[105th Congress Public Law 33]
[From the U.S. Government Printing Office]


<DOC>
[DOCID: f:publ33.105]


[[Page 111 STAT. 251]]

  

  

*Public Law 105-33
105th Congress

                                 An Act


 
To provide for reconciliation pursuant to subsections (b)(1) and (c) of 
 section 105 of the concurrent resolution on the budget for fiscal year 
              1998. <<NOTE: Aug. 5, 1997 -  [H.R. 2015]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Balanced Budget 
Act of 1997.>> 

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.
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                          ``(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);

[[Page 111 STAT. 252]]

                                    ``(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:

[[Page 111 STAT. 253]]

            ``(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.

[[Page 111 STAT. 254]]

                          ``(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 <<NOTE: 7 USC 2025 note.>> 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))

[[Page 111 STAT. 255]]

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 <<NOTE: 7 USC 2020 note.>> 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

[[Page 111 STAT. 256]]

                      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.

[[Page 111 STAT. 257]]

                    ``(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. <<NOTE: 7 USC 2015 note.>> 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''.

[[Page 111 STAT. 258]]

      TITLE III--COMMUNICATIONS AND SPECTRUM ALLOCATION PROVISIONS

SEC. 3001. DEFINITIONS.

    (a) Common <<NOTE: 47 USC 153 note.>> Terminology.--Except as 
otherwise provided in this title, the terms used in this title have the 
meanings provided in section 3 of the Communications Act of 1934 (47 
U.S.C. 153), as amended by this section.

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

SEC. 3002. SPECTRUM AUCTIONS.

    (a) Extension and Expansion of Auction Authority.--
            (1) In general.--Section 309(j) of the Communications Act of 
        1934 (47 U.S.C. 309(j)) is amended--
                    (A) by striking paragraphs (1) and (2) and inserting 
                in lieu thereof the following:
            ``(1) General authority.--If, consistent with the 
        obligations described in paragraph (6)(E), mutually exclusive 
        applications are accepted for any initial license or 
        construction permit, then, except as provided in paragraph (2), 
        the Commission shall grant the license or permit to a qualified 
        applicant through a system of competitive bidding that meets the 
        requirements of this subsection.
            ``(2) Exemptions.--The competitive bidding authority granted 
        by this subsection shall not apply to licenses or construction 
        permits issued by the Commission--
                    ``(A) for public safety radio services, including 
                private internal radio services used by State and local 
                governments and non-government entities and including 
                emergency road services provided by not-for-profit 
                organizations, that--
                          ``(i) are used to protect the safety of life, 
                      health, or property; and
                          ``(ii) are not made commercially available to 
                      the public;
                    ``(B) for initial licenses or construction permits 
                for digital television service given to existing 
                terrestrial broadcast licensees to replace their analog 
                television service licenses; or
                    ``(C) for stations described in section 397(6) of 
                this Act.'';

[[Page 111 STAT. 259]]

                    (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''.

[[Page 111 STAT. 260]]

            (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 <<NOTE: 47 USC 309 note.>> is 
        amended by striking subsection (e).
            (5) Effective <<NOTE: 47 USC 309 note.>> Date.--Except as 
        otherwise provided therein, the amendments made by this 
        subsection are effective on July 1, 1997.

    (b) Accelerated <<NOTE: 47 USC 925 note.>> 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)).

[[Page 111 STAT. 261]]

    (c) Commission <<NOTE: 47 USC 925 note.>> Obligation To Make 
Additional Spectrum Available by Auction.--
            (1) In general.--The Commission shall complete all actions 
        necessary to permit the assignment by September 30, 2002, by 
        competitive bidding pursuant to section 309(j) of the 
        Communications Act of 1934 (47 U.S.C. 309(j)), of licenses for 
        the use of bands of frequencies that--
                    (A) in the aggregate span not less than 55 
                megahertz;
                    (B) are located below 3 gigahertz;
                    (C) have not, as of the date of enactment of this 
                Act--
                          (i) been designated by Commission regulation 
                      for assignment pursuant to such section;
                          (ii) been identified by the Secretary of 
                      Commerce pursuant to section 113 of the National 
                      Telecommunications and Information Administration 
                      Organization Act (47 U.S.C. 923);
                          (iii) been allocated for Federal Government 
                      use pursuant to section 305 of the Communications 
                      Act of 1934 (47 U.S.C. 305);
                          (iv) been designated for reallocation under 
                      section 337 of the Communications Act of 1934 (as 
                      added by this Act); or
                          (v) been allocated or authorized for 
                      unlicensed use pursuant to part 15 of the 
                      Commission's regulations (47 C.F.R. Part 15), if 
                      the operation of services licensed pursuant to 
                      competitive bidding would interfere with operation 
                      of end-user products permitted under such 
                      regulations;
                    (D) include frequencies at 2,110-2,150 megahertz; 
                and
                    (E) include 15 megahertz from within the bands of 
                frequencies at 1,990-2,110 megahertz.
            (2) Criteria for Reassignment.--In making available bands of 
        frequencies for competitive bidding pursuant to paragraph (1), 
        the Commission shall--
                    (A) seek to promote the most efficient use of the 
                electromagnetic spectrum;
                    (B) consider the cost of relocating existing uses to 
                other bands of frequencies or other means of 
                communication;
                    (C) consider the needs of existing public safety 
                radio services (as such services are described in 
                section 309(j)(2)(A) of the Communications Act of 1934, 
                as amended by this Act);
                    (D) comply with the requirements of international 
                agreements concerning spectrum allocations; and
                    (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,

[[Page 111 STAT. 262]]

        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.--

[[Page 111 STAT. 263]]

            ``(1) In general.--In order to expedite the commercial use 
        of the electromagnetic spectrum and notwithstanding section 
        3302(b) of title 31, United States Code, any Federal entity 
        which operates a Federal Government station may accept from any 
        person payment of the expenses of relocating the Federal 
        entity's operations from one or more frequencies to another 
        frequency or frequencies, including the costs of any 
        modification, replacement, or reissuance of equipment, 
        facilities, operating manuals, or regulations incurred by that 
        entity. Such payments may be in advance of relocation and may be 
        in cash or in kind. Any such payment in cash shall be deposited 
        in the account of such Federal entity in the Treasury of the 
        United States or in a separate account authorized by law. Funds 
        deposited according to this paragraph shall be available, 
        without appropriation or fiscal year limitation, only for such 
        expenses of the Federal entity for which such funds were 
        deposited under this paragraph.
            ``(2) Process for relocation.--Any person seeking to 
        relocate a Federal Government station that has been assigned a 
        frequency within a band that has been allocated for mixed 
        Federal and non-Federal use, or that has been scheduled for 
        reallocation to non-Federal use, may submit a petition for such 
        relocation to NTIA. The NTIA shall limit or terminate the 
        Federal Government station's operating license within 6 months 
        after receiving the petition if the following requirements are 
        met:
                    ``(A) the person seeking relocation of the Federal 
                Government station has guaranteed to pay all relocation 
                costs incurred by the Federal entity, including all 
                engineering, equipment, site acquisition and 
                construction, and regulatory fee costs;
                    ``(B) all activities necessary for implementing the 
                relocation have been completed, including construction 
                of replacement facilities (if necessary and appropriate) 
                and identifying and obtaining new frequencies for use by 
                the relocated Federal Government station (where such 
                station is not relocating to spectrum reserved 
                exclusively for Federal use);
                    ``(C) any necessary replacement facilities, 
                equipment modifications, or other changes have been 
                implemented and tested to ensure that the Federal 
                Government station is able to successfully accomplish 
                its purposes; and
                    ``(D) NTIA has determined that the proposed use of 
                the spectrum frequency band to which the Federal entity 
                will relocate its operations is--
                          ``(i) consistent with obligations undertaken 
                      by the United States in international agreements 
                      and with United States national security and 
                      public safety interests; and
                          ``(ii) suitable for the technical 
                      characteristics of the band and consistent with 
                      other uses of the band.
                In exercising its authority under clause (i) of this 
                subparagraph, NTIA shall consult with the Secretary of 
                Defense, the Secretary of State, or other appropriate 
                officers of the Federal Government.
            ``(3) Right to reclaim.--If within one year after the 
        relocation the Federal entity demonstrates to the Commission 
        that

[[Page 111 STAT. 264]]

        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).''.

[[Page 111 STAT. 265]]

            (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

[[Page 111 STAT. 266]]

                                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. <<NOTE: Reports.>> 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:

[[Page 111 STAT. 267]]

``SEC. 337. <<NOTE: 47 USC 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

[[Page 111 STAT. 268]]

        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

[[Page 111 STAT. 269]]

            ``(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. <<NOTE: 47 USC 254 note.>> 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. <<NOTE: 47 USC 309 note.>> 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. <<NOTE: 47 USC 309 note.>> 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

[[Page 111 STAT. 270]]

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 subvention 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.

[[Page 111 STAT. 271]]

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.

[[Page 111 STAT. 272]]

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.

[[Page 111 STAT. 273]]

              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 lose 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.

[[Page 111 STAT. 274]]

             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 as 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.

[[Page 111 STAT. 275]]

                           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 
           noncompliant 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:

[[Page 111 STAT. 276]]

                    ``Part C--Medicare+Choice Program

                 ``eligibility, election, and enrollment

    ``Sec. 1851. <<NOTE: 42 USC 1395w-21.>> (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

[[Page 111 STAT. 277]]

                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.--

[[Page 111 STAT. 278]]

            ``(1) In general.--The Secretary shall establish a process 
        through which elections described in subsection (a) are made and 
        changed, including the form and manner in which such elections 
        are made and changed. Such elections shall be made or changed 
        only during coverage election periods specified under subsection 
        (e) and shall become effective as provided in subsection (f).
            ``(2) Coordination through medicare+choice organizations.--
                    ``(A) Enrollment.--Such process shall permit an 
                individual who wishes to elect a Medicare+Choice plan 
                offered by a Medicare+Choice organization to make such 
                election through the filing of an appropriate election 
                form with the organization.
                    ``(B) Disenrollment.--Such process shall permit an 
                individual, who has elected a Medicare+Choice plan 
                offered by a Medicare+Choice organization and who wishes 
                to terminate such election, to terminate such election 
                through the filing of an appropriate election form with 
                the organization.
            ``(3) Default.--
                    ``(A) Initial election.--
                          ``(i) In general.--Subject to clause (ii), an 
                      individual who fails to make an election during an 
                      initial election period under subsection (e)(1) is 
                      deemed to have chosen the original medicare fee-
                      for-service program option.
                          ``(ii) Seamless continuation of coverage.--The 
                      Secretary may establish procedures under which an 
                      individual who is enrolled in a health plan (other 
                      than Medicare+Choice plan) offered by a 
                      Medicare+Choice organization at the time of the 
                      initial election period and who fails to elect to 
                      receive coverage other than through the 
                      organization is deemed to have elected the 
                      Medicare+Choice plan offered by the organization 
                      (or, if the organization offers more than one such 
                      plan, such plan or plans as the Secretary 
                      identifies under such procedures).
                    ``(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

[[Page 111 STAT. 279]]

                period (as defined in subsection (e)(3)(B)), the 
                Secretary shall mail to each Medicare+Choice eligible 
                individual residing in an area the following:
                          ``(i) General information.--The general 
                      information described in paragraph (3).
                          ``(ii) List of plans and comparison of plan 
                      options.--A list identifying the Medicare+Choice 
                      plans that are (or will be) available to residents 
                      of the area and information described in paragraph 
                      (4) concerning such plans. Such information shall 
                      be presented in a comparative form.
                          ``(iii) Additional information.--Any other 
                      information that the Secretary determines will 
                      assist the individual in making the election under 
                      this section.
                The mailing of such information shall be coordinated, to 
                the extent practicable, with the mailing of any annual 
                notice under section 1804.
                    ``(B) Notification to newly eligible medicare+choice 
                eligible individuals.--To the extent practicable, the 
                Secretary shall, not later than 30 days before the 
                beginning of the initial Medicare+Choice enrollment 
                period for an individual described in subsection (e)(1), 
                mail to the individual the information described in 
                subparagraph (A).
                    ``(C) Form.--The information disseminated under this 
                paragraph shall be written and formatted using language 
                that is easily understandable by medicare beneficiaries.
                    ``(D) Periodic updating.--The information described 
                in subparagraph (A) shall be updated on at least an 
                annual basis to reflect changes in the availability of 
                Medicare+Choice plans and the benefits and 
                Medicare+Choice monthly basic and supplemental 
                beneficiary premiums for such plans.
            ``(3) General information.--General information under this 
        paragraph, with respect to coverage under this part during a 
        year, shall include the following:
                    ``(A) Benefits under original medicare fee-for-
                service program option.--A general description of the 
                benefits covered under the original medicare fee-for-
                service program under parts A and B, including--
                          ``(i) covered items and services,
                          ``(ii) beneficiary cost sharing, such as 
                      deductibles, coinsurance, and copayment amounts, 
                      and
                          ``(iii) any beneficiary liability for balance 
                      billing.
                    ``(B) Election procedures.--Information and 
                instructions on how to exercise election options under 
                this section.
                    ``(C) Rights.--A general description of procedural 
                rights (including grievance and appeals procedures) of 
                beneficiaries under the original medicare fee-for-
                service program and the Medicare+Choice program and the 
                right to be protected against discrimination based on 
                health status-related factors under section 1852(b).
                    ``(D) Information on medigap and medicare select.--A 
                general description of the benefits, enrollment rights, 
                and other requirements applicable to medicare 
                supplemental policies under section 1882 and provisions

[[Page 111 STAT. 280]]

                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

[[Page 111 STAT. 281]]

                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

[[Page 111 STAT. 282]]

                      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--

[[Page 111 STAT. 283]]

                          ``(i) the organization offering the plan 
                      substantially violated a material provision of the 
                      organization's contract under this part in 
                      relation to the individual (including the failure 
                      to provide an enrollee on a timely basis medically 
                      necessary care for which benefits are available 
                      under the plan or the failure to provide such 
                      covered care in accordance with applicable quality 
                      standards); or
                          ``(ii) the organization (or an agent or other 
                      entity acting on the organization's behalf) 
                      materially misrepresented the plan's provisions in 
                      marketing the plan to the individual; or
                    ``(D) the individual meets such other exceptional 
                conditions as the Secretary may provide.
        Effective as of January 1, 2002, an individual who, upon first 
        becoming eligible for benefits under part A at age 65, enrolls 
        in a Medicare+Choice plan under this part, the individual may 
        discontinue the election of such plan, and elect coverage under 
        the original fee-for-service plan, at any time during the 12-
        month period beginning on the effective date of such enrollment.
            ``(5) Special rules for msa plans.--Notwithstanding the 
        preceding provisions of this subsection, an individual--
                    ``(A) may elect an MSA plan only during--
                          ``(i) an initial open enrollment period 
                      described in paragraph (1),
                          ``(ii) an annual, coordinated election period 
                      described in paragraph (3)(B), or
                          ``(iii) the month of November 1998;
                    ``(B) subject to subparagraph (C), may not 
                discontinue an election of an MSA plan except during the 
                periods described in clause (ii) or (iii) of 
                subparagraph (A) and under the first sentence of 
                paragraph (4); and
                    ``(C) who elects an MSA plan during an annual, 
                coordinated election period, and who never previously 
                had elected such a plan, may revoke such election, in a 
                manner determined by the Secretary, by not later than 
                December 15 following the date of the election.
            ``(6) Open enrollment periods.--Subject to paragraph (5), a 
        Medicare+Choice organization--
                    ``(A) shall accept elections or changes to elections 
                during the initial enrollment periods described in 
                paragraph (1), during the month of November 1998 and 
                each subsequent year (as provided in paragraph (3)), and 
                during special election periods described in the first 
                sentence of paragraph (4); and
                    ``(B) may accept other changes to elections at such 
                other times as the organization provides.

    ``(f) Effectiveness of Elections and Changes of Elections.--
            ``(1) During initial coverage election period.--An election 
        of coverage made during the initial coverage election period 
        under subsection (e)(1)(A) shall take effect upon the date the 
        individual becomes entitled to benefits under part A and 
        enrolled under part B, except as the Secretary may provide 
        (consistent with section 1838) in order to prevent retroactive 
        coverage.

[[Page 111 STAT. 284]]

            ``(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.--

[[Page 111 STAT. 285]]

                          ``(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--

[[Page 111 STAT. 286]]

                    ``(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. <<NOTE: 42 USC 1395w-22.>> (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).

[[Page 111 STAT. 287]]

            ``(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 an MSA plan, (without affording those individuals 
                an option to decline the coverage) supplemental health 
                care benefits that the Secretary may approve. The 
                Secretary shall approve any such supplemental benefits 
                unless the Secretary determines that including such 
                supplemental benefits would substantially discourage 
                enrollment by Medicare+Choice eligible individuals with 
                the organization.
                    ``(B) At enrollees' option.--
                          ``(i) In general.--Subject to clause (ii), a 
                      Medicare+Choice organization may provide to 
                      individuals enrolled under this part supplemental 
                      health care benefits that the individuals may 
                      elect, at their option, to have covered.
                          ``(ii) Special rule for msa plans.--A 
                      Medicare+Choice organization may not provide, 
                      under an MSA plan, supplemental health care 
                      benefits that cover the deductible described in 
                      section 1859(b)(2)(B). In applying the previous 
                      sentence, health benefits described in section 
                      1882(u)(2)(B) shall not be treated as covering 
                      such deductible.
                    ``(C) Application to Medicare+Choice private fee-
                for-service plans.--Nothing in this paragraph shall be 
                construed as preventing a Medicare+Choice private fee-
                for-service plan from offering supplemental benefits 
                that include payment for some or all of the balance 
                billing amounts permitted consistent with section 
                1852(k) and coverage of additional services that the 
                plan finds to be medically necessary.
            ``(4) Organization as secondary payer.--Notwithstanding any 
        other provision of law, a Medicare+Choice organization may (in 
        the case of the provision of items and services to an individual 
        under a Medicare+Choice plan under circumstances in which 
        payment under this title is made secondary pursuant to section 
        1862(b)(2)) charge or authorize the provider of such services to 
        charge, in accordance with the charges allowed under a law, 
        plan, or policy described in such section--
                    ``(A) the insurance carrier, employer, or other 
                entity which under such law, plan, or policy is to pay 
                for the provision of such services, or
                    ``(B) such individual to the extent that the 
                individual has been paid under such law, plan, or policy 
                for such services.
            ``(5) National coverage determinations.--If there is a 
        national coverage determination made in the period beginning on 
        the date of an announcement under section 1853(b) and ending on 
        the date of the next announcement under such section and the 
        Secretary projects that the determination will result in a 
        significant change in the costs to a Medicare+Choice 
        organization of providing the benefits that are the subject of 
        such national coverage determination and that such change in 
        costs was not incorporated in the determination of the annual 
        Medicare+Choice capitation rate under section 1853 included

[[Page 111 STAT. 288]]

        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

[[Page 111 STAT. 289]]

                      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

[[Page 111 STAT. 290]]

                      of an unforeseen illness, injury, or condition, 
                      and (II) it was not reasonable given the 
                      circumstances to obtain the services through the 
                      organization,
                          ``(ii) the services were renal dialysis 
                      services and were provided other than through the 
                      organization because the individual was 
                      temporarily out of the plan's service area, or
                          ``(iii) the services are maintenance care or 
                      post-stabilization care covered under the 
                      guidelines established under paragraph (2);
                    ``(D) the organization provides access to 
                appropriate providers, including credentialed 
                specialists, for medically necessary treatment and 
                services; and
                    ``(E) coverage is provided for emergency services 
                (as defined in paragraph (3)) without regard to prior 
                authorization or the emergency care provider's 
                contractual relationship with the organization.
            ``(2) Guidelines respecting coordination of post-
        stabilization care.--A Medicare+Choice plan shall comply with 
        such guidelines as the Secretary may prescribe relating to 
        promoting efficient and timely coordination of appropriate 
        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

[[Page 111 STAT. 291]]

                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;

[[Page 111 STAT. 292]]

                          ``(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

[[Page 111 STAT. 293]]

        enrollee records) if the organization is accredited (and 
        periodically reaccredited) by a private organization under a 
        process that the Secretary has determined assures that the 
        organization, as a condition of accreditation, applies and 
        enforces standards with respect to the requirements involved 
        that are no less stringent than the standards established under 
        section 1856 to carry out the respective requirements.

    ``(f) Grievance Mechanism.--Each Medicare+Choice organization must 
provide meaningful procedures for hearing and resolving grievances 
between the organization (including any entity or individual through 
which the organization provides health care services) and enrollees with 
Medicare+Choice plans of the organization under this part.
    ``(g) Coverage Determinations, Reconsiderations, and Appeals.--
            ``(1) Determinations by organization.--
                    ``(A) In general.--A Medicare+Choice organization 
                shall have a procedure for making determinations 
                regarding whether an individual enrolled with the plan 
                of the organization under this part is entitled to 
                receive a health service under this section and the 
                amount (if any) that the individual is required to pay 
                with respect to such service. Subject to paragraph (3), 
                such procedures shall provide for such determination to 
                be made on a timely basis.
                    ``(B) Explanation of determination.--Such a 
                determination that denies coverage, in whole in part, 
                shall be in writing and shall include a statement in 
                understandable language of the reasons for the denial 
                and a description of the reconsideration and appeals 
                processes.
            ``(2) Reconsiderations.--
                    ``(A) In general.--The organization shall provide 
                for reconsideration of a determination described in 
                paragraph (1)(B) upon request by the enrollee involved. 
                The reconsideration shall be within a time period 
                specified by the Secretary, but shall be made, subject 
                to paragraph (3), not later than 60 days after the date 
                of the receipt of the request for reconsideration.
                    ``(B) Physician decision on certain 
                reconsiderations.--A reconsideration relating to a 
                determination to deny coverage based on a lack of 
                medical necessity shall be made only by a physician with 
                appropriate expertise in the field of medicine which 
                necessitates treatment who is other than a physician 
                involved in the initial determination.
            ``(3) Expedited determinations and reconsiderations.--
                    ``(A) Receipt of requests.--
                          ``(i) Enrollee requests.--An enrollee in a 
                      Medicare+Choice plan may request, either in 
                      writing or orally, an expedited determination 
                      under paragraph (1) or an expedited 
                      reconsideration under paragraph (2) by the 
                      Medicare+Choice organization.
                          ``(ii) Physician requests.--A physician, 
                      regardless whether the physician is affiliated 
                      with the organization or not, may request, either 
                      in writing or orally, such an expedited 
                      determination or reconsideration.
                    ``(B) Organization procedures.--

[[Page 111 STAT. 294]]

                          ``(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 <<NOTE: Contracts.>> 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

[[Page 111 STAT. 295]]

records or other health information regarding enrollees under this part, 
the Medicare+Choice organization shall establish procedures--
            ``(1) to safeguard the privacy of any individually 
        identifiable enrollee information;
            ``(2) to maintain such records and information in a manner 
        that is accurate and timely, and
            ``(3) to assure timely access of enrollees to such records 
        and information.

    ``(i) Information on Advance Directives.--Each Medicare+Choice 
organization shall meet the requirement of section 1866(f) (relating to 
maintaining written policies and procedures respecting advance 
directives).
    ``(j) Rules Regarding Provider Participation.--
            ``(1) Procedures.--Insofar as a Medicare+Choice organization 
        offers benefits under a Medicare+Choice plan through agreements 
        with physicians, the organization shall establish reasonable 
        procedures relating to the participation (under an agreement 
        between a physician and the organization) of physicians under 
        such a plan. Such procedures shall include--
                    ``(A) providing notice of the rules regarding 
                participation,
                    ``(B) providing written notice of participation 
                decisions that are adverse to physicians, and
                    ``(C) providing a process within the organization 
                for appealing such adverse decisions, including the 
                presentation of information and views of the physician 
                regarding such decision.
            ``(2) Consultation in medical policies.--A Medicare+Choice 
        organization shall consult with physicians who have entered into 
        participation agreements with the organization regarding the 
        organization's medical policy, quality, and medical management 
        procedures.
            ``(3) Prohibiting interference with provider advice to 
        enrollees.--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), a Medicare+Choice organization (in relation to an 
                individual enrolled under a Medicare+Choice plan offered 
                by the organization under this part) shall not prohibit 
                or otherwise restrict a covered health care professional 
                (as defined in subparagraph (D)) from advising such an 
                individual who is a patient of the professional about 
                the health status of the individual or medical care or 
                treatment for the individual's condition or disease, 
                regardless of whether benefits for such care or 
                treatment are provided under the plan, if the 
                professional is acting within the lawful scope of 
                practice.
                    ``(B) Conscience protection.--Subparagraph (A) shall 
                not be construed as requiring a Medicare+Choice plan to 
                provide, reimburse for, or provide coverage of a 
                counseling or referral service if the Medicare+Choice 
                organization offering the plan--
                          ``(i) objects to the provision of such service 
                      on moral or religious grounds; and
                          ``(ii) in the manner and through the written 
                      instrumentalities such Medicare+Choice 
                      organization deems appropriate, makes available 
                      information on its policies regarding such service 
                      to prospective enrollees

[[Page 111 STAT. 296]]

                      before or during enrollment and to enrollees 
                      within 90 days after the date that the 
                      organization or plan adopts a change in policy 
                      regarding such a counseling or referral service.
                    ``(C) Construction.--Nothing in subparagraph (B) 
                shall be construed to affect disclosure requirements 
                under State law or under the Employee Retirement Income 
                Security Act of 1974.
                    ``(D) Health care professional defined.--For 
                purposes of this paragraph, the term `health care 
                professional' means a physician (as defined in section 
                1861(r)) or other health care professional if coverage 
                for the professional's services is provided under the 
                Medicare+Choice plan for the services of the 
                professional. Such term includes a podiatrist, 
                optometrist, chiropractor, psychologist, dentist, 
                physician assistant, physical or occupational therapist 
                and therapy assistant, speech-language pathologist, 
                audiologist, registered or licensed practical nurse 
                (including nurse practitioner, clinical nurse 
                specialist, certified registered nurse anesthetist, and 
                certified nurse-midwife), licensed certified social 
                worker, registered respiratory therapist, and certified 
                respiratory therapy technician.
            ``(4) Limitations on physician incentive plans.--
                    ``(A) In general.--No Medicare+Choice organization 
                may operate any physician incentive plan (as defined in 
                subparagraph (B)) unless the following requirements are 
                met:
                          ``(i) No specific payment is made directly or 
                      indirectly under the plan to a physician or 
                      physician group as an inducement to reduce or 
                      limit medically necessary services provided with 
                      respect to a specific individual enrolled with the 
                      organization.
                          ``(ii) If the plan places a physician or 
                      physician group at substantial financial risk (as 
                      determined by the Secretary) for services not 
                      provided by the physician or physician group, the 
                      organization--
                                    ``(I) provides stop-loss protection 
                                for the physician or group that is 
                                adequate and appropriate, based on 
                                standards developed by the Secretary 
                                that take into account the number of 
                                physicians placed at such substantial 
                                financial risk in the group or under the 
                                plan and the number of individuals 
                                enrolled with the organization who 
                                receive services from the physician or 
                                group, and
                                    ``(II) conducts periodic surveys of 
                                both individuals enrolled and 
                                individuals previously enrolled with the 
                                organization to determine the degree of 
                                access of such individuals to services 
                                provided by the organization and 
                                satisfaction with the quality of such 
                                services.
                          ``(iii) The organization provides the 
                      Secretary with descriptive information regarding 
                      the plan, sufficient to permit the Secretary to 
                      determine whether the plan is in compliance with 
                      the requirements of this subparagraph.
                    ``(B) Physician incentive plan defined.--In this 
                paragraph, the term `physician incentive plan' means any

[[Page 111 STAT. 297]]

                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.

[[Page 111 STAT. 298]]

            ``(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

[[Page 111 STAT. 299]]

                      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 <<NOTE: 42 USC 1395w-23.>> to 
Organizations.--
            ``(1) Monthly payments.--
                    ``(A) In general.--Under a contract under section 
                1857 and subject to subsections (e) and (f) and section 
                1859(e)(4), the Secretary shall make monthly payments 
                under this section in advance to each Medicare+Choice 
                organization, with respect to coverage of an individual 
                under this part in a Medicare+Choice payment area for a 
                month, in an amount equal to \1/12\ of the annual 
                Medicare+Choice capitation rate (as calculated under 
                subsection (c)) with respect to that individual for that 
                area, adjusted for such risk factors as age, disability 
                status, gender, institutional status, and such other 
                factors as the Secretary determines to be appropriate, 
                so as to ensure actuarial equivalence. The Secretary may 
                add to, modify, or substitute for such factors, if such 
                changes will improve the determination of actuarial 
                equivalence.
                    ``(B) Special rule for end-stage renal disease.--The 
                Secretary shall establish separate rates of payment to a 
                Medicare+Choice organization with respect to classes of 
                individuals determined to have end-stage renal disease 
                and enrolled in a Medicare+Choice plan of the 
                organization. Such rates of payment shall be actuarially 
                equivalent to rates paid to other enrollees in the 
                Medicare+Choice payment area (or such other area as 
                specified by the Secretary). In accordance with 
                regulations, the Secretary shall provide for the 
                application of the seventh sentence of section 
                1881(b)(7) to payments under this section covering the 
                provision of renal dialysis treatment in the same manner 
                as such sentence applies to composite rate payments 
                described in such sentence.
            ``(2) Adjustment to reflect number of enrollees.--
                    ``(A) In general.--The amount of payment under this 
                subsection may be retroactively adjusted to take into 
                account any difference between the actual number of 
                individuals enrolled with an organization under this 
                part and the number of such individuals estimated to be 
                so enrolled in determining the amount of the advance 
                payment.
                    ``(B) Special rule for certain enrollees.--
                          ``(i) In general.--Subject to clause (ii), the 
                      Secretary may make retroactive adjustments under 
                      subparagraph (A) to take into account individuals 
                      enrolled during the period beginning on the date 
                      on which the individual enrolls with a 
                      Medicare+Choice organization under a plan 
                      operated, sponsored, or

[[Page 111 STAT. 300]]

                      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

[[Page 111 STAT. 301]]

        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,

[[Page 111 STAT. 302]]

                    ``(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

[[Page 111 STAT. 303]]

                      adjustment that would have been made under clause 
                      (i) if the hospitals had not been reimbursed under 
                      such section.
                    ``(D) Treatment of areas with highly variable 
                payment rates.--In the case of a Medicare+Choice payment 
                area for which the annual per capita rate of payment 
                determined under section 1876(a)(1)(C) for 1997 varies 
                by more than 20 percent from such rate for 1996, for 
                purposes of this subsection the Secretary may substitute 
                for such rate for 1997 a rate that is more 
                representative of the costs of the enrollees in the 
                area.
            ``(4) Input-price-adjusted annual national medicare+choice 
        capitation rate.--
                    ``(A) In general.--For purposes of paragraph (1)(A), 
                the input-price-adjusted annual national Medicare+Choice 
                capitation rate for a Medicare+Choice payment area for a 
                year is equal to the sum, for all the types of medicare 
                services (as classified by the Secretary), of the 
                product (for each such type of service) of--
                          ``(i) the national standardized annual 
                      Medicare+Choice capitation rate (determined under 
                      subparagraph (B)) for the year,
                          ``(ii) the proportion of such rate for the 
                      year which is attributable to such type of 
                      services, and
                          ``(iii) an index that reflects (for that year 
                      and that type of services) the relative input 
                      price of such services in the area compared to the 
                      national average input price of such services.
                In applying clause (iii), the Secretary may, subject to 
                subparagraph (C), apply those indices under this title 
                that are used in applying (or updating) national payment 
                rates for specific areas and localities.
                    ``(B) National standardized annual medicare+choice 
                capitation rate.--In subparagraph (A)(i), the `national 
                standardized annual Medicare+Choice capitation rate' for 
                a year is equal to--
                          ``(i) the sum (for all Medicare+Choice payment 
                      areas) of the product of--
                                    ``(I) the annual area-specific 
                                Medicare+Choice capitation rate for that 
                                year for the area under paragraph (3), 
                                and
                                    ``(II) the average number of 
                                medicare beneficiaries residing in that 
                                area in the year, multiplied by the 
                                average of the risk factor weights used 
                                to adjust payments under subsection 
                                (a)(1)(A) for such beneficiaries in such 
                                area; divided by
                          ``(ii) the sum of the products described in 
                      clause (i)(II) for all areas for that year.
                    ``(C) Special rules for 1998.--In applying this 
                paragraph for 1998--
                          ``(i) medicare services shall be divided into 
                      2 types of services: part A services and part B 
                      services;
                          ``(ii) the proportions described in 
                      subparagraph (A)(ii)--
                                    ``(I) for part A services shall be 
                                the ratio (expressed as a percentage) of 
                                the national average annual per capita 
                                rate of payment for part A for

[[Page 111 STAT. 304]]

                                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),

[[Page 111 STAT. 305]]

                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

[[Page 111 STAT. 306]]

                      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

[[Page 111 STAT. 307]]

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

[[Page 111 STAT. 308]]

                amount equal to the value of the additional benefits 
                required under section 1854(f)(1)(A).

                               ``premiums

    ``Sec. 1854. (a) Submission <<NOTE: 42 USC 1395w-24.>> 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:

[[Page 111 STAT. 309]]

                    ``(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-

[[Page 111 STAT. 310]]

                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 respect to all individuals in same 
        geographic area, the State, or in the United States, eligible to 
        enroll in the Medicare+Choice plan involved under this part or 
        on the basis of other appropriate data.
            ``(4) Special rule for private fee-for-service plans.--With 
        respect to a Medicare+Choice private fee-for-service plan (other 
        than a plan that is an MSA plan), in no event may--

[[Page 111 STAT. 311]]

                    ``(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

[[Page 111 STAT. 312]]

        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 <<NOTE: 42 USC 1395w-25.>> 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.

[[Page 111 STAT. 313]]

            ``(2) Special exception for provider-sponsored 
        organizations.--
                    ``(A) In general.--In the case of a provider-
                sponsored organization that seeks to offer a 
                Medicare+Choice plan in a State, the Secretary shall 
                waive the requirement of paragraph (1) that the 
                organization be licensed in that State if--
                          ``(i) the organization files an application 
                      for such waiver with the Secretary by not later 
                      than November 1, 2002, and
                          ``(ii) the Secretary determines, based on the 
                      application and other evidence presented to the 
                      Secretary, that any of the grounds for approval of 
                      the application described in subparagraph (B), 
                      (C), or (D) has been met.
                    ``(B) Failure to act on licensure application on a 
                timely basis.--The ground for approval of such a waiver 
                application described in this subparagraph is that the 
                State has failed to complete action on a licensing 
                application of the organization within 90 days of the 
                date of the State's receipt of a substantially complete 
                application. No period before the date of the enactment 
                of this section shall be included in determining such 
                90-day period.
                    ``(C) Denial of application based on discriminatory 
                treatment.--The ground for approval of such a waiver 
                application described in this subparagraph is that the 
                State has denied such a licensing application and--
                          ``(i) the standards or review process imposed 
                      by the State as a condition of approval of the 
                      license imposes any material requirements, 
                      procedures, or standards (other than solvency 
                      requirements) to such organizations that are not 
                      generally applicable to other entities engaged in 
                      a substantially similar business, or
                          ``(ii) the State requires the organization, as 
                      a condition of licensure, to offer any product or 
                      plan other than a Medicare+Choice plan.
                    ``(D) Denial of application based on application of 
                solvency requirements.--With respect to waiver 
                applications filed on or after the date of publication 
                of solvency standards under section 1856(a), the ground 
                for approval of such a waiver application described in 
                this subparagraph is that the State has denied such a 
                licensing application based (in whole or in part) on the 
                organization's failure to meet applicable solvency 
                requirements and--
                          ``(i) such requirements are not the same as 
                      the solvency standards established under section 
                      1856(a); or
                          ``(ii) the State has imposed as a condition of 
                      approval of the license documentation or 
                      information requirements relating to solvency or 
                      other material requirements, procedures, or 
                      standards relating to solvency that are different 
                      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

[[Page 111 STAT. 314]]

                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

[[Page 111 STAT. 315]]

                      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.

[[Page 111 STAT. 316]]

            ``(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,

[[Page 111 STAT. 317]]

                    ``(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 <<NOTE: 42 USC 1395w-26.>> 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

[[Page 111 STAT. 318]]

                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, <<NOTE: Federal Register, 
        publication.>> 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

[[Page 111 STAT. 319]]

        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. <<NOTE: Publication.>> 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 <<NOTE: 42 USC 1395w-27.>> 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.

[[Page 111 STAT. 320]]

            ``(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

[[Page 111 STAT. 321]]

                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) <<NOTE: Reports.>> Disclosure.--
                    ``(A) In general.--Each Medicare+Choice organization 
                shall, in accordance with regulations of the Secretary, 
                report to the Secretary financial information which 
                shall include the following:
                          ``(i) Such information as the Secretary may 
                      require demonstrating that the organization has a 
                      fiscally sound operation.
                          ``(ii) A copy of the report, if any, filed 
                      with the Health Care Financing Administration 
                      containing the information required to be reported 
                      under section 1124 by disclosing entities.
                          ``(iii) A description of transactions, as 
                      specified by the Secretary, between the 
                      organization and a party in interest. Such 
                      transactions shall include--
                                    ``(I) any sale or exchange, or 
                                leasing of any property between the 
                                organization and a party in interest;
                                    ``(II) any furnishing for 
                                consideration of goods, services 
                                (including management services), or 
                                facilities between the organization and 
                                a party in interest, but not including 
                                salaries paid to employees for services 
                                provided in the normal course of their 
                                employment and health services provided 
                                to members by hospitals and other 
                                providers and by staff, medical group 
                                (or groups), individual practice 
                                association (or associations), or any 
                                combination thereof; and
                                    ``(III) any lending of money or 
                                other extension of credit between an 
                                organization and a party in interest.
                The Secretary may require that information reported 
                respecting an organization which controls, is controlled 
                by, or is under common control with, another entity be 
                in the form of a consolidated financial statement for 
                the organization and such entity.
                    ``(B) Party in interest defined.--For the purposes 
                of this paragraph, the term `party in interest' means--
                          ``(i) any director, officer, partner, or 
                      employee responsible for management or 
                      administration of a Medicare+Choice organization, 
                      any person who is directly or indirectly the 
                      beneficial owner of more than 5 percent of the 
                      equity of the organization, any person

[[Page 111 STAT. 322]]

                      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

[[Page 111 STAT. 323]]

                year under this paragraph shall be deposited and 
                credited as offsetting collections.
                    ``(D) Limitation.--In any fiscal year the fees 
                collected by the Secretary under subparagraph (B) shall 
                not exceed the lesser of--
                          ``(i) the estimated costs to be incurred by 
                      the Secretary in the fiscal year in carrying out 
                      the activities described in section 1851 and 
                      section 4360 of the Omnibus Budget Reconciliation 
                      Act of 1990; or
                          ``(ii)(I) $200,000,000 in fiscal year 1998;
                          ``(II) $150,000,000 in fiscal year 1999; and
                          ``(III) $100,000,000 in fiscal year 2000 and 
                      each subsequent fiscal year.

    ``(f) Prompt Payment by Medicare+Choice Organization.--
            ``(1) Requirement.--A contract under this part shall require 
        a Medicare+Choice organization to provide prompt payment 
        (consistent with the provisions of sections 1816(c)(2) and 
        1842(c)(2)) of claims submitted for services and supplies 
        furnished to enrollees pursuant to the contract, if the services 
        or supplies are not furnished under a contract between the 
        organization and the provider or supplier (or in the case of a 
        Medicare+Choice private fee-for-service plan, if a claim is 
        submitted to such organization by an enrollee).
            ``(2) Secretary's option to bypass noncomplying 
        organization.--In the case of a Medicare+Choice eligible 
        organization which the Secretary determines, after notice and 
        opportunity for a hearing, has failed to make payments of 
        amounts in compliance with paragraph (1), the Secretary may 
        provide for direct payment of the amounts owed to providers and 
        suppliers (or, in the case of a Medicare+Choice private fee-for-
        service plan, amounts owed to the enrollees) for covered 
        services and supplies furnished to individuals enrolled under 
        this part under the contract. If the Secretary provides for the 
        direct payments, the Secretary shall provide for an appropriate 
        reduction in the amount of payments otherwise made to the 
        organization under this part to reflect the amount of the 
        Secretary's payments (and the Secretary's costs in making the 
        payments).

    ``(g) Intermediate Sanctions.--
            ``(1) In general.--If the Secretary determines that a 
        Medicare+Choice organization with a contract under this 
        section--
                    ``(A) fails substantially to provide medically 
                necessary items and services that are required (under 
                law or under the contract) to be provided to an 
                individual covered under the contract, if the failure 
                has adversely affected (or has substantial likelihood of 
                adversely affecting) the individual;
                    ``(B) imposes premiums on individuals enrolled under 
                this part in excess of the amount of the Medicare+Choice 
                monthly basic and supplemental beneficiary premiums 
                permitted under section 1854;
                    ``(C) acts to expel or to refuse to re-enroll an 
                individual in violation of the provisions of this part;
                    ``(D) engages in any practice that would reasonably 
                be expected to have the effect of denying or 
                discouraging enrollment (except as permitted by this 
                part) by eligible individuals with the organization 
                whose medical condition

[[Page 111 STAT. 324]]

                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

[[Page 111 STAT. 325]]

                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 <<NOTE: Applicability.>> 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 <<NOTE: 42 USC 1395w-28.>> 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

[[Page 111 STAT. 326]]

                    ``(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).

[[Page 111 STAT. 327]]

    ``(d) Coordinated Acute and Long-Term Care Benefits Under a 
Medicare+Choice Plan.--Nothing in this part shall be construed as 
preventing a State from coordinating benefits under a medicaid plan 
under title XIX with those provided under a Medicare+Choice plan in a 
manner that assures continuity of a full-range of acute care and long-
term care services to poor elderly or disabled individuals eligible for 
benefits under this title and under such plan.
    ``(e) Restriction on Enrollment for Certain Medicare+Choice Plans.--
            ``(1) In general.--In the case of a Medicare+Choice 
        religious fraternal benefit society plan described in paragraph 
        (2), notwithstanding any other provision of this part to the 
        contrary and in accordance with regulations of the Secretary, 
        the society offering the plan may restrict the enrollment of 
        individuals under this part to individuals who are members of 
        the church, convention, or group described in paragraph (3)(B) 
        with which the society is affiliated.
            ``(2) Medicare+choice religious fraternal benefit society 
        plan described.--For purposes of this subsection, a 
        Medicare+Choice religious fraternal benefit society plan 
        described in this paragraph is a Medicare+Choice plan described 
        in section 1851(a)(2)(A) that--
                    ``(A) is offered by a religious fraternal benefit 
                society described in paragraph (3) only to members of 
                the church, convention, or group described in paragraph 
                (3)(B); and
                    ``(B) permits all such members to enroll under the 
                plan without regard to health status-related factors.
        Nothing in this subsection shall be construed as waiving any 
        plan requirements relating to financial solvency.
            ``(3) Religious fraternal benefit society defined.--For 
        purposes of paragraph (2)(A), a `religious fraternal benefit 
        society' described in this section is an organization that--
                    ``(A) is described in section 501(c)(8) of the 
                Internal Revenue Code of 1986 and is exempt from 
                taxation under section 501(a) of such Act;
                    ``(B) is affiliated with, carries out the tenets of, 
                and shares a religious bond with, a church or convention 
                or association of churches or an affiliated group of 
                churches;
                    ``(C) offers, in addition to a Medicare+Choice 
                religious fraternal benefit society plan, health 
                coverage to individuals not entitled to benefits under 
                this title who are members of such church, convention, 
                or group; and
                    ``(D) does not impose any limitation on membership 
                in the society based on any health status-related 
                factor.
            ``(4) Payment adjustment.--Under regulations of the 
        Secretary, in the case of individuals enrolled under this part 
        under a Medicare+Choice religious fraternal benefit society plan 
        described in paragraph (2), the Secretary shall provide for such 
        adjustment to the payment amounts otherwise established under 
        section 1854 as may be appropriate to assure an appropriate 
        payment level, taking into account the actuarial characteristics 
        and experience of such individuals.''.

[[Page 111 STAT. 328]]

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 <<NOTE: Effective date.>> for contract periods 
beginning after December 31, 1996, the Secretary may waive or modify the 
requirement imposed by paragraph (1) to the extent the Secretary finds 
that it is in the public interest.''.

    (b) Transition.--
            (1) Risk-sharing contracts.--Section 1876 (42 U.S.C. 1395mm) 
        is amended by adding at the end the following new subsections:

    ``(k)(1) Except as provided in paragraph (2)--
            ``(A) on or after the date standards for Medicare+Choice 
        organizations and plans are first established under section 
        1856(b)(1), the Secretary shall not enter into any risk-sharing 
        contract under this section with an eligible organization; and
            ``(B) for any contract year beginning on or after January 1, 
        1999, the Secretary shall not renew any such contract.

    ``(2) An individual who is enrolled in part B only and is enrolled 
in an eligible organization with a risk-sharing contract under this 
section on December 31, 1998, may continue enrollment in such 
organization in accordance with regulations described in section 
1856(b)(1).
    ``(3) Notwithstanding subsection (a), the Secretary shall provide 
that payment amounts under risk-sharing contracts under this section for 
months in a year (beginning with January 1998) shall be computed--
            ``(A) with respect to individuals entitled to benefits under 
        both parts A and B, by substituting payment rates under section 
        1853(a) for the payment rates otherwise established under 
        section 1876(a), and
            ``(B) with respect to individuals only entitled to benefits 
        under part B, by substituting an appropriate proportion of such 
        rates (reflecting the relative proportion of payments under this 
        title attributable to such part) for the payment rates otherwise 
        established under subsection (a).

    ``(4) <<NOTE: Applicability.>> 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).''.

[[Page 111 STAT. 329]]

            (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 <<NOTE: 42 USC 1395mm note.>> 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 <<NOTE: 42 USC 1395w-21 note.>> 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 <<NOTE: 42 USC note prec. 1395x.>> 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).

[[Page 111 STAT. 330]]

            (2) Secretarial <<NOTE: 42 USC 1395w-21 note.>> 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 <<NOTE: 42 USC 1395w-27 note.>> 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 <<NOTE: 42 USC 1395mm note.>> 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 <<NOTE: 42 USC 1395w-23 note.>> 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 <<NOTE: 42 USC 1395l note.>> 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 <<NOTE: Effective date.>> 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

[[Page 111 STAT. 331]]

                          (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 <<NOTE: 26 USC 138, 139.>> and by inserting after section 137 the 
following new section:

[[Page 111 STAT. 332]]

``SEC. 138. <<NOTE: 26 USC 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.

[[Page 111 STAT. 333]]

                    ``(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 <<NOTE: Applicability.>> 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 <<NOTE: 26 USC 4973.>> is amended by inserting ``or section 
        138(c)(3)'' after ``section 220(f)(3)''.
            (2) Subsection (b) of section 220 of such Code <<NOTE: 26 
        USC 220.>> 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.''.

[[Page 111 STAT. 334]]

            (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 <<NOTE: 26 USC 138 note.>> Date.--The amendments made 
by this section shall apply to taxable years beginning after December 
31, 1998.

                        CHAPTER 2--DEMONSTRATIONS

     Subchapter <<NOTE: 42 USC 1395w-23 note.>> 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 <<NOTE: Urban and rural areas.>> 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

[[Page 111 STAT. 335]]

                          (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,

[[Page 111 STAT. 336]]

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 <<NOTE: 101 Stat. 1330-
65.>> 1987 is amended--

[[Page 111 STAT. 337]]

            (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 <<NOTE: 107 Stat. 608.>> 1993 is amended by 
striking ``12,000'' and inserting ``36,000''.

    (c) Report <<NOTE: 42 USC 1395w-21 note.>> 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 <<NOTE: 42 usc 
1395ggg.>> 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;

[[Page 111 STAT. 338]]

                    ``(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;

[[Page 111 STAT. 339]]

                          ``(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.

[[Page 111 STAT. 340]]

            ``(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. <<NOTE: Regulations.>> In cases in 
        which a payment amount may not otherwise be readily computed, 
        the Secretary shall

[[Page 111 STAT. 341]]

        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--

[[Page 111 STAT. 342]]

                          ``(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.

[[Page 111 STAT. 343]]

                    ``(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 <<NOTE: 42 USC 1395ggg note.>> 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. <<NOTE: 42 USC 1395b-1 note.>> 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--

[[Page 111 STAT. 344]]

                    (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 <<NOTE: Urban and rural areas. District of 
        Columbia.>> and project areas.--Not later than 2 years after the 
        date of enactment of this Act, the Secretary shall implement at 
        least 9 demonstration projects, including--
                    (A) 5 projects in urban areas;
                    (B) 3 projects in rural areas; and
                    (C) 1 project within the District of Columbia which 
                is operated by a nonprofit academic medical center that 
                maintains a National Cancer Institute certified 
                comprehensive cancer center.
            (3) Expansion of projects; implementation of demonstration 
        project results.--
                    (A) Expansion of projects.--If the initial report 
                under subsection (c) contains an evaluation that 
                demonstration projects--
                          (i) reduce expenditures under the medicare 
                      program; or
                          (ii) do not increase expenditures under the 
                      medicare program and increase the quality of 
                      health care services provided to target 
                      individuals and satisfaction of beneficiaries and 
                      health care providers;
                the Secretary shall continue the existing demonstration 
                projects and may expand the number of demonstration 
                projects.
                    (B) Implementation of demonstration project 
                results.--If a report under subsection (c) contains an 
                evaluation as described in subparagraph (A), the 
                Secretary may issue regulations to implement, on a 
                permanent basis, the components of the demonstration 
                project that are beneficial to the medicare program.

    (c) Report to Congress.--
            (1) In general.--Not later than 2 years after the Secretary 
        implements the initial demonstration projects under this 
        section, and biannually thereafter, the Secretary shall submit 
        to Congress a report regarding the demonstration projects 
        conducted under this section.
            (2) Contents of report.--The report in paragraph (1) shall 
        include the following:
                    (A) A description of the demonstration projects 
                conducted under this section.
                    (B) An evaluation of--

[[Page 111 STAT. 345]]

                          (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, <<NOTE: 42 USC 1395b-1 note.>> 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

[[Page 111 STAT. 346]]

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 <<NOTE: 42 USC 1395w-21 note.>> 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.

[[Page 111 STAT. 347]]

SEC. 4019. <<NOTE: 42 USC 1395mm note.>> 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. <<NOTE: 42 USC 1395b note.>> 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

[[Page 111 STAT. 348]]

        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) <<NOTE: President.>> four shall be appointed by 
                the President;
                    (B) six shall be appointed by the Majority Leader of 
                the Senate, in consultation with the Minority Leader of 
                the Senate, of whom not more than 4 shall be of the same 
                political party;
                    (C) six shall be appointed by the Speaker of the 
                House of Representatives, in consultation with the 
                Minority Leader of the House of Representatives, of whom 
                not more than 4 shall be of the same political party; 
                and
                    (D) one, who shall serve as Chairman of the 
                Commission, appointed jointly by the President, Majority 
                Leader of the Senate, and the Speaker of the House of 
                Representatives.
            (2) Deadline for appointment.--Members of the Commission 
        shall be appointed by not later than December 1, 1997.
            (3) Terms of appointment.--The term of any appointment under 
        paragraph (1) to the Commission shall be for the life of the 
        Commission.
            (4) Meetings.--The Commission shall meet at the call of its 
        Chairman or a majority of its members.
            (5) Quorum.--A quorum shall consist of 8 members of the 
        Commission, except that 4 members may conduct a hearing under 
        subsection (e).
            (6) Vacancies.--A vacancy on the Commission shall be filled 
        in the same manner in which the original appointment was made 
        not later than 30 days after the Commission is given notice of 
        the vacancy and shall not affect the power of the remaining 
        members to execute the duties of the Commission.
            (7) Compensation.--Members of the Commission shall receive 
        no additional pay, allowances, or benefits by reason of their 
        service on the Commission.
            (8) Expenses.--Each member of the Commission shall receive 
        travel expenses and per diem in lieu of subsistence in 
        accordance with sections 5702 and 5703 of title 5, United States 
        Code.

    (d) Staff and Support Services.--
            (1) Executive director.--
                    (A) Appointment.--The Chairman shall appoint an 
                executive director of the Commission.
                    (B) Compensation.--The executive director shall be 
                paid the rate of basic pay for level V of the Executive 
                Schedule.

[[Page 111 STAT. 349]]

            (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

[[Page 111 STAT. 350]]

        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 <<NOTE: 42 usc 1395b-6.>> 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,

[[Page 111 STAT. 351]]

                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

[[Page 111 STAT. 352]]

        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

[[Page 111 STAT. 353]]

                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

[[Page 111 STAT. 354]]

        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,''.

[[Page 111 STAT. 355]]

                    (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).

<<NOTE: 42 USC 1395b-6 note.>>     (c) Effective Date; Transition.--
            (1) In general.--The Comptroller General shall first provide 
        for appointment of members to the Medicare Payment Advisory 
        Commission (in this subsection referred to as ``MedPAC'') by not 
        later than September 30, 1997.
            (2) Transition.--As quickly as possible after the date a 
        majority of members of MedPAC are first appointed, the 
        Comptroller General, in consultation with the Prospective 
        Payment Assessment Commission (in this subsection referred to as 
        ``ProPAC'') and the Physician Payment Review Commission (in this 
        subsection referred to as ``PPRC''), shall provide for the 
        termination of the ProPAC and the PPRC. As of the date of 
        termination of the respective Commissions, the amendments made 
        by paragraphs (1) and (2), respectively, of subsection (b) 
        become effective. The Comptroller General, to the extent 
        feasible, shall provide for the transfer to the MedPAC of assets 
        and staff of the ProPAC and the PPRC, without any loss of 
        benefits or seniority by virtue of such transfers. Fund balances 
        available to the ProPAC or the PPRC for any period shall be 
        available to the MedPAC for such period for like purposes.
            (3) Continuing responsibility for reports.--The MedPAC shall 
        be responsible for the preparation and submission of reports 
        required by law to be submitted (and which have not been 
        submitted by the date of establishment of the MedPAC) by the 
        ProPAC and the PPRC, and, for this purpose, any reference in law 
        to either such Commission is deemed, after the appointment of 
        the MedPAC, to refer to the MedPAC.

                     CHAPTER 4--MEDIGAP PROTECTIONS

SEC. 4031. MEDIGAP PROTECTIONS.

    (a) Guaranteeing Issue Without Preexisting Conditions for 
Continuously Covered Individuals.--Section 1882(s) (42 U.S.C. 1395ss(s)) 
is amended--
            (1) in paragraph (3), by striking ``paragraphs (1) and (2)'' 
        and inserting ``this subsection'',
            (2) by redesignating paragraph (3) as paragraph (4), and
            (3) by inserting after paragraph (2) the following new 
        paragraph:

    ``(3)(A) The issuer of a medicare supplemental policy--
            ``(i) may not deny or condition the issuance or 
        effectiveness of a medicare supplemental policy described in 
        subparagraph (C) that is offered and is available for issuance 
        to new enrollees by such issuer;
            ``(ii) may not discriminate in the pricing of such policy, 
        because of health status, claims experience, receipt of health 
        care, or medical condition; and
            ``(iii) may not impose an exclusion of benefits based on a 
        pre-existing condition under such policy,

in the case of an individual described in subparagraph (B) who seeks to 
enroll under the policy not later than 63 days after the

[[Page 111 STAT. 356]]

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)).

[[Page 111 STAT. 357]]

            ``(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''.
<<NOTE: 42 USC 1395ss note.>>     (d) Effective Dates.--

[[Page 111 STAT. 358]]

            (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.

<<NOTE: 42 USC 1395ss note.>>     (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).
        <<NOTE: Regulations.>>     (2) NAIC standards.--If, within 9 
        months after the date of the enactment of this Act, the National 
        Association of Insurance Commissioners (in this subsection 
        referred to as the ``NAIC'') modifies its NAIC Model Regulation 
        relating to section 1882 of the Social Security Act (referred to 
        in such section as the 1991 NAIC Model Regulation, as modified 
        pursuant to section 171(m)(2) of the Social Security Act 
        Amendments of 1994 (Public Law 103-432) and as modified pursuant 
        to section 1882(d)(3)(A)(vi)(IV) of the Social Security Act, as 
        added by section 271(a) of the Health Insurance Portability and 
        Accountability Act of 1996 (Public Law 104-191) to conform to 
        the amendments made by this section, such revised regulation 
        incorporating the modifications shall be considered to be the 
        applicable NAIC model regulation (including the revised NAIC 
        model regulation and the 1991 NAIC Model Regulation) for the 
        purposes of such section.
            (3) Secretary standards.--If the NAIC does not make the 
        modifications described in paragraph (2) within the period 
        specified in such paragraph, the Secretary of Health and Human 
        Services shall make the modifications described in such 
        paragraph and such revised regulation incorporating the 
        modifications shall be considered to be the appropriate 
        Regulation for the purposes of such section.
            (4) Date specified.--
                    (A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is the 
                earlier of--
                          (i) the date the State changes its statutes or 
                      regulations to conform its regulatory program to 
                      the changes made by this section, or
                          (ii) 1 year after the date the NAIC or the 
                      Secretary first makes the modifications under 
                      paragraph (2) or (3), respectively.
                    (B) Additional legislative action required.--In the 
                case of a State which the Secretary identifies as--
                          (i) requiring State legislation (other than 
                      legislation appropriating funds) to conform its 
                      regulatory program to the changes made in this 
                      section, but

[[Page 111 STAT. 359]]

                          (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.

<<NOTE: 42 USC 1395ss note.>>     (f) Conforming Benefits to Changes in 
Terminology for Hospital Outpatient Department Cost Sharing.--For 
purposes of apply section 1882 of the Social Security Act (42 U.S.C. 
1395ss) and regulations referred to in subsection (e), copayment amounts 
provided under section 1833(t)(5) of such Act with respect to hospital 
outpatient department services shall be treated under medicare 
supplemental policies in the same manner as coinsurance with respect to 
such services.

SEC. 4032. ADDITION OF HIGH DEDUCTIBLE MEDIGAP POLICIES.

    (a) In General.--Section 1882(p) (42 U.S.C. 1395ss(p)) is amended--
            (1) in paragraph (2)(C), by inserting ``plus the 2 plans 
        described in paragraph (11)(A)'' after ``exceed 10''; and
            (2) by adding at the end the following:

    ``(11)(A) For purposes of paragraph (2), the benefit packages 
described in this subparagraph are as follows:
            ``(i) The benefit package classified as `F' under the 
        standards established by such paragraph, except that it has a 
        high deductible feature.
            ``(ii) The benefit package classified as `J' under the 
        standards established by such paragraph, except that it has a 
        high deductible feature.

    ``(B) For purposes of subparagraph (A), a high deductible feature is 
one which--
            ``(i) requires the beneficiary of the policy to pay annual 
        out-of-pocket expenses (other than premiums) in the amount 
        specified in subparagraph (C) before the policy begins payment 
        of benefits, and
            ``(ii) covers 100 percent of covered out-of-pocket expenses 
        once such deductible has been satisfied in a year.

    ``(C) The amount specified in this subparagraph--
            ``(i) for 1998 and 1999 is $1,500, and
            ``(ii) for a subsequent year, is the amount specified in 
        this subparagraph for the previous year increased by the 
        percentage increase in the Consumer Price Index for all urban 
        consumers (all items; U.S. city average) for the 12-month period 
        ending with August of the preceding year.

If any amount determined under clause (ii) is not a multiple of $10, it 
shall be rounded to the nearest multiple of $10.''.
<<NOTE: 42 USC 1395ss note.>>     (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.

[[Page 111 STAT. 360]]

    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 <<NOTE: 26 USC 501.>> (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.''
<<NOTE: 26 USC 501 note.>>     (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),''.
<<NOTE: 42 USC 1395l note.>>     (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'';

[[Page 111 STAT. 361]]

            (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))''.
<<NOTE: 42 USC 1395l note.>>     (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.

[[Page 111 STAT. 362]]

    ``(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)''
<<NOTE: 42 USC 1395l note.>>     (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.

[[Page 111 STAT. 363]]

            ``(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.''.
        <<NOTE: Federal Register, publication. 42 USC 1395x note.>>     
        (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

[[Page 111 STAT. 364]]

                      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

[[Page 111 STAT. 365]]

                      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

[[Page 111 STAT. 366]]

described in subparagraphs (B) , (C), and (D) of section 1861(pp)(1)),'' 
before ``(3)''.
<<NOTE: 42 USC 1395l note.>>     (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

[[Page 111 STAT. 367]]

        4102, 4103, and 4104, is amended by inserting ``(2)(S),'' before 
        ``(3),''.
            (3) Consultation <<NOTE: 42 USC 1395w-4 note.>>  with 
        organizations in establishing payment amounts for services 
        provided by physicians.--In establishing payment amounts under 
        section 1848 of the Social Security Act for physicians' services 
        consisting of diabetes outpatient self-management training 
        services, the Secretary of Health and Human Services shall 
        consult with appropriate organizations, including such 
        organizations representing individuals or medicare beneficiaries 
        with diabetes.

    (b) Blood-testing Strips for Individuals With Diabetes.--
            (1) Including strips and monitors as durable medical 
        equipment.--The first sentence of section 1861(n) (42 U.S.C. 
        1395x(n)) is amended by inserting before the semicolon the 
        following: ``, and includes blood-testing strips and blood 
        glucose monitors for individuals with diabetes without regard to 
        whether the individual has Type I or Type II diabetes or to the 
        individual's use of insulin (as determined under standards 
        established by the Secretary in consultation with the 
        appropriate organizations)''.
            (2) 10 percent reduction in payments for testing strips.--
        Section 1834(a)(2)(B)(iv) (42 U.S.C. 1395m(a)(2)(B)(iv)) is 
        amended by adding before the period the following: ``(reduced by 
        10 percent, in the case of a blood glucose testing strip 
        furnished after 1997 for an individual with diabetes)''.

<<NOTE: 42 USC 1395x note.>>     (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.

<<NOTE: 42 USC 1395m note.>>     (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'',

[[Page 111 STAT. 368]]

                    (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.
<<NOTE: Regulations.>>     ``(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)''.
<<NOTE: 42 USC 1395x note.>>     (d) Effective Date.--The amendments 
made by this section shall apply to bone mass measurements performed on 
or after July 1, 1998.

<<NOTE: 42 USC 1395x note.>> 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).

[[Page 111 STAT. 369]]

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.

<<NOTE: 42 USC 1395x note.>> 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--

[[Page 111 STAT. 370]]

                          ``(i) provides for the creation of 1 or more 
                      rural health networks (as defined in subsection 
                      (d)) in the State;
                          ``(ii) promotes regionalization of rural 
                      health services in the State; and
                          ``(iii) improves access to hospital and other 
                      health services for rural residents of the State; 
                      and
                    ``(B) has developed the rural health care plan 
                described in subparagraph (A) in consultation with the 
                hospital association of the State, rural hospitals 
                located in the State, and the State Office of Rural 
                Health (or, in the case of a State in the process of 
                developing such plan, that assures the Secretary that 
                the State will consult with its State hospital 
                association, rural hospitals located in the State, and 
                the State Office of Rural Health in developing such 
                plan);
            ``(2) assurances that the State has designated (consistent 
        with the rural health care plan described in paragraph (1)(A)), 
        or is in the process of so designating, rural nonprofit or 
        public hospitals or facilities located in the State as critical 
        access hospitals; and
            ``(3) such other information and assurances as the Secretary 
        may require.

    ``(c) Medicare Rural Hospital Flexibility Program Described.--
            ``(1) In general.--A State that has submitted an application 
        in accordance with subsection (b), may establish a medicare 
        rural hospital flexibility program that provides that--
                    ``(A) the State shall develop at least 1 rural 
                health network (as defined in subsection (d)) in the 
                State; and
                    ``(B) at least 1 facility in the State shall be 
                designated as a critical access hospital in accordance 
                with paragraph (2).
            ``(2) State designation of facilities.--
                    ``(A) In general.--A State may designate 1 or more 
                facilities as a critical access hospital in accordance 
                with subparagraph (B).
                    ``(B) Criteria for designation as critical access 
                hospital.--A State may designate a facility as a 
                critical access hospital if the facility--
                          ``(i) is a nonprofit or public hospital and is 
                      located in a county (or equivalent unit of local 
                      government) in a rural area (as defined in section 
                      1886(d)(2)(D)) that--
                                    ``(I) is located more than a 35-mile 
                                drive (or, in the case of mountainous 
                                terrain or in areas with only secondary 
                                roads available, a 15-mile drive) from a 
                                hospital, or another facility described 
                                in this subsection; or
                                    ``(II) is certified by the State as 
                                being a necessary provider of health 
                                care services to residents in the area;
                          ``(ii) makes available 24-hour emergency care 
                      services that a State determines are necessary for 
                      ensuring access to emergency care services in each 
                      area served by a critical access hospital;

[[Page 111 STAT. 371]]

                          ``(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

[[Page 111 STAT. 372]]

                                    ``(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

[[Page 111 STAT. 373]]

                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--

[[Page 111 STAT. 374]]

                    (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.''.
        <<NOTE: 42 USC 1395i-4 note.>>     (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.

<<NOTE: 42 USC 1395f note.>>     (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

[[Page 111 STAT. 375]]

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.''.
<<NOTE: 42 USC 1395ww note.>>     (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.

<<NOTE: 42 USC 1395ww note.>> 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

[[Page 111 STAT. 376]]

                    (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).''.
        <<NOTE: 42 USC 1395ww note.>>     (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''.

<<NOTE: 42 USC 1395ww note.>>     (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)''.
                <<NOTE: 42 USC 1395l note.>>     (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,''.
        <<NOTE: 42 USC 1395x note.>>     (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''.
        <<NOTE: 42 USC 1395x note.>>     (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''.

[[Page 111 STAT. 377]]

            (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''.
        <<NOTE: 42 USC 1395x note.>>     (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 enactment of this Act, 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.

<<NOTE: 42 USC 1395l note.>> 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

[[Page 111 STAT. 378]]

(b) for professional consultation via telecommunications systems with a 
physician (as defined in section 1861(r) of such Act (42 U.S.C. 
1395x(r)) or a practitioner (described in section 1842(b)(18)(C) of such 
Act (42 U.S.C. 1395u(b)(18)(C)) furnishing a service for which payment 
may be made under such part to a beneficiary under the medicare program 
residing in a county in a rural area (as defined in section 
1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))) that is 
designated as a health professional shortage area under section 
332(a)(1)(A) of the Public Health Service Act (42 U.S.C. 254e(a)(1)(A)), 
notwithstanding that the individual physician or practitioner providing 
the professional consultation is not at the same location as the 
physician or practitioner furnishing the service to that beneficiary.
    (b) Methodology for Determining Amount of Payments.--Taking into 
account the findings of the report required under section 192 of the 
Health Insurance Portability and Accountability Act of 1996 (Public Law 
104-191; 110 Stat. 1988), the findings of the report required under 
paragraph (c), and any other findings related to the clinical efficacy 
and cost-effectiveness of telehealth applications, the Secretary shall 
establish a methodology for determining the amount of payments made 
under subsection (a) within the following parameters:
            (1) The payment shall 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

[[Page 111 STAT. 379]]

        possibility of making payments from the Federal Supplementary 
        Medical Insurance Trust Fund under part B of title XVIII of the 
        Social Security Act (42 U.S.C. 1395j et seq.) for professional 
        consultation via telecommunications systems with such a 
        physician or practitioner furnishing a service for which payment 
        may be made under such part to a beneficiary described in 
        paragraph (2), notwithstanding that the individual physician or 
        practitioner providing the professional consultation is not at 
        the same location as the physician or practitioner furnishing 
        the service to that beneficiary.
            (2) Beneficiary described.--A beneficiary described in this 
        paragraph is a beneficiary under the medicare program under 
        title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
        who does not reside in a rural area (as so defined) that is 
        designated as a health professional shortage area under section 
        332(a)(1)(A) of the Public Health Service Act (42 U.S.C. 
        254e(a)(1)(A)), who is homebound or nursing homebound, and for 
        whom being transferred for health care services imposes a 
        serious hardship.
            (3) Report.--The report described in paragraph (1) shall 
        contain a detailed statement of the potential costs and savings 
        to the medicare program of making the payments described in that 
        paragraph using various reimbursement schemes.

<<NOTE: 42 USC 1395b-1 note.>> 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.

[[Page 111 STAT. 380]]

            (2) Developing a curriculum to train health professionals 
        (particularly primary care health professionals) in the use of 
        medical informatics and telecommunications.
            (3) Demonstrating the application of advanced technologies, 
        such as video-conferencing from a patient's home, remote 
        monitoring of a patient's medical condition, interventional 
        informatics, and applying individualized, automated care 
        guidelines, to assist primary care providers in assisting 
        patients with diabetes in a home setting.
            (4) Application of medical informatics to residents with 
        limited English language skills.
            (5) Developing standards in the application of telemedicine 
        and medical informatics.
            (6) Developing a model for the cost-effective delivery of 
        primary and related care both in a managed care environment and 
        in a fee-for-service environment.

    (c) Eligible Health Care Provider Telemedicine Network Defined.--For 
purposes of this section, the term ``eligible health care provider 
telemedicine network'' means a consortium that includes at least one 
tertiary care hospital (but no more than 2 such hospitals), at least one 
medical school, no more than 4 facilities in rural or urban areas, and 
at least one regional telecommunications provider and that meets the 
following requirements:
            (1) The consortium is located in an area with a high 
        concentration of medical schools and tertiary care facilities in 
        the United States and has appropriate arrangements (within or 
        outside the consortium) with such schools and facilities, 
        universities, and telecommunications providers, in order to 
        conduct the project.
            (2) The consortium submits to the Secretary an application 
        at such time, in such manner, and containing such information as 
        the Secretary may require, including a description of the use to 
        which the consortium would apply any amounts received under the 
        project and the source and amount of non-Federal funds used in 
        the project.
            (3) The consortium guarantees that it will be responsible 
        for payment for all costs of the project that are not paid under 
        this section and that the maximum amount of payment that may be 
        made to the consortium under this section shall not exceed the 
        amount specified in subsection (d)(3).

    (d) Coverage as Medicare Part B Services.--
            (1) In general.--Subject to the succeeding provisions of 
        this subsection, services related to the treatment or management 
        of (including prevention of complications from) diabetes for 
        medicare beneficiaries furnished under the project shall be 
        considered to be services covered under part B of title XVIII of 
        the Social Security Act.
            (2) Payments.--
                    (A) In general.--Subject to paragraph (3), payment 
                for such services shall be made at a rate of 50 percent 
                of the costs that are reasonable and related to the 
                provision of such services. In computing such costs, the 
                Secretary shall include costs described in subparagraph 
                (B), but may not include costs described in subparagraph 
                (C).

[[Page 111 STAT. 381]]

                    (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.

[[Page 111 STAT. 382]]

    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.''.
<<NOTE: 42 USC 1395u note.>>     (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--

[[Page 111 STAT. 383]]

            (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.''.

<<NOTE: 42 USC 1320a-7 note.>>     (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

[[Page 111 STAT. 384]]

                    (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)''.

<<NOTE: 42 USC 1320a-7a note.>>     (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.''.
        <<NOTE: 42 USC 1395b-2 note.>>     (2) Effective date.--The 
        amendment made by this subsection shall apply to notices 
        provided on or after January 1, 1998.

[[Page 111 STAT. 385]]

    (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

<<NOTE: 42 USC 1395b-7.>>     ``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

[[Page 111 STAT. 386]]

        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 <<NOTE: 42 USC 1395b-5.>>  is repealed.
        <<NOTE: 42 USC 1395b-7 note.>>     (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

[[Page 111 STAT. 387]]

                    (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 end the following: ``The Secretary, at the Secretary's 
discretion, may impose the requirements of the first sentence with 
respect to some or all providers of items or services under part A or 
some or all suppliers or other persons (other than physicians or other 
practitioners, as defined in section 1842(b)(18)(C)) who furnish items 
or services under this part.''.
    (d) Application to Comprehensive Outpatient Rehabilitation 
Facilities (CORFs).--Section 1861(cc)(2) (42 U.S.C. 1395x(cc)(2)) is 
amended--
            (1) in subparagraph (H), by striking ``and'' at the end;
            (2) by redesignating subparagraph (I) as subparagraph (J);
            (3) by inserting after subparagraph (H) the following new 
        subparagraph:
            ``(I) provides the Secretary on a continuing basis with a 
        surety bond in a form specified by the Secretary and in an 
        amount that is not less than $50,000; and''; and
            (4) by adding at the end the following flush sentence:

``The Secretary may waive the requirement of a surety bond under 
subparagraph (I) in the case of a facility that provides a comparable 
surety bond under State law.''.
    (e) Application to Rehabilitation Agencies.--Section 1861(p) (42 
U.S.C. 1395x(p)) is amended--
            (1) in paragraph (4)(A)(v), by inserting after ``as the 
        Secretary may find necessary,'' the following: ``and provides 
        the Secretary on a continuing basis with a surety bond in a form 
        specified by the Secretary and in an amount that is not less 
        than $50,000,'', and
            (2) by adding at the end the following: ``The Secretary may 
        waive the requirement of a surety bond under paragraph (4)(A)(v) 
        in the case of a clinic or agency that provides a comparable 
        surety bond under State law.''.

    (f) Effective Dates.--
        <<NOTE: 42 USC 1395m note.>>     (1) Suppliers of durable 
        medical equipment.--The amendment made by subsection (a) shall 
        apply to suppliers

[[Page 111 STAT. 388]]

        of durable medical equipment with respect to such equipment 
        furnished on or after January 1, 1998.
        <<NOTE: 42 USC 1395x note.>>     (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.
        <<NOTE: 42 USC 1395m note.>>     (3) Other amendments.--The 
        amendments made by subsections (c) through (e) shall take effect 
        on the date of the enactment of this Act and may be applied with 
        respect to items and services furnished on or after January 1, 
        1998.

SEC. 4313. PROVISION OF CERTAIN IDENTIFICATION NUMBERS.

    (a) Requirements To Disclose Employer Identification Numbers (EINS) 
and Social Security Account Numbers (SSNs).--Section 1124(a)(1) (42 
U.S.C. 1320a-3(a)(1)) is amended by inserting before the period at the 
end the following: ``and supply the Secretary with the both the employer 
identification number (assigned pursuant to section 6109 of the Internal 
Revenue Code of 1986) and social security account number (assigned under 
section 205(c)(2)(B)) of the disclosing entity, each person with an 
ownership or control interest (as defined in subsection (a)(3)), and any 
subcontractor in which the entity directly or indirectly has a 5 percent 
or more ownership interest.
    (b) Other Medicare Providers.--Section 1124A (42 U.S.C. 1320a-3a) is 
amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), by striking ``and'' at the 
                end;
                    (B) in paragraph (2), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(3) including the employer identification number (assigned 
        pursuant to section 6109 of the Internal Revenue Code of 1986) 
        and social security account number (assigned under section 
        205(c)(2)(B)) of the disclosing part B provider and any person, 
        managing employee, or other entity identified or described under 
        paragraph (1) or (2).''; and
            (2) in subsection (c)(1), by inserting ``(or, for purposes 
        of subsection (a)(3), any entity receiving payment)'' after ``on 
        an assignment-related basis''.

    (c) Verification by Social Security Administration (SSA).--Section 
1124A (42 U.S.C. 1320a-3a), as amended by subsection (b), is amended--
            (1) by redesignating subsection (c) as subsection (d); and
            (2) by inserting after subsection (b) the following new 
        subsection:

    ``(c) Verification.--
            ``(1) Transmittal by hhs.--The Secretary shall transmit--
                    ``(A) to the Commissioner of Social Security 
                information concerning each social security account 
                number (assigned under section 205(c)(2)(B)), and
                    ``(B) to the Secretary of the Treasury information 
                concerning each employer identification number (assigned

[[Page 111 STAT. 389]]

                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.''.

<<NOTE: 42 USC 1320a-3 note.>>     (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.

<<NOTE: 42 USC 1320a-3 note.>>     (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).''.

[[Page 111 STAT. 390]]

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;''.

<<NOTE: 42 USC 1395l note.>>     (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.

<<NOTE: 42 USC 1395u note.>>     (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:
<<NOTE: Regulations.>>     ``(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

[[Page 111 STAT. 391]]

        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.
<<NOTE: Federal Register, publication.>>     ``(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.
<<NOTE: Federal Register, publication.>>     ``(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.''.

[[Page 111 STAT. 392]]

    (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.

<<NOTE: 42 USC 1395m note.>>     (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.''.
<<NOTE: 42 USC 1395u note.>>     (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:

<<NOTE: 42 USC 1395w-3.>> ``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

[[Page 111 STAT. 393]]

                    ``(C) shall be operated over a 3-year period.
            ``(3) Criteria for establishment of competitive acquisition 
        areas.--Each competitive acquisition area established under a 
        demonstration project implemented under paragraph (1)--
                    ``(A) shall be, or shall be within, a metropolitan 
                statistical area (as defined by the Secretary of 
                Commerce), and
                    ``(B) shall be chosen based on the availability and 
                accessibility of entities able to furnish items and 
                services, and the probable savings to be realized by the 
                use of competitive bidding in the furnishing of items 
                and services in such area.

    ``(b) Awarding of Contracts in Areas.--
            ``(1) In general.--The Secretary shall conduct a competition 
        among individuals and entities supplying items and services 
        described in subsection (c) for each competitive acquisition 
        area established under a demonstration project implemented under 
        subsection (a).
            ``(2) Conditions for awarding contract.--The Secretary may 
        not award a contract to any entity under the competition 
        conducted pursuant to paragraph (1) to furnish an item or 
        service unless the Secretary finds that the entity meets quality 
        standards specified by the Secretary that the total amounts to 
        be paid under the contract are expected to be less than the 
        total amounts that would otherwise be paid.
            ``(3) Contents of contract.--A contract entered into with an 
        entity under the competition conducted pursuant to paragraph (1) 
        is subject to terms and conditions that the Secretary may 
        specify.
            ``(4) Limit on number of contractors.--The Secretary may 
        limit the number of contractors in a competitive acquisition 
        area to the number needed to meet projected demand for items and 
        services covered under the contracts.

    ``(c) Expansion of Projects.--
            ``(1) Evaluations.--The Secretary shall evaluate the impact 
        of the implementation of the demonstration projects on medicare 
        program payments, access, diversity of product selection, and 
        quality. The Secretary shall make annual reports to the 
        Committees on Ways and Means and Commerce of the House of 
        Representatives and the Committee on Finance of the Senate on 
        the results of the evaluation described in the preceding 
        sentence and a final report not later than 6 months after the 
        termination date specified in subsection (e).
            ``(2) Expansion.--If the Secretary determines from the 
        evaluations under paragraph (1) that there is clear evidence 
        that any demonstration project--
                    ``(A) results in a decrease in Federal expenditures 
                under this title, and
                    ``(B) does not reduce program access, diversity of 
                product selection, and quality under this title,
        the Secretary may expand the project to additional competitive 
        acquisition areas.

    ``(d) Services described.--The items and services to which this 
section applies are all items and services covered under this part 
(except for physicians' services as defined in section 1861(s)(1)) that 
the Secretary may specify. At least one demonstration project shall 
include oxygen and oxygen equipment.

[[Page 111 STAT. 394]]

    ``(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.''.

<<NOTE: 42 USC 1395w-3 note.>>     (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
                    ``(v) 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

[[Page 111 STAT. 395]]

                (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:

<<NOTE: 42 usc 1320b-16.>> ``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).''.
<<NOTE: 42 USC 1395x note.>>     (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.
        <<NOTE: Regulations. 42 USC 1320b-16 note.>>     (2) The 
        Secretary of Health and Human Services shall issue regulations 
        by not later than the date which is 1 year after the date of the 
        enactment of this Act to carry out the amendments made by 
        subsections (b) and (c) and such amendments shall take effect as 
        of such date (on or after the issuance of such regulations) as 
        the Secretary specifies in such regulations.

             CHAPTER 3--CLARIFICATIONS AND TECHNICAL CHANGES

SEC. 4331. OTHER FRAUD AND ABUSE RELATED PROVISIONS.

    (a) Reference Correction.--(1) Section 1128D(b)(2)(D) (42 U.S.C. 
1320a-7d(b)(2)(D)), as added by section 205 of the Health Insurance 
Portability and Accountability Act of 1996, is amended by striking 
``1128B(b)'' and inserting ``1128A(b)''.
    (2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a-7e(g)(3)(C)) is amended 
by striking ``Veterans' Administration'' and inserting ``Department of 
Veterans Affairs''.

[[Page 111 STAT. 396]]

    (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.
                <<NOTE: Publication.>>     ``(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;''.

<<NOTE: 42 USC 1320a-7e note.>>     (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.

[[Page 111 STAT. 397]]

            (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.''.

<<NOTE: 42 USC 1395ww note.>>     (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;

[[Page 111 STAT. 398]]

                    (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--

[[Page 111 STAT. 399]]

            ``(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.''.

<<NOTE: 42 USC 1395ww note.>>     (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)).

<<NOTE: 42 USC 1395ww note.>>     (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.

[[Page 111 STAT. 400]]

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.

<<NOTE: 42 USC 1395x note.>>     (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)''.
<<NOTE: 42 USC 1395ww note.>>     (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)''.

[[Page 111 STAT. 401]]

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

    Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended--
            (1) in subparagraph (I)(ii) by inserting ``not taking in 
        account the effect of subparagraph (J),'' after ``in a fiscal 
        year, ''; and
            (2) by adding at the end the following new subparagraph:

    ``(J)(i) The Secretary shall treat the term `transfer case' (as 
defined in subparagraph (I)(ii)) as including the case of a qualified 
discharge (as defined in clause (ii)), which is classified within a 
diagnosis-related group described in clause (iii), and which occurs on 
or after October 1, 1998. In the case of a qualified discharge for which 
a substantial portion of the costs of care are incurred in the early 
days of the inpatient stay (as defined by the Secretary), in no case may 
the payment amount otherwise provided under this subsection exceed an 
amount equal to the sum of--
            ``(I) 50 percent of the amount of payment under this 
        subsection for transfer cases (as established under subparagraph 
        (I)(i)), and
            ``(II) 50 percent of the amount of payment which would have 
        been made under this subsection with respect to the qualified 
        discharge if no transfer were involved.

    ``(ii) For purposes of clause (i), subject to clause (iii), the term 
`qualified discharge' means a discharge classified with a diagnosis-
related group (described in clause (iii)) of an individual from a 
subsection (d) hospital, if upon such discharge the individual--
            ``(I) is admitted as an inpatient to a hospital or hospital 
        unit that is not a subsection (d) hospital for the provision of 
        inpatient hospital services;
            ``(II) is admitted to a skilled nursing facility;
            ``(III) is provided home health services from a home health 
        agency, if such services relate to the condition or diagnosis 
        for which such individual received inpatient hospital services 
        from the subsection (d) hospital, and if such services are 
        provided within an appropriate period (as determined by the 
        Secretary); or
            ``(IV) for discharges occurring on or after October 1, 2000, 
        the individual receives post discharge services described in 
        clause (iv)(I).

    ``(iii) Subject to clause (iv), a diagnosis-related group described 
in this clause is--
            ``(I) 1 of 10 diagnosis-related groups selected by the 
        Secretary based upon a high volume of discharges classified 
        within such groups and a disproportionate use of post discharge 
        services described in clause (ii); and
            ``(II) a diagnosis-related group specified by the Secretary 
        under clause (iv)(II).

    ``(iv) The Secretary shall include in the proposed rule published 
under subsection (e)(5)(A) for fiscal year 2001, a description of the 
effect of this subparagraph. The Secretary may include in the proposed 
rule (and in the final rule published under paragraph (6)) for fiscal 
year 2001 or a subsequent fiscal year, a description of--
            ``(I) post-discharge services not described in subclauses 
        (I), (II), and (III) of clause (ii), the receipt of which 
        results in a qualified discharge; and
            ``(II) diagnosis-related groups described in clause (iii)(I) 
        in addition to the 10 selected under such clause.''.

[[Page 111 STAT. 402]]

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.

<<NOTE: 42 USC 1395ww note.>> SEC. 4409. GEOGRAPHIC RECLASSIFICATION FOR 
            CERTAIN DISPROPORTIONATELY LARGE HOSPITALS.

<<NOTE: Publication.>>     (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.

<<NOTE: 42 USC 1395ww note.>> 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

[[Page 111 STAT. 403]]

shall exclude the general service wages and hours of personnel 
associated with a skilled nursing facility that is owned by the hospital 
of the same municipality and that is physically separated from the 
hospital to the extent that such wages and hours of such personnel are 
not shared with the hospital and are separately documented. A hospital 
that applied for and was denied reclassification as an urban hospital 
for fiscal year 1998, but that would have received reclassification had 
the exclusion required by this section been applied to it, shall be 
reclassified as an urban hospital for fiscal year 1998.

               CHAPTER 2--PAYMENT OF PPS-EXEMPT HOSPITALS

                Subchapter A--General Payment Provisions

SEC. 4411. PAYMENT UPDATE.

    (a) In General.--Section 1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) 
is amended--
            (1) in clause (ii)--
                    (A) by striking ``and'' at the end of subclause (V),
                    (B) by redesignating subclause (VI) as subclause 
                (VIII); and
                    (C) by inserting after subclause (V), the following 
                subclauses:
            ``(VI) for fiscal year 1998, is 0 percent;
            ``(VII) for fiscal years 1999 through 2002, is the 
        applicable update factor specified under clause (vi) for the 
        fiscal year; and''; and
            (2) by adding at the end the following new clause:

    ``(vi) For purposes of clause (ii)(VII) for a fiscal year, if a 
hospital's allowable operating costs of inpatient hospital services 
recognized under this title for the most recent cost reporting period 
for which information is available--
            ``(I) is equal to, or exceeds, 110 percent of the hospital's 
        target amount (as determined under subparagraph (A)) for such 
        cost reporting period, the applicable update factor specified 
        under this clause is the market basket percentage;
            ``(II) exceeds 100 percent, but is less than 110 percent, of 
        such target amount for the hospital, the applicable update 
        factor specified under this clause is 0 percent or, if greater, 
        the market basket percentage minus 0.25 percentage points for 
        each percentage point by which such allowable operating costs 
        (expressed as a percentage of such target amount) is less than 
        110 percent of such target amount;
            ``(III) is equal to, or less than 100 percent, but exceeds 
        \2/3\ of such target amount for the hospital, the applicable 
        update factor specified under this clause is 0 percent or, if 
        greater, the market basket percentage minus 2.5 percentage 
        points; or
            ``(IV) does not exceed \2/3\ of such target amount for the 
        hospital, the applicable update factor specified under this 
        clause is 0 percent.''.

    (b) No Effect of Payment Reduction on Exceptions and Adjustments.--
Section 1886(b)(4)(A)(ii) (42 U.S.C. 1395ww(b)(4)(A)(ii)) is amended by 
adding at the end the following new sentence: ``In making such 
reductions, the Secretary shall treat the applicable update factor 
described in paragraph (3)(B)(vi)

[[Page 111 STAT. 404]]

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.

[[Page 111 STAT. 405]]

            ``(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.''.

[[Page 111 STAT. 406]]

SEC. 4415. BONUS AND RELIEF PAYMENTS.

    (a) Change in Bonus Payment.--Section 1886(b)(1) (42 U.S.C. 
1395ww(b)(1)) is amended in subparagraph (A) by striking all that 
follows ``plus--'' and inserting the following:
                    ``(i) 15 percent of the amount by which the target 
                amount exceeds the amount of the operating costs, or
                    ``(ii) 2 percent of the target amount,
        whichever is less;''.

    (b) Continuous Improvement Bonus Payments.--Section 1886(b) (42 
U.S.C. 1395ww(b)) is amended--
            (1) in paragraph (1), by inserting ``plus the amount, if 
        any, provided under paragraph (2)'' before ``except that in no 
        case''; and
            (2) by inserting after paragraph (1), the following new 
        paragraph:

    ``(2)(A) In addition to the payment computed under paragraph (1), in 
the case of an eligible hospital (described in subparagraph (B)) for a 
cost reporting period beginning on or after October 1, 1997, the amount 
of payment on a per discharge basis under paragraph (1) shall be 
increased by the lesser of--
            ``(i) 50 percent of the amount by which the operating costs 
        are less than the expected costs (as defined in subparagraph 
        (D)) for the period; or
            ``(ii) 1 percent of the target amount for the period.

    ``(B) For purposes of this paragraph, an `eligible hospital' means 
with respect to a cost reporting period, a hospital--
            ``(i) that has received payments under this subsection for 
        at least 3 full cost reporting periods before that cost 
        reporting period, and
            ``(ii) whose operating costs for the period are less than 
        the least of its target amount, its trended costs (as defined in 
        subparagraph (C)), or its expected costs (as defined in 
        subparagraph (D)) for the period.

    ``(C) For purposes of subparagraph (B)(ii), the term `trended costs' 
means for a hospital cost reporting period ending in a fiscal year--
            ``(i) in the case of a hospital for which its cost reporting 
        period ending in fiscal year 1996 was its third or subsequent 
        full cost reporting period for which it receives payments under 
        this subsection, the lesser of the operating costs or target 
        amount for that hospital for its cost reporting period ending in 
        fiscal year 1996, or
            ``(ii) in the case of any other hospital, the operating 
        costs for that hospital for its third full cost reporting period 
        for which it receives payments under this subsection,

increased (in a compounded manner) for each succeeding fiscal year 
(through the fiscal year involved) by the market basket percentage 
increase for the fiscal year.
    ``(D) For purposes of this paragraph, the term `expected costs', 
with respect to the cost reporting period ending in a fiscal year, means 
the lesser of the operating costs of inpatient hospital services or 
target amount per discharge for the previous cost reporting period 
updated by the market basket percentage increase (as defined in 
paragraph (3)(B)(iii)) for the fiscal year.''.
    (c) Change in Relief Payments.--Section 1886(b)(1) (42 U.S.C. 
1395ww(b)(1)), as amended in subsections (a) and (b), is further 
amended--

[[Page 111 STAT. 407]]

            (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''.

<<NOTE: 42 USC 1395ww note.>>     (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.)).

<<NOTE: 42 USC 1395ww note.>>     (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:

[[Page 111 STAT. 408]]

            ``(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.''.
<<NOTE: 42 USC 1395ww note.>>     (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''.

<<NOTE: 42 USC 1395ww note.>>     (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

[[Page 111 STAT. 409]]

        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.''.
<<NOTE: 42 USC 1395ww note.>>     (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)''.
        <<NOTE: 42 USC 1395ww note.>>     (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.

<<NOTE: Federal Register, publication. 42 USC 1395ww note.>>     (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.

[[Page 111 STAT. 410]]

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--

[[Page 111 STAT. 411]]

                          ``(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

[[Page 111 STAT. 412]]

                      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).

[[Page 111 STAT. 413]]

                          ``(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.
        <<NOTE: Federal Register, publication.>>     ``(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)''.

<<NOTE: 42 USC 1395 note.>>     (c) Effective Date.--The amendments made 
by this section shall apply to cost reporting periods beginning on or 
after October

[[Page 111 STAT. 414]]

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.

<<NOTE: 42 USC 1395ww note.>> 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--

[[Page 111 STAT. 415]]

                          ``(i) the non-Federal percentage of the 
                      facility-specific per diem rate (computed under 
                      paragraph (3)), and
                          ``(ii) the Federal percentage of the adjusted 
                      Federal per diem rate (determined under paragraph 
                      (4)) applicable to the facility; and
                    ``(B) after the transition period is equal to the 
                adjusted Federal per diem rate applicable to the 
                facility.
            ``(2) Definitions.--For purposes of this subsection:
                    ``(A) Covered skilled nursing facility services.--
                          ``(i) In general.--The term `covered skilled 
                      nursing facility services'--
                                    ``(I) means post-hospital extended 
                                care services as defined in section 
                                1861(i) for which benefits are provided 
                                under part A; and
                                    ``(II) includes all items and 
                                services (other than services described 
                                in clause (ii)) for which payment may be 
                                made under part B and which are 
                                furnished to an individual who is a 
                                resident of a skilled nursing facility 
                                during the period in which the 
                                individual is provided covered post-
                                hospital extended care services.
                          ``(ii) Services excluded.--Services described 
                      in this clause are physicians' services, services 
                      described by clauses (i) through (iii) of section 
                      1861(s)(2)(K), certified nurse-midwife services, 
                      qualified psychologist services, services of a 
                      certified registered nurse anesthetist, items and 
                      services described in subparagraphs (F) and (O) of 
                      section 1861(s)(2), and, only with respect to 
                      services furnished during 1998, the transportation 
                      costs of electrocardiogram equipment for 
                      electrocardiogram test services (HCPCS Code 
                      R0076). Services described in this clause do not 
                      include any physical, occupational, or speech-
                      language therapy services regardless of whether or 
                      not the services are furnished by, or under the 
                      supervision of, a physician or other health care 
                      professional.
                    ``(B) All costs.--The term `all costs' means routine 
                service costs, ancillary costs, and capital-related 
                costs of covered skilled nursing facility services, but 
                does not include costs associated with approved 
                educational activities.
                    ``(C) Non-federal percentage; federal percentage.--
                For--
                          ``(i) the first cost reporting period (as 
                      defined in subparagraph (D)) of a facility, the 
                      `non-Federal percentage' is 75 percent and the 
                      `Federal percentage' is 25 percent;
                          ``(ii) the next cost reporting period of such 
                      facility, the `non-Federal percentage' is 50 
                      percent and the `Federal percentage' is 50 
                      percent; and
                          ``(iii) the subsequent cost reporting period 
                      of such facility, the `non-Federal percentage' is 
                      25 percent and the `Federal percentage' is 75 
                      percent.

[[Page 111 STAT. 416]]

                    ``(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.

[[Page 111 STAT. 417]]

                    ``(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

[[Page 111 STAT. 418]]

                      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.

[[Page 111 STAT. 419]]

                    ``(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.
                <<NOTE: Federal Register, publication.>>     ``(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.

[[Page 111 STAT. 420]]

            ``(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.''.

[[Page 111 STAT. 421]]

            (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--

[[Page 111 STAT. 422]]

                          (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''.

<<NOTE: 42 USC 1395yy note.>>     (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.

<<NOTE: 42 USC 1395i-3 note.>>     (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

[[Page 111 STAT. 423]]

            (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.''.
<<NOTE: 42 USC 1395f note.>>     (b) Effective Date.--The amendment made 
by subsection (a) applies to cost reporting periods beginning on or 
after October 1, 1997.

SEC. 4443. HOSPICE CARE BENEFITS PERIODS.

    (a) Restructuring of Benefit Period.--Section 1812 (42 U.S.C. 1395d) 
is amended in subsections (a)(4) and (d)(1) by striking ``, a subsequent 
period of 30 days, and a subsequent extension period'' and inserting 
``and an unlimited number of subsequent periods of 60 days each''.
    (b) Conforming Amendments.--(1) Section 1812 (42 U.S.C. 1395d) is 
amended in subsection (d)(2)(B) by striking ``90- or 30-day period or a 
subsequent extension period'' and inserting ``90-day period or a 
subsequent 60-day period''.
    (2) Section 1814(a)(7)(A) (42 U.S.C. 1395f(a)(7)(A)) is amended--
            (A) in clause (i), by inserting ``and'' at the end;
            (B) in clause (ii)--
                    (i) by striking ``30-day'' and inserting ``60-day''; 
                and
                    (ii) by striking ``, and'' at the end and inserting 
                a period; and
            (C) by striking clause (iii).

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

    (a) In General.--Section 1861(dd)(1) (42 U.S.C. 1395x(dd)(1)) is 
amended--
            (1) in subparagraph (G), by striking ``and'' at the end;
            (2) in subparagraph (H), by striking the period at the end 
        and inserting ``, and''; and
            (3) by inserting after subparagraph (H) the following:
            ``(I) any other item or service which is specified in the 
        plan and for which payment may otherwise be made under this 
        title.''.

<<NOTE: 42 USC 1395x note.>>     (b) Effective Date.--The amendment made 
by subsection (a) shall apply with respect to items or services 
furnished on or after April 1, 1998.

[[Page 111 STAT. 424]]

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''.

<<NOTE: 42 USC 1395d note.>> 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.

[[Page 111 STAT. 425]]

                   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 <<NOTE: 42 USC 1395ww note.>>  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),

[[Page 111 STAT. 426]]

        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.''.

<<NOTE: 42 USC 1395i-2 note.>>     (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

[[Page 111 STAT. 427]]

                      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,

[[Page 111 STAT. 428]]

                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:

    <<NOTE: 42 usc 1395i-5.>> ``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--

[[Page 111 STAT. 429]]

            ``(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

[[Page 111 STAT. 430]]

        shall estimate the level of expenditures under this part for 
        services described in subsection (a) for that fiscal year.
            ``(2) Adjustment in payments.--
                    ``(A) Proportional adjustment.--If the Secretary 
                determines that the level estimated under paragraph (1) 
                for a fiscal year will exceed the trigger level (as 
                defined in subparagraph (C)) for that fiscal year, the 
                Secretary shall, subject to subparagraph (B), provide 
                for such a proportional reduction in payment amounts 
                under this part for services described in subsection (a) 
                for the fiscal year involved as will assure that such 
                level (taking into account any adjustment under 
                subparagraph (B)) does not exceed the trigger level for 
                that fiscal year.
                    ``(B) Alternative adjustments.--The Secretary may, 
                instead of making some or all of the reduction described 
                in subparagraph (A), impose such other conditions or 
                limitations with respect to the coverage of covered 
                services (including limitations on new elections of 
                coverage and new facilities) as may be appropriate to 
                reduce the level of expenditures described in paragraph 
                (1) to the trigger level.
                    ``(C) Trigger level.--For purposes of this 
                subsection--
                          ``(i) In general.--Subject to adjustment under 
                      paragraph (3)(B), the `trigger level' for a year 
                      is the unadjusted trigger level described in 
                      clause (ii).
                          ``(ii) Unadjusted trigger level.--The 
                      `unadjusted trigger level' for--
                                    ``(I) fiscal year 1998, is 
                                $20,000,000, or
                                    ``(II) a succeeding fiscal year is 
                                the amount specified under this clause 
                                for the previous fiscal year increased 
                                by the percentage increase in the 
                                consumer price index for all urban 
                                consumers (all items; United States city 
                                average) for the 12-month period ending 
                                with July preceding the beginning of the 
                                fiscal year.
                    ``(D) Prohibition of administrative and judicial 
                review.--There shall be no administrative or judicial 
                review under section 1869, 1878, or otherwise of the 
                estimation of expenditures under subparagraph (A) or the 
                application of reduction amounts under subparagraph (B).
                    ``(E) Effect on billing.--Notwithstanding any other 
                provision of this title, in the case of a reduction in 
                payment provided under this subsection for services of a 
                religious nonmedical health care institution provided to 
                an individual, the amount that the institution is 
                otherwise permitted to charge the individual for such 
                services is increased by the amount of such reduction.
            ``(3) Monitoring expenditure level.--
                    ``(A) In general.--The Secretary shall monitor the 
                expenditure level described in paragraph (2)(A) for each 
                fiscal year (beginning with fiscal year 1999).
                    ``(B) Adjustment in trigger level.--
                          ``(i) In general.--If the Secretary determines 
                      that such level for a fiscal year exceeded, or was 
                      less than, the trigger level for that fiscal year, 
                      then, subject to clause (ii), the trigger level 
                      for the succeeding fiscal

[[Page 111 STAT. 431]]

                      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)).''.

<<NOTE: 42 USC 1395i-5 note.>>     (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 <<NOTE: Regulations.>> 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

[[Page 111 STAT. 432]]

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.

[[Page 111 STAT. 433]]

                    ``(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.''.
        <<NOTE: 42 USC 1395w-4 note.>>     (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,

[[Page 111 STAT. 434]]

                    ``(B) 1 plus the Secretary's estimate of the 
                percentage change (divided by 100) in the average number 
                of individuals enrolled under this part (other than 
                Medicare+Choice plan enrollees) from the previous fiscal 
                year to the fiscal year involved,
                    ``(C) 1 plus the Secretary's estimate of the 
                projected percentage growth in real gross domestic 
                product per capita (divided by 100) from the previous 
                fiscal year to the fiscal year involved, and
                    ``(D) 1 plus the Secretary's estimate of the 
                percentage change (divided by 100) in expenditures for 
                all physicians' services in the fiscal year (compared 
                with the previous fiscal year) which will result from 
                changes in law and regulations, determined without 
                taking into account estimated changes in expenditures 
                resulting from the update adjustment factor determined 
                under subsection (d)(3)(B),
        minus 1 and multiplied by 100.
            ``(3) Definitions.--In this subsection:
                    ``(A) Services included in physicians' services.--
                The term `physicians' services' includes other items and 
                services (such as clinical diagnostic laboratory tests 
                and radiology services), specified by the Secretary, 
                that are commonly performed or furnished by a physician 
                or in a physician's office, but does not include 
                services furnished to a Medicare+Choice plan enrollee.
                    ``(B) Medicare+choice plan enrollee.--The term 
                `Medicare+Choice plan enrollee' means, with respect to a 
                fiscal year, an individual enrolled under this part who 
                has elected to receive benefits under this title for the 
                fiscal year through a Medicare+Choice plan offered under 
                part C, and also includes an individual who is receiving 
                benefits under this part through enrollment with an 
                eligible organization with a risk-sharing contract under 
                section 1876.''.

    (b) Conforming Amendment.--So much of section 1848(f) (42 U.S.C. 
1395w-4(f)) as precedes paragraph (2) is amended to read as follows:
    ``(f) Sustainable Growth Rate.--
        <<NOTE: Federal Register, publication.>>     ``(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

[[Page 111 STAT. 435]]

                factor established for other physicians' services, 
                except as adjusted for changes in work, practice 
                expense, or malpractice relative value units.''.

<<NOTE: 42 USC 1395w-4 note.>>     (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.
<<NOTE: 42 USC 1395w-4 note.>>     (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

[[Page 111 STAT. 436]]

        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.
        <<NOTE: Publication.>>     (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

[[Page 111 STAT. 437]]

                                    ``(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''.
        <<NOTE: 42 USC 1395w-4 note.>>     (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.

<<NOTE: 42 USC 1395ww note.>> 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

[[Page 111 STAT. 438]]

                    (B) whether the hospital-specific relative value is 
                projected to be excessive (as determined based on such 
                value represented as a percentage of the median of 
                hospital-specific per discharge relative values 
                determined under subsection (b)).
            (2) Notice to subset of medical staffs; evaluation of 
        responses.--The Secretary shall notify the medical executive 
        committee of a subset of the hospitals identified under 
        paragraph (1)(B) as having an excessive hospital-specific 
        relative value, of the determinations made with respect to the 
        medical staff under paragraph (1). The Secretary shall evaluate 
        the responses of the hospitals so notified with the responses of 
        other hospitals so identified that were not so notified.

    (b) Determination of Hospital-Specific Per Discharge Relative 
Values.--
            (1) In general.--For purposes of this section, the hospital-
        specific per discharge relative value for the medical staff of a 
        hospital (other than a teaching hospital) for a year shall be 
        equal to the average per discharge relative value (as determined 
        under section 1848(c)(2) of the Social Security Act (42 U.S.C. 
        1395w-4(c)(2)) for physicians' services furnished to inpatients 
        of the hospital by the hospital's medical staff (excluding 
        interns and residents) during the second year preceding that 
        calendar year, adjusted for variations in case-mix among 
        hospitals and disproportionate share status and teaching status 
        among hospitals (as determined by the Secretary under paragraph 
        (3)).
            (2) Special rule for teaching hospitals.--The hospital-
        specific relative value projected for a teaching hospital in a 
        year shall be equal to the sum of--
                    (A) the average per discharge relative value (as 
                determined under section 1848(c)(2) of such Act) for 
                physicians' services furnished to inpatients of the 
                hospital by the hospital's medical staff (excluding 
                interns and residents) during the second year preceding 
                that calendar year, and
                    (B) the equivalent per discharge relative value (as 
                determined under such section) for physicians' services 
                furnished to inpatients of the hospital by interns and 
                residents of the hospital during the second year 
                preceding that calendar year, adjusted for variations in 
                case-mix among hospitals, and in disproportionate share 
                status and teaching status among hospitals (as 
                determined by the Secretary under paragraph (3)).
        The Secretary shall determine the equivalent relative value unit 
        per discharge for interns and residents based on the best 
        available data and may make such adjustment in the aggregate.
            (3) Adjustment for teaching and disproportionate share 
        hospitals.--The Secretary shall adjust the allowable per 
        discharge relative values otherwise determined under this 
        subsection to take into account the needs of teaching hospitals 
        and hospitals receiving additional payments under subparagraphs 
        (F) and (G) of section 1886(d)(5) of the Social Security Act (42 
        U.S.C. 1395ww(d)(5)). The adjustment for teaching status or 
        disproportionate share shall not be less than zero.

    (c) Definitions.--For purposes of this section:

[[Page 111 STAT. 439]]

            (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--

[[Page 111 STAT. 440]]

                          ``(i) the contract is in writing and is signed 
                      by the medicare beneficiary before any item or 
                      service is provided pursuant to the contract;
                          ``(ii) the contract contains the items 
                      described in subparagraph (B); and
                          ``(iii) the contract is not entered into at a 
                      time when the medicare beneficiary is facing an 
                      emergency or urgent health care situation.
                    ``(B) Items required to be included in contract.--
                Any contract to provide items and services to which 
                paragraph (1) applies shall clearly indicate to the 
                medicare beneficiary that by signing such contract the 
                beneficiary--
                          ``(i) agrees not to submit a claim (or to 
                      request that the physician or practitioner submit 
                      a claim) under this title for such items or 
                      services even if such items or services are 
                      otherwise covered by this title;
                          ``(ii) agrees to be responsible, whether 
                      through insurance or otherwise, for payment of 
                      such items or services and understands that no 
                      reimbursement will be provided under this title 
                      for such items or services;
                          ``(iii) acknowledges that no limits under this 
                      title (including the limits under section 1848(g)) 
                      apply to amounts that may be charged for such 
                      items or services;
                          ``(iv) acknowledges that Medigap plans under 
                      section 1882 do not, and other supplemental 
                      insurance plans may elect not to, make payments 
                      for such items and services because payment is not 
                      made under this title; and
                          ``(v) acknowledges that the medicare 
                      beneficiary has the right to have such items or 
                      services provided by other physicians or 
                      practitioners for whom payment would be made under 
                      this title.
                Such contract shall also clearly indicate whether the 
                physician or practitioner is excluded from participation 
                under the medicare program under section 1128.
            ``(3) Physician or practitioner requirements.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any contract entered into by a physician or practitioner 
                unless an affidavit described in subparagraph (B) is in 
                effect during the period any item or service is to be 
                provided pursuant to the contract.
                    ``(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.

[[Page 111 STAT. 441]]

                    ``(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).''.

<<NOTE: 42 USC 1395a note.>>     (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

[[Page 111 STAT. 442]]

        if so, what legislative changes, if any should be made to 
        improve such contracts.

<<NOTE: 42 USC 1395a note.>>     (c) Effective Date.--The amendment made 
by subsection (a) shall apply with respect to contracts entered into on 
and after January 1, 1998.

              Subchapter B--Other Health Care Professionals

SEC. 4511. INCREASED MEDICARE REIMBURSEMENT FOR NURSE PRACTITIONERS AND 
            CLINICAL NURSE SPECIALISTS.

    (a) Removal of Restrictions on Settings.--
            (1) In general.--Clause (ii) of section 1861(s)(2)(K) (42 
        U.S.C. 1395x(s)(2)(K)) is amended to read as follows:
            ``(ii) services which would be physicians' services if 
        furnished by a physician (as defined in subsection (r)(1)) and 
        which are performed by a nurse practitioner or clinical nurse 
        specialist (as defined in subsection (aa)(5)) working in 
        collaboration (as defined in subsection (aa)(6)) with a 
        physician (as defined in subsection (r)(1)) which the nurse 
        practitioner or clinical nurse specialist is legally authorized 
        to perform by the State in which the services are performed, and 
        such services and supplies furnished as an incident to such 
        services as would be covered under subparagraph (A) if furnished 
        incident to a physician's professional service, but only if no 
        facility or other provider charges or is paid any amounts with 
        respect to the furnishing of such services;''.
            (2) Conforming amendments.--(A) Section 1861(s)(2)(K) (42 
        U.S.C. 1395x(s)(2)(K)) is further amended--
                    (i) in clause (i), by inserting ``and such services 
                and supplies furnished as incident to such services as 
                would be covered under subparagraph (A) if furnished 
                incident to a physician's professional service; and'' 
                after ``are performed,''; and
                    (ii) by striking clauses (iii) and (iv).
            (B) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended by 
        striking ``clauses (i) or (iii) of subsection (s)(2)(K)'' and 
        inserting ``subsection (s)(2)(K)''.
            (C) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
        by striking ``section 1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)'' 
        and inserting ``section 1861(s)(2)(K)''.
            (D) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is 
        amended by striking ``section 1861(s)(2)(K)(i) or 
        1861(s)(2)(K)(iii)'' and inserting ``section 1861(s)(2)(K)''.
            (E) Section 1888(e)(2)(A)(ii) (42 U.S.C. 
        1395yy(e)(2)(A)(ii)), as added by section 4432(a) (relating to 
        prospective payment system for rehabilitation hospitals), is 
        amended by striking ``through (iii)'' and inserting ``and 
        (ii)''.

    (b) Increased Payment.--
            (1) Fee schedule amount.--Subparagraph (O) of section 
        1833(a)(1) (42 U.S.C. 1395l(a)(1)) is amended to read as 
        follows: ``(O) with respect to services described in section 
        1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical 
        nurse specialist services), the amounts paid shall be equal to 
        80 percent of (i) the lesser of the actual charge or 85 percent 
        of the fee schedule amount provided under section 1848, or (ii) 
        in the case of services as an assistant at surgery, the lesser 
        of the actual charge or 85 percent of the amount that

[[Page 111 STAT. 443]]

        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.''.

<<NOTE: 42 USC 1395k note.>>     (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

[[Page 111 STAT. 444]]

                    (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.''.
<<NOTE: 42 USC 1395l note.>>     (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''.
<<NOTE: 42 USC 1395x note.>>     (b) Effective Date.--The amendment made 
by subsection (a) applies to services furnished on or after January 1, 
2000.

<<NOTE: 42 USC 1395x note.>>     (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)''.

<<NOTE: 42 USC 1395l note.>>     (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''.

[[Page 111 STAT. 445]]

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

SEC. 4523. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT 
            SERVICES.

    (a) In General.--Section 1833 (42 U.S.C. 1395l) is amended by adding 
at the end the following:
    ``(t) Prospective Payment System for Hospital Outpatient Department 
Services.--
            ``(1) Amount of payment.--
                    ``(A) In general.--With respect to covered OPD 
                services (as defined in subparagraph (B)) furnished 
                during a year beginning with 1999, the amount of payment 
                under this part shall be determined under a prospective 
                payment system established by the Secretary in 
                accordance with this subsection.
                    ``(B) Definition of covered opd services.--For 
                purposes of this subsection, the term `covered OPD 
                services'--
                          ``(i) means hospital outpatient services 
                      designated by the Secretary;
                          ``(ii) subject to clause (iii), includes 
                      inpatient hospital services designated by the 
                      Secretary that are covered under this part and 
                      furnished to a hospital inpatient who (I) is 
                      entitled to benefits under part A but has 
                      exhausted benefits for inpatient hospital services 
                      during a spell of illness, or (II) is not so 
                      entitled; but
                          ``(iii) does not include any therapy services 
                      described in subsection (a)(8) or ambulance 
                      services, for which payment is made under a fee 
                      schedule described in section 1834(k) or section 
                      1834(l).
            ``(2) System requirements.--Under the payment system--
                    ``(A) the Secretary shall develop a classification 
                system for covered OPD services;
                    ``(B) the Secretary may establish groups of covered 
                OPD services, within the classification system described 
                in subparagraph (A), so that services classified within 
                each group are comparable clinically and with respect to 
                the use of resources;
                    ``(C) the Secretary shall, using data on claims from 
                1996 and using data from the most recent available cost 
                reports, establish relative payment weights for covered 
                OPD services (and any groups of such services described 
                in subparagraph (B)) based on median hospital costs and 
                shall determine projections of the frequency of 
                utilization of each such service (or group of services) 
                in 1999;
                    ``(D) the Secretary shall determine a wage 
                adjustment factor to adjust the portion of payment and 
                coinsurance attributable to labor-related costs for 
                relative differences in labor and labor-related costs 
                across geographic regions in a budget neutral manner;
                    ``(E) the Secretary shall establish other 
                adjustments, in a budget neutral manner, as determined 
                to be necessary to ensure equitable payments, such as 
                outlier adjustments or adjustments for certain classes 
                of hospitals; and

[[Page 111 STAT. 446]]

                    ``(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.

[[Page 111 STAT. 447]]

                          ``(ii) Subsequent years.--Subject to paragraph 
                      (8)(B), the Secretary shall establish a conversion 
                      factor for covered OPD services furnished in 
                      subsequent years in an amount equal to the 
                      conversion factor established under this 
                      subparagraph and applicable to such services 
                      furnished in the previous year increased by the 
                      OPD fee schedule increase factor specified under 
                      clause (iii) for the year involved.
                          ``(iii) OPD fee schedule increase factor.--For 
                      purposes of this subparagraph, the `OPD fee 
                      schedule increase factor' for services furnished 
                      in a year is equal to the market basket percentage 
                      increase applicable under section 
                      1886(b)(3)(B)(iii) to hospital discharges 
                      occurring during the fiscal year ending in such 
                      year, reduced by 1 percentage point for such 
                      factor for services furnished in each of 2000, 
                      2001, and 2002. In applying the previous sentence 
                      for years beginning with 2000, the Secretary may 
                      substitute for the market basket percentage 
                      increase an annual percentage increase that is 
                      computed and applied with respect to covered OPD 
                      services furnished in a year in the same manner as 
                      the market basket percentage increase is 
                      determined and applied to inpatient hospital 
                      services for discharges occurring in a fiscal 
                      year.
                    ``(D) Calculation of medicare opd fee schedule 
                amounts.--The Secretary shall compute a medicare OPD fee 
                schedule amount for each covered OPD service (or group 
                of such services) furnished in a year, in an amount 
                equal to the product of--
                          ``(i) the conversion factor computed under 
                      subparagraph (C) for the year, and
                          ``(ii) the relative payment weight (determined 
                      under paragraph (2)(C)) for the service or group.
                    ``(E) Pre-deductible payment percentage.--The pre-
                deductible payment percentage for a covered OPD service 
                (or group of such services) furnished in a year is equal 
                to the ratio of--
                          ``(i) the medicare OPD fee schedule amount 
                      established under subparagraph (D) for the year, 
                      minus the unadjusted copayment amount determined 
                      under subparagraph (B) for the service or group, 
                      to
                          ``(ii) the medicare OPD fee schedule amount 
                      determined under subparagraph (D) for the year for 
                      such service or group.
            ``(4) Medicare payment amount.--The amount of payment made 
        from the Trust Fund under this part for a covered OPD service 
        (and such services classified within a group) furnished in a 
        year is determined as follows:
                    ``(A) Fee schedule adjustments.--The medicare OPD 
                fee schedule amount (computed under paragraph (3)(D)) 
                for the service or group and year is adjusted for 
                relative differences in the cost of labor and other 
                factors determined by the Secretary, as computed under 
                paragraphs (2)(D) and (2)(E).
                    ``(B) Subtract applicable deductible.--Reduce the 
                adjusted amount determined under subparagraph (A) by

[[Page 111 STAT. 448]]

                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 <<NOTE: Procedures.>>  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).

[[Page 111 STAT. 449]]

            ``(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''.
                <<NOTE: Applicability. 42 USC 1395l note.>>     (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,''.

[[Page 111 STAT. 450]]

                    (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.--

[[Page 111 STAT. 451]]

            (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.

[[Page 111 STAT. 452]]

            ``(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).
        <<NOTE: Applicability.>>     ``(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.''.
        <<NOTE: 42 USC 1395l note.>>     (3) Effective date.--The 
        amendments made by this subsection shall apply to services 
        furnished on or after January 1, 2000.

<<NOTE: 42 USC 1395x note.>>     (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.

[[Page 111 STAT. 453]]

SEC. 4532. DEMONSTRATION <<NOTE: 42 USC 1395m note.>>  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);

[[Page 111 STAT. 454]]

            (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

[[Page 111 STAT. 455]]

                    ``(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 <<NOTE: Applicability.>>  on billing.--The 
        provisions of subparagraphs (A) and (B) of section 1842(b)(18) 
        shall apply to therapy

[[Page 111 STAT. 456]]

        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 sentence of section 1861(p) (or 
        under such sentence through the operation of section 1861(g)) as 
        such standards and conditions would apply to such therapy 
        services if furnished by a therapist.''.

    (c) Applying Financial Limitation to All Rehabilitation Services.--
Section 1833(g) (42 U.S.C. 1395l(g)) is amended--
            (1) in the first sentence, by striking ``services described 
        in the second sentence of section 1861(p)'' and inserting 
        ``physical therapy services of the type described in section 
        1861(p), but not described in section 1833(a)(8)(B), and 
        physical therapy services of such type which are furnished by a 
        physician or as incident to physicians' services'', and
            (2) in the second sentence, by striking ``outpatient 
        occupational therapy services which are described in the second 
        sentence of section 1861(p) through the operation of section 
        1861(g)'' and inserting ``occupational therapy services (of the 
        type that are described in section 1861(p) (but not described in 
        section 1833(a)(8)(B)) through the operation of section 1861(g) 
        and of such type which are furnished by a physician or as 
        incident to physicians' services)''.

    (d) Indexing Limitation.--
            (1) In general.--Section 1833(g) (42 U.S.C. 1395l(g)), as 
        amended by subsection (c), is further amended--
                    (A) by striking ``$900'' each place it appears and 
                inserting ``the amount specified in paragraph (2) for 
                the year'',
                    (B) by inserting ``(1)'' after ``(g)'',
                    (C) by designating the last sentence as a paragraph 
                (3), and
                    (D) by inserting before paragraph (3), as so 
                designated, the following:

    ``(2) The amount specified in this paragraph--

[[Page 111 STAT. 457]]

            ``(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) <<NOTE: 42 USC 1395l note.>>  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 <<NOTE: 42 USC 1395l note.>>  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--

[[Page 111 STAT. 458]]

                    (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 <<NOTE: 42 USC 1395m note.>>  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;

[[Page 111 STAT. 459]]

                          ``(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 <<NOTE: 42 USC 1395 note.>>  
        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 <<NOTE: 42 USC 1395m note.>>  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 <<NOTE: 42 USC 1395m note.>>  Home Oxygen Equipment.--
            (1) Study.--The <<NOTE: Reports.>>  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 <<NOTE: 42 USC 1395m note.>>  Date.--

[[Page 111 STAT. 460]]

            (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 <<NOTE: 42 USC 1395l note.>>  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 <<NOTE: 42 USC 1395u note.>>  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

[[Page 111 STAT. 461]]

                    (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

[[Page 111 STAT. 462]]

        part may implement changes relating to requirements for the 
        submission of a claim for clinical diagnostic laboratory tests.
            (4) Use of interim policies.--After the date the Secretary 
        first implements such national policies, the Secretary shall 
        permit any carrier to develop and implement interim policies of 
        the type described in paragraph (1), in accordance with 
        guidelines established by the Secretary, in cases in which a 
        uniform national policy has not been established under this 
        subsection and there is a demonstrated need for a policy to 
        respond to aberrant utilization or provision of unnecessary 
        tests. Except as the Secretary specifically permits, no policy 
        shall be implemented under this paragraph for a period of longer 
        than 2 years.
            (5) Interim national policies.--After the date the Secretary 
        first designates regional carriers under subsection (a), the 
        Secretary shall establish a process under which designated 
        carriers can collectively develop and implement interim national 
        policies of the type described in paragraph (1). No such policy 
        shall be implemented under this paragraph for a period of longer 
        than 2 years.
            (6) Biennial review process.--Not less often than once every 
        2 years, the Secretary shall solicit and review comments 
        regarding changes in the national policies established under 
        this subsection. As part of such biennial review process, the 
        Secretary shall specifically review and consider whether to 
        incorporate or supersede interim policies developed under 
        paragraph (4) or (5). Based upon such review, the Secretary may 
        provide for appropriate changes in the national policies 
        previously adopted under this subsection.
            (7) Requirement and notice.--The Secretary shall ensure that 
        any policies adopted under paragraph (3), (4), or (5) shall 
        apply to all laboratory claims payable under part B of title 
        XVIII of the Social Security Act, and shall provide for advance 
        notice to interested parties and a 45-day period in which such 
        parties may submit comments on the proposed change.

    (c) Inclusion of Laboratory Representative on Carrier Advisory 
Committees.--The Secretary shall direct that any advisory committee 
established by a carrier to advise such carrier with respect to coverage 
and administrative policies under part B of title XVIII of the Social 
Security Act shall include an individual to represent the independent 
clinical laboratories and such other laboratories as the Secretary deems 
appropriate. The Secretary shall consider recommendations from national 
and local organizations that represent independent clinical laboratories 
in such selection.

SEC. 4555. UPDATES FOR AMBULATORY SURGICAL SERVICES.

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

SEC. 4556. REIMBURSEMENT FOR DRUGS AND BIOLOGICALS.

    (a) In General.--Section 1842 (42 U.S.C. 1395u) is amended by 
inserting after subsection (n) the following new subsection:
    ``(o)(1) If a physician's, supplier's, or any other person's bill or 
request for payment for services includes a charge for a drug

[[Page 111 STAT. 463]]

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 <<NOTE: 42 USC 1395u note.>>  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 <<NOTE: 42 USC 1395l note.>>  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 <<NOTE: 42 USC 1395x note.>>  Date.--The amendments 
made by subsection (a) shall apply to items and services furnished on or 
after January 1, 1998.

SEC. 4558. RENAL <<NOTE: 42 USC 1395rr note.>>  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

[[Page 111 STAT. 464]]

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 <<NOTE: Effective date.>>  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, <<NOTE: Regulations.>>  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''.

[[Page 111 STAT. 465]]

        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 <<NOTE: 42 USC 1395p note.>>  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.

[[Page 111 STAT. 466]]

            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 <<NOTE: 42 USC 1395x note.>>  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--

[[Page 111 STAT. 467]]

            ``(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 <<NOTE: Applicability.>>  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 <<NOTE: 42 USC 1395fff note.>>  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 <<NOTE: Effective date. 42 USC 1395fff note.>>  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 <<NOTE: 42 usc 1395fff.>>  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.

[[Page 111 STAT. 468]]

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

[[Page 111 STAT. 469]]

                          ``(ii) Home health market basket percentage 
                      increase.--For purposes of this subsection, the 
                      term `home health market basket percentage 
                      increase' means, with respect to a fiscal year, a 
                      percentage (estimated by the Secretary before the 
                      beginning of the fiscal year) determined and 
                      applied with respect to the mix of goods and 
                      services included in home health services in the 
                      same manner as the market basket percentage 
                      increase under section 1886(b)(3)(B)(iii) is 
                      determined and applied to the mix of goods and 
                      services comprising inpatient hospital services 
                      for the fiscal year.
                    ``(C) Adjustment for outliers.--The Secretary shall 
                reduce the standard prospective payment amount (or 
                amounts) under this paragraph applicable to home health 
                services furnished during a period by such proportion as 
                will result in an aggregate reduction in payments for 
                the period equal to the aggregate increase in payments 
                resulting from the application of paragraph (5) 
                (relating to outliers).
            ``(4) Payment computation.--
                    ``(A) In general.--The payment amount for a unit of 
                home health services shall be the applicable standard 
                prospective payment amount adjusted as follows:
                          ``(i) Case mix adjustment.--The amount shall 
                      be adjusted by an appropriate case mix adjustment 
                      factor (established under subparagraph (B)).
                          ``(ii) Area wage adjustment.--The portion of 
                      such amount that the Secretary estimates to be 
                      attributable to wages and wage-related costs shall 
                      be adjusted for geographic differences in such 
                      costs by an area wage adjustment factor 
                      (established under subparagraph (C)) for the area 
                      in which the services are furnished or such other 
                      area as the Secretary may specify.
                    ``(B) Establishment of case mix adjustment 
                factors.--The Secretary shall establish appropriate case 
                mix adjustment factors for home health services in a 
                manner that explains a significant amount of the 
                variation in cost among different units of services.
                    ``(C) Establishment of area wage adjustment 
                factors.--The Secretary shall establish area wage 
                adjustment factors that reflect the relative level of 
                wages and wage-related costs applicable to the 
                furnishing of home health services in a geographic area 
                compared to the national average applicable level. Such 
                factors may be the factors used by the Secretary for 
                purposes of section 1886(d)(3)(E).
            ``(5) Outliers.--The Secretary may provide for an addition 
        or adjustment to the payment amount otherwise made in the case 
        of outliers because of unusual variations in the type or amount 
        of medically necessary care. The total amount of the additional 
        payments or payment adjustments made under this paragraph with 
        respect to a fiscal year may not exceed 5 percent of the total 
        payments projected or estimated to be made based on the 
        prospective payment system under this subsection in that year.
            ``(6) Proration of prospective payment amounts.--If a 
        beneficiary elects to transfer to, or receive services from,

[[Page 111 STAT. 470]]

        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:

[[Page 111 STAT. 471]]

                    ``(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 <<NOTE: 42 USC 1395fff note.>>  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 <<NOTE: 42 USC 1395fff note.>>  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

[[Page 111 STAT. 472]]

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 <<NOTE: 42 USC 1395x note.>>  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

[[Page 111 STAT. 473]]

        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) <<NOTE: 42 USC 1395d note.>>  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\.

[[Page 111 STAT. 474]]

                          (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 <<NOTE: 42 USC 1395d note.>>  Date.--The amendments 
made by this section apply to services furnished on or after January 1, 
1998. For purpose of applying such amendments, any home health spell of 
illness that began, but not 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 <<NOTE: 42 USC 1395x note.>>  Date.--The amendment 
made by subsection (a) applies to services furnished on or after October 
1, 1997.

SEC. 4613. STUDY <<NOTE: 42 USC 1395x note.>>  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 <<NOTE: 42 USC 1395y note.>>  Secretary of 
Health and Human Services may establish a process for notifying a 
physician in cases

[[Page 111 STAT. 475]]

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 <<NOTE: 42 USC 1395y note.>>  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 for the purpose of obtaining a blood sample)'' 
after ``skilled nursing care''.
    (b) Effective <<NOTE: 42 USC 1395f note.>>  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 <<NOTE: 42 USC 1395y note.>>  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 <dbl-dagger> 
                (((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;

[[Page 111 STAT. 476]]

                          ``(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 <<NOTE: Applicability.>>  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 <<NOTE: Effective date.>>  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

[[Page 111 STAT. 477]]

        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.

[[Page 111 STAT. 478]]

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

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

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

[[Page 111 STAT. 479]]

                      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, and
                                    ``(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.''.

[[Page 111 STAT. 480]]

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

    (a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)) is amended by 
adding at the end the following new paragraph:
            ``(6) Incentive payment under plans for voluntary reduction 
        in number of residents.--
                    ``(A) In general.--In the case of a voluntary 
                residency reduction plan for which an application is 
                approved under subparagraph (B), subject to subparagraph 
                (F), each hospital which is part of the qualifying 
                entity submitting the plan shall be paid an applicable 
                hold harmless percentage (as specified in subparagraph 
                (E)) of the sum of--
                          ``(i) the amount (if any) by which--
                                    ``(I) the amount of payment which 
                                would have been made under this 
                                subsection if there had been a 5-percent 
                                reduction in the number of full-time 
                                equivalent residents in the approved 
                                medical education training programs of 
                                the hospital as of June 30, 1997, 
                                exceeds
                                    ``(II) the amount of payment which 
                                is made under this subsection, taking 
                                into account the reduction in such 
                                number effected under the reduction 
                                plan; and
                          ``(ii) the amount of the reduction in payment 
                      under subsection (d)(5)(B) for the hospital that 
                      is attributable to the reduction in number of 
                      residents effected under the plan below 95 percent 
                      of the number of full-time equivalent residents in 
                      such programs of the hospital as of June 30, 1997.
                The determination of the amounts under clauses (i) and 
                (ii) for any year shall be made on the basis of the 
                provisions of this title in effect on the application 
                deadline date for the first calendar year to which the 
                reduction plan applies.
                    ``(B) Approval of plan applications.--The Secretary 
                may not approve the application of an qualifying entity 
                unless--
                          ``(i) the application is submitted in a form 
                      and manner specified by the Secretary and by not 
                      later than November 1, 1999,
                          ``(ii) the application provides for the 
                      operation of a plan for the reduction in the 
                      number of full-time equivalent residents in the 
                      approved medical residency training programs of 
                      the entity consistent with the requirements of 
                      subparagraph (D);
                          ``(iii) the entity elects in the application 
                      the period of residency training years (not 
                      greater than 5) over which the reduction will 
                      occur;
                          ``(iv) the entity will not reduce the 
                      proportion of its residents in primary care (to 
                      the total number of residents) below such 
                      proportion as in effect as of the applicable time 
                      described in subparagraph (D)(v); and
                          ``(v) the Secretary determines that the 
                      application and the entity and such plan meet such 
                      other requirements as the Secretary specifies in 
                      regulations.
                    ``(C) Qualifying entity.--For purposes of this 
                paragraph, any of the following may be a qualifying 
                entity:

[[Page 111 STAT. 481]]

                          ``(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--

[[Page 111 STAT. 482]]

                                    ``(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.

[[Page 111 STAT. 483]]

                    ``(G) Treatment <<NOTE: Rules.>>  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 <<NOTE: 42 USC 1395ww note.>>  to Demonstration 
Projects and Authority.--
            (1) Section 1886(h)(6) of the Social Security Act, added by 
        subsection (a), other than subparagraph (F)(ii) thereof, shall 
        not apply to any residency training program with respect to 
        which a demonstration project described in paragraph (3) has 
        been approved by the Health Care Financing Administration as of 
        May 27, 1997.
            (2) Effective <<NOTE: Effective date.>>  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 <<NOTE: 42 USC 1395ww note.>>  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.

[[Page 111 STAT. 484]]

SEC. 4628. DEMONSTRATION <<NOTE: 42 USC 1395ww note.>>  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 <<NOTE: 42 USC 1395ww note.>>  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--

[[Page 111 STAT. 485]]

                    (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 <<NOTE: 42 USC 1395ww note.>>  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

[[Page 111 STAT. 486]]

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 <<NOTE: Effective date.>>  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 <<NOTE: 26 USC 6103.>>  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 <<NOTE: 42 USC 1395y note.>>  Date.--The amendments 
made by this section apply to items and services furnished on or after 
the date of the enactment of this Act.

[[Page 111 STAT. 487]]

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 <<NOTE: 42 USC 1395y note.>>  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 <<NOTE: 42 USC 1395cc note.>>  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:

[[Page 111 STAT. 488]]

    ``(b)(1) There <<NOTE: Establishment.>>  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 <<NOTE: Federal Register, publication. 42 USC 
        1395ww note.>>  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 <<NOTE: Federal Register, publication. 42 USC 
        1395ww note.>>  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''.

[[Page 111 STAT. 489]]

                          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 <<NOTE: 42 USC 1396v.>>  section 1932 as section 1933 and 
by inserting after section 1931 the following new section:

``provisions <<NOTE: 42 usc 1396u-2.>>  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.

[[Page 111 STAT. 490]]

                    ``(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.

[[Page 111 STAT. 491]]

            ``(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.

[[Page 111 STAT. 492]]

                    ``(B) Information to enrollees and potential 
                enrollees.--Each managed care entity that is a medicaid 
                managed care organization shall, upon request, make 
                available to enrollees and potential enrollees in the 
                organization's service area information concerning the 
                following:
                          ``(i) Providers.--The identity, locations, 
                      qualifications, and availability of health care 
                      providers that participate with the organization.
                          ``(ii) Enrollee rights and responsibilities.--
                      The rights and responsibilities of enrollees.
                          ``(iii) Grievance and appeal procedures.--The 
                      procedures available to an enrollee and a health 
                      care provider to challenge or appeal the failure 
                      of the organization to cover a service.
                          ``(iv) Information on covered items and 
                      services.--All items and services that are 
                      available to enrollees under the contract between 
                      the State and the organization that are covered 
                      either directly or through a method of referral 
                      and prior authorization. Each managed care entity 
                      that is a primary care case manager shall, upon 
                      request, make available to enrollees and potential 
                      enrollees in the organization's service area the 
                      information described in clause (iii).
                    ``(C) Comparative information.--A State that 
                requires individuals to enroll with managed care 
                entities under paragraph (1)(A) shall annually (and upon 
                request) provide, directly or through the managed care 
                entity, to such individuals a list identifying the 
                managed care entities that are (or will be) available 
                and information (presented in a comparative, chart-like 
                form) relating to the following for each such entity 
                offered:
                          ``(i) Benefits and cost-sharing.--The benefits 
                      covered and cost-sharing imposed by the entity.
                          ``(ii) Service area.--The service area of the 
                      entity.
                          ``(iii) Quality and performance.--To the 
                      extent available, quality and performance 
                      indicators for the benefits under the entity.
                    ``(D) Information on benefits not covered under 
                managed care arrangement.--A State, directly or through 
                managed care entities, shall, on or before an individual 
                enrolls with such an entity under this title, inform the 
                enrollee in a written and prominent manner of any 
                benefits to which the enrollee may be entitled to under 
                this title but which are not made available to the 
                enrollee through the entity. Such information shall 
                include information on where and how such enrollees may 
                access benefits not made available to the enrollee 
                through the entity.''.

    (b) Change in Terminology.--
            (1) In general.--Section 1903(m)(1)(A) (42 U.S.C. 1396b(m)) 
        is amended--
                    (A) by striking ``The term'' and all that follows 
                through ``and--'' and inserting ``The term `medicaid 
                managed care organization' means a health maintenance 
                organization, an eligible organization with a contract 
                under section 1876 or a Medicare+Choice organization 
                with a contract under part C of title XVIII, a provider 
                sponsored organization,

[[Page 111 STAT. 493]]

                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)--

[[Page 111 STAT. 494]]

                          (i) by striking ``except as provided under 
                      subparagraph (F),'',
                          (ii) by striking ``without cause'' and all 
                      that follows through ``for such termination'' and 
                      inserting ``in accordance with section 
                      1932(a)(4);'',
                          (iii) by inserting ``in accordance with such 
                      section'' after ``provides for notification''; and
                    (B) by striking subparagraph (F).

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

    (a) In General.--Section 1905 (42 U.S.C. 1396d) is amended--
            (1) in subsection (a)--
                    (A) by striking ``and'' at the end of paragraph 
                (24);
                    (B) by redesignating paragraph (25) as paragraph 
                (26) and by striking the period at the end of such 
                paragraph and inserting a comma; and
                    (C) by inserting after paragraph (24) the following 
                new paragraph:
            ``(25) primary care case management services (as defined in 
        subsection (t)); and''; and
            (2) by adding at the end the following new subsection:

    ``(t)(1) The term `primary care case management services' means 
case-management related services (including locating, coordinating, and 
monitoring of health care services) provided by a primary care case 
manager under a primary care case management contract.
    ``(2) The term `primary care case manager' means any of the 
following that provides services of the type described in paragraph (1) 
under a contract referred to in such paragraph:
            ``(A) A physician, a physician group practice, or an entity 
        employing or having other arrangements with physicians to 
        provide such services.
            ``(B) At State option--
                    ``(i) a nurse practitioner (as described in section 
                1905(a)(21));
                    ``(ii) a certified nurse-midwife (as defined in 
                section 1861(gg)); or
                    ``(iii) a physician assistant (as defined in section 
                1861(aa)(5)).

    ``(3) The term `primary care case management contract' means a 
contract between a primary care case manager and a State under which the 
manager undertakes to locate, coordinate, and monitor covered primary 
care (and such other covered services as may be specified under the 
contract) to all individuals enrolled with the manager, and which--
            ``(A) provides for reasonable and adequate hours of 
        operation, including 24-hour availability of information, 
        referral, and treatment with respect to medical emergencies;
            ``(B) restricts enrollment to individuals residing 
        sufficiently near a service delivery site of the manager to be 
        able to reach that site within a reasonable time using available 
        and affordable modes of transportation;
            ``(C) provides for arrangements with, or referrals to, 
        sufficient numbers of physicians and other appropriate health 
        care professionals to ensure that services under the contract 
        can be furnished to enrollees promptly and without compromise to 
        quality of care;

[[Page 111 STAT. 495]]

            ``(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

[[Page 111 STAT. 496]]

                      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 <<NOTE: Applicability.>>  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

[[Page 111 STAT. 497]]

                      enrollment and to enrollees within 90 days after 
                      the date that the organization adopts a change in 
                      policy regarding such a counseling or referral 
                      service.
                Nothing in this subparagraph shall be construed to 
                affect disclosure requirements under State law or under 
                the Employee Retirement Income Security Act of 1974.
                    ``(C) Health care professional defined.--For 
                purposes of this paragraph, the term `health care 
                professional' means a physician (as defined in section 
                1861(r)) or other health care professional if coverage 
                for the professional's services is provided under the 
                contract referred to in subparagraph (A) for the 
                services of the professional. Such term includes a 
                podiatrist, optometrist, chiropractor, psychologist, 
                dentist, physician assistant, physical or occupational 
                therapist and therapy assistant, speech-language 
                pathologist, audiologist, registered or licensed 
                practical nurse (including nurse practitioner, clinical 
                nurse specialist, certified registered nurse 
                anesthetist, and certified nurse-midwife), licensed 
                certified social worker, registered respiratory 
                therapist, and certified respiratory therapy technician.
            ``(4) Grievance procedures.--Each medicaid managed care 
        organization shall establish an internal grievance procedure 
        under which an enrollee who is eligible for medical assistance 
        under the State plan under this title, or a provider on behalf 
        of such an enrollee, may challenge the denial of coverage of or 
        payment for such assistance.
            ``(5) Demonstration of adequate capacity and services.--Each 
        medicaid managed care organization shall provide the State and 
        the Secretary with adequate assurances (in a time and manner 
        determined by the Secretary) that the organization, with respect 
        to a service area, has the capacity to serve the expected 
        enrollment in such service area, including assurances that the 
        organization--
                    ``(A) offers an appropriate range of services and 
                access to preventive and primary care services for the 
                population expected to be enrolled in such service area, 
                and
                    ``(B) maintains a sufficient number, mix, and 
                geographic distribution of providers of services.
            ``(6) Protecting enrollees against liability for payment.--
        Each medicaid managed care organization shall provide that an 
        individual eligible for medical assistance under the State plan 
        under this title who is enrolled with the organization may not 
        be held liable--
                    ``(A) for the debts of the organization, in the 
                event of the organization's insolvency,
                    ``(B) for services provided to the individual--
                          ``(i) in the event of the organization failing 
                      to receive payment from the State for such 
                      services; or
                          ``(ii) in the event of a health care provider 
                      with a contractual, referral, or other arrangement 
                      with the organization failing to receive payment 
                      from the State or the organization for such 
                      services, or
                    ``(C) for payments to a provider that furnishes 
                covered services under a contractual, referral, or other 
                arrangement with the organization in excess of the 
                amount that would

[[Page 111 STAT. 498]]

                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 <<NOTE: 42 USC 1396u-2.>>  ASSURANCE STANDARDS.

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

[[Page 111 STAT. 499]]

                      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. <<NOTE: Applicability.>>  
                Guidelines relating to quality assurance that are 
                applied under section 1915(b)(1) shall apply under this 
                subsection until the effective date of standards for 
                quality assurance established under this subparagraph.
                    ``(C) Monitoring.--The Secretary shall monitor the 
                development and implementation of strategies under 
                subparagraph (A).
                    ``(D) Consultation.--The Secretary shall conduct 
                activities under subparagraphs (B) and (C) in 
                consultation with the States.
            ``(2) External independent review of managed care 
        activities.--
                    ``(A) Review of contracts.--
                          ``(i) In general.--Each contract under section 
                      1903(m) with a medicaid managed care organization 
                      shall provide for an annual (as appropriate) 
                      external independent review conducted by a 
                      qualified independent entity of the quality 
                      outcomes and timeliness of, and access to, the 
                      items and services for which the organization is 
                      responsible under the contract. The requirement 
                      for such a review shall not apply until after the 
                      date that the Secretary establishes the 
                      identification method described in clause (ii).
                          ``(ii) Qualifications of reviewer.--The 
                      Secretary, in consultation with the States, shall 
                      establish a method for the identification of 
                      entities that are qualified to conduct reviews 
                      under clause (i).
                          ``(iii) Use of protocols.--The Secretary, in 
                      coordination with the National Governors' 
                      Association, shall contract with an independent 
                      quality review organization (such as the National 
                      Committee for Quality Assurance) to develop the 
                      protocols to be used in external independent 
                      reviews conducted under this paragraph on and 
                      after January 1, 1999.
                          ``(iv) Availability of results.--The results 
                      of each external independent review conducted 
                      under this subparagraph shall be available to 
                      participating health care providers, enrollees, 
                      and potential enrollees of the organization, 
                      except that the results may not be made available 
                      in a manner that discloses the identity of any 
                      individual patient.
                    ``(B) Nonduplication of accreditation.--A State may 
                provide that, in the case of a medicaid managed care 
                organization that is accredited by a private independent 
                entity (such as those described in section 1852(e)(4)) 
                or that has an external review conducted under section 
                1852(e)(3), the external review activities conducted 
                under subparagraph (A) with respect to the organization 
                shall

[[Page 111 STAT. 500]]

                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 <<NOTE: 42 USC 1396u-2 note.>>  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.

[[Page 111 STAT. 501]]

                    (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 <<NOTE: 42 USC 1396u-2.>>  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

[[Page 111 STAT. 502]]

                          ``(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

[[Page 111 STAT. 503]]

        1903(m) unless the State has in effect conflict-of-interest 
        safeguards with respect to officers and employees of the State 
        with responsibilities relating to contracts with such 
        organizations or to the default enrollment process described in 
        subsection (a)(4)(C)(ii) that are at least as effective as the 
        Federal safeguards provided under section 27 of the Office of 
        Federal Procurement Policy Act (41 U.S.C. 423), against 
        conflicts of interest that apply with respect to Federal 
        procurement officials with comparable responsibilities with 
        respect to such contracts.
            ``(4) Use of unique physician identifier for participating 
        physicians.--Each medicaid managed care organization shall 
        require each physician providing services to enrollees eligible 
        for medical assistance under the State plan under this title to 
        have a unique identifier in accordance with the system 
        established under section 1173(b).

    ``(e) Sanctions for Noncompliance.--
            ``(1) Use of intermediate sanctions by the state to enforce 
        requirements.--
                    ``(A) In general.--A State may not enter into or 
                renew a contract under section 1903(m) unless the State 
                has established intermediate sanctions, which may 
                include any of the types described in paragraph (2), 
                other than the termination of a contract with a medicaid 
                managed care organization, which the State may impose 
                against a medicaid managed care organization with such a 
                contract, if the organization--
                          ``(i) fails substantially to provide medically 
                      necessary items and services that are required 
                      (under law or under such organization's contract 
                      with the State) to be provided to an enrollee 
                      covered under the contract;
                          ``(ii) imposes premiums or charges on 
                      enrollees in excess of the premiums or charges 
                      permitted under this title;
                          ``(iii) acts to discriminate among enrollees 
                      on the basis of their health status or 
                      requirements for health care services, including 
                      expulsion or refusal to reenroll an individual, 
                      except as permitted by this title, or engaging in 
                      any practice that would reasonably be expected to 
                      have the effect of denying or discouraging 
                      enrollment with the organization by eligible 
                      individuals whose medical condition or history 
                      indicates a need for substantial future medical 
                      services;
                          ``(iv) misrepresents or falsifies information 
                      that is furnished--
                                    ``(I) to the Secretary or the State 
                                under this title; or
                                    ``(II) to an enrollee, potential 
                                enrollee, or a health care provider 
                                under such title; or
                          ``(v) fails to comply with the applicable 
                      requirements of section 1903(m)(2)(A)(x).
                The State may also impose such intermediate sanction 
                against a managed care entity if the State determines 
                that the entity distributed directly or through any 
                agent or independent contractor marketing materials in 
                violation of subsection (d)(2)(A)(i)(II).

[[Page 111 STAT. 504]]

                    ``(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.

[[Page 111 STAT. 505]]

            ``(3) Treatment of chronic substandard entities.--In the 
        case of a medicaid managed care organization which has 
        repeatedly failed to meet the requirements of section 1903(m) 
        and this section, the State shall (regardless of what other 
        sanctions are provided) impose the sanctions described in 
        subparagraphs (B) and (C) of paragraph (2).
            ``(4) Authority to terminate contract.--
                    ``(A) In general.--In the case of a managed care 
                entity which has failed to meet the requirements of this 
                part or a contract under section 1903(m) or 1905(t)(3), 
                the State shall have the authority to terminate such 
                contract with the entity and to enroll such entity's 
                enrollees with other managed care entities (or to permit 
                such enrollees to receive medical assistance under the 
                State plan under this title other than through a managed 
                care entity).
                    ``(B) Availability of hearing prior to termination 
                of contract.--A State may not terminate a contract with 
                a managed care entity under subparagraph (A) unless the 
                entity is provided with a hearing prior to the 
                termination.
                    ``(C) Notice and right to disenroll in cases of 
                termination hearing.--A State may--
                          ``(i) notify individuals enrolled with a 
                      managed care entity which is the subject of a 
                      hearing to terminate the entity's contract with 
                      the State of the hearing, and
                          ``(ii) in the case of such an entity, permit 
                      such enrollees to disenroll immediately with the 
                      entity without cause.
            ``(5) Other protections for managed care entities against 
        sanctions imposed by state.--Before imposing any sanction 
        against a managed care entity other than termination of the 
        entity's contract, the State shall provide the entity with 
        notice and such other due process protections as the State may 
        provide, except that a State may not provide a managed care 
        entity with a pre-termination hearing before imposing the 
        sanction described in paragraph (2)(B).''.

    (b) Limitation on Availability of FFP for Use of Enrollment 
Brokers.--Section 1903(b) (42 U.S.C. 1396b(b)) is amended by adding at 
the end the following:
    ``(4) Amounts expended by a State for the use an enrollment broker 
in marketing medicaid managed care organizations and other managed care 
entities to eligible individuals under this title shall be considered, 
for purposes of subsection (a)(7), to be necessary for the proper and 
efficient administration of the State plan but only if the following 
conditions are met with respect to the broker:
            ``(A) The broker is independent of any such entity and of 
        any health care providers (whether or not any such provider 
        participates in the State plan under this title) that provide 
        coverage of services in the same State in which the broker is 
        conducting enrollment activities.
            ``(B) No person who is an owner, employee, consultant, or 
        has a contract with the broker either has any direct or indirect 
        financial interest with such an entity or health care provider 
        or has been excluded from participation in the program under 
        this title or title XVIII or debarred by any Federal agency, or 
        subject to a civil money penalty under this Act.''.

[[Page 111 STAT. 506]]

    (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 <<NOTE: 42 USC 1396u-2.>>  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 <<NOTE: 42 USC 1396b note.>>  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.

[[Page 111 STAT. 507]]

    (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,

[[Page 111 STAT. 508]]

                          ``(ii) providers, beneficiaries and their 
                      representatives, and other concerned State 
                      residents are given a reasonable opportunity for 
                      review and comment on the proposed rates, 
                      methodologies, and justifications,
                          ``(iii) final rates, the methodologies 
                      underlying the establishment of such rates, and 
                      justifications for such final rates are published, 
                      and
                          ``(iv) in the case of hospitals, such rates 
                      take into account (in a manner consistent with 
                      section 1923) the situation of hospitals which 
                      serve a disproportionate number of low-income 
                      patients with special needs;'';
            (2) by redesignating subparagraphs (D) and (E) as 
        subparagraphs (B) and (C), respectively;
            (3) in subparagraph (B), as so redesignated, by adding 
        ``and'' at the end;
            (4) in subparagraph (C), as so redesignated, by striking 
        ``and'' at the end; and
            (5) by striking subparagraph (F).

    (b) Study <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396a note.>>  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

[[Page 111 STAT. 509]]

                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 <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396r-7 note.>>  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

[[Page 111 STAT. 510]]

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 <<NOTE: Applicability.>>  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 <<NOTE: 42 USC 1396a note.>>  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--

[[Page 111 STAT. 511]]

            ``(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 <<NOTE: Applicability.>>  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 <<NOTE: 42 USC 1396a note.>>  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
 

[[Page 111 STAT. 512]]

 
 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) <<NOTE: 42 USC 1396r-4 note.>>  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.

[[Page 111 STAT. 513]]

    (b) Limitation on Payments to Institutions For Mental Diseases.--
Section 1923 of the Social Security Act (42 U.S.C. 1396r-4) is amended 
by adding at the end the following:
    ``(h) Limitation on Certain State DSH Expenditures.--
            ``(1) In general.--Payment under section 1903(a) shall not 
        be made to a State with respect to any payment adjustments made 
        under this section for quarters in a fiscal year (beginning with 
        fiscal year 1998) to institutions for mental diseases or other 
        mental health facilities, to the extent the aggregate of such 
        adjustments in the fiscal year exceeds the lesser of the 
        following:
                    ``(A) 1995 imd dsh payment adjustments.--The total 
                State DSH expenditures that are attributable to fiscal 
                year 1995 for payments to institutions for mental 
                diseases and other mental health facilities (based on 
                reporting data specified by the State on HCFA Form 64 as 
                mental health DSH, and as approved by the Secretary).
                    ``(B) Applicable percentage of 1995 total dsh 
                payment allotment.--The amount of such payment 
                adjustments which are equal to the applicable percentage 
                of the Federal share of payment adjustments made to 
                hospitals in the State under subsection (c) that are 
                attributable to the 1995 DSH allotment for the State for 
                payments to institutions for mental diseases and other 
                mental health facilities (based on reporting data 
                specified by the State on HCFA Form 64 as mental health 
                DSH, and as approved by the Secretary).
            ``(2) Applicable percentage.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the applicable percentage with respect to--
                          ``(i) each of fiscal years 1998, 1999, and 
                      2000, is the percentage determined under 
                      subparagraph (B); or
                          ``(ii) a succeeding fiscal year is the lesser 
                      of the percentage determined under subparagraph 
                      (B) or the following percentage:
                                    ``(I) For fiscal year 2001, 50 
                                percent.
                                    ``(II) For fiscal year 2002, 40 
                                percent.
                                    ``(III) For each succeeding fiscal 
                                year, 33 percent.
                    ``(B) 1995 percentage.--The percentage determined 
                under this subparagraph is the ratio (determined as a 
                percentage) of--
                          ``(i) the Federal share of payment adjustments 
                      made to hospitals in the State under subsection 
                      (c) that are attributable to the 1995 DSH 
                      allotment for the State (as reported by the State 
                      not later than January 1, 1997, on HCFA Form 64, 
                      and as approved by the Secretary) for payments to 
                      institutions for mental diseases and other mental 
                      health facilities, to
                          ``(ii) the State 1995 DSH spending amount.
                    ``(C) State 1995 dsh spending amount.--For purposes 
                of subparagraph (B)(ii), the `State 1995 DSH spending 
                amount', with respect to a State, is the Federal medical 
                assistance percentage (for fiscal year 1995) of the 
                payment adjustments made under subsection (c) under the 
                State plan that are attributable to the fiscal year 1995 
                DSH

[[Page 111 STAT. 514]]

                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 <<NOTE: Reports.>>  State shall provide an annual report to 
        the Secretary describing the disproportionate share payments to 
        each such disproportionate share hospital.''.

    (d) Direct Payment by State for Managed Care Enrollees.--Section 
1923 (42 U.S.C. 1396r-4) is amended by adding at the end the following:
    ``(i) Requirement for Direct Payment.--
            ``(1) In general.--No payment may be made under section 
        1903(a)(1) with respect to a payment adjustment made under this 
        section, for services furnished by a hospital on or after 
        October 1, 1997, with respect to individuals eligible for 
        medical assistance under the State plan who are enrolled with a 
        managed care entity (as defined in section 1932(a)(1)(B)) or 
        under any other managed care arrangement unless a payment, equal 
        to the amount of the payment adjustment--
                    ``(A) is made directly to the hospital by the State; 
                and
                    ``(B) is not used to determine the amount of a 
                prepaid capitation payment under the State plan to the 
                entity or arrangement with respect to such individuals.
            ``(2) Exception for current arrangements.--Paragraph (1) 
        shall not apply to a payment adjustment provided pursuant to a 
        payment arrangement in effect on July 1, 1997.''.

    (e) Transition <<NOTE: Effective date. California. 42 USC 1396r-4 
note.>>  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:

[[Page 111 STAT. 515]]

    ``(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 <<NOTE: 42 USC 1396b note.>>  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 <<NOTE: 8 USC 1611 note.>>  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

[[Page 111 STAT. 516]]

        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--
                    (A) in paragraph (17), by striking the period at the 
                end and inserting ``; or''; and
                    (B) 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 <<NOTE: 42 USC 1396b note.>>  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

[[Page 111 STAT. 517]]

                    (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 <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396a note.>>  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

[[Page 111 STAT. 518]]

        medical equipment, as defined in section 1861(n), and the State 
        shall not issue or renew such a supplier number for any such 
        supplier unless--
                    ``(A)(i) full and complete information as to the 
                identity of each person with an ownership or control 
                interest (as defined in section 1124(a)(3)) in the 
                supplier or in any subcontractor (as defined by the 
                Secretary in regulations) in which the supplier directly 
                or indirectly has a 5 percent or more ownership 
                interest; and
                    ``(ii) to the extent determined to be feasible under 
                regulations of the Secretary, the name of any disclosing 
                entity (as defined in section 1124(a)(2)) with respect 
                to which a person with such an ownership or control 
                interest in the supplier is a person with such an 
                ownership or control interest in the disclosing entity; 
                and
                    ``(B) a surety bond in a form specified by the 
                Secretary under section 1834(a)(16)(B) and in an amount 
                that is not less than $50,000 or such comparable surety 
                bond as the Secretary may permit under the second 
                sentence of such section.''.
            (2) Effective <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396d note.>>  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 <<NOTE: 42 USC 1396d note.>>  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.

[[Page 111 STAT. 519]]

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

[[Page 111 STAT. 520]]

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 <<NOTE: 42 USC 1396v.>>  and by inserting 
after section 1932 the following new section:

``state coverage of <<NOTE: 42 usc 1396u-3.>>  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

[[Page 111 STAT. 521]]

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.

[[Page 111 STAT. 522]]

    ``(d) Applicable FMAP.--With respect to assistance described in 
section 1902(a)(10)(E)(iv) furnished in a State for calendar quarters in 
a calendar year --
            ``(1) to the extent that such assistance does not exceed the 
        State's allocation under subsection (c) for the fiscal year 
        ending in the calendar year, the Federal medical assistance 
        percentage shall be equal to 100 percent; and
            ``(2) to the extent that such assistance exceeds such 
        allocation, the Federal medical assistance percentage is 0 
        percent.

    ``(e) Limitation on Entitlement.--Except as specifically provided 
under this section, nothing in this title shall be construed as 
establishing any entitlement of individuals described in section 
1902(a)(10)(E)(iv) to assistance described in such section.
    ``(f) Coverage of Costs Through Part B of the Medicare Program.--For 
each fiscal year, the Secretary shall provide for the transfer from the 
Federal Supplementary Medical Insurance Trust Fund under section 1841 to 
the appropriate account in the Treasury that provides for payments under 
section 1903(a) with respect to medical assistance provided under this 
section, of an amount equivalent to the total of the amount of payments 
made under such section that is attributable to this section and such 
transfer shall be treated as an expenditure from such Trust Fund for 
purposes of section 1839.''.

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

    Section 1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)) is 
amended--
            (1) in subclause (XI), by striking ``or'' at the end;
            (2) in subclause (XII), by adding ``or'' at the end; and
            (3) by adding at the end the following:
                                    ``(XIII) who are in families whose 
                                income is less than 250 percent of the 
                                income official poverty line (as defined 
                                by the Office of Management and Budget, 
                                and revised annually in accordance with 
                                section 673(2) of the Omnibus Budget 
                                Reconciliation Act of 1981) applicable 
                                to a family of the size involved, and 
                                who but for earnings in excess of the 
                                limit established under section 
                                1905(q)(2)(B), would be considered to be 
                                receiving supplemental security income 
                                (subject, notwithstanding section 1916, 
                                to payment of premiums or other cost-
                                sharing charges (set on a sliding scale 
                                based on income) that the State may 
                                determine);''.

SEC. 4734. PENALTY FOR FRAUDULENT ELIGIBILITY.

    Section 1128B(a) (42 U.S.C. 1320a-7b(a)), as amended by section 217 
of the Health Insurance Portability and Accountability Act of 1996 
(Public Law 104-191; 110 Stat. 2008), is amended--
            (1) by striking paragraph (6) and inserting the following:
            ``(6) for a fee knowingly and willfully counsels or assists 
        an individual to dispose of assets (including by any transfer in 
        trust) in order for the individual to become eligible for 
        medical assistance under a State plan under title XIX, if 
        disposing of the assets results in the imposition of a period of 
        ineligibility for such assistance under section 1917(c),''; and
            (2) in clause (ii) of the matter following such paragraph, 
        by striking ``failure, or conversion by any other person'' and

[[Page 111 STAT. 523]]

        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 <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396a note.>>  Date.--The amendment 
made by subsection (a) shall apply to services furnished on or after the 
date of the enactment of this Act.

[[Page 111 STAT. 524]]

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 <<NOTE: 42 USC 1396n note.>>  Date.--The amendment 
made by subsection (a) apply to services furnished on or after October 
1, 1997.

SEC. 4744. STUDY AND <<NOTE: 42 USC 1396d note.>>  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 <<NOTE: 42 USC 1396a note.>>  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

[[Page 111 STAT. 525]]

Secretary's satisfaction that the alternative remedies are effective in 
deterring noncompliance and correcting deficiencies, and may provide''.
    (b) Effective <<NOTE: 42 USC 1396a note.>>  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

[[Page 111 STAT. 526]]

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 <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396r note.>>  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 <<NOTE: Procedures.>>  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 <<NOTE: Procedures.>>  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.

[[Page 111 STAT. 527]]

                          ``(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 <<NOTE: 42 USC 1395i-3 note.>>  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 <<NOTE: Applicability.>>  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 <<NOTE: Evaluation.>>  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,

[[Page 111 STAT. 528]]

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 <<NOTE: 42 USC 1315 note.>>  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, <<NOTE: 103 Stat. 2267.>>  is amended by striking ``December 31, 
1995'' and inserting ``December 31, 2002''.

SEC. 4759. EXTENSION <<NOTE: 42 USC 1396a note.>>  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, <<NOTE: 42 usc 1395eee.>>  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.

[[Page 111 STAT. 529]]

            ``(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

[[Page 111 STAT. 530]]

                    ``(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 <<NOTE: Contracts.>>  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,

[[Page 111 STAT. 531]]

                      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

[[Page 111 STAT. 532]]

                State administering agency determines that there is no 
                reasonable expectation of improvement or significant 
                change in an individual's condition during the period 
                because of the severity of chronic condition, or degree 
                of impairment of functional capacity of the individual 
                involved.
            ``(4) Continuation of eligibility.--An individual who is a 
        PACE program eligible individual may be deemed to continue to be 
        such an individual notwithstanding a determination that the 
        individual no longer meets the requirement of subsection 
        (a)(5)(B) if, in accordance with regulations, in the absence of 
        continued coverage under a PACE program the individual 
        reasonably would be expected to meet such requirement within the 
        succeeding 6-month period.
            ``(5) Enrollment; disenrollment.--
                    ``(A) Voluntary disenrollment at any time.--The 
                enrollment and disenrollment of PACE program eligible 
                individuals in a PACE program shall be pursuant to 
                regulations and the PACE program agreement and shall 
                permit enrollees to voluntarily disenroll without cause 
                at any time.
                    ``(B) Limitations on disenrollment.--
                          ``(i) In general.--Regulations promulgated by 
                      the Secretary under this section and section 1934, 
                      and the PACE program agreement, shall provide that 
                      the PACE program may not disenroll a PACE program 
                      eligible individual except--
                                    ``(I) for nonpayment of premiums (if 
                                applicable) on a timely basis; or
                                    ``(II) for engaging in disruptive or 
                                threatening behavior, as defined in such 
                                regulations (developed in close 
                                consultation with State administering 
                                agencies).
                          ``(ii) No disenrollment for noncompliant 
                      behavior.--Except as allowed under regulations 
                      promulgated to carry out clause (i)(II), a PACE 
                      program may not disenroll a PACE program eligible 
                      individual on the ground that the individual has 
                      engaged in noncompliant behavior if such behavior 
                      is related to a mental or physical condition of 
                      the individual. For purposes of the preceding 
                      sentence, the term `noncompliant behavior' 
                      includes repeated noncompliance with medical 
                      advice and repeated failure to appear for 
                      appointments.
                          ``(iii) Timely review of proposed nonvoluntary 
                      disenrollment.--A proposed disenrollment, other 
                      than a voluntary disenrollment, shall be subject 
                      to timely review and final determination by the 
                      Secretary or by the State administering agency (as 
                      applicable), prior to the proposed disenrollment 
                      becoming effective.

    ``(d) Payments to PACE Providers on a Capitated Basis.--
            ``(1) In general.--In the case of a PACE provider with a 
        PACE program agreement under this section, except as provided in 
        this subsection or by regulations, the Secretary shall make 
        prospective monthly payments of a capitation amount for each 
        PACE program eligible individual enrolled under the agreement 
        under this section in the same manner and from the same sources 
        as payments are made to a Medicare+Choice

[[Page 111 STAT. 533]]

        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 <<NOTE: Procedures.>>  
                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) <<NOTE: Applicability.>>  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;

[[Page 111 STAT. 534]]

                          ``(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; <<NOTE: Records.>>  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 <<NOTE: Reports.>>  
                                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

[[Page 111 STAT. 535]]

                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 <<NOTE: Public 
                information.>>  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

[[Page 111 STAT. 536]]

                under this paragraph shall implement the transition 
                procedures required under subsection (a)(2)(C).
            ``(6) Secretary's oversight; enforcement authority.--
                    ``(A) In general.--Under regulations, if the 
                Secretary determines (after consultation with the State 
                administering agency) that a PACE provider is failing 
                substantially to comply with the requirements of this 
                section and regulations, the Secretary (and the State 
                administering agency) may take any or all of the 
                following actions:
                          ``(i) Condition the continuation of the PACE 
                      program agreement upon timely execution of a 
                      corrective action plan.
                          ``(ii) Withhold some or all further payments 
                      under the PACE program agreement under this 
                      section or section 1934 with respect to PACE 
                      program services furnished by such provider until 
                      the deficiencies have been corrected.
                          ``(iii) Terminate such agreement.
                    ``(B) Application of intermediate sanctions.--Under 
                regulations, the Secretary may provide for the 
                application against a PACE provider of remedies 
                described in section 1857(g)(2) (or, for periods before 
                January 1, 1999, section 1876(i)(6)(B)) or 1903(m)(5)(B) 
                in the case of violations by the provider of the type 
                described in section 1857(g)(1) (or section 
                1876(i)(6)(A) for such periods) or 1903(m)(5)(A), 
                respectively (in relation to agreements, enrollees, and 
                requirements under this section or section 1934, 
                respectively).
            ``(7) Procedures <<NOTE: Applicability.>>  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

[[Page 111 STAT. 537]]

                PACE demonstration waiver programs under the PACE 
                protocol.
                    ``(B) Flexibility.--In order to provide for 
                reasonable flexibility in adapting the PACE service 
                delivery model to the needs of particular organizations 
                (such as those in rural areas or those that may 
                determine it appropriate to use nonstaff physicians 
                according to State licensing law requirements) under 
                this section and section 1934, the Secretary (in close 
                consultation with State administering agencies) may 
                modify or waive provisions of the PACE protocol so long 
                as any such modification or waiver is not inconsistent 
                with and would not impair the essential elements, 
                objectives, and requirements of this section, but may 
                not modify or waive any of the following provisions:
                          ``(i) The focus on frail elderly qualifying 
                      individuals who require the level of care provided 
                      in a nursing facility.
                          ``(ii) The delivery of comprehensive, 
                      integrated acute and long-term care services.
                          ``(iii) The interdisciplinary team approach to 
                      care management and service delivery.
                          ``(iv) Capitated, integrated financing that 
                      allows the provider to pool payments received from 
                      public and private programs and individuals.
                          ``(v) The assumption by the provider of full 
                      financial risk.
            ``(3) Application of certain additional beneficiary and 
        program protections.--
                    ``(A) In general.--In issuing such regulations and 
                subject to subparagraph (B), the Secretary may apply 
                with respect to PACE programs, providers, and agreements 
                such requirements of part C (or, for periods before 
                January 1, 1999, section 1876) and sections 1903(m) and 
                1932 relating to protection of beneficiaries and program 
                integrity as would apply to Medicare+Choice 
                organizations under part C (or for such periods eligible 
                organizations under risk-sharing contracts under section 
                1876) and to medicaid managed care organizations under 
                prepaid capitation agreements under section 1903(m).
                    ``(B) Considerations.--In issuing such regulations, 
                the Secretary shall--
                          ``(i) take into account the differences 
                      between populations served and benefits provided 
                      under this section and under part C (or, for 
                      periods before January 1, 1999, section 1876) and 
                      section 1903(m);
                          ``(ii) not include any requirement that 
                      conflicts with carrying out PACE programs under 
                      this section; and
                          ``(iii) not include any requirement 
                      restricting the proportion of enrollees who are 
                      eligible for benefits under this title or title 
                      XIX.
            ``(4) Construction.--Nothing in this subsection shall be 
        construed as preventing the Secretary from including in 
        regulations provisions to ensure the health and safety of 
        individuals enrolled in a PACE program under this section that 
        are in addition to those otherwise provided under paragraphs (2) 
        and (3).

[[Page 111 STAT. 538]]

    ``(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 <<NOTE: 42 USC 1396v.>>  1935; and

[[Page 111 STAT. 539]]

            (3) by inserting after section 1933, as added by such 
        section, the following new section:

   ``program of <<NOTE: 42 usc 1396u-4.>>  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

[[Page 111 STAT. 540]]

                      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

[[Page 111 STAT. 541]]

                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.

[[Page 111 STAT. 542]]

            ``(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

[[Page 111 STAT. 543]]

                      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 <<NOTE: Procedures.>>  
                Secretary, in close cooperation with the State 
                administering agency, shall establish procedures for 
                entering into, extending, and terminating PACE program 
                agreements for the operation of PACE programs by 
                entities that meet the requirements for a PACE provider 
                under this section, section 1894, and regulations.
                    ``(B) Numerical limitation.--
                          ``(i) In general.--The Secretary shall not 
                      permit the number of PACE providers with which 
                      agreements are in effect under this section or 
                      under section 9412(b) of the Omnibus Budget 
                      Reconciliation Act of 1986 to exceed--
                                    ``(I) 40 as of the date of the 
                                enactment of this section, or
                                    ``(II) as of each succeeding 
                                anniversary of such date, the numerical 
                                limitation under this subparagraph for 
                                the preceding year plus 20.
                      Subclause (II) shall <<NOTE: Applicability.>>  
                      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

[[Page 111 STAT. 544]]

                                    ``(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 <<NOTE: Records.>>  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 <<NOTE: Reports.>>  
                                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

[[Page 111 STAT. 545]]

                 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 <<NOTE: Public 
                information.>>  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

[[Page 111 STAT. 546]]

                                    ``(II) the provider has failed to 
                                comply substantially with conditions for 
                                a program or provider under this section 
                                or section 1894; and
                          ``(ii) the entity has failed to develop and 
                      successfully initiate, within 30 days of the date 
                      of the receipt of written notice of such a 
                      determination, a plan to correct the deficiencies, 
                      or has failed to continue implementation of such a 
                      plan.
                    ``(C) Termination and transition procedures.--An 
                entity whose PACE provider agreement is terminated under 
                this paragraph shall implement the transition procedures 
                required under subsection (a)(2)(C).
            ``(6) Secretary's oversight; enforcement authority.--
                    ``(A) In general.--Under regulations, if the 
                Secretary determines (after consultation with the State 
                administering agency) that a PACE provider is failing 
                substantially to comply with the requirements of this 
                section and regulations, the Secretary (and the State 
                administering agency) may take any or all of the 
                following actions:
                          ``(i) Condition the continuation of the PACE 
                      program agreement upon timely execution of a 
                      corrective action plan.
                          ``(ii) Withhold some or all further payments 
                      under the PACE program agreement under this 
                      section or section 1894 with respect to PACE 
                      program services furnished by such provider until 
                      the deficiencies have been corrected.
                          ``(iii) Terminate such agreement.
                    ``(B) Application of intermediate sanctions.--Under 
                regulations, the Secretary may provide for the 
                application against a PACE provider of remedies 
                described in section 1857(g)(2) (or, for periods before 
                January 1, 1999, section 1876(i)(6)(B)) or 1903(m)(5)(B) 
                in the case of violations by the provider of the type 
                described in section 1857(g)(1) (or 1876(i)(6)(A) for 
                such periods) or 1903(m)(5)(A), respectively (in 
                relation to agreements, enrollees, and requirements 
                under section 1894 or this section, respectively).
            ``(7) Procedures <<NOTE: Applicability.>>  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

[[Page 111 STAT. 547]]

        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

[[Page 111 STAT. 548]]

                          ``(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.--

[[Page 111 STAT. 549]]

            (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 <<NOTE: 42 USC 1395eee note.>>  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 <<NOTE: 100 Stat. 2062.>>  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

[[Page 111 STAT. 550]]

        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 <<NOTE: 97 Stat. 166.>>  (Public Law 98-21).
                    (B) Section 9220 of the Consolidated Omnibus Budget 
                Reconciliation Act <<NOTE: 100 Stat. 183.>>  of 1985 
                (Public Law 99-272).
                    (C) Section 9412(b) of the Omnibus Budget 
                Reconciliation Act of <<NOTE: 100 Stat. 2062.>>  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.

[[Page 111 STAT. 551]]

                    (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) <<NOTE: 42 USC 1395eee note.>>  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) <<NOTE: 42 USC 1395eee note.>>  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.

[[Page 111 STAT. 552]]

    (c) Information <<NOTE: 42 USC 1395b-6 note.>>  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. <<NOTE: 42 USC 1397aa.>>  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. <<NOTE: 42 USC 1397bb.>>  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--

[[Page 111 STAT. 553]]

            ``(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;

[[Page 111 STAT. 554]]

                    ``(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. <<NOTE: 42 USC 1397cc.>>  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

[[Page 111 STAT. 555]]

                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--

[[Page 111 STAT. 556]]

                    ``(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,

[[Page 111 STAT. 557]]

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

    ``(f) Application of Certain Requirements.--
            ``(1) Restriction on application of preexisting condition 
        exclusions.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                State child health plan shall not permit the imposition 
                of any preexisting condition exclusion for covered 
                benefits under the plan.
                    ``(B) Group health plans and group health insurance 
                coverage.--If the State child health plan provides for 
                benefits through payment for, or a contract with, a 
                group health plan or group health insurance coverage, 
                the

[[Page 111 STAT. 558]]

                 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. <<NOTE: 42 USC 1397dd.>>  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

[[Page 111 STAT. 559]]

                                    ``(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 Department of Labor 
                for each of the most recent 3 years before the beginning 
                of the fiscal year involved.
            ``(4) Floor for states.--Subject to paragraph (5), in no 
        case shall the amount of the allotment under this subsection for 
        one of the 50 States or the District of Columbia for a year be 
        less than $2,000,000. To the extent that the application of the 
        previous sentence results in an increase in the allotment to a 
        State above the amount otherwise provided, the allotments for 
        the other States and the District of Columbia under this 
        subsection shall be reduced in a pro rata manner (but not below 
        $2,000,000) so that the total of such allotments in a fiscal 
        year does not exceed the amount otherwise provided for allotment 
        under paragraph (1) for that fiscal year.

    ``(c) Allotments to Territories.--
            ``(1) In general.--Of the amount available for allotment 
        under subsection (a) for a fiscal year, subject to subsection 
        (d), the Secretary shall allot 0.25 percent among each of the 
        commonwealths and territories described in paragraph (3) in the 
        same proportion as the percentage specified in paragraph (2) for 
        such commonwealth or territory bears to the sum of such 
        percentages for all such commonwealths or territories so 
        described.
            ``(2) Percentage.--The percentage specified in this 
        paragraph for--
                    ``(A) Puerto Rico is 91.6 percent,
                    ``(B) Guam is 3.5 percent,
                    ``(C) Virgin Islands is 2.6 percent,

[[Page 111 STAT. 560]]

                    ``(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. <<NOTE: 42 USC 1397ee.>>  PAYMENTS TO STATES.

    ``(a) In General.--Subject to the succeeding provisions of this 
section, the Secretary shall pay to each State with a plan approved 
under this title, from its allotment under section 2104 (taking into 
account any adjustment under section 2104(d)), an amount for each 
quarter equal to the enhanced FMAP of expenditures in the quarter--
            ``(1) for child health assistance under the plan for 
        targeted low-income children in the form of providing health 
        benefits coverage that meets the requirements of section 2103; 
        and
            ``(2) only to the extent permitted consistent with 
        subsection (c)--
                    ``(A) for payment for other child health assistance 
                for targeted low-income children;

[[Page 111 STAT. 561]]

                    ``(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.

[[Page 111 STAT. 562]]

            ``(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

[[Page 111 STAT. 563]]

                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. <<NOTE: 42 USC 1397ff.>>  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)--

[[Page 111 STAT. 564]]

                    ``(A) shall be approved for purposes of this title, 
                and
                    ``(B) shall <<NOTE: Effective date.>>  be effective 
                beginning with a calendar quarter that is specified in 
                the plan, but in no case earlier than October 1, 1997.

    ``(b) Plan Amendments.--
            ``(1) In general.--A State may amend, in whole or in part, 
        its State child health plan at any time through transmittal of a 
        plan amendment.
            ``(2) Approval.--Except as the Secretary may provide under 
        subsection (e), an amendment to a State plan submitted under 
        paragraph (1)--
                    ``(A) shall be approved for purposes of this title, 
                and
                    ``(B) shall be effective as provided in paragraph 
                (3).
            ``(3) Effective dates for amendments.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, an amendment to a State 
                plan shall take effect on one or more effective dates 
                specified in the amendment.
                    ``(B) Amendments relating to eligibility or 
                benefits.--
                          ``(i) Notice requirement.--Any plan amendment 
                      that eliminates or restricts eligibility or 
                      benefits under the plan may not take effect unless 
                      the State certifies that it has provided prior 
                      public notice of the change, in a form and manner 
                      provided under applicable State law.
                          ``(ii) Timely transmittal.--Any plan amendment 
                      that eliminates or restricts eligibility or 
                      benefits under the plan shall not be effective for 
                      longer than a 60-day period unless the amendment 
                      has been transmitted to the Secretary before the 
                      end of such period.
                    ``(C) Other amendments.--Any plan amendment that is 
                not described in subparagraph (B) and that becomes 
                effective in a State fiscal year may not remain in 
                effect after the end of such fiscal year (or, if later, 
                the end of the 90-day period on which it becomes 
                effective) unless the amendment has been transmitted to 
                the Secretary.

    ``(c) Disapproval of Plans and Plan Amendments.--
            ``(1) Prompt review of plan submittals.--The Secretary shall 
        promptly review State plans and plan amendments submitted under 
        this section to determine if they substantially comply with the 
        requirements of this title.
            ``(2) 90-day approval deadlines.--A State plan or plan 
        amendment is considered approved unless the Secretary notifies 
        the State in writing, within 90 days after receipt of the plan 
        or amendment, that the plan or amendment is disapproved (and the 
        reasons for disapproval) or that specified additional 
        information is needed.
            ``(3) Correction.--In the case of a disapproval of a plan or 
        plan amendment, the Secretary shall provide a State with a 
        reasonable opportunity for correction before taking financial 
        sanctions against the State on the basis of such disapproval.

    ``(d) Program Operation.--
            ``(1) In general.--The State shall conduct the program in 
        accordance with the plan (and any amendments) approved under 
        subsection (c) and with the requirements of this title.

[[Page 111 STAT. 565]]

            ``(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. <<NOTE: 42 USC 1397gg.>>  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.

[[Page 111 STAT. 566]]

    ``(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. <<NOTE: 42 USC 1397hh.>>  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,

[[Page 111 STAT. 567]]

                          ``(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 <<NOTE: Public information.>>  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. <<NOTE: 42 USC 1397ii.>>  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. <<NOTE: 42 USC 1397jj.>>  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

[[Page 111 STAT. 568]]

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--

[[Page 111 STAT. 569]]

                    ``(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.

[[Page 111 STAT. 570]]

            ``(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 <<NOTE: 42 USC 1301.>>  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

[[Page 111 STAT. 571]]

        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 <<NOTE: 42 USC 1396a note.>>  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:

[[Page 111 STAT. 572]]

                 ``presumptive eligibility for children

    ``Sec. 1920A. <<NOTE: 42 USC 1396r-1a.>>  (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.

[[Page 111 STAT. 573]]

    ``(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) <<NOTE: Notification.>>  notify the State agency of 
        the determination within 5 working days after the date on which 
        determination is made, and
            ``(B) inform the parent or custodian of the child at the 
        time the determination is made that an application for medical 
        assistance under the State plan is required to be made by not 
        later than the last day of the month following the month during 
        which the determination is made.

    ``(3) In the case of a child who is determined by a qualified entity 
to be presumptively eligible for medical assistance under a State plan, 
the parent, guardian, or other person shall make application on behalf 
of the child for medical assistance under such plan by not later than 
the last day of the month following the month during which the 
determination is made, which application may be the application used for 
the receipt of medical assistance by individuals described in section 
1902(l)(1).
    ``(d) Notwithstanding any other provision of this title, medical 
assistance for items and services described in subsection (a) that--
            ``(1) are furnished to a child--
                    ``(A) during a presumptive eligibility period,
                    ``(B) by a entity that is eligible for payments 
                under the State plan; and
            ``(2) are included in the care and services covered by a 
        State plan;

shall be treated as medical assistance provided by such plan for 
purposes of section 1903.''.
    (b) Conforming Amendments.--
            (1) Section 1902(a)(47) (42 U.S.C. 1396a(a)(47)) is amended 
        by inserting before the semicolon at the end the following: 
        ``and provide for making medical assistance for items and 
        services described in subsection (a) of section 1920A available 
        to children during a presumptive eligibility period in 
        accordance with such section''.
            (2) Section 1903(u)(1)(D)(v) (42 U.S.C. 1396b(u)(1)(D)(v)) 
        is amended by inserting before the period at the end the 
        following: ``or for items and services described in subsection 
        (a) of section 1920A provided to a child during a presumptive 
        eligibility period under such section''.

    (c) Effective <<NOTE: 42 USC 1396a note.>>  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 <<NOTE: 42 USC 1396a note.>>  Date.--The amendment 
made by subsection (a) applies to medical assistance furnished on or 
after July 1, 1997.

[[Page 111 STAT. 574]]

                   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. <<NOTE: 42 USC 254c-2.>>  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 <<NOTE: 42 USC 254c-3.>>  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. <<NOTE: 42 USC 1254c-2 note.>>  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--

[[Page 111 STAT. 575]]

            (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.

[[Page 111 STAT. 576]]

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.

[[Page 111 STAT. 577]]

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

[[Page 111 STAT. 578]]

                                (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),

[[Page 111 STAT. 579]]

                                and to cooperate with the conduct of any 
                                such evaluation.
                                    ``(IV) The State is an eligible 
                                State for the fiscal year.
                                    ``(V) The State certifies that 
                                qualified State expenditures (within the 
                                meaning of section 409(a)(7)) for the 
                                fiscal year will be not less than the 
                                applicable percentage of historic State 
                                expenditures (within the meaning of 
                                section 409(a)(7)) with respect to the 
                                fiscal year.
                          ``(iii) Allotments to welfare-to-work 
                      states.--
                                    ``(I) In general.--Subject to this 
                                clause, the allotment of a welfare-to-
                                work State for a fiscal year shall be 
                                the available amount for the fiscal 
                                year, multiplied by the State percentage 
                                for the fiscal year.
                                    ``(II) Minimum allotment.--The 
                                allotment of a welfare-to-work State 
                                (other than Guam, the Virgin Islands, or 
                                American Samoa) for a fiscal year shall 
                                not be less than 0.25 percent of the 
                                available amount for the fiscal year.
                                    ``(III) Pro rata reduction.--Subject 
                                to subclause (II), the Secretary of 
                                Labor shall make pro rata reductions in 
                                the allotments to States under this 
                                clause for a fiscal year as necessary to 
                                ensure that the total of the allotments 
                                does not exceed the available amount for 
                                the fiscal year.
                          ``(iv) Available amount.--As used in this 
                      subparagraph, the term `available amount' means, 
                      for a fiscal year, the sum of--
                                    ``(I) 75 percent of the sum of--
                                            ``(aa) the amount specified 
                                        in subparagraph (I) for the 
                                        fiscal year, minus the total of 
                                        the amounts reserved pursuant to 
                                        subparagraphs (E), (F), (G), and 
                                        (H) for the fiscal year; and
                                            ``(bb) any amount reserved 
                                        pursuant to subparagraph (F) for 
                                        the immediately preceding fiscal 
                                        year that has not been 
                                        obligated; and
                                    ``(II) any available amount for the 
                                immediately preceding fiscal year that 
                                has not been obligated by a State or 
                                sub-State entity.
                          ``(v) State percentage.--As used in clause 
                      (iii), the term `State percentage' means, with 
                      respect to a fiscal year, \1/2\ of the sum of--
                                    ``(I) the percentage represented by 
                                the number of individuals in the State 
                                whose income is less than the poverty 
                                line divided by the number of such 
                                individuals in the United States; and
                                    ``(II) the percentage represented by 
                                the number of adults who are recipients 
                                of assistance under the State program 
                                funded under this part divided by the 
                                number of adults in the United States 
                                who are recipients of assistance under 
                                any State program funded under this 
                                part.

[[Page 111 STAT. 580]]

                          ``(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

[[Page 111 STAT. 581]]

                                amendments made by section 103(a) of the 
                                Personal Responsibility and Work 
                                Opportunity Reconciliation Act of 1996 
                                first applied to the State) enter 
                                unsubsidized employment.
                          ``(vii) Administration.--
                                    ``(I) Private industry councils.--
                                The private industry council for a 
                                service delivery area in a State shall 
                                have sole authority, in coordination 
                                with the chief elected official (as 
                                described in section 103(c) of the Job 
                                Training Partnership Act) of the area, 
                                to expend the amounts distributed under 
                                clause (vi)(II)(aa) for the benefit of 
                                the service delivery area, in accordance 
                                with the assurances described in clause 
                                (ii)(I)(dd) provided by the Governor of 
                                the State.
                                    ``(II) Enforcement of coordination 
                                of expenditures with other expenditures 
                                under this part.--Notwithstanding 
                                subclause (I) of this clause, on a 
                                determination by the Governor of a State 
                                that a private industry council (or an 
                                alternate agency described in clause 
                                (ii)(I)(dd)) has used funds provided 
                                under this subparagraph in a manner 
                                inconsistent with the assurances 
                                described in clause (ii)(I)(dd)--
                                            ``(aa) the private industry 
                                        council (or such alternate 
                                        agency) shall remit the funds to 
                                        the Governor; and
                                            ``(bb) the Governor shall 
                                        apply to the Secretary of Labor 
                                        for a waiver of subclause (I) of 
                                        this clause with respect to the 
                                        service delivery area or areas 
                                        involved in order to permit an 
                                        alternate agency designated by 
                                        the Governor to administer the 
                                        funds in accordance with the 
                                        assurances.
                                    ``(III) Authority to permit use of 
                                alternate administering agency.--The 
                                Secretary of Labor shall approve an 
                                application submitted under clause 
                                (ii)(I)(ee) or subclause (II)(bb) of 
                                this clause to waive subclause (I) of 
                                this clause with respect to 1 or more 
                                service delivery areas if the Secretary 
                                determines that the alternate agency 
                                designated in the application would 
                                improve the effectiveness or efficiency 
                                of the administration of amounts 
                                distributed under clause (vi)(II)(aa) 
                                for the benefit of the area or areas.
                          ``(viii) Data to be used in determining the 
                      number of adult tanf recipients.--For purposes of 
                      this subparagraph, the number of adult recipients 
                      of assistance under a State program funded under 
                      this part for a fiscal year shall be determined 
                      using data for the most recent 12-month period for 
                      which such data is available before the beginning 
                      of the fiscal year.
                    ``(B) Competitive grants.--
                          ``(i) In general.--The Secretary of Labor 
                      shall award grants in accordance with this 
                      subparagraph, in fiscal years 1998 and 1999, for 
                      projects proposed by eligible applicants, based on 
                      the following:

[[Page 111 STAT. 582]]

                                    ``(I) The effectiveness of the 
                                proposal in--
                                            ``(aa) expanding the base of 
                                        knowledge about programs aimed 
                                        at moving recipients of 
                                        assistance under State programs 
                                        funded under this part who are 
                                        least job ready into 
                                        unsubsidized employment.
                                            ``(bb) moving recipients of 
                                        assistance under State programs 
                                        funded under this part who are 
                                        least job ready into 
                                        unsubsidized employment; and
                                            ``(cc) moving recipients of 
                                        assistance under State programs 
                                        funded under this part who are 
                                        least job ready into 
                                        unsubsidized employment, even in 
                                        labor markets that have a 
                                        shortage of low-skill jobs.
                                    ``(II) At the discretion of the 
                                Secretary of Labor, any of the 
                                following:
                                            ``(aa) The history of 
                                        success of the applicant in 
                                        moving individuals with multiple 
                                        barriers into work.
                                            ``(bb) Evidence of the 
                                        applicant's ability to leverage 
                                        private, State, and local 
                                        resources.
                                            ``(cc) Use by the applicant 
                                        of State and local resources 
                                        beyond those required by 
                                        subparagraph (A).
                                            ``(dd) Plans of the 
                                        applicant to coordinate with 
                                        other organizations at the local 
                                        and State level.
                                            ``(ee) Use by the applicant 
                                        of current or former recipients 
                                        of assistance under a State 
                                        program funded under this part 
                                        as mentors, case managers, or 
                                        service providers.
                          ``(ii) Eligible applicants.--As used in clause 
                      (i), the term `eligible applicant' means a private 
                      industry council for a service delivery area in a 
                      State, a political subdivision of a State, or a 
                      private entity applying in conjunction with the 
                      private industry council for such a service 
                      delivery area or with such a political 
                      subdivision, that submits a proposal developed in 
                      consultation with the Governor of the State.
                          ``(iii) Determination of grant amount.--In 
                      determining the amount of a grant to be made under 
                      this subparagraph for a project proposed by an 
                      applicant, the Secretary of Labor shall provide 
                      the applicant with an amount sufficient to ensure 
                      that the project has a reasonable opportunity to 
                      be successful, taking into account the number of 
                      long-term recipients of assistance under a State 
                      program funded under this part, the level of 
                      unemployment, the job opportunities and job 
                      growth, the poverty rate, and such other factors 
                      as the Secretary of Labor deems appropriate, in 
                      the area to be served by the project.
                          ``(iv) Consideration of needs of rural areas 
                      and cities with large concentrations of poverty.--
                      In making grants under this subparagraph, the 
                      Secretary of Labor shall consider the needs of 
                      rural

[[Page 111 STAT. 583]]

                      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.

[[Page 111 STAT. 584]]

                                            ``(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.--

[[Page 111 STAT. 585]]

                                    ``(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

[[Page 111 STAT. 586]]

                      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

[[Page 111 STAT. 587]]

                       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.

[[Page 111 STAT. 588]]

                                    ``(III) Other prohibitions.--An 
                                adult participant in a work activity 
                                engaged in under a program operated with 
                                funds provided under this paragraph 
                                shall not be employed or assigned--
                                            ``(aa) when any other 
                                        individual is on layoff from the 
                                        same or any substantially 
                                        equivalent job;
                                            ``(bb) if the employer has 
                                        terminated the employment of any 
                                        regular employee or otherwise 
                                        caused an involuntary reduction 
                                        in its workforce with the 
                                        intention of filling the vacancy 
                                        so created with the participant; 
                                        or
                                            ``(cc) if the employer has 
                                        caused an involuntary reduction 
                                        to less than full time in hours 
                                        of any employee in the same or a 
                                        substantially equivalent job.
                          ``(ii) Health and safety.--Health and safety 
                      standards established under Federal and State law 
                      otherwise applicable to working conditions of 
                      employees shall be equally applicable to working 
                      conditions of other participants engaged in a work 
                      activity under a program operated with funds 
                      provided under this paragraph.
                          ``(iii) Nondiscrimination.--In addition to the 
                      protections provided under the provisions of law 
                      specified in section 408(c), an individual may not 
                      be discriminated against by reason of gender with 
                      respect to participation in work activities 
                      engaged in under a program operated with funds 
                      provided under this paragraph.
                          ``(iv) Grievance procedure.--
                                    ``(I) In general.--Each State to 
                                which a grant is made under this 
                                paragraph shall establish and maintain a 
                                procedure for grievances or complaints 
                                from employees alleging violations of 
                                clause (i) and participants in work 
                                activities alleging violations of clause 
                                (i), (ii), or (iii).
                                    ``(II) Hearing.--The procedure shall 
                                include an opportunity for a hearing.
                                    ``(III) Remedies.--The procedure 
                                shall include remedies for violation of 
                                clause (i), (ii), or (iii), which may 
                                continue during the pendency of the 
                                procedure, and which may include--
                                            ``(aa) suspension or 
                                        termination of payments from 
                                        funds provided under this 
                                        paragraph;
                                            ``(bb) prohibition of 
                                        placement of a participant with 
                                        an employer that has violated 
                                        clause (i), (ii), or (iii);
                                            ``(cc) where applicable, 
                                        reinstatement of an employee, 
                                        payment of lost wages and 
                                        benefits, and reestablishment of 
                                        other relevant terms, conditions 
                                        and privileges of employment; 
                                        and
                                            ``(dd) where appropriate, 
                                        other equitable relief.
                                    ``(IV) Appeals.--

[[Page 111 STAT. 589]]

                                            ``(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:

[[Page 111 STAT. 590]]

            ``(3) Welfare-to-work grants.--
                    ``(A) In general.--The Secretary of Labor shall 
                award a grant in accordance with this paragraph to an 
                Indian tribe for each fiscal year specified in section 
                403(a)(5)(I) for which the Indian tribe is a welfare-to-
                work tribe, in such amount as the Secretary of Labor 
                deems appropriate, subject to subparagraph (B) of this 
                paragraph.
                    ``(B) Welfare-to-work tribe.--An Indian tribe shall 
                be considered a welfare-to-work tribe for a fiscal year 
                for purposes of this paragraph if the Indian tribe meets 
                the following requirements:
                          ``(i) The Indian tribe has submitted to the 
                      Secretary of Labor a plan which describes how, 
                      consistent with section 403(a)(5), the Indian 
                      tribe will use any funds provided under this 
                      paragraph during the fiscal year. If the Indian 
                      tribe has a tribal family assistance plan, the 
                      plan referred to in the preceding sentence shall 
                      be in the form of an addendum to the tribal family 
                      assistance plan.
                          ``(ii) The Indian tribe is operating a program 
                      under a tribal family assistance plan approved by 
                      the Secretary of Health and Human Services, a 
                      program described in paragraph (2)(C), or an 
                      employment program funded through other sources 
                      under which substantial services are provided to 
                      recipients of assistance under a program funded 
                      under this part.
                          ``(iii) The Indian tribe has provided the 
                      Secretary of Labor with an estimate of the amount 
                      that the Indian tribe intends to expend during the 
                      fiscal year (excluding tribal expenditures 
                      described in section 409(a)(7)(B)(iv) (other than 
                      subclause (III) thereof)) pursuant to this 
                      paragraph.
                          ``(iv) The Indian tribe has agreed to 
                      negotiate in good faith with the Secretary of 
                      Health and Human Services with respect to the 
                      substance and funding of any evaluation under 
                      section 413(j), and to cooperate with the conduct 
                      of any such evaluation.
                    ``(C) Limitations on use of funds.--
                          ``(i) <<NOTE: Applicability.>>  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.''.

[[Page 111 STAT. 591]]

    (d) Funds Received From Grants to be Disregarded in Applying 
Durational Limit on Assistance.--Section 408(a)(7) (42 U.S.C. 608(a)(7)) 
is amended by adding at the end the following:
                    ``(G) Inapplicability to welfare-to-work grants and 
                assistance.--For purposes of subparagraph (A) of this 
                paragraph, a grant made under section 403(a)(5) shall 
                not be considered a grant made under section 403, and 
                noncash assistance from funds provided under section 
                403(a)(5) shall not be considered assistance.''.

    (e) Data Collection and Reporting.--Section 411(a) (42 U.S.C. 
611(a)(1)(A)), as amended by section 5507 of this Act, is amended--
            (1) in paragraph (1)(A), by adding at the end the following:
                          ``(xviii) With respect to families 
                      participating in a program operated with funds 
                      provided under section 403(a)(5)--
                                    ``(I) any activity described in 
                                section 403(a)(5)(C)(i) engaged in by a 
                                family member;
                                    ``(II) the total amount expended 
                                during the month on the family member 
                                for each such activity;
                                    ``(III) if the family member is 
                                engaged in subsidized employment or on-
                                the-job training under the program, the 
                                wage paid to the family member and the 
                                amount of any wage subsidy provided to 
                                the family member from Federal or State 
                                funds; and
                                    ``(IV) if the participation of a 
                                family member in the program was ended 
                                during a month due to the family member 
                                obtaining employment, the wage of the 
                                family member in the employment and 
                                whether the participation was ended due 
                                to the family member obtaining 
                                unsubsidized employment, obtaining 
                                subsidized employment, receiving an 
                                increased wage, engaging in a work 
                                training activity funded under a program 
                                funded other than under section 
                                403(a)(5), or for other reasons.'';
            (2) in paragraph (2), by inserting ``, with a separate 
        statement of the percentage of such funds that are used to cover 
        administrative costs or overhead incurred for programs operated 
        with funds provided under section 403(a)(5)'' before the period;
            (3) in paragraph (3), by inserting ``, with a separate 
        statement of the total amount expended by the State during the 
        quarter on programs operated with funds provided under section 
        403(a)(5)'' before the period;
            (4) in paragraph (4), by inserting ``, with a separate 
        statement of the number of such parents who participated in 
        programs operated with funds provided under section 403(a)(5)'' 
        before the period;
            (5) in paragraph (6)--
                    (A) by striking ``and'' at the end of subparagraph 
                (A);
                    (B) by striking the period at the end of 
                subparagraph (B) and inserting ``; and''; and
                    (C) by adding at the end the following:
                    ``(C) with respect to families and individuals 
                participating in a program operated with funds provided 
                under section 403(a)(5)--

[[Page 111 STAT. 592]]

                          ``(i) the total number of such families and 
                      individuals; and
                          ``(ii) the number of such families and 
                      individuals whose participation in such a program 
                      was terminated during a month.''' and
            (6) in paragraph (7), by inserting ``, and shall consult 
        with the Secretary of Labor in defining the data elements with 
        respect to programs operated with funds provided under section 
        403(a)(5)'' before the period.

    (f) Evaluations.--Section 413 (42 U.S.C. 613) is amended by adding 
at the end the following:
    ``(j) Evaluation of Welfare-To-Work Programs.--
            ``(1) Evaluation.--The Secretary, in consultation with the 
        Secretary of Labor and the Secretary of Housing and Urban 
        Development--
                    ``(A) shall develop a plan to evaluate how grants 
                made under sections 403(a)(5) and 412(a)(3) have been 
                used;
                    ``(B) may evaluate the use of such grants by such 
                grantees as the Secretary deems appropriate, in 
                accordance with an agreement entered into with the 
                grantees after good-faith negotiations; and
                    ``(C) is urged to include the following outcome 
                measures in the plan developed under subparagraph (A):
                          ``(i) Placements in unsubsidized employment, 
                      and placements in unsubsidized employment that 
                      last for at least 6 months.
                          ``(ii) Placements in the private and public 
                      sectors.
                          ``(iii) Earnings of individuals who obtain 
                      employment.
                          ``(iv) Average expenditures per placement.
            ``(2) Reports to the congress.--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), the Secretary, in consultation with the Secretary 
                of Labor and the Secretary of Housing and Urban 
                Development, shall submit to the Congress reports on the 
                projects funded under section 403(a)(5) and 412(a)(3) 
                and on the evaluations of the projects.
                    ``(B) Interim report.--Not later than January 1, 
                1999, the Secretary shall submit an interim report on 
                the matter described in subparagraph (A).
                    ``(C) Final report.--Not later than January 1, 2001, 
                (or at a later date, if the Secretary informs the 
                Committees of the Congress with jurisdiction over the 
                subject matter of the report) the Secretary shall submit 
                a final report on the matter described in subparagraph 
                (A).''.

    (g) Penalties.--
            (1) Penalty for failure of state to maintain historic effort 
        during year in which welfare-to-work grant is received.--
                    (A) In general.--Section 409(a) (42 U.S.C. 609(a)) 
                is amended by adding at the end the following:
            ``(13) Penalty for failure of state to maintain historic 
        effort during year in which welfare-to-work grant is received.--
        If a grant is made to a State under section 403(a)(5)(A) for a 
        fiscal year and paragraph (7) of this subsection requires the 
        grant payable to the State under section 403(a)(1) to be reduced 
        for the immediately succeeding fiscal

[[Page 111 STAT. 593]]

        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 <<NOTE: 42 USC 608 note.>>  
        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 <<NOTE: 42 USC 613 note.>>  Study of Effect of Family 
Violence on Need for Public Assistance.--
            (1) Study.--The Comptroller General shall conduct a study of 
        the effect of family violence on the use of public assistance 
        programs, and in particular the extent to which family violence 
        prolongs or increases the need for public assistance.
            (2) Report.--Within 1 year after the date of the enactment 
        of this Act, the Comptroller General shall submit to the 
        Committees on Ways and Means and Education and the Workforce of 
        the House of Representatives and the Committee on Finance of the 
        Senate a report that contains the findings of the study required 
        by paragraph (1).

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

    (a) In General.--Section 404(d) (42 U.S.C. 604(d)) is amended--
            (1) in paragraph (1), by striking ``A State may'' and 
        inserting ``Subject to paragraph (2), a State may''; and
            (2) by amending paragraph (2) to read as follows:

[[Page 111 STAT. 594]]

            ``(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 <<NOTE: 42 USC 604 note.>>  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 <<NOTE: 42 USC 607 note.>>  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 <<NOTE: 42 USC 609 note.>>  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.

[[Page 111 STAT. 595]]

                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) <<NOTE: 42 USC 1382c note.>>  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 <<NOTE: Notification.>>  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

[[Page 111 STAT. 596]]

                          (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

[[Page 111 STAT. 597]]

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 <<NOTE: 42 USC 1382e note.>>  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

[[Page 111 STAT. 598]]

                (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:

[[Page 111 STAT. 599]]

                    ``(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

[[Page 111 STAT. 600]]

                    (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--

[[Page 111 STAT. 601]]

                          ``(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. <<NOTE: 8 USC 1646.>>  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

[[Page 111 STAT. 602]]

                                Programs Appropriations Act, 1989, 
                                Public Law 100-461, as amended).''; and
            (2) in clause (ii)--
                    (A) by striking ``or'' at the end of subclause 
                (III);
                    (B) by striking the period at the end of subclause 
                (IV) and inserting ``; or''; and
                    (C) by adding at the end the following:
                                    ``(V) an alien is admitted to the 
                                United States as an Amerasian immigrant 
                                as described in clause (i)(V).''.

    (b) For Purposes of TANF, SSBG, and Medicaid.--Section 402(b)(2)(A) 
of the Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (8 U.S.C. 1612(b)(2)(A)) as amended by section 5302 is amended--
            (1) in clause (i)--
                    (A) by striking ``or'' at the end of subclause 
                (III);
                    (B) by striking the period at the end of subclause 
                (IV) and inserting ``; or''; and
                    (C) by adding at the end the following:
                          ``(V) an alien admitted to the United States 
                      as an Amerasian immigrant as described in 
                      subsection (a)(2)(A)(i)(V) until 5 years after the 
                      date of such alien's entry into the United 
                      States.''; and
            (2) in clause (ii)--
                    (A) by striking ``or'' at the end of subclause 
                (III);
                    (B) by striking the period at the end of subclause 
                (IV) and inserting ``; or''; and
                    (C) by adding at the end the following:
                          ``(V) an alien admitted to the United States 
                      as an Amerasian immigrant as described in 
                      subsection (a)(2)(A)(i)(V) until 5 years after the 
                      date of such alien's entry into the United 
                      States.''.

    (c) For Purposes of Exception from 5-Year Limited Eligibility of 
Qualified Aliens.--Section 403(b)(1) of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1613(b)(1)) is 
amended by adding at the end the following:
                    ``(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. <<NOTE: 8 USC 1625.>>  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.''.

[[Page 111 STAT. 603]]

    (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. <<NOTE: 8 USC 1612 note.>>  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 <<NOTE: 42 USC 503 note.>>  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 <<NOTE: 42 USC 1102 note.>>  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 <<NOTE: Applicability.>>  (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

[[Page 111 STAT. 604]]

        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 <<NOTE: 42 USC 1103.>>  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 <<NOTE: 42 USC 1322 note.>>  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) <<NOTE: 26 USC 3309.>>  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:

[[Page 111 STAT. 605]]

                    ``(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 <<NOTE: 26 USC 3309 note.>>  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 <<NOTE: 26 USC 3306.>>  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 <<NOTE: 26 USC 3306 note.>>  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 <<NOTE: 26 USC 3309.>>  (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 <<NOTE: 26 USC 3309 note.>>  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 <<NOTE: Appropriation authorization.>>  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

[[Page 111 STAT. 606]]

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

[[Page 111 STAT. 607]]

                                    ``(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)--

[[Page 111 STAT. 608]]

                          (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

[[Page 111 STAT. 609]]

                                    ``(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''.

[[Page 111 STAT. 610]]

    (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--

[[Page 111 STAT. 611]]

                    (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 <<NOTE: Applicability.>>  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;

[[Page 111 STAT. 612]]

                          ``(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.

[[Page 111 STAT. 613]]

                    ``(B) Duties <<NOTE: Contracts.>>  of federal 
                agencies.--The Secretary shall enter into agreements 
                with the Secretary of State and the Attorney General 
                under which any information available to them and 
                required in order to make any determination under this 
                subsection will be provided by them to the Secretary 
                (who may, in turn, make the information available, upon 
                request, to a concerned State agency).
            ``(4) Non-213a alien defined.--An alien is a non-213A alien 
        for purposes of this subsection if the affidavit of support or 
        similar agreement with respect to the alien that was executed by 
        the sponsor of the alien's entry into the United States was 
        executed other than pursuant to section 213A of the Immigration 
        and Nationality Act.
            ``(5) Inapplicability to alien minor sponsored by a 
        parent.--This subsection shall not apply to an alien who is a 
        minor child if the sponsor of the alien or any spouse of the 
        sponsor is a parent of the alien.
            ``(6) Inapplicability to certain categories of aliens.--This 
        subsection shall not apply to an alien who is--
                    ``(A) admitted to the United States as a refugee 
                under section 207 of the Immigration and Nationality 
                Act;
                    ``(B) paroled into the United States under section 
                212(d)(5) of such Act for a period of at least 1 year; 
                or
                    ``(C) granted political asylum by the Attorney 
                General under section 208 of such Act.''.

SEC. 5506. PENALTIES.

    (a) States Given More Time To File Quarterly Reports.--Section 
409(a)(2)(A) (42 U.S.C. 609(a)(2)(A)) is amended by striking ``1 month'' 
and inserting ``45 days''.
    (b) Treatment of Support Payments Passed Through to Families as 
Qualified State Expenditures.--Section 409(a)(7)(B)(i)(I)(aa) (42 U.S.C. 
609(a)(7)(B)(i)(I)(aa)) is amended by inserting ``, including any amount 
collected by the State as support pursuant to a plan approved under part 
D, on behalf of a family receiving assistance under the State program 
funded under this part, that is distributed to the family under section 
457(a)(1)(B) and disregarded in determining the eligibility of the 
family for, and the amount of, such assistance'' before the period.
    (c) Disregard of Expenditures Made To Replace Penalty Grant 
Reductions.--Section 409(a)(7)(B)(i) (42 U.S.C. 609(a)(7)(B)(i)) is 
amended by redesignating subclause (III) as subclause (IV) and by 
inserting after subclause (II) the following:
                                    ``(III) Exclusion of amounts 
                                expended to replace penalty grant 
                                reductions.--Such term does not include 
                                any amount expended in order to comply 
                                with paragraph (12).''.

    (d) Treatment of Families of Certain Aliens as Eligible Families.--
Section 409(a)(7)(B)(i)(IV) (42 U.S.C. 609(a)(7)(B)(i)(IV)), as so 
redesignated by subsection (c) of this section, is amended--
            (1) by striking ``and families'' and inserting ``families''; 
        and
            (2) by striking ``Act or section 402'' and inserting ``Act, 
        and families of aliens lawfully present in the United States 
        that would be eligible for such assistance but for the 
        application of title IV''.

[[Page 111 STAT. 614]]

    (e) Elimination of Meaningless Language.--Section 409(a)(7)(B)(ii) 
(42 U.S.C. 609(a)(7)(B)(ii)) is amended by striking ``reduced (if 
appropriate) in accordance with subparagraph (C)(ii)''.
    (f) Clarification of Source of Data To Be Used in Determining 
Historic State Expenditures.--Section 409(a)(7)(B) (42 U.S.C. 
609(a)(7)(B)) is amended by adding at the end the following:
                          ``(v) Source of data.--In determining 
                      expenditures by a State for fiscal years 1994 and 
                      1995, the Secretary shall use information which 
                      was reported by the State on ACF Form 231 or (in 
                      the case of expenditures under part F) ACF Form 
                      331, available as of the dates specified in 
                      clauses (ii) and (iii) of section 403(a)(1)(D).''.

    (g) Conforming Title IV-A Penalties to Title IV-D Performance-Based 
Standards.--Section 409(a)(8) (42 U.S.C. 609(a)(8)) is amended to read 
as follows:
            ``(8) Noncompliance of state child support enforcement 
        program with requirements of part d.--
                    ``(A) In general.--If the Secretary finds, with 
                respect to a State's program under part D, in a fiscal 
                year beginning on or after October 1, 1997--
                          ``(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;

[[Page 111 STAT. 615]]

                          ``(ii) not less than 2 nor more than 3 
                      percent, if the finding is the 2nd consecutive 
                      finding made pursuant to subparagraph (A); or
                          ``(iii) not less than 3 nor more than 5 
                      percent, if the finding is the 3rd or a subsequent 
                      consecutive such finding.
                    ``(C) Disregard of noncompliance which is of a 
                technical nature.--For purposes of this section and 
                section 452(a)(4), a State determined as a result of an 
                audit--
                          ``(i) to have failed to have substantially 
                      complied with 1 or more of the requirements of 
                      part D shall be determined to have achieved 
                      substantial compliance only if the Secretary 
                      determines that the extent of the noncompliance is 
                      of a technical nature which does not adversely 
                      affect the performance of the State's program 
                      under part D; or
                          ``(ii) to have submitted incomplete or 
                      unreliable data pursuant to section 454(15)(B) 
                      shall be determined to have submitted adequate 
                      data only if the Secretary determines that the 
                      extent of the incompleteness or unreliability of 
                      the data is of a technical nature which does not 
                      adversely affect the determination of the level of 
                      the State's paternity establishment percentages 
                      (as defined under section 452(g)(2)) or other 
                      performance measures that may be established by 
                      the Secretary.''.

    (h) Correction of Reference to 5-Year Limit on Assistance.--Section 
409(a)(9) (42 U.S.C. 609(a)(9)) is amended by striking ``408(a)(1)(B)'' 
and inserting ``408(a)(7)''.
    (i) Correction of Errors in Penalty for Failure To Meet Maintenance 
of Effort Requirement Applicable to the Contingency Fund.--Section 
409(a)(10) (42 U.S.C. 609(a)(10)) is amended--
            (1) by striking ``the expenditures under the State program 
        funded under this part for the fiscal year (excluding any 
        amounts made available by the Federal Government)'' and 
        inserting ``the qualified State expenditures (as defined in 
        paragraph (7)(B)(i) (other than the expenditures described in 
        subclause (I)(bb) of that paragraph)) under the State program 
        funded under this part for the fiscal year'';
            (2) by inserting ``excluding any amount expended by the 
        State for child care under subsection (g) or (i) of section 402 
        (as in effect during fiscal year 1994) for fiscal year 1994,'' 
        after ``(as defined in paragraph (7)(B)(iii) of this 
        subsection),''; and
            (3) by inserting ``that the State has not remitted under 
        section 403(b)(6)'' before the period.

    (j) Penalty for State Failure to Expend Additional State Funds To 
Replace Grant Reductions.--Section 409(a)(12) (42 U.S.C. 609(a)(12)) is 
amended--
            (1) in the heading--
                    (A) by striking ``Failure'' and inserting 
                ``Requirement''; and
                    (B) by striking ``reductions'' and inserting 
                ``reductions; penalty for failure to do so''; and
            (2) by adding at the end the following: ``If the State fails 
        during such succeeding fiscal year to make the expenditure

[[Page 111 STAT. 616]]

        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 <<NOTE: Reports.>>  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));

[[Page 111 STAT. 617]]

                                    ``(IV) aid or assistance under a 
                                State plan approved under title XVI (as 
                                in effect without regard to such 
                                amendment) by reason of being 
                                permanently and totally disabled; or
                                    ``(V) supplemental security income 
                                benefits under title XVI (as in effect 
                                pursuant to such amendment) by reason of 
                                disability.'';
                          (ii) in clause (iv), by striking ``youngest 
                      child in'' and inserting ``head of'';
                          (iii) in each of clauses (vii) and (viii), by 
                      striking ``status'' and inserting ``level''; and
                          (iv) by adding at the end the following:
                          ``(xvii) With respect to each individual in 
                      the family who has not attained 20 years of age, 
                      whether the individual is a parent of a child in 
                      the family.''; and
                    (B) in subparagraph (B)--
                          (i) in the heading, by striking ``estimates'' 
                      and inserting ``samples''; and
                          (ii) in clause (i), by striking ``an estimate 
                      which is obtained'' and inserting ``disaggregated 
                      case record information on a sample of families 
                      selected''; and
            (2) by redesignating paragraph (6) as paragraph (7) and 
        inserting after paragraph (5) the following:
            ``(6) Report on families receiving assistance.--The report 
        required by paragraph (1) for a fiscal quarter shall include for 
        each month in the quarter--
                    ``(A) the number of families and individuals 
                receiving assistance under the State program funded 
                under this part (including the number of 2-parent and 1-
                parent families); and
                    ``(B) the total dollar value of such assistance 
                received by all families.''.

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

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

[[Page 111 STAT. 618]]

    (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 <<NOTE: Applicability.>>  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)''.

[[Page 111 STAT. 619]]

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 <<NOTE: 42 USC 613 note.>>  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) <<NOTE: 42 USC 652.>>  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;

[[Page 111 STAT. 620]]

        110 Stat. 2166) <<NOTE: 42 USC 656.>>  is amended by inserting 
        ``and inserting `pursuant to section 408(a)(3)' '' before the 
        period.
            (4) Elimination of obsolete cross reference.--Section 
        464(a)(1) (42 U.S.C. 664(a)(1)) is amended by striking ``section 
        402(a)(26)'' and inserting ``section 408(a)(3)''.

    (b) Amendments to Part E of Title IV.--Each of the following is 
amended by striking ``June 1, 1995'' each place such term appears and 
inserting ``July 16, 1996'':
            (1) Section 472(a) (42 U.S.C. 672(a)).
            (2) Section 472(h) (42 U.S.C. 672(h)).
            (3) Section 473(a)(2) (42 U.S.C. 673(a)(2)).
            (4) Section 473(b) (42 U.S.C. 673(b)).

SEC. 5514. OTHER CONFORMING AMENDMENTS.

    (a) Elimination of Amendments Included Inadvertently.--Section 
110(l) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 2173) is 
amended--
            (1) by striking <<NOTE: 26 USC 51, 6103, 6402. 26 USC 3304, 
        6103, 6334, 7523. 26 USC 6334.>>  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) <<NOTE: 7 USC 612c note.>>  is amended by 
striking ``93-186'' and inserting ``93-86''.

    (c) Correction of <<NOTE: 42 USC 6013et seq.>>  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 <<NOTE: 42 USC 1315 note.>>  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; <<NOTE: 21 USC 862a.>>  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 <<NOTE: 42 USC 601 note.>>  104-193; 110 Stat. 2181) is amended by 
adding at the end the following:

[[Page 111 STAT. 621]]

            ``(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) <<NOTE: 42 USC 601 note.>> 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 <<NOTE: 42 USC 602 note.>> to Part A of Title IV of 
the Social Security Act.--The amendments made by this chapter to a 
provision of part A of title IV of the Social Security Act shall take 
effect as if the amendments had been included in section 103(a) of the 
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 
at the time such section became law.

    (b) Amendments <<NOTE: 42 USC 652 note.>> 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 <<NOTE: 26 USC 51 note.>> 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 <<NOTE: 21 USC 862a note.>> 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

[[Page 111 STAT. 622]]

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).''.

[[Page 111 STAT. 623]]

    (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) <<NOTE: 42 USC 1382c.>> 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--

[[Page 111 STAT. 624]]

            (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 <<NOTE: 42 USC 1382 note.>> (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).''.

[[Page 111 STAT. 625]]

    (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) <<NOTE: 42 USC 925 note, 1382 note.>> 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. <<NOTE: 42 USC 909 note.>> 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. <<NOTE: 42 USC 903 note.>> 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''.

[[Page 111 STAT. 626]]

    (b) Correction of Reference.--Section 464(a)(2)(A) (42 U.S.C. 
654(a)(2)(A)) <<NOTE: 42 USC 664.>> 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)--

[[Page 111 STAT. 627]]

                    (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;

[[Page 111 STAT. 628]]

            ``(B) information on the individual's wages (or other 
        income) from, and benefits of, employment (including rights to 
        or enrollment in group health care coverage); and
            ``(C) information on the type, status, location, and amount 
        of any assets of, or debts owed by or to, any such individual.

    ``(3) For the purpose of enforcing any Federal or State law with 
respect to the unlawful taking or restraint of a child, or making or 
enforcing a child custody or visitation determination, as defined in 
section 463(d)(1), the Federal Parent Locator Service shall be used to 
obtain and transmit the information specified in section 463(c) to the 
authorized persons specified in section 463(d)(2).'';
            (2) by striking subsection (b) and inserting the following:

    ``(b)(1) Upon request, filed in accordance with subsection (d), of 
any authorized person, as defined in subsection (c) for the information 
described in subsection (a)(2), or of any authorized person, as defined 
in section 463(d)(2) for the information described in section 463(c), 
the Secretary shall, notwithstanding any other provision of law, provide 
through the Federal Parent Locator Service such information to such 
person, if such information--
            ``(A) is contained in any files or records maintained by the 
        Secretary or by the Department of Health and Human Services; or
            ``(B) is not contained in such files or records, but can be 
        obtained by the Secretary, under the authority conferred by 
        subsection (e), from any other department, agency, or 
        instrumentality of the United States or of any State,

and is not prohibited from disclosure under paragraph (2).
    ``(2) No information shall be disclosed to any person if the 
disclosure of such information would contravene the national policy or 
security interests of the United States or the confidentiality of census 
data. The Secretary shall give priority to requests made by any 
authorized person described in subsection (c)(1). No information shall 
be disclosed to any person if the State has notified the Secretary that 
the State has reasonable evidence of domestic violence or child abuse 
and the disclosure of such information could be harmful to the custodial 
parent or the child of such parent, provided that--
            ``(A) in response to a request from an authorized person (as 
        defined in subsection (c) of this section and section 
        463(d)(2)), the Secretary shall advise the authorized person 
        that the Secretary has been notified that there is reasonable 
        evidence of domestic violence or child abuse and that 
        information can only be disclosed to a court or an agent of a 
        court pursuant to subparagraph (B); and
            ``(B) information may be disclosed to a court or an agent of 
        a court described in subsection (c)(2) of this section or 
        section 463(d)(2)(B), if--
                    ``(i) upon receipt of information from the 
                Secretary, the court determines whether disclosure to 
                any other person of that information could be harmful to 
                the parent or the child; and
                    ``(ii) if the court determines that disclosure of 
                such information to any other person could be harmful, 
                the court and its agents shall not make any such 
                disclosure.

[[Page 111 STAT. 629]]

    ``(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''.

[[Page 111 STAT. 630]]

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.''.

[[Page 111 STAT. 631]]

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

[[Page 111 STAT. 632]]

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. <<NOTE: Regulations.>> The Secretary shall promulgate 
regulations establishing the requirements which must be met by an Indian 
tribe or tribal organization to be eligible for a grant under this 
subsection.''.

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

    Section 457 (42 U.S.C. 657) is amended--
            (1) in subsection (a), in the matter preceding paragraph 
        (1), by striking ``subsection (e)'' and inserting ``subsections 
        (e) and (f)''; and
            (2) by adding at the end the following:

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

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

[[Page  111 STAT. 633]]

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

    (a) State Plan.--Section 454(4)(A)(i) (42 U.S.C. 654(4)(A)(i)) is 
amended--
            (1) by striking ``or'' before ``(III)''; and
            (2) by inserting ``or (IV) cooperation is required pursuant 
        to section 6(l)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
        2015(l)(1)),'' after ``title XIX,''.

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

[[Page 111 STAT. 634]]

            ``(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) <<NOTE: Records.>> 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

[[Page 111 STAT. 635]]

        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

[[Page 111 STAT. 636]]

                    (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) <<NOTE: Courts.>> 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).''.

[[Page 111 STAT. 637]]

    (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 <<NOTE: 42 USC 654.>> (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) <<NOTE: 42 USC 652, 653.>> 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'. <<NOTE: Effective date. 42 USC 652 note.>> 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. <<NOTE: 42 USC 608 note.>> 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

[[Page 111 STAT. 638]]

in the enactment of section 103(a) of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (Public Law 104-193; 110 
Stat. 2112).

      CHAPTER 4--RESTRICTING WELFARE AND PUBLIC BENEFITS FOR ALIENS

             Subchapter A--Eligibility for Federal Benefits

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

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

    (b) Limited Application to Benefits Under the Railroad Retirement 
Act.--Section 401(b) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (8 U.S.C. 1611(b)) (as amended by subsection 
(a)) is amended by inserting at the end the following:
            ``(4) Subsection (a) shall not apply to any benefit payable 
        under the Railroad Retirement Act of 1974 or the Railroad 
        Unemployment Insurance Act to an alien who is lawfully present 
        in the United States as determined by the Attorney General or to 
        an alien residing outside the United States.''.

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

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

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

    (a) Application of Minimum Active Duty Service Requirement.--
Sections 402(a)(2)(C)(i), 402(b)(2)(C)(i), 403(b)(2)(A), and 
412(b)(3)(A) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (8 U.S.C. 1612(a)(2)(C)(i), 1612(b)(2)(C)(i), 
1613(b)(2)(A), and 1622(b)(3)(A)) are each amended by inserting

[[Page 111 STAT. 639]]

``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, <<NOTE: 42 USC 1437y.>> are each amended by 
striking ``unlawfully in the United States'' each place it appears and 
inserting ``not lawfully present in the United States''.

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

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

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

    (a) Findings.--The Congress makes the following findings:
            (1) Hmong and other Highland Lao tribal peoples were 
        recruited, armed, trained, and funded for military operations by 
        the United States Department of Defense, Central Intelligence 
        Agency, Department of State, and Agency for International 
        Development to further United States national security interests 
        during the Vietnam conflict.
            (2) Hmong and other Highland Lao tribal forces sacrificed 
        their own lives and saved the lives of American military 
        personnel by rescuing downed American pilots and aircrews and by 
        engaging and successfully fighting North Vietnamese troops.
            (3) Thousands of Hmong and other Highland Lao veterans who 
        fought in special guerilla units on behalf of the United States 
        during the Vietnam conflict, along with their families, have 
        been lawfully admitted to the United States in recent years.
            (4) The Personal Responsibility and Work Opportunity 
        Reconciliation Act of 1996 (Public Law 104-193), the new 
        national welfare reform law, restricts certain welfare benefits 
        for noncitizens of the United States and the exceptions for 
        noncitizen

[[Page 111 STAT. 640]]

        veterans of the Armed Forces of the United States do not extend 
        to Hmong veterans of the Vietnam conflict era, making Hmong 
        veterans and their families receiving certain welfare benefits 
        subject to restrictions despite their military service on behalf 
        of the United States.

    (b) Congressional Statement.--It is the sense of the Congress that 
Hmong and other Highland Lao veterans who fought on behalf of the Armed 
Forces of the United States during the Vietnam conflict and have 
lawfully been admitted to the United States for permanent residence 
should be considered veterans for purposes of continuing certain welfare 
benefits consistent with the exceptions provided other noncitizen 
veterans under the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996.

                    Subchapter B--General Provisions

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

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

[[Page 111 STAT. 641]]

                between such battery or cruelty and the need for the 
                benefits to be provided; and
                    ``(B) who meets the requirement of subparagraph (B) 
                of paragraph (1).''.

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

SEC. 5572. VERIFICATION OF ELIGIBILITY FOR BENEFITS.

    (a) Regulations and Guidance.--Section 432(a) of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1642(a)) is amended--
            (1) by inserting at the end of paragraph (1) the following: 
        ``Not later than 90 days after the date of the enactment of the 
        Balanced Budget Act of 1997, the Attorney General of the United 
        States, after consultation with the Secretary of Health and 
        Human Services, shall issue interim verification guidance.''; 
        and
            (2) by adding after paragraph (2) the following new 
        paragraph:

    ``(3) Not later than 90 days after the date of the enactment of the 
Balanced Budget Act of 1997, the Attorney General shall promulgate 
regulations which set forth the procedures by which a State or local 
government can verify whether an alien applying for a State or local 
public benefit is a qualified alien, a nonimmigrant under the 
Immigration and Nationality Act, or an alien paroled into the United 
States under section 212(d)(5) of the Immigration and Nationality Act 
for less than 1 year, for purposes of determining whether the alien is 
ineligible for benefits under section 411 of this Act.''.
    (b) Disclosure of Information for Verification.--Section 384(b) of 
the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 
(division C of Public Law 104-208) <<NOTE: 8 USC 1367.>> 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

[[Page 111 STAT. 642]]

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.-- <<NOTE: Effective date.>> 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.

[[Page 111 STAT. 643]]

        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. <<NOTE: 8 USC 1367.>> 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);

[[Page 111 STAT. 644]]

            (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 <<NOTE: 42 USC 622.>> 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), <<NOTE: 42 USC 
                624, 625.>> 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)) <<NOTE: 42 USC 628b.>> 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) <<NOTE: 42 USC 622.>> 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. <<NOTE: 42 USC 622 note.>> 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

[[Page 111 STAT. 645]]

                          (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), <<NOTE: 42 USC 9858c.>> by 
        striking ``tribal organization'' and inserting ``tribal 
        organizations'';

[[Page 111 STAT. 646]]

            (2) in section <<NOTE: 42 USC 9858i.>> 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, <<NOTE: 42 USC 9858j.>> by striking 
        ``1997'' and inserting ``1998'';
            (4) in section 658O(c)(6)(C), <<NOTE: 42 USC 9858m.>> by 
        striking ``(A)'' and inserting ``(B)''; and
            (5) in section 658P(13), <<NOTE: 42 USC 9858n.>> by striking 
        ``or'' and inserting ``and''.

SEC. 5603. <<NOTE: 42 USC 618 note.>> 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

[[Page 111 STAT. 647]]

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 <<NOTE: 29 USC 1169 note.>> 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 <<NOTE: 29 USC 1169 note.>> 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'';

[[Page 111 STAT. 648]]

            (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 <<NOTE: 29 USC 1169 note.>> 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. <<NOTE: 31 USC 3101.>> 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)

[[Page 111 STAT. 649]]

        based on the agency's required share of recalled reserve funds 
        held by guaranty agencies as of September 30, 1996. For purposes 
        of this paragraph, a guaranty agency's required share of 
        recalled reserve funds shall be determined as follows:
                    ``(A) The Secretary shall compute each guaranty 
                agency's reserve ratio by dividing (i) the amount held 
                in the agency's reserve funds as of September 30, 1996 
                (but reflecting later accounting or auditing adjustments 
                approved by the Secretary), by (ii) the original 
                principal amount of all loans for which the agency has 
                an outstanding insurance obligation as of such date, 
                including amounts of outstanding loans transferred to 
                the agency from another guaranty agency.
                    ``(B) If the reserve ratio of any guaranty agency as 
                computed under subparagraph (A) exceeds 2.0 percent, the 
                agency's required share shall include so much of the 
                amounts held in the agency's reserve funds as exceed a 
                reserve ratio of 2.0 percent.
                    ``(C) If any additional amount is required to be 
                recalled under paragraph (1) (after deducting the total 
                of the required shares calculated under subparagraph 
                (B)), such additional amount shall be obtained by 
                imposing on each guaranty agency an equal percentage 
                reduction in the amount of the agency's reserve funds 
                remaining after deduction of the amount recalled under 
                subparagraph (B), except that such percentage reduction 
                under this subparagraph shall not result in the agency's 
                reserve ratio being reduced below 0.58 percent. The 
                equal percentage reduction shall be the percentage 
                obtained by dividing--
                          ``(i) the additional amount required to be 
                      recalled (after deducting the total of the 
                      required shares calculated under subparagraph 
                      (B)), by
                          ``(ii) the total amount of all such agencies' 
                      reserve funds remaining (after deduction of the 
                      required shares calculated under such 
                      subparagraph).
                    ``(D) If any additional amount is required to be 
                recalled under paragraph (1) (after deducting the total 
                of the required shares calculated under subparagraphs 
                (B) and (C)), such additional amount shall be obtained 
                by imposing on each guaranty agency with a reserve ratio 
                (after deducting the required shares calculated under 
                such subparagraphs) in excess of 0.58 percent an equal 
                percentage reduction in the amount of the agency's 
                reserve funds remaining (after such deduction) that 
                exceed a reserve ratio of 0.58 percent. The equal 
                percentage reduction shall be the percentage obtained by 
                dividing--
                          ``(i) the additional amount to be recalled 
                      under paragraph (1) (after deducting the amount 
                      recalled under subparagraphs (B) and (C)), by
                          ``(ii) the total amount of all such agencies' 
                      reserve funds remaining (after deduction of the 
                      required shares calculated under such 
                      subparagraphs) that exceed a reserve ratio of 0.58 
                      percent.
            ``(4) Restricted accounts required.--
                    ``(A) In general.--Within 90 days after the 
                beginning of each of the fiscal years 1998 through 2002, 
                each guaranty agency shall transfer a portion of the 
                agency's required

[[Page 111 STAT. 650]]

                share determined under paragraph (3) to a restricted 
                account established by the agency that is of a type 
                selected by the agency with the approval of the 
                Secretary. Funds transferred to such restricted accounts 
                shall be invested in obligations issued or guaranteed by 
                the United States or in other similarly low-risk 
                securities.
                    ``(B) Requirement.--A guaranty agency shall not use 
                the funds in such a restricted account for any purpose 
                without the express written permission of the Secretary, 
                except that a guaranty agency may use the earnings from 
                such restricted account for default reduction 
                activities.
                    ``(C) Installments.--In each of fiscal years 1998 
                through 2002, each guaranty agency shall transfer the 
                agency's required share to such restricted account in 5 
                equal annual installments, except that--
                          ``(i) a guaranty agency that has a reserve 
                      ratio (as computed under subparagraph (3)(A)) 
                      equal to or less than 1.10 percent may transfer 
                      the agency's required share to such account in 4 
                      equal installments beginning in fiscal year 1999; 
                      and
                          ``(ii) a guaranty agency may transfer such 
                      required share to such account in accordance with 
                      such other payment schedules as are approved by 
                      the Secretary.
            ``(5) Shortage.--If, on September 1, 2002, the total amount 
        in the restricted accounts described in paragraph (4) is less 
        than the amount the Secretary is required to recall under 
        paragraph (1), the Secretary shall require the return of the 
        amount of the shortage from other reserve funds held by guaranty 
        agencies under procedures established by the Secretary. The 
        Secretary shall first attempt to obtain the amount of such 
        shortage from each guaranty agency that failed to transfer the 
        agency's required share to the agency's restricted account in 
        accordance with paragraph (4).
            ``(6) Enforcement.--
                    ``(A) In general.--The Secretary may take such 
                reasonable measures, and require such information, as 
                may be necessary to ensure that guaranty agencies comply 
                with the requirements of this subsection.
                    ``(B) Prohibition.--If the Secretary determines that 
                a guaranty agency has failed to transfer to a restricted 
                account any portion of the agency's required share under 
                this subsection, the agency may not receive any other 
                funds under this part until the Secretary determines 
                that the agency has so transferred the agency's required 
                share.
                    ``(C) Waiver.--The Secretary may waive the 
                requirements of subparagraph (B) for a guaranty agency 
                described in such subparagraph if the Secretary 
                determines that there are extenuating circumstances 
                beyond the control of the agency that justify such 
                waiver.
            ``(7) Limitation.--
                    ``(A) Restriction on other authority.--The Secretary 
                shall not have any authority to direct a guaranty agency 
                to return reserve funds under subsection (g)(1)(A) 
                during the period from the date of enactment of the 
                Balanced Budget Act of 1997 through September 30, 2002.

[[Page 111 STAT. 651]]

                    ``(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.''.

[[Page 111 STAT. 652]]

    (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), <<NOTE: 20 USC 1074.>> by striking 
        ``1998.'' and ``2002.'' and inserting ``2002.'' and ``2006.'', 
        respectively;
            (2) in section 428(a)(5), <<NOTE: 20 USC 1078.>> by striking 
        ``1998,'' and ``2002.'' and inserting ``2002,'' and ``2006.'', 
        respectively; and
            (3) in section 428C(e), <<NOTE: 20 USC 1078-3.>> by striking 
        ``1998.'' and inserting ``2002.''.

[[Page 111 STAT. 653]]

       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 <<NOTE: 5 USC 8334 note.>> 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 <<NOTE: 5 USC 8334 note.>> 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,

[[Page 111 STAT. 654]]

                 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.

[[Page 111 STAT. 655]]

 
                                   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.

[[Page 111 STAT. 656]]

 
                                   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.

[[Page 111 STAT. 657]]

 
                                          7.5....................  After December 31, 2002.''.
 

            (4) Other service.--
                    (A) Military service.--Section 8334(j) of title 5, 
                United States Code, is amended--
                          (i) in paragraph (1)(A) by inserting ``and 
                      subject to paragraph (5),'' after ``Except as 
                      provided in subparagraph (B),''; and
                          (ii) by adding at the end the following new 
                      paragraph:

    ``(5) <<NOTE: Effective date.>> Effective with respect to any period 
of military service after December 31, 1998, the percentage of basic pay 
under section 204 of title 37 payable under paragraph (1) shall be equal 
to the same percentage as would be applicable under subsection (c) of 
this section for that same period for service as an employee, subject to 
paragraph (1)(B).''.
                    (B) Volunteer service.--Section 8334(l) of title 5, 
                United States Code, is amended--
                          (i) in paragraph (1) by adding at the end the 
                      following: ``This paragraph shall be subject to 
                      paragraph (4).''; and
                          (ii) by adding at the end the following new 
                      paragraph:

    ``(4) <<NOTE: Effective date.>> 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.

[[Page 111 STAT. 658]]

 
                                          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, firefighter,     7.5....................  January 1, 1987, to December 31, 1998.
 member of the 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 <<NOTE: 5 USC 8422 note.>> 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 <<NOTE: 50 USC 2021 note.>> 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

[[Page 111 STAT. 659]]

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

    ``(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 <<NOTE: 22 USC 4045 note.>> 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

[[Page 111 STAT. 660]]

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

      

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

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

      

                                         ``On and after January 1, 1970........................................................   7'';
 

                and inserting the following:

      

                                         ``January 1, 1970, through December 31, 1998, inclusive...............................   7
                                          January 1, 1999, through December 31, 1999, inclusive................................   7.25
                                          January 1, 2000, through December 31, 2000, inclusive................................   7.4

[[Page 111 STAT. 661]]

 
                                          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) <<NOTE: Effective date.>> 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:

      

[[Page 111 STAT. 662]]



                                  ``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) <<NOTE: Regulations.>> 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 <<NOTE: 22 USC 4071c.>> 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 <<NOTE: 5 USC 8334 note.>> 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 <<NOTE: 5 USC 8906 note.>> 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

[[Page 111 STAT. 663]]

from taking any action, before such first day, which it considers 
necessary in order to ensure the timely implementation of this section.

SEC. 7003. REPEAL OF AUTHORIZATION OF TRANSITIONAL APPROPRIATIONS FOR 
            THE UNITED STATES POSTAL SERVICE.

    (a) Repeal.--
            (1) In general.--Section 2004 of title 39, United States 
        Code, is repealed.
            (2) Technical and conforming amendments.--
                    (A) The table of sections for chapter 20 of such 
                title is amended by repealing the item relating to 
                section 2004.
                    (B) Section 2003(e)(2) of such title is amended by 
                striking ``sections 2401 and 2004'' each place it 
                appears and inserting ``section 2401''.

    (b) Clarification That Liabilities Formerly Paid Pursuant to Section 
2004 Remain Liabilities Payable by the Postal Service.--Section 2003 of 
title 39, United States Code, is amended by adding at the end the 
following:
    ``(h) Liabilities of the former Post Office Department to the 
Employees' Compensation Fund (appropriations for which were authorized 
by former section 2004, as in effect before the effective date of this 
subsection) shall be liabilities of the Postal Service payable out of 
the Fund.''.
    (c) Effective <<NOTE: 39 USC 2003 note.>> 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 <<NOTE: Veterans Reconciliation Act of 1997.>> AND 
RELATED MATTERS

SEC. 8001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short <<NOTE: 38 USC 101 note.>> 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.

[[Page 111 STAT. 664]]

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.--

[[Page 111 STAT. 665]]

            (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

[[Page 111 STAT. 666]]

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) <<NOTE: Reports.>> 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.

[[Page 111 STAT. 667]]

    ``(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 <<NOTE: 38 USC 1729 note.>> 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 <<NOTE: Reports. 38 USC 1729A note.>> 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

[[Page 111 STAT. 668]]

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 <<NOTE: 38 USC 712 note.>> Date.--(1) Except as 
provided in paragraph (2), this section and the amendments made by this 
section shall take effect on October 1, 1997.

    (2) The amendments made by subsection (d) shall take effect on the 
date of the enactment of this Act.

                        Subtitle C--Other Matters

SEC. 8031. ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN COMPENSATION 
            AND DIC RATES FOR FISCAL YEARS 1998 THROUGH 2002.

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

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

    ``(a) In the computation of cost-of-living adjustments for fiscal 
years 1998 through 2002 in the rates of, and dollar limitations 
applicable to, compensation payable under this chapter, such adjustments 
shall be made by a uniform percentage that is no more than the 
percentage equal to the social security increase for that fiscal year, 
with all increased monthly rates and limitations (other than increased 
rates or limitations equal to a whole dollar amount) rounded down to the 
next lower whole dollar amount.
    ``(b) For purposes of this section, the term `social security 
increase' means the percentage by which benefit amounts payable under 
title II of the Social Security Act (42 U.S.C. 401 et seq.) are 
increased for any fiscal year as a result of a determination under 
section 215(i) of such Act (42 U.S.C. 415(i)).''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1102 the 
following new item:

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

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

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

    ``(a) In the computation of cost-of-living adjustments for fiscal 
years 1998 through 2002 in the rates of dependency and indemnity 
compensation payable under this chapter, such adjustments (except as 
provided in subsection (b)) shall be made by a uniform percentage that 
is no more than the percentage equal to the social security increase for 
that fiscal year, with all increased monthly rates (other than increased 
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)).''.

[[Page 111 STAT. 669]]

    (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 <<NOTE: 38 USC 3726 note.>> 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.

[[Page 111 STAT. 670]]

     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.
Sec. 9304. Identification of limited tax benefits subject to line item 
           veto.
Sec. 9305. Payment of benefits in appropriate fiscal year.

                        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. <<NOTE: 40 USC 811 note.>> 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.

[[Page 111 STAT. 671]]

            (3) Part of lot 811, square 717.

    (c) Proceeds.--Before September 30, 2002, proceeds from the sale of 
air rights under subsection (a) shall be deposited in the general fund 
of the Treasury and credited as miscellaneous receipts.
    (d) Conveyance of Amtrak Air Rights.--
            (1) General rule.--As a condition of future Federal 
        financial assistance, Amtrak shall convey to the Administrator 
        of General Services on or before December 31, 1997, at no 
        charge, all of the air rights of Amtrak described in subsection 
        (b).
            (2) Failure to comply.--If Amtrak does not meet the 
        condition established by paragraph (1), Amtrak shall be 
        prohibited from obligating Federal funds after March 1, 1998.

                          Subtitle B--User Fees

SEC. 9201. EXTENSION OF HIGHER VESSEL TONNAGE DUTIES.

    (a) Extension of Duties.--Section 36 of the Act of August 5, 1909 
(36 Stat. 111; 46 U.S.C. App. 121) is amended by striking ``for fiscal 
years 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998,'' each place it 
appears and inserting ``for fiscal years 1991 through 2002,''.
    (b) Conforming Amendment.--The Act entitled ``An Act concerning 
tonnage duties on vessels entering otherwise than by sea'', approved 
March 8, 1910 (36 Stat. 234; 46 U.S.C. App. 132) is amended by striking 
``for fiscal years 1991, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 
1998,'' and inserting ``for fiscal years 1991 through 2002,''.

                  Subtitle C--Miscellaneous Provisions

SEC. 9301. <<NOTE: Minnesota.>> 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 <<NOTE: 26 USC 5701.>>  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

[[Page 111 STAT. 672]]

            (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:

[[Page 111 STAT. 673]]

            ``(1) a person who produces cigars, cigarettes, smokeless 
        tobacco, pipe tobacco, or roll-your-own tobacco solely for the 
        person's own personal consumption or use, and''.
                    (C) The chapter heading for chapter 52 of such Code 
                is amended to read as follows:

    ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

                    (D) The table of chapters for subtitle E of such 
                Code is amended by striking the item relating to chapter 
                52 and inserting the following new item:
                ``Chapter 52. Tobacco products and cigarette papers and 
                                tubes.''.

    (h) Modifications of Certain Tobacco Tax Provisions.--
            (1) Exemption for exported tobacco products and cigarette 
        papers and tubes to apply only to articles marked for export.--
                    (A) Subsection (b) of section 5704 of such Code is 
                amended by adding at the end the following new sentence: 
                ``Tobacco products and cigarette papers and tubes may 
                not be transferred or removed under this subsection 
                unless such products or papers and tubes bear such 
                marks, labels, or notices as the Secretary shall by 
                regulations prescribe.''.
                    (B) Section 5761 of such Code is amended by 
                redesignating subsections (c) and (d) as subsections (d) 
                and (e), respectively, and by inserting after subsection 
                (b) the following new subsection:

    ``(c) Sale of Tobacco Products and Cigarette Papers and Tubes for 
Export.--Except as provided in subsections (b) and (d) of section 5704--
            ``(1) every person who sells, relands, or receives within 
        the jurisdiction of the United States any tobacco products or 
        cigarette papers or tubes which have been labeled or shipped for 
        exportation under this chapter,
            ``(2) every person who sells or receives such relanded 
        tobacco products or cigarette papers or tubes, and
            ``(3) every person who aids or abets in such selling, 
        relanding, or receiving,

shall, in addition to the tax and any other penalty provided in this 
title, be liable for a penalty equal to the greater of $1,000 or 5 times 
the amount of the tax imposed by this chapter. All tobacco products and 
cigarette papers and tubes relanded within the jurisdiction of the 
United States, and all vessels, vehicles, and aircraft used in such 
relanding or in removing such products, papers, and tubes from the place 
where relanded, shall be forfeited to the United States.''.
                    (C) Subsection (a) of section 5761 of such Code is 
                amended by striking ``subsection (b)'' and inserting 
                ``subsection (b) or (c)''.
                    (D) Subsection (d) of section 5761 of such Code, as 
                redesignated by subparagraph (B), is amended by striking 
                ``The penalty imposed by subsection (b)'' and inserting 
                ``The penalties imposed by subsections (b) and (c)''.
                    (E)(i) Subpart F of chapter 52 of such Code is 
                amended by adding at the end the following new section:

[[Page 111 STAT. 674]]

``SEC. 5754. <<NOTE: 26 USC 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 <<NOTE: 26 USC 5701 note.>> 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

[[Page 111 STAT. 675]]

                    (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 <<NOTE: 26 USC 5701 note.>> 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 <<NOTE: Regulations.>> 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 <<NOTE: Regulations.>> 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--

[[Page 111 STAT. 676]]

                    (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 <<NOTE: Applicability.>> 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 <<NOTE: 42 usc 6247a.>> 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 for foreign governments or their 
representatives do not impair the ability of the United States to 
withdraw, distribute, or sell petroleum products from the Strategic 
Petroleum Reserve in response to an energy emergency or to the 
obligations of the United States under the Agreement on an International 
Energy Program.
    ``(d) Availability of Funds.--Funds collected through the leasing of 
Strategic Petroleum Reserve facilities authorized by subsection (a) 
after September 30, 2007, shall be used by the Secretary of Energy 
without further appropriation for the purchase of petroleum products for 
the Strategic Petroleum Reserve.''.

[[Page 111 STAT. 677]]

    (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 <<NOTE: Budget Enforcement Act of 1997. President.>> X--BUDGET 
ENFORCEMENT AND PROCESS PROVISIONS

SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short <<NOTE: 2 USC 900 note.>> 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.

[[Page 111 STAT. 678]]

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 <<NOTE: 2 USC 622.>> 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 <<NOTE: 2 USC 601.>> is amended to read 
as follows: ``The term of office of the Director shall be 4 years and 
shall expire on January 3 of the year preceding each Presidential 
election.''.

    (b) Conforming Change.--Section 201(e) of the Congressional Budget 
Act of 1974 is amended by inserting ``and'' before ``the Library'', by 
striking ``and the Office of Technology Assessment,'', by inserting 
``and'' before ``the Librarian'', and by striking ``, and the Technology 
Assessment Board''.
    (c) Redesignation of Executed Provision.--Section 201 of the 
Congressional Budget Act of 1974 is amended by redesignating subsection 
(g) (relating to revenue estimates) as subsection (f).

SEC. 10103. AMENDMENTS TO SECTION 202.

    (a) Assistance to Budget Committees.--The first sentence of section 
202(a) of the Congressional Budget Act of 1974 <<NOTE: 2 USC 602.>> 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''.

[[Page 111 STAT. 679]]

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 <<NOTE: 2 USC 631.>> 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 <<NOTE: 2 USC 632.>> is amended by 
striking ``, and planning levels for each of the two ensuing fiscal 
years,'' and inserting ``and for at least each of the 4 ensuing fiscal 
years''.

    (b) Contents of Budget Resolutions.--Paragraphs (1) and (4) of 
section 301(a) of the Congressional Budget Act of 1974 are amended by 
striking ``, budget outlays, direct loan obligations, and primary loan 
guarantee commitments'' each place it appears and inserting ``and 
outlays''.
    (c) Additional Matters.--Section 301(b) of the Congressional Budget 
Act of 1974 is amended by--
            (1) striking paragraph (7) and inserting the following:
            ``(7) set forth procedures in the Senate whereby committee 
        allocations, aggregates, and other levels can be revised for 
        legislation if that legislation would not increase the deficit, 
        or would not increase the deficit when taken with other 
        legislation enacted after the adoption of the resolution, for 
        the first fiscal year or the total period of fiscal years 
        covered by the resolution;'';
            (2) in paragraph 8, striking the period and inserting ``; 
        and''; and
            (3) adding the following new paragraph:
            ``(9) set forth direct loan obligation and primary loan 
        guarantee commitment levels.''.

    (d) Views and Estimates.--The first sentence of section 301(d) of 
the Congressional Budget Act of 1974 is amended by inserting ``or at 
such time as may be requested by the Committee on the Budget,'' after 
``Code,''.
    (e) Hearings and Report.--Section 301(e) of the Congressional Budget 
Act of 1974 is amended--
            (1) by striking ``In developing'' and inserting the 
        following:
            ``(1) In general.--In developing''; and
            (2) by striking the sentence beginning with ``The report 
        accompanying'' and all that follows through the end of the 
        subsection and inserting the following:
            ``(2) Required contents of report.--The report accompanying 
        the resolution shall include--
                    ``(A) a comparison of the levels of total new budget 
                authority, total outlays, total revenues, and the 
                surplus or deficit for each fiscal year set forth in the 
                resolution

[[Page 111 STAT. 680]]

                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 <<NOTE: 2 USC 632.>> 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) <<NOTE: 108 Stat. 5092.>> is repealed.

SEC. 10106. AMENDMENTS TO SECTION 302.

    (a) Allocations and Suballocations.--Section 302 of the 
Congressional Budget Act of 1974 <<NOTE: 2 USC 633.>> 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

[[Page 111 STAT. 681]]

        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

[[Page 111 STAT. 682]]

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 <<NOTE: 2 USC 633.>> 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

[[Page 111 STAT. 683]]

        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 <<NOTE: 2 USC 634.>> is amended to read as follows:

  ``concurrent resolution on the budget must be adopted before budget-
                    related legislation is considered

    ``Sec. 303. (a) In General.--Until the concurrent resolution on the 
budget for a fiscal year has been agreed to, it shall not be in order in 
the House of Representatives, with respect to the first fiscal year 
covered by that resolution, or the Senate, with respect to any fiscal 
year covered by that resolution, to consider any bill or joint 
resolution, amendment or motion thereto, or conference report thereon 
that--
            ``(1) first provides new budget authority for that fiscal 
        year;
            ``(2) first provides an increase or decrease in revenues 
        during that fiscal year;

[[Page 111 STAT. 684]]

            ``(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 <<NOTE: 2 USC 
635.>> 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 <<NOTE: 2 USC 636.>> 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

[[Page 111 STAT. 685]]

        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 <<NOTE: 2 USC 
639.>> 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 <<NOTE: 2 
USC 641.>>  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)

[[Page 111 STAT. 686]]

                      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 <<NOTE: 2 USC 642.>> 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

[[Page 111 STAT. 687]]

        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 <<NOTE: 2 USC 643.>> 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

[[Page 111 STAT. 688]]

            ``(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 <<NOTE: 2 USC 644.>> 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. <<NOTE: 2 USC 645.>> (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;

[[Page 111 STAT. 689]]

                    ``(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) <<NOTE: Congressional Record, publication.>> 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

[[Page 111 STAT. 690]]

        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 <<NOTE: 2 usc 645a.>>  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 <<NOTE: 2 USC 651.>> 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.''.

[[Page 111 STAT. 691]]

            (2) Point of order.--Section 401(b) of the Congressional 
        Budget Act of 1974 <<NOTE: 2 USC 651.>> 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 in incurred under chapter 31 of title 31 of 
        the United States Code) for the repayment of which the United 
        States is liable, the budget authority for which is not provided 
        in advance by appropriation Acts; new entitlement authority as 
        defined in section 3(9) of the Congressional Budget Act of 1974, 
        including bills and resolutions (reported by other committees) 
        which provide new entitlement authority as defined in section 
        3(9) of the Congressional Budget Act of 1974 and are referred to 
        the committee under clause 4(a); authority to forego the 
        collection by the United States of proprietary offsetting 
        receipts, the budget authority for which is not provided in 
        advance by appropriation Acts to offset such foregone receipts; 
        and authority to make payments by the United States (including 
        loans, grants, and payments from

[[Page 111 STAT. 692]]

        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 <<NOTE: 2 USC 652.>> 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, <<NOTE: 2 USC 653-656.>> respectively.
            (2) GAO analysis.--Section 404 (as redesignated) of the 
        Congressional Budget Act of 1974 <<NOTE: 2 USC 654.>> 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. <<NOTE: Loans.>> AMENDMENTS TO TITLE V.

    (a) Section 502.--Section 502 of the Federal Credit Reform Act of 
1990 <<NOTE: 2 USC 661a.>> 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

[[Page 111 STAT. 693]]

                    ``(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 <<NOTE: 2 USC 661c.>> 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;''.

[[Page 111 STAT. 694]]

            (2) In subsection (b)(2), strike ``is enacted'' and insert 
        ``has been provided in advance in an appropriations Act''.
            (3) In subsection (c), strike ``Subsection (b)'' and insert 
        ``Subsections (b) and (e)''.
            (4) In subsection (d)(1), strike ``directly or indirectly 
        alter the costs of outstanding direct loans and loan 
        guarantees'' and insert ``modify outstanding direct loans (or 
        direct loan obligations) or loan guarantees (or loan guarantee 
        commitments)''.
            (5) Amend subsection (e) to read as follows:

    ``(e) Modifications.--An outstanding direct loan (or direct loan 
obligation) or loan guarantee (or loan guarantee commitment) shall not 
be modified in a manner that increases its costs unless budget authority 
for the additional cost has been provided in advance in an 
appropriations Act.''.
    (c) Section 505.--Section 505 of the Federal Credit Reform Act of 
1990 <<NOTE: 2 USC 661d.>> 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). <<NOTE: Applicability.>> 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;

[[Page 111 STAT. 695]]

            ``(E) payments for the costs of foreclosing, managing, and 
        selling collateral that are capitalized or routinely deducted 
        from the proceeds of sales;
            ``(F) payments to financing accounts when required for 
        modifications;
            ``(G) administrative expenses, if--
                    ``(i) amounts credited to the liquidating account 
                would have been available for administrative expenses 
                under a provision of law in effect prior to October 1, 
                1991; and
                    ``(ii) no direct loan obligation or loan guarantee 
                commitment has been made, or any modification of a 
                direct loan or loan guarantee has been made, since 
                September 30, 1991; or
            ``(H) such other payments as are necessary for the 
        liquidation of such direct loan obligations and loan guarantee 
        commitments.

    ``(2) Amounts credited to liquidating accounts in any year shall be 
available only for payments required in that year. Any unobligated 
balances in liquidating accounts at the end of a fiscal year shall be 
transferred to miscellaneous receipts as soon as practicable after the 
end of the fiscal year.
    ``(3) If funds in liquidating accounts are insufficient to satisfy 
obligations and commitments of such accounts, there is hereby provided 
permanent, indefinite authority to make any payments required to be made 
on such obligations and commitments.''.
    (d) Section 506.--Section 506 of the Federal Credit Reform Act of 
1990 <<NOTE: 2 USC 661e.>> 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 <<NOTE: 2 USC 665 et seq.>> 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 <<NOTE: 2 USC 621 note.>> 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

[[Page 111 STAT. 696]]

        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 <<NOTE: 2 USC 621 note.>> is amended to read as follows:

    ``(d) Appeals.--
            ``(1) Procedure.--Appeals in the Senate from the decisions 
        of the Chair relating to any provision of title III or IV or 
        section 1017 shall, except as otherwise provided therein, be 
        limited to 1 hour, to be equally divided between, and controlled 
        by, the mover and the manager of the resolution, concurrent 
        resolution, reconciliation bill, or rescission bill, as the case 
        may be.
            ``(2) Permanent.--An affirmative vote of three-fifths of the 
        Members, duly chosen and sworn, shall be required in the Senate 
        to sustain an appeal of the ruling of the Chair on a point of 
        order raised under sections 305(b)(2), 305(c)(4), 306, 
        310(d)(2), 313, 904(c), and 904(d) of this Act.
            ``(3) Temporary.--An affirmative vote of three-fifths of the 
        Members, duly chosen and sworn, shall be required in the Senate 
        to sustain an appeal of the ruling of the Chair on a point of 
        order raised under sections 301(i), 302(c), 302(f), 310(g), 
        311(a), 312(b), and 312(c) of this Act and sections 
        258(a)(4)(C), 258A(b)(3)(C)(I), 258B(f)(1), 258B(h)(1), 
        258(h)(3), 258C(a)(5), and 258C(b)(1) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985.''.

    (d) Expiration of Supermajority Voting Requirements.--Section 904 of 
the Congressional Budget Act of 1974 is amended by adding at the end the 
following:
    ``(e) Expiration of Certain Supermajority Voting Requirements.--
Subsections (c)(2) and (d)(3) shall expire on September 30, 2002.''.

SEC. 10120. REPEAL OF SECTIONS 905 AND 906.

    (a) Repealer.--Sections 905 and 906 of the Congressional Budget Act 
of 1974 <<NOTE: 2 USC 621 note, 632 note.>> 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 <<NOTE: 2 USC 691a.>> 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 <<NOTE: 2 USC 691c.>> is amended by 
striking ``section 601(a)(2)'' and inserting ``section 251(c) of the 
Balanced Budget and Emergency Deficit Control Act of 1985''.

[[Page 111 STAT. 697]]

SEC. 10122. AMENDMENT TO SECTION 1026.

    Section 1026(7)(A)(iv) of the Congressional Budget and Impoundment 
Control Act of 1974 <<NOTE: 2 USC 691e.>> 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. <<NOTE: 2 USC 900 note.>> 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 <<NOTE: 2 USC 900.>> 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.'';

[[Page 111 STAT. 698]]

            (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 <<NOTE: 2 USC 901.>> 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 <<NOTE: Reports.>> estimates and 
                explanation of differences.--Not later than 7 calendar 
                days (excluding Saturdays, Sundays, and legal holidays) 
                after the date of enactment of any discretionary 
                appropriation, OMB shall transmit a report to the House 
                of Representatives and to the Senate containing the CBO 
                estimate of that legislation, an OMB estimate of the 
                amount of discretionary new budget authority and outlays 
                for the current year (if any) and the budget year 
                provided by that legislation, and an explanation of any 
                difference between the 2 estimates. If during the 
                preparation of the report OMB determines that there is a 
                significant difference between OMB and CBO, OMB shall 
                consult with the Committees on the Budget of the House 
                of Representatives and the Senate

[[Page 111 STAT. 699]]

                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

[[Page 111 STAT. 700]]

                (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--

[[Page 111 STAT. 701]]

                          ``(i) an increase in the United States quota 
                      as part of the International Monetary Fund 
                      Eleventh General Review of Quotas (United States 
                      Quota); or
                          ``(ii) any increase in the maximum amount 
                      available to the Secretary of the Treasury 
                      pursuant to section 17 of the Bretton Woods 
                      Agreements Act, as amended from time to time (New 
                      Arrangements to Borrow).
                    ``(E) Allowance for international arrearages.--
                          ``(i) Adjustments.--If an appropriation bill 
                      or joint resolution is enacted for fiscal year 
                      1998, 1999, or 2000 that includes an appropriation 
                      for arrearages for international organizations, 
                      international peacekeeping, and multilateral 
                      development banks for that fiscal year, the 
                      adjustment shall be the amount of budget authority 
                      in that measure and the outlays flowing in all 
                      fiscal years from that budget authority.
                          ``(ii) Limitations.--The total amount of 
                      adjustments made pursuant to this subparagraph for 
                      the period of fiscal years 1998 through 2000 shall 
                      not exceed $1,884,000,000 in budget authority.
                    ``(F) EITC compliance initiative.--If an 
                appropriation bill or joint resolution is enacted for a 
                fiscal year that includes an appropriation for an earned 
                income tax credit compliance initiative, the adjustment 
                shall be the amount of budget authority in that measure 
                for that initiative and the outlays flowing in all 
                fiscal years from that budget authority, but not to 
                exceed--
                          ``(i) with respect to fiscal year 1998, 
                      $138,000,000 in new budget authority and 
                      $131,000,000 in outlays;
                          ``(ii) with respect to fiscal year 1999, 
                      $143,000,000 in new budget authority and 
                      $143,000,000 in outlays;
                          ``(iii) with respect to fiscal year 2000, 
                      $144,000,000 in new budget authority and 
                      $144,000,000 in outlays;
                          ``(iv) with respect to fiscal year 2001, 
                      $145,000,000 in new budget authority and 
                      $145,000,000 in outlays; and
                          ``(v) with respect to fiscal year 2002, 
                      $146,000,000 in new budget authority and 
                      $146,000,000 in outlays.''.

    (b) Shifting of Discretionary Spending Limits Into the Balanced 
Budget and Emergency Deficit Control Act of 1985.--Section 251 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 <<NOTE: 2 USC 
901.>> 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;

[[Page 111 STAT. 702]]

            ``(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 <<NOTE: 2 USC 901a.>> 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 <<NOTE: 2 USC 
        900.>> 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 <<NOTE: 2 USC 902.>> is amended--
            (1) by striking subsections (a) and (b) and inserting the 
        following:

    ``(a) Purpose.--The purpose of this section is to assure that any 
legislation enacted 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--

[[Page 111 STAT. 703]]

                    ``(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''.

[[Page 111 STAT. 704]]

SEC. 10206. REPORTS AND ORDERS.

    Section 254 of the Balanced Budget and Emergency Deficit Control Act 
of 1985 <<NOTE: 2 USC 904.>> 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 <<NOTE: 2 USC 905.>> 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.--

[[Page 111 STAT. 705]]

            ``(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 <<NOTE: 2 USC 
905.>> 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.

[[Page 111 STAT. 706]]

            (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 <<NOTE: 2 USC 905.>> is amended as follows:

[[Page 111 STAT. 707]]

            (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 <<NOTE: 2 USC 905.>> 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);''.

[[Page 111 STAT. 708]]

                    ``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 <<NOTE: 2 USC 905.>> 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 <<NOTE: 2 
        USC 906.>> 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 <<NOTE: 2 USC 
        900.>> 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.

[[Page 111 STAT. 709]]

    ``(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

[[Page 111 STAT. 710]]

        accounts, and may not be made so as to achieve a percentage rate 
        of reduction in any such item exceeding the rate specified in 
        the order.
            ``(5) Dairy program.--Notwithstanding any other provision of 
        this subsection, as the sole means of achieving any reduction in 
        outlays under the milk price support program, the Secretary of 
        Agriculture shall provide for a reduction to be made in the 
        price received by producers for all milk produced in the United 
        States and marketed by producers for commercial use. That price 
        reduction (measured in cents per hundred weight of milk 
        marketed) shall occur under section 201(d)(2)(A) of the 
        Agricultural Act of 1949 (7 U.S.C. 1446(d)(2)(A)), shall begin 
        on the day any sequestration order is issued under section 254, 
        and shall not exceed the aggregate amount of the reduction in 
        outlays under the milk price support program that otherwise 
        would have been achieved by reducing payments for the purchase 
        of milk or the products of milk under this subsection during the 
        applicable fiscal year.''.

    (g) Effects of Sequestration.--Section 256(k) of the Balanced Budget 
and Emergency Deficit Control Act of 1985 <<NOTE: 2 USC 906.>> 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 <<NOTE: 2 USC 907.>> 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:

[[Page 111 STAT. 711]]

            ``(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, <<NOTE: 2 USC 908.>> entitled ``Modification of Presidential 
Order'', is repealed.

SEC. 10211. JUDICIAL REVIEW.

    Section 274 of the Balanced Budget and Emergency Deficit Control Act 
of 1985 <<NOTE: 2 USC 922.>> 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''.

[[Page 111 STAT. 712]]

            (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 <<NOTE: 2 USC 900 note.>> 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. <<NOTE: 2 USC 902 note.>> 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 <<NOTE: National Capital Revitalization and Self-
Government Improvement Act of 1997.>> 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.

[[Page 111 STAT. 713]]

   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.

[[Page 111 STAT. 714]]

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).

[[Page 111 STAT. 715]]

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 <<NOTE: District of Columbia Retirement Protection Act of 
1997.>> 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

[[Page 111 STAT. 716]]

        taken or any failure to act that lay within the power of the 
        District of Columbia government or the District of Columbia 
        Retirement Board;
            (5) the presence of the unfunded pension liability is having 
        and will continue to have a negative impact on the District of 
        Columbia's credit rating as it is a legal obligation and the 
        total unfunded liability exceeds the total General Obligation 
        debt of the District, and the costs associated with this 
        liability are a contributing cause of the District's ongoing 
        financial crisis;
            (6) the obligations of the District associated with these 
        pension programs in fiscal year 1997 represents nearly 10 
        percent of the District's revenue;
            (7) the annual Federal contribution toward these costs under 
        the District of Columbia Retirement Reform Act has remained 
        $52,000,000;
            (8) if the unfunded pension liability situation is not 
        resolved, in 2004 the District of Columbia would be responsible 
        for annual costs exceeding $800,000,000, a figure which would be 
        impossible to meet without catastrophic impact on the District 
        government's resources and programs;
            (9) the financial resources of the District of Columbia are 
        not adequate to discharge the unfunded liabilities of the 
        retirement programs; and
            (10) the level of benefits and funding of the current 
        retirement programs were authorized by various Acts of Congress.

    (b) Policy.--It is the policy of this subtitle--
            (1) to relieve the District of Columbia government of the 
        responsibility for the unfunded pension liabilities transferred 
        to it by the Federal government;
            (2) for the Federal government to assume the legal 
        responsibility for paying certain pension benefits (including 
        certain unfunded pension liabilities which existed as of the day 
        prior to introduction of this legislation) for the retirement 
        plans of teachers, police, and firefighters;
            (3) to provide for a responsible Federal system for payment 
        of benefits accrued prior to the date of introduction of this 
        legislation; and
            (4) to require the establishment of replacement plans by the 
        District of Columbia government for the current retirement plans 
        for teachers, and police and firefighters.

SEC. 11003. DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
            (1) The term ``contract'' means the contract under section 
        11035 between the Secretary and the Trustee.
            (2) The term ``covered District employee'' means a teacher 
        of the District of Columbia public schools, or a member of the 
        Metropolitan Police Force or the Fire Department of the District 
        of Columbia, as defined under the District Retirement Program.
            (3) The term ``District Government'' means any entity 
        treated as part of the District government under section 305(5) 
        of the District of Columbia Financial Responsibility and 
        Management Assistance Act of 1995, including the District

[[Page 111 STAT. 717]]

        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.

[[Page 111 STAT. 718]]

SEC. 11012. FEDERAL BENEFIT PAYMENTS DESCRIBED.

    (a) In General.--Subject to the succeeding provisions of this 
subtitle, a ``Federal benefit payment'' is any benefit payment to which 
an individual is entitled under a District Retirement Program, in such 
amount and under such terms and conditions as may apply under such 
Program.
    (b) Treatment of Service Occurring After Freeze Date.--Service after 
the freeze date shall not be credited for purposes of determining the 
amount of any Federal benefit payment. Nothing in this subsection shall 
be construed to affect the crediting of such service for any other 
purpose under the District Retirement Program.
    (c) Special Rule Regarding Disability Benefits.--To the extent that 
any portion of a benefit payment to which an individual is entitled 
under a District Retirement Program is based on a determination of 
disability made by the District of Columbia Retirement Board or the 
Trustee after the freeze date, the Federal benefit payment determined 
with respect to the individual shall be an amount equal to the deferred 
retirement benefit or normal retirement benefit the individual would 
receive if the individual left service on the day before the 
commencement of disability retirement benefits.
    (d) Special Rule Regarding Certain Death Benefits.--
            (1) In general.--In the case of a benefit payment to which 
        an individual is entitled under a District Retirement Program 
        which is payable on the death of a covered District employee or 
        former covered District employee and which is not determined by 
        the length of service of the employee or former employee, the 
        Federal benefit payment determined with respect to the 
        individual shall be equal to the pre-freeze date percentage of 
        the amount otherwise payable.
            (2) Pre-freeze date percentage defined.--In paragraph (1), 
        the ``pre-freeze date percentage'' with respect to a covered 
        District employee or former covered District employee is the 
        amount (expressed as a percentage) equal to the quotient of--
                    (A) the number of months of the covered District 
                employee's or former covered District employee's service 
                prior to the freeze date; divided by
                    (B) the total number of months of the covered 
                District employee's or former covered District 
                employee's service.

SEC. 11013. ESTABLISHMENT OF SINGLE ANNUAL COST-OF-LIVING ADJUSTMENT 
            UNDER DISTRICT RETIREMENT PROGRAM.

    (a) Program for Police and Fire Fighters.--Subsection (m) of the 
Policemen and Firemen's Retirement and Disability Act (DC Code, sec. 4-
624) is amended--
            (1) in paragraph (2), by striking ``the Mayor shall'' and 
        all that follows and inserting the following: ``on January 1 of 
        each year (or within a reasonable time thereafter), the Mayor 
        shall determine the per centum change in the price index for the 
        preceding year by determining the difference between the index 
        published for December of the preceding year and the index 
        published for December of the second preceding year.''; and
            (2) by amending paragraph (3) to read as follows:

    ``(3)(A) If (in accordance with paragraph (2)) the Mayor determines 
in a year (beginning with 1999) that the per centum change

[[Page 111 STAT. 719]]

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 (2), 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 (2), 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

[[Page 111 STAT. 720]]

        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

[[Page 111 STAT. 721]]

            (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, <<NOTE: 26 USC 6103.>> 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

[[Page 111 STAT. 722]]

                Security, or to the extent not available from the Social 
                Security Administration, by the Secretary, to any duly 
                authorized officer or employee of the Department of the 
                Treasury, or a Trustee or any designated officer or 
                employee of a Trustee (as defined in the District of 
                Columbia Retirement Protection Act of 1997), or any 
                actuary engaged by a Trustee under the terms of the 
                District of Columbia Retirement Protection Act of 1997, 
                whose official duties require such disclosure, solely 
                for the purpose of, and to the extent necessary in, 
                determining an individual's eligibility for, or the 
                correct amount of, benefits under the District of 
                Columbia Retirement Protection Act of 1997.
                    ``(B) Disclosure for use in judicial or 
                administrative proceedings.--Return information 
                disclosed to any person under this paragraph may be 
                disclosed in a judicial or administrative proceeding 
                relating to the determination of an individual's 
                eligibility for, or the correct amount of, benefits 
                under the District of Columbia Retirement Protection Act 
                of 1997.''.
            (2) In section 6103(a)(3), <<NOTE: 26 USC 6103.>> 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 (l)(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), <<NOTE: 26 USC 7213.>> by 
        striking ``or (15),'' and inserting ``(15), or (16)''.

    (c) Confidentiality.--The <<NOTE: 26 USC 6103 note.>> Secretary may 
issue regulations governing the confidentiality of the information 
obtained pursuant

[[Page 111 STAT. 723]]

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

[[Page 111 STAT. 724]]

        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.

[[Page 111 STAT. 725]]

           CHAPTER 5--RESPONSIBILITIES OF DISTRICT GOVERNMENT

SEC. 11041. INTERIM ADMINISTRATION.

    (a) Administration of Benefits Until Appointment of Trustee.--
Notwithstanding chapter 2, after the enactment of this subtitle the 
District Government shall continue to discharge its duties and 
responsibilities under the District Retirement Program and the District 
Retirement Fund (as such duties and responsibilities are modified by 
this subtitle), including the responsibility for Federal benefit 
payments, until such time as the Secretary notifies the District 
Government that the Secretary has directed the Trustee to carry out the 
duties and responsibilities required under the contract.
    (b) Reimbursement From Trust Fund.--The Trustee shall reimburse the 
District Government for any administrative expenses incurred by the 
District Government in carrying out subsection (a)--
            (1) if the Trustee finds such expenses to be reasonable and 
        necessary; and
            (2) to the extent that the District Government is not 
        reimbursed for such expenses from other sources.

    (c) Making District Retirement Fund Whole.--The District Government 
shall reimburse the District Retirement Fund for any benefits paid 
inconsistent with this subtitle from the District Retirement Fund 
between the freeze date and the replacement plan adoption date.

SEC. 11042. REPLACEMENT PLAN.

    (a) Adoption by District Government.--Not later than one year after 
the date of the enactment of this subtitle, the District Government 
shall adopt a replacement plan for pension benefits for covered District 
employees, effective as of the freeze date.
    (b) Replacement Plan Imposed If District Government Fails to Adopt 
Plan.--If the District Government fails to adopt a replacement plan 
within the period prescribed in subsection (a), the retirement program 
applicable to police, firefighters, and teachers under the laws of the 
District of Columbia in effect as of June 1, 1997 (except as otherwise 
amended by this Act), including all requirements of the program 
regarding benefits, contributions, and cost-of-living adjustments, shall 
be treated as the replacement plan for purposes of this subtitle.
    (c) No Payment of Amounts Paid as Federal Benefit Payment.--
Notwithstanding any provision of the Reform Act or any other law, rule, 
or regulation, the District Government is not required to pay any amount 
under any replacement plan under this subtitle if the amount is paid as 
a Federal benefit payment under this subtitle.

 CHAPTER 6--FINANCING OF BENEFIT PAYMENTS AFTER DEPLETION OF TRUST FUND

SEC. 11051. CREATION OF FEDERAL SUPPLEMENTAL FUND.

    (a) Establishment.--There is established on the books of the 
Treasury the Federal Supplemental District of Columbia Pension Fund, 
which shall be administered by the Secretary and shall consist of the 
following assets:

[[Page 111 STAT. 726]]

            (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.

[[Page 111 STAT. 727]]

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 shall 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--

[[Page 111 STAT. 728]]

            (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.

[[Page 111 STAT. 729]]

    (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 <<NOTE: Contracts.>> 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

[[Page 111 STAT. 730]]

this subtitle, together with an analysis of the impact of each 
alternative on the federal budget. <<NOTE: Records.>> 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 <<NOTE: Reports.>> contract entered into under 
subsection (a) shall require the consultant to report the results of the 
study not later than 12 months after the date of enactment of this Act.

    (c) No Effect on Federal Obligations.--Nothing in this section may 
be construed to affect any obligation of the Federal Government to make 
payments under this subtitle.

SEC. 11083. ISSUANCE OF REGULATIONS BY SECRETARY.

    The Secretary is authorized to issue regulations to implement, 
interpret, administer and carry out the purposes of this subtitle, and, 
in the Secretary's discretion, those regulations may have retroactive 
effect.

SEC. 11084. EFFECT ON REFORM ACT AND OTHER LAWS.

    (a) Reform Act.--
            (1) In general.--This subtitle supersedes any provision of 
        the Reform Act inconsistent with this subtitle and the 
        regulations thereunder.
            (2) Termination of payments to district retirement funds.--
        Section 144 of the Reform Act (DC Code, sec. 1-724) is amended 
        by adding at the end the following new subsection:

    ``(f) Notwithstanding any other provision of this Act, no Federal 
payments may be made to any Fund established by this title for any 
fiscal year after fiscal year 1997.''.
    (b) No Effect on Tax Treatment of Benefits.--Except as otherwise 
specifically provided, nothing in this subtitle may be construed to 
affect the application of any provision of the Internal Revenue Code of 
1986 to any annuity or other benefit provided to or on behalf of any 
individual, including any disability benefit or any portion of a 
retirement benefit attributable to an individual's disability status.
    (c) No Effect on Benefits for Park Police and Secret Service.--
Nothing in this subtitle shall be deemed to alter or amend in any way 
the provisions of existing law (including the Reform Act) relating to 
the program of annuities, other retirement benefits, or medical benefits 
for members and officers, retired members and officers, and survivors 
thereof, of the United States Park Police force, the United States 
Secret Service, or the United States Secret Service Uniformed Division.

SEC. 11085. REFERENCE TO NEW FEDERAL PROGRAM FOR RETIREMENT OF JUDGES OF 
            DISTRICT OF COLUMBIA COURTS.

    For provisions describing the retirement program for judges and 
judicial personnel of the District of Columbia, see subchapter B of 
chapter 4 of subtitle C.

SEC. 11086. FULL FAITH AND CREDIT.

    Federal obligations for benefits under this subtitle are backed by 
the full faith and credit of the United States.

SEC. 11087. SEVERABILITY OF PROVISIONS.

    If any provision of this subtitle, or the application of such 
provision to any person or circumstances, shall be held invalid,

[[Page 111 STAT. 731]]

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 <<NOTE: District of Columbia Management Reform 
Act of 1997.>> 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

[[Page 111 STAT. 732]]

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) <<NOTE: Notification.>> In consultation 
                      with the Authority and the Council, the Mayor 
                      shall nominate an individual for appointment and 
                      notify the Council of the nomination.
                          (iii) <<NOTE: Notification.>> 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.

[[Page 111 STAT. 733]]

                    (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

[[Page 111 STAT. 734]]

                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) <<NOTE: Reports.>> 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,

[[Page 111 STAT. 735]]

                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) <<NOTE: Reports.>> submit a report to Congress 
                no later than one year after the dater of enactment of 
                this Act.

    (d) Site Acquisition and Construction.--In order to house the 
District of Columbia felony inmate population the Bureau of Prisons 
shall acquire land, construct and build new facilities at sites selected 
by the Bureau of Prisons, or contract for appropriate bed space, but no 
facilities may be built on the grounds of the Lorton Reservation.
    (e) National Capital Planning.--Notwithstanding any other provision 
of law, the requirements of the National Capital Planning Act of 1952 
(40 U.S.C. 71 et seq.) shall not apply to any actions taken by the 
Bureau of Prisons or its agents or employees.
    (f) Department of Corrections Authority.--The District of Columbia 
Department of Corrections shall remain responsible for the custody, 
care, subsistence, education, treatment, and training of any person 
convicted of a felony offense pursuant to the District of Columbia Code 
and housed at the Lorton Correctional Complex until December 31, 2001, 
or the date on which the last inmate housed at the Lorton Correctional 
Complex is designated by the Bureau of Prisons, whichever is earlier.
    (g) Lorton Correctional Complex.--
            (1) Transfer of functions.--Notwithstanding any other 
        provision of law, to the extent the Bureau of Prisons assumes 
        functions of the Department of Corrections under this subtitle, 
        the Department is no longer responsible for such functions and 
        the provisions of ``An Act to create a Department of Corrections 
        in the District of Columbia'', approved June 27, 1946 (D.C. Code 
        24-441, 442), that apply with respect to such functions are no 
        longer applicable. Except as provided in paragraph (2), any 
        property on which the Lorton Correctional Complex is located 
        shall be transferred to the Department of the Interior.
            (2) Transfer of land.--
                    (A) In general.--
                          (i) Fairfax county water authority.--150 acres 
                      of parcel 106-4-001-54 located west of Ox Road 
                      (State Route 123) on which the Lorton Correctional 
                      Complex is located shall be transferred, without 
                      consideration, to the Fairfax County Water 
                      Authority of Fairfax, Virginia.
                          (ii) Fairfax county department of parks and 
                      recreation.--Any acres of parcel 106-4-001-54 
                      located west of Ox Road (State Route 123) on which 
                      the Lorton Correctional Complex is located not 
                      transferred under clause (i) shall be assigned to 
                      the Department of the Interior, National Park 
                      Service, for conveyance to the Fairfax County 
                      Department of Parks and Recreation for 
                      recreational purposes pursuant to the section 
                      203(k)(2) of the Federal Property and 
                      Administrative Services Act of 1949 (40 U.S.C. 
                      484(k)(2)).
                    (B) Condition of transfer.--

[[Page 111 STAT. 736]]

                          (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

[[Page 111 STAT. 737]]

of Prisons shall begin the transferring of inmates to Bureau of Prison 
or private contract facilities required by this section.

SEC. 11202. CORRECTIONS TRUSTEE.

    (a) Appointment and Removal of Trustee.--
            (1) Appointment.--Pursuant to the Federal Government's 
        assumption of responsibility for persons convicted of a felony 
        offense under the District of Columbia Code, the Attorney 
        General, in consultation with the Chairman of the District of 
        Columbia Financial Responsibility and Management Assistance 
        Authority (hereafter in this chapter referred to as the ``D.C. 
        Control Board''), the Mayor of the District of Columbia, the 
        District of Columbia Council, and the District of Columbia 
        judiciary, shall select a Corrections Trustee, who shall be an 
        independent officer of the government of the District of 
        Columbia, to oversee financial operations of the District of 
        Columbia Department of Corrections until the Bureau of Prisons 
        has designated all felony offenders sentenced under the District 
        of Columbia Code to a penal or correctional facility operated or 
        contracted for by the Bureau of Prisons under section 11201.
            (2) Removal.--The Corrections Trustee may be removed by the 
        Mayor with the concurrence of the Attorney General. The Attorney 
        General shall have the authority to remove the Corrections 
        Trustee for misfeasance or malfeasance in office. At the request 
        of the Corrections Trustee, the District of Columbia Financial 
        Responsibility and Management Assistance Authority may exercise 
        any of its powers and authorities on behalf of the Corrections 
        Trustee.

    (b) Duties of Trustee.--Beginning on the date of appointment and 
continuing until the felony population sentenced pursuant to the 
District of Columbia Code residing at the Lorton Correctional Complex is 
transferred to a penal or correctional facility operated or contracted 
for by the Bureau of Prisons, the Corrections Trustee shall carry out 
the following responsibilities (notwithstanding any law of the District 
of Columbia to the contrary):
            (1) Exercise financial oversight over the District of 
        Columbia Department of Corrections and allocate funds as enacted 
        in law or as otherwise allocated, including funds for short term 
        improvements which are necessary for the safety and security of 
        staff, inmates and the community.
            (2) Purchase any necessary goods or services on behalf of 
        the District of Columbia Department of Corrections consistent 
        with Federal procurement regulations as they apply to the Bureau 
        of Prisons.

    (c) Funding.--
            (1) In general.--Funds available for the Corrections 
        Trustee, staff and all necessary and appropriate operations 
        shall be made available to the extent provided in appropriations 
        acts to the Corrections Trustee. Funding requests shall be 
        proposed by the Corrections Trustee to the President and 
        Congress for each Fiscal Year.
            (2) Reimbursement to bureau of prisons.--Upon receipt of 
        Federal funds, the Corrections Trustee shall immediately provide 
        an advance reimbursement to the Bureau of Prisons of all funds 
        identified by the Congress for construction of new prisons and 
        major renovations, which shall remain available until expended. 
        The Bureau of Prisons shall be responsible

[[Page 111 STAT. 738]]

        and accountable for determining how these funds shall be used 
        for renovation and construction, including type, security level, 
        and location of new facilities.
            (3) Accountability and reports.--The District of Columbia 
        Department of Corrections and the Bureau of Prisons shall 
        maintain accountability for funds reimbursed from the 
        Corrections Trustee, and shall provide expense reports by 
        project at the request of the Corrections Trustee.

    (d) Compensation and Detailees.--The Corrections Trustee shall be 
compensated at a rate not to exceed the basic pay payable for Level IV 
of the Executive Schedule. The Corrections Trustee may appoint and fix 
the pay of additional staff without regard to the provisions of the 
District of Columbia Code governing appointments and salaries, without 
regard to the provisions of title 5, United States Code, governing 
appointments in the competitive service, and without regard to the 
provisions of chapter 51 and subchapter III of chapter 53 of title 5, 
United States Code, relating to classification and General Schedule pay 
rates. Upon request of the Corrections Trustee, the head of any Federal 
department or agency may, on a reimbursable or non reimbursable basis, 
provide services and detail any personnel of that department or agency 
to the Corrections Trustee to assist in carrying out his duties.
    (e) Procurement and Judicial Review.--The provisions of the District 
of Columbia Code governing procurement shall not apply to the 
Corrections Trustee. The Corrections Trustee may seek judicial 
enforcement of his authority to carry out his duties.
    (f) Preservation of Retirement and Certain Other Rights of Federal 
Employees Who Become Employed by the Corrections Trustee.--
            (1) In general.--A Federal employee who, within 3 days after 
        separating from the Federal Government, is appointed Corrections 
        Trustee or becomes employed by the Corrections Trustee--
                    (A) shall be treated as an employee of the Federal 
                Government for purposes of chapters 83, 84, 87, and 89 
                of title 5 of the United States Code; and
                    (B) if, after serving with the Trustee, such 
                employee becomes reemployed by the Federal Government, 
                shall be entitled to credit for the full period of such 
                individual's service with the Trustee, for purposes of 
                determining the applicable leave accrual rate.
            (2) Regulations.--The Office of Personnel Management shall 
        prescribe such regulations as may be necessary to carry out this 
        subsection.

SEC. 11203. PRIORITY CONSIDERATION FOR EMPLOYEES OF THE DISTRICT OF 
            COLUMBIA.

    (a) Establishment.--As soon as practicable after appointment, the 
Bureau of Prisons, working with the Corrections Trustee, shall establish 
a priority consideration program to facilitate employment placement for 
employees of the District of Columbia Department of Corrections who are 
scheduled to be separated from service as a result of closing the Lorton 
Correctional Complex.
    (b) Provisions.--The priority consideration program shall include 
provisions under which a vacant federal correctional institution 
position established as a result of this Act and identified for external 
hiring shall not be filled by the appointment of any

[[Page 111 STAT. 739]]

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 <<NOTE: Termination 
date.>> 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 semicolon;
                    (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

[[Page 111 STAT. 740]]

        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. <<NOTE: Notices. Reports.>> The 
                Trustee shall provide to the Attorney General such 
                notice and reports concerning litigation as the Attorney 
                General may direct.
                    (C) Discretion.--Any decision to exercise any 
                authority of the Attorney General under this subsection 
                shall be in the sole discretion of the Attorney General 
                and shall not be reviewable in any court.

    (c) Limitations.--Nothing in this section shall be construed--
            (1) as a waiver of sovereign immunity, or as limiting any 
        other defense or immunity that would otherwise be available to 
        the United States, the District of Columbia, their agencies, 
        officers, employees, or agents; or
            (2) to obligate the District of Columbia to represent or 
        indemnify the Corrections Trustee or any officer, employee, or 
        agent where the Trustee (or any person employed by or acting 
        under the authority of the Trustee) acts beyond the scope of his 
        authority.

SEC. 11206. PERMITTING EXPENDITURE OF FUNDS TO CARRY OUT CERTAIN SEWER 
            AGREEMENT.

    Notwithstanding the fourth sentence of section 446 of the District 
of Columbia Self-Government and Governmental Reorganization Act, the 
District of Columbia is authorized to obligate or expend such funds as 
may be necessary during a fiscal year (beginning with fiscal year 1997) 
to carry out the Sewage Delivery System and Capacity Purchase Agreement 
between Fairfax County and the District of Columbia with respect to 
Project Number K00301, without regard to the amount appropriated for 
such purpose in the budget of the District of Columbia for the fiscal 
year.

                          CHAPTER 2--SENTENCING

SEC. 11211. TRUTH IN SENTENCING COMMISSION.

    (a) Establishment.--There is established as an independent agency of 
the District of Columbia a District of Columbia Truth in Sentencing 
Commission (hereafter in this chapter referred to as ``the 
Commission''), which shall consist of 7 voting members. The Attorney 
General, or the Attorney General's designee, shall be the chairperson of 
the Commission and shall have the duty to convene meetings of the 
Commission to ensure that it fulfills

[[Page 111 STAT. 741]]

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.

[[Page 111 STAT. 742]]

    (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).

[[Page 111 STAT. 743]]

                    (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 District of Columbia,'' 
                approved March 3, 1901 (DC Code, sec. 22-2406).
            (8) Section 8 of the Act of July 15, 1932 (chapter 492; 47 
        Stat. 698) (DC Code, sec. 22-2601) (relating to prison breach).
            (9) The Act entitled ``An Act to prohibit the introduction 
        of contraband into the District of Columbia penal 
        institutions,'' approved December 15, 1941 (DC Code, sec. 22-
        2603).
            (10) Section 810 of the Act entitled ``An Act to establish a 
        code of law for the District of Columbia,'' approved March 3, 
        1901 (DC Code, sec. 22-2901) (relating to robbery).

[[Page 111 STAT. 744]]

            (11) Section 811a of the Act entitled ``An Act to establish 
        a code of law for the District of Columbia,'' approved March 3, 
        1901 (DC Code, sec. 22-2903) (relating to carjacking).
            (12) The Dangerous Weapons Act (DC Code, sec. 22-3201 et 
        seq.).
            (13) The following provisions relating to sex offenses:
                    (A) Section 201 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4102).
                    (B) Section 202 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4103).
                    (C) Section 203 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4104).
                    (D) Section 204 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4105).
                    (E) Section 207 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4108).
                    (F) Section 208 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4109).
                    (G) Section 209 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4110).
                    (H) Section 212 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4113).
                    (I) Section 213 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4114).
                    (J) Section 214 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4115).
                    (K) Section 215 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4116).
                    (L) Section 217 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4118).
                    (M) Section 219 of the Anti-Sexual Abuse Act of 1994 
                (DC Code, sec. 22-4120).
            (14) Section 401 of the District of Columbia Uniform 
        Controlled Substances Act of 1981 (D.C. Code, sec. 33-541) 
        (relating to recidivist drug offenders), but only in the case of 
        a second or subsequent violation.

SEC. 11213. DATA COLLECTION.

    (a) Data for Attorney General.--The Commission, the Superior Court 
of the District of Columbia, the District of Columbia Department of 
Corrections, and other agencies as necessary shall provide to the 
Attorney General such data as are requested in furtherance of this Act.
    (b) Superior Court.--The Superior Court of the District of Columbia, 
in connection with defendants sentenced in such Court, shall provide to 
the Commission and the Attorney General such data as are requested for 
planning, statistical analysis or projecting future prison population 
levels.

SEC. 11214. ENACTMENT OF AMENDMENTS TO DISTRICT OF COLUMBIA CODE.

    If, within 270 days after the date of the enactment of this Act, the 
Council of the District of Columbia has failed to amend the District of 
Columbia Code to enact in whole the recommendations of the Commission 
under this chapter, or if the Commission fails to make such 
recommendations within the deadline established under such section, the 
Attorney General (after consultation with the Commission) shall 
promulgate within 90 days amendments

[[Page 111 STAT. 745]]

 to the District of Columbia Code with respect to the sentences to be 
imposed for all offenses committed on or after 3 years after the date of 
the enactment of this Act. Such amendments shall be consistent with the 
standards of subsections (a) through (d) of section 
11212. <<NOTE: Effective date.>> 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

[[Page 111 STAT. 746]]

Phaseout Act of 1996 (Public Law 104-232) <<NOTE: 18 USC 4201 note.>> is 
amended to read as follows:

    ``(c) The United States Parole Commission shall have no more than 
five members.''.

SEC. 11232. PRETRIAL SERVICES, DEFENSE SERVICES, PAROLE, ADULT PROBATION 
            AND OFFENDER SUPERVISION TRUSTEE.

    (a) Appointment and Removal.--
            (1) Appointment.--The Attorney General, in consultation with 
        the Chairman of the District of Columbia Financial 
        Responsibility and Management Assistance Authority (hereafter in 
        this section referred to as the ``D.C. Control Board'') and the 
        Mayor of the District of Columbia, shall appoint a Pretrial 
        Services, Defense Services, Parole, Adult Probation and Offender 
        Supervision Trustee, who shall be an independent officer of the 
        government of the District of Columbia, to effectuate the 
        reorganization and transition of functions and funding relating 
        to pretrial services, defense services, parole, adult probation 
        and offender supervision.
            (2) Removal.--The Trustee may be removed by the Mayor with 
        the concurrence of the Attorney General. The Attorney General 
        shall have the authority to remove the Trustee for misfeasance 
        or malfeasance in office. At the request of the Trustee, the 
        District of Columbia Financial Responsibility and Management 
        Assistance Authority may exercise any of its powers and 
        authorities on behalf of the Trustee.

    (b) Authority.--Beginning on the date of appointment, and continuing 
until the District of Columbia Offender Supervision, Defender, and 
Courts Services Agency is established under section 11233, the Trustee 
shall--
            (1) have the authority to exercise all powers and functions 
        authorized for the Director of the District of Columbia Offender 
        Supervision, Defender and Courts Services Agency;
            (2) have the authority to direct the actions of all agencies 
        of the District of Columbia whose functions will be assumed by 
        or within the District of Columbia Offender Supervision, 
        Defender and Courts Services Agency, and of the Board of Parole 
        of the District of Columbia, including the authority to 
        discharge or replace any officers or employees of these 
        agencies, except that the Trustee may not direct the conduct of 
        particular cases by the District of Columbia Public Defender 
        Service;
            (3) exercise financial oversight over all agencies of the 
        District of Columbia whose functions will be assumed by or 
        within the District of Columbia Offender Supervision, Defender 
        and Courts Services Agency, and over the Board of Parole of the 
        District of Columbia, and allocate funds to these agencies as 
        appropriated by Congress and allocated by the President;
            (4) receive and transmit to the District of Columbia 
        Pretrial Services Agency all funds appropriated for such agency; 
        and
            (5) receive and transmit to the District of Columbia Public 
        Defender Service all funds appropriated for such agency.

    (c) Compensation.--The Trustee shall be compensated at a rate not to 
exceed the basic pay payable for Level IV of the Executive Schedule. The 
Trustee may appoint and fix the pay of additional staff without regard 
to the provisions of the District of Columbia Code governing 
appointments and salaries, without regard to the

[[Page 111 STAT. 747]]

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 may seek 
judicial enforcement of the Trustee's authority to carry out the 
Trustee's duties.
    (e) Preservation of Retirement and Certain Other Rights of Federal 
Employee Who Becomes the Trustee or Federal Employees Who Become 
Employed by the Trustee.--
            (1) In general.--A Federal employee who, within 3 days after 
        separating from the Federal Government, is appointed Trustee or 
        becomes employed by the Trustee--
                    (A) shall be treated as an employee of the Federal 
                Government for purposes of chapters 83, 84, 87, and 89 
                of title 5 of the United States Code; and
                    (B) if, after serving with the Trustee, such 
                employee becomes reemployed by the Federal Government, 
                shall be entitled to credit for the full period of such 
                individual's service with the Trustee, for purposes of 
                determining the applicable leave accrual rate.
            (2) Regulations.--The Office of Personnel Management shall 
        prescribe such regulations as may be necessary to carry out this 
        subsection.

    (f) Funding.--Funds available for operations of the Trustee shall be 
made available to the extent provided in appropriations acts to the 
Trustee, through the State Justice Institute. Funding requests shall be 
proposed by the Trustee to the President and Congress for each Fiscal 
Year.
    (g) Liability and Litigation Authority.--
            (1) Liability.--The District of Columbia shall defend any 
        civil action or proceeding brought in any court or other 
        official Federal, state, or municipal forum against the Trustee, 
        or against the District of Columbia or its officers, employees, 
        or agents, and shall assume any liability resulting from such an 
        action or proceeding, if the action or proceeding arises from 
        the--
                    (A) supervision of offenders on probation, parole, 
                or supervised release;
                    (B) provision of pretrial services by the District 
                of Columbia; or
                    (C) activities of the District of Columbia Board of 
                Parole.
            (2) Litigation.--
                    (A) Corporation counsel.--Subject to subparagraph 
                (B), the Corporation Counsel of the District of Columbia 
                shall provide litigation services to the Trustee, except 
                that the Trustee may instead elect, either generally or 
                in relation to particular cases or classes of cases, to 
                hire necessary

[[Page 111 STAT. 748]]

                staff and personnel or enter into contracts for the 
                provision of litigation services at the Trustee's 
                expense.
                    (B) Attorney general.--
                          (i) In general.--Notwithstanding subparagraph 
                      (A), with respect to any litigation involving the 
                      Trustee, the Attorney General may--
                                    (I) direct the litigation of the 
                                Trustee, and of the District of Columbia 
                                on behalf of the Trustee; and
                                    (II) provide on a reimbursable or 
                                non-reimbursable basis litigation 
                                services for the Trustee at the 
                                Trustee's request or on the Attorney 
                                General's own initiative.
                          (ii) Approval of settlement.--With respect to 
                      any litigation involving the Trustee, the Trustee 
                      may not agree to any settlement involving any form 
                      of equitable relief without the approval of the 
                      Attorney General. The Trustee shall provide to the 
                      Attorney General such notice and reports 
                      concerning litigation as the Attorney General may 
                      direct.
                          (iii) Discretion.--Any decision to exercise 
                      any authority of the Attorney General under this 
                      paragraph shall be in the sole discretion of the 
                      Attorney General and shall not be reviewable in 
                      any court.
            (3) Limitations.--Nothing in this section shall be 
        construed--
            (1) as a waiver of sovereign immunity, or as limiting any 
        other defense or immunity that would otherwise be available to 
        the United States, the District of Columbia, their agencies, 
        officers, employees, or agents; or
            (2) to obligate the District of Columbia to represent or 
        indemnify the Corrections Trustee or any officer, employee, or 
        agent where the Trustee (or any person employed by or acting 
        under the authority of the Trustee) acts beyond the scope of his 
        authority.

    (h) Certification.--The <<NOTE: Effective date. Termination 
date.>> 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 assumes its duties 
not less than one year or more than three years after the enactment of 
this Act.
    (b) Director.--
            (1) Appointment <<NOTE: President.>> 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

[[Page 111 STAT. 749]]

        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. <<NOTE: Reports.>> 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

[[Page 111 STAT. 750]]

        reports to the Superior Court with respect to an individual on 
        probation as the Superior Court may require.
            (4) Supervision <<NOTE: Reports.>> 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

[[Page 111 STAT. 751]]

                 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. <<NOTE: Notices. Reports.>> 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

[[Page 111 STAT. 752]]

submissions to the Office of Management and Budget and the Congress, the 
budget and appropriations requests of the Superior Court for the 
District of Columbia, the District of Columbia Court of Appeals, and the 
District of Columbia Court System.

SEC. 11242. ADMINISTRATION OF COURTS UNDER DISTRICT OF COLUMBIA CODE.

    (a) Submission of Annual Budget Requests by Joint Committee on 
Judicial Administration.--Section 11-1701(b)(4), District of Columbia 
Code, is amended to read as follows:
            ``(4) Submission of the annual budget requests of the 
        District of Columbia Court of Appeals, the Superior Court of the 
        District of Columbia, and the District of Columbia Court System 
        as the integrated budget of the District of Columbia courts, 
        except that such requests may be modified upon the concurrence 
        of four of the five members of the Joint Committee.''.

    (b) Audit of Accounts of Courts.--Section 11-1723(a)(3), District of 
Columbia Code, is amended to read as follows:
            ``(3) The Fiscal Officer shall be responsible for the 
        approval of vouchers and the internal auditing of the accounts 
        of the courts and shall arrange for an annual independent audit 
        of the accounts of the courts.''.

    (c) Appointment and Removal of Court Personnel.--Section 11-1725(b) 
of the District of Columbia Code is amended to read as follows:
    ``(b) The Executive Officer shall appoint, and may remove, the 
Director of Social Services, the clerks of the courts, the Auditor-
Master, and all other nonjudicial personnel for the courts (other than 
the Register of Wills and personal law clerks and secretaries of the 
judges) as may be necessary, subject to--
            ``(1) regulations approved by the Joint Committee; and
            ``(2) the approval of the chief judge of the court to which 
        the personnel are or will be assigned.

Appointments and removals of court personnel shall not be subject to the 
laws, rules, and limitations applicable to District of Columbia 
employees.''.
    (d) Procurement of Equipment and Supplies.--Section 11-1742(b), 
District of Columbia Code, is amended to read as follows:
    ``(b) The Executive Officer shall be responsible for the procurement 
of necessary equipment, supplies, and services for the courts and shall 
have power, subject to applicable law, to reimburse the District of 
Columbia government for services provided and to contract for such 
equipment, supplies, and services as may be necessary.''.
    (e) Budget and Expenditures.--
            (1) In general.--Section 11-1743, District of Columbia Code, 
        is amended to read as follows:

``Sec. 11-1743. Annual Budget and Expenditures.

    ``(a) The Joint Committee shall prepare and submit to the Mayor and 
the Council of the District of Columbia annual estimates of the 
expenditures and appropriations necessary for the maintenance and 
operations of the District of Columbia courts, and shall submit such 
estimates to Congress and the Director of the Office of Management and 
Budget after submitting them to the Mayor and the Council. All such 
estimates shall be included in the budge

[[Page 111 STAT. 753]]

t 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.''.

[[Page 111 STAT. 754]]

    (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:

[[Page 111 STAT. 755]]

    ``(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.

[[Page 111 STAT. 756]]

    ``(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

[[Page 111 STAT. 757]]

        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;

[[Page 111 STAT. 758]]

                    ``(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 be in public debt securities with maturities 
suitable to the needs of the Fund, as determined by the Secretary, and 
bearing interest at rates determined by the Secretary, taking into 
consideration current market yields on outstanding marketable 
obligations of the United States of comparable maturities.
    ``(f) None of the moneys mentioned in this subchapter shall be 
assignable, either in law or in equity, or be subject to execution, 
levy, attachment, garnishment, or other legal process (except to the 
extent permitted pursuant to the District of Columbia Spouse Equity Act 
of 1988).
    ``(g) Notwithstanding any other provision of District law, rule, or 
regulation, any civil action brought--
            ``(1) by an individual to enforce or clarify rights to 
        benefits from the Fund; or
            ``(2) by the Secretary--
                    ``(A) to enforce any claim arising (in whole or in 
                part) under this section or any contract entered into to 
                carry out this section,
                    ``(B) to recover benefits improperly paid from the 
                Fund or to clarify an individual's rights to benefits 
                from the Fund, or
                    ``(C) to enforce any provision of this section or 
                any contract entered into to carry out this section,

shall be brought in the United States District Court for the District of 
Columbia.''.
    (b) Clerical Amendment.--The table of sections for subchapter III of 
chapter 15 of title 11, District of Columbia Code, is amended by 
amending the item relating to section 11-1570 to read as follows:

``11-1570. The District of Columbia Judicial Retirement and Survivors 
           Annuity Fund.''.

SEC. 11252. TERMINATION OF CURRENT FUND AND PROGRAM.

    (a) Termination of Judges' Retirement Fund.--Section 124 of the 
District of Columbia Retirement Reform Act (DC Code, sec. 1-714) is 
amended by striking subsection (c) and inserting the following:
    ``(c)(1) Notwithstanding any other provision of this Act or the 
amendments made by this Act, upon the date the assets of the Retirement 
Fund described in title I of the National Capital Revitalization and 
Self-Government Improvement Act of 1997 are transferred, the assets of 
the District of Columbia Judges' Retirement Fund established under 
subsection (a) shall be transferred to the District of Columbia Judicial 
Retirement and Survivors Annuity

[[Page 111 STAT. 759]]

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 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''.

[[Page 111 STAT. 760]]

  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.--

[[Page 111 STAT. 761]]

            (1) In general.--Section 11-2609, District of Columbia Code, 
        is repealed.
            (2) Clerical amendment.--The table of sections for chapter 
        26 of title 11, District of Columbia Code, is amended by 
        striking the item relating to section 11-2609.

     CHAPTER 5--PRETRIAL SERVICES AGENCY AND PUBLIC DEFENDER SERVICE

SEC. 11271. AMENDMENTS AFFECTING PRETRIAL SERVICES AGENCY.

    (a) In General.--Sections 23-1304 through 23-1308 of the District of 
Columbia Code are amended to read as follows:

``Sec. 23-1304. Executive committee; composition; appointment and 
                        qualifications of Director

    ``(a) The agency shall be advised by an executive committee of seven 
members, of which four members shall constitute a quorum. The Executive 
Committee shall be composed of the following persons or their designees: 
the Chief Judge of the United States Court of Appeals for the District 
of Columbia Circuit, the Chief Judge of the United States District Court 
for the District of Columbia, the Chief Judge of the District of the 
Columbia Court of Appeals, the Chief Judge of the Superior Court of the 
District of Columbia, the United States Attorney for the District of 
Columbia, the Director of the District of Columbia Public Defender 
Service, and the Director of the District of Columbia Offender 
Supervision, Defender and Courts Services Agency.
    ``(b) The Chief Judge of the United States Court of Appeals for the 
District of Columbia Circuit and the Chief Judge of the United States 
District Court for the District of Columbia, in consultation with the 
other members of the executive committee, shall appoint a Director of 
the agency who shall be a member of the bar of the District of Columbia.

``Sec. 23-1305. Duties of director; compensation

    ``(a) The Director of the agency shall be responsible for the 
supervision and execution of the duties of the agency. The Director 
shall be compensated as a member of the Senior Executive Service 
pursuant to subchapter VIII of chapter 53 of title 5, United States 
Code.

``Sec. 23-1306. Chief assistant and other agency personnel; compensation

    ``The Director shall employ a chief assistant who shall be 
compensated as a member of the Senior Executive Service pursuant to 
section 5382 of title 5, United States Code. The Director shall employ 
such agency personnel as may be necessary properly to conduct the 
business of the agency. All employees other than the chief assistant 
shall receive compensation that is comparable to levels of compensation 
established for Federal pretrial services agencies.

``Sec. 23-1307. Annual reports

    ``(a) The Director shall each year submit to the executive committee 
and to the Director of the District of Columbia Offender Supervision, 
Defender and Courts Services Agency a report as to the Pretrial Services 
Agency's administration of its responsibilities

[[Page 111 STAT. 762]]

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 trial 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--

[[Page 111 STAT. 763]]

            (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. <<NOTE: Reports.>> 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 <<NOTE: Appropriation authorization.>> 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

[[Page 111 STAT. 764]]

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

[[Page 111 STAT. 765]]

        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

[[Page 111 STAT. 766]]

                    ``(B) a schedule setting out the anticipated timing 
                and amounts of requisitions for advances under this 
                section;
            ``(4) the Authority certifies to the Secretary that--
                    ``(A) there is an approved financial plan and budget 
                in effect under the District of Columbia Financial 
                Responsibility and Management Assistance Act of 1995 for 
                the fiscal year in which the requisition is to be made;
                    ``(B) at the time that the Mayor's requisition for 
                an advance is delivered to the Secretary, the District 
                government is in compliance with the approved financial 
                plan and budget;
                    ``(C) both the receipt of funds from such advance 
                and the reimbursement of Treasury for such advance are 
                consistent with the approved financial plan and budget 
                for the year;
                    ``(D) such advance will not adversely affect the 
                financial stability of the District government; and
                    ``(E) at the time that the Mayor's requisition for 
                an advance is delivered to the Secretary, the District 
                government is effectively unable to obtain credit in the 
                public credit markets or elsewhere in sufficient amounts 
                and on sufficiently reasonable terms to meet the 
                District government's need for financing to accomplish 
                the purpose described in subsection (a);
            ``(5) <<NOTE: Certification.>> 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).

[[Page 111 STAT. 767]]

            ``(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''.

[[Page 111 STAT. 768]]

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 <<NOTE: District of Columbia Bond Financing 
Improvements Act of 1997.>> 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.

[[Page 111 STAT. 769]]

            (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

[[Page 111 STAT. 770]]

equal to at least 2 percent of the par amount of general obligation 
bonds bid for, and the Mayor shall reserve the right to reject any and 
all bids.''.

SEC. 11505. AMENDMENT TO SECTION 467 (RELATING TO AUTHORITY TO CREATE 
            SECURITY INTERESTS IN DISTRICT REVENUES).

    Section 467 of the District of Columbia Self-Government and 
Governmental Reorganization Act (D.C. Code Sec. 47-326.1.) is amended by 
striking all after the heading and inserting the following:
    ``Sec. 467. (a) In general.--An act of the Council authorizing the 
issuance of general obligation bonds or notes under section 461(a), 
section 471(a), section 472(a), or section 475(a) may create a security 
interest in any District revenues as additional security for the payment 
of the bonds or notes authorized by such act.
    ``(b) Contents of Acts.--Any such act creating a security interest 
in District revenues may contain provisions (which may be part of the 
contract with the holders of such bonds or notes)--
            ``(1) describing the particular District revenues which are 
        subject to such security interest;
            ``(2) creating a reasonably required debt service reserve 
        fund or any other special fund;
            ``(3) authorizing the Mayor of the District to execute a 
        trust indenture securing the bonds or notes;
            ``(4) vesting in the trustee under such a trust indenture 
        such properties, rights, powers, and duties in trust as may be 
        necessary, convenient, or desirable;
            ``(5) authorizing the Mayor of the District to enter into 
        and amend agreements concerning--
                    ``(A) the custody, collection, use, disposition, 
                security, investment, and payment of the proceeds of the 
                bonds or notes and the District revenues which are 
                subject to such security interest; and
                    ``(B) the doing of any act (or the refraining from 
                doing any act) that the District would have the right to 
                do in the absence of such an agreement;
            ``(6) prescribing the remedies of the holders of the bonds 
        or notes in the event of a default; and
            ``(7) authorizing the Mayor to take any other actions in 
        connection with the issuance, sale, delivery, security, and 
        payment of the bonds or notes.

    ``(c) Timing and Perfection of Security Interests.--Notwithstanding 
article 9 of title 28 of the District of Columbia Code, any security 
interest in District revenues created under subsection (a) shall be 
valid, binding, and perfected from the time such security interest is 
created, with or without the physical delivery of any funds or any other 
property and with or without any further action. Such security interest 
shall be valid, binding, and perfected whether or not any statement, 
document, or instrument relating to such security interest is recorded 
or filed. The lien created by such security interest is valid, binding, 
and perfected with respect to any individual or legal entity having 
claims against the District, whether or not such individual or legal 
entity has notice of such lien.
    ``(d) Obligations and Expenditures Not Subject to Appropriation.--
The fourth sentence of section 446 shall not apply to

[[Page 111 STAT. 771]]

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. <<NOTE: Certification.>> 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.

[[Page 111 STAT. 772]]

            ``(2) Purposes; permitting issuance of general obligation 
        bonds to cover indebtedness.--The proceeds of bond anticipation 
        notes issued under this section shall be used for the purposes 
        for which general obligation bonds may be issued under section 
        461, and such notes shall constitute indebtedness which may be 
        refunded through the issuance of general obligation bonds under 
        such section.

    ``(b) Maximum Annual Debt Service Amount.--The Act of the Council 
authorizing the issuance of bond anticipation notes shall set forth for 
the bonds anticipated by such notes an estimated maximum annual debt 
service amount based on an estimated schedule of annual principal 
payments and an estimated schedule of annual interest payments (based on 
an estimated maximum average annual interest rate for such bonds over a 
period of 30 years from the earlier of the date of issuance of the notes 
or the date of original issuance of prior notes in anticipation of those 
bonds). Such estimated maximum annual debt service amount as estimated 
at the time of issuance of the original bond anticipation notes shall be 
included in the calculation required by section 603(b) while such notes 
or renewal notes are outstanding.
    ``(c) Permitted Outstanding Duration.--Any bond anticipation note, 
including any renewal note, shall be due and payable not later than the 
last day of the third fiscal year following the fiscal year during which 
the note was originally issued.
    ``(d) General Authority of Council.--If provided for in Act of the 
Council authorizing such an issue of bond anticipation notes, bond 
anticipation notes may be issued in succession, in such amounts, at such 
times, and bearing interest rates within the permitted maximum 
authorized by such Act.
    ``(e) Effective Date of Authorization Acts; Payments Not Subject to 
Appropriation.--
            ``(1) Effective date.--Notwithstanding section 602(c)(1), 
        any act of the Council authorizing the renewal of bond 
        anticipation notes under subsection (c) or the issuance of 
        general obligation bonds under section 461(a) to refund any bond 
        anticipation notes shall take effect--
                    ``(A) if such act is enacted during a control year 
                (as defined in section 305(4) of the District of 
                Columbia Financial Responsibility and Management 
                Assistance Act of 1995), on the date of approval by the 
                District of Columbia Financial Responsibility and 
                Management Assistance Authority; or
                    ``(B) if such act is enacted during any other year, 
                on the date of enactment of such act.
            ``(2) Payment not subject to appropriation.--The fourth 
        sentence of 446 shall not apply to any amount obligated or 
        expended by the District for the payment of the principal of, 
        interest on, or redemption premium for any bond anticipation 
        note issued under this section.''.

    (b) Clerical Amendment.--The table of contents for the District of 
Columbia Self-Government and Governmental Reorganization Act is amended 
by adding at the end of the items relating to subpart 2 of part E of 
title IV the following new item:
        ``Sec. 475. Bond anticipation notes.''.

[[Page 111 STAT. 773]]


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 1finance, 
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

[[Page 111 STAT. 774]]

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).'';

[[Page 111 STAT. 775]]

            (3) by amending subsection (c) to read as follows:

    ``(c) Any and all such revenue bonds, notes, or other obligations 
issued under subsection (a)(1) shall not be general obligations of the 
District, shall not be a pledge of or involve the faith and credit or 
taxing power of the District (other than with respect to any dedicated 
taxes) and shall not constitute a debt of the District, and shall not 
constitute lending of the public credit for private undertakings for 
purposes of section 602(a)(2).'';
            (4) by amending subsection (f) to read as follows:

    ``(f) The fourth sentence of section 446 shall not apply to--
            ``(1) any amount (including the amount of any accrued 
        interest or premium) obligated or expended from the proceeds of 
        the sale of any revenue bond, note, or other obligations issued 
        under subsection (a)(1);
            ``(2) any amount obligated or expended for the payment of 
        the principal of, interest on, or any premium for any revenue 
        bond, note, or other obligation issued under subsection (a)(1);
            ``(3) any amount obligated or expended pursuant to 
        provisions made to secure any revenue bond, note, or other 
        obligations issued under subsection (a)(1); and
            ``(4) any amount obligated or expended pursuant to 
        commitments made in connection with the issuance of revenue 
        bonds, notes, or other obligations for repair, maintenance, and 
        capital improvements relating to undertakings financed through 
        any revenue bond, note, or other obligation issued under 
        subsection (a)(1).''; and
            (5) by adding at the end the following new subsections:

    ``(i) The revenue bonds, notes, or other obligations issued under 
subsection (a)(1) are not general obligation bonds of the District 
government and shall not be included in determining the aggregate amount 
of all outstanding obligations subject to the limitation specified in 
section 603(b).
    ``(j) The issuance of revenue bonds, notes, or other obligations by 
the District where the ultimate obligation to repay such revenue bonds, 
notes, or other obligations is that of one or more non-governmental 
persons or entities may be authorized by resolution of the Council. The 
issuance of all other revenue bonds, notes, or other obligations by the 
District shall be authorized by act of the Council.
    ``(k) During any control period (as defined in section 209 of the 
District of Columbia Financial Responsibility and Management Assistance 
Act of 1995), any act or resolution of the Council authorizing the 
issuance of revenue bonds, notes, or other obligations under subsection 
(a)(1) shall be submitted to the District of Columbia Financial 
Responsibility and Management Assistance Authority for certification in 
accordance with section 204 of that Act. Any certification issued by the 
Authority during a control period shall be effective for purposes of 
this subsection for revenue bonds, notes, or other obligations issued 
pursuant to such act or resolution of the Council whether the revenue 
bonds, notes, or other obligations are issued during or subsequent to 
that control period.
    ``(l) The following provisions of law shall not apply with respect 
to property acquired, held, and disposed of by the District in 
accordance with the terms of any lease-purchase financing authorized 
pursuant to subsection (a)(1):

[[Page 111 STAT. 776]]

            ``(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

[[Page 111 STAT. 777]]

        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''.

[[Page 111 STAT. 778]]

            (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.

[[Page 111 STAT. 779]]

            (2) Federal <<NOTE: Appropriation 
        authorization.>> 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

[[Page 111 STAT. 780]]

            ``(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

[[Page 111 STAT. 781]]

        Reform Commission Act of 1994 (DC Code, sec. 2-4101 et seq.) and 
        other existing and ongoing public and private regulatory reform 
        efforts. The Authority shall transmit the findings of its review 
        to the Mayor, Council, and Congress.
            (2) Revision.--Based on the review conducted under paragraph 
        (1) and taking into account actions by the Council and the 
        Executive Branch of the District of Columbia government, the 
        Authority shall take such additional actions as it considers 
        appropriate to repeal or revise the permit and application 
        processes (and their completion times) of the District of 
        Columbia, in accordance with (and subject to the terms and 
        conditions described in) section 207 of the District of Columbia 
        Financial Responsibility and Management Assistance Act of 1995. 
        In carrying out such repeals or revisions, the Authority shall 
        seek to ensure that the average time required to obtain a permit 
        or application from the District of Columbia is consistent with 
        the average time for other similar jurisdictions in the United 
        States.

    (c) Reports to Congress.--Upon the expiration of the 6-month period 
which begins on the date of the enactment of this title and on a 
quarterly basis thereafter, the Authority shall submit a report to 
Congress describing the steps taken to carry out the requirements of 
this section and the effectiveness of the regulatory, permit, and 
application processes of the District of Columbia.

SEC. 11702. REPEAL OF CLEAN AIR COMPLIANCE FEE ACT OF 1994.

    (a) Repeal.--
            (1) In <<NOTE: Effective date.>> 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.

[[Page 111 STAT. 782]]

            ``(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;

[[Page 111 STAT. 783]]

            (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 Part 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--

[[Page 111 STAT. 784]]

            (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 
by striking ``in section 467(d)'' and inserting ``in section 445A(b), 
section 467(d)''.
    (c) Effective Date.--The amendments made by this section shall apply 
with respect to fiscal years beginning on or after October 1, 1996.

SEC. 11715. <<NOTE: 40 USC 138.>> 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

[[Page 111 STAT. 785]]

        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.

[[Page 111 STAT. 786]]

SEC. 11716. REPEAL TERM OF DEED OF CONVEYANCE TO CERTAIN HOSPITAL.

    Section 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. <<NOTE: 18 USC 4246 note.>> 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

[[Page 111 STAT. 787]]

            (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.

    Approved August 5, 1997.

LEGISLATIVE HISTORY--H.R. 2015 (S. 947):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 105-149 (Comm. on the Budget) and 105-217 (Comm. of 
Conference).
CONGRESSIONAL RECORD, Vol. 143 (1997):
            June 25, considered and passed House; considered and passed 
                Senate, amended, in lieu of S. 947.
            July 30, House agreed to conference report. Senate 
                considered conference 
                report.
            July 31, Senate agreed to conference report.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 33 (1997):
            Aug. 5, Presidential remarks and statement.
            Aug. 11, Presidential remarks and special message on line 
                item veto.
FEDERAL REGISTER, Vol. 62 (1997):
            Aug. 12, Cancellation of item pursuant to Line Item Veto 
                Act.

                                  <all>