before January 1, 1999, section 1876) and sec-
tion 1903(m) relating to protection of bene-
ficiaries and program integrity as would apply
to MedicarePlus organizations under such part
C (or for such periods eligible organizations
under risk-sharing contracts under section
1876) and to health maintenance organizations
under prepaid capitation agreements under sec-
tion 1903(m).
‘‘(B) CONSIDERATIONS.—In issuing such
regulations, the Secretary shall—
‘‘(i) take into account the differences
between populations served and benefits
provided under this section and under part
C of title XVIII (or, for periods before
January 1, 1999, section 1876) and sec-
tion 1903(m);
‘‘(ii) not include any requirement that
conflicts with carrying out PACE pro-
grams under this section; and
‘‘(iii) not include any requirement re-
stricting the proportion of enrollees who
are eligible for benefits under this title or
title XVIII.
‘‘(g) WAIVERS OF REQUIREMENTS.—With respect to
carrying out a PACE program under this section, the fol-
lowing requirements of this title (and regulations relating
to such requirements) shall not apply:
‘‘(1) Section 1902(a)(1), relating to any re-
quirement that PACE programs or PACE program
services be provided in all areas of a State.
‘‘(2) Section 1902(a)(10), insofar as such sec-
tion relates to comparability of services among dif-
ferent population groups.
‘‘(3) Sections 1902(a)(23) and 1915(b)(4), re-
lating to freedom of choice of providers under a
PACE program.
‘‘(4) Section 1903(m)(2)(A), insofar as it re-
stricts a PACE provider from receiving prepaid capi-
tation payments.
‘‘(h) DEMONSTRATION PROJECT FOR FOR-PROFIT
ENTITIES.—
‘‘(1) IN
GENERAL.—In order to demonstrate
the operation of a PACE program by a private, for-
profit entity, the Secretary (in close consultation
with State administering agencies) shall grant waiv-
ers from the requirement under subsection (a)(3)
that a PACE provider may not be a for-profit, pri-
vate entity.
‘‘(2) SIMILAR TERMS AND CONDITIONS.—
‘‘(A) IN
GENERAL.—Except as provided
under subparagraph (B), and paragraph (1),
the terms and conditions for operation of a
PACE program by a provider under this sub-
section shall be the same as those for PACE
providers that are nonprofit, private organiza-
tions.
‘‘(B) NUMERICAL LIMITATION.—The num-
ber of programs for which waivers are granted
under this subsection shall not exceed 10. Pro-
grams with waivers granted under this sub-
section shall not be counted against the numeri-
cal limitation specified in subsection (e)(1)(B).
‘‘(i) POST-ELIGIBILITY TREATMENT OF INCOME.—A
State may provide for post-eligibility treatment of income
for individuals enrolled in PACE programs under this sec-
tion in the same manner as a State treats post-eligibility
income for individuals receiving services under a waiver
under section 1915(c).
‘‘(j) MISCELLANEOUS PROVISIONS.—
‘‘(1) CONSTRUCTION.—Nothing in this section
or section 1894 shall be construed as preventing a
PACE provider from entering into contracts with
other governmental or nongovernmental payers for
the care of PACE program eligible individuals who
are not eligible for benefits under part A, or enrolled
under part B, of title XVIII or eligible for medical
assistance under this title.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 1902 (42 U.S.C. 1396a), as amend-
ed by section 3403(c), is amended—
(A) in subsection (a)(10)(C)(iv), by strik-
ing ‘‘(25)’’ and inserting ‘‘(26)’’, and
(B) in subsection (j), by striking ‘‘(26)’’
and inserting ‘‘(27)’’.
(2) Section 1924(a)(5) (42 U.S.C. 1396r–
5(a)(5)) is amended—
(A) in the heading, by striking ‘‘FROM OR-
GANIZATIONS
RECEIVING
CERTAIN
WAIVERS’’
and inserting ‘‘UNDER PACE PROGRAMS’’, and
(B) by striking ‘‘from any organization’’
and all that follows and inserting ‘‘under a
PACE demonstration waiver program (as de-
fined in subsection (a)(7) of section 1932) or
under a PACE program under section 1894.’’.
(3) 
Section 
1903(f)(4)(C) 
(42 
U.S.C.
1396b(f)(4)(C)) is amended by inserting ‘‘or who is
a PACE program eligible individual enrolled in a
PACE program under section 1932,’’ after ‘‘section
1902(a)(10)(A),’’.
SEC. 3432. COVERAGE OF PACE UNDER THE MEDICARE
PROGRAM.
Title XVIII (42 U.S.C. 1395 et seq.) is amended by
inserting after section 1894 the following new section:
‘‘PAYMENTS TO, AND COVERAGE OF BENEFITS UNDER,
PROGRAMS OF ALL-INCLUSIVE CARE FOR THE EL-
DERLY (PACE)
‘‘SEC. 1894. (a) RECEIPT OF BENEFITS THROUGH
ENROLLMENT
IN PACE PROGRAM; DEFINITIONS
FOR
PACE PROGRAM RELATED TERMS.—
‘‘(1) BENEFITS THROUGH ENROLLMENT IN A
PACE PROGRAM.—In accordance with this section, in
the case of an individual who is entitled to benefits
under part A or enrolled under part B and who is
a PACE program eligible individual with respect to
a PACE program offered by a PACE provider under
a PACE program agreement—
‘‘(A) the individual may enroll in the pro-
gram under this section; and
‘‘(B) so long as the individual is so en-
rolled and in accordance with regulations—
‘‘(i) the individual shall receive bene-
fits under this title solely through such
program, and
(b) EXPANSION AND TRANSITION FOR PACE DEM-
ONSTRATION PROJECT WAIVERS.—
(1) EXPANSION IN CURRENT NUMBER AND EX-
TENSION
OF
DEMONSTRATION
PROJECTS.—Section
9412(b) of the Omnibus Budget Reconciliation Act
of 1986, as amended by section 4118(g) of the Om-
nibus Budget Reconciliation Act of 1987, is amend-
ed—
(A) in paragraph (1), by inserting before
the period at the end the following: ‘‘, except
that the Secretary shall grant waivers of such
requirements to up to the applicable numerical
limitation specified in section 1932(e)(1)(B) of
the Social Security Act’’; and
(B) in paragraph (2)—
(i) in subparagraph (A), by striking ‘‘,
including permitting the organization to
assume progressively (over the initial 3-
year period of the waiver) the full financial
risk’’; and
(ii) in subparagraph (C), by adding at
the end the following: ‘‘In granting further
extensions, an organization shall not be re-
quired to provide for reporting of informa-
tion which is only required because of the
demonstration nature of the project.’’.
(2) ELIMINATION
OF
REPLICATION
REQUIRE-
MENT.—Subparagraph (B) of paragraph (2) of such
section shall not apply to waivers granted under
such section after the date of the enactment of this
Act.
(3) TIMELY
CONSIDERATION
OF
APPLICA-
TIONS.—In considering an application for waivers
under such section before the effective date of re-
peals under subsection (c), subject to the numerical
limitation under the amendment made by paragraph
(1), the application shall be deemed approved unless
the Secretary of Health and Human Services, within
90 days after the date of its submission to the Sec-
retary, either denies such request in writing or in-
forms the applicant in writing with respect to any
additional information which is needed in order to
make a final determination with respect to the appli-
cation. After the date the Secretary receives such
additional information, the application shall be
deemed approved unless the Secretary, within 90
days of such date, denies such request.
(c) PRIORITY AND SPECIAL CONSIDERATION IN AP-
PLICATION.—During the 3-year period beginning on the
date of the enactment of this Act:
(1) PROVIDER
STATUS.—The Secretary of
Health and Human Services shall give priority, in
processing applications of entities to qualify as
PACE programs under section 1894 or 1932 of the
Social Security Act—
(A) first, to entities that are operating a
PACE demonstration waiver program (as de-
fined in section 1932(a)(7) of such Act), and
(B) then entities that have applied to oper-
ate such a program as of May 1, 1997.
(2) NEW WAIVERS.—The Secretary shall give
priority, in the awarding of additional waivers under
section 9412(b) of the Omnibus Budget Reconcili-
ation Act of 1986—
(A) to any entities that have applied for
such waivers under such section as of May 1,
1997; and
(B) to any entity that, as of May 1, 1997,
has formally contracted with a State to provide
services for which payment is made on a
capitated basis with an understanding that the
entity was seeking to become a PACE provider.
(3) SPECIAL CONSIDERATION.—The Secretary
shall give special consideration, in the processing of
applications described in paragraph (1) and the
awarding of waivers described in paragraph (2), to
an entity which as of May 1, 1997 through formal
activities (such as entering into contracts for fea-
sibility studies) has indicated a specific intent to be-
come a PACE provider.
(d) REPEAL OF CURRENT PACE DEMONSTRATION
PROJECT WAIVER AUTHORITY.—
(1) IN GENERAL.—Subject to paragraphs (2)
and (3), the following provisions of law are repealed:
(A) Section 603(c) of the Social Security
Amendments of 1983 (Public Law 98–21).
(B) Section 9220 of the Consolidated Om-
nibus Budget Reconciliation Act of 1985 (Pub-
lic Law 99–272).
(C) Section 9412(b) of the Omnibus Budg-
et Reconciliation Act of 1986 (Public Law 99–
509).
(2) DELAY IN APPLICATION.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the repeals made by paragraph (1)
shall not apply to waivers granted before the
initial effective date of regulations described in
subsection (a).
(B) APPLICATION
TO
APPROVED
WAIV-
ERS.—Such repeals shall apply to waivers
granted before such date only after allowing
such organizations a transition period (of up to
24 months) in order to permit sufficient time
for an orderly transition from demonstration
project authority to general authority provided
under the amendments made by this sub-
chapter.
(3) STATE
OPTION.—A State may elect to
maintain the PACE program which (as of the date
of the enactment of this Act) were operating under
the authority described in paragraph (1) without
electing to use the authority under section 1932 of
the Public Health Service Act.
SEC. 3434. STUDY AND REPORTS.
(a) STUDY.—
(1) IN GENERAL.—The Secretary of Health and
Human Services (in close consultation with State
administering agencies, as defined in section
1932(a)(8) of the Social Security Act) shall conduct
a study of the quality and cost of providing PACE
program services under the medicare and medicaid
programs under the amendments made by this sub-
chapter.
(2) STUDY OF PRIVATE, FOR-PROFIT PROVID-
ERS.—Such study shall specifically compare the
costs, quality, and access to services by entities that
are private, for-profit entities operating under dem-
onstration projects waivers granted under section
1932(h) of the Social Security Act with the costs,
quality, and access to services of other PACE pro-
viders.
(b) REPORT.—
(1) IN GENERAL.—Not later than 4 years after
the date of the enactment of this Act, the Secretary
shall provide for a report to Congress on the impact
of such amendments on quality and cost of services.
The Secretary shall include in such report such rec-
ommendations for changes in the operation of such
amendments as the Secretary deems appropriate.
(2) TREATMENT OF PRIVATE, FOR-PROFIT PRO-
VIDERS.—The report shall include specific findings
on whether any of the following findings is true:
(A) The number of covered lives enrolled
with entities operating under demonstration
project waivers under section 1932(h) of the
Social Security Act is fewer than 800 (or such
lesser number as the Secretary may find statis-
tically sufficient to make determinations re-
specting findings described in the succeeding
subparagraphs).
(B) The population enrolled with such en-
tities is less frail than the population enrolled
with other PACE providers.
(C) Access to or quality of care for individ-
uals enrolled with such entities is lower than
such access or quality for individuals enrolled
with other PACE providers.
(D) The application of such section has re-
sulted in an increase in expenditures under the
medicare or medicaid programs above the ex-
penditures that would have been made if such
section did not apply.
(c) INFORMATION
INCLUDED
IN
ANNUAL
REC-
OMMENDATIONS.—The Medicare Payment Advisory Com-
mission shall include in its annual report under section
1805(b)(1)(B) of the Social Security Act recommenda-
tions on the methodology and level of payments made to
PACE providers under section 1894(d) of such Act and
on the treatment of private, for-profit entities as PACE
providers.
Subchapter E—Benefits
SEC. 3441. ELIMINATION OF REQUIREMENT TO PAY FOR
PRIVATE INSURANCE.
(a) REPEAL OF STATE PLAN PROVISION.—Section
1902(a)(25) (42 U.S.C. 1396a(a)(25)) is amended—
(1) by striking subparagraph (G); and
(2) by redesignating subparagraphs (H) and (I)
as subparagraphs (G) and (H), respectively.
(b) MAKING PROVISION OPTIONAL.—Section 1906
(42 U.S.C. 1396e) is amended—
(1) in subsection (a)—
(A) by striking ‘‘For purposes of section
1902(a)(25)(G) and subject to subsection (d),
each’’ and inserting ‘‘Each’’,
(B) in paragraph (1), by striking ‘‘shall’’
and inserting ‘‘may’’, and
(C) in paragraph (2), by striking ‘‘shall’’
and inserting ‘‘may’’; and
(2) by striking subsection (d).
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 3442. PERMITTING SAME COPAYMENTS IN HEALTH
MAINTENANCE ORGANIZATIONS AS IN FEE-
FOR-SERVICE.
(a) IN GENERAL.—Section 1916(a)(2)(D) (42 U.S.C.
1396o(a)(2)(D)) is amended by inserting ‘‘(at the option
of the State)’’ after ‘‘section 1905(a)(4)(C), or’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to cost sharing with respect to
deductions, cost sharing and similar charges imposed for
items and services furnished on or after the date of the
enactment of this Act.
SEC. 3443. PHYSICIAN QUALIFICATION REQUIREMENTS.
(a) IN
GENERAL.—Section 1903(i) (42 U.S.C.
1396b(i)) is amended by striking paragraph (12)
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to services furnished on or after
the date of the enactment of this Act.
SEC. 3444. ELIMINATION OF REQUIREMENT OF PRIOR IN-
STITUTIONALIZATION WITH RESPECT TO HA-
BILITATION SERVICES FURNISHED UNDER A
WAIVER FOR HOME OR COMMUNITY-BASED
SERVICES.
(a) IN GENERAL.—Section 1915(c)(5) (42 U.S.C.
1396n(c)(5)) is amended, in the matter preceding sub-
paragraph (A), by striking ‘‘, with respect to individuals
who receive such services after discharge from a nursing
facility or intermediate care facility for the mentally re-
tarded’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) apply to services furnished on or after Octo-
ber 1, 1997.
SEC. 3445. BENEFITS FOR SERVICES OF PHYSICIAN ASSIST-
ANTS.
(a) IN
GENERAL.—Section 1905(a) (42 U.S.C.
1396d(a)), as amended by sections 3403(a) and 3431(a),
is amended—
(1) by redesignating paragraphs (22) through
(27) as paragraphs (23) through (28), and
(2) by inserting after paragraph (21) the fol-
lowing new paragraph:
‘‘(22) services furnished by an physician assist-
ant (as defined in section 1861(aa)(5)) which the as-
sistant is legally authorized to perform under State
law and with the supervision of a physician;’’.
(b) CONFORMING AMENDMENTS.—Section 1902 (42
U.S.C. 1396a), as amended by sections 3403(c) and
3431(b)(1), is amended—
(1) in subsection (a)(10)(C)(iv), by striking
‘‘(26)’’ and inserting ‘‘(27)’’, and
(2) in subsection (j), by striking ‘‘(27)’’ and in-
serting ‘‘(28)’’.
100
SEC. 3446. STUDY AND REPORT ON ACTUARIAL VALUE OF
EPSDT BENEFIT.
(a) STUDY.—The Secretary of Health and Human
Services shall provide for a study on the actuarial value
of the provision of early and periodic screening, diagnostic,
and treatment services (as defined in section 1905(r) of
the Social Security Act (42 U.S.C. 1396d(r))) under the
medicaid program under title XIX of such Act. Such study
shall include an examination of the portion of such value
that is attributable to paragraph (5) of such section and
to the second sentence of such section.
(b) REPORT.—By not later than 18 months after the
date of the enactment of this Act, the Secretary shall sub-
mit a report to Congress on the results of the study under
subsection (a).
Subchapter F—Administration
SEC. 3451. ELIMINATION OF DUPLICATIVE INSPECTION OF
CARE REQUIREMENTS FOR ICFS/MR AND
MENTAL HOSPITALS.
(a) MENTAL HOSPITALS.—Section 1902(a)(26) (42
U.S.C. 1396a(a)(26)) is amended—
(1) by striking ‘‘provide—
‘‘(A) with respect to each patient’’ and in-
serting ‘‘provide, with respect to each patient’’;
and
(2) by striking subparagraphs (B) and (C).
101
(b) ICFS/MR.—Section 1902(a)(31) (42 U.S.C.
1396a(a)(31)) is amended—
(1) by striking ‘‘provide—
‘‘(A) with respect to each patient’’ and in-
serting ‘‘provide, with respect to each patient’’;
and
(2) by striking subparagraphs (B) and (C).
(c) EFFECTIVE DATE.—The amendments made by
this section take effect on the date of the enactment of
this Act.
SEC. 3452. ALTERNATIVE SANCTIONS FOR NONCOMPLIANT
ICFS/MR.
(a) IN GENERAL.—Section 1902(i)(1)(B) (42 U.S.C.
1396a(i)(1)(B)) is amended by striking ‘‘provide’’ and in-
serting ‘‘establish alternative remedies if the State dem-
onstrates to the Secretary’s satisfaction that the alter-
native remedies are effective in deterring noncompliance
and correcting deficiencies, and may provide’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) takes effect on the date of the enactment
of this Act.
SEC. 3453. MODIFICATION OF MMIS REQUIREMENTS.
(a) IN
GENERAL.—Section 1903(r) (42 U.S.C.
1396b(r)) is amended—
102
(1) by striking all that precedes paragraph (5)
and inserting the following:
‘‘(r)(1) In order to receive payments under subsection
(a) for use of automated data systems in administration
of the State plan under this title, a State must have in
operation mechanized claims processing and information
retrieval systems that meet the requirements of this sub-
section and that the Secretary has found—
‘‘(A) is adequate to provide efficient, economi-
cal, and effective administration of such State plan;
‘‘(B) is compatible with the claims processing
and information retrieval systems used in the admin-
istration of title XVIII, and for this purpose—
‘‘(i) has a uniform identification cod-
ing system for providers, other payees, and
beneficiaries under this title or title XVIII;
‘‘(ii) provides liaison between States
and carriers and intermediaries with agree-
ments under title XVIII to facilitate timely
exchange of appropriate data; and
‘‘(iii) provides for exchange of data
between the States and the Secretary with
respect to persons sanctioned under this
title or title XVIII;
103
‘‘(C) is capable of providing accurate and timely
data;
‘‘(D) is complying with the applicable provisions
of part C of title XI;
‘‘(E) is designed to receive provider claims in
standard formats to the extent specified by the Sec-
retary; and
‘‘(F) effective for claims filed on or after Janu-
ary 1, 1999, provides for electronic transmission of
claims data in the format specified by the Secretary
and consistent with the Medicaid Statistical Infor-
mation System (MSIS) (including detailed individual
enrollee encounter data and other information that
the Secretary may find necessary).’’.
(2) in paragraph (5)—
(A) by striking subparagraph (B);
(B) by striking all that precedes clause (i)
and inserting the following:
‘‘(2) In order to meet the requirements of this para-
graph, mechanized claims processing and information re-
trieval systems must meet the following requirements:’’;
(C) in clause (iii), by striking ‘‘under para-
graph (6)’’; and
(D) by redesignating clauses (i) through
(iii) as paragraphs (A) through (C); and
104
(3) by striking paragraphs (6), (7), and (8).
(b) 
CONFORMING
AMENDMENTS.—Section
1902(a)(25)(A)(ii) (42 U.S.C. 1396a(a)(25)(A)(ii)) is
amended by striking all that follows ‘‘shall’’ and inserting
the following: ‘‘be integrated with, and be monitored as
a part of the Secretary’s review of, the State’s mechanized
claims processing and information retrieval system under
section 1903(r);’’.
(c) EFFECTIVE DATE.—Except as otherwise specifi-
cally provided, the amendments made by this section shall
take effect on January 1, 1998.
SEC. 3454. FACILITATING IMPOSITION OF STATE ALTER-
NATIVE 
REMEDIES 
ON 
NONCOMPLIANT
NURSING FACILITIES.
(a) IN GENERAL.—Section 1919(h)(3)(D) (42 U.S.C.
1396r(h)(3)(D)) is amended—
(1) by inserting ‘‘and’’ at the end of clause (i);
(2) by striking ‘‘, and’’ at the end of clause (ii)
and inserting a period; and
(3) by striking clause (iii).
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) take effect on the date of the enactment
of this Act.
105
SEC. 3455. MEDICALLY ACCEPTED INDICATION.
Section 
1927(g)(1)(B)(i) 
(42 
U.S.C. 
1396r–
8(g)(1)(B)(i)) is amended—
(1) by striking ‘‘and’’ at the end of subclause
(II),
(2) by redesignating subclause (III) as sub-
clause (IV), and
(3) by inserting after subclause (II) the follow-
ing:
‘‘(III) the DRUGDEX Informa-
tion System; and’’.
SEC. 3456. CONTINUATION OF STATE-WIDE SECTION 1115
MEDICAID WAIVERS.
(a) IN GENERAL.—Section 1115 (42 U.S.C. 1315)
is amended by adding at the end the following new sub-
section:
‘‘(e)(1) The provisions of this subsection shall apply
to the extension of State-wide comprehensive demonstra-
tion project (in this subsection referred to as ‘waiver
project’) for which a waiver of compliance with require-
ments of title XIX is granted under subsection (a).
‘‘(2) Not earlier than 1 year before the date the waiv-
er under subsection (a) with respect to a waiver project
would otherwise expire, the chief executive officer of the
State which is operating the project may submit to the
106
Secretary a written request for an extension, of up to 3
years, of the project.
‘‘(3) If the Secretary fails to respond to the request
within 6 months after the date it is submitted, the request
is deemed to have been granted.
‘‘(4) If such a request is granted, the deadline for
submittal of a final report under the waiver project is
deemed to have been extended until the date that is 1 year
after the date the waivers under subsection (a) with re-
spect to the project would otherwise have expired.
‘‘(5) The Secretary shall release an evaluation of each
such project not later than 1 year after the date of receipt
of the final report.
‘‘(6) Subject to paragraphs (4) and (7), the extension
of a waiver project under this subsection shall be on the
same terms and conditions (including applicable terms and
conditions relating to quality and access of services, budg-
et neutrality, data and reporting requirements, and special
population protections) that applied to the project before
its extension under this subsection.
‘‘(7) If an original condition of approval of a waiver
project was that Federal expenditures under the project
not exceed the Federal expenditures that would otherwise
have been made, the Secretary shall take such steps as
may be necessary to assure that, in the extension of the
107
project under this subsection, such condition continues to
be met. In applying the previous sentence, the Secretary
shall take into account the Secretary’s best estimate of
rates of change in expenditures at the time of the exten-
sion.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to demonstration projects ini-
tially approved before, on, or after the date of the enact-
ment of this Act.
SEC. 3457. AUTHORIZING ADMINISTRATIVE STREAMLINING
AND PRIVATIZING MODIFICATIONS UNDER
THE MEDICAID PROGRAM.
Section 1902 (42 U.S.C. 1396a) is amended by add-
ing at the end the following:
‘‘(aa)(1) Notwithstanding any other provision of law,
no provision of law shall be construed as preventing any
State from allowing determinations of eligibility to receive
medical assistance under this title to be made by an entity
that is not a State or local government, or by an individual
who is not an employee of a State or local government,
which meets such qualifications as the State determines.
For purposes of any Federal law, such determinations
shall be considered to be made by the State and by a State
agency.
108
‘‘(2) Nothing in this subsection shall be construed as
affecting—
‘‘(A) the conditions for eligibility for benefits
(including any conditions relating to income or re-
sources); and
‘‘(B) the rights to challenge determinations re-
garding eligibility or rights to benefits; and
‘‘(C) determinations regarding quality control
or error rates.’’.
SEC. 3458. EXTENSION OF MORATORIUM.
Section 6408(a)(3) of the Omnibus Budget Reconcili-
ation Act of 1989, as amended by section 13642 of the
Omnibus Budget Reconciliation Act of 1993, is amended
by striking ‘‘December 31, 1995’’ and inserting ‘‘Decem-
ber 31, 2002’’.
CHAPTER 2—QUALITY ASSURANCE
SEC. 3461. REQUIREMENTS TO ENSURE QUALITY OF AND
ACCESS TO CARE UNDER MANAGED CARE
PLANS.
(a) STATE PLAN REQUIREMENT.—Section 1902(a)
(42 U.S.C. 1396a(a)) is amended—
(1) in paragraph (62), by striking ‘‘; and’’ at
the end and inserting a semicolon;
(2) by striking the period at the end of para-
graph (63) and inserting ‘‘; and’’; and
109
(3) by inserting after paragraph (63) the fol-
lowing new paragraph:
‘‘(64) provide, with respect to all contracts de-
scribed in section 1903(m)(2)(A) with an organiza-
tion or provider, that—
‘‘(A) the State agency develops and imple-
ments a quality assessment and improvement
strategy, consistent with standards that the
Secretary shall establish, in consultation with
the States, and monitor and that do not pre-
empt the application of stricter State standards,
which includes—
‘‘(i) standards for access to care so
that covered services are available within
reasonable timeframes and in a manner
that ensures continuity of care and ade-
quate primary care and, where applicable,
specialized services capacity, including pe-
diatric specialized services for special needs
children (as defined in section 1915(i));
and
‘‘(ii) procedures for monitoring and
evaluating the quality and appropriateness
of care and services to beneficiaries that
reflect the full spectrum of populations en-
110
rolled under the contract and that in-
clude—
‘‘(I) requirements for provision of
quality assurance data to the State
using the data and information set
that the Secretary shall specify with
respect to entities contracting under
section 1876 or alternative data re-
quirements approved by the Secretary;
‘‘(II) regular and periodic exam-
ination of the scope and content of
the quality improvement strategy; and
‘‘(III) other aspects of care and
service directly related to the improve-
ment of quality of care (including
grievance procedures and marketing
and information standards); and
‘‘(B) that adequate provision is made, con-
sistent with standards that the Secretary shall
specify and monitor, with respect to financial
reporting under the contracts.’’.
(b) DEEMED COMPLIANCE.—Section 1903(m) (42
U.S.C. 1396b(m)) is amended by adding at the end the
following:
‘‘(7) DEEMED COMPLIANCE.—
111
‘‘(A) MEDICARE ORGANIZATIONS.—At the op-
tion of a State, the requirements of the previous
provisions of this subsection shall not apply with re-
spect to a health maintenance organization if the or-
ganization is an eligible organization with a contract
in effect under section 1876 or a MedicarePlus orga-
nization with a contract in effect under C of title
XVIII.
‘‘(B) PRIVATE ACCREDITATION.—
‘‘(i) IN
GENERAL.—At the option of a
State, such requirements shall not apply with
respect to a health maintenance organization
if—
‘‘(I) the organization is accredited by
an organization meeting the requirements
described in subparagraph (C); and
‘‘(II) the standards and process under
which the organization is accredited meet
such requirements as are established under
clause (ii), without regard to whether or
not the time requirement of such clause is
satisfied.
‘‘(ii) STANDARDS
AND
PROCESS.—Not
later than 180 days after the date of the enact-
ment of this paragraph, the Secretary shall
112
specify requirements for the standards and
process under which a health maintenance orga-
nization is accredited by an organization meet-
ing the requirements of subparagraph (C).
‘‘(C) ACCREDITING
ORGANIZATION.—An ac-
crediting organization meets the requirements of this
subparagraph if the organization—
‘‘(i) is a private, nonprofit organization;
‘‘(ii) exists for the primary purpose of ac-
crediting managed care organizations or health
care providers; and
‘‘(iii) is independent of health care provid-
ers or associations of health care providers.’’.
(c) APPLICATION TO MANAGED CARE ENTITIES.—
Section 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is
amended—
(1) by striking ‘‘and’’ at the end of clause (x),
(2) by striking the period at the end of clause
(xi) and inserting ‘‘; and’’, and
(3) by adding at the end the following new
clause:
‘‘(xii) such contract provides for—
‘‘(I) submitting to the State agency such
information as may be necessary to monitor the
care delivered to members,
113
‘‘(II) maintenance of an internal quality
assurance program consistent with section
1902(a)(64)(A), and meeting standards that
the Secretary shall establish in regulations; and
‘‘(III) providing effective procedures for
hearing and resolving grievances between the
entity and members enrolled with the organiza-
tion under this subsection.’’.
(d) APPLICATION TO PRIMARY CARE CASE MANAGE-
MENT CONTRACTS.—Section 1905(t)(3), as added by sec-
tion 3403(b), is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (D),
(2) by striking the period at the end of sub-
paragraph (E) and inserting ‘‘; and’’, and
(3) by adding at the end the following new sub-
paragraph:
‘‘(F) if payment is made to the organization on
a prepaid capitated or other risk basis, compliance
with the requirements of section 1903(m)(2)(A)(xii)
in the same manner such requirements apply to a
health maintenance organization under section
1903(m)(2)(A).’’.
(e) EFFECTIVE DATE.—The amendments made by
this section apply to agreements between a State agency
114
and an organization entered into or renewed on or after
January 1, 1999.
SEC. 3462. SOLVENCY STANDARDS FOR CERTAIN HEALTH
MAINTENANCE ORGANIZATIONS.
(a) IN GENERAL.—Section 1903(m)(1) (42 U.S.C.
1396b(m)(1)) is amended—
(1) in subparagraph (A)(ii), by inserting ‘‘,
meets the requirements of subparagraph (C)(i) (if
applicable),’’ after ‘‘provision is satisfactory to the
State’’, and
(2) by adding at the end the following:
‘‘(C)(i) Subject to clause (ii), a provision meets the
requirements of this subparagraph for an organization if
the organization meets solvency standards established by
the State for private health maintenance organizations or
is licensed or certified by the State as a risk-bearing en-
tity.
‘‘(ii) Clause (i) shall not apply to an organization if—
‘‘(I) the organization is not responsible for the
provision (directly or through arrangements with
providers of services) of inpatient hospital services
and physicians’ services;
‘‘(II) the organization is a public entity;
‘‘(III) the solvency of the organization is guar-
anteed by the State; or
115
‘‘(IV) the organization is (or is controlled by)
one or more federally-qualified health centers and
meets solvency standards established by the State
for such an organization.
For purposes of subclause (IV), the term ‘control’ means
the possession, whether direct or indirect, of the power to
direct or cause the direction of the management and poli-
cies of the organization through membership, board rep-
resentation, or an ownership interest equal to or greater
than 50.1 percent.’’
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to contracts entered into or re-
newed on or after October 1, 1998.
(c) TRANSITION.—In the case of a health mainte-
nance organization that as of the date of the enactment
of this Act has entered into a contract with a State for
the provision of medical assistance under title XIX under
which the organization assumes full financial risk and is
receiving capitation payments, the amendment made by
subsection (a) shall not apply to such organization until
3 years after the date of the enactment of this Act.
116
SEC. 3463. APPLICATION OF PRUDENT LAYPERSON STAND-
ARD FOR EMERGENCY MEDICAL CONDITION
AND PROHIBITION OF GAG RULE RESTRIC-
TIONS.
Section 1903(m) (42 U.S.C. 1396b(m)) is amended
by adding at the end the following:
‘‘(8)(A)(i) Each contract with a health maintenance
organization under this subsection shall require the orga-
nization—
‘‘(I) to provide coverage for emergency services
(as defined in subparagraph (B)) without regard to
prior authorization or the emergency care provider’s
contractual relationship with the organization, and
‘‘(II) to comply with guidelines established
under section 1852(d)(2) (respecting coordination of
post-stabilization care) in the same manner as such
guidelines apply to MedicarePlus plans offered under
part C of title XVIII.
‘‘(B) In subparagraph (A)(i)(I), 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
117
‘‘(ii) are needed to evaluate or stabilize an
emergency medical condition (as defined in subpara-
graph (C)).
‘‘(C) In subparagraph (B)(ii), the term ‘emergency
medical condition’ means a medical condition manifesting
itself by acute symptoms of sufficient severity such that
a prudent layperson, who possesses an average knowledge
of health and medicine, could reasonably expect the ab-
sence of immediate medical attention to result in—
‘‘(i) placing the health of the individual (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.
‘‘(9)(A) Subject to subparagraphs (B) and (C), under
a contract under this subsection a health maintenance or-
ganization (in relation to an individual enrolled under the
contract) shall not prohibit or otherwise restrict a covered
health care professional (as defined in subparagraph (D))
from advising such an individual who is a patient of the
professional about the health status of the individual or
medical care or treatment for the individual’s condition
or disease, regardless of whether benefits for such care
118
or treatment are provided under the plan, if the profes-
sional is acting within the lawful scope of practice.
‘‘(B) Subparagraph (A) shall not be construed as re-
quiring a health maintenance organization to provide, re-
imburse for, or provide coverage of a counseling or referral
service if the organization—
‘‘(i) objects to the provision of such service on
moral or religious grounds; and
‘‘(ii) in the manner and through the written in-
strumentalities such organization deems appropriate,
makes available information on its policies regarding
such service to prospective enrollees before or during
enrollment and to enrollees within 90 days after the
date that the organization or plan adopts a change
in policy regarding such a counseling or referral
service.
‘‘(C) Nothing in subparagraph (B) shall be construed
to affect disclosure requirements under State law or under
the Employee Retirement Income Security Act of 1974.
‘‘(D) For purposes of this paragraph, the term
‘health care professional’ means a physician (as defined
in section 1861(r)) or other health care professional if cov-
erage for the professional’s services is provided under the
contract under this subsection for the services of the pro-
fessional. Such term includes a podiatrist, optometrist,
119
chiropractor, psychologist, dentist, physician assistant,
physical or occupational therapist and therapy assistant,
speech-language pathologist, audiologist, registered or li-
censed practical nurse (including nurse practitioner, clini-
cal nurse specialist, certified registered nurse anesthetist,
and certified nurse-midwife), licensed certified social work-
er, registered respiratory therapist, and certified res-
piratory therapy technician.’’.
SEC. 3464. ADDITIONAL FRAUD AND ABUSE PROTECTIONS
IN MANAGED CARE.
(a) PROTECTION AGAINST MARKETING ABUSES.—
Section 1903(m) (42 U.S.C. 1396b(m)), as amended by
section 3463, is amended—
(1) in paragraph (2)(A)(viii), by inserting ‘‘and
compliance with the requirements of paragraphs
(10) and (11)’’ after ‘‘of this subsection’’, and
(2) by adding at the end the following:
‘‘(10)(A)(i) A health maintenance organization with
respect to activities under this subsection may not distrib-
ute directly or through any agent or independent contrac-
tor marketing materials within any State—
‘‘(I) without the prior approval of the State;
and
‘‘(II) that contain false or materially misleading
information.
120
‘‘(ii) In the process of reviewing and approving such
materials, the State shall provide for consultation with a
medical care advisory committee.
‘‘(iii) The State may not enter into or renew a con-
tract with a health maintenance organization for the provi-
sion of services to individuals enrolled under the State
plan under this title if the State determines that the entity
distributed directly or through any agent or independent
contractor marketing materials in violation of clause
(i)(II).
‘‘(B) A health maintenance organization shall distrib-
ute marketing materials to the entire service area of such
organization.
‘‘(C) A health maintenance organization, or any
agency of such organization, may not seek to influence an
individual’s enrollment with the organization in conjunc-
tion with the sale of any other insurance.
‘‘(D) Each health maintenance organization shall
comply with such procedures and conditions as the Sec-
retary prescribes in order to ensure that, before an individ-
ual is enrolled with the organization under this title, the
individual is provided accurate oral and written and suffi-
cient information to make an informed decision whether
or not to enroll.
121
‘‘(E) Each health maintenance organization shall not,
directly or indirectly, conduct door-to-door, telephonic, or
other ‘cold call’ marketing of enrollment under this title.’’.
(b) PROHIBITING AFFILIATIONS WITH INDIVIDUALS
DEBARRED BY FEDERAL AGENCIES.—Section 1903(m)
(42 U.S.C. 1396b(m)), as amended by section 3463 and
subsection (a), is further amended by adding at the end
the following:
‘‘(11)(A) A health maintenance organization may not
knowingly—
‘‘(i) have a person described in subparagraph
(C) as a director, officer, partner, or person with
beneficial ownership of more than 5 percent of the
organization equity; or
‘‘(ii) have an employment, consulting, or other
agreement with a person described in such subpara-
graph for the provision of items and services that
are significant and material to the organization’s ob-
ligations under its contract with the State.
‘‘(B) If a State finds that a health maintenance orga-
nization is not in compliance with clause (i) or (ii) of sub-
paragraph (A), the State—
‘‘(i) shall notify the Secretary of such non-
compliance;
122
‘‘(ii) may continue an existing agreement with
the organization unless the Secretary (in consulta-
tion with the Inspector General of the Department
of Health and Human Services) directs otherwise;
and
‘‘(iii) may not renew or otherwise extend the
duration of an existing agreement with the organiza-
tion unless the Secretary (in consultation with the
Inspector General of the Department of Health and
Human Services) provides to the State and to the
Congress a written statement describing compelling
reasons that exist for renewing or extending the
agreement.
‘‘(C) A person is described in this subparagraph if
such person—
‘‘(i) is debarred, suspended, or otherwise ex-
cluded from participating in procurement activities
under the Federal acquisition regulation or from
participating in nonprocurement activities under reg-
ulations issued pursuant to Executive Order 12549;
or
‘‘(ii) is an affiliate (within the meaning of the
Federal acquisition regulation) of a person described
in clause (i).’’.
123
(c) APPLICATION OF STATE CONFLICT-OF-INTEREST
SAFEGUARDS.—Section 
1903(m)(2)(A) 
(42 
U.S.C.
1396b(m)(2)(A)), as amended by section 3461(c), is
amended—
(1) by striking ‘‘and’’ at the end of clause (xi),
(2) by striking the period at the end of clause
(xii) and inserting ‘‘; and’’, and
(3) by inserting after clause (xi) the following:
‘‘(xiii) the State has in effect conflict-of-interest
safeguards with respect to officers and employees of
the State with responsibilities relating to contracts
with such organizations and to any default enroll-
ment process that are at least as effective as the
Federal safeguards provided under section 27 of the
Office of Federal Procurement Policy Act (41 U.S.C.
423), against conflicts of interest that apply with re-
spect to Federal procurement officials with com-
parable responsibilities with respect to such con-
tracts.’’.
(d) LIMITATION ON AVAILABILITY OF FFP FOR USE
OF ENROLLMENT BROKERS.—Section 1903(b) (42 U.S.C.
1396b(b)), as amended by section 3413(b), is amended by
adding at the end the following:
‘‘(5) Amounts expended by a State for the use an
enrollment broker in marketing health maintenance orga-
124
nizations and other managed care entities to eligible indi-
viduals under this title shall be considered, for purposes
of subsection (a)(7), to be necessary for the proper and
efficient administration of the State plan but only if the
following conditions are met with respect to the broker:
‘‘(A) The broker is independent of any such en-
tity and of any health care providers (whether or not
any such provider participates in the State plan
under this title) that provide coverage of services in
the same State in which the broker is conducting en-
rollment activities.
‘‘(B) No person who is an owner, employee,
consultant, or has a contract with the broker either
has any direct or indirect financial interest with
such an entity or health care provider or has been
excluded from participation in the program under
this title or title XVIII or debarred by any Federal
agency, or subject to a civil money penalty under
this Act.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on January 1, 1998.
SEC. 3465. GRIEVANCES UNDER MANAGED CARE PLANS.
Section 1903(m) (42 U.S.C. 1396b(m)) is amend-
ed—
125
(1) in paragraph (2)(A), as amended by sec-
tions 3461(c) and 3464(c),—
(A) by striking ‘‘and’’ at the end of clause
(xii),
(B) by striking the period at the end of
clause (xiii) and inserting ‘‘; and’’, and
(C) by inserting after clause (xiii) the fol-
lowing new clause:
‘‘(xiv) such contract provides for compliance of
the organization with the grievance and appeals re-
quirements described in paragraph (3).’’; and
(2) by inserting after paragraph (2) the follow-
ing new paragraph:
‘‘(3)(A) An eligible organization must provide a
meaningful and expedited procedure, which includes notice
and hearing requirements, for resolving grievances be-
tween the organization (including any entity or individual
through which the organization provides health care serv-
ices) and members enrolled with the organization under
this subsection. Under the procedure any member enrolled
with the organization may at any time file orally or in
writing a complaint to resolve grievances between the
member and the organization before a board of appeals
established under subparagraph (C).
126
‘‘(B)(i) The organization must provide, in a timely
manner, such an enrollee a notice of any denial of services
in-network or denial of payment for out-of-network care
or notice of termination or reduction of services.
‘‘(ii) Such notice shall include the following:
‘‘(I) A clear statement of the reason for the de-
nial.
‘‘(II) An explanation of the complaint process
under subparagraph (C) which is available to the en-
rollee upon request.
‘‘(III) An explanation of all other appeal rights
available to all enrollees.
‘‘(IV) A description of how to obtain supporting
evidence for this hearing, including the patient’s
medical records from the organization, as well as
supporting affidavits from the attending health care
providers.
‘‘(C)(i) Each eligible organization shall establish a
board of appeals to hear and make determinations on com-
plaints by enrollees under this subsection concerning deni-
als of coverage or payment for services (whether in-net-
work or out-of-network) and the medical necessity and ap-
propriateness of covered items and services.
‘‘(ii) A board of appeals of an eligible organization
shall consist of—
127
‘‘(I) representatives of the organization, includ-
ing physicians, nonphysicians, administrators, and
enrollees;
‘‘(II) consumers who are not enrollees; and
‘‘(III) providers with expertise in the field of
medicine which necessitates treatment.
‘‘(iii) A board of appeals shall hear and resolve com-
plaints within 30 days after the date the complaint is filed
with the board.
‘‘(D) Nothing in this paragraph may be construed to
replace or supersede any appeals mechanism otherwise
provided for an individual entitled to benefits under this
title.’’.
SEC. 3466. STANDARDS RELATING TO ACCESS TO OBSTET-
RICAL 
AND 
GYNECOLOGICAL 
SERVICES
UNDER MANAGED CARE PLANS.
(a) IN
GENERAL.—Section 1903(m)(2)(A) (42
U.S.C. 1396b(m)(2)(A)), as amended by sections 3461(c),
3464(c), and 3465(1), is amended—
(1) by striking ‘‘and’’ at the end of clause (xiii),
(2) by striking the period at the end of clause
(xiv) and inserting ‘‘; and’’, and
(3) by inserting after clause (xiv) the following:
‘‘(xv) the organization complies with the re-
quirements of paragraph (12).’’.
129
‘‘(II) shall treat the ordering of other
gynecologic care by such a participating physi-
cian as the prior authorization of the primary
care provider with respect to such care under
the contract.
‘‘(B) Nothing in subparagraph (A)(ii)(II) shall waive
any requirements of coverage relating to medical necessity
or appropriateness with respect to coverage of gynecologic
care so ordered.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to contracts entered into, renewed,
or extended on or after January 1, 1998.
CHAPTER 3—FEDERAL PAYMENTS
SEC. 3471. REFORMING DISPROPORTIONATE SHARE PAY-
MENTS UNDER STATE MEDICAID PROGRAMS.
(a) DIRECT PAYMENT BY STATE.—Subsection (a)(1)
of section 1923 (42 U.S.C. 1396r–4) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (A),
(2) by striking the period at the end of sub-
paragraph (B) and inserting ‘‘, and’’, and
(3) by adding at the end the following new sub-
paragraph:
‘‘(C) provides that payment adjustments
under the plan under this section for services
130
furnished by a hospital on or after October 1,
1997, for individuals entitled to benefits under
the plan, and enrolled with an entity described
in section 1903(m), under a primary care case
management system (described in section
1905(t)), or other managed care plan—
‘‘(i) are made directly to the hospital
by the State, and
‘‘(ii) are not used as part of, and are
disregarded in determining the amount of,
prepaid capitation paid under the State
plan with respect to those services.’’.
(b) ADJUSTMENT TO STATE DSH ALLOCATIONS.—
(1) IN GENERAL.—Subsection (f) of such sec-
tion is amended—
(A) in paragraph (2)(A), by inserting ‘‘and
paragraph (5)’’ after ‘‘subparagraph (B)’’, and
(B) by adding at the end the following new
paragraph:
‘‘(5) ADJUSTMENTS IN DSH ALLOTMENTS.—
‘‘(A) ALLOTMENT
FROZEN
FOR
STATES
WITH VERY LOW DSH EXPENDITURES.—In the
case of a State for which its State 1995 DSH
spending did not exceed 1 percent of the total
amount expenditures made under the State
131
plan under this title for medical assistance dur-
ing fiscal year 1995 (as reported by the State
no later than January 1, 1997, on HCFA Form
64), the DSH allotment for each of fiscal years
1998 through 2002 is equal to its State 1995
DSH spending.
‘‘(B) FULL
REDUCTION
FOR
HIGH
DSH
STATES.—In the case of a State which was
classified under this subsection as a high DSH
State for fiscal year 1997, the DSH allotment
for each of fiscal years 1998 through 2002 is
equal to the State 1995 DSH spending reduced
by the full reduction percentage (described in
subparagraph (D)) for the fiscal year involved.
‘‘(C) 
HALF-REDUCTION
FOR
OTHER
STATES.—In the case of a State not described
in subparagraph (A) or (B), the DSH allotment
for each of fiscal years 1998 through 2002 is
equal to the State 1995 DSH spending reduced
by 1⁄2 of the full reduction percentage for the
fiscal year involved.
‘‘(D) FULL
REDUCTION
PERCENTAGE.—
For purposes of this paragraph, the ‘full reduc-
tion percentage’ for—
‘‘(i) fiscal year 1998 is 2 percent,
132
‘‘(ii) fiscal year 1999 is 5 percent,
‘‘(iii) fiscal year 2000 is 20 percent,
‘‘(iv) fiscal year 2001 is 30 percent,
and
‘‘(v) fiscal year 2002 is 40 percent.
‘‘(E) DEFINITIONS.— In this paragraph:
‘‘(i) STATE.—The term ‘State’ means
the 50 States and the District of Colum-
bia.
‘‘(ii) STATE
1995
DSH
SPENDING.—
The term ‘State 1995 DSH spending’
means, with respect to a State, the total
amount of payment adjustments made
under subsection (c) under the State plan
during fiscal year 1995 as reported by the
State no later than January 1, 1997, on
HCFA Form 64.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to fiscal years begin-
ning with fiscal year 1998.
(c) TRANSITION RULE.—Effective July 1, 1997, sec-
tion 1923(g)(2)(A) of the Social Security Act (42 U.S.C.
1396r–4(g)(2)(A)) shall be applied to the State of Califor-
nia as though—
133
(1) ‘‘or that begins on or after July 1, 1997,
and before July 1, 1999’’ were inserted in such sec-
tion after ‘‘January 1, 1995’’; and
(2) ‘‘(or 175 percent in the case of a State fis-
cal year that begins on or after July 1, 1997, and
before July 1, 1999)’’ were inserted in such section
after ‘‘200 percent’’.
SEC. 3472. ADDITIONAL FUNDING FOR STATE EMERGENCY
HEALTH SERVICES FURNISHED TO UNDOCU-
MENTED ALIENS.
(a) TOTAL AMOUNT AVAILABLE FOR ALLOTMENT.—
There are available for allotments under this section for
each of the 5 fiscal years (beginning with fiscal year 1998)
$20,000,000 for payments to certain States under this
section.
(b) STATE ALLOTMENT AMOUNT.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall compute an allotment for each
fiscal year beginning with fiscal year 1998 and end-
ing with fiscal year 2002 for each of the 12 States
with the highest number of undocumented aliens.
The amount of such allotment for each such State
for a fiscal year shall bear the same ratio to the
total amount available for allotments under sub-
section (a) for the fiscal year as the ratio of the
134
number of undocumented aliens in the State in the
fiscal year bears to the total of such numbers for all
such States for such fiscal year. The amount of al-
lotment to a State provided under this paragraph for
a fiscal year that is not paid out under subsection
(c) shall be available for payment during the subse-
quent fiscal year.
(2) DETERMINATION.—For purposes of para-
graph (1), the number of undocumented aliens in a
State under this section shall be determined based
on estimates of the resident illegal alien population
residing in each State prepared by the Statistics Di-
vision of the Immigration and Naturalization Service
as of October 1992 (or as of such later date if such
date is at least 1 year before the beginning of the
fiscal year involved),
(c) USE
OF FUNDS.—From the allotments made
under subsection (b), the Secretary shall pay to each State
amounts the State demonstrates were paid by the State
(or by a political subdivision of the State) for emergency
health services furnished to undocumented aliens.
(d) STATE DEFINED.—For purposes of this section,
the term ‘‘State’’ includes the District of Columbia.
(e) STATE ENTITLEMENT.—This section constitutes
budget authority in advance of appropriations Acts and
135
represents the obligation of the Federal Government to
provide for the payment to States of amounts provided
under subsection (c).
Subtitle F—Child Health
Assistance Program (CHAP)
SEC. 3501. SHORT TITLE OF SUBTITLE; TABLE OF CON-
TENTS OF SUBTITLE.
(a) SHORT TITLE OF SUBTITLE.—This subtitle may
be cited as the ‘‘Child Health Assistance Program Act of
1997’’.
(b) TABLE OF CONTENTS OF SUBTITLE.—The table
of contents of this subtitle is as follows:
Sec. 3501. Short title of subtitle; table of contents.
Sec. 3502. Establishment of Child Health Assistance Program (CHAP).
‘‘TITLE XXI—CHILD HEALTH ASSISTANCE PROGRAM
‘‘Sec. 2101. Purpose; State child health plans.
‘‘Sec. 2102. Contents of State child health plan.
‘‘Sec. 2103. Allotments.
‘‘Sec. 2104. Payments to States.
‘‘Sec. 2105. Process for submission, approval, and amendment of State
child health plans.
‘‘Sec. 2106. Strategic objectives and performance goals; plan administra-
tion.
‘‘Sec. 2107. Annual reports; evaluations.
‘‘Sec. 2108. Definitions.
Sec. 3503. Optional use of State child health assistance funds for enhanced
medicaid match for expanded medicaid eligibility.
Sec. 3504. Medicaid presumptive eligibility for low-income children.
Sec. 3505. State option of continuation of Medicaid eligibility for disabled chil-
dren who lose SSI benefits.
SEC. 3502. ESTABLISHMENT OF CHILD HEALTH ASSIST-
ANCE PROGRAM (CHAP).
The Social Security Act is amended by adding at the
end the following new title:
136
‘‘TITLE XXI—CHILD HEALTH ASSISTANCE
PROGRAM
‘‘SEC. 2101. PURPOSE; STATE CHILD HEALTH PLANS.
‘‘(a) PURPOSE.—The purpose of this title is to pro-
vide funds to States to enable them to implement plans
to initiate and expand the provision of child health care
assistance to uninsured, low-income children in an effec-
tive and efficient manner that is coordinated with other
sources of coverage for children. Such assistance may be
provided for obtaining creditable health coverage through
methods specified in the plan, which may include any or
all of the following:
‘‘(1) Providing benefits under the State’s med-
icaid plan under title XIX.
‘‘(2) Obtaining coverage under group health
plans or group or individual health insurance cov-
erage.
‘‘(3) Direct purchase of services for targeted
low-income children from providers, such as Feder-
ally qualified health centers and rural health clinics.
‘‘(4) Other methods specified under the plan for
the provision of health insurance coverage or medical
assistance for targeted low-income children.
‘‘(b) STATE CHILD HEALTH PLAN REQUIRED.—A
State is not eligible for payment under section 2104 unless
137
the State has submitted to the Secretary under section
2105 a plan that—
‘‘(1) sets forth how the State intends to use the
funds provided under this title to provide child
health assistance to needy children consistent with
the provisions of this title, and
‘‘(2) is approved under section 2105.
‘‘(c) STATE ENTITLEMENT.—This title constitutes
budget authority in advance of appropriations Acts and
represents the obligation of the Federal Government to
provide for the payment to States of amounts provided
under section 2104.
‘‘(d) EFFECTIVE DATE.—No State is eligible for pay-
ments under section 2104 for any calendar quarter begin-
ning before October 1, 1997.
‘‘SEC. 2102. CONTENTS OF STATE CHILD HEALTH PLAN.
‘‘(a) GENERAL BACKGROUND AND DESCRIPTION.—
A State child health plan shall include a description, con-
sistent with the requirements of this title, of—
‘‘(1) the extent to which, and manner in which,
children in the State, including targeted low-income
children and other classes of children classified by
income and other relevant factors, currently have
creditable health coverage (as defined in section
2108(c)(2));
138
‘‘(2) current State efforts to provide or obtain
creditable health coverage for uncovered children, in-
cluding the steps the State is taking to identify and
enroll all uncovered children who are eligible to par-
ticipate in public health insurance programs and
health insurance programs that involve public-pri-
vate partnerships;
‘‘(3) how the plan is designed to be coordinated
with such efforts to increase coverage of children
under creditable health coverage; and
‘‘(4) how the plan will comply with subsection
(c)(5).
‘‘(b) 
GENERAL
DESCRIPTION
OF
ELIGIBILITY
STANDARDS AND METHODOLOGY.—
‘‘(1) ELIGIBILITY STANDARDS.—
‘‘(A) IN GENERAL.—The plan shall include
a description of the standards used to deter-
mine the eligibility of targeted low-income chil-
dren for child health assistance under the plan.
Such standards may include (to the extent con-
sistent with this title) those relating to the geo-
graphic areas to be served by the plan, age, in-
come and resources (including any standards
relating to spenddowns and disposition of re-
sources), residency, disability status, immigra-
139
tion status, access to or coverage under other
health coverage, and duration of eligibility.
Such standards may not discriminate on the
basis of diagnosis.
‘‘(B) LIMITATIONS ON ELIGIBILITY STAND-
ARDS.—Such eligibility standards—
‘‘(i) shall, within any defined group of
covered targeted low-income children, not
cover such children with higher family in-
come without covering children with a
lower family income, and
‘‘(ii) may not deny eligibility based on
a child having a preexisting medical condi-
tion.
‘‘(2) METHODOLOGY.—The plan shall include a
description of methods of establishing and continu-
ing eligibility and enrollment, including a methodol-
ogy for computing family income that is consistent
with 
the 
methodology 
used 
under 
section
1902(l)(3)(E).
‘‘(3) ELIGIBILITY
SCREENING; COORDINATION
WITH OTHER HEALTH COVERAGE PROGRAMS.—The
plan shall include a description of procedures to be
used to ensure—
140
‘‘(A) through both intake and followup
screening, that only targeted low-income chil-
dren are furnished child health assistance under
the State child health plan;
‘‘(B) that children found through the
screening to be eligible for medical assistance
under the State medicaid plan under title XIX
are enrolled for such assistance under such
plan;
‘‘(C) that the insurance provided under the
State child health plan does not substitute for
coverage under group health plans; and
‘‘(D) coordination with other public and
private programs providing creditable coverage
for low-income children.
‘‘(4) NONENTITLEMENT.—Nothing in this title
shall be construed as providing an individual with an
entitlement to child health assistance under a State
child health plan.
‘‘(c) DESCRIPTION OF ASSISTANCE.—
‘‘(1) IN GENERAL.—A State child health plan
shall include a description of the child health assist-
ance provided under the plan for targeted low-in-
come children. The child health assistance provided
to a targeted low-income child under the plan in the
141
form described in paragraph (2) of section 2101(a)
shall include benefits (in an amount, duration, and
scope specified under the plan) for at least the fol-
lowing categories of services:
‘‘(A) Inpatient and outpatient hospital
services.
‘‘(B) Physicians’ surgical and medical serv-
ices.
‘‘(C) Laboratory and x-ray services.
‘‘(D) Well-baby and well-child care, includ-
ing age-appropriate immunizations.
The previous sentence shall not apply to coverage
under a group health plan if the benefits under such
coverage for individuals under this title are no less
than the benefits for other individuals similarly cov-
ered under the plan.
‘‘(2) ITEMS.—The description shall include the
following:
‘‘(A) COST
SHARING.—Subject to para-
graph (3), the amount (if any) of premiums,
deductibles, coinsurance, and other cost sharing
imposed.
‘‘(B) DELIVERY
METHOD.—The State’s
approach to delivery of child health assistance,
including a general description of—
142
‘‘(i) the use (or intended use) of dif-
ferent delivery methods, which may include
the delivery methods used under the medic-
aid plan under title XIX, fee-for-service,
managed care arrangements (such as
capitated health care plans, case manage-
ment, and case coordination), direct provi-
sion of health care services (such as
through community health centers and dis-
proportionate share hospitals), vouchers,
and other delivery methods; and
‘‘(ii) utilization control systems.
‘‘(3) LIMITATIONS ON COST SHARING.—
‘‘(A) NO COST SHARING ON PREVENTIVE
BENEFITS.—The 
plan 
may 
not 
impose
deductibles, coinsurance, or similar cost sharing
with respect to benefits for preventive services.
‘‘(B) SLIDING SCALE.—To the extent prac-
ticable, any premiums imposed under the plan
shall be imposed on a sliding scale related to in-
come and the plan may only vary premiums,
deductibles, coinsurance, and other cost sharing
based on the family income of targeted low-in-
come children only in a manner that does not
143
favor children from families with higher income
over children from families with lower income.
‘‘(4) RESTRICTION ON APPLICATION OF PRE-
EXISTING CONDITION EXCLUSIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the State child health plan shall not
permit the imposition of any preexisting condi-
tion exclusion for covered benefits under the
plan.
‘‘(B) GROUP HEALTH PLANS AND GROUP
HEALTH INSURANCE COVERAGE.—If the State
child health plan provides for benefits through
payment for, or a contract with, a group health
plan or group health insurance coverage, the
plan may permit the imposition of a preexisting
condition exclusion but only insofar as it is per-
mitted under the applicable provisions of part 7
of subtitle B of title I of the Employee Retire-
ment Income Security Act of 1974 and title
XXVII of the Public Health Service Act.
‘‘(5) SPECIAL
PROTECTION
FOR
CHILDREN
WITH CHRONIC HEALTH CONDITIONS AND SPECIAL
HEALTH CARE NEEDS.—In the case of a child who
has a chronic condition, life-threatening condition, or
combination of conditions that warrants medical spe-
144
cialty care and who is eligible for benefits under the
plan with respect to such care, the State child health
plan shall assure access to such care, including the
use of a medical specialist as a primary care pro-
vider.
‘‘(6) SECONDARY PAYMENT.—Nothing in this
section shall be construed as preventing a State
from denying benefits to an individual to the extent
such benefits are available to the individual under
another public or private health care insurance pro-
gram.
‘‘(7) TREATMENT OF CASH PAYMENTS.—Pay-
ments in the form of cash or vouchers provided as
child health or other assistance under the State child
health plan to parents, guardians or other caretakers
of a targeted low-income child are not considered in-
come for purpose of eligibility for, or benefits pro-
vided under, any means-tested Federal or Federally-
assisted program.
‘‘(d) OUTREACH AND COORDINATION.—A State child
health plan shall include a description of the procedures
to be used by the State to accomplish the following:
‘‘(1) OUTREACH.—Outreach to families of chil-
dren likely to be eligible for child health assistance
under the plan or under other public or private
145
health coverage programs to inform these families of
the availability of, and to assist them in enrolling
their children in, such a program.
‘‘(2) COORDINATION WITH OTHER HEALTH IN-
SURANCE PROGRAMS.—Coordination of the adminis-
tration of the State program under this subtitle with
other public and private health insurance programs.
‘‘SEC. 2103. ALLOTMENTS.
‘‘(a) TOTAL ALLOTMENT.—The total allotment that
is available under this title for—
‘‘(1) fiscal year 1998 is $2,830,000,000,
‘‘(2) fiscal year 1999 is $2,830,000,000,
‘‘(3) fiscal year 2000 is $2,830,000,000,
‘‘(4) fiscal year 2001 is $2,830,000,000,
‘‘(5) fiscal year 2002 is $2,830,000,000, and
‘‘(6) fiscal year 2003 and each succeeding fiscal
year is $2,850,000,000.
‘‘(b) ALLOTMENTS TO 50 STATES AND DISTRICT OF
COLUMBIA.—
‘‘(1) IN GENERAL.—Subject to paragraphs (4)
and (5), of the total allotment available under sub-
section (a) for a fiscal year, reduced by the amount
of allotments made under subsection (c) for the fis-
cal year, the Secretary shall allot to each State
(other than a State described in such subsection)
146
with a State child health plan approved under this
title the same proportion as the ratio of—
‘‘(A) the product of (i) the number of un-
covered low-income children for the fiscal year
in the State (as determined under paragraph
(2)) and (ii) the State cost factor for that State
(established under paragraph (3)); to
‘‘(B) the sum of the products computed
under subparagraph (A).
‘‘(2) NUMBER
OF
UNCOVERED
LOW-INCOME
CHILDREN.—For 
the 
purposes 
of 
paragraph
(1)(A)(i), the number of uncovered low-income chil-
dren for a fiscal year in a State is equal to the arith-
metic average of the number of low-income children
(as defined in section 2108(c)(4)) with no health in-
surance coverage, as reported and defined in the 3
most recent March supplements to the Current Pop-
ulation Survey of the Bureau of the Census before
the beginning of the fiscal year.
‘‘(3) ADJUSTMENT
FOR
GEOGRAPHIC
VARI-
ATIONS IN HEALTH COSTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A)(ii), the ‘State cost factor’ for a
State for a fiscal year equal to the sum of—
‘‘(i) 0.15, and
147
‘‘(ii) 0.85 multiplied by the ratio of—
‘‘(I) the annual average wages
per employee for the State for such
year (as determined under subpara-
graph (B)), to
‘‘(II) the annual average wages
per employee for the 50 States and
the District of Columbia.
‘‘(B) ANNUAL AVERAGE WAGES PER EM-
PLOYEE.—For purposes of subparagraph (A),
the ‘annual average wages per employee’ for a
State, or for all the States. for a fiscal year is
equal to the average of the annual wages per
employee for the State or for the 50 States and
the District of Columbia for employees in the
health services industry (SIC code 8000), as re-
ported by the Bureau of Labor Statistics of the
Department of Labor for each of the for the
most recent 3 years before the beginning of the
fiscal year involved.
‘‘(4) FLOOR
FOR
STATES.—Subject to para-
graph (5), in no case shall the amount of the allot-
ment under this subsection for one of the 50 States
or the District of Columbia for a year be less than
$2,000,000. To the extent that the application of the
148
previous sentence results in an increase in the allot-
ment to a State above the amount otherwise pro-
vided, the allotments for the other States and the
District of Columbia under this subsection shall be
decreased in a pro rata manner (but not below
$2,000,000) so that the total of such allotments in
a fiscal year does not exceed the amount otherwise
provided for allotment under paragraph (1) for that
fiscal year.
‘‘(5) OFFSET FOR EXPENDITURES UNDER MED-
ICAID PRESUMPTIVE ELIGIBILITY.—The amount of
the allotment otherwise provided to a State under
this subsection for a fiscal year shall be reduced by
the amount of the payments made to the State
under section 1903(a) for calendar quarters during
such fiscal year that are attributable to provision of
medical assistance to a child during a presumptive
eligibility period under section 1920A.
‘‘(c) ALLOTMENTS TO TERRITORIES.—
‘‘(1) IN GENERAL.—Subject to paragraph (3),
of the total allotment under subsection (a) for a fis-
cal year, the Secretary shall allot 0.5 percent among
each of the commonwealths and territories described
in paragraph (4) in the same proportion as the per-
centage specified in paragraph (2) for such common-
149
wealth or territory bears to the sum of such percent-
ages for all such commonwealths or territories so de-
scribed.
‘‘(2) PERCENTAGE.—The percentage specified
in this paragraph for—
‘‘(A) Puerto Rico is 91.6 percent,
‘‘(B) Guam is 3.5 percent,
‘‘(C) Virgin Islands is 2.6 percent,
‘‘(D) American Samoa is 1.2 percent, and
‘‘(E) the Northern Mariana Islands is 1.1
percent.
‘‘(3) FLOOR.—In no case shall the amount of
the allotment to a commonwealth or territory under
paragraph (1) for a fiscal year be less than
$100,000. To the extent that the application of the
previous sentence results in an increase in the allot-
ment to a commonwealth or territory above the
amount otherwise provided, the allotments for the
other commonwealths and territories under this sub-
section for the fiscal year shall be decreased (but not
below $100,000) in a pro rata manner so that the
total of such allotments does not exceed the total
amount otherwise provided for allotment under para-
graph (1).
150
‘‘(4) COMMONWEALTHS AND TERRITORIES.—A
commonwealth or territory described in this para-
graph is any of the following if it has a State child
health plan approved under this title:
‘‘(A) Puerto Rico.
‘‘(B) Guam.
‘‘(C) the Virgin Islands.
‘‘(D) American Samoa.
‘‘(E) the Northern Mariana Islands.
‘‘(d) ADJUSTMENT FOR STATES USING ENHANCED
MEDICAID MATCH.—In the case of a State that elects the
increased medicaid matching option under section 1905(t),
the amount of the State’s allotment under this section
shall be reduced by the amount of additional payment
made under section 1903 that is attributable to the in-
crease in the Federal medical assistance percentage ef-
fected under such option.
‘‘(e) 3-YEAR AVAILABILITY
OF AMOUNTS ALLOT-
TED.—Amounts allotted to a State pursuant to this sec-
tion for a fiscal year shall remain available for expenditure
by the State through the end of the second succeeding fis-
cal year.
‘‘SEC. 2104. PAYMENTS TO STATES.
‘‘(a) IN GENERAL.—Subject to the succeeding provi-
sions of this section, the Secretary shall pay to each State
151
with a program approved under this title, from its allot-
ment under section 2103 (as may be adjusted under sec-
tion 2103(d)), an amount for each quarter up to 80 per-
cent of expenditures under that program in the quarter
for—
‘‘(1) child health assistance for targeted low-in-
come children;
‘‘(2) health services initiatives for improving the
health of children (including targeted low-income
children and other low-income children);
‘‘(3) expenditures for outreach activities as pro-
vided in section 2102(d)(1); and
‘‘(4) other reasonable costs incurred by the
State to administer the plan.
‘‘(b) LIMITATION ON CERTAIN PAYMENTS FOR CER-
TAIN EXPENDITURES.—
‘‘(1) IN GENERAL.—Funds provided to a State
under this title shall only be used to carry out the
purposes of this title.
‘‘(2) LIMITATION ON EXPENDITURES NOT USED
FOR
ASSISTANCE.—Payment shall not be made
under subsection (a) for expenditures for items de-
scribed in paragraphs (2), (3), or (4) of subsection
to the extent the total of such expenditures exceeds
15 percent of total expenditures under the plan for
152
the period involved (including any in such total addi-
tional Federal medical assistance payments under
section 1903(a)(1) that are attributable to an en-
hanced 
State 
medicaid 
match 
under 
section
1905(t)).
‘‘(3) PURCHASE OF FAMILY COVERAGE.—The
Secretary shall establish rules regarding the extent
to which payment may be made under subsection
(a)(1) for the purchase of family coverage under a
group health plan or health insurance coverage that
includes coverage of targeted low-income children.
Under such rules such payment may be permitted,
notwithstanding that a portion may be considered
attributable to purchase of coverage for other family
members, if the State demonstrates that purchase of
such coverage is cost effective relative to the
amounts that the State would have paid to obtain
comparable coverage only of the targeted low-income
children involved. In making such determination,
there shall be taken into account the costs of provid-
ing coverage for medical assistance for children with
similar 
actuarial 
characteristics 
under 
section
1902(l).
‘‘(4) DENIAL OF PAYMENT FOR REDUCTION OF
MEDICAID
ELIGIBILITY
STANDARDS.—No payment
153
may be made under subsection (a) with respect to
child health assistance provided under a State child
health plan to a targeted low-income child if the
child would be eligible for medical assistance under
the State plan under title XIX (as such plan was in
effect as of June 1, 1997) but for a change in the
income or assets standards or methodology under
such plan effected after such date.
‘‘(5) DISALLOWANCES FOR EXCLUDED PROVID-
ERS.—
‘‘(A) IN GENERAL.—Payment shall not be
made to a State under subsection (a) for ex-
penditures for items and services furnished—
‘‘(i) by a provider who was excluded
from participation under title V, XVIII, or
XX or under this title pursuant to section
1128, 1128A, 1156, or 1842(j)(2), or
‘‘(ii) under the medical direction or on
the prescription of a physician who was so
excluded, if the provider of the services
knew or had reason to know of the exclu-
sion.
‘‘(B) EXCEPTION FOR EMERGENCY SERV-
ICES.—Subparagraph (A) shall not apply to
154
emergency items or services, not including hos-
pital emergency room services.
‘‘(6) USE OF NON-FEDERAL FUNDS FOR STATE
MATCHING
REQUIREMENT.—Amounts provided by
the Federal Government, or services assisted or sub-
sidized to any significant extent by the Federal Gov-
ernment, may not be included in determining the
amount of non-Federal contributions required under
subsection (a).
‘‘(7) TREATMENT
OF
THIRD
PARTY
LIABIL-
ITY.—No payment shall be made to a State under
this section for expenditures for child health assist-
ance provided for a targeted low-income child under
its plan to the extent that a private insurer (as de-
fined by the Secretary by regulation and including a
group health plan (as defined in section 607(1) of
the Employee Retirement Income Security Act of
1974), a service benefit plan, and a health mainte-
nance organization) would have been obligated to
provide such assistance but for a provision of its in-
surance contract which has the effect of limiting or
excluding such obligation because the individual is
eligible for or is provided child health assistance
under the plan.
155
‘‘(8) SECONDARY PAYER PROVISIONS.—Except
as otherwise provided by law, no payment shall be
made to a State under this section for expenditures
for child health assistance provided for a targeted
low-income child under its plan to the extent that
payment has been made or can reasonably be ex-
pected to be made promptly (as determined in ac-
cordance with regulations) under any other federally
operated or financed health care insurance program,
other than an insurance program operated or fi-
nanced by the Indian Health Service, as identified
by the Secretary. For purposes of this paragraph,
rules similar to the rules for overpayments under
section 1903(d)(2) shall apply.
‘‘(9) LIMITATION
ON
PAYMENT
FOR
ABOR-
TIONS.—
‘‘(A) IN GENERAL.—Payment shall not be
made to a State under this section for any
amount expended under the State plan to pay
for any abortion or to assist in the purchase, in
whole or in part, of health benefit coverage that
includes coverage of abortion.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to an abortion—
156
‘‘(i) if the pregnancy is the result of
an act of rape or incest, or
‘‘(ii) in the case where a woman suf-
fers from a physical disorder, illness, or in-
jury that would, as certified by a physi-
cian, place the woman in danger of death
unless an abortion is performed.
‘‘(c) ADVANCE PAYMENT; RETROSPECTIVE ADJUST-
MENT.—The Secretary may make payments under this
section for each quarter on the basis of advance estimates
of expenditures submitted by the State and other inves-
tigation the Secretary may find necessary, and may reduce
or increase the payments as necessary to adjust for any
overpayment or underpayment for prior quarters.
‘‘SEC. 2105. PROCESS FOR SUBMISSION, APPROVAL, AND
AMENDMENT 
OF 
STATE 
CHILD 
HEALTH
PLANS.
‘‘(a) INITIAL PLAN.—
‘‘(1) IN GENERAL.—As a condition of receiving
funding under section 2104, a State shall submit to
the Secretary a State child health plan that meets
the applicable requirements of this title.
‘‘(2) APPROVAL.—Except as the Secretary may
provide under subsection (e), a State plan submitted
under paragraph (1)—
157
‘‘(A) shall be approved for purposes of this
title, and
‘‘(B) shall be effective beginning with a
calendar quarter that is specified in the plan,
but in no case earlier than the first calendar
quarter that begins at least 60 days after the
date the plan is submitted.
‘‘(b) PLAN AMENDMENTS.—
‘‘(1) IN
GENERAL.—A State may amend, in
whole or in part, its State child health plan at any
time through transmittal of a plan amendment.
‘‘(2) APPROVAL.—except as the secretary may
provide under subsection (e), an amendment to a
state plan submitted under paragraph (1)—
‘‘(A) shall be approved for purposes of this
title, and
‘‘(B) shall be effective as provided in para-
graph (3).
‘‘(3) EFFECTIVE DATES FOR AMENDMENTS.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this paragraph, an amend-
ment to a State plan shall take effect on one or
more effective dates specified in the amend-
ment.
158
‘‘(B) AMENDMENTS RELATING TO ELIGI-
BILITY OR BENEFITS.—
‘‘(i) 
NOTICE
REQUIREMENT.—Any
plan amendment that eliminates or re-
stricts eligibility or benefits under the plan
may not take effect unless the State cer-
tifies that it has provided prior or contem-
poraneous public notice of the change, in a
form and manner provided under applica-
ble State law.
‘‘(ii) 
TIMELY
TRANSMITTAL.—Any
plan amendment that eliminates or re-
stricts eligibility or benefits under the plan
shall not be effective for longer than a 60-
day period unless the amendment has been
transmitted to the Secretary before the end
of such period.
‘‘(C) OTHER
AMENDMENTS.—Any plan
amendment that is not described in subpara-
graph (C) becomes effective in a State fiscal
year may not remain in effect after the end of
such fiscal year (or, if later, the end of the 90-
day period on which it becomes effective) unless
the amendment has been transmitted to the
Secretary.
159
‘‘(c) DISAPPROVAL OF PLANS AND PLAN AMEND-
MENTS.—
‘‘(1) PROMPT REVIEW OF PLAN SUBMITTALS.—
The Secretary shall promptly review State plans and
plan amendments submitted under this section to
determine if they substantially comply with the re-
quirements of this title.
‘‘(2) 90-DAY APPROVAL DEADLINES.—A State
plan or plan amendment is considered approved un-
less the Secretary notifies the State in writing, with-
in 90 days after receipt of the plan or amendment,
that the plan or amendment is disapproved (and the
reasons for disapproval) or that specified additional
information is needed.
‘‘(3) CORRECTION.—In the case of a dis-
approval of a plan or plan amendment, the Secretary
shall provide a State with a reasonable opportunity
for correction before taking financial sanctions
against the State on the basis of such disapproval.
‘‘(d) PROGRAM OPERATION.—
‘‘(1) IN GENERAL.—The State shall conduct the
program in accordance with the plan (and any
amendments) approved under subsection (c) and
with the requirements of this title.
160
‘‘(2) VIOLATIONS.—The Secretary shall estab-
lish a process for enforcing requirements under this
title. Such process shall provide for the withholding
of funds in the case of substantial noncompliance
with such requirements. In the case of an enforce-
ment action against a State under this paragraph,
the Secretary shall provide a State with a reasonable
opportunity for correction before taking financial
sanctions against the State on the basis of such an
action.
‘‘(e) CONTINUED APPROVAL.—An approved State
child health plan shall continue in effect unless and until
the State amends the plan under subsection (b) or the Sec-
retary finds substantial noncompliance of the plan with
the requirements of this title under section subsection
(d)(2).
‘‘SEC. 2106. STRATEGIC OBJECTIVES AND PERFORMANCE
GOALS; PLAN ADMINISTRATION.
‘‘(a) STRATEGIC OBJECTIVES
AND PERFORMANCE
GOALS.—
‘‘(1) DESCRIPTION.—A State child health plan
shall include a description of—
‘‘(A) the strategic objectives,
‘‘(B) the performance goals, and
‘‘(C) the performance measures,
161
the State has established for providing child health
assistance to targeted low-income children under the
plan and otherwise for maximizing health coverage
for other low-income children and children generally
in the State.
‘‘(2) STRATEGIC OBJECTIVES.—Such plan shall
identify specific strategic objectives relating to in-
creasing the extent of creditable health coverage
among targeted low-income children and other low-
income children.
‘‘(3) PERFORMANCE GOALS.—Such plan shall
specify one or more performance goals for each such
strategic objective so identified.
‘‘(4) PERFORMANCE
MEASURES.—Such plan
shall describe how performance under the plan will
be—
‘‘(A) measured through objective, inde-
pendently verifiable means, and
‘‘(B) compared against performance goals,
in order to determine the State’s performance
under this title.
‘‘(b) RECORDS, REPORTS, AUDITS, AND EVALUA-
TION.—
‘‘(1) DATA
COLLECTION, RECORDS, AND
RE-
PORTS.—A State child health plan shall include an
162
assurance that the State will collect the data, main-
tain the records, and furnish the reports to the Sec-
retary, at the times and in the standardized format
the Secretary may require in order to enable the
Secretary to monitor State program administration
and compliance and to evaluate and compare the ef-
fectiveness of State plans under this title.
‘‘(2) STATE ASSESSMENT AND STUDY.—A State
child health plan shall include a description of the
State’s plan for the annual assessments and reports
under section 2107(a) and the evaluation required
by section 2107(b).
‘‘(3) AUDITS.—A State child health plan shall
include an assurance that the State will afford the
Secretary access to any records or information relat-
ing to the plan for the purposes of review or audit.
‘‘(c) PROGRAM DEVELOPMENT PROCESS.—A State
child health plan shall include a description of the process
used to involve the public in the design and implementa-
tion of the plan and the method for ensuring ongoing pub-
lic involvement.
‘‘(d) PROGRAM BUDGET.—A State child health plan
shall include a description of the budget for the plan. The
description shall be updated periodically as necessary and
shall include details on the planned use of funds and the
163
sources of the non-Federal share of plan expenditures, in-
cluding any requirements for cost sharing by beneficiaries.
‘‘(e) APPLICATION
OF CERTAIN GENERAL PROVI-
SIONS.—The following sections in part A of title XI shall
apply to States under this title in the same manner as
they applied to a State under title XIX:
‘‘(1) Section 1101(a)(1) (relating to definition
of State).
‘‘(2) Section 1116 (relating to administrative
and judicial review), but only insofar as consistent
with the provisions of part B.
‘‘(3) Section 1124 (relating to disclosure of
ownership and related information).
‘‘(4) Section 1126 (relating to disclosure of in-
formation about certain convicted individuals).
‘‘(5) Section 1128B(d) (relating to criminal
penalties for certain additional charges).
‘‘(6) Section 1132 (relating to periods within
which claims must be filed).
‘‘SEC. 2107. ANNUAL REPORTS; EVALUATIONS.
‘‘(a) ANNUAL REPORT.—The State shall—
‘‘(1) assess the operation of the State plan
under this title in each fiscal year, including the
progress made in reducing the number of uncovered
low-income children; and
164
‘‘(2) report to the Secretary, by January 1 fol-
lowing the end of the fiscal year, on the result of the
assessment.
‘‘(b) STATE EVALUATIONS.—
‘‘(1) IN GENERAL.—By March 31, 2000, each
State that has a State child health plan shall submit
to the Secretary an evaluation that includes each of
the following:
‘‘(A) An assessment of the effectiveness of
the State plan in increasing the number of chil-
dren with creditable health coverage.;
‘‘(B) A description and analysis of the ef-
fectiveness of elements of the State plan, in-
cluding—
‘‘(i) the characteristics of the children
and families assisted under the State plan
including age of the children, family in-
come, and the assisted child’s access to or
coverage by other health insurance prior to
the State plan and after eligibility for the
State plan ends,
‘‘(ii) the quality of health coverage
provided including the types of benefits
provided,
165
‘‘(iii) the amount and level (payment
of part or all of the premium) of assistance
provided by the State,
‘‘(iv) the service area of the State
plan,
‘‘(v) the time limits for coverage of a
child under the State plan,
‘‘(vi) the State’s choice of health in-
surance plans and other methods used for
providing child health assistance , and
‘‘(vii) the sources of non-Federal
funding used in the State plan;
‘‘(C) an assessment of the effectiveness of
other public and private programs in the State
in increasing the availability of affordable qual-
ity individual and family health insurance for
children;
‘‘(D) a review and assessment of State ac-
tivities to coordinate the plan under this title
with other public and private programs provid-
ing health care and health care financing, in-
cluding Medicaid and maternal and child health
services;
‘‘(E) an analysis of changes and trends in
the State that affect the provision of accessible,
166
affordable, quality health insurance and health
care to children;
‘‘(F) a description of any plans the State
has for improving the availability of health in-
surance and health care for children;
‘‘(G) recommendations for improving the
program under this title; and
‘‘(H) any other matters the State and the
Secretary consider appropriate.
‘‘(2) REPORT OF THE SECRETARY.—The Sec-
retary shall submit to the Congress and make avail-
able to the public by December 31, 2000, a report
based on the evaluations submitted by States under
paragraph (1), containing any conclusions and rec-
ommendations the Secretary considers appropriate.
‘‘SEC. 2108. DEFINITIONS.
‘‘(a) CHILD HEALTH ASSISTANCE.—For purposes of
this title, the term ‘child health assistance’ means pay-
ment of part or all of the cost of any of the following,
or assistance in the purchase, in whole or in part, of health
benefit coverage that includes any of the following, for tar-
geted low-income children (as defined in subsection (b))
as specified under the State plan:
‘‘(1) Inpatient hospital services.
‘‘(2) Outpatient hospital services.
167
‘‘(3) Physician services.
‘‘(4) Surgical services.
‘‘(5) Clinic services (including health center
services) and other ambulatory health care services.
‘‘(6) Prescription drugs and biologicals and the
administration of such drugs and biologicals, only if
such drugs and biologicals are not furnished for the
purpose of causing, or assisting in causing, the
death, suicide, euthanasia, or mercy killing of a per-
son.
‘‘(7) Over-the-counter medications.
‘‘(8) Laboratory and radiological services.
‘‘(9) Prenatal care and prepregnancy family
planning services and supplies.
‘‘(10) Inpatient mental health services, includ-
ing services furnished in a State-operated mental
hospital and including residential or other 24-hour
therapeutically planned structured services.
‘‘(11) Outpatient mental health services, includ-
ing services furnished in a State-operated mental
hospital and including community-based services.
‘‘(12) Durable medical equipment and other
medically-related or remedial devices (such as pros-
thetic devices, implants, eyeglasses, hearing aids,
dental devices, and adaptive devices).
168
‘‘(13) Disposable medical supplies.
‘‘(14) Home and community-based health care
services and related supportive services (such as
home health nursing services, home health aide serv-
ices, personal care, assistance with activities of daily
living, chore services, day care services, respite care
services, training for family members, and minor
modifications to the home).
‘‘(15) Nursing care services (such as nurse
practitioner services, nurse midwife services, ad-
vanced practice nurse services, private duty nursing
care, pediatric nurse services, and respiratory care
services) in a home, school, or other setting.
‘‘(16) Abortion only if necessary to save the life
of the mother or if the pregnancy is the result of an
act of rape or incest.
‘‘(17) Dental services.
‘‘(18) Inpatient substance abuse treatment
services and residential substance abuse treatment
services.
‘‘(19) Outpatient substance abuse treatment
services.
‘‘(20) Case management services.
‘‘(21) Care coordination services.
169
‘‘(22) Physical therapy, occupational therapy,
and services for individuals with speech, hearing,
and language disorders.
‘‘(23) Hospice care.
‘‘(24) Any other medical, diagnostic, screening,
preventive, restorative, remedial, therapeutic, or re-
habilitative services (whether in a facility, home,
school, or other setting) if recognized by State law
and only if the service is—
‘‘(A) prescribed by or furnished by a physi-
cian or other licensed or registered practitioner
within the scope of practice as defined by State
law,
‘‘(B) performed under the general super-
vision or at the direction of a physician, or
‘‘(C) furnished by a health care facility
that is operated by a State or local government
or is licensed under State law and operating
within the scope of the license.
‘‘(25) Premiums for private health care insur-
ance coverage.
‘‘(26) Medical transportation.
‘‘(27) Enabling services (such as transpor-
tation, translation, and outreach services) only if de-
signed to increase the accessibility of primary and
170
preventive health care services for eligible low-in-
come individuals.
‘‘(28) Any other health care services or items
specified by the Secretary and not excluded under
this section.
‘‘(b) TARGETED LOW-INCOME CHILD DEFINED.—
For purposes of this title—
‘‘(1) IN GENERAL.—The term ‘targeted low-in-
come child’ means a child—
‘‘(A) who has been determined eligible by
the State for child health assistance under the
State plan;
‘‘(B) whose family income (as determined
under the State child health plan)—
‘‘(i) exceeds the medicaid applicable
income level (as defined in paragraph (2)
and expressed as a percentage of the pov-
erty line), but
‘‘(ii) but does not exceed an income
level that is 75 percentage points higher
(as so expressed) than the medicaid appli-
cable income level, or, if higher, 133 per-
cent of the poverty line for a family of the
size involved; and
171
‘‘(C) who is not found to be eligible for
medical assistance under title XIX or covered
under a group health plan or under health in-
surance coverage (as such terms are defined in
section 2791 of the Public Health Service Act).
Such term does not include a child who is an inmate
of a public institution.
‘‘(2) MEDICAID APPLICABLE INCOME LEVEL.—
The term ‘medicaid applicable income level’ means,
with respect to a child, the effective income level (ex-
pressed as a percent of the poverty line) that has
been specified under the State plan under title XIX
(including under a waiver authorized by the Sec-
retary or under section 1902(r)(2)), as of June 1,
1997, for the child to be eligible for medical assist-
ance under section 1902(l)(2) for the age of such
child. In applying the previous sentence in the case
of a child described in section 1902(l)(2)(D), such
level shall be applied taking into account the ex-
panded coverage effected among such children under
such section with the passage of time.
‘‘(c) ADDITIONAL DEFINITIONS.—For purposes of
this title:
‘‘(1) CHILD.—The term ‘child’ means an indi-
vidual under 19 years of age.
172
‘‘(2) CREDITABLE
HEALTH
COVERAGE.—The
term ‘creditable health coverage’ has the meaning
given the term ‘creditable coverage’ under section
2701(c) of the Public Health Service Act (42 U.S.C.
300gg(c)) and includes coverage (including the di-
rect provision of services) provided to a targeted low-
income child under this title.
‘‘(3) GROUP
HEALTH
PLAN; HEALTH
INSUR-
ANCE
COVERAGE; ETC.—The terms ‘group health
plan’, ‘group health insurance coverage’, and ‘health
insurance coverage’ have the meanings given such
terms in section 2191 of the Public Health Service
Act.
‘‘(4) 
LOW-INCOME.—The 
term 
‘low-income
child’ means a child whose family income is below
300 percent of the poverty line for a family of the
size involved.
‘‘(5) POVERTY LINE DEFINED.—The term ‘pov-
erty line’ has the meaning given such term in section
673(2) of the Community Services Block Grant Act
(42 U.S.C. 9902(2)), including any revision required
by such section.
‘‘(6) PREEXISTING
CONDITION
EXCLUSION.—
The term ‘preexisting condition exclusion’ has the
meaning given such term in section 2701(b)(1)(A) of
173
the 
Public 
Health 
Service 
Act 
(42 
U.S.C.
300gg(b)(1)(A)).
‘‘(7) STATE CHILD HEALTH PLAN; PLAN.—Un-
less the context otherwise requires, the terms ‘State
child health plan’ and ‘plan’ mean a State child
health plan approved under section 2105.
‘‘(8) UNCOVERED CHILD.—The term ‘uncovered
child’ means a child that does not have creditable
health coverage.’’.
(b) CONFORMING AMENDMENTS.—
(1) 
DEFINITION
OF
STATE.—Section
1101(a)(1) is amended—
(A) by striking ‘‘and XIX’’ and inserting
‘‘XIX, and XXI’’, and
(B) by striking ‘‘title XIX’’ and inserting
‘‘titles XIX and XXI’’.
SEC. 3503. OPTIONAL USE OF STATE CHILD HEALTH AS-
SISTANCE FUNDS FOR ENHANCED MEDICAID
MATCH FOR EXPANDED MEDICAID ELIGI-
BILITY.
(a) INCREASED FMAP FOR MEDICAL ASSISTANCE
FOR EXPANDED COVERAGE OF TARGETED LOW-INCOME
CHILDREN.—Section 1905 of the Social Security Act (42
U.S.C. 1396d) is amended—
174
(1) in subsection (b), by adding at the end the
following new sentence: ‘‘Notwithstanding the first
sentence of this subsection, in the case of a State
plan that meets the condition described in subsection
(t)(1), with respect to expenditures for medical as-
sistance for optional targeted low-income children
described in subsection (t)(2), the Federal medical
assistance percentage is equal to the enhanced medi-
cal assistance percentage described in subsection
(t)(3).’’; and
(2) by adding at the end the following new sub-
section:
‘‘(t)(1) The conditions described in this paragraph for
a State plan are as follows:
‘‘(A) The plan is not applying income and re-
source standards and methodologies for the purpose
of determining eligibility of individuals under section
1902(l) that are more restrictive than those applied
as of June 1, 1997, for the purpose of determining
eligibility of individuals under such section.
‘‘(B) The plan provides for such reporting of in-
formation about expenditures and payments attrib-
utable to the operation of this subsection as the Sec-
retary deems necessary in order to carry out sections
2103(d) and 2104(b)(2).
175
‘‘(C) The amount of the increased payments
under section 1903(a) resulting from the application
of this subsection does not exceed the total amount
of any allotment not otherwise expended by the
State under section 2103 for the period involved.
‘‘(2) For purposes of subsection (b), the term ‘op-
tional targeted low-income child’ means a targeted low-
income child described in section 2108(b)(1) who would
not qualify for medical assistance under the State plan
under this title based on such plan as in effect on June
1, 1997 (taking into account the process of individuals
aging into eligibility under section 1902(l)(2)(D)).
‘‘(3) The enhanced medical assistance percentage de-
scribed in this paragraph for a State is equal to the Fed-
eral medical assistance percentage (as defined in the first
sentence of subsection (b)) for the State increased by a
number of percentage points equal to 30 percent of the
number of percentage points by which (A) such Federal
medical assistance percentage for the State, is less than
(B) 100 percent.
‘‘(4) Notwithstanding any other provision of this title,
a State plan under this title may impose a limit on the
number of optional targeted low-income children described
in paragraph (2).’’.
176
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to medical assistance for items and
services furnished on or after October 1, 1997.
SEC. 3504. MEDICAID PRESUMPTIVE ELIGIBILITY FOR LOW-
INCOME CHILDREN.
(a) IN GENERAL.—Title XIX of the Social Security
Act is amended by inserting after section 1920 the follow-
ing new section:
‘‘PRESUMPTIVE ELIGIBILITY FOR CHILDREN
‘‘SEC. 1920A. (a) A State plan approved under sec-
tion 1902 may provide for making medical assistance with
respect to health care items and services covered under
the State plan available to a child during a presumptive
eligibility period.
‘‘(b) For purposes of this section:
‘‘(1) The term ‘child’ means an individual
under 19 years of age.
‘‘(2) The term ‘presumptive eligibility period’
means, with respect to a child, the period that—
‘‘(A) begins with the date on which a
qualified entity determines, on the basis of pre-
liminary information, that the family income of
the child does not exceed the applicable income
level of eligibility under the State plan, and
177
‘‘(B) ends with (and includes) the earlier
of—
‘‘(i) the day on which a determination
is made with respect to the eligibility of
the child for medical assistance under the
State plan, or
‘‘(ii) in the case of a child on whose
behalf an application is not filed by the
last day of the month following the month
during which the entity makes the deter-
mination referred to in subparagraph (A),
such last day.
‘‘(3)(A) Subject to subparagraph (B), the term
‘qualified entity’ means any entity that—
‘‘(i)(I) is eligible for payments under a
State plan approved under this title and pro-
vides items and services described in subsection
(a) or (II) is authorized to determine eligibility
of a child to participate in a Head Start pro-
gram under the Head Start Act (42 U.S.C.
9821 et seq.), eligibility of a child to receive
child care services for which financial assistance
is provided under the Child Care and Develop-
ment Block Grant Act of 1990 (42 U.S.C. 9858
et seq.), eligibility of an infant or child to re-
178
ceive assistance under the special supplemental
nutrition program for women, infants, and chil-
dren (WIC) under section 17 of the Child Nu-
trition Act of 1966 (42 U.S.C. 1786); and
‘‘(ii) is determined by the State agency to
be capable of making determinations of the type
described in paragraph (1)(A).
‘‘(B) The Secretary may issue regulations fur-
ther limiting those entities that may become quali-
fied entities in order to prevent fraud and abuse and
for other reasons.
‘‘(C) Nothing in this section shall be construed
as preventing a State from limiting the classes of en-
tities that may become qualified entities, consistent
with any limitations imposed under subparagraph
(B).
‘‘(c)(1) The State agency shall provide qualified enti-
ties with—
‘‘(A) such forms as are necessary for an appli-
cation to be made on behalf of a child for medical
assistance under the State plan, and
‘‘(B) information on how to assist parents,
guardians, and other persons in completing and fil-
ing such forms.
179
‘‘(2) A qualified entity that determines under sub-
section (b)(1)(A) that a child is presumptively eligible for
medical assistance under a State plan shall—
‘‘(A) notify the State agency of the determina-
tion within 5 working days after the date on which
determination is made, and
‘‘(B) inform the parent or custodian of the
child at the time the determination is made that an
application for medical assistance under the State
plan is required to be made by not later than the
last day of the month following the month during
which the determination is made.
‘‘(3) In the case of a child who is determined by a
qualified entity to be presumptively eligible for medical as-
sistance under a State plan, the parent, guardian, or other
person shall make application on behalf of the child for
medical assistance under such plan by not later than the
last day of the month following the month during which
the determination is made, which application may be the
application used for the receipt of medical assistance by
individuals described in section 1902(l)(1).
‘‘(d) Notwithstanding any other provision of this title,
medical assistance for items and services described in sub-
section (a) that—
‘‘(1) are furnished to a child—
180
‘‘(A) during a presumptive eligibility pe-
riod,
‘‘(B) by a entity that is eligible for pay-
ments under the State plan; and
‘‘(2) are included in the care and services cov-
ered by a State plan;
shall be treated as medical assistance provided by such
plan for purposes of section 1903.’’.
(b) 
CONFORMING
AMENDMENTS.—(1) 
Section
1902(a)(47) of such Act (42 U.S.C. 1396a(a)(47)) is
amended by inserting before the semicolon at the end the
following: ‘‘and provide for making medical assistance for
items and services described in subsection (a) of section
1920A available to children during a presumptive eligi-
bility period in accordance with such section’’.
(2) Section 1903(u)(1)(D)(v) of such Act (42 U.S.C.
1396b(u)(1)(D)(v)) of such Act is amended by inserting
before the period at the end the following: ‘‘or for items
and services described in subsection (a) of section 1920A
provided to a child during a presumptive eligibility period
under such section’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
181
SEC. 3505. STATE OPTION OF CONTINUATION OF MEDICAID
ELIGIBILITY FOR DISABLED CHILDREN WHO
LOSE SSI BENEFITS.
Section 
1902(a)(10)(A)(ii) 
(42 
U.S.C.
1396a(a)(10)(A)(ii)) is amended—
(1) by striking ‘‘or’’ at the end of subclause
(XI),
(2) by striking ‘‘or’’ at the end of subclause
(XII), and
(3) by adding at the end the following:
‘‘(XIII) with respect to whom
supplemental security income benefits
were being paid under title XVI as of
the date of the enactment of section
211(a) of the Personal Responsibility
and Work Opportunity Reconciliation
Act of 1996 (P.L. 104–193)) and
would continue to be paid but for the
enactment of that section;’’.
TITLE IV—COMMITTEE ON
COMMERCE—MEDICARE
SEC. 4000. AMENDMENTS TO SOCIAL SECURITY ACT AND
REFERENCES TO OBRA; TABLE OF CONTENTS
OF TITLE.
(a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
182
title an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence shall be considered to be made to that section or
other provision of the Social Security Act.
(b) REFERENCES TO OBRA.—In this title, the terms
‘‘OBRA–1986’’, 
‘‘OBRA–1987’’, 
‘‘OBRA–1989’’,
‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus
Budget Reconciliation Act of 1986 (Public Law 99–509),
the Omnibus Budget Reconciliation Act of 1987 (Public
Law 100–203), the Omnibus Budget Reconciliation Act
of 1989 (Public Law 101–239), the Omnibus Budget Rec-
onciliation Act of 1990 (Public Law 101–508), and the
Omnibus Budget Reconciliation Act of 1993 (Public Law
103–66), respectively.
(c) TABLE OF CONTENTS OF TITLE.—The table of
contents of this title is as follows:
Sec. 4000. Amendments to Social Security Act and references to OBRA; table
of contents of title.
Subtitle A—MedicarePlus Program
CHAPTER 1—MEDICAREPLUS PROGRAM
SUBCHAPTER A—MEDICAREPLUS PROGRAM
Sec. 4001. Establishment of MedicarePlus program.
‘‘PART C—MEDICAREPLUS PROGRAM
‘‘Sec. 1851. Eligibility, election, and enrollment.
‘‘Sec. 1852. Benefits and beneficiary protections.
‘‘Sec. 1853. Payments to MedicarePlus organizations.
‘‘Sec. 1854. Premiums.
‘‘Sec. 1855. Organizational and financial requirements for MedicarePlus
organizations; provider-sponsored organizations.
‘‘Sec. 1856. Establishment of standards.
‘‘Sec. 1857. Contracts with MedicarePlus organizations.
‘‘Sec. 1859. Definitions; miscellaneous provisions.
183
Sec. 4002. Transitional rules for current medicare HMO program.
Sec. 4003. Conforming changes in medigap program.
SUBCHAPTER B—SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS
ACCOUNTS
Sec. 4006. MedicarePlus MSA.
SUBCHAPTER C—GME, IME, AND DSH PAYMENTS FOR MANAGED CARE
ENROLLEES
Sec. 4008. Graduate medical education and indirect medical education pay-
ments for managed care enrollees.
Sec. 4009. Disproportionate share hospital payments for managed care enroll-
ees.
CHAPTER 2—INTEGRATED LONG-TERM CARE PROGRAMS
SUBCHAPTER A—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
Sec. 4011. Reference to coverage of PACE under the medicare program.
Sec. 4012. Reference to establishment of PACE program as medicaid State op-
tion.
SUBCHAPTER B—SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS)
Sec. 4015. Social health maintenance organizations (SHMOs).
SUBCHAPTER C—OTHER PROGRAMS
Sec. 4018. Orderly transition of municipal health service demonstration
projects.
Sec. 4019. Extension of certain medicare community nursing organization dem-
onstration projects.
CHAPTER 3—MEDICARE PAYMENT ADVISORY COMMISSION
Sec. 4021. Medicare Payment Advisory Commission.
CHAPTER 4—MEDIGAP PROTECTIONS
Sec. 4031. Medigap protections.
Sec. 4032. Medicare prepaid competitive pricing demonstration project.
Subtitle B—Prevention Initiatives
Sec. 4101. Screening mammography.
Sec. 4102. Screening pap smear and pelvic exams.
Sec. 4103. Prostate cancer screening tests.
Sec. 4104. Coverage of colorectal screening.
Sec. 4105. Diabetes screening tests.
Sec. 4106. Standardization of medicare coverage of bone mass measurements.
Sec. 4107. Vaccines outreach expansion.
Sec. 4108. Study on preventive benefits.
Subtitle C—Rural Initiatives
Sec. 4206. Informatics, telemedicine, and education demonstration project.
Subtitle D—Anti-Fraud and Abuse Provisions
184
Sec. 4301. Permanent exclusion for those convicted of 3 health care related
crimes.
Sec. 4302. Authority to refuse to enter into medicare agreements with individ-
uals or entities convicted of felonies.
Sec. 4303. Inclusion of toll-free number to report medicare waste, fraud, and
abuse in explanation of benefits forms.
Sec. 4304. Liability of medicare carriers and fiscal intermediaries for claims
submitted by excluded providers.
Sec. 4305. Exclusion of entity controlled by family member of a sanctioned in-
dividual.
Sec. 4306. Imposition of civil money penalties.
Sec. 4307. Disclosure of information and surety bonds.
Sec. 4308. Provision of certain identification numbers.
Sec. 4309. Advisory opinions regarding certain physician self-referral provi-
sions.
Sec. 4310. Nondiscrimination in post-hospital referral to home health agencies.
Sec. 4311. Other fraud and abuse related provisions.
Subtitle E—Prospective Payment Systems
CHAPTER 2—PAYMENT UNDER PART B
SUBCHAPTER A—PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT
SERVICES
Sec. 4411. Elimination of formula-driven overpayments (FDO) for certain out-
patient hospital services.
Sec. 4412. Extension of reductions in payments for costs of hospital outpatient
services.
Sec. 4413. Prospective payment system for hospital outpatient department serv-
ices.
SUBCHAPTER B—REHABILITATION SERVICES
Sec. 4421. Rehabilitation agencies and services.
Sec. 4422. Comprehensive outpatient rehabilitation facilities (corf).
SUBCHAPTER C—AMBULANCE SERVICES
Sec. 4431. Payments for ambulance services.
Sec. 4432. Demonstration of coverage of ambulance services under medicare
through contracts with units of local government.
CHAPTER 3—PAYMENT UNDER PARTS A AND B
Sec. 4441. Prospective payment for home health services.
Subtitle G—Provisions Relating to Part B Only
CHAPTER 1—PHYSICIANS’ SERVICES
Sec. 4601. Establishment of single conversion factor for 1998.
Sec. 4602. Establishing update to conversion factor to match spending under
sustainable growth rate.
Sec. 4603. Replacement of volume performance standard with sustainable
growth rate.
Sec. 4604. Payment rules for anesthesia services.
Sec. 4605. Implementation of resource-based physician practice expense.
185
Sec. 4606. Dissemination of information on high per admission relative values
for in-hospital physicians’ services.
Sec. 4607. No X-ray required for chiropractic services.
Sec. 4608. Temporary coverage restoration for portable electrocardiogram
transportation.
CHAPTER 2—OTHER PAYMENT PROVISIONS
Sec. 4611. Payments for durable medical equipment.
Sec. 4612. Oxygen and oxygen equipment.
Sec. 4613. Reduction in updates to payment amounts for clinical diagnostic
laboratory tests.
Sec. 4614. Simplification in administration of laboratory services benefit.
Sec. 4615. Updates for ambulatory surgical services.
Sec. 4616. Reimbursement for drugs and biologicals.
Sec. 4617. Coverage of oral anti-nausea drugs under chemotherapeutic regimen.
Sec. 4618. Rural health clinic services.
Sec. 4619. Increased medicare reimbursement for nurse practitioners and clini-
cal nurse specialists.
Sec. 4620. Increased medicare reimbursement for physician assistants.
Sec. 4621. Renal dialysis-related services.
Sec. 4622. Payment for cochlear implants as customized durable medical equip-
ment.
CHAPTER 3—PART B PREMIUM
Sec. 4631. Part B premium.
Subtitle H—Provisions Relating to Parts A and B
CHAPTER 1—PROVISIONS RELATING TO MEDICARE SECONDARY PAYER
Sec. 4701. Permanent extension and revision of certain secondary payer provi-
sions.
Sec. 4702. Clarification of time and filing limitations.
Sec. 4703. Permitting recovery against third party administrators.
CHAPTER 2—HOME HEALTH SERVICES
Sec. 4711. Recapturing savings resulting from temporary freeze on payment in-
creases for home health services.
Sec. 4712. Interim payments for home health services.
Sec. 4713. Clarification of part-time or intermittent nursing care.
Sec. 4714. Study of definition of homebound.
Sec. 4715. Payment based on location where home health service is furnished.
Sec. 4716. Normative standards for home health claims denials,
Sec. 4717. No home health benefits based solely on drawing blood.
Sec. 4718. Making part B primary payor for certain home health services.
CHAPTER 3—BABY BOOM GENERATION MEDICARE COMMISSION
Sec. 4721. Bipartisan Commission on the Effect of the Baby Boom Generation
on the Medicare Program.
CHAPTER 4—PROVISIONS RELATING TO DIRECT GRADUATE MEDICAL
EDUCATION
186
Sec. 4731. Limitation on payment based on number of residents and implemen-
tation of rolling average FTE count.
Sec. 4732. Phased-in limitation on hospital overhead and supervisory physician
component of direct medical education costs.
Sec. 4733. Permitting payment to non-hospital providers.
Sec. 4734. Incentive payments under plans for voluntary reduction in number
of residents.
Sec. 4735. Demonstration project on use of consortia.
Sec. 4736. Recommendations on long-term payment policies regarding financ-
ing teaching hospitals and graduate medical education.
Sec. 4737. Medicare special reimbursement rule for certain combined residency
programs.
CHAPTER 5—OTHER PROVISIONS
Sec. 4741. Centers of excellence.
Sec. 4742. Medicare part B special enrollment period and waiver of part B late
enrollment penalty and medigap special open enrollment period
for certain military retirees and dependents.
Sec. 4743. Competitive bidding for certain items and services.
Subtitle I—Medical Liability Reform
CHAPTER 1—GENERAL PROVISIONS
Sec. 4801. Federal reform of health care liability actions.
Sec. 4802. Definitions.
Sec. 4803. Effective date.
CHAPTER 2—UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS
Sec. 4811. Statute of limitations.
Sec. 4812. Calculation and payment of damages.
Sec. 4813. Alternative dispute resolution.
Subtitle A—MedicarePlus Program
CHAPTER 1—MEDICAREPLUS PROGRAM
Subchapter A—MedicarePlus Program
SEC. 4001. ESTABLISHMENT OF MEDICAREPLUS PROGRAM.
(a) IN GENERAL.—Title XVIII is amended by redes-
ignating part C as part D and by inserting after part B
the following new part:
187
‘‘PART C—MEDICAREPLUS PROGRAM
‘‘ELIGIBILITY, ELECTION, AND ENROLLMENT
‘‘SEC. 1851. (a) CHOICE OF MEDICARE BENEFITS
THROUGH MEDICAREPLUS PLANS.—
‘‘(1) IN GENERAL.—Subject to the provisions of
this section, each MedicarePlus eligible individual
(as defined in paragraph (3)) is entitled to elect to
receive benefits under this title—
‘‘(A) through the medicare fee-for-service
program under parts A and B, or
‘‘(B) through enrollment in a MedicarePlus
plan under this part.
‘‘(2) TYPES
OF
MEDICAREPLUS
PLANS
THAT
MAY BE AVAILABLE.—A MedicarePlus plan may be
any of the following types of plans of health insur-
ance:
‘‘(A) COORDINATED CARE PLANS.—Coordi-
nated care plans which provide health care serv-
ices, including health maintenance organization
plans and preferred provider organization plans.
‘‘(B) PLANS OFFERED BY PROVIDER-SPON-
SORED
ORGANIZATION.—A MedicarePlus plan
offered by a provider-sponsored organization, as
defined in section 1855(e).
188
‘‘(C) COMBINATION
OF
MSA
PLAN
AND
CONTRIBUTIONS TO MEDICAREPLUS MSA.—An
MSA plan, as defined in section 1859(b)(2),
and a contribution into a MedicarePlus medical
savings account (MSA).
‘‘(3) MEDICAREPLUS ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—In this title, subject to
subparagraph (B), the term ‘MedicarePlus eligi-
ble individual’ means an individual who is enti-
tled to benefits under part A and enrolled under
part B.
‘‘(B) SPECIAL
RULE
FOR
END-STAGE
RENAL DISEASE.—Such term shall not include
an individual medically determined to have end-
stage renal disease, except that an individual
who develops end-stage renal disease while en-
rolled in a MedicarePlus plan may continue to
be enrolled in that plan.
‘‘(b) SPECIAL RULES.—
‘‘(1) RESIDENCE REQUIREMENT.—
‘‘(A) IN
GENERAL.—Except as the Sec-
retary may otherwise provide, an individual is
eligible to elect a MedicarePlus plan offered by
a MedicarePlus organization only if the organi-
189
zation serves the geographic area in which the
individual resides.
‘‘(B) CONTINUATION
OF
ENROLLMENT
PERMITTED.—Pursuant to rules specified by
the Secretary, the Secretary shall provide that
an individual may continue enrollment in a
plan, notwithstanding that the individual no
longer resides in the service area of the plan, so
long as the plan provides benefits for enrollees
located in the area in which the individual re-
sides.
‘‘(2) SPECIAL RULE FOR CERTAIN INDIVIDUALS
COVERED UNDER FEHBP OR ELIGIBLE FOR VETER-
ANS 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 Personnel Management has adopted policies
which will ensure that the enrollment of such
individuals in such plans will not result in in-
creased expenditures for the Federal Govern-
190
ment for health benefit plans under such chap-
ter.
‘‘(B) VA AND DOD.—The Secretary may
apply rules similar to the rules described in
subparagraph (A) in the case of individuals who
are eligible for health care benefits under chap-
ter 55 of title 10, United States Code, or under
chapter 17 of title 38 of such Code.
‘‘(3) LIMITATION
ON
ELIGIBILITY
OF
QUALI-
FIED MEDICARE BENEFICIARIES AND OTHER MEDIC-
AID
BENEFICIARIES
TO
ENROLL
IN
AN
MSA
PLAN.—An individual 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 sec-
tion 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
eligible to enroll in an MSA plan under this
part—
‘‘(i) on or after January 1, 2003, un-
less the enrollment is the continuation of
191
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 500,000.
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 sta-
tus of the Trust Funds under this title.
‘‘(C) REPORTS.—The Secretary shall sub-
mit to Congress periodic reports on the num-
bers of individuals enrolled in such plans and
on the evaluation being conducted under sub-
paragraph (B). The Secretary shall submit such
a report, by not later than March 1, 2002, on
whether the time limitation under subparagraph
192
(A)(i) should be extended or removed and
whether to change the numerical limitation
under subparagraph (A)(ii).
‘‘(c) PROCESS FOR EXERCISING CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a process through which elections described in
subsection (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 only during coverage election periods speci-
fied under subsection (e) and shall become effective
as provided in subsection (f).
‘‘(2) COORDINATION THROUGH MEDICAREPLUS
ORGANIZATIONS.—
‘‘(A) ENROLLMENT.—Such process shall
permit an individual who wishes to elect a
MedicarePlus plan offered by a MedicarePlus
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
MedicarePlus plan offered by a MedicarePlus
organization and who wishes to terminate such
election, to terminate such election through the
193
filing of an appropriate election form with the
organization.
‘‘(3) DEFAULT.—
‘‘(A) INITIAL ELECTION.—
‘‘(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 medicare fee-for-service pro-
gram option.
‘‘(ii) SEAMLESS
CONTINUATION
OF
COVERAGE.—The Secretary may establish
procedures under which an individual who
is enrolled in a health plan (other than
MedicarePlus 
plan) 
offered 
by 
a
MedicarePlus 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 MedicarePlus plan offered by
the organization (or, if the organization of-
fers more than one such plan, such plan or
plans as the Secretary identifies under
such procedures).
194
‘‘(B) CONTINUING PERIODS.—An individ-
ual 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—
‘‘(i) the individual changes the elec-
tion under this section, or
‘‘(ii) a MedicarePlus plan is discon-
tinued, if the individual had elected such
plan at the time of the discontinuation.
‘‘(d) PROVIDING INFORMATION TO PROMOTE IN-
FORMED CHOICE.—
‘‘(1) IN GENERAL.—The Secretary shall provide
for activities under this subsection to broadly dis-
seminate information to medicare beneficiaries (and
prospective medicare beneficiaries) on the coverage
options provided under this section in order to pro-
mote an active, informed selection among such op-
tions.
‘‘(2) PROVISION OF NOTICE.—
‘‘(A) OPEN
SEASON
NOTIFICATION.—At
least 30 days before the beginning of each an-
nual, coordinated election period (as defined in
subsection (e)(3)(B)), the Secretary shall mail
195
to each MedicarePlus eligible individual residing
in an area the following:
‘‘(i) GENERAL
INFORMATION.—The
general information described in paragraph
(3).
‘‘(ii) LIST OF PLANS AND COMPARI-
SON OF PLAN OPTIONS.—A list identifying
the MedicarePlus plans that are (or will
be) available to residents of the area and
information described in paragraph (4)
concerning such plans. Such information
shall be presented in a comparative form.
‘‘(iii) MEDICAREPLUS MONTHLY CAPI-
TATION RATE.—The amount of the month-
ly MedicarePlus capitation rate for the
area.
‘‘(iv) 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
MEDICAREPLUS
ELIGIBLE
INDIVIDUALS.—To
196
the extent practicable, the Secretary shall, not
later than 2 months before the beginning of the
initial MedicarePlus enrollment period for an
individual described in subsection (e)(1), mail
to the individual the information described in
subparagraph (A).
‘‘(C) FORM.—The information dissemi-
nated under this paragraph shall be written and
formatted using language that is easily under-
standable by medicare beneficiaries.
‘‘(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 MedicarePlus
plans and the benefits and monthly premiums
(and net monthly premiums) for such plans.
‘‘(3) GENERAL INFORMATION.—General infor-
mation under this paragraph, with respect to cov-
erage under this part during a year, shall include
the following:
‘‘(A) BENEFITS UNDER FEE-FOR-SERVICE
PROGRAM
OPTION.—A general description of
the benefits covered (and not covered) under
the medicare fee-for-service program under
parts A and B, including—
197
‘‘(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.
‘‘(C) ELECTION
PROCEDURES.—Informa-
tion and instructions on how to exercise election
options under this section.
‘‘(D) RIGHTS.—The general description of
procedural rights (including grievance and ap-
peals procedures) of beneficiaries under the
medicare 
fee-for-service 
program 
and 
the
MedicarePlus program and right to be pro-
tected against discrimination based on health
status-related factors under section 1852(b).
‘‘(E) INFORMATION
ON
MEDIGAP
AND
MEDICARE SELECT.—A general description of
the benefits, enrollment rights, and other re-
quirements applicable to medicare supplemental
policies under section 1882 and provisions relat-
198
ing to medicare select policies described in sec-
tion 1882(t).
‘‘(F) POTENTIAL FOR CONTRACT TERMI-
NATION.—The fact that a MedicarePlus organi-
zation may terminate or refuse to renew its
contract under this part and the effect the ter-
mination or nonrenewal of its contract may
have 
on 
individuals 
enrolled 
with 
the
MedicarePlus plan under this part.
‘‘(4) INFORMATION
COMPARING
PLAN
OP-
TIONS.—Information under this paragraph, with re-
spect to a MedicarePlus plan for a year, shall in-
clude the following:
‘‘(A) BENEFITS.—The benefits covered
(and not covered) under the plan, including—
‘‘(i) covered items and services beyond
those provided under the medicare fee-for-
service program,
‘‘(ii) any beneficiary cost sharing,
‘‘(iii) any maximum limitations on
out-of-pocket expenses,
‘‘(iv) in the case of an MSA plan, dif-
ferences in cost sharing under such a plan
compared to under other MedicarePlus
plans,
199
‘‘(v) the use of provider networks and
the restriction on payments for services
furnished other than by other through the
organization,
‘‘(vi) the organization’s coverage of
emergency and urgently needed care,
‘‘(vii) the appeal and grievance rights
of enrollees,
‘‘(viii) number of grievances and ap-
peals, and information on their disposition
in the aggregate,
‘‘(ix) procedures used by the organiza-
tion to control utilization of services and
expenditures, and
‘‘(x) any exclusions in the types of
providers participating in the plan’s net-
work.
‘‘(B) PREMIUMS.—The monthly premium
(and net monthly premium), 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 perform-
ance indicators for the benefits under the plan
200
(and how they compare to such indicators
under the medicare fee-for-service program
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 outside the plan’s service area),
‘‘(ii) information on medicare enrollee
satisfaction,
‘‘(iii) information on health outcomes,
and
‘‘(iv) the recent record regarding com-
pliance of the plan with requirements of
this part (as determined by the Secretary).
‘‘(E) 
SUPPLEMENTAL
BENEFITS
OP-
TIONS.—Whether the organization offering the
plan offers optional supplemental benefits and
the terms and conditions (including premiums)
for such coverage.
‘‘(5) MAINTAINING A TOLL-FREE NUMBER AND
INTERNET
SITE.—The Secretary shall maintain a
toll-free 
number 
for 
inquiries 
regarding
MedicarePlus options and the operation of this part
201
in all areas in which MedicarePlus plans are offered
and an Internet site through which individuals may
electronically obtain information on such options and
MedicarePlus plans.
‘‘(6) USE
OF
NONFEDERAL
ENTITIES.—The
Secretary may enter into contracts with non-Federal
entities to carry out activities under this subsection.
‘‘(7) 
PROVISION
OF
INFORMATION.—A
MedicarePlus organization shall provide the Sec-
retary with such information on the organization
and each MedicarePlus plan it offers as may be re-
quired for the preparation of the information re-
ferred to in paragraph (2)(A).
‘‘(e) COVERAGE ELECTION PERIODS.—
‘‘(1) INITIAL
CHOICE
UPON
ELIGIBILITY
TO
MAKE ELECTION IF MEDICAREPLUS PLANS AVAIL-
ABLE TO INDIVIDUAL.—If, at the time an individual
first becomes entitled to benefits under part A and
enrolled under part B, there is one or more
MedicarePlus plans offered in the area in which the
individual resides, the individual shall make the elec-
tion under this section during a period (of a dura-
tion and beginning at a time specified by the Sec-
retary) at such time. Such period shall be specified
in a manner so that, in the case of an individual who
202
elects a MedicarePlus plan during the period, cov-
erage under the plan becomes effective as of the first
date on which the individual may receive such cov-
erage.
‘‘(2) OPEN ENROLLMENT AND DISENROLLMENT
OPPORTUNITIES.—Subject to paragraph (5)—
‘‘(A) CONTINUOUS
OPEN
ENROLLMENT
AND DISENROLLMENT THROUGH 2000.—At any
time 
during 
1998, 
1999, 
and 
2000, 
a
MedicarePlus eligible individual may change the
election under subsection (a)(1).
‘‘(B) CONTINUOUS
OPEN
ENROLLMENT
AND
DISENROLLMENT
FOR
FIRST
MONTHS
DURING 2001.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), at any time during the first 6 months
of 2001, or, if the individual first becomes
a MedicarePlus eligible individual during
2001, during the first 6 months during
2001 
in 
which 
the 
individual 
is 
a
MedicarePlus 
eligible 
individual, 
a
MedicarePlus 
eligible 
individual 
may
change the election under subsection
(a)(1).
203
‘‘(ii) LIMITATION
OF
ONE
CHANGE
PER
YEAR.—An individual may exercise
the right under clause (i) only once during
2001. The limitation under this clause
shall not apply to changes in elections ef-
fected during an annual, coordinated elec-
tion period under paragraph (3) or during
a special enrollment period under para-
graph (4).
‘‘(C) CONTINUOUS
OPEN
ENROLLMENT
AND DISENROLLMENT FOR FIRST 3 MONTHS IN
SUBSEQUENT YEARS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), at any time during the first 3 months
of a year after 2001, or, if the individual
first becomes a MedicarePlus eligible indi-
vidual during a year after 2001, during the
first 3 months of such year in which the
individual is a MedicarePlus eligible indi-
vidual, a MedicarePlus eligible individual
may change the election under subsection
(a)(1).
‘‘(ii) LIMITATION
OF
ONE
CHANGE
PER
YEAR.—An individual may exercise
the right under clause (i) only once a year.
204
The limitation under this clause shall not
apply to changes in elections effected dur-
ing an annual, coordinated election period
under paragraph (3) or during a special
enrollment period under paragraph (4).
‘‘(3) ANNUAL, COORDINATED
ELECTION
PE-
RIOD.—
‘‘(A) IN GENERAL.—Subject to paragraph
(5), each individual who is eligible to make an
election under this section may change such
election during an annual, coordinated election
period.
‘‘(B) ANNUAL, COORDINATED
ELECTION
PERIOD.—For purposes of this section, the
term ‘annual, coordinated election period’
means, with respect to a calendar year (begin-
ning with 2001), the month of October before
such year.
‘‘(C) MEDICAREPLUS HEALTH FAIRS.—In
the month of October of each year (beginning
with 1998), the Secretary shall provide for a
nationally coordinated educational and publicity
campaign to inform MedicarePlus eligible indi-
viduals about MedicarePlus plans and the elec-
tion process provided under this section.
205
‘‘(4) SPECIAL
ELECTION
PERIODS.—Effective
as of January 1, 2001, an individual may dis-
continue an election of a MedicarePlus plan offered
by a MedicarePlus organization other than during
an annual, coordinated election period and 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
discontinued providing the plan;
‘‘(B) the individual is no longer eligible to
elect the plan because of a change in the indi-
vidual’s place of residence or other change in
circumstances (specified by the Secretary, but
not including termination of the individual’s en-
rollment on the basis described in clause (i) or
(ii) of 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 (including
the failure to provide an enrollee on a
206
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
behalf) 
materially 
misrepresented 
the
plan’s provisions in marketing the plan to
the individual; or
‘‘(D) the individual meets such other ex-
ceptional conditions as the Secretary may pro-
vide.
‘‘(5) SPECIAL RULES FOR MSA PLANS.—Not-
withstanding the preceding provisions of this sub-
section, an individual—
‘‘(A) may elect an MSA plan only during—
‘‘(i) an initial open enrollment period
described in paragraph (1),
‘‘(ii) an annual, coordinated election
period described in paragraph (3)(B), or
‘‘(iii) the months of October 1998 and
October 1999; and
‘‘(B) may not discontinue an election of an
MSA plan except during the periods described
207
in clause (ii) or (iii) of subparagraph (A) and
under paragraph (4).
‘‘(f) EFFECTIVENESS OF ELECTIONS AND CHANGES
OF ELECTIONS.—
‘‘(1) DURING INITIAL COVERAGE ELECTION PE-
RIOD.—An election of coverage made during the ini-
tial coverage election period under subsection (e)(1)
shall take effect upon the date the individual be-
comes 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
retroactive 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 de-
fined in subsection (e)(3)(B)) in a year shall take ef-
fect as of the first day of the following year.
‘‘(4) OTHER PERIODS.—An election or change
of coverage made during any other period under
subsection (e)(4) shall take effect in such manner as
208
the Secretary provides in a manner consistent (to
the extent practicable) with protecting continuity of
health benefit coverage.
‘‘(g) GUARANTEED ISSUE AND RENEWAL.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, a MedicarePlus organization shall pro-
vide that at any time during which elections are ac-
cepted under this section with respect to a
MedicarePlus plan offered by the organization, the
organization will accept without restrictions individ-
uals who are eligible to make such election.
‘‘(2) PRIORITY.—If the Secretary determines
that a MedicarePlus organization, in relation to a
MedicarePlus plan it offers, has a capacity limit and
the number of MedicarePlus eligible individuals who
elect the plan under this section exceeds the capacity
limit, the organization may limit the election of indi-
viduals of the plan under this section but only if pri-
ority 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
209
described in section 1852(b), among the individ-
uals (who seek to elect the plan).
The preceding sentence shall not apply if it would
result in the enrollment of enrollees substantially
nonrepresentative, as determined in accordance with
regulations of the Secretary, of the medicare popu-
lation in the service area of the plan.
‘‘(3) LIMITATION ON TERMINATION OF ELEC-
TION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a MedicarePlus organization may
not for any reason terminate the election of any
individual under this section for a MedicarePlus
plan it offers.
‘‘(B) BASIS FOR TERMINATION OF ELEC-
TION.—A MedicarePlus organization may ter-
minate an individual’s election under this sec-
tion with respect to a MedicarePlus 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),
210
‘‘(ii) the individual has engaged in
disruptive behavior (as specified in such
standards), or
‘‘(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 medicare
fee-for-service program option described 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
coverage 
to 
coverage 
under 
another
MedicarePlus plan. Such an individual who
fails to make an election during such pe-
riod is deemed to have chosen to change
coverage to the medicare fee-for-service
211
program option described in subsection
(a)(1)(A).
‘‘(D) ORGANIZATION
OBLIGATION
WITH
RESPECT TO ELECTION FORMS.—Pursuant to a
contract under section 1857, each MedicarePlus
organization receiving an election form under
subsection (c)(2) shall transmit to the Secretary
(at such time and in such manner as the Sec-
retary 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 AP-
PLICATION FORMS.—
‘‘(1) SUBMISSION.—No marketing material or
application 
form 
may 
be 
distributed 
by 
a
MedicarePlus organization to (or for the use of)
MedicarePlus eligible individuals unless—
‘‘(A) at least 45 days before the date of
distribution the organization has submitted the
material 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
213
ganization) completing any portion of any election
form used to carry out elections under this section
on behalf of any individual.
‘‘(i) EFFECT OF ELECTION OF MEDICAREPLUS PLAN
OPTION.—Subject to sections 1852(a)(5), 1857(f)(2), and
1857(g)—
‘‘(1) payments under a contract with a
MedicarePlus organization under section 1853(a)
with respect to an individual electing a MedicarePlus
plan offered by the organization shall be instead of
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 (f) of section
1853, only the MedicarePlus organization shall be
entitled to receive payments from the Secretary
under this title for services furnished to the individ-
ual.
‘‘BENEFITS AND BENEFICIARY PROTECTIONS
‘‘SEC. 1852. (a) BASIC BENEFITS.—
‘‘(1) IN GENERAL.—Except as provided in sec-
tion 1859(b)(2) for MSA plans, each MedicarePlus
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—
214
‘‘(A) those items and services for which
benefits are available under parts A and B to
individuals residing in the area served by the
plan, and
‘‘(B) additional benefits required under
section 1854(f)(1)(A).
‘‘(2) 
SATISFACTION
OF
REQUIREMENT.—A
MedicarePlus plan (other than an MSA plan) offered
by a MedicarePlus organization satisfies paragraph
(1)(A), with respect to benefits for items and serv-
ices furnished other than through a provider that
has a contract with the organization 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 per-
mitted under such parts).
‘‘(3) SUPPLEMENTAL BENEFITS.—
‘‘(A) BENEFITS
INCLUDED
SUBJECT
TO
SECRETARY’S
APPROVAL.—Each MedicarePlus
organization may provide to individuals enrolled
under this part (without affording those individ-
uals an option to decline the coverage) supple-
mental health care benefits that the Secretary
215
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 MedicarePlus eligible individuals with
the organization.
‘‘(B) 
AT
ENROLLEES’ 
OPTION.—A
MedicarePlus organization may provide to indi-
viduals 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.
‘‘(4) ORGANIZATION AS SECONDARY PAYER.—
Notwithstanding any other provision of law, a
MedicarePlus organization may (in the case of the
provision of items and services to an individual
under a MedicarePlus 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 accord-
ance with the charges allowed under such a law,
plan, or policy—
‘‘(A) the insurance carrier, employer, or
other entity which under such law, plan, or pol-
216
icy is to pay for the provision of such services,
or
‘‘(B) such individual to the extent that the
individual has been paid under such law, plan,
or policy for such services.
‘‘(5) NATIONAL COVERAGE DETERMINATIONS.—
If there is a national coverage determination made
in the period beginning on the date of an announce-
ment under section 1853(b) and ending on the date
of the next announcement under such section and
the Secretary projects that the determination will re-
sult in a significant change in the costs to a
MedicarePlus organization of providing the benefits
that are the subject of such national coverage deter-
mination and that such change in costs was not in-
corporated in the determination of the annual
MedicarePlus capitation rate under section 1853 in-
cluded in the announcement made at the beginning
of such period—
‘‘(A) such determination shall not apply to
contracts under this part until the first contract
year that begins after the end of such period,
and
‘‘(B) if such coverage determination pro-
vides for coverage of additional benefits or cov-
217
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,
unless otherwise required by law.
‘‘(b) ANTIDISCRIMINATION.—
‘‘(1) IN GENERAL.—A MedicarePlus organiza-
tion may not deny, limit, or condition the coverage
or provision of benefits under this part, for individ-
uals 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.
‘‘(2) CONSTRUCTION.—Paragraph (1) shall not
be construed as requiring a MedicarePlus organiza-
tion to enroll individuals who are determined to have
end-stage renal disease, except as provided under
section 1851(a)(3)(B).
‘‘(c) DETAILED
DESCRIPTION
OF
PLAN
PROVI-
SIONS.—A MedicarePlus organization shall disclose, in
clear, accurate, and standardized form to each enrollee
with a MedicarePlus plan offered by the organization
under this part at the time of enrollment and at least an-
218
nually thereafter, the following information regarding such
plan:
‘‘(1) SERVICE AREA.—The plan’s service area.
‘‘(2) BENEFITS.—Benefits offered (and not of-
fered) under the plan offered, including information
described in section 1851(d)(3)(A) and exclusions
from coverage and, if it is an MSA plan, a compari-
son of benefits under such a plan with benefits
under other MedicarePlus plans.
‘‘(3) ACCESS.—The number, mix, and distribu-
tion of plan providers and any point-of-service option
(including the supplemental premium for such op-
tion).
‘‘(4) 
OUT-OF-AREA
COVERAGE.—Out-of-area
coverage provided by the plan.
‘‘(5) EMERGENCY
COVERAGE.—Coverage of
emergency services and urgently needed care, includ-
ing—
‘‘(A) the appropriate use of emergency
services, including use of the 911 telephone sys-
tem or its local equivalent in emergency situa-
tions and an explanation of what constitutes an
emergency situation;
‘‘(B) the process and procedures of the
plan for obtaining emergency services; and
219
‘‘(C) the locations of (i) emergency depart-
ments, and (ii) other settings, in which plan
physicians and hospitals provide emergency
services and post-stabilization care..
‘‘(6) 
SUPPLEMENTAL
BENEFITS.—Supple-
mental benefits available from the organization of-
fering the plan, including—
‘‘(A) whether the supplemental benefits are
optional,
‘‘(B) the supplemental benefits covered,
and
‘‘(C) the premium price for the supple-
mental benefits.
‘‘(7) PRIOR AUTHORIZATION RULES.—Rules re-
garding prior authorization or other review require-
ments that could result in nonpayment.
‘‘(8) PLAN GRIEVANCE AND APPEALS PROCE-
DURES.—Any appeal or grievance rights and proce-
dures.
‘‘(9) QUALITY
ASSURANCE
PROGRAM.—A de-
scription of the organization’s quality assurance pro-
gram under subsection (e).
‘‘(d) ACCESS TO SERVICES.—
‘‘(1) IN GENERAL.—A MedicarePlus organiza-
tion offering a MedicarePlus plan may select the
220
providers from whom the benefits under the plan are
provided 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;
‘‘(B) when medically necessary in the opin-
ion of the treating health care provider the or-
ganization makes such benefits available and
accessible 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 in the opinion of the treating health
care provider and immediately required be-
cause of an unforeseen illness, injury, or
condition, and it was not reasonable given
the circumstances to obtain the services
through the organization,
‘‘(ii) the services were renal dialysis
services and were provided other than
221
through the organization because the indi-
vidual was temporarily out of the plan’s
service area, or
‘‘(iii) the services are maintenance
care or post-stabilization care covered
under the guidelines established under
paragraph (2);
‘‘(D) the organization provides access to
appropriate providers, including credentialed
specialists, for treatment and services when
such treatment and services are determined to
be medically necessary in the professional opin-
ion of the treating health care provider, in con-
sultation with the individual; and
‘‘(E) coverage is provided for emergency
services (as defined in paragraph (3)) without
regard to prior authorization or the emergency
care provider’s contractual relationship with the
organization.
‘‘(2) GUIDELINES RESPECTING COORDINATION
OF
POST-STABILIZATION
CARE.—A MedicarePlus
plan shall comply with such guidelines as the Sec-
retary may prescribe relating to promoting efficient
and timely coordination of appropriate maintenance
and post-stabilization care of an enrollee after the
222
enrollee has been determined to be stable under sec-
tion 1867.
‘‘(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
‘‘(ii) are needed to evaluate or sta-
bilize 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 such that a prudent
layperson, who possesses an average knowledge
of health and medicine, could reasonably 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,
223
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.
‘‘(4) DETERMINATION
OF
HOSPITAL
LENGTH
OF STAY.—
‘‘(A) IN GENERAL.—A MedicarePlus orga-
nization shall cover the length of an inpatient
hospital stay under this part as determined by
the attending physician (or other attending
health care provider to the extent permitted
under State law) in consultation with the pa-
tient to be medically appropriate.
‘‘(B) CONSTRUCTION.—Nothing in this
paragraph shall be construed—
‘‘(i) as requiring the provision of inpa-
tient coverage if the attending physician
(or other attending health care provider to
the extent permitted under State law) and
patient determine that a shorter period of
hospital stay is medically appropriate, or
‘‘(ii) as affecting the application of
deductibles and coinsurance.
224
‘‘(e) QUALITY ASSURANCE PROGRAM.—
‘‘(1) IN GENERAL.—Each MedicarePlus organi-
zation must have arrangements, consistent with any
regulation, for an ongoing quality assurance pro-
gram for health care services it provides to individ-
uals enrolled with MedicarePlus plans of the organi-
zation.
‘‘(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 in-
dices of the quality of MedicarePlus plans and
organizations;
‘‘(B) provide for the establishment of writ-
ten protocols for utilization review, based on
current standards of medical practice;
‘‘(C) provide review by physicians and
other health care professionals of the process
followed in the provision of such health care
services;
225
‘‘(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 un-
derutilization and overutilization of services;
‘‘(G) after identifying areas for improve-
ment, establish or alter practice parameters;
‘‘(H) take action to improve quality and
assesses the effectiveness of such action
through systematic followup;
‘‘(I) make available information on quality
and outcomes measures to facilitate beneficiary
comparison and choice of health coverage op-
tions (in such form and on such quality and
outcomes measures as the Secretary determines
to be appropriate);
‘‘(J) be evaluated on an ongoing basis as
to its effectiveness;
‘‘(K) include measures of consumer satis-
faction; and
‘‘(L) provide the Secretary with such ac-
cess to information collected as may be appro-
226
priate to monitor and ensure the quality of care
provided under this part.
‘‘(3) EXTERNAL REVIEW.—Each MedicarePlus
organization shall, for each MedicarePlus plan it op-
erates, have an agreement with an independent qual-
ity review and improvement organization approved
by the Secretary to perform functions of the type de-
scribed in sections 1154(a)(4)(B) and 1154(a)(14)
with respect to services furnished by MedicarePlus
plans for which payment is made under this title.
‘‘(4) TREATMENT
OF
ACCREDITATION.—The
Secretary shall provide that a MedicarePlus organi-
zation is deemed to meet requirements of para-
graphs (1) through (3) of this subsection and sub-
section (h) (relating to confidentiality and accuracy
of enrollee records) if the organization is accredited
(and periodically reaccredited) by a private organiza-
tion under a process that the Secretary has deter-
mined assures that the organization, as a condition
of accreditation, applies and enforces standards with
respect to the requirements involved that are no less
stringent than the standards established under sec-
tion 1856 to carry out the respective requirements.
‘‘(f) COVERAGE DETERMINATIONS.—
227
‘‘(1) DECISIONS ON NONEMERGENCY CARE.—A
MedicarePlus organization shall make determina-
tions regarding authorization requests for non-
emergency care on a timely basis, depending on the
urgency of the situation. The organization shall pro-
vide notice of any coverage denial, which notice shall
include a statement of the reasons for the denial and
a description of the grievance and appeals processes
available.
‘‘(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
RECONSIDERATIONS.—A reconsideration relat-
ing to a determination to deny coverage based
on a lack of medical necessity shall be made
only by a physician with appropriate expertise
in the field of medicine which necessitates treat-
ment who is other than a physician involved in
the initial determination.
‘‘(g) GRIEVANCES AND APPEALS.—
228
‘‘(1) 
GRIEVANCE
MECHANISM.—Each
MedicarePlus organization must provide meaningful
procedures for hearing and resolving grievances be-
tween the organization (including any entity or indi-
vidual through which the organization provides
health 
care 
services) 
and 
enrollees 
with
MedicarePlus plans of the organization under this
part.
‘‘(2) 
APPEALS.—An 
enrollee 
with 
a
MedicarePlus plan of a MedicarePlus organization
under this part who is dissatisfied by reason of the
enrollee’s failure to receive any health service to
which the enrollee believes the enrollee is entitled
and at no greater charge than the enrollee believes
the enrollee is required 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 pro-
vided in section 205(b), and in any such hearing the
Secretary shall make the organization a party. If the
amount in controversy is $1,000 or more, the indi-
vidual or organization shall, upon notifying the other
party, be entitled to judicial review of the Sec-
retary’s final decision as provided in section 205(g),
and both the individual and the organization shall be
entitled to be parties to that judicial review. In ap-
229
plying sections 205(b) and 205(g) as provided in
this paragraph, and in applying section 205(l) there-
to, any reference therein to the Commissioner of So-
cial Security or the Social Security Administration
shall be considered a reference to the Secretary or
the Department of Health and Human Services, re-
spectively.
‘‘(3) INDEPENDENT REVIEW OF COVERAGE DE-
NIALS.—The Secretary shall contract with an inde-
pendent, outside entity to review and resolve in a
timely manner reconsiderations that affirm denial of
coverage.
‘‘(4) EXPEDITED
DETERMINATIONS
AND
RE-
CONSIDERATIONS.—
‘‘(A) RECEIPT OF REQUESTS.—An enrollee
in a MedicarePlus plan may request, either in
writing or orally, an expedited determination or
reconsideration by the MedicarePlus 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 MedicarePlus
organization shall maintain procedures for
expediting organization determinations and
230
reconsiderations when, upon request of an
enrollee, the organization determines that
the application of normal time frames for
making a determination (or a reconsider-
ation involving a determination) could seri-
ously 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 orga-
nization 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 re-
ceipt of the request for the determination
or reconsideration (or receipt of the infor-
mation necessary to make the determina-
tion or reconsideration), or such longer pe-
riod as the Secretary may permit in speci-
fied cases.
‘‘(iii) 
SECRETARIAL
REPORT.—The
Secretary shall annually report publicly on
231
the number and disposition of denials and
appeals within each MedicarePlus organi-
zation, and those reviewed and resolved by
the independent entities under this sub-
section.
‘‘(h) CONFIDENTIALITY
AND ACCURACY
OF EN-
ROLLEE
RECORDS.—Each MedicarePlus organization
shall establish procedures—
‘‘(1) to safeguard the privacy of individually
identifiable enrollee information,
‘‘(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
MedicarePlus organization shall meet the requirement of
section 1866(f) (relating to maintaining written policies
and procedures respecting advance directives).
‘‘(j) RULES
REGARDING
PHYSICIAN
PARTICIPA-
TION.—
‘‘(1) PROCEDURES.—Each MedicarePlus orga-
nization shall establish reasonable procedures relat-
ing to the participation (under an agreement be-
tween a physician and the organization) of physi-
232
cians under MedicarePlus plans offered by the orga-
nization under this part. Such procedures shall in-
clude—
‘‘(A) providing notice of the rules regard-
ing 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.
‘‘(2) CONSULTATION IN MEDICAL POLICIES.—A
MedicarePlus organization shall consult with physi-
cians who have entered into participation agree-
ments with the organization regarding the organiza-
tion’s medical policy, quality, and medical manage-
ment procedures.
‘‘(3) PROHIBITING INTERFERENCE WITH PRO-
VIDER ADVICE TO ENROLLEES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), a MedicarePlus organiza-
tion (in relation to an individual enrolled under
a MedicarePlus plan offered by the organization
under this part) shall not prohibit or otherwise
233
restrict a covered health care professional (as
defined in subparagraph (D)) from advising
such an individual who is a patient of the pro-
fessional about the health status of the individ-
ual or medical care or treatment for the individ-
ual’s condition or disease, regardless of whether
benefits for such care or treatment are provided
under the plan, if the professional is acting
within the lawful scope of practice.
‘‘(B) 
CONSCIENCE
PROTECTION.—Sub-
paragraph (A) shall not be construed as requir-
ing a MedicarePlus plan to provide, reimburse
for, or provide coverage of a counseling or re-
ferral service if the MedicarePlus organization
offering the plan—
‘‘(i) objects to the provision of such
service on moral or religious grounds; and
‘‘(ii) in the manner and through the
written 
instrumentalities 
such
MedicarePlus organization deems appro-
priate, makes available information on its
policies regarding such service to prospec-
tive enrollees before or during enrollment
and to enrollees within 90 days after the
date that the organization or plan adopts
234
a change in policy regarding such a coun-
seling or referral service.
‘‘(C) CONSTRUCTION.—Nothing in sub-
paragraph (B) shall be construed to affect dis-
closure requirements under State law or under
the Employee Retirement Income Security Act
of 1974.
‘‘(D) HEALTH
CARE
PROFESSIONAL
DE-
FINED.—For purposes of this paragraph, the
term ‘health care professional’ means a physi-
cian (as defined in section 1861(r)) or other
health care professional if coverage for the pro-
fessional’s services is provided under the
MedicarePlus plan for the services of the pro-
fessional. Such term includes a podiatrist, op-
tometrist, chiropractor, psychologist, dentist,
physician assistant, physical or occupational
therapist and therapy assistant, speech-lan-
guage pathologist, audiologist, registered or li-
censed practical nurse (including nurse practi-
tioner, clinical nurse specialist, certified reg-
istered nurse anesthetist, and certified nurse-
midwife), licensed certified social worker, reg-
istered respiratory therapist, and certified res-
piratory therapy technician.
235
‘‘(4) LIMITATIONS ON HEALTH CARE PROVIDER
INCENTIVE PLANS.—
‘‘(A) IN GENERAL.—No MedicarePlus or-
ganization may operate any health care provider
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
health care provider or health care pro-
vider group as an inducement to reduce or
limit medically necessary services provided
with respect to a specific individual en-
rolled with the organization.
‘‘(ii) If the plan places a health care
provider or health care provider group at
substantial financial risk (as determined by
the Secretary) for services not provided by
the health care provider or health care pro-
vider group, the organization—
‘‘(I) provides stop-loss protection
for the health care provider or group
that is adequate and appropriate,
based on standards developed by the
Secretary that take into account the
number of health care providers
236
placed at such substantial financial
risk in the group or under the plan
and the number of individuals enrolled
with the organization who receive
services from the health care provider
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
access of such individuals to services
provided by the organization and sat-
isfaction with the quality of such serv-
ices.
‘‘(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) HEALTH CARE PROVIDER INCENTIVE
PLAN DEFINED.—In this paragraph, the term
‘health care provider incentive plan’ means any
compensation 
arrangement 
between 
a
MedicarePlus organization and a health care
237
provider or health care provider group that may
directly or indirectly have the effect of reducing
or limiting services provided with respect to in-
dividuals enrolled with the organization under
this part.
‘‘(C) 
HEALTH
CARE
PROVIDER
DE-
FINED.—For the purposes of this paragraph,
the term ‘health care provider’ has the meaning
given the term ‘health care professional’ in
paragraph (3)(D).
‘‘(5) LIMITATION ON PROVIDER INDEMNIFICA-
TION.—A MedicarePlus 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
MedicarePlus plan of the organization under this
part by the organization’s denial of medically nec-
essary care.
‘‘(6) LIMITATION ON NON-COMPETE CLAUSE.—
A MedicarePlus organization may not (directly or in-
directly) seek to enforce any contractual provision
which prevents a provider whose contractual obliga-
tions to the organization for the provision of services
through the organization have ended from joining or
238
forming any competing MedicarePlus organization
that is a provider-sponsored organization in the
same area.
‘‘(k) TREATMENT OF SERVICES FURNISHED BY CER-
TAIN PROVIDERS.—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 indi-
vidual the amounts that the physician or other entity could
collect if the individual were not so enrolled. Any penalty
or other provision of law that applies to such a payment
with respect to an individual entitled to benefits under this
title (but not enrolled with a MedicarePlus organization
under this part) also applies with respect to an individual
so enrolled.
‘‘(l) DISCLOSURE OF USE OF DSH AND TEACHING
HOSPITALS.—Each MedicarePlus organization shall pro-
vide the Secretary with information on—
‘‘(1) the extent to which the organization pro-
vides inpatient and outpatient hospital benefits
under this part—
‘‘(A) through the use of hospitals that are
eligible for additional payments under section
239
1886(d)(5)(F)(i) (relating to so-called DSH
hospitals), or
‘‘(B) through the use of teaching hospitals
that receive payments under section 1886(h);
and
‘‘(2) the extent to which differences between
payment rates to different hospitals reflect the dis-
proportionate share percentage of low-income pa-
tients and the presence of medical residency training
programs in those hospitals.
‘‘(m) OUT-OF-NETWORK ACCESS.—If an organiza-
tion offers to members enrolled under this section one plan
which provides for coverage of services covered under
parts A and B primarily through providers and other per-
sons who are members of a network of providers and other
persons who have entered into a contract with the organi-
zation to provide such services, nothing in this section
shall be construed as preventing the organization from of-
fering such members (at the time of enrollment) another
plan which provides for coverage of such items which are
not furnished through such network providers.
‘‘(n) NON-PREEMPTION OF STATE LAW.—A State
may establish or enforce requirements with respect to ben-
eficiary protections in this section, but only if such re-
240
quirements are more stringent than the requirements es-
tablished under this section.
‘‘(o) NONDISCRIMINATION IN SELECTION OF NET-
WORK HEALTH PROFESSIONALS.—
‘‘(1) IN GENERAL.—A MedicarePlus organiza-
tion offering a MedicarePlus plan offering network
coverage shall not discriminate in selecting the mem-
bers of its health professional network (or in estab-
lishing the terms and conditions for membership in
such network) on the basis of the race, national ori-
gin, gender, age, or disability (other than a disability
that impairs the ability of an individual to provide
health care services or that may threaten the health
of enrollees) of the health professional.
‘‘(2) APPROPRIATE
RANGE
OF
SERVICES.—A
MedicarePlus organization shall not deny any health
care professionals, based solely on the license or cer-
tification as applicable under State law, the ability
to participate in providing covered health care serv-
ices, or be reimbursed or indemnified by a network
plan for providing such services under this part.
‘‘(2) DEFINITIONS.—For purposes of this sub-
section:
‘‘(A) 
NETWORK.—The 
term 
‘network’
means, with respect to a MedicarePlus organi-
241
zation offering a MedicarePlus plan, the partici-
pating 
health 
professionals 
and 
providers
through whom the organization provides health
care items and services to enrollees.
‘‘(B) NETWORK
COVERAGE.—The term
‘network coverage’ means a MedicarePlus plan
offered by a MedicarePlus organization that
provides or arranges for the provision of health
care items and services to enrollees through
participating health professionals and providers.
‘‘(C) PARTICIPATING.—The term ‘partici-
pating’ means, with respect to a health profes-
sional or provider, a health professional or pro-
vider that provides health care items and serv-
ices to enrollees under network coverage under
an agreement with the MedicarePlus organiza-
tion offering the coverage.
‘‘(p) SPECIAL RULE FOR UNRESTRICTED FEE-FOR-
SERVICE MSA PLANS.—Subsections (j)(1) and (k) shall
not apply to a MedicarePlus organization with respect to
an MSA plan it offers if the plan does not limit the provid-
ers through whom benefits may be obtained under the
plan.
‘‘PAYMENTS TO MEDICAREPLUS ORGANIZATIONS
‘‘SEC. 1853. (a) PAYMENTS TO ORGANIZATIONS.—
‘‘(1) MONTHLY PAYMENTS.—
242
‘‘(A) IN
GENERAL.—Under a contract
under section 1857 and subject to subsections
(e) and (f), the Secretary shall make monthly
payments under this section in advance to each
MedicarePlus organization, with respect to cov-
erage of an individual under this part in a
MedicarePlus payment area for a month, in an
amount 
equal 
to 
1⁄12
of 
the 
annual
MedicarePlus capitation rate (as calculated
under subsection (c)) with respect to that indi-
vidual for that area, adjusted for such risk fac-
tors as age, disability status, gender, institu-
tional status, and such other factors as the Sec-
retary determines to be appropriate, so as to
ensure actuarial equivalence. The Secretary
may add to, modify, or substitute for such fac-
tors, if such changes will improve the deter-
mination of actuarial equivalence.
‘‘(B) SPECIAL
RULE
FOR
END-STAGE
RENAL DISEASE.—The Secretary shall establish
separate rates of payment to a MedicarePlus
organization with respect to classes of individ-
uals determined to have end-stage renal disease
and enrolled in a MedicarePlus plan of the or-
ganization. Such rates of payment shall be ac-
243
tuarially equivalent to rates paid to other en-
rollees in the MedicarePlus payment area (or
such other area as specified by the Secretary).
In accordance with regulations, the Secretary
shall provide for the application of the seventh
sentence of section 1881(b)(7) to payments
under this section covering the provision of
renal dialysis treatment in the same manner as
such sentence applies to composite rate pay-
ments described in such sentence.
‘‘(2) ADJUSTMENT
TO
REFLECT
NUMBER
OF
ENROLLEES.—
‘‘(A) IN GENERAL.—The amount of pay-
ment under this subsection may be retroactively
adjusted to take into account any difference be-
tween the actual number of individuals enrolled
with an organization under this part and the
number of such individuals estimated to be so
enrolled in determining the amount of the ad-
vance payment.
‘‘(B) SPECIAL
RULE
FOR
CERTAIN
EN-
ROLLEES.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the Secretary may make retroactive
adjustments under subparagraph (A) to
244
take into account individuals enrolled dur-
ing the period beginning on the date on
which 
the 
individual 
enrolls 
with 
a
MedicarePlus organization under a plan
operated, sponsored, or contributed to by
the individual’s employer or former em-
ployer (or the employer or former employer
of the individual’s spouse) and ending on
the date on which the individual is enrolled
in the organization under this part, except
that for purposes of making such retro-
active adjustments under this subpara-
graph, such period may not exceed 90
days.
‘‘(ii) 
EXCEPTION.—No 
adjustment
may be made under clause (i) with respect
to any individual who does not certify that
the organization provided the individual
with the information required to be dis-
closed under section 1852(c) at the time
the individual enrolled with the organiza-
tion.
‘‘(3) ESTABLISHMENT
OF
RISK
ADJUSTMENT
FACTORS.—
245
‘‘(A) REPORT.—The Secretary shall de-
velop, and submit to Congress by not later than
October 1, 1999, a report on a method of risk
adjustment of payment rates under this section
that accounts for variations in per capita costs
based on health status. Such report shall in-
clude an evaluation of such method by an out-
side, independent actuary of the actuarial
soundness of the proposal.
‘‘(B) DATA
COLLECTION.—In order to
carry out this paragraph, the Secretary shall re-
quire MedicarePlus organizations (and eligible
organizations with risk-sharing contracts under
section 1876) to submit, for periods beginning
on or after January 1, 1998, data regarding in-
patient hospital services and other services and
other information the Secretary deems nec-
essary.
‘‘(C) 
INITIAL
IMPLEMENTATION.—The
Secretary shall first provide for implementation
of a risk adjustment methodology that accounts
for variations in per capita costs based on
health status and other demographic factors for
payments by no later than January 1, 2000.
246
‘‘(b) 
ANNUAL
ANNOUNCEMENT
OF
PAYMENT
RATES.—
‘‘(1) ANNUAL ANNOUNCEMENT.—The Secretary
shall annually determine, and shall announce (in a
manner intended to provide notice to interested par-
ties) not later than August 1 before the calendar
year concerned—
‘‘(A) the annual MedicarePlus capitation
rate for each MedicarePlus payment area for
the year, and
‘‘(B) the risk and other factors to be used
in adjusting such rates under subsection
(a)(1)(A) for payments for months in that year.
‘‘(2) ADVANCE
NOTICE
OF
METHODOLOGICAL
CHANGES.—At least 45 days before making the an-
nouncement under paragraph (1) for a year, the
Secretary shall provide for notice to MedicarePlus
organizations of proposed changes to be made in the
methodology from the methodology and assumptions
used in the previous announcement and shall provide
such organizations an opportunity to comment on
such proposed changes.
‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each
announcement made under paragraph (1), the Sec-
retary shall include an explanation of the assump-
247
tions and changes in methodology used in the an-
nouncement in sufficient detail so that MedicarePlus
organizations 
can 
compute 
monthly 
adjusted
MedicarePlus capitation rates for individuals in each
MedicarePlus payment area which is in whole or in
part within the service area of such an organization.
‘‘(c) CALCULATION
OF
ANNUAL
MEDICAREPLUS
CAPITATION RATES.—
‘‘(1) IN GENERAL.—For purposes of this part,
each annual MedicarePlus capitation rate, for a
MedicarePlus payment area for a contract year con-
sisting of a calendar year, is equal to the largest of
the amounts specified in the following subpara-
graphs (A), (B), or (C):
‘‘(A) BLENDED
CAPITATION
RATE.—The
sum of—
‘‘(i) area-specific percentage for the
year (as specified under paragraph (2) for
the year) of the annual area-specific
MedicarePlus capitation rate for the year
for the MedicarePlus payment area, as de-
termined under paragraph (3), and
‘‘(ii) national percentage (as specified
under paragraph (2) for the year) of the
input-price-adjusted 
annual 
national
248
MedicarePlus capitation rate for the year,
as determined under paragraph (4),
multiplied by the payment adjustment factors
described in subparagraphs (A) and (B) of
paragraph (5).
‘‘(B) MINIMUM
AMOUNT.—12 multiplied
by the following amount:
‘‘(i) For 1998, $350 (but not to ex-
ceed, in the case of an area outside the 50
States and the District of Columbia, 150
percent of the annual per capita rate of
payment for 1997 determined under sec-
tion 1876(a)(1)(C) for the area).
‘‘(ii) For a succeeding year, the mini-
mum amount specified in this clause (or
clause (i)) for the preceding year increased
by the national per capita MedicarePlus
growth percentage, specified under para-
graph (6) for that succeeding year.
‘‘(C) MINIMUM PERCENTAGE INCREASE.—
‘‘(i) For 1998, the annual per capita
rate of payment for 1997 determined
under 
section 
1876(a)(1)(C) 
for 
the
MedicarePlus payment area.
249
‘‘(ii) For 1999 and 2000, 101 percent
of the annual MedicarePlus capitation rate
under this paragraph for the area for the
previous year.
‘‘(iii) For a subsequent year, 102 per-
cent of the annual MedicarePlus capitation
rate under this paragraph for the area for
the previous year.
‘‘(2) AREA-SPECIFIC AND NATIONAL PERCENT-
AGES.—For purposes of paragraph (1)(A)—
‘‘(A) for 1998, the ‘area-specific percent-
age’ is 90 percent and the ‘national percentage’
is 10 percent,
‘‘(B) for 1999, the ‘area-specific percent-
age’ is 85 percent and the ‘national percentage’
is 15 percent,
‘‘(C) for 2000, the ‘area-specific percent-
age’ is 80 percent and the ‘national percentage’
is 20 percent,
‘‘(D) for 2001, the ‘area-specific percent-
age’ is 75 percent and the ‘national percentage’
is 25 percent, and
‘‘(E) for a year after 2001, the ‘area-spe-
cific percentage’ is 70 percent and the ‘national
percentage’ is 30 percent.
250
‘‘(3) ANNUAL
AREA-SPECIFIC
MEDICAREPLUS
CAPITATION RATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A), subject to subparagraph (B), the
annual area-specific MedicarePlus capitation
rate for a MedicarePlus payment area—
‘‘(i) for 1998 is the annual per capita
rate of payment for 1997 determined
under section 1876(a)(1)(C) for the area,
increased by the national per capita
MedicarePlus growth percentage for 1998
(as defined in paragraph (6)); or
‘‘(ii) for a subsequent year is the an-
nual area-specific MedicarePlus capitation
rate for the previous year determined
under this paragraph for the area, in-
creased 
by 
the 
national 
per 
capita
MedicarePlus growth percentage for such
subsequent year.
‘‘(B) REMOVAL OF MEDICAL EDUCATION
AND DISPROPORTIONATE SHARE HOSPITAL PAY-
MENTS FROM CALCULATION OF ADJUSTED AV-
ERAGE PER CAPITA COST.—
‘‘(i) IN
GENERAL.—In determining
the area-specific MedicarePlus capitation
251
rate under subparagraph (A), for a year
(beginning with 1998), the annual per cap-
ita rate of payment for 1997 determined
under section 1876(a)(1)(C) shall be ad-
justed to exclude from the rate the applica-
ble percent (specified in clause (ii)) of the
payment adjustments described in subpara-
graph (C).
‘‘(ii) 
APPLICABLE
PERCENT.—For
purposes of clause (i), the applicable per-
cent for—
‘‘(I) 1998 is 20 percent,
‘‘(II) 1999 is 40 percent,
‘‘(III) 2000 is 60 percent,
‘‘(IV) 2001 is 80 percent, and
‘‘(V) a succeeding year is 100
percent.
‘‘(C) PAYMENT
ADJUSTMENT.—The pay-
ment adjustments described in this subpara-
graph are payment adjustments which the Sec-
retary estimates were payable during 1997—
‘‘(i) under section 1886(d)(5)(F) for
hospitals serving a disproportionate share
of low-income patients,
252
‘‘(ii) for the indirect costs of medical
education under section 1886(d)(5)(B),
and
‘‘(iii) for direct graduate medical edu-
cation costs under section 1886(h),
multiplied by a ratio (estimated by the Sec-
retary) of total payments under subsection (h)
and section 1858 in 1998 to payments under
such subsection and payments under such sec-
tion in such year for hospitals not reimbursed
under section 1814(b)(3).
‘‘(4) 
INPUT-PRICE-ADJUSTED
ANNUAL
NA-
TIONAL MEDICAREPLUS CAPITATION RATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1)(A), the input-price-adjusted annual
national MedicarePlus capitation rate for a
MedicarePlus payment area for a year is equal
to the sum, for all the types of medicare serv-
ices (as classified by the Secretary), of the
product (for each such type of service) of—
‘‘(i) the national standardized annual
MedicarePlus capitation rate (determined
under subparagraph (B)) for the year,
253
‘‘(ii) the proportion of such rate for
the year which is attributable to such type
of services, and
‘‘(iii) an index that reflects (for that
year and that type of services) the relative
input price of such services in the area
compared to the national average input
price of such services.
In applying clause (iii), the Secretary shall, sub-
ject to subparagraph (C), apply those indices
under this title that are used in applying (or
updating) national payment rates for specific
areas and localities.
‘‘(B) NATIONAL
STANDARDIZED
ANNUAL
MEDICAREPLUS
CAPITATION
RATE.—In sub-
paragraph (A)(i), the ‘national standardized an-
nual MedicarePlus capitation rate’ for a year is
equal to—
‘‘(i) the sum (for all MedicarePlus
payment areas) of the product of—
‘‘(I) 
the 
annual 
area-specific
MedicarePlus capitation rate for that
year for the area under paragraph
(3), and
254
‘‘(II) the average number of med-
icare beneficiaries residing in that
area in the year, multiplied by the av-
erage of the risk factor weights used
to adjust payments under subsection
(a)(1)(A) for such beneficiaries in
such area; divided by
‘‘(ii) the sum of the products de-
scribed in clause (i)(II) for all areas for
that year.
‘‘(C) SPECIAL RULES FOR 1998.—In apply-
ing this paragraph for 1998—
‘‘(i) medicare services shall be divided
into 2 types of services: part A services
and part B services;
‘‘(ii) the proportions described in sub-
paragraph (A)(ii)—
‘‘(I) for part A services shall be
the ratio (expressed as a percentage)
of the national average annual per
capita rate of payment for part A for
1997 to the total national average an-
nual per capita rate of payment for
parts A and B for 1997, and
255
‘‘(II) for part B services shall be
100 percent minus the ratio described
in subclause (I);
‘‘(iii) for part A services, 70 percent
of payments 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 in-
volved;
‘‘(iv) for part B services—
‘‘(I) 66 percent of payments at-
tributable to such services shall be ad-
justed by the index of the geographic
area factors under section 1848(e)
used to adjust payment rates for phy-
sicians’ services furnished in the pay-
ment area, and
‘‘(II) of the remaining 34 percent
of the amount of such payments, 40
percent shall be adjusted by the index
described in clause (iii); and
‘‘(v) the index values shall be com-
puted based only on the beneficiary popu-
lation who are 65 years of age or older and
256
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 1999.
‘‘(5) PAYMENT
ADJUSTMENT
BUDGET
NEU-
TRALITY
FACTORS.—For purposes of paragraph
(1)(A)—
‘‘(A) BLENDED RATE PAYMENT ADJUST-
MENT FACTOR.—For each year, the Secretary
shall compute a blended rate payment adjust-
ment factor such that, not taking into account
subparagraphs (B) and (C) of paragraph (1)
and the application of the payment adjustment
factor described in subparagraph (B) but tak-
ing into account paragraph (7), the aggregate
of the payments that would be made under this
part is equal to the aggregate payments that
would have been made under this part (not tak-
ing into account such subparagraphs and such
other adjustment factor) if the area-specific
percentage under paragraph (1) for the year
had been 100 percent and the national percent-
age had been 0 percent.
257
‘‘(B) FLOOR-AND-MINIMUM-UPDATE
PAY-
MENT ADJUSTMENT FACTOR.—For each year,
the Secretary shall compute a floor-and-mini-
mum-update payment adjustment factor so
that, taking into account the application of the
blended rate payment adjustment factor under
subparagraph (A) and subparagraphs (B) and
(C) of paragraph (1) and the application of the
adjustment factor under this subparagraph, the
aggregate of the payments under this part shall
not exceed the aggregate payments that would
have been made under this part if subpara-
graphs (B) and (C) of paragraph (1) did not
apply and if the floor-and-minimum-update pay-
ment adjustment factor under this subpara-
graph was 1.
‘‘(6) NATIONAL
PER
CAPITA
MEDICAREPLUS
GROWTH PERCENTAGE DEFINED.—
‘‘(A) IN GENERAL.—In this part, the ‘na-
tional per capita MedicarePlus growth percent-
age’ for a year is the percentage determined by
the Secretary, by April 30th before the begin-
ning of the year involved, to reflect the Sec-
retary’s estimate of the projected per capita
rate of growth in expenditures under this title
258
for an individual entitled to benefits under part
A and enrolled under part B, reduced by the
number of percentage points specified in sub-
paragraph (B) for the year. Separate deter-
minations may be made for aged enrollees, dis-
abled enrollees, and enrollees with end-stage
renal disease. Such percentage shall include an
adjustment for over or under projection in the
growth percentage for previous years.
‘‘(B) ADJUSTMENT.—The number of per-
centage points specified in this subparagraph
is—
‘‘(i) for 1998, 0.5 percentage points,
‘‘(ii) for 1999, 0.5 percentage points,
‘‘(iii) for 2000, 0.5 percentage points,
‘‘(iv) for 2001, 0.5 percentage points,
‘‘(v) for 2002, 0.5 percentage points,
and
‘‘(vi) for a year after 2002, 0 percent-
age points.
‘‘(7) TREATMENT
OF
AREAS
WITH
HIGHLY
VARIABLE
PAYMENT
RATES.—In the case of a
MedicarePlus payment area for which the annual
per capita rate of payment determined under section
1876(a)(1)(C) for 1997 varies by more than 20 per-
259
cent from such rate for 1996, for purposes of this
subsection the Secretary may substitute for such
rate for 1997 a rate that is more representative of
the costs of the enrollees in the area.
‘‘(d) MEDICAREPLUS PAYMENT AREA DEFINED.—
‘‘(1) IN GENERAL.—In this part, except as pro-
vided in paragraph (3), the term ‘MedicarePlus pay-
ment area’ means a county, or equivalent area speci-
fied by the Secretary.
‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the
case of individuals who are determined to have end
stage renal disease, the MedicarePlus payment area
shall be a State or such other payment area as the
Secretary specifies.
‘‘(3) GEOGRAPHIC ADJUSTMENT.—
‘‘(A) IN GENERAL.—Upon written request
of the chief executive officer of a State for a
contract year (beginning after 1998) made at
least 7 months before the beginning of the year,
the Secretary shall make a geographic adjust-
ment to a MedicarePlus payment area in the
State otherwise determined under paragraph
(1)—
‘‘(i) 
to 
a 
single 
statewide
MedicarePlus payment area,
260
‘‘(ii) to the metropolitan based system
described in subparagraph (C), or
‘‘(iii) to consolidating into a single
MedicarePlus payment area noncontiguous
counties (or equivalent areas described in
paragraph (1)) within a State.
Such adjustment shall be effective for payments
for months beginning with January of the year
following the year in which the request is re-
ceived.
‘‘(B) 
BUDGET
NEUTRALITY
ADJUST-
MENT.—In the case of a State requesting an
adjustment under this paragraph, the Secretary
shall adjust the payment rates otherwise estab-
lished under this section for MedicarePlus pay-
ment areas in the State in a manner so that the
aggregate of the payments under this section in
the State shall not exceed the aggregate pay-
ments that would have been made under this
section for MedicarePlus payment areas in the
State in the absence of the adjustment under
this paragraph.
‘‘(C) METROPOLITAN
BASED
SYSTEM.—
The metropolitan based system described in this
subparagraph is one in which—
261
‘‘(i) all the portions of each metropoli-
tan statistical area in the State or in the
case of a consolidated metropolitan statis-
tical area, all of the portions of each pri-
mary metropolitan statistical area within
the consolidated area within the State, are
treated as a single MedicarePlus payment
area, and
‘‘(ii) all areas in the State that do not
fall within a metropolitan statistical area
are treated as a single MedicarePlus pay-
ment area.
‘‘(D) AREAS.—In subparagraph (C), the
terms ‘metropolitan statistical area’, ‘consoli-
dated metropolitan statistical area’, and ‘pri-
mary metropolitan statistical area’ mean any
area designated as such by the Secretary of
Commerce.
‘‘(e) SPECIAL RULES FOR INDIVIDUALS ELECTING
MSA PLANS.—
‘‘(1) IN
GENERAL.—If the amount of the
monthly premium for an MSA plan for a
MedicarePlus payment area for a year is less than
1⁄12 of the annual MedicarePlus capitation rate ap-
plied under this section for the area and year in-
262
volved, the Secretary shall deposit an amount equal
to 100 percent of such difference in a MedicarePlus
MSA established (and, if applicable, designated) by
the individual under paragraph (2).
‘‘(2) ESTABLISHMENT
AND
DESIGNATION
OF
MEDICAREPLUS MEDICAL SAVINGS ACCOUNT AS RE-
QUIREMENT FOR PAYMENT OF CONTRIBUTION.—In
the case of an individual who has elected coverage
under an MSA plan, no payment shall be made
under paragraph (1) on behalf of an individual for
a month unless the individual—
‘‘(A) has established before the beginning
of the month (or by such other deadline as the
Secretary may specify) a MedicarePlus MSA
(as defined in section 138(b)(2) of the Internal
Revenue Code of 1986), and
‘‘(B) if the individual has established more
than one such MedicarePlus MSA, has des-
ignated one of such accounts as the individual’s
MedicarePlus MSA for purposes of this part.
Under rules under this section, such an individual
may change the designation of such account under
subparagraph (B) for purposes of this part.
‘‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS
ACCOUNT CONTRIBUTION.—In the case of an indi-
263
vidual electing an MSA plan effective beginning with
a month in a year, the amount of the contribution
to the MedicarePlus MSA on behalf of the individual
for that month and all successive months in the year
shall be deposited during that first month. In the
case of a termination of such an election as of a
month before the end of a year, the Secretary shall
provide for a procedure for the recovery of deposits
attributable to the remaining months in the year.
‘‘(f) PAYMENTS FROM TRUST FUND.—The payment
to a MedicarePlus organization under this section for indi-
viduals enrolled under this part with the organization and
payments to a MedicarePlus MSA under subsection (e)(1)
shall be made from the Federal Hospital Insurance Trust
Fund and the Federal Supplementary Medical Insurance
Trust Fund in such proportion as the Secretary deter-
mines reflects the relative weight that benefits under part
A and under part B represents of the actuarial value of
the total benefits under this title. Monthly payments oth-
erwise payable under this section for October 2001 shall
be paid on the last business day of September 2001.
‘‘(g) SPECIAL RULE FOR CERTAIN INPATIENT HOS-
PITAL STAYS.—In the case of an individual who is receiv-
ing inpatient hospital services from a subsection (d) hos-
264
pital (as defined in section 1886(d)(1)(B)) as of the effec-
tive date of the individual’s—
‘‘(1) election under this part of a MedicarePlus
plan offered by a MedicarePlus organization—
‘‘(A) payment for such services until the
date of the individual’s discharge shall be made
under this title through the MedicarePlus plan
or the medicare fee-for-service program option
described in section 1851(a)(1)(A) (as the case
may be) elected before the election with such
organization,
‘‘(B) the elected organization shall not be
financially responsible for payment for such
services until the date after the date of the indi-
vidual’s discharge, and
‘‘(C) the organization shall nonetheless be
paid the full amount otherwise payable to the
organization under this part; or
‘‘(2) termination of election with respect to a
MedicarePlus organization under this part—
‘‘(A) the organization shall be financially
responsible for payment for such services after
such date and until the date of the individual’s
discharge,
265
‘‘(B) payment for such services during the
stay shall not be made under section 1886(d) or
by any succeeding MedicarePlus organization,
and
‘‘(C) the terminated organization shall not
receive any payment with respect to the individ-
ual under this part during the period the indi-
vidual is not enrolled.
‘‘PREMIUMS
‘‘SEC. 1854. (a) SUBMISSION
AND CHARGING
OF
PREMIUMS.—
‘‘(1) IN GENERAL.—Subject to paragraph (3),
each MedicarePlus organization shall file with the
Secretary each year, in a form and manner and at
a time specified by the Secretary—
‘‘(A) the amount of the monthly premium
for coverage for services under section 1852(a)
under each MedicarePlus plan it offers under
this part in each MedicarePlus payment area
(as defined in section 1853(d)) in which the
plan is being offered; and
‘‘(B) the enrollment capacity in relation to
the plan in each such area.
‘‘(2) TERMINOLOGY.—In this part—
‘‘(A) the term ‘monthly premium’ means,
with respect to a MedicarePlus plan offered by
266
a MedicarePlus organization, the monthly pre-
mium filed under paragraph (1), not taking
into account the amount of any payment made
toward the premium under section 1853; and
‘‘(B) the term ‘net monthly premium’
means, with respect to such a plan and an indi-
vidual enrolled with the plan, the premium (as
defined in subparagraph (A)) for the plan re-
duced by the amount of payment made toward
such premium under section 1853.
‘‘(b) MONTHLY PREMIUM CHARGED.—The monthly
amount of the premium charged by a MedicarePlus orga-
nization 
for 
a 
MedicarePlus 
plan 
offered 
in 
a
MedicarePlus payment area to an individual under this
part shall be equal to the net monthly premium plus any
monthly premium charged in accordance with subsection
(e)(2) for supplemental benefits.
‘‘(c) UNIFORM PREMIUM.—The monthly premium
and monthly amount charged under subsection (b) of a
MedicarePlus organization under this part may not vary
among individuals who reside in the same MedicarePlus
payment area.
‘‘(d) TERMS AND CONDITIONS OF IMPOSING PRE-
MIUMS.—Each MedicarePlus organization shall permit the
payment of net monthly premiums on a monthly basis and
267
may terminate election of individuals for a MedicarePlus
plan for failure to make premium payments only in ac-
cordance with section 1851(g)(3)(B)(i). A MedicarePlus
organization is not authorized to provide for cash or other
monetary rebates as an inducement for enrollment or oth-
erwise.
‘‘(e) LIMITATION ON ENROLLEE COST-SHARING.—
‘‘(1) FOR BASIC AND ADDITIONAL BENEFITS.—
Except as provided in paragraph (2), in no event
may—
‘‘(A) the net monthly premium (multiplied
by 12) and the actuarial value of the
deductibles, coinsurance, and copayments appli-
cable on average to individuals enrolled under
this part with a MedicarePlus plan of an orga-
nization with respect to required benefits de-
scribed in section 1852(a)(1) and additional
benefits (if any) required under subsection
(f)(1) for a year, exceed
‘‘(B) the actuarial value of the deductibles,
coinsurance, and copayments that would be ap-
plicable on average to individuals entitled to
benefits under part A and enrolled under part
B if they were not members of a MedicarePlus
organization for the year.
268
‘‘(2) FOR
SUPPLEMENTAL
BENEFITS.—If the
MedicarePlus organization provides to its members
enrolled under this part supplemental benefits de-
scribed in section 1852(a)(3), the sum of the month-
ly premium rate (multiplied by 12) charged for such
supplemental benefits and the actuarial value of its
deductibles, coinsurance, and copayments charged
with respect to such benefits may not exceed the ad-
justed community rate for such benefits (as defined
in subsection (f)(4)).
‘‘(3) EXCEPTION FOR MSA PLANS.—Paragraphs
(1) and (2) do not apply to an MSA plan.
‘‘(4) DETERMINATION ON OTHER BASIS.—If the
Secretary determines that adequate data are not
available to determine the actuarial value under
paragraph (1)(A) or (2), the Secretary may deter-
mine such amount with respect to all individuals in
the MedicarePlus payment area, the State, or in the
United States, eligible to enroll in the MedicarePlus
plan involved under this part or on the basis of other
appropriate data.
‘‘(f) REQUIREMENT FOR ADDITIONAL BENEFITS.—
‘‘(1) REQUIREMENT.—
‘‘(A) IN
GENERAL.—Each MedicarePlus
organization (in relation to a MedicarePlus plan
269
it offers) shall provide that if there is an excess
amount (as defined in subparagraph (B)) for
the plan for a contract year, subject to the suc-
ceeding provisions of this subsection, the orga-
nization shall provide to individuals such addi-
tional benefits (as the organization may specify)
in a value which is at least equal to the ad-
justed excess amount (as defined in subpara-
graph (C)).
‘‘(B) EXCESS AMOUNT.—For purposes of
this paragraph, the ‘excess amount’, for an or-
ganization for a plan, is the amount (if any) by
which—
‘‘(i) the average of the capitation pay-
ments made to the organization under sec-
tion 1853 for the plan at the beginning of
contract year, exceeds
‘‘(ii) the actuarial value of the re-
quired 
benefits 
described 
in 
section
1852(a)(1) under the plan for individuals
under this part, as determined based upon
an adjusted community rate described in
paragraph (4) (as reduced for the actuarial
value of the coinsurance and deductibles
under parts A and B).
270
‘‘(C) ADJUSTED
EXCESS
AMOUNT.—For
purposes of this paragraph, the ‘adjusted excess
amount’, for an organization for a plan, is the
excess amount reduced to reflect any amount
withheld and reserved for the organization for
the year under paragraph (2).
‘‘(D) NO APPLICATION TO MSA PLANS.—
Subparagraph (A) shall not apply to an MSA
plan.
‘‘(E) UNIFORM APPLICATION.—This para-
graph shall be applied uniformly for all enroll-
ees for a plan in a MedicarePlus payment area.
‘‘(F) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing a
MedicarePlus 
organization 
from 
providing
health care benefits that are in addition to the
benefits otherwise required to be provided under
this paragraph and from imposing a premium
for such additional benefits.
‘‘(2) STABILIZATION
FUND.—A MedicarePlus
organization may provide that a part of the value of
an excess amount described in paragraph (1) be
withheld and reserved in the Federal Hospital Insur-
ance Trust Fund and in the Federal Supplementary
Medical Insurance Trust Fund (in such proportions
271
as the Secretary determines to be appropriate) by
the Secretary for subsequent annual contract peri-
ods, to the extent required to stabilize and prevent
undue fluctuations in the additional benefits offered
in those subsequent periods by the organization in
accordance with such paragraph. Any of such value
of the amount reserved which is not provided as ad-
ditional benefits described in paragraph (1)(A) to in-
dividuals electing the MedicarePlus plan of the orga-
nization in accordance with such paragraph prior to
the end of such periods, shall revert for the use of
such trust funds.
‘‘(3) DETERMINATION BASED ON INSUFFICIENT
DATA.—For purposes of this subsection, if the Sec-
retary finds that there is insufficient enrollment ex-
perience (including no enrollment experience in the
case of a provider-sponsored organization) to deter-
mine an average of the capitation payments to be
made under this part at the beginning of a contract
period, the Secretary may determine such an aver-
age based on the enrollment experience of other con-
tracts entered into under this part.
‘‘(4) ADJUSTED COMMUNITY RATE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, subject to subparagraph (B), the
272
term ‘adjusted community rate’ for a service or
services 
means, 
at 
the 
election 
of 
a
MedicarePlus organization, either—
‘‘(i) the rate of payment for that serv-
ice or services which the Secretary annu-
ally determines would apply to an individ-
ual electing a MedicarePlus plan under
this part if the rate of payment were deter-
mined under a ‘community rating system’
(as defined in section 1302(8) of the Pub-
lic Health Service Act, other than subpara-
graph (C)), or
‘‘(ii) such portion of the weighted ag-
gregate premium, which the Secretary an-
nually estimates would apply to such an in-
dividual, as the Secretary annually esti-
mates is attributable to that service or
services,
but adjusted for differences between the utiliza-
tion characteristics of the individuals electing
coverage under this part and the utilization
characteristics of the other enrollees with the
plan (or, if the Secretary finds that adequate
data are not available to adjust for those dif-
ferences, the differences between the utilization
273
characteristics of individuals selecting other
MedicarePlus coverage, or MedicarePlus eligible
individuals in the area, in the State, or in the
United States, eligible to elect MedicarePlus
coverage under this part and the utilization
characteristics of the rest of the population in
the area, in the State, or in the United States,
respectively).
‘‘(B) SPECIAL RULE FOR PROVIDER-SPON-
SORED
ORGANIZATIONS.—In the case of a
MedicarePlus organization that is a provider-
sponsored organization, the adjusted community
rate 
under 
subparagraph 
(A) 
for 
a
MedicarePlus plan of the organization may be
computed (in a manner specified by the Sec-
retary) using data in the general commercial
marketplace or (during a transition period)
based on the costs incurred by the organization
in providing such a plan.
‘‘(g) PERIODIC AUDITING.—The Secretary shall pro-
vide for the annual auditing of the financial records (in-
cluding data relating to medicare utilization, costs, and
computation of the adjusted community rate) of at least
one-third of the MedicarePlus organizations offering
MedicarePlus plans under this part. The Comptroller Gen-