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(c) INFORMATION
INCLUDED
IN
ANNUAL
REC-
OMMENDATIONS.—The Physician Payment Review Com-
mission shall include in its annual recommendations under
section 1845(b) of the Social Security Act (42 U.S.C.
1395w–1), and the Prospective Payment Review Commis-
sion shall include in its annual recommendations reported
under section 1886(e)(3)(A) of such Act (42 U.S.C.
1395ww(e)(3)(A)), recommendations on the methodology
and level of payments made to PACE providers under sec-
tion 1894(d) of such Act and on the treatment of private,
for-profit entities as PACE providers. References in the pre-
ceding sentence to the Physician Payment Review Commis-
sion and the Prospective Payment Review Commission shall
be deemed to be references to the Medicare Payment Advi-
sory Commission (MedPAC) established under section
5022(a) after the termination of the Physician Payment Re-
view Commission and the Prospective Payment Review
Commission provided for in section 5022(c)(2).
CHAPTER 4—MEDICAID MANAGEMENT
AND PROGRAM REFORMS
SEC. 5751. ELIMINATION OF REQUIREMENT TO PAY FOR
PRIVATE INSURANCE.
(a) REPEAL
OF STATE PLAN PROVISION.—Section
1902(a)(25) (42 U.S.C. 1396a(a)(25)) is amended—
(1) by striking subparagraph (G); and
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(2) by redesignating subparagraphs (H) and (I)
as subparagraphs (G) and (H), respectively.
(b) REPEAL OF ENROLLMENT REQUIREMENTS.—Sec-
tion 1906 (42 U.S.C. 1396e) is repealed.
(c) REINSTATEMENT
OF
STATE
OPTION.—Section
1905(a) (42 U.S.C. 1396a(a)) is amended, in the matter
preceding clause (i), by inserting ‘‘(including, at State op-
tion, through purchase or payment of enrollee costs of health
insurance)’’ after ‘‘The term ‘medical assistance’ means
payment’’.
SEC. 5752. ELIMINATION OF OBSTETRICAL AND PEDIATRIC
PAYMENT RATE REQUIREMENTS.
(a) IN GENERAL.—Section 1926 (42 U.S.C. 1396r–7)
is repealed.
(b) EFFECTIVE DATE.—The repeal made by subsection
(a) shall apply to services furnished on or after October 1,
1997.
SEC. 5753. PHYSICIAN QUALIFICATION REQUIREMENTS.
(a) IN
GENERAL.—Section 1903(i) (42 U.S.C.
1396b(i)) is amended by striking paragraph (12).
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to services furnished on or after the
date of the enactment of this Act.
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SEC. 5754. EXPANDED COST-SHARING REQUIREMENTS.
Section 1916 (42 U.S.C. 1396o) is amended by adding
at the end the following:
‘‘(g)(1) Notwithstanding any other provision of this
title, the State plan may impose cost-sharing with respect
to any medical assistance provided to an individual who
is not described in section 1902(a)(10)(A)(i) in accordance
with the provisions of this subsection, except that no cost-
sharing may be imposed with respect to medical assistance
provided to an individual who has not attained age 18 if
such individual’s family income does not exceed 150 percent
of the poverty line applicable to a family of the size in-
volved, and if, as of the date of enactment of the Balanced
Budget Act of 1997, cost-sharing could not be imposed with
respect to medical assistance provided to such individual.
‘‘(2) Any cost-sharing imposed under this subsection
shall be pursuant to a public schedule and shall reflect such
economic factors, employment status, and family size with
respect to each such individual as the State determines ap-
propriate.
‘‘(3) In the case of any family whose income is less
than 150 percent of the income official poverty line (as de-
fined by the Office of Management and Budget, and revised
annually in accordance with section 673(2) of the Omnibus
Budget Reconciliation Act of 1981) applicable to a family
of the size involved, the total annual amount of cost-sharing
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that may be imposed for such family shall not exceed 3 per-
cent of the family’s average gross monthly earnings (less
the average monthly costs for such child care as is necessary
for the employment of the caretaker relative) for such pe-
riod.
‘‘(4) In the case of any family whose income exceeds
150 percent, but does not exceed 200 percent of, such poverty
line, paragraph (3) shall be applied by substituting ‘5 per-
cent’ for ‘3 percent’.
‘‘(5) Nothing in this subsection shall be construed as
preventing a State from imposing cost-sharing with respect
to individuals eligible for medical assistance under the
State plan, or with respect to items or services provided
as medical assistance under such plan, if the provisions of
this title otherwise allow the State to do so or if the State
has received a waiver that authorizes such cost-sharing.
‘‘(6) Any cost-sharing imposed under this subsection
may not be included in determining the amount of the State
percentage required for reimbursement of expenditures
under a State plan under this title.
‘‘(7) In this subsection, the term ‘cost-sharing’ includes
copayments, deductibles, coinsurance, enrollment fees, pre-
miums, and other charges for the provision of health care
services.’’.
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SEC. 5755. PENALTY FOR FRAUDULENT ELIGIBILITY.
Section 1128B(a) (42 U.S.C. 1320a–7b(a)), as amend-
ed by section 217 of the Health Insurance Portability and
Accountability Act of 1996, is amended—
(1) by amending paragraph (6) to read as fol-
lows:
‘‘(6) for a fee knowingly and willfully counsels or
assists an individual to dispose of assets (including
by any transfer in trust) in order for the individual
to become eligible for medical assistance under a
State plan under title XIX, if disposing of the assets
results in the imposition of a period of ineligibility
for such assistance under section 1917(c),’’; and
(2) in clause (ii) of the matter following such
paragraph, by striking ‘‘failure, or conversion by any
other person’’ and inserting ‘‘failure, conversion, or
provision of counsel or assistance by any other per-
son’’.
SEC. 5756. ELIMINATION OF WASTE, FRAUD, AND ABUSE.
(a) BAN ON SPENDING FOR NONHEALTH RELATED
ITEMS.—Section 1903(i) (42 U.S.C. 1396b(i)) is amend-
ed—
(1) in paragraphs (2) and (15), by striking the
period at the end and inserting ‘‘; or’’;
(2) in paragraphs (10)(B), (11), and (13), by
adding ‘‘or’’ at the end; and
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(3) by inserting after paragraph (15), the follow-
ing:
‘‘(16) with respect to any amount expended for
roads, bridges, stadiums, or any other item or service
not covered under a State plan under this title.’’.
(b) DISCLOSURE OF INFORMATION AND SURETY BOND
REQUIREMENT
FOR SUPPLIERS
OF DURABLE MEDICAL
EQUIPMENT.—
(1) REQUIREMENT.—Section 1902(a) (42 U.S.C.
1396a(a)), is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (62);
(B) by striking the period at the end of
paragraph (63) and inserting ‘‘; and’’; and
(C) by inserting after paragraph (63) the
following:
‘‘(64) provide that the State shall not issue or
renew a provider number for a supplier of medical
assistance consisting of durable medical equipment, as
defined in section 1861(n), for purposes of payment
under this part for such assistance that is furnished
by the supplier, unless the supplier provides the State
agency on a continuing basis with—
‘‘(A)(i) full and complete information as to
the identity of each person with an ownership or
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control interest (as defined in section 1124(a)(3))
in the supplier or in any subcontractor (as de-
fined by the Secretary in regulations) in which
the supplier directly or indirectly has a 5 per-
cent or more ownership interest; and
(ii) to the extent determined to be feasible
under regulations of the Secretary, the name of
any disclosing entity (as defined in section
1124(a)(2)) with respect to which a person with
such an ownership or control interest in the sup-
plier is a person with such an ownership or con-
trol interest in the disclosing entity; and
‘‘(B) a surety bond in a form specified by
the State and in an amount that is not less than
$50,000.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to suppliers of medical
assistance consisting of durable medical equipment
furnished on or after January 1, 1998.
(c) SURETY BOND REQUIREMENT FOR HOME HEALTH
AGENCIES.—
(1) IN GENERAL.—Section 1905(a)(7) (42 U.S.C.
1396d(a)(7) is amended by inserting ‘‘, provided that
the agency or organization providing such services
provides the State agency on a continuing basis with
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a surety bond in a form specified by the State and
in an amount that is not less than $50,000’’ after
‘‘services’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall apply to home health agencies
with respect to services furnished on or after January
1, 1998.
(d) CONFLICT OF INTEREST SAFEGUARDS.—Section
1902(a)(4) (42 U.S.C. 1396a(a)(4)) is amended to read as
follows:
‘‘(4) provide—
‘‘(A) such methods of administration (in-
cluding methods relating to the establishment
and maintenance of personnel standards on a
merit basis, except that the Secretary shall exer-
cise no authority with respect to the selection,
tenure of office, and compensation of any indi-
vidual employed in accordance with such meth-
ods, and including provision for utilization of
professional medical personnel in the adminis-
tration and, where administered locally, super-
vision of administration of the plan) as are
found by the Secretary to be necessary for the
proper and efficient operation of the plan;
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‘‘(B) for the training and effective use of
paid subprofessional staff, with particular em-
phasis on the full-time or part-time employment
of recipients and other persons of low income, as
community service aides, in the administration
of the plan and for the use of nonpaid or par-
tially paid volunteers in a social service volun-
teer program in providing services to applicants
and recipients and in assisting any advisory
committees established by the State agency; and
‘‘(C) that each State or local officer or em-
ployee, or independent contractor—
‘‘(i) who is responsible for the expendi-
ture of substantial amounts of funds under
the State plan, or who is responsible for ad-
ministering the State plan under this title,
each individual who formerly was such an
officer, employee, or independent contractor,
and each partner of such an officer, em-
ployee, or independent contractor shall be
prohibited from committing any act, in re-
lation to any activity under the plan, the
commission of which, in connection with
any activity concerning the United States
Government, by an officer or employee of
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the United States Government, an individ-
ual who was such an officer or employee, or
a partner of such an officer or employee is
prohibited by section 207 or 208 of title 18,
United States Code; and
‘‘(ii) who is responsible for selecting,
awarding, or otherwise obtaining items and
services under the State plan shall be sub-
ject to safeguards against conflicts of inter-
est that are at least as stringent as the safe-
guards that apply under section 27 of the
Office of Federal Procurement Policy Act
(41 U.S.C. 423) to persons described in sub-
section (a)(2) of such section of that Act;’’.
(e) AUTHORITY TO REFUSE TO ENTER INTO MEDICAID
AGREEMENTS WITH INDIVIDUALS OR ENTITIES CONVICTED
OF
FELONIES.—Section 
1902(a)(23) 
(42 
U.S.C.
1396a(a)(23)) is amended to read as follows:
‘‘(23) provide that—
‘‘(A) any individual eligible for medical as-
sistance (including drugs) may obtain such as-
sistance from any institution, agency, commu-
nity pharmacy, or person, qualified to perform
the service or services required (including an or-
ganization which provides such services, or ar-
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ranges for their availability, on a prepayment
basis), who undertakes to provide him such serv-
ices; and
‘‘(B) an enrollment of an individual eligible
for medical assistance in a primary care case-
management 
system 
(described 
in 
section
1915(b)(1)), a health maintenance organization,
or a similar entity shall not restrict the choice
of the qualified person from whom the individual
may receive services under section 1905(a)(4)(C),
except as provided in subsection (g) and in section
1915, except in the case of Puerto Rico, the Virgin Is-
lands, and Guam, and except that nothing in this
paragraph shall be construed as requiring a State to
provide medical assistance for items or services fur-
nished by a person or entity convicted of a felony
under Federal or State law for an offense which the
State agency determines is inconsistent with the best
interest of beneficiaries under the State plan;’’.
(f) MONITORING PAYMENTS FOR DUAL ELIGIBLES.—
The Administrator of the Health Care Financing Adminis-
tration shall—
(1) develop mechanisms to better monitor and
prevent inappropriate payments under the medicaid
program under title XIX of the Social Security Act
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(42 U.S.C. 1396 et seq.) in the case of individuals
who are dually eligible for benefits under such pro-
gram and under the medicare program under title
XVIII of such Act (42 U.S.C. 1395 et seq.);
(2) study the use of case management or care co-
ordination in order to improve the appropriateness of
care, quality of care, and cost effectiveness of care for
individuals who are dually eligible for benefits under
such programs; and
(3) work with the States to ensure better care co-
ordination for dual eligibles and make recommenda-
tions to Congress as to any statutory changes that
would not compromise beneficiary protections and
that would improve or facilitate such care.
(g) 
BENEFICIARY
AND
PROGRAM
PROTECTION
AGAINST WASTE, FRAUD, AND ABUSE.—Section 1902(a)
(42 U.S.C. 1396a(a)), as amended by subsection (b)(1), is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(63);
(2) by striking the period at the end of para-
graph (64) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (64) the follow-
ing:
‘‘(65) provide programs—
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‘‘(A) to ensure program integrity, protect
and advocate on behalf of individuals, and to re-
port to the State data concerning beneficiary
concerns and complaints and instances of bene-
ficiary abuse or program waste or fraud by
managed care plans operating in the State under
contact with the State agency;
‘‘(B) to provide assistance to beneficiaries,
with particular emphasis on the families of spe-
cial needs children and persons with disabilities
to—
‘‘(i) explain the differences between
managed care and fee-for-service plans;
‘‘(ii) clarify the coverage for such bene-
ficiaries under any managed care plan of-
fered under the State plan under this title;
‘‘(iii) explain the implications of the
choices between competing plans;
‘‘(iv) assist such beneficiaries in under-
standing their rights under any managed
care plan offered under the State plan, in-
cluding their right to—
‘‘(I) access and benefits;
‘‘(II) nondiscrimination;
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‘‘(III) grievance and appeal mech-
anisms; and
‘‘(IV) change plans, as designated
in the State plan; and
‘‘(v) exercise the rights described in
clause (iv); and
‘‘(C) to collect and report to the State data
on the number of complaints or instances identi-
fied under subparagraph (A) and to report to the
State annually on any systematic problems in
the implementation of managed care entities con-
tracting with the State under the State plan
under this title.’’.
SEC. 5757. STUDY ON EPSDT BENEFITS.
(a) STUDY.—The Secretary of Health and Human
Services, in consultation with Governors, directors of State
medicaid and State maternal and child programs, the In-
stitute of Medicine, the American Academy of Pediatrics,
and representatives of beneficiaries under the medicaid pro-
gram under title XIX of the Social Security Act (42 U.S.C.
1396 et seq.) shall conduct a study of the early and periodic
screening, diagnostic, and treatment services provided
under State plans under title XIX of the Social Security
Act in accordance with section 1905(r) of such Act (42
U.S.C. 1396d(r)).
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(b) REPORT.—Not later than 12 months after the date
of enactment of this Act, the Secretary of Health and
Human Services shall submit a report to Congress on the
results of the conducted study under subsection (a).
SEC. 5758. STUDY AND GUIDELINES REGARDING MANAGED
CARE 
ORGANIZATIONS 
AND 
INDIVIDUALS
WITH SPECIAL HEALTH CARE NEEDS.
(a) STUDY AND RECOMMENDATIONS.—The Secretary
of Health and Human Services (in this section referred to
as the ‘‘Secretary’’), in consultation with States, managed
care organizations, the National Academy of State Health
Policy, representatives of beneficiaries with special health
care needs, experts in specialized health care, and others,
shall conduct a study and develop the guidelines described
in subsection (b). Not later than 2 years after the date of
enactment of this Act, the Secretary shall report such guide-
lines to Congress and make recommendations for imple-
menting legislation.
(b) GUIDELINES DESCRIBED.—The guidelines to be de-
veloped by the Secretary shall relate to issues such as risk
adjustment, solvency, medical necessity definitions, case
management, quality controls, adequacy of provider net-
works, access to specialists (including pediatric specialists
and the use of specialists as primary care providers), mar-
keting, compliance with the Americans with Disabilities Act
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of 1990 (42 U.S.C. 12101 et seq.), speedy grievance and ap-
peals procedures, data collection, and such other matters as
the Secretary may determine, as these issues affect care pro-
vided to individuals with special health care needs and
chronic conditions in capitated managed care or primary
care case management plans. The Secretary shall distin-
guish which guidelines should apply to primary care case
management arrangements, to capitated risk sharing ar-
rangements, or to both. Such guidelines should be designed
to be used in reviewing State proposals under title XIX of
the Social Security Act (42 U.S.C. 1396 et seq.) (by waiver
request or State plan amendment) to implement mandatory
capitated managed care or primary care case management
arrangements that enroll beneficiaries with chronic condi-
tions or special health care needs.
CHAPTER 5—MISCELLANEOUS
SEC. 5761. INCREASED FMAPS.
Section 1905(b) (42 U.S.C. 1396d(b)(1)) is amended—
(1) by striking ‘‘and (2)’’ and inserting ‘‘(2)’’;
and
(2) by striking the period and inserting ‘‘, and
(3) during the period beginning on October 1, 1997,
and ending on September 30, 2000, the Federal medi-
cal assistance percentage for the District of Columbia
shall be 60 per centum, and the Federal medical as-
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sistance percentage for Alaska shall be 59.8 per cen-
tum (but only, in the case of such States, with respect
to expenditures under a State plan under this title).’’.
SEC. 5762. INCREASE IN PAYMENT CAPS FOR TERRITORIES.
Section 1108 (42 U.S.C. 1308) is amended—
(1) in subsection (f), by striking ‘‘The’’ and in-
serting ‘‘Subject to subsection (g), the’’; and
(2) by adding at the end the following:
‘‘(g) MEDICAID PAYMENTS TO TERRITORIES FOR FIS-
CAL YEAR 1998 AND THEREAFTER.—
‘‘(1) FISCAL YEAR 1998.—With respect to fiscal
year 1998, the amounts otherwise determined for
Puerto Rico, the Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa under sub-
section (f) for such fiscal year shall be increased in
the following manner:
‘‘(A) For Puerto Rico, $30,000,000.
‘‘(B) For the Virgin Islands, $750,000.
‘‘(C) For Guam, $750,000.
‘‘(D) For the Northern Mariana Islands,
$500,000.
‘‘(E) For American Samoa, $500,000.
‘‘(2) FISCAL YEAR 1999 AND THEREAFTER.—Not-
withstanding subsection (f), with respect to fiscal year
1999 and any fiscal year thereafter, the total amount
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certified by the Secretary under title XIX for pay-
ment to—
‘‘(A) Puerto Rico shall not exceed the sum
of the amount provided in this subsection for the
preceding fiscal year increased by the percentage
increase in the medical care component of the
consumer price index for all urban consumers
(as published by the Bureau of Labor Statistics)
for the twelve-month period ending in March
preceding the beginning of the fiscal year, round-
ed to the nearest $100,000;
‘‘(B) the Virgin Islands shall not exceed the
sum of the amount provided in this subsection
for the preceding fiscal year increased by the
percentage increase referred to in subparagraph
(A), rounded to the nearest $10,000;
‘‘(C) Guam shall not exceed the sum of the
amount provided in this subsection for the pre-
ceding fiscal year increased by the percentage in-
crease referred to in subparagraph (A), rounded
to the nearest $10,000;
‘‘(D) Northern Mariana Islands shall not
exceed the sum of the amount provided in this
subsection for the preceding fiscal year increased
by the percentage increase referred to in sub-
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paragraph (A), rounded to the nearest $10,000;
and
‘‘(E) American Samoa shall not exceed the
sum of the amount provided in this subsection
for the preceding fiscal year increased by the
percentage increase referred to in subparagraph
(A), rounded to the nearest $10,000.’’.
SEC. 5763. COMMUNITY-BASED MENTAL HEALTH SERVICES.
(a) IN
GENERAL.—Section 1905(a) (42 U.S.C.
1396d(a)), as amended by section 5741(a)(1), is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(26);
(2) by redesignating paragraph (27) as para-
graph (28); and
(3) by inserting after paragraph (26) the follow-
ing new paragraph:
‘‘(27) outpatient and intensive community-based
mental health services, including psychiatric rehabili-
tation, day treatment, intensive in-home services for
children, assertive community treatment, therapeutic
out-of-home placements (excluding room and board),
clinic services, partial hospitalization, and targeted
case management; and’’.
(b) CONFORMING AMENDMENTS.—
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(1) 
Section 
1902(a)(10)(C)(iv) 
(42 
U.S.C.
1396a(a)(10)(C)(iv)), 
as 
amended 
by 
section
5702(a)(2)(A), is amended by inserting ‘‘or (27)’’
after ‘‘(25)’’.
(2) Section 1902(j) (42 U.S.C. 1396a(j)), as
amended by section 5741(b)(1), is amended by strik-
ing ‘‘(27)’’ and inserting ‘‘(28)’’.
SEC. 5764. OPTIONAL MEDICAID COVERAGE OF CERTAIN
CDC-SCREENED BREAST CANCER PATIENTS.
(a) COVERAGE AS OPTIONAL CATEGORICALLY NEEDY
GROUP.—Section 
1902(a)(10)(A)(ii) 
(42 
U.S.C.
1396a(a)(10)(A)(ii)) is amended—
(1) in subclause (XI), by striking ‘‘or’’ at the
end;
(2) in subclause (XII), by adding ‘‘or’’ at the
end; and
(3) by adding at the end the following:
‘‘(XIII) who are described in sub-
section 
(aa)(1)(relating 
to 
certain
CDC-screened breast cancer patients);’’.
(b) GROUP AND BENEFIT DESCRIBED.—Section 1902
(42 U.S.C. 1396a) is amended by adding at the end the
following:
‘‘(aa)(1) Individuals described in this paragraph are
individuals not described in subsection (a)(10)(A)(i) who—
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‘‘(A) have not attained age 65;
‘‘(B) have been diagnosed with breast cancer
through participation in the program to screen
women for breast and cervical cancer conducted by
the Director of the Centers for Disease Control and
Prevention under title 15 of the Public Health Service
Act (42 U.S.C. 300k et seq.);
‘‘(C) satisfy the income and resource eligibility
criteria established by such Director for participation
in such program; and
‘‘(D) are not otherwise eligible for medical assist-
ance under the State plan under this title.
‘‘(2) For purposes of subsection (a)(10), the term
‘‘breast cancer-related services’’ means each of the following
services relating to treatment of breast cancer:
‘‘(A) Prescribed drugs.
‘‘(B) Physicians’ services and services described
in section 1905(a)(2).
‘‘(C) Laboratory and X-ray services (including
services to confirm the presence of breast cancer).
‘‘(D) Rural health clinic services and Federally-
qualified health center services.
‘‘(E) Case management services (as defined in
section 1915(g)(2)).
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‘‘(F) Services (other than room and board) de-
signed to encourage completion of regimens of pre-
scribed drugs by outpatients, including services to ob-
serve directly the intake of prescribed drugs.’’.
(c) LIMITATION ON BENEFITS.—Section 1902(a)(10)
(42 U.S.C. 1396a(a)(10)) is amended in the matter follow-
ing subparagraph (F)—
(1) by striking ‘‘, and (XIII)’’; and
(2) by inserting before the semicolon at the end
the following: ‘‘, and (XIV) the medical assistance
made available to an individual described in sub-
section (aa)(1) who is eligible for medical assistance
only because of subparagraph (A)(ii)(XIII) shall be
limited to medical assistance for breast cancer-related
services (described in subsection (aa)(2))’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 1905(a) (42 U.S.C. 1396d(a)) is
amended—
(A) in clause (x), by striking ‘‘or’’ at the
end;
(B) in clause (xi), by adding ‘‘or’’ at the
end;
(C) by inserting after clause (xi) the follow-
ing:
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‘‘(xii) 
individuals 
described 
in 
section
1902(aa)(1),’’; and
(D) by striking paragraph (19) and insert-
ing the following:
‘‘(19) case management services (as defined in
section 1915(g)(2)), TB-related services described in
section 1902(z)(2)(F), and breast cancer-related serv-
ices described in section 1902)(2)(F);’’.
(2) Section 1915(g)(1) (42 U.S.C. 1396n(g)(1))
is amended by inserting ‘‘or section 1902(aa)(1)’’
after ‘‘section 1902(z)(1)(A)’’.
(e) EFFECTIVE DATE.—The amendments made by this
section apply to medical assistance furnished on or after
October 1, 1997, without regard to whether or not final reg-
ulations to carry out such amendments have been promul-
gated by such date.
SEC. 5765. TREATMENT OF STATE TAXES IMPOSED ON CER-
TAIN HOSPITALS THAT PROVIDE FREE CARE.
(a) EXCEPTION FROM TAX DOES NOT DISQUALIFY AS
BROAD-BASED
TAX.—Section 1903(w)(3) (42 U.S.C.
1396b(w)(3)) is amended—
(1) in subparagraph (B), by striking ‘‘and (E)’’
and inserting ‘‘(E), and (F)’’; and
(2) by adding at the end the following:
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‘‘(F) In no case shall a tax not qualify as a broad-
based health care related tax under this paragraph because
it does not apply to a hospital that is described in section
501(c)(3) of the Internal Revenue Code of 1986 and exempt
from taxation under section 501(a) of such Code and that
does not accept payment under the State plan under this
title or under title XVIII.’’.
(b) REDUCTION IN FEDERAL FINANCIAL PARTICIPA-
TION IN CASE OF IMPOSITION OF TAX.—Section 1903(b)
(42 U.S.C. 1396b(b)) is amended by adding at the end the
following:
‘‘(4) Notwithstanding the preceding provisions of this
section, the amount determined under subsection (a)(1) for
any State shall be decreased in a quarter by the amount
of any health care related taxes (described in section
1902(w)(3)(A)) that are imposed on a hospital described in
subsection (w)(3)(F) in that quarter.’’.
(c) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to taxes imposed before, on, or after
the date of the enactment of this Act and the amendment
made by subsection (b) shall apply to taxes imposed on or
after such date.
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SEC. 5766. TREATMENT OF VETERANS PENSIONS UNDER
MEDICAID.
(a) POST-ELIGIBILITY.—Section 1902(r)(1) of the So-
cial Security Act (42 U.S.C. 1396a(r)(1)) is amended to
read as follows:
‘‘(r)(1) For purposes of sections 1902(a)(17) and
1924(d)(1)(D) and for purposes of a waiver under section
1915, with respect to the post-eligibility treatment of income
of individuals who are institutionalized or receiving home
or community-based services under such a waiver—
‘‘(A) there shall be disregarded reparation pay-
ments made by the Federal Republic of Germany;
‘‘(B) there shall be taken into account amounts
for incurred expenses for medical or remedial care
that are not subject to payment by a third party, in-
cluding—
‘‘(i) medicare and other health insurance
premiums, deductibles, or coinsurance, and
‘‘(ii) necessary medical or remedial care
recognized under State law but not covered
under the State plan under this title, subject to
reasonable limits the State may establish on the
amount of these expenses; and
‘‘(C) in the case of a resident in a State veterans
home, there shall be taken into account, as income,
any and all payments received under a Department
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of Veterans Affairs pension or compensation program,
including payments attributable to the recipient’s
medical expenses or to the recipient’s need for aid and
attendance, but excluding that part of any augmented
benefit attributable to a dependent.
For purposes of subparagraph (C), any Department of Vet-
erans Affairs pension benefit that has been limited to $90
per month pursuant to section 5503(f) of title 38, United
States Code, may be applied to meet the monthly personal
needs allowance provided by the State plan under this title,
but shall not otherwise be used to reduce the amount paid
to a facility under the State plan.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall be effective with respect to periods begin-
ning on and after July 1, 1994.
SEC. 5767. REMOVAL OF NAME FROM NURSE AIDE REG-
ISTRY.
(a) MEDICARE.—Section 1819(g)(1)(C) of the Social
Security Act (42 U.S.C. 1395i-3(g)(1)(C)) is amended—
(1) in the first sentence by striking ‘‘The State’’
and inserting ‘‘(i) The State’’; and
(2) by adding at the end the following:
‘‘(ii)(I) In the case of a finding of neglect,
the State shall establish a procedure to permit a
nurse aide to petition the State to have his or
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her name removed from the registry upon a de-
termination by the State that—
‘‘(aa) the employment and personal
history of the nurse aide does not reflect a
pattern of abusive behavior or neglect; and
‘‘(bb) the neglect involved in the origi-
nal finding was a singular occurrence.
‘‘(II) In no case shall a determination on a
petition submitted under clause (I) be made
prior to the expiration of the 1-year period be-
ginning on the date on which the name of the pe-
titioner was added to the registry under this sub-
paragraph.’’.
(b) MEDICAID.—Section 1919(g)(1)(C) of the Social
Security Act (42 U.S.C. 1396r(g)(1)(C)) is amended—
(1) in the first sentence by striking ‘‘The State’’
and inserting ‘‘(i) The State’’; and
(2) by adding at the end the following:
‘‘(ii)(I) In the case of a finding of neglect,
the State shall establish a procedure to permit a
nurse aide to petition the State to have his or
her name removed from the registry upon a de-
termination by the State that—
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‘‘(aa) the employment and personal
history of the nurse aide does not reflect a
pattern of abusive behavior or neglect; and
‘‘(bb) the neglect involved in the origi-
nal finding was a singular occurrence.
‘‘(II) In no case shall a determination on a
petition submitted under clause (I) be made
prior to the expiration of the 1-year period be-
ginning on the date on which the name of the pe-
titioner was added to the registry under this sub-
paragraph.’’.
(c) RETROACTIVE REVIEW.—The procedures developed
by a State under the amendments made by subsection (a)
and (b) shall permit an individual to petition for a review
of any finding made by a State under section 1819(g)(1)(C)
or 1919(g)(1)(C) of the Social Security Act (42 U.S.C.
1395i-3(g)(1)(C) or 1396r(g)(1)(C)) after January 1, 1995.
(d) STUDY AND REPORT.—
(1) STUDY.—The Secretary of Health and
Human Services shall conduct a study of—
(A) the use of nurse aide registries by
States, including the number of nurse aides
placed on the registries on a yearly basis and the
circumstances that warranted their placement on
the registries;
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(B) the extent to which institutional envi-
ronmental factors (such as a lack of adequate
training or short staffing) contribute to cases of
abuse and neglect at nursing facilities; and
(C) whether alternatives (such as a proba-
tional period accompanied by additional train-
ing or mentoring or sanctions on facilities that
create an environment that encourages abuse or
neglect) to the sanctions that are currently ap-
plied under the Social Security Act for abuse
and neglect at nursing facilities might be more
effective in minimizing future cases of abuse and
neglect.
(2) REPORT.—Not later than 2 years after the
date of enactment of this Act, the Secretary of Health
and Human Services shall prepare and submit to the
appropriate committees of Congress, a report concern-
ing the results of the study conducted under para-
graph (1) and the recommendation of the Secretary
for legislation based on such study.
SEC. 5768. WAIVER OF CERTAIN PROVIDER TAX PROVI-
SIONS.
Notwithstanding any other provision of law, taxes,
fees, or assessments, as defined in section 1903(w)(3)(A) of
the Social Security Act (42 U.S.C. 1396b(w)(3)(A)), that
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were collected by the State of New York from a health care
provider before June 1, 1997, and for which a waiver of
the provisions of subparagraph (B) or (C) of section
1903(w)(3) of such Act has been applied for, or that would,
but for this paragraph require that such a waiver be ap-
plied for, in accordance with subparagraph (E) of such sec-
tion, and, (if so applied for) upon which action by the Sec-
retary of Health and Human Services (including any judi-
cial review of any such proceeding) has not been completed
as of the date of enactment of this Act, are deemed to be
permissible health care related taxes and in compliance
with the requirements of subparagraphs (B) and (C) of sec-
tions 1903(w)(3) of such Act.
SEC. 5769. CONTINUATION OF STATE-WIDE SECTION 1115
MEDICAID WAIVERS.
(a) IN GENERAL.—Section 1115 of the Social Security
Act (42 U.S.C. 1315) is amended by adding at the end the
following:
‘‘(d)(1) The provisions of this subsection shall apply
to the extension of statewide comprehensive research and
demonstration projects (in this subsection referred to as
‘waiver project’) for which waivers of compliance with the
requirements of title XIX are granted under subsection (a).
With respect to a waiver project that, but for the enactment
of this subsection, would expire, the State at its option may
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not later than 1 year before the waiver under subsection
(a) would expire (acting through the chief executive officer
of the State who is operating the project), submit to the
Secretary a written request for an extension of such waiver
project for up to 2 years.
‘‘(2) The requirements of this paragraph are that the
waiver project—
‘‘(A) has been successfully operated for 5 or more
years; and
‘‘(B) has been shown, through independent eval-
uations sponsored by the Health Care Financing Ad-
ministration, to successfully contain costs and provide
access to health care.
‘‘(3)(A) In the case of waiver projects described in
paragraph (1)(A), if the Secretary fails to respond to the
request within 6 months after the date on which the request
was submitted, the request is deemed to have been granted.
‘‘(B) If the request is granted or deemed to have been
granted, the deadline for submittal of a final report shall
be 1 year after the date on which the waiver project would
have expired but for the enactment of this subsection.
‘‘(C) The Secretary shall release an evaluation of each
such project not later than 1 year after the date of receipt
of the final report.
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‘‘(D) Phase-down provisions which were applicable to
waiver projects before an extension was provided under this
subsection shall not apply.
‘‘(4) The extension of a waiver project under this sub-
section shall be on the same terms and conditions (including
applicable terms and conditions related to quality and ac-
cess of services, budget neutrality as adjusted for inflation,
data and reporting requirements and special population
protections), except for any phase down provisions, and
subject to the same set of waivers that applied to the project
or were granted before the extension of the project under
this subsection. The permanent continuation of a waiver
project shall be on the same terms and conditions, including
financing, and subject to the same set of waivers. No test
of budget neutrality shall be applied in the case of projects
described in paragraph (2) after that date on which the per-
manent extension was granted.
‘‘(5) In the case of a waiver project described in para-
graph (2), the Secretary, acting through the Health Care
Financing Administration shall, deem any State’s request
to expand medicaid coverage in whole or in part to individ-
uals who have an income at or below the Federal poverty
level as budget neutral if independent evaluations sponsored
by the Health Care Financing Administration have shown
that the State’s medicaid managed care program under
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such original waiver is more cost effective and efficient than
the traditional fee-for-service medicaid program that, in the
absence of any managed care waivers under this section,
would have been provided in the State.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall become effective on the date of enactment
of this Act.
SEC. 5770. EFFECTIVE DATE.
(a) IN GENERAL.—Except as otherwise specifically
provided, the provisions of and amendments made by this
subtitle shall apply with respect to State programs under
title XIX of the Social Security Act (42 U.S.C. 1396 et seq.)
on and after October 1, 1997.
(b) EXTENSION FOR STATE LAW AMENDMENT.—In the
case of a State plan under title XIX of the Social Security
Act which the Secretary of Health and Human Services de-
termines requires State legislation in order for the plan to
meet the additional requirements imposed by the amend-
ments made by this subtitle, the State plan shall not be
regarded as failing to comply with the requirements of this
subtitle solely on the basis of its failure to meet these addi-
tional requirements before the first day of the first calendar
quarter beginning after the close of the first regular session
of the State legislature that begins after the date of the en-
actment of this Act. For purposes of the previous sentence,
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in the case of a State that has a 2-year legislative session,
each year of the session is considered to be a separate regu-
lar session of the State legislature.
Subtitle J—Children’s Health
Insurance Initiatives
SEC. 5801. ESTABLISHMENT OF CHILDREN’S HEALTH IN-
SURANCE INITIATIVES.
(a) IN GENERAL.—The Social Security Act is amend-
ed by adding at the end the following:
‘‘TITLE XXI—CHILD HEALTH INSURANCE
INITIATIVES
‘‘SEC. 2101. PURPOSE.
‘‘The purpose of this title is to provide funds to States
to enable such States to expand the provision of health in-
surance coverage for low-income children. Funds provided
under this title shall be used to achieve this purpose through
outreach activities described in section 2106(a) and, at the
option of the State through—
‘‘(1) a grant program conducted in accordance
with section 2107 and the other requirements of this
title; or
‘‘(2) expansion of coverage of such children
under the State medicaid program who are not re-
quired to be provided medical assistance under section
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1902(l) (taking into account the process of individ-
uals aging into eligibility under subsection (l)(1)(D)).
‘‘SEC. 2102. DEFINITIONS.
‘‘In this title:
‘‘(1) BASE-YEAR
COVERED
LOW-INCOME
CHILD
POPULATION.—The term ‘base-year covered low-in-
come child population’ means the total number of
low-income children with respect to whom, as of fiscal
year 1996, an eligible State provides or pays the cost
of health benefits either through a State funded pro-
gram or through expanded eligibility under the State
plan under title XIX (including under a waiver of
such plan), as determined by the Secretary. Such
term does not include any low-income child described
in paragraph (3)(A) that a State must cover in order
to be considered an eligible State under this title.
‘‘(2) CHILD.—The term ‘child’ means an indi-
vidual under 19 years of age.
‘‘(3) ELIGIBLE STATE.—The term ‘eligible State’
means, with respect to a fiscal year, a State that—
‘‘(A) provides, under section 1902(l)(1)(D)
or under a waiver, for eligibility for medical as-
sistance under a State plan under title XIX of
individuals under 17 years of age in fiscal year
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1998, and under 19 years of age in fiscal year
2000, regardless of date of birth;
‘‘(B) has submitted to the Secretary under
section 2104 a program outline that—
‘‘(i) sets forth how the State intends to
use the funds provided under this title to
provide health insurance coverage for low-
income children consistent with the provi-
sions of this title; and
‘‘(ii) is approved under section 2104;
and
‘‘(iii) otherwise satisfies the require-
ments of this title; and
‘‘(C) satisfies the maintenance of effort re-
quirement described in section 2105(c)(5).
‘‘(4) FEDERAL MEDICAL ASSISTANCE PERCENT-
AGE.—The term ‘Federal medical assistance percent-
age’ means, with respect to a State, the meaning
given that term under section 1905(b). Any cost-shar-
ing imposed under this title may not be included in
determining Federal medical assistance percentage for
reimbursement of expenditures under a State program
funded under this title.
‘‘(5) FEHBP-EQUIVALENT CHILDREN’S HEALTH
INSURANCE
COVERAGE.—The term ‘FEHBP-equiva-
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lent children’s health insurance coverage’ means, with
respect to a State, any plan or arrangement that pro-
vides, or pays the cost of, health benefits that the Sec-
retary has certified are equivalent to or better than
the services covered for a child, including hearing and
vision services, under the standard Blue Cross/Blue
Shield preferred provider option service benefit plan
offered under chapter 89 of title 5, United States
Code.
‘‘(6) INDIANS.—The term ‘Indians’ has the
meaning given that term in section 4(c) of the Indian
Health Care Improvement Act (25 U.S.C. 1601 et
seq.).
‘‘(7) LOW-INCOME CHILD.—The term ‘low-income
child’ means a child in a family whose income is
below 200 percent of the poverty line for a family of
the size involved.
‘‘(8) POVERTY
LINE.—The term ‘poverty line’
has the meaning given that term in section 673(2) of
the Community Services Block Grant Act (42 U.S.C.
9902(2)), including any revision required by such sec-
tion.
‘‘(9) SECRETARY.—The term ‘Secretary’ means
the Secretary of Health and Human Services.
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‘‘(10) STATE.—The term ‘State’ means each of
the 50 States, the District of Columbia, Puerto Rico,
Guam, the Virgin Islands, American Samoa, and the
Northern Mariana Islands.
‘‘(11) STATE
CHILDREN’S
HEALTH
EXPENDI-
TURES.—The term ‘State children’s health expendi-
tures’ means the State share of expenditures by the
State for providing children with health care items
and services under—
‘‘(A) the State plan for medical assistance
under title XIX;
‘‘(B) the maternal and child health services
block grant program under title V;
‘‘(C) the preventive health services block
grant program under part A of title XIX of the
Public Health Services Act (42 U.S.C. 300w et
seq.);
‘‘(D) State-funded programs that are de-
signed to provide health care items and services
to children;
‘‘(E) school-based health services programs;
‘‘(F) State programs that provide uncom-
pensated or indigent health care;
‘‘(G) county-indigent care programs for
which the State requires a matching share by a
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county government or for which there are inter-
governmental transfers from a county to State
government; and
‘‘(H) any other program under which the
Secretary determines the State incurs uncompen-
sated expenditures for providing children with
health care items and services.
‘‘(12) STATE
MEDICAID
PROGRAM.—The term
‘State medicaid program’ means the program of med-
ical assistance provided under title XIX.
‘‘SEC. 2103. APPROPRIATION.
‘‘(a) APPROPRIATION.—
‘‘(1) IN GENERAL.—Subject to subsection (b), out
of any money in the Treasury of the United States
not otherwise appropriated, there is appropriated for
the purpose of carrying out this title—
‘‘(A) for fiscal year 1998, $2,500,000,000;
‘‘(B) for each of fiscal years 1999 and 2000,
$3,200,000,000;
‘‘(C) for fiscal year 2001, $3,600,000,000;
‘‘(D) for fiscal year 2002, $3,500,000,000;
‘‘(E) for each of fiscal years 2003 through
2007, $4,580,000,000.
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‘‘(2) AVAILABILITY.—Funds appropriated under
this section shall remain available without fiscal year
limitation, as provided under section 2105(b)(4).
‘‘(b) REDUCTION FOR INCREASED MEDICAID EXPENDI-
TURES.—With respect to each of the fiscal years described
in subsection (a)(1), the amount appropriated under sub-
section (a)(1) for each such fiscal year shall be reduced by
an amount equal to the amount of the total Federal outlays
under the medicaid program under title XIX resulting
from—
‘‘(1) the amendment made by section 5732 of the
Balanced Budget Act of 1997 (regarding the State op-
tion to provide 12-month continuous eligibility for
children);
‘‘(2) increased enrollment under State plans ap-
proved under such program as a result of outreach ac-
tivities under section 2106(a); and
‘‘(3) the requirement under section 2102(3)A) to
provide eligibility for medical assistance under the
State plan under title XIX for all children under 19
years of age who have families with income that is at
or below the poverty line.
‘‘(c) STATE
ENTITLEMENT.—This title constitutes
budget authority in advance of appropriations Acts and
represents the obligation of the Federal Government to pro-
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vide for the payment to States of amounts provided in ac-
cordance with the provisions of this title.
‘‘(d) EFFECTIVE DATE.—No State is eligible for pay-
ments under section 2105 for any calendar quarter begin-
ning before October 1, 1997.
‘‘SEC. 2104. PROGRAM OUTLINE.
‘‘(a) GENERAL DESCRIPTION.—A State shall submit to
the Secretary for approval a program outline, consistent
with the requirements of this title, that—
‘‘(1) identifies, on or after the date of enactment
of the Balanced Budget Act of 1997, which of the 2
options described in section 2101 the State intends to
use to provide low-income children in the State with
health insurance coverage;
‘‘(2) describes the manner in which such coverage
shall be provided; and
‘‘(3) provides such other information as the Sec-
retary may require.
‘‘(b) OTHER REQUIREMENTS.—The program outline
submitted under this section shall include the following:
‘‘(1) ELIGIBILITY STANDARDS AND METHODOLO-
GIES.—A summary of the standards and methodolo-
gies used to determine the eligibility of low-income
children for health insurance coverage under a State
program funded under this title.
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‘‘(2) ELIGIBILITY
SCREENING; 
COORDINATION
WITH OTHER HEALTH COVERAGE.—A description of
the procedures to be used to ensure—
‘‘(A) through both intake and followup
screening, that only low-income children are fur-
nished health insurance coverage through funds
provided under this title; and
‘‘(B) that any health insurance coverage
provided for children through funds under this
title does not reduce the number of children who
are provided such coverage through any other
publicly or privately funded health plan.
‘‘(3) INDIANS.—A description of how the State
will ensure that Indians are served through a State
program funded under this title.
‘‘(c) DEADLINE FOR SUBMISSION.—A State program
outline shall be submitted to the Secretary by not later than
March 31 of any fiscal year (October 1, 1997, in the case
of fiscal year 1998).
‘‘SEC. 2105. DISTRIBUTION OF FUNDS.
‘‘(a) ESTABLISHMENT OF FUNDING POOLS.—
‘‘(1) IN
GENERAL.—From the amount appro-
priated under section 2103(a)(1) for each fiscal year,
determined after the reduction required under section
2103(b), the Secretary shall, for purposes of fiscal
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year 1998, reserve 85 percent of such amount for dis-
tribution to eligible States through the basic allotment
pool under subsection (b) and 15 percent of such
amount for distribution through the new coverage in-
centive pool under subsection (c)(2)(B)(ii).
‘‘(2) ANNUAL
ADJUSTMENT
OF
RESERVE
PER-
CENTAGES.—The Secretary shall annually adjust the
amount of the percentages described in paragraph (1)
in order to provide sufficient basic allotments and
sufficient new coverage incentives to achieve the pur-
pose of this title.
‘‘(b) DISTRIBUTION OF FUNDS UNDER THE BASIC AL-
LOTMENT POOL.—
‘‘(1) STATES.—
‘‘(A) IN GENERAL.—From the total amount
reserved under subsection (a) for a fiscal year for
distribution through the basic allotment pool, the
Secretary shall first set aside 0.25 percent for
distribution under paragraph (2) and shall allot
from the amount remaining to each eligible State
not described in such paragraph the State’s allot-
ment percentage for such fiscal year.
‘‘(B) STATE’S ALLOTMENT PERCENTAGE.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the allotment percentage
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for a fiscal year for each State is the per-
centage equal to the ratio of the number of
low-income children in the base period in
the State to the total number of low-income
children in the base period in all States not
described in paragraph (2).
‘‘(ii) NUMBER OF LOW-INCOME CHIL-
DREN IN THE BASE PERIOD.—In clause (i),
the number of low-income children in the
base period for a fiscal year in a State is
equal to the average of the number of low-
income children in the State for the period
beginning on October 1, 1992, and ending
on September 30, 1995, as reported in the
March 1994, March 1995, and March 1996
supplements to the Current Population Sur-
vey of the Bureau of the Census.
‘‘(2) OTHER STATES.—
‘‘(A) IN GENERAL.—From the amount set
aside under paragraph (1)(A) for each fiscal
year, the Secretary shall make allotments for
such fiscal year in accordance with the percent-
ages specified in subparagraph (B) to Puerto
Rico, Guam, the Virgin Islands, American
Samoa, and the Northern Mariana Islands, if
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such States are eligible States for such fiscal
year.
‘‘(B) PERCENTAGES SPECIFIED.—The per-
centages specified in this subparagraph are in
the case of—
‘‘(i) Puerto Rico, 91.6 percent;
‘‘(ii) Guam, 3.5 percent;
‘‘(iii) the Virgin Islands, 2.6 percent;
‘‘(iv) American Samoa, 1.2 percent;
and
‘‘(v) the Northern Mariana Islands, 1.1
percent.
‘‘(3) THREE-YEAR
AVAILABILITY
OF
AMOUNTS
ALLOTTED.—Amounts allotted to a State pursuant to
this subsection for a fiscal year shall remain available
for expenditure by the State through the end of the
second succeeding fiscal year.
‘‘(4) PROCEDURE FOR DISTRIBUTION OF UNUSED
FUNDS.—The Secretary shall determine an appro-
priate procedure for distribution of funds to eligible
States that remain unused under this subsection after
the expiration of the availability of funds required
under paragraph (3). Such procedure shall be devel-
oped and administered in a manner that is consistent
with the purpose of this title.
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‘‘(c) PAYMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall—
‘‘(A) before October 1 of any fiscal year,
pay an eligible State an amount equal to 1 per-
cent of the amount allotted to the State under
subsection (b) for conducting the outreach activi-
ties required under section 2106(a); and
‘‘(B) make quarterly fiscal year payments
to an eligible State from the amount remaining
of such allotment for such fiscal year in an
amount equal to the Federal medical assistance
percentage for the State (as defined under section
2102(4) and determined without regard to the
amount of Federal funds received by the State
under title XIX before the date of enactment of
this title) of the Federal and State incurred cost
of providing health insurance coverage for a low-
income child in the State plus the applicable
bonus amount.
‘‘(2) APPLICABLE BONUS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the applicable bonus amount is—
‘‘(i) 5 percent of the Federal and State
incurred cost, with respect to a period, of
providing health insurance coverage for
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children covered at State option among the
base-year covered low-income child popu-
lation (measured in full year equivalency)
(including such children covered by the
State through expanded eligibility under the
medicaid program under title XIX before
the date of enactment of this title, but ex-
cluding any low-income child described in
section 2102(3)(A) that a State must cover
in order to be considered an eligible State
under this title); and
‘‘(ii) 10 percent of the Federal and
State incurred cost, with respect to a pe-
riod, of providing health insurance coverage
for children covered at State option among
the number (as so measured) of low-income
children that are in excess of such popu-
lation.
‘‘(B) SOURCE OF BONUSES.—
‘‘(i) BASE-YEAR COVERED LOW-INCOME
CHILD POPULATION.—A bonus described in
subparagraph (A)(i) shall be paid out of an
eligible State’s allotment for a fiscal year.
‘‘(ii) FOR OTHER LOW-INCOME CHILD
POPULATIONS.—A bonus described in sub-
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paragraph (A)(ii) shall be paid out of the
new coverage incentive pool reserved under
subsection (a)(1).
‘‘(3) DEFINITION
OF
COST
OF
PROVIDING
HEALTH INSURANCE COVERAGE.—For purposes of this
subsection the cost of providing health insurance cov-
erage for a low-income child in the State means—
‘‘(A) in the case of an eligible State that
opts to use funds provided under this title
through the medicaid program, the cost of pro-
viding such child with medical assistance under
the State plan under title XIX; and
‘‘(B) in the case of an eligible State that
opts to use funds provided under this title under
section 2107, the cost of providing such child
with health insurance coverage under such sec-
tion.
‘‘(4) LIMITATION
ON
TOTAL
PAYMENTS.—With
respect to a fiscal year, the total amount paid to an
eligible State under this title (including any bonus
payments) shall not exceed 85 percent of the total cost
of a State program conducted under this title for such
fiscal year.
‘‘(5) MAINTENANCE OF EFFORT.—
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‘‘(A) DEEMED COMPLIANCE.—A State shall
be deemed to be in compliance with this provi-
sion if—
‘‘(i) it does not adopt income and re-
source standards and methodologies that are
more restrictive than those applied as of
June 1, 1997, for purposes of determining a
child’s eligibility for medical assistance
under the State plan under title XIX; and
‘‘(ii) in the case of fiscal year 1998
and each fiscal year thereafter, the State
children’s health expenditures defined in
section 2102(11) are not less than the
amount of such expenditures for fiscal year
1996.
‘‘(B) FAILURE
TO
MAINTAIN
MEDICAID
STANDARDS
AND
METHODOLOGIES.—A State
that fails to meet the conditions described in sub-
paragraph (A) shall not receive—
‘‘(i) funds under this title for any child
that would be determined eligible for medi-
cal assistance under the State plan under
title XIX using the income and resource
standards and methodologies applied under
such plan as of June 1, 1997; and
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‘‘(ii) any bonus amounts described in
paragraph (2)(A)(ii).
‘‘(C) FAILURE TO MAINTAIN SPENDING ON
CHILD HEALTH PROGRAMS.—A State that fails
to meet the condition described in subparagraph
(A)(ii) shall not receive funding under this title.
‘‘(6) ADVANCE
PAYMENT; RETROSPECTIVE
AD-
JUSTMENT.—The Secretary may make payments
under this subsection for each quarter on the basis of
advance estimates of expenditures submitted by the
State and such other investigation as the Secretary
may find necessary, and shall reduce or increase the
payments as necessary to adjust for any overpayment
or underpayment for prior quarters.
‘‘SEC. 2106. USE OF FUNDS.
‘‘(a) SET-ASIDE FOR OUTREACH ACTIVITIES.—
‘‘(1) IN GENERAL.—From the amount allotted to
a State under section 2105(b) for a fiscal year, each
State shall conduct outreach activities described in
paragraph (2).
‘‘(2) OUTREACH
ACTIVITIES
DESCRIBED.—The
outreach activities described in this paragraph in-
clude activities to—
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‘‘(A) identify and enroll children who are
eligible for medical assistance under the State
plan under title XIX; and
‘‘(B) conduct public awareness campaigns
to encourage employers to provide health insur-
ance coverage for children.
‘‘(b) STATE OPTIONS FOR REMAINDER.—A State may
use the amount remaining of the allotment to a State under
section 2105(b) for a fiscal year, determined after the pay-
ment required under section 2105(c)(1)(A), in accordance
with section 2107 or the State medicaid program (but not
both). Nothing in the preceding sentence shall be construed
as limiting a State’s eligibility for receiving the 5 percent
bonus described in section 2105(c)(2)(A)(i) for children cov-
ered by the State through expanded eligibility under the
medicaid program under title XIX before the date of enact-
ment of this title.
‘‘(c) PROHIBITION ON USE OF FUNDS.—No funds pro-
vided under this title may be used to provide health insur-
ance coverage for—
‘‘(1) families of State public employees; or
‘‘(2) children who are committed to a penal in-
stitution.
‘‘(d) USE LIMITED TO STATE PROGRAM EXPENDI-
TURES.—Funds provided to an eligible State under this
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title shall only be used to carry out the purpose of this title
(as described in section 2101), and any health insurance
coverage provided with such funds may include coverage of
abortion only if necessary to save the life of the mother or
if the pregnancy is the result of an act of rape or incest.
‘‘(e) ADMINISTRATIVE EXPENDITURES.—
‘‘(1) IN GENERAL.—Not more than the applicable
percentage of the amount allotted to a State under
section 2105(b) for a fiscal year, determined after the
payment required under section 2105(c)(1)(A), shall
be used for administrative expenditures for the pro-
gram funded under this title.
‘‘(2) APPLICABLE
PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage with re-
spect to a fiscal year is—
‘‘(A) for the first 2 years of a State pro-
gram funded under this title, 10 percent;
‘‘(B) for the third year of a State program
funded under this title, 7.5 percent; and
‘‘(C) for the fourth year of a State program
funded under this title and each year thereafter,
5 percent.
‘‘(f) NONAPPLICATION OF FIVE-YEAR LIMITED ELIGI-
BILITY FOR MEANS-TESTED PUBLIC BENEFITS.—The pro-
visions of section 403 of the Personal Responsibility and
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Work Opportunity Reconciliation Act of 1996 (8 U.S.C.
1613) shall not apply with respect to a State program fund-
ed under this title.
‘‘(g) AUDITS.—The provisions of section 506(b) shall
apply to funds expended under this title to the same extent
as they apply to title V.
‘‘(h) REQUIREMENT
TO FOLLOW STATE PROGRAM
OUTLINE.—The State shall conduct the program in accord-
ance with the program outline approved by the Secretary
under section 2104.
‘‘SEC. 2107. STATE OPTION FOR THE PURCHASE OR PROVI-
SION OF CHILDREN’S HEALTH INSURANCE.
‘‘(a) STATE OPTION.—
‘‘(1) IN GENERAL.—An eligible State that opts to
use funds provided under this title under this section
shall use such funds to provide FEHBP-equivalent
children’s health insurance coverage for low-income
children who reside in the State.
‘‘(2) PRIORITY FOR LOW-INCOME CHILDREN.—A
State that uses funds provided under this title under
this section shall not cover low-income children with
higher family income without covering such children
with a lower family income.
‘‘(3) DETERMINATION OF ELIGIBILITY AND FORM
OF ASSISTANCE.—An eligible State may establish any
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additional eligibility criteria for the provision of
health insurance coverage for a low-income child
through funds provided under this title, so long as
such criteria and assistance are consistent with the
purpose and provisions of this title.
‘‘(4) AFFORDABILITY.—An eligible State may
impose any family premium obligations or cost-shar-
ing requirements otherwise permitted under this title
on low-income children with family incomes that ex-
ceed 150 percent of the poverty line. In the case of a
low-income child whose family income is at or below
150 percent of the poverty line, limits on beneficiary
costs generally applicable under title XIX apply to
coverage provided such children under this section.
‘‘(b) NONENTITLEMENT.—Nothing in this section shall
be construed as providing an entitlement for an individual
or person to any health insurance coverage, assistance, or
service provided through a State program funded under this
title. If, with respect to a fiscal year, an eligible State deter-
mines that the funds provided under this title are not suffi-
cient to provide health insurance coverage for all the low-
income children that the State proposes to cover in the State
program outline submitted under section 2104 for such fis-
cal year, the State may adjust the applicable eligibility cri-
teria for such children appropriately or adjust the State
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‘‘(9) Section 1903(i) (relating to limitations on
payment).
‘‘(10) Section 1903(m)(5) (as in effect on the day
before the date of enactment of the Balanced Budget
Act of 1997).
‘‘(11) Section 1903(w) (relating to limitations on
provider taxes and donations).
‘‘(12) Section 1905(a)(B) (relating to the exclu-
sion of care or services for any individual who has
not attained 65 years of age and who is a patient in
an institution for mental diseases from the definition
of medical assistance).
‘‘(13) Section 1921 (relating to state licensure
authorities).
‘‘(14) Sections 1902(a)(25), 1912(a)(1)(A), and
1903(o) (insofar as such sections relate to third party
liability).
‘‘(15) Sections 1948 and 1949 (as added by sec-
tion 5701(a)(2) of the Balanced Budget Act of 1997).
‘‘SEC. 2109. ANNUAL REPORTS.
‘‘(a) ANNUAL STATE ASSESSMENT OF PROGRESS.—An
eligible State shall—
‘‘(1) assess the operation of the State program
funded under this title in each fiscal year, including
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the progress made in providing health insurance cov-
erage for low-income children; and
‘‘(2) report to the Secretary, by January 1 fol-
lowing the end of the fiscal year, on the result of the
assessment.
‘‘(b) REPORT
OF
THE SECRETARY.—The Secretary
shall submit to the appropriate committees of Congress an
annual report and evaluation of the State programs funded
under this title based on the State assessments and reports
submitted under subsection (a). Such report shall include
any conclusions and recommendations that the Secretary
considers appropriate.’’.
(b) CONFORMING AMENDMENT.—Section 1128(h) (42
U.S.C. 1320a–7(h)) is amended by—
(1) in paragraph (2), by striking ‘‘or’’ at the
end;
(2) in paragraph (3), by striking the period and
inserting ‘‘, or’’; and
(3) by adding at the end the following:
‘‘(4) a program funded under title XXI.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section apply on and after October 1, 1997.
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DIVISION 3—INCOME SECURITY
AND OTHER PROVISIONS
Subtitle K—Income Security, Wel-
fare-to-Work 
Grant 
Program,
and Other Provisions
CHAPTER 1—INCOME SECURITY
SEC. 5811. SSI ELIGIBILITY FOR ALIENS RECEIVING SSI ON
AUGUST 22, 1996.
(a) IN GENERAL.—Section 402(a)(2) of the Personal
Responsibility and Work Opportunity Reconciliation Act
of 1996 (8 U.S.C. 1612(a)(2)) is amended by adding after
subparagraph (D) the following new subparagraph:
‘‘(E) ALIENS RECEIVING SSI ON AUGUST 22,
1996.—With respect to eligibility for benefits for
the program defined in paragraph (3)(A) (relat-
ing to the supplemental security income pro-
gram), paragraph (1) shall not apply to an alien
who is lawfully residing in any State and who
was receiving such benefits on August 22, 1996.’’.
(b) STATUS OF CUBAN AND HAITIAN ENTRANTS.—For
purposes of section 402(a)(2)(E) of the Personal Respon-
sibility and Work Opportunity Reconciliation Act of 1996
(8 U.S.C. 1612(a)(2)(E)), an alien who is a Cuban and
Haitian entrant, as defined in section 501(e) of the Refugee
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Education Assistance Act of 1980, shall be considered a
qualified alien.
(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’’; and
(4) by redesignating subclauses (I), (II), and
(III) as clauses (i), (ii), and (iii).
SEC. 5812. 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 REFU-
GEES AND ASYLEES.—
‘‘(i) SSI.—With respect to the specified
Federal program described in paragraph
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(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.’’.
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(b) MEDICAID.—Section 402(b)(2)(A) of the Personal
Responsibility and Work Opportunity Reconciliation Act
of 1996 (8 U.S.C. 1612(b)(2)(A)) is amended to read as fol-
lows:
‘‘(A) TIME-LIMITED EXCEPTION FOR REFU-
GEES 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 designated
Federal programs under paragraph (3)
(other than subparagraph (C)), paragraph
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‘‘(1) IN GENERAL.—Each fiscal year, there shall
be available to the Secretary from funds not otherwise
appropriated, funds to be obligated for—
‘‘(A) administrative costs under this part,
including the costs of the direct student loan pro-
grams under this part, and
‘‘(B) administrative cost allowances payable
to guaranty agencies under part B and cal-
culated in accordance with paragraph (2),
not to exceed (from such funds not otherwise appro-
priated) 
$532,000,000 
in 
fiscal 
year 
1998,
$610,000,000 in fiscal year 1999, $705,000,000 in fis-
cal year 2000, $750,000,000 in fiscal year 2001, and
$750,000,000 in fiscal year 2002. Administrative cost
allowances under subparagraph (B) of this paragraph
shall be paid quarterly and used in accordance with
section 428(f). The Secretary may carry over funds
available under this section to a subsequent fiscal
year.
‘‘(2) CALCULATION BASIS.—Administrative cost
allowances payable to guaranty agencies under para-
graph (1)(B) shall be calculated on the basis of 0.85
percent of the total principal amount of loans upon
which insurance is issued on or after the date of en-