700
(b) TABLE OF CONTENTS.—The table of contents for
this title is as follows:
Sec. 8001. Short title; table of contents.
Subtitle A—Extension of Temporary Authorities
Sec. 8011. Authority to require that certain veterans make copayments in ex-
change for receiving health-care benefits.
Sec. 8012. Medical care cost recovery for non-service-connected disabilities of
service-connected veterans.
Sec. 8013. Department of Veterans Affairs medical-care receipts.
Sec. 8014. Income verification authority.
Sec. 8015. Limitation on pension for certain recipients of medicaid-covered
nursing home care.
Sec. 8016. Home loan fees.
Sec. 8017. Procedures applicable to liquidation sales on defaulted home loans
guaranteed by the Secretary of Veterans Affairs.
Sec. 8018. Enhanced loan asset sale authority.
Subtitle B—Other Matters
Sec. 8021. Rounding down of cost-of-living adjustments in compensation and
DIC rates.
Sec. 8022. Withholding of payments and benefits.
Subtitle A—Extension of
Temporary Authorities
SEC. 8011. AUTHORITY TO REQUIRE THAT CERTAIN VETER-
ANS MAKE COPAYMENTS IN EXCHANGE FOR
RECEIVING HEALTH-CARE BENEFITS.
(a) HOSPITAL AND MEDICAL CARE.—
(1) EXTENSION.—Section 1710(f)(2)(B) of title
38, United States Code, is amended by inserting
‘‘before September 30, 2002,’’ after ‘‘(B)’’.
(2) REPEAL OF SUPERSEDED PROVISION.—Sec-
tion 8013(e) of the Omnibus Budget Reconciliation
Act of 1990 (38 U.S.C. 1710 note) is repealed.
701
(b) OUTPATIENT MEDICATIONS.—Section 1722A(c)
of title 38, United States Code, is amended by striking
out ‘‘September 30, 1998’’ and inserting in lieu thereof
‘‘September 30, 2002’’.
SEC. 8012. MEDICAL CARE COST RECOVERY FOR NON-SERV-
ICE-CONNECTED DISABILITIES OF SERVICE-
CONNECTED VETERANS.
Section 1729(a)(2)(E) of title 38, United States
Code, is amended by striking out ‘‘before October 1,
1998,’’ and inserting ‘‘before October 1, 2002,’’.
SEC. 8013. DEPARTMENT OF VETERANS AFFAIRS MEDICAL-
CARE RECEIPTS.
(a) ALLOCATION OF RECEIPTS.—(1) Chapter 17 of
title 38, United States Code, is amended by inserting after
section 1729 the following new section:
‘‘§ 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 Col-
lections Fund.
‘‘(b) Amounts recovered or collected after September
30, 1997, under any of the following provisions of law
shall be deposited in the fund:
‘‘(1) Section 1710(f) of this title.
‘‘(2) Section 1710(g) of this title.
702
‘‘(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 collec-
tion under that law is based on medical care or serv-
ices 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 pur-
poses:
‘‘(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 ap-
propriated from the general fund of the Treasury for
that fiscal year for medical care.
‘‘(B) Expenses of the Department for the iden-
tification, billing, auditing, and collection of amounts
owed the United States by reason of medical care
and services furnished under this chapter.
703
‘‘(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.
‘‘(2)(A) If for fiscal year 1998, 1999, or 2000 the
Secretary determines that the total amount to be recov-
ered for that fiscal year under the provisions of law speci-
fied in subsection (b) will be less than the amount con-
tained in the latest Congressional Budget Office baseline
estimate (computed under section 257 of the Balanced
Budget and Emergency Deficit Control Act of 1985) for
the amount of such recoveries for that fiscal year by at
least $25,000,000, the Secretary shall promptly certify to
the Secretary of the Treasury the amount of the shortfall
(as estimated by the Secretary) that is in excess of
$25,000,000. Upon receipt of such a certification, the Sec-
retary of the Treasury shall, not later than 30 days after
receiving the certification, deposit in the fund, from any
unobligated amounts in the Treasury, an amount equal
to the amount certified by the Secretary.
‘‘(B) For a fiscal year for which a deposit is made
under subparagraph (A), if the Secretary subsequently de-
termines 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 Sec-
704
retary under subparagraph (A), the Secretary shall pay
into the general fund of the Treasury, from amounts avail-
able 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 de-
posit under subparagraph (A) pursuant to such certifi-
cation).
‘‘(C) For a fiscal year for which a deposit is made
under subparagraph (A), if the Secretary subsequently de-
termines 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 Sec-
retary under subparagraph (A), the Secretary shall
promptly certify to the Secretary of the Treasury the
amount of the shortfall. Upon receipt of such a certifi-
cation, the Secretary of the Treasury shall, not later than
30 days after receiving the certification, deposit in the
fund, from any unobligated amounts in the Treasury, an
amount equal to the amount certified by the Secretary.
‘‘(d)(1) The Secretary may allocate amounts available
to the Secretary under subsection (c) among components
of the Department in such manner as the Secretary con-
siders appropriate.
705
‘‘(2) The Secretary shall establish a policy for the al-
location under paragraph (1) of amounts in the fund.
Such policy shall be designed so as to facilitate the realiza-
tion of the maximum feasible collections under the provi-
sions of law specified in subsection (b). In developing the
policy, the Secretary shall take into account any factors
beyond the control of the Secretary that the Secretary con-
siders may impede such collections.
‘‘(e)(1) The Secretary shall submit to the Committees
on Veterans’ Affairs of the Senate and House of Rep-
resentatives quarterly reports on the operation of this sec-
tion for fiscal years 1998, 1999, and 2000 and for the
first quarter of fiscal year 2001. Each such report shall
specify the amount collected under each of the provisions
specified in subsection (b) during the preceding quarter
and the amount originally estimated to be collected under
each such provision during such quarter.
‘‘(2) A report under paragraph (1) for a quarter shall
be submitted not later than 45 days after the end of that
quarter.’’.
(2) The table of sections at the beginning of such
chapter is amended by inserting after the item relating
to section 1729 the following new item:
‘‘1729A. Department of Veterans Affairs Medical Care Collections Fund.’’.
(b) CONFORMING AMENDMENTS.—Chapter 17 of
such title is amended as follows:
706
(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 Col-
lections Fund’’.
(4) Section 1729 is amended by striking out
subsection (g).
(c) TERMINATION OF MEDICAL-CARE COST RECOV-
ERY FUND.—The amount of the unobligated balance re-
maining in the Department of Veterans Affairs Medical-
Care Cost Recovery Fund (established pursuant to section
1729(g)(1) of title 38, United States Code), at the close
of September 30, 1997, shall be deposited, not later than
December 31, 1997, in the Treasury as miscellaneous re-
ceipts, and that fund shall be terminated when the deposit
occurs.
(d) DETERMINATION OF AMOUNTS SUBJECT TO RE-
COVERY.—Section 1729 of title 38, United States Code,
is amended—
708
Integrated Service Networks) and, to the extent prac-
ticable for each facility within each such network. The
Secretary shall include in the report an analysis of dif-
ferences among the networks with respect to (A) the mar-
ket in which the networks operates, (B) the effort ex-
pended to achieve collections, (C) the efficiency of such
effort, and (D) any other relevant information.
(2) The Secretary shall adjust the allocation policy
established under section 1729A(d)(2) of title 38, United
States Code, as added by subsection (a), to take account
of differences in collections that the Secretary determines
are attributable to the different markets in which net-
works operate and shall include in the report under para-
graph (1) a description of such adjustments.
(g) EFFECTIVE DATE.—(1) Except as provided in
paragraph (2), this section and the amendments made by
this section shall take effect on October 1, 1997.
(2) The amendments made by subsection (d) shall
take effect on the date of the enactment of this Act.
SEC. 8014. INCOME VERIFICATION AUTHORITY.
(a) EXTENSION.—Section 5317(g) of title 38, United
States Code, is amended by striking out ‘‘September 30,
1998’’ and inserting in lieu thereof ‘‘September 30,
2002’’.
709
(b) SOCIAL SECURITY AND TAX RETURN INFORMA-
TION.—Section 6103(l)(7) of the Internal Revenue Code
of 1986 is amended by striking out ‘‘Clause (viii) shall
not apply after September 30, 1998’’ and inserting in lieu
thereof ‘‘Clause (viii) shall not apply after September 30,
2002’’.
SEC. 8015. LIMITATION ON PENSION FOR CERTAIN RECIPI-
ENTS 
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 in-
serting in lieu thereof ‘‘September 30, 2002’’.
SEC. 8016. HOME LOAN FEES.
(a) INCREASE
IN LOAN FEE UNDER PROPERTY
MANAGEMENT
PROGRAM.—Paragraph (2) of section
3729(a) of title 38, United States Code, is amended—
(1) in subparagraph (A), by striking out ‘‘or
3733(a)’’;
(2) by striking out ‘‘and’’ at the end of sub-
paragraph (D);
(3) by striking out the period at the end of sub-
paragraph (E) and inserting in lieu thereof ‘‘; and’’;
and
(4) by adding at the end the following new sub-
paragraph:
710
‘‘(F) in the case of a loan made under section
3733(a) of this title, the amount of such fee shall be
2.25 percent of the total loan amount.’’.
(b) EXTENSIONS.—Such section is further amend-
ed—
(1) in paragraph (4)—
(A) by striking out ‘‘October 1, 1998’’ and
inserting in lieu thereof ‘‘October 1, 2002’’; and
(B) by striking out ‘‘or (E)’’ and inserting
in lieu thereof ‘‘(E), or (F)’’; and
(2) in paragraph (5)(C), by striking out ‘‘Octo-
ber 1, 1998’’ and inserting in lieu thereof ‘‘October
1, 2002’’.
SEC. 8017. PROCEDURES APPLICABLE TO LIQUIDATION
SALES ON DEFAULTED HOME LOANS GUAR-
ANTEED BY THE SECRETARY OF VETERANS
AFFAIRS.
Section 3732(c)(11) of title 38, United States Code,
is amended by striking out ‘‘October 1, 1998’’ and insert-
ing ‘‘October 1, 2002’’.
SEC. 8018. ENHANCED LOAN ASSET SALE AUTHORITY.
Section 3720(h)(2) of title 38, United States Code,
is amended by striking out ‘‘December 31, 1997’’ and in-
serting in lieu thereof ‘‘September 30, 2002’’.
711
Subtitle B—Other Matters
SEC. 8021. ROUNDING DOWN OF COST-OF-LIVING ADJUST-
MENTS IN COMPENSATION AND DIC RATES.
(a) COMPENSATION COLAS.—(1) Chapter 11 of title
38, United States Code, is amended by inserting after sec-
tion 1102 the following new section:
‘‘§ 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 se-
curity 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)).’’.
712
(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) OUT-YEAR DIC COLAS.—(1) Chapter 13 of title
38, United States Code, is amended by inserting after sec-
tion 1302 the following new section:
‘‘§ 1303. Cost-of-living adjustments
‘‘(a) In the computation of cost-of-living adjustments
for fiscal years 1998 through 2002 in the rates of depend-
ency and indemnity compensation payable under this
chapter, such adjustments shall be made by a uniform per-
centage that is no more than the percentage equal to the
social security increase for that fiscal year, with all in-
creased 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 se-
curity 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)).’’.
713
(2) The table of sections at the beginning of such
chapter is amended by inserting after the item relating
to section 1302 the following new item:
‘‘1303. Cost-of-living adjustments.’’.
SEC. 8022. WITHHOLDING OF PAYMENTS AND BENEFITS.
(a) NOTICE REQUIRED IN LIEU OF CONSENT OR
COURT ORDER.—Section 3726 of title 38, United States
Code, is amended by striking out ‘‘unless’’ and all that
follows and inserting in lieu thereof the following: ‘‘unless
the Secretary provides such veteran or surviving spouse
with notice by certified mail with return receipt requested
of the authority of the Secretary to waive the payment
of indebtedness under section 5302(b) of this title. If the
Secretary does not waive the entire amount of the liability,
the Secretary shall then determine whether the veteran or
surviving spouse should be released from liability under
section 3713(b) of this title. If the Secretary determines
that the veteran or surviving spouse should not be released
from liability, the Secretary shall notify the veteran or sur-
viving 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.’’.
714
(b) CONFORMING AMENDMENT.—Section 5302(b) of
such title is amended by inserting ‘‘with return receipt re-
quested’’ after ‘‘certified mail’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to any indebtedness
to the United States arising pursuant to chapter 37 of
title 38, United States Code, before, on, or after the date
of the enactment of this Act.
TITLE IX—COMMITTEE ON WAYS
AND MEANS—NONMEDICARE
SEC. 9000. TABLE OF CONTENTS.
The table of contents of this title is as follows:
Sec. 9000. Table of contents.
Subtitle A—TANF Block Grant
Sec. 9001. Welfare-to-work grants.
Sec. 9002. Limitation on amount of Federal funds transferable to title XX pro-
grams.
Sec. 9003. Clarification of limitation on number of persons who may be treated
as engaged in work by reason of participation in vocational
educational training.
Sec. 9004. Rules governing expenditures of funds for work experience and com-
munity service programs.
Sec. 9005. State option to take account of certain work activities of recipients
with sufficient participation in work experience or community
service programs.
Sec. 9006. Worker protections.
Sec. 9007. Penalty for failure of State to reduce assistance for recipients refus-
ing without good cause to work.
Subtitle B—Supplemental Security Income
Sec. 9101. Requirement to perform childhood disability redeterminations in
missed cases.
Sec. 9102. Repeal of maintenance of effort requirements applicable to optional
State programs for supplementation of SSI benefits.
Sec. 9103. Fees for Federal administration of State supplementary payments.
Subtitle C—Child Support Enforcement
715
Sec. 9201. Clarification of authority to permit certain redisclosures of wage and
claim information.
Subtitle D—Restricting Welfare and Public Benefits for Aliens
Sec. 9301. Extension of eligibility period for refugees and certain other quali-
fied aliens from 5 to 7 years for SSI and medicaid.
Sec. 9302. SSI eligibility for aliens receiving SSI on August 22, 1996.
Sec. 9303. SSI eligibility for permanent resident aliens who are members of an
Indian tribe.
Sec. 9304. Verification of eligibility for State and local public benefits.
Sec. 9305. Derivative eligibility for benefits.
Sec. 9306. Effective date.
Subtitle E—Unemployment Compensation
Sec. 9401. Clarifying provision relating to base periods.
Sec. 9402. Increase in Federal unemployment account ceiling.
Sec. 9403. Special distribution to States from Unemployment Trust Fund.
Sec. 9404. Interest-free advances to State accounts in Unemployment Trust
Fund restricted to States which meet funding goals.
Sec. 9405. Exemption of service performed by election workers from the Fed-
eral unemployment tax.
Sec. 9406. Treatment of certain services performed by inmates.
Sec. 9407. Exemption of service performed for an elementary or secondary
school operated primarily for religious purposes from the Fed-
eral unemployment tax.
Sec. 9408. State program integrity activities for unemployment compensation.
Subtitle F—Increase in Public Debt Limit
Sec. 9501. Increase in public debt limit.
Subtitle A—TANF Block Grant
SEC. 9001. WELFARE-TO-WORK GRANTS.
(a) GRANTS TO STATES.—
(1) IN GENERAL.—Section 403(a) of the Social
Security Act (42 U.S.C. 603(a)) is amended by add-
ing at the end the following:
‘‘(5) WELFARE-TO-WORK GRANTS.—
‘‘(A) NONCOMPETITIVE GRANTS.—
‘‘(i) ENTITLEMENT.—A State shall be
entitled to receive from the Secretary a
grant for each fiscal year specified in sub-
716
paragraph (H) of this paragraph for which
the State is a welfare-to-work State, in an
amount that does not exceed the lesser
of——
‘‘(I) 2 times the total of the ex-
penditures by the State (excluding
qualified State expenditures (as de-
fined in section 409(a)(7)(B)(i)) and
any expenditure described in sub-
clause (I), (II), or (IV) of section
409(a)(7)(B)(iv)) during the fiscal
year for activities described in sub-
paragraph (C)(i) of this paragraph; or
‘‘(II) the allotment of the State
under clause (iii) of this subparagraph
for the fiscal year.
‘‘(ii) WELFARE-TO-WORK
STATE.—A
State shall be considered a welfare-to-work
State for a fiscal year for purposes of this
subparagraph if the Secretary, after con-
sultation (and the sharing of any plan or
amendment thereto submitted under this
clause) with the Secretary of Health and
Human Services and the Secretary of
Housing and Urban Development, deter-
717
mines that the State meets the following
requirements:
‘‘(I) The State has submitted to
the Secretary (in the form of an ad-
dendum to the State plan submitted
under section 402) a plan which—
‘‘(aa) describes how, consist-
ent 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 con-
sultation and coordination with
sub-State areas; and
‘‘(dd) is approved by the
agency administering the State
program funded under this part.
‘‘(II) The State has provided the
Secretary with an estimate of the
718
amount that the State intends to ex-
pend during the fiscal year (excluding
expenditures 
described 
in 
section
409(a)(7)(B)(iv)) for activities de-
scribed in subparagraph (C)(i) of this
paragraph.
‘‘(III) The State has agreed to
negotiate in good faith with the Sec-
retary of Health and Human Services
with respect to the substance of any
evaluation under section 413(j), and
to cooperate with the conduct of any
such evaluation.
‘‘(IV) The State is an eligible
State for the fiscal year.
‘‘(V) Qualified State expenditures
(within 
the 
meaning 
of 
section
409(a)(7)) are at least 80 percent of
historic State expenditures (within the
meaning of such section), with respect
to the fiscal year or the immediately
preceding fiscal year.
‘‘(iii) ALLOTMENTS TO WELFARE-TO-
WORK STATES.—The allotment of a wel-
fare-to-work State for a fiscal year shall be
719
the available amount for the fiscal year
multiplied by the State percentage for the
fiscal year.
‘‘(iv) AVAILABLE AMOUNT.—As used
in this subparagraph, the term ‘available
amount’ means, for a fiscal year, the sum
of—
‘‘(I) 50 percent of the sum of—
‘‘(aa) the amount specified
in subparagraph (H) for the fis-
cal year, minus the total of the
amounts reserved pursuant to
subparagraphs (F) and (G) for
the fiscal year; and
‘‘(bb) any amount reserved
pursuant to subparagraph (F)
for the immediately preceding fis-
cal year that has not been obli-
gated; 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
720
percentage’ means, with respect to a
fiscal year, 1⁄3 of the sum of—
‘‘(aa) the percentage rep-
resented by the number of indi-
viduals in the State whose in-
come is less than the poverty line
divided by the number of such in-
dividuals in the United States;
‘‘(bb) the percentage rep-
resented by the number of unem-
ployed individuals in the State di-
vided by the number of such indi-
viduals in the United States; and
‘‘(cc) the percentage rep-
resented by the number of indi-
viduals who are adult recipients
of assistance under the State
program funded under this part
divided by the number of individ-
uals in the United States who are
adult recipients of assistance
under any State program funded
under this part.
‘‘(vi) DISTRIBUTION OF FUNDS WITH-
IN STATES.—
721
‘‘(I) IN
GENERAL.—A State to
which a grant is made under this sub-
paragraph shall distribute not less
than 85 percent of the grant funds
among the service delivery areas in
the State, in accordance with a for-
mula which—
‘‘(aa) 
determines 
the
amount to be distributed for the
benefit of a service delivery area
in proportion to the number (if
any) by which the number of in-
dividuals residing in the service
delivery area with an income that
is less than the poverty line ex-
ceeds 5 percent of the population
of the service delivery area, rel-
ative to such number for the
other service delivery areas in the
State, and accords a weight of
not less than 50 percent to this
factor;
‘‘(bb) may determine the
amount to be distributed for the
benefit of a service delivery area
722
in proportion to the number of
adults residing in the service de-
livery area who are recipients of
assistance under the State pro-
gram funded under this part
(whether in effect before or after
the amendments made by section
103(a) of the Personal Respon-
sibility and Work Opportunity
Reconciliation Act first applied to
the State) for at least 30 months
(whether or not consecutive) rel-
ative to the number of such
adults residing in the other serv-
ice delivery areas in the State;
and
‘‘(cc) may determine the
amount to be distributed for the
benefit of a service delivery area
in proportion to the number of
unemployed individuals residing
in the service delivery area rel-
ative to the number of such indi-
viduals residing in the other serv-
ice delivery areas in the State.
723
‘‘(II) SPECIAL
RULE.—Notwith-
standing subclause (I), if the formula
used pursuant to subclause (I) would
result in the distribution of less than
$100,000 during a fiscal year for the
benefit of a service delivery area, then
in lieu of distributing such sum in ac-
cordance with the formula, such sum
shall be available for distribution
under subclause (III) during the fiscal
year.
‘‘(III) PROJECTS TO HELP LONG-
TERM
RECIPIENTS
OF
ASSISTANCE
INTO THE WORK FORCE.—The Gov-
ernor 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 re-
quired to be distributed under this
subclause by reason of subclause (II))
to projects that appear likely to help
long-term 
recipients 
of 
assistance
under the State program funded
under this part (whether in effect be-
fore or after the amendments made by
724
section 103(a) of the Personal Re-
sponsibility and Work Opportunity
Reconciliation Act first applied to the
State) enter the work force.
‘‘(vii) ADMINISTRATION.—
‘‘(I) 
IN
GENERAL.—A 
grant
made under this subparagraph to a
State shall be administered by the
State agency that is administering, or
supervising the administration of, the
State program funded under this part,
or by another State agency designated
by the Governor of the State.
‘‘(II) SPENDING BY PRIVATE IN-
DUSTRY
COUNCILS.—The private in-
dustry council for a service delivery
area shall have sole authority to ex-
pend the amounts provided for the
benefit of a service delivery area
under subparagraph (vi)(I), pursuant
to an agreement with the agency that
is administering the State program
funded under this part in the service
delivery area.
‘‘(B) COMPETITIVE GRANTS.—
725
‘‘(i) IN GENERAL.—The Secretary, in
consultation with the Secretary of Health
and Human Services and the Secretary of
Housing and Urban Development, shall
award grants in accordance with this sub-
paragraph, in fiscal years 1998 and 1999,
for projects proposed by eligible applicants,
based on the following:
‘‘(I) The effectiveness of the pro-
posal in—
‘‘(aa) expanding the base of
knowledge about programs aimed
at moving recipients of assistance
under State programs funded
under this part who are least job
ready into the work force.
‘‘(bb) moving recipients of
assistance under State programs
funded under this part who are
least job ready into the work
force; and
‘‘(cc) moving recipients of
assistance under State programs
funded under this part who are
least job ready into the work
726
force, even in labor markets that
have a shortage of low-skill jobs.
‘‘(II) At the discretion of the
Secretary, any of the following:
‘‘(aa) The history of success
of the applicant in moving indi-
viduals with multiple barriers
into work.
‘‘(bb) Evidence of the appli-
cant’s ability to leverage private,
State, and local resources.
‘‘(cc) Use by the applicant
of State and local resources be-
yond those required by subpara-
graph (A).
‘‘(dd) Plans of the applicant
to coordiate with other organiza-
tions 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 men-
tors, case managers, or service
providers.
727
‘‘(ii) ELIGIBLE APPLICANTS.—As used
in clause (i), the term ‘eligible applicant’
means a private industry council or a polit-
ical subdivision of a State that submits a
proposal that is approved by the agency
administering the State program funded
under this part.
‘‘(iii) DETERMINATION
OF
GRANT
AMOUNT.—In determining the amount of a
grant to be made under this subparagraph
for a project proposed by an applicant, the
Secretary shall provide the applicant with
an amount sufficient to ensure that the
project has a reasonable opportunity to be
successful, taking into account the number
of long-term recipients of assistance under
a State program funded under this part,
the level of unemployment, the job oppor-
tunities and job growth, the poverty rate,
and such other factors as the Secretary
deems appropriate, in the area to be served
by the project.
‘‘(iv) TARGETING OF FUNDS TO CER-
TAIN AREAS.—
728
‘‘(I) CITIES
WITH
GREATEST
NUMBER OF PERSONS WITH INCOME
LESS THAN THE POVERTY LINE.—The
Secretary shall use not less than 65
percent of the funds available for
grants under this subparagraph for a
fiscal year to award grants for ex-
penditures in cities that are among
the 100 cities in the United States
with the highest number of residents
with an income that is less than the
poverty line.
‘‘(II) RURAL AREAS.—
‘‘(aa) IN
GENERAL.—The
Secretary shall use not less than
25 percent of the funds available
for grants under this subpara-
graph for a fiscal year to award
grants for expenditures in rural
areas.
‘‘(bb) 
RURAL
AREA
DE-
FINED.—As used in item (aa),
the term ‘rural area’ means a
city, town, or unincorporated
area that has a population of
729
50,000 or fewer inhabitants and
that is not an urbanized area im-
mediately adjacent to a city,
town, or unincorporated area
that has a population of more
than 50,000 inhabitants.
‘‘(v) FUNDING.—For grants under
this subparagraph for each fiscal year
specified in subparagraph (H), there shall
be available to the Secretary an amount
equal to the sum of—
‘‘(I) 50 percent of the sum of—
‘‘(aa) the amount specified
in subparagraph (H) for the fis-
cal year, minus the total of the
amounts reserved pursuant to
subparagraphs (F) and (G) for
the fiscal year; and
‘‘(bb) any amount reserved
pursuant to subparagraph (F)
for the immediately preceding fis-
cal year that has not been obli-
gated; and
‘‘(II) any amount available for
grants under this subparagraph for
730
the immediately preceding fiscal year
that has not been obligated.
‘‘(C) LIMITATIONS ON USE OF FUNDS.—
‘‘(i) ALLOWABLE ACTIVITIES.—An en-
tity to which funds are provided under this
paragraph may use the funds to move into
the work force recipients of assistance
under the program funded under this part
of the State in which the entity is located
and the noncustodial parent of any minor
who is such a recipient, by means of any
of the following:
‘‘(I) Job creation through public
or private sector employment wage
subsidies.
‘‘(II) On-the-job training.
‘‘(III) Contracts with public or
private providers of readiness, place-
ment, and post-employment services.
‘‘(IV) Job vouchers for place-
ment, readiness, and postemployment
services.
‘‘(V) Job support services (ex-
cluding child care services) if such
services are not otherwise available.
731
‘‘(ii) REQUIRED BENEFICIARIES.—An
entity that operates a project with funds
provided under this paragraph shall expend
at least 90 percent of all funds provided to
the project for the benefit of recipients of
assistance under the program funded
under this part of the State in which the
entity is located who meet the require-
ments of each of the following subclauses:
‘‘(I) At least 2 of the following
apply to the recipient:
‘‘(aa) The individual has not
completed secondary school or
obtained a certificate of general
equivalency, and has low skills in
reading and mathematics.
‘‘(bb) The individual re-
quires substance abuse treatment
for employment.
‘‘(cc) The individual has a
poor work history.
The Secretary shall prescribe such
regulations as may be necessary to in-
terpret this subclause.
‘‘(II) The individual—
732
‘‘(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 Per-
sonal 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 assist-
ance, without regard to any ex-
emption provided pursuant to
section 408(a)(7)(C) that may
apply to the individual.
‘‘(iii) LIMITATION ON APPLICABILITY
OF
SECTION
404.—The rules of section
404, other than subsections (b), (f), and
(h) of section 404, shall not apply to a
grant made under this paragraph.
733
‘‘(iv) LIMITATIONS RELATING TO PRI-
VATE INDUSTRY COUNCILS.—
‘‘(I) NO
DIRECT
PROVISION
OF
SERVICES.—A private industry council
may not directly provide services
using funds provided under this para-
graph.
‘‘(II) COOPERATION WITH TANF
AGENCY.—On a determination by the
Secretary, in consultation with the
Secretary of Health and Human Serv-
ices and the Secretary of Housing and
Urban Development, that the private
industry council for a service delivery
area in a State for which funds are
provided under this paragraph and
the agency administering the State
program funded under this part are
not adhering to the agreement re-
ferred to in subparagraph (A)(vii)(II)
to implement any plan or project for
which the funds are provided, the re-
cipient of the funds shall remit the
funds to the Secretary.
734
‘‘(v) PROHIBITION
AGAINST
USE
OF
GRANT
FUNDS
FOR
ANY
OTHER
FUND
MATCHING
REQUIREMENT.—An entity to
which funds are provided under this para-
graph shall not use any part of the funds
to fulfill any obligation of any State, politi-
cal subdivision, or private industry council
to contribute funds under other Federal
law.
‘‘(vi) 
DEADLINE
FOR
EXPENDI-
TURE.—An entity to which funds are pro-
vided under this paragraph shall remit to
the Secretary any part of the funds that
are not expended within 3 years after the
date the funds are so provided.
‘‘(D) INDIVIDUALS
WITH
INCOME
LESS
THAN THE POVERTY LINE.—For purposes of
this paragraph, the number of individuals with
an income that is less than the poverty line
shall be determined based on the methodology
used by the Bureau of the Census to produce
and publish intercensal poverty data for 1993
for States and counties.
‘‘(E) DEFINITIONS.—As used in this para-
graph:
735
‘‘(i) PRIVATE INDUSTRY COUNCIL.—
The term ‘private industry council’ means,
with respect to a service delivery area, the
private industry council (or successor en-
tity) established for the service delivery
area pursuant to the Job Training Part-
nership Act.
‘‘(ii) SECRETARY.—The term ‘Sec-
retary’ means the Secretary of Labor, ex-
cept as otherwise expressly provided.
‘‘(iii) SERVICE DELIVERY AREA.—The
term ‘service delivery area’ shall have the
meaning given such term for purposes of
the Job Training Partnership Act.
‘‘(F) SET-ASIDE FOR INDIAN TRIBES.—1
percent of the amount specified in subpara-
graph (H) for each fiscal year shall be reserved
for grants to Indian tribes under section
412(a)(3).
‘‘(G) SET-ASIDE FOR EVALUATIONS.—0.5
percent of the amount specified in subpara-
graph (H) for each fiscal year shall be reserved
for use by the Secretary of Health and Human
Services to carry out section 413(j).
736
‘‘(H) FUNDING.—The amount specified in
this subparagraph is $1,500,000,000 for each
of fiscal years 1998 and 1999.
‘‘(I) BUDGET SCORING.—Notwithstanding
section 457(b)(2) of the Balanced Budget and
Emergency Deficit Control Act of 1985, the
baseline shall assume that no grant shall be
awarded under this paragraph or under section
412(a)(3) after fiscal year 2000.
(2) 
CONFORMING
AMENDMENT.—Section
409(a)(7)(B)(iv) 
of 
such 
Act 
(42 
U.S.C.
609(a)(7)(B)(iv)) is amended to read as follows:
‘‘(iv) 
EXPENDITURES
BY
THE
STATE.—The term ‘expenditures by the
State’ does not include—
‘‘(I) 
any 
expenditure 
from
amounts made available by the Fed-
eral 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
737
‘‘(IV) any State funds which are
expended as a condition of recieving
Federal funds other than under this
part.
Notwithstanding subclause (IV) of the pre-
ceding sentence, such term includes ex-
penditures by a State for child care in a
fiscal year to the extent that the total
amount of the expenditures does not ex-
ceed the amount of State expenditures in
fiscal year 1994 or 1995 (whichever is the
greater) that equal the non-Federal share
for the programs described in section
418(a)(1)(A).’’.
(b) GRANTS TO OUTLYING AREAS.—Section 1108(a)
of such Act (42 U.S.C. 1308(a)) is amended by inserting
‘‘(except section 403(a)(5))’’ after ‘‘title IV’’.
(c) GRANTS TO INDIAN TRIBES.—Section 412(a) of
such Act (42 U.S.C. 612(a)) is amended by adding at the
end the following:
‘‘(3) WELFARE-TO-WORK GRANTS.—
‘‘(A) IN
GENERAL.—The Secretary shall
award a grant in accordance with this para-
graph to an Indian tribe for each fiscal year
specified in section 403(a)(5)(H) for which the
738
Indian tribe is a welfare-to-work tribe, in such
amount as the Secretary deems appropriate,
subject to subparagraph (B) of this paragraph.
‘‘(B) WELFARE-TO-WORK TRIBE.—An In-
dian tribe shall be considered a welfare-to-work
tribe for a fiscal year for purposes of this para-
graph if the Indian tribe meets the following re-
quirements:
‘‘(i) The Indian tribe has submitted to
the Secretary (in the form of an addendum
to the tribal family assistance plan, if any,
of the Indian tribe) a plan which describes
how, consistent with section 403(a)(5), the
Indian tribe will use any funds provided
under this paragraph during the fiscal
year.
‘‘(ii) The Indian tribe has provided
the Secretary with an estimate of the
amount that the Indian tribe intends to ex-
pend during the fiscal year (excluding trib-
al 
expenditures 
described 
in 
section
409(a)(7)(B)(iv)) for activities described in
section 403(a)(5)(C)(i).
‘‘(iii) The Indian tribe has agreed to
negotiate in good faith with the Secretary
739
of Health and Human Services with re-
spect to the substance of any evaluation
under section 413(j), and to cooperate with
the conduct of any such evaluation.
‘‘(C) LIMITATIONS ON USE OF FUNDS.—
Section 403(a)(5)(C) shall apply to funds pro-
vided to Indian tribes under this paragraph in
the same manner in which such section applies
to funds provided under section 403(a)(5).’’.
(d) FUNDS RECEIVED FROM GRANTS TO BE DIS-
REGARDED IN APPLYING DURATIONAL LIMIT ON ASSIST-
ANCE.—Section 408(a)(7) of such Act (42 U.S.C.
608(a)(7)) is amended by adding at the end the following:
‘‘(G) INAPPLICABILITY
TO
WELFARE-TO-
WORK GRANTS AND ASSISTANCE.—For purposes
of subparagraph (A) of this paragraph, a grant
made under section 403(a)(5) shall not be con-
sidered a grant made under section 403, and
assistance from funds provided under section
403(a)(5) shall not be considered assistance.’’.
(e) EVALUATIONS.—Section 413 of such Act (42
U.S.C. 613) is amended by adding at the end the follow-
ing:
‘‘(j) EVALUATION
OF
WELFARE-TO-WORK
PRO-
GRAMS.—
740
‘‘(1) EVALUATION.—The Secretary—
‘‘(A) shall, in consultation with the Sec-
retary of Labor, develop a plan to evaluate how
grants made under sections 403(a)(5) and
412(a)(3) have been used;
‘‘(B) may evaluate the use of such grants
by such grantees as the Secretary deems appro-
priate, in accordance with an agreement entered
into with the grantees after good-faith negotia-
tions; and
‘‘(C) is urged to include the following out-
come measures in the plan developed under
subparagraph (A):
‘‘(i) Placements in the labor force and
placements in the labor force that last for
at least 6 months.
‘‘(ii) Placements in the private and
public sectors.
‘‘(iii) Earnings of individuals who ob-
tain employment.
‘‘(iv) Average expenditures per place-
ment.
‘‘(2) REPORTS TO THE CONGRESS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the Secretary, in consulta-
741
tion with the Secretary of Labor and the Sec-
retary 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 sub-
paragraph (A).
‘‘(C) FINAL REPORT.—Not later than Jan-
uary 1, 2001, (or at a later date, if the Sec-
retary informs the Committees of the Congress
with jurisdiction over the subject matter of the
report) the Secretary shall submit a final report
on the matter described in subparagraph (A).’’.
SEC. 9002. LIMITATION ON AMOUNT OF FEDERAL FUNDS
TRANSFERABLE TO TITLE XX PROGRAMS.
(a) IN GENERAL.—Section 404(d) of the Social Secu-
rity Act (42 U.S.C. 604(d)) is amended—
(1) in paragraph (1), by striking ‘‘A State
may’’ and inserting ‘‘Subject to paragraph (2), a
State may’’; and
(2) by amending paragraph (2) to read as fol-
lows:
742
‘‘(2) LIMITATION ON AMOUNT TRANSFERABLE
TO
TITLE
XX
PROGRAMS.—A State may use not
more than 10 percent of the amount of any grant
made to the State under section 403(a) for a fiscal
year to carry out State programs pursuant to title
XX.’’.
(b) RETROACTIVITY.—The amendments made by
subsection (a) of this section shall take effect as if in-
cluded in the enactment of section 103(a) of the Personal
Responsibility and Work Opportunity Reconciliation Act
of 1996.
SEC. 9003. CLARIFICATION OF LIMITATION ON NUMBER OF
PERSONS WHO MAY BE TREATED AS EN-
GAGED IN WORK BY REASON OF PARTICIPA-
TION IN VOCATIONAL EDUCATIONAL TRAIN-
ING.
(a) IN GENERAL.—Section 407(c)(2)(D) of the Social
Security Act (42 U.S.C. 607(c)(2)(D)) is amended to read
as follows:
‘‘(D) LIMITATION
ON
NUMBER
OF
PER-
SONS WHO MAY BE TREATED AS ENGAGED IN
WORK BY REASON OF PARTICIPATION IN VOCA-
TIONAL
EDUCATIONAL
TRAINING.—For pur-
poses of determining monthly participation
rates under paragraphs (1)(B)(i) and (2)(B) of
743
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 train-
ing.’’.
(b) RETROACTIVITY.—The amendment made by sub-
section (a) of this section shall take effect as if included
in the enactment of section 103(a) of the Personal Re-
sponsibility and Work Opportunity Reconciliation Act of
1996.
SEC. 9004. RULES GOVERNING EXPENDITURE OF FUNDS
FOR WORK EXPERIENCE AND COMMUNITY
SERVICE PROGRAMS.
(a) IN GENERAL.—Section 407 of the Social Security
Act (42 U.S.C. 607) is amended by adding at the end the
following:
‘‘(j) RULES GOVERNING EXPENDITURE OF FUNDS
FOR WORK EXPERIENCE AND COMMUNITY SERVICE PRO-
GRAMS.—
‘‘(1) IN GENERAL.—To the extent that a State
to which a grant is made under section 403(a)(5) or
any other provision of section 403 uses the grant to
744
establish or operate a work experience or community
service program, the State may establish and oper-
ate the program in accordance with this subsection.
‘‘(2) PURPOSE.—The purpose of a work experi-
ence or community experience program is to provide
experience or training for individuals not able to ob-
tain employment in order to assist them to move to
regular employment. Such a program shall be de-
signed to improve the employability of participants
through actual work experience to enable individuals
participating in the program to move promptly into
regular public or private employment. Such a pro-
gram shall not place individuals in private, for-profit
entities.
‘‘(3) LIMITATION ON PROJECTS THAT MAY BE
UNDERTAKEN.—A work experience or community
service program shall be limited to projects which
serve a useful public purpose in fields such as
health, social service, environmental protection, edu-
cation, urban and rural development and redevelop-
ment, welfare, recreation, public facilities, public
safety, and day care, and other purposes identified
by the State.
‘‘(4) MAXIMUM HOURS OF PARTICIPATION PER
MONTH.—A State that elects to establish a work ex-
745
perience or community service program shall operate
the program so that each participant participates in
the program with the maximum number of hours
that any such individual may be required to partici-
pate in any month being a number equal to—
‘‘(A)(i) the amount of assistance provided
during the month to the family of which the in-
dividual is a member under the State program
funded under this part; plus
‘‘(ii) the dollar value equivalent of any ben-
efits provided during the month to the house-
hold of which the individual is a member under
the food stamp program under the Food Stamp
Act of 1977; minus
‘‘(iii) any amount collected by the State as
child support with respect to the family that is
retained by the State; divided by
‘‘(B) the greater of the Federal minimum
wage or the applicable State minimum wage.
‘‘(5) MAXIMUM HOURS OF PARTICIPATION PER
WEEK.—A State that elects to establish a work ex-
perience or community service program may not re-
quire any participant in any such program to par-
ticipate in any such program for a combined total of
more than 40 hours per week.
746
‘‘(6) RULE
OF
INTERPRETATION.—This sub-
section shall not be construed as authorizing the
provision of assistance under a State program fund-
ed under this part as compensation for work per-
formed, nor shall a participant be entitled to a sal-
ary or to any other work or training expense pro-
vided under any other provision of law by reason of
participation in a work experience or community
service program described in this subsection.’’.
(b) RETROACTIVITY.—The amendment made by sub-
section (a) of this section shall take effect as if included
in the enactment of section 103(a) of the Personal Re-
sponsibility and Work Opportunity Reconciliation Act of
1996.
SEC. 9005. STATE OPTION TO TAKE ACCOUNT OF CERTAIN
WORK ACTIVITIES OF RECIPIENTS WITH SUF-
FICIENT PARTICIPATION IN WORK EXPERI-
ENCE OR COMMUNITY SERVICE PROGRAMS.
(a) IN GENERAL.—Section 407(c) of the Social Secu-
rity Act (42 U.S.C. 607(c)) is amended by adding at the
end the following:
‘‘(3) STATE OPTION TO TAKE ACCOUNT OF CER-
TAIN WORK ACTIVITIES OF RECIPIENTS WITH SUFFI-
CIENT
PARTICIPATION
IN
WORK
EXPERIENCE
OR
COMMUNITY SERVICE PROGRAMS.—Notwithstanding
747
paragraphs (1) and (2) of this subsection and sub-
section (d)(8), for purposes of determining monthly
participation rates under paragraphs (1)(B)(i) and
(2)(B) of subsection (b), an individual who, during
a month, has participated in a work experience or
community service program operated in accordance
with subsection (j), for the maximum number of
hours that the individual may be required to partici-
pate in such a program during the month shall be
treated as engaged in work for the month if, during
the month, the individual has participated in any
other work activity for a number of hours that is not
less than the number of hours required by sub-
section (c)(1) for the month minus such maximum
number of hours.’’.
(b) RETROACTIVITY.—The amendment made by sub-
section (a) of this section shall take effect as if included
in the enactment of section 103(a) of the Personal Re-
sponsibility and Work Opportunity Reconciliation Act of
1996.
SEC. 9006. WORKER PROTECTIONS.
Section 407(f) of the Social Security Act (42 U.S.C.
607(f)) is amended to read as follows:
‘‘(f) WORKER PROTECTIONS.—
748
‘‘(1) NONDISPLACEMENT
IN
WORK
ACTIVI-
TIES.—
‘‘(A) GENERAL PROHIBITION.—Subject to
this paragraph, an adult in a family receiving
assistance under a State program funded under
this part attributable to funds provided by the
Federal Government may fill a vacant employ-
ment position in order to engage in a work ac-
tivity.
‘‘(B) PROHIBITION AGAINST VIOLATION OF
CONTRACTS.—A work activity shall not violate
an existing contract for services or collective
bargaining agreement.
‘‘(C) OTHER
PROHIBITIONS.—An adult
participant in a work activity shall not be em-
ployed or assigned—
‘‘(i) when any other individual is on
layoff from the same or any substantially
equivalent job; or
‘‘(ii) if the employer has terminated
the employment of any regular employee or
otherwise caused an involuntary reduction
if its workforce with the intention of filling
the vacancy so created with the partici-
pant.
749
‘‘(2) HEALTH AND SAFETY.—Health and safety
standards established under Federal and State law
otherwise applicable to working conditions of em-
ployees shall be equally applicable to working condi-
tions of participants engaged in a work activity.
‘‘(3) NONDISCRIMINATION.—In addition to the
protections provided under the provisions of law
specified in section 408(c), an individual may not be
discriminated against with respect to participation in
work activities by reason of gender.
‘‘(4) GRIEVANCE PROCEDURE.—
‘‘(A) IN GENERAL.—Each State to which a
grant is made under section 403 shall establish
and maintain a procedure for grievances or
complaints from employees alleging violations of
paragraph (1) and participants in work activi-
ties alleging violations of paragraph (1), (2), or
(3).
‘‘(B) HEARING.—The procedure shall in-
clude an opportunity for a hearing.
‘‘(C) REMEDIES.—The procedure shall in-
clude remedies for violation of paragraph (1),
(2), or (3), which may include—
750
‘‘(i) prohibition against placement of a
participant with an employer that has vio-
lated paragraph (1), (2), or (3);
‘‘(ii) where applicable, reinstatement
of an employee, payment of lost wages and
benefits, and reestablishment of other rel-
evant terms, conditions and privileges of
employment; and
‘‘(iii) where appropriate, other equi-
table relief.
‘‘(5) 
NONPREEMPTION
OF
STATE
NON-
DISPLACEMENT LAWS.—The provisions of this sub-
section relating to nondisplacement of employees
shall not be construed to preempt any provision of
State law relating to nondisplacement of employees
that affords greater protections to employees than is
afforded by such provisions of this subsection.’’.
SEC. 9007. PENALTY FOR FAILURE OF STATE TO REDUCE
ASSISTANCE 
FOR 
RECIPIENTS 
REFUSING
WITHOUT GOOD CAUSE TO WORK.
(a) IN GENERAL.—Section 409(a) of the Social Secu-
rity Act (42 U.S.C. 609(a)) is amended by adding at the
end the following:
751
‘‘(13) PENALTY FOR FAILURE TO REDUCE AS-
SISTANCE
FOR
RECIPIENTS
REFUSING
WITHOUT
GOOD CAUSE TO WORK.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines 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 Sec-
retary shall reduce the grant payable to the
State under section 403(a)(1) for the imme-
diately 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 reduc-
tions under subparagraph (A) with respect to a
fiscal year based on the degree of noncompli-
ance.’’.
(b) RETROACTIVITY.—The amendment made by sub-
section (a) of this section shall take effect as if included
in the enactment of section 103(a) of the Personal Re-
sponsibility and Work Opportunity Reconciliation Act of
1996.
752
Subtitle B—Supplemental Security
Income
SEC. 9101. REQUIREMENT TO PERFORM CHILDHOOD DIS-
ABILITY 
REDETERMINATIONS 
IN 
MISSED
CASES.
Section 211(d)(2) of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (110 Stat.
2190) is amended—
(1) in subparagraph (A)—
(A) in the 1st sentence, by striking ‘‘1
year’’ and inserting ‘‘18 months’’; and
(B) by inserting after the 1st sentence the
following: ‘‘Any redetermination required by the
preceding sentence that is not performed before
the end of the period described in the preceding
sentence shall be performed as soon as is prac-
ticable thereafter.’’; and
(2) in subparagraph (C), by adding at the end
the following: ‘‘Before commencing a redetermina-
tion under the 2nd sentence of subparagraph (A), in
any case in which the individual involved has not al-
ready been notified of the provisions of this para-
graph, the Commissioner of Social Security shall no-
tify the individual involved of the provisions of this
paragraph.’’.
753
SEC. 9102. REPEAL OF MAINTENANCE OF EFFORT RE-
QUIREMENTS 
APPLICABLE 
TO 
OPTIONAL
STATE PROGRAMS FOR SUPPLEMENTATION
OF SSI BENEFITS.
Section 1618 of the Social Security Act (42 U.S.C.
1382g) is repealed.
SEC. 9103. FEES FOR FEDERAL ADMINISTRATION OF STATE
SUPPLEMENTARY PAYMENTS.
(a) FEE SCHEDULE.—
(1) OPTIONAL
STATE
SUPPLEMENTARY
PAY-
MENTS.—
(A) IN GENERAL.—Section 1616(d)(2)(B)
of 
the 
Social 
Security 
Act 
(42 
U.S.C.
1382e(d)(2)(B)) is amended—
(i) by striking ‘‘and’’ at the end of
clause (iii); and
(ii) by striking clause (iv) and insert-
ing 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—
754
‘‘(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 in-
crease exceeds the Consumer Price Index for
the month of June of the calendar year preced-
ing the calendar year of the increase, and
rounded to the nearest whole cent; or
‘‘(II) such different rate as the Commis-
sioner 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 PAY-
MENTS.—
(A) 
IN
GENERAL.—Section
212(b)(3)(B)(ii) of Public Law 93–66 (42
U.S.C. 1382 note) is amended—
(i) by striking ‘‘and’’ at the end of
subclause (III); and
(ii) by striking subclause (IV) and in-
serting the following:
‘‘(IV) for fiscal year 1997, $5.00;
‘‘(V) for fiscal year 1998, $6.20;
755
‘‘(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 in-
crease exceeds the Consumer Price Index for
the month of June of the calendar year preced-
ing the calendar year of the increase, and
rounded to the nearest whole cent; or
‘‘(bb) such different rate as the Commis-
sioner 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 in-
serting ‘‘(ii)(X)(bb)’’.
(b) USE OF NEW FEES TO DEFRAY THE SOCIAL SE-
CURITY
ADMINISTRATION’S
ADMINISTRATIVE
EX-
PENSES.—
(1) CREDIT
TO
SPECIAL
FUND
FOR
FISCAL
YEAR 1998 AND SUBSEQUENT YEARS.—
756
(A) OPTIONAL
STATE
SUPPLEMENTARY
PAYMENT FEES.—Section 1616(d)(4) of the So-
cial Security Act (42 U.S.C. 1382e(d)(4)) is
amended to read as follows:
‘‘(4)(A) The first $5 of each administration fee as-
sessed 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 ex-
cess 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 avail-
able to defray expenses incurred in carrying out this title
and related laws.’’.
(B) MANDATORY STATE SUPPLEMENTARY
PAYMENT FEES.—Section 212(b)(3)(D) of Pub-
lic Law 93–66 (42 U.S.C. 1382 note) is amend-
ed to read as follows:
‘‘(D)(i) The first $5 of each administration fee as-
sessed pursuant to subparagraph (B), upon collection,
757
shall be deposited in the general fund of the Treasury of
the United States as miscellaneous receipts.
‘‘(ii) The portion of each administration fee in excess
of $5, and 100 percent of each additional services fee
charged pursuant to subparagraph (C), upon collection for
fiscal year 1998 and each subsequent fiscal year, shall be
credited to a special fund established in the Treasury of
the United States for State supplementary payment fees.
The amounts so credited, to the extent and in the amounts
provided in advance in appropriations Acts, shall be avail-
able to defray expenses incurred in carrying out this sec-
tion and title XVI of the Social Security Act and related
laws.’’.
(2) LIMITATIONS ON AUTHORIZATION OF AP-
PROPRIATIONS.—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.
758
Subtitle C—Child Support
Enforcement
SEC. 9201. CLARIFICATION OF AUTHORITY TO PERMIT CER-
TAIN REDISCLOSURES OF WAGE AND CLAIM
INFORMATION.
Section 303(h)(1)(C) of the Social Security Act (42
U.S.C. 503(h)(1)(C)) is amended by striking ‘‘section
453(i)(1) in carrying out the child support enforcement
program under title IV’’ and inserting ‘‘subsections (i)(1),
(i)(3), and (j) of section 453’’.
Subtitle D—Restricting Welfare
and Public Benefits for Aliens
SEC. 9301. EXTENSION OF ELIGIBILITY PERIOD FOR REFU-
GEES 
AND 
CERTAIN 
OTHER 
QUALIFIED
ALIENS FROM 5 TO 7 YEARS FOR SSI AND
MEDICAID.
(a) SSI.—Section 402(a)(2)(A) of the Personal Re-
sponsibility and Work Opportunity Reconciliation Act of
1996 (8 U.S.C. 1612(a)(2)(A)) is amended to read as fol-
lows:
‘‘(A) TIME-LIMITED EXCEPTION FOR REF-
UGEES AND ASYLEES.—
‘‘(i) SSI.—With respect to the speci-
fied Federal program described in para-
759
graph (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 sec-
tion 207 of the Immigration and Na-
tionality Act;
‘‘(II) an alien is granted asylum
under section 208 of such Act; or
‘‘(III) an alien’s deportation is
withheld under section 243(h) of such
Act.
‘‘(ii) FOOD STAMPS.—With respect to
the specified Federal program described in
paragraph (3)(B), paragraph 1 shall not
apply to an alien until 5 years after the
date—
‘‘(I) an alien is admitted to the
United States as a refugee under sec-
tion 207 of the Immigration and Na-
tionality Act;
‘‘(II) an alien is granted asylum
under section 208 of such Act; or
‘‘(III) an alien’s deportation is
withheld under section 243(h) of such
Act.’’.
760
(b) MEDICAID.—Section 402(b)(2)(A) of the Per-
sonal Responsibility and Work Opportunity Reconciliation
Act of 1996 (8 U.S.C. 1612(b)(2)(A)) is amended to read
as follows:
‘‘(A) TIME-LIMITED EXCEPTION FOR REF-
UGEES 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 sec-
tion 207 of the Immigration and Na-
tionality Act;
‘‘(II) an alien is granted asylum
under section 208 of such Act; or
‘‘(III) an alien’s deportation is
withheld under section 243(h) of such
Act.
‘‘(ii) OTHER
DESIGNATED
FEDERAL
PROGRAMS.—With respect to the des-
ignated Federal programs under paragraph
(3) (other than subparagraph (C)), para-
761
graph 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 sec-
tion 207 of the Immigration and Na-
tionality Act;
‘‘(II) an alien is granted asylum
under section 208 of such Act; or
‘‘(III) an alien’s deportation is
withheld under section 243(h) of such
Act.’’.
SEC. 9302. SSI ELIGIBILITY FOR ALIENS RECEIVING SSI ON
AUGUST 22, 1996.
(a) IN GENERAL.—Section 402(a)(2) of the Personal
Responsibility and Work Opportunity Reconciliation Act
of 1996 (8 U.S.C. 1612(a)(2)) is amended by adding after
subparagraph (D) the following new subparagraph:
‘‘(E) ALIENS RECEIVING SSI ON AUGUST
22, 1996.—With respect to eligibility for bene-
fits for the program defined in paragraph
(3)(A) (relating to the supplemental security in-
come program), paragraph (1) shall not apply
to an alien who was receiving such benefits on
August 22, 1996.’’.
762
(b) STATUS OF CUBAN AND HAITIAN ENTRANTS AND
AMERASIAN PERMANENT RESIDENT ALIENS.—For pur-
poses of section 402(a)(2)(E) of the Personal Responsibil-
ity and Work Opportunity Reconciliation Act of 1996, the
following aliens shall be considered qualified aliens:
(1) An alien who is a Cuban and Haitian en-
trant as defined in section 501(e) of the Refugee
Education Assistance Act of 1980.
(2) An alien admitted to the United States as
an Amerasian immigrant pursuant to section 584 of
the Foreign Operations, Export Financing, and Re-
lated Programs Appropriations Act, 1988, as con-
tained in section 101(e) of Public Law 100-202,
(other than an alien admitted pursuant to section
584(b)(1)(C)).
(c) 
CONFORMING
AMENDMENTS.—Section
402(a)(2)(D) of the Personal Responsibility and Work Op-
portunity 
Reconciliation 
Act 
of 
1996 
(8 
U.S.C.
1612(a)(D)) is amended—
(1) by striking clause (i);
(2) in the subparagraph heading by striking
‘‘BENEFITS’’ and inserting ‘‘FOOD STAMPS’’;
(3) by striking ‘‘(ii) FOOD STAMPS’.—’;
(3) by redesignating subclauses (I), (II), and
(III) as clauses (i), (ii), and (iii).
763
SEC. 9303. SSI ELIGIBILITY FOR PERMANENT RESIDENT
ALIENS WHO ARE MEMBERS OF AN INDIAN
TRIBE.
Section 402(a)(2) of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (8 U.S.C.
1612(a)(2)) (as amended by section 9302) is amended by
adding after subparagraph (E) the following new subpara-
graph:
‘‘(F) PERMANENT RESIDENT ALIENS WHO
ARE MEMBERS OF AN INDIAN TRIBE.—With re-
spect to eligibility for benefits for the program
defined in paragraph (3)(A) (relating to the
supplemental security income program), para-
graph (1) shall not apply to an alien who—
‘‘(i) is lawfully admitted for perma-
nent residence under the Immigration and
Nationality Act; and
‘‘(ii) is a member of an Indian tribe
(as defined in section 4(e) of the Indian
Self-Determination and Education Assist-
ance Act).’’.
SEC. 9304. VERIFICATION OF ELIGIBILITY FOR STATE AND
LOCAL PUBLIC BENEFITS.
(a) IN GENERAL.—The Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 is amended
by adding after section 412 the following new section:
764
‘‘SEC. 413. AUTHORIZATION FOR VERIFICATION OF ELIGI-
BILITY FOR STATE AND LOCAL PUBLIC BENE-
FITS.
‘‘A State or political subdivision of a State is author-
ized to require an applicant for State and local public ben-
efits (as defined in section 411(c)) to provide proof of eli-
gibility.’’.
(b) CLERICAL AMENDMENT.—Section 2 of the Per-
sonal Responsibility and Work Opportunity Reconciliation
Act of 1996 is amended by adding after the item related
to section 412 the following:
‘‘Sec. 413. Authorization for verification of eligibility for state and local public
benefits.’’.
SEC. 9305. DERIVATIVE ELIGIBILITY FOR BENEFITS.
(a) IN GENERAL.—The Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 is amended
by adding after section 435 the following new section:
‘‘SEC. 436. DERIVATIVE ELIGIBILITY FOR BENEFITS.
‘‘(a) FOOD STAMPS.—Notwithstanding any other
provision of law, an alien who under the provisions of this
title is ineligible for benefits under the food stamp pro-
gram (as defined in section 402(a)(3)(A)) shall not be eli-
gible for such benefits because the alien receives benefits
under the supplemental security income program (as de-
fined in section 402(a)(3)(B)).
765
‘‘(b) MEDICAID.—Notwithstanding any other provi-
sion of this title, an alien who under the provisions of this
title is ineligible for benefits under the medicaid program
(as defined in section 402(b)(3)(C)) shall be eligible for
such benefits if the alien is receiving benefits under the
supplemental security income program and title XIX of
the Social Security Act provides for such derivative eligi-
bility.’’.
(b) CLERICAL AMENDMENT.—Section 2 of the Per-
sonal Responsibility and Work Opportunity Reconciliation
Act of 1996 is amended by adding after the item related
to section 435 the following:
‘‘Sec. 436. Derivative eligibility for benefits.’’.
SEC. 9306. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this subtitle shall be effective as if included in the en-
actment of title IV of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996.
Subtitle E—Unemployment
Compensation
SEC. 9401. CLARIFYING PROVISION RELATING TO BASE PE-
RIODS.
(a) IN GENERAL.—No provision of a State law under
which the base period for such State is defined or other-
wise determined shall, for purposes of section 303(a)(1)
766
of the Social Security Act (42 U.S.C. 503(a)(1)), be con-
sidered 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 Fed-
eral-State Extended Unemployment Compensation Act of
1970 (26 U.S.C. 3304 note).
(c) EFFECTIVE DATE.—This section shall apply for
purposes of any period beginning before, on, or after the
date of the enactment of this Act.
SEC. 9402. INCREASE IN FEDERAL UNEMPLOYMENT AC-
COUNT CEILING.
(a) IN GENERAL.—Section 902(a)(2) of the Social
Security Act (42 U.S.C. 1102(a)(2)) is amended by strik-
ing ‘‘0.25 percent’’ and inserting ‘‘0.5 percent’’.
(b) EFFECTIVE DATE.—This section and the amend-
ment made by this section—
(1) shall take effect on October 1, 2001, and
(2) shall apply to fiscal years beginning on or
after that date.
SEC. 9403. SPECIAL DISTRIBUTION TO STATES FROM UNEM-
PLOYMENT TRUST FUND.
(a) IN GENERAL.—Subsection (a) of section 903 of
the Social Security Act (42 U.S.C. 1103(a)) is amended
by adding at the end the following new paragraph:
767
‘‘(3)(A) Notwithstanding any other provision of this
section, for purposes of carrying out this subsection with
respect to any excess amount (referred to in paragraph
(1)) remaining in the employment security administration
account as of the close of fiscal year 1999, 2000, or 2001,
such amount shall—
‘‘(i) to the extent of any amounts not in excess
of $100,000,000, be subject to subparagraph (B),
and
‘‘(ii) to the extent of any amounts in excess of
$100,000,000, be subject to subparagraph (C).
‘‘(B) Paragraphs (1) and (2) shall apply with respect
to any amounts described in subparagraph (A)(i), except
that—
‘‘(i) in carrying out the provisions of paragraph
(2)(B) with respect to such amounts (to determine
the portion of such amounts which is to be allocated
to a State for a succeeding fiscal year), the ratio to
be applied under such provisions shall be the same
as the ratio that—
‘‘(I) the amount of funds to be allocated to
such State for such fiscal year pursuant to title
III, bears to
768
‘‘(II) the total amount of funds to be allo-
cated to all States for such fiscal year pursuant
to title III,
as determined by the Secretary of Labor, and
‘‘(ii) the amounts allocated to a State pursuant
to this subparagraph shall be available to such
State, subject to the last sentence of subsection
(c)(2).
Nothing in this paragraph shall preclude the application
of subsection (b) with respect to any allocation determined
under this subparagraph.
‘‘(C) Any amounts described in clause (ii) of subpara-
graph (A) (remaining in the employment security adminis-
tration 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 unemploy-
ment account, without regard to the limit provided in sec-
tion 902(a).’’
(b) CONFORMING AMENDMENT.—Paragraph (2) of
section 903(c) of the Social Security Act is amended by
adding at the end, as a flush left sentence, the following:
‘‘Any amount allocated to a State under this section for
fiscal year 2000, 2001, or 2002 may be used by such State
only to pay expenses incurred by it for the administration
of its unemployment compensation law, and may be so
769
used by it without regard to any of the conditions pre-
scribed in any of the preceding provisions of this para-
graph.’’
SEC. 9404. INTEREST-FREE ADVANCES TO STATE AC-
COUNTS IN UNEMPLOYMENT TRUST FUND
RESTRICTED TO STATES WHICH MEET FUND-
ING GOALS.
(a) IN GENERAL.—Paragraph (2) of section 1202(b)
of the Social Security Act (42 U.S.C. 1322(b)) is amend-
ed—
(1) by striking ‘‘and’’ at the end of subpara-
graph (A),
(2) by striking the period at the end of sub-
paragraph (B) and inserting ‘‘, and’’, and
(3) by adding at the end the following new sub-
paragraph:
‘‘(C) the average daily balance in the account of
such State in the Unemployment Trust Fund for
each of 4 of the 5 calendar quarters preceding the
calendar quarter in which such advances were made
exceeds the funding goal of such State (as defined
in subsection (d)).’’
(b) FUNDING GOAL DEFINED.—Section 1202 of the
Social Security Act is amended by adding at the end the
following new subsection:
770
‘‘(d) For purposes of subsection (b)(2)(C), the term
‘funding goal’ means, for any State for any calendar quar-
ter, the average of the unemployment insurance benefits
paid by such State during each of the 3 years, in the 20-
year period ending with the calendar year containing such
calendar quarter, during which the State paid the greatest
amount of unemployment benefits.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to calendar years beginning after
the date of the enactment of this Act.
SEC. 9405. EXEMPTION OF SERVICE PERFORMED BY ELEC-
TION WORKERS FROM THE FEDERAL UNEM-
PLOYMENT TAX.
(a) IN GENERAL.—Paragraph (3) of section 3309(b)
of the Internal Revenue Code of 1986 (relating to exemp-
tion for certain services) is amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(D),
(2) by adding ‘‘or’’ at the end of subparagraph
(E), and
(3) by inserting after subparagraph (E) the fol-
lowing new subparagraph:
‘‘(F) as an election official or election
worker if the amount of remuneration received
by the individual during the calendar year for
771
services as an election official or election worker
is less than $1,000;’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to service performed
after the date of the enactment of this Act.
SEC. 9406. TREATMENT OF CERTAIN SERVICES PER-
FORMED BY INMATES.
(a) IN GENERAL.—Subsection (c) of section 3306 of
the Internal Revenue Code of 1986 (defining employment)
is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(19),
(2) by striking the period at the end of para-
graph (20) and inserting ‘‘; or’’, and
(3) by adding at the end the following new
paragraph:
‘‘(21) service performed by a person committed
to a penal institution.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to service performed
after March 26, 1996.
772
SEC. 9407. EXEMPTION OF SERVICE PERFORMED FOR AN
ELEMENTARY OR SECONDARY SCHOOL OPER-
ATED PRIMARILY FOR RELIGIOUS PURPOSES
FROM THE FEDERAL UNEMPLOYMENT TAX.
(a) IN GENERAL.—Paragraph (1) of section 3309(b)
of the Internal Revenue Code of 1986 (relating to exemp-
tion 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 pur-
poses, which is described in section 501(c)(3), and
which is exempt from tax under section 501(a)’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to service performed
after the date of the enactment of this Act.
SEC. 9408. STATE PROGRAM INTEGRITY ACTIVITIES FOR
UNEMPLOYMENT COMPENSATION.
Section 901(c) of the Social Security Act (42 U.S.C.
1101(c)) is amended by adding at the end the following
new paragraph:
‘‘(5)(A) There are authorized to be appropriated out
of the employment security administration account to
carry out program integrity activities, in addition to any
amounts available under paragraph (1)(A)(i)—
773
‘‘(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 pursu-
ant to paragraph (1)(A)(i) to carry out program integrity
activities that is not less than the proportion of the funds
appropriated under such paragraph that was expended by
the State to carry out program integrity activities in fiscal
year 1997.
‘‘(C) For purposes of this paragraph, the term ‘pro-
gram integrity activities’ means initial claims review ac-
tivities, eligibility review activities, benefit payments con-
trol activities, and employer liability auditing activities.’’.
Subtitle F—Increase in Public Debt
Limit
SEC. 9501. INCREASE IN PUBLIC DEBT LIMIT.
Subsection (b) of section 3101 of title 31, United
States Code, is amended by striking the dollar amount
contained therein and inserting ‘‘$5,950,000,000,000’’.
774
TITLE X—COMMITTEE ON WAYS
AND MEANS—MEDICARE
SEC. 10000. AMENDMENTS TO SOCIAL SECURITY ACT AND
REFERENCES TO OBRA; TABLE OF CONTENTS
OF TITLE.
(a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
title an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence 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 Rec-
onciliation Act of 1990 (Public Law 101–508), and the
Omnibus Budget Reconciliation Act of 1993 (Public Law
103–66), respectively.
(c) TABLE OF CONTENTS OF TITLE.—The table of
contents of this title is as follows:
Sec. 10000. Amendments to Social Security Act and references to OBRA; table
of contents of title.
Subtitle A—MedicarePlus Program
775
CHAPTER 1—MEDICAREPLUS PROGRAM
SUBCHAPTER A—MEDICAREPLUS PROGRAM
Sec. 10001. Establishment of MedicarePlus program.
‘‘PART C—MEDICAREPLUS PROGRAM
‘‘Sec. 1851. Eligibility, election, and enrollment.
‘‘Sec. 1852. Benefits and beneficiary protections.
‘‘Sec. 1853. Payments to MedicarePlus organizations.
‘‘Sec. 1854. Premiums.
‘‘Sec. 1855. Organizational and financial requirements for MedicarePlus
organizations; provider-sponsored organizations.
‘‘Sec. 1856. Establishment of standards.
‘‘Sec. 1857. Contracts with MedicarePlus organizations.
‘‘Sec. 1859. Definitions; miscellaneous provisions.
Sec. 10002. Transitional rules for current medicare HMO program.
Sec. 10003. Conforming changes in medigap program.
SUBCHAPTER B—SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS
ACCOUNTS
Sec. 10006. MedicarePlus MSA.
CHAPTER 2—INTEGRATED LONG-TERM CARE PROGRAMS
SUBCHAPTER A—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
Sec. 10011. Coverage of PACE under the medicare program.
Sec. 10012. Establishment of PACE program as medicaid State option.
Sec. 10013. Effective date; transition.
Sec. 10014. Study and reports.
SUBCHAPTER B—SOCIAL HEALTH MAINTENANCE ORGANIZATIONS
Sec. 10015. Social health maintenance organizations (SHMOs).
SUBCHAPTER C—OTHER PROGRAMS
Sec. 10018. Orderly transition of municipal health service demonstration
projects.
Sec. 10019. Extension of certain medicare community nursing organization
demonstration projects.
CHAPTER 3—MEDICARE PAYMENT ADVISORY COMMISSION
Sec. 10021. Medicare Payment Advisory Commission.
CHAPTER 4—MEDIGAP PROTECTIONS
Sec. 10031. Medigap protections.
Sec. 10032. Medicare prepaid competitive pricing demonstration project.
CHAPTER 5—TAX TREATMENT OF HOSPITALS PARTICIPATING IN PROVIDER-
SPONSORED ORGANIZATIONS
Sec. 10041. Tax treatment of hospitals which participate in provider-sponsored
organizations.
776
Subtitle B—Prevention Initiatives
Sec. 10101. Screening mammography.
Sec. 10102. Screening pap smear and pelvic exams.
Sec. 10103. Prostate cancer screening tests.
Sec. 10104. Coverage of colorectal screening.
Sec. 10105. Diabetes screening tests.
Sec. 10106. Standardization of medicare coverage of bone mass measurements.
Sec. 10107. Vaccines outreach expansion.
Sec. 10108. Study on preventive benefits.
Subtitle C—Rural Initiatives
Sec. 10201. Rural primary care hospital program.
Sec. 10202. Prohibiting denial of request by rural referral centers for reclassi-
fication on basis of comparability of wages.
Sec. 10203. Hospital geographic reclassification permitted for purposes of dis-
proportionate share payment adjustments.
Sec. 10204. Medicare-dependent, small rural hospital payment extension.
Sec. 10205. Geographic reclassification for certain disproportionately large hos-
pitals.
Sec. 10206. Floor on area wage index.
Sec. 10207. Informatics, telemedicine, and education demonstration project.
Subtitle D—Anti-Fraud and Abuse Provisions
Sec. 10301. Permanent exclusion for those convicted of 3 health care related
crimes.
Sec. 10302. Authority to refuse to enter into medicare agreements with individ-
uals or entities convicted of felonies.
Sec. 10303. Inclusion of toll-free number to report medicare waste, fraud, and
abuse in explanation of benefits forms.
Sec. 10304. Liability of medicare carriers and fiscal intermediaries for claims
submitted by excluded providers.
Sec. 10305. Exclusion of entity controlled by family member of a sanctioned in-
dividual.
Sec. 10306. Imposition of civil money penalties.
Sec. 10307. Disclosure of information and surety bonds.
Sec. 10308. Provision of certain identification numbers.
Sec. 10309. Advisory opinions regarding certain physician self-referral provi-
sions.
Sec. 10310. Other fraud and abuse related provisions.
Subtitle E—Prospective Payment Systems
CHAPTER 1—PAYMENT UNDER PART A
Sec. 10401. Prospective payment for skilled nursing facility services.
Sec. 10402. Prospective payment for inpatient rehabilitation hospital services.
CHAPTER 2—PAYMENT UNDER PART B
SUBCHAPTER A—PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT
SERVICES
Sec. 10411. Elimination of formula-driven overpayments (FDO) for certain
outpatient hospital services.
777
Sec. 10412. Extension of reductions in payments for costs of hospital out-
patient services.
Sec. 10413. Prospective payment system for hospital outpatient department
services.
SUBCHAPTER B—REHABILITATION SERVICES
Sec. 10421. Rehabilitation agencies and services.
Sec. 10422. Comprehensive outpatient rehabilitation facilities (corf).
SUBCHAPTER C—AMBULANCE SERVICES
Sec. 10431. Payments for ambulance services.
Sec. 10432. Demonstration of coverage of ambulance services under medicare
through contracts with units of local government.
CHAPTER 3—PAYMENT UNDER PARTS A AND B
Sec. 10441. Prospective payment for home health services.
Subtitle F—Provisions Relating to Part A
CHAPTER 1—PAYMENT OF PPS HOSPITALS
Sec. 10501. PPS hospital payment update.
Sec. 10502. Capital payments for PPS hospitals.
Sec. 10503. Freeze in disproportionate share.
Sec. 10504. Medicare capital asset sales price equal to book value.
Sec. 10505. Elimination of IME and DSH payments attributable to outlier
payments.
Sec. 10506. Reduction in adjustment for indirect medical education.
Sec. 10507. Treatment of transfer cases.
Sec. 10508. Increase base payment rate to Puerto Rico hospitals.
CHAPTER 2—PAYMENT OF PPS EXEMPT HOSPITALS
Sec. 10511. Payment update.
Sec. 10512. Reductions to capital payments for certain PPS-exempt hospitals
and units.
Sec. 10513. Cap on TEFRA limits.
Sec. 10514. Change in bonus and relief payments.
Sec. 10515. Change in payment and target amount for new providers.
Sec. 10516. Rebasing.
Sec. 10517. Treatment of certain long-term care hospitals.
Sec. 10518. Elimination of exemptions; report on exceptions and adjustments.
CHAPTER 3—PROVISIONS RELATED TO HOSPICE SERVICES
Sec. 10521. Payments for hospice services.
Sec. 10522. Payment for home hospice care based on location where care is fur-
nished.
Sec. 10523. Hospice care benefits periods.
Sec. 10524. Other items and services included in hospice care.
Sec. 10525. Contracting with independent physicians or physician groups for
hospice care services permitted.
Sec. 10526. Waiver of certain staffing requirements for hospice care programs
in non-urbanized areas.
778
Sec. 10527. Limitation on liability of beneficiaries for certain hospice coverage
denials.
Sec. 10528. Extending the period for physician certification of an individual’s
terminal illness.
Sec. 10529. Effective date.
CHAPTER 4—MODIFICATION OF PART A HOME HEALTH BENEFIT
Sec. 10531. Modification of part A home health benefit for individuals enrolled
under part B.
CHAPTER 5—OTHER PAYMENT PROVISIONS
Sec. 10541. Reductions in payments for enrollee bad debt.
Sec. 10542. Permanent extension of hemophilia pass-through.
Sec. 10543. Reduction in part A medicare premium for certain public retirees.
Subtitle G—Provisions Relating to Part B Only
CHAPTER 1—PHYSICIANS’ SERVICES
Sec. 10601. Establishment of single conversion factor for 1998.
Sec. 10602. Establishing update to conversion factor to match spending under
sustainable growth rate.
Sec. 10603. Replacement of volume performance standard with sustainable
growth rate.
Sec. 10604. Payment rules for anesthesia services.
Sec. 10605. Implementation of resource-based physician practice expense.
Sec. 10606. Dissemination of information on high per discharge relative values
for in-hospital physicians’ services.
Sec. 10607. No X-ray required for chiropractic services.
Sec. 10608. Temporary coverage restoration for portable electrocardiogram
transportation.
CHAPTER 2—OTHER PAYMENT PROVISIONS
Sec. 10611. Payments for durable medical equipment.
Sec. 10612. Oxygen and oxygen equipment.
Sec. 10613. Reduction in updates to payment amounts for clinical diagnostic
laboratory tests.
Sec. 10614. Simplification in administration of laboratory tests.
Sec. 10615. Updates for ambulatory surgical services.
Sec. 10616. Reimbursement for drugs and biologicals.
Sec. 10617. Coverage of oral anti-nausea drugs under chemotherapeutic regi-
men.
Sec. 10618. Rural health clinic services.
Sec. 10619. Increased medicare reimbursement for nurse practitioners and clin-
ical nurse specialists.
Sec. 10620. Increased medicare reimbursement for physician assistants.
Sec. 10621. Renal dialysis-related services.
CHAPTER 3—PART B PREMIUM
Sec. 10631. Part B premium.
Subtitle H—Provisions Relating to Parts A and B
CHAPTER 1—PROVISIONS RELATING TO MEDICARE SECONDARY PAYER
779
Sec. 10701. Permanent extension and revision of certain secondary payer provi-
sions.
Sec. 10702. Clarification of time and filing limitations.
Sec. 10703. Permitting recovery against third party administrators.
CHAPTER 2—HOME HEALTH SERVICES
Sec. 10711. Recapturing savings resulting from temporary freeze on payment
increases for home health services.
Sec. 10712. Interim payments for home health services.
Sec. 10713. Clarification of part-time or intermittent nursing care.
Sec. 10714. Study of definition of homebound.
Sec. 10715. Payment based on location where home health service is furnished.
Sec. 10716. Normative standards for home health claims denials,
Sec. 10717. No home health benefits based solely on drawing blood.
CHAPTER 3—BABY BOOM GENERATION MEDICARE COMMISSION
Sec. 10721. Bipartisan Commission on the Effect of the Baby Boom Genera-
tion on the Medicare Program.
CHAPTER 4—PROVISIONS RELATING TO DIRECT GRADUATE MEDICAL
EDUCATION
Sec. 10731. Limitation on payment based on number of residents and imple-
mentation of rolling average FTE count.
Sec. 10732. Phased-in limitation on hospital overhead and supervisory physi-
cian component of direct medical education costs.
Sec. 10733. Permitting payment to non-hospital providers.
Sec. 10734. Incentive payments under plans for voluntary reduction in number
of residents.
Sec. 10735. Demonstration project on use of consortia.
Sec. 10736. Recommendations on long-term payment policies regarding financ-
ing teaching hospitals and graduate medical education.
Sec. 10737. Medicare special reimbursement rule for certain combined resi-
dency programs.
CHAPTER 5—OTHER PROVISIONS
Sec. 10741. Centers of excellence.
Sec. 10742. Medicare part B special enrollment period and waiver of part B
late enrollment penalty and medigap special open enrollment
period for certain military retirees and dependents.
Sec. 10743. Protections under the medicare program for disabled workers who
lose benefits under a group health plan.
Sec. 10744. Placement of advance directive in medical record.
Subtitle I—Medical Liability Reform
CHAPTER 1—GENERAL PROVISIONS
Sec. 10801. Federal reform of health care liability actions.
Sec. 10802. Definitions.
Sec. 10803. Effective date.
CHAPTER 2—UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS
Sec. 10811. Statute of limitations.
780
Sec. 10812. Calculation and payment of damages.
Sec. 10813. Alternative dispute resolution.
Subtitle A—MedicarePlus Program
CHAPTER 1—MEDICAREPLUS PROGRAM
Subchapter A—MedicarePlus Program
SEC. 10001. ESTABLISHMENT OF MEDICAREPLUS PRO-
GRAM.
(a) IN GENERAL.—Title XVIII is amended by redes-
ignating part C as part D and by inserting after part B
the following new part:
‘‘PART C—MEDICAREPLUS PROGRAM
‘‘ELIGIBILITY, ELECTION, AND ENROLLMENT
‘‘SEC. 1851. (a) CHOICE OF MEDICARE BENEFITS
THROUGH MEDICAREPLUS PLANS.—
‘‘(1) IN GENERAL.—Subject to the provisions of
this section, each MedicarePlus eligible individual
(as defined in paragraph (3)) is entitled to elect to
receive benefits under this title—
‘‘(A) through the medicare fee-for-service
program under parts A and B, or
‘‘(B) through enrollment in a MedicarePlus
plan under this part.
‘‘(2) TYPES
OF
MEDICAREPLUS
PLANS
THAT
MAY BE AVAILABLE.—A MedicarePlus plan may be
any of the following types of plans of health insur-
ance:
781
‘‘(A) COORDINATED CARE PLANS.—Coordi-
nated care plans which provide health care serv-
ices, including health maintenance organization
plans and preferred provider organization plans.
‘‘(B) PLANS OFFERED BY PROVIDER-SPON-
SORED
ORGANIZATION.—A MedicarePlus plan
offered by a provider-sponsored organization, as
defined in section 1855(e).
‘‘(C) COMBINATION
OF
MSA
PLAN
AND
CONTRIBUTIONS TO MEDICAREPLUS MSA.—An
MSA plan, as defined in section 1859(b)(2),
and a contribution into a MedicarePlus medical
savings account (MSA).
‘‘(3) MEDICAREPLUS ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—In this title, subject to
subparagraph (B), the term ‘MedicarePlus eligi-
ble individual’ means an individual who is enti-
tled 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 en-
782
rolled in a MedicarePlus plan may continue to
be enrolled in that plan.
‘‘(b) SPECIAL RULES.—
‘‘(1) RESIDENCE REQUIREMENT.—
‘‘(A) IN
GENERAL.—Except as the Sec-
retary may otherwise provide, an individual is
eligible to elect a MedicarePlus plan offered by
a MedicarePlus organization only if the organi-
zation serves the geographic area in which the
individual resides.
‘‘(B) CONTINUATION
OF
ENROLLMENT
PERMITTED.—Pursuant to rules specified by
the Secretary, the Secretary shall provide that
an individual may continue enrollment in a
plan, notwithstanding that the individual no
longer resides in the service area of the plan, so
long as the plan provides benefits for enrollees
located in the area in which the individual re-
sides.
‘‘(2) SPECIAL RULE FOR CERTAIN INDIVIDUALS
COVERED UNDER FEHBP OR ELIGIBLE FOR VETER-
ANS OR MILITARY HEALTH BENEFITS, VETERANS .—
‘‘(A) FEHBP.—An individual who is en-
rolled in a health benefit plan under chapter 89
of title 5, United States Code, is not eligible to
783
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 in-
creased expenditures for the Federal Govern-
ment for health benefit plans under such chap-
ter.
‘‘(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 chap-
ter 55 of title 10, United States Code, or under
chapter 17 of title 38 of such Code.
‘‘(3) LIMITATION
ON
ELIGIBILITY
OF
QUALI-
FIED MEDICARE BENEFICIARIES AND OTHER MEDIC-
AID
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 sec-
tion 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.
784
‘‘(4) COVERAGE UNDER MSA PLANS ON A DEM-
ONSTRATION 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, un-
less the enrollment is the continuation of
such an enrollment in effect as of such
date; or
‘‘(ii) as of any date if the number of
such individuals so enrolled as of such date
has reached 500,000.
Under rules established by the Secretary, an in-
dividual is not eligible to enroll (or continue en-
rollment) 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 en-
rollment in MSA plans under this part on selec-
tion (including adverse selection), use of preven-
tive care, access to care, and the financial sta-
tus of the Trust Funds under this title.
785
‘‘(C) REPORTS.—The Secretary shall sub-
mit to Congress periodic reports on the num-
bers of individuals enrolled in such plans and
on the evaluation being conducted under sub-
paragraph (B). The Secretary shall submit such
a report, by not later than March 1, 2002, on
whether the time limitation under subparagraph
(A)(i) should be extended or removed and
whether to change the numerical limitation
under subparagraph (A)(ii).
‘‘(c) PROCESS FOR EXERCISING CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish 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 speci-
fied under subsection (e) and shall become effective
as provided in subsection (f).
‘‘(2) COORDINATION THROUGH MEDICAREPLUS
ORGANIZATIONS.—
‘‘(A) ENROLLMENT.—Such process shall
permit an individual who wishes to elect a
MedicarePlus plan offered by a MedicarePlus
organization to make such election through the
786
filing of an appropriate election form with the
organization.
‘‘(B) 
DISENROLLMENT.—Such 
process
shall permit an individual, who has elected a
MedicarePlus plan offered by a MedicarePlus
organization and who wishes to terminate such
election, to terminate such election through the
filing of an appropriate election form with the
organization.
‘‘(3) DEFAULT.—
‘‘(A) INITIAL ELECTION.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), an individual who fails to make an
election during an initial election period
under subsection (e)(1) is deemed to have
chosen the medicare fee-for-service pro-
gram option.
‘‘(ii) SEAMLESS
CONTINUATION
OF
COVERAGE.—The Secretary may establish
procedures under which an individual who
is enrolled in a health plan (other than
MedicarePlus 
plan) 
offered 
by 
a
MedicarePlus organization at the time of
the initial election period and who fails to
elect to receive coverage other than
787
through the organization is deemed to have
elected the MedicarePlus plan offered by
the organization (or, if the organization of-
fers more than one such plan, such plan or
plans as the Secretary identifies under
such procedures).
‘‘(B) CONTINUING PERIODS.—An individ-
ual 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 elec-
tion under this section, or
‘‘(ii) a MedicarePlus plan is discon-
tinued, if the individual had elected such
plan at the time of the discontinuation.
‘‘(d) PROVIDING INFORMATION TO PROMOTE IN-
FORMED CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for activities under this subsection to broadly dis-
seminate information to medicare beneficiaries (and
prospective medicare beneficiaries) on the coverage
options provided under this section in order to pro-
mote an active, informed selection among such op-
tions.
788
‘‘(2) PROVISION OF NOTICE.—
‘‘(A) OPEN
SEASON
NOTIFICATION.—At
least 30 days before the beginning of each an-
nual, coordinated election period (as defined in
subsection (e)(3)(B)), the Secretary shall mail
to each MedicarePlus eligible individual residing
in an area the following:
‘‘(i) GENERAL
INFORMATION.—The
general information described in paragraph
(3).
‘‘(ii) LIST OF PLANS AND COMPARI-
SON OF PLAN OPTIONS.—A list identifying
the MedicarePlus plans that are (or will
be) available to residents of the area and
information described in paragraph (4)
concerning such plans. Such information
shall be presented in a comparative form.
‘‘(iii) MEDICAREPLUS MONTHLY CAPI-
TATION RATE.—The amount of the month-
ly MedicarePlus capitation rate for the
area.
‘‘(iv) ADDITIONAL
INFORMATION.—
Any other information that the Secretary
determines will assist the individual in
making the election under this section.
789
The mailing of such information shall be coordi-
nated with the mailing of any annual notice
under section 1804.
‘‘(B) 
NOTIFICATION
TO
NEWLY
MEDICAREPLUS
ELIGIBLE
INDIVIDUALS.—To
the extent practicable, the Secretary shall, not
later than 2 months before the beginning of the
initial MedicarePlus enrollment period for an
individual described in subsection (e)(1), mail
to the individual the information described in
subparagraph (A).
‘‘(C) FORM.—The information dissemi-
nated under this paragraph shall be written and
formatted using language that is easily under-
standable by medicare beneficiaries.
‘‘(D) PERIODIC UPDATING.—The informa-
tion described in subparagraph (A) shall be up-
dated on at least an annual basis to reflect
changes in the availability of MedicarePlus
plans and the benefits and monthly premiums
(and net monthly premiums) for such plans.
‘‘(3) GENERAL INFORMATION.—General infor-
mation under this paragraph, with respect to cov-
erage under this part during a year, shall include
the following:
790
‘‘(A) BENEFITS UNDER FEE-FOR-SERVICE
PROGRAM
OPTION.—A general description of
the benefits covered (and not covered) under
the medicare fee-for-service program under
parts A and B, including—
‘‘(i) covered items and services,
‘‘(ii) beneficiary cost sharing, such as
deductibles, coinsurance, and copayment
amounts, and
‘‘(iii) any beneficiary liability for bal-
ance billing.
‘‘(B) PART B PREMIUM.—The part B pre-
mium rates that will be charged for part B cov-
erage.
‘‘(C) ELECTION
PROCEDURES.—Informa-
tion and instructions on how to exercise election
options under this section.
‘‘(D) RIGHTS.—The general description of
procedural rights (including grievance and ap-
peals procedures) of beneficiaries under the
medicare 
fee-for-service 
program 
and 
the
MedicarePlus program and right to be pro-
tected against discrimination based on health
status-related factors under section 1852(b).
791
‘‘(E) INFORMATION
ON
MEDIGAP
AND
MEDICARE SELECT.—A general description of
the benefits, enrollment rights, and other re-
quirements applicable to medicare supplemental
policies under section 1882 and provisions relat-
ing to medicare select policies described in sec-
tion 1882(t).
‘‘(F) POTENTIAL FOR CONTRACT TERMI-
NATION.—The fact that a MedicarePlus organi-
zation may terminate or refuse to renew its
contract under this part and the effect the ter-
mination or nonrenewal of its contract may
have 
on 
individuals 
enrolled 
with 
the
MedicarePlus plan under this part.
‘‘(4) INFORMATION
COMPARING
PLAN
OP-
TIONS.—Information under this paragraph, with re-
spect to a MedicarePlus plan for a year, shall in-
clude the following:
‘‘(A) BENEFITS.—The benefits covered
(and not covered) under the plan, including—
‘‘(i) covered items and services beyond
those provided under the medicare fee-for-
service program,
‘‘(ii) any beneficiary cost sharing,
792
‘‘(iii) any maximum limitations on
out-of-pocket expenses, and
‘‘(iv) in the case of an MSA plan, dif-
ferences in cost sharing and balance billing
under such a plan compared to under
other MedicarePlus plans.
‘‘(B) PREMIUMS.—The monthly premium
(and net monthly premium), if any, for the
plan.
‘‘(C) SERVICE AREA.—The service area of
the plan.
‘‘(D) QUALITY
AND
PERFORMANCE.—To
the extent available, plan quality and perform-
ance indicators for the benefits under the plan
(and how they compare to such indicators
under the medicare fee-for-service program
under parts A and B in the area involved), in-
cluding—
‘‘(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,
793
‘‘(iii) information on health outcomes,
and
‘‘(iv) the recent record regarding com-
pliance of the plan with requirements of
this part (as determined by the Secretary).
‘‘(E) 
SUPPLEMENTAL
BENEFITS
OP-
TIONS.—Whether the organization offering the
plan offers optional supplemental benefits and
the terms and conditions (including premiums)
for such coverage.
‘‘(5) MAINTAINING A TOLL-FREE NUMBER AND
INTERNET
SITE.—The Secretary shall maintain a
toll-free 
number 
for 
inquiries 
regarding
MedicarePlus options and the operation of this part
in all areas in which MedicarePlus plans are offered
and an Internet site through which individuals may
electronically obtain information on such options and
MedicarePlus plans.
‘‘(6) USE
OF
NONFEDERAL
ENTITIES.—The
Secretary may enter into contracts with non-Federal
entities to carry out activities under this subsection.
‘‘(7) 
PROVISION
OF
INFORMATION.—A
MedicarePlus organization shall provide the Sec-
retary with such information on the organization
and each MedicarePlus plan it offers as may be re-
794
quired for the preparation of the information re-
ferred to in paragraph (2)(A).
‘‘(e) COVERAGE ELECTION PERIODS.—
‘‘(1) INITIAL
CHOICE
UPON
ELIGIBILITY
TO
MAKE ELECTION IF MEDICAREPLUS PLANS AVAIL-
ABLE TO INDIVIDUAL.—If, at the time an individual
first becomes entitled to benefits under part A and
enrolled under part B, there is one or more
MedicarePlus plans offered in the area in which the
individual resides, the individual shall make the elec-
tion under this section during a period (of a dura-
tion and beginning at a time specified by the Sec-
retary) at such time. Such period shall be specified
in a manner so that, in the case of an individual who
elects a MedicarePlus plan during the period, cov-
erage under the plan becomes effective as of the first
date on which the individual may receive such cov-
erage.
‘‘(2) OPEN ENROLLMENT AND DISENROLLMENT
OPPORTUNITIES.—Subject to paragraph (5)—
‘‘(A) CONTINUOUS
OPEN
ENROLLMENT
AND DISENROLLMENT THROUGH 2000.—At any
time 
during 
1998, 
1999, 
and 
2000, 
a
MedicarePlus eligible individual may change the
election under subsection (a)(1).
795
‘‘(B) CONTINUOUS
OPEN
ENROLLMENT
AND
DISENROLLMENT
FOR
FIRST
MONTHS
DURING 2001.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), at any time during the first 6 months
of 2001, or, if the individual first becomes
a MedicarePlus eligible individual during
2001, during the first 6 months during
2001 
in 
which 
the 
individual 
is 
a
MedicarePlus 
eligible 
individual, 
a
MedicarePlus 
eligible 
individual 
may
change the election under subsection
(a)(1).
‘‘(ii) LIMITATION
OF
ONE
CHANGE
PER
YEAR.—An individual may exercise
the right under clause (i) only once during
2001. The limitation under this clause
shall not apply to changes in elections ef-
fected during an annual, coordinated elec-
tion period under paragraph (3) or during
a special enrollment period under para-
graph (4).
‘‘(C) CONTINUOUS
OPEN
ENROLLMENT
AND DISENROLLMENT FOR FIRST 3 MONTHS IN
SUBSEQUENT YEARS.—
796
‘‘(i) IN GENERAL.—Subject to clause
(ii), at any time during the first 3 months
of a year after 2001, or, if the individual
first becomes a MedicarePlus eligible indi-
vidual during a year after 2001, during the
first 3 months of such year in which the
individual is a MedicarePlus eligible indi-
vidual, a MedicarePlus eligible individual
may change the election under subsection
(a)(1).
‘‘(ii) LIMITATION
OF
ONE
CHANGE
PER
YEAR.—An individual may exercise
the right under clause (i) only once a year.
The limitation under this clause shall not
apply to changes in elections effected dur-
ing an annual, coordinated election period
under paragraph (3) or during a special
enrollment period under paragraph (4).
‘‘(3) ANNUAL, COORDINATED
ELECTION
PE-
RIOD.—
‘‘(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.
797
‘‘(B) ANNUAL, COORDINATED
ELECTION
PERIOD.—For purposes of this section, the
term ‘annual, coordinated election period’
means, with respect to a calendar year (begin-
ning with 2001), the month of October before
such year.
‘‘(C) MEDICAREPLUS HEALTH FAIRS.—In
the month of October of each year (beginning
with 1998), the Secretary shall provide for a
nationally coordinated educational and publicity
campaign to inform MedicarePlus eligible indi-
viduals about MedicarePlus plans and the elec-
tion process provided under this section.
‘‘(4) SPECIAL
ELECTION
PERIODS.—Effective
as of January 1, 2001, an individual may dis-
continue an election of a MedicarePlus plan offered
by a MedicarePlus organization other than during
an annual, coordinated election period and make a
new election under this section if—
‘‘(A) the organization’s or plan’s certifi-
cation under this part has been terminated or
the organization has terminated or otherwise
discontinued providing the plan;
‘‘(B) the individual is no longer eligible to
elect the plan because of a change in the indi-
798
vidual’s place of residence or other change in
circumstances (specified by the Secretary, but
not including termination of the individual’s en-
rollment on the basis described in clause (i) or
(ii) of subsection (g)(3)(B));
‘‘(C) the individual demonstrates (in ac-
cordance with guidelines established by the Sec-
retary) that—
‘‘(i) the organization offering the plan
substantially violated a material provision
of the organization’s contract under this
part in relation to the individual (including
the failure to provide an enrollee on a
timely basis medically necessary care for
which benefits are available under the plan
or the failure to provide such covered care
in accordance with applicable quality
standards); or
‘‘(ii) the organization (or an agent or
other entity acting on the organization’s
behalf) 
materially 
misrepresented 
the
plan’s provisions in marketing the plan to
the individual; or
799
‘‘(D) the individual meets such other ex-
ceptional conditions as the Secretary may pro-
vide.
‘‘(5) SPECIAL RULES FOR MSA PLANS.—Not-
withstanding the preceding provisions of this sub-
section, an individual—
‘‘(A) may elect an MSA plan only during—
‘‘(i) an initial open enrollment period
described in paragraph (1),
‘‘(ii) an annual, coordinated election
period described in paragraph (3)(B), or
‘‘(iii) the months of October 1998 and
October 1999; and
‘‘(B) may not discontinue an election of an
MSA plan except during the periods described
in clause (ii) or (iii) of subparagraph (A) and
under paragraph (4).
‘‘(f) EFFECTIVENESS OF ELECTIONS AND CHANGES
OF ELECTIONS.—
‘‘(1) DURING INITIAL COVERAGE ELECTION PE-
RIOD.—An election of coverage made during the ini-
tial coverage election period under subsection (e)(1)
shall take effect upon the date the individual be-
comes entitled to benefits under part A and enrolled
under part B, except as the Secretary may provide
800
(consistent with section 1838) in order to prevent
retroactive coverage.
‘‘(2) DURING CONTINUOUS OPEN ENROLLMENT
PERIODS.—An election or change of coverage made
under subsection (e)(2) shall take effect with the
first day of the first calendar month following the
date on which the election is made.
‘‘(3) ANNUAL, COORDINATED
ELECTION
PE-
RIOD.—An election or change of coverage made dur-
ing an annual, coordinated election period (as de-
fined in subsection (e)(3)(B)) in a year shall take ef-
fect as of the first day of the following year.
‘‘(4) OTHER PERIODS.—An election or change
of coverage made during any other period under
subsection (e)(4) shall take effect in such manner as
the Secretary provides in a manner consistent (to
the extent practicable) with protecting continuity of
health benefit coverage.
‘‘(g) GUARANTEED ISSUE AND RENEWAL.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, a MedicarePlus organization shall pro-
vide that at any time during which elections are ac-
cepted under this section with respect to a
MedicarePlus plan offered by the organization, the
801
organization will accept without restrictions individ-
uals who are eligible to make such election.
‘‘(2) PRIORITY.—If the Secretary determines
that a MedicarePlus organization, in relation to a
MedicarePlus plan it offers, has a capacity limit and
the number of MedicarePlus eligible individuals who
elect the plan under this section exceeds the capacity
limit, the organization may limit the election of indi-
viduals of the plan under this section but only if pri-
ority in election is provided—
‘‘(A) first to such individuals as have elect-
ed 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 individ-
uals (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 popu-
lation in the service area of the plan.
‘‘(3) LIMITATION ON TERMINATION OF ELEC-
TION.—
802
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a MedicarePlus organization may
not for any reason terminate the election of any
individual under this section for a MedicarePlus
plan it offers.
‘‘(B) BASIS FOR TERMINATION OF ELEC-
TION.—A MedicarePlus organization may ter-
minate an individual’s election under this sec-
tion with respect to a MedicarePlus plan it of-
fers if—
‘‘(i) any net monthly premiums re-
quired with respect to such plan are not
paid on a timely basis (consistent with
standards under section 1856 that provide
for a grace period for late payment of net
monthly premiums),
‘‘(ii) the individual has engaged in
disruptive behavior (as specified in such
standards), or
‘‘(iii) the plan is terminated with re-
spect to all individuals under this part in
the area in which the individual resides.
‘‘(C) CONSEQUENCE OF TERMINATION.—
‘‘(i) TERMINATIONS
FOR
CAUSE.—
Any individual whose election is terminated
803
under clause (i) or (ii) of subparagraph
(B) is deemed to have elected the medicare
fee-for-service program option described in
subsection (a)(1)(A).
‘‘(ii) TERMINATION BASED ON PLAN
TERMINATION OR SERVICE AREA REDUC-
TION.—Any individual whose election is
terminated under subparagraph (B)(iii)
shall have a special election period under
subsection (e)(4)(A) in which to change
coverage 
to 
coverage 
under 
another
MedicarePlus plan. Such an individual who
fails to make an election during such pe-
riod is deemed to have chosen to change
coverage to the medicare fee-for-service
program option described in subsection
(a)(1)(A).
‘‘(D) ORGANIZATION
OBLIGATION
WITH
RESPECT TO ELECTION FORMS.—Pursuant to a
contract under section 1857, each MedicarePlus
organization receiving an election form under
subsection (c)(2) shall transmit to the Secretary
(at such time and in such manner as the Sec-
retary may specify) a copy of such form or such
804
other information respecting the election as the
Secretary may specify.
‘‘(h) APPROVAL OF MARKETING MATERIAL AND AP-
PLICATION FORMS.—
‘‘(1) SUBMISSION.—No marketing material or
application 
form 
may 
be 
distributed 
by 
a
MedicarePlus organization to (or for the use of)
MedicarePlus eligible individuals unless—
‘‘(A) at least 45 days before the date of
distribution the organization has submitted the
material or form to the Secretary for review,
and
‘‘(B) the Secretary has not disapproved the
distribution of such material or form.
‘‘(2) 
REVIEW.—The 
standards 
established
under section 1856 shall include guidelines for the
review of all such material or form submitted and
under such guidelines the Secretary shall disapprove
(or later require the correction of) such material or
form if the material or form is materially inaccurate
or misleading or otherwise makes a material mis-
representation.
‘‘(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 re-
805
gional office of the Department of Health and
Human Services and the Secretary or the office has
not disapproved the distribution of marketing mate-
rial or form under paragraph (1)(B) with respect to
a MedicarePlus plan in an area, the Secretary is
deemed not to have disapproved such distribution in
all other areas covered by the plan and organization
except to the extent that such material or form is
specific only to an area involved.
‘‘(4) PROHIBITION
OF
CERTAIN
MARKETING
PRACTICES.—Each MedicarePlus organization shall
conform to fair marketing standards, in relation to
MedicarePlus plans offered under this part, included
in the standards established under section 1856.
Such standards shall include a prohibition against a
MedicarePlus organization (or agent of such an or-
ganization) completing any portion of any election
form used to carry out elections under this section
on behalf of any individual.
‘‘(i) EFFECT OF ELECTION OF MEDICAREPLUS PLAN
OPTION.—Subject to sections 1852(a)(5), 1857(f)(2), and
1857(g)—
‘‘(1) payments under a contract with a
MedicarePlus organization under section 1853(a)
with respect to an individual electing a MedicarePlus
806
plan offered by the organization shall be instead of
the amounts which (in the absence of the contract)
would otherwise be payable under parts A and B for
items and services furnished to the individual, and
‘‘(2) subject to subsections (e) and (f) of section
1853, only the MedicarePlus organization shall be
entitled to receive payments from the Secretary
under this title for services furnished to the individ-
ual.
‘‘BENEFITS AND BENEFICIARY PROTECTIONS
‘‘SEC. 1852. (a) BASIC BENEFITS.—
‘‘(1) IN GENERAL.—Except as provided in sec-
tion 1859(b)(2) for MSA plans, each MedicarePlus
plan shall provide to members enrolled under this
part, through providers and other persons that meet
the applicable requirements of this title and part A
of title XI—
‘‘(A) those items and services for which
benefits are available under parts A and B to
individuals residing in the area served by the
plan, and
‘‘(B) additional benefits required under
section 1854(f)(1)(A).
‘‘(2) 
SATISFACTION
OF
REQUIREMENT.—A
MedicarePlus plan (other than an MSA plan) offered
by a MedicarePlus organization satisfies paragraph
807
(1)(A), with respect to benefits for items and serv-
ices furnished other than through a provider that
has a contract with the organization offering the
plan, if the plan provides (in addition to any cost
sharing provided for under the plan) for at least the
total dollar amount of payment for such items and
services as would otherwise be authorized under
parts A and B (including any balance billing per-
mitted under such parts).
‘‘(3) SUPPLEMENTAL BENEFITS.—
‘‘(A) BENEFITS
INCLUDED
SUBJECT
TO
SECRETARY’S
APPROVAL.—Each MedicarePlus
organization may provide to individuals enrolled
under this part, other than under an MSA plan,
(without affording those individuals an option
to decline the coverage) supplemental health
care benefits that the Secretary may approve.
The Secretary shall approve any such supple-
mental benefits unless the Secretary determines
that including such supplemental benefits would
substantially 
discourage 
enrollment 
by
MedicarePlus eligible individuals with the orga-
nization.
‘‘(B) 
AT
ENROLLEES’ 
OPTION.—A
MedicarePlus organization may provide to indi-
808
viduals enrolled under this part, other than
under an MSA plan, supplemental health care
benefits that the individuals may elect, at their
option, to have covered.
‘‘(4) ORGANIZATION AS SECONDARY PAYER.—
Notwithstanding any other provision of law, a
MedicarePlus organization may (in the case of the
provision of items and services to an individual
under a MedicarePlus plan under circumstances in
which payment under this title is made secondary
pursuant to section 1862(b)(2)) charge or authorize
the provider of such services to charge, in accord-
ance with the charges allowed under such a law,
plan, or policy—
‘‘(A) the insurance carrier, employer, or
other entity which under such law, plan, or pol-
icy 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 announce-
ment under section 1853(b) and ending on the date
809
of the next announcement under such section and
the Secretary projects that the determination will re-
sult in a significant change in the costs to a
MedicarePlus organization of providing the benefits
that are the subject of such national coverage deter-
mination and that such change in costs was not in-
corporated in the determination of the annual
MedicarePlus capitation rate under section 1853 in-
cluded in the announcement made at the beginning
of such period—
‘‘(A) such determination shall not apply to
contracts under this part until the first contract
year that begins after the end of such period,
and
‘‘(B) if such coverage determination pro-
vides for coverage of additional benefits or cov-
erage under additional circumstances, section
1851(i) shall not apply to payment for such ad-
ditional benefits or benefits provided under such
additional circumstances until the first contract
year that begins after the end of such period,
unless otherwise required by law.
‘‘(b) ANTIDISCRIMINATION.—
‘‘(1) IN GENERAL.—A MedicarePlus organiza-
tion may not deny, limit, or condition the coverage
810
or provision of benefits under this part, for individ-
uals permitted to be enrolled with the organization
under this part, based on any health status-related
factor described in section 2702(a)(1) of the Public
Health Service Act.
‘‘(2) CONSTRUCTION.—Paragraph (1) shall not
be construed as requiring a MedicarePlus organiza-
tion to enroll individuals who are determined to have
end-stage renal disease, except as provided under
section 1851(a)(3)(B).
‘‘(c) DETAILED
DESCRIPTION
OF
PLAN
PROVI-
SIONS.—A MedicarePlus organization shall disclose, in
clear, accurate, and standardized form to each enrollee
with a MedicarePlus plan offered by the organization
under this part at the time of enrollment and at least an-
nually thereafter, the following information regarding such
plan:
‘‘(1) SERVICE AREA.—The plan’s service area.
‘‘(2) BENEFITS.—Benefits offered (and not of-
fered) under the plan offered, including information
described in section 1851(d)(3)(A) and exclusions
from coverage and, if it is an MSA plan, a compari-
son of benefits under such a plan with benefits
under other MedicarePlus plans.
811
‘‘(3) ACCESS.—The number, mix, and distribu-
tion of plan providers.
‘‘(4) 
OUT-OF-AREA
COVERAGE.—Out-of-area
coverage provided by the plan.
‘‘(5) EMERGENCY
COVERAGE.—Coverage of
emergency services and urgently needed care, includ-
ing—
‘‘(A) the appropriate use of emergency
services, including use of the 911 telephone sys-
tem or its local equivalent in emergency situa-
tions and an explanation of what constitutes an
emergency situation;
‘‘(B) the process and procedures of the
plan for obtaining emergency services; and
‘‘(C) the locations of (i) emergency depart-
ments, and (ii) other settings, in which plan
physicians and hospitals provide emergency
services and post-stabilization care.
‘‘(6) 
SUPPLEMENTAL
BENEFITS.—Supple-
mental benefits available from the organization of-
fering the plan, including—
‘‘(A) whether the supplemental benefits are
optional,
‘‘(B) the supplemental benefits covered,
and
812
‘‘(C) the premium price for the supple-
mental benefits.
‘‘(7) PRIOR AUTHORIZATION RULES.—Rules re-
garding prior authorization or other review require-
ments that could result in nonpayment.
‘‘(8) PLAN GRIEVANCE AND APPEALS PROCE-
DURES.—Any appeal or grievance rights and proce-
dures.
‘‘(9) QUALITY
ASSURANCE
PROGRAM.—A de-
scription of the organization’s quality assurance pro-
gram under subsection (e).
‘‘(d) ACCESS TO SERVICES.—
‘‘(1) IN GENERAL.—A MedicarePlus organiza-
tion offering a MedicarePlus plan may select the
providers from whom the benefits under the plan are
provided so long as—
‘‘(A) the organization makes such benefits
available and accessible to each individual elect-
ing 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 organi-
zation makes such benefits available and acces-
sible 24 hours a day and 7 days a week;
813
‘‘(C) the plan provides for reimbursement
with respect to services which are covered under
subparagraphs (A) and (B) and which are pro-
vided to such an individual other than through
the organization, if—
‘‘(i) the services were medically nec-
essary and immediately required because of
an unforeseen illness, injury, or condition,
and it was not reasonable given the cir-
cumstances to obtain the services through
the organization,
‘‘(ii) the services were renal dialysis
services and were provided other than
through the organization because the indi-
vidual 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
814
‘‘(E) coverage is provided for emergency
services (as defined in paragraph (3)) without
regard to prior authorization or the emergency
care provider’s contractual relationship with the
organization.
‘‘(2) GUIDELINES RESPECTING COORDINATION
OF
POST-STABILIZATION
CARE.—A MedicarePlus
plan shall comply with such guidelines as the Sec-
retary 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 sec-
tion 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 sta-
bilize an emergency medical condition (as
defined in subparagraph (B)).
815
‘‘(B) EMERGENCY
MEDICAL
CONDITION
BASED
ON
PRUDENT
LAYPERSON.—The term
‘emergency medical condition’ means a medical
condition manifesting itself by acute symptoms
of sufficient severity such that a prudent
layperson, who possesses an average knowledge
of health and medicine, could reasonably expect
the absence of immediate medical attention to
result in—
‘‘(i) placing the health of the individ-
ual (or, with respect to a pregnant woman,
the health of the woman or her unborn
child) in serious jeopardy,
‘‘(ii) serious impairment to bodily
functions, or
‘‘(iii) serious dysfunction of any bodily
organ or part.
‘‘(e) QUALITY ASSURANCE PROGRAM.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation must have arrangements, consistent with any
regulation, for an ongoing quality assurance pro-
gram for health care services it provides to individ-
uals enrolled with MedicarePlus plans of the organi-
zation.
816
‘‘(2) ELEMENTS OF PROGRAM.—The quality as-
surance program shall—
‘‘(A) stress health outcomes and provide
for the collection, analysis, and reporting of
data (in accordance with a quality measurement
system that the Secretary recognizes) that will
permit measurement of outcomes and other in-
dices of the quality of MedicarePlus plans and
organizations;
‘‘(B) provide for the establishment of writ-
ten protocols for utilization review, based on
current standards of medical practice;
‘‘(C) provide review by physicians and
other health care professionals of the process
followed in the provision of such health care
services;
‘‘(D) monitor and evaluate high volume
and high risk services and the care of acute and
chronic conditions;
‘‘(E) evaluate the continuity and coordina-
tion of care that enrollees receive;
‘‘(F) have mechanisms to detect both un-
derutilization and overutilization of services;
‘‘(G) after identifying areas for improve-
ment, establish or alter practice parameters;
817
‘‘(H) take action to improve quality and
assesses the effectiveness of such action
through systematic followup;
‘‘(I) make available information on quality
and outcomes measures to facilitate beneficiary
comparison and choice of health coverage op-
tions (in such form and on such quality and
outcomes measures as the Secretary determines
to be appropriate);
‘‘(J) be evaluated on an ongoing basis as
to its effectiveness;
‘‘(K) include measures of consumer satis-
faction; and
‘‘(L) provide the Secretary with such ac-
cess to information collected as may be appro-
priate to monitor and ensure the quality of care
provided under this part.
‘‘(3) EXTERNAL REVIEW.—Each MedicarePlus
organization shall, for each MedicarePlus plan it op-
erates, have an agreement with an independent qual-
ity review and improvement organization approved
by the Secretary to perform functions of the type de-
scribed in sections 1154(a)(4)(B) and 1154(a)(14)
with respect to services furnished by MedicarePlus
plans for which payment is made under this title.
818
‘‘(4) TREATMENT
OF
ACCREDITATION.—The
Secretary shall provide that a MedicarePlus organi-
zation is deemed to meet requirements of para-
graphs (1) through (3) of this subsection and sub-
section (h) (relating to confidentiality and accuracy
of enrollee records) if the organization is accredited
(and periodically reaccredited) by a private organiza-
tion under a process that the Secretary has deter-
mined 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 sec-
tion 1856 to carry out the respective requirements.
‘‘(f) COVERAGE DETERMINATIONS.—
‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A
MedicarePlus organization shall make determina-
tions regarding authorization requests for non-
emergency care on a timely basis, depending on the
urgency of the situation.
‘‘(2) RECONSIDERATIONS.—
‘‘(A) IN GENERAL.—Subject to subsection
(g)(4), a reconsideration of a determination of
an organization denying coverage shall be made
within 30 days of the date of receipt of medical
819
information, but not later than 60 days after
the date of the determination.
‘‘(B) PHYSICIAN
DECISION
ON
CERTAIN
RECONSIDERATIONS.—A reconsideration relat-
ing to a determination to deny coverage based
on a lack of medical necessity shall be made
only by a physician other than a physician in-
volved in the initial determination.
‘‘(g) GRIEVANCES AND APPEALS.—
‘‘(1) 
GRIEVANCE
MECHANISM.—Each
MedicarePlus organization must provide meaningful
procedures for hearing and resolving grievances be-
tween the organization (including any entity or indi-
vidual through which the organization provides
health 
care 
services) 
and 
enrollees 
with
MedicarePlus plans of the organization under this
part.
‘‘(2) 
APPEALS.—An 
enrollee 
with 
a
MedicarePlus plan of a MedicarePlus organization
under this part who is dissatisfied by reason of the
enrollee’s failure to receive any health service to
which the enrollee believes the enrollee is entitled
and at no greater charge than the enrollee believes
the enrollee is required to pay is entitled, if the
amount in controversy is $100 or more, to a hearing
820
before the Secretary to the same extent as is pro-
vided 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 indi-
vidual or organization shall, upon notifying the other
party, be entitled to judicial review of the Sec-
retary’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 ap-
plying sections 205(b) and 205(g) as provided in
this paragraph, and in applying section 205(l) there-
to, any reference therein to the Commissioner of So-
cial Security or the Social Security Administration
shall be considered a reference to the Secretary or
the Department of Health and Human Services, re-
spectively.
‘‘(3) INDEPENDENT REVIEW OF CERTAIN COV-
ERAGE DENIALS.—The Secretary shall contract with
an independent, outside entity to review and resolve
reconsiderations that affirm denial of coverage.
‘‘(4) EXPEDITED
DETERMINATIONS
AND
RE-
CONSIDERATIONS.—
‘‘(A) RECEIPT OF REQUESTS.—An enrollee
in a MedicarePlus plan may request, either in
writing or orally, an expedited determination or
821
reconsideration by the MedicarePlus organiza-
tion regarding a matter described in paragraph
(2). The organization shall also permit the ac-
ceptance of such requests by physicians.
‘‘(B) ORGANIZATION PROCEDURES.—
‘‘(i) IN GENERAL.—The MedicarePlus
organization shall maintain procedures for
expediting organization determinations and
reconsiderations when, upon request of an
enrollee, the organization determines that
the application of normal time frames for
making a determination (or a reconsider-
ation involving a determination) could seri-
ously jeopardize the life or health of the
enrollee or the enrollee’s ability to regain
maximum function.
‘‘(ii) TIMELY RESPONSE.—In an ur-
gent case described in clause (i), the orga-
nization shall notify the enrollee (and the
physician involved, as appropriate) of the
determination (or determination on the re-
consideration) as expeditiously as the en-
rollee’s health condition requires, but not
later than 72 hours (or 24 hours in the
case of a reconsideration) of the time of re-
822
ceipt of the request for the determination
or reconsideration (or receipt of the infor-
mation necessary to make the determina-
tion or reconsideration), or such longer pe-
riod as the Secretary may permit in speci-
fied cases.
‘‘(h) CONFIDENTIALITY
AND ACCURACY
OF EN-
ROLLEE
RECORDS.—Each MedicarePlus organization
shall establish procedures—
‘‘(1) to safeguard the privacy of individually
identifiable enrollee information,
‘‘(2) to maintain accurate and timely medical
records and other health information for enrollees,
and
‘‘(3) to assure timely access of enrollees to their
medical information.
‘‘(i) INFORMATION ON ADVANCE DIRECTIVES.—Each
MedicarePlus organization shall meet the requirement of
section 1866(f) (relating to maintaining written policies
and procedures respecting advance directives).
‘‘(j) RULES
REGARDING
PHYSICIAN
PARTICIPA-
TION.—
‘‘(1) PROCEDURES.—Each MedicarePlus orga-
nization shall establish reasonable procedures relat-
ing to the participation (under an agreement be-
823
tween a physician and the organization) of physi-
cians under MedicarePlus plans offered by the orga-
nization under this part. Such procedures shall in-
clude—
‘‘(A) providing notice of the rules regard-
ing participation,
‘‘(B) providing written notice of participa-
tion decisions that are adverse to physicians,
and
‘‘(C) providing a process within the organi-
zation for appealing such adverse decisions, in-
cluding the presentation of information and
views of the physician regarding such decision.
‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A
MedicarePlus organization shall consult with physi-
cians who have entered into participation agree-
ments with the organization regarding the organiza-
tion’s medical policy, quality, and medical manage-
ment procedures.
‘‘(3) PROHIBITING INTERFERENCE WITH PRO-
VIDER ADVICE TO ENROLLEES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), a MedicarePlus organiza-
tion (in relation to an individual enrolled under
a MedicarePlus plan offered by the organization
824
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 pro-
fessional about the health status of the individ-
ual or medical care or treatment for the individ-
ual’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.—Sub-
paragraph (A) shall not be construed as requir-
ing a MedicarePlus plan to provide, reimburse
for, or provide coverage of a counseling or re-
ferral service if the MedicarePlus organization
offering the plan—
‘‘(i) objects to the provision of such
service on moral or religious grounds; and
‘‘(ii) in the manner and through the
written 
instrumentalities 
such
MedicarePlus organization deems appro-
priate, makes available information on its
policies regarding such service to prospec-
tive enrollees before or during enrollment
and to enrollees within 90 days after the
825
date that the organization or plan adopts
a change in policy regarding such a coun-
seling or referral service.
‘‘(C) CONSTRUCTION.—Nothing in sub-
paragraph (B) shall be construed to affect dis-
closure requirements under State law or under
the Employee Retirement Income Security Act
of 1974.
‘‘(D) HEALTH
CARE
PROFESSIONAL
DE-
FINED.—For purposes of this paragraph, the
term ‘health care professional’ means a physi-
cian (as defined in section 1861(r)) or other
health care professional if coverage for the pro-
fessional’s services is provided under the
MedicarePlus plan for the services of the pro-
fessional. Such term includes a podiatrist, op-
tometrist, chiropractor, psychologist, dentist,
physician assistant, physical or occupational
therapist and therapy assistant, speech-lan-
guage pathologist, audiologist, registered or li-
censed practical nurse (including nurse practi-
tioner, clinical nurse specialist, certified reg-
istered nurse anesthetist, and certified nurse-
midwife), licensed certified social worker, reg-
826
istered respiratory therapist, and certified res-
piratory therapy technician.
‘‘(4) LIMITATIONS
ON
PHYSICIAN
INCENTIVE
PLANS.—
‘‘(A) IN GENERAL.—No MedicarePlus or-
ganization may operate any physician incentive
plan (as defined in subparagraph (B)) unless
the following requirements are met:
‘‘(i) No specific payment is made di-
rectly or indirectly under the plan to a
physician or physician group as an induce-
ment 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 ade-
quate and appropriate, based on
standards developed by the Secretary
that take into account the number of
physicians placed at such substantial
827
financial risk in the group or under
the plan and the number of individ-
uals enrolled with the organization
who receive services from the physi-
cian or group, and
‘‘(II) conducts periodic surveys of
both individuals enrolled and individ-
uals previously enrolled with the orga-
nization to determine the degree of
access of such individuals to services
provided by the organization and sat-
isfaction with the quality of such serv-
ices.
‘‘(iii) The organization provides the
Secretary with descriptive information re-
garding 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
DE-
FINED.—In this paragraph, the term ‘physician
incentive plan’ means any compensation ar-
rangement between a MedicarePlus organiza-
tion and a physician or physician group that
may directly or indirectly have the effect of re-
828
ducing or limiting services provided with respect
to individuals enrolled with the organization
under this part.
‘‘(5) LIMITATION ON PROVIDER INDEMNIFICA-
TION.—A MedicarePlus organization may not pro-
vide (directly or indirectly) for a provider (or group
of providers) to indemnify the organization against
any liability resulting from a civil action brought for
any 
damage 
caused 
to 
an 
enrollee 
with 
a
MedicarePlus plan of the organization under this
part by the organization’s denial of medically nec-
essary care.
‘‘(k) TREATMENT OF SERVICES FURNISHED BY CER-
TAIN PROVIDERS.—A physician or other entity (other
than a provider of services) that does not have a contract
establishing payment amounts for services furnished to an
individual enrolled under this part with a MedicarePlus
organization (other than under an MSA plan) shall accept
as payment in full for covered services under this title that
are furnished to such an individual the amounts that the
physician or other entity could collect if the individual
were not so enrolled. Any penalty or other provision of
law that applies to such a payment with respect to an indi-
vidual entitled to benefits under this title (but not enrolled
829
with a MedicarePlus organization under this part) also ap-
plies with respect to an individual so enrolled.
‘‘(l) DISCLOSURE OF USE OF DSH AND TEACHING
HOSPITALS.—Each MedicarePlus organization shall pro-
vide the Secretary with information on—
‘‘(1) the extent to which the organization pro-
vides inpatient and outpatient hospital benefits
under this part—
‘‘(A) through the use of hospitals that are
eligible for additional payments under section
1886(d)(5)(F)(i) (relating to so-called DSH
hospitals), or
‘‘(B) through the use of teaching hospitals
that receive payments under section 1886(h);
and
‘‘(2) the extent to which differences between
payment rates to different hospitals reflect the dis-
proportionate share percentage of low-income pa-
tients and the presence of medical residency training
programs in those hospitals.
‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1853. (a) PAYMENTS TO ORGANIZATIONS.—
‘‘(1) MONTHLY PAYMENTS.—
‘‘(A) IN
GENERAL.—Under a contract
under section 1857 and subject to subsections
(e) and (f), the Secretary shall make monthly
830
payments under this section in advance to each
MedicarePlus organization, with respect to cov-
erage of an individual under this part in a
MedicarePlus payment area for a month, in an
amount 
equal 
to 
1⁄12
of 
the 
annual
MedicarePlus capitation rate (as calculated
under subsection (c)) with respect to that indi-
vidual for that area, adjusted for such risk fac-
tors as age, disability status, gender, institu-
tional status, and such other factors as the Sec-
retary determines to be appropriate, so as to
ensure actuarial equivalence. The Secretary
may add to, modify, or substitute for such fac-
tors, if such changes will improve the deter-
mination of actuarial equivalence.
‘‘(B) SPECIAL
RULE
FOR
END-STAGE
RENAL DISEASE.—The Secretary shall establish
separate rates of payment to a MedicarePlus
organization with respect to classes of individ-
uals determined to have end-stage renal disease
and enrolled in a MedicarePlus plan of the or-
ganization. Such rates of payment shall be ac-
tuarially equivalent to rates paid to other en-
rollees in the MedicarePlus payment area (or
such other area as specified by the Secretary).
831
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 pay-
ments described in such sentence.
‘‘(2) ADJUSTMENT
TO
REFLECT
NUMBER
OF
ENROLLEES.—
‘‘(A) IN GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any difference be-
tween 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 ad-
vance payment.
‘‘(B) SPECIAL
RULE
FOR
CERTAIN
EN-
ROLLEES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make retroactive
adjustments under subparagraph (A) to
take into account individuals enrolled dur-
ing the period beginning on the date on
which 
the 
individual 
enrolls 
with 
a
832
MedicarePlus organization under a plan
operated, sponsored, or contributed to by
the individual’s employer or former em-
ployer (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 retro-
active adjustments under this subpara-
graph, such period may not exceed 90
days.
‘‘(ii) 
EXCEPTION.—No 
adjustment
may be made under clause (i) with respect
to any individual who does not certify that
the organization provided the individual
with the information required to be dis-
closed under section 1852(c) at the time
the individual enrolled with the organiza-
tion.
‘‘(3) ESTABLISHMENT
OF
RISK
ADJUSTMENT
FACTORS.—
‘‘(A) REPORT.—The Secretary shall de-
velop, and submit to Congress by not later than
October 1, 1999, a report on a method of risk
adjustment of payment rates under this section
833
that accounts for variations in per capita costs
based on health status. Such report shall in-
clude an evaluation of such method by an out-
side, independent actuary of the actuarial
soundness of the proposal.
‘‘(B) DATA
COLLECTION.—In order to
carry out this paragraph, the Secretary shall re-
quire MedicarePlus organizations (and eligible
organizations with risk-sharing contracts under
section 1876) to submit, for periods beginning
on or after January 1, 1998, data regarding in-
patient hospital services and other services and
other information the Secretary deems nec-
essary.
‘‘(C) 
INITIAL
IMPLEMENTATION.—The
Secretary shall first provide for implementation
of a risk adjustment methodology that accounts
for variations in per capita costs based on
health status and other demographic factors for
payments by no later than January 1, 2000.
‘‘(b) 
ANNUAL
ANNOUNCEMENT
OF
PAYMENT
RATES.—
‘‘(1) ANNUAL ANNOUNCEMENT.—The Secretary
shall annually determine, and shall announce (in a
manner intended to provide notice to interested par-
834
ties) not later than August 1 before the calendar
year concerned—
‘‘(A) the annual MedicarePlus capitation
rate for each MedicarePlus payment area for
the year, and
‘‘(B) the risk and other factors to be used
in adjusting such rates under subsection
(a)(1)(A) for payments for months in that year.
‘‘(2) ADVANCE
NOTICE
OF
METHODOLOGICAL
CHANGES.—At least 45 days before making the an-
nouncement under paragraph (1) for a year, the
Secretary shall provide for notice to MedicarePlus
organizations of proposed changes to be made in the
methodology from the methodology and assumptions
used in the previous announcement and shall provide
such organizations an opportunity to comment on
such proposed changes.
‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each
announcement made under paragraph (1), the Sec-
retary shall include an explanation of the assump-
tions and changes in methodology used in the an-
nouncement in sufficient detail so that MedicarePlus
organizations 
can 
compute 
monthly 
adjusted
MedicarePlus capitation rates for individuals in each
835
MedicarePlus payment area which is in whole or in
part within the service area of such an organization.
‘‘(c) CALCULATION
OF
ANNUAL
MEDICAREPLUS
CAPITATION RATES.—
‘‘(1) IN GENERAL.—For purposes of this part,
each annual MedicarePlus capitation rate, for a
MedicarePlus payment area for a contract year con-
sisting of a calendar year, is equal to the largest of
the amounts specified in the following subpara-
graphs (A), (B), or (C):
‘‘(A) BLENDED
CAPITATION
RATE.—The
sum of—
‘‘(i) area-specific percentage for the
year (as specified under paragraph (2) for
the year) of the annual area-specific
MedicarePlus capitation rate for the year
for the MedicarePlus payment area, as de-
termined under paragraph (3), and
‘‘(ii) national percentage (as specified
under paragraph (2) for the year) of the
input-price-adjusted 
annual 
national
MedicarePlus capitation rate for the year,
as determined under paragraph (4),
836
multiplied by the payment adjustment factors
described in subparagraphs (A) and (B) of
paragraph (5).
‘‘(B) MINIMUM
AMOUNT.—12 multiplied
by the following amount:
‘‘(i) For 1998, $350 (but not to ex-
ceed, 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 sec-
tion 1876(a)(1)(C) for the area).
‘‘(ii) For a succeeding year, the mini-
mum amount specified in this clause (or
clause (i)) for the preceding year increased
by the national per capita MedicarePlus
growth percentage, specified under para-
graph (6) for that succeeding year.
‘‘(C) MINIMUM PERCENTAGE INCREASE.—
‘‘(i) For 1998, 102 percent of the an-
nual per capita rate of payment for 1997
determined under section 1876(a)(1)(C)
for the MedicarePlus payment area.
‘‘(ii) For a subsequent year, 102 per-
cent of the annual MedicarePlus capitation
837
rate under this paragraph for the area for
the previous year.
‘‘(2) AREA-SPECIFIC AND NATIONAL PERCENT-
AGES.—For purposes of paragraph (1)(A)—
‘‘(A) for 1998, the ‘area-specific percent-
age’ is 90 percent and the ‘national percentage’
is 10 percent,
‘‘(B) for 1999, the ‘area-specific percent-
age’ is 80 percent and the ‘national percentage’
is 20 percent,
‘‘(C) for 2000, the ‘area-specific percent-
age’ is 70 percent and the ‘national percentage’
is 30 percent,
‘‘(D) for 2001, the ‘area-specific percent-
age’ is 60 percent and the ‘national percentage’
is 40 percent, and
‘‘(E) for a year after 2001, the ‘area-spe-
cific percentage’ is 50 percent and the ‘national
percentage’ is 50 percent.
‘‘(3) ANNUAL
AREA-SPECIFIC
MEDICAREPLUS
CAPITATION
RATE.—For purposes of paragraph
(1)(A), the annual area-specific MedicarePlus capita-
tion rate for a MedicarePlus payment area—
‘‘(A) for 1998 is the annual per capita rate
of payment for 1997 determined under section
838
1876(a)(1)(C) for the area, increased by the
national per capita MedicarePlus growth per-
centage for 1998 (as defined in paragraph (6));
or
‘‘(B) for a subsequent year is the annual
area-specific MedicarePlus capitation rate for
the previous year determined under this para-
graph for the area, increased by the national
per capita MedicarePlus growth percentage for
such subsequent year.
‘‘(4) 
INPUT-PRICE-ADJUSTED
ANNUAL
NA-
TIONAL MEDICAREPLUS CAPITATION RATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A), the input-price-adjusted annual
national MedicarePlus capitation rate for a
MedicarePlus payment area for a year is equal
to the sum, for all the types of medicare serv-
ices (as classified by the Secretary), of the
product (for each such type of service) of—
‘‘(i) the national standardized annual
MedicarePlus capitation rate (determined
under subparagraph (B)) for the year,
‘‘(ii) the proportion of such rate for
the year which is attributable to such type
of services, and
839
‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area
compared to the national average input
price of such services.
In applying clause (iii), the Secretary shall, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or
updating) national payment rates for specific
areas and localities.
‘‘(B) NATIONAL
STANDARDIZED
ANNUAL
MEDICAREPLUS
CAPITATION
RATE.—In sub-
paragraph (A)(i), the ‘national standardized an-
nual MedicarePlus capitation rate’ for a year is
equal to—
‘‘(i) the sum (for all MedicarePlus
payment areas) of the product of—
‘‘(I) 
the 
annual 
area-specific
MedicarePlus capitation rate for that
year for the area under paragraph
(3), and
‘‘(II) the average number of med-
icare beneficiaries residing in that
area in the year, multiplied by the av-
erage of the risk factor weights used
840
to adjust payments under subsection
(a)(1)(A) for such beneficiaries in
such area; divided by
‘‘(ii) the sum of the products de-
scribed in clause (i)(II) for all areas for
that year.
‘‘(C) SPECIAL RULES FOR 1998.—In apply-
ing 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 sub-
paragraph (A)(ii)—
‘‘(I) for part A services shall be
the ratio (expressed as a percentage)
of the national average annual per
capita rate of payment for part A for
1997 to the total national average an-
nual 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
841
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 in-
volved;
‘‘(iv) for part B services—
‘‘(I) 66 percent of payments at-
tributable to such services shall be ad-
justed by the index of the geographic
area factors under section 1848(e)
used to adjust payment rates for phy-
sicians’ services furnished in the pay-
ment 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 com-
puted based only on the beneficiary popu-
lation 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.
842
‘‘(5) PAYMENT
ADJUSTMENT
BUDGET
NEU-
TRALITY
FACTORS.—For purposes of paragraph
(1)(A)—
‘‘(A) BLENDED RATE PAYMENT ADJUST-
MENT FACTOR.—For each year, the Secretary
shall compute a blended rate payment adjust-
ment factor such that, not taking into account
subparagraphs (B) and (C) of paragraph (1)
and the application of the payment adjustment
factor described in subparagraph (B), the ag-
gregate of the payments that would be made
under this part is equal to the aggregate pay-
ments that would have been made under this
part (not taking into account such subpara-
graphs and such other adjustment factor) if the
area-specific percentage under paragraph (1)
for the year had been 100 percent and the na-
tional percentage had been 0 percent.
‘‘(B) FLOOR-AND-MINIMUM-UPDATE
PAY-
MENT ADJUSTMENT FACTOR.—For each year,
the Secretary shall compute a floor-and-mini-
mum-update payment adjustment factor so
that, taking into account the application of the
blended rate payment adjustment factor under
subparagraph (A) and subparagraphs (B) and
843
(C) of paragraph (1) and the application of the
adjustment factor under this subparagraph, the
aggregate of the payments under this part shall
not exceed the aggregate payments that would
have been made under this part if subpara-
graphs (B) and (C) of paragraph (1) did not
apply and if the floor-and-minimum-update pay-
ment adjustment factor under this subpara-
graph was 1.
‘‘(6) NATIONAL
PER
CAPITA
MEDICAREPLUS
GROWTH PERCENTAGE DEFINED.—
‘‘(A) IN GENERAL.—In this part, the ‘na-
tional per capita MedicarePlus growth percent-
age’ for a year is the percentage determined by
the Secretary, by April 30th before the begin-
ning of the year involved, to reflect the Sec-
retary’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 sub-
paragraph (B) for the year. Separate deter-
minations may be made for aged enrollees, dis-
abled enrollees, and enrollees with end-stage
renal disease. Such percentage shall include an
844
adjustment for over or under projection in the
growth percentage for previous years.
‘‘(B) ADJUSTMENT.—The number of per-
centage points specified in this subparagraph
is—
‘‘(i) for 1998, 0.5 percentage points,
‘‘(ii) for 1999, 0.5 percentage points,
‘‘(iii) for 2000, 0.5 percentage points,
‘‘(iv) for 2001, 0.5 percentage points,
‘‘(v) for 2002, 0.5 percentage points,
and
‘‘(vi) for a year after 2002, 0 percent-
age points.
‘‘(d) MEDICAREPLUS PAYMENT AREA DEFINED.—
‘‘(1) IN GENERAL.—In this part, except as pro-
vided in paragraph (3), the term ‘MedicarePlus pay-
ment area’ means a county, or equivalent area speci-
fied by the Secretary.
‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the
case of individuals who are determined to have end
stage renal disease, the MedicarePlus payment area
shall be a State or such other payment area as the
Secretary specifies.
‘‘(3) GEOGRAPHIC ADJUSTMENT.—
845
‘‘(A) IN GENERAL.—Upon written request
of the chief executive officer of a State for a
contract year (beginning after 1998) made at
least 7 months before the beginning of the year,
the Secretary shall make a geographic adjust-
ment to a MedicarePlus payment area in the
State otherwise determined under paragraph
(1)—
‘‘(i) 
to 
a 
single 
statewide
MedicarePlus payment area,
‘‘(ii) to the metropolitan based system
described in subparagraph (C), or
‘‘(iii) to consolidating into a single
MedicarePlus payment area noncontiguous
counties (or equivalent areas described in
paragraph (1)) within a State.
Such adjustment shall be effective for payments
for months beginning with January of the year
following the year in which the request is re-
ceived.
‘‘(B) 
BUDGET
NEUTRALITY
ADJUST-
MENT.—In the case of a State requesting an
adjustment under this paragraph, the Secretary
shall adjust the payment rates otherwise estab-
lished under this section for MedicarePlus pay-
846
ment 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 pay-
ments that would have been made under this
section for MedicarePlus payment areas in the
State in the absence of the adjustment under
this paragraph.
‘‘(C) METROPOLITAN
BASED
SYSTEM.—
The metropolitan based system described in this
subparagraph is one in which—
‘‘(i) all the portions of each metropoli-
tan statistical area in the State or in the
case of a consolidated metropolitan statis-
tical area, all of the portions of each pri-
mary metropolitan statistical area within
the consolidated area within the State, are
treated as a single MedicarePlus payment
area, and
‘‘(ii) all areas in the State that do not
fall within a metropolitan statistical area
are treated as a single MedicarePlus pay-
ment area.
‘‘(D) AREAS.—In subparagraph (C), the
terms ‘metropolitan statistical area’, ‘consoli-
dated metropolitan statistical area’, and ‘pri-
847
mary metropolitan statistical area’ mean any
area designated as such by the Secretary of
Commerce.
‘‘(e) SPECIAL RULES FOR INDIVIDUALS ELECTING
MSA PLANS.—
‘‘(1) IN
GENERAL.—If the amount of the
monthly premium for an MSA plan for a
MedicarePlus payment area for a year is less than
1⁄12 of the annual MedicarePlus capitation rate ap-
plied under this section for the area and year in-
volved, the Secretary shall deposit an amount equal
to 100 percent of such difference in a MedicarePlus
MSA established (and, if applicable, designated) by
the individual under paragraph (2).
‘‘(2) ESTABLISHMENT
AND
DESIGNATION
OF
MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE-
QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In
the case of an individual who has elected coverage
under an MSA plan, no payment shall be made
under paragraph (1) on behalf of an individual for
a month unless the individual—
‘‘(A) has established before the beginning
of the month (or by such other deadline as the
Secretary may specify) a MedicarePlus MSA
848
(as defined in section 138(b)(2) of the Internal
Revenue Code of 1986), and
‘‘(B) if the individual has established more
than one such MedicarePlus MSA, has des-
ignated one of such accounts as the individual’s
MedicarePlus MSA for purposes of this part.
Under rules under this section, such an individual
may change the designation of such account under
subparagraph (B) for purposes of this part.
‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS
ACCOUNT CONTRIBUTION.—In the case of an indi-
vidual electing an MSA plan effective beginning with
a month in a year, the amount of the contribution
to the MedicarePlus MSA on behalf of the individual
for that month and all successive months in the year
shall be deposited during that first month. In the
case of a termination of such an election as of a
month before the end of a year, the Secretary shall
provide for a procedure for the recovery of deposits
attributable to the remaining months in the year.
‘‘(f) PAYMENTS FROM TRUST FUND.—The payment
to a MedicarePlus organization under this section for indi-
viduals enrolled under this part with the organization and
payments to a MedicarePlus MSA under subsection (e)(1)
shall be made from the Federal Hospital Insurance Trust
849
Fund and the Federal Supplementary Medical Insurance
Trust Fund in such proportion as the Secretary deter-
mines 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 oth-
erwise payable under this section for October 2001 shall
be paid on the last business day of September 2001.
‘‘(g) SPECIAL RULE FOR CERTAIN INPATIENT HOS-
PITAL STAYS.—In the case of an individual who is receiv-
ing inpatient hospital services from a subsection (d) hos-
pital (as defined in section 1886(d)(1)(B)) as of the effec-
tive date of the individual’s—
‘‘(1) election under this part of a MedicarePlus
plan offered by a MedicarePlus organization—
‘‘(A) payment for such services until the
date of the individual’s discharge shall be made
under this title through the MedicarePlus plan
or the medicare fee-for-service program option
described in section 1851(a)(1)(A) (as the case
may be) elected before the election with such
organization,
‘‘(B) the elected organization shall not be
financially responsible for payment for such
services until the date after the date of the indi-
vidual’s discharge, and
850
‘‘(C) the organization shall nonetheless be
paid the full amount otherwise payable to the
organization under this part; or
‘‘(2) termination of election with respect to a
MedicarePlus organization under this part—
‘‘(A) the organization shall be financially
responsible for payment for such services after
such date and until the date of the individual’s
discharge,
‘‘(B) payment for such services during the
stay shall not be made under section 1886(d) or
by any succeeding MedicarePlus organization,
and
‘‘(C) the terminated organization shall not
receive any payment with respect to the individ-
ual under this part during the period the indi-
vidual is not enrolled.
‘‘PREMIUMS
‘‘SEC. 1854. (a) SUBMISSION
AND CHARGING
OF
PREMIUMS.—
‘‘(1) IN GENERAL.—Subject to paragraph (3),
each MedicarePlus organization shall file with the
Secretary each year, in a form and manner and at
a time specified by the Secretary—
‘‘(A) the amount of the monthly premium
for coverage for services under section 1852(a)
851
under each MedicarePlus plan it offers under
this part in each MedicarePlus payment area
(as defined in section 1853(d)) in which the
plan is being offered; and
‘‘(B) the enrollment capacity in relation to
the plan in each such area.
‘‘(2) TERMINOLOGY.—In this part—
‘‘(A) the term ‘monthly premium’ means,
with respect to a MedicarePlus plan offered by
a MedicarePlus organization, the monthly pre-
mium filed under paragraph (1), not taking
into account the amount of any payment made
toward the premium under section 1853; and
‘‘(B) the term ‘net monthly premium’
means, with respect to such a plan and an indi-
vidual enrolled with the plan, the premium (as
defined in subparagraph (A)) for the plan re-
duced by the amount of payment made toward
such premium under section 1853.
‘‘(b) MONTHLY PREMIUM CHARGED.—The monthly
amount of the premium charged by a MedicarePlus orga-
nization 
for 
a 
MedicarePlus 
plan 
offered 
in 
a
MedicarePlus payment area to an individual under this
part shall be equal to the net monthly premium plus any
852
monthly premium charged in accordance with subsection
(e)(2) for supplemental benefits.
‘‘(c) UNIFORM PREMIUM.—The monthly premium
and monthly amount charged under subsection (b) of a
MedicarePlus organization under this part may not vary
among individuals who reside in the same MedicarePlus
payment area.
‘‘(d) TERMS AND CONDITIONS OF IMPOSING PRE-
MIUMS.—Each MedicarePlus organization shall permit the
payment of net monthly premiums on a monthly basis and
may terminate election of individuals for a MedicarePlus
plan for failure to make premium payments only in ac-
cordance with section 1851(g)(3)(B)(i). A MedicarePlus
organization is not authorized to provide for cash or other
monetary rebates as an inducement for enrollment or oth-
erwise.
‘‘(e) LIMITATION ON ENROLLEE COST-SHARING.—
‘‘(1) FOR BASIC AND ADDITIONAL BENEFITS.—
Except as provided in paragraph (2), in no event
may—
‘‘(A) the net monthly premium (multiplied
by 12) and the actuarial value of the
deductibles, coinsurance, and copayments appli-
cable on average to individuals enrolled under
this part with a MedicarePlus plan of an orga-
853
nization with respect to required benefits de-
scribed in section 1852(a)(1) and additional
benefits (if any) required under subsection
(f)(1) for a year, exceed
‘‘(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be ap-
plicable on average to individuals entitled to
benefits under part A and enrolled under part
B if they were not members of a MedicarePlus
organization for the year.
‘‘(2) FOR
SUPPLEMENTAL
BENEFITS.—If the
MedicarePlus organization provides to its members
enrolled under this part supplemental benefits de-
scribed in section 1852(a)(3), the sum of the month-
ly premium rate (multiplied by 12) charged for such
supplemental benefits and the actuarial value of its
deductibles, coinsurance, and copayments charged
with respect to such benefits may not exceed the ad-
justed community rate for such benefits (as defined
in subsection (f)(4)).
‘‘(3) EXCEPTION FOR MSA PLANS.—Paragraphs
(1) and (2) do not apply to an MSA plan.
‘‘(4) DETERMINATION ON OTHER BASIS.—If the
Secretary determines that adequate data are not
available to determine the actuarial value under
854
paragraph (1)(A) or (2), the Secretary may deter-
mine such amount with respect to all individuals in
the MedicarePlus payment area, the State, or in the
United States, eligible to enroll in the MedicarePlus
plan involved under this part or on the basis of other
appropriate data.
‘‘(f) REQUIREMENT FOR ADDITIONAL BENEFITS.—
‘‘(1) REQUIREMENT.—
‘‘(A) IN
GENERAL.—Each MedicarePlus
organization (in relation to a MedicarePlus plan
it offers) shall provide that if there is an excess
amount (as defined in subparagraph (B)) for
the plan for a contract year, subject to the suc-
ceeding provisions of this subsection, the orga-
nization shall provide to individuals such addi-
tional benefits (as the organization may specify)
in a value which is at least equal to the ad-
justed excess amount (as defined in subpara-
graph (C)).
‘‘(B) EXCESS AMOUNT.—For purposes of
this paragraph, the ‘excess amount’, for an or-
ganization for a plan, is the amount (if any) by
which—
‘‘(i) the average of the capitation pay-
ments made to the organization under sec-
855
tion 1853 for the plan at the beginning of
contract year, exceeds
‘‘(ii) the actuarial value of the re-
quired 
benefits 
described 
in 
section
1852(a)(1) under the plan for individuals
under this part, as determined based upon
an adjusted community rate described in
paragraph (4) (as reduced for the actuarial
value of the coinsurance and deductibles
under parts A and B).
‘‘(C) ADJUSTED
EXCESS
AMOUNT.—For
purposes of this paragraph, the ‘adjusted excess
amount’, for an organization for a plan, is the
excess amount reduced to reflect any amount
withheld and reserved for the organization for
the year under paragraph (2).
‘‘(D) NO APPLICATION TO MSA PLANS.—
Subparagraph (A) shall not apply to an MSA
plan.
‘‘(E) UNIFORM APPLICATION.—This para-
graph shall be applied uniformly for all enroll-
ees for a plan in a MedicarePlus payment area.
‘‘(F) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing a
MedicarePlus 
organization 
from 
providing
856
health care benefits that are in addition to the
benefits otherwise required to be provided under
this paragraph and from imposing a premium
for such additional benefits.
‘‘(2) STABILIZATION
FUND.—A MedicarePlus
organization may provide that a part of the value of
an excess amount described in paragraph (1) be
withheld and reserved in the Federal Hospital Insur-
ance 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 peri-
ods, to the extent required to stabilize and prevent
undue fluctuations in the additional benefits offered
in those subsequent periods by the organization in
accordance with such paragraph. Any of such value
of the amount reserved which is not provided as ad-
ditional benefits described in paragraph (1)(A) to in-
dividuals electing the MedicarePlus plan of the orga-
nization in accordance with such paragraph prior to
the end of such periods, shall revert for the use of
such trust funds.
‘‘(3) DETERMINATION BASED ON INSUFFICIENT
DATA.—For purposes of this subsection, if the Sec-
retary finds that there is insufficient enrollment ex-
857
perience (including no enrollment experience in the
case of a provider-sponsored organization) to deter-
mine an average of the capitation payments to be
made under this part at the beginning of a contract
period, the Secretary may determine such an aver-
age based on the enrollment experience of other con-
tracts entered into under this part.
‘‘(4) ADJUSTED COMMUNITY RATE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, subject to subparagraph (B), the
term ‘adjusted community rate’ for a service or
services 
means, 
at 
the 
election 
of 
a
MedicarePlus organization, either—
‘‘(i) the rate of payment for that serv-
ice or services which the Secretary annu-
ally determines would apply to an individ-
ual electing a MedicarePlus plan under
this part if the rate of payment were deter-
mined under a ‘community rating system’
(as defined in section 1302(8) of the Pub-
lic Health Service Act, other than subpara-
graph (C)), or
‘‘(ii) such portion of the weighted ag-
gregate premium, which the Secretary an-
nually estimates would apply to such an in-
858
dividual, as the Secretary annually esti-
mates is attributable to that service or
services,
but adjusted for differences between the utiliza-
tion 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 dif-
ferences, the differences between the utilization
characteristics of individuals selecting other
MedicarePlus coverage, or MedicarePlus eligible
individuals in the area, in the State, or in the
United States, eligible to elect MedicarePlus
coverage under this part and the utilization
characteristics of the rest of the population in
the area, in the State, or in the United States,
respectively).
‘‘(B) SPECIAL RULE FOR PROVIDER-SPON-
SORED
ORGANIZATIONS.—In the case of a
MedicarePlus organization that is a provider-
sponsored organization, the adjusted community
rate 
under 
subparagraph 
(A) 
for 
a
MedicarePlus plan of the organization may be
computed (in a manner specified by the Sec-
859
retary) using data in the general commercial
marketplace or (during a transition period)
based on the costs incurred by the organization
in providing such a plan.
‘‘(g) PERIODIC AUDITING.—The Secretary shall pro-
vide for the annual auditing of the financial records (in-
cluding data relating to medicare utilization, costs, and
computation of the adjusted community rate) of at least
one-third of the MedicarePlus organizations offering
MedicarePlus plans under this part. The Comptroller Gen-
eral shall monitoring auditing activities conducted under
this subsection.
‘‘(h) PROHIBITION OF STATE IMPOSITION OF PRE-
MIUM TAXES.—No State may impose a premium tax or
similar tax with respect to premiums on MedicarePlus
plans or the offering of such plans.
‘‘ORGANIZATIONAL AND FINANCIAL REQUIREMENTS FOR
MEDICAREPLUS
ORGANIZATIONS; 
PROVIDER-SPON-
SORED ORGANIZATIONS
‘‘SEC. 1855. (a) ORGANIZED AND LICENSED UNDER
STATE LAW.—
‘‘(1) IN GENERAL.—Subject to paragraphs (2)
and (3), a MedicarePlus organization shall be orga-
nized and licensed under State law as a risk-bearing
entity eligible to offer health insurance or health
860
benefits coverage in each State in which it offers a
MedicarePlus plan.
‘‘(2) SPECIAL EXCEPTION FOR PROVIDER-SPON-
SORED ORGANIZATIONS.—
‘‘(A) IN GENERAL.—In the case of a pro-
vider-sponsored organization that seeks to offer
a MedicarePlus plan in a State, the Secretary
shall waive the requirement of paragraph (1)
that the organization be licensed in that State
if—
‘‘(i) the organization files an applica-
tion for such waiver with the Secretary,
and
‘‘(ii) the Secretary determines, based
on the application and other evidence pre-
sented to the Secretary, that any of the
grounds for approval of the application de-
scribed in subparagraph (B), (C), or (D)
has been met.
‘‘(B) FAILURE TO ACT ON LICENSURE AP-
PLICATION ON A TIMELY BASIS.—A ground for
approval of such a waiver application is that the
State has failed to complete action on a licens-
ing application of the organization within 90
days of the date of the State’s receipt of the
861
completed application. No period before the
date of the enactment of this section shall be
included in determining such 90-day period.
‘‘(C) DENIAL OF APPLICATION BASED ON
DISCRIMINATORY
TREATMENT.—A ground for
approval of such a waiver application is that the
State has denied such a licensing application
and—
‘‘(i) the State has imposed docu-
mentation or information requirements not
related to solvency requirements that are
not generally applicable to other entities
engaged in substantially similar business,
or
‘‘(ii) the standards or review process
imposed by the State as a condition of ap-
proval of the license imposes any material
requirements, procedures, or standards
(other than requirements and standards
relating to solvency) to such organizations
that are not generally applicable to other
entities engaged in substantially similar
business.
‘‘(D) DENIAL OF APPLICATION BASED ON
APPLICATION OF SOLVENCY REQUIREMENTS.—
862
A ground for approval of such a waiver applica-
tion is that the State has denied such a licens-
ing application based (in whole or in part) on
the organization’s failure to meet applicable sol-
vency 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 con-
dition of approval of the license any docu-
mentation or information requirements re-
lating to solvency or other material re-
quirements, procedures, or standards relat-
ing to solvency that are different from the
requirements, procedures, and standards
applied by the Secretary under subsection
(d)(2).
For purposes of this subparagraph, the term
‘solvency requirements’ means requirements re-
lating to solvency and other matters covered
under the standards established under section
1856(a).
‘‘(E) TREATMENT
OF
WAIVER.—In the
case of a waiver granted under this paragraph
for a provider-sponsored organization—
863
‘‘(i) the waiver shall be effective for a
36-month period, except it may be renewed
based on a subsequent application filed
during the last 6 months of such period,
and
‘‘(ii) any provisions of State law which
relate to the licensing of the organization
and which prohibit the organization from
providing coverage pursuant to a contract
under this part shall be superseded.
Nothing in this subparagraph shall be con-
strued as limiting the number of times such a
waiver may be renewed.
‘‘(F) PROMPT ACTION ON APPLICATION.—
The Secretary shall grant or deny such a waiver
application within 60 days after the date the
Secretary determines that a substantially com-
plete application has been filed. Nothing in this
section shall be construed as preventing an or-
ganization which has had such a waiver applica-
tion denied from submitting a subsequent waiv-
er application.
‘‘(3) EXCEPTION IF REQUIRED TO OFFER MORE
THAN MEDICAREPLUS PLANS.—Paragraph (1) shall
not apply to a MedicarePlus organization in a State
864
if the State requires the organization, as a condition
of licensure, to offer any product or plan other than
a MedicarePlus plan.
‘‘(4) LICENSURE DOES NOT SUBSTITUTE FOR
OR CONSTITUTE CERTIFICATION.—The fact that an
organization is licensed in accordance with para-
graph (1) does not deem the organization to meet
other requirements imposed under this part.
‘‘(b) PREPAID PAYMENT.—A MedicarePlus organiza-
tion shall be compensated (except for premiums,
deductibles, coinsurance, and copayments) for the provi-
sion of health care services to enrolled members under the
contract under this part by a payment which is paid on
a periodic basis without regard to the date the health care
services are provided and which is fixed without regard
to the frequency, extent, or kind of health care service ac-
tually provided to a member.
‘‘(c) ASSUMPTION OF FULL FINANCIAL RISK.—The
MedicarePlus organization shall assume full financial risk
on a prospective basis for the provision of the health care
services (except, at the election of the organization, hos-
pice care) for which benefits are required to be provided
under section 1852(a)(1), except that the organization—
‘‘(1) may obtain insurance or make other ar-
rangements for the cost of providing to any enrolled
865
member such services the aggregate value of which
exceeds $5,000 in any year,
‘‘(2) may obtain insurance or make other ar-
rangements for the cost of such services provided to
its enrolled members other than through the organi-
zation because medical necessity required their pro-
vision before they could be secured through the orga-
nization,
‘‘(3) may obtain insurance or make other ar-
rangements for not more than 90 percent of the
amount by which its costs for any of its fiscal years
exceed 115 percent of its income for such fiscal year,
and
‘‘(4) may make arrangements with physicians
or other health professionals, health care institu-
tions, or any combination of such individuals or in-
stitutions 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 pro-
fessionals or through the institutions.
‘‘(d) CERTIFICATION OF PROVISION AGAINST RISK
OF INSOLVENCY FOR UNLICENSED PSOS.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation that is a provider-sponsored organization,
that is not licensed by a State under subsection (a),
866
and for which a waiver application has been ap-
proved under subsection (a)(2), shall meet standards
established under section 1856(a) relating to the fi-
nancial solvency and capital adequacy of the organi-
zation.
‘‘(2) CERTIFICATION PROCESS FOR SOLVENCY
STANDARDS FOR PSOS.—The Secretary shall estab-
lish a process for the receipt and approval of appli-
cations of a provider-sponsored organization de-
scribed in paragraph (1) for certification (and peri-
odic recertification) of the organization as meeting
such solvency standards. Under such process, the
Secretary shall act upon such an application not
later than 60 days after the date the application has
been received.
‘‘(e) PROVIDER-SPONSORED
ORGANIZATION
DE-
FINED.—
‘‘(1) IN GENERAL.—In this part, the term ‘pro-
vider-sponsored organization’ means a public or pri-
vate entity—
‘‘(A) that is established or organized by a
health care provider, or group of affiliated
health care providers,
‘‘(B) that provides a substantial proportion
(as defined by the Secretary in accordance with
867
paragraph (2)) of the health care items and
services under the contract under this part di-
rectly through the provider or affiliated group
of providers, and
‘‘(C) with respect to which those affiliated
providers that share, directly or indirectly, sub-
stantial financial risk with respect to the provi-
sion of such items and services have at least a
majority financial interest in the entity.
‘‘(2) SUBSTANTIAL PROPORTION.—In defining
what is a ‘substantial proportion’ for purposes of
paragraph (1)(B), the Secretary—
‘‘(A) shall take into account (i) the need
for such an organization to assume responsibil-
ity for a substantial proportion of services in
order to assure financial stability and (ii) the
practical difficulties in such an organization in-
tegrating a very wide range of service providers;
and
‘‘(B) may vary such proportion based upon
relevant differences among organizations, such
as their location in an urban or rural area.
‘‘(3) AFFILIATION.—For purposes of this sub-
section, a provider is ‘affiliated’ with another pro-
vider if, through contract, ownership, or otherwise—
868
‘‘(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 con-
trolled group of corporations under section
1563 of the Internal Revenue Code of 1986, or
‘‘(C) both providers are part of an affili-
ated service group under section 414 of such
Code.
‘‘(4) CONTROL.—For purposes of paragraph
(3), control is presumed to exist if one party, di-
rectly or indirectly, owns, controls, or holds the
power to vote, or proxies for, not less than 51 per-
cent of the voting rights or governance rights of an-
other.
‘‘(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 de-
livery of health care services in a State and
869
that, if it is required by State law or regulation
to be licensed or certified by the State to en-
gage in the delivery of such services in the
State, is so licensed.
‘‘(6) REGULATIONS.—The Secretary shall issue
regulations to carry out this subsection.
‘‘ESTABLISHMENT OF STANDARDS
‘‘SEC. 1856. (a) ESTABLISHMENT
OF SOLVENCY
STANDARDS
FOR
PROVIDER-SPONSORED
ORGANIZA-
TIONS.—
‘‘(1) ESTABLISHMENT.—
‘‘(A) IN
GENERAL.—The Secretary shall
establish, on an expedited basis and using a ne-
gotiated rulemaking process under subchapter
III of chapter 5 of title 5, United States Code,
standards described in section 1855(d)(1) (re-
lating to the financial solvency and capital ade-
quacy of the organization) that entities must
meet to qualify as provider-sponsored organiza-
tions under this part.
‘‘(B) FACTORS
TO
CONSIDER
FOR
SOL-
VENCY
STANDARDS.—In establishing solvency
standards under subparagraph (A) for provider-
sponsored organizations, the Secretary shall
consult with interested parties and shall take
into account—
870
‘‘(i) the delivery system assets of such
an organization and ability of such an or-
ganization to provide services directly to
enrollees through affiliated providers, and
‘‘(ii) alternative means of protecting
against insolvency, including reinsurance,
unrestricted surplus, letters of credit, guar-
antees, organizational insurance coverage,
partnerships with other licensed entities,
and valuation attributable to the ability of
such an organization to meet its service
obligations through direct delivery of care.
‘‘(C) ENROLLEE PROTECTION AGAINST IN-
SOLVENCY.—Such standards shall include pro-
visions to prevent enrollees from being held lia-
ble to any person or entity for the MedicarePlus
organization’s debts in the event of the organi-
zation’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 Amer-
ican Academy of Actuaries, organizations represent-
ative of medicare beneficiaries, and other interested
parties, shall publish the notice provided for under
871
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 sub-
stituted for ‘30 days’.
‘‘(5) APPOINTMENT
OF
NEGOTIATED
RULE-
MAKING COMMITTEE AND FACILITATOR.—The Sec-
retary shall provide for—
‘‘(A) the appointment of a negotiated rule-
making 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 para-
graph (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 com-
mittee.
872
‘‘(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 commit-
tee’s progress on achieving a consensus with regard
to the rulemaking proceeding and whether such con-
sensus is likely to occur before one month before the
target date for publication of the rule. If the com-
mittee 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 pro-
vide for the publication of a rule under this sub-
section through such other methods as the Secretary
may provide.
‘‘(7) FINAL COMMITTEE REPORT.—If the com-
mittee is not terminated under paragraph (6), the
rulemaking committee shall submit a report contain-
ing a proposed rule by not later than one month be-
fore the target date of publication.
‘‘(8) INTERIM, FINAL EFFECT.—The Secretary
shall publish a rule under this subsection in the Fed-
eral Register by not later than the target date of
publication. Such rule shall be effective and final im-
mediately on an interim basis, but is subject to
873
change and revision after public notice and oppor-
tunity 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 re-
view and approval of applications of entities to be
certified as provider-sponsored organizations pursu-
ant to such rules and consistent with this subsection.
‘‘(9) PUBLICATION
OF
RULE
AFTER
PUBLIC
COMMENT.—The Secretary shall provide for consid-
eration of such comments and republication of such
rule by not later than 1 year after the target date
of publication.
‘‘(b) ESTABLISHMENT OF OTHER STANDARDS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish by regulation other standards (not described in
subsection (a)) for MedicarePlus organizations and
plans consistent with, and to carry out, this part.
‘‘(2) USE OF CURRENT STANDARDS.—Consist-
ent with the requirements of this part, standards es-
tablished under this subsection shall be based on
standards established under section 1876 to carry
out analogous provisions of such section.
‘‘(3) USE OF INTERIM STANDARDS.—For the
period in which this part is in effect and standards
are being developed and established under the pre-
874
ceding provisions of this subsection, the Secretary
shall provide by not later than June 1, 1998, for the
application of such interim standards (without re-
gard to any requirements for notice and public com-
ment) as may be appropriate to provide for the expe-
dited implementation of this part. Such interim
standards shall not apply after the date standards
are established under the preceding provisions of
this subsection.
‘‘(4) APPLICATION OF NEW STANDARDS TO EN-
TITIES
WITH
A
CONTRACT.—In the case of a
MedicarePlus organization with a contract in effect
under this part at the time standards applicable to
the organization under this section are changed, the
organization may elect not to have such changes
apply to the organization until the end of the cur-
rent contract year (or, if there is less than 6 months
remaining in the contract year, until 1 year after the
end of the current contract year).
‘‘(5) RELATION TO STATE LAWS.—The stand-
ards established under this subsection shall super-
sede any State law or regulation with respect to
MedicarePlus 
plans 
which 
are 
offered 
by
MedicarePlus organizations under this part to the
875
extent such law or regulation is inconsistent with
such standards.
‘‘CONTRACTS WITH MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1857. (a) IN GENERAL.—The Secretary shall
not permit the election under section 1851 of a
MedicarePlus plan offered by a MedicarePlus organization
under this part, and no payment shall be made under sec-
tion 1853 to an organization, unless the Secretary has en-
tered into a contract under this section with the organiza-
tion with respect to the offering of such plan. Such a con-
tract with an organization may cover more than one
MedicarePlus plan. Such contract shall provide that the
organization agrees to comply with the applicable require-
ments and standards of this part and the terms and condi-
tions of payment as provided for in this part.
‘‘(b) MINIMUM ENROLLMENT REQUIREMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraphs (2)
and (3), the Secretary may not enter into a contract
under this section with a MedicarePlus organization
unless the organization has at least 5,000 individ-
uals (or 1,500 individuals in the case of an organiza-
tion that is a provider-sponsored organization) who
are receiving health benefits through the organiza-
tion, except that the standards under section 1856
may permit the organization to have a lesser number
of beneficiaries (but not less than 500 in the case
876
of an organization that is a provider-sponsored orga-
nization) if the organization primarily serves individ-
uals residing outside of urbanized areas.
‘‘(2) EXCEPTION FOR MSA PLAN.—Paragraph
(1) shall not apply with respect to a contract that
relates only to an MSA plan.
‘‘(3) ALLOWING
TRANSITION.—The Secretary
may waive the requirement of paragraph (1) during
the first 3 contract years with respect to an organi-
zation.
‘‘(c) CONTRACT PERIOD AND EFFECTIVENESS.—
‘‘(1) PERIOD.—Each contract under this sec-
tion shall be for a term of at least one year, as de-
termined by the Secretary, and may be made auto-
matically renewable from term to term in the ab-
sence of notice by either party of intention to termi-
nate at the end of the current term.
‘‘(2) TERMINATION
AUTHORITY.—In accord-
ance 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;
877
‘‘(B) is carrying out the contract in a man-
ner inconsistent with the efficient and effective
administration of this part; or
‘‘(C) no longer substantially meets the ap-
plicable conditions of this part.
‘‘(3) EFFECTIVE
DATE
OF
CONTRACTS.—The
effective date of any contract executed pursuant to
this section shall be specified in the contract, except
that in no case shall a contract under this section
which provides for coverage under an MSA plan be
effective before January 1999 with respect to such
coverage.
‘‘(4) PREVIOUS TERMINATIONS.—The Secretary
may not enter into a contract with a MedicarePlus
organization if a previous contract with that organi-
zation under this section was terminated at the re-
quest of the organization within the preceding five-
year period, except in circumstances which warrant
special consideration, as determined by the Sec-
retary.
‘‘(5) CONTRACTING AUTHORITY.—The author-
ity vested in the Secretary by this part may be per-
formed without regard to such provisions of law or
regulations relating to the making, performance,
amendment, or modification of contracts of the
878
United States as the Secretary may determine to be
inconsistent with the furtherance of the purpose of
this title.
‘‘(d) PROTECTIONS AGAINST FRAUD
AND BENE-
FICIARY PROTECTIONS.—
‘‘(1) INSPECTION AND AUDIT.—Each contract
under this section shall provide that the Secretary,
or any person or organization designated by the Sec-
retary—
‘‘(A) shall have the right to inspect or oth-
erwise evaluate (i) the quality, appropriateness,
and timeliness of services performed under the
contract and (ii) the facilities of the organiza-
tion when there is reasonable evidence of some
need for such inspection, and
‘‘(B) shall have the right to audit and in-
spect 
any 
books 
and 
records 
of 
the
MedicarePlus organization that pertain (i) to
the ability of the organization to bear the risk
of potential financial losses, or (ii) to services
performed or determinations of amounts pay-
able under the contract.
‘‘(2) ENROLLEE NOTICE AT TIME OF TERMI-
NATION.—Each contract under this section shall re-
quire the organization to provide (and pay for) writ-
879
ten notice in advance of the contract’s termination,
as well as a description of alternatives for obtaining
benefits under this title, to each individual enrolled
with the organization under this part.
‘‘(3) DISCLOSURE.—
‘‘(A) IN
GENERAL.—Each MedicarePlus
organization shall, in accordance with regula-
tions of the Secretary, report to the Secretary
financial information which shall include the
following:
‘‘(i) Such information as the Sec-
retary 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 Adminis-
tration containing the information required
to be reported under section 1124 by dis-
closing entities.
‘‘(iii) A description of transactions, as
specified by the Secretary, between the or-
ganization 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;
880
‘‘(II) any furnishing for consider-
ation of goods, services (including
management services), or facilities be-
tween the organization and a party in
interest, but not including salaries
paid to employees for services pro-
vided in the normal course of their
employment and health services pro-
vided 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 re-
ported respecting an organization which con-
trols, is controlled by, or is under common con-
trol with, another entity be in the form of a
consolidated financial statement for the organi-
zation and such entity.
‘‘(B) PARTY IN INTEREST DEFINED.—For
the purposes of this paragraph, the term ‘party
in interest’ means—
881
‘‘(i) any director, officer, partner, or
employee responsible for management or
administration of a MedicarePlus organiza-
tion, any person who is directly or indi-
rectly the beneficial owner of more than 5
percent of the equity of the organization,
any person who is the beneficial owner of
a mortgage, deed of trust, note, or other
interest secured by, and valuing more than
5 percent of the organization, and, in the
case of a MedicarePlus organization orga-
nized as a nonprofit corporation, an incor-
porator or member of such corporation
under applicable State corporation law;
‘‘(ii) any entity in which a person de-
scribed 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 per-
cent of the equity; or
‘‘(IV) has a mortgage, deed of
trust, note, or other interest valuing
882
more than 5 percent of the assets of
such entity;
‘‘(iii) any person directly or indirectly
controlling, controlled by, or under com-
mon control with an organization; and
‘‘(iv) any spouse, child, or parent of
an individual described in clause (i).
‘‘(C) ACCESS
TO
INFORMATION.—Each
MedicarePlus organization shall make the infor-
mation reported pursuant to subparagraph (A)
available to its enrollees upon reasonable re-
quest.
‘‘(4) LOAN INFORMATION.—The contract shall
require the organization to notify the Secretary of
loans and other special financial arrangements which
are made between the organization and subcontrac-
tors, affiliates, and related parties.
‘‘(e) ADDITIONAL CONTRACT TERMS.—
‘‘(1) IN GENERAL.—The contract shall contain
such other terms and conditions not inconsistent
with this part (including requiring the organization
to provide the Secretary with such information) as
the Secretary may find necessary and appropriate.
‘‘(2) COST-SHARING IN ENROLLMENT-RELATED
COSTS.—The contract with a MedicarePlus organiza-
883
tion shall require the payment to the Secretary for
the organization’s pro rata share (as determined by
the Secretary) of the estimated costs to be incurred
by the Secretary in carrying out section 1851 (relat-
ing to enrollment and dissemination of information).
Such payments are appropriated to defray the costs
described in the preceding sentence, to remain avail-
able until expended.
‘‘(f) PROMPT PAYMENT BY MEDICAREPLUS ORGANI-
ZATION.—
‘‘(1) REQUIREMENT.—A contract under this
part shall require a MedicarePlus organization to
provide prompt payment (consistent with the provi-
sions of sections 1816(c)(2) and 1842(c)(2)) of
claims submitted for services and supplies furnished
to individuals pursuant to the contract, if the serv-
ices or supplies are not furnished under a contract
between the organization and the provider or sup-
plier.
‘‘(2) SECRETARY’S
OPTION
TO
BYPASS
NON-
COMPLYING
ORGANIZATION.—In the case of a
MedicarePlus eligible organization which the Sec-
retary determines, after notice and opportunity for
a hearing, has failed to make payments of amounts
in compliance with paragraph (1), the Secretary may
884
provide for direct payment of the amounts owed to
providers and suppliers for covered services and sup-
plies 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 pay-
ments otherwise made to the organization under this
part to reflect the amount of the Secretary’s pay-
ments (and the Secretary’s costs in making the pay-
ments).
‘‘(g) INTERMEDIATE SANCTIONS.—
‘‘(1) IN GENERAL.—If the Secretary determines
that a MedicarePlus organization with a contract
under this section—
‘‘(A) fails substantially to provide medi-
cally necessary items and services that are re-
quired (under law or under the contract) to be
provided to an individual covered under the con-
tract, if the failure has adversely affected (or
has substantial likelihood of adversely affecting)
the individual;
‘‘(B) imposes net monthly premiums on in-
dividuals enrolled under this part in excess of
the net monthly premiums permitted;
885
‘‘(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 de-
nying or discouraging enrollment (except as
permitted by this part) by eligible individuals
with the organization whose medical condition
or history indicates a need for substantial fu-
ture medical services;
‘‘(E) misrepresents or falsifies information
that is furnished—
‘‘(i) to the Secretary under this part,
or
‘‘(ii) to an individual or to any other
entity under this part;
‘‘(F) fails to comply with the requirements
of section 1852(j)(3); or
‘‘(G) employs or contracts with any indi-
vidual or entity that is excluded from participa-
tion under this title under section 1128 or
1128A for the provision of health care, utiliza-
tion review, medical social work, or administra-
tive services or employs or contracts with any
entity for the provision (directly or indirectly)
886
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 determina-
tion under subparagraph (D) or (E)(i) of such
paragraph, of not more than $100,000 for each
such determination, plus, with respect to a de-
termination 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 re-
spect 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 individ-
uals under this part after the date the Sec-
retary notifies the organization of a determina-
tion under paragraph (1) and until the Sec-
887
retary is satisfied that the basis for such deter-
mination has been corrected and is not likely to
recur, or
‘‘(C) suspension of payment to the organi-
zation under this part for individuals enrolled
after the date the Secretary notifies the organi-
zation of a determination under paragraph (1)
and until the Secretary is satisfied that the
basis for such determination has been corrected
and is not likely to recur.
‘‘(3) OTHER
INTERMEDIATE
SANCTIONS.—In
the case of a MedicarePlus organization for which
the Secretary makes a determination under sub-
section (c)(2) the basis of which is not described in
paragraph (1), the Secretary may apply the follow-
ing 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 ad-
versely 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
888
initiation of procedures by the Secretary under
subsection (g) during which the deficiency that
is the basis of a determination under subsection
(c)(2) exists.
‘‘(C) Suspension of enrollment of individ-
uals under this part after the date the Sec-
retary notifies the organization of a determina-
tion under subsection (c)(2) and until the Sec-
retary is satisfied that the deficiency that is the
basis for the determination has been corrected
and is not likely to recur.
‘‘(h) PROCEDURES FOR TERMINATION.—
‘‘(1) IN GENERAL.—The Secretary may termi-
nate a contract with a MedicarePlus organization
under this section in accordance with formal inves-
tigation and compliance procedures established by
the Secretary under which—
‘‘(A) the Secretary provides the organiza-
tion with the reasonable opportunity to develop
and implement a corrective action plan to cor-
rect the deficiencies that were the basis of the
Secretary’s determination under subsection
(c)(2);
‘‘(B) the Secretary provides the organiza-
tion with reasonable notice and opportunity for