striking ‘‘September 30, 1998’’ and inserting ‘‘September
30, 2002’’.
Subtitle B—Lease of Excess Strate-
gic Petroleum Reserve Capacity
SEC. 3101. LEASE OF EXCESS STRATEGIC PETROLEUM RE-
SERVE CAPACITY.
(a) AMENDMENT.—Part B of title I of the Energy
Policy and Conservation Act (42 U.S.C. 6231 et seq.) is
amended by adding at the end the following:
‘‘USE OF UNDERUTILIZED FACILITIES
‘‘SEC. 168. (a) AUTHORITY.—Notwithstanding any
other provision of this title, the Secretary, by lease or oth-
erwise, for any term and under such other conditions as
the Secretary considers necessary or appropriate, may
store in underutilized Strategic Petroleum Reserve facili-
ties petroleum product owned by a foreign government or
its representative. Petroleum products stored under this
section are not part of the Strategic Petroleum Reserve
and may be exported without license from the United
States.
‘‘(b) PROTECTION OF FACILITIES.—All agreements
entered into pursuant to subsection (a) shall contain provi-
sions providing for fees to fully compensate the United
States for all costs of storage and removals of petroleum
products, including the cost of replacement facilities neces-
sitated as a result of any withdrawals.
‘‘(c) ACCESS TO STORED OIL.—The Secretary shall
ensure that agreements to store petroleum products for
foreign governments or their representatives do not affect
the ability of the United States to withdraw, distribute,
or sell petroleum from the Strategic Petroleum Reserve
in response to an energy emergency or to the obligations
of the United States under the Agreement on an Inter-
national Energy Program.
‘‘(d) AVAILABILITY
OF FUNDS.—Funds collected
through the leasing of Strategic Petroleum Reserve facili-
ties authorized by subsection (a) after September 30,
2002, shall be used by the Secretary of Energy without
further appropriation for the purchase of oil for, and oper-
ation and maintenance costs of, the Strategic Petroleum
Reserve.’’.
(b) TABLE OF CONTENTS AMENDMENT.—The table
of contents of part B of title I of the Energy Policy and
Conservation Act is amended by adding at the end the
following:
‘‘Sec. 168. Use of underutilized facilities.’’.
Subtitle C—Sale of DOE Assets
SEC. 3201. SALE OF DOE SURPLUS URANIUM ASSETS.
(a) IN GENERAL.—The Secretary of Energy shall,
during the period fiscal year 1999 through fiscal year
2002, sell 3.2 million pounds per year of natural and low-
enriched uranium that the President has determined is not
necessary for national security needs. Such sales shall
be—
(1) made for delivery after January 1, 1999;
(2) subject to a determination, for the period
fiscal year 1999 through fiscal year 2002, by the
Secretary under section 3112(d)(2)(B) of the USEC
Privatization Act (42 U.S.C. 2297h–10(d)(2)(B));
and
(3) made at a price not less than the fair mar-
ket value of the uranium and in a manner that
maximizes proceeds to the Treasury.
The Secretary shall receive the proceeds from such sale
in the period fiscal year 1999 through fiscal year 2002
and shall deposit such proceeds in the General Fund of
the Treasury.
(b) COSTS.—The costs of making the sales required
by subsection (a) shall be covered by the unobligated bal-
ances of appropriations of the Department of Energy.
Subtitle D—Communications
SEC. 3301. SPECTRUM AUCTIONS.
(a) EXTENSION AND EXPANSION OF AUCTION AU-
THORITY.—
(1) AMENDMENTS.—Section 309(j) of the Com-
munications Act of 1934 (47 U.S.C. 309(j)) is
amended—
(A) by striking paragraphs (1) and (2) and
inserting in lieu thereof the following:
‘‘(1) GENERAL AUTHORITY.—If, consistent with
the obligations described in paragraph (6)(E), mutu-
ally exclusive applications are accepted for any ini-
tial license or construction permit which will involve
an exclusive use of the electromagnetic spectrum,
then the Commission shall grant such license or per-
mit to a qualified applicant through a system of
competitive bidding that meets the requirements of
this subsection.
‘‘(2) EXEMPTIONS.—The competitive bidding
authority granted by this subsection shall not apply
to licenses or construction permits issued by the
Commission—
‘‘(A) that, as the result of the Commission
carrying out the obligations described in para-
graph (6)(E), are not mutually exclusive;
‘‘(B) for public safety radio services, in-
cluding private internal radio services used by
non-Government entities, that—
‘‘(i) protect the safety of life, health,
or property; and
‘‘(ii) are not made commercially avail-
able to the public;
‘‘(C) for initial licenses or construction
permits assigned by the Commission to existing
terrestrial broadcast licensees for new terres-
trial digital television services; or
‘‘(D) for public telecommunications serv-
ices, as defined in section 397(14) of the Com-
munications Act of 1934 (47 U.S.C. 397(14)),
when the license application is for channels re-
served for noncommercial use.’’;
(B) in paragraph (3)—
(i) by inserting after the second sen-
tence the following new sentence: ‘‘The
Commission shall, directly or by contract,
provide for the design and conduct (for
purposes of testing) of competitive bidding
using a contingent combinatorial bidding
system that permits prospective bidders to
bid on combinations or groups of licenses
in a single bid and to enter multiple alter-
native bids within a single bidding round.’’;
(ii) by striking ‘‘and’’ at the end of
subparagraph (C);
(iii) by striking the period at the end
of subparagraph (D) and inserting ‘‘;
and’’; and
(iv) by adding at the end the following
new subparagraph:
‘‘(E) ensuring that, in the scheduling of
any competitive bidding under this subsection,
an adequate period is allowed—
‘‘(i) before issuance of bidding rules,
to permit notice and comment on proposed
auction procedures; and
‘‘(ii) after issuance of bidding rules, to
ensure that interested parties have a suffi-
cient time to develop business plans, assess
market conditions, and evaluate the avail-
ability of equipment for the relevant serv-
ices.’’;
(C) in paragraph (4)—
(i) by striking ‘‘and’’ at the end of
subparagraph (D);
(ii) by striking the period at the end
of subparagraph (E) and inserting ‘‘;
and’’; and
(iii) by adding at the end the follow-
ing new subparagraph:
‘‘(F) establish methods by which a mini-
mum bid, in an amount that is more than
nominal in relation to the value of the public
spectrum resource being made available, will be
required to obtain any license or permit being
assigned pursuant to the competitive bidding.’’;
(D) in paragraph (8)—
(i) by striking subparagraph (B); and
(ii) by redesignating subparagraph
(C) as subparagraph (B);
(E) in paragraph (11), by striking ‘‘Sep-
tember 30, 1998’’ and inserting ‘‘December 31,
2002’’; and
(F) in paragraph (13)(F), by striking
‘‘September 30, 1998’’ and inserting ‘‘the date
of enactment of the Balanced Budget Act of
1997’’.
(2) CONFORMING AMENDMENT.—Subsection (i)
of section 309 of the Communications Act of 1934
(47 U.S.C. 309(i)) is repealed.
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1)(A) shall not apply with respect to
any license or permit for which the Federal Commu-
nications Commission has accepted mutually exclu-
sive applications on or before the date of enactment
of this Act.
(b) COMMISSION OBLIGATION TO MAKE ADDITIONAL
SPECTRUM AVAILABLE BY AUCTION.—
(1) IN
GENERAL.—The Federal Communica-
tions Commission shall complete all actions nec-
essary to permit the assignment, by September 30,
2002, by competitive bidding pursuant to section
309(j) of the Communications Act of 1934 (47
U.S.C. 309(j)) of licenses for the use of bands of
frequencies that—
(A) individually span not less than 25
megahertz, unless a combination of smaller
bands can, notwithstanding the provisions of
paragraph (7) of such section, reasonably be ex-
pected to produce greater receipts;
(B) in the aggregate span not less than
100 megahertz;
(C) are located below 3 gigahertz;
(D) have not, as of the date of enactment
of this Act—
(i) been designated by Commission
regulation for assignment pursuant to such
section;
(ii) been identified by the Secretary of
Commerce pursuant to section 113 of the
National Telecommunications and Infor-
mation Administration Organization Act;
(iii) been allocated for Federal Gov-
ernment use pursuant to section 305 of the
Communications Act of 1934 (47 U.S.C.
305);
(iv) been designated in section 3303
of this Act; or
(v) been allocated for unlicensed use
pursuant to part 15 of the Commission’s
regulations (47 C.F.R. Part 15), if the
competitive bidding for licenses would
interfere with operation of end-user prod-
ucts permitted under such regulations;
(E) notwithstanding section 115(b)(1)(B)
of the National Telecommunications and Infor-
mation Administration Organization Act (47
U.S.C. 925(b)(1)(B)) or any proposal pursuant
to such section, include frequencies at 1,710–
1,755 megahertz;
(F) include frequencies at 2,110–2,150
megahertz; and
(G) include 15 megahertz from within the
bands of frequencies at 1,990–2,110 megahertz.
(2) SCHEDULE
FOR
ASSIGNMENT
OF 1,710–
1,755 MEGAHERTZ.—The Commission shall com-
mence competitive bidding for the commercial li-
censes pursuant to paragraph (1)(E) after January
1, 2001. The Commission shall complete the assign-
ment of such commercial licenses, and report to the
Congress the total revenues from such competitive
bidding, by September 30, 2002.
(3) USE
OF
BANDS
AT
2,110-2,150
MEGA-
HERTZ.—The Commission shall reallocate spectrum
located at 2,110-2,150 megahertz for assignment by
competitive bidding unless the Commission deter-
mines that auction of other spectrum (A) better
serves the public interest, convenience, and neces-
sity, and (B) can reasonably be expected to produce
greater receipts. If the Commission makes such a
determination, then the Commission shall, within 2
years after the date of enactment of this Act, iden-
tify an alternative 40 megahertz, and report to the
Congress an identification of such alternative 40
megahertz for assignment by competitive bidding.
(4) USE OF 15 MEGAHERTZ FROM BANDS AT
1,990-2,110 MEGAHERTZ.—The Commission shall re-
allocate 15 megahertz from spectrum located at
1,990-2,110 megahertz for assignment by competi-
tive bidding unless the President determines such
spectrum cannot be reallocated due to the need to
protect incumbent Federal systems from inter-
ference, and that allocation of other spectrum (A)
better serves the public interest, convenience, and
necessity, and (B) can reasonably be expected to
produce greater receipts. If the President makes
such a determination, then the President shall, with-
in 2 years after the date of enactment of this Act,
identify alternative bands of frequencies totalling 15
megahertz, and report to the Congress an identifica-
tion of such alternative bands for assignment by
competitive bidding.
(5) CRITERIA FOR REASSIGNMENT.—In making
available bands of frequencies for competitive bid-
ding pursuant to paragraph (1), the Commission
shall—
(A) seek to promote the most efficient use
of the spectrum;
(B) take into account the cost to incum-
bent licensees of relocating existing uses to
other bands of frequencies or other means of
communication; and
(C) comply with the requirements of inter-
national agreements concerning spectrum allo-
cations.
(6) NOTIFICATION TO NTIA.—The Commission
shall notify the Secretary of Commerce if—
(A) the Commission is not able to provide
for the effective relocation of incumbent licens-
ees to bands of frequencies that are available to
the Commission for assignment; and
(B) the Commission has identified bands
of frequencies that are—
(i) suitable for the relocation of such
licensees; and
(ii) allocated for Federal Government
use, but that could be reallocated pursuant
to part B of the National Telecommuni-
cations and Information Administration
Organization Act (as amended by this
Act).
(c) IDENTIFICATION AND REALLOCATION OF FRE-
QUENCIES.—The National Telecommunications and Infor-
mation Administration Organization Act (47 U.S.C. 901
et seq.) is amended—
(1) in section 113, by adding at the end the fol-
lowing new subsection:
‘‘(f) ADDITIONAL REALLOCATION REPORT.—If the
Secretary receives a notice from the Commission pursuant
to section 3301(b)(3) of the Balanced Budget Act of 1997,
the Secretary shall prepare and submit to the President,
the Commission, and the Congress a report recommending
for reallocation for use other than by Federal Government
stations under section 305 of the 1934 Act (47 U.S.C.
305), bands of frequencies that are suitable for the uses
identified in the Commission’s notice. The Commission
shall, not later than one year after receipt of such report,
prepare, submit to the President and the Congress, and
implement, a plan for the immediate allocation and assign-
ment of such frequencies under the 1934 Act to incumbent
licencees described in section 3301(b)(3) of the Balanced
Budget Act of 1997.’’; and
(2) in section 114(a)(1), by striking ‘‘(a) or
(d)(1)’’ and inserting ‘‘(a), (d)(1), or (f)’’.
(d) 
IDENTIFICATION
AND
REALLOCATION
OF
AUCTIONABLE
FREQUENCIES.—The 
National 
Tele-
communications and Information Administration Organi-
zation Act (47 U.S.C. 901 et seq.) is amended—
(1) in section 113(b)—
(A) by striking the heading of paragraph
(1) and inserting ‘‘INITIAL REALLOCATION RE-
PORT’’;
(B) by inserting ‘‘in the first report re-
quired by subsection (a)’’ after ‘‘recommend for
reallocation’’ in paragraph (1);
(C) by inserting ‘‘or (3)’’ after ‘‘paragraph
(1)’’ each place it appears in paragraph (2);
and
(D) by inserting after paragraph (2) the
following new paragraph:
‘‘(3) SECOND REALLOCATION REPORT.—In ac-
cordance with the provisions of this section, the Sec-
retary shall recommend for reallocation in the sec-
ond report required by subsection (a), for use other
than by Federal Government stations under section
305 of the 1934 Act (47 U.S.C. 305), a band or
bands of frequencies that—
‘‘(A) in the aggregate span not less than
20 megahertz;
‘‘(B) individually span not less than 20
megahertz, unless a combination of smaller
bands can reasonably be expected to produce
greater receipts;
‘‘(C) are located below 3 gigahertz; and
‘‘(D) meet the criteria specified in para-
graphs (1) through (5) of subsection (a).’’; and
(2) in section 115—
(A) in subsection (b), by striking ‘‘the re-
port required by section 113(a)’’ and inserting
‘‘the initial reallocation report required by sec-
tion 113(a)’’; and
(B) by adding at the end the following new
subsection:
‘‘(c) ALLOCATION
AND
ASSIGNMENT
OF
FRE-
QUENCIES IDENTIFIED IN THE SECOND REALLOCATION
REPORT.—With respect to the frequencies made available
for reallocation pursuant to section 113(b)(3), the Com-
mission shall, not later than one year after receipt of the
second reallocation report required by such section, pre-
pare, submit to the President and the Congress, and im-
plement, a plan for the immediate allocation and assign-
ment under the 1934 Act of all such frequencies in accord-
ance with section 309(j) of such Act.’’.
SEC. 3302. AUCTION OF RECAPTURED BROADCAST TELE-
VISION SPECTRUM.
Section 309(j) of the Communications Act of 1934
(47 U.S.C. 309(j)) is amended by adding at the end the
following new paragraph:
‘‘(14) AUCTION
OF
RECAPTURED
BROADCAST
TELEVISION SPECTRUM.—
‘‘(A) LIMITATIONS ON TERMS OF TERRES-
TRIAL
TELEVISION
BROADCAST
LICENSES.—A
television license that authorizes analog tele-
vision services may not be renewed to authorize
such service for a period that extends beyond
December 31, 2006. The Commission shall have
the authority to grant by regulation an exten-
sion of such date to licensees in a market if the
Commission determines that more than 5 per-
cent of households in such market continue to
rely exclusively on over-the-air terrestrial analog
television signals.
‘‘(B) SPECTRUM
REVERSION
AND
RE-
SALE.—
‘‘(i) The Commission shall ensure
that, when the authority to broadcast ana-
log television services under a license ex-
pires pursuant to subparagraph (A), each
licensee shall return spectrum according to
the Commission’s direction and the Com-
mission shall reclaim such spectrum.
‘‘(ii) Licensees for new services occu-
pying spectrum reclaimed pursuant to
clause (i) shall be selected in accordance
with this subsection. The Commission shall
complete the assignment of such licenses,
and report to the Congress the total reve-
nues from such competitive bidding, by
September 30, 2002.
‘‘(C) CERTAIN LIMITATIONS ON QUALIFIED
BIDDERS PROHIBITED.—In prescribing any reg-
ulations relating to the qualification of bidders
for spectrum reclaimed pursuant to subpara-
graph (B)(i), the Commission shall not—
‘‘(i) preclude any party from being a
qualified bidder for spectrum that is allo-
cated for any use that includes digital tele-
vision service on the basis of—
‘‘(I) the Commission’s duopoly
rule (47 C.F.R. 73.3555(b)); or
‘‘(II) the Commission’s news-
paper cross-ownership rule (47 C.F.R.
73.3555(d)); or
‘‘(ii) apply either such rule to preclude
such a party that is a successful bidder in
a competitive bidding for such spectrum
from using such spectrum for digital tele-
vision service.
‘‘(D) DEFINITIONS.—As used in this para-
graph:
‘‘(i) The term ‘digital television serv-
ice’ means television service provided using
digital technology to enhance audio quality
and video resolution, as further defined in
the Memorandum Opinion, Report, and
Order of the Commission entitled ‘Ad-
vanced Television Systems and Their Im-
pact Upon the Existing Television Service’,
MM Docket No. 87–268 and any subse-
quent Commission proceedings dealing
with digital television.
‘‘(ii) The term ‘analog television serv-
ice’ means service provided pursuant to the
transmission standards prescribed by the
Commission in section 73.682(a) of its reg-
ulation (47 CFR 73.682(a)).’’.
SEC. 3303. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC
SAFETY AND COMMERCIAL LICENSES.
(a) IN GENERAL.—The Federal Communications
Commission shall, not later than January 1, 1998, allocate
on a national, regional, or market basis, from radio spec-
trum between 746 megahertz and 806 megahertz—
(1) 24 megahertz of that spectrum for public
safety services according to the terms and conditions
established by the Commission, unless the Commis-
sion determines that the needs for public safety serv-
ices can be met in particular areas with allocations
of less than 24 megahertz; and
(2) the remainder of that spectrum for commer-
cial purposes to be assigned by competitive bidding
in accordance with section 309(j).
(b) ASSIGNMENT.—The Commission shall—
(1) assign the licenses for public safety created
pursuant to subsection (a) no later than March 31,
1998;
(2) commence competitive bidding for the com-
mercial licenses created pursuant to subsection (a)
after January 1, 2001; and
(3) complete competitive bidding for such com-
mercial licenses, and report to the Congress the total
revenues from such competitive bidding, by Septem-
ber 30, 2002.
(c) LICENSING OF UNUSED FREQUENCIES FOR PUB-
LIC SAFETY RADIO SERVICES.—
(1) USE OF UNUSED CHANNELS FOR PUBLIC
SAFETY.—It shall be the policy of the Commission,
notwithstanding any other provision of this Act or
any other law, to waive whatever licensee eligibility
and other requirements (including bidding require-
ments) are applicable in order to permit the use of
unassigned frequencies for public safety purposes by
a State or local governmental agency upon a show-
ing that—
(A) no other existing satisfactory public
safety channel is immediately available to sat-
isfy the requested use;
(B) the proposed use is technically feasible
without causing harmful interference to existing
stations in the frequency band entitled to pro-
tection from such interference under the rules
of the Commission; and
(C) use of the channel for public safety
purposes is consistent with other existing public
safety channel allocations in the geographic
area of proposed use.
(2) APPLICABILITY.—Paragraph (1) shall apply
to any application that is pending before the Federal
Communications Commission, or that is not finally
determined under either section 402 or 405 of the
Communications Act of 1934 (47 U.S.C. 402, 405)
on May 15, 1997, or that is filed after such date.
(d) CONDITIONS
ON LICENSES.—With respect to
public safety and commercial licenses granted pursuant to
this subsection, the Commission shall—
(1) establish interference limits at the bound-
aries of the spectrum block and service area;
(2) establish any additional technical restric-
tions necessary to protect full-service analog tele-
vision service and digital television service during a
transition to digital television service; and
(3) permit public safety and commercial licens-
ees—
(A) to aggregate multiple licenses to create
larger spectrum blocks and service areas; and
(B) to disaggregate or partition licenses to
create smaller spectrum blocks or service areas.
(e) PROTECTION OF QUALIFYING LOW-POWER STA-
TIONS.—After making any allocation or assignment under
this section the Commission shall seek to assure that each
qualifying low-power television station is assigned a fre-
quency below 746 megahertz to permit the continued oper-
ation of such station.
(f) DEFINITIONS.—For purposes of this section:
(1) COMMISSION.—The term ‘‘Commission’’
means the Federal Communications Commission.
(2) DIGITAL TELEVISION SERVICE.—The term
‘‘digital television service’’ means television service
provided using digital technology to enhance audio
quality and video resolution, as further defined in
the Memorandum Opinion, Report, and Order of the
Commission entitled ‘Advanced Television Systems
and Their Impact Upon the Existing Television
Service’, MM Docket No. 87–268 and any subse-
quent Commission proceedings dealing with digital
television.
(3) ANALOG TELEVISION SERVICE.—The term
‘‘analog television service’’ means services provided
pursuant to the transmission standards prescribed
by the Commission in section 73.682(a) of its regu-
lation (47 CFR 73.682(a)).
(4) PUBLIC
SAFETY
SERVICES.—The term
‘‘public safety services’’ means services—
(A) the sole or principal purpose of which
is to protect the safety of life, health, or prop-
erty;
(B) that are provided—
(i) by State or local government enti-
ties; or
(ii) by nongovernmental, private orga-
nizations that are authorized by a govern-
mental entity whose primary mission is the
provision of such services; and
(C) that are not made commercially avail-
able to the public by the provider.
(5) SERVICE AREA.—The term ‘‘service area’’
means the geographic area over which a licensee
may provide service and is protected from inter-
ference.
(6) SPECTRUM BLOCK.—The term ‘‘spectrum
block’’ means the range of frequencies over which
the apparatus licensed by the Commission is author-
ized to transmit signals.
(7) QUALIFYING LOW-POWER TELEVISION STA-
TIONS.—A station is a qualifying low-power tele-
vision station if, during the 90 days preceding the
date of enactment of this Act—
(A) such station broadcast a minimum of
18 hours per day;
(B) such station broadcast an average of
at least 3 hours per week of programming that
was produced within the community of license
of such station; and
(C) such station was in compliance with
the requirements applicable to low-power tele-
vision stations.
SEC. 3304. ADMINISTRATIVE PROCEDURES FOR SPECTRUM
AUCTIONS.
(a) EXPEDITED PROCEDURES.—The rules governing
competitive bidding under this subtitle shall be effective
immediately upon publication in the Federal Register not-
withstanding section 553(d), 801(a)(3), and 806(a) of title
5, United States Code. Chapter 6 of such title, and sec-
tions 3507 and 3512 of title 44, United States Code, shall
not apply to such rules and competitive bidding procedures
governing frequencies assigned under this subtitle. Not-
withstanding section 309(b) of the Communications Act
of 1934 (47 U.S.C. 309(b)), no application for an instru-
ment of authorization for such frequencies shall be grant-
ed by the Commission earlier than 7 days following issu-
ance of public notice by the Commission of the acceptance
for filing of such application or of any substantial amend-
ment thereto. Notwithstanding section 309(d)(1) of such
Act (47 U.S.C. 309(d)(1)), the Commission may specify
a period (no less than 5 days following issuance of such
public notice) for the filing of petitions to deny any appli-
cation for an instrument of authorization for such fre-
quencies.
(b) DEADLINE FOR COLLECTION.—The Commission
shall conduct the competitive bidding under this subtitle
in a manner that ensures that all proceeds of the bidding
are deposited in accordance with section 309(j)(8) of the
Communications Act of 1934 not later September 30,
2002.
SEC. 3305. UNIVERSAL SERVICE FUND PAYMENT SCHED-
ULE.
(a) ACCELERATION OF PAYMENTS.—There shall be
available in fiscal year 2001 from funds in the Treasury
not otherwise appropriated $2,000,000,000 to the univer-
sal service fund under part 54 of the Federal Communica-
tions Commission’s regulations (47 C.F.R. Part 54) in ad-
dition to any other revenues required to be collected under
such part.
(b) LIMITATION ON EXPENDITURES.—The outlays of
the universal service fund under part 54 of the Federal
Communications Commission’s regulations (47 C.F.R.
Part 54) in fiscal year 2002 shall not exceed the amount
of revenue required to be collected in such fiscal year, less
$2,000,000,000.
SEC. 3306. INQUIRY REQUIRED.
The Federal Communications Commission shall, not
later than July 1, 1997, initiate the inquiry required by
section 309(j)(12) of the Communications Act of 1934 (47
U.S.C. 309(j)(12)) for the purposes of collecting the infor-
mation required for its report under each of subpara-
graphs (A) through (E) of such section, and shall keep
the Congress fully and currently informed with respect to
the progress of such inquiry.
Subtitle E—Medicaid
SEC. 3400. TABLE OF CONTENTS OF SUBTITLE; REF-
ERENCES.
(a) TABLE OF CONTENTS OF SUBTITLE.—The table
of contents of this subtitle is as follows:
Sec. 3400. Table of contents of subtitle; references.
CHAPTER 1—STATE FLEXIBILITY
SUBCHAPTER A—USE OF MANAGED CARE
Sec. 3401. State options to provide benefits through managed care entities.
Sec. 3402. Elimination of 75:25 restriction on risk contracts.
Sec. 3403. Primary care case management services as State option without
need for waiver.
Sec. 3404. Change in threshold amount for contracts requiring Secretary’s
prior approval.
SUBCHAPTER B—PAYMENT METHODOLOGY
Sec. 3411. Flexibility in payment methods for hospital, nursing facility, and
ICF/MR services; flexibility for home health.
Sec. 3412. Payment for Federally qualified health center services.
Sec. 3413. Treatment of State taxes imposed on certain hospitals that provide
free care.
SUBCHAPTER C—ELIGIBILITY
Sec. 3421. State option of continuous eligibility for 12 months; clarification of
State option to cover children.
Sec. 3422. Payment of part or all of Medicare part B premium amount for cer-
tain low-income individuals.
Sec. 3423. Penalty for fraudulent eligibility.
Sec. 3424. Treatment of certain settlement payments.
SUBCHAPTER D—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
Sec. 3431. Establishment of PACE program as medicaid State option.
Sec. 3432. Coverage of PACE under the medicare program.
Sec. 3433. Effective date; transition.
Sec. 3434. Study and reports.
SUBCHAPTER E—BENEFITS
Sec. 3441. Elimination of requirement to pay for private insurance.
Sec. 3442. Permitting same copayments in health maintenance organizations as
in fee-for-service.
Sec. 3443. Physician qualification requirements.
Sec. 3444. Elimination of requirement of prior institutionalization with respect
to habilitation services furnished under a waiver for home or
community-based services.
Sec. 3445. Benefits for services of physician assistants.
Sec. 3446. Study and report on actuarial value of EPSDT benefit.
SUBCHAPTER F—ADMINISTRATION
Sec. 3451. Elimination of duplicative inspection of care requirements for ICFS/
MR and mental hospitals.
Sec. 3452. Alternative sanctions for noncompliant ICFS/MR.
Sec. 3453. Modification of MMIS requirements.
Sec. 3454. Facilitating imposition of State alternative remedies on noncompli-
ant nursing facilities.
Sec. 3455. Medically accepted indication.
Sec. 3456. Continuation of State-wide section 1115 medicaid waivers.
Sec. 3457. Authorizing administrative streamlining and privatizing modifica-
tions under the medicaid program.
Sec. 3458. Extension of moratorium.
CHAPTER 2—QUALITY ASSURANCE
Sec. 3461. Requirements to ensure quality of and access to care under man-
aged care plans.
Sec. 3462. Solvency standards for certain health maintenance organizations.
Sec. 3463. Application of prudent layperson standard for emergency medical
condition and prohibition of gag rule restrictions.
Sec. 3464. Additional fraud and abuse protections in managed care.
Sec. 3465. Grievances under managed care plans.
Sec. 3466. Standards relating to access to obstetrical and gynecological services
under managed care plans.
CHAPTER 3—FEDERAL PAYMENTS
Sec. 3471. Reforming disproportionate share payments under State medicaid
programs.
Sec. 3472. Additional funding for State emergency health services furnished to
undocumented aliens.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex-
cept as otherwise specifically provided, whenever in this
subtitle an amendment is expressed in terms of an amend-
ment to or repeal of a section or other provision, the ref-
erence is considered to be made to that section or other
provision of the Social Security Act.
CHAPTER 1—STATE FLEXIBILITY
Subchapter A—Use of Managed Care
SEC. 
3401. 
STATE 
OPTIONS 
TO 
PROVIDE 
BENEFITS
THROUGH MANAGED CARE ENTITIES.
(a) IN
GENERAL.—Section 1915(a) (42 U.S.C.
1396n(a)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(1),
(2) by striking the period at the end of para-
graph (2) and inserting ‘‘; or’’, and
(3) by adding at the end the following new
paragraph:
‘‘(3) requires individuals, other than special
needs children (as defined in subsection (i)), eligible
for medical assistance for items or services under
the State plan to enroll with an entity that provides
or arranges for services for enrollees under a con-
tract pursuant to section 1903(m), or with a pri-
mary care case manager (as defined in section
1905(t)(2)) (or restricts the number of provider
agreements with those entities under the State plan,
consistent with quality of care), if—
‘‘(A) the State permits an individual to
choose the manager or managed care entity
from among the managed care organizations
and primary care case providers who meet the
requirements of this title;
‘‘(B)(i) individuals are permitted to choose
between at least 2 of those entities, or 2 of the
managers, or an entity and a manager, each of
which has sufficient capacity to provide services
to enrollees; or
‘‘(ii) with respect to a rural area—
‘‘(I) individuals who are required to
enroll with a single entity are afforded the
option to obtain covered services by an al-
ternative provider; and
‘‘(II) an individual who is offered no
alternative to a single entity or manager is
given a choice between at least two provid-
ers within the entity or through the man-
ager;
‘‘(C) no individual who is an Indian (as de-
fined in section 4 of the Indian Health Care
Improvement Act of 1976) is required to enroll
in any entity that is not one of the following
(and only if such entity is participating under
the plan): the Indian Health Service, an Indian
health program operated by an Indian tribe or
tribal organization pursuant to a contract,
grant, cooperative agreement, or compact with
the Indian Health Service pursuant to the In-
dian Self-Determination Act (25 U.S.C. 450 et
seq.), or an urban Indian health program oper-
ated by an urban Indian organization pursuant
to a grant or contract with the Indian Health
Service pursuant to title V of the Indian Health
Care Improvement Act (25 U.S.C. 1601 et
seq.);
‘‘(D) the State restricts those individuals
from changing their enrollment without cause
for periods no longer than six months (and per-
mits enrollees to change enrollment for cause at
any time);
‘‘(E) the restrictions do not apply to pro-
viders of family planning services (as defined in
section 1905(a)(4)(C)) and are not conditions
for payment of medicare cost sharing pursuant
to section 1905(p)(3); and
‘‘(F) prior to establishing an enrollment
requirement under this paragraph, the State
agency provides for public notice and comment
pursuant to requirements established by the
Secretary.’’.
(b) SPECIAL NEEDS CHILDREN DEFINED.—Section
1915 (42 U.S.C. 1396n) is amended by adding at the end
the following:
‘‘(i) For purposes of subsection (a)(3), the term ‘spe-
cial needs child’ means an individual under 19 years of
age who—
‘‘(1) is eligible for supplemental security income
under title XVI,
‘‘(2) is described in section 501(a)(1)(D),
‘‘(3) is described in section 1902(e)(3), or
‘‘(4) is in foster care or otherwise in an out-of-
home placement.’’.
(c) CONFORMING AMENDMENT TO RISK-BASED AR-
RANGEMENTS.—Section 
1903(m)(2) 
(42 
U.S.C.
1396b(m)(2)) is amended—
(1) in paragraph (A)(vi)—
(A) by striking ‘‘(I) except as provided
under subparagraph (F),’’; and
(B) by striking all that follows ‘‘to termi-
nate such enrollment’’ and inserting ‘‘in accord-
ance with the provisions of subparagraph (F);’’;
and
(2) in subparagraph (F)—
(A) by striking ‘‘In the case of—’’ and all
that follows through ‘‘a State plan’’ and insert-
ing ‘‘A State plan’’, and
(B) by striking ‘‘(A)(vi)(I)’’ and inserting
‘‘(A)(vi)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section take effect on the date of the enactment of
this Act.
SEC. 3402. ELIMINATION OF 75:25 RESTRICTION ON RISK
CONTRACTS.
(a) 75 PERCENT LIMIT ON MEDICARE AND MEDIC-
AID ENROLLMENT.—
(1) IN GENERAL.—Section 1903(m)(2)(A) (42
U.S.C. 1396b(m)(2)(A)) is amended by striking
clause (ii).
(2) 
CONFORMING
AMENDMENTS.—Section
1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended—
(A) by striking subparagraphs (C), (D),
and (E); and
(B) in subparagraph (G), by striking
‘‘clauses (i) and (ii)’’ and inserting ‘‘clause (i)’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) take effect on the date of the enactment
of this Act.
SEC. 3403. PRIMARY CARE CASE MANAGEMENT SERVICES
AS STATE OPTION WITHOUT NEED FOR WAIV-
ER.
(a) OPTIONAL COVERAGE AS PART OF MEDICAL AS-
SISTANCE.—Section 1905(a) (42 U.S.C. 1396d(a)) is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(24);
(2) by redesignating paragraph (25) as para-
graph (26) and by striking the period at the end of
such paragraph and inserting a comma; and
(3) by inserting after paragraph (24) the fol-
lowing new paragraph:
‘‘(25) primary care case management services
(as defined in subsection (t)); and’’.
(b) PRIMARY CARE CASE MANAGEMENT SERVICES
DEFINED.—Section 1905 (42 U.S.C. 1396d) is amended
by adding at the end the following new subsection:
‘‘(t)(1) The term ‘primary care case management
services’ means case-management related services (includ-
ing coordination and monitoring of health care services)
provided by a primary care case manager under a primary
care case management contract.
‘‘(2)(A) The term ‘primary care case manager’
means, with respect to a primary care case management
contract, a provider described in subparagraph (B).
‘‘(B) A provider described in this subparagraph is a
provider that provides primary care case management
services under contract and is—
‘‘(i) a physician, a physician group practice, or
an entity employing or having other arrangements
with physicians; or
‘‘(ii) at State option—
‘‘(I) a nurse practitioner (as described in
section 1905(a)(21));
‘‘(II) a certified nurse-midwife (as defined
in section 1861(gg)); or
‘‘(III) a physician assistant (as defined in
section 1861(aa)(5)).
‘‘(3) The term ‘primary care case management con-
tract’ means a contract with a State agency under which
a primary care case manager undertakes to locate, coordi-
nate and monitor covered primary care (and such other
covered services as may be specified under the contract)
to all individuals enrolled with the primary care case man-
ager, and which provides for—
‘‘(A) reasonable and adequate hours of oper-
ation, including 24-hour availability of information,
referral, and treatment with respect to medical
emergencies;
‘‘(B) restriction of enrollment to individuals re-
siding sufficiently near a service delivery site of the
entity to be able to reach that site within a reason-
able time using available and affordable modes of
transportation;
‘‘(C) employment of, or contracts or other ar-
rangements with, sufficient numbers of physicians
and other appropriate health care professionals to
ensure that services under the contract can be fur-
nished to enrollees promptly and without com-
promise to quality of care;
‘‘(D) a prohibition on discrimination on the
basis of health status or requirements for health
services in enrollment, disenrollment, or reenrollment
of individuals eligible for medical assistance under
this title; and
‘‘(E) a right for an enrollee to terminate enroll-
ment without cause during the first month of each
enrollment period, which period shall not exceed six
months in duration, and to terminate enrollment at
any time for cause.
‘‘(4) For purposes of this subsection, the term ‘pri-
mary care’ includes all health care services customarily
provided in accordance with State licensure and certifi-
cation laws and regulations, and all laboratory services
customarily provided by or through, a general practitioner,
family medicine physician, internal medicine physician, ob-
stetrician/gynecologist, or pediatrician.’’.
(c) CONFORMING AMENDMENTS.—Section 1902 (42
U.S.C. 1396a) is amended—
(1) in subsection (a)(10)(C)(iv), by striking
‘‘(24)’’ and inserting ‘‘(25)’’, and
(2) in subsection (j), by striking ‘‘(25)’’ and in-
serting ‘‘(26)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section apply to primary care case management serv-
ices furnished on or after October 1, 1997.
SEC. 3404. CHANGE IN THRESHOLD AMOUNT FOR CON-
TRACTS REQUIRING SECRETARY’S PRIOR AP-
PROVAL.
(a) IN GENERAL.—Section 1903(m)(2)(A)(iii) (42
U.S.C. 1396b(m)(2)(A)(iii)) is amended by striking
‘‘$100,000’’ and inserting ‘‘$1,000,000 for 1998 and, for
a subsequent year, the amount established under this
clause for the previous year increased by the percentage
increase in the consumer price index for all urban consum-
ers over the previous year’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to contracts entered into or re-
newed on or after the date of the enactment of this Act.
Subchapter B—Payment Methodology
SEC. 3411. FLEXIBILITY IN PAYMENT METHODS FOR HOS-
PITAL, NURSING FACILITY, AND ICF/MR SERV-
ICES; FLEXIBILITY FOR HOME HEALTH.
(a) REPEAL
OF BOREN REQUIREMENTS.—Section
1902(a)(13) (42 U.S.C. 1396a(a)) is amended—
(1) by amending subparagraphs (A) and (B) to
read as follows:
‘‘(A) for a public process for determination
of rates of payment under the plan for hospital
services, nursing facility services, and services
of intermediate care facilities for the mentally
retarded under which—
‘‘(i) proposed rates are published, and
providers, beneficiaries and their represent-
atives, and other concerned State residents
are given a reasonable opportunity for re-
view and comment on the proposed rates;
‘‘(ii) final rates are published, to-
gether with justifications, and
‘‘(iii) in the case of hospitals, take
into account (in a manner consistent with
section 1923) the situation of hospitals
which serve a disproportionate number of
low income patients with special needs;
‘‘(B) that the State shall provide assur-
ances satisfactory to the Secretary that the av-
erage level of payments under the plan for
nursing facility services (as determined on an
aggregate per resident-day basis) and the level
of payments under the plan for inpatient hos-
pital services (as determined on an aggregate
hospital payment basis) furnished during the
18-month period beginning October 1, 1997, is
not less than the average level of payments that
would be made under the plan during such 18-
month period for such respective services (de-
termined on such basis) based on rates or pay-
ment basis in effect as of May 1, 1997;’’; and
(2) by striking subparagraph (C).
(b) REPEAL OF REQUIREMENTS RELATING TO HOME
HEALTH SERVICES.—Such section is further amended—
(1) by adding ‘‘and’’ at the end of subpara-
graph (D),
(2) by striking ‘‘and’’ at the end of subpara-
graph (E), and
(3) by striking subparagraph (F).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payment for items and services
furnished on or after the date of the enactment of this
Act.
SEC. 3412. PAYMENT FOR CENTER AND CLINIC SERVICES.
(a) PHASE-OUT OF PAYMENT BASED ON REASON-
ABLE
COSTS.—Section 
1902(a)(13)(E) 
(42 
U.S.C.
1396a(a)(13)(E)) is amended by inserting ‘‘(or 95 percent
for services furnished during fiscal year 2000, 90 percent
for service furnished during fiscal year 2001, and 85 per-
cent for services furnished during fiscal year 2002)’’ after
‘‘100 percent’’.
(b) TRANSITIONAL SUPPLEMENTAL PAYMENT FOR
SERVICES FURNISHED UNDER CERTAIN MANAGED CARE
CONTRACTS.—
(1) IN
GENERAL.—Section 1902(a)(13)(E) is
further amended—
(A) by inserting ‘‘(i)’’ after ‘‘(E)’’, and
(B) by inserting before the semicolon at
the end the following: ‘‘and (ii) in carrying out
clause (i) in the case of services furnished by a
federally qualified health center or a rural
health clinic pursuant to a contract between the
center and a health maintenance organization
under section 1903(m), for payment by the
State of a supplemental payment equal to the
amount (if any) by which the amount deter-
mined under clause (i) exceeds the amount of
the payments provided under such contract’’.
(2) CONFORMING
AMENDMENT
TO
MANAGED
CARE CONTRACT REQUIREMENT.—Clause (ix) of sec-
tion 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is
amended to read as follows:
‘‘(ix) such contract provides, in the case of an
entity that has entered into a contract for the provi-
sion of services with a federally qualified health cen-
ter or a rural health clinic, that the entity shall pro-
vide payment that is not less than the level and
amount of payment which the entity would make for
the services if the services were furnished by a pro-
vider which is not a federally qualified health center
or a rural health clinic;’’.
(3) EFFECTIVE DATE.—The amendments made
by this section shall apply to services furnished on
or after October 1, 1997.
(c) END OF TRANSITIONAL PAYMENT RULES.—Ef-
fective for services furnished on or after October 1,
2002—
(1) subparagraph (E) of section 1902(a)(13)
(42 U.S.C. 1396a(a)(13)) is repealed, and
(2) clause (ix) of section 1903(m)(2)(A) (42
U.S.C. 1396b(m)(2)(A)) is repealed.
(d) FLEXIBILITY
IN
COVERAGE
OF
NON-FREE-
STANDING LOOK-ALIKES.—
(1) IN
GENERAL.—Section 1905(l)(2)(B)(iii)
(42 U.S.C. 1396d(l)(2)(B)(iii)) is amended by in-
serting ‘‘and is not other than an entity that is
owned, controlled, or operated by another provider’’
after ‘‘such a grant’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to service furnished on
and after the date of the enactment of this Act.
(e) GAO REPORT.—By not later than February 1,
2001, the Comptroller General shall submit to Congress
a report on the impact of the amendments made by this
section on access to health care for medicaid beneficiaries
and the uninsured served at health centers and rural
health clinics and the ability of health centers and rural
health clinics to become integrated in a managed care sys-
tem.
SEC. 3413. TREATMENT OF STATE TAXES IMPOSED ON CER-
TAIN HOSPITALS THAT PROVIDE FREE CARE.
(a) EXCEPTION FROM TAX DOES NOT DISQUALIFY
AS BROAD-BASED TAX.—Section 1903(w)(3) (42 U.S.C.
1396b(w)(3)) is amended—
(1) in subparagraph (B), by striking ‘‘and (E)’’
and inserting ‘‘(E), and (F)’’, and
(2) by adding at the end the following:
‘‘(F) In no case shall a tax not qualify as a broad-
based health care related tax under this paragraph be-
cause it does not apply to a hospital that is exempt from
taxation under section 501(c)(3) of the Internal Revenue
Code of 1986 and that does not accept payment under
the State plan under this title or under title XVIII.’’.
(b) REDUCTION IN FEDERAL FINANCIAL PARTICIPA-
TION IN CASE OF IMPOSITION OF TAX.—Section 1903(b)
(42 U.S.C. 1396b(b)) is amended by adding at the end
the following:
‘‘(4) Notwithstanding the preceding provisions of this
section, the amount determined under subsection (a)(1)
for any State shall be decreased in a quarter by the
amount of any health care related taxes (described in sec-
tion 1902(w)(3)(A)) that are imposed on a hospital de-
scribed in subsection (w)(3)(F) in that quarter.’’.
(c) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to taxes imposed before, on, or
after the date of the enactment of this Act and the amend-
ment made by subsection (b) shall apply to taxes imposed
on or after such date.
Subchapter C—Eligibility
SEC. 3421. STATE OPTION OF CONTINUOUS ELIGIBILITY
FOR 12 MONTHS; CLARIFICATION OF STATE
OPTION TO COVER CHILDREN.
(a) CONTINUOUS
ELIGIBILITY
OPTION.—Section
1902(e) (42 U.S.C. 1396a(e)) is amended by adding at
the end the following new paragraph:
‘‘(12) At the option of the State, the plan may pro-
vide that an individual who is under an age specified by
the State (not to exceed 19 years of age) and who is deter-
mined to be eligible for benefits under a State plan ap-
proved under this title under subsection (a)(10)(A) shall
remain eligible for those benefits until the earlier of—
‘‘(A) the end of a period (not to exceed 12
months) following the determination; or
‘‘(B) the time that the individual exceeds that
age.’’.
(b) CLARIFICATION OF STATE OPTION TO COVER
ALL CHILDREN UNDER 19 YEARS
OF AGE.—Section
1902(l)(1)(D) (42 U.S.C. 1396a(l)(1)(D)) is amended by
inserting ‘‘(or, at the option of a State, after any earlier
date)’’ after ‘‘children born after September 30, 1983’’.
(c) 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. 3422. PAYMENT OF PART OR ALL OF MEDICARE PART
B PREMIUM FOR CERTAIN LOW-INCOME INDI-
VIDUALS.
(a) 
ELIGIBILITY.—Section 
1902(a)(10)(E) 
(42
U.S.C. 1396a(a)(10)(E)) is amended—
(1) by striking ‘‘and’’ at the end of clause (ii),
(2) in clause (iii), by striking ‘‘and 120 percent
in 1995 and years thereafter’’ and inserting ‘‘120
percent in 1995, 1996, and 1997, and 135 percent
in 1998 and years thereafter’’; and
SEC. 3423. PENALTY FOR FRAUDULENT ELIGIBILITY.
Section 1128B(a) (42 U.S.C. 1320a–7b(a)), as
amended by section 217 of the Health Insurance Port-
ability and Accountability Act of 1996, is amended—
(1) by amending paragraph (6) to read as fol-
lows:
‘‘(6) for a fee knowingly and willfully counsels
or assists an individual to dispose of assets (includ-
ing by any transfer in trust) in order for the individ-
ual to become eligible for medical assistance under
a State plan under title XIX, if disposing of the as-
sets results in the imposition of a period of ineligibil-
ity for such assistance under section 1917(c),’’; and
(2) in clause (ii) of the matter following such
paragraph, by striking ‘‘failure, or conversion by any
other person’’ and inserting ‘‘failure, conversion, or
provision of counsel or assistance by any other per-
son’’.
SEC. 3424. TREATMENT OF CERTAIN SETTLEMENT PAY-
MENTS.
Notwithstanding any other provision of law, the pay-
ments made from any fund established pursuant to the
settlement in the case of In re Factor VIII or IX Con-
centrate Blood Products Litigation, MDL–986, no. 93–
C7452 (N.D. Ill.) shall not be considered income or re-
sources in determining eligibility for, or the amount of
benefits under, a State plan of medical assistance ap-
proved under title XIX of the Social Security Act.
Subchapter D—Programs of All-inclusive
Care for the Elderly (PACE)
SEC. 3431. ESTABLISHMENT OF PACE PROGRAM AS MEDIC-
AID STATE OPTION.
(a) IN GENERAL.—Title XIX is amended—
(1) in section 1905(a) (42 U.S.C. 1396d(a)), as
amended by section 3403(a)—
(A) by striking ‘‘and’’ at the end of para-
graph (25);
(B) by redesignating paragraph (26) as
paragraph (27); and
(C) by inserting after paragraph (25) the
following new paragraph:
‘‘(26) services furnished under a PACE pro-
gram under section 1932 to PACE program eligible
individuals enrolled under the program under such
section; and’’;
(2) by redesignating section 1932 as section
1933; and
(3) by inserting after section 1931 the following
new section:
‘‘PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY
(PACE)
‘‘SEC. 1932. (a) OPTION.—
‘‘(1) IN GENERAL.—A State may elect to pro-
vide medical assistance under this section with re-
spect to PACE program services to PACE program
eligible individuals who are eligible for medical as-
sistance under the State plan and who are enrolled
in a PACE program under a PACE program agree-
ment. Such individuals need not be eligible for bene-
fits under part A, or enrolled under part B, of title
XVIII to be eligible to enroll under this section. In
the case of an individual enrolled with a PACE pro-
gram pursuant to such an election—
‘‘(A) the individual shall receive benefits
under the plan solely through such program,
and
‘‘(B) the PACE provider shall receive pay-
ment in accordance with the PACE program
agreement for provision of such benefits.
A State may limit through its PACE program agree-
ment the number of individuals who may be enrolled
in a PACE program under the State plan.
‘‘(2) PACE PROGRAM DEFINED.—For purposes
of this section and section 1894, the term ‘PACE
program’ means a program of all-inclusive care for
the elderly that meets the following requirements:
‘‘(A) OPERATION.—The entity operating
the program is a PACE provider (as defined in
paragraph (3)).
‘‘(B) COMPREHENSIVE
BENEFITS.—The
program provides comprehensive health care
services to PACE program eligible individuals
in accordance with the PACE program agree-
ment and regulations under this section.
‘‘(C) TRANSITION.—In the case of an indi-
vidual who is enrolled under the program under
this section and whose enrollment ceases for
any reason (including the individual no longer
qualifies as a PACE program eligible individual,
the termination of a PACE program agreement,
or otherwise), the program provides assistance
to the individual in obtaining necessary transi-
tional care through appropriate referrals and
making the individual’s medical records avail-
able to new providers.
‘‘(3) PACE PROVIDER DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘PACE provider’ means an en-
tity that—
‘‘(i) subject to subparagraph (B), is
(or is a distinct part of) a public entity or
a private, nonprofit entity organized for
charitable 
purposes 
under 
section
501(c)(3) of the Internal Revenue Code of
1986, and
‘‘(ii) has entered into a PACE pro-
gram agreement with respect to its oper-
ation of a PACE program.
‘‘(B) TREATMENT OF PRIVATE, FOR-PROF-
IT PROVIDERS.—Clause (i) of subparagraph (A)
shall not apply—
‘‘(i) to entities subject to a dem-
onstration project waiver under subsection
(h); and
‘‘(ii) after the date the report under
section 4014(b) of the Balanced Budget
Act of 1997 is submitted, unless the Sec-
retary determines that any of the findings
described in subparagraph (A), (B), (C) or
(D) of paragraph (2) of such section are
true.
‘‘(4) PACE PROGRAM AGREEMENT DEFINED.—
For purposes of this section, the term ‘PACE pro-
gram agreement’ means, with respect to a PACE
provider, an agreement, consistent with this section,
section 1894 (if applicable), and regulations promul-
gated to carry out such sections, between the PACE
provider, the Secretary, and a State administering
agency for the operation of a PACE program by the
provider under such sections.
‘‘(5) PACE PROGRAM
ELIGIBLE
INDIVIDUAL
DEFINED.—For purposes of this section, the term
‘PACE program eligible individual’ means, with re-
spect to a PACE program, an individual who—
‘‘(A) is 55 years of age or older;
‘‘(B) subject to subsection (c)(4), is deter-
mined under subsection (c) to require the level
of care required under the State medicaid plan
for coverage of nursing facility services;
‘‘(C) resides in the service area of the
PACE program; and
‘‘(D) meets such other eligibility conditions
as may be imposed under the PACE program
agreement for the program under subsection
(e)(2)(A)(ii).
‘‘(6) PACE PROTOCOL.—For purposes of this
section, the term ‘PACE protocol’ means the Proto-
col for the Program of All-inclusive Care for the El-
derly (PACE), as published by On Lok, Inc., as of
April 14, 1995.
‘‘(7) PACE DEMONSTRATION WAIVER PROGRAM
DEFINED.—For purposes of this section, the term
‘PACE demonstration waiver program’ means a
demonstration program under either of the following
sections (as in effect before the date of their repeal):
‘‘(A) Section 603(c) of the Social Security
Amendments of 1983 (Public Law 98–21), as
extended by section 9220 of the Consolidated
Omnibus Budget Reconciliation Act of 1985
(Public Law 99–272).
‘‘(B) Section 9412(b) of the Omnibus
Budget Reconciliation Act of 1986 (Public Law
99–509).
‘‘(8) STATE
ADMINISTERING
AGENCY
DE-
FINED.—For purposes of this section, the term
‘State administering agency’ means, with respect to
the operation of a PACE program in a State, the
agency of that State (which may be the single agen-
cy responsible for administration of the State plan
under this title in the State) responsible for admin-
istering PACE program agreements under this sec-
tion and section 1894 in the State.
‘‘(9) TRIAL PERIOD DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘trial period’ means, with re-
spect to a PACE program operated by a PACE
provider under a PACE program agreement,
the first 3 contract years under such agreement
with respect to such program.
‘‘(B) TREATMENT
OF
ENTITIES
PRE-
VIOUSLY
OPERATING
PACE
DEMONSTRATION
WAIVER
PROGRAMS.—Each contract year (in-
cluding a year occurring before the effective
date of this section) during which an entity has
operated a PACE demonstration waiver pro-
gram shall be counted under subparagraph (A)
as a contract year during which the entity oper-
ated a PACE program as a PACE provider
under a PACE program agreement.
‘‘(10) REGULATIONS.—For purposes of this
section, the term ‘regulations’ refers to interim final
or final regulations promulgated under subsection (f)
to carry out this section and section 1894.
‘‘(b) SCOPE
OF BENEFITS; BENEFICIARY SAFE-
GUARDS.—
‘‘(1) IN GENERAL.—Under a PACE program
agreement, a PACE provider shall—
‘‘(A) provide to PACE program eligible in-
dividuals, regardless of source of payment and
directly or under contracts with other entities,
at a minimum—
‘‘(i) all items and services covered
under title XVIII (for individuals enrolled
under section 1894) and all items and
services covered under this title, but with-
out any limitation or condition as to
amount, duration, or scope and without
application of deductibles, copayments, co-
insurance, or other cost-sharing that would
otherwise apply under such title or this
title, respectively; and
‘‘(ii) all additional items and services
specified in regulations, based upon those
required under the PACE protocol;
‘‘(B) provide such enrollees access to nec-
essary covered items and services 24 hours per
day, every day of the year;
‘‘(C) provide services to such enrollees
through 
a 
comprehensive, 
multidisciplinary
health and social services delivery system which
integrates acute and long-term care services
pursuant to regulations; and
‘‘(D) specify the covered items and services
that will not be provided directly by the entity,
and to arrange for delivery of those items and
services through contracts meeting the require-
ments of regulations.
‘‘(2) QUALITY
ASSURANCE; 
PATIENT
SAFE-
GUARDS.—The PACE program agreement shall re-
quire the PACE provider to have in effect at a mini-
mum—
‘‘(A) a written plan of quality assurance
and improvement, and procedures implementing
such plan, in accordance with regulations, and
‘‘(B) written safeguards of the rights of
enrolled participants (including a patient bill of
rights and procedures for grievances and ap-
peals) in accordance with regulations and with
other requirements of this title and Federal and
State law designed for the protection of pa-
tients.
‘‘(c) ELIGIBILITY DETERMINATIONS.—
‘‘(1) IN
GENERAL.—The determination of
whether an individual is a PACE program eligible
individual—
‘‘(A) shall be made under and in accord-
ance with the PACE program agreement, and
‘‘(B) who is entitled to medical assistance
under this title, shall be made (or who is not
so entitled, may be made) by the State admin-
istering agency.
‘‘(2) CONDITION.—An individual is not a PACE
program eligible individual (with respect to payment
under this section) unless the individual’s health sta-
tus has been determined, in accordance with regula-
tions, to be comparable to the health status of indi-
viduals who have participated in the PACE dem-
onstration waiver programs. Such determination
shall be based upon information on health status
and related indicators (such as medical diagnoses
and measures of activities of daily living, instrumen-
tal activities of daily living, and cognitive impair-
ment) that are part of a uniform minimum data set
collected by PACE providers on potential eligible in-
dividuals.
‘‘(3) 
ANNUAL
ELIGIBILITY
RECERTIFI-
CATIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the determination described in sub-
section (a)(5)(B) for an individual shall be re-
evaluated at least once a year.
‘‘(B) EXCEPTION.—The requirement of
annual reevaluation under subparagraph (A)
may be waived during a period in accordance
with regulations in those cases where the State
administering agency determines that there is
no reasonable expectation of improvement or
significant change in an individual’s condition
during the period because of the advanced age,
severity of the advanced age, severity of chronic
condition, or degree of impairment of functional
capacity of the individual involved.
‘‘(4) CONTINUATION OF ELIGIBILITY.—An indi-
vidual who is a PACE program eligible individual
may be deemed to continue to be such an individual
notwithstanding a determination that the individual
no longer meets the requirement of subsection
(a)(5)(B) if, in accordance with regulations, in the
absence of continued coverage under a PACE pro-
gram the individual reasonably would be expected to
meet such requirement within the succeeding 6–
month period.
‘‘(5) ENROLLMENT; DISENROLLMENT.—The en-
rollment and disenrollment of PACE program eligi-
ble individuals in a PACE program shall be pursu-
ant to regulations and the PACE program agree-
ment and shall permit enrollees to voluntarily
disenroll without cause at any time.
‘‘(d) PAYMENTS
TO
PACE PROVIDERS
ON
A
CAPITATED BASIS.—
‘‘(1) IN GENERAL.—In the case of a PACE pro-
vider with a PACE program agreement under this
section, except as provided in this subsection or by
regulations, the State shall make prospective month-
ly payments of a capitation amount for each PACE
program eligible individual enrolled under the agree-
ment under this section.
‘‘(2) CAPITATION
AMOUNT.—The capitation
amount to be applied under this subsection for a
provider for a contract year shall be an amount
specified in the PACE program agreement for the
year. Such amount shall be an amount, specified
under the PACE agreement, which is less than the
amount that would otherwise have been made under
the State plan if the individuals were not so enrolled
and shall be adjusted to take into account the com-
parative frailty of PACE enrollees and such other
factors as the Secretary determines to be appro-
priate. The payment under this section shall be in
addition to any payment made under section 1894
for individuals who are enrolled in a PACE program
under such section.
‘‘(e) PACE PROGRAM AGREEMENT.—
‘‘(1) REQUIREMENT.—
‘‘(A) IN
GENERAL.—The Secretary, in
close cooperation with the State administering
agency, shall establish procedures for entering
into, extending, and terminating PACE pro-
gram agreements for the operation of PACE
programs by entities that meet the require-
ments for a PACE provider under this section,
section 1894, and regulations.
‘‘(B) NUMERICAL LIMITATION.—
‘‘(i) IN
GENERAL.—The Secretary
shall not permit the number of PACE pro-
viders with which agreements are in effect
under this section or under section 9412(b)
of the Omnibus Budget Reconciliation Act
of 1986 to exceed—
‘‘(I) 40 as of the date of the en-
actment of this section, or
‘‘(II) as of each succeeding anni-
versary of such date, the numerical
limitation under this subparagraph for
the preceding year plus 20.
Subclause (II) shall apply without regard
to the actual number of agreements in ef-
fect as of a previous anniversary date.
‘‘(ii) TREATMENT
OF
CERTAIN
PRI-
VATE, FOR-PROFIT PROVIDERS.—The nu-
merical limitation in clause (i) shall not
apply to a PACE provider that—
‘‘(I) is operating under a dem-
onstration project waiver under sub-
section (h), or
‘‘(II) was operating under such a
waiver and subsequently qualifies for
PACE provider status pursuant to
subsection (a)(3)(B)(ii).
‘‘(2) SERVICE AREA AND ELIGIBILITY.—
‘‘(A) IN
GENERAL.—A PACE program
agreement for a PACE program—
‘‘(i) shall designate the service area of
the program;
‘‘(ii) may provide additional require-
ments for individuals to qualify as PACE
program eligible individuals with respect to
the program;
‘‘(iii) shall be effective for a contract
year, but may be extended for additional
contract years in the absence of a notice by
a party to terminate and is subject to ter-
mination by the Secretary and the State
administering agency at any time for cause
(as provided under the agreement);
‘‘(iv) shall require a PACE provider to
meet all applicable State and local laws
and requirements; and
‘‘(v) shall have such additional terms
and conditions as the parties may agree to
consistent with this section and regula-
tions.
‘‘(B) SERVICE
AREA
OVERLAP.—In des-
ignating a service area under a PACE program
agreement under subparagraph (A)(i), the Sec-
retary (in consultation with the State admin-
istering agency) may exclude from designation
an area that is already covered under another
PACE program agreement, in order to avoid
unnecessary duplication of services and avoid
impairing the financial and service viability of
an existing program.
‘‘(3) DATA COLLECTION.—
‘‘(A) IN GENERAL.—Under a PACE pro-
gram agreement, the PACE provider shall—
‘‘(i) collect data,
‘‘(ii) maintain, and afford the Sec-
retary and the State administering agency
access to, the records relating to the pro-
gram, including pertinent financial, medi-
cal, and personnel records, and
‘‘(iii) make to the Secretary and the
State administering agency reports that
the Secretary finds (in consultation with
State administering agencies) necessary to
monitor the operation, cost, and effective-
ness of the PACE program under this title
and title XVIII.
‘‘(B) REQUIREMENTS DURING TRIAL PE-
RIOD.—During the first three years of oper-
ation of a PACE program (either under this
section or under a PACE demonstration waiver
program), the PACE provider shall provide
such additional data as the Secretary specifies
in regulations in order to perform the oversight
required under paragraph (4)(A).
‘‘(4) OVERSIGHT.—
‘‘(A) ANNUAL, CLOSE OVERSIGHT DURING
TRIAL PERIOD.—During the trial period (as de-
fined in subsection (a)(9)) with respect to a
PACE program operated by a PACE provider,
the Secretary (in cooperation with the State ad-
ministering agency) shall conduct a comprehen-
sive annual review of the operation of the
PACE program by the provider in order to as-
sure compliance with the requirements of this
section and regulations. Such a review shall in-
clude—
‘‘(i) an on-site visit to the program
site;
‘‘(ii) comprehensive assessment of a
provider’s fiscal soundness;
‘‘(iii) comprehensive assessment of the
provider’s capacity to provide all PACE
services to all enrolled participants;
‘‘(iv) detailed analysis of the entity’s
substantial compliance with all significant
requirements of this section and regula-
tions; and
‘‘(v) any other elements the Secretary
or State agency considers necessary or ap-
propriate.
‘‘(B) CONTINUING OVERSIGHT.—After the
trial period, the Secretary (in cooperation with
the State administering agency) shall continue
to conduct such review of the operation of
PACE providers and PACE programs as may
be appropriate, taking into account the per-
formance level of a provider and compliance of
a provider with all significant requirements of
this section and regulations.
‘‘(C) DISCLOSURE.—The results of reviews
under this paragraph shall be reported prompt-
ly to the PACE provider, along with any rec-
ommendations for changes to the provider’s
program, and shall be made available to the
public upon request.
‘‘(5) TERMINATION OF PACE PROVIDER AGREE-
MENTS.—
‘‘(A) IN GENERAL.—Under regulations—
‘‘(i) the Secretary or a State admin-
istering agency may terminate a PACE
program agreement for cause, and
‘‘(ii) a PACE provider may terminate
such an agreement after appropriate notice
to the Secretary, the State agency, and en-
rollees.
‘‘(B) CAUSES FOR TERMINATION.—In ac-
cordance with regulations establishing proce-
dures for termination of PACE program agree-
ments, the Secretary or a State administering
agency may terminate a PACE program agree-
ment with a PACE provider for, among other
reasons, the fact that—
‘‘(i) the Secretary or State admin-
istering agency determines that—
‘‘(I) there are significant defi-
ciencies in the quality of care provided
to enrolled participants; or
‘‘(II) the provider has failed to
comply substantially with conditions
for a program or provider under this
section or section 1894; and
‘‘(ii) the entity has failed to develop
and successfully initiate, within 30 days of
the date of the receipt of written notice of
such a determination, and continue imple-
mentation of a plan to correct the defi-
ciencies.
‘‘(C) TERMINATION AND TRANSITION PRO-
CEDURES.—An entity whose PACE provider
agreement is terminated under this paragraph
shall implement the transition procedures re-
quired under subsection (a)(2)(C).
‘‘(6) SECRETARY’S OVERSIGHT; ENFORCEMENT
AUTHORITY.—
‘‘(A) IN GENERAL.—Under regulations, if
the Secretary determines (after consultation
with the State administering agency) that a
PACE provider is failing substantially to com-
ply with the requirements of this section and
regulations, the Secretary (and the State ad-
ministering agency) may take any or all of the
following actions:
‘‘(i) Condition the continuation of the
PACE program agreement upon timely
execution of a corrective action plan.
‘‘(ii) Withhold some or all further
payments under the PACE program agree-
ment under this section or section 1894
with respect to PACE program services
furnished by such provider until the defi-
ciencies have been corrected.
‘‘(iii) Terminate such agreement.
‘‘(B) APPLICATION
OF
INTERMEDIATE
SANCTIONS.—Under regulations, the Secretary
may provide for the application against a
PACE provider of remedies described in section
1857(f)(2) (or, for periods before January 1,
1999, section 1876(i)(6)(B)) or 1903(m)(6)(B)
in the case of violations by the provider of the
type 
described 
in 
section 
1857(f)(1) 
(or
1876(i)(6)(A) 
for 
such 
periods) 
or
1903(m)(6)(A), respectively (in relation to
agreements, enrollees, and requirements under
section 1894 or this section, respectively).
‘‘(7) PROCEDURES FOR TERMINATION OR IMPO-
SITION OF SANCTIONS.—Under regulations, the pro-
visions of section 1857(g) (or for periods before Jan-
uary 1, 1999, section 1876(i)(9)) shall apply to ter-
mination and sanctions respecting a PACE program
agreement and PACE provider under this subsection
in the same manner as they apply to a termination
and sanctions with respect to a contract and a
MedicarePlus organization under part C (or for such
periods an eligible organization under section 1876).
‘‘(8) TIMELY CONSIDERATION OF APPLICATIONS
FOR PACE PROGRAM PROVIDER STATUS.—In consid-
ering an application for PACE provider program
status, the application shall be deemed approved un-
less the Secretary, within 90 days after the date of
the submission of the application to the Secretary,
either denies such request in writing or informs the
applicant in writing with respect to any additional
information that is needed in order to make a final
determination with respect to the application. After
the date the Secretary receives such additional infor-
mation, the application shall be deemed approved
unless the Secretary, within 90 days of such date,
denies such request.
‘‘(f) REGULATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall issue
interim final or final regulations to carry out this
section and section 1894.
‘‘(2) USE OF PACE PROTOCOL.—
‘‘(A) IN GENERAL.—In issuing such regu-
lations, the Secretary shall, to the extent con-
sistent with the provisions of this section, incor-
porate the requirements applied to PACE dem-
onstration waiver programs under the PACE
protocol.
‘‘(B) FLEXIBILITY.—The Secretary (in
close consultation with State administering
agencies) may modify or waive such provisions
of the PACE protocol in order to provide for
reasonable flexibility in adapting the PACE
service delivery model to the needs of particular
organizations (such as those in rural areas or
those that may determine it appropriate to use
non-staff physicians accordingly to State licens-
ing law requirements) under this section and
section 1932 where such flexibility is not incon-
sistent with and would not impair the essential
elements, objectives, and requirements of the
this section, including—
‘‘(i) the focus on frail elderly qualify-
ing individuals who require the level of
care provided in a nursing facility;
‘‘(ii) the delivery of comprehensive, in-
tegrated acute and long-term care services;
‘‘(iii) the interdisciplinary team ap-
proach to care management and service de-
livery;
‘‘(iv) capitated, integrated financing
that allows the provider to pool payments
received from public and private programs
and individuals; and
‘‘(v) the assumption by the provider
over time of full financial risk.
‘‘(3) APPLICATION
OF
CERTAIN
ADDITIONAL
BENEFICIARY AND PROGRAM PROTECTIONS.—
‘‘(A) IN GENERAL.—In issuing such regu-
lations and subject to subparagraph (B), the
Secretary may apply with respect to PACE pro-
grams, providers, and agreements such require-
ments of part C of title XVIII (or, for periods
‘‘(ii) the PACE provider is entitled to
payment under and in accordance with this
section and such agreement for provision
of such benefits.
‘‘(2) APPLICATION OF DEFINITIONS.—The defi-
nitions of terms under section 1932(a) shall apply
under this section in the same manner as they apply
under section 1932.
‘‘(b) APPLICATION OF MEDICAID TERMS AND CONDI-
TIONS.—Except as provided in this section, the terms and
conditions for the operation and participation of PACE
program eligible individuals in PACE programs offered by
PACE providers under PACE program agreements under
section 1932 shall apply for purposes of this section.
‘‘(c) PAYMENT.—
‘‘(1) ADJUSTMENT IN PAYMENT AMOUNTS.—In
the case of individuals enrolled in a PACE program
under this section, the amount of payment under
this section shall not be the amount calculated under
section 1932(d)(2), but shall be an amount, specified
under the PACE agreement, based upon payment
rates established for purposes of payment under sec-
tion 1854 (or, for periods before January 1, 1999,
for purposes of risk-sharing contracts under section
1876) and shall be adjusted to take into account the
comparative frailty of PACE enrollees and such
other factors as the Secretary determines to be ap-
propriate. Such amount under such an agreement
shall be computed in a manner so that the total pay-
ment level for all PACE program eligible individuals
enrolled under a program is less than the projected
payment under this title for a comparable population
not enrolled under a PACE program.
‘‘(2) FORM.—The Secretary shall make pro-
spective monthly payments of a capitation amount
for each PACE program eligible individual enrolled
under this section in the same manner and from the
same sources 
as 
payments 
are 
made 
to 
a
MedicarePlus organization under section 1854 (or,
for periods beginning before January 1, 1999, to an
eligible organization under a risk-sharing contract
under section 1876). Such payments shall be subject
to adjustment in the manner described in section
1854(a)(2) or section 1876(a)(1)(E), as the case
may be.
‘‘(d) 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) are waived and shall not apply: