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high-volume disproportionate share hospitals and a
detailed description of the specific methodology to be
used to provide disproportionate share payments to
such hospitals. The State shall provide an annual re-
port to the Secretary describing the disproportionate
share payments to such high-volume disproportionate
share hospitals.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section apply on and after October 1, 1997.
CHAPTER 2—EXPANSION OF MEDICAID
ELIGIBILITY
SEC. 5731. STATE OPTION TO PERMIT WORKERS WITH DIS-
ABILITIES TO BUY INTO MEDICAID.
Section 
1902(a)(10)(A)(ii) 
(42 
U.S.C.
1396a(a)(10)(A)(ii)) is amended—
(1) in subclause (XI), by striking ‘‘or’’ at the
end;
(2) in subclause (XII), by adding ‘‘or’’ at the
end; and
(3) by adding at the end the following:
‘‘(XIII) who are in families whose
income is less than 250 percent of the
income official poverty line (as defined
by the Office of Management and
Budget, and revised annually in ac-
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cordance with section 673(2) of the
Omnibus Budget Reconciliation Act of
1981) applicable to a family of the size
involved, and who but for earnings in
excess of the limit established under
section 1619(b), would be considered to
be receiving supplemental security in-
come (subject, notwithstanding section
1916, to payment of premiums or other
charges (set on a sliding scale based on
income) that the State may deter-
mine);’’.
SEC. 5732. 12-MONTH CONTINUOUS ELIGIBILITY FOR CHIL-
DREN.
(a) IN
GENERAL.—Section 1902(e) (42 U.S.C.
1396a(e)) is amended by adding at the end the following:
‘‘(12) At the option of the State, the State plan may
provide that an individual who is under an age specified
by the State (not to exceed 19 years of age) and who is
determined to be eligible for benefits under a State plan
approved under this title under subsection (a)(10)(A) shall
remain eligible for those benefits until the earlier of—
‘‘(A) the end of the 12-month period following
the determination; or
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‘‘(B) the date that the individual exceeds that
age.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to medical assistance for items and
services furnished on or after October 1, 1997.
CHAPTER 3—PROGRAMS OF ALL-INCLU-
SIVE CARE FOR THE ELDERLY (PACE)
SEC. 5741. 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 5702(a)(1)—
(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 program
under section 1932 to PACE program eligible indi-
viduals enrolled under the program under such sec-
tion; and’’;
(2) by redesignating section 1932 as section
1933; and
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(3) by inserting after section 1931 the following
new section:
‘‘PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
‘‘SEC. 1932. (a) STATE OPTION.—
‘‘(1) IN GENERAL.—A State may elect to provide
medical assistance under this section with respect to
PACE program services to PACE program eligible in-
dividuals who are eligible for medical assistance
under the State plan and who are enrolled in a
PACE program under a PACE program agreement.
Such individuals need not be eligible for benefits
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 program pur-
suant 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.
‘‘(2) PACE PROGRAM DEFINED.—For purposes
of this section and section 1894, the term ‘PACE pro-
gram’ means a program of all-inclusive care for the
elderly that meets the following requirements:
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‘‘(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 agreement
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 that 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
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private, nonprofit entity organized for char-
itable 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-PROFIT
PROVIDERS.—Clause (i) of subparagraph (A)
shall not apply—
‘‘(i) to entities subject to a demonstra-
tion project waiver under subsection (h);
and
‘‘(ii) after the date the report under
section 5743(b) of the Balanced Budget Act
of 1997 is submitted, unless the Secretary
determines that any of the findings de-
scribed 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 program
agreement’ means, with respect to a PACE provider,
an agreement, consistent with this section, section
1894 (if applicable), and regulations promulgated to
carry out such sections, among the PACE provider,
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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 DE-
FINED.—For purposes of this section, the term ‘PACE
program eligible individual’ means, with respect 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 Protocol
for the Program of All-inclusive Care for the Elderly
(PACE), as published by On Lok, Inc., as of April 14,
1995, or any successor protocol that may be agreed
upon between the Secretary and On Lok, Inc.
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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 PREVIOUSLY
OPERATING PACE DEMONSTRATION WAIVER PRO-
GRAMS.—Each contract year (including a year
occurring before the effective date of this section)
during which an entity has operated a PACE
demonstration waiver program shall be counted
under subparagraph (A) as a contract year dur-
ing which the entity operated a PACE program
as a PACE provider under a PACE program
agreement.
‘‘(10) REGULATIONS.—For purposes of this sec-
tion, 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
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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 serv-
ices covered under this title, but without
any limitation or condition as to amount,
duration, or scope and without application
of deductibles, copayments, coinsurance, or
other cost-sharing that would otherwise
apply under such title or this title, respec-
tively; 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 pur-
suant to regulations; and
‘‘(D) specify the covered items and services
that will not be provided directly by the entity,
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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 en-
rolled 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 patients.
‘‘(c) ELIGIBILITY DETERMINATIONS.—
‘‘(1) IN GENERAL.—The determination of—
‘‘(A) whether an individual is a PACE pro-
gram eligible individual shall be made under
and in accordance with the PACE program
agreement, and
‘‘(B) who is entitled to medical assistance
under this title shall be made (or who is not so
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entitled, may be made) by the State administer-
ing 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 by the Secretary or the State
administering agency, in accordance with regulations,
to be comparable to the health status of individuals
who have participated in the PACE demonstration
waiver programs. Such determination shall be based
upon information on health status and related indica-
tors (such as medical diagnoses and measures of ac-
tivities of daily living, instrumental activities of
daily living, and cognitive impairment) that are part
of a uniform minimum data set collected by PACE
providers on potential eligible individuals.
‘‘(3) ANNUAL ELIGIBILITY RECERTIFICATIONS.—
‘‘(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 annually.
‘‘(B) EXCEPTION.—The requirement of an-
nual reevaluation under subparagraph (A) may
be waived during a period in accordance with
regulations in those cases in which the State ad-
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ministering agency determines that there is no
reasonable expectation of improvement or signifi-
cant change in an individual’s condition during
the period because of the advanced age, severity
of the advanced age, severity of chronic condi-
tion, or degree of impairment of functional ca-
pacity 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 program
the individual reasonably would be expected to meet
such requirement within the succeeding 6-month pe-
riod.
‘‘(5) ENROLLMENT; DISENROLLMENT.—The en-
rollment and disenrollment of PACE program eligible
individuals in a PACE program shall be pursuant to
regulations and the PACE program agreement and
shall permit enrollees to voluntarily disenroll without
cause at any time. Such regulations and agreement
shall provide that the PACE program may not
disenroll a PACE program eligible individual on the
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ground that the individual has engaged in noncompli-
ant behavior if such behavior is related to a mental
or physical condition of the individual. For purposes
of the preceding sentence, the term ‘noncompliant be-
havior’ includes repeated noncompliance with medical
advice and repeated failure to appear for appoint-
ments.
‘‘(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 monthly
payments of a capitation amount for each PACE pro-
gram eligible individual enrolled under the agreement
under this section.
‘‘(2) 
CAPITATION
AMOUNT.—The 
capitation
amount to be applied under this subsection for a pro-
vider 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 comparative frailty
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of PACE enrollees and such other factors as the Sec-
retary determines to be appropriate. The payment
under this section shall be in addition to any pay-
ment 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, ex-
tending, and terminating PACE program agree-
ments for the operation of PACE programs by
entities that meet the requirements 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 providers
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 enact-
ment of this section, or
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‘‘(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 effect 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 sub-
section (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
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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,
provided that such terms and conditions are
consistent with this section and regulations.
‘‘(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 un-
necessary duplication of services and avoid im-
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pairing the financial and service viability of an
existing program.
‘‘(3) DATA COLLECTION; DEVELOPMENT OF OUT-
COME MEASURES.—
‘‘(A) DATA COLLECTION.—
‘‘(i) IN
GENERAL.—Under a PACE
program agreement, the PACE provider
shall—
‘‘(I) collect data;
‘‘(II) maintain, and afford the
Secretary and the State administering
agency access to, the records relating to
the program, including pertinent fi-
nancial, 
medical, 
and 
personnel
records; and
‘‘(III) submit to the Secretary and
the State administering agency such
reports as the Secretary finds (in con-
sultation with State administering
agencies) necessary to monitor the op-
eration, cost, and effectiveness of the
PACE program.
‘‘(ii) REQUIREMENTS
DURING
TRIAL
PERIOD.—During the first 3 years of oper-
ation of a PACE program (either under this
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section or under a PACE demonstration
waiver program), the PACE provider shall
provide such additional data as the Sec-
retary specifies in regulations in order to
perform the oversight required under para-
graph (4)(A).
‘‘(B) DEVELOPMENT
OF
OUTCOME
MEAS-
URES.—Under a PACE program agreement, the
PACE provider, the Secretary, and the State ad-
ministering agency shall jointly cooperate in the
development and implementation of health status
and quality of life outcome measures with respect
to PACE program eligible individuals.
‘‘(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 assure com-
pliance with the requirements of this section and
regulations. Such a review shall include—
‘‘(i) an onsite visit to the program site;
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‘‘(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 regulations;
and
‘‘(v) any other elements the Secretary
or the State administering agency considers
necessary or appropriate.
‘‘(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 appro-
priate, taking into account the performance 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 promptly
to the PACE provider, along with any rec-
ommendations for changes to the provider’s pro-
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gram, 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 administering
agency, and enrollees.
‘‘(B) CAUSES
FOR
TERMINATION.—In ac-
cordance with regulations establishing procedures
for termination of PACE program agreements,
the Secretary or a State administering agency
may terminate a PACE program agreement with
a PACE provider for, among other reasons, the
fact that—
‘‘(i) the Secretary or State administer-
ing agency determines that—
‘‘(I) there are significant defi-
ciencies in the quality of care provided
to enrolled participants; or
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‘‘(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, a plan to correct the
deficiencies, or has failed to continue imple-
mentation of such a plan.
‘‘(C) TERMINATION AND TRANSITION PROCE-
DURES.—An entity whose PACE provider agree-
ment is terminated under this paragraph shall
implement the transition procedures required
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 comply with
the requirements of this section and regulations,
the Secretary (and the State administering agen-
cy) may take any or all of the following actions:
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‘‘(i) Condition the continuation of the
PACE program agreement upon timely exe-
cution of a corrective action plan.
‘‘(ii) Withhold some or all further pay-
ments under the PACE program agreement
under this section or section 1894 with re-
spect to PACE program services furnished
by such provider until the deficiencies have
been corrected.
‘‘(iii) Terminate such agreement.
‘‘(B) APPLICATION OF INTERMEDIATE SANC-
TIONS.—Under regulations, the Secretary may
provide for the application against a PACE pro-
vider of remedies described in section 1857(f)(2)
(or, for periods before January 1, 1999, section
1876(i)(6)(B)) or 1903(m)(5)(B) in the case of
violations by the provider of the type described
in section 1857(f)(1) (or 1876(i)(6)(A) for such
periods) or 1903(m)(5)(A), respectively (in rela-
tion to agreements, enrollees, and requirements
under section 1894 or this section, respectively).
‘‘(7) PROCEDURES FOR TERMINATION OR IMPOSI-
TION OF SANCTIONS.—Under regulations, the provi-
sions of section 1857(g) (or for periods before January
1, 1999, section 1876(i)(9)) shall apply to termi-
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nation 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 Medi-
care Choice organization under part C of title XVIII
(or for such periods an eligible organization under
section 1876).
‘‘(8) TIMELY CONSIDERATION OF APPLICATIONS
FOR PACE PROGRAM PROVIDER STATUS.—In consider-
ing an application for PACE provider program sta-
tus, the application shall be deemed approved unless
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 appli-
cant in writing with respect to any additional infor-
mation that is needed in order to make a final deter-
mination with respect to the application. After the
date the Secretary receives such additional informa-
tion, 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 in-
terim final or final regulations to carry out this sec-
tion and section 1894.
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‘‘(2) USE OF PACE PROTOCOL.—
‘‘(A) IN GENERAL.—In issuing such regula-
tions, the Secretary shall, to the extent consistent
with the provisions of this section, incorporate
the requirements applied to PACE demonstra-
tion waiver programs under the PACE protocol.
‘‘(B) FLEXIBILITY.—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
nonstaff physicians according to State licensing
law requirements) under this section and section
1894, the Secretary (in close consultation with
State administering agencies) may modify or
waive provisions of the PACE protocol so long as
any such modification or waiver is not inconsist-
ent with and would not impair the essential ele-
ments, objectives, and requirements of this sec-
tion, but may not modify or waive any of the
following provisions:
‘‘(i) The focus on frail elderly qualify-
ing individuals who require the level of care
provided in a nursing facility.
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‘‘(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.
‘‘(v) The assumption by the provider of
full financial risk.
‘‘(3) APPLICATION OF CERTAIN ADDITIONAL BEN-
EFICIARY AND PROGRAM PROTECTIONS.—
‘‘(A) IN GENERAL.—In issuing such regula-
tions and subject to subparagraph (B), the Sec-
retary may apply with respect to PACE pro-
grams, providers, and agreements such require-
ments of part C of title XVIII (or, for periods be-
fore January 1, 1999, section 1876) and section
1903(m) relating to protection of beneficiaries
and program integrity as would apply to Medi-
care Choice organizations under such part C (or
for such periods eligible organizations under
risk-sharing contracts under section 1876) and to