201
Title I, Subtitle F
SEC. 1526. EFFECTIVE DATE.
The amendments made by this part shall take effect
October 1, 1994, or upon the date of the enactment of
this Act, whichever occurs later.
PART 4—ADDITIONAL RURAL HEALTH CARE
PROVISIONS
SEC. 
1531. 
DEVELOPMENT 
OF 
COMMUNITY-OPERATED
HEALTH PLANS IN RURAL AND FRONTIER
AREAS.
(a) COMMUNITY-OPERATED HEALTH PLANS.—The
Secretary of Health and Human Services (in this part re-
ferred to as the ‘‘Secretary’’) may make grants to public
and nonprofit private entities for the purpose of carrying
out projects to develop health plans to provide services ex-
clusively in rural and frontier areas.
(b) COMMUNITY INVOLVEMENT.—The Secretary may
make a grant under subsection (a) only if the applicant
involved meets the following conditions:
(1) In developing the proposal of the applicant
for a project under such subsection, the applicant
has consulted with the local governments of the geo-
graphic area to be served by the health plan devel-
oped through the project, with individuals who reside
in the area, and with a reasonable number and vari-
ety of health professionals who provide services in
the area.
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Title I, Subtitle F
(2) The applicant agrees that the principal legal
authority over the operation of the health plan will
be vested in individuals who reside in such geo-
graphic area.
(3) In the proposal the applicant specifies how
a full continuum of services will be provided.
(4) In the proposal the applicant specifies how
the proposed health plan will utilize existing health
care facilities in a manner that avoids unnecessary
duplication.
(c) USE OF FUNDS.—
(1) IN GENERAL.—Funds made available under
this section may be used for the following:
(A) To develop integrated health networks,
utilizing existing local providers and facilities
where appropriate, with community involve-
ment.
(B) For information systems, including
telecommunications.
(C) For transportation services.
(D) To develop rural emergency access
care 
hospitals 
(as 
defined 
in 
section
1861(oo)(1) of the Social Security Act, as
added by section 1501).
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Title I, Subtitle F
(2) LIMITATIONS.—Funds made available under
this section shall not be used for the following:
(A) For a telecommunications system, un-
less the system is coordinated with, and does
not duplicate, such a system existing in the
area.
(B) For paying off existing debt.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $25,000,000 in each of
fiscal years 1996, 1997, and 1998 to carry out this
section.
SEC. 1532. PRIMARY HEALTH CARE FOR MEDICALLY UN-
DERSERVED 
RURAL 
COMMUNITIES; 
IN-
CREASED CAPACITY OF HOSPITALS AND OUT-
PATIENT FACILITIES.
(a) IN GENERAL.—The Secretary may make grants
to public and nonprofit private hospitals in medically un-
derserved rural communities, and to public and nonprofit
outpatient facilities in such communities, for the purpose
of carrying out projects to develop or increase the capacity
of the hospitals and facilities to provide primary health
services.
(b) MEDICALLY
UNDERSERVED
RURAL
COMMU-
NITY.—For purposes of this section, the term ‘‘medically
underserved rural community’’ means—
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Title I, Subtitle F
(1) a rural area that has a substantial number
of individuals who are members of a medically un-
derserved population, as defined in section 330 of
the Public Health Service Act; or
(2) a rural area a significant portion of which
is a health professional shortage area designated
under section 332 of such Act.
(c) CERTAIN EXPENDITURES.—The purposes for
which the Secretary may authorize a grant under sub-
section (a) to be expended include the renovation of facili-
ties, the purchase of equipment, and the training of per-
sonnel.
(d) AUTHORIZATION OF APPROPRIATIONS.—
(1) HOSPITALS.—There are authorized to be
appropriated $50,000,000 in each of fiscal years
1996, 1997, and 1998 for the purpose of making
grants to hospitals under subsection (a).
(2) OUTPATIENT
FACILITIES.—There are au-
thorized to be appropriated $25,000,000 in each of
fiscal years 1996, 1997, and 1998 for the purpose
of making grants to outpatient facilities under sub-
section (a).
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Title I, Subtitle F
SEC. 1533. INNOVATIVE APPROACHES TO DELIVERY OF
HEALTH SERVICES IN RURAL AREAS.
(a) IN GENERAL.—The Secretary, acting through the
Administrator for Health Care Policy and Research, may
make grants to public and nonprofit private entities for
the purposes of conducting research and carrying out dem-
onstration projects to develop innovative approaches to the
delivery of health care in rural areas, such as the use of
telemedicine and the use of mobile delivery units.
(b) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $15,000,000 in each of
fiscal years 1996 through 2000 to carry out this section.
SEC. 1534. TRAINING OF RURAL HEALTH PROFESSIONALS
OTHER THAN PHYSICIANS.
(a) FUNDING
FOR
PROGRAMS
UNDER
PUBLIC
HEALTH SERVICE ACT.—With respect to programs of
title VII or VIII of the Public Health Service Act that
provide for the training of individuals as health profes-
sionals other than physicians, there are authorized to be
appropriated, in addition to amounts otherwise authorized
to be appropriated, $50,000,000 in each of fiscal years
1996 through 2000 for the purpose of the Secretary carry-
ing out such programs through entities described in sub-
section (b).
206
Title I, Subtitle F
(b) ELIGIBILITY.—With respect to a program re-
ferred to in subsection (a), an entity described in this sub-
section is an entity—
(1) that is eligible to receive grants or contracts
under the program (as provided in the applicable
provisions of title VII or VIII of the Public Health
Service Act); and
(2) a substantial number of whose designated
graduates are providing health services in a rural
area.
(c) DEFINITION OF DESIGNATED GRADUATE.—For
purposes of this section, the term ‘‘designated graduate’’,
with respect to an entity, means an individual completing
the training involved during the 5-year period preceding
the fiscal year for which the entity is applying to receive
a grant or contract under the applicable program referred
to in subsection (a).
(d) 
RELATIONSHIP
TO
OTHER
FUNDS.—The
amounts made available in subsection (a) for carrying out
programs referred to in such subsection are in addition
to any other amounts that are available for carrying out
the programs.
SEC. 1535. GENERAL PROVISIONS.
(a) APPLICATION FOR GRANT.—The Secretary may
make a grant under any section of this part only if an
207
Title I, Subtitle G
application for the grant is submitted to the Secretary and
the application is in such form, is made in such manner,
and contains such agreements, assurances, and informa-
tion as the Secretary determines to be necessary to carry
out the program involved.
(b) TECHNICAL ASSISTANCE.—The Secretary may
provide technical assistance to recipients of grants or con-
tracts under this part with respect to the planning, devel-
opment, and operation of activities under the grants or
contracts.
Subtitle G—Assistance in Enrolling
Uninsured Children in Health
Insurance
SEC. 1601. ESTABLISHMENT OF STATE PROGRAMS.
(a) MEDICAID STATE PLAN REQUIREMENT.—Section
1902(a) of the Social Security Act (42 U.S.C. 1396a(a))
is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(61);
(2) by striking the period at the end of para-
graph (62) and inserting ‘‘; and’’; and
(3) by adding at the end the following new
paragraph:
208
Title I, Subtitle G
‘‘(63) provide for a State program furnishing
premium subsidies for needy children in accordance
with section 1931.’’.
(b) STATE PROGRAMS FOR PREMIUM SUBSIDIES FOR
NEEDY CHILDREN.—Title XIX of the Social Security Act
(42 U.S.C. 1396 et seq.) is amended by redesignating sec-
tion 1931 as section 1932 and by inserting after section
1930 the following new section:
‘‘STATE PREMIUM SUBSIDY PROGRAMS FOR NEEDY
CHILDREN
‘‘SEC. 1931. (a) REQUIREMENT TO OPERATE STATE
PROGRAM.—
‘‘(1) IN GENERAL.—A State with a State plan
approved under this title shall have in effect a pre-
mium subsidy program for furnishing premium sub-
sidy under subsection (b) to premium subsidy eligi-
ble children in the State in fiscal years beginning
with fiscal year 1997.
‘‘(2) DESIGNATION
OF
STATE
AGENCY.—A
State may designate any appropriate State agency to
administer the program under this section.
‘‘(b) ASSISTANCE WITH PREMIUMS FOR STANDARD
HEALTH COVERAGE.—
‘‘(1) ELIGIBILITY.—An eligible individual who
has been determined by a State to be a premium
subsidy eligible child (as defined in paragraph (2))
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Title I, Subtitle G
shall be entitled to premium subsidies in the amount
determined under subsection (c).
‘‘(2) PREMIUM SUBSIDY ELIGIBLE CHILD.—For
purposes of this section, the term ‘premium subsidy
eligible child’ means an individual who is provided
certified standard health coverage (as defined in
subsection (j)(1)) and—
‘‘(A) who is under 20 years of age,
‘‘(B) whose family has a family income de-
termined under this section which does not ex-
ceed 240 percent (or such lesser percent as the
Secretary shall specify so that the total Federal
payments to States under this section for the
fiscal year do not exceed the amount specified
for the fiscal year under subsection (i)(1)) of
the poverty line, and
‘‘(C) except as provided in paragraph (3),
who is not otherwise eligible for medical assist-
ance under the State plan (or would be eligible
for such assistance on the basis of the plan in
effect as of the date of the enactment of the Af-
fordable Health Care Now Act of 1994).
‘‘(3) ELIGIBILITY OF CHILDREN BECOMING ELI-
GIBLE FOR MEDICAID.—At the option of the State,
a premium subsidy eligible child may include an in-
210
Title I, Subtitle G
dividual who meets the requirements of subpara-
graphs (A) and (B) of paragraph (2) and is eligible
for medical assistance under the State plan if the in-
dividual was formerly a premium subsidy eligible
child under paragraph (2). The exercise of such op-
tion shall not diminish the benefits to which such a
child is otherwise entitled under the State plan.
‘‘(4) ADDITIONAL
CHILDREN
USING
STATE-
ONLY FUNDS.—Nothing in this section shall be con-
strued as preventing a State, using its own funds
and without any Federal financial participation,
from covering additional children as premium sub-
sidy eligible children.
‘‘(c) AMOUNT OF PREMIUM SUBSIDY.—
‘‘(1) IN GENERAL.—
‘‘(A) IN GENERAL.—The premium subsidy
amount determined under this paragraph is a
monthly amount equal to the subsidy percent-
age of 1⁄12th of the lesser of—
‘‘(i) the annual premium for certified
standard health coverage provided the
child, or
‘‘(ii) the actuarial value of the stand-
ard option, nationwide service benefit plan
(taking into account cost sharing) made
211
Title I, Subtitle G
available under chapter 89 of title, United
States Code for the year, adjusted to re-
flect a premium for a single child of the
age involved and adjusted to reflect the rel-
ative cost of premiums for health coverage
of premium subsidy eligible children in the
geographic area in which the child resides
compared to the national average and ad-
justed to reflect the reduction in cost-shar-
ing effected under subsection (j)(4).
‘‘(B) SUBSIDY
PERCENTAGE.—For pur-
poses of paragraph (1), an individual’s ‘subsidy
percentage’ means 100 percent reduced (but
not below zero percent) by 1.8 percentage
points for each percentage point (or portion
thereof) such individual’s income equals or ex-
ceeds 185 percent of the poverty line.
‘‘(d) PAYMENTS.—
‘‘(1) IN
GENERAL.—The amount of the pre-
mium subsidy available to a premium subsidy eligi-
ble child under subsection (b) shall be paid by the
State in which the individual resides directly to the
insurer that provides the coverage for the premium
subsidy eligible child. Payments under the preceding
sentence shall commence in the first month during
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Title I, Subtitle G
which the individual is provided coverage and deter-
mined under this section to be a premium subsidy
eligible child.
‘‘(2) ADMINISTRATIVE ERRORS.—A State is fi-
nancially responsible for premium subsidy paid
based on an eligibility determination error to the ex-
tent the State’s error rate for eligibility determina-
tions exceeds a maximum permissible error rate to
be specified by the Secretary.
‘‘(e) ELIGIBILITY DETERMINATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall pro-
mulgate regulations specifying requirements for
State programs under this section with respect to
determining eligibility for premium subsidy, includ-
ing requirements with respect to—
‘‘(A) application procedures;
‘‘(B) information verification procedures;
‘‘(C) timeliness of eligibility determina-
tions;
‘‘(D) procedures for applicants to appeal
adverse decisions; and
‘‘(E) any other matters determined appro-
priate by the Secretary.
‘‘(2) SPECIFICATIONS FOR REGULATIONS.—The
regulations promulgated by the Secretary under
213
Title I, Subtitle G
paragraph (1) shall include the following require-
ments:
‘‘(A) FREQUENCY
OF
APPLICATIONS.—A
State program shall provide that an individual
may file an application for assistance with an
agency designated by the State at any time, in
person or by mail.
‘‘(B) APPLICATION FORM.—A State pro-
gram shall provide for the use of an application
form developed by the Secretary under this sec-
tion.
‘‘(C) DISTRIBUTION OF APPLICATIONS.—A
State program shall distribute applications for
assistance through employers and appropriate
public agencies.
‘‘(D) REQUIREMENT TO SUBMIT REVISED
APPLICATION.—A State program shall, in ac-
cordance with regulations promulgated by the
Secretary, require individuals to submit revised
applications during a year to reflect changes in
estimated family incomes, including changes in
employment status of family members, during
the year. The State shall revise the amount of
any premium subsidy based on such a revised
application.
214
Title I, Subtitle G
‘‘(E) VERIFICATION.—A State program
shall provide for verification of the information
supplied in applications under this section.
Such verification may include examining return
information disclosed to the State for such pur-
pose under section 6103(l)(15) of the Internal
Revenue Code of 1986.
‘‘(f) ADMINISTRATION OF STATE PROGRAMS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish standards for States operating programs under
this section which ensure that such programs are op-
erated in a uniform manner with respect to applica-
tion procedures, data processing systems, and such
other administrative activities as the Secretary de-
termines to be necessary.
‘‘(2) APPLICATION
FORMS.—The Secretary
shall develop an application form for assistance
which shall—
‘‘(A) be simple in form and understandable
to the average individual;
‘‘(B) require the provision of information
necessary to make a determination as to wheth-
er an individual is a premium subsidy eligible
child including a declaration of estimated in-
215
Title I, Subtitle G
come by the individual based, at the election of
the individual—
‘‘(i) on multiplying by a factor of 4
the individual’s family income for the 3-
month period immediately preceding the
month in which the application is made, or
‘‘(ii) on estimated income for the en-
tire year for which the application is sub-
mitted; and
‘‘(C) require attachment of such docu-
mentation as deemed necessary by the Sec-
retary in order to ensure eligibility for assist-
ance.
‘‘(3) OUTREACH ACTIVITIES.—A State operat-
ing a program under this section shall conduct such
outreach activities as the Secretary determines ap-
propriate.
‘‘(4) EFFECTIVENESS OF ELIGIBILITY FOR PRE-
MIUM SUBSIDIES.—A determination by a State that
an individual is a premium subsidy eligible child
shall be effective for the calendar year for which
such determination is made unless a revised applica-
tion submitted under paragraph (2) indicates that
an individual is no longer eligible for premium sub-
sidies.
216
Title I, Subtitle G
‘‘(5) PENALTIES FOR MATERIAL MISREPRESEN-
TATIONS.—
‘‘(A) IN
GENERAL.—Any individual who
knowingly makes a material misrepresentation
of information in an application for assistance
under this section shall be liable to the Federal
Government for the amount of any premium
subsidy received by individual on the basis of a
misrepresentation and interest on such amount
at a rate specified by the Secretary, and shall,
in addition, be liable to the Federal Government
for $2,000 or, if greater, 3 times the amount
any premium subsidy received by individual on
the basis of a misrepresentation.
‘‘(B) 
COLLECTION
OF
PENALTY
AMOUNTS.—A State which receives an applica-
tion for assistance with respect to which a ma-
terial misrepresentation has been made shall
collect the penalty amount required under sub-
paragraph (A) and submit 50 percent of such
amount to the Secretary in a timely manner.
‘‘(g) END-OF-YEAR RECONCILIATION FOR PREMIUM
SUBSIDY.—
‘‘(1) IN GENERAL.—
217
Title I, Subtitle G
‘‘(A) REQUIREMENT
TO
FILE
STATE-
MENT.—An individual who received premium
subsidies under this section from a State for
any month in a calendar year shall file with the
State an income reconciliation statement to ver-
ify the individual’s family income for the year.
Such a statement shall be filed at such time,
and contain such information, as the State may
specify in accordance with regulations promul-
gated by the Secretary.
‘‘(B) NOTICE OF REQUIREMENT.—A State
shall provide a written notice of the require-
ment under subparagraph (A) at the end of the
year to an individual who received premium
subsidies under this part from such State in
any month during the year.
‘‘(2) RECONCILIATION
OF
PREMIUM
SUBSIDY
BASED ON ACTUAL INCOME.—
‘‘(A) IN GENERAL.—Based on and using
the income reported in the reconciliation state-
ment filed under paragraph (1) with respect to
an individual, the State shall compute the
amount of premium subsidy that should have
been provided under this section with respect to
the individual for the year involved.
218
Title I, Subtitle G
‘‘(B) OVERPAYMENT OF ASSISTANCE.—If
the total amount of the premium subsidy pro-
vided was greater than the amount computed
under subparagraph (A), the individual is liable
to the State to pay an amount equal to the
amount of the excess payment. Any amount col-
lected by a State under this subparagraph shall
be submitted to the Secretary in a timely man-
ner.
‘‘(C) UNDERPAYMENT OF ASSISTANCE.—If
the total amount of the premium subsidy pro-
vided was less than the amount computed under
subparagraph (A), the State shall pay to the in-
dividual an amount equal to the amount of the
deficit.
‘‘(D) STATE OPTION.—A State may, in ac-
cordance with regulations promulgated by the
Secretary, establish a procedure under which
any overpayments or underpayments of pre-
mium subsidy determined under subparagraphs
(A) and (B) with respect to an individual for a
year may be collected or paid, as appropriate,
through adjustments to the premium subsidy
furnished to such individual in the succeeding
year.
219
Title I, Subtitle G
‘‘(3) VERIFICATION.—Each State may use such
information as it has available to verify income of in-
dividuals with applications filed under this section,
including return information disclosed to the state
for such purpose under section 6103(l)(15) of the
internal revenue code of 1986.
‘‘(4) PENALTIES
FOR
FAILURE
TO
FILE.—In
the case of an individual who is required to file a
statement under this subsection in a year who fails
to file such a statement by such date as the Sec-
retary shall specify in regulations, the entire amount
of the premium subsidy provided in such year shall
be considered an excess amount under paragraph
(2)(A) and such individual shall not be eligible for
premium subsidy assistance under this section until
such statement is filed. A State, using rules estab-
lished by the Secretary, shall waive the application
of this paragraph if the individual establishes, to the
satisfaction of the State under such rules, good
cause for the failure to file the statement on a timely
basis.
‘‘(5) PENALTIES FOR FALSE INFORMATION.—
Any individual who provides false information in a
statement filed under paragraph (1) is subject to the
same penalties as are provided under subsection
220
Title I, Subtitle G
(f)(5) for a misrepresentation of material fact de-
scribed in such section.
‘‘(h) SPECIAL RULES ON FEDERAL FINANCIAL PAR-
TICIPATION.—
‘‘(1) PREMIUM SUBSIDY.—In applying section
1903(a)(1) with respect to expenditures for premium
subsidy (other than administrative expenses) under
this section—
‘‘(A) such expenditures shall be considered
to be expenditures on medical assistance;
‘‘(B) in the case of assistance for a pre-
mium subsidy eligible child not described in
subsection (b)(3), the Federal medical assist-
ance percentage is deemed to be 100 percent;
and
‘‘(C) the total amount of Federal financial
participation with respect to any State for quar-
ters in any fiscal year (with respect to premium
subsidy eligible children not described in sub-
section (b)(3)) shall not exceed the State allot-
ment under subsection (i)(2) for that year.
‘‘(2) 
ADMINISTRATION
EXPENSES.—The
amount of expenditures that may be taken into ac-
count in computing amounts that are payable to a
State under section 1903(a) (other than paragraph
221
Title I, Subtitle G
(1)) with respect to the administration of the pro-
gram under this section may not exceed 3 percent of
the total expenditures.
‘‘(i) TOTAL FEDERAL BUDGET FOR PROGRAM; AL-
LOTMENTS TO STATES.—
‘‘(1) TOTAL FEDERAL BUDGET.—
‘‘(A) FISCAL YEARS 1997 THROUGH 2004.—
Subject to subparagraph (E)(iii), for purposes
of this section, the total Federal payments to
States under this section may not exceed the
following:
‘‘(i) For fiscal year 1997, $4.7 billion.
‘‘(ii) For fiscal year 1998, $5.2 bil-
lion.
‘‘(iii) For fiscal year 1999, $6.5 bil-
lion.
‘‘(iv) For fiscal year 2000, $9.8 bil-
lion.
‘‘(v) For fiscal year 2001, $12.3 bil-
lion.
‘‘(vi) For fiscal year 2002, $15.3 bil-
lion.
‘‘(vii) For fiscal year 2003, $20.0 bil-
lion.
222
Title I, Subtitle G
‘‘(viii) For fiscal year 2004, $24.4 bil-
lion.
‘‘(B) SUBSEQUENT
FISCAL
YEARS.—For
purposes of this section, the total Federal budg-
et for State plans under this part for each fiscal
year after fiscal year 2004 is the total Federal
budget under this subsection for the preceding
fiscal year multiplied by the Secretary’s esti-
mate of the percentage increase in private sec-
tor health expenditures for the year.
‘‘(2) ALLOTMENTS TO STATES.—
‘‘(A) IN
GENERAL.—The amount of a
State’s allotment under this section for a fiscal
year shall be equal to the product of—
‘‘(i) the limit on the total amount of
Federal payments for the year under para-
graph (1)(A); and
‘‘(ii) the State’s allotment percentage
under subparagraph (B).
‘‘(B) STATE ALLOTMENT PERCENTAGE.—
In subparagraph (A), a State’s allotment per-
centage for a fiscal year is equal to the percent-
age of all premium subsidy eligible children in
the United States who are residents of the
223
Title I, Subtitle G
State (as estimated by the Secretary prior to
the beginning of the fiscal year).
‘‘(3) LIMITATION ON PREMIUM PAYMENTS FOR
ABORTION
SERVICES.—Notwithstanding any other
provision of this title or the Affordable Health Care
Now Act of 1994, none of the funds appropriated to
carry out this section shall be expended to assist in
the purchase, in whole or in part, of a health benefit
package that includes abortion except in cases (A)
where the life of the mother would be endangered if
the fetus were carried to term, or (B) where the
pregnancy is the result of rape or incest.
‘‘(j) CERTIFIED STANDARD HEALTH COVERAGE DE-
FINED.—
‘‘(1) IN GENERAL.—In this section, health in-
surance coverage is considered to provide certified
standard health coverage if—
‘‘(A) benefits under such coverage are pro-
vided within at least each of the required cat-
egories of benefits described in subparagraph
(A) of paragraph (2) and consistent with such
paragraph;
‘‘(B) the actuarial value of the benefits
meets the requirements of paragraph (3); and
224
Title I, Subtitle G
‘‘(C) the benefits comply with the mini-
mum requirements specified in paragraph (4).
‘‘(2) REQUIRED CATEGORIES OF COVERED BEN-
EFITS.—
‘‘(A) IN GENERAL.—The categories of cov-
ered benefits described in this subparagraph are
the types of benefits specified in subparagraphs
(A), (B), (C), (D), and (F) of paragraph (1),
and subparagraphs (E) and (F) of paragraph
(2), of section 8904(a) of title 5, United States
Code (relating to types of benefits required to
be in health insurance offered to Federal em-
ployees) and includes the category of preventive
benefits.
‘‘(B) COVERAGE OF OFF-LABEL USE.—An
off-label use for a drug that has been found to
be safe and effective under section 505 of the
Federal Food, Drug, and Cosmetic Act shall be
covered if the medical indication for which it is
used is listed in one of the following 3 compen-
dia: the American Hospital Formulary Service-
Drug Information, the American Medical Asso-
ciation Drug Evaluations, and the United
States Pharmacopeia-Drug Information.
225
Title I, Subtitle G
‘‘(C) NO COVERAGE OF SPECIFIC TREAT-
MENT, PROCEDURES, OR CLASSES REQUIRED.—
Nothing in this subsection may be construed to
require the coverage of any specific procedure
or treatment or class of service in certified
standard health coverage under this Act or
through regulation.
‘‘(3) STANDARD ACTUARIAL VALUE.—
‘‘(A) IN GENERAL.—The actuarial value of
the benefits under standard coverage in a rat-
ing area meets the requirements of this para-
graph if such value is equivalent to the stand-
ard actuarial value described in subparagraph
(B) for the area, as adjusted for inflation under
subparagraph (D). The actuarial value of bene-
fits under standard coverage shall be deter-
mined using the standardized population and
set of standardized utilization and cost factors
described in subparagraph (C). Such actuarial
value shall be adjusted to reflect the reduction
in cost-sharing effected under paragraph (4).
‘‘(B) STANDARD
ACTUARIAL
VALUE
DE-
SCRIBED.—The standard actuarial value de-
scribed in this subparagraph for coverage in a
geographic area is the actuarial value of bench-
226
Title I, Subtitle G
mark coverage during 1994 in such area. Such
actuarial value shall be determined using the
standardized population and set of standardized
utilization and cost factors described in sub-
paragraph (C) and shall be adjusted to reflect
the age of the population of premium subsidy
eligible children under this section.
‘‘(C) ADJUSTMENTS
FOR
STANDARDIZED
POPULATION, STANDARDIZED UTILIZATION AND
COST FACTORS, AND GEOGRAPHIC AREA.—The
adjustment under this subparagraph—
‘‘(i) for a standardized population
shall be made by not taking into account
individuals 65 years of age or older, em-
ployees of the United States Postal Serv-
ice, and retirees; and
‘‘(ii) for a geographic area shall be
made in a manner that reflects the ratio of
the actuarial value of benchmark coverage
in such geographic area (as adjusted under
clause (i)) to such actuarial value for such
benchmark coverage for the United States
as a whole, taking into account standard-
ized actuarial utilization and cost factors.
‘‘(D) ADJUSTMENT FOR INFLATION.—
227
Title I, Subtitle G
‘‘(i) IN
GENERAL.—The adjustment
under this paragraph for a year (beginning
with 1995) is the FEHBP national rolling
increase percentage for the year involved,
compounded by such increase for each pre-
ceding year after 1994.
‘‘(ii) FEHBP NATIONAL ROLLING IN-
CREASE
PERCENTAGE.—For purposes of
this paragraph, the term ‘FEHBP national
rolling increase percentage’ means, for a
year, the 5-year average of the annual na-
tional percentage increase in the premiums
for health plans offered under the Federal
Employees 
Health 
Benefits 
Program
(under chapter 89 of title 5, United States
Code) for the period ending with the pre-
vious year. Such increase shall be deter-
mined by the Secretary in consultation
with the Director of Office of Personnel
Management based on the best information
available.
‘‘(4) MINIMUM
REQUIREMENTS.—Benefits of-
fered under standard coverage within any category
shall be not less than the narrowest scope and short-
est duration of benefits within that category, in an
228
Title I, Subtitle G
approved health benefits plan under chapter 89 of
title 5, United States Code, except that under such
coverage—
‘‘(A) no cost-sharing may be imposed for
preventive services (as specified by the Sec-
retary); and
‘‘(B) with respect to individuals with fam-
ily income below 100 percent of the poverty
line, any cost-sharing imposed for other items
and services may only be nominal.
‘‘(k) DEFINITIONS; DETERMINATIONS OF INCOME.—
For purposes of this part:
‘‘(1) DETERMINATIONS OF INCOME.—
‘‘(A) FAMILY INCOME.—The term ‘family
income’ means, with respect to an individual
who—
‘‘(i) is not a dependent (as defined in
subparagraph (B)) of another individual,
the sum of the modified adjusted gross in-
comes (as defined in subparagraph (D))
for the individual, the individual’s spouse,
and dependents of the individual; or
‘‘(ii) is a dependent of another indi-
vidual, the sum of the modified adjusted
gross incomes for the other individual, the
229
Title I, Subtitle G
other individual’s spouse, and dependents
of the other individual.
‘‘(B) DEPENDENT.—The term ‘dependent’
shall have the meaning given such term under
paragraphs (1) or (2) of section 152(a) of the
Internal Revenue Code of 1986.
‘‘(C) SPECIAL
RULE
FOR
FOSTER
CHIL-
DREN.—For purposes of subparagraph (A), a
child who is placed in foster care by a State
agency shall not be considered a dependent of
another individual.
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means adjusted gross income (as defined
in section 62(a) of the Internal Revenue Code
of 1986)—
‘‘(i) determined without regard to sec-
tions 135, 162(l), 911, 931, and 933 of
such Code, and
‘‘(ii) increased by—
‘‘(I) the amount of interest re-
ceived or accrued by the individual
during the taxable year which is ex-
empt from tax, and
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Title I, Subtitle G
‘‘(II) the amount of the social se-
curity benefits (as defined in section
86(d) of such Code) received during
the taxable year to the extent not in-
cluded in gross income under section
86 of such Code.
The determination under the preceding sen-
tence shall be made without regard to any car-
ryover or carryback.
‘‘(2) ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘eligible individual’
means any individual who is residing in the
United States.
‘‘(B) EXCLUSION.—The term ‘eligible indi-
vidual’ does not include—
‘‘(i) an alien who is ineligible for as-
sistance under this title pursuant to sec-
tion 2802 of the Affordable Health Care
Now Act of 1994; or
‘‘(ii) an individual who is an inmate of
a public institution (except as a patient of
a medical institution).
‘‘(3) POVERTY LINE.—The term ‘poverty line’
means the income official poverty line (as defined by
231
Title I, Subtitle G
the Office of Management and Budget, and revised
annually in accordance with section 673(2) of the
Omnibus Budget Reconciliation Act of 1981) that—
‘‘(A) in the case of a family of less than
five individuals, is applicable to a family of the
size involved; and
‘‘(B) in the case of a family of more than
four individuals, is applicable to a family of
four persons.
‘‘(4) PREMIUM.—Any reference to the term
‘premium’ includes a reference to premium equiva-
lence for self-insured plans.
‘‘(5) 
BENCHMARK
COVERAGE.—The 
term
‘benchmark coverage’ means the standard option of
the Blue Cross-Blue Shield plan offered under the
Federal Employees Health Benefits Program under
chapter 89 of title 5, United States Code, as in ef-
fect during 1994.’’.
232
Title I, Subtitle H
Subtitle H—Medicaid Reform
PART 1—STATE FLEXIBILITY IN THE MEDICAID
PROGRAM: THE MEDICAL HEALTH ALLOW-
ANCE PROGRAM
SEC. 1701. ESTABLISHMENT OF PROGRAM.
(a) IN GENERAL.—Title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.), as amended by section 1601,
is further amended—
(1) by redesignating section 1932 as section
1933; and
(2) by inserting after section 1931 the following
new section:
‘‘STATE HEALTH ALLOWANCE PROGRAMS
‘‘SEC. 1932. (a) TREATMENT
OF EXPENDITURES
UNDER HEALTH ALLOWANCE PROGRAMS AS MEDICAL
ASSISTANCE UNDER STATE PLAN.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this title, for purposes of determining
the amount to be paid to a State under section
1903(a)(1) for quarters in any fiscal year, amounts
expended by an eligible State (as described in sub-
section (b)) during the fiscal year under a State
health allowance program (as described in subsection
(c)) shall be included in the total amount expended
during the fiscal year as medical assistance under
233
Title I, Subtitle H
the State plan (except as provided under paragraphs
(2) and (3) and under subsection (d)(1)(C)).
‘‘(2) FEDERAL
PAYMENT
RESTRICTED
TO
ACUTE
CARE
SERVICES.—No amounts expended
under a State health allowance program that are at-
tributable to medical assistance described in para-
graphs (4), (14), (15), (23), or (24) of section
1905(a) shall be included in the total amount ex-
pended as medical assistance under the State plan.
‘‘(3) AMOUNT OF FEDERAL PAYMENT BASED
UPON UNUSED PREMIUM SUBSIDY PROGRAM ALLOT-
MENT.—In no case shall this subsection result in the
total Federal payments to the State under this title
(including payments attributable to this section and
section 1923) for quarters in a fiscal year exceeding
an amount equal to the difference between—
‘‘(A) the State’s allotment for the premium
subsidy program for children under section
1931(i)(2) for such fiscal year; and
‘‘(B) the amount paid to the State for such
program for such fiscal year.
‘‘(4) LIMITATION ON PREMIUM PAYMENTS FOR
ABORTION
SERVICES.—Notwithstanding any other
provision of this title or the Affordable Health Care
Now Act of 1994, none of the funds appropriated to
234
Title I, Subtitle H
carry out this section shall be expended to assist in
the purchase, in whole or in part, of a health benefit
package that includes abortion except in cases (A)
where the life of the mother would be endangered if
the fetus were carried to term, or (B) where the
pregnancy is the result of rape or incest.
‘‘(b) ELIGIBILITY OF STATE.—A State is eligible for
purposes of subsection (a) if the State submits (at such
time and in such form as the Secretary may require) an
application to the Secretary containing such information
and assurances as the Secretary may require, including
assurances that the State has adopted and is enforcing
standards regarding quality assurance for group health
plans participating in the State health allowance program,
including standards regarding—
‘‘(1) uniform reporting requirements for such
plans relating to a minimum set of clinical data, pa-
tient satisfaction data, and other information that
may be used by individuals to compare the quality
of various plans; and
‘‘(2) the establishment or designation of an en-
tity of the State government to collect the data de-
scribed in subparagraph (A) and to regularly report
such data to the Secretary.
235
Title I, Subtitle H
‘‘(c) STATE HEALTH ALLOWANCE PROGRAM DE-
SCRIBED.—
‘‘(1) ENROLLMENT OF PARTICIPATING INDIVID-
UALS IN APPROVED GROUP HEALTH PLANS.—In this
section, a State health allowance program is a pro-
gram in effect in all the political subdivisions of the
State (except as provided in (c)) under which the
State makes payments to a group health plan (ap-
proved under paragraph (2)) which provides cov-
erage to the individual as an allowance towards the
costs of providing the individual with benefits under
the plan.
‘‘(2) APPROVED PLANS DESCRIBED.—For pur-
poses of paragraph (1), a State shall approve group
health plans in accordance with such standards as
the State may establish, except that—
‘‘(A) the State may not approve a plan for
a year unless the plan provides certified stand-
ard health coverage described in section
1931(j);
‘‘(B) at least one of the plans approved by
the State shall be a health maintenance organi-
zation or other plan under which payments are
otherwise made on a capitated basis for provid-