[House Report 105-217]
[From the U.S. Government Publishing Office]




     105th Congress                                       Report 
      1st Session        HOUSE OF REPRESENTATIVES        105-217
                                                       
_______________________________________________________________________

                                    



 
                      BALANCED BUDGET ACT OF 1997

                               ----------                              

                           CONFERENCE REPORT

                              to accompany

                               H.R. 2015




  July 30, (legislative day of July 29), 1997.--Ordered to be printed




105th Congress                                                   Report 
1st Session             HOUSE OF REPRESENTATIVES                105-217 
                                                       
_______________________________________________________________________

                                    



                      BALANCED BUDGET ACT OF 1997

                               ----------                              

                           CONFERENCE REPORT

                              to accompany

                               H.R. 2015




  July 30, (legislative day of July 29), 1997.--Ordered to be printed





105th Congress                                                   Report
 1st Session              HOUSE OF REPRESENTATIVES               105-217


_______________________________________________________________________


                      BALANCED BUDGET ACT OF 1997

                                _______
                                

    July 30 (legislative day, July 29), 1997.--Ordered to be printed

_______________________________________________________________________


 Mr. Kasich, from the committee of conference, submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 2015]

      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
                                    ``(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
            (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 shallgrant 
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 licensedpursuant 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
                    (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 (ifnecessary 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 
                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.
    (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.

            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. Waiver 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-hospital 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.  Increased 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 
          outpatient 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.  Protections under the medicare program for disabled workers 
          who lost benefits under a group health plan.
Sec. 4582.  Governmental 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

              SUBCHAPTER 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.  Protections against fraud and abuse.
Sec. 4708.  Improved 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.
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 terminatesuch 
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).
                    ``(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 atleast 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 
                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 orthe 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.--
            ``(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 
        annualMedicare+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 planshall comply 
with such guidelines as the Secretary may prescribe relating to 
promoting efficient and timely coordination of appropriate maintenance 
and post-stabilization care of an enrollee after the enrollee has been 
determined to be stable under section 1867.
            ``(3) Definition of emergency services.--In this 
        subsection--
                    ``(A) In general.--The term `emergency 
                services' means, with respect to an individual 
                enrolled with an organization, covered 
                inpatient and outpatient services that--
                            ``(i) are furnished by a provider 
                        that is qualified to furnish such 
                        services under this title, and
                            ``(ii) are needed to evaluate or 
                        stabilize an emergency medical 
                        condition (as defined in subparagraph 
                        (B)).
                    ``(B) Emergency medical condition based on 
                prudent layperson.--The term `emergency medical 
                condition' means a medical condition 
                manifesting itself by acute symptoms of 
                sufficient severity (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 or 
                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 
                        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 
        planthrough 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 limitmedically 
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 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+Choiceplan 
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 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 for1997 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 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 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 respectto 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 
                substantiallycomplete 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 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 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 containingthe 
information required to be reported under section 1124 by disclosing 
entities.
                            ``(iii) A description of 
                        transactions, as specified by the 
                        Secretary, between the organization and 
                        a party in interest. Such transactions 
                        shall include--
                                    ``(I) any sale or exchange, 
                                or leasing of any property 
                                between the organization and a 
                                party in interest;
                                    ``(II) any furnishing for 
                                consideration of goods, 
                                services (including management 
                                services), or facilities 
                                between the organization and a 
                                party in interest, but not 
                                including salaries paid to 
                                employees for services provided 
                                in the normal course of their 
                                employment and health services 
                                provided to members by 
                                hospitals and other providers 
                                and by staff, medical group (or 
                                groups), individual practice 
                                association (or associations), 
                                or any combination thereof; and
                                    ``(III) any lending of 
                                money or other extension of 
                                credit between an organization 
                                and a party in interest.
                The Secretary may require that information 
                reported respecting an organization which 
                controls, is controlled by, or is under common 
                control with, another entity be in the form of 
                a consolidated financial statement for the 
                organization and such entity.
                    ``(B) Party in interest defined.--For the 
                purposes of this paragraph, the term `party in 
                interest' means--
                            ``(i) any director, officer, 
                        partner, or employee responsible for 
                        management or administration of a 
                        Medicare+Choice organization, any 
                        person who is directly or indirectly 
                        the beneficial owner of more than 5 
                        percent of the equity of the 
                        organization, any person who is the 
                        beneficial owner of a mortgage, deed of 
                        trust, note, or other interest secured 
                        by, and valuing more than 5 percent of 
                        the organization, and, in the case of a 
                        Medicare+Choice organization organized 
                        as a nonprofit corporation, an 
                        incorporator or member of such 
                        corporation under applicable State 
                        corporation law;
                            ``(ii) any entity in which a person 
                        described in clause (i)--
                                    ``(I) is an officer or 
                                director;
                                    ``(II) is a partner (if 
                                such entity is organized as a 
                                partnership);
                                    ``(III) has directly or 
                                indirectly a beneficial 
                                interest of more than 5 percent 
                                of the equity; or
                                    ``(IV) has a mortgage, deed 
                                of trust, note, or other 
                                interest valuing more than 5 
                                percent of the assets of such 
                                entity;
                            ``(iii) any person directly or 
                        indirectly controlling, controlled by, 
                        or under common control with an 
                        organization; and
                            ``(iv) any spouse, child, or parent 
                        of an individual described in clause 
                        (i).
                    ``(C) Access to information.--Each 
                Medicare+Choice organization shall make the 
                information reported pursuant to subparagraph 
                (A) available to its enrollees upon reasonable 
                request.
            ``(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 adverselyaffected 
(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.


                ``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 thechurch, 
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 ratesunder 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, 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 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 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.
                    ``(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 
        Secretaryshall 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.
    (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.
            (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 
                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 
        benefitsor 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
                    ``(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 of1996 (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 
applying 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), 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 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 shallconsult 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:

                        ``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 forensuring 
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 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--
                    (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 
medicareprogram 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 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 beingtransferred 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.--
            (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 suchinformation 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):
            ``(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
                    (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 endthe 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 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.) 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 areexpected 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:
            ``(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 afterthe 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 (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 amountotherwise 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.''.

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 sharedwith 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:
    ``(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 operatingcosts 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.''.
    (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 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 inwhich 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 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 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 BENEFIT 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 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:


     ``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 cityaverage) 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:
            ``(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 enrollmentwith 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.--
                            ``(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). TheSecretary 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 servicesprovided 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.
                    ``(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 
undersection 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.

     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 asoutlier 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 
acovered 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.
                    ``(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 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.''.
    (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 sentenceof 
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.
            (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 uponsuch 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 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.''.
    (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 
                        basedon 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 levelof 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 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), 1395n(a)(2)(A)) are each amended by 
inserting ``(other than solely venipuncture forthe 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 additionalpayment 
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 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 
                        medicalresidency 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 inparagraph (3) has been approved by 
the Health Care Financing Administration as of May 27, 1997.
            (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.-- 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 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 prominentmanner 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;
            ``(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 organizationshall 
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 availablewithin 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 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 privateindependent 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.
                    ``(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 
wouldreasonably 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 otherthan 
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 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 residentsare 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.''.
            (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
 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 formental 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 
        hospitalon 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) 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 supplieror 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
                    ``(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 paymentsunder 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--
            (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) 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
                    ``(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 
voluntarydisenrollment, 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 
                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 providefor 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 
sections1903(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.
            ``(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.--
            ``(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 operationof 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 
                                orprovider 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 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, 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, 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 fromfamilies 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 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 Departmentof 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 section2104(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 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 
                        amendmenthas 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--
                            ``(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;
                    (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 
assistanceunder 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 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.
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 bythe 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 firstapplied 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 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 
                                        thispart 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
                                    ``(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 
                                underthis 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 
torecipients 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.
                            ``(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 subsidizedemployment, 
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 theCommittees 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 theCommittee 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:
            ``(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) 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 WorkOpportunity 
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:
                    ``(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 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 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 beprovided 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 Form331, 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--
                            ``(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 
thedetermination 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 followsthrough ``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''.
            (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 
bystriking ``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 chapterto 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 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 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 
nationalpolicy 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.

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 anIndian 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 StampAct 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
                            ``(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.''.

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 OpportunityReconciliation 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 
eachamended 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 Generalshall 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:
            ``(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 Law104-208) 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 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.

               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 
areserve 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 aguaranty 
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, 
        $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) Mg1,t3,ilitary 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:
    ``(5) Effective with respect to any period of 
mg1,t3,ilitary 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 
tablein 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:
    ``(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 forwhich 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''.

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 dollaramount) 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 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 beforeDecember 
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.''.
            (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 
                insertingafter 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 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 forforeign 
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 isamended 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 enactedafter 
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).
            ``(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;
            ``(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.
    ``(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 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 theUnited 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 thatincreases 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 miscellaneousreceipts 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.--'';
            (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 appealof 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 
transmita 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 
                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 inthat 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
                    ``(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);''.
    (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 ofreduction 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:
            ``(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.
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 forthe 
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).
            (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 
        reasonabletime 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 precedingyear, 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 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 
thedetermination 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 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 DistrictGovernment 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.

                    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 ReformAct (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 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 untilDecember 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.--
                            (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 ColumbiaCouncil, 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, ona 
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''.

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 authorityof 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).
            (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 
Districtof 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 amendmentsto 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 
ManagementAssistance 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 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 mayseek 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 reportsconcerning 
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 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 
anannual 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 
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. Such investments shall bein 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 ofColumbia 
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 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 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 
theSecretary, 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 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 theproceeds 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 Districtfor 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 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 theDistrict 
(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.
            ``(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 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 thesteps 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 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 bystriking ``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 
                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,
                                   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 30.
      ``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 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 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 recipients 
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; 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).]

                            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.
      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.
      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 forreallocation 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.

   Section 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- 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.

 Section 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 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)

       Section 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.

         Section 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.

                 Section 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.

     Section 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 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 
thatHCFA 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 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 determinedby 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 () 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, 
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 
notwithstanding 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.
(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.
      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 a 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 
woman, 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 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) includemeasures 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 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 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 
beingcovered 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 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:

                                                    Percentage reduction
  Months enrolled in a Medicare Choice plan:
        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 MedicarePlus 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 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 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%.
            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. 
TheSecretary 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) MedicarePlus 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 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 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 organization 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 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 whichthe 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 orhealth 
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.
(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 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 
organizationthat 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.

                               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 than $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.

                               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 (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.
(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 
providedto 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 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 aneligible 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.

                            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, exceptthat 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 cannot 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
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.
      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, regardlessof 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, 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.

                         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 berequired 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. 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 ofCongress (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 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 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 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 consideration 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 fromconducting 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 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 MedicareChoice 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.
      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 careprovider, 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.

                          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\ 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).
---------------------------------------------------------------------------

                               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\ 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 appropriatefor 
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 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 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.

                               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.

                               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 healthprofessionals 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 
                               Amendment

                              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 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 accessto 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 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 imposemandatory 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.

                               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. 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 in 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.

                            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. 
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-relatedcosts. 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) 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.

                            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 targetamounts 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 costsor 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.
      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 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 equalto 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.

     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 SNFmarket 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.
      (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, theSecretary 
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 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 atleast 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 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. 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.

                 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 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) acknowledgesthat 
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 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 
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 be 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 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 by5.8% 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 theapplicable 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.

                          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. Thepayment 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 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

   Sections 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

                 Sections 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 renaldialysis 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 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.
      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 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 forhome 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.
(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 
wouldbe 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.

                 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 ahospital 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.

            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 numberof 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 Confereesemphatically 
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 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 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 trainingrequired 
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 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.

                          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.

                  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.
      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 rules about solvency, enrollment 
practices, procedures for protecting beneficiaries' rights, and 
contracting arrangements of managed 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 managed 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 reenrollment 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 in 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 managed 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 managed care 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 provision of 
information in easily understood form, the conference agreement 
modifies the Senate amendment to delete the specification of 
for whom such information must be presented 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'sbenefits 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 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 provision 
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 licensure 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 plan that has had a 
Medicaid contract for less than 3 years, if the plan is making 
continuous and reasonable efforts to comply with the 75% limit. 
For some HMOs, the 75/25 rule has been bypassed through state 
demonstration waivers or through specific federal legislation.

                               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 provisiondoes 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.

                            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 whicha 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.
      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 andmarketing 
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 andlocal 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.
            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, 1998.
      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.

                          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 retarded (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 FQHCs and RHCs 
during fiscal years 1998 and 1999, but could reduce rates in 
later years. States are required to pay FQHCs 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 of enactment.

                            Senate Amendment

      Requires a Medicaid managed care organization that has a 
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 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 provideror 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 
states 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 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'shospitals, 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 totalundocumented 
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.
      (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, andpayments 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 topay 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 
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 whomeet 
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, coinsurance, 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 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.
      (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 waiver's terms 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 inspectionsof 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 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.

                               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 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). Stateswould 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 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 healthinsurance 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 years 
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 theFederal 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 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 percentageincreased 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 insurancestatus 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, (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 coverageprovided, 
(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 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

      States 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 States, 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 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 Statesand localities up to three years to 
expend 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 spend 33 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 funds, 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 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 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;
      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 
notdistributed 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.

                            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.
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 itfalls 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 third 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.

                     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 required 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, 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:

                                                                 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 
conclusionsregarding 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 food stamp 
eligibility and Medicaid eligibility to be made by an entity 
that is not a State or local government, or by a personwho 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 reservefunds 
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 thisamount 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.

                            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 nextannual 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 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 ofMarch 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 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 of 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 used 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 unusualmedical 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 on 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.

                               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 byVA 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 deposited 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 provisions 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.
      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
      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 wouldincrease 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 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 and 
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 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 foradjustments 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 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 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 areprovided 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.

                            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.
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 
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 depositinsurance 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.

                    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 anincrease 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 
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. Thisrequirement 
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 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 widows 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 widows 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.
    \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
  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
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.
      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  Non-proliferation 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)
  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
  Administration 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
      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
    00-0174  -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
    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
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
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 TITLE

                       Criminal Justice Subtitle

      (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 Governmental Affairs:
                                   Fred Thompson,
                                   Susan Collins.
                From the Committee on Veterans' Affairs:
                                   Arlen Specter,
                                   Strom Thurmond,
                                   John Rockefeller.
                                Managers on the part of the Senate.

                                
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