(2) The table of sections for chapter 43 of such
Code is amended by striking the item relating to sec-
tion 4973 and inserting the following:
‘‘Sec. 4973. Tax on excess contributions to individual retirement
accounts, medical savings accounts, certain 403(b)
contracts, and certain individual retirement annu-
ities.’’
(3) The table of sections for subchapter B of
chapter 68 of such Code is amended by inserting ‘‘or
on medical savings accounts’’ after ‘‘annuities’’ in
the item relating to section 6693.
SEC. 212. REFUNDABLE CREDIT FOR PURCHASE OF COV-
ERAGE 
UNDER 
TAX-QUALIFIED 
HEALTH
CARE PLANS.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits) is amended by redes-
ignating section 35 as section 36 and by inserting after
section 34 the following new section:
‘‘SEC. 35. PURCHASE OF COVERAGE UNDER TAX-QUALIFIED
HEALTH CARE PLANS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this subtitle for the taxable year an amount
equal to 31 percent of the amount paid by the taxpayer
during the taxable year for coverage under a tax-qualified
health care plan (as defined in section 101 of the Health
Savings and Security Act of 1994) for the taxpayer, the
spouse of the taxpayer, and any dependent (as defined in
section 152) of the taxpayer.
‘‘(b) COVERAGE OF CERTAIN INDIVIDUALS NOT IN-
CLUDED.—There shall not be taken into account under
subsection (a) amounts paid for coverage for any individ-
ual if—
‘‘(1) such individual is covered by—
‘‘(A) part A or part B of the medicare pro-
gram under title XVIII of the Social Security
Act,
‘‘(B) the medicaid program under title
XIX of the Social Security Act,
‘‘(C) the health care program for active
military personnel under title 10, United States
Code,
‘‘(D) the veterans health care program
under chapter 17 of title 38, United States
Code,
‘‘(E) the Civilian Health and Medical Pro-
gram of the Uniformed Services (CHAMPUS),
as defined in section 1073(4) of title 10, United
States Code, or
‘‘(F) the Indian health service program
under the Indian Health Care Improvement Act
(25 U.S.C. 1601 et seq.), or
‘‘(2) the amendments made by subtitle A of
title II of the Health Savings and Security Act of
1994 do not apply to such individual’s health cov-
erage by reason of section 204(b) of such Act.
‘‘(c) COORDINATION
WITH
HEALTH
INSURANCE
CREDIT CERTIFICATES.—
‘‘(1) IN
GENERAL.—If any health insurance
credit certificate is used pursuant to section 212(b)
of the Health Savings and Security Act of 1994 by
the taxpayer to pay for coverage under a tax-quali-
fied health care plan during any taxable year, then
the tax imposed by this chapter for such taxable
year shall be increased by the aggregate dollar
amount of the certificates so used during such tax-
able year.
‘‘(2) RECONCILIATION OF CERTIFICATES AND
CREDIT ALLOWED.—Any increase in tax under para-
graph (1) shall not be treated as tax imposed by this
chapter for purposes of determining the amount of
any credit (other than the credit allowed by sub-
section (a)) allowable under this subpart.’’
100
(b) HEALTH INSURANCE CERTIFICATES FOR LOW-
INCOME INDIVIDUALS ELIGIBLE FOR CREDIT.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall establish a program under which individ-
uals provide certificates to any provider of a tax-
qualified health care plan (as defined in section 101
of this Act) in full or partial payment of the provid-
er’s premium for the individual for the year. If an
individual presents the provider with such a certifi-
cate, the provider shall accept the certificate toward
payment of the provider’s premium for the individ-
ual for the year.
(2) INDIVIDUALS
ELIGIBLE
FOR
CERTIFI-
CATES.—Under the program established pursuant to
paragraph (1), certificates shall be available only to
individuals—
(A) to whom a credit under section 35 of
the Internal Revenue Code of 1986 (as added
by subsection (a)) is allowable for the taxable
year, and
(B) whose liability for tax under subtitle A
of such Code (determined without regard to
such credit) is likely (as determined by the Sec-
retary) to be less than the amount of such cred-
it allowable for such taxable year.
101
(3) AMOUNT
OF
CERTIFICATES.—The dollar
amount of the certificates provided under such pro-
gram to an individual for any taxable year shall not
exceed the amount of the credit under such section
35 that the Secretary estimates will be allowable to
such individual for such taxable year.
(4) PAYMENT TO PROVIDERS.—
(A) AMOUNT.—Except as otherwise pro-
vided in this paragraph, a provider of any tax-
qualified health care plan shall be entitled, upon
presentation to the Secretary (or his designee)
of an individual’s certificate and of information
used by the provider to determine the individ-
ual’s applicable premium, to payment equal to
the dollar amount of the certificate.
(B) PREMIUM
LESS
THAN
CERTIFICATE
DOLLAR
AMOUNT.—If the certificate dollar
amount is greater than the amount of the indi-
vidual’s applicable premium, the provider of the
tax-qualified health care plan to the individual
shall be entitled to payment under subpara-
graph (A) only in the amount of the individual’s
applicable premium.
(C) OFFSETTING
PAYMENTS.—If a pro-
vider of a tax-qualified health care plan has re-
102
ceived prepayment of an individual’s applicable
premium for any period for which the individ-
ual’s certificate is in effect, the amount of the
payment to which the provider is otherwise enti-
tled under subparagraph (A) shall be reduced
to the extent of such premium paid.
(D) ACCEPTANCE OF CERTAIN IMPROPER
CERTIFICATES.—The Secretary may not deny
payment under subparagraph (A) to a provider
of a tax-qualified health care plan because a
certificate presented for payment was invalid,
unless the entity had knowledge of such invalid-
ity at the time of its acceptance of the certifi-
cate.
(5) HEALTH PLANS PROVIDED BY STATES.—In
the case of a tax-qualified health care plan provided
pursuant to a program described in section 1932 of
the Social Security Act, the State shall be treated
for purposes of this subsection as the provider of
such plan.
(c) TECHNICAL AMENDMENTS.—
(1) Subsection (l) of section 162 of such Code
is hereby repealed.
103
(2) The table of sections for such subpart C is
amended by striking the last item and inserting the
following new items:
‘‘Sec. 35. Purchase of coverage under tax-qualified health care
plans.
‘‘Sec. 36. Overpayments of tax.’’
(3) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘or from section 35 of such Code’’.
SEC. 213. CREDIT FOR COST OF ROUTINE PREVENTIVE
CARE.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to nonrefundable credits) is amended by
inserting after section 23 the following new section:
‘‘SEC. 24. COST OF ROUTINE PREVENTIVE CARE.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this chapter for the taxable year an amount
equal to 31 percent of the amount paid by the taxpayer
during the taxable year for routine preventive care for the
taxpayer, the spouse of the taxpayer, and any dependent
(as defined in section 152) of the taxpayer.
‘‘(b) CARE
OF CERTAIN INDIVIDUALS NOT IN-
CLUDED.—There shall not be taken into account under
subsection (a) amounts paid for routine preventive care
for—
104
‘‘(1) any individual who is the beneficiary of a
medical savings account (as defined in section 23(c))
or the spouse or a dependent of such a beneficiary,
‘‘(2) any individual who is covered under a
managed health care plan (as defined in section 101
of Health Savings and Security Act of 1994),
‘‘(3) any individual who is covered by—
‘‘(A) part A or part B of the medicare pro-
gram under title XVIII of the Social Security
Act,
‘‘(B) the medicaid program under title
XIX of the Social Security Act,
‘‘(C) the health care program for active
military personnel under title 10, United States
Code,
‘‘(D) the veterans health care program
under chapter 17 of title 38, United States
Code,
‘‘(E) the Civilian Health and Medical Pro-
gram of the Uniformed Services (CHAMPUS),
as defined in section 1073(4) of title 10, United
States Code,
‘‘(F) the Indian health service program
under the Indian Health Care Improvement Act
(25 U.S.C. 1601 et seq.), and
105
‘‘(4) any individual if the amendments made by
subtitle A of title II of the Health Savings and Secu-
rity Act of 1994 do not apply to such individual’s
health coverage by reason of section 204(b) of such
Act.
‘‘(c) ROUTINE PREVENTIVE CARE.—For purposes of
this section, the term ‘routine preventive care’ means any
service provided in accordance with the recommended
schedule of clinical preventive services of the United States
Preventive Services Task Force.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such subpart A is amended by inserting after the item
relating to section 23 the following new item:
‘‘Sec. 24. Cost of routine preventive care.’’
SEC. 214. EFFECTIVE DATE.
The amendments made by this subtitle shall apply to
taxable years beginning after December 31, 1995.
Subtitle C—Repeal of Medical
Expense Deduction
SEC. 221. REPEAL OF MEDICAL EXPENSE DEDUCTION.
Section 213 of the Internal Revenue Code of 1986
(relating to medical, dental, etc., expenses) is amended by
adding at the end thereof the following new subsection:
‘‘(f) TERMINATION.—No deduction shall be allowed
under this section for any taxable year beginning after De-
cember 31, 1995.’’
106
Subtitle D—Veterans Medical
Benefits and Services Unaffected
SEC. 231. VETERANS MEDICAL BENEFITS AND SERVICES
UNAFFECTED.
Nothing in this title or the amendments made by this
title shall affect the eligibility of any veteran (or spouse
or dependent thereof) for medical benefits and services
provided under title 38, United States Code.
TITLE 
III—SAVINGS 
IN 
MEDI-
CARE AND MEDICAID PRO-
GRAMS
Subtitle A—Medicare Program
SEC. 301. INCREASE IN MEDICARE PART B PREMIUM FOR
INDIVIDUALS WITH HIGH INCOME.
(a) IN GENERAL.—Subchapter A of chapter 1 of the
Internal Revenue Code of 1986 is amended by adding at
the end thereof the following new part:
‘‘PART VIII—MEDICARE PART B PREMIUMS FOR
HIGH-INCOME INDIVIDUALS
‘‘Sec. 59B. Medicare part B premium tax.
‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.
‘‘(a) IMPOSITION OF TAX.—In the case of an individ-
ual to whom this section applies for the taxable year, there
is hereby imposed (in addition to any other tax imposed
by this subtitle) a tax for such taxable year equal to the
107
aggregate of the Medicare part B premium taxes for each
of the months during such year that such individual is
covered by Medicare part B.
‘‘(b) INDIVIDUALS TO WHOM SECTION APPLIES.—
This section shall apply to any individual for any taxable
year if—
‘‘(1) such individual is covered under Medicare
part B for any month during such year, and
‘‘(2) the modified adjusted gross income of the
taxpayer for such taxable year exceeds the threshold
amount.
‘‘(c) MEDICARE
PART
B PREMIUM
TAX
FOR
MONTH.—
‘‘(1) IN GENERAL.—The Medicare part B pre-
mium tax for any month is 2⁄3 the amount equal to
the excess of—
‘‘(A) 150 percent of the monthly actuarial
rate for enrollees age 65 and over determined
for that calendar year under section 1839(b) of
the Social Security Act, over
‘‘(B) the total monthly premium under sec-
tion 1839 of the Social Security Act (deter-
mined without regard to subsections (b) and (f)
of section 1839 of such Act).
108
‘‘(2) PHASEIN
OF
TAX.—If the modified ad-
justed gross income of the taxpayer for any taxable
years exceeds the threshold amount by less than
$50,000, the Medicare part B premium tax for any
month during such taxable year shall be an amount
which bears the same ratio to the amount deter-
mined under paragraph (1) (without regard to this
paragraph) as such excess bears to $50,000. The
preceding sentence shall not apply to any individual
whose threshold amount is zero.
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh-
old amount’ means—
‘‘(A) except as otherwise provided in this
paragraph, $100,000,
‘‘(B) $125,000 in the case of a joint re-
turn, and
‘‘(C) zero in the case of a taxpayer who—
‘‘(i) is married at the close of the tax-
able year but does not file a joint return
for such year, and
‘‘(ii) does not live apart from his
spouse at all times during the taxable year.
109
‘‘(2) MODIFIED
ADJUSTED
GROSS
INCOME.—
The term ‘modified adjusted gross income’ means
adjusted gross income—
‘‘(A) determined without regard to sections
135, 911, 931, and 933, and
‘‘(B) increased by the amount of interest
received or accrued by the taxpayer during the
taxable year which is exempt from tax.
‘‘(3) MEDICARE PART B COVERAGE.—An indi-
vidual shall be treated as covered under Medicare
part B for any month if a premium is paid under
part B of title XVIII of the Social Security Act for
the coverage of the individual under such part for
the month.
‘‘(4) MARRIED
INDIVIDUAL.—The determina-
tion of whether an individual is married shall be
made in accordance with section 7703.’’
(b) CLERICAL AMENDMENT.—The table of parts for
subchapter A of chapter 1 of such Code is amended by
adding at the end thereof the following new item:
‘‘Part VIII. Medicare Part B Premiums For High-Income Individ-
uals.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to months after December 1993
in taxable years ending after December 31, 1995.
110
SEC. 302. IMPOSITION OF 20 PERCENT COINSURANCE ON
CLINICAL LABORATORY SERVICES UNDER
MEDICARE.
(a) IN GENERAL.—Paragraphs (1)(D) and (2)(D) of
section 1833(a) of the Social Security Act (42 U.S.C.
1395l(a)) are each amended—
(1) by striking ‘‘(or 100 percent’’ and all that
follows through ‘‘the first opinion))’’; and
(2) by striking ‘‘100 percent of such negotiated
rate’’ and inserting ‘‘80 percent of such negotiated
rate’’.
(b) REPEAL OF MANDATORY ASSIGNMENT.—Section
1833(h)(5) of such Act (42 U.S.C. 1395l(h)(5)) is amend-
ed by striking subparagraphs (C) and (D).
(c) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to tests furnished on
or after January 1, 1996.
SEC. 303. ANNUAL INDEXING OF PART B DEDUCTIBLE.
Section 1833(b) of the Social Security Act (42 U.S.C.
1395l(b)) is amended by striking ‘‘1991 and subsequent
years’’ and inserting the following: ‘‘calendar years 1991
through 1995, and, for calendar year 1996 and each sub-
sequent year, by a deductible equal to the deductible under
this subsection for the previous year increased by the per-
centage increase in the consumer price index for all urban
111
consumers (U.S. city average) for the 12-month period
ending with June of the previous year’’.
Subtitle B—Medicaid Program
PART 1—ACHIEVING SAVINGS IN PROGRAM
SEC. 311. CAP ON FEDERAL PAYMENTS MADE FOR ACUTE
MEDICAL SERVICES FURNISHED UNDER THE
MEDICAID PROGRAM.
(a) IN GENERAL.—Title XIX of the Social Security
Act (42 U.S.C. 1396 et seq.) is amended by redesignating
section 1931 as section 1932 and by inserting after section
1930 the following new section:
‘‘CAP ON FEDERAL PAYMENT MADE FOR ACUTE MEDICAL
SERVICES
‘‘SEC. 1931. (a) ANNUAL FEDERAL CAP.—Federal
financial participation is not available under section
1903(a)(1) for expenditures for acute medical services (as
defined in subsection (c)) for a class of medicaid categor-
ical individuals (as defined in subsection (c)(2)) for a
State for a quarter in a fiscal year, to the extent such
expenditures exceed 1⁄4 of the product of—
‘‘(1) the per-capita limit determined under sub-
section (b) for the State for such fiscal year for such
class, multiplied by
‘‘(2) the average number of medicaid categor-
ical individuals in such class entitled to receive medi-
112
cal assistance under the State plan in any month in
the quarter.
‘‘(b) PER-CAPITA LIMIT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the per-capita limit for a class of medicaid cat-
egorical individuals for a State for—
‘‘(A) fiscal year 1996, is an amount equal
to the base per-capita funding amount (as de-
termined under paragraph (2)) for such class
for such State, increased by 20 percent; and
‘‘(B) fiscal year 1997 and each succeeding
fiscal year, is an amount equal to the amount
determined under this paragraph for the pre-
vious fiscal year for the class updated by the
applicable percentage for such fiscal year (de-
scribed in paragraph (3)).
‘‘(2) BASE PER-CAPITA FUNDING AMOUNT.—
‘‘(A) IN
GENERAL.—The base per-capita
funding amount for a State for a class is an
amount equal to the quotient of—
‘‘(i) the gross amount of payments
under the State plan under this title with
respect to medical assistance furnished for
acute medical services for individuals with-
in such class for calendar quarters in fiscal
113
year 1994, but does not include such ex-
penditures for which no Federal financial
participation is provided under such plan;
divided by
‘‘(ii) the average total number of med-
icaid categorical individuals in such class
in the State in any month during fiscal
year 1994.
‘‘(B) DISPROPORTIONATE
SHARE
PAY-
MENTS NOT INCLUDED.—In applying subpara-
graph (A), payments made under section 1923
shall not be counted in the gross amount of
payments.
‘‘(C) TREATMENT OF DISALLOWANCES.—
The amount determined under this paragraph
shall take into account amounts (or an estimate
of amounts) disallowed.
‘‘(3) APPLICABLE PERCENTAGE.—In paragraph
(1), the applicable percentage for a fiscal year is
equal to—
‘‘(A) for fiscal year 1997, the greater of—
‘‘(i) the estimated percentage change
in the Consumer Price Index through the
midpoint of fiscal year 1996, plus 3 per-
centage points, or
114
‘‘(ii) the medicare economic index re-
ferred to in the fourth sentence of section
1842(b)(3) applicable to services provided
as of January 1 of the fiscal year, minus
1 percentage point;
‘‘(B) for fiscal year 1998, the greater of—
‘‘(i) the estimated percentage change
in the Consumer Price Index through the
midpoint of fiscal year 1997, plus 2 per-
centage points, or
‘‘(ii) the medicare economic index re-
ferred to in the fourth sentence of section
1842(b)(3) applicable to services provided
as of January 1 of the fiscal year, minus
1 percentage point;
‘‘(C) for fiscal year 1999, the greater of—
‘‘(i) the estimated percentage change
in the Consumer Price Index through the
midpoint of fiscal year 1998, plus 1 per-
centage point, or
‘‘(ii) the medicare economic index re-
ferred to in the fourth sentence of section
1842(b)(3) applicable to services provided
as of January 1 of the fiscal year, minus
2 percentage points; and
115
‘‘(D) for fiscal year 2000 and each suc-
ceeding fiscal year, the greater of—
‘‘(i) the estimated percentage change
in the Consumer Price Index through the
midpoint of the previous fiscal year, or
‘‘(ii) the medicare economic index re-
ferred to in the fourth sentence of section
1842(b)(3) applicable to services provided
as of January 1 of the fiscal year, minus
2 percentage points.
‘‘(4) ESTIMATIONS OF AND ADJUSTMENTS TO
STATE
TOTAL
FUNDING
AMOUNT.—The Secretary
shall—
‘‘(A) establish a process for estimating the
limit on expenditures for acute medical services
applicable under subsection (a) at the beginning
of each fiscal year and adjusting such amount
during such fiscal year; and
‘‘(B) notifying each State of the esti-
mations and adjustments referred to in sub-
paragraph (A).
‘‘(c) DEFINITIONS.—For purposes of this section and
section 1931:
116
‘‘(1) ACUTE
MEDICAL
SERVICES.—The term
‘acute medical services’ means items and services de-
scribed in section 1905(a) other than the following:
‘‘(A) Nursing facility services (as defined
in section 1905(f)).
‘‘(B) Intermediate care facility for the
mentally retarded services (as defined in section
1905(d)).
‘‘(C) Personal care services (as described
in section 1905(a)(24)).
‘‘(D) Private duty nursing services (as re-
ferred to in section 1905(a)(8)).
‘‘(E) Home or community-based services
furnished under a waiver granted under sub-
section (c), (d), or (e) of section 1915.
‘‘(F) Home and community care furnished
to functionally disabled elderly individuals
under section 1929.
‘‘(G) Community supported living arrange-
ments services under section 1930.
‘‘(H) Case-management services (as de-
scribed in section 1915(g)(2)).
‘‘(I) Home health care services (as referred
to in section 1905(a)(7)), clinic services, and re-
habilitation services that are furnished to an in-
117
dividual who has a condition or disability that
qualifies the individual to receive any of the
services described in a previous subparagraph.
‘‘(J) Hospice care.
‘‘(2) MEDICAID
CATEGORICAL
INDIVIDUAL.—
The term ‘medicaid categorical individual’ means an
individual described in section 1902(a)(10)(A).
‘‘(3) CLASS OF MEDICAID CATEGORICAL INDI-
VIDUALS.—The term ‘class’ means individuals within
each of the following classes:
‘‘(A) SSI-RELATED INDIVIDUALS.—Medic-
aid categorical individuals—
‘‘(i) with respect to whom supple-
mental security income benefits are being
paid under title XVI of the Social Security
Act,
‘‘(ii) who receiving a supplementary
payment under section 1616 of such Act or
under section 212 of Public Law 93–66, or
‘‘(iii) who receiving monthly benefits
under section 1619(a) of such Act (wheth-
er or not pursuant to section 1616(c)(3) of
such Act).
118
‘‘(B) OTHER INDIVIDUALS.—Medicaid cat-
egorical individuals not described in subpara-
graph (A).’’.
(b) REQUIRING STATE MAINTENANCE OF EFFORT.—
Section 1902(a) of such 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:
‘‘(63) provide that the State will continue to
make eligible for medical assistance under section
1902(a)(10)(A) any class or category of individuals
eligible for medical assistance under such section
during fiscal year 1994.’’.
(c) DISCONTINUATION OF REIMBURSEMENT STAND-
ARDS
FOR INPATIENT HOSPITAL SERVICES.—Section
1902(a)(13)(A) of such Act (42 U.S.C. 1396a(a)(13)(A))
is amended—
(1) by striking ‘‘hospital services, nursing facil-
ity services, and’’ and inserting ‘‘nursing facilities
services and’’;
119
(2) by striking ‘‘, in the case of hospitals,’’ and
all that follows through ‘‘(v)(1)(G))) which’’;
(3) by striking ‘‘and to assure’’ and all that fol-
lows through ‘‘adequate quality’’; and
(4) by striking ‘‘each hospital, nursing facility,
and’’ and inserting ‘‘each nursing facility and’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall become effective on October 1, 1995.
PART 2—OPTIONAL ENROLLMENT OF LOW-IN-
COME INDIVIDUALS UNDER HIGH DEDUCT-
IBLE UMBRELLA INSURANCE PLANS AND
MANAGED HEALTH CARE PLANS
SEC. 321. OPTIONAL ENROLLMENT UNDER PLANS.
(a) STATE OPTION.—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:
‘‘(63) at the option of the State, provide that
an individual eligible for medical assistance under
the State plan has the option to receive medical as-
sistance consisting of acute medical services (as de-
120
fined in section 1931(c)(1)) through enrollment with
a high deductible umbrella insurance plan or a man-
aged health care plan (as defined in section
1932(f)(2)) under the program described in section
1932, in accordance with the requirements of section
1932.’’.
(b) REQUIREMENTS DESCRIBED.—Title XIX of such
Act (42 U.S.C. 1396 et seq.), as amended by section
311(a)(1), is further amended by redesignating section
1932 as section 1933 and by inserting after section 1931
the following new section:
‘‘OPTIONAL STATE PROGRAM TO ENROLL INDIVIDUALS IN
HIGH
DEDUCTIBLE
UMBRELLA
INSURANCE
PLANS
OR MANAGED HEALTH CARE PLANS
‘‘SEC. 1932. (a) IN GENERAL.—For purposes of sec-
tion 1902(a)(63), a program under this section is a pro-
gram under which the State makes payments to high de-
ductible umbrella insurance plans and managed health
care plans for enrolling eligible individuals (as described
in subsection (c)) for coverage of acute medical services
under such plans, including all necessary payments of pre-
miums, copayments, and deductibles applicable under such
a plan on behalf of such an individual.
‘‘(b) TREATMENT OF PAYMENTS AS MEDICAL AS-
SISTANCE.—
121
‘‘(1) IN GENERAL.—Subject to paragraph (3),
for purposes of determining the amount of Federal
financial participation for a State under section
1903 in a quarter, any payments made by a State
under the program under this section shall be treat-
ed as expenditures for medical assistance under the
State plan for such quarter, without regard to
whether or not such payments are on behalf of indi-
viduals who (but for this section) would not other-
wise be eligible for medical assistance under the
State plan under this title.
‘‘(2) FEDERAL
PAYMENT
RESTRICTED
TO
ACUTE MEDICAL SERVICES.—No amounts expended
under a qualified health plan on behalf of an individ-
ual enrolled under such a plan pursuant to this sec-
tion that are attributable to medical assistance for
other than acute medical services shall be included
in the total amount expended as medical assistance
under the State plan under paragraph (1). No
amounts expended for abortions or services directly
related to the performance of abortions, except when
necessary to prevent the death of the mother, shall
be included in the total amount expended as medical
assistance under the State plan under paragraph
(1).
122
‘‘(3) LIMITATION.—In no case shall this sub-
section result in (A) the total Federal payments to
the State for the quarter under this title (including
payments attributable to this section and section
1923), exceeding (B) the total Federal payments
that the Secretary estimates would have been paid
under this title to the State for the quarter if the
State did not have a program under this section.
‘‘(c) ELIGIBILITY OF INDIVIDUALS TO PARTICIPATE
IN PROGRAM.—
‘‘(1) AUTOMATIC
ELIGIBILITY
OF
MEDICAID
CATEGORICALLY
ELIGIBLE
INDIVIDUALS.—Subject
to subsection (d), any individual to whom the State
makes medical assistance available under the State
plan under this title pursuant to clause (i) of section
1902(a)(10)(A) shall be eligible to participate in the
program under this section.
‘‘(2) MANDATORY ELIGIBILITY OF INDIVIDUALS
WITH INCOME UNDER THE POVERTY LEVEL.—
‘‘(A) IN GENERAL.—Subject to subsection
(e) and subparagraph (B), an individual law-
fully residing in the State shall be eligible to
participate in the program if the income of the
individual’s family is equal to or less than 100
percent of the official poverty line (as defined
123
by the Office of Management and Budget, and
revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation
Act of 1991) applicable to a family of the size
involved.
‘‘(B) EXCEPTION.—If the application of
subparagraph (A) would result in—
‘‘(i) the total State expenditures for a
quarter under this title (including expendi-
tures attributable to this section and sec-
tion 1923), exceeding
‘‘(ii) the total State expenditures that
the Secretary estimates would have been
made under this title for the quarter if the
State did not have a program under this
section,
then there shall be substituted for 100 percent
in subparagraph (A) such percent as would re-
sult in the amount described in clause (i) equal-
ing the amount described in clause (ii).
‘‘(3) OPTIONAL
ELIGIBILITY
OF
INDIVIDUALS
WITH
INCOME
UP
TO
160
PERCENT
OF
POVERTY
LEVEL.—
‘‘(A) IN GENERAL.—Subject to subsection
(e), a State operating a program under this sec-
124
tion may make an individual lawfully residing
in the State eligible to participate in the pro-
gram if the income of the individual’s family is
greater than 100 percent (but less than such
percentage, not to exceed 160 percent, as the
State may specify) of such official poverty line.
‘‘(B) CONTRIBUTION MAY BE REQUIRED.—
In the case of an individual who is participating
in the program pursuant to this paragraph, the
program may require such an individual to con-
tribute all (or a portion) of the premiums and
cost-sharing of such a high deductible umbrella
insurance plan or managed care health plan if
the amount of such contribution is determined
in accordance with a sliding scale based on the
individual’s family income.
‘‘(4) OPTIONAL ENROLLMENT OF OTHER INDI-
VIDUALS.—
‘‘(A) IN GENERAL.—Subject to subsection
(e), a State operating a program under this sec-
tion may make any individual (or class of indi-
viduals) who is not described in paragraph (1),
(2), or (3) and who is not otherwise offered cov-
erage under a high deductible umbrella insur-
125
ance plan or managed care health plan eligible
to participate in the program.
‘‘(B) SPECIAL RULES.—
‘‘(i) CONTRIBUTION
MAY
BE
RE-
QUIRED.—In the case of an individual who
is participating in the program pursuant to
this paragraph, the program may require
such an individual to contribute all (or a
portion) of the premiums and cost-sharing
of such a high deductible umbrella insur-
ance plan or managed health care plan.
‘‘(ii) NO
FEDERAL
MATCHING
PAY-
MENTS.—For purposes of payment to
States under section 1903(a), no amounts
expended by the State under the program
during a fiscal year on behalf of an indi-
vidual enrolled pursuant to subparagraph
(A) may be included in the total amount
expended during the fiscal year as medical
assistance under the State plan.
‘‘(5) 
OFFERING
OF
COVERAGE
THROUGH
OTHER PROGRAMS.—Nothing in this section shall be
construed as preventing a State which—
‘‘(A) does not operate a State program
under this section from assuring that individ-
126
uals in the State who are not offered coverage
under a high deductible umbrella insurance
plan or managed health care plan are offered
coverage under a health plan, or
‘‘(B) does operate such a program from as-
suring that individuals in the State who are not
described in paragraph (1), (2), or (3) and who
are not offered coverage under a high deduct-
ible umbrella insurance plan or managed health
care plan are offered coverage under a health
plan other than through such program.’’.
‘‘(d) EXCLUSION AND USE OF RESOURCE STAND-
ARD.—
‘‘(1) EXCLUSION OF ELDERLY MEDICARE-ELIGI-
BLE INDIVIDUALS.—No individual shall be eligible to
participate in the program under this section if the
individual is entitled to benefits under title XVIII of
the Social Security Act pursuant to section 226 of
such Act.
‘‘(2) USE OF RESOURCE STANDARD.—A State
may require an individual to meet a resource stand-
ard as a condition of eligibility to participate in the
program only if the Secretary approves the State’s
use of such a standard.
127
‘‘(e) CONSTRUCTION.—No provision of any Federal
law shall prevent a State from enrolling any employee or
other individual in accordance with this section. The pre-
vious sentence shall not be construed as permitting a State
to require the employer of an individual participating in
the program to contribute toward the individual’s pre-
mium required for such participation.
‘‘(f) DEFINITIONS.—For purposes of this section:
‘‘(1) ACUTE
MEDICAL
SERVICES.—The term
‘acute medical services’ means the care and services
described in section 1932(c)(1).
‘‘(2) HIGH DEDUCTIBLE UMBRELLA INSURANCE
PLAN; MANAGED HEALTH CARE PLAN.—The terms
‘high deductible umbrella insurance plan’ and ‘man-
aged health care plan’ have the meaning given such
terms in section 101(a) of the Health Savings and
Security Act of 1994.’’.
(c) REDUCTION IN DISPROPORTIONATE SHARE HOS-
PITAL PAYMENTS FOR PARTICIPATING STATES.—Section
1923 of the Social Security Act (42 U.S.C. 1396r–4), as
amended by section 13621(b)(1) of the Omnibus Budget
Reconciliation Act of 1993, is amended by adding at the
end the following new subsection:
‘‘(h) REDUCTION IN PAYMENT ADJUSTMENTS FOR
STATES ENROLLING INDIVIDUALS IN CERTAIN PRIVATE
128
HEALTH PLANS.—In the case of a State operating a pro-
gram under section 1932 to make payments to enroll indi-
viduals in high deductible umbrella insurance plans or
managed health care plans in a fiscal year, the Secretary
shall reduce the total payment adjustments made under
this section for hospitals in the State for quarters in the
year by such amount as the Secretary determines to be
necessary to ensure that the total amount paid to the
State under section 1903(a)(1) for the year does not ex-
ceed the amount that would have been paid to the State
under such section for the year if the State did not operate
such a program.’’.
PART 3—INCREASING STATE FLEXIBILITY TO
USE MANAGED CARE UNDER MEDICAID
SEC. 331. MODIFICATION OF FEDERAL REQUIREMENTS TO
ALLOW STATES MORE FLEXIBILITY IN CON-
TRACTING FOR COORDINATED CARE SERV-
ICES UNDER MEDICAID.
(a) IN GENERAL.—
(1) PAYMENT
PROVISIONS.—Section 1903(m)
of the Social Security Act (42 U.S.C. 1396b(m)) is
amended to read as follows:
‘‘(m)(1) No payment shall be made under this title
to a State with respect to expenditures incurred by such
State for payment to an entity which is at risk (as defined
129
in section 1933(a)(4)) for services provided by such entity
to individuals eligible for medical assistance under the
State plan under this title, unless the entity is a risk con-
tracting entity (as defined in section 1933(a)(3)) and the
State and such entity comply with the applicable provi-
sions of section 1933.
‘‘(2) No payment shall be made under this title to
a State with respect to expenditures incurred by such
State for payment for services provided to an individual
eligible for medical assistance under the State plan under
this title if such payment by the State is contingent upon
the individual receiving such services from a specified
health care provider or subject to the approval of a speci-
fied health care provider, unless the entity receiving pay-
ment is a primary care case management entity (as de-
fined in section 1933(a)(2)) and the State and such entity
comply with the applicable provisions of section 1933.’’.
(2) REQUIREMENTS FOR COORDINATED CARE
SERVICES.—Title XIX of the Social Security Act (42
U.S.C. 1396 et seq.), as amended by sections
311(a)(1) and 321(b), is further amended by redes-
ignating section 1933 as section 1934 and by insert-
ing after section 1932 the following new section:
‘‘REQUIREMENTS FOR COORDINATED CARE SERVICES
‘‘SEC. 1933. (a) DEFINITIONS.—For purposes of this
title: