Union Calendar No. 89
105TH CONGRESS
1ST SESSION
H. R. 2015
[Report No. 105–149]
A BILL
To provide for reconciliation pursuant to sub-
sections (b)(1) and (c) of section 105 of the con-
current resolution on the budget for fiscal year
1998.
JUNE 24, 1997
Reported from the Committee on the Budget; committed
to the Committee of the Whole House on the State of
the Union and ordered to be printed
IB
105TH CONGRESS
1ST SESSION
H. R. 2015
[Report No. 105–149]
To provide for reconciliation pursuant to subsections (b)(1) and (c) of section
105 of the concurrent resolution on the budget for fiscal year 1998.
IN THE HOUSE OF REPRESENTATIVES
JUNE 24, 1997
Mr. KASICH from the Committee on the Budget, reported the following bill;
which was committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
A BILL
To provide for reconciliation pursuant to subsections (b)(1)
and (c) of section 105 of the concurrent resolution on
the budget for fiscal year 1998.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Balanced Budget Act
of 1997’’.
SEC. 2. TABLE OF CONTENTS.
Title I—Committee on Agriculture.
Title II—Committee on Banking and Financial Services.
Title III—Committee on Commerce—Nonmedicare.
Title IV—Committee on Commerce—Medicare.
Title V—Committee on Education and the Workforce.
Tittle VI—Committee on Government Reform and Oversight.
Title VII—Committee on Transportation and Infrastructure.
Title VIII—Committee on Veterans’ Affairs.
Title IX—Committee on Ways and Means—Nonmedicare.
Title X—Committee on Ways and Means—Medicare.
TITLE I—COMMITTEE ON
AGRICULTURE
SEC. 1001. EXEMPTION.
Section 6(o) of the Food Stamp Act of 1977 (7
U.S.C. 2015(o)) is amended—
(1) in paragraph (2)(D), by striking ‘‘or (5)’’
and inserting ‘‘(5), or (6)’’;
(2) by redesignating paragraphs (5) and (6) as
paragraphs (6) and (7), respectively; and
(3) by inserting after paragraph (4) the follow-
ing new paragraph:
‘‘(5) 15-PERCENT EXEMPTION.—
‘‘(A) DEFINITIONS.—In this paragraph:
‘‘(i) CASELOAD.—The term ‘caseload’
means the average monthly number of in-
dividuals receiving food stamps during the
12-month period ending the preceding
June 30.
‘‘(ii) 
COVERED
INDIVIDUAL.—The
term ‘covered individual’ means a food
stamp recipient, or an individual denied
eligibility for food stamp benefits solely
due to paragraph (2), who—
‘‘(I) is not eligible for an excep-
tion under paragraph (3);
‘‘(II) does not reside in an area
covered by a waiver granted under
paragraph (4);
‘‘(III) is not complying with sub-
paragraph (A), (B), or (C) of para-
graph (2);
‘‘(IV) is not in the first 3 months
of eligibility under paragraph (2); and
‘‘(V) is not receiving benefits
under paragraph (6).
‘‘(B) GENERAL
RULE.—Subject to sub-
paragraphs (C) through (F), a State agency
may provide an exemption from the require-
ments of paragraph (2) for covered individuals.
‘‘(C) FISCAL YEAR 1998.—Subject to sub-
paragraph (E), for fiscal year 1998, a State
agency may provide a number of exemptions
such that the average monthly number of the
exemptions in effect during the fiscal year does
not exceed 15 percent of the number of covered
individuals in the State in fiscal year 1998, as
estimated by the Secretary, based on the survey
conducted to carry out section 16(c) for fiscal
year 1996 and such other factors as the Sec-
retary considers appropriate due to the timing
and limitations of the survey.
‘‘(D) SUBSEQUENT FISCAL YEARS.—Sub-
ject to subparagraphs (E) and (F), for fiscal
year 1999 and each subsequent fiscal year, a
State agency may provide a number of exemp-
tions such that the average monthly number of
the exemptions in effect during the fiscal year
does not exceed 15 percent of the number of
covered individuals in the State, as estimated
by the Secretary under subparagraph (C), ad-
justed by the Secretary to reflect changes in the
State’s caseload and the Secretary’s estimate of
changes in the proportion of food stamp recipi-
ents covered by waivers granted under para-
graph (4).
‘‘(E) CASELOAD ADJUSTMENTS.—The Sec-
retary shall adjust the number of individuals es-
timated for a State under subparagraph (C) or
(D) during a fiscal year if the number of food
stamp recipients in the State varies by a signifi-
cant number from the caseload, as determined
by the Secretary.
‘‘(F) EXEMPTION ADJUSTMENTS.—During
fiscal year 1999 and each subsequent fiscal
year, the Secretary shall increase or decrease
the number of individuals who may be granted
an exemption by a State agency to the extent
that the average monthly number of exemptions
in effect in the State for the preceding fiscal
year is greater or less than the average monthly
number of exemptions estimated for the State
agency during such preceding fiscal year.
‘‘(G) REPORTING REQUIREMENT.—A State
agency shall submit such reports to the Sec-
retary as the Secretary determines are nec-
essary to ensure compliance with this para-
graph.’’.
SEC. 1002. ADDITIONAL FUNDING FOR EMPLOYMENT AND
TRAINING.
(a) IN GENERAL.—Section 16(h) of the Food Stamp
Act of 1977 (7 U.S.C. 2025(h)) is amended—
(1) by striking paragraph (1) and inserting the
following new paragraph:
‘‘(1) IN GENERAL.—
‘‘(A) AMOUNTS.—To carry out employ-
ment and training programs, the Secretary
shall reserve for allocation to State agencies, to
remain available until expended, from funds
made available for each fiscal year under sec-
tion 18(a)(1) the amount of—
‘‘(i) for fiscal year 1996, $75,000,000;
‘‘(ii) 
for 
fiscal 
year 
1997,
$79,000,000;
‘‘(iii) 
for 
fiscal 
year 
1998,
$221,000,000;
‘‘(iv) 
for 
fiscal 
year 
1999,
$224,000,000;
‘‘(v) 
for 
fiscal 
year 
2000,
$226,000,000;
‘‘(vi) 
for 
fiscal 
year 
2001,
$228,000,000; and
‘‘(vii) 
for 
fiscal 
year 
2002,
$210,000,000.
‘‘(B) LIMITATIONS.—The Secretary shall
ensure that—
‘‘(i) the funds provided in this sub-
paragraph shall not be used for food stamp
recipients who receive benefits under a
State program funded under part A of title
IV of the Social Security Act (42 U.S.C.
601 et seq.); and
‘‘(ii) not less than 75 percent of the
funds provided in this subparagraph shall
be used by a State agency for the employ-
ment and training of food stamp recipients
not excepted by section 6(o)(3).
‘‘(C) ALLOCATION.—
‘‘(i) 
ALLOCATION
FORMULA.—The
Secretary shall allocate the amounts re-
served under subparagraph (A) among the
State agencies using a reasonable formula,
as determined and adjusted by the Sec-
retary each fiscal year, to reflect changes
in each State’s caseload (as defined in sec-
tion 6(o)(5)(A)) that reflects the propor-
tion of food stamp recipients who reside in
each State—
‘‘(I) who are not eligible for an
exception under section 6(o)(3); and
‘‘(II) who do not reside in an
area subject to the waiver granted by
the Secretary under section 6(o)(4), if
the State agency does not provide em-
ployment and training services in the
area to food stamp recipients not ex-
cepted by section 6(o)(3).
‘‘(ii) REPORTING
REQUIREMENT.—A
State agency shall submit such reports to
the Secretary as the Secretary determines
are necessary to ensure compliance with
this paragraph.’’; and
‘‘(D) REALLOCATION.—
‘‘(i) NOTIFICATION.—A State agency
shall promptly notify the Secretary if the
State agency determines that it will not ex-
pend all of the funds allocated to it under
subparagraph (B).
‘‘(ii) REALLOCATION.—On notification
under clause (i), the Secretary shall reallo-
cate the funds that the State agency will
not expend as the Secretary considers ap-
propriate and equitable.
‘‘(E) MINIMUM
ALLOCATION.—Notwith-
standing subparagraphs (A) through (C), the
Secretary shall ensure that each State agency
operating an employment and training program
shall receive not less than $50,000 for each fis-
cal year.
‘‘(F) MAINTENANCE OF EFFORT.—To re-
ceive the additional funding under subpara-
graph (A), as provided by the amendment made
by section 1002 of the Balanced Budget Act of
1997, a State agency shall maintain the ex-
penditures of the State agency for employment
and training programs and workfare programs
for any fiscal year under paragraph (2), and
administrative expenses under section 20(g)(1),
at a level that is not less than the level of the
expenditures by the State agency to carry out
the programs for fiscal year 1996.’’;
(2) by redesignating paragraphs (2) through
(5) as paragraphs (3) through (6), respectively;
(3) by inserting after paragraph (1) the follow-
ing new paragraph:
‘‘(2) REPORT
TO
CONGRESS
ON
ADDITIONAL
FUNDING.—Beginning one year after the date of the
enactment of this paragraph, the Secretary shall
submit an annual report to the Committee on Agri-
culture of the House of Representatives and the
Committee on Agriculture, Nutrition, and Forestry
of the Senate regarding whether the additional fund-
ing provided under paragraph (1)(A) has been uti-
lized by State agencies to increase the number of
work slots in their employment and training pro-
grams and workfare for recipients subject to section
6(o) in the most efficient and effective manner.’’;
and
(4) in paragraph (3) (as so redesignated), by
striking ‘‘paragraph (3)’’ and inserting ‘‘paragraph
(4)’’.
(b) CONFORMING
AMENDMENTS.—(1) Subsection
(b)(1)(B)(iv)(III)(hh) of section 17 of the Food Stamp Act
of 1977 (7 U.S.C. 2026) is amended by striking ‘‘(h)(2),
or (h)(3) of section 16’’ and inserting ‘‘(h)(3), or (h)(4)
of section 16’’.
(2) Subsection (d)(1)(B)(ii) of section 22 of such Act
(7 U.S.C. 2031) is amended by striking ‘‘(h)(2), and
(h)(3) of section 16’’ and inserting ‘‘(h)(3), and (h)(4) of
section 16’’.
SEC. 1003. AUTHORIZING USE OF NONGOVERNMENTAL
PERSONNEL IN MAKING DETERMINATIONS
OF ELIGIBILITY FOR BENEFITS UNDER THE
FOOD STAMP PROGRAM.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, no provision of law shall be construed as pre-
venting any State (as defined in section 3(m) of the Food
Stamp Act of 1977 (7 U.S.C. 2012(m))) from allowing
eligibility determinations described in subsection (b) to be
made by an entity that is not a State or local government,
or by an individual who is not an employee of a State or
local government, which meets such qualifications as the
State determines. For purposes of any Federal law, such
determinations shall be considered to be made by the State
and by a State agency.
(b) ELIGIBILITY DETERMINATIONS.—An eligibility
determination described in this subsection is a determina-
tion of eligibility of individuals or households to receive
benefits under the food stamp program as defined in sec-
tion 3(h) of the Food Stamp Act of 1977 (7 U.S.C.
2012(h)).
(c) CONSTRUCTION.—Nothing in this section shall be
construed as affecting—
(1) the conditions for eligibility for benefits (in-
cluding any conditions relating to income or re-
sources);
(2) the rights to challenge determinations re-
garding eligibility or rights to benefits; and
(3) determinations regarding quality control or
error rates.
striking ‘‘September 30, 1998’’ and inserting ‘‘September
30, 2002’’.
Subtitle B—Lease of Excess Strate-
gic Petroleum Reserve Capacity
SEC. 3101. LEASE OF EXCESS STRATEGIC PETROLEUM RE-
SERVE CAPACITY.
(a) AMENDMENT.—Part B of title I of the Energy
Policy and Conservation Act (42 U.S.C. 6231 et seq.) is
amended by adding at the end the following:
‘‘USE OF UNDERUTILIZED FACILITIES
‘‘SEC. 168. (a) AUTHORITY.—Notwithstanding any
other provision of this title, the Secretary, by lease or oth-
erwise, for any term and under such other conditions as
the Secretary considers necessary or appropriate, may
store in underutilized Strategic Petroleum Reserve facili-
ties petroleum product owned by a foreign government or
its representative. Petroleum products stored under this
section are not part of the Strategic Petroleum Reserve
and may be exported without license from the United
States.
‘‘(b) PROTECTION OF FACILITIES.—All agreements
entered into pursuant to subsection (a) shall contain provi-
sions providing for fees to fully compensate the United
States for all costs of storage and removals of petroleum
products, including the cost of replacement facilities neces-
sitated as a result of any withdrawals.
‘‘(c) ACCESS TO STORED OIL.—The Secretary shall
ensure that agreements to store petroleum products for
foreign governments or their representatives do not affect
the ability of the United States to withdraw, distribute,
or sell petroleum from the Strategic Petroleum Reserve
in response to an energy emergency or to the obligations
of the United States under the Agreement on an Inter-
national Energy Program.
‘‘(d) AVAILABILITY
OF FUNDS.—Funds collected
through the leasing of Strategic Petroleum Reserve facili-
ties authorized by subsection (a) after September 30,
2002, shall be used by the Secretary of Energy without
further appropriation for the purchase of oil for, and oper-
ation and maintenance costs of, the Strategic Petroleum
Reserve.’’.
(b) TABLE OF CONTENTS AMENDMENT.—The table
of contents of part B of title I of the Energy Policy and
Conservation Act is amended by adding at the end the
following:
‘‘Sec. 168. Use of underutilized facilities.’’.
Subtitle C—Sale of DOE Assets
SEC. 3201. SALE OF DOE SURPLUS URANIUM ASSETS.
(a) IN GENERAL.—The Secretary of Energy shall,
during the period fiscal year 1999 through fiscal year
2002, sell 3.2 million pounds per year of natural and low-
enriched uranium that the President has determined is not
necessary for national security needs. Such sales shall
be—
(1) made for delivery after January 1, 1999;
(2) subject to a determination, for the period
fiscal year 1999 through fiscal year 2002, by the
Secretary under section 3112(d)(2)(B) of the USEC
Privatization Act (42 U.S.C. 2297h–10(d)(2)(B));
and
(3) made at a price not less than the fair mar-
ket value of the uranium and in a manner that
maximizes proceeds to the Treasury.
The Secretary shall receive the proceeds from such sale
in the period fiscal year 1999 through fiscal year 2002
and shall deposit such proceeds in the General Fund of
the Treasury.
(b) COSTS.—The costs of making the sales required
by subsection (a) shall be covered by the unobligated bal-
ances of appropriations of the Department of Energy.
Subtitle D—Communications
SEC. 3301. SPECTRUM AUCTIONS.
(a) EXTENSION AND EXPANSION OF AUCTION AU-
THORITY.—
(1) AMENDMENTS.—Section 309(j) of the Com-
munications Act of 1934 (47 U.S.C. 309(j)) is
amended—
(A) by striking paragraphs (1) and (2) and
inserting in lieu thereof the following:
‘‘(1) GENERAL AUTHORITY.—If, consistent with
the obligations described in paragraph (6)(E), mutu-
ally exclusive applications are accepted for any ini-
tial license or construction permit which will involve
an exclusive use of the electromagnetic spectrum,
then the Commission shall grant such license or per-
mit to a qualified applicant through a system of
competitive bidding that meets the requirements of
this subsection.
‘‘(2) EXEMPTIONS.—The competitive bidding
authority granted by this subsection shall not apply
to licenses or construction permits issued by the
Commission—
‘‘(A) that, as the result of the Commission
carrying out the obligations described in para-
graph (6)(E), are not mutually exclusive;
‘‘(B) for public safety radio services, in-
cluding private internal radio services used by
non-Government entities, that—
‘‘(i) protect the safety of life, health,
or property; and
‘‘(ii) are not made commercially avail-
able to the public;
‘‘(C) for initial licenses or construction
permits assigned by the Commission to existing
terrestrial broadcast licensees for new terres-
trial digital television services; or
‘‘(D) for public telecommunications serv-
ices, as defined in section 397(14) of the Com-
munications Act of 1934 (47 U.S.C. 397(14)),
when the license application is for channels re-
served for noncommercial use.’’;
(B) in paragraph (3)—
(i) by inserting after the second sen-
tence the following new sentence: ‘‘The
Commission shall, directly or by contract,
provide for the design and conduct (for
purposes of testing) of competitive bidding
using a contingent combinatorial bidding
system that permits prospective bidders to
bid on combinations or groups of licenses
in a single bid and to enter multiple alter-
native bids within a single bidding round.’’;
(ii) by striking ‘‘and’’ at the end of
subparagraph (C);
(iii) by striking the period at the end
of subparagraph (D) and inserting ‘‘;
and’’; and
(iv) by adding at the end the following
new subparagraph:
‘‘(E) ensuring that, in the scheduling of
any competitive bidding under this subsection,
an adequate period is allowed—
‘‘(i) before issuance of bidding rules,
to permit notice and comment on proposed
auction procedures; and
‘‘(ii) after issuance of bidding rules, to
ensure that interested parties have a suffi-
cient time to develop business plans, assess
market conditions, and evaluate the avail-
ability of equipment for the relevant serv-
ices.’’;
(C) in paragraph (8)—
(i) by striking subparagraph (B); and
(ii) by redesignating subparagraph
(C) as subparagraph (B);
(D) in paragraph (11), by striking ‘‘1998’’
and inserting ‘‘2002’’; and
(E) in paragraph (13)(F), by striking
‘‘September 30, 1998’’ and inserting ‘‘the date
of enactment of the Balanced Budget Act of
1997’’.
(2) CONFORMING AMENDMENT.—Subsection (i)
of section 309 of the Communications Act of 1934
(47 U.S.C. 309(i)) is repealed.
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1)(A) shall not apply with respect to
any license or permit for which the Federal Commu-
nications Commission has accepted mutually exclu-
sive applications on or before the date of enactment
of this Act.
(b) COMMISSION OBLIGATION TO MAKE ADDITIONAL
SPECTRUM AVAILABLE BY AUCTION.—
(1) IN
GENERAL.—The Federal Communica-
tions Commission shall complete all actions nec-
essary to permit the assignment, by September 30,
2002, by competitive bidding pursuant to section
309(j) of the Communications Act of 1934 (47
U.S.C. 309(j)) of licenses for the use of bands of
frequencies that—
(A) individually span not less than 25
megahertz, unless a combination of smaller
bands can, notwithstanding the provisions of
paragraph (7) of such section, reasonably be ex-
pected to produce greater receipts;
(B) in the aggregate span not less than
100 megahertz;
(C) are located below 3 gigahertz;
(D) have not, as of the date of enactment
of this Act—
(i) been designated by Commission
regulation for assignment pursuant to such
section;
(ii) been identified by the Secretary of
Commerce pursuant to section 113 of the
National Telecommunications and Infor-
mation Administration Organization Act;
(iii) been allocated for Federal Gov-
ernment use pursuant to section 305 of the
Communications Act of 1934 (47 U.S.C.
305);
(iv) been designated in section 3303
of this Act; or
(v) been allocated for unlicensed use
pursuant to part 15 of the Commission’s
regulations (47 C.F.R. Part 15), if the
competitive bidding for licenses would
interfere with operation of end-user prod-
ucts permitted under such regulations; and
(E) notwithstanding section 115(b)(1)(B)
of the National Telecommunications and Infor-
mation Administration Organization Act (47
U.S.C. 925(b)(1)(B)) or any proposal pursuant
to such section, include frequencies at 1,710–
1,755 megahertz.
(2) CRITERIA FOR REASSIGNMENT.—In making
available bands of frequencies for competitive bid-
ding pursuant to paragraph (1), the Commission
shall—
(A) seek to promote the most efficient use
of the spectrum;
(B) take into account the cost to incum-
bent licensees of relocating existing uses to
other bands of frequencies or other means of
communication; and
(C) comply with the requirements of inter-
national agreements concerning spectrum allo-
cations.
(3) NOTIFICATION TO NTIA.—The Commission
shall notify the Secretary of Commerce if—
(A) the Commission is not able to provide
for the effective relocation of incumbent licens-
ees to bands of frequencies that are available to
the Commission for assignment; and
(B) the Commission has identified bands
of frequencies that are—
(i) suitable for the relocation of such
licensees; and
(ii) allocated for Federal Government
use, but that could be reallocated pursuant
to part B of the National Telecommuni-
cations and Information Administration
Organization Act (as amended by this
Act).
(4) PROTECTION OF SPACE RESEARCH USES.—
The licenses assigned pursuant to paragraph (1)
shall require licensees to avoid interference with
communications in space research and earth explo-
ration-satellite services authorized under notes 750A
and US90 to section 2.106 of the regulations of the
Federal Communications Commission (47 C.F.R.
2.106) as in effect on the date of enactment of this
Act.
(c) IDENTIFICATION AND REALLOCATION OF FRE-
QUENCIES.—The National Telecommunications and Infor-
mation Administration Organization Act (47 U.S.C. 901
et seq.) is amended—
(1) in section 113, by adding at the end the fol-
lowing new subsection:
‘‘(f) ADDITIONAL REALLOCATION REPORT.—If the
Secretary receives a notice from the Commission pursuant
to section 3301(b)(3) of the Balanced Budget Act of 1997,
the Secretary shall prepare and submit to the President,
the Commission, and the Congress a report recommending
for reallocation for use other than by Federal Government
stations under section 305 of the 1934 Act (47 U.S.C.
305), bands of frequencies that are suitable for the uses
identified in the Commission’s notice. The Commission
shall, not later than one year after receipt of such report,
prepare, submit to the President and the Congress, and
implement, a plan for the immediate allocation and assign-
ment of such frequencies under the 1934 Act to incumbent
licencees described in section 3301(b)(3) of the Balanced
Budget Act of 1997.’’; and
(2) in section 114(a)(1), by striking ‘‘(a) or
(d)(1)’’ and inserting ‘‘(a), (d)(1), or (f)’’.
(d) 
IDENTIFICATION
AND
REALLOCATION
OF
AUCTIONABLE
FREQUENCIES.—The 
National 
Tele-
communications and Information Administration Organi-
zation Act (47 U.S.C. 901 et seq.) is amended—
(1) in section 113(b)—
(A) by striking the heading of paragraph
(1) and inserting ‘‘INITIAL REALLOCATION RE-
PORT’’;
(B) by inserting ‘‘in the first report re-
quired by subsection (a)’’ after ‘‘recommend for
reallocation’’ in paragraph (1);
(C) by inserting ‘‘or (3)’’ after ‘‘paragraph
(1)’’ each place it appears in paragraph (2);
and
(D) by inserting after paragraph (2) the
following new paragraph:
‘‘(3) SECOND REALLOCATION REPORT.—In ac-
cordance with the provisions of this section, the Sec-
retary shall recommend for reallocation in the sec-
ond report required by subsection (a), for use other
than by Federal Government stations under section
305 of the 1934 Act (47 U.S.C. 305), a band or
bands of frequencies that—
‘‘(A) in the aggregate span not less than
20 megahertz;
‘‘(B) individually span not less than 20
megahertz, unless a combination of smaller
bands can reasonably be expected to produce
greater receipts;
‘‘(C) are located below 3 gigahertz; and
‘‘(D) meet the criteria specified in para-
graphs (1) through (5) of subsection (a).’’; and
(2) in section 115—
(A) in subsection (b), by striking ‘‘the re-
port required by section 113(a)’’ and inserting
‘‘the initial reallocation report required by sec-
tion 113(a)’’; and
(B) by adding at the end the following new
subsection:
‘‘(c) ALLOCATION
AND
ASSIGNMENT
OF
FRE-
QUENCIES IDENTIFIED IN THE SECOND REALLOCATION
REPORT.—With respect to the frequencies made available
for reallocation pursuant to section 113(b)(3), the Com-
mission shall, not later than one year after receipt of the
second reallocation report required by such section, pre-
pare, submit to the President and the Congress, and im-
plement, a plan for the immediate allocation and assign-
ment under the 1934 Act of all such frequencies in accord-
ance with section 309(j) of such Act.’’.
(e) MINIMUM RECOVERY FOR PUBLIC REQUIRED.—
(1) METHODOLOGY
TO
SECURE
MINIMUM
AMOUNTS REQUIRED.—In establishing, pursuant to
section 309(j)(3) of the Communications Act of
1934 (47 U.S.C. 309(j)(3)), a competitive bidding
methodology with respect to the frequencies required
to be assigned by competitive bidding under sub-
section (b) of this section and section 115(c) of the
National Telecommunications and Information Ad-
ministration Organization Act (47 U.S.C. 925(c)),
the Commission shall establish procedures that are
designed to secure winning bids totaling not less
than two-thirds of $7,500,000,000.
(2) AUTHORITY.—In establishing such meth-
odology, the Commission is authorized—
(A) to partition the total required to be ob-
tained under paragraph (1) among separate
competitive bidding proceedings, or among sep-
arate bands, regions, or markets;
(B) to void any such separated competitive
bidding proceeding that fails to obtain the par-
titioned subtotal that pertains to that proceed-
ing; and
(C) to prescribe minimum bids or other
bidding requirements to obtain such total or
subtotal.
(3) LICENSES
WITHHELD.—Notwithstanding
any other requirement of this section, or the amend-
ments made by this section, the Commission shall
refrain from conducting any competitive bidding
pursuant to the methodology established pursuant to
this subsection unless the Commission determines
that such methodology will secure winning bids to-
taling not less than two-thirds of $7,500,000,000.
(4) AUTHORITY TO REBID AT A LATER TIME TO
SECURE STATUTORY OBJECTIVES.—Nothing in para-
graph (2) or (3) shall preclude or limit the Commis-
sion from assigning the frequencies described in
paragraph (1) by competitive bidding at such later
date (than the date required by this section) as the
Commission determines, in its discretion, will better
attain the objectives of recovering for the public a
fair portion of the value of the public spectrum re-
source and avoiding unjust enrichment.
SEC. 3302. AUCTION OF RECAPTURED BROADCAST TELE-
VISION SPECTRUM.
Section 309(j) of the Communications Act of 1934
(47 U.S.C. 309(j)) is amended by adding at the end the
following new paragraph:
‘‘(14) AUCTION
OF
RECAPTURED
BROADCAST
TELEVISION SPECTRUM.—
‘‘(A) LIMITATIONS ON TERMS OF TERRES-
TRIAL
TELEVISION
BROADCAST
LICENSES.—A
television license that authorizes analog tele-
vision services may not be renewed to authorize
such service for a period that extends beyond
December 31, 2006. The Commission shall
grant by regulation an extension of such date to
licensees in a market if the Commission deter-
mines that more than 5 percent of households
in such market continue to rely exclusively on
over-the-air terrestrial analog television signals.
‘‘(B) SPECTRUM
REVERSION
AND
RE-
SALE.—
‘‘(i) The Commission shall ensure
that, when the authority to broadcast ana-
log television services under a license ex-
pires pursuant to subparagraph (A), each
licensee shall return spectrum according to
the Commission’s direction and the Com-
mission shall reclaim such spectrum.
‘‘(ii) Licensees for new services occu-
pying spectrum reclaimed pursuant to
clause (i) shall be selected in accordance
with this subsection. The Commission shall
start such selection process by July 1,
2001, with payment pursuant to rules es-
tablished by the Commission under this
subsection.
‘‘(C) MINIMUM RECOVERY FOR PUBLIC RE-
QUIRED.—
‘‘(i) METHODOLOGY TO SECURE MINI-
MUM AMOUNTS REQUIRED.—In establish-
ing, pursuant to section 309(j)(3) of the
Communications Act of 1934 (47 U.S.C.
309(j)(3)), a competitive bidding methodol-
ogy with respect to the frequencies re-
quired to be assigned by competitive bid-
ding under subparagraph (B) of this para-
graph, the Commission shall establish pro-
cedures that are designed to secure win-
ning bids totaling not less than two-thirds
of $4,000,000,000.
‘‘(ii) 
AUTHORITY.—In 
establishing
such methodology, the Commission is au-
thorized—
‘‘(I) to partition the total re-
quired to be obtained under clause (i)
among separate competitive bidding
proceedings, 
or 
among 
separate
bands, regions, or markets;
‘‘(II) to void any such separated
competitive bidding proceeding that
fails to obtain the partitioned subtotal
that pertains to that proceeding; and
‘‘(III) to prescribe minimum bids
or other bidding requirements to ob-
tain such aggregate total.
‘‘(iii) 
LICENSES
WITHHELD.—Not-
withstanding any other requirement of this
paragraph, the Commission shall refrain
from conducting any competitive bidding
pursuant to the methodology established
pursuant to this subparagraph unless the
Commission determines that such meth-
odology will secure winning bids totaling
not 
less 
than 
two-thirds 
of
$4,000,000,000.
‘‘(iv) AUTHORITY
TO
REBID
AT
A
LATER TIME TO SECURE STATUTORY OB-
JECTIVES.—Nothing in clause (ii) or (iii)
shall preclude or limit the Commission
from assigning the frequencies described in
clause (i) by competitive bidding at such
later date (than the date required by this
paragraph) as the Commission determines,
in its discretion, will better attain the ob-
jectives of recovering for the public a fair
portion of the value of the public spectrum
resource and avoiding unjust enrichment.
‘‘(D) CERTAIN LIMITATIONS ON QUALIFIED
BIDDERS PROHIBITED.—In prescribing any reg-
ulations relating to the qualification of bidders
for spectrum reclaimed pursuant to subpara-
graph (B)(i), the Commission shall not—
‘‘(i) preclude any party from being a
qualified bidder for spectrum that is allo-
cated for any use that includes digital tele-
vision service on the basis of—
‘‘(I) the Commission’s duopoly
rule (47 C.F.R. 73.3555(b)); or
‘‘(II) the Commission’s news-
paper cross-ownership rule (47 C.F.R.
73.3555(d)); or
‘‘(ii) apply either such rule to preclude
such a party that is a successful bidder in
a competitive bidding for such spectrum
from using such spectrum for digital tele-
vision service.
‘‘(E) DEFINITIONS.—As used in this para-
graph:
‘‘(i) The term ‘digital television serv-
ice’ means television service provided using
digital technology to enhance audio quality
and video resolution, as further defined in
the Memorandum Opinion, Report, and
Order of the Commission entitled ‘Ad-
vanced Television Systems and Their Im-
pact Upon the Existing Television Service’,
MM Docket No. 87–268 and any subse-
quent Commission proceedings dealing
with digital television.
‘‘(ii) The term ‘analog television serv-
ice’ means service provided pursuant to the
transmission standards prescribed by the
Commission in section 73.682(a) of its reg-
ulation (47 CFR 73.682(a)).’’.
SEC. 3303. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC
SAFETY AND COMMERCIAL LICENSES.
(a) IN GENERAL.—The Federal Communications
Commission shall, not later than January 1, 1998, allocate
on a national, regional, or market basis, from radio spec-
trum between 746 megahertz and 806 megahertz—
(1) 24 megahertz of that spectrum for public
safety services according to the terms and conditions
established by the Commission, unless the Commis-
sion determines that the needs for public safety serv-
ices can be met in particular areas with allocations
of less than 24 megahertz; and
(2) the remainder of that spectrum for commer-
cial purposes to be assigned by competitive bidding
in accordance with section 309(j).
(b) ASSIGNMENT.—The Commission shall—
(1) assign the licenses for public safety created
pursuant to subsection (a) no later than March 31,
1998; and
(2) commence competitive bidding for the com-
mercial licenses created pursuant to subsection (a)
no later than July 1, 2001.
(c) LICENSING OF UNUSED FREQUENCIES FOR PUB-
LIC SAFETY RADIO SERVICES.—
(1) USE OF UNUSED CHANNELS FOR PUBLIC
SAFETY.—It shall be the policy of the Commission,
notwithstanding any other provision of this Act or
any other law, to waive whatever licensee eligibility
and other requirements (including bidding require-
ments) are applicable in order to permit the use of
unassigned frequencies for public safety purposes by
a State or local governmental agency upon a show-
ing that—
(A) no other existing satisfactory public
safety channel is immediately available to sat-
isfy the requested use;
(B) the proposed use is technically feasible
without causing harmful interference to existing
stations in the frequency band entitled to pro-
tection from such interference under the rules
of the Commission; and
(C) use of the channel for public safety
purposes is consistent with other existing public
safety channel allocations in the geographic
area of proposed use.
(2) APPLICABILITY.—Paragraph (1) shall apply
to any application that is pending before the Federal
Communications Commission, or that is not finally
determined under either section 402 or 405 of the
Communications Act of 1934 (47 U.S.C. 402, 405)
on May 15, 1997, or that is filed after such date.
(d) CONDITIONS
ON LICENSES.—With respect to
public safety and commercial licenses granted pursuant to
this subsection, the Commission shall—
(1) establish interference limits at the bound-
aries of the spectrum block and service area;
(2) establish any additional technical restric-
tions necessary to protect full-service analog tele-
vision service and digital television service during a
transition to digital television service; and
(3) permit public safety and commercial licens-
ees—
(A) to aggregate multiple licenses to create
larger spectrum blocks and service areas; and
(B) to disaggregate or partition licenses to
create smaller spectrum blocks or service areas.
(e) MINIMUM RECOVERY FOR PUBLIC REQUIRED.—
(1) METHODOLOGY
TO
SECURE
MINIMUM
AMOUNTS REQUIRED.—In establishing, pursuant to
section 309(j)(3) of the Communications Act of
1934 (47 U.S.C. 309(j)(3)), a competitive bidding
methodology with respect to the frequencies required
to be assigned by competitive bidding under this sec-
tion, the Commission shall establish procedures that
are designed to secure winning bids totaling not less
than two-thirds of $1,900,000,000.
(2) AUTHORITY.—In establishing such meth-
odology, the Commission is authorized—
(A) to partition the total required to be ob-
tained under paragraph (1) among separate
competitive bidding proceedings, or among sep-
arate bands, regions, or markets;
(B) to void any such separated competitive
bidding proceeding that fails to obtain the par-
titioned subtotal that pertains to that proceed-
ing; and
(C) to prescribe minimum bids or other
bidding requirements to obtain such total or
subtotal.
(3) LICENSES
WITHHELD.—Notwithstanding
any other requirement of this section, the Commis-
sion shall refrain from conducting any competitive
bidding pursuant to the methodology established
pursuant to this subsection unless the Commission
determines that such methodology will secure win-
ning bids totaling not less than two-thirds of
$1,900,000,000.
(4) AUTHORITY TO REBID AT A LATER TIME TO
SECURE STATUTORY OBJECTIVES.—Nothing in para-
graph (2) or (3) shall preclude or limit the Commis-
sion from assigning the frequencies described in
paragraph (1) by competitive bidding at such later
date (than the date required by this section) as the
Commission determines, in its discretion, will better
attain the objectives of recovering for the public a
fair portion of the value of the public spectrum re-
source and avoiding unjust enrichment.
(f) PROTECTION OF QUALIFYING LOW-POWER STA-
TIONS.—Prior to making any allocation or assignment
under this section the Commission shall assure that each
qualifying low-power television station is assigned a fre-
quency below 746 megahertz to permit the continued oper-
ation of such station.
(g) DEFINITIONS.—For purposes of this section:
(1) COMMISSION.—The term ‘‘Commission’’
means the Federal Communications Commission.
(2) DIGITAL TELEVISION SERVICE.—The term
‘‘digital television service’’ means television service
provided using digital technology to enhance audio
quality and video resolution, as further defined in
the Memorandum Opinion, Report, and Order of the
Commission entitled ‘Advanced Television Systems
and Their Impact Upon the Existing Television
Service’, MM Docket No. 87–268 and any subse-
quent Commission proceedings dealing with digital
television.
(3) ANALOG TELEVISION SERVICE.—The term
‘‘analog television service’’ means services provided
pursuant to the transmission standards prescribed
by the Commission in section 73.682(a) of its regu-
lation (47 CFR 73.682(a)).
(4) PUBLIC
SAFETY
SERVICES.—The term
‘‘public safety services’’ means services—
(A) the sole or principal purpose of which
is to protect the safety of life, health, or prop-
erty;
(B) that are provided—
(i) by State or local government enti-
ties; or
(ii) by nongovernmental, private orga-
nizations that are authorized by a govern-
mental entity whose primary mission is the
provision of such services; and
(C) that are not made commercially avail-
able to the public by the provider.
(5) SERVICE AREA.—The term ‘‘service area’’
means the geographic area over which a licensee
may provide service and is protected from inter-
ference.
(6) SPECTRUM BLOCK.—The term ‘‘spectrum
block’’ means the range of frequencies over which
the apparatus licensed by the Commission is author-
ized to transmit signals.
(7) QUALIFYING LOW-POWER TELEVISION STA-
TIONS.—A station is a qualifying low-power tele-
vision station if—
(A) during the 90 days preceding the date
of enactment of this Act—
(i) such station broadcast a minimum
of 18 hours per day;
(ii) such station broadcast an average
of at least 3 hours per week of program-
ming that was produced within the com-
munity of license of such station; and
(iii) such station was in compliance
with the requirements applicable to low-
power television stations; or
(B) the Commission determines that the
public interest, convenience, and necessity
would be served by treating the station as a
qualifying low-power television station for pur-
poses of this section.
SEC. 3304. INQUIRY REQUIRED.
The Federal Communications Commission shall, not
later than July 1, 1997, initiate the inquiry required by
section 309(j)(12) of the Communications Act of 1934 (47
U.S.C. 309(j)(12)) for the purposes of collecting the infor-
mation required for its report under each of subpara-
graphs (A) through (E) of such section, and shall keep
the Congress fully and currently informed with respect to
the progress of such inquiry.
Subtitle E—Medicaid
SEC. 3400. TABLE OF CONTENTS OF SUBTITLE; REF-
ERENCES.
(a) TABLE OF CONTENTS OF SUBTITLE.—The table
of contents of this subtitle is as follows:
Sec. 3400. Table of contents of subtitle; references.
CHAPTER 1—STATE FLEXIBILITY
SUBCHAPTER A—USE OF MANAGED CARE
Sec. 3401. State options to provide benefits through managed care entities.
Sec. 3402. Elimination of 75:25 restriction on risk contracts.
Sec. 3403. Primary care case management services as State option without
need for waiver.
Sec. 3404. Change in threshold amount for contracts requiring Secretary’s
prior approval.
Sec. 3405. Determination of hospital stay.
SUBCHAPTER B—PAYMENT METHODOLOGY
Sec. 3411. Flexibility in payment methods for hospital, nursing facility, and
ICF/MR services; flexibility for home health.
Sec. 3412. Payment for Federally qualified health center services.
Sec. 3413. Treatment of State taxes imposed on certain hospitals that provide
free care.
SUBCHAPTER C—ELIGIBILITY
Sec. 3421. State option of continuous eligibility for 12 months; clarification of
State option to cover children.
Sec. 3422. Payment of home-health-related medicare part B premium amount
for certain low-income individuals.
Sec. 3423. Penalty for fraudulent eligibility.
Sec. 3424. Treatment of certain settlement payments.
SUBCHAPTER D—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
Sec. 3431. Establishment of PACE program as medicaid State option.
Sec. 3432. Coverage of PACE under the medicare program.
Sec. 3433. Effective date; transition.
Sec. 3434. Study and reports.
SUBCHAPTER E—BENEFITS
Sec. 3441. Elimination of requirement to pay for private insurance.
Sec. 3442. Permitting same copayments in health maintenance organizations as
in fee-for-service.
Sec. 3443. Physician qualification requirements.
Sec. 3444. Elimination of requirement of prior institutionalization with respect
to habilitation services furnished under a waiver for home or
community-based services.
Sec. 3445. Benefits for services of physician assistants.
Sec. 3446. Study and report on actuarial value of EPSDT benefit.
SUBCHAPTER F—ADMINISTRATION
Sec. 3451. Elimination of duplicative inspection of care requirements for ICFS/
MR and mental hospitals.
Sec. 3452. Alternative sanctions for noncompliant ICFS/MR.
Sec. 3453. Modification of MMIS requirements.
Sec. 3454. Facilitating imposition of State alternative remedies on noncompli-
ant nursing facilities.
Sec. 3455. Medically accepted indication.
Sec. 3456. Continuation of State-wide section 1115 medicaid waivers.
Sec. 3457. Authorizing administrative streamlining and privatizing modifica-
tions under the medicaid program.
Sec. 3458. Extension of moratorium.
CHAPTER 2—QUALITY ASSURANCE
Sec. 3461. Requirements to ensure quality of and access to care under man-
aged care plans.
Sec. 3462. Solvency standards for certain health maintenance organizations.
Sec. 3463. Application of prudent layperson standard for emergency medical
condition and prohibition of gag rule restrictions.
Sec. 3464. Additional fraud and abuse protections in managed care.
Sec. 3465. Grievances under managed care plans.
Sec. 3466. Standards relating to access to obstetrical and gynecological services
under managed care plans.
CHAPTER 3—FEDERAL PAYMENTS
Sec. 3471. Reforming disproportionate share payments under State medicaid
programs.
Sec. 3472. Additional funding for State emergency health services furnished to
undocumented aliens.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
subtitle an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence is considered to be made to that section or other
provision of the Social Security Act.
CHAPTER 1—STATE FLEXIBILITY
Subchapter A—Use of Managed Care
SEC. 
3401. 
STATE 
OPTIONS 
TO 
PROVIDE 
BENEFITS
THROUGH MANAGED CARE ENTITIES.
(a) IN
GENERAL.—Section 1915(a) (42 U.S.C.
1396n(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(1),
(2) by striking the period at the end of para-
graph (2) and inserting ‘‘; or’’, and
(3) by adding at the end the following new
paragraph:
‘‘(3) requires individuals, other than special
needs children (as defined in subsection (i)), eligible
for medical assistance for items or services under
the State plan to enroll with an entity that provides
or arranges for services for enrollees under a con-
tract pursuant to section 1903(m), or with a pri-
mary care case manager (as defined in section
1905(t)(2)) (or restricts the number of provider
agreements with those entities under the State plan,
consistent with quality of care), if—
‘‘(A) the State permits an individual to
choose the manager or managed care entity
from among the managed care organizations
and primary care case providers who meet the
requirements of this title;
‘‘(B)(i) individuals are permitted to choose
between at least 2 of those entities, or 2 of the
managers, or an entity and a manager, each of
which has sufficient capacity to provide services
to enrollees; or
‘‘(ii) with respect to a rural area—
‘‘(I) individuals who are required to
enroll with a single entity are afforded the
option to obtain covered services by an al-
ternative provider; and
‘‘(II) an individual who is offered no
alternative to a single entity or manager is
given a choice between at least two provid-
ers within the entity or through the man-
ager;
‘‘(C) no individual who is an Indian (as de-
fined in section 4 of the Indian Health Care
Improvement Act of 1976) is required to enroll
in any entity that is not one of the following
(and only if such entity is participating under
the plan): the Indian Health Service, an Indian
health program operated by an Indian tribe or
tribal organization pursuant to a contract,
grant, cooperative agreement, or compact with
the Indian Health Service pursuant to the In-
dian Self-Determination Act (25 U.S.C. 450 et
seq.), or an urban Indian health program oper-
ated by an urban Indian organization pursuant
to a grant or contract with the Indian Health
Service pursuant to title V of the Indian Health
Care Improvement Act (25 U.S.C. 1601 et
seq.);
‘‘(D) the State restricts those individuals
from changing their enrollment without cause
for periods no longer than six months (and per-
mits enrollees to change enrollment for cause at
any time);
‘‘(E) the restrictions do not apply to pro-
viders of family planning services (as defined in
section 1905(a)(4)(C)) and are not conditions
for payment of medicare cost sharing pursuant
to section 1905(p)(3); and
‘‘(F) prior to establishing an enrollment
requirement under this paragraph, the State
agency provides for public notice and comment
pursuant to requirements established by the
Secretary.’’.
(b) SPECIAL NEEDS CHILDREN DEFINED.—Section
1915 (42 U.S.C. 1396n) is amended by adding at the end
the following:
‘‘(i) For purposes of subsection (a)(3), the term ‘spe-
cial needs child’ means an individual under 19 years of
age who—
‘‘(1) is eligible for supplemental security income
under title XVI,
‘‘(2) is described in section 501(a)(1)(D),
‘‘(3) is described in section 1902(e)(3), or
‘‘(4) is in foster care or otherwise in an out-of-
home placement.’’.
(c) CONFORMING AMENDMENT TO RISK-BASED AR-
RANGEMENTS.—Section 
1903(m)(2) 
(42 
U.S.C.
1396b(m)(2)) is amended—
(1) in paragraph (A)(vi)—
(A) by striking ‘‘(I) except as provided
under subparagraph (F),’’; and
(B) by striking all that follows ‘‘to termi-
nate such enrollment’’ and inserting ‘‘in accord-
ance with the provisions of subparagraph (F);’’;
and
(2) in subparagraph (F)—
(A) by striking ‘‘In the case of—’’ and all
that follows through ‘‘a State plan’’ and insert-
ing ‘‘A State plan’’, and
(B) by striking ‘‘(A)(vi)(I)’’ and inserting
‘‘(A)(vi)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section take effect on the date of the enactment of
this Act.
SEC. 3402. ELIMINATION OF 75:25 RESTRICTION ON RISK
CONTRACTS.
(a) 75 PERCENT LIMIT ON MEDICARE AND MEDIC-
AID ENROLLMENT.—
(1) IN GENERAL.—Section 1903(m)(2)(A) (42
U.S.C. 1396b(m)(2)(A)) is amended by striking
clause (ii).
(2) 
CONFORMING
AMENDMENTS.—Section
1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended—
(A) by striking subparagraphs (C), (D),
and (E); and
(B) in subparagraph (G), by striking
‘‘clauses (i) and (ii)’’ and inserting ‘‘clause (i)’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) take effect on the date of the enactment
of this Act.
SEC. 3403. PRIMARY CARE CASE MANAGEMENT SERVICES
AS STATE OPTION WITHOUT NEED FOR WAIV-
ER.
(a) OPTIONAL COVERAGE AS PART OF MEDICAL AS-
SISTANCE.—Section 1905(a) (42 U.S.C. 1396d(a)) is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(24);
(2) by redesignating paragraph (25) as para-
graph (26) and by striking the period at the end of
such paragraph and inserting a comma; and
(3) by inserting after paragraph (24) the fol-
lowing new paragraph:
‘‘(25) primary care case management services
(as defined in subsection (t)); and’’.
(b) PRIMARY CARE CASE MANAGEMENT SERVICES
DEFINED.—Section 1905 (42 U.S.C. 1396d) is amended
by adding at the end the following new subsection:
‘‘(t)(1) The term ‘primary care case management
services’ means case-management related services (includ-
ing coordination and monitoring of health care services)
provided by a primary care case manager under a primary
care case management contract.
‘‘(2)(A) The term ‘primary care case manager’
means, with respect to a primary care case management
contract, a provider described in subparagraph (B).
‘‘(B) A provider described in this subparagraph is a
provider that provides primary care case management
services under contract and is—
‘‘(i) a physician, a physician group practice, or
an entity employing or having other arrangements
with physicians; or
‘‘(ii) at State option—
‘‘(I) a nurse practitioner (as described in
section 1905(a)(21));
‘‘(II) a certified nurse-midwife (as defined
in section 1861(gg)); or
‘‘(III) a physician assistant (as defined in
section 1861(aa)(5)).
‘‘(3) The term ‘primary care case management con-
tract’ means a contract with a State agency under which
a primary care case manager undertakes to locate, coordi-
nate and monitor covered primary care (and such other
covered services as may be specified under the contract)
to all individuals enrolled with the primary care case man-
ager, and which provides for—
‘‘(A) reasonable and adequate hours of oper-
ation, including 24-hour availability of information,
referral, and treatment with respect to medical
emergencies;
‘‘(B) restriction of enrollment to individuals re-
siding sufficiently near a service delivery site of the
entity to be able to reach that site within a reason-
able time using available and affordable modes of
transportation;
‘‘(C) employment of, or contracts or other ar-
rangements with, sufficient numbers of physicians
and other appropriate health care professionals to
ensure that services under the contract can be fur-
nished to enrollees promptly and without com-
promise to quality of care;
‘‘(D) a prohibition on discrimination on the
basis of health status or requirements for health
services in enrollment, disenrollment, or reenrollment
of individuals eligible for medical assistance under
this title; and
‘‘(E) a right for an enrollee to terminate enroll-
ment without cause during the first month of each
enrollment period, which period shall not exceed six
months in duration, and to terminate enrollment at
any time for cause.
‘‘(4) For purposes of this subsection, the term ‘pri-
mary care’ includes all health care services customarily
provided in accordance with State licensure and certifi-
cation laws and regulations, and all laboratory services
customarily provided by or through, a general practitioner,
family medicine physician, internal medicine physician, ob-
stetrician/gynecologist, or pediatrician.’’.
(c) CONFORMING AMENDMENTS.—Section 1902 (42
U.S.C. 1396a) is amended—
(1) in subsection (a)(10)(C)(iv), by striking
‘‘(24)’’ and inserting ‘‘(25)’’, and
(2) in subsection (j), by striking ‘‘(25)’’ and in-
serting ‘‘(26)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section apply to primary care case management serv-
ices furnished on or after October 1, 1997.
SEC. 3404. CHANGE IN THRESHOLD AMOUNT FOR CON-
TRACTS REQUIRING SECRETARY’S PRIOR AP-
PROVAL.
(a) IN GENERAL.—Section 1903(m)(2)(A)(iii) (42
U.S.C. 1396b(m)(2)(A)(iii)) is amended by striking
‘‘$100,000’’ and inserting ‘‘$1,000,000 for 1998 and, for
a subsequent year, the amount established under this
clause for the previous year increased by the percentage
increase in the consumer price index for all urban consum-
ers over the previous year’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to contracts entered into or re-
newed on or after the date of the enactment of this Act.
SEC. 3405. DETERMINATION OF HOSPITAL STAY.
(a) IN GENERAL.—Title XIX, as amended by section
3431(a), is amended—
(1) by redesignating section 1933 as section
1934, and
(2) by inserting after section 1932 the following
new section:
‘‘DETERMINATION OF HOSPITAL STAY
‘‘SEC. 1933. (a) IN GENERAL.—A Medicaid health
plan shall cover the length of an inpatient hospital stay
under this title as determined by the attending physician
(or other attending health care provider to the extent per-
mitted under State law) in consultation with the patient
to be medically appropriate.
‘‘(b) CONSTRUCTION.—Nothing in this title shall be
construed—
‘‘(1) as requiring the provision of inpatient cov-
erage if the attending physician (or other attending
health care provider to the extent permitted under
State law) and patient determine that a shorter pe-
riod of hospital stay is medically appropriate, or
‘‘(2) as affecting the application of deductibles
and coinsurance.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to discharges occurring on or
after 6 months after the date of the enactment of this
Act.
Subchapter B—Payment Methodology
SEC. 3411. FLEXIBILITY IN PAYMENT METHODS FOR HOS-
PITAL, NURSING FACILITY, AND ICF/MR SERV-
ICES; FLEXIBILITY FOR HOME HEALTH.
(a) REPEAL
OF BOREN REQUIREMENTS.—Section
1902(a)(13) (42 U.S.C. 1396a(a)) is amended—
(1) by amending subparagraphs (A) and (B) to
read as follows:
‘‘(A) for a public process for determination
of rates of payment under the plan for hospital
services, nursing facility services, and services
of intermediate care facilities for the mentally
retarded under which—
‘‘(i) proposed rates are published, and
providers, beneficiaries and their represent-
atives, and other concerned State residents
are given a reasonable opportunity for re-
view and comment on the proposed rates;
‘‘(ii) final rates are published, to-
gether with justifications, and
‘‘(iii) in the case of hospitals, take
into account (in a manner consistent with
section 1923) the situation of hospitals
which serve a disproportionate number of
low income patients with special needs;
‘‘(B) that the State shall provide assur-
ances satisfactory to the Secretary that the av-
erage level of payments under the plan for
nursing facility services (as determined on an
aggregate per resident-day basis) and the level
of payments under the plan for inpatient hos-
pital services (as determined on an aggregate
hospital payment basis) furnished during the
18-month period beginning October 1, 1997, is
not less than the average level of payments that
would be made under the plan during such 18-
month period for such respective services (de-
termined on such basis) based on rates or pay-
ment basis in effect as of May 1, 1997;’’; and
(2) by striking subparagraph (C).
(b) REPEAL OF REQUIREMENTS RELATING TO HOME
HEALTH SERVICES.—Such section is further amended—
(1) by adding ‘‘and’’ at the end of subpara-
graph (D),
(2) by striking ‘‘and’’ at the end of subpara-
graph (E), and
(3) by striking subparagraph (F).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payment for items and services
furnished on or after the date of the enactment of this
Act.
SEC. 3412. PAYMENT FOR CENTER AND CLINIC SERVICES.
(a) PHASE-OUT OF PAYMENT BASED ON REASON-
ABLE
COSTS.—Section 
1902(a)(13)(E) 
(42 
U.S.C.
1396a(a)(13)(E)) is amended by inserting ‘‘(or 95 percent
for services furnished during fiscal year 2000, 90 percent
for service furnished during fiscal year 2001, and 85 per-
cent for services furnished during fiscal year 2002)’’ after
‘‘100 percent’’.
(b) TRANSITIONAL SUPPLEMENTAL PAYMENT FOR
SERVICES FURNISHED UNDER CERTAIN MANAGED CARE
CONTRACTS.—
(1) IN
GENERAL.—Section 1902(a)(13)(E) is
further amended—
(A) by inserting ‘‘(i)’’ after ‘‘(E)’’, and
(B) by inserting before the semicolon at
the end the following: ‘‘and (ii) in carrying out
clause (i) in the case of services furnished by a
federally qualified health center or a rural
health clinic pursuant to a contract between the
center and a health maintenance organization
under section 1903(m), for payment by the
State of a supplemental payment equal to the
amount (if any) by which the amount deter-
mined under clause (i) exceeds the amount of
the payments provided under such contract’’.
(2) CONFORMING
AMENDMENT
TO
MANAGED
CARE CONTRACT REQUIREMENT.—Clause (ix) of sec-
tion 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is
amended to read as follows:
‘‘(ix) such contract provides, in the case of an
entity that has entered into a contract for the provi-
sion of services with a federally qualified health cen-
ter or a rural health clinic, that the entity shall pro-
vide payment that is not less than the level and
amount of payment which the entity would make for
the services if the services were furnished by a pro-
vider which is not a federally qualified health center
or a rural health clinic;’’.
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to services furnished on
or after October 1, 1997.
(c) END OF TRANSITIONAL PAYMENT RULES.—Ef-
fective for services furnished on or after October 1,
2002—
(1) subparagraph (E) of section 1902(a)(13)
(42 U.S.C. 1396a(a)(13)) is repealed, and
(2) clause (ix) of section 1903(m)(2)(A) (42
U.S.C. 1396b(m)(2)(A)) is repealed.
(d) FLEXIBILITY
IN
COVERAGE
OF
NON-FREE-
STANDING LOOK-ALIKES.—
(1) IN
GENERAL.—Section 1905(l)(2)(B)(iii)
(42 U.S.C. 1396d(l)(2)(B)(iii)) is amended by in-
serting ‘‘and is not other than an entity that is
owned, controlled, or operated by another provider’’
after ‘‘such a grant’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to service furnished on
and after the date of the enactment of this Act.
(e) GAO REPORT.—By not later than February 1,
2001, the Comptroller General shall submit to Congress
a report on the impact of the amendments made by this
section on access to health care for medicaid beneficiaries
and the uninsured served at health centers and rural
health clinics and the ability of health centers and rural
health clinics to become integrated in a managed care sys-
tem.
SEC. 3413. 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:
‘‘(F) In no case shall a tax not qualify as a broad-
based health care related tax under this paragraph be-
cause it does not apply to a hospital that is exempt from
taxation under section 501(c)(3) of the Internal Revenue
Code of 1986 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 sec-
tion 1902(w)(3)(A)) that are imposed on a hospital de-
scribed in subsection (w)(3)(F) in that quarter.’’.
(c) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to taxes imposed before, on, or
after the date of the enactment of this Act and the amend-
ment made by subsection (b) shall apply to taxes imposed
on or after such date.
Subchapter C—Eligibility
SEC. 3421. STATE OPTION OF CONTINUOUS ELIGIBILITY
FOR 12 MONTHS; CLARIFICATION OF STATE
OPTION TO COVER CHILDREN.
(a) CONTINUOUS
ELIGIBILITY
OPTION.—Section
1902(e) (42 U.S.C. 1396a(e)) is amended by adding at
the end the following new paragraph:
‘‘(12) At the option of the State, the plan may pro-
vide that an individual who is under an age specified by
the State (not to exceed 19 years of age) and who is deter-
mined to be eligible for benefits under a State plan ap-
proved under this title under subsection (a)(10)(A) shall
remain eligible for those benefits until the earlier of—
‘‘(A) the end of a period (not to exceed 12
months) following the determination; or
‘‘(B) the time that the individual exceeds that
age.’’.
(b) CLARIFICATION OF STATE OPTION TO COVER
ALL CHILDREN UNDER 19 YEARS
OF AGE.—Section
1902(l)(1)(D) (42 U.S.C. 1396a(l)(1)(D)) is amended by
inserting ‘‘(or, at the option of a State, after any earlier
date)’’ after ‘‘children born after September 30, 1983’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to medical assistance for items and
services furnished on or after October 1, 1997.
SEC. 3422. PAYMENT OF HOME-HEALTH-RELATED MEDI-
CARE PART B PREMIUM AMOUNT FOR CER-
TAIN LOW-INCOME INDIVIDUALS.
(a) 
ELIGIBILITY.—Section 
1902(a)(10)(E) 
(42
U.S.C. 1396a(a)(10)(E)) is amended—
(1) by striking ‘‘and’’ at the end of clause (ii),
and
(2) by inserting after clause (iii) the following:
‘‘(iv) subject to section 1905(p)(4), for
making medical assistance available for the por-
tion of medicare cost sharing described in sec-
tion 1905(p)(3)(A)(ii), that is attributable to
the application under section 1839(a)(5) of sec-
tion 1833(d)(2) for individuals who would be
described in clause (iii) but for the fact that
their income exceeds 120 percent, but is less
than 175 percent, of the official poverty line
(referred to in section 1905(p)(2)) for a family
of the size involved;’’.
(b) 100 PERCENT FEDERAL PAYMENT.—The third
sentence of section 1905(b) (42 U.S.C. 1396d(b)) is
amended by inserting ‘‘and with respect to amounts ex-
pended for medical assistance described in section
1902(a)(10)(E)(iv) for individuals described in such sec-
tion’’ before the period at the end..
SEC. 3423. PENALTY FOR FRAUDULENT ELIGIBILITY.
Section 1128B(a) (42 U.S.C. 1320a–7b(a)), as
amended by section 217 of the Health Insurance Port-
ability 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 (includ-
ing by any transfer in trust) in order for the individ-
ual to become eligible for medical assistance under
a State plan under title XIX, if disposing of the as-
sets results in the imposition of a period of ineligibil-
ity 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. 3424. TREATMENT OF CERTAIN SETTLEMENT PAY-
MENTS.
Notwithstanding any other provision of law, the pay-
ments made from any fund established pursuant to the
settlement in the case of In re Factor VIII or IX Con-
centrate Blood Products Litigation, MDL–986, no. 93–
C7452 (N.D. Ill.) shall not be considered income or re-
sources in determining eligibility for, or the amount of
benefits under, a State plan of medical assistance ap-
proved under title XIX of the Social Security Act.
Subchapter D—Programs of All-inclusive
Care for the Elderly (PACE)
SEC. 3431. ESTABLISHMENT OF PACE PROGRAM AS MEDIC-
AID STATE OPTION.
(a) IN GENERAL.—Title XIX is amended—
(1) in section 1905(a) (42 U.S.C. 1396d(a)), as
amended by section 3403(a)—
(A) by striking ‘‘and’’ at the end of para-
graph (25);
(B) by redesignating paragraph (26) as
paragraph (27); and
(C) by inserting after paragraph (25) the
following new paragraph:
‘‘(26) services furnished under a PACE pro-
gram under section 1932 to PACE program eligible
individuals enrolled under the program under such
section; and’’;
(2) by redesignating section 1932 as section
1933; and
(3) by inserting after section 1931 the following
new section:
‘‘PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
‘‘SEC. 1932. (a) OPTION.—
‘‘(1) IN GENERAL.—A State may elect to pro-
vide medical assistance under this section with re-
spect to PACE program services to PACE program
eligible individuals who are eligible for medical as-
sistance under the State plan and who are enrolled
in a PACE program under a PACE program agree-
ment. Such individuals need not be eligible for bene-
fits under part A, or enrolled under part B, of title
XVIII to be eligible to enroll under this section. In
the case of an individual enrolled with a PACE pro-
gram pursuant to such an election—
‘‘(A) the individual shall receive benefits
under the plan solely through such program,
and
‘‘(B) the PACE provider shall receive pay-
ment in accordance with the PACE program
agreement for provision of such benefits.
A State may limit through its PACE program agree-
ment the number of individuals who may be enrolled
in a PACE program under the State plan.
‘‘(2) PACE PROGRAM DEFINED.—For purposes
of this section and section 1894, the term ‘PACE
program’ means a program of all-inclusive care for
the elderly that meets the following requirements:
‘‘(A) OPERATION.—The entity operating
the program is a PACE provider (as defined in
paragraph (3)).
‘‘(B) COMPREHENSIVE
BENEFITS.—The
program provides comprehensive health care
services to PACE program eligible individuals
in accordance with the PACE program agree-
ment and regulations under this section.
‘‘(C) TRANSITION.—In the case of an indi-
vidual who is enrolled under the program under
this section and whose enrollment ceases for
any reason (including the individual no longer
qualifies as a PACE program eligible individual,
the termination of a PACE program agreement,
or otherwise), the program provides assistance
to the individual in obtaining necessary transi-
tional care through appropriate referrals and
making the individual’s medical records avail-
able to new providers.
‘‘(3) PACE PROVIDER DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘PACE provider’ means an en-
tity that—
‘‘(i) subject to subparagraph (B), is
(or is a distinct part of) a public entity or
a private, nonprofit entity organized for
charitable 
purposes 
under 
section
501(c)(3) of the Internal Revenue Code of
1986, and
‘‘(ii) has entered into a PACE pro-
gram agreement with respect to its oper-
ation of a PACE program.
‘‘(B) TREATMENT OF PRIVATE, FOR-PROF-
IT PROVIDERS.—Clause (i) of subparagraph (A)
shall not apply—
‘‘(i) to entities subject to a dem-
onstration project waiver under subsection
(h); and
‘‘(ii) after the date the report under
section 4014(b) of the Balanced Budget
Act of 1997 is submitted, unless the Sec-
retary determines that any of the findings
described in subparagraph (A), (B), (C) or
(D) of paragraph (2) of such section are
true.
‘‘(4) PACE PROGRAM AGREEMENT DEFINED.—
For purposes of this section, the term ‘PACE pro-
gram agreement’ means, with respect to a PACE
provider, an agreement, consistent with this section,
section 1894 (if applicable), and regulations promul-
gated to carry out such sections, between the PACE
provider, the Secretary, and a State administering
agency for the operation of a PACE program by the
provider under such sections.
‘‘(5) PACE PROGRAM
ELIGIBLE
INDIVIDUAL
DEFINED.—For purposes of this section, the term
‘PACE program eligible individual’ means, with re-
spect to a PACE program, an individual who—
‘‘(A) is 55 years of age or older;
‘‘(B) subject to subsection (c)(4), is deter-
mined under subsection (c) to require the level
of care required under the State medicaid plan
for coverage of nursing facility services;
‘‘(C) resides in the service area of the
PACE program; and
‘‘(D) meets such other eligibility conditions
as may be imposed under the PACE program
agreement for the program under subsection
(e)(2)(A)(ii).
‘‘(6) PACE PROTOCOL.—For purposes of this
section, the term ‘PACE protocol’ means the Proto-
col for the Program of All-inclusive Care for the El-
derly (PACE), as published by On Lok, Inc., as of
April 14, 1995.
‘‘(7) PACE DEMONSTRATION WAIVER PROGRAM
DEFINED.—For purposes of this section, the term
‘PACE demonstration waiver program’ means a
demonstration program under either of the following
sections (as in effect before the date of their repeal):
‘‘(A) Section 603(c) of the Social Security
Amendments of 1983 (Public Law 98–21), as
extended by section 9220 of the Consolidated
Omnibus Budget Reconciliation Act of 1985
(Public Law 99–272).
‘‘(B) Section 9412(b) of the Omnibus
Budget Reconciliation Act of 1986 (Public Law
99–509).
‘‘(8) STATE
ADMINISTERING
AGENCY
DE-
FINED.—For purposes of this section, the term
‘State administering agency’ means, with respect to
the operation of a PACE program in a State, the
agency of that State (which may be the single agen-
cy responsible for administration of the State plan
under this title in the State) responsible for admin-
istering PACE program agreements under this sec-
tion and section 1894 in the State.
‘‘(9) TRIAL PERIOD DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘trial period’ means, with re-
spect to a PACE program operated by a PACE
provider under a PACE program agreement,
the first 3 contract years under such agreement
with respect to such program.
‘‘(B) TREATMENT
OF
ENTITIES
PRE-
VIOUSLY
OPERATING
PACE
DEMONSTRATION
WAIVER
PROGRAMS.—Each contract year (in-
cluding a year occurring before the effective
date of this section) during which an entity has
operated a PACE demonstration waiver pro-
gram shall be counted under subparagraph (A)
as a contract year during which the entity oper-
ated a PACE program as a PACE provider
under a PACE program agreement.
‘‘(10) REGULATIONS.—For purposes of this
section, the term ‘regulations’ refers to interim final
or final regulations promulgated under subsection (f)
to carry out this section and section 1894.
‘‘(b) SCOPE
OF BENEFITS; BENEFICIARY SAFE-
GUARDS.—
‘‘(1) IN GENERAL.—Under a PACE program
agreement, a PACE provider shall—
‘‘(A) provide to PACE program eligible in-
dividuals, regardless of source of payment and
directly or under contracts with other entities,
at a minimum—
‘‘(i) all items and services covered
under title XVIII (for individuals enrolled
under section 1894) and all items and
services covered under this title, but with-
out any limitation or condition as to
amount, duration, or scope and without
application of deductibles, copayments, co-
insurance, or other cost-sharing that would
otherwise apply under such title or this
title, respectively; and
‘‘(ii) all additional items and services
specified in regulations, based upon those
required under the PACE protocol;
‘‘(B) provide such enrollees access to nec-
essary covered items and services 24 hours per
day, every day of the year;
‘‘(C) provide services to such enrollees
through 
a 
comprehensive, 
multidisciplinary
health and social services delivery system which
integrates acute and long-term care services
pursuant to regulations; and
‘‘(D) specify the covered items and services
that will not be provided directly by the entity,
and to arrange for delivery of those items and
services through contracts meeting the require-
ments of regulations.
‘‘(2) QUALITY
ASSURANCE; 
PATIENT
SAFE-
GUARDS.—The PACE program agreement shall re-
quire the PACE provider to have in effect at a mini-
mum—
‘‘(A) a written plan of quality assurance
and improvement, and procedures implementing
such plan, in accordance with regulations, and
‘‘(B) written safeguards of the rights of
enrolled participants (including a patient bill of
rights and procedures for grievances and ap-
peals) in accordance with regulations and with
other requirements of this title and Federal and
State law designed for the protection of pa-
tients.
‘‘(c) ELIGIBILITY DETERMINATIONS.—
‘‘(1) IN
GENERAL.—The determination of
whether an individual is a PACE program eligible
individual—
‘‘(A) shall be made under and in accord-
ance with the PACE program agreement, and
‘‘(B) who is entitled to medical assistance
under this title, shall be made (or who is not
so entitled, may be made) by the State admin-
istering agency.
‘‘(2) CONDITION.—An individual is not a PACE
program eligible individual (with respect to payment
under this section) unless the individual’s health sta-
tus has been determined, in accordance with regula-
tions, to be comparable to the health status of indi-
viduals who have participated in the PACE dem-
onstration waiver programs. Such determination
shall be based upon information on health status
and related indicators (such as medical diagnoses
and measures of activities of daily living, instrumen-
tal activities of daily living, and cognitive impair-
ment) that are part of a uniform minimum data set
collected by PACE providers on potential eligible in-
dividuals.
‘‘(3) 
ANNUAL
ELIGIBILITY
RECERTIFI-
CATIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the determination described in sub-
section (a)(5)(B) for an individual shall be re-
evaluated at least once a year.
‘‘(B) EXCEPTION.—The requirement of
annual reevaluation under subparagraph (A)
may be waived during a period in accordance
with regulations in those cases where the State
administering agency determines that there is
no reasonable expectation of improvement or
significant change in an individual’s condition
during the period because of the advanced age,
severity of the advanced age, severity of chronic
condition, or degree of impairment of functional
capacity of the individual involved.
‘‘(4) CONTINUATION OF ELIGIBILITY.—An indi-
vidual who is a PACE program eligible individual
may be deemed to continue to be such an individual
notwithstanding a determination that the individual
no longer meets the requirement of subsection
(a)(5)(B) if, in accordance with regulations, in the
absence of continued coverage under a PACE pro-
gram the individual reasonably would be expected to
meet such requirement within the succeeding 6–
month period.
‘‘(5) ENROLLMENT; DISENROLLMENT.—The en-
rollment and disenrollment of PACE program eligi-
ble individuals in a PACE program shall be pursu-
ant to regulations and the PACE program agree-
ment and shall permit enrollees to voluntarily
disenroll without cause at any time.
‘‘(d) PAYMENTS
TO
PACE PROVIDERS
ON
A
CAPITATED BASIS.—
‘‘(1) IN GENERAL.—In the case of a PACE pro-
vider with a PACE program agreement under this
section, except as provided in this subsection or by
regulations, the State shall make prospective month-
ly payments of a capitation amount for each PACE
program eligible individual enrolled under the agree-
ment under this section.
‘‘(2) CAPITATION
AMOUNT.—The capitation
amount to be applied under this subsection for a
provider for a contract year shall be an amount
specified in the PACE program agreement for the
year. Such amount shall be an amount, specified
under the PACE agreement, which is less than the
amount that would otherwise have been made under
the State plan if the individuals were not so enrolled
and shall be adjusted to take into account the com-
parative frailty of PACE enrollees and such other
factors as the Secretary determines to be appro-
priate. The payment under this section shall be in
addition to any payment made under section 1894
for individuals who are enrolled in a PACE program
under such section.
‘‘(e) PACE PROGRAM AGREEMENT.—
‘‘(1) REQUIREMENT.—
‘‘(A) IN
GENERAL.—The Secretary, in
close cooperation with the State administering
agency, shall establish procedures for entering
into, extending, and terminating PACE pro-
gram agreements for the operation of PACE
programs by entities that meet the require-
ments for a PACE provider under this section,
section 1894, and regulations.
‘‘(B) NUMERICAL LIMITATION.—
‘‘(i) IN
GENERAL.—The Secretary
shall not permit the number of PACE pro-
viders with which agreements are in effect
under this section or under section 9412(b)
of the Omnibus Budget Reconciliation Act
of 1986 to exceed—
‘‘(I) 40 as of the date of the en-
actment of this section, or
‘‘(II) as of each succeeding anni-
versary of such date, the numerical
limitation under this subparagraph for
the preceding year plus 20.
Subclause (II) shall apply without regard
to the actual number of agreements in ef-
fect as of a previous anniversary date.
‘‘(ii) TREATMENT
OF
CERTAIN
PRI-
VATE, FOR-PROFIT PROVIDERS.—The nu-
merical limitation in clause (i) shall not
apply to a PACE provider that—
‘‘(I) is operating under a dem-
onstration project waiver under sub-
section (h), or
‘‘(II) was operating under such a
waiver and subsequently qualifies for
PACE provider status pursuant to
subsection (a)(3)(B)(ii).
‘‘(2) SERVICE AREA AND ELIGIBILITY.—
‘‘(A) IN
GENERAL.—A PACE program
agreement for a PACE program—
‘‘(i) shall designate the service area of
the program;
‘‘(ii) may provide additional require-
ments for individuals to qualify as PACE
program eligible individuals with respect to
the program;
‘‘(iii) shall be effective for a contract
year, but may be extended for additional
contract years in the absence of a notice by
a party to terminate and is subject to ter-
mination by the Secretary and the State
administering agency at any time for cause
(as provided under the agreement);
‘‘(iv) shall require a PACE provider to
meet all applicable State and local laws
and requirements; and
‘‘(v) shall have such additional terms
and conditions as the parties may agree to
consistent with this section and regula-
tions.
‘‘(B) SERVICE
AREA
OVERLAP.—In des-
ignating a service area under a PACE program
agreement under subparagraph (A)(i), the Sec-
retary (in consultation with the State admin-
istering agency) may exclude from designation
an area that is already covered under another
PACE program agreement, in order to avoid
unnecessary duplication of services and avoid
impairing the financial and service viability of
an existing program.
‘‘(3) DATA COLLECTION.—
‘‘(A) IN GENERAL.—Under a PACE pro-
gram agreement, the PACE provider shall—
‘‘(i) collect data,
‘‘(ii) maintain, and afford the Sec-
retary and the State administering agency
access to, the records relating to the pro-
gram, including pertinent financial, medi-
cal, and personnel records, and
‘‘(iii) make to the Secretary and the
State administering agency reports that
the Secretary finds (in consultation with
State administering agencies) necessary to
monitor the operation, cost, and effective-
ness of the PACE program under this title
and title XVIII.
‘‘(B) REQUIREMENTS DURING TRIAL PE-
RIOD.—During the first three years of oper-
ation of a PACE program (either under this
section or under a PACE demonstration waiver
program), the PACE provider shall provide
such additional data as the Secretary specifies
in regulations in order to perform the oversight
required under paragraph (4)(A).
‘‘(4) OVERSIGHT.—
‘‘(A) ANNUAL, CLOSE OVERSIGHT DURING
TRIAL PERIOD.—During the trial period (as de-
fined in subsection (a)(9)) with respect to a
PACE program operated by a PACE provider,
the Secretary (in cooperation with the State ad-
ministering agency) shall conduct a comprehen-
sive annual review of the operation of the
PACE program by the provider in order to as-
sure compliance with the requirements of this
section and regulations. Such a review shall in-
clude—
‘‘(i) an on-site visit to the program
site;
‘‘(ii) comprehensive assessment of a
provider’s fiscal soundness;
‘‘(iii) comprehensive assessment of the
provider’s capacity to provide all PACE
services to all enrolled participants;
‘‘(iv) detailed analysis of the entity’s
substantial compliance with all significant
requirements of this section and regula-
tions; and
‘‘(v) any other elements the Secretary
or State agency considers necessary or ap-
propriate.
‘‘(B) CONTINUING OVERSIGHT.—After the
trial period, the Secretary (in cooperation with
the State administering agency) shall continue
to conduct such review of the operation of
PACE providers and PACE programs as may
be appropriate, taking into account the per-
formance level of a provider and compliance of
a provider with all significant requirements of
this section and regulations.
‘‘(C) DISCLOSURE.—The results of reviews
under this paragraph shall be reported prompt-
ly to the PACE provider, along with any rec-
ommendations for changes to the provider’s
program, and shall be made available to the
public upon request.
‘‘(5) TERMINATION OF PACE PROVIDER AGREE-
MENTS.—
‘‘(A) IN GENERAL.—Under regulations—
‘‘(i) the Secretary or a State admin-
istering agency may terminate a PACE
program agreement for cause, and
‘‘(ii) a PACE provider may terminate
such an agreement after appropriate notice
to the Secretary, the State agency, and en-
rollees.
‘‘(B) CAUSES FOR TERMINATION.—In ac-
cordance with regulations establishing proce-
dures for termination of PACE program agree-
ments, the Secretary or a State administering
agency may terminate a PACE program agree-
ment with a PACE provider for, among other
reasons, the fact that—
‘‘(i) the Secretary or State admin-
istering agency determines that—
‘‘(I) there are significant defi-
ciencies in the quality of care provided
to enrolled participants; or
‘‘(II) the provider has failed to
comply substantially with conditions
for a program or provider under this
section or section 1894; and
‘‘(ii) the entity has failed to develop
and successfully initiate, within 30 days of
the date of the receipt of written notice of
such a determination, and continue imple-
mentation of a plan to correct the defi-
ciencies.
‘‘(C) TERMINATION AND TRANSITION PRO-
CEDURES.—An entity whose PACE provider
agreement is terminated under this paragraph
shall implement the transition procedures re-
quired under subsection (a)(2)(C).
‘‘(6) SECRETARY’S OVERSIGHT; ENFORCEMENT
AUTHORITY.—
‘‘(A) IN GENERAL.—Under regulations, if
the Secretary determines (after consultation
with the State administering agency) that a
PACE provider is failing substantially to com-
ply with the requirements of this section and
regulations, the Secretary (and the State ad-
ministering agency) may take any or all of the
following actions:
uary 1, 1999, section 1876(i)(9)) shall apply to ter-
mination and sanctions respecting a PACE program
agreement and PACE provider under this subsection
in the same manner as they apply to a termination
and sanctions with respect to a contract and a
MedicarePlus organization under part C (or for such
periods an eligible organization under section 1876).
‘‘(8) TIMELY CONSIDERATION OF APPLICATIONS
FOR PACE PROGRAM PROVIDER STATUS.—In consid-
ering an application for PACE provider program
status, the application shall be deemed approved un-
less the Secretary, within 90 days after the date of
the submission of the application to the Secretary,
either denies such request in writing or informs the
applicant in writing with respect to any additional
information that is needed in order to make a final
determination with respect to the application. After
the date the Secretary receives such additional infor-
mation, the application shall be deemed approved
unless the Secretary, within 90 days of such date,
denies such request.
‘‘(f) REGULATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall issue
interim final or final regulations to carry out this
section and section 1894.
‘‘(2) USE OF PACE PROTOCOL.—
‘‘(A) IN GENERAL.—In issuing such regu-
lations, the Secretary shall, to the extent con-
sistent with the provisions of this section, incor-
porate the requirements applied to PACE dem-
onstration waiver programs under the PACE
protocol.
‘‘(B) FLEXIBILITY.—The Secretary (in
close consultation with State administering
agencies) may modify or waive such provisions
of the PACE protocol in order to provide for
reasonable flexibility in adapting the PACE
service delivery model to the needs of particular
organizations (such as those in rural areas or
those that may determine it appropriate to use
non-staff physicians accordingly to State licens-
ing law requirements) under this section and
section 1932 where such flexibility is not incon-
sistent with and would not impair the essential
elements, objectives, and requirements of the
this section, including—
‘‘(i) the focus on frail elderly qualify-
ing individuals who require the level of
care provided in a nursing facility;
‘‘(ii) the delivery of comprehensive, in-
tegrated acute and long-term care services;
‘‘(iii) the interdisciplinary team ap-
proach to care management and service de-
livery;
‘‘(iv) capitated, integrated financing
that allows the provider to pool payments
received from public and private programs
and individuals; and
‘‘(v) the assumption by the provider
over time of full financial risk.
‘‘(3) APPLICATION
OF
CERTAIN
ADDITIONAL
BENEFICIARY AND PROGRAM PROTECTIONS.—
‘‘(A) IN GENERAL.—In issuing such regu-
lations and subject to subparagraph (B), the
Secretary may apply with respect to PACE pro-
grams, providers, and agreements such require-
ments of part C of title XVIII (or, for periods
before January 1, 1999, section 1876) and sec-
tion 1903(m) relating to protection of bene-
ficiaries and program integrity as would apply
to MedicarePlus organizations under such part
C (or for such periods eligible organizations
under risk-sharing contracts under section
1876) and to health maintenance organizations
under prepaid capitation agreements under sec-
tion 1903(m).
‘‘(B) CONSIDERATIONS.—In issuing such
regulations, the Secretary shall—
‘‘(i) take into account the differences
between populations served and benefits
provided under this section and under part
C of title XVIII (or, for periods before
January 1, 1999, section 1876) and sec-
tion 1903(m);
‘‘(ii) not include any requirement that
conflicts with carrying out PACE pro-
grams under this section; and
‘‘(iii) not include any requirement re-
stricting the proportion of enrollees who
are eligible for benefits under this title or
title XVIII.
‘‘(g) WAIVERS OF REQUIREMENTS.—With respect to
carrying out a PACE program under this section, the fol-
lowing requirements of this title (and regulations relating
to such requirements) shall not apply:
‘‘(1) Section 1902(a)(1), relating to any re-
quirement that PACE programs or PACE program
services be provided in all areas of a State.
‘‘(2) Section 1902(a)(10), insofar as such sec-
tion relates to comparability of services among dif-
ferent population groups.
‘‘(3) Sections 1902(a)(23) and 1915(b)(4), re-
lating to freedom of choice of providers under a
PACE program.
‘‘(4) Section 1903(m)(2)(A), insofar as it re-
stricts a PACE provider from receiving prepaid capi-
tation payments.
‘‘(h) DEMONSTRATION PROJECT FOR FOR-PROFIT
ENTITIES.—
‘‘(1) IN
GENERAL.—In order to demonstrate
the operation of a PACE program by a private, for-
profit entity, the Secretary (in close consultation
with State administering agencies) shall grant waiv-
ers from the requirement under subsection (a)(3)
that a PACE provider may not be a for-profit, pri-
vate entity.
‘‘(2) SIMILAR TERMS AND CONDITIONS.—
‘‘(A) IN
GENERAL.—Except as provided
under subparagraph (B), and paragraph (1),
the terms and conditions for operation of a
PACE program by a provider under this sub-
section shall be the same as those for PACE
providers that are nonprofit, private organiza-
tions.
‘‘(B) NUMERICAL LIMITATION.—The num-
ber of programs for which waivers are granted
under this subsection shall not exceed 10. Pro-
grams with waivers granted under this sub-
section shall not be counted against the numeri-
cal limitation specified in subsection (e)(1)(B).
‘‘(i) POST-ELIGIBILITY TREATMENT OF INCOME.—A
State may provide for post-eligibility treatment of income
for individuals enrolled in PACE programs under this sec-
tion in the same manner as a State treats post-eligibility
income for individuals receiving services under a waiver
under section 1915(c).
‘‘(j) MISCELLANEOUS PROVISIONS.—
‘‘(1) CONSTRUCTION.—Nothing in this section
or section 1894 shall be construed as preventing a
PACE provider from entering into contracts with
other governmental or nongovernmental payers for
the care of PACE program eligible individuals who
are not eligible for benefits under part A, or enrolled
under part B, of title XVIII or eligible for medical
assistance under this title.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1902 (42 U.S.C. 1396a), as amend-
ed by section 3403(c), is amended—
(A) in subsection (a)(10)(C)(iv), by strik-
ing ‘‘(25)’’ and inserting ‘‘(26)’’, and
(B) in subsection (j), by striking ‘‘(26)’’
and inserting ‘‘(27)’’.
(2) Section 1924(a)(5) (42 U.S.C. 1396r–
5(a)(5)) is amended—
(A) in the heading, by striking ‘‘FROM OR-
GANIZATIONS
RECEIVING
CERTAIN
WAIVERS’’
and inserting ‘‘UNDER PACE PROGRAMS’’, and
(B) by striking ‘‘from any organization’’
and all that follows and inserting ‘‘under a
PACE demonstration waiver program (as de-
fined in subsection (a)(7) of section 1932) or
under a PACE program under section 1894.’’.
(3) 
Section 
1903(f)(4)(C) 
(42 
U.S.C.
1396b(f)(4)(C)) is amended by inserting ‘‘or who is
a PACE program eligible individual enrolled in a
PACE program under section 1932,’’ after ‘‘section
1902(a)(10)(A),’’.
SEC. 3432. COVERAGE OF PACE UNDER THE MEDICARE
PROGRAM.
Title XVIII (42 U.S.C. 1395 et seq.) is amended by
inserting after section 1894 the following new section:
‘‘PAYMENTS TO, AND COVERAGE OF BENEFITS UNDER,
PROGRAMS OF ALL-INCLUSIVE CARE FOR THE EL-
DERLY (PACE)
‘‘SEC. 1894. (a) RECEIPT OF BENEFITS THROUGH
ENROLLMENT
IN PACE PROGRAM; DEFINITIONS
FOR
PACE PROGRAM RELATED TERMS.—
‘‘(1) BENEFITS THROUGH ENROLLMENT IN A
PACE PROGRAM.—In accordance with this section, in
the case of an individual who is entitled to benefits
under part A or enrolled under part B and who is
a PACE program eligible individual with respect to
a PACE program offered by a PACE provider under
a PACE program agreement—
‘‘(A) the individual may enroll in the pro-
gram under this section; and
‘‘(B) so long as the individual is so en-
rolled and in accordance with regulations—
‘‘(i) the individual shall receive bene-
fits under this title solely through such
program, and
‘‘(ii) the PACE provider is entitled to
payment under and in accordance with this
section and such agreement for provision
of such benefits.
‘‘(2) APPLICATION OF DEFINITIONS.—The defi-
nitions of terms under section 1932(a) shall apply
under this section in the same manner as they apply
under section 1932.
‘‘(b) APPLICATION OF MEDICAID TERMS AND CONDI-
TIONS.—Except as provided in this section, the terms and
conditions for the operation and participation of PACE
program eligible individuals in PACE programs offered by
PACE providers under PACE program agreements under
section 1932 shall apply for purposes of this section.
‘‘(c) PAYMENT.—
‘‘(1) ADJUSTMENT IN PAYMENT AMOUNTS.—In
the case of individuals enrolled in a PACE program
under this section, the amount of payment under
this section shall not be the amount calculated under
section 1932(d)(2), but shall be an amount, specified
under the PACE agreement, based upon payment
rates established for purposes of payment under sec-
tion 1854 (or, for periods before January 1, 1999,
for purposes of risk-sharing contracts under section
1876) and shall be adjusted to take into account the
comparative frailty of PACE enrollees and such
other factors as the Secretary determines to be ap-
propriate. Such amount under such an agreement
shall be computed in a manner so that the total pay-
ment level for all PACE program eligible individuals
enrolled under a program is less than the projected
payment under this title for a comparable population
not enrolled under a PACE program.
‘‘(2) FORM.—The Secretary shall make pro-
spective monthly payments of a capitation amount
for each PACE program eligible individual enrolled
under this section in the same manner and from the
same sources 
as 
payments 
are 
made 
to 
a
MedicarePlus organization under section 1854 (or,
for periods beginning before January 1, 1999, to an
eligible organization under a risk-sharing contract
under section 1876). Such payments shall be subject
to adjustment in the manner described in section
1854(a)(2) or section 1876(a)(1)(E), as the case
may be.
‘‘(d) WAIVERS OF REQUIREMENTS.—With respect to
carrying out a PACE program under this section, the fol-
lowing requirements of this title (and regulations relating
to such requirements) are waived and shall not apply:
‘‘(1) Section 1812, insofar as it limits coverage
of institutional services.
‘‘(2) Sections 1813, 1814, 1833, and 1886, in-
sofar as such sections relate to rules for payment for
benefits.
‘‘(3) Sections 1814(a)(2)(B), 1814(a)(2)(C),
and 1835(a)(2)(A), insofar as they limit coverage of
extended care services or home health services.
‘‘(4) Section 1861(i), insofar as it imposes a 3-
day prior hospitalization requirement for coverage of
extended care services.
‘‘(5) Sections 1862(a)(1) and 1862(a)(9), inso-
far as they may prevent payment for PACE program
services to individuals enrolled under PACE pro-
grams.’’.
SEC. 3433. EFFECTIVE DATE; TRANSITION.
(a) TIMELY ISSUANCE OF REGULATIONS; EFFECTIVE
DATE.—The Secretary of Health and Human Services
shall promulgate regulations to carry out this subchapter
in a timely manner. Such regulations shall be designed
so that entities may establish and operate PACE pro-
grams under sections 1894 and 1932 for periods begin-
ning not later than 1 year after the date of the enactment
of this Act.
(b) EXPANSION AND TRANSITION FOR PACE DEM-
ONSTRATION PROJECT WAIVERS.—
(1) EXPANSION IN CURRENT NUMBER AND EX-
TENSION
OF
DEMONSTRATION
PROJECTS.—Section
9412(b) of the Omnibus Budget Reconciliation Act
of 1986, as amended by section 4118(g) of the Om-
nibus Budget Reconciliation Act of 1987, is amend-
ed—
(A) in paragraph (1), by inserting before
the period at the end the following: ‘‘, except
that the Secretary shall grant waivers of such
requirements to up to the applicable numerical
limitation specified in section 1932(e)(1)(B) of
the Social Security Act’’; and
(B) in paragraph (2)—
(i) in subparagraph (A), by striking ‘‘,
including permitting the organization to
assume progressively (over the initial 3-
year period of the waiver) the full financial
risk’’; and
(ii) in subparagraph (C), by adding at
the end the following: ‘‘In granting further
extensions, an organization shall not be re-
quired to provide for reporting of informa-
tion which is only required because of the
demonstration nature of the project.’’.
(2) ELIMINATION
OF
REPLICATION
REQUIRE-
MENT.—Subparagraph (B) of paragraph (2) of such
section shall not apply to waivers granted under
such section after the date of the enactment of this
Act.
(3) TIMELY
CONSIDERATION
OF
APPLICA-
TIONS.—In considering an application for waivers
under such section before the effective date of re-
peals under subsection (c), subject to the numerical
limitation under the amendment made by paragraph
(1), the application shall be deemed approved unless
the Secretary of Health and Human Services, within
90 days after the date of its submission to the Sec-
retary, either denies such request in writing or in-
forms the applicant in writing with respect to any
additional information which is needed in order to
make a final determination with respect to the appli-
cation. After the date the Secretary receives such
additional information, the application shall be
deemed approved unless the Secretary, within 90
days of such date, denies such request.
(c) PRIORITY AND SPECIAL CONSIDERATION IN AP-
PLICATION.—During the 3-year period beginning on the
date of the enactment of this Act:
(1) PROVIDER
STATUS.—The Secretary of
Health and Human Services shall give priority, in
processing applications of entities to qualify as
PACE programs under section 1894 or 1932 of the
Social Security Act—
(A) first, to entities that are operating a
PACE demonstration waiver program (as de-
fined in section 1932(a)(7) of such Act), and
(B) then entities that have applied to oper-
ate such a program as of May 1, 1997.
(2) NEW WAIVERS.—The Secretary shall give
priority, in the awarding of additional waivers under
section 9412(b) of the Omnibus Budget Reconcili-
ation Act of 1986—
(A) to any entities that have applied for
such waivers under such section as of May 1,
1997; and
(B) to any entity that, as of May 1, 1997,
has formally contracted with a State to provide
services for which payment is made on a
capitated basis with an understanding that the
entity was seeking to become a PACE provider.
(3) SPECIAL CONSIDERATION.—The Secretary
shall give special consideration, in the processing of
applications described in paragraph (1) and the
awarding of waivers described in paragraph (2), to
an entity which as of May 1, 1997 through formal
activities (such as entering into contracts for fea-
sibility studies) has indicated a specific intent to be-
come a PACE provider.
(d) REPEAL OF CURRENT PACE DEMONSTRATION
PROJECT WAIVER AUTHORITY.—
(1) IN GENERAL.—Subject to paragraphs (2)
and (3), the following provisions of law are repealed:
(A) Section 603(c) of the Social Security
Amendments of 1983 (Public Law 98–21).
(B) Section 9220 of the Consolidated Om-
nibus Budget Reconciliation Act of 1985 (Pub-
lic Law 99–272).
(C) Section 9412(b) of the Omnibus Budg-
et Reconciliation Act of 1986 (Public Law 99–
509).
(2) DELAY IN APPLICATION.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the repeals made by paragraph (1)
shall not apply to waivers granted before the
initial effective date of regulations described in
subsection (a).
(B) APPLICATION
TO
APPROVED
WAIV-
ERS.—Such repeals shall apply to waivers
granted before such date only after allowing
such organizations a transition period (of up to
24 months) in order to permit sufficient time
for an orderly transition from demonstration
project authority to general authority provided
under the amendments made by this sub-
chapter.
(3) STATE
OPTION.—A State may elect to
maintain the PACE program which (as of the date
of the enactment of this Act) were operating under
the authority described in paragraph (1) without
electing to use the authority under section 1932 of
the Public Health Service Act.
SEC. 3434. STUDY AND REPORTS.
(a) STUDY.—
(1) IN GENERAL.—The Secretary of Health and
Human Services (in close consultation with State
administering agencies, as defined in section
1932(a)(8) of the Social Security Act) shall conduct
a study of the quality and cost of providing PACE
program services under the medicare and medicaid
programs under the amendments made by this sub-
chapter.
(2) STUDY OF PRIVATE, FOR-PROFIT PROVID-
ERS.—Such study shall specifically compare the
costs, quality, and access to services by entities that
are private, for-profit entities operating under dem-
onstration projects waivers granted under section
1932(h) of the Social Security Act with the costs,
quality, and access to services of other PACE pro-
viders.
(b) REPORT.—
(1) IN GENERAL.—Not later than 4 years after
the date of the enactment of this Act, the Secretary
shall provide for a report to Congress on the impact
of such amendments on quality and cost of services.
The Secretary shall include in such report such rec-
ommendations for changes in the operation of such
amendments as the Secretary deems appropriate.
(2) TREATMENT OF PRIVATE, FOR-PROFIT PRO-
VIDERS.—The report shall include specific findings
on whether any of the following findings is true:
(A) The number of covered lives enrolled
with entities operating under demonstration
project waivers under section 1932(h) of the
Social Security Act is fewer than 800 (or such
lesser number as the Secretary may find statis-
tically sufficient to make determinations re-
specting findings described in the succeeding
subparagraphs).
(B) The population enrolled with such en-
tities is less frail than the population enrolled
with other PACE providers.
(C) Access to or quality of care for individ-
uals enrolled with such entities is lower than
such access or quality for individuals enrolled
with other PACE providers.
(D) The application of such section has re-
sulted in an increase in expenditures under the
medicare or medicaid programs above the ex-
penditures that would have been made if such
section did not apply.
(c) INFORMATION
INCLUDED
IN
ANNUAL
REC-
OMMENDATIONS.—The Medicare Payment Advisory Com-
mission shall include in its annual report under section
1805(b)(1)(B) of the Social Security Act recommenda-
tions on the methodology and level of payments made to
PACE providers under section 1894(d) of such Act and
on the treatment of private, for-profit entities as PACE
providers.
Subchapter E—Benefits
SEC. 3441. ELIMINATION OF REQUIREMENT TO PAY FOR
PRIVATE INSURANCE.
(a) REPEAL OF STATE PLAN PROVISION.—Section
1902(a)(25) (42 U.S.C. 1396a(a)(25)) is amended—
(1) by striking subparagraph (G); and
(2) by redesignating subparagraphs (H) and (I)
as subparagraphs (G) and (H), respectively.
100
(b) MAKING PROVISION OPTIONAL.—Section 1906
(42 U.S.C. 1396e) is amended—
(1) in subsection (a)—
(A) by striking ‘‘For purposes of section
1902(a)(25)(G) and subject to subsection (d),
each’’ and inserting ‘‘Each’’,
(B) in paragraph (1), by striking ‘‘shall’’
and inserting ‘‘may’’, and
(C) in paragraph (2), by striking ‘‘shall’’
and inserting ‘‘may’’; and
(2) by striking subsection (d).
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 3442. PERMITTING SAME COPAYMENTS IN HEALTH
MAINTENANCE ORGANIZATIONS AS IN FEE-
FOR-SERVICE.
(a) IN GENERAL.—Section 1916(a)(2)(D) (42 U.S.C.
1396o(a)(2)(D)) is amended by inserting ‘‘(at the option
of the State)’’ after ‘‘section 1905(a)(4)(C), or’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to cost sharing with respect to
deductions, cost sharing and similar charges imposed for
items and services furnished on or after the date of the
enactment of this Act.
101
SEC. 3443. PHYSICIAN QUALIFICATION REQUIREMENTS.
(a) IN
GENERAL.—Section 1903(i) (42 U.S.C.
1396b(i)) is amended by striking paragraph (12)
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to services furnished on or after
the date of the enactment of this Act.
SEC. 3444. ELIMINATION OF REQUIREMENT OF PRIOR IN-
STITUTIONALIZATION WITH RESPECT TO HA-
BILITATION SERVICES FURNISHED UNDER A
WAIVER FOR HOME OR COMMUNITY-BASED
SERVICES.
(a) IN GENERAL.—Section 1915(c)(5) (42 U.S.C.
1396n(c)(5)) is amended, in the matter preceding sub-
paragraph (A), by striking ‘‘, with respect to individuals
who receive such services after discharge from a nursing
facility or intermediate care facility for the mentally re-
tarded’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) apply to services furnished on or after Octo-
ber 1, 1997.
SEC. 3445. BENEFITS FOR SERVICES OF PHYSICIAN ASSIST-
ANTS.
(a) IN
GENERAL.—Section 1905(a) (42 U.S.C.
1396d(a)), as amended by sections 3403(a) and 3431(a),
is amended—
102
(1) by redesignating paragraphs (22) through
(27) as paragraphs (23) through (28), and
(2) by inserting after paragraph (21) the fol-
lowing new paragraph:
‘‘(22) services furnished by an physician assist-
ant (as defined in section 1861(aa)(5)) which the as-
sistant is legally authorized to perform under State
law and with the supervision of a physician;’’.
(b) CONFORMING AMENDMENTS.—Section 1902 (42
U.S.C. 1396a), as amended by sections 3403(c) and
3431(b)(1), is amended—
(1) in subsection (a)(10)(C)(iv), by striking
‘‘(26)’’ and inserting ‘‘(27)’’, and
(2) in subsection (j), by striking ‘‘(27)’’ and in-
serting ‘‘(28)’’.
SEC. 3446. STUDY AND REPORT ON ACTUARIAL VALUE OF
EPSDT BENEFIT.
(a) STUDY.—The Secretary of Health and Human
Services shall provide for a study on the actuarial value
of the provision of early and periodic screening, diagnostic,
and treatment services (as defined in section 1905(r) of
the Social Security Act (42 U.S.C. 1396d(r))) under the
medicaid program under title XIX of such Act. Such study
shall include an examination of the portion of such value
103
that is attributable to paragraph (5) of such section and
to the second sentence of such section.
(b) REPORT.—By not later than 18 months after the
date of the enactment of this Act, the Secretary shall sub-
mit a report to Congress on the results of the study under
subsection (a).
Subchapter F—Administration
SEC. 3451. ELIMINATION OF DUPLICATIVE INSPECTION OF
CARE REQUIREMENTS FOR ICFS/MR AND
MENTAL HOSPITALS.
(a) MENTAL HOSPITALS.—Section 1902(a)(26) (42
U.S.C. 1396a(a)(26)) is amended—
(1) by striking ‘‘provide—
‘‘(A) with respect to each patient’’ and in-
serting ‘‘provide, with respect to each patient’’;
and
(2) by striking subparagraphs (B) and (C).
(b) ICFS/MR.—Section 1902(a)(31) (42 U.S.C.
1396a(a)(31)) is amended—
(1) by striking ‘‘provide—
‘‘(A) with respect to each patient’’ and in-
serting ‘‘provide, with respect to each patient’’;
and
(2) by striking subparagraphs (B) and (C).
104
(c) EFFECTIVE DATE.—The amendments made by
this section take effect on the date of the enactment of
this Act.
SEC. 3452. ALTERNATIVE SANCTIONS FOR NONCOMPLIANT
ICFS/MR.
(a) IN GENERAL.—Section 1902(i)(1)(B) (42 U.S.C.
1396a(i)(1)(B)) is amended by striking ‘‘provide’’ and in-
serting ‘‘establish alternative remedies if the State dem-
onstrates to the Secretary’s satisfaction that the alter-
native remedies are effective in deterring noncompliance
and correcting deficiencies, and may provide’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) takes effect on the date of the enactment
of this Act.
SEC. 3453. MODIFICATION OF MMIS REQUIREMENTS.
(a) IN
GENERAL.—Section 1903(r) (42 U.S.C.
1396b(r)) is amended—
(1) by striking all that precedes paragraph (5)
and inserting the following:
‘‘(r)(1) In order to receive payments under subsection
(a) for use of automated data systems in administration
of the State plan under this title, a State must have in
operation mechanized claims processing and information
retrieval systems that meet the requirements of this sub-
section and that the Secretary has found—
105
‘‘(A) is adequate to provide efficient, economi-
cal, and effective administration of such State plan;
‘‘(B) is compatible with the claims processing
and information retrieval systems used in the admin-
istration of title XVIII, and for this purpose—
‘‘(i) has a uniform identification cod-
ing system for providers, other payees, and
beneficiaries under this title or title XVIII;
‘‘(ii) provides liaison between States
and carriers and intermediaries with agree-
ments under title XVIII to facilitate timely
exchange of appropriate data; and
‘‘(iii) provides for exchange of data
between the States and the Secretary with
respect to persons sanctioned under this
title or title XVIII;
‘‘(C) is capable of providing accurate and timely
data;
‘‘(D) is complying with the applicable provisions
of part C of title XI;
‘‘(E) is designed to receive provider claims in
standard formats to the extent specified by the Sec-
retary; and
‘‘(F) effective for claims filed on or after Janu-
ary 1, 1999, provides for electronic transmission of
106
claims data in the format specified by the Secretary
and consistent with the Medicaid Statistical Infor-
mation System (MSIS) (including detailed individual
enrollee encounter data and other information that
the Secretary may find necessary).’’.
(2) in paragraph (5)—
(A) by striking subparagraph (B);
(B) by striking all that precedes clause (i)
and inserting the following:
‘‘(2) In order to meet the requirements of this para-
graph, mechanized claims processing and information re-
trieval systems must meet the following requirements:’’;
(C) in clause (iii), by striking ‘‘under para-
graph (6)’’; and
(D) by redesignating clauses (i) through
(iii) as paragraphs (A) through (C); and
(3) by striking paragraphs (6), (7), and (8).
(b) 
CONFORMING
AMENDMENTS.—Section
1902(a)(25)(A)(ii) (42 U.S.C. 1396a(a)(25)(A)(ii)) is
amended by striking all that follows ‘‘shall’’ and inserting
the following: ‘‘be integrated with, and be monitored as
a part of the Secretary’s review of, the State’s mechanized
claims processing and information retrieval system under
section 1903(r);’’.
107
(c) EFFECTIVE DATE.—Except as otherwise specifi-
cally provided, the amendments made by this section shall
take effect on January 1, 1998.
SEC. 3454. FACILITATING IMPOSITION OF STATE ALTER-
NATIVE 
REMEDIES 
ON 
NONCOMPLIANT
NURSING FACILITIES.
(a) IN GENERAL.—Section 1919(h)(3)(D) (42 U.S.C.
1396r(h)(3)(D)) is amended—
(1) by inserting ‘‘and’’ at the end of clause (i);
(2) by striking ‘‘, and’’ at the end of clause (ii)
and inserting a period; and
(3) by striking clause (iii).
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) take effect on the date of the enactment
of this Act.
SEC. 3455. MEDICALLY ACCEPTED INDICATION.
Section 
1927(g)(1)(B)(i) 
(42 
U.S.C. 
1396r–
8(g)(1)(B)(i)) is amended—
(1) by striking ‘‘and’’ at the end of subclause
(II),
(2) by redesignating subclause (III) as sub-
clause (IV), and
(3) by inserting after subclause (II) the follow-
ing:
108
‘‘(III) the DRUGDEX Informa-
tion System; and’’.
SEC. 3456. CONTINUATION OF STATE-WIDE SECTION 1115
MEDICAID WAIVERS.
(a) IN GENERAL.—Section 1115 (42 U.S.C. 1315)
is amended by adding at the end the following new sub-
section:
‘‘(e)(1) The provisions of this subsection shall apply
to the extension of State-wide comprehensive demonstra-
tion project (in this subsection referred to as ‘waiver
project’) for which a waiver of compliance with require-
ments of title XIX is granted under subsection (a).
‘‘(2) Not earlier than 1 year before the date the waiv-
er under subsection (a) with respect to a waiver project
would otherwise expire, the chief executive officer of the
State which is operating the project may submit to the
Secretary a written request for an extension, of up to 3
years, of the project.
‘‘(3) If the Secretary fails to respond to the request
within 6 months after the date it is submitted, the request
is deemed to have been granted.
‘‘(4) If such a request is granted, the deadline for
submittal of a final report under the waiver project is
deemed to have been extended until the date that is 1 year
109
after the date the waivers under subsection (a) with re-
spect to the project would otherwise have expired.
‘‘(5) The Secretary shall release an evaluation of each
such project not later than 1 year after the date of receipt
of the final report.
‘‘(6) Subject to paragraphs (4) and (7), the extension
of a waiver project under this subsection shall be on the
same terms and conditions (including applicable terms and
conditions relating to quality and access of services, budg-
et neutrality, data and reporting requirements, and special
population protections) that applied to the project before
its extension under this subsection.
‘‘(7) If an original condition of approval of a waiver
project was that Federal expenditures under the project
not exceed the Federal expenditures that would otherwise
have been made, the Secretary shall take such steps as
may be necessary to assure that, in the extension of the
project under this subsection, such condition continues to
be met. In applying the previous sentence, the Secretary
shall take into account the Secretary’s best estimate of
rates of change in expenditures at the time of the exten-
sion.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to demonstration projects ini-
110
tially approved before, on, or after the date of the enact-
ment of this Act.
SEC. 3457. AUTHORIZING ADMINISTRATIVE STREAMLINING
AND PRIVATIZING MODIFICATIONS UNDER
THE MEDICAID PROGRAM.
Section 1902 (42 U.S.C. 1396a) is amended by add-
ing at the end the following:
‘‘(aa)(1) Notwithstanding any other provision of law,
no provision of law shall be construed as preventing any
State from allowing determinations of eligibility to receive
medical assistance under this title to be made by an entity
that is not a State or local government, or by an individual
who is not an employee of a State or local government,
which meets such qualifications as the State determines.
For purposes of any Federal law, such determinations
shall be considered to be made by the State and by a State
agency.
‘‘(2) Nothing in this subsection shall be construed as
affecting—
‘‘(A) the conditions for eligibility for benefits
(including any conditions relating to income or re-
sources); and
‘‘(B) the rights to challenge determinations re-
garding eligibility or rights to benefits; and
111
‘‘(C) determinations regarding quality control
or error rates.’’.
SEC. 3458. EXTENSION OF MORATORIUM.
Section 6408(a)(3) of the Omnibus Budget Reconcili-
ation Act of 1989, as amended by section 13642 of the
Omnibus Budget Reconciliation Act of 1993, is amended
by striking ‘‘December 31, 1995’’ and inserting ‘‘Decem-
ber 31, 2002’’.
CHAPTER 2—QUALITY ASSURANCE
SEC. 3461. REQUIREMENTS TO ENSURE QUALITY OF AND
ACCESS TO CARE UNDER MANAGED CARE
PLANS.
(a) STATE PLAN REQUIREMENT.—Section 1902(a)
(42 U.S.C. 1396a(a)) is amended—
(1) in paragraph (62), by striking ‘‘; and’’ at
the end and inserting a semicolon;
(2) by striking the period at the end of para-
graph (63) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (63) the fol-
lowing new paragraph:
‘‘(64) provide, with respect to all contracts de-
scribed in section 1903(m)(2)(A) with an organiza-
tion or provider, that—
‘‘(A) the State agency develops and imple-
ments a quality assessment and improvement
112
strategy, consistent with standards that the
Secretary shall establish, in consultation with
the States, and monitor and that do not pre-
empt the application of stricter State standards,
which includes—
‘‘(i) standards for access to care so
that covered services are available within
reasonable timeframes and in a manner
that ensures continuity of care and ade-
quate primary care and, where applicable,
specialized services capacity, including pe-
diatric specialized services for special needs
children (as defined in section 1915(i));
and
‘‘(ii) procedures for monitoring and
evaluating the quality and appropriateness
of care and services to beneficiaries that
reflect the full spectrum of populations en-
rolled under the contract and that in-
clude—
‘‘(I) requirements for provision of
quality assurance data to the State
using the data and information set
that the Secretary shall specify with
respect to entities contracting under
113
section 1876 or alternative data re-
quirements approved by the Secretary;
‘‘(II) regular and periodic exam-
ination of the scope and content of
the quality improvement strategy; and
‘‘(III) other aspects of care and
service directly related to the improve-
ment of quality of care (including
grievance procedures and marketing
and information standards); and
‘‘(B) that adequate provision is made, con-
sistent with standards that the Secretary shall
specify and monitor, with respect to financial
reporting under the contracts.’’.
(b) DEEMED COMPLIANCE.—Section 1903(m) (42
U.S.C. 1396b(m)) is amended by adding at the end the
following:
‘‘(7) DEEMED COMPLIANCE.—
‘‘(A) MEDICARE ORGANIZATIONS.—At the op-
tion of a State, the requirements of the previous
provisions of this subsection shall not apply with re-
spect to a health maintenance organization if the or-
ganization is an eligible organization with a contract
in effect under section 1876 or a MedicarePlus orga-
114
nization with a contract in effect under C of title
XVIII.
‘‘(B) PRIVATE ACCREDITATION.—
‘‘(i) IN
GENERAL.—At the option of a
State, such requirements shall not apply with
respect to a health maintenance organization
if—
‘‘(I) the organization is accredited by
an organization meeting the requirements
described in subparagraph (C); and
‘‘(II) the standards and process under
which the organization is accredited meet
such requirements as are established under
clause (ii), without regard to whether or
not the time requirement of such clause is
satisfied.
‘‘(ii) STANDARDS
AND
PROCESS.—Not
later than 180 days after the date of the enact-
ment of this paragraph, the Secretary shall
specify requirements for the standards and
process under which a health maintenance orga-
nization is accredited by an organization meet-
ing the requirements of subparagraph (C).
115
‘‘(C) ACCREDITING
ORGANIZATION.—An ac-
crediting organization meets the requirements of this
subparagraph if the organization—
‘‘(i) is a private, nonprofit organization;
‘‘(ii) exists for the primary purpose of ac-
crediting managed care organizations or health
care providers; and
‘‘(iii) is independent of health care provid-
ers or associations of health care providers.’’.
(c) APPLICATION TO MANAGED CARE ENTITIES.—
Section 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is
amended—
(1) by striking ‘‘and’’ at the end of clause (x),
(2) by striking the period at the end of clause
(xi) and inserting ‘‘; and’’, and
(3) by adding at the end the following new
clause:
‘‘(xii) such contract provides for—
‘‘(I) submitting to the State agency such
information as may be necessary to monitor the
care delivered to members,
‘‘(II) maintenance of an internal quality
assurance program consistent with section
1902(a)(64)(A), and meeting standards that
the Secretary shall establish in regulations; and
116
‘‘(III) providing effective procedures for
hearing and resolving grievances between the
entity and members enrolled with the organiza-
tion under this subsection.’’.
(d) APPLICATION TO PRIMARY CARE CASE MANAGE-
MENT CONTRACTS.—Section 1905(t)(3), as added by sec-
tion 3403(b), is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (D),
(2) by striking the period at the end of sub-
paragraph (E) and inserting ‘‘; and’’, and
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) if payment is made to the organization on
a prepaid capitated or other risk basis, compliance
with the requirements of section 1903(m)(2)(A)(xii)
in the same manner such requirements apply to a
health maintenance organization under section
1903(m)(2)(A).’’.
(e) EFFECTIVE DATE.—The amendments made by
this section apply to agreements between a State agency
and an organization entered into or renewed on or after
January 1, 1999.
117
SEC. 3462. SOLVENCY STANDARDS FOR CERTAIN HEALTH
MAINTENANCE ORGANIZATIONS.
(a) IN GENERAL.—Section 1903(m)(1) (42 U.S.C.
1396b(m)(1)) is amended—
(1) in subparagraph (A)(ii), by inserting ‘‘,
meets the requirements of subparagraph (C)(i) (if
applicable),’’ after ‘‘provision is satisfactory to the
State’’, and
(2) by adding at the end the following:
‘‘(C)(i) Subject to clause (ii), a provision meets the
requirements of this subparagraph for an organization if
the organization meets solvency standards established by
the State for private health maintenance organizations or
is licensed or certified by the State as a risk-bearing en-
tity.
‘‘(ii) Clause (i) shall not apply to an organization if—
‘‘(I) the organization is not responsible for the
provision (directly or through arrangements with
providers of services) of inpatient hospital services
and physicians’ services;
‘‘(II) the organization is a public entity;
‘‘(III) the solvency of the organization is guar-
anteed by the State; or
‘‘(IV) the organization is (or is controlled by)
one or more federally-qualified health centers and
118
meets solvency standards established by the State
for such an organization.
For purposes of subclause (IV), the term ‘control’ means
the possession, whether direct or indirect, of the power to
direct or cause the direction of the management and poli-
cies of the organization through membership, board rep-
resentation, or an ownership interest equal to or greater
than 50.1 percent.’’
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to contracts entered into or re-
newed on or after October 1, 1998.
(c) TRANSITION.—In the case of a health mainte-
nance organization that as of the date of the enactment
of this Act has entered into a contract with a State for
the provision of medical assistance under title XIX under
which the organization assumes full financial risk and is
receiving capitation payments, the amendment made by
subsection (a) shall not apply to such organization until
3 years after the date of the enactment of this Act.
SEC. 3463. APPLICATION OF PRUDENT LAYPERSON STAND-
ARD FOR EMERGENCY MEDICAL CONDITION
AND PROHIBITION OF GAG RULE RESTRIC-
TIONS.
Section 1903(m) (42 U.S.C. 1396b(m)) is amended
by adding at the end the following:
119
‘‘(8)(A)(i) Each contract with a health maintenance
organization under this subsection shall require the orga-
nization—
‘‘(I) to provide coverage for emergency services
(as defined in subparagraph (B)) without regard to
prior authorization or the emergency care provider’s
contractual relationship with the organization, and
‘‘(II) to comply with guidelines established
under section 1852(d)(2) (respecting coordination of
post-stabilization care) in the same manner as such
guidelines apply to MedicarePlus plans offered under
part C of title XVIII.
‘‘(B) In subparagraph (A)(i)(I), the term ‘emergency
services’ means, with respect to an individual enrolled with
an organization, covered inpatient and outpatient services
that—
‘‘(i) are furnished by a provider that is qualified
to furnish such services under this title, and
‘‘(ii) are needed to evaluate or stabilize an
emergency medical condition (as defined in subpara-
graph (C)).
‘‘(C) In subparagraph (B)(ii), 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
120
of health and medicine, could reasonably expect the ab-
sence of immediate medical attention to result in—
‘‘(i) placing the health of the individual (or,
with respect to a pregnant woman, the health of the
woman or her unborn child) in serious jeopardy,
‘‘(ii) serious impairment to bodily functions, or
‘‘(iii) serious dysfunction of any bodily organ or
part.
‘‘(9)(A) Subject to subparagraphs (B) and (C), under
a contract under this subsection a health maintenance or-
ganization (in relation to an individual enrolled under the
contract) shall not prohibit or otherwise restrict a covered
health care professional (as defined in subparagraph (D))
from advising such an individual who is a patient of the
professional about the health status of the individual or
medical care or treatment for the individual’s condition
or disease, regardless of whether benefits for such care
or treatment are provided under the plan, if the profes-
sional is acting within the lawful scope of practice.
‘‘(B) Subparagraph (A) shall not be construed as re-
quiring a health maintenance organization to provide, re-
imburse for, or provide coverage of a counseling or referral
service if the organization—
‘‘(i) objects to the provision of such service on
moral or religious grounds; and
121
‘‘(ii) in the manner and through the written in-
strumentalities such organization deems appropriate,
makes available information on its policies regarding
such service to prospective enrollees before or during
enrollment and to enrollees within 90 days after the
date that the organization or plan adopts a change
in policy regarding such a counseling or referral
service.
‘‘(C) Nothing in subparagraph (B) shall be construed
to affect disclosure requirements under State law or under
the Employee Retirement Income Security Act of 1974.
‘‘(D) For purposes of this paragraph, the term
‘health care professional’ means a physician (as defined
in section 1861(r)) or other health care professional if cov-
erage for the professional’s services is provided under the
contract under this subsection for the services of the pro-
fessional. Such term includes a podiatrist, optometrist,
chiropractor, psychologist, dentist, physician assistant,
physical or occupational therapist and therapy assistant,
speech-language pathologist, audiologist, registered or li-
censed practical nurse (including nurse practitioner, clini-
cal nurse specialist, certified registered nurse anesthetist,
and certified nurse-midwife), licensed certified social work-
er, registered respiratory therapist, and certified res-
piratory therapy technician.’’.
122
SEC. 3464. ADDITIONAL FRAUD AND ABUSE PROTECTIONS
IN MANAGED CARE.
(a) PROTECTION AGAINST MARKETING ABUSES.—
Section 1903(m) (42 U.S.C. 1396b(m)), as amended by
section 3463, is amended—
(1) in paragraph (2)(A)(viii), by inserting ‘‘and
compliance with the requirements of paragraphs
(10) and (11)’’ after ‘‘of this subsection’’, and
(2) by adding at the end the following:
‘‘(10)(A)(i) A health maintenance organization with
respect to activities under this subsection may not distrib-
ute directly or through any agent or independent contrac-
tor marketing materials within any State—
‘‘(I) without the prior approval of the State;
and
‘‘(II) that contain false or materially misleading
information.
‘‘(ii) In the process of reviewing and approving such
materials, the State shall provide for consultation with a
medical care advisory committee.
‘‘(iii) The State may not enter into or renew a con-
tract with a health maintenance organization for the provi-
sion of services to individuals enrolled under the State
plan under this title if the State determines that the entity
distributed directly or through any agent or independent
123
contractor marketing materials in violation of clause
(i)(II).
‘‘(B) A health maintenance organization shall distrib-
ute marketing materials to the entire service area of such
organization.
‘‘(C) A health maintenance organization, or any
agency of such organization, may not seek to influence an
individual’s enrollment with the organization in conjunc-
tion with the sale of any other insurance.
‘‘(D) Each health maintenance organization shall
comply with such procedures and conditions as the Sec-
retary prescribes in order to ensure that, before an individ-
ual is enrolled with the organization under this title, the
individual is provided accurate oral and written and suffi-
cient information to make an informed decision whether
or not to enroll.
‘‘(E) Each health maintenance organization shall not,
directly or indirectly, conduct door-to-door, telephonic, or
other ‘cold call’ marketing of enrollment under this title.’’.
(b) PROHIBITING AFFILIATIONS WITH INDIVIDUALS
DEBARRED BY FEDERAL AGENCIES.—Section 1903(m)
(42 U.S.C. 1396b(m)), as amended by section 3463 and
subsection (a), is further amended by adding at the end
the following:
125
Human Services) provides to the State and to the
Congress a written statement describing compelling
reasons that exist for renewing or extending the
agreement.
‘‘(C) A person is described in this subparagraph if
such person—
‘‘(i) is debarred, suspended, or otherwise ex-
cluded from participating in procurement activities
under the Federal acquisition regulation or from
participating in nonprocurement activities under reg-
ulations issued pursuant to Executive Order 12549;
or
‘‘(ii) is an affiliate (within the meaning of the
Federal acquisition regulation) of a person described
in clause (i).’’.
(c) APPLICATION OF STATE CONFLICT-OF-INTEREST
SAFEGUARDS.—Section 
1903(m)(2)(A) 
(42 
U.S.C.
1396b(m)(2)(A)), as amended by section 3461(c), is
amended—
(1) by striking ‘‘and’’ at the end of clause (xi),
(2) by striking the period at the end of clause
(xii) and inserting ‘‘; and’’, and
(3) by inserting after clause (xi) the following:
‘‘(xiii) the State has in effect conflict-of-interest
safeguards with respect to officers and employees of
126
the State with responsibilities relating to contracts
with such organizations and to any default enroll-
ment process that are at least as effective as the
Federal safeguards provided under section 27 of the
Office of Federal Procurement Policy Act (41 U.S.C.
423), against conflicts of interest that apply with re-
spect to Federal procurement officials with com-
parable responsibilities with respect to such con-
tracts.’’.
(d) LIMITATION ON AVAILABILITY OF FFP FOR USE
OF ENROLLMENT BROKERS.—Section 1903(b) (42 U.S.C.
1396b(b)), as amended by section 3413(b), is amended by
adding at the end the following:
‘‘(5) Amounts expended by a State for the use an
enrollment broker in marketing health maintenance orga-
nizations and other managed care entities to eligible indi-
viduals under this title shall be considered, for purposes
of subsection (a)(7), to be necessary for the proper and
efficient administration of the State plan but only if the
following conditions are met with respect to the broker:
‘‘(A) The broker is independent of any such en-
tity and of any health care providers (whether or not
any such provider participates in the State plan
under this title) that provide coverage of services in
127
the same State in which the broker is conducting en-
rollment activities.
‘‘(B) No person who is an owner, employee,
consultant, or has a contract with the broker either
has any direct or indirect financial interest with
such an entity or health care provider or has been
excluded from participation in the program under
this title or title XVIII or debarred by any Federal
agency, or subject to a civil money penalty under
this Act.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1998.
SEC. 3465. GRIEVANCES UNDER MANAGED CARE PLANS.
Section 1903(m) (42 U.S.C. 1396b(m)) is amend-
ed—
(1) in paragraph (2)(A), as amended by sec-
tions 3461(c) and 3464(c),—
(A) by striking ‘‘and’’ at the end of clause
(xii),
(B) by striking the period at the end of
clause (xiii) and inserting ‘‘; and’’, and
(C) by inserting after clause (xiii) the fol-
lowing new clause:
128
‘‘(xiv) such contract provides for compliance of
the organization with the grievance and appeals re-
quirements described in paragraph (3).’’; and
(2) by inserting after paragraph (2) the follow-
ing new paragraph:
‘‘(3)(A) An eligible organization must provide a
meaningful and expedited procedure, which includes notice
and hearing requirements, for resolving grievances be-
tween the organization (including any entity or individual
through which the organization provides health care serv-
ices) and members enrolled with the organization under
this subsection. Under the procedure any member enrolled
with the organization may at any time file orally or in
writing a complaint to resolve grievances between the
member and the organization before a board of appeals
established under subparagraph (C).
‘‘(B)(i) The organization must provide, in a timely
manner, such an enrollee a notice of any denial of services
in-network or denial of payment for out-of-network care
or notice of termination or reduction of services.
‘‘(ii) Such notice shall include the following:
‘‘(I) A clear statement of the reason for the de-
nial.
129
‘‘(II) An explanation of the complaint process
under subparagraph (C) which is available to the en-
rollee upon request.
‘‘(III) An explanation of all other appeal rights
available to all enrollees.
‘‘(IV) A description of how to obtain supporting
evidence for this hearing, including the patient’s
medical records from the organization, as well as
supporting affidavits from the attending health care
providers.
‘‘(C)(i) Each eligible organization shall establish a
board of appeals to hear and make determinations on com-
plaints by enrollees under this subsection concerning deni-
als of coverage or payment for services (whether in-net-
work or out-of-network) and the medical necessity and ap-
propriateness of covered items and services.
‘‘(ii) A board of appeals of an eligible organization
shall consist of—
‘‘(I) representatives of the organization, includ-
ing physicians, nonphysicians, administrators, and
enrollees;
‘‘(II) consumers who are not enrollees; and
‘‘(III) providers with expertise in the field of
medicine which necessitates treatment.
130
‘‘(iii) A board of appeals shall hear and resolve com-
plaints within 30 days after the date the complaint is filed
with the board.
‘‘(D) Nothing in this paragraph may be construed to
replace or supersede any appeals mechanism otherwise
provided for an individual entitled to benefits under this
title.’’.
SEC. 3466. STANDARDS RELATING TO ACCESS TO OBSTET-
RICAL 
AND 
GYNECOLOGICAL 
SERVICES
UNDER MANAGED CARE PLANS.
(a) IN
GENERAL.—Section 1903(m)(2)(A) (42
U.S.C. 1396b(m)(2)(A)), as amended by sections 3461(c),
3464(c), and 3465(1), is amended—
(1) by striking ‘‘and’’ at the end of clause (xiii),
(2) by striking the period at the end of clause
(xiv) and inserting ‘‘; and’’, and
(3) by inserting after clause (xiv) the following:
‘‘(xv) the organization complies with the re-
quirements of paragraph (12).’’.
(b) REQUIREMENTS.—Section 1903(m) (42 U.S.C.
1396b(m)), as amended by sections 3463, 3464(a), and
3464(b), is amended by adding at the end the following
new paragraph:
‘‘(12)(A) If a health maintenance organization, under
a contract under this subsection, requires or provides for
131
an enrollee to designate a participating primary care pro-
vider—
‘‘(i) the organization shall permit a female en-
rollee to designate an obstetrician-gynecologist who
has agreed to be designated as such, as the enroll-
ee’s primary care provider; and
‘‘(ii) if such an enrollee has not designated such
a provider as a primary care provider, the organiza-
tion—
‘‘(I) may not require prior authorization by
the enrollee’s primary care provider or other-
wise for coverage of obstetric and gynecologic
care provided by a participating obstetrician-
gynecologist, or a participating health care pro-
fessional practicing in collaboration with the ob-
stetrician-gynecologist and in accordance with
State law, to the extent such care is otherwise
covered, and
‘‘(II) shall treat the ordering of other
gynecologic care by such a participating physi-
cian as the prior authorization of the primary
care provider with respect to such care under
the contract.
‘‘(B) Nothing in subparagraph (A)(ii)(II) shall waive
any requirements of coverage relating to medical necessity
132
or appropriateness with respect to coverage of gynecologic
care so ordered.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to contracts entered into, renewed,
or extended on or after January 1, 1998.
CHAPTER 3—FEDERAL PAYMENTS
SEC. 3471. REFORMING DISPROPORTIONATE SHARE PAY-
MENTS UNDER STATE MEDICAID PROGRAMS.
(a) DIRECT PAYMENT BY STATE.—Subsection (a)(1)
of section 1923 (42 U.S.C. 1396r–4) is amended—
(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) provides that payment adjustments
under the plan under this section for services
furnished by a hospital on or after October 1,
1997, for individuals entitled to benefits under
the plan, and enrolled with an entity described
in section 1903(m), under a primary care case
management system (described in section
1905(t)), or other managed care plan—
133
‘‘(i) are made directly to the hospital
by the State, and
‘‘(ii) are not used as part of, and are
disregarded in determining the amount of,
prepaid capitation paid under the State
plan with respect to those services.’’.
(b) ADJUSTMENT TO STATE DSH ALLOCATIONS.—
(1) IN GENERAL.—Subsection (f) of such sec-
tion is amended—
(A) in paragraph (2)(A), by inserting ‘‘and
paragraph (5)’’ after ‘‘subparagraph (B)’’, and
(B) by adding at the end the following new
paragraph:
‘‘(5) ADJUSTMENTS IN DSH ALLOTMENTS.—
‘‘(A) ALLOTMENT
FROZEN
FOR
STATES
WITH VERY LOW DSH EXPENDITURES.—In the
case of a State for which its State 1995 DSH
spending did not exceed 1 percent of the total
amount expenditures made under the State
plan under this title for medical assistance dur-
ing fiscal year 1995 (as reported by the State
no later than January 1, 1997, on HCFA Form
64), the DSH allotment for each of fiscal years
1998 through 2002 is equal to its State 1995
DSH spending.
134
‘‘(B) FULL
REDUCTION
FOR
HIGH
DSH
STATES.—In the case of a State which was
classified under this subsection as a high DSH
State for fiscal year 1997, the DSH allotment
for each of fiscal years 1998 through 2002 is
equal to the State 1995 DSH spending reduced
by the full reduction percentage (described in
subparagraph (D)) for the fiscal year involved.
‘‘(C) 
HALF-REDUCTION
FOR
OTHER
STATES.—In the case of a State not described
in subparagraph (A) or (B), the DSH allotment
for each of fiscal years 1998 through 2002 is
equal to the State 1995 DSH spending reduced
by 1⁄2 of the full reduction percentage for the
fiscal year involved.
‘‘(D) FULL
REDUCTION
PERCENTAGE.—
For purposes of this paragraph, the ‘full reduc-
tion percentage’ for—
‘‘(i) fiscal year 1998 is 2 percent,
‘‘(ii) fiscal year 1999 is 5 percent,
‘‘(iii) fiscal year 2000 is 20 percent,
‘‘(iv) fiscal year 2001 is 30 percent,
and
‘‘(v) fiscal year 2002 is 40 percent.
‘‘(E) DEFINITIONS.— In this paragraph:
135
‘‘(i) STATE.—The term ‘State’ means
the 50 States and the District of Colum-
bia.
‘‘(ii) STATE
1995
DSH
SPENDING.—
The term ‘State 1995 DSH spending’
means, with respect to a State, the total
amount of payment adjustments made
under subsection (c) under the State plan
during fiscal year 1995 as reported by the
State no later than January 1, 1997, on
HCFA Form 64.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to fiscal years begin-
ning with fiscal year 1998.
(c) TRANSITION RULE.—Effective October 1, 1997,
section 1923(g)(2)(A) of the Social Security Act (42
U.S.C. 1396r–4(g)(2)(A)) shall be applied to the State of
California as though—
(1) ‘‘or that begins on or after October 1, 1997,
and before October 1, 1999’’ were inserted in such
section after ‘‘January 1, 1995’’; and
(2) ‘‘(or 175 percent in the case of a State fis-
cal year that begins on or after October 1, 1997,
and before October 1, 1999)’’ were inserted in such
section after ‘‘200 percent’’.
136
SEC. 3472. ADDITIONAL FUNDING FOR STATE EMERGENCY
HEALTH SERVICES FURNISHED TO UNDOCU-
MENTED ALIENS.
(a) TOTAL AMOUNT AVAILABLE FOR ALLOTMENT.—
There are available for allotments under this section for
each of the 5 fiscal years (beginning with fiscal year 1998)
$20,000,000 for payments to certain States under this
section.
(b) STATE ALLOTMENT AMOUNT.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall compute an allotment for each
fiscal year beginning with fiscal year 1998 and end-
ing with fiscal year 2002 for each of the 12 States
with the highest number of undocumented aliens.
The amount of such allotment for each such State
for a fiscal year shall bear the same ratio to the
total amount available for allotments under sub-
section (a) for the fiscal year as the ratio of the
number of undocumented aliens in the State in the
fiscal year bears to the total of such numbers for all
such States for such fiscal year. The amount of al-
lotment to a State provided under this paragraph for
a fiscal year that is not paid out under subsection
(c) shall be available for payment during the subse-
quent fiscal year.
137
(2) DETERMINATION.—For purposes of para-
graph (1), the number of undocumented aliens in a
State under this section shall be determined based
on estimates of the resident illegal alien population
residing in each State prepared by the Statistics Di-
vision of the Immigration and Naturalization Service
as of October 1992 (or as of such later date if such
date is at least 1 year before the beginning of the
fiscal year involved),
(c) USE
OF FUNDS.—From the allotments made
under subsection (b), the Secretary shall pay to each State
amounts the State demonstrates were paid by the State
(or by a political subdivision of the State) for emergency
health services furnished to undocumented aliens.
(d) STATE DEFINED.—For purposes of this section,
the term ‘‘State’’ includes the District of Columbia.
(e) STATE ENTITLEMENT.—This section constitutes
budget authority in advance of appropriations Acts and
represents the obligation of the Federal Government to
provide for the payment to States of amounts provided
under subsection (c).
138
Subtitle F—Child Health
Assistance Program (CHAP)
SEC. 3501. SHORT TITLE OF SUBTITLE; TABLE OF CON-
TENTS OF SUBTITLE.
(a) SHORT TITLE OF SUBTITLE.—This subtitle may
be cited as the ‘‘Child Health Assistance Program Act of
1997’’.
(b) TABLE OF CONTENTS OF SUBTITLE.—The table
of contents of this subtitle is as follows:
Sec. 3501. Short title of subtitle; table of contents.
Sec. 3502. Establishment of Child Health Assistance Program (CHAP).
‘‘TITLE XXI—CHILD HEALTH ASSISTANCE PROGRAM
‘‘Sec. 2101. Purpose; State child health plans.
‘‘Sec. 2102. Contents of State child health plan.
‘‘Sec. 2103. Allotments.
‘‘Sec. 2104. Payments to States.
‘‘Sec. 2105. Process for submission, approval, and amendment of State
child health plans.
‘‘Sec. 2106. Strategic objectives and performance goals; plan administra-
tion.
‘‘Sec. 2107. Annual reports; evaluations.
‘‘Sec. 2108. Definitions.
Sec. 3503. Optional use of State child health assistance funds for enhanced
medicaid match for expanded medicaid eligibility.
Sec. 3504. Medicaid presumptive eligibility for low-income children.
SEC. 3502. ESTABLISHMENT OF CHILD HEALTH ASSIST-
ANCE PROGRAM (CHAP).
The Social Security Act is amended by adding at the
end the following new title:
139
‘‘TITLE XXI—CHILD HEALTH ASSISTANCE
PROGRAM
‘‘SEC. 2101. PURPOSE; STATE CHILD HEALTH PLANS.
‘‘(a) PURPOSE.—The purpose of this title is to pro-
vide funds to States to enable them to implement plans
to initiate and expand the provision of child health care
assistance to uninsured, low-income children in an effec-
tive and efficient manner that is coordinated with other
sources of coverage for children. Such assistance may be
provided for obtaining creditable health coverage through
methods specified in the plan, which may include any or
all of the following:
‘‘(1) Providing benefits under the State’s med-
icaid plan under title XIX.
‘‘(2) Obtaining coverage under group health
plans or group or individual health insurance cov-
erage.
‘‘(3) Direct purchase of services from providers.
‘‘(4) Other methods specified under the plan.
‘‘(b) STATE CHILD HEALTH PLAN REQUIRED.—A
State is not eligible for payment under section 2104 unless
the State has submitted to the Secretary under section
2105 a plan that—
‘‘(1) sets forth how the State intends to use the
funds provided under this title to provide child
140
health assistance to needy children consistent with
the provisions of this title, and
‘‘(2) is approved under section 2105.
‘‘(c) STATE ENTITLEMENT.—This title constitutes
budget authority in advance of appropriations Acts and
represents the obligation of the Federal Government to
provide for the payment to States of amounts provided
under section 2104.
‘‘(d) EFFECTIVE DATE.—No State is eligible for pay-
ments under section 2104 for any calendar quarter begin-
ning before October 1, 1997.
‘‘SEC. 2102. CONTENTS OF STATE CHILD HEALTH PLAN.
‘‘(a) GENERAL BACKGROUND AND DESCRIPTION.—
A State child health plan shall include a description, con-
sistent with the requirements of this title, of—
‘‘(1) the extent to which, and manner in which,
children in the State, including targeted low-income
children and other classes of children classified by
income and other relevant factors, currently have
creditable health coverage (as defined in section
2108(c)(2));
‘‘(2) current State efforts to provide or obtain
creditable health coverage for uncovered children, in-
cluding the steps the State is taking to identify and
enroll all uncovered children who are eligible to par-
141
ticipate in public health insurance programs and
health insurance programs that involve public-pri-
vate partnerships;
‘‘(3) how the plan is designed to be coordinated
with such efforts to increase coverage of children
under creditable health coverage; and
‘‘(4) how the plan will comply with subsection
(c)(5).
‘‘(b) 
GENERAL
DESCRIPTION
OF
ELIGIBILITY
STANDARDS AND METHODOLOGY.—
‘‘(1) ELIGIBILITY STANDARDS.—
‘‘(A) IN GENERAL.—The plan shall include
a description of the standards used to deter-
mine the eligibility of targeted low-income chil-
dren for child health assistance under the plan.
Such standards may include (to the extent con-
sistent with this title) those relating to the geo-
graphic areas to be served by the plan, age, in-
come and resources (including any standards
relating to spenddowns and disposition of re-
sources), residency, disability status, immigra-
tion status, access to or coverage under other
health coverage, and duration of eligibility.
Such standards may not discriminate on the
basis of diagnosis.
142
‘‘(B) LIMITATIONS ON ELIGIBILITY STAND-
ARDS.—Such eligibility standards—
‘‘(i) shall, within any defined group of
covered targeted low-income children, not
cover such children with higher family in-
come without covering children with a
lower family income, and
‘‘(ii) may not deny eligibility based on
a child having a preexisting medical condi-
tion.
‘‘(2) METHODOLOGY.—The plan shall include a
description of methods of establishing and continu-
ing eligibility and enrollment, including a methodol-
ogy for computing family income that is consistent
with 
the 
methodology 
used 
under 
section
1902(l)(3)(E).
‘‘(3) ELIGIBILITY
SCREENING; COORDINATION
WITH OTHER HEALTH COVERAGE PROGRAMS.—The
plan shall include a description of procedures to be
used to ensure—
‘‘(A) through both intake and followup
screening, that only targeted low-income chil-
dren are furnished child health assistance under
the State child health plan;
143
‘‘(B) that children found through the
screening to be eligible for medical assistance
under the State medicaid plan under title XIX
are enrolled for such assistance under such
plan;
‘‘(C) that the insurance provided under the
State child health plan does not substitute for
coverage under group health plans; and
‘‘(D) coordination with other public and
private programs providing creditable coverage
for low-income children.
‘‘(4) NONENTITLEMENT.—Nothing in this title
shall be construed as providing an individual with an
entitlement to child health assistance under a State
child health plan.
‘‘(c) DESCRIPTION OF ASSISTANCE.—
‘‘(1) IN GENERAL.—A State child health plan
shall include a description of the child health assist-
ance provided under the plan for targeted low-in-
come children. The child health assistance provided
to a targeted low-income child under the plan in the
form described in paragraph (2) of section 2101(a)
shall include benefits (in an amount, duration, and
scope specified under the plan) for at least the fol-
lowing categories of services:
144
‘‘(A) Inpatient and outpatient hospital
services.
‘‘(B) Physicians’ surgical and medical serv-
ices.
‘‘(C) Laboratory and x-ray services.
‘‘(D) Well-baby and well-child care, includ-
ing age-appropriate immunizations.
The previous sentence shall not apply to coverage
under a group health plan if the benefits under such
coverage for individuals under this title are no less
than the benefits for other individuals similarly cov-
ered under the plan.
‘‘(2) ITEMS.—The description shall include the
following:
‘‘(A) COST
SHARING.—Subject to para-
graph (3), the amount (if any) of premiums,
deductibles, coinsurance, and other cost sharing
imposed.
‘‘(B) DELIVERY
METHOD.—The State’s
approach to delivery of child health assistance,
including a general description of—
‘‘(i) the use (or intended use) of dif-
ferent delivery methods, which may include
the delivery methods used under the medic-
aid plan under title XIX, fee-for-service,
145
managed care arrangements (such as
capitated health care plans, case manage-
ment, and case coordination), direct provi-
sion of health care services (such as
through community health centers and dis-
proportionate share hospitals), vouchers,
and other delivery methods; and
‘‘(ii) utilization control systems.
‘‘(3) LIMITATIONS ON COST SHARING.—
‘‘(A) NO COST SHARING ON PREVENTIVE
BENEFITS.—The 
plan 
may 
not 
impose
deductibles, coinsurance, or similar cost sharing
with respect to benefits for preventive services.
‘‘(B) SLIDING SCALE.—To the extent prac-
ticable, any premiums imposed under the plan
shall be imposed on a sliding scale related to in-
come and the plan may only vary premiums,
deductibles, coinsurance, and other cost sharing
based on the family income of targeted low-in-
come children only in a manner that does not
favor children from families with higher income
over children from families with lower income.
‘‘(4) RESTRICTION ON APPLICATION OF PRE-
EXISTING CONDITION EXCLUSIONS.—
146
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the State child health plan shall not
permit the imposition of any preexisting condi-
tion exclusion for covered benefits under the
plan.
‘‘(B) GROUP HEALTH PLANS AND GROUP
HEALTH INSURANCE COVERAGE.—If the State
child health plan provides for benefits through
payment for, or a contract with, a group health
plan or group health insurance coverage, the
plan may permit the imposition of a preexisting
condition exclusion but only insofar as it is per-
mitted under the applicable provisions of part 7
of subtitle B of title I of the Employee Retire-
ment Income Security Act of 1974 and title
XXVII of the Public Health Service Act.
‘‘(5) SPECIAL
PROTECTION
FOR
CHILDREN
WITH CHRONIC HEALTH CONDITIONS AND SPECIAL
HEALTH CARE NEEDS.—In the case of a child who
has a chronic condition, life-threatening condition, or
combination of conditions that warrants medical spe-
cialty care and who is eligible for benefits under the
plan with respect to such care, the State child health
plan shall assure access to such care, including the
147
use of a medical specialist as a primary care pro-
vider.
‘‘(6) SECONDARY PAYMENT.—Nothing in this
section shall be construed as preventing a State
from denying benefits to an individual to the extent
such benefits are available to the individual under
another public or private health care insurance pro-
gram.
‘‘(7) TREATMENT OF CASH PAYMENTS.—Pay-
ments in the form of cash or vouchers provided as
child health or other assistance under the State child
health plan to parents, guardians or other caretakers
of a targeted low-income child are not considered in-
come for purpose of eligibility for, or benefits pro-
vided under, any means-tested Federal or Federally-
assisted program.
‘‘(d) OUTREACH AND COORDINATION.—A State child
health plan shall include a description of the procedures
to be used by the State to accomplish the following:
‘‘(1) OUTREACH.—Outreach to families of chil-
dren likely to be eligible for child health assistance
under the plan or under other public or private
health coverage programs to inform these families of
the availability of, and to assist them in enrolling
their children in, such a program.
148
‘‘(2) COORDINATION WITH OTHER HEALTH IN-
SURANCE PROGRAMS.—Coordination of the adminis-
tration of the State program under this subtitle with
other public and private health insurance programs.
‘‘SEC. 2103. ALLOTMENTS.
‘‘(a) TOTAL ALLOTMENT.—The total allotment that
is available under this title for each fiscal year, beginning
with fiscal year 1998, is $2,880,000,000.
‘‘(b) ALLOTMENTS TO 50 STATES AND DISTRICT OF
COLUMBIA.—
‘‘(1) IN GENERAL.—Subject to paragraphs (4)
and (5), of the total allotment available under sub-
section (a) for a fiscal year, reduced by the amount
of allotments made under subsection (c) for the fis-
cal year, the Secretary shall allot to each State
(other than a State described in such subsection)
with a State child health plan approved under this
title the same proportion as the ratio of—
‘‘(A) the product of (i) the number of un-
covered low-income children for the fiscal year
in the State (as determined under paragraph
(2)) and (ii) the State cost factor for that State
(established under paragraph (3)); to
‘‘(B) the sum of the products computed
under subparagraph (A).
149
‘‘(2) NUMBER
OF
UNCOVERED
LOW-INCOME
CHILDREN.—For 
the 
purposes 
of 
paragraph
(1)(A)(i), the number of uncovered low-income chil-
dren for a fiscal year in a State is equal to the arith-
metic average of the number of low-income children
(as defined in section 2108(c)(4)) with no health in-
surance coverage, as reported and defined in the 3
most recent March supplements to the Current Pop-
ulation Survey of the Bureau of the Census before
the beginning of the fiscal year.
‘‘(3) ADJUSTMENT
FOR
GEOGRAPHIC
VARI-
ATIONS IN HEALTH COSTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A)(ii), the ‘State cost factor’ for a
State for a fiscal year equal to the sum of—
‘‘(i) 0.15, and
‘‘(ii) 0.85 multiplied by the ratio of—
‘‘(I) the annual average wages
per employee for the State for such
year (as determined under subpara-
graph (B)), to
‘‘(II) the annual average wages
per employee for the 50 States and
the District of Columbia.
150
‘‘(B) ANNUAL AVERAGE WAGES PER EM-
PLOYEE.—For purposes of subparagraph (A),
the ‘annual average wages per employee’ for a
State, or for all the States. for a fiscal year is
equal to the average of the annual wages per
employee for the State or for the 50 States and
the District of Columbia for employees in the
health services industry (SIC code 8000), as re-
ported by the Bureau of Labor Statistics of the
Department of Labor for each of the for the
most recent 3 years before the beginning of the
fiscal year involved.
‘‘(4) FLOOR
FOR
STATES.—Subject to para-
graph (5), in no case shall the amount of the allot-
ment under this subsection for one of the 50 States
or the District of Columbia for a year be less than
$2,000,000. To the extent that the application of the
previous sentence results in an increase in the allot-
ment to a State above the amount otherwise pro-
vided, the allotments for the other States and the
District of Columbia under this subsection shall be
decreased in a pro rata manner (but not below
$2,000,000) so that the total of such allotments in
a fiscal year does not exceed the amount otherwise
151
provided for allotment under paragraph (1) for that
fiscal year.
‘‘(5) OFFSET FOR EXPENDITURES UNDER MED-
ICAID PRESUMPTIVE ELIGIBILITY.—The amount of
the allotment otherwise provided to a State under
this subsection for a fiscal year shall be reduced by
the amount of the payments made to the State
under section 1903(a) for calendar quarters during
such fiscal year that are attributable to provision of
medical assistance to a child during a presumptive
eligibility period under section 1920A.
‘‘(c) ALLOTMENTS TO TERRITORIES.—
‘‘(1) IN GENERAL.—Subject to paragraph (3),
of the total allotment under subsection (a) for a fis-
cal year, the Secretary shall allot 0.5 percent among
each of the commonwealths and territories described
in paragraph (4) in the same proportion as the per-
centage specified in paragraph (2) for such common-
wealth or territory bears to the sum of such percent-
ages for all such commonwealths or territories so de-
scribed.
‘‘(2) PERCENTAGE.—The percentage specified
in this paragraph for—
‘‘(A) Puerto Rico is 91.6 percent,
‘‘(B) Guam is 3.5 percent,
152
‘‘(C) Virgin Islands is 2.6 percent,
‘‘(D) American Samoa is 1.2 percent, and
‘‘(E) the Northern Mariana Islands is 1.1
percent.
‘‘(3) FLOOR.—In no case shall the amount of
the allotment to a commonwealth or territory under
paragraph (1) for a fiscal year be less than
$100,000. To the extent that the application of the
previous sentence results in an increase in the allot-
ment to a commonwealth or territory above the
amount otherwise provided, the allotments for the
other commonwealths and territories under this sub-
section for the fiscal year shall be decreased (but not
below $100,000) in a pro rata manner so that the
total of such allotments does not exceed the total
amount otherwise provided for allotment under para-
graph (1).
‘‘(4) COMMONWEALTHS AND TERRITORIES.—A
commonwealth or territory described in this para-
graph is any of the following if it has a State child
health plan approved under this title:
‘‘(A) Puerto Rico.
‘‘(B) Guam.
‘‘(C) the Virgin Islands.
‘‘(D) American Samoa.
153
‘‘(E) the Northern Mariana Islands.
‘‘(d) ADJUSTMENT FOR STATES USING ENHANCED
MEDICAID MATCH.—In the case of a State that elects the
increased medicaid matching option under section 1905(t),
the amount of the State’s allotment under this section
shall be reduced by the amount of additional payment
made under section 1903 that is attributable to the in-
crease in the Federal medical assistance percentage ef-
fected under such option.
‘‘(e) 3-YEAR AVAILABILITY
OF AMOUNTS ALLOT-
TED.—Amounts allotted to a State pursuant to this sec-
tion for a fiscal year shall remain available for expenditure
by the State through the end of the second succeeding fis-
cal year.
‘‘SEC. 2104. PAYMENTS TO STATES.
‘‘(a) IN GENERAL.—Subject to the succeeding provi-
sions of this section, the Secretary shall pay to each State
with a program approved under this title, from its allot-
ment under section 2103 (as may be adjusted under sec-
tion 2103(d)), an amount for each quarter up to 80 per-
cent of expenditures under that program in the quarter
for—
‘‘(1) child health assistance for targeted low-in-
come children;
154
‘‘(2) health services initiatives for improving the
health of children (including targeted low-income
children and other low-income children);
‘‘(3) expenditures for outreach activities as pro-
vided in section 2102(d)(1); and
‘‘(4) other reasonable costs incurred by the
State to administer the plan.
‘‘(b) LIMITATION ON CERTAIN PAYMENTS FOR CER-
TAIN EXPENDITURES.—
‘‘(1) IN GENERAL.—Funds provided to a State
under this title shall only be used to carry out the
purposes of this title.
‘‘(2) LIMITATION ON EXPENDITURES NOT USED
FOR
ASSISTANCE.—Payment shall not be made
under subsection (a) for expenditures for items de-
scribed in paragraphs (2), (3), or (4) of subsection
to the extent the total of such expenditures exceeds
15 percent of total expenditures under the plan for
the period involved (including any in such total addi-
tional Federal medical assistance payments under
section 1903(a)(1) that are attributable to an en-
hanced 
State 
medicaid 
match 
under 
section
1905(t)).
‘‘(3) PURCHASE OF FAMILY COVERAGE.—The
Secretary shall establish rules regarding the extent
155
to which payment may be made under subsection
(a)(1) for the purchase of family coverage under a
group health plan or health insurance coverage that
includes coverage of targeted low-income children.
Under such rules such payment may be permitted,
notwithstanding that a portion may be considered
attributable to purchase of coverage for other family
members, if the State demonstrates that purchase of
such coverage is cost effective relative to the
amounts that the State would have paid to obtain
comparable coverage only of the targeted low-income
children involved. In making such determination,
there shall be taken into account the costs of provid-
ing coverage for medical assistance for children with
similar 
actuarial 
characteristics 
under 
section
1902(l).
‘‘(4) DENIAL OF PAYMENT FOR REDUCTION OF
MEDICAID
ELIGIBILITY
STANDARDS.—No payment
may be made under subsection (a) with respect to
child health assistance provided under a State child
health plan to a targeted low-income child if the
child would be eligible for medical assistance under
the State plan under title XIX (as such plan was in
effect as of June 1, 1997) but for a change in the
156
income or assets standards or methodology under
such plan effected after such date.
‘‘(5) DISALLOWANCES FOR EXCLUDED PROVID-
ERS.—
‘‘(A) IN GENERAL.—Payment shall not be
made to a State under subsection (a) for ex-
penditures for items and services furnished—
‘‘(i) by a provider who was excluded
from participation under title V, XVIII, or
XX or under this title pursuant to section
1128, 1128A, 1156, or 1842(j)(2), or
‘‘(ii) under the medical direction or on
the prescription of a physician who was so
excluded, if the provider of the services
knew or had reason to know of the exclu-
sion.
‘‘(B) EXCEPTION FOR EMERGENCY SERV-
ICES.—Subparagraph (A) shall not apply to
emergency items or services, not including hos-
pital emergency room services.
‘‘(6) USE OF NON-FEDERAL FUNDS FOR STATE
MATCHING
REQUIREMENT.—Amounts provided by
the Federal Government, or services assisted or sub-
sidized to any significant extent by the Federal Gov-
ernment, may not be included in determining the
157
amount of non-Federal contributions required under
subsection (a).
‘‘(7) TREATMENT
OF
THIRD
PARTY
LIABIL-
ITY.—No payment shall be made to a State under
this section for expenditures for child health assist-
ance provided for a targeted low-income child under
its plan to the extent that a private insurer (as de-
fined by the Secretary by regulation and including a
group health plan (as defined in section 607(1) of
the Employee Retirement Income Security Act of
1974), a service benefit plan, and a health mainte-
nance organization) would have been obligated to
provide such assistance but for a provision of its in-
surance contract which has the effect of limiting or
excluding such obligation because the individual is
eligible for or is provided child health assistance
under the plan.
‘‘(8) SECONDARY PAYER PROVISIONS.—Except
as otherwise provided by law, no payment shall be
made to a State under this section for expenditures
for child health assistance provided for a targeted
low-income child under its plan to the extent that
payment has been made or can reasonably be ex-
pected to be made promptly (as determined in ac-
cordance with regulations) under any other federally
158
operated or financed health care insurance program,
other than an insurance program operated or fi-
nanced by the Indian Health Service, as identified
by the Secretary. For purposes of this paragraph,
rules similar to the rules for overpayments under
section 1903(d)(2) shall apply.
‘‘(9) LIMITATION
ON
PAYMENT
FOR
ABOR-
TIONS.—
‘‘(A) IN GENERAL.—Payment shall not be
made to a State under this section for any
amount expended under the State plan to pay
for any abortion or to assist in the purchase, in
whole or in part, of health benefit coverage that
includes coverage of abortion.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to an abortion—
‘‘(i) if the pregnancy is the result of
an act of rape or incest, or
‘‘(ii) in the case where a woman suf-
fers from a physical disorder, illness, or in-
jury that would, as certified by a physi-
cian, place the woman in danger of death
unless an abortion is performed.
‘‘(c) ADVANCE PAYMENT; RETROSPECTIVE ADJUST-
MENT.—The Secretary may make payments under this
159
section for each quarter on the basis of advance estimates
of expenditures submitted by the State and other inves-
tigation the Secretary may find necessary, and may reduce
or increase the payments as necessary to adjust for any
overpayment or underpayment for prior quarters.
‘‘SEC. 2105. PROCESS FOR SUBMISSION, APPROVAL, AND
AMENDMENT 
OF 
STATE 
CHILD 
HEALTH
PLANS.
‘‘(a) INITIAL PLAN.—
‘‘(1) IN GENERAL.—As a condition of receiving
funding under section 2104, a State shall submit to
the Secretary a State child health plan that meets
the applicable requirements of this title.
‘‘(2) APPROVAL.—Except as the Secretary may
provide under subsection (e), a State plan submitted
under paragraph (1)—
‘‘(A) shall be approved for purposes of this
title, and
‘‘(B) shall be effective beginning with a
calendar quarter that is specified in the plan,
but in no case earlier than the first calendar
quarter that begins at least 60 days after the
date the plan is submitted.
‘‘(b) PLAN AMENDMENTS.—
160
‘‘(1) IN
GENERAL.—A State may amend, in
whole or in part, its State child health plan at any
time through transmittal of a plan amendment.
‘‘(2) APPROVAL.—except as the secretary may
provide under subsection (e), an amendment to a
state plan submitted under paragraph (1)—
‘‘(A) shall be approved for purposes of this
title, and
‘‘(B) shall be effective as provided in para-
graph (3).
‘‘(3) EFFECTIVE DATES FOR AMENDMENTS.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this paragraph, an amend-
ment to a State plan shall take effect on one or
more effective dates specified in the amend-
ment.
‘‘(B) AMENDMENTS RELATING TO ELIGI-
BILITY OR BENEFITS.—
‘‘(i) 
NOTICE
REQUIREMENT.—Any
plan amendment that eliminates or re-
stricts eligibility or benefits under the plan
may not take effect unless the State cer-
tifies that it has provided prior or contem-
poraneous public notice of the change, in a
161
form and manner provided under applica-
ble State law.
‘‘(ii) 
TIMELY
TRANSMITTAL.—Any
plan amendment that eliminates or re-
stricts eligibility or benefits under the plan
shall not be effective for longer than a 60-
day period unless the amendment has been
transmitted to the Secretary before the end
of such period.
‘‘(C) OTHER
AMENDMENTS.—Any plan
amendment that is not described in subpara-
graph (C) becomes effective in a State fiscal
year may not remain in effect after the end of
such fiscal year (or, if later, the end of the 90-
day period on which it becomes effective) unless
the amendment has been transmitted to the
Secretary.
‘‘(c) DISAPPROVAL OF PLANS AND PLAN AMEND-
MENTS.—
‘‘(1) PROMPT REVIEW OF PLAN SUBMITTALS.—
The Secretary shall promptly review State plans and
plan amendments submitted under this section to
determine if they substantially comply with the re-
quirements of this title.
162
‘‘(2) 90-DAY APPROVAL DEADLINES.—A State
plan or plan amendment is considered approved un-
less the Secretary notifies the State in writing, with-
in 90 days after receipt of the plan or amendment,
that the plan or amendment is disapproved (and the
reasons for disapproval) or that specified additional
information is needed.
‘‘(3) CORRECTION.—In the case of a dis-
approval of a plan or plan amendment, the Secretary
shall provide a State with a reasonable opportunity
for correction before taking financial sanctions
against the State on the basis of such disapproval.
‘‘(d) PROGRAM OPERATION.—
‘‘(1) IN GENERAL.—The State shall conduct the
program in accordance with the plan (and any
amendments) approved under subsection (c) and
with the requirements of this title.
‘‘(2) VIOLATIONS.—The Secretary shall estab-
lish a process for enforcing requirements under this
title. Such process shall provide for the withholding
of funds in the case of substantial noncompliance
with such requirements. In the case of an enforce-
ment action against a State under this paragraph,
the Secretary shall provide a State with a reasonable
opportunity for correction before taking financial
163
sanctions against the State on the basis of such an
action.
‘‘(e) CONTINUED APPROVAL.—An approved State
child health plan shall continue in effect unless and until
the State amends the plan under subsection (b) or the Sec-
retary finds substantial noncompliance of the plan with
the requirements of this title under section subsection
(d)(2).
‘‘SEC. 2106. STRATEGIC OBJECTIVES AND PERFORMANCE
GOALS; PLAN ADMINISTRATION.
‘‘(a) STRATEGIC OBJECTIVES
AND PERFORMANCE
GOALS.—
‘‘(1) DESCRIPTION.—A State child health plan
shall include a description of—
‘‘(A) the strategic objectives,
‘‘(B) the performance goals, and
‘‘(C) the performance measures,
the State has established for providing child health
assistance to targeted low-income children under the
plan and otherwise for maximizing health coverage
for other low-income children and children generally
in the State.
‘‘(2) STRATEGIC OBJECTIVES.—Such plan shall
identify specific strategic objectives relating to in-
creasing the extent of creditable health coverage
164
among targeted low-income children and other low-
income children.
‘‘(3) PERFORMANCE GOALS.—Such plan shall
specify one or more performance goals for each such
strategic objective so identified.
‘‘(4) PERFORMANCE
MEASURES.—Such plan
shall describe how performance under the plan will
be—
‘‘(A) measured through objective, inde-
pendently verifiable means, and
‘‘(B) compared against performance goals,
in order to determine the State’s performance
under this title.
‘‘(b) RECORDS, REPORTS, AUDITS, AND EVALUA-
TION.—
‘‘(1) DATA
COLLECTION, RECORDS, AND
RE-
PORTS.—A State child health plan shall include an
assurance that the State will collect the data, main-
tain the records, and furnish the reports to the Sec-
retary, at the times and in the standardized format
the Secretary may require in order to enable the
Secretary to monitor State program administration
and compliance and to evaluate and compare the ef-
fectiveness of State plans under this title.
165
‘‘(2) STATE ASSESSMENT AND STUDY.—A State
child health plan shall include a description of the
State’s plan for the annual assessments and reports
under section 2107(a) and the evaluation required
by section 2107(b).
‘‘(3) AUDITS.—A State child health plan shall
include an assurance that the State will afford the
Secretary access to any records or information relat-
ing to the plan for the purposes of review or audit.
‘‘(c) PROGRAM DEVELOPMENT PROCESS.—A State
child health plan shall include a description of the process
used to involve the public in the design and implementa-
tion of the plan and the method for ensuring ongoing pub-
lic involvement.
‘‘(d) PROGRAM BUDGET.—A State child health plan
shall include a description of the budget for the plan. The
description shall be updated periodically as necessary and
shall include details on the planned use of funds and the
sources of the non-Federal share of plan expenditures, in-
cluding any requirements for cost sharing by beneficiaries.
‘‘(e) APPLICATION
OF CERTAIN GENERAL PROVI-
SIONS.—The following sections in part A of title XI shall
apply to States under this title in the same manner as
they applied to a State under title XIX:
166
‘‘(1) Section 1101(a)(1) (relating to definition
of State).
‘‘(2) Section 1116 (relating to administrative
and judicial review), but only insofar as consistent
with the provisions of part B.
‘‘(3) Section 1124 (relating to disclosure of
ownership and related information).
‘‘(4) Section 1126 (relating to disclosure of in-
formation about certain convicted individuals).
‘‘(5) Section 1128B(d) (relating to criminal
penalties for certain additional charges).
‘‘(6) Section 1132 (relating to periods within
which claims must be filed).
‘‘SEC. 2107. ANNUAL REPORTS; EVALUATIONS.
‘‘(a) ANNUAL REPORT.—The State shall—
‘‘(1) assess the operation of the State plan
under this title in each fiscal year, including the
progress made in reducing the number of uncovered
low-income children; and
‘‘(2) report to the Secretary, by January 1 fol-
lowing the end of the fiscal year, on the result of the
assessment.
‘‘(b) STATE EVALUATIONS.—
‘‘(1) IN GENERAL.—By March 31, 2000, each
State that has a State child health plan shall submit
167
to the Secretary an evaluation that includes each of
the following:
‘‘(A) An assessment of the effectiveness of
the State plan in increasing the number of chil-
dren with creditable health coverage.;
‘‘(B) A description and analysis of the ef-
fectiveness of elements of the State plan, in-
cluding—
‘‘(i) the characteristics of the children
and families assisted under the State plan
including age of the children, family in-
come, and the assisted child’s access to or
coverage by other health insurance prior to
the State plan and after eligibility for the
State plan ends,
‘‘(ii) the quality of health coverage
provided including the types of benefits
provided,
‘‘(iii) the amount and level (payment
of part or all of the premium) of assistance
provided by the State,
‘‘(iv) the service area of the State
plan,
‘‘(v) the time limits for coverage of a
child under the State plan,
168
‘‘(vi) the State’s choice of health in-
surance plans and other methods used for
providing child health assistance , and
‘‘(vii) the sources of non-Federal
funding used in the State plan;
‘‘(C) an assessment of the effectiveness of
other public and private programs in the State
in increasing the availability of affordable qual-
ity individual and family health insurance for
children;
‘‘(D) a review and assessment of State ac-
tivities to coordinate the plan under this title
with other public and private programs provid-
ing health care and health care financing, in-
cluding Medicaid and maternal and child health
services;
‘‘(E) an analysis of changes and trends in
the State that affect the provision of accessible,
affordable, quality health insurance and health
care to children;
‘‘(F) a description of any plans the State
has for improving the availability of health in-
surance and health care for children;
‘‘(G) recommendations for improving the
program under this title; and
169
‘‘(H) any other matters the State and the
Secretary consider appropriate.
‘‘(2) REPORT OF THE SECRETARY.—The Sec-
retary shall submit to the Congress and make avail-
able to the public by December 31, 2000, a report
based on the evaluations submitted by States under
paragraph (1), containing any conclusions and rec-
ommendations the Secretary considers appropriate.
‘‘SEC. 2108. DEFINITIONS.
‘‘(a) CHILD HEALTH ASSISTANCE.—For purposes of
this title, the term ‘child health assistance’ means pay-
ment of part or all of the cost of any of the following,
or assistance in the purchase, in whole or in part, of health
benefit coverage that includes any of the following, for tar-
geted low-income children (as defined in subsection (b))
as specified under the State plan:
‘‘(1) Inpatient hospital services.
‘‘(2) Outpatient hospital services.
‘‘(3) Physician services.
‘‘(4) Surgical services.
‘‘(5) Clinic services (including health center
services) and other ambulatory health care services.
‘‘(6) Prescription drugs and biologicals and the
administration of such drugs and biologicals, only if
such drugs and biologicals are not furnished for the
170
purpose of causing, or assisting in causing, the
death, suicide, euthanasia, or mercy killing of a per-
son.
‘‘(7) Over-the-counter medications.
‘‘(8) Laboratory and radiological services.
‘‘(9) Prenatal care and prepregnancy family
planning services and supplies.
‘‘(10) Inpatient mental health services, includ-
ing services furnished in a State-operated mental
hospital and including residential or other 24-hour
therapeutically planned structured services.
‘‘(11) Outpatient mental health services, includ-
ing services furnished in a State-operated mental
hospital and including community-based services.
‘‘(12) Durable medical equipment and other
medically-related or remedial devices (such as pros-
thetic devices, implants, eyeglasses, hearing aids,
dental devices, and adaptive devices).
‘‘(13) Disposable medical supplies.
‘‘(14) Home and community-based health care
services and related supportive services (such as
home health nursing services, home health aide serv-
ices, personal care, assistance with activities of daily
living, chore services, day care services, respite care
171
services, training for family members, and minor
modifications to the home).
‘‘(15) Nursing care services (such as nurse
practitioner services, nurse midwife services, ad-
vanced practice nurse services, private duty nursing
care, pediatric nurse services, and respiratory care
services) in a home, school, or other setting.
‘‘(16) Abortion only if necessary to save the life
of the mother or if the pregnancy is the result of an
act of rape or incest.
‘‘(17) Dental services.
‘‘(18) Inpatient substance abuse treatment
services and residential substance abuse treatment
services.
‘‘(19) Outpatient substance abuse treatment
services.
‘‘(20) Case management services.
‘‘(21) Care coordination services.
‘‘(22) Physical therapy, occupational therapy,
and services for individuals with speech, hearing,
and language disorders.
‘‘(23) Hospice care.
‘‘(24) Any other medical, diagnostic, screening,
preventive, restorative, remedial, therapeutic, or re-
habilitative services (whether in a facility, home,
172
school, or other setting) if recognized by State law
and only if the service is—
‘‘(A) prescribed by or furnished by a physi-
cian or other licensed or registered practitioner
within the scope of practice as defined by State
law,
‘‘(B) performed under the general super-
vision or at the direction of a physician, or
‘‘(C) furnished by a health care facility
that is operated by a State or local government
or is licensed under State law and operating
within the scope of the license.
‘‘(25) Premiums for private health care insur-
ance coverage.
‘‘(26) Medical transportation.
‘‘(27) Enabling services (such as transpor-
tation, translation, and outreach services) only if de-
signed to increase the accessibility of primary and
preventive health care services for eligible low-in-
come individuals.
‘‘(28) Any other health care services or items
specified by the Secretary and not excluded under
this section.
‘‘(b) TARGETED LOW-INCOME CHILD DEFINED.—
For purposes of this title—
173
‘‘(1) IN GENERAL.—The term ‘targeted low-in-
come child’ means a child—
‘‘(A) who has been determined eligible by
the State for child health assistance under the
State plan;
‘‘(B) whose family income (as determined
under the State child health plan)—
‘‘(i) exceeds the medicaid applicable
income level (as defined in paragraph (2)
and expressed as a percentage of the pov-
erty line), but
‘‘(ii) but does not exceed an income
level that is 75 percentage points higher
(as so expressed) than the medicaid appli-
cable income level, or, if higher, 133 per-
cent of the poverty line for a family of the
size involved; and
‘‘(C) who is not found to be eligible for
medical assistance under title XIX or covered
under a group health plan or under health in-
surance coverage (as such terms are defined in
section 2791 of the Public Health Service Act).
Such term does not include a child who is an inmate
of a public institution.
174
‘‘(2) MEDICAID APPLICABLE INCOME LEVEL.—
The term ‘medicaid applicable income level’ means,
with respect to a child, the effective income level (ex-
pressed as a percent of the poverty line) that has
been specified under the State plan under title XIX
(including under a waiver authorized by the Sec-
retary or under section 1902(r)(2)), as of June 1,
1997, for the child to be eligible for medical assist-
ance under section 1902(l)(2) for the age of such
child. In applying the previous sentence in the case
of a child described in section 1902(l)(2)(D), such
level shall be applied taking into account the ex-
panded coverage effected among such children under
such section with the passage of time.
‘‘(c) ADDITIONAL DEFINITIONS.—For purposes of
this title:
‘‘(1) CHILD.—The term ‘child’ means an indi-
vidual under 19 years of age.
‘‘(2) CREDITABLE
HEALTH
COVERAGE.—The
term ‘creditable health coverage’ has the meaning
given the term ‘creditable coverage’ under section
2701(c) of the Public Health Service Act (42 U.S.C.
300gg(c)) and includes coverage (including the di-
rect provision of services) provided to a targeted low-
income child under this title.
175
‘‘(3) GROUP
HEALTH
PLAN; HEALTH
INSUR-
ANCE
COVERAGE; ETC.—The terms ‘group health
plan’, ‘group health insurance coverage’, and ‘health
insurance coverage’ have the meanings given such
terms in section 2191 of the Public Health Service
Act.
‘‘(4) 
LOW-INCOME.—The 
term 
‘low-income
child’ means a child whose family income is below
200 percent of the poverty line for a family of the
size involved.
‘‘(5) POVERTY LINE DEFINED.—The term ‘pov-
erty line’ has the meaning given such term in section
673(2) of the Community Services Block Grant Act
(42 U.S.C. 9902(2)), including any revision required
by such section.
‘‘(6) PREEXISTING
CONDITION
EXCLUSION.—
The term ‘preexisting condition exclusion’ has the
meaning given such term in section 2701(b)(1)(A) of
the 
Public 
Health 
Service 
Act 
(42 
U.S.C.
300gg(b)(1)(A)).
‘‘(7) STATE CHILD HEALTH PLAN; PLAN.—Un-
less the context otherwise requires, the terms ‘State
child health plan’ and ‘plan’ mean a State child
health plan approved under section 2105.
176
‘‘(8) UNCOVERED CHILD.—The term ‘uncovered
child’ means a child that does not have creditable
health coverage.’’.
(b) CONFORMING AMENDMENTS.—
(1) 
DEFINITION
OF
STATE.—Section
1101(a)(1) is amended—
(A) by striking ‘‘and XIX’’ and inserting
‘‘XIX, and XXI’’, and
(B) by striking ‘‘title XIX’’ and inserting
‘‘titles XIX and XXI’’.
SEC. 3503. OPTIONAL USE OF STATE CHILD HEALTH AS-
SISTANCE FUNDS FOR ENHANCED MEDICAID
MATCH FOR EXPANDED MEDICAID ELIGI-
BILITY.
(a) INCREASED FMAP FOR MEDICAL ASSISTANCE
FOR EXPANDED COVERAGE OF TARGETED LOW-INCOME
CHILDREN.—Section 1905 of the Social Security Act (42
U.S.C. 1396d) is amended—
(1) in subsection (b), by adding at the end the
following new sentence: ‘‘Notwithstanding the first
sentence of this subsection, in the case of a State
plan that meets the condition described in subsection
(t)(1), with respect to expenditures for medical as-
sistance for optional targeted low-income children
described in subsection (t)(2), the Federal medical
177
assistance percentage is equal to the enhanced medi-
cal assistance percentage described in subsection
(t)(3).’’; and
(2) by adding at the end the following new sub-
section:
‘‘(t)(1) The conditions described in this paragraph for
a State plan are as follows:
‘‘(A) The plan is not applying income and re-
source standards and methodologies for the purpose
of determining eligibility of individuals under section
1902(l) that are more restrictive than those applied
as of June 1, 1997, for the purpose of determining
eligibility of individuals under such section.
‘‘(B) The plan provides for such reporting of in-
formation about expenditures and payments attrib-
utable to the operation of this subsection as the Sec-
retary deems necessary in order to carry out sections
2103(d) and 2104(b)(2).
‘‘(C) The amount of the increased payments
under section 1903(a) resulting from the application
of this subsection does not exceed the total amount
of any allotment not otherwise expended by the
State under section 2103 for the period involved.
‘‘(2) For purposes of subsection (b), the term ‘op-
tional targeted low-income child’ means a targeted low-
178
income child described in section 2108(b)(1) who would
not qualify for medical assistance under the State plan
under this title based on such plan as in effect on June
1, 1997 (taking into account the process of individuals
aging into eligibility under section 1902(l)(2)(D)).
‘‘(3) The enhanced medical assistance percentage de-
scribed in this paragraph for a State is equal to the Fed-
eral medical assistance percentage (as defined in the first
sentence of subsection (b)) for the State increased by a
number of percentage points equal to 30 percent of the
number of percentage points by which (A) such Federal
medical assistance percentage for the State, is less than
(B) 100 percent.
‘‘(4) Notwithstanding any other provision of this title,
a State plan under this title may impose a limit on the
number of optional targeted low-income children described
in paragraph (2).’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to medical assistance for items and
services furnished on or after October 1, 1997.
179
SEC. 3504. MEDICAID PRESUMPTIVE ELIGIBILITY FOR LOW-
INCOME CHILDREN.
(a) IN GENERAL.—Title XIX of the Social Security
Act is amended by inserting after section 1920 the follow-
ing new section:
‘‘PRESUMPTIVE ELIGIBILITY FOR CHILDREN
‘‘SEC. 1920A. (a) A State plan approved under sec-
tion 1902 may provide for making medical assistance with
respect to health care items and services covered under
the State plan available to a child during a presumptive
eligibility period.
‘‘(b) For purposes of this section:
‘‘(1) The term ‘child’ means an individual
under 19 years of age.
‘‘(2) The term ‘presumptive eligibility period’
means, with respect to a child, the period that—
‘‘(A) begins with the date on which a
qualified entity determines, on the basis of pre-
liminary information, that the family income of
the child does not exceed the applicable income
level of eligibility under the State plan, and
‘‘(B) ends with (and includes) the earlier
of—
‘‘(i) the day on which a determination
is made with respect to the eligibility of
180
the child for medical assistance under the
State plan, or
‘‘(ii) in the case of a child on whose
behalf an application is not filed by the
last day of the month following the month
during which the entity makes the deter-
mination referred to in subparagraph (A),
such last day.
‘‘(3)(A) Subject to subparagraph (B), the term
‘qualified entity’ means any entity that—
‘‘(i)(I) is eligible for payments under a
State plan approved under this title and pro-
vides items and services described in subsection
(a) or (II) is authorized to determine eligibility
of a child to participate in a Head Start pro-
gram under the Head Start Act (42 U.S.C.
9821 et seq.), eligibility of a child to receive
child care services for which financial assistance
is provided under the Child Care and Develop-
ment Block Grant Act of 1990 (42 U.S.C. 9858
et seq.), eligibility of an infant or child to re-
ceive assistance under the special supplemental
nutrition program for women, infants, and chil-
dren (WIC) under section 17 of the Child Nu-
trition Act of 1966 (42 U.S.C. 1786); and
181
‘‘(ii) is determined by the State agency to
be capable of making determinations of the type
described in paragraph (1)(A).
‘‘(B) The Secretary may issue regulations fur-
ther limiting those entities that may become quali-
fied entities in order to prevent fraud and abuse and
for other reasons.
‘‘(C) Nothing in this section shall be construed
as preventing a State from limiting the classes of en-
tities that may become qualified entities, consistent
with any limitations imposed under subparagraph
(B).
‘‘(c)(1) The State agency shall provide qualified enti-
ties with—
‘‘(A) such forms as are necessary for an appli-
cation to be made on behalf of a child for medical
assistance under the State plan, and
‘‘(B) information on how to assist parents,
guardians, and other persons in completing and fil-
ing such forms.
‘‘(2) A qualified entity that determines under sub-
section (b)(1)(A) that a child is presumptively eligible for
medical assistance under a State plan shall—
182
‘‘(A) notify the State agency of the determina-
tion within 5 working days after the date on which
determination is made, and
‘‘(B) inform the parent or custodian of the
child at the time the determination is made that an
application for medical assistance under the State
plan is required to be made by not later than the
last day of the month following the month during
which the determination is made.
‘‘(3) In the case of a child who is determined by a
qualified entity to be presumptively eligible for medical as-
sistance under a State plan, the parent, guardian, or other
person shall make application on behalf of the child for
medical assistance under such plan by not later than the
last day of the month following the month during which
the determination is made, which application may be the
application used for the receipt of medical assistance by
individuals described in section 1902(l)(1).
‘‘(d) Notwithstanding any other provision of this title,
medical assistance for items and services described in sub-
section (a) that—
‘‘(1) are furnished to a child—
‘‘(A) during a presumptive eligibility pe-
riod,
183
‘‘(B) by a entity that is eligible for pay-
ments under the State plan; and
‘‘(2) are included in the care and services cov-
ered by a State plan;
shall be treated as medical assistance provided by such
plan for purposes of section 1903.’’.
(b) 
CONFORMING
AMENDMENTS.—(1) 
Section
1902(a)(47) of such Act (42 U.S.C. 1396a(a)(47)) is
amended by inserting before the semicolon at the end the
following: ‘‘and provide for making medical assistance for
items and services described in subsection (a) of section
1920A available to children during a presumptive eligi-
bility period in accordance with such section’’.
(2) Section 1903(u)(1)(D)(v) of such Act (42 U.S.C.
1396b(u)(1)(D)(v)) of such Act is amended by inserting
before the period at the end the following: ‘‘or for items
and services described in subsection (a) of section 1920A
provided to a child during a presumptive eligibility period
under such section’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
184
TITLE IV—COMMITTEE ON
COMMERCE—MEDICARE
SEC. 4000. 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. 4000. Amendments to Social Security Act and references to OBRA; table
of contents of title.
Subtitle A—MedicarePlus Program
185
CHAPTER 1—MEDICAREPLUS PROGRAM
SUBCHAPTER A—MEDICAREPLUS PROGRAM
Sec. 4001. 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. 4002. Transitional rules for current medicare HMO program.
Sec. 4003. Conforming changes in medigap program.
SUBCHAPTER B—SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS
ACCOUNTS
Sec. 4006. MedicarePlus MSA.
SUBCHAPTER C—GME, IME, AND DSH PAYMENTS FOR MANAGED CARE
ENROLLEES
Sec. 4008. Graduate medical education and indirect medical education pay-
ments for managed care enrollees.
Sec. 4009. Disproportionate share hospital payments for managed care enroll-
ees.
CHAPTER 2—INTEGRATED LONG-TERM CARE PROGRAMS
SUBCHAPTER A—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
Sec. 4011. Reference to coverage of PACE under the medicare program.
Sec. 4012. Reference to establishment of PACE program as medicaid State op-
tion.
SUBCHAPTER B—SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS)
Sec. 4015. Social health maintenance organizations (SHMOs).
SUBCHAPTER C—OTHER PROGRAMS
Sec. 4018. Orderly transition of municipal health service demonstration
projects.
Sec. 4019. Extension of certain medicare community nursing organization dem-
onstration projects.
CHAPTER 3—MEDICARE PAYMENT ADVISORY COMMISSION
Sec. 4021. Medicare Payment Advisory Commission.
CHAPTER 4—MEDIGAP PROTECTIONS
Sec. 4031. Medigap protections.
Sec. 4032. Medicare prepaid competitive pricing demonstration project.
186
Subtitle B—Prevention Initiatives
Sec. 4101. Screening mammography.
Sec. 4102. Screening pap smear and pelvic exams.
Sec. 4103. Prostate cancer screening tests.
Sec. 4104. Coverage of colorectal screening.
Sec. 4105. Diabetes screening tests.
Sec. 4106. Standardization of medicare coverage of bone mass measurements.
Sec. 4107. Vaccines outreach expansion.
Sec. 4108. Study on preventive benefits.
Subtitle C—Rural Initiatives
Sec. 4206. Informatics, telemedicine, and education demonstration project.
Subtitle D—Anti-Fraud and Abuse Provisions
Sec. 4301. Permanent exclusion for those convicted of 3 health care related
crimes.
Sec. 4302. Authority to refuse to enter into medicare agreements with individ-
uals or entities convicted of felonies.
Sec. 4303. Inclusion of toll-free number to report medicare waste, fraud, and
abuse in explanation of benefits forms.
Sec. 4304. Liability of medicare carriers and fiscal intermediaries for claims
submitted by excluded providers.
Sec. 4305. Exclusion of entity controlled by family member of a sanctioned in-
dividual.
Sec. 4306. Imposition of civil money penalties.
Sec. 4307. Disclosure of information and surety bonds.
Sec. 4308. Provision of certain identification numbers.
Sec. 4309. Advisory opinions regarding certain physician self-referral provi-
sions.
Sec. 4310. Nondiscrimination in post-hospital referral to home health agencies.
Sec. 4311. Other fraud and abuse related provisions.
Subtitle E—Prospective Payment Systems
CHAPTER 2—PAYMENT UNDER PART B
SUBCHAPTER A—PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT
SERVICES
Sec. 4411. Elimination of formula-driven overpayments (FDO) for certain out-
patient hospital services.
Sec. 4412. Extension of reductions in payments for costs of hospital outpatient
services.
Sec. 4413. Prospective payment system for hospital outpatient department serv-
ices.
SUBCHAPTER B—REHABILITATION SERVICES
Sec. 4421. Rehabilitation agencies and services.
Sec. 4422. Comprehensive outpatient rehabilitation facilities (corf).
SUBCHAPTER C—AMBULANCE SERVICES
Sec. 4431. Payments for ambulance services.
Sec. 4432. Demonstration of coverage of ambulance services under medicare
through contracts with units of local government.
187
CHAPTER 3—PAYMENT UNDER PARTS A AND B
Sec. 4441. Prospective payment for home health services.
Subtitle G—Provisions Relating to Part B Only
CHAPTER 1—PHYSICIANS’ SERVICES
Sec. 4601. Establishment of single conversion factor for 1998.
Sec. 4602. Establishing update to conversion factor to match spending under
sustainable growth rate.
Sec. 4603. Replacement of volume performance standard with sustainable
growth rate.
Sec. 4604. Payment rules for anesthesia services.
Sec. 4605. Implementation of resource-based physician practice expense.
Sec. 4606. Dissemination of information on high per admission relative values
for in-hospital physicians’ services.
Sec. 4607. No X-ray required for chiropractic services.
Sec. 4608. Temporary coverage restoration for portable electrocardiogram
transportation.
CHAPTER 2—OTHER PAYMENT PROVISIONS
Sec. 4611. Payments for durable medical equipment.
Sec. 4612. Oxygen and oxygen equipment.
Sec. 4613. Reduction in updates to payment amounts for clinical diagnostic
laboratory tests.
Sec. 4614. Simplification in administration of laboratory services benefit.
Sec. 4615. Updates for ambulatory surgical services.
Sec. 4616. Reimbursement for drugs and biologicals.
Sec. 4617. Coverage of oral anti-nausea drugs under chemotherapeutic regimen.
Sec. 4618. Rural health clinic services.
Sec. 4619. Increased medicare reimbursement for nurse practitioners and clini-
cal nurse specialists.
Sec. 4620. Increased medicare reimbursement for physician assistants.
Sec. 4621. Renal dialysis-related services.
Sec. 4622. Payment for cochlear implants as customized durable medical equip-
ment.
CHAPTER 3—PART B PREMIUM
Sec. 4631. Part B premium.
Subtitle H—Provisions Relating to Parts A and B
CHAPTER 1—PROVISIONS RELATING TO MEDICARE SECONDARY PAYER
Sec. 4701. Permanent extension and revision of certain secondary payer provi-
sions.
Sec. 4702. Clarification of time and filing limitations.
Sec. 4703. Permitting recovery against third party administrators.
CHAPTER 2—HOME HEALTH SERVICES
Sec. 4711. Recapturing savings resulting from temporary freeze on payment in-
creases for home health services.
Sec. 4712. Interim payments for home health services.
Sec. 4713. Clarification of part-time or intermittent nursing care.
188
Sec. 4714. Study of definition of homebound.
Sec. 4715. Payment based on location where home health service is furnished.
Sec. 4716. Normative standards for home health claims denials,
Sec. 4717. No home health benefits based solely on drawing blood.
Sec. 4718. Making part B primary payor for certain home health services.
CHAPTER 3—BABY BOOM GENERATION MEDICARE COMMISSION
Sec. 4721. Bipartisan Commission on the Effect of the Baby Boom Generation
on the Medicare Program.
CHAPTER 4—PROVISIONS RELATING TO DIRECT GRADUATE MEDICAL
EDUCATION
Sec. 4731. Limitation on payment based on number of residents and implemen-
tation of rolling average FTE count.
Sec. 4732. Phased-in limitation on hospital overhead and supervisory physician
component of direct medical education costs.
Sec. 4733. Permitting payment to non-hospital providers.
Sec. 4734. Incentive payments under plans for voluntary reduction in number
of residents.
Sec. 4735. Demonstration project on use of consortia.
Sec. 4736. Recommendations on long-term payment policies regarding financ-
ing teaching hospitals and graduate medical education.
Sec. 4737. Medicare special reimbursement rule for certain combined residency
programs.
CHAPTER 5—OTHER PROVISIONS
Sec. 4741. Centers of excellence.
Sec. 4742. 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. 4743. Competitive bidding for certain items and services.
Subtitle I—Medical Liability Reform
CHAPTER 1—GENERAL PROVISIONS
Sec. 4801. Federal reform of health care liability actions.
Sec. 4802. Definitions.
Sec. 4803. Effective date.
CHAPTER 2—UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS
Sec. 4811. Statute of limitations.
Sec. 4812. Calculation and payment of damages.
Sec. 4813. Alternative dispute resolution.
189
Subtitle A—MedicarePlus Program
CHAPTER 1—MEDICAREPLUS PROGRAM
Subchapter A—MedicarePlus Program
SEC. 4001. ESTABLISHMENT OF MEDICAREPLUS PROGRAM.
(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:
‘‘(A) COORDINATED CARE PLANS.—Coordi-
nated care plans which provide health care serv-
190
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-
rolled in a MedicarePlus plan may continue to
be enrolled in that plan.
‘‘(b) SPECIAL RULES.—