     (a) Definitions related to Medicare+Choice Organizations


                              Current Law

       No provision.

[[Page H6194]]

                               House Bill

       Section 10001 (new section 1859(a)). A Medicare+Choice 
     organization is a public or private entity that is certified 
     under section 1856 (as created by this Act) as meeting the 
     Medicare+Choice requirements and standards for such an 
     organization.
       A provider-sponsored organization is defined in section 
     1855(e)(1) as created by this Act.
       Section 4001 (new section 1859(a)). Identical provision.


                            Senate Amendment

       Identical provision except applies to Medicare Choice 
     organization.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment but 
     applies the provisions to Medicare+Choice organizations and 
     plans.
     (b) Definitions relating to Medicare+Choice Plans


                               House Bill

       Section 10001 (new section 1859 (b)). A Medicare+Choice 
     plan is health benefits coverage offered under a policy, 
     contract, or plan by a Medicare+Choice organization pursuant 
     to and in accordance with a contract under section 1857 as 
     created by this Act.
       An MSA plan is a Medicare+Choice plan that (i) provides 
     reimbursement for at least the items and services for which 
     benefits are available under Medicare parts A and B to 
     individuals residing in the area served by the plan and 
     additional health services the Secretary may approve, but 
     only after the enrollee incurs countable expenses (as 
     specified in the plan) equal to the amount of the annual 
     deductible; (ii) counts as such expenses at least all amounts 
     that would have been payable under parts A and B or by the 
     enrollee as deductibles, coinsurance, or copayments if the 
     enrollee had elected to receive benefits through those parts; 
     and (iii) provides, after the deductible is met for a year 
     (and for all subsequent expenses referred to in (i) in the 
     year) for a level of reimbursement that is not less than the 
     lesser of (A) 100 percent of such expenses, or (B) 100 
     percent of the amount that would have been paid (without 
     regard to any deductibles or coinsurance) under Medicare 
     parts A and B. For contract year 1999, the annual deductible 
     under a MSA plan could not be more than $6,000. For a 
     subsequent contract year, the annual deductible could not be 
     more than the maximum amount for the previous contract year 
     increased by the national per capita Medicare+Choice growth 
     percentage and rounded to the nearest multiple of $50.
       Section 4001 (new section 1859(b)). Identical provision.-


                            Senate Amendment

       Similar provision except applies to Medicare Choice plans.
       A Medicare Choice unrestricted fee-for-service plan is a 
     Medicare Choice plan that provides for coverage of benefits 
     without regard to utilization and to whether the provider has 
     a contract or other arrangement with the organization 
     offering the plan for the provision of such benefits.
       The annual deductible under an MSA plan could not be less 
     than $1,500 nor more than $2,250, and annual out-of-pocket 
     expenses required to be paid under an MSA plan (other than 
     for premiums) could not exceed $3,000. For taxable years 
     after 1998, these amounts would be increased by the 
     percentage by which the Consumer Price Index (CPI) for all 
     urban consumers for the preceding calendar year exceeds the 
     CPI for calendar year 1992, rounded to the nearest multiple 
     of $50.


                          Conference Agreement

       The conference agreement includes the House provision with 
     an amendment that defines a Medicare+Choice private fee-for-
     service plan as a Medicare+Choice plan that (A) reimburses 
     hospitals, physicians, and other providers at a rate 
     determined by the plan on a fee-for-service basis without 
     placing the provider at financial risk; (B) does not vary 
     such rates for such a provider based on utilization relating 
     to such provider; and  does not restrict the 
     selection of providers among those who are lawfully 
     authorized to provide the covered services and agree to 
     accept the terms and conditions of payment established by the 
     plan.
     (c) Other references to other terms


                               House Bill

       Section 1001 (new section 1859(c)). Defines through 
     reference (i) Medicare+Choice Eligible Individual; (ii) 
     Medicare+Choice payment are; (iii) national per capita 
     Medicare+Choice growth percentage; and (iv) monthly premium; 
     net monthly premium.
       Section 4001 (new section 1859(c)). Identical provision.


                            Senate Amendment

       Similar provision except applies to Medicare Choice plans 
     and in (iii) refers to national average per capita growth 
     percentage.


                          Conference Agreement

       The conference agreement includes the House provision with 
     clarification that references in (iv) are to Medicare+Choice 
     monthly basic beneficiary premium and Medicare+Choice monthly 
     supplemental beneficiary premium.
     (d) Coordinated acute and long-term care benefits under a 
         Medicare+Choice Plan


                               House Bill

       Section 10001 (new section 1859(``d)). A state would not be 
     prevented from coordinating benefits under a Medicaid plan 
     and a Medicare+Choice 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 
     Medicare benefits under a Medicare+Choice plan.
       Section 4001 (new section 1859(``d)). Identical provision.-


                            Senate Amendment

       Identical provision except applies to Medicare Choice 
     plan.--


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment.
     (e) Restriction on enrollment for certain Medicare+Choice 
         Plans


                               House Bill

       Section 10001 (new section 1859(e)). A Medicare+Choice 
     religious fraternal benefit society plan could restrict 
     enrollment to individuals who are members of the church, 
     convention, or group with which the society is affiliated. A 
     Medicare+Choice religious fraternal benefit society plan 
     would be a Medicare+Choice plan that: (i) is offered by a 
     religious fraternal benefit society only to members of the 
     church, convention, or affiliated group; and (ii) permits all 
     members to enroll without regard to health status-related 
     factors. This provision could not be construed as waiving 
     plan requirements for financial solvency. In developing 
     solvency standards, the Secretary would take into account 
     open contract and assessment features characteristic of 
     fraternal insurance certificates. Under regulations, the 
     Secretary would provide for adjustments to payment amounts 
     under section 1854 (as created by this Act) to assure an 
     appropriate payment level, taking account of the actuarial 
     characteristics of the individuals enrolled in such a plan.
       A religious fraternal benefit society is an organization 
     that (i) is exempt from Federal income taxation under section 
     501(c)(8) of the Internal Revenue Code; (ii) 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; (iii) offers, in addition to a 
     Medicare+Choice religious fraternal benefit society plan, at 
     least the same level of health coverage to individuals 
     entitled to Medicare benefits who are members of such church, 
     convention, or group; and (iv) does not impose any limitation 
     on membership in the society based on any health status-
     related factor.
       Section 4001 (new section 1859(``e)). Identical provision.


                            Senate Amendment

       Identical provision except applies to Medicare Choice 
     plans.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment.
     (f) Report on coverage of beneficiaries with end-stage renal 
         disease


                               House Bill

       Section 10001 (new section 1859(b)). The Secretary would 
     provide for a study on the feasibility and impact of removing 
     the restriction on beneficiaries with end-stage renal disease 
     from enrolling in a MSA Medicare+Choice plan. No later than 
     October 1, 1998, the Secretary would submit to Congress a 
     report on this study and include recommendations regarding 
     removing or restricting the limitation as may be appropriate.
       Section 4001 (new section 1859(b)). Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not contain the House bill.
     (g) Report on Medicare+Choice teaching programs and use of 
         DSH and teaching hospitals


                               House Bill

       Section 10001 (new section 1859(c)). No later than October 
     1, 1999, the Secretary would submit to Congress a report on 
     the extent to which Medicare+Choice organizations are 
     providing payments to disproportionate share hospitals and 
     teaching hospitals. The report would be based on information 
     provided to the Secretary by Medicare+Choice organizations as 
     required by this provision and such information as the 
     Secretary may obtain.
       Section 4001 (new section 1859(c)). Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not contain the House bill.

          Transitional Rules for Current Medicare HMO Program

   Sections 10002 and 4002 of House bill and Section 5002 of Senate 
                               amendment-

     (a) Waiver of the 50:50 Rule


                              Current Law

       Current law requires that to be a risk contractor, no more 
     than 50 percent of the organization's enrollees may be 
     Medicare or Medicaid beneficiaries. The rule may be waived, 
     however, for an organization that serves a geographic area 
     where Medicare and Medicaid beneficiaries make up more than 
     50 percent of the population or (for 3 years) for an

[[Page H6195]]

     HMO that is owned and operated by a governmental entity.-


                               House Bill

       Section 10002. Effective for contract periods beginning 
     after December 31, 1996, the Secretary could waive or modify 
     the 50:50 rule to the extent the Secretary finds the waiver 
     is in the public interest. Beginning in 1999, the 50:50 rule 
     would no longer be applicable to organizations offering 
     Medicare+Choice plans.
       Section 4002. Identical provision.-


                            Senate Amendment

       Limits 50:50 rule to contract periods beginning before 
     January 1, 1999. Deletes provision that applies to Medicaid 
     beneficiaries. The Secretary could waive the requirement if 
     the Secretary determines that the plan meets all other 
     beneficiary protections and quality standards under the 
     section.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     an amendment that the Secretary could waive or modify the 
     50:50 rule to the extent the Secretary finds the waiver is in 
     the public interest.
       The Conferees believe it is unnecessary to continue in 
     effect the outdated 50:50 rule after January 1, 1999. Between 
     the date of enactment and January 1, 1999, the conference 
     agreement grants the Secretary broad authority to waive the 
     50:50 rule. The Conferees expect that the Secretary will use 
     this authority, among other things, to provide extensions of 
     existing waivers and new waivers to organizations that have a 
     demonstrated history of adherence to quality standards. In 
     particular, the Conferees intend that the Secretary grant 
     waivers to the Wellness Plan in Southeastern Michigan and the 
     Watts Health Foundation providing care in medically under 
     served inner city areas.
     (b) Transition


                               House Bill

       Section 10002. The Secretary would be prohibited from 
     entering into, renewing, or continuing any risk-sharing 
     contract under section 1876 for any contract year beginning 
     on or after the date Medicare+Choice standards are first 
     established for Medicare+Choice organizations that are 
     insurers or HMOs. If the organization had a contract in 
     effect on that date, the prohibition would be effective one 
     year later. The Secretary could not enter into, renew, or 
     continue a risk-sharing contract for any contract year 
     beginning on or after January 1, 2000. An individual who is 
     enrolled in Medicare part B only and also in an organization 
     with a risk-sharing contract on December 31, 1998 could 
     continue enrollment in accordance with regulations issued not 
     later than July 1, 1998.
       For individuals enrolled under both Medicare part A and 
     part B, payments for risk-sharing contracts for months 
     beginning with January 1998 would be computed by substituting 
     the Medicare+Choice payment rates specified in this bill. For 
     individuals enrolled only under part B, the substitution 
     would be based upon the proportion of those rates that 
     reflects the proportion of payments under title XVIII of the 
     Social Security Act (i.e., Medicare) attributable to part B. 
     With respect to months in 1998, the Secretary would compute, 
     announce, and apply the Medicare+Choice payment rates in as 
     timely manner as possible (notwithstanding deadlines in 
     section 1853(a) as described above) and could provide for 
     retroactive adjustments in risk-sharing contract payments not 
     in accordance with those rates.
       Section 4002. Identical provision.


                            Senate Amendment

       Similar provision except applies to Medicare+Choice 
     organizations. Makes clear that Secretary could not enter 
     into, renew, or continue a risk-sharing contract for any 
     contract year beginning on or after January 1, 2000.--


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment with a 
     clarification that on or after the date standards for 
     Medicare+Choice organizations and plans are first established 
     under section 1856(b)(1), the Secretary could not enter into 
     any risk-sharing contract with an eligible organization, and 
     that for any contract year beginning on or after January 
     1, 1999, the Secretary could not renew any such contract. 
     The agreement also clarifies that an individual who is 
     enrolled in Medicare part B only and also in an 
     organization with a risk-sharing contract on December 31, 
     1998, could continue enrollment in accordance with 
     regulations described in section 1856(b)(1). The agreement 
     does not include the provision that for months in 1998 the 
     Secretary would compute, announce, and apply the 
     Medicare+Choice payment rates in as timely a manner as 
     possible and could provide for retroactive adjustments in 
     risk-sharing contract payments not in accordance with 
     those rates.
       The conference agreement also provides that the following 
     requirements would apply to eligible organizations with risk-
     sharing contracts in the same manner as they apply to 
     Medicare+Choice organizations under Part C: (A) data 
     collection requirements under section 1853(a)(3)(B) relating 
     to in-patient hospital services and other services; (B) 
     restrictions on imposition of premium taxes under section 
     1854(h) relating to payments to such organizations; (C) the 
     requirement to accept enrollment of new enrollees during 
     November 1998 under section 1851(e)(6); and (D) payments 
     under section 1857(e)(2) relating to cost-sharing in 
     enrollment-related costs.
       In addition, the conference agreement provides that after 
     enactment of this provision the Secretary may not enter into 
     a reasonable cost reimbursement contract (if the contract is 
     not in effect as of that date) except for an organization 
     which immediately prior to entering into such contract had an 
     agreement in effect under section 1833(a)(1)(A). The 
     Secretary could not extend or renew a reasonable cost 
     reimbursement contract under this subsection beyond December 
     31, 2002. Not later than January 1, 2001, the Secretary would 
     submit to Congress a report analyzing the potential impact of 
     termination of reasonable cost reimbursement contracts on 
     Medicare beneficiaries enrolled under them. The report would 
     include recommendations regarding any extension or transition 
     of the contracts that the Secretary deems appropriate.
     (c) Enrollment transition rule


                               House Bill

       Section 10002. An individual who is enrolled on December 
     31, 1998 with an organization having a section 1876 contract 
     would be considered to be enrolled with that organization 
     under Medicare+Choice if the organization has a 
     Medicare+Choice contract for providing services on January 1, 
     1999, unless the individual had disenrolled effective that 
     date.
       Section 4002. Identical provision.-


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment.
     (e) Extension of provider requirement


                               House Bill

       Section 10002. Hospitals would accept Medicare payment 
     rates as payment in full for inpatient emergency services 
     covered under Medicare that an out-of-plan provider furnishes 
     enrollees in a Medicare+Choice plan which does not have a 
     contract establishing such payment amounts.
       Section 4002. Similar provision except amount would be 
     reduced by any payment under section 1858 as created by this 
     Act for disproportionate share hospitals and graduate medical 
     education.


                            Senate Amendment

       Identical provision except applies to Medicare Choice 
     organization.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment with an 
     amendment that the amount would be reduced by any payment 
     under sections 1886(d)(11) and 1886(h)(3)(D) relating to 
     graduate medical education.
     (f) Additional conforming changes


                               House Bill

       Section 10002. Any reference in law in effect before the 
     date of enactment of this legislation to part C of Medicare 
     would be deemed a reference to part D as in effect after such 
     date.
       Not later than 90 days after enactment of this legislation, 
     the Secretary would submit to Congress a legislative proposal 
     providing for technical and conforming amendments as the 
     Medicare+Choice provisions require.
       Section 4002. Identical provision.-


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment with an 
     amendment that the Secretary would submit the proposal not 
     later than 6 months after enactment.
     (g) Immediate effective date for certain requirements for 
         demonstrations


                               house bill

       Section 10002. Required Medicare+Choice organization 
     contributions for costs related to enrollment and 
     dissemination of information would apply to demonstrations if 
     their enrollment were effected or coordinated under section 
     1851 as created by this Act.
       Section 4002. Identical provision.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment.
     (h) Use of interim, final regulations


                               house bill

       Section 10002. In order to carry out the Medicare+Choice 
     provisions in a timely manner, the Secretary could (after 
     notice and opportunity for public comment) promulgate 
     regulations that take effect on an interim basis.
       Section 4002. Identical provision.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement does not include the House bill.
     (i) Transition rule for PSO enrollment


                               house bill

       Section 10002. Provides that a PSO with at least 1,500 
     enrollees in urban areas and 500 enrollees in rural areas may 
     qualify for a risk-sharing contract beginning on or after 
     January 1, 1998.
       Section 4002. Identical provision.

[[Page H6196]]

                            senate amendment

       Similar provision except that the PSO may count toward the 
     threshold numbers individuals for whom the organization has 
     assumed substantial financial risk.


                          conference agreement

       The conference agreement includes the House provision with 
     amendments. It provides that not later than 4 weeks after 
     enactment the Secretary would announce the annual 
     Medicare+Choice capitation rates for 1998. In addition, the 
     conference agreement eliminates the health care prepayment 
     plan option for entities eligible to participate as a managed 
     care organization.-

                 Conforming Changes in Medigap Program

  Section 10003 and 4003 of House bill; and Section 5003 and 5652 of 
                            Senate amendment


                              current law

       Current law contains rules regarding the sale of Medicare 
     supplement policies (generally referred to as ``Medigap'' 
     policies). Included are prohibitions governing the sale of 
     duplicative policies and exceptions to the general 
     prohibitions.


                               house bill

       Section 10003. Includes conforming language to the 
     duplication provisions for persons electing a Medicare+Choice 
     plan. Included in the general prohibitions would be a general 
     prohibition against selling to a person electing a 
     Medicare+Choice plan a Medicare supplemental policy with the 
     knowledge that it duplicated benefits to which the individual 
     was otherwise entitled to under Medicare or another 
     supplemental policy. A Medicare+Choice policy is not included 
     within the definition of a Medicare supplementary policy.
       Prohibits the sale of certain policies to a person electing 
     a high deductible plan. Specifically, the prohibition would 
     apply to the sale of policies providing coverage for expenses 
     that are otherwise required to be counted toward meeting the 
     annual deductible amount provided under a medical savings 
     account (MSA) plan.
       Effective Date. Enactment
       Section 4003. Identical provision


                            Senate Amendment

       Identical provision, except refers to Medicare Choice.
       Adds to list of exceptions for policies not considered 
     duplicative. A health insurance policy (which may be a 
     contract with a health maintenance organization) would not be 
     considered duplicative if it: (1) provides comprehensive 
     health care benefits that replace benefits provided by 
     another insurance policy, (2) is being provided to a disabled 
     enrollee, and (3) coordinates against items and services 
     available or paid for under Medicare or Medicaid, provided 
     that Medicare or Medicaid payments are not treated as 
     payments in determining annual or lifetime benefits under the 
     policy.
       Effective Date. Enactment


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with a 
     modification. The modification specifies that the prohibition 
     on the sale of health insurance policies to persons with MSA 
     plans would not apply to the following types of policies: (a) 
     a policy that provides coverage (whether through insurance or 
     otherwise) for accidents, disability, dental care, vision 
     care, or long term care; (2) an insurance policy whose 
     coverage primarily relates to liabilities incurred under 
     workers compensation laws, tort liabilities, liabilities 
     relating to ownership or use of property, or other similar 
     liabilities specified by the Secretary in regulations; (3) an 
     insurance policy that provides coverage for a specified 
     disease or illness; or (4) an insurance policy that pays a 
     fixed amount per day (or other period) of hospitalization.
       The conference agreement does not include the Senate 
     provision adding to the list of exceptions for policies 
     considered duplicative.

  Description of Taxation of Medicare+Choice/Medicare Choice Medical 
                            Savings Accounts

  Secs. 4006 and 10006 of the House bill and sec. 5006 of the Senate 
                               amendment

       Present law
       Under present law, the value of Medicare coverage and 
     benefits is not includible in taxable income.
       Individuals who itemize deductions may deduct amounts paid 
     during the taxable year (if not reimbursed by insurance or 
     otherwise) for medical expenses of the taxpayer and the 
     taxpayer's spouse and dependents (including expenses for 
     insurance providing medical care) to the extent that the 
     total of such expenses exceeds 7.5 percent of the taxpayer's 
     adjusted gross income (``AGI'').
       Within limits, contributions to a medical savings account 
     (``MSA'') are deductible in determining AGI if made by an 
     eligible individual and are excludable from gross income and 
     wages for employment tax purposes if made by the employer of 
     an eligible individual.\1\ Individuals covered under Medicare 
     are not eligible to have an MSA.
---------------------------------------------------------------------------
     \1\ The number of MSAs which can be established is subject to 
     a cap.
---------------------------------------------------------------------------
       Earnings on amounts in an MSA are not currently includible 
     in income. Distributions from an MSA for medical expenses of 
     the MSA account holder and his or her spouse or dependents 
     are not includible in income. For this purpose, medical 
     expenses are defined as under the itemized deduction for 
     medical expenses, except that medical expenses do not include 
     any insurance premiums other than premiums for long-term 
     care insurance, continuation coverage (so-called ``COBRA 
     coverage''), or premiums for coverage while an individual 
     is receiving unemployment compensation. Distributions not 
     used for medical expenses are subject to an additional 15-
     percent tax unless the distribution is made after age 65, 
     death, or disability.
       Under present law, there are no tax provisions for 
     Medicare+Choice medical savings accounts (``Medicare+Choice 
     MSAs'').


                               house bill

       In general
       Under the bill, individuals who are eligible for Medicare 
     are permitted to choose either the traditional Medicare 
     program or a Medicare+Choice MSA plan. To the extent an 
     individual chooses such a plan, the Secretary of Health and 
     Human Services makes a specified contribution directly into a 
     Medicare+Choice MSA designated by such individual. Only 
     contributions by the Secretary of Health and Human Services 
     can be made to a Medicare+Choice MSA and such contributions 
     are not included in the taxable income of the Medicare+Choice 
     MSA holder. Income earned on amounts held in a 
     Medicare+Choice MSA are not currently includible in taxable 
     income. Withdrawals from a Medicare+Choice MSA are excludable 
     from taxable income if used for the qualified medical 
     expenses of the Medicare+Choice MSA holder. Withdrawals from 
     a Medicare+Choice MSA that are not used for the qualified 
     medical expenses of the account holder are includible in 
     income and may be subject to an additional tax (described 
     below).
       Definition of Medicare+Choice MSAs
       In general, a Medicare+Choice MSA is an MSA that is 
     designated as Medicare+Choice MSA and to which the only 
     contributions that can be made are those by the Secretary of 
     Health and Human Services.\2\ Thus, a Medicare+Choice MSA is 
     a tax-exempt trust (or a custodial account) created 
     exclusively for the purpose of paying the qualified medical 
     expenses of the account holder that meets requirements 
     similar to those applicable to individual retirement 
     arrangements (``IRAs'').\3\ The trustee of a Medicare+Choice 
     MSA can be a bank, insurance company, or other person that 
     demonstrates to the satisfaction of the Secretary of the 
     Treasury that the manner in which such person will administer 
     the trust will be consistent with applicable requirements.
---------------------------------------------------------------------------
     \2\ Medicare+Choice MSAs are not taken into account for 
     purposes of the cap on non-Medicare+Choice MSAs, nor are they 
     subject to that cap.
     \3\ For example, no Medicare+Choice MSA assets could be 
     invested in life insurance contracts, Medicare+Choice MSA 
     assets could not be commingled with other property except in 
     a common trust fund or common investment fund, and an account 
     holder's interest in a Medicare+Choice MSA would be 
     nonforfeitable. In addition, if an account holder engages in 
     a prohibited transaction with respect to a Medicare+Choice 
     MSA or pledges assets in a Medicare+Choice MSA, rules similar 
     to those for IRAs would apply, and any amounts treated as 
     distributed to the account holder under such rules would be 
     treated as not used for qualified medical expenses.
---------------------------------------------------------------------------
       A Medicare+Choice MSA trustee would be required to make 
     such reports as may be required by the Secretary of the 
     Treasury. A $50 penalty would be imposed for each failure to 
     file without reasonable cause.
       Taxation of distributions from a Medicare+Choice MSA
       Distributions from a Medicare+Choice MSA that are used to 
     pay the qualified medical expenses of the account holder 
     would be excludable from taxable income regardless of whether 
     the account holder is enrolled in the Medicare+Choice MSA 
     plan at the time of the distribution.\4\ Qualified medical 
     expenses are defined as under the rules relating to the 
     itemized deduction for medical expenses. However, for this 
     purpose, qualified medical expenses would not include any 
     insurance premiums other than premiums for long-term care 
     insurance, continuation insurance (so-called ``COBRA 
     coverage''), or premium for coverage while an individual is 
     receiving unemployment compensation. Distributions from a 
     Medicare+Choice MSA that are excludable from gross income 
     under the provision can not be taken into account for 
     purposes of the itemized deduction for medical expenses.
---------------------------------------------------------------------------
     \4\ Under the provision, medical expenses of the account 
     holder's spouse or dependents would not be treated as 
     qualified medical expenses.
---------------------------------------------------------------------------
       Distributions for purposes other than qualified medical 
     expenses are includible in taxable income. An additional tax 
     of 50 percent applies to the extent the total distributions 
     for purposes other than qualified medical expenses in a 
     taxable year exceed the amount by which the value of the 
     Medicare+Choice MSA as of December 31 of the preceding 
     taxable year exceeds 60 percent of the deductible of the plan 
     under which the individual is covered. The additional tax 
     does not apply to distributions on account of the disability 
     or death of the account holder.
       Following is an example of how the amount available to be 
     withdrawn from a Medicare+Choice MSA without penalty is 
     calculated.\5\
---------------------------------------------------------------------------
     \5\ The numbers are provided for illustrative purposes only.

------------------------------------------------------------------------
                                Year 1     Year 2     Year 3     Year 4 
------------------------------------------------------------------------
1.-Deductible-..............    $3,000-     $3,000     $3,000     $3,000
2.-60% of deductible........      1,800      1,800      1,800      1,800
3.-Contributions-...........     1,300-     1,300-     1,300-      1,300

[[Page H6197]]

                                                                        
4.-Earnings.................       130-       200-       300-        400
5.-Total withdrawals........       600-        500        600        600
6.-Closing account (Dec. 31                                             
 of current year)...........       830-     1,830-     2,830-      3,930
7.-Amount available for                                                 
 nonmedical withdrawal                                                  
 without penalty (2-3 from                                              
 prior year, or 0 if less                                               
 than 0)....................          0          0         30      1,030
------------------------------------------------------------------------

       Direct trustee-to-trustee transfers could be made from one 
     Medicare+Choice MSA to another Medicare+Choice MSA without 
     income inclusion.
       The provision includes a correction mechanism so that if 
     contributions for a year are erroneously made by the 
     Secretary of Health and Human Services, such erroneous 
     contributions can be returned to the Secretary of Health and 
     Human Services (along with any attributable earnings) from 
     the Medicare+Choice MSA without tax consequence to the 
     account holder.
       Treatment of Medicare+Choice MSA at death
       Upon the death of the account holder, if the beneficiary of 
     the Medicare+Choice MSA is the account holder's surviving 
     spouse, the surviving spouse may continue the Medicare+Choice 
     MSA, but no new contributions could be made. Distributions 
     from the Medicare+Choice MSA are subject to the rules 
     applicable to MSAs that are not Medicare+Choice MSAs. Thus, 
     earnings on the account balance are not currently includible 
     in income. Distributions from the account for the qualified 
     medical expenses of the spouse or the spouse's dependents (or 
     subsequent spouse) are not includible in income. 
     Distributions not for such medical expenses are includible in 
     income, and subject to a 15-percent excise tax unless the 
     distribution is made after the surviving spouse attains age 
     65, dies, or becomes disabled.
       If the beneficiary of a Medicare+Choice MSA is not the 
     account holder's spouse, the Medicare+Choice MSA is no longer 
     treated as a Medicare+Choice MSA and the value of the 
     Medicare+Choice MSA on the account holder's date of death is 
     included in the taxable income of the beneficiary for the 
     taxable year in which the death occurred (under the rules 
     applicable to MSAs generally). If the account holder fails to 
     name a beneficiary, the value of the Medicare+Choice MSA on 
     the account holder's date of death is to be included in the 
     taxable income of the account holder's final income tax 
     return (under the rules applicable to MSAs generally).
       In all cases, the value of the Medicare+Choice MSA is 
     included in the account holder's gross estate for estate tax 
     purposes.
                             Effective date
       The provision is effective with respect to taxable years 
     beginning after December 31, 1998.


                            senate amendment

       The Senate amendment is the same as the House bill (except 
     that the account is called a Medicare Choice MSA).


                          conference agreement

       The conference agreement follows the House bill and the 
     Senate amendment.

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

Graduate Medical Education and Indirect Medical Education Payments for 
                         Managed Care Enrollees

Section 4008 of the House bill and Section 5451 of the Senate amendment


                              current law

       Medicare payments to risk-contract HMOs include amounts 
     that reflect Medicare's fee-for-service payments to hospitals 
     in an area for indirect and direct graduate medical education 
     costs.
     (a) Payments to managed care organizations operating graduate 
         medical education programs


                               house bill

       Amends Section 1853 of the new Medicare Part C of the 
     Social Security Act, as established by this legislation, to 
     establish a mechanism for the allocation of payments for 
     direct GME and IME costs carved out from the AAPCCs and 
     Medicare+Choice capitation rates to be made to risk contract 
     plans under Section 1876 and Medicare+Choice organizations. 
     Beginning January 1, 1998, each contract with a 
     Medicare+Choice organization would be required to provide an 
     additional payment for Medicare's share of allowable direct 
     GME costs incurred by the organization for an approved 
     medical residency program. A Medicare+Choice organization 
     that incurred all or substantially all of the costs of the 
     medical residency program would receive a payment equal to 
     the national average per resident amount times the number of 
     full-time-equivalent (FTE) residents in the program in non-
     hospital settings. The Secretary would be required to 
     estimate the national average per resident amount equal to 
     the weighted average amount that would be paid per FTE 
     resident under the direct GME payment in a calendar year. A 
     separate determination would be required to be made for 
     primary care residency programs as defined by Medicare, 
     including obstetrics and gynecology residency programs.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement does not include the House bill. 
     (See Subtitle G-Provisions Relating to Parts A and B, Chapter 
     2--Graduate Medical Education.)
     (b) Payments to hospitals for direct and indirect costs of 
         graduate medical education programs attributable to 
         managed care enrollees


                               house bill

       Amends Part C of Medicare, as amended by Section 4001 of 
     the bill, by inserting a new section 1858, ``Payments to 
     Hospitals for Certain Costs Attributable to Managed Care 
     Enrollees.''
       The Secretary would be required to make additional payments 
     for the direct GME costs to PPS and PPS-exempt hospitals and 
     hospitals located in a state with a state hospital 
     reimbursement control system for services furnished to 
     Medicare beneficiaries enrolled in managed care. These 
     payments would be phased in over 5 years in the same 
     proportion as amounts are deducted (carved out) from Medicare 
     managed care plans under the new Section 1853 established by 
     the bill. Total payments under this provision could not 
     exceed amounts deducted (carved out) of the Medicare+Choice 
     capitation rates. Subject to certain limits, the direct GME 
     payment amount would be equal to the product of: (1) the 
     aggregated approved amount of direct GME payments for the 
     period, and (2) the fraction of the total number of 
     inpatient-bed-days determined by the Secretary during the 
     period which was attributable to Medicare managed care 
     enrollees. The Secretary would be required to separately 
     determine the direct GME payment amount that would be paid to 
     hospitals in a state with a reimbursement control system.
       The IME payment amount would be determined, subject to 
     certain limits, as equal to the product of: (1) the amount of 
     the IME adjustment factor applicable to the hospital under 
     PPS, and (2) the product of (i) the number of discharges 
     attributable to Medicare managed care enrollees and (ii) the 
     estimated average per discharge amount that would otherwise 
     have been paid under PPS if the individuals had not been 
     enrolled in a managed care plan. The Secretary would also be 
     required to make payments for the costs attributable to 
     Medicare managed care enrollees, subject to certain limits in 
     the same way as the direct GME payment amount. The Secretary 
     would be required to separately determine the IME payment 
     amounts that would be paid to hospitals in a state with a 
     reimbursement control system.
       Effective date. Applies to contracts entered into on or 
     after January 1, 1998.


                            senate amendment

       Provides for additional direct GME payments to hospitals 
     for the services provided to Medicare managed care enrollees 
     for cost reporting periods beginning on or after January 1, 
     1998. Payments would be equal to the product of (1) the 
     aggregate approved direct GME amount for the hospital in that 
     period, and the fraction of the total number of inpatient-bed 
     days attributable to Medicare managed care enrollees. The 
     direct GME payment amount would be phased in over a 4-year 
     period. The Secretary would be required to determine 
     separately the direct GME payment amount that would be paid 
     to hospitals in a state with a reimbursement control system.
       The Secretary would also be required to make additional 
     payments to PPS hospitals and hospitals located in a state 
     with a rate setting system for IME costs attributable to 
     providing services to Medicare managed care enrollees. The 
     amount of the payment would be phased in over 4 years and be 
     the product of (1) the aggregate approved amount for that 
     period, and (2) the fraction of the total number of 
     inpatient-bed days attributable to Medicare managed care 
     enrollees.
       Effective date. Applies to contracts entered into on or 
     after January 1, 1998.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     amendments to phase in the payments over 5 years equal to 20% 
     in 1998; 40% in 1999; 60% in 2000; 80% in 2001; and 100% in 
     2002. (See Subtitle G-Provisions Relating to Parts A and B, 
     Chapter 2--Graduate Medical Education.)

  Disproportionate Share Hospital Payments for Managed Care Enrollees

Section 4009 of the House bill and Section 5461 of the Senate amendment


                              Current Law

       Medicare payments to risk-contract HMOs include amounts 
     that reflect Medicare's fee-for-service payments to hospitals 
     in an area for disproportionate share adjustments.-


                               House Bill

       Amends new Section 1858, as added above, to require the 
     Secretary to provide additional payments for PPS hospitals 
     and hospitals in a state with a state hospital reimbursement 
     control system for hospitals that furnish services to 
     Medicare risk plan enrollees under Section 1876 and 
     Medicare+Choice enrollees. These payments would be phased in 
     over 5 years in the same proportion as amounts are deducted 
     (carved out) from Medicare managed care plans under the new 
     Section 1853 (see above). Subject to certain limits, the DSH 
     payment would be equal to the product of (1) the DSH 
     adjustment factor that would be attributable to the hospital 
     under PPS, and (2) the product of (i) the number of 
     discharges attributable to Medicare managed care enrollees 
     and (ii) the estimated average per discharge amount that 
     would otherwise have been paid under PPS if the individuals 
     had not been enrolled in a managed care plan. The Secretary 
     would be required to separately determine the DSH payment 
     amount that would be paid to hospitals in a state with a 
     reimbursement control system.

[[Page H6198]]

       Effective date. Applies to contracts entered into on or 
     after January 1, 1998.-


                            Senate Amendment

       Provides for additional payments for Medicare managed care 
     enrollees for cost reporting periods beginning on or after 
     January 1, 1998. Additional payments would be made to PPS 
     hospitals and hospitals located in states with state rate 
     setting systems that qualify as disproportionate share 
     hospitals, and would be phased in over a 4-year period. The 
     amount of the payment would be equal to the phased-in 
     percentage provided for IME and direct GME payments under 
     Section 5451, of the estimated average per discharge amount 
     that would otherwise have been paid DSH if the individual had 
     not been a managed care enrollee.
       Effective date. Applies to contracts entered into on or 
     after January 1, 1998.


                          Conference Agreement

       The conference agreement does not include the House bill or 
     the Senate amendment.

Chapter 2. Integrated Long-Term Care Programs (Sections 10011-10019 and 
  4011-4019 of House bill and Sections 5011-5018 of Senate amendment)

     (a) Coverage of PACE under the Medicare program


                              Current Law

       OBRA 86 required the Secretary to grant waivers of certain 
     Medicare and Medicaid requirements to not more than 10 public 
     or non-profit private community-based organizations to 
     provide health and long-term care services on a capitated 
     basis to frail elderly persons at risk of 
     institutionalization. These projects, known as the Programs 
     of All Inclusive Care for the Elderly, or PACE projects, were 
     intended to determine whether an earlier demonstration 
     program, On Lok, could be replicated across the country. OBRA 
     90 expanded the number of organizations eligible for waivers 
     to 15.


                               House Bill

       Section 10011-10014. Repeals current On Lok and PACE 
     project demonstration waiver authority and establishes in 
     Medicare law PACE as a permanent benefit category eligible 
     for coverage and reimbursement under the Medicare program. 
     PACE providers would offer comprehensive health care services 
     to eligible individuals in accordance with a PACE program 
     agreement and regulations. In general, PACE providers would 
     be public or private nonprofit entities, except for entities 
     (up to 10) participating in a demonstration to test the 
     operation of a PACE program by private, for-profit entities.
       Eligible individuals would be 55 years of age or older 
     requiring nursing facility level of care, reside in the 
     service area of the program, and meet such other conditions 
     as may be required under the program agreement. Enrollees 
     would be required to receive all covered benefits through the 
     program.
       Eligibility would be determined by the State agency 
     responsible for administering PACE program agreements. An 
     individual's health status would have to be comparable to 
     that of persons who participate in the PACE demonstration. 
     Enrollees would be reevaluated annually to determine 
     continued qualification for nursing facility level of care, 
     except where the State determines there would be no 
     reasonable expectation of improvement or significant change 
     in an individual's condition because of advanced age, 
     severity of chronic condition or degree of impairment. A 
     person could continue to be considered a PACE eligible 
     individual, even though that person no longer requires 
     nursing facility level of care, if in the absence of 
     continued coverage, the individual reasonably would be 
     expected to meet the requirement within the succeeding 6-
     month period. Enrollment and disenrollment in a PACE program 
     would be done according to regulation and enrollees would be 
     permitted to voluntarily disenroll without cause at any time.
       At a minimum, a PACE provider would be required to provide 
     to eligible persons, regardless of source of payment and 
     directly or under contracts with other entities, all items 
     and services covered under Medicare and Medicaid without 
     any limitation as to amount, duration, or scope and 
     without application of deductibles, copayments, 
     coinsurance, or other cost-sharing provisions. Providers 
     would also have to cover all additional items and services 
     specified in regulations, based on those required under 
     the PACE protocol. The PACE protocol would be defined as 
     that published by On Lok, Inc., as of April 14, 1995.
       PACE providers would be required to provide enrollees 
     access to necessary covered items and services on a 
     continuous basis, 24 hours per day, 365 days a year. Services 
     would be provided through a comprehensive, multidisciplinary 
     team that integrates acute and long-term care services. 
     Providers also would specify covered items and services that 
     would not be provided directly, and arrange for delivery of 
     these services through contracts meeting regulatory 
     requirements. Providers would be required to have a written 
     plan of quality assurance and improvement and implementing 
     procedures as well as written safeguards of the enrollee 
     rights.
       The Secretary would be required to make prospective monthly 
     capitation payments for each PACE program enrollee in the 
     same manner and from the same sources as payments are made to 
     a MedicarePlus organization. The amount would be adjusted to 
     take into account the comparative frailty of PACE enrollees 
     and such other factors as the Secretary determines to be 
     appropriate. The total payment level for all PACE program 
     enrollees would be required to be less than the projected 
     payment under Medicare for a comparable population not 
     enrolled under PACE.
       The Secretary, in cooperation with the State agency, would 
     establish procedures for entering into, extending, and 
     terminating PACE agreements. The Secretary could not enter 
     into more than 40 agreements (including those in effect as 
     the result of demonstration waivers) as of enactment, and 20 
     additional agreements upon each succeeding anniversary date 
     (without regard to the actual number of agreements in effect 
     as of a previous anniversary date). The numeric limitation 
     would not apply to a provider operating under the for-profit 
     demonstration or which subsequently qualifies for PACE 
     provider status.
       A PACE agreement would designate its service area and could 
     include additional eligibility requirements for individuals. 
     The Secretary (in consultation with the State) could exclude 
     an area already covered under another agreement, so as to 
     avoid unnecessary duplication of services and/or impairing 
     the financial and service viability of an existing program. 
     Agreements would be effective for a year, and could be 
     extended in the absence of notice to terminate, but would be 
     subject to termination by the Secretary or the State at any 
     time for cause.
       Under an agreement, providers would be required to collect 
     and maintain data, provide the Secretary and State access to 
     records relating to the program, including pertinent 
     financial, medical and personnel records; and make reports to 
     the Secretary and the State necessary to monitor operation, 
     cost, and effectiveness. During a provider's first 3 years of 
     operation, it would be required to provide such additional 
     data as the Secretary might specify for comprehensive annual 
     review. Subsequently, the Secretary would continue to conduct 
     reviews of PACE providers as might be appropriate, to 
     evaluate performance levels and compliance with regulations.
       Under regulations, the Secretary or State could terminate 
     an agreement for, among other reasons, significant 
     deficiencies in the quality of care, failure to comply 
     substantially with conditions of participation, or failure to 
     develop and successfully initiate within 30 days of notice a 
     plan to correct deficiencies.
       If the Secretary determines (after consultation with the 
     State) that a provider fails substantially to comply with 
     program requirements, the Secretary and State could take any 
     or all of the following actions: (1) condition continuation 
     upon timely execution of a corrective action plan; (2) 
     withhold some or all payments until the deficiencies were 
     corrected; or, (3) terminate the agreement. The Secretary 
     could provide for the application of intermediate sanctions 
     for certain deficiencies. Procedures for termination and 
     sanctions of PACE programs would be the same as those that 
     apply to MedicarePlus managed care entities.
       The Secretary would issue interim and final regulations to 
     carry out the statutory provisions for PACE. The Secretary 
     would incorporate the requirements applied to PACE 
     demonstration waiver programs under the PACE Protocol, to the 
     extent consistent with this section. The Secretary (in close 
     consultation with States) could modify or waive provisions of 
     the PACE Protocol to provide 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 wish to use non-staff physicians) where 
     flexibility is not inconsistent with and would not impair the 
     essential elements, objectives, and requirements of the PACE 
     program. The Secretary could also apply to PACE requirements 
     which apply to managed care plans, taking into account 
     differences in populations served and not including 
     requirements restricting the proportion of enrollees eligible 
     for Medicare and Medicaid.
       Certain Medicare requirements would be waived for PACE, 
     including those pertaining to limits on coverage of 
     institutional services, rules for payment for benefits, 
     limits on coverage of SNF and home health services, the 3-day 
     prior hospitalization requirement for SNF care, and other 
     coverage rules.
       The Secretary would be required to promulgate regulations 
     for PACE in a timely manner so that entities may establish 
     and operate PACE programs beginning not later than 1 year 
     after enactment.
       During the transition from demonstration waiver authority 
     to permanent provider status, applications for waivers 
     (subject to the numerical limitation) would be deemed 
     approved unless the Secretary, within 90 days after the date 
     of submission, either denies the request in writing or 
     informs the applicant in writing that additional information 
     is needed. After the date the Secretary receives the 
     additional information, the application would be deemed 
     approved unless the Secretary, within 90 days, denies the 
     request. The same time frames would be applicable to non-
     waiver applications for PACE.
       During the 3-year period beginning with enactment, the 
     Secretary would give priority, in processing applications to: 
     (1) entities that are operating a PACE demonstration waiver 
     program; and, (2) entities that applied to operate a program 
     as of May 1, 1997. In awarding additional waivers under the 
     original demonstration authority, the Secretary would also be 
     required to give priority to entities which applied for 
     waivers as of May 1, 1997, and to entities that as of May 1, 
     1997,

[[Page H6199]]

     have formally contracted with States to provide services on a 
     capitation basis with an understanding that they were seeking 
     to become PACE providers. The Secretary would give special 
     consideration, in the processing of PACE applications for 
     provider status and demonstration waivers, to entities which 
     as of May 1, 1997, indicated through formal activities (such 
     as entering into contracts for feasibility studies) a 
     specific intent to become PACE providers. Repeal of waiver 
     demonstration authority would not apply to waivers granted 
     before the initial effective date of regulations. Repeals 
     would apply to waivers granted before this date only after 
     allowing organizations a transition period (of up to 24 
     months) in order to permit sufficient time for orderly 
     transition from demonstration to general authority.
       The Secretary (in close consultation with States) would be 
     required to conduct a study of the quality and cost of 
     providing PACE services under Medicare and Medicaid. This 
     study would specifically compare cost, quality, and access to 
     services offered by private for-profit entities operating 
     under the new demonstration described above with the costs, 
     quality, and access to services of other PACE providers. The 
     Secretary would report to Congress on findings of the study 
     (including specific findings on private for-profit 
     providers), together with any recommendations for changes, 
     not later than 4 years after enactment. The Medicare Payment 
     Evaluation Commission would include in its annual report to 
     Congress recommendations on the methodology and level of 
     payments made to PACE providers and on the treatment of 
     private for-profit PACE providers.
       The provision would also establish PACE as an optional 
     benefit under Medicaid.
       Effective date. Enactment.
       Section 4011-4014. Similar provisions, except establishes 
     PACE as an optional benefit under Medicaid, with similar 
     provisions applied to Medicare.


                            Senate Amendment

       Medicare provisions similar to Sections 10011-10014, 
     except:
       (1) The PACE protocol would be defined to include not only 
     that as published April 14, 1995, but also any successor 
     protocol agreed upon between the Secretary and On Lok, Inc.
       (2) A provision clarifies that the evaluation of a person's 
     health status for purposes of eligibility would be determined 
     by the Secretary and State administering agency in accordance 
     with regulations, rather than simply according to 
     regulations.
       (3) PACE programs could not disenroll individuals on the 
     ground that they have engaged in noncompliant behavior, if 
     the behavior is related to a mental or physical condition.
       (4) Capitation payments to PACE providers would be based on 
     payment rates established for risk-sharing HMOs under current 
     Medicare law (with no reference to Medicare Choice program).
       (5) PACE providers, the Secretary, and the State 
     administering agency would be required to cooperate jointly 
     in the development and implementation of health status and 
     quality of life outcome measures for PACE enrollees.
       (6) A provision clarifies language about termination and 
     plans to correct deficiencies.
       (7) Procedures for termination and application of sanctions 
     would be the same as those that apply to HMOs under current 
     Medicare law (with no reference to Medicare Choice program).
       (8) The Secretary could not modify or waive certain 
     enumerated provisions of the PACE protocol (rather than 
     defining these same provisions as essential elements, 
     objectives, and requirements of the PACE programs).
       (9) The Secretary could apply to PACE providers 
     requirements relating to beneficiary protections and program 
     integrity that exist under current Medicare HMO law (with no 
     reference to Medicare Choice program).
       (10) The Physician Payment Review Commission and the 
     Prospective Payment Review Commission would be required to 
     report on PACE until they are terminated and replaced with 
     the Medicare Payment Advisory Commission.
       Similar provisions are included in Medicaid law.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language and amendments. The amendments would (1) 
     allow PACE programs to disenroll individuals for nonpayment 
     of premiums (if applicable) on a timely basis or for engaging 
     in disruptive or threatening behavior as defined in 
     regulations (developed in close consultation with State 
     administering agencies); (2) require that a proposed 
     disenrollment be subject to timely review and final 
     determination by the Secretary or by the State administering 
     agency (as applicable), prior to the proposed disenrollment 
     becoming effective; and (3) allow the Secretary to include in 
     regulations provisions to ensure the health and safety of 
     individuals enrolled in PACE programs.
     (b) Social health maintenance organizations (SHMOs)


                              Current Law

       The Deficit Reduction Act of 1984 required the Secretary to 
     grant 3-year waivers for demonstrations of social health 
     maintenance organizations (SHMOs) which provide integrated 
     health and long-term care services on a prepaid capitation 
     basis. The waivers have been extended on several occasions 
     since then and a second generation of projects was authorized 
     by OBRA 90.


                               House Bill

       Section 10015. Requires the Secretary to extend waivers for 
     SHMOs through December 31, 2000, and to submit a final report 
     on the projects by March 31, 2001. The limit on the number of 
     persons served per site would be expanded from 12,000 to 
     36,000. The Secretary would also be required to submit to 
     Congress by January 1, 1999, a plan, including an appropriate 
     transition, for the integration of health plans offered by 
     first and second generation SHMOs and similar plans into the 
     MedicarePlus program. The report on the plan would be 
     required to include recommendations on appropriate payment 
     levels for SHMO plans, including an analysis of the extent to 
     which it is appropriate to apply the MedicarePlus risk 
     adjustment factors to SHMO populations.
       Effective date. Enactment.
       Section 4015. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment. The 
     Conferees intend that this legislation be the last such 
     waiver extension for both SHMO I and SHMO II sites, and that 
     all HCFA activities and resources previously focused on 
     "testing" the SHMO concept during the last 13 years should be 
     shifted immediately toward efforts to make SHMOs a permanent 
     option available for beneficiaries under the Medicare+Choice 
     program.
     (c) Orderly transition of municipal health service 
         demonstration projects


                              Current Law

       Under a general demonstration authority, the Health Care 
     Financing Administration began waiving in the late 1970s 
     certain Medicare requirements to conduct the Municipal Health 
     Services Demonstration. This project has been conducted in 
     four cities--Baltimore, Cincinnati, Milwaukee, and San Jose. 
     As originally conceived, the project was intended to 
     encourage the use of municipal health centers, in place of 
     more costly hospital emergency rooms and outpatient 
     departments, by eliminating coinsurance and deductibles, 
     expanding the range of covered services, and paying the 
     cities the full cost of delivering services at the clinics. 
     Waivers have been extended several times since the inception 
     of the project by budget reconciliation bills.


                               House Bill

       Section 10018. Extends the demonstration through December 
     31, 2000, but only with respect to persons enrolled in the 
     projects before January 1, 1998. The Secretary would be 
     required to work with each demonstration project to develop a 
     plan, to be submitted to the House Ways and Means and Senate 
     Finance Committees by March 31, 1998, for the orderly 
     transition of projects and project enrollees to a non-
     demonstration health plan, such as a Medicaid managed care or 
     MedicarePlus plan. A demonstration project which does not 
     develop and submit a transition plan by March 31, 1998 or 
     within 6 months after enactment of the Act, whichever is 
     later, would be discontinued as of December 31, 1998. The 
     Secretary would be required to provide appropriate technical 
     assistance to assist in the transition so that disruption of 
     medical services to project enrollees would be minimized.
       Effective date. Enactment.
       Section 4018. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision with 
     a modification to specify that the demonstration would be 
     extended through the year 2000 only for individuals who 
     received at least one service during the period January 1, 
     1996, through the date of enactment of this Act.
     (d) Community nursing organization demonstration projects


                              Current Law

       OBRA 87 required the Secretary to conduct demonstration 
     projects to test a prepaid capitated, nurse-managed system of 
     care. Covered services include home health care, durable 
     medical equipment, and certain ambulatory care services. Four 
     sites (Mahomet, Illinois; Tucson, Arizona; New York, New 
     York; and St. Paul, Minnesota) were awarded contracts in 
     September 1992, and represent a mix of urban and rural 
     sites and different types of health care providers, 
     including a home health agency, a hospital-based system, 
     and a large multi-specialty clinic. The community nursing 
     organization (CNO) sites completed development activities 
     and implemented the demonstration in January 1994, with 
     service delivery beginning February 1994.


                               House Bill

       Section 10019. Extends the CNO demonstration for an 
     additional period of 2 years, and the deadline for the report 
     on the results of the demonstration would be not later than 6 
     months before the end of the extension.
       Effective date. Enactment.
       Section 4019. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

[[Page H6200]]

                         Chapter 3--Commissions

Bipartisan Commission on the Effect of the Baby Boom Generation on the 
   Medicare Program; National Bipartisan Commission on the Future of 
                                Medicare

   Sections 10721 and 4721 of House bill and Section 5021 of Senate 
                               amendment


                              Current Law

       No provision.
     (a) Establishment; duties


                               House Bill

       Section 10721. Establishes a commission to be known as the 
     Bipartisan Commission on the Effect of the Baby Boom 
     Generation on the Medicare Program, hereafter referred to as 
     ``the Commission.'' It would be required to: (1) examine the 
     financial impact on the Medicare program of the significant 
     increase in the number of Medicare eligible individuals which 
     will occur beginning approximately in 2010 and lasting for 
     approximately 25 years, (2) make specific recommendations to 
     Congress with respect to a comprehensive approach to preserve 
     the Medicare program for the period during which such 
     individuals are eligible for Medicare; and (3) study the 
     feasibility and desirability of: (I) establishing an 
     independent commission on Medicare to make annual 
     recommendations on how best to match the program's structure 
     to available funding, (ii) an expedited process for 
     consideration of recommendations by Congress, and (iii) a 
     default mechanism to enforce congressional spending targets 
     if Congress fails to approve recommendations. In making its 
     recommendations, the Commission would be required to 
     consider: (1) the amount and sources of federal funds to 
     finance Medicare, including innovative financing methods; (2) 
     methods used by other nations to respond to comparable 
     demographics; (3) modifying age-based eligibility to 
     correspond to that under the OASDI program; and (4) trends in 
     employment-related health care for retirees, including the 
     use of medical savings accounts and similar financing 
     devices;
       Section 4721. Similar provision, except: (1) does not 
     include requirement to study feasibility of establishing a 
     commission to make annual recommendations, a process for 
     expedited consideration and a default process for meeting 
     spending targets; (2) includes as a consideration in making 
     recommendations the role Medicare should play in addressing 
     the needs of persons with chronic illness.


                            Senate Amendment

       Establishes a National Bipartisan Commission on the Future 
     of Medicare. Includes Congressional findings that: Medicare 
     provides essential health care coverage, the Part A trust 
     fund will be bankrupt in 2001, that the fund will face even 
     greater solvency problems in the long run, that the trustees 
     have reported that Part B growth is not sustainable, and that 
     expeditious action is needed.
       Requires the Commission to review the long-term financial 
     conditions of the trust funds, identify problems that 
     threaten their financial integrity (including the extent to 
     which current update indexes do not accurately reflect 
     inflation), and analyze potential solutions that will ensure 
     both financial integrity and provision of appropriate 
     benefits. It would be required to make recommendations 
     concerning the following issues: (1) restoring financial 
     solvency and integrity through 2030; (2) establishing an 
     appropriate financial structure for the program as a whole; 
     (3) establishing the appropriate balance of benefits and 
     beneficiary contributions; (4) financing graduate medical 
     education; (5) feasibility of allowing those between age 62 
     and the Medicare eligibility age to buy into the program; (6) 
     impact of chronic disease and disability trends on the future 
     costs and quality of services under the current system and 
     (7) time periods during which recommendations under (1) (2), 
     and (3) should be implemented.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     modifications. The provision does not include Congressional 
     findings and modifies the required duties. The Commission, in 
     identifying the problems threatening the program's financial 
     integrity, would be required to include the financial impact 
     of the increase in the number of beneficiaries that will 
     occur beginning in 2010. The Commission would be required 
     to analyze methods used by other nations to respond to 
     comparable demographic patterns and trends in employment-
     related health care for retirees. The Commission would be 
     required to make recommendations on modifying the age-
     based eligibility criteria to conform to that applicable 
     for social security. It would further be required to make 
     recommendations regarding a comprehensive approach to 
     preserve the program.
       The charge to the Bipartisan Commission includes a 
     responsibility for making recommendations regarding the 
     financing of graduate medical education. The Conferees intend 
     that such recommendations address the graduate training of 
     all health professions that currently receive Medicare funds, 
     such as nurses and certain allied health professions, as well 
     as other health professions that do not receive Medicare 
     support but who receive graduate clinical training in 
     hospitals, such as psychologists and physician assistants.
     (b) Membership; administration


                               House Bill

       Section 10721. Specifies that the Commission would be 
     composed of 15 voting members, 6 appointed by the Majority 
     Leader of the Senate in consultation with the Minority 
     Leader, of whom no more than 4 are of the same party; 6 by 
     the Speaker of the House, after consultation with the 
     Minority Leader, of whom no more than 4 are in the same 
     party; and 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. The provision spells out the appointment of 
     a chair and vice chair, appointment of staff and consultants, 
     compensation, the procedure for filling vacancies, and 
     requirements relating to meetings and quorums.
       Authorizes the Chairman, in consultation with the vice 
     chairman, to appoint an advisory panel. Upon request of the 
     Commission, the Comptroller General would be required to 
     conduct such studies or investigations as the Commission 
     determined were needed to carry out its duties. The Director 
     of the Congressional Budget Office (CBO) would be required to 
     provide the Commission with cost estimates, and CBO would be 
     compensated for such estimates. The Commission would be 
     authorized to detail to it employees of federal agencies, and 
     to obtain technical assistance and information from federal 
     agencies.
       Section 4721. Identical provision.


                            Senate Amendment

       Specifies that the Commission would be composed of 15 
     voting members, 3 appointed by the President; 6 appointed by 
     the Majority Leader of the Senate in consultation with the 
     Minority Leader, of whom no more than 4 are of the same 
     party; and 6 by the Speaker of the House, after consultation 
     with the Minority Leader, of whom no more than 4 are in the 
     same political party.
       Requires the Comptroller General to advise on methodology 
     to be used in identifying problems and analyzing potential 
     solutions. The provision spells out the appointment of a 
     chairperson, terms of appointment, appointment of staff and 
     consultants, and use of other resources.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     amendments. It would increase the number of total members to 
     17. One of the additional members would be appointed by the 
     President (for a total of four appointed by the President). 
     The other additional member, who would serve as Chairman of 
     the Commission, would be appointed jointly by the President, 
     Majority Leader of the Senate, and the Speaker of the House. 
     The Commission would be appointed by December 1, 1997.
       The agreement would require the CBO or the Chief Actuary of 
     HCFA to provide cost estimates to the Commission upon request 
     of the Commission. CBO, but not the Chief Actuary, would be 
     compensated for such estimates. The agreement also would 
     modify the role of the Comptroller General to specify that 
     the GAO would conduct studies or investigations at the 
     request of the Commission. The conference agreement includes 
     further clarifying language.
     (c) Reports


                               House Bill

       Section 10721. Requires Commission to submit to Congress a 
     report, no later than May 1, 1999, 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 a period of projected solvency of 
     the Federal Old-Age and Survivors Insurance Trust Fund). The 
     report would be required to include detailed recommendations 
     for legislative initiatives with respect to how to accomplish 
     this objective.
       Requires submission of report within 12 months of enactment 
     regarding feasibility and desirability of establishing a 
     commission to make annual recommendations, a process for 
     expedited consideration and a default process for meeting 
     spending targets. If considered feasible and desirable, the 
     report would recommend specific legislative changes.
       Section 4701. Does not include requirement for second 
     report.


                            Senate Amendment

       Requires submission of a report to the President and 
     Congress within one year of enactment which contains detailed 
     statement of recommendations, findings, and conclusions.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     an amendment. The report would be due by March 1, 1999. It 
     would include a detailed statement of only those 
     recommendations, findings, and conclusions of the Commission 
     that receive approval of at least 11 members of the 
     Commission.
     (d) Appropriation; termination


                               House Bill

       Section 10721. Provides for termination 30 days after the 
     date of submission of the mandated report. An amount of $1.5 
     million would be authorized to be appropriated; 60% would be 
     payable from the Federal Hospital Insurance Trust Fund and 
     40% from the Federal Supplementary Medical Insurance Trust 
     Fund.
       Effective Date. Enactment.
       Section 4721. Identical provision.


                            Senate Amendment

       Provides for termination 30 days after the date of 
     submission of the mandated report.

[[Page H6201]]

     Such sums as necessary would be authorized to be 
     appropriated; amounts would be payable in equal parts from 
     the Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund.
       Effective Date. Enactment


                          Conference Agreement

       The conference agreement includes the House bill.

                  Medicare Payment Advisory Commission

   Sections 10021 and 4021 of House bill and Section 5022 of Senate 
                               amendment


                              Current Law

       The Prospective Payment Assessment Commission was 
     established by Congress through the Social Security Act 
     Amendments of 1983 (P.L. 98-21). The Commission is charged 
     with reporting each year its recommendation of an update 
     factor for PPS payment rates and for other changes in 
     reimbursement policy. It is also required each year to submit 
     a report to Congress which provides background information on 
     trends in health care delivery and financing. The Physician 
     Payment Review Commission was established by the Congress 
     through the Consolidated Omnibus Budget Reconciliation Act of 
     1985 (P.L. 99-272). It was charged with advising and making 
     recommendations to the Congress on methods to reform payment 
     to physicians under the Medicare program. In subsequent laws, 
     Congress mandated additional responsibilities relating to the 
     Medicare and Medicaid programs as well as the health care 
     system more generally.
       The law specified that both Commissions were to be 
     appointed by the Director of the Office of Technology 
     Assessment and funded through appropriations from the 
     Medicare trust funds. In 1995, the Office of Technology 
     Assessment was abolished. In May 1997, P.L. 105-13 was 
     enacted; this legislation extended the terms of those 
     Commission members whose terms were slated to expire in 1997 
     to May 1, 1998.


                               House Bill

       Section 10021. Establishes the Medicare Payment Advisory 
     Commission (hereafter referred to as the Commission) to 
     review and make recommendations to Congress concerning 
     payment policies under Medicare. The Commission would be 
     required to submit a report to Congress by March 1 of each 
     year (beginning in 1998) containing the results of its 
     reviews of payment policies and its recommendations 
     concerning such policies. By June 1 of every year it would be 
     required to submit a report containing an examination of 
     issues affecting Medicare, including implications of changes 
     in health care delivery in the U.S. and in the market for 
     health care services on Medicare.
       Charges Commission with the following specific review 
     responsibilities with respect to the MedicarePlus program: 
     (1) the methodology for making payments to the plans, 
     including the making of differential payments and the 
     distribution of differential updates among different payment 
     areas; (2) the risk adjustment mechanisms and the need to 
     adjust such mechanisms to take into account health status; 
     (3) the implications of risk selection among MedicarePlus 
     organizations and between the MedicarePlus option and the 
     Medicare fee-for-service option; (4) in relation to payment 
     under MedicarePlus, the development and implementation of 
     quality assurance mechanisms for those enrolled with 
     MedicarePlus organizations; (5) the impact of the 
     MedicarePlus program on beneficiary access to care; and (6) 
     other major issues in implementation and further development 
     of the MedicarePlus program.
       Requires Commission to review payment policies under 
     Medicare Parts A and B fee-for-service system, including: (1) 
     factors affecting expenditures in different sectors, 
     including the process for updating hospital, skilled nursing 
     facility, physician, and other fees; (2) payment 
     methodologies; and (3) the relationship of payment policies 
     to access and quality of care. It would also review the 
     effect of Medicare payment policies on the delivery of health 
     care services not provided under Medicare and assess the 
     implications of changes in the health services market on 
     Medicare.
       Requires Commission to evaluate required reports on payment 
     policies submitted by the Secretary to Congress (or a 
     committee of Congress). The Commission would be required to 
     submit a report on the evaluation within 6 months of the 
     Secretary's report. The Commission would also be required to 
     consult with the Chairmen and ranking Members of the 
     appropriate committees of Congress (House Ways and Means, 
     House Commerce, and Senate Finance) regarding its agenda. 
     The Commission would be authorized to submit from time to 
     time other reports as requested by such Chairmen and 
     Members and as it deemed appropriate. The reports would be 
     made public.
       Specifies that the Commission would be composed of 19 
     members appointed by the Comptroller General, with the first 
     appointments being made by September 30, 1997. These members 
     would have to meet specific qualifications (such as national 
     recognition for their expertise). Commission membership would 
     consist of a broad mix of different professionals, a broad 
     geographic representation, and a balance between urban and 
     rural representatives. It would include representatives of 
     consumers and the elderly. Health care providers could not 
     constitute a majority of the membership. Commissioners would 
     serve for 3-year staggered terms. The provision would include 
     a mechanism for filling vacancies, compensating 
     commissioners, appointing a chair and vice chair; convening 
     meetings; and providing for the executive director and other 
     staff, experts, and consultants. The Commission would be 
     authorized to secure directly from any department or agency 
     information to carry out these provisions. It would be 
     required to collect and assess information (which would be 
     available on an unrestricted basis to GAO). The Commission 
     would be subject to periodic audit by GAO.
       Requires the Commission to submit appropriations requests 
     in the same manner as the Comptroller General does; however, 
     the amounts appropriated for each would be separate. It would 
     authorize such sums as may be necessary to be appropriated 
     from the Medicare trust funds (60% from Part A and 40% from 
     Part B).
       Effective Date. Requires the Comptroller General to first 
     provide for appointment of members of the Commission (to be 
     known as MedPAC) by not later than September 30, 1997. As 
     quickly as possible after they were first appointed, the 
     Comptroller General (in consultation with ProPac and PPRC) 
     would provide for termination of these entities. As of that 
     date, ProPac and PPRC would be abolished. To the extent 
     possible, the Comptroller General would be required to 
     provide for the transfer to the new commission assets and 
     staff of the former commissions without any loss of benefits 
     or seniority by virtue of such transfers. Fund balances 
     available to the former commissions would be transferred to 
     the new commission. MedPAC would be responsible for the 
     preparation and submission of reports required by law to be 
     submitted (and which had not been submitted by the time it 
     was established) by the former commissions.
       Section 4021. Similar provision except: (1) does not 
     include requirement for June report; (2) adds requirement for 
     examination of Medicare issues to March report; (3) adds to 
     review requirement for MedicarePlus an examination of 
     appropriate role for Medicare program in addressing needs of 
     individuals with chronic illnesses; (4) specifies that 
     Commission is composed of 11 members; (5) does not eliminate 
     requirement for PPRC review of Secretary's update 
     recommendation; and (6) does not eliminate required quarterly 
     reporting by Secretary to PPRC.
       Effective Date. Same as Section 10021.


                            Senate Amendment

       Identical to Section 10021, except Commission composed of 
     15 members.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

                     Chapter 4--Medigap Protections

                          Medigap Protections

   Sections 10031 and 4031 of House bill and Section 5031 of Senate 
                               amendment


                              Current Law

       Medigap is the term used to describe individually-purchased 
     Medicare supplement policies. In 1990, Congress provided for 
     a standardization of Medigap policies; the intention was to 
     enable consumers to better understand policy choices. 
     Implementing regulations generally limit the number of 
     different types of Medigap plans that can be sold in a state 
     to no more than 10 standard benefit plans; these are known as 
     Plans A through J. The Plan A standardized package covers a 
     basic benefits package. Each of the other nine plans includes 
     the basic benefits plus a different combination of additional 
     benefits.
       All insurers offering Medigap policies are required to 
     offer a 6-month open enrollment period for persons turning 
     age 65. This is known as guaranteed open enrollment. There is 
     no guaranteed open enrollment provision for the under-65 
     disabled population.
       At the time insurers sell a Medigap policy, whether or not 
     during an open enrollment period, they are permitted to limit 
     or exclude coverage for services related to a preexisting 
     health condition; such exclusions cannot be imposed for more 
     than 6 months. An individual who has met the preexisting 
     condition limitation in one Medigap policy does not have to 
     meet the requirement under a new policy for previously 
     covered benefits. However, an insurer could impose exclusions 
     for newly covered benefits.
       Federal requirements for open enrollment and limits on 
     preexisting condition exclusions are designed to insure 
     beneficiaries have access to Medigap protection. However, 
     persons who disenroll (or wish to disenroll) from managed 
     care plans and move back into fee-for-service Medicare may 
     not have the same access to Medigap coverage as those who 
     join during the open enrollment period.
     (a) Guaranteed issue without preexisting conditions for 
         continuously covered individuals


                               House Bill

       Section 10031. Guarantees issuance of a Medigap ``A'', 
     ``B'', ``C'', or ``F'' policy without a pre-existing 
     condition exclusion for certain continuously covered 
     individuals. The insurer also would be prohibited from 
     discriminating in the pricing of such policy on the basis of 
     the individual's health status, claims experience, receipt of 
     health care, or medical condition. The following persons 
     would be covered under the guaranteed issuance provision:
       (i) Individuals enrolled under an employee welfare benefit 
     plan that provides benefits supplementing Medicare and the 
     plan terminates or ceases to provide such benefits.
       (ii) Persons enrolled with a MedicarePlus organization who 
     discontinue under circumstances permitting disenrollment 
     other

[[Page H6202]]

     than during an annual election period. (These include: (1) 
     the termination of the entity's certification, (2) the 
     individual moves outside of the entity's service area; or (3) 
     the individual elects termination due to cause.)
       (iii) Persons enrolled with a risk or cost contract HMO, a 
     similar organization operating under a demonstration project 
     authority, a Medicare SELECT policy, and enrollment ceases 
     for the reasons noted above, and in the case of a SELECT 
     policy, there is no applicable provision in state law for 
     continuation of such coverage.
       (iv) Individuals enrolled under a Medigap policy and 
     enrollment ceases because of the bankruptcy or insolvency of 
     the issuer, or because of other involuntary termination of 
     coverage and there is no provision under applicable state law 
     for the continuation of such coverage.
       (v) An individual who: (1) was enrolled under a Medigap 
     policy; (2) subsequently terminates such enrollment and 
     enrolls with a MedicarePlus organization, a risk or cost 
     contract HMO, a similar organization operating under a 
     demonstration project authority, or a Medicare SELECT policy; 
     and (3) terminates such enrollment within 6 months (or within 
     3 months beginning in 2003), but only if the individual was 
     never previously enrolled with such an entity.
       Specifies that at the time of the event which results in 
     the cessation of enrollment or loss of coverage, the 
     organization, insurer, or plan administrator (whichever is 
     appropriate) would notify the individual of his or her rights 
     and the obligations of issuers of Medigap policies. The 
     individual must seek to enroll under the Medigap ``A'', 
     ``B'', ``C'', or ``F'' policy not later than 63 days after 
     termination of other enrollment and provide evidence of the 
     date of termination or disenrollment along with the 
     application for such Medicare supplemental policy. 
     Individuals who re-enroll with a Medigap plan after the one 
     time test specified in (v) above could re-enroll in the same 
     Medigap policy (if still available from the same issuer) as 
     they had before trying MedicarePlus.
       Section 4031. Similar provision. Adds an additional 
     category of persons for whom the guaranteed issue applies. 
     These are persons who terminate such first time enrollment 
     (occurring in 2002 or later) with an organization described 
     in (v) above during the next coordinated annual coordinated 
     election period.


                            Senate Amendment

       Similar to Section 10031, except: (1) specifies that for 
     persons described in (v) the enrollment is terminated during 
     the first 12 months of enrollment; (2) includes an additional 
     category of persons defined as those who upon first becoming 
     eligible at age 65 enroll in a Medicare Choice plan and 
     disenroll from such plan within 12 months; (3) specifies that 
     guaranteed issue is for a policy of comparable or lesser 
     benefits to that under the prior plan or policy, except for 
     those described in (2) above for which guaranteed issue is 
     for any Medigap policy; (4) does not include reference to 
     states which offer benefit packages other than A through J 
     and (5) refers to Medicare Choice.


                          Conference Agreement

       The conference agreement includes the House bill as 
     contained in Section 10031 with modifications. For 
     individuals described in item (v) the subsequent enrollment 
     may be terminated by the enrollee during any 12 month period 
     (during the first 12 months of enrollment) during which the 
     individual is permitted to terminate such subsequent 
     enrollment.
       The agreement adds an additional category of persons to 
     those guaranteed issuance of Medigap policies. These are 
     individuals who upon first becoming eligible for Medicare at 
     age 65, enroll in a Medicare+Choice plan, and disenroll from 
     such plan within 12 months of the effective date of such 
     enrollment. For these persons, the guaranteed issue would be 
     for any type of Medigap policy.
       The agreement includes additional clarifying language.
     (b) Limitation on Imposition of preexisting condition 
         exclusion during initial open enrollment period
       Section 10031. Limits the application of a preexisting 
     condition exclusion during the initial 6-month open 
     enrollment period. Specifically, such an exclusion could not 
     be imposed on an individual who, on the date of application, 
     had a continuous period of at least 6 months of health 
     insurance coverage defined as ``creditable coverage'' under 
     the Health Insurance Portability and Accountability Act 
     (HIPAA). If the individual had less than 6 months coverage, 
     the policy would reduce the period of any pre-existing 
     exclusion by the aggregate of periods of ``creditable 
     coverage'' applicable to the individual as of the enrollment 
     date. The rules used to determine the reduction would be 
     based on rules used under HIPAA.
       Section 4031 Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with 
     clarifying language.
     (c) Extending six month initial enrollment period to non-
         elderly beneficiaries


                               House Bill

       No provision.


                            Senate Amendment

       Extends guaranteed issue period to disabled persons who 
     enroll during the first six months they are entitled to Part 
     A benefits.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (d) Effective date


                               House Bill

       Section 10031. Guaranteed issue effective July 1, 1998. 
     Limit on preexisting exclusion applies to policies issued on 
     or after July 1, 1998. In general, a state would not be 
     deemed out of compliance due solely to failure to make 
     changes before 1 year after the date the National Association 
     of Insurance Commissioners (NAIC) or Secretary made changes 
     in its regulations. A longer time may be permitted if a state 
     requires legislation. The NAIC would be given 9 months to 
     modify its regulations to conform to the new requirements. If 
     the NAIC, did not make the changes within this time, the 
     Secretary would make the appropriate modification in the 
     regulations.
       Section 4031. Identical provision.


                            Senate Amendment

       Effective Date. Similar provision. Guaranteed issuance for 
     disabled applies to policies issued on or after July 1, 1998. 
     Disabled persons enrolled before that date would have a six-
     month guaranteed issue period beginning July 1, 1998; before 
     that date the Secretary would notify them of their rights.


                          Conference Agreement

       The conference agreement includes the House bill with 
     clarifying language.

               Addition of High Deductible Medigap Policy

                    Section 5032 of Senate amendment


                              Current Law

       In 1990, Congress provided for a standardization of Medigap 
     policies. Implementing regulations generally limit the number 
     of different types of Medigap plans that can be sold in a 
     state to no more than 10 standard benefit plans; these are 
     known as Plans A through J. The Plan A standardized package 
     covers a basic benefits package. Each of the other nine plans 
     includes the basic benefits plus a different combination of 
     additional benefits. All 10 plans cover Part A and Part B 
     coinsurance; all but Plan A cover the Part B deductible; and 
     three (including the most popular) include the part B 
     deductible.


                               House Bill

       No provision.


                            Senate Amendment

       Authorizes States to allow at least one high deductible 
     Medigap policy. The high-deductible policy would offer one of 
     the benefit packages included in one of the ten standardized 
     plans. In addition, it would require the beneficiary to pay 
     annual out-of-pocket expenses (not including the premium) of 
     $1,500 before the policy begins paying benefits.
       Effective Date. One year after enactment, except that a 
     longer time permitted where state legislation is required.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     an amendment. Under the agreement the high deductible plan 
     must either be classified as Plan F or Plan J, except that it 
     has a high deductible feature. The high deductible amount 
     would be $1,500 in 1998 and 1999, increased by the CPI in 
     subsequent years. The beneficiary would be responsible for 
     payment of expenses up to this amount; the policy would pay 
     100% of covered out-of-pocket expenses once the deductible 
     had been met. The provision would be effective on enactment, 
     with delay permitted where state legislation required.

                       Chapter 5.--Demonstrations

       Medicare Prepaid Competitive Pricing Demonstration Project

  Sections 10032 and 4032 of House bill and sections 5041-5044 of the 
                            Senate amendment

     (a) Establishment of project


                              current law

       Under section 402 of the Social Security Amendments of 1967 
     (P.L. 90-248, 42 U.S.C. 1395b-1), the Secretary is authorized 
     to develop and engage in experiments and demonstration 
     projects for specified purposes, including to determine 
     whether, and if so, which changes in methods of payment or 
     reimbursement for Medicare services, including a change to 
     methods based on negotiated rates, would have the effect of 
     increasing the efficiency and economy of such health 
     services. Under this authority, HCFA is seeking to 
     demonstrate the application of competitive bidding as a 
     method for establishing payments for risk contract HMOs in 
     the Denver area. HCFA's actions have been challenged in the 
     courts.


                               house bill

       Section 10032. Requires the Secretary to provide, no later 
     than one year after enactment, for implementation of a 
     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 
     several geographic areas.
       Section 4032. Identical provision.


                            senate amendment

       Requires the Secretary, beginning January 1, 1999, to 
     conduct demonstration projects in applicable areas for the 
     purpose of: (I) applying a pricing methodology for payments 
     to Medicare Choice organizations that use the competitive 
     market approach described in

[[Page H6203]]

     this provision; (ii) applying a benefit structure and 
     beneficiary premium structure described in this provision; 
     (iii) applying information and quality programs specified 
     herein; and (iv) evaluating the effects of the this 
     methodology and these structures to Medicare FFS.


                          conference agreement

       The conference agreement includes the Senate amendment, 
     with modifications. It requires that the Secretary of HHS 
     establish up to seven demonstration projects.
     (b) Research design advisory committee


                               house bill

       Section 10032. Before implementing the project, the 
     Secretary would be required to appoint a national advisory 
     committee, including independent actuaries and individuals 
     with expertise in competitive health plan pricing, to 
     recommend to the Secretary the appropriate research design 
     for implementing the project, including 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, 
     information dissemination, and methods of evaluating the 
     results of the project. Upon implementation of the project, 
     the Committee would 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.
       Section 4032. Identical provision.


                            senate amendment

       Requires the Secretary to appoint a technical advisory 
     group, composed of representatives of Medicare Choice 
     organizations, beneficiaries, employers and others in 
     affected areas who have technical expertise relative to the 
     design and implementation of the project to advise the 
     Secretary concerning how the project would be implemented in 
     the area.


                          conference agreement

       The conference agreement includes the House provision, with 
     modifications. The Competitive Pricing Advisory Committee 
     would make initial recommendations regarding the method for 
     area selection, benefit design, structuring choice, etc. Upon 
     implementation of the project, the Committee would continue 
     to advise the Secretary on the application of the design in 
     the different areas and changes in the project based on 
     experience with its operations. Notwithstanding section 9(c) 
     of the Federal Advisory Committee Act, the Committee could 
     meet as soon as members were appointed. The Committee would 
     terminate December 31, 2004.
       Upon the designation of an area, the Secretary would be 
     required to 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 would be implemented in the area. 
     Notwithstanding section 9(c) of the Federal Advisory 
     Committee Act, these committees could meet as soon as members 
     were appointed.
     (c) Area selection


                               house bill

       Section 10032. Taking into account the national advisory 
     committee's recommendations, the Secretary would be required 
     to designate demonstration areas. Upon such designation, the 
     Secretary would be required to appoint an area advisory 
     committee, composed of representatives of health plans, 
     providers, and beneficiaries in each demonstration area. The 
     committee could advise the Secretary on marketing and pricing 
     of plans in the area, and other relevant factors.
       Section 4032. Identical provision.


                           senate amendment-

       The applicable area would be determined by the Secretary 
     and would mean 10 urban areas with respect to which less than 
     25% of beneficiaries enrolled with an eligible organization 
     under section 1876 and 3 rural areas. Any applicable area 
     would be treated as a Medicare Choice payment area.-


                          conference agreement

       The conference agreement includes the House bill with a 
     modification. The Secretary would designate, in accordance 
     with recommendations of the Competitive Pricing Advisory 
     Committee, up to 7 Medicare payment areas in which the 
     project would be conducted. The Committee would be required 
     to recommend to the Secretary the designation of 4 specific 
     areas to be included. Such recommendations would have to be 
     made to ensure that payments under the project in 2 areas 
     would begin on January 1, 1999 and in 2 areas on January 1, 
     2000. Of the 4 areas recommended, 3 would have to be in urban 
     areas and 1 in a rural area. By December 31, 2001, the 
     Committee could recommend to the Secretary the designation of 
     up to 3 additional payment areas to be included in the 
     project.
       Subject to consultation with the area advisory committee, 
     the Secretary would, for each Medicare payment area 
     designated in accordance with the recommendations of the 
     Competitive Pricing Advisory Committee: (I) establish the 
     benefit design among plans offered in the area, (ii) 
     structure the method for selecting plans offered in the area, 
     and (iii) in consultation with the Committee, (a) establish 
     methods for setting the price to be paid to the plans, 
     including the rewarding and penalizing Medicare+Choice plans 
     on the basis of the attainment of, or failure to attain, 
     applicable quality standards, and (b) provide for the 
     collection of plan information, information dissemination, 
     and methods for project evaluation.
       The aggregate payments under the project for any designated 
     area could not exceed the aggregate payments that would have 
     been made under Medicare if the project had not been 
     conducted.
     (d) Monitoring and report/evaluation


                               house bill

       Section 10032. Taking into considerations the 
     recommendations of the advisory committee (established under 
     (b)), the Secretary would be required to closely monitor the 
     impact of projects in areas on the price and quality of, and 
     access to, Medicare covered services, choice of plans, 
     changes in enrollment, and other relevant factors. The 
     Secretary would be required to periodically report to 
     Congress on project progress.
       Section 4032. Identical provision.


                            senate amendment

       Not later than December 31, 2001, the Secretary would be 
     required to submit to the President a report regarding the 
     demonstration projects conducted under this section. The 
     report would have to include the following: (I) a description 
     of the demonstration projects; (ii) an evaluation of the 
     effectiveness of the demonstration projects and any 
     legislative recommendations determined appropriate by the 
     Secretary; (iii) any other information regarding the 
     demonstration projects that the Secretary determines to be 
     appropriate; (iv) an evaluation as to whether the method of 
     payment under section 5042 (see below) used in the 
     demonstration projects for payment to Medicare Choice plans 
     should be extended to the entire Medicare population and if 
     such evaluation determines that such method should not be 
     extended, legislative recommendations to modify such method 
     so that it may be applied to the entire Medicare population.
       Requires the President to report to the Congress and if the 
     President determines appropriate, any legislative 
     recommendations for extending the project to the entire 
     Medicare population.


                          conference agreement

       The conference agreement includes the Senate provision with 
     a modification. Taking into consideration the recommendations 
     of the Competitive Pricing Advisory Committee and the area 
     advisory committees, the Secretary would be required to 
     closely monitor and measure the impact of the project in the 
     different areas on the price and quality of, and access to, 
     Medicare covered services, choice of health plans, changes in 
     enrollment, and other relevant factors. By December 31, 2002, 
     the Secretary would be required to submit to Congress a 
     report on the progress of the project, including a comparison 
     of the matters noted above among the different designated 
     areas. Such report could include legislative recommendations 
     for extending the project to the entire Medicare population.
     (e) Waiver authority
       Section 10032. Authorizes the Secretary to waive such 
     requirements of section 1876 (relating to Medicare risk, 
     cost, and HCPP plans) and of MedicarePlus as may be needed to 
     carry out the demonstration project.
       Section 4032.--Identical provision.-


                            senate amendment

       Authorizes the Secretary to waive compliance with the 
     requirements of titles XI, XVIII (Medicare), and XIX 
     (Medicaid) of the Social Security Act to such extent and for 
     such period as the Secretary determines is necessary to 
     conduct demonstration projects.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     a modification to provide that only the requirements of title 
     XVIII would be waived.
     (f) Relationship to other authority


                               house bill

       Section 10032 (new section 1854(a)).--No provision.
       Section 4032.--Except as specified above, the Secretary 
     would be prohibited from conducting or continuing any ongoing 
     demonstration project (i.e., the Denver demonstration) 
     designed to demonstrate competitive bidding as an 
     alternative to paying plans on the basis of the AAPCCs (as 
     specified under current law) or the Medicare Plus 
     capitation rates (as established under new Section 1853 of 
     the provision).


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision with 
     a modification providing that the Secretary could not conduct 
     or continue any related demonstration project on the basis of 
     a competitive bidding process or pricing system (as described 
     above) other than on the basis described in this section of 
     the legislation.
     (g) Determination of annual medicare choice capitation rates


                               House Bill

       Section 10032. No provision.
       Section 4032. No provision.


                           Senate Amendment-

       Provides that for a Medicare Choice payment area within 
     which a demonstration project is being conducted, the annual 
     Medicare Choice capitation rate would be the standardized 
     payment amount determined under this section rather than the 
     amount determined under section 1853.
       Not later than June 1 of each calendar year, each Medicare 
     Choice organization offering one or more Medicare Choice 
     plans in an applicable Medicare Choice payment would be 
     required to file with the Secretary

[[Page H6204]]

     a bid which contained the amount of the monthly premium for 
     coverage under each such Medicare Choice plan. The premiums 
     charged by a Medicare Choice plan sponsor under this part 
     could not vary among individuals who reside in the same 
     applicable Medicare Choice payment area.
       After bids were submitted, the Secretary could negotiate 
     with Medicare Choice organizations to modify such bids if the 
     Secretary determined that the bids did not provide enough 
     revenues to ensure the plan's actuarial soundness, were too 
     high, or met other conditions. Not later than July 31 of each 
     calendar year (beginning with 1998), the Secretary would 
     determine and announce a standardized payment amount the 
     following calendar year for each applicable Medicare Choice 
     payment area.
       The standardized payment amount for a calendar year after 
     1998 for any applicable Medicare Choice payment area would be 
     equal to the maximum premium. The maximum premium for any 
     applicable Medicare Choice payment area would be equal to the 
     weighted average bid price (disregarding certain plans) but 
     in no case would the amount be greater than the sum of: (I) 
     the average per capita amount, as determined by the Secretary 
     as appropriate for the population eligible to enroll in 
     Medicare Choice plans in such payment area, for such calendar 
     year that the Secretary would have expended for an individual 
     in such payment area enrolled under Medicare FFS plus (ii) 
     the amount equal to the actuarial value of deductibles, 
     coinsurance, and copayments charged an individual for 
     services provided under the Medicare FFS. Payments to plans 
     would be adjusted for specified risk factors (e.g., age and 
     disability status). PPRC and ProPAC would be required to 
     develop recommendations on the risk factors to adjust 
     payments by January 1, 1999 and report such to Congress in 
     their respective annual reports.
       The Secretary would make monthly payments to plan sponsors 
     from the HI and SMI trust funds equal to \1/12\ of the 
     specified payment amounts. These would be the lesser of: (I) 
     the standardized payment amount for the applicable Medicare 
     Choice payment area, as adjusted for the individual's risk 
     factors, or (ii) the premium charged by the plan for such 
     individual, as adjusted for such individual, minus the amount 
     such individual paid to the plan pursuant to section 5043 
     (relating to 10 percent of the premium). A physician or other 
     entity (other than a provider of services) that did not have 
     a contract with a Medicare Choice organization would have to 
     accept as payment in full for services to such an individual 
     the amounts that the physician or other entity could collect 
     if the individual were in Medicare FFS.
       An Office of Competition would be established in the 
     Department of HHS. The Secretary would be required to appoint 
     a director of the office who would administer the competitive 
     demonstration. Requires the Secretary, to the maximum extent 
     feasible, to enter into contracts with appropriate non-
     Federal entities to carry out related activities.


                          conference agreement

       The conference agreement does not include the Senate 
     amendment.
     (h) Benefits and beneficiary protections
       Section 10032. No provision.
       Section 4032. No provision.


                            senate amendment

       Requires each Medicare Choice plan in an applicable 
     Medicare Choice payment area to provide those items and 
     services covered under Medicare FFS, subject to nominal 
     copayments as determined by the Secretary, prescription 
     drugs, subject to such limits as established by the 
     Secretary, and such additional health services as the 
     Secretary may approve.
       Supplemental benefits.--Each Medicare Choice plan could 
     offer any of the optional supplemental benefit plans 
     specified to an individual enrolled in the basic benefit plan 
     for an additional premium amount. Such benefits may be 
     marketed and sold by the Medicare Choice organization outside 
     of the enrollment process described in part C. The provision 
     limits the premiums that could be charged for supplemental 
     benefits.
       Premium Requirements for Beneficiaries.--If an eligible 
     individual enrolled in a Medicare Choice demonstration plan, 
     the individual would be required to pay the following 
     premium differentials: (I) 10 percent of the plan's 
     premium; (ii) if the premium of the plan was higher than 
     the standardized payment amount, 100% of such difference; 
     and (iii) an amount equal to cost-sharing under Medicare 
     FFS, except that such amount could not exceed the 
     actuarial value of the deductibles and coinsurance less 
     the actual value of nominal copayments for the plan's 
     basic benefits. An individual enrolled in a Medicare 
     Choice demonstration plan could not be required to pay the 
     Part B premium.


                          conference agreement

       The conference agreement does not include the Senate 
     amendment.
     (I) Information and quality standards


                               House Bill

       Section 10032. No provision.
       Section 4032. No provision.
       Effective Date.--
       Section 10032. Enactment
       Section 4032. Identical.-


                            senate amendment

       A. Information requirements.--Requires the Secretary to 
     provide that the following information and cooperative 
     reports be used in the competitive pricing demonstration 
     instead of those required under the Medicare Part C 
     established by this legislation. Specifies requirements for 
     the communication of notice and informational materials. The 
     information required would include: (I) general information 
     (e.g., Part B premium rates, cost-sharing, benefits, how to 
     enroll, etc.), and (ii) a copy of the most recent comparative 
     plan report for the demonstration plans in the individual's 
     payment area. This report would provide easily understood 
     comparison information on the plan's service area, coverage 
     of emergency services, cost-sharing, disenrollment rates, 
     quality information, information on access, utilization 
     review procedures, premium prices, out-of-network providers, 
     and additional specified information. This information would 
     have to be updated annually. Plans would be required to help 
     share in the estimated costs incurred by the Secretary in 
     preparing information.
       B. Quality demonstration plans.--Provides definitions of 
     comparative report, director, Medicare, demonstration plan, 
     and demonstration plan sponsor.
       Establishes a Quality Advisory Institute to recommend to 
     the Director licensing and certification criteria and 
     comparative measurement methods. Provides for the membership, 
     duties, terms, and other aspects of the institute.
       Establishes the duties of the Director of the Quality 
     Advisory Institute, which would include adopting criteria for 
     licensing of certifying entities, issuing licenses, 
     developing comparative health care measures, etc.
       Provides that by January 1, 1999, the Director ensure that 
     no demonstration plan be offered, contracted with, or 
     reimbursed unless it has been certified in accordance with 
     the requirements of this provision.
       Requires that the director of the Quality Advisory 
     Institute establish a program under which payments are made 
     to various demonstration plans to reward such plans for 
     meeting or exceeding quality targets. The Director would be 
     required to establish broad categories of quality targets and 
     performance measures. The Director would be required to 
     withhold 0.50% from any payment that a demonstration plan 
     sponsor received with respect to an enrolled beneficiary and 
     to use such amounts to make annual payments to plans that 
     have been determined to meet or exceed the quality targets 
     and performance measures. Excess funds would be applied to 
     deficit reduction. Specified the amount of payment.
       Requires a plan to participate in the certification process 
     described above. Specifies procedures in the event of a plan 
     merger or purchase and treatment of new plans.
       Requires the Director to develop procedures for the 
     licensing of entities to certify demonstration plans.
       Requires the Director to establish minimum criteria to be 
     used by licensed certifying entities in the certification of 
     demonstration plans and establishes requirements for the 
     criteria.
       Requires the Director to develop grievance and appeals 
     procedures under which a demonstration plan that is denied 
     certification may appeal such denial to the director.
       Effective date.--Enactment.


                          conference agreement

       The conference agreement does not include the Senate 
     amendment.-
       The effective date for the demonstration projects would be 
     enactment.--

               Medicare Enrollment Demonstration Project

                    Section 5045 of Senate amendment


                              current law

       No provision.


                               House Bill

       No provision-


                            Senate Amendment

       Requires the Secretary to implement a demonstration project 
     to evaluate the use of a third-party contractor to conduct 
     the Medicare Choice plan enrollment and disenrollment 
     functions, as described in Medicare Part C, Medicare Choice, 
     established under this provision.
       Before implementing the project, the Secretary would be 
     required to consult with affected parties on the: (I) design 
     of the project; (ii) selection criteria for the third-party 
     contractor; and (iii) establishment of performance standards. 
     The Secretary would be required to establish performance 
     standards for the accuracy and timeliness of the Medicare 
     Choice plan enrollment and disenrollment functions performed 
     by the third-party contractor. If the Secretary determined 
     that a third-party contractor was out of compliance with the 
     performance standards, the enrollment and disenrollment 
     functions would be performed by the Medicare Choice plan 
     until the Secretary appointed a new third-party contractor. 
     In the event that there was a dispute between the Secretary 
     and a Medicare Choice plan regarding whether or not the 
     third-party contractor was in compliance, such enrollment and 
     disenrollment functions would be performed by the Medicare 
     Choice plan.
       The Secretary would be required to periodically report to 
     Congress on the progress of the project.
       The Secretary would be required to waive compliance with 
     the requirements of Medicare Choice to such extent and for 
     such period as the Secretary determined was necessary to 
     conduct the project.

[[Page H6205]]

       The demonstration project would be conducted for a 3-year 
     period. This project would be conducted separately from any 
     other demonstration.
       Effective date--Enactment


                          Conference Agreement

       The conference agreement includes the Senate amendment 
     except that the provision relating to disputes between the 
     Secretary and a Medicare Choice plan regarding whether or not 
     the third-party contractor is in compliance is not included.

            Medicare Coordinated Care Demonstration Project

                    section 5046 of Senate amendment


                              Current Law

       No provision.-


                               House Bill

       No provision.-


                            Senate Amendment

       Requires the Secretary to establish a demonstration program 
     to evaluate methods such as case management and other models 
     of coordinated care that improve the quality of care and 
     reduce Medicare expenditures for beneficiaries with chronic 
     illnesses enrolled in traditional Medicare.
       The Secretary would be required to examine best practices 
     in the private sector for coordinating care for individuals 
     with chronic illnesses for one year and, using the results of 
     the evaluation, establish at least nine demonstration 
     projects (6 urban and 3 rural) within 2 years of enactment.
       Not later than two years after implementation (and 
     biannually thereafter), the Secretary would be required to 
     evaluate the demonstrations and submit a report to Congress. 
     The evaluation would have to address, at a minimum, the cost-
     effectiveness of the demonstration projects, quality of care 
     received by beneficiaries, beneficiary satisfaction, and 
     provider satisfaction. If the initial evaluation showed the 
     demonstration projects to either reduce Medicare expenditures 
     or to not increase Medicare expenditures while increasing the 
     quality of care received by beneficiaries and increasing 
     beneficiary and provider satisfaction, the Secretary would 
     continue the projects and could expand the number of 
     demonstration projects.
       The Secretary would be authorized to waive compliance with 
     existing requirements of Medicare and Medicaid to such extent 
     and for such period as necessary to conduct the demonstration 
     projects.
       Such sums as necessary would be authorized to be 
     appropriated for the purpose of evaluating and reporting on 
     the demonstrations.
       Effective date--Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     modifications. The number of demonstration projects would be 
     5 in urban areas, 3 in rural areas, and 1 in the District of 
     Columbia which is operated by a nonprofit academic medical 
     center that maintains a National Cancer Institute certified 
     comprehensive cancer center. Funding for this last project 
     would be available only as provided in any federal law making 
     appropriations for the District of Columbia. The Secretary 
     could waive requirements of Medicare to the extent needed to 
     conduct the projects.

     Establishment of Medicare Reimbursement Demonstration Projects

                    Section 5047 of Senate amendment


                              Current Law

       Medicare is prohibited from reimbursing for any services 
     provided by a federal health care provider, unless the 
     provider is determined by the Secretary of Health and 
     Human Services to be providing services to the public 
     generally as a community institution or agency or is 
     operated by the Indian Health Service. In addition, 
     Medicare is prohibited from making payment to any federal 
     health care provider who is obligated by law or contract 
     to render services at the public expense.
     (a) Medicare subvention project for veterans


                               House Bill

       No provision


                            Senate Amendment

       Authorizes a Medicare subvention project for veterans. The 
     Secretaries of HHS and VA would be authorized to establish a 
     demonstration project, under an agreement, under which the 
     Secretary of HHS would reimburse the Secretary of VA from the 
     Medicare trust funds, for Medicare health care services 
     furnished to certain targeted medicare-eligible veterans. The 
     agreement would include at a minimum: (1) a description of 
     the benefits to be provided to the participants; (2) a 
     description of the eligibility rules for participation, (3) a 
     description of how the demonstration would satisfy Medicare 
     requirements; (4) a description of the sites selected; (5) a 
     description of how reimbursement and maintenance of effort 
     requirements would be implemented; and (6) a statement that 
     the Secretary would have access to all data of the VA that 
     the Secretary determined was necessary to conduct independent 
     estimates and audits of the maintenance of effort 
     requirement, the annual reconciliation, and related matters 
     required under the demonstration project.
       Provides that the Secretaries would establish a plan for 
     the selection of up to 12 medical centers under the 
     jurisdiction of the Secretary of VA and located in 
     geographically dispersed locations. The selection plan would 
     favor selection of those medical centers that were suited to 
     serve targeted medicare-eligible individuals because: (1) 
     there is a high potential demand by targeted medicare-
     eligible veterans for their services; (2) they have 
     sufficient capability in billing and accounting to 
     participate; (3) they have favorable indicators of quality of 
     care, including patient satisfaction; (4) they deliver a 
     range of services required by targeted medicare-eligible 
     veterans; and (5) they meet other relevant factors identified 
     in the plan. The Secretaries would endeavor to include at 
     least 1 medical center that was in the same catchment area as 
     a military medical facility which was closed pursuant to 
     either: The Defense Base Closure and Realignment Act of 1990; 
     or Title II of the Defense Authorization Amendments and Base 
     Closure and Realignment Act. No new facilities would be built 
     or expanded with funds from the demonstration project. The 
     Secretaries would conduct the project during the 3-year 
     period beginning on January 1, 1998.
       Specifies that participation of veterans would be 
     voluntary, subject to the capacity of participating medical 
     centers and the funding limitations. Veterans who were 
     military retirees would be given preference at military 
     centers near a closed base. The Secretary of VA could 
     establish cost-sharing requirements. The Secretaries would be 
     required to submit a report 30 days prior to the start of a 
     project.
       Permits the Secretary of VA to establish and operate 
     managed health care plans. Any such plan would be operated by 
     or through a VA medical center or group of medical centers 
     and could include the provision of health care services 
     through other facilities under the jurisdiction of the 
     Secretary of VA as well as public and private entities under 
     arrangements made between them and the VA. The benefits would 
     include at least those covered under Medicare.
       Specifies that the Secretary of VA could establish a 
     managed health care plan using one or more medical centers 
     only after submission of a report to Congress setting forth a 
     plan for their use. The plan could not be implemented until 
     the Secretary of VA received from the VA Inspector General a 
     certification that the plan meets specified criteria. The 
     Secretary would maintain necessary reserves.
       Specifies that, in general, payments would equal 95% of 
     amounts that would otherwise be payable under Medicare for 
     services provided both on a capitated and non-capitated 
     basis. In computing payments for services provided on a non-
     capitated basis the following would be excluded: (1) 
     disproportionate share hospital adjustment; (2) direct 
     graduate medical education payments; (3) 40% of indirect 
     medical education adjustment; and (4) 67% of any capital-
     related costs. In years prior to 2001, the capitated payments 
     would be computed as if amounts excluded for non-capitated 
     payments had been excluded for determining Medicare Choice 
     payments. Payments under the demonstration could not exceed 
     $50 million in any year. Payments would be reduced to the 
     extent that the VA failed to maintain the effort level in 
     effect for targeted veterans in FY 1997.
       Requires the Secretaries, in consultation with the 
     Comptroller General, to closely monitor the expenditures made 
     under the medicare program for targeted medicare-eligible 
     veterans compared to the expenditures that would have been 
     made if the demonstration had not been conducted. The 
     Comptroller General would submit to the Secretaries and the 
     appropriate committees of Congress an annual report on the 
     extent, if any, to which Medicare costs increased during the 
     preceding fiscal year as a result of the demonstration. If 
     so, the Secretaries would be required to take steps necessary 
     to recoup costs and prevent future increases.
       Requires the administering Secretaries to arrange for an 
     independent entity with expertise in the evaluation of health 
     services to conduct an evaluation of the demonstration 
     project. The entity would submit annual reports to the 
     administering Secretaries and to appropriate congressional 
     committees. The first report would be submitted not later 
     than 12 months after the demonstration project begins 
     operation, and the final report not later than 3\1/2\ years 
     after that date. The reports would include an assessment of: 
     (1) the cost to the VA of providing care to veterans under 
     the project; (2) compliance of participating medical centers 
     with applicable measures of quality of care, compared to such 
     compliance for other medicare-participating medical centers; 
     (3) a comparison of the costs of medical centers' 
     participation in the program with the reimbursements provided 
     for services of such medical centers; (4) savings or costs to 
     medicare from the project; (5) any change in access to care 
     or quality of care for targeted medicare-eligible veterans 
     participating in the project; (6) any effect of the project 
     on the access to care and quality of care for targeted 
     medicare-eligible veterans not participating in the project 
     and other veterans not participating in the project; (7) 
     provision of services under managed health care plans; (8) 
     any impact on enrollment in Medicare Choice. Within 6 months 
     of submission of the penultimate report, the Secretaries 
     would submit to Congress a report containing recommendations 
     on whether to extend the demonstration or make it permanent; 
     whether to expand the project to cover additional sites and 
     increase the maximum amount of reimbursement; and whether 
     terms and conditions of the project should be extended or 
     modified.

[[Page H6206]]

                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment. However, it does require the Secretary and the 
     Secretary of Veterans Affairs (in consultation with the 
     Secretary of Defense) to jointly submit to Congress a 
     detailed implementation plan for a subvention demonstration 
     project for veterans. The provision would require submission 
     of the plan within 12 months of the start of the subvention 
     demonstration project for military retirees; the plan would 
     follow the DoD model.
     (b) Medicare subvention project for military retirees


                               House Bill

       No provision


                            Senate Amendment

       Authorizes the Secretary of DoD and the Secretary of HHS to 
     establish a demonstration project (under an agreement entered 
     into by the administering Secretaries) under which the 
     Secretary of HHS would reimburse the Secretary of DoD from 
     the trust funds, for medicare health care services furnished 
     to certain medicare-eligible military retirees or dependents. 
     The agreement would include (1) a description of the benefits 
     to be provided; (2) a description of the eligibility rules 
     for participation; (3) a description of how the demonstration 
     project would satisfy Medicare requirements; (4) a 
     description of the sites selected; (5) a description of how 
     reimbursement and maintenance of effort requirements would be 
     implemented; and (6) a statement that the Secretary shall 
     have access to all data of the DoD that the Secretary 
     determines necessary. The project would be limited to six 
     sites after review of all TRICARE regions. No new military 
     treatment facility could be built or expanded with the funds. 
     The project would be conducted during the 3-year period 
     beginning January 1, 1998. The Inspector General of HHS could 
     investigate any matters regarding expenditure of funds. The 
     administering Secretaries would be required to submit a copy 
     of the agreement at least 30 days prior to the start of the 
     project.
       Specifies participation is voluntary, subject to capacity 
     and funding limitation. Cost-sharing requirements could be 
     established. TRICARE enrollment fee would be waived for 
     persons enrolled in the managed care option of TRICARE. The 
     minimum benefits would include at least Medicare benefits.
       Specifies that, in general, payments would equal 95% of 
     amounts that would otherwise be payable under Medicare for 
     services provided both on a capitated and non-capitated 
     basis. In computing payments for services provided on a non-
     capitated basis the following would be excluded: indirect 
     medical education costs, disproportionate share costs, and 
     direct graduate medical education costs. In addition, the 
     Secretaries would determine the portion of capital-related 
     costs to be excluded. In years prior to 2001, the capitated 
     payments would be computed as if amounts excluded for non-
     capitated payments had been excluded for determining Medicare 
     Choice payments.
       Specifies that the aggregate amount to be reimbursed under 
     the project is $55 million in 1998, $65 million in 1999, and 
     $75 million in 2000.
       Requires the Secretaries, in consultation with the 
     Comptroller General, to closely monitor the expenditures made 
     under the medicare program for medicare-eligible military 
     retirees and their dependants compared to the expenditures 
     that would have been made if the demonstration had not been 
     conducted. Any participating military treatment facility 
     would be required to maintain the level of effort for space 
     available care to medicare-eligible military retirees and 
     their dependants. The Comptroller General would submit to the 
     Secretaries and the appropriate committees of Congress an 
     annual report on the extent, if any, to which Medicare costs 
     increased during the preceding fiscal year as a result of the 
     demonstration. If so, the Secretaries would be required to 
     take steps necessary to recoup costs and prevent future 
     increases.
       Requires the administering Secretaries to arrange for an 
     independent entity with expertise in the evaluation of health 
     services to conduct an evaluation of the demonstration 
     project. The entity would submit annual reports to the 
     administering Secretaries and to appropriate congressional 
     committees. The first report would be submitted not later 
     than 12 months after the demonstration project begins 
     operation, and the final report not later than 3\1/2\ years 
     after that date. The reports would include an evaluation of 
     the demonstration project, including the financial costs to 
     Medicare and Defense, the quality of care provided to 
     military retirees, and the impact on military readiness. 
     Within 6 months of submission of the final report, the 
     Secretaries would submit to Congress a report containing 
     recommendations on whether to extend the demonstration or 
     make it permanent; whether to expand the project to cover 
     additional sites and increase the maximum amount of 
     reimbursement; and whether terms and conditions of the 
     project should be extended or modified.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     modifications. It would add to the minimum standards for the 
     agreement. The agreement would have to include a description 
     of any requirements waived by the Secretary. It would also 
     have to include a certification, provided after review by the 
     administering Secretaries, that any entity that is receiving 
     payments under the demonstration: (1) has sufficient 
     resources and expertise to provide the full range of required 
     benefits; and (2) has information and billing systems in 
     place to assure the accurate and timely submission of claims 
     for benefits and ensure timely reimbursement of providers and 
     practitioners. The administering Secretaries would be 
     required to submit a copy of the agreement to the committees 
     of jurisdiction at least 60 days prior to commencement of the 
     project.
       The conference agreement would permit the Secretary to 
     waive Medicare requirements (or approve alternative ways of 
     meeting such requirements), except for the following 
     specified requirements relating to beneficiary protections 
     and quality assurance: enrollment and disenrollment, 
     nondiscrimination, information provided to beneficiaries, 
     cost-sharing limitations, appeal and grievance procedures, 
     provider participation, access to services, quality assurance 
     and external review, advance directives, and other areas of 
     beneficiary protections the Secretary determines are 
     applicable.
       The agreement would clarify that the authority to modify 
     existing TRICARE contracts must be consistent with 
     Medicare+Choice.
       The agreement would authorize the Secretaries of HHS and 
     DoD to include in the demonstration project any of the 
     Medicare+Choice plans (excluding unrestricted fee-for-service 
     plans and MSAs). The Secretary of Defense could enter an 
     agreement with the Medicare+Choice organization to provide 
     medicare services to medicare-eligible military retirees or 
     dependents.
       The conference agreement specifies that payments under the 
     demonstration project would equal 95% of the amount that 
     would be paid to a Medicare+Choice organization for that 
     enrollee. In computing the amount, the following would be 
     excluded: indirect medical education costs, disproportionate 
     share costs, and direct graduate medical education costs. In 
     addition, the Secretaries would determine the portion of 
     capital-related costs to be excluded. The conference 
     agreement would cap the amount of total payments at $50 
     million in calendar 1998, $60 million in calendar 1999, and 
     $65 million in FY 2000.
       The conference agreement would provide that the independent 
     evaluation and reports would be conducted by the Comptroller 
     General. The list of items the evaluation is required to 
     assess would be modified. Added to the list would be any 
     additional elements the Comptroller General determines is 
     appropriate to assess. Dropped from the list are an analysis 
     of the impact on prescription drug costs. The agreement would 
     further provide that within six months of submission of the 
     final (rather than penultimate) report by the GAO, the 
     Secretaries would be required to submit their report to 
     Congress. This report would be required to contain 
     recommendations concerning whether there is a cost to 
     Medicare in conducting the demonstration and whether the 
     project could be expanded without there being a cost to 
     Medicare or the Federal government.

  Tax Treatment of Hospitals Which Participate in Provider-Sponsored 
                             Organizations

   Sec. 10041 of the House bill and sec. 5049 of the Senate amendment


                              Present Law

       To qualify as a charitable tax-exempt organization 
     described in Internal Revenue Code (the ``Code'') section 
     501(c)(3), an organization must be organized and operated 
     exclusively for religious, charitable, scientific, testing 
     for public safety, literary, or educational purposes, or to 
     foster international sports competition, or for the 
     prevention of cruelty to children or animals. Although 
     section 501(c)(3) does not specifically mention furnishing 
     medical care and operating a nonprofit hospital, such 
     activities have long been considered to further charitable 
     purposes, provided that the organization benefits the 
     community as a whole.
       No part of the net earnings of a 501(c)(3) organization may 
     inure to the benefit of any private shareholder or 
     individual. No substantial part of the activities of a 
     501(c)(3) organization may consist of carrying on propaganda, 
     or otherwise attempting to influence legislation, and such 
     organization may not participate in, or intervene in, any 
     political campaign on behalf of (or in opposition to) any 
     candidate for public office. In addition, under section 
     501(m), an organization described in section 501(c)(3) or 
     501(c)(4) is exempt from tax only if no substantial part of 
     its activities consists of providing commercial-type 
     insurance.
       A tax-exempt organization may, subject to certain 
     limitations, enter into a joint venture or partnership with a 
     for-profit organization without affecting its tax-exempt 
     status. Under current ruling practice, the IRS examines the 
     facts and circumstances of each arrangement to determine (1) 
     whether the venture itself and the participation of the tax-
     exempt organization therein furthers a charitable purpose, 
     and (2) whether the sharing of profits and losses or other 
     aspects of the arrangement entail improper private inurement 
     or more than incidental private benefit.\1\
---------------------------------------------------------------------------
     \1\ 1 See IRS General Counsel Memorandum 39862; Announcement 
     92-83, 1992-22 I.R.B. 59 (IRS Audit Guidelines for 
     Hospitals). Even where no prohibited private inurement 
     exists, however, more than incidental private benefits 
     conferred on individuals may result in the organization not 
     being operated ``exclusively'' for an exempt purpose. See, 
     e.g., American Campaign Academy v. Commissioner, 92 T.C. 1053 
     (1989).

---------------------------------------------------------------------------

[[Page H6207]]

                               House Bill

       The provision provides that an organization does not fail 
     to be treated as organized and operated exclusively for a 
     charitable purpose for purposes of Code section 501(c)(3) 
     solely because a hospital which is owned and operated by such 
     organization participates in a provider-sponsored 
     organization (``PSO'') (as defined in section 1845(a)(1) of 
     the Social Security Act), whether or not such PSO is exempt 
     from tax. Thus, participation by a hospital in a PSO (whether 
     taxable or tax-exempt) is deemed to satisfy the first part of 
     the inquiry under current IRS ruling practice.\2\
---------------------------------------------------------------------------
     \2\ 2 The qualification of a hospital as a tax-exempt 
     charitable organization under section 501(c)(3) is determined 
     as under present law. See Rev. Rul. 69-545, 1969-2 C.B. 117.
---------------------------------------------------------------------------
       The provision does not change present-law restrictions on 
     private inurement and private benefit. However, the provision 
     provides that any person with a material financial interest 
     in such a PSO shall be treated as a private shareholder or 
     individual with respect to the hospital for purposes of 
     applying the private inurement prohibition in Code section 
     501(c)(3). Accordingly, the facts and circumstances of each 
     PSO arrangement are evaluated to determine whether the 
     arrangement entails impermissible private inurement or more 
     than incidental private benefit (e.g., where there is a 
     disproportionate allocation of profits and losses to the non-
     exempt partners, the tax-exempt partner makes loans to the 
     joint venture that are commercially unreasonable, the tax-
     exempt partner provides property or services to the joint 
     venture at less than fair market value, or a non-exempt 
     partner receives more than reasonable compensation for the 
     sale of property or services to the joint venture).
       The provision does not change present-law restrictions on 
     lobbying and political activities. In addition, the 
     restrictions of Code section 501(m) on the provision of 
     commercial-type insurance continue to apply.
       Effective date.--The provision is effective on the date of 
     enactment.


                            Senate Amendment

       The Senate amendment is the same as the House bill.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment.

                   Subtitle B--Prevention Initiatives

                         Screening Mammography

   Sections 10101 and 4101 of House bill and Section 5101 of Senate 
                               amendment


                              current law

       Medicare provides coverage for screening mammograms. 
     Frequency of coverage is dependent on the age and risk 
     factors of the woman. For women ages 35-39, one test is 
     authorized. For women ages 40-49, a test is covered every 24 
     months, except, an annual test is authorized for women at 
     high risk. Annual tests are covered for women ages 50-64. For 
     women aged 65 and over, the program covers one test every 24 
     months. Medicare's Part B deductible and coinsurance apply 
     for these services.


                               house bill

       Section 10101. Authorizes coverage for annual mammograms 
     for all women ages 40 and over. It would also waive the 
     deductible for screening mammograms.
       Effective Date. Applies to items and services furnished on 
     or after January 1, 1998.
       Section 4101. Identical provision.


                            senate amendment

       Similar provision except that it would waive the 
     coinsurance rather than the deductible.
       Effective Date. Applies to items and services furnished on 
     or after January 1, 1998.


                          conference agreement

       The conference agreement includes the House provision.

                  Screening Pap Smear and Pelvic Exams

                 Sections 10102 and 4102 of House bill


                              current law

       Medicare covers a screening Pap smear once every 3 years 
     for purposes of early detection of cervical cancer. The 
     Secretary is permitted to specify a shorter time period in 
     the case of women at high risk of developing cervical cancer.


                               house bill

       Section 10102. Authorizes coverage, every 3 years, for a 
     screening pelvic exam which would include a clinical breast 
     examination. It would modify the purpose of Pap smears to 
     include early detection of vaginal cancer.
       Specifies that for both Pap smears and screening pelvic 
     exams, coverage would be authorized on a yearly basis for 
     women at high risk of developing cervical or vaginal cancer 
     (as determined pursuant to factors identified by the 
     Secretary). Coverage would also be authorized on a yearly 
     basis for a woman of childbearing age who had not had a 
     negative test in each of the preceding 3 years. The 
     deductible would be waived for screening Pap smears and 
     screening pelvic exams.
       Effective Date. Applies to items and services furnished on 
     or after January 1, 1998.
       Section 4102. Identical provision. In addition, it would 
     require the Secretary, within 6 months of enactment, to 
     submit a report to Congress 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 pap smears improves the 
     early detection of cervical or vaginal cancer. The report 
     must also consider cost implications.
       Effective Date. Enactment


                            senate amendment

       No provision


                          conference agreement

       The conference agreement includes the House provision, 
     except that the requirement for a report on computer assisted 
     diagnostic tests contained in Section 4102 is not included. 
     The Conferees strongly recommend that the Secretary examine 
     the value of new technologies in improving the accuracy of 
     screening procedures, such as computer-assisted diagnostic 
     tests, and expanding Medicare coverage policies to include 
     proven new technologies.

                    Prostate Cancer Screening Tests

                 Sections 10103 and 4103 of House bill


                              current law

       Medicare does not cover prostate cancer screening tests.


                               house bill

       Section 10103. Authorizes an annual prostate cancer 
     screening test for men over age 50. The test could consist of 
     any (or all) of the following procedures: (1) a digital 
     rectal exam; (2) a prostate-specific antigen blood test; and 
     (3) after 2001, other procedures as the Secretary finds 
     appropriate for the purpose of early detection of prostate 
     cancer, taking into account such factors as changes in 
     technology and standards of medical practice, 
     availability, effectiveness, and costs.
       Specifies that payment for prostate-specific antigen blood 
     tests would be made under the clinical laboratory fee 
     schedule.
       Effective Date. Applies to items and services furnished on 
     or after January 1, 1998.
       Section 4103. Identical provision.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision with 
     an amendment. The provision would apply to services furnished 
     on or after January 1, 2000. The provision authorizing 
     coverage for additional procedures specified by the Secretary 
     would be effective for years beginning after 2002.

                    Coverage of Colorectal Screening

   Sections 10104 and 4104 of House bill and section 5102 of Senate 
                               amendment


                              current law

       Medicare does not cover preventive colorectal screening 
     procedures. Such services are covered only as diagnostic 
     services.


                               house bill

       Section 10104. Authorizes coverage of colorectal cancer 
     screening tests. A test covered under the provision would be 
     any of the following procedures furnished for the purpose of 
     early detection of colorectal cancer: (1) screening fecal-
     occult blood test; (2) screening flexible sigmoidoscopy; (3) 
     screening colonoscopy for high-risk individuals; (4) 
     screening barium enema, if found by the Secretary to be an 
     appropriate alternative to screening flexible sigmoidoscopy 
     or screening colonoscopy; and (5) after 2002, other 
     procedures as the Secretary finds appropriate for the purpose 
     of early detection of colorectal cancer, taking into account 
     such factors as changes in technology and standards of 
     medical practice, availability, effectiveness, and costs. A 
     high-risk individual (for purposes of coverage for screening 
     colonoscopy) would be defined as one who faces a high risk 
     for colorectal cancer 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, or other predisposing factors. The Secretary would 
     be required to make a decision with respect to coverage of 
     screening barium enema tests within 2 years of enactment; the 
     determination would be published.
       Establishes frequency and payment limits for the tests. For 
     screening fecal-occult blood tests, payment would be made 
     under the lab fee schedule. In 1998, the payment amount could 
     not exceed $5; in future years the update would be limited to 
     the update applicable under the fee schedule. Medicare could 
     not make payments if the test were performed on an individual 
     under age 50 or within 11 months of a previous screening 
     fecal-occult blood test.
       Requires the Secretary to establish a payment amount under 
     the physician fee schedule for screening flexible 
     sigmoidoscopies that is consistent with payment amounts for 
     similar or related services. The payment amount could not 
     exceed the amount the Secretary specifies, based upon the 
     rates recognized for diagnostic flexible sigmoidoscopy 
     services. For services performed in ambulatory surgical 
     centers or hospital outpatient departments, the payment 
     amount could not exceed the lesser of the payment rate that 
     would apply to such services if they were performed at either 
     site. Medicare could not make payments for a screening 
     flexible sigmoidoscopy if the test were performed on an 
     individual under age 50 or within 47 months of a previous 
     screening flexible sigmoidoscopy.
       Requires the Secretary to establish a payment amount under 
     the physician fee schedule for screening colonoscopy for high 
     risk

[[Page H6208]]

     individuals that is consistent with payment amounts for 
     similar or related services. The payment amount could not 
     exceed the amount the Secretary specifies, based upon the 
     rates recognized for diagnostic colonoscopy services. For 
     services performed in ambulatory surgical centers or hospital 
     outpatient departments, the payment amount could not exceed 
     the lesser of the payment rate that would apply to such 
     services if they were performed at either site. Medicare 
     could not make payments if the test were performed on a high-
     risk individual within 23 months of a previous screening 
     colonoscopy.
       Establishes special payment rules, in the case of both a 
     screening flexible sigmoidoscopy or screening colonoscopy, if 
     a lesion or growth is discovered during the procedure which 
     results in a biopsy or removal of the lesion or growth during 
     the procedure. In these cases, payment would be made for the 
     procedure classified as either a flexible sigmoidoscopy with 
     such biopsy or removal or screening colonoscopy with such 
     biopsy or removal.
       Requires the Secretary to review from time to time the 
     appropriateness of the amount of the payment limit for fecal-
     occult blood tests. The Secretary could, beginning after 
     2000, reduce the amount of the limit as it applies nationally 
     or in a given area to the amount the Secretary estimates is 
     required to assure that such tests of an appropriate quality 
     are readily and conveniently available.
       Requires the Secretary to review periodically the 
     appropriate frequency for performing colorectal cancer 
     screening tests based on age and other factors the Secretary 
     believes to be pertinent. The Secretary may revise from time 
     to time the frequency limitations, but no revisions could 
     occur before January 1, 2001.
       Specifies that nonparticipating physicians providing 
     screening flexible sigmoidoscopies or screening colonoscopies 
     for high risk individuals would be subject to limiting charge 
     provisions applicable for physicians services. The Secretary 
     could impose sanctions if a physician or supplier knowingly 
     and willfully imposed a charge in violation of this 
     requirement.
       Requires the Secretary to establish payment limits and 
     frequency limits for screening barium enema tests if the 
     Secretary issues a determination that such tests should be 
     covered. Payment limits would be consistent with those 
     established for diagnostic barium enema procedures.
       Effective Date. Applies to items and services furnished on 
     or after January 1, 1998.
       Section 4104. Identical provision.


                            senate amendment

       Authorizes coverage of colorectal cancer screening tests. A 
     covered test is defined as a procedure the Secretary 
     prescribes in regulations as appropriate for the purpose of 
     early detection of colorectal cancer, taking into account 
     availability, effectiveness, costs, changes in technology and 
     standards of medical practice, and other factors the 
     Secretary considers appropriate. The Secretary would consult 
     with appropriate organizations.
       Requires the Secretary to prescribe regulations that 
     establish frequency limits for colorectal cancer screening 
     tests. The limits would take into account the risk status of 
     an individual and would be consistent with frequency limits 
     for similar or related services. The regulations would also 
     establish payment limits (including limits on charges of 
     nonparticipating physicians) for colorectal cancer screening 
     tests that are consistent with payment limits for similar 
     services. The Secretary would be required to periodically 
     review, and to the extent considered appropriate, revise the 
     frequency and payment limits.
       Specifies that in establishing criteria to determine 
     whether an individual is at high risk, the Secretary would 
     take into consideration family history, prior experience of 
     cancer, a history of chronic digestive disease condition, and 
     the presence of any appropriate recognized gene markers for 
     colorectal cancer. The Secretary would consult with 
     appropriate organizations.
       Effective Date. Applies to items and services furnished on 
     or after January 1, 1998. The Secretary would be required to 
     issue the regulations within three months of enactment.


                          conference agreement

       The conference agreement includes the House provision with 
     modifications. Specified covered procedures would be: (1) 
     screening fecal-occult blood test, (2) screening flexible 
     sigmoidoscopy, (3) screening colonoscopy for high risk 
     individuals, and (4) such other tests or procedures, and 
     modifications to tests and procedures with such frequency and 
     payment limits as the Secretary determines appropriate, in 
     consultation with appropriate organizations. The Secretary 
     would be required within 90 days of enactment or January 1, 
     1998, whichever is earlier, to publish a notice in the 
     Federal Register with respect to a determination on the 
     coverage of a screening barium enema as a colorectal cancer 
     screening test.
       The conference agreement would specify that the payment 
     amount for a screening fecal-occult blood test would be the 
     same as the payment amount for a diagnostic fecal-occult 
     blood test under the lab fee schedule. The requirement for 
     periodic review of the limits for such tests would be 
     deleted.
       The Conference agreement provides that screening flexible 
     sigmoidoscopies and screening colonoscopies furnished in an 
     ambulatory surgical center or a hospital outpatient 
     department after January 1, 1999 would be subject to the 
     applicable fee schedule amounts. Beneficiary liability would 
     be limited to 25 percent of the fee schedule payment amount 
     for ambulatory surgical centers. The conference agreement 
     does not include the language relating to limiting charges of 
     nonparticipating physicians or the requirement for periodic 
     review of frequency limits.

                        Diabetes Screening Tests

   Sections 10105 and 4105 of House bill and Section 5103 of Senate 
                               amendment


                              current law

       In general, Medicare covers only those items and services 
     which are medically reasonable and necessary for the 
     diagnosis or treatment of illness or injury. In addition, 
     Medicare covers home blood glucose monitors and associated 
     testing strips for certain diabetes patients. Home blood 
     glucose monitors enable diabetics to measure their blood 
     glucose levels and then alter their diets or insulin dosages 
     to ensure that they are maintaining an adequate blood glucose 
     level. Home glucose monitors and testing strips are covered 
     under Medicare's durable medical equipment benefit. Coverage 
     of home blood glucose monitors is currently limited to 
     certain diabetics, formerly referred to as Type I diabetics, 
     if: (1) the patient is an insulin-treated diabetic; (2) the 
     patient is capable of being trained to use the monitor in an 
     appropriate manner, or, in some cases, another responsible 
     person is capable of being trained to use the equipment and 
     monitor the patient to assure that the intended effect is 
     achieved; and (3) the device is designed for home rather than 
     clinical use.


                               house bill

       Section 10105. Effective January 1, 1998, the Ways and 
     Means and Commerce Committees would include among Medicare's 
     covered benefits diabetes outpatient self-management training 
     services. These services would include educational and 
     training services furnished to an individual with diabetes by 
     a certified provider in an outpatient setting meeting certain 
     quality standards. They would be covered only if the 
     physician who is managing the individual's diabetic condition 
     certifies that the services are needed under a comprehensive 
     plan of care 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. Certified 
     providers for these purposes would be defined as 
     physicians or other individuals or entities that, in 
     addition to providing diabetes outpatient self-management 
     training services, provide other items or services 
     reimbursed by Medicare. Providers would have to meet 
     quality standards established by the Secretary. They would 
     be deemed to have met the Secretary's standards if they 
     meet standards originally established by the National 
     Diabetes Advisory Board and subsequently revised by 
     organizations who participated in the establishment of 
     standards of the Board, or if they are recognized by an 
     organization representing persons with diabetes as meeting 
     standards for furnishing such services. In establishing 
     payment amounts for diabetes outpatient self-management 
     training provided by physicians and determining the 
     relative value for these services, the Secretary would be 
     required to consult with appropriate organizations, 
     including organizations representing persons or Medicare 
     beneficiaries with diabetes.
       In addition, beginning January 1, 1998, the provision would 
     extend Medicare coverage of blood glucose monitors and 
     testing strips to Type II diabetics and without regard to a 
     person's use of insulin (as determined under standards 
     established by the Secretary in consultation with appropriate 
     organization). The provision would also reduce the national 
     payment limit used by Medicare for testing strips by 10% 
     beginning in 1998.
       The Secretary, in consultation with appropriate 
     organizations, would be required to 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. The Secretary would also be required to submit 
     recommendations to Congress from time to time on 
     modifications to coverage of services for these 
     beneficiaries.
       Effective date. Applies to items and services furnished on 
     or after January 1, 1998.
       Section 4105. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that were 
     identical in the House bill and Senate amendment, with 
     amendments (1) to clarify that the Secretary would determine 
     the times when diabetes self-management educational and 
     training services would be considered appropriate, (2) to 
     require that physicians certify that services are needed to 
     ensure therapy compliance or to provide necessary skills and 
     knowledge; and (3) to postpone the effective date for 
     coverage of diabetes outpatient self-management training 
     services to July 1, 1998.
       This provision is intended to empower Medicare 
     beneficiaries with diabetes to better manage and control 
     their condition. The Conferees believe that this provision 
     will provide significant Medicare savings over time due to 
     reduced hospitalizations and complications arising from 
     diabetes. The provision would allow reimbursement for

[[Page H6209]]

     physicians, as well as other providers designated by the 
     Secretary who currently are reimbursed by Medicare. The 
     Conferees intend that these additional classes of providers 
     have expertise in diabetes self-management training and, 
     consistent with the standards set forth in the provision, 
     demonstrate the ability to provide counseling and training in 
     a cost-effective way to beneficiaries. In addition, the 
     Conferees are aware that there are a wealth of innovative 
     disease management programs that are not now covered by 
     Medicare. However, there is not sufficient evidence at this 
     time that indicates these programs will be cost-effective for 
     Medicare.

                         Bone Mass Measurement

   Sections 10106 and 4106 of House bill and Section 5104 of Senate 
                               amendment


                              Current Law

       Medicare does not include specific coverage of bone mass 
     measurement.


                               House Bill

       Section 10106. Authorizes coverage of bone mass measurement 
     procedures for the following high risk persons: an estrogen-
     deficient woman at clinical risk for osteoporosis; an 
     individual with vertebral abnormalities; an individual 
     receiving long-term glucocorticoid steroid therapy, and an 
     individual with primary hyperparathyroidism, or an individual 
     being monitored to assess the response to or efficacy of an 
     approved osteoporosis drug therapy. Covered procedures are 
     radiologic or radioisotopic procedure or other procedure 
     approved by the FDA for the purpose of identifying bone mass 
     or detecting bone loss or deterioration; it would include a 
     physician's interpretation. The Secretary would be required 
     to establish frequency limits. Payments would be made under 
     the physician fee schedule.
       Effective Date. Applies to measurements performed on or 
     after July 1, 1998.
       Section 4106. Identical provision.


                            Senate Amendment

       Similar provision except: (1) specifies that an estrogen-
     deficient individual who is at clinical risk of developing 
     osteoporosis is one who is also considering treatment; (2) 
     refers to FDA ``approved technology'' rather than ``other 
     procedure'' approved by the FDA; (3) does not include 
     provisions relating to payment under the physician fee 
     schedule.
       Effective Date. Applies to measurements performed on or 
     after January 1, 1998.


                          Conference Agreement

       The conference agreement includes the House provision.

                      Vaccines Outreach Expansion

                 Sections 10107 and 4107 of House bill


                              Current Law

       The Health Care Financing Administration, in conjunction 
     with the Centers for Disease Control and the National 
     Coalition for Adult Immunization, conducts an Influenza and 
     Pneumococcal Vaccination Campaign. The Campaign is scheduled 
     to cease operations in 2000.


                               House Bill

       Section 10107. Extends the campaign through the end of FY 
     2002. It would authorize appropriations of $8 million for 
     each fiscal year 1998-2002 to the Campaign; 60% of the 
     appropriation would come from the Federal Hospital Insurance 
     Trust Fund and 40% from the Federal Supplementary Medical 
     Insurance Trust Fund.
       Effective Date. Enactment
       Section 4107. Similar provision, except that it 
     appropriates the funds.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision as 
     contained in Section 10107.
       There is evidence that education and outreach efforts alone 
     can increase immunization rates. For example, pneumonia and 
     influenza vaccination rates have increased 8 percent during 
     the past few years due largely to educational outreach 
     efforts. Therefore, this provision is intended to nearly 
     double the $9 million annual budget of the Health Care 
     Financing Administration's Influenza and Pneumococcal 
     Vaccination Campaign through 2000, and extend the program for 
     two additional years through 2002.

                      Study on Preventive Benefits

   Sections 10108 and 4108 of House bill and Section 5105 of Senate 
                               amendment


                              Current Law

       No provision.


                               House Bill

       Section 10108. Requires the Secretary to request the 
     National Academy of Sciences, in conjunction with the U. S. 
     Preventive Services Task Force, to analyze the expansion or 
     modification of preventive services covered under Medicare. 
     The study would consider both the short term and long term 
     benefits and costs to Medicare. The study would have to 
     include specific findings with respect to the following: (1) 
     nutrition therapy, including parenteral and enteral 
     nutrition; (2) medically necessary dental care; (3) routine 
     patient care costs for beneficiaries enrolled in approved 
     clinical trial programs; and (4) elimination of time 
     limitation for coverage of immunosuppressive drugs for 
     transplant patients. The Secretary would be required to 
     provide such funding as may be necessary in FY 1998 and FY 
     1999
       Effective Date. Enactment
       Section 4108. Similar provision, except also includes study 
     of coverage for bone mass measurement.


                            Senate Amendment

       Requires the Secretary to request the National Academy of 
     Sciences, in conjunction with the U.S. Preventative Services 
     Task Force, to analyze the expansion or modification of 
     preventative benefits to include medical nutritional therapy 
     services by a registered dietitian. The Secretary would be 
     required to submit a report on the findings to the House Ways 
     and Means and Commerce Committees and the Senate Finance 
     Committee. The report would include specific findings 
     regarding cost to Medicare, savings to Medicare, clinical 
     outcomes, and short and long term benefits to Medicare. The 
     Secretary would provide for such funds as may be necessary 
     for FY 1998 and FY 1999.
       Effective Date. Enactment


                          Conference Agreement

       The conference agreement includes the House provision with 
     a modification to clarify that the study applies to other 
     benefits in addition to preventive benefits. Skin cancer 
     screening would be added to the list of benefits studied. The 
     study of nutrition therapy services would be modified to 
     include the provision of such services by a dietician.
       The Conference agreement includes a study on both 
     preventive and enhanced benefits in the Medicare program, 
     including nutrition therapy services. Because of widespread 
     interest in expanding and updating Medicare's current benefit 
     package to focus more attention on prevention, this provision 
     is intended to signal the interest of the Conferees in 
     continuing to reexamine Medicare's benefits in light of 
     evolving scientific evidence about the costs and benefits of 
     various prevention initiatives.
       The Conferees recommend that the nutrition study include an 
     examination of nutritional services provided by registered 
     dieticians to Medicare beneficiaries in both individual and 
     group settings. The nutrition study should also examine the 
     cost and benefits of treatment of obesity, which is a 
     significant cause of morbidity and mortality in the United 
     States.

                     Subtitle C--Rural Initiatives

                        Sole Community Hospitals

                  Section 5151 of the Senate amendment


                              Current Law

       Medicare designates certain hospitals as sole community 
     hospitals (SCHs) that, because of factors such as isolated 
     location, weather conditions, travel conditions, or the 
     absence of other hospitals, are the sole source of inpatient 
     services reasonably available in a geographic area, or are 
     located more than 35 road miles from another hospital.
       An SCH may be paid the higher of the following rates: a 
     target amount based on FY 1982 hospital-specific rates, 
     updated to the present; a target amount based on FY 1987 
     hospital-specific rates based on FY 1987, updated to the 
     present; or the federal PPS payment rate.


                               House Bill

       No provision.


                            Senate Amendment

       Beginning with discharges occurring in FY 1998, substitutes 
     for the base cost reporting period either (1) the allowable 
     operating costs of inpatient hospital services for a cost 
     reporting period beginning during FY 1994 increased (in a 
     compounded manner) by the applicable percentage increases 
     applied to hospitals for discharges occurring in fiscal years 
     1995, 1996, 1997, and 1998; or (2) the allowable operating 
     costs of inpatient hospital services for a cost reporting 
     period beginning during FY 1995 increased (in a compounded 
     manner) by the applicable percentage increase for discharges 
     occurring in fiscal years 1995, 1996, 1997, and 1998. The new 
     base cost reporting period would be substituted if it 
     resulted in an increase in the target amount for the SCH.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.

                  Rural Primary Care Hospital Program

    Section 10201 of the House bill and Section 5153 of the Senate 
                               amendment


                              Current Law

       Under the Essential Access Community Hospital (EACH) 
     demonstration program, seven states received grants to 
     develop rural health networks consisting of essential access 
     community hospitals (EACHs) and rural primary care hospitals 
     (RPCHs). In order to have been designated by a State as a 
     RPCH, a facility was required to meet certain criteria, 
     including a requirement that inpatient stays not exceed 72 
     hours.
       Montana also has a limited service hospital program called 
     the Medical Assistance Facility (MAF). The Medical Assistance 
     Facility Demonstration Project in Montana has been in 
     operation since 1988. The program operates under a waiver 
     from HCFA that allows these limited service hospitals to be 
     reimbursed for providing treatment to Medicare beneficiaries. 
     In addition, HCFA supplies grant funding to the Montana 
     Hospital Research and Education Foundation to provide 
     technical assistance, liaison, public education and other 
     services to the MAFs. The first MAF was licensed and 
     certified in 1990. Since then, a total of 12 MAFs have been 
     licensed and certified. Additional facilities are in the 
     process of considering a conversion to this model.

[[Page H6210]]

                               House Bill

       Expands the Medicare Rural Primary Care Hospital Program 
     under which a state could designate one or more facilities as 
     a rural primary care hospital (RPCH). A facility could be 
     designated as a RPCH if it was a nonprofit or public hospital 
     located in a county in a rural area that was located at a 
     distance that corresponded to travel time of more than 30 
     minutes from another hospital or RPCH, or was certified by 
     the state as being a necessary provider of health care 
     services. A RPCH would be required to provide 24-hour 
     emergency care services, provide not more than 15 acute care 
     inpatient beds and a total of 25 swing beds for providing 
     inpatient care for a period not to exceed 96 hours (except 
     under certain conditions), and would not have to meet all the 
     staffing requirements that apply to hospitals under Medicare.
       RPCHs would be required to have agreements with at least 
     one hospital for patient referral and transfer, the 
     development and use of communication systems including 
     telemetry systems and systems for electronic sharing of 
     patient data, and the provision of emergency and non-
     emergency transportation between the facility and the 
     hospital. Each RPCH would also be required to have an 
     agreement concerning credentialing and quality assurance with 
     at least one hospital, peer review organization or equivalent 
     entity, or other appropriate and qualified entity identified 
     by the state.
       Payment for inpatient and outpatient services provided at 
     RPCHs would be made on the basis of the reasonable costs of 
     providing such services. Reasonable cost payment would also 
     continue for designated EACH hospitals, as well as for the 
     MAF demonstration program.
       Effective Date. Applies to services furnished in cost 
     reporting periods beginning on or after October 1, 1997.


                            Senate Amendment

       Similar provision, except replaces the EACH program with 
     the Medicare Rural Hospital Flexibility Program. The 
     provision would require that facilities be located more than 
     a 35-mile drive from another hospital or other health care 
     facility. The Secretary would be authorized to award grants 
     to states for activities related to engaging in planning and 
     implementing a rural health care plan, engaging in planning 
     and implementing rural health networks, and designating 
     facilities as critical access hospitals (CAHs). The provision 
     would authorize appropriations of $25 million for each of the 
     years FY 1998-2002 for the grants.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     amendments. The distance requirement for facilities includes 
     a 15-mile drive in the case of mountainous terrain or in 
     areas with only secondary roads available. The conference 
     includes the House provision that would allow States to 
     designate or the Secretary to certify facilities applying for 
     the designation as long as the total number of beds used at 
     any time for furnishing either extended care 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. Beds in a facility licensed 
     as a distinct-part skilled nursing facility at the time the 
     facility applied to the state for designation would not be 
     counted. The Secretary would also be required to provide for 
     an appropriate transition for facilities participating in the 
     MAF demonstration program, and at the conclusion of the 
     transition period, the demonstration would be terminated.
       The Critical Access Hospital (CAH) provisions of this 
     legislation are largely based on both the successful MAF 
     demonstration project in Montana and the EACH/RPCH 
     demonstration project.
       Regarding MAFs, it is the intent of the Conferees that MAFs 
     that are licensed and certified prior to the date of 
     enactment will be grandfathered into the new CAH program. To 
     ease this transition in Montana, the MAF demonstration 
     project is extended until October 1,1998 to allow the 
     Secretary of HHS time to issue regulations for the CAH 
     program. New facilities may still seek certification under 
     the MAF demonstration until the demonstration project has 
     been terminated. It is the intent of the Conferees that the 
     MAF demonstration be folded into the new rural hospital 
     flexibility program. It is the intent of the Conferees that 
     there be no gap in grant money from HCFA to Montana in the 
     event the grant program that accompanies the CAH legislation 
     is not in operation as of October 1, 1998. If the new grant 
     program is available prior to termination of the MAF 
     demonstration, HCFA would be required to terminate the grant 
     money available from the demonstration and provide money to 
     Montana from the new grant program as long as there is no gap 
     in the grant money.

      Prohibiting Denial of Request By Rural Referral Centers For 
          Reclassification on Basis of Comparability of Wages

    Section 10202 of the House bill and Section 5154 of the Senate 
                               amendment


                              Current Law

       Rural Referral Centers are defined as:
       (1) rural hospitals having 275 or more beds; (2) hospitals 
     having at least 50 percent of their Medicare patients 
     referred from other hospitals or from physicians not on the 
     hospital's staff, at least 60 percent of their Medicare 
     patients residing more than 25 miles from the hospital, and 
     at least 60 percent of the services furnished to Medicare 
     beneficiaries living 25 miles or more from the hospital; or 
     (3) rural hospitals meeting the following criteria for 
     hospital cost reporting periods beginning on or after October 
     1, 1985:-
       (a) a case mix index equal to or greater than the median 
     case mix for all urban hospitals (the national standard), or 
     the median case mix for urban hospitals located in the same 
     census region, excluding hospitals with approved teaching 
     programs;
       (b) a minimum of 5,000 discharges, the national discharge 
     criterion (3,000 in the case of osteopathic hospitals), or 
     the median number of discharges in urban hospitals for the 
     region in which the hospital is located; and (c) at least one 
     of the following three criteria: more than 50 percent of the 
     hospital's medical staff are specialists, at least 60 percent 
     of discharges are for inpatients who reside more than 25 
     miles from the hospital, or at least 40 percent of inpatients 
     treated at the hospital have been referred either from 
     physicians not on the hospital's staff or from other 
     hospitals.
       Under Section 1886(d)(10)(d), RRCs are allowed to apply to 
     the Medicare Geographic Classification Review Board (MGCRB) 
     to be reclassified for purposes of wage index adjustment. (A 
     wage index adjustment translates to higher prospective 
     payment system reimbursement for the reclassified hospitals.) 
     To be reclassified, RRCs must meet two thresholds: (1) the 
     hospital's average hourly wage must be at least 108 percent 
     of the statewide rural hourly wage; and, (2) the hospital's 
     average hourly wage must be at least 84 percent of the 
     average hourly wage of the target urban area to which the RRC 
     is applying.
       RRCs were paid prospective payments based on the applicable 
     urban payment amount rather than the rural payment amount, as 
     adjusted by the hospital's area wage index, until FY 1995 
     when the standardized payment amount for "other urban" and 
     "rural" were combined into a single payment category, "other 
     areas."
       OBRA 93 extended the classification through FY 1994 for 
     those referral centers classified as of September 30, 1992.


                               House Bill

       Prohibits the Medicare Geographic Classification Review 
     Board (MGCRB) from rejecting a hospital's request for 
     reclassification on the basis of any comparison between the 
     average hourly wage of any hospital ever classified as a RRC 
     and the average hourly wage of hospitals in the area in which 
     the RRC is located. The provision would also permanently 
     grandfather RRC status for any hospitals designated since 
     1991.
       Effective Date. Enactment.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

    Hospital Geographic Reclassification Permitted for Purposes of 
               Disproportionate Share Payment Adjustments

                    Section 10203 of the House bill


                              Current Law

       The MGCRB is required to consider applications from PPS 
     hospitals requesting that the Secretary change the hospital's 
     geographic classification for purposes of determining for a 
     fiscal year the hospital's average standardized amount and 
     the wage index used to adjust the DRG payment to reflect area 
     differences in hospital wage levels.


                               House Bill

       Permits hospitals to request geographic reclassification 
     for purposes of receiving additional disproportionate share 
     hospital (DSH) payment amounts provided to hospitals that 
     treat a disproportionate share of low-income patients. The 
     provision would require the Board to apply the guidelines 
     established for reclassification for the standardized amount 
     to applications for DSH payments until the Secretary 
     promulgates separate guidelines for reclassification for DSH.
       Effective Date. Enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House bill with an 
     amendment to limit the geographic reclassification for DSH 
     payments to the period beginning on the date of enactment and 
     ending 30 months after enactment.
       It is the intent of Conferees to allow eligible rural 
     hospitals to be reclassified for purposes of receiving a DSH 
     adjustment until such time as a new DSH methodology is 
     adopted that more accurately distributes Medicare DSH 
     payments to hospitals in both rural and urban areas.

       Medicare-Dependent Small Rural Hospital Payment Extension

    Section 10204 of the House bill and Section 5152 of the Senate 
                               amendment


                              Current Law

       Medicare-dependent small rural hospitals are hospitals 
     located in a rural area, with 100 beds or less, that are not 
     classified as a sole community provider, and for which not 
     less than 60 percent of inpatient days or discharges in the 
     hospital cost reporting period are attributable to Medicare. 
     These hospitals were reimbursed on the same basis as sole 
     community hospitals. The designation for Medicare-dependent 
     small rural hospitals expired on October 1, 1994.

[[Page H6211]]

                               House Bill

       Reinstates and extends the classification, and extends the 
     target amount for inpatient costs through October 1, 2001. 
     The provision would also permit hospitals to decline 
     reclassification.
       Effective Date. Applies to discharges occurring on or after 
     October 1, 1997.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

                   Rural Health Clinic (RHC) Services

  Sections 10618 and 4618 of the House bills and Section 5155 of the 
                            Senate amendment


                              Current Law

       Medicare establishes payment limits for RHC services 
     provided by independent (RHCs). RHCs, among other 
     requirements, must have appropriate procedures for 
     utilization review of clinic services. The Secretary is 
     required to waive the RHC requirement for certain staffing of 
     health professionals if the clinic has been unable to hire a 
     physician assistant, nurse practitioner, or certified 
     nurse-midwife in the previous nine years. The Secretary is 
     prohibited from granting a waiver to a facility if the 
     request for the waiver is made less than 6 months after 
     the date of the expiration of previous waiver of the 
     facility. RHCs are required to be located in a health 
     professional shortage area. For RHCs that are in operation 
     and subsequently fail to meet the requirement of being 
     located in a health professional shortage area, the 
     Secretary would be required to continue to consider the 
     facility to meet the health professions shortage area 
     requirement.


                               House Bill

       Section 10618. Applies per-visit payment limits to all 
     RHCs, other than such clinics in rural hospitals with less 
     than 50 beds. The provision would require that RHCs have a 
     quality assessment and performance improvement program, in 
     addition to appropriate procedures for utilization review. 
     The provision would amend the waiver on the staffing 
     requirement, to provide a waiver if the facility cannot meet 
     the requirement of having a nurse practitioner, physician 
     assistant, or a certified nurse-midwife available 50% of the 
     time the clinic operates; such a waiver would only be 
     available to clinics once they have been certified. The 
     provision would require that shortage designations for RHCs 
     be reviewed every three years. The provision would further 
     amend the shortage area requirement by adding that RHCs must 
     be located in an area in which there are insufficient numbers 
     of needed health care practitioners as determined by the 
     Secretary. The provision would require that operating RHCs 
     that subsequently fail to meet the requirement of being 
     located in a health professional shortage area continue to be 
     considered to meet the health professional shortage 
     requirement, but only when, under criteria established by the 
     Secretary in regulations, the RHCs are determined to be 
     essential to the delivery of primary care services that would 
     otherwise be unavailable in the geographic area served by the 
     clinic. The Secretary would be required to issue final 
     regulations implementing the grandfathered clinics that would 
     take effect no later than January 1 of the third calendar 
     year beginning at least one month after enactment.
       Effective Date. Per-visit payment limit provision applies 
     to services furnished after 1997. The provision on the 
     assurance of quality assessment would take effect on January 
     1, 1998. The waiver of staffing requirements provision would 
     apply to waiver requests made after 1997. The refinement of 
     the shortage area requirements provision would go into effect 
     on January 1 of the first calendar years after enactment. The 
     grandfathered clinics provision would take effect on the 
     effective date of the regulations required by the provision.
       Section 4618. Identical provision.


                            Senate Amendment

       Similar provision, except requires the Secretary to include 
     in the regulations issued to implement the grandfathered 
     clinics, provisions for the direct payment to the physician 
     assistant (PA) for any PA services provided at a RHC that is 
     principally owned, as determined by the Secretary, by a PA as 
     of the date of enactment and continuously from that date 
     through the date on which services are provided. The PA 
     payment provision would sunset (not apply) after January 1, 
     2003.
       Effective Date. Takes effect on the effective date of 
     regulations issued for grandfathered RHCs.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment, with 
     amendments to include the provision for payment of certain 
     PAs through January 1, 2003 from the Senate amendment, and to 
     require the Secretary to issue final regulations for 
     implementing the grandfathered RHCs no later than January 1, 
     1999.

   Geographic Reclassification for Certain Disproportionately Large 
                               Hospitals

                    Section 10205 of the House bill


                              Current Law

       OBRA 1989 created the five member panel and set forth 
     criteria for the Medicare Geographic Classification Review 
     Board (MGCRB) to use in issuing its decisions concerning 
     geographic reclassification of hospitals as rural or urban 
     for prospective payment purposes of Medicare's hospital 
     reimbursement. In 1992, HCFA issued guidelines requiring that 
     hospitals seeking reclassification for years beginning with 
     FY 1994 have an average hourly wage of at least 108 percent 
     of the average hourly wage of hospitals in its home region.


                               House Bill

       Allows certain relatively large hospitals to be 
     reclassified by the MGCRB if the hospital has 40 percent of 
     the wages in a region and its wages are 108 percent or higher 
     than the other hospitals in the region.
       Effective Date. Enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision with 
     an amendment clarifying that the provision would apply to 
     hospitals that applied in each of the fiscal years 1992-1997 
     and were subsequently approved for reclassification for 
     purposes of the wage index.

                        Floor on Area Wage Index

    Section 10206 of the House bill and Section 5467 of the Senate 
                               amendment


                              Current Law

       As part of the methodology for determining prospective 
     payments to hospitals under PPS, the Secretary is required to 
     adjust a portion of the standardized amounts for area 
     differences in hospital wage levels by a factor reflecting 
     the relative hospital wage level in the geographic area of 
     the hospital compared to the national average hospital wage 
     level.


                               House Bill

       Provides that, for discharges occurring on or after October 
     1, 1997, the area wage index applicable for any hospital 
     which was not located in a rural area could not be less than 
     the area wage indices applicable to hospitals located in 
     rural areas in the state in which the hospital was located. 
     The Secretary would be required to make any adjustments in 
     the wage index in a budget neutral manner.
       Effective Date. Enactment.


                            Senate Amendment

       Identical provision on the area wage index. In addition, 
     the Senate amendment provides that in the case of a hospital 
     that is owned by a municipality and that was reclassified as 
     an urban hospital for FY 1996, in calculating the hospital's 
     average hourly wage for the purposes of geographic 
     reclassification for FY 1998, the Secretary would be required 
     to exclude the general service wages and hours of personnel 
     associated with a skilled nursing facility that is owned by 
     the hospital of the same municipality and that is physically 
     separated from the hospital to the extent that such wages and 
     hours of such personnel are not shared with the hospital and 
     are separately documented. A hospital that applied for and 
     was denied reclassification as an urban hospital for FY 1998, 
     but that would have received reclassification had the 
     exclusion required by this section been applied to it, would 
     be reclassified as an urban hospital for FY 1998.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

             Medicare Reimbursement for Telehealth Services

                  Section 5156 of the Senate amendment


                              Current Law

       HCFA is currently conducting a 3-year demonstration project 
     under which Medicare will pay for telemedicine services at 57 
     Medicare-Certified facilities. The demonstration will focus 
     on medical consultations between medical specialists located 
     at medical center facilities and primary care providers 
     treating Medicare patients at remote rural sites. Five 
     telemedicine centers are participating in the project.


                               House Bill

       No provision.


                            Senate Amendment

       Requires the Secretary, no later than July 1, 1998, to make 
     payments under Part B of Medicare for professional 
     consultation via telecommunications systems with a health 
     care provider furnishing a service for which Medicare payment 
     would be made for a beneficiary residing in a rural county 
     that was designated as a health professional shortage area, 
     or is a rural county not adjacent to a Metropolitan 
     Statistical Area.
       The Secretary would be required to develop a methodology 
     for making such payments taking into account the findings of 
     the report on Medicare payments for telemedicine that was 
     required by the Health Insurance Portability and 
     Accountability Act of 1996 (P.L. 104-191), and any other 
     findings related to the clinical efficacy and cost-
     effectiveness of telehealth applications. The Secretary would 
     be required to develop a payment methodology that would (1) 
     include bundled payments to be shared between the referring 
     health care provider and the consulting provider that could 
     not be greater than the current fee schedule of the 
     consulting health care providers for the services provided, 
     and (2) would not include any reimbursement for any line 
     charges or any facility fees.
       The provision would require the Secretary to submit a 
     report to Congress no later than January 1, 1998, which would 
     analyze in detail: (1) how telemedicine and telehealth 
     systems are expanding access to health care

[[Page H6212]]

     services; (2) the clinical efficacy and cost-effectiveness of 
     telemedicine and telehealth applications; (3) the quality of 
     telemedicine and telehealth services delivered; and (4) the 
     reasonable cost of telecommunications charges incurred in 
     practicing telemedicine and telehealth in rural, frontier, 
     and underserved areas.
       The provision would require the Secretary to submit a 
     report to Congress by January 1, 1999, that would examine the 
     possibility of making Medicare Part B payments for 
     professional consultation via telecommunications systems to 
     beneficiaries who do not reside in a rural area designated as 
     a health manpower shortage area, who are homebound or nursing 
     homebound, and for whom being transferred for health care 
     services imposes a serious hardship. The report would be 
     required to contain a detailed statement of the potential 
     costs to Medicare of making these payments using various 
     reimbursement schemes.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     amendments. The Secretary would be required to make Part B 
     payments for telehealth services by no later than January 1, 
     1999. In determining the amount of payments for telehealth 
     services, the payments would be subject to Medicare 
     coinsurance and deductible requirements, and balanced billing 
     limits would apply to services furnished by non-participating 
     physicians. Beneficiaries could not be billed for any 
     telephone line charges or any facility fees. In addition, 
     payment for telehealth services would be increased annually 
     by the update factor for physician services under the fee 
     schedule.
       It is the intent of the Conferees that the enhanced 
     Medicare reimbursement provided by the conference agreement 
     not inadvertently modify the payment provided to participants 
     in the on-going HCFA telemedicine demonstration projects.

     Informatics, Telemedicine, and Education Demonstration Project

  Sections 10207 and 4206 of the House bills and Section 5157 of the 
                            Senate amendment


                              Current Law

       HCFA is currently conducting a 3-year demonstration project 
     under which Medicare will pay for telemedicine services at 57 
     Medicare-Certified facilities. The demonstration will focus 
     on medical consultations between medical specialists located 
     at medical center facilities and primary care providers 
     treating Medicare patients at remote rural sites. Five 
     telemedicine centers are participating in the project.


                               House Bill

       Requires the Secretary to conduct, no later than 9 months 
     after enactment, a 4-year demonstration project designed to 
     use eligible health care provider telemedicine networks to 
     apply high-capacity computing and advanced networks for the 
     provision of health care to Medicare beneficiaries who are 
     residents of medically underserved rural and inner-city 
     areas. The project would focus on improvements in primary 
     care and prevention of complications for those residents with 
     diabetes mellitus. The Secretary would be required to waive 
     any Medicare provisions necessary to provide payment for 
     services under the project. The objectives of the project 
     would include: (1) improving patient access to and compliance 
     with appropriate care guidelines for chronic diseases through 
     direct telecommunications links with information networks; 
     (2) developing a curriculum to train, and provide standards 
     for credentialing and licensure of, health professionals 
     (particularly primary care) in the use of medical informatics 
     and telecommunications; (3) demonstrating the application of 
     advanced technologies to assist primary care providers in 
     assisting patients with chronic illnesses in a home setting; 
     (4) applying medical informatics to residents with limited 
     English language skills; (5) developing standards in the 
     application of telemedicine and medical informatics; and (6) 
     developing a model for the cost-effective delivery of primary 
     and related care both in a managed care and fee-for-service 
     environment.
       The provision defines an eligible health care provider 
     telemedicine network as a consortium that includes at least 
     one tertiary care hospital (but no more than two such 
     hospitals), at least one medical school, no more than four 
     facilities in rural or urban areas, and at least one regional 
     telecommunications provider that meets certain additional 
     requirements. The provision would define those services to be 
     covered under Part B for the purposes of this demonstration 
     project. Medicare payment for covered Part B services would 
     be made at a rate of 50% of the reasonable costs of providing 
     such services. The Secretary would be required to recognize 
     the following project costs as permissible costs for coverage 
     under Part B: (1) the acquisition of telemedicine equipment 
     for use in patient homes; (2) curriculum development and 
     training of health professionals in medical informatics and 
     telemedicine, (3) payment of certain telecommunications 
     costs, including costs of telecommunications between 
     patients' homes and the eligible network and between the 
     network and other entities under the arrangements described 
     in the bill; and (4) payments to practitioners and providers 
     under Medicare. Costs not covered under Part B would include: 
     (1) purchase or installation of transmission equipment, (2) 
     the establishment or operation of a telecommunications common 
     carrier network, (3) the costs of construction (except for 
     minor renovations related to the installation of reimbursable 
     equipment), or (4) the acquisition or building of real 
     property.
       The total amount of Medicare payments permitted under the 
     project would be $30 million. The project would be prohibited 
     from imposing cost sharing on a Medicare beneficiary for the 
     receipt of services under the project of more than 20% of the 
     recognized costs of the project attributable to these 
     services.
       The Secretary would be required to submit to the House 
     Committees on Ways and Means and Commerce and the Senate 
     Committee on Finance interim reports on the project and a 
     final report on the project within 6 months of the conclusion 
     of the project. The final report would be required to include 
     an evaluation of the impact of the use of telemedicine and 
     medical informatics on improving the 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.
       Effective Date. Enactment.
       Section 4206. Identical provision.


                            Senate Amendment

       Similar provision, except establishes a 5-year 
     demonstration project to study the use of eligible health 
     care provider telemedicine networks to implement high-
     capacity computing and advanced networks to improve primary 
     care, improve access to specialty care, and provide 
     educational and training support to rural practitioners. The 
     Secretary would be required to waive any Medicare, title XI 
     of the Social Security Act, or Medicaid provisions necessary 
     to conduct the project. The provision would not include the 
     objectives of improving patient access to and compliance with 
     appropriate care guidelines for individuals with diabetes 
     mellitus through direct telecommunications links with 
     information networks, or the application of medical 
     informatics to residents with limited English language 
     skills, but would include the objective of improving 
     access to primary and specialty care and the reduction of 
     inappropriate hospital visits in order to improve patient 
     quality-of-life and reduce overall health care costs.
       The provision would allow an eligible telemedicine network 
     to include no more than six facilities, including at least 
     three rural referral centers in rural areas and require that 
     the consortium would be located in a region that is 
     predominantly rural.
       The total amount of Medicare payments permitted under the 
     project would be $27 million.


                          Conference Agreement

       The conference agreement includes the House bill with 
     modifications.

    Subtitle D--Anti-Fraud and Abuse Provisions and Administrative 
                              Efficiencies

Permanent Exclusion for Those Convicted of 3 Health Care Related Crimes

                  Section 10301 and 4301 of House bill


                              Current Law

       Section 1128(a) of the Social Security Act directs the 
     Secretary of Health and Human Services to mandatorily exclude 
     individuals and entities from participation in the Medicare 
     program and state health care programs (Medicaid, Title V 
     Maternal and Child Health Block Grants, and Title XX Social 
     Services Block Grants) upon conviction of certain criminal 
     offenses including Medicare and Medicaid program-related 
     crimes, patient abuse crimes, health care fraud felonies, and 
     felonies relating to controlled substances. Such mandatory 
     exclusions are, in most cases, for a minimum period of five 
     years.


                               House Bill

       Section 10301. Provides that if an individual has been 
     mandatorily excluded by the Secretary of Health and Human 
     Services from participation in Federal health care programs, 
     as defined in Section 1128b(f) of the Social Security Act 
     (see Section 10310(c) of this subtitle), and state health 
     care programs, because of a conviction relating to Medicare 
     and Medicaid program-related crimes, patient abuse, or 
     felonies related to health care fraud or controlled 
     substances, that the exclusion be either for a period of 10 
     years if the individual has been convicted on only one 
     previous occasion of one or more offenses for which such an 
     exclusion may be imposed, or that the exclusion be permanent 
     if the individual has been convicted on two or more previous 
     occasions of one or more offenses for which such an exclusion 
     may be imposed. The provision would apply to exclusions based 
     on a conviction occurring on or after the date of enactment 
     of this section where the individual has had prior 
     convictions occurring before, on or after the date of 
     enactment of this section.
       Section 4301. Identical provision.
       Effective Date. Enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision with 
     clarifying language.

Authority to Refuse to Enter into Medicare Agreements with Individuals 
                   or Entities Convicted of Felonies

    Section 10302 and 4302 of House bill and Section 5201 of Senate 
                               amendment


                              Current Law

       Section 1866 of the Social Security Act sets forth certain 
     conditions under which providers may become qualified to 
     participate in

[[Page H6213]]

     the Medicare program. The Secretary may refuse to enter into 
     an agreement with a provider, or may refuse to renew or may 
     terminate such an agreement, if the Secretary determines that 
     the provider has failed to comply with provisions of the 
     agreement, other applicable Medicare requirements and 
     regulations, or if the provider has been excluded from 
     participation in a health care program under section 1128 or 
     1128A of the Social Security Act. Section 1842 of the Social 
     Security Act permits physicians and suppliers to enter into 
     agreements with the Secretary under which they become 
     ``participating'' physicians or suppliers under the Medicare 
     program.


                               House Bill

       Section 10302. Adds a new section giving the Secretary 
     authority to refuse to enter into an agreement, or refuse to 
     renew or terminate an agreement with a provider if 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. This authority would extend to the Secretary's 
     agreements with physicians or suppliers who become 
     ``participating'' physicians or suppliers under the Medicare 
     program. Similar provisions would apply to the Medicaid 
     program.
       Section 4302. Identical provision.
       Effective Date. Enactment, with application to new and 
     renewed contracts on or after that date.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions which are 
     identical in the House bill and the Senate amendment with 
     clarifying language.

Improving Information to Medicare Beneficiaries (Inclusion of Toll-Free 
  Number to Report Medicare Waste, Fraud, and Abuse in Explanation of 
                            Benefits Forms)

 Section 10303 and 4303 of the House bill and Section 5219 and 5222 of 
                          the Senate Amendment


                              Current Law

       Carriers and fiscal intermediaries are the entities which 
     process claims for Medicare. Intermediaries process claims 
     submitted by institutional providers of services and carriers 
     process claims submitted by physicians and suppliers.


                               House Bill

       Section 10303. Specifies that each explanation of benefits 
     form contain a toll-free telephone number maintained by the 
     Inspector General in the Department of Health and Human 
     Services for persons to report complaints and information 
     about waste, fraud and abuse in Medicare services or billing 
     for services.
       Section 4303. Identical provision.
       Effective Date. Effective for explanations of benefits as 
     of such date, not later than January 1, 1999, as the 
     Secretary provides.


                            Senate Amendment

       While the Senate amendment also requires a toll-free fraud 
     and abuse telephone number in each explanation of benefits, 
     the provision is broader, including requirements regarding a 
     beneficiary's right to request an itemized bill for Medicare 
     services within 30 days, penalties for failure to comply with 
     such requests, and procedures for review of itemized bills by 
     the appropriate carrier or fiscal intermediary upon request.
       Effective Date. Effective for medical or other items or 
     services provided on or after January 1, 1998.


                          Conference Agreement

       The conference agreement includes the House provision 
     regarding a toll-free fraud and abuse telephone number and 
     the Senate amendment with modifications regarding new 
     statutory requirements for information to beneficiaries 
     regarding fraud and abuse, explanation of benefits 
     statements, and a beneficiary's right to request an itemized 
     bill for Medicare.

  Liability of Medicare Carriers and Fiscal Intermediaries for Claims 
                     Submitted by Excluded Persons

                  Section 10304 and 4304 of House bill


                              Current Law

       Carriers and fiscal intermediaries are the entities which 
     process claims for Medicare. Intermediaries process claims 
     submitted by institutional providers of services and carriers 
     process claims submitted by physicians and suppliers.


                               House Bill

       Section 10304. Provides that agreements with fiscal 
     intermediaries or carriers require that such organizations 
     reimburse the Secretary for any amounts paid for services 
     under Medicare which have been furnished, directed, or 
     prescribed by an individual or entity during any period in 
     which the individual or entity has been excluded from 
     participation under Medicare, if the amounts have been paid 
     after the fiscal intermediary or carrier has received notice 
     of the exclusion. Similar restrictions would be imposed upon 
     states under the Medicaid program.
       Section 4304. Identical provision.
       Effective Date. Applies to contracts and agreements entered 
     into, renewed, or extended after the date of enactment of 
     this Act, but only with respect to claims submitted on or 
     after either January 1, 1998, or the effective date of the 
     contract, whichever is later.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House 
     provision.

    Exclusion of Entity Controlled by Family Member of a Sanctioned 
                               Individual

    Section 10305 and 4305 of House bill and Section 5202 of Senate 
                               amendment


                              Current Law

       Section 1128 of the Social Security Act authorizes the 
     Secretary of HHS to impose mandatory and permissive 
     exclusions of individuals and entities from participation 
     in the Medicare program, Medicaid program and programs 
     receiving funds under the Title V Maternal and Child 
     Health Services Block Grant, or the Title XX Social 
     Services Block Grant. The Secretary may exclude any entity 
     which the Secretary determines has a person with a direct 
     or indirect ownership or control interest of 5 percent or 
     more in the entity or who is an officer, director, agent, 
     or managing employee of the entity, where that person has 
     been convicted of a specified criminal offense, or against 
     whom a civil monetary penalty has been assessed, or who 
     has been excluded from participation under Medicare or a 
     state health care program.


                               House Bill

       Section 10305. Provides that if a person transfers an 
     ownership or control interest in an entity to an immediate 
     family member or to a member of the household of the person 
     in anticipation of, or following, a conviction, assessment or 
     exclusion against the person, that the entity may be excluded 
     from participation in Federal health care programs on the 
     basis of that transfer. The terms ``immediate family member'' 
     and ``member of the household'' are defined in this section.
       Section 4305. Identical provision.
       Effective Date. Effective 45 days after enactment.


                            Senate Amendment

       Identical provision


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment. The 
     Conferees expect the Secretary to examine the facts and 
     circumstances of each case carefully before applying this 
     penalty.

                  Imposition of Civil Money Penalties

    Section 10306 and 4306 of House bill and Section 5203 of Senate 
                               amendment


                              Current Law

       Section 1128A of the Social Security Act sets forth a list 
     of fraudulent activities relating to claims submitted for 
     payments for items of services under a Federal health care 
     program. Civil money penalties of up to $10,000 for each item 
     or service may be assessed. In addition, the Secretary of HHS 
     (or head of the department or agency for the Federal health 
     care program involved) may also exclude the person involved 
     in the fraudulent activity from participation in a Federal 
     health care program, defined as any program providing health 
     benefits, whether directly or otherwise, which is funded 
     directly, in whole or in part, by the United States 
     Government (other than the Federal Employees Health Benefits 
     Program).


                               House Bill

       Section 10306. Adds a new civil money penalty for cases in 
     which a person contracts with an excluded provider for the 
     provision of health care items or services, where the person 
     knows or should know that the provider has been excluded from 
     participation in a Federal health care program. A civil money 
     penalty is also added for cases in which a person provides a 
     service ordered or prescribed by an excluded provider, where 
     that person knows or should know that the provider has been 
     excluded from participation in a Federal health care program.
       Section 4306. Similar, but does not provide a civil money 
     penalty for cases in which a person provides a service 
     ordered or prescribed by an excluded provider.
       Effective Date. Enactment.


                            Senate Amendment

       Identical to Ways and Means provision, with an additional 
     provision providing a civil money penalty of $50,000 for each 
     kickback violation under Section 1128B(b) of the Social 
     Security Act and damages of up to 3 times the total amount of 
     remuneration offered, paid, solicited, or received under that 
     section.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment 
     providing civil money penalties for kickbacks and civil money 
     penalties for persons who contract with excluded providers, 
     with a modification eliminating the civil money penalty for 
     services ordered or prescribed by an excluded individual or 
     entity.

               Disclosure of Information and Surety Bonds

    Section 10307 and 4307 of House bill and Section 5211 of Senate 
                               amendment


                              Current Law

       Section 1834(a) of the Social Security Act establishes 
     requirements for payments under Medicare for covered items 
     defined as durable medical equipment. Home health agencies 
     are required, under Section 1861(o) of the Social Security 
     Act, to meet specified conditions in order to provide health 
     care services under Medicare, including requirements, set by 
     the Secretary, relating to bonding or establishing of escrow 
     accounts, as the Secretary finds necessary for the effective 
     and efficient operation of the Medicare program.

[[Page H6214]]

                               House Bill

       Section 10307. Requires that suppliers of durable medical 
     equipment provide the Secretary with full and complete 
     information as to persons with an ownership or control 
     interest in the supplier, or in any subcontractor in which 
     the supplier has a direct or indirect 5 percent or more 
     ownership interest, other information concerning such 
     ownership or control, and a surety bond for at least $50,000. 
     Home health agencies, comprehensive outpatient rehabilitation 
     facilities, and rehabilitation agencies would also be 
     required to provide a surety bond for at least $50,000. The 
     Secretary may impose the surety bond requirement which 
     applies to durable medical equipment suppliers to suppliers 
     of ambulance services and certain clinics that furnish 
     medical and other health services (other than physicians' 
     services). In each of these cases the Secretary could waive 
     the surety bond requirement if the entity provides a 
     comparable surety bond under state law.
       Section 4307. Identical provision.
       Effective Date. Applies with respect to items and services 
     furnished on or after January 1, 1998.


                            Senate Amendment

       Identical, except minor wording differences and provision 
     that Secretary may also require a supplier of durable medical 
     equipment to provide evidence of compliance with applicable 
     Medicare conditions or requirements through an accreditation 
     survey conducted by a national accreditation body.


                          Conference Agreement

       The conference agreement includes provisions in the House 
     bill and the Senate amendment which are similar, with a 
     modification making all surety bond requirements mandatory 
     and eliminating the Senate amendment language regarding 
     accreditation, and with clarifying language.
       The Conferees wish to clarify that these surety bond 
     requirements do not apply to physicians and other health care 
     professionals.

              Provision of Certain Identification Numbers

    Section 10308 and 4208 of House bill and Section 5212 of Senate 
                               amendment


                              Current Law

       Section 1124 of the Social Security Act requires that 
     entities participating in Medicare, Medicaid and the Maternal 
     and Child Health Block Grant programs (including providers, 
     clinical laboratories, renal disease facilities, health 
     maintenance organizations, carriers and fiscal 
     intermediaries), provide certain information regarding the 
     identity of each person with an ownership or control interest 
     in the entity, or in any subcontractor in which the entity 
     has a direct or indirect 5 percent or more ownership 
     interest. Section 1124A of the Social Security Act requires 
     that providers under part B of Medicare also provide 
     information regarding persons with ownership or control 
     interest in a provider or any subcontractor in which the 
     provider has a direct or indirect 5 percent or more ownership 
     interest.


                               House Bill

       Section 1308. Requires that all Medicare providers supply 
     the Secretary with both the employer identification number 
     and Social Security account number of each disclosing entity, 
     each person with an ownership or control interest, and any 
     subcontractor in which the entity has a direct or indirect 5 
     percent or more ownership interest. The Secretary of HHS is 
     directed to transmit to the Commissioner of Social Security 
     information concerning each social security account number 
     and employer identification number supplied to the Secretary 
     for verification of such information. The Secretary would 
     reimburse the Commissioner for costs incurred in performing 
     the verification services required by this provision. The 
     Secretary of HHS would report to Congress on the steps taken 
     to assure confidentiality of Social Security numbers to be 
     provided to the Secretary of HHS under this section.
       Section 4308. Similar, but specifies that Social Security 
     numbers would not be disclosed to other persons or entities, 
     and use of such numbers would be limited to verification and 
     matching purposes only.
       Effective Date. Effective 90 days after submission of 
     Secretary's report to Congress on confidentiality of Social 
     Security numbers.


                            Senate Amendment

       Identical to Ways and Means provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     similar in the House bill and the Senate amendment with 
     modifications. Although the Conferees are aware of the 
     widespread use of Social Security numbers as personal 
     identifiers, the Conferees had concern about the 
     confidentiality of such numbers under this new disclosure 
     requirement. Therefore, this provision provides for a study 
     by the Secretary before this requirement would become 
     effective. In addition, the Conferees note that the 
     disclosure of Social Security numbers and other personal 
     identifiers to a Federal agency are protected by applicable 
     provisions of the Privacy Act.

 Advisory Opinions Regarding Certain Physician Self-Referral Provisions

                  Section 10309 and 4309 of House bill


                              Current Law

       Section 1877 of the Social Security Act establishes a ban 
     on certain financial arrangements between a referring 
     physician and an entity. Specifically, if a physician (or 
     immediate family member) has an ownership or investment 
     interest in or a compensation arrangement with an entity, the 
     physician is prohibited from making certain referrals to the 
     entity for services for which Medicare would otherwise pay.


                               House Bill

       Section 10309. Requires the Secretary of HHS to issue 
     written advisory opinions concerning whether a physician 
     referral relating to designated health services (other than 
     clinical laboratory services) is prohibited under Section 
     1877 of the Social Security Act. Such opinions would be 
     binding as to the Secretary and the party requesting the 
     opinion. To the extent practicable, the Secretary is to apply 
     the regulations issued under the advisory opinion provisions 
     of Section 1128D of the Social Security Act to the issuance 
     of advisory opinions under this provision.
       Section 4309. Identical provision.
       Effective Date. Enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision. The 
     conference agreement also clarifies the application of 
     certain rules to advisory opinions.

                Other Fraud and Abuse Related Provisions

   (Section 10310 and 4311 of House bill and Section 5221 of Senate 
                               amendment


                              Current Law

       Section 1128D provides for safe harbors, advisory opinions, 
     and fraud alerts as guidance regarding application of health 
     care fraud and abuse sanctions. Section 1128E of the Social 
     Security Act directs the Secretary of HHS to establish a 
     national health care fraud and abuse data collection program 
     for the reporting of final adverse actions against health 
     care providers, suppliers, or practitioners.-


                               House Bill

       Section 10310. Makes certain technical changes in 
     provisions added by the Health Insurance Portability and 
     Accountability Act of 1996. The provision would also provide 
     that mandatory and permissive exclusions under Section 1128 
     apply to any Federal health care program, defined as any 
     program providing health benefits, whether directly or 
     otherwise, which is funded directly, in whole or in part, by 
     the United States Government (other than the Federal 
     Employees Health Benefits Program). A new provision is added 
     to the health care fraud and abuse data collection program to 
     provide a civil money penalty of up to $25,000 to be imposed 
     against a health plan that fails to report information on an 
     adverse action required to be reported under this program. 
     The Secretary would also publicize those government agencies 
     which fail to report information on adverse actions as 
     required.
       Section 4311. Identical provision.
       Effective Date. The change in the federal programs under 
     which a person may be excluded under Section 1128 of the 
     Social Security Act would be effective on the date of 
     enactment of this Act. The sanction provision for failure to 
     report adverse action information as required under Section 
     1128E of the Social Security Act would apply to failures 
     occurring on or after the date of the enactment of this Act. 
     The other amendments made by this section would be effective 
     as if included in the enactment of the Health Insurance 
     Portability and Accountability Act of 1996.


                            Senate Amendment

       Identical, but with an additional provision clarifying that 
     certain waivers and payments of premiums do not violate 
     Section 1128A, as amended by the Health Insurance Portability 
     and Accountability Act of 1996.


                          Conference Agreement

       The conference agreement includes provisions in the House 
     bill and the Senate amendment which are identical, with a 
     modification adding the Senate amendment language clarifying 
     the definition of ``remuneration'' under Section 1128A(I)(6) 
     of the Social Security Act, and adding additional clarifying 
     language to that section.

Notification of Availability of Providers as Part of Discharge Planning 
                                Process

                       Section 4310 of House bill


                              Current Law

       Hospitals are required to have a discharge planning process 
     meeting certain requirements. The discharge planning 
     evaluation must include an evaluation of the patient's need 
     for likely post-hospital services and the availability of 
     those services.


                               House Bill

       Includes, as part of this evaluation, the availability of 
     those services through individuals and entities that 
     participate in Medicare, serve the geographic area where the 
     patient resides, and request to be listed by the hospital as 
     available. The provision would prohibit the discharge plan 
     from specifying or otherwise limiting the qualified provider 
     which may provide post-hospital care. The plan would also 
     identify any provider (to whom the individual is referred) in 
     which the hospital has a disclosable financial interest or 
     which has such disclosable interest in the hospital.
       Effective Date. Discharge plan provisions would be 
     effective 90 days after enactment.

[[Page H6215]]

     The Secretary of HHS would issue regulations implementing the 
     information disclosure provisions within one year of date of 
     enactment, and such regulations would specify the effective 
     date of such provisions.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision with 
     a modification expanding the required notification of 
     financial interest to include any post-hospital provider.

                          Competitive Bidding

    Section 4743 of House bill and Section 5218 of Senate amendment


                              Current Law

       Medicare does not use competitive bidding for the selection 
     of providers authorized to provide covered services to 
     beneficiaries.


                               House Bill

       Requires the Secretary, within 1 year of enactment, to 
     establish and operate, over a 2-year period, demonstration 
     projects in two geographic areas selected by the Secretary. 
     Under the demonstration, the amount of payment for selected 
     items or services furnished in the region would be the amount 
     determined pursuant to a competitive bidding process. The 
     process would have to meet the requirements imposed by the 
     Secretary to ensure cost-effective delivery to beneficiaries 
     of items and services of high quality.
       Provides that the Secretary would select the items and 
     services based on a determination that the use of competitive 
     bidding would be appropriate and cost effective. The 
     Secretary would be required to consult with an advisory task 
     force which included representatives of providers and 
     suppliers (including small business providers and suppliers) 
     in each project region.


                            Senate Amendment

       Requires the Secretary to establish competitive acquisition 
     areas for furnishing Part B services (except for physicians 
     services) as specified by the Secretary. The Secretary could 
     establish different competitive acquisition areas for 
     different classes of items and services. The areas would be 
     chosen based on availability and accessibility of entities 
     able to furnish items and services and probable savings to be 
     realized.
       Requires the Secretary to conduct a competition among 
     individuals and entities supplying items and services for 
     each area for each class of items and services. The Secretary 
     could not award a contract unless the Secretary found that 
     the entity met quality standards specified by the Secretary. 
     Further, the Secretary would have to find that the total 
     amounts to be paid are expected to be less than would 
     otherwise be paid. A contract could not be let for an amount 
     in excess of the applicable fee schedule amount unless the 
     Secretary determined that the amount of the excess is 
     warranted by reason of technological innovation, quality 
     improvement, or similar reasons. Regardless, the total amount 
     paid under the contract could not exceed the amount that 
     would otherwise be paid.
       Authorizes the Secretary to specify contract terms. The 
     Secretary would be authorized to limit the number of 
     contractors in an area to the number needed to meet projected 
     demand. Payment could not be made in a competitive 
     acquisition area to a non-contracting entity unless the 
     Secretary found that the expenses were incurred in a case of 
     urgent need or other circumstances specified by the 
     Secretary.
       Effective Date. Applies to items and services furnished 
     after December 31, 1997.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     an amendment to limit the Secretary's authority to the 
     conduct of demonstration projects. The Secretary would be 
     authorized to implement not more than five such projects, at 
     three sites each. The agreement would further specify that at 
     least one competitive acquisition area would be for oxygen 
     and oxygen equipment.
       The agreement would require the Secretary to evaluate the 
     impact of establishing competitive acquisition areas on 
     Medicare program savings, access, diversity of product 
     selection, and quality. The Secretary would make annual 
     reports to the House Committees on Ways and Means and 
     Commerce and the Senate Committee on Finance on the results 
     of the evaluation. If the Secretary determined that a 
     demonstration project was successful at the end of three 
     years, the Secretary could expand bidding for that item or 
     service to additional sites. The GAO would be required to 
     study the effectiveness of the competitive acquisition areas.
       All projects authorized under this provision would 
     terminate no later than December 31, 2002. This provision 
     would be effective on enactment.

        Application of Certain Provisions of the Bankruptcy Code

                  Section 5213 of the Senate amendment


                              Current Law

       Under the Bankruptcy Code, a provider can assert that any 
     civil monetary penalty due to the Medicare program is 
     discharged and does not survive the bankruptcy proceeding. 
     Current law provides for various causes of exclusion from the 
     Medicare program. However, several bankruptcy courts have 
     held that a provider may not be excluded from Medicare during 
     the pendency of a bankruptcy proceeding because of the 
     court's automatic stay.


                               House Bill

       No provision.


                            Senate Amendment

       Changes the current status of the United States as a 
     creditor in a bankruptcy proceeding involving a debtor who 
     participates in Medicare or Medicaid. It would exempt the 
     United States from bankruptcy's automatic stay with respect 
     to actions to exclude the debtor from program participation, 
     to assess civil money penalties, or to deny, recoup or setoff 
     overpayments due to fraud (not including overpayments for 
     medical services); it would specify that debts owed to the 
     United States for certain overpayments, or for certain 
     penalties are nondischargeable; it would exclude debt 
     repayments to the United States for certain overpayments from 
     the Bankruptcy Code's preferential transfer provision; it 
     would permit the Department of HHS, not a U.S. bankruptcy 
     court, to determine the allowability and finality of debtor 
     claims for payment; and it would provide special notice 
     requirements.
       Effective Date. Enactment.


                          Conference Agreement

       The Conference agreement does not include the bankruptcy 
     provisions in the Senate amendment, which would have barred 
     bankruptcy courts from staying exclusions of physicians and 
     other health care providers from Medicare, and from the 
     dischargeability in a bankruptcy proceeding of fines and 
     recovery of payments received through fraud. The Conferees 
     recommend that the committees with jurisdiction over the 
     Medicare program and over bankruptcy law continue to address 
     these significant issues in other pending legislation.

             Replacement of Reasonable Charge Fee Schedule

                    Section 5214 of Senate amendment


                              Current Law

       Medicare pays for most Part B services (including 
     physicians services, lab services and durable medical 
     equipment) on the basis of fee schedules. A few items are 
     still paid on the basis of reasonable charges.


                               House Bill

       No provision.


                            Senate Amendment

       Provides that payment under Medicare Part B is to be based 
     on the lessor of the actual charge for the service or amounts 
     determined by the applicable fee schedule developed by the 
     Secretary for the particular service. The provision would 
     make conforming changes to Part B. For an enteral or 
     parenteral pump furnished on a rental basis during a period 
     of medical need, payment would be limited to 15 months of 
     medical need after which payment could be made for 
     maintenance and servicing of the pump in amounts reasonable 
     and necessary to ensure proper operation. The provision would 
     delete current provisions relating to determination of 
     reasonable charges for services personally performed by 
     teaching physicians and inherent reasonableness authority for 
     determining payments to physicians.
       Specifies that the Secretary in developing a fee schedule 
     for a particular service shall, in the first year set payment 
     amounts so that total payments for those services would be 
     approximately equal to those which would have been made if 
     the fee schedule had not been effect.
       Effective Date. Applies, to the extent the amendments 
     substitute fee schedules for reasonable charges, to 
     particular services as of the date specified by the 
     Secretary.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     an amendment. Under the agreement, the Secretary would be 
     authorized to implement a statewide or other areawide fee 
     schedule for payment of specified items and services paid on 
     a reasonable charge basis. The specified items and services 
     are medical supplies; home dialysis supplies and equipment; 
     therapeutic shoes; parenteral and enteral nutrients, 
     equipment, and supplies; electromyogram devices; salivation 
     devices; blood products; and transfusion medicine.
       The agreement provides that the fee schedule would be 
     updated each year by the percentage increase in the CPI for 
     the 12-month period ending the preceding June. No update 
     could occur before 2003 for parenteral and enteral nutrients, 
     equipment, and supplies. The Secretary, in developing a fee 
     schedule would be required to set amounts for the first year 
     period to which the fee schedule applies so that total 
     Medicare payments for those services would be approximately 
     equal to the estimated total payments if those amendments had 
     not been made.
       With regard to parenteral and enteral nutrition, the 
     Conferees recommend that the Secretary examine carefully the 
     appropriateness of including the costs of professional 
     services and variations in payments according to the setting 
     where services are provided.

  Application of Inherent Reasonableness to All Part B Services Other 
                        Than Physicians Services

                    Section 5215 of Senate amendment


                              Current Law

       The Secretary is permitted to increase or decrease Medicare 
     payments in cases where the payment amount is ``grossly 
     excessive or grossly deficient and not inherently 
     reasonable.'' The Secretary's authority to make these payment 
     adjustments is generally referred to as ``inherent 
     reasonableness authority''.


                               House Bill

       No provision.

[[Page H6216]]

                            Senate Amendment

       Requires the Secretary to describe by regulation the 
     factors to be used in determining cases in which application 
     of payment rules under Part B (other than to physicians 
     services) results in the determination of an amount that is 
     not inherently reasonable. The Secretary would provide in 
     these cases for factors to be considered in establishing a 
     realistic and equitable amount.
       Effective Date. Enactment


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     an amendment. The factors provided by the Secretary could not 
     increase or decrease payment amounts by more than 15 percent 
     from the preceding year for a particular item or service. The 
     Conference agreement also includes additional clarifying 
     language.

             Requirement To Furnish Diagnostic Information

                    Section 5216 of Senate amendment


                              Current Law

       Physicians are required to provide diagnostic codes when 
     billing for services.


                               House Bill

       No provision


                            Senate Amendment

       Extends the requirement to furnish diagnostic information 
     to non-physician practitioners.
       Specifies that physicians and non-physician practitioners 
     would be required to furnish diagnostic information to 
     entities when ordering specified items or services furnished 
     by such entities. Specifically they would be required to 
     supply diagnostic information to the entity if the entity is 
     required by the Secretary (or fiscal agent of the Secretary) 
     to furnish such information as a condition of payment. This 
     requirement would apply to diagnostic X-rays, diagnostic lab 
     tests, and other diagnostic tests, durable medical equipment, 
     prosthetic devices, and braces and artificial legs, arms and 
     eyes.
       Effective Date. Applies to items and services furnished on 
     or after January 1, 1998.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

     Report by GAO on Operation of Fraud and Abuse Control Program

                    Section 5217 of Senate amendment


                              Current Law

       The Health Insurance Portability and Accountability Act of 
     1996 requires the first report by the General Accounting 
     Office (GAO) not later than January 1, 2000 on the operation 
     of a new Medicare fraud and abuse control program designed to 
     improve investigation and prosecution of fraud against the 
     Medicare program.


                               House Bill

       No provision.


                            Senate Amendment

       Requires the first GAO report no later than June 1, 1998.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

  Prohibiting Unnecessary and Wasteful Medicare Payments for Certain 
                                 Items

               Section 5220 and 5223 of Senate amendment


                              Current Law

       The reasonable cost of medical services and items under 
     Medicare is defined and limitations upon such costs are set 
     forth in Section 1861(v) of the Social Security Act.-


                               House Bill

       No provision.


                            Senate Amendment

       Specifies that reasonable costs would not include costs for 
     entertainment, gifts, costs for fines and penalties under 
     Federal or state law, or certain education expenses for 
     spouses or dependents of providers of services, their 
     employees or contractors. Section 5223, with similar 
     language, also includes personal use of motor vehicles as a 
     non-reimbursable charge under Medicare.
       Effective Date. Effective with respect to medical or other 
     items or services provided on or after January 1, 1998.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     clarifying language.

     Reducing Excessive Billings and Utilization for Certain Items

               Section 5221 and 5224 of Senate amendment


                              Current Law

       Medicare law authorizes the Secretary to develop and 
     periodically update a list of DME items that are determined, 
     on the basis of prior payment experience, to be frequently 
     subject to unnecessary utilization throughout a carrier's 
     entire service area or a portion of an area. The Secretary is 
     also authorized to develop and periodically update a list of 
     DME suppliers for whom the Secretary has found a substantial 
     number of denied claims because items were not medically 
     necessary and reasonable or the Secretary has identified a 
     pattern of overutilization resulting from the business 
     practice of the supplier.


                               House Bill

       No provision.


                            Senate Amendment

       Requires the Secretary to develop the list of DME items and 
     suppliers (see also item 16, durable medical equipment 
     below).
       Effective date. Enactment.


                         Conference Agreement.

       The conference agreement does not include the Senate 
     provision.

   Improved Carrier Authority to Reduce Excessive Medicare Payments/
                   Itemization of Surgical Dressings

               Sections 5225 and 5226 of Senate amendment


                              Current Law

       Surgical dressings are paid according to the DME fee 
     schedule for inexpensive and other routinely purchased items 
     (with national limited payment amounts based on 1992 
     reasonable charge data, updated). Fee schedule payments do 
     not apply to dressings furnished as an incident to a 
     physician's service or by a home health agency.


                               House Bill

       No provision.


                            Senate Amendment

       Authorizes the Secretary to apply inherent reasonableness 
     authority to payments for surgical dressings. Applies fee 
     schedule to surgical dressings provided by a home health 
     agency. (Note that other provisions on prospective payment 
     for home health specify that all services covered and paid on 
     a reasonable cost basis, including medical supplies, would be 
     required to be included in the prospective rate.)
       Effective date. Enactment.


                          Conference Agreement

       The conference agreement does not include the Senate 
     provision.

               Subtitle E--Provisions Relating to Part A

                  Chapter 1--Payment of PPS Hospitals

                      PPS Hospital Payment Update

    Section 10501 of the House bill and Section 5401 of the Senate 
                               amendment


                              Current Law

       Hospitals are paid on the basis of a prospectively fixed 
     payment rate for costs associated with each discharge. Each 
     hospital's basic payment rate is based on a national 
     standardized payment amount, which is higher for hospitals in 
     large urban areas than for other hospitals. Each standardized 
     payment amount is adjusted by a wage index. Payment also 
     depends on the relative costliness of the case, based on the 
     diagnosis related group (DRG) to which the discharge is 
     assigned. Additional payments are made for the following: 
     extraordinary costly cases (outliers); indirect costs of 
     medical education; and for hospitals serving a 
     disproportionate share of low-income patients. Other 
     exceptions and adjustments are made.
       PPS payment rates are annually updated using an ``update 
     factor.'' The annual update factor applied to increase the 
     Federal base payment amounts is determined, in part, by the 
     projected increase in the hospital market basket index (MBI), 
     which measures the costs of goods and services purchased by 
     hospitals. Under the Omnibus Budget Reconciliation Act of 
     1993 (OBRA 93), the PPS update factor in FY 1998 for all PPS 
     hospitals is equal to the percentage increase in the market 
     basket.


                               House Bill

       Sets the update factor for FY 1998 at 0% for all hospitals 
     in all areas; for FY 1999-2002, at MBI minus 1.0 percentage 
     points for all hospitals in all areas; and for FY 2003 and 
     each subsequent fiscal year equal to the MBI for all 
     hospitals in all areas.
       Effective Date. Enactment.


                            Senate Amendment

       Establishes a calendar year (CY) update cycle for PPS 
     hospital payments. Hospital payment rates for FY 1997 would 
     be continued until January 1, 1998. For CY 1998, the annual 
     update for PPS hospitals would be equal to the MBI minus 2.5 
     percentage points; for CY 1999, the MBI minus 1.3 percentage 
     points; for CY 2000-2002, the MBI minus 1.0 percentage point; 
     and for CY 2003 and each subsequent year, the MBI.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement includes 0% update for FY 1998; 
     the MBI minus 1.9 percentage points for FY 1999; the MBI 
     minus 1.8 percentage points for FY 2000; the MBI minus 1.1 
     percentage points for FY 2001 and FY 2002; and for FY 2003 
     and each subsequent fiscal year, the MBI percentage increase 
     for all hospitals in all areas. The conference agreement 
     includes a provision which would set a different update for 
     certain non-teaching, non-DSH, and non-Medicare dependent 
     hospitals to provide these hospitals with temporary relief. 
     Hospitals would qualify for the higher update if they were 
     located in states in which a non-teaching, non-DSH hospital 
     received lower aggregate payments for their cost reporting 
     periods beginning during FY 1995 than the aggregate allowable 
     operating costs of inpatient hospital services for all such 
     hospitals in the state. In addition, the amount of payments 
     for discharges occurring in the cost reporting period 
     involved would have to be less than the allowable operating 
     cost of inpatient hospital services for such a hospital for 
     such period. In FY 1998, these hospitals would receive a 
     payment update equal to the update provided that year for all 
     other hospitals plus 0.5 percentage points; for FY 1999, a 
     payment update equal to the update for that year provided for 
     all other hospitals plus 0.3 percentage points.
       Regarding temporary relief for certain non-teaching, non-
     DSH hospitals, it is the intent of Conferees that these 
     payment adjustments be available for eligible hospitals for 
     FY 1998 and FY 1999 to account for disproportionately low 
     Medicare margins.

[[Page H6217]]

      Moreover, the conferees intend that Medicare payments be 
     paid to eligible hospitals in a timely manner, first through 
     estimated interim payments, and then reconciled when the 
     respective fiscal year cost reports are settled.
       Historically, the Health Care Financing Administration 
     (HCFA) has analyzed only Medicare Provider Analysis and 
     Review (MedPAR) data in its annual recalibration of diagnosis 
     related group (DRG) relative weights and when considering 
     whether to reclassify certain procedures within the DRG 
     system. Because the International Classification of Disease 
     9th Revision Clinical Modification (ICD-9-CM) system used in 
     conjunction with MedPAR may not be fully updated to permit 
     tracking the administration of inpatient drug therapies, 
     certain drug therapies essentially are eliminated from HCFA's 
     recalibration and reclassification process. Thus, in order to 
     ensure that Medicare beneficiaries have access to innovative 
     new drug therapies, the Conferees believe that HCFA should 
     consider, to the extent feasible, reliable, validated data 
     other than MedPAR data in annually recalibrating and 
     reclassifying the DRGs. Data collection should be done in 
     such a manner so as to assure accurate reflection of drug 
     utilization. The Conferees are concerned that because of the 
     connection between reporting and payment, drug therapies not 
     already included in the DRG could be under-reported. 
     Furthermore, to the extent feasible, any new procedure coding 
     system adopted under the Health Insurance Portability and 
     Accountability Act of 1996, should consider a means of 
     tracking the administration of drug therapies such that 
     future MedPAR data shall contain information regarding the 
     utilization of specific drugs.

                   Capital Payments for PPS Hospitals

    Section 10502 of the House bill and Section 5402 of the Senate 
                               amendment


                              Current Law

       In FY 1992, Medicare began phasing in prospectively-
     determined per case rates for capital-related costs. During 
     the 10-year transition to a single capital rate, payments 
     will reflect both hospital-specific costs and a single 
     Federal capital payment rate. During the transition, 
     hospitals are paid according to either a fully prospective 
     method or a ``hold harmless'' method of payment.
       Capital payment rates are updated annually. For the first 5 
     years of the transition to prospectively determined per-case 
     rates, historical cost increases were used to increase the 
     Federal and hospital-specific rates. Under a budget 
     neutrality requirement, per case capital rates were adjusted 
     in the first 5 years of the transition so that total payments 
     equaled 90 percent of estimated Medicare-allowed capital 
     costs. In FY 1996, the budget neutrality requirement was 
     lifted. In addition, the cost-based updates are replaced by 
     an ``update framework'' (developed by HCFA and proposed in 
     the June 2, 1995 Federal Register), which determines payment 
     rate growth. This analytical framework is to take into 
     account changes in the price of capital and appropriate 
     changes in capital requirements resulting from development of 
     new technologies and other factors. With the expiration of 
     the budget neutrality language in 1996, the federal capital 
     rate jumped 22.6 percent.
       Medicare, through regulation, provides for capital 
     exception payments for hospitals that incur unanticipated 
     capital expenditures due to circumstances beyond the 
     hospital's control. Eligible hospitals include: (1) sole 
     community hospitals; (2) hospitals located in an urban area 
     with at least 100 beds that qualify for DSH payments; and (3) 
     hospitals with a combined inpatient Medicare and Medicaid 
     utilization of at least 70%. In most instances, the 
     additional payment is based on the minimum payment amount of 
     85% of Medicare's share of allowable capital-related costs. 
     The hospital must show that it obtained approval from a state 
     planning authority for the capital project, must satisfy an 
     age-of-asset test, and, in the case of an urban hospital, a 
     specified excess capacity test. To be eligible for exception 
     payments, the capital project must be completed during the 
     period from the beginning of its first cost reporting period 
     beginning on or after October 1, 1991, to the end of its last 
     cost reporting period beginning before October 1, 2001, and 
     have costs of at least: (1) $200 million; or (2) 100% of its 
     operating cost during the first 12 month cost reporting 
     period beginning on or after October 1, 1991.


                               house bill

       Requires the Secretary to rebase the capital payment rates 
     in FY 1998 using the actual rates in effect in FY 1995, by 
     applying the budget neutrality adjustment factor used to 
     determine the federal capital payment rate on September 30, 
     1995, to the unadjusted standard federal capital payment rate 
     in effect on September 30, 1997, and to the unadjusted 
     hospital-specific rate in effect on September 30, 1997.
       The provision would also revise the exceptions process for 
     certain capital projects provided under PPS for eligible 
     hospitals located in urban areas with over 100 beds.
       Effective Date. Enactment.


                            senate amendment

       Similar provision, except the provision would also amend 
     the exceptions process for major capital projects provided in 
     federal regulation to include, as eligible for an exception, 
     hospitals located in an urban area and has more than 300 
     beds, without regard to its disproportionate share patient 
     percentage or whether it qualifies for additional 
     disproportionate share hospital (DSH) payment amounts. The 
     provision would amend the project size requirement to require 
     that a hospital's project costs must be at least 150% of its 
     operating costs during the first 12-month cost reporting 
     period beginning on or after October 1, 1991. The provision 
     would also require the Secretary to reduce the federal 
     capital and hospital rates by up to $50 million in a calendar 
     year to ensure that the amended exceptions process would not 
     result in an increase in the total amount that would have 
     otherwise been paid in a fiscal year.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment on the 
     rebasing of capital payment rates with an amendment to reduce 
     the capital payment rate by an additional 2.1%. The 
     conference agreement does not include capital exceptions 
     payment provisions.

                         Disproportionate Share

    Section 10503 of the House bill and Section 5462 of the Senate 
                               amendment


                              Current Law

       Under PPS, an adjustment is made to the payment to 
     hospitals that serve a disproportionate share of low-income 
     patients. The disproportionate share hospital (DSH) 
     adjustment is intended to compensate hospitals that treat 
     large proportions of low-income patients. The factors 
     considered in determining whether a hospital qualifies for a 
     DSH payment adjustment include the number of beds, the 
     hospital's location, and the disproportionate patient 
     percentage. A hospital's disproportionate patient percentage 
     is the sum of (1) the total number of inpatient days 
     attributable to federal Supplemental Security Income (SSI) 
     beneficiaries divided by the total number of Medicare patient 
     days, and (2) the number of Medicaid patient days divided by 
     total patient days, expressed as a percentage. A hospital is 
     classified as a DSH under any of the following circumstances:
       (1) If its disproportionate patient percentage equals or 
     exceeds: (a) 15 percent for an urban hospital with 100 or 
     more beds, or a rural hospital with 500 or more beds (the 
     latter is set by regulation); (b) 30 percent for a rural 
     hospital with more than 100 beds and fewer than 500 beds or 
     is classified as a sole community hospital (SCH); (c) 40 
     percent for an urban hospital with fewer than 100 beds; or 
     (d) 45 percent for a rural hospital with 100 or fewer beds, 
     or
       (2) if it is located in an urban area, has 100 or more 
     beds, and can demonstrate that, during its cost reporting 
     period, more than 30 percent of its net inpatient care 
     revenues are derived from State and local government payments 
     for care furnished to indigent payments. (This provision is 
     intended to help hospitals in States that fund care for low-
     income patients through direct grants rather than expanded 
     Medicaid programs.)
       For a hospital qualifying on the basis of (1)(a) above, if 
     its disproportionate patient percentage is greater than 20.2 
     percent, the applicable PPS payment adjustment factor is 5.88 
     percent plus 82.5 percent of the difference between 20.2 
     percent and the hospital's disproportionate patient 
     percentage. If the hospital's disproportionate patient 
     percentage is less than 20.2 percent, the applicable payment 
     adjustment factor is equal to: 2.5 percent plus 65 percent of 
     the difference between 15 percent and the hospital's 
     disproportionate patient percentage. If the hospital 
     qualifies as a DSH on the basis of (1)(b), the payment 
     adjustment factor is determined as follows: (a) if the 
     hospital is classified as a rural referral center, the 
     payment adjustment factor is 4 percent plus 60 percent of the 
     difference between the hospital's disproportionate patient 
     percentage and 30 percent; (b) if the hospital is a SCH, the 
     adjustment factor is 10 percent; (c) if the hospital is 
     classified as both a rural referral center and a SCH, the 
     adjustment factor is the greater of 10 percent or 4 percent 
     plus 60 percent of the difference between the hospital's 
     disproportionate patient percentage and 30 percent; and (d) 
     if the hospital is not classified as either a SCH or a rural 
     referral center, the payment adjustment factor is 4 percent.
       If the hospital qualifies on the basis of (1)(c), the 
     adjustment factor is equal to 5 percent. If the hospital 
     qualifies on the basis of (1)(d), the adjustment factor is 4 
     percent. If the hospital qualifies on the basis of (2) above, 
     the payment adjustment factor is 35 percent.


                               house bill

       Freezes DSH payments for discharges for FY 1998 and FY 
     1999. The Secretary would be required to develop a proposal 
     to modify the current definitions for DSH payments and 
     transmit the proposal to the Ways and Means and Finance 
     Committees by April 1, 1999.
       Effective Date. Enactment.


                            senate amendment

       Applies the current formula with a 4% reduction in the DSH 
     adjustment from October 1, 1997 to January 1, 1999. For 
     calendar years 1999-2002, the Secretary would be required to 
     apply an additional 4% reduction each year in the DSH 
     adjustment. By January 1, 1999, the Secretary would be 
     required to establish a new formula that takes into account 
     Medicaid and Medicare SSI beneficiaries, and uncompensated/
     charity care. The new formula would be required to have a 
     single (one)

[[Page H6218]]

     threshold for all hospitals. In each calendar year that the 
     formula applied, the additional payment determined for a 
     calendar year could not exceed an amount equal to the 
     additional payment that would have been determined without 
     the formula, reduced by 8% in CY 1999; 12% in CY 2000; 16% in 
     CY 2001; 20% in CY 2002; and by 0% in CY 2003 and subsequent 
     calendar years.
       Effective Date. Applies to discharges occurring on and 
     after October 1, 1997.


                          conference agreement

       The conference agreement includes the Senate provision with 
     amendments. The current DSH payment formula amounts would be 
     reduced by 1% for FY 1998; 2% in FY 1999; 3% in FY 2000; 4% 
     in FY 2001; 5% in FY 2002; and 0% in FY 2003 and each 
     subsequent fiscal year. The conference agreement includes a 
     requirement that the Secretary submit to the House Ways and 
     Means and Senate Finance Committees, no later than 1 year 
     after enactment, a report that contains a formula for 
     determining additional DSH payments to hospitals. In 
     determining the formula, the Secretary would be required to 
     establish a single threshold for costs incurred by hospitals 
     in serving low-income patients, and consider the following 
     costs: (1) the costs incurred of furnishing hospital services 
     to individuals entitled to Medicare Part A and SSI; and (2) 
     the costs incurred by the hospital of furnishing services to 
     individuals receiving Medicaid who are not entitled to 
     benefits under Part A of Medicare, including individuals 
     enrolled in a managed care organization or any other managed 
     care plan under Medicaid and individuals who receive medical 
     assistance in a state with an 1115 waiver under Medicaid. In 
     developing the formula, the Secretary would be allowed to 
     require hospitals receiving DSH payments to submit any 
     information the Secretary requested to develop the formula.

         Medicare Capital Asset Sales Price Equal to Book Value

    Section 10504 of the House bill and Section 5463 of the Senate 
                               amendment


                              current law

       Medicare provides for establishing an appropriate allowance 
     for depreciation and for interest on capital indebtedness and 
     a return on equity capital when a hospital has undergone a 
     change of ownership. The valuation of the asset is the lesser 
     of the allowable acquisition costs of the asset to the owner 
     of record, or the acquisition cost of such asset to the new 
     owner.


                               House Bill

       Eliminates the allowance for return on equity capital, and 
     provides for a depreciation adjustment of the historical cost 
     of the asset recognized by Medicare, less depreciation 
     allowed, to the owner of record as of the date of enactment 
     of this bill, or to the first owner of record of the asset in 
     the case of an asset not in existence as of the date of 
     enactment.
       Effective date. Applies to changes of ownership that occur 
     beginning three months after enactment.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

  Elimination of Indirect Medical Education (IME) Adjustment and DSH 
               Payments Attributable to Outlier Payments

    Section 10505 of the House bill and Section 5464 of the Senate 
                               amendment


                              Current Law

       Medicare provides outlier payments to hospitals that are 
     intended to protect them from the risk of large financial 
     losses associated with cases having exceptionally high costs 
     or unusually long hospital stays. Beginning in FY 1998, the 
     length of stay outlier policy will terminate, and hospitals 
     will receive outlier payments only for very high cost cases. 
     For each DRG, a specific dollar loss threshold is set, and 
     outlier payments are calculated based on the amount by which 
     a hospital's costs exceed this loss threshold. For teaching 
     and disproportionate share hospitals, however, their 
     estimated cost for each case is reduced by the amount of the 
     hospital's IME and DSH payment adjustments. The amount by 
     which the estimated cost exceeds the outlier threshold thus 
     is less for a case treated at a teaching or disproportionate 
     share hospital, resulting in lower outlier payments. The 
     lower outlier payment amount is then increased by the 
     hospital's IME and DSH adjustments, but this generally is not 
     enough to offset the loss in outlier payments resulting from 
     the reduced cost estimate for the case.


                               House Bill

       Allows teaching and disproportionate share hospitals to be 
     treated like all other hospitals in the calculation of 
     outlier payment amounts. Their estimated costs per case would 
     not be reduced by their IME and DSH payments, and an 
     additional IME or DSH adjustment would not be added to these 
     payments.
       Effective Date. Applies to discharges occurring after 
     September 30, 1997.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

                 Certain Discharges to Post Acute Care

    Section 10507 of the House bill and Section 5465 of the Senate 
                               amendment


                              Current Law

       PPS hospitals that move patients to PPS-exempt hospitals 
     and distinct-part hospital units, or skilled nursing 
     facilities are currently considered to have ``discharged'' 
     the patient and receive a full DRG payment. Under current 
     law, a ``transfer'' is defined as moving a patient from one 
     PPS hospital to another PPS hospital. In a transfer case, 
     payment to the first PPS hospital is made on a per diem 
     basis, and the second PPS hospital is paid the full DRG 
     payment.


                               House Bill

       Defines a ``transfer case'' to include an individual 
     discharged from a PPS hospital who is: (1) admitted as an 
     inpatient to a hospital or distinct-part hospital unit that 
     is not a PPS hospital for further inpatient hospital 
     services; (2) is admitted to a skilled nursing facility or 
     other extended care facility for extended care services; or 
     (3) receives home health services from a home health agency 
     if such services directly relate to the condition or 
     diagnosis for which the individual received inpatient 
     hospital services, and if such services were provided within 
     an appropriate period, as determined by the Secretary in 
     regulations promulgated no later than September 1, 1998. 
     Under the provision, a PPS hospital that ``transferred'' a 
     patient would be paid on a per diem basis up to the full DRG 
     payment. The PPS-exempt hospital or other facility would be 
     paid under its own Medicare payment policy.
       Effective Date. With respect to transfers from PPS-exempt 
     hospitals and SNFs, applies to discharges occurring on or 
     after October 1, 1997. For home health care, applies to 
     discharges occurring on or after October 1, 1998.


                            Senate Amendment

       Similar provision, except defines a transfer case as 
     including the case of an individual who, immediately upon 
     discharge from, and pursuant to the discharge planning 
     process of a PPS hospital, is admitted to a PPS-exempt 
     hospital, hospital unit, SNF, or other extended care 
     facility. The provision does not include home health services 
     in the definition of a transfer.


                          Conference Agreement

       The conference agreement would provide that for discharges 
     occurring on or after October 1, 1998, those that fall within 
     a specified group of 10 DRGs would be treated as a 
     transfer for payment purposes. The Secretary would be 
     given the authority to select the 10 DRGs focusing on 
     those with high volume and high post acute care. The 
     provision would apply to patients transferred from a PPS 
     hospital to a PPS-exempt hospital or unit, SNF, discharges 
     with subsequent home health care provided within an 
     appropriate period (as defined by the Secretary), and for 
     discharges occurring on or after October 1, 2000, the 
     Secretary may propose to include additional post discharge 
     settings and DRGs to the transfer policy.
       Payments to PPS hospitals would be fully or partially based 
     on Medicare's current payment policies applicable to patients 
     transferred from one PPS hospital to another PPS hospital 
     (per diem rates). The Secretary would determine whether the 
     full transfer policy or a blended payment rate (50% of the 
     transfer per diem payment and 50% of the total DRG payment) 
     would apply based on the distribution of marginal costs 
     across days, so that if a substantial portion of the costs of 
     a case are incurred in the early days of a hospital stay the 
     payment would reflect these costs. For FY 2001, the Secretary 
     would be required to publish a proposed rule which included a 
     description of the effect of the transfer policy. The 
     Secretary would be authorized to include in the proposed rule 
     and final rule for FY 2001 or a subsequent fiscal year, a 
     description of additional post-discharge services that would 
     result in a qualified discharge and diagnosis-related groups 
     specified by the Secretary in addition to the 10 diagnosis-
     related groups originally selected under this policy.
       The Conferees are concerned that Medicare may in some cases 
     be overpaying hospitals for patients who are transferred to a 
     post acute care setting after a very short acute care 
     hospital stay. The Conferees believe that Medicare's payment 
     system should continue to provide hospitals with strong 
     incentives to treat patients in the most effective and 
     efficient manner, while at the same time, adjust PPS payments 
     in a manner that accounts for reduced hospital lengths of 
     stay because of a discharge to another setting.
       The Conferees expect that the application of the transfer 
     policy to 10 high volume/high post-acute use DRGs will 
     provide extensive data to examine hospital behavioral effects 
     under the new transfer policy.

          Increase Base Payment Rate to Puerto Rico Hospitals

    Section 10508 of the House bill and Section 5468 of the Senate 
                               amendment


                              Current Law

       Medicare's hospital PPS includes a special provision for 
     determining payment to hospitals in Puerto Rico. These 
     hospitals are paid a blended rate based on a standardized 
     payment amount for large urban or other areas specific to 
     Puerto Rico and the national standardized payment amount for 
     all areas combined. The two rates have weights of 75 percent 
     and 25 percent, respectively.


                               House Bill

       Adjusts the base payment rate to Puerto Rico hospitals to 
     50 percent local and 50 percent national.
       Effective Date. Enactment.

[[Page H6219]]

                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

 Inclusion of Stanly County, N.C. In A Large Urban Area Under Medicare 
                                Program

                  Section 5651 of the Senate amendment


                              Current Law

       No provision.


                               House Bill

       No provision.


                            Senate Amendment

       Specifies that, for the purpose of Medicare PPS payments to 
     inpatient hospitals, the large urban area of Charlotte-
     Gastonia-Rock Hill, North Carolina-South Carolina may be 
     deemed to include Stanly County, North Carolina.
       Effective Date. Applies to discharges occurring on or after 
     October 1, 1997.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

               Chapter 2--Payment of PPS Exempt Hospitals

                             Payment Update

    Section 10511 of the House bill and Section 5421 of the Senate 
                               amendment


                              Current Law

       Under Medicare, five types of specialty hospitals 
     (psychiatric, rehabilitation, long-term care, children's and 
     cancer) and two types of distinct-part units in general 
     hospitals (psychiatric and rehabilitation) are exempt from 
     PPS. They are subject to the payment limitations and 
     incentives established in the Tax Equity and Fiscal 
     Responsibility Act of 1982 (TEFRA). Each provider is paid on 
     the basis of reasonable cost subject to a rate of increase 
     ceiling on inpatient operating costs. The ceiling is based on 
     a target amount per discharge. The target amount for a cost 
     reporting period is equal to the hospital's allowable 
     inpatient operating costs (excluding capital) per discharge 
     in a base year increased by applicable update factors for 
     subsequent years. This amount is then multiplied by Medicare 
     discharges, to yield the ceiling or upper limit on operating 
     costs.
       Updates to the target amounts for fiscal years 1994 through 
     1997 range from the PPS-excluded market basket index (MBI) to 
     the MBI minus 1.0 percentage point, depending on how a 
     hospital's costs compare to its target amount. For fiscal 
     years 1998 and beyond, the updates are the market basket 
     percentage increase.


                               House Bill

       Sets the FY 1998 update at 0%, and for FY 1999 through FY 
     2002, the update factor would depend on a hospital's target 
     amount and costs. For hospitals (1) with costs that equal or 
     exceed their target amounts by 10% or more, the update would 
     equal the market basket; (2) that exceed their target, but by 
     less than 10%, the update factor would be equal to the market 
     basket minus 0.25 percentage points for each percentage point 
     by which costs are less than 10% over the target (but in no 
     case less than zero); (3) that are either at their target, or 
     below (but not below 2/3 of the target amount for the 
     hospital), the market basket percentage minus 2.5 percentage 
     points (but in no case less than zero); or (4) that do not 
     exceed 2/3 of their target amount, the update factor would be 
     0%.
       Effective Date. Enactment.


                            Senate Amendment

       Sets the update for FY 1998 through FY 2001 at 0%; for FY 
     2002, at the MBI minus 3.0 percentage points. The Secretary 
     would be required to treat the applicable update factor for a 
     fiscal year as being equal to the MBI for the purposes of 
     exceptions and adjustments to payment amounts.


                          Conference Agreement

       The conference agreement includes the House bill.

  Reductions to Capital Payments For Certain PPS-Exempt Hospitals and 
                                 Units

    Section 10512 of the House bill and Section 5422 of the Senate 
                               amendment


                              Current Law

       Medicare pays for capital costs for PPS exempt hospitals on 
     a reasonable cost basis.


                               House Bill

       Requires the Secretary to reduce capital payment amounts 
     for PPS-exempt hospitals and distinct part units by 10% for 
     fiscal years 1998 through 2002.
       Effective Date. Enactment.


                            Senate Amendment

       Similar provision except, requires the Secretary to reduce 
     capital payment amounts for PPS-exempt hospitals and distinct 
     part units by 15% for fiscal years 1998 through 2002.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

                          Cap on TEFRA Limits

    Section 10513 of the House bill and Section 5423 of the Senate 
                               amendment


                              Current Law

       Medicare places limits, referred to as ``TEFRA limits,'' on 
     the annual increase allowed for the operating costs of 
     certain categories of hospitals.


                               House Bill

       Sets limits on the target amounts for PPS-exempt hospitals 
     or units for cost reporting periods beginning on or after 
     October 1, 1997, and before October 1, 2002. The target 
     amounts could not be greater than the 90th percentile of the 
     target amounts for cost reporting periods beginning during 
     that fiscal year. The cap on the target amounts would apply 
     to psychiatric, rehabilitation, and long-term care hospitals 
     and distinct-part units of such hospitals.
       Effective Date. Enactment.


                            Senate Amendment

       Similar provision, except that the target amounts could not 
     be greater than the 75th percentile of the target amount for 
     each class of hospitals. Hospitals or units that are below 
     their target amount for the cost reporting period beginning 
     on or after October 1, 1997 and before October 1, 1998, the 
     target amount for the period would be equal to the greater of 
     90% of a dollar limit on the target amounts or the operating 
     costs of the hospital or unit during the period.


                          Conference Agreement

       The conference agreement includes the House bill, with 
     amendments. The Secretary would be required to estimate the 
     75th percentile of the target amounts for each category of 
     hospitals (excluding childrens and cancer hospitals) for cost 
     reporting periods ending during 1996, and then update the 
     amount up to the first cost reporting period beginning on or 
     after October 1, 1997, by a factor equal to the market basket 
     percentage increase. For cost reporting periods beginning 
     during each of fiscal years 1999 through 2002, the Secretary 
     would be required to update the amount by a factor equal to 
     the market basket increase.

                        Change In Bonus Payments

    Section 10514 of the House bill and Section 5424 of the Senate 
                               amendment


                              Current Law

       Medicare provides for bonus payments for hospitals whose 
     operating costs are less than or equal to the target amount, 
     as well as makes relief payments to hospitals whose costs 
     exceed their target amount. If the hospital's costs are less 
     than or equal to the target amount for that period, the 
     hospital receives a bonus payment equal to 50% of the amount 
     by which the target amount exceeds the amount of the 
     operating costs, or 5% of the target amount, whichever is 
     less. If a hospital's operating costs are greater than the 
     target amount, the amount of the payment is equal to (1) the 
     target amount, plus (2) an additional amount equal to 50% of 
     the amount by which the operating costs exceed the target 
     amount, but not more than 10% of the target amount.


                               House Bill

       Allows bonus payments of (1) 10% of the amount by which the 
     target amount exceeds the amount of operating costs, or (2) 
     1% of operating costs, whichever is less. The provision would 
     change the relief payments to provide that costs would be 
     required not to exceed 110% in order to receive relief 
     payments and that the relief payment could not be more than 
     20% of the target amount.
       Effective Date. Enactment.


                            Senate Amendment

       Similar provision, except bonus payments for hospitals with 
     (1) a target amount less than 135% of the median of the 
     target amounts for hospitals in the same class, the lesser of 
     40% of the amount by which the target amount exceeds the 
     amount of the operating costs, or 4% of the target amount; 
     (2) a target amount that equals or exceeds 135% of the median 
     but is less than 150%, the lesser of 30% of the amount by 
     which the target amount exceeds the amount of the operating 
     costs or 3% of the target amount; and (3) a target amount 
     that equals or exceeds 150% of such median, the lesser of 
     20% of the amount that the target amount exceeds the 
     amount of operating costs or 2% of the target amount.
       Identical provision for relief payments.


                          Conference Agreement

       The conference agreement includes the House bill with 
     amendments to bonus payments. Bonus payments would be the 
     lesser of (1) 15% of the amount by which the target amount 
     exceeds the amount of operating costs, or (2) 2% of the 
     target amount.
       For cost reporting periods beginning on or after October 1, 
     1997, eligible hospitals could receive continuous improvement 
     bonus payments. To qualify, their operating costs for the 
     period must be less than the least of its target amount, its 
     trended costs, or its expected costs for the period. The 
     amount of the payment would be equal to the lesser of: (1) 
     50% of the amount by which the operating costs were less than 
     the expected costs for the period; or (2) 1% of the target 
     amount for the period. The trended costs would be (1) in the 
     case of a hospital whose cost reporting period ending in FY 
     1996 was its third or subsequent full cost reporting period, 
     the hospital's operating costs for its cost reporting period 
     ending in 1996; or (2) in the case of any other hospital, the 
     operating costs for that hospital for its third full cost 
     reporting period. These base costs would then be increased 
     (in a compounded manner) for each succeeding fiscal year 
     (through the fiscal year involved) by the market basket 
     percentage increase for the fiscal year. The expected costs 
     per discharge would be the operating costs of inpatient 
     hospital services per discharge for the previous fiscal year 
     cost reporting period, updated by the market basket 
     percentage increase for the fiscal year.

[[Page H6220]]

       The conference agreement also amends the relief payment to 
     limit such payment to 10% of the target amount, and the 
     effective date for the change in bonus and relief payments to 
     apply with respect to cost reporting periods beginning on or 
     after October 1, 1997. The agreement also includes a 
     requirement that the Secretary report to the Congress by 
     October 1, 1999 on the effects of the relief payment changes 
     on psychiatric hospitals that have approved medical residency 
     training programs.

         Change in Payment and Target Amount for New Providers

    Section 10515 of the House bill and Section 5425 of the Senate 
                               amendment


                              Current Law

       No provision.


                               House Bill

       Establishes different payment and target amount rules for 
     hospitals or distinct-part units within hospitals that first 
     receive Medicare payments on or after October 1, 1997. The 
     provision would apply to psychiatric, rehabilitation, and 
     long-term care hospitals and distinct-part units of 
     hospitals. For the first two full or partial cost 
     reporting periods, the amount of payment for operating 
     costs under Part A on a per discharge or per admission 
     basis would be equal to the lesser of the amount of 
     operating costs for the respective period, or 150% of the 
     national median operating costs for hospitals in the same 
     class of hospital for cost reporting periods beginning 
     during the same fiscal year, adjusted for labor-related 
     costs. This same limited target amount would then be 
     updated in subsequent years using the update factor 
     described above.
       For determining national median operating costs for 
     hospitals in the same class, the Secretary would be required 
     to provide for an appropriate adjustment to the labor-related 
     portion of the amount determined to take into account 
     differences between average wage-related costs in the area 
     the hospital is located in and the national average of such 
     costs within the same class of hospital. The Secretary would 
     also be required to create subclasses of long-term care 
     hospitals based on differences in the case mix and patient 
     acuity in calculating and applying the 150% of the national 
     median cost limits.
       Effective Date. Enactment.


                            Senate Amendment

       Establishes new target amounts for rehabilitation hospitals 
     or units for cost reporting periods beginning on or after 
     October 1, 1997. For rehabilitation facilities that received 
     Medicare payments before October 1, 1997, the target amount 
     would be required to be no less than 50% of the national mean 
     of the target amounts determined for all such hospitals for 
     cost reporting periods beginning during the fiscal year. 
     Rehabilitation facilities that first receive Medicare 
     payments on or after October 1, 1997, would have a target 
     amount that could not be more than 110% of the national mean 
     of the target amounts for such hospitals and units for cost 
     reporting periods beginning during FY 1991. The target 
     amounts for long-term care and psychiatric hospitals and 
     units would be determined in the same manner.


                          Conference Agreement

       The conference agreement includes the House bill with 
     modifications which would require that payments for operating 
     costs for the first 2 cost reporting periods for which the 
     hospital has a settled cost report be equal to the lesser of 
     the amount of operating costs for the period, or 110% of the 
     national median of the target amount for hospitals in the 
     same class of hospital for cost reporting periods ending 
     during 1996, updated by the hospital market basket increase 
     percentage to the fiscal year in which the hospital first 
     received payments. The conference agreement also modifies the 
     effective date of the provision to apply to discharges 
     occurring on or after October 1, 1997.

                                Rebasing

    Section 10516 of the House bill and Section 5426A of the Senate 
                               amendment


                              Current Law

       No provision.


                               House Bill

       Provides psychiatric, rehabilitation, children's, cancer, 
     and long-term care hospitals and psychiatric and 
     rehabilitation distinct units of hospitals that received 
     Medicare payments for services furnished during cost 
     reporting periods ending before October 1, 1990, the option 
     of electing to rebase the hospital's target amount for the 
     12-month cost reporting period beginning during FY 1998. The 
     rebased target amount would be equal to an average determined 
     by the Secretary as follows: (1) the Secretary would be 
     required to determine the allowable operating cost for 
     inpatient hospital services for the hospital or hospital unit 
     for each of the five cost reporting periods for which the 
     Secretary had settled cost reports as of the date of 
     enactment; (2) the Secretary would be required to increase 
     the amount determined for the five cost reporting periods by 
     the applicable percentage increase used to update costs for 
     each of the cost reporting periods; (3) the Secretary would 
     be required to identify among the five cost reporting periods 
     the periods for which the updated cost amount was the highest 
     and the lowest; (4) the Secretary would be required to 
     compute the average cost per discharge of the updated cost 
     report amounts for the three cost reporting periods that were 
     not the highest or the lowest amounts.
       The provision would also allow certain qualified long-term 
     care hospitals that elect to do so, to apply for rebasing of 
     their target amount beginning during FY 1998. The target 
     amount for the hospital's 12-month cost reporting period 
     would be equal to the allowable operating costs of inpatient 
     hospital services recognized by Medicare for the 12-month 
     cost reporting periods beginning during FY 1996, increased by 
     the applicable percentage increase for the cost reporting 
     period beginning during FY 1997. The provision would define a 
     qualified long-term care hospital as those facilities that, 
     for each of the two most recent settled cost reports as of 
     the date of enactment, have operating costs of inpatient 
     hospital services under Medicare that exceeded 115% of the 
     hospital's target amount, and the hospital had a 
     disproportionate patient percentage of at least 70%.
       Effective Date. Enactment.


                            Senate Amendment

       Similar provision, except applies to hospital services 
     furnished before January 1, 1990. The provision does not 
     include provision for rebasing of certain qualified long-term 
     care hospitals with high disproportionate share percentages.


                          Conference Agreement

       The conference agreement includes the House provision.

             Treatment of Certain Long-Term Care Hospitals

    Section 10517 of the House bill and Section 5426 of the Senate 
                               amendment


                              current law

       No provision.


                               house bill

       Extends the status of a hospital that was classified by the 
     Secretary on or before September 30, 1995, as a long-term 
     care hospital, notwithstanding that it was located in the 
     same building as, or on the same campus as, another hospital.
       Effective Date. The provision would apply to discharges 
     occurring on or after October 1, 1995.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

    Elimination of Exemptions; Report on Exceptions and Adjustments

    Section 10518 of the House bill and Section 5427 of the Senate 
                               amendment


                              current law

       The Secretary is required to provide an exemption from 
     various provisions of the law regarding Medicare payments to 
     PPS-excluded hospitals.


                               house bill

       Amends current law, replacing the term ``exemption from, or 
     an exception and adjustment to,'' with ``an exception and 
     adjustment to'' each place it appears, eliminating exemption 
     from the target amounts for all PPS-exempt hospitals except 
     children's hospitals.
       The provision would also require the Secretary to publish 
     annually in the Federal Register a report describing the 
     total amount of exceptions payments made to PPS-excluded 
     hospitals and units for cost reporting periods ending during 
     the previous fiscal year.
       Effective Date. The provision would apply to hospitals that 
     first qualify as PPS-excluded facilities on or after October 
     1, 1997.


                            senate amendment

       Similar provision, except does not apply to children's or 
     cancer hospitals.


                          conference agreement

       The conference agreement includes the House provision with 
     modifications.

       Technical Correction Relating to Subsection (d) Hospitals

                  Section 5428 of the Senate amendment


                              current law

       Certain special categories of hospitals, including cancer 
     hospitals, are exempt from the Medicare inpatient PPS and are 
     paid on the basis of reasonable costs, subject to certain 
     limits.


                               house bill

       No provision.


                            senate amendment

       Amends the provision for PPS-exempt cancer hospitals to 
     include hospitals that: (1) were recognized as a 
     comprehensive cancer center or clinical cancer research 
     center by the National Cancer Institute of the National 
     Institutes of Health as of April 20, 1983, or were able to 
     demonstrate that for any six-month period at least 50% of its 
     total discharges had a principal diagnosis that reflected a 
     finding of neoplastic disease; (2) applied on or before 
     December 31, 1990, for classification as a cancer hospital; 
     and (3) were located in a state which, as of December 19, 
     1989, was not operating a state hospital rate-setting 
     demonstration project. The hospital classifications would 
     apply to all cost reporting periods beginning on or after 
     January 1, 1991, and any resulting payments owed to a 
     hospital would be required to be paid no later than one year 
     after enactment.
       Effective Date. Enactment.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     an amendment

[[Page H6221]]

     which would establish the base cost reporting period for 
     purposes of determining the target amount for such a hospital 
     as the hospital's cost reporting period beginning during FY 
     1990. The conference agreement would also require that the 
     facility demonstrate that for the 4-year period ending on 
     December 31, 1996, that at least 50% of the total discharges 
     have a principle finding of neoplastic disease, defined to 
     include patient admissions for certain specified diagnostic 
     codes.

              Certain Long Term Care and Cancer Hospitals

   Section 10516(c) of the House bill and Section 5429 of the Senate 
                               amendment


                              current law

       No provision.


                               house bill

       Amends the definition of long-term care hospitals to 
     include long-term care hospitals that received Medicare 
     payment in 1986, have an average inpatient length of stay of 
     more than 20 days, and that had 80% or more of its annual 
     Medicare inpatient discharges with a diagnosis that reflects 
     a finding of neoplastic disease.
       Effective Date. Applies to cost reporting periods beginning 
     on or after the date of enactment.


                            senate amendment

       Further amends the classification for cancer hospitals to 
     include long-term care hospitals classified as such beginning 
     on or before December 31, 1990 through December 31, 1995, 
     that throughout the period and currently had greater than 49% 
     of its total patient discharges with a principle diagnosis 
     that reflects a finding of neoplastic disease. The provision 
     would also prohibit rebasing of such hospital's base period 
     costs and would require that such hospital use the base 
     period in effect for the hospital's December 31, 1995 cost 
     report.
       Effective Date. Enactment.


                          conference agreement

       The conference agreement includes the House bill with a 
     modification which would specify that the finding of 
     neoplastic disease would be for the 12-month cost reporting 
     period ending in FY 1997.

     Chapter 3--Prospective Payment System for PPS-Exempt Hospitals

  Prospective Payment for Inpatient Rehabilitation Hospital Services 
       Based on Discharges Classified by Patient Case Mix Groups

     Section 10402 of the House bill and Section 5301 of the Senate 
                               amendment


                              current law

       Under Medicare, five types of specialty hospitals 
     (psychiatric, rehabilitation, long-term care, children's and 
     cancer) and two types of distinct-part units in general 
     hospitals (psychiatric and rehabilitation) are exempt from 
     PPS. They are subject to the payment limitations and 
     incentives established in the Tax Equity and Fiscal 
     Responsibility Act of 1982 (TEFRA). Each provider is paid on 
     the basis of reasonable cost subject to a rate of increase 
     ceiling on inpatient operating costs. The ceiling is based on 
     a target amount per discharge. The target amount for a cost 
     reporting period is equal to the hospital's allowable 
     inpatient operating costs (excluding capital and medical 
     education costs) per discharge in a base year increased by 
     applicable update factors for subsequent years. This amount 
     is then multiplied by Medicare discharges, to yield the 
     ceiling or upper limit on operating costs.


                               house bill

       Requires the Secretary to establish a prospective payment 
     system for inpatient rehabilitation hospital services based 
     on patient case mix groups.
       For this system, the Secretary would be required to 
     establish (1) classes of discharges of rehabilitation 
     facilities by patient case mix groups based on impairment, 
     age, related prior hospitalization, comorbidities, and 
     functional capability of the discharged individual and other 
     appropriate factors; and (2) a method of classifying specific 
     discharges from rehabilitation facilities within these 
     groups.
       The provision would require the Secretary to assign each 
     case mix group an appropriate weighting factor which would 
     reflect the relative facility resources used with respect to 
     discharges classified within a group compared to discharges 
     classified within other groups. The Secretary would be 
     required to adjust the classifications and weighting factors 
     to correct for forecast errors and to reflect changes in 
     treatment patterns, technology, case mix, number of 
     discharges paid for under Medicare, and other factors which 
     might affect the relative use of resources. The Secretary 
     would be authorized to require rehabilitation facilities 
     providing inpatient hospital services to submit data on 
     discharges classified according to case mix group or other 
     rehabilitation impairment groups, measurement of functional 
     disability, and other patient assessment factors as deemed 
     necessary to establish and administer the prospective payment 
     system.
       The Secretary would be required to determine a prospective 
     payment rate for each payment unit for which a rehabilitation 
     facility would be entitled to be paid under Medicare. The 
     payment rate would be based on the average payment under 
     Medicare for operating and capital costs of rehabilitation 
     facilities using the latest available data, adjusted by (1) 
     updating such per-unit amounts to the fiscal year involved by 
     the applicable percentage increases provided by the bill for 
     each fiscal year and up to FY 2000, and an increase factor 
     specified by the Secretary for subsequent fiscal years; (2) 
     reducing such rates by a factor equal to the proportion of 
     payments by Medicare for outliers; (3) variations among 
     rehabilitation facilities by areas; (4) weighting factors 
     described in the bill; and (5) other factors the Secretary 
     determined were necessary to reflect variations in necessary 
     costs of treatment among rehabilitation facilities.
       Prospective payment rates would be phased in between 
     October 1, 2000 and before October 1, 2003, by blending the 
     prospective rate with the TEFRA percentage of the hospital's 
     target amount that would have been paid under Part A if this 
     provision did not apply, and the prospective payment 
     percentage of the per unit payment rate established by the 
     Secretary. For cost reporting periods beginning on or after 
     October 1, 2000 and before October 1, 2001, the TEFRA 
     percentage would be 75% and the prospective payment 
     percentage would be 25%; for cost reporting periods on or 
     after October 1, 2001, and before October 1, 2002, the TEFRA 
     percentage would be 50% and the prospective payment 
     percentage would be 50%; for cost reporting periods on or 
     after October 1, 2002, and before October 1, 2003, the TEFRA 
     percentage would be 25% and the prospective payment 
     percentage would be 75%. Payment rates on or after October 1, 
     2003, would be equal to the per unit fully prospective 
     payment rate. Payment per unit would mean a discharge, day of 
     inpatient hospital services, or other unit of payment 
     specified by the Secretary.
       For fiscal years 2001 through 2004, the Secretary would be 
     required to establish prospective payment amounts that were 
     budget neutral, so that total payments for rehabilitation 
     hospitals would equal 99% of the amount of payments that 
     would have been made if prospective payments had not been 
     made. The Secretary would be required to develop an increase 
     factor which could be based on an appropriate percentage 
     increase in a market basket of goods and services purchased 
     by rehabilitation hospitals. The Secretary would also be 
     required to provide for additional payments for outlier cases 
     that involved unusually long lengths of stay or were very 
     costly, or other factors. These adjustments would be made in 
     a budget neutral manner. The Secretary would also be required 
     to adjust prospective payments to rehabilitation facilities 
     by a wage index that reflected area differences for wages and 
     wage-related costs. No later than October 1, 2001, the 
     Secretary would be required to update the area wage 
     adjustment factor based on a survey of wages and wage related 
     costs of providing rehabilitation services.
       Effective Date. Enactment. The prospective payment system 
     would be implemented for cost reporting periods beginning on 
     or after October 1, 2000.


                            senate amendment

       Similar provision, except does not specify that, in 
     determining budget neutral prospective payment rates equal to 
     99% of what would have been paid, the Secretary would include 
     adjustments for outlier and special payments, or area wage 
     adjustments.


                          conference agreement

       The conference agreement includes the House bill with 
     amendments. The prospective system would be fully implemented 
     by October 1, 2002. Payments during the transition period 
     would be based on TEFRA and prospective payment percentage 
     amounts equal to 66\2/3\% and 33\1/3\%, respectively, for 
     cost reporting periods beginning on or after October 1, 2000, 
     and before October 1, 2001; and 33\1/3\% and 66 \2/3\%, 
     respectively, for cost reporting periods beginning on or 
     after October 1, 2001, and before October 1, 2002. The budget 
     neutral rates would be required to be equal to 98% of the 
     amount of payments that would have been made if the 
     prospective payment system had not been enacted. The 
     Secretary would be required to update the area wage 
     adjustment on the basis of information collected on wages 
     and wage-related costs incurred in furnishing 
     rehabilitation services. The conference agreement does not 
     include the provision allowing the Secretary to make other 
     adjustments to payment rates.

       Study and Report on Payments for Long-Term Care Hospitals

                  Section 5302 of the Senate amendment


                              current law

       No provision.


                               house bill

       No provision.


                            senate amendment

       Requires the Secretary to collect data to develop, 
     establish, administer, and evaluate a case-mix adjusted 
     prospective payment system for long-term care hospitals. The 
     Secretary would be required to develop a legislative proposal 
     for establishing and administering a payment system that 
     would include an adequate patient classification system that 
     would reflect differences in patient resource use. The 
     Secretary would be required to submit the proposal to the 
     appropriate committees of Congress by no later than October 
     1, 1999.
       Effective Date. Enactment.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     modifications.

[[Page H6222]]

     Chapter 4--Skilled Nursing Facility (SNF) Prospective Payment

                  Prospective Payment for SNF Services

   Section 10401 of House bill and Sections 5332 of Senate amendment


                              current law

       Currently, Medicare reimburses the great bulk of SNF care 
     on a retrospective cost-based basis. This means that SNFs are 
     paid after services are delivered for the reasonable costs 
     (as defined by the program) they have incurred for the care 
     they provide. For Medicare reimbursement purposes, the costs 
     SNFs incur for providing services to beneficiaries can be 
     divided into three major categories: (1) routine services 
     costs that include nursing, room and board, administration, 
     and other overhead; (2) ancillary services, such as physical 
     and occupational therapy and speech language pathology, 
     laboratory services, drugs, supplies and other equipment; and 
     (3) capital-related costs, including net depreciation 
     expense, taxes, lease and rental payments, improvements that 
     extend the life or increase the productivity of assets, net 
     interest expense, etc.).
       Routine costs are subject to national average per diem 
     limits. Separate per diem routine cost limits are established 
     for freestanding and hospital-based SNFs by urban or rural 
     area. Freestanding SNF routine limits are set at 112% of the 
     average per diem labor-related and nonlabor-related costs. 
     Hospital-based SNF limits are set at the limit for 
     freestanding SNFs, plus 50% of the difference between the 
     freestanding limits and 112% of the average per diem routine 
     services costs of hospital-based SNFs. Routine cost limits 
     for SNF care are required to be updated every 2 years. In the 
     interim, the Secretary applies a SNF market basket developed 
     by HCFA to reflect changes in the price of goods and services 
     purchased by SNFs. OBRA93 eliminated updates in SNF routine 
     cost limits for cost reporting periods beginning in FY 1994 
     and FY 1995.
       Ancillary service and capital costs are both paid on the 
     basis of reasonable costs and neither are subject to limits.
       SNFs providing less than 1,500 days of care per year to 
     Medicare patients in the preceding year have the option of 
     being paid a prospective payment rate set at 105 percent of 
     the regional mean for all SNFs in the region. The rate covers 
     routine and capital-related costs (but not ancillary 
     services) and is calculated separately for urban and rural 
     areas, adjusted to reflect differences in wage levels. 
     Prospective rates can not exceed the routine service costs 
     limits that would be applicable to the facility, adjusted to 
     take into account average capital-related costs with respect 
     to the type and location of the facility.
       Congress on a number of occasions has required the 
     Secretary to develop alternative methods for paying for SNF 
     care on a prospective basis. In response, the Health Care 
     Financing Administration has conducted research to develop a 
     prospective payment system that uses a patient classification 
     system, known as resource utilization groups (RUGs), that 
     will account for variations in resource use among Medicare 
     SNF patients.


                               house bill

       Phases in a prospective payment system for SNF care that 
     would pay a Federal per diem rate for covered SNF services. 
     Covered services would include Part A SNF benefits as well as 
     all services for which payment may be made under Part B 
     during the period when the beneficiary is provided covered 
     SNF care (excluding, however, physician services, certain 
     nurse practitioner and physician assistant services, 
     certified nurse-midwife services, qualified psychologist 
     services, services of a certified registered nurse 
     anesthetist, certain dialysis services and drugs, and in 
     1998, the transportation costs of electrocardiogram 
     equipment). The per diem payment would cover routine service 
     costs, ancillary and capital-related costs, but would not 
     include costs associated with approved educational 
     activities.
       During a transition period lasting through the three cost 
     reporting periods beginning on or after July 1, 1998, a 
     portion of the per diem payment to a SNF would be based on a 
     facility-specific rate, and the remaining portion on the 
     Federal rate. For the first cost reporting period, the 
     facility specific percentage would be 75 percent and Federal 
     per diem percentage would be 25. For the second cost 
     reporting period, the facility-specific percentage would be 
     50 percent and the Federal 50. For the last period, the 
     facility-specific percentage would be 25 percent and the 
     Federal 75.
       In determining for a cost reporting period the facility-
     specific per diem rate for each SNF, the Secretary would 
     calculate, on a per diem basis, the total allowable costs for 
     covered Part A SNF benefits and estimates of amounts that 
     would be payable under Part B for services described above, 
     regardless of whether or not payment had been made for the 
     Part B services to the facility or another entity. The Part A 
     calculations would be done using cost reports for cost 
     reporting periods beginning in fiscal year 1995, with 
     appropriate adjustments made to non-settled fiscal year 1995 
     cost reports. The total would be updated to the relevant cost 
     reporting period by the SNF historical trend factor. The SNF 
     historical trend factor for a fiscal year or other annual 
     period would be defined as the percentage change, from the 
     midpoint of a prior fiscal year to the midpoint of the year 
     involved, in the SNF routine cost index used for per diem 
     routine cost limits, reduced (on an annualized basis) by 1 
     percentage point. Beginning with the first cost reporting 
     period of the transition, the facility-specific per diem rate 
     would be updated by the SNF market basket.
       For the Federal per diem rate, the Secretary would first 
     estimate, on a per diem basis for each freestanding SNF that 
     received Medicare payments during a cost reporting period 
     beginning in fiscal year 1995 and that was subject to (and 
     not exempted from) routine cost limits of current law 
     (including low-volume SNFs if appropriate), the total 
     allowable costs for covered Part A SNF benefits and an 
     estimate of amounts that would be payable under Part B, 
     regardless of whether or not payment had been made for the 
     Part B services to the facility or another entity. The Part A 
     calculations would be done using cost reports for cost 
     reporting periods beginning in fiscal year 1995, with 
     appropriate adjustments to non-settled fiscal year 1995 cost 
     reports. This total would be updated to the relevant cost 
     reporting period by the SNF historical trend factor (again 
     reflecting a 1 percentage point reduction in the routine cost 
     index). The Secretary would standardize the updated amount 
     for each facility by adjusting for variations among 
     facilities in average wage levels and case mix. The Secretary 
     would then compute a weighted average per diem rate. This 
     would equal the average of the standardized amounts, weighted 
     for each facility by the number of covered days of care 
     provided during the cost reporting period. The Secretary 
     could compute and apply an average separately for facilities 
     located in urban and rural areas.
       Beginning with fiscal year 1998, the Secretary would be 
     required to compute for each SNF an unadjusted Federal per 
     diem rate equal to the weighted average per diem rate, 
     updated by the SNF market basket. The actual per diem rate 
     paid to a SNF would include adjustments for case mix based on 
     a resident classification system established by the Secretary 
     to account for relative resource utilization of different 
     patient types. The labor-related portion of the rate would 
     also include budget neutral adjustments to reflect the 
     relative level of wages and wage-related costs for the 
     geographic area in which the facility is located. To deal 
     with case-mix ``creep'' when changes in the coding or 
     classification of residents result in higher aggregate 
     payments that do not reflect real changes in case mix, the 
     Secretary would be authorized to adjust per diem rates to 
     discount the effect of coding changes.
       The Secretary would be required to publish in the Federal 
     Register before July 1 preceding each fiscal year (beginning 
     with fiscal year 1999): (1) the unadjusted Federal per diem 
     rates for covered SNF care during the fiscal year; (2) the 
     case mix classification system to be applied to the rates; 
     and (3) the factors to be applied in making area wage 
     adjustments. SNFs would be required to provide the Secretary 
     resident assessment data necessary to develop and implement 
     per diem rates in the manner and within the timeframes 
     prescribed by the Secretary.
       Low volume SNFs and rural hospitals using inpatient beds to 
     provide SNF care (swing-bed hospitals) would be included in 
     the new prospective per diem payment system in a manner and 
     timeframe established by the Secretary (but not earlier than 
     July 1, 1999).
       Administrative or judicial review would not be permitted 
     for the establishment of facility-specific per diem rates; 
     the establishment of federal per diem rates, including the 
     computation of the standardized per diem rates and 
     adjustments for case mix and relative wage levels; and for 
     the establishment of transitional amounts for low-volume SNFs 
     and rural hospitals providing SNF care with inpatient beds.
       For beneficiaries residing in SNFs but no longer eligible 
     for Part A SNF care, payments for Part B covered services 
     would have to be made to the facility without regard as to 
     whether or not the item or service was furnished by the 
     facility, by others under arrangement, or under any other 
     contracting or consulting arrangement. Payments for Part B 
     services would be based on existing or other fee schedules 
     established by the Secretary. Claims for Part B items and 
     services would be required to include a code identifying the 
     items or services delivered. Covered SNF services when 
     provided by an entity other than the SNF would have to be 
     furnished under arrangements.
       The Secretary would be required to establish and implement 
     a thorough medical review process to examine the effects of 
     the new prospective payment system on the quality of covered 
     SNF care. In this medical review process, the Secretary would 
     be required to place a particular emphasis on the quality of 
     ancillary services and physician services.
       Effective date. Effective for cost-reporting periods 
     beginning on or after July 1, 1998.


                            Senate Amendment

       Similar provisions except:
       (1) For the facility-specific per diem rates, 1995 
     allowable costs would be updated by the SNF market basket 
     rather than by the SNF historical trend factor (which 
     includes a 1 percentage point reduction from the SNF 
     routine cost index). In addition, 1995 costs would be 
     updated to the first cost reporting period, as opposed to 
     the cost reporting period immediately preceding the first 
     cost reporting period. For SNFs participating in HCFA's 
     RUGs prospective payment demo, the facility-specific per 
     diem rate after 1997 would be the 1997 RUGS-III rate 
     increased by the SNF market basket.

[[Page H6223]]

       (2) The Federal per diem rate would be based on 1995 
     allowable costs for all SNFs, including low-volume SNFs, and 
     not just freestanding facilities. In addition, 1995 costs 
     would be updated to 1998 by the SNF market basket minus 1 
     percentage point, rather than the SNF historical trend factor 
     (which includes a 1 percentage point reduction from the SNF 
     routine cost index). Furthermore, 1995 costs would be updated 
     to the first cost reporting period, as opposed to the cost 
     reporting period immediately preceding the first cost 
     reporting period. In determining allowable costs for the 
     Federal per diem rate, the Secretary would be required to 
     exclude payments made as exceptions to the routine cost 
     limits and exclude cost reports from new SNFs exempted from 
     routine cost limits. For FY 1999 (as opposed to FY 1998), the 
     Federal per diem would be updated by the SNF market basket.
       (3) The Secretary would be required to develop an 
     appropriate transition to the new prospective payment system 
     for swing bed hospitals only, and not for low-volume SNFs as 
     well.
       (4) The limitation on administrative or judicial review 
     would apply to Federal per diem rates and transitional 
     amounts for swing-bed hospitals, but not to the establishment 
     of facility-specific per diem rates.
       (5) Covered SNF services when provided by an entity other 
     than a SNF would have to be provided under arrangements or by 
     a physician.
       (6) Payments for Part B services would be based on the Part 
     B methodology applicable to the item or service, except that 
     for services that would be included in the facility's cost 
     report if not for this provision, the SNF could continue to 
     use a cost report until the new prospective payment system is 
     established.
       (7) Payment for physical, respiratory, and occupational 
     therapy, and speech language pathology services would be 
     required to reflect new salary equivalency guidelines when 
     finalized through the regulatory process.
       Effective date. Effective for cost-reporting period 
     beginning on or after July 1, 1998.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language and amendments. Amendments include the 
     following:
       (1) In making appropriate adjustments to 1995 allowable 
     Part A costs for purposes of calculating the facility-
     specific per diem rate, the Secretary would be required to 
     take into account exceptions to the routine cost limits as 
     well as exemptions, but only to the extent that routine costs 
     of the exempted facility do not exceed 150 percent of the 
     routine cost limits otherwise applicable.
       (2) The base year facility-specific rate would be updated 
     to the first cost reporting period by the SNF market basket 
     minus 1 percentage point. For SNFs participating in HCFA's 
     RUGs prospective payment demonstration, the updated facility-
     specific rate would be the 1997 RUGS-III rate. During FY 1998 
     and 1999, the facility-specific rate would be updated by the 
     SNF market basket minus 1 percentage point and during each 
     subsequent fiscal year, by the SNF market basket.
       (3) For purposes of calculating the 1995 base year Federal 
     per diem rate, allowable Part A costs would exclude 
     exceptions payments and cost reports from SNFs exempted from 
     routine cost limits. The Secretary would be required to 
     compute a weighted average standardized per diem rate for all 
     SNFs and a weighted average standardized per diem rate for 
     freestanding facilities. For the initial period beginning on 
     July 1, 1998, and ending September 30, 1999, the Secretary 
     would then compute an unadjusted Federal per diem rate equal 
     to the average of the two previous amounts increased by the 
     SNF market basket minus 1 percentage point. For FY 2000 
     through 2002, the Federal per diem rate would be updated by 
     the SNF market basket minus 1 percentage point. In subsequent 
     years, it would be updated by the SNF market basket.
       (4) The Secretary would be required to publish in the 
     Federal Register prior to May 1, 1998, the unadjusted Federal 
     per diem rate in effect for the period July 1, 1998, through 
     September 30, 1990. For each subsequent fiscal year, the 
     Secretary would be required to publish in the Federal 
     Register prior to August 1 the unadjusted Federal per diem 
     rates, the case-mix classification system, and the factors to 
     be applied in the making area wage adjustments.
       (5) In the case of SNFs first receiving Medicare payments 
     on or after October 1, 1995, payment would be made as if all 
     services were furnished after the transition period.
       (6) Consolidated billing requirements would apply to 
     Medicare beneficiaries residing in SNFs or facilities of 
     which only a distinct part is a SNF. Payments for Part B 
     services would be based on existing or other fee schedules 
     established by the Secretary.
       (7) Each bill submitted by a physician for a service 
     furnished to a resident of a facility that is (or is part of 
     a facility that includes) a SNF would be required to include 
     the facility's Medicare provider number.
       The Conferees note that under the proposed SNF prospective 
     payment system, services and supplies provided to residents 
     will be included in pre-determined per diem payment rates. To 
     ensure that the frail elderly residing in SNFs receive needed 
     and appropriate medication therapy, the Secretary of Health 
     and Human Services should consider the results of studies 
     conducted by independent organizations including those 
     which examine appropriate payment mechanisms and payment 
     rates for medication therapy under a prospective payment 
     system for SNFs. It is the intent of the Conferees that 
     the Secretary develop case mix adjusters that reflect the 
     needs of such patients.
       It is also the intent of the Conferees that restrictions on 
     judicial review should not preclude skilled nursing 
     facilities from using the regular appeals process to correct 
     for errors in their cost reports.

                        Extension of Cost Limits

                   (Section 5331 of Senate amendment


                              Current Law

       Routine costs are subject to national average per diem 
     limits. Separate per diem routine cost limits are established 
     for freestanding and hospital-based SNFs by urban or rural 
     area. Freestanding SNF routine limits are set at 112% of the 
     average per diem labor-related and nonlabor-related costs. 
     Hospital-based SNF limits are set at the limit for 
     freestanding SNFs, plus 50% of the difference between the 
     freestanding limits and 112% of the average per diem routine 
     services costs of hospital-based SNFs. Routine cost limits 
     for SNF care are required to be updated every 2 years. In the 
     interim, the Secretary applies a SNF market basket developed 
     by HCFA to reflect changes in the price of goods and services 
     purchased by SNFs. OBRA93 eliminated updates in SNF routine 
     cost limits for cost reporting periods beginning in FY 1994 
     and FY 1995.


                               House Bill

       No provision.


                            Senate Amendment

       SNF routine cost limits effective for cost reporting 
     periods beginning on or after October 1, 1997, would be based 
     on limits in effect for the previous year.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

           Chapter 5--Provisions Related to Hospice Services

  Sections 10521-10528 of House bill and Sections 5481-5488 of Senate 
                               amendment

     (a) Payments for Hospice Services


                              Current Law

       Medicare covers hospice care, in lieu of most other 
     Medicare benefits, for terminally ill beneficiaries. Payment 
     for hospice care is based on one of four prospectively 
     determined rates, which correspond to four different levels 
     of care, each day a beneficiary is under the care of the 
     hospice. The four rate categories are routine home care, 
     continuous home care, inpatient respite care, and general 
     inpatient care. The prospective payment rates are updated 
     annually by the hospital market basket (MB).


                               House Bill

       Updates the hospice prospective payment rates by the market 
     basket minus 1.0 percentage point for each of the fiscal 
     years 1998 through 2002. The Secretary would be required to 
     collect data from participating hospices on the costs of care 
     they provide for each fiscal year beginning with FY 1999.
       Effective date. Enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House bill with 
     clarifying language about cost data that hospices would be 
     required to submit to the Secretary.
     (b) Payment for Home Hospice Care Based on Location Where 
         Care is Furnished


                              Current Law

       Hospices generally bill Medicare on the basis of the 
     location of the home office, rather than where service is 
     actually delivered.


                               House Bill

       Effective for cost reporting periods beginning on or after 
     October 1, 1997, requires hospices to submit claims on the 
     basis of the location where a service is actually furnished.
       Effective date. Applies to cost reporting periods beginning 
     on or after October 1, 1997.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (c) Hospice Care Benefits Periods


                              Current Law

       Persons electing Medicare's hospice benefit are covered for 
     four benefit periods: two 90-day periods, a subsequent 30-day 
     period, and a final period of unlimited duration.


                               House Bill

       Restructures hospice benefit periods to include two 90-day 
     periods, followed by an unlimited number of 60-day periods. 
     The medical director or physician member of the hospice 
     interdisciplinary team would have to re-certify at the 
     beginning of the 60-day periods that the beneficiary is 
     terminally ill.
       Effective date. Enactment.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (d) Other Items and Services Included in Hospice Care


                              Current Law

       Hospice services are defined in Medicare statute to include 
     nursing care; physical and occupational therapy and speech 
     language

[[Page H6224]]

     pathology services; medical social services; home health aide 
     services; homemaker services; medical supplies (including 
     drugs and biologicals) and medical appliances; physician 
     services; short-term inpatient care (including both respite 
     care and procedures necessary for pain control and acute and 
     chronic symptom management); and counseling. Beneficiaries 
     electing hospice waive coverage to most Medicare services 
     when the services they need are related to the terminal 
     illness.


                               House Bill

       Amends the definition for hospice care to include the 
     existing enumerated services as well as any other item or 
     service which is specified in a patient's plan of care and 
     which Medicare may pay for.
       Effective date. Enactment.


                            Senate Amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment, with a 
     modification to change the effective date to April 1, 1998.
     (e) Contracting with Independent Physicians or Physician 
         Groups for Hospice Care Services Permitted


                              current law

       Medicare law requires that hospices routinely directly 
     provide the majority of certain specified services, often 
     referred to as core services. Physician services are among 
     these core services. HCFA has defined ``directly'' to require 
     that services be provided by hospice employees.


                               house bill

       Deletes physician services from a hospice's core services 
     and allows hospices to employ or contract with physicians for 
     their services.
       Effective date. Enactment.


                            senate amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (f) Waiver of Certain Staffing Requirements for Hospice Care 
         Programs in Non-Urbanized Areas


                              Current Law

       Hospices must provide certain services in order to 
     participate in Medicare.


                               House Bill

       Allows the Secretary to waive requirements with regard to 
     hospices having to provide certain services so long as they 
     are not located in urbanized areas and can demonstrate to the 
     satisfaction of the Secretary that they have been unable, 
     despite diligent efforts, to recruit appropriate personnel. 
     For these hospices, the Secretary could waive specifically 
     the provision of physical or occupational therapy or speech-
     language pathology services and dietary counseling.
       Effective date. Enactment.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (g) Limitation on Liability of Beneficiaries and Providers 
         for Certain Hospice Coverage Denials


                              Current Law

       Medicare law provides financial relief to beneficiaries and 
     providers for certain services for which Medicare payment 
     would otherwise be denied. Medicare payment under this 
     ``limitation of liability'' provision is dependent on a 
     finding that the beneficiary or provider did not know and 
     could not reasonably have been expected to know that services 
     would not be covered on one of several bases (but not on the 
     determination that an individual is not terminally ill).


                               House Bill

       Extends the limitation of liability protection to 
     determinations that an individual is not terminally ill.
       Effective date. Enactment.


                            Senate Amendment

       Similar provision, except also specifies that when care is 
     denied because an individual is not terminally ill, only the 
     beneficiary that received care would be indemnified for any 
     payments that the individual made to the provider or other 
     person for care that would otherwise be paid by Medicare.


                          Conference Agreement

       The conference agreement includes the House bill.
     (h) Extending the Period for Physician Certification of an 
         Individual's Terminal Illness


                              Current Law

       At the beginning of the first 90-day period when a Medicare 
     beneficiary elects hospice, both the individual's attending 
     physician and the hospice physician must certify in writing 
     that the beneficiary is terminally ill not later than 2 days 
     after hospice is initiated (or, verbally not later than 2 
     days after care is initiated and in writing not later than 8 
     days after care has begun).


                               House Bill

       Eliminates the specific time frame specified in statute for 
     completion of physicians' certifications for admission to 
     hospice to require only that physicians certify that a 
     beneficiary is terminally ill at the beginning of the initial 
     90-day period.
       Effective date. Enactment.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

               Chapter 6--Other Part A Payment Provisions

              Reductions in Payments For Enrollee Bad Debt

     Section 10541 of the House bill and Section 5466 of the Senate 
                               amendment


                              current law

       Certain hospital and other provider bad debts are 
     reimbursed by Medicare on an allowable cost basis. To be 
     qualified for reimbursement, the debt must be related to 
     covered services and derived from deductible and coinsurance 
     amounts left unpaid by Medicare beneficiaries. The provider 
     must be able to establish that reasonable collection efforts 
     were made and that sound business judgement established that 
     there was no likelihood of recovery at any time in the 
     future.


                               house bill

       Reduces the allowable costs of bad debt payments to 
     providers to 75% for cost reporting periods beginning during 
     FY 1998; 60% for cost reporting periods beginning during FY 
     1999; and 50% for cost reporting periods beginning during FY 
     2000 and each subsequent fiscal year.
       Effective Date. Enactment.


                            senate amendment

       Similar provision, except that for cost reporting periods 
     beginning on or after October 1, 1997 and on or before 
     December 31, 1998, payments would be reduced by 25%; 
     beginning January 1, 1999, payments would be reduced on a 
     calendar year basis by 40%; for cost reporting periods 
     beginning during subsequent calendar years, payments would be 
     reduced by 50%.


                          conference agreement

       The conference agreement includes provisions that are 
     similar in the House bill and Senate amendment, with an 
     amendment to provide for a 25% reduction in FY 1998, a 40% 
     reduction in FY 1999, and a 45% reduction in FY 2000 and each 
     subsequent year.

             Permanent Extension of Hemophilia Pass-Through

     Section 10542 of the House bill and Section 5469 of the Senate 
                               amendment


                              current law

       Medicare makes additional payments for the costs of 
     administering blood clotting factor to Medicare beneficiaries 
     with hemophilia admitted for hospital stays where the 
     clotting factor was furnished between June 19, 1990 and 
     September 30, 1994.


                               house bill

       Makes the payment for the costs of administering blood 
     clotting factor permanent.
       Effective Date. Enactment.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment, effective 
     October 1, 1997.

    Reduction in Part A Medicare Premium For Certain Public Retirees

                      Section 10543 of House bill


                              current law

       Almost all persons age 65 or over are automatically 
     entitled to Part A. These individuals (or their spouses) 
     established entitlement during their working careers by 
     paying the hospital insurance (HI) payroll tax on earnings 
     covered by either the social security or railroad retirement 
     systems.
       Persons not automatically entitled to Part A include some 
     state and local government employees. State and local 
     governments can choose whether or not to participate in 
     Medicare for employees hired before April 1, 1986. They are 
     required to participate (and pay the employer share of the 
     payroll taxes) for all employees hired after that date.
       Persons not automatically entitled to Part A may obtain 
     coverage by paying the Part A premium. The 1997 premium is 
     $311.


                               house bill

       Specifies that the premium amount is zero for certain 
     public retirees. An individual covered under this provision 
     is one who has established to the satisfaction of the 
     Secretary that the individual is receiving cash benefits 
     under a qualified State or local government retirement system 
     on the basis of the individual's employment over at least 40 
     calendar quarters (or on the basis of some combination of 
     such covered employment and quarters of coverage under social 
     security totaling at least 40 quarters). Also included would 
     be an individual: (1) married for at least a year to an 
     individual who had at least 40 quarters of such coverage; 
     (2) had been married for at least a year to a worker who 
     had at least 40 quarters of coverage before the worker 
     died; or (3) are divorced from (after at least 10 years of 
     marriage to) a worker with at least 40 quarters of 
     coverage. Individuals covered under this provision are 
     those whose premium will not be paid in whole or part by a 
     state (including under its Medicaid program), a political 
     subdivision of a state, or agency or instrumentality of 
     one or more states or political subdivisions. Further, for 
     each of the preceding 60 months, the

[[Page H6225]]

     individual must have been enrolled in Part B and not have 
     the premium paid in whole or in part by such governmental 
     entity.
       Specifies that a qualified state or local government 
     retirement system is one which: (1) is established or 
     maintained by a state or political subdivision, or an agency 
     or instrumentality of one or more states or political 
     subdivisions thereof; (2) covers positions of some or all 
     employees of such entity; and (3) does not adjust cash 
     retirement benefits based on eligibility for a premium 
     reduction.
       Effective Date. Applies to premiums for months beginning 
     with January 1, 1998, except that months before that date 
     could be counted in determining whether an individual met the 
     60 month requirement specified above.


                            senate amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House bill with a 
     modification specifying that the individual must have been 
     enrolled in Part B and not have had the premium paid in whole 
     or in part by a governmental entity for the preceding 84 
     months (rather than the preceding 60 months).

Coverage of Services in Religious Non-Medical Health Care Institutions 
                Under the Medicare and Medicaid Programs

                  Section 5470 of the Senate amendment


                              current law

       Medicare covers the services furnished by Christian Science 
     sanatoria under Part A of the program. In order to be a 
     covered provider, the institution must be listed and 
     certified by the First Church of Christ, Scientist of Boston, 
     Mass. A certified sanatorium qualifies as both a hospital and 
     as a skilled nursing facility. Under Medicare, two separate 
     types of benefits are payable: services received in an 
     inpatient Christian Science sanatorium and extended care 
     services in a sanatorium. Section 1861(e)(9) of the Social 
     Security Act includes a Christian Science sanatorium in the 
     definition of a hospital; 1861(y) defines an extended care in 
     a Christian Science skilled nursing facility.


                               house bill

       No provision.


                            senate amendment

       Strikes the reference to Christian Science sanatorium in 
     the definition of ``hospital,'' and in the definition of 
     extended care in Christian Science skilled nursing 
     facilities, and inserts the term ``a religious nonmedical 
     health care institution'' in these sections. The provision 
     would define a nonmedical health care institution as an 
     institution that (1) is exempt from taxes under section 
     501(c)(3) of the Internal Revenue Code of 1986; (2) is 
     lawfully operated under all applicable federal, state, and 
     local laws and regulations; (3) provides only nonmedical 
     nursing items and services exclusively to patients who choose 
     to rely solely upon a religious method of healing, and for 
     whom the acceptance of medical health services would be 
     inconsistent with their religious beliefs; (4) provides such 
     nonmedical items and services exclusively through nonmedical 
     nursing personnel who are experienced in caring for the 
     physical needs of such patients; (5) provides such nonmedical 
     items and services to inpatients on a 24-hour basis; (6) on 
     the basis of religious beliefs, does not provide through its 
     personnel or otherwise medical items and services (including 
     any medical screening, examination, diagnosis, prognosis, 
     treatment, or the administration of drugs) for its patients; 
     (7) is not part of, or owned by, or under common ownership 
     with, or affiliated with a health care facility that provides 
     medical services; (8) has in effect a specified utilization 
     review plan; (9) provides the Secretary with information 
     required to implement this section, to monitor quality of 
     care, and to provide for coverage determinations; and (10) 
     meets such other requirements as the Secretary finds 
     necessary in the interest of the health and safety of 
     individuals who are furnished services in these institutions.
       The Secretary would be required to treat an institution as 
     meeting the conditions of participation for Medicare if the 
     accreditation of an institution by a State, regional, or 
     national agency or association provided reasonable assurances 
     that any or all of the preceding requirements were met. The 
     Secretary would be prohibited from requiring any patient of a 
     religious nonmedical health care institution to undergo any 
     medical screening, examination, diagnosis, prognosis, or 
     treatment of any kind or to accept any other medical health 
     care service, if the patient (or legal representative of the 
     patient) objects on religious grounds. The Secretary would be 
     prohibited from subjecting a religious nonmedical health care 
     institution (or its patients or personnel) to any medical 
     supervision, regulation, or control, to the extent that such 
     supervision, regulation or control would be contrary to the 
     religious beliefs of the institution or its patients or 
     personnel.
       Medicare payment would be made for inpatient hospital 
     services or post-hospital extended care services furnished to 
     an individual in a religious nonmedical health care 
     institution only if: (1) the individual had made an election 
     in effect for such benefits; and (2) the individual had a 
     condition such that the individual would qualify for benefits 
     under Medicare for inpatient hospital services or extended 
     care services if the individual was an inpatient of a 
     hospital or skilled nursing facility.
       To elect religious nonmedical health care services, an 
     individual or their legal representative would be required to 
     sign a statement that they were conscientiously opposed to 
     acceptance of non-excepted medical treatment and the 
     individual's acceptance of non-excepted medical treatment 
     would be inconsistent with the individual's sincere religious 
     beliefs. (Excepted medical treatment would include medical 
     care or treatment for the setting of fractured bones, medical 
     care or treatment received involuntarily, or medical care or 
     treatment required under federal or state law or law of a 
     political subdivision of a state.) An election could be 
     revoked in a manner specified by the Secretary, and would be 
     deemed to be revoked if the individual received Medicare 
     reimbursable non-excepted medical treatment, regardless of 
     whether or not benefits for such treatment were provided 
     under Medicare. If an individual's election had been made and 
     revoked twice, the next election could not become effective 
     until one year after the most recent previous revocation, and 
     any succeeding election could not become effective until 5 
     years after the date of the most recent previous revocation.
       The Secretary would also be required to estimate the 
     relevant Medicare expenditure level before the beginning of 
     each fiscal year, beginning with FY 2000. If the Secretary 
     determined that the level estimated Medicare expenditures for 
     a fiscal year would exceed the trigger level for that fiscal 
     year, the Secretary would be required to provide for a 
     proportional reduction in payment amounts under Part A of 
     Medicare for covered services for the fiscal year involved 
     that would assure that the level does not exceed the trigger 
     level for that year. The Secretary would be authorized to, 
     instead of making some or all of the payment reduction, 
     impose other conditions or limitations with respect to the 
     coverage of services as appropriate to reduce the relevant 
     Medicare expenditure level to the trigger level.
       The trigger level for a fiscal year for FY 1998 would be 
     $20 million, and for a succeeding fiscal year the amount 
     would be specified as the amount for the previous fiscal year 
     increased by the percentage increase in the consumer price 
     index for all urban consumers for the 12-month period ending 
     with July preceding the beginning of the fiscal year.
       The Secretary would be required to monitor the relevant 
     Medicare expenditure level for each fiscal year beginning 
     with FY 1999. If the Secretary determined that the relevant 
     Medicare expenditure level for a fiscal year exceeded, or was 
     less than, the trigger level for that fiscal year, then the 
     trigger level for the succeeding fiscal year would be 
     required to be reduced, or increased, respectively, by the 
     amount of the excess or deficit expenditure.
       At the beginning of each fiscal year (beginning with FY 
     1999), the Secretary would be required to submit to the 
     Committee on Ways and Means of the House of Representatives 
     and the Committee on Finance of the Senate an annual report 
     on coverage and expenditures for covered services under the 
     Medicare and Medicaid programs. The report would be required 
     to include: (1) the relevant Medicare expenditure level for 
     the previous fiscal year and estimated for the fiscal year 
     involved; (2) trends in the expenditure level; and (3) facts 
     and circumstances of any significant change in the 
     expenditure level from the levels in previous fiscal years.
       The provision would amend Medicaid to strike references to 
     Christian Science and inserting ``a religious nonmedical 
     health care institution.'' The provision would provide 
     conforming amendments to sections of the Social Security Act.
       Effective Date. Applies to items and services furnished on 
     or after enactment. By no later than July 1, 1998, the 
     Secretary would be required to issue regulations to carry out 
     these amendments on an interim basis pending notice and 
     opportunity for public comment. For periods before the 
     effective date of the regulations, such regulations would be 
     required to recognize elections entered into in good faith in 
     order to comply with the requirements of this section.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     amendments specifying what would constitute common ownership 
     or ownership interest by a provider of medical services, that 
     ownership interest of less than 5% would not be taken into 
     account, and what would be considered to create an 
     affiliation between a medical care provider and a religious 
     nonmedical health care institution. Excepted medical 
     treatment would not include medical care or treatment for the 
     setting of broken bones. In making adjustments to the trigger 
     level, if expenditures for a fiscal year were less than the 
     trigger level projected for a fiscal year, the Secretary 
     could not increase the trigger level for a succeeding fiscal 
     year by more than $50 million.
       The conference agreement continues the provision of needed 
     nonmedical nursing services to poor and elderly Americans who 
     have contributed to the Medicare and Medicaid systems, 
     without requiring them to violate their sincerely held 
     religious beliefs. Like the Senate amendment, it repeals 
     certain provisions applicable only to Christian Science 
     sanatoria and nursing care, 42 U.S.C. Sec. Sec. 1395x(e), 
     1395x(y)(1), 1320c-11, which were held unconstitutional by a 
     federal district court on the ground that they were sect-
     specific, in violation of the Establishment Clause 
     (C.H.I.L.D., Inc. v. Vladeck, 938 F.

[[Page H6226]]

     Supp. 1466 (D. Minn. 1996)). The conference agreement 
     replaces these provisions with a sect-neutral accommodation 
     available to any person who is relying on a religious method 
     of healing and for whom the acceptance of medical health 
     services would be inconsistent with his or her religious 
     beliefs. The Conferees believe these modifications fully 
     respond to and satisfy the constitutional concerns raised by 
     the district court.
       The conference agreement limits Medicare and Medicaid 
     reimbursements to services furnished to patients having a 
     condition such that they would be inpatients in a hospital or 
     a medical skilled nursing facility were it not for their 
     religious beliefs. Reimbursable services are limited to 
     nonmedical nursing services and related items, comparable to 
     services and related nursing materials supplied to inpatients 
     in a hospital or a medical skilled nursing facility. These 
     services and items are plainly secular in nature. No payments 
     can be made for the services of those who provide spiritual 
     treatment through prayer; and, therefore, in the case of 
     Christian Scientists, for example, no payments can be made 
     for the services of the Christian Science practitioner. 
     Accordingly, the proposed statute meets the requirements of 
     Establishment Clause decisions precluding the direct funding 
     of religious teaching or prayer. See Bradfield v. Roberts, 
     175 U.S. 291 (1899); Bowen v. Kendrick, 487 U.S. 589 (1988).
       The Conference Committee, after extensive consultation with 
     the Committee on the Judiciary of the Senate and of the House 
     of Representatives, is satisfied that the conference 
     agreement comports with the First Amendment, and indeed that 
     it serves the interest of religious freedom. The conference 
     agreement does not provide unconstitutional benefits to 
     religion. Rather, it avoids the unfairness of requiring these 
     Americans to pay taxes, including payroll taxes to the 
     Medicare Trust Fund, for years without being able to receive 
     any benefits. The Conferees believe it would be particularly 
     harsh to cut off nursing benefits for poor and elderly men 
     and women who have not made alternative arrangements for 
     financing their health care and who now rely on the 
     availability of nonmedical nursing benefits at a time when 
     other patients receive reimbursement for hospital care.
       In addition, the conference agreement sets out detailed 
     eligibility criteria for religious nonmedical health care 
     institutions that the Conferees believe are necessary to 
     protect the health and safety of patients in such 
     institutions and to prevent fraud and abuse
       The Conferees understand that there are religious 
     nonmedical health care institutions that have been Medicare 
     and/or Medicaid providers since the inception of these 
     programs. It is the intent of the Conferees that these 
     providers will continue to receive reimbursement during the 
     interim period prior to regulations being finalized, unless 
     the Secretary concludes they are ineligible under the new 
     provision.

             Subtitle G--Provisions Relating to Part B Only

                    Chapter 1--Physicians' Services

           Establishment of Single Conversion Factor for 1998

   Sections 10601 and 4601 of House Bill and Section 5501 of Senate 
                               Amendment


                              Current Law

       Medicare pays for physicians services on the basis of a fee 
     schedule. The fee schedule assigns relative values to 
     services. Relative values reflect three factors: physician 
     work (time, skill, and intensity involved in the service), 
     practice expenses, and malpractice costs. These relative 
     values are adjusted for geographic variations in the costs of 
     practicing medicine. Geographically-adjusted relative values 
     are converted into a dollar payment amount by a dollar figure 
     known as the conversion factor. There are three conversion 
     factors--one for surgical services, one for primary care 
     services, and one for other services. The conversion factors 
     in 1997 are $40.96 for surgical services, $35.77 for primary 
     care services, and $33.85 for other services.


                               House Bill

       Section 10601. Sets a single conversion factor for 1998, 
     based on the 1997 primary care conversion factor, updated to 
     1998 by the Secretary's estimate of the weighted average of 
     the three separate updates that would occur in the absence of 
     the legislation. In subsequent years, the conversion factor 
     would be the conversion factor established for the previous 
     year, adjusted by the update.
       Effective Date. Enactment.
       Section 4601. Identical provision.


                            senate Amendment

       Similar provision, except that the Secretary would be 
     required during the last 15 days of October each year, to 
     publish the conversion factor and the update for the 
     following year.
       Effective Date. Enactment.


                          conference Agreement

       The conference agreement includes the House provision.

   Establishing Update to Conversion Factor to Match Spending Under 
                        Sustainable Growth Rate

   Sections 10602 and 4602 of House bill and 5502 of Senate amendment


                              current Law

       The conversion factors are updated each year by a formula 
     specified in the law. The update equals inflation plus or 
     minus actual rate of spending growth in a prior period 
     compared to a target known as the Medicare volume performance 
     standard (MVPS). (For example, fiscal year 1995 data were 
     used in calculating the calendar 1997 update.) However, 
     regardless of actual performance during a base period, there 
     is a 5 percentage point limit on the amount of the reduction. 
     There is no limit on the amount of the increase.


                               house bill

       Section 10602. Specifies the update to the conversion 
     factor that would apply beginning in 1999 (unless otherwise 
     provided for by law). The update to the single conversion 
     factor for a year would equal the Medicare Economic Index 
     (MEI) subject to an adjustment to match spending under a 
     sustainable growth rate. Specifically, the update for a year 
     would be calculated by multiplying: (1) 1 plus the percentage 
     change in the MEI, times (2) 1 plus the update adjustment 
     factor (expressed as a percentage) for the year. The result 
     would be reduced by 1 and multiplied by 100.
       Links the update to the sustainable growth rate. The update 
     adjustment factor would be calculated as follows. First, the 
     Secretary would estimate the difference between the 
     cumulative sum of allowed expenditures for July 1, 1997 
     through June 30 of the year involved and the cumulative sum 
     of actual expenditures for July 1, 1997 through June 30 of 
     the preceding year. This amount would be divided by the 
     actual expenditures for the 12-month period (ending June 30) 
     of the preceding year, increased by the applicable 
     sustainable growth rate which begins during such 12 month 
     period. For the 12-month period ending June 30, 1997, allowed 
     expenditures would be defined as actual expenditures for the 
     period, as estimated by the Secretary. For a subsequent 12-
     month period, allowed expenditures would be defined as 
     allowed expenditures established for the previous period, 
     increased by the sustainable growth rate established for the 
     fiscal year which begins during that 12-month period.
       Establishes limits on the amount of variation from the MEI; 
     the update could not be more than three percentage points 
     above or seven percentage points below the MEI.
       Effective Date. Applies to update for years beginning with 
     1999.
       Section 4602. Identical provision.


                            senate amendment

       Similar provision except refers to cumulative ``amount'' 
     rather than cumulative ``sum'' of actual expenditures.
       Effective Date. Applies to update for years beginning with 
     1999.


                          conference agreement

       The conference agreement includes the Senate provision with 
     an amendment that specifies that the base period for the 
     update adjustment factor would begin April 1, 1997 rather 
     than July 1, 1997 and that calculations would be for 12-month 
     periods ending March 31 rather than June 30.

Replacement of Volume Performance Standard with Sustainable Growth Rate

    Section 10603 and 4603 of House bill and Section 5503 of Senate 
                               amendment


                              current law

       The Medicare Volume Performance Standard (MVPS), used to 
     calculate the update in the conversion factor, is a goal for 
     the rate of expenditure growth from one fiscal year to the 
     next. The MVPS for a year is based on estimates of several 
     factors (changes in fees, enrollment, volume and intensity, 
     and laws and regulations). The calculation is subject to a 
     reduction known as the performance standard factor.


                               House Bill

       Section 10603. The provision would replace the MVPS with 
     the sustainable growth rate based on real gross domestic 
     product (GDP) growth. Specifically, the rate for FY 1998 and 
     subsequent years would be equal to the product of: (1) 1 plus 
     the weighted average percentage change in fees for all 
     physicians services in the fiscal year; (2) 1 plus the 
     percentage change in the average number of individuals 
     enrolled under Part B (other than private plan enrollees) 
     from the previous fiscal year; (3) 1 plus the Secretary's 
     estimate of the percentage growth in real GDP per capita from 
     the previous fiscal year; and (4) 1 plus the Secretary's 
     estimate of the percentage change in expenditures for all 
     physicians services in the fiscal year which will result from 
     changes in law and regulations (excluding changes in volume 
     and intensity resulting from changes in the conversion factor 
     update). The result would be reduced by one and multiplied by 
     100. The term ``physicians services'' would exclude services 
     furnished to a MedicarePlus plan enrollee.
       Requires publication of sustainable growth rates for each 
     fiscal year beginning with FY 1999. The publication would 
     occur in the last 15 days of October of the fiscal year in 
     which the year begins, except that the FY 1999 rate would be 
     published not later than January 1, 1999.
       Effective Date. Enactment.
       Section 4603. Identical provision.


                            Senate Amendment

       Similar provision except requires publication of 
     sustainable growth rates for each fiscal year beginning with 
     FY 1998 with the FY 1998 rate published not later than 
     January 1, 1998.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

[[Page H6227]]

                 Payment Rules for Anesthesia Services

    Section 10604 and 4604 of House bill and section 5504 of Senate 
                               amendment


                              Current Law

       Anesthesia services are paid under a separate fee schedule 
     (based on base and time units) with a separate conversion 
     factor. The 1997 conversion factor is $16.68.


                               House Bill

       Section 10604. Specifies that the conversion factor would 
     equal 46% of the conversion factor established for other 
     services for the year, except as adjusted for changes in 
     work, practice expense, or malpractice relative value units.
       Effective Date. Applies to services furnished on or after 
     January 1, 1998.
       Section 4604. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with 
     clarifying language.

      Implementation of Resource-Based Physician Practice Expense

    Section 10605 and 4605 of House bill and Section 5504 of Senate 
                               amendment


                              Current Law

       The Social Security Amendments of 1994 (P.L. 103-432) 
     required that the Secretary develop and provide for the 
     implementation, beginning in 1998, of a resource-based 
     methodology for payment of practice expenses under the 
     physician fee schedule. Such expenses are currently paid on 
     the basis of historical charges.
     (a) One-year delay in implementation; special rules for 1998


                               House Bill

       Section 10605. Delays implementation of the practice 
     expense methodology for 1 year until 1999.
       Section 4605. Identical provision.


                            Senate Amendment

       Delays implementation of proposed HCFA rule on practice 
     expenses for one year, until January 1, 1999. Specifics for 
     1998, practice expense relative value units would be reduced 
     to 110% of the number of work relative value units for 
     specified services. These are services: (1) which have 
     work relative units; and (2) for which the number of 
     practice expense relative value units determined for 1998 
     exceeds 110% of the number of work relative value units. 
     Not included are services which the Secretary determines 
     at least 75% of which are provided in an office setting. A 
     budget neutral increase would be made in practice expense 
     relative value units for office visit procedure codes.


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     an amendment. If the Secretary determined that the amount of 
     the reallocation would exceed $390 million, the Secretary 
     would apply a higher percentage than 110% so that the 
     estimated reallocation would not exceed $390 million. 
     Further, the practice expense relative value units for a 
     procedure performed in an office or a setting outside an 
     office could not be reduced if the in-office or out-of-office 
     practice expense relative value would be increased under the 
     proposed regulations issued June 18, 1997.
     (b) Phased-in implementation


                               House Bill

       Section 10605. Phases-in new methodology. In 1999, 25% of 
     the practice payment would be based on the new methodology. 
     This percentage would increase to 50% in 2000 and 75% in 
     2001. Beginning in 2002, the payment would be based solely on 
     the new methodology.
       Section 4605. Similar provision.


                            Senate Amendment

       Requires the Secretary to implement the resource-based 
     practice expense unit methodology ratably over the three year 
     period, 1999-2001, such that the methodology is fully 
     implemented for 2001 and subsequent years.


                          Conference agreement

       The conference agreement includes the House provision 
     contained in Section 4605.
     (c) Secretarial direction


                               House Bill

       Section 10605. No provision.
       Section 4605. Requires the Secretary, to develop new 
     resource-based relative value units. In developing the units, 
     the Secretary would be required to utilize, to the maximum 
     extent practicable, generally accepted cost accounting 
     principles and standards which recognize all staff, 
     equipment, supplies and expenses, not just those that can be 
     tied to specific procedures. The Secretary would be required 
     to use actual data on equipment utilization and other key 
     assumptions such as the proportion of costs which are direct 
     versus indirect. The Secretary would be required to study 
     whether hospital cost reduction methods and changing practice 
     patterns may have increased physician practice costs and 
     consider adverse effects on patient access. The Secretary 
     would further be required to consult with organizations 
     representing physicians regarding methodology and data to be 
     used.
       Requires the Secretary to transmit a report to the House 
     Ways and Means and Commerce Committees and the Senate Finance 
     Committee by March 1, 1998. The report would include a 
     presentation of the data used and an explanation of the 
     methodology.
       Requires the Secretary to publish a notice of proposed 
     rule-making by May 1, 1998, and allow for a 90-day public 
     comment period. The proposed rule would include: (1) detailed 
     impact projections which compare proposed payment amounts 
     with data on actual practice expenses; (2) impact projections 
     for specialties, sub-specialties, geographic payment 
     localities, urban versus rural localities, and academic 
     versus non-academic medical staffs; and (3) impact 
     projections on access to care for Medicare patients and 
     physician employment of clinical and administrative staff.


                            Senate Amendment

       Requires the Secretary to assemble physicians in both 
     surgical and nonsurgical areas, accounting experts and the 
     chairman of the PPRC (or its successor) to solicit individual 
     views on whether sufficient data exist to allow HCFA to 
     proceed with implementation. The Secretary would then 
     determine whether sufficient data exists to proceed with 
     practice expense relative value determination and would 
     report on views of individual members to the congressional 
     committees including any recommendations for modifying the 
     rule. If the Secretary determines insufficient data exists or 
     that the rule needs to be revised, the Secretary would 
     provide for additional data collection and other actions to 
     correct deficiencies.


                          Conference Agreement

       The conference agreement includes the House provision with 
     an amendment. The Secretary would be required to utilize to 
     the maximum extent practicable, generally accepted accounting 
     principles and standards which recognize all staff equipment, 
     supplies and expenses, not just those that can be tied to 
     specific procedures. The Secretary would be required to use 
     actual data on equipment utilization and other key 
     assumptions. The Secretary would be required to consult with 
     physician organizations regarding methodology and data to be 
     used. Further , the Secretary would be required to develop a 
     refinement process to be used during each of the four years 
     of the transition. The agreement makes clarifying 
     modifications to items to be included in the proposed rule.
     (d) Review by Comptroller General


                               house bill

       No provision.-


                            senate amendment

       Requires the Comptroller General to review and evaluate the 
     proposed rule issued by HCFA. Within six months of enactment, 
     the Comptroller General would be required to report to the 
     Committees on Ways and Means and Finance on the results of 
     the evaluation including the adequacy of the data used, 
     categories of allowable costs, methods for allocating direct 
     and indirect costs, and potential impact on beneficiary 
     access.


                          conference agreement

       The conference agreement includes the Senate amendment.
     (e) Malpractice relative value units


                               house bill

       Section 10605. No provision.
       Section 4605. No provision.
       Effective Date.--
       Section 10605. Enactment.
       Section 4605. Enactment


                            senate amendment

       Requires that for years beginning in 1999, the malpractice 
     expense component would be based on the malpractice expense 
     resources involved in furnishing the service.
       Effective Date. Applies to years beginning on or after 
     January 1, 1998, except that provision relating to 
     application of resource-based malpractice expense methodology 
     applies to years beginning on or after January 1, 1999.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     an amendment specifying that the application of resource-
     based methodology to malpractice relative value units would 
     apply beginning January 1, 2000. The provision clarifies that 
     the current law limitation on annual adjustments, namely that 
     the adjustments would be budget neutral, would apply.

 Dissemination of Hospital-Specific Per Discharge Relative Values for 
                      Inpatient Hospital Services

                  Section 10606 and 4606 of House bill


                              current law

       In general, the law does not include a specific limit on 
     the number or mix of physicians services provided in 
     connection with an inpatient hospital stay. (However, the law 
     does require that certain services provided in connection 
     with a surgery be included in a global surgical package and 
     not billed separately.)


                               house bill

       Section 10606. Requires the Secretary, during 1999 and 
     2001, to determine for each hospital the hospital-specific 
     per discharge relative value amount for the following year 
     and whether this amount is projected to be excessive. The 
     Secretary would be required to notify the medical executive 
     committee of each hospital having been identified as having 
     an excessive hospital-specific relative value.
       Specifies that the hospital-specific relative value 
     projected for a non-teaching hospital would be the average 
     per discharge relative value for inpatient physicians 
     services furnished by the medical staff for the second 
     preceding calendar year, adjusted for variations in case mix 
     and disproportionate

[[Page H6228]]

     share status. For teaching hospitals, the projected hospital-
     specific relative value would be: (1) the average per 
     discharge relative value for inpatient physicians services 
     furnished by the medical staff for the second preceding 
     calendar year; plus (2) the equivalent per discharge relative 
     value for physicians services furnished by interns and 
     residents during the second preceding year, adjusted for 
     case-mix, disproportionate share status, and teaching status 
     among hospitals. The Secretary would be required to determine 
     the equivalent relative value unit per intern and resident 
     based on the best available data and could make such 
     adjustment in the aggregate. The Secretary would be required 
     to adjust the allowable per discharge relative value 
     otherwise determined to take into account the needs of 
     teaching hospitals and hospitals receiving additional 
     payments under PPS as disproportionate share hospitals or on 
     the basis of their classification as Medicare-dependent small 
     rural hospitals. The adjustment for teaching or 
     disproportionate share status could not be less than zero.
       Section 4606. Identical provision.


                            senate amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision with 
     a modification. The notice would be sent to a subset of 
     identified hospitals. Further, the Secretary would be 
     required to evaluate responses of notified hospitals and 
     identified hospitals not notified.

     Temporary Coverage Restoration for Portable Electrocardiogram 
                             Transportation

                 Sections 10608 and 4608 of House bill


                              current law

       Medicare regulations for the 1997 physician fee schedule 
     eliminated the separate payment for transportation of EKG 
     equipment by any supplier.


                               house bill

       Section 10608. Restores separate payment for 1 year, 1998, 
     for transportation of EKG equipment based on the coding in 
     effect in 1996. The Secretary would be required by July 1, 
     1998 to determine, taking into account the study by GAO and 
     other information, whether portable EKG transportation should 
     be covered.
       Effective date. Enactment
       Section 4608. Similar provision except replaces requirement 
     for Secretarial determination with requirement for submission 
     of GAO report by July 1, 1998 on appropriateness of 
     continuing payment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision as 
     contained in Section 10608 with a modification to specify 
     that payment in 1998 would be based on the payment methods in 
     effect in 1996. The Secretary would be required to make 
     recommendations to Congress by July 1, 1998 as to whether 
     portable X-ray transportation should be covered. Further 
     Congressional action would be needed to extend the 
     transportation payment after 1998.

  Facilitating the Use of Private Contracts Under the Medicare Program

                    Section 5613 of Senate amendment


                              current law

       Physicians are required to submit claims for services 
     provided to their Medicare patients and are subject to limits 
     on amounts they can bill these patients.


                               house bill

       No provision.


                            senate amendment

       Specifies that nothing in Medicare law shall prohibit a 
     physician or another health care professional who does not 
     provide items and services under Medicare from entering into 
     a private contract with a Medicare beneficiary for health 
     services for which no Medicare claim is to be submitted. 
     Medicare's limiting charge provisions would not apply to 
     services provided to a beneficiary under such a contract. The 
     Administrator of HCFA would be required to report to Congress 
     by October 1, 2001, on the effect of private contracts under 
     Medicare. The report would include analyses regarding the 
     fiscal impact of such contracts on total Medicare 
     expenditures and out-of-pocket expenditures for covered 
     Medicare services. It would also include analyses of the 
     quality of health services provided under the contracts. In 
     addition, the report would include recommendations as to 
     whether Medicare beneficiaries should continue to be able to 
     enter private contracts and, if so, what legislative changes 
     if any should be made to improve such contracts.
       Effective Date. Applies with respect to contracts entered 
     into on and after October 1, 1997.


                          conference agreement

       The conference agreement includes the Senate provision with 
     an amendment relating to contract requirements. The amendment 
     would specify that nothing in Medicare law would prohibit a 
     physician or other practitioner from entering into a private 
     contract with a Medicare beneficiary for health services, 
     provided certain conditions are met. The physician or 
     practitioner could not receive Medicare reimbursement for any 
     item or service, either directly or on a capitated basis. 
     Further, the physician or practitioner could not receive 
     reimbursement from an organization which receives Medicare 
     reimbursement for the item or service directly or on a 
     capitated basis.
       The private contract would have to provide specified 
     beneficiary protections. It would have to be written and 
     signed by the beneficiary before any item or service was 
     provided pursuant to the contract. It could also not be 
     entered into at a time when the beneficiary was facing an 
     emergency or urgent health care situation. The contract would 
     also clearly indicate to the beneficiary that by signing the 
     contract the beneficiary: (1) agrees not to submit a claim 
     for services even if they were otherwise covered under 
     Medicare; (2) agrees to be responsible, whether through 
     insurance or otherwise, for payments of such items and 
     services and understands that no Medicare reimbursement will 
     be provided; (3) acknowledges that no Medicare limiting 
     charge limits apply; (4) acknowledges that Medigap plans do 
     not, and other supplemental insurance plans may elect not 
     to, make payments for such items and services; and (5) 
     acknowledges that the Medicare beneficiary has the right 
     to have such items or services provided by other 
     physicians or practitioners for whom Medicare payment 
     would be made. The contract would also be required to 
     indicate whether the individual is excluded from 
     participation in Medicare.
       The conference agreement would specify that an affidavit 
     must be in effect at the time services are provided pursuant 
     to the contract. The affidavit must be in writing and signed 
     by the physician or practitioner. It must provide that the 
     physician or practitioner would not submit any Medicare claim 
     for any item or service provided to a Medicare beneficiary 
     (and will not receive any reimbursement for any such item or 
     service) for a 2-year period beginning on the date the 
     affidavit is signed. A copy of the affidavit would have to be 
     filed with the Secretary within 10 days after the first 
     contract to which the affidavit applies is entered into. If a 
     physician or practitioner signing an affidavit knowingly and 
     willfully submits a Medicare claim (or receives Medicare 
     reimbursement for) an item or service during such 2-year 
     period, the ability to provide services under the private 
     contract provision would not apply for the remainder of the 
     period. Further, the physician or practitioner could not 
     receive Medicare payments during such period.
       The Secretary rather than the Administrator would submit 
     the required report. The provision would apply with respect 
     to contracts entered into on or after January 1, 1998.

               Chapter 2--Other Health Care Professionals

 Increased Medicare Reimbursement for Nurse Practitioners and Clinical 
                           Nurse Specialists

    Section 10619 and 4619 of House bill and section 5506 of Senate 
                               amendment


                              Current Law

       Separate payments are made for nurse practitioner (NP) 
     services provided in collaboration with a physician, which 
     are furnished in a nursing facility. Recognized payments 
     equal 85% of the physician fee schedule amount. Nurse 
     practitioners and clinical nurse specialists (CNSs) are paid 
     directly for services provided in collaboration with a 
     physician in a rural area. Payment equals 75% of the 
     physician fee schedule amount for services furnished in a 
     hospital and 85% of the fee schedule amount for other 
     services.


                               House Bill

       Section 10619. Removes the restriction on settings. It 
     would also provide that payment for NP and CNS services could 
     only be made if no facility or other provider charges are 
     paid in connection with the service. Payment would equal 80% 
     of the lesser of either the actual charge or 85% of the fee 
     schedule amount for the same service if provided by a 
     physician. For assistant-at-surgery services, payment would 
     equal 80% of the lesser of either the actual charge or 85% of 
     the amount that would be recognized for a physician serving 
     as an assistant at surgery. The provision would authorize 
     direct payment for NP and CNS services.
       Clarifies that a clinical nurse specialist is a registered 
     nurse licensed to practice in the state and who holds a 
     master's degree in a defined clinical area of nursing from an 
     accredited educational institution.
       Effective Date. Applies with respect to services furnished 
     and supplies provided on or after January 1, 1998.
       Section 4619. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

       Increased Medicare Reimbursement for Physician Assistants

    Section 10620 and 4620 of House bill and Section 5507 of Senate 
                               amendment


                              Current Law

       Separate payments are made for physician assistant (PA) 
     services when provided under the supervision of a physician: 
     (1) in a hospital, skilled nursing or nursing facility, (2) 
     as an assistant at surgery, or (3) in a rural area designated 
     as a health professional shortage area.


                               House Bill

       Section 10620. Removes the restriction on settings. Payment 
     for PA services could only

[[Page H6229]]

     be made if no facility or other provider charges were paid in 
     connection with the service. Payment would equal 80% of the 
     lesser of either the actual charge or 85% of the fee schedule 
     amount for the same service if provided by a physician. For 
     assistant-at-surgery services, payment would equal 80% of the 
     lesser of either the actual charge or 85% of the amount that 
     would be recognized for a physician serving as an assistant 
     at surgery. The PA could be in an independent contractor 
     relationship with the physician. Employer status would be 
     determined in accordance with state law.
       Effective Date. Applies with respect to services furnished 
     and supplies provided on or after January 1, 1998.
       Section 4620. Identical provision.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

                         Chiropractor Services

                  Section 10607 and 4607 of House bill


                              current law

       Medicare covers chiropractic services involving manual 
     manipulation of the spine to correct a subluxation 
     demonstrated to exist by X-ray. Medicare regulations prohibit 
     payment for the X-ray either if performed by a chiropractor 
     or ordered by a chiropractor.


                               house bill

       Section 10607. Eliminates the X-ray requirement effective 
     January 1, 1998.
       Section 4607. Similar provision, except it would also 
     require the Secretary to develop and implement utilization 
     guidelines relating to coverage of chiropractic services when 
     a subluxation has not been demonstrated to exist by X-ray.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House bill as 
     contained in Section 4607 with an amendment to change the 
     effective date to January 1, 2000.
       Nothing in this section shall be interpreted as a 
     legislative indication that x-ray findings are not important 
     and can serve a purpose in the practice of chiropractic.
       Chapter 3--Outpatient Hospital Services

Elimination of Formula-Driven Overpayments (FDO) for Certain Outpatient 
                           Hospital Services

  Sections 10411 and 4411 of the House bills and section 5311 of the 
                            Senate amendment


                              current law

       Medicare payments for hospital outpatient ambulatory 
     surgery, radiology, and other diagnostic services equals the 
     lesser of: (1) the lower of a hospital's reasonable costs or 
     its customary charges, net of deductible and coinsurance 
     amounts, or (2) a blended amount comprised of a cost portion 
     and a fee schedule portion, net of beneficiary cost-sharing. 
     The cost portion of the blend is based on the lower of the 
     hospital's costs or charges, net of beneficiary cost sharing, 
     and the fee schedule portion is based, in part, on ambulatory 
     surgery center payment rates or the rates for radiology and 
     diagnostic services in other settings, net of beneficiary 
     coinsurance (for those settings). The hospital cost portion 
     and the fee schedule portion for surgical and radiology 
     services are 42% and 58%, respectively. For diagnostic 
     services the hospital cost portion is 50 percent and the fee 
     schedule portion is 50 percent.
       A hospital may bill a beneficiary for the coinsurance 
     amount owed for the outpatient service provided. The 
     beneficiary coinsurance is based on 20 percent of the 
     hospital's submitted charges for the outpatient service, 
     whereas Medicare usually pays based on the blend of the 
     hospital's costs and the amount paid in other settings for 
     the same service. This results in an anomaly whereby the 
     amount a beneficiary pays in coinsurance does not equal 20 
     percent of the program's payment and does not result in a 
     dollar-for-dollar decrease in Medicare program payments.


                               house bill

       Section 10411. Requires that beneficiary coinsurance 
     amounts be deducted later in the reimbursement calculation 
     for hospital outpatient services, so that Medicare payments 
     for covered services would be lower. Medicare's payment for 
     hospital outpatient services would equal the blended amount 
     less any amount the hospital may charge the beneficiary as 
     coinsurance for services furnished during portions of cost 
     reporting periods occurring on or after October 1, 1997.
       Effective Date. Applies to services furnished during 
     portions of cost reporting periods occurring on or after 
     October 1, 1997.
       Section 4411. Identical provision.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

 Extension of Reductions in Payments for Costs of Hospital Outpatient 
                                Services

  Sections 10412 and 4412 of the House bills and Section 5312 of the 
                            Senate amendment

     a. Reduction in payments for capital-related costs.


                              Current Law

       Hospitals receive payments for Medicare's share of capital 
     costs associated with outpatient departments. OBRA 93 
     extended a 10 percent reduction in payments for the capital 
     costs of outpatient departments through FY 1998.


                               House Bill

       Section 10412. The provision would extend the 10 percent 
     reduction in payments for outpatient capital through FY 1999 
     and during FY 2000 before January 1, 2000.
       Effective Date. Effective for cost reporting periods 
     beginning on or after October 1, 1997.
       Section 4412. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     b. Reduction in payments for non-capital-related costs.


                              Current Law

       Certain hospital outpatient services are paid on the basis 
     of reasonable costs. OBRA 93 extended a 5.8 percent reduction 
     for those services paid on a cost-related basis through FY 
     1998.


                               House Bill

       Section 10412. The 5.8 percent reduction for outpatient 
     services paid on a cost basis would be extended through FY 
     1999 and during FY 2000 before January 1, 2000.
       Effective Date. Effective for cost reporting periods 
     beginning on or after October 1, 1997.
       Section 4412. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

 Prospective Payment System for Hospital Outpatient Department Services

  Sections 10413 and 4413 of the House bills and Section 5313 of the 
                            Senate amendment


                              Current Law

       Medicare payments for hospital outpatient ambulatory 
     surgery, radiology, and other diagnostic services equals the 
     lesser of: (1) the lower of a hospital's reasonable costs or 
     its customary charges, net of deductible and coinsurance 
     amounts, or (2) a blended amount comprised of a cost portion 
     and a fee schedule portion, net of beneficiary cost-sharing. 
     The cost portion of the blend is based on the lower of the 
     hospital's costs or charges, net of beneficiary cost sharing, 
     and the fee schedule portion is based on ambulatory surgery 
     center payment rates or the rates for radiology and 
     diagnostic services in other settings, net of beneficiary 
     coinsurance (for these other settings). For cost reporting 
     periods beginning on or after January 1, 1991, the hospital 
     cost portion and the fee schedule portion for surgical and 
     radiology services are 42 percent and 58 percent, 
     respectively. For diagnostic services the hospital cost 
     portion is 50 percent and the fee schedule portion is 50 
     percent.


                               House Bill

       Section 10413. Requires the Secretary to establish a 
     prospective payment system for covered OPD services furnished 
     beginning in 1999. The Secretary would be required to develop 
     a classification system for covered OPD services, such that 
     services classified within each group would be comparable 
     clinically and with respect to the use of resources. The 
     Secretary would be required to establish relative payment 
     rates for covered OPD services using 1996 hospital claims and 
     cost report data, and determine projections of the frequency 
     of utilization of each such service or group of services in 
     1999. The Secretary would be required to determine a wage 
     adjustment factor to adjust the portions of payment 
     attributable to labor-related costs for relative geographic 
     differences in labor and labor-related costs that would be 
     applied in a budget neutral manner. The Secretary would be 
     required to establish other adjustments as necessary, 
     including adjustments to account for variations in 
     coinsurance payments for procedures with similar resource 
     costs, to ensure equitable payments under the system. The 
     Secretary would also be required to develop a method for 
     controlling unnecessary increases in the volume of covered 
     OPD services.
       Hospital OPD coinsurance payments would be limited to 20% 
     of the national median of the charges for the service (or 
     services within the group) furnished in 1996 updated to 1999 
     using the Secretary's estimate of charge growth during this 
     period. The Secretary would be required to establish rules 
     for the establishment of a coinsurance payment amount for a 
     covered OPD service not furnished during 1996, based on its 
     classification within a group of such services.
       For 1999, the Secretary would be required to establish a 
     conversion factor for determining the Medicare OPD fee 
     payment amounts for each covered OPD service (or group of 
     services) furnished in 1999 so that the sum of the products 
     of the Medicare OPD fee payment amounts and the frequencies 
     for each service or group would be equal to the total amounts 
     estimated by the Secretary that would be paid for OPD 
     services in 1999. In subsequent years, the Secretary would be 
     required to establish a conversion factor for covered OPD 
     services furnished in an amount equal to the conversion 
     factor established for 1999 and applicable to services 
     furnished in the previous year increased by the OPD payment 
     increase factor. The OPD payment increase factor would be 
     equal to the sum of

[[Page H6230]]

     the hospital market basket (MB) percentage increase, plus 3.5 
     percentage points, but in no case more than the number of 
     percentage points that would result in the pre-deductible 
     payment percentage exceeding 80%. When the amount of the 
     beneficiary coinsurance for an individual procedure is equal 
     to 20 percent of the total payment, both the coinsurance and 
     the Medicare program payment would be increased by the full 
     market basket.
       The Secretary would be required to establish a procedure 
     under which a hospital, before the beginning of a year 
     (starting with 1999), could elect to reduce the coinsurance 
     payment for some or all covered OPD services to an amount 
     that would not be less than 20% of the total (Medicare 
     program plus beneficiary coinsurance payment) amount paid for 
     the service involved, adjusted for relative differences in 
     labor costs and other factors. A reduced coinsurance payment 
     could not be further reduced or increased during the year 
     involved, and hospitals could disseminate information on the 
     reduction of coinsurance amounts.
       The Secretary would be authorized to periodically review 
     and revise the groups, relative payment weights, and the wage 
     and other adjustments to take into account changes in medical 
     practice, medical technology, the addition of new services, 
     new cost data, and other relevant information. Any 
     adjustments made by the Secretary would be made in a budget 
     neutral manner. If the Secretary determined that the volume 
     of services paid for under this subsection increased beyond 
     amounts established through those methodologies, the 
     Secretary would be authorized to adjust the update to the 
     conversion factor otherwise applicable in a subsequent year.
       The coinsurance payment for covered OPD services would be 
     determined by the provisions of this bill instead of the 
     standard 20% coinsurance for other Part B services.
       Effective Date. Effective for services delivered on or 
     after January 1, 1999.
       Section 4413. Identical provision.


                            Senate amendment

       Similar provision, except requires the Secretary to use 
     claims data from 1997 for establishing the system 
     requirements, the unadjusted copayment amount, and rules for 
     new services.


                          conference agreement

       The conference agreement includes the House bill with 
     amendments. These include defining covered OPD services and 
     updating the entire fee schedule amount (program payments 
     plus beneficiary coinsurance payments) by the market basket 
     increase minus one percentage point for 2000 through 2002, 
     and by the market basket percentage increase in subsequent 
     years. Beneficiary coinsurance payments would be subtracted 
     from the fee schedule amount to determine Medicare program 
     payments.
       The Conferees have given the Secretary discretion in 
     determining the adjustment factors that will be applied to 
     the OPD prospective rates. In examining the necessary 
     adjustment factors, the Conferees would like the Secretary to 
     examine whether an adjustment is warranted for those Eye and 
     Ear specialty hospitals that received payments under a 
     different blend formula for cost reporting periods beginning 
     on or after October 1, 1988 and before January 1, 1995.

                     Chapter 4--Ambulance Services

                    Payments for Ambulance Services

   Sections 10431 and 4431 of House bill and Section 5321 of Senate 
                               amendment


                              current law

       Payment for ambulance services provided by freestanding 
     suppliers is based on reasonable charge screens developed by 
     individual carriers based on local billings. Hospital or 
     other provider-based ambulance services are paid on a 
     reasonable cost basis; payment cannot exceed what would be 
     paid to a freestanding suppliers.


                               house bill

       Specifies payment limits for ambulance services for FY 1998 
     through FY 2002. For ambulance services paid on a reasonable 
     cost basis, the annual increase in the costs recognized as 
     reasonable would be limited to the percentage increase in the 
     consumer price index reduced for fiscal years 1998 and 1999 
     by 1 percentage point. Similarly, for ambulance services 
     furnished on a reasonable charge basis, the annual increase 
     in the charges recognized as reasonable would be limited to 
     the percentage increase in the consumer price index reduced 
     for fiscal years 1998 and 1999 by 1 percentage point.
       Requires the Secretary to establish a fee schedule for 
     ambulance services through a negotiated rule-making process. 
     In establishing the fee schedule, the Secretary would be 
     required to: (1) establish mechanisms to control Medicare 
     expenditure increases; (2) establish definitions for 
     services; (3) consider appropriate regional and operational 
     differences; (4) consider adjustments to payment rates to 
     account for inflation and other relevant factors; and (5) 
     phase-in the application of the payment rates in an efficient 
     and fair manner. In establishing the fee schedule, the 
     Secretary would be required to consult with various national 
     organizations representing individuals and entities who 
     furnish and regulate ambulance services.
       Requires the Secretary to assure that payments in FY 2000 
     under the fee schedule do not exceed the aggregate amount of 
     payments which would have been made in the absence of the fee 
     schedule. The annual increase in the payment amounts in each 
     subsequent year would be limited to the increase in the 
     consumer price index. Medicare payments would equal 80% of 
     the lesser of the fee schedule amount or the actual charge. 
     Services would be paid on as assignment basis.
       Authorizes payment for advanced life support (ALS) services 
     provided by paramedic intercept service providers in rural 
     areas. The ALS services would be provided under contract with 
     one or more volunteer ambulance services. The volunteer 
     ambulance service involved must be certified as qualified to 
     provide the service, provide only basic life support services 
     at the time of the intercept, and be prohibited by state law 
     from billing for services. The ALS service provider must be 
     certified to provide the services and bill all recipients 
     (not just Medicare beneficiaries) for ALS intercept services.
       Effective Date. Enactment, except fee schedule provisions 
     apply to services furnished on or after January 1, 2000.
       Section 4431. Similar provision, except specifies that 
     limits on reasonable cost increases for FY 1998--FY 2002 
     apply on a per trip basis.


                            senate amendment

       Similar to Section 10431, except that: (1) the one 
     percentage point reduction in the increase in reasonable 
     charge and cost limits would be made only in 1998; (2) the 
     fee schedule would be implemented in 1999 with payments not 
     to exceed those which would have been made in the absence of 
     the fee schedule; and (3) the annual increase would be 
     limited to the increase in the CPI minus one percentage point 
     (but not less than zero).
       Effective Date. Enactment, except fee schedule provisions 
     apply to services furnished on or after January 1, 1999.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     modifications. The reasonable costs limits would be applied 
     in FY 1998, FY 1999 and so much of FY 2000 as precedes 
     January 1, 2000. The reduction would be one percentage point 
     each fiscal year. The limits would be applied on a per trip 
     basis. The Secretary could require, for services provided 
     after June 30, 1998, that a code be provided; the code would 
     be under a uniform coding system specified by the Secretary. 
     The limits on reasonable charge payments would apply on a 
     calendar basis for FY 1998 and FY 1999 with the one 
     percentage point reduction applicable in both years.
       The conference agreement specifies that the fee schedule 
     would be implemented in 2000. The aggregate amount of 
     payments could not exceed what would be paid if the interim 
     reductions remained in effect in that year. For purposes of 
     this determination, the Secretary would assume the update in 
     2002 to be equal to the CPI minus one percentage point in 
     2001 and 2002. Beginning in 2001, the update would equal the 
     preceding year's amount updated by the CPI, reduced by one 
     percentage point in 2001 and 2002. The Secretary could 
     require the use of a code under a uniform coding system. The 
     fee schedule would apply to ambulance services whether 
     provided directly by a supplier or provider or under 
     arrangements with a provider.

Demonstration of Coverage of Ambulance Services Under Medicare Through 
                Contracts With Units of Local Government

                 Sections 10432 and 4432 of House bill


                              current law

       No provision.


                               house bill

       Section 10432. Requires the Secretary to establish up to 
     three demonstration projects under which, at the request of a 
     county or parish, the Secretary enters into agreement with 
     such entity to furnish or arrange for the furnishing of 
     ambulance services. The county or parish could not enter into 
     a contract unless the contract covered at least 80% of the 
     residents enrolled in Part B. Individuals or entities 
     furnishing services would have to meet the requirements 
     otherwise applicable. The Secretary would make monthly per 
     capita payments to the county or parish. In the first year, 
     the capitated payment would equal 95% of the average annual 
     per capita payment for ambulance services made in the most 
     recent 3 years for which data is available. In subsequent 
     years, it would the amount established for the preceding year 
     increased by the CPI. Payments under the contract would be in 
     lieu of other payments for ambulance services.
       Specifies that the contract may provide for the inclusion 
     of persons residing in additional counties or parishes, 
     permit transportation to non-hospital providers, and 
     implement other innovations proposed by the county or parish.
       Requires the Secretary to evaluate the demonstration 
     projects and report by January 1, 2000, on the study 
     including recommendations regarding modifications to the 
     payment methodology and whether to extend or expand such 
     projects.
       Effective Date. Enactment.
       Section 4432. Identical provision.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House bill with 
     clarifying language to specify that the contracts would be 
     made with units of local government. Further, the 
     determination of whether the contract covers 80 percent of 
     Part B enrollees residing in the

[[Page H6231]]

     area would not include persons in a Medicare+Choice plan.

                   Chapter 5--Rehabilitation Services

                  Rehabilitation Agencies and Services

               Sections 10421 and 4421 of the House bills


                              current law

       Medicare provides for special payment rules for certain 
     types of providers of services covered under Part B and paid 
     out of the SMI Trust Fund.


                               house bill

       Section 10421. For outpatient physical therapy and 
     occupational therapy services, Medicare program payments for 
     services provided in 1998 would be, the lesser of the actual 
     charges for the services or the adjusted reasonable costs for 
     the services minus beneficiary coinsurance payments. Adjusted 
     reasonable costs would be defined as operating costs reduced 
     by 5.8% and capital costs reduced by 10%. After 1998, payment 
     for these services would be 80% of the lesser of the actual 
     charge for the services, or 80% of the applicable physician 
     fee schedule amount. The provision would also exclude from 
     Medicare coverage outpatient occupational therapy and 
     physical therapy services furnished as incident to a 
     physician's professional services that did not meet the 
     standards provided for outpatient physical therapy services 
     furnished by a provider in a clinic, rehabilitation agency, 
     public health agency, or by others under an arrangement with 
     and under the supervision of such providers.
       The provision would also apply the independent therapist 
     per beneficiary cap of $900 per year to outpatient therapy 
     services beginning in 1999. The cap would be increased each 
     year by the estimated increase in gross domestic product 
     (GDP).
       Effective Date. Effective for services provided on or after 
     January 1, 1998.
       Section 4421. Identical provision.


                            senate amendment

       No provision.


                          conference agreement

       The Conference agreement includes the House provisions with 
     modifications. For rehabilitation agencies and certain 
     outpatient therapy providers other than outpatient hospital 
     departments, the Conference agreement includes: (1) 10-
     percent operating and capital cost reductions for 1998, (2) 
     application of fee-schedule provisions for therapy services 
     beginning in 1999, and (3) per beneficiary therapy caps 
     currently applicable to independent therapists. Other non-
     therapy services provided by CORFs would be paid under 
     existing fee schedules or those established by the Secretary, 
     beginning in 1999. The per beneficiary cap is also amended to 
     equal $1,500 (instead of $900) per year in 1999 through 2001, 
     then increased for each subsequent year by the increase in 
     the MEI, rounded to the nearest multiple of $10. Beginning in 
     1999, hospital outpatient departments would be subject to the 
     fee schedule for therapy services; however, the per 
     beneficiary cap would not apply.
       The conference agreement requires the Secretary to report 
     to the Congress, by no later than January 1, 2001, on 
     recommendations on a revised coverage policy of outpatient 
     physical therapy services and outpatient occupational therapy 
     services based on classification of individuals by diagnostic 
     category and prior use of services, in both inpatient and 
     outpatient settings, in place of uniform dollar limitations. 
     The recommendations would be required to include how a system 
     of durational limits by diagnostic category might be 
     implemented in a budget-neutral manner. The conference 
     agreement also modifies the effective date to provide that 
     payments made under the physician fee schedule and the higher 
     per beneficiary cap apply to services furnished and expenses 
     incurred on or after January 1, 1999.

       Comprehensive Outpatient Rehabilitation Facilities (CORFs)

               Sections 10422 and 4422 of the House bills


                              current law

       Medicare provides for special payment rules for certain 
     types of providers of services covered under Part B and paid 
     out of the SMI Trust Fund.


                               house bill

       Section 10422. CORF payments for services provided in 1998 
     would be the lessor of the actual charges for the services or 
     the adjusted reasonable costs for the services minus 
     beneficiary coinsurance payments. Adjusted reasonable costs 
     would be defined as operating costs reduced by 5.8% and 
     capital costs reduced by 10%. After 1998, payment for 
     these services would be 80% of the lesser of the actual 
     charge for the services, or 80% of the applicable 
     physician fee schedule amount. The provision would also 
     exclude from Medicare coverage outpatient occupational 
     therapy and physical therapy services furnished as 
     incident to a physician's professional services that did 
     not meet the standards provided for outpatient physical 
     therapy services furnished by a provider in a clinic, 
     rehabilitation agency, public health agency, or by others 
     under an arrangement with and under the supervision of 
     such providers.
       The provision would also apply the independent therapist 
     per beneficiary cap of $900 per year to outpatient therapy 
     services beginning in 1999. The cap would be increased each 
     year by the estimated increase in gross domestic product 
     (GDP).
       Effective Date. Effective for services delivered on or 
     after January 1, 1998.
       Section 4422. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill or 
     the Senate amendment. (See Rehabilitation Agencies and 
     Services, above.)

                  Chapter 6--Other Payment Provisions

                 Payments for Durable Medical Equipment

   (Sections 10611, 10612 and 4611, 4612, and 4622 of House bill and 
  Sections 5523, 5524, 5221, 5224, 5225, and 5226 of Senate amendment)

     (a) Durable Medical Equipment (DME) Updates


                              Current Law

       DME is reimbursed on the basis of a fee schedule. Items are 
     classified into five groups for purposes of determining the 
     fee schedules and making payments: (1) inexpensive or other 
     routinely purchased equipment (defined as items costing less 
     than $150 or which are purchased at least 75 percent of the 
     time); (2) items requiring frequent and substantial 
     servicing; (3) customized items; (4) oxygen and oxygen 
     equipment; and (5) other items referred to as capped rental 
     items. In general, the fee schedules establish national 
     payment limits for DME. The limits have floors and ceilings. 
     The floor is equal to 85 percent of the weighted median of 
     local payment amounts and the ceiling is equal to 100 percent 
     of the weighted median of local payment amounts. Fee schedule 
     amounts are updated annually by the consumer price index for 
     all urban consumers, CPI-U.


                               House Bill

       Section 10611(a)(1). Eliminates updates to the DME fee 
     schedules for each of the years 1998 through 2002.
       Effective date. Enactment.
       Section 4611(a)(1). Identical provision.


                            Senate Amendment

       Reduces the DME fee schedule update to CPI minus 2 
     percentage points (but not below zero) for each of the years 
     1998 through 2002.
       Effective date. Applies to items furnished on and after 
     January 1, 1998.


                          Conference Agreement

       The conference agreement includes the House bill.
     (b) Upgraded Durable Medical Equipment


                              Current Law

       Medicare requires that the payment amount for covered DME 
     be consistent with what is reasonable and medically necessary 
     to serve the intended purpose. Additional expenses for 
     upgraded or deluxe features or items which are rented or 
     purchased for added convenience or other purposes do not meet 
     the reasonableness test. A beneficiary wishing upgraded 
     features must purchase the upgraded item and seek 
     reimbursement from Medicare for the basic item. Payment is 
     based on the payment amount for the kind of item normally 
     used to meet the intended purpose (i.e., the standard item). 
     Usually this is the least costly item.


                               House Bill

       No provision.


                            Senate Amendment

       Effective on the date the Secretary issues regulations, 
     beneficiaries could purchase or rent an item of upgraded DME 
     for which payment would be made by Medicare as if the item 
     were a standard item. Suppliers of the upgraded item would 
     receive payment as if the item were a standard item and the 
     beneficiary would pay the supplier the difference between the 
     supplier's charge and Medicare's payment. In no event could 
     the supplier's charge for an upgraded item exceed 
     the applicable fee schedule amount (if any) for the item. 
     The Secretary's regulations would address the 
     determination of fair market prices for upgraded items; 
     full disclosure of the availability and price of standard 
     items and proof of receipt of this information by the 
     beneficiary before furnishing of the upgraded item; 
     conditions of participation for suppliers in the 
     simplified billing arrangement; sanctions of suppliers who 
     are determined to engage in coercive or abusive practices, 
     including exclusion; and such other safeguards as the 
     Secretary determines are necessary.
       Effective date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language. The provision would apply to purchases 
     or rentals after the effective date of any regulations issued 
     by the Secretary.
     (c) Update for Orthotics and Prosthetics


                              Current Law

       Prosthetics and orthotics are paid according to a fee 
     schedule with principles similar to the DME fee schedule. The 
     fee schedule establishes regional payment limits for covered 
     items. The payment limits have floors and ceilings. The floor 
     is equal to 90 percent of the weighted average of regional 
     payment amounts and the ceiling is 120 percent. Fee schedule 
     amounts are updated annually by CPI-U.


                               House Bill

       Section 10611(a)(2). Limits the update for the prosthetics 
     and orthotics fee schedule to 1 percent for each of the years 
     1998 through 2002.
       Effective date. Enactment.
       Section 4611(a)(2). Identical provision.


                            Senate Amendment

       Reduces the prosthetics and orthotics fee schedule update 
     to CPI minus 2 percentage points (but not below zero) for 
     each of the years 1998 through 2000.
       Effective date. Applies to items furnished on and after 
     January 1, 1998.

[[Page H6232]]

                          Conference Agreement

       The conference agreement includes the House bill.
     (d) Payment Freeze for Parenteral and Enteral Nutrients, 
         Supplies, and Equipment (PEN)


                              Current Law

       Parenteral and enteral nutrients, supplies, and equipment 
     are paid on the basis of the lowest reasonable charge levels 
     at which items are widely and consistently available in the 
     community.


                               House Bill

       Section 10611(a)(3). Freezes reasonable charge payments for 
     PEN at 1995 levels for the period 1998 through 2002.
       Effective date. Enactment.
       Section 4611(a)(3). Identical provision.


                            Senate Amendment

       Reduces the reasonable charge updates for PEN to CPI minus 
     2 percentage points (but not below zero) for each of the 
     years 1998 through 2002.
       Effective date. Enactment.


                          Conference Agreement

       The conference agreement includes the House bill.
       The Conferees note that there is scientific evidence 
     suggesting that intradialytic parenteral nutrition (IDPN) 
     therapy may be of benefit to certain subgroups of chronic 
     dialysis patients. However, many questions remain about the 
     physiologic effects, efficacy, and indications for IDPN 
     therapy. The Conferees urge the Secretary to further 
     investigate the clinical value of IDPN therapy, in 
     consultation with appropriate organizations, and to provide 
     recommendations regarding Medicare coverage of this therapy.
     (e) Payment for Cochlear Implants


                              Current Law

       Prosthetics and orthotics are paid according to a fee 
     schedule with principles similar to the DME fee schedule. The 
     fee schedule establishes regional payment limits for covered 
     items. The payment limits have floors and ceilings. The floor 
     is equal to 90 percent of the weighted average of regional 
     payment amounts and the ceiling is 120 percent.


                               House Bill

       Section 4622. Specifies that cochlear implants would be 
     paid according to DME fee schedule for customized items.
       Effective date. Applies to implants implanted on or after 
     January 1, 1998.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House 
     provision regarding cochlear implants. A cochlear implant is 
     a surgically implanted, biomedical device used to improve 
     hearing for patients with serious hearing loss. The Conferees 
     were concerned that the cochlear provision would, in effect, 
     establish in statute the reimbursement for one specific item 
     of durable medical equipment. Given that cochlear implant 
     technology is rapidly advancing, and the relatively low 
     number of such implants each year, the Conferees believed 
     this matter requires further examination. The Conferees also 
     noted that the Secretary is currently developing a fee 
     schedule limit on cochlear implants but has not yet done so. 
     Cochlear manufacturers are concerned that the Secretary is 
     using inaccurate data in developing the fee schedule. 
     According to manufacturers, many cochlear development 
     programs will cease to be financially viable if inaccurate 
     data is used to generate a fee schedule. In this regard, the 
     Conferees request that the Secretary examine this issue 
     carefully and report to Congress on the fee schedule 
     proposal. The Conferees recommend that the committees with 
     jurisdiction over the Medicare program carefully monitor this 
     issue. In addition, the Conferees note that other provisions 
     of the conference agreement may address the concerns of 
     cochlear manufacturers. For example, the conference agreement 
     includes a more flexible ``inherent reasonableness'' 
     authority for the Secretary to adjust payment amounts that 
     are ``grossly excessive or grossly deficient and not 
     inherently reasonable.'' The Conferees believe cochlear 
     implants may be a candidate for inherent reasonableness 
     action if a problem develops in the future.

                      Oxygen and Oxygen Equipment

   Sections 10612 and 4612 of House bill and Section 5524 of Senate 
                               amendment


                              Current Law

       Under Medicare oxygen and oxygen equipment are considered 
     durable medical equipment and are paid according to a DME fee 
     schedule. The fee schedule establishes a national payment 
     limit for oxygen and oxygen equipment.


                               House Bill

       Section 10612. Reduces the national payment limit for 
     oxygen and oxygen equipment by 20 percent in 1998 through 
     2002.
       Effective date. Enactment.
       Section 4612. Identical provision.


                            Senate Amendment

       Reduces the national payment limit for oxygen and oxygen 
     equipment by 25 percent in 1998 and an additional 12.5 
     percent in 1999. These reductions would continue to be 
     reflected in payments for oxygen in subsequent years. The 
     Secretary would be authorized to establish separate classes 
     of oxygen and oxygen equipment with differing payments, but 
     only to the extent payments for home oxygen equipment are no 
     greater (or less) than they would have been had separate 
     classes and payment rates not been established. The Secretary 
     would be required to establish, as soon as practicable, 
     service standards and accreditation requirements for home 
     oxygen providers. The General Accounting Office (GAO) would 
     be required to study and report to the Ways and Means and 
     Finance Committees on access to oxygen equipment, including 
     recommendations for legislation, within 6 months of 
     enactment. The Secretary would be required to arrange with 
     peer review organizations to evaluate access to and quality 
     of home oxygen equipment. In addition, the Secretary would be 
     required to conduct a demonstration project on competitive 
     bidding for home oxygen equipment.
       Effective date. Reductions in payments for oxygen effective 
     January 1, 1998. Other provisions effective on enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     modifications. The national payment limit for oxygen and 
     oxygen equipment would be reduced by 25 percent in 1998 and 
     an additional 5 percent in 1999; the thirty percent reduction 
     would apply in each subsequent year. The Secretary would be 
     required to establish service standards but not accreditation 
     requirements for home oxygen providers. GAO's report on 
     access to oxygen would be required to be submitted to Ways 
     and Means, Commerce, and Finance within 18 months of 
     enactment. The requirement for the Secretary to conduct a 
     competitive bidding demonstration for home oxygen would be 
     eliminated (but at least one of the competitive acquisition 
     areas established in Subtitle D, Anti-Fraud and Abuse, would 
     have to be for oxygen and oxygen equipment). The conferees 
     wish to clarify that reductions in payments to oxygen and 
     home oxygen equipment are in lieu of the Administration's 
     proposed reductions through the regulatory process.

                      Clinical Laboratory Services

    Section 10613 and 4613 of House bill and Section 5521 of Senate 
                               amendment


                              Current Law

       Clinical diagnostic laboratory tests are paid on the basis 
     of areawide fee schedules. The law sets a cap on payment 
     amounts equal to 76% of the median of all fee schedules for 
     the test. The fee schedules amounts are updated by the 
     percentage change in the CPI.
     (a) Update; cap


                               House Bill

       Section 10613. Freezes fee schedule payments for the 1998-
     2002 period. The cap would be lowered from 76% of the median 
     to 72% of the median beginning in 1998.
       Section 4613. Identical provision.


                            Senate Amendment

       Reduces (but not below zero) the update by 2 percentage 
     points for each year, 1998-2002. The cap would be lowered to 
     74% of the median beginning in 1998.


                          Conference Agreement

       The conference agreement includes the House provision on 
     the update. It includes the Senate amendment on lowering the 
     cap.
     (b) Study.


                               House Bill

       No provision.
       Effective Date. Enactment.


                            Senate Amendment

       Requires the Secretary to request the Institute of Medicine 
     to conduct a study of lab payments. The study would include a 
     review of the adequacy of the current methodology and 
     recommendations regarding alternative payment systems. It 
     would also analyze and discuss the relationship between 
     payment systems and access to high quality lab services for 
     beneficiaries, including availability and access to new 
     testing methodologies. The Secretary would be required to 
     report to Congress within 2 years of enactment.
       Effective Date. Enactment


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language.

     Improvements in Administration of Laboratory Services Benefit

   Sections 10614 and 4614 of House bill and Section 5522 of Senate 
                               amendment


                              Current Law

       Significant variations exist among carriers in rules 
     governing requirements labs must meet in filing claims for 
     payments.


                               House Bill

       Section 10614. Requires the Secretary to divide the country 
     into no more than five regions and designate a single carrier 
     for each region to process laboratory claims (other than for 
     independent physicians offices) no later than January 1, 
     1999. One of the carriers would be selected as a central 
     statistical resource. The allocation of claims to a 
     particular carrier would be based on whether the carrier 
     serves the geographic area where the specimen was collected 
     or other method selected by the Secretary.
       Requires the Secretary, by July 1, 1998, to adopt uniform 
     coverage, administration, and payment policies for lab tests 
     using a negotiated rule-making process. The policies would be 
     designed to promote uniformity and program integrity and 
     reduce administrative burdens with respect to clinical 
     diagnostic laboratory tests in connection with beneficiary 
     information submitted with a claim, physicians' obligations 
     for documentation and recordkeeping, claims filing

[[Page H6233]]

     procedures, documentation, and frequency limitations. 
     Carriers could implement changes pending implementation of 
     uniform policies.
       Permits the use of interim regional policies where a 
     uniform national policy had not been established and there is 
     a demonstrated need for policy to respond to aberrant 
     utilization or provision of unnecessary services. The 
     Secretary would establish a process under which designated 
     carriers could collectively develop and implement interim 
     national standards for up to 2 years.
       Requires the Secretary to conduct a review, at least every 
     2 years, of uniform national standards. The review would 
     consider whether to incorporate or supercede interim regional 
     or national policies.
       Specifies that before carriers implement a change in 
     requirements (including use of interim regional and interim 
     national policies) in the period prior to the adoption of 
     uniform policies, they must provide advance notice to 
     interested parties and allow a 45 day period for parties to 
     submit comments on proposed modifications.
       Requires the inclusion of a laboratory representative on 
     carrier advisory committees. The representative would be 
     selected by the committee from nominations submitted by 
     national and local organizations representing independent 
     clinical labs.
       Effective Date. Enactment.
       Section 4614. Similar provision, except that designation of 
     single carrier excludes tests performed in ``physicians 
     offices'' rather than ``independent physicians offices.''


                            Senate Amendment

       Similar provision, except: (1) specifies that the provision 
     designating single carriers for each of five regions would 
     not apply to lab services furnished by independent physicians 
     offices until such time as the Secretary determines such 
     offices would not be unduly burdened by the application of 
     billing requirements with respect to more than one carrier; 
     (2) specifies that one of the goals in designing uniform 
     policies is to ``simplify administrative requirements'' 
     rather than ``reduce administrative burdens''; and (3) 
     specifies that interim and national guidelines would apply to 
     all lab services.
       Effective Date. Enactment


                          Conference Agreement

       The conference agreement includes the Senate provision with 
     amendments. The provision designating single carriers for 
     each of five regions would not apply to those physician 
     office laboratories which the Secretary determines would be 
     unduly burdened by the application of billing 
     responsibilities with respect to more than one carrier.
       The agreement would clarify that uniform policies are 
     national uniform policies. The policies would be designed to 
     promote program integrity and national uniformity and 
     simplify administrative requirements with respect to lab 
     tests in connection with beneficiary information submitted 
     with a claim, medical conditions for which a lab test is 
     reasonable and necessary, appropriate use of procedure codes 
     in billing, required medical documentation, recordkeeping 
     requirements, claims filing procedures, and limitations on 
     frequency of coverage for the same test performed on the same 
     individual.
       The agreement would provide that recommendations from 
     national and local organizations that represent clinical 
     laboratories would be considered in selecting the laboratory 
     representative on a carrier advisory committee.

                Updates for Ambulatory Surgical Services

  Sections 10615 and 4615 of the House bills and Section 5525 of the 
                            Senate amendment


                              Current Law

       Medicare pays for ambulatory surgical center (ASC) services 
     on the basis of prospectively determined rates. These rates 
     are updated annually by the CPI-U. OBRA 93 eliminated updates 
     for ASCs for FY 1994 and FY 1995.


                               House Bill

       Section 10615. Sets the updates for FY 1998 through FY 2002 
     at the increase in the CPI-U minus 2.0 percentage points. The 
     provision would set the update for each succeeding fiscal 
     year equal to the increase in the CPI-U.
       Effective date. Enactment.
       Section 4615. Identical provision.


                            Senate Amendment

       Similar provision, except sets the updates for FY 1998 
     through FY 2002 at the increase in the CPI-U minus 2.0 
     percentage points, but not below zero. The provision does not 
     include updates for succeeding years.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

                Reimbursement for Drugs and Biologicals

   Section 10614 and 4614 of House bill and 5526 of Senate amendment


                              Current Law

       Payment for drugs is based on the lower of the estimated 
     acquisition cost or the national average wholesale price. 
     Payment may also be made as part of a reasonable cost or 
     prospective payment.


                               House Bill

       Section 10616. Specifies that in any case where payment is 
     not made on a cost or prospective payment basis, the payment 
     would equal 95% of the average wholesale price.
       Effective Date. Applies to drugs and biologicals furnished 
     on or after January 1, 1998.
       Section 4616. Identical provision.


                            Senate Amendment

       Similar provision except the average wholesale price would 
     be ``as specified by the Secretary''.
       Specifies that in 1998, the payment amount could not exceed 
     the amount payable on May 1, 1997, and in subsequent years 
     could not exceed the previous year's amount increased by the 
     percentage increase in the CPI. For any other drug or 
     biological, the annual increase for any year following the 
     first year for which payment is made would be limited to the 
     percentage increase in the CPI. If payment is made to a 
     licensed pharmacy, the Secretary (as the Secretary determines 
     appropriate) would pay a dispensing fee (less applicable 
     deductible and insurance amounts).
       Requires the Secretary to conduct studies and surveys as 
     necessary to determine the average wholesale price (and such 
     other prices the Secretary determines appropriate). The 
     Secretary would report to the appropriate congressional 
     committees within six months of enactment on the results.
       Effective Date. Applies to drugs and biologicals furnished 
     on or after January 1, 1998.


                          Conference Agreement

       The conference agreement includes the House bill with 
     modifications. The provision would specify that if payment is 
     made to a licensed pharmacy, the Secretary (as the Secretary 
     determines appropriate) would pay a dispensing fee (less 
     applicable deductible and coinsurance amounts).
       The agreement would require the Secretary to study the 
     effect of the provision on average wholesale prices and 
     report the results of such study to the appropriate 
     committees of Congress by July 1, 1999.

   Coverage of Oral Anti-Nausea Drugs Under Chemotherapeutic Regimen

                  Section 10617 and 4617 of House bill


                              Current Law

       Medicare provides coverage for certain oral cancer drugs. 
     The Administration has specified that Medicare will pay for 
     self-administrable oral or rectal versions of self-
     administered anti-emetic drugs when they are needed for the 
     administration and absorption of primary Medicare covered 
     oral anticancer chemotherapeutic agents when a high 
     likelihood of vomiting exists.


                               House Bill

       Section 10617. Provides coverage, under specified 
     conditions, for an oral drug used as an acute anti-emetic 
     used as part of an anticancer chemotherapeutic regimen. It 
     would have to be administered by a physician (or as 
     prescribed by a physician) for use immediately before, at, or 
     within 48 hours after the time of administration of the 
     chemotherapeutic agent and used as a full replacement for the 
     anti-emetic therapy which would otherwise be administered 
     intravenously.
       Establishes a per dose payment limit equal to 90% 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 in 1996. The Secretary would be 
     required to make adjustments in the coverage of, or payment, 
     for the anti-nausea drugs so that an increase in aggregate 
     payments per capita does not result.
       Effective Date. Applies to services furnished on or after 
     January 1, 1998.
       Section 4617. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House bill with 
     modifications. It deletes the provisions specifying payment 
     limits. The Conferees expect that the oral forms of the anti-
     emetics will result in substantial cost savings to Medicare 
     relative to the intraveneous versions of anti-emetics.

                    Renal Dialysis-Related Services

               Sections 10621 and 4621 of the House bills


                              Current Law

       Medicare covers persons who suffer from end-stage renal 
     disease. Facilities providing dialysis services must meet 
     certain requirements.


                               House Bill

       Section 10621. Requires the Secretary to audit a sample of 
     cost reports of renal dialysis providers for 1995 and for 
     each third year thereafter. The Secretary would also be 
     required to develop and implement by January 1, 1999, a 
     method to measure and report on the quality of renal 
     dialysis services provided under Medicare in order to 
     reduce payments for inappropriate or low quality care.
       Effective date. Enactment.
       Section 4621. Identical provision


                            Senate Amendment

       No provision.


                          Conference Agreement

       The Conference agreement includes the House provision with 
     modifications. The Conference agreement would require each 
     provider to be audited at least once every three years. The 
     Conference agreement would require the Secretary to develop 
     by no later than January 1, 1999, and implement by no later 
     than January 1, 2000, a method to

[[Page H6234]]

     measure and report on the quality of renal dialysis services 
     provided under Medicare. The conference agreement does not 
     include the provision specifying that the quality measures 
     are to be implemented in order to reduce payments for 
     inappropriate or low quality care.

                       Chapter 7--Part B Premium

                             Part B Premium

    Section 10631 and 4631 of House bill and Section 5541 of Senate 
                               amendment


                              Current Law

       When Medicare was established in 1965, the Part B monthly 
     premium was intended to equal 50% of program costs. The 
     remainder was to be financed by federal general revenues, 
     i.e., tax dollars. Legislation enacted in 1972 limited the 
     annual percentage increase in the premium to the same 
     percentage by which social security benefits were adjusted 
     for cost-of-living increases (i.e., cost-of-living or COLA 
     adjustments). As a result, revenues dropped to below 25% of 
     program costs in the early 1980s. Since the early 1980s, 
     Congress has regularly voted to set the premium equal to 25% 
     of costs. Under current law, the 25% provision is extended 
     through 1998; the COLA limitation would again apply in 1999.


                               House Bill

       Section 10631. Sets permanently the Part B premium at 25% 
     of program costs.
       Effective Date. Enactment.
       Section 4631. Identical provision


                            Senate Amendment

       Similar provision
       Effective Date. Enactment


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language.

              Income-Related Reduction in Medicare Subsidy

                    Section 5542 of Senate amendment


                              Current Law

       Under current law, all beneficiaries, regardless of income, 
     pay the same Part B premium. The premium is equal to 25% of 
     program costs. The remaining 75% of Part B costs are paid 
     from Federal general revenues.
     (a) Amount


                               House Bill

       No provision.


                            Senate Amendment

       Specifies that individuals with incomes over $50,000 and 
     couples (filing joint returns) with incomes over $75,000 
     would be subject to an increased Part B premium. The Federal 
     subsidy would be phased out so that individuals with incomes 
     at $100,000 and couples with incomes at $125,000 would pay 
     100% of program costs. There would be a straight line sliding 
     scale phase-out of the subsidy for individuals with incomes 
     between $50,000 and $100,000 and couples with incomes between 
     $75,000 and $125,000. Income is defined as modified adjusted 
     gross income (AGI) for a taxable year. (Married couples 
     living together but filing separate returns would be subject 
     to a straight line sliding scale phase-out over the income 
     range from zero to $50,000)


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (b) Administration


                               House Bill

       No provision.


                            Senate Amendment

       Requires the Secretary to make an initial determination of 
     the amount of an individual's modified AGI for a year. Not 
     later than the preceding September, the Secretary would be 
     required to notify each individual the Secretary determines 
     would be subject to an increased premium. The determination 
     would be based on the individual's actual modified AGI for 
     the most recent taxable year for which such information is 
     available or other information provided to the Secretary by 
     the Secretary of the Treasury. The notice to the individual 
     would include the Secretary's estimate of the individual's 
     AGI for the year. The individual would have a 30 day period 
     (beginning with the date the notice is provided) to provide 
     information on the individual's anticipated AGI for the 
     forthcoming year. If the individual provides information 
     during this period, it would serve as the basis for 
     determining the individual's modified AGI.
       Requires the Secretary to make a premium adjustment if he 
     or she determined (based on information provided by the 
     Secretary of the Treasury) that actual modified AGI was 
     different from the amount initially determined. The 
     adjustment would be made to the subsequent year's premium to 
     account for any overpayments or underpayments in the previous 
     year.
       Requires the Secretary to increase the adjustment for an 
     underpayment if the initial determination was based on 
     information supplied by the individual. The increase would 
     equal the interest rate (as determined under the Internal 
     Revenue Code, compounded daily) applied to any underpayment. 
     The interest would accrue from the first day of the month 
     after the individual supplied information to the Secretary. 
     It would end 30 days before the first month for which the 
     monthly premium was increased to account for the 
     underpayment.
       Authorizes the Secretary to make appropriate recovery 
     efforts in the case of an individual who owed an additional 
     amount, but was not enrolled in Part B in the subsequent 
     year. The Secretary would also be authorized, in the case of 
     a deceased individual, to make payments to the surviving 
     spouse, or an individual's estate, in the case of 
     overpayments to the program.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (c) Definition of Modified AGI


                               House Bill

       No provision.


                            Senate Amendment

        Specifies that modified AGI would generally be defined as 
     such term is used in the tax Code. The determination of 
     modified AGI would be made without regard to provisions in 
     the Code relating to: income from U.S. savings bonds used to 
     pay higher education costs, income for persons living abroad, 
     and income from sources within the U.S. possessions and 
     Puerto Rico. The definition would include interest income 
     which is exempt from Federal taxes.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (d) Transfer of Premium Amounts


                               House Bill

       No provision.


                            Senate Amendment

       Specifies that Part B premium amounts attributable to the 
     income-related reduction in the Federal subsidy would be 
     transferred to the Part A trust fund. Amounts appropriated to 
     cover the government contribution to Part B would not take 
     into account the premium amounts attributable to the income-
     related reduction in the Federal subsidy.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (e) Impact on Other Part B Premium Calculations


                               House Bill

       No provision.


                            Senate Amendment

       Specifies that the delayed enrollment penalty would apply 
     to the income-related premium amount. The provision that 
     specifies that an individual's premium increase could not 
     result in a reduction in an individual's social security 
     check would not apply to persons subject to an income-related 
     premium.
       Specifies that individuals would be able to pay the 
     Secretary if the amount of estimated modified AGI is too low 
     and results in a portion of the required premium not being 
     deducted from the beneficiary's social security check.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (f) Reporting Requirements for Secretary of the Treasury


                               House Bill

       No provision.


                            Senate Amendment

       Permits the Secretary of the Treasury, upon written request 
     from the Secretary of HHS, to disclose to officers and 
     employees of HCFA return information for taxpayers required 
     to pay Part B premiums. The information would be limited to: 
     taxpayer identity information; filing status; AGI; amounts 
     excluded from gross income (under provisions relating to 
     savings bonds used to pay higher education costs and persons 
     living abroad); tax-exempt interest income to the extent such 
     information is available; and amounts excluded from gross 
     income (under provisions relating to income from sources 
     within U.S. possessions or Puerto Rico) to the extent such 
     information is available. The information disclosed to HCFA 
     could only be used for purposes of establishing the monthly 
     Part B premium.
       Effective Date. Applies to monthly premiums for months 
     beginning with January 1998. The Secretary would be permitted 
     to request taxpayer return information for taxable years 
     beginning after December 31, 1994.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.

       Demonstration Project on Income-Related Part B Deductible

                    Section 5543 of Senate amendment


                              Current Law

       No provision.


                               House Bill

       No provision.


                            Senate Amendment

       Requires the Secretary to conduct a demonstration project 
     in which individuals otherwise responsible for an income-
     related premium (under Section 5542 of the Senate amendment) 
     would instead be responsible for an income-related 
     deductible. The income limits and administrative procedures 
     would be the same as those used for the income-related 
     premium. The Secretary would conduct the project in a 
     representative number of sites and include a sufficient 
     number of individuals to ensure that the project produced 
     statistically valid findings. Participation in the project 
     would be on a voluntary basis. Individuals enrolled in a 
     Medigap plan could not participate in the project.
       Specifies that the project could not exceed a five-year 
     period. The Secretary would consult with appropriate 
     organizations and experts in conducting the project. The 
     Secretary would be permitted to waive compliance with 
     Medicare and Medicaid law to the extent determined necessary.

[[Page H6235]]

       Requires the Secretary to report on the project to Congress 
     within two years of enactment, within five years of 
     enactment, and biannually thereafter. The reports would 
     include a description of the demonstration projects; a 
     description of the utilization and health care status of 
     individuals participating in the project; and any other 
     information the Secretary determined to be appropriate.
       Effective Date. Enactment


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.

               Low Income Beneficiary Block Grant Program

                    Section 5544 of Senate amendment


                              Current Law

       Medicare beneficiaries are liable for specific cost-sharing 
     charges, namely premiums, deductibles, and coinsurance. 
     Certain low-income beneficiaries, known as qualified Medicare 
     beneficiaries (QMBs), are entitled to have their Medicare 
     cost-sharing charges paid by the Federal-State Medicaid 
     program. A QMB is an aged or disabled person with income at 
     or below the Federal poverty line ($7,890 for a single and 
     $10,610 for a couple in 1997) and resources below $4,000 for 
     an individual and $6,000 for a couple. Medicaid protection is 
     limited to payment of Medicare cost-sharing charges unless 
     the individual is otherwise entitled to Medicaid.
       States are also required to pay Medicare Part B premiums 
     for Specified Low-Income Medicare beneficiaries (SLIMBs). 
     These are persons who meet the QMB criteria, except that 
     their income is slightly over the QMB limit. The SLIMB limit 
     is 120% of the Federal poverty line. Medicaid protection is 
     limited to payment of the Medicare Part B premium unless the 
     individual is otherwise entitled to Medicaid.
       The Federal government and the States share in the payment 
     for QMB and SLIMB benefits according to the matching formula 
     applicable for Medicaid services (known as the Federal 
     Medical Assistance Percentage (FMAP)).


                               House Bill

       No provision (See Section 3422 in discussion of Medicaid).


                            Senate Amendment

       Requires the Secretary to establish a block grant program 
     to the States for the payment of Medicare Part B premiums for 
     persons meeting the SLIMB definition, except that their 
     income is between 120% and 150% of the Federal poverty line.
       Requires States to submit a grant application to the 
     Secretary. The Secretary would award grants to states with 
     approved applications. The amount of a state grant would bear 
     the same ratio to the total appropriated as the total number 
     of eligible persons in the state bears to the total eligible 
     population nationwide. The FMAP in a state with a grant would 
     be 100%.
       Authorizes the Secretary to transfer from Part B the 
     following amounts: $200 million in FY 1998, $250 million in 
     FY 1999, $300 million in FY 2000, $350 million in FY 2001, 
     and $400 million in FY 2002. The funds would remain available 
     without fiscal year limitation. The section would establish 
     budget authority and represent an obligation of the Federal 
     government. Grants could be made to the 50 States, the 
     District of Columbia, Puerto Rico, Guam, the Virgin Islands, 
     American Samoa, and the Northern Mariana Islands.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment. However, see Section 4731 which authorizes state 
     coverage of additional low-income Medicare beneficiaries 
     under the Medicaid program.

  Governmental Entities Eligible to Elect to Pay Part B Premiums for 
                          Eligible Individuals


                          Conference Agreement

       The conference agreement authorizes the Secretary to enter 
     into an agreement with any state or local governmental entity 
     specified by the Secretary for payment of the Part B late 
     enrollment penalty.

            Subtitle G--Provisions Relating to Parts A and B

                    Chapter 1--Home Health Services

     (a) Home health prospective payment

   Sections 10441 and 4441 of House bill and Section 5343 of Senate 
                               amendment


                              Current Law

       Medicare reimburses home health agencies on a retrospective 
     cost-based basis. This means that agencies are paid after 
     services are delivered for the reasonable costs (as defined 
     by the program) they have incurred for the care they provide 
     to program beneficiaries, up to certain limits. In provisions 
     contained in the Orphan Drug Act of 1983, OBRA 87 and OBRA 
     90, Congress required the Secretary to develop alternative 
     methods for paying for home health care on a prospective 
     basis. In 1994, the Office of Research and Demonstration in 
     the Health Care Financing Administration completed a 
     demonstration project that tested prospective payment on a 
     per visit basis. Preliminary analysis indicates that the per 
     visit prospective payment methodology had no effect on cost 
     per visit or volume of visits. The Health Care Financing 
     Administration has begun a second project, referred to as 
     Phase II, to test prospective payment on a per episode basis, 
     and has also undertaken research to develop a home health 
     case-mix adjustor that would translate patients' varying 
     service needs into specific reimbursement rates.


                               House Bill

       Section 10441. Requires the Secretary to establish a 
     prospective payment system for home health and implement the 
     system beginning October 1, 1999. All services covered and 
     paid on a reasonable cost basis at the time of enactment of 
     this section, including medical supplies, would be required 
     to be paid on a prospective basis. In implementing the 
     system, the Secretary could provide for a transition of not 
     longer than 4 years during which a portion of the payment 
     would be based on agency-specific costs, but only if 
     aggregate payments were not greater than they would have been 
     if a transition had not occurred.
       In establishing the prospective system, the Secretary would 
     be authorized to consider an appropriate unit of service and 
     the number 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.
       Under the new system, the Secretary would compute a 
     standard prospective payment amount (or amounts) that would 
     initially be based on the most current audited cost report 
     data available to the Secretary. For fiscal year 2000, 
     payment amounts under the prospective system would be 
     computed in such a way that total payments would equal 
     amounts that would have been paid had the system not been in 
     effect, but would also reflect a 15% reduction in cost limits 
     and per beneficiary limits in effect September 30, 1999. 
     Payment amounts would 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. The Secretary could recognize regional 
     differences or differences based on whether or not 
     services are provided in an urbanized area. Beginning with 
     fiscal year 2001, standard prospective payment amounts 
     would be adjusted by the home health market basket.
       The payment amount for a unit of home health service would 
     be adjusted by a case mix adjustor factor established by the 
     Secretary to explain a significant amount of the variation in 
     the cost of different units of service. The labor-related 
     portion of the payment amount would be adjusted by an area 
     wage adjustment factor that would reflect the relative level 
     of wages and wage-related costs in a particular geographic 
     area as compared to the national average. The Secretary could 
     provide for additions or adjustments to payment amounts for 
     outliers because of unusual variations in the type or amount 
     of medically necessary care. The total amount of outlier 
     payments could not exceed 5 percent of total payments 
     projected or estimated to be made in a year. The Secretary 
     would be required to reduce the standard prospective payments 
     by amounts that in the aggregate would equal outlier 
     adjustments. If a beneficiary were to transfer to or receive 
     services from another home health agency within the period 
     covered by a prospective payment amount, then the payment 
     would be prorated between the agencies involved.
       Claims for home health services furnished on or after 
     October 1, 1998, would be required to contain an appropriate 
     identifier for the physician prescribing home health services 
     or certifying the need for care. Claims would also be 
     required to include information (coded in an appropriate 
     manner) on the length of time of a service, as measured in 15 
     minute increments. The categories of services for which time 
     information would have to be included on a claim would be 
     skilled nursing care; therapies--physical and occupational 
     therapy and speech language pathology; medical social 
     services; and home health aide services.
       Administrative or judicial review would not be permitted 
     for the establishment of the transition period (if any) for 
     the prospective payment system; the definition and 
     application of payment units; the computation of initial 
     standard payment amounts; the establishment of the reduction 
     in the standard prospective payment amount for outliers and 
     the establishment of any adjustments for outliers; the 
     establishment of case-mix and area wage adjustments; and the 
     amounts or types of adjustments to the prospective payment 
     amounts.
       Periodic interim payments for home health services would be 
     eliminated. All home health care agencies would be paid 
     according to the prospective payment system.
       In order for home health services to be considered covered 
     care, home health care agencies would be required to submit 
     claims for all services, and all payments would be made to a 
     home health agency without regard to whether or not the item 
     or service was furnished by the agency, by others under 
     arrangement, or under any other contacting or consulting 
     arrangement.
       Effective date. Applies to cost-reporting periods beginning 
     on or after October 1, 1999.
       Section 4441. Identical provision.


                            Senate Amendment

       Identical provision, except requires the Secretary to 
     reduce cost limits and per beneficiary limits in effect 
     September 30, 1999, by 15%, even if the Secretary is not 
     prepared to implement the new prospective payment system 
     October 1, 1999.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language.
       The Conferees continue to be concerned about ``shell'' 
     certified home health agencies

[[Page H6236]]

     and support efforts to route out abuses that exist. However, 
     the Conferees believe that in establishing cost limits or a 
     prospective payment system for home health care, the 
     Secretary should consider state programs aimed at targeting 
     such abuses, particularly those that provide for increased 
     flexibility in the training and utilization of home health 
     aides.
     (b) Recapturing Savings Resulting from Temporary Freeze on 
         Payment Increases for Home Health Services (Sections 
         10711 and 4711 of House bill and Section 5341 of Senate 
         amendment)


                              Current Law

       Home health limits are updated annually. The Omnibus Budget 
     Reconciliation Act of 1993 (OBRA93) required that there be no 
     updates in home health cost limits (including no adjustments 
     for changes in the wage index or other updates of data) for 
     cost reporting periods beginning on or after July 1, 1994, 
     and before July 1, 1996.


                               House Bill

       Section 10711. Requires the Secretary, in establishing home 
     health limits for cost reporting periods beginning after 
     September 30, 1997, to capture the savings stream resulting 
     from the OBRA 93 freeze of home health limits by not allowing 
     for the market basket updates to the limits that occurred 
     during the cost reporting periods July 1, 1994 through June 
     30, 1996. In granting exemptions or exceptions to the cost 
     limits, the Secretary would not consider the preceding 
     provision for recapturing savings from the OBRA 93 freeze.
       Effective date. Enactment.
       Section 4711. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (c) Interim Payments for Home Health Services (Section 10712 
         and 4712 of House bill and Section 5342 of Senate 
         amendment)


                              Current Law

       Limits for individual home health services are set at 112 
     percent of the mean labor-related and nonlabor per visit 
     costs for freestanding agencies (i.e., agencies not 
     affiliated with hospitals). The limits are effective for cost 
     reporting periods beginning on or after July 1 of a given 
     year and ending June 30 of the following year.


                               House Bill

       Section 10712. Prior to implementation of the new home 
     health prospective payment system, reduces per visit cost 
     limits to 105 percent of the national median of labor-related 
     and nonlabor costs for freestanding home health agencies, 
     effective for cost-reporting periods beginning October 1, 
     1997 ( in effect, delaying the cycle for updating the 
     limits).
       In addition, for cost reporting periods beginning on or 
     after October 1, 1997, home health agencies would be paid the 
     lesser of: (1) their actual costs (i.e., allowable reasonable 
     costs); (2) the per visit limits, reduced to 105% of the 
     national median, applied in the aggregate; or (3) a new 
     blended agency-specific per beneficiary annual limit, applied 
     to the agency's unduplicated census count of Medicare 
     patients. The blended per beneficiary limit would be based 
     75% on an agency's own costs per beneficiary and 25% on the 
     average cost per beneficiary for agencies in the same census 
     region (adjusted for differences in labor costs). These costs 
     would be calculated using cost reports for cost reporting 
     periods ending in 1994, updated by the home health market 
     basket and would include the costs associated with non-
     routine medical supplies. For new providers and those 
     providers without a 12-month cost reporting period ending in 
     calendar year 1994, the per beneficiary limit would be equal 
     to the median of these limits (or the Secretary's best 
     estimates) applied to home health agencies. Home health 
     agencies that have altered their corporate structure or name 
     would not be considered new providers for these purposes. For 
     beneficiaries using more than one home health agency, the per 
     beneficiary limitation would be prorated among the agencies.
       The Secretary would be required to expand research on a 
     prospective payment system for home health 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 variance in cost. The 
     Secretary would be authorized to require all home health 
     agencies to submit additional information that is necessary 
     for the development of a reliable case-mix system, effective 
     for cost reporting periods beginning on or after October 1, 
     1997.
       Effective date. Enactment.
       Section 4712. Identical provision.


                            Senate Amendment

       Identical, except the per beneficiary limit would be based 
     strictly on agency-specific costs, and not on a blended 
     amount.


                          Conference Agreement

       The conference agreement includes the House provision with 
     amendments to (1) calculate the blended per beneficiary 
     limits based on 98 percent of 1994 costs; (2) specify that 
     the per beneficiary limits for new providers and others 
     without a 12-month cost reporting period ending in fiscal 
     year 1994 would be equal to the median of limits for home 
     health agencies; and (3) require the Secretary to establish 
     by April 1, 1998, per beneficiary limits that would be 
     effective for FY 1998.
     (d) Clarification of Part-Time or Intermittent Nursing Care 
         (Section 10713 and 4713 of House bill and Section 5363 of 
         Senate amendment)


                              Current Law

       Both Parts A and B of Medicare cover home health visits for 
     persons who need skilled nursing care on an intermittent 
     basis or physical therapy or speech therapy. Once 
     beneficiaries qualify for the benefit, the program covers 
     part-time or intermittent nursing care provided by or under 
     the supervision of a registered nurse and part-time or 
     intermittent home health aide services, among other services. 
     Coverage guidelines issued by HCFA have defined part-time and 
     intermittent.


                               House Bill

       Section 10713. Effective for services furnished on or after 
     October 1, 1997, includes in Medicare statute definitions for 
     part-time and intermittent skilled nursing and home health 
     aide services. For purposes of receiving skilled nursing and 
     home health aide services, ``part-time or intermittent'' 
     would mean 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 
     qualifying for Medicare's home health benefit because of a 
     need for intermittent skilled nursing care, 
     ``intermittent'' would mean 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).
       Effective date. Applies to services furnished on or after 
     October 1, 1997.
       Section 4713. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (e) Study on Definition of Homebound (Section 10714 and 4714 
         of House bill and Section 5364 of Senate amendment)


                              Current Law

       In order to be eligible for home health care, a Medicare 
     beneficiary must be confined to his or her home. The law 
     specifies that this ``homebound'' requirement is met when the 
     beneficiary has a condition that restricts the ability of the 
     individual to leave home, except with the assistance of 
     another individual or with the aid of a supportive device 
     (such as crutches, a cane, a wheelchair, or a walker), or if 
     the individual has a condition such that leaving his or her 
     home is medically contraindicated. The law further specifies 
     that while an individual does not have to be bedridden to be 
     considered confined to home, the condition of the individual 
     should be such that there exists a normal inability to leave 
     home, that leaving home requires a considerable and taxing 
     effort by the individual, and that absences from home are 
     infrequent or of relatively short duration, or are 
     attributable to the need to receive medical treatment.


                               House Bill

       Section 10714. Requires the Secretary of Health and Human 
     Services to conduct a study on the criteria that should be 
     applied, and the method for applying criteria, to the 
     determination of whether an individual is considered 
     homebound for purposes of qualifying for Medicare's home 
     health benefit. The Secretary would be required to report to 
     Congress no later than October 1, 1998, and make specific 
     recommendations on such criteria.
       Effective date. Enactment.
       Section 4714. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (f) Payment Based on Location Where Home Health Service is 
         Furnished (Section 10715 and 4715 of House bill and 
         Section 5344 of Senate amendment)


                              Current Law

       Some home health agencies are established with the home 
     office in an urban area and branch offices in rural areas. 
     Payment is based on where the service is billed, in this case 
     the urban area with its higher wage rate, even if the service 
     had been delivered in a rural area.


                               House Bill

       Section 10715. Effective for cost reporting periods 
     beginning on or after October 1, 1997, requires home health 
     agencies to submit claims on the basis of the location where 
     a service is actually furnished.
       Effective date. Applies to cost reporting periods beginning 
     on or after October 1, 1997.
       Section 4715. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.

[[Page H6237]]

     (g) Normative Standards for Home Health Claims Denials 
         (Section 10716 and 4716 of House bill and Section 5365 of 
         Senate amendment)


                              Current Law

       As long as they remain eligible, home health users are 
     entitled to unlimited number of visits.


                               House Bill

       Section 10716. Authorizes the Secretary to establish 
     normative guidelines for the frequency and duration of home 
     health services. Payments would be denied for visits that 
     exceed the normative standards. Also authorizes the Secretary 
     to establish a process for notifying a physician in which the 
     number of home health visits furnished according to a 
     prescription or certification of the physician significantly 
     exceeds the threshold normative number of visits that would 
     be covered for specific conditions or situations.
       Effective date. Applies to services on or after October 1, 
     1997.
       Section 4716. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment.
     (h) No Home Health Benefits Based Solely on Drawing Blood 
         (Section 10717 and 4717 of House bill)


                              Current Law

       In order to qualify for Medicare's home health benefit, a 
     person must be homebound and be in need of intermittent 
     skilled nursing care or physical or speech therapy.


                               House Bill

       Section 10717. Clarifies that a person could not qualify 
     for Medicare's home health benefit on the basis of needing 
     skilled nursing care for venipuncture for the purpose of 
     obtaining a blood sample.
       Effective date. Applies to home health services furnished 
     beginning 6 months after enactment.
     Section 4717. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision.
     (I) Copayment for Part B Home Health Services (Section 5362 
         of Senate amendment)


                              Current Law

       Medicare's home health benefit is subject neither to 
     deductibles nor coinsurance.


                               House Bill

       No provision.


                            Senate Amendment

       Establishes a $5 per visit copayment for Part B covered 
     home health services, billed monthly, and capped annually at 
     an amount equal to the Part A hospital deductible.
       Effective date. Applies to services furnished on or after 
     October 1, 1997.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (j) Inclusion of Cost of Service in Explanation of Medicare 
         Benefits (Section 5366 of Senate amendment)


                              Current Law

       The Health Care Financing Administration is required to 
     include certain information in the explanation of benefits 
     that beneficiaries receive following the provision of 
     services.


                               House Bill

       No provision.


                            Senate Amendment

       Requires, in the case of home health services covered under 
     Part B, that the explanation of benefits include information 
     about the total amount the home health agency billed for 
     services provided.
       Effective date. Applies to explanation of benefits provided 
     on and after October 1, 1997.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.
     (k) Transfer of Certain Home Health Visits to Part B 
         (Sections 10531 and 4718 of House bill and Section 5361 
         of Senate amendment)


                              Current Law

       Both Parts A and B of Medicare cover home health. Neither 
     part of the program applies deductibles or coinsurance to 
     covered visits, and beneficiaries are entitled to an 
     unlimited number of visits as long as they meet eligibility 
     criteria. Section 1833(d) of Medicare law prohibits payments 
     to be made under part B for covered services to the extent 
     that individuals are also covered under Part A for the same 
     services. As a result, the comparatively few persons who have 
     no Part A coverage are the only beneficiaries for whom 
     payments are made under Part B.


                               House Bill

       Section 10531. Gradually transfers from Part A to Part B 
     home health visits that are not part of the first 100 visits 
     following a beneficiary's stay in a hospital or skilled 
     nursing facility and during a home health spell of illness. 
     The transfer would be phased in over a period of 6 years 
     between 1998 and 2003. In order to determine what portion of 
     visits to transfer in a given year, the Secretary would first 
     estimate the amount of payments that would have been made if 
     (1) Part A home health services had the definition they did 
     before enactment of this section and (2) Part A home health 
     services were limited to the 100 visits following an 
     institutional stay. The Secretary would next determine the 
     difference between the two amounts for each year 1998 through 
     2002 and then multiply that amount by a proportion specified 
     for the given year. For 1998, the proportion is 1/6; for 
     1999, 2/6; for 2000, 3/6; for 2001, 4/6; for 2002, 5/6; and 
     for 2003, 6/6. The Secretary would be required to specify a 
     visit limit or a post-institutional limitation that would 
     result in a reduction in the amount of Part A home health 
     payments equal to the transfer amount specified above. On 
     or after January 1, 2003, Part A would cover only post-
     institutional home health services for up to 100 visits 
     during a home health spell of illness, except for those 
     persons with Part A coverage only who would be covered for 
     services without regard to the post-institutional 
     limitation.
       The increase in the Part B premium attributable to the 
     transferred visits would be phased in over a period of 7 
     years, between 1998 and 2004. For 1998, the Part B premium 
     would be increased by one-seventh of the extra costs due to 
     the transfer; for 1999, the Part B premium would be increased 
     by two-sevenths of the extra costs; for 2000, three-sevenths; 
     for 2001, four-sevenths; for 2002, five-sevenths; for 2003, 
     six-sevenths; and for 2004, the total of the extra costs due 
     to the transfer.
       Post-institutional home health services would be defined as 
     services furnished to a Medicare beneficiary: (1) after an 
     inpatient hospital or rural primary care hospital stay of at 
     least 3 days, initiated within 14 days after discharge; or 
     (2) after a stay in a skilled nursing facility, initiated 
     within 14 days after discharge. Home health spell of illness 
     would be defined as the period beginning when a patient first 
     receives post-institutional home health services and ending 
     when the beneficiary has not received inpatient hospital, 
     skilled nursing facility, or home health services for 60 
     days.
       Claims administration for transferred visits would continue 
     to be done by Part A fiscal intermediaries.
       The threshold for hearings before an administrative law 
     judge on disputed claims would be $100 for home health 
     services covered under Part B.
       Effective date. Applies to services furnished on or after 
     January 1, 1998.
       Section 4718. All home health visits that are not post-
     hospital visits would be transferred from Part A to Part B 
     effective October 1, 1997. Post-hospital home health services 
     would be defined as the first 100 visits furnished to an 
     individual under a plan of treatment established when the 
     individual is an inpatient of a hospital or rural primary 
     care hospital for at least 3 consecutive days, or during a 
     covered SNF stay, so long as services are initiated within 30 
     days after discharge from the institution. The Secretary 
     would be required to calculate the increase in the Part B 
     premium attributable to the transfer. This increase would be 
     phased in over a period of 7 years, between 1998 and 2004. 
     For 1998, the Part B premium would be increased by one-
     seventh of the extra costs due to the transfer; for 1999, the 
     Part B premium would be increased by two-sevenths of the 
     extra costs; for 2000, three-sevenths; for 2001, four-
     sevenths; for 2002, five-sevenths; for 2003, six-sevenths; 
     and for 2004, the total of the extra costs due to the 
     transfer.
       Identical provision regarding hearings for home health 
     disputed claims, but no provision on fiscal intermediary 
     administration of transferred Part B home health visits.
       The Secretary would be required to submit to Congress by 
     October 1, 1999, a report on the impact on home health 
     utilization and admissions to hospitals and skilled nursing 
     facilities of covering only the first 100 post-hospital home 
     health visits under Part A. In addition, the Secretary would 
     be required to re-examine and submit a report on this impact 
     1 year after the full implementation of the home health 
     prospective payment system required under the bill.
       Effective date. Applies to services furnished on or after 
     October 1, 1997.


                            Senate Amendment

       Similar to Section 10531, except that transfer to Part B 
     (of home health visits that are not part of the first 100 
     post-institutional visits) would take place over a period of 
     7 years, rather than 6.


                          Conference Agreement

       The conference agreement includes the House Ways and Means 
     provision as included in section 10531, with an amendment to 
     require the Secretary to transfer, over the 6-year period and 
     in the specified proportions, expenditures rather than 
     visits.
       The conference agreement also includes a provision 
     requiring the Secretary, not later than October 1, 1997, to 
     report to the Commerce, Ways and Means, and Finance 
     Committees on an estimate of Medicare home health outlays 
     under parts A and B during each of the fiscal years 1998 
     through 2002. Not later than the end of each of the years 
     1999 through 2002, the Secretary would also be required to 
     submit a report that compares actual outlays with estimated 
     outlays. If the Secretary finds for a fiscal year that actual 
     outlays were greater than estimated outlays, the report would 
     also be required to include recommendations regarding 
     beneficiary copayments or such other methods as will reduce 
     the growth in outlays for Medicare home health services.

[[Page H6238]]

                 Chapter 2--Graduate Medical Education

                Subchapter A--Indirect Medical Education

         Reduction in Adjustment for Indirect Medical Education

    Section 10506 of the House bill and Section 5446 of the Senate 
                               amendment


                              Current Law

       Medicare recognizes the costs of graduate medical education 
     in teaching hospitals and the higher costs of providing 
     services in those institutions. Medicare recognizes the costs 
     of graduate medical education under two mechanisms: direct 
     graduate medical education (GME) payments and an indirect 
     medical education (IME) adjustment. The IME is designed to 
     compensate hospitals for indirect costs attributable to the 
     involvement of residents in patient. The additional payment 
     to a hospital is based on a formula that provides an increase 
     of approximately 7.7 percent in the DRG payment, for each 
     10 percent increase in the hospital teaching intensity 
     (based on its intern and resident-to-bed).


                               house bill

       Reduces the IME adjustment from the current aggregate 7.7% 
     to 6.6% in FY 1998, and to 5.5% during and after FY 1999. For 
     discharges occurring on or after October 1, 1997, the total 
     number of residents and interns in either a hospital or non-
     hospital setting could not exceed the number of interns and 
     residents reported on the hospital's cost report for the 
     period ending December 31, 1996. For hospital's first cost 
     reporting period beginning on or after October 1, 1997, the 
     total number of FTE residents and interns for payment 
     purposes would equal the average of the actual FTE resident 
     and intern count for the cost reporting period and the 
     preceding year's cost reporting period. For the cost 
     reporting period beginning October 1, 1998, and each 
     subsequent cost reporting period, subject to certain limits, 
     the total number of FTE residents and interns for payment 
     purposes would equal the average of the actual FTE resident 
     count for the cost reporting period and the preceding two 
     year's cost reporting periods. The Secretary would have 
     discretion to establish rules for new residency programs.
       Effective Date. Enactment.


                            senate amendment

       Similar provision, except reduces the IME adjustment from 
     the current 7.7% to 7.0% in FY 1998; to 6.5% in FY 1999; to 
     6.0% in FY 2000; and to 5.5% in FY 2001 and subsequent years.
       The provision would authorize the Secretary to allow 
     hospitals with new approved residency training programs, for 
     the first 5 years of such a program, an additional amount of 
     FTE interns and residents, subject to the overall limit on 
     the total number of FTE interns and residents. The additional 
     number of FTE residents could not exceed the amount which 
     would result in the number of FTE interns or residents for 
     all hospitals exceeding the number for the preceding year. In 
     allocating any additional residents, the Secretary would be 
     required to give special consideration to facilities that 
     meet the needs of underserved rural areas.
       For discharges occurring on or after October 1, 1997, all 
     the time spent by an intern or resident in patient care 
     activities under an approved residency training program in a 
     nonhospital setting would be counted towards the 
     determination of FTEs if the hospital incurred all, or 
     substantially all, of the costs of the training program in 
     that setting.
       Effective Date. Enactment.


                          conference agreement

       The conference agreement includes the Senate provision with 
     amendments. The conference agreement includes a requirement 
     that the Secretary prescribe rules for limiting and counting 
     the number of interns and residents in training programs 
     established on or after January 1, 1995. The Secretary would 
     be required to prescribe special rules for new and developing 
     medical residency training programs. In promulgating such 
     rules, the Secretary would be required to give special 
     consideration to facilities that meet the needs of 
     underserved rural areas.
       The conference agreement includes new permission for 
     hospitals to rotate residents through non-hospital settings, 
     which include primarily ambulatory care settings, without 
     reduction in indirect medical education funds. The Conferees 
     are concerned about the current lack of data on the number of 
     residents receiving training in ambulatory care sites. To 
     address this matter, the Secretary is directed to develop an 
     inventory of the number and types of such sites and the 
     average number of residents at these sites. The Conferees 
     also intend that the Secretary include in this inventory 
     residents in training at qualified non-hospital providers 
     which receive direct graduate medical education payments, as 
     provided elsewhere in this legislation.

Graduate Medical Education and Indirect Medical Education Payments for 
                         Managed Care Enrollees

Section 4008 of the House bill and Section 5451 of the Senate amendment


                              current law

       Medicare payments to risk-contract HMOs include amounts 
     that reflect Medicare's fee-for-service payments to hospitals 
     in an area for indirect and direct graduate medical education 
     costs.
       (a) Payments to Managed Care Organizations Operating 
     Graduate Medical Education Programs.


                               house bill

       Amends Section 1853 of the new Medicare Part C of the 
     Social Security Act, as established by this legislation, to 
     establish a mechanism for the allocation of payments for 
     direct GME and IME costs carved out from the AAPCCs and 
     MedicarePlus capitation rates to be made to risk contract 
     plans under Section 1876 and MedicarePlus organizations. 
     Beginning January 1, 1998, each contract with a MedicarePlus 
     organization would be required to provide an additional 
     payment for Medicare's share of allowable direct GME costs 
     incurred by the organization for an approved medical 
     residency program. A MedicarePlus organization that incurred 
     all or substantially all of the costs of the medical 
     residency program would receive a payment equal to the 
     national average per resident amount times the number of 
     full-time-equivalent (FTE) residents in the program in non-
     hospital settings. The Secretary would be required to 
     estimate the national average per resident amount equal to 
     the weighted average amount that would be paid per FTE 
     resident under the direct GME payment in a calendar year. A 
     separate determination would be required to be made for 
     primary care residency programs as defined by Medicare, 
     including obstetrics and gynecology residency programs.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement does not include the House bill.
     (b) Payments to Hospitals for Direct and Indirect Costs of 
         Graduate Medical Education Programs Attributable to 
         Managed Care Enrollees.


                               house bill

       Amends Part C of Medicare, as amended by Section 4001 of 
     the bill, by inserting a new section 1858, ``Payments to 
     Hospitals for Certain Costs Attributable to Managed Care 
     Enrollees.''
       The Secretary would be required to make additional payments 
     for the direct GME costs to PPS and PPS-exempt hospitals and 
     hospitals located in a state with a state hospital 
     reimbursement control system for services furnished to 
     Medicare beneficiaries enrolled in managed care. These 
     payments would be phased in over 5 years in the same 
     proportion as amounts are deducted (carved out) from Medicare 
     managed care plans under the new Section 1853 established by 
     the bill. Total payments under this provision could not 
     exceed amounts deducted (carved out) of the MedicarePlus 
     capitation rates. Subject to certain limits, the direct GME 
     payment amount would be equal to the product of: (1) the 
     aggregated approved amount of direct GME payments for the 
     period, and (2) the fraction of the total number of 
     inpatient-bed-days determined by the Secretary during the 
     period which was attributable to Medicare managed care 
     enrollees. The Secretary would be required to separately 
     determine the direct GME payment amount that would be paid to 
     hospitals in a state with a reimbursement control system.
       The IME payment amount would be determined, subject to 
     certain limits, as equal to the product of: (1) the amount of 
     the IME adjustment factor applicable to the hospital under 
     PPS, and (2) the product of (I) the number of discharges 
     attributable to Medicare managed care enrollees and (ii) the 
     estimated average per discharge amount that would otherwise 
     have been paid under PPS if the individuals had not been 
     enrolled in a managed care plan. The Secretary would also be 
     required to make payments for the costs attributable to 
     Medicare managed care enrollees, subject to certain limits in 
     the same way as the direct GME payment amount. The Secretary 
     would be required to separately determine the IME payment 
     amounts that would be paid to hospitals in a state with a 
     reimbursement control system.
       Effective date. Applies to contracts entered into on or 
     after January 1, 1998.


                            senate amendment

       Provides for additional direct GME payments to hospitals 
     for the services provided to Medicare managed care enrollees 
     for cost reporting periods beginning on or after January 1, 
     1998. Payments would be equal to the product of (1) the 
     aggregate approved direct GME amount for the hospital in that 
     period, and the fraction of the total number of inpatient-bed 
     days attributable to Medicare managed care enrollees. The 
     direct GME payment amount would be phased in over a 4-year 
     period. The Secretary would be required to determine 
     separately the direct GME payment amount that would be paid 
     to hospitals in a state with a reimbursement control system.
       The Secretary would also be required to make additional 
     payments to PPS hospitals and hospitals located in a state 
     with a rate setting system for IME costs attributable to 
     providing services to Medicare managed care enrollees. The 
     amount of the payment would be phased in over 4 years and be 
     the product of (1) the aggregate approved amount for that 
     period, and (2) the fraction of the total number of 
     inpatient-bed days attributable to Medicare managed care 
     enrollees.
       Effective date. Applies to contracts entered into on or 
     after January 1, 1998.


                          conference agreement

       The conference agreement includes the Senate provision with 
     amendments to phase in the payments over 5 years equal to 20% 
     in 1998; 40% in 1999; 60% in 2000; 80% in 2001; and 100% in 
     2002.

[[Page H6239]]

            Subchapter B--Direct Graduate Medical Education

 Limitation on Payment Based on Number of Residents and Implementation 
                      of Rolling Average FTE Count

  Sections 10731 and 4731 of the House bills and Section 5441 of the 
                            Senate amendment


                              current law

       The direct costs of approved graduate medical education 
     (GME) programs (such as the salaries of residents and 
     faculty, and other costs related to medical education 
     programs) are excluded from PPS and are paid on the basis of 
     a formula that reflects Medicare's share of each hospital's 
     per resident costs. Medicare's payment to each hospital 
     equals the hospital's costs per full-time-equivalent (FTE) 
     resident, times the weighted average number of FTE residents, 
     times the percentage of inpatient days attributable to 
     Medicare Part A beneficiaries. Each hospital's per FTE 
     resident amount is calculated using data from the hospital's 
     cost reporting period that began in FY 1984, increased by 1 
     percent for hospital cost reporting periods beginning July 1, 
     1985, and updated in subsequent cost reporting periods by the 
     change in the CPI. OBRA 93 provided that the per resident 
     amount would not be updated by the CPI for costs reporting 
     periods during FY 1994 and FY 1995, except for primary care 
     residents and residents in obstetrics and gynecology. The 
     number of FTE residents is weighted at 100 percent for 
     residents in their initial residency period (i.e., the 
     number of years of formal training necessary to satisfy 
     specialty requirements for board eligibility). Residents 
     in preventive care or geriatrics are allowed a period of 
     up to 2 additional years in the initial residency training 
     period. For residents not in their initial residency 
     period, the weighting factor is 50 percent. On or after 
     July 1, 1986, residents who are foreign medical graduates 
     can only be counted as FTE residents if they have passed 
     designated examinations.


                               house bill

       Section 10731. For cost reporting periods beginning on or 
     after October 1, 1997, limits the total number of full-time 
     equivalent (FTE) residents for which Medicare would make 
     payments to the number of FTE residents in medical residency 
     training program during the hospital's cost reporting period 
     ending December 31, 1996. For cost reporting periods 
     beginning on or after October 1, 1997, the total number of 
     FTE equivalent residents counted for determining the 
     hospital's direct GME payment would equal the average FTE 
     counts for the cost reporting period and the preceding cost 
     reporting period. For each subsequent cost reporting period, 
     the total number of FTEs residents counted for determining 
     the hospital's direct GME payment, would be equal to the 
     average of the actual FTE counts for the cost reporting 
     period and preceding two cost reporting periods. The 
     provision would allow that, if a hospital's cost reporting 
     period beginning on or after October 1, 1997, was not equal 
     to 12 months, the Secretary would make appropriate 
     modifications to ensure that the average FTE resident counts 
     were based on the equivalent of full 12-month cost reporting 
     periods. The provision would require the Secretary to 
     establish rules for new residency medical training programs.
       Effective Date. Enactment.
       Section 4731. Similar provision, except would not require 
     the Secretary to establish rules for new programs. The 
     provision would exclude dental residents from the counts of 
     FTE residents.


                            senate amendment

       Similar provision, except limit on the total number of 
     residents specifically includes only residents in a 
     hospital's approved medical residency training program in the 
     fields of allopathic medicine and osteopathic medicine. The 
     provision would count the number of FTE residents as equal to 
     the FTE count for the cost reporting period and the preceding 
     two cost reporting periods. For new residency programs, 
     defined as programs in their first five years of existence, 
     the provision would authorize the Secretary to provide an 
     additional amount of FTE residents, as long as the number of 
     new FTEs would not cause the total number of all FTE 
     residents for all programs to exceed the total number of FTEs 
     in the preceding year. In allocating additional FTE 
     residents, the Secretary would be required to give special 
     consideration to facilities that meet the needs of the 
     underserved rural areas.


                          conference agreement

       The conference agreement includes the Senate provision with 
     amendments including a requirement that the Secretary 
     prescribe rules for limiting and counting the number of 
     interns and residents in training programs established on or 
     after January 1, 1995. In promulgating such rules, the 
     Secretary would be required to give special consideration to 
     facilities that meet the needs of underserved rural areas.
       The conference agreement provides for a ``cap'' or limit on 
     the number of residents that may be reimbursed by the 
     Secretary, on a national and a facility level, both in this 
     section and in an earlier provision on indirect medical 
     education payments. However, the Conferees recognize that 
     such limits raise complex issues, and provide for specific 
     authority for the Secretary to promulgate regulations to 
     address the implementation of this provision. The Conferees 
     believe that rulemaking by the Secretary would allow careful 
     but timely consideration of this matter, and that the record 
     of the Secretary's rulemaking would be valuable when Congress 
     revisits this provision.
       Among the specific issues that concerned the Conferees was 
     application of a limit to new facilities, that is, hospitals 
     or other entities which established programs after January 1, 
     1995. The Conferees understand that there are a sizeable 
     number of hospitals that elect to initiate such programs (as 
     well as terminate such programs) over any period of time, and 
     the Conferees are concerned that within the principles of the 
     cap that there is proper flexibility to respond to such 
     changing needs, including the period of time such programs 
     would be permitted to receive an increase in payments before 
     a cap was applied. Nonetheless, the Secretary's flexibility 
     is limited by the conference agreement that the aggregate 
     number of FTE residents should not increase over current 
     levels.
       In addition, the Conferees have included a provision for 
     direct medical education payments to entities not previously 
     eligible, including Federally qualified health centers, rural 
     health centers, and Medicare+Choice organizations. The 
     Secretary is expected to establish rules for such payments 
     within the principles established by this provision.
       Another issue was the treatment of institutions which are 
     members of an affiliated group. In some circumstances, the 
     Conferees believe that the intent of this provision would 
     best be met by providing an aggregate limit for such 
     affiliates or consortia rather than a per facility limit. 
     Examples of consortia include an institution that operates 
     affiliated programs at various sites nationwide, and a group 
     of community-based hospitals that together provide for 
     residency training in conjunction with a medical school.
       The Conferees are also concerned about the application of 
     the limit on the number of residents to programs established 
     to serve rural underserved areas, which the Conferees believe 
     have special importance in easing physician shortages in such 
     areas. The conference agreement provides the Secretary with 
     statutory direction to provide special consideration to such 
     programs.
       The Conferees also note that a facility limit on the number 
     of residents was provided, rather than any direction on 
     payments according to specialty of physicians in training, to 
     specifically avoid the involvement by the Secretary in 
     decision making about workforce matters. The 
     Conferees emphatically believe such decisions should 
     remain within each facility, which is best able to respond 
     to clinical needs and opportunities.
       With regard to graduate medical education payments, the 
     Conferees also note that the Secretary reimburses for the 
     training of certain allied health professionals, and urges 
     the Secretary to include physician assistants and 
     psychologists under such authority.

  Phased-In Limitation on Hospital Overhead and Supervisory Physician 
              Component of Direct Medical Education Costs

               Sections 10732 and 4732 of the House bills


                              Current Law

       Medicare's direct medical education costs for a cost 
     reporting period includes an aggregate amount that is the 
     product of the hospital's approved FTE resident amount and 
     the weighted average number of FTE residents in the hospitals 
     approved medical residency training programs in that period.


                               House Bill

       Section 10732. Phases in over five years a limitation on 
     hospital overhead and supervisory physician costs. For 
     hospitals with overhead GME amounts that exceed the 75 
     percentile of the overhead GME for all hospitals, the GME 
     amount made for periods beginning on or after October 1, 
     1997, would be reduced by the lesser of: (1) 20% of the 
     amount by which the overhead GME amount exceeds the 75th 
     percentile amount, or (2) 15% of the hospital's overhead GME 
     amount otherwise determined without regard to this provision.
       The overhead GME amount for a period would be the product 
     of the percentage of the hospital's per resident payment 
     amount for the base period that was not attributable to 
     salaries and fringe benefits, and the hospital specific per 
     resident payment amount for the period involved. The base 
     period would be defined as the cost reporting period 
     beginning in FY 1984 or the period used to establish the 
     hospital's per resident payment amount for hospitals that did 
     not have approved residency training programs in FY 1984. The 
     Secretary would be required to establish rules for hospitals 
     that initiate residency training programs during or after the 
     base period.
       Effective Date. Applies to per resident payment amounts 
     attributable to periods beginning on or after October 1, 
     1997.
       Section 4732. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House bill with an 
     amendment which would require the Secretary to conduct a 
     study on the variations among hospitals in hospital overhead 
     and supervisory physician components of their direct medical 
     education costs, and the reasons for such variations. The 
     report would be required to be submitted to the Congress no 
     later than one year after enactment.
       The Conferees are aware of and concerned about studies and 
     reports from the Prospective Payment Assessment Commission 
     and

[[Page H6240]]

     the Physician Payment Review Commission that describe wide 
     variation in hospital-specific per resident payment amounts. 
     The Conferees have directed the Secretary to study and report 
     back to the Committees of jurisdiction on reasons for such 
     variations and to provide recommendations to reduce such 
     variation, as appropriate, to provide greater payment equity 
     among all teaching facilities receiving direct graduate 
     medical education payments.

              Permitting Payment to Non-Hospital Providers

  Sections 10733 and 4733 of the House bills and Section 5442 of the 
                            Senate amendment


                              Current Law

       No provision.


                               House Bill

       Section 10733. Requires the Secretary to submit to 
     Congress, no later than 18 months after enactment, a proposal 
     for payment to qualified non-hospital providers for their 
     direct costs of medical education, if those costs were 
     incurred in the operation of a Medicare approved medical 
     residency training program. The Secretary would be required 
     to specify the amounts, form, and manner in which such 
     payments would be made, and the portion of the payments that 
     would be made from each of the Medicare trust funds. The 
     Secretary would be authorized to implement the proposal for 
     residency years beginning no earlier than 6 months after the 
     date the report is submitted. Qualified non-hospital 
     providers could include federally qualified health centers, 
     rural health clinics, MedicarePlus organizations, and other 
     providers the Secretary determines to be appropriate.
       The provision would also require the Secretary to reduce 
     the hospital's approved amount to the extent payment would be 
     made to non-hospital providers for residents included in the 
     hospital's count of FTE residents. In the case of residents 
     not included in the FTE count, the Secretary would be 
     required to provide for such a reduction in aggregate 
     approved hospital payment amounts under this subsection to 
     assure that the application of non-hospital providers does 
     not result in any increase in expenditures than would have 
     occurred if payments were not made to non-hospital providers.
       Effective Date. Enactment.
       Section 4733. Similar provision, except does not include 
     MedicarePlus organizations as a qualified non-hospital 
     provider.


                            Senate Amendment

       Authorizes the Secretary to establish rules for payment to 
     qualified nonhospital providers for their direct costs of 
     medical education for cost reporting periods beginning on or 
     after October 1, 1997, if the costs were incurred in the 
     operation of a Medicare approved medical residency training 
     program. The rules would be required to specify the amounts, 
     form, and manner in which payments will be made and the 
     portion of such payments that would be made from each of the 
     Medicare trust funds.
       Qualified non-hospital providers are similar, except would 
     not include MedicarePlus organizations.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     an amendment to include Medicare+Choice organizations as 
     qualified nonhospital providers.
       The Conferees believe this authority may help alleviate 
     physician shortages in underserved rural areas. The Conferees 
     also note that preventive medicine residency training occurs 
     most often in non-hospital settings, and the Conferees 
     encourage the Secretary to examine carefully the 
     opportunities to provide support to such training programs.

  Incentive Payments Under Plans for Voluntary Reduction in Number of 
                               Residents

               Sections 10734 and 4734 of the House bills


                              Current Law

       No provision.


                               House Bill

       Section 10734. Establishes a program to provide incentive 
     payments to qualifying entities that developed plans for the 
     voluntary reduction in the number of residents in a training 
     program. For voluntary residency reduction plans for which an 
     application was approved, the qualifying entity submitting 
     the plan would be required to be paid an applicable 
     percentage (defined below) equal to the sum of the following: 
     (1) the amount of payment which would have been made under 
     this subsection if there had been a 5% reduction in the 
     number of FTE residents in the approved medical education 
     training programs as of June 30, 1997, exceeded the amount of 
     the payment which would be made taking into account the 
     reduction in the number effected FTEs under the plan; and, 
     (2) the amount of the reduction in payment under Medicare's 
     indirect medical education adjustment that was attributable 
     to the reduction in the number of residents effected under 
     the plan.
       The base number of residents would be defined as the number 
     of FTE residents in the residency training program of the 
     entity as of June 30, 1997. The ``applicable hold harmless 
     percentage'' for entities electing a 5-year reduction plan 
     would be 100% for the first and second residency training 
     years of the reduction plan; 75% in the third year; 50% in 
     the fourth year; and 25% in the fifth year. The ``applicable 
     hold harmless percentage'' for entities electing a 6-year 
     reduction plan would be 100% in the first residency training 
     year of the plan; 95% in the second year of the plan; 85% in 
     the third year; 70% in the fourth year; 50% in the fifth 
     year; 25% in the sixth year. In addition, if payments were 
     made under this program to an entity that increased the 
     number of FTE residents above the number provided in the 
     plan, the entity would then be liable for repayment to the 
     Secretary of the total amount paid under the plan. The 
     Secretary would also be required to establish rules regarding 
     the counting of residents who are assigned to institutions 
     that do not have medical residency training programs 
     participating in a residency reduction plan.
       The provision specifies that qualifying entities would 
     include individual hospitals operating one or more approved 
     medical residency training programs; two or more hospitals 
     operating residency programs that apply as a single 
     qualifying entity; or a qualifying consortium. In the case of 
     an application by a qualifying entity consisting of two 
     hospitals, the Secretary would be prohibited from approving 
     the application unless the application represented that the 
     qualifying entity either would not: (1) reduce the number of 
     FTE residents in primary care during the period of the plan, 
     or (2) reduce the proportion of its residents in primary care 
     (to the total number of residents) below such proportion as 
     in effect during the period the residency reduction plan was 
     in effect. In the case of an application from a consortia, 
     the Secretary would be prohibited from approving the 
     application unless the application represented that the 
     qualifying consortium would not reduce the proportion of 
     residents in primary care (to total residents) below such 
     proportion in effect during the period the residency 
     reduction plan was in effect.
       For individual hospital applicants, the number of FTE 
     residents in all the approved medical residency training 
     programs operated by or through the facility would be 
     required to be reduced as follows: (1) if the base number of 
     residents exceeded 750 residents, by a number equal to at 
     least 20% of the base number; (2) if the base number of 
     residents exceeded 500, but was less than 750 residents, by 
     150 residents; (3) if the base number of residents did not 
     exceed 500 residents, by a number equal to at least 25% of 
     the base number; (4) in the case of a qualifying entity that 
     was a consortia, by a number equal to at least 20% of the 
     base number. The reductions in the number of FTE residents in 
     the approved medical residency programs operated through or 
     by an entity would be below the base number of residents for 
     the entity and would be fully effective no later than the 5th 
     residency training year for entities electing a 5-year plan, 
     or the 6th residency training year for entities making the 
     election of a 6-year reduction plan.
       The provision would require that entities provide assurance 
     that in reducing the number of residents, the entities would 
     maintain the number of primary care residents. Entities would 
     be required to provide assurance that they would maintain the 
     number of primary care residents if: (1) the base number of 
     residents is less than 750; (2) the number of FTE 
     residents in primary care included in the base year was at 
     least 10% of the total number of residents; and (3) the 
     entity represented in its application that there would be 
     no reduction under the plan in the number of FTE residents 
     in primary care. If the entity failed to comply with the 
     requirement that the number of FTE residents in primary 
     care were maintained, the entity would be subject to 
     repayment of all amounts received under this program.
       The requirements of the residency reduction plan would not 
     apply to any residency training demonstration project 
     approved by HCFA as of May 27, 1997. The Secretary would be 
     required to take necessary action to assure that in no case 
     the amount of payments under the plan would exceed 95% of 
     what payments would have been prior to the plan for direct 
     GME payments under Medicare. As of May 27, 1997, the 
     Secretary would be prohibited from approving any 
     demonstration project that would provide for additional 
     Medicare payments in connection with reductions in the number 
     of residents in a training program for any residency training 
     year beginning before July 1, 2006. The Secretary would be 
     authorized to promulgate regulations, that would take effect 
     on an interim basis, after notice and pending opportunity for 
     public comment, by no later than 6 months after the date of 
     enactment.
       Effective Date. Enactment.
       Section 4734. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House provision with 
     amendments which would require plan applications to be 
     submitted by no later than November 1, 1999. Reductions in 
     the number of residents would occur over no greater than a 5-
     year period, and that the applying entity would provide 
     assurances that it would not reduce the proportion of its 
     residents in primary care relative to the total number of 
     residents. The residency reduction requirements would be: (1) 
     20% of the base number of residents if the base number of 
     residents exceeds 750 residents; (2) 150 residents if the 
     base number of residents exceeds 600 but is less than 750; 
     (3) 25% if the base number does not exceed 600 residents; and 
     (4) at least 20% of the base number of residents in cases 
     where the qualifying entity has less than 750 base number of

[[Page H6241]]

     residents or is joint applicant, and represents in its 
     application that it would increase the number of FTE 
     residents in primary care by at least 20% from the number 
     included in the base number of residents by no later than the 
     5th year of the plan. The Conference agreement would not 
     reduce incentive payments for the initial five-percent 
     reduction of residents for current demonstration projects.
       The Conferees believes that this policy can provide long-
     term savings to Medicare while providing important assistance 
     to hospitals making a difficult transition to smaller 
     residency programs. The conference agreement is modeled 
     directly on a demonstration project currently underway, and 
     the Conferees believe that this opportunity should be 
     extended on equal terms to hospitals elsewhere in the United 
     States.

               Demonstration Project on Use of Consortia

  Sections 10735 and 4735 of the House bills and Section 5452 of the 
                            Senate amendment


                              Current Law

       No provision.


                               House Bill

       Section 10735. Requires the Secretary to establish a 
     demonstration project under which, instead of making direct 
     GME payments to teaching hospitals, the Secretary would make 
     payments to each consortium that met the requirements of the 
     demonstration project. A qualifying consortia would be 
     required to be in compliance with the following: (1) the 
     consortium would consist of an approved medical residency 
     training program in a teaching hospital and one or more of 
     the following entities: a school of allopathic or osteopathic 
     medicine, another teaching hospital, including a children's 
     hospital, another approved medical residency training 
     program, a federally qualified health center, a medical group 
     practice, a managed care entity, an entity providing 
     outpatient services, or an entity determined to be 
     appropriate by the Secretary; (2) the members of the 
     consortium would have agreed to participate in the programs 
     of graduate medical education that are operated by entities 
     in the consortium; (3) with respect to receipt by the 
     consortium of direct GME payments, the members of the 
     consortium would agree on a method for allocating the 
     payments among the members; and (4) the consortium would meet 
     additional requirements established by the Secretary. The 
     total payments to a qualifying consortium for a fiscal year 
     would not be permitted to exceed the amount that would have 
     been paid under the direct GME payment to teaching hospitals 
     in the consortium. The payments would be required to be made 
     in such proportion from each of the Medicare trust funds as 
     the Secretary specifies.
       Effective Date. Enactment.
       Section 4735. Identical provision.


                            Senate Amendment

       Identical provision.


                          Conference Agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment with 
     modifications.

   Recommendations on Long-Term Payment Policies Regarding Financing 
           Teaching Hospitals and Graduate Medical Education

               Sections 10736 and 4736 of the House bills


                              Current Law

       No provision.


                               House Bill

       Section 10736. Requires the Medicare Payment Advisory 
     Commission (established by the bill) to 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. The Commission's recommendations would be required 
     to include 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, including consideration of the 
     effects on teaching hospitals of the method of financing used 
     for the MedicarePlus program under part C of Medicare; (3) 
     possible methodologies for making payments for graduate 
     medical education and the selection of entities to receive 
     such payments, including consideration of matters as (A) 
     issues regarding children's hospitals and approved medical 
     residency training programs in pediatrics, and (B) whether 
     and to what extent payments were being made (or should be 
     made) for training in the various nonphysician health 
     professions; (4) federal policies regarding international 
     graduates; (5) the dependence of schools of medicine on 
     service-generated income; (6) whether and to what extent the 
     needs of the U.S. regarding the supply of physicians, in the 
     aggregate and in different specialties, would change during 
     the 10-year period beginning on October 1, 1997, and whether 
     and to what extent any such changes would have significant 
     financial effects on teaching hospitals; and, (7) methods for 
     promoting an appropriate number, mix, and geographical 
     distribution of health professionals.
       The Commission would be required to 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 their 
     equivalent) 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 allopathic and osteopathic 
     schools of dentistry and approved medical residency training 
     programs in oral surgery; (5) individuals with experience 
     from representative fields of non-physician health 
     professionals; (6) individuals with experience in three study 
     of issues regarding the composition of the U.S. health care 
     workforce; and, (7) individuals with expertise on the 
     financing of health care.
       The Commission would be required to submit a report to the 
     Congress no later than 2 years after enactment providing its 
     recommendations under this section and the reasons and 
     justifications for such recommendations.
       Effective Date. Enactment.
       Section 4736. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House bill with an 
     amendment which would not require the Commission to include 
     recommendations on the financing of graduate medical 
     education or the financing of teaching hospitals. Issues of 
     long-term financing of GME would be considered by the 
     Bipartisan Commission.

  Medicare Special Reimbursement Rule for Certain Combined Residency 
                                Programs

  Sections 10737 and 4737 of the House bills and Section 5443 of the 
                            Senate amendment


                              Current Law

       Combined residency programs run concurrently for a period 
     of time that is longer than the required time for 
     certification in either program, but shorter than would be 
     required if the programs were taken sequentially. Medicare 
     makes direct GME payments for residents in their initial 
     residency period. The initial residency period is defined as 
     the number of years of formal training necessary to satisfy 
     specialty requirements for board eligibility, but not more 
     than 5 years, with an exception for residents in preventive 
     care or geriatrics who are allowed a period of up to 2 
     additional years in the initial residency training period. 
     Residents in their initial residency period are counted as 
     1.0 FTE during their initial residency period and as 0.5 FTE 
     for subsequent years. For combined residency training 
     programs there is no special provision in current law, so 
     that regardless of the number of additional years the second 
     program requires for certification, during the initial 
     residency period residents are counted as a full (1.0) FTE 
     and subsequent years are paid at half (0.5) the FTE.


                               House Bill

       Section 10737. Permits residents enrolled in a combined 
     medical residency training program in which all of the 
     individual programs that are combined are for training in 
     primary care, to have a defined period of board eligibility 
     equal to 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.
       Effective Date. Applies to combined medical residency 
     programs for residency years beginning on or after July 1, 
     1998.
       Section 4737. Identical provision.


                            senate amendment

       Identical provision.
       Effective Date. Applies to combined medical residency 
     programs in effect on or after January 1, 1998.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and Senate amendment, with an 
     amendment to the effective dates of July 1, 1997.

Chapter 3--Medicare Secondary Payer Provisions/Coordination of Benefits

       Permanent Extension of Certain Secondary Payer Provisions

    Section 10701 and 4701 of House bill and Section 5601 of Senate 
                               amendment


                              current law

       Generally, Medicare is the primary payer, that is, it pays 
     health claims first, with an individual's private or other 
     public plan filling in some or all of the coverage gaps. In 
     certain cases, the individual's other coverage pays first, 
     while Medicare is the secondary payer. This is known as the 
     Medicare secondary payer (MSP) program. The MSP provisions 
     apply to group health plans for the working aged, large group 
     health plans for the disabled, and employer health plans 
     (regardless of size) for the end-stage renal disease (ESRD) 
     population for 18 months. The MSP provisions for the disabled 
     expire October 1, 1998. The MSP provisions for the ESRD 
     population apply for 12 months, except the period is extended 
     to 18 months for the February 1, 1991-October 1, 1998 period.
       The law authorizes a data match program which is intended 
     to identify potential secondary payer situations. Medicare 
     beneficiaries are matched against data contained

[[Page H6242]]

     in the Social Security Administration and Internal Revenue 
     Service files to identify cases where a working beneficiary 
     (or working spouse) may have employer-based health insurance 
     coverage.


                               house bill

       Section 10701. Makes permanent the provisions relating to 
     the disabled and the data match program.
       Extends application of the MSP provisions for the ESRD 
     population for 30 months on a permanent basis.
       Effective Date. Enactment. ESRD provision applies to items 
     and services furnished on or after enactment with respect to 
     periods beginning on or after the date that is 18 months 
     prior to enactment.
       Section 4701. Identical provision.


                            senate amendment

       Similar provision.
       Effective Date. Enactment. ESRD provision applies to items 
     and services furnished on or after enactment with respect to 
     periods beginning on or after the date that is 18 months 
     prior to enactment.


                          conference agreement

       The conference agreement includes provisions that are 
     essentially identical in the House bill and Senate amendment.

              Clarification of Time and Filing Limitations

  Section 10702 and 4702 of House bill and Section 5602 (b and c) of 
                            Senate amendment


                              current law

       In many cases where MSP recoveries are sought, claims have 
     never been filed with the primary payer. Identification of 
     potential recoveries under the data match process typically 
     takes several years--considerably in excess of the period 
     many health plans allow for claims filing. A 1994 appeals 
     court decision held that HCFA could not recover overpayments 
     without regard to an insurance plan's filing requirements.


                               house bill

       Section 10702. Specifies that the U.S. could seek to 
     recover payments if the request for payments was submitted to 
     the entity required or responsible to pay within 3 years from 
     the date the item or service was furnished. This provision 
     would apply notwithstanding any other claims filing time 
     limits that may apply under an employer group health plan.
       Effective Date. Applies to items and services furnished 
     after 1990. The provision should not be construed as 
     permitting any waiver of the 3-year requirement in the case 
     of items and services furnished more than 3 years before 
     enactment.
       Section 4702. Identical provision.


                            senate amendment

       Identical provision.
       Effective Date. Applies to items and services furnished on 
     or after enactment.


                          conference agreement

       The conference agreement includes the Senate amendment.

         Permitting Recovery Against Third Party Administrators

  Sections 10703 and 4703 of House bill and Section 5602(a) of Senate 
                               amendment


                              current law

       A 1994 appeals court decision held that HCFA could not 
     recover from third party administrators of self-insured 
     plans.


                               house bill

       Section 10703. Permits recovery from third party 
     administrators of primary plans. However, recovery would not 
     be permitted 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.
       Clarifies that the beneficiary is not liable in MSP 
     recovery cases unless the benefits were paid directly to the 
     beneficiary.
       Effective Date. Applies to services furnished on or after 
     enactment.
       Section 4703. Identical provision.


                            senate amendment

       Similar provision except does not include clarification of 
     beneficiary liability.
       Effective Date. Applies to items and services furnished on 
     or after enactment.


                          conference agreement

       The conference agreement includes the House bill with 
     clarification that the third party administrator must be 
     employed by or under contract with the employer or group 
     health plan at the time the recovery action is initiated.

                      Chapter 4--Other Provisions

                         Centers of Excellence

               Sections 10741 and 4741 of the House bills


                              current law

       No provision.


                               house bill

       Section 10741. Establishes a new program, the Centers of 
     Excellence, under which the Secretary would be required to 
     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 could 
     include any services covered by Medicare that the Secretary 
     determined were appropriate, including post-hospital 
     services. The Secretary would be required to contract with 
     entities that meet quality standards established by the 
     Secretary, and contracting entities would be required to 
     implement a quality improvement plan approved by the 
     Secretary.
       Payment for services provided under the program would be 
     made on the basis of a negotiated all-inclusive rate. The 
     amount of payment made for services covered under a contract 
     would be required to be less than the aggregate amount of 
     payments that would have been made otherwise for these same 
     services. The contract period would be required to be 3 
     years, and could be renewed as long as the entity continued 
     to meet quality and other contractual standards. Entities 
     under these contracts would be permitted to furnish 
     additional services (at no cost to a Medicare beneficiary) or 
     waive cost-sharing, subject to approval by the Secretary. The 
     Secretary would be required to limit the number of centers in 
     a geographic area to the number needed to meet project demand 
     for contracted services.
       Effective date. Applies to services furnished on or after 
     October 1, 1997.
       Section 4741. Similar provision, except requires the 
     Secretary to consider quality as the primary factor in 
     selecting hospitals or other entities to enter into contracts 
     under this section.


                            senate amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.

  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

                 Sections 10742 and 4702 of House bill


                              Current Law

       Persons generally enroll in Part B when they turn 65. 
     Persons who delay enrollment in the program after their 
     initial enrollment period are subject to a premium penalty. 
     This penalty is a surcharge equal to 10% of the premium 
     amount for each 12 months of delayed enrollment. There is no 
     upper limit on the amount of penalty that may apply. Further, 
     the penalty continues to apply for the entire time the 
     individual is enrolled in Part B.
       Some persons declined Part B coverage because they thought 
     they would be able to get health care coverage at a nearby 
     military base; many of these bases subsequently closed.


                               House Bill

       Section 10742. Waives the delayed enrollment penalty for 
     certain persons who enroll during a special six month 
     enrollment period which begins with the first month that 
     begins at least 45 days after enactment. An individual 
     covered under this provision is one: (1) who, on the date of 
     enactment is at least 65 and eligible to enroll in Part B; 
     (2) who, at the time the individual first met the enrollment 
     requirements was a ``covered beneficiary'' under the military 
     medical and dental care program. Covered beneficiary as 
     defined in section 1072(5) of title 10 of the U.S. Code 
     excludes an active duty beneficiary. Part B coverage would 
     begin the month after enrollment.
       Guarantees issuance of a Medigap type ``A'', ``B'', ``C'', 
     or ``F'' policy to an individual who enrolls with a Medigap 
     plan during the same 6-month enrollment period.
       Effective Date. Enactment
       Section 4742. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.

 Protections under the Medicare Program for Disabled Workers who Lose 
                   Benefits Under a Group Health Plan

                      Section 10743 of House bill


                              Current Law

       Persons generally enroll in Part B when they turn 65. 
     Persons who delay enrollment in the program after their 
     initial enrollment period are subject to a premium penalty. 
     This penalty is a surcharge equal to 10% of the premium 
     amount for each 12 months of delayed enrollment. There is no 
     upper limit on the amount of penalty that may apply. Further, 
     the penalty continues to apply for the entire time the 
     individual is enrolled in Part B.
       Some persons declined Part B coverage because they thought 
     they would be able to continue to get health care coverage 
     from their employer-sponsored health plan.


                               House Bill

       Waives the Part B enrollment penalty for certain disabled 
     retired workers who were continuously enrolled in a group 
     health plan and whose coverage was involuntarily terminated. 
     To qualify, individuals must be disabled and continuously 
     enrolled under a group health plan at the time they first 
     become eligible to enroll in Medicare Part B. Individuals 
     meeting these requirements may enroll in Medicare Part B 
     without penalty within the 6-month enrollment period 
     beginning on the date their employer-provided coverage is 
     terminated at a time when enrollment under the plan is not by 
     reason of the individual's, or the individual's spouse's, 
     current employment.
       Effective Date. Applies to involuntary terminations of 
     coverage under a group health plan occurring on or after 
     enactment.


                            Senate Amendment

       No provision.

[[Page H6243]]

                          Conference Agreement

       The conference agreement includes the House bill with 
     clarifying language.
       The Secretary should provide by regulation for recognition 
     of short-time, erroneous enrollments in Medicare during the 
     individual's initial enrollment period which are quickly 
     reversed. Such an error should not disqualify an individual 
     for later use of this section.

           Placement of Advanced Directive in Medical Record

                    Section 10744 of the House bill


                              Current Law

       The Patient Self-Determination Act of 1990 requires that 
     hospitals, skilled nursing facilities, home health agencies, 
     hospice programs and health maintenance organizations which 
     participate in Medicare guarantee that every adult receiving 
     medical care be given written information concerning patient 
     involvement in treatment decisions. Providers must document 
     in the medical record whether the patient has an advance 
     directive or not.


                               House Bill

       Requires that the individual's advance directive be placed 
     in a prominent part of the individual's current medical 
     record.
       Effective date. Applies to provider agreements entered 
     into, renewed, or extended on or after such date (but no 
     later than 1 year after the date of enactment) as specified 
     by the Secretary.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the House bill.

  Conforming Age for Eligibility Under Medicare to Retirement Age for 
                            Social Security

                    Section 5611 of Senate amendment


                              Current Law

       The Social Security Amendments of 1983 raised the full 
     retirement age (the age at which one receives unreduced 
     benefits) for social security cash benefits from age 65 to 67 
     over the 2003-2027 period. The legislation provided for two 
     transition periods. First, the retirement age increases by 2 
     months for each year that a person is born in 1938 or later 
     (i.e. attains 65 in 2003 or later) until it reaches age 66 
     for those born in 1943 (i.e. attain age 66 in 2009). For 
     persons born between 1943 and 1954 (i.e. attain age 66 
     between 2009 and 2020), the full retirement age is 66. The 
     second transition begins for persons born in 1955 (i.e. 
     attain 66 in 2021). The retirement age again increases by 2 
     months for each year that a person is born in 1955 or later 
     until it reaches age 67 for persons born in 1960 (i.e. attain 
     age 67 in 2027). The Medicare eligibility remains at age 65.


                               House Bill

       No provision.


                            Senate Amendment

       Raises the Medicare eligibility age from age 65 to 67 
     according to the same schedule established in law for social 
     security cash benefits. The provision makes conforming 
     changes in provisions relating to: (1) purchase of hospital 
     insurance coverage for those not otherwise eligible; (2) 
     hospital insurance benefits for disabled persons who have 
     exhausted other entitlement; (3) eligibility for Part B 
     benefits; (4) appropriations to cover government 
     contributions and contingency reserve; (5) Medicare secondary 
     payer; and (6) medicare supplemental policies.
       Effective Date. Enactment.


                          Conference Agreement

       The conference agreement does not include the Senate 
     amendment.

   Increase Certification Period for Organ Procurement Organizations

                  Section 5612 of the Senate amendment


                              Current Law

       Section 1138(b) of the Social Security Act requires that 
     the Secretary can make Medicare and Medicaid payments for 
     organ procurement costs to organ procurement organizations 
     (OPOs) operating under Section 371 of the Public Health 
     Service Act, or having been certified or recertified by the 
     Secretary within the previous 2 years as meeting certain 
     requirements.


                               House Bill

       No provision.


                            Senate Amendment

       Amends current law to provide OPOs three years between 
     certifications or recertifications if the Secretary deems the 
     organizations as having a good record in meeting standards to 
     be a qualified OPO.
       Effective date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     a modification authorizing the Secretary to allow four years 
     between certifications or recertifications if it is 
     appropriate on the basis of an organization's past practices.
       The Conferees note with concern that a few Organ 
     Procurement Organizations may be earning excessive profits 
     that could violate the provision in the National Transplant 
     Act that prohibits profits on the sale of human organs. OPOs 
     are supposed to facilitate and promote transplantation in 
     America and should guard against institutional 
     aggrandizement.

Office of the Chief Actuary in the Health Care Financing Administration


                          Conference Agreement

       The conference agreement would establish the position of 
     Chief Actuary in the Health Care Financing Administration. 
     The Chief Actuary would be appointed by the Administrator of 
     HCFA among individuals who have demonstrated by their 
     education and experience, superior expertise in the actuarial 
     sciences. The Chief Actuary would be in direct line of 
     authority to the Administrator. The individual would exercise 
     such duties as are appropriate for the office and in 
     accordance with professional standards of actuarial 
     independence. The individual could only be removed for cause. 
     Compensation would be at the highest rate of basic pay for 
     the Senior Executive Service. The provision would be 
     effective on enactment.
       The Conferees wish to emphasize the very important role of 
     the Office of the Actuary in assessing the financial 
     condition of the Medicare trust funds and in developing 
     estimates of the financial effects of potential legislative 
     and administrative changes in the Medicare and Medicaid 
     programs. The Office of the Actuary has a unique role within 
     the agency in that it serves both the Administration and the 
     Congress. While the Chief Actuary is an official within the 
     Administration, this individual and his or her office often 
     must work with the committees of jurisdiction in the 
     development of legislation.
       Beginning with the appointment of the first Chief Actuary 
     for Social Security in 1936, through the enactment of 
     Medicare and Medicaid in 1965, and through the establishment 
     of the Health Care Financing Administration in 1977, the 
     tradition has been for a close and confidential working 
     relationship between the SSA and HCFA chief actuaries and the 
     committees of jurisdiction in the Congress-- a relationship 
     which the Committees value highly. It is important to 
     emphasize that the Senate Committee on Finance, the House 
     Committee on Ways and Means, and the House Committee on 
     Commerce all rely on their ability to seek estimates and 
     other technical assistance from the Chief Actuary, especially 
     when developing new legislation. Similarly, the Congressional 
     Budget Office and Congressional Research Service depend 
     heavily on such assistance. Thus, the independence of the 
     Office of the Actuary with respect to providing assistance to 
     the Congress is vital. The process of monitoring, updating, 
     and reforming the Medicare and Medicaid programs is greatly 
     enhanced by the free flow of actuarial information from the 
     Office of the Actuary to the committees of jurisdiction in 
     the Congress.
       The Conferees believe that it is important for the Office 
     of the Actuary to receive adequate staffing and support from 
     the agency and the Administration at large. The Committees 
     rely on the actuaries to provide prompt, impartial, 
     authoritative, and confidential information with respect to 
     the effects of legislative proposals. When information is 
     delayed or circumscribed by the operation of an internal 
     Administration clearance process or the inadequacy of 
     actuarial resources, the Committees' ability to make informed 
     decisions based on the best available information is 
     compromised. The Conferees consider independent analyses by 
     the Office of the Actuary to be consistent with the general 
     role and responsibilities of the actuarial profession, and in 
     the past have found these analyses helpful in understanding 
     the factors underlying estimates and trends in the Medicare 
     and Medicaid programs.
       With respect to adequate staffing, the conferees wish to 
     note that it is essential that the strength of the Office of 
     the Actuary be maintained. The Conferees strongly urge that 
     the actuarial staff at HCFA be enhanced on an ongoing basis. 
     The need for actuarial assistance will be greater than ever 
     in the next few years as the Congress and the Administration, 
     with advice from the bipartisan commission mandated in this 
     legislation, address the future financial pressures facing 
     the Medicare program as a result of the retirement of the 
     post-World War II ``baby boom'' generation.
       The conferees recognize the important role of the Office of 
     the Chief Actuary and expect that in the reorganized HCFA the 
     office will be permitted to function with a high degree of 
     independence and professionalism.

  Conforming Amendments to Comply With Congressional Review of Agency 
                              Rule-Making


                          Conference Agreement

       The conference agreement also includes provisions related 
     to changing the annual deadlines for agency rulemaking in 
     order to comply with requirements for congressional review of 
     agency rulemaking. The provision would change the required 
     date for publication in the Federal Register the DRG 
     prospective payment rate methodology from September 1, to 
     August 1; for hospital payment updates, from May 1, to April 
     1; for applications for geographic reclassification, from 
     ``the first day of the preceding year,'' to ``the first day 
     of the 13-month period ending on September 30 of the 
     preceding fiscal year.'' The agreement would require 
     publication of the physician fee schedule by November 1 of 
     the calendar year preceding the year it applies and the 
     performance standard rate of increase by August 1 of each 
     year. The agreement further establishes transition rules for 
     1998.

[[Page H6244]]

                  Subtitle H--Medical Liability Reform

                     Chapter 1--General Provisions

            Federal Reform of Health Care Liability Actions

                 Sections 10801 and 4801 of House bill


                              Current Law

       There are no uniform Federal standards governing health 
     care liability actions.


                               House Bill

       Section 10801. Provides for Federal reform of health care 
     liability actions. It would apply to any health care 
     liability action brought in any State or Federal court. The 
     provisions would not apply to any action for damages arising 
     from a vaccine-related injury or death or to the extent that 
     the provisions of the National Vaccine Injury Compensation 
     Program apply. The provisions would also not apply to actions 
     under the Employment Retirement Income Security Act (ERISA). 
     The provisions would preempt State law to the extent State 
     law provisions were inconsistent with the new requirements. 
     However, it would not preempt State law to the extent State 
     law provisions were more stringent. The provision would not 
     affect or waive the defense of sovereign immunity asserted by 
     any State or the U.S., affect the applicability of the 
     Foreign Sovereign Immunities Act of 1976, preempt State 
     choice-of- law rules with respect to claims brought by a 
     foreign nation or citizen, or affect the right of any court 
     to transfer venue.
       Effective Date. See Sections 10803 and 4803, below.
       Section 4801. Similar provision except: (1) does not 
     include exemption for actions arising under ERISA; and (2) 
     specifies preemption applies to both Federal and State laws.
       Effective Date. See Sections 10803 and 4803, below.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.

                              Definitions

                 Sections 10802 and 4802 of House bill


                              Current Law

       No provision.


                               House Bill

       Section 10802. Defines the following terms for purposes of 
     the Federal reforms: actual damages; alternative dispute 
     resolution system; claimant; clear and convincing evidence; 
     collateral source payments; drug; economic loss; harm; health 
     benefit plan; health care liability action; health care 
     liability claim; health care provider; health care service; 
     medical device; noneconomic damages; person; product seller; 
     punitive damages; and State. Harm is defined as legally 
     cognizable wrong or injury for which punitive damages may be 
     imposed.
       Effective Date. See Sections 10803 and 4803, below.
       Section 4802. Similar provision except: (1) specifies that 
     economic loss is attributable to harm rather than injury; (2) 
     defines harm as any physical injury, illness or death or 
     mental anguish or emotional injury caused by or causing the 
     claimant's physical injury; (3) does not include definition 
     of health benefit plan or health care service; (4) excludes 
     from the definition of health care liability action a claim 
     based upon the provision of 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; (5) includes within the 
     definition of health care liability claim the use of a 
     medical product, regardless of the theory of liability on 
     which the claim is based; (7) adds definition for the term 
     manufacturer; (8) modifies exclusion from the term product 
     seller to apply to a person who 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; and (9) includes the Trust Territory of the 
     Pacific Islands within the definition of state.
       Effective Date. See Sections 10803 and 4803, below.


                            Senate Amendment

       No provision


                          Conference Agreement

       The conference agreement does not include the House bill.

                             Effective Date

                 Sections 10803 and 4803 of House bill


                              Current Law

       No provision.


                               House Bill

       Section 10803. Specifies that Federal reforms apply to any 
     health care liability action brought in any Federal or state 
     court that is initiated on or after the date of enactment. 
     The provision would also apply to any health care liability 
     claim subject to an alternative dispute resolution system. 
     Any health care liability claim or action arising from an 
     injury occurring prior to enactment would be governed by the 
     statute of limitations in effect at the time the injury 
     occurred.
       Section 4803. Similar provision, except does not include 
     language relating to claims or actions arising from an injury 
     occurring prior to enactment.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.

     Chapter 2--Uniform Standards for Health Care Liability Actions

                         Statute of Limitations

                 Sections 10811 and 4811 of House bill


                              Current Law

       To date, reforms of the malpractice system have occurred 
     primarily at the State level and have generally involved 
     changes in the rules governing tort cases. (A tort case is a 
     civil action to recover damages, other than for a breach of 
     contract.)


                               House Bill

       Section 10811. Establishes uniform standards for health 
     care liability claims. It would establish a uniform statute 
     of limitations. Actions could not be brought more than two 
     years after the injury was discovered or reasonably should 
     have been discovered. In no event could the action be brought 
     more than five years after the date of the alleged injury.
       Effective Date. Enactment
       Section 4811. Specifies that a health care liability action 
     could 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 the harm that is subject of the 
     action and the cause of the harm. A person with a legal 
     disability (as determined under applicable state law) could 
     file a health care liability action not later than 2 years 
     after the person ceased to have such disability. If either of 
     these provisions would shorten the period during which an 
     action could otherwise be brought under another provision of 
     law, the claimant could bring the action not later than 2 
     years after enactment.
       Effective Date. Enactment


                            Senate Amendment

       No provision


                          Conference Agreement

       The conference agreement does not include the House bill.

                   Calculation and Payment of Damages

                 Sections 10812 and 4812 of House bill


                              Current Law

       No provision
     (a) Noneconomic Damages


                               House Bill

       Section 10812. Limits noneconomic damages to $250,000 in a 
     particular case. The limit would apply regardless of the 
     number of persons against whom the action was brought or the 
     number of actions brought.
       Section 4812. Similar provision except refers to ``harm'' 
     rather than ``losses resulting from the injury''.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.
     (b) Joint and Several Liability


                               House Bill

       Section 10812. Specifies that a defendant would only be 
     liable for the amount of noneconomic damages attributable to 
     that defendant's proportionate share of the fault or 
     responsibility for that claimant's injury, as determined by 
     the trier of fact. In all cases, the liability of the 
     defendant for noneconomic damages would be several and not 
     joint.
       Section 4812. Specifies that a defendant would only be 
     liable for the amount of noneconomic damages attributable to 
     that defendant's proportionate share of the fault or 
     responsibility for the harm to that claimant. The court would 
     render a separate judgment against each defendant. The trier 
     of fact would determine the percentage of responsibility of 
     each person responsible for the harm, whether or not the 
     person is party to the action. The liability of each 
     defendant would be several and not joint.


                            Senate Amendment

       No provision.


                          conference agreement

       The conference agreement does not include the House bill.
     (c) Treatment of punitive damages


                               house bill

       Section 10812. Permits the award of punitive damages (to 
     the extent allowed under State law) only if the claimant 
     established by clear and convincing evidence either that the 
     harm was the result of conduct that specifically intended to 
     cause harm or the conduct manifested a conscious flagrant 
     indifference to the rights or safety of others. The amount of 
     punitive damages awarded could not exceed $250,000 or three 
     times the amount of economic damages, whichever was greater. 
     The determination of punitive damages would be determined by 
     the court and not be disclosed to the jury. The provision 
     would not create a cause of action for punitive damages. 
     Further, it would not preempt or supersede any State or 
     Federal law to the extent that such law would further limit 
     punitive damage awards.
       Permits either party to request a separate proceeding 
     (bifurcation) on the issue of whether punitive damages should 
     be awarded and in what amount. If a separate proceeding was 
     requested, evidence related only to the claim of punitive 
     damages would be inadmissible in any proceeding to determine 
     whether actual damages should be awarded.

[[Page H6245]]

       Section 4812. Similar provision except: (1) does not 
     include punitive damages for conduct specifically intended to 
     cause harm; (2) refers to applicable law rather than 
     applicable state law; (3) does not include provision relating 
     to applicability in Federal or State courts; and (4) 
     specifies that a request for bifurcation applies to 
     proceedings held subsequent to award of compensatory damages. 
     In addition, any evidence, argument, or contention that is 
     relevant only to the claim of punitive damages would be 
     inadmissable in any proceeding relating to the award of 
     compensatory damages.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement does not include the House bill.
     (d) Drugs and devices


                               house bill

       Section 10812. Prohibits the award of punitive damages 
     against a manufacturer or product seller in a case where a 
     drug or medical device was subject to premarket approval by 
     the Food and Drug Administration (or generally recognized as 
     safe according to conditions established by the FDA), unless 
     there was misrepresentation or fraud. A manufacturer or 
     product seller would not be held liable for punitive damages 
     related to adequacy of required tamper resistant packaging 
     unless the packaging or labeling was found by clear and 
     convincing evidence to be substantially out of compliance 
     with the regulations.
       Section 4812. Similar provision, except specifies that the 
     manufacturer would not be held liable for punitive damages 
     related to adequacy of required tamper resistant packaging 
     unless the drug was found by clear and convincing evidence to 
     be substantially out of compliance with the regulations.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement does not include the House bill.
     (e) Periodic payments for future losses


                               house bill

       Section 10812. Permits the periodic (rather than lump sum) 
     payment of future economic and noneconomic losses in excess 
     of $50,000, with payments determined by the court. The 
     judgment of a court awarding periodic payments could not, in 
     the absence of fraud, be reopened at any time to contest, 
     amend, or modify the schedule or amount of payments. A lump 
     sum settlement would not be precluded.
       Section 4812. Identical provision, except specifies both 
     the amount and schedule of payments would be determined by 
     the court.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement does not include the House bill.
     (f) Collateral source payments


                               House Bill

       Section 10812. Permits a defendant to introduce evidence of 
     collateral source payments. Such payments are those which are 
     any amounts paid or reasonably likely to be paid by health or 
     accident insurance, income-disability coverage, workers 
     compensation, or other third party sources. If such evidence 
     was introduced, the claimant could introduce evidence of any 
     amount paid or reasonably likely to be paid to secure the 
     right to such collateral source payments. No provider of 
     collateral source payments would be permitted to recover any 
     amount against the claimant or against the claimant's 
     recovery.
       Effective Date. Enactment.
       Section 4812. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.

                     Alternative Dispute Resolution

                 Sections 10813 and 4813 of House bill


                              Current Law

       No provision.


                               House Bill

       Section 10813. Requires that any alternative dispute 
     resolution system used to resolve health care liability 
     actions or claims must include provisions identical to those 
     specified in the bill relating to statute of limitations, 
     non-economic damages, joint and several liability, punitive 
     damages, collateral source rule, and periodic payments.
       Effective Date. Enactment.
       Section 4813. Identical provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement does not include the House bill.

                        Chapter 1--Managed Care

       State Options of Using Managed Care; Change in Terminology

   Section 3401 of House bill and Section 5701 (new section 1941 and 
              1942), and Section 5703 of Senate amendment


                              current law

       To control costs and quality of care, states are 
     increasingly delivering services to their Medicaid 
     populations through Health Maintenance Organizations (HMOs) 
     and other managed care arrangements. Medicaid programs use 
     three main types of managed care arrangements. These vary 
     according to the comprehensiveness of the services they 
     provide and the degree to which they accept risk, and include 
     Primary Care Case Management (PCCM), fully capitated HMOs and 
     Health Insuring Organizations (HIOs), and partially capitated 
     Pre-Paid Health plans (PHPs). Under PCCM a Medicaid 
     beneficiary selects or is assigned to a single primary care 
     provider, which provides or arranges for all covered services 
     and is reimbursed on a fee-for-service basis in addition to 
     receiving a small monthly ``management'' fee. Fully capitated 
     plans contract on a risk basis to provide beneficiaries with 
     a comprehensive set of covered services in return for a 
     monthly capitation payment. Partially capitated plans provide 
     a less than comprehensive set of services on a risk basis; 
     services not included in the contract are reimbursed on a 
     fee-for-service basis. Under fully and partially capitated 
     managed care arrangements, beneficiaries have a regular 
     source of coordinated care and states have predictable, 
     controlled spending per beneficiary. This is in contrast to 
     the traditional fee-for-service arrangements used by Medicaid 
     beneficiaries where Medicaid pays for each service used.
       The Medicaid statute contains several provisions that limit 
     a state's ability to use managed care, including the freedom 
     of choice, statewideness, and comparability requirements. 
     Currently, states may only bypass statewideness and 
     comparability requirements by establishing voluntary 
     capitated managed care plans or by providing voluntary case 
     management. Voluntary capitated MCOs must meet other 
     requirements that govern how Medicaid managed care plans 
     contracting to provide a comprehensive set of services 
     operate. These requirements, contained in Section 1903(m) of 
     the Medicaid statute, include rule and solvency, enrollment 
     practices, procedures for protecting beneficiaries' rights, 
     and contracting arrangements of manage care plans.
       Under current law, a state may offer managed care services 
     on a voluntary basis and may contract with a health plan that 
     provides services in addition to those covered under the 
     state plan. Once a beneficiary chooses the managed care plan, 
     a state may define the beneficiary's freedom of choice to 
     providers participating in that managed care plan. However, 
     to mandate that a beneficiary enroll in a managed care 
     organization, including PCCM, a state must first obtain a 
     waiver of the freedom-of-choice provision of Medicaid law. 
     These renewable waivers, as authorized under Section 1915(b) 
     of Medicaid law, are initially good for 2 years. (States also 
     may implement statewide demonstration programs that may 
     include mandatory manage care under the authority of a 
     Section 1115(a) waiver.)
       Beneficiaries are permitted to disenroll from a managed 
     care plan without cause during the first month of enrollment 
     and may disenroll at any time for cause. Enrollees may be 
     locked into the same plan for up to 6 months if the plan is a 
     federally qualified HMO. States may also guarantee 
     eligibility for up to 6 months for persons enrolled in 
     federally qualified HMOs. States may not restrict access to 
     family planning services under managed care. Plans may not 
     discriminate against individuals in enrollment, 
     disenrollment, or renrollment based on health status or need 
     for care.


                               house bill

       The House bill provides states, under section 1915(a), the 
     option of requiring individuals eligible for medical 
     assistance under the state plan to enroll is a capitated 
     managed care plan or with a primary care case manager, 
     without a 1915(b) waiver. It also permits states to restrict 
     the number of plans or providers it contracts with, 
     consistent with quality of care. Individuals must be 
     permitted to choose their manager or managed care entity from 
     among those that meet Medicaid requirements. Individuals must 
     be given a choice of at least two managed care entities or 
     managers. In the case of rural areas, eligible individuals 
     who are required to enroll with a single entity must be given 
     the option of obtaining covered services through an 
     alternative provider; those individuals offered no 
     alternative to a single entity or manager must be given the 
     choice of at least two providers within the managed care 
     entity or through the primary care case manager.
       Under the House bill, Native Americans/Alaskan Natives 
     could only be required to enroll in a managed care entity if 
     it is a participating Indian Health Service, tribally 
     operated, or urban Indian Health program.
       The bill also permits states to limit beneficiary migration 
     from plans for periods up to 6 months. As under current law, 
     beneficiaries would be allowed to disenroll from a plan at 
     any time for cause. Prior to establishing a mandatory managed 
     care requirement, a state would be required to provide for 
     public notice and comment. States could not require either 
     special needs children or Qualified Medicare Beneficiaries to 
     enroll in management care plans. As under current law, access 
     to family planning providers may not be restricted.


                            senate amendment

       The Senate bill designates current Medicaid law as Part A, 
     General Provisions, and establishes a Part B, Provisions 
     Relating to Managed Care. It gives states the option to 
     require enrollment in management care

[[Page H6246]]

     without a waiver in new section 1941, which is similar to 
     House bill except it also:
       Requires states to permit individuals to have access to 
     religiously-affiliated long-term care facilities;
       Requires states to allow individuals to change enrollment 
     among managed care entities once annually and to terminate 
     enrollment at any time for cause. Establishes notice of 
     termination requirements for individuals, managed care 
     entities, and states;
       Requires states to establish a method for establishing 
     enrollment priorities in the event a managed care entity 
     doesn't have sufficient capacity to enroll all those seeking 
     enrollment;
       Requires states to establish a default enrollment process 
     for enrolling any individual who does not choose a managed 
     care entity within the enrollment period specified by the 
     state. The default enrollment process must provide for 
     enrollment with an MCO that maintains existing provider-
     individual relationships or has contracted with providers 
     that have traditionally served Medicaid recipients; if no 
     such provider exists, the process must provide for equitable 
     distribution of individuals among all available qualified 
     managed care entities with sufficient capacity;
       Provides for automatic reenrollment for those individuals 
     enrolled with a managed care entity that lose Medicaid 
     eligibility for no longer than 2 months;
       Allows states to establish a minimum enrollment period of 
     not more than 6 months (states may extend such period up to 
     12 months if extension is done uniformly for all 
     individuals). Deems individuals who lose Medicaid eligibility 
     prior to the end of the minimum enrollment period eligible to 
     receive benefits through the entity until the end of the 
     enrollment period;
       Prohibits managed care entities from discriminating against 
     eligible individuals in enrollment, disenrollment, or 
     reenrollment based on health status or need for care;
       Requires states, enrollment brokers, or MCOs to provide all 
     enrollment notices and informational and instructional 
     materials in a manner and form which may be easily understood 
     by Medicaid-eligible enrollees and potential enrollees, 
     including those who are blind, deaf, disabled, or unable to 
     read or understand English;
       Requires states and managed care entities to provide 
     specified information to all enrollees and potential 
     enrollees. Requires states to provide, on an annual basis, 
     comparative information (in a chart-like form) that includes: 
     benefits, premiums, service area, quality and performance, 
     disenrollment rates, enrollee satisfaction, grievance 
     procedures, supplemental benefits option, and physician 
     compensation; and
       Requires managed care entities to inform enrollees of any 
     benefits to which they are entitled that the entity does not 
     provide, and how and where enrollees may access such 
     benefits.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language and amendments. Section 4701 of the 
     conference agreement would amend the Social Security Act to 
     establish a new section, ``Provisions Related to Managed 
     Care,'' Section 1932. New Section 1932 gives states the 
     option of requiring individuals eligible for medical 
     assistance under the state plan to enroll with a managed care 
     entity without a 1915(b) waiver. The agreement defines a 
     Medicaid managed care organization as a health maintenance 
     organization, an eligible organization with a contract under 
     section 1876 or a Medicare+Choice organization with a 
     contract under part C of title XVIII, a provider sponsored 
     organization, or any other public or private organization 
     meeting the requirement of section 1902(w) that (1) makes 
     services it provides accessible to enrolled individuals to 
     the same extent as such services are made accessible to 
     Medicaid-eligible individuals not enrolled with the 
     organization and (2) has made adequate provision against the 
     risk of insolvency. Qualified HMOs would be deemed to meet 
     requirements (1) and (2). Section 1932 contains provisions 
     relating to (a) special rules, (b) choice of coverage, (c) 
     process for enrollment and termination and change of 
     enrollment, and (d) provision of information.
       With respect to requiring that individuals be given a 
     choice of at least two managed care entities or managers, the 
     conference agreement includes the Senate amendment, which 
     allows beneficiaries to choose among qualified managed care 
     plans, with a choice of at least two plans. A special rule 
     applies for certain Health Insuring Organizations (HIOs). 
     With respect to rural areas, changes in enrollment, 
     enrollment priorities, termination of enrollment, Medicare 
     beneficiaries, and information on benefit carve outs, the 
     conference agreement includes the Senate amendment. With 
     respect to religious choice, notice of termination, 
     reenrollment, and nondiscrimination, the conference agreement 
     does not include the Senate amendment. With respect to Indian 
     enrollment and special needs children, the conference 
     agreement includes provisions that are identical in the House 
     bill and Senate amendment. Children who receive Adoption 
     Assistance under part E of Title IV are added to those 
     considered to be special needs children. With respect to 
     default enrollment process, the conference agreement includes 
     the Senate amendment.
       With respect to state minimum enrollment option, the 
     conference agreement includes the Senate amendment modified 
     to allow states to guarantee eligibility for up to 6 months 
     (without extension up to 12 months) for persons enrolled with 
     a Medicaid managed care organization (as defined in section 
     1903(m)(1)(A)), with a primary care case manager (as defined 
     in section 1905(t)), or by or through a case manager. (See 
     ``6-month Guaranteed Eligibility for All Individuals Enrolled 
     in Managed Care,'' below). With respect to provisions of 
     information in easily understood form, the conference 
     agreement modifies the Senate amendment to delete the 
     specification of for whom such information must be present in 
     an easily understood form. With respect to the provision of 
     information and comparative information to enrollees and 
     potential enrollees, the conference agreement includes the 
     Senate amendment with modifications. Managed care entities 
     must make available to enrollees and potential enrollees 
     information about (a) providers, (b) enrollee rights and 
     responsibilities, (c) grievance and appeal procedures, and 
     (d) information on covered items and services. States must, 
     on an annual basis, provide individuals required to enroll 
     with managed care entities with a list identifying the 
     managed care entities available and comparative information 
     about each entity's benefits and cost-sharing, service area, 
     and quality and performance.

Primary Care Case Management Services As State Option Without Need For 
                                 Waiver

    Section 3403 of House bill and Section 5702 of Senate amendment)


                              current law

       All states are required to provide some services and a are 
     permitted to provide others. Under current law a state may 
     offer case management services on a voluntary basis. However, 
     to mandate that a beneficiary enroll in a PCCM system a state 
     must first obtain a waiver of the freedom-of-choice 
     provisions of Medicaid law. Section 1915(b)(1) waivers allow 
     states to restrict the provider from whom a beneficiary can 
     obtain services. Except in the case of an emergency, the 
     beneficiary may obtain other services, such as specialty 
     physician and hospital care, only with the authroization of 
     the primary care provider. The aim of the program is to 
     reduce the use of unnecessary services and provide better 
     overall coordination of beneficiaries' care.


                               house bill

       Effective October 1, 1997, the House bill adds primary care 
     case management as an optional service states may provide. 
     Primary care case management services are those case 
     management and primary care services a physician, a physician 
     group practice, or an entity employing or having other 
     arrangements with physicians, or at state option, nurse 
     practitioners, certified nurse-midwives, or physician 
     assistants contracts with the state to provide. these include 
     covered primary care services provided or arranged for 
     directly by the primary care case manager and other services 
     as specified under the contract.
       The contract must provide that: (1) hours of operation are 
     reasonable and adequate, including 24-hour availability of 
     information, referral, and treatment with respect to medical 
     emergencies; (2) enrollment is restricted to those living 
     reasonably near a service delivery site; (3) a sufficient 
     number of providers are employed or contracted with to meet 
     the needs of enrollees; (4) individuals are not discriminated 
     against in enrollment, disenrollment, or reenrollment based 
     on health status or need for care; (5) enrollees are allowed 
     to disenroll without cause during the first month of each 
     enrollment period and to disenroll at any time for cause. 
     Enrollees may not be locked in to a provider for more than 6 
     months.
       Primary care services include all health care and 
     laboratory services customarily provided in accordance with 
     State license and certification laws and regulations by or 
     through a general practitioner, family medicine physician, 
     internal medicine physician, obstetrician/gynecologist, or 
     pediatrician.


                            senate amendment

       The Senate bill includes a similar provision, except that 
     it repeals Section 1915(b)(1) freedom-of-choice waiver 
     authority.


                          conference agreement

       The conference agreement includes House provision with 
     conforming amendments. Effective for PCCM services furnished 
     on or after October 1, 1997.

           Elimination of 75:25 Restriction on Risk Contracts

    Section 3402 of House bill and Section 5703 of Senate amendment


                              current law

       As a proxy for quality, current law requires that plans 
     limit their enrollment of Medicaid and Medicare beneficiaries 
     to less than 75% of total enrollment (known as the ``75/25 
     rule''). This requirement may be waived for community, 
     migrant, or Appalachian health centers which receive federal 
     grant funds and meet certain other conditions. It may be 
     waived temporarily for a publicly owned contracting plan, a 
     plan with more than 25,000 enrollees that serves a designated 
     ``medically underserved'' area and that previously 
     participated in an approved demonstration project, or a plant 
     hat has had a Medicaid contract for less than 3 years, if the 
     plan is making continuous and reasonable efforts to comply 
     with 75% limit. For some HMOs, the 75/25 rule has been 
     bypassed through state demonstration waivers or through 
     specific federal legislation.

[[Page H6247]]

                               house bill

       The House bill eliminates the 75/25 rule, effective on the 
     date of enactment.


                            senate amendment

       The Senate bill has a similar provision, except that the 
     provision is effective on and after June 20, 1997.


                          conference agreement

       The conference agreement includes Senate amendment.

                   Increased Beneficiary Protections

   Sections 3463, 3465, and 3466 of House bill and Section 5701 (new 
                sections 1941-1945) of Senate amendment

       a. Specification of Benefits


                              current law

       No provision.


                               house bill

       No provision.


                            senate amendment

       Requires contracts with Medicaid managed care entities to 
     specify the benefits the provision (or arrangement) for which 
     the entity is responsible.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     conforming language.
       b. Application of Prudent Layperson Standard for Medical 
           Emergencies


                              current law

       Contracts with MCOs that provide a comprehensive set of 
     Medicaid services must provide that either the MCO or the 
     state shall reimburse enrollees for medically necessary 
     services provided by a nonparticipating provider if the 
     services were immediately required due to an unforeseen 
     illness, injury, or condition.


                               house bill

       Requires that contracts with managed care plans provide for 
     coverage for emergency services without regard to: (1) 
     whether the emergency care provider has an arrangement with 
     the plan or (2) prior authorization. Plans would be required 
     to comply with such guidelines as the Secretary may prescribe 
     relating to promoting efficiency and timely coordination of 
     appropriate maintenance and post-stabilization care provided 
     to an enrollee determined to be stable by a medical screening 
     examination required under the Examination and Treatment 
     under Emergency Medical Conditions and Women in Labor 
     requirements of the Social Security Act (Section 1867).
       Emergency services would be defined, with respect to an 
     individual enrolled with a participating HMO, as covered 
     inpatient and outpatient services that are furnished by a 
     qualified provider and needed to evaluate or stabilize an 
     emergency medical condition. An emergency medical condition 
     would be defined as one 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: (a) placing the health of the individual in 
     serious jeopardy (and in case of a pregnant woman, her health 
     or that of her unborn child); (b) serious impairment to 
     bodily functions; or (c) serious dysfunction of any bodily 
     organ or part.
       Prohibits interference with physician advice to enrollees. 
     A participating health plan may not prohibit or otherwise 
     restrict covered health care professionals from talking to 
     their patients about their health status, health care, or 
     treatment options, regardless of whether benefits for such 
     care or treatment are provided under the plan, so long as the 
     professional is acting within the lawful scope of practice. 
     ``Covered health care professional'' includes physicians and 
     other health care professionals (as specified).
       HMOs could not be required to provide, reimburse, or 
     provide coverage of a counseling or referral service if they 
     objected to the provision of such service on moral or 
     religious grounds. Requires HMOs to inform prospective and 
     current enrollees of any such services they do not provide, 
     before or during enrollment or within 90 days after the date 
     that the HMO adopts a change in policy regarding such a 
     counseling or referral service.


                            senate amendment

       Similar provision to House bill except (1) adds severe pain 
     to definition of emergency medical services and (2) does not 
     include the prohibition on physician communication.


                          conference agreement

       The conference agreement includes the House and Senate 
     provisions.
       c. Grievances Procedures


                              current law

       No provision.


                               house bill

       Requires that contracts with capitated managed care 
     entities provide for compliance with the following grievance 
     and appeals requirements: (1) Participating managed care 
     entities must provide a meaningful and expedited procedure 
     for resolving grievances between the entity and its 
     enrollees. Such a procedure would include notice and hearing 
     requirements. (2) The managed care entity must inform plan 
     enrollees in a timely manner of any denial, termination, or 
     reduction of services. The plan must clearly state the reason 
     for the denial of service. The plan must provide enrollees 
     with an explanation of the plan's complaint process and of 
     all other appeal rights available to them. (3) Plans must 
     establish a board of appeals to resolve grievances concerning 
     denials of coverage or payment for services. The board would 
     consist of representatives of the managed care entity, 
     including physician and nonphysicians; consumers who are not 
     plan enrollees; and providers with expertise in the field of 
     medicine related to the condition or disease which requires 
     treatment. The board would hear and resolve filed complaints 
     within 30 days. This provision does not replace or supercede 
     any other Medicaid appeal mechanisms.


                            senate amendment

       Requires Medicaid managed care entities to establish an 
     internal grievance procedure under which an enrollee who is 
     eligible for medical assistance under the State plan, or a 
     provider on behalf of such an enrollee, may challenge the 
     denial of coverage of or payment for such assistance. 
     Requires entities to provide effective procedures for hearing 
     and resolving grievances between the entity and members 
     enrolled with the entity.


                          conference agreement

       The conference agreement includes the Senate amendment.
       d. Demonstration of Adequate Capacity and Services


                              current law

       No provision.


                               house bill

       No provision.


                            senate amendment

       Requires Medicaid MCOs to provide the state and the 
     Secretary with adequate assurances as determined by the 
     Secretary, that the organization meets specified requirements 
     with respect to a service area. Such requirements include: 
     (1) the capacity to serve the expected enrollment in such 
     service area; (2) an appropriate range of services, including 
     transportation and translation services; (3) a sufficient 
     number, mix, and geographic distribution of providers; (4) 
     extended hours of operation with respect to primary care 
     services; (5) preventive and primary care services in readily 
     accessible locations; (6) information about health and other 
     services offered by other programs for which enrollees may be 
     eligible; (7) compliance with other access to care 
     requirements the Secretary or state may impose.


                          conference agreement

       The conference agreement includes the Senate amendment 
     modified to require assurances with respect to (1) the 
     capacity to serve the expected enrollment in such service 
     area; (2) an appropriate range of services and access to 
     preventive and primary care; and (3) a sufficient number, 
     mix, and geographic distribution of providers.
       e. Protecting Enrollees Against Liability for Payment


                              current law

       Requires MCOs to make adequate provision against the risk 
     of insolvency, which assures that individuals eligible for 
     benefits are not held liable for debts of the organization in 
     case of the organization's insolvency.


                               house bill

       No provision.


                            senate amendment

       Managed care entities are required to assure that 
     individuals enrolled with the entity are not held liable for 
     the debts of the entity (or any health care provider with a 
     contractual or other arrangement with the entity) in the 
     event of insolvency, or for services provided to them in the 
     event the entity (or any health care provider with a 
     contractual or other arrangement with the entity) fails to 
     receive payment from the state for such services.


                          conference agreement

       The conference agreement includes the Senate amendment.
       f. Antidiscrimination


                              current law

       No provision.


                               house bill

       No provision.


                            senate amendment

       Prohibits managed care entities from discriminating against 
     any provider acting within the scope of the provider's 
     license or certification under applicable state law with 
     respect to participation, reimbursement, or indemnification, 
     solely on the basis of such license or certification.


                          conference agreement

       The conference agreement includes the Senate amendment.
       g. Compliance with Certain Maternity and Mental Health 
           Requirements


                              current law

       Public Law 104-204 requires group health plans and issuers 
     of health insurance plans in the group and individual markets 
     to provide coverage of 48 hours of inpatient care for normal 
     childbirth deliveries and 96 hours for caesareans. Public Law 
     104-204 also prohibits group health plans that cover medical, 
     surgical, and mental health benefits from imposing more 
     restrictive annual or lifetime dollar limitations on the 
     coverage of mental health benefits than on medical and 
     surgical benefits. The definition of mental health benefits 
     does not include treatment of substance abuse and chemical 
     dependency.


                               house bill

       No provision.

[[Page H6248]]

                            senate amendment

       Requires Medicaid MCOs to comply with the mental health 
     parity and maternity length-of-stay requirements enacted by 
     Public Law 104-204.


                          conference agreement

       The conference agreement includes the Senate amendment.
       h. Protection of Enrollees Against Balance Billing Through 
           Subcontractors


                              current law

       Section 1128B(d)(1) of the Social Security Act contains 
     penalties for those who knowingly and willfully charge, for 
     any service provided to a patient under an approved Medicaid 
     state plan, money or other consideration at a rate in excess 
     of the rates established by the state.


                               house bill

       No provision.


                            senate amendment

       Applies balance billing limitation requirements to any 
     entity subcontracting with participating managed care 
     entities.


                          conference agreement

       The conference agreement includes the Senate amendment, 
     with clarifications to simplify language.
       i. Standards Relating to Access and Obstetrical and 
           Gynecological Services Under Managed Care


                              current law

       No provision.


                               house bill

       Managed care plans requiring or allowing enrollees to 
     designate their primary care provider must permit female 
     enrollees to designate a participating obstetrician-
     gynecologist as their primary care provider. Enrollees who 
     have designated other providers as their primary care 
     provider must be permitted to obtain obstetric and 
     gynecologic care from a participating obstetrician-
     gynecologist without prior authorization. The ordering of any 
     other gynecologic care by the participating obstetrician-
     gynecologist is considered prior authorization for such care. 
     Provision shall be effective for contracts entered into, 
     renewed, or extended on or after January 1, 1998.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement does not include the House 
     provision.
       j. Miscellaneous


                              current law

       Requires MCOs to make services they provide accessible to 
     enrolled individuals to the same extent as such services are 
     made accessible to Medicaid-eligible individuals not enrolled 
     with the organization.
       Requires MCO contracts to provide, in the case of medically 
     necessary services provided to an individual other than 
     through the MCO, that either the MCO or the state provides 
     for reimbursement with respect to those services if they were 
     immediately required due to an unforseen illness, injury, or 
     condition.


                            senate amendment

       Requires a managed care entity to provide Medicaid services 
     to provide or arrange for all medically necessary services 
     specified in the contract. Requires entities to meet 
     standards, established by the Secretary, relating to the 
     ratio of enrollees to full-time-equivalent primary care 
     providers.
       Requires a managed care entity to refer enrollees requiring 
     specialty care to an available and accessible specialist. 
     Specialty care provided must be approved by the entity, in 
     accordance with quality assurance and utilization review 
     standards. Referral to a nonparticipating specialty provider 
     is required only if the plan doesn't have the appropriate 
     specialist available. Care provided to an enrollee referred 
     to a nonparticipating specialists may cost the enrollee no 
     more than care provided by a participating specialist.
       Requires managed care entities to make medical assistance 
     available to enrollees with reasonable promptness and 
     medically necessary care available and accessible 24 hours a 
     day and 7 days a week. Provides reimbursement to individuals 
     who receive medical assistance other than through the managed 
     care entity or without prior approval, if the services are 
     medically necessary and immediately required because of an 
     unforeseen emergency.
       Assistance to special needs children enrolled in a managed 
     care entity shall be provided either by a participating 
     experienced pediatric health care provider or, if appropriate 
     services are not available through the entity, from 
     appropriate outside providers. An individual referred to a 
     provider or allowed to seek outside treatment shall be deemed 
     to have obtained any prior authorization required by the 
     entity.


                          conference agreement

       With respect to access to services, primary care provider 
     ratios, referral to specialty care, timely delivery of 
     services, and treatment of special needs children, the 
     conference agreement does not include the Senate amendment.

                      Quality Assurance Standards

  Section 3461 of the House bill and Section 5701 (new sections 1945, 
       1946, 1947, and 1950) and Section 5758 of Senate amendment


                              current law

       The Medicaid statute includes a number of provisions 
     intended to improve quality of care in prepaid programs and 
     to protect beneficiaries. States are required to obtain an 
     independent assessment of the quality of services furnished 
     by contracting HMOs and pre-paid health plans (those offering 
     a non-comprehensive set of services under partial 
     capitation), using either a utilization and quality control 
     peer review organization (PRO) under contract to the 
     Secretary or another independent accrediting body.
       States are prohibited from contracting with an organization 
     which is managed or controlled by, or has a significant 
     subcontractual relationship with, individuals or entities 
     potentially excludable from participating in Medicaid or 
     Medicare.
       States are required to collect sufficient data on HMO 
     enrollees' encounters with physicians to identify the 
     physicians furnishing services to Medicaid beneficiaries. As 
     a proxy for quality, federal law requires that less than 75% 
     of a managed care organization's enrollment must be Medicaid 
     and Medicare beneficiaries. For some HMOs, the 75/25 rule has 
     been bypassed through state demonstration waivers or through 
     specific federal legislation. Some HMOs are federally 
     qualified--determined by the Secretary to meet standards set 
     forth in title XIII of the Public Health Service Act that 
     includes quality standards.
       States' payments under contracts with MCOs must be 
     established on a actuarially sound basis. By regulation, 
     payment rates may not exceed what the state would have paid 
     for similar services for a beneficiary not enrolled in a MCO. 
     This upper payment limit is known as the fee-for-service 
     equivalent. States may pay less than the upper limit.
       MCOs' physician incentive plans are required to meet the 
     requirements of section 1876(i)(8) and comparable 
     requirements under part C of title XVIII.


                               house bill

       States entering into contracts with managed care entities 
     would be required to establish a quality assurance program, 
     consistent with standards that the Secretary would establish 
     and monitor, in consultation with states and that do not 
     preempt the application of stricter state standards. State 
     quality assurance programs are required to include (1) 
     standards for access to care that ensure (a) that covered 
     services are available within reasonable timeframes, (b) 
     adequate primary care, and (c) specialized service capacity, 
     including pediatric services for special needs children, (2) 
     procedures for monitoring and evaluating quality of care that 
     includes submitting quality assurance data using requirements 
     for entities with Medicare contracts or other requirements as 
     approved by the Secretary, and periodic assessment of quality 
     improvement strategies, and (3) provisions for financial 
     reporting.
       Managed care entities would be required to submit to the 
     state any information the state may find necessary to monitor 
     care, maintain an internal quality assurance program 
     consistent with the state's quality assurance program 
     described above, and provide effective grievance procedures.
       Health maintenance organizations with contracts in effect 
     under Section 1876 of the Social Security Act or MedicarePlus 
     organizations with contracts in effect under Part C of Title 
     XVIII of the Social Security Act could, at state option, be 
     deemed to be in compliance with the requirements of Section 
     1903(m) pertaining to managed care organizations.
       The provision would allow states to deem those managed care 
     entities that have been accredited by an accrediting 
     organization to be in compliance with the requirements of 
     Section 1903(m) pertaining to managed care entities. The 
     accrediting organization must be: (1) private and nonprofit; 
     (2) in existence for the primary purpose of accrediting 
     managed organizations or health care providers; and (3) 
     independent of health care providers or associations of 
     health care providers. The Secretary is required to specify 
     requirements for the standards and process by which a managed 
     care entity may be accredited by such an accrediting 
     organization.
       The provisions of this section apply to agreements between 
     state agencies and managed care entities entered into or 
     renewed on or after January 1, 1999.


                            senate amendment

       Similar to House provision, except it requires primary care 
     case managers and managed care organizations to obtain an 
     annual external independent review of the quality outcomes 
     and timeliness of, and access to the services included in the 
     manager's or organization's contract with the state. The 
     MCO's review shall include: (1) a review of the MCO's medical 
     care and enrollee inpatient and ambulatory data for 
     indications of quality of care, inappropriate utilization, 
     and treatment; (2) notification of the entity and the state 
     if inappropriate care, treatment, or utilization is found; 
     and (3) other activities prescribed by the Secretary or the 
     state. Requires the review to use protocols, developed and 
     validated by the Secretary, that are at least as rigorous as 
     those used by the National Committee on Quality Assurance as 
     of the date of enactment. Requires the results of the reviews 
     to be available to participating providers, enrollees and 
     potential enrollees of the MCO. Requires the Secretary to 
     review the external independent reviews each year, and 
     monitor the effectiveness of the state's monitoring of 
     managed care entities.

[[Page H6249]]

       In addition, the Senate Amendment: requires Medicaid 
     managed care organizations and primary care case managers to 
     provide specified information to states; requires entities 
     entering into contracts with the state to submit to the state 
     information that demonstrates improvement in the care 
     delivered to members and requires MCOs to provide enrollees 
     with an annual report on non-health expenditures; and 
     requires Medicaid MCOs to maintain sufficient patient 
     encounter data to identify the health care provider 
     furnishing services to Medicaid beneficiaries and to submit 
     such data to the state or Secretary upon request.
       Permits the Secretary and the State to establish an 
     incentive program to reward high quality managed care 
     entities.
       Provides federal financial participation (FFP) for 75% of 
     the amount expended with respect to costs incurred in a 
     quarter (as found necessary by the Secretary for the proper 
     and efficient administration of the state plan) as are 
     attributable to the performance of independent external 
     reviews of managed care entities.
       Modifies the payment limit and actuarial soundness 
     standards to require that capitated payment amounts be set at 
     rates that have been determined to be sufficient and not 
     excessive. Such determination would be made by an independent 
     actuary meeting the standards of qualification and practice 
     established to the Actuarial Standards Board.
       Requires MCO's physician incentive plans to meet the 
     requirements of section 1876(i)(8) and comparable 
     requirements under part C of title XVIII.
       Requires specified aspects of an MCOs provider 
     participation agreements with rural health clinics, federally 
     qualified health centers, and clinics providing Title X 
     services to be no more restrictive than the MCOs agreements 
     with other participating providers. Payments to federally 
     qualified health centers and rural health clinics are 
     required, at the election of such center or clinic, to be 
     made on a cost basis.
       Requires the Secretary, in consultation with specified 
     others, to conduct a study and develop guidelines regarding 
     managed care entities and individuals with special health 
     care needs. The Secretary shall report such guidelines to 
     Congress not later than 2 years after the date of enactment 
     and make recommendations for implementing legislation. The 
     guidelines shall relate to specified issues and will apply to 
     primary care case management and capitated risk sharing 
     arrangements.
       Requires other specified studies and reports:
       (1) By January 1, 1998, the Secretary must report to the 
     Senate Finance and House Commerce Committees on the effect of 
     managed care entities on the delivery of and payment for the 
     services traditionally provided through FOHCs, RHCs, and DSH 
     hospitals that have traditionally served Medicaid 
     beneficiaries. The report must include specified information.
       (2) The Secretary and Comptroller General must submit 
     annually a report on the rates paid for hospital services 
     under Medicaid managed care entities.
       (3) Requires each state to report information on hospital 
     rates submitted to such state under section 1947(b)(2).
       (4) Requires the Institute of Medicine to analyze whether 
     the quality assurance programs and accreditation standards 
     applicable to managed care entities operating in the private 
     sector or under contract under the Medicare program include 
     consideration of the accessibility and quality of health care 
     items and services such entities deliver to low-income 
     individuals.


                          conference agreement

       With respect to quality improvement strategy the conference 
     agreement includes provisions that are similar in the House 
     bill and Senate amendment. States entering into contracts 
     with managed care entities would be required to establish a 
     quality assurance program, consistent with standards that the 
     Secretary would establish and monitor, in consultation with 
     states and that do not preempt the application of stricter 
     state standards. State quality assurance programs are 
     required to include (1) standards for access to care that 
     ensure (a) that covered services are available within 
     reasonable timeframes, (b) adequate primary care, and (c) 
     specialized service, (2) examination of other aspects of care 
     and service directly related to the improvement of quality of 
     care (including grievance procedures and marketing and 
     information standards), and (3) procedures for monitoring 
     and evaluating quality of care that includes submitting 
     quality assurance data using requirements for entities 
     with Medicare contracts or other requirements as approved 
     by the Secretary, and periodic assessment of quality 
     improvement strategies.
       With respect to external independent review of managed care 
     activities, the conference agreement includes the Senate 
     amendment with modifications. The modifications would apply 
     the requirement for external review for external review to 
     managed care organizations only (not PCCMs) and require the 
     Secretary, in coordination with the National Governors' 
     Association, to contract with an independent quality review 
     organization to develop the protocols to be used in external 
     independent reviews. The conference agreement does not 
     include the Senate amendment with respect to the contents of 
     the review, Secretarial review and monitoring, information 
     requirements, annual report on non-health expenditures, and 
     incentives for high quality.
       With respect to deemed compliance, the conference agreement 
     includes the Senate amendment with modifications. The 
     modifications would, at the option of a state, deem Medicaid 
     MCOs with contracts in effect under Section 1876 of the 
     Social Security Act of Medicare+Choice organizations with 
     contracts in effect under Part C of Title XVIII of the Social 
     Security Act that have had contracts in effect under section 
     1903(m) at least during the previous 2-year period to be in 
     compliance with external independent review requirements, 
     permit private accreditation at the option of a state, and 
     allow the Secretary to waive the external independent review 
     requirement for organizations she determines have 
     consistently maintained a good record of quality assurance.
       With respect to FFP for external quality review 
     organizations, the conference agreement includes the Senate 
     amendment with clarifications to simplify language.
       With respect to payment limits and encounter data, 
     physician incentive plans, provider participation agreements, 
     and payments to federally qualified health centers and rural 
     health clinics, the conference agreement does not include the 
     Senate amendment.
       With respect to studies and reports, the conference 
     agreement includes the Senate amendment with modifications 
     requiring only studies of (1) managed care entities and 
     individuals with special health care needs and (2) quality 
     assurance programs and accreditation standards applicable to 
     managed care entities operating in the private sector.

                           Solvency Standards

   Section 3462 of House bill and Section 5701 (new section 1948) of 
                            Senate amendment


                              Current Law

       HMOs are required to make adequate provision against the 
     risk of insolvency that is satisfactory to the state and 
     assures that Medicaid beneficiaries are in no case held 
     liable for debt of the HMO in case of its insolvency.


                               House Bill

       Effective for contracts entered into or renewed on or after 
     October 1, 1998, requires an HMO to either meet the same 
     solvency standards set by the states for private HMOs or be 
     licensed or certified by the state as a risk-bearing entity. 
     Such requirements would not apply to an organization if: (1) 
     the organization does not provide inpatient and physician 
     services; (2) the organization is a public entity; (3) the 
     organization's solvency is guaranteed by the state; or (4) 
     the organization is a federally qualified health center.
       Such requirements shall not apply to fully capitated HMOs 
     under contract of the date of enactment of this Act until 3 
     years after the date of enactment of this Act.


                            Senate Amendment

       The Secretary would be required to establish standards 
     under which MCOs would make adequate provision against 
     insolvency. Requires the Secretary to issue guidelines 
     concerning solvency standards for risk contracting entities 
     and their subcontractors.
       Requires Medicaid MCOs to report to the state such 
     financial information as the state may require to demonstrate 
     the MCO can bear risk and that it doesn't place providers at 
     risk for services they don't provide. The Secretary and the 
     state have the right to audit and inspect the MCO's books 
     relating to financial information. Each MCO shall furnish the 
     state with an audited financial statement of the 
     organization's net earnings, consistent with generally 
     accepted accounting principles.


                          Conference Agreement

       The conference agreement includes the House provision, 
     effective for contracts entered into or renewed on or after 
     October 1, 1998.

         Additional Fraud and Abuse Protections in Managed Care

  Section 3464 in House bill and Section 5701 (new sections 1948 and 
                       1949) of Senate amendment


                              Current Law

       a. Prohibiting Affiliations With Individuals Debarred by 
           Federal Agencies
       No provision.
       b. Protection Against Marketing Abuse
       No provision.
       c. Application of State Conflict-of-Interest Safeguards
       Medicaid state and local officers, or employees, former 
     officers or employees, and partners of former officers or 
     employees are prohibited from committing any act that is 
     prohibited by Section 207 or 208 of title 18 of the United 
     States Code.
       d. Sanctions for Noncompliance by Managed Care Entities
       The Secretary may carry out specific remedies, including 
     civil money penalties and the suspension of enrollment of 
     individuals and the payment for services provided to them, in 
     the event an MCO: (1) fails to substantially provide 
     medically necessary items and services required to be 
     provided, and if the failure adversely affected (or had the 
     substantial likelihood of adversely affecting) the 
     individual; (2) imposed premiums in excess of premiums 
     permitted; (3) discriminated among individuals on the basis 
     of their health status or requirements for health care 
     service; (4) misrepresented or falsified information that it 
     furnished to the Secretary or others; or (5) failed to comply 
     with rules regarding physician incentive participation.

[[Page H6250]]

       e. Limitation on Availability of FFP for Use of Enrollment 
           Brokers
       No provision
       f. Disclosure of Ownership and Related Information
       Section 1124 of the Social Security Act requires that 
     entities participating in Medicare, Medicaid, and the 
     Maternal and Child Health Block Grant programs provide 
     certain information regarding the identity of each person 
     with an ownership or control interest in the entity, or in 
     any subcontractor in which the entity has a direct or 
     indirect 5% or more ownership interest.
       g. Disclosure of Transaction Information
       Each non-qualified HMO must report to the state and upon 
     request to the Secretary and selected others a description of 
     transactions between the organization and a party of interest 
     (as defined in section 1318(b) of the Social Security Act), 
     including: (1) any sale or exchange, or leasing of any 
     property between the organization and such party; (2) any 
     furnishing for consideration of goods, services, and 
     facilities (but generally not including employees' salaries 
     or health services provided to members); and (3) any lending 
     of money or other extension of credit.


                               House Bill

       a. Prohibiting Affiliations With Individuals Debarred by 
           Federal Agencies
       An HMO could not knowingly affiliate with a person (or an 
     affiliate of such person) 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. Specifically, an HMO may not have 
     such a person as a director, officer, partner, or person with 
     beneficial ownership of more than 5% of the organization 
     equity. Further, an HMO may not have an employment, 
     consulting, or other agreement with such a person for items 
     and services related to the organization's contract with the 
     state.
       If a state found an HMO contractor to be out of compliance 
     with the above requirements, it could not continue an 
     existing agreement with such organization unless the 
     Secretary, in consultation with the Inspector General of the 
     Department, directs otherwise. The state could not renew or 
     otherwise extend the duration of an existing contract with 
     such organization unless the Secretary, in consultation with 
     the Inspector General of the Department, provided to the 
     state and to Congress compelling reasons for such renewal or 
     extension.
       b. Protection Against Marketing Abuse
       Requires that a state, in consultation with a medical care 
     advisory committee, approve all marketing material an HMO 
     wishes to distribute, prior to distribution. HMOs would be 
     prohibited from: (1) distributing any marketing material 
     containing false or misleading information; (2) seeking to 
     influence enrollment in conjunction with the sale of any 
     other insurance; and (3) directly or indirectly conducting 
     door-to-door, telephonic, or other ``cold call'' marketing of 
     enrollment. Requires HMOs to distribute marketing information 
     to their entire service area. Before an individual is 
     enrolled in a plan, HMOs are required to comply with 
     conditions the Secretary would prescribe to ensure that they 
     are provided with accurate oral and written information 
     sufficient to make an informed enrollment decision. Prohibits 
     the state from contracting with an HMO found to have 
     distributed false or misleading marketing information.
       c. Application of State Conflict-of-Interest Safeguards
       Requires states to have conflict-of-interest safeguards in 
     effect relating to state officers and employees having 
     responsibilities over contracts with managed care 
     organizations. Such safeguards must be at least as effective 
     as the federal safeguards provided under Section 27 of the 
     Office of Federal Procurement Policy Act.
       d. Sanctions for Noncompliance by Managed Care Entities
       No provision.
       e. Limitation on Availability of FFP for Use of Enrollment 
           Brokers
       Federal financial participation (FFP) would be available 
     for expenditures for the use of an enrollment broker in 
     marketing HMOs and other managed care entities to eligible 
     individuals, on the condition that the broker is independent 
     of any plan or provider in the state, and that no person who 
     is an owner, employee, consultant, or has a contract with the 
     broker has any financial relationship with participating 
     managed care entities or providers, or has been excluded from 
     participating in Medicaid or Medicare. This provision would 
     be effective January 1, 1998.
       f. Disclosure of Ownership and Related Information
       No provision.
       g. Disclosure of Transaction Information
       No provision.


                            Senate Amendment

       a. Prohibiting Affiliations With Individuals Debarred by 
           Federal Agencies
       Identical to House provision except would apply protection 
     against marketing abuse to managed care entities.
       b. Protection Against Marketing Abuse
       Identical to House provision except would apply protection 
     against marketing abuse to managed care entities including 
     PCCM.
       c. Application of State Conflict-of-Interest Safeguards
       Identical to House provision.
       d. Sanctions for Noncompliance by Managed Care Entities
       Requires states to establish intermediate sanctions (other 
     than the termination of a contract with a managed care 
     entity), including civil money penalties, the appointment of 
     temporary management, the suspension of enrollment of 
     individuals and the payment for services provided to them, 
     and permitting enrollees to terminate enrollment without 
     cause, in the event an MCO or primary care case manager 
     contracting with the state: (1) fails to substantially 
     provide medically necessary items and services required to be 
     provided, and if the failure adversely affected (or had the 
     substantial likelihood of adversely affecting) the 
     individual; (2) imposed premiums in excess of premiums 
     permitted; (3) discriminated among individuals on the basis 
     of their health status or requirements for health care 
     service; (4) misrepresented or falsified information that it 
     furnished to the Secretary or others; or (5) failed to comply 
     with rules regarding physician incentive participation. The 
     Secretary could also to apply the sanctions described above 
     and could deny payments to states for persons enrolled in 
     plans.
       The term ``medically necessary'' may not be construed as 
     requiring an abortion be performed by an individual, except 
     if necessary to save the life of the mother or if a pregnancy 
     is the result of an act of rape or incest.
       Applies specified sanctions against chronically substandard 
     managed care entities.
       Allows states to terminate contracts with managed care 
     entities failing to meet the requirements described above.
       Establishes due process for managed care entities prior to 
     the termination of a contract or the imposition of sanctions.
       e. Limitation on Availability of FFP for Use of Enrollment 
           Brokers
       Identical to House provision.
       f. Disclosure of Ownership and Related Information
       Requires each Medicaid MCO to provide for disclosure of 
     information in accordance with section 1124.
       g. Disclosure of Transaction Information
       Similar to current law except applies to Medicaid MCOs that 
     are not qualified HMOs.


                          conference agreement

       With respect to prohibiting affiliations of debarred 
     individuals and marketing protection, the conference 
     agreement includes the House provision.
       With respect to conflict of interest safeguards and 
     limitation on availability of FFP for use of enrollment 
     brokers, the conference agreement includes provisions that 
     are identical in the House bill and Senate amendment. 
     Provisions on FFP for enrollment brokers would apply to 
     amounts expended on or after October 1, 1997.
       With respect to intermediate sanctions for noncompliance, 
     the conference agreement provides the states with the tools 
     they need to ensure that beneficiaries are enrolled in 
     quality managed care plans and that they will receive the 
     services provided for under contract. This section requires, 
     as a condition of state entry into or renewal of a contract 
     under Section 1903(m), that a state establishes intermediate 
     sanctions which it may impose on an entity which fails to 
     provide an item or service under its contract with the state. 
     This section is intended to ensure that a state may not 
     impose a sanction on any plan that does not provide abortion 
     services if the plan is not contracted to provide that 
     service, whether or not that service is required to be 
     provided under law.
       With respect to sanctions for chronically substandard 
     managed care entities, authority to terminate contracts, and 
     due process for managed care entities prior to the 
     termination of a contract or the imposition of sanctions, the 
     conference agreement will include the Senate amendment with 
     conforming amendments, effective for contracts entered into 
     or renewed on or after April 1, 1988.
       With respect to disclosure of ownership and related 
     information and disclosure of transaction information, the 
     conference agreement does not include the Senate amendment.

                        Improved Administration

Section 3404 and 3402 of House bill and Section 5701 (new section 1948) 
                      and 5703 of Senate amendment

       a. Change in Threshold Amount for Contracts Requiring 
           Secretary's Prior Approval


                              current law

       All state contracts with a managed care organization must 
     receive prior approval from the Secretary if expenditures are 
     expected to be over $100,000.


                               house bill

       For contracts entered into or renewed on or after the date 
     of enactment, raises the managed care contract expenditure 
     level requiring prior approval from the Secretary of Health 
     and Human Services to $1,000,000, effective 1998. In future 
     years, indexes the amount for inflation according to the 
     percentage increase in the consumer price index for all urban 
     consumers (CPI-U) over the previous year.


                            senate amendment

       Similar provision except does not index the amount for 
     inflation in future years.

[[Page H6251]]

                          conference agreement

       The conference agreement includes House provision, 
     effective on date of enactment.
     b. Permitting same copayments in HMOs as in fee-for-service


                              current law

       Enrollment fees, coinsurance, or other cost-sharing charges 
     may not be imposed on certain Medicaid recipients for 
     services furnished by health maintenance organizations.


                               house bill

       Eliminates the prohibition on cost sharing for services 
     furnished by health maintenance organizations. Applies to 
     cost-sharing for items and services furnished on and after 
     the date of enactment.


                            senate amendment

       Similar provision.


                          conference agreement

       The conference agreement includes the Senate amendment.
     c. Timeliness of payment


                              current law

       No provision.


                               house bill

       No provision.


                            senate amendment

       Requires managed care organizations to pay affiliated 
     providers in a timely manner for items and services provided 
     to Medicaid beneficiaries.


                          conference agreement

       The conference agreement includes the Senate amendment.

6-Month Guaranteed Eligibility for All Individuals Enrolled in Managed 
                                  Care

        Section 5701 (new section 1941) of the Senate amendment


                              current law

       States may also guarantee eligibility for up to 6 months 
     for persons enrolled in federally qualified HMOs.


                               house bill

       No provision.


                            senate amendment

       Would allow states to establish a minimum enrollment period 
     of not more than 6 months (states may extend such period up 
     to 12 months if extension is done uniformly for all 
     individuals). Deems individuals who lose Medicaid eligibility 
     prior to the end of the minimum enrollment period eligible to 
     receive benefits through the entity until the end of the 
     enrollment period.


                          conference agreement

       The conference agreement includes the Senate amendment 
     modified to allow states to guarantee eligibility for up to 6 
     months for persons enrolled with a Medicaid managed care 
     organization (as defined in section 1903(m)(1)(A)), with a 
     primary care case manager (as defined in section 1905(t)), or 
     by or through a case manager. Provision shall take effect on 
     October 1, 1997.
       Effective Dates (Section 5701 (new section 1950) of Senate 
     amendment)


                               house bill

       No provision.


                            senate amendment

       Except as otherwise provided, amendments take effect on the 
     date of enactment and apply to contracts entered into or 
     renewed on or after October 1, 1997.
       Makes allowances for States with section 1915 or section 
     1115 Medicaid waivers either approved or in effect.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     modifications.

             Chapter 2--Flexibility in Payment of Providers

Flexibility in Payment Methods for Hospital, Nursing Facility, ICF/MR, 
                        and Home Health Services

    Section 3411 of House bill and Section 5711 of Senate amendment


                              Current Law

       Under so-called Boren amendments, states are required to 
     pay hospitals, nursing facilities, and intermediate care 
     facilities for the mentally regarded (ICFs/MR) rates that are 
     ``reasonable and adequate'' to cover the costs which must be 
     incurred by ``efficiently and economically operated 
     facilities.'' A number of courts found that state systems 
     failed to meet the test of ``reasonableness'' and some states 
     have had to increase payments to these providers.


                               house bill

       Repeals the Boren amendments and establishes a public 
     notice process for setting payment rates for hospitals, 
     nursing facilities, and ICFs/MR. In the case of hospitals, 
     rates would have to take into account the situation of 
     hospitals that serve a disproportionate number of low-income 
     patients with special needs. For hospitals and nursing 
     facilities, each state would have to assure that the average 
     level of payments furnished during the 18-month period 
     beginning October 1, 1997, is not less than the average level 
     of payments that would be made for such services based on 
     rates in effect as of May 1, 1997.


                            senate amendment

       Repeals the Boren amendments and establishes a public 
     notice process for rates and their underlying methodologies, 
     including a description of how such methodologies will affect 
     access to services, quality of services, and safety of 
     beneficiaries. The Secretary would be required to study the 
     effects of the rate-setting methods used by states and submit 
     a report with recommendations not later than 4 years after 
     enactment.


                          conference agreement

       Repeals the Boren amendments and establishes a public 
     process under which proposed rates, methodologies underlying 
     the rates and the justifications for such rates are published 
     and subject to public review and comment, and final rates are 
     published with underlying methodologies and justifications. 
     Requires the Secretary to study the effects of states' rate-
     setting methods on access to and quality of services and 
     submit a report with recommendations not later than 4 years 
     after enactment.
       Effective upon enactment; applies to payments for services 
     furnished on or after October 1, 1997.

                 Payment for Center and Clinic Services

   Section 3412 of House bill and Section 1946(d) of Senate amendment


                              Current law

       State Medicaid programs are required to cover ambulatory 
     services that are furnished by federally qualified health 
     centers (FQHCs) and rural health clinics (RHCs). Medicaid 
     payments for ambulatory services that are provided by FQHCs 
     or RHCs must be equal to 100% of the facilities' reasonable 
     costs for providing the services. If an FQHC enters into a 
     contract with a health maintenance organization (HMO) that 
     contracts with a state Medicaid program, the HMO must pay the 
     FQHC 100% of reasonable costs and the state's capitation 
     payment to the HMO must reflect the 100% rate that is due to 
     the FQHC.
       The law defines FQHC as a center that receives, or meets 
     the requirements to receive, a certain grant under the Public 
     Health Service Act. In addition, an entity is an FQHC if (1) 
     based on the recommendation of the Health Resources and 
     Services Administration within the Public Health Service, the 
     Secretary determines that the entity meets the requirements 
     for receiving such a grant or (2) the entity was treated by 
     the Secretary as a comprehensive FQHC as of January 1, 1990. 
     The definition includes a program or facility operated by an 
     Indian tribe, a tribal organization, or by an urban Indian 
     organization.


                               house bill

       States would be required to continue to pay 100% of 
     reasonable costs for services furnished by FQHC and RHCs 
     during fiscal years 1998 and 1999, but could reduce rates in 
     later years. States are required to pay FQHC and RHCs at 
     least 95% of costs for services furnished during FY2000, 90% 
     for FY2001, and 85% for FY2002.
       To ease the transition from cost-based payment rates, the 
     provision specifies two special payment rules that would be 
     applicable during fiscal years 1998-2002. In the case of a 
     contract between an FQHC or RHC and an HMO, the HMO would 
     have to pay the FQHC or RHC at least as much as it would pay 
     any other provider for similar services. States would be 
     required to make supplemental payments to the FQHCs and RHCs. 
     Such payments would be equal to the difference between the 
     contracted amount and the cost-based amount.
       Modifies the definition of FQHC to allow states flexibility 
     in coverage. With respect to an entity that the Secretary 
     determined met the requirements for a grant, and the entity 
     was owned, controlled, or operated by another provider, the 
     state would have the option of whether to treat the entity as 
     an FQHC or not.
       The Comptroller General would be required, not later than 
     February 1, 2001, to report on the impact of these amendments 
     on access to health care for Medicaid beneficiaries and the 
     uninsured, and on the ability of FQHCs and RHCs to become 
     integrated in a managed care system.
       The provision would apply to services furnished on and 
     after the date enactment.


                            Senate Amendment

       Requires a Medicaid managed care organization that has 
     contract with an FQHC or RHC to pay the center on a basic 
     that was comparable to the basis on which other providers 
     were paid. In addition, the provision would require that, at 
     the election of the center, a managed care organization pay 
     100% of reasonable costs for services furnished under a 
     contract with an FQHC or RHC.
       Effective October 1, 1997.


                          Conference Agreement

       The conference agreement includes the House bill with 
     amendments. The conference agreement would phase out the 
     requirement that states pay 100% of costs to FQHCs and RHCs. 
     Under the phase-out schedule, states could pay 95% of 
     reasonable costs for services furnished during FY2000, 90% 
     for 2001, 85% for 2002, and 70% for 2003.
       The conference agreement includes the House bill's 
     transitional provisions regarding states' supplemental 
     payments to FQHCs and RHCs, and HMO payments to FQHCs or RHCs 
     under contracts with the HMO.
       The conferees recognize the important contributions to the 
     health of many low-income individuals made by these 
     facilities. States are encouraged to work with the FQHCs and 
     RHCs in making the transition to the new challenges and 
     opportunities presented in Medicaid reform.
       With respect to an entity which, based on the 
     recommendation of the Health Resources and Services 
     Administration is determined

[[Page H6252]]

     to meet the requirements of receiving a grant, the conference 
     agreement amends the definition to mean an entity that is 
     determined to meet the requirements of receiving a grant 
     including requirements of the secretary that an entity may 
     not be owned, controlled, or operated by another entity.

   Elimination of Obstetrical and Pediatric Payment Rate Requirements

                  Section 5752 of the Senate amendment


                              Current Law

       States are required to assure adequate payment levels for 
     obstetrical and pediatric services and provide annual reports 
     on their payment rates for such services.


                               House Bill

       No provision.


                            Senate Amendment

       Repeals the current law provision effective with services 
     furnished on or after October 1, 1997.


                          Conference Agreement

       The conference agreement includes the Senate amendment.

        Medicaid Payment Rates for Certain Medicare Cost-Sharing

                    Section 5712 of Senate amendment


                              Current Law

       State Medicaid programs are required to pay Medicare cost-
     sharing charges for individuals who are beneficiaries under 
     both Medicaid and Medicare, (dual eligibles) and for 
     qualified Medicare beneficiaries (QMBs). QMBs are individuals 
     who have incomes not over 100% of the poverty level and who 
     meet specified resources standards.) The amount of required 
     payment has been the subject of some controversy.
       State Medicaid programs frequently have lower payment rates 
     for services than the rates that would be paid under 
     Medicare. Program guidelines permit states to pay either (1) 
     the full Medicare deductible and coinsurance amounts or (2) 
     cost-sharing charges only to the extent that the Medicare 
     provider has not received the full Medicaid rate for an item 
     or service. Some courts have forced state Medicaid programs 
     to reimburse Medicare providers to the full Medicare 
     allowable rates for services provided to QMBs and dually 
     eligible individuals.


                               House Bill

       No provision.


                            Senate Amendment

       Clarifies that state Medicaid programs may limit Medicare 
     cost-sharing to amounts that, with the Medicare payment, do 
     not exceed what the state's Medicaid program would have paid 
     for such service to a recipient who is not a QMB. Specifies 
     that the Medicare payment plus the state's Medicaid payment 
     will be considered payment in full and the QMB will not be 
     liable for payment to a provider or managed care entity. 
     Additionally, provides that any sanctions for excess 
     charges that may be imposed on a provider or managed care 
     entity under Medicare may be imposed for making excess 
     charges under Medicaid.
       Applies to items and services furnished on or after the 
     date of enactment. In the case of payment that is subject to 
     a law suit pending as of the date of enactment, or initiated 
     after the date of enactment, applies to items and services 
     furnished before the date of enactment.


                          conference agreement

       The conference agreement includes the Senate amendment.

             Treatment of Veterans Pensions under Medicaid

                    Section 5766 of Senate amendment


                              current law

       No provision.


                               house bill

       No provision.


                            senate amendment

       Specifies that in the case of a Medicaid-eligible resident 
     in a state veterans home to which the Secretary of Veterans 
     Affairs makes payments for nursing home care, if the veteran 
     has no spouse or child, and receives a veteran's pension of 
     more than $90 per month, any pension payment (including any 
     payment due to the need for aid and attendance, or for 
     unreimbursed medical expenses) that is over $90 per month 
     will be counted as income to be applied to the cost of 
     nursing home care. These provisions will also apply to a 
     Medicaid-eligible surviving spouse of a veteran.
       Effective October 1, 1997.


                          conference agreement

       The conference agreement includes the Senate amendment.

                     3--FEDERAL PAYMENTS TO STATES

                 Chapter 3--Federal Payments to States

                    Disproportionate Share Payments

    Section 3471 of House Bill and Subchapter C of Senate Amendment


                              current law

       (a) Direct Payment by State. States are required to make 
     payment adjustments to the rates of certain hospitals that 
     treat large numbers of low income and Medicaid patients.
       The law sets minimum standards by which a hospital may 
     qualify as a disproportionate share (DSH) hospital, and 
     minimum payments to be made to those hospitals. State are 
     generally free to exceed federal minimums in both designation 
     and payments up to certain ceilings.
       (b) State DSH allocations. Each year states are designated 
     as either ``high'' DSH states or ``low'' DSH states based on 
     the percentage of total medical assistance payments for DSH 
     adjustments in the prior year. States making DSH payments in 
     excess of 12% of medical assistance are designated ``high'' 
     DSH, while those paying less than 12% of medical assistance 
     for DSH are designated as low DSH. Total disproportionate 
     share payments to each state are limited to a published 
     allotment amount that can be no more than 12% of medical 
     assistance payments in states designated as ``low'' DSH 
     states, and in states designated as ``high'' DSH states the 
     amount of payments in 1992. A hospital may not be designated 
     as a DSH hospital by a state unless it serves a minimum of 1% 
     Medicaid clients among its caseload.
       (c) Transition Rule. Under current law, DSH payments to 
     inpatient general hospitals are limited to no more than the 
     costs of providing inpatient and outpatient services to 
     Medicaid and uninsured patients, less payments received from 
     Medicaid and uninsured patients. This cap, known as the 
     hospital-specific or facility-specific DSH cap, was phased-in 
     for certain public hospitals so that during state fiscal 
     years beginning before January 1995, those hospitals could 
     receive 200% of the above costs. After that, all hospitals 
     would be limited to no more than 100% of unreimbursed costs.
       (d) Limitations on Payments to IMDs. No provision.
       (e) Effective Date. no provision.
       (f) DSH Payments for Certain Children's and Teaching 
     Hospitals. Under current law, states have a great deal of 
     flexibility in defining hospitals qualifying as DSH hospitals 
     and setting payment adjustments for those hospitals within 
     broad federal guidelines. DSH hospitals must include at least 
     all hospitals meeting minimum criteria and may not include 
     hospitals that do not have a Medicaid utilization rate of at 
     least 1%. The DSH payment formulas must at least meet minimum 
     criteria and DSH payments cannot exceed a hospital-specific 
     cap based on the unreimbursed costs of providing hospital 
     services to Medicaid and uninsured patients.


                               House Bill

       (a) Direct Payment by State. Requires states to pay for 
     services furnished by a hospital on behalf of individuals 
     enrolled in Medicaid managed care entities directly to 
     hospitals rather than to the managed care entities and not to 
     include such payments in the capitation rate.
       (b) State DSH allocations. Establishes additional caps on 
     the state DSH allotments for fiscal years 1998-2002. The 
     state DSH allotments for states in which 1995 DSH payments 
     were less than 1% of total medical assistance spending would 
     be frozen at the level of payments for DSH adjustments in 
     those states in 1995. For states classified as ``high'' DSH 
     states (those with DSH payments in excess of 12% of medical 
     assistance payments) for fiscal year 1997, DSH allotments 
     would be reduced from 1995 payment levels. The reduction 
     percentage for ``high'' DSH states would be equal to 2% in 
     1998, 5% in 1999, 20% in 2000, 30% in 2001, and 40% in 2002. 
     All other states' DSH payments would be equal to 1995 DSH 
     payments levels reduced by one-half of the reduction 
     percentages for ``high'' DSH states. The provisions of this 
     section would become effective beginning with fiscal year 
     1998.
       (c) Transition Rule. Increases the hospital-specific cap on 
     DSH payments for the State of California to 175% of the cost 
     of care provided to Medicaid recipients and individuals who 
     have no health insurance or other third-party coverage for 
     services during the year (net of non-disproportionate-share 
     Medicaid payments and other payments by uninsured 
     individuals) for the period October 1, 1997, to October 1, 
     1999.
       (d) Limitations on Payments to IMDs. No provision.
       (e) Effective Date. Fiscal year 1998.
       (f) DSH Payments for Certain Children's and Teaching 
     Hospitals. No provision.


                            Senate Amendment

       (a) Direct Payment by State. No Provision.
       (b) State DSH allocations. Establishes additional caps on 
     state DSH allotments for ``high'' and non-high DSH states 
     beginning in fiscal year 1998. ``High'' DSH states would be 
     defined as those designated as such for 1997 using the 
     preliminary DSH allotment as published in the Federal 
     Register on January 31, 1997.
       In 1998, DSH allotments for state that are not ``high'' DSH 
     states would be equal to actual 1995 DSH payment and for 
     States that are ``high'' DSH states, would be the sum of 1995 
     DSH payments to general hospitals and 70% of DSH payments to 
     mental hospitals.
       Except as provided below, allotments for non-high DSH 
     staets for 1999 through 2002 would be equal to 1995 payments 
     reduced by the following percentages: 2% in 1999, 5% in 2000, 
     10% in 2001, and 15% in 2002. Allotments for ``high'' DSH 
     states for those years would be reduced in the following 
     manner. In 1999, ``high'' DSH states would be allotted the 
     sum of 1995 DSH payments to inpatient general hospitals plus 
     50% of their 1995 DSH payments to mental hospitals and then 
     the sum would be reduced by 8%, in 2000, the sum of their 
     1995 DSH payments to inpatient general hospitals plus 20% of 
     their 1995 DSH payments to mental hospitals and then the sum 
     would be reduced by 15%. In 2001 and 2002, ``high'' DSH 
     states would be allotted an amount equal to 1995 DSH payments 
     to inpatient general hospitals reduced by 20%.
       For states with 1995 DSH spending of more than 12% of total 
     medical assistance payments and which reported no DSH 
     payments

[[Page H6253]]

     to inpatient mental health facilities in that year, 
     allotments for the years 1998-2002 would be equal to the 
     average of reported DSH payments in 1995 and 1996.
       For states with 1995 DSH spending of less than 3% of total 
     medical assistance payments, allotments for years 1998-2002 
     would be equal to their 1995 spending amounts.
       For states with 1995 DSH spending of over 3% of total 
     medical assistance payments, allotments for 1998-2002 would 
     be equal to the greater of the formula as described above or 
     50% of 1995 DSH payments.
       Allotments for all states for 2003 and thereafter would be 
     equal to the allotment for the preceding year, increased by 
     the estimated percentage change in the consumer price index 
     for medical services (as determined by the Bureau of Labor 
     Statistics.)
       (c) Transition Rule. No provision.
       (d) Limitations on Payments to IMDs.--
       Payments to institutions for mental diseases and other 
     mental health facilities would not be allowed to exceed total 
     DSH spending in 1995 for such facilities or the applicable 
     percentage multiplied by 1995 DSH payments to such 
     facilities. The applicable percentage is the lesser of the 
     percentage of total 1995 DSH payments that were paid to IMDs 
     or other mental health facilities or 50% in 2001, 40% in 
     2002, or 33% in 2003.
       (e) Effective Date. October 1, 1997, without regard to 
     whether or not final regulations to carry out such provisions 
     have been promulgated.
       (f) DSH Payments for Certain Children's and Teaching 
     Hospitals. Requires states to provide assurances to the 
     Secretary that the state has developed a methdology for 
     prioritizing DSH payments to hospitals, including 
     children's hospitals, that is based on the proportion of 
     low-income and medicaid patients served by such hospitals. 
     Such assurance would be required to include a definition 
     of high volume disproportionate share hospitals and a 
     detailed description of the methodology to be used to 
     provide DSH payments to such hospitals. The state would 
     also be required to provide a report annually to the 
     secretary that describes the payments to such hospitals.


                          Conference Agreement

       (a) Direct Payment by State. The conference agreement 
     includes the House provision with the following modification. 
     The provision would not apply to DSH payments made under 
     payment arrangements in effect on July 1, 1997.
       (b) State DSH allocations. The conference agreement 
     establishes additional caps on the state DSH allotments for 
     fiscal years beginning in 1998. The agreement sets the caps 
     for 1998 to 2002 and establishes specific amounts that states 
     would receive in each of these years. Thereafter, the DSH 
     allotments for a state would be equal to the allotment for 
     the proceeding fiscal year increased by the percentage change 
     in the medical care component of the consumer price index for 
     all urban consumers as estimated by the Secretary for the 
     previous fiscal year subject to a ceiling of 12% of the total 
     amount of expenditures under the State plan for medical 
     assistance during the fiscal year.
       (c) Transition Rule. The conference agreement includes the 
     House provision.
       (d) Limitations on Payments to IMDs. The conference 
     agreement includes the Senate Amendment with further 
     specifications that 1995 DSH payments and DSH payments to 
     IMDs are defined as those reported by the state on HCFA Form 
     64 no later than January 1, 1997.
       (e) Effective Date. Fiscal Year 1998.
       (f) DSH Payments for Certain Children's and Teaching 
     Hospitals. The conference agreement includes the Senate 
     amendment with the modification that states must submit to 
     the Secretary a description of the methodology to be used by 
     the State for to identify and to make payments to 
     disproportionate share hospitals, including children's 
     hospitals, on the basis of the proportion of low-income and 
     medicaid patients services by such hospitals. The state shall 
     make an annual report to the Secretary describing the DSH 
     payments made.

         Treatment of State Taxes Imposed on Certain Hospitals

    Section 3413 of House bill and Section 5765 and 5768 of Senate 
                               Amendment


                              Current Law

       States may not claim for federal matching payments state 
     spending generated from health care taxes that are not broad 
     based. Health care provider-specific taxes are not considered 
     broad-based and, thus, may not be used to claim federal 
     matching payments for Medicaid spending.


                               House Bill

       Amends the definition of the term ``broad-based health care 
     related tax'' to specify that health related taxes that 
     exclude hospitals described in section 501(c)(3) of the 
     Internal Revenue code that are exempt from taxation under 
     section 501(a) of the code, and do not accept Medicaid or 
     Medicare reimbursement would qualify for federal matching 
     payments if used as state Medicaid spending. The provision 
     also prohibits states from claiming federal matching payments 
     for state spending generated from health care taxes applied 
     to these facilities.
       The provision applies to taxes imposed before, on, or after 
     the date of enactment.


                            Senate Amendment

       Identical provision, additionally, deems taxes, fees, or 
     assessments that were collected by the state of New York from 
     a health care provider before June 1, 1997, and for which a 
     waiver has been applied for, to be permissible health care 
     related taxes in compliance with the requirements of Medicaid 
     law.


                          Conference Agreement

       The conference agreement includes the House bill and the 
     Senate amendment.

  Additional Funding for State Emergency Health Services Furnished to 
                          Undocumented Aliens

                       Section 3472 of House bill


                              Current Law

       The Medicaid program requires states to cover the cost of 
     care and services necessary for the treatment of an emergency 
     medical condition for undocumented aliens as long as those 
     individuals would otherwise meet the eligibility requirements 
     for the state Medicaid program.


                               House Bill

       Provides for additional funding for emergency health 
     services furnished to undocumented aliens for 1998 through 
     2001. For each of the four fiscal years, $25 million would be 
     available to distribute among the 12 states (including the 
     District of Columbia) having the highest number of 
     undocumented aliens. In a fiscal year, each state's portion 
     of total funds available would be based on its share of 
     total undocumented aliens in all of the eligible states. 
     From the allotments, the Secretary will pay to each state 
     amounts the state demonstrates it paid for services 
     furnished to undocumented aliens. Any amount of a state's 
     allotment not paid out would be available for the 
     following fiscal year. The number of undocumented aliens 
     in a state would be based on estimates prepared by the 
     Statistics Division of the Immigration and Naturalization 
     Services as of October 1992.


                            senate amendment

       No provision.


                          Conference agreement

       The conference agreement includes the House bill.

                 Elimination of Waste, Fraud, and Abuse

                    Section 5756 of Senate amendment


                              Current Law

       (a) Ban on Spending for Nonhealth Related Items. No 
     provision.
       (b) Disclosure of Information and Surety Bond Requirement 
     for Suppliers of Durable Medical Equipment. Under Section 
     1124 of the Social Security Act, an entity (other than an 
     individual practitioner or group of practitioners) that 
     furnishes, or arranges for furnishing Medicaid items or 
     services is required to supply full and complete information 
     as to the identity of each person with an ownership or 
     control interest in the entity.
       (c) Surety Bond Requirement for Home Health Agencies. No 
     provision.
       (d) Conflict of Interest Safeguards. Medicaid state and 
     local officers, or employees, former officers or employees, 
     and partners of former officers or employees are prohibited 
     from committing any act that is prohibited by Section 207 or 
     208 of title 18 of the United States Code.
       (e) Authority to Refuse to Enter Into Medicaid Agreement 
     with Individuals or Entities Convicted of Felonies. 
     Generally, Medicaid beneficiaries are free to obtain services 
     from any providers that undertake to provide them.
       (f) Monitoring Payment for Dual Eligibles. No provision.
       (g) Beneficiary and Program Protection Against Waste, 
     Fraud, and Abuse. No provision.


                               House BIll

       (a) Ban of Spending for Nonhealth Related Items. No 
     provision.
       (b) Disclosure of Information and Surety Bond Requirement 
     for Suppliers of Durable Medicaid Equipment. No provision.
       (c) Surety Bond Requirement for Home Health Agencies. No 
     provision.
       (d) Conflict of Interest Safeguards. No provision.
       (e) Authority to Refuse to Enter Into Medicaid Agreement 
     with Individuals or Entities Convicted of Felonies. No 
     provision.
       (f) Monitoring Payment for Dual Eligibles. No provision.
       (g) Beneficiary and Program Protection Against Waste, 
     Fraud, and Abuse. No provision.


                            Senate Amendment

       (a) Ban of Spending for Nonhealth Related Items. Specifies 
     that federal Medicaid payment would not be made for any 
     amount spent for roads, bridges, stadiums, or any other item 
     or service not covered under a Medicaid state plan.
       (b) Disclosure of Information and Surety Bond Requirement 
     for Suppliers of Durable Medical Equipment. Adds the 
     requirement that states would be prohibited from issuing or 
     renewing provider status for suppliers of durable medical 
     equipment unless, on a continuing bases, the supplier 
     provided the state Medicaid agency with a surety bond in an 
     amount not less than $50,000.
       (c) Surety Bond Requirement for Home Health Agencies. 
     Requires home health agencies to provide state Medicaid 
     agencies with surety bonds in amounts to less than $50,000.
       (d) Conflict of Interest Safeguards. Amends the officer and 
     employee provisions to include independent contractors and 
     require that if they are responsible for obtaining services 
     under a Medicaid state plan, that they will be subject to 
     safeguards against conflicts of interest that are as 
     stringent as the safeguards that apply under section 27 of 
     the Office of Federal Procurement Policy Act.

[[Page H6254]]

       (e) Authority to Refuse to Enter Into Medicaid Agreement 
     with Individuals or Entities Convicted of Felonies. Clarifies 
     that a state is not required to have, as a Medicaid provider, 
     any person or entity convicted of a felony which the state 
     agency determines is inconsistent with the best interest of 
     Medicaid beneficiaries.
       (f) Monitoring Payment for Dual Eligibles. Requires the 
     Administrator of the Health Care Financing Administration 
     (HCFA) to:
       Develop mechanisms to monitor and prevent inappropriate 
     Medicaid payments for services furnished to individuals 
     eligible for both Medicare and Medicaid benefits;
       Study the use of case management or care coordination to 
     improve care for individuals who are eligible for both 
     programs; and
       Work with states to ensure better care coordination for 
     dual eligibles and recommend changes to Congress.
       (g) Beneficiary and Program Protection Against Waste, 
     Fraud, and Abuse. Requires each state to provide programs to 
     ensure program integrity, protect and advocate on behalf of 
     individuals, and report data about beneficiary concerns, 
     complaints, and instances of beneficiary abuse, program 
     waste, or fraud by managed care plans. Each state's programs 
     would provide assistance to beneficiaries, with emphasis on 
     the families of special needs children and persons with 
     disabilities. Such assistance would include beneficiary 
     education on managed care plans. The state's programs would 
     collect and report data to the state and report to the state 
     on any systematic problems in the implementation of managed 
     care entities.


                          conference agreement

       (a) Ban of Spending for Nonhealth Related Items.
       The conference agreement includes the Senate amendment.
       (b) Disclosure of Information and Surety Bond Requirement 
     for Suppliers of Durable Medical Equipment.
       The conference agreement includes the Senate amendment.
       (c) Surety Bond Requirement for Home Health Agencies.
       The conference agreement includes the Senate amendment 
     modified to require a surety bond of not less than $50,000 or 
     such comparable surety bond as the Secretary may permit.
       Applies to home health care services furnished on or after 
     January 1, 1998.
       (d) Conflict of Interest Safeguards.
       The conference agreement includes the Senate amendment with 
     technical modifications.
       Effective January 1, 1998.
       (e) Authority to Refuse to Enter Into Medicaid Agreement 
     with Individuals or Entities Convicted of Felonies.
       The conference agreement includes the Senate amendment with 
     technical modifications.
       (f) Monitoring Payment for Dual Eligibles.
       The conference agreement includes only the first item of 
     the Senate amendment. That is, the conference agreement 
     includes the Senate provision amended to require only that 
     the HCFA Administrator monitor and prevent inappropriate 
     payments.
       (g) Beneficiary and Program Protection Against Waste, 
     Fraud, and Abuse.
       The conference agreement requires each state to provide, 
     not later than 1 year after enactment, a mechanism to receive 
     reports from beneficiaries and others, and compile data 
     concerning alleged instances of waste, fraud, and abuse.
       The conferees support efforts at all levels of government 
     to eliminate waste, fraud, and abuse in this program. States 
     are encouraged to develop innovative approaches in this area.

                            Increased FMAPs

                    Section 5761 of Senate amendment


                              current law

       The federal share of a state's expenditures for Medicaid 
     items and services is called the federal medical assistance 
     percentage (FMAP). Each state's FMAP is determined annually 
     according to a statutory formula designed to pay a higher 
     matching percentage to states with lower per capita incomes 
     relative to the national average per capita income. The law 
     establishes a minimum FMAP of 50% and a maximum of 83%. For 
     the District of Columbia (treated as a state under Medicaid 
     law) and 11 states including Alaska, the FMAP is 50%. The 
     FMAP does not apply to a state's administrative expenditures; 
     the federal share of those is generally 50% for all states.


                               house bill

       No provision.


                            senate amendment

       Increases the FMAP for the District of Columbia to 60% 
     during fiscal years 1998-2000 and increases the FMAP for 
     Alaska to 59.8% during the same period.


                          conference agreement

       For the District of Columbia, the FMAP is increased 
     permanently to 70% beginning in 1998. For the state of 
     Alaska, the FMAP is increased to 59.8% for fiscal years 1998, 
     1999, and 2000. The conference agreement specifies that the 
     increased FMAPs apply only to items and services furnished 
     under Medicaid or a state child health plan, payments made on 
     a capitation or other risk-basis, and payments attributable 
     to disproportionate share hospital allotments for such 
     fiscal years.
       The conferees note the importance of establishing equitable 
     matching rates across the states. The current methodology for 
     calculating match rates, per capita income, is a poor and 
     inadequate measure of the states' needs and abilities to 
     participate in the Medicaid program. The conferees note that 
     the poverty guidelines for Alaska and Hawaii, for example, 
     are different than those for the rest of the nation but there 
     is no variation from the national calculation in the FMAP. 
     The increase in Alaska's FMAP demonstrates there is a 
     recognition that a more accurate measurement is needed in the 
     program. Conferees also note that comparable adjustments are 
     generally made for Alaska and Hawaii.

             Increase in Payment Limitation for Territories

                    Section 5762 of Senate amendment


                              current law

       Puerto Rico and each of the territories has a federal 
     Medicaid matching rate of 50%. Total annual Medicaid payments 
     to them are subject to statutory limits. Beginning with 
     amounts specified for each territory for FY1994, Medicaid 
     limits increase annually according to the percentage increase 
     in the medical care component of the consumer price index for 
     all urban consumers (CPI-U).


                               house bill

       No provision.


                            senate amendment

       For FY1998, for federal Medicaid payment limits would be 
     increased as follows: Puerto Rico, $30,000,000; Virgin 
     Islands, $750,000; Guam, $750,000; Northern Mariana Islands, 
     $500,000; and American Samoa, $500,000.
       For FY1999 and thereafter, the Medicaid payment limit for 
     each territory would be the amount provided for the preceding 
     fiscal year increased by the percentage increase in the 
     medical care component of the CPI-U.


                          conference agreement

       The conference agreement includes the Senate amendment.

                         Chapter 4--Eligibility

State Option of Continuous Eligibility for 12 Months; Clarification of 
                     State Option to Cover Children

    Section 3421 of House bill and Section 5732 of Senate amendment


                              current law

       In general, Medicaid coverage can be provided only to 
     individuals who continue to meet all the requirements for 
     eligibility. For some individuals and families, income 
     fluctuates so that there are frequent interruptions in 
     eligibility. Medicaid law makes an exception to provide 
     continuous eligibility for pregnant women and infants 
     regardless of changes in income. The law specifies that a 
     pregnant recipient continues to be eligible for Medicaid 
     until 60 days after the pregnancy ends. Further, a child born 
     to a woman receiving medical assistance remains eligible for 
     medical assistance for one year so long as the child is a 
     member of the woman's household and the woman remains (or 
     would remain if pregnant) eligible for medical assistance. 
     The law requires states to provide Medicaid coverage to 
     children who are in households with incomes not over 100% of 
     the federal poverty level, and who were born after September 
     30, 1983.


                               house bill

       Permits states to provide a full continuous 12 months of 
     eligibility for children up to age 19 or an earlier age 
     specified by the state. Each state would also be permitted to 
     cover older children under age 19, at an age specified by the 
     state, in households with incomes not over 100% of poverty.
       Applies to items and services furnished on or after October 
     1, 1997.


                            senate amendment

       Similar provision.
       Applies to items and services furnished on or after October 
     1, 1997.


                          conference agreement

       The conference agreement includes the House provision.

                       Payment of Part B Premiums

  Section 3422 of the House bill and Section 5544 of Senate amendment


                              current law

       Medicare beneficiaries are liable for specific cost-sharing 
     charges, namely premiums, deductibles, and coinsurance. State 
     Medicaid programs are required to pay Medicare cost-sharing 
     charges for certain low-income Medicare beneficiaries 
     known as qualified Medicare beneficiaries (QMBs). A QMB is 
     an aged or disabled person with income at or below the 
     federal poverty line and resources below $4,000 for an 
     individual and $6,000 for a couple.
       States are also required to pay Medicare Part B Premiums 
     for specified low-income Medicare beneficiaries (SLMBs) These 
     are persons who meet the QMB criteria, except that their 
     income is slightly over the QMB limit. The SLMB limit is 120% 
     of poverty.
       The federal government and the states share in the payment 
     for QMB and SLMB benefits according to each state's Medicaid 
     matching formula known as the federal medical assistance 
     percentage (FMAP).


                               House Bill

       Beginning in calendar year 1998, raises the poverty 
     threshold for mandatory Medicaid payment of Medicare Part B 
     premiums for Medicare beneficiaries from 120% of poverty to 
     135% of poverty.
       For individuals who would be specified low-income Medicare 
     beneficiaries except that their incomes are between 135% of 
     poverty and 175% of poverty, state Medicaid programs would be 
     required to cover that portion of the Medicare Part B premium 
     attributable to the transfer of certain home health

[[Page H6255]]

     visits from Part A to Part B. The federal government would 
     pay 100% of these costs.
       Effective on date of enactment.


                            Senate Amendment

       Requires the Secretary to establish a block grant program 
     to the states for the payment of Medicare Part B premiums for 
     persons meeting the SLMB definition, except that their income 
     is between 120% and 150% of the federal poverty level. See 
     discussion of ``Low Income Beneficiary Block Grant Program'' 
     in Medicare provisions.


                          Conference Agreement

       The conference agreement includes the House provision with 
     amendments. State Medicaid programs would make payments for 
     Medicare Part B premiums for the additional low-income 
     Medicaid beneficiaries described in the provision (qualifying 
     individuals) only to the extent that premiums are payable for 
     months during the period beginning January 1998 and ending 
     December 2002.
       The Secretary would be required to provide for allocations 
     to states based on the sum of (1) a state's number of 
     Medicare beneficiaries with incomes between 135% and 175% of 
     poverty and (2) twice the number of Medicare beneficiaries 
     with incomes between 120% and 135% of poverty, relative to 
     the sum for all eligible states. Total amounts available for 
     allocations are $200 million for FY 1998, $250 million for FY 
     1999, $300 million for FY 2000, $350 million for FY 2001, and 
     $400 million for FY 2002. The FMAP for each participating 
     state would be 100% up to the state's allocation. If a state 
     exceeded its allocation, the FMAP would be zero.
       A state would permit all qualifying individuals to apply 
     for assistance during a calendar year and select qualifying 
     individuals in the order in which they apply, limiting the 
     number selected so that the state's allocation would not be 
     exceeded. An individual selected for assistance for a month 
     would be entitled to receive assistance for the remainder of 
     the year so long as the individual continued to be a 
     qualifying individual. However, an individual selected to 
     receive assistance at any time during a year would not be 
     entitled to continued assistance for any succeeding year. It 
     is the Conferees' expectation that States will budget the 
     capped funds received under this section to ensure payment 
     for the full year for qualifying individuals selected for, 
     and therefore entitled to, premium assistance.

 State Option to Permit Workers with Disabilities to Buy Into Medicaid

                    Section 5731 of Senate amendment


                              Current Law

       States must continue Medicaid coverage for ``qualified 
     severely impaired individuals under the age of 65.'' These 
     are disabled and blind individuals whose earnings reach or 
     exceed the SSI benefit standard. (The current law threshold 
     for earnings is $1,053 per month.) This special eligibility 
     status applies as long as the individual (1) continues to be 
     blind or have a disabling impairment; (2) except for 
     earnings, continues to meet all the other requirements for 
     SSI eligibility; (3) would be seriously inhibited from 
     continuing or obtaining employment if Medicaid eligibility 
     were to end; and (4) has earnings that are not sufficient to 
     provide a reasonable equivalent of benefits from SSI, state 
     supplementary payments (if provided), Medicaid, and publicly 
     funded attendant care that would have been available in the 
     absence of those earnings. To implement the fourth criterion, 
     the Social Security Administration compares the individual's 
     gross earnings to a ``threshold'' amount that represents 
     average expenditures for Medicaid benefits for disabled SSI 
     cash recipients in the individual's state of residence.


                               House Bill

       No provision.


                            Senate Amendment

       Provides states the option of allowing disabled SSI 
     beneficiaries with incomes up to 250% of poverty to ``buy 
     into'' Medicaid by paying a premium. Premium levels are on a 
     sliding scale, based on the individual's income as determined 
     by the State.
       Effective on and after October 1, 1997.


                          conference Agreement

       The conference agreement includes the Senate amendment.

                   Penalty for Fraudulent Eligibility

    Section 3423 of House bill and Section 5755 of Senate amendment


                              current law

       A person who knowingly and willfully disposes of assets, 
     including transfers to certain trusts, in order to obtain 
     Medicaid eligibility for nursing home care is liable for a 
     criminal fine and/or imprisonment, if the disposition of 
     assets results in a period of ineligibility for such Medicaid 
     benefits.


                               house bill

       Specifies that a person who, for a fee, assists an 
     individual to dispose of assets in order to obtain Medicaid 
     eligibility for nursing home care, would be subject to 
     criminal liability if the individual disposes of assets and a 
     period of ineligibility is imposed against such individual.
       Effective on date of enactment.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment.

                Treatment of Certain Settlement Payments

                       Section 3424 of House bill


                              current law

       Under a recent class settlement, four manufacturers of 
     blood plasma products will pay $100,000 to each of 6,200 
     hemophilia patients who are infected with human 
     immunodeficiency virus (HIV). Some of the HIV-infected 
     patients are receiving or may apply for, Medicaid benefits. 
     The amount of the settlement would exceed the income and 
     resource limits for Medicaid eligibility.


                               House bill

       Specifies that payments made from the specified settlement 
     shall not be considered income or resources in determining 
     Medicaid eligibility, or the amount of benefits under 
     Medicaid.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision with 
     technical modifications. Conferees do not consider this 
     provision to set precedent for future class settlements.

         Programs of All-Inclusive Care for the Elderly (PACE)

 Sections 3431-3434 of the House bill and Sections 5741-5743 of Senate 
                               amendment


                              current law

       OBRA 86 required the Secretary to grant waivers of certain 
     Medicare and Medicaid requirements to not more than 10 public 
     or non-profit private community-based organizations to 
     provide health and long-term care services on a capitated 
     basis to frail elderly persons at risk of 
     institutionalization. These projects, known as the Programs 
     of All Inclusive Care for the Elderly, or PACE projects, were 
     intended to determine whether an earlier demonstration 
     program, On Lok, serving frail elderly persons, could be 
     replicated across the country. OBRA 90 expanded the number of 
     organizations eligible for waivers to 15.


                               house bill

       Repeals current On Lok and PACE project demonstration 
     waiver authority and establishes PACE as a State option under 
     Medicaid. Persons enrolled in PACE would be eligible for 
     Medicaid and need not be eligible for Medicare. Enrollees 
     would receive Medicaid covered benefits solely through the 
     PACE program. PACE providers would offer comprehensive health 
     care services to eligible individuals in accordance with a 
     PACE program agreement and regulations. Through its PACE 
     program agreement, a state could limit the number of 
     individuals who could be enrolled in a PACE program. In 
     general, PACE providers would be public or private nonprofit 
     entities, except for entities (up to 10) participating in a 
     demonstration to test the operation of a PACE program by 
     private, for-profit entities.
       Eligible individuals would be those persons who are 55 
     years of age or older; who require nursing facility level of 
     care that would be covered under a State's Medicaid program; 
     who reside in the service area of the PACE program; and 
     who meet such other eligibility conditions as may be 
     imposed under the PACE program agreement.
       Eligiblity determinations would be made in accordance with 
     the PACE program agreement, and for enrollees entitled to 
     Medicaid, would be made by the state agency, responsible for 
     administering PACE agreements. An eligible individual's 
     health status would have to be comparable to the health 
     status of persons who have participated in the PACE 
     demonstration waivers. Information on health status and 
     related indicators would be part of a uniform minimum data 
     set collected by PACE providers. Persons would be reevaluated 
     annually to determine if they continue to need nursing 
     facility level of care, except for those cases where the 
     state determines that there is no reasonable expectation of 
     improvement or significant change in an individual's 
     condition during the period because of advanced age, severity 
     of chronic condition, or degree of impairment. A person could 
     continue to be considered a PACE eligible individual, even 
     though that person no longer requires nursing facility level 
     of care, if in the absence of continued coverage under a PACE 
     program the individual reasonably would be expected to meet 
     the requirements within the succeeding 6-month period. 
     Enrollment and disenrollment in a PACE program would be done 
     according to regulation and enrollees would be permitted to 
     voluntarily disenroll without cause at any time.
       Under a PACE agreement, a provider would be required to 
     provide to eligible persons, regardless of source of payment 
     and directly or under contracts with other entities, at a 
     minimum, all items and services covered under Medicaid and 
     Medicare. Services would be provided without any limitation 
     or condition as to amount, duration, or scope and without 
     application of deductibles, copayments, conisurance, or other 
     cost-sharing that would otherwise apply under Medicare or 
     Medicaid. Providers would also have to provide all additional 
     items and services specified in regulations, based on those 
     required under a PACE protocol. The PACE protocol would be 
     defined as that published by On Lok, Inc., as of April 14, 
     1995.
       PACE providers would be required to provide enrollees 
     access to necessary covered items and services 24 hours per 
     day, every day of the year. They would have to provide

[[Page H6256]]

     services through a comprehensive, multidisciplinary health 
     and social services delivery system which integrates acute 
     and long-term care services according to regulations. 
     Providers would also have to specify the covered items and 
     services that would not be provided directly by the entity, 
     and to arrange for delivery of these services through 
     contracts meeting the requirements of regulations.
       PACE providers would be required to have in effect, at a 
     minimum, a written plan of quality assurance and improvement 
     and procedures implementing the plan as well as written 
     safeguards of the rights of enrolled participants (including 
     a patient bill of rights and procedures for grievances and 
     appeals), in accordance with regulations.
       States would be required to make prospective monthly 
     capitation payments for each enrollee, in an amount specified 
     in the PACE agreement. The amount would be required to be 
     less than the amount that would have been made had the person 
     not been enrolled in PACE and would be adjusted to take into 
     account the comparative frailty of PACE enrollees and such 
     other factors as the Secretary determines to be appropriate. 
     Payments would be in addition to amounts received from 
     Medicare for the dually eligible individual.
       The Secretary, in close cooperation with the State 
     administering agency, would be required to establish 
     procedures for entering into, extending, and terminating PACE 
     agreements with entities that meet Medicaid and Medicare 
     statutory and regulatory requirements. The Secretary could 
     not enter into more than 40 agreements (including those in 
     effect as the result of demonstration waivers) as of the date 
     of enactment, and 20 additional agreements for each 
     succeeding anniversary date (without regard to the actual 
     number of agreements in effect as of a previous anniversary 
     date). This numeric limitation would not apply to a PACE 
     provider that is operating under the for-profit demonstration 
     or that subsequently qualifies for PACE provider status.
       A PACE agreement would designate the service area of the 
     program and could provide additional requirements for 
     individuals to qualify as eligible individuals. The Secretary 
     (in consultation with the State administering agency) could 
     exclude from designation an area that is already covered 
     under another PACE agreement, in order to avoid unnecessary 
     duplication of service and impairing the financial and 
     service viability of an existing program. The PACE agreement 
     would be effective for a year, but could be extended for 
     additional contract years in the absence of a notice to 
     terminate and would be subject to termination by the 
     Secretary and the State administering agency at any time for 
     cause. PACE providers would be required to meet all 
     applicable state and local laws and requirements and would 
     have such additional terms and conditions as the parties 
     agree to, consistent with the law and regulations.
       Under an agreement, PACE providers would be required to 
     collect data; maintain and provide the Secretary and State 
     administering agency access to the records relating to the 
     program, including pertinent financial, medical and personnel 
     records; and make reports to the Secretary and the state that 
     are necessary to monitor the operation, cost, and 
     effectiveness of the PACE program. During the trial period of 
     the first 3 years of operation, a PACE provider would be 
     required to provide additional data the Secretary specifies 
     in order to perform a comprehensive annual review of its 
     operation. After the trial period, the Secretary (in 
     cooperation with the state) would continue to conduct a 
     review of the operation of PACE providers as may be 
     appropriate, taking into account the performance level of a 
     provider and compliance with requirements of law and 
     regulations.
       Under regulations, the Secretary or state could terminate 
     an agreement for, among other reasons, significant 
     deficiencies in the quality of care, failure to comply 
     substantially with conditions for participation, or failure 
     to develop and successfully initiate within 30 days of notice 
     a plan to correct deficiencies.
       If the Secretary determines (after consultation with a 
     state) that a provider is failing substantially to comply 
     with the requirements for participation, the Secretary and 
     state could take any or all of the following actions: (1) 
     condition the continuation of the PACE program agreement upon 
     timely execution of a corrective action plan; (2) withhold 
     some or all further payments until the deficiencies have been 
     corrected; (3) terminate the agreement. Under regulations, 
     the Secretary could provide for the application of 
     intermediate sanctions for certain deficiencies. Procedures 
     for termination and sanctions of PACE programs would be the 
     same as those that apply to managed care entities 
     participating in Medicare.
       An application for PACE provider program status would be 
     deemed approved unless the Secretary, within 90 days after 
     the date of submission, either denies the request in writing 
     or informs the applicant in writing that additional 
     information is needed. After the date the Secretary receives 
     the additional information, the application would be deemed 
     approved unless the Secretary, within 90 days, denies the 
     request.
       The Secretary would be required to issue interim and final 
     regulations to carry out Medicaid and Medicare statutory 
     provisions on PACE. In issuing regulations, the Secretary 
     would be required to incorporate the requirements applied to 
     PACE demonstration waiver programs under the PACE protocol, 
     to the extent they are consistent with this section. The 
     Secretary (in close consultation with states) could modify or 
     waive 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 wish to use nonstaff 
     physicians) where flexibility is not inconsistent with and 
     would not impair the essential elements, objectives, and 
     requirements of the PACE program. The Secretary could also 
     apply to PACE programs and providers Medicare and Medicaid 
     requirements that apply to managed care plans, taking into 
     account differences in populations served and not including 
     requirements that restrict the proportion of enrollees 
     eligible for Medicaid and Medicare.
       For purposes of carrying out a PACE program, certain 
     Medicaid requirements would be waived, including those 
     pertaining to statewideness, comparability of services among 
     different population groups, freedom of choice of providers, 
     and restrictions on receiving prepaid capitation payments. 
     States could provide for the post-eligibility treatment of 
     income for PACE enrollees in the same manner a State treats 
     post-eligibility income for persons receiving home and 
     community-based care waiver services.
       A PACE provider could enter into contracts with other 
     governmental or nongovernmental payers for the care of PACE 
     program eligible persons who are not eligible for Medicare or 
     Medicaid.
       The Secretary would be required to promulgate regulations 
     for PACE in a timely manner so that entities may establish 
     and operate PACE programs under Medicare and Medicaid 
     beginning not later than 1 year after enactment.
       During the transition from demonstration waiver authority 
     to permanent provider status, applications for waivers 
     (subject to the numerical limitation) would be deemed 
     approved unless the Secretary, within 90 days after the date 
     of submission, either denies the request in writing or 
     informs the applicant in writing that additional information 
     is needed. After the date the Secretary receives the 
     additional information, the application would be deemed 
     approved unless the Secretary, within 90 days, denies the 
     request.
       During the 3-year period beginning on the date of 
     enactment, the Secretary would be required to give priority, 
     in processing applications of entities seeking to qualify as 
     PACE programs under Medicare or Medicaid (1) first, to 
     entities that are operating a PACE demonstration waiver 
     program, (2) then, to entities that have applied to operate a 
     program as of May 1, 1997. In awarding additional waivers 
     under the original PACE demonstration authority, the 
     Secretary would be required to give priority to any entities 
     that have applied for a waiver as of May 1, 1997, and to any 
     entity that, as of May 1, 1997, has formally contracted with 
     a State to provide services on a capitation basis with an 
     understanding that the entity was seeking to become a PACE 
     provider. The Secretary would be required to give special 
     consideration, in the processing of applications for PACE 
     provider status and for demonstration waivers, to entities 
     which, as of May 1, 1997, have indicated through formal 
     activities (such as entering into contracts for feasibility 
     studies) a specific intent to become a PACE provider. Repeal 
     of waiver demonstration authority would not apply to waivers 
     granted before the initial effective date of regulations. 
     Repeals would apply to waivers granted before this date only 
     after allowing 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.
       The Secretary (in close consultation with States) would be 
     required to conduct a study of the quality and cost of 
     providing PACE program services under the Medicare and 
     Medicaid programs. This study would be required specifically 
     to compare the costs, quality, and access to services offered 
     by private for-profit entities operating under the new 
     demonstration described above with the costs, quality, and 
     access to services of other PACE providers. The Secretary 
     would be required to report to Congress on findings of the 
     study (including specific findings on private for-profit 
     providers), together with recommendations for changes, not 
     later than 4 years after enactment. The Medicare Payment 
     Evaluation Commission would be required to include in its 
     annual report to Congress recommendations on the methodology 
     and level of payments made to PACE providers and on the 
     treatment of private for-profit PACE providers.
       Certain provisions applied to Medicare statute.
       Effective date. Enactment.


                            Senate Amendment

       Similar provisions, except:
       (1) States would not be authorized to limit the number of 
     persons enrolled in PACE programs.
       (2) The PACE protocol would be defined to include not only 
     that as published April 14, 1995, but also any successor 
     protocol agreed upon between the Secretary and On Lok, Inc.
       (3) A provision clarifies that the evaluation of a person's 
     health status for purposes of eligibility would be determined 
     by the Secretary and State administering agency in accordance 
     with regulations, rather than simply according to 
     regulations.

[[Page H6257]]

       (4) PACE programs could not disenroll individuals on the 
     ground that they have engaged in noncompliant behavior, if 
     the behavior is related to a mental or physical condition.
       (5) PACE providers, the Secretary, and the State 
     administering agency would be required to cooperate jointly 
     in the development and implementation of health status and 
     quality of life outcome measures for PACE enrollees.
       (6) A provision clarifies language about termination and 
     plans to correct deficiencies.
       (7) The Secretary could not modify or waive certain 
     enumerated provisions of the PACE protocol (rather than 
     defining these same provisions as essential elements, 
     objectives, and requirements of the PACE programs).
       (8) States would not have the option of continuing to 
     operate a PACE demonstration program under demonstration 
     waiver authority rather than the new optional benefit 
     authority.
       (9) The Physician Payment Review Commission and the 
     Prospective Payment Review Commission would be required to 
     report on PACE until they are terminated and replaced with 
     the Medicare Payment Advisory Commission.
       Similar provisions included in Medicare law.
       Effective date. Enactment.


                          Conference Agreement

       The conference agreement includes the Senate amendment with 
     clarifying language and amendments. The amendments would (1) 
     allow States to limit the number of persons who could be 
     enrolled in PACE programs; (2) allow PACE programs to 
     disenroll individuals for nonpayment of premiums (if 
     applicable) on a timely basis or for engaging in disruptive 
     or threatening behavior as defined in regulations (developed 
     in close consultation with State administering agencies); (3) 
     require that a proposed disenrollment be subject to timely 
     review and final determination by the Secretary or by the 
     State administering agency (as applicable), prior to the 
     proposed disenrollment becoming effective; (4) allow the 
     Secretary to include in regulations provisions to ensure the 
     health and safety of individuals enrolled in PACE programs; 
     (5) allow the Secretary to waive, in addition to specified 
     provisions of Medicaid law, any other requirements that the 
     Secretary determines are inapplicable to carrying out PACE 
     programs; and (6) allow States to continue to operate PACE 
     waiver programs under the waiver authority for 3 years after 
     the date that waivers would otherwise expire, but only so 
     long as programs continue to operate under the wavier's term 
     and conditions.

                          Chapter 5--Benefits

        Elimination of Requirements to Pay for Private Insurance

    Section 3441 of House bill and Section 5751 of Senate amendment


                              Current Law

       Under Section 1906 of the Social Security Act, states are 
     required to identify cases in which it would be cost-
     effective to enroll a Medicaid-eligible individual in a 
     private insurance plan and, as a condition of eligibility, 
     require the individual to enroll in the plan.


                               House Bill

       Eliminates identification and enrollment requirements. 
     States would have the option of identifying cases and 
     purchasing private insurance for Medicaid-eligible 
     individuals.
       Effective on date of enactment.


                            Senate Amendment

       Repeals Section 1906, and adds payment enrollee costs of 
     health insurance as an optional Medicaid service.


                          Conference Agreement

       The conference agreement includes the House bill effective 
     on enactment.

                  Physician Qualification Requirements

    Section 3443 of House bill and Section 5753 of Senate amendment


                              Current law

       Medicaid law established special minimum qualifications for 
     a physician who furnishes services to a child under age 21 or 
     to a pregnant woman.


                               house bill

       Repeals the current law provision.
       Applies to services furnished on or after the date of 
     enactment.


                            senate amendment

       Identical provision.


                          conference agreement

       The conference agreement includes provisions that are 
     identical in the House bill and the Senate amendment.

 Elimination of Requirement of Prior Institutionalization with Respect 
     to Habilitation Services Furnished Under a Waiver for Home or 
                        Community-Based Services

                       Section 3444 of House bill


                              current law

       States may obtain waivers to provide a broad range of home 
     and community-based services, including habilitation 
     services, to persons who otherwise would require 
     institutional care. Habilitation services, however, may be 
     provided only to an individual who has been discharged from a 
     nursing facility or an intermediate care facility for the 
     mentally retarded.


                               house bill

       Repeals the prior institutionalization requirement that 
     applies to habilitation services offered under home and 
     community-based waiver programs.
       Applies to services furnished on or after October 1, 1997.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision. The 
     conferees support and encourage efforts enable individuals to 
     remain in their homes and communities.

                   Study and Report on EPSDT Benefit

    Section 3446 of House bill and Section 5757 of Senate amendment


                              current law

       States are required to provide early and periodic 
     screening, diagnostic, and treatment services (EPSDT) to 
     Medicaid beneficiaries under age 21. Such services include 
     screening, vision, dental, and hearing services. A state is 
     required to provide other necessary health care services to 
     correct or ameliorate defects and conditions discovered by 
     the screening services, whether or not the services are 
     covered under the state's Medicaid plan.


                               house bill

       Requires the Secretary to provide for a study on the 
     actuarial value of EPSDT services. The study must include an 
     examination of the value attributable to the non-screening 
     portions of EPDST services. A report on the results of the 
     study would be due to Congress not later than 18 months after 
     the date of enactment.


                            senate amendment

       In consultation with Governors, directors of state Medicaid 
     and state maternal and child health programs, the Institute 
     of Medicine, the American Academy of Pediatrics, and 
     representatives of Medicaid beneficiaries, the Secretary 
     would be required to conduct a study of EPSDT services. A 
     report on the results of the study would be due to Congress 
     not later than 12 months after the date of enactment.


                          conference agreement

       The conference agreement includes the Senate amendment with 
     modifications. The Secretary would consult with Governors, 
     directors of state Medicaid programs, the American Academy of 
     Actuaries, and representatives of appropriate provider and 
     beneficiary organizations. The study would include 
     examination of the actuarial value of the provision of EPSDT 
     services and an examination of the actuarial value 
     attributable to the non-screening portions of EPSDT services.

              Chapter 6--Administration and Miscellaneous

Elimination of Duplicative Inspection of Care Requirements for ICFs/MR 
                          and Mental Hospitals

                       Section 3451 of House bill


                              current law

       States that provide services in mental hospitals and in 
     intermediate care facilities for the mentally retarded (ICF/
     MR) must provide for periodic inspections of care for each 
     Medicaid beneficiary who receives services in the 
     institution. Inspections of care have been conducted to 
     assure that persons are receiving the appropriate level of 
     care of adequate quality. The Department of Health and 
     Human Services has established a new survey outcome-
     oriented process for mental hospitals and ICFs/MR.


                               house bill

       Eliminates Inspection of Care reviews in mental hospitals 
     and ICFs/MR. Survey and certification reviews for the 
     facilities would remain in place.
       Effective on date of enactment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House bill.

             Alternative Sanctions for Noncompliant ICFs/MR

                       Section 3452 of House bill


                              current law

       ICFs/MR must meet certain requirements and standards for 
     safety and for the proper provision of care. If a state finds 
     that a facility is out of compliance with the requirements, 
     the facility's participation in Medicaid can be terminated, 
     or the state can withhold payment for new admissions to the 
     facility until the deficiencies have been corrected. States 
     have limited sanctions available for use for ICFs/MR that are 
     found to have deficiencies that do not jeopardize the health 
     and safety of patients.


                               house bill

       Allows states to establish alternative remedies that are 
     demonstrated to be effective in deterring noncompliance with 
     correcting deficiencies.
       Effective on date of enactment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision.

                   Modification of MMIS Requirements

                       Section 3453 of House bill


                              current law

       Beginning October 1, 1986 states have been required to 
     maintain mechanized claims

[[Page H6258]]

     processing and information retrieval systems better known as 
     Medicaid Management Information Systems (MMIS). Failure to 
     meet the 1986 deadline resulted in reduced federal Medicaid 
     funds. An MMIS is reviewed at least once every three years by 
     the Health Care Financing Administration of the Department of 
     Health and Human Services. Failure to pass a systems 
     performance review could result in reduction of the usual 75% 
     federal Medicaid match rate for operation of an approved 
     MMIS.


                               house bill

       Deletes the statutory language that relates to 1980s 
     requirements for MMIS, and requires each state to operate a 
     system that is adequate to provide efficient, economical, and 
     effective administration, and is compatible with the claims 
     processing and information retrieval systems that are used to 
     administer the Medicare program. In addition, for claims 
     filed on or after January 1, 1999, requires each state's 
     system to electronically transmit data to the Secretary in a 
     specific format.
       Effective January 1, 1998.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision.

 Facilitating Imposition of State Alternative Remedies on Noncompliant 
                           Nursing Facilities

                       Section 3454 of House bill


                              current law

       States have available a range of sanctions they may take 
     against nursing facilities found to be out of compliance with 
     the requirements for participation in Medicaid. These include 
     termination of participation in the program, denial of 
     payment for new admissions, civil money penalties, 
     appointment of temporary management; and authority to close 
     the facility or transfer residents. For facilities that are 
     not terminated and that are taking steps to eliminate 
     deficiencies according to an approved plan of correction, the 
     Secretary of HHS is authorized to continue federal Medicaid 
     matching payments to the State for no longer than 6 
     months. States, however, are required to repay to the 
     federal government any payments made to facilities that 
     fail to take corrective action according to the approved 
     plan and timetable.


                               house bill

       Eliminates the requirement for States to repay federal 
     funds for failure of a facility to correct deficiencies 
     according to an approved plan of correction.
       Effective on date of enactment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision.

                Removal of Name from Nurse Aide Registry

                    Section 5767 of Senate amendment


                              current law

       If a State finds that a nurse aide has neglected or abused 
     a nursing facility resident or misappropriated property of 
     the resident, then the State must have such information 
     included in the State's nurse aide registry.


                               house bill

       No provision.


                            senate amendment

       Requires States, in the case of a finding of neglect of a 
     nursing facility resident, to establish a procedure to permit 
     a nurse aide to petition the State to have his or her name 
     removed from the registry if the State determines that the 
     employment and personal history of the nurse aide does not 
     reflect a pattern of abusive behavior or neglect and the 
     original finding of neglect was a singular occurrence. Names 
     would have to be on the registry for at least 1 year before 
     they could be removed. Individuals could petition for a 
     review of a state finding made after January 1, 1995. The 
     Secretary would be required to conduct a study, and to report 
     to Congress within 2 years of enactment, on (1) the use of 
     nurse aide registries by states, (2) the extent to which 
     institutional environmental factors contribute to cases of 
     abuse and neglect, and (3) whether alternatives to existing 
     sanctions for abuse and neglect might be more effective in 
     minimizing future cases of abuse.
       Effective on October 1, 1997.


                          conference agreement

       The conference agreement includes the Senate amendment.

                     Medically Accepted Indication

                       Section 3455 of House bill


                              current law

       Each state is required to provide for a drug use review 
     (DUR) program to assure that covered outpatient drugs are 
     appropriate, medically necessary, and are not likely to 
     result in adverse medical results. Under the DUR program, 
     data on drug use are to be assessed against predetermined 
     standards consistent with compendia specified in the law.


                               house bill

       Adds the DRUGDEX Information System to specified compendia 
     for assessing data on drug use.
       Effective on date of enactment.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House bill.

        Continuation of State-Wide Section 1115 Medicaid Waivers

    Section 3456 of House bill and Section 5769 of Senate amendment


                              current law

       Under Section 1115 of the Social Security Act, a state may 
     obtain waivers of compliance with a broad range of Medicaid 
     requirements in order to conduct an experimental, pilot, or 
     demonstration project that is likely to promote the 
     objectives of Medicaid. In the absence of established 
     conditions for these projects, each request receives 
     individual consideration from the Department of Health and 
     Human Services. Some states are using the waiver authority to 
     operate comprehensive statewide demonstration projects. 
     Typically, a waiver is approved for 5 years. States have 
     objected to the waiver process as unnecessarily complex and 
     lengthy.


                               house bill

       Amends Section 1115 of the Act to provide for a simplified 
     renewal or extension process. Within a year before the 
     expiration date of a waiver project, the chief executive 
     officer of a state could submit a written request to the 
     Secretary of HHS to extend the project for up to 3 years. If 
     the Secretary did not respond to the request within 6 months, 
     the request would be deemed to have been granted. Extends the 
     deadline for a final report on the project until 1 year after 
     the waivers would originally have expired, and the 
     Secretary's evaluation of the project up to 1 year after the 
     final report. The project extension would be on the same 
     terms and conditions that applied to the project before the 
     extension. If budget neutrality was an original condition of 
     approval of a waiver project, the Secretary would be required 
     to assure that such condition was met in the extension of the 
     project. In so doing, the Secretary must take into account 
     the Secretary's best estimate of rates of change in 
     expenditures at the time of the extension.
       Provision shall apply to demonstration projects initially 
     approved before, on, or after the date of enactment.


                            senate amendment

       Similar to House provision, except:
       Gives states the option of requesting a waiver project be 
     extended for up to 2 years. Extension would be available to 
     projects that: (1) have been successfully operated for 5 or 
     more years and (2) have been shown, through independent HCFA-
     sponsored evaluations, to successfully contain costs and 
     provide access to health care. A state with a waiver project 
     meeting the above requirements and an independent HCFA-
     sponsored evaluation that shows the state's Medicaid managed 
     care waiver program is more cost effective than the fee-for-
     service program may expand Medicaid coverage to individuals 
     with incomes up to the Federal poverty level and be deemed 
     budget neutral.
       The permanent continuation of a waiver project shall be on 
     the same terms and conditions, including financing, and 
     subject to the same set of waivers. No test of budget 
     neutrality shall apply to waiver projects meeting the above 
     requirements after the date on which the permanent extension 
     was granted.
       Provision will be effective on the date of enactment.


                          conference agreement

       The conference agreement includes the House bill modified 
     to require that the chief executive officer of a state submit 
     a written extension request to the Secretary of HHS during 
     the 6-month period ending a year before the expiration date 
     of a waiver project.

                 Community-Based Mental Health Services

                    Section 5763 of Senate amendment


                              current law

       All states are required to provide some services and are 
     permitted to provide others.


                               house bill

       No provision.


                            senate amendment

       Adds community-based mental health services as an optional 
     service states may provide. Community-based mental health 
     services would include outpatient and intensive community-
     based mental health services, including psychiatric 
     rehabilitation, day treatment, intensive in-home treatment, 
     therapeutic out-of-home placements (excluding room and 
     board), clinic services, partial hospitalization, and 
     targeted case management.


                          conference agreement

       The conference agreement does not include Senate amendment.

                        Extension of Moratorium

    Section 3458 of House bill and Section 5000A of Senate amendment


                              current law

       Medicaid payment for services provided by an institution 
     for mental disease (IMD) may be made only for beneficiaries 
     who are under age 21 or over 65. IMD means a hospital, 
     nursing facility, or other institution of more than 16 beds, 
     that is primarily engaged in providing diagnosis, treatment, 
     or care of persons with mental diseases, including medical 
     attention, nursing care, and related services. For two 
     facilities in Michigan--Kent Community Hospital Complex and 
     Saginaw Community Hospital--previous legislation has imposed 
     a moratorium on determination of the facilities as IMDs.

[[Page H6259]]

                               house bill

       For purposes of Medicaid reimbursement, exempts the two 
     facilities from classification as IMDs through December 31, 
     2002.


                            senate amendment

       Similar provision.


                          conference agreement

       The conference agreement includes the House bill.
     Extension of effective date for state law amendment
       The conference agreement provides that in the case of a 
     state that must pass state legislation to meet the 
     requirements of these amendments, the state will not be out 
     of compliance solely on the basis of failure to meet these 
     additional requirements before the first day of the first 
     calendar quarter beginning after the close of the first 
     regular session of the state legislature that begins after 
     enactment. In the case of a state that has a 2-year 
     legislative session, each year of the session is considered 
     to be a separate regular session of the state legislature.

             (1) State Children's Health Insurance Program

   Subtitle F Section 3502 of House bill, Subtitle J Section 5801 of 
                            Senate amendment

     (a) Purpose; State child health plans


                              current law

       No provision.


                               House bill

       Establishes the Child Health Assistance Program (CHAP) 
     under new Title XXI of the Social Security Act to provide 
     federal matching funds, beginning in 1998, to States to 
     enable them to implement plans to initiate and expand the 
     provision of child health care assistance to targeted 
     uninsured, low-income children.
       States would be able to use CHAP funds for: (1) providing 
     Medicaid benefits to uninsured children, (2) obtaining 
     coverage under group or individual health plans, (3) directly 
     purchasing services from providers, or (4) other methods to 
     increase access to health coverage for children. States would 
     also be able to choose to use some or all of their CHAP 
     allotments for an enhanced federal Medicaid matching rate for 
     expanding Medicaid to targeted, uninsured low income 
     children. States exercising this option would have their 
     allotment under this section reduced by such amounts.
       States would be eligible for payment once the state has 
     submitted to the Secretary and received approval of a plan 
     that sets forth how the state intends to use the child health 
     assistance funds. States would be permitted to use CHAP funds 
     for non-coverage purposes (defined as administration, 
     outreach, and services), but the total of such expenditures 
     would be limited to not more than 10 percent of the matched 
     allotment in any quarter.


                            senate amendment

       Establishes the Child Health Insurance Initiatives under 
     new Title XXI of the Social Security Act to provide eligible 
     states with federal matching funds for 1998 through 2007 to 
     increase access to health insurance for low-income children.
       To access the funds, states would be required to phase-in 
     Medicaid coverage for children under poverty who are under 
     age 17 by 1998 and the remaining children under age 19 by 
     2000 and to submit to the Secretary and receive approval for 
     a program outline that sets forth how the State intends to 
     use Child Health Insurance Initiative funds. Participating 
     states would choose to receive their allotted funds either: 
     (1) through Medicaid, or (2) for the purchase of FEHBP 
     equivalent insurance coverage. States would be required to 
     use 1% of their basic allotment for Medicaid outreach and 
     public awareness campaigns to encourage employers to provide 
     health insurance for children.


                          conference agreement

       The conference agreement includes the House provisions with 
     the following modifications. The SCHIP program is authorized 
     through FY 2007. States would be able to use SCHIP funds for 
     obtaining health benefit coverage, expanding Medicaid 
     coverage, providing needed health care services, or through a 
     combination of the three to the extent permitted by this 
     title.
     (b) Funding levels


                              current law

       No provision.


                               house bill

       Authorizes and appropriates $2.8 billion for each of the 
     fiscal years 1998 through 2002 for the State Child Health 
     Assistance Program.
       Creates an entitlement to states for amounts in accordance 
     with the provisions of Title XXI.


                            senate amendment

       Authorizes and appropriates $2.5 billion in 1998, $3.2 
     billion in 1999, $3.2 billion in 2000, $3.6 billion in 2001, 
     $3.5 billion in 2002, and for each of the fiscal years 2003 
     through 2007, $4.58 billion and would be available without 
     fiscal year limitation. Provisions in the tax bill would add 
     an additional $8 billion to the Child Health Insurance 
     Initiatives for 1998 through 2002.
       Creates an entitlement to states for amounts in accordance 
     with the provisions of Title XXI.


                          conference agreement

       Authorizes and appropriates $5.0 billion for each of fiscal 
     years 1998 through 2001, $4.0 billion for each of fiscal 
     years 2002 through 2004, $5.0 billion for each of fiscal 
     years 2005 through 2006, and $6.0 billion for fiscal year 
     2007 for the State Child Health Assistance Program.
       Creates an entitlement to states for amounts in accordance 
     with the provisions of Title XXI.
     (c) Eligibility


                              current law

       States choosing to participate in the Medicaid program are 
     required to cover children in families who would have 
     qualified to receive AFDC under the program rules in effect 
     on August 22, 1996; children under age 6 in families with 
     income below 133% of the federal poverty level; and 
     children under age 14 in families with income below 100% 
     of the federal poverty level. Coverage for children 
     between the ages of 14 and 18 and in families with income 
     below 100% of the federal poverty level is being phased-in 
     through 2002. States also have the option to cover other 
     categories of low-income children under Medicaid and many 
     have done so.


                               house bill

       Defines targeted low income children as those whose family 
     income exceeds the Medicaid applicable levels including those 
     children being phased-in under OBRA 1990 provisions but whose 
     family income does not exceed an income level that is 75 
     percentage points higher than the Medicaid applicable income 
     level, or if higher, 133 percent of the poverty line for the 
     size of the family involved. The poverty line is defined as 
     that used in section 673(2) of the Community Services Block 
     Grant Act.
       Eligibility standards could include geography, age, income 
     and resources, residency, disability status, and others as 
     specified. The eligibility standards could not, within any 
     defined class or group of covered targeted low-income 
     children, cover children with higher family incomes without 
     covering children with lower family incomes. They also could 
     not deny eligibility to a child based on a preexisting 
     medical condition (defined as a limitation or exclusion of 
     benefits relating to a condition based on the fact that the 
     condition was present before the date of enrollment, whether 
     or not any medical advice, diagnosis, care, or treatment was 
     recommended or received before such date.)
       title XXI would not establish an entitlement for benefits 
     for any individual under a State child health plan.


                            senate amendment

       Defines low income children as those in families whose 
     income is below 200 percent for the poverty line for a family 
     of the size involved. The poverty line is defined as that use 
     in section 673(2) of the Community Services Block Grant Act.
       The option allowing states to purchase and provide FEHBP-
     equivalent coverage under new or existing state programs, 
     would not create an individual entitlement and nothing in 
     this section would prevent a state from adjusting the 
     eligibility criteria or the program in any way necessary to 
     ensure that funds under this section are sufficient to cover 
     the costs of the program.


                          conference agreement

       Defines targeted low-income children as those who (1) meet 
     the eligibility standards as determined by the state, (2) 
     reside in families with income below 200% of the federal 
     poverty level (defined as that in use in section 673(2) of 
     the Community Services Block Grant Act) or, in states with 
     Medicaid applicable income levels at, above, or less than 50 
     percentage points below 200% of poverty on the date of 
     enactment, below the Medicaid applicable income level 
     increased by no more than 50 percentage points, and (3) are 
     not eligible for Medicaid or covered under a group health 
     plan or other health insurance as defined in section 2791 of 
     the Public Health Service Act. Children who are inmates of a 
     public institution, patients in institutions for mental 
     disease, or eligible for health benefits under a state plan 
     on the basis of a family member's employment with the state 
     are not considered targeted low-income children. Targeted 
     low-income children may include children covered under a 
     health insurance program which has been in operation since 
     before July 2, 1997, and which receives no Federal funds.
       Eligibility standards could include geography, age, income 
     and resources (including standards for spending down income 
     and disposition of resources), residency, disability status, 
     access to other health insurance and duration of eligibility. 
     The eligibility standards could not, within any defined class 
     or group of covered targeted low-income children, cover 
     children with higher family incomes before covering children 
     with lower family incomes. They also could not deny 
     eligibility to a child based on a preexisting medical 
     condition (defined as a limitation or exclusion of benefits 
     relating to a condition based on the fact that the condition 
     was present before the date of enrollment, whether or not any 
     medical advice, diagnosis, care, or treatment was recommended 
     or received before such date.)
       Title XXI would not establish an entitlement for benefits 
     for any individual under a State child health plan (children 
     enrolled through the State plan into Medicaid would be 
     entitled to Medicaid coverage).
     (d) Benefits


                              current law

       No provision.


                               house bill

       The child health assistance provided under the plan would 
     be required to include at

[[Page H6260]]

     least the following items and services: inpatient and 
     outpatient hospital care, physician services, laboratory and 
     x-ray, well-baby and well child care including immunizations 
     unless the care is provided under a group health plan. If the 
     care is provided under a group health plan, then the benefits 
     under the plan could be no less for CHAP beneficiaries than 
     the benefits provided for other individuals covered by that 
     plan.
       A plan could not permit the imposition of any preexisting 
     medical condition exclusion for covered benefits. If the plan 
     provided for benefits through a group health plan or group 
     insurance, preexisting condition exclusions could be imposed 
     only to the extent that such exclusions are permitted under 
     the Health Insurance Portability and Accountability Act (P.L. 
     104-191). States would be required to assure access to 
     specialty care as required by eligible children who have 
     chronic or life-threatening conditions.


                            senate amendment

       States opting to use Medicaid would be required to follow 
     Medicaid coverage rules. States providing coverage through 
     new or existing state programs would be required to provide a 
     FEHB-equivalent children's health insurance coverage. FEHB 
     equivalent children's health insurance coverage would be 
     defined as any plan or arrangement that provides or pays the 
     cost of health benefits that the Secretary has certified is 
     equivalent to or better than the services covered for a 
     child, including hearing and vision services that are covered 
     under the standard Blue Cross/Blue Shield preferred provider 
     option under the Federal Employees Health Benefits Plan.


                          conference agreement

       The conference agreement includes provisions defining four 
     options for minimum benefits for states choosing to provide 
     child health assistance coverage under Title XXI instead of 
     under the Medicaid program. The options include (1) coverage 
     of benefits that are equivalent to those provided in a 
     benchmark benefit package, (2) coverage of benefits that are 
     the same actuarial value, as certified in an actuarial 
     memorandum, as one of the benchmark benefit packages, (3) 
     coverage of comprehensive benefits provided by an existing 
     child health program, or (4) any other health benefits plan 
     that the Secretary determines, upon application by a State, 
     provides appropriate coverage for the targeted population of 
     low-income children.
       A state choosing to provide benefits with the same 
     actuarial value as a benchmark plan under option (2) must 
     provide for at least the benefits in the basic benefits 
     category plus at least 75% of the actuarial value of coverage 
     under the benchmark plan for each of the benefits in the 
     additional service category. The basic benefits category 
     includes inpatient and outpatient hospital services, 
     physicians' surgical and medical services, lab and x-ray 
     services and well-baby and well-child care, including age-
     appropriate immunizations. The additional services category 
     includes prescription drugs, mental health services, vision 
     services, and hearing services. Existing state programs under 
     option (3) are defined as those child health programs that 
     were in effect on the date of enactment, are administered or 
     overseen by the state and received state funds, and are 
     located in Florida, New York, or Pennsylvania. Nothing in 
     this section is intended to prevent SCHIP plans from 
     providing coverage for benefits that are not in the basic or 
     additional service categories.
       A benchmark benefit package would be one of the following 
     three plans: (1) the standard Blue Cross/Blue Shield 
     preferred provider option service benefit plan offered under 
     the Federal Employees Health Benefits Plan, (2) the health 
     coverage that is offered and generally available to state 
     employees in the state involved, (3) the health coverage that 
     is offered by an HMO (as defined in section 2791(b)(3) of the 
     Public Health Service Act) and has the largest commercial 
     (non-Medicaid) enrollment of such coverage offered by such an 
     organization in the state involved.
       Actuarial memorandums must (a) be rendered by an individual 
     who is a member of the American Academy of Actuaries, (b) use 
     generally accepted actuarial principles, and methodologies, 
     (c) use a single standardized set of utilization and price 
     factors, (d) use a standardized population consisting of 
     children of the age to be covered under the State child 
     health plan, (e) apply the same principles and factors in 
     comparing the value of different coverage, and (f) not take 
     into account any differences in coverage based on the method 
     of delivery, or means of cost control, or utilization used. 
     Coverage of items or services for which payment is prohibited 
     in the benchmark benefits packages should not be considered 
     in determining equivalent coverage or actuarial equivalent 
     coverage.
       The conference agreement includes the House provisions 
     restricting the imposition of preexisting conditions. 
     Coverage under title XXI must comply with the requirements of 
     the Health Insurance Portability Act of 1996 and shall be 
     treated as creditable coverage for purposes of part 7 of 
     subtitle B of title II of the Employee Retirement Income 
     Security Act. Nothing in this title shall be construed as 
     affecting or modifying section 514 of the Employee Retirement 
     Income Security Act of 1974.
       The Conferees urge the states to provide for prompt 
     placement of high risk infants into neonatal specialty 
     service facilities because of the critical connection between 
     appropriate and timely care and healthy childhoods, lower 
     infant mortality, and reduced long-term care needs. The 
     Conferees also encourage the states, in making dental 
     coverage and service provision decisions, to recognize the 
     importance of oral health for children and the role that 
     regular preventive and restorative dental care plays in 
     addressing pediatric dental and oral diseases. Finally, the 
     Conferees encourage the states to provide for such means as 
     considered appropriate to assure access to quality specialty 
     care for children with chronic illnesses.
     (e) Cost sharing


                              current law

       State Medicaid programs may impose a monthly enrollment fee 
     or premium charge for certain non-mandatory recipients that 
     is related to the individuals' income in compliance with the 
     standards prescribed by the Secretary. If a state chooses to 
     impose monthly enrollment fees, the fees charged to pregnant 
     women and infants cannot exceed 10% of the amount by which 
     the family income (less expenses for the care of a dependent 
     child) of an individual exceeds 150% of poverty. Medicaid 
     programs may include premiums of no more than 3% of a 
     family's average gross monthly earnings for certain families 
     with income over poverty who are receiving transitional 
     Medicaid benefits in a 6-month extension period.
       For most Medicaid beneficiaries, no deductibles cost 
     sharing or similar charges may be imposed. No such charges 
     may be imposed for services that relate to pregnancy or a 
     medical condition which may complicate pregnancy, or for 
     emergency services, family planning services and supplies. 
     For the remaining beneficiaries and services such charges may 
     not be imposed unless they are ``nominal in amount'' as 
     defined by the Secretary.


                               house bill

       Allows child health assistance plans to vary premiums, 
     deductibles, coinsurance and other cost-sharing based on 
     family income of the targeted low-income children only in a 
     manner that did not favor children from higher-income 
     families over those from lower incomes. Cost sharing would 
     not be allowed for preventive services or benefits.


                            senate amendment

       States opting to use Medicaid would be required to follow 
     Medicaid cost sharing rules. States choosing to use a new or 
     existing program to provide coverage would be allowed to 
     impose any family premium or cost sharing requirement 
     otherwise permitted under Title XXI for children in families 
     with income above 150% of poverty. For children in families 
     with income below 150% of poverty, cost sharing rules under 
     the Medicaid program would apply.


                          conference agreement

       The conference agreement would require that state child 
     health plans include descriptions of the amount, if any, of 
     premiums, deductibles, coinsurance, and other cost sharing 
     imposed. Any cost sharing imposed must be pursuant to a 
     public schedule. The agreement would allow child health 
     assistance plans to impose premiums, deductibles, coinsurance 
     and other cost-sharing based on family income only in a 
     manner that did not favor children from higher-income 
     families over those from families with lower incomes. Cost 
     sharing would not be allowed for preventive services or 
     benefits.
       For targeted low-income children in families with income 
     below 150% of the poverty line, premiums may be imposed only 
     insofar as they do not exceed those maximum monthly charges 
     permitted under Medicaid for medically-needy individuals. 
     Other cost sharing for such children may not exceed 
     ``nominal'' amounts, as determined consistent with Medicaid 
     regulations, with adjustments determined as appropriate by 
     the Secretary. For targeted low-income children in families 
     with income above 150% of the poverty line, premiums, 
     deductibles, cost sharing or similar charges may be imposed 
     on a sliding scale related to income only insofar as the 
     total annual cost sharing for all targeted low-income 
     children in a family does not exceed 5% of such family's 
     income.
       Cost sharing rules for coverage provided under Title XXI 
     would not impact Medicaid cost sharing rules for any targeted 
     low-income children covered under the Medicaid program.
     (f) Allotments


                              current law

       No provision.


                               house bill

       For each of 1998 through 2002, a total allotment of $2.83 
     billion, and for succeeding fiscal years, $2.85 billion would 
     be available for the State Child Health Assistance Program. 
     The funds would be allotted to states based on the number of 
     uncovered children in families with income below 300% of 
     poverty during a base period in a state and the relative cost 
     of health care services in that state with a floor of $2 
     million. The base would be determined by taking the state's 
     average number of uninsured children for the years 1993 
     through 1995 as reported in the March 1994, March 1995, and 
     March 1996 supplements to the Current Population Surveys of 
     the Bureau of the Census. The Secretary would be required to 
     allot .5% of the total amount of funds to the territories, in 
     a manner specified by the provision.
       A state's allotment under this section would be reduced by 
     the amount of payments made to the state for presumptive 
     eligibility for children under the Medicaid program.
       In the case of a state electing the increased Medicaid 
     matching option, the amount of

[[Page H6261]]

     the state allotment would be reduced by the amount of the 
     state's additional federal Medicaid payment. States would 
     have 3 years to spend their allotments.


                            senate amendment

       To determine the amounts available for distribution among 
     states, the following amounts would be subtracted from the 
     total amounts authorized: the cost of (1) the state option 
     providing 12 months of continuous Medicaid eligibility, (2) 
     increased participation in the Medicaid program resulting 
     from new outreach activities, and (3) the accelerated phase-
     in of children under age 19 in families with income under 
     poverty.
       The remaining child health initiative funds would be 
     divided into two pools: a basic allotment pool and a new 
     coverage incentive pool. In 1998, the basic allotment pool 
     would be comprised of 85% of funds remaining and the new 
     coverage incentive pool would be 15%. For years thereafter, 
     the Secretary would make annual adjustments to the size of 
     the two pools in order to provide sufficient basic allotments 
     and new coverage incentives.
       A set aside of .25% of the basic allotment pool would be 
     established for the territories. The rest of the basic 
     allotment pool would be allotted to each state based on the 
     average percentage of all children in families with income 
     below 200% of poverty that reside in the state during the 
     three fiscal years beginning on October 1, 1992 (as reported 
     in the Current Population Surveys of March 1994, 1995 and 
     1996). Amounts allotted to a state would be available to the 
     state for a period of three years beginning with the fiscal 
     year for which the allotment was made.
       States would be eligible for bonus payments for the number 
     of low income children covered under either Medicaid or other 
     state-run health insurance programs who are not in a required 
     Medicaid coverage group during 1996 in an amount equal to 5% 
     of the cost of providing health insurance coverage. This 5% 
     bonus would come from the state's basic allotment pool. 
     Performance bonus payments in an amount of 10% of the cost 
     of providing health insurance coverage for newly covered 
     children in excess of those covered in 1996 would also be 
     available with funds coming from the new coverage 
     incentive pool.
       States would receive 1% of their allotted funds prior to 
     the beginning of the fiscal year for the purpose of 
     conducting outreach activities. During the year, the state 
     would receive quarterly payments in an amount equal to the 
     Federal Medicaid medical assistance percentage of the cost of 
     providing health insurance coverage for an eligible low-
     income child and any applicable bonuses based on estimates by 
     the states. The Secretary could increase or reduce payments 
     as necessary to adjust for any overpayment or underpayment 
     for prior quarters.


                          conference agreement

       The conference agreement authorizes for the State 
     Children's Health Insurance Program for each of fiscal year 
     1998 through 2001, a total allotment of $4.275 billion; for 
     FY 2003 and 2004, $3.15 billion; for FY 2005 and 2006, $4.05 
     billion; and for FY 2007, $5.0 billion. Before distribution 
     among the states and the District of Columbia, total amounts 
     authorized for child health assistance would be reduced by 
     .25% for allotments for the commonwealths and territories to 
     be distributed in the following manner; Puerto Rico would 
     receive 91.6%, Guam, 3.5%, Virgin Islands, 2.6%, American 
     Samoa, 1.2%, and Northern Mariana Islands, 1.1%. After being 
     reduced by the allotments to territories, funds would be 
     allotted to states and the District of Columbia based on the 
     product of the number of low-income uncovered children for 
     the state for the fiscal year and the state cost factor. The 
     number of low-income uncovered children in families would, 
     for each of fiscal year 1998 through 2000, be equal to the 3-
     year average of uninsured children in families with income 
     below 200% of poverty as estimated using the three most 
     recent supplements to the March Current Population Surveys of 
     the Bureau of the Census. For fiscal year 2001, low-income 
     uncovered children would be equal to 75% of the 3-year 
     average of the number of low-income children in the state for 
     the fiscal year with no health insurance coverage plus 25% of 
     the number of low-income children in the State. For years 
     thereafter, low-income uncovered children would be equal to 
     50% of the 3-year average of the number of low-income 
     children in the state for the fiscal year with no health 
     insurance coverage plus 50% of the number of low-income 
     children in the state. The state cost factor for a fiscal 
     year would be equal to the sum of .85 multiplied by the ratio 
     of the annual average wages per employee in the state for 
     such year to the national average wages per employee for such 
     year and .15. The annual average wage per employee for each 
     year would be calculated using the wages of employees in the 
     health services industry as reported by the Bureau of Labor 
     Statistics of the Department of Labor for each of the most 
     recent 3 years before the beginning of the fiscal year 
     involved.
       The agreement includes a floor on allotments for the states 
     and the District of Columbia of $2 million. In case a state's 
     allotment would be required to be raised to the $2 million 
     floor, all other states' allotments would be adjusted in a 
     pro rata manner such that the total of all allotment does not 
     exceed the total of allotment available under Title XXI.
       States would have 3 years to spend their allotments.
     (g) Payments to States


                              current law

       No provision.


                               house bill

       The Secretary would be required to make quarterly payments 
     to each State with an approved child health assistance plan 
     in amounts up to 80% of program spending during that quarter 
     for child health assistance, other initiatives for improving 
     child health, outreach and administration of the plan, except 
     that no more than 15% of the total program spending could be 
     used for other child health initiatives, outreach and 
     administration. The Secretary would establish rules regarding 
     the extent to which funds could be used to purchase family 
     coverage for families that include targeted low-income 
     children. The rules would allow such payment if the State 
     demonstrates that the purchase of such coverage is cost 
     effective when compared with the cost of covering only the 
     targeted low-income children in the families involved.
       CHAP funds may not be used to (a) cover children who would 
     be eligible for Medicaid using the income and assets 
     standards or methodologies as in effect on June 1, 1997, (b) 
     pay for the services of a provider who has been excluded from 
     participation under the MCH or Social Services Block Grant 
     programs, Medicare or other federal programs except for 
     emergency services not provided in hospital emergency rooms, 
     (c) pay for services that a private insurer would be 
     obligated to cover but for a provision of its insurance 
     contract that limits its obligation because the child is 
     eligible for child health assistance, (d) pay for services 
     for which payment can reasonably be expected to be made under 
     any other federally operated or financed health insurance 
     program or the Indian Health Service, (e) pay for abortions, 
     except in the case of a pregnancy resulting from rape or 
     incest, or unless the mother is in danger of death unless an 
     abortion is performed.
       Federal funds or program spending that is largely 
     subsidized by federal funds may not be claimed as the 
     required non-federal share of costs.
       The Secretary may make payments to states on the basis of 
     advance estimates of spending made by the State and other 
     investigation that the Secretary may find necessary, and may 
     adjust payments as necessary to account for overpayment in 
     prior quarters.


                            senate amendment

       The funds would be distributed in the following manner. 
     States would receive 1% of their allotted funds prior to the 
     beginning of the fiscal year for the purpose of conducting 
     outreach activities. During the year, the states would 
     receive quarterly payments in an amount equal to the Federal 
     Medicaid medical assistance percentage of the cost of 
     providing health insurance coverage for an eligible low-
     income child and any applicable bonuses based on estimates 
     by the states. The Secretary could increase or reduce 
     payments as necessary to adjust for any overpayment or 
     underpayment for prior quarters.
       Provisions of Title IV of the Personal Responsibility and 
     Work Opportunity Reconciliation Act of 1996, prohibiting the 
     receipt of public benefits for certain legal immigrants for a 
     period of five years, would not be applied to benefits 
     provided under the Child Health Insurance Initiatives.
       As a term and condition of receiving funds under this 
     program, a state may not use funds to cover the costs of 
     abortions except in cases of rape or incest or when necessary 
     to save the women's life. No more than between 5 and 10% of 
     funds under this title would be allowed for the 
     administrative costs of the program. Funds could not be used 
     to provide health insurance coverage for families of State 
     public employees or children in penal institutions nor to 
     cover the costs of abortions except in cases of rape or 
     incest or when necessary to save the women's life.
       Under this program the Secretary would not approve any 
     amount in excess of a state's allotment and would make 
     adjustments in the federal share of the costs to ensure the 
     caps are not exceeded.


                          conference agreement

       The Secretary would make quarterly payments to each State 
     with an approved child health assistance plan in amounts up 
     to the amount of the allotment using the enhanced FMAP. The 
     allotment would be reduced by the amount of the cost of the 
     state's Medicaid program of presumptive eligibility and the 
     costs of covering targeted low-income uninsured children 
     under the Medicaid program. Payments for child health 
     assistance may be made for coverage meeting the requirements 
     of section 2103, other initiatives for improving child 
     health, outreach and administration of the plan, except that 
     no more than 10% of the total program spending could be used 
     for other child health initiatives, outreach and 
     administration. The enhanced FMAP is defined as the Federal 
     medical assistance percentage under the Medicaid program 
     increased by the 30% multiplied by the number of percentage 
     points by which the FMAP for the state is less than 100%. The 
     enhanced FMAP can be no higher than 85%. The 10% limitation 
     on payments for child health assistance that does not meet 
     the coverage requirements may be waived if a state 
     establishes to the satisfaction of the Secretary that 1) the 
     coverage provided to

[[Page H6262]]

     targeted low-income children meets the benefits and cost 
     sharing requirements of Title XXI, 2) the cost of such 
     coverage is no more than it would otherwise be under such 
     section, and 3) such coverage is provided through the use of 
     a community-based health delivery system.
       A state may use Title XXI funds to purchase family coverage 
     for families that include targeted low-income children if the 
     state establishes to the satisfaction of the Secretary that 
     the purchase of such coverage is cost effective when compared 
     with the cost of covering only the target low-income children 
     in the families involved and would not substitute for other 
     health insurance coverage.
       SCHIP funds may not be used to (a) cover children who would 
     be eligible for Medicaid using the income and assets 
     standards or methodologies as in effect on April 15, (b) pay 
     for services that a private insurer would be obligated to 
     cover but for provision of its insurance contract that limits 
     its obligation because the child is eligible for child health 
     assistance, or (c) pay for services for which payment can 
     reasonably be expected to be made under any other federally 
     operated or financed health insurance program or the Indian 
     Health Service.
       In addition, as a term and condition of receiving funds 
     under this program, a state may not use funds for any 
     abortion or for health benefits coverage that includes 
     coverage of abortion except in cases of rape or incest or 
     when necessary to save the women's life. It is the Conferees' 
     intention that Section 2105(c)(7) not restrict the ability of 
     any provider from offering abortion coverage or the ability 
     of a state to contract with such a provider by such coverage 
     except, as prohibited under this section, where federal funds 
     are used in whole or in part to obtain such coverage under 
     this title.
       Federal funds or program spending that is largely 
     subsidized by federal funds may not be claimed as the 
     required non-federal share of costs.
       The Secretary may make payments to states on the basis of 
     advance estimates of spending made by the State and other 
     investigation that the Secretary may find necessary, and may 
     adjust payments as necessary to account for overpayment or 
     underpayment in prior quarters.
     (h) State matching requirement


                              current law

       The costs of providing Medicaid coverage are shared by the 
     states and the federal government. The federal share is 
     determined by a formula that takes into account the average 
     per capita income in the state relative to the national 
     average. States with lower per capita incomes have higher 
     federal matching rates. These federal matching rates range 
     from a floor of 50% to almost 80%. All 50 states currently 
     participate in Medicaid.
       Federal funds or program spending that is largely 
     subsidized by federal funds may not be claimed as the 
     required non-federal share of costs.


                               house bill

       CHAP funds paid to states under the block grant option 
     would be equal to 80% of program costs requiring a 20% state 
     matching share. States would be provided with an enhanced 
     federal Medicaid matching rate if the state chooses to use 
     CHAP funds under the Medicaid program. The enhanced medical 
     assistance percentage would be equal to the Federal medical 
     assistance percentage increased by the number of percentage 
     points equal to 30% multiplied by the number of percentage 
     points by which the Federal medical assistance percentage 
     is less than 100%.
       States may not use state funds that are used as state match 
     for purposes of another federal program, such as the TANF 
     block grant, to satisfy the state matching requirement under 
     the child health block grant.


                            senate amendment

       Requires states to share the cost of providing new coverage 
     equal to the state Medicaid matching percentage. States 
     choosing the option to provide FEHBP coverage would also be 
     eligible for federal matching payments for eligible children 
     currently covered under existing state-funded programs. Total 
     amounts paid to a state under this title, including bonus 
     payments, would not be allowed to exceed 85% of the total 
     cost of a state program conducted under this title.
       Bonus payments of 5% of the cost of providing insurance to 
     children covered during 1996, and 10% of the cost of covering 
     new children would effectively reduce the state matching 
     shares for these groups by 5 and 10%, respectively.
       States would be prohibited from including cost sharing 
     imposed on beneficiaries as program costs when determining 
     Federal medical assistance percentage for reimbursement of 
     expenditures.
       Medicaid rules, relating to limitations on the use of 
     provider taxes and donations as the state share of 
     expenditures, would apply to the Child Health Insurance 
     Initiatives.


                          conference agreement

       The conference agreement would provide for federal matching 
     under the Title XXI equal to the states' Medicaid Federal 
     medical assistance percentage increased by the number of 
     percentage points that is equal to 30% multiplied by the 
     number of percentage points by which the Federal medical 
     assistance percentage is less than 100%. All child health 
     assistance, including child health coverage for targeted low-
     income children provided under the Medicaid program, would be 
     subject to the same federal matching percentage.
     (i) Maintenance of effort


                              current law

       No provision.


                               house bill

       Prohibits payments under Title XXI on behalf of a child if 
     the child would be eligible for Medicaid using the income and 
     resource standards and methodologies in place in the state on 
     June 1, 1997.
       States that choose to use state child health assistance 
     funds for enhanced Medicaid matching payments for expanded 
     Medicaid eligibility would be prohibited from using income 
     and resource standards and methodologies for children that 
     are more restrictive than those used as of June 1, 1997.


                            senate amendment

       Requires participating states to maintain Medicaid income 
     and resource standards and methodologies that are no more 
     restrictive than those in place on June 1, 1997 and to 
     maintain state spending on children's health care that is no 
     less than the amounts spent in 1996. If states do not 
     maintain Medicaid income and resource standards, they would 
     be ineligible for payments and bonuses for children who would 
     have been eligible for Medicaid under the standards in place 
     in June of 1997. State children's health expenditures is 
     defined to include spending for children under (a) Medicaid, 
     (b) the maternal and child health services block grant 
     program under Title V of the Social Security Act, (c) the 
     preventive health services block grant program under part A 
     of Title XIX of the Public Health Services Act, (d) state-
     funded programs providing health care items and services to 
     children, (e) school-based health programs, (f) state 
     programs providing for uncompensated or indigent care, (g) 
     county indigent care programs for which an intergovernmental 
     transfer is made from the county to the State, (h) other 
     programs providing children with health care as determined by 
     the Secretary.


                          Conference Agreement

       The conference agreement includes the house provisions, 
     with amendments adding a maintenance of effort requirement 
     for spending on state-only health insurance programs and 
     changing the effective date to April 15, 1997.
     (j) State child health plans


                              current law

       No provision.


                               house bill

       State participating in Title XXI would be required to 
     submit a plan to the Secretary that specifies how the state 
     intends to use the federal funds to provide health assistance 
     to needy children consistent with requirements of the CHAP 
     program. States that meet the requirements would be entitled 
     to federal assistance from funds appropriated for this 
     purpose.
       A state child health plan would have to include a 
     description of: (a) the current insurance status of children, 
     including targeted low-income children; (b) current state 
     efforts to provide or obtain creditable coverage for 
     uncovered children; and (c) how the plan is designed to be 
     coordinated with current state efforts to increase 
     creditable coverage of children. A state plan also would 
     have to include a description of the methods of 
     establishing and continuing eligibility and enrollment, 
     including a methodology for computing family income that 
     is consistent with the method used for certain Medicaid 
     beneficiaries. Procedures established for eligibility 
     would have to ensure: (a) that only targeted low-income 
     children received the assistance, (b) that children found 
     through screening to be eligible for medical assistance 
     under the state's Medicaid program were enrolled in 
     Medicaid, (c) that the new insurance did not substitute 
     for coverage under group health plans, and (d) that there 
     was coordination with other public and private programs 
     providing creditable coverage for low-income children.
       A state plan would have to describe the nature of the 
     assistance to be provided including: cost-sharing, the health 
     care delivery method (e.g., managed care, fee-for-service, 
     direct provision of services, or vouchers), and utilization 
     control systems. A state would not be permitted to pay 
     benefits to an individual to the extent that such benefits 
     were available to the individual under another public or 
     private health care insurance program. Payments in the form 
     of a voucher or cash would not be considered income for 
     purposes of eligibility for, or benefits provided, under any 
     means-tested federal or federally-assisted program.
       A state plan would have to describe the procedures to be 
     used to accomplish outreach and enrollment assistance to 
     families of eligible children and to coordinate with other 
     public and private health insurance programs.


                            Senate Amendment

       States participating in Title XXI would be required to 
     submit to the Secretary, no later than March 31 of any fiscal 
     year (or, in the case of fiscal year 1998, October 1, 1997), 
     an outline that identifies which option the State intends to 
     use to provide coverage under this section (Medicaid or other 
     qualified program), describes how such coverage shall be 
     provided, and includes other information as the Secretary may 
     require. The outline would also include: (a) the eligibility 
     standards for the program, (b) the methodologies to be used 
     to determine eligibility,

[[Page H6263]]

     (c) the procedures to be used to ensure only eligible 
     children receive benefits and that the establishment of a 
     program under this section does not reduce the number of 
     children who currently have insurance coverage, and (d) a 
     description of how the state would ensure that Indians are 
     served by a program under this title.


                          Conference Agreement

       The conference agreement includes the House provisions with 
     the following modifications. The State child health plans 
     would be required to include descriptions of the child health 
     assistance to be provided under the plan for targeted low 
     income children, including the proposed methods of delivery 
     and utilization control systems, eligibility standards, and 
     outreach activities. The Conferees encourage states to 
     consider such innovative means as vouchers and tax credits in 
     developing these strategies. The plan would be required to 
     include a description of (1) the methods of establishing and 
     continuing eligibility and enrollment and (2) the provision 
     of child health assistance to targeted low-income children in 
     the state who are Indians as defined in the Indian Health 
     Care Improvement Act.
       A state plan would have to describe the procedures to be 
     used to accomplish outreach and enrollment assistance to 
     families of eligible children and to coordinate with other 
     public and private health insurance programs.
     (k) Process for submission, approval, and amendment of State 
         child health plan


                              Current Law

       No provision.


                               House Bill

       States participating in Title XXI would be required to 
     submit a State child health plan for approval by the 
     Secretary. A state plan would become effective beginning in a 
     specified calendar quarter that is at least 60 days after the 
     plan is submitted. A state may amend its state child health 
     plan at any time with a plan amendment. Plan amendments must 
     be approved for the purposes of this title and would take 
     effect on dates as specified in the amendment. Amendments 
     restricting or limiting eligibility or benefits could not 
     take effect until there had been public notice of the change. 
     The Secretary would be required to promptly review State 
     plans and amendments to determine compliance with the 
     requirements of this title. Unless the state were notified in 
     writing within 90 days that a plan or amendment was 
     disapproved and the reasons for disapproval or that 
     additional information was needed, the plan or amendment 
     would be deemed approved. In the case of a disapproval, the 
     Secretary would provide a state with a reasonable opportunity 
     for correction.
       CHAP programs would have to be conducted in accordance with 
     the state plan and any approved amendments. The Secretary 
     would establish a process for enforcing requirements under 
     this title. Approved plans would continue in effect unless 
     amended or unless the Secretary found the plan out of 
     compliance with this title.
       A State child health plan would be required to identify (a) 
     specific strategic objectives aimed at increasing health 
     coverage among low-income children, (b) performance goals for 
     each strategic objective identified, and (c) performance 
     measures that are objective and verifiable, so that when 
     compared with the performance goals, indicate the State's 
     performance under this title. Plans must include assurances 
     that the state will collect data, maintain records, and 
     furnish reports as required by the Secretary as well as 
     provide the required annual assessments and evaluations. The 
     Secretary would be required to have access to any records or 
     information for reviews or audits as deemed necessary.
       Plans would be required to include a description of the 
     process for obtaining ongoing public involvement in the 
     design and implementation of the plan, and the plan's budget 
     to be updated periodically including details on the sources 
     of the non-Federal share of plan spending.


                            senate amendment

       States participating in Title XXI would be required to 
     submit to the Secretary for approval, no later than March 31 
     of any fiscal year (or, in the case of fiscal year 1998, 
     October 1, 1997), an outline that identifies which option the 
     State intends to use to provide coverage (Medicaid or other 
     qualified program), describes how such coverage shall be 
     provided, and includes other information as the Secretary may 
     require.


                          conference agreement

       The conference agreement includes the House provisions with 
     the following modifications. Plan amendments that would 
     eliminate or restrict eligibility or benefits would require 
     prior public notice of the change before taking effect.
     (l) Strategic objectives and performance goals; plan 
         administration


                              current law

       No provision.


                               house bill

       A state child health plan would be required to describe 
     strategic objectives, performance goals, and performance 
     measures for providing child health assistance to targeted 
     low-income children. Strategic objectives shall be specific 
     and relate to increasing the extent of creditable health 
     coverage among targeted low-income children and other low-
     income children. One or more performance goals would be 
     specified for each strategic objective. Performance measures 
     must be objective and independently verifiable and must be 
     compared against performance goals in order to determine the 
     State's performance under this title. The state child health 
     plan would be required to include an assurance that the State 
     will collect data, maintain records, and furnish report to 
     the Secretary as needed. The plan would be required to 
     describe the State's plans for annual assessment, reports and 
     evaluations as required and to assure that the Secretary 
     would have access to information for the purposes of review 
     or audit as necessary. The plan would include a description 
     of the budget and the process for involving the public in the 
     design and implementation and ensuring ongoing public 
     involvement. The following sections of Title XI would apply 
     to States' Child Health Assistance Insurance Programs as they 
     do under Medicaid: Section 1101(a)(1) relating to the 
     definition of a State, Section 1116 relating to 
     administrative and judicial review, Section 1124 relating to 
     disclosure of ownership and related information, Section 1126 
     relating to disclosure of information about certain convicted 
     individuals, Section 1128B(d) relating to criminal penalties, 
     and Section 1132 relating to periods within which claims must 
     be filed.


                            senate amendment

       The following sections of Title XI would apply to states' 
     Child Health Insurance Initiatives as they do under Medicaid: 
     Section 1116 relating to administrative and judicial review, 
     Section 1124 relating to disclosure of ownership and related 
     information, Section 1126 relating to disclosure of 
     information about certain convicted individuals, Section 
     1128A relating to criminal penalties for certain additional 
     charges, Section 1128B(d) relating to criminal penalties, and 
     Section 1132 relating to periods within which claims must be 
     filed, Section 1902(a)(4)(C) relating to conflict of interest 
     standards, Section 1903(e) relating to limitations on 
     payment, Section 1903(w) relating to limitations on provider 
     taxes and donations, Section 1905(a)(B) relating to exclusion 
     of care or services for individuals under the age of 65 in 
     IMDs from the definition of medical assistance, Section 1921 
     relating to state licensure, Sections 1902(a)(25), 
     1912(a)(1)(A), and 1903(o) relating to third party liability. 
     Section 506(b) of Title V, the Maternal and Child Health 
     Block Grant program, relating to independent audits of state 
     expenditures and receipts would apply to the Child Health 
     Insurance Initiatives.


                          conference agreement

       The conference agreement includes the House provision with 
     the following modifications. The following additional 
     provisions of Title XI and XIX would apply the SCHIP as they 
     apply to the Medicaid program. Section 1128A relating to 
     criminal penalties for certain additional charges, Section 
     1128B(d) relating to criminal penalties, Section 
     1902(a)(4)(c) relating to conflict of interest standards, 
     Paragraphs (2) and (16) of Section 1903(i) relating to 
     limitations on payments, Section 1903(w) relating to 
     limitations on provider taxes and donations, Section 1921 
     relating to state licensure, and Sections 1932(d) and 1932(e) 
     as added by the Balanced Budget Act of 1997 relating to fraud 
     and sanctions for managed care entities.
     (m) Annual reports and evaluations


                              current law

       No provision.


                               house bill

       A State would be required to provide an annual report to 
     the Secretary by January 1 following the end of each fiscal 
     year assessing the operation of the plan and the progress 
     made in reducing the number of uncovered low-income children 
     during the prior fiscal year. States would also be required 
     to provide an evaluation by March 31, 2000, assessing (a) the 
     effectiveness of the State plan in increasing the number of 
     children with health coverage, (b) the effectiveness of 
     specific elements of the plan, such as characteristics of 
     families and children assisted the quality of 
     coverage provided, (c) the effectiveness of other public 
     and private programs in the State in increasing health 
     coverage for children, (d) state activities to coordinate 
     the plan with other public and private programs providing 
     health care coverage, (e) trends in the state affecting 
     the provision of health care to children, (f) plans for 
     improving the availability of health insurance and health 
     care for children, and (g) recommendations for improving 
     the program, among other matters the State and Secretary 
     consider appropriate. By December 31, 2000, the Secretary 
     would be required to submit to Congress a report based on 
     the state evaluations and make the report available to the 
     public.


                            Senate Amendment

       Participating states would be required to provide an annual 
     assessment of the operation of the program funded under this 
     title that includes a description of the progress made in 
     providing health insurance coverage for low income children. 
     The Secretary would be required to submit to Congress an 
     annual report and evaluation of the State programs based on 
     the annual assessment and would include any conclusions and 
     recommendations the Secretary considers appropriate.


                          Conference Agreement

       The conference agreement includes the House provisions with 
     the following modification. The Secretary would be required 
     to

[[Page H6264]]

     submit to Congress a report based on the state evaluation by 
     December 31, 2001.
     (n) Definitions


                              Current Law

       No provision.


                            House Provision

       The House provision defines the following terms: child 
     health assistance, targeted low-income child, Medicaid 
     applicable income level, child, creditable health coverage, 
     group health plan and health insurance coverage, low-income, 
     poverty line, preexisting condition exclusion, state child 
     health plan, and uncovered child.


                            Senate Amendment

       The Senate Amendment defines the following terms: base-year 
     covered low-income child population, child, eligible state, 
     federal medical assistance percentage, FEHBP-equivalent 
     children's health insurance coverage, Indians, low-income 
     child, poverty line, Secretary, state, state children's 
     health expenditures, and state Medicaid program.


                          Conference Agreement

       The conference agreement defines the following terms: child 
     health assistance, targeted low-income child, child, 
     creditable health coverage, group health plan and health 
     insurance coverage, low-income, poverty line, preexisting 
     condition exclusion, state child health plan, and uncovered 
     child.
     (o) Outreach


                              Current Law

       No provision.


                               House Bill

       Requires state health plans to include a description of the 
     procedures to be used to inform families of children eligible 
     for child health assistance under any public or private 
     programs of the availability of such assistance and to assist 
     in enrolling children.


                            Senate Amendment

       Requires states to use 1% of their basic allotment for 
     Medicaid outreach and public awareness campaigns to encourage 
     employers to provide health insurance for children.


                           Conference Report

       The conference report follows the House and Senate 
     provisions. Outreach is included within a 10% administrative 
     cap.
     (p) Effective date


                              Current Law

       No provision.


                               House Bill

       States become eligible for payments for calendar quarters 
     after October 1, 1997.


                            Senate Amendment

       States become eligible for payments for calender quarters 
     after October 1, 1997.


                          Conference Agreement

       State become eligible for payments for child health 
     assistance provided after October 1, 1997.
     (2) Mental health parity--Title XV of Senate tax bill--sec. 
         2107A


                              current law

       Public Law 104-204 prohibits group health plans that cover 
     medical, surgical, and mental health benefits from imposing 
     more restrictive annual or lifetime dollar limitations on the 
     coverage of mental health benefits than on medical and 
     surgical benefits.
       The definition of mental health benefits does not include 
     treatment of substance abuse and chemical dependency.


                               house bill

       No provision.


                            senate amendment

       Prohibits plans that enroll children under the Child Health 
     Insurance Initiative and cover medical, surgical, and mental 
     health benefits from imposing treatment limitations of 
     financial requirements on the coverage of mental health 
     benefits if similar limitations or requirements are not 
     imposed on medical and surgical benefits.
       The definition of mental health benefits does not include 
     treatment of substance abuse and chemical dependency.


                          conference agreement

       Mental health services are included as one of the four 
     categories of additional services.
     (3) Medicaid presumptive eligibility for low-income 
         children--section 3504 of House bill)


                              current law

       The Medicaid program allows states the option to provide 
     presumptive eligibility for pregnant women. Under presumptive 
     eligibility, health care providers are able to grant pregnant 
     women with immediate, short-term Medicaid eligibility as the 
     provider site while formal determination is being made. 
     Presumptive eligibility is intended to provide immediate 
     access to prenatal care services. As of 1996, 30 states have 
     opted to provide presumptive eligibility.


                               house bill

       Allows state Medicaid programs to provide for a presumptive 
     eligibility period for children under the age of 19. The 
     presumptive eligibility period would begin when a qualified 
     entity determines, based on preliminary information, that the 
     family income of the child is below the applicable income 
     eligibility threshold for the state Medicaid program, and 
     ends when a formal determination is made. For children on 
     whose behalf an application is not filed, the presumptive 
     eligibility period would end on the last day of the month 
     following the month when the period began.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement includes the House provision.
     (4) Continuation of Medicaid eligibility for disabled 
         children who lose SSI benefits--section 3505 of House 
         bill


                              current law

       In most sttes, people who receive benefits under the 
     Supplemental Security (SSI) program automatically are 
     eligible for Medicaid benefits only because they are SSI 
     beneficiaries. P.L. 104-193, the Personal Responsibility and 
     Work Opportunity Act (PRWOA) of 1996, established a new 
     definition of childhood disability for receipt of SSI 
     benefits. Under the new definition, some chldren will lose 
     their SSI and their Medicaid eligibility as well.


                               house bill

       Allows states the option of continuing Medicaid coverage 
     for disabled children who were receiving SSI as of the date 
     of enactment of PRWOA if they lose SSI because of the new 
     definition.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement requires States to continue 
     Medicaid coverage for disabled children who were receiving 
     SSI on the date of the enactment of PRWOA if they lose SSI 
     because of the new definition of disability.

                   Chapter 3--Diabetes Grant Programs

      Special Diabetes Programs for Children With Type I Diabetes


                              Current Law

       No provision.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement amends Title III of the Public 
     Health Service Act to create a grant program under which the 
     Secretary shall make grants to support prevention and 
     treatment services of, and research relating to, type I 
     diabetes in children. This section transfers $30 million for 
     each of fiscal years 1998 through 2002 from Title XXI for 
     these grants.

                 Special Diabetes Programs for Indians


                              Current Law

       No provision.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement amends Title III of the Public 
     Health Service Act to create a grant program under which the 
     Secretary shall make grants to support prevention and 
     treatment services of diabetes in Indians. These grants shall 
     purchase services provided through one or more of the 
     following entities: the Indian Health Service, a tribal 
     Indian health program, and an urban Indian health program. 
     This section transfers $30 million for each of fiscal years 
     1998 through 2002 from Title XXI for these grants.

                   Report on Diabetes Grant Programs


                              Current Law

       No provision.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement requires the Secretary to conduct 
     an evaluation of the diabetes grant programs established 
     under this chapter and to report to the appropriate 
     committees of Congress an interim report on January 1, 2000, 
     and a final report on January 1, 2002.

  I. Welfare-to-Work Grant, Block Grants for Temporary Assistance to 
                  Needy Families, and Other Provisions

                       1. Welfare-to-Work Grants

     a. Purpose


                              current law

       The 1996 welfare reform law combined recent Federal funding 
     levels for three repealed programs--AFDC, Emergency 
     Assistance (EA), and JOBS--into a single block grant for 
     Temporary Assistance for Needy Families (TANF). The TANF 
     grant equals $16.4 billion annually through Fiscal Year 2002. 
     The law also provides an average of $2.3 billion annually in 
     a child care block grant. Each State is entitled to the sum 
     it received for AFDC, EA, and JOBS in a recent year, but no 
     part of the TANF grant is earmarked for any program 
     component, such as benefits or work programs.


                               house bill

       Provides $3 billion to States and localities for additional 
     resources to support welfare-to-work (WTW) efforts.


                            senate amendment

       Same as House.


                          conference agreement

       The conference agreement follows the House bill and the 
     State amendment.
     b. Administering agency


                              current law

       HHS administers the TANF block grant but has limited 
     authority over State programs, except in setting penalties 
     and in

[[Page H6265]]

     conducting evaluations of State performance in meeting 
     program goals


                               house bill

       The WTW block grant would be administered by the Department 
     of Labor in consultation with the Secretary of HHS and the 
     Secretary of HUD.


                            senate amendment

       The WTW block grant would be administered by the Secretary 
     of HHS.


                          conference agreement

       The conference agreement follows the House bill so that the 
     Department of Labor would administer the program.
     c. Inter-agency coordination


                              current law

       No provision.


                               house bill

       Note: the House bill contains separate provisions from the 
     committees of jurisdiction (the Committee on Ways and Means 
     and the Committee on Education and the Workforce) on 
     interagency coordination and several other provisions 
     described below related to welfare-to-work grants.
     Committee on Ways and Means
       Formula Grant Provisions:
       1. Administered by the State TANF agency or another agency 
     designated by the Governor.
       2. Plans must be approved by the State TANF agency.
       3. Private Industry Councils (PICs) have sole authority for 
     expenditures in Service Delivery Areas (SDAs) under the 85 
     percent portion of the non-competitive funds, pursuant to an 
     agreement with the agency responsible for administering TANF 
     in the SDA.
       4. If the Secretary of Labor, in consultation with the 
     Secretary of HHS and the Secretary of HUD, determines that a 
     PIC and the agency responsible for administering TANF in the 
     SDA are not adhering to their agreement, funding shall be 
     remitted to the Secretary of Labor.
       Competitive Grant Provisions:
       Proposals must be approved by State TANF agency.
     Committee on Education and the Workforce
       Formula Grant Provisions:
       1. Administered by the State TANF agency or another agency 
     designated by the Governor.
       2. No provision on whether plans must be approved by the 
     State TANF agency.
       3. Private Industry Councils have sole authority for 
     expenditures in SDAs under the 85 percent portion of the non-
     competitive funds, in coordination with the chief elected 
     official of the SDA.
       4. No provision on remission of funding in the event of 
     noncompliance.


                            senate amendment

       Formula Grant Provisions:
       1. Administered by the State TANF agency.
       2. Plans must be approved by the State TANF agency (same as 
     Ways and Means).
       3. No provision on PICs.
       4. If the Secretary of HHS determines that an entity 
     operating a project and the agency responsible for 
     administering the State TANF program are not adhering to 
     their agreement, funding shall be remitted to the Secretary.
       Competitive Grant Provisions:
       Proposals must be approved by State TANF agency. In 
     addition, if the Secretary of HHS determines that an entity 
     operating a project and the agency responsible for 
     administering the State TANF program are not adhering to 
     their agreement, funding shall be remitted to the Secretary.


                          conference agreement

       The conference agreement follows the House bill and the 
     Senate amendment with modifications. The Governor is to 
     submit the plan to the Secretary of Labor and Secretary of 
     HHS. The provision regarding approval of State plans by State 
     agencies is dropped. Private Industry Councils (PICs) have 
     authority, in coordination with the area's chief elected 
     official, for expenditures in SDAs under the 85 percent 
     portion of the non-competitive funds. The addendum to the 
     State TANF plan for formula grants must contain an assurance 
     by the Governor that the PIC (or through a waiver, an 
     alternative entity) will coordinate welfare-to-work funds 
     with TANF funds.
       The conference agreement requires that PICs, political 
     subdivisions of States, or private entities working in 
     conjunction with a PIC or a political subdivision develop 
     competitive grant proposals in consultation with the State's 
     Governor.
     d. Entitlement and Distribution of Funds


                              current law

       No provision.


                               house bill

       A total of $3 billion is authorized for distribution among 
     States, sub-state units, and Indian tribes for the welfare-
     to-work program: $1.5 billion is provided in Fiscal Year 
     1998, and $1.5 billion in Fiscal Year 1999.
       Under the provision adopted by the Committee on Ways and 
     Means, after subtracting set-asides, funds are distributed 50 
     percent by formula to States and 50 percent to PICs or 
     political subdivisions of States through a competitive grant 
     process (see below).
       Under the provision adopted by the Committee on Education 
     and the Workforce, after set-asides, funds are distributed 95 
     percent by formula to States and 5 percent to PICs or 
     political subdivisions of States through a competitive grant 
     process.
       The House bill provides for the following set-asides: (1) 1 
     percent set-aside each year for Indian tribes that choose to 
     run their own program; and (2) 0.5 percent set-aside each 
     year for evaluations through HHS.
       Funds not expended within 3 years must be returned.


                            senate amendment

       A total of $3 billion is authorized for distribution among 
     States, sub-state units, and Indian tribes for the welfare-
     to-work program. In Fiscal Year 1998, $0.75 billion is 
     provided; in Fiscal Year 1999, $1.25 billion; and in Fiscal 
     Year 2000, $1.00 billion.
       After set-asides, funds are distributed 75 percent by 
     formula to States and 25 percent to political subdivisions of 
     States through a competitive grant process (see below).
       The set-asides for Indian tribes and evaluation and the 
     provisions allowing States and localities up to three years 
     to expand grant funds are identical to the House bill.
       A $100 million set-aside from Fiscal Year 1999 funding is 
     provided for a high performance bonus payable to qualifying 
     States in Fiscal Year 2003.


                          conference Agreement

       The conference agreement follows the House bill by 
     providing $1.5 billion in each of Fiscal Years 1998 and 1999.
       The conference agreement follows the Senate amendment on 
     division of funds between formula and competitive grants so 
     that 75 percent of funds is for formula grants and 25 percent 
     is for competitive grants. The conference agreement provides 
     a reservation of 0.8 percent of welfare-to-work funds for 
     each of Fiscal Years 1998 and 1999 for evaluations; in 
     addition, the conference agreement authorizes the Secretary 
     to use no more than $6 million of this funding for evaluation 
     of abstinence programs. The provisions on set-asides for 
     Indian tribes and spending funds over no more than three 
     years are identical in the House bill and the Senate 
     amendment. The conference agreement follows the Senate 
     amendment in providing a $100 million performance set-aside 
     from Fiscal Year 1999 funds. The successful performance bonus 
     would be paid to States in Fiscal Year 2000.
     e. Matching requirements


                              Current Law

       No provision.


                               House Bill

       States must meet a 33 percent match requirement for non-
     competitive grants (i.e. State must spend 50 cents to receive 
     $1 in Federal funds). States that do not fully expend the 
     estimated State share of welfare-to-work funds will have 
     their TANF grants reduced by the difference the following 
     year. State matching funds cannot be used to satisfy matching 
     requirements for other programs. Indian tribes are not 
     required to put up any matching funds.


                            Senate Amendment

       States must certify that they plan to a spend 33 cents for 
     each Federal dollar received in noncompetitive funds (\1/4\ 
     match). State matching funds cannot be used to satisfy 
     matching requirements for other programs. The provision on 
     matching by Indian tribes is identical to the House bill.


                          Conference Agreement

       The conference agreement follows the House bill by 
     requiring a 33 percent State match. The House bill and the 
     Senate amendment are identical in requiring no match by 
     Indian tribes. The conference agreement follows the House 
     bill and the Senate amendment in providing that State funds 
     cannot be used to satisfy matching requirements for other 
     programs, with the added clarification that State funds 
     expended to match Federal welfare-to-work grants cannot be 
     used to match or satisfy State spending requirements for the 
     TANF contingency fund, child care block grant matching funs, 
     or any other Federal program.
     f. Prior State spending requirements


                              Current Law

       States are required to maintain their own spending for 
     TANF-eligible families at 75 percent of their ``historic'' 
     level (Fiscal Year 1994 spending on the replaced programs and 
     AFDC-related child care), and, under penalty of loss of 
     funds, they must achieve specified work participation rates. 
     If work participation rates are not met, the State must spend 
     80 percent of its historic level.


                               House Bill

       Under the provision adopted by the Committee on Ways and 
     Means, qualified State expenditures must be at least 80 
     percent of historic State expenditures for the current or 
     prior year. The Committee on Education and the Workforce did 
     not specify a prior State spending requirement.


                            Senate Amendment

       State must meet prior year's State maintenance of effort 
     requirement.


                          Conference Agreement

       The conference agreement follows the Senate amendment, with 
     the clarification that a State must meet the TANF maintenance 
     of effort requirement in a year for which it receives a 
     welfare-to-work formula grant.
       g. Allocation of formula funds to States


                              Current Law

       No provision.


                               House Bill

     Committee on Ways and Means
       50 percent of the appropriated funds (after subtracting 
     set-asides for Indian tribes and

[[Page H6266]]

     evaluation) are distributed to States with approved State 
     welfare-to-work plans allocated on the basis of each State's 
     average of the following:
       1. percent of U.S. poverty population;
       2. percent of U.S. adults receiving TANF assistance; and
       3. percent of U.S. unemployed.
     Committee on Education and the Workforce
       95 percent of appropriated funds (after subtracting set-
     asides for Indian tribes and evaluation) are distributed to 
     States with approved State welfare-to-work plans allocated on 
     the basis of each State's average of the following:
       1. percent of U.S. poverty population; and
       2. percent of U.S. adults receiving TANF assistance.


                            Senate Amendment

       75 percent of the appropriated funds (after subtracting 
     set-asides for Indian tribes, evaluation, and high 
     performance bonuses) are distributed to States with approved 
     State welfare-to-work plans allocated on the basis of each 
     State's average of the following:
       1. percent of U.S. poverty population;
       2. percent of U.S. adults receiving TANF assistance; and
       3. percent of U.S. unemployed.
       A small State minimum of 0.5 percent of appropriated funds 
     (after subtracting set-asides for Indian tribes and 
     evaluation) will apply to all States; i.e. regardless of how 
     much a small State would receive under the distribution 
     formula, no State can receive less than 0.5 percent of total 
     appropriated funds.


                          Conference Agreement

       The conference agreement follows the provision adopted by 
     the Committee on Education and the Workforce, thus dropping 
     unemployment as a factor. The conference agreement adopts a 
     small State minimum (Senate provision), but reduces it to 
     0.25 percent of formula grant funds. The small State minimum 
     does not apply to Guam, the Virgin Islands, or American 
     Samoa.
       h. Definition of welfare-to-work State


                              Current Law

       No provision.


                               House Bill

     Committee on Ways and Means
       The Secretary of Labor, in consultation with the Secretary 
     of HHS and the Secretary of HUD, determines whether States 
     meet the following criteria to qualify as a welfare-to-work 
     State:
       1. submit a plan as an addendum to their TANF State plan 
     that includes a description of how welfare-to-work funds will 
     be used, the sub-State distribution formula, and evidence 
     that the plan was developed in consultation and coordination 
     with sub-State areas and approved by the State TANF agency;
       2. provide an estimate of State spending;
       3. agree to negotiate with the Secretary of HHS on the 
     substance of and cooperate with the conduct of an evaluation;
       4. be an eligible TANF State for the fiscal year; and
       5. meet 80 percent Maintenance of Effort (MOE) requirements 
     under TANF for current or preceding fiscal year.
     Committee on Education and the Workforce
       The Secretary of Labor, in consultation with the Secretary 
     of HHS and the Secretary of HUD, determines whether States 
     meet the following criteria as a welfare-to-work State:
       1. submit a plan as an addendum to their TANF State plan 
     that includes a description of how welfare-to-work funds will 
     be used, a description of the sub-State distribution formula, 
     and evidence that the plan was developed through a 
     collaborative process that, at minimum, included sub-State 
     areas;
       2. provide an estimate of State spending;
       3. agree to negotiate with the Secretary of HHS on the 
     substance of and cooperate with the conduct of an evaluation; 
     and
       4. be an eligible TANF State for the fiscal year.


                            Senate Amendment

       The Secretary of HHS determines whether States meet the 
     following criteria as a welfare-to-work State:
       1. submit a plan as an addendum to their TANF State plan 
     that includes a description of how welfare-to-work funds will 
     be used, a description of the sub-State distribution formula, 
     and evidence that the plan was developed in consultation with 
     sub-State areas and approved by the State TANF agency;
       2. provide an estimate of State spending;
       3. agree to negotiate with the Secretary of HHS on the 
     substance of and cooperate with the conduct of an evaluation;
       4. be an eligible TANF State for the fiscal year; and
       5. meet prior year's State maintenance of effort 
     requirement.


                          Conference Agreement

       The conference agreement adopts provisions common to both 
     House bills and the Senate amendment, with the clarification 
     that a welfare-to-work State must also certify that it will 
     meet TANF maintenance of effort requirements. The conference 
     agreement requires that the State plan addendum contain 
     assurance that the PIC in SDA will coordinate expenditure of 
     welfare-to-work funds with the expenditure of the TANF block 
     grant. The plan may contain an application to the Secretary 
     of Labor for a waiver of the requirement that the PIC 
     administer welfare-to-work formula funds within the SDA.
       i. Distribution of Formula Funds Within States


                              Current Law

       No provision.


                               House Bill

       Within each State, 85 percent of formula funds are to be 
     distributed to service delivery areas (SDAs) as defined in 
     the Job Training Partnership Act. At least half of the funds 
     must be distributed on the basis of the share of each SDA's 
     population in high poverty (above 5 percent). Additionally, 
     States may incorporate either or both of the following for 
     the remaining 50 percent of the formula: (1) the number of 
     adults receiving TANF assistance in the SDA for 30 months or 
     more (whether or not consecutive); and (2) the number of 
     unemployed residents in the SDA. The remaining 15 percent of 
     formula funds may be distributed by the Governor for projects 
     to help move long-term recipients into work.
       Grants to SDAs have a minimum threshold of $100,000 in lieu 
     of distributing lesser amounts, unused funds as a result of 
     this threshold would be added to the Governor's 15 percent 
     fund for projects to help move long-term recipients into 
     work.


                            Senate Amendment

       Within each State, at least 85 percent of formula funds are 
     to be distributed to political subdivisions with poverty and 
     unemployment rates above the State average. At least half of 
     the funds must be distributed on the basis of each 
     subdivision's population in poverty. States may incorporate 
     either or both of the following for the remaining 50 percent 
     of the formula: (1) the number of adults receiving TANF 
     assistance in the political subdivision for 30 months or more 
     (whether or not consecutive); and (2) the number of 
     unemployed residents in the political subdivision (in each 
     case rather than in the SDA as in the House bill). The 
     remaining 15 percent of formula funds may be distributed by 
     the Governor for projects to help move long-term recipients 
     into work.
       Grants to political subdivisions (rather than to SDAs as in 
     the House bill) have a minimum threshold of $100,000; in lieu 
     of distributing lesser amounts, unused funds as a result of 
     this threshold would be added to the Governor's 15 percent 
     fund for projects to help move long-term recipients into 
     work.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment with the following modifications: the 
     conference agreement follows the House bill with respect to 
     distribution of funds to service delivery areas; and the 
     conference agreement follows the House bill with respect to 
     the formula for such distribution, except the portion of 
     funds distributed based on the share of each SDA's population 
     in poverty is determined by the number in poverty above 7.5 
     percent instead of above 5 percent.
       j. Performance Bonuses


                              Current Law

       No provision. However, the 1996 welfare reform law provides 
     a total of $1 billion in Federal performance bonus funds 
     through Fiscal Year 2003 for States that are the most 
     successful in meeting the goals of the TANF block grant, 
     including ending the dependence of the needy parents on 
     government assistance by promoting job preparation and work.


                               house bill

       No provision.


                            senate amendment

       $100 million of Fiscal Year 1999 funds are to be reserved 
     and added to the High Performance Bonus under TANF in Fiscal 
     Year 2003 for welfare-to-work States that are most successful 
     in increasing the earnings of long-term welfare recipients or 
     those at risk of long-term welfare dependency.


                          conference agreement

       The conference agreement follows the Senate amendment, with 
     a modification. The conference agreement sets aside $100 
     million of Fiscal Year 1999 funds of successful performance 
     bonuses to be paid in Fiscal Year 2000. Within 1 year, the 
     Secretary of Labor, in consultation with the Department of 
     Health and Human Services, the National Governors' 
     Association, and the American Public Welfare Association, 
     shall develop a formula for measuring the success of a State 
     which received welfare-to-work formula grants in Fiscal Year 
     1998 and Fiscal Year 1999 in placing individuals in 
     employment; the duration of such placements; any increase in 
     earnings of individuals and other factors. The Secretary 
     shall use the formula to score each welfare-to-work State and 
     set a threshold for awarding bonuses.
       k. Competitive Grant Funds for Private Industry Councils, 
           Private Entities, and Political subdivisions of States


                              current law

       No provision.


                               house bill

     Committee on Ways and Means
       50 percent of welfare-to-work funds (after subtracting set-
     asides for Indian tribes and evaluation) is distributed to 
     establish competitive grants. Eligible applicants are PICs or 
     political subdivisions of States.
       Grants must be sufficient to ensure a reasonable 
     opportunity for success. Not less than 25 percent of 
     competitive funds will be available for grants in rural areas 
     with populations less than 50,000. Not less than 65 percent 
     of competitive funds will be available

[[Page H6267]]

     for grants among the 100 cities in the U.S. with the highest 
     number of individuals in poverty.
       Grants are based on: the likelihood of the project's 
     effectiveness in expanding the base of knowledge about 
     welfare-to-work programs for the least job ready, moving the 
     least job ready into the labor force, and moving the least 
     job ready into the labor force even in labor markets with a 
     shortage of low-skill jobs; at the Secretary's discretion, 
     other factors may be considered: the applicant's success in 
     addressing multiple barriers, ability to leverage other 
     resources, use of State or local resources that exceed the 
     required match, plans to coordinate with other organizations, 
     or use of current or former recipients as mentors, case 
     managers or providers.
       Grants made by the Secretary of Labor in consultation with 
     the Secretary of HHS and the Secretary of HUD in Fiscal Years 
     1998 and 1999.
     Committee on Education and the Workforce
       5 percent of welfare-to-work funds (after subtracting set-
     asides for Indian tribes and evaluation) plus any unobligated 
     funds from prior fiscal years, is distributed to establish 
     demonstration projects. Eligible applicants are PICs or 
     political subdivisions of States.
       Grants are based on the likelihood of the demonstration 
     project placing long-term recipients into the workforce.
       Grants are made by the Secretary of Labor in consultation 
     with the Secretary of HHS and the Secretary of HUD in Fiscal 
     Years 1998 and 1999. Funds remain available until the end of 
     Fiscal Year 2001.


                            senate amendment

       Twenty-five percent of welfare-to-work funds (after 
     subtracting set-asides for Indian tribes, evaluation, and 
     high performance bonuses) is distributed to establish 
     competitive grants to political subdivisions of States. 
     Eligible applicants are political subdivisions of States or 
     community action agencies, community development 
     corporations, and other non-profit organizations with 
     demonstrated effectiveness in moving recipients into the work 
     force. Their proposals must be approved by the State TANF 
     agency.
       Grants must be sufficient to ensure a reasonable 
     opportunity for success. Not less than 30 percent of 
     competitive funds will be available for grants in rural 
     areas, as defined by the House.
       Grants are based on: the likelihood of the project's 
     effectiveness in expanding the base of knowledge about 
     welfare-to-work programs for the least job ready, moving the 
     least job ready into the labor force, and moving the least 
     job ready into the labor force even in labor markets with a 
     shortage of low-skill jobs; at the Secretary's discretion, 
     other factors may be considered: the applicant's success in 
     addressing multiple barriers, ability to leverage other 
     resources, use of State or local resources that exceed the 
     required match, plans to coordinate with other organizations, 
     or use of current or former recipients as mentors, case 
     managers or providers.
       Competitive grants awards are made in Fiscal Year 1998 and 
     Fiscal Year 2000.


                          conference agreement

       The conference agreement provides that eligible applicants 
     include PICs, political subdivisions of States, or private 
     entities applying in conjunction with a PIC or political 
     subdivision. The House bill and the Senate amendment are 
     identical on the requirement that grants must be sufficient 
     to ensure a reasonable opportunity for success.
       The conference agreement does not include a set-aside for 
     rural areas or cities with large concentrations of poverty. 
     However, the Secretary is directed to consider the needs of 
     rural areas and cities in awarding competitive grants.
       The conference agreement follows the House bill (Ways and 
     Means provision) and the Senate amendment on the requirement 
     that grants must be made on the basis of the likelihood of 
     the project's effectiveness in expanding knowledge about 
     welfare-to-work programs, among other factors.
       The conference agreement follows the House bill so that 
     grants are available in Fiscal Years 1998 and 1999.
       l. Grants to Indian Tribes


                              current law

       No provision.


                               house bill

       1 percent of appropriated funds is distributed to Indian 
     tribes with welfare-to-work plans, in such amounts as the 
     Secretary deems appropriate.
       An Indian tribe shall be considered a welfare-to-work tribe 
     if it meets the following criteria:
       1. submit a plan in the form of an amendment to the tribal 
     family assistance plan, if any, (including a description of 
     how welfare-to-work funds will be used);
       2. provide an estimate tribal spending; and
       3. agree to negotiate in good faith with the Secretary of 
     HHS on the substance of and cooperate with the conduct of an 
     evaluation.


                            senate amendment

       The set-aside for Indian tribes is identical to the House 
     (1 percent of appropriated funds). The criteria for 
     determining an eligible tribe is similar to the House bill.


                          conference agreement

       The conference agreement follows the House bill and the 
     Senate amendment, but adds a provision allowing Secretary of 
     Labor to waive or modify limitations on the use of welfare-
     to-work funds by Indian tribes.
       m. Grants to Territories/Outlying Areas


                              current law

       Total Federal funding to the territories (Puerto Rico, U.S. 
     Virgin Islands, Guam and American Samoa) for public 
     assistance programs, including TANF, is limited to specified 
     dollar amounts. These limits are raised effective October 1, 
     1996. Territories may receive TANF funds in addition to their 
     family assistance grant on a matching basis to take advantage 
     of their increased caps.


                               house bill

       Welfare-to-work funds to territories do not count against 
     their public assistance funding cap.


                            senate amendment

       Same as House, except refers to ``outlying areas'' instead 
     of ``territories.''


                          conference agreement

       The conference agreement follows the Senate amendment.
       n. Use of Funds


                              Current Law

       No provision.


                               House bill

     Committee on Ways and Means
       Funds must be used to move TANF recipients and noncustodial 
     parents of any minor who is a recipient into the work force 
     through the following:
       1. job creation through public or private wage subsidies;
       2. on-the-job training;
       3. contracts (through public or private providers) for job 
     readiness, placement or post-employment services;
       4. vouchers for job readiness, placement or post-employment 
     services; and
       5. job support services (excluding child care) if not 
     otherwise available.
       PICs cannot be used to provide direct services.
       Funds are subject to the 15 percent cap on administrative 
     costs, may be used for public or private job placement 
     agencies, and may be used to fund Individual Development 
     Accounts.
     Committee on Education and the Workforce
       Funds must be used to move TANF recipients into the work 
     force through the following:
       1. job creation through public or private wage subsidies;
       2. on-the-job training;
       3. job placement contracts (through companies or public 
     programs);
       4. job vouchers; and
       5. job retention or support services, if not otherwise 
     available.


                            Senate Amendment

       Funds must be used to move TANF recipients and noncustodial 
     parents of any minor who is a recipient into the work force 
     through the following:
       1. job creation through public or private wage subsidies;
       2. on-the-job training;
       3. contracts (through public or private providers) for job 
     readiness, placement or post-employment services;
       4. vouchers for job readiness, placement or post-employment 
     services;
       5. job support services (excluding child care) if not 
     otherwise available; and
       6. technical assistance and related services that lead to 
     self-employment through the microloan demonstration program 
     under section 7(m) of the Small Business Act.
       Contracts or vouchers for job placement services using 
     welfare-to-work funds must require that at least one-half of 
     the payment be withheld until after the person placed in a 
     job has been at work for at least six months.


                          conference Agreement

       The conference agreement adopts most provisions of the 
     House bill and Senate amendment on allowable activities, but 
     adds permission for States to spend welfare-to-work fund on 
     community service and work experience programs, and it drops 
     the exclusion of child care from allowable job support 
     services.
       The conference agreement follows the Senate amendment to 
     require that contracts or vouchers for job placement services 
     supported by welfare-to-work fund must withhold at least one-
     half of the payment until after the person has been at work 
     for at least six months. The conference agreement follows the 
     Senate amendment by dropping the House provision specifying 
     that PICs cannot use funds to provide direct services.
       The conference agreement adopts the provision in the House 
     bill and the Senate amendment specifying that funds are 
     subject to the 15 percent administrative cap and may be used 
     for job placement or to fund Individual Development Accounts.
       o. Eligible Individuals


                              Current Law

       No provision


                               House Bill

     Committee on Ways and Means
       90 percent of funds must be expended on TANF recipients who 
     have received assistance for at least 30 months (whether or 
     not consecutive); OR who are within 12 months of reaching the 
     time limit; AND who meet at least two of the following 
     criteria:
       1. are not high school graduates or do not have GED and 
     have low skills in reading and math;
       2. require substance abuse treatment for employment;

[[Page H6268]]

       3. have a poor work history.
       The Secretary shall prescribe regulations necessary to 
     interpret these criteria.
     Committee on Education and the Workforce
       90 percent of funds must be expended on TANF recipients who 
     have received assistance for at least 30 months (whether or 
     not consecutive); OR who are within 12 months of reaching the 
     time limit; OR who meet at least two of the following 
     criteria:
       1. are not high school graduates or do not have GED and 
     have low skills in reading and math;
       2. require substance abuse treatment for employment;
       3. have a poor work history.


                            Senate Amendment

       90 percent of funds must be expended on TANF recipients who 
     have received assistance for at least 30 months (whether or 
     not consecutive); OR who are within 12 months of reaching the 
     time limit; OR who meet at least two of the following 
     criteria:
       1. are not high school graduates or do not have GED and 
     have low skills in reading and math;
       2. require substance abuse treatment for employment;
       3. have a poor work history.


                          Conference Agreement

       The conference agreement follows the House bill (Ways and 
     Means) on target criteria, but modifies the provision to 
     require that at least 70 percent of funds (instead of 90 
     percent) must be spent on the specified groups, with a 
     modification that non-high school graduates have low skills 
     in reading OR mathematics rather than reading AND 
     mathematics. States may spend up to 30 percent of funds on 
     individuals (including non-custodial parents of minors whose 
     custodial parent is a TANF recipient) who have the 
     characteristics of long-term recipients, with the 
     clarification that funds not spent for these purposes shall 
     be used for the same purposes as the 70 percent spent on 
     specified groups. The conference agreement follows the House 
     bill so that the Secretary must prescribe necessary 
     regulations within 90 days after the date of enactment.
       p. Interaction with TANF


                              Current Law

       No provision.


                               House Bill

       Adults who received TANF for 60 months are eligible for 
     assistance from the welfare-to-work program. Assistance to 
     individuals from welfare-to-work funds is not counted as TANF 
     assistance for purposes of the TANF 60-month time limit. 
     Welfare-to-work is considered assistance for purposes of 
     other TANF requirements; for example, work participation, 
     child support, and data reporting. States must adopt the 
     welfare-to-work plan as an addendum to their TANF State plan. 
     States must be eligible TANF States for the fiscal year.


                            Senate Amendment

       Same as House.


                          Conference Agreement

       The conference agreement follows the identical provisions 
     in the House bill and the Senate amendment with two 
     modifications. It provides authority to provide assistance to 
     those who have reached the TANF 60-month limit. It also 
     clarifies that assistance to individuals from welfare-to-work 
     funds does not count toward the TANF 60-month time limit. 
     Months when cash assistance is provided, directly or 
     indirectly (for example, wage subsidies), count toward the 
     60-month limit.
       q. Evaluation


                              Current Law

       No provision.


                               House Bill

       The Secretary of HHS must develop, in consultation with the 
     Secretary of Labor, a plan to evaluate use of welfare-to-work 
     grants. States must agree to negotiate with the Secretary of 
     HHS on the substance and cooperate with the conduct of an 
     evaluation; 0.5 percent of funds is reserved for HHS 
     evaluation. The Secretary is urged to include the following 
     measures:
       1. placements in the labor force and placements that last 
     at least six months;
       2. placements in the private and public sectors;
       3. earnings of individuals who obtain employment;
       4. average expenditures per placement.
       The Secretary of HHS, in consultation with the Secretary of 
     Labor and the Secretary of HUD, must report to Congress on 
     projects funded under the welfare-to-work program and on the 
     evaluations of projects. An interim report is due January 1, 
     1999, and a final report is due January 1, 2001.


                            Senate Amendment

       Same as House.


                          Conference Agreement

       The conference agreement follows the identical provisions 
     in the House bill and the Senate amendment, with the 
     modification that 0.8 percent of total funds is reserved for 
     evaluations, including $6 million for evaluation of 
     abstinence education programs.
       r. Data Reporting


                              Current Law

       States are required to collect on a monthly basis and 
     report to the Secretary on a quarterly basis specified 
     information about families receiving TANF assistance. 
     Information on the demographic and financial characteristics 
     of TANF families is reported as disaggregated case records, 
     and may be based on a sample of TANF families. In addition to 
     the disaggregated case records, States are required to report 
     aggregate information on total expenditures, Federal funds 
     used to cover administrative costs, the number of 
     noncustodial parents participating in work activities, and 
     transitional services. The Secretary has the authority to 
     regulate and define the data elements for the required 
     reports.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       Recipients of welfare-to-work funds are subject to TANF 
     reporting requirements. In addition to the information 
     required of all TANF families, States are required to report 
     additional information on families with a member receiving 
     welfare-to-work assistance, including the types of welfare-
     to-work activities they engaged in, the amount expended for 
     the recipient in the activity, and information about their 
     employment or training status when their welfare-to-work 
     assistance ends. Additionally, separate information on 
     aggregate welfare-to-work expenditures, administrative costs, 
     and noncustodial parents in the welfare-to-work program is 
     required.
     2. Workfare--Rules for Community Service and Work Experience 
         Programs


                              Current Law

       States may establish work experience and community service 
     programs in which TANF recipients may be required to work as 
     a condition of receiving their grant. These programs are 
     often called ``workfare.'' The Department of Labor has held 
     that workfare participants may be considered ``employees'' 
     and thus would be covered by the Fair Labor Standards Act 
     (FLSA), which sets hour and wage standards, and other 
     employment laws.


                               House Bill

       Work experience and community service programs are designed 
     to improve the employability of participants through actual 
     work experience or training. Such programs are limited to 
     projects which serve a useful public purpose. Participants 
     may not be placed in private, for-profit organizations and 
     may not be required to participate for more hours than the 
     combined value of their TANF and Food Stamp benefits minus 
     child support collected and retained by the State, divided by 
     the greater of the Federal or State minimum wage. 
     Participants engaged in work experience and community service 
     programs are not entitled to a salary or work or training 
     expenses and are not entitled to any other compensation for 
     work performed.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the Senate amendment (no 
     provision).
     2a. Sanctions


                              Current Law

       No provision (see above).


                               House Bill

       No provision.


                            Senate Amendment

       Notwithstanding minimum wage requirements, States retain 
     the ability to sanction a family for noncompliance with 
     program rules.


                          Conference Agreement

       The conference agreement follows the Senate amendment.
     3. Counting Any Other Work Activity for Recipients With 
         Sufficient Participation in Workfare Programs


                              Current Law

       TANF law requires single adult parents to engage in ``work 
     activities'' for an average of 20 hours weekly in Fiscal 
     Years 1997 and 1998 (more in later years) and requires that 
     all 20 hours be spent in specified ``priority'' activities 
     (not including, for instance, job skills training). In Fiscal 
     Year 1999, when required work hours for those without a 
     preschooler climb to 25 hours, 5 hours credit may be received 
     for lower priority work activities. (Required weekly work 
     hours for 2-parent families are 35, with 30 in ``priority'' 
     activities.) TANF law also places time limits on vocational 
     educational training (12 months per person) and job search.


                               House Bill

       Participants in work experience and community service 
     programs who do not meet the hourly work requirements when 
     minimum wage is taken into account can meet the remaining 
     hours of the work requirement by participating in any other 
     work activity. States must treat persons who participate 
     enough hours, calculated at the minimum wage, to equal their 
     combined TANF/food stamp benefits (less child support 
     collections not distributed to them) as engaged in work if 
     they make up any shortfall in required hours by time spent 
     in other work activity.
       The provision provides an alternative method for a TANF 
     recipient to meet the hourly work requirements. It does not 
     preclude a recipient from meeting the hourly work 
     requirements through other means. For example, a single 
     parent with a child under age 6 would meet hourly work 
     requirements by engaging in work for 20 hours per week.

[[Page H6269]]

                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the Senate amendment (no 
     provision).
     4. Protections for employees and TANF participants


                              Current Law

       Although a TANF recipient may fill a vacant employment 
     position, no adult in a TANF work activity may be employed or 
     assigned when another person is on layoff from the same or 
     any substantially equivalent job; or if the employer has 
     caused an involuntary workforce reduction in order to fill 
     the resulting vacancy with a TANF recipient. These provisions 
     do not preempt or supersede any State or local law that 
     provides greater protection against displacement. TANF-funded 
     activities are subject to the Age Discrimination Act, the 
     Americans with Disabilities Act, Title VI of the Civil Rights 
     Act, and Sec. 504 of the Rehabilitation Act.


                               House Bill

       Displacement: Participants in activities funded by welfare-
     to-work funds and TANF may fill a vacant employment position 
     in order to engage in a work activity, except when another 
     individual is on layoff from the same or substantially 
     equivalent job or if the employer has caused an involuntary 
     reduction in the workforce with the intention of filling the 
     vacancy with the participant.
       Impairment of contracts: The work activity cannot impair an 
     existing contract for services or collective bargaining 
     agreement. Any activity that would impair an existing 
     contract or agreement cannot be undertaken without written 
     consent of the labor organization and employer.
       Health and safety: Otherwise applicable Federal and State 
     health standards shall apply to all TANF and welfare-to-work 
     participants engaged in a work activity.
       Nondiscrimination: Adds gender to the other 
     nondiscrimination provisions applicable to TANF and welfare-
     to-work participants.
       Grievance procedure: States must establish grievance 
     procedures for employees alleging nondisplacement violations 
     and for TANF and welfare-to-work participants who allege 
     violations of provisions regarding nondisplacement, health 
     and safety standards, or gender discrimination. The procedure 
     must include an opportunity for a hearing.
       Remedies: States must provide remedies for violations of 
     anti-displacement, health and safety, and anti-discrimination 
     protections, which may include reinstatement of an employee 
     with payment of lost wages and benefits, reestablishment of 
     terms, conditions and privileges of employment, and where 
     appropriate, other equitable relief.


                            Senate Amendment

       Displacement: Participants in activities funded by welfare-
     to-work funds cannot displace current employees (including a 
     reduction in hours, wages, or benefits) or be employed in a 
     job resulting from a layoff or a workforce reduction to 
     create the vacancy or in a job that impairs promotional 
     opportunities for current employees.
       Impairment of contracts: Existing contracts for services or 
     collective bargaining agreements cannot be impaired by a work 
     activity; any activity inconsistent with a collective 
     bargaining agreement cannot be undertaken without the written 
     consent of the labor organization and employer.
       Health and safety: Otherwise applicable Federal and State 
     health and safety standards, as well as workers' 
     compensation, apply to welfare-to-work participants.
       Grievance procedures: States must establish grievance 
     procedures which include an opportunity for a hearing within 
     60 days, with appeal rights to the Secretary of Labor.
       Investigation: Requires the Secretary of Labor to 
     investigate alleged violations of nondisplacement and health 
     and safety provisions if decision on alleged complaint is not 
     reached within 60 days and either party appeals; or if 
     decision is reached and appealed.
       Remedies: Remedies are limited to suspension or termination 
     of payments, prohibition of placement with an employer who 
     violated these provisions, reinstatement of the employee and 
     payment of lost wages and benefits, or equitable relief.


                          Conference Agreement

       The conference agreement follows the Senate amendment by 
     applying the specified protections to welfare-to-work 
     participants but not all TANF participants engaged in work 
     activities. The agreement follows the House bill regarding 
     displacement, with the modification that an involuntary 
     reduction in hours to less than full-time work is prohibited 
     and the clarification that State laws, if broader, are not 
     preempted by this federal provision. With regard to 
     impairment of contracts, the conference agreement follows the 
     Senate amendment, with clarification that an activity that 
     would ``violate'' a collective bargaining agreement cannot be 
     undertaken without written consent of the labor organization 
     and employer. The conference agreement follows the House bill 
     and the Senate amendment on health and safety protections.
       The conference agreement follows the House bill on 
     nondiscrimination protections. On grievance procedures, the 
     conference agreement follows the House bill with the 
     modification that States have the option of continuing any 
     sanctions during the grievance procedure. In addition, the 
     State grievance procedure must include an opportunity for 
     appeal to a State agency other than the agency administering 
     the State welfare-to-work program; however, this condition 
     will be satisfied by the allowance of appeals to an 
     independent review board within the agency administering the 
     State welfare-to-work program. On investigations, the 
     conference agreement follows the House bill (thus, there is 
     no provision). The conference agreement follows the Senate 
     amendment on remedies.
     5. Limit on Vocational Educational Training as a Work 
         Activity


                              Current Law

       The law restricts to 20 percent the proportion of TANF 
     recipients ``in all families and in 2-parent families'' who 
     may be treated as engaged in work for a month by reason of 
     participating in vocational educational training or, if 
     single teenage household heads without a high school diploma, 
     by reason of satisfactory attendance at secondary school or 
     participation in education directly related to employment.


                               House Bill

       The provision adopted by the Committee on Ways and Means 
     clarifies the limit on the number of persons who may be 
     treated as engaged in work by reason of participation in 
     vocational educational activities as 30 percent of 
     individuals in all families and in two-parent families, 
     respectively, who are engaged in work for a month. Teen heads 
     of households who are deemed to be meeting the work 
     requirements by maintaining satisfactory school attendance or 
     participating in education directly related to work are 
     specifically excluded from the cap.
       The provision adopted by the Committee on Education and the 
     Workforce clarifies the limit on the number of persons who 
     may be treated as engaged in work by reason of participation 
     in vocational educational activities as 20 percent of 
     individuals in all families and in two-parent families, 
     respectively, who are engaged in work for a month or deemed 
     to be engaged in work by reason of being teen heads of 
     households who are maintaining satisfactory school attendance 
     or participating in education directly related to work.


                            Senate Amendment

       Allows 20 percent of persons in all families and in two-
     parent families (other than those headed by teen parents 
     without a high school diploma) to be treated as engaged in 
     work by reason of participation in vocational educational 
     activities. Strikes the limit on the number of teen parents 
     who may meet the work requirement by maintaining satisfactory 
     school attendance or participating in education directly 
     related to work.


                          Conference Agreement

       The conference agreement follows the House bill (provision 
     adopted by the Committee on Ways and Means) so that the 
     number of persons who may be treated as engaged in work by 
     reason of participation in vocational educational activities 
     is limited to 30 percent of individuals in all families and 
     in two-parent families, respectively, who are engaged in work 
     for a month. The conference agreement provides that teen 
     heads of households who are deemed to be meeting the work 
     requirements by maintaining satisfactory school attendance or 
     participating in education directly related to work are 
     specifically excluded from the cap for Fiscal Years 1998 and 
     1999.
     6. Limit on Transfer of TANF Funds


                              Current Law

       States may transfer up to 30 percent of their TANF funds to 
     the Title XX social services block grant and the Child Care 
     and Development Block Grant (CCDBG), but no more than one-
     third of the total transfer may go to the former. Thus, for 
     every $1 transferred to Title XX, $2 must be transferred to 
     the child care block grant. TANF funds transferred to Title 
     XX can be spent only on children and families with income 
     below 200 percent of the poverty guideline.


                               house bill

       Limits the amount transferable to Title XX to 10 percent of 
     the TANF block grant without respect to any transfers to the 
     Child Care and Development Block Grant. Up to 30 percent may 
     be transferred to the CCDBG, but total transfers are limited 
     to 30 percent, and current law restrictions on funds 
     transferable into the Title XX program remain in effect.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement follows the House bill.
       7. Penalty Against State for Not Reducing Benefit of 
           Recipient for Refusal to Work


                              current law

       If an adult recipient refuses to engage in required work, 
     the State must reduce aid to the family pro rata (or more, at 
     State option) or shall discontinue aid, subject to good cause 
     and other exceptions of the State.


                               house bill

       A State shall be penalized between 1 percent and 5 percent 
     of its TANF block grant if it fails to reduce a recipient's 
     grant for refusing without good cause to participate in work. 
     The Secretary is to impose the reduction based on the degree 
     of noncompliance.


                            senate amendment

       No provision.


                          conference agreement

       The conference agreement follows the House bill.

[[Page H6270]]

     8. Family Violence Exemptions from TANF Rules


                              current law

       TANF law gives the State an option to certify that it has 
     established and is enforcing standards to screen and identify 
     recipients with a history of domestic violence, to refer them 
     to counseling and supportive services, and to waive some 
     program requirements, such as time limits (subject to the 20 
     percent limit on exemptions from the Federal 5-year time 
     limit), for TANF recipients in cases where the requirements 
     would make it harder for them to escape domestic violence or 
     would unfairly penalize persons who have been victimized by 
     domestic violence or those at risk of further violence.


                               house bill

       No provision.


                            senate amendment

       Provides that:
       1. States shall not be subject to any numerical limitation 
     in the granting of good cause waivers in accordance with the 
     Family Violence Option;
       2. HHS shall exclude persons with a family violence waiver 
     in determining a State's compliance with work participation 
     rates and enforcement of the time limit. HHS shall exclude 
     these persons in determining whether to impose a penalty for 
     a State's failure to meet participation rates, enforce the 
     time limit, or enforce penalties requested by the child 
     support agency against TANF recipients for their failure to 
     cooperate in establishing paternity or in establishing, 
     modifying, or enforcing a child support order without good 
     cause;
       3. Prohibits the Federal Parent Locator Service from 
     disclosing information (except to a court) if there is 
     reasonable evidence of domestic violence or child abuse or if 
     the health, safety, or liberty of a parent or child would be 
     unreasonably put at risk by the disclosure.


                          conference agreement

       The conference agreement follows the House bill (i.e. 
     dropping the Senate provision). Instead, the conference 
     agreement requires that the General Accounting Office conduct 
     a study of the effect of family violence on the use of 
     welfare programs.
     9. Penalty for Failure to Meet Minimum Participation Rates


                              current law

       TANF law requires the HHS Secretary to reduce a State's 
     TANF block grant if it falls short of the required work 
     participation rate. For the first year of failure, the 
     penalty is not more than 5 percent of the grant; in 
     subsequent years, annual penalties would rise by 2 
     percentage points per year; e.g., up to 7 percent in 
     second year, 9 percent in the second year, and so forth--
     with a maximum cumulative penalty of 21 percent. States 
     must replace Federal funds lost because of penalties with 
     funds of their own.


                               house bill

       No provision.


                            senate amendment

       Requires penalty of 5 percent for first failure (7 percent 
     for next, rising to a maximum of 21 percent). Adds proviso 
     that the Secretary may reduce the penalty if noncompliance is 
     due to ``extraordinary circumstances, such as a natural 
     disaster or regional recession.'' In this case, the Secretary 
     must justify the penalty reduction to Congress in writing.


                          Conference Agreement

       The conference agreement follows the Senate amendment.
     10. Data Collection About TANF Families


                              current law

       TANF law requires States to report quarterly information 
     about recipient families. One question asks whether a child 
     receiving TANF or an adult in the family is disabled.


                               house bill

       Revises and expands the current question. Requires States 
     to report: whether a child or adult in a TANF recipient 
     family is receiving disability benefits under specified 
     provisions of the Social Security Act; namely, section 202, 
     section 223, Title XIV (for needy adults in the outlying 
     areas), Title XVI (Federal SSI), or Title XVI (State 
     supplements to SSI).


                            senate amendment

       Broadens the question about disability status to include 
     benefits outside the Social Security Act. Requires States to 
     report whether a TANF child or adult is receiving ``Federal 
     disability insurance benefits or benefits based on Federal 
     disability status.''


                          Conference Agreement

       The conference agreement follows the Senate amendment. 
     (This provision appears in the section on technical 
     corrections.)

                    II. SUPPLEMENTAL SECURITY INCOME

     11. Requirement to Perform Childhood Disability 
         Redeterminations in Missed Cases


                              current law

       By August 22, 1997 (one year after the date of enactment of 
     P.L. 104-193), the Commissioner of the Social Security 
     Administration (SSA) is expected to redetermine the 
     eligibility of any child receiving SSI benefits on August 22, 
     1996, whose eligibility may be affected by changes in 
     childhood disability eligibility criteria, including the new 
     definition of childhood disability and the elimination of the 
     individualized functional assessment. Benefits of current 
     recipients will continue until the later of July 1, 1997 or a 
     redetermination assessment. Should a child be found 
     ineligible, benefits will end following redetermination. 
     Within 1 year of attainment of age 18, SSA is expected to 
     make a medical redetermination of current SSI childhood 
     recipients using adult disability eligibility criteria. For 
     low birth weight babies, a review must be conducted within 12 
     months after the birth of a child whose low birth weight is a 
     contributing factor to his or her disability.


                               house bill

       This provision extends from 1 year after the date of 
     enactment to 18 months after the date of enactment the period 
     by which SSA must redetermine the eligibility of any child 
     receiving benefits on August 22, 1996 whose eligibility may 
     be affected by changes in childhood disability. The provision 
     also specifies that any child subject to an SSI 
     redetermination under the terms of the welfare reform law 
     whose redetermination does not occur during the 18-month 
     period following enactment (that is, by February 22, 1998) is 
     to be assessed as soon as practicable thereafter using the 
     new eligibility standards applied to other children under the 
     welfare reform law.


                            senate amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.
     12. Repeal of Maintenance-of-Effort Requirement for Optional 
         State Supplementation of SSI Benefits


                              Current Law

       States have an option to supplement the Federal SSI payment 
     with their own funds. States that operate optional 
     supplementation programs are required by Section 1618 of the 
     Social Security Act to ``pass along'' the amount of any 
     Federal SSI benefit increase to recipients. The law allows 
     States to comply with this requirement by either maintaining 
     their supplementary payment levels to recipients of a given 
     type at or above 1983 levels or by maintaining their 
     supplementary payments at a level that, when combined with 
     Federal payments, at least equals combined payments to the 
     same type of recipients during the previous 12 months. In 
     effect, Section 1618 requires that once a State elects to 
     provide supplementary payments, it must continue to do so.


                               House Bill

       The House Bill repeals Section 1618, ending the requirement 
     that States pass along any Federal benefit increase to 
     recipients.


                            Senate Amendment

        No provision.


                          Conference Agreement

        The conference agreement follows the Senate amendment (no 
     provision).
     13. Fees for Federal Administration of State Supplementary 
         Payments


                              Current Law

        The law requires the Commissioner of Social Security to 
     assess an administration fee for making State supplementary 
     SSI payments (optional or mandatory) on behalf of States. For 
     Fiscal Year 1997 and each succeeding fiscal year, the fee is 
     $5.00 monthly or a different rate that the Commissioner 
     determines to be appropriate for the State. The 
     administration fees--along with any additional service fees 
     that the Commissioner imposes to cover costs--are deposited 
     in the general fund of the Treasury as miscellaneous 
     receipts.


                               House Bill

        The House Bill increases fees for administering State 
     supplements (optional or mandatory) as follows:

  For Fiscal Year 1998............................................$6.20
  For Fiscal Year 1999............................................$7.60
  For Fiscal Year 2000............................................$7.80
  For Fiscal Year 2001............................................$8.10
  For Fiscal Year 2002............................................$8.50

       For Fiscal Year 2003 and each succeeding fiscal year, the 
     rate in the preceding year, adjusted for price inflation (by 
     use of the Consumer Price Index); or a different rate that 
     the Commissioner determines to be appropriate for the State.
       The first $5 in monthly administration shall be deposited 
     in the general fund of the Treasury as miscellaneous 
     receipts. The remaining portion of administration fees (and 
     100 percent of additional services fees) shall, upon 
     collection for Fiscal Year 1998 and later years, be credited 
     to a special Treasury fund to be available to defray expenses 
     in carrying out SSI and related laws.
       The bill authorizes $35 million to be appropriated from the 
     new special Treasury fund for Fiscal Year 1998 and ``such 
     sums as are necessary'' for later years.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill, with the 
     modification that administration fees authorized by this 
     section to be charged and credited to a special fund 
     established in the Treasury for State supplementary payment 
     fees shall not be scored as receipts under section 252 of the 
     Balanced Budget and Emergency Deficit Control Act of 1985; 
     such amounts shall be credited as a discretionary offset to 
     discretionary spending to the extent they are made available 
     for expenditure in appropriations Acts.

[[Page H6271]]

                     III. CHILD SUPPORT ENFORCEMENT

     14. Clarification of Authority to Permit Certain 
         Redisclosures of Wage and Claim Information


                              Current Law

       P.L. 104-193 gives HHS the authority to obtain information 
     about the wages and unemployment compensation paid to 
     individuals from State unemployment compensation agencies for 
     the State Directory of New Hires. The State Directory of New 
     Hires is then to furnish this wage and unemployment 
     compensation claim information, on a quarterly basis, to the 
     National Directory of New Hires. The law also requires State 
     unemployment compensation agencies to establish such 
     safeguards as the Secretary of Labor determines are necessary 
     to insure that the information disclosed to the National 
     Directory of New Hires is used only for the purpose of 
     administering programs under State plans approved under the 
     Child Support Enforcement program, the TANF block grant, and 
     for other purposes authorized in section 453 of the Social 
     Security Act (as amended by P.L. 104-193).


                               House Bill

        Clarifies that HHS may disclose wage and unemployment 
     compensation information contained in the Directory of New 
     Hires to the Department of Treasury, the Social Security 
     Administration, and to State Child Support Enforcement 
     agencies.


                            Senate Amendment

        No provision.


                          Conference Agreement

        The conference agreement follows the House bill.

         IV. RESTRICTING WELFARE AND PUBLIC BENEFITS FOR ALIENS

     15. Extension of SSI/Medicaid Eligibility Period for Refugees 
         and Certain Other Qualified Aliens From 5 to 7 Years


                              Current Law

        Provides 5-year exemption from: (1) the bar against SSI 
     and Food Stamps; and (2) the provision allowing States to 
     deny ``qualified aliens'' access to Medicaid, TANF, and 
     Social Services Block Grant for refugees, asylees, and aliens 
     granted withholding of deportation for persecution.


                               House Bill

        Lengthens from 5 years to 7 years the period during which 
     SSI and Medicaid eligibility is guaranteed to refugees, 
     asylees, and aliens whose deportation has been withheld.


                            Senate Amendment

        Similar to House, except also clarifies that Cuban-Haitian 
     entrants would be considered ``refugees.''


                          Conference Agreement

        The conference agreement follows the Senate amendment.
     16. Definition: ``Qualified Aliens''


                              Current Law

        Defined by P.L. 104-193 (as amended by P.L. 104-208) as 
     aliens admitted for legal permanent residence (i.e., 
     immigrants), refugees, aliens paroled into the United States 
     for at least 1 year, aliens granted asylum or related relief, 
     and certain abused spouses and children. Most Cuban/Haitian 
     entrants are paroled for 1 year and, as such, are ``qualified 
     aliens.'' Amerasians enter as immigrants and, as such, are 
     qualified aliens.


                               House Bill

        Specifies that Cuban and Haitian entrants and Amerasian 
     permanent resident aliens are to be considered qualified 
     aliens for purpose of continuing SSI and Medicaid eligibility 
     of those who were receiving benefits on August 22, 1996.


                            Senate Amendment

        Specifies Cuban and Haitian entrants are qualified aliens 
     for purpose of continuing SSI and Medicaid eligibility of 
     those who were receiving benefits on August 22, 1996 (see 
     below regarding treatment of Amerasians).


                          Conference Agreement

       The conference agreement follows the Senate amendment.
     17. SSI Eligibility for Noncitizens Receiving SSI on August 
         22, 1996


                              Current Law

        Most ``qualified aliens'' are barred from Supplemental 
     Security Income (SSI) for the Aged, Blind, and Disabled. 
     Current recipients must be screened for continuing 
     eligibility by September 30, 1997.


                               House Bill

        ``Qualified aliens'' receiving SSI benefits on August 22, 
     1996 would remain eligible for SSI. Applies to both the aged 
     and disabled.


                            Senate Amendment

        Similar to House, but clarifies that ban does not apply to 
     an alien who is ``lawfully residing in any State.''


                          Conference Agreement

        The conference agreement follows the Senate amendment, 
     with the modification that the ban does not apply to an alien 
     who is ``lawfully residing in the United States.'' The 
     conference agreement clarifies that non-qualified aliens who 
     are current SSI recipients would remain eligible for SSI and 
     guaranteed Medicaid until October 1, 1998.
     18. SSI Eligibility for Noncitizens Here by August 22, 1996 
         and Subsequently Disabled


                              Current Law

        Not eligible under current law (unless otherwise exempt 
     from ineligibility).


                               House Bill

       No provision (thus eligibility continues beyond September 
     30, 1997 only for those receiving benefits as of August 22, 
     1996; see above).


                            Senate Amendment

        Eligibility for SSI disability benefits provided for 
     ``qualified aliens'' here by August 22, 1996 who subsequently 
     become disabled.


                          Conference Agreement

        The conference agreement follows the Senate amendment, 
     with the modification that benefits are to be provided to 
     aliens ``lawfully residing in the United States'' on August 
     22, 1996.
     19. SSI Eligibility for the Severely Disabled


                              Current Law

        No provision for eligibility of severely disabled 
     ``qualified aliens'' beyond continued coverage through 
     September 30, 1997 of those on rolls as of August 22, 1996.


                               House Bill

        No special provision for the severely disabled. 
     Eligibility of those on the rolls as of August 22, 1996 would 
     continue (see above).


                            Senate Amendment

       Provides for coverage of future severely disabled 
     ``qualified aliens'' who are unable to naturalize solely 
     because of their disability.


                          Conference Agreement

       The conference agreement follows the House bill (no 
     provision). However, qualified aliens present in the U.S. on 
     August 22, 1996 who subsequently become disabled would be 
     eligible for SSI (see item 18 above).
     20. SSI Eligibility for SSI Recipients with Applications 
         Filed Before January 1, 1979


                              Current Law

       Not eligible under current law beyond September 30, 1997 
     unless can prove citizenship (or are otherwise exempt because 
     of work record or veteran status).


                               House Bill

        No provision.


                            Senate Amendment

        Individuals who have been receiving SSI on basis of an 
     application filed before January 1, 1979 would continue to be 
     eligible unless there is convincing evidence that they are 
     non-qualified aliens.


                          Conference Agreement

        The conference agreement follows the Senate amendment.
     21. Medicaid eligibility for noncitizens receiving SSI on 
         August 22, 1996


                              Current Law

       States may exclude ``qualified aliens'' who entered the 
     United States before enactment of the welfare law (August 22, 
     1996) from Medicaid beginning January 1, 1997. Additionally, 
     to the extent that legal immigrants' receipt of Medicaid is 
     based only on their eligibility for SSI, some will lose 
     Medicaid because of their ineligibility for SSI.


                               House Bill

       ``Qualified aliens'' who were receiving derivative Medicaid 
     benefits on August 22, 1996 as a result of receipt of SSI 
     would remain eligible for Medicaid.


                            Senate Amendment

       Similar to House.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment.
     22. Food stamp eligibility


                              Current Law

       ``Qualified aliens'' here before August 22, 1996 are barred 
     from food stamps by August 22, 1997; new arrivals are barred 
     from date of entry.


                               House Bill

        No derivative eligibility from SSI eligibility; i.e., no 
     change in existing law.


                            Senate Amendment

        No derivative eligibility from SSI eligibility; i.e., no 
     change in existing law.


                          Conference Agreement

        The conference agreement follows the House bill and the 
     Senate amendment.
     23. Medicaid eligibility for children


                              Current Law

        ``Qualified aliens'' entering after August 22, 1996 are 
     barred from all but emergency Medicaid for their first 5 
     years after entry, at which point their participation is a 
     State option; no special provision is made for children.


                               House Bill

       No change in existing law.


                            Senate Amendment

        Exempts ``qualified alien'' children under age 19 entering 
     after August 22, 1996 from the 5-year bar on full Medicaid.


                          Conference Agreement

        The conference agreement follows the House bill (no 
     provision).
     24. SSI/Medicaid eligibility for permanent resident aliens 
         who are members of an Indian tribe


                              Current Law

       Makes no exception for qualified aliens who are Native 
     Americans. Section 289 of the Immigration and Nationality Act 
     of 1952 (INA) preserves the right of free passage recognized 
     in the Jay Treaty of 1794 by allowing ``American Indians born 
     in Canada'' unimpeded entry and residency rights if they 
     ``possess at least 50 per centum of blood of the American 
     Indian race.'' By regulation,

[[Page H6272]]

     individuals who enter the U.S. and reside here under this 
     provision are regarded as lawful permanent resident aliens.


                               House Bill

        Excepts members of federally recognized American Indian 
     tribes who are lawfully admitted for permanent residence from 
     the SSI (and derivative Medicaid if applicable) restrictions 
     on qualified aliens.


                            Senate Amendment

       Excepts (1) members of federally recognized tribes and (2) 
     American Indians who come under Sec. 289 of the INA from the 
     SSI (and derivative Medicaid if applicable) restrictions on 
     qualified aliens. Makes similar exceptions to the 5-year bar 
     on benefits for newly arriving qualified aliens.


                          Conference Agreement

       The conference agreement follows the Senate amendment, with 
     clarifying amendments.
     25. Amerasians


                              Current Law

       Amerasians enter as immigrants and, as such, are qualified 
     aliens.


                               House Bill

       Considered to be ``qualified aliens'' for purpose of 
     continued eligibility for SSI for those here by August 22, 
     1996.


                            Senate Amendment

       Amerasians would be made eligible for benefits on same 
     basis as refugees. Provides for funding through $100 
     processing fees to be levied on unlawfully present aliens who 
     are ordered removed after having been convicted in the U.S. 
     of a felony.


                          Conference Agreement

       The conference agreement follows the Senate amendment, with 
     the modification that the funding provision is dropped.
     26. Verification of eligibility for state and local public 
         benefits


                              Current Law

       Requires verification that applicants for federal benefits 
     are eligible for the benefits, and that States administering 
     such programs have a verification system.


                               House Bill

       Authorizes State and local governments to verify 
     eligibility for State or local public benefits.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.

                      V. Unemployment Compensation

     27. Clarifying provision relating to base periods


                              Current Law

       A ``base period'' is used to measure a claimant's covered 
     wages for eligibility determination. Each State sets its base 
     period, and most use the first 4 of the last 5 completed 
     calendar quarters. A Federal court decision in Illinois (in 
     the Pennington case) has ruled that the State's choice of 
     base period does not ensure full payment of benefits when due 
     as Federal law requires.


                               House Bill

       A State's decision of which base period to use will not be 
     considered a provision for a method of administration to 
     which the ``when due'' clause of Federal law applies. This 
     means States would have complete authority in setting base 
     periods for determining eligibility for benefits.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.
     28. Increase in Federal unemployment account ceiling


                              Current Law

       The Federal Unemployment Account (FUA), a reserve account 
     in the Unemployment Trust Fund, provides authority for loans 
     to insolvent State benefit accounts in the trust fund. If 
     FUA's assets exceed 0.25 percent of wages in covered 
     employment, excess assets are transferred to certain other 
     trust fund accounts, including State benefit accounts if 
     Federal accounts are at their ceilings.


                               House Bill

       The ceiling on FUA assets will be increased to 0.5 percent 
     of wages in covered employment for Fiscal Year 2002 and 
     subsequent years.


                            Senate Amendment

       Same as House.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment.
     29. Special distribution to states from unemployment trust 
         fund


                              Current Law

       80 percent of Federal unemployment tax revenue is credited 
     to the Employment Security Administration Account (ESAA) of 
     the Unemployment Trust Fund. Up to 95 percent of these funds 
     may be appropriated annually for grants to States for program 
     administration. The distribution of the appropriation among 
     the States is determined by the U.S. Secretary of Labor based 
     on each State's expected caseload and its agency's cost 
     structure. At the end of each fiscal year, ESAA funds in 
     excess of 40 percent of the prior year's appropriation are 
     transferred to other accounts.


                               House Bill

       ESAA funds up to $100 million that would otherwise be 
     transferred to other accounts at the end of a fiscal year 
     will instead be made available to each State in the same 
     proportion as the State's share of funds appropriated for 
     administration for that fiscal year. Excess ESAA funds 
     greater than $100 million will be transferred to FUA without 
     regard to that account's ceiling. This provision applies for 
     Fiscal Year 1999, Fiscal Year 2000, and Fiscal Year 2001.


                            Senate Amendment

       Same as House.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment.
     30. Interest-free advances to state accounts in unemployment 
         trust fund restricted to states which meet funding goals


                              Current Law

       Each State decides how to fund benefit payments and the 
     extent to which reserves are accumulated to meet future 
     obligations. States that borrow Federal funds to pay benefits 
     receive interest-bearing repayable loans.


                               House Bill

       A ``funding goal'' is established as the average annual 
     benefit payment during the 3-year period within the past 20 
     years when benefit payments were the largest. A State must 
     meet this funding goal to be eligible for interest-free 
     advances of Federal funds to its Unemployment Trust Fund 
     benefit account.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill, with the 
     modification that the Secretary is to establish appropriate 
     funding goals for States.
     31. Exemption of service performed by election workers from 
         the Federal unemployment tax


                              Current Law

       Federal law requires States to cover most jobs in State and 
     local governments. Certain exceptions to coverage are 
     allowed, but election workers are not identified as an 
     excepted group.


                               House Bill

       An election official or election worker could be excluded 
     from coverage if the individual's calendar-year pay as an 
     election official or election worker is less than $1,000.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.
     32. Treatment of certain services performed by inmates


                              Current Law

       Although Federal law requires States to cover most jobs in 
     State and local governments, an exception is allowed for 
     services performed for a governmental agency by inmates of 
     custodial or penal institutions. However, wages earned by 
     inmates in private-sector jobs may still be covered under the 
     broad coverage requirement that applies to private 
     employment.


                               House Bill

       The definition of private-sector employment subject to 
     coverage would exclude service performed by an inmate of a 
     penal institution. This exclusion would apply for service 
     performed after March 26, 1996.


                            Senate Amendment

       Same as House.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment, with the modification that the exclusion 
     would apply for service performed after January 1, 1994.
     33. Exemption of service performed for an elementary or 
         secondary school operated primarily for religious 
         purposes from the Federal unemployment tax


                              Current Law

       Although States are required to cover most jobs in 
     nonprofit organizations, an exception is allowed for 
     employment subject to supervision or control by a church or 
     association of churches.


                               House Bill

       The exception for jobs under church control is broadened to 
     include employment in an elementary or secondary school 
     operated primarily for religious purposes (including 
     religious schools operated by lay boards).


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.
     34. State program integrity activities for unemployment 
         compensation


                              Current Law

       States receive Federal grants for program administration. 
     While funds have sometimes been designated for certain 
     activities, generally States have authority to use their 
     grants as they choose for program administration.


                               House Bill

       Appropriations for ``program integrity activities'' are 
     authorized in the following amounts:


[[Page H6273]]




                                                                Million
Fiscal year:
  1998..............................................................$89
  1999...............................................................91
  2000...............................................................93
  2001...............................................................96
  2002...............................................................98

       Program integrity activities are initial claims review, 
     eligibility review, benefit payments control, and employer 
     liability auditing activities.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the House bill.

                       VI. Technical Corrections

       Note: Provisions of the House-passed Technical Corrections 
     Act (H.R. 1048) are identical to those of the Senate-passed 
     Technical Corrections Act (Subtitle M of Title V of S. 947) 
     except the items noted below.
     35. Inadvertent references to Internal Revenue Code


                              Current Law

       No provision.


                               House Bill

       Strikes one paragraph (number 7) of Sec. 110(l) of P.L. 
     104-193, which made an inadvertent change in the Internal 
     Revenue Code.


                            Senate Amendment

       Strikes additional paragraphs (numbers 1, 4, and 5) which 
     made inadvertent or obsolete changes in the Internal Revenue 
     Code.


                          Conference Agreement

       The conference agreement follows the Senate amendment.
     36. Expenditures to be excluded from historic state 
         expenditures


                              Current Law

       No provision.


                               House Bill

       Clarifies that State funds spent as a condition of 
     receiving other Federal funds may not count toward the State 
     maintenance of effort requirement; also makes a minor wording 
     change to ensure that State spending on JOBS is included in 
     the maintenance-of-effort baseline (historic State 
     expenditures).


                            Senate Amendment

       Makes this change in conforming amendments to the welfare-
     to-work block grant (see item 1 above). Language is the same 
     as that in the Ways and Means welfare-to-work provision.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment.
     37. Correction of references


                              Current Law

       No provision.


                               House Bill

       No provision.


                            Senate Amendment

       Strikes ``amendment made by section 2103 of the Personal 
     Responsibility and Work Opportunity'' and inserts 
     ``amendments made by section 103 of the Personal 
     Responsibility and Work Opportunity Reconciliation.''


                          Conference Agreement

       The conference agreement follows the Senate amendment.
     38. Technical correction pertaining to Social Security


                              Current Law

       The two technical changes made in this section pertain to 
     the definition of ``qualified organization'' that may serve 
     as a representative payee, ``final adjudication'' as it 
     applies to drug addicts and alcoholics, and cost-of-living 
     increases as they apply to Social Security benefits.


                               House Bill

       Makes minor changes in wording to improve clarity.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the Senate amendment with 
     the modification that only the provisions of subtitle B of H. 
     R. 1048 affecting title II of the Social Security Act are 
     deleted.
       The provisions of Public Law 104-121 denying Social 
     Security and Supplemental Security Income disability benefits 
     to drug addicts and alcoholics used identical language in 
     pegging the effective dates to the ``final adjudication'' of 
     an individual's claim. Those provisions warrant 
     clarification, since at least one court has already reached 
     conclusions regarding their meaning that are contrary to the 
     intent of Congress. The conference agreement includes 
     language clarifying the effective date of the Supplemental 
     Security Income provision only; it does not include 
     parallel language clarifying the effective date of the 
     Social Security provision due only to procedural 
     considerations in the Senate regarding reconciliation 
     bills.
     39. Timing of delivery of October 2000 SSI benefit payments


                              Current Law

       Section 708 of the Social Security Act provides that 
     benefits for a month are paid in the preceding month if the 
     regular pay date falls on a Saturday, Sunday, or Federal 
     holiday. Since the regular pay date for October 2000 (October 
     1) falls on a Sunday, the check for that month, under current 
     law, would be delivered on Friday, September 29, 2000. As a 
     result, 13 months of SSI benefits would be paid in FY 1999.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement includes the technical 
     modification that the date of delivery of SSI benefits in 
     October 2000 will be October 2, 2000. It is the intention of 
     conferees to return to this issue and work with the Social 
     Security Administration to minimize any possible difficulties 
     recipients might experience as a result of this change.
     40. Clarification of the Contingency Fund


                              Current Law

       States that have high unemployment (at least 6.5 percent 
     and up 10 percent or more from the comparable period in at 
     least one of the two preceding years) or a substantial 
     increase in food stamp recipients (10 percent above same 
     period of Fiscal Year 1994 or Fiscal Year 1995, assuming the 
     new law had been in effect throughout Fiscal Year 1994) are 
     entitled to matching grants out of a contingency fund, 
     provided their State spending under the TANF program exceeds 
     100 percent of its `historic' level. Historic spending level 
     is Fiscal Year 1994 State spending on AFDC, JOBS, Emergency 
     Assistance, and AFDC-related child care. Monthly payments 
     from the contingency fund cannot exceed \1/12\th of 20 
     percent of the State TANF grant.
       House Bill
       The contingency fund operates in two stages: (1) States get 
     an advance payment of \1/12\th of 20 percent of their block 
     grant every month that they meet the trigger and then for 1 
     month after they no longer meet the trigger; and (2) an 
     annual reconciliation is performed in which States are 
     required to remit money they did not deserve, usually because 
     either they did not achieve the 100 percent maintenance of 
     effort requirement or they financed more of the extra 
     spending from contingency fund advances than they should 
     have. The primary change is how the annual reconciliation is 
     conducted. Generally, countable expenditures are subtracted 
     from historic State expenditures to compute a new measure 
     called reimbursable expenditures. Countable expenditures are 
     defined as qualified State expenditures (as defined in the 
     Act) under the TANF program (minus spending on child care) 
     plus expenditures made by States from contingency fund 
     monthly advances. Historic State expenditures are the same as 
     under the Act except that spending on AFDC-related child care 
     is not counted. The amount to which States are entitled under 
     the contingency fund equals reimbursable expenditures times 
     the State Medicaid match rate times the number of months in 
     the year during which States were eligible divided by 12. 
     This formula provides States with a Federal match on the 
     amount of money they spent under the TANF program out of 
     State funds that exceed the State's historic State 
     expenditures prorated for the number of months during the 
     year the State was eligible for contingency payments. This 
     section also contains a slight modification of language to 
     clarify that the Medicaid matching rate formula itself, and 
     not the values for each State produced by the formula, is 
     maintained as it existed on September 30, 1995.
       The amendment retains the policy of only counting State 
     expenditures made under the TANF program toward meeting 
     contingency fund spending requirements. It would permit 
     States to count only the portion of qualified State 
     expenditures made under the TANF program, and hence under the 
     rules that apply to State expenditures under TANF, toward 
     meeting contingency fund maintenance of effort and matching 
     requirements.


                            Senate Amendment

       Same as House.


                          Conference Agreement

       The conference agreement follows the identical provisions 
     in the House bill and the Senate amendment.

                           VII. MISCELLANEOUS

     41. Increase in the public debt limit


                              Current Law

       The current statutory limit on the public debt is $5.5 
     trillion.


                               House Bill

       The statutory limit would be increased to $5.950 trillion. 
     This is sufficient debt authority until December 15, 1999.


                            Senate Amendment

       Same as House.


                          Conference Agreement

       The conference agreement follows the House bill and the 
     Senate amendment.
     42. Administration by non-governmental entity


                              Current Law

       P.L. 104-193 allows States to ``administer and provide 
     services'' under TANF, food stamps, and Medicaid through 
     contracts with charitable, religious, or private 
     organizations. However, basic provisions of food stamp and 
     Medicaid law effectively require that eligibility be 
     determined by a public official. Some elements of eligibility 
     for the Special Supplemental Nutrition Program of Women, 
     Infants, and Children (WIC) also must be determined by a 
     public official.


                               House Bill

       The House bill allows determinations of

[[Page H6274]]

     food stamp eligibility and Medicaid eligibility to be made by 
     an entity that is not a State or local government, or by a 
     person who is not an employee of a State or local government, 
     that meets qualifications set by the State. The House bill 
     provides that for purposes of any Federal law, these 
     eligibility determinations shall be considered to be made 
     by the State and by a State agency. The House bill 
     stipulates that these provisions shall not be construed to 
     affect eligibility conditions, the rights to challenge 
     eligibility determinations or benefit rights, and 
     determinations regarding quality control or error rates.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement follows the Senate amendment (no 
     provision).
     43. Earned income credit mandatory appropriation


                              Current Law

       No provision.


                               House Bill

       No provision.


                            Senate Amendment

       No provision.


                          Conference Agreement

       The conference agreement specifies that, out of any funds 
     in the Treasury not otherwise appropriated, there is 
     appropriated to the Internal Revenue Service for Earned 
     Income Credit enforcement, in addition to other amounts for 
     this purpose, the following amounts: $138 million in FY 1998, 
     $143 million in FY 1999, $144 million in FY 2000, $145 
     million in FY 2001, and $146 million in FY 2002.

                         STATEMENT OF MANAGERS

 Subconference on Student Loans/Other (#8) Balanced Budget Act of 1997 
                          (H.R. 2015/ S. 947)

                      Subtitle B--Higher Education


                   RECALL OF GUARANTY AGENCY RESERVES

       Note #1.


                               House bill

       The House bill requires the return of $1,000,000,000 in 
     guaranty agency reserve funds.


                            Senate amendment

       The Senate amendment requires the return of $1,028,000,000 
     in guaranty agency reserve funds and defines reserve funds as 
     any reserve funds held by or under the control of any other 
     entity.


                          Conference agreement

       The Senate recedes.
       Note #2.


                               House bill

       The House bill uses the term ``required share'' to describe 
     each guaranty agency's share of recalled reserve funds.


                            Senate amendment

       The Senate amendment uses the term ``equitable share'' to 
     describe each guaranty agency's share of recalled reserve 
     funds.


                          Conference agreement

       The Senate recedes.
       Note #3.


                               House bill

       The House bill allows for accounting adjustments approved 
     by the Secretary in determining reserve ratios and ties the 
     outstanding insurance obligations to September 30, 1996.


                            Senate amendment

       The Senate amendment defines reserve funds as including 
     funds held by, or under the control of, any other entity.


                          Conference agreement

       The Senate recedes with an amendment adding at the end of 
     the subparagraph ``including amounts of outstanding loans 
     transferred to the guaranty agency from another guaranty 
     agency.''
       Note #4.


                               House bill

       The House bill includes all funds in excess of a 2-percent 
     reserve ratio in an agency's required share.


                            Senate amendment

       The Senate amendment includes all funds in excess of a 
     1.12-percent reserve ratio in an agency's equitable share.


                          Conference agreement

       The Senate recedes with an amendment. The compromise 
     amendment includes a three step formula for calculating the 
     required share for each guaranty agency. In step one, all 
     funds in excess of a 2-percent reserve ratio will be included 
     in an agency's required share. In step two, the total amount 
     recalled under step one shall be subtracted from the total 
     amount to be recalled under this part and the difference 
     shall be calculated as a percentage of total remaining 
     reserves. Each agency will then include this percentage of 
     its remaining reserves in its required share with the 
     exception that no agency will be required to reduce its 
     reserve ratio below .58%. If an additional amount is required 
     to meet the total recall, a third calculation shall be 
     employed. The remaining amount required to meet the total 
     recall after steps one and two shall be calculated as a 
     percentage of the total reserves above .58% of all agencies 
     with reserve levels above .58%. This percentage shall, in 
     turn, be multiplied by each agency's remaining reserves over 
     a .58% level. This additional amount shall be included within 
     the agency's required share. If any agency fails to transfer 
     its required share to its restricted account, the Secretary 
     will attempt to obtain the shortage from the agency which 
     fails to make the required payment. If, on September 1, 2002, 
     after collecting funds from agencies which have failed to 
     make required payments, the Secretary determines that the 
     total amount within the restricted accounts is less than the 
     amount required, the Secretary shall require the return of 
     the amount of the shortage from other reserve funds held by 
     guaranty agencies.
       Note #5.


                               House bill

       The House bill uses the term ``required shares.''


                            Senate amendment

       The Senate amendment uses the term ``equitable shares.''


                          Conference agreement

       The Senate recedes.
       Note #6.
       6a.


                               House bill

       The House bill requires five equal annual installments to 
     the restricted accounts, except that a guaranty agency with a 
     reserve ratio under 1.10-percent may make four equal annual 
     installments beginning in 1999 or in accordance with an 
     agreement with the Secretary.


                            Senate amendment

       The Senate amendment provides that the transfer to the 
     restricted accounts in the first year is based on all 
     agencies combined transferring 20 percent. All amounts in 
     excess of a 2-percent reserve ratio would first be 
     transferred and, then, equal percentages would come from each 
     agency. In 1999 through 2002, each agency must transfer 25 
     percent of its remaining equitable share.


                          Conference agreement

       The Senate recedes with an amendment incorporating the 
     compromise formula. (See note #4.)
       6b.


                               House bill

       The House bill allows guaranty agencies to use earnings on 
     the restricted account for operational expenses.


                            Senate amendment

       The Senate amendment allows guaranty agencies to use 
     earnings on the restricted account for activities to reduce 
     student loan defaults.


                          Conference agreement

       The House recedes with an amendment defining default 
     reduction activities as activities to reduce student loan 
     defaults that improve, strengthen and expand default 
     prevention activities. It is the intent of the conferees that 
     guaranty agencies use the earnings on the restricted account 
     to improve and strengthen current default prevention 
     activities as well as to expand these activities.
       Note #7.


                               House bill

       The House bill gives the Secretary the authority to 
     withhold funds if a guaranty agency fails to comply with this 
     part, prohibits the Secretary from requiring the return of 
     excess reserves under subsection (g)(1)(A) and requires that 
     any reserve funds returned under (g)(1)(B) or (g)(1)(C) will 
     be placed in the restricted accounts and returned to the 
     Treasury in 2002.


                            Senate amendment

       The Senate amendment has no comparable provision dealing 
     with the withholding of funds but does prohibit the Secretary 
     from requiring the return of excess reserves under subsection 
     (g)(1)(A) and requires that any reserve funds returned under 
     (g)(1)(B) or (g)(1)(C) will be placed in the restricted 
     accounts and returned to the Treasury in the year 2002.


                          Conference agreement

       The Senate recedes with an amendment clarifying that a 
     guaranty agency which has not transferred its required share 
     to a restricted account may not receive any other funds under 
     Part B of Title IV until the Secretary determines the agency 
     is in compliance. The Secretary may waive this provision due 
     to extenuating circumstances beyond the control of the 
     agency.
       In addition, the amendment clarifies that reserve amounts 
     returned to the Secretary under section 422(g)(1)(B) will 
     first be applied to the agency's total required share. 
     Amounts recalled to the Secretary in excess of the required 
     share will be returned to the Treasury. Reserve amounts 
     recalled by the Secretary under section 422(g)(1)(C) will 
     first be used to satisfy the agency's next installment 
     required under the recall formula. Amounts recalled in excess 
     of this amount will be returned to the Treasury.
       Note #8.


                               House bill

       The House bill refers to cash reserve funds when defining 
     reserve funds.


                            Senate amendment

       The Senate amendment refers to reserve funds without 
     specifically mentioning cash.


                          Conference agreement

       The Senate recedes with an amendment including both cash 
     and ``liquid assets'' in the definition of ``reserve funds.''
       Note #9


                               House bill

       The House bill provides that funds under Section 458 may be 
     used for administrative costs under Part B.

[[Page H6275]]

                            Senate amendment

       The Senate amendment does not mention Part B.


                          Conference agreement

       The Senate recedes.
       Note #10.


                               House bill

       The House bill includes a provision which clarifies the 
     amounts that may be retained by guaranty agencies when 
     defaulted loans are collected through consolidation. Under 
     the House provision, guaranty agencies may retain 18.5 
     percent plus the reinsurance complement in effect for all 
     such loans consolidated on or after July 1, 1997. For 
     defaulted loans consolidated prior to that date, guaranty 
     agencies which have retained 18.5 percent are allowed to 
     retain only 18.5 percent, and agencies which have been 
     retaining 27 percent plus the reinsurance complement are 
     allowed to retain 27 percent plus the reinsurance complement.


                            Senate amendment

       The Senate amendment has no comparable provision.


                          Conference agreement

       The House recedes. This agreement to remove this provision 
     is not an endorsement or rejection of any particular position 
     on the collection retention issue. Rather, it represents the 
     conferees' agreement that this policy issue should be 
     addressed during the reauthorization process where it can be 
     given full and thorough consideration. In recognition of that 
     agreement, five of the six conferees will be asking that the 
     Department defer further attempts to collect amounts in 
     dispute with respect to these particular loans for a period 
     of one year or until the Higher Education Act is 
     reauthorized, whichever occurs first. It is the conferees' 
     understanding that the Department has issued final 
     regulations on this issue which went into effect on July 1, 
     1997. The conferees fully expect that guaranty agencies will 
     comply with those regulations for loans consolidated on or 
     after that date until Congress has the opportunity to act on 
     this issue.

           Subtitle C--Smith-Hughes Vocational Education Act


                 SMITH-HUGHES VOCATIONAL EDUCATION ACT

       Note #11


                               House bill

       The House bill repeals the Smith-Hughes Vocational 
     Education Act.


                            Senate amendment

       The Senate amendment has no comparable provision.


                          Conference agreement

       The Senate recedes.

   Subtitle D--Expansion of Portability and Health Insurance Coverage


                               House bill

       The House bill amends the Employee Retirement Income 
     Security Act (ERISA) to establish a certification procedure 
     for Association Health Plans (AHPs) in order to promote 
     multiple employer pooling, particularly among small 
     businesses, so as to expand health insurance coverage for the 
     employees of such businesses and their families. In general, 
     bona fide associations, multiemployer plans, franchise 
     networks, and certain other entities meeting financial, 
     reporting, fiduciary and solvency requirements would be able 
     to offer self-insured coverage as well as fully-insured 
     coverage options. The bill also clarifies the status of 
     single employer, multiemployer and other collectively-
     bargained plans with respect to the application of the 
     preemption provisions of section 514 of ERISA. The bill 
     amends ERISA's enforcement sections to provide federal cease 
     and desist authority to shut down fraudulent health insurance 
     operations and to provide for criminal penalties for certain 
     willful misrepresentations by such entities.


                            Senate amendment

       The Senate amendment has no comparable provision.


                          Conference agreement

       The House recedes.

          Section-by-Section Analysis of Conference Agreement

                      Subtitle B--Higher Education

     Section 6101. Management and Recovery of Reserves
       This section describes section 422 of the Higher Education 
     Act of 1965 as proposed to be added to or amended by the 
     conference agreement. Unless otherwise noted, all section and 
     paragraph references are to the Balanced Budget Act of 1997.
       Required shares
       The conference agreement requires that the guaranty 
     agencies return one billion dollars of their current excess 
     cash reserves to the Federal Treasury in Fiscal Year 2002. 
     The Secretary shall require each guaranty agency to return 
     excess reserve funds based on each agency's required share. 
     This share will be calculated based upon the excess reserve 
     funds held by the agency as of September 30, 1996. For the 
     sole purpose of determining each agency's required share, the 
     calculation of the reserve ratio will include transfers of 
     the liabilities to each agency of the outstanding loans from 
     merged agencies as well as transfers of the reserves from the 
     merged agencies. Once the reserve ratios are determined for 
     each agency, their required shares will be calculated in 
     accordance with a three-step formula.
       In step one, all funds in excess of a 2-percent reserve 
     ratio will be included in an agency's required share. In step 
     two, the total amount recalled under step one shall be 
     subtracted from the total amount to be returned under the 
     recall ($1 billion) and the difference shall be calculated as 
     a percentage of the total remaining reserves. Each agency 
     will then include this percentage of its remaining reserves 
     in its required share with the exception that no agency will 
     be required to reduce its reserve ratio below .58%. Such 
     guarantors will pay their share up until the point where 
     their reserve level is .58%.
       If an additional amount is required to meet the $1 billion 
     recall, a third calculation shall be made. The remaining 
     amount required to meet the $1 billion recall after steps one 
     and two shall be calculated as a percentage of the reserves 
     above .58% of all agencies with reserve levels above .58%. 
     This percentage shall, in turn, be multiplied by each 
     agency's remaining reserves over a .58% level. This 
     additional amount shall be included within each agency's 
     required share.
       The formula approved by the conferees meets the goals of 
     the bipartisan budget agreement without jeopardizing the 
     viability of guaranty agencies with low reserve levels. This 
     step was necessary to ensure that students participating in 
     the Federal Family Education Loan Program would continue to 
     be able to access loans and services without disruption. The 
     conferees deferred consideration of all proposals to 
     restructure the FFELP program until they could be reviewed in 
     the context of reauthorization of the Higher Education Act.
       Restricted accounts
       Each agency shall establish a restricted account of its own 
     choosing with approval from the Secretary. Each agency shall, 
     consistent with current law, invest the reserves placed 
     within the restricted accounts in obligations issued or 
     guaranteed by the United States or in other similarly low-
     risk securities. A guaranty agency may use the earnings from 
     these funds to improve and strengthen current default 
     reduction activities as well as to initiate new default 
     reducation activities. Authorized activities include, but are 
     not limited to, partial loan cancellation programs, debt 
     management counseling programs, placement counseling 
     programs, and development of public service announcements.
       Orderly recall
       Paragraph (4) establishes a timetable for the orderly 
     recall of the $1 billion in excess guaranty agency reserves 
     over the next five years. In each of fiscal years 1998-2002, 
     each guaranty agency that has a reserve ratio in excess of 
     1.10 percent must transfer its required share into its 
     restricted account in five equal annual installments. Each 
     agency with a reserve ratio equal to or less than 1.10 
     percent may transfer its required share into its restricted 
     account in four equal payments beginning in fiscal year 1999. 
     A guaranty agency may also transfer its required share in 
     accordance with an alternate payment schedule approved by the 
     Secretary of Education.
       Shortage
       Paragraph (5) provides that if, on September 1, 2002, any 
     agency has failed to transfer all of its required share to 
     its restricted account, the Secretary will attempt to obtain 
     the shortage from the agency which fails to make the full 
     required payment. If, on September 1, 2002, after collecting 
     funds from agencies which have failed to make required 
     payments, the Secretary determines that the total amount 
     within the restricted accounts is less than the amount 
     required, the Secretary shall require the return of the 
     amount of the shortage from other reserve funds held by 
     guaranty agencies.
       Enforcement
       Paragraph (6) provides that the Secretary of Education may 
     take reasonable measures to ensure that guaranty agencies 
     comply with the requirements of the subsection. If a guaranty 
     agency fails to transfer a portion of its required share into 
     its restricted account, the agency may not receive any other 
     funds under Part B of Title IV until the agency has made the 
     required transfer of funds. The Secretary may waive this 
     provision in the case of extenuating circumstances.
       Limitations on recall authority
       In order to ensure that sufficient reserve funds will be 
     available to meet the $1 billion recall, paragraph (7) places 
     restrictions on the Secretary's recall authority during the 
     five year period covered by the budget agreement. The 
     Secretary may not recall reserves under 422(g)(1)(A) of the 
     Higher Education Act. Funds recalled to the Secretary under 
     422(g)(1)(B) must first be used to satisfy the agency's 
     required share of reserve funds and deposited in the 
     restricted account established by the agency. Funds recalled 
     to the Secretary in excess of this amount will be deposited 
     in the Treasury. Funds recalled to the Secretary under 
     422(g)(1)(C) shall be used to satisfy the agency's next 
     installment of its required share and deposited in its 
     restricted account. Funds recalled to the Secretary in excess 
     of the amount required for the next annual installment will 
     be deposited in the Treasury.
       Minimum reserve ratio
        Each guaranty agency is required to maintain a minimum 
     reserve level in order to ensure that it will be able to meet 
     its insurance obligations. In 1993, the minimum level

[[Page H6276]]

     was 0.5% of outstanding loans guaranteed by an agency. 
     Between FY 1994 and FY 1996, the minimum level rose to 1.1%. 
     In order to accommodate the reduced reserve ratios that will 
     be produced under the recall formula, Section 428(c)(9)(A) of 
     the Higher Education Act of 1965 is amended to restore the 
     minimum reserve ratio for guaranty agencies to .5%.
     Section 6102. Repeal of the direct lending loan origination 
         payment
       This section describes section 452 of the Higher Education 
     as proposed to be amended by the conference report.
       The authority to make the Federal payment of $10 per loan 
     to schools and/or alternative originators that make direct 
     loans under subsection (b) of section 452 of the Higher 
     Education Act of 1965 is repealed. This repeal extends for 
     five years a provision currently contained within the FY 1997 
     Labor, HHS, Education and Related Agencies Appropriations 
     Bill and provides savings of $160 million over five years.
     Section 6103. Funds for administrative expenses
       Unless otherwise indicated, references are to section 458 
     of the Higher Education Act of 1965, as proposed to be added 
     or amended by the conference report.
       The bipartisan budget agreement preserved a commitment to 
     maintaining two viable student loan programs and called for 
     ``an equitable balance of savings between the direct student 
     loan program and the guaranteed student loan program.'' In 
     order to preserve this balance, $604 million in savings are 
     required from the Department of Education's mandatory account 
     to administer the federal direct lending program, the FFELP 
     program and to pay the administrative cost allowance to 
     guaranty agencies. The Department will receive $3.2 billion 
     for this account over the next five years.
       In accordance with current law, the payment of 
     administrative cost allowances to guaranty agencies is to be 
     provided by the Department of Education from funds available 
     in Section 458. The conference agreement provides that the 
     administrative cost allowance paid to guaranty agencies will 
     be capped at .85% of every new loan. These expenditures are 
     capped at $170 million in each of Fiscal Years 1998 and 1999 
     and $150 million in each of Fiscal Years 2000, 2001, and 
     2002.
     Section 6104. Extension of Student Aid Programs
       This section refers to Title IV of the Higher Education 
     Act, as proposed to be amended by the conference report.
       Section 424(a) is amended to extend the duration of the 
     Federal Loan Insurance program from 1998 to 2002. Section 
     428(a)(5) is amended to extend the duration of the authority 
     to make interest subsidized loans from 1998 until 2002. 
     Section 428C(e) is amended to extend the authority to make 
     consolidation loans from 1998 until 2002. These extensions 
     are required for Congressional Budget Office scoring 
     purposes.
     Subtitle C--Repeal of Smith-Hughes Vocational Education Act
       The Smith-Hughes Act (39 Stat. 929, chapter 114; 20 U.S.C. 
     11 et seq) provides a permanent appropriation for vocational 
     education. Consistent with the Administration's budget 
     request, this program is repealed providing $29 million in 
     savings over 5 years.

                         STATEMENT OF MANAGERS

          TITLE VII--FEDERAL RETIREMENT AND RELATED PROVISIONS

     Increased Contributions to Federal Civilian Retirement Systems


                               house bill

       Sections 6101 and 6102 provide for increased contributions 
     to the Civil Service Retirement System (CSRS) and the Federal 
     Employees Retirement System (FERS), respectively. Agencies 
     will be required to increase their contributions to the CSRS 
     for their employees who participate in the CSRS. Employees 
     participating in either the CSRS or the FERS system will be 
     required to increase their contributions to the system.
       The increase in employee contributions to CSRS and FERS 
     will apply to all individuals participating in these systems.
       The amount deducted from basic pay for an individual 
     participating in CSRS and FERS will be increased above the 
     level in effect on the date of enactment by .25% in 1999, by 
     an additional .15% in 2000, and by an additional .10% in 
     2001. The increase will then remain constant at .5% 
     throughout 2002.
       The bill also requires all federal agencies, except for the 
     United States Postal Service to contribute an additional 
     1.51% each year above the percentage an agency is now 
     contributing for each individual employee participating in 
     CSRS. These additional contributions begin on October 1, 1997 
     and continue through September 30, 2002. The 1.51% increase 
     does not apply to the United States Postal Service, which, 
     with its employees, currently contributes the full actuarial 
     cost of each employee's retirement under CSRS.
       This bill adjusts the amounts employees must repay for any 
     military service or any covered volunteer service between 
     January 1, 1999 and December 31, 2002 for which they would 
     like to receive retirement credit under CSRS and FERS to 
     reflect the increases in employee contributions.
       The bill prohibits employing agencies (including the Postal 
     Service) from reducing their contributions to FERS for each 
     individual employee as a result of the increases in 
     individual contributions contained in the bill. Under current 
     law, agency contributions would automatically decrease with 
     any increase in employee contributions.


                            senate amendment

       The Senate amendment (section 6001) is similar to the House 
     bill in many respects; however, it differs substantively from 
     the House bill in the following ways: (1) it increases agency 
     contributions from October 1, 2001 through September 30, 2002 
     by 1.6% rather than 1.51%; (2) employees in the CSRS-offset 
     program are not covered by the agency contribution; (3) it 
     exempts the Metropolitan Washington Airports Authority and 
     the District of Columbia from increased agency contributions 
     under CSRS; (4) it does not exempt the Postal Service from 
     matching increases in employee contributions; (5) it 
     prohibits reductions in the Postal Service's 30-year 
     amortization payments under the CSRS; (6) it increases 
     employee and agency contributions to the Central Intelligence 
     Agency Retirement and Disability System, the Foreign Service 
     Retirement and Disability System, and the Foreign Service 
     Pension System corresponding to the increases under CSRS and 
     FERS; (7) it provides an effective date of the first day of 
     the first pay period beginning on or after January 1, 1999; 
     and (8) the Senate amendment also delineates the Capitol 
     Police in a table separate from other congressional 
     employees; the House bill does not.


                          conference agreement

       The Conference agreement includes the language of the 
     Senate and House bills with modifications. Under the 
     agreement, the differences are resolved as follows: (1) 
     agency contributions are increased by a uniform 1.51% 
     throughout the five-year period; (2) increased agency 
     contributions are required for CSRS-offset employees; (3) the 
     Metropolitan Washington Airports Authority by law provides 
     full funding for its employees and thus is exempted from the 
     increased agency contributions; but the District of Columbia 
     is not provided a special exemption; (4) the Postal Service 
     is not required to match the increases in employee 
     contributions; (5) both the Postal Service and Treasury are 
     prohibited from reducing payments required under 5 U.S.C. 
     Sec. Sec. 8348 and 8423 as a result of the increases in 
     employee contributions; (6) employee and agency contributions 
     to the Central Intelligence Agency Retirement and Disability 
     System, the Foreign Service Retirement and Disability System, 
     and the Foreign Service Pension System are increased to 
     correspond to the increases under CSRS and FERS; (7) the 
     effective date adopted is October 1, 1997, with a special 
     rule to cover a later date of enactment.

              Government Contribution for Health Benefits


                               house bill

       Section 6103 amends 5 U.S.C. Sec. 8906 to establish a 
     permanent formula for computing the government's share of 
     premiums for self alone and self and family enrollments under 
     the Federal Employees Health Benefits Program (FEHBP). Under 
     this formula, the government's contribution will be based 
     upon 72% of the weighted average of the subscription charges 
     for self alone enrollments for all options of all plans 
     participating in the FEHBP. A similar calculation for self 
     and family enrollments will be performed. Current law 
     regarding part-time employees and the prohibition against 
     payment of more than 75% of any premium are retained. The 
     Office of Personnel Management (Office) is required to 
     determine, not later than October 1 of each year, the 
     weighted average of the subscription charges that will be in 
     effect during the following contract year by weighting the 
     subscription charges of each option of each plan by the 
     actual distribution of enrollees entitled to a government 
     contribution as of March 31 of the year in which the 
     determination is being made. (This assumes the Office will 
     continue to produce and make publicly available the 
     enrollment reports semi-annually; the enrollment used in 
     weighting includes all individuals who are eligible to 
     receive a contribution, including active Postal Service 
     employees, in participating plans that will be continuing 
     in the FEHBP during the contract year to which the 
     weighted average applies; and that the Office will perform 
     a straightforward mathematical calculation based on the 
     actual number of enrollees.) The bill allows for 
     ministerial actions the Office may deem necessary to take 
     before the effective date in order to ensure timely 
     implementation of this provision. This section is 
     effective on the first day of the contract year that 
     begins in 1999.


                            senate amendment

       The Senate amendment (section 6002) is almost identical to 
     the House bill.


                          conference agreement

       The House recedes to the Senate.

  Repeal of Transitional Appropriations for the United States Postal 
                                Service


                               house bill

       Section 6001 eliminates the authorization for 
     appropriations to the U.S. Postal Service for reimbursement 
     for workers' compensation liabilities incurred by the former 
     Post Office Department. The elimination of this funding will 
     result in the Postal Service assuming the liabilities for 
     this payment to the Employee Compensation Fund, within the 
     Department of Labor, providing payments made to employees of 
     the former Post Office Department.
       Under the existing framework, the Department of Labor 
     assesses the U.S. Postal Service for claims to both its 
     employees and

[[Page H6277]]

     those of the former Post Office Department. The U.S. Postal 
     Service pays for its own employees and requests funding from 
     Congress for the amount attributable to former Post Office 
     Department employees.
       The bill removes the federal government and Congress from 
     the process and directs that employees of the Post Office 
     Department be treated the same as the current employees of 
     the U.S. Postal Service for purposes of the Employee 
     Compensation Fund.
       This section of the House bill is effective on October 1, 
     1997 or, if later, the date of enactment. Under a special 
     rule, if any payment for workers' compensation liabilities 
     incurred by the former Post Office Department is made to the 
     Postal Service Fund pursuant to an appropriation for fiscal 
     year 1998, an equal amount shall be paid from Fund into the 
     Treasury as miscellaneous receipts before October 1, 1998.


                            senate amendment

       The Senate amendment (section 6003) is the same as the 
     House bill but does not contain the special rule governing 
     payments under fiscal year 1998 appropriations.


                          conference agreement

       The Senate agrees to adopt the special rule as provided in 
     the House bill.

Medicare Means Testing Standard Applicable to Senators' Health Coverage 
                            Under the FEHBP


                               house bill

       The House bill contains no provision on this subject.


                            senate amendment

       The Senate amendment (section 6004) eliminates the 
     government contribution to the FEHBP on behalf of Senators. 
     Senators will be required to make both the individual and 
     government contributions in order to participate in the 
     FEHBP.


                          conference agreement

       The Senate recedes to the House.

                     TITLE VIII--VETERANS' PROGRAMS

             Subtitle A--Extension of Expiring Authorities

                   Enhanced Loan Asset Sale Authority


                              Current Law

       Section 3720(h) of title 38, United States Code, authorizes 
     VA to guarantee the timely payment of principal and interest 
     to purchasers of real mortgage investment conduits (REMICs). 
     REMICs are used to ``bundle'' and market vendee loan notes. 
     Such notes are made on direct loans made by VA to purchasers 
     of VA-acquired real estate. Using this authority, VA 
     guarantees to REMIC purchasers that principal and interest 
     will be paid in a timely manner which in turn, enhances the 
     value of the REMICs in the secondary market and increases the 
     return to VA when such securities are sold. This provision 
     expires on December 31, 1997.


                               House Bill

       Section 8018 would extend VA's authority to market REMICs 
     through September 30, 2002.


                            Senate Amendment

       Section 8011 would extend VA's authority to market REMICs 
     through December 31, 2002.


                          Compromise Agreement

       Section 8011 follows the Senate Amendment.

                             Home Loan Fees


                              Current Law

       Section 3729 of title 38, United States Code, specifies 
     that borrowers who obtain VA-guaranteed, insured or direct 
     home loans will pay a fee. For first loans, the fees range 
     from 0.5 percent to 2 percent, depending on the amount of 
     down payment and the type of military or naval service 
     (active duty or reserve). Public Law 103-66, the Omnibus 
     Budget Reconciliation Act of 1993 (OBRA '93), added section 
     3729(a)(4) of title 38, United States Code, to require a 
     surcharge of .75 percent for all first-use loans. This 
     provision expires on October 1, 1998.
       There is no limitation to the number of times a veteran may 
     use the VA home loan program. Section 3729 of title 38, 
     United States Code, requires a 3 percent fee for all second 
     and subsequent home loans with less than a 5 percent down 
     payment. This provision expires on October 1, 1998.


                               House Bill

       Section 8016 would extend the surcharge provision to 
     October 1, 2002, and extend VA's authority to charge the 3 
     percent fee for second and subsequent use of the home loan 
     program to October 1, 2002.


                            Senate Amendment

       Section 8012 contains a substantially identical provision.


                          Compromise Agreement

       Section 8012 follows the Senate Amendment.

  Procedures Applicable to Liquidation Sales on Defaulted Home Loans 
            Guaranteed by the Department of Veterans Affairs


                              Current Law

       Section 3732 of title 38, United States Code, specifies 
     that VA has two options when a property, the financing of 
     which is guaranteed under the VA Home Loan Guaranty Program, 
     goes into foreclosure. VA may simply pay off the guaranty, or 
     elect to purchase the property securing the loan in default 
     and resell it. The decision on the course of action to take 
     depends, generally, on VA calculations as to which action 
     would be less costly and, therefore, more advantageous to the 
     government. The Secretary's authority to use ``no-bid'' 
     procedures, by which VA determines which option is more 
     advantageous, expires on October 1, 1998.


                               House Bill

       Section 8017 would extend VA's authority to use the 
     alternative ``no-bid'' formula to October 1, 2002.


                            Senate Amendment

       Section 8013 contains an identical provision.


                          Compromise Agreement

       Section 8013 contains this provision.

                     Income Verification Authority


                              Current Law

       VA administers a needs-based pension program and provides 
     priority access to health care services on a means-tested 
     basis. Section 5317 of title 38, United States Code, and 
     section 6103 of the Internal Revenue Code of 1986, authorize 
     VA to verify the eligibility of recipients of, or applicants 
     for, VA needs-based benefits and VA means-tested medical care 
     by gaining access to income records of the Department of 
     Health and Human Services/Social Security Administration and 
     the Internal Revenue Service. These provisions were 
     originally enacted as section 8051 of Public Law 101-508, the 
     Omnibus Budget Reconciliation Act of 1990 (OBRA '90), and 
     extended by section 12004 or OBRA '93 to September 30, 1998.


                               House Bill

       Section 8014 would extend VA's authority to verify this 
     data under section 5317(g) of title 38, United States Code, 
     through September 30, 2002. Section 8014 would also extend 
     VA's authority to verify this data under section 6103(l)(7) 
     of the Internal Revenue Code of 1986, through September 30, 
     2002.


                            Senate Amendment

       Section 8014 would extend VA's authority to verify this 
     data under section 5317(g) of title 38, United States Code, 
     through September 30, 2002.


                          Compromise Agreement

       Section 8014 follows the Senate Amendment.

   Limitation of Pension for Certain Recipients of Medicaid-Covered 
                           Nursing Home Care


                              Current Law

       Section 5503(f) of title 38, United States Code, limits to 
     $90 per month the maximum amount of VA pension that may be 
     paid to Medicaid-eligible veterans and surviving spouses who 
     have no dependents and who are in nursing homes that 
     participate in Medicaid. The payments may not be use to 
     offset the costs of care. This section treats such 
     individuals as if the care were being furnished at VA 
     expense. This provision was originally enacted as section 
     8003 OBRA '90, and extended by section 12005 of OBRA '93 to 
     September 30, 1998.
       VA pension is a needs-based program that provides a minimum 
     level of income to wartime veterans who are permanently and 
     totally disabled due to non-service-connected causes. The 
     minimum level of income is approximately equal to the poverty 
     level, with additional amounts payable for dependents. 
     Pension payments are offset dollar-for-dollar by any 
     household income and can also be adjusted for unusual medical 
     expenses. Today, the maximum annual rate for a single 
     veteran with no dependents is $8,486.


                               House Bill

       Section 8015 would extend the $90 limitation to September 
     30, 2002.


                            Senate Amendment

       Section 8015 contains an identical provision.


                          Compromise Agreement

       Section 8015 contains this provision.

         Subtitle B--Copayments and Medical Care Cost Recovery

Authority to Require That Certain Veterans Make Copayments in Exchange 
                   for Receiving Health Care Benefits


                              Current Law

       Public Law 99-272 required veterans with incomes exceeding 
     so-called ``category A and B'' means-tests levels to agree to 
     pay copayments as a condition of receiving VA health care. 
     (That law also provided that ``category C'' veterans--
     generally those not eligible for priority access to VA health 
     care services--were only eligible for care to the extent 
     resources and facilities were available.) Public Law 101-508, 
     the Omnibus Budget Reconciliation Act of 1990 (OBRA `90), 
     eliminated the distinction, for purposes of copayments, 
     between veterans in income categories ``B'' and ``C'' and 
     provided that, in addition to the copayments established 
     earlier, veterans in both so-called ``B'' and ``C'' income 
     categories would be required to make per diem payments of $10 
     for VA-provided hospital care and $5 for nursing home care. 
     The per diem payment requirement, which would have expired 
     under OBRA `90 September 30, 1997, was extended through 
     September 30, 1998, by OBRA `93.
       Section 1722A of title 38, United States Code, requires a 
     veteran (other than a veteran who has a service-connected 
     disability rated 50% or greater, or a veteran whose income is 
     at or below the maximum annual rate of VA pension) to pay $2 
     for each 30-day supply of prescription medication furnished 
     on an outpatient basis. Congress, in OBRA `93, extended this 
     provision through September 30, 1998.

[[Page H6278]]

                               House Bill

       Section 8011 would extend these expiring copayment 
     authorities through September 30, 2002.


                            Senate Amendment

       Section 8021 contains a substantially identical provision.


                          Compromise Agreement

       Section 8021 follows the House Bill.

                  Medical Care Cost Recovery Authority


                              Current Law

       Section 1729 of title 38, United States Code, provides 
     ongoing authority for the Department of Veterans Affairs to 
     collect from a third-party payer the reasonable cost of VA-
     furnished care and treatment rendered to a non-service-
     connected veteran. That section of law also authorizes VA to 
     collect from a health care payment plan the reasonable cost 
     of medical care furnished for a non-service-connected 
     disability of a veteran who has a service-connected 
     disability and who, under that health plan, is entitled to 
     care or to payment of the expenses of that care. VA's 
     authority to collect for non-service-connected care furnished 
     to a service-connected veteran was initially established by 
     section 8011 of OBRA `90. Congress, in OBRA `93 extended the 
     expiration date of that provision (which is codified at 
     section 1729(a)(2)(E) of title 38, United States Code) to 
     October 1, 1998.


                               House Bill

       Section 8012 of the bill would extend this date until 
     October 1, 2002.


                            Senate Amendment

       Section 8022 contains an identical provision.


                          Compromise Agreement

       Section 8022 contains this provision.

          Department of Veterans Affairs Medical Care Receipts


                              Current Law

       Section 1729(g) of title 38, United States Code, 
     established in the United States Treasury the Department of 
     Veterans Affairs Medical-Care Cost Recovery Fund (``the 
     Fund''). Copayments and receipts from health care plans and 
     insurance carriers under section 1729 of title 38, United 
     States Code, are deposited in the Fund. VA is authorized to 
     use money deposited in the Fund for payment of necessary 
     expenses for the identification, billing, and collection of 
     the cost of care and services furnished by VA and for the 
     administration and collection of certain payments required 
     by sections 1710 and 1722A of title 38, United States 
     Code. VA is also authorized to use money deposited in the 
     Fund for payment of certain administrative expenses, 
     including reasonable charges for services and utilities 
     furnished by VA, recovery and collection activities under 
     section 1729 of title 38, United States Code, and 
     administration of the Fund. After such withdrawals from 
     the Fund by VA, receipts in the Fund are remitted to the 
     United States Treasury.


                               House Bill

       Section 8013 would establish the Department of Veterans 
     Affairs Medical Care Collections Fund and provide that 
     amounts collected or recovered after September 30, 1997, 
     under specified provisions of chapter 17 and the Federal 
     Medical Care Recovery Act, are to be deposited in that fund. 
     Subject to the provisions of appropriations acts, amounts in 
     that fund are to be available, without fiscal year 
     limitation, only for (1) furnishing VA medical care and 
     services during any fiscal year and (2) for VA expenses for 
     identification, billing, auditing, and collection of amounts 
     owed the government by reason of VA provision of medical care 
     and services.
       Section 8013 also reflects a recognition that, despite the 
     apparent incentives associated with authority (subject to 
     provisions of appropriations acts) for VA to retain 
     collections, factors beyond the Department's control could 
     result in collections falling substantially short of targets 
     during the initital years. The measure, accordingly, would 
     establish a special funding mechanism to address that 
     contingency. It would provide that if, during fiscal year 
     1998, 1999, or 2000, the Secretary of Veterans Affairs 
     (``Secretary'') determines that the total amount to be 
     recovered for that fiscal year will be more than $25 million 
     below the Congressional Budget Office's estimate for that 
     fiscal year, the Secretary shall promptly certify to the 
     Secretary of the Treasury the amount of the estimated 
     shortfall in excess of $25 million. The measure would require 
     the Secretary of the Treasury to deposit that amount in the 
     Medical Care Collections Fund within 30 days of receipt of 
     the VA certification. In the event of such contingency 
     payments from the Treasury, the measure provides for the 
     further contingency that if VA is fact recovered more than 
     the amount certified by the Secretary, VA would pay back into 
     the Treasury the difference between the amount actually 
     recovered and the amount certified. On the other hand, if the 
     actual shortfall exceeded VA's projected shortfall, VA is to 
     certify the amount of that difference to the Treasury, and 
     the Secretary is to deposit such sum in the fund. The measure 
     contains reporting requirements applicable to the contingency 
     funding mechanism, which require quarterly reporting (within 
     45 days after the end of each quarter) as to amounts 
     collected (accounting separately for collections under each 
     of the specified authorities and the amount orginally 
     estimated to be collected for such period).
       Section 8013 would also direct the Secretary to establish a 
     policy for allocation of monies in the Medical Care 
     Collections Fund. That policy would be designed to achieve 
     the maximum possible collections under applicable laws, and 
     to take account of factors beyond VA's control which could 
     impede VA efforts.
       Section 8013 would also require certain reporting 
     requirements, including a report on January 1, 1999, 
     tabulating collections by network, and, if feasible, by 
     facility, and including an analysis of differences among 
     networks in collecting funds, and other relevant information. 
     The Secretary would be required to adjust the policy for 
     allocating monies from the collections fund to take account 
     of differences among networks attributable to the respective 
     markets in which each operates.
       Section 8013 would take effect on October 1, 1997, except 
     that amendments to section 1729 (a)(1) and (c)(2) of title 
     38, United States Code, relating to the determination of 
     amounts subject to recovery under section 1729 of title 38, 
     United States Code, would take effect upon enactment.
       These amendments would allow VA to move away from a cost-
     based medical care recovery system to one that more 
     appropriately resembles market pricing for health care 
     services; the Committee envisions VA would establish health 
     care charges that would allow it to recover amounts needed to 
     help preserve the viability of the health care system for all 
     veterans and that also reflect the substantial advantages to 
     VA patients both in having the quality services provided by 
     that system available and in using them. The amendments 
     reflect the expectation that VA would establish reasonable 
     charges that are responsive to market prices--charges that 
     are not constrained to recovery of costs, but which may yield 
     net revenues. (The concept of ``market price'' here refers to 
     the price for a service that is based on competition in open 
     markets. When a substantial competitive demand exists for a 
     service, its market price normally is determined using 
     commercial practices, such as by reference to prevailing 
     prices and payments in competitive markets for services the 
     same or similar to those provided by the Government.)
       Not later than December 31, 1997, the unobligated balance 
     in the Medical Care Cost Recovery Fund at the close of 
     September 30, 1997, is to be deposited in the Treasury as 
     miscellaneous receipts and that fund terminated at that time.


                            Senate Amendment

       Section 8023 would establish the Department of Veterans 
     Affairs Medical Care Collections Fund and provide that 
     amounts collected or recovered after June 30, 1997, under 
     specified provisions of chapter 17 and the Federal Medical 
     Care Recovery Act, would be doposited in that fund. Not later 
     than December 31, 1997, the unobligated balance in the 
     Medical Care Cost Recovery Fund (which would be terminated by 
     section 8023) would also be deposited in the new fund.
       Subject to the provisons of appropriations acts, amounts in 
     that fund would be available only for (1) furnishing VA 
     medical care and services during any fiscal year and (2) for 
     VA expenses for identification, billing, auditing, and 
     collection of amounts owed the government by reason of VA 
     provision of medical care and services. The provision would 
     direct that the Secretary ensure that the amount made 
     available to a Veterans Integrated Service Network from the 
     fund in a fiscal year be equal to the amount recovered or 
     collected by the Veterans Integrated Service Network.


                          Compromise Agreement

       Section 8023 generally follows section 8013 of the House 
     bill. The compromise agreement, however, incorporates the 
     policy established in the Senate bill of requiring that funds 
     recovered or collected by VA and made available to VA for 
     distribution under the provisions of appropriations acts 
     shall be distributed to the collecting service networks.
       In addition, the compromise agreement adds language 
     anticipating the possibility, contrary to the expectation of 
     the Committees, that less than the entire amount of funds 
     recovered or collected by VA might be made available to VA 
     for distribution under appropriations acts. That language 
     specifies that, in that contingency, (1) all funds received 
     under appropriations acts shall be distributed among the 
     service networks (and more shall be retained by VA 
     headquarters for use for other purposes) and (2) that each 
     network shall receive a percentage of distributed funds equal 
     to that network's percentage of recoveries and collections 
     paid into the fund.
       Further, the compromise agreement strikes language from the 
     Senate bill which refers specifically to VA's current 
     organizational structure of 22 ``Veterans Integrated Service 
     Networks (VISNs),'' and substitutes in place of that language 
     general language referring to the ``designated health care 
     regions of the Department.'' It is the Committees' intention 
     that, under the current organizational structure, all funds 
     recovered or collected and made available to VA under this 
     provision would be distributed to the VISNs. The purpose of 
     this modification is solely to afford VA administrative 
     flexibility to organize its regional structure differently 
     than the current VISN structure, and to assure that, if VA 
     does reorganize that structure, the policies of this 
     provision will be carried out under that reorganized 
     structure.
       The compromise measure would also limit the application of 
     the ``contingency funding'' provision in the House bill to 
     fiscal year 1998.

[[Page H6279]]

       Finally, the managers agree that the language in section 
     (8023(g)) is included in the bill solely for purposes of 
     budget scoring and is not intended to, and does not, limit, 
     in any way the amount available to be appropriated from 
     discretionary funding for VA medical care.

                       Subtitle C--Other Matters

  Rounding Down of Cost-of-Living Adjustments in Compensation and DIC 
                Rates for Fiscal Years 1998 Through 2002


                              Current Law

       Compensation is paid to veterans with service-connected 
     disabilities. Amounts of compensation are based on a rating 
     schedule that uses 10 percent increments from zero percent to 
     100 percent. Calendar year 1997 payments range from $94 for a 
     veteran rated as 10 percent disabled to $1,924 for a 100% 
     disability rating.
       Dependency and Indemnity Compensation (DIC) is paid to 
     survivors of veterans who die from service-connected 
     disabilities. Prior to the passage of Public Law 102-568, 
     payments were based on the rank of the deceased veteran. With 
     the passage of Public Law 102-568, compensation for deaths 
     occurring after January 1, 1993, is paid on a flat-rate 
     basis. With the addition of subsequent cost-of-living 
     adjustments (COLA), that rate is now $794. However, survivors 
     receiving payments in excess of the flat rate were 
     ``grandmothered'' at the higher rates for deaths prior to 
     January 1, 1993. The top rate for these beneficiaries is now 
     $1,774.
       Compensation and DIC payments are not indexed. Congress 
     has, however, enacted legislation which, for a given year, 
     has adjusted compensation and DIC benefits to reflect the 
     percentage of change in the consumer price index (CPI) 
     relative to the prior year. When such a COLA is enacted and 
     new compensation and DIC rates are computed, the prior year's 
     benefit--which is paid in ``round dollar'' amounts--is 
     multiplied by a fraction which expresses the change in the 
     CPI, and the product is then converted to a whole-dollar 
     amount using ``normal'' rounding techniques. That is, if the 
     product of the whole dollar amount multiplied by the CPI is a 
     fractional dollar amount of $0.50 or more, the compensation 
     or DIC payment is rounded up; if it is a fractional amount of 
     $0.49 or less, it is rounded down.


                               House Bill

       Section 8021 would require that any increase authorized in 
     the rates of compensation and DIC during fiscal years 1998-
     2002 could not exceed the percentage increase applied to 
     payments under title II of the Social Security Act. The 
     provision would also require that such increases be rounded 
     down to the next lower whole dollar. For example, based on a 
     projected 2.7 percent increase in the Social Security cost-
     of-living allowance, the current $94 payment for a 10 percent 
     disability would be multiplied by 2.7 percent. The result 
     would be $96.53, which would then be rounded down to $96.


                            Senate Amendment

       Section 8031 contains a substantially identical round down 
     provision.


                          Compromise Agreement

       Section 8031 follows the House Bill.

 Increase in Amount of Home Loan Fees for the Purchase of Repossessed 
             Homes From the Department of Veterans Affairs


                              Current Law

       Section 3729 of title 38, United States Code, specifies 
     that borrowers who obtain VA-guaranteed, insured, or direct 
     home loans will pay a fee. In addition, purchasers of VA-
     owned foreclosed properties pay a fee of 1 percent of the 
     loan amount borrowed from VA to finance the purchase of a VA-
     owned property.


                               House Bill

       Section 8016 would increase, from 1 percent to 2.25 
     percent, the fee paid by purchasers of VA-owned properties.


                            Senate Amendment

       Section 8032 contains a substantially identical provision.


                          Compromise Agreement

       Section 8032 follows the Senate Amendment.

                  Withholding of Payments and Benefits


                              Current Law

       Section 3726 of title 38, United States Code, prohibits the 
     offset of federal payments, other than veterans' or 
     survivors' benefits, to recover losses incurred by VA arising 
     from loans made to, assumed by, or guaranteed or insured on 
     behalf of a veteran or surviving spouse. To offset losses 
     through other federal payments such as salaries or federal 
     tax refunds, the veteran or surviving spouse must consent in 
     writing to the offset, or a court must determine the veteran 
     or surviving spouse is liable.


                               House Bill

       Section 8022 would eliminate the consent and court 
     determination requirements. Prior to referring the debt to 
     another federal agency for offset, such as the IRS, the 
     Secretary would be required to notify the veteran or 
     surviving spouse by certified mail of the process by which 
     the Secretary may waive indebtedness under section 5302(b) of 
     title 38, United States Code. If such a request is filed, the 
     Secretary must determine whether the veteran or surviving 
     spouse is responsible for some or all of the liability 
     incurred by the Secretary, and that decision may be appealed. 
     If the Secretary does not waive the entire amount of the 
     liability, the Secretary must also determine whether the 
     veteran should be released from liability under the 
     provisions of 38 U.S.C. 3713(b) (which authorizes the 
     Secretary to ``look back'' at the time a loan was assumed and 
     decide whether a release of liability would have been issued 
     had the veteran applied for such a release).


                            senate amendment

       Section 8033 contains a substantially identical provision.


                          Compromise Agreement

       Section 8033 follows the Senate Amendment.

                         STATEMENT OF MANAGERS

     TITLE IX--ASSET SALES, USER FEES, AND MISCELLENEOUS PROVISIONS

                     Subtitle A--GSA Property Sales

                   Sale of Governors Island, New York


                               House bill

       Section 7002 of the House bill calls for the General 
     Services Administration, notwithstanding any other provision 
     of law, to sell, at fair market value, no earlier than the 
     fiscal year 2002, Governors Island, New York. This property 
     is currently occupied but being vacated by the Coast Guard. 
     The sale of this 171 acre island, in the New York City 
     harbor, is not subject to laws and regulations that normally 
     apply to the disposal of real property by the Federal 
     Government, including requirements of the National 
     Environmental Policy Act, and the National Historic 
     Preservation Act. It is recognized, however, that State and 
     local environmental and historic preservation laws will 
     protect the property upon sale and during any development of 
     the property. The sale is intended for cash. The language 
     provides the State and City be given the right of first 
     refusal to purchase all or part of Governors Island. Such 
     right may be exercised either by the State, the city, or both 
     acting jointly. Net proceeds from the sale, estimated to 
     generate approximately $500 million, would be deposited in 
     the miscellaneous account of the Treasury.


                            Senate amendment

       The Senate amendment (section 6011) is substantially the 
     same; however, it provides the State and City the right of 
     first offer to purchase as opposed to the right of first 
     refusal to purchase.


                          Conference agreement

       The House recedes to the Senate.

                           Sale of Air Rights


                               House bill

       Section 7003 of the House bill directs the sale of air 
     rights over the train tracks at Union Station, Washington, 
     D.C. These air rights cover approximately 16.5 acres and are 
     bounded by Union Station on the south, 2nd Street NE on the 
     east, K Street NE on the north, and 1st Street NE on the 
     west. The provision would direct the General Services 
     Administration, notwithstanding any other provision of law, 
     to sell these air rights, at fair market value, in a manner 
     to be determined before September 30, 2002. The air rights 
     are a combination of the Department of Transportation (DOT) 
     and AMTRAK air rights. The provision calls for the transfer 
     of AMTRAK air rights to DOT without compensation to AMTRAK, 
     then GSA would sell the air rights.


                            Senate amendment

       The Senate amendment is the same as the House provision.


                          Conference agreement

       The House recedes to the Senate.

                 BUDGET RECONCILIATION CONFERENCE REPORT


Report language to accompany section 9---- (Extension of Higher Vessel 
                            Tonnage Duties)

       Section 9--- of the Senate bill extends through fiscal year 
     2002 the authority to collect the higher vessel tonnage 
     duties first authorized for fiscal year 1991. These higher 
     tonnage duties were to have expired after fiscal year 1998. 
     The statutes amended by this provision originally authorized 
     two vessel tonnage duties: $0.02 per net registered ton for 
     the first five entries a vessel makes into the United States 
     from another port in the Western Hemisphere and $0.06 per net 
     registered ton for the first five entries a vessel makes from 
     outside the Western Hemisphere. In 1991, these duties were 
     increased to $0.09 and $0.27, respectively, through fiscal 
     year 1998. Upon expiration of the temporary higher vessel 
     tonnage duties, the original rates would remain in effect.
       The House provision is similar to the Senate provision.
       The Conference substitute adopts the House provision with a 
     technical amendment.

                   --. Increase Tobacco Excise Taxes

             Sec. 846 of the Senate amendment to H.R. 2014


                              present law

       The following excise taxes are imposed on tobacco products:
       Cigarettes--
       Small cigarettes--24 cents/pack of 20
       Large cigarettes--$25.20/1000
       Cigars--
       Large cigars--12.75% of mfgr. price up to $30/1000
       Small cigars--$2.125/1000
       Cigarette papers--$0.0075/50 papers
       Cigarette tubes--$0.15/50 tubes

[[Page H6280]]

       Chewing tobacco--$0.12/lb.
       Snuff--$0.36/lb.
       Pipe tobacco--$0.675/lb.


                               house bill

       No provision.


                            senate amendment

       No provision in H.R. 2015. However, the Senate amendment to 
     H.R. 2014 increases the small cigarette tax rate by 20 cents 
     per pack of 20 (i.e., to 44 cents per pack), and increases 
     the tax rates on other tobacco products proportionately. The 
     Senate amendment also extends the tax to ``roll-your-own'' 
     cigarette tobacco at $0.66/lb., and includes compliance 
     provisions for untaxed cigarettes destined for export.
       Floor stocks taxes are imposed on cigarettes and other 
     currently taxed tobacco products held for sale on October 1, 
     1997 (including articles held in foreign trade zones).
       Effective date.--October 1, 1997.


                          Conference Agreement

       The conference agreement follows the Senate amendment to 
     H.R. 2014, with modifications. First, the tax rate on small 
     cigarettes is increased by $5 per thousand (10 cents per pack 
     of 20 cigarettes) and the tax rates on other currently taxed 
     tobacco products are increased proportionately beginning on 
     January 1, 2000. On January 1, 2002, the small cigarette tax 
     rate is increased by an additional $2.50 per thousand (5 
     cents per pack) with the tax rates on other currently taxed 
     tobacco products also being increased proportionately at that 
     time. Thus, the aggregate tax increase on small cigarettes is 
     15 cents per pack of 20 cigarettes. The conference agreement 
     imposes tax on ``roll-your-own'' tobacco at the same rate as 
     pipe tobacco.
       Effective date.--The conference agreement is effective on 
     the date of enactment for tobacco products removed after 
     December 31, 1999, and December 31, 2001, respectively. 
     Appropriate floor stocks taxes are imposed on January 1, 
     2000, and on January 1, 2002.

                     TITLE IX--DEPARTMENT OF ENERGY

    Sec. 9303. Lease of Excess Strategic Petroleum Reserve Capacity


                               house bill

       The bill provides for the lease of excess Strategic 
     Petroleum Reserve capacity, subject to certain conditions. 
     The bill provides for the use of funds collected through the 
     leasing to be used for the purchase of oil for the Strategic 
     Petroleum Reserve beginning in fiscal year 2003.


                            senate amendment

       The amendment provides for the lease of excess Strategic 
     Petroleum Reserve capacity. The amendment provides for the 
     use of funds collected through the leasing to be used for the 
     purchase of oil for the Strategic Petroleum Reserve beginning 
     in fiscal year 2008.


                          conference agreement

       The conference agreement includes the House language, with 
     technical changes, except that the conference agreement 
     provides for the use of funds collected through the leasing 
     to be used for the purchase of oil for the Strategic 
     Petroleum Reserve beginning in fiscal year 2008.

                TITLE X--BUDGET ENFORCEMENT ACT OF 1997

                               Background


                              current law

       Current budget enforcement mechanisms were put into place 
     as a result of the Congressional Budget and Impoundment 
     Control Act of 1974 and the Balanced Budget and Emergency 
     Deficit Control Act of 1985 (GRH). While the Supreme Court's 
     1986 decision in Bowsher v. Synar (478 U.S. 714) invalidated 
     the GRH sequester mechanism, Congress moved to correct the 
     constitutional flaw in the law by enacting the Balanced 
     Budget and Emergency Deficit Control Reaffirmation Act of 
     1987.
       In the spring of 1990 it was evident that the deficit would 
     exceed the GRH maximum deficit amount by more than $100 
     billion. Later that year, the Office of Management and Budget 
     estimated that a sequester of $85 billion would be required 
     to eliminate the excess deficit amount. A key feature of the 
     1990 budget summit agreement was a major restructuring of 
     budget enforcement provisions of GRH. The budget process 
     provisions of the 1990 budget summit agreement were enacted 
     as the Budget Enforcement Act of 1990 (BEA) (title XIII of 
     the Omnibus Budget Reconciliation Act of 1990; H.R. 5835; 
     Pub. L. 101-508). The BEA created a two-tiered budget 
     enforcement regime by establishing caps on discretionary 
     appropriations spending and a ``pay-as-you-go'' requirement 
     for legislation affecting mandatory spending or revenues.
       While the BEA also extended deficit limits through 1995, it 
     relied exclusively on discretionary spending limits and the 
     pay-as-you-go requirement for 1991 through 1993 to impose 
     budgetary discipline. For 1991 through 1993, the BEA required 
     the President to adjust the deficit limits each year to equal 
     the deficit. This effectively made the deficit limits 
     unenforceable for those years. The BEA, however, gave the 
     President the choice of returning to fixed enforceable 
     deficit limits in 1993. In 1993, President Clinton chose to 
     continue to adjust the deficit limits and effectively 
     discontinued enforceable deficit limits. Later that year, 
     when the BEA was extended through 1998, Congress did not 
     extend deficit limits.
       The discretionary spending limits and the pay-as-you-go 
     requirement are scheduled to sunset at the end of 1998. These 
     mechanisms have been extremely useful tools for the Congress 
     to control discretionary spending and to ensure legislation 
     is not enacted that would increase the deficit.
     Congressional budget process
       Under the Congressional Budget Act of 1974, as amended, the 
     Congress adopts its own budget in the form of a concurrent 
     budget resolution. The budget resolution provides a budgetary 
     framework within which it considers spending and tax 
     legislation. The budget resolution establishes aggregate 
     spending and revenue levels and distributes the spending 
     levels across 20 functional categories.
       The conference report accompanying the budget resolution 
     allocates a lump sum of spending authority to all committees 
     with jurisdiction over federal spending. The Appropriations 
     Committee subdivides this allocation amount among each of its 
     13 subcommittees.
       If the budget resolution envisions changes in revenue and 
     mandatory spending, the budget resolution may provide 
     reconciliation instructions directing the authorizing 
     committees to report legislation that achieves the specified 
     spending and revenue targets. The authorizing committees 
     respond to these reconciliation directives by reporting their 
     legislative recommendations to the Budget Committees. The 
     Budget Committees compile these legislative recommendations 
     into omnibus reconciliation bills that are considered under 
     fast-track procedures in the Congress.
       The spending and revenue levels in the budget resolution 
     and the accompanying report are enforced through points of 
     order that may be raised by members of Congress when the 
     House or Senate considers spending and tax legislation.
     Statutory controls over the budget
        The Budget Enforcement Act of 1990 amended the 
     Congressional Budget Act of 1974 and the Balanced Budget Act 
     of 1985 to establish two new statutory controls over federal 
     spending: (1) limits on general purpose discretionary budget 
     authority and discretionary outlays, which apply to spending 
     controlled through the annual appropriations process; and (2) 
     a pay-as-you-go (PAYGO) requirement, which applies to direct 
     spending and revenues. Initially, the two processes were to 
     be effective for 1991 through 1995. The spending limits and 
     PAYGO were extended through 1998 by Title XIV of P.L. 103-66, 
     the Omnibus Budget Reconciliation Act of 1993. The Congress 
     established separate discretionary spending limits through 
     1998 for crime prevention and certain law enforcement 
     activities as part of the Violent Crime Control and Law 
     Enforcement Act of 1994 (P.L. 103-322).
       Breaches of the discretionary spending limits and PAYGO 
     requirements are enforced by sequestration--automatic across-
     the-board spending reductions in non-exempt programs. A 
     sequester is triggered under the discretionary spending 
     limits if either the budget authority or outlay limit for the 
     applicable fiscal year is exceeded. A sequester is triggered 
     under PAYGO if the net effect of legislation affecting 
     receipts or entitlement spending is to increase the deficit.
     Summary of this title
       The primary purpose of this title is to implement the 
     budget process provisions of the Bipartisan Budget Agreement. 
     The Bipartisan Budget Agreement called for the extension of 
     the BEA through 2002 with some modifications (the text of the 
     Bipartisan Budget Agreement appears on pages 75-92 of the 
     Senate print accompanying S. Con. Res. 27, S.Rpt. 105-27). 
     This title also makes a number of changes to consolidate 
     provisions, repeal obsolete provisions, make technical and 
     conforming changes, and to update the Budget Act and GRH. The 
     Budget Act and GRH have been amended in a piecemeal fashion 
     over the years. Consequently both of these laws contain 
     redundant and obsolete provisions. Finally, this title calls 
     for a task force in the Senate to review the floor procedures 
     used during the considerations of budget resolutions and 
     reconciliation bills.
       House procedures
       This title makes various changes in the application of 
     certain budget procedures in the House. Many of these changes 
     are applicable only in the House of Representatives. The 
     title allows the Committee on Ways and Means to reduce 
     revenue below the revenue floor if it is offset by reductions 
     in spending (in excess of amounts required under 
     reconciliation). In addition, this title discontinues the 
     practice of providing an allocation of new entitlement 
     authority separate from other forms of mandatory spending. 
     Finally, this title provides that it is not necessary to 
     waive the Budget Act where through rulemaking the Budget Act 
     violation is removed in the text pending before the House.
       Senate procedures
       This title makes a number of changes to the Budget Act 
     regarding the congressional budget process and its 
     application to the Senate. During consideration of the 
     revenue reconciliation bill, Senator Byrd offered an 
     amendment to incorporate many aspects of Senate Rule XXII 
     (cloture) to procedures governing the Senate's consideration 
     of reconciliation bills. The Senate adopted the Byrd 
     amendment (#572) by a vote of 92-8. After a great deal of 
     consultation, the Senate leadership concluded that any change 
     to floor procedures under fast-track requires

[[Page H6281]]

     further study. Consequently, the conference agreement 
     includes the creation of a bipartisan Senate task force which 
     is to report to the Senate by October 8, 1997.
     Structure of this title
       During the course of the past year, the House and Senate 
     Committees on the Budget, with the assistance of the 
     Congressional Budget Office and the Office of Management 
     Budget, developed legislation to extend the BEA, incorporate 
     the budget process provisions of the Bipartisan Budget 
     Agreement, and make technical and conforming changes to 
     budget laws.
       At the start of the legislative process, the House and 
     Senate Committees on the Budget worked from the same basic 
     draft. This draft was then modified to meet the specific 
     concerns of the membership of each House. In the House of 
     Representatives, the draft was incorporated into the language 
     of H.R. 2015 (as title XI Budget Enforcement) as part of a 
     Manager's Amendment. During consideration in the Senate of 
     the spending reconciliation bill, S. 947, (the text of which 
     became the Senate amendment to H.R. 2015) no budget 
     enforcement language was included. However, during 
     consideration in the Senate of the revenue reconciliation 
     bill, S.949, (the text of which became the Senate amendment 
     to H.R. 2014) the enforcement language was adopted by a vote 
     of 98-2 in the form of an amendment offered by Senators 
     Domenici and Lautenberg (amendment number 537) and became 
     title XVI.
        As a result of each House sending the enforcement language 
     to conference on a different bill, this joint explanatory 
     statement: (1) sets forth the language found in each bill (by 
     identifying the section in the respective bill), (2) compares 
     the two (by reference to the section of the Budget Act or GRH 
     which is sought to be amended), and (3) indicates the 
     agreement reached by the conferees. Where the position of the 
     House and Senate are identical with respect to any particular 
     language, for purposes of clarity, the Senate will recede to 
     the language of the House bill. Any other results will be 
     specifically explained below.

  Subtitle A: Amendments to the Congressional Budget and Impoundment 
               Control Act of 1974; Sections 10001-10123

     1. Table of Contents


                       House Bill (Section 11001)

       Sets forth a short title and table of contents for the 
     Budget Enforcement Act of 1997.


                            Senate Amendment

       No provision.


                      Conference Agreement (10001)

       The Senate recedes to the House with the appropriate 
     renumbering.
     2. Amendments to section 3 of the Congressional Budget Act


                       House Bill (Section 11101)

       Amends Section 3 of the Congressional Budget and 
     Impoundment Control Act of 1974 (``Budget Act'') to include 
     entitlement authority as defined under current law in section 
     401(c)(2)(C) of the Budget Act and the Food Stamp program 
     (which is technically not an entitlement). This change is 
     taken in concert with the discontinuation of separate 
     allocations of new entitlement authority in section 11106. As 
     a consequence of these changes, entitlement authority will be 
     allocated as new budget authority and will be subject to the 
     points of under the Budget Act that apply to new budget 
     authority.


                            Senate Amendment

       No provision.


                  Conference Agreement (Section 10101)

       The Conference agreement reflects the House bill with 
     modifications. The Conference agreement defines the term 
     ``entitlement authority'' in section 3 of the Budget Act and 
     adds the food stamp program to that definition.
       It is the intent of the conferees that legislation 
     providing new entitlement authority as defined in section 
     401(c)(2)(C) is also a form of new budget authority as set 
     forth in Section 3(2). In the House, legislation providing 
     new entitlement authority will also be considered as new 
     budget authority and subject to the same Budget Act 
     requirements that apply to new budget authority. In the 
     Senate, this provision merely conforms to current practice.
     3. Amendment to section 201 of the Congressional Budget Act


                       House Bill (Section 11102)

       Provides a nonsubstantive change clarifying that the term 
     of the Director of the Congressional Budget Office is one of 
     four years that expires in the year preceding a Presidential 
     election.
       Corrects an error made by Section 13202 of the Budget 
     Enforcement Act of 1990 that designated two different 
     subsections as 201(g) by redesignating the first as Section 
     201(f).


                    senate amendment (Section 1601)

       Provides a technical correction to redesignate a subsection 
     regarding revenue estimates which was not properly executed 
     in prior amendments.


                  conference agreement (Section 10102)

       The Conference agreement reflects the House bill with 
     modifications to eliminate the references to the Office of 
     Technology Assessment and the Technology Assessment Board 
     from this section.
     4. Amendments to section 202 of the Congressional Budget Act


                       house bill (Section 11103)

       Amends Section 202(a) of the Budget Act to clarify that the 
     ``primary'' duty of the Congressional Budget Office is to 
     assist the House and Senate Budget Committees. This section 
     also eliminates an obsolete provision relating to the 
     transfer of the functions of the Joint Committee on 
     Reductions of Federal Expenditures to the Congressional 
     Budget Office.


                    senate amendment (Section 1602)

       The language in the Senate Amendment is identical to the 
     House Bill.


                  conference agreement (Section 10103)

       The Conference agreement reflects the House bill with a 
     modification. The conferees recognize that CBO's 
     responsibilities have expanded considerably, particularly 
     with the enactment of the Unfunded Mandate Reform Act of 
     1995. In addition to scoring reported legislation and 
     providing spending and revenue projections, CBO also provides 
     assistance to committees and individual members upon request. 
     The intent of this language is to clarify that CBO's primary 
     duty is to assist the Budget Committees in its duties to the 
     Congress to develop, implement, and enforce the budget 
     resolution and address other budgetary matters.
       The Conference agreement also requires CBO to include in 
     its report the estimated budgetary impact associated with 
     assuming the extension of mandatory programs that exceed $50 
     million and excise taxes dedicated to trust funds for the 
     baseline as required by section 257 of GRH.
     5. Amendments to section 300 of the Congressional Budget Act


                       house bill (Section 11104)

       Conforms the date in the table in Section 300 of the Budget 
     Act for committee submission of views and estimates (six 
     weeks after the submission of the President's budget) with 
     the date in Section 301(d) of the Budget Act (which was in 
     turn amended to allow the Budget Committee Chairman to set an 
     alternative deadline for submission of committee views and 
     estimates).


                    senate amendment (Section 1603)

       The language in the Senate Amendment is identical to the 
     House Bill.


                  conference agreement (Section 10104)

       The Conference agreement reflects House bill with a 
     modification.
     6. Amendments to section 301 of the Congressional Budget Act


                       house bill (Section 11105)

       This section makes various changes in the content and 
     enforcement of the budget resolution through changes to 
     Section 301 of the Budget Act. First, and most importantly, 
     it permanently extends the requirement that the term of 
     budget resolutions be for a period of at least 5 years. Under 
     current law, the resolution must cover three fiscal years, 
     but this window was temporarily extended to five years as 
     part of the Omnibus Budget Reconciliation Acts of 1990 and 
     1993.
       Second, it eliminates the requirement that budget 
     resolutions set forth levels of direct loan obligations and 
     primary loan guarantee commitment levels because under the 
     Credit Reform Act of 1990 all loans are scored up front as 
     new budget authority.
       Third, it extends a provision, applicable only in the 
     Senate, that provides for adjustments of committee 
     allocations for deficit-neutral legislation as long as the 
     legislation is deficit-neutral in the first year covered 
     by the resolution and for the 5-year period covered by the 
     resolution.
       Fourth, it allows the Budget Committee Chairmen to set an 
     alternative deadline for submission of committee views and 
     estimates.
       Finally, it extends the Social Security point of order in 
     the Senate to include the concurrent budget resolution and 
     any related amendments, motions, or conference reports.


                    senate amendment (Section 1604)

       The Senate amendment is identical to the House bill with 
     two exceptions. First, it adds a new paragraph (9) to include 
     direct loan obligations and primary loan commitment guarantee 
     levels as items that may be included in a budget resolution. 
     Second, it also amends the listing of those items that must 
     be included in a committee report accompanying a budget 
     resolution and adds a listing of those items that may be 
     included in such a report.


                  conference agreement (Section 10105)

       The Conference agreement reflects the House bill with an 
     amendment.
       The Conference agreement modifies the scope of budget 
     resolutions to provide that a budget resolution must cover at 
     least five years. The Congress has expanded the scope of 
     budget enforcement activities in recent years. The 1990 BEA 
     (section 606 of the Budget Act) expanded the scope of budget 
     enforcement by requiring budget resolutions to set 5-year 
     enforceable levels. The Senate adopted its pay-as-you-go rule 
     in 1993 that established a 10-year time-frame with respect to 
     direct spending and revenue legislation. The 1996 budget 
     resolution covered 7 years. The Bipartisan Budget Agreement 
     covers ten years. The conference agreement retains the 
     requirement that budget resolutions cover at least five years 
     and provides Congress with the discretion to set a longer 
     time frame in a budget resolution.
       The conference agreement eliminates the requirement that a 
     budget resolution contain direct loan and loan guarantee 
     levels. The Conference agreement allows a budget

[[Page H6282]]

     resolution to set credit levels. The Federal Credit Reform 
     Act of 1990 (``Credit Reform'') modified the budgetary 
     treatment of credit programs to require a subsidy 
     appropriation before a direct loan obligation or loan 
     guarantee commitment is made. Under credit reform, budget 
     authority and outlays are scored when the subsidy 
     appropriation is made and these levels are enforced by the 
     section 302 allocations and the section 311 aggregates 
     established by the budget resolution. Since the subsidy 
     appropriation controls credit activity levels, there is no 
     reason to continue these credit levels.
       Credit reform is largely dependent on estimates made by the 
     Executive Branch about interest rates and default risk. The 
     integrity of these subsidy estimates is entirely in the 
     control of the Executive Branch. If the Executive Branch made 
     gross errors with respect to subsidy estimates or 
     intentionally manipulated these estimates, the subsidy 
     appropriation becomes much less relevant for determining 
     credit levels. The conferees have been satisfied with the 
     implementation of the Federal Credit Reform Act. However, if 
     there are significant errors in subsidy estimates, for 
     whatever reason, the Congress may want to return to 
     establishing credit levels in a budget resolution. While the 
     conferees do not believe credit levels need to be established 
     in a budget resolution, for the reasons stated above, the 
     conference agreement leaves this option to the discretion of 
     the Congress.
     7. Amendments to section 302 of the Congressional Budget Act


                       house bill (Section 11106)

       The House bill permanently extends the requirement that 
     allocations to the authorizing committees cover at least a 
     five-year period. In the process, it collapses the temporary 
     allocations under section 602 into section 302, generally 
     conforming to the structure set forth in section 602.
       It also modifies the default allocation in which an interim 
     allocation is provided to the Appropriations Committee in the 
     House if the budget resolution is not agreed to by April 15. 
     Under the modified default allocation, the Appropriations 
     Committee would be allocated an amount based on the prior 
     year's budget resolution (instead of the President's budget). 
     It clarifies that the Appropriations Committee shall 
     subdivide its allocation among its 13 subcommittees. It 
     provides that the allocations and suballocations shall be 
     divided between defense, non-defense, and the violent crime 
     reduction category as long as separate spending limits are in 
     effect.


                    senate amendment (Section 1605)

       The Senate amendment is essentially identical to the House 
     bill, though it does not contain the provision regarding 
     temporary allocations to the House Appropriations Committee 
     in section 302.


                  conference agreement (Section 10106)

       The Conference agreement reflects the House bill with 
     modifications. As with section 301 regarding the scope of the 
     timeframes in a budget resolution, the conference agreement 
     also requires that section 302 allocations made to committees 
     cover at least five years. Interim allocations only apply in 
     the House.
       The conference agreement also provides that the Budget 
     Committee must make separate allocations of defense, 
     nondefense, and violent crime reduction funding. Section 
     302(a)(3) requires that the allocation of budget authority 
     and outlays to the Appropriations Committees will be further 
     divided among the categories specified in section 250(c)(4) 
     of GRH. Under section 302(b), the Appropriations Committees 
     are required to allocate these separate categories among its 
     13 subcommittees. These separate divisions of the allocations 
     are enforced in the Senate pursuant to section 302(f) of the 
     Budget Act.
       As modified, section 302(f) of the Budget Act refers to the 
     ``applicable'' allocation. The word ``applicable'' is used in 
     part to recognize the fact that two budget resolutions will 
     often be in force at the same time.
     8. Amendments to section 303 of the Congressional Budget Act


                       house bill (section 11107)

       The House bill makes several technical changes to Section 
     303(a) of the Budget Act which prohibits the consideration of 
     spending legislation before Congress has agreed to a budget 
     resolution. It eliminates references to new credit authority 
     and new entitlement authority. In the future, legislation 
     providing new entitlement authority will be scored as 
     providing new budget authority which is also subject to 
     section 303(a). Credit authority is already scored as new 
     budget authority, in the amount of the subsidy.


                    senate amendment (section 1606)

       The Senate amendment repeals subsection (c) of section 303, 
     which provides a process for the Senate to consider a 
     resolution to waive this point of order. Since this point of 
     order can be waived under section 904 of the Budget Act 
     through a motion, the waiver resolution process is not 
     needed.


                  conference agreement (section 10107)

       The Conference agreement reflects the House bill with an 
     amendment. The Conference agreement rewrites section 303 in 
     its entirety to simplify this section, drop obsolete 
     provisions, and make conforming changes to reflect changes 
     made to other provisions in the Act. The Conference agreement 
     retains the general objective of section 303: to discourage 
     the Congress from considering budget-related legislation 
     until the adoption of a budget resolution for a year.
       The language of current section 303 is vague with respect 
     to its application to appropriations measures in the Senate. 
     Under section 302 of the Budget Act, allocations are made to 
     the Senate Appropriations Committee for just the first year 
     of a budget resolution (the budget year). The conference 
     clarifies the application of this point of order to provide 
     that it is out of order to consider an appropriations measure 
     for a year until an allocation under section 302(a) has been 
     made pursuant to the budget resolution for that year. The 
     conference agreement retains the current law exception that 
     allows appropriations measures to contain advance 
     appropriations for the two years following that year. By 
     ``advance appropriations'', the conferees mean an 
     appropriation which is first available in a year beyond the 
     year for which the appropriation bill applies.
       The conferees intend to clarify that section 303(a) is a 
     gross test which looks at whether any provision within the 
     measure provides new budget authority, increases revenue, 
     etc. It is not a net test that looks at the sum of changes in 
     budget authority, increases in revenue, etc. as is the case 
     with sections 302(f) and 311(a).
     9. Amendments to section 304 of the Congressional Budget Act


                               house bill

       No provision


                            senate amendment

       No provision


                  conference agreement (section 10108)

       The Conference agreement repeals subsection (b) of section 
     304. Subsection 304(a) provides the authority for Congress to 
     revise a budget resolution at any time. Subsection (b) 
     provides that section 301(g), regarding economic assumptions, 
     applies to revisions to budget resolutions. This subsection 
     is not needed and raises an ambiguity with respect to whether 
     other provisions of the Budget Act apply to revisions of a 
     budget resolution.
       By repealing subsection 304(b), the conferees intend that 
     all provisions of the Budget Act apply to revised budget 
     resolutions unless there is a specific exception made for a 
     revision to a budget resolution, such as section 305(b) which 
     provides for only 10 hours of debate on a revision to a 
     budget resolution.
     10. Amendments to section 305 of the Congressional Budget Act


                       house bill (section 11108)

       Clarifies that the five day layover requirement for budget 
     resolutions includes Saturdays, Sundays and holidays when the 
     House is in session. This is a conforming change to clause 
     2(1)(5) of House Rule XI, which was amended in the 104th 
     Congress to count Saturdays, Sundays and holidays when the 
     House is in session towards the layover requirement for bills 
     and resolutions.


                    senate amendment (section 1607)

       The Senate amendment includes the same provision.


                  conference agreement (section 10109)

       The Conference agreement reflects the House bill with a 
     modification providing that the resolution can be considered 
     the third calendar day (except Saturdays, Sundays and legal 
     holidays when the House is not in session) after the report 
     has been made available to Members.
     11. Amendments to section 308 of the Congressional Budget Act


                       house bill (section 11109)

       The House bill includes a technical change eliminating a 
     reference to credit authority in legislation for which 
     committees must include a statement essentially justifying 
     changes in revenue or direct spending. It also clarifies that 
     such statements are to be provided for joint resolutions 
     rather than simple (one-House) resolutions.


                    senate amendment (section 1608)

       The Senate amendment is essentially identical to the House 
     bill.


                  conference agreement (Section 10110)

       The Conference agreement reflects the House bill with 
     modifications to make additional technical and conforming 
     changes regarding section 308.
     12. Amendments to section 310 of the Congressional Budget Act


                       house bill (section 11110)

       The House bill provides that reconciliation instructions 
     may direct committees to achieve specified changes in direct 
     spending. Under current law, the instructions are to be 
     expressed as a change in new entitlement authority and new 
     budget authority. This section essentially codifies the 
     recent practice of reconciling committees to report 
     legislation providing the necessary change in direct 
     spending. Under current law, reconciliation instructions may 
     be for new budget authority, outlays and new entitlement 
     authority. Direct spending is defined under section 250(c)(8) 
     of GRH.
       It also codifies the interpretation of the House that the 
     fungibility rule in section 310 of the Budget Act applies to 
     legislation regardless of whether it increases or decreases 
     revenues or spending. In order to preserve the original 
     intent of section 310 to provide committees maximum 
     flexibility in meeting their reconciliation targets, 
     committees are allowed to substitute changes in revenue for 
     changes in spending, or vice versa, by up to 20 percent of 
     the sum of the reconciled

[[Page H6283]]

     changes in spending and revenue as long as the result does 
     not increase the deficit relative to the reconciliation 
     instructions.
       Under one interpretation, the existing fungibility rule 
     could not be invoked when a committee reduces revenues 
     because the revenue change may cancel out reductions in 
     spending. Accordingly, the rule now explicitly provides that 
     the substitution factor is 20 percent of the sum of the 
     absolute value of the reconciled change in revenue and the 
     absolute value of the reconciled change in spending.


                     senate amendment (section 787)

       The Senate amendment amends section 310(e)(2) of the 
     Congressional Budget Act to provide 30 hours of Senate 
     consideration of a Reconciliation Bill. The amendment 
     requires consent to yield back time on the bill or to limit 
     debate. It also provides 30 minutes of debate per first 
     degree amendment, and 20 minutes of debate per second degree 
     amendment until the 15th hour of debate after which all 
     amendments are limited to 30 minutes of debate. And, it 
     prohibits submitting first degree amendments after the 15th 
     hour of consideration, and prohibits submitting second degree 
     amendments after the 20th hour.


                  conference agreement (section 10111)

       The Conference agreement reflects the House bill with a 
     modification. The conference agreement only amends section 
     310 to modify subsection 310(c)(1)(A) regarding the 
     application of the fungibility rule in the House. While no 
     language regarding Senate floor procedure is included, the 
     conference agreement calls for a Senate bipartisan task force 
     to study and report on budget resolution and reconciliation 
     floor procedures.
      13. Amendments to section 311 of the Congressional Budget 
         Act


                       House Bill (Section 11111)

       This section modifies section 311, which enforces the 
     budget resolution by prohibiting the consideration of 
     legislation that exceeds its aggregate spending levels or 
     reduces revenues below its revenue floor.
       It eliminates references in section 311 to new entitlement 
     authority. It clarifies that the exception under 303 for 
     legislation providing new budget authority applies only to 
     advanced discretionary budget authority--not mandatory 
     spending.
       This section also preserves the so-called Fazio exception 
     in the House that allows appropriation measures to exceed the 
     aggregate ceiling on new budget authority or outlays if they 
     do not exceed the Appropriations Committee's applicable 
     allocation.
       Finally, this section eliminates a redundant point of order 
     in the Senate and clarifies the Social Security ``firewall'' 
     point of order, making its application more clear.


                    Senate Amendment (Section 1609)

       The Senate amendment is identical to the House bill.


                  Conference Agreement (Section 10112)

       The Conference agreement reflects the House bill with 
     modifications. The Conference agreement provides that the 
     spending and revenue levels are enforced for the first year 
     covered by the budget resolution. The Conference agreement 
     also provides that the revenue level is also enforced for the 
     same multiyear period covered by the allocations provided in 
     a conference report accompanying a budget resolution, which 
     is at least 5 years.
     14. Amendments to section 312 of the Congressional Budget Act


                       House Bill (Section 11112)

       The House bill makes stylistic changes to the heading and 
     consolidates existing provisions regarding points of order 
     and adds some new provisions.
       Subsection (a) provides generic authority clarifying that 
     the Committees on the Budget are responsible for providing 
     estimates (or ``scoring'' information) to the House and 
     Senate for the purposes of evaluating the applicability of 
     Budget Act points of order. Redundant language is repealed 
     throughout the Act and replaced with this one statement that 
     applies to all points of order under titles III and IV.
       Subsection (b) moves the existing section 601(b) point of 
     order in the Senate for the enforcement of discretionary 
     spending limits to subsection 312(b).
       Subsection (c) moves the existing section 605(b) point of 
     order in the Senate for the enforcement of the maximum 
     deficit amount to subsection 312(c). This point of order will 
     not be enforced because the House bill does not provide 
     ``maximum deficit amounts'' in GRH. The House bill retains 
     both the point of order and the sequester procedures (section 
     253 of GRH) in the event the Congress wants to return to 
     deficit limits.
       Subsection (d) adds new language which places into law the 
     current practice in the Senate with respect to the timing of 
     points of order.
       Subsection (e) retains current law (first paragraph of 
     section 312) with respect to amendments between the Houses.
       Subsection (f) retains current law (section 312(b)) with 
     respect to the effect of a point of order against a bill in 
     the Senate.
       It repeals the now redundant (by virtue of new 312(a)) 
     language from current law.


                    Senate Amendment (Section 1610)

       The Senate amendment is identical to the House Bill.


                  Conference Agreement (Section 10113)

       The Conference agreement reflects the House bill with 
     technical changes.
     15. Addition of a new section ``314'' of the Congressional 
         Budget Act


                       House Bill (Section 11113)

       Adds a new section 314 to the Budget Act containing some of 
     the elements in the now-eliminated title VI. Most 
     importantly, section 314 provides a procedure for adjusting 
     the appropriate budget resolution levels for certain 
     legislation for which similar adjustments are provided in the 
     statutory discretionary spending levels under section 
     11203 of this title. The adjustments are for continuing 
     disability reviews, the IMF, arrearages and emergencies.
       In a change from current law, the appropriate spending 
     levels are adjusted for legislation designating funding for 
     emergencies instead of the previous practice of simply not 
     counting such spending against the budget resolution's 
     levels.
       In another change in allocation procedures for the House, 
     the adjustments are made only for the consideration of the 
     relevant legislation and do not become permanent until the 
     legislation is actually enacted.


                    Senate Amendment (Section 1611)

       The Senate amendment is the same as the House language with 
     slight modifications.


                  Conference Agreement (Section 10114)

       The Conference agreement reflects the House bill with 
     modifications. The conference agreement provides for a 
     process for the Budget Committee Chairman to make adjustments 
     to levels set forth in or pursuant to a budget resolution for 
     emergency legislation, continuing disability reviews, an IMF 
     allowance, an allowance for international arrearages, and 
     earned income tax credit compliance. The purpose of these 
     adjustments is to ensure that budgetary limits, are only 
     adjusted for the legislation that meets the specific criteria 
     spelled out in this section. This section sets out a process 
     regarding discretionary spending limits that is similar to 
     the process in section 251 of GRH.
       Subsection (a)(1) provides the general authority for the 
     Budget Committee Chairman to make adjustments for 
     legislation. Subsection (a)(2) provides the Chairman with the 
     authority to revise the levels set forth by or pursuant to a 
     budget resolution. Subsection (b) provides the criteria for 
     legislation that qualified for the adjustments. A bill, 
     resolution, amendment or conference report must meet the 
     specific terms spelled out in one of these paragraphs before 
     the Chairman can make any adjustments pursuant to this 
     section. Subsection (c) provides that the adjustments only 
     apply while the legislation is under consideration and only 
     take final effect upon the legislation's enactment. The 
     conferees intend that the adjustments only apply while the 
     legislation that meets the terms of one of the paragraphs of 
     subsection (b) is under consideration. In subsection (c), the 
     reference to ``legislation'' means a bill, joint resolution, 
     amendment, motion or conference report. It is the Chairman's 
     responsibility to ensure these adjustments are only available 
     for legislation that meets the terms of subsection (b). This 
     could necessitate that the Chairman reverse the adjustments, 
     particularly the aggregates, after the pending legislation is 
     disposed of.
     16. Addition of a new section 315 to the Congressional Budget 
         Act


                       House Bill (Section 11114)

       The House bill provides that it is not necessary to waive 
     the Budget Act as part of a House resolution to consider 
     legislation in which the resolution eliminates the source of 
     the Budget Act violation. Most points of order under the 
     Budget Act lie against consideration of the bill as 
     originally reported by a committee. If the reported version 
     of the bill violates the Budget Act, then the Chairman of the 
     Budget Committee often arranges to have the violation 
     corrected as part of a rule that effectively amends the 
     version of the bill pending before the House. However, it is 
     still necessary to waive the point of order because the point 
     of order lies against the bill as reported. As modified, it 
     will no longer be necessary to waive the point of order in 
     order to consider a bill in which the rule eliminates the 
     source of the violation.


                            Senate Amendment

       No provision.


                  Conference Agreement (Section 10115)

       The Conference agreement reflects the House bill with 
     technical changes providing that it is not necessary to waive 
     the Budget Act when the source of the Budget Act violation in 
     the reported bill is eliminated through a special rule or 
     unanimous consent request. This provision only applies in the 
     House.
     17. Amendments to section 401 and repeal of section 402 of 
         the Congressional Budget Act


                       House Bill (Section 11115)

       The House bill makes changes in section 401 (which defines 
     and enforces various forms of spending authority that are not 
     controlled through the annual appropriations process). It 
     repeals the definition of new entitlement authority (which is 
     shifted into section 3 of the Budget Act). It repeals a 
     seldom used process in the House for referring bills 
     providing certain forms of mandatory appropriations to the 
     Committee on Appropriations. Finally, it collapses a point of 
     order against legislation providing credit authority not 
     subject to appropriations into section 401, which also 
     prohibits the consideration of legislation providing contract 
     or borrowing authority.

[[Page H6284]]

                            Senate Amendment

       No provision.


                  conference agreement (section 10116)

       The Conference agreement reflects the House bill with 
     modifications.
       Sections 401 and 402 were enacted as a means of controlling 
     ``backdoor'' spending. This is spending not under the annual 
     control of the Congress through the appropriations process. 
     The Conference agreement's changes to section 401 are not 
     intended to weaken this section, but to update it.
       The conference agreement provides that section 401(a) will 
     apply, just as it does under current law, to contract 
     authority and borrowing authority. The conference expands 
     section 401(a) to apply to credit authority and repeals 
     section 402. This change has no practical effect. It just 
     consolidates the point of order against creating these types 
     of spending authority in one section of the Budget Act.
       The Conference agreement repeals the definition of ``new 
     spending authority''. This definition is no longer needed and 
     raises questions about what constitutes new spending 
     authority. Since being defined in the original 1974 Budget 
     Act, the Congress has expanded the definition of budget 
     authority. Under the current definition, ``new spending 
     authority'' as defined in section 401(c) and ``budget 
     authority'' as defined in section 3 are essentially the same. 
     As a result, the separate definition in section 401(c) of the 
     Budget Act is unneeded.
       The important provisions of section 401 of the Budget Act 
     are to provide controls on backdoor spending and to provide a 
     definition of ``entitlement authority''. The definition of 
     the term ``entitlement authority'' has been moved to section 
     3 of the Budget Act. The conference agreement refers to ``new 
     entitlement authority.'' The conferees intend that this term 
     applies to legislation that either expands an existing 
     entitlement or creates a new entitlement. The existing 
     controls on backdoor spending authority have been retained.
       This Conference agreement generally makes technical and 
     conforming changes to the Budget Act. The conferees note that 
     there are major deficiencies in section 401 that have not 
     been corrected in this section. It is the intent of the 
     conferees that future legislation should address the purposes 
     of section 401 and the definitions of ``contract authority'' 
     and ``borrowing authority'', and should provide an up-to-date 
     and more effective means of controlling backdoor spending.
     18. Amendments to Title V of the Congressional Budget Act 
         (Credit Reform)


                               house bill

       No provision.


                    senate amendment (section 1612)

       The Senate amendment contains technical corrections and 
     conforming amendments to the Federal Credit Reform Act of 
     1990. All of the proposed changes to Credit Reform in this 
     amendment are taken from suggestions made by OMB. In general 
     they reflect the experience with implementing Credit Reform 
     since 1990 and codify current working definitions used by the 
     Congressional Budget Office and the Office of Management and 
     Budget.
       The amendments to section 502 clarify the definition of a 
     direct loan by explicitly including the sale of assets on 
     credit terms. These amendments also clarify the law to 
     reflect current practice concerning the treatment of 
     modifications of outstanding direct loans and loan guarantees 
     that affect their cost, adding a definition of the term 
     ``modification.'
       The amendments to section 504 clarify that appropriation 
     action is required before direct loans and loan guarantees 
     can be made (subsidy costs must be appropriated in advance), 
     except for mandatory programs that are exempt from this 
     requirement. The existing language with respect to 
     modifications is also made clearer.
       The amendments to section 505 provide technical 
     instructions concerning the interest rate charged to 
     Government agencies by Treasury to finance credit programs, 
     including the interest rate charged on loans financed by the 
     Federal Financing Bank (FFB). The amendments require 
     Treasury, including the FFB, to use the same rate as the one 
     used to calculate the cost of a direct loan or loan 
     guarantee. That is the current practice for Treasury 
     financing other than financing by the FFB. The FFB is 
     permitted to add a surcharge to the Treasury rate of 
     interest, which is paid by the borrower and, in turn, by the 
     agency. Current law does not provide instructions for dealing 
     with the surcharge. The amendments specify that the surcharge 
     will be credited to the credit program's financing account 
     along with other interest paid to the Government. Currently, 
     a fraction of the surcharge is used to finance the FFB's 
     administrative expenses. The amendments allow the FFB to 
     require reimbursement from an agency to cover the FFB's 
     administrative expenses. The agency will pay for its 
     administrative expenses out of appropriations for that 
     purpose, as is required now for other administrative expenses 
     of most credit programs.


                  conference agreement (section 10117)

       The Conference agreement adopts the Senate Amendment with 
     additional changes for clarification.
       Amendments to section 502 clarify the definition of the 
     term ``cost,'' including a modification of the requirement 
     concerning the ``discount rate'' used to determine cost so 
     that it is based on the timing of the cash flows, as opposed 
     to the term of the loan. Under this approach, a claim payment 
     that will occur in year 1 of a guaranteed loan is discounted 
     using the rate on a 1-year Treasury security, while a claim 
     payment that will occur in year 30 is discounted using the 
     rate on a 30-year Treasury security. The total cost is the 
     sum of the present values of each year's cash flows over the 
     life of the direct loan or loan guarantee. This change 
     increases accuracy and reduces bias. Accuracy is improved 
     because each cash flow is discounted by the interest rate on 
     a Treasury security having the same maturity as the period of 
     that cash flow. Under the present practice, the rate on a 
     Treasury security of similar maturity to the loan is based on 
     the pattern of interest and principal payments for the 
     security (semi-annual interest payments and full principal 
     repayment on the last payment date). The estimated cash flows 
     for credit programs almost never match this pattern. Bias is 
     reduced because loans with the same cash flows but different 
     maturities would be priced using the same basket of discount 
     rates, and would therefore have the same cost.
        Also under the definition of ``cost,'' the amendments 
     requires that, for purposes of an agency obligating funds for 
     the cost of a credit program, the cost estimate will be based 
     on the assumptions used in the President's budget for the 
     fiscal year in which the direct loan or loan guarantee is 
     obligated, adjusted for differences between the projected and 
     actual terms of the contract. For example, assuming no 
     difference between the projected and actual terms of the loan 
     contract, the cost estimate for the obligation of a direct 
     loan in 1998 would be based on the assumptions used in the 
     President's 1998 budget. This incorporates by statute OMB's 
     current guidelines for calculating the cost estimate when 
     funds are obligated for a direct loan or loan guarantee. For 
     one-year funds, it provides Congress with the assurance that 
     loan volume will not be affected by changes in assumptions 
     during the period of program execution. In effect, it means 
     that Congress will get the volume it paid for when it 
     appropriated funds for the credit program. For programs with 
     multi-year funds, the cost estimate will reflect more recent 
     assumptions.
        Workouts are not assumed to be included in the definition 
     of modifications. The conference agreement does not change 
     the treatment of workouts as implemented under the Federal 
     Credit Reform Act of 1990. OMB and CBO shall report 
     recommendations for any changes in such treatment to the 
     House and Senate Committees on the Budget not later than 
     March 30, 1998. Such report shall include data on the extent 
     of the use of workouts and the resulting costs or savings.
        The amendments add a definition of the term ``current,'' 
     which is used in other credit definitions with regard to 
     credit assumptions. By referring to GRH, the definition is 
     the same as the one that is used for Budget Enforcement Act 
     purposes.
     19. Repeal of title VI of the Congressional Budget Act 
         (Budget Agreement Enforcement Provisions)


                       house bill (section 11116)

       The House bill repeals title VI, which provided changes in 
     Congressional budget procedures that were expected to last 
     only for the duration of previous budget agreements. Title VI 
     temporarily extended the coverage and enforcement of budget 
     resolutions from three to five fiscal years. It also provided 
     for adjustments in the budget resolution for such factors as 
     emergencies, estimating differences, and tax compliance.
        The five-year scope of the resolution is permanently 
     extended in sections 11105 and 11106. The new adjustments are 
     set forth in section 11113. The House bill repeals an unused 
     provision in section 604 of the Budget Act, which provided 
     the House Budget Committee with the authority to report a 
     reconciliation directive providing for tax increases to 
     offset legislation cutting taxes.


                    senate amendment (section 1613)

       The language in the Senate Amendment is identical to the 
     House Bill.


                  conference agreement (section 10118)

       The Senate recedes to the House.
     20. Amendments to section 904 of the Congressional Budget Act


                       house bill (Section 11117)

       The House bill contains technical corrections regarding 
     waivers and appeals. It redrafts the section so as to make it 
     possible to differentiate between those points of order which 
     are subject to supermajority discipline and those that are 
     not. It adds a new subsection ``(e)'' to indicate which 
     waiver and appeal provisions expire at the end of 2002. This 
     has previously been applicable in the Senate by virtue of a 
     provision of the 1996 Budget Resolution. This amendment thus 
     codifies the current Senate rules regarding the sunset date 
     for these points of order. Generally for those points of 
     order which relate to budget levels, the supermajority 
     requirements sunset in 2002. With respect to the other points 
     of order which relate to the substantive effect of language 
     (germaneness, the Byrd Rule, Budget Committee jurisdiction 
     etc.), the supermajority requirements are permanent.


                    senate amendment (section 1614)

       The language in the Senate Amendment is identical to the 
     House Bill.


                  conference agreement (section 10119)

       The Conference agreement reflects the House bill with 
     technical modifications.

[[Page H6285]]

     21. Repeal of sections 905 and 906 of the Congressional 
         Budget Act


                       house bill (section 11118)

       The House bill repeals two obsolete sections in the Budget 
     Act: the original effective dates for the Budget Act in 
     section 905 and a special rule relating to the applicability 
     of the Act for Fiscal Year 1976.


                    senate amendment (section 1615)

       The language in the Senate Amendment is identical to the 
     House Bill.


                  conference agreement (section 10120)

       The Senate recedes to the House.
     22. Amendments to sections 1022 and 1024 of the Congressional 
         Budget Act


                       house bill (section 11119)

       The House bill makes conforming changes to sections 1022 
     and 1024 of the Line Item Veto Act reflecting the repeal of 
     section 601 of the Budget Act and its incorporation into 
     section 251(c) of GRH.


                    senate amendment (section 1616)

       The language in the Senate Amendment is identical to the 
     House Bill.


                  conference agreement (section 10121)

       The Senate recedes to the House.
     23. Amendments to section 1026 of the Congressional Budget 
         Act


                       house bill (section 11120)

       The House bill makes conforming changes to section 1026 
     (definitions) to correct a drafting error in the definition 
     of ``dollar amount of discretionary budget authority'' to 
     reflect the repeal of section 601 of the Budget Act and its 
     incorporation into section 251(c) of GRH.


                    senate amendment (section 1617)

       The language in the Senate Amendment is identical to the 
     House Bill.


                  conference agreement (section 10122)

       The Senate recedes to the House.
     24. Senate task force


                               house bill

       No provision.


                     senate amendment (section 787)

       During consideration of S.949 (spending reconciliation bill 
     in the Senate) the Senate adopted by a vote of 92 to 8 an 
     amendment offered by Senator Byrd (number 148) which provided 
     new floor procedures for the consideration of reconciliation 
     legislation in the Senate. The most significant aspect of the 
     Byrd amendment was the proposal to adopt cloture like 
     procedures at the conclusion of consideration. The amendment 
     called for changing the current law's 20 hour limit on 
     consideration to 30 hours of debate. In addition, it called 
     for imposing a filing requirement for all amendments to be 
     considered after 15 hours. This is a significant departure 
     from current law in that it would have the effect of closing 
     off the amendment process once all time has expired.
       Current law provides that an unlimited number of amendments 
     and motions are in order, without debate, at the end of time. 
     Although this is not explicitly set forth in section 305 of 
     the Budget Act, it is the interpretation that has governed 
     the Senate's consideration of budget resolutions and 
     reconciliation legislation. At the insistence of a number of 
     Senators, current Senate practice has permitted (by unanimous 
     consent) a very brief time for debate (usually between 2 and 
     4 minutes, equally divided) prior to the vote on such 
     amendments. This at least permits proponents and the managers 
     to lay out for their colleagues the basic issue presented by 
     the amendment. This has resulted in what many refer to as a 
     ``vote-a-ramma'' at the end of time. In this situation 
     Senators are forced to vote on scores of amendments with 
     little or no debate.
       In addition to ending the ``vote-a-ramma'', the Byrd 
     amendment provides that the time for debate on individual 
     amendments be reduced from 2 hours to 30 minutes for 
     amendments in the first degree, from 1 hour to 20 minutes for 
     amendments in the second degree or debatable motions and 
     appeals, and after 15 hours debate on all debatable items 
     would be limited to 20 minutes. The Byrd amendment also 
     provides that the motion to reduce time be debatable for 30 
     minutes and that time may be yielded back only by unanimous 
     consent. Current law permits this motion to be voted on 
     without debate and time to be yielded back as a matter of 
     right.


                  conference agreement (Section 10123)

       The conference agreement provides for a bipartisan task 
     force in the Senate to review the floor procedures governing 
     consideration of budget resolutions and reconciliation bills. 
     The task force is to report to the Senate by October 8, 1997.

  Subtitle B: Amendments to the Balanced Budget and Emergency Deficit 
               Control Act of 1985; Sections 10201-10213

     24. Purpose


                       house bill (section 11201)

       Purpose. States that the purpose of this subtitle is to 
     extend discretionary spending limits and pay-as-you-go 
     requirements.


                    senate amendment (section 1651)

       The language in the Senate Amendment is identical to the 
     House bill.


                  conference agreement (section 10201)

       The Senate recedes to the House.
     25. Amendments to section 250 of Gramm-Rudman-Hollings


                       house bill (section 11202)

       Amends section 250(b) of GRH to state that it provides for 
     the enforcement of a balanced budget by 2002 as called for in 
     H. Con. Res. 84.
       This section also defines the terms ``category'', 
     ``budgetary resources'' and ``consultation''. 
     ``Consultation'' means that the Budget Committee is consulted 
     by CBO in manner timely enough to afford the committee an 
     opportunity to comment on the matter; ``category'' means 
     defense, non-defense, and violent crime reduction 
     discretionary spending, and the definition of budgetary 
     resources is amended to drop an obsolete reference to credit 
     authority. The terms ``current'' and ``outyear'' are also 
     modified and extended.


                    senate amendment (section 1652)

       The Senate amendment is substantially similar to the House 
     bill though it does not provide a definition of 
     ``consultation''.


                  conference agreement (section 10202)

       The Conference agreement reflects the Senate amendment with 
     modifications. The conference agreement also updates the 
     definition of ``budget authority'' and other terms in section 
     250(c)(1).
     26. Amendments to section 251 of Gramm-Rudman-Hollings


                       house bill (section 11203)

       The House bill provides for the extension of discretionary 
     spending limits and enforcement procedures (sequestration) 
     through 2002. Retains adjustments for emergencies, changes in 
     concepts and definitions, and estimating differences in 
     outlays. Adds automatic adjustments in these limits for 
     legislation relating to the International Monetary Fund and 
     arrearages. Eliminates adjustments for inflation, estimating 
     differences in budget authority as well as expired 
     adjustments for loan forgiveness and IRS compliance.
       It imposes separate spending limits for defense and non 
     defense discretionary spending for 1998 and 1999 and then 
     collapses these limits under a general purpose discretionary 
     spending limit for 2000, 2001 and 2002.
       In conformance with the Bipartisan Budget Agreement, the 
     House bill allows the separate limits on the violent crime 
     reduction category to expire at the end of 1998. Funding for 
     these programs will be subject to the non defense 
     discretionary spending limit in 1999 and 2000 and the general 
     purpose discretionary limits in 2001 and 2002.


                    senate amendment (section 1653)

       The Senate amendment is substantially similar to the House 
     bill except that it extends separate violent crime reduction 
     spending limits through 2002.


                  conference agreement (section 10203)

       The Conference agreement reflects the House bill with some 
     modifications. The violent crime reduction spending limits 
     are extended through 2000.
     27. Amendments to section 251A of Gramm-Rudman-Hollings and 
         to section 310002 of P.L. 103-322


                       house bill (section 11204)

        The House bill shifts the separate spending limits on the 
     Violent Crime Reduction Trust Fund spending into section 251 
     of GRH, which includes the limits for defense and nondefense 
     discretionary spending. Under current law, section 251 
     provides sequester procedures for defense and nondefense 
     discretionary spending and section 251A provides sequester 
     procedures for violent crime reduction spending. Because this 
     bill amends section 251 to provide for violent crime 
     reduction as a separate category of discretionary spending, 
     section 251A is not needed and is repealed. Also makes a 
     conforming change by repealing section 310002 of the Violent 
     Crime Control and Law Enforcement Act of 1994, which reduced 
     the discretionary caps to provide a separate category for 
     violent crime reduction funding. Since the section 251(c) 
     caps reflect these reductions, section 310002 of the Crime 
     Act is no longer necessary.


                    Senate Amendment (Section 1654)

       The Senate amendment is identical to the House bill.


                  Conference Agreement (Section 10204)

       The Senate recedes to the House.
     28. Amendments to section 252 of Gramm-Rudman-Hollings


                       House Bill (Section 11205)

       The House bill extends the pay-as-you-go requirements for 
     legislation enacted through 2002. Under current law, PAYGO 
     expires at the end of 1998.
       In order to impede legislation that would exacerbate the 
     deficit beyond 2002, the House bill provides a ``rolling'' 
     PAYGO scorecard. Under a rolling five year scorecard, OMB 
     will score legislation for the budget year and each of the 
     ensuing four fiscal years through 2002. If this legislation 
     causes a net deficit increase for any year through 2006, OMB 
     will be required to implement a sequester in that year to 
     eliminate any deficit increase. For example, a bill enacted 
     in January 2002 would be scored for 2002 through 2006. 
     Although the PAYGO requirements expire at the end of 2002, 
     the estimates and enforcing sequestration process would 
     extend as late as 2006 for legislation that is enacted prior 
     to the end of 2002.
       The House bill also corrects the ``lookback'' procedure in 
     which size of a sequester can be offset by savings from the 
     prior fiscal year. Current law provides a ``lookback'' 
     procedure to ensure that legislation that is enacted after 
     the beginning of a fiscal year is captured by the pay-as-you-
     go

[[Page H6286]]

     requirements. Under OMB's current interpretation of the 
     existing lookback mechanism, OMB double-counts pay-as-you-go 
     surpluses or deficits in calculating whether a sequester 
     would be necessary. OMB currently interprets the PAYGO 
     lookback mechanism to require that the PAYGO balance for the 
     current year be added to the budget year in determining if 
     there will be a net deficit increase (this results in 
     ``double-counting'').
       The House bill amends the pay-as-you-go lookback procedures 
     to require OMB to calculate the net deficit impact on the 
     current year of all legislation enacted after the final 
     deficit sequester report for that year. If this legislation 
     would result in a net deficit increase, OMB is required to 
     add the amount of this net deficit increase to the next 
     year's sequester calculations. If legislation is not enacted 
     to offset this deficit increase, a sequester will occur.
       The House bill makes other technical and conforming changes 
     to PAYGO.


                    Senate Amendment (Section 1655)

       The Senate amendment is substantially similar to the House 
     bill except that it would sunset pay-as-you-go sequester 
     procedures in 2002.


                  Conference Agreement (Section 10205)

       The conference agreement reflects the House bill with 
     modifications. The lookback procedure is modified to provide 
     that any net deficit increase or decrease created during the 
     current year that is enacted after the final sequester report 
     for that year is added to the pay-as-you-go estimates for the 
     budget year. The conference agreement makes other clarifying 
     and conforming changes to section 252.
       The conference agreement also modifies the manner in which 
     deposit insurance and emergency spending estimates are 
     covered under section 252. The conference agreement provides 
     that estimates associated with either deposit insurance 
     legislation or emergency legislation will not be recorded on 
     the pay-as-you-go scorecard. The conferees intend that OMB 
     and CBO include the estimated budgetary impact of deposit 
     insurance and emergency legislation separately for 
     informational purposes in their reports to Congress, but 
     these estimates should not be recorded for the purposes of 
     calculating pay-as-you-go.
       For deposit insurance, the conference agreement provides 
     that OMB and CBO should only score legislation that modifies 
     the deposit insurance guarantee commitment under current 
     estimates. ``Current'' is a defined term and the conferees 
     intend that OMB use the technical and economic assumptions 
     for deposit insurance contained in the President's most 
     recent budget submission (CBO should use the economic and 
     technical assumptions in the baseline). Section 252 presently 
     requires OMB and CBO to measure the impact relative to the 
     deposit insurance commitment in effect in 1990. To the extent 
     legislation modifies the deposit insurance guarantee 
     commitment, it should be scored by OMB and CBO. If this 
     legislation becomes law, the cost will have been captured 
     for the purposes of pay-as-you-go and should be reflected 
     in the next baseline.
     29. Amendments to section 254 of Gramm-Rudman-Hollings


                       House Bill (Section 11206)

       Amends section 254 of GRH by removing an expired provision 
     relating to the optional adjustment of maximum deficit 
     amounts and extending the requirements for sequestration 
     reports through fiscal year 2006 (for legislation enacted 
     prior to the end of 2002).


                    Senate Amendment (Section 1656)

       The Senate amendment is identical to the House bill except 
     that it deletes the requirement for a General Accounting 
     Office compliance report.


                  Conference Agreement (Section 10206)

       The Senate recedes to the House.
     30. Amendments to section 255 of Gramm-Rudman-Hollings


                       House Bill (Section 11207)

       Makes several conforming changes to the list of exempt 
     programs to account for changes in the program code, changes 
     in program names, and programs that are no longer in 
     existence.


                    Senate Amendment (Section 1657)

       The Senate amendment is identical to the House bill with a 
     few minor exceptions.


                  Conference Agreement (Section 10207)

       The conference agreement reflects the Senate amendment with 
     modifications, including a technical correction regarding the 
     treatment of low-income programs.
       The amendments to section 255(d) change the titles of three 
     accounts to reflect actions by the Committees on 
     Appropriation. Also, three accounts have been added to this 
     section. The Personal Responsibility and Work Opportunities 
     Act of 1996 eliminated the former Aid to Families with 
     Dependent Children (AFDC) Program and created these three 
     accounts in its place. As such, the exemption of these 
     accounts is a continuation of the exemption of the former 
     AFDC program.
     31. Amendments to section 256 of Gramm-Rudman-Hollings


                       House Bill (Section 11208)

       The House bill makes technical corrections and conforming 
     changes to special sequestration procedures to reflect 
     changes since the Budget Enforcement Act of 1990. The only 
     substantive change in this section is in the sequestration 
     procedure for the student loan program, which provides that 
     in the event of a PAYGO sequester, origination fees for both 
     direct loans and guaranteed loans will be increased by 0.50 
     percent.


                    Senate Amendment (Section 1658)

       The Senate amendment makes similar technical corrections 
     and conforming changes, but does not change the sequestration 
     procedure for student loan programs.


                  Conference Agreement (Section 10208)

       The conference agreement reflects the House bill with an 
     additional technical change related to agriculture programs.
       The amendments to section 256(b) update the special rule 
     for guaranteed student loans to reflect recent changes in the 
     Higher Education Act, including the introduction of the 
     direct loan program, and for consistency with the Federal 
     Credit Reform Act. The rule continues to allow a 
     sequestration order to be carried out through a limited 
     increase in loan origination fees.
       The amendments to section 256(j) update the special rule 
     for programs of the Commodity Credit Corporation to reflect 
     recent changes in farm legislation. The rule allows for the 
     application of a sequester order, if one is issued, to CCC 
     programs on a crop-year basis, instead of a fiscal year 
     basis, and for sequestration of the dairy program through 
     reduction in price supports.
     32. Amendments to section 257 of Gramm-Rudman-Hollings


                       House Bill (Section 11209)

       The House bill makes various changes in the definition of 
     the baseline which is used to score legislation for the 
     purpose of enforcing PAYGO requirements. It modifies the rule 
     that programs with outlays greater than $50 million are 
     assumed to continue beyond their expiration date. As 
     modified, the exception would apply only when the legislation 
     explicitly designates that a provision is exempt from the 
     baseline extension requirement.
       It assumes that the baseline for expiring mandatory 
     programs continues to operate under the law that was 
     immediately in effect before the program's expiration.
       It changes the index used for calculating the inflator from 
     the ``national product fixed-weight price index'' to the 
     ``domestic product chain-type price index''.
       It changes the budgetary treatment of asset sales (which 
     currently prohibits counting the proceeds of asset sales for 
     PAYGO purposes). As modified, the proceeds will score only if 
     the sale does not result in a net cost to the Federal 
     government. The formula for making this determination is 
     included in the scorekeeping guidelines.


                    Senate Amendment (Section 1659)

       The Senate amendment is similar to the House bill with two 
     exceptions. First, the Senate amendment provides a different 
     treatment of the baseline for mandatory programs that exceed 
     $50 million. Under current law, CBO and OMB will not score 
     savings associated with terminating mandatory programs that 
     exceed $50 million or reflect the termination of such 
     programs in their baselines. The Senate amendment would allow 
     CBO and OMB to score savings associated with the termination 
     of mandatory programs and reflect the program's termination 
     in the baseline if the legislation clearly eliminated the 
     Federal government's financial obligation to continue to fund 
     the program. Second, the Senate amendment conforms provisions 
     of the Social Security Act regarding the budgetary treatment 
     of the Hospital Insurance Fund with section 257 of GRH. The 
     law is ambiguous regarding the budgetary treatment of the 
     Hospital Insurance Fund. The amendment clarifies that this 
     trust fund is not off-budget and modifies provisions 
     regarding the budget resolution's display of health care 
     budgetary levels.


                  Conference Agreement (Section 10209)

       The conference agreement reflects the Senate amendment with 
     modifications. The conference agreement amends section 257 to 
     provide that only those programs with current year outlays in 
     excess of $50 million and that were in existence on or before 
     the date of enactment of the Balanced Budget Act of 1997 are 
     assumed to continue for the purposes of the baseline. The 
     conference agreement provides that the Budget Committees and 
     OMB, as applicable, will determine the scoring of new 
     programs in excess of $50 million annually and CBO and OMB 
     will consult on any differences on scoring of such new 
     programs. The subsequent baseline treatment of such a new 
     program should be consistent with the scoring of that 
     program.
     33. Amendments to section 258 of Gramm-Rudman-Hollings


                       House Bill (Section 11210)

       This section removes a superseded provision (Section 258 of 
     GRH) regarding modification of a presidential order.


                    Senate Amendment (Section 1660)

       The Senate amendment is identical to the House bill.


                  Conference Agreement (Section 10210)

       The Senate recedes to the House.
     34. Amendments to section 274 of Gramm-Rudman-Hollings


                       House Bill (Section 11211)

       Makes conforming changes to Section 274 of GRH (providing 
     standing for Members of Congress and other persons affected 
     by sequestration orders to seek judicial review) to reflect 
     changes in section numbers made by this Act.

[[Page H6287]]

                    Senate Amendment (Section 1661)

       The Senate amendment is identical with one technical 
     exception.


                  Conference Agreement (Section 10211)

       The conference agreement reflects the House bill with 
     modifications.
     35. Amendments to section 275(b) of Gramm-Rudman-Hollings and 
         section 14002(c)(3) of OBRA 1993


                       House Bill (Section 11212)

       Makes conforming changes to the effective dates of certain 
     programs in Part C of GRH to indicate that the sequestration 
     rules and the special reconciliation process expire in 2002, 
     while the other programs in Part C of GRH (including five-
     year estimates) expire in 2006.
       This section also repeals an expiring provision of OBRA 
     1993 (section 14002(c)(3)) which provided that Part C of GRH 
     (sequestration procedures) and Title VI of the Budget Act 
     were to expire on September 30, 1998.


                    Senate Amendment (Section 1662)

       The Senate amendment is identical to the House bill except 
     that it sunsets pay-as-you-go sequester procedures in 2002.


                  Conference Agreement (Section 10212)

       The Senate recedes to the House.
     36. Provisions related to the Paygo Scorecard


                       House Bill (Section 11213)

       The House bill provides that existing PAYGO balance is 
     eliminated. It further provides that the net deficit 
     reduction from reconciliation is not counted under PAYGO. 
     Such net savings could not be used to offset future PAYGO 
     legislation. This effectively locks in the net savings from 
     reconciliation and previously enacted PAYGO legislation for 
     deficit reduction. This language is similar to language 
     enacted as part of the Omnibus Reconciliation Act of 1993.


                    Senate Amendment (Section 1663)

       The language in the Senate Amendment has the same effect as 
     the House bill.


                  Conference Agreement (Section 10213)

       The conference agreement reflects the House bill with a 
     modification with respect to the references to the two 
     reconciliation bills.
     Scorekeeping Guidelines
       These budget scorekeeping guidelines are to be used by the 
     House and Senate Budget Committees, the Congressional Budget 
     Office, and the Office of Management and Budget (the 
     ``scorekeepers'') in measuring compliance with the 
     Congressional Budget Act of 1974 (CBA), as amended, and GRH 
     as amended. The purpose of the guidelines is to ensure that 
     the scorekeepers measure the effects of legislation on the 
     deficit consistent with established scorekeeping conventions 
     and with the specific requirements in those Acts regarding 
     discretionary spending, direct spending, and receipts. These 
     rules shall be reviewed annually by the scorekeepers and 
     revised as necessary to adhere to the purpose. These rules 
     shall not be changed unless all of the scorekeepers agree. 
     New accounts or activities shall be classified only after 
     consultation among the scorekeepers. Accounts and activities 
     shall not be reclassified unless all of the scorekeepers 
     agree.
       1. Classification of appropriations
       Following is a list of appropriations that are normally 
     enacted in appropriations acts. The list identifies 
     appropriated entitlements and other mandatory spending in 
     appropriations acts, and it identifies discretionary 
     appropriations by category.
       2. Outlays prior
       Outlays from prior-year appropriations will be classified 
     consistent with the discretionary/mandatory classification of 
     the account from which the outlays occur.
       3. Direct spending programs
       Entitlements and other mandatory programs (including 
     offsetting receipts) will be scored at current law levels as 
     defined in section 257 of GRH, unless Congressional action 
     modifies the authorizing legislation. Substantive changes to 
     or restrictions on entitlement law or other mandatory 
     spending law in appropriations laws will be scored against 
     the Appropriations Committee's section 302(b) allocations in 
     the House and the Senate. For the purpose of CBA scoring, 
     direct spending savings that are included in both an 
     appropriations bill and a reconciliation bill will be scored 
     to the reconciliation bill and not to the appropriations 
     bill. For scoring under sections 251 or 252 of GRH, such 
     provisions will be scored to the first bill enacted.
       4. Transfer of budget authority from a mandatory account to 
           a discretionary account
       The transfer of budget authority to a discretionary account 
     will be scored as an increase in discretionary budget 
     authority and outlays in the gaining account. The losing 
     account will not show an offsetting reduction if the 
     account is an entitlement or mandatory program.
       5. Permissive transfer authority
       Permissive transfers will be assumed to occur (in full or 
     in part) unless sufficient evidence exists to the contrary. 
     Outlays from such transfers will be estimated based on the 
     best information available, primarily historical experience 
     and, where applicable, indications of Executive or 
     Congressional intent.
       This guideline will apply both to specific transfers 
     (transfers where the gaining and losing accounts and the 
     amounts subject to transfer can be ascertained) and general 
     transfer authority.
       6. Reappropriations
       Reappropriations of expiring balances of budget authority 
     will be scored as new budget authority in the fiscal year in 
     which the balances become newly available.
       7. Advance appropriations
       Advance appropriations of budget authority will be scored 
     as new budget authority in the fiscal year in which the funds 
     become newly available for obligation, not when the 
     appropriations are enacted.
       8. Rescissions and transfers of unobligated balances
       Rescissions of unobligated balances will be scored as 
     reductions in current budget authority and outlays in the 
     year the money is rescinded.
       Transfers of unobligated balances will be scored as 
     reductions in current budget authority and outlays in the 
     account from which the funds are being transferred, and as 
     increases in budget authority and outlays in the account to 
     which these funds are being transferred.
       In certain instances, these transactions will result in a 
     net negative budget authority amount in the source accounts. 
     For purposes of section 257 of GRH, such amounts of budget 
     authority will be projected at zero. Outlay estimates for 
     both the transferring and receiving accounts will be based on 
     the spending patterns appropriate to the respective accounts.
       9. Delay of obligations
       Appropriations acts specify a date when funds will become 
     available for obligation. It is this date that determines the 
     year for which new budget authority is scored. In the absence 
     of such a date, the act is assumed to be effective upon 
     enactment.
       If a new appropriation provides that a portion of the 
     budget authority shall not be available for obligation until 
     a future fiscal year, that portion shall be treated as an 
     advance appropriation of budget authority. If a law defers 
     existing budget authority (or unobligated balances) from a 
     year in which it was available for obligation to a year in 
     which it was not available for obligation, that law shall be 
     scored as a rescission in the current year and a 
     reappropriation in the year in which obligational authority 
     is extended.
       10. Contingent legislation
       If the authority to obligate is contingent upon the 
     enactment of a subsequent appropriation, new budget authority 
     and outlays will be scored with the subsequent appropriation. 
     If a discretionary appropriation is contingent on the 
     enactment of a subsequent authorization, new budget authority 
     and outlays will be scored with the appropriation. If a 
     discretionary appropriation is contingent on the fulfillment 
     of some action by the Executive branch or some other event 
     normally estimated, new budget authority will be scored with 
     the appropriation, and outlays will be estimated based on the 
     best information about when (or if) the contingency will be 
     met. If direct spending legislation is contingent on the 
     fulfillment of some action by the Executive branch or some 
     other event normally estimated, new budget authority and 
     outlays will be scored based on the best information about 
     when (or if) the contingency will be met. Non-lawmaking 
     contingencies within the control of the Congress are not 
     scoreable events.
       11. Scoring purchases, lease-purchases, capital leases, and 
           operating leases
       When a law provides the authority for an agency to enter 
     into a contract for the purchase, lease-purchase, capital 
     lease, or operating lease of an asset, budget authority and 
     outlays will be scored as follows:
       For lease-purchases and capital leases, budget authority 
     will be scored against the legislation in the year in which 
     the budget authority is first made available in the amount of 
     the estimated net present value of the government's total 
     estimated legal obligations over the life of the contract, 
     except for imputed interest costs calculated at Treasury 
     rates for marketable debt instruments of similar maturity to 
     the lease period and identifiable annual operating expenses 
     that would be paid by the Government as owner (such as 
     utilities, maintenance, and insurance). Property taxes will 
     not be considered to be an operating cost. Imputed interest 
     costs will be classified as mandatory and will not be 
     scored against the legislation or for the current level 
     but will count for other purposes.
       For operating leases, budget authority will be scored 
     against the legislation in the year in which the budget 
     authority is first made available in the amount necessary to 
     cover the government's legal obligations. The amount scored 
     will include the estimated total payments expected to arise 
     under the full term of a lease contract or, if the contract 
     will include a cancellation clause, an amount sufficient to 
     cover the lease payments for the first fiscal year during 
     which the contract is in effect, plus an amount sufficient to 
     cover the costs associated with cancellation of the contract. 
     For funds that are self-insuring under existing authority, 
     only budget authority to cover the annual lease payment is 
     required to be scored.
       Outlays for a lease-purchase in which the Federal 
     government assumes substantial risk--for example, through an 
     explicit government guarantee of third party financing--will 
     be spread across the period during which the contractor 
     constructs, manufactures, or purchases the asset. Outlays for 
     an operating lease, a capital lease, or a lease-purchase in

[[Page H6288]]

     which the private sector retains substantial risk, will be 
     spread across the lease period. In all cases, the total 
     amount of outlays scored over time against legislation will 
     equal the amount of budget authority scored against that 
     legislation.
       No special rules apply to scoring purchases of assets 
     (whether the asset is existing or is to be manufactured or 
     constructed). Budget authority is scored in the year in which 
     the authority to purchase is first made available in the 
     amount of the government's estimated legal obligations. 
     Outlays scored will equal the estimated disbursements by the 
     government based on the particular purchase arrangement, and 
     over time will equal the amount of budget authority scored 
     against that legislation.
       Existing contracts will not be rescored.
       To distinguish lease purchases and capital leases from 
     operating leases, the following criteria will be used for 
     defining an operating lease:
       --Ownership of the asset remains with the lessor during the 
     term of the lease and is not transferred to the Government at 
     or shortly after the end of the lease period.
       --The lease does not contain a bargain-price purchase 
     option.
       --The lease term does not exceed 75 percent of the 
     estimated economic lifetime of the asset.
       --The present value of the minimum lease payments over the 
     life of the lease does not exceed 90 percent of the fair 
     market value of the asset at the inception of the lease.
       --The asset is a general purpose asset rather than being 
     for a special purpose of the Government and is not built to 
     unique specification for the Government as lessee.
       --There is a private-sector market for the asset.
       Risks of ownership of the asset should remain with the 
     lessor.
       Risk is defined in terms of how governmental in nature the 
     project is. If a project is less governmental in nature, the 
     private-sector risk is considered to be higher. To evaluate 
     the level of private-sector risk associated with a lease-
     purchase, legislation and lease-purchase contracts will be 
     considered against the following type of illustrative 
     criteria, which indicate ways in which the project is less 
     governmental:
       --There should be no provision of Government financing and 
     no explicit government guarantee of third party financing.
       --Risks of ownership of the asset should remain with the 
     lessor unless the government was at fault for such losses.
       --The asset should be a general purpose asset rather than 
     for a special purpose of the government and should not be 
     built to unique specification for the government as lessee.
       --There should be a private-sector market for the asset.
       --The project should not be constructed on government land.
       Language that attempts to waive the Anti-Deficiency Act, or 
     to limit the amount or timing of obligations recorded, does 
     not change the government's obligations or obligational 
     authority, and so will not affect the scoring of budget 
     authority or outlays.
       Unless language that authorizes a project clearly states 
     that no obligations are allowed unless budget authority is 
     provided specifically for that project in an appropriations 
     bill in advance of the obligation, the legislation will be 
     interpreted as providing obligation authority, in an amount 
     to be estimated by the scorekeepers.
     12. Write-offs of uncashed checks, unredeemed food stamps, 
         and similar instruments
       Exceptional write-offs of uncashed checks, unredeemed food 
     stamps, and similar instruments (i.e., write-offs of 
     cumulative balances that have built up over several years or 
     have been on the books for several years) shall be scored as 
     an adjustment to the means of financing the deficit rather 
     than as an offset. An estimate of write-offs or similar 
     adjustments that are part of a continuing routine process 
     shall be netted against outlays in the year in which the 
     write-off will occur. Such write-offs shall be recorded in 
     the account in which the outlay was originally recorded.
     13. Reclassification after an agreement
       Except to the extent assumed in a budget agreement, a law 
     that has the effect of altering the classification or scoring 
     of spending and revenues (e.g., from discretionary to 
     mandatory, special fund to revolving fund, on-budget to off-
     budget, revenue to offsetting receipt), will not be scored as 
     reclassified for the purpose of enforcing a budget agreement.
     14. Scoring of receipt increases or direct spending 
         reductions for additional administrative or program 
         management expenses
       No increase in receipts or decrease in direct spending will 
     be scored as a result of provisions of a law that provides 
     direct spending for administrative or program management 
     activities.
     15. Asset sales
       If the net financial cost to the government of an asset 
     sale is zero or negative (a savings), the amount scored shall 
     be the estimated change in receipts and mandatory outlays in 
     each fiscal year on a cash basis. If the cost to the 
     government is positive (a loss), the proceeds from the sale 
     shall not be scored for purposes of the CBA or GRH.
       The net financial cost to the federal government of an 
     asset sale shall be the net present value of the cash flows 
     from:
        (1) estimated proceeds from the asset sale;
        (2) the net effect on federal revenues, if any, based on 
     special tax treatments specified in the legislation;
        (3) the loss of future offsetting receipts that would 
     otherwise be collected under continued government ownership 
     (using baseline levels for the projection period and 
     estimated levels thereafter); and
        (4) changes in future spending, both discretionary and 
     mandatory, from levels that would otherwise occur under 
     continued government ownership (using baseline levels for the 
     projection period and at levels estimated to be necessary to 
     operate and maintain the asset thereafter).
        The discount rate used to estimate the net present value 
     shall be the average interest rate on marketable Treasury 
     securities of similar maturity to the expected remaining 
     useful life of the asset for which the estimate is being 
     made, plus 2 percentage points to reflect the economic 
     effects of continued ownership by the government.
     Explanation of changes to the scorekeeping guidelines
       The Scorekeeping Guidelines above are based on the 
     guidelines that accompanied the Budget Enforcement Act of 
     1990 and have been used for scoring legislation since that 
     time. Some of the existing guidelines have been changed in 
     order to clarify them. Some new guidelines were added to make 
     certain current scoring conventions explicit. There are no 
     substantive changes from current scorekeeping practices. The 
     changes to the introductory paragraph make it clear that the 
     scorekeepers--the Budget Committees, CBO, and OMB--are bound 
     by established scorekeeping conventions and the specific 
     requirements of the Congressional Budget Act and the Balanced 
     Budget Act, as amended by the Budget Enforcement Act. They 
     also make it clear that the guidelines will be reviewed and 
     changed if all of the scorekeepers agree. The scorekeepers 
     are required to consult on new account classifications and 
     must agree to any reclassification. Following is a 
     description of the significant changes to specific 
     scorekeeping guidelines.
       1. Classification of appropriations
       There was no substantive change to this guideline. The 
     title was changed to more accurately reflect the nature of 
     the list of accounts to which the guideline refers. The list 
     includes mandatory appropriations and discretionary accounts 
     listed according to the new categories--defense, non-defense, 
     and violent crime reduction.
       2. Outlays prior
       No significant change.
       3. Direct spending programs
       Language was added on scoring provisions that affect direct 
     spending when similar provisions are included in both an 
     appropriations bill and a reconciliation bill. 
     This requirement applies to bills, not to enacted 
     legislation.
       4. Transfer of budget authority from a mandatory to a 
           discretionary account--No change.
       5. Permissive transfer authority--No significant change.
       6. Reappropriations--No change.
       7. Advance appropriations--No significant change.
       8. Rescissions and transfers of unobligated balances--No 
           significant change.
       9. Delay of obligations
       The existing guideline covers the scoring of legislation 
     with provisions that delay obligations and contingencies. 
     There are no significant changes to the part concerning delay 
     of obligations. The part concerning contingencies has been 
     broken out as a separate guideline--new guideline 10.
       10. Contingent legislation
       The existing language (formerly part of guideline 9) was 
     changed to clarify the treatment of contingencies affecting 
     discretionary spending versus those affecting direct 
     spending.
       The former guideline 10, concerning the absorption of pay 
     raises, has been deleted because it was no longer necessary. 
     Any pay raises are assumed to be within the caps.
       11. Scoring purchases, lease-purchases, and capital leases
       The changes in this guideline clarify existing conventions 
     that were developed to implement the 1990 requirements. The 
     requirements are generally consistent with commercial 
     accounting practices. Matter formerly included in an addendum 
     to the rule has been integrated into the rule itself.
       12. Write-offs of uncashed checks, unredeemed food stamps, 
           and similar instruments--No change.
       13. Reclassification after an agreement--No significant 
           change.
       14. Scoring of receipt increases or direct spending 
           reductions for additional administrative or program 
           management expenses
        This new rule would prohibit scoring direct spending, 
     savings, or receipt increases to legislation providing 
     mandatory spending for administrative or program management 
     activities.
       15. Asset sales
       GRH formerly included a prohibition on the scoring of the 
     proceeds from asset sales. That provision was amended to 
     allow scoring on a cash basis if the sale does not result in 
     a net cost to the government over the long term. This 
     guideline specifies the method for determining the net 
     financial cost to the government of an asset sale. It 
     requires a

[[Page H6289]]

     calculation of the net present value of the estimated changes 
     in cash flows resulting from the sale. It requires using a 
     discount rate equal to the interest rate on Treasury 
     securities plus 2 percentage points. The 2 percentage points 
     addition is an arbitrary factor intended to take into account 
     the economic effects of continued government ownership. This 
     is believed to be a fairer test that handicaps for private 
     sector risk and taxes.

     APPROPRIATED ENTITLEMENTS AND MANDATORIES FOR FISCAL YEAR 1997


          Agriculture, Rural Development and Related Agencies

     Agriculture Department:
       Agricultural Marketing Service:
         12-5209  -0-2-605  Funds for strengthening markets, 
     income, and supply (section 32) \1\
       Risk Management Agency:
         12-4085  -0-3-351  Federal Crop Insurance Corporation 
     fund
       Farm Service Agency:
         12-3314  -0-1-351  Dairy indemnity program
         12-4336  -0-3-351  Commodity Credit Corporation fund
       Food and Consumer Service:
         12-3505  -0-1-605  Food stamp program
         12-3539  -0-1-605  Child nutrition programs
     Treasury Department:
       Financial Management Service:
         20-1850  -0-1-351  Payments to the farm credit system 
     financial assistance corp.


      COMMERCE, JUSTICE, STATE, THE JUDICIARY AND RELATED AGENCIES

     The Judiciary:
         10-0100  -0-1-752  Supreme Court of the United States, 
     Salaries and expenses \2\
         10-0400  -0-1-752  U.S. Court of International Trade, 
     Salaries and expenses \2\
         10-0510  -0-1-752  U.S. Court of Appeals for the Federal 
     Circuit, Salaries and expenses \2\
         10-0920  -0-1-752  Courts of Appeals, District Courts, 
     etc., Salaries and expenses \2\
         10-0941  -0-1-752  Judicial Retirement Funds, Payment to 
     judiciary trust funds
     Commerce Department:
       National  Oceanic and Atmospheric Administration:
         13-4313  -0-3-306  Coastal zone management fund \3\
     Justice Department:
       Legal Activities:
         15-0311  -0-1-752  Fees and expenses of witnesses
         15-0327  -0-1-752  Independent counsel
         15-0329  -0-1-808  Civil liberties public education fund
       Office of Justice Programs:
         15-0403  -0-1-754  Public safety officers' benefits \4\
     State Department:
       Administration of Foreign Affairs:
         19-0540  -0-1-153  Payment to the Foreign Service 
     retirement and disability fund


                                DEFENSE

     Central Intelligence Agency:
         56-3400  -0-1-054  Payment to Central Intelligence Agency 
     retirement and disability fund


                          DISTRICT OF COLUMBIA

         No mandatory accounts.


                      ENERGY AND WATER DEVELOPMENT

         No mandatory accounts.


                           FOREIGN OPERATIONS

      Agency for International Development:
         72-1036  -0-1-153  Payment to the Foreign Service 
     retirement and disability fund


                     INTERIOR AND RELATED AGENCIES

     Interior Department:
       Bureau of Land Management:
         14-5132  -0-2-302  Range improvements
         14-9971  -0-7-302  Miscellaneous trust funds
     Insular Affairs:
         14-0412  -0-1-808  Assistance to territories \5\
         14-0415  -0-1-808  Compact of free association \6\


               LABOR, HHS, EDUCATION AND RELATED AGENCIES

     Labor Department:
       Employment and Training Services:
         16-0326  -0-1-504  Federal unemployment benefits and 
     allowances (FUBA)
         16-0326  -0-1-603  Federal unemployment benefits and 
     allowances (FUBA)
         16-0327  -0-1-601  Advances to the unemployment trust 
     fund and other funds
       Employment Standards Administration:
         16-1521  -0-1-601  Special benefits
         16-1521  -0-1-602  Special benefits
         20-8144  -0-7-601 Black  lung disability trust fund
     Health and Human Services:
       Health Resources and Services Administration:
         75-0350  -0-1-551  Health resources and services \7\
         75-0320  -0-1-551  Vaccine injury compensation
         75-9931  -0-3-551  Health loan funds
         75-4430  -0-1-551  Medical facilities guarantee and loan 
     fund
         20-8175  -0-7-551  Vaccine injury compensation program 
     trust fund \8\
       Health Care Financing Administration (HCFA):
         75-0512  -0-1-551  Grants to States for Medicaid
         75-0580  -0-1-571  Payments to health care trust funds
         75-4420  -0-3-551  HMO loan and loan guarantee fund
       Administration for Children and Families:
         75-1501  -0-1-609  Family support payments to States
         75-1509  -0-1-504  Job opportunities and basic skills
         75-1512  -0-1-506  Family preservation and support
         75-1534  -0-1-506  Social services block grant
         75-1545  -0-1-506  Payments to States for foster care and 
     adoption assistance
       Program Support Center:
         75-0379  -0-1-551  Retirement pay and medical benefits 
     for commissioned officers
     Education Department:
       Office of Special Education and Rehabilitative Services:
         91-0301  -0-1-506  Rehabilitative services and disability 
     research
     Social Security Administration:
         28-0404  -0-1-651  Payments to social security trust 
     funds
         28-0409  -0-1-601  Special benefits for disabled coal 
     miners
         28-0406  -0-1-609  Supplemental security income program 
     \9\
     Treasury Department:
         20-1702  -0-1-808  Payment to D.C. financial 
     responsibility and management assistance authority


                           LEGISLATIVE BRANCH

     Legislative Branch:
       Senate:
         00-0100  -0-1-801  Compensation of members, Senate
         00-0115  -0-1-801  Payments to windows and heirs of 
     deceased members of Congress--Senate
       House:
         00-0200  -0-1-801  Compensation of members, House and 
     related administrative expenses
         00-0215  -0-1-801  Payments to windows and heirs of 
     deceased members of Congress--House


                         MILITARY CONSTRUCTION

         No mandatory accounts.


                             TRANSPORTATION

     Transportation Department:
       Coast Guard:
         69-0241  -0-1-403  Retired pay
         69-8349  -0-7-304  Oil spill recovery


            TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT

     Treasury Department:
       Bureau of the Public Debt:
         20-1710  -0-1-803  Payment of government losses in 
     shipment
         20-0560  -0-1-803  Administering the public debt \10\
     Postal Service:
         18-1004  -0-1-372  Payment to the Postal Service fund for 
     non-funded liabilities
     Office of Personnel Management:
         24-0206  -0-1-551  Government payment for annuitants, 
     employees health benefits
         24-0500  -0-1-602  Government payment for annuitants, 
     employee life insurance benefits
         24-0200  -0-1-805  Payment to civil service retirement 
     and disability fund
     Executive Office of the President:
       Compensation of the President and the White House Office:
         11-0001  -0-1-802  Compensation of the President


         VETERANS, HOUSING AND URBAN, AND INDEPENDENT AGENCIES

     Housing and Urban Development:
       Housing Programs:
         86-0183  -0-1-371  FHA-mutual mortgage insurance program 
     account \11\
     Veterans Affairs:
       Veterans Benefits Administration:
         36-0153  -0-1-701  Compensation
         36-0154  -0-1-701  Pensions
         36-0155  -0-1-701  Burial benefits and miscellaneous 
     assistance
         36-0137  -0-1-702  Readjustment benefits
         36-0120  -0-1-701  Veterans insurance and indemnities
         36-0138  -0-1-704  Veterans housing benefit program fund 
     program account \9\
     Other Agencies:
         51-4065  -0-3-373  FSLIC resolution fund


    APPROPRIATED ENTITLEMENTS AND MANDATORIES FOR FISCAL YEAR 1997--
                               Footnotes:

     \1\ The entire account shall be scored as mandatory except to 
     the extent that discretionary set asides are specified in 
     appropriations language.
     \2\ Account split--only salaries of judges are mandatory.
     \3\ Account split--loan repayments from the former Coastal 
     Zone Emergency Impact Program are mandatory.
     \4\ Account split--the entire account shall be scored as 
     mandatory except to the extent that discretionary activities 
     are specified in appropriations language.
     \5\ Account split--the interest rate differential related to 
     the Guam Power Authority refinancing and the Northern 
     Marianas covenant will be scored as mandatory.
     \6\ Account split--the account shall be split between 
     mandatory payments (required by treaty) and discretionary 
     costs.
     \7\ Account split--the Welfare Reform bill provides $50 
     million in mandatory funding for each fiscal year from 1998 
     through 2002.

[[Page H6290]]

     \8\ The administrative expenses associated with this account 
     are discretionary within the jurisdiction of the Commerce, 
     Justice, State subcommittee.
     \9\ Account split--administrative expenses shall be scored as 
     discretionary budget authority and outlays.
     \10\ Account split--reimbursement to the Federal Reserve is 
     mandatory.
     \11\ Portion of account is discretionary.

                DISCRETIONARY APPROPRIATIONS CATEGORIES

       The following is a list of discretionary accounts organized 
     by three subsets of discretionary appropriations: defense 
     discretionary; non-defense discretionary, excluding violent 
     crime reduction; and, violent crime reduction, pursuant to 
     Section 250(c)4. New accounts or activities shall be 
     classified or reclassified consistent with the Scorekeeping 
     Guidelines.

    APPROPRIATED DEFENSE DISCRETIONARY ACCOUNTS FOR FISCAL YEAR 1997


                        COMMERCE, JUSTICE, STATE

     Transportation Department:
       Maritime Administration:
         69-1711  -0-1-054  Maritime security program
     Justice Department:
       Radiation Exposure Compensation:
         15-0105  -0-1-054  Administrative expenses
         15-0333  -0-1-054  Payment to the radiation exposure 
     compensation trust fund
         15-8116  -0-7-054  Radiation exposure compensation trust 
     fund
       Federal Bureau of Investigation:
         15-0200  -0-1-054  Salaries and expenses
         15-0202  -0-1-054  Telecommunications carrier compliance 
     fund
     Defense Department:
       Military Personnel:
         21-2010  -0-1-051  Army
         17-1453  -0-1-051  Navy
         17-1105  -0-1-051  Marine Corps
         57-3500  -0-1-051  Air Force
         21-2070  -0-1-051  Reserve Forces, Reserve personnel, 
     Army
         17-1405  -0-1-051  Reserve personnel, Navy
         17-1108  -0-1-051  Reserve personnel, Marine Corps
         57-3700  -0-1-051  Reserve personnel, Air Force
         21-2060  -0-1-051  National Guard personnel, Army
         57-3850  -0-1-051  National Guard personnel, Air Force
       Operations and Maintenance:
         21-2020  -0-1-051  Army
         17-1804  -0-1-051  Navy
         17-1106  -0-1-051  Marine Corps
         57-3400  -0-1-051  Air Force
         97-0100  -0-1-051  Defense-wide
         97-0107  -0-1-051  Office of the Inspector General
         21-2080  -0-1-051  Army Reserve
         17-1806  -0-1-051  Navy Reserve
         17-1107  -0-1-051  Marine Corps Reserve
         57-3740  -0-1-051  Air Force Reserve
         21-2065  -0-1-051  Army National Guard
         57-3840  -0-1-051  Air National Guard
         97-0839  -0-1-051  Quality of Life Enhancements, Defense
         97-0118  -0-1-051  Overseas contingency operations 
     transfer account
         97-0104  -0-1-051  United States Courts of Appeals for 
     the armed forces
         97-0105  -0-1-051  Drug interdiction and counter-drug 
     activities, Defense
         97-0838  -0-1-051  Support for international sporting 
     competitions, Defense
         97-0131  -0-1-051  Real property maintenance, Defense
         97-0132  -0-1-051  Disaster relief
         97-0130  -0-1-051  Defense health program
         97-0810  -0-1-051  Environmental restoration, Defense
         97-0819  -0-1-051  Overseas humanitarian, disaster and 
     civic aid
         97-0828  -0-1-051  Defense reinvestment for economic 
     growth
         97-0134  -0-1-051  Former Soviet Union threat reduction 
     account
         97-0837  -0-1-051  Defense Against Weapons of Mass 
     Destruction
         17-1236  -0-1-051  Payment to Kaho'Olawe conveyance, 
     remediation, and environmental Restoration fund
         97-0833  -0-1-051  Emergency response fund
         97-9922  -0-2-051  Disposal and lease of DOD real 
     property
         97-5193  -0-2-051  Overseas military facility investment 
     recovery
         97-5441  -0-2-051  Burdensharing and other cooperative 
     activities
         17-5185  -0-2-051  Kaho'Olawe Island conveyance, 
     remediation, and environmental restoration fund
       Procurement:
         21-2031  -0-1-051  Aircraft procurement, Army
         21-2032  -0-1-051  Missile procurement, Army
         21-2033  -0-1-051  Procurement of weapons and tracked 
     combat vehicles, Army
         21-2034  -0-1-051  Procurement of ammunition, Army
         21-2035  -0-1-051  Other procurement, Army
         97-0835  -0-1-051  Defense export loan guarantee program 
     account
         17-1506  -0-1-051  Aircraft procurement, Navy
         17-1507  -0-1-051  Weapons procurement, Navy
         17-1508  -0-1-051  Procurement of ammunition, Navy and 
     Marine Corps
         17-1611  -0-1-051  Shipbuilding and conversion, Navy
         17-1810  -0-1-051  Other procurement, Navy
         17-1109  -0-1-051  Marine Corps
         57-3010  -0-1-051  Aircraft procurement, Air Force
         57-3020  -0-1-051  Missile procurement, Air Force
         57-3011  -0-1-051  Procurement of ammunition, Air Force
         57-3080  -0-1-051  Other procurement, Air Force
         97-0300  -0-1-051  Procurement, Defense-wide
         97-0350  -0-1-051  National guard and reserve equipment
         97-0360  -0-1-051  Defense production act purchases
         97-0390  -0-1-051  Chemical agents and munitions 
     destruction, Army
       Research, development, test, and evaluation:
         21-2040  -0-1-051  Army
         17-1319  -0-1-051  Navy
         57-3600  -0-1-051  Air Force
         97-0400  -0-1-051  Defense-wide
         97-0450  -0-1-051  Developmental test and evaluation, 
     Defense
         97-0460  -0-1-051  Operational test and evaluation, 
     Defense
       Revolving and Management Funds:
         97-4555  -0-3-051  National defense stockpile transaction 
     fund
         17-4557  -0-4-051  National defense sealift fund
         97-4930  -0-4-051  Defense Business Operation Fund (DBOF)
       Allowances:
         97-9918  -0-1-051  General transfer authority outlay 
     allowance
       Trust Funds:
         97-8168  -0-7-051  Trust Funds, National security 
     education trust fund
     Other Agencies:
         95-0401  -0-1-054  Intelligence community management 
     account


                      ENERGY AND WATER DEVELOPMENT

     Energy Department:
       Atomic Energy Defense Activities:
         89-0240  -0-1-053  Weapons activities
         89-0242  -0-1-053  Defense environmental restoration and 
     waste management
         89-0243  -0-1-053  Other Defense Activities
         89-0244  -0-1-053  Defense nuclear waste disposal
     Other Agencies:
         95-3900  -0-1-053  Defense Nuclear Facilities Safety 
     Board, Salaries and expenses


                         MILITARY CONSTRUCTION

     Defense Department:
       Military Construction:
         21-2050  -0-1-051  Army
         17-1205  -0-1-051  Navy
         57-3300  -0-1-051  Air Force
         97-0500  -0-1-051  Defense-wide
         97-0804  -0-1-051  North Atlantic Treaty Organization 
     security investment program
         21-2085  -0-1-051  Army National Guard
         57-3830  -0-1-051  Air National Guard
         21-2086  -0-1-051  Army Reserve
         17-1235  -0-1-051  Naval Reserve
         57-3730  -0-1-051  Air Force Reserve
         97-0103  -0-1-051  Base realignment and closure account
       Family Housing:
         21-0702  -0-1-051  Army
         17-0703  -0-1-051  Navy and Marine Corps
         57-0704  -0-1-051  Air Force
         97-0706  -0-1-051  Defense-wide
         97-4090  -0-3-051  Homeowners assistance fund, Defense
         97-0834  -0-1-051  Family housing improvement fund
         97-0836  -0-1-051  Military unaccompanied housing 
     improvement fund


                  TRANSPORTATION AND RELATED AGENCIES

     Transportation Department:
       Coast Guard:
         69-0201   -0-1-054  Operating expenses


   VETERANS AFFAIRS, HOUSING AND URBAN DEVELOPMENT, AND INDEPENDENT 
                                AGENCIES

     FEMA:
         58-0100  -0-1-054  Salaries and expenses
         58-0101  -0-1-054  Emergency management planning and 
     assistance
     NSF:
         49-0100  -0-1-054  Research and related activities
     Selective Service System:
         90-0400  -0-1-054  Salaries and expenses

   APPROPRIATED DOMESTIC DISCRETIONARY ACCOUNTS FOR FISCAL YEAR 1997


          AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES

     Agriculture Department:
       Office of the Secretary:
         12-0115  -0-1-352  Office of the Secretary
     Executive Operations:
         12-0705  -0-1-352  Executive Operations
         12-0014  -0-1-352  Chief financial officer
       Departmental Administration:
         12-0120  -0-1-352  Departmental Administration
         12-0500  -0-1-304  Hazardous waste management
         12-0117  -0-1-352  Agriculture buildings and facilities 
     and rental payments
       Office of Communication:
         12-0150  -0-1-352  Office of Communications
       Office of the Inspector General:
         12-0900  -0-1-352  Office of the Inspector General

[[Page H6291]]

       Office of the General Counsel:
         12-2300  -0-1-352  Office of the General Counsel
       Economic Research Service:
         12-1701  -0-1-352  Economic Research Service
       National Agricultural Statistics Service:
         12-1801  -0-1-352  National Agricultural Statistics 
     Service
       Agricultural Research Service:
         12-1400  -0-1-352  Agricultural Research Service
         12-1401  -0-1-352  Buildings and facilities
       Cooperative State Research, Education and Extension 
         Service:
         12-1500  -0-1-352  Cooperative state research activities
         12-0502  -0-1-352  Extension activities
       Animal and Plant Health Inspection Service:
         12-1600  -0-1-352  Salaries and expenses \1\
         12-1601  -0-1-352  Buildings and facilities
       Food Safety and Inspection Services:
         12-3700  -0-1-554  Salaries and expenses
       Grain Inspection, Packers, and Stockyards Administration:
         12-2400  -0-1-352  Salaries and expenses
       Agricultural Marketing Service:
         12-2500  -0-1-352  Marketing services
         12-2501  -0-1-352  Payments to States and possessions
       Risk Management Agency (Federal Crop Insurance 
         Corporation):
         12-2707  -0-1-351  Administrative and operating expenses
       Farm Service Agency:
         12-0600  -0-1-351  Salaries and expenses
         12-3300  -0-1-351  Salaries and expenses
         12-3315  -0-1-302  Agricultural conservation program
         12-0170  -0-1-351  State mediation grants
         12-3316  -0-1-453  Emergency conservation program
         12-1336  -0-1-351  Commodity Credit Corporation export 
     loans program account \1\
         12-1140  -0-1-351  Agricultural credit insurance fund 
     program account
       Natural Resources Conservation Service:
         12-1000  -0-1-302  Conservation operations
         12-1066  -0-1-301  Watershed surveys and planning
         12-1072  -0-1-301  Watershed and flood prevention 
     operations
         12-1010  -0-1-302  Resource conservation and development
         12-0601  -0-1-351  Outreach for socially disadvantaged 
     farmers
         12-2268  -0-1-302  Great plains conservation program
         12-3336  -0-1-302  Forestry incentives program
         12-3320  -0-1-302  Water Bank program
         12-3318  -0-1-304  Colorado river basin salinity control 
     program
         12-3337  -0-1-304  Rural clean water program
       Rural Utilities Service:
         12-1981  -0-1-452  Salaries and expenses
         12-2045  -0-1-304  Solid waste management grants
         12-2046  -0-1-451  Emergency community water assistance 
     grants
         12-2066  -0-1-452  Rural water and waste disposal grants
         12-1230  -0-1-271  Rural electrification and 
     telecommunications loans program account \1\
         12-1980  -0-1-452  Rural water and waste disposal loans 
     program account
         12-1231  -0-1-452  Rural telephone bank program account
       Rural Housing Service:
         12-1952  -0-1-452  Salaries and expenses
         12-1953  -0-1-452  Rural housing assistance grants
         12-0137  -0-1-604  Rental assistance program
         12-2002  -0-1-604  Rural Housing Service, Rural housing 
     voucher program
         12-2004  -0-1-604  Rural housing for domestic farm labor 
     grants
         12-2006  -0-1-604  Mutual and self-help housing grants
         12-2009  -0-1-604  Supervisory and technical assistance 
     grants
         12-2064  -0-1-604  Very low income housing repair grants
         12-2067  -0-1-452  Rural community fire protection grants
         12-2070  -0-1-604  Rural housing preservation grants
         12-1951  -0-1-452  Rural community facility loans program 
     account
         12-2081  -0-1-371  Rural housing insurance fund program 
     account
       Rural Business and Cooperative Development Service:
         12-1903  -0-1-452  Rural Business--Cooperative Service, 
     Salaries and Expenses
         12-3400  -0-1-452  Salaries and expenses (Rural 
     Development Administration)
         12-1900  -0-1-452  Rural cooperative development grants
         12-1901  -0-1-452  Local technical assistance and 
     planning grants
         12-2065  -0-1-452  Rural Business--Cooperative Service
         12-1902  -0-1-452  Rural business and industry loans 
     program account
         12-2069  -0-1-452  Rural development loan fund program 
     account
         12-3108  -0-1-452  Rural economic development loans 
     program account
         12-4144  -0-3-352  Alternative agricultural research and 
     commercialization corporation
       Foreign Agricultural Service:
         12-2900  -0-1-352  Foreign agricultural service and 
     general sales manager
         12-1404  -0-1-352  Scientific activities overseas 
     (foreign currency program)
         12-2278  -0-1-151  Public Law 480 Grants--Titles I (OFD), 
     II, and III
         12-2277  -0-1-351  P.L. 480 program account
       Food and Consumer Service:
         12-3508  -0-1-605  Food program administration
         12-3510  -0-1-605  Special supplemental nutrition program 
     for women, infants, and children
         12-3507  -0-1-605  Commodity assistance program
         12-3503  -0-1-605  Food donations programs for selected 
     groups \2\
     Health and Human Services:
        Food and Drug Administration:
         75-0600  -0-1-554  Salaries and expenses
         75-0601  -0-1-554  Rental payments
         75-0603  -0-1-554  Buildings and facilities
         75-9911  -0-1-554  Salaries and expenses
     Other Agencies:
         95-1400  0-1-376  Commodity Futures Trading Commission


      COMMERCE, JUSTICE, STATE, THE JUDICIARY AND RELATED AGENCIES

     Legislative Branch:
         48-2101  -0-1-801  Gambling Impact Study Commission: 
     Salaries and expenses
          00-0110  -0-1-153  Commission on Security and 
     Cooperation in Europe: Salaries and expenses
         95-0650  -0-1-801  Commission on Immigration Reform: 
     Salaries and expenses
     The Judiciary:
       Supreme Court of the United States:
         10-0100  -0-1-752  Salaries and expenses \2\
         10-0103  -0-1-752  Care of the buildings and grounds
       United States Court of Appeals for the Federal Circuit:
         10-0510  -0-1-752  Salaries and expenses \2\
       United States Court of International Trade:
         10-0400  -0-1-752  Salaries and expenses \2\
       Courts of Appeals, District Courts, and other judicial 
         services:
         10-0920  -0-1-752  Salaries and expenses \2\
         10-0923  -0-1-752  Defender services
         10-0925  -0-1-752  Fees of jurors and commissioners
         10-0930  -0-1-752  Court security
       Administrative Office of the United States Courts:
         10-0927  -0-1-752  Salaries and expenses
       Federal judicial center:
         10-0928  -0-1-752  Salaries and expenses
       United States Sentencing Commission:
         10-0938  -0-1-752  Salaries and expenses
     Commerce Department:
       General Administration:
         13-0120  -0-1-376  Salaries and expenses
         13-0126  -0-1-376  Office of the Inspector General
       Economic Development Agency:
         13-0125  -0-1-452  Salaries and expenses
         13-2050  -0-1-452  Economic development assistance 
     programs
       Bureau of the Census:
         13-0401  -0-1-376  Salaries and expenses \1\
         13-0450  -0-1-376  Periodic censuses and programs
       Economic and Statistical Analysis:
         13-1500  -0-1-376  Salaries and expenses
         13-4323  -0-3-376  Economics and statistics 
     administration revolving fund
       International Trade Administration:
         13-1250  -0-1-376  Operations and administration
       Export Administration:
         13-0300  -0-1-376  Operations and administration
       Minority Business Development Agency:
         13-0201  -0-1-376  Minority business development
       U.S. Travel and Tourism Administration:
         13-0700  -0-1-376  United States Travel and Tourism 
     Administration, Salaries and expenses
       National Oceanic and Atmospheric Administration:
         13-1450  -0-1-306  Operations, research, and facilities
         13-1450  -0-1-376  Operations, research, and facilities
         13-1452  -0-1-306  Construction
         13-1457  -0-1-376  Fleet Modernization, shipbuilding and 
     conversion
         13-5139  -0-2-376  Promote and develop fishery products 
     and research pertaining to American fisheries \1\
         13-5124  -0-2-376  Fisheries promotional fund
         13-4313  -0-3-306  Coastal zone management fund \2\
         13-5120  -0-2-376  Fishermen's contingency fund
         13-5119  -0-2-376  Fishing vessel and gear damage 
     compensation fund
         13-4316  -0-3-304  Damage assessment and restoration 
     revolving fund
         13-1456  -0-1-376  Fisheries finance, program account
         13-5122  -0-2-376  Foreign fishing observer fund
       Patent and Trademark Office:
         13-1006  -0-1-376  Salaries and expenses

[[Page H6292]]

     Technology Administration:
         13-1100  -0-1-376  Salaries and expenses
     National Technical Information Service:
         13-4295  -0-3-376  NTIS revolving fund
     National Institutes of Standards and Technology:
         13-0500  -0-1-376  Scientific and technical research and 
     services
         13-0525  -0-1-376  Industrial technology services
         13-0515  -0-1-376  Construction of research facilities
         13-4650  -0-4-376  Working capital fund
     National Telecommunications and Information Administration:
         13-0550  -0-1-376  Salaries and expenses
         13-0551  -0-1-503  Public broadcasting facilities, 
     planning and construction
         13-0552  -0-1-503  Information infrastructure grants
     Department of Health and Human Services:
       Health Resources and Services Administration:
         20-8175  -0-7-551  Vaccine injury compensation program 
     trust fund \2\
     Justice Department:
       General Administration:
         15-0129  -0-1-751  General Administration, Salaries and 
     expenses
         15-0130  -0-1-751  Counterterrorism fund
         15-0328  -0-1-751  Office of the Inspector General
         15-0339  -0-1-751  Administrative review and appeals
       U.S. Parole Commission:
         15-1061  -0-1-751  Salaries and expenses
       Legal Activities:
         15-0128  -0-1-752  Salaries and expenses, General legal 
     activities
         15-0319  -0-1-752  Antitrust division, Salaries and 
     expenses
         15-0322  -0-1-752  United States Attorneys, Salaries and 
     expenses
         15-0100  -0-1-153  Salaries and expenses, foreign claims 
     settlement commission
         15-0324  -0-1-752  United States Marshals service, 
     Salaries and expenses
         15-1020  -0-1-752  Federal prisoner detention
         15-0500  -0-1-752  Community relations service, Salaries 
     and expenses
         15-5073  -0-2-752  United States trustees system fund
         15-5042  -0-2-752  Assets forfeiture fund \1\
       Interagency Law Enforcement:
         15-0323  -0-1-751  Interagency crime and drug enforcement
       Federal Bureau of Investigation:
         15-0200  -0-1-751  Salaries and expenses
         15-0203  -0-1-751  Construction
         15-0202  -0-1-751  Telecommunications carrier compliance 
     fund
       Drug Enforcement Administration:
         15-1100  -0-1-751  Salaries and expenses
         15-1101  -0-1-751  Construction
       Immigration and Naturalization Service:
         15-1217  -0-1-751  Salaries and expenses
         15-1219  -0-1-751  Construction
         15-1218  -0-1-751  Immigration Emergency Fund
       Federal Prison System:
         15-1060  -0-1-753  Salaries and expenses
         15-1003  -0-1-753  Buildings and facilities
         15-4500  -0-4-753  Federal Prison Industries, 
     Incorporated \1\
       Office of Justice Programs:
         15-0401  -0-1-754  Justice assistance
         15-0404  -0-1-754  State and local law enforcement 
     assistance
         15-0405  -0-1-754  Juvenile justice program
         15-0403  -0-1-754  Public safety officers' benefits \2\
     State Department:
       Administration of Foreign Affairs:
         19-0113  -0-1-153  Diplomatic and consular programs
         19-0107  -0-1-153  Salaries and expenses
         19-0120  -0-1-153  Capital investment fund
         19-0529  -0-1-153  Office of the Inspector General
         19-0535  -0-1-153  Security and maintenance of United 
     States missions
         19-0545  -0-1-153  Representation allowances
         19-0520  -0-1-153  Protection of foreign missions and 
     officials
         19-0522  -0-1-153  Emergencies in the diplomatic and 
     consular service
         19-0523  -0-1-153  Payment to the American Institute in 
     Taiwan
         19-0601  -0-1-153  Repatriation loans program account
       International Organizations and Conferences:
         19-1126  -0-1-153  Contributions to international 
     organizations
         19-1124  -0-1-153  Contributions for international 
     peacekeeping activities
         19-1125  -0-1-153  International conferences and 
     contingencies
       International Commissions:
         19-1069  -0-1-301  Salaries and expenses, IBWC
         19-1078  -0-1-301  Construction, IBWC
         19-1082  -0-1-301  American sections, international 
     commissions
         19-1087  -0-1-302  International fisheries commissions
       Other:
         19-0525  -0-1-154  Payment to the Asia foundation
     Transportation Department:
       Maritime Administration:
         69-1709  -0-1-403  Operating differential subsidies
         69-1750  -0-1-403  Operations and Training
         69-1752  -0-1-403  Maritime guaranteed loan (Title XI) 
     program account
       Small Business Administration:
         73-0100  -0-1-376  Small Business Administration, 
     Salaries and expenses
         73-0200  -0-1-376  Office of Inspector General
         73-4156  -0-3-376  Surety bond guarantees revolving fund
         73-1154  -0-1-376  Business loan program account
         73-1152  -0-1-453  Disaster loans program account
     Legal Services Corporation:
         20-0501  -0-1-752  Payment to the Legal Services 
     Corporation
     United States Information Agency:
         67-0201  -0-1-154  International information programs
         67-0400  -0-1-154  Technology fund
         67-0209  -0-1-154  Educational and cultural exchange 
     programs
         67-0210  -0-1-154  National Endowment for Democracy
         67-0208  -0-1-154  Broadcasting to Cuba
         67-0202  -0-1-154  East-West center
         67-0203  -0-1-154  North/South Center
         67-0206  -0-1-154  International broadcasting operations
         67-0204  -0-1-154  Radio construction
     Ounce of Prevention Council:
         95-0100  -0-1-754  Violent crime reduction programs
     Other Agencies:
         09-9911  -0-1-801  Other legislative branch boards and 
     commissions
         11-0400  -0-1-802  Office of the United States Trade 
     Representative, Salaries and expenses
         27-0100  -0-1-376  Federal Communications Commission, 
     Salaries and expenses
         29-0100  -0-1-376  Federal Trade Commission, Salaries and 
     expenses
         34-0100  -0-1-153  International Trade Commission, 
     Salaries and expenses
         45-0100  -0-1-751  Equal Employment Opportunity 
     Commission, Salaries and expenses
         48-0052  -0-1-752  State Justice Institute, Salaries and 
     expenses
         48-2101  -0-1-801  Legislative Branch, Legislative Branch 
     Boards and Commissions, Gambling impact study commission
         50-0100  -0-1-376  Securities and Exchange Commission, 
     Salaries and expenses
         65-0100  -0-1-403  Federal Maritime Commission, Salaries 
     and expenses
         94-0100  -0-1-153  Arms Control and Disarmament Agency, 
     Arms control and disarmament activities
         95-1900  -0-1-751  Commission on Civil Rights, Salaries 
     and expenses
         95-2200  -0-1-302  Marine Mammal Commission, Salaries and 
     expenses
         95-3700  -0-1-153  Commission for the Preservation of 
     America's Heritage Abroad, Salaries and expenses
         95-8025  -0-7-154  Japan-United States Friendship 
     Commission, Japan-United States friendship trust fund
         95-8276  -0-7-154  Israeli Arab and Eisenhower exchange 
     fellowship programs


                                defense

     Department of Defense:
       Research, Development, Test, and Evaluation:
         21-2040  -0-1-552  Army


                          District of Columbia

         20-1700  -0-1-806  Federal payment to the District of 
     Columbia


                      ENERGY AND WATER DEVELOPMENT

     DOD-Civil, Corps of Engineers:
       Corps of Engineers:
         96-3121  -0-1-301  General investigations
         
         96-3122  -0-1-301  Construction, general
         
         96-3123  -0-1-301  Operation and maintenance, general
         96-3126  -0-1-301  Regulatory Program
         96-3125  -0-1-301  Flood control and coastal emergencies
         96-3124  -0-1-301  General expenses
         96-3112  -0-1-301  Flood control, Mississippi River and 
     tributaries
         20-8861  -0-7-301  Inland waterways trust fund
         96-8863  -0-7-301  Harbor maintenance trust fund
     Energy Department:
       Energy Programs:
         89-0222  -0-1-251  Department of Energy, General science 
     and research activities
         89-0224  -0-1-271  Energy supply, R&D activities
         89-0226  -0-1-271  Uranium supply and enrichment 
     activities
         89-5227  -0-2-271  Nuclear waste disposal fund
         89-0212  -0-1-276  Federal Energy Regulatory Commission
         89-5231  -0-2-271  Uranium enrichment decontamination and 
     decommissioning fund
       Power Marketing Administration:
         89-0304  -0-1-271  Operation and Maintenance, Alaska 
     Power Administration
         89-0302  -0-1-271  Southeastern Power Administration, 
     Operation and Maintenance
         89-0303  -0-1-271  Southwestern Power Administration, 
     Operation and Maintenance
         89-5068  -0-2-271  Construction, rehabilitation, 
     operation and maintenance, Western Area P.A.

[[Page H6293]]

         89-4452  -0-3-271  Colorado river basins power marketing 
     fund, Western Area P.A.
     Departmental Management:
         89-0228  -0-1-276  Departmental Administration
         89-0236  -0-1-276  Office of the inspector general
     Interior Department:
       Bureau of Reclamation:
         14-0680  -0-1-301  Water and related resources
         14-5065  -0-2-301  Policy and administration
         14-5173  -0-2-301  Central valley project restoration 
     fund
         14-5656  -0-2-301  Colorado River dam fund, Boulder 
     Canyon project \1\
         14-4079  -0-3-301  Lower Colorado river basin development 
     fund \1\
         14-4081  -0-3-301  Upper Colorado river basin fund \1\
         14-0685  -0-1-301  Bureau of reclamation loan program 
     account
         14-0787  -0-1-301  Central Utah Project, Central Utah 
     project completion account
         14-5174  -0-2-301  Utah reclamation mitigation and 
     conservation account
     Nuclear Regulatory Commission:
         31-0200  -0-1-276  Salaries and expenses
         31-0300  -0-1-276  Office of Inspector General
     Other Agencies:
         46-0200  -0-1-452  Appalachian Regional Commission, 
     development programs
         64-4110  -0-3-452  Tennessee Valley Authority fund \3\
         48-0500  -0-1-271  Nuclear Waste Technical Review Board, 
     Salaries and expenses


                           FOREIGN OPERATIONS

     Funds Appropriated to the President:
     International Security Assistance:
         72-1037  -0-1-152  Economic support fund
         11-1082  -0-1-152  Foreign military financing program
         11-1080  -0-1-152  International Security Assistance, 
     Military assistance
         11-1081  -0-1-152  International military education and 
     training
         72-1032  -0-1-152  Peacekeeping operations
         11-1075  -0-1-152  Non-proliferation, anti-terrorism, 
     demining, and related programs
         11-1071  -0-1-152  Nonproliferation and disarmament fund
         11-1085  -0-1-152  Foreign military financing loan 
     program account
     Multilateral Assistance:
         11-0077  -0-1-151  Contribution to the International Bank 
     for Reconstruction and Development (World Bank)
         11-0073  -0-1-151  Contribution to the International 
     Development Association
         11-0078  -0-1-151  Contribution to the International 
     Finance Corporation
         11-0072  -0-1-151  Contribution to the Inter-American 
     Development Bank
         11-0076  -0-1-151  Contribution to the Asian Development 
     Bank
         11-0079  -0-1-151  Contribution to the African 
     Development Fund
         11-0088  -0-1-151  Contribution to the European bank for 
     reconstruction and development
         11-1008  -0-1-151  North American development bank
         11-0089  -0-1-151  Contribution to enterprise for the 
     Americas multilateral investment fund
         72-1005  -0-1-151  International organizations and 
     programs
         11-0091  -0-1-151  Debt restructuring
     Agency for International Development:
         72-1021  -0-1-151  Sustainable development assistance 
     program
         72-1010  -0-1-151  Assistance for Eastern Europe and the 
     Baltic States
         72-1093  -0-1-151  Assistance for the New Independent 
     States of the former Soviet Union
         72-1014  -0-1-151  Development fund for Africa
         72-1012  -0-1-151  Sahel development program
         11-1013  -0-1-151  American schools and hospitals abroad
         72-1040  -0-1-151  Sub-Saharan Africa disaster assistance
         72-1035  -0-1-151  International disaster assistance
         72-1000  -0-1-151  Operating expenses of the Agency for 
     International Development
         72-1007  -0-1-151  Operating expenses of AID, office of 
     inspector general
         72-0402  -0-1-151  Assistance for the New Independent 
     States of the Former Soviet Union, Ukraine export credit 
     insurance program account
         72-0401  -0-1-151  Urban and environmental credit program 
     account
         72-0400  -0-1-151  Microenterprise and other development 
     credit program account
       Overseas Private Investment Corporation:
         71-4184  -0-3-151  OPIC noncredit account
         71-0100  -0-1-151  OPIC program account
       Trade and Development Agency :
         11-1001  -0-1-151  Trade and development agency
       Peace Corps:
         11-0100  -0-1-151  Peace Corps
       Inter-American Foundation:
         11-3100  -0-1-151  Inter-American foundation
       African Development Foundation:
         11-0700  -0-1-151  African Development Foundation
       International Monetary Programs:
         11-0005  -0-1-155  Contribution to enhanced structural 
     adjustments facility of the international monetary fund
       Military sales programs:
         11-4116  -0-3-155  Special defense acquisition fund
       Special Assistance for Central America:
         72-1500  -0-1-152  Demobilization and transition fund
     State Department:
       Other:
         19-1143  -0-1-151  Migration and refugee assistance
         11-0040  -0-1-151  U.S. emergency refugee and migration 
     assistance fund
         19-1022  -0-1-151  International narcotics control
         19-0114  -0-1-152  Anti-terrorism assistance
     Export-Import Bank:
         83-0100  -0-1-155  Export-Import Bank of the United 
     States loans program account


                     INTERIOR AND RELATED AGENCIES

     Agriculture Department:
       Forest Service:
         12-1106  -0-1-302  National forest system
         12-1103  -0-1-302  Reconstruction and construction
         12-1104  -0-1-302  Forest and rangeland research
         12-1105  -0-1-302  State and Private Forestry
         12-1115  -0-1-302  Wildland fire management
         12-1108  -0-1-451  Southeast Alaska economic disaster 
     fund
         12-5207  -0-2-302  Range betterment fund
         12-9923  -0-2-302  Land acquisition accounts
         12-9923  -0-2-303  Land acquisition accounts
     Energy Department:
       Energy Programs:
         89-0213  -0-1-271  Fossil energy research and development
         89-0219  -0-1-271  Naval petroleum and oil shale reserves
         89-0215  -0-1-272  Energy conservation
         89-0218  -0-1-274  Strategic petroleum reserve
         89-0233  -0-1-274  SPR petroleum account
         89-0216  -0-1-276  Energy information administration
         89-0234  -0-1-274  Emergency preparedness
         89-0217  -0-1-276  Economic regulation
         89-0235  -0-1-271  Clean coal technology
         89-5180  -0-2-271  Alternative Fuels Production
     Health and Human Service:
       Indian Health Services:
         75-0390  -0-1-551  Indian health services
         75-0391  -0-1-551  Indian health facilities \1\
     Interior Department:
       Bureau of Land Management:
         14-1109  -0-1-302  Management of lands and resources
         14-1110  -0-1-302  Construction
         14-1114  -0-1-806  Payments in lieu of taxes
         14-1116  -0-1-302  Oregon and California grant lands
         14-1125  -0-1-302  Wildland fire management
         14-1121  -0-1-304  Central hazardous materials fund
         14-5033  -0-2-302  Land acquisition
         14-5017  -0-2-302  Service charges, deposits, and 
     forfeitures
       Minerals Management Service:
         14-1917  -0-1-302  Royalty and offshore minerals 
     management
         14-8370  -0-7-302  Oil spill research
     Office of Surface Mining Reclamation and Enforcement:
         14-5015  -0-2-302  Abandoned mine reclamation fund
         14-1801  -0-1-302  Regulation and technology
       U.S. Geological Service:
         14-0804  -0-1-306  Geological survey, Surveys, 
     investigations and research
         14-0804  -0-1-303  Surveys, investigations and research
     Bureau of Mines:
         14-0959  -0-1-306  Mines and minerals
       U.S. Fish and Wildlife Service:
         14-1611  -0-1-303  Resource management
         14-1612  -0-1-303  Construction
         14-1618  -0-1-303  Natural resource damage assessment 
     fund \1\
         14-1692  -0-1-303  Rewards and Operations
         14-5020  -0-2-303  Land acquisition
         14-5091  -0-2-806  National wildlife refuge fund \1\
         14-5150  -0-2-303  Wildlife conservation and appreciation 
     fund
         14-5241  -0-2-303  North American Wetlands Conservation 
     Fund
         14-5143  -0-2-303  Cooperative endangered species 
     conservation fund \1\
       National Park Service:
         14-1036  -0-1-303  Operation of the national park system
         14-1042  -0-1-303  National recreation and preservation
         14-1039  -0-1-303  Construction
         14-1031  -0-1-303  Urban Park and Recreation Fund
         14-5035  -0-2-303  Land acquisition and state assistance 
     \1\
         14-5140  -0-2-303  Historic preservation fund
         14-8215  -0-7-401  Construction (trust fund)

[[Page H6294]]

       Bureau of Indian Affairs:
         14-2100  -0-1-302  Operation of Indian programs
         14-2100  -0-1-452  Operation of Indian programs
         14-2100  -0-1-501  Operation of Indian programs
         14-2628  -0-1-452  Indian guaranteed loan program account
         14-2301  -0-1-452  Construction
         14-2303  -0-1-452  Indian land and water claim 
     settlements and miscellaneous payments
         14-2369  -0-1-452  Technical assistance of Indian 
     enterprises
     Departmental Management:
         14-0102  -0-1-306  Salaries and expenses
       Insular Affairs:
         14-0412  -0-1-808  Assistance to territories \2\
         14-0414  -0-1-808  Trust Territory of the Pacific Islands
         14-0415  -0-1-808  Compact of free association 
     \1\,\2\
       Office of the Inspector General:
         14-0104  -0-1-306  Office of Inspector General
       Office of the Solicitor:
         14-0107  -0-1-306  Office of the Solicitor
     Office of Special Trustee for American Indians:
         14-0120  -0-1-306  Office of the special trustee for 
     American Indians
     National Indian Gaming Commission:
         14-0118  -0-1-806  Salaries and expenses
     Treasury Department:
       Financial Management Service:
         20-0112  -0-1-271  Energy security reserve
     National Endowment for the Arts:
          59-0100  -0-1-503  National Endowment for the Arts, 
     grants and administration \1\
         National Endowment for the Humanities:
         59-0200  -0-1-503  National Endowment for the Humanities, 
     grants and administration
     Smithsonian Institution:
         33-0100  -0-1-503  Salaries and expenses
         33-0102  -0-1-503  Museum programs and related research 
     (special foreign currency program)
         33-0129  -0-1-503  Construction and improvements, 
     National Zoological Park
         33-0132  -0-1-503  Repair and restoration of buildings
         33-0133  -0-1-503  Construction
         33-0200  -0-1-503  National Gallery of Art, Salaries and 
     expenses
         33-0201  -0-1-503  Repair, restoration, and renovation of 
     buildings
         33-0400  -0-1-503  Woodrow Wilson International Center 
     for scholars, Salaries and expenses
         33-0302  -0-1-503  Operations and maintenance, JFK center 
     for the performing arts
         33-0303  -0-1-503  Construction, JFK center for the 
     performing arts
     Other Agencies:
         95-2300  -0-1-303  Advisory Council on Historic 
     Preservation, Salaries and expenses
         95-2600  -0-1-451  Commission of Fine Arts, Salaries and 
     expenses
         95-2602  -0-1-503  Commission of Fine Arts, National 
     capital arts and cultural affairs
         95-2900  -0-1-502  Institute of American Indian and 
     Alaska Native Culture and Arts, Salaries and expenses
         59-0300  -0-1-503  Institute of Museum and Library 
     Services, grants and administration
         95-2500  -0-1-451  National Capital Planning Commission, 
     Salaries and expenses
         48-1100  -0-1-808  Office of Navajo and Hopi Indian 
     Relocation, Salaries and expenses
         95-3300  -0-1-808  United States Holocaust Memorial 
     Council
         95-9911  -0-1-808  Other commissions and boards


              LABOR, HHS, EDUCATION, AND RELATED AGENCIES

     Legislative Branch:
         95-3400  -0-1-551  Prospective Payment Assessment 
     Commission: Salaries and expenses
         95-1000  -0-1-801  Physician Payment Review Commission: 
     Salaries and expenses
     DOD-Civil:
       Armed Forces Retirement Home:
         84-8522  -0-7-602  Armed forces retirement home
      Education Department:
       Office of Elementary and Secondary Education:
         91-0500  -0-1-501  Education reform
         91-0900  -0-1-501  Education for the disadvantaged
         91-0102  -0-1-501  Impact aid
         91-1000  -0-1-501  School improvement programs
         91-0220  -0-1-501  Chicago litigation settlement
         91-0101  -0-1-501  Indian education
       Office of Bilingual Education and Minority Languages 
         Affairs:
         91-1300  -0-1-501  Bilingual and immigrant education
       Office of Special Education and Rehabilitative Services:
         91-0300  -0-1-501  Special education
         91-0600  -0-1-501  American printing house for the blind
         91-0601  -0-1-502  National technical institute for the 
     deaf
         91-0602  -0-1-502  Gallaudet University
     Office of Vocational and Adult Education:
         91-0400  -0-1-501  Office of Vocational and Adult 
     Education \1\
       Office of Postsecondary Education:
         91-0200  -0-1-502  Student Financial Assistance
         91-0201  -0-1-502  Higher education
         91-0603  -0-1-502  Howard University
         91-0231  -0-1-502  Federal family education loan program 
     account \1\
         91-0241  -0-1-502  College housing and academic 
     facilities loans, program account
       Office of Educational Research and Improvement:
         91-1100  -0-1-503  Education research, statistics, and 
     improvement
       Departmental Management:
         91-0800  -0-1-503  Program administration
         91-0700  -0-1-751  Office for Civil Rights
         91-1400  -0-1-751  Office of the Inspector General
         91-1500  -0-1-503  Headquarters renovation
     Health and Human Services:
       Health Resources and Services Administration:
         75-0350  -0-1-551  Health resources and services \1\
         75-0350  -0-1-552  Health resources and services
         75-0340  -0-1-552  Health professions graduate student 
     loan insurance program account \1\
         75-4306  -0-1-553  Nurse training fund
         75-4307  -0-1-553  Health education loans
       Centers for Disease Control and Prevention:
         75-0943  -0-1-551  Disease control, research, and 
     training
         75-0943  -0-1-552  Disease control, research, and 
     training \1\
       National Institutes of Health:
         75-0807  -0-1-552  National Library of Medicine
         75-0819  -0-1-552  John E. Fogarty International Center
         75-0838  -0-1-552  Buildings and facilities
         75-0843  -0-1-552  National Institute on Aging
         75-0844  -0-1-552  National Institute of Child Health and 
     Human Development
         75-0846  -0-1-552  Office of the Director
         75-0848  -0-1-552  National Center for Research Resources
         75-0849  -0-1-552  National Cancer Institute
         75-0851  -0-1-552  National Institute of General Medical 
     Science
         75-0862  -0-1-552  National Institute of Environmental 
     Health Sciences
         75-0872  -0-1-552  National Heart, Lung and Blood 
     Institute
         75-0873  -0-1-552  National Institute of Dental Research
         75-0884  -0-1-552  National Institute of Diabetes and 
     Digestive and Kidney Disease
         75-0885  -0-1-552  National Institute of Allergy and 
     Infectious Diseases
         75-0886  -0-1-552  National Institute of Neurological 
     Disorders and Stroke
         75-0887  -0-1-552  National Eye Institute
         75-0888  -0-1-552  National Institute of Arthritis and 
     Musculoskeletal and Skin Diseases
         75-0889  -0-1-552  National Institute for Nursing 
     Research
         75-0890  -0-1-552  National Institute on Deafness and 
     other Communicative Disorders
         75-0891  -0-1-552  National Center for Human Genome 
     Research
         75-0894  -0-1-552  National Institute on Alcohol Abuse 
     and Alcoholism
         75-0893  -0-1-552  National Institute on Drug Abuse
         75-0892  -0-1-552  National Institute of Mental Health
         75-9915  -0-1-552  National Institutes of Health \1\
       Substance Abuse and Mental Health Services Administration:
         75-1362  -0-1-551  Substance abuse and mental health 
     services \1\
       Agency for Health Care Policy and Research:
         75-1700  -0-1-552  Health care policy and research
       Health Care Financing Administration:
         75-0511  -0-1-551  Program management
         75-0511  -0-1-552  Program management
         20-8005  -0-7-571  Federal hospital insurance trust fund 
     \1\
         20-8004  -0-7-571  Federal supplementary medical 
     insurance trust fund \1\
       Administration for Children and Families:
         75-1502  -0-1-609  Low income home energy assistance
         75-1503  -0-1-609  Refugee and entrant assistance
         75-1508  -0-1-506  State legalization impact assistance 
     grants
         75-1515  -0-1-609  Child care and development block grant
         75-1536  -0-1-506  Children and families services 
     programs
       Aministration on Aging:
         75-0142  -0-1-506  Aging services programs
       Departmental Management:
         75-0122  -0-1-609  Policy research
         75-0135  -0-1-751  Office for Civil Rights
         75-1101  -0-1-551  Assistant Secretary for Health, Public 
     Health service management

[[Page H6295]]

         75-9912  -0-1-551  General departmental management
       Program Support Center:
         75-9913  -0-1-552  Health activities funds
       Office of the Inspector General:
         75-0128  -0-1-551  Office of the Inspector General
       Labor Department:
       Employment and Training Administration:
         16-0174  -0-1-504  Training and employment services
         16-0175  -0-1-504  Community service employment for older 
     Americans
         16-0179  -0-1-504  State unemployment insurance and 
     employment service operations
         16-0172  -0-1-504  Program administration
         20-8042  -0-7-504  Unemployment Trust fund
         20-8042  -0-7-603  Unemployment Trust fund \1\
       Pension and Welfare Benefit Administration:
         16-1700  -0-1-601  Salaries and expenses
       Pension Benefit Guaranty Corporation:
         16-4204  -0-3-601  Pension Benefit Guaranty Corporation 
     fund \1\
       Employment Standards Administration:
         16-0105  -0-1-505  Salaries and expenses
         16-9971  -0-7-601  Special workers' compensation \1\
       Occupational Safety and Health Administration:
         16-0400  -0-1-554  Salaries and expenses
       Mine Safety and Health Administration:
         16-1200  -0-1-554  Salaries and expenses
       Bureau of Labor Statistics:
         16-0200  -0-1-505  Salaries and expenses
       Departmental Management:
         16-0165  -0-1-505  Salaries and Expenses
         16-0106  -0-1-505  Office of the Inspector General
         16-4601  -0-4-505  Working capital fund
     Social Security Administration:
         28-0406  -0-1-609  Supplemental security income program 
     \2\
         28-0400  -0-1-651  Office of the inspector general
         20-8006  -0-7-651  Federal old-age and survivors 
     insurance trust fund \1\
         20-8007  -0-7-651  Federal disability insurance trust 
     fund \1\
     Corporation for National and Community Service:
         95-0103  -0-1-506  Domestic volunteer service programs, 
     operating expenses
     Corporation for Public Broadcasting:
         20-0151  -0-1-503  Corporation for Public Broadcasting
     Railroad Retirement Board:
         60-0111  -0-1-601  Federal windfall subsidy \1\
         60-8051  -0-7-603  Railroad unemployment insurance trust 
     fund \1\
         60-8011  -0-7-601  Rail Industry Pension Fund \1\
         60-8010  -0-7-601  Railroad social security equivalent 
     benefit account \1\
         60-8012  -0-7-601  Supplemental Annuity Pension Fund \1\
     United States Institute of Peace:
         95-1300  -0-1-153  Operating expenses
     Other Agencies:
         93-0100  -0-1-505  Federal Mediation and Conciliation 
     Service, Salaries and expenses
         95-2800  -0-1-554  Federal Mine Safety and Health Review 
     Commission, Salaries and expenses
         95-2700  -0-1-503  National Commission on Libraries and 
     Information Science, Salaries and expenses
         95-3500  -0-1-506  National Council on Disability, 
     Salaries and expenses
         95-2650  -0-1-503  National Education Goals Panel, 
     Salaries and expenses
         63-0100  -0-1-505  National Labor Relations Board, 
     Salaries and expenses
         95-2400  -0-1-505  National Mediation board, Salaries and 
     expenses
         59-0301  -0-1-503  Institute of Museum and Library 
     Services, Office of libraries: grants and administration
         95-2100  -0-1-554  Occupational Safety and Health Review 
     Commission, Salaries and expenses


                           LEGISLATIVE BRANCH

     Legislative Branch:
       Senate:
         00-0107  -0-1-801  Expense allowances
         00-0108  -0-1-801  Representation allowances for the 
     Majority and Minority Leaders
         00-0110  -0-1-801  Salaries, officers and employees
         00-0185  -0-1-801  Office of the Legislative Counsel of 
     the Senate
         00-0171  -0-1-801  Office of the Senate Legal Counsel
         00-0172  -0-1-801  Expense allowances of the Secretary of 
     the Senate, Sergeant at Arms and Doorkeeper of the Senate, 
     and Secretaries for the Majority and Minority of the Senate
         00-0128  -0-1-801  Contingent expenses of the Senate: 
     Inquiries and investigations
         00-0129  -0-1-801  Expenses of the United States Senate 
     Caucus on International Narcotics Control
         00-0126  -0-1-801  Secretary of the Senate
         00-0127  -0-1-801  Sergeant at Arms and Doorkeeper of the 
     Senate
         00-0123  -0-1-801  Miscellaneous items
         00-0130  -0-1-801  Senators' official personnel and 
     office expense account
         00-0140  -0-1-801  Stationery
         00-0132  -0-1-801  Official mail costs
       House of Representatives:
         00-0400  -0-1-801  Salaries and expenses
       Joint Items:
         00-0186  -0-1-801  Joint Committee on Inaugural 
     Ceremonies
         00-0181  -0-1-801  Joint Economic Committee
         00-0180  -0-1-801  Joint Committee on Printing
         00-0460  -0-1-801  Joint Committee on Taxation
         00-0425  -0-1-801  Office of the Attending Physician
         00-0474  -0-1-801  Capitol Police: Salaries
         00-0476  -0-1-801  Capitol Police: General expenses
         0-0174  -0-1-801  Capitol guide service and special 
     services office
         00-0199  -0-1-801  Statements of appropriations
       Office of Compliance:
         09-1200  -0-1-801 Salaries and expenses
         09-1450  -0-1-801 Awards and settlements
       Congressional Budget Office:
         08-0100  -0-1-801  Salaries and expenses
       Architect of the Capitol:
         01-0100  -0-1-801  Office of the Architect of the 
     Capitol: Salaries
         01-0102  -0-1-801  Contingent expenses
         01-0105  -0-1-801  Capitol buildings
         01-0108  -0-1-801  Capitol grounds
         01-0123  -0-1-801  Senate office buildings
         01-0127  -0-1-801  House office buildings
         01-0133  -0-1-801  Capitol power plant
         01-0155  -0-1-801  Library buildings and grounds, 
     structural and mechanical care
       Botanic Garden:
         09-0200  -0-1-801  Salaries and expenses
       Library of Congress:
         03-0101  -0-1-503  Salaries and expenses
         03-0102  -0-1-376  Copyright Office: Salaries and 
     expenses
         03-0127  -0-1-801  Congressional Research Service: 
     Salaries and expenses
         03-0141  -0-1-503  Books for the blind and physically 
     handicapped: Salaries and expenses
         03-0146  -0-1-503  Furniture and furnishings
        Government Printing Office:
         04-0203  -0-1-801  Congressional printing and binding
         04-0201  -0-1-808  Office of Superintendent of Documents: 
     Salaries and expenses
       General Accounting Office:
         05-0107  -0-1-801  Salaries and expenses
       U.S. Tax Court:
         23-0100  -0-1-752  Salaries and expenses


                  transportation and related agencies

       Transportation Department:
       Office of the Secretary:
         69-0102  -0-1-407  Salaries and expenses
         69-0118  -0-1-407  Office of Civil Rights
         69-0119  -0-1-407  Minority business outreach
         69-0117  -0-1-407  Rental payments
         69-0142  -0-1-407  Transportation, planning, research, 
     and development
         69-0150  -0-1-402  Payments to air carriers
         69-0155  -0-1-407  Minority business resource center 
     program account
         69-8066  -0-7-407  Trust fund share of rental payments
         69-8304  -0-7-402  Payments to air carriers (trust 
     fund)\1\
       Coast Guard:
         69-0201  -0-1-403  Operating expenses
         69-0240  -0-1-403  Acquisition, construction, and 
     improvements
         69-0247  -0-1-403  Port safety development
         69-0230  -0-1-304  Environmental compliance and 
     restoration
         69-0244  -0-1-403  Alteration of bridges
         69-0242  -0-1-403  Reserve training
         69-0243  -0-1-403  Research, development, test, and 
     evaluation
         69-8149  -0-7-403  Boat safety\1\
         69-8314  -0-7-304  Trust fund share of expenses
       Federal Aviation Administration:
         69-1301  -0-1-402  Operations
         69-1334  -0-1-402  National Civil Aviation Review 
     Commission
         69-9912  -0-1-402  Miscellaneous expired accounts
         69-4120  -0-3-402  Aviation insurance revolving fund
         69-8106  -0-7-402  Grants-in-aid for airports (Airport 
     and airway trust fund)1, 4
         69-8107  -0-7-402  Facilities and equipment (Airport and 
     airway trust fund)
         69-8104  -0-7-402  Trust fund share of FAA operations
         69-8108  -0-7-402  Research, engineering, and development 
     (Airport and airway trust fund)
       Federal Highway Administration:
         69-9911  -0-1-401  Miscellaneous appropriations
         69-0543  -0-1-401  Orange County (CA) Toll Road 
     Demonstration Project Program
         69-0549  -0-1-401  State infrastructure banks
         69-8083  -0-7-401  Federal-aid highways 1, 4
         69-8019  -0-7-401  Highway-related safety grants 
     1, 4
         69-8048  -0-7-401  Motor carrier safety grants 
     1, 4
         69-9972  -0-7-401  Miscellaneous highway trust funds
       National Highway Traffic Safety Administration:
         69-0650  -0-1-401  Operations and research

[[Page H6296]]

         69-8016  -0-7-401  Operations and research (trust fund 
     share)
         69-8020  -0-7-401  Highway traffic safety grants \1\
       Federal Railroad Administration:
         69-0700  -0-1-401  Office of the Administrator
         69-0714  -0-1-401  Local rail freight assistance
         69-0702  -0-1-401  Railroad safety
         69-0745  -0-1-401  Railroad research and development
         69-0747  -0-1-401  Conrail commuter transition assistance
         69-9914  -0-1-401  Northeast corridor high-speed rail 
     infrastructure program
         69-0755  -0-1-401  High-speed rail trainsets and 
     facilities
         69-0730  -0-1-401  Railroad rehabilitation activities
         69-0704  -0-1-401  Grants to National Railroad Passenger 
     Corporation
         69-0722  -0-1-401  Next generation high-speed rail 
     program
         69-0536  -0-1-401  Direct loan financing program
         69-9973  -0-7-401  Trust fund share of next generation 
     high-speed rail
       Federal Transit Administration:
         69-1120  -0-1-401  Administrative expenses
         69-1121  -0-1-401  Research, training, and human 
     resources
         69-1127  -0-1-401  Interstate transfer grants-transit
         69-1128  -0-1-401  Washington Metropolitan Area Transit 
     Authority
         69-1129  -0-1-401  Formula grants
         69-1136  -0-1-401  University transportation centers
         69-1137  -0-1-401  Transit planning and research
         69-9913  -0-1-401  Miscellaneous expired accounts
         69-8191  -0-7-401  Major capital investments (highway 
     trust fund, mass transit account) \1\
         69-8350  -0-7-401  Trust fund share of expenses 1
         69-0124  -0-1-401  Emergency railroad rehabilitation and 
     repair
       St. Lawrence Seaway Development Corporation:
         69-8003  -0-7-403  Operations and maintenance
       Research and Special Programs Administration:
         69-0104  -0-1-407  Research and Special programs
         69-5172  -0-2-407  Pipeline safety
         69-8121  -0-7-407  Trust fund share of pipeline safety
       Office of the Inspector General:
         69-0130  -0-1-407  Salaries and expenses
       Surface Transportation Board:
         69-0301  -0-1-401  Salaries and expenses
       Bureau of Transportation Statistics:
         69-0305  -0-1-407  Transportation statistics
       National Transportation Safety Board:
         95-0310  -0-1-407  Salaries and expenses
         95-0311  -0-1-407  Emergency fund
       Other Agencies:
         95-3200  -0-1-751  Architectural and Transportation 
     Barriers Compliance Board, Salaries and expenses


            treasury, postal service and general government

       Executive Office of the President:
       Compensation of the President and White House Office:
         11-0110  -0-1-802  Compensation of the President and the 
     White House Office \2\
       Executive Residence at the White House:
         11-0210  -0-1-802  Operating expenses
         11-0109  -0-1-802  White house repair and restoration
       Special Assistance to the President and Official Residence 
         of the Vice President:
         11-1454  -0-1-802  Special assistance to the President 
     and the official residence of the Vice President
       Council of Economic Advisers:
         11-1900  -0-1-802  Salaries and expenses
       Office of Policy Development:
         11-2200  -0-1-802  Salaries and expenses
       National Security Council:
         11-2000  -0-1-802  Salaries and expenses
       Office of Administration:
         11-0038  -0-1-802  Salaries and expenses
       Armstrong Resolution:
         11-1073  -0-1-802  Armstrong resolution account
       Office of Management and Budget:
         11-0300  -0-1-802  Salaries and expenses
       Office of National Drug Control Policy:
         11-1457  -0-1-802  Salaries and expenses
       Funds Appropriated to the President:
       Unanticipated Needs:
         11-0037  -0-1-802  Unanticipated needs
       Federal Drug Control Programs:
         11-5001  -0-2-802  Special forfeiture fund
         11-1070  -0-1-802  High intensity drug trafficking areas 
     program
       Treasury Department:
       Departmental Offices:
         20-0101  -0-1-803  Salaries and expenses
         20-0115  -0-1-803   Automation enhancement
         20-0106  -0-1-803  Office of Inspector General
         20-0108  -0-1-803  Treasury buildings and annex repair 
     and restoration
         20-0173  -0-1-751  Financial crimes enforcement network
         20-5407  -0-2-808  Sallie Mae assessments
         20-5697  -0-2-751  Department of the Treasury forfeiture 
     fund \1\
       Federal Law Enforcement Training Center:
         20-0104  -0-1-751  Salaries and expenses
         20-0105  -0-1-751  Acquisitions, construction, 
     improvements, and related expenses
       Financial Management Service:
         20-1801  -0-1-803  Salaries and expenses
       Bureau of Alcohol, Tobacco, and Firearms:
         20-1000  -0-1-751  Salaries and expenses
         20-1003  -0-1-751  Laboratory facilities and headquarters
       U.S. Customs Service:
         20-0602  -0-1-751  Salaries and expenses \1\
         20-0604  -0-1-751  Operation and maintenance, air and 
     marine interdiction programs
         20-0608  -0-1-751  Customs facilities, construction, 
     improvements and related expenses
         20-5694  -0-2-751  Customs services at small airports
         20-8870  -0-7-751  Harbor maintenance fee collection
       Bureau of Engraving and Printing:
         20-4502  -0-4-803  Bureau of Engraving and Printing fund
       U.S. Mint:
         20-4159  -0-3-803  United States mint public enterprise 
     fund
       Bureau of the Public Debt:
         20-0560  -0-1-803  Administering the public debt \2\
       Internal Revenue Service:
         20-0912  -0-1-803  Processing assistance and management 
     \2\
         20-0913  -0-1-803  Tax law enforcement \2\
         20-0919  -0-1-803  Information systems
       U.S. Secret Service:
         20-1408  -0-1-751  Salaries and expenses
         20-1409  -0-1-751  Acquisition, construction, 
     improvements and related expenses
       General Services Administration:
       Real Property Activities:
         47-0535  -0-1-804  Real property relocation
         47-0118  -0-1-451  Pennsylvania avenue activities \1\
         47-4542  -0-4-804  Federal buildings fund
       Supply and Technology Activities:
         47-4548  -0-4-804  Information technology fund
     General Activities:
         47-0110  -0-1-804  Policy and operations
         47-0108  -0-1-804  Office of Inspector General
         47-0105  -0-1-802  Allowances and office staff for former 
     Presidents
         47-0107  -0-1-802  Expenses, Presidential transition
     Office of Personnel Management:
         24-0100  -0-1-805  OPM, Salaries and expenses
         24-0400  -0-1-805  Office of the Inspector General
         24-8135  -0-7-602  Civil service retirement and 
     disability fund \1\
         24-8424  -0-8-602  Employees life insurance fund \1\
         24-9981  -0-8-551  Employees and retired employees health 
     benefits fund \1\
     National Archives and Records Administration:
         88-0300  -0-1-804  Operating expenses
         88-0301  -0-1-804  National historical publications and 
     records commission grants program
         88-0302  -0-1-804  Repairs and restoration
     Postal Service:
         18-1001  -0-1-372  Payment to the Postal Service fund
     Other Agencies:
         23-0100  -0-1-752  Federal litigative and judicial 
     activities, U.S. Tax Court, Salaries and expenses
         41-0100  -0-1-805  Merit Systems Protection Board, 
     Salaries and expenses
         54-0100  -0-1-805  Federal Labor Relations Authority, 
     Salaries and expenses
         95-1100  -0-1-805  Office of Government Ethics, Salaries 
     and expenses
         62-0100  -0-1-8085  Office of Special Counsel, Salaries 
     and expenses
         95-1600  -0-1-808  Federal Election Commission, Salaries 
     and expenses
         48-1001  -0-1-808  John F. Kennedy assassination records 
     review board
         48-2450  -0-1-803  National Commission on Restructuring 
     the IRS, Salaries and expenses
         95-2000  -0-1-505  Committee for Purchase from People who 
     are Blind or Severely Disabled, Salaries and expenses


   veterans affairs, housing and urban development, and independent 
                                agencies

     Executive Office of the President:
       Council on Environmental Quality and Office of 
         Environmental Quality:
         11-1453  -0-1-802  Council on Environmental Quality and 
     Office of Environmental Quality
     Office of Science and Technology Policy:
         11-2600  -0-1-802  Salaries and expenses
     DOD--Civil:
       Cemeterial Expenses, Army:
         21-1805  -0-1-705  Salaries and expenses
     Health and Human Services:
     Departmental Management:
         75-0137  -0-1-506  Office of Consumer Affairs

[[Page H6297]]

     Housing and Urban Development:
     Public and Indian Housing:
         86-0311  -0-1-604  Housing certificate fund
         86-0164  -0-1-604  Annual contributions for assisted 
     housing
         86-0312  -0-1-604  Preserving existing housing investment
         86-0163  -0-1-604  Public housing operating fund
         86-0197  -0-1-604  Drug elimination grants, low income 
     housing
         86-0218  -0-1-604  Revitalization of severely distressed 
     public housing projects (HOPE VII)
         86-0223  -0-1-604  Indian housing loan guarantee fund 
     program account
     Community Planning and Development:
         86-0308  -0-1-604  Housing opportunities for persons with 
     AIDS
         86-0162  -0-1-451  Community development block grants
         86-0205  -0-1-604  Home investment partnership program
         86-0170  -0-1-451  Urban Development action grants
         86-0222  -0-1-451  Capacity building for community 
     development and affordable housing
         86-0181  -0-1-604  Emergency shelter grants program
         86-0188  -0-1-604  Supportive housing program
         86-0187  -0-1-451  Supplemental assistance for facilities 
     to assist the homeless
         86-0204  -0-1-604  Shelter plus care
         86-0221  -0-1-604  Innovative homeless initiatives 
     demonstration program
         86-0192  -0-1-604  Homeless assistance grants
         86-0219  -0-1-604  Youthbuild program
         86-0220  -0-1-451  National cities in schools community 
     development program
         86-0198  -0-1-451  Community development loan guarantees 
     program account
       Housing Programs:
         86-0310  -0-1-604  Housing for special populations
         86-0206  -0-1-604  Other assisted housing programs
         86-0196  -0-1-604  Homeownership and opportunity for 
     people everywhere grants (HOPE)
         86-0178  -0-1-604  Congregate services
         86-0156  -0-1-506  Housing counseling assistance
         86-0195  -0-1-604  Section 8 moderate rehabilitation, 
     single room occupancy
         86-4044  -0-3-604  Flexible subsidy fund
         86-4071  -0-3-604  Nehemiah housing opportunity fund
         86-0183  -0-1-371  FHA-mutual mortgage insurance program 
     account \5\
         86-0200  -0-1-371  FHA-General and special risk program 
     account
       Government National Mortgage Association:
         86-0186  -0-1-371  Guarantees of mortgage-backed 
     securities loan guarantee program
       Policy Development and Research:
         86-0108  -0-1-451  Research and technology
       Fair Housing and Equal Opportunity:
         86-0144  -0-1-751  Fair housing activities
       Management and Administration:
         86-0143  -0-1-451  Salaries and expenses
         86-0189  -0-1-451  Office of the Inspector General
         86-5272  -0-2-371  Office of federal housing enterprise 
     oversight
     Treasury Department:
       Departmental Offices:
         20-1881  -0-1-451  Community development financial 
     institutions fund program account
     Veterans Affairs:
       Veterans Health Administration:
         36-0160  -0-1-703  Medical care
         36-0161  -0-1-703  Medical and prosthetic research
         36-0152  -0-1-703  Medical administration and 
     miscellaneous operating expenses
         36-0163  -0-1-703  Health professional scholarship 
     program
       Veterans Benefits Administration:
         36-0138  -0-1-704  Veterans housing benefit program fund 
     program account \1\
         36-0140  -0-3-702  Miscellaneous Veterans Programs loan 
     fund program account
       Construction:
         36-0110  -0-1-703  Construction, Major projects
         36-0111  -0-1-703  Construction, Minor projects
         36-0181  -0-1-703  Grants for construction of state 
     extended care facilities
         36-0183  -0-1-705  Grants for the construction of State 
     veterans cemeteries
         36-4538  -0-3-703  Parking revolving fund
       Departmental Administration:
         36-0151  -0-1-705  General operating expenses
         36-0170  -0-1-705  Office of the Inspector General
         36-0129  -0-1-705  National cemetery system
     Environmental Protection Agency:
         68-0200  -0-1-304  Program and research operations
         68-0112  -0-1-304  Office of the Inspector General
         68-0107  -0-1-304  Science and technology
         68-0108  -0-1-304  Environmental programs and management
         68-0110  -0-1-304  Buildings and facilities
         68-0103  -0-1-304  State and tribal assistance grants
         68-0250  -0-1-304  Payment to the hazardous substance 
     superfund
         68-8145  -0-7-304  Interfund transactions, Hazardous 
     substance superfund
         68-0118  -0-1-304  Abatement, control, and compliance 
     loan program account
         20-8145  -0-7-304  Hazardous substance superfund
         20-8153  -0-7-304  Leaking underground storage tank trust 
     fund
         68-8221  -0-7-304  Oil spill response
     General Services Administration:
       General Activities:
         47-4549  -0-3-376  Consumer information center fund
     National Aeronautics and Space Administration:
         80-0111  -0-1-252  Human space flight
         80-0110  -0-1-252  Science, aeronautics and technology
         80-0110  -0-1-402  Science, aeronautics and technology
         80-0112  -0-1-252  Mission support
         80-0112  -0-1-402  Mission support
         80-0108  -0-1-252  Research and development
         80-0108  -0-1-402  Research and development
         80-0105  -0-1-252  Space flight, control, and data 
     communications
         80-0107  -0-1-252  Construction of facilities
         80-0107  -0-1-402  Construction of facilities
         80-0103  -0-1-252  Research and program management
         80-0103  -0-1-402  Research and program management
         80-0109  -0-1-252  Office of the Inspector General
       Corporation for National and Community Service:
       National and Community Service Programs:
         95-2720  -0-1-506  Operating expenses
         95-2721  -0-1-506  Inspector general
         95-9972  -0-7-506  Gifts and contributions
       FEMA:
         58-0104  -0-1-453  Disaster relief
         58-0100  -0-1-453  Salaries and expenses
         58-0101  -0-1-453  Emergency management planning and 
     assistance
         58-0300  -0-1-453  Office of the inspector general
         58-0103  -0-1-605  Emergency food and shelter program
         58-4188  -0-4-803  Working capital fund
         58-0105  -0-1-453  Disaster assistance direct loan 
     program account
       National Science Foundation:
         49-0100  -0-1-251  Research and related activities
         49-0106  -0-1-251  Education and human resources
         49-0150  -0-1-251  Academic research infrastructure
         49-0551  -0-1-251  Major research equipment
         49-0180  -0-1-251  Salaries and expenses
         49-0300  -0-1-251  Office of the Inspector General
       Resolution Trust Corporation:
         22-1500  -0-1-373  Office of Inspector General
       Other Agencies:
         82-1300  -0-1-451  Payment to the Neighborhood 
     Reinvestment Corporation
         61-0100  -0-1-554  Consumer Product Safety Commission, 
     Salaries and expenses
         74-0100  -0-1-705  American Battle Monuments Commission, 
     Salaries and expenses
         95-0300  -0-1-705  Court of Veterans Appeals, Salaries 
     and expenses
         25-4472  -0-3-373  National Credit Union Administration, 
     Community development credit union revolving loan fund
         51-5100  -0-1-604  FDIC, Affordable housing program

         VIOLENT CRIME REDUCTION ACCOUNTS FOR FISCAL YEAR 1997


      commerce, justice, state, the judiciary and related agencies

       The Judiciary:
         10-8516  -0-1-752  Violent crime reduction programs
       Justice Department:
         General Administration:
         15-8593  -0-1-751  Violent crime reduction programs, 
     General administration
         15-8608  -0-1-751  Violent crime reduction programs, 
     Administrative review and appeals
       Legal Activities:
         15-8595  -0-1-752  Violent crime reduction programs, 
     General legal activities
         15-8596  -0-1-752  Violent crime reduction programs, U.S. 
     Attorneys
         15-8603  -0-1-752  Violent crime reduction programs, U.S. 
     Marshals Service
       Federal Bureau of Investigation:
         15-8604  -0-1-751  Violent crime reduction programs
       Drug Enforcement Administration:
         15-8602  -0-1-751  Violent crime reduction programs
       Immigration and Naturalization Service:
         15-8598  -0-1-751  Violent crime reduction fund programs
       Federal Prison System:
         15-8600  -0-1-753  Violent crime reduction programs
       Office of Justice Programs:
         15-0401  -0-1-754  Justice assistance
         15-8594  -0-1-754  Community oriented policing services
         15-8586  -0-1-754  Violent crime reduction programs

[[Page H6298]]

     Ounce of Prevention Council:
         95-0100  -0-1-754  Violent crime reduction programs


              LABOR, HHS, EDUCATION, AND RELATED AGENCIES

       Health and Human Services:
       Centers for Disease Control and Prevention:
         75-0943  -0-1-551  Disease control, research, and 
     training
         75-8606  -0-1-754  Violent crime reduction programs
       Administration for Children and Families:
         75-8605  -0-1-754  Violent crime reduction programs


            TREASURY, POSTAL SERVICE AND GENERAL GOVERNMENT

       Treasury Department:
       Federal Law Enforcement Training Center
         20-0104  -0-1-751  Salaries and expenses
       Violent Crime Reduction Programs:
         20-8526  -0-1-751  Violent crime reduction programs


          DISCRETIONARY APPROPRIATIONS CATEGORIES--Footnotes:

     \1\ Portion of account is mandatory and is provided by 
     authorizing legislation.
     \2\ Portion of account is mandatory and is provided by 
     Appropriations Committee action.
     \3\ Authority to borrow available to the Tennessee Valley 
     Authority is available on a permanent indefinite basis. This 
     authority is limited only in that the amount outstanding at 
     any time can not exceed $30 billion.
     \4\ Contract authority is mandatory--provided in 
     authorization bill. Outlays scored as discretionary because 
     obligation limitation is set by Appropriations Committee 
     action.
     \5\ Portion of account is mandatory.

                         REPORT LANGUAGE FOR DC

                            Criminal Justice

       (1) The managers recognize that it will require substantial 
     resources to implement the provisions of title III, and that 
     the obligation of the Department of Justice to meet the 
     deadlines set forth in this title is contingent on the 
     appropriation of funds sufficient to carry out the 
     requirements of this title.
       (2) It is the intent of the managers that the funds 
     necessary to implement the provisions of this title come from 
     the savings achieved by reducing the existing Federal payment 
     to the District of Columbia, not from the existing programs 
     of the Department of Justice.

     For consideration of the House bill, and the Senate 
     amendment, and modifications committed to conference:
     John R. Kasich,
     David L. Hobson,
     Richard K. Armey,
     Tom DeLay,
     J. Dennis Hastert,
     John M. Spratt, Jr.,
     David E. Bonior,
     Vic Fazio.
     As additional conferees from the Committee on Agriculture, 
     for consideration of title I of the House bill, and title I 
     of the Senate amendment, and modifications committed to 
     conference:
     Robert Smith,
     Bob Goodlatte,
     Charles W. Stenholm.
     As additional conferees from the Committee on Banking and 
     Financial Services, for consideration of title II of the 
     House bill, and title II of the Senate amendment, and 
     modifications committed to conference:
     James A. Leach,
     Rick Lazio.
     As additional conferees from the Committee on Commerce, for 
     consideration of subtitles A-C of title III of the House 
     bill, and title IV of the Senate amendment, and modifications 
     committed to conference:
     Tom Bliley,
     Dan Schaefer,
     John D. Dingell.
     As additional conferees from the Committee on Commerce, for 
     consideration of subtitle D of title III of the House bill, 
     and subtitle A of title III of the Senate amendment, and 
     modifications committed to conference:
     Tom Bliley,
     Billy Tauzin.
     As additional conferees from the Committee on Commerce, for 
     consideration of subtitles E and F of title III, titles IV 
     and X of the House bill, and divisions 1 and 2 of title V of 
     the Senate amendment, and modifications committed to 
     conference:
     Tom Bliley,
     Michael Bilirakis.
     As additional conferees from the Committee on Education and 
     Workforce, for consideration of subtitle A of title V and 
     subtitle A of title IX of the House bill, and chapter 2 of 
     division 3 of title V of the Senate amendment, and 
     modifications committed to conference:
     Bill Goodling,
     Jim Talent.
     As additional conferees from the Committee on Education and 
     the Workforce, for consideration of subtitles B and C of 
     title V of the House bill, and title VII of the Senate 
     amendment, and modifications committed to conference:
     Bill Goodling,
     Howard ``Buck'' McKeon,
     Dale E. Kildee.
     As additional conferees from the Committee on Education and 
     Workforce, for consideration of subtitle D of title V of the 
     House bill, and chapter 7 of division 4 of title V of the 
     Senate amendment, and modifications committed to conference:
     Donald M. Payne.
     As additional conferees from the Committee on Government 
     Reform and Oversight, for consideration of title VI of the 
     House bill, and subtitle A of title VI of the Senate 
     amendment, and modification committed to conference:
     Dan Burton,
     John L. Mica.
     As additional conferees from the Committee on Transportation 
     and Infrastructure, for consideration of title VII of the 
     House bill, and subtitle B of title III and subtitle B of 
     title VI of the Senate amendment, and modifications committed 
     to conference:
     Bud Shuster,
     Wayne T. Gilchrest,
     James L. Oberstar.
     As additional conferees from the Committee on Veterans' 
     Affairs, for consideration of title VIII of the House bill, 
     and title VIII of the Senate amendment, and modifications 
     committed to conference:
     Bob Stump,
     Christopher H. Smith,
     Lane Evans.
     As additional conferees from the Committee on Ways and Means, 
     for consideration of subtitle A of title V and title IX of 
     the House bill, and divisions 3 and 4 of title V of the 
     Senate amendment, and modifications committed to conference:
     Bill Archer,
     E. Clay Shaw, Jr.,
     Dave Camp,
     Charles B. Rangel,
     Sander M. Levin.

     As additional conferees from the Committee on Ways and Means, 
     for consideration of titles IV and X of the House bill, and 
     division 1 of title V of the Senate amendment, and 
     modifications committed to conference:
     Bill Archer,
     William Thomas.
                                Managers on the part of the House.
     From the Committee on the Budget:
     Pete Domenici,
     Chuck Grassley,
     Don Nickles,
     Phil Gramm,
     Frank Lautenberg.
     From the Committee on Agriculture, Nutrition, and Forestry:
     Dick Lugar.
     From the Committee on Banking, Housing, and Urban Affairs:
     Alfonse D'Amato,
     Richard Shelby,
     Paul Sarbanes.
     From the Committee on Commerce, Science and Transportation:
     John McCain,
     Ted Stevens,
       (Except for provisions in universal service fund).
     From the Committee on Energy and Natural Resources:
     Frank H. Murkowski,
     Larry E. Craig.
     From the Committee on Finance:
     Bill Roth,
     Trent Lott,
     Daniel P. Moynihan.
     From the Committee on Government Affairs:
     Fred Thompson,
     Susan Collins.
     From the Committee on Veterans' Affairs:
     Arlen Specter,
     Strom Thurmond,
     John Rockefeller.
                               Managers on the part of the Senate.