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‘‘(c) ADJUSTMENTS FOR PAYMENTS TO PLAN SPON-
SORS.—
‘‘(1) IN GENERAL.—The rate of payment under
section 1895O to a medicare choice plan sponsor with
respect to any individual enrolled in a medicare
choice plan of the sponsor shall be equal to the stand-
ardized medicare payment amount for the medicare
payment area, adjusted for such risk factors as age,
disability status, gender, institutional status, health
status, and such other factors as the Secretary deter-
mines to be appropriate, so as to ensure actuarial
equivalence. The Secretary may add to, modify, or
substitute for such classes, if such changes will im-
prove the determination of actuarial equivalence.
‘‘(2) SPECIAL RULE FOR END-STAGE RENAL DIS-
EASE.—The Secretary shall establish a separate rate
of payment under section 1895O to a medicare choice
plan sponsor with respect to any individual with end-
stage renal disease enrolled in a medicare choice plan
of the sponsor. Such rate of payment shall be actuari-
ally equivalent to rates paid to other enrollees in the
medicare payment area (or such other area as speci-
fied by the Secretary).
‘‘(d) GEOGRAPHICAL ADJUSTMENTS.—
‘‘(1) ANNUAL ADJUSTMENTS.—
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‘‘(A) IN
GENERAL.—Unless Congress pro-
vides otherwise, beginning with calendar years
after 1999, the Secretary shall, based on the
analysis under paragraph (2) and to the extent
the Secretary determines necessary, make annual
differential adjustments to the standardized med-
icare payment amounts determined under sub-
section (b)(2) for calendar years 2000 and 2001
in a manner designed to achieve appropriate
and equitable variation in standardized medi-
care payment amounts across medicare payment
areas by calendar year 2002. Such variation
shall be reasonably related to measurable geo-
graphic differences in medicare payment areas.
‘‘(B) BUDGET NEUTRALITY.—The Secretary
shall adjust the standardized medicare payment
amounts under subsection (b) in a manner that
ensures that total payments under this section
for a year are not greater or less than total pay-
ments under this section would have been but for
the application of subparagraph (A).
‘‘(2) ANALYSIS.—The Secretary, in consultation
with interested parties, shall conduct an analysis of
the measurable input cost differences across medicare
payment areas, including wage differentials, and
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other measurable variables identified by the Sec-
retary. The Secretary shall also determine the degree
to which medicare beneficiaries, including bene-
ficiaries in rural and underserved areas, have access
to more health plan choices by calendar year 2000
under this part, and the extent to which standardized
medicare payment amounts have limited or enhanced
such choices.
‘‘(3) REPORT
TO
CONGRESS.—Not later than
March 1, 1999, the Secretary shall submit a report to
the appropriate committees of Congress that includes
the results of the analysis described in paragraph (2)
and the annual differential adjustments that the Sec-
retary intends to implement under paragraph (1) for
calendar years 2000 and 2001.
‘‘(e) NOTICE
IN CHANGES
TO BENEFIT ASSUMP-
TIONS.—
‘‘(1) IN GENERAL.—At least 45 days before mak-
ing the announcement under subsection (a) for a year
(beginning with the announcement for 1998), the Sec-
retary shall provide for notice to medicare choice
plans of proposed changes to be made in the methodol-
ogy or benefit coverage assumptions from the meth-
odology and assumptions used in the previous an-
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nouncement and shall provide such plans an oppor-
tunity to comment on such proposed changes.
‘‘(2) EXPLANATION.—In each announcement
made under subsection (a) for a year (beginning with
the announcement for 1998), the Secretary shall in-
clude an explanation of the assumptions (including
any benefit coverage assumptions) and changes in
methodology used in the announcement in sufficient
detail so that medicare choice plans can compute
medicare payment rates under subsection (d) for
classes of individuals located in each medicare pay-
ment area which is in whole or in part within the
medicare service area of such a plan.
‘‘(f) DEMONSTRATION PROJECT ON MARKET-BASED
REIMBURSEMENT AND COMPETITIVE PRICING.—The Sec-
retary shall establish 1 or more demonstration projects to
determine the standardized medicare payment amounts de-
scribed in subsection (b) through competitive bidding by
medicare choice plans in a medicare payment area. Not
later than December 31, 2001, the Secretary shall submit
a report to the Congress on the success of such projects in
determining standardized medicare payment amounts that
are reflective of market price.
‘‘SEC. 1895N. PREMIUMS AND REBATES.
‘‘(a) SUBMISSION AND CHARGING OF PREMIUMS.—
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‘‘(1) IN GENERAL.—Each medicare choice plan
sponsor shall file with the Secretary each year, in a
form and manner and at a time specified by the Sec-
retary, the amount of the monthly premium for cov-
erage under each medicare choice plan it offers under
this part in each medicare payment area in which the
plan is being offered.
‘‘(2) 
UNIFORM
PREMIUM.—The 
premiums
charged by a medicare choice plan sponsor under this
part may not vary among individuals who reside in
the same medicare payment area.
‘‘(3) TERMS AND CONDITIONS OF IMPOSING PRE-
MIUMS.—Each medicare choice plan sponsor shall
permit the payment of monthly premiums on a
monthly basis.
‘‘(b) REBATES.—
‘‘(1) IN GENERAL.—If the standardized medicare
payment amount for the medicare payment area in
which an individual resides exceeds the amount of the
monthly premium for the plan in which the individ-
ual is enrolled (as submitted under subsection (a)(1)),
the Secretary shall—
‘‘(A) in the case of an individual—
‘‘(i) who is enrolled in a high deduct-
ible health plan described in section
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1895A(b)(1)(B)(iii), deposit 100 percent of
such excess in the medicare choice account
specified by the individual, or
‘‘(ii) who is not so enrolled but who
elects the application of this clause, deposit
100 percent of such excess in the medicare
choice account specified by the individual;
or
‘‘(B)(i) pay to the medicare choice plan
sponsor on behalf of such individual the monthly
amount equal to 100 percent of such excess up to
the amount of the premium amount of such indi-
vidual for supplemental benefits described in sec-
tion 1895H(b),
‘‘(ii) pay to such individual an amount
equal to 75 percent of the remainder of such ex-
cess, and
‘‘(iii) deposit the remainder of such excess
in the Federal Hospital Insurance Trust Fund.
‘‘(2) TIME FOR PAYMENT.—
‘‘(A) IN GENERAL.—A rebate under para-
graph (1)(B)(ii) shall be paid as of the close of
the calendar year to which the enrollment ap-
plied.
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‘‘(B) DEPOSITS IN MEDICARE CHOICE AC-
COUNTS.—Deposits 
described 
in 
paragraph
(1)(A) shall be made on a monthly basis.
‘‘(C) OTHER PAYMENTS AND DEPOSITS.—
Payments and deposits described in subpara-
graphs (B)(i) and (iii) shall be made on a
monthly basis.
‘‘(3) SOURCE OF REBATES.—Deposits and pay-
ments described in paragraph (1) shall be made in
the same manner as payments are made under sec-
tion 1895O(b).
‘‘SEC. 1895O. PAYMENTS TO PLAN SPONSORS.
‘‘(a) MONTHLY PAYMENTS.—
‘‘(1) IN GENERAL.—For each individual enrolled
with a plan under this part, the Secretary shall make
monthly payments in advance to the medicare choice
plan sponsor of the medicare choice plan with which
the individual is enrolled in an amount equal to the
medicare payment rate determined with respect to
such individual under section 1895M(c).
‘‘(2) RETROACTIVE ADJUSTMENTS.—The amount
of payment under this paragraph may be retro-
actively adjusted to take into account any difference
between the actual number of individuals enrolled in
the plan under this section and the number of such
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individuals estimated to be so enrolled in determining
the amount of the advance payment.
‘‘(b) PAYMENTS FROM TRUST FUNDS.—The payment
to a medicare choice plan sponsor under this section for
a medicare-eligible individual shall be made from the Fed-
eral Hospital Insurance Trust Fund and the Federal Sup-
plementary Medical Insurance Trust Fund in such propor-
tion as the Secretary determines reflects the relative weight
that benefits under parts A and B are representative of the
actuarial value of the total benefits under this part.
‘‘Subpart 5—Contractual Authority; Temporary
Certification; Regulations
‘‘SEC. 1895P. GENERAL PERMISSION TO CONTRACT.
‘‘The Secretary shall enter into a contract with any
medicare choice plan sponsor in a medicare payment area
if the requirements of this part are met with respect to the
medicare choice plan and the plan sponsor.
‘‘SEC. 1895Q. RENEWAL AND TERMINATION OF CONTRACT.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), each contract under this part may be made automati-
cally renewable from term to term in the absence of notice
by either party of intention to terminate at the end of the
current term.
‘‘(b) TERMINATION FOR CAUSE.—
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‘‘(1) IN GENERAL.—In accordance with proce-
dures established under paragraph (2), the Secretary
may terminate any contact with a medicare choice
plan sponsor at any time or may impose the inter-
mediate sanctions described in paragraph (2) or (3)
or subsection (f) (whichever is applicable) on the plan
sponsor, if the Secretary finds that the plan spon-
sor—
‘‘(A) has failed substantially to carry out
the contract,
‘‘(B) is carrying out the contract in a man-
ner substantially inconsistent with the efficient
and effective administration of this part, or
‘‘(C) no longer substantially meets the ap-
plicable conditions of this part.
‘‘(2) PROCEDURES.—The Secretary may termi-
nate a contract with a medicare choice plan sponsor
under this part or may impose the intermediate sanc-
tions described in subsection (f)(3) on the plan in ac-
cordance with formal investigation and compliance
procedures 
established 
by 
the 
Secretary 
under
which—
‘‘(A) the Secretary first provides the medi-
care choice plan sponsor with the reasonable op-
portunity to develop and implement a corrective
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action plan to correct the deficiencies that were
the basis of the Secretary’s determination under
paragraph (1) and the medicare choice plan
sponsor fails to develop or implement such a cor-
rective action plan,
‘‘(B) in deciding whether to impose sanc-
tions, the Secretary considers aggravating factors
such as whether a plan sponsor has a history of
deficiencies or has not taken action to correct de-
ficiencies the Secretary has brought to the plan
sponsor’s attention,
‘‘(C) there are no unreasonable or unneces-
sary delays between the finding of a deficiency
and the imposition of sanctions, and
‘‘(D) the Secretary provides the plan spon-
sor with reasonable notice and opportunity for
hearing (including the right to appeal an initial
decision) before imposing any sanction or termi-
nating the contract.
‘‘(c) TERMS OF CONTRACT.—Each contract under this
part—
‘‘(1) shall provide that the Secretary, or any per-
son or organization designated by the Secretary—
‘‘(A) shall have the right to inspect or other-
wise evaluate—
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‘‘(i) the quality, appropriateness, and
timeliness of services performed under the
contract, and
‘‘(ii) the facilities of the plan sponsor
when there is reasonable evidence of some
need for such inspection,
‘‘(B) shall have the right to audit and in-
spect any books and records of the plan sponsor
that pertain—
‘‘(i) to the ability of the plan sponsor
to bear the risk of potential financial losses,
and
‘‘(ii) shall require the plan sponsor
with a contract to provide (and pay for)
written notice in advance of the contract’s
termination, as well as a description of al-
ternatives for obtaining benefits under this
title, to each individual enrolled under this
part with the plan sponsor,
‘‘(C)(i) except as provided by the Secretary,
shall require the plan sponsor to comply with re-
quirements similar to the requirements of sub-
sections (a) and (c) of section 1318 of the Public
Health Service Act (relating to disclosure of cer-
tain 
financial 
information) 
and 
section
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1301(c)(8) of such Act (relating to liability ar-
rangements to protect members),
‘‘(ii) shall require the plan sponsor to pro-
vide and supply information (described in sec-
tion 1866(b)(2)(C)(ii)) in the manner such infor-
mation is required to be provided or supplied
under that section, and
‘‘(iii) shall require the plan sponsor to no-
tify the Secretary of loans and other special fi-
nancial arrangements which are made between
the plan sponsor and subcontractors, affiliates,
and related parties, and
‘‘(D) shall contain such other terms and
conditions not inconsistent with this part (in-
cluding requiring the plan sponsor to provide the
Secretary with such information) as the Sec-
retary may find necessary and appropriate.
‘‘(d) 5-YEAR LOCKOUT.—The Secretary may not enter
into a contract under this part with a medicare choice plan
sponsor if a previous contract with that plan sponsor under
this part was terminated at the request of the plan sponsor
within the preceding 5-year period, except in circumstances
which warrant special consideration, as determined by the
Secretary.
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‘‘(e) APPLICATION OF OTHER FEDERAL LAWS.—The
authority vested in the Secretary by this part may be per-
formed without regard to such provisions of law or regula-
tions relating to the making, performance, amendment, or
modification of contracts of the United States as the Sec-
retary may determine to be inconsistent with the further-
ance of the purpose of this title.
‘‘(f) REMEDIES FOR FAILURE TO COMPLY.—
‘‘(1) FAILURE
OF
PLAN
SPONSOR
TO
COMPLY
WITH CONTRACT.—If the Secretary determines that a
medicare choice plan sponsor—
‘‘(A) fails substantially to provide medically
necessary items and services that are required
(under law or under the contract) to be provided
to an individual covered under the contract, and
the failure has adversely affected (or has substan-
tial likelihood of adversely affecting) the individ-
ual,
‘‘(B) imposes cost sharing on individuals
enrolled under this part in excess of the cost
sharing permitted,
‘‘(C) acts to expel or to refuse to re-enroll an
individual in violation of the provisions of this
part,
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‘‘(D) engages in any practice that would
reasonably be expected to have the effect of deny-
ing or discouraging enrollment (except as per-
mitted by this part) by eligible individuals with
the plan whose medical condition or history in-
dicates a need for substantial future medical
services,
‘‘(E) misrepresents or falsifies information
that is furnished—
‘‘(i) to the Secretary under this section,
or
‘‘(ii) to an individual or to any other
entity under this section,
‘‘(F) fails to comply with the requirements
of section 1895J(f), or
‘‘(G) employs or contracts with any indi-
vidual or entity that is excluded from participa-
tion under this title under section 1128 or 1128A
for the provision of health care, utilization re-
view, medical social work, or administrative
services or employs or contracts with any entity
for the provision (directly or indirectly) through
such an excluded individual or entity of such
services,
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the Secretary may provide, in addition to any other
remedies authorized by law, for any of the remedies
described in paragraph (2).
‘‘(2) REMEDIES.—The remedies described in this
paragraph are—
‘‘(A) civil money penalties of not more than
$25,000 for each determination under paragraph
(1) or, with respect to a determination under
subparagraph (D) or (E)(i) of such paragraph,
of not more than $100,000 for each such deter-
mination, plus, with respect to a determination
under paragraph (1)(B), double the excess
amount charged in violation of such subpara-
graph (and the excess amount charged shall be
deducted from the penalty and returned to the
individual concerned), and plus, with respect to
a 
determination 
under 
paragraph 
(1)(D),
$15,000 for each individual not enrolled as a re-
sult of the practice involved,
‘‘(B) suspension of enrollment of individ-
uals under this section after the date the Sec-
retary notifies the plan sponsor of a determina-
tion under paragraph (1) and until the Sec-
retary is satisfied that the basis for such deter-
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mination has been corrected and is not likely to
recur, or
‘‘(C) suspension of payment to the plan
sponsor under this section for individuals en-
rolled after the date the Secretary notifies the
plan sponsor of a determination under para-
graph (1) and until the Secretary is satisfied
that the basis for such determination has been
corrected and is not likely to recur.
‘‘(3) INTERMEDIATE SANCTIONS.—In the case of
a medicare choice plan sponsor for which the Sec-
retary makes a determination under subsection (b)(1)
the basis of which is not described in subparagraph
(A) thereof, the Secretary may apply the following in-
termediate sanctions:
‘‘(A) Civil money penalties of not more
than $25,000 for each determination under sub-
section (b)(1) if the deficiency that is the basis
of the determination has directly adversely af-
fected (or has the substantial likelihood of ad-
versely affecting) an individual covered under
the plan’s contract.
‘‘(B) Civil money penalties of not more
than $10,000 for each week beginning after the
initiation of procedures by the Secretary under
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subsection (b)(2) during which the deficiency
that is the basis of a determination under sub-
section (b)(1) exists.
‘‘(C) Suspension of enrollment of individ-
uals under this section after the date the Sec-
retary notifies the plan sponsor of a determina-
tion under subsection (b)(1) and until the Sec-
retary is satisfied that the deficiency that is the
basis for the determination has been corrected
and is not likely to recur.
‘‘(4) PROCEEDINGS.—The provisions of section
1128A (other than subsections (a) and (b)) shall
apply to a civil money penalty under paragraph
(2)(A) or (3)(A) in the same manner as they apply
to a civil money penalty or proceeding under section
1128A(a).
‘‘SEC. 1895R. TEMPORARY CERTIFICATION PROCESS FOR
COORDINATED CARE PLANS.
‘‘(a) FEDERAL ACTION ON CERTIFICATION.—
‘‘(1) IN GENERAL.—If—
‘‘(A) a State fails to substantially complete
action on a licensing application of a coordi-
nated care plan sponsor within 90 days of re-
ceipt of the completed application, or
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‘‘(B) a State denies a licensing application
and the Secretary determines that the State’s li-
censing standards or review process create an
unreasonable barrier to market entry,
the Secretary shall evaluate such application pursu-
ant to the procedures established under subsection (b).
‘‘(2) UNREASONABLE
BARRIERS
TO
MARKET
ENTRY.—A State’s licensing standards and review
process shall not be treated as unreasonable barriers
to market entry under paragraph (1) if—
‘‘(A) they are applied consistently to all co-
ordinated care medicare choice plan applica-
tions,
‘‘(B) are not directly in conflict, or incon-
sistent with, the Federal standards.
‘‘(b) FEDERAL CERTIFICATION PROCEDURES.—
‘‘(1) IN GENERAL.—The Secretary shall establish
a process for certification of a coordinated care plan
and its sponsor as meeting the requirements of this
part in cases described in subsection (a)(1).
‘‘(2) REQUIREMENTS.—Such process shall—
‘‘(A) set forth the standards for certifi-
cation,
‘‘(B) provide that final action will be taken
on an application for certification within 120
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business days of receipt of the completed applica-
tion,
‘‘(C) provide that State law and regulations
shall apply to the extent they have not been
found to be an unreasonable barrier to market
entry under subsection (a)(1)(B), and
‘‘(D) require any person receiving a certifi-
cate to provide the Secretary with all reasonable
information in order to ensure compliance with
the certification.
‘‘(3) EFFECT OF CERTIFICATIONS.—
‘‘(A) IN GENERAL.—A certificate under this
section shall be issued for not more than 36
months and may not be renewed.
‘‘(B) COORDINATION WITH STATE.—A per-
son receiving a certificate under this section
shall continue to seek State licensure under sub-
section (a) during the period the certificate is in
effect.
‘‘(C) SUNSET.—No certificate shall be is-
sued under this section after December 31, 2000,
and no certificate under this section shall re-
main in effect after December 31, 2001.
‘‘(c) REPORT.—Not later than December 31, 1998, the
Secretary shall report to Congress on the temporary Federal