II
June 26, 1997
Ordered to be printed as passed
In the Senate of the United States,
June 25, 1997.
Resolved, That the bill from the House of Representa-
tives (H.R. 2015) entitled ‘‘An Act to provide for reconcili-
ation pursuant to subsections (b)(1) and (c) of section 105
of the concurrent resolution on the budget for fiscal year
1998.’’, do pass with the following
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Balanced Budget Act
of 1997’’.
SEC. 2. TABLE OF TITLES.
The table of titles for this Act is as follows:
Title I. Committee on Agriculture, Nutrition, and Forestry.
Title II. Committee on Banking, Housing, and Urban Affairs.
Title III. Committee on Commerce, Science, and Transportation.
Title IV. Committee on Energy and Natural Resources.
Title V. Committee on Finance.
Title VI. Committee on Governmental Affairs.
Title VII. Committee on Labor and Human Resources.
Title VIII. Committee on Veterans’ Affairs.
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TITLE I—COMMITTEE ON AGRI-
CULTURE, 
NUTRITION, 
AND
FORESTRY
SEC. 1001. HARDSHIP EXEMPTION.
Section 6(o) of the Food Stamp Act of 1977 (7 U.S.C.
2015(o)) is amended—
(1) in paragraph (2)(D), by striking ‘‘or (5)’’
and inserting ‘‘(5), or (6)’’;
(2) by redesignating paragraph (6) as para-
graph (7); and
(3) by inserting after paragraph (5) the follow-
ing:
‘‘(6) 15-PERCENT HARDSHIP EXEMPTION.—
‘‘(A) DEFINITIONS.—In this paragraph:
‘‘(i) CASELOAD.—The term ‘caseload’
means the average monthly number of indi-
viduals receiving food stamps during the
12-month period ending the preceding June
30.
‘‘(ii) COVERED INDIVIDUAL.—The term
‘covered individual’ means a food stamp re-
cipient, or an individual denied eligibility
for food stamp benefits solely due to para-
graph (2), who—
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‘‘(I) is not eligible for an excep-
tion under paragraph (3);
‘‘(II) does not reside in an area
covered by a waiver granted under
paragraph (4);
‘‘(III) is not complying with sub-
paragraph (A), (B), or (C) of para-
graph (2);
‘‘(IV) is not receiving food stamp
benefits during the 3 months of eligi-
bility provided under paragraph (2);
and
‘‘(V) is not receiving food stamp
benefits under paragraph (5).
‘‘(B) GENERAL RULE.—Subject to subpara-
graphs (C) through (F), a State agency may pro-
vide a hardship exemption from the requirements
of paragraph (2) for covered individuals.
‘‘(C) FISCAL
YEAR
1998.—Subject to sub-
paragraph (E), for fiscal year 1998, a State
agency may provide a number of hardship ex-
emptions such that the average monthly number
of the exemptions in effect during the fiscal year
does not exceed 15 percent of the number of cov-
ered individuals in the State in fiscal year 1998,
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‘‘(F) EXEMPTION ADJUSTMENTS.—For fis-
cal year 1999 and each subsequent fiscal year,
the Secretary shall increase or decrease the num-
ber of individuals who may be granted a hard-
ship exemption by a State agency to the extent
that the average monthly number of hardship ex-
emptions in effect in the State for the preceding
fiscal year is greater or less than the average
monthly number of hardship exemptions esti-
mated for the State agency for such preceding
fiscal year.
‘‘(G) REPORTING REQUIREMENT.—A State
agency shall submit such reports to the Secretary
as the Secretary determines are necessary to en-
sure compliance with this paragraph.’’.
SEC. 1002. ADDITIONAL FUNDING FOR EMPLOYMENT AND
TRAINING.
Section 16(h) of the Food Stamp Act of 1977 (7 U.S.C.
2025(h)) is amended by striking paragraphs (1) and (2)
and inserting the following:
‘‘(1) IN GENERAL.—
‘‘(A) AMOUNTS.—To carry out employment
and training programs, the Secretary shall re-
serve for allocation to State agencies, to remain
available until expended, from funds made avail-
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able for each fiscal year under section 18(a)(1)
the amount of—
‘‘(i) for fiscal year 1996, $75,000,000;
‘‘(ii) for fiscal year 1997, $79,000,000;
‘‘(iii) 
for 
fiscal 
year 
1998,
$221,000,000;
‘‘(iv) 
for 
fiscal 
year 
1999,
$224,000,000;
‘‘(v) for fiscal year 2000, $226,000,000;
‘‘(vi) 
for 
fiscal 
year 
2001,
$228,000,000; and
‘‘(vii) 
for 
fiscal 
year 
2002,
$170,000,000.
‘‘(B) ALLOCATION.—The Secretary shall al-
locate the amounts reserved under subparagraph
(A) among the State agencies using a reasonable
formula (as determined by the Secretary) that
reflects the proportion of food stamp recipients
who are not eligible for an exception under sec-
tion 6(o)(3) that reside in each State, as esti-
mated by the Secretary based on the survey con-
ducted to carry out subsection (c) for fiscal year
1996 and such other factors as the Secretary con-
siders appropriate due to the timing and limita-
tions of the survey (as adjusted by the Secretary
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each fiscal year to reflect changes in each State’s
caseload (as defined in section 6(o)(5)(A))).
‘‘(C) REALLOCATION.—If a State agency
will not expend all of the funds allocated to the
State agency for a fiscal year under subpara-
graph (B), the Secretary shall reallocate the un-
expended funds to other States (during the fiscal
year or the subsequent fiscal year) as the Sec-
retary considers appropriate and equitable.
‘‘(D) 
MINIMUM
ALLOCATION.—Notwith-
standing subparagraph (B), the Secretary shall
ensure that each State agency operating an em-
ployment and training program shall receive not
less than $50,000 for each fiscal year.
‘‘(E) PLACEMENTS.—Of the amount of
funds reserved for a State agency for a fiscal
year under subparagraphs (A) through (D), the
State agency shall be eligible to receive for the
fiscal year not more than an amount equal to
the sum of—
‘‘(i) the product obtained by multiply-
ing—
‘‘(I) the average monthly number
of food stamp recipients who during
the fiscal year—
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‘‘(aa) are not eligible for an
exception under section 6(o)(3);
and
‘‘(bb) are placed in and com-
ply with a program described in
subparagraph (B) or (C) of sec-
tion 6(o)(2), other than a pro-
gram described in subparagraph
(A) or (B) of section 6(o)(1); by
‘‘(II) an amount determined by
the Secretary to reflect the reasonable
cost of efficiently and economically
providing services that meet the re-
quirements of subparagraph (B) or (C)
of section 6(o)(2) to food stamp recipi-
ents described in subclause (I) for the
fiscal year, as periodically adjusted by
the Secretary; and
‘‘(ii) the product obtained by multiply-
ing—
‘‘(I) the average monthly number
of food stamp recipients in activities
not described in clause (i)(I)(bb) who
during the fiscal year are placed in
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and comply with an employment and
training program; by
‘‘(II) an amount determined by
the Secretary to reflect the reasonable
cost of efficiently and economically
providing employment and training
services to food stamp recipients de-
scribed in subclause (I) for the fiscal
year that is less than the amount de-
termined under clause (i)(II), as peri-
odically adjusted by the Secretary.
‘‘(F) USE OF FUNDS.—Of the amount of
funds a State agency receives under subpara-
graphs (A) through (E) for a fiscal year, not less
than 75 percent shall be used by the State agency
in the fiscal year to serve food stamp recipients
described in subparagraph (E)(i)(I)(aa) who are
placed in and comply with a program described
in subparagraph (E)(i)(I)(bb).
‘‘(G) MAINTENANCE
OF
EFFORT.—To re-
ceive an amount reserved under subparagraph
(A), a State agency shall maintain the expendi-
tures of the State agency for employment and
training programs and workfare programs for
any fiscal year under paragraph (2), and ad-
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ministrative expenses under section 20(g)(1), at
a level that is not less than 75 percent of the
level of the expenditures by the State agency to
carry out the programs for fiscal year 1996.
‘‘(2) ADDITIONAL PAYMENTS TO STATES.—If a
State agency—
‘‘(A) incurs costs to place individuals in
employment and training programs, including
the costs for case management and casework to
facilitate the transition from economic depend-
ency to self-sufficiency through work; and
‘‘(B) does not use the funds provided under
paragraph (1)(A) to defray the costs incurred;
the Secretary shall pay the State agency an amount
equal to 50 percent of the costs incurred, subject to
paragraph (3).’’.
SEC. 1003. DENIAL OF FOOD STAMPS FOR PRISONERS.
(a) STATE PLANS.—
(1) IN GENERAL.—Section 11(e) of the Food
Stamp Act of 1977 (7 U.S.C. 2020(e)) is amended by
striking paragraph (20) and inserting the following:
‘‘(20) that the State agency shall establish a sys-
tem and take action on a periodic basis—
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‘‘(A) to verify and otherwise ensure that an
individual does not receive coupons in more than
1 jurisdiction within the State; and
‘‘(B) to verify and otherwise ensure that an
individual who is placed under detention in a
Federal, State, or local penal, correctional, or
other detention facility for more than 30 days
shall not be eligible to participate in the food
stamp program as a member of any household,
except that—
‘‘(i) the Secretary may determine that
extraordinary circumstances make it im-
practicable for the State agency to obtain
information necessary to discontinue inclu-
sion of the individual; and
‘‘(ii) a State agency that obtains infor-
mation 
collected 
under 
section
1611(e)(1)(I)(i)(I) of the Social Security
Act (42 U.S.C. 1382(e)(1)(I)(i)(I)) through
an 
agreement 
under 
section
1611(e)(1)(I)(ii)(II) of that Act (42 U.S.C.
1382(e)(1)(I)(ii)(II)), or under another pro-
gram determined by the Secretary to be
comparable to the program carried out
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under that section, shall be considered in
compliance with this subparagraph.’’.
(2) LIMITS ON DISCLOSURE AND USE OF INFOR-
MATION.—Section 11(e)(8)(E) of the Food Stamp Act
of 1977 (7 U.S.C. 2020(e)(8)(E)) is amended by strik-
ing ‘‘paragraph (16)’’ and inserting ‘‘paragraph (16)
or (20)(B)’’.
(3) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the amendments made by this
subsection shall take effect on the date that is 1
year after the date of enactment of this Act.
(B) EXTENSION.—The Secretary of Agri-
culture may grant a State an extension of time
to comply with the amendments made by this
subsection, not to exceed beyond the date that is
2 years after the date of enactment of this Act,
if the chief executive officer of the State submits
a request for the extension to the Secretary—
(i) stating the reasons why the State is
not able to comply with the amendments
made by this subsection by the date that is
1 year after the date of enactment of this
Act;
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(ii) providing evidence that the State
is making a good faith effort to comply with
the amendments made by this subsection as
soon as practicable; and
(iii) detailing a plan to bring the
State into compliance with the amendments
made by this subsection as soon as prac-
ticable and not later than the date of the re-
quested extension.
(b) INFORMATION SHARING.—Section 11 of the Food
Stamp Act of 1977 (7 U.S.C. 2020) is amended by adding
at the end the following:
‘‘(q) DENIAL OF FOOD STAMPS FOR PRISONERS.—The
Secretary shall assist States, to the maximum extent prac-
ticable, in implementing a system to conduct computer
matches or other systems to prevent prisoners described in
section 11(e)(20)(B) from receiving food stamp benefits.’’.
SEC. 1004. NUTRITION EDUCATION.
Section 11(f) of the Food Stamp Act of 1977 (7 U.S.C.
2020(f)) is amended—
(1) by striking ‘‘(f) To encourage’’ and inserting
the following:
‘‘(f) NUTRITION EDUCATION.—
‘‘(1) IN GENERAL.—To encourage’’; and
(2) by adding at the end the following:
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‘‘(2) GRANTS.—
‘‘(A) IN
GENERAL.—The Secretary shall
make available not more than $600,000 for each
of fiscal years 1998 through 2001 to pay the
Federal share of grants made to eligible private
nonprofit organizations and State agencies to
carry out subparagraph (B).
‘‘(B) ELIGIBILITY.—A private nonprofit or-
ganization or State agency shall be eligible to re-
ceive a grant under subparagraph (A) if the or-
ganization or agency agrees—
‘‘(i) to use the funds to direct a col-
laborative effort to coordinate and integrate
nutrition education into health, nutrition,
social service, and food distribution pro-
grams for food stamp participants and
other low-income households; and
‘‘(ii) to design the collaborative effort
to reach large numbers of food stamp par-
ticipants and other low-income households
through a network of organizations, includ-
ing schools, child care centers, farmers’
markets, health clinics, and outpatient edu-
cation services.
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‘‘(C) PREFERENCE.—In deciding between 2
or more private nonprofit organizations or State
agencies that are eligible to receive a grant under
subparagraph (B), the Secretary shall give a
preference to an organization or agency that con-
ducted a collaborative effort described in sub-
paragraph (B) and received funding for the col-
laborative effort from the Secretary before the
date of enactment of this paragraph.
‘‘(D) FEDERAL SHARE.—
‘‘(i) IN GENERAL.—Subject to subpara-
graph (E), the Federal share of a grant
under this paragraph shall be 50 percent.
‘‘(ii) NO
IN-KIND
CONTRIBUTIONS.—
The non-Federal share of a grant under this
paragraph shall be in cash.
‘‘(iii) PRIVATE FUNDS.—The non-Fed-
eral share of a grant under this paragraph
may include amounts from private non-
governmental sources.
‘‘(E) LIMIT
ON
INDIVIDUAL
GRANT.—A
grant under subparagraph (A) may not exceed
$200,000 for a fiscal year.’’.
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TITLE II—COMMITTEE ON BANK-
ING, HOUSING, AND URBAN
AFFAIRS
Subtitle A—Mortgage Assignment
and Annual Adjustment Factors
SEC. 2001. TABLE OF CONTENTS.
The table of contents for this title is as follows:
TITLE II—COMMITTEE ON BANKING, HOUSING, AND URBAN
AFFAIRS
Subtitle A—Mortgage Assignment and Annual Adjustment Factors
Sec. 2001. Table of contents.
Sec. 2002. Extension of foreclosure avoidance and borrower assistance provisions
for FHA single family housing mortgage insurance program.
Sec. 2003. Adjustment of maximum monthly rents for certain dwelling units in
new construction and substantial or moderate rehabilitation
projects assisted under section 8 rental assistance program.
Sec. 2004. Adjustment of maximum monthly rents for nonturnover dwelling units
assisted under section 8 rental assistance program.
Subtitle B—Multifamily Housing Reform
Sec. 2100. Short title.
PART 1—FHA-INSURED MULTIFAMILY HOUSING MORTGAGE AND HOUSING
ASSISTANCE RESTRUCTURING
Sec. 2101. Findings and purposes.
Sec. 2102. Definitions.
Sec. 2103. Authority of participating administrative entities.
Sec. 2104. Mortgage restructuring and rental assistance sufficiency plan.
Sec. 2105. Section 8 renewals and long-term affordability commitment by owner
of project.
Sec. 2106. Prohibition on restructuring.
Sec. 2107. Restructuring tools.
Sec. 2108. Shared savings incentive.
Sec. 2109. Management standards.
Sec. 2110. Monitoring of compliance.
Sec. 2111. Review.
Sec. 2112. GAO audit and review.
Sec. 2113. Regulations.
Sec. 2114. Technical and conforming amendments.
Sec. 2115. Termination of authority.
PART 2—MISCELLANEOUS PROVISIONS
Sec. 2201. Rehabilitation grants for certain insured projects.
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Sec. 2202. Minimum rent.
Sec. 2203. Repeal of Federal preferences.
PART 3—ENFORCEMENT PROVISIONS
Sec. 2301. Implementation.
SUBPART A—FHA SINGLE FAMILY AND MULTIFAMILY HOUSING
Sec. 2311. Authorization to immediately suspend mortgagees.
Sec. 2312. Extension of equity skimming to other single family and multifamily
housing programs.
Sec. 2313. Civil money penalties against mortgagees, lenders, and other partici-
pants in FHA programs.
SUBPART B—FHA MULTIFAMILY PROVISIONS
Sec. 2320. Civil money penalties against general partners, officers, directors, and
certain managing agents of multifamily projects.
Sec. 2321. Civil money penalties for noncompliance with section 8 HAP con-
tracts.
Sec. 2322. Extension of double damages remedy.
Sec. 2323. Obstruction of Federal audits.
SEC. 2002. EXTENSION OF FORECLOSURE AVOIDANCE AND
BORROWER ASSISTANCE PROVISIONS FOR
FHA SINGLE FAMILY HOUSING MORTGAGE IN-
SURANCE PROGRAM.
Section 407 of The Balanced Budget Downpayment
Act, I (12 U.S.C. 1710 note) is amended—
(1) in subsection (c)—
(A) by striking ‘‘only’’; and
(B) by inserting ‘‘, on, or after’’ after ‘‘be-
fore’’; and
(2) by striking subsection (e).
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SEC. 2003. ADJUSTMENT OF MAXIMUM MONTHLY RENTS
FOR CERTAIN DWELLING UNITS IN NEW CON-
STRUCTION 
AND 
SUBSTANTIAL 
OR 
MOD-
ERATE 
REHABILITATION 
PROJECTS 
AS-
SISTED UNDER SECTION 8 RENTAL ASSIST-
ANCE PROGRAM.
The third sentence of section 8(c)(2)(A) of the United
States Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is
amended by inserting before the period at the end the follow-
ing: ‘‘, and during fiscal year 1999 and thereafter’’.
SEC. 2004. ADJUSTMENT OF MAXIMUM MONTHLY RENTS
FOR NONTURNOVER DWELLING UNITS AS-
SISTED UNDER SECTION 8 RENTAL ASSIST-
ANCE PROGRAM.
The last sentence of section 8(c)(2)(A) of the United
States Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is
amended by inserting before the period at the end the follow-
ing: ‘‘, and during fiscal year 1999 and thereafter’’.
Subtitle B—Multifamily Housing
Reform
SEC. 2100. SHORT TITLE.
This subtitle may be cited as the ‘‘Multifamily Assisted
Housing Reform and Affordability Act of 1997’’.
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Part 1—FHA-Insured Multifamily Housing Mortgage
and Housing Assistance Restructuring
SEC. 2101. FINDINGS AND PURPOSES.
(a) FINDINGS.—Congress finds that—
(1) there exists throughout the Nation a need for
decent, safe, and affordable housing;
(2) as of the date of enactment of this Act, it is
estimated that—
(A) the insured multifamily housing port-
folio of the Federal Housing Administration con-
sists of 14,000 rental properties, with an aggre-
gate unpaid principal mortgage balance of
$38,000,000,000; and
(B) approximately 10,000 of these prop-
erties contain housing units that are assisted
with project-based rental assistance under section
8 of the United States Housing Act of 1937;
(3) FHA-insured multifamily rental properties
are a major Federal investment, providing affordable
rental housing to an estimated 2,000,000 low- and
very low-income families;
(4) approximately 1,600,000 of these families
live in dwelling units that are assisted with project-
based rental assistance under section 8 of the United
States Housing Act of 1937;
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(5) a substantial number of housing units receiv-
ing project-based assistance have rents that are higher
than the rents of comparable, unassisted rental units
in the same housing rental market;
(6) many of the contracts for project-based assist-
ance will expire during the several years following the
date of enactment of this Act;
(7) it is estimated that—
(A) if no changes in the terms and condi-
tions of the contracts for project-based assistance
are made before fiscal year 2000, the cost of re-
newing all expiring rental assistance contracts
under section 8 of the United States Housing Act
of 1937 for both project-based and tenant-based
rental assistance will increase from approxi-
mately $3,600,000,000 in fiscal year 1997 to
over $14,300,000,000 by fiscal year 2000 and
some $22,400,000,000 in fiscal year 2006;
(B) of those renewal amounts, the cost of re-
newing project-based assistance will increase
from $1,200,000,000 in fiscal year 1997 to al-
most $7,400,000,000 by fiscal year 2006; and
(C) without changes in the manner in
which project-based rental assistance is provided,
renewals of expiring contracts for project-based
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rental assistance will require an increasingly
larger portion of the discretionary budget au-
thority of the Department of Housing and Urban
Development in each subsequent fiscal year for
the foreseeable future;
(8) absent new budget authority for the renewal
of expiring rental contracts for project-based assist-
ance, many of the FHA-insured multifamily housing
projects that are assisted with project-based assistance
will likely default on their FHA-insured mortgage
payments, resulting in substantial claims to the FHA
General Insurance Fund and Special Risk Insurance
Funds;
(9) more than 15 percent of federally assisted
multifamily housing projects are physically or finan-
cially distressed, including a number which suffer
from mismanagement;
(10) due to Federal budget constraints, the
downsizing of the Department of Housing and Urban
Development, and diminished administrative capac-
ity, the Department lacks the ability to ensure the
continued economic and physical well-being of the
stock of federally insured and assisted multifamily
housing projects; and
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the Secretary, to promote greater multifamily housing
project operating and cost efficiencies;
(3) to encourage owners of eligible multifamily
housing projects to restructure their FHA-insured
mortgages and project-based assistance contracts in a
manner that is consistent with this part before the
year in which the contract expires;
(4) to streamline and improve federally insured
and assisted multifamily housing project oversight
and administration;
(5) to resolve the problems affecting financially
and physically troubled federally insured and assisted
multifamily housing projects through cooperation
with residents, owners, State and local governments,
and other interested entities and individuals; and
(6) to grant additional enforcement tools to use
against those who violate agreements and program re-
quirements, in order to ensure that the public interest
is safeguarded and that Federal multifamily housing
programs serve their intended purposes.
SEC. 2102. DEFINITIONS.
In this part:
(1) COMPARABLE PROPERTIES.—The term ‘‘com-
parable properties’’ means properties that are—
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(A) similar to the eligible multifamily hous-
ing project in neighborhood (including risk of
crime), location, access, street appeal, age, prop-
erty size, apartment mix, physical configuration,
property and unit amenities, and utilities;
(B) unregulated by contractual encum-
brances or local rent-control laws; and
(C) occupied predominantly by renters who
receive no rent supplements or rental assistance.
(2) 
ELIGIBLE
MULTIFAMILY
HOUSING
PROJECT.—The term ‘‘eligible multifamily housing
project’’ means a property consisting of more than 4
dwelling units—
(A) with rents which, on an average per
unit or per room basis, exceed the fair market
rent or the rent of comparable properties in the
same market area, as determined by the Sec-
retary;
(B) that is covered in whole or in part by
a contract for project-based assistance under—
(i) the new construction and substan-
tial rehabilitation program under section
8(b)(2) of the United States Housing Act of
1937 (as in effect before October 1, 1983);
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(ii) the property disposition program
under section 8(b) of the United States
Housing Act of 1937;
(iii) the moderate rehabilitation pro-
gram under section 8(e)(2) of the United
States Housing Act of 1937;
(iv) the loan management assistance
program under section 8 of the United
States Housing Act of 1937;
(v) section 23 of the United States
Housing Act of 1937 (as in effect before
January 1, 1975);
(vi) the rent supplement program
under section 101 of the Housing and
Urban Development Act of 1965; or
(vii) section 8 of the United States
Housing Act of 1937, following conversion
from assistance under section 101 of the
Housing and Urban Development Act of
1965; and
(C) financed by a mortgage insured or held
by the Secretary under the National Housing
Act.
(3) EXPIRING CONTRACT.—The term ‘‘expiring
contract’’ means a project-based assistance contract
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attached to an eligible multifamily housing project
which, under the terms of the contract, will expire.
(4) EXPIRATION
DATE.—The term ‘‘expiration
date’’ means the date on which an expiring contract
expires.
(5) FAIR MARKET RENT.—The term ‘‘fair market
rent’’ means the fair market rental established under
section 8(c) of the United States Housing Act of 1937.
(6) LOW-INCOME FAMILIES.—The term ‘‘low-in-
come families’’ has the same meaning as provided
under section 3(b)(2) of the United States Housing
Act of 1937.
(7) PORTFOLIO RESTRUCTURING AGREEMENT.—
The term ‘‘Portfolio restructuring agreement’’ means
the agreement entered into between the Secretary and
a participating administrative entity, as provided
under section 2103.
(8) PARTICIPATING ADMINISTRATIVE ENTITY.—
The term ‘‘participating administrative entity’’
means a public agency, including a State housing fi-
nance agency or local housing agency, which meets
the requirements under section 2103(b).
(9) PROJECT-BASED
ASSISTANCE.—The term
‘‘project-based assistance’’ means rental assistance
under section 8 of the United States Housing Act of
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1937 that is attached to a multifamily housing
project.
(10) RENEWAL.—The term ‘‘renewal’’ means the
replacement of an expiring Federal rental contract
with a new contract under section 8 of the United
States Housing Act of 1937, consistent with the re-
quirements of this part.
(11) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Housing and Urban Development.
(12) STATE.—The term ‘‘State’’ has the same
meaning as in section 104 of the Cranston-Gonzalez
National Affordable Housing Act.
(13) TENANT-BASED
ASSISTANCE.—The term
‘‘tenant-based assistance’’ has the same meaning as in
section 8(f) of the United States Housing Act of 1937.
(14) UNIT OF GENERAL LOCAL GOVERNMENT.—
The term ‘‘unit of general local government’’ has the
same meaning as in section 104 of the Cranston-Gon-
zalez National Affordable Housing Act.
(15) VERY
LOW-INCOME
FAMILY.—The term
‘‘very low-income family’’ has the same meaning as
in section 3(b) of the United States Housing Act of
1937.
(16) QUALIFIED MORTGAGEE.—The term ‘‘quali-
fied mortgagee’’ means an entity approved by the Sec-
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retary that is capable of servicing, as well as origi-
nating, FHA-insured mortgages, and that—
(A) is not suspended or debarred by the Sec-
retary;
(B) is not suspended or on probation im-
posed by the Mortgagee Review Board;
(C) is not in default under any Government
National Mortgage Association obligation; and
(D) meets previous participation require-
ments.
SEC. 2103. AUTHORITY OF PARTICIPATING ADMINISTRA-
TIVE ENTITIES.
(a) PARTICIPATING ADMINISTRATIVE ENTITIES.—
(1) IN GENERAL.—The Secretary shall enter into
portfolio restructuring agreements with participating
administrative entities for the implementation of
mortgage restructuring and rental assistance suffi-
ciency plans to restructure FHA-insured multifamily
housing mortgages, in order to—
(A) reduce the costs of current and expiring
contracts for assistance under section 8 of the
United States Housing Act of 1937;
(B) address financially and physically trou-
bled projects; and
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(C) correct management and ownership de-
ficiencies.
(2) 
PORTFOLIO
RESTRUCTURING
AGREE-
MENTS.—Each portfolio restructuring agreement en-
tered into under this subsection shall—
(A) be a cooperative agreement to establish
the obligations and requirements between the
Secretary and the participating administrative
entity;
(B) identify the eligible multifamily hous-
ing projects or groups of projects for which the
participating administrative entity is respon-
sible for assisting in developing and implement-
ing approved mortgage restructuring and rental
assistance sufficiency plans under section 2104;
(C) require the participating administrative
entity to review and certify to the accuracy and
completeness of a comprehensive needs assessment
submitted by the owner of an eligible multifam-
ily housing project, in accordance with the infor-
mation and data requirements of section 403 of
the Housing and Community Development Act of
1992, including such other data, information,
and requirements as the Secretary may require
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to be included as part of the comprehensive needs
assessment;
(D) identify the responsibilities of both the
participating administrative entity and the Sec-
retary in implementing a mortgage restructuring
and rental assistance sufficiency plan, including
any actions proposed to be taken under section
2106 or 2107;
(E) require each mortgage restructuring
and rental assistance sufficiency plan to be pre-
pared in accordance with the requirements of
section 2104 for each eligible multifamily hous-
ing project;
(F) indemnify the participating adminis-
trative entity against lawsuits and penalties for
actions taken pursuant to the agreement, exclud-
ing actions involving gross negligence or willful
misconduct; and
(G) include compensation for all reasonable
expenses incurred by the participating adminis-
trative entity necessary to perform its duties
under this part, including such incentives as
may be authorized under section 2108.
(b) SELECTION OF PARTICIPATING ADMINISTRATIVE
ENTITY.—
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(1) SELECTION CRITERIA.—The Secretary shall
select a participating administrative entity based on
the following criteria—
(A) is located in the State or local jurisdic-
tion in which the eligible multifamily housing
project or projects are located;
(B) has demonstrated expertise in the devel-
opment or management of low-income affordable
rental housing;
(C) has a history of stable, financially
sound, and responsible administrative perform-
ance;
(D) has demonstrated financial strength in
terms of asset quality, capital adequacy, and li-
quidity; and
(E) is otherwise qualified, as determined by
the Secretary, to carry out the requirements of
this part.
(2) SELECTION OF MORTGAGE RISK-SHARING EN-
TITIES
AND
FISCAL
YEAR
1997
MULTIFAMILY
DEM-
ONSTRATION AUTHORITY.—Any State housing finance
agency or local housing agency that is designated as
a qualified participating entity under section 542 of
the Housing and Community Development Act of
1992 or under section 212 of Public Law 104–204,
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shall automatically qualify as a participating admin-
istrative entity under this section.
(3) ALTERNATIVE
ADMINISTRATORS.—With re-
spect to any eligible multifamily housing project that
is located in a State or local jurisdiction in which the
Secretary determines that a participating adminis-
trative entity is not located, is unavailable, or does
not qualify, the Secretary shall either—
(A) carry out the requirements of this part
with respect to that eligible multifamily housing
project; or
(B) contract with other qualified entities
that meet the requirements of subsection (b), with
the exception of subsection (b)(1)(A), the author-
ity to carry out all or a portion of the require-
ments of this part with respect to that eligible
multifamily housing project.
(4) PREFERENCE FOR PUBLIC HOUSING FINANCE
AGENCIES AS PARTICIPATING ADMINISTRATIVE ENTI-
TIES.—In selecting participating administrative enti-
ties under this subsection, the Secretary shall give
preference to State housing finance agencies and local
housing agencies.
(5) STATE
AND
LOCAL
PORTFOLIO
REQUIRE-
MENTS.—
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(A) IN GENERAL.—If the housing finance
agency of a State is selected as the participating
administrative entity, that agency shall be re-
sponsible for all eligible multifamily housing
projects in that State, except that a local housing
agency selected as a participating administrative
entity shall be responsible for all eligible multi-
family housing projects in the jurisdiction of the
agency.
(B) RIGHT OF FIRST REFUSAL.—A partici-
pating State housing finance agency or local
housing agency shall have the right of first re-
fusal to assume responsibility for any properties
it has financed.
(C) DELEGATION.—A participating admin-
istrative entity may delegate or transfer respon-
sibilities and functions under this part to one or
more interested and qualified public entities.
(D) WAIVER.—A State housing finance
agency or local housing agency may request a
waiver from the Secretary from the requirements
of subparagraph (A) for good cause.
SEC. 2104. MORTGAGE RESTRUCTURING AND RENTAL AS-
SISTANCE SUFFICIENCY PLAN.
(a) IN GENERAL.—
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(1) DEVELOPMENT
OF
PROCEDURES
AND
RE-
QUIREMENTS.—The Secretary shall develop proce-
dures and requirements for the submission of a mort-
gage restructuring and rental assistance sufficiency
plan for each eligible multifamily housing project
with an expiring contract.
(2) TERMS
AND
CONDITIONS.—Each mortgage
restructuring and rental assistance sufficiency plan
submitted under this subsection shall be developed at
the initiative of an owner of an eligible multifamily
housing project, in cooperation with the qualified
mortgagee servicing the loan, with a participating
administrative entity, under such terms and condi-
tions as the Secretary shall require.
(3) 
CONSOLIDATION.—Mortgage 
restructuring
and rental assistance sufficiency plans submitted
under this subsection may be consolidated as part of
an overall strategy for more than one property.
(b) NOTICE REQUIREMENTS.—The Secretary shall es-
tablish notice procedures and hearing requirements for ten-
ants and owners concerning the dates for the expiration of
project-based assistance contracts for any eligible multifam-
ily housing project.
(c) EXTENSION
OF CONTRACT TERM.—Subject to
agreement by a project owner, the Secretary may extend
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the term of any expiring contract or provide a section 8
contract with rent levels set in accordance with subsection
(g) for a period sufficient to facilitate the implementation
of a mortgage restructuring and rental assistance suffi-
ciency plan, as determined by the Secretary.
(d) TENANT RENT PROTECTION.—If the owner of a
project with an expiring Federal rental assistance contract
does not agree to extend the contract, not less than 12
months prior to terminating the contract, the project owner
shall provide written notice to the Secretary and the tenants
and the Secretary shall make tenant-based assistance avail-
able to tenants residing in units assisted under the expiring
contract at the time of expiration.
(e) MORTGAGE RESTRUCTURING AND RENTAL ASSIST-
ANCE SUFFICIENCY PLAN.—Each mortgage restructuring
and rental assistance sufficiency plan shall—
(1) except as otherwise provided, restructure the
project-based assistance rents for the eligible multi-
family housing project in a manner consistent with
subsection (g);
(2) allow for rent adjustments by applying an
operating cost adjustment factor established under
guidelines established by the Secretary;
(3) require the owner or purchaser of an eligible
multifamily housing project with an expiring con-
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remaining term of the existing mortgage and, if ap-
plicable, the remaining term of the second mortgage,
as the participating administrative entity determines
to be appropriate and consistent with the rent levels
established under subsection (g), which restrictions
shall be consistent with the long-term physical and fi-
nancial viability character of the project as affordable
housing;
(7) meet subsidy layering requirements under
guidelines established by the Secretary;
(8) require the owner or purchaser of the project
to meet such other requirements as the Secretary de-
termines to be appropriate; and
(9) prohibit the owner from refusing to lease any
available dwelling unit to a recipient of tenant-based
assistance under section 8 of the United States Hous-
ing Act of 1937.
(f) TENANT AND COMMUNITY PARTICIPATION AND CA-
PACITY BUILDING.—
(1) PROCEDURES.—
(A) IN GENERAL.—The Secretary shall es-
tablish procedures to provide an opportunity for
tenants of the project and other affected parties,
including local government and the community
in which the project is located, to participate ef-
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fectively in the restructuring process established
by this part.
(B) CRITERIA.—These procedures shall in-
clude—
(i) the rights to timely and adequate
written notice of the proposed decisions of
the owner or the Secretary or participating
administrative entity;
(ii) timely access to all relevant infor-
mation (except for information determined
to be proprietary under standards estab-
lished by the Secretary);
(iii) an adequate period to analyze this
information and provide comments to the
Secretary or participating administrative
entity (which comments shall be taken into
consideration by the participating adminis-
trative entity); and
(iv) if requested, a meeting with a rep-
resentative of the participating administra-
tive entity and other affected parties.
(2) PROCEDURES
REQUIRED.—The procedures
established under paragraph (1) shall permit tenant,
local government, and community participation in at
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least the following decisions or plans specified in this
part:
(A) The Portfolio Restructuring Agreement.
(B) Any proposed expiration of the section
8 contract.
(C) The project’s eligibility for restructuring
pursuant to section 2106 and the mortgage re-
structuring and rental assistance sufficiency
plan pursuant to section 2104.
(D) Physical inspections.
(E) Capital needs and management assess-
ments, whether before or after restructuring.
(F) Any proposed transfer of the project.
(3) FUNDING.—
(A) IN GENERAL.—The Secretary may pro-
vide not more than $10,000,000 annually in
funding to tenant groups, nonprofit organiza-
tions, and public entities for building the capac-
ity of tenant organizations, for technical assist-
ance in furthering any of the purposes of this
part (including transfer of developments to new
owners) and for tenant services, from those
amounts made available under appropriations
Acts for implementing this part.
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(B) ALLOCATION.—The Secretary may allo-
cate any funds made available under subpara-
graph (A) through existing technical assistance
programs pursuant to any other Federal law, in-
cluding the Low-Income Housing Preservation
and Resident Homeownership Act of 1990 and
the Multifamily Property Disposition Reform
Act of 1994.
(C) PROHIBITION.—None of the funds made
available under subparagraph (A) may be used
directly or indirectly to pay for any personal
service, advertisement, telegram, telephone, letter,
printed or written matter, or other device, in-
tended or designed to influence in any manner
a Member of Congress, to favor or oppose, by vote
or otherwise, any legislation or appropriation by
Congress, whether before or after the introduction
of any bill or resolution proposing such legisla-
tion or appropriation.
(g) RENT LEVELS.—
(1) IN GENERAL.—Except as provided in para-
graph (2), each mortgage restructuring and rental as-
sistance sufficiency plan pursuant to the terms, con-
ditions, and requirements of this part shall establish
for units assisted with project-based assistance in eli-
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gible multifamily housing projects adjusted rent levels
that—
(A) are equivalent to rents derived from
comparable properties, if—
(i) the participating administrative
entity makes the rent determination not
later than 120 days after the owner submits
a mortgage restructuring and rental assist-
ance sufficiency plan; and
(ii) the market rent determination is
based on not less than 2 comparable prop-
erties; or
(B) if those rents cannot be determined, are
equal to 90 percent of the fair market rents for
the relevant market area.
(2) EXCEPTIONS.—
(A) IN GENERAL.—A contract under this
section may include rent levels that exceed the
rent level described in paragraph (1) at rent lev-
els that do not exceed 120 percent of the local
fair market rent if the participating administra-
tive entity—
(i) determines, that the housing needs
of the tenants and the community cannot be
adequately addressed through implementa-
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tion of the rent limitation required to be es-
tablished through a mortgage restructuring
and rental assistance sufficiency plan under
paragraph (1); and
(ii) follows the procedures under para-
graph (3).
(B) EXCEPTION
RENTS.—In any fiscal
year, a participating administrative entity may
approve exception rents on not more than 20
percent of all units in the geographic jurisdiction
of the entity with expiring contracts in that fis-
cal year, except that the Secretary may waive
this ceiling upon a finding of special need in the
geographic area served by the participating ad-
ministrative entity.
(3) RENT LEVELS FOR EXCEPTION PROJECTS.—
For purposes of this section, a project eligible for an
exception rent shall receive a rent calculation on the
actual and projected costs of operating the project, at
a level that provides income sufficient to support a
budget-based rent that consists of—
(A) the debt service of the project;
(B) the operating expenses of the project, as
determined by the participating administrative
entity, including—
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(i) contributions to adequate reserves;
(ii) the costs of maintenance and nec-
essary rehabilitation; and
(iii) other eligible costs permitted
under section 8 of the United States Hous-
ing Act of 1937;
(C) an adequate allowance for potential op-
erating losses due to vacancies and failure to col-
lect rents, as determined by the participating ad-
ministrative entity;
(D) an allowance for a reasonable rate of
return to the owner or purchaser of the project,
as determined by the participating administra-
tive entity, which may be established to provide
incentives for owners or purchasers to meet
benchmarks of quality for management and
housing quality; and
(E) other expenses determined by the par-
ticipating administrative entity to be necessary
for the operation of the project.
(h) EXEMPTIONS FROM RESTRUCTURING.—Subject to
section 2106, the Secretary shall renew project-based assist-
ance contracts at existing rents, or at a level that provides
income sufficient to support a budget-based rent (including
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a budget-based rent adjustment if justified by reasonable
and expected operating expenses), if—
(1) the project was financed through obligations
such that the implementation of a mortgage restruc-
turing and rental assistance sufficiency plan under
this section is inconsistent with applicable law or
agreements governing such financing;
(2) in the determination of the Secretary or the
participating administrative entity, the restructuring
would not result in significant section 8 savings to
the Secretary; or
(3) the project has an expiring contract under
section 8 of the United States Housing Act of 1937
but does not qualify as an eligible multifamily hous-
ing project pursuant to section 2102(2) of this part.
SEC. 2105. SECTION 8 RENEWALS AND LONG-TERM AFFORD-
ABILITY 
COMMITMENT 
BY 
OWNER 
OF
PROJECT.
(a) SECTION
8 RENEWALS
OF
RESTRUCTURED
PROJECTS.—Subject to the availability of amounts pro-
vided in advance in appropriations Acts, the Secretary
shall enter into contracts with participating administrative
entities pursuant to which the participating administrative
entity shall offer to renew or extend an expiring section 8
contract on an eligible multifamily housing project, and the
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owner of the project shall accept the offer, provided the ini-
tial renewal is in accordance with the terms and conditions
specified in the mortgage restructuring and rental assist-
ance sufficiency plan.
(b) REQUIRED COMMITMENT.—After the initial re-
newal of a section 8 contract pursuant to this section, the
owner shall accept each offer made pursuant to subsection
(a) to renew the contract, for the remaining term of the
existing mortgage and, if applicable, the remaining term
of an existing second mortgage, if the offer to renew is on
terms and conditions specified in the mortgage restructur-
ing and rental assistance sufficiency plan.
SEC. 2106. PROHIBITION ON RESTRUCTURING.
(a) PROHIBITION
ON RESTRUCTURING.—The Sec-
retary shall not consider any mortgage restructuring and
rental assistance sufficiency plan or request for contract re-
newal if the participating administrative entity determines
that—
(1) the owner or purchaser of the project has en-
gaged in material adverse financial or managerial ac-
tions or omissions with regard to this project (or with
regard to other similar projects if the Secretary deter-
mines that those actions or omissions constitute a
pattern of mismanagement that would warrant sus-
pension or debarment by the Secretary), including—
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(A) materially violating any Federal, State,
or local law or regulation with regard to this
project or any other federally assisted project,
after receipt of notice and an opportunity to
cure;
(B) materially breaching a contract for as-
sistance under section 8 of the United States
Housing Act of 1937, after receipt of notice and
an opportunity to cure;
(C) materially violating any applicable reg-
ulatory or other agreement with the Secretary or
a participating administrative entity, after re-
ceipt of notice and an opportunity to cure;
(D) repeatedly and materially violating
any Federal, State, or local law or regulation
with regard to the project or any other federally
assisted project;
(E) repeatedly and materially breaching a
contract for assistance under section 8 of the
United States Housing Act of 1937;
(F) repeatedly and materially violating any
applicable regulatory or other agreement with
the Secretary or a participating administrative
entity;
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(G) repeatedly failing to make mortgage
payments at times when project income was suf-
ficient to maintain and operate the property;
(H) materially failing to maintain the
property according to housing quality standards
after receipt of notice and a reasonable oppor-
tunity to cure; or
(I) committing any actions or omissions
that would warrant suspension or debarment by
the Secretary;
(2) the owner or purchaser of the property mate-
rially failed to follow the procedures and requirements
of this part, after receipt of notice and an oppor-
tunity to cure; or
(3) the poor condition of the project cannot be
remedied in a cost effective manner, as determined by
the participating administrative entity.
(b) OPPORTUNITY TO DISPUTE FINDINGS.—
(1) IN GENERAL.—During the 30-day period be-
ginning on the date on which the owner or purchaser
of an eligible multifamily housing project receives no-
tice of a rejection under subsection (a) or of a mort-
gage restructuring and rental assistance sufficiency
plan under section 2104, the Secretary or participat-
ing administrative entity shall provide that owner or
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purchaser with an opportunity to dispute the basis
for the rejection and an opportunity to cure.
(2) AFFIRMATION, MODIFICATION, OR
REVER-
SAL.—
(A) IN GENERAL.—After providing an op-
portunity to dispute under paragraph (1), the
Secretary or the participating administrative
entity may affirm, modify, or reverse any rejec-
tion under subsection (a) or rejection of a mort-
gage restructuring and rental assistance suffi-
ciency plan under section 2104.
(B) REASONS
FOR
DECISION.—The Sec-
retary or the participating administrative en-
tity, as applicable, shall identify the reasons for
any final decision under this paragraph.
(C) REVIEW PROCESS.—The Secretary shall
establish an administrative review process to ap-
peal any final decision under this paragraph.
(c) FINAL DETERMINATION.—Any final determination
under this section shall not be subject to judicial review.
(d) DISPLACED TENANTS.—Subject to the availability
of amounts provided in advance in appropriations Acts, for
any low-income tenant that is residing in a project or re-
ceiving assistance under section 8 of the United States
Housing Act of 1937 at the time of rejection under this sec-
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tion, that tenant shall be provided with tenant-based assist-
ance and reasonable moving expenses, as determined by the
Secretary.
(e) TRANSFER
OF PROPERTY.—For properties dis-
qualified from the consideration of a mortgage restructuring
and rental assistance sufficiency plan under this section be-
cause of actions by an owner or purchaser in accordance
with paragraph (1) or (2) of subsection (a), the Secretary
shall establish procedures to facilitate the voluntary sale or
transfer of a property as part of a mortgage restructuring
and rental assistance sufficiency plan, with a preference for
tenant organizations and tenant-endorsed community-based
nonprofit and public agency purchasers meeting such rea-
sonable qualifications as may be established by the Sec-
retary, which purchasers shall be eligible to receive project-
based assistance under section 8 of the United States Hous-
ing Act of 1937.
SEC. 2107. RESTRUCTURING TOOLS.
(a) RESTRUCTURING TOOLS.—In this part, and to the
extent these actions are consistent with this section, an ap-
proved mortgage restructuring and rental assistance suffi-
ciency plan may include one or more of the following:
(1) FULL
OR
PARTIAL
PAYMENT
OF
CLAIM.—
Making a full payment of claim or partial payment
of claim under section 541(b) of the National Housing
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Act. Any payment under this paragraph shall not re-
quire the approval of a mortgagee.
(2) REFINANCING OF DEBT.—Refinancing of all
or part of the debt on a project, if the refinancing
would result in significant subsidy savings under sec-
tion 8 of the United States Housing Act of 1937.
(3) MORTGAGE
INSURANCE.—Providing FHA
multifamily mortgage insurance, reinsurance or other
credit enhancement alternatives, including multifam-
ily risk-sharing mortgage programs, as provided
under section 542 of the Housing and Community
Development Act of 1992. Any limitations on the
number of units available for mortgage insurance
under section 542 shall not apply to eligible multi-
family housing projects. Any credit subsidy costs of
providing mortgage insurance shall be paid from the
General Insurance Fund and the Special Risk Insur-
ance Fund.
(4) CREDIT
ENHANCEMENT.—Any additional
State or local mortgage credit enhancements and risk-
sharing arrangements may be established with State
or local housing finance agencies, the Federal Hous-
ing Finance Board, the Federal National Mortgage
Association, and the Federal Home Loan Mortgage
Corporation, to a modified first mortgage.
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(5) COMPENSATION OF THIRD PARTIES.—Enter-
ing into agreements, incurring costs, or making pay-
ments, as may be reasonably necessary, to compensate
the participation of participating administrative en-
tities and other parties in undertaking actions au-
thorized by this part. Upon request, participating ad-
ministrative entities shall be considered to be contract
administrators under section 8 of the United States
Housing Act of 1937 for purposes of any contracts en-
tered into as part of an approved mortgage restruc-
turing and rental assistance sufficiency plan. Subject
to the availability of amounts provided in advance in
appropriations Acts for administrative fees under sec-
tion 8 of the United States Housing Act of 1937, such
fees shall be used to compensate participating admin-
istrative entities for compliance monitoring costs in-
curred under section 2110.
(6) RESIDUAL
RECEIPTS.—Applying any ac-
quired residual receipts to maintain the long-term af-
fordability and physical condition of the property or
of other eligible multifamily housing projects. The
participating administrative entity may expedite the
acquisition of residual receipts by entering into agree-
ments with owners of housing covered by an expiring
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contract to provide an owner with a share of the re-
ceipts, not to exceed 10 percent.
(7) REHABILITATION NEEDS.—Assisting in ad-
dressing the necessary rehabilitation needs of the
project, except that assistance under this paragraph
shall not exceed the equivalent of $5,000 per unit for
those units covered with project-based assistance. Re-
habilitation may be paid from the provision of grants
from residual receipts or, as provided in appropria-
tions Acts, from budget authority provided for in-
creases in the budget authority for assistance con-
tracts under section 8 of the United States Housing
Act of 1937, the rehabilitation grant program estab-
lished under section 2201 of this subtitle, or through
the debt restructuring transaction. Each owner that
receives rehabilitation assistance shall contribute not
less than 25 percent of the amount of rehabilitation
assistance received.
(8) MORTGAGE RESTRUCTURING.—Restructuring
mortgages to provide a structured first mortgage to
cover rents at levels that are established in section
2104(g) and a second mortgage equal to the difference
between the restructured first mortgage and the mort-
gage balance of the eligible multifamily housing
project at the time of restructuring. The second mort-
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gage shall bear interest at a rate not to exceed the ap-
plicable Federal rate for a term not to exceed 50
years. If the first mortgage remains outstanding, pay-
ments of interest and principal on the second mort-
gage shall be made from a portion of the excess project
income only after the payment of all reasonable and
necessary operating expenses (including deposits in a
reserve for replacement), debt service on the first
mortgage, and such other expenditures as may be ap-
proved by the Secretary. Such portion shall be equal
to not less than 75 percent of excess project income.
The participating administrative entity may provide
up to 25 percent of the excess project income to the
project owner if the participating administrative en-
tity determines that the project owner meets bench-
marks of quality for management and housing qual-
ity. During the period in which the first mortgage re-
mains outstanding, no payments of interest or prin-
cipal shall be required on the second mortgage. The
second mortgage shall be assumable by any subsequent
purchaser of any multifamily housing project, pursu-
ant to guidelines established by the Secretary. The
participating administrative entity may be author-
ized to modify the terms or forgive all or part of the
second mortgage upon acquisition by a tenant organi-
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zation or tenant-endorsed community-based nonprofit
or public agency, pursuant to guidelines established
by the Secretary. The principal and accrued interest
due under the second mortgage shall be fully payable
upon disposition of the property, unless the mortgage
is assumed under the preceding sentence. The owner
shall begin repayment of the second mortgage upon
full payment of the first mortgage in equal monthly
installments in an amount equal to the monthly prin-
cipal and interest payments formerly paid under the
first mortgage. The principal and interest of a second
mortgage shall be immediately due and payable upon
a finding by the Secretary that an owner has failed
to materially comply with this part or any require-
ments of the United States Housing Act of 1937 as
those requirements apply to the applicable project,
after receipt of notice of such failure and a reasonable
opportunity to cure such failure. The second mortgage
may be a direct obligation of the Secretary or a loan
financed through a lender, other than the Secretary.
If the second mortgage is a direct obligation of the
Secretary, the participating administrative entity
shall be authorized in the portfolio restructuring
agreement to act as the agent of the Secretary in serv-
icing such mortgage and enforcing the rights of the
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Secretary thereunder. Any credit subsidy costs of pro-
viding a second mortgage shall be paid from the Gen-
eral Insurance Fund and the Special Risk Insurance
Fund.
(b) ROLE OF FNMA AND FHLMC.—Section 1335 of
the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4565) is amended—
(1) in paragraph (3), by striking ‘‘and’’ at the
end;
(2) paragraph (4), by striking the period at the
end and inserting ‘‘; and’’;
(3) by striking ‘‘To meet’’ and inserting the fol-
lowing:
‘‘(a) IN GENERAL.—To meet’’; and
(4) by adding at the end the following:
‘‘(5) assist in maintaining the affordability of
assisted units in eligible multifamily housing projects
with expiring contracts, as defined under the Multi-
family Assisted Housing Reform and Affordability
Act of 1997.
‘‘(b) AFFORDABLE HOUSING GOALS.—Actions taken
under subsection (a)(5) shall constitute part of the contribu-
tion of each entity in meeting their affordable housing goals
under sections 1332, 1333, and 1334 for any fiscal year,
as determined by the Secretary.’’.
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(c) PROHIBITION ON EQUITY SHARING BY THE SEC-
RETARY.—The Secretary is prohibited from participating
in any equity agreement or profit-sharing agreement in
conjunction with any eligible multifamily housing project.
SEC. 2108. SHARED SAVINGS INCENTIVE.
(a) IN GENERAL.—At the time a participating admin-
istrative entity is designated, the Secretary shall negotiate
an incentive agreement with the participating administra-
tive entity, which agreement shall provide such entity with
a share of any principal and interest payments on the sec-
ond mortgage. The Secretary shall negotiate with partici-
pating administrative entities a savings incentive formula
that provides for periodic payments over a period of not
less than 5 years, which is allocated as incentives to partici-
pating administrative entities.
(b) USE
OF SAVINGS.—Notwithstanding any other
provision of law, the incentive agreement under subsection
(a) shall require any savings provided to a participating
administrative entity under that agreement to be used only
for providing decent, safe, and affordable housing for very
low-income families and persons with a priority for eligible
multifamily housing projects.
SEC. 2109. MANAGEMENT STANDARDS.
Each participating administrative entity shall estab-
lish and implement management standards, including re-
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quirements governing conflicts of interest between owners,
managers, contractors with an identity of interest, pursu-
ant to guidelines established by the Secretary and consistent
with industry standards.
SEC. 2110. MONITORING OF COMPLIANCE.
(a) COMPLIANCE AGREEMENTS.—Pursuant to regula-
tions issued by the Secretary after public notice and com-
ment, each participating administrative entity, through
binding contractual agreements with owners and otherwise,
shall ensure long-term compliance with the provisions of
this part. Each agreement shall, at a minimum, provide
for—
(1) enforcement of the provisions of this part;
and
(2) remedies for the breach of those provisions.
(b) PERIODIC MONITORING.—
(1) IN GENERAL.—Not less than annually, each
participating administrative entity shall review the
status of all multifamily housing projects for which a
mortgage restructuring and rental assistance suffi-
ciency plan has been implemented.
(2) INSPECTIONS.—Each review under this sub-
section shall include onsite inspection to determine
compliance with housing codes and other require-
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ments as provided in this part and the portfolio re-
structuring agreements.
(c) AUDIT
BY
THE SECRETARY.—The Comptroller
General of the United States, the Secretary, and the Inspec-
tor General of the Department of Housing and Urban De-
velopment may conduct an audit at any time of any multi-
family housing project for which a mortgage restructuring
and rental assistance sufficiency plan has been imple-
mented.
SEC. 2111. REVIEW.
(a) ANNUAL REVIEW.—In order to ensure compliance
with this part, the Secretary shall conduct an annual re-
view and report to Congress on actions taken under this
part and the status of eligible multifamily housing projects.
(b) SUBSIDY LAYERING REVIEW.—The participating
administrative entity shall certify, pursuant to guidelines
issued by the Secretary, that the requirements of section
102(d) of the Department of Housing and Urban Develop-
ment Reform Act of 1989 are satisfied so that the combina-
tion of assistance provided in connection with a property
for which a mortgage is to be restructured shall not be any
greater than is necessary to provide affordable housing.
SEC. 2112. GAO AUDIT AND REVIEW.
(a) INITIAL AUDIT.—Not later than 18 months after
the effective date of interim or final regulations promul-
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gated under this part, the Comptroller General of the Unit-
ed States shall conduct an audit to evaluate a representative
sample of all eligible multifamily housing projects and the
implementation of all mortgage restructuring and rental
assistance sufficiency plans.
(b) REPORT.—
(1) IN
GENERAL.—Not later than 18 months
after the audit conducted under subsection (a), the
Comptroller General of the United States shall submit
to Congress a report on the status of all eligible multi-
family housing projects and the implementation of all
mortgage restructuring and rental assistance suffi-
ciency plans.
(2) CONTENTS.—The report submitted under
paragraph (1) shall include—
(A) a description of the initial audit con-
ducted under subsection (a); and
(B) recommendations for any legislative ac-
tion to increase the financial savings to the Fed-
eral Government of the restructuring of eligible
multifamily housing projects balanced with the
continued availability of the maximum number
of affordable low-income housing units.
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SEC. 2113. REGULATIONS.
(a) RULEMAKING AND IMPLEMENTATION.—The Sec-
retary shall issue interim regulations necessary to imple-
ment this part not later than the expiration of the 6-month
period beginning on the date of enactment of this Act. Not
later than 1 year after the date of enactment of this subtitle,
in accordance with the negotiated rulemaking procedures
set forth in subchapter III of chapter 5 of title 5, United
States Code, the Secretary shall implement final regulations
implementing this part.
(b) REPEAL OF FHA MULTIFAMILY HOUSING DEM-
ONSTRATION AUTHORITY.—
(1) IN GENERAL.—Beginning upon the expira-
tion of the 6-month period beginning on the date of
enactment of this Act, the Secretary may not exercise
any authority or take any action under section 210
of the Balanced Budget Down Payment Act, II.
(2) UNUSED BUDGET AUTHORITY.—Any unused
budget authority under section 210(f) of the Balanced
Budget Down Payment Act, II, shall be available for
taking actions under the requirements established
through regulations issued under subsection (a).
SEC. 2114. TECHNICAL AND CONFORMING AMENDMENTS.
(a) CALCULATION OF LIMIT ON PROJECT-BASED AS-
SISTANCE.—Section 8(d) of the United States Housing Act
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of 1937 (42 U.S.C. 1437f(d)) is amended by adding at the
end the following:
‘‘(5) CALCULATION OF LIMIT.—Any contract en-
tered into under section 2104 of the Multifamily As-
sisted Housing Reform and Affordability Act of 1997
shall be excluded in computing the limit on project-
based assistance under this subsection.’’.
(b) PARTIAL PAYMENT OF CLAIMS ON MULTIFAMILY
HOUSING PROJECTS.—Section 541 of the National Housing
Act (12 U.S.C. 1735f–19) is amended—
(1) in subsection (a), in the subsection heading,
by striking ‘‘AUTHORITY’’ and inserting ‘‘DEFAULTED
MORTGAGES’’;
(2) by redesignating subsection (b) as subsection
(c); and
(3) by inserting after subsection (a) the follow-
ing:
‘‘(b) EXISTING MORTGAGES.—Notwithstanding any
other provision of law, the Secretary, in connection with
a mortgage restructuring under section 2104 of the Multi-
family Assisted Housing Reform and Affordability Act of
1997, may make a one time, nondefault partial payment
of the claim under the mortgage insurance contract, which
shall include a determination by the Secretary or the par-
ticipating administrative entity, in accordance with the
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Multifamily Assisted Housing Reform and Affordability
Act of 1997, of the market value of the project and a restruc-
turing of the mortgage, under such terms and conditions
as the Secretary may establish.’’.
(c) REUSE
AND RESCISSION
OF CERTAIN RECAP-
TURED BUDGET AUTHORITY.—Section 8(bb) of the United
States Housing Act of 1937 (42 U.S.C. 1437f(b)(b)) is
amended to read as follows:
‘‘(bb) REUSE AND RESCISSION OF CERTAIN RECAP-
TURED BUDGET AUTHORITY.—If a project-based assistance
contract for an eligible multifamily housing project subject
to actions authorized under title I is terminated or amended
as part of restructuring under section 107, the Secretary
shall recapture the budget authority not required for the ter-
minated or amended contract and, without regard to section
218 of the Departments of Veterans Affairs and Housing
and Urban Development, and Independent Agencies Appro-
priations Act of 1997, use such amounts as are necessary
to provide housing assistance for the same number of fami-
lies covered by such contract for the remaining term of such
contract, under a contract providing for project-based or
tenant-based assistance. The amount of budget authority
saved as a result of the shift to project-based or tenant-based
assistance shall be rescinded.’’.
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SEC. 2115. TERMINATION OF AUTHORITY.
(a) IN GENERAL.—Except as provided in subsection
(b), this part is repealed effective October 1, 2001.
(b) EXCEPTION.—The repeal under this section does
not apply with respect to projects and programs for which
binding commitments have been entered into before October
1, 2001.
Part 2—Miscellaneous Provisions
SEC. 2201. REHABILITATION GRANTS FOR CERTAIN IN-
SURED PROJECTS.
Section 236 of the National Housing Act (12 U.S.C.
1715z–1) is amended by adding at the end the following:
‘‘(s) GRANT AUTHORITY.—
‘‘(1) IN
GENERAL.—The Secretary may make
grants for the capital costs of rehabilitation to owners
of projects that meet the eligibility and other criteria
set forth in, and in accordance with, this subsection.
‘‘(2) PROJECT ELIGIBILITY.—A project may be
eligible for capital grant assistance under this sub-
section—
‘‘(A) if—
‘‘(i) the project was insured under sec-
tion 236 or section 221(d)(3) of the Na-
tional Housing Act; and
‘‘(ii) the project was assisted by the
loan management assistance program under
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section 8 of the United States Housing Act
of 1937 on the date of enactment of the Mul-
tifamily Assisted Housing Reform and Af-
fordability Act of 1997;
‘‘(B) if the project owner agrees to maintain
the housing quality standards that were in effect
immediately prior to the extinguishment of the
mortgage insurance;
‘‘(C) if the Secretary determines that the
owner or purchaser of the project has not en-
gaged in material adverse financial or manage-
rial actions or omissions with regard to this
project (or with regard to other similar projects
if the Secretary determines that those actions or
omissions constitute a pattern of mismanage-
ment that would warrant suspension or debar-
ment by the Secretary), including—
‘‘(i) materially violating any Federal,
State, or local law or regulation with re-
gard to this project or any other federally
assisted project, after receipt of notice and
an opportunity to cure;
‘‘(ii) materially breaching a contract
for assistance under section 8 of the United
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States Housing Act of 1937, after receipt of
notice and an opportunity to cure;
‘‘(iii) materially violating any appli-
cable regulatory or other agreement with the
Secretary or a participating administrative
entity, after receipt of notice and an oppor-
tunity to cure;
‘‘(iv) repeatedly failing to make mort-
gage payments at times when project in-
come was sufficient to maintain and oper-
ate the property;
‘‘(v) materially failing to maintain the
property according to housing quality
standards after receipt of notice and a rea-
sonable opportunity to cure; or
‘‘(vi) committing any act or omission
that would warrant suspension or debar-
ment by the Secretary; and
‘‘(D) if the project owner demonstrates to
the satisfaction of the Secretary—
‘‘(i) using information in a com-
prehensive needs assessment, that capital
grant assistance is needed for rehabilitation
of the project; and
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‘‘(ii) that project income is not suffi-
cient to support such rehabilitation.
‘‘(3) ELIGIBLE PURPOSES.—The Secretary may
make grants to the owners of eligible projects for the
purposes of—
‘‘(A) payment into project replacement re-
serves;
‘‘(B) providing a fair return on equity in-
vestment;
‘‘(C) debt service payments on non-Federal
rehabilitation loans; and
‘‘(D) payment of nonrecurring maintenance
and capital improvements, under such terms and
conditions as are determined by the Secretary.
‘‘(4) GRANT AGREEMENT.—
‘‘(A) IN
GENERAL.—The Secretary shall
provide in any grant agreement under this sub-
section that the grant shall be terminated if the
project fails to meet housing quality standards,
as applicable on the date of enactment of the
Multifamily Housing Reform and Affordability
Act of 1997, or any successor standards for the
physical conditions of projects, as are determined
by the Secretary.
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‘‘(B) AFFORDABILITY AND USE CLAUSES.—
The Secretary shall include in a grant agreement
under this subsection a requirement for the
project owners to maintain such affordability
and use restrictions as the Secretary determines
to be appropriate.
‘‘(C) OTHER TERMS.—The Secretary may
include in a grant agreement under this sub-
section such other terms and conditions as the
Secretary determines to be necessary.
‘‘(5) DELEGATION.—
‘‘(A) IN GENERAL.—In addition to the au-
thorities set forth in subsection (p), the Secretary
may delegate to State and local governments the
responsibility for the administration of grants
under this subsection. Any such government may
carry out such delegated responsibilities directly
or under contracts.
‘‘(B) ADMINISTRATION COSTS.—In addition
to other eligible purposes, amounts of grants
under this subsection may be made available for
costs of administration under subparagraph (A).
‘‘(6) FUNDING.—
‘‘(A) IN GENERAL.—For purposes of carry-
ing out this subsection, the Secretary may make
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available amounts that are unobligated amounts
for contracts for interest reduction payments—
‘‘(i) that were previously obligated for
contracts for interest reduction payments
under this section until insurance under
this section was extinguished;
‘‘(ii) that become available as a result
of the outstanding principal balance of a
mortgage having been written down;
‘‘(iii) that are uncommitted balances
within the limitation on maximum pay-
ments that may have been, before the date
of enactment of the Multifamily Assisted
Housing Reform and Affordability Act of
1997, permitted in any fiscal year; or
‘‘(iv) that become available from any
other source.
‘‘(B) LIQUIDATION
AUTHORITY.—The Sec-
retary may liquidate obligations entered into
under this subsection under section 1305(10) of
title 31, United States Code.
‘‘(C) CAPITAL GRANTS.—In making capital
grants under the terms of this subsection, using
the amounts that the Secretary has recaptured
from contracts for interest reduction payments,
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the Secretary shall ensure that the rates and
amounts of outlays do not at any one time ex-
ceed the rates and amounts of outlays that would
have been experienced if the insurance had not
been extinguished or the principal amount had
not been written down, and the interest reduc-
tion payments that the Secretary has recaptured
had continued in accordance with the terms in
effect immediately prior to such extinguishment
or write-down.’’.
SEC. 2202. MINIMUM RENT.
Notwithstanding section 3(a) of the United States
Housing Act of 1937, the Secretary of Housing and Urban
Development may provide that each family receiving
project-based assistance under section 8 shall pay a mini-
mum monthly rent in an amount not to exceed $25 per
month.
SEC. 2203. REPEAL OF FEDERAL PREFERENCES.
(a) SECTION 8 EXISTING AND MODERATE REHABILI-
TATION.—Section 8(d)(1)(A) of the United States Housing
Act of 1937 (42 U.S.C. 1437f(d)(1)(A)) is amended to read
as follows:
‘‘(A) the selection of tenants shall be the function
of the owner, subject to the annual contributions con-
tract between the Secretary and the agency, except
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that with respect to the certificate and moderate reha-
bilitation programs only, for the purpose of selecting
families to be assisted, the public housing agency may
establish, after public notice and an opportunity for
public comment, a written system of preferences for
selection that are not inconsistent with the com-
prehensive housing affordability strategy for the juris-
diction in which the project is located, in accordance
with title I of the Cranston-Gonzalez National Afford-
able Housing Act;’’.
(b) SECTION 8 NEW CONSTRUCTION AND SUBSTANTIAL
REHABILITATION.—
(1) REPEAL.—Section 545(c) of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C.
1437f note) is amended to read as follows:
‘‘(c) [Reserved.]’’.
(2) PROHIBITION.—The provisions of section
8(e)(2) of the United States Housing Act of 1937, as
in existence on the day before October 1, 1983, that
require tenant selection preferences shall not apply
with respect to—
(A) housing constructed or substantially re-
habilitated pursuant to assistance provided
under section 8(b)(2) of the United States Hous-
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ing Act of 1937, as in existence on the day before
October 1, 1983; or
(B) projects financed under section 202 of
the Housing Act of 1959, as in existence on the
day before the date of enactment of the Cranston-
Gonzalez National Affordable Housing Act.
(c) RENT SUPPLEMENTS.—Section 101(k) of the Hous-
ing and Urban Development Act of 1965 (12 U.S.C.
1701s(k)) is amended to read as follows:
‘‘(k) [Reserved.]’’.
(d) CONFORMING AMENDMENTS.—
(1) UNITED STATES HOUSING ACT OF 1937.—The
United States Housing Act of 1937 (42 U.S.C. 1437
et seq.) is amended—
(A) in section 6(o), by striking ‘‘preference
rules specified in’’ and inserting ‘‘written selec-
tion criteria established pursuant to’’;
(B) in section 8(d)(2)(A), by striking the
last sentence; and
(C) in section 8(d)(2)(H), by striking ‘‘Not-
withstanding subsection (d)(1)(A)(i), an’’ and
inserting ‘‘An’’.
(2) CRANSTON-GONZALEZ
NATIONAL
AFFORD-
ABLE
HOUSING
ACT.—The Cranston-Gonzalez Na-
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tional Affordable Housing Act (42 U.S.C. 12704 et
seq.) is amended—
(A) in section 455(a)(2)(D)(iii), by striking
‘‘would qualify for a preference under’’ and in-
serting ‘‘meet the written selection criteria estab-
lished pursuant to’’; and
(B) in section 522(f)(6)(B), by striking
‘‘any preferences for such assistance under sec-
tion 8(d)(1)(A)(i)’’ and inserting ‘‘the written se-
lection criteria established pursuant to section
8(d)(1)(A)’’.
(3) LOW-INCOME HOUSING PRESERVATION AND
RESIDENT HOMEOWNERSHIP ACT OF 1990.—The sec-
ond sentence of section 226(b)(6)(B) of the Low-In-
come Housing Preservation and Resident Home-
ownership Act of 1990 (12 U.S.C. 4116(b)(6)(B)) is
amended by striking ‘‘requirement for giving pref-
erences to certain categories of eligible families under’’
and inserting ‘‘written selection criteria established
pursuant to’’.
(4) HOUSING
AND
COMMUNITY
DEVELOPMENT
ACT OF 1992.—Section 655 of the Housing and Com-
munity Development Act of 1992 (42 U.S.C. 13615)
is amended by striking ‘‘preferences for occupancy’’
and all that follows before the period at the end and
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inserting ‘‘selection criteria established by the owner
to elderly families according to such written selection
criteria, and to near-elderly families according to
such written selection criteria, respectively’’.
(5) REFERENCES IN OTHER LAW.—Any reference
in any Federal law other than any provision of any
law amended by paragraphs (1) through (5) of this
subsection or to the preferences for assistance under
section 8(d)(1)(A)(i) of the United States Housing Act
of 1937, as that section existed on the day before the
effective date of this part, shall be considered to refer
to the written selection criteria established pursuant
to section 8(d)(1)(A) of the United States Housing
Act of 1937, as amended by this subsection.
Part 3—Enforcement Provisions
SEC. 2301. IMPLEMENTATION.
(a) ISSUANCE OF NECESSARY REGULATIONS.—Not-
withstanding section 7(o) of the Department of Housing
and Urban Development Act or part 10 of title 24, Code
of Federal Regulations (as in existence on the date of enact-
ment of this Act), the Secretary shall issue such regulations
as the Secretary determines to be necessary to implement
this subtitle and the amendments made by this subtitle in
accordance with section 552 or 553 of title 5, United States
Code, as determined by the Secretary.
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(b) USE OF EXISTING REGULATIONS.—In implement-
ing any provision of this subtitle, the Secretary may, in
the discretion of the Secretary, provide for the use of exist-
ing regulations to the extent appropriate, without rule-
making.
Subpart A—FHA Single Family and Multifamily
Housing
SEC. 2311. AUTHORIZATION TO IMMEDIATELY SUSPEND
MORTGAGEES.
Section 202(c)(3)(C) of the National Housing Act (12
U.S.C. 1708(c)(3)(C)) is amended by inserting after the
first sentence the following: ‘‘Notwithstanding paragraph
(4)(A), a suspension shall be effective upon issuance by the
Board if the Board determines that there exists adequate
evidence that immediate action is required to protect the
financial interests of the Department or the public.’’.
SEC. 2312. EXTENSION OF EQUITY SKIMMING TO OTHER
SINGLE FAMILY AND MULTIFAMILY HOUSING
PROGRAMS.
Section 254 of the National Housing Act (12 U.S.C.
1715z–19) is amended to read as follows:
‘‘SEC. 254. EQUITY SKIMMING PENALTY.
‘‘(a) IN GENERAL.—Whoever, as an owner, agent, or
manager, or who is otherwise in custody, control, or posses-
sion of a multifamily project or a 1- to 4-family residence
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that is security for a mortgage note that is described in
subsection (b), willfully uses or authorizes the use of any
part of the rents, assets, proceeds, income, or other funds
derived from property covered by that mortgage note for
any purpose other than to meet reasonable and necessary
expenses that include expenses approved by the Secretary
if such approval is required, in a period during which the
mortgage note is in default or the project is in a nonsurplus
cash position, as defined by the regulatory agreement cover-
ing the property, or the mortgagor has failed to comply with
the provisions of such other form of regulatory control im-
posed by the Secretary, shall be fined not more than
$500,000, imprisoned not more than 5 years, or both.
‘‘(b) MORTGAGE NOTES DESCRIBED.—For purposes of
subsection (a), a mortgage note is described in this sub-
section if it—
‘‘(1) is insured, acquired, or held by the Sec-
retary pursuant to this Act;
‘‘(2) is made pursuant to section 202 of the
Housing Act of 1959 (including property still subject
to section 202 program requirements that existed be-
fore the date of enactment of the Cranston-Gonzalez
National Affordable Housing Act); or
‘‘(3) is insured or held pursuant to section 542
of the Housing and Community Development Act of
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1992, but is not reinsured under section 542 of the
Housing and Community Development Act of 1992.’’.
SEC. 2313. CIVIL MONEY PENALTIES AGAINST MORTGA-
GEES, LENDERS, AND OTHER PARTICIPANTS
IN FHA PROGRAMS.
(a) CHANGE TO SECTION TITLE.—Section 536 of the
National Housing Act (12 U.S.C. 1735f–14) is amended by
striking the section heading and the section designation and
inserting the following:
‘‘SEC. 536. CIVIL MONEY PENALTIES AGAINST MORTGA-
GEES, LENDERS, AND OTHER PARTICIPANTS
IN FHA PROGRAMS.’’.
(b) EXPANSION
OF PERSONS ELIGIBLE
FOR PEN-
ALTY.—Section 536(a) of the National Housing Act (12
U.S.C. 1735f–14(a)) is amended—
(1) in paragraph (1), by striking the first sen-
tence and inserting the following: ‘‘If a mortgagee ap-
proved under the Act, a lender holding a contract of
insurance under title I, or a principal, officer, or em-
ployee of such mortgagee or lender, or other person or
entity participating in either an insured mortgage or
title I loan transaction under this Act or providing
assistance to the borrower in connection with any
such loan, including sellers of the real estate involved,
borrowers, closing agents, title companies, real estate
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agents, mortgage brokers, appraisers, loan correspond-
ents and dealers, knowingly and materially violates
any applicable provision of subsection (b), the Sec-
retary may impose a civil money penalty on the
mortgagee or lender, or such other person or entity,
in accordance with this section. The penalty under
this paragraph shall be in addition to any other
available civil remedy or any available criminal pen-
alty, and may be imposed whether or not the Sec-
retary imposes other administrative sanctions.’’; and
(2) in paragraph (2)—
(A) in the first sentence, by inserting ‘‘or
such other person or entity’’ after ‘‘lender’’; and
(B) in the second sentence, by striking ‘‘pro-
vision’’ and inserting ‘‘the provisions’’.
(c) ADDITIONAL
VIOLATIONS
FOR
MORTGAGEES,
LENDERS, AND OTHER PARTICIPANTS
IN FHA PRO-
GRAMS.—Section 536(b) of the National Housing Act (12
U.S.C. 1735f–14(b)) is amended—
(1) by redesignating paragraph (2) as para-
graph (3);
(2) by inserting after paragraph (1) the follow-
ing:
‘‘(2) The Secretary may impose a civil money
penalty under subsection (a) for any knowing and
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material violation by a principal, officer, or employee
of a mortgagee or lender, or other participants in ei-
ther an insured mortgage or title I loan transaction
under this Act or provision of assistance to the bor-
rower in connection with any such loan, including
sellers of the real estate involved, borrowers, closing
agents, title companies, real estate agents, mortgage
brokers, appraisers, loan correspondents, and dealers
for—
‘‘(A) submission to the Secretary of infor-
mation that was false, in connection with any
mortgage insured under this Act, or any loan
that is covered by a contract of insurance under
title I of this Act;
‘‘(B) falsely certifying to the Secretary or
submitting to the Secretary a false certification
by another person or entity; or
‘‘(C) failure by a loan correspondent or
dealer to submit to the Secretary information
which is required by regulations or directives in
connection with any loan that is covered by a
contract of insurance under title I.’’; and
(3) in paragraph (3), as redesignated, by strik-
ing ‘‘or paragraph (1)(F)’’ and inserting ‘‘or (F), or
paragraph (2) (A), (B), or (C)’’.
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(d) CONFORMING AND TECHNICAL AMENDMENTS.—
Section 536 of the National Housing Act (12 U.S.C. 1735f–
14) is amended—
(1) in subsection (c)(1)(B), by inserting after
‘‘lender’’ the following: ‘‘or such other person or en-
tity’’;
(2) in subsection (d)(1)—
(A) by inserting ‘‘or such other person or
entity’’ after ‘‘lender’’; and
(B) by striking ‘‘part 25’’ and inserting
‘‘parts 24 and 25’’; and
(3) in subsection (e), by inserting ‘‘or such other
person or entity’’ after ‘‘lender’’ each place that term
appears.
Subpart B—FHA Multifamily Provisions
SEC. 2320. CIVIL MONEY PENALTIES AGAINST GENERAL
PARTNERS, OFFICERS, DIRECTORS, AND CER-
TAIN MANAGING AGENTS OF MULTIFAMILY
PROJECTS.
(a) CIVIL MONEY PENALTIES AGAINST MULTIFAMILY
MORTGAGORS.—Section 537 of the National Housing Act
(12 U.S.C. 1735f–15) is amended—
(1) in subsection (b)(1), by striking ‘‘on that
mortgagor’’ and inserting the following: ‘‘on that
mortgagor, on a general partner of a partnership
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mortgagor, or on any officer or director of a corporate
mortgagor’’;
(2) in subsection (c)—
(A) by striking the subsection heading and
inserting the following:
‘‘(c) OTHER VIOLATIONS.—’’; and
(B) in paragraph (1)—
(i) by striking ‘‘VIOLATIONS.—The
Secretary may’’ and all that follows through
the colon and inserting the following:
‘‘(A) LIABLE PARTIES.—The Secretary may
also impose a civil money penalty under this sec-
tion on—
‘‘(i) any mortgagor of a property that
includes five or more living units and that
has a mortgage insured, coinsured, or held
pursuant to this Act;
‘‘(ii) any general partner of a partner-
ship mortgagor of such property;
‘‘(iii) any officer or director of a cor-
porate mortgagor;
‘‘(iv) any agent employed to manage
the property that has an identity of interest
with the mortgagor, with the general part-
ner of a partnership mortgagor, or with
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any officer or director of a corporate mort-
gagor of such property; or
‘‘(v) any member of a limited liability
company that is the mortgagor of such
property or is the general partner of a lim-
ited partnership mortgagor or is a partner
of a general partnership mortgagor.
‘‘(B) VIOLATIONS.—A penalty may be im-
posed under this section upon any liable party
under subparagraph (A) that knowingly and
materially takes any of the following actions:’’;
(ii) in subparagraph (B), as des-
ignated by clause (i), by redesignating the
subparagraph designations (A) through (L)
as clauses (i) through (xii), respectively;
(iii) by adding after clause (xii), as re-
designated by clause (ii), the following:
‘‘(xiii) Failure to maintain the prem-
ises, accommodations, any living unit in
the project, and the grounds and equipment
appurtenant thereto in good repair and
condition in accordance with regulations
and requirements of the Secretary, except
that nothing in this clause shall have the ef-
fect of altering the provisions of an existing
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regulatory agreement or federally insured
mortgage on the property.
‘‘(xiv) Failure, by a mortgagor, a gen-
eral partner of a partnership mortgagor, or
an officer or director of a corporate mortga-
gor, to provide management for the project
that is acceptable to the Secretary pursuant
to regulations and requirements of the Sec-
retary.’’; and
(iv) in the last sentence, by deleting ‘‘of
such agreement’’ and inserting ‘‘of this sub-
section’’;
(3) in subsection (d)—
(A) in paragraph (1)(B), by inserting after
‘‘mortgagor’’ the following: ‘‘, general partner of
a partnership mortgagor, officer or director of a
corporate mortgagor, or identity of interest agent
employed to manage the property’’; and
(B) by adding at the end the following:
‘‘(5) PAYMENT OF PENALTY.—No payment of a
civil money penalty levied under this section shall be
payable out of project income.’’;
(4) in subsection (e)(1), by deleting ‘‘a mortga-
gor’’ and inserting ‘‘an entity or person’’;
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(5) in subsection (f), by inserting after ‘‘mortga-
gor’’ each place such term appears the following: ‘‘,
general partner of a partnership mortgagor, officer or
director of a corporate mortgagor, or identity of inter-
est agent employed to manage the property’’;
(6) by striking the heading of subsection (f) and
inserting the following: ‘‘CIVIL MONEY PENALTIES
AGAINST
MULTIFAMILY
MORTGAGORS, 
GENERAL
PARTNERS
OF PARTNERSHIP MORTGAGORS, OFFI-
CERS AND DIRECTORS OF CORPORATE MORTGAGORS,
AND CERTAIN MANAGING AGENTS’’; and
(7) by adding at the end the following:
‘‘(k) IDENTITY OF INTEREST MANAGING AGENT.—In
this section, the terms ‘agent employed to manage the prop-
erty that has an identity of interest’ and ‘identity of inter-
est agent’ mean an entity—
‘‘(1) that has management responsibility for a
project;
‘‘(2) in which the ownership entity, including its
general partner or partners (if applicable) and its of-
ficers or directors (if applicable), has an ownership
interest; and
‘‘(3) over which the ownership entity exerts effec-
tive control.’’.
(b) IMPLEMENTATION.—
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(1) PUBLIC COMMENT.—The Secretary shall im-
plement the amendments made by this section by reg-
ulation issued after notice and opportunity for public
comment. The notice shall seek comments primarily
as to the definitions of the terms ‘‘ownership interest
in’’ and ‘‘effective control’’, as those terms are used in
the definition of the terms ‘‘agent employed to man-
age the property that has an identity of interest’’ and
‘‘identity of interest agent’’.
(2) TIMING.—A proposed rule implementing the
amendments made by this section shall be published
not later than 1 year after the date of enactment of
this Act.
(c) APPLICABILITY
OF AMENDMENTS.—The amend-
ments made by subsection (a) shall apply only with respect
to—
(1) violations that occur on or after the effective
date of the final regulations implementing the amend-
ments made by this section; and
(2) in the case of a continuing violation (as de-
termined by the Secretary of Housing and Urban De-
velopment), any portion of a violation that occurs on
or after that date.
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SEC. 2321. CIVIL MONEY PENALTIES FOR NONCOMPLIANCE
WITH SECTION 8 HAP CONTRACTS.
(a) BASIC AUTHORITY.—Title I of the United States
Housing Act of 1937 is amended—
(1) by designating the second section designated
as section 27 (as added by section 903(b) of Public
Law 104–193 (110 Stat. 2348)) as section 28; and
(2) by adding at the end the following:
‘‘SEC. 29. CIVIL MONEY PENALTIES AGAINST SECTION 8
OWNERS.
‘‘(a) IN GENERAL.—
‘‘(1) EFFECT ON OTHER REMEDIES.—The pen-
alties set forth in this section shall be in addition to
any other available civil remedy or any available
criminal penalty, and may be imposed regardless of
whether the Secretary imposes other administrative
sanctions.
‘‘(2) FAILURE
OF
SECRETARY.—The Secretary
may not impose penalties under this section for a vio-
lation, if a material cause of the violation is the fail-
ure of the Secretary, an agent of the Secretary, or a
public housing agency to comply with an existing
agreement.
‘‘(b) VIOLATIONS OF HOUSING ASSISTANCE PAYMENT
CONTRACTS FOR WHICH PENALTY MAY BE IMPOSED.—
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‘‘(1) LIABLE PARTIES.—The Secretary may im-
pose a civil money penalty under this section on—
‘‘(A) any owner of a property receiving
project-based assistance under section 8;
‘‘(B) any general partner of a partnership
owner of that property; and
‘‘(C) any agent employed to manage the
property that has an identity of interest with the
owner or the general partner of a partnership
owner of the property.
‘‘(2) VIOLATIONS.—A penalty may be imposed
under this section for a knowing and material breach
of a housing assistance payments contract, including
the following—
‘‘(A) failure to provide decent, safe, and
sanitary housing pursuant to section 8; or
‘‘(B) knowing or willful submission of false,
fictitious, or fraudulent statements or requests
for housing assistance payments to the Secretary
or to any department or agency of the United
States.
‘‘(3) AMOUNT OF PENALTY.—The amount of a
penalty imposed for a violation under this subsection,
as determined by the Secretary, may not exceed
$25,000 per violation.
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‘‘(c) AGENCY PROCEDURES.—
‘‘(1) 
ESTABLISHMENT.—The 
Secretary 
shall
issue regulations establishing standards and proce-
dures governing the imposition of civil money pen-
alties under subsection (b). These standards and pro-
cedures—
‘‘(A) shall provide for the Secretary or other
department official to make the determination to
impose the penalty;
‘‘(B) shall provide for the imposition of a
penalty only after the liable party has received
notice and the opportunity for a hearing on the
record; and
‘‘(C) may provide for review by the Sec-
retary of any determination or order, or inter-
locutory ruling, arising from a hearing and judi-
cial review, as provided under subsection (d).
‘‘(2) FINAL ORDERS.—
‘‘(A) IN GENERAL.—If a hearing is not re-
quested before the expiration of the 15-day period
beginning on the date on which the notice of op-
portunity for hearing is received, the imposition
of a penalty under subsection (b) shall constitute
a final and unappealable determination.
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‘‘(B) EFFECT OF REVIEW.—If the Secretary
reviews the determination or order, the Secretary
may affirm, modify, or reverse that determina-
tion or order.
‘‘(C) FAILURE
TO
REVIEW.—If the Sec-
retary does not review that determination or
order before the expiration of the 90-day period
beginning on the date on which the determina-
tion or order is issued, the determination or
order shall be final.
‘‘(3) FACTORS IN DETERMINING AMOUNT OF PEN-
ALTY.—In determining the amount of a penalty
under subsection (b), the Secretary shall take into
consideration—
‘‘(A) the gravity of the offense;
‘‘(B) any history of prior offenses by the vi-
olator (including offenses occurring before the en-
actment of this section);
‘‘(C) the ability of the violator to pay the
penalty;
‘‘(D) any injury to tenants;
‘‘(E) any injury to the public;
‘‘(F) any benefits received by the violator as
a result of the violation;
‘‘(G) deterrence of future violations; and
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‘‘(H) such other factors as the Secretary
may establish by regulation.
‘‘(4) PAYMENT OF PENALTY.—No payment of a
civil money penalty levied under this section shall be
payable out of project income.
‘‘(d) JUDICIAL REVIEW
OF AGENCY DETERMINA-
TION.—Judicial review of determinations made under this
section shall be carried out in accordance with section
537(e) of the National Housing Act.
‘‘(e) REMEDIES FOR NONCOMPLIANCE.—
‘‘(1) JUDICIAL INTERVENTION.—
‘‘(A) IN GENERAL.—If a person or entity
fails to comply with the determination or order
of the Secretary imposing a civil money penalty
under subsection (b), after the determination or
order is no longer subject to review as provided
by subsections (c) and (d), the Secretary may re-
quest the Attorney General of the United States
to bring an action in an appropriate United
States district court to obtain a monetary judg-
ment against that person or entity and such
other relief as may be available.
‘‘(B) FEES AND EXPENSES.—Any monetary
judgment awarded in an action brought under
this paragraph may, in the discretion of the
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court, include the attorney’s fees and other ex-
penses incurred by the United States in connec-
tion with the action.
‘‘(2) NONREVIEWABILITY OF DETERMINATION OR
ORDER.—In an action under this subsection, the va-
lidity and appropriateness of the determination or
order of the Secretary imposing the penalty shall not
be subject to review.
‘‘(f) SETTLEMENT
BY SECRETARY.—The Secretary
may compromise, modify, or remit any civil money penalty
which may be, or has been, imposed under this section.
‘‘(g) DEPOSIT OF PENALTIES.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of law, if the mortgage covering the prop-
erty receiving assistance under section 8 is insured or
formerly insured by the Secretary, the Secretary shall
apply all civil money penalties collected under this
section to the appropriate insurance fund or funds es-
tablished under this Act, as determined by the Sec-
retary.
‘‘(2) EXCEPTION.—Notwithstanding any other
provision of law, if the mortgage covering the prop-
erty receiving assistance under section 8 is neither in-
sured nor formerly insured by the Secretary, the Sec-
retary shall make all civil money penalties collected
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under this section available for use by the appropriate
office within the Department for administrative costs
related to enforcement of the requirements of the var-
ious programs administered by the Secretary.
‘‘(h) DEFINITIONS.—In this section—
‘‘(1) the term ‘agent employed to manage the
property that has an identity of interest’ means an
entity—
‘‘(A) that has management responsibility
for a project;
‘‘(B) in which the ownership entity, includ-
ing its general partner or partners (if applica-
ble), has an ownership interest; and
‘‘(C) over which such ownership entity ex-
erts effective control; and
‘‘(2) the term ‘knowing’ means having actual
knowledge of or acting with deliberate ignorance of or
reckless disregard for the prohibitions under this sec-
tion.’’.
(b) APPLICABILITY.—The amendments made by sub-
section (a) shall apply only with respect to—
(1) violations that occur on or after the effective
date of final regulations implementing the amend-
ments made by this section; and
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(2) in the case of a continuing violation (as de-
termined by the Secretary of Housing and Urban De-
velopment), any portion of a violation that occurs on
or after such date.
(c) IMPLEMENTATION.—
(1) REGULATIONS.—
(A) IN GENERAL.—The Secretary shall im-
plement the amendments made by this section by
regulation issued after notice and opportunity
for public comment.
(B) COMMENTS SOUGHT.—The notice under
subparagraph (A) shall seek comments as to the
definitions of the terms ‘‘ownership interest in’’
and ‘‘effective control’’, as such terms are used in
the definition of the term ‘‘agent employed to
manage such property that has an identity of in-
terest’’.
(2) TIMING.—A proposed rule implementing the
amendments made by this section shall be published
not later than 1 year after the date of enactment of
this Act.
SEC. 2322. EXTENSION OF DOUBLE DAMAGES REMEDY.
Section 421 of the Housing and Community Develop-
ment Act of 1987 (12 U.S.C. 1715z–4a) is amended—
(1) in subsection (a)(1)—
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(A) in the first sentence, by striking ‘‘Act;
or (B)’’ and inserting the following: ‘‘Act; (B) a
regulatory agreement that applies to a multifam-
ily project whose mortgage is insured or held by
the Secretary under section 202 of the Housing
Act of 1959 (including property subject to section
202 of such Act as it existed before enactment of
the 
Cranston-Gonzalez 
National 
Affordable
Housing Act of 1990); (C) a regulatory agree-
ment or such other form of regulatory control as
may be imposed by the Secretary that applies to
mortgages insured or held by the Secretary under
section 542 of the Housing and Community De-
velopment Act of 1992, but not reinsured under
section 542 of the Housing and Community De-
velopment Act of 1992; or (D)’’; and
(B) in the second sentence, by inserting
after ‘‘agreement’’ the following: ‘‘, or such other
form of regulatory control as may be imposed by
the Secretary,’’;
(2) in subsection (a)(2), by inserting after ‘‘Act,’’
the following: ‘‘under section 202 of the Housing Act
of 1959 (including section 202 of such Act as it ex-
isted before enactment of the Cranston-Gonzalez Na-
tional Affordable Housing Act of 1990) and under
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section 542 of the Housing and Community Develop-
ment Act of 1992,’’;
(3) in subsection (b), by inserting after ‘‘agree-
ment’’ the following: ‘‘, or such other form of regu-
latory control as may be imposed by the Secretary,’’;
(4) in subsection (c)—
(A) in the first sentence, by inserting after
‘‘agreement’’ the following: ‘‘, or such other form
of regulatory control as may be imposed by the
Secretary,’’; and
(B) in the second sentence, by inserting be-
fore the period the following: ‘‘or under the
Housing Act of 1959, as appropriate’’; and
(5) in subsection (d), by inserting after ‘‘agree-
ment’’ the following: ‘‘, or such other form of regu-
latory control as may be imposed by the Secretary,’’.
SEC. 2323. OBSTRUCTION OF FEDERAL AUDITS.
Section 1516(a) of title 18, United States Code, is
amended by inserting after ‘‘under a contract or sub-
contract,’’ the following: ‘‘or relating to any property that
is security for a mortgage note that is insured, guaranteed,
acquired, or held by the Secretary of Housing and Urban
Development pursuant to any Act administered by the Sec-
retary,’’.
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TITLE III—COMMITTEE ON COM-
MERCE SCIENCE AND TRANS-
PORTATION
Subtitle A—Spectrum Auctions and
License Fees
SEC. 3001. SPECTRUM AUCTIONS.
(a) EXTENSION AND EXPANSION OF AUCTION AUTHOR-
ITY.—
(1) IN GENERAL.—Section 309(j) of the Commu-
nications Act of 1934 (47 U.S.C. 309(j)) is amend-
ed—
(A) by striking paragraphs (1) and (2) and
inserting in lieu thereof the following:
‘‘(1) GENERAL AUTHORITY.—If mutually exclu-
sive applications are accepted for any initial license
or construction permit that will involve an exclusive
use of the electromagnetic spectrum, then, except as
provided in paragraph (2), the Commission shall
grant the license or permit to a qualified applicant
through a system of competitive bidding that meets
the requirements of this subsection. The Commission,
subject to paragraphs (2) and (7) of this subsection,
also may use auctions as a means to assign spectrum
when it determines that such an auction is consistent
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with the public interest, convenience, and necessity,
and the purposes of this Act.
‘‘(2) EXCEPTIONS.—The competitive bidding au-
thority granted by this subsection shall not apply to
a license or construction permit the Commission is-
sues—
‘‘(A) for public safety services, including
private internal radio services used by State and
local governments and non-government entities,
including emergency auto service by nonprofit
organizations, that—
‘‘(i) are used to protect the safety of
life, health, or property; and
‘‘(ii) are not made commercially avail-
able to the public;
‘‘(B) for public telecommunications services,
as defined in section 397(14) of this Act, when
the license application is for channels reserved
for noncommercial use;
‘‘(C) for spectrum and associated orbits
used in the provision of any communications
within a global satellite system;
‘‘(D) for initial licenses or construction per-
mits for new digital television service given to
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existing terrestrial broadcast licensees to replace
their current television licenses;
‘‘(E) for terrestrial radio and television
broadcasting when the Commission determines
that an alternative method of resolving mutually
exclusive applications serves the public interest
substantially better than competitive bidding; or
‘‘(F) for spectrum allocated for unlicensed
use pursuant to part 15 of the Commission’s reg-
ulations (47 C.F.R. part 15), if the competitive
bidding for licenses would interfere with oper-
ation of end-user products permitted under such
regulations.’’;
(B) by striking ‘‘1998’’ in paragraph (11)
and inserting ‘‘2007’’; and
(C) by inserting after paragraph (13) the
following:
‘‘(14) OUT-OF-BAND EFFECTS.—The Commission
and the National Telecommunications and Informa-
tion Administration shall seek to create incentives to
minimize the effects of out-of-band emissions to pro-
mote more efficient use of the electromagnetic spec-
trum. The Commission and the National Tele-
communications and Information Administration
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also shall encourage licensees to minimize the effects
of interference.’’.
(2) CONFORMING AMENDMENT.—Subsection (i) of
section 309 of the Communications Act of 1934 is re-
pealed.
(b) AUCTION OF 45 MEGAHERTZ LOCATED AT 1,710–
1,755 MEGAHERTZ.—
(1) IN GENERAL.—The Commission shall assign
by competitive bidding 45 megahertz located at
1,710–1,755 megahertz no later than December 31,
2001, for commercial use.
(2) FEDERAL GOVERNMENT USERS.—Any Fed-
eral Government station that, on the date of enact-
ment of this Act, is assigned to use electromagnetic
spectrum located in the 1,710–1,755 megahertz band
shall retain that use until December 31, 2003, unless
exempted from relocation.
(c) COMMISSION TO MAKE ADDITIONAL SPECTRUM
AVAILABLE BY AUCTION.—
(1) IN GENERAL.—The Federal Communications
Commission shall complete all actions necessary to
permit the assignment, by September 30, 2002, by
competitive bidding pursuant to section 309(j) of the
Communications Act of 1934 (47 U.S.C. 309(j)), of li-
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censes for the use of bands of frequencies currently al-
located by the Commission that—
(A) in the aggregate span not less than 55
megahertz;
(B) are located below 3 gigahertz; and
(C) as of the date of enactment of this Act,
have not been—
(i) designated by Commission regula-
tion for assignment pursuant to section
309(j);
(ii) identified by the Secretary of Com-
merce pursuant to section 113 of the Na-
tional Telecommunications and Information
Administration 
Organization 
Act 
(47
U.S.C. 923); or
(iii) allocated for Federal Government
use pursuant to section 305 of the Commu-
nications Act of 1934 (47 U.S.C. 305).
(2) CRITERIA FOR REASSIGNMENT.—In making
available bands of frequencies for competitive bidding
pursuant to paragraph (1), the Commission shall—
(A) seek to promote the most efficient use of
the electromagnetic spectrum;
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(B) consider the cost to incumbent licensees
of relocating existing uses to other bands of fre-
quencies or other means of communication;
(C) consider the needs of public safety radio
services;
(D) comply with the requirements of inter-
national agreements concerning spectrum alloca-
tions; and
(E) coordinate with the Secretary of Com-
merce when there is any impact on Federal Gov-
ernment spectrum use.
(3) NOTIFICATION TO THE SECRETARY OF COM-
MERCE.—The Commission shall attempt to accommo-
date incumbent licensees displaced under this section
by relocating them to other frequencies available to
the Commission. The Commission shall notify the
Secretary of Commerce whenever the Commission is
not able to provide for the effective relocation of an
incumbent licensee to a band of frequencies available
to the Commission for assignment. The notification
shall include—
(A) specific information on the incumbent
licensee;
(B) the bands the Commission considered
for relocation of the licensee; and
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(C) the reasons the incumbent cannot be ac-
commodated in these bands.
(4) REPORT
TO
THE
SECRETARY
OF
COM-
MERCE.—
(A) TECHNICAL REPORT.—The Commission,
in consultation with the National Telecommuni-
cations and Information Administration, shall
submit a detailed technical report to the Sec-
retary of Commerce setting forth—
(i) the reasons the incumbent licensees
described in paragraph (3) could not be ac-
commodated in existing non-government
spectrum; and
(ii) the Commission’s recommendations
for relocating those incumbents.
(B) NTIA USE OF REPORT.—The National
Telecommunications and Information Adminis-
tration shall review this report when assessing
whether a commercial licensee can be accommo-
dated by being reassigned to a frequency allo-
cated for Government use.
(d) IDENTIFICATION
AND REALLOCATION
OF FRE-
QUENCIES.—
(1) IN GENERAL.—Section 113 of the National
Telecommunications and Information Administration
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Organization Act (47 U.S.C. 901 et seq.) is amended
by adding at the end thereof the following:
‘‘(f) ADDITIONAL REALLOCATION REPORT.—If the Sec-
retary receives a report from the Commission pursuant to
section 3001(c)(6) of the Balanced Budget Act of 1997, the
Secretary shall submit to the President, the Congress, and
the Commission a report with the Secretary’s recommenda-
tions.
‘‘(g) REIMBURSEMENT
OF
FEDERAL
SPECTRUM
USERS FOR RELOCATION COSTS.—
‘‘(1) IN GENERAL.—
‘‘(A) ACCEPTANCE OF COMPENSATION AU-
THORIZED.—In order to expedite the efficient use
of the electromagnetic spectrum, and notwith-
standing section 3302(b) of title 31, United
States Code, any Federal entity that operates a
Federal Government station that has been identi-
fied by NTIA for relocation may accept pay-
ment, including in-kind compensation and shall
be reimbursed if required to relocate by the serv-
ice applicant, provider, licensee, or representa-
tive entering the band as a result of a license as-
signment by the Commission or otherwise au-
thorized by Commission rules.
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‘‘(B) DUTY TO COMPENSATE OUSTED FED-
ERAL ENTITY.—Any such service applicant, pro-
vider, licensee, or representative shall compensate
the Federal entity in advance for relocating
through monetary or in-kind payment for the
cost of relocating the Federal entity’s operations
from one or more electromagnetic spectrum fre-
quencies to any other frequency or frequencies, or
to any other telecommunications transmission
media.
‘‘(C) COMPENSABLE COSTS.—Compensation
shall include, but not be limited to, the costs of
any modification, replacement, or reissuance of
equipment, facilities, operating manuals, regula-
tions, or other relocation expenses incurred by
that entity.
‘‘(D) DISPOSITION
OF
PAYMENTS.—Pay-
ments, other than in-kind compensation, pursu-
ant to this section shall be deposited by electronic
funds transfer in a separate agency account or
accounts which shall be used to pay directly the
costs of relocation, to repay or make advances to
appropriations or funds which do or will ini-
tially bear all or part of such costs, or to refund
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excess sums when necessary, and shall remain
available until expended.
‘‘(E) APPLICATION TO CERTAIN OTHER RE-
LOCATIONS.—The provisions of this paragraph
also apply to any Federal entity that operates a
Federal Government station assigned to use elec-
tromagnetic spectrum identified for reallocation
under subsection (a), if before the date of enact-
ment of the Balanced Budget Act of 1997 the
Commission has not identified that spectrum for
service or assigned licenses or otherwise author-
ized service for that spectrum.
‘‘(2) PETITIONS FOR RELOCATION.—Any person
seeking to relocate a Federal Government station that
has been assigned a frequency within a band allocated
for mixed Federal and non-Federal use under this Act
shall submit a petition for relocation to NTIA. The
NTIA shall limit or terminate the Federal Govern-
ment station’s operating license within 6 months after
receiving the petition if the following requirements
are met:
‘‘(A) The proposed relocation is consistent
with obligations undertaken by the United States
in international agreements and with United
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States national security and public safety inter-
ests.
‘‘(B) The person seeking relocation of the
Federal Government station has guaranteed to
defray entirely, through payment in advance,
advance in-kind payment of costs, or a combina-
tion of payment in advance and advance in-kind
payment, all relocation costs incurred by the
Federal entity, including, but not limited to, all
engineering, equipment, site acquisition and con-
struction, and regulatory fee costs.
‘‘(C) The person seeking relocation com-
pletes all activities necessary for implementing
the relocation, including construction of replace-
ment facilities (if necessary and appropriate)
and identifying and obtaining on the Federal en-
tity’s behalf new frequencies for use by the relo-
cated Federal Government station (if the station
is not relocating to spectrum reserved exclusively
for Federal use).
‘‘(D) Any necessary replacement facilities,
equipment modifications, or other changes have
been implemented and tested by the Federal en-
tity to ensure that the Federal Government sta-
tion is able to accomplish successfully its pur-
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poses including maintaining communication sys-
tem performance.
‘‘(E) The Secretary has determined that the
proposed use of any spectrum frequency band to
which a Federal entity relocates its operations is
suitable for the technical characteristics of the
band and consistent with other uses of the band.
In exercising authority under this subparagraph,
the Secretary shall consult with the Secretary of
Defense, the Secretary of State, and other appro-
priate Federal officials.
‘‘(3) RIGHT TO RECLAIM.—If within one year
after the relocation of a Federal Government station,
the Federal entity affected demonstrates to the Sec-
retary and the Commission that the new facilities or
spectrum are not comparable to the facilities or spec-
trum from which the Federal Government station was
relocated, the person who sought the relocation shall
take reasonable steps to remedy any defects or pay the
Federal entity for the costs of returning the Federal
Government station to the electromagnetic spectrum
from which the station was relocated.
‘‘(h) FEDERAL ACTION
TO EXPEDITE SPECTRUM
TRANSFER.—Any Federal Government station which oper-
ates on electromagnetic spectrum that has been identified
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for reallocation under this Act for mixed Federal and non-
Federal use in any reallocation report under subsection (a),
to the maximum extent practicable through the use of sub-
section (g) and any other applicable law, shall take prompt
action to make electromagnetic spectrum available for use
in a manner that maximizes efficient use of the electro-
magnetic spectrum.
‘‘(i) FEDERAL SPECTRUM ASSIGNMENT RESPONSIBIL-
ITY.—This section does not modify NTIA’s authority under
section 103(b)(2)(A) of this Act.
‘‘(j) DEFINITIONS.—As used in this section—
‘‘(1) the term ‘Federal entity’ means any depart-
ment, agency, or instrumentality of the Federal Gov-
ernment that utilizes a Government station license ob-
tained under section 305 of the 1934 Act (47 U.S.C.
305);
‘‘(2) the term ‘digital television services’ means
television services provided using digital technology to
enhance audio quality and video resolution, as further
defined in the Memorandum Opinion, Report, and
Order of the Commission entitled ‘Advanced Tele-
vision Systems and Their Impact Upon the Existing
Television Service’, MM Docket No. 87–268 and any
subsequent FCC proceedings dealing with digital tele-
vision; and
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‘‘(3) the term ‘analog television licenses’ means
licenses issued pursuant to 47 CFR 73.682 et seq.’’.
(2) Section 114(a) of that Act (47 U.S.C. 924(a))
is amended by striking ‘‘(a) or (d)(1)’’ and inserting
‘‘(a), (d)(1), or (f)’’.
(e) 
IDENTIFICATION
AND
REALLOCATION
OF
AUCTIONABLE FREQUENCIES.—
(1) SECOND REPORT REQUIRED.—Section 113(a)
of the National Telecommunications and Information
Administration Organization Act (47 U.S.C. 923(a))
is amended by inserting ‘‘and within 6 months after
the date of enactment of the Balanced Budget Act of
1997’’ after ‘‘Act of 1993’’.
(2) IN GENERAL.—Section 113(b) of the National
Telecommunications and Information Administration
Organization Act (47 U.S.C. 923(b)) is amended—
(A) by striking the caption of paragraph
(1) and inserting ‘‘INITIAL REALLOCATION RE-
PORT.—’’;
(B) by inserting ‘‘in the initial report re-
quired by subsection (a)’’ after ‘‘recommend for
reallocation’’ in paragraph (1);
(C) by inserting ‘‘or (3)’’ after ‘‘paragraph
(1)’’ each place it appears in paragraph (2); and
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(D) by adding at the end thereof the follow-
ing:
‘‘(3) SECOND REALLOCATION REPORT.—The Sec-
retary shall make available for reallocation a total of
20 megahertz in the second report required by sub-
section (a), for use other than by Federal Government
stations under section 305 of the 1934 Act (47 U.S.C.
305), that is located below 3 gigahertz and that meets
the criteria specified in paragraphs (1) through (5) of
subsection (a).’’.
(3) ALLOCATION AND ASSIGNMENT.—Section 115
of that Act (47 U.S.C. 925) is amended—
(A) by striking ‘‘the report required by sec-
tion 113(a)’’ in subsection (b) and inserting ‘‘the
initial reallocation report required by section
113(a)’’; and
(B) by adding at the end thereof the follow-
ing:
‘‘(c) ALLOCATION AND ASSIGNMENT OF FREQUENCIES
IDENTIFIED IN THE SECOND ALLOCATION REPORT.—
‘‘(1) PLAN.—Within 12 months after it receives
a report from the Secretary under section 113(f) of
this Act, the Commission shall—
‘‘(A) submit a plan, prepared in coordina-
tion with the Secretary of Commerce, to the
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President and to the Senate Committee on Com-
merce, Science, and Transportation and the
House of Representatives Committee on Com-
merce, for the allocation and assignment under
the 1934 Act of frequencies identified in the re-
port; and
‘‘(B) implement the plan.
‘‘(2) CONTENTS.—The plan prepared by the
Commission under paragraph (1) shall consist of a
schedule of reallocation and assignment of those fre-
quencies in accordance with section 309(j) of the 1934
Act in time for the assignment of those licenses or
permits by September 30, 2002.’’.
SEC. 3002. DIGITAL TELEVISION SERVICES.
Section 309(j) of the Communications Act of 1934 (47
U.S.C. 309(j)) is amended by adding at the end thereof the
following:
‘‘(15) AUCTION
OF
RECAPTURED
BROADCAST
TELEVISION SPECTRUM AND POTENTIAL DIGITAL TEL-
EVISION LICENSE FEES.—
‘‘(A) LIMITATIONS ON TERMS OF TERRES-
TRIAL TELEVISION BROADCAST LICENSES.—
‘‘(i) A television license that authorizes
analog television services may not be re-
newed to authorize such services for a pe-
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riod that extends beyond December 31,
2006. The Commission shall extend or
waive this date for any station in any tele-
vision market unless 95 percent of the tele-
vision households have access to digital local
television signals, either by direct off-air re-
ception or by other means.
‘‘(ii) A commercial digital television li-
cense that is issued shall expire on Septem-
ber 30, 2003. A commercial digital tele-
vision license shall be re-issued only subject
to fulfillment of the licensee’s obligations
under subparagraph (C).
‘‘(iii) No later than December 31,
2001, and every 2 years thereafter, the Com-
mission shall report to Congress on the sta-
tus of digital television conversion in each
television market. In preparing this report,
the Commission shall consult with other de-
partments and agencies of the Federal Gov-
ernment. The report shall contain the fol-
lowing information:
‘‘(I) Actual consumer purchases of
analog and digital television receivers,
including the price, availability, and
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use of conversion equipment to allow
analog sets to receive a digital signal.
‘‘(II) The percentage of television
households in each market that has ac-
cess to digital local television signals
as defined in paragraph (a)(1), wheth-
er such access is attained by direct off-
air reception or by some other means.
‘‘(III) The cost to consumers of
purchasing digital television receivers
(or conversion equipment to prevent
obsolescence of existing analog equip-
ment) and other related changes in the
marketplace, such as increases in the
cost of cable converter boxes.
‘‘(B) SPECTRUM REVERSION AND RESALE.—
‘‘(i) The Commission shall—
‘‘(I) ensure that, as analog tele-
vision licenses expire pursuant to sub-
paragraph (A)(i), each broadcaster
shall return electromagnetic spectrum
according to the Commission’s direc-
tion; and
‘‘(II) reclaim and organize the
electromagnetic spectrum in a manner
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to maximize the deployment of new
and existing services.
‘‘(ii) Licensees for new services occupy-
ing electromagnetic spectrum previously
used for the broadcast of analog television
shall be selected by competitive bidding. The
Commission shall start the competitive bid-
ding process by July 1, 2001, with payment
pursuant to the competitive bidding rules
established by the Commission. The Com-
mission shall report the total revenues from
the competitive bidding by January 1,
2002.
‘‘(C) DEFINITIONS.—As used in this para-
graph—
‘‘(i) the term ‘digital television serv-
ices’ means television services provided
using digital technology to enhance audio
quality and video resolution, as further de-
fined in the Memorandum Opinion, Report,
and Order of the Commission entitled ‘Ad-
vanced Television Systems and Their Im-
pact Upon the Existing Television Service’,
MM Docket No. 87–268 and any subsequent
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Commission proceedings dealing with digi-
tal television; and
‘‘(ii) the term ‘analog television li-
censes’ means licenses issued pursuant to 47
CFR 73.682 et seq.’’.
SEC. 3003. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC
SAFETY AND COMMERCIAL LICENSES.
(a) IN GENERAL.—The Federal Communications Com-
mission, not later than January 1, 1998, shall allocate from
electromagnetic spectrum between 746 megahertz and 806
megahertz—
(1) 24 megahertz of that spectrum for public
safety services according to terms and conditions es-
tablished by the Commission, in consultation with the
Secretary of Commerce and the Attorney General; and
(2) 36 megahertz of that spectrum for commer-
cial purposes to be assigned by competitive bidding.
(b) ASSIGNMENT.—The Commission shall—
(1) commence assignment of the licenses for pub-
lic safety created pursuant to subsection (a) no later
than September 30, 1998; and
(2) commence competitive bidding for the com-
mercial licenses created pursuant to subsection (a) no
later than March 31, 1998.
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(c) LICENSING OF UNUSED FREQUENCIES FOR PUBLIC
SAFETY RADIO SERVICES.—
(1) USE
OF
UNUSED
CHANNELS
FOR
PUBLIC
SAFETY.—It shall be the policy of the Federal Com-
munications Commission, notwithstanding any other
provision of this Act or any other law, to waive what-
ever licensee eligibility and other requirements (in-
cluding bidding requirements) are applicable in order
to permit the use of unassigned frequencies for public
safety purposes by a State or local government agency
upon a showing that—
(A) no other existing satisfactory public
safety channel is immediately available to satisfy
the requested use;
(B) the proposed use is technically feasible
without causing harmful interference to existing
stations in the frequency band entitled to protec-
tion from such interference under the rules of the
Commission; and
(C) use of the channel for public safety pur-
poses is consistent with other existing public
safety channel allocations in the geographic area
of proposed use.
(2) APPLICABILITY.—Paragraph (1) shall apply
to any application—
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(A) is pending before the Commission on the
date of enactment of this Act;
(B) was not finally determined under sec-
tion 402 or 405 of the Communications Act of
1934 (47 U.S.C. 402 or 405) on May 15, 1997;
or
(C) is filed after May 15, 1997.
(d) PROTECTION OF BROADCAST TV LICENSEES DUR-
ING DIGITAL TRANSITION.—Public safety and commercial
licenses granted pursuant to this subsection—
(1) shall enjoy flexibility in use, subject to—
(A) interference limits set by the Commis-
sion at the boundaries of the electromagnetic
spectrum block and service area; and
(B) any additional technical restrictions
imposed by the Commission to protect full-service
analog and digital television licenses during a
transition to digital television;
(2) may aggregate multiple licenses to create
larger spectrum blocks and service areas;
(3) may disaggregate or partition licenses to cre-
ate smaller spectrum blocks or service areas; and
(4) may transfer a license to any other person
qualified to be a licensee.
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(e) PROTECTION OF PUBLIC SAFETY LICENSEES DUR-
ING DIGITAL TRANSITION.—The Commission shall establish
rules insuring that public safety licensees using spectrum
reallocated pursuant to subsection (a)(1) shall not be subject
to harmful interference from television broadcast licensees.
(f) DIGITAL TELEVISION ALLOTMENT.—In assigning
temporary transitional digital licenses, the Commission
shall—
(1) minimize the number of allotments between
746 and 806 megahertz and maximize the amount of
spectrum available for public safety and new services;
(2) minimize the number of allotments between
698 and 746 megahertz in order to facilitate the re-
covery of spectrum at the end of the transition;
(3) consider minimizing the number of allot-
ments between 54 and 72 megahertz to facilitate the
recovery of spectrum at the end of the transition; and
(4) develop an allotment plan designed to recover
78 megahertz of spectrum to be assigned by competi-
tive bidding, in addition to the 60 megahertz identi-
fied in paragraph (a) of this subsection.
(g) INCUMBENT BROADCAST LICENSEES.—Any person
who holds an analog television license or a digital television
license between 746 and 806 megahertz—
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(1) may not operate at that frequency after the
date on which the digital television services transition
period terminates, as determined by the Commission;
and
(2) shall surrender immediately the license or
permit to construct pursuant to Commission rules.
(h) DEFINITIONS.—For purposes of this section:
(1) 
COMMISSION.—The 
term 
‘‘Commission’’
means the Federal Communications Commission.
(2) DIGITAL
TELEVISION
(DTV)
SERVICE.—The
term ‘‘digital television (DTV) service’’ means terres-
trial broadcast services provided using digital tech-
nology to enhance audio quality and video resolution,
as further defined in the Memorandum Opinion, Re-
port, and Order of the Commission entitled ‘‘Ad-
vanced Television Systems and Their Impact Upon
the Existing Television Service’’, MM Docket No. 87–
268, or subsequent findings of the Commission.
(3) DIGITAL
TELEVISION
LICENSE.—The term
‘‘digital television license’’ means a full-service license
issued pursuant to rules adopted for digital television
service.
(4) ANALOG
TELEVISION
LICENSE.—The term
‘‘analog television license’’ means a full-service license
issued pursuant to 47 CFR 73.682 et seq.
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(5) PUBLIC SAFETY SERVICES.—The term ‘‘pub-
lic safety services’’ means services whose sole or prin-
cipal purpose is to protect the safety of life, health,
or property.
(6) SERVICE
AREA.—The term ‘‘service area’’
means the geographic area over which a licensee may
provide service and is protected from interference.
(7) SPECTRUM
BLOCK.—The term ‘‘spectrum
block’’ means the range of frequencies over which the
apparatus licensed by the Commission is authorized
to transmit signals.
SEC. 3004. FLEXIBLE USE OF ELECTROMAGNETIC SPEC-
TRUM.
Section 303 of the Communications Act of 1934 (47
U.S.C. 303) is amended by adding at the end thereof the
following:
‘‘(y) Shall allocate electromagnetic spectrum so as to
provide flexibility of use, except—
‘‘(1) as required by international agreements re-
lating to global satellite systems or other tele-
communication services to which the United States is
a party;
‘‘(2) as required by public safety allocations;
‘‘(3) to the extent that the Commission finds,
after notice and an opportunity for public comment,
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that such an allocation would not be in the public in-
terest;
‘‘(4) to the extent that flexible use would retard
investment in communications services and systems,
or technology development thereby lessening the value
of the electromagnetic spectrum; or
‘‘(5) to the extent that flexible use would result
in harmful interference among users.’’.
SEC. 3005. RESERVE PRICE.
In any auction conducted or supervised by the Federal
Communications Commission (hereinafter the Commission)
for any license, permit or right which has value, a reason-
able reserve price shall be set by the Commission for each
unit in the auction unless the Commission determines it
not to be in the public interest. The reserve price shall estab-
lish a minimum bid for the unit to be auctioned. If no bid
is received above the reserve price for a unit, the unit shall
be retained. The Commission shall re-assess the reserve price
for that unit and place the unit in the next scheduled or
next appropriate auction.
SUBTITLE B—MERCHANT
MARINE PROVISIONS
SEC. 3501. EXTENSION OF VESSEL TONNAGE DUTIES.
(a) EXTENSION OF DUTIES.—Section 36 of the Act of
August 5, 1909 (36 Stat. 111; 46 U.S.C. App. 121), is
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amended by inserting ‘‘1999, 2000, 2001, and 2002,’’ after
‘‘1998,’’ each place it appears.
(b) CONFORMING AMENDMENT.—The Act of March 8,
1910 (36 Stat. 234; 46 U.S.C. 132), is amended by striking
‘‘and 1998,’’ and inserting ‘‘1998, 1999, 2000, 2001, and
2002,’’.
TITLE IV—COMMITTEE ON EN-
ERGY 
AND 
NATURAL 
RE-
SOURCES
SEC. 4001. LEASE OF EXCESS STRATEGIC PETROLEUM RE-
SERVE CAPACITY.
Part B of title I of the Energy Policy and Conservation
Act (42 U.S.C. 6231 et seq.) is amended by adding at the
end the following new section:
‘‘USE OF UNDERUTILIZED FACILITIES
‘‘SEC. 168. Notwithstanding section 649(b) of the De-
partment of Energy Organization Act (42 U.S.C. 7259(b)),
the Secretary is authorized to store in underutilized Strate-
gic Petroleum Reserve facilities, by lease or otherwise, petro-
leum product owned by a foreign government or its rep-
resentative: Provided, That funds resulting from the leasing
or other use of a Reserve facility on or after October 1, 2007,
shall be available to the Secretary, without further appro-
priation, for the purchase of petroleum products for the Re-
serve: Provided further, That petroleum product stored
under this section is not part of the Strategic Petroleum
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(c) TABLE OF CONTENTS.—The table of contents of this
title is as follows:
TITLE V—COMMITTEE ON FINANCE
Sec. 5000. Amendments to Social Security Act and references to OBRA; table of
contents of title.
Sec. 5000A. Extension of moratorium.
DIVISION 1—MEDICARE
Subtitle A—Medicare Choice Program
CHAPTER 1—MEDICARE CHOICE PROGRAM
SUBCHAPTER A—MEDICARE CHOICE PROGRAM
Sec. 5001. Establishment of Medicare Choice program.
‘‘PART C—MEDICARE CHOICE PROGRAM
‘‘Sec. 1851. Eligibility, election, and enrollment.
‘‘Sec. 1852. Benefits and beneficiary protections.
‘‘Sec. 1853. Payments to Medicare Choice organizations.
‘‘Sec. 1854. Premiums.
‘‘Sec. 1855. Organizational and financial requirements for Medicare Choice
organizations; provider-sponsored organizations.
‘‘Sec. 1856. Establishment of standards.
‘‘Sec. 1857. Contracts with Medicare Choice organizations.
‘‘Sec. 1859. Definitions; miscellaneous provisions.
Sec. 5002. Transitional rules for current medicare HMO program.
Sec. 5003. Conforming changes in Medigap program.
SUBCHAPTER B—SPECIAL RULES FOR MEDICARE CHOICE MEDICAL SAVINGS
ACCOUNTS
Sec. 5006. Medicare Choice MSA.
CHAPTER 2—INTEGRATED LONG-TERM CARE PROGRAMS
SUBCHAPTER A—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
Sec. 5011. Coverage of PACE under the medicare program.
Sec. 5012. Effective date; transition.
Sec. 5013. Study and reports.
SUBCHAPTER B—SOCIAL HEALTH MAINTENANCE ORGANIZATIONS
Sec. 5015. Social health maintenance organizations (SHMOs).
SUBCHAPTER C—OTHER PROGRAMS
Sec. 5018. Extension of certain medicare community nursing organization dem-
onstration projects.
CHAPTER 3—COMMISSIONS
Sec. 5021. National Bipartisan Commission on the Future of Medicare.
Sec. 5022. Medicare Payment Advisory Commission.
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CHAPTER 4—MEDIGAP PROTECTIONS
Sec. 5031. Medigap protections.
Sec. 5032. Addition of high deductible Medigap policy.
CHAPTER 5—DEMONSTRATIONS
SUBCHAPTER A—MEDICARE CHOICE COMPETITIVE PRICING DEMONSTRATION
PROJECT
PART I—IN GENERAL
Sec. 5041. Medicare Choice competitive pricing demonstration project.
Sec. 5042. Determination of annual Medicare Choice capitation rates.
Sec. 5043. Benefits and beneficiary premiums.
PART II—INFORMATION AND QUALITY STANDARDS
SUBPART A—INFORMATION
Sec. 5044. Information requirements.
SUBPART B—QUALITY IN DEMONSTRATION PLANS
Sec. 5044A. Definitions.
Sec. 5044B. Quality Advisory Institute.
Sec. 5044C. Duties of Director.
Sec. 5044D. Compliance.
Sec. 5044E. Payments for value.
Sec. 5044F. Certification requirement.
Sec. 5044G. Licensing of certification entities.
Sec. 5044H. Certification criteria.
Sec. 5044I. Grievance and appeals.
SUBCHAPTER B—OTHER PROJECTS
Sec. 5045. Medicare enrollment demonstration project.
Sec. 5046. Medicare coordinated care demonstration project.
Sec. 5047. Establishment of medicare reimbursement demonstration projects.
CHAPTER 6—TAX TREATMENT OF HOSPITALS PARTICIPATING IN PROVIDER-
SPONSORED ORGANIZATIONS
Sec. 5049. Tax treatment of hospitals which participate in provider-sponsored or-
ganizations.
Subtitle B—Prevention Initiatives
Sec. 5101. Annual screening mammography for women over age 39.
Sec. 5102. Coverage of colorectal screening.
Sec. 5103. Diabetes screening tests.
Sec. 5104. Coverage of bone mass measurements.
Sec. 5105. Study on medical nutrition therapy services.
Subtitle C—Rural Initiatives
Sec. 5151. Sole community hospitals.
Sec. 5152. Medicare-dependent, small rural hospital payment extension.
Sec. 5153. Medicare rural hospital flexibility program.
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Sec. 5154. Prohibiting denial of request by rural referral centers for reclassifica-
tion on basis of comparability of wages.
Sec. 5155. Rural health clinic services.
Sec. 5156. Medicare reimbursement for telehealth services.
Sec. 5157. Telemedicine, informatics, and education demonstration project.
Subtitle D—Anti-Fraud and Abuse Provisions and Improvements in Protecting
Program Integrity
CHAPTER 1—REVISIONS TO SANCTIONS FOR FRAUD AND ABUSE
Sec. 5201. Authority to refuse to enter into medicare agreements with individuals
or entities convicted of felonies.
Sec. 5202. Exclusion of entity controlled by family member of a sanctioned indi-
vidual.
Sec. 5203. Imposition of civil money penalties.
CHAPTER 2—IMPROVEMENTS IN PROTECTING PROGRAM INTEGRITY
Sec. 5211. Disclosure of information, surety bonds, and accreditation.
Sec. 5212. Provision of certain identification numbers.
Sec. 5213. Application of certain provisions of the bankruptcy code.
Sec. 5214. Replacement of reasonable charge methodology by fee schedules.
Sec. 5215. Application of inherent reasonableness to all part B services other than
physicians’ services.
Sec. 5216. Requirement to furnish diagnostic information.
Sec. 5217. Report by GAO on operation of fraud and abuse control program.
Sec. 5218. Competitive bidding.
Sec. 5219. Improving information to medicare beneficiaries.
Sec. 5220. Prohibiting unnecessary and wasteful medicare payments for certain
items.
Sec. 5221. Reducing excessive billings and utilization for certain items.
Sec. 5222. Improving information to medicare beneficiaries.
Sec. 5223. Prohibiting unnecessary and wasteful medicare payments for certain
items.
Sec. 5224. Reducing excessive billings and utilization for certain items.
Sec. 5225. Improved carrier authority to reduce excessive medicare payments.
Sec. 5226. Itemization of surgical dressing bills submitted by home health agen-
cies.
CHAPTER 3—CLARIFICATIONS AND TECHNICAL CHANGES
Sec. 5231. Other fraud and abuse related provisions.
Subtitle E—Prospective Payment Systems
CHAPTER 1—PROVISIONS RELATING TO PART A
Sec. 5301. Prospective payment for inpatient rehabilitation hospital services.
Sec. 5302. Study and report on payments for long-term care hospitals.
CHAPTER 2—PROVISIONS RELATING TO PART B
SUBCHAPTER A—PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES
Sec. 5311. Elimination of formula-driven overpayments (FDO) for certain out-
patient hospital services.
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Sec. 5312. Extension of reductions in payments for costs of hospital outpatient
services.
Sec. 5313. Prospective payment system for hospital outpatient department serv-
ices.
SUBCHAPTER B—AMBULANCE SERVICES
Sec. 5321. Payments for ambulance services.
CHAPTER 3—PROVISIONS RELATING TO PARTS A AND B
SUBCHAPTER A—PAYMENTS TO SKILLED NURSING FACILITIES
Sec. 5331. Extension of cost limits.
Sec. 5332. Prospective payment for skilled nursing facility services.
SUBCHAPTER B—HOME HEALTH SERVICES AND BENEFITS
PART I—PAYMENTS FOR HOME HEALTH SERVICES
Sec. 5341. Recapturing savings resulting from temporary freeze on payment in-
creases for home health services.
Sec. 5342. Interim payments for home health services.
Sec. 5343. Prospective payment for home health services.
Sec. 5344. Payment based on location where home health service is furnished.
PART II—HOME HEALTH BENEFITS
Sec. 5361. Modification of part A home health benefit for individuals enrolled
under part B.
Sec. 5362. Imposition of $5 copayment for part B home health services.
Sec. 5363. Clarification of part-time or intermittent nursing care.
Sec. 5364. Study on definition of homebound.
Sec. 5365. Normative standards for home health claims denials.
Sec. 5366. Inclusion of cost of service in explanation of medicare benefits.
Subtitle F—Provisions Relating to Part A
CHAPTER 1—PAYMENT OF PPS HOSPITALS
Sec. 5401. PPS hospital payment update.
Sec. 5402. Capital payments for PPS hospitals.
CHAPTER 2—PAYMENT OF PPS EXEMPT HOSPITALS
Sec. 5421. Payment update.
Sec. 5422. Reductions to capital payments for certain PPS-exempt hospitals and
units.
Sec. 5423. Cap on TEFRA limits.
Sec. 5424. Change in bonus and relief payments.
Sec. 5425. Target amounts for rehabilitation hospitals, long-term care hospitals,
and psychiatric hospitals.
Sec. 5426. Treatment of certain long-term care hospitals located within other hos-
pitals.
Sec. 5426A. Rebasing.
Sec. 5427. Elimination of exemptions; report on exceptions and adjustments.
Sec. 5428. Technical correction relating to subsection (d) hospitals.
Sec. 5429. Certain cancer hospitals.
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CHAPTER 3—GRADUATE MEDICAL EDUCATION PAYMENTS
SUBCHAPTER A—DIRECT MEDICAL EDUCATION
Sec. 5441. Limitation on number of residents and rolling average FTE count.
Sec. 5442. Permitting payment to nonhospital providers.
Sec. 5443. Medicare special reimbursement rule for primary care combined resi-
dency programs.
SUBCHAPTER B—INDIRECT MEDICAL EDUCATION
Sec. 5446. Indirect graduate medical education payments.
SUBCHAPTER C—GRADUATE MEDICAL EDUCATION PAYMENTS FOR MANAGED
CARE ENROLLEES
Sec. 5451. Direct and indirect medical education payments to hospitals for man-
aged care enrollees.
Sec. 5452. Demonstration project on use of consortia.
CHAPTER 4—OTHER HOSPITAL PAYMENTS
Sec. 5461. Disproportionate share payments to hospitals for managed care and
Medicare Choice enrollees.
Sec. 5462. Reform of disproportionate share payments to hospitals serving vulner-
able populations.
Sec. 5463. Medicare capital asset sales price equal to book value.
Sec. 5464. Elimination of IME and DSH payments attributable to outlier pay-
ments.
Sec. 5465. Treatment of transfer cases.
Sec. 5466. Reductions in payments for enrollee bad debt.
Sec. 5467. Floor on area wage index.
Sec. 5468. Increase base payment rate to Puerto Rico hospitals.
Sec. 5469. Permanent extension of hemophilia pass-through.
Sec. 5470. Coverage of services in religious nonmedical health care institutions
under the medicare and medicaid programs.
CHAPTER 5—PAYMENTS FOR HOSPICE SERVICES
Sec. 5481. Payment for home hospice care based on location where care is fur-
nished.
Sec. 5482. Hospice care benefits periods.
Sec. 5483. Other items and services included in hospice care.
Sec. 5484. Contracting with independent physicians or physician groups for hos-
pice care services permitted.
Sec. 5485. Waiver of certain staffing requirements for hospice care programs in
non-urbanized areas.
Sec. 5486. Limitation on liability of beneficiaries for certain hospice coverage de-
nials.
Sec. 5487. Extending the period for physician certification of an individual’s ter-
minal illness.
Sec. 5488. Effective date.
Subtitle G—Provisions Relating to Part B Only
CHAPTER 1—PAYMENTS FOR PHYSICIANS AND OTHER HEALTH CARE
PROVIDERS
Sec. 5501. Establishment of single conversion factor for 1998.
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Sec. 5502. Establishing update to conversion factor to match spending under sus-
tainable growth rate.
Sec. 5503. Replacement of volume performance standard with sustainable growth
rate.
Sec. 5504. Payment rules for anesthesia services.
Sec. 5505. Implementation of resource-based methodologies.
Sec. 5506. Increased medicare reimbursement for nurse practitioners and clinical
nurse specialists.
Sec. 5507. Increased medicare reimbursement for physician assistants.
CHAPTER 2—OTHER PAYMENT PROVISIONS
Sec. 5521. Reduction in updates to payment amounts for clinical diagnostic lab-
oratory tests; study on laboratory services.
Sec. 5522. Improvements in administration of laboratory services benefit.
Sec. 5523. Payments for durable medical equipment.
Sec. 5524. Oxygen and oxygen equipment.
Sec. 5525. Updates for ambulatory surgical services.
Sec. 5526. Reimbursement for drugs and biologicals.
CHAPTER 3—PART B PREMIUM AND RELATED PROVISIONS
Sec. 5541. Part B premium.
Sec. 5542. Income-related reduction in medicare subsidy.
Sec. 5543. Demonstration project on income-related part B deductible.
Sec. 5544. Low-income medicare beneficiary block grant program.
Subtitle H—Provisions Relating to Parts A and B
CHAPTER 1—SECONDARY PAYOR PROVISIONS
Sec. 5601. Extension and expansion of existing requirements.
Sec. 5602. Improvements in recovery of payments.
CHAPTER 2—OTHER PROVISIONS
Sec. 5611. Conforming age for eligibility under medicare to retirement age for so-
cial security benefits.
Sec. 5612. Increased certification period for certain organ procurement organiza-
tions.
Sec. 5613. Facilitating the use of private contracts under the medicare program.
Subtitle I—Miscellaneous Provisions
Sec. 5651. Inclusion of Stanly County, N.C. in a large urban area under medi-
care program.
Sec. 5652. Medicare anti-duplication provision.
DIVISION 2—MEDICAID AND CHILDREN’S HEALTH INSURANCE
INITIATIVES
Subtitle I—Medicaid
CHAPTER 1—MEDICAID SAVINGS
SUBCHAPTER A—MANAGED CARE REFORMS
Sec. 5701. State option for mandatory managed care.
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‘‘PART B—PROVISIONS RELATING TO MANAGED CARE
‘‘Sec. 1941. Beneficiary choice; enrollment.
‘‘Sec. 1942. Beneficiary access to services generally.
‘‘Sec. 1943. Requirements for access to emergency care.
‘‘Sec. 1944. Other beneficiary protections.
‘‘Sec. 1945. Assuring quality care.
‘‘Sec. 1946. Protections for providers.
‘‘Sec. 1947. Assuring adequacy of payments to medicaid managed care orga-
nizations and entities.
‘‘Sec. 1948. Fraud and abuse.
‘‘Sec. 1949. Sanctions for noncompliance by managed care entities.
‘‘Sec. 1950. Definitions; miscellaneous provisions.’’.
Sec. 5702. Primary care case management services as State option without need
for waiver.
Sec. 5703. Additional reforms to expand and simplify managed care.
SUBCHAPTER B—MANAGEMENT FLEXIBILITY REFORMS
Sec. 5711. Elimination of Boren amendment requirements for provider payment
rates.
Sec. 5712. Medicaid payment rates for qualified medicare beneficiaries.
SUBCHAPTER C—REDUCTION OF DISPROPORTIONATE SHARE HOSPITAL (DSH)
PAYMENTS
Sec. 5721. Disproportionate share hospital (DSH) payments.
CHAPTER 2—EXPANSION OF MEDICAID ELIGIBILITY
Sec. 5731. State option to permit workers with disabilities to buy into medicaid.
Sec. 5732. 12-month continuous eligibility for children.
CHAPTER 3—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
Sec. 5741. Establishment of PACE program as medicaid State option.
Sec. 5742. Effective date; transition.
Sec. 5743. Study and reports.
CHAPTER 4—MEDICAID MANAGEMENT AND PROGRAM REFORMS
Sec. 5751. Elimination of requirement to pay for private insurance.
Sec. 5752. Elimination of obstetrical and pediatric payment rate requirements.
Sec. 5753. Physician qualification requirements.
Sec. 5754. Expanded cost-sharing requirements.
Sec. 5755. Penalty for fraudulent eligibility.
Sec. 5756. Elimination of waste, fraud, and abuse.
Sec. 5757. Study on EPSDT benefits.
Sec. 5758. Study and guidelines regarding managed care organizations and indi-
viduals with special health care needs.
CHAPTER 5—MISCELLANEOUS
Sec. 5761. Increased FMAPs.
Sec. 5762. Increase in payment caps for territories.
Sec. 5763. Community-based mental health services.
Sec. 5764. Optional medicaid coverage of certain CDC-screened breast cancer pa-
tients.
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Sec. 5765. Treatment of State taxes imposed on certain hospitals that provide free
care.
Sec. 5766. Treatment of veterans pensions under medicaid.
Sec. 5767. Removal of name from nurse aide registry.
Sec. 5768. Waiver of certain provider tax provisions.
Sec. 5769. Continuation of State-wide section 1115 medicaid waivers.
Sec. 5770. Effective date.
Subtitle J—Children’s Health Insurance Initiatives
Sec. 5801. Establishment of children’s health insurance initiatives.
‘‘TITLE XXI—CHILD HEALTH INSURANCE INITIATIVES
‘‘Sec. 2101. Purpose.
‘‘Sec. 2102. Definitions.
‘‘Sec. 2103. Appropriation.
‘‘Sec. 2104. Program outline.
‘‘Sec. 2105. Distribution of funds.
‘‘Sec. 2106. Use of funds.
‘‘Sec. 2107. State option for the purchase or provision of children’s health
insurance.
‘‘Sec. 2108. Program integrity.
‘‘Sec. 2109. Annual reports.’’.
DIVISION 3—INCOME SECURITY AND OTHER PROVISIONS
Subtitle K—Income Security, Welfare-to-Work Grant Program, and Other
Provisions
CHAPTER 1—INCOME SECURITY
Sec. 5811. SSI eligibility for aliens receiving SSI on August 22, 1996.
Sec. 5812. Extension of eligibility period for refugees and certain other qualified
aliens from 5 to 7 years for SSI and medicaid.
Sec. 5813. Exceptions for certain Indians from limitation on eligibility for sup-
plemental security income and medicaid benefits.
Sec. 5814. SSI eligibility for disabled legal aliens in the United States on August
22, 1996.
Sec. 5815. Exemption from restriction on supplemental security income program
participation by certain recipients eligible on the basis of very
old applications.
Sec. 5816. Reinstatement of eligibility for benefits.
Sec. 5817. Exemption for children who are legal aliens from 5-year ban on med-
icaid eligibility.
Sec. 5818. Treatment of certain Amerasian immigrants as refugees.
Sec. 5819. SSI eligibility for severely disabled aliens.
Sec. 5820. Effective date.
CHAPTER 2—WELFARE-TO-WORK GRANT PROGRAM
Sec. 5821. Welfare-to-work grants.
Sec. 5822. Clarification of a State’s ability to sanction an individual receiving
assistance under TANF for noncompliance.
CHAPTER 3—UNEMPLOYMENT COMPENSATION
Sec. 5831. Increase in Federal unemployment account ceiling.
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Sec. 5832. Special distribution to States from unemployment trust fund.
Sec. 5833. Treatment of certain services performed by inmates.
DIVISION 4—EARNED INCOME CREDIT AND OTHER PROVISIONS
Subtitle L—Earned Income Credit and Other Provisions
CHAPTER 1—EARNED INCOME CREDIT
Sec. 5851. Restrictions on availability of earned income credit for taxpayers who
improperly claimed credit in prior year.
CHAPTER 2—INCREASE IN PUBLIC DEBT LIMIT
Sec. 5861. Increase in public debt limit.
CHAPTER 3—MISCELLANEOUS
Sec. 5871. Sense of the Senate regarding the correction of cost-of-living adjust-
ments.
Subtitle M—Welfare Reform Technical Corrections
Sec. 5900. Short title of subtitle.
CHAPTER 1—BLOCK GRANTS FOR TEMPORARY ASSISTANCE TO NEEDY
FAMILIES
Sec. 5901. Amendment of the Social Security Act.
Sec. 5902. Eligible States; State plan.
Sec. 5903. Grants to States.
Sec. 5904. Use of grants.
Sec. 5905. Mandatory work requirements.
Sec. 5906. Prohibitions; requirements.
Sec. 5907. Penalties.
Sec. 5908. Data collection and reporting.
Sec. 5909. Direct funding and administration by Indian tribes.
Sec. 5910. Research, evaluations, and national studies.
Sec. 5911. Report on data processing.
Sec. 5912. Study on alternative outcomes measures.
Sec. 5913. Limitation on payments to the territories.
Sec. 5914. Conforming amendments to the Social Security Act.
Sec. 5915. Other conforming amendments.
Sec. 5916. Modifications to the job opportunities for certain low-income individ-
uals program.
Sec. 5917. Denial of assistance and benefits for drug-related convictions.
Sec. 5918. Transition rule.
Sec. 5919. Protecting victims of family violence.
Sec. 5920. Effective dates.
CHAPTER 2—SUPPLEMENTAL SECURITY INCOME
Sec. 5921. Conforming and technical amendments relating to eligibility restric-
tions.
Sec. 5922. Conforming and technical amendments relating to benefits for disabled
children.
Sec. 5923. Additional technical amendments to title XVI.
Sec. 5924. Additional technical amendments relating to title XVI.
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Sec. 5925. Effective dates.
CHAPTER 3—CHILD SUPPORT
Sec. 5935. State obligation to provide child support enforcement services.
Sec. 5936. Distribution of collected support.
Sec. 5937. Civil penalties relating to State directory of new hires.
Sec. 5938. Federal Parent Locator Service.
Sec. 5939. Access to registry data for research purposes.
Sec. 5940. Collection and use of social security numbers for use in child support
enforcement.
Sec. 5941. Adoption of uniform State laws.
Sec. 5942. State laws providing expedited procedures.
Sec. 5943. Voluntary paternity acknowledgement.
Sec. 5944. Calculation of paternity establishment percentage.
Sec. 5945. Means available for provision of technical assistance and operation of
Federal Parent Locator Service.
Sec. 5946. Authority to collect support from Federal employees.
Sec. 5947. Definition of support order.
Sec. 5948. State law authorizing suspension of licenses.
Sec. 5949. International support enforcement.
Sec. 5950. Child support enforcement for Indian tribes.
Sec. 5951. Continuation of rules for distribution of support in the case of a title
IV–E child.
Sec. 5952. Good cause in foster care and food stamp cases.
Sec. 5953. Date of collection of support.
Sec. 5954. Administrative enforcement in interstate cases.
Sec. 5955. Work orders for arrearages.
Sec. 5956. Additional technical State plan amendments.
Sec. 5957. Federal case registry of child support orders.
Sec. 5958. Full faith and credit for child support orders.
Sec. 5959. Development costs of automated systems.
Sec. 5960. Additional technical amendments.
Sec. 5961. Effective date.
CHAPTER 4—RESTRICTING WELFARE AND PUBLIC BENEFITS FOR ALIENS
SUBCHAPTER A—ELIGIBILITY FOR FEDERAL BENEFITS
Sec. 5965. Alien eligibility for Federal benefits: Limited application to medicare
and benefits under the Railroad Retirement Act.
Sec. 5966. Exceptions to benefit limitations: Corrections to reference concerning
aliens whose deportation is withheld.
Sec. 5967. Veterans exception: Application of minimum active duty service re-
quirement; extension to unremarried surviving spouse; expanded
definition of veteran.
Sec. 5968. Correction of reference concerning Cuban and Haitian entrants.
Sec. 5969. Notification concerning aliens not lawfully present: Correction of ter-
minology.
Sec. 5970. Freely associated States: Contracts and licenses.
Sec. 5971. Congressional statement regarding benefits for Hmong and other High-
land Lao veterans.
SUBCHAPTER B—GENERAL PROVISIONS
Sec. 5972. Determination of treatment of battered aliens as qualified aliens; in-
clusion of alien child of battered parent as qualified alien.
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Sec. 5973. Verification of eligibility for benefits.
Sec. 5974. Qualifying quarters: Disclosure of quarters of coverage information;
correction to assure that crediting applies to all quarters earned
by parents before child is 18.
Sec. 5975. Statutory construction: Benefit eligibility limitations applicable only
with respect to aliens present in the United States.
SUBCHAPTER C—MISCELLANEOUS CLERICAL AND TECHNICAL AMENDMENTS;
EFFECTIVE DATE
Sec. 5976. Correcting miscellaneous clerical and technical errors.
Sec. 5977. Effective date.
CHAPTER 5—CHILD PROTECTION
Sec. 5981. Conforming and technical amendments relating to child protection.
Sec. 5982. Additional technical amendments relating to child protection.
Sec. 5983. Effective date.
CHAPTER 6—CHILD CARE
Sec. 5985. Conforming and technical amendments relating to child care.
Sec. 5986. Additional conforming and technical amendments.
Sec. 5987. Effective dates.
CHAPTER 7—ERISA AMENDMENTS RELATING TO MEDICAL CHILD SUPPORT
ORDERS
Sec. 5991. Amendments relating to section 303 of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996.
Sec. 5992. Amendment relating to section 381 of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996.
Sec. 5993. Amendments relating to section 382 of the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996.
SEC. 5000A. EXTENSION OF MORATORIUM.
Section 6408(a)(3) of the Omnibus Budget Reconcili-
ation Act of 1989, as amended by section 13642 of the Om-
nibus Budget Reconciliation Act of 1993 is amended by
striking ‘‘December 31, 1995’’ and inserting ‘‘December 31,
2002’’.
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DIVISION 1—MEDICARE
Subtitle A—Medicare Choice
Program
CHAPTER 1—MEDICARE CHOICE
PROGRAM
Subchapter A—Medicare Choice Program
SEC. 5001. ESTABLISHMENT OF MEDICARE CHOICE PRO-
GRAM.
Title XVIII is amended by redesignating part C as
part D and by inserting after part B the following new
part:
‘‘PART C—MEDICARE CHOICE PROGRAM
‘‘ELIGIBILITY, ELECTION, AND ENROLLMENT
‘‘SEC. 1851. (a) CHOICE
OF MEDICARE BENEFITS
THROUGH MEDICARE CHOICE PLANS.—
‘‘(1) IN GENERAL.—Subject to the provisions of
this section, each Medicare Choice eligible individual
(as defined in paragraph (3)) is entitled to elect to re-
ceive benefits under this title—
‘‘(A) through the traditional medicare fee-
for-service program under parts A and B, or
‘‘(B) through enrollment in a Medicare
Choice plan under this part.
‘‘(2) TYPES OF MEDICARE CHOICE PLANS THAT
MAY BE AVAILABLE.—A Medicare Choice plan may be
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any of the following types of plans of health insur-
ance:
‘‘(A) FEE-FOR-SERVICE
PLANS.—A plan
that reimburses hospitals, physicians, and other
providers on the basis of a privately determined
fee schedule or other basis.
‘‘(B) PLANS OFFERED BY PREFERRED PRO-
VIDER
ORGANIZATIONS.—A 
Medicare 
Choice
plan offered by a preferred provider organiza-
tion.
‘‘(C) POINT OF SERVICE PLANS.—A point of
service plan.
‘‘(D) PLANS OFFERED BY PROVIDER-SPON-
SORED ORGANIZATION.—A Medicare Choice plan
offered by a provider-sponsored organization, as
defined in section 1855(e).
‘‘(E) PLANS OFFERED BY HEALTH MAINTE-
NANCE
ORGANIZATIONS.—A Medicare Choice
plan offered by a health maintenance organiza-
tion.
‘‘(F) COMBINATION OF MSA PLAN AND CON-
TRIBUTIONS
TO
MEDICARE
CHOICE
MSA.—An
MSA plan, as defined in section 1859(b)(3), and
a contribution into a Medicare Choice medical
savings account (MSA).
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‘‘(G) OTHER HEALTH CARE PLANS.—Any
other private plan for the delivery of health care
items and services that is not described in a pre-
ceding subparagraph.
‘‘(3) MEDICARE CHOICE ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—In this title, subject to
subparagraph (B), the term ‘Medicare Choice eli-
gible individual’ means an individual who is en-
titled to benefits under part A and enrolled
under part B.
‘‘(B) SPECIAL RULE FOR END-STAGE RENAL
DISEASE.—Such term shall not include an indi-
vidual medically determined to have end-stage
renal disease, except that an individual who de-
velops end-stage renal disease while enrolled in a
Medicare Choice plan may continue to be en-
rolled in that plan.
‘‘(b) SPECIAL RULES.—
‘‘(1) RESIDENCE REQUIREMENT.—
‘‘(A) IN GENERAL.—Except as the Secretary
may otherwise provide, an individual is eligible
to elect a Medicare Choice plan offered by a Med-
icare Choice organization only if the plan serves
the geographic area in which the individual re-
sides.
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‘‘(B) CONTINUATION OF ENROLLMENT PER-
MITTED.—Pursuant to rules specified by the Sec-
retary, the Secretary shall provide that an indi-
vidual may continue enrollment in a plan, not-
withstanding that the individual no longer re-
sides in the service area of the plan, so long as
the plan provides benefits for enrollees located in
the area in which the individual resides.
‘‘(2) SPECIAL RULE FOR CERTAIN INDIVIDUALS
COVERED UNDER FEHBP OR ELIGIBLE FOR VETERANS
OR MILITARY HEALTH BENEFITS, VETERANS.—
‘‘(A) FEHBP.—An individual who is en-
rolled in a health benefit plan under chapter 89
of title 5, United States Code, is not eligible to
enroll in an MSA plan until such time as the
Director of the Office of Management and Budget
certifies to the Secretary that the Office of Per-
sonnel Management has adopted policies which
will ensure that the enrollment of such individ-
uals in such plans will not result in increased
expenditures for the Federal Government for
health benefit plans under such chapter.
‘‘(B) VA AND
DOD.—The Secretary may
apply rules similar to the rules described in sub-
paragraph (A) in the case of individuals who are
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eligible for health care benefits under chapter 55
of title 10, United States Code, or under chapter
17 of title 38 of such Code.
‘‘(3) LIMITATION ON ELIGIBILITY OF QUALIFIED
MEDICARE
BENEFICIARIES
AND
OTHER
MEDICAID
BENEFICIARIES TO ENROLL IN AN MSA PLAN.—An in-
dividual who is a qualified medicare beneficiary (as
defined in section 1905(p)(1)), a qualified disabled
and 
working 
individual 
(described 
in 
section
1905(s)), 
an 
individual 
described 
in 
section
1902(a)(10)(E)(iii), or otherwise entitled to medicare
cost-sharing under a State plan under title XIX is
not eligible to enroll in an MSA plan.
‘‘(4) COVERAGE UNDER MSA PLANS ON A DEM-
ONSTRATION BASIS.—
‘‘(A) IN GENERAL.—An individual is not el-
igible to enroll in an MSA plan under this
part—
‘‘(i) on or after January 1, 2003, un-
less the enrollment is the continuation of
such an enrollment in effect as of such date;
or
‘‘(ii) as of any date if the number of
such individuals so enrolled as of such date
has reached 100,000.
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Under rules established by the Secretary, an in-
dividual is not eligible to enroll (or continue en-
rollment) in an MSA plan for a year unless the
individual provides assurances satisfactory to the
Secretary that the individual will reside in the
United States for at least 183 days during the
year.
‘‘(B) EVALUATION.—The Secretary shall
regularly evaluate the impact of permitting en-
rollment in MSA plans under this part on selec-
tion (including adverse selection), use of preven-
tive care, access to care, and the financial status
of the Trust Funds under this title.
‘‘(C) REPORTS.—The Secretary shall submit
to Congress periodic reports on the numbers of
individuals enrolled in such plans and on the
evaluation being conducted under subparagraph
(B). The Secretary shall submit such a report, by
not later than March 1, 2002, on whether the
time limitation under subparagraph (A)(i)
should be extended or removed and whether to
change the numerical limitation under subpara-
graph (A)(ii).
‘‘(c) PROCESS FOR EXERCISING CHOICE.—
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‘‘(1) IN GENERAL.—The Secretary shall establish
a process through which elections described in sub-
section (a) are made and changed, including the form
and manner in which such elections are made and
changed. Such elections shall be made or changed as
provided in subsection (e) and shall become effective
as provided in subsection (f).
‘‘(2) 
COORDINATION
THROUGH
MEDICARE
CHOICE ORGANIZATIONS.—
‘‘(A) ENROLLMENT.—Such process shall
permit an individual who wishes to elect a Medi-
care Choice plan offered by a Medicare Choice
organization to make such election through the
filing of an appropriate election form with the
organization.
‘‘(B) DISENROLLMENT.—Such process shall
permit an individual, who has elected a Medi-
care Choice plan offered by a Medicare Choice
organization and who wishes to terminate such
election, to terminate such election through the
filing of an appropriate election form with the
organization.
‘‘(3) DEFAULT.—
‘‘(A) INITIAL ELECTION.—
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‘‘(i) IN
GENERAL.—Subject to clause
(ii), an individual who fails to make an
election during an initial election period
under subsection (e)(1) is deemed to have
chosen the traditional medicare fee-for-serv-
ice program option.
‘‘(ii) SEAMLESS
CONTINUATION
OF
COVERAGE.—The Secretary may establish
procedures under which an individual who
is enrolled in a health plan (other than
Medicare Choice plan) offered by a Medi-
care Choice organization at the time of the
initial election period and who fails to elect
to receive coverage other than through the
organization is deemed to have elected the
Medicare Choice plan offered by the organi-
zation (or, if the organization offers more
than one such plan, such plan or plans as
the Secretary identifies under such proce-
dures).
‘‘(B) CONTINUING PERIODS.—An individual
who has made (or is deemed to have made) an
election under this section is considered to have
continued to make such election until such time
as—
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‘‘(i) the individual changes the election
under this section, or
‘‘(ii) the Medicare Choice plan with re-
spect to which such election is in effect is
discontinued.
‘‘(d) PROVIDING
INFORMATION
TO
PROMOTE
IN-
FORMED CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for activities under this subsection to broadly dissemi-
nate information to medicare beneficiaries (and pro-
spective medicare beneficiaries) on the coverage op-
tions provided under this section in order to promote
an active, informed selection among such options.
‘‘(2) PROVISION OF NOTICE.—
‘‘(A) OPEN SEASON NOTIFICATION.—At least
15 days before the beginning of each annual, co-
ordinated election period (as defined in sub-
section (e)(3)(B)), the Secretary shall mail to
each Medicare Choice eligible individual residing
in an area the following:
‘‘(i) 
GENERAL
INFORMATION.—The
general information described in paragraph
(3).
‘‘(ii) LIST OF PLANS AND COMPARISON
OF PLAN OPTIONS.—A list identifying the
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Medicare Choice plans that are (or will be)
available to residents of the area and infor-
mation described in paragraph (4) concern-
ing such plans. Such information shall be
presented in a comparative, chart-like form.
‘‘(iii) 
ADDITIONAL
INFORMATION.—
Any other information that the Secretary
determines will assist the individual in
making the election under this section.
The mailing of such information shall be coordi-
nated with the mailing of any annual notice
under section 1804.
‘‘(B) NOTIFICATION
TO
NEWLY
MEDICARE
CHOICE ELIGIBLE INDIVIDUALS.—To the extent
practicable, the Secretary shall, not later than 30
days before the beginning of the initial Medicare
Choice enrollment period for an individual de-
scribed in subsection (e)(1)(A), mail to the indi-
vidual the information described in subpara-
graph (A).
‘‘(C) FORM.—The information disseminated
under this paragraph shall be written and
formatted using language that is easily under-
standable by medicare beneficiaries.
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‘‘(D) PERIODIC
UPDATING.—The informa-
tion described in subparagraph (A) shall be up-
dated on at least an annual basis to reflect
changes in the availability of Medicare Choice
plans and the benefits and net monthly pre-
miums for such plans.
‘‘(3) GENERAL INFORMATION.—General informa-
tion under this paragraph, with respect to coverage
under this part during a year, shall include the fol-
lowing:
‘‘(A) BENEFITS UNDER TRADITIONAL MEDI-
CARE
FEE-FOR-SERVICE
PROGRAM
OPTION.—A
general description of the benefits covered under
the traditional medicare fee-for-service program
under parts A and B, including—
‘‘(i) covered items and services,
‘‘(ii) beneficiary cost sharing, such as
deductibles, coinsurance, and copayment
amounts, and
‘‘(iii) any beneficiary liability for bal-
ance billing.
‘‘(B) PART B PREMIUM.—The part B pre-
mium rates that will be charged for part B cov-
erage.
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‘‘(C) ELECTION PROCEDURES.—Information
and instructions on how to exercise election op-
tions under this section.
‘‘(D) RIGHTS.—A general description of
procedural rights (including grievance and ap-
peals procedures) of beneficiaries under the tra-
ditional medicare fee-for-service program and the
Medicare Choice program and the right to be
protected against discrimination based on health
status-related factors under section 1852(b).
‘‘(E) INFORMATION ON MEDIGAP AND MEDI-
CARE SELECT.—A general description of the ben-
efits, enrollment rights, and other requirements
applicable to medicare supplemental policies
under section 1882 and provisions relating to
medicare select policies described in section
1882(t).
‘‘(F) POTENTIAL
FOR
CONTRACT
TERMI-
NATION.—The fact that a Medicare Choice orga-
nization may terminate or refuse to renew its
contract under this part and the effect the termi-
nation or nonrenewal of its contract may have
on individuals enrolled with the Medicare Choice
plan under this part.
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‘‘(4) INFORMATION COMPARING PLAN OPTIONS.—
Information under this paragraph, with respect to a
Medicare Choice plan for a year, shall include the fol-
lowing:
‘‘(A) 
BENEFITS.—The 
benefits 
covered
under the plan, including—
‘‘(i) covered items and services beyond
those provided under the traditional medi-
care fee-for-service program,
‘‘(ii) any beneficiary cost sharing,
‘‘(iii) any maximum limitations on
out-of-pocket expenses, and
‘‘(iv) in the case of an MSA plan, dif-
ferences in cost sharing and balance billing
under such a plan compared to under other
Medicare Choice plans.
‘‘(B) PREMIUMS.—The net monthly pre-
mium, if any, for the plan.
‘‘(C) SERVICE AREA.—The service area of
the plan.
‘‘(D) QUALITY AND PERFORMANCE.—To the
extent available, plan quality and performance
indicators for the benefits under the plan (and
how they compare to such indicators under the
traditional 
medicare 
fee-for-service 
program
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under parts A and B in the area involved), in-
cluding—
‘‘(i) disenrollment rates for medicare
enrollees electing to receive benefits through
the plan for the previous 2 years (excluding
disenrollment due to death or moving out-
side the plan’s service area),
‘‘(ii) information on medicare enrollee
satisfaction,
‘‘(iii) information on health outcomes,
‘‘(iv) the extent to which a medicare
enrollee may select the health care provider
of their choice, including health care provid-
ers within the plan’s network and out-of-
network health care providers (if the plan
covers out-of-network items and services),
and
‘‘(v) an indication of medicare enrollee
exposure to balance billing and the restric-
tions on coverage of items and services pro-
vided to such enrollee by an out-of-network
health care provider.
‘‘(E) SUPPLEMENTAL BENEFITS OPTIONS.—
Whether the organization offering the plan offers
optional supplemental benefits and the terms
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and conditions (including premiums) for such
coverage.
‘‘(F) PHYSICIAN COMPENSATION.—An over-
all summary description as to the method of
compensation of participating physicians.
‘‘(5) MAINTAINING A TOLL-FREE NUMBER AND
INTERNET
SITE.—The Secretary shall maintain a
toll-free number for inquiries regarding Medicare
Choice options and the operation of this part in all
areas in which Medicare Choice plans are offered and
an Internet site through which individuals may elec-
tronically obtain information on such options and
Medicare Choice plans.
‘‘(6) USE OF NON-FEDERAL ENTITIES.—The Sec-
retary may enter into contracts with non-Federal en-
tities to carry out activities under this subsection.
‘‘(7) PROVISION OF INFORMATION.—A Medicare
Choice organization shall provide the Secretary with
such information on the organization and each Medi-
care Choice plan it offers as may be required for the
preparation of the information referred to in para-
graph (2)(A).
‘‘(8) COORDINATION
WITH
STATES.—The Sec-
retary shall coordinate with States to the maximum
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extent feasible in developing and distributing infor-
mation provided to beneficiaries.
‘‘(e) COVERAGE ELECTION PERIODS.—
‘‘(1) INITIAL CHOICE UPON ELIGIBILITY TO MAKE
ELECTION IF MEDICARE CHOICE PLANS AVAILABLE TO
INDIVIDUAL.—If, at the time an individual first be-
comes entitled to benefits under part A and enrolled
under part B, there is one or more Medicare Choice
plans offered in the area in which the individual re-
sides, the individual shall make the election under
this section during a period specified by the Secretary
such that if the individual elects a Medicare Choice
plan during the period, coverage under the plan be-
comes effective as of the first date on which the indi-
vidual may receive such coverage.
‘‘(2) OPEN ENROLLMENT AND DISENROLLMENT
OPPORTUNITIES.—Subject to paragraph (5), a Medi-
care Choice eligible individual may change the elec-
tion under subsection (a)(1) at any time, except that
such individual may only enroll in a Medicare Choice
plan which has an open enrollment period in effect at
that time.
‘‘(3) ANNUAL, 
COORDINATED
ELECTION
PE-
RIOD.—
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‘‘(A) IN GENERAL.—Subject to paragraph
(5), a Medicare Choice eligible individual may
change an election under subsection (a)(1) dur-
ing an annual, coordinated election period.
‘‘(B) ANNUAL, COORDINATED ELECTION PE-
RIOD.—For purposes of this section, the term
‘annual, coordinated election period’ means, with
respect to a calendar year (beginning with
1998), the month of November before such year.
‘‘(C) MEDICARE CHOICE HEALTH INFORMA-
TION FAIRS.—In the month of November of each
year (beginning with 1997), the Secretary shall
provide for a nationally coordinated educational
and publicity campaign to inform Medicare
Choice 
eligible 
individuals 
about 
Medicare
Choice plans and the election process provided
under this section.
‘‘(4) SPECIAL ELECTION PERIODS.—A Medicare
Choice individual may make a new election under
this section if—
‘‘(A) the organization’s or plan’s certifi-
cation under this part has been terminated or
the organization has terminated or otherwise dis-
continued providing the plan;
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‘‘(B) the individual is no longer eligible to
elect the plan because of a change in the individ-
ual’s place of residence or other change in cir-
cumstances (specified by the Secretary, but not
including termination of the individual’s enroll-
ment on the basis described in clause (i) or (ii)
subsection (g)(3)(B));
‘‘(C) the individual demonstrates (in ac-
cordance with guidelines established by the Sec-
retary) that—
‘‘(i) the organization offering the plan
substantially violated a material provision
of the organization’s contract under this
part in relation to the individual (includ-
ing the failure to provide an enrollee on a
timely basis medically necessary care for
which benefits are available under the plan
or the failure to provide such covered care
in accordance with applicable quality
standards); or
‘‘(ii) the organization (or an agent or
other entity acting on the organization’s be-
half) materially misrepresented the plan’s
provisions in marketing the plan to the in-
dividual; or
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‘‘(D) the individual meets such other excep-
tional conditions as the Secretary may provide.
‘‘(5) SPECIAL RULES FOR MSA PLANS.—Notwith-
standing the preceding provisions of this subsection,
an individual—
‘‘(A) may elect an MSA plan only during—
‘‘(i) an initial open enrollment period
described in paragraph (1), or
‘‘(ii) an annual, coordinated election
period described in paragraph (3)(B), and
‘‘(B) may not discontinue an election of an
MSA plan except during the periods described in
subparagraph (A) and under paragraph (4).
‘‘(6) OPEN ENROLLMENT PERIODS.—A Medicare
Choice organization—
‘‘(A) shall accept elections or changes to
elections described in paragraphs (1), (3), and
(4) during the periods prescribed in such para-
graphs, and
‘‘(B) may accept other changes to elections
at such other times as the organization provides.
‘‘(f) EFFECTIVENESS OF ELECTIONS AND CHANGES OF
ELECTIONS.—
‘‘(1) DURING INITIAL COVERAGE ELECTION PE-
RIOD.—An election of coverage made during the ini-
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tial 
coverage 
election 
period 
under 
subsection
(e)(1)(A) shall take effect upon the date the individual
becomes entitled to benefits under part A and enrolled
under part B, except as the Secretary may provide
(consistent with section 1838) in order to prevent ret-
roactive coverage.
‘‘(2) DURING
CONTINUOUS
OPEN
ENROLLMENT
PERIODS.—An election or change of coverage made
under subsection (e)(2) shall take effect with the first
day of the first calendar month following the date on
which the election is made.
‘‘(3) ANNUAL, 
COORDINATED
ELECTION
PE-
RIOD.—An election or change of coverage made dur-
ing an annual, coordinated election period (as defined
in subsection (e)(3)(B)) in a year shall take effect as
of the first day of the following year unless the indi-
vidual elects to have it take effect on December 1 of
the election year.
‘‘(4) OTHER PERIODS.—An election or change of
coverage made during any other period under sub-
section (e)(4) shall take effect in such manner as the
Secretary provides in a manner consistent (to the ex-
tent practicable) with protecting continuity of health
benefit coverage.
‘‘(g) GUARANTEED ISSUE AND RENEWAL.—
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‘‘(1) IN GENERAL.—Except as provided in this
subsection, a Medicare Choice organization shall pro-
vide that at any time during which elections are ac-
cepted under this section with respect to a Medicare
Choice plan offered by the organization, the organiza-
tion will accept without restrictions individuals who
are eligible to make such election.
‘‘(2) PRIORITY.—If the Secretary determines that
a Medicare Choice organization, in relation to a Med-
icare Choice plan it offers, has a capacity limit and
the number of Medicare Choice eligible individuals
who elect the plan under this section exceeds the ca-
pacity limit, the organization may limit the election
of individuals of the plan under this section but only
if priority in election is provided—
‘‘(A) first to such individuals as have elect-
ed the plan at the time of the determination, and
‘‘(B) then to other such individuals in such
a manner that does not discriminate, on a basis
described in section 1852(b), among the individ-
uals (who seek to elect the plan).
The preceding sentence shall not apply if it would re-
sult in the enrollment of enrollees substantially non-
representative, as determined in accordance with reg-
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ulations of the Secretary, of the medicare population
in the service area of the plan.
‘‘(3) LIMITATION
ON
TERMINATION
OF
ELEC-
TION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a Medicare Choice organization may
not for any reason terminate the election of any
individual under this section for a Medicare
Choice plan it offers.
‘‘(B) BASIS
FOR
TERMINATION
OF
ELEC-
TION.—A Medicare Choice organization may ter-
minate an individual’s election under this sec-
tion with respect to a Medicare Choice plan it of-
fers if—
‘‘(i) any net monthly premiums re-
quired with respect to such plan are not
paid on a timely basis (consistent with
standards under section 1856 that provide
for a grace period for late payment of net
monthly premiums),
‘‘(ii) the individual has engaged in
disruptive behavior (as specified in such
standards), or
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‘‘(iii) the plan is terminated with re-
spect to all individuals under this part in
the area in which the individual resides.
‘‘(C) CONSEQUENCE OF TERMINATION.—
‘‘(i) TERMINATIONS FOR CAUSE.—Any
individual whose election is terminated
under clause (i) or (ii) of subparagraph (B)
is deemed to have elected the traditional
medicare fee-for-service program option de-
scribed in subsection (a)(1)(A).
‘‘(ii) TERMINATION
BASED
ON
PLAN
TERMINATION
OR
SERVICE
AREA
REDUC-
TION.—Any individual whose election is
terminated under subparagraph (B)(iii)
shall have a special election period under
subsection (e)(4)(A) in which to change cov-
erage to coverage under another Medicare
Choice plan. Such an individual who fails
to make an election during such period is
deemed to have chosen to change coverage to
the traditional medicare fee-for-service pro-
gram 
option 
described 
in 
subsection
(a)(1)(A).
‘‘(D) ORGANIZATION OBLIGATION WITH RE-
SPECT
TO
ELECTION
FORMS.—Pursuant to a
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contract under section 1857, each Medicare
Choice organization receiving an election form
under subsection (c)(3) shall transmit to the Sec-
retary (at such time and in such manner as the
Secretary may specify) a copy of such form or
such other information respecting the election as
the Secretary may specify.
‘‘(h) APPROVAL OF MARKETING MATERIAL AND APPLI-
CATION FORMS.—
‘‘(1) SUBMISSION.—No marketing material or
application form may be distributed by a Medicare
Choice organization to (or for the use of) Medicare
Choice eligible individuals unless—
‘‘(A) at least 45 days before the date of dis-
tribution the organization has submitted the ma-
terial or form to the Secretary for review, and
‘‘(B) the Secretary has not disapproved the
distribution of such material or form.
‘‘(2) REVIEW.—The standards established under
section 1856 shall include guidelines for the review of
any material or form submitted and under such
guidelines the Secretary shall disapprove (or later re-
quire the correction of) such material or form if the
material or form is materially inaccurate or mislead-
ing or otherwise makes a material misrepresentation.
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‘‘(3) DEEMED APPROVAL (1-STOP SHOPPING).—
In the case of material or form that is submitted
under paragraph (1)(A) to the Secretary or a re-
gional office of the Department of Health and Human
Services and the Secretary or the office has not dis-
approved the distribution of marketing material or
form under paragraph (1)(B) with respect to a Medi-
care Choice plan in an area, the Secretary is deemed
not to have disapproved such distribution in all other
areas covered by the plan and organization except to
the extent that such material or form is specific only
to an area involved.
‘‘(4) PROHIBITION
OF
CERTAIN
MARKETING
PRACTICES.—Each Medicare Choice organization
shall conform to fair marketing standards, in relation
to Medicare Choice plans offered under this part, in-
cluded in the standards established under section
1856.
‘‘(i) EFFECT OF ELECTION OF MEDICARE CHOICE
PLAN
OPTION.—Subject to sections 1852(a)(5) and
1857(f)(2)—
‘‘(1) payments under a contract with a Medicare
Choice organization under section 1853(a) with re-
spect to an individual electing a Medicare Choice
plan offered by the organization shall be instead of
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the amounts which (in the absence of the contract)
would otherwise be payable under parts A and B for
items and services furnished to the individual, and
‘‘(2) subject to subsections (e) and (g) of section
1853, only the Medicare Choice organization shall be
entitled to receive payments from the Secretary under
this title for services furnished to the individual.
‘‘BENEFITS AND BENEFICIARY PROTECTIONS
‘‘SEC. 1852. (a) BASIC BENEFITS.—
‘‘(1) IN GENERAL.—Except as provided in sec-
tion 1859(b)(3) for MSA plans, each Medicare Choice
plan shall provide to members enrolled under this
part, through providers and other persons that meet
the applicable requirements of this title and part A
of title XI—
‘‘(A) those items and services for which ben-
efits are available under parts A and B to indi-
viduals residing in the area served by the plan,
and
‘‘(B) additional benefits required under sec-
tion 1854(f)(1)(A).
‘‘(2) SUPPLEMENTAL BENEFITS.—
‘‘(A) BENEFITS INCLUDED SUBJECT TO SEC-
RETARY’S APPROVAL.—Each Medicare Choice or-
ganization may provide to individuals enrolled
under this part (without affording those individ-
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uals an option to decline the coverage) supple-
mental health care benefits that the Secretary
may approve. The Secretary shall approve any
such supplemental benefits unless the Secretary
determines that including such supplemental
benefits would substantially discourage enroll-
ment by Medicare Choice eligible individuals
with the organization.
‘‘(B) AT ENROLLEES’ OPTION.—A Medicare
Choice organization may provide to individuals
enrolled under this part (other than under an
MSA plan) supplemental health care benefits
that the individuals may elect, at their option,
to have covered.
‘‘(3) ORGANIZATION
AS
SECONDARY
PAYER.—
Notwithstanding any other provision of law, a Medi-
care Choice organization may (in the case of the pro-
vision of items and services to an individual under
a Medicare Choice plan under circumstances in which
payment under this title is made secondary pursuant
to section 1862(b)(2)) charge or authorize the provider
of such services to charge, in accordance with the
charges allowed under a law, plan, or policy described
in such section—
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‘‘(B) if such coverage determination pro-
vides for coverage of additional benefits or cov-
erage under additional circumstances, section
1851(i) shall not apply to payment for such ad-
ditional benefits or benefits provided under such
additional circumstances until the first contract
year that begins after the end of such period.
‘‘(5) SATISFACTION OF REQUIREMENT.—
‘‘(A) IN GENERAL.—A MedicarePlus plan
offered by a MedicarePlus organization satisfies
paragraph (1)(A), with respect to benefits for
items and services furnished other than through
a provider that has a contract with the organiza-
tion offering the plan, if the plan provides (in
addition to any cost sharing provided for under
the plan) for at least the total dollar amount of
payment for such items and services as would
otherwise be authorized under parts A and B
(including any balance billing permitted under
such parts).
‘‘(B) EXCEPTION FOR MSA PLANS AND UN-
RESTRICTED
FEE-FOR-SERVICE
PLANS.—Sub-
paragraph (A) shall not apply to an MSA plan
or an unrestricted fee-for-service plan.
‘‘(b) ANTIDISCRIMINATION.—
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‘‘(1) BENEFICIARIES.—
‘‘(A) IN GENERAL.—A Medicare Choice or-
ganization may not deny, limit, or condition the
coverage or provision of benefits under this part,
for individuals permitted to be enrolled with the
organization under this part, based on any
health status-related factor described in section
2702(a)(1) of the Public Health Service Act.
‘‘(B) CONSTRUCTION.—Subparagraph (A)
shall not be construed as requiring a Medicare
Choice organization to enroll individuals who
are determined to have end-stage renal disease,
except as provided under section 1851(a)(3)(B).
‘‘(2) PROVIDERS.—A Medicare Choice organiza-
tion shall not discriminate with respect to participa-
tion, reimbursement, or indemnification as to any
provider who is acting within the scope of the provid-
er’s license or certification under applicable State
law, solely on the basis of such license or certification.
This paragraph shall not be construed to prohibit a
plan from including providers only to the extent nec-
essary to meet the needs of the plan’s enrollees or from
establishing any measure designed to maintain qual-
ity and control costs consistent with the responsibil-
ities of the plan.
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‘‘(c) DISCLOSURE REQUIREMENTS.—
‘‘(1) DETAILED DESCRIPTION OF PLAN PROVI-
SIONS.—A Medicare Choice organization shall dis-
close, in clear, accurate, and standardized form to
each enrollee with a Medicare Choice plan offered by
the organization under this part at the time of enroll-
ment and at least annually thereafter, the following
information regarding such plan:
‘‘(A) SERVICE
AREA.—The plan’s service
area.
‘‘(B) BENEFITS.—Benefits offered under the
plan, including information described in section
1851(d)(3)(A) and exclusions from coverage and,
if it is an MSA plan, a comparison of benefits
under such a plan with benefits under other
Medicare Choice plans.
‘‘(C) ACCESS.—The number, mix, and dis-
tribution of plan providers.
‘‘(D) 
OUT-OF-AREA
COVERAGE.—Out-of-
area coverage provided by the plan.
‘‘(E) EMERGENCY COVERAGE.—Coverage of
emergency services and urgently needed care, in-
cluding—
‘‘(i) the appropriate use of emergency
services, including use of the 911 telephone
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system or its local equivalent in emergency
situations and an explanation of what con-
stitutes an emergency situation;
‘‘(ii) the process and procedures of the
plan for obtaining emergency services; and
‘‘(iii) the locations of (I) emergency de-
partments, and (II) other settings, in which
plan physicians and hospitals provide emer-
gency services and post-stabilization care.
‘‘(F) SUPPLEMENTAL
BENEFITS.—Supple-
mental benefits available from the organization
offering the plan, including—
‘‘(i) whether the supplemental benefits
are optional,
‘‘(ii) the supplemental benefits covered,
and
‘‘(iii) the premium price for the sup-
plemental benefits.
‘‘(G) 
PRIOR
AUTHORIZATION
RULES.—
Rules regarding prior authorization or other re-
view requirements that could result in nonpay-
ment.
‘‘(H) PLAN GRIEVANCE AND APPEALS PRO-
CEDURES.—All plan appeal or grievance rights
and procedures.
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‘‘(I) QUALITY ASSURANCE PROGRAM.—A de-
scription of the organization’s quality assurance
program under subsection (e).
‘‘(J) 
OUT-OF-NETWORK
COVERAGE.—The
out-of-network coverage (if any) provided by the
plan.
‘‘(2) DISCLOSURE
UPON
REQUEST.—Upon re-
quest of a Medicare Choice eligible individual, a Med-
icare Choice organization must provide the following
information to such individual:
‘‘(A) The information described in para-
graphs (3) and (4) of section 1851(d).
‘‘(B) Information on utilization review pro-
cedures.
‘‘(d) ACCESS TO SERVICES.—
‘‘(1) IN GENERAL.—A Medicare Choice organiza-
tion offering a Medicare Choice plan, other than an
unrestricted fee-for-service plan, may select the pro-
viders from whom the benefits under the plan are pro-
vided so long as—
‘‘(A) the organization makes such benefits
available and accessible to each individual elect-
ing the plan within the plan service area with
reasonable promptness and in a manner which
assures continuity in the provision of benefits;
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‘‘(B) when medically necessary the organi-
zation makes such benefits available and acces-
sible 24 hours a day and 7 days a week;
‘‘(C) the plan provides for reimbursement
with respect to services which are covered under
subparagraphs (A) and (B) and which are pro-
vided to such an individual other than through
the organization, if—
‘‘(i) the services were medically nec-
essary and immediately required because of
an unforeseen illness, injury, or condition,
and it was not reasonable given the cir-
cumstances to obtain the services through
the organization, or
‘‘(ii) the services were renal dialysis
services and were provided other than
through the organization because the indi-
vidual was temporarily out of the plan’s
service area;
‘‘(D) the organization provides access to ap-
propriate providers, including credentialed spe-
cialists, for medically necessary treatment and
services;
‘‘(E) coverage is provided for emergency
services (as defined in paragraph (3)) without
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regard to prior authorization or the emergency
care provider’s contractual relationship with the
organization; and
‘‘(F) except as provided by the Secretary on
a case-by-case basis, the organization provides
primary care services within 30 minutes or 30
miles from an enrollee’s place of residence if the
enrollee resides in a rural area.
‘‘(2) GUIDELINES RESPECTING COORDINATION OF
POST-STABILIZATION CARE.—
‘‘(A) IN GENERAL.—A Medicare Choice plan
shall comply with such guidelines as the Sec-
retary shall prescribe relating to promoting effi-
cient and timely coordination of appropriate
maintenance and post-stabilization care of an
enrollee after the enrollee has been determined to
be stable under section 1867.
‘‘(B) 
CONTENT
OF
GUIDELINES.—The
guidelines prescribed under subparagraph (A)
shall provide that—
‘‘(i) a provider of emergency services
shall make a documented good faith effort to
contact the plan in a timely fashion from
the point at which the individual is sta-
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bilized to request approval for medically
necessary post-stabilization care,
‘‘(ii) the plan shall respond in a timely
fashion to the initial contact with the plan
with a decision as to whether the services
for which approval is requested will be au-
thorized, and
‘‘(iii) if a denial of a request is com-
municated, the plan shall, upon request
from the treating physician, arrange for a
physician who is authorized by the plan to
review the denial to communicate directly
with the treating physician in a timely
fashion.
‘‘(3) DEFINITION OF EMERGENCY SERVICES.—In
this subsection—
‘‘(A) IN
GENERAL.—The term ‘emergency
services’ means, with respect to an individual
enrolled with an organization, covered inpatient
and outpatient services that—
‘‘(i) are furnished by a provider that is
qualified to furnish such services under this
title, and
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‘‘(ii) are needed to evaluate or stabilize
an emergency medical condition (as defined
in subparagraph (B)).
‘‘(B) 
EMERGENCY
MEDICAL
CONDITION
BASED
ON
PRUDENT
LAYPERSON.—The term
‘emergency medical condition’ means a medical
condition manifesting itself by acute symptoms
of sufficient severity (including severe pain) such
that a prudent layperson, who possesses an aver-
age knowledge of health and medicine, could rea-
sonably expect the absence of immediate medical
attention to result in—
‘‘(i) placing the health of the individ-
ual (or, with respect to a pregnant woman,
the health of the woman or her unborn
child) in serious jeopardy,
‘‘(ii) serious impairment to bodily
functions, or
‘‘(iii) serious dysfunction of any bodily
organ or part.
‘‘(e) QUALITY ASSURANCE PROGRAM.—
‘‘(1) IN GENERAL.—Each Medicare Choice orga-
nization must have arrangements, consistent with
any regulation, for an ongoing quality assurance pro-
gram for health care services it provides to individ-
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uals enrolled with Medicare Choice plans of the orga-
nization.
‘‘(2) ELEMENTS OF PROGRAM.—The quality as-
surance program shall—
‘‘(A) stress health outcomes and provide for
the collection, analysis, and reporting of data (in
accordance with a quality measurement system
that the Secretary recognizes) that will permit
measurement of outcomes and other indices of the
quality of Medicare Choice plans and organiza-
tions;
‘‘(B) provide for the establishment of writ-
ten protocols for utilization review, based on cur-
rent standards of medical practice;
‘‘(C) provide review by physicians and
other health care professionals of the process fol-
lowed in the provision of such health care serv-
ices;
‘‘(D) monitor and evaluate high volume and
high risk services and the care of acute and
chronic conditions;
‘‘(E) evaluate the continuity and coordina-
tion of care that enrollees receive;
‘‘(F) have mechanisms to detect both under-
utilization and overutilization of services;
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‘‘(G) after identifying areas for improve-
ment, establish or alter practice parameters;
‘‘(H) take action to improve quality and as-
sesses the effectiveness of such action through sys-
tematic followup;
‘‘(I) make available information on quality
and outcomes measures to facilitate beneficiary
comparison and choice of health coverage options
(in such form and on such quality and outcomes
measures as the Secretary determines to be ap-
propriate);
‘‘(J) be evaluated on an ongoing basis as to
its effectiveness;
‘‘(K) include measures of consumer satisfac-
tion; and
‘‘(L) provide the Secretary with such access
to information collected as may be appropriate
to monitor and ensure the quality of care pro-
vided under this part.
‘‘(3) EXTERNAL REVIEW.—Each Medicare Choice
organization shall, for each Medicare Choice plan it
operates, have an agreement with an independent
quality review and improvement organization ap-
proved by the Secretary to perform functions of the
type 
described 
in 
sections 
1154(a)(4)(B) 
and
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1154(a)(14) with respect to services furnished by Med-
icare Choice plans for which payment is made under
this title.
‘‘(4) EXCEPTION FOR MEDICARE CHOICE UNRE-
STRICTED FEE-FOR-SERVICE PLANS.—Paragraphs (1)
through (3) of this subsection and subsection (h)(2)
(relating to maintaining medical records) shall not
apply in the case of a Medicare Choice organization
in relation to a Medicare Choice unrestricted fee-for-
service plan.
‘‘(5) TREATMENT OF ACCREDITATION.—The Sec-
retary shall provide that a Medicare Choice organiza-
tion is deemed to meet requirements of paragraphs (1)
and (2) of this subsection and subsection (h) (relating
to confidentiality and accuracy of enrollee records) if
the organization is accredited (and periodically re-
accredited) by a private organization under a process
that the Secretary has determined assures that the or-
ganization, as a condition of accreditation, applies
and enforces standards with respect to the require-
ments involved that are no less stringent than the
standards established under section 1856 to carry out
the respective requirements.
‘‘(6) ANNUAL REPORT ON NON-HEALTH EXPENDI-
TURES.—Each Medicare Choice organization shall, at
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the request of the enrollee, annually provide to enroll-
ees a statement disclosing the proportion of the pre-
miums and other revenues received by the organiza-
tion that are expended for non-health care items and
services.
‘‘(f) COVERAGE DETERMINATIONS.—
‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A
Medicare Choice organization shall make determina-
tions regarding authorization requests for non-
emergency care on a timely basis, depending on the
urgency of the situation.
‘‘(2) RECONSIDERATIONS.—
‘‘(A) IN
GENERAL.—Subject to subsection
(g)(4), a reconsideration of a determination of
an organization denying coverage shall be made
within 30 days of the date of receipt of medical
information, but not later than 60 days after the
date of the determination.
‘‘(B) PHYSICIAN DECISION ON CERTAIN RE-
CONSIDERATIONS.—A reconsideration relating to
a determination to deny coverage based on a lack
of medical necessity shall be made only by a
physician other than a physician involved in the
initial determination.
‘‘(g) GRIEVANCES AND APPEALS.—
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‘‘(1) GRIEVANCE
MECHANISM.—Each Medicare
Choice organization must provide meaningful proce-
dures for hearing and resolving grievances between the
organization (including any entity or individual
through which the organization provides health care
services) and enrollees with Medicare Choice plans of
the organization under this part.
‘‘(2) APPEALS.—An enrollee with a Medicare
Choice plan of a Medicare Choice organization under
this part who is dissatisfied by reason of the enrollee’s
failure to receive any health service to which the en-
rollee believes the enrollee is entitled and at no greater
charge than the enrollee believes the enrollee is re-
quired to pay is entitled, if the amount in controversy
is $100 or more, to a hearing before the Secretary to
the same extent as is provided in section 205(b), and
in any such hearing the Secretary shall make the or-
ganization a party. If the amount in controversy is
$1,000 or more, the individual or organization shall,
upon notifying the other party, be entitled to judicial
review of the Secretary’s final decision as provided in
section 205(g), and both the individual and the orga-
nization shall be entitled to be parties to that judicial
review. In applying subsections (b) and (g) of section
205 as provided in this paragraph, and in applying
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section 205(l) thereto, any reference therein to the
Commissioner of Social Security or the Social Secu-
rity Administration shall be considered a reference to
the Secretary or the Department of Health and
Human Services, respectively.
‘‘(3) INDEPENDENT
REVIEW
OF
CERTAIN
COV-
ERAGE DENIALS.—The Secretary shall contract with
an independent, outside entity to review and resolve
reconsiderations that affirm denial of coverage.
‘‘(4) EXPEDITED DETERMINATIONS AND RECON-
SIDERATIONS.—
‘‘(A) RECEIPT OF REQUESTS.—An enrollee
in a Medicare Choice plan may request, either in
writing or orally, an expedited determination or
reconsideration by the Medicare Choice organiza-
tion regarding a matter described in paragraph
(2). The organization shall also permit the ac-
ceptance of such requests by physicians.
‘‘(B) ORGANIZATION PROCEDURES.—
‘‘(i) 
IN
GENERAL.—The 
Medicare
Choice organization shall maintain proce-
dures for expediting organization deter-
minations and reconsiderations when, upon
request of an enrollee, the organization de-
termines that the application of normal
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time frames for making a determination (or
a reconsideration involving a determina-
tion) could seriously jeopardize the life or
health of the enrollee or the enrollee’s ability
to regain maximum function.
‘‘(ii) TIMELY
RESPONSE.—In an ur-
gent case described in clause (i), the organi-
zation shall notify the enrollee (and the
physician involved, as appropriate) of the
determination (or determination on the re-
consideration) as expeditiously as the en-
rollee’s health condition requires, but not
later than 72 hours (or 24 hours in the case
of a reconsideration) of the time of receipt
of the request for the determination or re-
consideration (or receipt of the information
necessary to make the determination or re-
consideration), or such longer period as the
Secretary may permit in specified cases.
‘‘(h) CONFIDENTIALITY AND ACCURACY OF ENROLLEE
RECORDS.—Each Medicare Choice organization shall estab-
lish procedures—
‘‘(1) to safeguard the privacy of individually
identifiable enrollee information,
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‘‘(2) to maintain accurate and timely medical
records and other health information for enrollees,
and
‘‘(3) to assure timely access of enrollees to their
medical information.
‘‘(i) INFORMATION ON ADVANCE DIRECTIVES.—Each
Medicare Choice organization shall meet the requirement of
section 1866(f) (relating to maintaining written policies
and procedures respecting advance directives).
‘‘(j) RULES REGARDING PHYSICIAN PARTICIPATION.—
‘‘(1) PROCEDURES.—Each Medicare Choice orga-
nization shall establish reasonable procedures relating
to the participation (under an agreement between a
physician and the organization) of physicians under
Medicare Choice plans offered by the organization
under this part. Such procedures shall include—
‘‘(A) providing notice of the rules regarding
participation,
‘‘(B) providing written notice of participa-
tion decisions that are adverse to physicians,
and
‘‘(C) providing a process within the organi-
zation for appealing such adverse decisions, in-
cluding the presentation of information and
views of the physician regarding such decision.
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‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A
Medicare Choice organization shall consult with phy-
sicians who have entered into participation agree-
ments with the organization regarding the organiza-
tion’s medical policy, quality, and medical manage-
ment procedures.
‘‘(3) LIMITATIONS
ON
PHYSICIAN
INCENTIVE
PLANS.—
‘‘(A) IN GENERAL.—No Medicare Choice or-
ganization may operate any physician incentive
plan (as defined in subparagraph (B)) unless the
following requirements are met:
‘‘(i) No specific payment is made di-
rectly or indirectly under the plan to a phy-
sician or physician group as an inducement
to reduce or limit medically necessary serv-
ices provided with respect to a specific indi-
vidual enrolled with the organization.
‘‘(ii) If the plan places a physician or
physician group at substantial financial
risk (as determined by the Secretary) for
services not provided by the physician or
physician group, the organization—
‘‘(I) provides stop-loss protection
for the physician or group that is ade-
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quate and appropriate, based on stand-
ards developed by the Secretary that
take into account the number of physi-
cians placed at such substantial finan-
cial risk in the group or under the
plan and the number of individuals
enrolled with the organization who re-
ceive services from the physician or
group, and
‘‘(II) conducts periodic surveys of
both individuals enrolled and individ-
uals previously enrolled with the orga-
nization to determine the degree of ac-
cess of such individuals to services pro-
vided by the organization and satisfac-
tion with the quality of such services.
‘‘(iii) The organization provides the
Secretary with descriptive information re-
garding the plan, sufficient to permit the
Secretary to determine whether the plan is
in compliance with the requirements of this
subparagraph.
‘‘(B) PHYSICIAN
INCENTIVE
PLAN
DE-
FINED.—In this paragraph, the term ‘physician
incentive plan’ means any compensation ar-
181
HR 2015 PP
rangement between a Medicare Choice organiza-
tion and a physician or physician group that
may directly or indirectly have the effect of re-
ducing or limiting services provided with respect
to individuals enrolled with the organization
under this part.
‘‘(4) LIMITATION
ON
PROVIDER
INDEMNIFICA-
TION.—A Medicare Choice organization may not pro-
vide (directly or indirectly) for a provider (or group
of providers) to indemnify the organization against
any liability resulting from a civil action brought for
any damage caused to an enrollee with a Medicare
Choice plan of the organization under this part by the
organization’s denial of medically necessary care.
‘‘(k) TREATMENT OF SERVICES FURNISHED BY CER-
TAIN PROVIDERS.—
‘‘(1) IN GENERAL.—A physician or other entity
(other than a provider of services) that does not have
a contract establishing payment amounts for services
furnished to an individual enrolled under this part
with a MedicarePlus organization shall accept as
payment in full for covered services under this title
that are furnished to such an individual the amounts
that the physician or other entity could collect if the
individual were not so enrolled. Any penalty or other