423
after the date the manufacturer provides
notice to the Secretary.
‘‘(iii) EFFECTIVENESS
OF
TERMI-
NATION.—Any termination under this sub-
paragraph shall not affect rebates due
under the agreement before the effective
date of its termination.
‘‘(iv) NOTICE
TO
STATES.—In the
case of a termination under this subpara-
graph, the Secretary shall provide notice of
such termination to the States within not
less than 30 days before the effective date
of such termination.
‘‘(v) APPLICATION TO TERMINATIONS
OF OTHER AGREEMENTS.—The provisions
of this subparagraph shall apply to the ter-
minations of master agreements described
in section 8126(a) of title 38, United
States Code.
‘‘(C) DELAY
BEFORE
REENTRY.—In the
case of any rebate agreement with a manufac-
turer under this section which is terminated,
another such agreement with the manufacturer
(or a successor manufacturer) may not be en-
tered into until a period of 1 calendar quarter
424
has elapsed since the date of the termination,
unless the Secretary finds good cause for an
earlier reinstatement of such an agreement.
‘‘(5) SETTLEMENT OF DISPUTES.—
‘‘(A) SECRETARY.—The Secretary shall
have the authority to resolve, settle, and com-
promise disputes regarding the amounts of re-
bates owed under this section and section 1927.
‘‘(B) STATE.—Each State, with respect to
covered outpatient drugs paid for under the
State plan, shall have authority, independent of
the Secretary’s authority under subparagraph
(A), to resolve, settle, and compromise disputes
regarding the amounts of rebates owed under
this section. Any such action shall be deemed to
comply with the requirements of this title, and
such covered outpatient drugs shall be eligible
for payment under the State plan under this
title.
‘‘(C) AMOUNT OF REBATE.—The Secretary
shall limit the amount of the rebate payable in
any case in which the Secretary determines
that, because of unusual circumstances or ques-
tionable data, the provisions of subsection (c)
result in a rebate amount that is inequitable or
425
otherwise inconsistent with the purposes of this
section.
‘‘(c) DETERMINATION OF AMOUNT OF REBATE.—
‘‘(1) BASIC
REBATE
FOR
SINGLE
SOURCE
DRUGS
AND
INNOVATOR
MULTIPLE
SOURCE
DRUGS.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), the amount of the rebate speci-
fied in this subsection with respect to a State
participating in the master rebate agreement
for a rebate period (as defined in subsection
(i)(7)) with respect to each dosage form and
strength of a single source drug or an innovator
multiple source drug shall be equal to the prod-
uct of—
‘‘(i) the total number of units of each
dosage form and strength paid for under
the State plan in the rebate period (as re-
ported by the State); and
‘‘(ii) the greater of—
‘‘(I) the difference between the
average manufacturer price and the
best price (as defined in subparagraph
(C)) for the dosage form and strength
of the drug, or
426
‘‘(II) the minimum rebate per-
centage (specified in subparagraph
(B)) of such average manufacturer
price,
for the rebate period.
‘‘(B) MINIMUM
REBATE
PERCENTAGE.—
For purposes of subparagraph (A)(ii)(II), the
‘minimum rebate percentage’ is 15 percent.
‘‘(C) BEST
PRICE
DEFINED.—For pur-
poses of this section—
‘‘(i) IN
GENERAL.—The term ‘best
price’ means, with respect to a single
source drug or innovator multiple source
drug of a manufacturer, the lowest price
available from the manufacturer during the
rebate period to any wholesaler, retailer,
provider, health maintenance organization,
nonprofit entity, or governmental entity
within the United States, excluding—
‘‘(I) any prices charged on or
after October 1, 1992, to the Indian
Health Service, the Department of
Veterans Affairs, a State home receiv-
ing funds under section 1741 of title
38, United States Code, the Depart-
427
ment of Defense, the Public Health
Service, or a covered entity described
in section 340B(a)(4) of the Public
Health Service Act,
‘‘(II) any prices charged under
the Federal Supply Schedule of the
General Services Administration,
‘‘(III) any prices used under a
State pharmaceutical assistance pro-
gram, and
‘‘(IV) any depot prices and single
award contract prices, as defined by
the Secretary, of any agency of the
Federal Government.
‘‘(ii) SPECIAL RULES.—The term ‘best
price’—
‘‘(I) shall be inclusive of cash dis-
counts, free goods that are contingent
on any purchase requirement, volume
discounts, and rebates (other than re-
bates under this section),
‘‘(II) shall be determined without
regard to special packaging, labeling,
or identifiers on the dosage form or
product or package,
428
‘‘(III) shall not take into account
prices that are merely nominal in
amount, and
‘‘(IV) shall exclude rebates paid
under this section or any other re-
bates paid to a State participating in
the master rebate agreement.
‘‘(2) ADDITIONAL REBATE FOR SINGLE SOURCE
AND INNOVATOR MULTIPLE SOURCE DRUGS.—
‘‘(A) IN GENERAL.—The amount of the re-
bate specified in this subsection with respect to
a State participating in the master rebate
agreement for a rebate period, with respect to
each dosage form and strength of a single
source drug or an innovator multiple source
drug, shall be increased by an amount equal to
the product of—
‘‘(i) the total number of units of such
dosage form and strength dispensed after
December 31, 1990, for which payment
was made under the State plan for the re-
bate period; and
‘‘(ii) the amount (if any) by which—
‘‘(I) the average manufacturer
price 
for 
the 
dosage 
form 
and
430
1990’ and ‘the month prior to the first month
of the first full calendar quarter after the day
on which the drug was first marketed’ for ‘Sep-
tember 1990’.
‘‘(3) REBATE FOR OTHER DRUGS.—
‘‘(A) IN GENERAL.—The amount of the re-
bate paid to a State participating in the master
rebate agreement for a rebate period with re-
spect to each dosage form and strength of cov-
ered outpatient drugs (other than single source
drugs and innovator multiple source drugs)
shall be equal to the product of—
‘‘(i) the applicable percentage (as de-
scribed in subparagraph (B)) of the aver-
age manufacturer price for the dosage
form and strength for the rebate period,
and
‘‘(ii) the total number of units of such
dosage form and strength dispensed after
December 31, 1990, for which payment
was made under the State plan for the re-
bate period.
‘‘(B) 
APPLICABLE
PERCENTAGE
DE-
FINED.—For purposes of subparagraph (A)(i),
the ‘applicable percentage’ is 11 percent.
431
‘‘(4) LIMITATION ON AMOUNT OF REBATE TO
AMOUNTS PAID FOR CERTAIN DRUGS.—
‘‘(A) IN GENERAL.—Upon request of the
manufacturer of a covered outpatient drug, the
Secretary shall limit, in accordance with sub-
paragraph (B), the amount of the rebate under
this subsection with respect to a dosage form
and strength of such drug if the majority of the
estimated number of units of such dosage form
and strength that are subject to rebates under
this section were dispensed to inpatients of
nursing facilities.
‘‘(B) AMOUNT OF REBATE.—In the case of
a covered outpatient drug subject to subpara-
graph (A), the amount of the rebate specified in
this subsection for a rebate period, with respect
to each dosage form and strength of such drug,
shall not exceed the amount paid under the
State plan with respect to such dosage form
and strength of the drug in the rebate period
(without consideration of any dispensing fees
paid).
‘‘(5) SUPPLEMENTAL REBATES PROHIBITED.—
No rebates shall be required to be paid by manufac-
turers with respect to covered outpatient drugs fur-
432
nished to individuals in any State that provides for
the collection of such rebates in excess of the rebate
amount payable under this section.
‘‘(d) LIMITATIONS
ON COVERAGE
OF DRUGS
BY
STATES PARTICIPATING IN MASTER AGREEMENT.—
‘‘(1) PERMISSIBLE
RESTRICTIONS.—A State
participating in the master rebate agreement under
this section may—
‘‘(A) subject to prior authorization under
its State plan any covered outpatient drug so
long as any such prior authorization program
complies with the requirements of paragraph
(5); and
‘‘(B) exclude or otherwise restrict coverage
under its plan of a covered outpatient drug if—
‘‘(i) the drug is contained in the list
referred to in paragraph (2);
‘‘(ii) the drug is subject to such re-
strictions pursuant to the master rebate
agreement or any agreement described in
subsection (a)(4); or
‘‘(iii) the State has excluded coverage
of the drug from its formulary established
in accordance with paragraph (4).
433
‘‘(2) LIST
OF
DRUGS
SUBJECT
TO
RESTRIC-
TION.—The following drugs or classes of drugs, or
their medical uses, may be excluded from coverage
or otherwise restricted by a State participating in
the master rebate agreement:
‘‘(A) Agents when used for anorexia,
weight loss, or weight gain.
‘‘(B) Agents when used to promote fertil-
ity.
‘‘(C) Agents when used for cosmetic pur-
poses or hair growth.
‘‘(D) Agents when used for the sympto-
matic relief of cough and colds.
‘‘(E) Agents when used to promote smok-
ing cessation.
‘‘(F) Prescription vitamins and mineral
products, except prenatal vitamins and fluoride
preparations.
‘‘(G) Nonprescription drugs.
‘‘(H) Covered outpatient drugs which the
manufacturer seeks to require as a condition of
sale that associated tests or monitoring services
be purchased exclusively from the manufacturer
or its designee.
‘‘(I) Barbiturates.
434
‘‘(J) Benzodiazepines.
‘‘(3) ADDITIONS TO DRUG LISTINGS.—The Sec-
retary shall, by regulation, periodically update the
list of drugs or classes of drugs described in para-
graph (2), or their medical uses, which the Secretary
has determined to be subject to clinical abuse or in-
appropriate use.
‘‘(4) REQUIREMENTS
FOR
FORMULARIES.—A
State participating in the master rebate agreement
may establish a formulary if the formulary meets the
following requirements:
‘‘(A) The formulary is developed by a com-
mittee consisting of physicians, pharmacists,
and other appropriate individuals appointed by
the Governor of the State.
‘‘(B) Except as provided in subparagraph
(C), the formulary includes the covered out-
patient drugs of any manufacturer which has
entered into and complies with the agreement
under subsection (a) (other than any drug ex-
cluded from coverage or otherwise restricted
under paragraph (2)).
‘‘(C) A covered outpatient drug may be ex-
cluded with respect to the treatment of a spe-
cific disease or condition for an identified popu-
435
lation (if any) only if, based on the drug’s label-
ing (or, in the case of a drug the prescribed use
of which is not approved under the Federal
Food, Drug, and Cosmetic Act but is a medi-
cally accepted indication, based on information
from the appropriate compendia described in
subsection (i)(5)), the excluded drug does not
have a significant, clinically meaningful thera-
peutic advantage in terms of safety, effective-
ness, or clinical outcome of such treatment for
such population over other drugs included in
the formulary and there is a written expla-
nation (available to the public) of the basis for
the exclusion.
‘‘(D) The State plan permits coverage of a
drug excluded from the formulary (other than
any drug excluded from coverage or otherwise
restricted under paragraph (2)) pursuant to a
prior authorization program that is consistent
with paragraph (5).
‘‘(E) The formulary meets such other re-
quirements as the Secretary may impose in
order to achieve program savings consistent
with protecting the health of program bene-
ficiaries.
436
A prior authorization program established by a State
under paragraph (5) is not a formulary subject to
the requirements of this paragraph.
‘‘(5) REQUIREMENTS OF PRIOR AUTHORIZATION
PROGRAMS.—The State plan of a State participating
in the master rebate agreement may require, as a
condition of coverage or payment for a covered out-
patient drug for which Federal financial participa-
tion is available in accordance with this section, the
approval of the drug before its dispensing for any
medically accepted indication (as defined in sub-
section (i)(5)) only if the system providing for such
approval—
‘‘(A) provides response by telephone or
other telecommunication device within 24 hours
of a request for prior authorization, and
‘‘(B) except with respect to the drugs on
the list referred to in paragraph (2), provides
for the dispensing of at least a 72-hour supply
of a covered outpatient prescription drug in an
emergency situation (as defined by the Sec-
retary).
‘‘(6) OTHER
PERMISSIBLE
RESTRICTIONS.—A
State participating in the master rebate agreement
may impose limitations, with respect to all such
437
drugs in a therapeutic class, on the minimum or
maximum quantities per prescription or on the num-
ber of refills, if such limitations are necessary to dis-
courage waste, and may address instances of fraud
or abuse by individuals in any manner authorized
under this Act.
‘‘(e) DRUG USE REVIEW.—
‘‘(1) IN GENERAL.—A State participating in the
master rebate agreement may provide for a drug use
review program to educate physicians and phar-
macists to identify and reduce the frequency of pat-
terns of fraud, abuse, gross overuse, or inappropri-
ate or medically unnecessary care, among physicians,
pharmacists, and patients, or associated with specific
drugs or groups of drugs, as well as potential and
actual severe adverse reactions to drugs.
‘‘(2) APPLICATION OF STATE STANDARDS.—A
State with a drug use review program under this
subsection shall establish and operate the program
under such standards as it may establish.
‘‘(f) ELECTRONIC CLAIMS MANAGEMENT.—In ac-
cordance with chapter 35 of title 44, United States Code
(relating to coordination of Federal information policy),
the Secretary shall encourage each State to establish, as
its principal means of processing claims for covered out-
438
patient drugs under its State plan, a point-of-sale elec-
tronic claims management system, for the purpose of per-
forming on-line, real time eligibility verifications, claims
data capture, adjudication of claims, and assisting phar-
macists (and other authorized persons) in applying for and
receiving payment.
‘‘(g) ANNUAL REPORT.—
‘‘(1) IN GENERAL.—Not later than May 1 of
each year, the Secretary shall transmit to the Com-
mittee on Finance of the Senate, and the Committee
on Commerce of the House of Representatives, a re-
port on the operation of this section in the preceding
fiscal year.
‘‘(2) DETAILS.—Each report shall include infor-
mation on—
‘‘(A) ingredient costs paid under this title
for single source drugs, multiple source drugs,
and nonprescription covered outpatient drugs,
‘‘(B) the total value of rebates received
and number of manufacturers providing such
rebates,
‘‘(C) the effect of inflation on the value of
rebates required under this section,
‘‘(D) trends in prices paid under this title
for covered outpatient drugs, and
439
‘‘(E) Federal and State administrative
costs associated with compliance with the provi-
sions of this title.
‘‘(h) EXEMPTION FOR CAPITATED HEALTH CARE
ORGANIZATIONS, HOSPITALS, AND CERTAIN NURSING
FACILITIES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the requirements of the master rebate
agreement under this section shall not apply with re-
spect to covered outpatient drugs dispensed by or
through—
‘‘(A) a capitated health care organization
(as defined in section 1504(c)(1)),
‘‘(B) a hospital that dispenses covered out-
patient drugs using a drug formulary system
and bills the State no more than the hospital’s
purchasing costs for covered outpatient drugs,
or
‘‘(C) a nursing facility which receives pay-
ment under this title for health care services,
including prescription drugs, on a capitated
basis or which dispenses covered outpatient
drugs using a drug formulary system.
‘‘(2) CONSTRUCTION
IN
DETERMINING
BEST
PRICE.—Nothing in paragraph (1) shall be con-
440
strued as excluding amounts paid by the entities de-
scribed in such paragraph for covered outpatient
drugs from the determination of the best price (as
defined in subsection (c)(1)(C)) for such drugs.
‘‘(i) DEFINITIONS.—In the section—
‘‘(1) AVERAGE
MANUFACTURER
PRICE.—The
term ‘average manufacturer price’ means, with re-
spect to a covered outpatient drug of a manufacturer
for a rebate period, the average price paid to the
manufacturer for the drug in the United States by
wholesalers for drugs distributed to the retail phar-
macy class of trade, after deducting customary
prompt pay discounts.
‘‘(2) COVERED OUTPATIENT DRUG.—Subject to
the exceptions in paragraph (3), the term ‘covered
outpatient drug’ means—
‘‘(A) of those drugs which are treated as
prescribed drugs for purposes of section
1571(a)(8), a drug which may be dispensed
only upon prescription (except as provided in
subparagraph (D)), and—
‘‘(i) which is approved as a prescrip-
tion drug under section 505 or 507 of the
Federal Food, Drug, and Cosmetic Act;
441
‘‘(ii)(I) which was commercially used
or sold in the United States before the
date of the enactment of the Drug Amend-
ments of 1962 or which is identical, simi-
lar, or related (within the meaning of sec-
tion 310.6(b)(1) of title 21 of the Code of
Federal Regulations) to such a drug, and
(II) which has not been the subject of a
final determination by the Secretary that it
is a ‘new drug’ (within the meaning of sec-
tion 201(p) of the Federal Food, Drug,
and Cosmetic Act) or an action brought by
the Secretary under section 301, 302(a),
or 304(a) of such Act to enforce section
502(f) or 505(a) of such Act; or
‘‘(iii)(I) which is described in section
107(c)(3) of the Drug Amendments of
1962 and for which the Secretary has de-
termined there is a compelling justification
for its medical need, or is identical, simi-
lar, or related (within the meaning of sec-
tion 310.6(b)(1) of title 21 of the Code of
Federal Regulations) to such a drug, and
(II) for which the Secretary has not issued
a notice of an opportunity for a hearing
442
under section 505(e) of the Federal Food,
Drug, and Cosmetic Act on a proposed
order of the Secretary to withdraw ap-
proval of an application for such drug
under such section because the Secretary
has determined that the drug is less than
effective for some or all conditions of use
prescribed, recommended, or suggested in
its labeling;
‘‘(B) a biological product, other than a
vaccine which—
‘‘(i) may only be dispensed upon pre-
scription,
‘‘(ii) is licensed under section 351 of
the Public Health Service Act, and
‘‘(iii) is produced at an establishment
licensed under such section to produce
such product;
‘‘(C) insulin certified under section 506 of
the Federal Food, Drug, and Cosmetic Act; and
‘‘(D) a drug which may be sold without a
prescription (commonly referred to as an ‘over-
the-counter drug’), if the drug is prescribed by
a physician (or other person authorized to pre-
scribe under State law).
443
‘‘(3) LIMITING DEFINITION.—The term ‘covered
outpatient drug’ does not include any drug, biologi-
cal product, or insulin provided as part of, or as in-
cident to and in the same setting as, any of the fol-
lowing (and for which payment may be made under
a State plan as part of payment for the following
and not as direct reimbursement for the drug):
‘‘(A) Inpatient hospital services.
‘‘(B) Hospice services.
‘‘(C) Dental services, except that drugs for
which the State plan authorizes direct reim-
bursement to the dispensing dentist are covered
outpatient drugs.
‘‘(D) Physicians’ services.
‘‘(E) Outpatient hospital services.
‘‘(F) Nursing facility services and services
provided by an intermediate care facility for the
mentally retarded.
‘‘(G) Other laboratory and x-ray services.
‘‘(H) Renal dialysis services.
Such term also does not include any such drug or
product for which a National Drug Code number is
not required by the Food and Drug Administration
or a drug or biological product used for a medical
indication which is not a medically accepted indica-
444
tion. Any drug, biological product, or insulin ex-
cluded from the definition of such term as a result
of this paragraph shall be treated as a covered out-
patient drug for purposes of determining the best
price (as defined in subsection (c)(1)(C)) for such
drug, biological product, or insulin.
‘‘(4) MANUFACTURER.—The term ‘manufac-
turer’ means, with respect to a covered outpatient
drug, the entity holding legal title to or possession
of the National Drug Code number for such drug.
‘‘(5) MEDICALLY ACCEPTED INDICATION.—The
term ‘medically accepted indication’ means any use
for a covered outpatient drug which is approved
under the Federal Food, Drug, and Cosmetic Act, or
the use of which is supported by one or more cita-
tions included or approved for inclusion in any of the
following compendia:
‘‘(A) American Hospital Formulary Service
Drug Information.
‘‘(B) United States Pharmacopeia-Drug
Information.
‘‘(C) American Medical Association Drug
Evaluations.
‘‘(D) The DRUGDEX Information Sys-
tem.
445
‘‘(E) The peer-reviewed medical literature.
‘‘(6) MULTIPLE
SOURCE
DRUG; INNOVATOR
MULTIPLE
SOURCE
DRUG; NONINNOVATOR
MUL-
TIPLE SOURCE DRUG; SINGLE SOURCE DRUG.—
‘‘(A) DEFINED.—
‘‘(i) MULTIPLE SOURCE DRUG.—The
term ‘multiple source drug’ means, with
respect to a rebate period, a covered out-
patient drug (not including any drug de-
scribed in paragraph (2)(D)) for which
there are 2 or more drug products which—
‘‘(I) are rated as therapeutically
equivalent (under the Food and Drug
Administration’s most recent publica-
tion of ‘Approved Drug Products with
Therapeutic 
Equivalence 
Evalua-
tions’),
‘‘(II) except as provided in sub-
paragraph (B), are pharmaceutically
equivalent and bioequivalent, as de-
fined in subparagraph (C) and as de-
termined by the Food and Drug Ad-
ministration, and
‘‘(III) are sold or marketed in
the State during the period.
446
‘‘(ii) INNOVATOR
MULTIPLE
SOURCE
DRUG.—The 
term 
‘innovator 
multiple
source drug’ means a multiple source drug
that was originally marketed under an
original new drug application or product li-
censing application approved by the Food
and Drug Administration.
‘‘(iii) 
NONINNOVATOR
MULTIPLE
SOURCE
DRUG.—The term ‘noninnovator
multiple source drug’ means a multiple
source drug that is not an innovator mul-
tiple source drug.
‘‘(iv) SINGLE
SOURCE
DRUG.—The
term ‘single source drug’ means a covered
outpatient drug (other than a drug de-
scribed in subparagraph (C) or (D) of
paragraph (2)) which is produced or dis-
tributed under an original new drug appli-
cation approved by the Food and Drug Ad-
ministration, including a drug product
marketed by any cross-licensed producers
or distributors operating under the new
drug application or product licensing appli-
cation.
447
‘‘(B) 
EXCEPTION.—Subparagraph
(A)(i)(II) shall not apply if the Food and Drug
Administration changes by regulation the re-
quirement that, for purposes of the publication
described in subparagraph (A)(i)(I), in order
for drug products to be rated as therapeutically
equivalent, they must be pharmaceutically
equivalent and bioequivalent, as defined in sub-
paragraph (C).
‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) drug products are pharmaceuti-
cally equivalent if the products contain
identical amounts of the same active drug
ingredient in the same dosage form and
meet compendial or other applicable stand-
ards of strength, quality, purity, and iden-
tity,
‘‘(ii) drugs are bioequivalent if they do
not present a known or potential bio-
equivalence problem, or, if they do present
such a problem, they are shown to meet an
appropriate standard of bioequivalence,
and
448
‘‘(iii) a drug product is considered to
be sold or marketed in a State if it appears
in a published national listing of average
wholesale prices selected by the Secretary,
if the listed product is generally available
to the public through retail pharmacies in
that State.
‘‘(7) REBATE PERIOD.—The term ‘rebate pe-
riod’ means, with respect to an agreement under
subsection (a), a calendar quarter or other period
specified by the Secretary with respect to the pay-
ment of rebates under such agreement.’’.
SEC. 2004. STATE ELECTION; TERMINATION OF CURRENT
PROGRAM; AND TRANSITION.
(a) TERMINATION OF CURRENT PROGRAM; LIMITA-
TION ON MEDICAID PAYMENTS IN FISCAL YEAR 1997.—
(1) REPEAL OF TITLE.—Title XIX of the Social
Security Act is repealed effective October 1, 1997,
except that the repeal of section 1928 of such Act
is effective on the date of the enactment of this Act
and the succeeding two sections of such title shall be
effective during fiscal year 1996 in the same manner
and to the same extent as such sections were effec-
tive during fiscal year 1995.
449
(2) LIMITATION ON OBLIGATION AUTHORITY.—
Notwithstanding any other provision of such title—
(A) FISCAL YEAR 1997.—Subject to sub-
paragraph (B), the Secretary of Health and
Human Services (in this section referred to as
the ‘‘Secretary’’) may enter into obligations
under such title with any State (as defined for
purposes of such title) for expenses incurred
during fiscal year 1997, but not in excess of the
sum determined under clauses (i), (ii) and (iv)
of section 1511(a)(2)(A) of the Social Security
Act (as added by section 2003) for that State
for fiscal year 1997.
(B) NONE AFTER EFFECTIVE DATE.—The
Secretary is not authorized to enter into any
obligation with any State under title XIX of
such Act for expenses incurred on or after the
earlier of—
(i) October 1, 1997, or
(ii) the first day of the first quarter
on which the State plan under title XV of
such Act (as added by section 2003) is
first effective.
(C) AGREEMENT.—A State’s submission of
claims for payment under section 1903 of such
450
Act on or after October 1, 1996, is deemed to
constitute the State’s acceptance of the obliga-
tion limitation under subparagraph (A) (includ-
ing the formula for computing the amount of
such obligation limitation).
(D) EFFECT ON MEDICAL ASSISTANCE.—
Effective October 1, 1996—
(i) except as provided in this para-
graph, the Federal Government has no ob-
ligation to provide payment with respect to
items and services provided under title
XIX of the Social Security Act, and
(ii) such title and title XV of such Act
shall not be construed as providing for an
entitlement, under Federal law in relation
to the Federal Government, in an individ-
ual or person (including any provider) at
the time of provision or receipt of services.
(3) REQUIREMENT FOR TIMELY SUBMITTAL OF
CLAIMS.—No payment shall be made to a State
under title XIX of such Act with respect to an obli-
gation incurred before October 1, 1996, unless the
State has submitted to the Secretary, by not later
than April 1, 1997, a claim for Federal financial
participation for expenses paid by the State with re-
451
spect to such obligations. Nothing in paragraph (2)
shall be construed as affecting the obligation of the
Federal Government to pay claims described in the
previous sentence.
(b) TRANSITION PROVISIONS.—
(1) Notwithstanding any other provision of law,
in the case where payment has been made under sec-
tion 1903(a) of the Social Security Act to a State
before March 1, 1996, and for which a disallowance
has not been taken as of such date (or, if so taken,
has not been completed, including judicial review, by
such date), the Secretary of Health and Human
Services shall discontinue the disallowance proceed-
ing and, if such disallowance has been taken as of
the date of the enactment of this Act, any payment
reductions effected shall be rescinded and the pay-
ments returned to the State.
(2) The repeal under subsection (a)(1) of sec-
tion 1928 of the Social Security Act shall not affect
the distribution of vaccines purchased and delivered
to the States before the date of the enactment of
this Act. No vaccine may be purchased after such
date by the Federal Government or any State under
any contract under section 1928(d) of the Social Se-
curity Act.
452
(3) No judicial or administrative decision ren-
dered regarding requirements imposed under title
XIX of the Social Security Act with respect to a
State shall have any application to the State plan of
the State under title XV of such Act. A State may,
pursuant to the previous sentence, seek the abroga-
tion or modification of any such decision after the
date of termination of the State medicaid plan under
title XIX of such Act.
(4) No cause of action under title XIX of the
Social Security Act which seeks to require a State
to establish or maintain minimum payment rates
under such title or claim which seeks reimbursement
for any period before the date of the enactment of
this Act based on the alleged failure of the State to
comply with such title and which has not become
final as of such date shall be brought or continued.
(5) Section 6408(a)(3) of the Omnibus Budget
Reconciliation Act of 1989 (as amended by section
13642 of the Omnibus Budget Reconciliation Act of
1993) and section 2 of Public Law 102–276 (as
amended by section 13644 of the Omnibus Budget
Reconciliation Act of 1993) are each amended by
striking ‘‘December 31, 1995’’ and inserting ‘‘Octo-
ber 1, 1997’’.
453
(c) ANTI-FRAUD PROVISIONS.—Section 1128(h)(1)
of the Social Security Act (42 U.S.C. 1320a–7(h)(1)) is
amended by inserting ‘‘or a State plan under title XV’’
after ‘‘title XIX’’.
(d) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) SECRETARIAL SUBMISSION OF LEGISLATIVE
PROPOSAL.—Not later than 90 days after the date
of the enactment of this Act, the Secretary of
Health and Human Services, in consultation, as ap-
propriate, with heads of other Federal agencies and
the States (as defined in section 1101(a)(8) of the
Social Security Act for purposes of title XIX of such
Act), shall submit to the appropriate committees of
Congress a legislative proposal providing for such
technical and conforming amendments in the law as
are required by the provisions of, and amendments
made by, this title.
(2) TRANSITIONAL
RULE.—Any reference in
any provision of law to title XIX of the Social Secu-
rity Act or any provision thereof shall be deemed to
be a reference to such title or provision as in effect
on the day before the date of the enactment of this
Act.
SEC. 2005. INTEGRATION DEMONSTRATION PROJECT.
(a) DESCRIPTION OF PROJECTS.—
454
(1) IN GENERAL.—The Secretary of Health and
Human Services (in this section referred to as the
‘‘Secretary’’) may waive such requirements of titles
XVIII and XV of the Social Security Act as may be
necessary for States to conduct demonstration
projects under this section. Such projects shall dem-
onstrate the manner in which States may use funds
from the programs under such titles to develop and
implement innovative programs for individuals dually
eligible for benefits under both titles, including such
individuals who are chronically ill. The Secretary
shall grant waivers in a manner that permits States
flexibility in contracting with medicare risk providers
and other providers for services, oversight of con-
tract administration and quality management, and
administration of a single enrollment process. Such
a waiver may restrict time period during which
project participants may disenroll without cause
from capitated health plans under the medicare pro-
gram.
(2) VOLUNTARY PARTICIPATION.—A State may
not require an individual eligible to receive items and
services under the medicare and title XV programs
to participate in a demonstration project under this
section.
455
(b) BUDGET NEUTRALITY AND REINVESTMENT OF
SAVINGS.—
(1) BUDGET NEUTRALITY.—The Secretary shall
not approve a demonstration project under this sec-
tion for a State unless the State demonstrates that
the amount of the Federal expenditures under the
program will not exceed the amount of the Federal
expenditures that would have been made if the
project had not been approve.
(2) USE OF SAVINGS.—The Secretary shall per-
mit a State to retain any savings achieved under a
project and to use such savings for—
(A) expanding eligibility for low income
medicare beneficiaries who are risk of institu-
tionalization and who, if institionalized, are
likely to qualify for benefits under title XV of
the Social Security Act, and
(B) providing a scope of services under the
project that exceeds the scope of services nor-
mally covered under such title.
(c) LIMITATION ON NUMBER OF PROJECTS.—Not
more than 10 demonstration projects shall be conducted
under this section.
(d) DURATION.—
456
(1) IN GENERAL.—Subject to paragraph (2), a
demonstration project conducted under this section
shall be conducted for an initial period of 5 years
and, upon the request of a State and a finding by
the Secretary that the project has been successful,
shall be extended indefinitely.
(2) TERMINATION.—The Secretary may, with
90 days’ notice, terminate any demonstration project
conducted under this section that is not in substan-
tial compliance with the terms of the application ap-
proved by the Secretary under this section.
(e) APPLICATIONS.—Each State, or a coalition of
States, desiring to conduct a demonstration project under
this section shall prepare and submit to the Secretary an
application at such time, in such manner, and containing
such information as the Secretary may require, including
an explanation of a plan for evaluating the project. The
Secretary shall approve or deny an application not later
than 90 days after the receipt of such application.
(f) PAYMENTS.—For each calendar quarter occurring
during a demonstration project conducted under this sec-
tion, the Secretary shall provide for payments to the State
in a manner consistent with subsection (b)(1).
(g) OVERSIGHT.—The Secretary shall establish qual-
ity standards for evaluating and monitoring the dem-
457
onstration projects conducted under this section. Such
quality standards shall include reporting requirements
which contain the following:
(1) A description of the demonstration project.
(2) An analysis of beneficiary satisfaction under
such project.
(3) An analysis of the quality of the services de-
livered under the project.
(4) A description of the savings to the medicare
and title XV programs as a result of the demonstra-
tion project.
Subtitle B—Other Provisions
PART 1—INVOLVEMENT OF COMMERCE COMMIT-
TEE IN FEDERAL GOVERNMENT POSITION
REDUCTIONS
SEC. 2101. INVOLVEMENT OF COMMERCE COMMITTEE IN
FEDERAL GOVERNMENT POSITION REDUC-
TIONS.
In any provision of law that provides for consultation
with (or a report to) a relevant committee of Congress
respecting reductions in Federal Government positions, a
reference to the Committee on Commerce of the House
of Representatives shall be deemed to have been made in
relation to matters within the jurisdiction of such Commit-
tee.
458
PART 2—RESTRICTING PUBLIC BENEFITS FOR
ALIENS
Subpart A—Eligibility for Federal Benefits
SEC. 2211. ALIENS WHO ARE NOT QUALIFIED ALIENS INELI-
GIBLE FOR FEDERAL PUBLIC BENEFITS.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law and except as provided in subsection (b), an
alien who is not a qualified alien (as defined in section
2221) is not eligible for any Federal public benefit (as de-
fined in subsection (c)).
(b) EXCEPTIONS.—Subsection (a) shall not apply
with respect to the following Federal public benefits:
(1) Emergency medical services under title XIX
or XV of the Social Security Act.
(2)(A) Public health assistance for immuniza-
tions.
(B) Public health assistance for testing and
treatment of a serious communicable disease if the
Secretary of Health and Human Services determines
that it is necessary to prevent the spread of such
disease.
(c) FEDERAL PUBLIC BENEFIT DEFINED.—
(1) Except as provided in paragraph (2), for
purposes of this part, the term ‘‘Federal public ben-
efit’’ means—
459
(A) any grant, contract, loan, professional
license, or commercial license provided by an
agency of the United States or by appropriated
funds of the United States; and
(B) any retirement, welfare, health, dis-
ability, or any other similar benefit for which
payments or assistance are provided to an indi-
vidual, household, or family eligibility unit by
an agency of the United States or by appro-
priated funds of the United States,
but only if such grant, contract, loan, or license
under subparagraph (A) or program providing bene-
fits under subparagraph (B) is under the jurisdic-
tion of the Committee on Commerce of the House of
Representatives.
(2) Such term shall not apply—
(A) to any contract, professional license, or
commercial license for a nonimmigrant whose
visa for entry is related to such employment in
the United States; or
(B) with respect to benefits for an alien
who as a work authorized nonimmigrant or as
an alien lawfully admitted for permanent resi-
dence under the Immigration and Nationality
Act qualified for such benefits and for whom
460
the United States under reciprocal treaty agree-
ments is required to pay benefits, as determined
by the Attorney General, after consultation with
the Secretary of State.
SEC. 2212. LIMITED ELIGIBILITY OF QUALIFIED ALIENS
FOR MEDICAL ASSISTANCE.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law and except as provided in section 2213 and
subsection (b), a State is authorized to determine the eligi-
bility of an alien who is a qualified alien (as defined in
section 2221) for the program of medical assistance under
titles XV and XIX of the Social Security Act.
(b) EXCEPTIONS.—Qualified aliens under this sub-
section shall be eligible for benefits under such program:
(1) TIME-LIMITED EXCEPTION FOR REFUGEES
AND ASYLEES.—
(A) An alien who is admitted to the United
States as a refugee under section 207 of the
Immigration and Nationality Act until 5 years
after the date of an alien’s entry into the Unit-
ed States.
(B) An alien who is granted asylum under
section 208 of such Act until 5 years after the
date of such grant of asylum.
461
(C) An alien whose deportation is being
withheld under section 243(h) of such Act until
5 years after such withholding.
(2) CERTAIN PERMANENT RESIDENT ALIENS.—
An alien who—
(A) is lawfully admitted to the United
States for permanent residence under the Im-
migration and Nationality Act; and
(B)(i) has worked 40 qualifying quarters
of coverage as defined under title II of the So-
cial Security Act or can be credited with such
qualifying quarters as provided under sub-
section (c), and (ii) did not receive any Federal
means-tested public benefit (as defined in sec-
tion 2213(c)) during any such quarter.
(3) VETERAN AND ACTIVE DUTY EXCEPTION.—
An alien who is lawfully residing in any State and
is—
(A) a veteran (as defined in section 101 of
title 38, United States Code) with a discharge
characterized as an honorable discharge and not
on account of alienage,
(B) on active duty (other than active duty
for training) in the Armed Forces of the United
States, or
462
(C) the spouse or unmarried dependent
child of an individual described in subparagraph
(A) or (B).
(4) TRANSITION FOR THOSE CURRENTLY RE-
CEIVING BENEFITS.—An alien who on the date of
the enactment of this Act is lawfully residing in any
State and is receiving benefits under such program
on the date of the enactment of this Act shall con-
tinue to be eligible to receive such benefits until Jan-
uary 1, 1997.
(c) QUALIFYING QUARTERS.—For purposes of this
section, in determining the number of qualifying quarters
of coverage under title II of the Social Security Act an
alien shall be credited with—
(1) all of the qualifying quarters of coverage as
defined under title II of the Social Security Act
worked by a parent of such alien while the alien was
under age 18 if the parent did not receive any Fed-
eral means-tested public benefit (as defined by the
Secretary and including the medicaid program) dur-
ing any such quarter, and
(2) all of the qualifying quarters worked by a
spouse of such alien during their marriage if the
spouse did not receive any Federal means-tested
public benefit (as so defined) during any such quar-
463
ter and the alien remains married to such spouse or
such spouse is deceased.
SEC. 2213. FIVE-YEAR LIMITED ELIGIBILITY OF QUALIFIED
ALIENS FOR FEDERAL MEANS-TESTED PUB-
LIC BENEFIT.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law and except as provided in subsection (b), an
alien who is a qualified alien (as defined in section 2221)
and who enters the United States on or after the date
of the enactment of this Act is not eligible for any Federal
means-tested public benefit (as defined in subsection (c))
for a period of five years beginning on the date of the
alien’s entry into the United States with a status within
the meaning of the term ‘‘qualified alien’’.
(b) EXCEPTIONS.—The limitation under subsection
(a) shall not apply to the following aliens:
(1) 
EXCEPTION
FOR
REFUGEES
AND
ASYLEES.—
(A) An alien who is admitted to the United
States as a refugee under section 207 of the
Immigration and Nationality Act.
(B) An alien who is granted asylum under
section 208 of such Act.
(C) An alien whose deportation is being
withheld under section 243(h) of such Act.
464
(2) VETERAN AND ACTIVE DUTY EXCEPTION.—
An alien who is lawfully residing in any State and
is—
(A) a veteran (as defined in section 101 of
title 38, United States Code) with a discharge
characterized as an honorable discharge and not
on account of alienage,
(B) on active duty (other than active duty
for training) in the Armed Forces of the United
States, or
(C) the spouse or unmarried dependent
child of an individual described in subparagraph
(A) or (B).
(c) FEDERAL MEANS-TESTED PUBLIC BENEFIT DE-
FINED.—
(1) Except as provided in paragraph (2), for
purposes of this part, the term ‘‘Federal means-test-
ed public benefit’’ means a Federal public benefit
described in section 2211(c) in which the eligibility
of an individual, household, or family eligibility unit
for benefits, or the amount of such benefits, or both
are determined on the basis of income, resources, or
financial need of the individual, household, or unit.
(2) Such term does not include the following:
465
(A) Emergency medical services under title
XV or XIX of the Social Security Act.
(B)(i) Public health assistance for immuni-
zations.
(ii) Public health assistance for testing and
treatment of a serious communicable disease if
the Secretary of Health and Human Services
determines that it is necessary to prevent the
spread of such disease.
SEC. 2214. NOTIFICATION.
Each Federal agency that administers a program to
which section 2211, 2212, or 2213 applies shall, directly
or through the States, post information and provide gen-
eral notification to the public and to program recipients
of the changes regarding eligibility for any such program
pursuant to this subpart.
Subpart B—General Provisions
SEC. 2221. DEFINITIONS.
(a) IN GENERAL.—Except as otherwise provided in
this part, the terms used in this part have the same mean-
ing given such terms in section 101(a) of the Immigration
and Nationality Act.
(b) QUALIFIED ALIEN.—For purposes of this part,
the term ‘‘qualified alien’’ means an alien who, at the time
466
the alien applies for, receives, or attempts to receive a
Federal public benefit, is—
(1) an alien who is lawfully admitted for perma-
nent residence under the Immigration and National-
ity Act,
(2) an alien who is granted asylum under sec-
tion 208 of such Act,
(3) a refugee who is admitted to the United
States under section 207 of such Act,
(4) an alien who is paroled into the United
States under section 212(d)(5) of such Act for a pe-
riod of at least 1 year,
(5) an alien whose deportation is being withheld
under section 243(h) of such Act, or
(6) an alien who is granted conditional entry
pursuant to section 203(a)(7) of such Act as in ef-
fect prior to April 1, 1980.
SEC. 2222. VERIFICATION OF ELIGIBILITY FOR FEDERAL
PUBLIC BENEFITS.
(a) IN GENERAL.—Not later than 18 months after
the date of the enactment of this Act, the Attorney Gen-
eral of the United States, after consultation with the Sec-
retary of Health and Human Services, shall promulgate
regulations requiring verification that a person applying
for a Federal public benefit (as defined in section
467
2211(c)), to which the limitation under section 2211 ap-
plies, is a qualified alien and is eligible to receive such
benefit. Such regulations shall, to the extent feasible, re-
quire that information requested and exchanged be similar
in form and manner to information requested and ex-
changed under section 1137 of the Social Security Act.
(b) STATE COMPLIANCE.—Not later than 24 months
after the date the regulations described in subsection (a)
are adopted, a State that administers a program that pro-
vides a Federal public benefit shall have in effect a ver-
ification system that complies with the regulations.
(c) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated such sums as may be
necessary to carry out the purpose of this section.
PART 3—ENERGY ASSISTANCE
SEC. 2131. ENERGY ASSISTANCE.
Section 2605(f) of the Low-Income Home Energy As-
sistance Act of 1981 (42 U.S.C. 8624(f)) is amended—
(1) by striking ‘‘(f)(1) Notwithstanding’’ and
inserting ‘‘(f) Notwithstanding’’; and
(2) by striking paragraph (2).
468
TITLE III—COMMITTEE ON ECO-
NOMIC 
AND 
EDUCATIONAL
OPPORTUNITIES
SEC. 3001. SHORT TITLE.
This title may be cited as the ‘‘Personal Responsibil-
ity and Work Opportunity Act of 1996’’.
SEC. 3002. TABLE OF CONTENTS.
The table of contents of this title is as follows:
TITLE III—COMMITTEE ON ECONOMIC AND EDUCATIONAL
OPPORTUNITIES
Sec. 3001. Short title.
Sec. 3002. Table of contents.
Subtitle A—Work Requirements
Sec. 3101. Replacement of the JOBS program with mandatory work require-
ments.
Subtitle B—Child and Family Services Block Grant
Sec. 3201. Child and Family Services Block Grant.
Sec. 3202. Reauthorizations.
Sec. 3203. Repeals.
Subtitle C—Child Care
Sec. 3301. Short title and references.
Sec. 3302. Goals.
Sec. 3303. Authorization of appropriations and entitlement authority.
Sec. 3304. Lead agency.
Sec. 3305. Application and plan.
Sec. 3306. Limitation on State allotments.
Sec. 3307. Activities to improve the quality of child care.
Sec. 3308. Repeal of early childhood development and before- and after-school
care requirement.
Sec. 3309. Administration and enforcement.
Sec. 3310. Payments.
Sec. 3311. Annual report and audits.
Sec. 3312. Report by the Secretary.
Sec. 3313. Allotments.
Sec. 3314. Definitions.
Sec. 3315. Repeals.
Sec. 3316. Effective date.
Subtitle D—Child Nutrition Programs
469
CHAPTER 1—NATIONAL SCHOOL LUNCH ACT
Sec. 3401. State disbursement to schools.
Sec. 3402. Nutritional and other program requirements.
Sec. 3403. Free and reduced price policy statement.
Sec. 3404. Special assistance.
Sec. 3405. Miscellaneous provisions and definitions.
Sec. 3406. Summer food service program for children.
Sec. 3407. Commodity distribution.
Sec. 3408. Child care food program.
Sec. 3409. Pilot projects.
Sec. 3410. Reduction of paperwork.
Sec. 3411. Information on income eligibility.
Sec. 3412. Nutrition guidance for child nutrition programs.
Sec. 3413. Information clearinghouse.
CHAPTER 2—CHILD NUTRITION ACT OF 1966
Sec. 3421. Special milk program.
Sec. 3422. Free and reduced price policy statement.
Sec. 3423. School breakfast program authorization.
Sec. 3424. State administrative expenses.
Sec. 3425. Regulations.
Sec. 3426. Prohibitions.
Sec. 3427. Miscellaneous provisions and definitions.
Sec. 3428. Accounts and records.
Sec. 3429. Special supplemental nutrition program for women, infants, and
children.
Sec. 3430. Cash grants for nutrition education.
Sec. 3431. Nutrition education and training.
CHAPTER 3—MISCELLANEOUS PROVISIONS
Sec. 3441. Coordination of school lunch, school breakfast, and summer food
service programs.
Subtitle E—Related Provisions
Sec. 3501. Requirement that data relating to the incidence of poverty in the
United States be published at least every 2 years.
Sec. 3502. Sense of the Congress.
Sec. 3503. Legislative accountability.
Subtitle A—Work Requirements
SEC. 3101. REPLACEMENT OF THE JOBS PROGRAM WITH
MANDATORY WORK REQUIREMENTS.
(a) IN GENERAL.—Part F of title IV of the Social
Security Act (42 U.S.C. 681–687) is amended to read as
follows:
470
‘‘PART F—MANDATORY WORK REQUIREMENTS
‘‘SEC. 481. MANDATORY WORK REQUIREMENTS.
‘‘(a) PARTICIPATION RATE REQUIREMENTS.—
‘‘(1) ALL FAMILIES.—A State that is operating
a program under part A for a fiscal year shall
achieve the minimum participation rate specified in
the following table for the fiscal year with respect to
all families receiving assistance under the State pro-
gram operated under part A:
The minimum
participation
‘‘If the fiscal year is:
rate is:
1996 ...............................................................
1997 ...............................................................
1998 ...............................................................
1999 ...............................................................
2000 ...............................................................
2001 ...............................................................
2002 or thereafter .........................................
50.
‘‘(2) 2-PARENT FAMILIES.—A State that is op-
erating a program under part A for a fiscal year
shall achieve the minimum participation rate speci-
fied in the following table for the fiscal year with re-
spect to 2-parent families receiving assistance under
the State program operated under part A:
The minimum
participation
‘‘If the fiscal year is:
rate is:
1996 ...............................................................
1997 ...............................................................
1998 ...............................................................
1999 or thereafter .........................................
90.
‘‘(b) CALCULATION OF PARTICIPATION RATES.—
‘‘(1) ALL FAMILIES.—
471
‘‘(A) AVERAGE MONTHLY RATE.—For pur-
poses of subsection (a)(1), the participation
rate for all families of a State for a fiscal year
is the average of the participation rates for all
families of the State for each month in the fis-
cal year.
‘‘(B) MONTHLY PARTICIPATION RATES.—
The participation rate of a State for all families
of the State for a month, expressed as a per-
centage, is—
‘‘(i) the number of families receiving
assistance under the State program oper-
ated under part A that include an adult
who is engaged in work for the month; di-
vided by
‘‘(ii) the amount by which—
‘‘(I) the number of families re-
ceiving such assistance during the
month that include an adult receiving
such assistance; exceeds
‘‘(II) the number of families re-
ceiving such assistance that are sub-
ject in such month to a penalty de-
scribed in subsection (e)(1) but have
not been subject to such penalty for
472
more than 3 months within the pre-
ceding 12-month period (whether or
not consecutive).
‘‘(2) 2-PARENT FAMILIES.—
‘‘(A) AVERAGE MONTHLY RATE.—For pur-
poses of subsection (a)(2), the participation
rate for 2-parent families of a State for a fiscal
year is the average of the participation rates for
2-parent families of the State for each month in
the fiscal year.
‘‘(B) MONTHLY PARTICIPATION RATES.—
The participation rate of a State for 2-parent
families of the State for a month shall be cal-
culated by use of the formula set forth in para-
graph (1)(B), except that in the formula the
term ‘number of 2-parent families’ shall be sub-
stituted for the term ‘number of families’ each
place such latter term appears.
‘‘(3) PRO RATA REDUCTION OF PARTICIPATION
RATE
DUE
TO
CASELOAD
REDUCTIONS
NOT
RE-
QUIRED
BY
FEDERAL
LAW.—The Secretary shall
prescribe regulations for reducing the minimum par-
ticipation rate otherwise required by this section for
a fiscal year by the number of percentage points
473
equal to the number of percentage points (if any) by
which—
‘‘(A) the number of families receiving as-
sistance during the fiscal year under the State
plan approved under part A is less than
‘‘(B) the number of families that received
aid under the State plan approved under part
A during fiscal year 1995.
The minimum participation rate shall not be re-
duced to the extent that the Secretary deter-
mines that the reduction in the number of fami-
lies receiving such assistance is required by
Federal law.
‘‘(4) STATE
OPTION
FOR
PARTICIPATION
RE-
QUIREMENT EXEMPTIONS.—For any fiscal year, a
State may, at its option, not require an individual
who is a single custodial parent caring for a child
who has not attained 12 months of age to engage in
work and may disregard such an individual in deter-
mining the participation rates under subsection (a).
‘‘(c) ENGAGED IN WORK.—
‘‘(1) ALL
FAMILIES.—For purposes of sub-
section (b)(1)(B)(i), a recipient is engaged in work
for a month in a fiscal year if the recipient is par-
ticipating in work activities for at least the minimum
474
average number of hours per week specified in the
following table during the month, not fewer than 20
hours per week of which are attributable to an activ-
ity described in paragraph (1), (2), (3), (4), (5), (6),
(7), or (8) of subsection (d):
The minimum
‘‘If the month is
average number of
in fiscal year:
hours per week is:
1996 ...............................................................
1997 ...............................................................
1998 ...............................................................
1999 ...............................................................
2000 ...............................................................
2001 ...............................................................
2002 ...............................................................
2003 or thereafter .........................................
35.
‘‘(2) 2-PARENT
FAMILIES.—For purposes of
subsection (b)(2)(B)(i), an adult is engaged in work
for a month in a fiscal year if the adult is making
progress in work activities for at least 35 hours per
week during the month, not fewer than 30 hours per
week of which are attributable to an activity de-
scribed in paragraph (1), (2), (3), (4), (5), (6), (7),
or (8) of subsection (d).
‘‘(3) LIMITATION ON NUMBER OF WEEKS FOR
WHICH JOB SEARCH COUNTS AS WORK.—Notwith-
standing paragraphs (1) and (2), an individual shall
not be considered to be engaged in work by virtue
of participation in an activity described in subsection
(d)(6), after the individual has participated in such
an activity for 4 weeks (except if the unemployment
475
rate is above the national average, 12 weeks) in a
fiscal year. An individual shall be considered to be
participating in such an activity for a week if the
individual participates in such an activity at any
time during the week.
‘‘(4) LIMITATION ON VOCATIONAL EDUCATION
ACTIVITIES COUNTED AS WORK.—For purposes of
determining monthly participation rates under para-
graphs (1)(B)(i) and (2)(B)(i) of subsection (b), not
more than 20 percent of adults in all families and
in 2-parent families determined to be engaged in
work in the State for a month may meet the work
activity requirement through participation in voca-
tional educational training.
‘‘(5) SINGLE PARENT WITH CHILD UNDER AGE
6 DEEMED TO BE MEETING WORK PARTICIPATION
REQUIREMENTS IF PARENT IS ENGAGED IN WORK
FOR 20 HOURS PER WEEK.—For purposes of deter-
mining monthly participation rates under subsection
(b)(1)(B)(i), a recipient in a 1-parent family who is
the parent of a child who has not attained 6 years
of age is deemed to be engaged in work for a month
if the recipient is engaged in work for an average of
at least 20 hours per week during the month.
476
‘‘(6) TEEN HEAD OF HOUSEHOLD WHO MAIN-
TAINS
SATISFACTORY
SCHOOL
ATTENDANCE
DEEMED TO BE MEETING WORK PARTICIPATION RE-
QUIREMENTS.—For purposes of determining month-
ly participation rates under subsection (b)(1)(B)(i),
a recipient who is a single head of household and
has not attained 20 years of age is deemed to be en-
gaged in work for a month in a fiscal year if the re-
cipient—
‘‘(A) maintains satisfactory attendance at
secondary school or the equivalent during the
month; or
‘‘(B) participates in education directly re-
lated to employment for at least the minimum
average number of hours per week specified in
the table set forth in paragraph (1).
‘‘(d) WORK ACTIVITIES DEFINED.—As used in this
section, the term ‘work activities’ means—
‘‘(1) unsubsidized employment;
‘‘(2) subsidized private sector employment;
‘‘(3) subsidized public sector employment;
‘‘(4) work experience (including work associated
with the refurbishing of publicly assisted housing) if
sufficient private sector employment is not available;
‘‘(5) on-the-job training;
477
‘‘(6) job search and job readiness assistance;
‘‘(7) community service programs;
‘‘(8) vocational educational training (not to ex-
ceed 12 months with respect to any individual);
‘‘(9) job skills training directly related to em-
ployment;
‘‘(10) education directly related to employment,
in the case of a recipient who has not received a
high school diploma or a certificate of high school
equivalency; and
‘‘(11) satisfactory attendance at secondary
school or high school equivalency program, in the
case of a recipient who has not completed secondary
school.
‘‘(e) SUPPLEMENTAL GRANT
FOR OPERATION
OF
WORK PROGRAM.—
‘‘(1) APPLICATION REQUIREMENTS.—An eligi-
ble State may submit to the Secretary an application
for additional funds to meet the requirements of this
section with respect to a fiscal year if the Secretary
determines that—
‘‘(A) the total expenditures of the State to
meet such requirements for the fiscal year ex-
ceed the total expenditures of the State during
478
fiscal year 1994 to carry out part F (as in ef-
fect on September 30, 1994);
‘‘(B) the work programs of the State under
this section are coordinated with the job train-
ing programs established by title II of the Job
Training Partnership Act, or (if such title is re-
pealed by the Consolidated and Reformed Edu-
cation, Employment, and Rehabilitation Sys-
tems Act) the Consolidated and Reformed Edu-
cation, Employment, and Rehabilitation Sys-
tems Act; and
‘‘(C) the State needs additional funds to
meet such requirements or certifies that it in-
tends to exceed such requirements.
‘‘(2) GRANTS.—The Secretary may make a
grant to any eligible State which submits an applica-
tion in accordance with paragraph (1) for a fiscal
year in an amount equal to the Federal medical as-
sistance percentage of the amount (if any) by which
the total expenditures of the State to meet or exceed
the requirements of this section for the fiscal year
exceeds the total expenditures of the State during
fiscal year 1994 to carry out part F (as in effect on
September 30, 1994).
479
‘‘(3) REGULATIONS.—The Secretary shall issue
regulations providing for the equitable distribution
of funds under this subsection.
‘‘(4) AUTHORIZATION OF APPROPRIATIONS.—
‘‘(A) IN GENERAL.—There are authorized
to be appropriated for grants under this sub-
section $3,000,000,000 for fiscal year 1999.
‘‘(B) 
AVAILABILITY.—Amounts 
appro-
priated pursuant to subparagraph (A) are au-
thorized to remain available until expended.
‘‘(f) PENALTIES.—
‘‘(1) AGAINST INDIVIDUALS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), if an adult in a family re-
ceiving assistance under the State program op-
erated under part A refuses to engage in work
required in accordance with this section, the
State shall—
‘‘(i) reduce the amount of assistance
otherwise payable to the family pro rata
(or more, at the option of the State) with
respect to any period during a month in
which the adult so refuses; or
‘‘(ii) terminate such assistance,
480
subject to such good cause and other exceptions as
the State may establish.
‘‘(B) EXCEPTION.—Notwithstanding sub-
paragraph (A), a State may not reduce or ter-
minate assistance under the State program op-
erated under part A based on a refusal of an
adult to work if the adult is a single custodial
parent caring for a child who has not attained
11 years of age, and the adult proves that the
adult has a demonstrated inability (as deter-
mined by the State) to obtain needed child care,
for 1 or more of the following reasons:
‘‘(i) 
Unavailability 
of 
appropriate
child care within a reasonable distance
from the individual’s home or work site.
‘‘(ii) Unavailability or unsuitability of
informal child care by a relative or under
other arrangements.
‘‘(iii) Unavailability of appropriate
and affordable formal child care arrange-
ments.
‘‘(2) AGAINST STATES.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines that a State that is operating a program
under part A for a fiscal year has failed to com-
481
ply with this section for the fiscal year, the Sec-
retary shall reduce the total amount otherwise
payable to the State under section 403 for the
immediately succeeding fiscal year by an
amount equal to not more than 5 percent of
such otherwise payable amount.
‘‘(B) PENALTY
BASED
ON
SEVERITY
OF
FAILURE.—The Secretary shall impose reduc-
tions under subparagraph (A) based on the de-
gree of noncompliance.
‘‘(g) NONDISPLACEMENT IN WORK ACTIVITIES.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
an adult in a family receiving assistance under a
State program operated under part A attributable to
funds provided by the Federal Government may fill
a vacant employment position in order to engage in
a work activity described in subsection (d).
‘‘(2) NO FILLING OF CERTAIN VACANCIES.—No
adult in a work activity described in subsection (d)
which is funded, in whole or in part, by funds pro-
vided by the Federal Government shall be employed
or assigned—
‘‘(A) when any other individual is on layoff
from the same or any substantially equivalent
job; or
482
‘‘(B) if the employer has terminated the
employment of any regular employee or other-
wise caused an involuntary reduction of its
workforce in order to fill the vacancy so created
with an adult described in paragraph (1).
‘‘(3) NO PREEMPTION.—Nothing in this sub-
section shall preempt or supersede any provision of
State or local law that provides greater protection
for employees from displacement.
‘‘(h) SENSE OF THE CONGRESS.—It is the sense of
the Congress that in complying with this section, each
State that operates a program under part A is encouraged
to assign the highest priority to requiring adults in 2-par-
ent families and adults in single-parent families that in-
clude older preschool or school-age children to be engaged
in work activities.
‘‘(i) SENSE
OF
THE
CONGRESS
THAT
STATES
SHOULD IMPOSE CERTAIN REQUIREMENTS
ON NON-
CUSTODIAL, NONSUPPORTING MINOR PARENTS.—It is the
sense of the Congress that the States should require non-
custodial, nonsupporting parents who have not attained 18
years of age to fulfill community work obligations and at-
tend appropriate parenting or money management classes
after school.
483
‘‘SEC. 482. INDIVIDUAL RESPONSIBILITY PLANS.
‘‘(a) ASSESSMENT.—The State agency responsible
for administering the State program funded under part
A shall make an initial assessment of the skills, prior work
experience, and employability of each recipient of assist-
ance under the program who—
‘‘(1) has attained 18 years of age; or
‘‘(2) has not completed high school or obtained
a certificate of high school equivalency, and is not
attending secondary school.
‘‘(b) CONTENTS OF PLANS.—
‘‘(1) IN GENERAL.—On the basis of the assess-
ment made under subsection (a) with respect to an
individual, the State agency, in consultation with the
individual, shall develop an individual responsibility
plan for the individual, which—
‘‘(A) shall provide that participation by the
individual in job search activities shall be a con-
dition of eligibility for assistance under the
State program funded under part A, except
during any period for which the individual is
employed full-time in an unsubsidized job in the
private sector;
‘‘(B) sets forth an employment goal for the
individual and a plan for moving the individual
immediately into private sector employment;
560
State described in paragraph (1)(A) shall prepare
and submit to the Secretary a report that includes
aggregate data concerning—
‘‘(A) the number of child care providers
that received funding under this subchapter as
separately identified based on the types of pro-
viders listed in section 658P(5);
‘‘(B) the monthly cost of child care serv-
ices, and the portion of such cost that is paid
for with assistance provided under this sub-
chapter, listed by the type of child care services
provided;
‘‘(C) the number of payments made by the
State through vouchers, contracts, cash, and
disregards under public benefit programs, listed
by the type of child care services provided;
‘‘(D) the manner in which consumer edu-
cation information was provided to parents and
the number of parents to whom such informa-
tion was provided; and
‘‘(E) the total number (without duplica-
tion) of children and families served under this
subchapter;
during the period for which such report is required
to be submitted.’’; and