H. R. 2491—208
allotment under this subsection for fiscal year
1997.
‘‘(III) SUBSEQUENT FISCAL YEARS.—For a fiscal
year after 1998, 102 percent of the amount of
the State outlay allotment under this subsection
for the previous fiscal year.
‘‘(iii) FLOOR BASED ON OUTLAY ALLOTMENT GROWTH
RATE IN FIRST YEAR.—Beginning with fiscal year 1998,
in the case of a State for which the outlay allotment
under this subsection for fiscal year 1997 exceeded
its outlay allotment under this subsection for the pre-
vious fiscal year by more than the national MediGrant
growth percentage for fiscal year 1997, 104 percent
of the amount of the State outlay allotment under
this subsection for the previous fiscal year (or, if less,
beginning with fiscal year 2003, 95 percent of the
national MediGrant growth percentage for the year).
‘‘(B) CEILINGS.—
‘‘(i) IN GENERAL.—Subject to clause (ii), in no case
shall the amount of the State outlay allotment under
paragraph (2) for a fiscal year be greater than the
product of—
‘‘(I) the State outlay allotment under this sub-
section for the State for the preceding fiscal year,
and
‘‘(II) the applicable percent (specified in clause
(ii) or (iii)) for the fiscal year involved.
‘‘(ii) GENERAL RULE FOR APPLICABLE PERCENT.—
For purposes of clause (i), subject to clause (iii), the
‘applicable percent’—
‘‘(I) for fiscal year 1997 is 109 percent, and
‘‘(II) for a subsequent fiscal year is 105.33
percent.
‘‘(iii) SPECIAL RULE.—For a fiscal year after fiscal
year 1997, in the case of a State (among the 50 States
and the District of Columbia) that is one of the 10
States with the lowest Federal MediGrant spending
per resident-in-poverty rates (as determined under
clause (iv)) for the fiscal year, the ‘applicable percent’
is 107 percent.
‘‘(iv) DETERMINATION
OF
FEDERAL
MEDIGRANT
SPENDING
PER
RESIDENT-IN-POVERTY
RATE.—For pur-
poses of clause (iii), the ‘Federal MediGrant spending
per resident-in-poverty rate’ for a State for a fiscal
year is equal to—
‘‘(I) the State’s outlay allotment under this
subsection for the previous fiscal year (determined
without regard to paragraph (4)), divided by
‘‘(II) the average annual number of residents
of the State in poverty (as defined in subsection
(d)(2)) with respect to the fiscal year.
‘‘(C) SPECIAL RULE.—
‘‘(i) IN GENERAL.—Notwithstanding the preceding
subparagraphs of this paragraph, the State outlay
allotment for—
‘‘(I) New Hampshire for each of the fiscal years
1997 through 2000, is $360,000,000,
H. R. 2491—209
‘‘(II) Louisiana, subject to subclause (III), for
each of the fiscal years 1997 through 2000, is
$2,622,000,000,
‘‘(III) Louisiana and Nebraska for fiscal year
1997, as otherwise determined, shall be increased
by $37,048,207 and $106,132,408, respectively, and
‘‘(IV) Nevada for each of fiscal years 1996,
1997, and 1998, as otherwise determined, shall
be increased by $90,000,000.
‘‘(ii) EXCEPTION.—A State described in subclause
(I) or (II) of clause (i) may apply to the Secretary
for use of the State outlay allotment otherwise deter-
mined under this subsection for any fiscal year, if
such State notifies the Secretary not later than March
1 preceding such fiscal year that such State will be
able to expend sufficient State funds in such fiscal
year to qualify for such allotment.
‘‘(iii) TREATMENT OF INCREASE AS SUPPLEMENTAL
ALLOTMENT.—Any increase in an outlay allotment
under clause (i)(III) shall not be taken into account
for purposes of determining the scalar factor under
paragraph (2) for fiscal year 1997, any State outlay
allotment for a fiscal year after fiscal year 1997, the
pool amount for a fiscal year after fiscal year 1997,
or determination of the national MediGrant growth
percentage for any fiscal year.
‘‘(4) ELECTION OF ALTERNATIVE GROWTH FORMULA.—
‘‘(A) ELECTION.—In order to reduce variations in
increases in outlay allotments over time, any of the 50
States or the District of Columbia may elect (by notice
provided to the Secretary by not later than April 1, 1996)
to adopt an alternative growth rate formula under this
paragraph for the determination of the State’s outlay allot-
ment in fiscal year 1996 and for the increase in the amount
of such allotment in subsequent fiscal years.
‘‘(B) FORMULA.—The alternative growth formula under
this paragraph may be any formula under which a portion
of the State outlay allotment for fiscal year 1996 under
paragraph (1) is deferred and applied to increase the
amount of its outlay allotment for one or more subsequent
fiscal years, so long as the total amount of such increases
for all such subsequent fiscal years does not exceed the
amount of the outlay allotment deferred from fiscal year
1996.
‘‘(5) COMMONWEALTHS AND TERRITORIES.—
‘‘(A) IN GENERAL.—The outlay allotment for each of
the Commonwealths and Territories for a fiscal year is
the maximum amount that could have been certified under
section 1108(c) (as in effect on the day before the date
of the enactment of this title) with respect to the Common-
wealth or Territory for the fiscal year with respect to
title XIX, if the national MediGrant growth percentage
(as determined under subsection (b)(2)) for the fiscal year
had been substituted (beginning with fiscal year 1997)
for the percentage increase referred to in section
1108(c)(1)(B) (as so in effect).
H. R. 2491—210
‘‘(B) DISREGARD
OF
ROUNDING
REQUIREMENTS.—For
purposes of subparagraph (A), the rounding requirements
under section 1108(c) shall not apply.
‘‘(C) LIMITATION ON TOTAL AMOUNT FOR FISCAL YEAR
1996.—Notwithstanding the provisions of subparagraph (A),
the total amount of the outlay allotments for the Common-
wealths and Territories for fiscal year 1996 may not exceed
$139,950,000.
‘‘(d) STATE AGGREGATE EXPENDITURE NEED DETERMINED.—
‘‘(1) IN GENERAL.—For purposes of subsection (c), the ‘State
aggregate expenditure need’ for a State or the District of Colum-
bia for a fiscal year is equal to the product of the following
4 factors:
‘‘(A) RESIDENTS
IN
POVERTY.—The average annual
number of residents in poverty of such State or District
with respect to the fiscal year (as determined under para-
graph (2)).
‘‘(B) CASE MIX INDEX.—The case mix index for such
State or District (as determined under paragraph (3)) for
the most recent fiscal year for which data are available,
but in no case less than 0.9 or greater than 1.15.
‘‘(C) INPUT COST INDEX.—The input cost index for the
State (as determined under paragraph (4)) for the most
recent fiscal year for which data are available.
‘‘(D) NATIONAL AVERAGE SPENDING PER RESIDENT IN
POVERTY.—The national average spending per resident in
poverty (as determined under paragraph (5)).
‘‘(2) RESIDENTS IN POVERTY.—In this section—
‘‘(A) IN GENERAL.—The term ‘average annual number
of residents in poverty’ means, with respect to a State
or the District of Columbia and a fiscal year, the average
annual number of residents in poverty (as defined in
subparagraph (B)) in such State or District (based on data
made generally available by the Bureau of the Census
from the Current Population Survey) for the most recent
3-calendar-year period (ending before the fiscal year) for
which such data are available.
‘‘(B) RESIDENT IN POVERTY DEFINED.—The term ‘resi-
dent in poverty’ means an individual whose family income
does not exceed the poverty threshold (as such terms are
defined by the Office of Management and Budget and are
generally interpreted and applied by the Bureau of the
Census for the year involved).
‘‘(3) CASE MIX INDEX.—
‘‘(A) IN GENERAL.—In this subsection, the ‘case mix
index’ for a State or the District of Columbia for a fiscal
year is equal to—
‘‘(i) the sum of—
‘‘(I) the projected per recipient expenditures
with respect to elderly individuals in such State
or District for the fiscal year (determined under
subparagraph (B)),
‘‘(II) the projected per recipient expenditures
with respect to the blind and disabled individuals
in such State or District for the fiscal year (deter-
mined under subparagraph (C)), and
H. R. 2491—211
‘‘(III) the projected per recipient expenditures
with respect to other individuals in such State
or District (determined under subparagraph (D));
divided by—
‘‘(ii) the national average spending per recipient
determined under subparagraph (E) for the fiscal year
involved.
‘‘(B) PROJECTED PER RECIPIENT EXPENDITURES FOR THE
ELDERLY.—For purposes of subparagraph (A)(i)(I), the ‘pro-
jected per recipient expenditures with respect to elderly
individuals’ in a State or the District of Columbia for
a fiscal year is equal to the product of—
‘‘(i) the national average per recipient expenditures
under this title in the 50 States and the District of
Columbia for the most recent fiscal year for which
data are available for elderly individuals, and
‘‘(ii) the proportion, of all individuals who received
medical assistance under this title in such State or
District in the most recent fiscal year referred to in
clause (i), that were individuals described in such
clause.
‘‘(C) PROJECTED PER RECIPIENT EXPENDITURES FOR THE
BLIND
AND
DISABLED.—For purposes of subparagraph
(A)(i)(II), the ‘projected per recipient expenditures with
respect to blind and disabled individuals’ in a State or
the District of Columbia for a fiscal year is equal to the
product of—
‘‘(i) the national average per recipient expenditures
under this title in the 50 States and the District of
Columbia for the most recent fiscal year for which
data are available for individuals who are eligible for
medical assistance because such individuals are blind
or disabled and are not elderly individuals, and
‘‘(ii) the proportion, of all individuals who received
medical assistance under this title in the State in
the most recent fiscal year referred to in clause (i),
that were individuals described in such clause.
‘‘(D) PROJECTED
PER
RECIPIENT
EXPENDITURES
FOR
OTHER
INDIVIDUALS.—For 
purposes 
of 
subparagraph
(A)(i)(III), the ‘projected per recipient expenditures with
respect to other individuals’ in a State or the District
of Columbia for a fiscal year is equal to the product of—
‘‘(i) the national average per recipient expenditures
under this title in the 50 States and the District of
Columbia for the most recent fiscal year for which
data are available for individuals who are not described
in subparagraph (B)(i) or (C)(i), and
‘‘(ii) the proportion, of all individuals who received
medical assistance under this title in such State or
District in the most recent fiscal year referred to in
clause (i), that were individuals described in such
clause.
‘‘(E) NATIONAL
AVERAGE
SPENDING
PER
RECIPIENT.—
For purposes of this paragraph, the ‘national average
expenditures per recipient’ for a fiscal year is equal to
the sum of—
H. R. 2491—212
‘‘(i) the product of (I) the national average
described in subparagraph (B)(i), and (II) the propor-
tion, of all individuals who received medical assistance
under this title in any of the 50 States or the District
of Columbia in the fiscal year referred to in such
subparagraph, who are described in such subpara-
graph,
‘‘(ii) the product of (I) the national average
described in subparagraph (C)(i), and (II) the propor-
tion, of all individuals who received medical assistance
under this title in any of the 50 States or the District
of Columbia in the fiscal year referred to in such
subparagraph, who are described in such subpara-
graph, and
‘‘(iii) the product of (I) the national average
described in subparagraph (D)(i), and (II) the propor-
tion, of all individuals who received medical assistance
under this title in any of the 50 States or the District
of Columbia in the fiscal year referred to in such
subparagraph, who are described in such subpara-
graph.
‘‘(F) DETERMINATION
OF
NATIONAL
AVERAGES
AND
PROPORTIONS.—
‘‘(i) IN GENERAL.—The national averages per recipi-
ent and the proportions referred to in clauses (i) and
(ii), respectively, of subparagraphs (B), (C), and (D)
and subparagraph (E) shall be determined by the Sec-
retary using the most recent data available.
‘‘(ii) USE OF MEDICAID DATA.—If for a fiscal year
there is inadequate data to compute such averages
and proportions based on expenditures and numbers
of individuals receiving medical assistance under this
title, the Secretary may compute such averages based
on expenditures and numbers of such individuals under
title XIX for the most recent fiscal year for which
data are available and, for this purpose—
‘‘(I) any reference in subparagraph (B)(i) to
‘elderly individuals’ is deemed a reference to
‘individuals whose eligibility for medical assistance
is based on being 65 years of age or older’,
‘‘(II) the reference in subparagraph (C)(i) to
‘and are not elderly individuals’ shall be considered
to be deleted, and
‘‘(III) individuals whose basis for eligibility for
medical assistance was reported as unknown shall
not be counted as individuals under subparagraph
(D)(i).
‘‘(iii) EXPENDITURE DEFINED.—For purposes of this
paragraph, the term ‘expenditure’ means medical ven-
dor payments by basis of eligibility as reported by
HCFA Form 2082.
‘‘(4) INPUT COST INDEX.—
‘‘(A) IN GENERAL.—In this section, the ‘input cost index’
for a State or the District of Columbia for a fiscal year
is the sum of—
‘‘(i) 0.15, and
H. R. 2491—213
‘‘(ii) 0.85 multiplied by the ratio of (I) the annual
average wages for hospital employees in such State
or District for the fiscal year (as determined under
subparagraph (B)), to (II) the annual average wages
for hospital employees in the 50 States and the District
of Columbia for such year (as determined under such
subparagraph).
‘‘(B) DETERMINATION OF ANNUAL AVERAGE WAGES OF
HOSPITAL EMPLOYEES.—The Secretary shall provide for the
determination of annual average wages for hospital employ-
ees in a State or the District of Columbia and, collectively,
in the 50 States and the District of Columbia for a fiscal
year based on the area wage data applicable to hospitals
under section 1886(d)(2)(E) (or, if such data no longer
exists, comparable data of hospital wages) for discharges
occurring during the fiscal year involved.
‘‘(5) NATIONAL AVERAGE SPENDING PER RESIDENT IN POV-
ERTY.—For purposes of this subsection, the ‘national average
spending per resident in poverty’—
‘‘(A) for fiscal year 1997 is equal to—
‘‘(i) the sum (for each of the 50 States and the
District of Columbia) of the total of the Federal and
State expenditures under title XIX for calendar quar-
ters in fiscal year 1994, increased by the percentage
by which (I) the pool amount for fiscal year 1997,
exceeds (II) $83,213,431,458 (which represents Federal
medicaid expenditures for such States and District for
fiscal year 1994); divided by
‘‘(ii) the sum of the number of residents in poverty
(as defined in paragraph (2)(A)) for all of the 50 States
and the District of Columbia for fiscal year 1994; and
‘‘(B) for a succeeding fiscal year is equal to the national
average spending per resident in poverty under this para-
graph for the preceding fiscal year increased by the national
MediGrant growth percentage (as defined in subsection
(b)(2)) for the fiscal year involved.
‘‘(e) PUBLICATION OF OBLIGATION AND OUTLAY ALLOTMENTS.—
‘‘(1) NOTICE OF PRELIMINARY ALLOTMENTS.—Not later than
April 1 before the beginning of each fiscal year (beginning
with fiscal year 1997), the Secretary shall initially compute,
after consultation with the Comptroller General, and publish
in the Federal Register notice of the proposed obligation and
outlay allotments for each State under this section (not taking
into account subsection (a)(2)(B)) for the fiscal year. The Sec-
retary shall include in the notice a description of the methodol-
ogy and data used in deriving such allotments for the year.
‘‘(2) REVIEW BY GAO.—The Comptroller General shall sub-
mit to Congress by not later than May 15 of each such fiscal
year, a report analyzing such allotments and the extent to
which they comply with the precise requirements of this section.
‘‘(3) NOTICE OF FINAL ALLOTMENTS.—Not later than July
1 before the beginning of each such fiscal year, the Secretary,
taking into consideration the analysis contained in the report
of the Comptroller General under paragraph (2), shall compute
and publish in the Federal Register notice of the final allot-
ments under this section (both taking into account and not
taking into account subsection (a)(2)(B)) for the fiscal year.
H. R. 2491—308
‘‘(ii) the proportions described in subparagraph
(A)(ii) for such types of services shall be—
‘‘(I) for part A services, the ratio (expressed
as a percentage) of the average annual per capita
rate of payment for the area for part A for 1995
to the total average annual per capita rate of pay-
ment for the area for parts A and B for 1995,
and
‘‘(II) for part B services, 100 percent minus
the ratio described in subclause (I);
‘‘(iii) for the part A services, 70 percent of pay-
ments attributable to such services shall be adjusted
by the index used under section 1886(d)(3)(E) to adjust
payment rates for relative hospital wage levels for
hospitals located in the payment area involved;
‘‘(iv) for part B services—
‘‘(I) 66 percent of payments attributable to
such services shall be adjusted by the index of
the geographic area factors under section 1848(e)
used to adjust payment rates for physicians’ serv-
ices furnished in the payment area, and
‘‘(II) of the remaining 34 percent of the amount
of such payments, 70 percent shall be adjusted
by the index described in clause (iii);
‘‘(v) the index values shall be computed based only
on the beneficiary population who are 65 years of age
or older who are not determined to have end stage
renal disease.
The Secretary may continue to apply the rules described
in this subparagraph (or similar rules) for 1997.
‘‘(5) BUDGET NEUTRALITY ADJUSTMENT FACTOR.—For each
year, the Secretary shall compute a budget neutrality adjust-
ment factor so that the aggregate of the payments under this
part shall not exceed the aggregate payments that would have
been made under this part if the area-specific percentage for
the year had been 100 percent and the national percentage
had been 0 percent.
‘‘(6) NATIONAL AVERAGE PER CAPITA GROWTH PERCENTAGE
DEFINED.—In this part, the ‘national average per capita growth
percentage’ for—
‘‘(A) 1996 is 8.0 percent,
‘‘(B) 1997 is 3.8 percent,
‘‘(C) 1998 is 4.6 percent,
‘‘(D) 1999 is 4.3 percent,
‘‘(E) 2000 is 3.8 percent,
‘‘(F) 2001 is 5.5 percent,
‘‘(G) 2002 is 5.6 percent, and
‘‘(H) each subsequent year is 5.0 percent.
‘‘(d) MEDICAREPLUS PAYMENT AREA DEFINED.—
‘‘(1) IN GENERAL.—In this part, except as provided in para-
graph (3), the term ‘MedicarePlus payment area’ means a
county, or equivalent area specified by the Secretary.
‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the case of individ-
uals who are determined to have end stage renal disease,
the MedicarePlus payment area shall be each State.
‘‘(3) GEOGRAPHIC ADJUSTMENT.—
H. R. 2491—376
substantial financial risk for the cost or utilization of the
items or services which the individual or entity is obligated
to provide, whether through a withhold, capitation, incen-
tive pool, per diem payment, or any other similar risk
arrangement which places the individual or entity at
substantial financial risk.’’.
(d) NEW EXCEPTION FOR SHARED FACILITY SERVICES.—
(1) IN GENERAL.—Section 1877(b) (42 U.S.C. 1395nn(b)),
as amended by section 8201(b)(3)(C), is amended—
(A) by redesignating paragraphs (4) through (7) as
paragraphs (5) through (8); and
(B) by inserting after paragraph (3) the following new
paragraph:
‘‘(4) SHARED
FACILITY
SERVICES.—In the case of a des-
ignated health service consisting of a shared facility service
of a shared facility—
‘‘(A) that is furnished—
‘‘(i) personally by the referring physician who is
a shared facility physician or personally by an individ-
ual directly employed or under the general supervision
of such a physician,
‘‘(ii) by a shared facility in a building in which
the referring physician furnishes substantially all of
the services of the physician that are unrelated to
the furnishing of shared facility services, and
‘‘(iii) to a patient of a shared facility physician;
and
‘‘(B) that is billed by the referring physician or a group
practice of which the physician is a member.’’.
(2) DEFINITIONS.—Section 1877(h) (42 U.S.C. 1395nn(h)),
as amended by section 8201(b)(6), is amended by inserting
before paragraph (4) the following new paragraph:
‘‘(1) SHARED FACILITY RELATED DEFINITIONS.—
‘‘(A) SHARED FACILITY SERVICE.—The term ‘shared facil-
ity service’ means, with respect to a shared facility, a
designated health service furnished by the facility to
patients of shared facility physicians.
‘‘(B) SHARED
FACILITY.—The term ‘shared facility’
means an entity that furnishes shared facility services
under a shared facility arrangement.
‘‘(C) SHARED FACILITY PHYSICIAN.—The term ‘shared
facility physician’ means, with respect to a shared facility,
a physician (or a group practice of which the physician
is a member) who has a financial relationship under a
shared facility arrangement with the facility.
‘‘(D) 
SHARED
FACILITY
ARRANGEMENT.—The 
term
‘shared facility arrangement’ means, with respect to the
provision of shared facility services in a building, a financial
arrangement—
‘‘(i) which is only between physicians who are
providing services (unrelated to shared facility services)
in the same building,
‘‘(ii) in which the overhead expenses of the facility
are shared, in accordance with methods previously
determined by the physicians in the arrangement,
among the physicians in the arrangement, and
H. R. 2491—377
‘‘(iii) which, in the case of a corporation, is wholly
owned and controlled by shared facility physicians.’’.
(e) NEW EXCEPTION FOR SERVICES FURNISHED IN COMMUNITIES
WITH NO ALTERNATIVE PROVIDERS.—Section 1877(b) (42 U.S.C.
1395nn(b)), as amended by section 8201(b)(3)(C) and subsection
(d)(1), is amended—
(1) by redesignating paragraphs (5) through (8) as para-
graphs (6) through (9); and
(2) by inserting after paragraph (4) the following new para-
graph:
‘‘(5) NO ALTERNATIVE PROVIDERS IN AREA.—In the case of
a designated health service furnished in any area with respect
to which the Secretary determines that individuals residing
in the area do not have reasonable access to such a designated
health service for which subsection (a)(1) does not apply.’’.
(f) NEW EXCEPTION FOR SERVICES FURNISHED IN AMBULATORY
SURGICAL CENTERS.—Section 1877(b) (42 U.S.C. 1395nn(b)), as
amended by section 8201(b)(3)(C), subsection (d)(1), and subsection
(e)(1), is amended—
(1) by redesignating paragraphs (6) through (9) as para-
graphs (7) through (10); and
(2) by inserting after paragraph (5) the following new para-
graph:
‘‘(6) SERVICES FURNISHED IN AMBULATORY SURGICAL CEN-
TERS.—In the case of a designated health service furnished
in an ambulatory surgical center described in section
1832(a)(2)(F)(i).’’.
(g) NEW EXCEPTION FOR SERVICES FURNISHED IN RENAL DIALY-
SIS FACILITIES.—Section 1877(b) (42 U.S.C. 1395nn(b)), as amended
by section 8201(b)(3)(C), subsection (d)(1), subsection (e)(1), and
subsection (f), is amended—
(1) by redesignating paragraphs (7) through (10) as para-
graphs (8) through (11); and
(2) by inserting after paragraph (6) the following new para-
graph:
‘‘(7) SERVICES FURNISHED IN RENAL DIALYSIS FACILITIES.—
In the case of a designated health service furnished in a renal
dialysis facility under section 1881.’’.
(h) NEW EXCEPTION FOR SERVICES FURNISHED IN A HOSPICE.—
Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section
8201(b)(3)(C), subsection (d)(1), subsection (e)(1), subsection (f), and
subsection (g), is amended—
(1) by redesignating paragraphs (8) through (11) as para-
graphs (9) through (12); and
(2) by inserting after paragraph (7) the following new para-
graph:
‘‘(8) SERVICES FURNISHED BY A HOSPICE PROGRAM.—In the
case of a designated health service furnished by a hospice
program under section 1861(dd)(2).’’.
(i) NEW EXCEPTION FOR SERVICES FURNISHED IN A COMPREHEN-
SIVE OUTPATIENT REHABILITATION FACILITY.—Section 1877(b) (42
U.S.C. 1395nn(b)), as amended by section 8201(b)(3)(C), subsection
(d)(1), subsection (e)(1), subsection (f), subsection (g), and subsection
(h), is amended—
(1) by redesignating paragraphs (9) through (12) as para-
graphs (10) through (13); and
H. R. 2491—383
‘‘(I) For discharges occurring on or after October 1, 1995,
and on or before September 30, 1996, by 5 percent.
‘‘(II) For discharges occurring on or after October 1, 1996,
and on or before September 30, 1997, by 10 percent.
‘‘(III) For discharges occurring on or after October 1, 1997,
and on or before September 30, 1998, by 17.5 percent.
‘‘(IV) For discharges occurring on or after October 1, 1998,
and on or before September 30, 1999, by 25 percent.
‘‘(V) For discharges occurring on or after October 1, 1999,
and on or before September 30, 2002, by 30 percent.
(b) CONFORMING AMENDMENT RELATING TO DETERMINATION OF
STANDARDIZED
AMOUNTS.—Section 1886(d)(2)(C)(iv) (42 U.S.C.
1395ww(d)(2)(C)(iv)) is amended by striking the period at the end
and inserting the following: ‘‘, and the Secretary shall not take
into account any reductions in the amount of such additional pay-
ments resulting from the amendments made by section 8403(a)
of the Medicare Preservation Act of 1995.’’.
(c) EFFECTIVE DATE.—The amendments made by subsections
(a) and (b) shall apply to discharges occurring on or after October
1, 1995.
SEC. 8404. CAPITAL PAYMENTS FOR PPS HOSPITALS.
(a) REDUCTION IN PAYMENTS.—
(1) CONTINUATION
OF
CURRENT
REDUCTIONS.—Section
1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended in the
second sentence—
(A) by striking ‘‘through 1995’’ and inserting ‘‘through
2002’’; and
(B) by inserting after ‘‘10 percent reduction’’ the follow-
ing: ‘‘(or a 15 percent reduction in the case of payments
during fiscal years 1996 through 2002)’’.
(2) 
REDUCTION
IN
BASE
PAYMENT
RATES.—Section
1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended by adding
at the end the following new sentence: ‘‘In addition to the
reduction described in the preceding sentence, for discharges
occurring after September 30, 1995, the Secretary shall reduce
by 7.47 percent the unadjusted standard Federal capital pay-
ment rate (as described in 42 CFR 412.308(c), as in effect
on the date of the enactment of the Medicare Preservation
Act of 1995) and shall reduce by 8.27 percent the unadjusted
hospital-specific rate (as described in 42 CFR 412.328(e)(1),
as in effect on such date of enactment).’’.
(b) HOSPITAL-SPECIFIC ADJUSTMENT FOR CAPITAL-RELATED TAX
COSTS.—Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended—
(1) by redesignating subparagraph (C) as subparagraph
(D), and
(2) by inserting after subparagraph (B) the following
subparagraph:
‘‘(C)(i) For discharges occurring after September 30,
1995, such system shall provide for an adjustment in an
amount equal to the amount determined under clause (iv)
for capital-related tax costs for each hospital that is eligible
for such adjustment.
‘‘(ii) Subject to clause (iii), a hospital is eligible for
an adjustment under this subparagraph, with respect to
discharges occurring in a fiscal year, if the hospital—
H. R. 2491—389
an individual who (at the time the service is furnished)
is a resident of a skilled nursing facility who is entitled
to coverage under section 1812(a)(2) for such service, the
skilled nursing facility shall submit a claim for payment
under this title for such service under part A (without
regard to whether or not the item or service was furnished
by the facility, by others under arrangement with them
made by the facility, under any other contracting or consult-
ing arrangement, or otherwise).
‘‘(B) PART B BILLING.—In the case of a covered non-
routine service other than a portable X-ray or portable
electrocardiogram treated as a physician’s service for pur-
poses of section 1848(j)(3) furnished to an individual who
(at the time the service is furnished) is a resident of a
skilled nursing facility who is not entitled to coverage
under section 1812(a)(2) for such service but is entitled
to coverage under part B for such service, the skilled nurs-
ing facility shall submit a claim for payment under this
title for such service under part B (without regard to
whether or not the item or service was furnished by the
facility, by others under arrangement with them made
by the facility, under any other contracting or consulting
arrangement, or otherwise). This subparagraph shall not
apply to physician’s services furnished by a physician (as
defined in section 1861(r)(1)) to a resident of a skilled
nursing facility if such services are not covered non-routine
services (as defined in section 1888A(a)(1)) or services for
which routine service costs (as defined in section 1888(e))
are determined.
‘‘(C) MAINTAINING
RECORDS
ON
SERVICES
FURNISHED
TO RESIDENTS.—Each skilled nursing facility receiving pay-
ments for extended care services under this title shall
document on the facility’s cost report all covered non-rou-
tine services furnished to all residents of the facility to
whom the facility provided extended care services for which
payment was made under part A or B (including a portable
X-ray or portable electrocardiogram treated as a physician’s
service for purposes of section 1848(j)(3)) during a fiscal
year (beginning with fiscal year 1996) (without regard to
whether or not the services were furnished by the facility,
by others under arrangement with them made by the facil-
ity, under any other contracting or consulting arrangement,
or otherwise).
‘‘(c) NO PAYMENT IN EXCESS OF PRODUCT OF PER STAY AMOUNT
AND NUMBER OF STAYS.—
‘‘(1) IN GENERAL.—If a skilled nursing facility has received
aggregate payments under subsection (b) for covered non-rou-
tine services during a cost reporting period beginning during
a fiscal year in excess of an amount equal to the cost reporting
period amount determined under paragraph (2), the Secretary
shall reduce the payments made to the facility with respect
to such services for cost reporting periods beginning during
the following fiscal year in an amount equal to such excess.
The Secretary shall reduce payments under this subparagraph
at such times and in such manner during a fiscal year as
the Secretary finds necessary to meet the requirement of this
subparagraph.
H. R. 2491—400
(2) CONFORMING AMENDMENTS.—Section 1848 (42 U.S.C.
1395w–4) is amended—
(A) by striking ‘‘(or factors)’’ each place it appears
in subsection (d)(1)(A) and (d)(1)(D)(ii) (as redesignated
by paragraph (1)(a));
(B) in subsection (d)(1)(A), by striking ‘‘or updates’’;
(C) in subsection (d)(1)(D)(ii) (as redesignated by para-
graph (1)(a)), by striking ‘‘(or updates)’’; and
(D) in subsection (i)(1)(C), by striking ‘‘conversion fac-
tors’’ and inserting ‘‘the conversion factor’’.
SEC. 8502. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR
CERTAIN OUTPATIENT HOSPITAL SERVICES.
(a) AMBULATORY
SURGICAL
CENTER
PROCEDURES.—Section
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended—
(1) by striking ‘‘of 80 percent’’; and
(2) by striking the period at the end and inserting the
following: ‘‘, less the amount a provider may charge as described
in clause (ii) of section 1866(a)(2)(A).’’.
(b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCEDURES.—Sec-
tion 1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended—
(1) by striking ‘‘of 80 percent’’; and
(2) by striking the period at the end and inserting the
following: ‘‘, less the amount a provider may charge as described
in clause (ii) of section 1866(a)(2)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to services furnished during portions of cost reporting
periods occurring on or after October 1, 1995.
SEC. 8503. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF
HOSPITAL OUTPATIENT SERVICES.
(a) REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS.—
Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is amend-
ed by striking ‘‘through 1998’’ and inserting ‘‘through 2002’’.
(b) REDUCTION
IN
PAYMENTS
FOR
OTHER
COSTS.—Section
1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is amended by
striking ‘‘through 1998’’ and inserting ‘‘through 2002’’.
SEC. 8504. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR CLINI-
CAL DIAGNOSTIC LABORATORY TESTS.
(a) CHANGE IN UPDATE.—Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C.
1395l(h)(2)(A)(ii)(IV)) is amended by striking ‘‘1994 and 1995’’ and
inserting ‘‘1994 through 2002’’.
(b) 
LOWERING
CAP
ON
PAYMENT
AMOUNTS.—Section
1833(h)(4)(B) (42 U.S.C. 1395l(h)(4)(B)) is amended—
(1) in clause (vi), by striking ‘‘and’’ at the end;
(2) in clause (vii)—
(A) by inserting ‘‘and before January 1, 1997,’’ after
‘‘1995,’’, and
(B) by striking the period at the end and inserting
‘‘, and’’; and
(3) by adding at the end the following new clause:
‘‘(viii) after December 31, 1996, is equal to 65 percent
of such median.’’.
SEC. 8505. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.
(a) REDUCTION IN PAYMENT AMOUNTS FOR ITEMS OF DURABLE
MEDICAL EQUIPMENT.—
H. R. 2491—401
(1) FREEZE
IN
UPDATE
FOR
COVERED
ITEMS.—Section
1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended—
(A) by striking ‘‘and’’ at the end of subparagraph (A);
(B) in subparagraph (B)—
(i) by striking ‘‘a subsequent year’’ and inserting
‘‘1993, 1994, and 1995’’, and
(ii) by striking the period at the end and inserting
a semicolon; and
(C) by adding at the end the following:
‘‘(C) for each of the years 1996 through 2002, 0 percent-
age points; and
‘‘(D) for a subsequent year, the percentage increase
in the consumer price index for all urban consumers (U.S.
urban average) for the 12-month period ending with June
of the previous year.’’.
(2) UPDATE
FOR
ORTHOTICS
AND
PROSTHETICS.—Section
1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended—
(A) by striking ‘‘and’’ at the end of clause (iii);
(B) by redesignating clause (iv) as clause (v); and
(C) by inserting after clause (iii) the following new
clause:
‘‘(iv) for each of the years 1996 through 2002,
1 percent, and’’.
(b) OXYGEN AND OXYGEN EQUIPMENT.—
(1) 
IN
GENERAL.—Section 
1834(a)(9)(C) 
(42 
U.S.C.
1395m(a)(9)(C)) is amended—
(A) by striking ‘‘and’’ at the end of clause (iii);
(B) in clause (iv)—
(i) by striking ‘‘a subsequent year’’ and inserting
‘‘1993, 1994, and 1995’’, and
(ii) by striking the period at the end and inserting
a semicolon; and
(C) by adding at the end the following new clauses:
‘‘(v) in each of the years 1996 through 2002, is
the national limited monthly payment rate computed
under subparagraph (B) for the item for the year
reduced by the applicable percentage described in
subparagraph (D) (but in no case may the amount
determined under this clause be less than 70 percent
of such national limited payment rate); and
‘‘(vi) in a subsequent year, is the national limited
monthly payment rate computed under subparagraph
(B) for the item for the year.’’.
(2) 
APPLICABLE
PERCENTAGE
DESCRIBED.—Section
1834(a)(9) (42 U.S.C. 1395m(a)(9)) is amended by adding at
the end the following new subparagraph:
‘‘(D) APPLICABLE
PERCENTAGE
DESCRIBED.—In clause
(v) of subparagraph (C), the ‘applicable percentage’ with
respect to a year described in such clause is—
‘‘(i) for 1996, 20 percent,
‘‘(ii) for 1997, 212⁄3 percent,
‘‘(iii) for 1998, 231⁄3 percent,
‘‘(iv) for 1999, 25 percent,
‘‘(v) for 2000, 262⁄3 percent,
‘‘(vi) for 2001, 281⁄3 percent, and
‘‘(vii) for 2002, 30 percent.’’.
H. R. 2491—427
‘‘(ii) the sum of the adjusted allotments for all
sectors for such year (as defined in paragraph (2)),
then the allotment for each final excess spending sector
(as defined in subparagraph (B)(i)) for the particular fiscal
year shall be reduced by the look-back sector reduction
amount determined under subparagraph (B)(ii) for such
sector and year.
‘‘(B) FINAL EXCESS SPENDING SECTORS.—
‘‘(i) IN GENERAL.—In this paragraph, the term ‘final
excess spending sector’ means, for a fiscal year, a sector
of medicare services for which the Secretary determines
under subsection (e)(3)(B) that—
‘‘(I) the fee-for-service expenditures (as defined
in subsection (f)) for the fiscal year, exceeded
‘‘(II) the adjusted allotment for such fiscal
year.
For purposes of clause (ii), the term ‘final excess spend-
ing’ means, for a fiscal year with respect to such a
sector, the amount by which the amount described
in subclause (I) (for the fiscal year and sector) exceeds
the amount described in subclause (II) for such year
and sector.
‘‘(ii) LOOK-BACK SECTOR REDUCTION AMOUNT.—In
subparagraph (A)(i), the ‘look-back sector reduction
amount’ for a final excess spending sector for a fiscal
year is equal to the product of—
‘‘(I) the amount of the final excess spending
for such sector and year (as defined in clause (i));
and
‘‘(II) the ratio of—
‘‘(a) the aggregate final excess spending
for the year (described in subparagraph (A)(i)),
to
‘‘(b) the sum of the amounts of the final
excess spending for all final excess spending
sectors.
‘‘(2) ADJUSTED ALLOTMENT.—The adjusted allotment under
this paragraph for a sector for a fiscal year is—
‘‘(A) the amount that would be computed as the allot-
ment under subsection (c) for the sector for the fiscal year
if the actual amount of payments made in the fiscal year
under the MedicarePlus program under part C in the fiscal
year were substituted for the amount described in sub-
section (c)(2)(A)(ii) for that fiscal year,
‘‘(B) adjusted to take into account the amount of any
adjustment under paragraph (1) for that fiscal year (based
on expenditures in the second preceding fiscal year).’’.
(b) REPORT OF TRUSTEES ON GROWTH RATE IN PART A EXPENDI-
TURES.—Section 1817 (42 U.S.C. 1395i) is amended by adding at
the end the following new subsection:
‘‘(k) Each annual report provided in subsection (b)(2) shall
include information regarding the annual rate of growth in program
expenditures that would be required to maintain the financial sol-
vency of the Trust Fund and the extent to which the provisions
of section 1895 restrain the rate of growth of expenditures under
this part in order to achieve such solvency.’’.
H. R. 2491—428
Subtitle H—Rural Areas
SEC. 8701. MEDICARE-DEPENDENT, SMALL, RURAL HOSPITAL PAY-
MENT EXTENSION.
(a) SPECIAL TREATMENT EXTENDED.—
(1) PAYMENT
METHODOLOGY.—Section 1886(d)(5)(G) (42
U.S.C. 1395ww(d)(5)(G)) is amended—
(A) in clause (i), by striking ‘‘October 1, 1994,’’ and
inserting ‘‘October 1, 1994, or beginning on or after Septem-
ber 1, 1995, and before October 1, 2000,’’; and
(B) in clause (ii)(II), by striking ‘‘October 1, 1994,’’
and inserting ‘‘October 1, 1994, or beginning on or after
September 1, 1995, and before October 1, 2000,’’.
(2) EXTENSION OF TARGET AMOUNT.—Section 1886(b)(3)(D)
(42 U.S.C. 1395ww(b)(3)(D)) is amended—
(A) in the matter preceding clause (i), by striking
‘‘September 30, 1994,’’ and inserting ‘‘September 30, 1994,
and for cost reporting periods beginning on or after Septem-
ber 1, 1995, and before October 1, 2000,’’;
(B) in clause (ii), by striking ‘‘and’’ at the end;
(C) in clause (iii), by striking the period at the end
and inserting ‘‘, and’’; and
(D) by adding at the end the following new clause:
‘‘(iv) with respect to discharges occurring during September
1995 through fiscal year 1999, the target amount for the preced-
ing year increased by the applicable percentage increase under
subparagraph (B)(iv).’’.
(3) PERMITTING HOSPITALS TO DECLINE RECLASSIFICATION.—
Section 13501(e)(2) of OBRA–93 (42 U.S.C. 1395ww note) is
amended by striking ‘‘or fiscal year 1994’’ and inserting ‘‘,
fiscal year 1994, fiscal year 1995, fiscal year 1996, fiscal year
1997, fiscal year 1998, or fiscal year 1999’’.
(b) EFFECTIVE DATE.—The amendments made by subsection
(a) shall apply with respect to discharges occurring on or after
September 1, 1995.
SEC. 8702. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.
(a) MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.—Section
1820 (42 U.S.C. 1395i–4) is amended to read as follows:
‘‘MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM
‘‘SEC. 1820. (a) ESTABLISHMENT.—Any State that submits an
application in accordance with subsection (b) may establish a medi-
care rural hospital flexibility program described in subsection (c).
‘‘(b) APPLICATION.—A State may establish a medicare rural
hospital flexibility program described in subsection (c) if the State
submits to the Secretary at such time and in such form as the
Secretary may require an application containing—
‘‘(1) assurances that the State—
‘‘(A) has developed, or is in the process of developing,
a State rural health care plan that—
‘‘(i) provides for the creation of one or more rural
health networks (as defined in subsection (d)) in the
State,
‘‘(ii) promotes regionalization of rural health serv-
ices in the State, and
H. R. 2491—465
‘‘(6) TIME WHEN CONTRIBUTIONS MADE.—For purposes of
this section, the rule of section 219(f)(3) shall apply.
‘‘(d) DISTRIBUTION RULES.—For purposes of this title—
‘‘(1) GENERAL RULES.—
‘‘(A) EXCLUSIONS FROM GROSS INCOME.—Any qualified
distribution from an AD IRA shall not be includible in
gross income.
‘‘(B) NONQUALIFIED DISTRIBUTIONS.—In applying sec-
tion 72 to any distribution from an AD IRA which is
not a qualified distribution, such distribution shall be
treated as made from contributions to the AD IRA to the
extent that such distribution, when added to all previous
distributions from the AD IRA, does not exceed the aggre-
gate amount of contributions to the AD IRA. For purposes
of the preceding sentence, all AD IRAs maintained for
the benefit of an individual shall be treated as 1 account.
‘‘(C) EXCEPTION FROM PENALTY TAX.—Section 72(t) shall
not apply to—
‘‘(i) any qualified distribution from an AD IRA,
and
‘‘(ii) any qualified special purpose distribution
(whether or not a qualified distribution) from an AD
IRA.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes of this sub-
section—
‘‘(A) IN
GENERAL.—The term ‘qualified distribution’
means any payment or distribution—
‘‘(i) made on or after the date on which the individ-
ual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the estate of
the individual) on or after the death of the individual,
‘‘(iii) attributable to the individual’s being disabled
(within the meaning of section 72(m)(7)), or
‘‘(iv) which is a qualified special purpose distribu-
tion.
‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—No payment or
distribution shall be treated as a qualified distribution
if—
‘‘(i) it is made within the 5-taxable year period
beginning with the 1st taxable year for which the
individual made a contribution to an AD IRA (or such
individual’s spouse made a contribution to an AD IRA)
established for such individual, or
‘‘(ii) in the case of a payment or distribution prop-
erly allocable (as determined in the manner prescribed
by the Secretary) to a qualified rollover contribution
(or income allocable thereto), it is made within the
5-taxable year period beginning with the taxable year
in which the rollover contribution was made.
Clause (ii) shall not apply to a qualified rollover contribu-
tion from an AD IRA.
‘‘(3) ROLLOVERS.—
‘‘(A) IN GENERAL.—Paragraph (1) shall not apply to
any distribution which is transferred in a qualified rollover
contribution to an AD IRA.
‘‘(B) INCOME
INCLUSION
FOR
ROLLOVERS
FROM
NON-
AD IRAS.—In the case of any qualified rollover contribution
H. R. 2491—481
(i) by striking ‘‘if there is a capital gain rate differential
(as defined in section 904(b)(3)(D)) for the taxable year,’’,
and
(ii) by striking ‘‘section 904(b)(3)(E)’’ and inserting ‘‘sec-
tion 904(b)(3)(D)’’.
(9) The last sentence of section 1044(d) is amended by
striking ‘‘1202’’ and inserting ‘‘1203’’.
(10)(A) Paragraph (2) of section 1211(b) is amended to
read as follows:
‘‘(2) the sum of—
‘‘(A) the excess of the net short-term capital loss over
the net long-term capital gain, and
‘‘(B) one-half of the excess of the net long-term capital
loss over the net short-term capital gain.’’.
(B) So much of paragraph (2) of section 1212(b) as precedes
subparagraph (B) thereof is amended to read as follows:
‘‘(2) SPECIAL RULES.—
‘‘(A) ADJUSTMENTS.—
‘‘(i) For purposes of determining the excess referred
to in paragraph (1)(A), there shall be treated as short-
term capital gain in the taxable year an amount equal
to the lesser of—
‘‘(I) the amount allowed for the taxable year
under paragraph (1) or (2) of section 1211(b), or
‘‘(II) the adjusted taxable income for such tax-
able year.
‘‘(ii) For purposes of determining the excess
referred to in paragraph (1)(B), there shall be treated
as short-term capital gain in the taxable year an
amount equal to the sum of—
‘‘(I) the amount allowed for the taxable year
under paragraph (1) or (2) of section 1211(b) or
the adjusted taxable income for such taxable year,
whichever is the least, plus
‘‘(II) the excess of the amount described in
subclause (I) over the net short-term capital loss
(determined without regard to this subsection) for
such year.’’.
(C) Subsection (b) of section 1212 is amended by adding
at the end the following new paragraph:
‘‘(3) TRANSITIONAL RULE.—In the case of any amount which,
under this subsection and section 1211(b) (as in effect for tax-
able years beginning before January 1, 1996), is treated as
a capital loss in the first taxable year beginning after December
31, 1995, paragraph (2) and section 1211(b) (as so in effect)
shall apply (and paragraph (2) and section 1211(b) as in effect
for taxable years beginning after December 31, 1995, shall
not apply) to the extent such amount exceeds the total of
any capital gain net income (determined without regard to
this subsection) for taxable years beginning after December
31, 1995.’’.
(11) Paragraph (1) of section 1402(i) is amended by insert-
ing ‘‘, and the deduction provided by section 1202 shall not
apply’’ before the period at the end thereof.
(12) Subsection (e) of section 1445 is amended—
(A) in paragraph (1) by striking ‘‘35 percent (or, to
the extent provided in regulations, 28 percent)’’ and insert-
H. R. 2491—502
‘‘(A) IN GENERAL.—The requirements of this paragraph
are met with respect to any policy if such policy meets—
‘‘(i) MODEL REGULATION.—The following require-
ments of the model regulation:
‘‘(I) Section 7A (relating to guaranteed renewal
or noncancellability), and the requirements of sec-
tion 6B of the model Act relating to such section
7A.
‘‘(II) Section 7B (relating to prohibitions on
limitations and exclusions).
‘‘(III) Section 7C (relating to extension of bene-
fits).
‘‘(IV) Section 7D (relating to continuation or
conversion of coverage).
‘‘(V) Section 7E (relating to discontinuance and
replacement of policies).
‘‘(VI) Section 8 (relating to unintentional
lapse).
‘‘(VII) Section 9 (relating to disclosure), other
than section 9F thereof.
‘‘(VIII) Section 10 (relating to prohibitions
against post-claims underwriting).
‘‘(IX) Section 11 (relating to minimum stand-
ards).
‘‘(X) Section 12 (relating to requirement to
offer inflation protection), except that any require-
ment for a signature on a rejection of inflation
protection shall permit the signature to be on an
application or on a separate form.
‘‘(XI) Section 23 (relating to prohibition against
preexisting conditions and probationary periods in
replacement policies or certificates).
‘‘(ii) MODEL ACT.—The following requirements of
the model Act:
‘‘(I) Section 6C (relating to preexisting condi-
tions).
‘‘(II) Section 6D (relating to prior hospitaliza-
tion).
‘‘(B) DEFINITIONS.—For purposes of this paragraph—
‘‘(i) MODEL PROVISIONS.—The terms ‘model regula-
tion’ and ‘model Act’ mean the long-term care insurance
model regulation, and the long-term care insurance
model Act, respectively, promulgated by the National
Association of Insurance Commissioners (as adopted
as of January 1993).
‘‘(ii) COORDINATION.—Any provision of the model
regulation or model Act listed under clause (i) or (ii)
of subparagraph (A) shall be treated as including any
other provision of such regulation or Act necessary
to implement the provision.
‘‘(3) DISCLOSURE REQUIREMENT.—The requirement of this
paragraph is met with respect to any policy if such policy
meets the requirements of section 4980C(d)(1).
‘‘(4) NONFORFEITURE REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of this paragraph
are met with respect to any level premium long-term care
insurance policy, if the issuer of such policy offers to the
H. R. 2491—517
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting ‘cal-
endar year 2000’ for ‘calendar year 1992’ in subparagraph
(B) thereof.
If any amount as adjusted under the preceding sentence is
not a multiple of $10,000, such amount shall be rounded to
the nearest multiple of $10,000.’’
(C) Paragraph (1) of section 6018(a) is amended by
striking ‘‘$600,000’’ and inserting ‘‘the applicable exclusion
amount in effect under section 2010(c) (as adjusted under
paragraph (2) thereof) for the calendar year which includes
the date of death’’.
(D) Paragraph (2) of section 2001(c) is amended by
striking ‘‘$21,040,000’’ and inserting ‘‘the amount at which
the average tax rate under this section is 55 percent’’.
(E) Subparagraph (A) of section 2102(c)(3) is amended
by striking ‘‘$192,800’’ and inserting ‘‘the applicable credit
amount in effect under section 2010(c) for the calendar
year which includes the date of death’’.
(2) UNIFIED GIFT TAX CREDIT.—Paragraph (1) of section
2505(a) is amended by striking ‘‘$192,800’’ and inserting ‘‘the
applicable credit amount in effect under section 2010(c) for
such calendar year’’.
(3) EFFECTIVE DATE.—The amendments made by this sub-
section shall apply to the estates of decedents dying, and gifts
made, after December 31, 1995.
(b) ALTERNATE VALUATION OF CERTAIN FARM, ETC., REAL PROP-
ERTY.—Subsection (a) of section 2032A is amended by adding at
the end the following new paragraph:
‘‘(3) INFLATION
ADJUSTMENT.—In the case of estates of
decedents dying in a calendar year after 2000, the $750,000
amount contained in paragraph (2) shall be increased by an
amount equal to—
‘‘(A) $750,000, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting ‘cal-
endar year 1999’ for ‘calendar year 1992’ in subparagraph
(B) thereof.
If any amount as adjusted under the preceding sentence is
not a multiple of $10,000, such amount shall be rounded to
the nearest multiple of $10,000.’’
(c) ANNUAL GIFT TAX EXCLUSION.—Subsection (b) of section
2503 is amended—
(1) by striking the subsection heading and inserting the
following:
‘‘(b) EXCLUSIONS FROM GIFTS.—
‘‘(1) IN GENERAL.—’’,
(2) by moving the text 2 ems to the right, and
(3) by adding at the end the following new paragraph:
‘‘(2) INFLATION ADJUSTMENT.—In the case of gifts made
in a calendar year after 2000, the $10,000 amount contained
in paragraph (1) shall be increased by an amount equal to—
‘‘(A) $10,000, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year by substituting ‘cal-
endar year 1999’ for ‘calendar year 1992’ in subparagraph
(B) thereof.
H. R. 2491—518
If any amount as adjusted under the preceding sentence is
not a multiple of $1,000, such amount shall be rounded to
the nearest multiple of $1,000.’’
(d) EXEMPTION FROM GENERATION-SKIPPING TAX.—Section 2631
(relating to GST exemption) is amended by adding at the end
the following new subsection:
‘‘(c) INFLATION ADJUSTMENT.—In the case of an individual who
dies in any calendar year after 2000, the $1,000,000 amount con-
tained in subsection (a) shall be increased by an amount equal
to—
‘‘(1) $1,000,000, multiplied by
‘‘(2) the cost-of-living adjustment determined under section
1(f)(3) for such calendar year by substituting ‘calendar year
1999’ for ‘calendar year 1992’ in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not
a multiple of $10,000, such amount shall be rounded to the nearest
multiple of $10,000.’’
(e) AMOUNT OF TAX ELIGIBLE FOR 4 PERCENT INTEREST RATE
ON EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX ON CLOSELY
HELD BUSINESS.—
(1) Subparagraph (A) of section 6601(j)(2) is amended by
striking ‘‘$345,800’’ and inserting ‘‘the applicable limitation
amount’’.
(2) Subsection (j) of section 6601 is amended by redesignat-
ing paragraph (3) as paragraph (4) and by inserting after
paragraph (2) the following new paragraph:
‘‘(3) APPLICABLE LIMITATION AMOUNT.—
‘‘(A) IN GENERAL.—For purposes of paragraph (2), the
applicable limitation amount is the amount of the tentative
tax which would be determined under the rate schedule
set forth in section 2001(c) if the amount with respect
to which such tentative tax is to be computed were
$1,000,000.
‘‘(B) INFLATION ADJUSTMENT.—In the case of estates
of decedents dying in a calendar year after 2000, the
$1,000,000 amount contained in subparagraph (A) shall
be increased by an amount equal to—
‘‘(i) $1,000,000, multiplied by
‘‘(ii) the cost-of-living adjustment determined
under section 1(f)(3) for such calendar year by
substituting ‘calendar year 1999’ for ‘calendar year
1992’ in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence
is not a multiple of $10,000, such amount shall be rounded
to the nearest multiple of $10,000.’’
SEC. 11072. FAMILY-OWNED BUSINESS EXCLUSION.
(a) IN GENERAL.—Part III of subchapter A of chapter 11 (relat-
ing to gross estate) is amended by inserting after section 2033
the following new section:
‘‘SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.
‘‘(a) IN GENERAL.—In the case of an estate of a decedent to
which this section applies, the value of the gross estate shall not
include the lesser of—
‘‘(1) the adjusted value of the qualified family-owned busi-
ness interests of the decedent otherwise includible in the estate,
or
H. R. 2491—519
‘‘(2) the sum of—
‘‘(A) $1,000,000, plus
‘‘(B) 50 percent of the excess (if any) of the adjusted
value of such interests over $1,000,000, but not over
$2,500,000.
‘‘(b) ESTATES TO WHICH SECTION APPLIES.—
‘‘(1) IN GENERAL.—This section shall apply to an estate
if—
‘‘(A) the decedent was (at the date of the decedent’s
death) a citizen or resident of the United States,
‘‘(B) the sum of—
‘‘(i) the adjusted value of the qualified family-
owned business interests described in paragraph (2),
plus
‘‘(ii) the amount of the gifts of such interests deter-
mined under paragraph (3),
exceeds 50 percent of the adjusted gross estate, and
‘‘(C) during the 8-year period ending on the date of
the decedent’s death there have been periods aggregating
5 years or more during which—
‘‘(i) such interests were owned by the decedent
or a member of the decedent’s family, and
‘‘(ii) there was material participation (within the
meaning of section 2032A(e)(6)) by the decedent or
a member of the decedent’s family in the operation
of the business to which such interests relate.
‘‘(2) 
INCLUDIBLE
QUALIFIED
FAMILY-OWNED
BUSINESS
INTERESTS.—The qualified family-owned business interests
described in this paragraph are the interests which—
‘‘(A) are included in determining the value of the gross
estate (without regard to this section), and
‘‘(B) are acquired by any qualified heir from, or passed
to any qualified heir from, the decedent (within the mean-
ing of section 2032A(e)(9)).
‘‘(3) INCLUDIBLE GIFTS OF INTERESTS.—The amount of the
gifts of qualified family-owned business interests determined
under this paragraph is the excess of—
‘‘(A) the sum of—
‘‘(i) the amount of such gifts from the decedent
to members of the decedent’s family taken into account
under subsection 2001(b)(1)(B), plus
‘‘(ii) the amount of such gifts otherwise excluded
under section 2503(b),
to the extent such interests are continuously held by mem-
bers of such family (other than the decedent’s spouse)
between the date of the gift and the date of the decedent’s
death, over
‘‘(B) the amount of such gifts from the decedent to
members of the decedent’s family otherwise included in
the gross estate.
‘‘(c) ADJUSTED GROSS ESTATE.—For purposes of this section,
the term ‘adjusted gross estate’ means the value of the gross estate
(determined without regard to this section)—
‘‘(1) reduced by any amount deductible under paragraph
(3) or (4) of section 2053(a), and
‘‘(2) increased by the excess of—
‘‘(A) the sum of—