Balanced Budget Act of 1997
PL 105-33 (H.R.2015), enacted 08/05/1997

PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 251 
•Public Law 105-33 
105th Congress 
An Act 
To provide for reconciliation pursuant to subsections (b)(1) and (c) of section 105 
Aug. 5, 1997 
of the concurrent resolution on the budget for fiscal year 1998. 
[H.R. 2015] 
Be it enacted by the Senate and House of Representatives 
of 
the United States of America in Congress assembled, 
Balanced Budget 
Art- of 1QQ7 
SECTION 1. SHORT TITLE. 
"' ° ^^ ' 
This Act may be cited as the "Balanced Budget Act of 1997". 
SEC. 2. TABLE OF TITLES. 
This Act is organized into titles as follows: 
Title I—^Food Stamp Provisions 
Title II—Housing and Related Provisions 
Title III—Communications and Spectrum Allocation Provisions 
Title IV—^Medicare, Medicaid, and Children's Health Provisions 
Title V—Welfare and Related Provisions 
Title VI—Education and Related Provisions 
Title VII—Civil Service Retirement and Related Provisions 
Title VIII—^Veterans and Related Provisions 
Title IX—^Asset Sales, User Fees, and Miscellaneous Provisions 
Title X—Budget Enforcement and Process Provisions 
Title XI—District of Columbia Revitalization 
TITLE I—FOOD STAMP PROVISIONS 
SEC. 1001. EXEMPTION. 
Section 6(o) of the Food Stamp Act of 1977 (7 U.S.C. 2015(o)) 
is amended— 
(1) in paragraph (2)(D), by striking "or (5)" and inserting 
"(5), or (6)"; 
(2) by redesignating paragraph (6) as paragraph (7); and 
(3) by inserting after paragraph (5) the following: 
"(6) 15-PERCENT EXEMPTION.— 
"(A) DEFINITIONS.—In this paragraph: 
"(i) CASELOAD.—^The term 'caseload' means the 
average monthly number of individuals receiving food 
stamps during the 12-month period ending the preced-
ing June 30. 
"(ii) 
COVERED INDIVIDUAL.—The term 'covered 
individual' means a food stamp recipient, or an individ-
ual denied eligibility for food stamp benefits solely 
due to paragraph (2), who— 
"(I) is not eligible for an exception under para-
graph (3); 
"(II) does not reside in an area covered by 
a waiver granted under paragraph (4); 
*Note: This law contains an item that was cancelled by the President pursuant to the Line 
Item Veto Act. For more information, see the Federal Itegister entry under "LEGISLATIVE 
HISTORY" at the end of this law. 
I l l STAT. 252 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(III) is not complying with subparagraph (A), 
(B), or (C) of paragraph (2); 
"(IV) is not receiving food stamp benefits dur-
ing the 3 months of ehgibiHty provided under para-
graph (2); and 
"(V) is not receiving food stamp benefits imder 
paragraph (5). 
"(B) GENERAL RULE.—Subject to subparagraphs (C) 
through (G), a State agency may provide an exemption 
from the requirements of paragraph (2) for covered individ-
uals. 
"(C) FISCAL YEAR 1998.—Subject to subparagraphs (E) 
and (G), for fiscal year 1998, a State agency may provide 
a numlser of exemptions such that the average monthly 
number of the exemptions in effect during the fiscal year 
does not exceed 15 percent of the number of covered individ-
uals in the State in fiscal year 1998, as estimated by 
the Secretary, based on the survey conducted to carry 
out section 16(c) for fiscal year 1996 and such other factors 
as the Secretary considers appropriate due to the timing 
and limitations of the survey. 
"(D) SUBSEQUENT FISCAL YEARS.—Subject to subpara-
graphs (E) through (G), for fiscal year 1999 and each subse-
quent fiscal year, a State agency may provide a number 
of exemptions such that the average monthly number of 
the exemptions in effect during the fiscal year does not 
exceed 15 percent of the number of covered individuals 
in the State, as estimated by the Secretary under subpara-
graph (C), adjusted by the Secretary to reflect changes 
in the State's caseload and the Secretary's estimate of 
changes in the proportion of food stamp recipients covered 
by waivers granted under paragraph (4). 
"(E) CASELOAD ADJUSTMENTS.—The Secretary shall 
adjust the number of individuals estimated for a State 
under subparagraph (C) or (D) during a fiscal year if the 
number of food stamp recipients in the State varies fi-om 
the State's caseload by more than 10 percent, as determined 
by the Secretary. 
"(F) EXEMPTION ADJUSTMENTS.—During fiscal year 
1999 and each subsequent fiscal year, the Secretary shall 
increase or decrease the number of individuals who may 
be granted an exemption by a State agency under this 
paragraph to the extent that the average monthly number 
of exemptions in effect in the State for the preceding fiscal 
year under this paragraph is lesser or greater than the 
average monthly number of exemptions estimated for the 
State agency for such preceding fiscal year under this 
paragraph. 
"(G) REPORTING REQUIREMENT.—A State agency shall 
submit such reports to the Secretary as the Secretary deter-
mines are necessary to ensure compliance with this para-
graph.". 
SEC. 1002. ADDITIONAL FUNDING FOR EMPLOYMENT AND TRAINING. 
(a) IN GENERAL.—Section 16(h) of the Food Stamp Act of 1977 
(7 U.S.C. 2025(h)) is amended by striking paragraph (1) and insert-
ing the following: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 253 
"(1) IN GENERAL.— 
"(A) AMOUNTS.—To carry out employment and training 
programs, the Secretary shall reserve for allocation to State 
agencies, to remain available until expended, from funds 
made available for each fiscal year under section 18(a)(1) 
the amount of— 
"(i) for fiscal year 1996, $75,000,000; 
"(ii) for fiscal year 1997, $79,000,000; 
"(iii) for fiscal year 1998— 
"(I) $81,000,000; and 
"(II) an additional amount of $131,000,000; 
"(iv) for fiscal year 1999— 
"(I) $84,000,000; and 
"(II) an additional amount of $131,000,000; 
"(v) for fiscal year 2000— 
"(I) $86,000,000; and 
"(II) an additional amount of $131,000,000; 
"(vi) for fiscal year 2001— 
"(I) $88,000,000; and 
"(II) an additional amount of $131,000,000; 
and 
"(vii) for fiscal year 2002— 
"(I) $90,000,000; and 
"(II) an additional amount of $75,000,000. 
"(B) ALLOCATION.— 
"(i) ALLOCATION FORMULA.—The Secretary shall 
allocate the amounts reserved under subparagraph (A) 
among the State agencies using a reasonable formula, 
as determined and adjusted by the Secretary each fiscal 
year, to reflect— 
"(I) changes in each State's caseload (as 
defined in section 6(o)(6)(A)); 
"(II) for fiscal year 1998, the portion of food 
stamp recipients who reside in each State who 
are not eligible for an exception under section 
6(o)(3);and 
"(III) for each of fiscal years 1999 through 
2002, the portion of food stamp recipients who 
reside in each State who are not eligible for an 
exception under section 6(o)(3) and who— 
"(aa) do not reside in an area subject to 
a WEiiver granted by the Secretary under sec-
tion 6(o)(4); or 
"(bb) do reside in an area subject to a 
waiver granted by the Secretary under section 
6(o)(4), if the State agency provides employ-
ment and training services in the area to food 
stamp recipients who are not eligible for an 
exception under section 6(o)(3). 
"(ii) ESTIMATED FACTORS.—The Secretary shall 
estimate the portion of food stamp recipients who 
reside in each State who are not eligible for an excep-
tion imder section 6(o)(3) based on the survey con-
ducted to carry out subsection (c) for fiscal year 1996 
and such other factors as the Secretary considers 
appropriate due to the timing and limitations of the 
survey. 
I l l STAT. 254 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(iii) REPORTING REQUIREMENT.—A State agency 
shall submit such reports to the Secretary as the Sec-
retary determines are necessary to ensure compliance 
with this paragraph. 
"(C) REALLOCATION.—If a State agency will not expend 
all of the funds allocated to the State agency for a fiscal 
year under subparagraph (B), the Secretary shall reallocate 
the unexpended funds to other States (during the fiscal 
year or the subsequent fiscal year) as the Secretary consid-
ers appropriate and equitable. 
"(D) 
MINIMUM 
ALLOCATION.—Notwithstanding 
subparagraph (B), the Secretary shall ensure that each 
State agency operating an employment and training pro-
gram shall receive not less than $50,000 for each fiscal 
year. 
"(E) USE OF FUNDS.—Of the amount of funds a State 
agency receives under subparagraphs (A) through (D) for 
a fiscal year, not less than 80 percent of the funds shall 
be used by the State agency during the fiscal year to 
serve food stamp recipients who— 
"(i) are not eligible for £in exception under section 
6(o)(3); and 
"(ii) are placed in and comply with a program 
described in subparagraph (B) or (C) of section 6(o)(2). 
"(F) MAINTENANCE OF EFFORT.—TO receive an alloca-
tion of an additional amount made available under sub-
clause (II) of each of clauses (iii) through (vii) of subpara-
graph (A), a State agency shall maintain the expenditures 
of the State agency for employment and training programs 
and workfare programs for any fiscal year under paragraph 
(2), and administrative expenses described in section 
20(g)(1), at a level that is not less than the level of the 
expenditures by the State agency to carry out the programs 
and such expenses for fiscal year 1996. 
"(G) COMPONENT COSTS.—The Secretary shall monitor 
State agencies' expenditure of funds for emplo5anent and 
training programs provided under this paragraph, includ-
ing the costs of individual components of State agencies' 
programs. The Secretary may determine the reimbursable 
costs of employment and training components, and, if the 
Secretary makes such a determination, the Secretary shall 
determine that the amounts spent or planned to be spent 
on the components reflect the reasonable cost of efficiently 
and economically providing components appropriate to 
recipient employment and training needs, taking into 
account, as the Secretary deems appropriate, prior expendi-
tures on the components, the variability of costs among 
State agencies' components, the characteristics of the 
recipients to be served, and such other factors as the Sec-
retary considers necessary.". 
7 use 2025 note. 
(b) REPORT TO CONGRESS.—Not later than 30 months after 
the date of enactment of this Act, the Secretary of Agriculture 
shall submit to the Committee on Agriculture of the House of 
Representatives and the Committee on Agriculture, Nutrition, and 
Forestry of the Senate a report regarding whether the amounts 
made available under section 16(h)(1)(A) of the Food Stamp Act 
of 1977 (as a result of the amendment made by subsection (a)) 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 255 
have been used by State agencies to increase the number of work 
slots for recipients subject to section 6(o) of the Food Stamp Act 
of 1977 (7 U.S.C. 2015(o)) in emplojrment and training programs 
and workfare in the most efficient and effective manner practicable. 
SEC. 1003. DENIAL OF FOOD STAMPS FOR PRISONERS. 
(a) STATE PLANS.— 
(1) IN GENERAL.—Section 11(e) of the Food Stamp Act 
of 1977 (7 U.S.C. 2020(e)) is amended by striking paragraph 
(20) and inserting the following: 
"(20) that the State agency shall establish a system and 
take action on a periodic basis— 
"(A) to verify and otherwise ensure that an individual 
does not receive coupons in more than 1 jurisdiction within 
the State; and 
"(B) to verify and otherwise ensure that an individual 
who is placed under detention in a Federal, State, or local 
penal, correctional, or other detention facility for more than 
30 days shall not be eligible to participate in the food 
stamp program as a member of any household, except 
that— 
"(i) the Secretary may determine that extraor-
dinary circumstances m2ike it impracticable for the 
State agency to obtain information necessary to dis-
continue inclusion of the individual; and 
"(ii) a State agency that obtains information col-
lected under section 1611(e)(l)(I)(i)(I) of the Social 
Security Act (42 U.S.C. 1382(e)(l)(I)(i)(I)) pursuant to 
section 1611(e)(l)(I)(ii)(II) of that Act (42 U.S.C. 
1382(e)(l)(I)(ii)(II)), or under another program deter-
mined by the Secretary to be comparable to the pro-
gram carried out under that section, shall be consid-
ered in compliance with this subparagraph.". 
(2) LIMITS ON DISCLOSURE AND USE OF INFORMATION.— 
Section 11(e)(8)(E) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(8)(E)) is amended by striking "paragraph (16)" and 
inserting "paragraph (16) or (20)(B)". 
(3) EFFECTIVE D A T E . — 
7 use 2020 note. 
(A) IN GENERAL.—Except as provided in subparagraph 
(B), the amendments made by this subsection shall take 
effect on the date that is 1 year after the date of enactment 
of this Act. 
(B) EXTENSION.—The Secretary of Agriculture may 
grgint a State an extension of time to comply with the 
amendments made by this subsection, not to exceed beyond 
the date that is 2 years after the date of enactment of 
this Act, if the chief executive officer of the State submits 
a request for the extension to the Secretary— 
(i) stating the reasons why the State is not able 
to comply with the amendments made by this sub-
section by the date that is 1 year after the date of 
enactment of this Act; 
(ii) providing evidence that the State is msiking 
a good faith effort to comply with the amendments 
made by this subsection as soon as practicable; and 
(iii) detailing a plan to bring the State into compli-
ance with the amendments made by this subsection 
I l l STAT. 256 
PUBLIC LAW 105-33—AUG. 5, 1997 
as soon as practicable but not later than the date 
of the requested extension. 
(b) INFORMATION SHARING.—Section 11 of the Food Stamp Act 
of 1977 (7 U.S.C. 2020) is amended by adding at the end the 
following: 
"(q) DENIAL OF FOOD STAMPS FOR PRISONERS.—The Secretary 
shall assist States, to the maximum extent practicable, in 
implementing a system to conduct computer matches or other sys-
tems to prevent prisoners described in section ll(e)(20)(B) from 
participating in the food stamp program as a member of any house-
hold.". 
SEC. 1004. NUTRITION EDUCATION. 
Section 11(f) of the Food Stamp Act of 1977 (7 U.S.C. 2020(f)) 
is amended— 
(1) by striking "(f) To encourage" and inserting the follow-
ing: 
"(f) NUTRITION EDUCATION.— 
"(1) IN GENERAL.—TO encourage"; and 
(2) by adding at the end the following: 
"(2) GRANTS.— 
"(A) IN GENERAL.—The Secretary shall make available 
not more than $600,000 for each of fiscal years 1998 
through 2001 to pay the Federal share of grants made 
to eligible private nonprofit organizations and State agen-
cies to carry out subparagraph (B). 
"(B) ELIGIBILITY.—^A private nonprofit organization or 
State agency shall be eligible to receive a grant under 
subparagraph (A) if the organization or agency agrees— 
"(i) to use the funds to direct a collaborative effort 
to coordinate and integrate nutrition education into 
health, nutrition, social service, and food distribution 
programs for food stamp participants and other low-
income households; and 
"(ii) to design the collaborative effort to reach large 
numbers of food stamp participants and other low-
income households through a network of organizations, 
including schools, child care centers, farmers' markets, 
health clinics, and outpatient education services. 
"(C) PREFERENCE.—In deciding between 2 or more pri-
vate nonprofit organizations or State agencies that are 
eligible to receive a grant under subparagraph (B), the 
Secretary shall give a preference to an organization or 
agency that conducted a collaborative effort described in 
subparagraph (B) and received fiinding for the collaborative 
effort fi-om the Secretary before the date of enactment 
of this paragraph. 
"(D) FEDERAL SHARE.— 
"(i) IN GENERAL.—Subject to subparagraph (E), the 
Federal share of a grant under this paragraph shall 
be 50 percent. 
"(ii) No IN-KIND CONTRIBUTIONS.—The non-Federal 
share of a grant under this paragraph shall be in 
cash. 
"(iii) PRIVATE FUNDS.—The non-Federal share of 
a grant under this paragraph may include amounts 
from private nongovernmental sources. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 257 
"(E) LIMIT ON INDIVIDUAL GRANT.—The Federal share 
of a grant under subparagraph (A) may not exceed $200,000 
for a fiscal year.". 
SEC. 1005. REGULATIONS; EFFECTIVE DATE. 
7 USC 2015 note. 
(a) REGULATIONS.—Not later than 1 year after the date of 
enactment of this Act, the Secretary of Agriculture shall promulgate 
such regulations as are necessary to implement the amendments 
made by this title. 
(b) EFFECTIVE DATE.—The amendments made by sections 1001 
and 1002 take effect on October 1, 1997, without regard to whether 
regulations have been promulgated to implement the amendments 
made by such sections. 
TITLE II—HOUSING AND RELATED 
PROVISIONS 
SEC. 2001. TABLE OF CONTENTS. 
The table of contents for this title is as follows: 
TITLE II—HOUSING AND RELATED PROVISIONS 
Sec. 2001. Table of contents. 
Sec. 2002. Extension of foreclosure avoidance and borrower assistance provisions 
for FHA single family housing mortgage insurance program. 
Sec. 2003. Adjustment of maximum monthly rents for certain dwelling units in new 
construction and substantial or moderate rehabilitation projects assisted 
under section 8 rental assistance program. 
Sec. 2004. Adjustment of maximum monthly rents for non-turnover dwelling units 
assisted under section 8 rental assistance program. 
SEC. 2002. EXTENSION OF FORECLOSURE AVOIDANCE AND BORROWER 
ASSISTANCE PROVISIONS FOR FHA SINGLE FAMILY 
HOUSING MORTGAGE INSURANCE PROGRAM. 
Section 407 of The Balanced Budget Downpajmient Act, I (12 
U.S.C. 1710 note) is amended— 
(1) in subsection (c)— 
(A) by striking "only; and 
(B) by inserting ", on, or after" after "before"; and 
(2) by striking subsection (e). 
SEC. 2003. ADJUSTMENT OF MAXIMUM MONTHLY RENTS FOR CERTAIN 
DWELLING UNITS IN NEW CONSTRUCTION AND SUBSTAN-
TIAL 
OR 
MODERATE 
REHABILITATION 
PROJECTS 
ASSISTED UNDER SECTION 8 RENTAL ASSISTANCE PRO-
GRAM. 
The third sentence of section 8(c)(2)(A) of the United States 
Housing Act of 1937 (42 U.S.C. 1437f:c)(2)(A)) is amended by insert-
ing before the period at the end the following: ", and during fiscal 
year 1999 and thereafter". 
SEC. 2004. ADJUSTMENT OF MAXIMUM MONTHLY RENTS FOR NON-
TURNOVER DWELLING UNITS ASSISTED UNDER SECTION 
8 RENTAL ASSISTANCE PROGRAM. 
The last sentence of section 8(c)(2)(A) of the United States 
Housing Act of 1937 (42 U.S.C. 1437fi:c)(2)(A)) is amended by insert-
ing before the period at the end the following: ", and during fiscal 
year 1999 and thereafter". 
I l l STAT. 258 
PUBLIC LAW 105-33—AUG. 5, 1997 
TITLE III—COMMUNICATIONS AND 
SPECTRUM ALLOCATION PROVISIONS 
SEC. 3001. DEFINITIONS. 
47 use 153 note. 
(a) COMMON TERMINOLOGY.—Except as Otherwise provided in 
this title, the terms used in this title have the meanings provided 
in section 3 of the Communications Act of 1934 (47 U.S.C. 153), 
as amended by this section. 
(b) ADDITIONAL DEFINITIONS.—Section 3 of the Communications 
Act of 1934 (47 U.S.C. 153) is amended— 
(1) by redesignating paragraphs (49) through (51) as para-
graphs (50) through (52), respectively; and 
(2) by inserting after paragraph (48) the following new 
paragraph: 
"(49) TELEVISION SERVICE.— 
"(A) ANALOG TELEVISION SERVICE.—The term 'analog 
television service' means television service provided pursu-
ant to the transmission standards prescribed by the 
Commission in section 73.682(a) of its regulations (47 
C.F.R. 73.682(a)). 
"(B) DIGITAL TELEVISION SERVICE.—The term 'digital 
television service' means television service provided pursu-
ant to the transmission standards prescribed by the 
Commission in section 73.682(d) of its regulations (47 
C.F.R. 73.682(d)).". 
SEC 3002. SPECTRUM AUCTIONS. 
(a) EXTENSION AND EXPANSION OF AUCTION AUTHORITY.— 
(1) IN GENERAL.—Section 309(j) of the Communications 
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 obliga-
tions described in paragraph (6)(E), mutually exclusive applica-
tions are accepted for any initial license or construction permit, 
then, except as provided in paragraph (2), the Commission 
shall grant the license or permit to a qualified applicant through 
a system of competitive bidding that meets the requirements 
of this subsection. 
"(2) 
EXEMPTIONS.—The 
competitive 
bidding 
authority 
granted by this subsection shall not apply to licenses or 
construction permits issued by the Commission— 
"(A) for public safety radio services, including private 
internal radio services used by State and local governments 
and non-government entities and including emergency road 
services provided by not-for-profit organizations, that— 
"(i) are used to protect the safety of life, health, 
or property; and 
"(ii) are not made commercially available to the 
public; 
"(B) for initial licenses or construction permits for digi-
tal television service given to existing terrestrial broadcast 
licensees to replace their analog television service licenses; 
or 
"(C) for stations described in section 397(6) of this 
Act."; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 259 
(B) in paragraph (3)— 
(i) by inserting after the second sentence the fol-
lowing 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 subpara-
graph (D) and inserting "; and"; and 
(iv) by adding at the end the following new 
subparagraph: 
"(E) ensure 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 sufficient time to develop 
business plans, assess market conditions, and evaluate 
the availability of equipment for the relevant services."; 
(C) in paragraph (4)— 
(i) by striking "and" at the end of subparagraph 
(D); 
(ii) by striking the period at the end of subpara-
graph (E) and inserting "; and"; and 
(iii) by adding at the end the following new 
subparagraph: 
"(F) prescribe methods by which a reasonable reserve 
price will be required, or a minimum bid will be established, 
to obtain any license or permit being assigned pursuant 
to the competitive bidding, unless the Commission deter-
mines that such a reserve price or minimum bid is not 
in the public interest."; 
(D) in paragraph (8)(B)— 
(i) by striking the third sentence; and 
(ii) by adding at the end the following new sen-
tence: "No sums may be retained under this subpara-
graph during any fiscal year beginning after September 
30, 1998, if the annual report of the Commission under 
section 4(k) for the second preceding fiscal year fails 
to include in the itemized statement required by para-
graph (3) of such section a statement of each expendi-
ture made for purposes of conducting competitive bid-
ding under this subsection during such second preced-
ing fiscal year."; 
(E) in paragraph (11), by striking "1998" and inserting 
"2007"; and 
(F) in paragraph (13)(F), by striking "September 30, 
1998" and inserting "the date of enactment of the Balanced 
Budget Act of 1997". 
I l l STAT. 260 
PUBLIC LAW 105-33—AUG. 5, 1997 
(2) TERMINATION OF LOTTERY AUTHORITY.—Section 309(i) 
of the Communications Act of 1934 (47 U.S.C. 309(i)) is amend-
ed— 
(A) by striking paragraph (1) and inserting the follow-
ing: 
"(1) GENERAL AUTHORITY.—Except as provided in para-
graph (5), if there is more than one application for any initial 
license or construction permit, then the Commission shall have 
the authority to grant such license or permit to a qualified 
applicant through the use of a system of random selection."; 
and 
(B) by adding at the end the following new paragraph: 
"(5) TERMINATION OF AUTHORITY.—(A) Except as provided 
in subparagraph (B), the Commission shall not issue any license 
or permit using a system of random selection under this sub-
section after July 1, 1997. 
"(B) Subparagraph (A) of this paragraph shall not apply 
with respect to licenses or permits for stations described in 
section 397(6) of this Act.". 
(3) 
RESOLUTION OF PENDING 
COMPARATIVE LICENSING 
CASES.—Section 309 of the Communications Act of 1934 (47 
U.S.C. 309) is further amended by adding at the end the 
following new subsection: 
"(1) 
APPLICABILITY OF COMPETITIVE BIDDING TO PENDING 
COMPARATIVE 
LICENSING CASES.^With respect to competing 
applications for initial licenses or construction permits for commer-
cial radio or television stations that were filed with the Commission 
before July 1, 1997, the Commission shall— 
"(1) have the authority to conduct a competitive bidding 
proceeding pursuant to subsection (j) to assign such license 
or permit; 
"(2) treat the persons filing such applications as the only 
persons eligible to be qualified bidders for purposes of such 
proceeding; and 
"(3) waive any provisions of its regulations necessary to 
permit such persons to enter an agreement to procure the 
removal of a conflict between their applications during the 
180-day period beginning on the date of enactment of the Bal-
anced Budget Act of 1997.". 
(4) CONFORMING AMENDMENT.—Section 6002 of the Omni-
47 use 309 note. 
bus Budget Reconciliation Act of 1993 is amended by striking 
subsection (e). 
47 use 309 note. 
(5) EFFECTIVE DATE.—Except as otherwise 
provided 
therein, the amendments made by this subsection are effective 
on July 1, 1997. 
47 u s e 925 note. 
(b) ACCELERATED AVAILABILITY FOR AUCTION OF 1,710-1,755 
MEGAHERTZ FROM INITIAL REALLOCATION REPORT.—^The band of 
frequencies located at 1,710-1,755 megahertz identified in the initial 
reallocation report under section 113(a) of the National Tele-
communications and Information Administration Act (47 U.S.C. 
923(a)) shall, notwithstanding the timetable recommended under 
section 113(e) of such Act and section 115(b)(1) of such Act, be 
available in accordance with this subsection for assignment for 
commercial use. The Commission shall assign licenses for such 
use by competitive bidding commenced after January 1, 2001, pursu-
ant to section 309(j) of the Communications Act of 1934 (47 U.S.C. 
309(j)). 
' #>4*^ai-
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 261 
(c) COMMISSION OBLIGATION TO MAKE ADDITIONAL SPECTRUM 47 use 925 note. 
AVAILABLE BY AUCTION.— 
(1) IN GENERAL.—The Commission shall complete all 
actions necessary to permit the assignment by September 30, 
2002, by competitive bidding pursuant to section 309(j) of the 
Communications Act of 1934 (47 U.S.C. 3090')), of hcenses 
for the use of bands of frequencies that— 
(A) in the aggregate span not less than 55 megahertz; 
(B) are located below 3 gigahertz; 
(C) 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 Telecommuni-
cations Eind Information Administration Organization 
Act (47 U.S.C. 923); 
(iii) been allocated for Federal Government use 
pursuant to section 305 of the Communications Act 
of 1934 (47 U.S.C. 305); 
(iv) been designated for reallocation under section 
337 of the Communications Act of 1934 (as added 
by this Act); or 
(v) been allocated or authorized for unlicensed use 
pursuant to part 15 of the Commission's regulations 
(47 C.F.R. Part 15), if the operation of services licensed 
pursuant to competitive bidding would interfere with 
operation of end-user products permitted under such 
regulations; 
(D) include frequencies at 2,110-2,150 megahertz; and 
(E) include 15 megahertz from within the bands of 
frequencies at 1,990-2,110 megahertz. 
(2) CRITERIA FOR REASSIGNMENT.—In making available 
bands of fi"equencies for competitive bidding pursuant to para-
graph (1), the Commission shall— 
(A) seek to promote the most efficient use of the electro-
magnetic spectrum; 
(B) consider the cost of relocating existing uses to 
other bands of frequencies or other mesms of communica-
tion; 
(C) consider the needs of existing public safety radio 
services (as such services are described in section 
309(j)(2)(A) of the Communications Act of 1934, as amended 
by this Act); 
(D) comply with the requirements of international 
agreements concerning spectrum allocations; and 
(E) coordinate with the Secretary of Commerce when 
there is any impact on Federal Government spectrum use. 
(3) USE OF BANDS AT 2,110-2,150 MEGAHERTZ.—The Commis-
sion shall reallocate spectrum located at 2,110-2,150 megahertz 
for assignment by competitive bidding unless the Commission 
determines that auction of other spectrum (A) better serves 
the public interest, convenience, and necessity, and XB) 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, 
I l l STAT. 262 
PUBLIC LAW 105-33—AUG. 5, 1997 
identify an alternative 40 megahertz, and report to the Con-
gress an identification of such alternative 40 megahertz for 
assignment by competitive bidding. 
(4) USE OF 15 MEGAHERTZ FROM BANDS AT 1,990-2,110 MEGA-
HERTZ.—^The Commission shall reallocate 15 megahertz from 
spectrum located at 1,990-2,110 megahertz for assignment by 
competitive bidding unless the President determines such spec-
trum cannot be reallocated due to the need to protect incumbent 
Federal systems from interference, and that allocation of other 
spectrum (A) better serves the public interest, convenience, 
and necessity, and (B) can reasonably be expected to produce 
comparable receipts. If the President makes such a determina-
tion, then the President shall, within 2 years after the date 
of enactment of this Act, identify alternative bsmds of fre-
quencies totalling 15 megahertz, and report to the Congress 
an identification of such alternative bands for assignment by 
competitive bidding. 
(5) NOTIFICATION TO THE SECRETARY OF COMMERCE.—The 
Commission shall attempt to accommodate incumbent licensees 
displaced under this section by relocating them to other fre-
quencies available for allocation by the Commission. The 
Commission shall notify the Secretary of Commerce whenever 
the Commission is not able to provide for the effective relocation 
of an incumbent licensee to a band of frequencies available 
to the Commission for assignment. The notification shall 
include— 
(A) specific information on the incumbent licensee; 
(B) the bands the Commission considered for relocation 
of the licensee; 
(C) the reasons the licensee cannot be accommodated 
in such bands; and 
(D) the bands of frequencies identified by the Commis-
sion that are— 
(i) suitable for the relocation of such licensee; £uid 
(ii) allocated for Federal Government use, but that 
could be reallocated pursuant to part B of the National 
Telecommunications and Information Administration 
Organization Act (as amended by this Act). 
(d) IDENTIFICATION AND REALLOCATION OF FREQUENCIES.— 
(1) IN GENERAL.—Section 113 of the National Telecommuni-
cations and Information Administration Organization Act (47 
U.S.C. 923) is amended by adding at the end thereof the follow-
ing: 
"(f) 
ADDITIONAL REALLOCATION REPORT.—If 
the 
Secretary 
receives a notice from the Commission pursuant to section 3002(c)(5) 
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 licensees identi-
fied 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 assignment of such frequencies under 
the 1934 Act to incumbent licensees described in the Commission's 
notice. 
"(g) RELOCATION OF FEDERAL GOVERNMENT STATIONS.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 263 
"(1) IN GENERAL.—In order to expedite the commercial use 
of the electromagnetic spectrum and notwithstanding section 
3302(b) of title 31, United States Code, any Federal entity 
which operates a Federal Government station may accept from 
any person payment of the expenses of relocating the Federal 
entity's operations from one or more frequencies to another 
frequency or frequencies, including the costs of any modifica-
tion, replacement, or reissuance of equipment, facilities, operat-
ing manuals, or regulations incurred by that entity. Such pay-
ments may be in advance of relocation and may be in cash 
or in kind. Any such payment in cash shall be deposited in 
the account of such Federal entity in the Treasury of the 
United States or in a separate account authorized by law. 
Funds deposited according to this paragraph shall be available, 
without appropriation or fiscal year limitation, only for such 
expenses of the Federal entity for which such fimds were depos-
ited under this paragraph. 
"(2) PROCESS FOR RELOCATION.—Any person seeking to 
relocate a Federal Government station that has been assigned 
a frequency within a band that has been allocated for mixed 
Federal and non-Federal use, or that has been scheduled for 
reallocation to non-Federal use, may submit a petition for such 
relocation to NTIA. The NTIA shgJl limit or terminate the 
Federal Government station's operating license within 6 months 
after receiving the petition if the following requirements are 
met: 
"(A) the person seeking relocation of the Federal 
Government station has guaranteed to pay all relocation 
costs incurred by the Federal entity, including all engineer-
ing, equipment, site acquisition and construction, and regu-
latory fee costs; 
"(B) all activities necessary for implementing the 
relocation have been completed, including construction of 
replacement facilities (if necessary and appropriate) and 
identifying and obtaining new frequencies for use by the 
relocated Federal Government station (where such station 
is not relocating to spectrum reserved exclusively for Fed-
eral use); 
"(C) any necessary replacement facilities, equipment 
modifications, or other changes have been implemented 
and tested to ensure that the Federal Government station 
is able to successfully accomplish its purposes; and 
"(D) NTIA has determined that the proposed use of 
the spectrum frequency band to which the Federal entity 
will relocate its operations is— 
"(i) consistent with obligations undertaken by the 
United States in international agreements and with 
United States national security £ind public safety 
interests; and 
"(ii) suitable for the technical characteristics of 
the band and consistent with other uses of the band. 
In exercising its authority under clause (i) of this subpara-
graph, NTIA shsdl consult with the Secretary of Defense, 
the Secretary of State, or other appropriate officers of the 
Federal Government. 
"(3) RIGHT TO RECLAIM.—If within one year after the reloca-
tion the Federal entity demonstrates to the Commission that 
I l l STAT. 264 
PUBLIC LAW 105-33—AUG. 5, 1997 
the new facilities or spectrum are not comparable to the facili-
ties or spectrum from which the Federal Government station 
was relocated, the person who filed the petition under para-
graph (2) for such relocation shall take reasonable steps to 
remedy £iny defects or pay the Federal entity for the expenses 
incurred in returning the Federal Government station to the 
spectrum from which such station was relocated. 
"(h) FEDERAL ACTION TO EXPEDITE SPECTRUM TRANSFER.—Any 
Federal Government station which operates on electromagnetic 
spectrum that has been identified in any reallocation report under 
this section shall, to the maximum extent practicable through the 
use of the authority granted under subsection (g) and any other 
applicable provision of law, take action to relocate its spectrum 
use to other frequencies that are reserved for Federal use or to 
consolidate its spectrum use with other Federal Government sta-
tions in a manner that maximizes the spectrum available for non-
Federal use. 
"(i) DEFINITION.—For purposes of this section, the term 'Federal 
entity means £iny department, agency, or other instrumentality 
of the Federal Government that utilizes a Government station 
license obtained under section 305 of the 1934 Act (47 U.S.C. 
305).". 
(2) Section 114(a) of such Act (47 U.S.C. 924(a)) is amend-
ed— 
(A) in paragraph (1), by striking "(a) or (d)(1)" and 
inserting "(a), (d)(1), or (f)"; and 
(B) in paragraph (2), by striking "either" and inserting 
"any". 
(e) IDENTIFICATION AND REALLOCATION OF AUCTIONABLE FRE-
QUENCIES.— 
(1) 
SECOND REPORT REQUIRED.—Section 113(a) of 
the 
National Telecommunications and Information Administration 
Organization Act (47 U.S.C. 923(a)) is amended by inserting 
"and within 6 months after the date of enactment of the Bal-
anced Budget Act of 1997" after "Act of 1993". 
(2) IN GENERAL.—Section 113(b) of such Act (47 U.S.C. 
923(b)) is amended— 
(A) by striking the caption of paragraph (1) and insert-
ing "INITIAL REALLOCATION REPORT.—"; 
(B) by inserting "in the initial report required by sub-
section (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 adding at the end thereof the following: 
"(3) SECOND REALLOCATION REPORT.—In accordance with 
the provisions of this section, the Secretary shall recommend 
for reallocation in the second 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) are located below 3 gigahertz; and 
"(C) meet the criteria specified in paragraphs (1) 
through (5) of subsection (a).". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 265 
(3) CONFORMING AMENDMENT.—Section 113(d) of such Act 
(47 U.S.C. 923(d)) is amended by striking "final report" and 
inserting "initial report". 
(4) ALLOCATION AND ASSIGNMENT.—Section 115 of such Act 
(47 U.S.C. 925) is amended— 
(A) by striking "the report required by section 113(a)" 
in subsection (b) and inserting "the initial reallocation 
report required by section 113(a)"; and 
(B) by adding at the end thereof the following: 
"(c) ALLOCATION AND ASSIGNMENT OF FREQUENCIES IDENTIFIED 
IN THE SECOND REALLOCATION REPORT.— 
"(1) PLAN AND IMPLEMENTATION.—With respect to the fre-
quencies made available for reallocation pursuant to section 
113(b)(3), the Commission shall, not later than one year after 
receipt of the second reallocation report required by section 
113(a), prepare, submit to the President and the Congress, 
and implement, a plan for the immediate allocation and assign-
ment under the 1934 Act of all such fi*equencies in accordance 
with section 309(j) of such Act. 
"(2) CONTENTS.—The plan prepared by the Commission 
under paragraph (1) shall consist of a schedule of allocation 
and assignment of those frequencies in accordance with section 
309(j) of the 1934 Act in time for the assignment of those 
licenses or permits by September 30, 2002.". 
SEC. 3003. AUCTION OF RECAPTURED BROADCAST TELEVISION SPEC-
TRUM. 
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 para-
graph: 
"(14) 
AUCTION OF RECAPTURED BROADCAST TELEVISION 
SPECTRUM.— 
"(A) LIMITATIONS ON TERMS OF TERRESTRIAL TELEVISION 
BROADCAST LICENSES.—A television broadcast license that 
authorizes analog television service may not be renewed 
to authorize such service for a period that extends beyond 
December 31, 2006. 
"(B) EXTENSION.—The Commission shall extend the 
date described in subparagraph (A) for any station that 
requests such extension in any television market if the 
Commission finds that— 
"(i) one or more of the stations in such market 
that are licensed to or affiliated with one of the four 
largest national television networks are not broadcast-
ing a digital television service signal, and the Commis-
sion finds that each such station has exercised due 
diligence and satisfies the conditions for an extension 
of the Commission's applicable construction deadlines 
for digital television service in that market; 
"(ii) digital-to-analog converter technology is not 
generally available in such market; or 
"(iii) in any market in which an extension is not 
available under clause (i) or (ii), 15 percent or more 
of the television households in such market— 
"(I) do not subscribe to a multichannel video 
programming distributor (as defined in section 
39-194 O - 97 - 10 : QL 3 Part 1 
Ill STAT. 266 
PUBLIC LAW 105-33—AUG. 5, 1997 
602) that carries one of the digital television serv-
ice programming channels of each of the television 
stations broadcasting such a channel in such mar-
ket; and 
"(11) do not have either— 
"(a) at least one television receiver capable 
of receiving the digital television service sig-
nals of the television stations licensed in such 
market; or 
"(b) at least one television receiver of ana-
log television service signals equipped with 
digital-to-analog converter technology capable 
of receiving the digital television service sig-
nals of the television stations licensed in such 
market. 
"(C) SPECTRUM REVERSION AND RESALE.— 
"(i) The Commission shall— 
"(I) ensure that, as licenses for analog tele-
vision service expire pursuant to subparagraph (A) 
or (B), each licensee shall cease using electro-
magnetic spectrum assigned to such service accord-
ing to the Commission's direction; and 
"(II) reclaim and organize the electromagnetic 
spectrum in a manner consistent with the objec-
tives described in paragraph (3) of this subsection, 
"(ii) Licensees for new services occupying spectrum 
reclsdmed pursuant to clause (i) shall be assigned in 
Reports. 
accordance with this subsection. The Commission shall 
complete the assignment of such licenses, and report 
to the Congress the total revenues from such competi-
tive bidding, by September 30, 2002. 
"(D) 
CERTAIN 
LIMITATIONS ON 
QUALIFIED 
BIDDERS 
PROHIBITED.—In prescribing any regulations relating to the 
qualification of bidders for spectrum reclaimed pursuant 
to subparagraph (C)(i), the Commission, for any license 
that may be used for any digital television service where 
the grade A contour of the station is projected to encompass 
the entirety of a city with a population in excess of 400,000 
(as determined using the 1990 decennial census), shall 
not— 
"(i) preclude any party from being a qualified bid-
der for such spectrum on the basis of— 
"(I) the Commission's duopoly rule (47 C.F.R. 
73.3555(b)); or 
"(II) the Commission's newspaper cross-owner-
ship rule (47 C.F.R. 73.3555(d)); or 
"(ii) apply either such rule to preclude such a 
party that is a winning bidder in a competitive bidding 
for such spectrum from using such spectrum for digital 
television service.". 
SEC. 3004. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY 
SERVICES LICENSES AND COMMERCIAL LICENSES. 
Title III of the Communications Act of 1934 is amended by 
inserting after section 336 (47 U.S.C. 336) the following new section: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 267 
"SEC. 337. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY 47 USC 337. 
SERVICES LICENSES AND COMMERCIAL LICENSES. 
"(a) IN GENERAL.—Not later than January 1, 1998, the Commis-
sion shall allocate the electromagnetic spectrum between 746 mega-
hertz and 806 megahertz, inclusive, as follows: 
"(1) 24 megahertz of that spectrum for public safety services 
according to the terms and conditions established by the 
Commission, in consultation with the Secretary of Commerce 
and the Attorney General; and 
"(2) 36 megahertz of that spectrum for commercial use 
to be assigned by competitive bidding pursuant to section 309(j). 
"(b) ASSIGNMENT.—The Commission shall— 
"(1) commence assignment of the licenses for public safety 
services created pursuant to subsection (a) no later than 
September 30, 1998; and 
"(2) commence competitive bidding for the commercial 
licenses created pursuant to subsection (a) after January 1, 
2001. 
"(c) LICENSING OF UNUSED FREQUENCIES FOR PUBLIC SAFETY 
SERVICES.— 
"(1) USE OF UNUSED CHANNELS FOR PUBLIC SAFETY SERV-
ICES.—Upon application by an entity seeking to provide public 
safety services, the Commission shall waive any requirement 
of this Act or its regulations implementing this Act (other 
than its regulations regarding harmful interference) to the 
extent necessary to permit the use of unassigned frequencies 
for the provision of public safety services by such entity. An 
application shall be granted under this subsection if the 
Commission finds that— 
"(A) no other spectrum allocated to public safety serv-
ices is immediately available to satisfy the requested public 
safety service use; 
"(B) the requested use is technically feasible without 
causing harmful interference to other spectrum users enti-
tled to protection from such interference under the Commis-
sion's regulations; 
"(C) the use of the unassigned frequency for the provi-
sion of public safety services is consistent with other alloca-
tions for the provision of such services in the geographic 
area for which the application is made; 
"(D) the unassigned frequency was allocated for its 
present use not less than 2 years prior to the date on 
which the application is granted; and 
"(E) granting such application is consistent with the 
public interest. 
"(2) APPLICABILITY.—Paragraph (1) shall apply to any 
application to provide public safety services that is pending 
or filed on or after the date of enactment of the Balanced 
Budget Act of 1997. 
"(d) CONDITIONS ON LICENSES.—In estabhshing service rules 
with respect to licenses granted pursuant to this section, the 
Commission— 
"(1) shall establish interference limits at the boundaries 
of the spectrum block and service area; 
"(2) shall establish any additional technical restrictions 
necessary to protect full-service sinalog television service and 
I l l STAT. 268 
PUBLIC LAW 105-33—AUG. 5, 1997 
digital television service during a transition to digital television 
service; 
"(3) may permit public safety services licensees and 
commercial licensees— 
"(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; £ind 
"(4) shall establish rules insuring that public safety services 
licensees using spectrum reallocated pursuant to subsection 
(a)(1) shall not be subject to harmful interference from tele-
vision broadcast licensees. 
"(e) 
REMOVAL AND RELOCATION OF INCUMBENT BROADCAST 
LICENSEES.— 
"(1) CHANNELS 60 TO 69.—Any person who holds a tele-
vision broadcast license to operate between 746 and 806 mega-
hertz may not operate at that frequency after the date on 
which the digital television service transition period terminates, 
as determined by the Commission. 
"(2) INCUMBENT QUALIFYING LOW-POWER STATIONS.—After 
making any allocation or assignment under this section, the 
Commission shall seek to assure, consistent with the Commis-
sion's plan for allotments for digital television service, that 
each qualifying low-power television station is assigned a fre-
quency below 746 megahertz to permit the continued operation 
of such station. 
"(f) DEFINITIONS.—For purposes of this section: 
"(1) PUBLIC SAFETY SERVICES.—The term 'public safety serv-
ices' means services— 
"(A) the sole or principal purpose of which is to protect 
the safety of life, health, or property; 
"(B) that are provided— 
"(i) by State or local government entities; or 
"(ii) by nongovernmental organizations that are 
authorized by a governmental entity whose primary 
mission is the provision of such services; and 
"(C) that are not made commercially available to the 
public by the provider. 
"(2) QUALIFYING LOW-POWER TELEVISION STATIONS.—^A sta-
tion is a qualifying low-power television station if, during the 
90 days preceding the date of enactment of the Balanced Budget 
Act of 1997— 
"(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 market area served by such station; and 
"(C) such station was in compliance with the require-
ments applicable to low-power television stations.". 
SEC. 3005. FLEXIBLE USE OF ELECTROMAGNETIC SPECTRUM. 
Section 303 of the Communications Act of 1934 (47 U.S.C. 
303) is amended by adding at the end thereof the following: 
"(y) Have authority to allocate electromagnetic spectrum so 
as to provide flexibility of use, if— 
"(1) such use is consistent with international agreements 
to which the United States is a party; and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 269 
"(2) the Commission finds, after notice and an opportunity 
for public comment, that— 
"(A) such an allocation would be in the public interest; 
"(B) such use would not deter investment in commu-
nications services and systems, or technology development; 
and 
"(C) such use would not result in harmful interference 
among users.". 
SEC. 3006. UNIVERSAL SERVICE FUND PAYMENT SCHEDULE. 
47 USC 254 note. 
(a) APPROPRIATIONS TO THE UNIVERSAL SERVICE FUND.— 
(1) APPROPRIATION.—There is hereby appropriated to the 
Commission $3,000,000,000 in fiscal year 2001, which shall 
be disbursed on October 1, 2000, to the Administrator of the 
Federal universal service support programs established pursu-
ant to section 254 of the Communications Act of 1934 (47 
U.S.C. 254), and which may be expended by the Administrator 
in support of such programs as provided pursuant to the rules 
implementing that section. 
(2) RETURN TO TREASURY.—The Administrator shall trans-
fer $3,000,000,000 fi-om the funds collected for such support 
programs to the General Fund of the Treasury on October 
1, 2001. 
(b) FEE ADJUSTMENTS.—The Commission shall direct the 
Administrator to adjust payments by telecommunications carriers 
and other providers of interstate telecommunications so that the 
$3,000,000,000 of the total payments by such carriers or providers 
to the Administrator for fiscal year 2001 shall be deferred until 
October 1, 2001. 
(c) PRESERVATION OF AUTHORITY.—Nothing in this section shall 
affect the Administrator's authority to determine the amounts that 
should be expended for universal service support programs pursuant 
to section 254 of the Communications Act of 1934 and the rules 
implementing that section. 
(d) DEFINITION.—For purposes of this section, the term 
"Administrator" means the Administrator designated by the Federal 
Communications Commission to administer Federal universal serv-
ice support programs pursuant to section 254 of the Communica-
tions Act of 1934. 
SEC. 3007. DEADLINE FOR COLLECTION 
47 USC 309 note. 
The Commission shall conduct the competitive bidding required 
under this title or the amendments made by this title in a manner 
that ensures that all proceeds of such bidding are deposited in 
accordance with section 309(j)(8) of the Communications Act of 
1934 not later than September 30, 2002. 
SEC. 3008. ADMINISTRATIVE PROCEDURES FOR SPECTRUM AUCTIONS. 
47 USC 309 note. 
Notwithstanding section 309(b) of the Communications Act of 
1934 (47 U.S.C. 309(b)), no application for an instrument of 
authorization for fi*equencies assigned under this title (or amend-
ments made by this title) shall be granted by the Commission 
earlier than 7 days following issuance of public notice by the 
Commission of the acceptance for filing of such application or of 
any substantial amendment 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 
I l l STAT. 270 
PUBLIC LAW 105-33—AUG. 5, 1997 
public notice) for the filing of petitions to deny any application 
for an instrument of authorization for such frequencies. 
TITLE IV—MEDICARE, MEDICAID, AND 
CHILDREN'S HEALTH PROVISIONS 
SEC. 4000. AMENDMENTS TO SOCIAL SECURITY ACT AND REFERENCES 
TO OBRA; TABLE OF CONTENTS OF TITLE. 
(a) AMENDMENTS TO SOCIAL SECURITY ACT.—Except as other-
wise specifically provided, whenever in this title an amendment 
is expressed in terms of an amendment to or repeal of a section 
or other provision, the reference shall be considered to be made 
to that section or other provision of the Social Security Act. 
(b) REFERENCES TO OBRA.—In this title, the terms "OBRA-
1986", "OBRA-1987", "OBRA-1989", "OBRA-1990", and "OBRA-
1993" refer to the Omnibus Budget Reconciliation Act of 1986 
(Public Law 99-509), the Omnibus Budget Reconciliation Act of 
1987 (Public Law 100-203), the Omnibus Budget Reconcihation 
Act of 1989 (PubUc Law 101-239), the Omnibus Budget Reconcili-
ation Act of 1990 (Public Law 101-508), and the Omnibus Budget 
Reconciliation Act of 1993 (Public Law 103-66), respectively. 
(c) TABLE OF CONTENTS OF TITLE,—The table of contents of 
this title is as follows: 
Sec. 4000. Amendments to Social Security Act and references to OBRA; table of 
contents of title. 
Subtitle A—Medicare+Choice Program 
CHAPTER 1—MEDICARE+CHOICE PROGRAM 
SUBCHAPTER A—MEDICARE+CHOICE PROGRAM 
Sec. 4001. Establishment of Medicare+Choice program. 
"PART C—MEDICARE+CHOICE PROGRAM 
"Sec. 1851. Eligibility, election, and enrollment. 
"Sec. 1852. Benefits and beneficiaryprotections. 
"Sec. 1853. Payments to Medicare+Choice organizations. 
"Sec. 1854. Premiums. 
"Sec. 1855. Organizational and financial requirements for Medicare+Choice or-
ganizations; provider-sponsored organizations. 
"Sec. 1856. Establishment of standards. 
"Sec. 1857. Contracts with Medicare+Choice organizations. 
"Sec. 1859. Definitions; miscellaneous provisions. 
Sec. 4002. Transitional rules for current medicare HMO program. 
Sec. 4003. Conforming changes in medigap program. 
SUBCHAPTER B—SPECIAL RULES FOR MEDICARE+CHOICE MEDICAL SAVINGS ACCOUNTS 
Sec. 4006. Medicare+Choice MSA. 
CHAPTER 2—DEMONSTRATIONS 
SUBCHAPTER A—MEDICARE+CHOICE COMPETITIVE PRICING DEMONSTRATION PROJECT 
Sec. 4011. Medicare prepaid competitive pricing demonstration project. 
Sec. 4012. Administration through the Office of Competition; advisory committee. 
Sec. 4013. Project design based on FEHBP competitive bidding model. 
SUBCHAPTER B—SOCIAL HEALTH MAINTENANCE ORGANIZATIONS 
Sec. 4014. Social health maintenance organizations (SHMOs). 
SUBCHAPTER C—MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR MILITARY 
RETIREES 
Sec. 4015. Medicare subvention demonstration project for military retirees. 
SUBCHAPTER D—OTHER PROJECTS 
Sec. 4016. Medicare coordinated care demonstration project. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 271 
Sec. 4017. Orderly transition of municipal health service demonstration projects. 
Sec. 4018. Medicare enrollment demonstration project. 
Sec. 4019. Extension of certain medicare community nursing organization dem-
onstration projects. 
CHAPTER 3—COMMISSIONS 
Sec. 4021. National Bipartisan Commission on the Future of Medicare. 
Sec. 4022. Medicare Payment Advisory Commission. 
CHAPTER 4—MEDIGAP PROTECTIONS 
Sec. 4031. Medigap protections. 
Sec. 4032. Addition of high deductible medigap policies. 
CHAPTER 5—TAX TREATMENT OF HOSPITALS PARTICIPATING IN PROVIDER-SPONSORED 
ORGANIZATIONS 
Sec. 4041. Tax treatment of hospitals which participate in provider-sponsored orga- • 
nizations. 
Subtitle B—Prevention Initiatives 
Sec. 4101. Screening mammography. 
Sec. 4102. Screening pap smear and pelvic exams. 
Sec. 4103. Prostate cancer screening tests. 
Sec. 4104. Coverage of colorectal screening. 
Sec. 4105. Diabetes self-management benefits. 
Sec. 4106. Standardization of medicare coverage of bone mass measurements. 
Sec. 4107. Vaccines outreach expansion. 
Sec. 4108. Study on preventive and enhanced benefits. 
Subtitle C—Rural Initiatives 
Sec. 4201. Medicare rural hospital flexibility program. 
Sec. 4202. Prohibiting denial of request by rural referral centers for reclassification 
on basis of comparabilitv of wages. 
Sec. 4203. Hospital geographic reclassification permitted for purposes of dispropor-
tionate snare payment adjustments. 
Sec. 4204. Medicare-dependent, small rural hospital payment extension. 
Sec. 4205. Rural health clinic services. 
Sec. 4206. Medicare reimbursement for telehealth services. 
Sec. 4207. Informatics, telemedicine, and education demonstration project. 
Subtitle D—^Anti-Fraud and Abuse Provisions and Improvements in Protecting 
Program Integrity 
CHAPTER 1—REVISIONS TO SANCTIONS FOR FRAUD AND ABUSE 
Sec. 4301. Permanent exclusion for those convicted of 3 health care related crimes. 
Sec. 4302. Authority to refuse to enter into medicare agreements with individuals 
or entities convicted of felonies. 
Sec. 4303. Exclusion of entity controlled by family member of a sanctioned individ-
ual. 
Sec. 4304. Imposition of civil money penalties. 
CHAPTER 2—IMPROVEMENTS IN PROTECTING PROGRAM INTEGRITY 
Sec. 4311. Improving information to medicare beneficiaries. 
Sec. 4312. Disclosure of information and surety bonds. 
Sec. 4313. Provision of certain identification numbers. 
Sec. 4314. Advisory opinions regarding certain physician self-referral provisions. 
Sec. 4315. Replacement of reasonable charge methodology by fee schedules. 
Sec. 4316. Application of inherent reasonableness to all part B services other than 
S
hysicians' services, 
equirement to furnish diagnostic information. 
Sec. 4318. Report by GAO on operation of fraud and abuse control program. 
Sec. 4319. Competitive bidding demonstration proiects. 
Sec. 4320. Prohibiting unnecessary and wasteful medicare payments for certain 
items. 
Sec. 4321. Nondiscrimination in post-hospital referral to home health agencies and 
other entities. 
CHAPTER 3—CLARIFICATIONS AND TECHNICAL CHANGES 
Sec. 4331. Other fraud and abuse related provisions. 
Subtitle E—Provisions Relating to Part A Only 
CHAPTER 1—PAYMENT OF P P S HOSPITALS 
Sec. 4401. PPS hospital pasonent update. 
I l l STAT. 272 
PUBLIC LAW 105-33—AUG. 5, 1997 
Sec. 4402. Maintaining savings from temporary reduction in capital payments for 
PPS hospitals. 
Sec. 4403. Disproportionate share. 
Sec. 4404. Meoicare capital asset sales price equal to book value. 
Sec. 4405. Elimination of IME and DSH payments attributable to outlier payments. 
Sec. 4406. Increase base payment rate to Puerto Rico hospitals. 
Sec. 4407. Certain hospital discharges to post acute care. 
Sec. 4408. Reclassification of certain counties as large urban areas under medicare 
program. 
Sec. 4409. Geographic reclassification for certain disproportionately large hospitals. 
Sec. 4410. Floor on area wage index. 
CHAPTER 2—PAYMENT OF PPS-EXEMPT HOSPITALS 
SUBCHAPTER A—GENERAL PAYMENT PROVISIONS 
Sec. 4411. Payment update. 
Sec. 4412. Reductions to capital payments for certain PPS-exempt hospitals and 
units. 
Sec. 4413. Rebasing. 
Sec. 4414. Cap on TEFRA limits. 
Sec. 4415. Bonus and relief payments. 
Sec. 4416. Change in payment and target amount for new providers. 
Sec. 4417. Treatment of certain long-term Care hospitals. 
Sec. 4418. Treatment of certain cancer hospitals. 
Sec. 4419. Elimination of exemptions for certain hospitals. 
SUBCHAPTER B—PROSPECTIVE PAYMENT SYSTEM FOR PPS-EXEMPT HOSPITALS 
Sec. 4421. Prospective payment for inpatient rehabilitation hospital services. 
Sec. 4422. Development of proposal on payments for long-term care hospitals. 
CHAPTER 3—PAYMENT FOR SKILLED NURSING FACILITIES 
Sec. 4431. Extension of cost limits. 
Sec. 4432. Prospective payment for skilled nursing facility services. 
CHAPTER 4—PROVISIONS RELATED TO HOSPICE SERVICES 
Sec. 4441. Payments for hospice services. 
Sec. 4442. Payment for home hospice care based on location where care is fur-
nished. 
Sec. 4443. Hospice care benefits periods. 
Sec. 4444. Other items and services included in hospice care. 
Sec. 4445. Contracting with independent physicians or physician groups for hospice 
care services permitted. 
Sec. 4446. Waiver of certain staffing requirements for hospice care programs in 
nonurbanized areas. 
Sec. 4447. Limitation on liability of beneficiaries for certain hospice coverage deni-
als. 
Sec. 4448. Extending the period for physician certification of an individual's termi-
nal illness. 
Sec. 4449. Effective date. 
CHAPTER 5—OTHER PAYMENT PROVISIONS 
Sec. 4451. Reductions in payments for enrollee bad debt. 
Sec. 4452. Permanent extension of hemophilia pass-through payment. 
Sec. 4453. Reduction in part A medicare premium for certain public retirees. 
Sec. 4454. Coverage of services in religious nonmedical health care institutions 
under the medicare and medicaid programs. 
Subtitle F—Provisions Relating to Part B Only 
CHAPTER 1—SERVICES OF HEALTH PROFESSIONALS 
SUBCHAPTER A—PHYSICL^NS' SERVICES 
Sec. 4501. Establishment of single conversion factor for 1998. 
Sec. 4502. Establishing update to conversion factor to match spending under sus-
tainable growtn rate. 
Sec. 4503. Replacement of volume performance standard with sustainable growth 
rate. 
Sec. 4504. Payment rules for anesthesia services. 
Sec. 4505. Implementation of resource-based methodologies. 
Sec. 4506. Dissemination of information on high per discharge relative values for 
in-hospital physicians' services. 
Sec. 4507. Use of private contracts by medicare beneficiaries. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 273 
SUBCHAPTER 
B—OTHER 
HEALTH 
CARE 
PROFESSIONALS 
Sec. 4511. Increased medicare reimbursement for nurse practitioners and clinical 
nurse specialists. 
Sec. 4512. Increased medicare reimbursement for physician assistants. 
Sec. 4513. No x-ray required for chiropractic services. 
CHAPTER 2—PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES 
Sec. 4521. Elimination of formula-driven overpayments (FDO) for certain out-
patient hospital services. 
Sec. 4522. Extension of reductions in payments for costs of hospital outpatient serv-
ices. 
Sec. 4523. Prospective payment system for hospital outpatient department services. 
CHAPTER 3—AMBULANCE SERVICES 
Sec. 4531. Payments for ambulance services. 
Sec. 4532. Demonstration of coverage of ambulance services under medicare 
through contracts with units of local government. 
CHAPTER 4—PROSPECTIVE PAYMENT FOR OUTPATIENT REHABILITATION SERVICES 
Sec. 4541. Prospective payment for outpatient rehabilitation services. 
CHAPTER 5—OTHER PAYMENT PROVISIONS 
Sec. 4551. Payments for durable medical equipment. 
Sec. 4552. Oxygen and oxygen equipment. 
Sec. 4553. Reduction in updates to payment amounts for clinical diagnostic labora-
tory tests; study on laboratory tests. 
Sec. 4554. Improvements in administration of laboratory tests benefit. 
Sec. 4555. Updates for ambulatory surgical services. 
Sec. 4556. Reimbursement for drugs and biologicals. 
Sec. 4557. Coverage of oral anti-nausea drugs under chemotherapeutic regimen. 
Sec. 4558. Renal dialysis-related services. 
Sec. 4559. Temporary coverage restoration for portable electrocardiogram transpor-
tation. 
CHAPTER 6—PART B PREMIUM AND RELATED PROVISIONS 
SUBCHAPTER A—DETERMINATION OF PART B PREMIUM AMOUNT 
Sec. 4571. Part B premium. 
SUBCHAPTER B—OTHER PROVISIONS RELATED TO PART B PREMIUM 
Sec. 4581. Protections under the medicare program for disabled workers who lose 
benefits under a group health plan. 
Sec. 4582. Governmental entities eligible to elect to pay part B premiums for eligi-
ble individuals. 
Subtitle G—Provisions Relating to Parts A and B 
CHAPTER 1—HOME HEALTH SERVICES AND BENEFITS 
SUBCHAPTER A—PAYMENTS FOR HOME HEALTH SERVICES 
Sec. 4601. Recapturing savings resulting from temporary freeze on payment in-
creases for nome health services. 
Sec. 4602. Interim pa3Tnents for home health services. 
Sec. 4603. Prospective payment for home health services. 
Sec. 4604. Payment based on location where home health service is furnished. 
SUBCHAPTER B—HOME HEALTH BENEFITS 
Sec. 4611. Modification of part A home health benefit for individuals enrolled under 
part B. 
Sec. 4612. Clarification of part-time or intermittent nursing care. 
Sec. 4613. Study on definition of homebound. 
Sec. 4614. Normative standards for home health claims denials. 
Sec. 4615. No home health benefits based solely on drawing blood. 
Sec. 4616. Reports to Congress regarding home health cost containment. 
CHAPTER 2—GRADUATE MEDICAL EDUCATION 
SUBCHAPTER A—INDIRECT MEDICAL EDUCATION 
Sec. 4621. Indirect graduate medical education payments. 
Sec. 4622. Payment 
to 
hospitals 
of indirect 
medical 
education 
costs 
for 
Medicare+Choice enrollees. 
Ill STAT. 274 
PUBLIC LAW 105-33—AUG. 5, 1997 
SUBCHAPTER B—DIRECT GRADUATE MEDICAL EDUCATION 
Sec. 4623. Limitation on number of residents and rolling average FTE count. 
Sec. 4624. Payments to hospitals for direct costs of graduate medical education of 
Medicare+Choice enroUees. 
Sec. 4625. Permitting payment to nonhospital providers. 
Sec. 4626. Incentive payments under plans for voluntary reduction in number of 
residents. 
Sec. 4627. Medicare special reimbursement rule for primary care combined resi-
dency programs. 
Sec. 4628. Demonstration project on use of consortia. 
Sec. 4629. Recommendations on long-term policies regarding teaching hospitals and 
graduate medical education. 
Sec. 4630. Study of hospital overhead and supervisory physician components of di-
rect medical education costs. 
CHAPTER 3—PROVISIONS RELATING TO MEDICARE SECONDARY PAYER 
Sec. 4631. Permanent extension and revision of certain secondary payer provisions. 
Sec. 4632. Clarification of time and filing limitations. 
Sec. 4633. Permitting recovery against third party administrators. 
CHAPTER 4—OTHER PROVISIONS 
Sec. 4641. Placement of advance directive in medical record. 
Sec. 4642. Increased certification period for certain organ procurement organiza-
tions. 
Sec. 4643. Office of the Chief Actuary in the Health Care Financing Administra-
tion. 
Sec. 4644. Conforming amendments to comply with congressional review of agency 
rulemaking. 
Subtitle H—Medicaid 
CHAPTER 1—MANAGED CARE 
Sec. 4701. State option of using managed care; change in terminology. 
Sec. 4702. Primary care case management services as State option without need for 
waiver. 
Sec. 4703. Elimination of 75:25 restriction on risk contracts. 
Sec. 4704. Increased beneficiary protections. 
Sec. 4705. Quality assurance standards. 
Sec. 4706. Solvency standards. 
Sec. 4707. Protections against fraud and abuse. 
Sec. 4708. Improved administration. 
Sec. 4709. 6-month guaranteed eligibility for all individuals enrolled in managed 
Sec. 4710. Effective dates. 
CHAPTER 2—FLEXIBILITY IN PAYMENT OF PROVIDERS 
Sec. 4711. Flexibility in payment methods for hospital, nursing facility, ICF/MR, 
and home health services. 
Sec. 4712. Payment for center and clinic services. 
Sec. 4713. Elimination of obstetrical and pediatric payment rate requirements. 
Sec. 4714. Medicaid payment rates for certain medicare cost-sharing. 
Sec. 4715. Treatment of veterans' pensions under medicaid. 
CHAPTER 3—FEDERAL PAYMENTS TO STATES 
Sec. 4721. Reforming disproportionate share pajmients under State medicaid pro-
grams. 
Sec. 4722. Treatment of State taxes imposed on certain hospitals. 
Sec. 4723. Additional funding for State emergency health services furnished to un-
documented aliens. 
Sec. 4724. Elimination of waste, fraud, and abuse. 
Sec. 4725. Increased FMAPs. 
Sec. 4726. Increase in payment limitation for territories. 
CHAPTER 4—ELIGIBILITY 
Sec. 4731. State option of continuous eligibility for 12 months; clarification of State 
option to cover children. 
Sec. 4732. Payment of part B premiums. 
Sec. 4733. State option to permit workers with disabilities to buy into medicaid. 
Sec. 4734. Penalty for fraudulent eligibility. 
Sec. 4735. Treatment of certain settlement payments. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 275 
CHAPTER 5—BENEFITS 
Sec. 4741. Elimination of requirement to pay for private insurance. 
Sec. 4742. Physician qualification requirements. 
Sec. 4743. Elimination of requirement of prior institutionalization with respect to 
habilitation services furnished under a waiver for home or community-
based services. 
Sec. 4744. Study and report on EPSDT benefit. 
CHAPTER 6—ADMINISTRATION AND MISCELLANEOUS 
Sec. 4751. Elimination of duplicative inspection of care requirements for ICFS/MR 
and mental hospitals. 
Sec. 4752. Alternative sanctions for noncompliant ICFS/MR. 
Sec. 4753. Modification of MMIS requirements. 
Sec. 4754. Facilitating imposition of State alternative remedies on noncompliant 
nursing facilities. 
Sec. 4755. Removal of name from nurse aide registry. 
Sec. 4756. Medically accepted indication. 
Sec. 4757. Continuation of State-wide section 1115 medicaid waivers. 
Sec. 4758. Extension of moratorium. 
Sec. 4759. Extension of effective date for State law amendment. 
Subtitle I—Programs of All-inclusive Care for the Elderly (PACE) 
Sec. 4801. Coverage of PACE under the medicare program. 
Sec. 4802. Establishment of PACE program as medicaid State option. 
Sec. 4803. Effective date; transition. 
Sec. 4804. Study and reports. 
Subtitle J—State Children's Health Insurance Program 
CHAPTER 1—5TATE CHILDREN'S HEALTH INSURANCE PROGRAM 
Sec. 4901. Establishment of program. 
"TITLE XXI—STATE CHILDREN'S HEALTH INSURANCE PROGRAM 
"Sec. 2101. Purpose; State child health plans. 
"Sec. 2102. General contents of State child health plan; eligibility; outreach. 
"Sec. 2103. Coverage requirements for children's health insurance. 
"Sec. 2104. Allotments. 
"Sec. 2105. Payments to States. 
"Sec. 2106. Process for submission, approval, and amendment of State child 
health plans. 
"Sec. 2107. Strategic objectives and performance goals; plan administration. 
"Sec. 2108. Annual reports; evaluations. 
"Sec. 2109. Miscellaneous provisions. 
"Sec. 2110. Definitions. 
CHAPTER 2—EXPANDED COVERAGE OF CHILDREN UNDER MEDICAID 
Sec. 4911. Optional use of State child health assistance funds for enhanced medic-
aid match for expanded medicaid eligibility. 
Sec. 4912. Medicaid presumptive eligibility for low-income children. 
Sec. 4913. Continuation of medicaid eligibility for disabled children who lose SSI 
benefits. 
CHAPTER 3—DL^ETES GRANT PROGRAMS 
Sec. 4921. Special diabetes programs for children with Type I diabetes. 
Sec. 4922. Special diabetes programs for Indians. 
Sec. 4923. Report on diabetes grant programs. 
Subtitle A—Medicare+Choice Program 
CHAPTER 1—MEDICARE+CHOICE PROGRAM 
Subchapter A—Medicare+Choice Program 
SEC. 4001. ESTABLISHMENT OF MEDICARE+CHOICE PROGRAM. 
Title XVIII is Eimended by redesignating part C as part D 
and by inserting after part B the following new part: 
I l l STAT. 276 
PUBLIC LAW 105-33—AUG. 5, 1997 
"PART C—^MEDICARE+CHOICE PROGRAM 
"ELIGIBILITY, ELECTION, AND ENROLLMENT 
42 use 
"SEC. 1851. 
(a) 
CHOICE OF MEDICARE BENEFITS THROUGH 
1395W-21. 
MEDICARE+CHOICE P L A N S . — 
"(1) IN GENERAL.—Subject to the provisions of this section, 
each Medicare+Choice eligible individual (as defined in para-
graph (3)) is entitled to elect to receive benefits under this 
title— 
"(A) through the original medicare fee-for-service pro-
gram under parts A and B, or 
"(B) through enrollment in a Medicare+Choice plan 
under this part. 
"(2) TYPES OF MEDICARE+CHOICE PLANS THAT MAY BE AVAIL-
ABLE.—^A Medicare+Choice plan may be any of the following 
types of plans of health insurance: 
"(A) 
COORDINATED 
CARE PLANS.—Coordinated care 
plans which provide health care services, including but 
not limited to health maintenance organization plans (with 
or without point of service options), plans offered by pro-
vider-sponsored 
organizations 
(as 
defined 
in 
section 
1855(d)), and preferred provider organization plans. 
"(B) COMBINATION OF MSA PLAN AND CONTRIBUTIONS 
TO MEDICARE+CHOICE MSA.—^An MSA plan, as defined in 
section 
1859(b)(3), 
and 
a 
contribution 
into 
a 
Medicare+Choice medical savings account (MSA). 
"(C) 
PRIVATE 
FEE-FOR-SERVICE 
PLANS.—A 
Medicare+Choice private fee-for-service plan, as defined 
in section 1859(b)(2). 
"(3) MEDICARE+CHOICE ELIGIBLE INDIVIDUAL.— 
"(A) IN GENERAL.—In this title, subject to subparagraph 
(B), the term 'Medicare+Choice eligible individual' means 
an individual who is entitled to benefits under part A 
and enrolled under part B. 
"(B) SPECIAL RULE FOR END-STAGE RENAL DISEASE.— 
Such term shall not include an individual medically deter-
mined to have end-stage renal disease, except that an 
individual who develops end-stage renal disease while 
enrolled in a Medicare+Choice plan may continue to be 
enrolled in that plan. 
"(b) SPECIAL RULES.— 
"(1) RESIDENCE REQUIREMENT.— 
"(A) IN GENERAL.—Except as the Secretary may other-
wise provide, 
an 
individual 
is 
eligible 
to 
elect 
a 
Medicare+Choice 
plan offered 
by a 
Medicare+Choice 
organization only if the plan serves the geographic area 
in which the individusd resides. 
"(B) 
CONTINUATION 
OF 
ENROLLMENT 
PERMITTED.— 
Pursuant to rules specified by the Secretary, the Secretary 
shall provide that a plan may offer to all individuals resid-
ing in a geographic area the option to continue enrollment 
in the plan, notwithstanding that the individual no longer 
resides in the service area of the plsin, so long as the 
plan provides that individuals exercising this option have, 
as part 
of the basic benefits 
described 
in 
section 
1852(a)(1)(A), reasonable access within that geographic 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 277 
area to the full range of basic benefits, subject to reasonable 
cost sharing liability in obtaining such benefits. 
"(2) 
SPECIAL RULE FOR CERTAIN INDIVIDUALS COVERED 
UNDER FEHBP OR ELIGIBLE FOR VETERANS OR MILITARY HEALTH 
BENEFITS, VETERANS.— 
"(A) FEHBP.—^An individual who is enrolled in a 
health benefit plan under chapter 89 of title 5, United 
States Code, is not eligible to enroll in an MSA plan until 
such time as the Director of the Office of Management 
and Budget certifies to the Secretary that the Office of 
Personnel Management has adopted policies which will 
ensure that the enrollment of such individuals in such 
plans will not result in increased expenditures for the 
Federal Government for health benefit plans under such 
chapter. 
"(B) VA AND DOD.—The Secretary may apply rules 
similar to the rules described in subparagraph (A) in the 
case of individuals who are eligible for health care benefits 
under chapter 55 of title 10, United States Code, or under 
chapter 17 of title 38 of such Code. 
"(3) 
LIMITATION ON ELIGIBILITY OF QUALIFIED MEDICARE 
BENEFICIARIES AND OTHER MEDICAID BENEFICIARIES TO ENROLL 
IN AN MSA PLAN.—An individual who is a qualified medicare 
beneficiary (as defined in section 1905(p)(l)), a qualified dis-
abled and working individual (described in section 1905(s)), 
an individual described in section 1902(a)(10)(E)(iii), or other-
wise entitled to medicare cost-sharing under a State plan under 
title XIX is not eligible to enroll in an MSA plan. 
"(4) 
COVERAGE UNDER MSA PLANS ON A DEMONSTRATION 
BASIS.— 
"(A) IN GENERAL.—An individual is not eligible to enroll 
in an MSA plan under this part— 
"(i) on or after January 1, 2003, unless the enroll-
ment is the continuation of such an enrollment in 
effect as of such date; or 
"(ii) as of any date if the number of such individ-
uals so enrolled as of such date has reached 390,000. 
Under rules established by the Secretary, an individual 
is not eligibly to enroll (or continue enrollment) in an 
MSA plan for a year unless the individual provides assur-
ances satisfactory to the Secretary that the individual will 
reside in the United States for at least 183 days during 
the year. 
"(B) 
EVALUATION.—The 
Secretary 
shall 
regularly 
evaluate the impact of permitting enrollment in MSA plans 
under this part on selection (including adverse selection), 
use of preventive care, access to care, and the financial 
status of the Trust Funds under this title. 
"(C) REPORTS.—The Secretary shall submit to Congress 
periodic reports on the numbers of individuals enrolled 
in such plans and on the evaluation being conducted under 
subparagraph (B). The Secretary shall submit such a 
report, by not later than March 1, 2002, on whether the 
time limitation under subparagraph (A)(i) should be 
extended or removed and whether to change the numerical 
limitation under subparagraph (A)(ii). 
"(c) PROCESS FOR EXERCISING CHOICE.— 
I l l STAT. 278 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(1) IN GENERAL.—^The Secretary shall establish a process 
through which elections described in subsection (a) are made 
and changed, including the form and manner in which such 
elections are made and changed. Such elections shall be made 
or changed only during coverage election periods specified under 
subsection (e) and shall become effective as provided in sub-
section (f). 
"(2) COORDINATION THROUGH MEDICARE+CHOICE ORGANIZA-
TIONS.— 
"(A) ENROLLMENT.—Such process shall permit an 
individual who wishes to elect a Medicare+Choice plan 
offered by a Medicare+Choice organization to make such 
election through the filing of an appropriate election form 
with the organization. 
"(B) DISENROLLMENT.—Such process shall permit an 
individual, who has elected a Medicare+Choice plan offered 
by a Medicare+Choice organization and who wishes to 
terminate such election, to terminate such election through 
the filing of an appropriate election form with the organiza-
tion. 
"(3) DEFAULT.— 
"(A) INITIAL ELECTION.— 
"(i) IN GENERAL.—Subject to clause (ii), an individ-
ual who fails to make an election during an initial 
election period under subsection (e)(1) is deemed to 
have chosen the original medicare fee-for-service pro-
gram option. 
"(ii) SEAMLESS CONTINUATION OF COVERAGE.—The 
Secretary may establish procedures under which an 
individual who is enrolled in a health plain (other them 
Medicare+Choice plan) offered by a Medicare+Choice 
organization at the time of the initial election period 
and who fails to elect to receive coverage other than 
through the organization is deemed to have elected 
the Medicare+Choice plan offered by the organization 
(or, if the organization offers more than one such plan, 
such plan or plans as the Secretary identifies under 
such procedures). 
"(B) CONTINUING PERIODS.—An individual who has 
made (or is deemed to have made) an election under this 
section is considered to have continued to make such elec-
. tion until such time as— 
"(i) the individual changes the election under this 
section, or 
"(ii) the Medicare+Choice plan with respect to 
which such election is in effect is discontinued or, 
subject to subsection (b)(1)(B), no longer serves the 
area in which the individual resides. 
"(d) PROVIDING INFORMATION TO PROMOTE INFORMED CHOICE.— 
"(1) IN GENERAL.—The Secretary shall provide for activities 
under this subsection to broadly disseminate information to 
medicare beneficiaries (and prospective medicare beneficiaries) 
on the coverage options provided under this section in order 
to promote an active, informed selection among such options. 
"(2) PROVISION OF NOTICE.— 
"(A) OPEN SEASON NOTIFICATION.—At lea«^ 15 days 
before the beginning of each annual, coordinated election 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 279 
period (as defined in subsection (e)(3)(B)), the Secretary 
shall mail to each Medicare+Choice eligible individual 
residing in an area the following: 
"(i) GENERAL INFORMATION.—The general informa-
tion described in paragraph (3). 
"(ii) LIST OF PLANS AND COMPARISON OF PLAN 
OPTIONS.—A list identif3dng the Medicare+Choice plans 
that are (or will be) available to residents of the area 
and information described in paragraph (4) concerning 
such plans. Such information shall be presented in 
a comparative form. 
"(iii) 
ADDITIONAL 
INFORMATION.—Any 
other 
information that the Secretary determines will assist 
the individual in making the election under this sec-
tion. 
The mailing of such information shall be coordinated, to 
the extent practicable, with the mailing of any annual 
notice under section 1804. 
"(B) 
NOTIFICATION 
TO 
NEWLY 
ELIGIBLE 
MEDICARE+CHOICE ELIGIBLE INDIVIDUALS.—To t h e extent 
practicable, the Secretary shall, not later than 30 days 
before the beginning of the initial Medicare+Choice enroll-
ment period for an individual described in subsection (e)(1), 
mail to the individual the information described in subpara-
graph (A). 
"(C) FORM.—The information disseminated under this 
paragraph shall be written and formatted using language 
that is easily understandable by medicare beneficiaries. 
"(D) PERIODIC UPDATING.—The information described 
in subparagraph (A) shall be updated on at least an annual 
basis 
to 
reflect 
changes 
in the 
availability of 
Medicare+Choice 
plans 
and 
the 
benefits 
and 
Medicare+Choice monthly basic and supplemental bene-
ficiary premiums for such plans. 
"(3) GENERAL INFORMATION.—General information under 
this paragraph, with respect to coverage under this part during 
a year, shall include the following: 
"(A) BENEFITS UNDER ORIGINAL MEDICARE FEE-FOR-
SERVICE PROGRAM OPTION.—^A general description of the 
benefits covered under the original medicare fee-for-service 
program under parts A and B, including— 
"(i) covered items and services, 
"(ii) beneficiary cost sharing, such as deductibles, 
coinsurance, and copa3nnent amounts, and 
"(iii) any beneficiary liability for balance billing. 
"(B) ELECTION PROCEDURES.—Information and instruc-
tions on how to exercise election options under this section. 
"(C) RIGHTS.—^A general description of procedural 
rights (including grievance and appeals procedures) of bene-
ficiaries under the original medicare fee-for-service pro-
gram and the Medicare+Choice program and the right to 
be protected against discrimination based on health status-
related factors under section 1852(b). 
"(D) 
INFORMATION 
ON 
MEDIGAP 
AND MEDICARE 
SELECT.—^A general description of the benefits, enrollment 
rights, 
and other requirements applicable to medicare 
supplemental policies under section 1882 and provisions 
I l l STAT. 280 
PUBLIC LAW 105-33—AUG. 5, 1997 
relating to medicare select policies described in section 
1882(t). 
"(E) POTENTIAL FOR CONTRACT TERMINATION.—The fact 
that a Medicare+Choice organization may terminate its 
contract, refuse to renew its contract, or reduce the service 
area included in its contract, under this part, and the 
effect of such a termination, nonrenewal, or service area 
reduction may have on individuals enrolled with the 
Medicare+Choice plan under this part. 
"(4) INFORMATION COMPARING PLAN OPTIONS.—Information 
under this paragraph, with respect to a Medicare+Choice plan 
for a year, shall include the following: 
"(A) BENEFITS.—The benefits covered under the plan, 
including the following: 
"(i) Covered items and services beyond those pro-
vided under the original medicare fee-for-service pro-
gram. 
"(ii) Any beneficiary cost sharing, 
"(iii) Any maximum limitations on out-of-pocket 
expenses. 
"(iv) In the case of an MSA plan, differences in 
cost sharing, premiums, and balance billing under such 
a plan compared to under other Medicare+Choice 
plans. 
"(v) In the case of a Medicare+Choice private fee-
for-service plan, differences in cost sharing, premiums, 
and balance billing under such a plan compared to 
under other Medicare+Choice plans. 
"(vi) The extent to which an enroUee may obtain 
benefits through out-of-network health care providers. 
"(vii) The extent to which an enroUee may select 
among in-network providers and the types of providers 
participating in the plan's network. 
"(viii) The organization's coverage of emergency 
and urgently needed care. 
"(B) PREMIUMS.—The Medicare+Choice monthly basic 
beneficiary premium and Medicare+Choice monthly supple-
mental beneficiary premium, if any, for the pl£in or, in 
the case of an MSA plan, the Medicare+Choice monthly 
MSA premium. 
"(C) SERVICE AREA.—The service area of the plan. 
"(D) QUALITY AND PERFORMANCE.—TO the extent avail-
able, plan quality and performance indicators for the bene-
fits under the plan (and how they compare to such indica-
tors under the original medicare fee-for-service program 
under parts A and B in the area involved), including— 
"(i) disenroUment rates for medicare enrollees 
electing to receive benefits through the plan for the 
previous 2 years (excluding disenroUment due to death 
or moving outside the plsin's service area), 
"(ii) information on medicare enroUee satisfaction, 
"(iii) information on health outcomes, and 
"(iv) the recent record regarding compliance of the 
plan with requirements of this part (as determined 
by the Secretary). 
"(E) SUPPLEMENTAL BENEFITS.—Whether the organiza-
tion offering the plan includes mandatory supplemental 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 281 
benefits in its base benefit package or offers optional 
supplemental benefits 
and the terms and 
conditions 
(including premiums) for such coverage. 
"(5) 
MAINTAINING A TOLL-FREE NUMBER AND INTERNET 
SITE.—The Secretary shall maintain a toll-free number for 
inquiries regarding Medicare+Choice options and the operation 
of this part in all areas in which Medicare+Choice plans are 
offered and an Internet site through which individuals may 
electronically 
obtain 
information 
on 
such 
options 
and 
Medicare+Choice plans. 
"(6) USE OF NON-FEDERAL ENTITIES.—The Secretary 
may 
enter into contracts with non-Federal entities to carry out 
activities under this subsection. 
"(7) 
PROVISION 
OF 
INFORMATION.—A 
Medicare+Choice 
organization shall provide the Secretary with such information 
on the organization and each Medicare+Choice plan it offers 
as may be required for the preparation of the information 
referred to in paragraph (2)(A). 
"(e) COVERAGE ELECTION PERIODS.— 
"(1) INITIAL CHOICE UPON ELIGIBILITY TO MAKE ELECTION 
IF MEDICARE+CHOICE PLANS AVAILABLE TO INDIVIDUAL.—IF, AT 
the time an individual first becomes entitled to benefits under 
part A and enrolled under part B, there is one or more 
Medicare+Choice plans offered in the area in which the individ-
ual resides, the individual shall make the election under this 
section during a period specified by the Secretary such that 
if the individual elects a Medicare+Choice plan during the 
period, coverage under the plan becomes effective as of the 
first date on which the individual may receive such coverage. 
"(2) OPEN ENROLLMENT AND DISENROLLMENT OPPORTUNI-
TIES.—Subject to paragraph (5)— 
"(A) 
CONTINUOUS 
OPEN 
ENROLLMENT 
AND 
DISENROLLMENT THROUGH 2001.—At any time during 1998, 
1999, 2000, and 2001, a Medicare+Choice eligible individual 
may change the election under subsection (a)(1). 
"(B) 
CONTINUOUS 
OPEN 
ENROLLMENT 
AND 
DISENROLLMENT FOR FIRST 6 MONTHS DURING 2002.— 
"(i) IN GENERAL.—Subject to clause (ii), at any 
time during the first 6 months of 2002, or, if the 
individual first becomes a Medicare+Choice eligible 
individual during 2002, during the first 6 months dur-
ing 2002 in which the individual is a Medicare+Choice 
eligible individual, a Medicare+Choice eligible individ-
ual may change the election under subsection (a)(1). 
"(ii) LIMITATION OF ONE CHANGE.—An individual 
may exercise the right under clause (i) only once. The 
limitation under this clause shall not apply to changes 
in elections effected during an annual, coordinated elec-
tion period under paragraph (3) or during a special 
enrollment period under the first sentence of paragraph 
(4). 
"(C) 
CONTINUOUS 
OPEN 
ENROLLMENT 
AND 
DISENROLLMENT FOR FIRST 3 MONTHS IN SUBSEQUENT 
YEARS.— 
"(i) IN GENERAL.—Subject to clause (ii), at any 
time during the first 3 months of a year after 2002, 
or, if the individual first becomes a Medicare+Choice 
I l l STAT. 282 
PUBLIC LAW 105-33—AUG. 5, 1997 
eligible individual during a year after 2002, during 
the first 3 months of such year in which the individual 
is 
a 
Medicare+Choice 
eligible 
individual, 
a 
Medicare+Choice eligible individual may change the 
election under subsection (a)(1). 
"(ii) LIMITATION OF ONE CHANGE DURING OPEN 
ENROLLMENT PERIOD EACH YEAR.—An individual may 
exercise the right under clause (i) only once during 
the applicable 3-month period described in such clause 
in each year. The limitation under this clause shall 
not apply to changes in elections effected during an 
annual, coordinated election period under paragraph 
(3) or during a special enrollment period under para-
graph (4). 
"(3) ANNUAL, COORDINATED ELECTION PERIOD.— 
"(A) IN GENERAL.—Subject to paragraph (5), each 
individual who is eligible to make an election under this 
section may change such election during an annual, coordi-
nated election period. 
"(B) ANNUAL, COORDINATED ELECTION PERIOD.—For 
purposes of this section, the term 'annual, coordinated elec-
tion period' means, with respect to a calendar year (begin-
ning with 2000), the month of November before such year. 
"(C) MEDICARE+CHOICE HEALTH INFORMATION FAIRS.— 
In the month of November of each year (beginning with 
1999), in conjunction with the annual coordinated election 
period defined in subparagraph (B), the Secretary shall 
provide for a nationally coordinated educational and public-
ity campaign to inform Medicare+Choice eligible individ-
uals about Medicare+Choice plans and the election process 
provided under this section. 
"(D) SPECIAL INFORMATION CAMPAIGN IN 1998.—During 
November 1998 the Secretary shall provide for an edu-
cational and publicity campaign to inform Medicare+Choice 
eligible 
individuals 
about 
the 
availability 
of 
Medicare+Choice plans, and eligible organizations with 
risk-sharing contracts under section 1876, offered in dif-
ferent areas and the election process provided under this 
section. 
"(4) SPECIAL ELECTION PERIODS.—Effective as of January 
1, 2002, an individual may discontinue an election of a 
Medicare+Choice plan offered by a Medicare+Choice organiza-
tion other than during an annual, coordinated election period 
and make a new election under this section if— 
"(A) the organization's or plan's certification under this 
part has been terminated or the organization has termi-
nated or otherwise discontinued providing the plan in the 
area in which the individual resides; 
"(B) the individual is no longer eligible to elect the 
plan because of a change in the individual's place of resi-
dence or other change in circumstances (specified by the 
Secretary, but not including termination of the individual's 
enrollment on the basis described in clause (i) or (ii) of 
subsection (g)(3)(B)); 
"(C) the individual demonstrates (in accordance with 
guidelines established by the Secretary) that— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 283 
"(i) the organization offering the plan substantially 
violated a material provision of the organization's con-
tract under this part in relation to the individual 
(including the failure to provide an enrollee on a timely 
basis medically necessary care for which benefits are 
available under the plan or the failure to provide such 
covered care in accordance with applicable quality 
standards); or 
"(ii) the organization (or an agent or other entity 
acting on the organization's behalf) materially mis-
represented the plan's provisions in marketing the plan 
to the individual; or 
"(D) the individual meets such other exceptional condi-
tions as the Secretary may provide. 
Effective as of January 1, 2002, an individual who, upon first 
becoming eligible for benefits under part A at age 65, enrolls 
in a Medicare+Choice plan under this part, the individual may 
discontinue the election of such plan, and elect coverage under 
the original fee-for-service plan, at any time during the 12-
month period beginning on the effective date of such enrollment. 
"(5) SPECIAL RULES FOR MSA PLANS.—Notwithstanding the 
preceding provisions of this subsection, an individual— 
"(A) may elect an MSA plan only during— 
"(i) an initial open enrollment period described 
in paragraph (1), 
"(ii) an 
annual, 
coordinated 
election 
period 
described in paragraph (3)(B), or 
"(iii) the month of November 1998; 
"(B) subject to subparagraph (C), may not discontinue 
an election of an MSA plan except during the periods 
described in clause (ii) or (iii) of subparagraph (A) and 
under the first sentence of paragraph (4); and 
"(C) who elects an MSA plan during an annual, coordi-
nated election period, and who never previously had elected 
such a plan, may revoke such election, in a manner deter-
mined by the Secretary, by not later than December 15 
following the date of the election. 
"(6) OPEN ENROLLMENT PERIODS.—Subject to paragraph (5), 
a Medicare+Choice organization— 
"(A) shall accept elections or changes to elections dur-
ing the initial enrollment periods described in paragraph 
(1), during the month of November 1998 and each subse-
quent year (as provided in paragraph (3)), and during spe-
cial election periods described in the first sentence of para-
graph (4); and 
"(B) may accept other changes to elections at such 
other times as the organization provides. 
"(f) 
EFFECTIVENESS OF ELECTIONS AND CHANGES OF ELEC-
TIONS.— 
"(1) DURING INITIAL COVERAGE ELECTION PERIOD.—An elec-
tion of coverage made during the initial coverage election period 
under subsection (e)(1)(A) shall take effect upon the date the 
individual becomes entitled to benefits under part A and 
enrolled under part B, except as the Secretary may provide 
(consistent with section 1838) in order to prevent retroactive 
coverage. 
I l l STAT. 284 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) DURING CONTINUOUS OPEN ENROLLMENT PERIODS.—An 
election or change of coverage made under subsection (e)(2) 
shall take effect with the first day of the first calendar month 
following the date on which the election is made. 
"(3) ANNUAL, COORDINATED ELECTION PERIOD.—An election 
or change of coverage made during an annual, coordinated 
election period (as defined in subsection (e)(3)(B)) in a year 
shall take effect as of the first day of the following year. 
"(4) OTHER PERIODS.—^An election or chsinge of coverage 
made during any other period under subsection (e)(4) shall 
take effect in such manner as the Secretary provides in a 
manner consistent (to the extent practicable) with protecting 
continuity of health benefit coverage. 
"(g) GUARANTEED ISSUE AND RENEWAL.— 
"(1) IN GENERAL.—Except as provided in this subsection, 
a Medicare+Choice organization shall provide that at any time 
during which elections are accepted under this section with 
respect to a Medicare+Choice plan offered by the organization, 
the organization will accept without restrictions individuals 
who are eligible to make such election. 
"(2) 
PRIORITY.—If the Secretary 
determines 
that a 
Medicare+Choice organization, in relation to a Medicare+Choice 
plan it offers, has a capacity limit and the number of 
Medicare+Choice eligible individuals who elect the plan under 
this section exceeds the capacity limit, the organization may 
limit the election of individuals of the plan under this section 
but only if priority in election is provided— 
"(A) first to such individuals as have elected the plan 
at the time of the determination, and 
"(B) then to other such individuals in such a manner 
that does not discriminate, on a basis described in section 
1852(b), among the individuals (who seek to elect the plan). 
The preceding sentence shall not apply if it would result in 
the enrollment of enroUees substantially nonrepresentative, as 
determined in accordance with regulations of the Secretary, 
of the medicare population in the service area of the plan. 
"(3) LIMITATION ON TERMINATION OF ELECTION.— 
"(A) IN GENERAL.—Subject to subparagraph (B), a 
Medicare+Choice organization may not for any reason 
terminate the election of any individual under this section 
for a Medicare+Choice plan it offers. 
"(B) 
BASIS 
FOR TERMINATION 
OF 
ELECTION.—A 
Medicare+Choice organization may terminate an individ-
ual's election under this section with respect to a 
Medicare+Choice plan it offers if— 
"(i) any Medicare+Choice monthly basic and 
supplemental beneficiary premiums required 
with 
respect to such plan are not paid on a timely basis 
(consistent with standards under section 1856 that 
provide for a grace period for late pa3anent of such 
premiums), 
"(ii) the individual has engaged in disruptive 
behavior (as specified in such standards), or 
"(iii) the plan is terminated with respect to all 
individuals under this part in the area in which the 
individual resides. 
"(C) CONSEQUENCE OF TERMINATION.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 285 
"(i) TERMINATIONS FOR CAUSE.—Any individual 
whose election is terminated under clause (i) or (ii) 
of subparagraph (B) is deemed to have elected the 
original 
medicare 
fee-for-service 
program 
option 
described in subsection (a)(1)(A). 
"(ii) 
TERMINATION BASED ON PLAN TERMINATION 
OR SERVICE AREA REDUCTION.—^Any individual whose 
election is terminated under subparagraph (B)(iii) shall 
have a special election period under subsection (e)(4)(A) 
in which to change coverage to coverage under another 
Medicare+Choice plan. Such an individual who fails 
to make an election during such period is deemed 
to have chosen to change coverage to the original medi-
care fee-for-service program option described in sub-
section (a)(1)(A). 
"(D) ORGANIZATION OBLIGATION WITH RESPECT TO ELEC-
TION FORMS.—Pursuant to a contract under section 1857, 
each Medicare+Choice organization receiving an election 
form under subsection (c)(2) shall transmit to the Secretary 
(at such time and in such manner as the Secretary may 
specify) a copy of such form or such other information 
respecting the election as the Secretary may specify. 
"(h) 
APPROVAL OF MARKETING MATERIAL AND APPLICATION 
FORMS.— 
"(1) SUBMISSION.—No marketing material or application 
form may be distributed by a Medicare+Choice organization 
to (or for the use of) Medicare+Choice eligible individuals 
unless— 
"(A) at least 45 days before the date of distribution 
the organization has submitted the material or form to 
the Secretary for review, and 
"(B) the Secretary has not disapproved the distribution 
of such material or form. 
"(2) REVIEW.—The standards established under section 
1856 shall include guidelines for the review of any material 
or form submitted and under such guidelines the Secretary 
shall disapprove (or later require the correction of) such mate-
rial or form if the material or form is materially inaccurate 
or misleading or otherwise makes a material misrepresentation. 
"(3) DEEMED APPROVAL (I-STOP SHOPPING).—In the case of 
material or form that is submitted under paragraph (1)(A) 
to the Secretary or a regional office of the Department of 
Health and Human Services and the Secretary or the office 
has not disapproved the distribution of marketing material 
or 
form 
under 
paragraph 
(1)(B) 
with 
respect 
to 
a 
Medicare+Choice plan in an area, the Secretary is deemed 
not to have disapproved such distribution in all other areas 
covered by the plan and organization except with regard to 
that portion of such material or form that is specific only 
to an area involved. 
"(4) PROHIBITION OF CERTAIN MARKETING PRACTICES.—Each 
Medicare+Choice organization shall conform to fair marketing 
standards, in relation to Medicare+Choice plans offered under 
this part, included in the standards established under section 
1856. Such standards— 
I l l STAT. 286 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 
1395W-22. 
"(A) shall not permit a Medicare+Choice organization 
to provide for cash or other monetary rebates as an induce-
ment for enrollment or otherwise, and 
"(B) 
may 
include 
a 
prohibition 
against 
a 
Medicare+Choice 
organization 
(or agent 
of such 
an 
organization) completing any portion of any election form 
used to carry out elections under this section on behalf 
of any individual, 
"(i) EFFECT OF ELECTION OF MEDICARE+CHOICE PLAN OPTION.— 
"(1) 
PAYMENTS TO ORGANIZATIONS.—Subject to sections 
1852(a)(5), 1853(g), 1853(h), 1886(d)(ll), and 1886(h)(3)(D), pay-
ments under a contract with a Medicare+Choice organization 
under section 1853(a) with respect to an individual electing 
a Medicare+Choice plan offered by the organization shall be 
instead of the amounts which (in the absence of the contract) 
would otherwise be payable under parts A and B for items 
and services furnished to the individual. 
"(2) ONLY ORGANIZATION ENTITLED TO PAYMENT.—Subject 
to sections 1853(e), 1853(g), 1853(h), 1857(f)(2), and 1886(d)(ll), 
and 1886(h)(3)(D), only the Medicare+Choice organization shall 
be entitled to receive payments from the Secretary under this 
title for services furnished to the individual. 
"BENEFITS AND BENEFICIARY PROTECTIONS 
"SEC. 1852. (a) BASIC BENEFITS.— 
"(1) IN GENERAL.—Except as provided in section 1859(b)(3) 
for MSA plans, each Medicare+Choice plan shall provide to 
members enrolled under this part, through providers and other 
persons that meet the applicable requirements of this title 
and part A of title XI— 
"(A) those items and services (other than hospice care) 
for which benefits are available under parts A and B to 
individuals residing in the area served by the plan, and 
"(B) 
additional 
benefits 
required 
under 
section 
1854(f)(1)(A). 
"(2) SATISFACTION OF REQUIREMENT.— 
"(A) IN GENERAL.—^A Medicare+Choice plan (other than 
an MSA plan) offered by a Medicare+Choice organization 
satisfies paragraph (1)(A), with respect to benefits for items 
and services furnished other than through a provider or 
other person that has a contract with the organization 
offering the plan, if the plan provides payment in an 
amount so that— 
"(i) the sum of such payment amount and any 
cost sharing provided for under the plan, is equal to 
at least 
"(ii) the total dollar amount of pajrment for such 
items and services as would otherwise be authorized 
under parts A and B (including any balance billing 
permitted under such parts). 
(B) REFERENCE TO RELATED PROVISIONS.—^For provi-
sion relating to— 
"(i) 
limitations 
on 
balance 
billing 
against 
Medicare+Choice organizations for non-contract provid-
ers, see sections 1852(k) and 1866(a)(l)(0), and 
"(ii) limiting actuarial value of enrollee liability 
for covered benefits, see section 1854(e). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 287 
"(3) SUPPLEMENTAL BENEFITS.— 
"(A) BENEFITS INCLUDED SUBJECT TO SECRETARY'S 
APPROVAL.—Each Medicare+Choice organization may pro-
vide to individuals enrolled under this part, other than 
under an MSA plan, (without affording those individuals 
an option to decline the coverage) supplemental health 
care benefits that the Secretary may approve. The Sec-
retary shall approve any such supplemental benefits unless 
the Secretary determines that including such supplemental 
benefits would substantially discourage enrollment by 
Medicare+Choice eligible individuals with the organization. 
"(B) AT ENROLLEES' OPTION.— 
"(i) IN GENERAL.—Subject 
to clause 
(ii), a 
Medicare+Choice organization may provide to individ-
uals enrolled under this part supplemental health care 
benefits that the individuals may elect, at their option, 
to have covered. 
"(ii) 
SPECIAL 
RULE 
FOR 
MSA 
PLANS.—A 
Medicare+Choice organization may not provide, under 
an MSA plan, supplemental health care benefits that 
cover the deductible described in section 1859(b)(2)(B). 
In applying the previous sentence, health benefits 
described in section 1882(u)(2)(B) shall not be treated 
as covering such deductible. 
"(C) APPLICATION TO MEDICARE+CHOICE PRIVATE FEE-
FOR-SERVICE PLANS.—Nothing in this paragraph shall be 
construed as preventing a Medicare+Choice private fee-
for-service plan firom offering supplemental benefits that 
include payment for some or all of the balance billing 
amounts permitted consistent with section 1852(k) and cov-
erage of additional services that the plan finds to be medi-
cally necessary. 
"(4) ORGANIZATION AS SECONDARY PAYER.—Notwithstanding 
any other provision of law, a Medicare+Choice organization 
may (in the case of the provision of items and services to 
an individual under a Medicare+Choice plan under cir-
cumstances in which payment under this title is made second-
ary pursuant to section 1862(b)(2)) charge or authorize the 
provider of such services to charge, in accordance with the 
charges allowed under a law, plan, or policy described in such 
section— 
"(A) the insurance carrier, employer, or other entity 
which under such law, plan, or policy is to pay for the 
provision of such services, or 
"(B) such individual to the extent that the individual 
has been paid under such law, plan, or policy for such 
services. 
"(5) NATIONAL COVERAGE DETERMINATIONS.—If there is a 
national coverage determination made in the period beginning 
on the date of an announcement under section 1853(b) and 
ending on the date of the next announcement under such sec-
tion and the Secretary projects that the determination will 
result in a significant change in the costs to a Medicare+Choice 
organization of providing the benefits that are the subject of 
such national coverage determination and that such change 
in costs was not incorporated in the determination of the annual 
Medicare+Choice capitation rate under section 1853 included 
I l l STAT. 288 
PUBLIC LAW 105-33—AUG. 5, 1997 
in the announcement made at the beginning of such period, 
then, unless otherwise required by law— 
"(A) such determination shall not apply to contracts 
under this part until the first contract year that begins 
after the end of such period, and 
"(B) if such coverage determination provides for cov-
erage of additional benefits or coverage under additional 
circumstances, section 1851(i)(l) shall not apply to payment 
for such additional benefits or benefits provided under such 
additional circumstances until the first contract year that 
begins after the end of such period. 
"(b) ANTIDISCRIMINATION.— 
"(1) BENEFICIARIES.— 
"(A) IN GENERAL.—A Medicare+Choice organization 
may not deny, limit, or condition the coverage or provision 
of benefits under this part, for individuals permitted to 
be enrolled with the organization under this part, based 
on any health status-related factor described in section 
2702(a)(1) of the Pubhc Health Service Act. 
"(B) CONSTRUCTION.—Subparagraph (A) shall not be 
construed as requiring a Medicare+Choice organization to 
enroll individuals who are determined to have end-stage 
renal 
disease, 
except 
as 
provided 
under 
section 
1851(a)(3)(B). 
"(2) PROVIDERS.—A Medicare+Choice organization shall not 
discriminate with respect to participation, reimbursement, or 
indemnification as to any provider who is acting within the 
scope of the provider's license or certification under applicable 
State law, solely on the basis of such license or certification. 
This paragraph shall not be construed to prohibit a plan from 
including providers only to the extent necessary to meet the 
needs of the plan's enroUees or from establishing any measure 
designed to maintain quality and control costs consistent with 
the responsibilities of the plan. 
"(c) DISCLOSURE REQUIREMENTS.— 
"(1) 
DETAILED 
DESCRIPTION 
OF 
PLAN 
PROVISIONS.—A 
Medicare+Choice organization shall disclose, in clear, accurate, 
and standardized form to each enroUee with a Medicare+Choice 
plan offered by the organization under this part at the time 
of enrollment and at least annually thereafter, the following 
information regarding such plan: 
"(A) SERVICE AREA.—The plan's service area. 
"(B) BENEFITS.—Benefits offered 
under the plan, 
including information described in section 1851(d)(3)(A) and 
exclusions from coverage and, if it is an MSA plan, a 
comparison of benefits under such a plan with benefits 
under other Medicare+Choice plans. 
"(C) ACCESS.—The number, mix, and distribution of 
plan providers, out-of-network coverage (if any) provided 
by the plan, and any point-of-service option (including the 
supplemental premium for such option). 
"(D) OUT-OF-AREA COVERAGE.—Out-of-area coverage 
provided by the plan. 
"(E) EMERGENCY COVERAGE.—Coverage of emergency 
services, including— 
"(i) the appropriate use of emergency services, 
including use of the 911 telephone system or its local 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 289 
equivalent in emergency situations and an explanation 
of what constitutes an emergency situation; 
"(ii) the process and procedures of the plan for 
obtaining emergency services; and 
"(iii) the locations of (I) emergency departments, 
and (II) other settings, in which plan physicians and 
hospitals provide emergency services and post-sta-
bilization care. 
"(F) SUPPLEMENTAL BENEFITS.—Supplemental benefits 
available from the organization offering the plan, includ-
ing— 
"(i) 
whether 
the supplemental 
benefits are 
optional, 
"(ii) the supplemental benefits covered, and 
"(iii) the Medicare+Choice monthly supplemental 
beneficiary premium for the supplemental benefits. 
"(G) PRIOR AUTHORIZATION RULES.—Rules regarding 
prior authorization or other review requirements that could 
result in nonpayment. 
"(H) PLAN GRIEVANCE AND APPEALS PROCEDURES.—All 
plan appeal or grievance rights and procedures. 
"(I) QUALITY ASSURANCE PROGRAM.—A description of 
the organization's quality assurance program under sub-
section (e). 
"(2) 
DISCLOSURE 
UPON 
REQUEST.—Upon request of a 
Medicare+Choice 
eligible 
individual, 
a 
Medicare+Choice 
organization must provide the following information to such 
individual: 
"(A) The general coverage information and general 
comparative plan information made available under clauses 
(i) and (ii) of section 1851(d)(2)(A). 
"(B) Information on procedures used by the organiza-
tion to control utilization of services and expenditures. 
"(C) Information on the number of grievances, redeter-
minations, and appeals and on the disposition in the aggre-
gate of such matters. 
"(D) An overall summary description as to the method 
of compensation of participating physicians. 
"(d) ACCESS TO SERVICES.— 
"(1) IN GENERAL.—^A Medicare+Choice organization offering 
a Medicare+Choice plan may select the providers from whom 
the benefits under the plan are provided so long as— 
"(A) the organization makes such benefits available 
and accessible to each individual electing the plan within 
the plan service area with reasonable promptness and in 
a manner which assures continuity in the provision of 
benefits; 
"(B) when medically necessary the organization makes 
such benefits available and: accessible 24 hours a day and 
7 days a week; 
"(C) the plan provides for reimbursement with respect 
to services which are covered under subparagraphs (A) 
and (B) and which are provided to such an individual 
other than through the organization, if— 
"(i) the services were not emergency services (as 
defined in paragraph (3)), but (I) the services were 
medically necessary and immediately required because 
I l l STAT. 290 
PUBLIC LAW 105-33—AUG. 5, 1997 
of an unforeseen illness, injury, or condition, and (II) 
it was not reasonable given the circumstances to obtain 
the services through the orgsmization, 
"(ii) the services were renal dialysis services and 
were provided other than through the organization 
because the individual was temporarily out of the 
plan's service area, or 
"(iii) the services are maintenance care or post-
stabilization care covered under the guidelines estab-
lished under paragraph (2); 
"(D) the organization provides access to appropriate 
providers, including credentialed specialists, for medically 
necessary treatment and services; and 
"(E) coverage is provided for emergency services (as 
defined in paragraph (3)) without regard to prior authoriza-
tion or the emergency care provider's contractual relation-
ship with the organization. 
"(2) GUIDELINES RESPECTING COORDINATION OF POST-STA-
BILIZATION CARE.—^A Medicare+Choice plan shall comply with 
such guidelines as the Secretary may prescribe relating to 
promoting efficient and timely coordination of appropriate 
maintenance and post-stabilization care of an enroUee after 
the enroUee has been determined to be stable under section 
1867. 
"(3) DEFINITION OF EMERGENCY SERVICES.—In this sub-
section— 
"(A) IN GENERAL.—The term 'emergency services' 
means, with respect to an individual enrolled with an 
organization, covered inpatient and outpatient services 
that— 
"(i) are furnished by a provider that is qualified 
to furnish such services under this title, and 
"(ii) are needed to evaluate or stabilize an emer-
gency medical condition (as defined in subparagraph 
(B)). 
"(B) EMERGENCY MEDICAL CONDITION BASED ON PRU-
DENT LAYPERSON.—The term 'emergency medical condition' 
means a medical condition manifesting itself by acute 
symptoms of sufficient severity (including severe pain) such 
that a prudent layperson, who possesses £in average knowl-
edge of health and medicine, could reasonably expect the 
absence of immediate medical attention to result in— 
"(i) placing the health of the individual (or, with 
respect to a pregnant woman, the health of the woman 
or her unborn child) in serious jeopardy, 
"(ii) serious impairment to bodily functions, or 
"(iii) serious dysfunction of any bodily organ or 
part. 
"(4) 
ASSURING 
ACCESS 
TO 
SERVICES 
IN 
MEDICARE+CHOICE 
PRIVATE 
FEE-FOR-SERVICE 
PLANS.—In 
addition to any other requirements under this part, in 
the case of a Medicare+Choice private fee-for-service plan, 
the organization offering the plan must demonstrate to 
the Secretary that the organization has sufficient number 
and range of health care professionals and providers willing 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 291 
to provide services under the terms of the plan. The Sec-
retary shall find that an organization has met such require-
ment with respect to any category of health care profes-
sional or provider if, with respect to that category of pro-
vider— 
"(A) the plan has established pa3mient rates for 
covered services furnished by that category of provider 
that are not less than the payment rates provided 
for under part A, part B, or both, for such services, 
or 
"(B) the plan has contracts or agreements with 
a sufficient number and range of providers within such 
category to provide covered services under the terms 
of the plan, 
or a combination of both. The previous sentence shall not 
be construed as restricting the persons from whom enrollees 
under such a plan may obtain covered benefits. 
"(e) QUALITY ASSURANCE PROGRAM.— 
"(1) IN GENERAL.—Each Medicare-f-Choice organization 
must have arrangements, consistent with any regulation, for 
an ongoing quality assurance program for health care services 
it provides to individuals enrolled with Medicare-i-Choice plans 
of the organization. 
"(2) ELEMENTS OF PROGRAM.— 
"(A) IN GENERAL.—The quality assurance program of 
an organization with respect to a Medicare+Choice plan 
(other than a Medicare+Choice private fee-for-service plan 
or a non-network MSA plan) it offers shall— 
"(i) stress health outcomes and provide for the 
collection, analysis, and reporting of data (in accord-
ance with a quality measurement system that the Sec-
retary recognizes) that will permit measurement of 
outcomes 
and 
other 
indices 
of the 
quality 
of 
Medicare+Choice plans and organizations; 
"(ii) monitor and evaluate high volume and high 
risk services and the care of acute and chronic condi-
tions; 
"(iii) evaluate the continuity and coordination of 
care that enrollees receive; 
"(iv) be evaluated on an ongoing basis as to its 
effectiveness; 
"(v) include measures of consumer satisfaction; 
"(vi) provide the Secretary with such access to 
information collected as may be appropriate to monitor 
£ind ensure the quality of care provided under this 
part; 
"(vii) provide review by physicians and other 
health care professionals of the process followed in 
the provision of such health care services; 
"(viii) provide for the establishment of written 
protocols for utilization review, based on current stand-
ards of medical practice; 
"(ix) have mechanisms to detect both underutiliza-
tion and overutilization of services; 
"(x) after identifying areas for improvement, estab-
lish or alter practice parameters; 
Ill STAT. 292 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(xi) take action to improve quality and assesses 
the effectiveness of such action through systematic 
foUowup; and 
"(xii) make available information on quality and 
outcomes measures to facilitate beneficiary comparison 
and choice of health coverage options (in such form 
and on such quality and outcomes measures as the 
Secretary determines to be appropriate). 
"(B) ELEMENTS OF PROGRAM FOR ORGANIZATIONS OFFER-
ING MEDICARE+CHOICE PRIVATE FEE-FOR-SERVICE PLANS AND 
NON-NETWORK MSA PLANS.—The quality assurance program 
of £m organization with respect to a Medicare+Choice pri-
vate fee-for-service plan or a non-network MSA plan it 
offers shall— 
"(i) meet the requirements of clauses (i) through 
(vi) of subparagraph (A); 
"(ii) insofar as it provides for the establishment 
of written protocols for utilization review, base such 
protocols on current standards of medical practice; and 
"(iii) have mechanisms to evaluate utilization of 
services and inform providers and enroUees of the 
results of such evaluation. 
"(C) DEFINITION OF NON-NETWORK MSA PLAN.—In this 
subsection, the term 'non-network MSA plan' means an 
MSA plan offered by a Medicare+Choice organization that 
does not provide benefits required to be provided by this 
part, in whole or in part, through a defined set of providers 
under contract, or under another arrangement, with the 
organization. 
"(3) EXTERNAL REVIEW.— 
"(A) IN GENERAL.—Each Medicare+Choice organization 
shall, for each Medicare+Choice plan it operates, have an 
agreement with an independent 
quality review 
and 
improvement organization approved by the Secretary to 
perform functions 
of the type described in 
sections 
1154(a)(4)(B) and 1154(a)(14) with respect to services fur-
nished by Medicare+Choice plans for which payment is 
made under this title. The previous sentence shall not 
apply to a Medicare+Choice private fee-for-service plan or 
a non-network MSA plan that does not employ utilization 
review. 
"(B) NONDUPLICATION OF ACCREDITATION.—Except in 
the case of the review of quality complaints, and consistent 
with subparagraph (C), the Secretary shall ensure that 
the external review activities conducted under subpara-
graph (A) are not duplicative of review activities conducted 
as part of the accreditation process. 
"(C) WAIVER AUTHORITY.—The Secretary may waive 
the requirement described in subparagraph (A) in the case 
of an organization if the Secretary determines that the 
organization has consistently maintained an excellent 
record of quality assurance and compliance with other 
requirements under this part. 
"(4) TREATMENT OF ACCREDITATION.—The Secretary shall 
provide that a Medicare+Choice organization is deemed to meet 
requirements of paragraphs (1) and (2) of this subsection and 
subsection (h) (relating to confidentiality and accuracy of 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 293 
enrollee records) if the organization is accredited (and periodi-
cally reaccredited) by a private organization under a process 
that the Secretary has determined assures that the organiza-
tion, as a condition of accreditation, applies and enforces stand-
ards with respect to the requirements involved that are no 
less stringent than the standards established under section 
1856 to carry out the respective requirements. 
"(f) GRIEVANCE MECHANISM.—Each Medicare+Choice organiza-
tion must provide meaningful procedures for hearing and resolving 
grievances between the organization (including any entity or 
individual through which the organization provides health care 
services) and enrollees with Medicare+Choice plans of the organiza-
tion under this part. 
"(g) 
COVERAGE 
DETERMINATIONS, 
RECONSIDERATIONS, AND 
APPEALS.— 
"(1) DETERMINATIONS BY ORGANIZATION.— 
"(A) IN GENERAL.—^A Medicare+Choice organization 
shall have a procedure for making determinations regard-
ing whether an individual enrolled with the plan of the 
organization under this part is entitled to receive a health 
service under this section and the amount (if any) that 
the individual is required to pay with respect to such 
service. Subject to paragraph (3), such procedures shall 
provide for such determination to be made on a timely 
basis. 
"(B) EXPLANATION OF DETERMINATION.—Such a deter-
mination that denies coverage, in whole in part, shall be 
in writing and shall include a statement in understandable 
language of the reasons for the denial and a description 
of the reconsideration and appeals processes. 
"(2) RECONSIDERATIONS.— 
"(A) IN GENERAL.—The organization shall provide for 
reconsideration of a determination described in paragraph 
(1)(B) upon 
request by the enrollee 
involved. TTie 
reconsideration shall be within a time period specified by 
the Secretary, but shall be made, subject to paragraph 
(3), not later than 60 days after the date of the receipt 
of the request for reconsideration. 
"(B) PHYSICIAN DECISION ON CERTAIN RECONSIDER-
ATIONS.—A reconsideration relating to a determination to 
deny coverage based on a lack of medical necessity shall 
be made only by a physician with appropriate expertise 
in the field of me^^icine which necessitates treatment who 
is other than a physician involved in the initial determina-
tion. 
"(3) EXPEDITED DETERMINATIONS AND RECONSIDERATIONS.— 
"(A) RECEIPT OF REQUESTS.— 
"(i) 
ENROLLEE 
REQUESTS.—An 
enrollee 
in 
a 
Medicare+Choice plan may request, either in writing 
or orally, an expedited determination under paragraph 
(1) or an expedited reconsideration under paragraph 
(2) by the Medicare+Choice organization. 
"(ii) PHYSICIAN REQUESTS . ^ A physician, regardless 
whether the physician is affiliated with the organiza-
tion or not, may request, either in writing or orally, 
such an expedited determination or reconsideration. 
"(B) ORGANIZATION PROCEDURES.— 
I l l STAT. 294 
PUBLIC LAW 105-33—AUG. 5, 1997 
Contracts. 
"(i) IN GENERAL.—The Medicare+Choice organiza-
tion shall maintain procedures for expediting organiza-
tion determinations and reconsiderations when, upon 
request of an enroUee, the organization determines 
that the application of the normal time frame for mak-
ing a determination (or a reconsideration involving 
a determination) could seriously jeopardize the life or 
health of the enroUee or the enroUee's ability to regain 
maximum function. 
"(ii) 
EXPEDITION 
REQUIRED 
FOR 
PHYSICIAN 
REQUESTS.—In the case of a request for an expedited 
determination or reconsideration made under subpara-
graph (A)(ii), the organization shall expedite the deter-
mination or reconsideration if the request indicates 
that the application of the normal time frame for mak-
ing a determination (or a reconsideration involving 
a determination) could seriously jeopardize the life or 
health of the enrollee or the enrollee's ability to regain 
maximum function 
"(iii) TIMELY RESPONSE.—In cases described in 
clauses (i) and (ii), the organization shall notify the 
enrollee (and the physician involved, as appropriate) 
of the determination or reconsideration under time 
limitations established by the Secretary, but not later 
than 72 hours of the time of receipt of the request 
for the determination or reconsideration (or receipt 
of the information necessary to make the determination 
or reconsideration), or such longer period as the Sec-
retary may permit in specified cases. 
"(4) 
INDEPENDENT 
REVIEW 
OF 
CERTAIN 
COVERAGE 
DENIALS.—The Secretary shall contract with an independent, 
outside entity to review and resolve in a timely manner 
reconsiderations that affirm denial of coverage, in whole or 
in part. 
"(5) APPEALS.—^An enrollee with a Medicare+Choice plan 
of a Medicare+Choice organization under this part who is 
dissatisfied by reason of the enrollee's failure to receive any 
health service to which the enrollee believes the enrollee is 
entitled and at no greater charge than the enrollee believes 
the enrollee is required to pay is entitled, if the amount in 
controversy is $100 or more, to a hearing before the Secretary 
to the same extent as is provided in section 205(b), and in 
any such hearing the Secretary shall make the organization 
a party. If the amount in controversy is $1,000 or more, the 
individual or organization shall, upon notif5dng the other party, 
be entitled to judicial review of the Secreta^s final decision 
as provided in section 205(g), and both the individual and 
the organization shall be entitled to be parties to that judicial 
review. In applying subsections (b) and (g) of section 205 as 
provided in this paragraph, £ind in applying section 205(1) there-
to, any reference therein to the Commissioner of Social Security 
or the Social Security Administration shall be considered a 
reference to the Secretary or the Department of Health and 
Human Services, respectively. 
"(h) CONFIDENTIALITY AND ACCURACY OF ENROLLEE RECORDS.— 
Insofar as a Medicare+Choice organization maintains medical 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 295 
records or other health information regarding enrollees under this 
part, the Medicare+Choice organization shall establish procedures— 
"(1) to safeguard the privacy of any individually identifiable 
enroUee information; 
"(2) to maintain such records and information in a mginner 
that is accurate and timely, and 
"(3) to assure timely access of enrollees to such records 
and information. 
"(i) 
INFORMATION 
ON 
ADVANCE 
DIRECTIVES.—Each 
Medicare+Choice organization shall meet the requirement of section 
1866(f) (relating to maintaining written policies and procedures 
respecting advance directives). 
"(j) RULES REGARDING PROVIDER PARTICIPATION.— 
"(1) PROCEDURES.—Insofar as a Medicare+Choice organiza-
tion offers benefits under a Medicare+Choice plan through 
agreements with physicians, the organization shall establish 
reasonable procedures relating to the participation (under an 
agreement between a physician and the organization) of physi-
ci£ins under such a plan. Such procedures shall include— 
"(A) providing notice of the rules regarding participa-
tion, 
"(B) providing written notice of participation decisions 
that are adverse to physicians, and 
"(C) providing a process within the organization for 
appealing such adverse decisions, including the presen-
tation of information and views of the physicisui regarding 
such decision. 
"(2) 
CONSULTATION 
IN 
MEDICAL 
POLICIES.—A 
Medicare+Choice organization shall consult with physicians 
who have entered into participation agreements with the 
organization regarding the organization's medical policy, qual-
ity, and medical management procedures. 
"(3) PROHIBITING INTERFERENCE WITH PROVIDER ADVICE TO 
ENROLLEES.— 
"(A) IN GENERAL.—Subject to subparagraphs (B) and 
(C), a Medicare+Choice organization (in relation to an 
individual enrolled under a Medicare+Choice plan offered 
by the organization under this part) shall not prohibit 
or otherwise restrict a covered health care professional 
(as defined in subparagraph (D)) fi-om advising such an 
individual who is a patient of the professional about the 
health status of the individual or medical care or treatment 
for the individual's condition or disease, regardless of 
whether benefits for such care or treatment are provided 
under the plan, if the professional is acting within the 
lawful scope of practice. 
"(B) 
CONSCIENCE 
PROTECTION.—Subparagraph 
(A) 
shall not be construed as requiring a Medicare+Choice 
plan to provide, reimburse for, or provide coverage of a 
counseling or referral service if the Medicare+Choice 
organization offering the plan— 
"(i) objects to the provision of such service on moral 
or religious grounds; and 
"(ii) in the manner and through the written 
instrumentalities such Medicare+Choice organization 
deems appropriate, makes available information on its 
policies regarding such service to prospective enrollees 
I l l STAT. 296 
PUBLIC LAW 105-33—AUG. 5, 1997 
before or during enrollment and to enrollees within 
90 days after the date that the organization or plan 
adopts a change in policy regarding such a counseling 
or referral service. 
"(C) CONSTRUCTION.—Nothing in subparagraph (B) 
shall be construed to affect disclosure requirements under 
State law or under the Employee Retirement Income Secu-
rity Act of 1974. 
"(D) HEALTH CARE PROFESSIONAL DEFINED.—For pur-
poses of this paragraph, the term 'health care professional' 
means a physician (as defined in section 186l(r)) or other 
health care professional if coverage for the professional's 
services is provided under the Medicare+Choice plan for 
the services of the professional. Such term includes a podia-
trist, optometrist, chiropractor, psychologist, dentist, physi-
cian assistant, physical or occupational therapist and ther-
apy assistant, speech-language pathologist, audiologist, reg-
istered or licensed practical nurse (including nurse practi-
tioner, clinical nurse specialist, certified registered nurse 
anesthetist, and certified nurse-midwife), licensed certified 
social worker, registered respiratory therapist, and certified 
respiratory therapy technician. 
"(4) LIMITATIONS ON PHYSICIAN INCENTIVE PLANS.— 
"(A) IN GENERAL.—No Medicare-i-Choice organization 
may operate any physician incentive plan (as defined in 
subparagraph (B)) unless the following requirements are 
met: 
"(i) No specific pa5nnent is made directly or 
indirectly under the plan to a physician or physician 
group as an inducement to reduce or limit medically 
necessary services provided with respect to a specific 
individual enrolled with the orgsinization. 
"(ii) If the plan places a physician or physician 
group at substantial financial risk (as determined by 
the Secretary) for services not provided by the physi-
cian or physician group, the organization— 
"(I) provides stop-loss protection for the physi-
cian or group that is adequate and appropriate, 
based on standards developed by the Secretary 
that take into account the number of physicians 
placed at such substantial financial risk in the 
group or under the plan and the number of individ-
uals enrolled with the organization who receive 
services from the physician or group, and 
"(II) conducts periodic surveys of both individ-
uals enrolled and individuals previously enrolled 
with the organization to determine the degree of 
access of such individuals to services provided by 
the organization and satisfaction with the quality 
of such services. 
"(iii) The organization provides the Secretary with 
descriptive information regarding the plan, sufficient 
to permit the Secretary to determine whether the plan 
is in compliance with the requirements of this subpara-
graph. 
"(B) PHYSICIAN INCENTIVE PLAN DEFINED.—In this 
paragraph, the term 'physician incentive plan' means any 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 297 
compensation arrangement between a Medicare+Choice 
organization and a physician or physician group that may 
directly or indirectly have the effect of reducing or limiting 
services provided with respect to individuals enrolled with 
the organization iinder this part. 
"(5) 
LIMITATION 
ON 
PROVIDER 
INDEMNIFICATION.—A 
Medicare+Choice organization may not provide (directly or 
indirectly) for a health care professional, provider of services, 
or other entity providing health care services (or group of 
such professionals, providers, or entities) to indemnify the 
organization against any liability resulting from a civil action 
brought for any damage caused to an enrollee with a 
Medicare+Choice plan of the organization under this part by 
the organization's denial of medically necessary care. 
"(6) 
SPECIAL RULES FOR MEDICARE+CHOICE PRIVATE FEE-
FOR-SERVICE PLANS.—For purposes of applying this part (includ-
ing subsection (k)(l)) and section 1866(a)(l)(0), a hospital (or 
other provider of services), a physician or other health care 
professional, or other entity furnishing health care services 
is treated as having an agreement or contract in effect with 
a Medicare+Choice organization (with respect to an individual 
enrolled in a Medicare+Choice private fee-for-service plan it 
offers), if— 
"(A) the provider, professional, or other entity furnishes 
services that are covered under the plan to such an enrollee; 
and 
"(B) before providing such services, the provider, 
professional, or other entity — 
"(i) has been informed of the individual's enroll-
ment under the plan, and 
"(ii) either— 
"(I) has been informed of the terms and condi-
tions of payment for such services under the plan, 
or 
"(II) is given a reasonable opportunity to 
obtain information concerning such terms and 
conditions, 
in a manner reasonably designed to effect informed 
agreement by a provider. 
The previous sentence shall only apply in the absence of an 
explicit agreement between such a provider, professional, or 
other entity and the Medicare+Choice organization, 
"(k) TREATMENT OF SERVICES FURNISHED BY CERTAIN PROVID-
ERS.— 
"(1) IN GENERAL.—Except as provided in paragraph (2), 
a physician or other entity (other than a provider of services) 
that does not have a contract establishing payment amounts 
for services furnished to an individual enrolled under this part 
with a Medicare+Choice organization described in section 
1851(a)(2)(A) shall accept as payment in full for covered services 
under this title that are furnished to such an individual the 
amounts that the physician or other entity could collect if 
the individual were not so enrolled. Any penalty or other provi-
sion of law that applies to such a payment with respect to 
an individual entitled to benefits under this title (but not 
enrolled with a Medicare+Choice organization under this part) 
also applies with respect to an individual so enrolled. 
39-194 O - 97 - 11: QL 3 Part 1 
I l l STAT. 298 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) APPLICATION TO MEDICARE+CHOICE PRIVATE FEE-FOR-
SERVICE PLANS.— 
"(A) BALANCE BILLING LIMITS UNDER MEDICARE+CHOICE 
PRIVATE FEE-FOR-SERVICE PLANS IN CASE OF CONTRACT 
PROVIDERS.— 
"(i) IN GENERAL.—In the case of an individual 
enrolled in a Medicare+Choice private fee-for-service 
plan under this part, a physician, provider of services, 
or other entity that has a contract (including through 
the operation of subsection (j)(6)) establishing a pay-
ment rate for services furnished to the enrollee shall 
accept as payment in full for covered services under 
this title that are furnished to such an individual an 
amount not to exceed (including any deductibles, 
coinsurance, copayments, or balance billing otherwise 
permitted under the plan) an amount equal to 115 
percent of such payment rate. 
"(ii) 
PROCEDURES 
TO 
ENFORCE 
LIMITS.—The 
Medicare+Choice organization that offers such a plan 
shall establish procedures, similar to the procedures 
described in section 1848(g)(1)(A), in order to carry 
out the previous sentence. 
"(iii) 
ASSURING 
ENFORCEMENT.—If 
the 
Medicare+Choice organization fails to establish and 
enforce procedures required under clause (ii), the 
organization is subject to intermediate sanctions under 
section 1857(g). 
"(B) ENROLLEE LIABILITY FOR NONCONTRACT PROVID-
ERS.—For provision— 
"(i) establishing minimum payment rate in the 
case of noncontract providers under a Medicare+Choice 
private fee-for-service plan, see section 1852(a)(2); or 
"(ii) limiting enrollee liability in the case of covered 
services furnished by such providers, see paragraph 
(1) and section 1866(a)(l)(0). 
"(C) INFORMATION ON BENEFICIARY LIABILITY.— 
"(i) IN GENERAL.—Each Medicare+Choice organiza-
tion that offers a Medicare+Choice private fee-for-serv-
ice plan shall provide that enroUees under the plan 
who are furnished services for which pajmtient is sought 
under the plan are provided an appropriate explanation 
of benefits (consistent with that provided under parts 
A and B and, if applicable, under medicare supple-
mental policies) that includes a clear statement of the 
amount of the enrollee's liability (including any liability 
for balance billing consistent with this subsection) with 
respect to payments for such services. 
"(ii) 
ADVANCE 
NOTICE 
BEFORE 
RECEIPT 
OF 
INPATIENT HOSPITAL SERVICES AND CERTAIN OTHER 
SERVICES.—In addition, such organization shall, in its 
terms and conditions of payments to hospitals for 
inpatient hospital services and for other services identi-
fied by the Secretary for which the amount of the 
balancing billing under subparagraph (A) could be 
substantial, require the hospital to provide to the 
enrollee, before furnishing such services and if the 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 299 
hospital imposes balance billing under subparagraph 
(A)-
"(I) notice of the fact that balance billing is 
permitted under such subparagraph for such serv-
ices, and 
"(11) a good faith estimate of the likely amount 
of such balance billing (if any), with respect to 
such services, based upon the presenting condition 
of theenrollee. 
"PAYMENTS TO MEDICARE+CHOICE ORGANIZATIONS 
*SEC. 1853. (a) PAYMENTS TO ORGANIZATIONS.— 
42 use 
"(1) MONTHLY PAYMENTS.— 
i395w-23. 
"(A) IN GENERAL.—Under a contract under section 1857 
and subject to subsections (e) and (f) and section 1859(e)(4), 
the Secretary shall make monthly payments under this 
section in advance to each Medicare+Choice organization, 
with respect to coverage of an individual under this part 
in a Medicare+Choice payment area for a month, in an 
amount equal to Vi2 of the annual Medicare+Choice capita-
tion rate (as calculated under subsection (c)) with respect 
to that individual for that area, adjusted for such risk 
factors as age, disability status, gender, institutional status, 
and such other factors as the Secretary determines to be 
appropriate, so as to ensure actuarial equivalence. The 
Secretary may add to, modify, or substitute for such factors, 
if such changes will improve the determination of actuarial 
equivalence. 
"(B) SPECIAL RULE FOR END-STAGE RENAL DISEASE.— 
The Secretary shall establish separate rates of pa3nnent 
to a Medicare+Choice organization with respect to classes 
of individuals determined to have end-stage renal disease 
and enrolled in a Medicare+Choice plan of the organization. 
Such rates of pa3rment shall be actuarially equivalent to 
rates paid to other enrollees in the Medicare+Choice pay-
ment area (or such other area as specified by the Secretary). 
In accordance with regulations, the Secretary shall provide 
for the application of the seventh sentence of section 
1881(b)(7) to pa3nnents under this section covering the 
provision of renal dialysis treatment in the same manner 
as such sentence applies to composite rate payments 
described in such sentence. 
"(2) ADJUSTMENT TO REFLECT NUMBER OF ENROLLEES.— 
"(A) IN GENERAL.—^The amount of pajmient under this 
subsection may be retroactively adjusted to take into 
account any difference between the actual number of 
individuals enrolled with an organization under this part 
and the number of such individuals estimated to be so 
enrolled in determining the amount of the advance pay-
ment. 
"(B) SPECL^L RULE FOR CERTAIN ENROLLEES.— 
"(i) IN GENERAL.—Subject to clause (ii), the Sec-
retary may make retroactive 
adjustments 
under 
subparagraph (A) to take into account individuals 
enrolled during the period beginning on the date on 
which the individual enrolls with a Medicare+Choice 
organization under a plan operated, sponsored, or 
m STAT. 300 
PUBLIC LAW 105-33—AUG. 5, 1997 
^ 
contributed to by the individual's employer or former 
employer (or the employer or former employer of the 
individual's spouse) and ending on the date on which 
the individual is enrolled in the organization under 
this part, except that for purposes of making such 
retroactive adjustments under this subparagraph, such 
period may not exceed 90 days. 
"(ii) EXCEPTION.—No adjustment may be made 
under clause (i) with respect to any individual who 
does not certify that the organization provided the 
individual with the disclosure statement described in 
section 1852(c) at the time the individual enrolled with 
the organization. 
"(3) ESTABLISHMENT OF RISK ADJUSTMENT FACTORS.— 
"(A) REPORT.—The Secretary shall develop, and submit 
to Congress by not later than March 1, 1999, a report 
on the method of risk adjustment of payment rates under 
this section, to be implemented under subparagraph (C), 
that accounts for variations in per capita costs based on 
health status. Such report shall include an evaluation of 
such method by an outside, independent actuary of the 
actuarial soundness of the proposal. 
"(B) DATA COLLECTION.—In order to carry out this 
paragraph, the Secretary shall require Medicare+Choice 
organizations (and eligible organizations with risk-sharing 
contracts under section 1876) to submit data regarding 
inpatient hospital services for periods beginning on or after 
July 1, 1997, and data regarding other services and other 
information as the Secretary deems necessary for periods 
beginning on or after July 1, 1998. The Secretary may 
not require an organization to submit such data before 
January 1,1998. 
"(C) INITIAL IMPLEMENTATION.—The Secretary shall 
first provide for implementation of a risk adjustment meth-
odology that accounts for variations in per capita costs 
based on health status and other demographic factors for 
payments by no later than January 1, 2000. 
"(D) UNIFORM APPLICATION TO ALL TYPES OF PLANS.— 
Subject to section 1859(e)(4), the methodology shall be 
applied uniformly without regard to the type of plan. 
"(b) ANNUAL ANNOUNCEMENT OF PAYMENT RATES.— 
"(1) 
ANNUAL 
ANNOUNCEMENT.—The 
Secretary 
shall 
annually determine, and shall announce (in a manner intended 
to provide notice to interested parties) not later than March 
1 before the calendar year concerned— 
"(A) the annual Medicare-i-Choice capitation rate for 
each Medicare+Choice payment area for the year, and 
"(B) the risk and other factors to be used in adjusting 
such rates under subsection (a)(1)(A) for payments for 
months in that year. 
"(2) ADVANCE NOTICE OF METHODOLOGICAL CHANGES.—At 
least 45 days before making the announcement under para-
graph (1) for a year, the Secretary shall provide for notice 
to Medicare+Choice organizations of proposed changes to be 
made in the methodology from the methodology and assump-
tions used in the previous announcement and shall provide 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 301 
such organizations an opportunity to comment on such proposed 
changes. 
"(3) EXPLANATION OF ASSUMPTIONS.—In each announce-
ment made under paragraph (1), the Secretary shall include 
an explanation of the assumptions and changes in methodology 
used in the announcement 
in sufficient 
detail so that 
Medicare+Choice organizations can compute monthly adjusted 
Medicare+Choice capitation rates for individuals in each 
Medicare+Choice payment area which is in whole or in part 
within the service area of such an organization. 
"(c) CALCULATION OF ANNUAL MEDICARE+CHOICE CAPITATION 
RATES.— 
"(1) IN GENERAL.—For purposes of this part, subject to 
paragraphs (6)(C) and (7), each annual Medicare+Choice capita-
tion rate, for a Medicare+Choice pa3mient area for a contract 
year consisting of a calendar year, is equal to the largest 
of the amounts specified in the following subparagraph (A), 
(B), or (C): 
"(A) BLENDED CAPITATION RATE.—The sum 
of— 
"(i) the area-specific percentage (as specified under 
paragraph (2) for the year) of the annual area-specific 
Medicare+Choice 
capitation 
rate 
for 
the 
Medicare+Choice pajmient area, as determined under 
paragraph (3) for the year, and 
"(ii) the national percentage (as specified under 
paragraph (2) for the year) of the input-price-adjusted 
annual national Medicare+Choice capitation rate, as 
determined under paragraph (4) for the year, 
multiplied by the budget neutrality adjustment 
factor 
determined under paragraph (5). 
"(B) MINIMUM AMOUNT.—12 multiplied by the following 
amount: 
"(i) For 1998, $367 (but not to exceed, in the case 
of an area outside the 50 States and the District of 
Columbia, 150 percent of the annual per capita rate 
of pa5anent for 
1997 determined 
under 
section 
1876(a)(1)(C) for the area). 
"(ii) For a succeeding year, the minimum amount 
specified in this clause (or clause (i)) for the preceding 
year 
increased 
by 
the 
national 
per 
capita 
Medicare+Choice growth percentage, described in para-
graph (6)(A) for that succeeding year. 
"(C) MINIMUM PERCENTAGE INCREASE.— 
"(i) For 1998, 102 percent of the annual per capita 
rate of pa3rment for 1997 determined under section 
1876(a)(1)(C) for the Medicare+Choice payment area, 
"(ii) For a subsequent year, 102 percent of the 
annual Medicare+Choice capitation rate under this 
paragraph for the area for the previous year. 
"(2) AREA-SPECIFIC AND NATIONAL PERCENTAGES.—For pur-
poses of paragraph (1)(A)— 
"(A) for 1998, the 'area-specific percentage' is 90 per-
cent and the 'national percentage' is 10 percent, 
"(B) for 1999, the 'area-specific percentage' is 82 per-
cent and the 'national percentage' is 18 percent, 
"(C) for 2000, the 'area-specific percentage' is 74 per-
cent and the 'national percentage' is 26 percent, 
I l l STAT. 302 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(D) for 2001, the 'area-specific percentage' is 66 per-
cent and the 'national percentage' is 34 percent, 
"(E) for 2002, the 'area-specific percentage' is 58 per-
cent and the 'national percentage' is 42 percent, and 
"(F) for a year after 2002, the 'area-specific percentage' 
is 50 percent and the 'national percentage' is 50 percent. 
"(3) ANNUAL AREA-SPECIFIC MEDICARE+CHOICE CAPITATION 
RATE.— 
"(A) IN GENERAL.—For purposes of paragraph (1)(A), 
subject to subparagraph (B), the annual 
area-specific 
Medicare+Choice capitation rate for a Medicare+Choice 
pajnnent area— 
"(i) for 1998 is, subject to subparagraph (D), the 
annual per capita rate of pa5anent for 1997 determined 
under section 1876(a)(1)(C) for the area, increased by 
the national per capita 
Medicare-i-Choice growth 
percentage for 1998 (described in paragraph (6)(A)); 
or 
"(ii) for a subsequent year is the annual area-
specific Medicare+Choice capitation rate for the pre-
vious year determined under this paragraph for the 
area, 
increased 
by the 
national 
per 
capita 
Medicare+Choice growth percentage for such subse-
quent year. 
"(B) REMOVAL OF MEDICAL EDUCATION FROM CALCULA-
TION OF ADJUSTED AVERAGE PER CAPITA COST.— 
"(i) IN GENERAL.—In determining the area-specific 
Medicare+Choice capitation rate under subparagraph 
(A) for a year (beginning with 1998), the annual per 
capita rate of payment for 1997 determined under sec-
tion 1876(a)(1)(C) shall be adjusted to exclude from 
the rate the applicable percent (specified in clause 
(ii)) of the payment adjustments described in subpara-
graph (C). 
"(ii) APPLICABLE PERCENT.;—For purposes of clause 
(i), the applicable percent for— 
"(I) 1998 is 20 percent, 
"(II) 1999 is 40 percent, 
"(III) 2000 is 60 percent, 
"(IV) 2001 is 80 percent, and 
"(V) a succeeding year is 100 percent. 
"(C) PAYMENT ADJUSTMENT.— 
"(i) IN GENERAL.—Subject to clause (ii), the pay-
ment adjustments described in this subparagraph are 
payment adjustments which the Secretary estimates 
were payable during 1997— 
"(I) for the indirect costs of medical education 
under section 1886(d)(5)(B), and 
"(II) for direct graduate medical education 
costs under section 1886(h). 
"(ii) TREATMENT OF PAYMENTS COVERED UNDER 
STATE 
HOSPITAL 
REIMBURSEMENT SYSTEM.—TO 
the 
extent that the Secretary estimates that an annual 
per capita rate of payment for 1997 described in clause 
(i) reflects payments to hospitals reimbursed under 
section 1814(b)(3), the Secretary shall estimate a pay-
ment adjustment that is comparable to the payment 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 303 
adjustment that would have been made under clause 
(i) if the hospitals had not been reimbursed under 
such section. 
"(D) TREATMENT OF AREAS WITH HIGHLY VARIABLE PAY-
MENT RATES.—In the case of a Medicare+Choice payment 
area for which the annual per capita rate of payment 
determined under section 1876(a)(1)(C) for 1997 varies by 
more than 20 percent from such rate for 1996, for purposes 
of this subsection the Secretary may substitute for such 
rate for 1997 a rate that is more representative of the 
costs of the enroUees in the area. 
"(4) 
INPUT-PRICE-ADJUSTED 
ANNUAL 
NATIONAL 
MEDICARE+CHOICE CAPITATION RATE.— 
"(A) IN GENERAL.—For purposes of paragraph (1)(A), 
the input-price-adjusted annual national Medicare+Choice 
capitation rate for a Medicare+Choice payment area for 
a year is equal to the sum, for all the types of medicare 
services (as classified by the Secretary), of the product 
(for each such type of service) o
f
— 
"(i) 
the 
national 
standardized 
annual 
Medicare+Choice capitation rate (determined under 
subparagraph (B)) for the year, 
"(ii) the proportion of such rate for the year which 
is attributable to such type of services, and 
"(iii) an index that reflects (for that year and that 
type of services) the relative input price of such services 
in the area compared to the national average input 
price of such services. 
In applying clause (iii), the Secretary may, subject to 
subparagraph (C), apply those indices under this title that 
are used in applying (or updating) national payment rates 
for specific areas and localities. 
"(B) 
NATIONAL 
STANDARDIZED 
ANNUAL 
MEDICARE+CHOICE CAPITATION RATE.—In Subparagraph 
(A)(i), the 'national standardized annual Medicare+Choice 
capitation rate' for a year is equal to— 
"(i) the sum (for all Medicare+Choice payment 
areas) of the product o
f
— 
"(I) the annual area-specific Medicare+Choice 
capitation rate for that year for the area under 
paragraph (3), and 
"(II) the average number of medicare bene-
ficiaries residing in that area in the year, multi-
plied by the average of the risk factor weights 
used to adjust payments under subsection (a)(1)(A) 
for such beneficiaries in such area; divided by 
"(ii) the sum of the products described in clause 
(i)(II) for all areas for that year. 
"(C) SPECIAL RULES FOR 1998.—In applying this para-
graph for 1998— 
"(i) medicare services shall be divided into 2 types 
of services: part A services and part B services; 
"(ii) the proportions described in subparagraph 
(A)(ii)-
"(I) for part A services shall be the ratio 
(expressed as a percentage) of the national average 
£uinual per capita rate of payment for part A for 
I l l STAT. 304 
PUBLIC LAW 105-33—AUG. 5, 1997 
1997 to the total national average annual per cap-
ita rate of payment for parts A and B for 1997, 
and 
"(II) for part B services shall be 100 percent 
minus the ratio described in subclause (I); 
"(iii) for part A services, 70 percent of payments 
attributable to such services shall be adjusted by the 
index used under section 1886(d)(3)(E) to adjust pay-
ment rates for relative hospital wage levels for hos-
pitals located in the payment area involved; 
"(iv) for part B services— 
"(I) 66 percent of pa5anents attributable to 
such services shall be adjusted by the index of 
the geographic area factors under section 1848(e) 
used to adjust pa5anent rates for physicians' serv-
ices furnished in the payment area, and 
"(II) of the remaining 34 percent of the amount 
of such payments, 40 percent shall be adjusted 
by the index described in clause (iii); and 
"(v) the index values shall be computed based only 
on the beneficiary population who are 65 years of age 
or older and who are not determined to have end 
stage renal disease. 
The Secretary may continue to apply the rules described 
in this subparagraph (or similar rules) for 1999. 
"(5) PAYMENT ADJUSTMENT BUDGET NEUTRALITY FACTOR.— 
For purposes of paragraph (1)(A), for each year, the Secretary 
shall determine a budget neutrality adjustment factor so that 
the aggregate of the payments under this part shall equal 
the aggregate payments that would have been made under 
this part inpayment were based entirely on area-specific capita-
tion rates. 
"(6) 
NATIONAL PER CAPITA 
MEDICARE+CHOICE 
GROWTH 
PERCENTAGE DEFINED.— 
"(A) IN GENERAL.—In this part, the 'national per capita 
Medicare+Choice growth percentage' for a year is the 
percentage determined by the Secretary, by March 1st 
before the beginning of the year involved, to reflect the 
Secretary's estimate of the projected per capita rate of 
growth in expenditures under this title for an individual 
entitled to benefits under part A and enrolled under part 
B, reduced by the number of percentage points specified 
in subparagraph (B) for the year. Separate determinations 
may be made for aged enrollees, disabled enroUees, and 
enroUees with end-stage renal disease. 
"(B) ADJUSTMENT.—The number of percentage points 
specified in this subparagraph is— 
"(i) for 1998, 0.8 percentage points, 
"(ii) for 1999, 0.5 percentage points, 
"(iii) for 2000, 0.5 percentage points, 
"(iv) for 2001, 0.5 percentage points, 
"(v) for 2002, 0.5 percentage points, and 
"(vi) for a year after 2002, 0 percentage points. 
"(C) ADJUSTMENT FOR OVER OR UNDER PROJECTION OF 
NATIONAL PER CAPITA MEDICARE+CHOICE GROWTH PERCENT-
AGE.—Beginning with rates calculated for 1999, before 
computing rates for a year as described in paragraph (1), 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 305 
the Secretary shall adjust all area-specific and national 
Medicare+Choice capitation rates (and beginning in 2000, 
the minimum amount) for the previous year for the dif-
ferences between the projections of the national per capita 
Medicare+Choice growth percentage for that year and pre-
vious years and the current estimate of such percentage 
for such years. 
"(7) ADJUSTMENT FOR NATIONAL COVERAGE DETERMINA-
TIONS.—If the Secretary makes a determination with respect 
to coverage under this title that the Secretary projects will 
result in a significant increase in the costs to Medicare+Choice 
of providing benefits under contracts under this part (for peri-
ods after any period described in section 1852(a)(5)), the Sec-
retary shall adjust 
appropriately the payments to such 
organizations under this part. 
"(d) MEDICARE+CHOICE PAYMENT AREA DEFINED.— 
"(1) IN GENERAL.—In this part, except as provided in para-
graph (3), the term 'Medicare+Choice pa3anent area' means 
a county, or equivalent area specified by the Secretary. 
"(2) RULE FOR ESRD BENEFICIARIES.—In the case of individ-
uals who are determined to have end stage renal disease, 
the Medicare+Choice pajnnent area shall be a State or such 
other payment area as the Secretary specifies. 
"(3) GEOGRAPHIC ADJUSTMENT.— 
"(A) IN GENERAL.—Upon written request of the chief 
executive officer of a State for a contract year (beginning 
after 1998) made by not later than February 1 of the 
previous year, the Secretanr shall make a geographic 
adjustment to a Medicare+Choice pa3mient area in the 
State otherwise determined under paragraph (1)— 
"(i) to a single statewide Medicare+Choice payment 
area, 
"(ii) to the metropolitan based system described 
in subparagraph (C), or 
"(iii) to consolidating into a single Medicare+Choice 
pa3maent area noncontiguous counties (or equivalent 
areas described in paragraph (1)) within a State. 
Such adjustment shall be effective for payments for months 
beginning with January of the year following the year 
in which the request is received. 
"(B) BUDGET NEUTRALITY ADJUSTMENT.—In the case 
of a State requesting an adjustment under this paragraph, 
the Secretary shall initially (sind annually thereafter) 
adjust the pa)Tnent rates otherwise established under this 
section for Medicare+Choice pa3nnent areas in the State 
in a manner so that the aggregate of the pajmients under 
this section in the State shall not exceed the aggregate 
payments that would have been made imder this section 
for Medicare+Choice payment areas in the State in the 
absence of the adjustment under this paragraph. 
"(C) METROPOLITAN BASED SYSTEM.—The metropolitan 
based system described in this subparagraph is one in 
which— 
"(i) all the portions of each metropolitan statistical 
area in the State or in the case of a consolidated 
metropolitan statistical area, all of the portions of each 
primary 
metropolitan 
statistical 
area within the 
I l l STAT. 306 
PUBLIC LAW 105-33—AUG. 5, 1997 
consolidated area within the State, are treated as a 
single Medicare+Choice payment area, sind 
"(ii) all areas in the State that do not fall within 
a metropolitan statistical area are treated as a single 
Medicare+Choice payment area. 
"(D) AREAS.—In subparagraph (C), the terms 'metro-
politEin statistical area', 'consolidated metropolitan statis-
tical area', and 'primary metropolitan statistical area' mean 
any area designated as such by the Secretary of Commerce. 
"(e) SPECIAL RULES FOR INDIVIDUALS ELECTING MSA PLANS.— 
"(1) IN GENERAL.—If the amount of the Medicare+Choice 
monthly MSA premium (as defined in section 1854(b)(2)(C)) 
for an MSA plan for a year is less thgin Vi2 of the annual 
Medicare+Choice capitation rate applied under this section for 
the area and year involved, the Secretary shall deposit an 
amount equal to 100 percent of such difference 
in 
a 
Medicare+Choice MSA established (and, if applicable, des-
ignated) by the individual imder paragraph (2). 
"(2) 
ESTABLISHMENT 
AND 
DESIGNATION 
OF 
MEDICARE+CHOICE MEDICAL SAVINGS ACCOUNT AS REQUIREMENT 
FOR PAYMENT OF CONTRIBUTION.—In the case of an individual 
who has elected coverage under an MSA plan, no payment 
shall be made under paragraph (1) on behalf of £in individual 
for a month unless the individual— 
"(A) has established before the beginning of the month 
(or by such other deadline as the Secretary may specify) 
a Medicare+Choice MSA (as defined in section 138(b)(2) 
of the Internal Revenue Code of 1986), and 
"(B) if the individual has established more than one 
such Medicare+Choice MSA, has designated one of such 
accounts as the individual's Medicare+Choice MSA for pur-
poses of this part. 
Under rules under this section, such an individual may change 
the designation of such account under subparagraph (B) for 
purposes of this part. 
"(3) LUMP-SUM DEPOSIT OF MEDICAL SAVINGS ACCOUNT CON-
TRIBUTION.—In the case of an individual electing an MSA plan 
effective beginning with a month in a year, the amount of 
the contribution to the Medicare+Choice MSA on behalf of 
the individual for that month and all successive months in 
the year shall be deposited during that first month. In the 
case of a termination of such an election as of a month before 
the end of a year, the Secretary shall provide for a procedure 
for the recovery of deposits attributable to the remaining 
months in the year. 
"(f) 
PAYMENTS 
FROM 
TRUST 
FUND.—The payment to 
a 
Medicare+Choice organization under this section for individuals 
enrolled imder this part with the organization and pa5rments to 
a Medicare+Choice MSA under subsection (e)(1) shall be made 
from the Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurgince Trust Fund in such proportion 
as the Secretary determines reflects the relative weight that benefits 
under part A and under part B represents of the actuarial value 
of the total benefits under this title. Monthly pa5nnents otherwise 
payable under this section for October 2000 shall be paid on the 
first business day of such month. Monthly pa5mients otherwise 
payable under this section for October 2001 shall be paid on the 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 307 
last business day of September 2001. Monthly payments otherwise 
payable under this section for October 2006 shall be paid on the 
first business day of October 2006. 
"(g) SPECIAL RULE FOR CERTAIN INPATIENT HOSPITAL STAYS.— 
In the case of an individual who is receiving inpatient hospital 
services from a subsection (d) hospital (as defined in section 
1886(d)(1)(B)) as of the effective date of the individual's— 
"(1) election under this part of a Medicare+Choice plan 
offered by a Medicare+Choice organization— 
"(A) payment for such services until the date of the 
individual's discharge shall be made under this title 
through the Medicare+Choice plan or the original medicare 
fee-for-service 
program 
option 
described 
in 
section 
1851(a)(1)(A) (as the case may be) elected before the elec-
tion with such organization, 
"(B) the elected organization shall not be financially 
responsible for payment for such services until the date 
after the date of the individual's discharge, and 
"(C) the organization shall nonetheless be paid the 
full amount otherwise payable to the organization under 
this part; or 
"(2) 
termination 
of 
election 
with 
respect 
to 
a 
Medicare+Choice organization under this part— 
"(A) the organization shall be financially responsible 
for pa3mient for such services after such date and until 
the date of the individual's discharge, 
"(B) payment for such services during the stay shall 
not be made under section 1886(d) or by any succeeding 
Medicare+Choice organization, and 
"(C) the terminated organization shall not receive any 
pa3mient with respect to the individual under this part 
during the period the individual is not enrolled. 
"(h) SPECIAL RULE FOR HOSPICE CARE.— 
"(1) INFORMATION.—^A contract under this part shall require 
the Medicare+Choice organization to inform each individual 
enrolled under this part with a Medicare+Choice plan offered 
by the organization about the availability of hospice care if— 
"(A) a hospice program participating under this title 
is located within the organization's service area; or 
"(B) it is common practice to refer patients to hospice 
programs outside such service area. 
"(2) PAYMENT.—If an individual who is enrolled with a 
Medicare+Choice organization under this part makes an elec-
tion under section 1812(d)(1) to receive hospice care from a 
particular hospice program— 
"(A) payment for the hospice care furnished to the 
individual shall be made to the hospice program elected 
by the individual by the Secretary; 
"(B) payment for other services for which the individual 
is eligible notwithstanding the individual's election of hos-
pice care under section 1812(d)(1), including services not 
related to the individual's terminal illness, shall be made 
by the Secretary to the Medicare+Choice organization or 
the provider or supplier of the service instead of payments 
calculated under subsection (a); and 
"(C) the Secretary shall continue to make monthly 
pajonents to the Medicare+Choice organization in an 
I l l STAT. 308 
PUBLIC LAW 105-33—AUG. 5, 1997 
amount equal to the value of the additional benefits 
required under section 1854(f)(1)(A). 
"PREMIUMS 
42 use 1395W- 
" S E C . 1854. (a) SUBMISSION OF PROPOSED PREMIUMS AND 
24. 
RELATED INFORMATION.— 
(1) IN GENERAL.—Not later than May 1 of each year, each 
Medicare+Choice organization shall submit to the Secretary, 
in a form and manner specified by the Secretary and for each 
Medicare+Choice plan for the service area in which it intends 
to be offered in the following year— 
"(A) the information described in paragraph (2), (3), 
or (4) for the type of plan involved; and 
"(B) the enrollment capacity (if any) in relation to 
the plan and area. 
"(2) 
INFORMATION 
REQUIRED FOR COORDINATED CARE 
PLANS.—For a Medicare+Choice plan described in section 
1851(a)(2)(A), the information described in this paragraph is 
as follows: 
"(A) BASIC (AND ADDITIONAL) BENEFITS.—For benefits 
described in 1852(a)(1)(A)— 
"(i) the adjusted community rate (as defined in 
subsection (f)(3)); 
"(ii) the Medicare+Choice monthly basic bene-
ficiary premium (as defined in subsection (b)(2)(A)); 
"(iii) a description of deductibles, coinsurance, and 
copayments applicable under the plan and the actuar-
ial value of such deductibles, coinsurance, and copay-
ments, described in subsection (e)(1)(A); and 
"(iv) if required under subsection (f)(1), a descrip-
tion of the additional benefits to be provided pursuant 
to such subsection and the value determined for such 
proposed benefits under such subsection. 
"(B) SUPPLEMENTAL BENEFITS.—For benefits described 
in 1852(a)(3)— 
"(i) the adjusted community rate (as defined in 
subsection (f)(3)); 
"(ii) the Medicare+Choice monthly supplemental 
beneficiary 
premium 
(as defined 
in 
subsection 
(b)(2)(B)); and 
"(iii) a description of deductibles, coinsurance, and 
copayments applicable under the plan and the actuar-
ial value of such deductibles, coinsurance, and copay-
ments, described in subsection (e)(2). 
"(3) REQUIREMENTS FOR MSA PLANS.—For an MSA plan 
described, the information described in this paragraph is as 
follows: 
"(A) BASIC (AND ADDITIONAL) BENEFITS.—For benefits 
described 
in 
1852(a)(1)(A), 
the 
amount 
of the 
Medicare+Choice monthly MSA premium. 
"(B) SUPPLEMENTAL BENEFITS.—For benefits described 
in 1852(a)(3), the amount of the Medicare+Choice monthly 
supplementary beneficiary premium. 
"(4) REQUIREMENTS FOR PRIVATE FEE-FOR-SERVICE PLANS.— 
For a Medicare+Choice plan described in section 1851(a)(2)(C) 
for 
benefits 
described in 1852(a)(1)(A), the information 
described in this paragraph is as follows: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 309 
"(A) BASIC (AND ADDITIONAL) BENEFITS.—For benefits 
described in 1852(a)(1)(A)— 
"(i) the adjusted community rate (as defined in 
subsection (f)(3)); 
"(ii) the amount of the Medicare+Choice monthly 
basic beneficiary premium; 
"(iii) a description of the deductibles, coinsurance, 
and copayments applicable under the plan, and the 
actuarial value of such deductibles, coinsursince, and 
copayments, as described in subsection (e)(4)(A); and 
"(iv) if required under subsection (f)(1), a descrip-
tion of the additional benefits to be provided pursuant 
to such subsection and the value determined for such 
proposed benefits under such subsection. 
"(B) SUPPLEMENTAL BENEFITS.—For benefits described 
in 1852(a)(3), the amount of the Medicare+Choice monthly 
supplemental beneficiary premium (as defined in sub-
section (b)(2)(B)). 
"(5) REVIEW.— 
"(A) IN GENERAL.—Subject to subparagraph (B), the 
Secretary shall review the adjusted community rates, the 
amounts of the basic and supplemental premiums, and 
values filed under this subsection and shall approve or 
disapprove such rates, amounts, and value so submitted. 
"(B) EXCEPTION.—The Secretary shall not review, 
approve, or disapprove the amounts submitted under para-
graph (3) or subparagraphs (A)(ii) and (B) of paragraph 
(4). 
"(b) MONTHLY PREMIUM CHARGED.— 
"(1) IN GENERAL.— 
"(A) RULE FOR OTHER THAN MSA PLANS.—The monthly 
amount of the premium charged to an individual enrolled 
in a Medicare+Choice plan (other than an MSA plan) 
offered by a Medicare+Choice organization shall be equal 
to the sum of the Medicare+Choice monthly basic bene-
ficiary premium and the Medicare+Choice monthly supple-
mentary beneficiary premium (if any). 
"(B) MSA PLANS.—The monthly amount of the pre-
mium charged to an individual enrolled in an MSA plan 
offered by a Medicare+Choice organization shall be equal 
to the Medicare+Choice monthly supplemental beneficiary 
premium (if any). 
"(2) PREMIUM TERMINOLOGY DEFINED.—For purposes of this 
part: 
"(A) THE MEDICARE+CHOICE MONTHLY BASIC BENE-
FICIARY PREMIUM.—The term 'Medicare+Choice monthly 
basic beneficiary premium' means, with respect to a 
Medicare+Choice plan, the amount authorized to be 
charged under subsection (e)(1) for the plan, or, in the 
case of a Medicare+Choice private fee-for-service plan, the 
amount filed under subsection (a)(4)(A)(ii). 
"(B) MEDICARE+CHOICE MONTHLY SUPPLEMENTAL BENE-
FICIARY PREMIUM.—The term 'Medicare+Choice monthly 
supplemental beneficiary premium' means, with respect 
to a Medicare+Choice plan, the amount authorized to be 
charged under subsection (e)(2) for the plan or, in the 
case of a MSA plan or Medicare+Choice private fee-for-
I l l STAT. 310 
PUBLIC LAW 105-33—AUG. 5, 1997 
service plan, the amount filed under paragraph (3)(B) or 
(4)(B) of subsection (a). 
"(C) MEDICARE+CHOICE MONTHLY MSA PREMIUM.—The 
term 'Medicare+Choice monthly MSA premium' means, 
with respect to a Medicare+Choice plan, the amount of 
such premium filed under subsection (a)(3)(A) for the plan. 
"(c) UNIFORM PREMIUM.—The Medicare+Choice monthly basic 
£ind supplemental beneficiary 
premium, the Medicare+Choice 
monthly MSA premium 
charged under subsection (b) of a 
Medicare+Choice organization under this part may not vary among 
individuals enrolled in the plan. 
"(d) TERMS AND CONDITIONS OF IMPOSING PREMIUMS.—Each 
Medicare+Choice 
organization 
shall 
permit the pajmient of 
Medicare+Choice monthly basic and supplemental beneficiary pre-
miums on a monthly basis, may terminate election of individuals 
for a Medicare+Choice plan for failure to make premium payments 
only in accordance with section 1851(g)(3)(B)(i), and may not provide 
for cash or other monetary rebates as an inducement for enrollment 
or otherwise. 
"(e) LIMITATION ON ENROLLEE LIABILITY.— 
"(1) FOR BASIC AND ADDITIONAL BENEFITS.—In no event 
may— 
"(A) the Medicare+Choice monthly basic beneficiary 
premium (multiplied by 12) and the actuarial value of 
the deductibles, coinsurance, and copayments applicable 
on average to individuals enrolled under this part with 
a Medicare+Choice plan described in section 1851(a)(2)(A) 
of an organization with respect to required 
benefits 
described in section 1852(a)(1)(A) and additional benefits 
(if any) required under subsection (f)(1)(A) for a year, 
exceed 
"(B) the actuarial value of the deductibles, coinsurance, 
and copayments that would be applicable on average to 
individuals entitled to benefits under part A and enrolled 
under 
part 
B if they 
were 
not members 
of a 
Medicare+Choice organization for the year. 
"(2) FOR SUPPLEMENTAL BENEFITS.—If the Medicare+Choice 
organization provides to its members enrolled under this part 
in a Medicare+Choice plan described in section 1851(a)(2)(A) 
with respect to supplemental benefits described in section 
1852(a)(3), the sum of the Medicare+Choice monthly supple-
mental beneficiary premium (multiplied by 12) charged and 
the actuarial value of its deductibles, coinsurance, £ind copay-
ments charged with respect to such benefits may not exceed 
the adjusted community rate for such benefits (as defined in 
subsection (f)(3)). 
"(3) DETERMINATION ON OTHER BASIS.—If the Secretary 
determines that adequate data are not available to determine 
the actuarial value under paragraph (1)(A) or (2), the Secretary 
may determine such amount with respect to all individuals 
in same geographic area, the State, or in the United States, 
eligible to enroll in the Medicare+Choice plan involved under 
this part or on the basis of other appropriate data. 
"(4) SPECIAL RULE FOR PRIVATE FEE-FOR-SERVICE PLANS.— 
With respect to a Medicare+Choice private fee-for-service plan 
(other than a plan that is an MSA plan), in no event may— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 311 
"(A) the actuarial value of the deductibles, coinsurance, 
and copajonents applicable on average to individuals 
enrolled under this part with such a plan of an organization 
with respect to required benefits described in section 
1852(a)(1), exceed 
"(B) the actuarial value of the deductibles, coinsurance, 
and copa3anents that would be applicable on average to 
individuals entitled to benefits under part A and enrolled 
under 
part 
B 
if 
they 
were 
not 
members 
of 
a 
Medicare+Choice organization for the year. 
"(f) REQUIREMENT FOR ADDITIONAL BENEFITS.— 
"(1) REQUIREMENT.— 
"(A) IN GENERAL.—Each Medicare+Choice organization 
(in relation to a Medicare+Choice plan, other than an MSA 
plan, it offers) shall provide that if there is an excess 
amount (as defined in subparagraph (B)) for the plan for 
a contract year, subject to the succeeding provisions of 
this subsection, the organization shall provide to individ-
uals such additional benefits (as the organization may 
specify) in a value which the Secretary determines is at 
least equal to the adjusted excess amount (as defined in 
subparagraph (O). 
"(B) EXCESS AMOUNT.—For purposes of this paragraph, 
the 'excess amount', for an organization for a plan, is the 
amount (if any) by which— 
"(i) the average of the capitation payments made 
to the organization under section 1853 for the plan 
at the beginning of contract year, exceeds 
"(ii) the actuarial value of the required benefits 
described in section 1852(a)(1)(A) under the plan for 
individuals under this part, as determined based upon 
an adjusted community rate described in paragraph 
(3) (as reduced for the actuarial value of the coinsur-
ance, copayments, and deductibles imder parts A and 
B). 
"(C) ADJUSTED EXCESS AMOUNT.—For purposes of this 
paragraph, the 'adjusted excess amount', for an organiza-
tion for a plan, is the excess amount reduced to reflect 
any amount withheld and reserved for the organization 
for the year under paragraph (2). 
"(D) UNIFORM APPLICATION.—This paragraph shall be 
applied uniformly for all enrollees for a plan. 
"(E) CONSTRUCTION.—Nothing in this subsection shall 
be construed as preventing a Medicare+Choice organization 
from providing supplemental benefits (described in section 
1852(a)(3)) that are in addition to the health care benefits 
otherwise required to be provided under this paragraph 
and from imposing a premium for such supplemental bene-
fits. 
"(2) STABILIZATION FUND.—A Medicare+Choice organization 
may provide that a part of the value of an excess amount 
described in paragraph (1) be withheld and reserved in the 
Federal Hospital Insurance Trust Fund and in the Federal 
Supplementary Medical Insurance Trust Fund (in such propor-
tions as the Secretary determines to be appropriate) by the 
Secretary for subsequent suinual contract periods, to the extent 
required to stabilize and prevent undue fluctuations in the 
I l l STAT. 312 
PUBLIC LAW 105-33—AUG. 5, 1997 
additional benefits offered in those subsequent periods by the 
organization in accordance with such paragraph. Any of such 
value of the amount reserved which is not provided as addi-
tional benefits described in paragraph (1)(A) to individuals 
electing the Medicare+Choice plan of the organization in accord-
ance with such paragraph prior to the end of such periods, 
shall revert for the use of such trust funds. 
"(3) ADJUSTED COMMUNITY RATE.—For purposes of this sub-
section, subject to paragraph (4), the term 'adjusted community 
rate' for a service or services means, at the election of a 
Medicare+Choice organization, either— 
"(A) the rate of payment for that service or services 
which the Secretary annually determines would apply to 
an individual electing a Medicare+Choice plan under this 
part if the rate of pajnnent were determined under a 
'community rating system' (as defined in section 1302(8) 
of the Public Health Service Act, other than subparagraph 
(C)), or 
"(B) such portion of the weighted aggregate premium, 
which the Secretary annually estimates would apply to 
such an individual, as the Secretary annually estimates 
is attributable to that service or services, 
but adjusted for differences between the utilization characteris-
tics of the individuals electing coverage under this part and 
the utilization characteristics of the other enrollees with the 
plan (or, if the Secretary finds that adequate data are not 
available to adjust for those differences, the differences between 
the utilization characteristics of individuals selecting other 
Medicare+Choice coverage, or Medicare+Choice eligible individ-
uals in the area, in the State, or in the United States, eligible 
to elect Medicare+Choice coverage under this part and the 
utilization characteristics of the rest of the population in the 
area, in the State, or in the United States, respectively). 
"(4) DETERMINATION BASED ON INSUFFICIENT DATA.—For 
purposes of this subsection, if the Secretary finds that there 
is insufficient enrollment experience to determine an average 
of the capitation pa3mrients to be made under this part at 
the beginning of a contract period or to determine (in the 
case of a newly operated provider-sponsored organization or 
other new organization) the adjusted community rate for the 
organization, the Secretary may determine such an average 
based on the enrollment experience of other contracts entered 
into under this part and may determine such a rate using 
data in the general commercial marketplace. 
"(g) PROHIBITION OF STATE IMPOSITION OF PREMIUM TAXES.— 
No State may impose a premium tax or similar tax with respect 
to payments to Medicare+Choice organizations under section 1853. 
"ORGANIZATIONAL 
AND 
FINANCIAL 
REQUIREMENTS 
FOR 
MEDICARE+CHOICE ORGANIZATIONS; PROVIDER-SPONSORED ORGANI-
ZATIONS 
42 use 
"SEC. 1855. (a) ORGANIZED AND LICENSED UNDER STATE LAW.— 
1395W-25. 
"(1) I N GENERAL.—Subject to paragraphs 
(2) and (3), a 
Medicare+Choice organization shall be organized and licensed 
under State law as a risk-bearing entity eligible to offer health 
insurance or health benefits coverage in each State in which 
it offers a Medicare+Choice plan. 
_ 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 313 
"(2) 
SPECIAL 
EXCEPTION 
FOR 
PROVIDER-SPONSORED 
ORGANIZATIONS.— 
"(A) IN GENERAL.—In the case of a provider-sponsored 
organization that seeks to offer a Medicare+Choice plan 
in a State, the Secretary shall waive the requirement of 
paragraph (1) that the organization be licensed in that 
State if— 
"(i) the organization files an application for such 
waiver with the Secretary by not later than November 
1,2002, and 
"(ii) the Secretary determines, based on the 
application and other evidence presented to the Sec-
retary, that any of the grounds for approval of the 
application described in subparagraph (B), (C), or (D) 
has been met. 
"(B) FAILURE TO ACT ON LICENSURE APPLICATION ON 
A TIMELY BASIS.—The ground for approval of such a waiver 
application described in this subparagraph is that the State 
has failed to complete action on a licensing application 
of the organization within 90 days of the date of the State's 
receipt of a substantially complete application. No period 
before the date of the enactment of this section shall be 
included in determining such 90-day period. 
"(C) DENIAL OF APPLICATION BASED ON DISCRIMINATORY 
TREATMENT.—The ground for approval of such a waiver 
application described in this subparagraph is that the State 
has denied such a licensing application and— 
"(i) the standards or review process imposed by 
the State as a condition of approval of the license 
imposes any material requirements, procedures, or 
standards (other than solvency requirements) to such 
organizations that are not generally applicable to other 
entities engaged in a substantially similar business, 
or 
"(ii) the State requires the organization, as a condi-
tion of licensure, to offer any product or plan other 
than a Medicare+Choice plan. 
"(D) 
DENIAL OF APPLICATION BASED ON APPLICATION 
OF SOLVENCY REQUIREMENTS.—With respect to waiver 
applications filed on or after the date of publication of 
solvency standards under section 1856(a), the ground for 
approval of such a waiver application described in this 
subparagraph is that the State has denied such a licensing 
application based (in whole or in part) on the organization's 
failure to meet applicable solvency requirements and— 
"(i) such requirements are not the same as the 
solvency standards established under section 1856(a); 
or 
"(ii) the State has imposed as a condition of 
approval of the license documentation or information 
requirements relating to solvency or other material 
requirements, procedures, or standards relating to sol-
vency that are different from the requirements, proce-
dures, and standards applied by the Secretary under 
subsection (d)(2). 
For purposes of this paragraph, the term 'solvency require-
ments' means requirements relating to solvency and other 
I l l STAT. 314 
PUBLIC LAW 105-33—AUG. 5, 1997 
matters covered under the standards established under 
section 1856(a). 
"(E) TREATMENT OF WAIVER.—In the case of a waiver 
granted under this paragraph for a provider-sponsored 
organization with respect to a State— 
"(i) LIMITATION TO STATE.—The waiver shall be 
effective only with respect to that State and does not 
apply to any other State. 
"(ii) LIMITATION TO 36-MONTH PERIOD.—The waiver 
shall be effective only for a 36-month period and may 
not be renewed. 
"(iii) 
CONDITIONED 
ON 
COMPLIANCE 
WITH 
CONSUMER PROTECTION AND QUALITY STANDARDS.—The 
continuation of the waiver is conditioned upon the 
organization's 
compliance 
with the requirements 
described in subparagraph (G). 
"(iv) PREEMPTION OF STATE LAW.—Any provisions 
of law of that State which relate to the licensing of 
the organization £ind which prohibit the organization 
from providing coverage pursuant to a contract under 
this part shall be superseded. 
"(F) PROMPT ACTION ON APPLICATION.—The Secretary 
shall grant or deny such a waiver application within 60 
days after the date the Secretary determines that a 
substantially complete waiver application has been filed. 
Nothing in this section shall be construed as preventing 
an organization which has had such a waiver application 
denied from submitting a subsequent waiver application. 
"(G) 
APPLICATION 
AND ENFORCEMENT 
OF STATE 
CONSUMER PROTECTION AND QUALITY STANDARDS.— 
"(i) IN GENERAL.—A waiver granted under this 
paragraph to an organization with respect to licensing 
under State law is conditioned upon the organization's 
compliance with all consumer protection and quality 
standards insofar as such standards— 
"(I) would apply in the State to the organiza-
tion if it were licensed under State law; 
"(II) 
are generally 
applicable 
to 
other 
Medicare+Choice organizations and plans in the 
State; and 
"(III) are consistent with the standards estab-
lished under this part. 
Such standards shall not include any standard pre-
empted under section 1856(b)(3)(B). 
"(ii) INCORPORATION INTO CONTRACT.—In the case 
of such a waiver granted to an organization with 
respect to a State, the Secretary shall incorporate the 
requirement 
that 
the 
organization 
(and 
MedicareH-Choice plans it offers) comply with standards 
under clause (i) as part of the contract between the 
Secretary and the organization under section 1857. 
"(iii) ENFORCEMENT.—In the case of such a waiver 
granted to an organization with respect to a State, 
the Secretary may enter into an agreement with the 
State under which the State agrees to provide for 
monitoring and enforcement activities with respect to 
compliance 
of 
such 
an 
organization 
and its 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 315 
Medicare+Choice plans with such standards. Such 
monitoring and enforcement shall be conducted by the 
State in the same manner as the State enforces such 
standards with respect to other Medicare+Choice 
organizations and plans, without discrimination based 
on the tj^e of organization to which the standards 
apply. Such an agreement shall specify or establish 
mechanisms by which compliance activities are under-
taken, while not lengthening the time required to 
re\'iew sind process applications for waivers under this 
paragraph. 
"(H) REPORT.—By not later than December 31, 2001, 
the Secretary shall submit to the Committee on Ways 
and Means and the Committee on Commerce of the House 
of Representatives and the Committee on Finance of the 
Senate a report regarding whether the waiver process 
under this paragraph should be continued after December 
31, 2002. In m ^ i n g such recommendation, the Secretary 
shall consider, among other factors, the impact of such 
process on beneficiaries and on the long-term solvency of 
the program under this title. 
"(3) LICENSURE DOES NOT SUBSTITUTE FOR OR CONSTITUTE 
CERTIFICATION.—The fact that an organization is licensed in 
accordance with paragraph (1) does not deem the organization 
to meet other requirements imposed under this part. 
"(b) 
ASSUMPTION 
OF 
FULL 
FINANCIAL 
RISK.—The 
Medicare+Choice organization shall assume full financial risk on 
a prospective basis for the provision of the health care services 
for which benefits are required to be provided under section 
1852(a)(1), except that the organization— 
"(1) may obtain insurance or make other arrangements 
for the cost of providing to any enrolled member such services 
the aggregate value of which exceeds such aggregate level 
as the Secretary specifies from time to time, 
"(2) may obtain insurance or make other arrangements 
for the cost of such services provided to its enrolled members 
other than through the organization because medical necessity 
required their provision before they could be secured through 
the organization, 
"(3) may obtain insurance or make other arrangements 
for not more than 90 percent of the amount by which its 
costs for any of its fiscal years exceed 115 percent of its income 
for such fiscal year, and 
"(4) may make arrangements with physicians or other 
health care professionals, health care institutions, or any com-
bination of such individuals or institutions to assume all or 
part of the financial risk on a prospective basis for the provision 
of basic health services by the physicians or other health profes-
sionals or through the institutions. 
"(c) CERTIFICATION OF PROVISION AGAINST RISK OF INSOLVENCY 
FOR UNLICENSED P S O S . — 
"(1) IN GENERAL.—Each Medicare+Choice organization that 
is a provider-sponsored organization, that is not licensed by 
a State under subsection (a), and for which a waiver application 
has been approved under subsection (a)(2), shall meet standards 
established under section 1856(a) relating to the financial sol-
vency and capital adequacy of the organization. 
I l l STAT. 316 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) CERTIFICATION PROCESS FOR SOLVENCY STANDARDS FOR 
PSOS.—The Secretary shall establish a process for the receipt 
and approval of applications of a provider-sponsored organiza-
tion described in paragraph (1) for certification (and periodic 
recertification) of the organization as meeting such solvency 
standards. Under such process, the Secretary shall act upon 
such a certification application not later than 60 days after 
the date the application has been received. 
"(d) PROVIDER-SPONSORED ORGANIZATION DEFINED.— 
"(1) IN GENERAL.—In this part, the term 'provider-spon-
sored organization' means a public or private entity— 
"(A) that is established or organized, eind operated, 
by a health care provider, or group of affiliated health 
care providers, 
"(B) that provides a substantial proportion (as defined 
by the Secretary in accordance with paragraph (2)) of the 
health care items and services under the contract \inder 
this part directly through the provider or affiliated group 
of providers, and 
"(C) with respect to which the affiliated providers 
share, directly or indirectly, substantial financial risk with 
respect to the provision of such items and services and 
have at least a majority financial interest in the entity. 
"(2) SUBSTANTIAL PROPORTION.—In defining what is a 
'substantial proportion' for purposes of paragraph (1)(B), the 
Secretary— 
"(A) shall take into account the need for such an 
organization to assume responsibility for providing— 
"(i) significantly more than the majority of the 
items and services imder the contract imder this sec-
tion through its own affiliated providers; and 
"(ii) most of the remainder of the items and serv-
ices under the contract through providers with which 
the organization has an agreement to provide such 
items and services, 
in order to assure financial stability and to address the 
practical considerations involved in integrating the delivery 
of a wide range of service providers; 
"(B) shall take into account the need for such an 
organization to provide a limited proportion of the items 
and services under the contract through providers that 
are neither affiliated with nor have an agreement with 
the organization; £ind 
"(C) may allow for variation in the definition of 
substantial proportion among such organizations based on 
relevant differences among the organizations, such as their 
location in an urban or rural area. 
"(3) AFFILIATION.—For purposes of this subsection, a pro-
vider is 'affiliated' with another provider if, through contract, 
ownership, or otherwise— 
"(A) one provider, directly or indirectly, controls, is 
controlled by, or is under common control vvith the other, 
"(B) both providers are part of a controlled group of 
corporations under section 1563 of the Internal Revenue 
Code of 1986, 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 317 
"(C) each provider is a participant in a lawful combina-
tion under which each provider shares substantial financial 
risk in connection with the organization's operations, or 
"(D) both providers are part of an affiliated service 
group under section 414 of such Code. 
"(4) CONTROL.—For purposes of paragraph (3), control is 
presumed to exist if one party, directly or indirectly, owns, 
controls, or holds the power to vote, or proxies for, not less 
than 51 percent of the voting rights or governance rights of 
another. 
"(5) HEALTH CARE PROVIDER DEFINED.—In this subsection, 
the term 'health care provider' means— 
"(A) any individual who is engaged in the delivery 
of health care services in a State and who is required 
by State law or regulation to be licensed or certified by 
the State to engage in the delivery of such services in 
the State, and 
"(B) any entity that is engaged in the delivery of health 
care services in a State and that, if it is required by 
State law or regulation to be licensed or certified by the 
State to engage in the delivery of such services in the 
State, is so licensed. 
"(6) REGULATIONS.—The Secretary shall issue regulations 
to carry out this subsection. 
"ESTABLISHMENT OF STANDARDS 
"SEC. 
1856. 
(a) ESTABLISHMENT OF SOLVENCY STANDARDS FOR 42 use 
PROVIDER-SPONSORED ORGANIZATIONS.— 
i395w-26. 
"(1) ESTABLISHMENT.— 
"(A) IN GENERAL.—^The Secretary shall establish, on 
an expedited basis and using a negotiated rulemaking proc-
ess under subchapter III of chapter 5 of title 5, United 
States Code, standards described in section 1855(c)(1) 
(relating to the financial solvency and capital adequacy 
of the organization) that entities must meet to qualify 
as provider-sponsored organizations under this part. 
"(B) 
FACTORS TO CONSIDER FOR SOLVENCY STAND-
ARDS.—In establishing solvency standards under subpara-
graph (A) for provider-sponsored organizations, the Sec-
retary shall consult with interested parties and shall take 
into account— 
"(i) the delivery system assets of such an organiza-
tion and ability of such an organization to provide 
services directly to enrollees through affiliated provid-
ers, 
"(ii) alternative means of protecting against insol-
vency, including reinsurance, unrestricted surplus, let-
ters of credit, guarantees, organizational insurance cov-
erage, partnerships with other licensed entities, and 
valuation attributable to the ability of such an 
organization to meet its service obligations through 
direct delivery of care, and 
"(iii) any standards developed by the National 
Association of Insurance Commissioners specifically for 
risk-based health care delivery organizations. 
"(C) 
ENROLLEE PROTECTION AGAINST INSOLVENCY.— 
Such standards shall include provisions to prevent enrollees 
I l l STAT. 318 
PUBLIC LAW 105-33—AUG. 5, 1997 
Federal Register, 
publication. 
from being held liable to any person or entity for the 
Medicare+Choice organization's debts in the event of the 
organization's insolvency. 
"(2) PUBLICATION OF NOTICE.—In carrying out the rule-
making process under this subsection, the Secretary, after con-
sultation with the National Association of Insurance Commis-
sioners, the American Academy of Actuaries, organizations rep-
resentative of medicare beneficiaries, and other interested par-
ties, shall publish the notice provided for under section 564(a) 
of title 5, United States Code, by not later than 45 days after 
the date of the enactment of this section. 
"(3) TARGET DATE FOR PUBLICATION OF RULE.—AS part of 
the notice under paragraph (2), and for purposes of this sub-
section, the 'target date for publication' (referred to in section 
564(a)(5) of such title) shall be April 1,1998. 
"(4) ABBREVIATED PERIOD FOR SUBMISSION OF COMMENTS.— 
In applying section 564(c) of such title under this subsection, 
'15 days' shall be substituted for *30 days'. 
"(5) APPOINTMENT OF NEGOTIATED RULEMAKING COMMITTEE 
AND FACILITATOR.—The Secretary shall provide for— 
"(A) the appointment of a negotiated rulemaking 
committee under section 565(a) of such title by not later 
than 30 days after the end of the comment period provided 
for under section 564(c) of such title (as shortened under 
paragraph (4)), and 
"(B) the nomination of a facilitator under section 566(c) 
of such title by not later than 10 days after the date 
of appointment of the committee. 
"(6) PRELIMINARY COMMITTEE REPORT.—The negotiated 
rulemaking committee appointed under paragraph (5) shall 
report to the Secretary, by not later than January 1, 1998, 
regarding the committee's progress on achieving a consensus 
with regard to the rulemaking proceeding and whether such 
consensus is likely to occur before 1 month before the target 
date for publication of the rule. If the committee reports that 
the committee has failed to make significant progress towards 
such consensus or is unlikely to reach such consensus by the 
target date, the Secretary may terminate such process and 
provide for the publication of a rule under this subsection 
through such other methods as the Secretary may provide. 
"(7) FINAL COMMITTEE REPORT.—If the committee is 
not 
terminated under paragraph (6), the rulemaking committee 
shall submit a report containing a proposed rule by not later 
than 1 month before the target date of publication. 
"(8) INTERIM, FINAL EFFECT.—The Secretary shall publish 
a rule under this subsection in the Federal Register by not 
later than the target date of publication. Such rule shall be 
effective and final immediately on an interim basis, but is 
subject to change and revision after public notice and oppor-
tunity for a period (of not less than 60 days) for public comment. 
In connection with such rule, the Secretary shall specify the 
process for the timely review and approval of applications of 
entities to be certified as provider-sponsored organizations 
pursuant to such rules and consistent with this subsection. 
"(9) PUBLICATION OF RULE AFTER PUBLIC COMMENT.—The 
Secretary shall provide for consideration of such comments 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 319 
and republication of such rule by not later than 1 year after 
the target date of publication. 
"(b) ESTABLISHMENT OF OTHER STANDARDS.— 
"(1) IN GENERAL.—^The Secretary shall establish by regula-
tion other standards (not described in subsection (a)) for 
Medicare+Choice organizations and plans consistent with, and 
to carry out, this part. The Secretary shall publish such regula- Publication, 
tions by June 1, 1998. In order to carry out this requirement 
in a timely manner, the Secretary may promulgate regulations 
that take effect on an interim basis, after notice and pending 
opportunity for public comment. 
"(2) USE OF CURRENT STANDARDS.—Consistent with the 
requirements of this part, standards established under this 
subsection shall be based on standards established under sec-
tion 1876 to carry out analogous provisions of such section. 
"(3) RELATION TO STATE LAWS.— 
"(A) IN GENERAL.—^The standards established under 
this subsection shall supersede any State law or regulation 
(including standards described in subparagraph (B)) with 
respect to Medicare+Choice plans which are offered by 
Medicare+Choice organizations under this part to the 
extent such law or regulation is inconsistent with such 
standards. 
"(B) 
STANDARDS 
SPECIFICALLY 
SUPERSEDED.—State 
standards relating to the following are superseded under 
this paragraph: 
"(i) Benefit requirements. 
"(ii) Requirements relating to inclusion or treat-
ment of providers. 
"(iii) Coverage determinations (including related 
appeals and grievance processes). 
"CONTRACTS WITH MEDICARE+CHOICE ORGANIZATIONS 
"SEC. 1857. (a) IN GENERAL.—^The Secretary shall not permit 42USC 
the election under section 1851 of a Medicare+Choice plan offered 
i395w-27. 
by a Medicare+Choice organization under this part, and no pa5mient 
shall be made under section 1853 to an organization, unless the 
Secretary has entered into a contract under this section with the 
organization with respect to the offering of such plan. Such a 
contract 
with 
an 
organization 
may 
cover 
more 
than 
1 
Medicare+Choice plan. Such contract shall provide that 
the 
organization agrees to comply with the applicable requirements 
and standards of this part and the terms and conditions of pa3maent 
as provided for in this part. 
"(b) MINIMUM ENROLLMENT REQUIREMENTS.— 
"(1) IN GENERAL.—Subject to paragraph (2), the Secretary 
may not enter into a contract under this section with a 
Medicare+Choice organization unless the organization has— 
"(A) at least 5,000 individuals (or 1,500 individuals 
in the case of an organization that is a provider-sponsored 
organization) who are receiving health benefits through 
the organization, or 
"(B) at least 1,500 individuals (or 500 individuals in 
the case of an organization that is a provider-sponsored 
organization) who are receiving health benefits through 
the organization if the organization primarily serves 
individuals residing outside of urbanized areas. 
I l l STAT. 320 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) APPLICATION TO MSA PLANS.—In applying paragraph 
(1) in the case of a Medicare+Choice organization that is offer-
ing an MSA plan, paragraph (1) shall be applied by substituting 
covered lives for individuals. 
"(3) ALLOWING TRANSITION.—The Secretary may waive the 
requirement of paragraph (1) during the first 3 contract years 
with respect to an organization. 
"(c) CONTRACT PERIOD AND EFFECTIVENESS.— 
"(1) PERIOD.—Each contract under this section shall be 
for a term of at least 1 year, as determined by the Secretary, 
and may be made automatically renewable from term to term 
in the absence of notice by either party of intention to terminate 
at the end of the current term. 
"(2) TERMINATION AUTHORITY.—In accordance with proce-
dures established under subsection (h), the Secretary may at 
any time terminate any such contract if the Secretary deter-
mines that the organization— 
"(A) has failed substantially to carry out the contract; 
"(B) is carrying out the contract in a manner inconsist-
ent with the efficient and effective administration of this 
part; or 
"(C) no longer substantially meets the applicable condi-
tions of this part. 
"(3) EFFECTIVE DATE OF CONTRACTS.—The effective date 
of any contract executed pursuant to this section shall be speci-
fied in the contract, except that in no case shall a contract 
under this section which provides for coverage under an MSA 
plan be effective before January 1999 with respect to such 
coverage. 
"(4) PREVIOUS TERMINATIONS.—The Secretary may not 
enter into a contract with a Medicare+Choice organization if 
a previous contract with that organization under this section 
was terminated at the request of the organization within the 
preceding 5-year period, except in circumstances which warrant 
special consideration, as determined by the Secretary. 
"(5) CONTRACTING AUTHORITY.—The authority vested in the 
Secretary by this part may be performed without regard to 
such provisions of law or regulations relating to the making, 
performance, amendment, or modification of contracts of the 
United States as the Secretary may determine to be inconsist-
ent with the furtherance of the purpose of this title. 
"(d) PROTECTIONS AGAINST FRAUD AND BENEFICIARY PROTEC-
TIONS.— 
"(1) PERIODIC AUDITING.—The Secretary shall provide for 
the annual auditing of the financial records (including data 
relating to medicare utilization, costs, and computation of the 
adjusted 
community rate) of at least one-third of the 
Medicare+Choice organizations offering Medicare+Choice plans 
under this part. The Comptroller General shall monitor audit-
ing activities conducted under this subsection. 
"(2) INSPECTION AND AUDIT.—Each contract under this sec-
tion shall provide that the Secretary, or any person or organiza-
tion designated by the Secretary— 
"(A) shall have the right to inspect or otherwise evalu-
ate (i) the quality, appropriateness, and timeliness of serv-
ices performed under the contract, and (ii) the facilities 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 321 
of the organization when there is reasonable evidence of 
some need for such inspection, and 
"(B) shall have the right to audit and inspect any 
books and records of the Medicare+Choice organization 
that pertain (i) to the ability of the organization to bear 
the risk of potential financial losses, or (ii) to services 
performed or determinations of amounts payable under 
the contract. 
"(3) ENROLLEE NOTICE AT TIME OF TERMINATION.—Each 
contract under this section shall require the organization to 
provide (and pay for) written notice in advance of the contract's 
termination, as well as a description of alternatives for obtain-
ing benefits under this title, to each individual enrolled with 
the organization under this part. 
"(4) DISCLOSURE.— 
Reports. 
"(A) IN GENERAL.—Each Medicare+Choice organization 
shall, in accordance with regulations of the Secretary, 
report to the Secretary financial information which shall 
include the following: 
"(i) Such information as the Secretary may require 
demonstrating that the organization has a fiscally 
sound operation. 
"(ii) A copy of the report, if any, filed with the 
Health Care Financing Administration containing the 
information required to be reported under section 1124 
by disclosing entities. 
"(iii) A description of transactions, as specified by 
the Secretary, between the organization and a party 
in interest. Such transactions shall include— 
"(I) any sale or exchange, or leasing of any 
property between the organization and a party 
in interest; 
"(II) any furnishing for consideration of goods, 
services (including management services), or facili-
ties between the organization and a party in 
interest, but not including salaries paid to employ-
ees for services provided in the normal course of 
their emplo)mient and health services provided to 
members by hospitals and other providers and by 
staff, medical group (or groups), individual practice 
association (or associations), or any combination 
thereof; and 
"(III) any lending of money or other extension 
of credit between an organization and a party in 
interest. 
The Secretary may require that information 
reported 
respecting an organization which controls, is controlled by, 
or is under common control with, another entity be in 
the form of a consolidated financial statement for the 
organization and such entity. 
"(B) PARTY IN INTEREST DEFINED.—For the purposes 
of this paragraph, the term 'party in interest' means— 
"(i) any director, officer, partner, or employee 
responsible for management or administration of a 
Medicare+Choice organization, any person who is 
directly or indirectly the beneficial owner of more than 
5 percent of the equity of the organization, any person 
I l l STAT. 322 
PUBLIC LAW 105-33—AUG. 5, 1997 
who is the beneficial owner of a mortgage, deed of 
trust, note, or other interest secured by, and valuing 
more than 5 percent of the organization, and, in the 
case of a Medicare+Choice orgsinization organized as 
a nonprofit corporation, an incorporator or member 
of such corporation under applicable State corporation 
law; 
"(ii) any entity in which a person described in 
clause (i)— 
"(I) is an officer or director; 
"(II) is a partner (if such entity is organized 
as a partnership); 
"(III) has directly or indirectly a beneficial 
interest of more than 5 percent of the equity; or 
"(IV) has a mortgage, deed of trust, note, or 
other interest valuing more than 5 percent of the 
assets of such entity; 
"(iii) any person directly or indirectly controlling, 
controlled by, or under common control with an 
organization; and 
"(iv) any spouse, child, or parent of an individual 
described in clause (i). 
"(C) ACCESS TO INFORMATION.—Each Medicare+Choice 
organization shall make the information reported pursuant 
to subparagraph (A) available to its enroUees upon reason-
able request. 
"(5) LOAN INFORMATION.—The contract shall require the 
organization to notify the Secretary of loans and other special 
fin£incial arrangements which are made between the organiza-
tion and subcontractors, affiliates, and related parties. 
"(e) ADDITIONAL CONTRACT TERMS.— 
"(1) IN GENERAL.—The contract shall contain such other 
terms and conditions not inconsistent with this part (including 
requiring the organization to provide the Secretary with such 
information) as the Secretary may find necessary and appro-
priate. 
"(2) COST-SHARING IN ENROLLMENT-RELATED COSTS.— 
"(A) IN GENERAL.—^A Medicare+Choice organization 
shall pay the fee established by the Secretary under 
subparagraph (B). 
"(B) AUTHORIZATION.—The Secretary is authorized to 
charge a fee to each Medicare+Choice organization with 
a contract under this part that is equal to the organization's 
pro rata share (as determined by the Secretary) of the 
aggregate amount of fees which the Secretary is directed 
to collect in a fiscal year. Any amounts collected are author-
ized to be appropriated only for the purpose of carrying 
out section 1851 (relating to enrollment and dissemination 
of information) and section 4360 of the Omnibus Budget 
Reconciliation Act of 1990 (relating to the health insurance 
counseling and assistance program). 
"(C) CONTINGENCY.—For any fiscal year, the fees 
authorized under subparagraph (B) are contingent upon 
enactment in an appropriations act of a provision specifying 
the aggregate amount of fees the Secretary is directed 
to collect in a fiscal year. Fees collected during any fiscal 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 323 
year under this paragraph shall be deposited and credited 
as offsetting collections. 
"(D) LIMITATION,—In any fiscal year the fees collected 
by the Secretary under subparagraph (B) shall not exceed 
the lesser of— 
"(i) the estimated costs to be incurred by the Sec-
retary in the fiscal year in canying out the activities 
described in section 1851 and section 4360 of the Omni-
bus Budget Reconciliation Act of 1990; or 
"(ii)(I) $200,000,000 in fiscal year 1998; 
"(II) $150,000,000 in fiscal year 1999; and 
"(III) $100,000,000 in fiscal year 2000 and each 
subsequent fiscal year. 
"(f) PROMPT PAYMENT BY MEDICARE+CHOICE ORGANIZATION.— 
"(1) REQUIREMENT.—^A contract under this part shall 
require a Medicare+Choice organization to provide prompt pay-
ment (consistent with the provisions of sections 1816(c)(2) and 
1842(c)(2)) of claims submitted for services and supplies fur-
nished to enrollees pursuant to the contract, if the services 
or supplies are not fiimished under a contract between the 
organization and the provider or supplier (or in the case of 
a Medicare+Choice private fee-for-service plan, if a claim is 
submitted to such organization by an enroUee). 
"(2) 
SECRETARY'S 
OPTION 
TO 
BYPASS 
NONCOMPLYING 
ORGANIZATION.—In the case of a Medicare+Choice eligible 
organization which the Secretary determines, after notice and 
opportunity for a hearing, has failed to make payments of 
amounts in compliance with paragraph (1), the Secretary may 
provide for direct payment of the amounts owed to providers 
and suppliers (or, in the case of a Medicare+Choice private 
fee-for-service plan, amounts owed to the enrollees) for covered 
services and supplies fiimished to individuals enrolled under 
this part under the contract. If the Secretary provides for 
the direct payments, the Secretary shall provide for an appro-
priate reduction in the amount of payments otherwise made 
to the organization under this part to reflect the amount of 
the Secretar3^s payments (and the Secretary's costs in making 
the payments). 
"(g) INTERMEDIATE SANCTIONS.— 
"(1) IN GENERAL.—If the Secretary determines that a 
Medicare+Choice organization with a contract under this sec-
tion— 
"(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, if the failure has adversely affected (or has 
substantial likelihood of adversely affecting) the individual; 
"(B) imposes premiums on individuals enrolled under 
this part in excess of the amount of the Medicare+Choice 
monthly basic and supplemental beneficiary premiums per-
mitted under section 1854; 
"(C) acts to expel or to refuse to re-enroll an individual 
in violation of the provisions of this part; 
"(D) engages in any practice that would reasonably 
be expected to have the effect of denying or discouraging 
enrollment (except as permitted by this part) by eligible 
individuals with the organization whose medical condition 
I l l STAT. 324 
PUBLIC LAW 105-33—AUG. 5, 1997 
or history indicates a need for substantial future medical 
services; 
"(E) misrepresents or falsifies information that is fur-
nished— 
"(i) to the Secretary under this part, or 
"(ii) to an individual or to any other entity under 
this part; 
"(F) fails to comply with the applicable requirements 
of section 1852(j)(3) or 1852(k)(2)(A)(ii); or 
"(G) employs or contracts with any individual or entity 
that is excluded from participation under this title under 
section 1128 or 1128A for the provision of health care, 
utilization review, 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; 
the Secretary may provide, in addition to any other remedies 
authorized by law, for any of the remedies described in para-
graph (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 
determination, plus, with respect to a determination under 
paragraph (1)(B), double the excess amount charged in 
violation of such paragraph (and the excess amount charged 
shall be deducted from the penalty and returned to the 
individual concerned), and plus, with respect to a deter-
mination under paragraph (1)(D), $15,000 for each individ-
ual not enrolled as a result of the practice involved, 
"(B) suspension of enrollment of individuals under this 
part after the date the Secretary notifies the organization 
of a determination under paragraph (1) and until the Sec-
retary is satisfied that the basis for such determination 
has been corrected and is not likely to recur, or 
"(C) suspension of payment to the organization under 
this part for individuals enrolled after the date the Sec-
retary notifies the organization of a determination under 
paragraph (1) and until the Secretary is satisfied that 
the basis for such determination has been corrected and 
is not likely to recur. 
"(3) OTHER INTERMEDIATE SANCTIONS.—In the case of a 
Medicare+Choice organization for which the Secretary makes 
a determination under subsection (c)(2) the basis of which is 
not described in paragraph (1), the Secretary may apply the 
following intermediate sanctions: 
"(A) Civil money penalties of not more than $25,000 
for each determination under subsection (c)(2) if the defi-
ciency that is the basis of the determination has directly 
adversely affected (or has the substantial likelihood of 
adversely affecting) 
an individual covered under the 
organization's contract. 
"(B) Civil money penalties of not more than $10,000 
for each week beginning after the initiation of civil money 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 325 
penalty procedures by the Secretary during which the defi-
ciency that is the basis of a determination under subsection 
(c)(2) exists. 
"(C) Suspension of enrollment of individuals under this 
part after the date the Secretary notifies the organization 
of a determination under subsection (c)(2) and until the 
Secretary is satisfied that the deficiency that is the basis 
for the determination has been corrected and is not likely 
to recur. 
"(4) CIVIL MONEY PENALTIES.—The provisions of section Applicability. 
1128A (other than subsections (a) and (b)) shall apply to a 
civil money penalty under paragraph (2) or (3) in the same 
manner as they apply to a civil money penalty or proceeding 
under section 1128A(a). 
"(h) PROCEDURES FOR TERMINATION.— 
"(1) IN GENERAL.—The Secretary may terminate a contract 
with a Medicare+Choice organization under this section in 
accordance with formal investigation and compliance proce-
dures established by the Secretary under which— 
"(A) the Secretary provides the organization with the 
reasonable opportunity to develop and implement a correc-
tive action plan to correct the deficiencies that were the 
basis of the Secretary's determination under subsection 
(c)(2); and 
"(B) the Secretary provides the organization with 
reasonable notice and opportunity for hearing (including 
the right to appeal an initial decision) before terminating 
the contract. 
"(2) 
EXCEPTION 
FOR IMMINENT AND SERIOUS 
RISK TO 
HEALTH.—Paragraph (1) shall not apply if the Secretary deter-
mines that a delay in termination, resulting from compliance 
with the procedures specified in such paragraph prior to termi-
nation, would pose an imminent and serious risk to the health 
of individuals enrolled under this part with the organization. 
"DEFINITIONS; MISCELLANEOUS PROVISIONS 
"SEC. 1859. 
(a) DEFINITIONS RELATING TO MEDICARE+CHOICE 42 use 
ORGANIZATIONS.—In this part— 
i395w-28. 
"(1) 
MEDICARE+CHOICE 
ORGANIZATION.—The 
term 
*Medicare-i-Choice organization' means a public or private entity 
that is certified under section 1856 as meeting the requirements 
and standards of this part for such an organization. 
"(2) PROVIDER-SPONSORED ORGANIZATION.—The term 'pro-
vider-sponsored organization' is defined in section 1855(d)(1). 
"(b) DEFINITIONS RELATING TO MEDICARE-HCHOICE PLANS.— 
"(1) MEDICARE+CHOICE PLAN.—The term 'Medicare+Choice 
plan' means health benefits coverage offered under a policy, 
contract, or plan by a Medicare+Choice organization pursuant 
to and in accordance with a contract under section 1857. 
"(2) MEDICARE+CHOICE PRIVATE FEE-FOR-SERVICE PLAN.— 
The term 'Medicare+Choice private fee-for-service plan' means 
a Medicare+Choice plan that— 
"(A) reimburses hospitals, physicians, and other provid-
ers at a rate determined by the plan on a fee-for-service 
basis without placing the provider at financial risk; 
"(B) does not vary such rates for such a provider based 
on utilization relating to such provider; and 
I l l STAT. 326 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(C) does not restrict the selection of providers among 
those who are lawfully authorized to provide the covered 
services and agree to accept the terms and conditions of 
payment established by the plan. 
"(3) MSA PLAN.— 
"(A) IN GENERAL.—The term 'MSA plan' means a 
Medicare+Choice plan that— 
"(i) provides reimbursement for at least the items 
and services described in section 1852(a)(1) in a year 
but only after the enrollee incurs countable expenses 
(as specified under the plan) equal to the amount of 
an annual deductible (described in subparagraph (B)); 
"(ii) counts as such expenses (for purposes of such 
deductible) at least all amounts that would have been 
payable under parts A and B, and that would have 
been payable by the enrollee as deductibles, coinsur-
ance, or copayments, if the enrollee had elected to 
receive benefits through the provisions of such parts; 
Eind 
"(iii) provides, after such deductible is met for a 
year and for all subsequent expenses for items and 
services referred to in clause (i) in the year, for a 
level of reimbursement that is not less than— 
"(I) 100 percent of such expenses, or 
"(II) 100 percent of the amounts that would 
have been paid (without regard to any deductibles 
or coinsurance) under parts A and B with respect 
to such expenses, 
whichever is less. 
"(B) DEDUCTIBLE.—The amount of annual deductible 
under an MSA plan— 
"(i) for contract year 1999 shall be not more than 
$6,000; and 
"(ii) for a subsequent contract year shall be not 
more than the maximum amoimt of such deductible 
for the previous contract year under this subparagraph 
increased by the national per capita Medicare+Choice 
growth percentage under section 1853(c)(6) for the 
year. 
If the amount of the deductible under clause (ii) is not 
a multiple of $50, the amount shall be rounded to the 
nearest multiple of $50. 
"(c) OTHER REFERENCES TO OTHER TERMS.— 
"(1) MEDICARE+CHOICE ELIGIBLE INDIVIDUAL.—The term 
'Medicare+Choice eligible individual' is defined in section 
1851(a)(3). 
"(2) 
MEDICARE+CHOICE 
PAYMENT 
AREA.—The 
term 
'Medicare+Choice payment area' is defined in section 1853(d). 
"(3) 
NATIONAL PER CAPITA MEDICARE+CHOICE GROWTH 
PERCENTAGE.—The 
'national 
per 
capita 
Medicare+Choice 
growth percentage' is defined in section 1853(c)(6). 
"(4) MEDICARE+CHOICE MONTHLY BASIC BENEFICIARY PRE-
MIUM; MEDICARE+CHOICE MONTHLY SUPPLEMENTAL BENEFICIARY 
PREMIUM.—^The terms 'Medicare+Choice monthly basic bene-
ficiary premium' and 'Medicare+Choice monthly supplemental 
beneficiary premium' are defined in section 1854(a)(2). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 327 
"(d) 
COORDINATED ACUTE AND LONG-TERM CARE BENEFITS 
UNDER A MEDICARE+CHOICE PLAN.—Nothing in this part shall be 
construed as preventing a State from coordinating benefits under 
a medicaid plan under title XIX with those provided under a 
Medicare+Choice plan in a manner that assures continuity of a 
full-range of acute care and long-term care services to poor elderly 
or disabled individuals eligible for benefits under this title and 
under such plan. 
"(e) 
RESTRICTION 
ON 
ENROLLMENT 
FOR 
CERTAIN 
MEDICARE+CHOICE PLANS.— 
"(1) IN GENERAL.—In the case of a Medicare+Choice reli-
gious fraternal benefit society plan described in paragraph (2), 
notwithstanding any other provision of this part to the contrary 
and in accordance with regulations of the Secretary, the society 
offering the plan may restrict the enrollment of individuals 
under this part to individuals who are members of the church, 
convention, or group described in paragraph (3)(B) with which 
the society is affiliated. 
"(2) MEDICARE+CHOICE RELIGIOUS FRATERNAL BENEFIT SOCI-
ETY PLAN DESCRIBED.—For purposes of this subsection, a 
Medicare+Choice 
religious 
fraternal 
benefit 
society 
plan 
described in this paragraph is a Medicare+Choice 
plan 
described in section 1851(a)(2)(A) that— 
"(A) is offered by a religious fraternal benefit society 
described in paragraph (3) only to members of the church, 
convention, or group described in paragraph (3)(B); and 
"(B) permits all such members to enroll under the 
plan without regard to health status-related factors. 
Nothing in this subsection shall be construed as waiving any 
plan requirements relating to financial solvency. 
"(3) RELIGIOUS FRATERNAL BENEFIT SOCIETY DEFINED.—For 
purposes of paragraph (2)(A), a 'religious fraternal benefit soci-
ety* described in this section is an organization that— 
"(A) is described in section 501(c)(8) of the Internal 
Revenue Code of 1986 and is exempt from taxation under 
section 501(a) of such Act; 
"(B) is affiliated with, carries out the tenets of, and 
shares a religious bond with, a church or convention or 
association of churches or an affiliated group of churches; 
"(C) offers, in addition to a Medicare+Choice religious 
fraternal benefit society plan, health coverage to individ-
uals not entitled to benefits under this title who are mem-
bers of such church, convention, or group; and 
"(D) does not impose any limitation on membership 
in the society based on any health status-related factor. 
"(4) PAYMENT ADJUSTMENT.—Under regulations of the Sec-
retary, in the case of individuals enrolled under this part under 
a Medicare+Choice religious fraternal benefit society plan 
described in paragraph (2), the Secretary shall provide for 
such adjustment to the payment amounts otherwise established 
under section 1854 as may be appropriate to assure an appro-
priate payment level, taking into account the 
actuarial 
characteristics and experience of such individuals.". 
I l l STAT. 328 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 4002. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO PRO-
GRAM. 
(a) AUTHORIZING TRANSITIONAL WAIVER OF 50:50 RULE.—Sec-
tion 1876(f) (42 U.S.C. 1395mm(f)) is amended— 
(1) in paragraph (1)— 
(A) by striking "Each" and inserting "For contract peri-
ods beginning before January 1,1999, each"; and 
(B) by striking "or under a State plan approved under 
title XIX"; 
(2) in paragraph (2), by striking "The Secretary" and insert-
ing "Subject to paragraph (4), the Secretary", and 
(3) by adding at the end the following: 
Effective date. 
"(4) Effective for contract periods beginning after December 
31, 1996, the Secretary may waive or modify the requirement 
imposed by paragraph (1) to the extent the Secretary finds that 
it is in the public interest.". 
(b) TRANSITION.— 
(1) RISK-SHARING CONTRACTS.—Section 1876 
(42 U.S.C. 
1395mm) is amended by adding at the end the following new 
subsections: 
"(k)(l) Except as provided in paragraph (2)— 
"(A) on or after the date standards for Medicare+Choice 
organizations and plans are first established under section 
1856(b)(1), the Secretary shall not enter into any risk-sharing 
contract under this section with an eligible organization; and 
"(B) for any contract year beginning on or after January 
1,1999, the Secretary shall not renew any such contract. 
"(2) An individual who is enrolled in part B only and is enrolled 
in an eligible organization with a risk-sharing contract under this 
section on December 31, 1998, may continue enrollment in such 
organization in accordance with regulations described in section 
1856(b)(1). 
"(3) Notwithstanding subsection (a), the Secretary shall provide 
that payment amounts under risk-sharing contracts under this 
section for months in a year (beginning with January 1998) shall 
be computed— 
"(A) with respect to individuals entitled to benefits under 
both parts A and B, by substituting pajnnent rates under section 
1853(a) for the pa5nnent rates otherwise established under sec-
tion 1876(a), and 
"(B) with respect to individuals only entitled to benefits 
under part B, by substituting an appropriate proportion of 
such rates (reflecting the relative proportion of payments under 
this title attributable to such part) for the pa5Tnent rates other-
wise established under subsection (a). 
Applicability. 
"(4) The following requirements shall apply to eligible organiza-
tions with risk-sharing contracts under this section in the same 
manner as they apply to Medicare+Choice organizations under part 
C: 
"(A) 
Data 
collection 
requirements 
under 
section 
1853(a)(3)(B). 
"(B) Restrictions on imposition of premium taxes under 
section 1854(g) in relating to pa3mients to such organizations 
under this section. 
"(C) The requirement to accept enrollment of new enroUees 
during November 1998 under section 1851(e)(6). 
"(D) Payments under section 1857(e)(2).". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 329 
(2) REASONABLE COST CONTRACTS.— 
(A) PHASE OUT OF CONTRACTS.—Section 1876(h) (42 
U.S.C. 1395mm(h)) is amended by adding at the end the 
following: 
"(5)(A) After the date of the enactment of this paragraph, 
the Secretary may not enter into a reasonable cost reimbursement 
contract under this subsection (if the contract is not in effect as 
of such date), except for a contract with an eligible organization 
which, immediately previous to entering into such contract, had 
an agreement in effect under section 1833(a)(1)(A). 
"(B) The Secretary may not extend or renew a reasonable 
cost reimbursement contract under this subsection for any period 
beyond December 31, 2002.". 
(B) REPORT ON IMPACT.—By not later than January 
1, 2001, the Secretary of Health and Human Services shall 
submit to Congress a report that analyzes the potential 
impact of termination of reasonable cost reimbursement 
contracts, pursuant to the amendment made by subpara-
graph (A), on medicare beneficiaries enrolled under such 
contracts and on the medicare program. The report shall 
include such recommendations regarding any extension or 
transition with respect to such contracts as the Secretary 
deems appropriate. 
(c) ENROLLMENT TRANSITION RULE.—^An individual who is 
enrolled on December 31, 1998, with an eligible organization under 
section 1876 of the Social Security Act (42 U.S.C. 1395mm) shall 
be considered to be enrolled with that organization on January 
1, 1999, under part C of title XVIH of such Act if that organization 
has a contract under that part for providing services on January 
1, 1999 (unless the individual has disenrolled effective on that 
date). 
(d) ADVANCE DIRECTIVES.—Section 1866(f) (42 U.S.C. 1395cc(f)) 
is amended— 
(1) in paragraph (1)— 
(A) by inserting "1855(i)," after "1833(s),", and 
(B) by inserting ", Medicare+Choice organization," after 
"provider of services"; and 
(2) in paragraph (2)(E), by inserting "or a Medicare+Choice 
organization" after "section 1833(a)(1)(A)". 
(e) 
EXTENSION 
OF 
PROVIDER 
REQUIREMENT.—Section 
1866(a)(l)(0) (42 U.S.C. 1395cc(a)(l)(0)) is amended— 
(1) by striking "in the case of hospitals and skilled nursing 
facilities,"; 
(2) by striking "inpatient hospital and extended care"; 
(3) by inserting "with a Medicare+Choice organization 
under part C or" after "any individual enrolled"; 
(4) by striking "(in the case of hospitals) or limits (in 
the case of skilled nursing facilities)"; and 
(5) by inserting "(less any payments under sections 
1886(d)(ll) and 1886(h)(3)(D))" after "under this title". 
(f) ADDITIONAL CONFORMING CHANGES.— 
(1) CONFORMING REFERENCES TO PREVIOUS PART C.—^Any 
reference in law (in effect before the date of the enactment 
of this Act) to part C of title XVIH of the Social Security 
Act is deemed a reference to part D of such title (as in effect 
after such date). 
42 u s e 1395mm 
note. 
42 use 
1395W-21 note. 
42 u s e note 
prec. 1395x. 
39-194 O - 97 - 12 : QL 3 Part 1 
I l l STAT. 330 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 
1395W-21 note. 
42 use 
1395W-27 note. 
42 u s e 1395nun 
note. 
42 use 
1395W-23 note. 
42 u s e 1395/ 
note. 
Effective date. 
(2) SECRETARIAL SUBMISSION OF LEGISLATIVE PROPOSAL.— 
Not later than 6 months after the date of the enactment of 
this Act, the Secretary of Health and Human Services shall 
submit to the appropriate committees of Congress a legislative 
proposal providing for such technical and conforming amend-
ments in the law as are required by the provisions of this 
chapter. 
(g) IMMEDIATE EFFECTIVE DATE FOR CERTAIN REQUIREMENTS 
FOR DEMONSTRATIONS.—Section 1857(e)(2) of the Social Security 
Act (requiring contribution to certain costs related to the enrollment 
process comparative materials) applies to demonstrations with 
respect to which enrollment is effected or coordinated under section 
1851 of such Act. 
(h) TRANSITION RULE FOR P S O ENROLLMENT.—In applying sub-
section (g)(1) of section 1876 of the Social Security Act (42 U.S.C. 
1395mm) to a risk-sharing contract entered into with an eligible 
organization that is a provider-sponsored organization (as defined 
in section 1855(d)(1) of such Act, as inserted by section 5001) 
for a contract year beginning on or after January 1, 1998, there 
shall be substituted for the minimum number of enrollees provided 
under such section the minimum number of enrollees permitted 
under section 1857(b)(1) of such Act (as so inserted). 
(i) PUBLICATION OF NEW CAPITATION RATES.—^Not later than 
4 weeks after the date of the enactment of this Act, the Secretary 
of Health and Human Services shall announce the annual 
Medicare+Choice capitation rates for 1998 under section 1853(b) 
of the Social Security Act. 
(j) ELIMINATION OF HEALTH CARE PREPAYMENT PLAN OPTION 
FOR 
ENTITIES 
ELIGIBLE TO PARTICIPATE AS 
MANAGED 
CARE 
ORGANIZATION.— 
(1) ELIMINATION OF OPTION.— 
(A) IN GENERAL.—Section 1833(a)(1)(A) (42 U.S.C. 
13951(a)(1)(A)) is amended by inserting "(and either is spon-
sored by a union or employer, or does not provide, or 
arrange for the provision of, any inpatient hospital serv-
ices)" after "prepayment basis". 
(B) 
EFFECTIVE 
DATE.—^The amendment 
made by 
subparagraph (A) applies to new contracts entered into 
after the date of enactment of this Act and, with respect 
to contracts in effect as of such date, shall apply to payment 
for services furnished after December 31, 1998. 
(2) MEDIGAP CONFORMING AMENDMENT.—Effective January 
1, 1999, section 1882(g)(1) (42 U.S.C. 1395ss(g)(l)) is amended 
by striking ", during the period beginning on the date specified 
in subsection (p)(lXC) and ending on December 31, 1995,". 
SEC. 
4003. 
CONFORMING 
CHANGES 
IN 
MEDIGAP 
PROGRAM. 
(a) 
CONFORMING 
AMENDMENTS 
TO 
MEDICARE+CHOICE 
CHANGES.— 
(1) IN GENERAL.—Section 
1882(d)(3)(A)(i) (42 U.S.C. 
1395ss(d)(3)(A)(i)) is amended— 
(A) in the matter before subclause (I), by inserting 
"(including an individual electing a Medicare+Choice plan 
under section 1851)" after "of this title"; and 
(B) in subclause (II)— 
(i) by inserting "in the case of an individual not 
electing a Medicare+Choice plan" after "(II)", and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 331 
(ii) by inserting before the comma at the end the 
following: "or in the case of an individual electing 
a Medicare+Choice plan, a medicare supplemental pol-
icy with knowledge that the policy duplicates health 
benefits to which the individual is otherwise entitled 
under the Medicare+Choice plan or under another 
medicare supplemental policy". 
(2) CONFORMING AMENDMENTS.—Section 1882(d)(3)(B)(i)(I) 
(42 U.S.C. 1395ss(d)(3)(B)(i)(I)) is amended by inserting 
"(including any Medicare+Choice plan)" after "health insurance 
policies". 
(3) MEDICARE+CHOICE PLANS NOT TREATED AS MEDICARE 
SUPPLEMENTARY POLICIES.—Section 
1882(g)(1) (42 U.S.C. 
1395ss(g)(l)) is amended by inserting "or a Medicare+Choice 
plan or" after "does not include". 
(b) ADDITIONAL RULES RELATING TO INDIVIDUALS ENROLLED 
IN MSA PLANS AND PRIVATE FEE-FOR-SERVICE PLANS.—Section 1882 
(42 U.S.C. 1395ss) is further amended by adding at the end the 
following new subsection: 
"(u)(l) It is unlawful for a person to sell or issue a policy 
described in paragraph (2) to an individual with knowledge that 
the individual has in effect under section 1851 an election of an 
MSA plan or a Medicare+Choice private fee-for-service plan. 
"(2)(A) A policy described in this subparagraph is a health 
insurance policy (other than a policy described in subparagraph 
(B)) that provides for coverage of expenses that are otherwise 
required to be counted toward meeting the annual deductible 
amount provided under the MSA plan. 
"(B) A policy described in this subparagraph is any of the 
following: 
"(i) A policy that provides coverage (whether through insur-
ance or otherwise) for accidents, disability, dental care, vision 
care, or long-term care. 
"(ii) A policy of insurance to which substantially all of 
the coverage relates to— 
"(I) liabilities incurred under workers' compensation 
laws, 
"(II) tort liabilities, 
"(III) liabilities relating to ownership or use of property, 
or 
"(IV) such other similar liabilities as the Secretary 
may specify by regulations. 
"(iii) A policy of insurance that provides coverage for a 
specified disease or illness. 
"(iv) A policy of insurance that pays a fixed amount per 
day (or other period) of hospitalization.". 
Subchapter B—Special Rules for Medicare+Choice Medical 
Savings Accounts 
SEC. 4006. MEDICARE+CHOICE MSA. 
(a) IN GENERAL.—Part III of subchapter B of chapter 1 of 
the Internal Revenue Code of 1986 (relating to amounts specifically 
excluded fi'om gross income) is amended by redesignating section 
138 as section 139 and by inserting after section 137 the following 
26 USC 138,139. 
new section: 
I l l STAT. 332 
PUBLIC LAW 105-33—AUG. 5, 1997 
26 use 138. 
"SEC. 138. MEDICARE+CHOICE MSA. 
"(a) EXCLUSION.—Gross income shall not include any pa5anent 
to the Medicare+Choice MSA of an individual by the Secretary 
of Health and Human Services under part C of title XVIII of 
the Social Security Act. 
"(b) MEDICARE+CHOICE MSA.—For purposes of this section, 
the term 'Medicare+Choice MSA' means a medical savings account 
(as defined in section 220(d))— 
"(1) which is designated as a Medicare+Choice MSA, 
"(2) with respect to which no contribution may be made 
other than— 
"(A) a contribution made by the Secretary of Health 
and Human Services pursuant to part C of title XVIII 
of the Social Security Act, or 
"(B) a trustee-to-trustee transfer described in sub-
section (c)(4), 
"(3) the governing instrument of which provides that 
trustee-to-trustee transfers described in subsection (c)(4) may 
be made to and from such account, and 
"(4) which is established in connection with an MSA plan 
described in section 1859(b)(3) of the Social Security Act. 
"(c) SPECIAL RULES FOR DISTRIBUTIONS.— 
"(1) 
DISTRIBUTIONS FOR QUALIFIED MEDICAL EXPENSES.— 
In applying section 220 to a Medicare+Choice MSA— 
"(A) qualified medical expenses shall not include 
amounts paid for medical care for any individual other 
than the account holder, and 
"(B) section 220(d)(2)(C) shall not apply. 
"(2) PENALTY FOR DISTRIBUTIONS FROM MEDICARE+CHOICE 
MSA NOT USED FOR QUALIFIED MEDICAL EXPENSES IF MINIMUM 
BALANCE NOT MAINTAINED.— 
"(A) IN GENERAL.—The tax imposed by this chapter 
for any teixable year in which there is a payment or dis-
tribution from a Medicare+Choice MSA which is not used 
exclusively to pay the qualified medical expenses of the 
account holder shall be increased by 50 percent of the 
excess (if any) o
f
— 
"(i) the amount of such payment or distribution, 
over 
"(ii) the excess (if any) of— 
"(I) the fair market value of the assets in 
such MSA as of the close of the calendar year 
preceding the calendar year in which the taxable 
year begins, over 
"(II) an amount equal to 60 percent of the 
deductible under the Medicare+Choice MSA plan 
covering the account holder as of January 1 of 
the calendar year in which the taxable year begins. 
Section 220(f)(4) shall not apply to any payment or distribu-
tion from a Medicare+Choice MSA. 
"(B) EXCEPTIONS.—Subparagraph (A) shall not apply 
if the payment or distribution is made on or after the 
date the account holder— 
"(i) becomes disabled within the meaning of section 
72(m)(7), or 
"(ii)dies. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 333 
"(C) SPECIAL RULES.—For purposes of subparagraph 
( A ) -
"(i) all Medicare+Choice MSAs of the account 
holder shall be treated as 1 account, 
"(ii) all payments and distributions not used exclu-
sively to pay the qualified medical expenses of the 
account holder during any taxable year shall be treated 
as 1 distribution, and 
"(iii) any distribution of property shall be taken 
into accoiuit at its fair market value on the date of 
the distribution. 
"(3) WITHDRAWAL OF ERRONEOUS CONTRIBUTIONS.—Section 
220(f)(2) and paragraph (2) of this subsection shall not apply 
to any payment or distribution from a Medicare+Choice MSA 
to the Secretary of Health and Human Services of an erroneous 
contribution to such MSA and of the net income attributable 
to such contribution. 
"(4) 
TRUSTEE-TO-TRUSTEE TRANSFERS.—Section 220(f)(2) 
and paragraph (2) of this subsection shall not apply to any 
trustee-to-trustee transfer fi*om a Medicare+Choice MSA of an 
account holder to another Mediceire+Choice MSA of such 
account holder. 
"(d) SPECIAL RULES FOR TREATMENT OF ACCOUNT AFTER DEATH Applicability. 
OF ACCOUNT HOLDER.—In applying section 220(f)(8)(A) to an 
account which was a Medicare+Choice MSA of a decedent, the 
rules of section 220(f) shall apply in lieu of the rules of subsection 
(c) of this section with respect to the spouse as the account holder 
of such Medicare+Choice MSA. 
"(e) REPORTS.—In the case of a Medicare+Choice MSA, the 
report under section 220(h)— 
"(1) shall include the fair market value of the assets in 
such Medicare+Choice MSA as of the close of each calendar 
year, and 
"(2) shall be furnished to the account holder— 
"(A) not later than January 31 of the calendar year 
following the calendar year to which such reports relate, 
and 
"(B) in such manner as the Secretary prescribes in 
such regulations. 
"(f) COORDINATION WITH LIMITATION ON NUMBER OF TAXPAYERS 
HAVING MEDICAL SAVINGS ACCOUNTS.—Subsection (i) of section 220 
shall not apply to an individual with respect to a Medicare+Choice 
MSA, and Medicare+Choice MSA's shall not be taken into account 
in determining whether the numerical limitations under section 
2200") are exceeded.". 
(b) TECHNICAL AMENDMENTS.— 
(1) The last sentence of section 4973(d) of such Code is 26USC4973. 
amended by inserting "or section 138(c)(3)" after "section 
220(f)(3)". 
(2) Subsection (b) of section 220 of such Code is amended 
26 USC 220. 
by adding at the end the following new paragraph: 
"(7) 
MEDICARE 
ELIGIBLE 
INDIVIDUALS.—The limitation 
under this subsection for any month with respect to an individ-
ual shall be zero for the first month such individual is entitled 
to benefits under title XVIII of the Social Security Act and 
for each month thereafter.". 
I l l STAT. 334 
PUBLIC LAW 105-33—AUG. 5, 1997 
26 u s e 138 note. 
(3) The table of sections for part III of subchapter B of 
chapter 1 of such Code is amended by striking the last item 
and inserting the following: 
"Sec. 138. Medicare+Choice MSA. 
"Sec. 139. Cross references to other Acts.". 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after December 31, 1998. 
CHAPTER 2—DEMONSTRATIONS 
42 use 
1395W-23 note. 
Urban and rural 
areas. 
Subchapter A—Medicare+Choice Competitive Pricing 
Demonstration Project 
SEC. 4011. MEDICARE PREPAID COMPETITIVE PRICING DEMONSTRA-
TION PROJECT. 
(a) ESTABLISHMENT OF PROJECT.—The Secretary of Health and 
Human Services (in this subchapter referred to as the "Secretary") 
shall establish a demonstration project (in this subchapter referred 
to as the "project") under which payments to Medicare+Choice 
organizations in medicare payment areas in which the project is 
being conducted are determined in accordance with a competitive 
pricing methodology established under this subchapter. 
(b) DESIGNATION OF 7 MEDICARE PAYMENT AREAS COVERED 
B
Y PROJECT.— 
(1) IN GENERAL.—The Secretary shall designate, in accord-
ance with the recommendations of the Competitive Pricing 
Advisory Committee under paragraphs (2) and (3), medicare 
payment areas as areas in which the project under this sub-
chapter will be conducted. In this section, the term "Competitive 
Pricing Advisory Committee" means the Competitive Pricing 
Advisory Committee established under section 4012(a). 
(2) INITIAL DESIGNATION OF 4 AREAS.— 
(A) IN GENERAL.—The Competitive Pricing Advisory 
Committee shall recommend to the Secretary, consistent 
with subparagraph (B), the designation of 4 specific areas 
as medicare payment areas to be included in the project. 
Such recommendations shall be made in a manner so as 
to ensure that payments under the project in 2 such areas 
will begin on January 1, 1999, and in 2 such areas will 
begin on January 1, 2000. 
(B) LOCATION OF DESIGNATION.—Of the 4 areas rec-
ommended under subparagraph (A), 3 shall be in urban 
areas and 1 shall be in a rural area. 
(3) DESIGNATION OF ADDITIONAL 3 AREAS.—Not later than 
December 31, 2001, the Competitive Pricing Advisory Commit-
tee may recommend to the Secretary the designation of up 
to 3 additional, specific medicare payment areas to be included 
in the project. 
(c) PROJECT IMPLEMENTATION.— 
(1) IN GENERAL.—Subject to paragraph (2), the Secretary 
shall for each medicare payment area designated under sub-
section (b)— 
(A) in accordance with the recommendations of the 
Competitive Pricing Advisory Committee— 
(i) establish the benefit design among plans offered 
in such area, and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 335 
(ii) structure the method for selecting plans offered 
in such area; and 
(B) in consultation with such Committee— 
(i) establish methods for setting the price to be 
paid to plans, including, if the Secretaries determines 
appropriate, 
the 
rewarding 
and 
penalizing 
of 
Medicare+Choice plans in the area on the basis of 
the attainment of, or failure to attain, applicable qual-
ity standards, and 
(ii) provide for the collection of plan information 
(including information concerning quality and access 
to care), the dissemination of information, and the 
methods of evaluating the results of the project. 
(2) CONSULTATION.—The Secretary shall take into account 
the recommendations of the area advisory committee estab-
lished in section 4012(b), in implementing a project design 
for any area, except that no modifications may be made in 
the project design without consultation with the Competitive 
Pricing Advisory Committee. In no case may the Secretary 
change the designation of an area based on recommendations 
of any area advisory committee. 
(d) MONITORING AND REPORT.— 
(1) MONITORING IMPACT.—Taking into consideration the 
recommendations of the Competitive Pricing Advisory Commit-
tee and the area advisory committees, the Secretary shall 
closely monitor and measure the impact of the project in the 
different areas on the price and quality of, and access to, 
medicare covered services, choice of health plans, changes in 
enrollment, and other relevant factors. 
(2) REPORT.—Not later than December 31, 2002, the Sec-
retary shall submit to Congress a report on the progress under 
the project under this subchapter, including a comparison of 
the matters monitored under paragraph (1) among the different 
designated areas. The report may include any legislative rec-
ommendations for extending the project to the entire medicare 
population. 
(e) WAIVER AUTHORITY.—The Secretary of Health and Human 
Services may waive such requirements of title XVIII of the Social 
Security Act (as amended by this Act) as may be necessary for 
the purposes of canying out the project. 
(f) RELATIONSHIP TO OTHER AUTHORITY.—Except pursuant to 
this subchapter, the Secretary of Health and Human Services may 
not conduct or continue any medicare demonstration project relating 
to payment of health maintenance organizations, Medicare+Choice 
organizations, or similar prepaid managed care entities on the 
basis of a competitive bidding process or pricing system described 
in subsection (a). 
(g) No ADDITIONAL COSTS TO MEDICARE PROGRAM.—The aggre-
gate pa)mients to Medicare+Choice organizations under the project 
for any designated area for a fiscal year may not exceed the aggre-
gate payments to such organizations that would have been made 
under title XVIII of the Social Security Act (42 U.S.C. 1395 et 
seq.), as amended by section 4001, if the project had not been 
conducted. 
(h) DEFINITIONS.—Any term used in this subchapter which 
is also used in part C of title XVIII of the Social Security Act, 
I l l STAT. 336 
PUBLIC LAW 105-33—AUG. 5, 1997 
as amended by section 4001, shall have the same meaning as 
when used in such part. 
SEC. 4012. ADVISORY COMMITTEES. 
(a) COMPETITIVE PRICING ADVISORY COMMITTEE.— 
(1) IN GENERAL.—Before implementing the project under 
this subchapter, the Secretary shall appoint the Competitive 
Pricing Advisory Committee, including independent actuaries, 
individuals with expertise in competitive health plan pricing, 
and an employee of the Office of Personnel Management with 
expertise in the administration of the Federal Employees 
Health Benefit Program, to make recommendations to the Sec-
retary concerning the designation of areas for inclusion in the 
project and appropriate research design for implementing the 
project. 
(2) INITIAL RECOMMENDATIONS.—^The Competitive Pricing 
Advisory Committee initially shall submit recommendations 
regarding the area selection, benefit design among plans 
offered, structuring choice among health plans offered, methods 
for setting the price to be paid to plans, collection of plan 
information (including information concerning quality and 
access to care), information dissemination, and methods of 
evaluating the results of the project. 
(3) QUALITY RECOMMENDATION.—^The Competitive Pricing 
Advisory Committee shall study and make recommendations 
regarding the feasibility of providing financial incentives and 
penalties to plans operating under the project that meet, or 
fail to meet, applicable quality standards. 
(4) ADVICE DURING IMPLEMENTATION.—^Upon implementa-
tion of the project, the Competitive Pricing Advisory Committee 
shall continue to advise the Secretary on the application of 
the design in different areas and changes in the project based 
on experience with its operations. 
(5) SUNSET.—^The Competitive Pricing Advisory Committee 
shall terminate on December 31, 2004. 
(b) APPOINTMENT OF AREA ADVISORY COMMITTEE.—Upon 
the 
designation of an area for inclusion in the project, the Secretary 
shall appoint an area advisory committee, composed of representa-
tives of health plans, providers, and medicare beneficiaries in the 
area, to advise the Secretary concerning how the project will be 
implemented in the area. Such advice may include advice concerning 
the marketing and pricing of plans in the area and other salient 
factors. The duration of such a committee for an area shall be 
for the duration of the operation of the project in the area. 
(c) SPECIAL APPLICATION.—^Notwithstanding section 9(c) of the 
Federal Advisory Committee Act (5 U.S.C. App.), the Competitive 
Pricing Advisory Commission and any area advisory committee 
(described in subsection (b)) may meet as soon as the members 
of the commission or committee, respectively, are appointed. 
Subchapter B—Social Health Maintenance Organizations 
SEC. 4014. SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS). 
(a) EXTENSION OF DEMONSTRATION PROJECT AUTHORITIES.— 
101 Stat. 
Section 4018(b) of the Omnibus Budget Reconciliation Act of 1987 
1330-65. 
is amended— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 337 
(1) in paragraph (1), by striking "1997" and inserting 
"2000", and 
(2) in paragraph (4), by striking "1998" and inserting 
"2001". 
(b) EXPANSION OF CAP.—Section 13567(c) of the Omnibus 
Budget Reconciliation Act of 1993 is amended by striking "12,000" 
107 Stat. 608. 
and inserting "36,000". 
(c) REPORT ON INTEGRATION AND TRANSITION.— 
42 use 
(1) IN GENERAL.—The Secretary of Health and Human 
I395w-2l note. 
Services shall submit to Congress, by not later than January 
1, 1999, a plan for the integration of health plans offered 
by social health maintenance organizations (including SHMO 
I and SHMO II sites developed under section 2355 of the 
Deficit Reduction Act of 1984 and under the amendment made 
by section 4207(b)(3)(B)(i) of OBRA-1990, respectively) and 
similar plans as an option under the Medicare+Choice program 
under part C of title XVIII of the Social Security Act. 
(2) PROVISION FOR TRANSITION.—Such plan shall include 
a transition for social health maintenance organizations operat-
ing under demonstration project authority under such section. 
(3) PAYMENT POLICY.—^The report shall also include rec-
ommendations on appropriate payment levels for plans offered 
by such organizations, including an analysis of the application 
of risk adjustment factors appropriate to the population served 
by such organizations. 
Subchapter C—^Medicare Subvention Demonstration Project 
for Military Retirees 
SEC. 4015. MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR 
MILITARY RETIREES. 
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et seq.) (as 
amended by sections 4603 and 4801) is amended by adding at 
the end the following: 
"MEDICARE SUBVENTION DEMONSTRATION PROJECT FOR MILITARY 
42 use 1395ggg. 
RETIREES 
"SEC. 1896. (a) DEFINITIONS.—In this section: 
"(1) ADMINISTERING SECRETARIES.—^The term 'administer-
ing Secretaries' means the Secretary and the Secretary of 
Defense acting jointly. 
"(2) DEMONSTRATION PROJECT; PROJECT.—^The terms 'dem-
onstration project' and 'project' mean the demonstration project 
carried out under this section. 
"(3) DESIGNATED PROVIDER.—The term 'designated provider' 
has the meaning given that term in section 721(5) of the 
National Defense Authorization Act For Fiscal Year 1997 (Pub-
He Law 104-201; 110 Stat. 2593; 10 U.S.C. 1073 note). 
"(4) 
MEDICARE-ELIGIBLE 
MILITARY RETIREE OR DEPEND-
ENT.—The term 'medicare-eligible military retiree or dependent' 
means an individual described in section 1074(b) or 1076(b) 
of title 10, United States Code, who— 
"(A) would be eligible for health benefits under section 
1086 of such title by reason of subsection (c)(1) of such 
section 1086 but for the operation of subsection (d) of 
such section 1086; 
I l l STAT. 338 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(B)(i) is entitled to benefits under part A of this title; 
and 
"(ii) if the individual was entitled to such benefits 
before July 1, 1997, received health care items or services 
from a health care facility of the uniformed services before 
that date, but after becoming entitled to benefits under 
part A of this title; 
"(C) is enrolled for benefits under part B of this title; 
and 
"(D) has attained age 65. 
"(5) MEDICARE HEALTH CARE SERVICES.—The term 'medi-
care health care services' means items or services covered under 
part A or B of this title. 
"(6) MILITARY TREATMENT FACILITY.—The term 'military 
treatment facility' means a facility referred to in section 1074(a) 
of title 10, United States Code. 
"(7) TRICARE.—The term 'TRICARE' has the same mean-
ing as the term TRICARE program' imder section 711 of the 
National Defense Authorization Act for Fiscal Year 1996 (10 
U.S.C. 1073 note). 
"(8) TRUST FUNDS.—The term 'trust funds' means the Fed-
eral Hospital Insurance Trust Fund established in section 1817 
and the Federal Supplementary Medical Insurance Trust Fund 
established in section 1841. 
"(b) DEMONSTRATION PROJECT.— 
"(1) IN GENERAL,— 
"(A) ESTABLISHMENT.—The administering Secretaries 
are authorized to establish a demonstration project (under 
an agreement entered into by the administering Secretar-
ies) under which the Secretary shall reimburse the Sec-
retary of Defense, fi-om the trust funds, for medicare health 
care services furnished to certain medicare-eligible military 
retirees or dependents in a military treatment facility or 
by a designated provider. 
"(B) AGREEMENT.—The agreement entered into under 
subparagraph (A) shall include at a minimum— 
"(i) a description of the benefits to be provided 
to the participants of the demonstration project estab-
lished under this section; 
"(ii) a description of the eligibility rules for partici-
^ 
pation in the demonstration project, including any cost 
sharing requirements; 
"(iii) a description of how the demonstration project 
will satisfy the requirements under this title; 
"(iv) a description of the sites selected under para-
graph (2); 
"(v) a description of how reimbursement require-
ments under subsection (i) £ind maintenance of effort 
requirements under subsection (j) will be implemented 
in the demonstration project; 
"(vi) a statement that the Secretary shall have 
access to all data of the Department of Defense that 
the Secretary determines is necessary to conduct 
independent estimates and audits of the maintenance 
of effort requirement, the annual reconciliation, and 
related matters required under the demonstration 
project; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 339 
"(vii) a description of any requirement that the 
Secretary waives pursuant to subsection (d); and 
"(viii) a certification, provided after review by the 
administering Secretaries, that any entity that is 
receiving pa5mients by reason of the demonstration 
project has sufficient— 
"(I) resources and expertise to provide, consist-
ent with payments under subsection (i), the full 
range of benefits required to be provided to bene-
ficiaries under the project; and 
"(II) information and billing systems in place 
to ensure the accurate and timely submission of 
claims for benefits and to ensure that providers 
of services, physicians, and other health care 
professionals are reimbursed by the entity in a 
timely and accurate manner. 
"(2) NUMBER OF SITES.—The project established under this 
section shall be conducted in no more than 6 sites, designated 
jointly by the administering Secretaries after review of all 
TRICARE regions. 
"(3) RESTRICTION.—No new military treatment facilities will 
be built or expsmded with funds fi-om the demonstration project. 
"(4) DURATION.—The administering Secretaries shall con-
duct the demonstration project during the 3-year period begin-
ning on January 1, 1998. 
"(5) REPORT.—^At least 60 days prior to the commencement 
of the demonstration project, the administering Secretaries 
shall submit a copy of the agreement entered into under para-
graph (1) to the committees of jurisdiction under this title. 
"(c) CREDITING OF PAYMENTS.—A payment received by the Sec-
retary of Defense under the demonstration project shall be credited 
to the applicable Department of Defense medical appropriation 
(and within that appropriation). Any such pajnnent received during 
a fiscal year for services provided during a prior fiscal year may 
be obligated by the Secretary of Defense during the fiscal year 
during which the payment is received. 
"(d) WAIVER OF CERTAIN MEDICARE REQUIREMENTS.— 
"(1) AUTHORITY.-
"(A) IN GENERAL.—Except as provided under subpara-
graph (B), the demonstration project shall meet all require-
ments of Medicare+Choice plans under part C of this title 
and regulations pertaining thereto, and other requirements 
for receiving medicare payments, except that the prohibi-
tion of payments to Federal providers of services under 
sections 1814(c) and 1835(d), and paragraphs (2) and (3) 
of section 1862(a) shall not apply. 
"(B) WAIVER.—Except as provided in paragraph (2), 
the Secretary is authorized to waive any requirement 
described under subparagraph (A), or approve equivalent 
or alternative ways of meeting such a requirement, but 
only if such waiver or approval— 
"(i) reflects the unique status of the Department 
of Defense as an agency of the Federal Government; 
and 
"(ii) is necessary to carry out the demonstration 
project. 
I l l STAT. 340 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) BENEFICIARY PROTECTIONS AND OTHER MATTERS.—The 
demonstration project shall comply with the requirements of 
part C of this title that relate to beneficiary protections and 
other matters, including such requirements relating to the fol-
lowing areas: 
"(A) Enrollment and disenroUment. 
"(B) Nondiscrimination. 
"(C) Information provided to beneficiaries. 
"(D) Cost-sharing limitations. 
"(E) Appeal and grievance procedures. 
"(F) Provider participation. 
"(G) Access to services. 
"(H) Quality assurance and external review. 
"(I) Advance directives. 
"(J) Other areas of beneficiary protections that the 
Secretary determines are applicable to such project. 
"(e) INSPECTOR GENERAL.—Nothing in the agreement entered 
into under subsection (b) shall limit the Inspector General of the 
Department of Health and Human Services from investigating any 
matters regarding the expenditure of funds under this title for 
the demonstration project, including compliance with the provisions 
of this title and all other relevant laws. 
"(f) VOLUNTARY PARTICIPATION.—Participation of medicare-
eligible military retirees or dependents in the demonstration project 
shall be voluntary. 
"(g) TRICARE HEALTH CARE PLANS.— 
"(1) MODIFICATION OF TRICARE CONTRACTS.—In carrying 
out the demonstration project, the Secretary of Defense is 
authorized to amend existing TRICARE contracts (including 
contracts with designated providers) in order to provide the 
medicare health care services to the medicare-eligible military 
retirees and dependents enrolled in the demonstration project 
consistent with part C of this title. 
"(2) HEALTH CARE BENEFITS.—The administering Secretar-
ies shall prescribe the minimum health care benefits to be 
provided under such a plan to medicare-eligible military retirees 
or dependents enrolled in the plan. Those benefits shall include 
at least all medicare health care services covered under this 
title. 
"(h) ADDITIONAL PLANS.—Notwithstanding any provisions of 
title 10, United States Code, the administering Secretaries may 
agree to include in the demonstration 
project any of the 
Medicare+Choice plans described in section 1851(a)(2)(A), and such 
agreement may include an agreement between the Secretary of 
Defense and the Medicare+Choice organization offering such plan 
to provide medicare health care services to medicare-eligible mili-
tary retirees or dependents and for such Secretary to receive pay-
ments from such organization for the provision of such services, 
"(i) 
PAYMENTS 
BASED 
ON REGULAR 
MEDICARE 
PAYMENT 
RATES.— 
"(1) IN GENERAL.—Subject to the succeeding provisions of 
this subsection, the Secretary shall reimburse the Secretary 
of Defense for services provided under the demonstration project 
at a rate equal to 95 percent of the amount paid to a 
Medicare+Choice organization under part C of this title with 
Regulations. 
respect to such an enroUee. In cases in which a payment amount 
may not otherwise be readily computed, the Secretary shall 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 341 
establish rules for computing equivalent or comparable payment 
amounts. 
"(2) EXCLUSION OF CERTAIN AMOUNTS.—In computing the 
amount of payment under paragraph (1), the following shall 
be excluded: 
"(A) SPECIAL PAYMENTS.—Any amount attributable to 
an adjustment under subparagraphs (B) and (F) of section 
1886(d)(5) and subsection (h) of such section. 
"(B) PERCENTAGE OF CAPITAL PAYMENTS.—An amount 
determined by the administering Secretaries for amounts 
attributable to payments for capital-related costs under 
subsection (g) of such section. 
"(3) PERIODIC PAYMENTS FROM MEDICARE TRUST FUNDS.— 
Payments under this subsection shall be made— 
"(A) on a periodic basis consistent with the periodicity 
of payments under this title; and 
"(B) in appropriate part, as determined by the Sec-
retary, from the trust funds. 
"(4) CAP ON AMOUNT.—The aggregate amount to be 
reimbursed under this subsection pursuant to the agreement 
entered into between the administering Secretaries under sub-
section (b) shall not exceed a total of— 
"(A) $50,000,000 for calendar year 1998; 
"(B) $60,000,000 for calendar year 1999; and 
"(C) $65,000,000 for calendar year 2000. 
"(j) MAINTENANCE OF EFFORT.— 
"(1) MONITORING EFFECT OF DEMONSTRATION PROGRAM ON 
COSTS TO MEDICARE PROGRAM.— 
"(A) IN GENERAL.—The administering Secretaries, in 
consultation with the Comptroller General, shall closely 
monitor the expenditures made under the medicare pro-
gram for medicare-eligible military retirees or dependents 
during the period of the demonstration project compared 
to the expenditures that would have been made for such 
medicare-eligible military retirees or dependents during 
that period if the demonstration project had not been con-
ducted. The agreement entered into by the administering 
Secretaries under subsection (b) shall require any partici-
pating military treatment facility to maintain the level 
of effort for space available care to medicare-eligible mili-
tary retirees or dependents. 
"(B) ANNUAL REPORT BY THE COMPTROLLER GENERAL.— 
Not later than December 31 of each year during which 
the demonstration project is conducted, the Comptroller 
General shall submit to the administering Secretaries and 
the appropriate committees of Congress a report on the 
extent, if any, to which the costs of the Secretary under 
the medicare program under this title increased during 
the preceding fiscal year as a result of the demonstration 
project. 
"(2) REQUIRED RESPONSE IN CASE OF INCREASE IN COSTS.— 
"(A) IN GENERAL.—If the administering Secretaries 
find, based on paragraph (1), that the expenditures under 
the medicare program under this title increased (or are 
expected to increase) during a fiscal year because of the 
demonstration project, the administering Secretaries shall 
take such steps as may be needed— 
I l l STAT. 342 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(i) to recoup for the medicare program the amount 
of such increase in expenditures; and 
"(ii) to prevent any such increase in the future. 
"(B) STEPS.—Such steps— 
"(i) under subparagraph (A)(i) shall include pay-
ment of the amount of such increased expenditures 
by the Secretary of Defense from the current medical 
care appropriation of the Department of Defense to 
the trust funds; and 
"(ii) under subparagraph (A)(ii) shall include 
suspending or terminating the demonstration project 
(in whole or in part) or lowering the amount of pa5anent 
under subsection (iXD. 
"(k) EVALUATION AND REPORTS.— 
"(1) INDEPENDENT EVALUATION.—The Comptroller General 
of the United States shall conduct an evaluation of the dem-
onstration project, and shall submit annual reports on the 
demonstration project to the administering Secretaries and to 
the committees of jurisdiction in the Congress. The first report 
shall be submitted not later than 12 months after the date 
on which the demonstration project begins operation, and the 
final report not later than 3V2 years after that date. The evalua-
tion and reports shall include an assessment, based on the 
agreement entered into under subsection (b), of the following: 
"(A) Any savings or costs to the medicare program 
under this title resulting from the demonstration project. 
"(B) The cost to the Department of Defense of providing 
care to medicare-eligible military retirees and dependents 
under the demonstration project. 
"(C) A description of the effects of the demonstration 
project on military treatment facility readiness and training 
and the probable effects of the project on overall Depart-
ment of Defense medical readiness and training. 
"(D) Any impact of the demonstration project on access 
to care for active duty military personnel and their depend-
ents. 
"(E) An analysis of how the demonstration project 
affects the overall accessibility of the uniformed services 
treatment system and the amount of space available for 
point-of-service care, and a description of the unintended 
effects (if any) upon the normal treatment priority system. 
"(F) Compliance by the Department of Defense with 
the requirements under this title. 
"(G) The number of medicare-eligible military retirees 
and dependents opting to participate in the demonstration 
project instead of receiving health benefits through another 
health insureince plem (including benefits under this title). 
"(H) A list of the health insurance plans and programs 
that were the primary payers for medicare-eligible military 
retirees and dependents during the year prior to their 
participation in the demonstration project and the distribu-
tion of their previous enrollment in such plans and pro-
grams. 
"(I) Any impact of the demonstration project on private 
health care providers and beneficiaries under this title 
that are not enrolled in the demonstration project. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 343 
"(J) An assessment of the access to care and quality 
of care for medicare-eligible military retirees and depend-
ents under the demonstration project. 
"(K) An analysis of whether, and in what manner, 
easier access to the uniformed services treatment system 
affects the number of medicare-eligible military retirees 
and dependents receiving medicare health care services. 
"(L) Any impact of the demonstration project on the 
access to care for medicare-eligible military retirees and 
dependents who did not enroll in the demonstration project 
and for other individuals entitled to benefits under this 
title. 
"(M) A description of the difficulties (if any) experi-
enced by the Department of Defense in managing the dem-
onstration project and TRICARE contracts. 
"(N) Any additional elements specified in the agree-
ment entered into under subsection (b). 
"(O) Any additional elements that the Comptroller Gen-
eral of the United States determines is appropriate to 
assess regarding the demonstration project. 
"(2) REPORT ON EXTENSION AND EXPANSION OF DEMONSTRA-
TION PROJECT.—Not later than 6 months after the date of 
the submission of the final report by the Comptroller General 
of the United States under paragraph (1), the administering 
Secretaries shall submit to Congress a report containing their 
recommendation as to— 
"(A) whether there is a cost to the health care program 
under this title in conducting the demonstration project, 
and whether the demonstration project could be expanded 
without there being a cost to such health care program 
or to the Federal Government; 
"(B) whether to extend the demonstration project or 
make the project permanent; and 
"(C) whether the terms and conditions of the project 
should be continued (or modified) if the project is extended 
or expanded.". 
(b) IMPLEMENTATION PLAN FOR VETERANS SUBVENTION.—Not 
later than 12 months after the start of the demonstration project, 
the Secretary of Health and Human Services and the Secretary 
of Veterans Affairs shall jointly submit to Congress a detailed 
implementation plan for a subvention demonstration project (that 
follows the model of the demonstration project conducted under 
section 1896 of the Social Security Act (as added by subsection 
(a)) to begin in 1999 for veterans (as defined in section 101 of 
title 38, United States Code) that are eligible for benefits under 
title XVIII of the Social Security Act. 
SEC. 
4016. 
MEDICARE 
PROJECT. 
Subchapter D—Other Projects 
COORDINATED 
CARE 
42 use 1395ggg 
note. 
DEMONSTRATION 
42 USC 1395b-l 
note. 
(a) DEMONSTRATION PROJECTS.— 
(1) IN GENERAL.—The Secretary of Health and Human 
Services (in this section referred to as the "Secretary") shall 
conduct demonstration projects for the purpose of evaluating 
methods, such as case management and other models of coordi-
nated care, that— 
I l l STAT. 344 
PUBLIC LAW 105-33—AUG. 5, 1997 
Urban and rural 
areas. 
District of 
Columbia. 
(A) improve the quality of items and services provided 
to target individuals; and 
(B) reduce expenditures under the medicare program 
under title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.) for items and services provided to target 
individuals. 
(2) TARGET INDIVIDUAL DEFINED.—In this section, the term 
"target individual" means an individual that has a chronic 
illness, as defined and identified by the Secretary, and is 
enrolled under the fee-for-service program under parts A and 
B of title XVIII of the Social Security Act (42 U.S.C. 1395c 
et seq.; 1395j et seq.). 
(b) PROGRAM DESIGN.— 
(1) INITIAL DESIGN.—The Secretary shall evaluate best prac-
tices in the private sector of methods of coordinated care for 
a period of 1 year and design the demonstration project based 
on such evaluation. 
(2) NUMBER AND PROJECT AREAS.—Not later than 2 years 
after the date of enactment of this Act, the Secretary shall 
implement at least 9 demonstration projects, including— 
(A) 5 projects in urban areas; 
(B) 3 projects in rural areas; and 
(C) 1 project within the District of Columbia which 
is operated by a nonprofit academic medical center that 
maintains a National Cancer Institute certified comprehen-
sive cancer center. 
(3) 
EXPANSION OF PROJECTS; IMPLEMENTATION OF DEM-
ONSTRATION PROJECT RESULTS.— 
(A) EXPANSION OF PROJECTS.—If the initial report 
under subsection (c) contains an evaluation that demonstra-
tion projects— 
(i) reduce expenditures under the medicare pro-
gram; or 
(ii) do not increase expenditures under the medi-
care program and increase the quality of health care 
services provided to target individuals and satisfaction 
of beneficiaries and health care providers; 
the Secretary shall continue the existing demonstration 
projects and may expand the number of demonstration 
projects. 
(B) 
IMPLEMENTATION OF 
DEMONSTRATION PROJECT 
RESULTS.—If a report under subsection (c) contains an 
evaluation as described in subparagraph (A), the Secretary 
may issue regulations to implement, on a permanent basis, 
the components of the demonstration project that are bene-
ficial to the medicare program. 
(c) REPORT TO CONGRESS.— 
(1) IN GENERAL.—Not later than 2 years after the Secretary 
implements the initial demonstration projects under this sec-
tion, and biannually thereafter, the Secretary shall submit 
to Congress a report regarding the demonstration projects con-
ducted under this section. 
(2) CONTENTS OF REPORT.—The report in paragraph (1) 
shall include the following: 
(A) A description of the demonstration projects con-
ducted under this section. 
(B) An evaluation o
f
— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 345 
(i) the cost-effectiveness of the demonstration 
projects; 
(ii) the quahty of the health care services provided 
to target individuals under the demonstration projects; 
and 
(iii) beneficiary and health care provider satisfac-
tion under the demonstration project. 
(C) Any other information regarding the demonstration 
projects conducted under this section that the Secretary 
determines to be appropriate. 
(d) WAIVER AUTHORITY.—The Secretary shall waive compliance 
with the requirements of title XVIII of the Social Security Act 
(42 U.S.C. 1395 et seq.) to such extent and for such period as 
the Secretary determines is necessary to conduct demonstration 
projects. 
(e) FUNDING.— 
(1) DEMONSTRATION PROJECTS.— 
(A) IN GENERAL.— 
(i) STATE PROJECTS.—Except as provided in clause 
(ii), the Secretary shall provide for the transfer from 
the Federal Hospital Insurance Trust Fund and the 
Federal Supplementary Insurance Trust Fund under 
title XVIII of the Social Security Act (42 U.S.C. 13951, 
1395t), in such proportions as the Secretary determines 
to be appropriate, of such fiinds as are necessary for 
the costs of carrying out the demonstration projects 
under this section. 
(ii) CANCER HOSPITAL.—In the case of the project 
described in subsection (b)(2)(C), amounts shall be 
available only as provided in any Federal law making 
appropriations for the District of Columbia. 
(B) LIMITATION.—In conducting the demonstration 
project under this section, the Secretary shall ensure that 
the aggregate payments made by the Secretary do not 
exceed the amount which the Secretary would have paid 
if the demonstration projects under this section were not 
implemented. 
(2) EVALUATION AND REPORT.—There are authorized to be 
appropriated such sums as are necessary for the purpose of 
developing and submitting the report to Congress under sub-
section (c). 
SEC. 4017. ORDERLY TRANSITION OF MUNICIPAL HEALTH SERVICE 
DEMONSTRATION PROJECTS. 
Section 9215 of the Consolidated Omnibus Budget Reconcili-
ation Act of 1985, as amended by section 6135 of OBRA-1989 
and section 13557 of OBRA-1993, is further amended— 
42 USC I395b-1 
(1) by inserting "(a)" before "The Secretary", and 
note. 
(2) by adding at the end the following: "Subject to sub-
section (c), the Secretary may further extend such demonstra-
tion projects through December 31, 2000, but only with respect 
to individuals who received at least one service during the 
period beginning on January 1, 1996, and ending on the date 
of the enactment of the Balanced Budget Act of 1997. 
"(b) The Secretary shall work with each such demonstration 
project to develop a plan, to be submitted to the Committee on 
Ways and Means and the Committee on Commerce of the House 
I l l STAT. 346 
PUBLIC LAW 105-33—AUG. 5, 1997 
of Representatives and the Committee on Finance of the Senate 
by March 31, 1998, for the orderly transition of demonstration 
projects and the project participants to a non-demonstration project 
health care delivery system, such as through integration with a 
private or public health plan, including a medicaid managed care 
or Medicare+Choice plan, 
"(c) A demonstration project under subsection (a) which does 
not develop and submit a transition plan under subsection (b) 
by March 31, 1998, or, if later, 6 months after the date of the 
enactment of the Balanced Budget Act of 1997, shall be discontinued 
as of December 31, 1998. The Secretary shall provide appropriate 
technical assistance to assist in the transition so that disruption 
of medical services to project participants may be minimized.". 
42 use 
SEC. 4018. MEDICARE E^fROLLMENT DEMONSTRATION PROJECT. 
1395W-21 note. 
/ x T
% 
T» 
(a) DEMONSTRATION PROJECT.— 
(1) ESTABLISHMENT.—^The Secretary shall implement a 
demonstration project (in this section referred to as the 
"project") for the purpose of evaluating the use of a third-
party contractor to conduct the Medicare+Choice plan enroll-
ment and disenrollment functions, as described in part C of 
title XVIII of the Social Security Act (as added by section 
4001 of this Act), in an area. 
(2) CONSULTATION.—Before implementing the project under 
this section, the Secretary shall consult with affected parties 
on— 
(A) the design of the project; 
(B) the selection criteria for the third-party contractor; 
and 
(C) the establishment of performance standards, as 
described in paragraph (3). 
(3) PERFORMANCE STANDARDS.— 
(A) IN GENERAL.—^The Secretary 
shall 
establish 
performance standards for the accuracy and timeliness of 
the Medicare+Choice plan enrollment and disenrollment 
functions performed by the third-party contractor. 
(B) NONCOMPLIANCE.—In the event that the third-party 
contractor is not in substantial compliance with the 
performance standards established under subparagraph 
(A), such enrollment and disenrollment functions shall be 
performed by the Medicare+Choice plan until the Secretary 
appoints a new third-party contractor. 
(b) REPORT TO CONGRESS.—^The Secretary shall periodically 
report to Congress on the progress of the project conducted pursuant 
to this section. 
(c) WAIVER AUTHORITY.—^The Secretary shall waive compliance 
with the requirements of part C of title XVIII of the Social Security 
Act (as amended by section 4001 of this Act) to such extent and 
for such period as the Secretary determines is necessary to conduct 
the project. 
(d) DURATION.—A demonstration project under this section shall 
be conducted for a 3-year period. 
(e) 
SEPARATE FROM 
OTHER 
DEMONSTRATION 
PROJECTS.—A 
project implemented by the Secretary under this section shall not 
be conducted in conjunction with any other demonstration project. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 347 
SEC. 4019. EXTENSION OF CERTAIN MEDICARE COMMUNITY NURSING 
ORGANIZATION DEMONSTRATION PROJECTS. 
Notwithstanding any other provision of law, demonstration 
projects conducted under section 4079 of the Omnibus Budget Rec-
onciUation Act of 1987 may be conducted for an additional period 
of 2 years, and the deadline for any report required relating to 
the results of such projects shall be not later than 6 months before 
the end of such additional period. 
CHAPTER 3—COMMISSIONS 
SEC. 4021. NATIONAL BIPARTISAN COMMISSION ON THE FUTURE OF 
MEDICARE. 
(a) ESTABLISHMENT.—There is established a commission to be 
known as the National Bipartisan Commission on the Future of 
Medicare (in this section referred to as the "Commission"). 
(b) DUTIES OF THE COMMISSION.—The Commission shall— 
(1) review and analyze the long-term financial condition 
of the medicare program under title XVIII of the Social Security 
Act (42 U.S.C. 1395 et seq.); 
(2) identify problems that threaten the financial integrity 
of the Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund established 
under that title (42 U.S.C. 1395i, 1395t), including— 
(A) the fin£incial impact on the medicare program of 
the significant increase in the number of medicare eligible 
individuals which will occur beginning approximately dur-
ing 2010 and lasting for approximately 25 years, and 
(B) the extent to which current medicare update 
indexes do not accurately reflect inflation; 
(3) analyze potential solutions to the problems identified 
under paragraph (2) that will ensure both the financial integrity 
of the medicare program and the provision of appropriate bene-
fits under such program, including methods used by other 
nations to respond to comparable demographic patterns in eligi-
bility for health care benefits for elderly and disabled individ-
uals and trends in employment-related health care for retirees; 
(4) make recommendations to restore the solvency of the 
Federal Hospital Insurance Trust Fund and the financial integ-
rity of the Federal Supplementary Medical Insurance Trust 
Fund; 
(5) make recommendations for establishing the appropriate 
financial structure of the medicare program as a whole; 
(6) make recommendations for establishing the appropriate 
balance of benefits covered and beneficiary contributions to 
the medicare program; 
(7) make recommendations for the time periods during 
which the recommendations described in paragraphs (4), (5), 
and (6) should be implemented; 
(8) make recommendations regarding the financing of grad-
uate medical education (GME), including consideration of alter-
native broad-based sources of funding for such education and 
fiinding for institutions not currently eligible for such GME 
support that conduct approved graduate medical residency pro-
grams, such as children's hospitals; 
(9) make recommendations on modifying age-based eligi-
bility to correspond to changes in age-based eligibility under 
42 use 1395mm 
note. 
42 use 1395b 
note. 
I l l STAT. 348 
PUBLIC LAW 105-33—AUG. 5, 1997 
President. 
the OASDI program and on the feasibihty of allowing individ-
uals between the age of 62 and the medicare eligibility age 
to buy into the medicare program; 
(10) make recommendations on the impact of chronic dis-
ease and disability trends on future costs and quality of services 
under the current benefit, financing, and delivery system struc-
ture of the medicare program; 
(11) make recommendations regarding a comprehensive 
approach to preserve the program; and 
(12) review and analyze such other matters as the Commis-
sion deems appropriate. 
(c) MEMBERSHIP.— 
(1) NUMBER AND APPOINTMENT.—The Commission shall be 
composed of 17 members, of whom— 
(A) four shall be appointed by the President; 
(B) six shall be appointed by the Majority Leader of 
the Senate, in consultation with the Minority Leader of 
the Senate, of whom not more than 4 shall be of the 
same political party; 
(C) six shall be appointed by the Speaker of the House 
of Representatives, in consultation with the Minority 
Leader of the House of Representatives, of whom not more 
than 4 shall be of the same political party; and 
(D) one, who shall serve as Chairman of the Commis-
sion, appointed jointly by the President, Majority Leader 
of the Senate, and the Speaker of the House of Representa-
tives. 
(2) DEADLINE FOR APPOINTMENT.—Members of the Commis-
sion shall be appointed by not later than December 1, 1997. 
(3) TERMS OF APPOINTMENT.—The term of any appointment 
under paragraph (1) to the Commission shall be for the life 
of the Commission. 
(4) MEETINGS.—The Commission shall meet at the call 
of its Chairman or a majority of its members. 
(5) QUORUM.—^A quorum shall consist of 8 members of 
the Commission, except that 4 members may conduct a hearing 
under subsection (e). 
(6) VACANCIES.—A vacancy on the Commission shall be 
filled in the same manner in which the original appointment 
was made not later than 30 days after the Commission is 
given notice of the vacancy and shall not affect the power 
of the remaining members to execute the duties of the Commis-
sion. 
(7) COMPENSATION.—Members of the Commission shall 
receive no additional pay, allowances, or benefits by reason 
of their service on the Commission. 
(8) EXPENSES.—Each member of the Commission shall 
receive travel expenses and per diem in lieu of subsistence 
in accordance with sections 5702 and 5703 of title 5, United 
States Code. 
(d) STAFF AND SUPPORT SERVICES.— 
(1) EXECUTIVE DIRECTOR.— 
(A) APPOINTMENT.—The Chairman shall appoint an 
executive director of the Commission. 
(B) COMPENSATION.—The executive director shall be 
paid the rate of basic pay for level V of the Executive 
Schedule. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 349 
(2) STAFF.—With the approval of the Commission, the 
executive director may appoint such personnel as the executive 
director considers appropriate. 
(3) APPLICABILITY OF CIVIL SERVICE LAWS.—The staff of 
the Commission shall be appointed without regard to the provi-
sions of title 5, United States Code, governing appointments 
in the competitive service, and shall be paid without regard 
to the provisions of chapter 51 and subchapter III of chapter 
53 of such title (relating to classification and General Schedule 
pay rates). 
(4) EXPERTS AND CONSULTANTS.—With the approval of the 
Commission, the executive director may procure temporary and 
intermittent services under section 3109(b) of title 5, United 
States Code. 
(5) PHYSICAL FACILITIES.—The Administrator of the Gen-
eral Services Administration shall locate suitable office space 
for the operation of the Commission. The facilities shall serve 
as the headquarters of the Commission and shall include all 
necessary equipment and incidentals required for the proper 
functioning of the Commission. 
(e) POWERS OF COMMISSION.— 
(1) HEARINGS AND OTHER ACTIVITIES.—For the purpose of 
carrying out its duties, the Commission may hold such hearings 
and undertake such other activities as the Commission deter-
mines to be necessary to carry out its duties. 
(2) STUDIES BY GAO.—Upon the request of the Commission, 
the Comptroller General shall conduct such studies or investiga-
tions as the Commission determines to be necessary to carry 
out its duties. 
(3) COST ESTIMATES BY CONGRESSIONAL BUDGET OFFICE AND 
OFFICE OF THE CHIEF ACTUARY OF HCFA.— 
(A) The Director of the Congressional Budget Office 
or the Chief Actuary of the Health Care Financing Adminis-
tration, or both, shall provide to the Commission, upon 
the request of the Commission, such cost estimates as 
the Commission determines to be necessary to carry out 
its duties. 
(B) The Commission shall reimburse the Director of 
the Congressional Budget Office for expenses relating to 
the employment in the office of the Director of such addi-
tional staff as may be necessary for the Director to comply 
with requests by the Commission under subparagraph (A). 
(4) DETAIL OF FEDERAL EMPLOYEES.—Upon the request of 
the Commission, the head of any Federal agency is authorized 
to detail, without reimbursement, any of the personnel of such 
agency to the Commission to assist the Commission in carrying 
out its duties. Any such detail shall not interrupt or otherwise 
affect the civil service status or privileges of the Federal 
employee. 
(5) TECHNICAL ASSISTANCE.—Upon the request of the 
Commission, the head of a Federal agency shall provide such 
technical assistance to the Commission as the Commission 
determines to be necessary to carry out its duties, 
(6) USE OF MAILS.—The Commission may use the United 
States mails in the same manner and under the same conditions 
as Federal agencies and shall, for purposes of the frank, be 
I l l STAT. 350 
PUBLIC LAW 105-33—AUG. 5, 1997 
considered a commission of Congress as described in section 
3215 of title 39, United States Code. 
(7) OBTAINING INFORMATION.—^The Commission may secure 
directly from any Federal agency information necessary to 
enable it to carry out its duties, if the information may be 
disclosed under section 552 of title 5, United States Code. 
Upon request of the Chairman of the Commission, the head 
of such agency shall furnish such information to the Commis-
sion. 
(8) ADMINISTRATIVE SUPPORT SERVICES.—Upon the request 
of the Commission, the Administrator of General Services shall 
provide to the Commission on a reimbursable basis such 
administrative 
support services as the Commission 
may 
request. 
(9) PRINTING.—For purposes of costs relating to printing 
and binding, including the cost of personnel detailed from the 
Government Printing Office, the Commission shall be deemed 
to be a committee of the Congress. 
(f) REPORT.—Not later than March 1, 1999, the Commission 
shall submit a report to the President and Congress which shall 
contain a detailed statement of only those recommendations, find-
ings, and conclusions of the Commission that receive the approval 
of at least 11 members of the Commission. 
(g) TERMINATION.—^The Commission shall terminate 30 days 
after the date of submission of the report required in subsection 
(f). 
(h) AUTHORIZATION OF APPROPRIATIONS.—There are authorized 
to be appropriated $1,500,000 to carry out this section. 60 percent 
of such appropriation shall be payable from the Federal Hospital 
Insurance Trust Fund, and 40 percent of such appropriation shall 
be payable from the Federal Supplementary Medical Insurance 
Trust Fund under title XVIII of the Social Security Act (42 U.S.C. 
13951, 1395t). 
SEC. 4022. MEDICARE PAYMENT ADVISORY COMMISSION. 
(a) IN GENERAL.—^Title XVIII is amended by inserting after 
section 1804 the following new section: 
42 use 1395b-€. 
"MEDICARE PAYMENT ADVISORY COMMISSION 
"SEC. 1805. (a) ESTABLISHMENT.—^There is hereby established 
the Medicare Payment Advisory Commission (in this section 
referred to as the 'Commission'). 
"(b) DUTIES.— 
"(1) REVIEW OF PAYMENT POLICIES AND ANNUAL REPORTS.— 
The Commission shall— 
"(A) review payment policies under this title, including 
the topics described in paragraph (2); 
"(B) make recommendations to Congress concerning 
such payment policies; 
"(C) by not later than March 1 of each year (beginning 
with 1998), submit a report to Congress containing the 
results of such reviews and its recommendations concerning 
such policies; and 
"(D) by not later than June 1 of each year (beginning 
with 1998), submit a report to Congress containing an 
examination of issues affecting the medicare program. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 351 
including the implications of changes in health care deliv-
ery in the United States and in the market for health 
care services on the medicare program. 
"(2) SPECIFIC TOPICS TO BE REVIEWED.— 
"(A) 
MEDICARE+CHOICE 
PROGRAM.—Specifically, 
the 
Commission 
shall 
review, 
with 
respect 
to 
the 
Medicare+Choice program under part C, the following: 
"(i) The methodology for making payment to plans 
under such program, including the making of differen-
tial payments and the distribution of differential 
updates among different payment areas. 
"(ii) The mechanisms used to adjust payments for 
risk and the need to adjust such mechanisms to take 
into account health status of beneficiaries. 
"(iii) The implications of risk selection both among 
Medicare+Choice 
organizations 
and 
between 
the 
Medicare+Choice option and the original medicare fee-
for-service option. 
"(iv) The development and implementation of 
mechanisms to assure the quality of care for those 
enrolled with Medicare+Choice organizations. 
"(v) The impact of the Medicare+Choice program 
on access to care for medicare beneficiaries. 
"(vi) Other major issues in implementation and 
further development of the Medicare+Choice program. 
"(B) ORIGINAL MEDICARE FEE-FOR-SERVICE SYSTEM.— 
Specifically, the Commission shall review payment policies 
under parts A and B, including— 
"(i) the factors affecting expenditures for services 
in different sectors, including the process for updating 
hospital, skilled nursing facility, physician, and other 
fees, 
"(ii) payment methodologies, and 
"(iii) their relationship to access and quality of 
care for medicare beneficiaries. 
"(C) INTERACTION OF MEDICARE PAYMENT POLICIES WITH 
HEALTH 
CARE 
DELIVERY 
GENERALLY.—Specifically, 
t h e 
Commission shall review the effect of payment policies 
under this title on the delivery of health care services 
other than under this title and assess the implications 
of changes in health care delivery in the United States 
and in the general market for health care services on 
the medicare program. 
"(3) COMMENTS ON CERTAIN SECRETARIAL REPORTS.—If the 
Secretary submits to Congress (or a committee of Congress) 
a report that is required by law and that relates to pa5nnent 
policies under this title, the Secretary shall transmit a copy 
of the report to the Commission. The Commission shall review 
the report and, not later than 6 months after the date of 
submittal of the Secretary's report to Congress, shall submit 
to the appropriate committees of Congress written comments 
on such report. Such comments may include such recommenda-
tions as the Commission deems appropriate. 
"(4) AGENDA AND ADDITIONAL REVIEWS.—The Commission 
shall consult periodically with the chairmen and ranking minor-
ity members of the appropriate committees of Congress regard-
ing the Commission's agenda and progress towards achieving 
I l l STAT. 352 
PUBLIC LAW 105-33—AUG. 5, 1997 
the agenda. The Commission may conduct additional reviews, 
£ind submit additional reports to the appropriate committees 
of Congress, from time to time on such topics relating to the 
program under this title as may be requested by such chairmen 
and members and as the Commission deems appropriate. 
"(5) AVAILABILITY OF REPORTS.—The Commission shall 
transmit to the Secretary a copy of each report submitted 
under this subsection and shall make such reports available 
to the public. 
"(6) APPROPRIATE COMMITTEES OF CONGRESS.—For purposes 
of this section, the term 'appropriate committees of Congress' 
means the Committees on Ways and Means and Commerce 
of the House of Representatives and the Committee on Finance 
of the Senate. 
"(c) MEMBERSHIP.— 
"(1) NUMBER AND APPOINTMENT.—The Commission shall 
be composed of 15 members appointed by the Comptroller Gen-
eral. 
"(2) QUALIFICATIONS.— 
"(A) IN GENERAL.—The membership of the Commission 
shall include individuals with national recognition for their 
expertise in health 
finance 
and economics, actuarial 
science, health facility management, health plans and 
integrated delivery systems, reimbursement of health facili-
ties, allopathic and osteopathic physicians, and other 
providers of health services, and other related fields, who 
provide a mix of different professionals, broad geographic 
representation, and a balance between urban and rural 
representatives. 
"(B) INCLUSION.—The membership of the Commission 
shall include (but not be limited to) physicians and other 
health professionals, employers, third-party payers, individ-
uals skilled in the conduct and interpretation of biomedical, 
health services, and health economics research and exper-
tise in outcomes and effectiveness research and technology 
assessment. Such membership shall also include represent-
atives of consumers and the elderly. 
"(C) 
MAJORITY NONPROVIDERS.—Individuals who 
are 
directly involved in the provision, or management of the 
delivery, of items and services covered under this title 
shall not constitute a majority of the membership of the 
Commission. 
"(D) ETHICAL DISCLOSURE.—The Comptroller General 
shall establish a system for public disclosure by members 
of the Commission of financial and other potential conflicts 
of interest relating to such members. 
"(3) TERMS.— 
"(A) IN GENERAL.—The terms of members of the 
Commission shall be for 3 years except that the Comptroller 
General shall designate staggered terms for the members 
first appointed. 
"(B) VACANCIES.—Any member appointed to fill a 
vacancy occurring before the expiration of the term for 
which the member's predecessor was appointed shall be 
appointed only for the remainder of that term. A member 
may serve after the expiration of that member's term until 
a successor has taken office. A vacancy in the Commission 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 353 
shall be filled in the manner in which the original appoint-
ment was made. 
"(4) COMPENSATION.—While serving on the business of the 
Commission (including traveltime), a member of the Commis-
sion shall be entitled to compensation at the per diem equiva-
lent of the rate provided for level IV of the Executive Schedule 
under section 5315 of title 5, United States Code; and while 
so serving away from home and the member's regular place 
of business, a member may be allowed travel expenses, as 
authorized by the Chairman of the Commission. Physicians 
serving as personnel of the Commission may be provided a 
physician comparability allowance by the Commission in the 
same manner as Government physicians may be provided such 
an allowance by an agency under section 5948 of title 5, United 
States Code, and for such purpose subsection (i) of such section 
shall apply to the Commission in the same manner as it applies 
to the Tennessee Valley Authority. For purposes of pay (other 
than pay of members of the Commission) and employment 
benefits, rights, and privileges, all personnel of the Commission 
shall be treated as if they were employees of the United States 
Senate. 
"(5) CHAIRMAN; VICE CHAIRMAN.—The Comptroller General 
shall designate a member of the Commission, at the time of 
appointment of the member as Chairman and a member as 
Vice Chairman for that term of appointment, except that in 
the case of vacancy of the Chairmanship or Vice Chairmanship, 
the Comptroller General may designate another member for 
the remainder of that member's term. 
"(6) MEETINGS.—The Commission shall meet at the call 
of the Chairman. 
"(d) DIRECTOR AND STAFF; EXPERTS AND CONSULTANTS.—Sub-
ject to such review as the Comptroller General deems necessary 
to assure the efficient administration of the Commission, the 
Commission may— 
"(1) employ and fix the compensation of an Executive Direc-
tor (subject to the approval of the Comptroller General) and 
such other personnel as may be necessary to carry out its 
duties (without regard to the provisions of title 5, United States 
Code, governing appointments in the competitive service); 
"(2) seek such assistance and support as may be required 
in the performance of its duties from appropriate Federal 
departments and agencies; 
"(3) enter into contracts or make other arrangements, as 
may be necessary for the conduct of the work of the Commission 
(without regard to section 3709 of the Revised Statutes (41 
U.S.C. 5)); 
"(4) make advEince, progress, and other payments which 
relate to the work of the Commission; 
"(5) provide transportation and subsistence for persons 
serving without compensation; and 
"(6) prescribe such rules and regulations as it deems nec-
essary with respect to the internal organization and operation 
of the Commission. 
"(e) POWERS.— 
"(1) OBTAINING OFFICIAL DATA.—The Commission may 
secure directly from any department or agency of the United 
States information necessary to enable it to carry out this 
I l l STAT. 354 
PUBLIC LAW 105-33—AUG. 5, 1997 
section. Upon request of the Chairman, the head of that depart-
ment or agency shall furnish that information to the Commis-
sion on an agreed upon schedule. 
"(2) DATA COLLECTION.—In order to carry out its functions, 
the Commission shall— 
"(A) utilize existing information, both published and 
unpublished, where possible, collected and assessed either 
by its own staff or under other arrangements made in 
accordance with this section, 
"(B) carry out, or award grants or contracts for, original 
research and experimentation, where existing information 
is inadequate, and 
"(C) adopt procedures allowing any interested party 
to submit information for the Commission's use in making 
reports and recommendations. 
"(3) ACCESS OF GAO TO INFORMATION.—The Comptroller 
General shall have unrestricted access to all deliberations, 
records, and nonproprietary data of the Commission, imme-
diately upon request. 
"(4) PERIODIC AUDIT.—The Commission shall be subject 
to periodic audit by the Comptroller General. 
"(f) AUTHORIZATION OF APPROPRIATIONS.— 
"(1) REQUEST FOR APPROPRIATIONS.—The Commission shall 
submit requests for appropriations in the same manner as 
the Comptroller General submits requests for appropriations, 
but amounts appropriated for the Commission shall be separate 
from amounts appropriated for the Comptroller General. 
"(2) AUTHORIZATION.—There are authorized to be appro-
priated such sums as may be necessary to carry out the provi-
sions of this section. Sixty percent of such appropriation shall 
be payable from the Federal Hospital Insurance Trust Fund, 
and 40 percent of such appropriation shall be payable from 
the Federal Supplementary Medical Insurance Trust Fund.", 
(b) ABOLITION OF PROPAC AND P P R C — 
(1) P R O P A C — 
(A) 
IN GENERAL.—Section 
1886(e) 
(42 U.S.C. 
1395ww(e)) is amended— 
(i) by striking paragraphs (2) and (6); and 
(ii) in paragraph (3), by striking "(A) The Commis-
sion" and all that follows through "(B)". 
(B) 
CONFORMING 
AMENDMENT.—Section 
1862 
(42 
U.S.C. 1395y) is amended by striking "Prospective Payment 
Assessment Commission" each place it appears in sub-
section (a)(1)(D) and subsection (i) and inserting "Medicare 
Payment Advisory Commission". 
(2) PPRC— 
(A) IN GENERAL.—Title XVIII is amended by striking 
section 1845 (42 U.S.C. 1395w-l). 
(B) ELIMINATION OF CERTAIN REPORTS.—Section 1848 
(42 U.S.C. 1395W-4) is amended— 
(i) by striking subparagraph (F) of subsection 
(d)(2), 
(ii) by striking subparagraph (B) of subsection 
(f)(1), and 
(iii) in subsection (f)(3), by striking "Physician Pay-
ment Review Commission,". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 355 
(C) 
CONFORMING AMENDMENTS.—Section 
1848 
(42 
U.S.C. 1395w-4) is amended by striking "Physician Pay-
ment Review Commission" and inserting "Medicare Pay-
ment Advisory Commission" each place it appears in sub-
sections (c)(2)(B)(iii), (g)(6)(C), and (g)(7)(C). 
(c) EFFECTIVE DATE; TRANSITION.— 
42 use i395b-6 
(1) IN GENERAL.—The Comptroller General shall first pro- note. 
vide for appointment of members to the Medicare Payment 
Advisory Commission (in this subsection referred to as 
"MedPAC") by not later than September 30, 1997. 
(2) TRANSITION.—As quickly as possible after the date a 
majority of members of MedPAC are first appointed, the 
Comptroller General, in consultation with the Prospective Pay-
ment Assessment Commission (in this subsection referred to 
as "ProPAC") and the Physician Payment Review Commission 
(in this subsection referred to as "PPRC"), shall provide for 
the termination of the ProPAC and the PPRC. As of the date 
of termination of the respective Commissions, the amendments 
made by paragraphs (1) and (2), respectively, of subsection 
(b) become effective. The Comptroller General, to the extent 
feasible, shall provide for the transfer to the MedPAC of assets 
and staff" of the ProPAC and the PPRC, without any loss 
of benefits or seniority by virtue of such transfers. Fund bal-
ances available to the ProPAC or the PPRC for any period 
shall be available to the MedPAC for such period for like 
purposes. 
(3) 
CONTINUING 
RESPONSIBILITY 
FOR 
REPORTS.—The 
MedPAC shall be responsible for the preparation and submis-
sion of reports required by law to be submitted (and which 
have not been submitted by the date of establishment of the 
MedPAC) by the ProPAC and the PPRC, and, for this purpose, 
any reference in law to either such Commission is deemed, 
after the appointment of the MedPAC, to refer to the MedPAC. 
CHAPTER 4—MEDIGAP PROTECTIONS 
SEC. 4031. MEDIGAP PROTECTIONS. 
(a) GUARANTEEING ISSUE WITHOUT PREEXISTING CONDITIONS 
FOR 
CONTINUOUSLY COVERED INDIVIDUALS.—Section 1882(s) 
(42 
U.S.C. 1395ss(s)) is amended— 
(1) in paragraph (3), by striking "paragraphs (1) and (2)" 
and inserting "this subsection", 
(2) by redesignating paragraph (3) as paragraph (4), and 
(3) by inserting after paragraph (2) the following new para-
graph: 
"(3)(A) The issuer of a medicare supplemental policy— 
"(i) may not deny or condition the issuance or effectiveness 
of a medicare supplemental policy described in subparagraph 
(C) that is offered and is available for issuance to new enrollees 
by such issuer; 
"(ii) may not discriminate in the pricing of such policy, 
because of health status, claims experience, receipt of health 
care, or medical condition; and 
"(iii) may not impose an exclusion of benefits based on 
a pre-existing condition under such policy, 
in the case of an individual described in subparagraph (B) who 
seeks to enroll under the policy not later than 63 days after the 
I l l STAT. 356 
PUBLIC LAW 105-33—AUG. 5, 1997 
date of the termination of enrollment described in such subpara-
graph and who submits evidence of the date of termination or 
disenroUment along with the application for such medicare supple-
mental policy. 
"(B) An individual described in this subparagraph is an individ-
ual described in any of the following clauses: 
"(i) The individual is enrolled under an employee welfare 
benefit plan that provides health benefits that supplement the 
benefits under this title and the plan terminates or ceases 
to provide all such supplemental health benefits to the individ-
ual. 
"(ii) The individual is enrolled with a Medicare+Choice 
organization under a Medicare+Choice plan under part C, and 
there are circumstances permitting discontinuance of the 
individual's election of the plsm under the first sentence of 
section 1851(e)(4). 
"(iii) The individual is enrolled with an eligible organization 
under a contract imder section 1876, a similar organization 
operating under demonstration project authority, effective for 
periods before April 1, 1999, with an organization under an 
agreement under section 1833(a)(1)(A), or with an organization 
under a policy described in subsection (t), and such enrollment 
ceases under the same circumstances that would permit dis-
continuance of an individual's election of coverage under the 
first sentence of section 1851(e)(4) and, in the case of a policy 
described in subsection (t), there is no provision under 
applicable State law for the continuation or conversion of cov-
erage under such policy. 
"(iv) The individual is enrolled under a medicare supple-
mental policy under this section and such enrollment ceases 
because— 
"(I) of the bankruptcy or insolvency of the issuer or 
because of other involuntary termination of coverage or 
enrollment under such policy and there is no provision 
under applicable State law for the continuation or conver-
sion of such coverage; 
"(II) the issuer of the policy substantially violated a 
material provision of the policy; or 
"(III) the issuer (or an agent or other entity acting 
on the issuer's behalf) materially misrepresented the pol-
icy's provisions in marketing the policy to the individual. 
"(v) The individual— 
"(I) was enrolled under a medicare supplemental policy 
under this section, 
"(II) subsequently terminates such enrollment and 
enrolls, for the first time, with any Medicare+Choice 
organization under a Medicare+Choice plan under part 
C, any eligible organization under a contract under section 
1876, any similar organization operating under demonstra-
tion project authority, or any policy described in subsection 
(t), and 
"(III) the subsequent enrollment under subclause (II) 
is terminated by the enrollee during any period within 
the first 12 months of such enrollment (during which the 
enrollee is permitted to terminate such subsequent enroll-
ment under section 1851(e)). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 357 
"(vi) The individual, upon first becoming eligible for benefits 
under part A at age 65, enrolls in a Medicare+Choice plan 
under part C, and disenrolls from such plan by not later than 
12 months after the effective date of such enrollment. 
"(C)(i) Subject to clauses (ii) and (iii), a medicare supplemental 
policy described in this subparagraph is a medicare supplemental 
policy which has a benefit package classified as 'A', *B', 'C\ or 
T' under the standards established under subsection (p)(2). 
"(ii) Only for purposes of an individual described in subpara-
graph (B)(v), a medicare supplemental policy described in this 
subparagraph is the same medicare supplemental policy referred 
to in such subparagraph in which the individual was most recently 
previously enrolled, if available fi-om the same issuer, or, if not 
so available, a policy described in clause (i). 
"(iii) Only for purposes of an individual described in subpara-
graph (B)(vi), a medicare supplemental policy described in this 
subparagraph shall include any medicare supplemental policy. 
"(iv) For purposes of appljdng this paragraph in the case of 
a State that provides for offering of benefit packages other than 
under the classification referred to in clause (i), the references 
to benefit packages in such clause are deemed references to com-
parable benefit packages offered in such State. 
"(D) At the time of an event described in subparagraph (B) 
because of which an individual ceases enrollment or loses coverage 
or benefits under a contract or agreement, policy, or plan, the 
organization that offers the contract or agreement, the insurer 
offering the policy, or the administrator of the plan, respectively, 
shall notify the individual of the rights of the individual under 
this paragraph, and obligations of issuers of medicare supplemental 
policies, under subparagraph (A).". 
(b) LIMITATION ON IMPOSITION OF PREEXISTING CONDITION 
EXCLUSION DURING INITIAL OPEN ENROLLMENT PERIOD.—Section 
1882(s)(2) (42 U.S.C. 1395ss(s)(2)) is amended— 
(1) in subparagraph (B), by striking "subparagraph (C)" 
and inserting "subparagraphs (C) and (D)", and 
(2) by adding at the end the following new subparagraph: 
"(D) In the case of a policy issued during the 6-month period 
described in subparagraph (A) to an individual who is 65 years 
of age or older as of the date of issuance and who as of the 
date of the application for enrollment has a continuous period 
of creditable coverage (as defined in 2701(c) of the Public Health 
Service Act) o
f
— 
"(i) at least 6 months, the policy may not exclude benefits 
based on a pre-existing condition; or 
"(ii) less than 6 months, if the policy excludes benefits 
based on a preexisting condition, the policy shall reduce the 
period of any preexisting condition exclusion by the aggregate 
of the periods of creditable coverage (if any, as so defined) 
applicable to the individual as of the enrollment date. 
The Secretary shall specify the manner of the reduction under 
clause (ii), based upon the rules used by the Secretary in carrying 
out section 2701(a)(3) of such Act.". 
(c) CONFORMING AMENDMENT.—Section 1882(d)(3)(A)(vi)(III) (42 
U.S.C. 1395ss(d)(2)(A)(vi)(III)) is amended by inserting ", a policy 
described in clause (v)," after "Medicare supplemental policy". 
(d) EFFECTIVE DATES.— 
42 use i395ss 
note. 
I l l STAT. 358 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 u s e 1395SS 
note. 
Regulations. 
(1) GUARANTEED ISSUE.—The amendment made by sub-
section (a) shall take effect on July 1, 1998. 
(2) 
LIMIT ON PREEXISTING CONDITION EXCLUSIONS.—The 
amendment made by subsection (b) shall apply to policies issued 
on or after July 1, 1998. 
(3) CONFORMING AMENDMENT.—The amendment made by 
subsection (c) shall be effective as if included in the enactment 
of the Health Insurance Portability and Accoimtability Act of 
1996. 
(e) TRANSITION PROVISIONS.— 
(1) IN GENERAL.—If the Secretary of Health and Human 
Services identifies a State as requiring a change to its statutes 
or regulations to conform its regulatory program to the changes 
made by this section, the State regulatory program shall not 
be considered to be out of compliaoice with the requirements 
of section 1882 of the Social Security Act due solely to failure 
to make such change until the/date specified in paragraph 
(4). 
(2) NAIC STANDARDS.—If,/Within 9 months after the date 
of the enactment of this A c t , ^ e National Association of Insur-
ance Commissioners (in this subsection referred to as the 
"NAIC") modifies its NAIC Model Regulation relating to section 
1882 of the Social Security Act (referred to in such section 
as the 1991 NAIC Model Regulation, as modified pursuant 
to section 171(m)(2) of the Social Security Act Amendments 
of 1994 (Public Law 103-432) and as modified pursuant to 
section 1882(d)(3)(A)(vi)(IV) of the Social Security Act, as added 
by section 271(a) of the Health Insurance Portability and 
Accountability Act of 1996 (Public Law 104-191) to conform 
to the amendments made by this section, such revised regula-
tion incorporating the modifications shall be considered to be 
the applicable NAIC model regulation (including the revised 
NAIC model regulation and the 1991 NAIC Model Regulation) 
for the purposes of such section. 
(3) SECRETARY STANDARDS.—If the NAIC does not make 
the modifications described in paragraph (2) within the period 
specified in such paragraph, the Secretary of Health and 
Human Services shall make the modifications described in such 
paragraph and such revised regulation incorporating the modi-
fications shall be considered to be the appropriate Regulation 
for the purposes of such section. 
(4) DATE SPECIFIED.— 
(A) IN GENERAL.—Subject to subparagraph (B), the date 
specified in this paragraph for a State is the earlier o
f
— 
(i) the date the State changes its statutes or regu-
lations to conform its regulatory program to the 
changes made by this section, or 
(ii) 1 year after the date the NAIC or the Secretary 
first makes the modifications under paragraph (2) or 
(3), respectively. 
(B) ADDITIONAL LEGISLATIVE ACTION REQUIRED.—In the 
case of a State which the Secretary identifies as— 
(i) requiring State legislation (other than legisla-
tion appropriating funds) to conform its regulatory pro-
gram to the changes made in this section, but 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 359 
(ii) having a legislature which is not scheduled 
to meet in 1999 in a legislative session in which such 
legislation may be considered, 
the date specified in this paragraph is the first day of 
the first calendar quarter beginning after the close of the 
first legislative session of the State legislature that begins 
on or after Jiily 1, 1999. For purposes of the previous 
sentence, in the case of a State that has a 2-year legislative 
session, each year of such session shall be deemed to be 
a separate regular session of the State legislature, 
(f) CONFORMING BENEFITS TO CHANGES IN TERMINOLOGY FOR 42 use i395ss 
HOSPITAL OUTPATIENT DEPARTMENT COST SHARING.—For purposes note. 
of apply section 1882 of the Social Security Act (42 U.S.C. 1395ss) 
and regulations referred to in subsection (e), copa)m(ient amounts 
provided under section 1833(t)(5) of such Act with respect to hospital 
outpatient department services shall be treated under medicare 
supplemental policies in the same manner as coinsurance with 
respect to such services. 
SEC. 4032. ADDITION OF IHGH DEDUCTIBLE MEDIGAP POLICIES. 
(a) IN GENERAL.—Section 1882(p) (42 U.S.C. 1395ss(p)) is 
amended— 
(1) in paragraph (2)(C), by inserting "plus the 2 plans 
described in paragraph (11)(A)" after "exceed 10"; and 
(2) by adding at the end the following: 
"(11)(A) For purposes of paragraph (2), the benefit packages 
described in this subparagraph are as follows: 
"(i) The benefit package classified as T' under the stand-
ards established by such paragraph, except that it has a high 
deductible feature. 
"(ii) The benefit package classified as 'J' under the stand-
ards established by such paragraph, except that it has a high 
deductible feature. 
"(B) For purposes of subparagraph (A), a high deductible feature 
is one which— 
"(i) requires the beneficiary of the policy to pay annual 
out-of-pocket expenses (other than premiums) in the amount 
specified in subparagraph (C) before the policy begins payment 
of benefits, and 
"(ii) covers 100 percent of covered out-of-pocket expenses 
once such deductible has been satisfied in a year. 
"(C) The amount specified in this subparagraph— 
"(i) for 1998 and 1999 is $1,500, and 
"(ii) for a subsequent year, is the amount specified in 
this subparagraph for the previous year increased by the 
percentage increase in the Consumer Price Index for all urban 
consumers (all items; U.S. city average) for the 12-month period 
ending with August of the preceding year. 
If any amount determined under clause (ii) is not a multiple of 
$10, it shall be rounded to the nearest multiple of $10.". 
(b) EFFECTIVE D A T E . — 
42 use i395ss 
(1) IN GENERAL.—The amendments made by subsection note, 
(a) shall take effect the date of the enactment of this Act. 
(2) TRANSITION.—The provisions of section 4031(e) shall 
apply with respect to this section in the same manner as 
they apply to section 4031. 
I l l STAT. 360 
PUBLIC LAW 105-33—AUG. 5, 1997 
CHAPTER 5—TAX TREATMENT OF HOSPITALS PARTICI-
PATD^G IN PROVIDER-SPONSORED ORGANIZATIONS 
SEC. 4041. TAX TREATMENT OF HOSPITALS WHICH PARTICIPATE IN 
PROVIDER-SPONSORED ORGANIZATIONS. 
(a) IN GENERAL.—Section 501 of the Internal Revenue Code 
26 use 501. 
of 1986 (relating to exemption from tax on corporations, certain 
trusts, etc.) is amended by redesignating subsection (o) as subsection 
(p) and by inserting after subsection (n) the following new sub-
section: 
"(o) TREATMENT OF HOSPITALS PARTICIPATING IN PROVIDER-
SPONSORED ORGANIZATIONS.—^An organization shall not fail to be 
treated as organized and operated exclusively for a charitable pur-
pose for purposes of subsection (c)(3) solely because a hospital 
which is owned and operated by such organization participates 
in a provider-sponsored organization (as defined in section 1853(e) 
of the Social Security Act), whether or not the provider-sponsored 
organization is exempt from tax. For purposes of subsection (c)(3), 
any person with a material financial interest in such a provider-
sponsored organization shall be treated as a private shareholder 
or individual with respect to the hospital." 
26 use 501 note. 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall take effect on the date of the enactment of this Act. 
Subtitle B—Prevention Initiatives 
SEC. 4101. SCREENING MAMMOGRAPHY. 
(a) PROVIDING ANNUAL SCREENING MAMMOGRAPHY FOR WOMEN 
OVER AGE 39.—Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is 
amended— 
(1) in clause (iii), to read as follows: 
"(iii) In the case of a woman over 39 years of 
age, payment may not be made under this part for 
screening mammography performed within 11 months 
following the month in which a previous screening 
mammography was performed."; and 
(2) by striking clauses (iv) and (v). 
(b) WAIVER OF DEDUCTIBLE.—The first sentence of section 
1833(b) (42 U.S.C. 13951(b)) is amended— 
(1) by striking "and" before "(4)", and 
(2) by inserting before the period at the end the following: 
", and (5) such deductible shall not apply with respect to screen-
ing mammography (as described in section 1861(jj))". 
(c) CONFORMING AMENDMENT.—Section 1834(c)(1)(C) (42 U.S.C. 
1395m(c)(l)(C)) is amended by striking ", subject to the deductible 
established under section 1833(b),". 
42 use 1395/ 
(d) EFFECTIVE DATE.—The amendments made by this section 
note. 
shall apply to items and services furnished on or after January 
1, 1998. 
SEC. 4102. SCREENING PAP SMEAR AND PELVIC EXAMS. 
(a) COVERAGE OF PELVIC EXAM; INCREASING FREQUENCY OF 
COVERAGE OF PAP SMEAR.—Section 1861(nn) (42 U.S.C. 1395x(nn)) 
is amended— 
(1) in the heading, by striking "Smear" and inserting 
"Smear; Screening Pelvic Exam"; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 361 
(2) by inserting "or vaginal" after "cervical" each place 
it appears; 
(3) by striking "(nn)" and inserting "(nn)(l)"; 
(4) by striking "3 years" and all that follows and inserting 
"3 years, or during the preceding year in the case of a woman 
described in paragraph (3)."; and 
(5) by adding at the end the following new paragraphs: 
"(2) The term 'screening pelvic exam' means a pelvic examina-
tion provided to a woman if the woman involved has not had 
such an examination during the preceding 3 years, or during the 
preceding year in the case of a woman described in paragraph 
(3), and includes a clinical breast examination. 
"(3) A woman described in this paragraph is a woman who— 
"(A) is of childbearing age and has had a test described 
in this subsection during any of the preceding 3 years that 
indicated the presence of cervical or vaginal cancer or other 
abnormality; or 
"(B) is at high risk of developing cervical or vaginal cancer 
(as determined pursuant to factors identified by the Sec-
retary).". 
(b) WAIVER OF DEDUCTIBLE.—The first sentence of section 
1833(b) (42 U.S.C. 13951(b)), as amended by section 4101(b), is 
amended— 
(1) by striking "and" before "(5)", and 
(2) by inserting before the period at the end the following: 
", and (6) such deductible shall not apply with respect to screen-
ing pap smear and screening pelvic exam (as described in 
section 1861(nn))". 
(c) 
CONFORMING 
AMENDMENTS.—Sections 
1861(s)(14) 
and 
1862(a)(1)(F) (42 U.S.C. 1395x(s)(14), 1395y(a)(l)(F)) are each 
amended by inserting "and screening pelvic exam" after "screening 
pap smear". 
(d) 
PAYMENT UNDER 
PHYSICIAN FEE SCHEDULE.—Section 
1848(j)(3) (42 U.S.C. 1395w-40')(3)) is amended by striking "and 
(4)" and inserting "(4) and (14) (with respect to services described 
in section 1861(nn)(2))". 
(e) EFFECTIVE DATE.—The amendments made by this section 
42 USC 1395/ 
shall apply to items and services furnished on or after January note. 
1, 1998. 
SEC. 4103. PROSTATE CANCER SCREENING TESTS. 
(a) COVERAGE.—Section 1861 (42 U.S.C. 1395x) is amended— 
(1) in subsection (s)(2)— 
(A) by striking "and" at the end of subparagraphs 
(N) and (O), and 
(B) by inserting after subparagraph (O) the following 
new subparagraph: 
"(P) prostate cancer screening tests (as defined in sub-
section (oo)); and"; and 
(2) by adding at the end the following new subsection: 
"Prostate Cancer Screening Tests 
"(oo)(l) The term 'prostate cancer screening test' means a test 
that consists of any (or all) of the procedures described in paragraph 
(2) provided for the purpose of early detection of prostate cancer 
to a m£in over 50 years of age who has not had such a test 
during the preceding year. 
-194 O - 97 - 13 : QL 3 Part 1 
Ill STAT. 362 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) The procedures described in this paragraph are as follows: 
"(A) A digital rectal examination. 
"(B) A prostate-specific antigen blood test. 
"(C) For years beginning after 2002, such other procedures 
as the Secretary finds appropriate for the purpose of early 
detection of prostate cancer, taking into account changes in 
technology and standards of medical practice, availability, 
effectiveness, costs, and such other factors as the Secretary 
considers appropriate.". 
(b) PAYMENT FOR PROSTATE-SPECIFIC ANTIGEN BLOOD TEST 
UNDER CLINICAL DIAGNOSTIC LABORATORY TEST FEE SCHEDULES.— 
Section 1833(h)(1)(A) (42 U.S.C. 13951(h)(1)(A)) is amended by 
inserting after "laboratory tests" the following: "(including prostate 
cancer screening tests under section 1861(oo) consisting of prostate-
specific antigen blood tests)". 
(c) CONFORMING AMENDMENT.—Section 1862(a) (42 U.S.C. 
1395y(a)) is amended— 
(1) in paragraph (1)— 
(A) in subparagraph (E), by striking "and" at the end, 
(B) in subparagraph (F), by striking the semicolon 
at the end and inserting ", and", and 
(C) by adding at the end the following new subpara-
graph: 
"(G) in the case of prostate cancer screening tests (as 
defined in section 1861(oo)), which are performed more fre-
quently than is covered under such section;"; and 
(2) in paragraph (7), by striking "paragraph (1)(B) or under 
paragraph (1)(F)" and inserting "subparagraphs (B), (F), or 
(Oof paragraph (1)". 
(d) 
PAYMENT 
UNDER 
PHYSICIAN FEE SCHEDULE.—Section 
1848(j)(3) (42 U.S.C. 1395w-4(j)(3)), as amended by section 4102, 
is amended by inserting ", (2)(P) (with respect to services described 
in subparagraphs (A) and (C) of section 1861(oo)(2)," after "(2)(G)" 
42 use 1395/ 
(e) EFFECTIVE DATE.—The amendments made by this section 
note. 
shall apply to items and services furnished on or after January 
1, 2000. 
SEC. 4104. COVERAGE OF COLORECTAL SCREENING. 
(1) IN GENERAL.—Section 1861 (42 U.S.C. 1395x), as amend-
ed by section 4103(a), is amended— 
(A) in subsection (s)(2)— 
(i) by striking "and" at the end of subparagraph 
(P); 
(ii) by adding "and" at the end of subparagraph 
(Q); and 
(iii) by adding at the end the following new 
subparagraph: 
"(R) colorectal cancer screening tests (as defined in sub-
section (pp)); and"; and 
(B) by adding at the end the following new subsection: 
"Colorectal Cancer Screening Tests 
"(pp)(l) The term 'colorectal cancer screening test' means any 
of the following procedures furnished to an individual for the pur-
pose of early detection of colorectal cancer: 
"(A) Screening fecal-occult blood test. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 363 
"(B) Screening flexible sigmoidoscopy. 
"(C) In the case of an individual at high risk for colorectal 
cancer, screening colonoscopy. 
"(D) Such other tests or procedures, and modifications to 
tests and procedures under this subsection, with such frequency 
and payment limits, as the Secretary determines appropriate, 
in consultation with appropriate organizations. 
"(2) In paragraph (1)(C), an 'individual at high risk for colorectal 
cancer' is an individual who, because of family history, prior experi-
ence of cancer or precursor neoplastic polyps, a history of chronic 
digestive disease condition (including inflammatory bowel disease, 
Crohn's Disease, or ulcerative colitis), the presence of any appro-
priate recognized gene markers for colorectal cancer, or other pre-
disposing factors, faces a high risk for colorectal cancer.". 
(2) DEADLINE FOR PUBLICATION OF DETERMINATION ON GOV- Federal Register, 
ERAGE OF SCREENING BARIUM ENEMA.—Not later than the ear- publication. 
Her of the date that is January 1, 1998, or 90 days after 
J^ use I395x 
the date of the enactment of this Act, the Secretary of Health 
and Human Services shall publish notice in the Federal Reg-
ister with respect to the determination under paragraph (1)(D) 
of section 1861(pp) of the Social Security Act (42 U.S.C. 
1395x(pp)), as added by paragraph (1), on the coverage of 
a screening barium enema as a colorectal cancer screening 
test under such section. 
(b) FREQUENCY LIMITS AND PAYMENT.— 
(1) IN GENERAL.—Section 1834 (42 U.S.C. 1395m) is amend-
ed by inserting after subsection (c) the following new subsection: 
"(d) FREQUENCY LIMITS AND PAYMENT FOR COLORECTAL CANCER 
SCREENING TESTS.— 
"(1) SCREENING FECAL-OCCULT BLOOD TESTS.— 
"(A) PAYMENT AMOUNT.—The payment amount for 
colorectal cancer screening tests consisting of screening 
fecal-occult blood tests is equal to the payment amount 
established for diagnostic fecal-occult blood tests under sec-
tion 1833(h). 
"(B) FREQUENCY LIMIT.—NO payment may be made 
under this part for a colorectal cancer screening test 
consisting of a screening fecal-occult blood test— 
"(i) if the individual is under 50 years of age; 
or 
"(ii) if the test is performed within the 11 months 
after a previous screening fecal-occult blood test. 
"(2) SCREENING FLEXIBLE SIGMOIDOSCOPIES.— 
"(A) FEE SCHEDULE.—With respect to colorectal cancer 
screening 
tests 
consisting 
of 
screening 
flexible 
sigmoidoscopies, payment under section 1848 shall be 
consistent with payment under such section for similar 
or related services. 
"(B) PAYMENT LIMIT.—In the case of screening flexible 
sigmoidoscopy services, pajnnent under this part shall not 
exceed such amount as the Secretary specifies, based upon 
the rates recognized for diagnostic flexible sigmoidoscopy 
services. 
"(C) FACILITY PAYMENT LIMIT.— 
"(i) IN GENERAL.—Notwithstanding subsections 
(i)(2)(A) and (t) of section 1833, in the case of screening 
I l l STAT. 364 
PUBLIC LAW 105-33—AUG. 5, 1997 
flexible sigmoidoscopy services furnished on or after 
January 1, 1999, that— 
"(I) in accordance with regulations, may be 
performed in an ambulatory surgical center and 
for which the Secretary permits ambulatory sur-
gical center payments under this part, and 
"(II) are performed in an ambulatory surgical 
center or hospital outpatient department, 
pa3mtient under this part shall be based on the lesser 
of the amount under the fee schedule that would apply 
to such services if they were performed in a hospital 
outpatient department in an area or the amount under 
the fee schedule that would apply to such services 
if they were performed in an ambulatory surgical cen-
ter in the same area. 
"(ii) 
LIMITATION ON DEDUCTIBLE AND COINSUR-
ANCE.—Notwithstanding any other provision of this 
title, in the case of a beneficiary who receives the 
services described in clause (i)— 
"(I) in computing the amount of any applicable 
deductible or copayment, the computation of such 
deductible or coinsurance shall be based upon the 
fee schedule under which payment is made for 
the services, and 
"(II) the amount of such coinsurance is equal 
to 25 percent of the payment amount under the 
fee schedule described in subclause (I). 
"(D) SPECIAL RULE FOR DETECTED LESIONS.—If during 
the course of such screening flexible sigmoidoscopy, a lesion 
or growth is detected which results in a biopsy or removal 
of the lesion or growth, payment under this part shall 
not be made for the screening flexible sigmoidoscopy but 
shall be made for the procedure classified as a flexible 
sigmoidoscopy with such biopsy or removal. 
"(E) FREQUENCY LIMIT.—No payment may be made 
under this part for a colorectal cancer screening test 
consisting of a screening flexible sigmoidoscopy— 
"(i) if the individual is under 50 years of age; 
or 
"(ii) if the procedure is performed within the 47 
months 
after 
a 
previous 
screening 
flexible 
sigmoidoscopy. 
"(3) SCREENING COLONOSCOPY FOR INDIVIDUALS AT HIGH 
RISK FOR COLORECTAL CANCER.— 
"(A) FEE SCHEDULE.—^With respect to colorectal cancer 
screening test consisting of a screening colonoscopy for 
individuals at high risk for colorectal c£incer (as defined 
in section 1861(pp)(2)), payment under section 1848 shall 
be consistent with payment amounts under such section 
for similar or related services. 
"(B) 
PAYMENT 
LIMIT.—In 
the 
case 
of 
screening 
colonoscopy services, pa)anent under this part shall not 
exceed such amount as the Secretary specifies, based upon 
the rates recognized for diagnostic colonoscopy services. 
"(C) FACILITY PAYMENT LIMIT.— 
"(i) IN GENERAL.—Notwithstanding 
subsections 
(i)(2)(A) and (t) of section 1833, in the case of screening 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 365 
colonoscopy services furnished on or after January 1, 
1999, that are performed in an ambulatory surgical 
center or a hospital outpatient department, payment 
under this part shall be based on the lesser of the 
amount under the fee schedule that would apply to 
such services if they were performed in a hospital 
outpatient department in an area or the amount under 
the fee schedule that would apply to such services 
if they were performed in an ambulatory surgical cen-
ter in the same area. 
"(ii) LIMITATION ON DEDUCTIBLE AND COINSUR-
ANCE.—Notwithstanding any other provision of this 
title, in the case of a beneficiary who receives the 
services described in clause (i)— 
"(I) in computing the amount of any applicable 
deductible or coinsurance, the computation of such 
deductible or coinsurance shall be based upon the 
fee schedule under which payment is made for 
the services, and 
"(II) the amount of such coinsurance is equal 
to 25 percent of the payment amount under the 
fee schedule described in subclause (I). 
"(D) SPECIAL RULE FOR DETECTED LESIONS.—If during 
the course of such screening colonoscopy, a lesion or growth 
is detected which results in a biopsy or removal of the 
lesion or growth, payment under this part shall not be 
made for the screening colonoscopy but shall be made for 
the procedure classified as a colonoscopy with such biopsy 
or removal. 
"(E) FREQUENCY LIMIT.—NO payment may be made 
under this part for a colorectal cancer screening test 
consisting of a screening colonoscopy for individuals at 
high risk for colorectal cancer if the procedure is performed 
within 
the 
23 
months 
after 
a 
previous 
screening 
colonoscopy.". 
(c) CONFORMING AMENDMENTS.—(1) Paragraphs (1)(D) and 
(2)(D) of section 1833(a) (42 U.S.C. 13951(a)) are each amended 
by inserting "or section 1834(d)(1)" after "subsection (h)(1)". 
(2) Section 1833(h)(1)(A) (42 U.S.C. 13951(h)(1)(A)) is amended 
by striking "The Secretary" and inserting "Subject to section 
1834(d)(1), the Secretary". 
(3) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by section 
4103(c), is amended— 
(A) in paragraph (1)— 
(i) in subparagraph (F), by striking "£ind" at the end, 
(ii) in subparagraph (G), by striking the semicolon 
at the end and inserting ", and", and 
(iii) by adding at the end the following new subpara-
graph: 
"(H) in the case of colorectal cancer screening tests, which 
are performed more fi*equently than is covered under section 
1834(d);"; and 
(B) in paragraph (7), by striking "or (G)" and inserting 
"(G), or (H)". 
(d) 
PAYMENT 
UNDER 
PHYSICIAN 
FEE 
SCHEDULE.—Section 
1848(j)(3) (42 U.S.C. 1395w-4(j)(3)), as amended by sections 4102 
and 4103, is amended by inserting "(2)(R) (with respect to services 
I l l STAT. 366 
PUBLIC LAW 105-33—AUG. 5, 1997 
described in subparagraphs 
(B) , (C), and (D) of section 
1861(pp)(l))," before "(3)". 
42 use 1
3
9
5
Z 
(e) EFFECTIVE DATE.—The amendments made by this section 
i^ote. 
shall apply to items and services furnished on or after January 
1, 1998. 
SEC. 4105. DIABETES SELF-MANAGEMENT BENEFITS. 
(a) COVERAGE OF DIABETES OUTPATIENT SELF-MANAGEMENT 
TRAINING SERVICES.— 
(1) IN GENERAL.—Section 1861 (42 U.S.C. 1395x), as amend-
ed by sections 4103(a) and 4104(a), is amended— 
(A) in subsection (s)(2)— 
(i) by striking "and" at the end of subparagraph 
(Q); 
(ii) by adding "and" at the end of subparagraph 
(R); and 
(iii) by adding at the end the following new 
subparagraph: 
"(S) diabetes outpatient self-management training services 
(as defined in subsection (qq)); and"; and 
(B) by adding at the end the following new subsection: 
"Diabetes Outpatient Self-Management Training Services 
"(qq)(l) The term 'diabetes outpatient self-management training 
services' megms educational and training services furnished (at 
such times as the Secretary determines appropriate) to an individ-
ual with diabetes by a certified provider (as described in paragraph 
(2)(A)) in an outpatient setting by an individual or entity who 
meets the quality standards described in paragraph (2)(B), but 
only if the physician who is managing the individual's diabetic 
condition certifies that such services are needed under a comprehen-
sive plan of care related to the individual's diabetic condition to 
ensure therapy compliance or to provide the individual with nec-
essary skills and knowledge (including skills related to the self-
administration of injectable drugs) to participate in the manage-
ment of the individual's condition. 
"(2) In paragraph (1)— 
"(A) a 'certified provider' is a physician, or other individual 
or entity designated by the Secretary, that, in addition to 
providing diabetes outpatient self-management training serv-
ices, provides other items or services for which payment may 
be made under this title; and 
"(B) a physician, or such other individual or entity, meets 
the quality standards described in this paragraph if the physi-
cian, or individual or entity, meets quality standards estab-
lished by the Secretary, except that the physician or other 
individual or entity shall be deemed to have met such standards 
if the physician or other individual or entity meets applicable 
standards originally established by the National Diabetes 
Advisory Board and subsequently revised by organizations who 
participated in the establishment of standards by such Board, 
or is recognized by an organization that represents individuals 
(including individuals under this title) with diabetes as meeting 
standards for furnishing the services.". 
(2) PAYMENT UNDER PHYSICIAN FEE SCHEDULE.—Section 
1848(j)(3) (42 U.S.C. 1395w-4(j)(3)) as amended in sections 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 367 
4102, 4103, and 4104, is amended by inserting "(2)(S)," before 
"(3),". 
(3) CONSULTATION WITH ORGANIZATIONS IN ESTABLISHING 
42USC1395W-4 
PAYMENT AMOUNTS FOR SERVICES PROVIDED BY PHYSICIANS.— N
O
T
E
. 
In establishing payment amounts under section 1848 of the 
Social Security Act for physicians' services consisting of diabetes 
outpatient self-management training services, the Secretary of 
Health and Human Services shall consult with appropriate 
organizations, 
including 
such 
organizations 
representing 
individuals or medicare beneficiaries with diabetes. 
(b) BLOOD-TESTING STRIPS FOR INDIVIDUALS WITH DIABETES.— 
(1) INCLUDING STRIPS AND MONITORS AS DURABLE MEDICAL 
EQUIPMENT.—The first sentence of section 1861(n) (42 U.S.C. 
1395x(n)) is amended by inserting before the semicolon the 
following: ", and includes blood-testing strips and blood glucose 
monitors for individuals with diabetes without regard to 
whether the individual has TVpe I or Tjrpe II diabetes or 
to the individual's use of insulin (as determined under stand-
ards established by the Secretary in consultation with the 
appropriate organizations)". 
(2) 10 PERCENT REDUCTION IN PAYMENTS FOR TESTING 
STRIPS.—Section 1834(a)(2)(B)(iv) (42 U.S.C. 1395m(a)(2)(B)(iv)) 
is amended by adding before the period the following: "(reduced 
by 10 percent, in the case of a blood glucose testing strip 
furnished after 1997 for an individual with diabetes)". 
(c) ESTABLISHMENT OF OUTCOME MEASURES FOR BENEFICLVRIES 42 use i395x 
WITH DIABETES.— 
note-
(1) IN GENERAL.—^The Secretary of Health and Human 
Services, in consultation with appropriate organizations, shall 
establish outcome measures, including glysolated hemoglobin 
(past 90-day average blood sugar levels), for purposes of 
evaluating the improvement of the health status of medicare 
beneficiaries with diabetes mellitus. 
(2) RECOMMENDATIONS FOR MODIFICATIONS TO SCREENING 
BENEFITS.—^Taking into account information on the health sta-
tus of medicare beneficiaries with diabetes mellitus as meas-
ured under the outcome measures established under paragraph 
(1), the Secretary shall from time to time submit recommenda-
tions to Congress regarding modifications to the coverage of 
services for such beneficiaries under the medicare program. 
(d) EFFECTIVE D A T E . — 
42usci395m 
(1) IN GENERAL.—Except as provided in paragraph (2), the °ote. 
amendments made by this section shall apply to items and 
services fiimished on or after July 1, 1998. 
(2) TESTING STRIPS.—^The amendment made by subsection 
(b)(2) shall apply with respect to blood glucose testing strips 
furnished on or after January 1, 1998. 
SEC. 4106. STANDARDIZATION OF MEDICARE COVERAGE OF BONE 
MASS MEASUREMENTS. 
(a) IN GENERAL.—Section 1861 (42 U.S.C. 1395x), as amended 
by sections 4103(a), 4104(a), and 4105(a), is amended— 
(1) in subsection (s)— 
(A) in paragraph (12)(C), by striking "and" at the end, 
(B) by striking the period at the end of paragraph 
(14) and inserting "; and". 
I l l STAT. 368 
PUBLIC LAW 105-33—AUG. 5, 1997 
(C) by redesignating paragraphs (15) and (16) as para-
graphs (16) and (17), respectively, and 
(D) by inserting after paragraph (14) the following 
new paragraph: 
"(15) bone mass measurement (as defined in subsection 
(rr))."; and 
(2) by inserting after subsection (qq) the following new 
subsection: 
Regulations. 
42 use 1395X 
note. 
42 use 1395X 
note. 
"Bone Mass Measurement 
"(rr)(l) The term 'bone mass measurement' means a radiologic 
or radioisotopic procedure or other procedure approved by the Food 
and Drug Administration performed on a qualified individual (as 
defined in paragraph (2)) for the purpose of identifying bone mass 
or detecting bone loss or determining bone quality, and includes 
a physician's interpretation of the results of the procedure. 
"(2) For purposes of this subsection, the term 'qualified individ-
ual' means an individual who is (in accordance with regulations 
prescribed by the Secretary)— 
"(A) an estrogen-deficient woman at clinical risk for 
osteoporosis; 
"(B) an individual with vertebral abnormalities; 
"(C) an individual receiving long-term glucocorticoid steroid 
therapy; 
"(D) an individual with primary hyperparath5n'oidism; or 
"(E) an individual being monitored to assess the response 
to or efficacy of an approved osteoporosis drug therapy. 
"(3) The Secretary shall establish such standards regarding 
the frequency with which a qualified individual shall be eligible 
to be provided benefits for bone mass measurement under this 
title.". 
(b) 
PAYMENT 
UNDER 
PHYSICIAN 
FEE 
SCHEDULE.—Section 
1848(j)(3) (42 U.S.C. 1395w-4(j)(3)), as amended by sections 4102, 
4103, 4104 and 4105, is amended— 
(1) by striking "(4) and (14)" and inserting "(4), (14)" and 
(2) by inserting "and (15)" after "1861(nn)(2))". 
(c) 
CONFORMING 
AMENDMENTS.—Sections 
1864(a), 
1902(a)(9)(C), 
and 
1915(a)(l)(B)(ii)(I) 
(42 
U.S.C. 
1395aa(a), 
1396a(a)(9)(C), and 1396n(a)(l)(B)(ii)(I)) are amended by striking 
"paragraphs (15) and (16)" each place it appears and inserting 
"paragraphs (16) and (17)". 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to bone mass measurements performed on or after 
July 1,1998. 
SEC. 4107. VACCINES OUTREACH EXPANSION. 
(a) EXTENSION OF INFLUENZA AND PNEUMOCOCCAL VACCINATION 
CAMPAIGN.—In order to increase utilization of pneumococcal and 
influenza vaccines in medicare beneficiaries, the Influenza and 
Pneumococcal Vaccination Campaign carried out by the Health 
Care Financing Administration in conjunction with the Centers 
for Disease Control and Prevention and the National Coalition 
for Adult Immunization, is extended until the end of fiscal year 
2002. 
(b) AUTHORIZATION OF APPROPRIATION.—There are hereby 
authorized to be appropriated for each of fiscal years 1998 through 
2002, $8,000,000 for the Campaign described in subsection (a). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 369 
Of the amount so authorized to be appropriated in each fiscal 
year, 60 percent of the amount so appropriated shall be payable 
from the Federal Hospital Insurance Trust Fund, and 40 percent 
shall be payable from the Federal Supplementary Medical Insurance 
Trust Fund. 
SEC. 4108. STUDY ON PREVENTIVE AND ENHANCED BENEFITS. 
42 USC 1395x 
(a) STUDY.—The Secretary of Health and Human Services shall 
request the National Academy of Sciences, and as appropriate in 
conjunction with the United States Preventive Services Task Force, 
to analyze the expansion or modification of preventive or other 
benefits provided to medicare beneficiaries under title XVIII of 
the Social Security Act. The analysis shall consider both the short 
term and long term benefits, and costs to the medicare program, 
of such expansion or modification. 
(b) REPORT.— 
(1) INITIAL REPORT.—Not later than 2 years after the date 
of the enactment of this Act, the Secretary shall submit a 
report on the findings of the analysis conducted under sub-
section (a) to the Committee on Ways and Means and the 
Committee on Commerce of the House of Representatives and 
the Committee on Finance of the Senate. 
(2) CONTENTS.—Such report shall include specific findings 
with respect to coverage of at least the following benefits: 
(A) Nutrition therapy services, including parenteral 
and enteral nutrition and including the provision of such 
services by a registered dietitian. 
(B) Skin cancer screening. 
(C) Medically necessary dental care. 
(D) Routine patient care costs for beneficiaries enrolled 
in approved clinical trial programs. 
(E) Elimination of time limitation for coverage of 
immunosuppressive drugs for transplant patients. 
(3) FUNDING.—From funds appropriated to the Department 
of Health and Human Services for fiscal years 1998 and 1999, 
the Secretary shall provide for such funding as the Secretary 
determines necessary for the conduct of the study by the 
National Academy of Sciences under this section. 
Subtitle C—Rural Initiatives 
SEC. 4201. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM. 
(a) MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.—Section 
1820 (42 U.S.C. 1395i-4) is amended to read as follows: 
"MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM 
"SEC 1820. (a) ESTABLISHMENT.—Any State that submits an 
application in accordance with subsection (b) may establish a medi-
care rural hospital flexibility program described in subsection (c). 
"(b) APPLICATION.—A State may establish a medicare rural 
hospital flexibility program described in subsection (c) if the State 
submits to the Secretary at such time and in such form as the 
Secretary may require an application containing— 
"(1) assurances that the State— 
"(A) has developed, or is in the process of developing, 
a State rural health care plan that— 
I l l STAT. 370 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(i) provides for the creation of 1 or more rural 
health networks (as defined in subsection (d)) in the 
State; 
"(ii) promotes regionalization of rural health serv-
ices in the State; and 
"(iii) improves access to hospital and other health 
services for rural residents of the State; and 
"(B) has developed the rural health care plan described 
in subparagraph (A) in consultation with the hospital 
association of the State, rural hospitals located in the State, 
and the State Office of Rural Health (or, in the case of 
a State in the process of developing such plan, that assures 
the Secretary that the State will consult with its State 
hospital association, rural hospitals located in the State, 
and the State Office of Rural Health in developing such 
plan); 
"(2) assurances that the State has designated (consistent 
with the rural health care plan described in paragraph (1)(A)), 
or is in the process of so designating, rural nonprofit or public 
hospitals or facilities located in the State as critical access 
hospitals; and 
"(3) such other information and assurances as the Secretary 
may require. 
"(c) 
MEDICARE 
RURAL 
HOSPITAL 
FLEXIBILITY 
PROGRAM 
DESCRIBED.— 
"(1) IN GENERAL.—A State that has submitted an applica-
tion in accordance with subsection (b), may establish a medicare 
rural hospital flexibility program that provides that— 
"(A) the State shall develop at least 1 rural health 
network (as defined in subsection (d)) in the State; and 
"(B) at least 1 facility in the State shall be designated 
as a critical access hospital in accordance with paragraph 
(2). 
"(2) STATE DESIGNATION OF FACILITIES.— 
"(A) IN GENERAL.—^A State may designate 1 or more 
facilities as a critical access hospital in accordance with 
subparagraph (B). 
"(B) 
CRITERIA FOR DESIGNATION AS CRITICAL ACCESS 
HOSPITAL.—A State may designate a facility as a critical 
access hospital if the facility— 
"(i) is a nonprofit or public hospital and is located 
in a county (or equivalent unit of local government) 
in a rural area (as defined in section 1886(d)(2)(D)) 
that— 
"(I) is located more than a 35-mile drive (or, 
in the case of mountainous terrain or in areas 
with only secondary roads available, a 15-mile 
drive) from a hospital, or another facility described 
in this subsection; or 
"(II) is certified by the State as being a nec-
essary provider of health care services to residents 
in the area; 
"(ii) makes available 24-hour emergency care serv-
ices that a State determines are necessary for ensuring 
access to emergency care services in each area served 
by a critical access hospital; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 371 
"(iii) provides not more than 15 (or, in the case 
of a facility under an agreement described in subsection 
(f), 25) acute care inpatient beds (meeting such stand-
ards as the Secretary may estabUsh) for providing 
inpatient care for a period not to exceed 96 hours 
(unless a longer period is required because transfer 
to a hospital is precluded because of inclement weather 
or other emergency conditions), except that a peer 
review organization or equivalent entity may, on 
request, waive the 96-hour restriction on a case-by-
case basis; 
"(iv) meets such staffing requirements as would 
apply under section 1861(e) to a hospital located in 
a rural area, except that— 
"(I) the facility need not meet hospital stand-
ards relating to the number of hours during a 
day, or days during a week, in which the facility 
must be open and fully staffed, except insofar as 
the facility is required to make available emer-
gency care services as determined under clause 
(ii) and must have nursing services available on 
a 24-hour basis, but need not otherwise staff the 
facility except when an inpatient is present; 
"(II) the facility may provide any services 
otherwise required to be provided by a full-time, 
on site dietitian, pharmacist, laboratory technician, 
medical technologist, and radiological technologist 
on a part-time, off site basis under arrangements 
as defined in section 1861(w)(l); and 
"(III) the inpatient care described in clause 
(iii) may be provided by a physician assistant, 
nurse practitioner, or clinical nurse specialist sub-
ject to the oversight of a physician who need not 
be present in the facility; and 
"(v) 
meets 
the 
requirements 
of 
section 
1861(aa)(2)(I). 
"(d) DEFINITION OF RURAL HEALTH NETWORK.— 
"(1) IN GENERAL.—In this section, the term 'rural health 
network' means, with respect to a State, an organization 
consisting o
f
— 
"(A) at least 1 facility that the State has designated 
or plans to designate as a critical access hospital; and 
"(B) at least 1 hospital that furnishes acute care serv-
ices. 
"(2) AGREEMENTS.— 
"(A) IN GENERAL.—Each critical access hospital that 
is a member of a rural health network shall have an 
agreement with respect to each item described in subpara-
graph (B) with at least 1 hospital that is a member of 
the network. 
"(B) ITEMS DESCRIBED.—The items described in this 
subparagraph are the following: 
"(i) Patient referral and transfer, 
"(ii) The development and use of communications 
systems including (where feasible)— 
"(I) telemetry systems; and 
I l l STAT. 372 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(II) systems for electronic sharing of patient 
data. 
"(iii) The provision of emergency and non-emer-
gency transportation among the facility and the hos-
pital. 
"(C) CREDENTIALING AND QUALITY ASSURANCE.—Each 
critical access hospital that is a member of a rural health 
network 
shall have an agreement 
with respect to 
credentialing and quality assurance with at least— 
"(i) 1 hospital that is a member of the network; 
"(ii) 1 peer review organization or equivalent 
entity; or 
"(iii) 1 other appropriate and qualified entity 
identified in the State rural health care plan. 
"(e) CERTIFICATION BY THE SECRETARY.—The Secretary shall 
certify a facility as a critical access hospital if the facility— 
"(1) is located in a State that has established a medicare 
rural hospital flexibility program in accordance with subsection 
(c); 
"(2) is designated as a critical access hospital by the State 
in which it is located; and 
"(3) meets such other criteria as the Secretary may require. 
"(f) PERMITTING MAINTENANCE OF SWING BEDS.—Nothing in 
this section shall be construed to prohibit a State from designating 
or the Secretary from certifying a facility as a critical access hospital 
solely because, at the time the facility applies to the State for 
designation as a critical access hospital, there is in effect an agree-
ment between the facility and the Secretary under section 1883 
under which the facility's inpatient hospital facilities are used for 
the provision of extended care services, so long as the total number 
of beds that may be used at any time for the furnishing of either 
such services or acute care inpatient services does not exceed 25 
beds and the number of beds used at any time for acute care 
inpatient services does not exceed 15 beds. For purposes of the 
previous sentence, any bed of a unit of the facility that is licensed 
as a distinct-part skilled nursing facility at the time the facility 
applies to the State for designation as a critical access hospital 
shall not be counted. 
"(g) GRANTS.— 
"(1) MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.— 
The Secretary may award grants to States that have submitted 
applications in accordance with subsection (b) for— 
"(A) engaging in activities relating to planning and 
implementing a rural health care plan; 
"(B) engaging in activities relating to planning and 
implementing rural health networks; and 
"(C) designating facilities as critical access hospitals. 
"(2) RURAL EMERGENCY MEDICAL SERVICES.— 
"(A) IN GENERAL.—^The Secretary may award grants 
to States that have submitted applications in accordance 
with subparagraph (B) for the establishment or expansion 
of a program for the provision of rural emergency medical 
services. 
"(B) APPLICATION.—An application is in accordance 
with this subparagraph if the State submits to the Sec-
retary at such time and in such form as the Secretary 
may require an application containing the assurances 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 373 
described in subparagraphs (A)(ii), (A)(iii), and (B) of sub-
section (b)(1) and paragraph (3) of that subsection. 
"(h) GRANDFATHERING OF CERTAIN FACILITIES.— 
"(1) IN GENERAL.—Any medical assistance facihty operating 
in Montana and any rural primary care hospital designated 
by the Secretary imder this section prior to the date of the 
enactment of the Balanced Budget Act of 1997 shall be deemed 
to have been certified by the Secretary under subsection (e) 
as a critical access hospital if such facility or hospital is other-
wise eligible to be designated by the State as a critical access 
hospital under subsection (c). 
"(2) CONTINUATION OF MEDICAL ASSISTANCE FACILITY AND 
RURAL PRIMARY CARE HOSPITAL TERMS.—Notwithstanding any 
other provision of this title, with respect to any medical assist-
ance facility or rural primary care hospital described in para-
graph (1), any reference in this title to a 'critical access hospital' 
shall be deemed to be a reference to a 'medical assistance 
facility' or 'rural primary care hospital'. 
"(i) WAIVER OF CONFLICTING PART A PROVISIONS.—The Sec-
retary is authorized to waive such provisions of this part and 
part D as are necessary to conduct the program established under 
this section. 
"0") AUTHORIZATION OF APPROPRIATIONS.—There are authorized 
to be appropriated from the Federal Hospital Insurance Trust Fund 
for making grants to all States under subsection (g), $25,000,000 
in each of the fiscal years 1998 through 2002.". 
(b) REPORT ON ALTERNATIVE TO 96-HOUR RULE.—Not later 
than June 1, 1998, the Secretary of Health and Human Services 
shall submit to Congress a report on the feasibility of, and adminis-
trative requirements necessary to establish an alternative for cer-
tain medical diagnoses (as determined by the Secretary) to the 
96-hour limitation for inpatient care in critical access hospitals 
required by section 1820(c)(2)(B)(iii) of the Social Security Act (42 
U.S.C. 1395i-4(c)(2)(B)(iii)), as added by subsection (a) of this sec-
tion. 
(c) CONFORMING AMENDMENTS RELATING TO RURAL PRIMARY 
CARE HOSPITALS AND CRITICAL ACCESS HOSPITALS.— 
(1) IN GENERAL.—Title XI of the Social Security Act (42 
U.S.C. 1301 et seq.) and title XVIII of that Act (42 U.S.C. 
1395 et seq.) are each amended by striking "rural primary 
care" each place it appears and inserting "critical access". 
(2) DEFINITIONS.—Section 1861(mm) of the Social Security 
Act (42 U.S.C. 1395x(mm)) is amended to read as follows: 
"CRITICAL ACCESS HOSPITAL; CRITICAL ACCESS HOSPITAL SERVICES 
"(mm)(l) The term 'critical access hospital' means a facility 
certified by the Secretary as a critical access hospital under section 
1820(e). 
"(2) The term 'inpatient critical access hospital services' means 
items and services, furnished to an inpatient of a critical access 
hospital by such facility, that would be inpatient hospital services 
if furnished to an inpatient of a hospital by a hospital. 
"(3) The term 'outpatient critical access hospital services' means 
medical and other health services furnished by a critical access 
hospital on an outpatient basis.". 
(3) PART A PAYMENT.—Section 1814 of the Social Security 
Act (42 U.S.C. 1395f) is amended— 
I l l STAT. 374 
PUBLIC LAW 105-33—AUG. 5, 1997 
(A) in subsection (a)(8), by striking "72" and inserting 
"96"; and 
(B) by amending subsection (1) to read as follows: 
"Payment for Inpatient Critical Access Hospital Services 
"(1) The amount of payment under this part for inpatient critical 
access hospital services is the reasonable costs of the critical access 
hospital in providing such services.". 
(4) PAYMENT CONTINUED TO DESIGNATED EACHS.—Section 
1886(d)(5)(D) 
of the 
Social 
Security 
Act (42 
U.S.C. 
1395ww(d)(5)(D)) is amended— 
(A) in clause (iii)(III), by inserting "as in effect on 
September 30, 1997" before the period at the end; and 
(B) in clause (v)— 
(i) by inserting "as in effect on September 30, 
1997" after "1820(i)(l)"; and 
(ii) by striking "1820(g)" and inserting "1820(d)". 
(5) PART B PAYMENT.—Section 1834(g) of the Social Security 
Act (42 U.S.C. 1395m(g)) is amended to read as follows: 
"(g) PAYMENT FOR OUTPATIENT CRITICAL ACCESS HOSPITAL 
SERVICES.—The amount of payment under this part for outpatient 
critical access hospital services is the reasonable costs of the critical 
access hospital in providing such services.". 
42 use 1395i-4 
(6) TRANSITION FOR MAF.— 
note. 
(A) IN GENERAL.—The Secretary of Health and Human 
Services shall provide for an appropriate transition for 
a facility that, as of the date of the enactment of this 
Act, operated as a limited service rural hospital under 
a demonstration described in section 4008(i)(l) of the Omni-
bus Budget Reconcihation Act of 1990 (42 U.S.C. 1395b-
1 note) from such demonstration to the program established 
under subsection (a). At the conclusion of the transition 
period described in subparagraph (B), the Secretary shall 
end such demonstration. 
(B) TRANSITION PERIOD DESCRIBED.— 
(i) INITIAL PERIOD.—Subject to clause (ii), the 
transition period described in this subparagraph is the 
period beginning on the date of the enactment of this 
Act and ending on October 1, 1998. 
(ii) EXTENSION.—If the Secretary determines that 
the transition is not complete as of October 1, 1998, 
the Secretary shall provide for an appropriate exten-
sion of the transition period. 
42 use I395f 
(d) EFFECTIVE DATE.—The amendments made by this section 
note. 
shall apply to services furnished on or after October 1, 1997. 
SEC. 4202. PROHIBITING DENIAL OF REQUEST BY RURAL REFERRAL 
CENTERS FOR RECLASSIFICATION ON BASIS OF COM-
PARABILITY O F WAGES. 
(a) 
IN 
GENERAL.—Section 
1886(d)(10)(D) 
(42 
U.S.C. 
1395ww(d)(10)(D)) is amended— 
(1) by redesignating clause (iii) as clause (iv); and 
(2) by inserting after clause (ii) the following new clause: 
"(iii) Under the guidelines published by the Secretary under 
clause (i), in the case of a hospital which has ever been classified 
by the Secretary as a rural referral center under paragraph (5)(C), 
the Board may not reject the application of the hospital under 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 375 
this paragraph on the basis of any comparison between the average 
hourly wage of the hospital and the average hourly wage of hospitals 
in the area in which it is located.". 
(b) CONTINUING TREATMENT OF PREVIOUSLY DESIGNATED CEN-
TERS.— 
(1) IN GENERAL.—Any hospital classified as a rural referral 
center by the Secretary of Health and Human Services under 
section 1886(d)(5)(C) of the Social Security Act for fiscal year 
1991 shall be classified as such a rural referral center for 
fiscal year 1998 and each subsequent fiscal year. 
(2) 
BUDGET 
NEUTRALITY.—The 
provisions 
of 
section 
1886(d)(8)(D) of the Social Security Act shall apply to reclassi-
fications made pursuant to paragraph (1) in the same manner 
as such provisions apply to a reclassification under section 
1886(d)(10)ofsuchAct. 
SEC. 4203. HOSPITAL GEOGRAPHIC RECLASSIFICATION 
PERMITTED 
FOR PURPOSES OF DISPROPORTIONATE 
SHARE PAY-
MENT ADJUSTMENTS. 
(a) IN GENERAL.—For the period described in subsection (c), 
the Medicare Geographic Classification Review Board shall consider 
the application under section 1886(d)(10)(C)(i) of the Social Security 
Act (42 U.S.C. 1395ww(d)(10)(C)(i)) of a hospital described in 
1886(d)(1)(B) of such Act (42 U.S.C. 1395ww(d)(l)(B)) to change 
the hospital's geographic classification for purposes of determining 
for a fiscal year eligibility for and amount of additional payment 
amounts under section 1886(d)(5)(F) of such Act (42 U.S.C. 
1395ww(d)(5)(F)). 
(b) APPLICABLE GUIDELINES.—The Medicare Geographic Classi-
fication Review Board shall apply the guidelines established for 
reclassification under subclause (I) of section 1886(d)(10)(C)(i) of 
such Act to reclassification by reason of subsection (a) until the 
Secretary of Health and Human Services promulgates separate 
guidelines for such reclassification. 
(c) PERIOD DESCRIBED.—The period described in this subsection 
is the period beginning on the date of the enactment of this Act 
and ending 30 months after such date. 
SEC. 4204. MEDICARE-DEPENDENT, SMALL RURAL HOSPITAL PAYMENT 
EXTENSION. 
(a) SPECIAL TREATMENT EXTENDED.— 
(1) PAYMENT METHODOLOGY.—Section 1886(d)(5)(G) (42 
U.S.C. 1395ww(d)(5)(G)) is amended— 
(A) in clause (i), by striking "October 1, 1994," and 
inserting "October 1, 1994, or beginning on or after October 
1, 1997, and before October 1, 2001,"; and 
(B) in clause (ii)(II), by striking "October 1, 1994," 
and inserting "October 1, 1994, or beginning on or after 
October 1, 1997, and before October 1, 2001,". 
(2) EXTENSION OF TARGET AMOUNT.—Section 1886(b)(3)(D) 
(42 U.S.C. 1395ww(b)(3)(D)) is amended— 
(A) in the matter preceding clause (i), by striking 
"September 30, 1994," and inserting "September 30, 1994, 
and for cost reporting periods beginning on or after (October 
1, 1997, and before October 1, 2001,"; 
(B) in clause (ii), by striking "and" at the end; 
(C) in clause (iii), by striking the period at the end 
and inserting ", and"; and 
42 u s e 1395WW 
note. 
42 u s e 1395WW 
note. 
I l l STAT. 376 
PUBLIC LAW 105-33—AUG. 5, 1997 
(D) by adding after clause (iii) the following new clause: 
"(iv) with respect to discharges occurring during fiscal year 
1998 through fiscal year 2000, the target amount for the preced-
ing year increased by the applicable percentage increase under 
subparagraph (B)(iv).". 
42 u s e 1395WW 
(3) PERMITTING HOSPITALS TO DECLINE RECLASSIFICATION.— 
note. 
Section 13501(e)(2) of OBRA-93 (42 U.S.C. 1395ww note) is 
amended by striking "or fiscal year 1994" and inserting ", 
fiscal year 1994, fiscal year 1998, fiscal year 1999, or fiscal 
year 2000". 
42USC1395WW 
(b) EFFECTIVE DATE.—^The amendments made by subsection 
note. 
(a) shall apply with respect to discharges occurring on or after 
October 1,1997. 
SEC. 4205. RURAL HEALTH CLINIC SERVICES. 
(a) PER-VISIT PAYMENT LIMITS FOR PROVIDER-BASED CLINICS.— 
(1) EXTENSION OF LIMIT.— 
(A) IN GENERAL.—The matter in section 1833(f) (42 
U.S.C. 13951(f)) preceding paragraph (1) is amended by 
striking "independent rural health clinics" and inserting 
"rural health clinics (other than such clinics in rural hos-
pitals with less than 50 beds)". 
42USG1395Z 
(B) EFFECTIVE DATE.—The amendment 
made 
by 
note. 
subparagraph (A) applies to services furnished on or after 
January 1, 1998. 
(2) 
TECHNICAL 
CLARIFICATION.—Section 
1833(f)(1) 
(42 
U.S.C. 13951(f)(1)) is amended by inserting "per visit" after 
"$46". 
(b) ASSURANCE OF QUALITY SERVICES.— 
(1) IN GENERAL.—Subparagraph (I) of the first sentence 
of section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended to 
read as follows: 
"(I) has a quality assessment and performance improve-
ment program, and appropriate procedures for review of 
utilization of clinic services, as the Secretary may specify,". 
42 use I395x 
(2) EFFECTIVE DATE.—The amendment made by paragraph 
note. 
(1) shall take effect on January 1, 1998. 
(c) WAIVER OF CERTAIN STAFFING REQUIREMENTS LIMITED TO 
CLINICS IN PROGRAM.— 
(1) 
IN GENERAL.—Section 
1861(aa)(7)(B) 
(42 
U.S.C. 
1395x(aa)(7)(B)) is amended by inserting before the period ", 
or if the facility has not yet been determined to meet the 
requirements (including subparagraph (J) of the first sentence 
of paragraph (2)) of a rural health clinic". 
42 use I395x 
(2) EFFECTIVE DATE.—^The amendment made by paragraph 
note. 
(1) applies to waiver requests made on or after January 1, 
1998. 
(d) REFINEMENT OF SHORTAGE AREA REQUIREMENTS.— 
(1) 
DESIGNATION 
REVIEWED 
TRIENNIALLY.—Section 
1861(aa)(2) (42 U.S.C. 1395x(aa)(2)) is amended in the second 
sentence, in the matter in clause (i) preceding subclause (I)— 
(A) by striking "and that is designated" and inserting 
"and that, within the previous 3-year period, has been 
designated"; and 
(B) by striking "or that is designated" and inserting 
"or designated". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 377 
(2) 
AREA 
MUST 
HAVE 
SHORTAGE 
OF 
HEALTH 
CARE 
PRACTITIONERS.—Section 1861(aa)(2) (42 U.S.C. 1395x(aa)(2)), 
as amended by paragraph (1), is further amended in the second 
sentence, in the matter in clause (i) preceding subclause (I)— 
(A) by striking the comma after "personal health serv-
ices"; and 
(B) by inserting "and in which there are insufficient 
numbers of needed health care practitioners (as determined 
by the Secretary)," after "Bureau of the Census)". 
(3) PREVIOUSLY QUALIFYING CLINICS GRANDFATHERED ONLY 
TO PREVENT SHORTAGE.— 
(A) IN GENERAL.—Section 1861(aa)(2) of the Social 
Security Act (42 U.S.C. 1395x(aa)(2)) is amended in the 
third sentence by inserting before the period "if it is deter-
mined, in accordance with criteria established by the Sec-
retary in regulations, to be essential to the delivery of 
primary care services that would otherwise be unavailable 
in the geographic area served by the clinic". 
(B) PAYMENT FOR CERTAIN PHYSICIAN ASSISTANT SERV-
ICES.—Section 1842(b)(6)(C) (42 U.S.C. 1395u(b)(6)(C)) is 
amended to read as follows: "(C) in the case of services 
described in clause (i) of section 1861(s)(2)(K), pajonent 
shall be made to either (i) the employer of the physician 
assistant involved, or (ii) with respect to a physician assist-
ant who was the owner of a rural health clinic (as described 
in section 1861(aa)(2)) for a continuous period beginning 
prior to the date of the enactment of the Balanced Budget 
Act of 1997 and ending on the date that the Secretary 
determines such rural health clinic no longer meets the 
requirements of section 1861(aa)(2), for such services pro-
vided before January 1, 2003, payment may be made 
directly to the physician assistant; and". 
(4) EFFECTIVE DATES; IMPLEMENTING REGULATIONS.— 
42 use i395x 
(A) IN GENERAL.—Except as otherwise provided, the note. 
amendments made by the preceding paragraphs take effect 
on the date of the enactment of this Act. 
(B) CURRENT RURAL HEALTH CLINICS.—The amend-
ments made by the preceding paragraphs take effect, with 
respect to entities that are rural health clinics under title 
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
on the date of enactment of this Act, on the date of the 
enactment of this Act. 
(C) GRANDFATHERED CLINICS.— 
(i) IN GENERAL.—The amendment made by para-
graph (3)(A) shall take effect on the effective date 
of regulations issued by the Secretary under clause 
(ii). 
(ii) REGULATIONS.—The Secretary shall issue final 
regulations implementing paragraph (3)(A) that shall 
take effect no later than January 1, 1999. 
SEC. 4206. MEDICARE REIMBURSEMENT FOR TELEHEALTH SERVICES. 
42 USC 1395/ 
(a) IN GENERAL.—Not later than January 1, 1999, the Secretary ^°^^' 
of Health and Human Services shall make payments from the 
Federal Supplementary Medical Insurance Trust Fund under part 
B of title XVIII of the Social Security Act (42 U.S.C. 1395j et 
seq.) in accordance with the methodology described in subsection 
I l l STAT. 378 
PUBLIC LAW 105-33—AUG. 5, 1997 
(b) for professional consultation via telecommunications systems 
with a physicism (as defined in section 1861(r) of such Act (42 
U.S.C. 
1395x(r)) 
or 
a 
practitioner 
(described 
in 
section 
1842(b)(18)(C) of such Act (42 U.S.C. 1395u(b)(18)(C)) furnishing 
a service for which pajnnent may be made under such part to 
a beneficiary under the medicare program residing in a county 
in a rural area (as defined in section 1886(d)(2)(D) of such Act 
(42 U.S.C. 1395ww(d)(2)(D))) that is designated as a health profes-
sional shortage area under section 332(a)(1)(A) of the Public Health 
Service Act (42 U.S.C. 254e(a)(l)(A)), notwithstanding that the 
individual physician or practitioner providing the professional con-
sultation is not at the same location as the physician or practitioner 
furnishing the service to that beneficiary. 
(b) METHODOLOGY FOR DETERMINING AMOUNT OF PAYMENTS.— 
Taking into account the findings of the report required under section 
192 of the Health Insurance Portability and Accountability Act 
of 1996 (Pubhc Law 104-191; 110 Stat. 1988), the findings of 
the report required under paragraph (c), and any other findings 
related to the clinical efficacy and cost-effectiveness of telehealth 
applications, the Secretary shall establish a methodology for deter-
mining the amount of payments made under subsection (a) within 
the following parameters: 
(1) The payment shall shared between the referring physi-
cian or practitioner and the consulting physician or practitioner. 
The amount of such payment shall not be greater than the 
current fee schedule of the consulting physician or practitioner 
for the health care services provided. 
(2) The payment shall not include any reimbursement for 
any telephone line charges or any facility fees, and a beneficiary 
may not be billed for any such charges or fees. 
(3) The pajonent shall be made subject to the coinsurance 
and deductible requirements under subsections (a)(1) and (b) 
of section 1833 of the Social Security Act (42 U.S.C. 13951). 
(4) The payment differential of section 1848(a)(3) of such 
Act (42 U.S.C. 1395w-4(a)(3)) shall apply to services furnished 
by non-participating physicians. The provisions of section 
1848(g) of such Act (42 U.S.C. 1395w-4(g)) and section 
1842(b)(18) of such Act (42 U.S.C. 1395u(b)(18)) shall apply. 
Payment for such service shall be increased annually by the 
update factor for physicians' services determined under section 
1848(d) of such Act (42 U.S.C. 1395w-4(d)). 
(c) SUPPLEMENTAL REPORT.—Not later than January 1, 1999, 
the Secretary shall submit a report to Congress which shall contain 
a detailed analysis o
f
— 
(1) how telemedicine and telehealth systems are expanding 
access to health care services; 
(2) the clinical efficacy and cost-effectiveness of telemedi-
cine and telehealth applications; 
(3) the quality of telemedicine and telehealth services deliv-
ered; and 
(4) the reasonable cost of telecommunications charges 
incurred in practicing telemedicine and telehealth in rural, 
frontier, and underserved areas. 
(d) EXPANSION OF TELEHEALTH SERVICES FOR CERTAIN MEDI-
CARE BENEFICIARIES.— 
(1) IN GENERAL.—Not later than January 1, 1999, the Sec-
retary shall submit a report to Congress that examines the 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 379 
possibility of making payments from the Federal Supple-
mentary Medical Insurance Trust Fund under part B of title 
XVIII of the Social Security Act (42 U.S.C. 1395j et seq.) for 
professional consultation via telecommunications systems with 
such a physician or practitioner furnishing a service for which 
pa5anent may be made under such part to a beneficiary 
described in paragraph (2), notwithstanding that the individual 
physician or practitioner providing the professional consultation 
is not at the same location as the physician or practitioner 
furnishing the service to that beneficiary. 
(2) BENEFICIARY DESCRIBED.—A beneficiary described in 
this paragraph is a beneficiary under the medicare program 
under title XVIII of the Social Security Act (42 U.S.C. 1395 
et seq.) who does not reside in a rural area (as so defined) 
that is designated as a health professional shortage area under 
section 332(a)(1)(A) of the Public Health Service Act (42 U.S.C. 
254e(a)(l)(A)), who is homebound or nursing homebound, and 
for whom being trsinsferred for health care services imposes 
a serious hardship. 
(3) REPORT.—The report described in paragraph (1) shall 
contain a detailed statement of the potential costs and savings 
to the medicare program of making the payments described 
in that paragraph using various reimbursement schemes. 
SEC. 
4207. INFORMATICS, TELEMEDICINE, AND EDUCATION DEM- 42 USC1395b-l 
ONSTRATION PROJECT. 
note. 
(a) PURPOSE AND AUTHORIZATION.— 
(1) IN GENERAL.—Not later than 9 months after the date 
of enactment of this section, the Secretary of Health and Human 
Services shall provide for a demonstration project described 
in paragraph (2). 
(2) DESCRIPTION OF PROJECT.— 
(A) IN GENERAL.—The demonstration project described 
in this paragraph is a single demonstration project to use 
eligible health care provider telemedicine networks to apply 
high-capacity computing and advanced networks to improve 
primary care (and prevent health care complications) to 
medicare beneficiaries with diabetes mellitus who are resi-
dents of medically underserved rural areas or residents 
of medically underserved inner-city areas. 
(B) MEDICALLY UNDERSERVED DEFINED.—As used in 
this paragraph, the term "medically underserved" has the 
meaning given such term in section 330(b)(3) of the Public 
Health Service Act (42 U.S.C. 254b(b)(3)). 
(3) WAIVER.—The Secretary shall waive such provisions 
of title XVIII of the Social Security Act as may be necessary 
to provide for pa5anent for services under the project in accord-
ance with subsection (d). 
(4) DURATION OF PROJECT.—The project shall be conducted 
over a 4-year period. 
(b) OBJECTIVES OF PROJECT.—The objectives of the project 
include the following: 
(1) Improving patient access to and compliance with appro-
priate care guidelines for individuals with diabetes mellitus 
through direct telecommunications link with information net-
works in order to improve patient quality-of-life and reduce 
overall health care costs. 
I l l STAT. 380 
PUBLIC LAW 105-33—AUG. 5, 1997 
(2) Developing a curriculum to train health professionals 
(particularly primary care health professionals) in the use of 
medical informatics and telecommunications. 
(3) Demonstrating the application of advanced technologies, 
such as video-conferencing from a patient's home, remote mon-
itoring 
of 
a 
patient's 
medical 
condition, 
interventional 
informatics, and applying individualized, automated care guide-
lines, to assist primary care providers in assisting patients 
with diabetes in a home setting. 
(4) Application of medical informatics to residents with 
limited English language skills. 
(5) Developing standards in the application of telemedicine 
and medical informatics. 
(6) Developing a model for the cost-effective delivery of 
primary and related care both in a managed care environment 
and in a fee-for-service environment. 
(c) ELIGIBLE HEALTH CARE PROVIDER TELEMEDICINE NETWORK 
DEFINED.—For purposes of this section, the term "eligible health 
care provider telemedicine network" means a consortium that 
includes at least one tertiary care hospital (but no more than 
2 such hospitals), at least one medical school, no more than 4 
facilities in rural or urban areas, and at least one regional tele-
communications provider and that meets the following require-
ments: 
(1) The consortium is located in an area with a high con-
centration of medical schools and tertiary care facilities in 
the United States and has appropriate arrangements (within 
or outside the consortium) with such schools and facilities, 
universities, and telecommunications providers, in order to con-
duct the project. 
(2) The consortium submits to the Secretary an application 
at such time, in such manner, and containing such information 
as the Secretary may require, including a description of the 
use to which the consortium would apply any amounts received 
under the project and the source and amount of non-Federal 
funds used in the project. 
(3) The consortium guarantees that it will be responsible 
for pajonent for all costs of the project that are not paid under 
this section and that the maximum amount of payment that 
may be made to the consortium under this section shall not 
exceed the amount specified in subsection (d)(3). 
(d) COVERAGE AS MEDICARE PART B SERVICES.— 
(1) IN GENERAL.—Subject to the succeeding provisions of 
this subsection, services related to the treatment or manage-
ment of (including prevention of complications from) diabetes 
for medicare beneficiaries furnished under the project shall 
be considered to be services covered under part B of title 
XVIII of the Social Security Act. 
(2) PAYMENTS.— 
(A) IN GENERAL.—Subject to paragraph (3), payment 
for such services shsdl be made at a rate of 50 percent 
of the costs that are reasonable and related to the provision 
of such services. In computing such costs, the Secretary 
shall include costs described in subparagraph (B), but may 
not include costs described in subparagraph (C). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 381 
(B) 
COSTS 
THAT 
MAY BE 
INCLUDED.—The 
costs 
described in this subparagraph are the permissible costs 
(as recognized by the Secretary) for the following: 
(i) The acquisition of telemedicine equipment for 
use in patients' homes (but only in the case of patients 
located in medically underserved areas). 
(ii) Curriculum development and training of health 
professionals in medical informatics and telemedicine. 
(iii) Pa5nnent of telecommunications costs (includ-
ing salaries and maintenance of equipment), including 
costs of telecommunications between patients' homes 
and the eligible network and between the network 
and other entities under the arrangements described 
in subsection (c)(1). 
(iv) Payments to practitioners and providers under 
the medicare programs. 
(C) COSTS NOT INCLUDED.—The costs described in this 
subparagraph are costs for any of the following: 
(i) The purchase or installation of transmission 
equipment (other than such equipment used by health 
professionals to deliver medical informatics services 
under the project). 
(ii) The establishment or operation of a tele-
communications common carrier network. 
(iii) Construction (except for minor renovations 
related to the installation of reimbursable equipment) 
or the acquisition or building of real property. 
(3) LIMITATION.—The total amount of the payments that 
may be made under this section shall not exceed $30,000,000 
for the period of the project (described in subsection (a)(4)). 
(4) LIMITATION ON COST-SHARING.—The project may not 
impose cost sharing on a medicare beneficiary for the receipt 
of services under the project in excess of 20 percent of the 
costs that are reasonable and related to the provision of such 
services. 
(e) REPORTS.—The Secretary shall submit to the Committee 
on Ways and Means and the Committee Commerce of the House 
of Representatives and the Committee on Finance of the Senate 
interim reports on the project and a final report on the project 
within 6 months after the conclusion of the project. The final 
report shall include an evaluation of the impact of the use of 
telemedicine and medical informatics on improving access of medi-
care beneficiaries to health care services, on reducing the costs 
of such services, and on improving the quality of life of such bene-
ficiaries, 
(f) DEFINITIONS.—For purposes of this section: 
(1) 
INTERVENTIONAL 
INFORMATICS.—The 
term 
"inter-
ventional informatics" means using information technology and 
virtual reality technology to intervene in patient care. 
(2) MEDICAL INFORMATICS.—The term "medical informatics" 
means the storage, retrieval, and use of biomedical and related 
information for problem solving and decision-making through 
computing and communications technologies. 
(3) PROJECT.—The term "project" means the demonstration 
project under this section. 
I l l STAT. 382 
PUBLIC LAW 105-33—AUG. 5, 1997 
Subtitle D—^Anti-Fraud and Abuse Provi-
sions and Improvements in Protecting 
Program Integrity 
CHAPTER 1—REVISIONS TO SANCTIONS FOR FRAUD 
AND ABUSE 
SEC. 4301. PERMANENT EXCLUSION FOR THOSE CONVICTED OF 3 
HEALTH CARE RELATED CRIMES. 
Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended— 
(1) in subparagraph (A), by inserting "or in the case 
described in subparagraph (G)" after "subsection (b)(12)"; 
(2) in subparagraphs (B) and (D), by striking "In the case" 
and inserting "Subject to subparagraph (G), in the case"; and 
(3) by adding at the end the following new subparagraph: 
"(G) In the case of an exclusion of an individual under sub-
section (a) based on a conviction occurring on or after the date 
of the enactment of this subparagraph, if the individual has (before, 
on, or after such date) been convicted— 
"(i) on one previous occasion of one or more offenses for 
which an exclusion may be effected under such subsection, 
the period of the exclusion shall be not less than 10 years, 
or 
"(ii) on 2 or more previous occasions of one or more offenses 
for which an exclusion may be effected under such subsection, 
the period of the exclusion shall be permanent.". 
SEC. 4302. AUTHORITY TO REFUSE TO ENTER INTO MEDICARE AGREE-
MENTS WITH INDIVIDUALS OR ENTITIES CONVICTED OF 
FELONIES. 
(a) 
MEDICARE 
PART 
A.—Section 
1866(b)(2) 
(42 
U.S.C. 
1395cc(b)(2)) is amended— 
(1) in subparagraph (B), by striking "or" at the end; 
(2) in subparagraph (C), by striking the period at the 
end and inserting ", or"; and 
(3) by adding at the end the following new subparagraph: 
"(D) has ascertained that the provider has been con-
victed of a felony under Federal or State law for an offense 
which the Secretary determines is detrimental to the best 
interests of the program or program beneficiaries.". 
(b) MEDICARE PART B.—Section 1842(h) (42 U.S.C. 1395u(h)) 
is amended by adding at the end the following new paragraph: 
"(8) The Secretary may refuse to enter into an agreement 
with a physician or supplier under this subsection, or may terminate 
or refuse to renew such agreement, in the event that such physician 
or supplier has been convicted of a felony under Federal or State 
law for an offense which the Secretary determines is detrimental 
to the best interests of the program or program, beneficiaries.". 
42 use I395u 
(c) EFFECTIVE DATE.—The amendments made by this section 
note. 
shall take effect on the date of the enactment of this Act and 
apply to the entry and renewal of contracts on or after such date. 
SEC. 4303. EXCLUSION OF ENTITY CONTROLLED BY FAMILY MEMBER 
OF A SANCTIONED INDIVIDUAL. 
(a) IN GENERAL.—Section 1128 (42 U.S.C. 1320a-7) is amend-
ed— 
-«~--S.'V 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 383 
(1) in subsection (b)(8)(A)— 
(A) in clause (i), by striking "or" at the end; 
(B) in clause (ii), by striking the dash at the end 
and inserting "; or"; and 
(C) by inserting after clause (ii) the following: 
"(iii) who was described in clause (i) but is no longer 
so described because of a transfer of ownership or control 
interest, in anticipation of (or following) a conviction, 
assessment, or exclusion described in subparagraph (B) 
against the person, to an immediate family member (as 
defined in subsection (j)(l)) or a member of the household 
of the person (as defined in subsection (j)(2)) who continues 
to maintain an interest described in such clause—"; and 
(2) by adding at the end the following new subsection: 
"(j) DEFINITION OF IMMEDIATE FAMILY MEMBER AND MEMBER 
OF HOUSEHOLD.—For purposes of subsection (b)(8)(A)(iii): 
"(1) The term 'immediate family memljer' means, with 
respect to a person— 
"(A) the husband or wife of the person; 
"(B) the natural or adoptive parent, child, or sibling 
of the person; 
"(C) the stepparent, stepchild, stepbrother, or stepsister 
of the person; 
"(D) the father-, mother-, daughter-, son-, brother-, or 
sister-in-law of the person; 
"(E) the grandparent or grandchild of the person; and 
"(F) the spouse of a grandparent or grandchild of the 
person. 
"(2) The term 'member of the household' means, with 
respect to any person, any individual sharing a common abode 
as part of a single family unit with the person, including 
domestic employees and others who live together as a family 
unit, but not including a roomer or boarder.". 
(b) EFFECTIVE DATE.—The amendments made by this section 
42 USC l320a-7 
shall take effect on the date that is 45 days after the date of note. 
the enactment of this Act. 
SEC. 4304. IMPOSITION OF CIVIL MONEY PENALTIES. 
(a) CIVIL MONEY PENALTIES FOR PERSONS THAT CONTRACT WITH 
EXCLUDED INDIVIDUALS.—Section 1128A(a) (42 U.S.C. 1320a-7a(a)) 
is amended— 
(1) in paragraph (4), by striking "or" at the end; 
(2) in paragraph (5), by adding "or" at the end; and 
(3) by inserting after paragraph (5) the following new para-
graph: 
"(6) arranges or contracts (by employment or otherwise) 
with an individual or entity that the person knows or should 
know is excluded from participation in a Federal health care 
program (as defined in section 1128B(f)), for the provision of 
items or services for which payment may be made under such 
a program;". 
(b) CIVIL MONEY PENALTIES FOR KICKBACKS.— 
(1) PERMITTING SECRETARY TO IMPOSE CIVIL MONEY PEN-
ALTY.—Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as amended 
by subsection (a), is amended— 
(A) in paragraph (5), by striking "or" at the end; 
(B) in paragraph (6), by adding "or" at the end; and 
I l l STAT. 384 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 
1320a-7a note. 
(C) by adding after paragraph (6) the following new 
paragraph: 
"(7) commits an act described in paragraph (1) or (2) of 
section 1128B(b);". 
(2) DESCRIPTION OF CIVIL MONEY PENALTY APPLICABLE.— 
Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by para-
graph (1), is amended in the matter following paragraph (7)— 
(A) by striking "occurs)." and inserting "occurs; or in 
cases under paragraph (7), $50,000 for each such act)."; 
and 
(B) by inserting after "of such claim" the following: 
"(or, in cases under paragraph (7), damages of not more 
than 3 times the total amount of remuneration offered, 
paid, solicited, or received, without regard to whether a 
portion of such remuneration was offered, paid, solicited, 
or received for a lawful purpose)". 
(c) EFFECTIVE DATES.— 
(1) CONTRACTS WITH EXCLUDED PERSONS.—The amend-
ments made by subsection (a) shall apply to arrangements 
and contracts entered into after the date of the enactment 
of this Act. 
(2) KICKBACKS.—^The amendments made by subsection (b) 
shall apply to acts committed after the date of the enactment 
of this Act. 
CHAPTER 
2—IMPROVEMENTS 
IN 
PROTECTING 
PROGRAM 
INTEGRITY 
42 use 1395b-2 
note. 
SEC. 4311. IMPROVING INFORMATION TO MEDICARE BENEFICIARIES. 
(a) INCLUSION OF INFORMATION REGARDING MEDICARE WASTE, 
FRAUD, AND ABUSE IN ANNUAL NOTICE.— 
(1) IN GENERAL.—Section 1804 (42 U.S.C. 1395b-2) is 
amended by adding at the end the following new subsection: 
"(c) The notice provided under subsection (a) shall include— 
"(1) a statement which indicates that because errors do 
occur and because medicare fraud, waste, and abuse is a signifi-
cant problem, beneficiaries should carefully check any expla-
nation of benefits or itemized statement furnished pursuant 
to section 1806 for accuracy and report any errors or question-
able charges by calling the toll-free phone number described 
in paragraph (4); 
"(2) a statement of the beneficiary's right to request an 
itemized statement for medicare items and services (as provided 
in section 1806(b)); 
"(3) a description of the program to collect information 
on medicare fraud and abuse established under section 203(b) 
of the Health Insurance Portability and Accountability Act of 
1996; and 
"(4) a toll-free telephone number maintained by the Inspec-
tor General in the Department of Health and Human Services 
for the receipt of complaints and information about waste, 
fraud, and abuse in the provision or billing of services under 
this title.". 
(2) EFFECTIVE DATE.—^The amendment made by this sub-
section shall apply to notices provided on or after January 
1, 1998. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 385 
(b) CLARIFICATION OF REQUIREMENT TO PROVIDE EXPLANATION 
OF MEDICARE BENEFITS.— 
(1) IN GENERAL.—Title XVIII is amended by inserting after 
section 1805 (as added by section 4022) the following new 
section: 
"EXPLANATION OF MEDICARE BENEFITS 
"SEC. 1806. (a) IN GENERAL.—The Secretary shall furnish to 
42 use i395b-7. 
each individual for whom payment has been made under this title 
(or would be made without regard to any deductible) a statement 
which— 
"(1) lists the item or service for which payment has been 
made and the amount of such payment for each item or service; 
and 
"(2) includes a notice of the individual's right to request 
an itemized statement (as provided in subsection (b)). 
"(b) REQUEST FOR ITEMIZED STATEMENT FOR MEDICARE ITEMS 
AND SERVICES.— 
"(1) IN GENERAL.—An individual may submit a written 
request to any physician, provider, supplier, or any other person 
(including an organization, agency, or other entity) for an item-
ized statement for any item or service provided to such individ-
ual by such person with respect to which payment has been 
made under this title. 
"(2) 30-DAY PERIOD TO FURNISH STATEMENT.— 
"(A) IN GENERAL.—Not later than 30 days after the 
date on which a request under paragraph (1) has been 
made, a person described in such paragraph shall furnish 
an itemized statement describing each item or service pro-
vided to the individual requesting the itemized statement. 
"(B) PENALTY.—Whoever knowingly fails to furnish an 
itemized statement in accordance with subparagraph (A) 
shall be subject to a civil money penalty of not more than 
$100 for each such failure. Such penalty shall be imposed 
and collected in the same manner as civil money penalties 
under subsection (a) of section 1128A are imposed and 
collected under that section, 
"(3) REVIEW OF ITEMIZED STATEMENT.— 
"(A) IN GENERAL.—Not later than 90 days after the 
receipt of an itemized statement furnished under paragraph 
(1), an individual may submit a written request for a 
review of the itemized statement to the Secretary. 
"(B) SPECIFIC ALLEGATIONS.—A request for a review 
of the itemized statement shall identify— 
"(i) specific items or services that the individual 
believes were not provided as claimed, or 
"(ii) any other billing irregularity (including dupli-
cate billing). 
"(4) FINDINGS OF SECRETARY.—The Secretary shall, with 
respect to each written request submitted under paragraph 
(3), determine whether the itemized statement identifies spe-
cific items or services that were not provided as claimed or 
any other billing irregularity (including duplicate billing) that 
has resulted in unnecessary payments under this title. 
"(5) RECOVERY OF AMOUNTS.—The Secretary shall take all 
appropriate measures to recover amounts unnecessarily paid 
I l l STAT. 386 
PUBLIC LAW 105-33—AUG. 5, 1997 
under this title with respect to a statement described in para-
graph (4).". 
(2) CONFORMING AMENDMENT.—Subsection (a) of section 
203 of the Health Insurance Portability and Accountability 
42 use i395b-5. 
Act of 1996 is repealed. 
42 use 1395b-7 
(3) EFFECTIVE DATES.— 
note. 
(A) STATEMENT BY SECRETARY.—Paragraph (1) of sec-
tion 1806(a) of the Social Security Act, as added by para-
graph (1), and the repeal made by paragraph (2) shall 
take effect on the date of the enactment of this Act. 
(B) ITEMIZED STATEMENT.—Paragraph (2) of section 
1806(a) and section 1806(b) of the Social Security Act, 
as so added, shall take effect not later than January 1, 
1999. 
SEC. 4312. DISCLOSURE OF INFORMATION AND SURETY BONDS. 
(a) DISCLOSURE OF INFORMATION AND SURETY BOND REQUIRE-
MENT FOR SUPPLIERS OF DURABLE MEDICAL EQUIPMENT.—Section 
1834(a) (42 U.S.C. 1395m(a)) is amended by inserting after para-
graph (15) the following new paragraph: 
"(16) DISCLOSURE OF INFORMATION AND SURETY BOND.— 
The Secretary shall not provide for the issuance (or renewal) 
of a provider number for a supplier of durable medical equip-
ment, for purposes of payment under this part for durable 
medical equipment furnished by the supplier, unless the sup-
plier provides the Secretary on a continuing basis— 
"(A) with— 
"(i) full and complete information as to the identity 
of each person with an ownership or control interest 
(as defined in section 1124(a)(3)) in the supplier or 
in any subcontractor (as defined by the Secretary in 
regulations) in which the supplier directly or indirectly 
has a 5 percent or more ownership interest; and 
"(ii) to the extent determined to be feasible under 
regulations of the Secretary, the name of any disclosing 
entity (as defined in section 1124(a)(2)) with respect 
to which a person with such an ownership or control 
interest in the supplier is a person with such an owner-
ship or control interest in the disclosing entity; and 
"(B) with a surety bond in a form specified by the 
Secretary and in an amount that is not less than $50,000. 
The Secretary may waive the requirement of a bond under 
subparagraph (B) in the case of a supplier that provides a 
comparable surety bond under State law.". 
(b) SURETY BOND REQUIREMENT FOR HOME HEALTH AGEN-
(1) IN GENERAL.—Section 1861(o) (42 U.S.C. 1395x(o)) is 
amended— 
(A) in paragraph (6), by striking "and" at the end; 
(B) by redesignating paragraph (7) as paragraph (8); 
(C) by inserting after paragraph (6) the following new 
paragraph: 
"(7) provides the Secretary on a continuing basis with 
a surety bond in a form specified by the Secretary and in 
£in amount that is not less than $50,000; and"; and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 387 
(D) by adding at the end the following: "The Secretary 
may waive the requirement of a surety bond under para-
graph (7) in the case of an agency or organization that 
provides a comparable surety bond under State law.". 
(2) CONFORMING AMENDMENTS.—Section 1861(v)(l)(H) (42 
U.S.C. 1395x(v)(l)(H)) is amended— 
(A) in clause (i), by striking "the financial security 
requirement described in subsection (o)(7)" and inserting 
"the surety bond requirement described in subsection (o)(7) 
and the financial security requirement described in sub-
section (o)(8)"; and 
(B) in clause (ii), by striking "the financial security 
requirement described in subsection (o)(7) applies" and 
inserting "the surety bond requirement described in sub-
section (o)(7) and the financial security 
requirement 
described in subsection (o)(8) apply". 
(3) REFERENCE TO CURRENT DISCLOSURE REQUIREMENT.— 
For additional provisions requiring home health agencies to 
disclose information on ownership and control interests, see 
section 1124 of the Social Security Act (42 U.S.C. 1320a-3). 
(c) AUTHORIZING APPLICATION OF DISCLOSURE AND SURETY 
BOND REQUIREMENTS TO OTHER HEALTH CARE PROVIDERS.—Section 
1834(a)(16) (42 U.S.C. 1395m(a)(16)), as added by subsection (a), 
is amended by adding at the end the following: "The Secretary, 
at the Secretary's discretion, may impose the requirements of the 
first sentence with respect to some or all providers of items or 
services under part A or some or all suppliers or other persons 
(other than physicians or other practitioners, as defined in section 
1842(b)(18)(C)) who furnish items or services under this part.". 
(d) APPLICATION TO COMPREHENSIVE OUTPATIENT REHABILITA-
TION 
FACILITIES 
(CORFS).—Section 
1861(cc)(2) 
(42 
U.S.C. 
1395x(cc)(2)) is amended— 
(1) in subparagraph (H), by striking "and" at the end; 
(2) by redesignating subparagraph (I) as subparagraph (J); 
(3) by inserting after subparagraph (H) the following new 
subparagraph: 
"(I) provides the Secretary on a continuing basis with a 
surety bond in a form specified by the Secretary and in an 
amount that is not less than $50,000; and"; and 
(4) by adding at the end the following flush sentence: 
"The Secretary may waive the requirement of a surety bond under 
subparagraph (I) in the case of a facility that provides a comparable 
surety bond under State law.". 
(e) 
APPLICATION 
TO REHABILITATION 
AGENCIES.—Section 
1861(p) (42 U.S.C. 1395x(p)) is amended— 
(1) in paragraph (4)(A)(v), by inserting after "as the Sec-
retary may find necessary," the following: "and provides the 
Secretary on a continuing basis with a surety bond in a form 
specified by the Secretary and in an amount that is not less 
than $50,000,", and 
(2) by adding at the end the following: "The Secretary 
may waive the requirement of a surety bond under paragraph 
(4)(A)(v) in the case of a clinic or agency that provides a 
comparable surety bond under State law.". 
(f) EFFECTIVE DATES.— 
(1) SUPPLIERS OF DURABLE MEDICAL EQUIPMENT.—The 42usci395m 
amendment made by subsection (a) shall apply to suppliers ^ote. 
I l l STAT. 388 
PUBLIC LAW 105-33—AUG. 5, 1997 
of durable medical equipment with respect to such equipment 
furnished on or after January 1, 1998. 
42 use I395x 
(2) HOME HEALTH AGENCIES.—The amendments made by 
note. 
subsection (b) shall apply to home health agencies with respect 
to services furnished on or after January 1, 1998. The Secretary 
of Health and Human Services shall modify participation agree-
ments under section 1866(a)(1) of the Social Security Act (42 
U.S.C. 1395cc(a)(l)) with respect to home health agencies to 
provide for implementation of such amendments on a timely 
basis. 
42 use 1395m 
(3) OTHER AMENDMENTS.—The amendments made by sub-
"lote. 
sections (c) through (e) shall take effect on the date of the 
enactment of this Act and may be applied with respect to 
items and services furnished on or after January 1, 1998. 
SEC. 4313. PROVISION OF CERTAIN IDENTIFICATION NUMBERS. 
(a) 
REQUIREMENTS TO DISCLOSE EMPLOYER IDENTIFICATION 
NUMBERS 
( E I N S ) 
AND SOCIAL 
SECURITY ACCOUNT 
NUMBERS 
(SSNs).—Section 1124(a)(1) (42 U.S.C. 1320a-3(a)(l)) is amended 
by inserting before the period at the end the following: "and supply 
the Secretary with the both the employer identification number 
(assigned pursuant to section 6109 of the Internal Revenue Code 
of 1986) and social security account number (assigned under section 
205(c)(2)(B)) of the disclosing entity, each person with £in ownership 
or control interest (as defined in subsection (a)(3)), and any sub-
contractor in which the entity directly or indirectly has a 5 percent 
or more ownership interest. 
(b) OTHER MEDICARE PROVIDERS.—Section 1124A (42 U.S.C. 
1320a-3a) is amended— 
(1) in subsection (a)— 
(A) in paragraph (1), by striking "and" at the end; 
(B) in paragraph (2), by striking the period at the 
end and inserting "; and"; and 
(C) by adding at the end the following new paragraph: 
"(3) including the employer identification number (assigned 
pursuant to section 6109 of the Internal Revenue Code of 
1986) and social security account number (assigned under sec-
tion 205(c)(2)(B)) of the disclosing part B provider and any 
person, managing employee, or other entity identified or 
described under paragraph (1) or (2)."; and 
(2) in subsection (c)(1), by inserting "(or, for purposes of 
subsection (a)(3), any entity receiving payment)" after "on an 
assignment-related basis". 
(c) VERIFICATION BY SOCIAL SECURITY ADMINISTRATION (SSA).— 
Section 1124A (42 U.S.C. 1320a-3a), as amended by subsection 
(b), is amended— 
(1) by redesignating subsection (c) as subsection (d); and 
(2) by inserting after subsection (b) the following new sub-
section: 
"(c) VERIFICATION.— 
"(1) TRANSMITTAL BY HHS.—The Secretary shall transmit— 
"(A) to the Commissioner of Social Security information 
concerning each social security account number (assigned 
under section 205(c)(2)(B)), and 
"(B) to the Secretary of the Treasury information 
concerning each employer identification number (assigned 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 389 
pursuant to section 6109 of the Internal Revenue Code 
of 1986), 
supplied to the Secretary pursuant to subsection (a)(3) or sec-
tion 1124(c) to the extent necessary for verification of such 
information in accordance with paragraph (2). 
"(2) VERIFICATION.—The Commissioner of Social Security 
and the Secretary of the Treasury shall verify the accuracy 
of, or correct, the information supplied by the Secretary to 
such official pursuant to paragraph (1), and shall report such 
verifications or corrections to the Secretary. 
"(3) 
FEES 
FOR VERIFICATION.—The 
Secretary 
shall 
reimburse the Commissioner and Secretary of the Treasury, 
at a rate negotiated between the Secretary and such official, 
for the costs incurred by such official in performing the verifica-
tion and correction services described in this subsection.". 
(d) REPORT.—Before the amendments made by this section may 
become effective, the Secretary of Health and Human Services 
shall submit to Congress a report on steps the Secretary has taken 
to assure the confidentiality of social security account numbers 
that will be provided to the Secretary under such amendments. 
(e) EFFECTIVE DATES.— 
(1) DISCLOSURE REQUIREMENTS.—The amendment made by 
subsection (a) shall apply to the application of conditions of 
participation, and entering into and renewal of contracts and 
agreements, occurring more than 90 days after the date of 
submission of the report under subsection (d). 
(2) OTHER PROVIDERS.—The amendments made by sub-
section (b) shall apply to payment for items and services fur-
nished more than 90 days after the date of submission of 
such report. 
SEC. 4314. ADVISORY OPINIONS REGARDING CERTAIN PHYSICIAN 
SELF-REFERRAL PROVISIONS. 
Section 1877(g) (42 U.S.C. 1395nn(g)) is amended by adding 
at the end the following new paragraph: 
"(6) ADVISORY OPINIONS.— 
"(A) IN GENERAL.—The Secretary shall issue written 
advisory opinions concerning whether a referral relating 
to designated health services (other than clinical laboratory 
services) is prohibited under this section. Each advisory 
opinion issued by the Secretary shall be binding as to 
the Secretary and the party or parties requesting the opin-
ion. 
"(B) APPLICATION OF CERTAIN RULES.—The Secretary 
shall, to the extent practicable, apply the rules under sub-
sections (b)(3) and (b)(4) and take into account the regula-
tions promulgated under subsection (b)(5) of section 1128D 
in the issuance of advisory opinions under this paragraph. 
"(C) REGULATIONS.—In order to implement this para-
graph in a timely manner, the Secretary may promulgate 
regulations that take effect on an interim basis, after notice 
and pending opportunity for public comment. 
"(D) APPLICABILITY.—This paragraph shall apply to 
requests for advisory opinions made after the date which 
is 90 days after the date of the enactment of this paragraph 
and before the close of the period described in section 
1128D(b)(6).". 
42 use 1320a-3 
note. 
42 use 1320a-3 
note. 
I l l STAT. 390 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 4315. REPLACEMENT OF REASONABLE CHARGE METHODOLOGY 
BY FEE SCHEDULES. 
(a) APPLICATION OF FEE SCHEDULE.—Section 1842 (42 U.S.C. 
1395u) is amended by adding at the end the following new sub-
section: 
"(s)(l) The Secretary may implement a statewide or other 
areawide fee schedule to be used for pajrment of any item or 
service described in paragraph (2) which is paid on a reasonable 
charge basis. Any fee schedule established under this paragraph 
for such item or service shall be updated each year by the percent-
age increase in the consumer price index for all urban consumers 
(United States city average) for the 12-month period ending with 
June of the preceding year, except that in no event shall a fee 
schedule for an item described in paragraph (2)(D) be updated 
before 2003. 
"(2) The items and services described in this paragraph are 
as follows: 
"(A) Medical supplies. 
"(B) Home dialysis supplies and equipment (as defined 
in section 1881(b)(8)). 
"(C) Therapeutic shoes. 
"(D) Parenteral and enteral nutrients, equipment, and sup-
plies. 
"(E) Electromyogram devices 
"(F) Salivation devices. 
"(G) Blood products. 
"(H) Transfusion medicine.". 
(b) CONFORMING AMENDMENT.—Section 1833(a)(1) (42 U.S.C. 
13951(a)(1)) is amended— 
(A) by striking "and (P)" and inserting "(P)"; and 
(B) by striking the semicolon at the end and inserting 
the following: ", and (Q) with respect to items or services 
for which fee schedules are established pursuant to section 
1842(s), the amounts paid shall be 80 percent of the lesser 
of the actual charge or the fee schedule established in 
such section;". 
42 use 1395/ 
(c) EFFECTIVE DATES.—The amendments made by this section 
note. 
to the extent such amendments substitute fee schedules for reason-
able charges, shall apply to particular services as of the date speci-
fied by the Secretary of Health and Human Services. 
42 use I395u 
(d) INITIAL BUDGET NEUTRALITY.—The Secretary, in developing 
note. 
a fee schedule for particular services (under the amendments made 
by this section), shall set amounts for the first year period to 
which the fee schedule applies at a level so that the total payments 
under title XVIII of the Social Security Act (42 U.S.C. 1395 et 
seq.) for those services for that year period shall be approximately 
equal to the estimated total payments if such fee schedule had 
not been implemented. 
SEC. 4316. APPLICATION OF INHERENT REASONABLENESS TO ALL 
PART B SERVICES OTHER THAN PHYSICLANS' SERVICES. 
(a) IN GENERAL.—Paragraphs (8) and (9) of section 1842(b) 
(42 U.S.C. 1395u(b)) are amended to read as follows: 
Regulations. 
"(8)(A)(i) The Secretary shall by regulation— 
"(I) describe the factors to be used in determining the 
cases (of particular items or services) in which the application 
of this part (other than to physicians' services paid under 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 391 
section 1848) results in the determination of an amount that, 
because of its being grossly excessive or grossly deficient, is 
not inherently reasonable, and 
"(11) provide in those cases for the factors to be considered 
in determining an amount that is realistic and equitable. 
"(ii) Notwithstanding the determination made in clause (i), 
the Secretary may not apply factors that would increase or decrease 
the payment under this part during any year for any particular 
item or service by more than 15 percent from such payment during 
the preceding year except as provided in subparagraph (B). 
"(B) The Secretary may make a determination under this 
subparagraph that would result in an increase or decrease under 
subparagraph (A) of more than 15 percent of the payment amount 
for a year, but only if— 
"(i) the Secretary's determination takes into account the 
factors described in subparagraph (C) and any additional factors 
the Secretary determines appropriate, 
"(ii) the Secretary's determination takes into account the 
potential impacts described in subparagraph (D), and 
"(iii) the Secretary complies with the procedural require-
ments of paragraph (9). 
"(C) The factors described in this subparagraph are as follows: 
"(i) The programs established under this title and title 
XIX are the sole or primary sources of pajmient for an item 
or service. 
"(ii) The payment amount does not reflect changing tech-
nology, increased facility with that technology, or reductions 
in acquisition or production costs. 
"(iii) The payment amount for an item or service under 
this part is substantially higher or lower than the payment 
made for the item or service by other purchasers. 
"(D) The potential impacts of a determination under subpara-
graph (B) on quality, access, and beneficiary liability, including 
the likely effects on assignment rates and participation rates. 
"(9)(A) The Secretary shall consult with representatives of 
suppliers or other individuals who furnish an item or service before 
making a determination under paragraph (8)(B) with regard to 
that item or service. 
"(B) The Secretary shall publish notice of a proposed determina-
tion under paragraph (8)(B) in the Federal Register— 
"(i) specifying the payment amount proposed to be estab-
lished with respect to an item or service, 
"(ii) explaining the factors and data that the Secretary 
took into account in determining the payment amount so speci-
fied, and 
"(iii) explaining the potential impacts described in para-
graph (8)(D). 
"(C) After publication of the notice required by subparagraph 
(B), the Secretary shall allow not less than 60 days for public 
comment on the proposed determination. 
"(D)(i) Taking into consideration the comments made by the 
public, the Secretary shall publish in the Federal Register a final 
determination under para^aph (8)(B) with respect to the payment 
amount to be established with respect to the item or service. 
"(ii) A final determination published pursuant to clause (i) 
shall explain the factors and data that the Secretary took into 
consideration in making the final determination.". 
Federal Register, 
publication. 
Federal Register, 
publication. 
I l l STAT. 392 
PUBLIC LAW 105-33—AUG. 5, 1997 
(b) 
CONFORMING 
AMENDMENT.—Section 
1834(a)(10)(B) 
(42 
U.S.C. 1395m(a)(10)(B)) is amended— 
(1) by striking "For covered items furnished on or after 
January 1, 1991, the" and inserting "The"; 
(2) by striking "(other than subparagraph (D))"; and 
(3) by striking all that follows "pa3anents under this sub-
section" and inserting a period. 
42 use 1395m 
(c) EFFECTIVE DATE.—The amendments made by this section 
note. 
shall take effect on the date of the enactment of this A^t. 
SEC. 4317. REQUIREMENT TO FURNISH DIAGNOSTIC INFORMATION. 
(a) INCLUSION OF NON-PHYSICIAN PRACTITIONERS IN REQUIRE-
MENT To PROVIDE DIAGNOSTIC CODES FOR PHYSICIAN SERVICES.— 
Paragraphs (1) and (2) of section 1842(p) (42 U.S.C. 1395u(p)) 
are each amended by inserting "or practitioner specified in sub-
section (b)(18)(C)" after "by a physician". 
(b) REQUIREMENT TO PROVIDE DIAGNOSTIC INFORMATION WHEN 
ORDERING CERTAIN ITEMS OR SERVICES FURNISHED BY ANOTHER 
ENTITY.—Section 1842(p) (42 U.S.C. 1395u(p)), is amended by add-
ing at the end the following new paragraph: 
"(4) In the case of an item or service defined in paragraph 
(3), (6), (8), or (9) of subsection 1861(s) ordered by a physician 
or a practitioner specified in subsection (b)(18)(C), but furnished 
by another entity, if the Secretary (or fiscal agent of the Secretary) 
requires the entity furnishing the item or service to provide diag-
nostic or other medical information in order for payment to be 
made to the entity, the physician or practitioner shall provide 
that information to the entity at the time that the item or service 
is ordered by the physician or practitioner.". 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to items and services furnished on or after January 
1, 1998. 
SEC. 
4318. 
REPORT 
BY 
GAO 
ON 
OPERATION 
OF 
FRAUD AND 
ABUSE 
CONTROL 
PROGRAM. 
Section 1817(k)(6) (42 U.S.C. 1395i(k)(6)) is amended by insert-
ing "June 1,1998, and" after "Not later than". 
SEC. 4319. COMPETITIVE BIDDING DEMONSTRATION PROJECTS. 
(a) GENERAL RULE.—Part B of title XVIII (42 U.S.C. 1395j 
et seq.) is amended by inserting after section 1846 the following 
new section: 
42 use 1395W-3. "SEC. 1847. DEMONSTRATION PROJECTS FOR COMPETITIVE ACQUISI-
TION OF ITEMS AND SERVICES. 
"(a) ESTABLISHMENT OF DEMONSTRATION PROJECT 
BIDDING 
AREAS.— 
"(1) IN GENERAL.—The Secretary shall implement not more 
than 5 demonstration projects under which competitive acquisi-
tion areas are established for contract award purposes for the 
furnishing under this part of the items and services described 
in subsection (d). 
"(2) PROJECT REQUIREMENTS.—Each demonstration project 
under paragraph (1)— 
"(A) shall include such group of items and services 
as the Secretary may prescribe, 
"(B) shall be conducted in not more than 3 competitive 
acquisition areas, and 
42 use 1395u 
note. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 393 
"(C) shall be operated over a 3-year period. 
"(3) CRITERIA FOR ESTABLISHMENT OF COMPETITIVE ACQUISI-
TION AREAS.—Each competitive acquisition area established 
under a demonstration project implemented under paragraph 
( 1 ) -
"(A) shall be, or shall be within, a metropolitan statis-
tical area (as defined by the Secretary of Commerce), and 
"(B) shall be chosen based on the availability and acces-
sibility of entities able to furnish items and services, and 
the probable savings to be realized by the use of competitive 
bidding in the furnishing of items and services in such 
area. 
"(b) AWARDING OF CONTRACTS IN AREAS.— 
"(1) IN GENERAL.—The Secretary shall conduct a competi-
tion among individuals and entities supplying items and serv-
ices described in subsection (c) for each competitive acquisition 
area established under a demonstration project implemented 
under subsection (a). 
"(2) CONDITIONS FOR AWARDING CONTRACT.—The Secretary 
may not award a contract to any entity under the competition 
conducted pursuant to paragraph (1) to furnish an item or 
service unless the Secretary finds that the entity meets quality 
standards specified by the Secretary that the total amounts 
to be paid under the contract are expected to be less than 
the total amounts that would otherwise be paid. 
"(3) CONTENTS OF CONTRACT.—A contract entered into with 
an entity under the competition conducted pursuant to para-
graph (1) is subject to terms and conditions that the Secretary 
may specify. 
"(4) LIMIT ON NUMBER OF CONTRACTORS.—The Secretary 
may limit the number of contractors in a competitive acquisition 
area to the number needed to meet projected demand for items 
and services covered under the contracts. 
"(c) EXPANSION OF PROJECTS.— 
"(1) EVALUATIONS.—The Secretary shall evaluate the 
impact of the implementation of the demonstration projects 
on medicare program payments, access, diversity of product 
selection, and quality. 'Rie Secretary shall make annual reports 
to the Committees on Ways and Means and Commerce of 
the House of Representatives and the Committee on Finance 
of the Senate on the results of the evaluation described in 
the preceding sentence and a final report not later than 6 
months after the termination date specified in subsection (e). 
"(2) EXPANSION.—If the Secretary determines fi*om the 
evaluations under paragraph (1) that there is clear evidence 
that any demonstration project— 
"(A) results in a decrease in Federal expenditures 
under this title, and 
"(B) does not reduce program access, diversity of prod-
uct selection, and quality under this title, 
the Secretary may expand the project to additional competitive 
acquisition areas. 
"(d) SERVICES DESCRIBED.—The items and services to which 
this section applies are all items and services covered under this 
part (except for physicians' services as defined in section 1861(s)(l)) 
that the Secretary may specify. At least one demonstration project 
shall include oxygen and oxygen equipment. 
9-194 O - 97 - 14 : QL 3 Part 1 
I l l STAT. 394 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(e) TERMINATION.—Notwithstanding any other provision of this 
section, all projects under this section shall terminate not later 
than December 31, 2002.". 
(b) ITEMS AND SERVICES TO BE FURNISHED ONLY THROUGH 
COMPETITIVE ACQUISITION.—Section 1862(a) (42 U.S.C. 1395y(a)) 
is amended— 
(1) by striking "or" at the end of paragraph (15), 
(2) by striking the period at the end of paragraph (16) 
and inserting "; or", and 
(3) by inserting after paragraph (16) the following new 
paragraph: 
"(17) where the expenses are for an item or service fur-
nished in a competitive acquisition area (as established by 
the Secretary under section 1847(a)) by an entity other than 
£in entity with which the Secretary has entered into a contract 
under section 1847(b) for the furnishing of such an item or 
service in that area, unless the Secretary finds that the 
expenses were incurred in a case of urgent need, or in other 
circumstances specified by the Secretary.". 
42 use 1395W-3 
(c) STUDY B
Y GAO.—The Comptroller of the United States 
note. 
shall study the effectiveness of the establishment of competitive 
acquisition areas under section 1847(a) of the Social Security Act, 
as added by this section. 
SEC. 4320. PROHIBITING UNNECESSARY AND WASTEFUL MEDICARE 
PAYMENTS FOR CERTAIN ITEMS. 
Section 1861(v) (42 U.S.C. 1395x(v)) is amended by adding 
at the end the following new paragraph: 
"(8) ITEMS UNRELATED TO PATIENT CARE.—Reasonable costs 
do not include costs for the following— 
"(i) entertainment, including tickets to sporting and 
other entertainment events; 
"(ii) gifts or donations; 
"(iii) personal use of motor vehicles; 
"(iv) costs for fines and penalties resulting from viola-
tions of Federal, State, or local laws; and 
"(v) education expenses for spouses or other dependents 
of providers of services, their employees or contractors.". 
SEC. 4321. NONDISCRIMINATION IN POST-HOSPITAL REFERRAL TO 
HOME HEALTH AGENCIES AND OTHER ENTITIES. 
(a) NOTIFICATION OF AVAILABILITY OF HOME HEALTH AGENCIES 
AND OTHER ENTITIES AS PART OF DISCHARGE PLANNING PROCESS.— 
Section 1861(ee)(2) (42 U.S.C. 1395x(ee)(2)) is amended— 
(1) in subparagraph (D), by inserting before the period 
the following: ", including the availability of home health serv-
ices through individuals and entities that participate in the 
program under this title and that serve the area in which 
the patient resides and that request to be listed by the hospital 
as available"; and 
(2) by adding at the end the following new subparagraph: 
"(H) Consistent with section 1802, the discharge plan 
shall— 
"(i) not specify or otherwise limit the qualified provider 
which may provide post-hospital home health services, and 
"(ii) identify (in a form and manner specified by the 
Secretary) any entity to whom the individual is referred 
in which the hospital has a disclosable financial interest 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 395 
(as specified by the Secretary consistent with section 
1866(a)(l)(S)) or which has such an interest in the hos-
pital.". 
(b) MAINTENANCE AND DISCLOSURE OF INFORMATION ON POST-
HOSPITAL HOME HEALTH AGENCIES AND OTHER ENTITIES.—Section 
1866(a)(1) (42 U.S.C. 1395cc(a)(l)) is amended— 
(1) by striking "and" at the end of subparagraph (Q), 
(2) by striking the period at the end of subparagraph (R), 
and 
(3) by adding at the end the following new subparagraph: 
"(S) in the case of a hospital that has a financial interest 
(as specified by the Secretary in regulations) in an entity to 
which individuals 
are 
referred 
as described 
in 
section 
1861(ee)(2)(H)(ii), or in which such an entity has such a finan-
cial interest, or in which another entity has such a financial 
interest (directly or indirectly) with such hospital and such 
an entity, to maintain and disclose to the Secretary (in a 
form and manner specified by the Secretary) information on— 
"(i) the nature of such financial interest, 
"(ii) the number of individuals who were discharged 
from the hospital and who were identified as requiring 
home health services, and 
"(iii) the percentage of such individuals who received 
such services from such provider (or another such pro-
vider).". 
(c) DISCLOSURE OF INFORMATION TO THE PUBLIC.—^Title XI is 
amended by inserting after section 1145 the following new section: 
"PUBLIC DISCLOSURE OF CERTAIN INFORMATION ON HOSPITAL 
FINANCIAL INTEREST AND REFERRAL PATTERNS 
"SEC. 1146. The Secretary shall make available to the public, 
in a form and manner specified by the Secretary, information dis-
closed to the Secretary pursuant to section 1866(a)(l)(S).". 
(d) EFFECTIVE DATES.— 
(1) The amendments made by subsection (a) shall apply 
to discharges occurring on or after the date which is 90 days 
after the date of the enactment of this Act. 
(2) The Secretary of Health and Human Services shall 
issue regulations by not later than the date which is 1 year 
after the date of the enactment of this Act to carry out the 
amendments made by subsections (b) and (c) and such amend-
ments shall take effect as of such date (on or after the issuance 
of such regulations) as the Secretary specifies in such regula-
tions. 
42 use 
1320b-16. 
42 use 1395X 
note. 
Regulations. 
42 use 
1320b-16 note. 
CHAPTER 3—CLARIFICATIONS AND TECHNICAL 
CHANGES 
SEC. 4331. OTHER FRAUD AND ABUSE RELATED PROVISIONS. 
(a) REFERENCE CORRECTION.—(1) Section 1128D(b)(2)(D) (42 
U.S.C. 1320a-7d(b)(2)(D)), as added by section 205 of the Health 
Insurance Portability and Accountability Act of 1996, is amended 
by striking "1128B(b)" and inserting "1128A(b)". 
(2) Section 1128E(g)(3)(C) (42 U.S.C. 1320a-7e(g)(3)(C)) is 
amended by striking "Veterans' Administration" and inserting 
"Department of Veterans Affairs". 
I l l STAT. 396 
PUBLIC LAW 105-33—AUG. 5, 1997 
Publication. 
42 u s e 1320a-7e 
note. 
(b) 
LANGUAGE 
IN 
DEFINITION 
OF 
CONVICTION.—Section 
1128E(g)(5) (42 U.S.C. 1320a-7e(g)(5)), as inserted by section 221(a) 
of the Health Insurance Portabihty and AccountabiUty Act of 1996, 
is amended by striking "paragraph (4)" and inserting "paragraphs 
(1) through (4)". 
(c) IMPLEMENTATION OF EXCLUSIONS.—Section 1128 (42 U.S.C. 
1320a-7) is amended— 
(1) in subsection (a), by striking "any program under title 
XVIII and shall direct that the following individuals and enti-
ties be excluded from participation in any State health care 
program (as defined in subsection (h))" and inserting "any 
Federal health care program (as defined in section 1128B(f))"; 
and 
(2) in subsection (b), by striking "any program under title 
XVIII and may direct that the following individuals and entities 
be excluded from participation in any State health care pro-
gram" and inserting "any Federal health care program (as 
defined in section 1128B(f))". 
(d) SANCTIONS FOR FAILURE TO REPORT.—Section 1128E(b) (42 
U.S.C. 1320a-7e(b)), as inserted by section 221(a) of the Health 
Insurance Portability and Accountability Act of 1996, is amended 
by adding at the end the following: 
"(6) SANCTIONS FOR FAILURE TO REPORT.— 
"(A) HEALTH PLANS.—Any health plan that fails to 
report information on an adverse action required to be 
reported under this subsection shall be subject to a civil 
money penalty of not more than $25,000 for each such 
adverse action not reported. Such penalty shall be imposed 
and collected in the same manner as civil money penalties 
under subsection (a) of section 1128A are imposed and 
collected under that section. 
"(B) GOVERNMENTAL AGENCIES.—The Secretary shall 
provide for a publication of a public report that identifies 
those Government agencies that have failed to report 
information on adverse actions as required to be reported 
under this subsection.". 
(e) CLARIFICATION OF TREATMENT OF CERTAIN WAIVERS AND 
PAYMENTS OF PREMIUMS.—Section 1128A(i)(6) (42 U.S.C. 1320a-
7a(i)(6)) is amended— 
(1) in subparagraph (A)(iii)— 
(A) in subclause (I), by adding "or" at the end; 
(B) in subclause (II), by striking "or" at the end; and 
(C) by striking subclause (III); 
(2) by redesignating subparagraphs (B) and (C) as subpara-
graphs (C) and (D); and 
(3) by inserting after subparagraph (A) the following: 
"(B) any permissible waiver as specified in section 
1128B(b)(3) or in regulations issued by the Secretary;". 
(f) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in this subsection, 
the amendments made by this section shall be effective as 
if included in the enactment of the Health Insurance Portability 
and Accountability Act of 1996. 
(2) FEDERAL HEALTH PROGRAM.—The amendments made 
by subsection (c) shall take effect on the date of the enactment 
of this Act. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 397 
(3) SANCTION FOR FAILURE TO REPORT.—The amendment 
made by subsection (d) shall apply to failures occurring on 
or after the date of the enactment of this Act. 
Subtitle E—Provisions Relating to Part A 
Only 
CHAPTER 1—PAYMENT OF PPS HOSPITALS 
SEC. 4401. PPS HOSPITAL PAYMENT UPDATE. 
(a) 
IN 
GENERAL.—Section 
1886(b)(3)(B)(i) 
(42 
U.S.C. 
1395ww(b)(3)(B)(i)) is amended— 
(1) by striking "and" at the end of subclause (XII), and 
(2) by striking subclause (XIII) and inserting the following: 
"(XIII) for fiscal year 1998, 0 percent, 
"(XIV) for fiscal year 1999, the market basket percentage 
increase minus 1.9 percentage points for hospitals in all areas, 
"(XV) for fiscal year 2000, the market basket percentage 
increase minus 1.8 percentage points for hospitals in all areas, 
"(XVI) for each of fiscal years 2001 and 2002, the market 
basket percentage increase minus 1.1 percentage point for hos-
pitals in all areas, and 
"(XVII) for fiscal year 2003 and each subsequent fiscal 
year, the market basket percentage increase for hospitals in 
all areas.". 
(b) TEMPORARY RELIEF FOR CERTAIN NON-TEACHING, NON-DSH 42 use i395ww 
HOSPITALS.— 
note. 
(1) IN GENERAL.—In the case of a hospital described in 
paragraph (2) for its cost reporting period— 
(A) beginning in fiscal year 1998 the amount of pay-
ment made to the hospital under section 1886(d) of the 
Social Security Act for discharges occurring during such 
fiscal year only shall be increased as though the applicable 
percentage increase (otherwise applicable to discharges 
occurring 
during 
fiscal 
year 
1998 
under 
section 
1886(b)(3)(B)(i)(XIII) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)(i)(XIII))) 
had 
been 
increased 
by 
0.5 
percentage points; and 
(B) beginning in fiscal year 1999 the amount of pay-
ment made to the hospital under section 1886(d) of the 
Social Security Act for discharges occurring during such 
fiscal year only shall be increased as though the applicable 
percentage increase (otherwise applicable to discharges 
occurring 
during 
fiscal 
year 
1999 
under 
section 
1886(b)(3)(B)(i)(XIII) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)(i)(XIII))) 
had 
been 
increased 
by 
0.3 
percentage points. 
Subparagraph (A) shall not apply in computing the increase 
under subparagraph (B) and neither subparagraph shall affect 
payment for discharges for any hospital occurring during a 
fiscal year after fiscal year 1999. Payment increases under 
this subsection for discharges occurring during a fiscal year 
are subject to settlement after the close of the fiscal year. 
(2) HOSPITALS COVERED.—A hospital described in this para-
graph for a cost reporting period is a hospital— 
(A) that is described in paragraph (3) for such period; 
I l l STAT. 398 
PUBLIC LAW 105-33—AUG. 5, 1997 
(B) that is located in a State in which the amount 
of the aggregate payments under section 1886(d) of such 
Act for hospitals located in the State and described in 
paragraph (3) for their cost reporting periods beginning 
during fiscal year 1995 is less than the aggregate allowable 
operating costs of inpatient hospital services (as defined 
in section 1886(a)(4) of such Act) for all such hospitals 
in such State with respect to such cost reporting periods; 
and 
(C) with respect to which the payments under section 
1886(d) of such Act (42 U.S.C. 1395ww(d)) for discharges 
occurring in the cost reporting period involved, as estimated 
by the Secretary, is less than the allowable operating costs 
of inpatient hospital services (as defined in section 
1886(a)(4) of such Act (42 U.S.C. 1395ww(a)(4)) for such 
hospital for such period, as estimated by the Secretary. 
(3) 
NON-TEACHING, NON-DSH HOSPITALS DESCRIBED.—A 
hospital described in this paragraph for a cost reporting period 
is a subsection (d) hospital (as defined in section 1886(d)(1)(B) 
of such Act (42 U.S.C. 1395ww(d)(l)(B))) that— 
(A) is not receiving any additional payment amount 
described in section 1886(d)(5)(F) of such Act (42 U.S.C. 
1395ww(d)(5)(F)) for discharges occurring during 
the 
period; 
(B) is not receiving any additional payment under sec-
tion 1886(d)(5)(B) of such Act (42 U.S.C. 1395ww(d)(5)(B)) 
or a payment under section 1886(h) of such Act (42 U.S.C. 
1395ww(h)) for discharges occurring during the period; and 
(C) does not qualify for payment under 
section 
1886(d)(5)(G) of such Act (42 U.S.C. 1395ww(d)(5)(G)) for 
the period. 
SEC. 4402. MAINTAINING SAVINGS FROM TEMPORARY REDUCTION IN 
CAPITAL PAYMENTS FOR PPS HOSPITALS. 
Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(l)(A)) is amended 
by adding at the end the following: "In addition to the reduction 
described in the preceding sentence, for discharges occurring on 
or after October 1, 1997, the Secretary shall apply the budget 
neutredity adjustment factor used to determine the Federal capital 
pa3niient rate in effect on September 30, 1995 (as described in 
section 412.352 of title 42 of the Code of Federal Regulations), 
to (i) the unadjusted standard Federal capital pa3anent rate (as 
described in section 412.308(c) of that title, as in effect on September 
30, 1997), and (ii) the unadjusted hospital-specific rate (as described 
in section 412.328(e)(1) of that title, as in effect on September 
30, 1997), and, for discharges occurring on or after October 1, 
1997, and before September 30, 2002, reduce the rates described 
in clauses (i) and (ii) by 2.1 percent.". 
SEC. 4403. DISPROPORTIONATE SHARE. 
(a) 
I N 
GENERAL.—Section 
1886(d)(5)(F) 
(42 
U.S.C. 
1395ww(d)(5)(F)) is amended— 
(1) in clause (i) by inserting "and before October 1, 1997" 
after "May 1, 1986"; 
(2) in clause (ii), by striking "The amount" and inserting 
"Subject to clause (ix), the amount"; and 
(3) by adding at the end the following new clause: 
"(ix) In the case of discharges occurring— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 399 
"(I) during fiscal year 1998, the additional payment amount 
otherwise determined under clause (ii) shall be reduced by 
1 percent; 
"(II) during fiscal year 1999, such additional payment 
amount shall be reduced by 2 percent; 
"(III) during fiscal year 2000, such additional payment 
amount shall be reduced by 3 percent; 
"(IV) during fiscal year 2001, such additional payment 
amount shall be reduced by 4 percent; 
"(V) during fiscal year 2002, such additional payment 
amount shall be reduced by 5 percent; and 
"(VI) during fiscal year 2003 and each subsequent fiscal 
year, such additional payment amount shall be reduced bv 
0 percent.". 
(b) REPORT ON NEW PAYMENT FORMULA.— 
' 42usci395ww 
(1) REPORT.—Not later than 1 year after the date of the note. 
enactment of this Act, the Secretary of Health and Human 
Services shall submit to the Committee on Ways and Means 
of the House of Representatives and the Committee on Finance 
of the Senate a report that contains a formula for determining 
additional 
payment 
amounts to hospitals under 
section 
1886(d)(5)(F) 
of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1395ww(d)(5)(F)). 
(2) FACTORS IN DETERMINATION OF FORMULA.—In determin-
ing such formula the Secretary shall— 
(A) establish a single threshold for costs incurred by 
hospitals in serving low-income patients, and 
(B) consider the costs described in paragraph (3). 
(3) The costs described in this paragraph are as follows: 
(A) The costs incurred by the hospital during a period 
(as determined by the Secretary) of furnishing hospital 
services to individuals who are entitled to benefits under 
part A of title XVIII of the Social Security Act and who 
receive supplemental security income benefits under title 
XVI of such Act (excluding any supplementation of those 
benefits by a State under section 1616 of such Act (42 
U.S.C. 1382e)). 
(B) The costs incurred by the hospital during a period 
(as so determined) of furnishing hospital services to individ-
uals who receive medical assistance under the State plan 
under title XIX of such Act and are not entitled to benefits 
under part A of title XVIII of such Act (including individ-
uals enrolled in a managed care organization (as defined 
in 
section 
1903(m)(l)(A) 
of 
such 
Act 
(42 
U.S.C. 
1396b(m)(l)(A)) or any other managed care plan under 
such title and individuals who receive medical assistance 
under such title pursuant to a waiver approved by the 
Secretary under section 1115 of such Act (42 U.S.C. 1315)). 
(c) DATA COLLECTION.—In developing the formula described 
42 USC I395ww 
in subsection (b), the Secretary of Health and Human Services note. 
may require any subsection (d) hospital (as defined in section 
1886(d)(1)(B) of the Social Security Act (42 U.S.C. 1395ww(d)(l)(B))) 
receiving additional payments by reason of section 1886(d)(5)(F) 
of such Act (42 U.S.C. 1395ww(d)(5)(F)) to submit to the Secretary 
any information that the Secretary determines is necessary to 
develop such formula. 
I l l STAT. 400 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 4404. MEDICARE CAPITAL ASSET SALES PRICE EQUAL TO BOOK 
VALUE. 
(a) 
IN 
GENERAL.—Section 
1861(v)(l)(0) 
(42 
U.S.C. 
1395x(v)(l)(0)) is amended— 
(1) in clause (i)— 
(A) by striking "and (if applicable) a return on equity 
capital"; 
(B) by striking "hospital or skilled nursing facility" 
and inserting "provider of services"; 
(C) by striking "clause (iv)" and inserting "clause (iii)"; 
and 
(D) by striking "the lesser of the allowable acquisition 
cost" and all that follows and inserting "the historical cost 
of the asset, as recognized under this title, less depreciation 
allowed, to the owner of record as of the date of enactment 
of the Balanced Budget Act of 1997 (or, in the case of 
an asset not in existence as of that date, the first owner 
of record of the asset after that date)."; 
(2) by striking clause (ii); and 
(3) by redesignating clauses (iii) and (iv) as clauses (ii) 
and (iii), respectively. 
42 use I395x 
(b) EFFECTIVE DATE.—^The amendments made by subsection 
note. 
(a) apply to changes of ownership that occur after the third month 
beginning after the date of enactment of this section. 
SEC. 4405. ELIMINATION OF IME AND DSH PAYMENTS ATTRIBUTABLE 
TO OUTLIER PAYMENTS. 
(a) INDIRECT MEDICAL EDUCATION.—Section 1886(d)(5)(B)(i)(I) 
(42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is amended by inserting ", for 
cases qualifying for additional payment under subparagraph (A)(i)," 
before "the amount paid to the hospital under subparagraph (A)". 
(b) 
DISPROPORTIONATE 
SHARE 
ADJUSTMENTS.—Section 
1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is amended by 
inserting ", for cases qualifjdng for additional payment under 
subpgiragraph (A)(i)," before "the amount paid to the hospital under 
subparagraph (A)". 
(c) COST OUTLIER PAYMENTS.—Section 1886(d)(5)(A)(ii) (42 
U.S.C. 1395ww(d)(5)(A)(ii)) is amended by striking "exceed the 
applicable DRG prospective payment rate" and inserting "exceed 
the sum of the applicable DRG prospective payment rate plus 
any amounts payable under subparagraphs (B) and (F)". 
42 use 1
3
9
5
W
W 
(d) EFFECTIVE DATE.—The amendments made by this section 
note. 
apply to discharges occurring after September 30, 1997. 
SEC. 4406. INCREASE BASE PAYMENT RATE TO PUERTO RICO HOS-
PITALS. 
Section 1886(d)(9)(A) (42 U.S.C. 1395ww(d)(9)(A)) is amended— 
(1) in the matter preceding clause (i), by striking "in a 
fiscal year beginning on or after October 1,1987,", 
(2) in clause (i), by striking "75 percent" and inserting, 
"for discharges beginning on or after October 1, 1997, 50 percent 
(and for discharges between October 1, 1987, and September 
30, 1997, 75 percent)", and 
(3) in clause (ii), by striking "25 percent" and inserting, 
"for discharges beginning in a fiscal year beginning on or after 
October 1, 1997, 50 percent (and for discharges between October 
1, 1987 and September 30, 1997, 25 percent)". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 401 
SEC. 4407. CERTAIN HOSPITAL DISCHARGES TO POST ACUTE CARE. 
Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended— 
(1) in subparagraph (I)(ii) by inserting "not taking in 
account the effect of subparagraph (J)," after "in a fiscal 
year, "; and 
(2) by adding at the end the following new subparagraph: 
"(J)(i) The Secretary shall treat the term 'transfer case' (as 
defined in subparagraph (I)(ii)) as including the case of a qualified 
discharge (as defined in clause (ii)), which is classified within a 
diagnosis-related group described in clause (iii), and which occurs 
on or after October 1, 1998. In the case of a qualified discharge 
for which a substantial portion of the costs of care are incurred 
in the early days of the inpatient stay (as defined by the Secretary), 
in no case may the payment amount otherwise provided under 
this subsection exceed an amount equal to the sum of— 
"(I) 50 percent of the amount of payment under this sub-
section for transfer cases (as established under subparagraph 
(I)(i)),and 
"(II) 50 percent of the amount of payment which would 
have been made under this subsection with respect to the 
qualified discharge if no transfer were involved, 
"(ii) For purposes of clause (i), subject to clause (iii), the term 
'qualified discharge' means a discharge classified with a diagnosis-
related group (described in clause (iii)) of an individual from a 
subsection (d) hospital, if upon such discharge the individual— 
"(I) is admitted as an inpatient to a hospital or hospital 
unit that is not a subsection (d) hospital for the provision 
of inpatient hospital services; 
"(II) is admitted to a skilled nursing facility; 
"(III) is provided home health services fi*om a home health 
agency, if such services relate to the condition or diagnosis 
for which such individual received inpatient hospital services 
fi-om the subsection (d) hospital, and if such services are pro-
vided within an appropriate period (as determined by the Sec-
retary); or 
"(IV) for discharges occurring on or after October 1, 2000, 
the individual receives post discharge services described in 
clause (iv)(I). 
"(iii) Subject to clause (iv), a diagnosis-related group described 
in this clause is— 
"(I) 1 of 10 diagnosis-related groups selected by the Sec-
retary based upon a high volume of discharges classified within 
such groups and a disproportionate use of post discharge serv-
ices described in clause (ii); and 
"(II) a diagnosis-related group specified by the Secretary 
under clause (iv)(II). 
"(iv) The Secretary shall include in the proposed rule published 
under subsection (e)(5)(A) for fiscal year 2001, a description of 
the effect of this subparagraph. The Secretary may include in 
the proposed rule (and in the final rule published under paragraph 
(6)) for fiscal year 2001 or a subsequent fiscal year, a description 
of— 
"(I) post-discharge services not described in subclauses (I), 
(II), and (III) of clause (ii), the receipt of which results in 
a qualified discharge; and 
"(II) diagnosis-related groups described in clause (iii)(I) in 
addition to the 10 selected under such clause.". 
I l l STAT. 402 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 u s e 1395WW 
note. 
Publication. 
42 u s e 1395WW 
note. 
SEC. 
4408. RECLASSIFICATION OF CERTAIN COUNTIES AS LARGE 
URBAN AREAS UNDER MEDICARE PROGRAM. 
(a) IN GENERAL.—For purposes of section 1886(d) of the Social 
Security Act (42 U.S.C. 1395ww(d)), the large urban area of Char-
lotte-Gastonia-Rock Hill-North Carolina-South Carolina may be 
deemed to include Stanly County, North Carolina. 
(b) EFFECTIVE DATE.—This section shall apply with respect 
to discharges occurring on or after October 1, 1997. 
SEC. 
4409. GEOGRAPHIC RECLASSIFICATION FOR CERTAIN DIS-
PROPORTIONATELY LARGE HOSPITALS. 
(a) NEW GUIDELINES FOR RECLASSIFICATION.—Notwithstanding 
the guidelines published under section 1886(d)(10)(D)(i)(I) of the 
Social Security Act (42 U.S.C. 1395ww(d)(10)(D)(i)(I)), the Secretary 
of Health and Human Services shall publish and use alternative 
guidelines under which a hospital described in subsection (b) quali-
fies for geographic reclassification under such section for a fiscal 
year beginning with fiscal year 1998. 
(b) HOSPITALS COVERED.—^A hospital described in this sub-
section is a hospital that demonstrates that— 
(1) the average hourly wage paid by the hospital is not 
less than 108 percent of the average hourly wage paid by 
all other hospitals located in the Metropolitan Statistical Area 
(or the New England County Metropolitan Area) in which the 
hospital is located; 
(2) not less than 40 percent of the adjusted uninflated 
wages paid by all hospitals located in such Area is attributable 
to wages paid by the hospital; and 
(3) the hospital submitted an application 
requesting 
reclassification for purposes of wage index under section 
1886(d)(10)(C) of such Act (42 U.S.C. 1395ww(d)(10)(C)) in each 
of fiscal years 1992 through 1997 and that such request was 
approved for each of such fiscal years. 
SEC. 4410. FLOOR ON AREA WAGE INDEX. 
(a) IN GENERAL.—For purposes of section 1886(d)(3)(E) of the 
Social Security Act (42 U.S.C. 1395ww(d)(3)(E)) for discharges occur-
ring on or after October 1, 1997, the area wage index applicable 
under such section to any hospital which is not located in a rural 
area (as defined in section 1886(d)(2)(D) of such Act (42 U.S.C. 
1395ww(d)(2)(D)) may not be less than the area wage index 
applicable under such section to hospitals located in rural areas 
in the State in which the hospital is located. 
(b) IMPLEMENTATION.—The Secretary of Health and Human 
Services shall adjust the area wage index referred to in subsection 
(a) for hospitals not described in such subsection in a manner 
which assures that the aggregate payments made under section 
1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) in a 
fiscal year for the operating costs of inpatient hospital services 
are not greater or less than those which would have been made 
in the year if this section did not apply. 
(c) EXCLUSION OF CERTAIN WAGES.—In the case of a hospital 
that is owned by a municipality and that was reclassified as an 
urban hospital under section 1886(d)(10) of the Social Security 
Act for fiscal year 1996, in calculating the hospital's average hourly 
wage for purposes of geographic reclassification under such section 
for fiscal year 1998, the Secretary of Health and Human Services 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 403 
shall exclude the general service wages and hours of personnel 
associated with a skilled nursing facility that is owned by the 
hospital of the same municipality and that is physically separated 
from the hospital to the extent that such wages and hours of 
such personnel are not shared with the hospital and are separately 
documented. A hospital that applied for and was denied reclassifica-
tion as an urban hospital for fiscal year 1998, but that would 
have received reclassification had the exclusion required by this 
section been applied to it, shall be reclassified as an urban hospital 
for fiscal year 1998. 
CHAPTER 2—PAYMENT OF PPS-EXEMPT HOSPITALS 
Subchapter A—General Payment Provisions 
SEC. 4411. PAYMENT UPDATE. 
(a) 
IN 
GENERAL.—Section 
1886(b)(3)(B) 
(42 
U.S.C. 
1395ww(b)(3)(B)) is amended— 
(1) in clause (ii)— 
(A) by striking "and" at the end of subclause (V), 
(B) by redesignating subclause (VI) as subclause (VIII); 
and 
(C) by inserting after subclause (V), the following sub-
clauses: 
"(VI) for fiscal year 1998, is 0 percent; 
"(VII) for fiscal years 1999 through 2002, is the apphcable 
update factor specified under clause (vi) for the fiscal year; 
and"; and 
(2) by adding at the end the following new clause: 
"(vi) For purposes of clause (ii)(VII) for a fiscal year, if a 
hospital's allowable operating costs of inpatient hospital services 
recognized under this title for the most recent cost reporting period 
for which information is available— 
"(I) is equal to, or exceeds, 110 percent of the hospital's 
target amount (as determined under subparagraph (A)) for 
such cost reporting period, the applicable update factor specified 
under this clause is the market basket percentage; 
"(II) exceeds 100 percent, but is less than 110 percent, 
of such target amount for the hospital, the applicable update 
factor specified under this clause is 0 percent or, if greater, 
the market basket percentage minus 0.25 percentage points 
for each percentage point by which such allowable operating 
costs (expressed as a percentage of such target amount) is 
less than 110 percent of such target amount; 
"(III) is equal to, or less than 100 percent, but exceeds 
% of such target amount for the hospital, the applicable update 
factor specified under this clause is 0 percent or, if greater, 
the market basket percentage minus 2.5 percentage points; 
or 
"(IV) does not exceed % of such target amount for the 
hospital, the applicable update factor specified under this clause 
is 0 percent.". 
(b) No EFFECT OF PAYMENT REDUCTION ON EXCEPTIONS AND 
ADJUSTMENTS.—Section 
1886(b)(4)(A)(ii) 
(42 
U.S.C. 
1395ww(b)(4)(A)(ii)) is amended by adding at the end the following 
new sentence: "In making such reductions, the Secretary shall 
treat the applicable update factor described in paragraph (3)(B)(vi) 
I l l STAT. 404 
PUBLIC LAW 105-33—AUG. 5, 1997 
for a fiscal year as being equal to the market basket percentage 
for that year.". 
SEC. 4412. REDUCTIONS TO CAPITAL PAYMENTS FOR CERTAIN PPS-
EXEMPT HOSPITALS AND UNITS. 
Section 1886(g) (42 U.S.C. 1395ww(g)) is amended by adding 
at the end the following new paragraph: 
"(4) In determining the amount of the pajonents that are attrib-
utable to portions of cost reporting periods occurring during fiscEil 
years 1998 through 2002 and that may be made under this title 
with respect to capital-related costs of inpatient hospital services 
of a hospital which is described in clause (i), (ii), or (iv) of subsection 
(d)(1)(B) or a unit described in the matter after clause (v) of such 
subsection, the Secretary shall reduce the amounts of such pay-
ments otherwise determined under this title by 15 percent.". 
SEC. 4413. REBASING. 
(a) OPTION OF REBASING FOR HOSPITALS IN OPERATION BEFORE 
1990.—Section 1886(b)(3)(42 U.S.C. 1395ww(b)(3)) is amended— 
(1) in subparagraph (A) by striking "subparagraphs (C), 
(D), and (E)" and inserting "subparagraph (C) and succeeding 
subparagraphs", and 
(2) by adding at the end the following new subparagraph: 
"(F)(i) In the case of a hospital (or unit described in the matter 
following clause (v) of subsection (d)(1)(B)) that received payment 
under this subsection for inpatient hospital services furnished dur-
ing cost reporting periods beginning before October 1, 1990, that 
is within a class of hospital described in clause (iii), and that 
elects (in a form and manner determined by the Secretary) this 
subparagraph to apply to the hospital, the target amount for the 
hospital's 12-montn cost reporting period beginning during fiscal 
year 1998 is equal to the average described in clause (ii). 
"(ii) The average described in this clause for a hospital or 
unit shall be determined by the Secretary as follows: 
"(I) The Secretary shall determine the allowable operating 
costs for inpatient hospital services for the hospital or unit 
for each of the 5 cost reporting periods for which the Secretary 
has the most recent settled cost reports as of the date of 
the enactment of this subparagraph. 
"(II) The Secretary shall increase the amount determined 
under subclause (I) for each cost reporting period by the 
\ 
applicable percentage increase under subparagraph (B)(ii) for 
each subsequent cost reporting period up to the cost reporting 
period described in clause (i). 
"(Ill) The Secretary shall identify among such 5 cost report-
ing periods the cost reporting periods for which the amount 
determined under subclause (II) is the highest, and the lowest. 
"(IV) The Secretary shall compute the averages of the 
amounts determined under subclause (II) for the 3 cost report-
ing periods not identified under subclause (III), 
"(iii) For purposes of this subparagraph, each of the following 
shall be treated as a separate class of hospital: 
"(I) Hospitals described in clause (i) of subsection (d)(1)(B) 
and psychiatric units described in the matter following clause 
(v) of such subsection. 
"(II) Hospitals described in clause (ii) of such subsection 
and rehabilitation units described in the matter following clause 
(v) of such subsection. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 405 
"(HI) Hospitals described in clause (iii) of such subsection. 
"(IV) Hospitals described in clause (iv) of such subsection. 
"(V) Hospitals described in clause (v) of such subsection.". 
(b) CERTAIN LONG-TERM CARE HOSPITALS.—Section 1886(b)(3) 
(42 U.S.C. 1395ww(b)(3)), as amended by subsection (a), is amended 
by adding at the end the following new subparagraph: 
"(G)(i) In the case of a qualified long-term care hospital (as 
defined in clause (ii)) that elects (in a form and manner determined 
by the Secretary) this subparagraph to apply to the hospital, the 
target amount for the hospital's 12-month cost reporting period 
beginning during fiscal year 1998 is equal to the allowable operating 
costs of inpatient hospital services (as defined in subsection (a)(4)) 
recognized under this title for the hospital for the 12-month cost 
reporting period beginning during fiscal year 1996, increased by 
the applicable percentage increase for the cost reporting period 
beginning during fiscal year 1997. 
"(ii) In clause (i), a 'qualified long-term care hospital' means, 
with respect to a cost reporting period, a hospital described in 
clause (iv) of subsection (d)(1)(B) during each of the 2 cost reporting 
periods for which the Secretary has the most recent settled cost 
reports as of the date of the enactment of this subparagraph for 
each of which— 
"(I) the hospital's allowable operating costs of inpatient 
hospital services recognized under this title exceeded 115 per-
cent of the hospital's target amount, and 
"(II) the hospital would have a disproportionate patient 
percentage of at least 70 percent (as determined by the Sec-
retary under subsection (d)(5)(F)(vi)) if the hospital were a 
subsection (d) hospital.". 
SEC. 4414. CAP ON TEFRA LIMITS. 
Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by 
section 4413, is amended by adding at the end the following new 
subparagraph: 
"(H)(i) In the case of a hospital or unit that is within a class 
of hospital described in clause (iv), the Secretary shall estimate 
the 75th percentile of the target amounts for such hospitals within 
such class for cost reporting periods ending during fiscal year 1996. 
"(ii) The Secretary shall update the amount determined under 
clause (i), for each cost reporting period after the cost reporting 
period described in such clause and up to the first cost reporting 
period beginning on or after October 1, 1997, by a factor equal 
to the market basket percentage increase. 
"(iii) For cost reporting periods beginning during each of fiscal 
years 1999 through 2002, the Secretary shall update such amount 
by a factor equal to the market basket percentage increase. 
"(iv) For purposes of this subparagraph, each of the following 
shall be treated as a separate class of hospital: 
"(I) Hospitals described in clause (i) of subsection (d)(1)(B) 
and psychiatric units described in the matter following clause 
(v) of such subsection. 
"(II) Hospitals described in clause (ii) of such subsection 
and rehabilitation units described in the matter following clause 
(v) of such subsection. 
"(Ill) Hospitals described in clause (iv) of such subsection.". 
I l l STAT. 406 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 4415. BONUS AND RELIEF PAYMENTS. 
(a) CHANGE IN BONUS PAYMENT.—Section 1886(b)(1) (42 U.S.C. 
1395ww(b)(l)) is amended in subparagraph (A) by striking all that 
follows "plus—" and inserting the following: 
"(i) 15 percent of the amount by which the target 
amount exceeds the amount of the operating costs, or 
"(ii) 2 percent of the target amount, 
whichever is less;". 
(b) 
CONTINUOUS IMPROVEMENT BONUS 
PAYMENTS.—Section 
1886(b) (42 U.S.C. 1395ww(b)) is amended— 
(1) in paragraph (1), by insert" ig "plus the amount, if 
any, provided under paragraph (2)" oefore "except that in no 
case"; and 
(2) by inserting after paragraph (1), the following new 
paragraph: 
"(2)(A) In addition to the pa3anent computed under paragraph 
(1), in the case of an eligible hospital (described in subparagraph 
(B)) for a cost reporting period beginning on or after October 1, 
1997, the amount of payment on a per discharge basis under para-
graph (1) shall be increased by the lesser o
f
— 
"(i) 50 percent of the amount by which the operating costs 
are less than the expected costs (as defined in subparagraph 
(D)) for the period; or 
"(ii) 1 percent of the target amount for the period. 
"(B) For purposes of this paragraph, an 'eligible hospital' means 
with respect to a cost reporting period, a hospital— 
"(i) that has received payments under this subsection for 
at least 3 full cost reporting periods before that cost reporting 
period, and 
"(ii) whose operating costs for the period are less than 
the least of its target amount, its trended costs (as defined 
in subparagraph (C)), or its expected costs (as defined in 
subparagraph (D)) for the period. 
"(C) For purposes of subparagraph (B)(ii), the term 'trended 
costs' means for a hospital cost reporting period ending in a fiscal 
year— 
"(i) in the case of a hospital for which its cost reporting 
period ending in fiscal year 1996 was its third or subsequent 
fiall cost reporting period for which it receives payments under 
this subsection, the lesser of the operating costs or target 
amount for that hospital for its cost reporting period ending 
in fiscal year 1996, or 
"(ii) in the case of any other hospital, the operating costs 
for that hospital for its third full cost reporting period for 
which it receives payments under this subsection, 
increased (in a compounded manner) for each succeeding fiscal 
year (through the fiscal year involved) by the market basket 
percentage increase for the fiscal year. 
"(D) For purposes of this paragraph, the term 'expected costs', 
with respect to the cost reporting period ending in a fiscal year, 
means the lesser of the operating costs of inpatient hospital services 
or target amount per discharge for the previous cost reporting 
period updated by the market basket percentage increase (as 
defined in paragraph (3)(B)(iii)) for the fiscal year.". 
(c) CHANGE IN RELIEF PAYMENTS.—Section 1886(b)(1) (42 U.S.C. 
1395ww(b)(l)), as amended in subsections (a) and (b), is further 
amended— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 407 
(C) 
(1) by redesignating subparagraph (B) as subparagraph 
(2) in subparagraph (C), as so redesignated— 
(A) by striking "greater than the target amount" and 
inserting "greater than 110 percent of the target amount", 
and 
(B) by striking "exceed the target amount" and insert-
ing "exceed 110 percent of the target amount", and 
(3) by inserting after subparagraph (A), the following new 
subparagraph: 
"(B) are greater than the target amount but do not exceed 
110 percent of the target amount, the amount of the payment 
with respect to those operating costs payable under part A 
on a per discharge basis shall equal the target amount; or". 
(d) REPORT.—Not later than October 1, 1999, the Secretary 
of Health and Human Services shall submit to the Committee 
on Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate a report that describes the 
effect of the amendments to section 1886(b)(1) of the Social Security 
Act (42 U.S.C. 1395ww(b)(l)), made under this section, on psy-
chiatric hospitals (as defined in section 1886(d)(l)(B)(i) of such 
Act (42 U.S.C. 1395ww(d)(l)(B)(i)) that have approved medical resi-
dency training programs under title XVIII of such Act (42 U.S.C. 
1395 et seq.)). 
(e) EFFECTIVE DATE.—The amendments made by subsections 
(a) and (c) shall apply with respect to cost reporting periods begin-
ning on or after October 1, 1997. 
SEC. 4416. CHANGE IN PAYMENT AND TARGET AMOUNT FOR NEW 
PROVIDERS. 
Section 1886(b) (42 U.S.C. 1395ww(b)) is amended— 
(1) by adding at the end the following new paragraph: 
"(7)(A) Notwithstanding paragraph (1), in the case of a hospital 
or unit that is within a class of hospital described in subparagraph 
(B) which first receives payments under this section on or after 
October 1, 1997— 
"(i) for each of the first 2 cost reporting periods for which 
the hospital has a settled cost report, the amount of the pay-
ment with respect to operating costs described in paragraph 
(1) under part A on a per discharge or per admission basis 
(as the case may be) is equal to the lesser o
f
— 
"(I) the amount of operating costs for such respective 
period, or 
"(II) 110 percent of the national median of the target 
amount for hospitals in the same class as the hospital 
for cost reporting periods ending during fiscal year 1996, 
updated by the hospital market basket increase percentage 
to the fiscal year in which the hospital first received pay-
ments under this section, as adjusted under subparagraph 
(C); and 
"(ii) for purposes of computing the target amount for the 
subsequent cost reporting period, the target amount for the 
preceding cost reporting period is equal to the amount deter-
mined under clause (i) for such preceding period. 
"(B) For purposes of this paragraph, each of the following 
shall be treated as a separate class of hospital: 
42 u s e 1395WW 
note. 
42 u s e 1395WW 
note. 
I l l STAT. 408 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 1
3
9
5
W
W 
note. 
42 use 1
3
9
5
W
W 
note. 
"(i) Hospitals described in clause (i) of subsection (d)(1)(B) 
and psychiatric units described in the matter following clause 
(v) of such subsection. 
"(ii) Hospitals described in clause (ii) of such subsection 
and rehabilitation units described in the matter following clause 
(v) of such subsection. 
"(iii) Hospitals described in clause (iv) of such subsection. 
"(C) In applying subparagraph (A)(i)(II) in the case of a hospital 
or unit, the Secretary shall provide for an appropriate adjustment 
to the labor-related portion of the amount determined under such 
subparagraph to take into account differences between average 
wage-related costs in the area of the hospital and the national 
average of such costs within the same class of hospital."; and 
(2) in paragraph (3)(A), as amended in sections 4413 and 
4414, by inserting "and in paragraph (7)(A)(ii)," before "for 
purposes of. 
SEC. 4417. TREATMENT OF CERTAIN LONG-TERM CARE HOSPITALS. 
(a) 
IN 
GENERAL.—(1) 
Section 
1886(d)(1)(B) 
(42 
U.S.C. 
1395ww(d)(l)(B)) is amended by adding at the end the following 
new sentence: "A hospital that was classified by the Secretary 
on or before September 30, 1995, as a hospital described in clause 
(iv) shall continue to be so classified notwithstanding that it is 
located in the same building as, or on the same campus as, another 
hospital.". 
(2) EFFECTIVE DATE.—The amendment made by paragraph (1) 
shall apply to discharges occurring on or after October 1, 1995. 
(b) CERTAIN LONG-TERM CARE HOSPITALS THAT TREAT CANCER 
PATIENTS.—(1) 
Section 
1886(d)(l)(B)(iv) 
(42 
U.S.C. 
1395ww(d)(l)(B)(iv)) is amended— 
(A) by inserting "(I)" after "(iv)"; and 
(B) by adding at the end the following: 
"(II) a hospital that first received payment under this sub-
section in 1986 which has an average inpatient length of stay 
(as determined by the Secretary) of greater than 20 days and 
that has 80 percent or more of its annual medicare inpatient 
discharges with a principal diagnosis that reflects a finding 
of neoplastic disease in the 12-month cost reporting period 
ending in fiscal year 1997, or". 
(2) EFFECTIVE DATE.—The amendment made by paragraph (1) 
shall apply to cost reporting periods beginning on or after the 
date of the enactment of this Act. 
SEC. 4418. TREATMENT OF CERTAIN CANCER HOSPITALS. 
(a) IN GENERAL.—Section 1886(d)(1) (42 U.S.C. 1395ww(d)(l)) 
is amended— 
(1) in subparagraph (B)(v)— 
(A) by inserting "(I)" after "(v)"; 
(B) by striking the semicolon at the end and inserting 
", or"; and 
(C) by adding at the end the following: 
"(II) a hospital that was recognized as a comprehensive 
cancer center or clinical cancer research center by the National 
Cancer Institute of the National Institutes of Health as of 
April 20, 1983, that is located in a State which, as of December 
19, 1989, was not operating a demonstration project under 
section 1814(b), that applied and was denied, on or before 
December 31, 1990, for classification as a hospital involved 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 409 
extensively in treatment for or research on cancer under this 
clause (as in effect on the day before the date of the enactment 
of this subclause), that as of the date of the enactment of 
this subclause, is licensed for less than 50 acute care beds, 
and that demonstrates for the 4-year period ending on Decem-
ber 31, 1996, that at least 50 percent of its total discharges 
have a principal finding of neoplastic disease, as defined in 
subparagraph (E);" and 
(2) by adding at the end the following: 
"(E) For purposes of subparagraph (B)(v)(II) only, the term 
'principal finding of neoplastic disease' means the condition estab-
lished after study to be chiefly responsible for occasioning the 
admission of a patient to a hospital, except that only discharges 
with ICD-9-CM principal diagnosis codes of 140 through 239, 
V58.0, V58.1, V66.1, V66.2, or 990 will be considered to reflect 
such a principal diagnosis.", 
(b) PAYMENT.— 
(1) APPLICATION TO COST REPORTING PERIODS.—Any classi-
fication by reason of section 1886(d)(l)(B)(v)(II) of the Social 
Security Act (42 U.S.C. 1395ww(d)(l)(B)(v)(II)) (as added by 
subsection (a)) shall apply to all cost reporting periods begin-
ning on or after January 1, 1991. 
(2) BASE YEAR.—Notwithstanding the provisions of section 
1886(b)(3)(E) of such Act (42 U.S.C. 1395ww(b)(3)(E)) or other 
provisions to the contrary, the base cost reporting period for 
purposes of determining the target amount for any hospital 
classified by reason of section 1886(d)(l)(B)(v)(II) of such Act 
shall be either— 
(A) the hospital's cost reporting period beginning dur-
ing fiscal year 1990, or 
(B) pursuant to an election under 1886(b)(3)(G) of such 
Act (42 U.S.C. 1395ww(b)(3)(G)), as added in section 
4413(b), the period provided for under such section. 
(3) DEADLINE FOR PAYMENTS.—Any payments owed to a 
hospital by reason of this subsection shall be made expedi-
tiously, but in no event later than 1 year after the date of 
the enactment of this Act. 
42 u s e 1395WW 
note. 
SEC. 4419. ELIMINATION OF EXEMPTIONS FOR CERTAIN HOSPITALS. 
(a) REDUCTION OF EXEMPTIONS.— 
(1) IN GENERAL.—Section 
1886(b)(4)(A)(i) (42 U.S.C. 
1395ww(b)(4)(A)(i)) is amended in the first sentence by striking 
"The Secretary shall provide for an exemption from, or an 
exception and adjustment to, " and inserting "The Secretary 
shall provide for an exception and adjustment to (and in the 
case of a hospital or unit described in subsection (d)(l)(B)(iii), 
may provide an exemption fi-om)". 
(2) EFFECTIVE DATE.—The amendment made by paragraph 
(1) shall apply to hospitals or units that first qualify as a 
hospital or unit described in section 1886(d)(1)(B) (42 U.S.C. 
1395ww(d)(l)(B)) for cost reporting periods beginning on or 
after October 1, 1997. 
(b) REPORT ON EXCEPTIONS.—The Secretary of Health and 
Human Services shall publish annually in the Federal Register 
a report describing the total amount of payments made to hospitals 
by reason of section 1886(b)(4) of the Social Security Act (42 U.S.C. 
42 u s e 1395WW 
note. 
Federal Register, 
publication. 
42 u s e 1395WW 
note. 
I l l STAT. 410 
PUBLIC LAW 105-33—AUG. 5, 1997 
1395ww(b)(4)), as amended by subsection (a), ending during the 
previous fiscal year. 
Subchapter B—Prospective Payment System for PPS-
Exempt Hospitals 
SEC. 4421. PROSPECTIVE PAYMENT FOR INPATIENT REHABILITATION 
HOSPITAL SERVICES. 
(a) IN GENERAL.—Section 1886 (42 U.S.C. 1395ww) is amended 
by adding at the end the following new subsection: 
"(j) PROSPECTIVE PAYMENT FOR INPATIENT REHABILITATION 
SERVICES.— 
"(1) PAYMENT DURING TRANSITION PERIOD.— 
"(A) IN GENERAL.—Notwithstanding section 1814(b), 
but subject to the provisions of section 1813, the amount 
of the payment with respect to the operating and capital 
costs of inpatient hospital services of a rehabilitation hos-
pital or a rehabilitation unit (in this subsection referred 
to as a 'rehabilitation facility), in a cost reporting period 
beginning on or after October 1, 2000, and before October 
1, 2002, is equal to the sum o
f
— 
"(i) the TEFRA percentage (as defined in subpara-
graph (O) of the amount that would have been paid 
under part A with respect to such costs if this sub-
section did not apply, and 
"(ii) the prospective payment 
percentage (as 
defined in subparagraph (C)) of the product of (I) the 
per unit payment rate established under this sub-
section for the fiscal year in which the payment unit 
of service occurs, and (II) the number of such payment 
units occurring in the cost reporting period. 
"(B) FULLY IMPLEMENTED SYSTEM.—Notwithstanding 
section 1814(b), but subject to the provisions of section 
1813, the amount of the pa3mient with respect to the operat-
ing and capital costs of inpatient hospital services of a 
rehabilitation facility for a payment unit in a cost reporting 
period beginning on or after October 1, 2002, is equal 
to the per unit payment rate established under this sub-
section for the fiscal year in which the payment unit of 
service occurs. 
"(C) TEFRA AND PROSPECTIVE PAYMENT PERCENTAGES 
SPECIFIED.—For purposes of subparagraph (A), for a cost 
reporting period beginning— 
"(i) on or after October 1, 2000, and before October 
1, 2001, the 'TEFRA percentage' is 66% percent and 
the 'prospective payment percentage' is 33Vs percent; 
and 
"(ii) on or after October 1, 2001, and before October 
1, 2002, the 'TEFRA percentage' is 33 Vs percent and 
the 'prospective payment percentage' is 66% percent. 
"(D) PAYMENT UNIT.—For purposes of this subsection, 
the term 'payment unit' means a discharge, day of inpatient 
hospital services, or other unit of payment defined by the 
Secretary. 
"(2) PATIENT CASE MIX GROUPS.— 
"(A) ESTABLISHMENT.—The Secretary shall establish— 
»-S¥v J^i 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 411 
"(i) classes of patients of rehabilitation facilities 
(each in this subsection referred to as a 'case mix 
group'), based on such factors as the Secretary deems 
appropriate, which may include impairment, age, 
related prior hospitalization, comorbidities, and func-
tional capability of the patient; and 
"(ii) a method of classifying specific patients in 
rehabilitation facilities within these groups. 
"(B) WEIGHTING FACTORS.—For each case mix group 
the Secretary shall assign an appropriate weighting which 
reflects the relative facility resources used with respect 
to patients classified within that group compared to 
patients classified within other groups. 
"(C) ADJUSTMENTS FOR CASE MIX.— 
"(i) IN GENERAL.—The Secretary shall from time 
to time adjust the classifications and weighting factors 
established under this paragraph as appropriate to 
reflect changes in treatment patterns, technology, case 
mix, number of payment units for which payment is 
made under this title, and other factors which may 
affect the relative use of resources. Such adjustments 
shall be made in a manner so that changes in aggregate 
payments under the classification system are a result 
of real changes and are not a result of changes in 
coding that are unrelated to real changes in case mix. 
"(ii) ADJUSTMENT.—Insofar as the Secretary deter-
mines that such adjustments for a previous fiscal year 
(or estimates that such adjustments for a future fiscal 
year) did (or are likely to) result in a change in aggre-
gate payments under the classification system during 
the fiscal year that are a result of changes in the 
coding or classification of patients that do not reflect 
real changes in case mix, the Secretary shall adjust 
the per payment unit payment rate for subsequent 
years so as to eliminate the effect of such coding or 
classification changes. 
"(D) DATA COLLECTION.—The Secretary is authorized 
to require rehabilitation facilities that provide inpatient 
hospital services to submit such data as the Secretary 
deems necessary to establish and administer the prospec-
tive payment system under this subsection. 
"(3) PAYMENT RATE.— 
"(A) IN GENERAL.—The Secretary shall determine a 
prospective pajonent rate for each payment unit for which 
such rehabilitation facility is entitled to receive payment 
under this title. Subject to subparagraph (B), such rate 
for pa3mient units occurring during a fiscal year shall be 
based on the average payment per pa5nnent unit under 
this title for inpatient operating and capital costs of 
rehabilitation facilities using the most recent data available 
(as estimated by the Secretary as of the date of establish-
ment of the system) adjusted— 
"(i) by updating such per-payment-unit amount to 
the fiscal year involved by the weighted average of 
the applicable percentage increases provided under 
subsection (b)(3)(B)(ii) (for cost reporting periods begin-
ning during the fiscal year) covering the period from 
I l l STAT. 412 
PUBLIC LAW 105-33—AUG. 5, 1997 
the midpoint of the period for such data through the 
midpoint of fiscal yeeir 2000 and by an increase factor 
(described in subparagraph (C)) specified by the Sec-
retary for subsequent fiscal years up to the fiscal year 
involved; 
"(ii) by reducing such rates by a factor equal to 
the proportion of pa)anents under this subsection (as 
estimated by the Secretary) based on prospective pay-
ment 
amounts 
which 
are 
additional 
payments 
described in paragraph (4) (relating to outlier and 
related payments); 
"(iii) for variations among rehabilitation facilities 
by area under paragraph (6); 
"(iv) by the weighting factors established under 
paragraph (2)(B); and 
"(v) by such other factors as the Secretary deter-
mines are necessary to properly reflect variations in 
necessary costs of treatment among rehabilitation 
facilities. 
"(B) BUDGET NEUTRAL RATES.—The Secretary shall 
establish the prospective payment amounts under this sub-
section for payment units during fiscal years 2001 and 
2002 at levels such that, in the Secretary's estimation, 
the amount of total payments under this subsection for 
such fiscal years (including any payment 
adjustments 
pursuant to paragraphs (4) and (6)) shall be equal to 98 
percent of the amount of pajmaents that would have been 
made under this title during the fiscal years for operating 
and capital costs of rehabilitation facilities had this sub-
section not been enacted. In establishing such pa5anent 
amounts, the Secretary shall consider the effects of the 
prospective pa3mient system established under this sub-
section on the total number of pa3mient units from 
rehabilitation facilities and other factors described in 
subparagraph (A). 
"(C) INCREASE FACTOR.—For purposes of this subsection 
for payment units in each fiscal year (beginning with fiscal 
year 2001), the Secretary shall establish an increase factor. 
Such factor shall be based on an appropriate percentage 
increase in a market basket of goods and services compris-
ing services for which payment is made under this sub-
section, which may be the market basket percentage 
increase described in subsection (b)(3)(B)(iii). 
"(4) OUTLIER AND SPECIAL PAYMENTS.— 
"(A) OUTLIERS.— 
"(i) IN GENERAL.—The Secretary may provide for 
an additional payment to a rehabilitation facility for 
patients in a case mix group, based upon the patient 
being classified as an outlier based on an unusual 
length of stay, costs, or other factors specified by the 
Secretary. 
"(ii) PAYMENT BASED ON MARGINAL COST OF CARE.— 
The amount of such additional pa3anent under clause 
(i) shall be determined by the Secretary and shall 
approximate the marginal cost of care beyond the cutoff 
point applicable under clause (i). 
^-iV^^-rtj^-^ 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 413 
"(iii) TOTAL PAYMENTS.—The total amount of the 
additional payments made under this subparagraph 
for payment units in a fiscal year may not exceed 
5 percent of the total payments projected or estimated 
to be made based on prospective payment rates for 
pa3ntnent units in that year. 
"(B) ADJUSTMENT.—The Secretary may provide for such 
adjustments to the payment amounts under this subsection 
as the Secretary deems appropriate to take into account 
the unique circumstances of rehabilitation facilities located 
in Alaska and Hawaii. 
"(5) PUBLICATION.—The Secretary shall provide for publica- Federal Register, 
tion in the Federal Register, on or before August 1 before publication. 
each fiscal year (beginning with fiscal year 2001), of the classi-
fication and weighting factors for case mix groups under para-
graph (2) for such fiscal year and a description of the methodol-
ogy and data used in computing the prospective payment rates 
under this subsection for that fiscal year. 
"(6) AREA WAGE ADJUSTMENT.—The Secretary shall adjust 
the proportion (as estimated by the Secretary from time to 
time) of rehabilitation facilities' costs which are attributable 
to wages and wage-related costs, of the prospective payment 
rates computed under paragraph (3) for area differences in 
wage levels by a factor (established by the Secretary) reflecting 
the relative hospital wage level in the geographic area of the 
rehabilitation facility compared to the national average wage 
level for such facilities. Not later than October 1, 2001 (and 
at least every 36 months thereafter), the Secretary shall update 
the factor under the preceding sentence on the basis of informa-
tion available to the Secretary (and updated as appropriate) 
of the wages and wage-related costs incurred in furnishing 
rehabilitation services. Any adjustments or updates made under 
this paragraph for a fiscal year shall be made in a manner 
that assures that the aggregated payments under this sub-
section in the fiscal year are not greater or less than those 
that would have been made in the year without such adjust-
ment. 
"(7) LIMITATION ON REVIEW.—There shall be no administra-
tive or judicial review under section 1869, 1878, or otherwise 
of the establishment o
f
— 
"(A) case mix groups, of the methodology for the classi-
fication of patients within such groups, and of the appro-
priate weighting factors thereof under paragraph (2), 
"(B) the prospective payment rates under paragraph 
(3), 
"(C) outlier and special payments under paragraph 
(4), and 
"(D) area wage adjustments under paragraph (6).". 
(b) CONFORMING AMENDMENTS.—Section 1886(b) (42 U.S.C. 
1395ww(b)) is amended— 
(1) in paragraph (1), by inserting "and other than a 
rehabilitation facility described in subsection (j)(l)" after "sub-
section (d)(1)(B)", and 
(2) in paragraph (3)(B)(i), by inserting "and subsection (j)" 
after "For purposes of subsection (d)". 
(c) EFFECTIVE DATE.—The amendments made by this section 
42 USC 1395 
shall apply to cost reporting periods beginning on or after October note. 
I l l STAT. 414 
PUBLIC LAW 105-33—AUG. 5, 1997 
1, 2000, except that the Secretary of Health and Human Services 
may require the submission of data under section 1886(j)(2)(D) 
of the Social Security Act (as added by subsection (a)) on and 
after the date of the enactment of this section. 
42 u s e 1395WW 
SEC. 4422. DEVELOPMENT OF PROPOSAL ON PAYMENTS FOR LONG-
note. 
TERM CARE HOSPITALS. 
(a) IN GENERAL.— 
(1) LEGISLATIVE PROPOSAL.—The Secretary of Health and 
Human Services shall develop a legislative proposal for 
establishing a case-mix adjusted prospective payment system 
for payment of long-term care hospitals described in section 
1886(d)(l)(B)(iv) of the Social 
Security Act (42 U.S.C. 
1395ww(d)(l)(B)(iv)) under the medicare program. Such system 
shall include an adequate patient classification system that 
reflects the differences in patient resource use and costs among 
such hospitals. 
(2) COLLECTION OF DATA AND EVALUATION.—In developing 
the legislative proposal described in paragraph (1), the Sec-
retary— 
(A) may require such long-term care hospitals to sub-
mit such information to the Secretary as the Secretary 
may require to develop the proposal; and 
(B) shall consider several payment methodologies, 
including the feasibility of expanding the current diagnosis-
related groups and prospective payment system established 
under section 1886(d) of the Social Security Act to apply 
to payments under the medicare program to long-term 
care hospitals. 
(b) REPORT.—Not later than October 1, 1999, the Secretary 
shall submit to the appropriate committees of Congress a report 
that includes the legislative proposal developed under subsection 
(a)(1). 
CHAPTER 3—PAYMENT FOR SKILLED NURSmG 
FACILITIES 
SEC. 4431. E X T E N S I O N OF COST LIMITS. 
The last sentence of section 1888(a) (42 U.S.C. 1395yy(a)) is 
amended by striking "subsection" the last place it appears and 
all that follows and inserting "subsection, except that the limits 
effective for cost reporting periods beginning on or after October 
1, 1997, shall be based on the limits effective for cost reporting 
periods beginning on or after October 1, 1996.". 
SEC. 4432. PROSPECTIVE PAYMENT FOR SKILLED NURSING FACILITY 
SERVICES. 
(a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy) is amended 
by adding at the end the following new subsection: 
"(e) PROSPECTIVE PAYMENT.— 
"(1) 
PAYMENT PROVISION.—Notwithstanding any other 
provision of this title, subject to paragraph (7), the amount 
of the pajrment for all costs (as defined in paragraph (2)(B)) 
of covered skilled nursing facility services (as defined in para-
graph (2)(A)) for each day of such services furnished— 
"(A) in a cost reporting period during the transition 
period (as defined in paragraph (2)(E)), is equal to the 
sum o
f
— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 415 
"(i) the non-Federal percentage of the facihty-spe-
cific per diem rate (computed under paragraph (3)), 
and 
"(ii) the Federal percentage of the adjusted Federal 
per diem rate (determined under paragraph (4)) 
applicable to the facility; and 
"(B) after the transition period is equal to the adjusted 
Federal per diem rate applicable to the facility. 
"(2) DEFINITIONS.—For purposes of this subsection: 
"(A) COVERED SKILLED NURSING FACILITY SERVICES.— 
"(i) IN GENERAL.—The term 'covered skilled nurs-
ing facility services'— 
"(I) means post-hospital extended care services 
as defined in section 1861(i) for which benefits 
are provided under part A; and 
"(II) includes all items and services (other than 
services described in clause (ii)) for which payment 
may be made under part B and which are fur-
nished to an individual who is a resident of a 
skilled nursing facility during the period in which 
the individual is provided covered post-hospital 
extended care services. 
"(ii) SERVICES EXCLUDED.—Services described in 
this clause are physicians' services, services described 
by clauses (i) through (iii) of section 1861(s)(2)(K), cer-
tified nurse-midwife services, qualified psychologist 
services, services of a certified registered nurse anes-
thetist, items and services described in subparagraphs 
(F) and (O) of section 1861(s)(2), and, only with respect 
to services furnished during 1998, the transportation 
costs of electrocardiogram equipment for electrocardio-
gram test services (HCPCS Code R0076). Services 
described in this clause do not include any physical, 
occupational, or speech-language therapy 
services 
regardless of whether or not the services are furnished 
by, or under the supervision of, a physician or other 
health care professional. 
"(B) ALL COSTS.—The term 'all costs' means routine 
service costs, ancillary costs, and capital-related costs of 
covered skilled nursing facility services, but does not 
include costs associated with approved educational activi-
ties. 
"(C) 
NON-FEDERAL PERCENTAGE; FEDERAL PERCENT-
AGE.—For— 
"(i) the first cost reporting period (as defined in 
subparagraph (D)) of a facility, the 'non-Federal 
percentage' is 75 percent and the 'Federal percentage' 
is 25 percent; 
"(ii) the next cost reporting period of such facility, 
the 'non-Federal percentage' is 50 percent and the 'Fed-
eral percentage' is 50 percent; and 
"(iii) the subsequent cost reporting period of such 
facility, the 'non-Federal percentage' is 25 percent and 
the 'Federal percentage' is 75 percent. 
I l l STAT. 416 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(D) FIRST COST REPORTING PERIOD.—The term 'first 
cost reporting period' means, with respect to a skilled nurs-
ing facility, the first cost reporting period of the facility 
beginning on or after July 1, 1998. 
"(E) TRANSITION PERIOD.— 
"(i) IN GENERAL.—The term 'transition period' 
means, with respect to a skilled nursing facility, the 
3 cost reporting periods of the facility beginning with 
the first cost reporting period. 
"(ii) TREATMENT OF NEW SKILLED NURSING FACILI-
TIES.—In the case of a skilled nursing facility that 
first received payment for services under this title 
on or after October 1, 1995, payment for such services 
shall be made under this subsection as if all services 
were furnished after the transition period. 
"(3) 
DETERMINATION OF 
FACILITY SPECIFIC 
PER 
DIEM 
RATES.—^The Secretary shall determine a facility-specific per 
diem rate for each skilled nursing facility not described in 
paragraph (2)(E)(ii) for a cost reporting period as follows: 
"(A) 
DETERMINING BASE PAYMENTS.—The Secretary 
shall determine, on a per diem basis, the total of— 
"(i) the allowable costs of extended care services 
for the facility for cost reporting periods beginning 
in fiscal year 1995, including costs associated with 
facilities described in subsection (d), with appropriate 
adjustments (as determined by the Secretary) to non-
settled cost reports, and 
"(ii) an estimate of the amounts that would be 
payable under part B (disregarding any applicable 
deductibles, coinsurance, and copayments) for covered 
skilled nursing facility services described in paragraph 
(2)(A)(i)(II) furnished during such period to an individ-
ual who is a resident of the facility, regardless of 
' 
whether or not the payment was made to the facility 
or to another entity. 
In making appropriate adjustments under clause (i), the 
Secretary shall take into account exceptions and shall take 
into account exemptions but, with respect to exemptions, 
only to the extent that routine costs do not exceed 150 
percent of the routine cost limits otherwise applicable but 
for the exemption. 
"(B) UPDATE TO FIRST COST REPORTING PERIOD.— 
"(i) IN GENERAL.—Subject to clause (ii), the Sec-
retary shall update the amount determined under 
subparagraph (A), for each cost reporting period after 
the cost reporting period described in subparagraph 
(A)(i) and up to the first cost reporting period by a 
factor equal to the skilled nursing facility market bas-
ket percentage increase minus 1 percentage point. 
"(ii) 
CERTAIN DEMONSTRATION PROJECTS.—In 
the 
case of a facility participating in the Nursing Home 
Case-Mix and Quality Demonstration 
(RUGS-III), 
there shall be substituted for the amount described 
in clause (i) the RUGS-III rate received by the facility 
for 1997. 
'P.*"" 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 417 
"(C) 
UPDATING 
TO APPLICABLE 
COST 
REPORTING 
PERIOD.—The Secretary shall update the amount deter-
mined under subparagraph (B) for each cost reporting 
period beginning with the first cost reporting period and 
up to and including the cost reporting period involved 
by a factor equal to the facility-specific update factor. 
"(D) FACILITY-SPECIFIC UPDATE FACTOR.—For purposes 
of this paragraph, the 'facility-specific update factor' for 
cost reporting periods beginning during— 
"(i) during each of fiscal years 1998 and 1999, 
is equal to the skilled nursing facility market basket 
percentage increase for such fiscal year minus 1 
percentage point, and 
"(ii) during each subsequent fiscal year is equal 
to the skilled nursing facility market basket percentage 
increase for such fiscal year. 
"(4) FEDERAL PER DIEM RATE.— 
"(A) DETERMINATION OF HISTORICAL PER DIEM FOR 
FACILITIES.—For each skilled nursing facility that received 
payments for post-hospital extended care services during 
a cost reporting period beginning in fiscal year 1995 and 
that was subject to (and not exempted from) the per diem 
limits referred to in paragraph (1) or (2) of subsection 
(a) (and facilities described in subsection (d)), the Secretary 
shall estimate, on a per diem basis for such cost reporting 
period, the total of— 
"(i) the allowable costs of extended care services 
(excluding exceptions payments) for the facility for cost 
reporting periods beginning in 1995 with appropriate 
adjustments (as determined by the Secretary) to non-
settled cost reports, and 
"(ii) an estimate of the amounts that would be 
payable under part B (disregarding any applicable 
deductibles, coinsurance, and copayinents) for covered 
skilled nursing facility services described in paragraph 
(2)(A)(i)(II) furnished during such period to an individ-
ual who is a resident of the facility, regardless of 
whether or not the payment was made to the facility 
or to another entity. 
"(B) UPDATE TO FIRST FISCAL YEAR.—The Secretary 
shall update the amount determined under subparagraph 
(A), for each cost reporting period after the cost reporting 
period described in subparagraph (A)(i) and up to the first 
cost reporting period by a factor equal to the skilled nursing 
facility market basket percentage increase reduced (on an 
annualized basis) by 1 percentage point. 
"(C) COMPUTATION OF STANDARDIZED PER DIEM RATE.— 
The Secretary shall standardize the amount updated under 
subparagraph (B) for each facility by— 
"(i) adjusting for variations among facilities by 
area in the average facility wage level per diem, and 
"(ii) adjusting for variations in case mix per diem 
among facilities. 
"(D) COMPUTATION OF WEIGHTED AVERAGE PER DIEM 
RATES.— 
"(i) ALL FACILITIES.—The Secretary shall compute 
a weighted average per diem rate for all facilities by 
I l l STAT. 418 
PUBLIC LAW 105-33—AUG. 5, 1997 
computing an average of the standardized amounts 
computed under subparagraph (C), weighted for each 
facihty by the number of days of extended care services 
furnished during the cost reporting period referred to 
in subparagraph (A). 
"(ii) 
FREESTANDING FACILITIES.—The 
Secretary 
shall compute a weighted average per diem rate for 
freestanding facilities by computing an average of the 
standardized amounts computed under subparagraph 
(C) only for such facilities , weighted for each facility 
by the number of days of extended care services fur-
nished during the cost reporting period referred to 
in subparagraph (A). 
"(iii) SEPARATE COMPUTATION.—The Secretary may 
compute and apply such averages separately for facili-
ties located in urban and rural areas (as defined in 
section 1886(d)(2)(D)). 
"(E) UPDATING.— 
"(i) INITIAL PERIOD.—For the initial period begin-
ning on July 1, 1998, and ending on September 30, 
1999, the Secretary shall compute for skilled nursing 
facilities an unadjusted federal per diem rate equal 
to the average of the weighted average per diem rates 
computed under clauses (i) and (ii) of subparagraph 
(D), increased by skilled nursing facility market basket 
percentage change for such period minus 1 percentage 
point. 
"(ii) SUBSEQUENT FISCAL YEARS.—The Secretary 
shall compute an unadjusted federal per diem rate 
equal to the federal per diem rate computed under 
this subparagraph— 
"(I) for fiscal year 2000, the rate computed 
for the initial period described in clause (i), 
increased by the skilled nursing facility market 
basket percentage change for the initial period 
minus 1 percentage point; 
"(II) for each of fiscal years 2001 and 2002, 
the rate computed for the previous fiscal year 
increased by the skilled nursing facility market 
basket percentage change for the fiscal year 
involved minus 1 percentage point; and 
"(III) for each subsequent fiscal year, the rate 
computed for the previous fiscal year increased 
by the skilled nursing facility market basket 
percentage change for the fiscal year involved. 
"(F) ADJUSTMENT FOR CASE MIX CREEP.—Insofar as the 
Secretary determines that the adjustments under subpara-
graph (G)(i) for a previous fiscal year (or estimates that 
such adjustments for a future fiscal year) did (or are likely 
to) result in a change in aggregate pa3anents under this 
subsection during the fiscal year that are a result of 
changes in the coding or classification of residents that 
do not reflect real changes in case mix, the Secretary 
may adjust unadjusted Federal per diem rates for subse-
quent fiscal years so as to eliminate the effect of such 
coding or classification changes. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 419 
"(G) DETERMINATION OF FEDERAL RATE.—The Secretary 
shall compute for each skilled nursing facility for each 
fiscal year (beginning with the initial period described in 
subparagraph (E)(i)) an adjusted Federal per diem rate 
equal to the unadjusted Federal per diem rate determined 
under subparagraph (E), as adjusted under subparagraph 
(F), and as further adjusted as follows: 
"(i) ADJUSTMENT FOR CASE MIX.—The Secretary 
shall provide for an appropriate adjustment to account 
for case mix. Such adjustment shall be based on a 
resident classification system, established by the Sec-
retary, that accounts for the relative resource utiliza-
tion of different patient types. The case mix adjustment 
shall be based on resident assessment data and other 
data that the Secretary considers appropriate. 
"(ii) ADJUSTMENT FOR GEOGRAPHIC VARIATIONS IN 
LABOR COSTS.—The Secretary shall adjust the portion 
of such per diem rate attributable to wages and wage-
related costs for the area in which the facility is located 
compared to the national average of such costs using 
an appropriate wage index as determined by the Sec-
retary. Such adjustment shall be done in a manner 
that does not result in aggregate pa3m(ients under this 
subsection that are greater or less than those that 
would otherwise be made if such adjustment had not 
been made. 
"(H) 
PUBLICATION 
OF 
INFORMATION 
ON 
PER 
DIEM 
Federal Register, 
RATES.—The Secretary shall provide for publication in the publication. 
Federal Register, before May 1, 1998 (with respect to fiscal 
period described in subparagraph (E)(i)) and before the 
August 1 preceding each succeeding fiscal year (with 
respect to that succeeding fiscal year), o
f
— 
"(i) the unadjusted Federal per diem rates to be 
applied to days of covered skilled nursing facility serv-
ices furnished during the fiscal year, 
"(ii) the case mix classification system to be applied 
under subparagraph (G)(i) with respect to such services 
during the fiscal year, and 
"(iii) the factors to be applied in making the area 
wage adjustment under subparagraph (G)(ii) with 
respect to such services. 
"(5) SKILLED NURSING FACILITY MARKET BASKET INDEX AND 
PERCENTAGE.—For purposes of this subsection: 
"(A) 
SKILLED 
NURSING 
FACILITY 
MARKET 
BASKET 
INDEX.—The Secretary shall establish a skilled nursing 
facility market basket index that reflects changes over 
time in the prices of an appropriate mix of goods and 
services included in covered skilled nursing facility services. 
"(B) 
SKILLED 
NURSING 
FACILITY 
MARKET 
BASKET 
PERCENTAGE.—The term 'skilled nursing facility market 
basket percentage' means, for a fiscal year or other annual 
period and as calculated by the Secretary, the percentage 
change in the skilled nursing facility market basket index 
(established under subparagraph (A)) from the midpoint 
of the prior fiscal year (or period) to the midpoint of the 
fiscal year (or other period) involved. 
I l l STAT. 420 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(6) SUBMISSION OF RESIDENT ASSESSMENT DATA.—A skilled 
nursing facility, or a facility described in paragraph (7)(B), 
shall provide the Secretary, in a manner and within the time-
frames prescribed by the Secretary, the resident assessment 
data necessary to develop and implement the rates under this 
subsection. For purposes of meeting such requirement, a skilled 
nursing facility, or a facility described in paragraph (7), may 
submit the resident assessment data required under section 
1819(b)(3), using the standard instrument designated by the 
State under section 1819(e)(5). 
"(7) TRANSITION FOR MEDICARE SWING BED HOSPITALS.— 
"(A) IN GENERAL.—The Secretary shall determine an 
appropriate manner in which to apply this subsection to 
the facilities described in subparagraph (B), taking into 
account the purposes of this subsection, and shall provide 
that at the end of the transition period (as defined in 
paragraph (2)(E)) such facilities shall be paid only under 
this subsection. Payment shall not be made under this 
subsection to such facilities for cost reporting periods begin-
ning before such date (not earlier than July 1, 1999) as 
the Secretary specifies. 
"(B) FACILITIES DESCRIBED.—The facilities described in 
this subparagraph are facilities that have in effect an agree-
ment described in section 1883, for which pajonent is made 
for the furnishing of extended care services on a reasonable 
cost basis under section 1814(1) (as in effect on and after 
such date). 
"(8) LIMITATION ON REVIEW.—There shall be no administra-
tive or judicial review under section 1869, 1878, or otherwise 
of— 
"(A) the establishment of Federal per diem rates under 
paragraph (4), including the computation of the standard-
ized per diem rates under paragraph (4)(C), adjustments 
and corrections for case mix under paragraphs (4)(F) and 
(4)(G)(i), and adjustments for variations in labor-related 
costs under paragraph (4)(G)(ii); 
"(B) the establishment of facility specific rates before 
January 1, 1999, (except any determination of costs paid 
under part A of this title); and 
"(C) the establishment of transitional amounts under 
paragraph (7).". 
(b) CONSOLIDATED BILLING.— 
(1) FOR SNF SERVICES.—Section 
1862(a) (42 U.S.C. 
1395y(a)), as amended by 4319(b), is amended— 
(A) by striking "or" at the end of paragraph (16), 
(B) by striking the period at the end of paragraph 
(17) and inserting "; or", and 
(C) by inserting after paragraph (17) the following 
new paragraph: 
"(18) which are covered skilled nursing facility services 
described in section 1888(e)(2)(A)(i) and which are furnished 
to an individual who is a resident of a skilled nursing facility 
or of a part of a facility that includes a skilled nursing facility 
(as determined under regulations), by an entity other than 
the skilled nursing facility, unless the services are furnished 
under arrangements (as defined in section 1861(w)(l)) with 
the entity made by the skilled nursing facility.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 421 
(2) REQUIRING PAYMENT FOR ALL PART B ITEMS AND SERV-
ICES TO BE MADE TO FACILITY.—The first sentence of section 
1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended— 
(A) by striking "and (D)" and inserting "(D)"; and 
(B) by striking the period at the end and inserting 
the following: ", and (E) in the case of an item or service 
(other than services described in section 1888(e)(2)(A)(ii)) 
furnished to an individual who (at the time the item or 
service is furnished) is a resident of a skilled nursing 
facility or of a part of a facility that includes a skilled 
nursing facility (as determined under regulations), payment 
shall be made to the facility (without regard to whether 
or not the item or service was furnished by the facility, 
by others under arrangement with them made by the facil-
ity, under any other contracting or consulting arrangement, 
or otherwise).". 
(3) PAYMENT RULES.—Section 1888(e) (42 U.S.C. 1395yy(e)), 
as added by subsection (a), is amended by adding at the end 
the following: 
"(9) PAYMENT FOR CERTAIN SERVICES.—In the case of an 
item or service furnished to a resident of a skilled nursing 
facility or a part of a facility that includes a skilled nursing 
facility (as determined under regulations) for which payment 
would (but for this paragraph) be made under part B in an 
amount determined in accordance with section 1833(a)(2)(B), 
the amount of the pa)anent under such part shall be the amount 
provided under the fee schedule for such item or service. 
"(10) REQUIRED CODING.—No payment may be made under 
part B for items and services (other than services described 
in paragraph (2)(A)(ii)) furnished to an individual who is a 
resident of a skilled nursing facility or of a part of a facility 
that includes a skilled nursing facility (as determined under 
regulations), unless the claim for such payment includes a 
code (or codes) under a uniform coding system specified by 
the Secretary that identifies the items or services fiimished.". 
(4) 
FACILITY 
PROVIDER NUMBER 
REQUIRED ON CLAIMS 
SUBMITTED BY PHYSICIANS.—Section 1842 (42 U.S.C. 1395u) 
is amended by adding at the end the following new section: 
"(t) Each request for payment, or bill submitted, for an item 
or service furnished by a physician to an individual who is a 
resident of a skilled nursing facility or of a part of a facility 
that includes a skilled nursing facility (as determined under regula-
tions), for which payment may be made under this part shall 
include the facility's medicare provider number.". 
(5) CONFORMING AMENDMENTS.— 
(A) 
Section 
1819(b)(3)(C)(i) 
(42 
U.S.C. 
13951-
3(b)(3)(C)(i)) is amended by striking "Such" and inserting 
"Subject to the timeframes prescribed by the Secretary 
under section 1888(e)(6), such". 
(B) Section 1832(a)(1) (42 U.S.C. 1395k(a)(l)) is amend-
ed by striking "(2);" and inserting "(2) and section 
1842(b)(6)(E);". 
(C) Section 1833(a)(2)(B) (42 U.S.C. 13951(a)(2)(B)) is 
amended by inserting "or section 1888(e)(9)" after "section 
1886". 
(D) Section 1861(h) (42 U.S.C 1395x(h)) is amended— 
I l l STAT. 422 
PUBLIC LAW 105-33—AUG. 5, 1997 
(i) in the opening paragraph, by striking "para-
graphs (3) and (6)" and inserting "paragraphs (3), (6), 
and (7)", and 
(ii) in paragraph (7), after "skilled nursing facili-
ties", by inserting ", or by others under arrangements 
with them made by the facility". 
(E) Section 1861(v)(7)(D) (42 U.S.C. 1395x(v)(7)(D)) is 
amended by inserting "subsections (a) through (c) of before 
"section 1888.". 
(F) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(l)(H)) 
is amended— 
(i) by redesignating clauses (i) and (ii) as sub-
clauses (I) and (II) respectively, 
(ii) by inserting "(i)" after "(H)", and . 
(iii) by adding after clause (i), as so redesignated, 
the following new clause: 
"(ii) in the case of skilled nursing facilities which provide 
covered skilled nursing facility services— 
"(I) that are furnished to an individual who is a resi-
dent of the skilled nursing facility, and 
"(II) for which the individual is entitled to have pay-
ment made under this title, 
to have items and services (other than services described in 
section 1888(e)(2)(A)(ii)) furnished by the skilled nursing facility 
or otherwise under arrangements (as defined in section 
1861(w)(l)) made by the skilled nursing facility,". 
(G) 
Section 
1883(a)(2)(B)(ii)(II) 
(42 
U.S.C. 
1395tt(a)(2)(B)(ii)(II)) is amended by inserting "subsections 
(a) through (d) of before "section 1888". 
(H) Section 1888(d)(1) (42 U.S.C. 1395yy(d)(l)) is 
amended by striking "Any skilled nursing facility" and 
inserting "Subject to subsection (e), any skilled nursing 
facility". 
42 use I395yy 
(c) MEDICAL REVIEW PROCESS.—In order to ensure that medi-
note. 
care beneficiaries are furnished appropriate services in skilled nurs-
ing facilities, the Secretary of Health and Human Services shall 
establish and implement a thorough medical review process to 
examine the effects of the amendments made by this section on 
the quality of covered skilled nursing facility services furnished 
to medicare beneficiaries. In developing such a medical review 
process, the Secretary shall place a particular emphasis on the 
quality of non-routine covered services and physicians' services 
for which payment is made under title XVIII of the Social Security 
Act. 
42 use l395i-3 
(d) EFFECTIVE DATE.—The amendments made by this section 
note. 
are effective for cost reporting periods beginning on or after July 
1, 1998; except that the amendments made by subsection (b) shall 
apply to items and services furnished on or after July 1, 1998. 
CHAPTER 4—PROVISIONS RELATED TO HOSPICE 
SERVICES 
SEC. 4441. PAYMENTS FOR HOSPICE SERVICES. 
(a) 
PAYMENT 
UPDATE.—Section 1814(i)(l)(C)(ii) (42 U.S.C. 
1395f(i)(l)(C)(ii)) is amended— 
(1) in subclause (V), by striking "and" at the end; 
(2) by redesignating subclause (VI) as subclause (VII); and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 423 
(3) by inserting after subclause (V) the following new sub-
clause: 
"(VI) for each of fiscal years 1998 through 2002, the market 
basket percentage increase for the fiscal year involved minus 
1.0 percentage points; and". 
(b) COLLECTION OF DATA.—Section 1814(i) (42 U.S.C. 1395fli)) 
is amended by adding at the end the following new paragraph: 
"(3) Hospice programs providing hospice care for which payment 
is made under this subsection shall submit to the Secretary such 
data with respect to the costs for providing such care for each 
fiscal year, beginning with fiscal year 1999, as the Secretary deter-
mines necessary.". 
SEC. 4442. PAYMENT FOR HOME HOSPICE CARE BASED ON LOCATION 
WHERE CARE IS FURNISHED. 
(a) IN GENERAL.—Section 1814(i)(2) (42 U.S.C. 1395f(i)(2)) is 
amended by adding at the end the following: 
"(D) A hospice program shall submit claims for payment for 
hospice care furnished in an individual's home under this title 
only on the basis of the geographic location at which the service 
is furnished, as determined by the Secretary.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
applies to cost reporting periods beginning on or after October 
1,1997. 
SEC. 4443. HOSPICE CARE BENEFITS PERIODS. 
(a) RESTRUCTURING OF BENEFIT PERIOD.—Section 1812 
(42 
U.S.C. 1395d) is amended in subsections (a)(4) and (d)(1) by striking 
", a subsequent period of 30 days, and a subsequent extension 
period" and inserting "and an unlimited number of subsequent 
periods of 60 days each". 
(b) CONFORMING AMENDMENTS.—(1) Section 1812 (42 U.S.C. 
1395d) is amended in subsection (d)(2)(B) by striking "90- or 30-
day period or a subsequent extension period" and inserting "90-
day period or a subsequent 60-day period". 
(2) Section 1814(a)(7)(A) (42 U.S.C. 1395f(a)(7)(A)) is amended— 
(A) in clause (i), by inserting "and" at the end; 
(B) in clause (ii)— 
(i) by striking "30-day" and inserting "60-day"; and 
(ii) by striking ", and" at the end and inserting a 
period; and 
(C) by striking clause (iii). 
SEC. 4444. OTHER ITEMS AND SERVICES INCLUDED IN HOSPICE CARE. 
(a) IN GENERAL.—Section 1861(dd)(l) (42 U.S.C. 1395x(dd)(l)) 
is amended— 
(1) in subparagraph (G), by striking "and" at the end; 
(2) in subparagraph (H), by striking the period at the 
end and inserting ", and"; and 
(3) by inserting after subparagraph (H) the following: 
"(I) any other item or service which is specified in the 
plan and for which payment may otherwise be made under 
this title.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply with respect to items or services furnished on or after 
April 1, 1998. 
42 u s e 1395f 
note. 
42 u s e 1395x 
note. 
I l l STAT. 424 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 4445. CONTRACTING WITH INDEPENDENT PHYSICIANS OR PHYSI-
CIAN GROUPS FOR HOSPICE CARE SERVICES PER-
MITTED. 
Section 1861(dd)(2) (42 U.S.C. 1395x(dd)(2)) is amended— 
(1) in subparagraph (A)(ii)(I), by striking "(F),"; and 
(2) in subparagraph (B)(i), by inserting "or, in the case 
of a physician described in subclause (I), under contract with" 
after "employed b/'. 
SEC. 4446. WAIVER OF CERTAIN STAFFING REQUIREMENTS FOR HOS-
PICE CARE PROGRAMS IN NONURBANIZED AREAS. 
Section 1861(dd)(5) (42 U.S.C. 1395x(dd)(5)) is amended— 
(1) in subparagraph (B), by inserting "or (C)" after 
"subparagraph (A)" each place it appears; and 
(2) by adding at the end the following: 
"(C) The Secretary may waive the requirements of paragraph 
(2)(A)(i) and (2)(A)(ii) for an agency or organization with respect 
to the services described in paragraph (1)(B) and, with respect 
to dietary counseling, paragraph (1)(H), if such agency or organiza-
tion— 
"(i) is located in an area which is not an urbanized area 
(as defined by the Bureau of Census), and 
"(ii) demonstrates to the satisfaction of the Secretary that 
the agency or organization has been unable, despite diligent 
efforts, to recruit appropriate personnel.". 
SEC. 4447. LIMITATION ON LIABILITY OF BENEFICIARIES FOR CERTAIN 
HOSPICE COVERAGE DENIALS. 
Section 1879(g) (42 U.S.C. 1395pp(g)) is amended— 
(1) by redesignating paragraphs (1) and (2) as subpara-
graphs (A) and (B), respectively, and moving such subpara-
graphs 2 ems to the right; 
(2) by striking "is," and inserting "is—"; 
(3) by making the remaining text of subsection (g), as 
amended, that follows "is—" a new paragraph (1) and indenting 
such paragraph 2 ems to the right; 
(4) by striking the period at the end and inserting "; and"; 
and 
(5) by adding at the end the following new paragraph: 
"(2) with respect to the provision of hospice care to an 
individual, a determination that the individual is not terminally 
ill.". 
SEC. 4448. EXTENDING THE PERIOD FOR PHYSICIAN CERTIFICATION 
OF AN INDIVIDUAL'S TERMINAL ILLNESS. 
Section 1814(a)(7)(A)(i) (42 U.S.C. 1395f:a)(7)(A)(i)) is amended 
in the matter following subclause (II) by striking ", not later thsin 
2 days after hospice care is initiated (or, if each certify verbally 
not later than 2 days after hospice care is initiated, not later 
than 8 days after such care is initiated)" and inserting "at the 
beginning of the period". 
42 use 1395d 
SEC. 4449. EFFECTIVE DATE. 
Except as otherwise provided in this chapter, the amendments 
made by this chapter apply to benefits provided on or after the 
date of the enactment of this chapter, regardless of whether or 
not an individual has made an election under section 1812(d) of 
the Social Security Act (42 U.S.C. 1395d(d)) before such date. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 425 
CHAPTER 5—OTHER PAYMENT PROVISIONS 
SEC. 
4451. 
REDUCTIONS 
IN 
PAYMENTS 
FOR 
ENROLLEE 
BAD 
DEBT. 
Section 1861(v)(l) (42 U.S.C. 1395x(v)(l)) is amended by adding 
at the end the following new subparagraph: 
"(T) In determining such reasonable costs for hospitals, no 
reduction in copayments under section 1833(t)(5)(B) shall be treated 
as a bad debt and the amount of bad debts otherwise treated 
as allowable costs which are attributable to the deductibles and 
coinsurance amounts under this title shall be reduced— 
"(i) for cost reporting periods beginning during fiscal year 
1998, by 25 percent of such amount otherwise allowable, 
"(ii) for cost reporting periods beginning during fiscal year 
1999, by 40 percent of such amount otherwise allowable, and 
"(iii) for cost reporting periods beginning during a subse-
quent fiscal year, by 45 percent of such amount otherwise 
allowable.". 
SEC. 4452. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH 
PAYMENT. 
Section 6011(d) of OBRA-1989 (as amended by section 13505 
of OBRA-1993) is amended by striking "and shall expire September 
42 USC 1395ww 
30, 1994." and inserting "and on or before September 30, 1994, note. 
and on or after October 1, 1997.". 
SEC. 4453. REDUCTION IN PART A MEDICARE PREMIUM FOR CERTAIN 
PUBLIC RETIREES. 
(a) IN GENERAL.—Section 1818(d) (42 U.S.C. 1395i-2(d)) is 
amended— 
(1) in paragraph (2), by striking "paragraph (4)" and insert-
ing "paragraphs (4) and (5)"; and 
(2) by adding at the end the following new paragraph: 
"(5)(A) The amount of the monthly premium shall be zero 
in the case of an individual who is a person described in subpara-
graph (B) for a month, if— 
"(i) the individual's premium under this section for the 
month is not (and will not be) paid for, in whole or in part, 
by a State (under title XIX or otherwise), a political subdivision 
of a State, or an agency or instrumentality of one or more 
States or political subdivisions thereof; and 
"(ii) in each of 84 months before such month, the individual 
was enrolled in this part under this section and the payment 
of the individual's premium under this section for the month 
was not paid for, in whole or in part, by a State (under title 
XIX or otherwise), a political subdivision of a State, or an 
agency or instrumentality of one or more States or political 
subdivisions thereof. 
"(B) A person described in this subparagraph for a month 
is a person who establishes to the satisfaction of the Secretary 
that, as of the last day of the previous month— 
"(i)(I) the person was receiving cash benefits under a quali-
fied State or local government retirement system (as defined 
in subparagraph (C)) on the basis of the person's employment 
in one or more positions covered under any such system, and 
(II) the person would have at least 40 quarters of coverage 
under title II if remuneration for medicare qualified government 
employment (as defined in paragraph (1) of section 210(p), 
-194 O - 97 - 15 : QL 3 Part 1 
I l l STAT. 426 
PUBLIC LAW 105-33—AUG. 5, 1997 
but determined without regard to paragraph (3) of such section) 
paid to such person were treated as wages paid to such person 
and credited for purposes of determining quarters of coverage 
under section 213; 
"(ii)(I) the person was married (and had been married 
for the previous 1-year period) to an individual who is described 
in clause (i), or (II) the person met the requirement of clause 
(i)(II) and was married (and had been married for the previous 
1-year period) to an individual described in clause (i)(I); 
"(iii) the person had been married to an individual for 
a period of at least 1 year (at the time of such individual's 
death) if (I) the individual was described in clause (i) at the 
time of the individual's death, or (II) the person met the require-
ment of clause (i)(II) and the individual was described in clause 
(i)(I) at the time of the individual's death; or 
"(iv) the person is divorced from an individual and had 
been married to the individual for a period of at least 10 
years (at the time of the divorce) if (I) the individual was 
described in clause (i) at the time of the divorce, or (II) the 
person met the requirement of clause (i)(II) and the individual 
was described in clause (i)(I) at the time of the divorce. 
"(C) For purposes of subparagraph (B)(i)(I), the term 'qualified 
State or local government retirement system' means a retirement 
system that— 
"(i) is established or maintained by a State or political 
subdivision thereof, or an agency or instrumentality of one 
or more States or political subdivisions thereof; 
"(ii) covers positions of some or all employees of such a 
State, subdivision, agency, or instrumentality; and 
"(iii) does not adjust cash retirement benefits based on 
eligibility for a reduction in premium under this paragraph.". 
42USCl395i-2 
(b) EFFECTIVE DATE.—The amendments made by subsection 
note. 
(a) shall apply to premiums for months beginning with January 
1998, and months before such month may be taken into account 
for purposes of meeting the requirement of section 1818(d)(5)(B)(iii) 
of the Social Security Act, as added by subsection (a). 
SEC. 4454. COVERAGE OF SERVICES IN RELIGIOUS NONMEDICAL 
HEALTH CARE INSTITUTIONS UNDER THE MEDICARE 
AND MEDICAID PROGRAMS. 
(a) MEDICARE COVERAGE.— 
(1) IN GENERAL.—Section 1861 (42 U.S.C. 1395x) (as 
amended by sections 4103 and 4106) is amended— 
(A) in the sixth sentence of subsection (e)— 
(i) by striking "includes" and all that follows up 
to "but only" and inserting "includes a religious non-
medical health care institution (as defined in sub-
section (ss)(l)),", and 
(ii) by inserting "consistent with section 1821" 
before the period; 
(B) in subsection (y)— 
(i) by amending the heading to read as follows: 
"Extended Care in Religious Nonmedical Health Care Institutions", 
(ii) in paragraph (1), by striking "includes" and 
all that follows up to "but only" and inserting "includes 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 427 
a religious nonmedical health care institution (as 
defined in subsection (ss)(l)),", and 
(iii) by inserting "consistent with section 1821" 
before the period; and 
(C) by adding at the end the following: 
"Religious Nonmedical Health Care Institution 
"(ss)(l) The term 'religious nonmedical health care institution' 
means an institution that— 
"(A) is described in subsection (c)(3) of section 501 
of the Internal Revenue Code of 1986 and is exempt from 
taxes under subsection (a) of such section; 
"(B) is lawfully operated under all applicable Federal, 
State, and local laws and regulations; 
"(C) provides only nonmedical nursing items and serv-
ices exclusively to patients who choose to rely solely upon 
a religious method of healing and for whom the acceptance 
of medical health services would be inconsistent with their 
religious beliefs; 
"(D) provides such nonmedical items and services 
exclusively through nonmedical nursing personnel who are 
experienced in caring for the physical needs of such 
patients; 
"(E) provides such nonmedical items and services to 
inpatients on a 24-hour basis; 
"(F) on the basis of its religious beliefs, does not provide 
through its personnel or otherwise medical items and serv-
ices (including any medical screening, examination, diag-
nosis, prognosis, treatment, or the administration of drugs) 
for its patients; 
"(G)(i) is not owed by, under common ownership with, 
or has an ownership interest in, a provider of medical 
treatment of services; 
"(ii) is not affiliated with— 
"(I) a provider of medical treatment or services, 
or 
"(II) an individual who has an ownership interest 
in a provider of medical treatment or services; 
"(H) has in effect a utilization review plan which— 
"(i) provides for the review of admissions to the 
institution, of the duration of stays therein, of cases 
of continuous extended duration, and of the items and 
services furnished by the institution, 
"(ii) requires that such reviews be made by an 
appropriate committee of the institution that includes 
the individuals responsible for overall administration 
and for supervision of nursing personnel at the institu-
tion, 
"(iii) provides that records be maintained of the 
meetings, decisions, and actions of such committee, 
£ind 
"(iv) meets such other requirements as the Sec-
retary finds necessary to establish an effective utiliza-
tion review plan; 
"(I) provides the Secretary with such information as 
the Secretary may require to implement section 1821, 
I l l STAT. 428 
PUBLIC LAW 105-33—AUG. 5, 1997 
including information relating to quality of care and cov-
erage determinations; and 
"(J) meets such other requirements as the Secretary 
finds necessary in the interest of the health and safety 
of individuals who are furnished services in the institution. 
"(2) To the extent that the Secretary finds that the accreditation 
of an institution by a State, regional, or national agency or associa-
tion provides reasonable assurances that any or all of the require-
ments of paragraph (1) are met or exceeded, the Secretary may 
treat such institution as meeting the condition or conditions with 
respect to which the Secretary made such finding. 
"(3)(A)(i) In administering this subsection and section 1821, 
the Secretary shall not require any patient of a religious nonmedical 
health care institution to undergo medical screening, examination, 
diagnosis, prognosis, or treatment or to accept any other medical 
health care service, if such patient (or legal representative of the 
patient) objects thereto on religious grounds. 
"(ii) Clause (i) shall not be construed as preventing the Sec-
retary from requiring under section 1821(a)(2) the provision of 
sufficient information regarding an individual's condition as a condi-
tion for receipt of benefits under part A for services provided in 
such an institution. 
"(B)(i) In administering this subsection and section 1821, the 
Secretary shall not subject a religious nonmedical health care 
institution or its personnel to any medical supervision, regulation, 
or control, insofar as such supervision, regulation, or control would 
be contrary to the religious beliefs observed by the institution 
or such personnel. 
"(ii) Clause (i) shall not be construed as preventing the Sec-
retary from reviewing items and services billed by the institution 
to the extent the Secretary determines such review to be necessary 
to determine whether such items and services were not covered 
under part A, are excessive, or are fraudulent. 
"(4)(A) For purposes of paragraph (l)(G)(i), an ownership 
interest of less than 5 percent shall not be taken into account. 
"(B) For purposes of paragraph (l)(G)(ii), none of the following 
shall be considered to create an affiliation: 
"(i) An individual serving as an uncompensated director, 
trustee, officer, or other member of the governing body of a 
religious nonmedical health care institution. 
"(ii) An individual who is a director, trustee, officer, 
employee, or staff member of a religious nonmedical health 
care institution having a family relationship with an individual 
who is affiliated with (or has an ownership interest in) a 
provider of medical treatment or services. 
"(iii) An individual or entity furnishing goods or services 
as a vendor to both providers of medical treatment or services 
and religious nonmedical health care institutions.". 
(2) CONDITIONS OF COVERAGE.—Part A of title XVIII is 
amended by adding at the end the following new section: 
42 u s e 1395i-5. 
"CONDITIONS FOR COVERAGE OF RELIGIOUS NONMEDICAL HEALTH 
CARE INSTITUTIONAL SERVICES 
"SEC. 1821. (a) IN GENERAL.—Subject to subsections (c) and 
(d), payment under this part may be made for inpatient hospital 
services or post-hospital extended care services furnished an individ-
ual in a religious nonmedical health care institution only if— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 429 
"(1) the individual has an election in effect for such benefits 
under subsection (b); and 
"(2) the individual has a condition such that the individual 
would qualify for benefits under this part for inpatient hospital 
services or extended care services, respectively, if the individual 
were an inpatient or resident in a hospital or skilled nursing 
facility that was not such an institution. 
"(b) ELECTION.— 
"(1) IN GENERAL.—An individual may make an election 
under this subsection in a form and manner specified by the 
Secretary consistent with this subsection. Unless otherwise pro-
vided, such an election shall take effect immediately upon its 
execution. Such an election, once made, shall continue in effect 
until revoked. 
"(2) FORM.—The election form under this subsection shall 
include the following: 
"(A) A written statement, signed by the individual 
(or such individual's legal representative), that— 
"(i) the individual is conscientiously opposed to 
acceptance of nonexcepted medical treatment; and 
"(ii) the individual's acceptance of nonexcepted 
medical treatment would be inconsistent with the 
individual's sincere religious beliefs. 
"(B) A statement that the receipt of nonexcepted medi-
cal services shall constitute a revocation of the election 
and may limit further receipt of services described in sub-
section (a). 
"(3) REVOCATION.—An election under this subsection by 
an individual may be revoked by voluntarily notifying the Sec-
retary in writing of such revocation and shall be deemed to 
be revoked if the individual receives nonexcepted medical treat-
ment for which reimbursement is made under this title. 
"(4) 
LIMITATION ON SUBSEQUENT ELECTIONS.—Once 
an 
individual's election under this subsection has been made and 
revoked twice— 
"(A) the next election may not become effective until 
the date that is 1 year after the date of most recent previous 
revocation, and 
"(B) any succeeding election may not become effective 
until the date that is 5 years after the date of the most 
recent previous revocation. 
"(5) EXCEPTED MEDICAL TREATMENT.—For purposes of this 
subsection: 
"(A) 
EXCEPTED 
MEDICAL 
TREATMENT.—The 
term 
'excepted medical treatment' means medical care or treat-
ment (including medical and other health services)— 
"(i) received involuntarily, or 
"(ii) required under Federal or State law or law 
of a political subdivision of a State. 
"(B) NONEXCEPTED MEDICAL TREATMENT.—The term 
'nonexcepted medical treatment' means medical care or 
treatment (including medical and other health services) 
other than excepted medical treatment. 
"(c) MONITORING AND SAFEGUARD AGAINST EXCESSIVE EXPENDI-
TURES.— 
"(1) ESTIMATE OF EXPENDITURES.—Before the beginning of 
each fiscal year (beginning with fiscal year 2000), the Secretary 
I l l STAT. 430 
PUBLIC LAW 105-33—AUG. 5, 1997 
shall estimate the level of expenditures under this part for 
services described in subsection (a) for that fiscal year. 
"(2) ADJUSTMENT IN PAYMENTS.— 
"(A) PROPORTIONAL ADJUSTMENT.—If the Secretary 
determines that the level estimated under paragraph (1) 
for a fiscal year will exceed the trigger level (as defined 
in subparagraph (C)) for that fiscal year, the Secretary 
shall, subject to subparagraph (B), provide for such a 
proportional reduction in pajnnent amounts under this part 
for services described in subsection (a) for the fiscal year 
involved as will assure that such level (taking into account 
any adjustment under subparagraph (B)) does not exceed 
the trigger level for that fiscal year. 
"(B) ALTERNATIVE ADJUSTMENTS.—The Secretary may, 
instead of making some or all of the reduction described 
in subparagraph (A), impose such other conditions or 
limitations with respect to the coverage of covered services 
(including limitations on new elections of coverage and 
new facilities) as may be appropriate to reduce the level 
of expenditures described in paragraph (1) to the trigger 
level. 
"(C) TRIGGER LEVEL.—For purposes of this subsection— 
"(i) IN GENERAL.—Subject to adjustment under 
paragraph (3)(B), the 'trigger level' for a year is the 
unadjusted trigger level described in clause (ii). 
"(ii) 
UNADJUSTED 
TRIGGER 
LEVEL.—The 
'unadjusted trigger level' for— 
"(I) fiscal year 1998, is $20,000,000, or 
"(II) a succeeding fiscal year is the amount 
specified under this clause for the previous fiscal 
year increased by the percentage increase in the 
consumer price index for all urban consumers (all 
items; United States city average) for the 12-month 
period ending with July preceding the beginning 
of the fiscal year. 
"(D) PROHIBITION OF ADMINISTRATIVE AND JUDICIAL 
REVIEW.—There shall be no administrative or judicial 
review under section 1869, 1878, or otherwise of the esti-
mation of expenditures under subparagraph (A) or the 
application of reduction amounts under subparagraph (B). 
"(E) EFFECT ON BILLING.—Notwithstanding any other 
provision of this title, in the case of a reduction in payment 
provided under this subsection for services of a religious 
nonmedical health care institution provided to an individ-
ual, the amount that the institution is otherwise permitted 
to charge the individual for such services is increased by 
the amount of such reduction. 
"(3) MONITORING EXPENDITURE LEVEL.— 
"(A) IN GENERAL.—The Secretary shall monitor the 
expenditure level described in paragraph (2)(A) for each 
fiscal year (beginning with fiscal year 1999). 
"(B) ADJUSTMENT IN TRIGGER LEVEL.— 
"(i) IN GENERAL.—If the Secretary determines that 
such level for a fiscal year exceeded, or was less than, 
the trigger level for that fiscal year, then, subject to 
clause (ii), the trigger level for the succeeding fiscal 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 431 
year shall be reduced, or increased, respectively, by 
the amount of such excess or deficit. 
"(ii) LIMITATION ON CARRYFORWARD.—In no case 
may the increase effected under clause (i) for a fiscal 
year exceed $50,000,000. 
"(d) SUNSET.—If the Secretary determines that the level of 
expenditures described in subsection (c)(1) for 3 consecutive fiscal 
years (with the first such year being not earlier than fiscal year 
2002) exceeds the trigger level for such expenditures for such years 
(as determined under subsection (c)(2)), benefits shall be paid under 
this part for services described in subsection (a) and furnished 
on or after the first January 1 that occurs after such 3 consecutive 
years only with respect to an individual who has an election in 
effect under subsection (b) as of such January 1 and only during 
the duration of such election. 
"(e) ANNUAL REPORT.—At the beginning of each fiscal year 
(beginning with fiscal year 1999), the Secretary shall submit to 
the Committee on Ways and Means of the House of Representatives 
and the Committee on Finance of the Senate an annual report 
on coverage and expenditures for services described in subsection 
(a) under this part and under State plans under title XIX. Such 
report shall include— 
"(1) level of expenditures described in subsection (c)(1) for 
the previous fiscal year and estimated for the fiscal year 
involved; 
"(2) trends in such level; and 
"(3) facts and circumstances of any significant change in 
such level from the level in previous fiscal years.". 
(b) MEDICAID.— 
(1) The third sentence of section 1902(a) (42 U.S.C. 
1396a(a)) is amended by striking all that follows "shall not 
apply" and inserting "to a religious nonmedical health care 
institution (as defined in section 1861(ss)(l)).". 
(2) Section 1908(e)(1) (42 U.S.C. 1396g-l(e)(l)) is amended 
42USC I396g. 
by striking all that follows "does not include" and inserting 
"a religious nonmedical health care institution (as defined in 
section 1861(ss)(l)).". 
(c) CONFORMING AMENDMENTS.— 
(1) Section 1122(h) (42 U.S.C. 1320a-l(h)) is amended by 
striking all that follows "shall not apply to" and inserting 
"a religious nonmedical health care institution (as defined in 
section 1861(ss)(l)).". 
(2) Section 1162 (42 U.S.C. 1320c-ll) is amended— 
(A) by amending the heading to read as follows: 
"EXEMPTIONS FOR RELIGIOUS NONMEDICAL HEALTH CARE 
INSTITUTIONS"; and 
(B) by striking all that follows "shall not apply with 
respect to a" and inserting "religious nonmedical health 
care institution (as defined in section 1861(ss)(l)).". 
(d) EFFECTIVE DATE.—The amendments made by this section 
42 use i395i-5 
shall take effect on the date of the enactment of this Act and "^o^. 
shall apply to items and services furnished on or after such date. 
By not later than July 1, 1998, the Secretary of Health and Human Regulations. 
Services shall first issue regulations to carry out such amendments. 
Such regulations may be issued so they are effective on an interim 
I l l STAT. 432 
PUBLIC LAW 105-33—AUG. 5, 1997 
basis pending notice and opportunity for public comment. For peri-
ods before the effective date of such regulations, such regulations 
shall recognize elections entered into in good faith in order to 
comply with the requirements of section 1821(b) of the Social Secu-
rity Act. 
Subtitle F—Provisions Relating to Part B 
Only 
CHAPTER 1—SERVICES OF HEALTH PROFESSIONALS 
Subchapter A—Physicians' Services 
SEC. 4501. ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 
1998. 
(a) IN GENERAL.—Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(l)) 
is amended— 
(1) by redesignating subparagraph (C) as subparagraph 
(D), and 
(2) by inserting after subparagraph (B) the following: 
"(C) SPECIAL RULES FOR 1998.—The single conversion 
factor for 1998 under this subsection shall be the conversion 
factor for primary care services for 1997, increased by 
the Secretar^s estimate of the weighted average of the 
three separate updates that would otherwise occur were 
it not for the enactment of chapter 1 of subtitle F of 
title IV of the Balanced Budget Act of 1997.". 
(b) 
CONFORMING AMENDMENTS.—Section 1848 (42 U.S.C. 
1395w-4) is amended— 
(1) by striking "(or factors)" each place it appears in sub-
section (d)(1)(A) £ind (d)(l)(D)(ii) (as redesignated by subsection 
(a)(1)), 
(2) in subsection (d)(1)(A), by striking "or updates", 
(3) in subsection (d)(1)(D) (as redesignated by subsection 
(a)(1)), by striking "(or updates)" each place it appears, and 
(4) in subsection (j)(l), by striking "The term" and inserting 
"For services furnished before January 1, 1998, the term". 
SEC. 4502. ESTABLISHING UPDATE TO CONVERSION FACTOR TO 
MATCH SPENDING UNDER SUSTAINABLE GROWTH RATE. 
(a) UPDATE.— 
(1) IN GENERAL.—Section 1848(d)(3) (42 U.S.C. 1395w-
4(d)(3)) is amended to read as follows: 
"(3) UPDATE.— 
"(A) IN GENERAL.—Unless otherwise provided by law, 
subject to subparagraph (D) and the budget-neutrality fac-
tor 
determined 
by 
the 
Secretary 
under 
subsection 
(c)(2)(B)(ii), the update to the single conversion factor estab-
lished in paragraph (1)(C) for a year beginning with 1999 
is equal to the product o
f
— 
"(i) 1 plus the Secretary's estimate of the percent-
age increase in the MEI (as defined in section 
1842(i)(3)) for the year (divided by 100), and 
"(ii) 1 plus the Secretary's estimate of the update 
adjustment factor for the year (divided by 100), 
minus 1 and multiplied by 100. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 433 
"(B) UPDATE ADJUSTMENT FACTOR.—For purposes of 
subparagraph (A)(ii), the 'update adjustment factor' for a 
year is equal (as estimated by the Secretary) to— 
"(i) the difference between (I) the sum of the 
allowed expenditures for physicians' services (as deter-
mined imder subparagraph (C)) for the period begin-
ning April 1, 1997, and ending on March 31 of the 
year involved, and (II) the amount of actual expendi-
tures for physicians' services furnished during the 
period beginning April 1, 1997, and ending on March 
31 of the preceding year; divided by 
"(ii) the actual expenditures for physicians' services 
for the 12-month period ending on March 31 of the 
preceding year, increased by the sustainable growth 
rate under subsection (f) for the fiscal year which 
begins during such 12-month period. 
"(C) DETERMINATION OF ALLOWED EXPENDITURES.—For 
purposes of this paragraph, the allowed expenditures for 
physicians' services for the 12-month period ending with 
March 31 o
f
— 
"(i) 1997 is equal to the actual expenditures for 
physicians' services furnished during such 12-month 
period, as estimated by the Secretary; or 
"(ii) a subsequent year is equal to the allowed 
expenditures for physicians' services for the previous 
year, increased by the sustainable growth rate under 
subsection (f) for the fiscal year which begins during 
such 12-month period. 
"(D) RESTRICTION ON VARIATION FROM MEDICARE ECO-
NOMIC INDEX.—Notwithstanding the amount of the update 
adjustment factor determined under subparagraph (B) for 
a year, the update in the conversion factor under this 
paragraph for the year may not be— 
"(i) greater than 100 times the following amount: 
(1.03 + (MEI percentage/100)) - 1 ; or 
"(ii) less than 100 times the following amount: 
(0.93 + (MEI percentage/100)) - 1 , 
where 'MEI percentage' means the Secretary's estimate 
of the percentage increase in the MEI (as defined in section 
1842(i)(3)) for the year involved.". 
(2) EFFECTIVE DATE.—The amendment made by this sub- 42 USC l395w-4 
section shall apply to the update for years beginning with note. 
1999. 
(b) ELIMINATION OF REPORT.—Section 1848(d) (42 U.S.C. 
1395w-4(d)) is amended by striking paragraph (2). 
SEC. 4503. REPLACEMENT OF VOLUME PERFORMANCE STANDARD 
WITH SUSTAINABLE GROWTH RATE. 
(a) IN GENERAL.—Section 1848(f) (42 U.S.C. 1395w-4(f)) is 
amended by striking paragraphs (2) through (5) and inserting the 
following: 
"(2) SPECIFICATION OF GROWTH RATE.—The sustainable 
growth rate for all physicians' services for a fiscal year (begin-
ning with fiscal year 1998) shall be equal to the product o
f
— 
"(A) 1 plus the Secretary's estimate of the weighted 
average percentage increase (divided by 100) in the fees 
for all physicigms' services in the fiscal year involved. 
I l l STAT. 434 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(B) 1 plus the Secretary's estimate of the percentage 
change (divided by 100) in the average number of individ-
uals enrolled under this part (other than Medicare+Choice 
plan enroUees) from the previous fiscal year to the fiscal 
year involved, 
"(C) 1 plus the Secretary's estimate of the projected 
percentage growth in real gross domestic product per capita 
(divided by 100) from the previous fiscal year to the fiscal 
year involved, and 
"(D) 1 plus the Secretary's estimate of the percentage 
change (divided by 100) in expenditures for all physicians' 
services in the fiscal year (compared with the previous 
fiscal year) which will result from changes in law and 
regulations, determined without taking into account esti-
mated changes in expenditures resulting from the update 
adjustment factor determined under subsection (d)(3)(B), 
minus 1 and multiplied by 100. 
"(3) DEFINITIONS.—In this subsection: 
"(A) 
SERVICES INCLUDED IN PHYSICIANS' SERVICES.— 
The term 'physicians' services' includes other items and 
services (such as clinical diagnostic laboratory tests and 
radiology services), specified by the Secretary, that are 
commonly performed or furnished by a physician or in 
a physician's office, but does not include services furnished 
to a Medicare+Choice plan enrollee. 
"(B) MEDICARE+CHOICE PLAN ENROLLEE.—The term 
'Medicare+Choice plan enrollee' means, with respect to a 
fiscal year, an individual enrolled under this part who 
has elected to receive benefits under this title for the fiscal 
year through a Medicare+Choice plan offered under part 
C, and also includes an individual who is receiving benefits 
under this part through enrollment with an eligible 
organization with a risk-sharing contract under section 
1876.". 
(b) CONFORMING AMENDMENT.—So much of section 1848(f) (42 
U.S.C. 1395w-4(f)) as precedes paragraph (2) is amended to read 
as follows: 
"(f) SUSTAINABLE GROWTH RATE.— 
Federal Register, 
"(1) PUBLICATION.—The Secretary shall cause to h a v e pub-
publication, 
lished in the Federal Register the sustainable growth rate 
for each fiscal year beginning with fiscal year 1998. Such 
publication shall occur by not later than August 1 before each 
fiscal year, except that such rate for fiscal year 1998 shall 
be published not later than November 1, 1997.". 
SEC. 4504. PAYMENT RULES FOR ANESTHESIA SERVICES. 
(a) IN GENERAL.—Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(l)), 
as amended by section 4501(a), is amended— 
(1) in subparagraph (C), by striking "The single" and insert-
ing "Except as provided in subparagraph (D), the single"; 
(2) by redesignating subparagraph (D) as subparagraph 
(E);and 
(3) by inserting after subparagraph (C) the following new 
subparagraph: 
"(D) SPECIAL RULES FOR ANESTHESIA SERVICES.—The 
separate conversion factor for anesthesia services for a 
year shall be equal to 46 percent of the single conversion 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 435 
factor established for other physicians' services, except as 
adjusted for changes in work, practice expense, or mal-
practice relative value units.", 
(b) EFFECTIVE DATE.—The amendments made by subsection 
(a) shall apply to services furnished on or after January 1, 1998. 
SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES. 
(a) 1-YEAR DELAY IN IMPLEMENTATION.—Section 1848(c) (42 
U.S.C. 1395w-4(c)) is amended— 
(1) in paragraph (2)(C)(ii), in the matter before subclause 
(I) and after subclause (II), by striking "1998" and inserting 
"1999" each place it appears; and 
(2) in paragraph (3)(C)(ii), by striking "1998" and inserting 
"1999". 
(b) PHASED-IN IMPLEMENTATION.— 
(1) IN GENERAL.—Section 
1848(c)(2)(C)(ii) (42 U.S.C. 
1395w-4(c)(2)(C)(ii)) is further amended— 
(A) by striking the comma at the end of clause (ii) 
and inserting a period and the following: 
"For 1999, such number of units shall be determined 
based 75 percent on such product and based 25 percent 
on the relative practice expense resources involved in 
furnishing the service. For 2000, such number of units 
shall be determined based 50 percent on such product 
and based 50 percent on such relative practice expense 
resources. For 2001, such number of units shall be 
determined based 25 percent on such product and 
based 75 percent on such relative practice expense 
resources. For a subsequent year, such number of units 
shall be determined based entirely on such relative 
practice expense resources.". 
(2) CONFORMING AMENDMENT.—Section 1848(c)(3)(C)(ii) (42 
U.S.C. 1395w-4(c)(3)(C)(ii)), as amended by subsection (a)(2), 
is amended by striking "1999" and inserting "2002". 
(c) REVIEW BY COMPTROLLER GENERAL.—The Comptroller Gen-
eral of the United States shall review and evaluate the proposed 
rule on resource-based methodology for practice expenses issued 
by the Secretary of Health and Human Services. The Comptroller 
General shall, within 6 months of the date of the enactment of 
this Act, report to the Committees on Commerce and Ways and 
Means of the House of Representatives and the Committee on 
Finance of the Senate the results of its evaluation, including an 
analysis o
f
— 
(1) the adequacy of the data used in preparing the rule, 
(2) categories of allowable costs, 
(3) methods for allocating direct and indirect expenses, 
(4) the potential impact of the rule on beneficiary access 
to services, and 
(5) any other matters related to the appropriateness of 
resource-based methodology for practice expenses. 
The Comptroller General shall consult with representatives of physi-
cians' organizations with respect to matters of both data and meth-
odology. 
(d) REQUIREMENTS FOR DEVELOPING NEW RESOURCE-BASED 
PRACTICE EXPENSE RELATIVE VALUE UNITS.— 
(1) DEVELOPMENT.—For purposes of section 1848(c)(2)(C)(ii) 
of the Social Security Act, the Secretary of Health and Human 
42 use 1395w^ 
note. 
42 use 1395W-4 
note. 
I l l STAT. 436 
PUBLIC LAW 105-33—AUG. 5, 1997 
Services shall develop new resource-based relative value units. 
In developing such units the Secretary shall— 
(A) utilize, to the maximum extent practicable, gen-
erally accepted cost accounting principles which (i) recog-
nize all staff, equipment, supplies, and expenses, not just 
those which can be tied to specific procedures, and (ii) 
use actual data on equipment utilization and other key 
assumptions; 
(B) consult with organizations representing physicians 
regarding methodology and data to be used; and 
(C) develop a refinement process to be used during 
each of the 4 years of the transition period. 
(2) REPORT.—The Secretary shall transmit a report by 
March 1, 1998, on the development of resource-based relative 
value units under paragraph (1) to the Committee on Ways 
and Means and the Committee on Commerce of the House 
of Representatives and the Committee on Finance of the Senate. 
The report shall include a presentation of data to be used 
in developing the value units and an explanation of the meth-
odology. 
PubUcation. 
(3) NOTICE OF PROPOSED RULEMAKING.—The Secretary shall 
publish a notice of proposed rulemaking with the new resource-
based relative value units on or before May 1, 1998, and shall 
allow for a 90-day public comment period. 
(4) ITEMS INCLUDED.—The new proposed rule shall consider 
the following: 
(A) Impact projections which compare new proposed 
payment amounts on data on actual physician practice 
expenses. 
(B) Impact projections for hospital-based and other 
specialties, geographic payment localities, and urban versus 
rural localities. 
(e) ADJUSTMENTS TO RELATIVE VALUE UNITS FOR 1998.—Section 
1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is amended by adding at the 
end the following new subparagraph: 
"(G) ADJUSTMENTS IN RELATIVE VALUE UNITS FOR 
1998.— 
"(i) IN GENERAL.—The Secretary shall— 
"(I) subject to clauses (iv) and (v), reduce the 
practice expense relative value units applied to 
any services described in clause (ii) furnished in 
1998 to a number equal to 110 percent of the 
number of work relative value units, and 
"(II) increase the practice expense relative 
value units for office visit procedure codes during 
1998 by a uniform percentage which the Secretary 
estimates will result in an aggregate increase in 
pa3nnents for such services equal to the aggregate 
decrease in payments by reason of subclause (I). 
"(ii) SERVICES COVERED.—For purposes of clause 
(i), the services described in this clause are physicians' 
services that are not described in clause (iii) and for 
which— 
"(I) there are work relative value units, and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 437 
"(II) the number of practice expense relative 
value units (determined for 1998) exceeds 110 per-
cent of the number of work relative value units 
(determined for such year). 
"(iii) EXCLUDED SERVICES.—For purposes of clause 
(ii), the services described in this clause are services 
which the Secretary determines at least 75 percent 
of which are provided under this title in an office 
setting. 
"(iv) LIMITATION ON AGGREGATE REALLOCATION.— 
If the application of clause (i)(I) would result in an 
aggregate amount of reductions under such clause in 
excess of $390,000,000, such clause shall be applied 
by substituting for 110 percent such greater percentage 
as the Secretary estimates will result in the aggregate 
amount of such reductions equaling $390,000,000. 
"(v) No REDUCTION FOR CERTAIN SERVICES.—Prac-
tice expense relative value units for a procedure per-
formed in an office or in a setting out of an office 
shall not be reduced under clause (i) if the in-office 
or out-of-office practice expense relative value, respec-
tively, for the procedure would increase under the pro-
posed rule on resource-based practice expenses issued 
by the Secretary on June 18, 1997 (62 Federal Register 
33158 et seq.).". 
(f) APPLICATION OF RESOURCE-BASED METHODOLOGY TO MAL-
PRACTICE RELATIVE VALUE UNITS.— 
(1) IN GENERAL.—Section 
1848(c)(2)(C)(iii) (42 U.S.C. 
1395w-4(c)(2)(C)(iii)) is amended— 
(A) in paragraph (2)(C)(iii)— 
(i) by inserting "for the service for years before 
2000" before "equal", and 
(ii) by striking the period at the end and inserting 
a comma and by adding at the end the following flush 
matter: 
"and for years beginning with 2000 based on the mal-
practice expense resources involved in furnishing the 
service."; and 
(B) in paragraph (3)(C)(iii), by striking "The mal-
practice" and inserting "For years before 1999, the mal-
practice". 
(2) APPLICATION OF CERTAIN BUDGET NEUTRALITY PROVI-
SIONS.—In implementing the amendment made by paragraph 
(l)(A)(ii), the provisions of clauses (ii)(II) and (iii) of section 
1848(c)(2)(B) of the Social Security Act (42 U.S.C. 1395w-
4(c)(2)(B)) shall apply in the same manner as they apply to 
adjustments under clause (ii)(I) of such section. 
SEC. 4506. DISSEMINATION OF INFORMATION ON HIGH PER DIS-
CHARGE RELATIVE VALUES FOR IN-HOSPITAL PHYSI-
CIANS' SERVICES. 
(a) DETERMINATION AND NOTICE CONCERNING HOSPITAL-SPE-
CIFIC PER DISCHARGE RELATIVE VALUES.— 
(1) IN GENERAL.—For 1999 and 2001 the Secretary of 
Health and Human Services shall determine for each hospital— 
(A) the hospital-specific per discharge relative value 
under subsection (b); and 
42 use 1395w^ 
note. 
42 use 1
3
9
5
W
W 
note. 
I l l STAT. 438 
PUBLIC LAW 105-33—AUG. 5, 1997 
(B) whether the hospital-specific relative value is pro-
jected to be excessive (as determined based on such value 
represented as a percentage of the median of hospital-
specific per discharge relative values determined under 
subsection (b)). 
(2) NOTICE TO SUBSET OF MEDICAL STAFFS; EVALUATION 
OF RESPONSES.—The Secretary shall notify the medical execu-
tive committee of a subset of the hospitals identified under 
paragraph (1)(B) as having an excessive hospital-specific rel-
ative value, of the determinations made with respect to the 
medical staff under paragraph (1). The Secretary shall evaluate 
the responses of the hospitals so notified with the responses 
of other hospitals so identified that were not so notified. 
(b) DETERMINATION OF HOSPITAL-SPECIFIC PER DISCHARGE REL-
ATIVE VALUES.— 
(1) IN GENERAL.—For purposes of this section, the hospital-
specific per discharge relative value for the medical staff of 
a hospital (other than a teaching hospital) for a year shall 
be equal to the average per discharge relative value (as deter-
mined under section 1848(c)(2) of the Social Security Act (42 
U.S.C. 1395w-4(c)(2)) for physicians' services furnished to 
inpatients of the hospital by the hospital's medical staff (exclud-
ing interns and residents) during the second year preceding 
that calendar year, adjusted for variations in case-mix among 
hospitals and disproportionate share status and teaching status 
among hospitals (as determined by the Secretary under para-
graph (3)). 
(2) SPECIAL RULE FOR TEACHING HOSPITALS.—The hospital-
specific relative value projected for a teaching hospital in a 
year shall be equal to the sum o
f
— 
(A) the average per discharge relative value (as deter-
mined under section 1848(c)(2) of such Act) for physicians' 
services furnished to inpatients of the hospital by the hos-
pital's medical staff (excluding interns and residents) dur-
ing the second year preceding that calendar year, and 
(B) the equivalent per discharge relative value (as 
determined under such section) for physicians' services fur-
nished to inpatients of the hospital by interns and residents 
of the hospital during the second year preceding that cal-
endar year, adjusted for variations in case-mix among hos-
pitals, and in disproportionate share status and teaching 
status among hospitals (as determined by the Secretary 
under paragraph (3)). 
The Secretary shall determine the equivalent relative value 
unit per discharge for interns and residents based on the best 
available data and may make such adjustment in the aggregate. 
(3) 
ADJUSTMENT FOR TEACHING AND DISPROPORTIONATE 
SHARE HOSPITALS.—The Secretary shall adjust the allowable 
per discharge relative values otherwise determined under this 
subsection to take into account the needs of teaching hospitals 
and hospitals receiving additional payments under subpara-
graphs (F) and (G) of section 1886(d)(5) of the Social Security 
Act (42 U.S.C. 1395ww(d)(5)). The adjustment for teaching sta-
tus or disproportionate share shall not be less than zero. 
(c) DEFINITIONS.—For purposes of this section: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 439 
(1) HOSPITAL.—The term "hospital" means a subsection 
(d) hospital as defined in section 1886(d) of the Social Security 
Act (42 U.S.C. 1395ww(d)). 
(2) MEDICAL STAFF.—^An individual furnishing a physician's 
service is considered to be on the medical staff of a hospital— 
(A) if (in accordance with requirements for hospitals 
established by the Joint Commission on Accreditation of 
Health Organizations)— 
(i) the individual is subject to bylaws, rules, and 
regulations established by the hospital to provide a 
framework for the self-governance of medical staff 
activities, 
(ii) subject to the bylaws, rules, and regulations, 
the individual has clinical privileges granted by the 
hospital's governing body, and 
(iii) under the clinical privileges, the individual 
may provide physicians' services independently within 
the scope of the individual's clinical privileges, or 
(B) if the physician provides at least one service to 
an individual entitled to benefits under this title in that 
hospital. 
(3) PHYSICIANS' SERVICES.—The term "physicians' services" 
means the services described in section 1848(j)(3) of the Social 
Security Act (42 U.S.C. 1395w-4(j)(3)). 
(4) RURAL AREA; URBAN AREA.—The terms "rural area" 
and "urban area" have the meaning given those terms under 
section 1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D)). 
(5) SECRETARY.—The term "Secretary means the Secretary 
of Health and Human Services. 
(6) TEACHING HOSPITAL.—The term "teaching hospital" 
means a hospital which has a teaching program approved as 
specified in section 1861(b)(6) of the Social Security Act (42 
U.S.C. 1395x(b)(6)). 
SEC. 4507. USE OF PRIVATE CONTRACTS BY MEDICARE BENE-
FICIARIES. 
(a) ITEMS OR SERVICES PROVIDED THROUGH PRIVATE CON-
TRACTS.— 
(1) IN GENERAL.—Section 1802 (42 U.S.C. 1395a) is amend-
ed by adding at the end the following new subsection: 
"(b) USE OF PRIVATE CONTRACTS BY MEDICARE BENEFICIARIES.— 
"(1) IN GENERAL.—Subject to the provisions of this sub-
section, nothing in this title shall prohibit a physiciein or practi-
tioner from entering into a private contract with a medicare 
beneficiary for any item or service— 
"(A) for which no claim for payment is to be submitted 
under this title, and 
"(B) for which the physician or practitioner receives— 
"(i) no reimbursement under this title directly or 
on a capitated basis, and 
"(ii) receives no amount for such item or service 
fi*om an organization which receives reimbursement 
for such item or service under this title directly or 
on a capitated basis. 
"(2) BENEFICIARY PROTECTIONS.— 
"(A) IN GENERAL.—Paragraph (1) shall not apply to 
any contract unless— 
I l l STAT. 440 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(i) the contract is in writing and is signed by 
the medicare beneficiary before any item or service 
is provided pursuant to the contract; 
"(ii) the contract contains the items described in 
subparagraph (B); and 
"(iii) the contract is not entered into at a time 
when the medicare beneficiary is facing an emergency 
or urgent health care situation. 
"(B) ITEMS REQUIRED TO BE INCLUDED IN CONTRACT.— 
Any contract to provide items and services to which para-
graph (1) apphes shall clearly indicate to the medicare 
beneficiary that by signing such contract the beneficiary— 
"(i) agrees not to submit a claim (or to request 
that the physician or practitioner submit a claim) 
under this title for such items or services even if such 
items or services are otherwise covered by this title; 
"(ii) agrees to be responsible, whether through 
insurance or otherwise, for payment of such items or 
services and understands that no reimbursement will 
be provided under this title for such items or services; 
"(iii) acknowledges that no limits under this title 
(including the limits under section 1848(g)) apply to 
amounts that may be charged for such items or serv-
ices; 
"(iv) acknowledges that Medigap plans under sec-
tion 1882 do not, and other supplemental insurance 
plans may elect not to, make payments for such items 
and services because payment is not made under this 
title; and 
"(v) acknowledges that the medicare beneficiary 
has the right to have such items or services provided 
by other physicians or practitioners for whom payment 
would be made under this title. 
Such contract shall also clearly indicate whether the physi-
cian or practitioner is excluded fi-om participation under 
the medicare program under section 1128. 
"(3) PHYSICIAN OR PRACTITIONER REQUIREMENTS.— 
"(A) IN GENERAL.—Paragraph (1) shall not apply to 
any contract entered into by a physician or practitioner 
unless an affidavit described in subparagraph (B) is in 
effect during the period any item or service is to be provided 
pursuant to the contract. 
"(B) AFFIDAVIT.—An affidavit is described in this 
subparagraph if— 
"(i) the affidavit identifies the physician or practi-
tioner and is in writing and is signed by the physician 
or practitioner; 
"(ii) the affidavit provides that the physician or 
practitioner will not submit any claim under this title 
for any item or service provided to any medicare bene-
ficiary (and will not receive any reimbursement or 
amount described in paragraph (1)(B) for any such 
item or service) during the 2-year period beginning 
on the date the affidavit is signed; and 
"(iii) a copy of the affidavit is filed with the Sec-
retary no later than 10 days after the first contract 
to which such affidavit applies is entered into. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 441 
"(C) ENFORCEMENT.—If a physician or practitioner 
signing an affidavit under subparagraph (B) knowingly 
and willfully submits a claim under this title for any item 
or service provided during the 2-year period described in 
subparagraph (B)(ii) (or receives any reimbursement or 
amount described in paragraph (1)(B) for any such item 
or service) with respect to such affidavit— 
"(i) this subsection shall not apply with respect 
to any items and services provided by the physician 
or practitioner pursuant to any contract on and after 
the date of such submission and before the end of 
such period; and 
"(ii) no pa5anent shall be made under this title 
for any item or service furnished by the physician 
or practitioner during the period described in clause 
(i) (and no reimbursement or pajmient of any amount 
described in paragraph (1)(B) shall be made for any 
such item or service). 
"(4) LIMITATION ON ACTUAL CHARGE AND CLAIM SUBMISSION 
REQUIREMENT NOT APPLICABLE.—Section 1848(g) shall not apply 
with respect to any item or service provided to a medicare 
beneficiary under a contract described in paragraph (1). 
"(5) DEFINITIONS.—In this subsection: 
"(A) 
MEDICARE 
BENEFICIARY.—The term 
'medicare 
beneficiary' means an individual who is entitled to benefits 
under part A or enrolled under part B. 
"(B) PHYSICIAN.—The term 'physician' has the meaning 
given such term by section 1861(r)(l). 
"(C) PRACTITIONER.—The term 'practitioner' has the 
meaning given such term by section 1842(b)(18)(C)." 
(2) CONFORMING AMENDMENTS.— 
(A) Section 1802 (42 U.S.C. 1395a) is amended by 
striking "Any" and inserting "(a) BASIC FREEDOM OF 
CHOICE.—Any". 
(B) Section 1862(a) (42 U.S.C. 1395y(a)), as amended 
by sections 4319(b) and 4432, is amended by striking "or" 
at the end of paragraph (17), by striking the period at 
the end of paragraph (18) and inserting "; or", and by 
adding after paragraph (18) the following new paragraph: 
"(19) which are for items or services which are furnished 
pursuant to a private contract described in section 1802(b).". 
(b) REPORT.—Not later than October 1, 2001, the Secretary 42USCi395a 
of Health and Human Services shall submit a report to Congress note. 
on the effect on the program under this title of private contracts 
entered into under the amendment made by subsection (a). Such 
report shall include— 
(1) analyses regarding— 
(A) the fiscal impact of such contracts on total Federal 
expenditures under title XVIII of the Social Security Act 
and on out-of-pocket expenditures by medicare beneficiaries 
for health services under such title; and 
(B) the quality of the health services provided under 
such contracts; and 
(2) recommendations as to whether medicare beneficiaries 
should continue to be able to enter private contracts under 
section 1802(b) of such Act (as added by subsection (a)) and 
I l l STAT. 442 
PUBLIC LAW 105-33—AUG. 5, 1997 
if so, what legislative changes, if any should be made to improve 
such contracts. 
42 use 1395a 
(c) EFFECTIVE DATE.—The amendment made by subsection (a) 
i^ote 
shall apply with respect to contracts entered into on and after 
January 1, 1998. 
Subchapter B—Other Health Care Professionals 
SEC. 4511. INCREASED MEDICARE REIMBURSEMENT FOR NURSE 
PRACTITIONERS AND CLINICAL NURSE SPECIALISTS. 
(a) REMOVAL OF RESTRICTIONS ON SETTINGS.— 
(1) IN GENERAL.—Clause (ii) of section 1861(s)(2)(K) (42 
U.S.C. 1395x(s)(2)(K)) is amended to read as follows: 
"(ii) services which would be physicians' services if fur-
nished by a physician (as defined in subsection (r)(l)) and 
which are performed by a nurse practitioner or clinical nurse 
specialist (as defined in subsection (aa)(5)) working in collabora-
tion (as defined in subsection (aa)(6)) with a physician (as 
defined in subsection (r)(l)) which the nurse practitioner or 
clinical nurse specialist is legally authorized to perform by 
the State in which the services are performed, and such services 
and supplies fiirnished as an incident to such services as would 
be covered under subparagraph (A) if furnished incident to 
a physician's professional service, but only if no facility or 
other provider charges or is paid any amounts with respect 
to the furnishing of such services;". 
(2) CONFORMING AMENDMENTS.—(A) Section 1861(s)(2)(K) 
(42 U.S.C. 1395x(s)(2)(K)) is further amended— 
(i) in clause (i), by inserting "and such services and 
supplies furnished as incident to such services as would 
be covered under subparagraph (A) if furnished incident 
to a physician's professional service; and" after "are per-
formed,"; and 
(ii) by striking clauses (iii) and (iv). 
(B) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended 
by striking "clauses (i) or (iii) of subsection (s)(2)(K)" and insert-
ing "subsection (s)(2)(K)". 
(C) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended 
by striking "section 1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)" and 
inserting "section 1861(s)(2)(K)". 
(D) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(l)(H)) is 
amended 
by 
striking 
"section 
1861(s)(2)(K)(i) 
or 
1861(s)(2)(K)(iii)" and inserting "section 1861(s)(2)(K)". 
(E) Section 1888(e)(2)(A)(ii) (42 U.S.C. 1395yy(e)(2)(A)(ii)), 
as added by section 4432(a) (relating to prospective payment 
system for rehabilitation hospitals), is amended by striking 
"through (iii)" and inserting "and (ii)". 
(b) INCREASED PAYMENT.— 
(1) FEE SCHEDULE AMOUNT.—Subparagraph (O) of section 
1833(a)(1) (42 U.S.C. 13951(a)(1)) is amended to read as follows: 
"(O) 
with 
respect 
to 
services 
described 
in 
section 
1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical nurse 
specialist services), the amounts paid shall be equal to 80 
percent of (i) the lesser of the actual charge or 85 percent 
of the fee schedule amount provided under section 1848, or 
(ii) in the case of services as an assistant at surgery, the 
lesser of the actual charge or 85 percent of the amount that 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 443 
would otherwise be recognized if performed by a physician 
who is serving as an assistant at surgery; and". 
(2) CONFORMING AMENDMENTS.—Section 1833(r) (42 U.S.C. 
13951(r)) is amended— 
(A) 
in 
paragraph 
(1), by 
striking 
"section 
1861(s)(2)(K)(iii) (relating to nurse practitioner or clinical 
nurse specialist services provided in a rural area)" and 
inserting "section 1861(s)(2)(K)(ii) (relating to nurse practi-
tioner or clinical nurse specialist services)"; 
(B) by striking paragraph (2); 
(C) 
in 
paragraph 
(3), by 
striking 
"section 
1861(s)(2)(K)(iii)" and inserting "section 1861(s)(2)(K)(ii)"; 
and 
(D) by redesignating paragraph (3) as paragraph (2). 
(c) DIRECT PAYMENT FOR NURSE PRACTITIONERS AND CLINICAL 
NURSE 
SPECIALISTS.—Section 
1832(a)(2)(B)(iv) 
(42 
U.S.C. 
1395k(a)(2)(B)(iv)) is amended by striking "provided in a rural area 
(as defined in section 1886(d)(2)(D))" and inserting "but only if 
no facility or other provider charges or is paid any amounts with 
respect to the furnishing of such services". 
(d) DEFINITION OF CLINICAL NURSE SPECIALIST CLARIFIED.— 
Section 1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended— 
(1) by inserting "(A)" after "(5)"; 
(2) by striking "The term 'physician assistant'" and all 
that follows through "who performs" and inserting "The term 
'physician assistsint' and the term 'nurse practitioner' mean, 
for purposes of this title, a physician assistant or nurse practi-
tioner who performs"; and 
(3) by adding at the end the following new subparagraph: 
"(B) The term 'clinical nurse specialist' means, for purposes 
of this title, an individual who— 
"(i) is a registered nurse and is licensed to practice nursing 
in the State in which the Clinical nurse specialist services 
are performed; and 
"(ii) holds a master's degree in a defined clinical area 
of nursing from an accredited educational institution.". 
(e) EFFECTIVE DATE.—The amendments made by this section 42 USC 1395k 
shall apply with respect to services furnished and supplies provided ^°^-
on and after Jeinuary 1, 1998. 
SEC. 4512. INCREASED MEDICARE REIMBURSEMENT FOR PHYSICIAN 
ASSISTANTS. 
(a) 
REMOVAL 
OF 
RESTRICTION 
ON 
SETTINGS.—Section 
1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)), as amended by section 
4511, is amended— 
(1) by striking "(I) in a hospital" and all that follows 
through "shortage area,", and 
(2) by adding at the end the following: "but only if no 
facility or other provider charges or is paid any amounts with 
respect to the furnishing of such services,". 
(b) INCREASED PAYMENT.— 
(1) FEE SCHEDULE AMOUNT.—Section 1833(a)(l)(0) (42 
U.S.C. 13951(a)(l)(0)), as amended by section 4511, is further 
amended— 
(A) by striking "section 1861(s)(2)(K)(ii)" and inserting 
"1861(s)(2)(K)", and 
I l l STAT. 444 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 u s e 1395/ 
note. 
42 u s e 1395X 
note. 
42 u s e 1395x 
note. 
42 u s e 1395/ 
note. 
(B) by striking "nurse practitioner or clinical nurse 
specialist services" and inserting "services furnished by 
physician assistants, nurse practitioners, or clinic nurse 
specialists". 
(2) CONFORMING AMENDMENT.—Paragraph (12) of section 
1842(b) (42 U.S.C. 1395u(b)) is repealed. 
(c) REMOVAL OF RESTRICTION ON EMPLOYMENT RELATIONSHIP.— 
Section 1842(b)(6) (42 U.S.C. 1395u(b)(6)), as amended by section 
4205, is amended by adding at the end the following new sentence: 
"For purposes of subparagraph (C) of the first sentence of this 
paragraph, an employment relationship may include any independ-
ent contractor arrangement, and employer status shall be deter-
mined in accordance with the law of the State in which the services 
described in such clause are performed.". 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply with respect to services furnished and supplies provided 
on and after January 1, 1998. 
SEC. 4513. NO X-RAY REQUIRED FOR CHIROPRACTIC SERVICES. 
(a) IN GENERAL.—Section 1861(r)(5) (42 U.S.C. 1395x(r)(5)) is 
amended by striking "demonstrated by X-ray to exist". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
applies to services furnished on or after January 1, 2000. 
(c) UTILIZATION GUIDELINES.—The Secretary of Health and 
Human Services shall develop and implement utilization guidelines 
relating to the coverage of chiropractic services under part B of 
title XVIII of the Social Security Act in cases in which a subluxation 
has not been demonstrated by X-ray to exist. 
CHAPTER 
2—PAYMENT 
FOR 
HOSPITAL 
OUTPATIENT 
DEPARTMENT 
SERVICES 
SEC. 4521. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS (FDO) 
FOR CERTAIN OUTPATIENT HOSPITAL SERVICES. 
(a) ELIMINATION OF FDO FOR AMBULATORY SURGICAL CENTER 
PROCEDURES.—Section 
1833(i)(3)(B)(i)(II) 
(42 
U.S.C. 
13951(i)(3)(B)(i)(II)) is amended— 
(1) by striking "of 80 percent"; and 
(2) by striking the period at the end and inserting the 
following: ", less the amount a provider may charge as described 
in clause (ii) of section 1866(a)(2)(A).". 
(b) ELIMINATION OF FDO FOR RADIOLOGY SERVICES AND DIAG-
NOSTIC 
PROCEDURES.—Section 
1833(n)(l)(B)(i) 
(42 
U.S.C. 
13951(n)(l)(B)(i)) is amended— 
(1) by striking "of 80 percent", and 
(2) by inserting before the period at the end the following: 
", less the amount a provider may charge as described in 
clause (ii) of section 1866(a)(2)(A)". 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to services furnished during portions of cost reporting 
periods occurring on or after October 1, 1997. 
SEC. 4522. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF 
HOSPITAL OUTPATIENT SERVICES. 
(a) REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS.— 
Section 1861(v)(l)(S)(ii)(I) (42 U.S.C. 1395x(v)(l)(S)(ii)(I)) is amend-
ed by striking "through 1998" and inserting "through 1999 and 
during fiscal year 2000 before January 1, 2000". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 445 
(b) 
REDUCTION IN PAYMENTS FOR OTHER COSTS.—Section 
1861(v)(l)(S)(ii)(II) (42 U.S.O. 1395x(v)(l)(S)(ii)(II)) is amended by 
striking "through 1998" and inserting "through 1999 and during 
fiscal year 2000 before January 1, 2000". 
SEC. 4523. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUT-
PATIENT DEPARTMENT SERVICES. 
(a) IN GENERAL.—Section 1833 (42 U.S.C. 13951) is amended 
by adding at the end the following: 
"(t) PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT 
DEPARTMENT SERVICES.— 
"(1) AMOUNT OF PAYMENT.— 
"(A) IN GENERAL.—^With respect to covered OPD serv-
ices (as defined in subparagraph (B)) furnished during a 
year beginning with 1999, the amount of payment under 
this part shall be determined under a prospective payment 
system established by the Secretary in accordance with 
this subsection. 
"(B) DEFINITION OF COVERED OPD SERVICES.—For pur-
poses of this subsection, the term 'covered OPD services'— 
"(i) means hospital outpatient services designated 
by the Secretary; 
"(ii) subject to clause (iii), includes inpatient hos-
pital services designated by the Secretary that are 
covered under this part and furnished to a hospital 
inpatient who (I) is entitled to benefits under part 
A but has exhausted benefits for inpatient hospital 
services during a spell of illness, or (II) is not so 
entitled; but 
"(iii) does not include any therapy 
services 
described in subsection (a)(8) or ambulance services, 
for which pa3nnent is made under a fee schedule 
described in section 1834(k) or section 1834(1). 
"(2) SYSTEM REQUIREMENTS.—Under the payment system— 
"(A) the Secretary shall develop a classification system 
for covered OPD services; 
"(B) the Secretary may establish groups of covered 
OPD services, within the classification system described 
in subparagraph (A), so that services classified within each 
group are comparable clinically and with respect to the 
use of resources; 
"(C) the Secretary shall, using data on claims from 
1996 and using data from the most recent available cost 
reports, establish relative payment weights for covered 
OPD services (and any groups of such services described 
in subparagraph (B)) based on median hospital costs and 
shall determine projections of the frequency of utilization 
of each such service (or group of services) in 1999; 
"(D) the Secretary shall determine a wage adjustment 
factor to adjust the portion of payment and coinsurance 
attributable to labor-related costs for relative differences 
in labor and labor-related costs across geographic regions 
in a budget neutral manner; 
"(E) the Secretary shall establish other adjustments, 
in a budget neutral manner, as determined to be necessary 
to ensure equitable payments, such as outlier adjustments 
or adjustments for certain classes of hospitals; and 
I l l STAT. 446 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(F) the Secretary shall develop a method for control-
ling unnecessary increases in the volume of covered OPD 
services. 
"(3) CALCULATION OF BASE AMOUNTS.— 
"(A) AGGREGATE AMOUNTS THAT WOULD BE PAYABLE 
IF DEDUCTIBLES WERE DISREGARDED.—The Secretary shall 
estimate the sum o
f
— 
"(i) the total amounts that would be payable from 
the Trust Fund under this part for covered OPD serv-
ices in 1999, determined without regard to this sub-
section, as though the deductible under section 1833(b) 
did not apply, and 
"(ii) the total amounts of copayments estimated 
to be paid under this subsection by beneficiaries to 
hospitals for covered OPD services in 1999, as though 
the deductible under section 1833(b) did not apply. 
"(B) UNADJUSTED COPAYMENT AMOUNT.— 
"(i) IN GENERAL.—For purposes of this subsection, 
subject to clause (ii), the 'unadjusted 
copayment 
amount' applicable to a covered OPD service (or group 
of such services) is 20 percent of the national median 
of the charges for the service (or services within the 
group) furnished during 1996, updated to 1999 using 
the Secretary's estimate of charge growth during the 
period. 
"(ii) ADJUSTED TO BE 20 PERCENT WHEN FULLY 
PHASED IN.—If the pre-deductible payment percentage 
for a covered OPD service (or group of such services) 
furnished in a year would be equal to or exceed 80 
percent, then the unadjusted copayment amount shall 
be 20 percent of amount determined under subpara-
graph (D). 
"(iii) RULES FOR NEW SERVICES.—The Secretary 
shall establish rules for establishment of an unadjusted 
copayment amount for a covered OPD service not fur-
nished during 1996, based upon its classification within 
a group of such services. 
"(C) CALCULATION OF CONVERSION FACTORS.— 
"(i) F O R 1999.— 
"(I) IN GENERAL.—The Secretary shall estab-
lish a 1999 conversion factor for determining the 
medicare OPD fee schedule amounts for each cov-
ered OPD service (or group of such services) fur-
nished in 1999. Such conversion factor shall be 
established on the basis of the weights and fre-
quencies described in paragraph (2)(C) and in such 
a manner that the sum for all services and groups 
of the products (described in subclause (II) for 
each such service or group) equals the total pro-
jected amount described in subparagraph (A). 
"(II) 
PRODUCT 
DESCRIBED.—The 
Secretary 
shall determine for each service or group the prod-
uct of the medicare OPD fee schedule amounts 
(taking into account 
appropriate 
adjustments 
described in paragraphs (2)(D) and (2)(E)) and the 
estimated frequencies for such service or group. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 447 
"(ii) SUBSEQUENT YEARS.—Subject to paragraph 
(8)(B), the Secretary shall establish a conversion factor 
for covered OPD services furnished in subsequent years 
in an amount equal to the conversion factor established 
under this subparagraph and applicable to such serv-
ices furnished in the previous year increased by the 
OPD fee schedule increase factor specified under clause 
(iii) for the year involved. 
"(iii) OPD FEE SCHEDULE INCREASE FACTOR.—For 
purposes of this subparagraph, the 'OPD fee schedule 
increase factor' for services furnished in a year is equal 
to the market basket percentage increase applicable 
under section 1886(b)(3)(B)(iii) to hospital discharges 
occurring during the fiscal year ending in such year, 
reduced by 1 percentage point for such factor for serv-
ices furnished in each of 2000, 2001, and 2002. In 
applying the previous sentence for years beginning 
with 2000, the Secretary may substitute for the market 
basket percentage increase an annual percentage 
increase that is computed and applied with respect 
to covered OPD services furnished in a year in the 
same manner as the market basket percentage increase 
is determined and applied to inpatient hospital services 
for discharges occurring in a fiscal year. 
"(D) 
CALCULATION OF MEDICARE OPD FEE SCHEDULE 
AMOUNTS.—The Secretary shall compute a medicare OPD 
fee schedule amount for each covered OPD service (or group 
^ 
of such services) furnished in a year, in an amount equal 
to the product o
f
— 
"(i) the conversion factor computed under subpara-
graph (C) for the year, and 
"(ii) the relative payment weight (determined 
under paragraph (2)(C)) for the service or group. 
"(E) PRE-DEDUCTIBLE PAYMENT PERCENTAGE.—The pre-
deductible payment percentage for a covered OPD service 
(or group of such services) furnished in a year is equal 
to the ratio o
f
— 
"(i) the medicare OPD fee schedule amount estab-
lished under subparagraph (D) for the year, minus 
the unadjusted copa5nnent amount determined under 
subparagraph (B) for the service or group, to 
"(ii) the medicare OPD fee schedule amount deter-
mined under subparagraph (D) for the year for such 
service or group. 
"(4) MEDICARE PAYMENT AMOUNT.—The amount of payment 
made from the Trust Fund under this part for a covered OPD 
service (and such services classified within a group) furnished 
in a year is determined as follows: 
"(A) FEE SCHEDULE ADJUSTMENTS.—The medicare OPD 
fee schedule amount (computed under paragraph (3)(D)) 
for the service or group and year is adjusted for relative 
differences in the cost of labor and other factors determined 
by the Secretary, as computed under paragraphs (2)(D) 
and (2)(E). 
"(B) 
SUBTRACT APPLICABLE DEDUCTIBLE.—Reduce 
the 
adjusted amount determined under subparagraph (A) by 
I l l STAT. 448 
PUBLIC LAW 105-33—AUG. 5, 1997 
the amount of the deductible under section 1833(b), to 
the extent applicable. 
"(C) APPLY PAYMENT PROPORTION TO REMAINDER.—The 
amount of payment is the amount so determined under 
subparagraph (B) multiplied by the pre-deductible payment 
percentage (as determined under paragraph (3)(E)) for the 
service or group and year involved. 
"(5) COPAYMENT AMOUNT.— 
"(A) IN GENERAL.—Except as provided in subparagraph 
(B), the copayment amount under this subsection is the 
amount by which the amount described in paragraph (4)(B) 
exceeds the amount of payment determined under para-
graph (4)(C). 
"(B) 
ELECTION 
TO 
OFFER 
REDUCED 
COPAYMENT 
Procedures. 
AMOUNT.—The Secretary shall establish a procedure under 
which a hospital, before the beginning of a year (beginning 
with 1999), may elect to reduce the copayment amount 
otherwise established under subparagraph (A) for some 
or all covered OPD services to an amount that is not 
less than 20 percent of the medicare OPD fee schedule 
amount (computed under paragraph (3)(D)) for the service 
involved. Under such procedures, such reduced copayment 
amount may not be further reduced or increased during 
the year involved and the hospital may disseminate 
information on the reduction of copayment amount effected 
under this subparagraph. 
"(C) No IMPACT ON DEDUCTIBLES.—Nothing in this 
paragraph shall be construed as affecting a hospital's 
authority to waive the charging of a deductible under sec-
tion 1833(b). 
"(6) PERIODIC REVIEW AND ADJUSTMENTS COMPONENTS OF 
PROSPECTIVE PAYMENT SYSTEM.— 
"(A) PERIODIC REVIEW.—The Secretary may periodically 
review and revise the groups, the relative payment weights, 
and the wage and other adjustments described in para-
graph (2) to take into account changes in medical practice, 
changes in technology, the addition of new services, new 
cost data, and other relevant information and factors. 
"(B) BUDGET NEUTRALITY ADJUSTMENT.—If the Sec-
retary makes adjustments under subparagraph (A), then 
the adjustments for a year may not cause the estimated 
amount of expenditures under this part for the year to 
increase or decrease from the estimated amount of expendi-
tures under this part that would have been made if the 
adjustments had not been made. 
"(C) UPDATE FACTOR.—If the Secretary determines 
under methodologies described in paragraph (2)(F) that 
the volume of services paid for under this subsection 
increased beyond amounts established through those meth-
odologies, the Secretary may appropriately adjust the 
update to the conversion factor otherwise applicable in 
a subsequent year. 
"(7) SPECL\L RULE FOR AMBULANCE SERVICES.—The Sec-
retary shall pay for hospital outpatient services that are ambu-
lance services on the basis described in the matter in subsection 
(a)(1) preceding subparagraph (A), or, if applicable, the fee 
schedule established under section 1834(1). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 449 
"(8) SPECIAL RULES FOR CERTAIN HOSPITALS.—In the case 
of hospitals described in section 1886(d)(l)(B)(v)— 
"(A) the system under this subsection shall not apply 
to covered OPD services furnished before January 1, 2000; 
and 
"(B) the Secretary may establish a separate conversion 
factor for such services in a manner that specifically takes 
into account the unique costs incurred by such hospitals 
by virtue of their patient population and service intensity. 
"(9) LIMITATION ON REVIEW.—There shall be no administra-
tive or judicial review under section 1869, 1878, or otherwise 
of— 
"(A) the development of the classification system under 
paragraph (2), including the establishment of groups and 
relative payment weights for covered OPD services, of wage 
adjustment 
factors, 
other 
adjustments, 
and methods 
described in paragraph (2)(F); 
"(B) the calculation of base amounts under paragraph 
(3); 
"(C) periodic adjustments made under paragraph (6); 
and 
"(D) the establishment of a separate conversion factor 
under paragraph (8)(B).". 
(b) 
COINSURANCE.—Section 
1866(a)(2)(A)(ii) 
(42 
U.S.C. 
1395cc(a)(2)(A)(ii)) is amended by adding at the end the following: 
"In the case of items and services for which payment is made 
under part B under the prospective payment system established 
under section 1833(t), clause (ii) of the first sentence shall be 
applied by substituting for 20 percent of the reasonable charge, 
the 
applicable copa5nnent amount established 
under 
section 
1833(t)(5).". 
(c) TREATMENT OF REDUCTION IN COPAYMENT AMOUNT.—Section 
1128A(i)(6) (42 U.S.C. 1320a-7a(i)(6)) is amended— 
(1) by striking "or" at the end of subparagraph (B), 
(2) by striking the period at the end of subparagraph (C) 
and inserting "; or", and 
(3) by adding at the end the following new subparagraph: 
"(D) a reduction in the copayment amount for covered 
OPD services under section 1833(t)(5)(B).". 
(d) CONFORMING AMENDMENTS.— 
(1) APPROVED ASC PROCEDURES PERFORMED IN HOSPITAL 
OUTPATIENT DEPARTMENTS.— 
(A)(i) Section 1833(i)(3)(A) (42 U.S.C. 13951(i)(3)(A)) is 
amended— 
(I) by inserting "before January 1, 1999," after 
"furnished", and 
(II) by striking "in a cost reporting period". 
(ii) The amendment made by clause (i) shall apply Applicability. 
to services furnished on or after January 1, 1999. 
42 USC 1395/ 
(B) Section 1833(a)(4) (42 U.S.C. 13951(a)(4)) is amend- "''*^-
ed by inserting "or subsection (t)" before the semicolon. 
(2) RADIOLOGY AND OTHER DIAGNOSTIC PROCEDURES.— 
(A) Section 1833(n)(l)(A) (42 U.S.C. 13951(n)(l)(A)) is 
amended by inserting "and before January 1, 1999," after 
"October 1, 1988," and after "October 1, 1989,". 
I l l STAT. 450 
PUBLIC LAW 105-33—AUG. 5, 1997 
(B) Section 1833(a)(2)(E) (42 U.S.C. 13951(a)(2)(E)) is 
amended by inserting "or, for services or procedures per-
formed on or after January 1, 1999, subsection (t)" before 
the semicolon. 
(3) 
OTHER 
HOSPITAL 
OUTPATIENT 
SERVICES.—Section 
1833(a)(2)(B) (42 U.S.C. 13951(a)(2)(B)) is amended— 
(A) in clause (i), by inserting "furnished before January 
1, 1999," after "(i)", 
(B) in clause (ii), by inserting "before January 1, 1999," 
after "furnished", 
(C) by redesignating clause (iii) as clause (iv), and 
(D) by inserting after clause (ii), the following new 
clause: 
"(iii) if such services are furnished on or after 
January 1, 1999, the amount determined under sub-
section (t), or". 
CHAPTER 3—AMBULANCE SERVICES 
SEC. 4531. PAYMENTS FOR AMBULANCE SERVICES. 
(a) INTERIM REDUCTIONS.— 
(1) PAYMENTS DETERMINED ON REASONABLE COST BASIS.— 
Section 1861(v)(l) (42 U.S.C. 1395x(v)(l)), as amended by sec-
tion 4451, is amended by adding at the end the following 
new subparagraph: 
"(U) In determining the reasonable cost of ambulance 
services (as described in subsection (s)(7)) provided during 
fiscal year 1998, during fiscal year 1999, and during so 
much of fiscal year 2000 as precedes January 1, 2000, 
the Secretary shall not recognize the costs per trip in 
excess of costs recognized as reasonable for ambulance 
services provided on a per trip basis during the previous 
fiscal 
year (after 
application of this 
subparagraph), 
increased by the percentage increase in the consumer price 
index for all urban consumers (U.S. city average) as esti-
mated by the Secretary for the 12-month period ending 
with the midpoint of the fiscal year involved reduced by 
1.0 percentage point. For ambulance services provided after 
June 30, 1998, the Secretary may provide that claims for 
such services must include a code (or codes) under a uni-
form coding system specified by the Secretary that identi-
fies the services famished.". 
(2) 
PAYMENTS 
DETERMINED 
ON 
REASONABLE 
CHARGE 
BASIS.—Section 1842(b) (42 U.S.C. 1395u(b)) is amended by 
adding at the end the following new paragraph: 
"(19) For purposes of section 1833(a)(1), the reasonable charge 
for ambulance services (as described in section 1861(s)(7)) provided 
during calendar year 1998 and calendar year 1999 may not exceed 
the reasonable charge for such services provided during the previous 
calendar year (after application of this paragraph), increased by 
the percentage increase in the consumer price index for all urban 
consumers (U.S. city average) as estimated by the Secretary for 
the 12-month period ending with the midpoint of the year involved 
reduced by 1.0 percentage point.". 
(b) ESTABLISHMENT OF PROSPECTIVE FEE SCHEDULE.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 451 
(1) PAYMENT IN ACCORDANCE WITH FEE SCHEDULE.—Section 
1833(a)(1) (42 U.S.C. 13951(a)(1)), as amended by section 
4315(b), is amended— 
(A) by striking "and (Q)" and inserting "(Q)"; and 
(B) by striking the semicolon at the end and inserting 
the following: ", and (R) with respect to ambulance service, 
the amounts paid shall be 80 percent of the lesser of 
the actual charge for the services or the amount determined 
by a fee schedule established by the Secretary under section 
1834(1);". 
(2) ESTABLISHMENT OF SCHEDULE.—Section 1834 (42 U.S.C. 
1395m), as amended by section 4541, is amended by adding 
at the end the following new subsection: 
"(1) ESTABLISHMENT OF FEE SCHEDULE FOR AMBULANCE SERV-
ICES.— 
"(1) IN GENERAL.—^The Secretary shall establish a fee sched-
ule for payment for ambulance services whether provided 
directly by a supplier or provider or under arrangement with 
a provider under this part through a negotiated rulemaking 
process described in title 5, United States Code, and in accord-
ance with the requirements of this subsection. 
"(2) CONSIDERATIONS.—In establishing such fee schedule, 
the Secretary shall— 
"(A) establish mechanisms to control increases in 
expenditures for ambulance services under this part; 
"(B) establish definitions for ambulance services which 
link payments to the tjrpe of services provided; 
"(C) consider appropriate regional and operational dif-
ferences; 
"(D) consider adjustments to pa3nnent rates to account 
for inflation and other relevant factors; and 
"(E) phase in the application of the payment rates 
under the fee schedule in an efficient and fair manner. 
"(3) SAVINGS.—In establishing such fee schedule, the Sec-
retary shall— 
"(A) ensure that the aggregate amount of payments 
made for ambulance services under this part during 2000 
does not exceed the aggregate amount of payments which 
would have been made for such services under this part 
during such year if the amendments made by section 
4531(a) of the Balanced Budget Act of 1997 continued 
in effect, except that in making such determination the 
Secretary shall assume an update in such payments for 
2002 equal to percentage increase in the consumer price 
index for all urban consumers (U.S. city average) for the 
12-month period ending with June of the previous year 
reduced in the case of 2001 and 2002 by 1.0 percentage 
points; and 
"(B) set the pajnnent amounts provided under the fee 
schedule for services furnished in 2001 and each subse-
quent year at amounts equal to the payment amounts 
under the fee schedule for services furnished during the 
previous year, increased by the percentage increase in the 
consumer price index for all urban consumers (U.S. city 
average) for the 12-month period ending with June of the 
previous year reduced in the case of 2001 and 2002 by 
1.0 percentage points. 
I l l STAT. 452 
PUBLIC LAW 105-33—AUG. 5, 1997 
Applicability. 
42 use 1395/ 
note. 
42 use 1395x 
note. 
"(4) CONSULTATION.—In establishing the fee schedule for 
ambulance services under this subsection, the Secretary shall 
consult with various national 
organizations 
representing 
individuals and entities who furnish and regulate ambulance 
services and share with such organizations relevant data in 
establishing such schedule. 
"(5) LIMITATION ON REVIEW.—^There shall be no administra-
tive or judicial review under section 1869 or otherwise of the 
amounts established under the fee schedule for ambulance serv-
ices under this subsection, including matters described in para-
graph (2). 
"(6) RESTRAINT ON BILLING.—^The provisions of subpara-
graphs (A) and (B) of section 1842(b)(18) shall apply to ambu-
lance services for which pajmtient is made under this subsection 
in the same manner as they apply to services provided by 
a practitioner described in section 1842(b)(18)(C). 
"(7) CODING SYSTEM.—^The Secretary may require the claim 
for any services for which the amount of payment is determined 
under this subsection to include a code (or codes) under a 
uniform coding system specified by the Secretary that identifies 
the services furnished.". 
(3) EFFECTIVE DATE.—^The amendments made by this sub-
section shall apply to services furnished on or after January 
1, 2000. 
(c) AUTHORIZING PAYMENT FOR PARAMEDIC INTERCEPT SERVICE 
PROVIDERS IN RURAL COMMUNITIES.—In promulgating regulations 
to carry out section 1861(s)(7) of the Social Security Act (42 U.S.C. 
1395x(s)(7)) with respect to the coverage of ambulance service, 
the Secretary of Health and Human Services may include coverage 
of advanced life support services (in this subsection referred to 
as "ALS intercept services") provided by a paramedic intercept 
service provider in a rural area if the following conditions are 
met: 
(1) The ALS intercept services are provided under a con-
tract with one or more volunteer ambulance services and are 
medically necessary based on the health condition of the 
individual being transported. 
(2) The volunteer ambulance service involved— 
(A) is certified as qualified to provide ambulance serv-
ice for purposes of such section, 
(B) provides only basic life support services at the 
time of the intercept, and 
(C) is prohibited by State law from billing for any 
services. 
(3) The entity supplying the ALS intercept services— 
(A) is certified as qualified to provide such services 
under the medicare program under title XVIII of the SocisJ 
Security Act, and 
(B) bills all recipients who receive ALS intercept serv-
ices from the entity, regardless of whether or not such 
recipients are medicare beneficiaries. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 453 
SEC. 4532. DEMONSTRATION OF COVERAGE OF AMBULANCE SERVICES 
42 USC 1395m 
UNDER MEDICARE THROUGH CONTRACTS WITH UNITS 
note. 
OF LOCAL GOVERNMENT. 
(a) DEMONSTRATION PROJECT CONTRACTS WITH LOCAL GOVERN-
MENTS.—^The Secretary of HegJth and Human Services shall estab-
lish up to 3 demonstration projects under which, at the request 
of a unit of local government, the Secretary enters into a contract 
with the unit of local government under which— 
(1) the unit of local government furnishes (or arranges 
for the furnishing of) ambulance services for which payment 
may be made under part B of title XVIII of the Social Security 
Act for individuals residing in the unit of local government 
who are enrolled under such part, except that the unit of 
local government may not enter into the contract unless the 
contract covers at least 80 percent of the individuals residing 
in the unit of local government who are enrolled under such 
part but not in a Medicare+Choice plan; 
(2) any individual or entity furnishing ambulance services 
under the contract meets the requirements otherwise applicable 
to individuals and entities furnishing such services under such 
part; and 
(3) for each month during which the contract is in effect, 
the Secretary makes a capitated payment to the unit of local 
government in accordance with subsection (b). 
The projects may extend over a period of not to exceed 3 years 
each. 
(b) AMOUNT OF PAYMENT.— 
(1) IN GENERAL.—^The amount of the monthly payment 
made for months occurring during a calendar year to a unit 
of local government under a demonstration project contract 
under subsection (a) shall be equal to the product of— 
(A) the Secretary's estimate of the number of individ-
ugQs covered under the contract for the month; and 
(B) Vi2 of the capitated payment rate for the year 
established under paragraph (2). 
(2) CAPITATED PAYMENT RATE DEFINED.—In this subsection, 
the "capitated pajrment rate" applicable to a contract under 
this subsection for a calendar year is equal to 95 percent 
of— 
(A) for the first calendar year for which the contract 
is in effect, the average annual per capita payment made 
under part B of title XVIII of the Social Security Act 
with respect to ambulance services furnished to such 
individuals during the 3 most recent calendar years for 
which data on the amount of such payment is available; 
and 
(B) for a subsequent year, the amount provided under 
this paragraph for the previous year increased by the 
percentage increase in the consumer price index for all 
urban consumers (U.S. city average) for the 12-month 
period ending with June of the previous year. 
(c) OTHER TERMS OF CONTRACT.—The Secretary and the unit 
of local government may include in a contract under this section 
such other terms as the parties consider appropriate, including— 
(1) covering individuals residing in additional units of local 
government (under arrangements entered into between such 
units and the unit of local government involved); 
I l l STAT. 454 
PUBLIC LAW 105-33—AUG. 5, 1997 
(2) permitting the unit of local government to transport 
individuals to non-hospital providers if such providers are able 
to furnish quality services at a lower cost than hospital provid-
ers; or 
(3) implementing such other innovations as the unit of 
local government may propose to improve the quality of ambu-
lance services and control the costs of such services. 
(d) CONTRACT PAYMENTS IN LIEU OF OTHER BENEFITS.—Pay-
ments under a contract to a unit of local government under this 
section shall be instead of the amounts which (in the absence 
of the contract) would otherwise be payable under part B of title 
XVIII of the Social Security Act for the services covered under 
the contract which are furnished to individuals who reside in the 
unit of local government, 
(e) REPORT ON EFFECTS OF CAPITATED CONTRACTS.— 
(1) STUDY.—^The Secretary shall evaluate the demonstra-
tion projects conducted under this section. Such evaluation 
shall include an analysis of the quality and cost-effectiveness 
of ambulance services furnished under the projects. 
(2) REPORT.—^Not later than January 1, 2000, the Secretary 
shall submit a report to Congress on the study conducted under 
paragraph (1), and shall include in the report such rec-
ommendations as the Secretary considers appropriate, including 
recommendations regarding modifications to the methodology 
used to determine the amount of payments made under such 
contracts and extending or expanding such projects. 
CHAPTER 4—PROSPECTIVE PAYMENT FOR OUTPATIENT 
REHABILITATION SERVICES 
SEC. 4541. PROSPECTIVE PAYMENT FOR OUTPATIENT REHABILITA-
TION SERVICES. 
(a) PAYMENT BASED ON FEE SCHEDULE.— 
(1) SPECIAL PAYMENT RULES.—Section 1833(a) (42 U.S.C. 
13951(a)) is amended— 
(A) in paragraph (2) in the matter before subparagraph 
(A), by inserting "(C)," before "(D)"; 
(B) in paragraph (3), by striking "subparagraphs (D) 
and (E) of section 1832(a)(2)" and inserting "section 
1832(a)(2)(D)"; 
(C) in paragraph (6), by striking "and" at the end; 
(D) in paragraph (7), by striking the period at the 
end and inserting a semicolon; and 
(E) by adding at the end the following new paragraphs: 
"(8) in the case of— 
"(A) outpatient 
physical therapy 
services 
(which 
includes outpatient speech-language pathology services) 
and outpatient occupational therapy services furnished— 
"(i) by a rehabilitation agency, public health 
agency, clinic, comprehensive outpatient rehabilitation 
facility, or skilled nursing facility, 
"(ii) by a home health agency to an individual 
who is not homebound, or 
"(iii) by another entity under an arrangement with 
an entity described in clause (i) or (ii); and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 455 
"(B) outpatient 
physical therapy 
services 
(which 
includes outpatient speech-language pathology services) 
and outpatient occupational therapy services furnished— 
"(i) by a hospital to an outpatient or to a hospital 
inpatient who is entitled to benefits under part A but 
has exhausted benefits for inpatient hospital services 
during a spell of illness or is not so entitled to benefits 
under part A, or 
"(ii) by another entity under an arrangement with 
a hospital described in clause (i), 
the amounts described in section 1834(k); and 
"(9) in the case of services described in section 1832(a)(2)(E) 
that are not described in paragraph (8), the amounts described 
in section 1834(k).". 
(2) PAYMENT RATES.—Section 1834 (42 U.S.C. 1395m) is 
amended by adding at the end the following new subsection: 
"(k) PAYMENT FOR OUTPATIENT THERAPY SERVICES AND COM-
PREHENSIVE OUTPATIENT REHABILITATION SERVICES.— 
"(1) IN GENERAL.—^With respect to services described in 
section 1833(a)(8) or 1833(a)(9) for which payment is deter-
mined under this subsection, the pa3mient basis shall be— 
"(A) for services furnished during 1998, the amount 
determined under paragraph (2); or 
"(B) for services furnished during a subsequent year, 
80 percent of the lesser of— 
"(i) the actual charge for the services, or 
"(ii) the applicable fee schedule amount (as defined 
in paragraph (3)) for the services. 
"(2) PAYMENT IN I998 BASED UPON ADJUSTED REASONABLE 
COSTS.—^The amount under this paragraph for services is the 
lesser of— 
"(A) the charges imposed for the services, or 
"(B) the adjusted reasonable costs (as defined in para-
graph (4)) for the services, 
less 20 percent of the amount of the charges imposed for such 
services. 
"(3) APPLICABLE FEE SCHEDULE AMOUNT.—In this sub-
section, the term 'applicable fee schedule amount' means, with 
respect to services furnished in a year, the amount determined 
under the fee schedule established under section 1848 for such 
services furnished during the year or, if there is no such fee 
schedule established for such services, the amount determined 
under the fee schedule established for such comparable services 
as the Secretary specifies. 
"(4) ADJUSTED REASONABLE COSTS.—In paragraph (2), the 
term 'adjusted reasonable costs' means, with respect to any 
services, reasonable costs determined for such services, reduced 
by 10 percent. The 10-percent reduction shall not apply to 
services described in section 1833(a)(8)(B) (relating to services 
provided by hospitals). 
"(5) UNIFORM CODING.—^For claims for services submitted 
on or after April 1, 1998, for which the amount of payment 
is determined under this subsection, the claim shall include 
a code (or codes) under a uniform coding system specified 
by the Secretary that identifies the services furnished. 
"(6) RESTRAINT ON BILLING.—The provisions of subpara- Applicability, 
graphs (A) and (B) of section 1842(b)(18) shall apply to therapy 
I l l STAT. 456 
PUBLIC LAW 105-33—AUG. 5, 1997 
services for which payment is made under this subsection in 
the same manner as they apply to services provided by a 
practitioner described in section 1842(b)(18)(C).". 
(3) 
CONFORMING 
CHANGE 
IN 
BILLING.—Section 
1866(a)(2)(A)(ii) (42 U.S.C. 1395cc(a)(2)(A)(ii)) is amended by 
adding at the end the following: "In the case of services 
described in section 1833(a)(8) or section 1833(a)(9) for which 
payment is made under part B under section 1834(k), clause 
(ii) of the first sentence shall be applied by substituting for 
20 percent of the reasonable charge for such services 20 percent 
of the lesser of the actual charge or the applicable fee schedule 
amount (as defined in such section) for such services.". 
(b) APPLICATION OF STANDARDS TO OUTPATIENT OCCUPATIONAL 
AND PHYSICAL THERAPY SERVICES PROVIDED AS AN INCIDENT TO 
A PHYSICIAN'S PROFESSIONAL SERVICES.—Section 1862(a), as amend-
ed by sections 4319(b), 4432(b), and 4507(a)(2)(B), (42 U.S.C. 
1395y(a)) is amended— 
(1) by striking "or" at the end of paragraph (18); 
(2) by striking the period at the end of paragraph (19) 
and inserting "; or"; and 
(3) by inserting eifter paragraph (19) the following: 
"(20) in the case of outpatient occupational therapy services 
or outpatient physical therapy services furnished as an incident 
to a physician's professional services (as described in section 
1861(s)(2)(A)), that do not meet the standards and conditions 
(other than any licensing requirement specified by the Sec-
retary) under the second sentence of section 186 l(p) (or under 
such sentence through the operation of section 1861(g)) as 
such standards and conditions would apply to such therapy 
services if furnished by a therapist.". 
(c) APPLYING FINANCIAL LIMITATION TO ALL REHABILITATION 
SERVICES.—Section 1833(g) (42 U.S.C. 13951(g)) is amended— 
(1) in the first sentence, by striking "services described 
in the second sentence of section 186 l(p)" and inserting "phys-
ical therapy services of the type described in section 186 l(p), 
but not described in section 1833(a)(8)(B), and physical therapy 
services of such type which are furnished by a physician or 
as incident to physicians' services", and 
(2) in the second sentence, by striking "outpatient occupa-
tional therapy services which are described in the second sen-
tence of section 186 l(p) through the operation of section 
1861(g)" and inserting "occupational therapy services (of the 
type that are described in section 186 l(p) (but not described 
in section 1833(a)(8)(B)) through the operation of section 1861(g) 
and of such type which are furnished by a physician or as 
incident to physicians' services)". 
(d) INDEXING LIMITATION.— 
(1) IN GENERAL.—Section 1833(g) (42 U.S.C. 13951(g)), as 
amended by subsection (c), is further amended— 
(A) by striking "$900" each place it appears and insert-
ing "the amount specified in paragraph (2) for the year", 
(B) by inserting "(1)" after ^(g)", 
(C) by designating the last sentence as a paragraph 
(3), and 
(D) by inserting before paragraph (3), as so designated, 
the following: 
"(2) The amount specified in this paragraph— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 457 
"(A) for 1999, 2000, and 2001, is $1,500, and 
"(B) for a subsequent year is the amount specified in this 
paragraph for the preceding year increased by the percentage 
increase in the MEI (as defined in section 1842(i)(3)) for such 
subsequent year; 
except that if an increase under subparagraph (B) for a year is 
not a multiple of $10, it shall be rounded to the nearest multiple 
of $10.". 
(2) REPORT.—By not later than January 1, 2001, the Sec- 42USC 1395/ 
retary of Health and Human Services shall submit to Congress note. 
a report that includes recommendations on the establishment 
of a revised coverage policy of outpatient physical therapy serv-
ices and outpatient occupational therapy services under the 
Social Security Act based on classification of individuals by 
diagnostic category and prior use of services, in both inpatient 
and outpatient settings, in place of the uniform dollar limita-
tions specified in section 1833(g) of such Act, as amended 
by paragraph (1). The recommendations shall include how such 
a system of durational limits by diagnostic category might 
be implemented in a budget-neutral manner. 
(e) EFFECTIVE DATES.— 
42 use 1395/ 
(1) The amendments made by subsections (a)(1), (a)(2), note. 
and (b) apply to services furnished on or after January 1, 
1998, including portions of cost reporting periods occurring 
on or after such date, except that section 1834(k) of the Social 
Security Act (as added by subsection (a)(2)) shall not apply 
to services described in section 1833(a)(8)(B) of such Act (as 
added by subsection (a)(1)) that are furnished during 1998. 
(2) The amendments made by subsections (a)(3) and (c) 
apply to services furnished on or after January 1, 1999. 
(3) The amendments made by subsection (d)(1) apply to 
expenses incurred on or after January 1,1999. 
CHAPTER 5—OTHER PAYMENT PROVISIONS 
SEC. 4551. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT. 
(a) REDUCTION IN PAYMENT AMOUNTS FOR ITEMS OF DURABLE 
MEDICAL EQUIPMENT.— 
(1) 
FREEZE IN UPDATE FOR COVERED ITEMS.—Section 
1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended— 
(A) in subparagraph (A), by striking "and" at the end; 
(B) in subparagraph (B)— 
(i) by striking "a subsequent year" and inserting 
"1993, 1994, 1995, 1996, and 1997", and 
(ii) by striking the period at the end and inserting 
a semicolon; and 
(C) by adding at the end the following new subpara-
graphs: 
"(C) for each of the years 1998 through 2002, 0 percent-
age points; and 
"(D) for a subsequent year, the percentage increase 
in the consumer price index for all urban consumers (U.S. 
urban average) for the 12-month period ending with June 
of the previous year.". 
(2) UPDATE FOR ORTHOTICS AND PROSTHETICS.—Section 
1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended— 
39-194 O - 97 - 16 : QL 3 Part 1 
I l l STAT. 458 
PUBLIC LAW 105-33—AUG. 5, 1997 
(A) in clause (iii), by striking ", and" at the end and 
inserting a semicolon; 
(B) in clause (iv), by striking "a subsequent year" and 
inserting "1996 and 1997"; and 
(C) by adding at the end the following new clauses: 
"(v) for each of the years 1998 through 2002, 1 
percent, and 
"(vi) for a subsequent year, the percentage increase 
in the consumer price index for all urban consumers 
(United States city average) for the 12-month period 
ending with June of the previous year;". 
42 use 1395m 
(b) PAYMENT FREEZE FOR PARENTERAL AND ENTERAL NUTRI-
note. 
ENTS, SUPPLIES, AND EQUIPMENT.—In determining the amount of 
payment under part B of title XVIII of the Social Security Act 
with respect to parenteral and enteral nutrients, supplies, and 
equipment during each of the years 1998 through 2002, the charges 
determined to be reasonable with respect to such nutrients, sup-
plies, and equipment may not exceed the charges determined to 
be reasonable with respect to such nutrients, supplies, and equip-
ment during 1995. 
(c) UPGRADED DURABLE MEDICAL EQUIPMENT.— 
(1) IN GENERAL.—Section 1834(a) (42 U.S.C. 1395m(a)), 
as amended by section 4312(a), is amended by inserting after 
paragraph (16) the following new paragraph: 
"(17) CERTAIN UPGRADED ITEMS.— 
"(A) INDIVIDUAL'S RIGHT TO CHOOSE UPGRADED ITEM.— 
Notwithstanding any other provision of this title, the Sec-
retary may issue regulations under which an individual 
may purchase or rent from a supplier an item of upgraded 
durable medical equipment for which payment would be 
made under this subsection if the item were a standard 
item. 
"(B) PAYMENTS TO SUPPLIER.—In the case of the pur-
chase or rental of an upgraded item under subparagraph 
( A ) -
"(i) the supplier shall receive payment under this 
subsection with respect to such item as if such item 
were a standard item; and 
"(ii) the individual purchasing or renting the item 
shall pay the supplier an amount equal to the dif-
ference between the supplier's charge and the amount 
under clause (i). 
In no event may the supplier's charge for an upgraded 
item exceed the applicable fee schedule amount (if any) 
for such item. 
"(C) CONSUMER PROTECTION SAFEGUARDS.—Any regula-
tions under subparagraph (A) shall provide for consumer 
protection standards with respect to the furnishing of 
upgraded equipment under subparagraph (A). Such regula-
tions shall provide for— 
"(i) determination of fair market prices with 
respect to an upgraded item; 
"(ii) full disclosure of the availability and price 
of standard items and proof of receipt of such disclosure 
information by the beneficiary before the furnishing 
of the upgraded item; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 459 
"(iii) conditions of participation for suppliers in 
the billing arrangement; 
"(iv) sanctions of suppliers who are determined 
to engage in coercive or abusive practices, including 
exclusion; and 
"(v) such other safeguards as the Secretary deter-
mines are necessary.". 
(2) EFFECTIVE DATE.—^The amendment made by paragraph 
(1) shall apply to purchases or rentals after the effective date 
of any regulations issued pursuant to such amendment. 
SEC. 4552. OXYGEN AND OXYGEN EQUIPMENT. 
(a) 
IN 
GENERAL.—Section 
1834(a)(9)(B) 
(42 
U.S.C. 
1395m(a)(9)(B)) is amended— 
(1) in clause (iii), by striking "and" at the end; 
(2) in clause (iv)— 
(A) by striking "each subsequent year" and inserting 
"1995, 1996, and 1997", and 
(B) by striking the period at the end and inserting 
a semicolon; and 
(3) by adding at the end the following new clauses: 
"(v) for 1998, 75 percent of the amount determined 
under this subparagraph for 1997; and 
"(vi) for 1999 and each subsequent year, 70 percent 
of the amount determined under this subparagraph 
for 1997.". 
(b) 
ESTABLISHMENT 
OF CLASSES 
FOR PAYMENT.—Section 
1848(a)(9) (42 U.S.C. 1395m(a)(9)) is amended by adding at the 
end the following new subparagraph: 
"(D) AUTHORITY TO CREATE CLASSES.— 
"(i) IN GENERAL.—Subject to clause (ii), the Sec-
retary may establish separate classes for any item 
of oxygen and oxygen equipment and separate national 
limited monthly payment rates for each of such classes, 
"(ii) BUDGET NEUTRALITY.—^The Secretary may 
take actions under clause (i) only to the extent such 
actions do not result in expenditures for any year 
to be more or less than the expenditures which would 
have been made if such actions had not been taken.". 
(c) STANDARDS.—^The Secretary shall as soon as practicable 
establish service standards for persons seeking pajrment under part 
B of title XVIII of the Social Security Act for the providing of 
oxygen and oxygen equipment to beneficiaries within their homes. 
(d) ACCESS TO HOME OXYGEN EQUIPMENT.— 
(1) STUDY.—The Comptroller General of the United States 
shall study issues relating to access to home oxygen equipment 
and shall, within 18 months after the date of the enactment 
of this Act, report to the Committees on Commerce and Ways 
and Me£uis of the House of Representatives and the Committee 
on Finance of the Senate the results of the study, including 
recommendations (if any) for legislation. 
(2) PEER REVIEW EVALUATION.—^The Secretary of Health 
and Human Services shall arrange for peer review organiza-
tions established under section 1154 of the Social Security 
Act to evaluate access to, and quality of, home oxygen equip-
ment. 
(e) EFFECTIVE DATE.— 
42 use 1395 
note. 
42 use 1395m 
note. 
42 use 1395m 
note. 
Reports. 
42 use 1395m 
note. 
I l l STAT. 460 
PUBLIC LAW 105-33—AUG. 5, 1997 
(1) OXYGEN.—^The amendments made by subsection (a) 
shall apply to items furnished on and after January 1, 1998. 
(2) OTHER PROVISIONS.—The amendments made by this 
section other than subsection (a) shall take effect on the date 
of the enactment of this Act. 
SEC. 4553. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR CLINI-
CAL DIAGNOSTIC LABORATORY TESTS; STUDY ON LAB-
ORATORY TESTS. 
(a) CHANGE IN UPDATE.—Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 
13951(h)(2)(A)(ii)(IV)) is amended by inserting "and 1998 through 
2002" after "1995". 
(b) 
LOWERING 
CAP 
ON 
PAYMENT 
AMOUNTS.—Section 
1833(h)(4)(B) (42 U.S.C. 13951(h)(4)(B)) is amended— 
(1) in clause (vi), by striking "and" at the end; 
(2) in clause (vii)— 
(A) by inserting "and before January 1, 1998," after 
"1995,", and 
(B) by striking the period at the end and inserting 
", and"; and 
(3) by adding at the end the following new clause: 
"(viii) after December 31, 1997, is equal to 74 percent 
of such median.". 
42 use 1395/ 
(c) STUDY AND REPORT ON CLINICAL LABORATORY TESTS.— 
note. 
(1) IN GENERAL.—The Secretary shall request the Institute 
of Medicine of the National Academy of Sciences to conduct 
a study of payments under part B of title XVIII of the Social 
Security Act for clinical laboratory tests. The study shall include 
a review of the adequacy of the current methodology and rec-
ommendations regarding alternative payment systems. The 
study shall also analyze and discuss the relationship between 
such payment systems and access to high quality laboratory 
tests for medicare beneficiaries, including availability and 
access to new testing methodologies. 
(2) REPORT TO CONGRESS.—^The Secretary shall, not later 
than 2 years after the date of enactment of this section, report 
to the Committees on Ways and Means and Commerce of 
the House of Representatives and the Committee on Finance 
of the Senate the results of the study described in paragraph 
(1), including any recommendations for legislation. 
42USC1395U 
SEC. 4554. IMPROVEMENTS IN ADMINISTRATION OF LABORATORY 
note. 
TESTS BENEFIT. 
(a) SELECTION OF REGIONAL CARRIERS.— 
(1) IN GENERAL.—The Secretary of Health and Human 
Services (in this section referred to as the "Secretary") shall— 
(A) divide the United States into no more than 5 
regions, and 
(B) designate a single carrier for each such region, 
for the purpose of pa3rtnent of claims under part B of title 
XVIII of the Social Security Act with respect to clinical diag-
nostic laboratory tests furnished on or after such date (not 
later than July 1, 1999) as the Secretary specifies. 
(2) DESIGNATION.—In designating such carriers, the Sec-
retary shall consider, among other criteria— 
(A) a carrier's timeliness, quality, and experience in 
claims processing, and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 461 
(B) a carrier's capacity to conduct electronic data inter-
change with laboratories and data matches with other car-
riers. 
(3) SINGLE DATA RESOURCE.—The Secretary shall select 
one of the designated carriers to serve as a central statistical 
resource for all claims information relating to such clinical 
diagnostic laboratory tests handled by all the designated car-
riers under such part. 
(4) ALLOCATION OF CLAIMS.—^The allocation of claims for 
clinical diagnostic laboratory tests to particular designated car-
riers shall be based on whether a carrier serves the geographic 
area where the laboratory specimen was collected or other 
method specified by the Secretary. 
(5) SECRETARL\L EXCLUSION.—Paragraph (1) shall not apply 
with respect to clinical diagnostic laboratory tests furnished 
by physician office laboratories if the Secretary determines 
that such offices would be unduly burdened by the application 
of billing responsibilities with respect to more than one carrier. 
Cb) ADOPTION OF NATIONAL POLICIES FOR CLINICAL LABORATORY 
TESTS BENEFIT.— 
(1) IN GENERAL.—Not later than January 1, 1999, the Sec-
retary shall first adopt, consistent with paragraph (2), national 
coverage and administrative policies for clinical diagnostic lab-
oratory tests under part B of title XVIII of the Social Security 
Act, using a negotiated rulemaking process under subchapter 
III of chapter 5 of title 5, United States Code. 
(2) CONSIDERATIONS IN DESIGN OF NATIONAL POLICIES.— 
The policies under paragraph (1) shall be designed to promote 
program integrity and national uniformity 
and 
simplify 
administrative requirements with respect to clinical diagnostic 
laboratory tests payable under such part in connection with 
the following: 
(A) Beneficiary information required to be submitted 
with each claim or order for laboratory tests. 
(B) The medical conditions for which a laboratory test 
is reasonable and necessary (within the meaning of section 
1862(a)(1)(A) of the Social Security Act). 
(C) The appropriate use of procedure codes in billing 
for a laboratory test, including the unbundling of laboratory 
services. 
(D) The medical documentation that is required by 
a medicare contractor at the time a claim is submitted 
for a laboratory test in accordance with section 1833(e) 
of the Social Security Act. 
(E) Recordkeeping requirements in addition to any 
information required to be submitted with a claim, includ-
ing physicians' obligations regarding such requirements. 
(F) Procedures for filing claims and for providing remit-
tances by electronic media. 
(G) Limitation on frequency of coverage for the same 
tests performed on the same individual. 
(3) CHANGES IN LABORATORY POLICIES PENDING ADOPTION 
OF NATIONAL POLICY.—During the period that begins on the 
date of the enactment of this Act and ends on the date the 
Secretary first implements national policies pursuant to regula-
tions promulgated under this subsection, a carrier under such 
I l l STAT. 462 
PUBLIC LAW 105-33—AUG. 5, 1997 
part may implement changes relating to requirements for the 
submission of a claim for clinical diagnostic laboratory tests. 
(4) USE OF INTERIM POLICIES.—After the date the Secretary 
first implements such national policies, the Secretary shall 
permit any carrier to develop and implement interim policies 
of the type described in paragraph (1), in accordance with 
guidelines established by the Secretary, in cases in which a 
uniform national policy has not been established under this 
subsection and there is a demonstrated need for a policy to 
respond to aberrant utilization or provision of unnecessary 
tests. Except as the Secretary specifically permits, no policy 
shall be implemented under this paragraph for a period of 
longer than 2 years. 
(5) INTERIM NATIONAL POLICIES.—After the date the Sec-
retary first designates regional carriers under subsection (a), 
the Secretary shall establish a process under which designated 
carriers can collectively develop and implement interim national 
policies of the type described in paragraph (1). No such policy 
shall be implemented under this paragraph for a period of 
longer than 2 years. 
(6) BIENNIAL REVIEW PROCESS.—^Not less often than once 
every 2 years, the Secretary shall solicit and review comments 
regarding changes in the national policies established under 
this subsection. As part of such biennial review process, the 
Secretary shall specifically review and consider whether to 
incorporate or supersede interim policies developed under para-
graph (4) or (5). Based upon such review, the Secretary may 
provide for appropriate changes in the national policies pre-
viously adopted under this subsection. 
(7) REQUIREMENT AND NOTICE.—The Secretary shall ensure 
that any policies adopted under paragraph (3), (4), or (5) shall 
apply to all laboratory claims payable under part B of title 
XVIII of the Social Security Act, and shall provide for advance 
notice to interested parties and a 45-day period in which such 
parties may submit comments on the proposed change. 
(c) INCLUSION OF LABORATORY REPRESENTATIVE ON CARRIER 
ADVISORY 
COMMITTEES.—^The Secretary shall direct that 
any 
advisory committee established by a carrier to advise such carrier 
with respect to coverage and administrative policies under part 
B of title XVIII of the Social Security Act shall include an individual 
to represent the independent clinical laboratories and such other 
laboratories as the Secretary deems appropriate. The Secretary 
shall consider recommendations from national and local organiza-
tions that represent independent clinical laboratories in such selec-
tion. 
SEC. 4555. UPDATES FOR AMBULATORY SURGICAL SERVICES. 
Section 1833(i)(2)(C) (42 U.S.C. 13951(i)(2)(C)) is amended by 
inserting at the end the following new sentence: "In each of the 
fiscal years 1998 through 2002, the increase under this subpara-
graph shall be reduced (but not below zero) by 2.0 percentage 
points.". 
SEC. 4556. REIMBURSEMENT FOR DRUGS AND BIOLOGICALS. 
(a) IN GENERAL.—Section 1842 (42 U.S.C. 1395u) is amended 
by inserting after subsection (n) the following new subsection: 
"(o)(l) If a physician's, supplier's, or any other person's bill 
or request for payment for services includes a charge for a drug 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 463 
or biological for which payment may be made under this part 
and the drug or biological is not paid on a cost or prospective 
payment basis as otherwise provided in this part, the amount 
payable for the drug or biological is equal to 95 percent of the 
average wholesale price. 
"(2) If payment for a drug or biological is made to a licensed 
pharmacy approved to dispense drugs or biologicals under this 
part, the Secretary may pay a dispensing fee (less the applicable 
deductible and coinsurance amounts) to the pharmacy.". 
(b) CONFORMING AMENDMENT.—Section 1833(a)(1) (42 U.S.C. 
13951(a)(1)), as amended by sections 4315(b) and 4531(b)(1), is 
amended— 
(1) by striking "and (R)" and inserting "(R)"; and 
(2) by striking the semicolon at the end and inserting 
the following: ", and (S) with respect to drugs and biologicals 
not paid on a cost or prospective payment basis as otherwise 
provided in this part (other than items and services described 
in subparagraph (B)), the amounts paid shall be 80 percent 
of the lesser of the actual charge or the pajmtient amount 
established in section 1842(o);". 
(c) STUDY AND REPORT.—^The Secretary of Health and Human 
Services shall study the effect on the average wholesede price of 
drugs and biologicals of the amendments made by subsection (a) 
and shall report to the Committees on Ways and Means and Com-
merce of the House of Representatives and the Committee on 
Finance of the Senate the result of such study not later than 
July 1, 1999. 
(d) EFFECTIVE DATE.—^The amendments made by subsections 
(a) and (b) shall apply to drugs and biologicals furnished on or 
after January 1, 1998. 
SEC. 
4557. COVERAGE OF ORAL ANTI-NAUSEA DRUGS UNDER 
CHEMOTHERAPEUTIC REGIMEN. 
(a) IN GENERAL.—Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), 
as amended by sections 4104 and 4105, is amended— 
(1) by striking "and" at the end of subparagraph (R); and 
(2) by inserting after subparagraph (S) the following new 
subparagraph: 
"(T) an oral drug (which is approved by the Federal Food 
and Drug Administration) prescribed for use as an acute anti-
emetic used as part of an anticancer chemotherapeutic regimen 
if the drug is administered by a physician (or as prescribed 
by a physician)— 
"(i) for use immediately before, at, or within 48 hours 
after the time of the administration of the anticancer 
chemotherapeutic agent; and 
"(ii) as a full replacement for the anti-emetic therapy 
which would otherwise be administered intravenously.". 
(b) EFFECTIVE DATE.—^The amendments made by subsection 
(a) shall apply to items and services furnished on or after January 
1, 1998. 
SEC. 4558. RENAL DIALYSIS-RELATED SERVICES. 
(a) AUDITING OF COST REPORTS.—^Beginning with cost reports 
for 1996, the Secretary shall audit cost reports of each renal dialysis 
provider at least once every 3 years. 
(b) IMPLEMENTATION OF QUALITY STANDARDS.—^The Secretary 
of Health and Human Services shall develop, by not later than 
42 use 1395u 
note. 
42 use 1395/ 
note. 
42 use 1395X 
note. 
42 use 1395rr 
note. 
I l l STAT. 464 
PUBLIC LAW 105-33—AUG. 5, 1997 
January 1, 1999, and implement, by not later than January 1, 
2000, a method to measure and report quality of renal dialysis 
services provided under the medicare program under title XVIII 
of the Social Security Act. 
SEC. 4559. TEMPORARY COVERAGE RESTORATION FOR PORTABLE 
ELECTROCARDIOGRAM TRANSPORTATION. 
Effective date. 
(a) IN GENERAL.—^Effective only for electrocardiogram tests fur-
nished during 1998, the Secretary of Health and Humsin Services 
shall restore separate payment, under part B of title XVIII of 
the Social Security Act, for the transportation of electrocardiogram 
equipment (HCPCS code R0076) based upon payment methods in 
effect for such service as of December 31, 1996. 
(b) DETERMINATION.—By not later than July 1, 1998, the Sec-
retary of Health and Human Services shall make a recommendation 
to the Committees on Commerce and Ways and Means of the 
House of Representatives and the Committee on Finance of the 
Senate as to whether coverage of portable electrocardiogram 
transportation should be provided under part B of title XVIII of 
the Social Security Act. In making such recommendation, the Sec-
retary shall take into account the study of coverage of portable 
electrocardiogram transportation conducted by the Comptroller Gen-
eral of the United States and other relevant information, including 
information submitted by interested parties. 
CHAPTER 
6—PART 
B 
PREMIUM 
AND 
RELATED 
PROVISIONS 
Subchapter A—Determination of Part B Premium Amount 
SEC. 4571. PART B PREMIUM. 
(a) IN GENERAL.—Section 1839(a)(3) (42 U.S.C. 1395Ka)(3)) is 
amended by striking the first 3 sentences and inserting the follow-
Regulations. 
ing: "The Secretary, during September of each year, shall determine 
and promulgate a monthly premium rate for the succeeding cal-
endar year that is equal to 50 percent of the monthly actuarial 
rate for enrollees age 65 and over, determined according to para-
graph (1), for that succeeding calendar year.". 
(b) CONFORMING AND TECHNICAL AMENDMENTS.— 
(1) SECTION 1839.—Section 1839 (42 U.S.C. 1395r) is 
amended— 
(A) in subsection (a)(2), by striking "(b) and (e)" and 
inserting "(b), (c), and (f)"; 
(B) in the last sentence of subsection (a)(3)— 
(i) by inserting "rate" after "premium", and 
(ii) by striking "and the derivation of the dollar 
amounts specified in this paragraph"; 
(C) in the first sentence of subsection (b), by striking 
"or (e)"; 
(D) by striking subsection (e); and 
(E) by redesignating subsection (g) as subsection (e) 
and inserting that subsection after subsection (d). 
(2) SECTION 1844.—Subparagraphs (A)(i) and (B)(i) of section 
1844(a)(1) (42 U.S.C. 1395w(a)(l)) are each amended by striking 
"or 1839(e), as the case may be". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 465 
Subchapter B—Other Provisions Related to Part B Premium 
SEC. 4581. PROTECTIONS UNDER THE MEDICARE PROGRAM FOR DIS-
ABLED WORKERS WHO LOSE BENEFITS UNDER A GROUP 
HEALTH PLAN. 
(a) No PREMIUM PENALTY FOR LATE ENROLLMENT.—^The first 
sentence of section 1839(b) (42 U.S.C. 1395r(b)) is amended by 
inserting "and not pursuant to a special enrollment period under 
section 1837(1X4)" after "section 1837)". 
(b) SPECIAL MEDICARE ENROLLMENT PERIOD.— 
(1) IN GENERAL.—Section 1837(i) (42 U.S.C. 1395p(i)) is 
amended by adding at the end the following new paragraph: 
"(4)(A) In the case of an individual who is entitled to benefits 
under part A pursuant to section 226(b) and— 
"(i) who at the time the individual first satisfies paragraph 
(1) of section 1836— 
"(I) is enrolled in a group health plan described in 
section 1862(b)(l)(A)(v) by reason of the individual's current 
or former employment or by reason of the current or former 
employment status of a member of the individual's family, 
and 
"(II) has elected not to enroll (or to be deemed enrolled) 
under this section during the individual's initial enrollment 
period; and 
"(ii) whose continuous enrollment under such group health 
plan is involuntarily terminated at a time when the enrollment 
under the plan is not by reason of the individual's current 
emplojrment or by reason of the current employment of a mem-
ber of the individual's family, 
there shall be a special enrollment period described in subparagraph 
(B). 
"(B) The special enrollment period referred to in subparagraph 
(A) is the 6-month period beginning on the first day of the month 
which includes the date of the enrollment termination described 
in subparagraph (A)(ii).". 
(2) COVERAGE PERIOD.—Section 1838(e) (42 U.S.C. 1395q(e)) 
is amended— 
(A) by inserting "or 1837(i)(4)(B)" after "1837(i)(3r the 
first place it appears, and 
(B) by inserting "or specified in section 1837(i)(4)(A)(i)" 
after "1837(i)(3)" the second place it appears. 
(c) EFFECTIVE DATE.—^The amendments made by this section 42 use I395p 
shall apply to involuntary terminations of coverage under a group note, 
health plan occurring on or after the date of the enactment of 
this Act. 
SEC. 4582. GOVERNMENTAL ENTITIES ELIGIBLE TO ELECT TO PAY 
PART B PREMIUMS FOR ELIGIBLE INDIVIDUALS. 
ed-
Section 1839(e)(1) (as amended by section 4571(b)) is amend-
(1) by inserting "(or any appropriate State or local govern-
mental entity specified by the Secretary)" after "State" the 
first place it appears, and 
(2) by inserting "(or such entity)" after "State" the second 
and third place it appears. 
Ill STAT. 466 
PUBLIC LAW 105-33—AUG. 5, 1997 
Subtitle G—^Provisions Relating to Parts A 
andB 
42 use 1395x 
note. 
CHAPTER 1—HOME HEALTH SERVICES AND BENEFITS 
Subchapter A—^Payments For Home Health Services 
SEC. 4601. RECAPTURING SAVINGS RESULTING FROM TEMPORARY 
FREEZE ON PAYMENT INCREASES FOR HOME HEALTH 
SERVICES. 
(a) BASING UPDATES TO PER VISIT COST LIMITS ON LIMITS 
FOR 
FISCAL 
YEAR 
1993.—Section 
1861(v)(l)(L) 
(42 
U.S.C. 
1395x(v)(l)(L)) is amended by adding at the end the following: 
"(iv) In establishing limits under this subparagraph for cost 
reporting periods beginning after September 30, 1997, the Secretary 
shall not take into account any changes in the home health market 
basket, as determined by the Secretary, with respect to cost report-
ing periods which began on or after July 1, 1994, and before 
July 1, 1996.". 
(b) No EXCEPTIONS PERMITTED BASED ON AMENDMENT.—^The 
Secretary of Health and Human Services shall not consider the 
amendment made by subsection (a) in making any exemptions 
and exceptions pursuant to section 1861(v)(l)(L)(ii) of the Social 
Security Act (42 U.S.C. 1395x(v)(l)(L)(ii)). 
SEC. 4602. INTERIM PAYMENTS FOR HOME HEALTH SERVICES. 
(a) REDUCTIONS IN COST LIMITS.—Section 1861(v)(l)(L)(i) (42 
U.S.C. 1395x(v)(l)(L)(i)) is amended— 
(1) by moving the indentation of subclauses (I) through 
(III) 2-ems to the left; 
(2) in subclause (I), by inserting "of the mean of the labor-
related and nonlabor per visit costs for freestanding home 
health agencies" before the comma at the end; 
(3) in subclause (II), by striking ", or" and inserting "of 
such mean,"; 
(4) in subclause (III)— 
(A) by inserting "and before October 1, 1997," after 
"July 1, 1987,", and 
(B) by striking the comma at the end and inserting 
"of such mean, or"; and 
(5) by striking the matter following subclause (III) and 
inserting the following: 
"(IV) October 1, 1997, 105 percent of the median of the 
labor-related and nonlabor per visit costs for freestanding home 
health agencies.". 
(b) DELAY IN UPDATES.—Section 1861(v)(l)(L)(iii) (42 U.S.C. 
1395x(v)(l)(L)(iii)) is amended by inserting ", or on or after July 
1, 1997, and before October 1, 1997" after "July 1, 1996". 
(c) ADDITIONS TO COST LIMITS.—Section 1861(v)(l)(L) (42 U.S.C. 
1395x(v)(l)(L)) (as amended by section 4601(a)) is amended by 
adding at the end the following new clauses: 
"(v) For services furnished by home health agencies for cost 
reporting periods beginning on or after October 1, 1997, the Sec-
retary shall provide for an interim system of limits. Payment shall 
not exceed the costs determined under the preceding provisions 
of this subparagraph or, if lower, the product of— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 467 
**(I) an agency-specific per beneficiary annual limitation 
calculated based 75 percent on 98 percent of the reasonable 
costs (including nonroutine medical supplies) for the agency's 
12-month cost reporting period ending during fiscal year 1994, 
and based 25 percent on 98 percent of the standardized regional 
average of such costs for the agency's census division, as applied 
to such agency, for cost reporting periods ending during fiscal 
year 1994, such costs updated by the home health market 
basket index; and 
"(11) the agency's unduplicated census count of patients 
(entitled to benefits under this title) for the cost reporting 
period subject to the limitation. 
'(vi) For services furnished by home health agencies for cost Applicability 
reporting periods beginning on or after October 1, 1997, the follow-
ing rules apply: 
"(I) For new providers and those providers without a 12-
month cost reporting period ending in fiscal year 1994, the 
{)er beneficiary limitation shall be equal to the median of these 
imits (or the Secretary's best estimates thereof) applied to 
other home health agencies as determined by the Secretary. 
A home health agency that has altered its corporate structure 
or name shall not be considered a new provider for this purpose. 
"(II) For beneficiaries who use services furnished by more 
than one home health agency, the per beneficiary limitations 
shall be prorated among the agencies. 
"(vii)(I) Not later than January 1, 1998, the Secretary shall 
establish per visit limits applicable for fiscal year 1998, and not 
later than April 1, 1998, the Secretary shall establish per bene-
ficiary limits under clause (v)(I) for fiscal year 1998. 
"(II) Not later than August 1 of each year (beginning in 1998) 
the Secretary shall establish the limits applicable under this 
subparagraph for services furnished during the fiscal year beginning 
October 1 of the year.". 
(d) DEVELOPME>rr OF CASE MIX SYSTEM.—The Secretary of 
Health and Human Services shall expand research on a prospective 
payment system for home health agencies under the medicare pro-
gram that ties prospective payments to a unit of service, including 
an intensive effort to develop a reliable case mix adjuster that 
explains a significant amount of the variances in costs. 
(e) SUBMISSION OF DATA FOR CASE MIX SYSTEM.—^Effective 
for cost reporting periods beginning on or after October 1, 1997, 
the Secretary of Health and Human Services may require all home 
health agencies to submit additional information that the Secretary 
considers necessary for the development of a reliable case mix 
system. 
SEC. 4603. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES. 
(a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et seq.) (as 
amended by section 4801) is amended by adding at the end the 
following: 
42 use 1395f!r 
note. 
Effective date. 
42 use 1395fff 
note. 
PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES 
42 use 1395fff. 
"SEC. 1895. (a) IN GENERAL.—Notwithstanding section 186l(v), 
the Secretary shall provide, for cost reporting periods beginning 
on or after October 1, 1999, for payments for home health services 
in accordance with a prospective payment system established by 
the Secretary under this section. 
I l l STAT. 468 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(b) SYSTEM OF PROSPECTIVE PAYMENT FOR HOME HEALTH 
SERVICES.— 
"(1) IN GENERAL.—^The Secretary shall establish under this 
subsection a prospective payment system for payment for all 
costs of home health services. Under the system under this 
subsection all services covered and paid on a reasonable cost 
basis under the medicare home health benefit as of the date 
of the enactment of the this section, including medical supplies, 
shall be paid for on the basis of a prospective pajnnent amount 
determined under this subsection and applicable to the services 
involved. In implementing the system, the Secretary may pro-
vide for a transition (of not longer than 4 years) during which 
a portion of such payment is based on agency-specific costs, 
but only if such transition does not result in aggregate pay-
ments under this title that exceed the aggregate payments 
that would be made if such a transition did not occur. 
"(2) UNIT OF PAYMENT.—In defining a prospective payment 
amount under the system under this subsection, the Secretary 
shall consider an appropriate unit of service and the number, 
type, and duration of visits provided within that unit, potential 
changes in the mix of services provided within that unit and 
their cost, and a general system design that provides for contin-
ued access to quality services. 
"(3) PAYMENT BASIS.— 
"(A) INITL\L BASIS.— 
"(i) IN GENERAL.—Under such system the Secretary 
shall provide for computation of a standard prospective 
pa3anent amount (or amounts). Such amount (or 
amounts) shall initially be based on the most current 
audited cost report data available to the Secretary 
and shall be computed in a manner so that the total 
amounts payable under the system for fiscal year 2000 
shall be equal to the total amount that would have 
been made if the system had not been in effect but 
if the reduction in limits described in clause (ii) had 
been in effect. Such amount shall be standardized in 
a manner that eliminates the effect of variations in 
relative case mix and wage levels among different home 
health agencies in a budget neutral manner consistent 
with the case mix and wage level adjustments provided 
under paragraph (4)(A). Under the system, the Sec-
retary may recognize regional differences or differences 
based upon whether or not the services or agency are 
in an urbanized area. 
"(ii) REDUCTION.—^The reduction described in this 
clause is a reduction by 15 percent in the cost limits 
and per beneficiary 
limits described in section 
1861(v)(l)(L), as those limits are in effect on September 
30, 1999. 
"(B) ANNUAL UPDATE.— 
"(i) IN GENERAL.—^The standard prospective pay-
ment amount (or amounts) shall be adjusted for each 
fiscal year (beginning with fiscal year 2001) in a 
prospective manner specified by the Secretary by the 
home health market 
basket 
percentage 
increase 
applicable to the fiscal year involved. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 469 
"(ii) HOME HEALTH MARKET BASKET PERCENTAGE 
INCREASE.—^For purposes of this subsection, the term 
'home health market basket percentage increase' 
means, with respect to a fiscal year, a percentage (esti-
mated by the Secretary before the beginning of the 
fiscal year) determined and applied with respect to 
the mix of goods and services included in home health 
services in the same manner as the market basket 
percentage increase under section 1886(b)(3)(B)(iii) is 
determined and applied to the mix of goods and serv-
ices comprising inpatient hospital services for the fiscal 
year. 
"(C) ADJUSTMENT FOR OUTLIERS.—^The Secretary shall 
reduce the standard prospective payment amount (or 
amounts) under this paragraph applicable to home health 
services furnished during a period by such proportion as 
will result in an aggregate reduction in payments for the 
period equal to the aggregate increase in payments result-
ing from the application of paragraph (5) (relating to 
outliers). 
"(4) PAYMENT COMPUTATION.— 
"(A) IN GENERAL.—^The payment amount for a unit 
of home health services shall be the applicable standard 
prospective payment amount adjusted as follows: 
"(i) CASE MIX ADJUSTMENT.—^The amount shall be 
adjusted by an appropriate case mix adjustment factor 
(established under subparagraph (B)). 
"(ii) AREA WAGE ADJUSTMENT.—^The portion of such 
amount that the Secretary estimates to be attributable 
to wages and wage-related costs shall be adjusted for 
geographic differences in such costs by an area wage 
adjustment factor (established under subparagraph 
(C)) for the area in which the services are furnished 
or such other area as the Secretary may specify. 
"(B) ESTABLISHMENT OF CASE MIX ADJUSTMENT FAC-
TORS.—^The Secretary shall establish appropriate case mix 
adjustment factors for home health services in a manner 
that explains a significant amount of the variation in cost 
among different units of services. 
"(C) ESTABLISHMENT OF AREA WAGE ADJUSTMENT FAC-
TORS.—^The Secretary shall establish area wage adjustment 
factors that reflect the relative level of wages and wage-
related costs applicable to the furnishing of home health 
services in a geographic area compared to the national 
average applicable level. Such factors may be the factors 
used by the Secretary for purposes of section 1886(d)(3)(E). 
"(5) OUTLIERS.—^The Secretary may provide for an addition 
or adjustment to the payment amount otherwise made in the 
case of outliers because of unusual variations in the type or 
amount of medically necessary care. The total amount of the 
additional payments or payment adjustments made under this 
paragraph with respect to a fiscal year may not exceed 5 
percent of the total payments projected or estimated to be 
made based on the prospective payment system under this 
subsection in that year. 
"(6) PRORATION OF PROSPECTIVE PAYMENT AMOUNTS.—If a 
beneficiary elects to transfer to, or receive services from, 
I l l STAT. 470 
PUBLIC LAW 105-33—AUG. 5, 1997 
another home health agency within the period covered by the 
prospective payment amount, the payment shall be prorated 
between the home health agencies involved. 
"(c) REQUIREMENTS FOR PAYMENT INFORMATION.—With respect 
to home health services furnished on or after October 1, 1998, 
no claim for such a service may be paid under this title unless— 
"(1) the claim has the unique identifier (provided under 
section 1842(r)) for the physician who prescribed the services 
or made the certification described in section 1814(a)(2) or 
1835(a)(2)(A); and 
"(2) in the case of a service visit described in paragraph 
(1), (2), (3), or (4) of section 186l(m), the claim contains a 
code (or codes) specified by the Secretary that identifies the 
length of time of the service visit, as measured in 15 minute 
increments. 
"(d) LIMITATION ON REVIEW.—^There shall be no administrative 
or judicial review under section 1869, 1878, or otherwise of— 
"(1) the establishment of a transition period under sub-
section (b)(1); 
"(2) the definition and application of pa3anent units under 
subsection (b)(2); 
"(3) the computation of initial standard prospective pay-
ment amounts under subsection (b)(3)(A) (including the reduc-
tion described in clause (ii) of such subsection); 
"(4) the establishment of the adjustment for outliers under 
subsection (b)(3)(C); 
"(5) the establishment of case mix and area wage adjust-
ments under subsection (b)(4); and 
"(6) the establishment of any adjustments for outliers under 
subsection (b)(5).". 
(b) ELIMINATION OF PERIODIC INTERIM PAYMENTS FOR HOME 
HEALTH AGENCIES.—Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is 
amended— 
(1) by inserting "and" at the end of subparagraph (C), 
(2) by striking subparagraph (D), and 
(3) by redesignating subparagraph (E) as subparagraph 
(D). 
(c) CONFORMING AMENDMENTS.— 
(1) PAYMENTS UNDER PART A.—Section 1814(b) (42 U.S.C. 
1395f(b)) is amended in the matter preceding paragraph (1) 
by striking "and 1886" and inserting "1886, and 1895". 
(2) TREATMENT OF ITEMS AND SERVICES PAID UNDER PART 
B.— 
(A) PAYMENTS UNDER PART B.—Section 1833(a)(2) (42 
U.S.C. 13951(a)(2)) is amended— 
(i) by amending subparagraph (A) to read as fol-
lows: 
"(A) with respect to home health services (other than 
a covered osteoporosis drug) (as defined 
in 
section 
1861(kk)), the amount determined under the prospective 
pa3anent system under section 1895;"; 
(ii) by striking "and" at the end of subparagraph 
(E); 
(iii) by adding "and" at the end of subparagraph 
(F); and 
(iv) by adding at the end the following new 
subparagraph: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 471 
"(G) with respect to items and services described in 
section 1861(s)(10)(A), the lesser of— 
"(i) the reasonable cost of such services, as deter-
mined under section 186 l(v), or 
"(ii) the customary charges with respect to such 
services, 
or, if such services are furnished by a public provider 
of services, or by another provider which demonstrates 
to the satisfaction of the Secretary that a significant portion 
of its patients are low-income (and requests that pajnnent 
be made under this provision), free of charge or at nominal 
charges to the public, the amount determined in accordance 
with section 1814(b)(2);". 
(B) REQUIRING PAYME^^^ FOR ALL ITEMS AND SERVICES 
TO BE MADE TO AGENCY.— 
(i) IN GENERAL.—^The first sentence of section 
1842(b)(6) (42 U.S.C. 1395u(b)(6)) (as amended by sec-
tion 4432(b)(2)) is amended— 
(I) by striking "and (E)" and inserting "(E)"; 
and 
(II) by striking the period at the end and 
inserting the following: ", and (F) in the case of 
home health services furnished to an individual 
who (at the time the item or service is furnished) 
is under a plan of care of a home heeilth agency, 
payment shall be made to the agency (without 
regard to whether or not the item or service was 
furnished by the agency, by others under arrange-
ment with them made by the agency, or when 
any other contracting or consulting arrangement, 
or otherwise).". 
(ii) CONFORMING AMENDMENT.—Section 1832(a)(1) 
(42 U.S.C. 
1395k(a)(l)) (as amended by section 
4432(b)(5)(B)) 
is 
amended 
by 
striking 
"section 
1842(b)(6)(E);" and inserting "subparagraphs (E) and 
(F) of section 1842(b)(6);". 
(C) EXCLUSIONS FROM COVERAGE.—Section 1862(a) (42 
U.S.C. 1395y(a)) (as amended by sections 4319(b), 4432(b), 
4507(a)(2)(B) and 4541(b)) is amended— 
(i) by striking "or" at the end of paragraph (19); 
(ii) by striking the period at the end of paragraph 
(20) and inserting "; or"; and 
(iii) by inserting after paragraph (20) the following: 
"(21) where such expenses are for home health services 
furnished to an individual who is under a plan of care of 
the home hegJth agency if the claim for payment for such 
services is not submitted by the agency.". 
(d) EFFECTIVE 
DATE.—Except as otherwise provided, 
the 
amendments made by this section shall apply to cost reporting 
periods beginning on or after October 1, 1999. 
(e) CONTINGENCY.—If the Secretary of Health and Human Serv-
ices for any reason does not establish and implement the prospective 
pajnnent system for home health services described in section 
1895(b) of the Social Security Act (as added by subsection (a)) 
for cost reporting periods described in subsection (d), for such cost 
reporting periods the Secretary shall provide for a reduction by 
15 percent in the cost limits and per beneficiary limits described 
42 use 1395fff 
note. 
42 use 1395fff 
note. 
I l l STAT. 472 
PUBLIC LAW 105-33—AUG. 5, 1997 
in section 1861(v)(l)(L) of such Act, as those limits would otherwise 
be in effect on September 30, 1999. 
SEC. 4604. PAYMENT BASED ON LOCATION WHERE HOME HEALTH 
SERVICE IS FURNISHED. 
(a) CONDITIONS OF PARTICIPATION.—Section 1891 (42 U.S.C. 
1395bbb) is amended by adding at the end the following: 
"(g) PAYMENT ON BASIS OF LOCATION OF SERVICE.^A home 
health agency shall submit claims for payment for home health 
services under this title only on the basis of the geographic location 
at which the service is furnished, as determined by the Secretary.". 
(b) WAGE ADJUSTMENT.—Section 1861(v)(l)(L)(iii) (42 U.S.C. 
1395x(v)(l)(L)(iii)) is amended by striking "agency is located" and 
inserting "service is furnished". 
42 use I395x 
(c) EFFECTIVE DATE.—^The amendments made by this section 
'^ote- 
apply to cost reporting periods beginning on or after October 1, 
1997. 
Subchapter B—Home Health BeneHts 
SEC. 4611. MODIFICATION OF PART A HOME HEALTH BENEFIT FOR 
INDIVIDUALS ENROLLED UNDER PART B. 
(a) IN GENERAL.—Section 1812 (42 U.S.C. 1395d) is amended— 
(1) in subsection (a)(3), by striking "home health services" 
and inserting "for individuals not enrolled in part B, home 
health services, and for individuals so enrolled, post-institu-
tional home health services furnished during a home health 
spell of illness for up to 100 visits during such spell of illness"; 
and 
(2) in subsection (b), by adding after and below paragraph 
(3) the following: 
"Payment under this part for post-institutional home health services 
furnished an individual during a home health spell of illness may 
not be made for such services beginning after such services have 
been furnished for a total of 100 visits such spell.". 
(b) POST-INSTITUTIONAL HOME HEALTH SERVICES DEFINED.— 
Section 1861 (42 U.S.C. 1395x), as amended by sections 4103(a), 
4104(a), 4105(a), 4106(a), and 4454, is amended by adding at the 
end the following: 
"Post-Institutional Home Health Services; Home Health Spell of 
Illness 
"(tt)(l) The term 'post-institutional home health services' means 
home health services mmished to an individual— 
"(A) after discharge from a hospital or rural primary care 
hospital in which the individual was an inpatient for not less 
than 3 consecutive days before such discharge if such home 
health services were initiated within 14 days after the date 
of such discharge; or 
"(B) after discharge from a skilled nursing facility in which 
the individual was provided post-hospital extended care services 
if such home health services were initiated within 14 days 
after the date of such discharge. 
"(2) The term 'home health spell of illness' with respect to 
any individual means a period of consecutive days— 
"(A) beginning with the first day (not included in a previous 
home health spell of illness) (i) on which such individual is 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 473 
furnished post-institutional home health services, and (ii) which 
occurs in a month for which the individual is entitled to benefits 
under part A, and 
"(B) ending with the close of the first period of 60 consecu-
tive days thereafter on each of which the individual is neither 
an inpatient of a hospital or rural primary care hospital nor 
an inpatient of a facility described in section 1819(a)(1) or 
subsection (y)(l) nor provided home health services.". 
(c) MAINTAINING APPEAL RIGHTS FOR HOME HEALTH SERV-
ICES.—Section 1869(b)(2)(B) (42 U.S.C. 1395fR:b)(2)(B)) is amended 
by inserting "(or $100 in the case of home health services)" after 
"$500". 
(d) MAINTAINING SEAMLESS ADMINISTRATION THROUGH FISCAL 
INTERMEDIARIES.—Section 1842(b)(2) (42 U.S.C. 1395u(b)(2)) is 
amended by adding at the end the following: 
"(E) With respect to the pajnnent of claims for home health 
services under this part that, but for the amendments made by 
section 4611 of the Balanced Budget Act of 1997, would be payable 
under part A instead of under this part, the Secretary shall continue 
administration of such claims through fiscal intermediaries under 
section 1816.". 
(e) TRANSITION.— 
42 use i395d 
(1) IN GENERAL.—^Notwithstanding any provision of title note. 
XVIII of the Social Security Act, the Secretary of Health and 
Human Services shall establish a transition for the aggregate 
amount of expenditures that are transferred from part A, to 
part B, of title XVIII of the Social Security Act, as a result 
of the amendments made by this section, during each of the 
years during the period beginning with 1998 and ending with 
2002 according to this subsection. Under the transition for 
each such year, the Secretary shall effect such transfer, between 
the trust funds under such parts, as will result in only the 
proportion (specified in paragraph (2)) of such aggregate 
expenditures for the year being transferred from such part 
A to such part B. 
(2) PROPORTION SPECiFiED.^The proportion specified in 
this paragraph for— 
(A) 1998 is Ve, 
(B) 1999 is Va, 
( 0 2000 is ^2, 
(D) 2001 is %, and 
(E) 2002 is %. 
(3) APPLICATION IN ESTABLISHING MONTHLY PREMIUMS FOR 
1998 THROUGH 2003.— 
(A) IN GENERAL.—For purposes only of computing the 
monthly premium under section 1839 of the Social Security 
Act (42 U.S.C. 1395r), the monthly actuarial rate for enroU-
ees age 65 and over shall be computed as though any 
reference in paragraph (1) of this subsection to 2002 were 
a reference to 2003 and as if the following proportions 
were substituted for the proportions specified in paragraph 
(2): 
(i) For 1998, V7. 
(ii) For 1999, ^7. 
(iii) For 2000, ^T. 
(iv) For 2001, y?. 
(v) For 2002,5/7. 
I l l STAT. 474 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 1395d 
note. 
42 use 1395x 
note. 
42 use 1395x 
note. 
42 use 1395y 
note. 
(vi) For 2003, %. 
(B) N o 
IMPACT ON GOVERNMENT 
CONTRIBUTION.— 
Subparagraph (A) does not apply in determining the 
amount of the Government contribution under section 1844 
of the Social Security Act (42 U.S.C. 1395w). 
(f) EFFECTIVE DATE.—^The amendments made by this section 
apply to services furnished on or after January 1, 1998. For purpose 
of applying such amendments, any home health spell of illness 
that began, but not did not end, before such date shall be considered 
to have begun as of such date. 
SEC. 4612. CLARIFICATION OF PART-TIME OR INTERMITTENT NURSING 
CARE. 
(a) IN GENERAL.—Section 1861(m) (42 U.S.C. 1395x(m)) is 
amended by adding at the end the following: "For purposes of 
paragraphs (1) and (4), the term 'part-time or intermittent services' 
means skilled nursing and home health aide services furnished 
any number of days per week as long as they are furnished (com-
bined) less than 8 hours each day and 28 or fewer hours each 
week (or, subject to review on a case-by-case basis as to the need 
for care, less than 8 hours each day and 35 or fewer hours per 
week). For purposes of sections 1814(a)(2)(C) and 1835(a)(2)(A), 
'intermittent' means skilled nursing care that is either provided 
or needed on fewer than 7 days each week, or less than 8 hours 
of each day for periods of 21 days or less (with extensions in 
exceptional circumstances when the need for additional care is 
finite and predictable).". 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
applies to services furnished on or after October 1, 1997. 
SEC. 4613. STUDY ON DEFINITION OF HOMEBOUND. 
(a) STUDY.—The Secretary of Health and Human Services shall 
conduct a study of the criteria that should be applied, and the 
method of applying such criteria, in the determination of whether 
an individual is homebound for purposes of qualifying for receipt 
of benefits for home health services under the medicare program. 
Such criteria shall include the extent and circumstances under 
which a person may be absent from the home but nonetheless 
qualify. 
(b) REPORT.—^Not later than October 1, 1998, the Secretary 
shall submit a report to Congress on the study conducted under 
subsection (a). The report shall include specific recommendations 
on such criteria and methods. 
SEC. 4614. NORMATIVE STANDARDS FOR HOME HEALTH CLAIMS 
DENIALS. 
(a) IN GENERAL.—Section 1862(a)(1) (42 U.S.C. 1395y(a)(l)) 
(as amended by section 4104(c)) is amended— 
(1) by striking "and" at the end of subparagraph (G), 
(2) by striking the semicolon at the end of subparagraph 
(H) and inserting ", and", and 
(3) by inserting after subparagraph (H) the following new 
subparagraph: 
"(I) the frequency and duration of home health services 
which are in excess of normative guidelines that the Secretary 
shall establish by regulation;". 
(b) NOTIFICATION.—^The Secretary of Health and Human Serv-
ices may establish a process for notifying a physician in cases 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 475 
in which the number of home health visits, furnished under title 
XVIII of the Social Security Act pursuant to a prescription or 
certification of the physician, significantly exceeds such threshold 
(or thresholds) as the Secretary specifies. The Secretary may adjust 
such threshold to reflect demonstrated differences in the need for 
home health services among different beneficiaries. 
(c) EFFECTIVE DATE.—^The amendments made by this section 
42 use I395y 
apply to services furnished on or after October 1, 1997. 
i^ote. 
SEC. 4615. NO HOME HEALTH BENEFITS BASED SOLELY ON DRAWING 
BLOOD. 
(a) IN GENERAL.—Sections 1814(a)(2)(C) and 1835(a)(2)(A) (42 
U.S.C. 1395f[a)(2)(C), 1395n(a)(2)(A)) are each amended by inserting 
"(other than solely venipuncture for the purpose of obtaining a 
blood sample)" after "skilled nursing care". 
(b) EFFECTIVE DATE.—The amendments made by subsection 
42 USC I395f 
(a) apply to home health services furnished after the 6-month "ote. 
period beginning after the date of enactment of this Act. 
SEC. 4616. REPORTS TO CONGRESS REGARDING HOME HEALTH COST 42 USC 1395y 
CONTAINMENT. 
note. 
(a) ESTIMATE.—^Not later than October 1, 1997, the Secretary 
of Health and Human Services shall submit to the Committees 
on Commerce and Ways and Means of the House of Representatives 
and the Committee on Finance of the Senate a report that includes 
an estimate of the outlays that will be made under parts A and 
B of title XVIII of the Social Security Act for the provision of 
home health services during each of fiscal years 1998 through 
2002. 
(b) ANNUAL REPORT.—Not later than the end of each of years 
1999 through 2002, the Secretary shall submit to such Committees 
a report that compares the actual outlays under such parts for 
such services during the fiscal year ending in the year, to the 
outlays estimated under subsection (a) for such fiscal year. If the 
Secretary finds that such actual outlays were greater than such 
estimated outlays for the fiscal year, the Secretary shall include 
in the report recommendations regarding beneficiary copayments 
for home health services provided under the medicare program 
or such other methods as will reduce the growth in outlays for 
home health services under the medicare program. 
CHAPTER 
2—GRADUATE 
MEDICAL 
EDUCATION 
Subchapter A—Indirect Medical Education 
SEC. 4621. INDIRECT GRADUATE MEDICAL EDUCATION PAYMENTS. 
(a) MuLTiYEAR TRANSITION REGARDING PERCENTAGES.— 
(1) IN GENERAL.—Section 
1886(d)(5)(B)(ii) (42 U.S.C. 
1395ww(d)(5)(B)(ii)) is amended to read as follows: 
"(ii) For purposes of clause (i)(II), the indirect teaching 
adjustment factor is equal to c x (((1+r) to the nth power) 
- 1), where 'r' is the ratio of the hospital's full-time equiva-
lent interns and residents to beds and 'n' equals .405. 
For discharges occurring— 
"(I) on or after October 1, 1988, and before October 
1, 1997, 'c' is equal to 1.89; 
"(II) during fiscal year 1998, V is equal to 1.72; 
"(III) during fiscal year 1999, 'c' is equal to 1.6; 
I l l STAT. 476 
PUBLIC LAW 105-33—AUG. 5, 1997 
Applicability. 
Effective date. 
"(IV) during fiscal year 2000, V is equal to 1.47; 
and 
"(V) on or after October 1, 2000, *c' is equal to 
1.35.". 
(2) CONFORMING AMENDMENT RELATING TO DETERMINATION 
OF STANDARDIZED AMOUNT.—Section 1886(d)(2)(C)(i) (42 U.S.C. 
1395ww(d)(2)(C)(i)) is amended by adding at the end the follow-
ing: "except that the Secretary shall not take into account 
any reduction in the amount of additional pa3mients under 
paragraph (5)(B)(ii) resulting from the amendment made by 
section 4621(a)(1) of the Balanced Budget Act of 1997,". 
(b) LIMITATION ON NUMBER OF RESIDENTS FOR CERTAIN FISCAL 
YEARS 
" (1) IN GENERAL.—Section 
1886(d)(5)(B) 
(42 
U.S.C. 
1395ww(d)(5)(B)) is amended by adding after clause (iv) the 
following: 
"(v) In determining the adjustment with respect to 
a hospital for discharges occurring on or after October 
1, 1997, the total number of full-time equivalent interns 
and residents in the fields of allopathic and osteopathic 
medicine in either a hospital or nonhospital setting may 
not exceed the number of such full-time equivalent interns 
and residents in the hospital with respect to the hospital's 
most recent cost reporting period ending on or before 
December 31, 1996. 
"(vi) For purposes of clause (ii)— 
"(I) 'r' may not exceed the ratio of the number 
of interns and residents, subject to the limit under 
clause (v), with respect to the hospital for its most 
recent cost reporting period to the hospital's available 
beds (as defined by the Secretary) during that cost 
reporting period, and 
"(II) for the hospital's cost reporting periods begin-
ning on or after October 1, 1997, subject to the limits 
described in clauses (iv) and (v), the total number 
of full-time equivalent residents for payment purposes 
shall equal the average of the actual full-time equiva-
lent resident count for the cost reporting period and 
the preceding two cost reporting periods. 
In the case of the first cost reporting period beginning 
on or after October 1, 1997, subclause (II) shall be applied 
by using the average for such period and the preceding 
cost reporting period. 
"(vii) If any cost reporting period beginning on oi after 
October 1, 1997, is not equal to twelve months, the Secretary 
shall make appropriate modifications to ensure that the average 
full-time equivalent residency count pursuant to subclause (II) 
of clause (vi) is based on the equivalent of full twelve-month 
cost reporting periods. 
"(viii) Rules similar to the rules of subsection (h)(4)(H) 
shall apply for purposes of clauses (v) and (vi).". 
(2) PAYMENT FOR INTERNS AND RESIDENTS PROVIDING OFF-
SITE 
SERVICES.—Section 
1886(d)(5)(B)(iv) 
(42 
U.S.C. 
1395ww(d)(5)(B)(iv)) is amended to read as follows: 
"(iv) Effective for discharges occurring on or after October 
1, 1997, all the time spent by an intern or resident in patient 
care activities under an approved medical residency training 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 477 
program at an entity in a nonhospital setting shall be counted 
towards the determination of full-time equivalency if the hos-
pital incurs all, or substantially all, of the costs for the training 
program in that setting.". 
SEC. 4622. PAYMENT TO HOSPITALS OF INDIRECT MEDICAL EDU-
CATION COSTS FOR MEDICARE+CHOICE ENROLLEES. 
Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by adding 
at the end the following: 
"(11) ADDITIONAL, PAYMENTS FOR MANAGED CARE ENROLL-
EES.— 
"(A) IN GENERAL.—^For portions of cost reporting peri-
ods occurring on or after January 1, 1998, the Secretary 
shall provide for an additional pajonent amount for each 
applicable discharge of any subsection (d) hospital that 
has an approved medical residency training program. 
"(B) APPLICABLE DISCHARGE.—For purposes of this 
paragraph, the term 'applicable discharge' means the dis-
charge of any individual who is enrolled under a risk-
sharing contract with an eligible organization under section 
1876 and who is entitled to benefits under part A or any 
individual 
who is enrolled with 
a 
Medicare+Choice 
organization under part C. 
"(C) DETERMINATION OF AMOUNT.—^The amount of the 
payment under this paragraph with respect to any 
applicable discharge shall be equal to the applicable 
percentage (as defined in subsection (h)(3)(D)(ii)) of the 
estimated average per discharge amount that would other-
wise have been paid under paragraph (5)(B) if the individ-
uals had not been enrolled as described in subparagraph 
(B). 
"(D) SPECIAL RULE FOR HOSPITALS UNDER REIMBURSE-
MENT SYSTEM.—^The Secretary shall establish rules for the 
application of this paragraph to a hospital reimbursed 
under a reimbursement system authorized under section 
1814(b)(3) in the same manner as it would apply to the 
hospital if it were not reimbursed under such section.". 
Subchapter B—Direct Graduate Medical Education 
SEC. 4623. LIMITATION ON NUMBER OF RESIDENTS AND ROLLING 
AVERAGE FTE COUNT. 
Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by 
adding after subparagraph (E) the following: 
"(F) 
LIMITATION 
ON 
NUMBER 
OF 
RESIDENTS 
IN 
ALLOPATHIC AND OSTEOPATHIC MEDICINE.—Such r u l e s shall 
provide that for purposes of a cost reporting period begin-
ning on or after October 1, 1997, the total number of 
full-time 
equivalent 
residents 
before 
application 
of 
weighting factors (as determined under this paragraph) 
with respect to a hospital's approved medical residency 
training program in the fields of allopathic medicine and 
osteopathic medicine may not exceed the number of such 
full-time equivalent residents for the hospital's most recent 
cost reporting period ending on or before December 31, 
1996. 
I l l STAT. 478 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(G) COUNTING INTERNS AND RESIDENTS FOR FY I998 
AND SUBSEQUENT YEARS.— 
"(i) IN GENERAL.—For cost reporting periods begin-
ning during fiscal years beginning on or after October 
1, 1997, subject to the limit described in subparagraph 
(F), the total number of full-time equivalent residents 
for determining a hospital's graduate medical edu-
cation pajmaent shall equal the average of the actual 
full-time equivalent resident counts for the cost report-
ing period and the preceding two cost reporting periods. 
"(ii) ADJUSTMENT FOR SHORT PERIODS.—If any cost 
reporting period beginning on or after October 1, 1997, 
is not equal to twelve months, the Secretary shall 
make appropriate modifications to ensure that the 
average full-time equivalent resident counts pursuant 
to clause (i) are based on the equivalent of full twelve-
month cost reporting periods. 
"(iii) TRANSITION RULE FOR 1998.—In the case of 
a hospital's first cost reporting period beginning on 
or after October 1, 1997, clause (i) shall be applied 
by using the average for such period and the preceding 
cost reporting period. 
"(H) 
SPECIAL RULES FOR APPLICATION O F SUBPARA-
GRAPHS (F) AND (G).— 
"(i) NEW FACILITIES.—^The Secretary shall, consist-
ent with the principles of subparagraphs (F) and (G), 
prescribe rules for the application of such subpara-
graphs in the case of medical residency training pro-
grams established on or after January 1, 1995. In 
promulgating such rules for purposes of subparagraph 
(F), the Secretary shall give special consideration to 
facilities that meet the needs of underserved rural 
areas. 
"(ii) AGGREGATION.—^The Secretary may prescribe 
rules which allow institutions which are members of 
the same affiliated group (as defined by the Secretary) 
to elect to apply the limitation of subparagraph (F) 
on an aggregate basis. 
"(iii) 
DATA 
COLLECTION.—The 
Secretary 
may 
require any entity that operates a medical residency 
training program and to which subparagraphs (F) and 
(G) apply to submit to the Secretary such additional 
information as the Secretary considers necessary to 
carry out such subparagraphs.". 
SEC. 4624. PAYMENTS TO HOSPITALS FOR DIRECT COSTS OF GRAD-
UATE MEDICAL EDUCATION OF MEDICARE+CHOICE 
ENROLLEES. 
Section 1886(h)(3) (42 U.S.C. 1395ww(h)(3)) is amended by 
adding after subparagraph (C) the following: 
"(D) PAYMENT FOR MANAGED CARE ENROLLEES.— 
"(i) IN GENERAL.—For portions of cost reporting 
periods occurring on or after January 1, 1998, the 
Secretary shall provide for an additional payment 
amount under this subsection for services furnished 
to individuals who are enrolled under a risk-sharing 
contract with an eligible organization under section 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 479 
1876 and who are entitled to part A or with a 
Medicare+Choice organization under part C. The 
amount of such a payment shall equal the applicable 
percentage of the product of— 
"(I) the aggregate approved amount (as defined 
in subparagraph (B)) for that period; and 
"(11) the fraction of the total number of 
inpatient-bed days (as established by the Sec-
retary) during the period which are attributable 
to such enrolled individuals, 
"(ii) APPLICABLE PERCE^^^AGE.—For purposes of 
clause (i), the applicable percentage is— 
"(I) 20 percent in 1998, 
"(II) 40 percent in 1999, 
"(III) 60 percent in 2000, and 
"(IV) 80 percent in 2001, and 
"(V) 100 percent in 2002 and subsequent years, 
"(iii) 
SPECLVL 
RULE 
FOR HOSPITALS 
UNDER 
REIMBURSEMENT SYSTEM.—^The Secretary shall estab-
lish rules for the application of this subparagraph to 
a hospital reimbursed under a reimbursement system 
authorized under section 1814(b)(3) in the same man-
ner as it would apply to the hospital if it were not 
reimbursed under such section.". 
SEC. 4625. PERMITTING PAYMENT TO NONHOSPITAL PROVIDERS. 
(a) IN GENERAL.—Section 1886 (42 U.S.C. 1395ww), as amended 
by section 4421(a), is amended by adding at the end the following: 
"(k) PAYMENT TO NONHOSPITAL PROVIDERS.— 
"(1) IN GENERAL.—For cost reporting periods beginning on 
or after October 1, 1997, the Secretary may establish rules 
for pa3anent to qualified nonhospital providers for their direct 
costs of medical education, if those costs are incurred in the 
operation of an approved medical residency training program 
described in subsection (h). Such rules shall specify the 
amounts, form, and manner in which such pajrments will be 
made and the portion of such payments that will be made 
from each of the trust funds under this title. 
"(2) QUALIFIED NONHOSPITAL PROVIDERS.—For purposes of 
this subsection, the term 'qualified nonhospital providers' 
means— 
"(A) a Federally qualified health center, as defined 
in section 1861(aa)(4); 
"(B) a rural health clinic, as defined in section 
1861(aa)(2); 
"(C) Medicare+Choice organizations; and 
"(D) such other providers (other than hospitals) as 
the Secretary determines to be appropriate.". 
(b) PROHIBITION ON DOUBLE PAYMENTS.—Section 1886(h)(3)(B) 
(42 U.S.C. 1395ww(h)(3)(B)) is amended by adding at the end the 
following: 
'The Secretary shall reduce the aggregate approved amount 
to the extent payment is made under subsection (k) for residents 
included in the hospital's count of full-time equivalent resi-
dents.". 
Ill STAT. 480 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 4626. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY 
REDUCTION IN NUMBER OF RESIDENTS. 
(a) IN GENERAL.—Section 1886(h) (42 U.S.C. 1395ww(h)) is 
amended by adding at the end the following new paragraph: 
"(6) 
INCENTIVE PAYMENT UNDER PLANS FOR VOLUNTARY 
REDUCTION IN NUMBER OF RESIDENTS.— 
"(A) IN GENERAL.—In the case of a voluntary residency 
reduction plan for which an application is approved under 
subparagraph (B), subject to subparagraph (F), each hos-
pital which is part of the qualifying entity submitting the 
plan shall be paid an applicable hold harmless percentage 
(as specified in subparagraph (E)) of the sum of— 
"(i) the amount (if any) by which— 
"(I) the amount of payment which would have 
been made under this subsection if there had been 
a 5-percent reduction in the number of full-time 
equivalent residents in the approved medical edu-
cation training programs of the hospital as of June 
30, 1997, exceeds 
"(II) the amount of payment which is made 
under this subsection, taking into account the 
reduction in such number effected under the reduc-
tion plan; and 
"(ii) the amount of the reduction in pa3rment under 
subsection (d)(5)(B) for the hospital that is attributable 
to the reduction in number of residents effected under 
the plan below 95 percent of the number of full-time 
equivalent residents in such programs of the hospital 
as of June 30, 1997. 
The determination of the amounts under clauses (i) and 
(ii) for any year shall be made on the basis of the provisions 
of this title in effect on the application deadline date for 
the first calendar year to which the reduction plan applies. 
"(B) APPROVAL OF PLAN APPLICATIONS.—^The Secretary 
may not approve the application of an qualifying entity 
unless— 
"(i) the application is submitted in a form and 
manner specified by the Secretary and by not later 
than November 1, 1999, 
"(ii) the application provides for the operation of 
a plan for the reduction in the number of full-time 
equivalent residents in the approved medical residency 
training programs of the entity consistent with the 
requirements of subparagraph (D); 
"(iii) the entity elects in the application the period 
of residency training years (not greater than 5) over 
which the reduction will occur; 
"(iv) the entity will not reduce the proportion of 
its residents in primary care (to the total number 
of residents) below such proportion as in effect as of 
the applicable time described in subparagraph (D)(v); 
and 
"(v) the Secretary determines that the application 
and the entity and such plan meet such other require-
ments as the Secretary specifies in regulations. 
"(C) QUALIFYING ENTITY.—^For purposes of this para-
graph, any of the following may be a qualifying entity: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 481 
"(i) Individual hospitals operating one or more 
approved medical residency training programs. 
"(ii) Two or more hospitals that operate such pro-
grams and apply for treatment under this paragraph 
as a single qualifying entity. 
"(iii) A qualifying consortium (as described in sec-
tion 4628 of the Balanced Budget Act of 1997). 
"(D) RESIDENCY REDUCTION REQUIREMENTS.— 
"(i) INDIVIDUAL HOSPITAL APPLICANTS.—In the case 
of a qualifying entity described in subparagraph (C)(i), 
the number of full-time equivalent residents in all 
the approved medical residency training programs 
operated by or through the entity shall be reduced 
as follows: 
"(I) If the base number of residents exceeds 
750 residents, by a number equal to at least 20 
percent of such base number. 
"(II) Subject to subclause (IV), if the base num-
ber of residents exceeds 600 but is less than 750 
residents, by 150 residents. 
"(Ill) Subject to subclause (IV), if the base 
number of residents does not exceed 600 residents, 
by a number equal to at least 25 percent of such 
base number. 
"(IV) In the case of a qualifying entity which 
is described in clause (v) and which elects treat-
ment under this subclause, by a number equal 
to at least 20 percent of the base number. 
"(ii) JOINT APPLICANTS.—In the case of a qualifying 
entity described in subparagraph (C)(ii), the number 
of full-time equivalent residents in the aggregate for 
all the approved medical residency training programs 
operated by or through the entity shall be reduced 
as follows: 
"(I) Subject to subclause (II), by a number 
equal to at least 25 percent of the base number. 
"(II) In the case of such a qualifying entity 
which is described in clause (v) and which elects 
treatment under this subclause, by a number equal 
to at least 20 percent of the base number. 
"(iii) CONSORTIA.—In the case of a qualifying entity 
described in subparagraph (C)(iii), the number of full-
time equivalent residents in the aggregate for all the 
approved medical residency training programs oper-
ated by or through the entity shall be reduced by 
a number equsd to at least 20 percent of the base 
number. 
"(iv) 
MANNER 
OF 
REDUCTION.—^The reductions 
specified 
under the preceding provisions of this 
subparagraph for a qualifying entity shall be below 
the base number of residents for that entity and shall 
be fully effective not later than the 5th residency train-
ing year in which the application under subparagraph 
(B) is effective. 
"(v) ENTITIES PROVIDING ASSURANCE OF INCREASE 
IN PRIMARY CARE RESIDENTS.—An entity is described 
in this clause if— 
I l l STAT. 482 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(I) the base number of residents for the entity 
is less than 750 or the entity is described in 
subparagraph (C)(ii); and 
"(II) the entity represents in its appHcation 
under subparagraph (B) that it will increase the 
number of full-time equivalent residents in pri-
mary care by at least 20 percent (from such num-
ber included in the base number of residents) by 
not later than the 5th residency training year in 
which the application under subparagraph (B) is 
effective. 
If a qualifying entity fails to comply with the represen-
tation described in subclause (II) by the end of such 
5th residency training year, the entity shall be subject 
to repayment of all amounts paid under this paragraph, 
in accordance with procedures established to carry out 
subparagraph (F), 
"(vi) 
BASE NUMBER OF RESIDENTS DEFINED.—^For 
purposes of this paragraph, the term TDase number 
of residents' means, with respect to a qualif3dng entity 
(or its participating hospitals) operating approved 
medical residency training programs, the number of 
full-time equivalent residents in such programs (before 
application of weighting factors) of the entity as of 
the most recent residency training year ending before 
June 30, 1997, or, if less, for any subsequent residency 
training year that ends before the date the entity 
makes application under this paragraph. 
"(E) 
APPLICABLE HOLD HARMLESS PERCENTAGE.—^For 
purposes of subparagraph (A), the 'applicable hold harmless 
percentage' for the— 
"(i) first and second residency training years in 
which the reduction plan is in effect, 100 percent, 
"(ii) third such year, 75 percent, 
"(iii) fourth such year, 50 percent, and 
"(iv) fifth such year, 25 percent. 
"(F) PENALTY FOR NONCOMPLIANCE.— 
"(i) IN GENERAL.—No payment may be made under 
this paragraph to a hospital for a residency training 
year if the hospital has failed to reduce the number 
of full-time equivalent residents (in the manner 
required under subparagraph (D)) to the number 
agreed to by the Secretary and the qualifying entity 
in approving the application under this paragraph with 
respect to such year. 
"(ii) INCREASE IN NUMBER OF RESIDENTS IN SUBSE-
QUENT YEARS.—If payments are made under this para-
graph to a hospital, and if the hospital increases the 
number of full-time equivalent residents above the 
number of such residents permitted under the reduc-
tion plan as of the completion of the plan, then, as 
specified by the Secretary, the entity is liable for repay-
ment to the Secretary of the total amounts paid under 
this paragraph to the entity. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 483 
42 use 1
3
9
5
W
W 
note. 
"(G) TREATMENT OF ROTATING RESIDENTS.—In applying Rules, 
this paragraph, the Secretary shall establish rules regard-
ing the counting of residents who are assigned to institu-
tions the medical residency training programs in which 
are not covered under approved applications under this 
paragraph.". 
(b) RELATION TO DEMONSTRATION PROJECTS AND AUTHORITY.— 
(1) Section 1886(h)(6) of the Social Security Act, added 
by subsection (a), other than subparagraph (F)(ii) thereof, shall 
not apply to any residency training program with respect to 
which a demonstration project described in paragraph (3) has 
been approved by the Health Care Financing Administration 
as of May 27, 1997. 
(2) Effective May 27, 1997, the Secretary of Health and EflFective date. 
Human Services is not authorized to approve any demonstration 
project described in paragraph (3) for any residency training 
year beginning before July 1, 2006. 
(3) A demonstration project described in this paragraph 
is a project that primarily provides for additional payments 
under title XVIII of the Social Security Act in connection with 
a reduction in the number of residents in a medical residency 
training program. 
(c) INTERIM, FINAL REGULATIONS.—In order to carry out the 
amendment made by subsection (a) in a timely manner, the Sec-
retary of Health and Human Services may first promulgate regula-
tions, that take effect on an interim basis, after notice and pending 
opportunity for public comment, by not later than 6 months after 
the date of the enactment of this Act. 
SEC. 4627. MEDICARE SPECIAL REIMBURSEMENT RULE FOR PRIMARY 
CARE COMBINED RESIDENCY PROGRAMS. 
(a) IN GENERAL.—Section 1886(h)(5)(G) of the Social Security 
Act (42 U.S.C. 1395ww(h)(5)(G)) is amended— 
(1) in clause (i), by striking "and (iii)" and inserting ", 
(iii), and (iv)"; and 
(2) by adding at the end the following: 
"(iv) SPECIAL RULE FOR CERTAIN PRIMARY CARE 
COMBINED RESIDENCY PROGRAMS.—(I) In the case of 
a resident enrolled in a combined medical residency 
training program in which all of the individual pro-
grams (that are combined) are for training a primary 
care resident (as defined in subparagraph (H)), the 
period of board eligibility shall be the minimum num-
ber of years of formal training required to satisfy the 
requirements for initial board eligibility in the longest 
of the individual programs plus one additional year. 
"(II) A resident enrolled in a combined medical 
residency training progrgim that includes an obstetrics 
and gynecology program shall qualify for the period 
of board eligibility under subclause (I) if the other 
programs such resident combines with such obstetrics 
and gynecology program are for training a primary 
care resident.". 
(b) EFFECTIVE DATE.—^The amendments made by subsection 
42 use I395ww 
(a) apply to combined medical residency training programs in effect 
^ote. 
for residency years beginning on or after July 1, 1997. 
I l l STAT. 484 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 1
3
9
5
W
W 
note. 
42 use 1
3
9
5
W
W 
note. 
SEC. 4628. DEMONSTRATION PROJECT ON USE OF CONSORTIA. 
(a) IN GENERAL.—The Secretary of Health and Human Services 
(in this section referred to as the "Secretary") shall establish a 
demonstration project under which, instead of making payments 
to teaching hospitals pursuant to section 1886(h) of the Social 
Security Act, the Secretary shall make payments under this section 
to each consortium that meets the requirements of subsection (b) 
and that applies to be included under the project. 
(b) QUALIFYING CONSORTIA.—For purposes of subsection (a), 
a consortium meets the requirements of this subsection if the 
consortium is in compliance with the following: 
(1) The consortium consists of a teaching hospital with 
one or more approved medical residency training programs 
and one or more of the following entities: 
(A) A school of allopathic medicine or osteopathic medi-
cine. 
(B) Another teaching hospital, which may be a chil-
dren's hospital. 
(C) A Federally qualified health center. 
(D) A medical group practice. 
(E) A managed care entity. 
(F) An entity furnishing outpatient services. 
(G) Such other entity as the Secretary determines to 
be appropriate. 
(2) The members of the consortium have agreed to partici-
pate in the programs of graduate medical education that are 
operated by the entities in the consortium. 
(3) With respect to the receipt by the consortium of pay-
ments made pursuant to this section, the members of the 
consortium have agreed on a method for allocating the pay-
ments among the members. 
(4) The consortium meets such additional requirements 
as the Secretary may establish. 
(c) AMOUNT AND SOURCE OF PAYMENT.—^The total of payments 
to a qualifying consortium for a fiscal year pursuant to subsection 
(a) shall not exceed the amount that would have been paid under 
section 1886 (h) or (k) of the Social Security Act for the teaching 
hospital (or hospitals) in the consortium. Such payments shall be 
made in such proportion from each of the trust funds established 
under title XVIII of such Act as the Secretary specifies. 
SEC. 4629. RECOMMENDATIONS ON LONG-TERM POLICIES REGARDING 
TEACHING HOSPITALS AND GRADUATE MEDICAL EDU-
CATION. 
(a) IN GENERAL.—The Medicare Payment Advisory Commission 
(established under section 1805 of the Social Security Act and 
in this section referred to as the "Commission") shall examine 
and develop recommendations on whether and to what extent medi-
care pa3niient policies and other Federal policies regarding teaching 
hospitals and graduate medical education should be changed. Such 
recommendations shall include recommendations regarding each 
of the following: 
(1) Possible methodologies for making pa3rments for grad-
uate medical education and the selection of entities to receive 
such payments. Matters considered under this paragraph shall 
include— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 485 
(A) issues regarding children's hospitals and approved 
medical residency training programs in pediatrics, and 
(B) whether and to what extent pa3rments are being 
made (or should be made) for training in the nursing and 
other allied health professions. 
(2) Federal policies regarding international medical grad-
uates. 
(3) The dependence of schools of medicine on service-gen-
erated income. 
(4) Whether and to what extent the needs of the United 
States regarding the supply of physicians, in the aggregate 
and in different specialties, will change during the 10-year 
period beginning on October 1, 1997, and whether and to what 
extent giny such changes will have significant financial effects 
on teaching hospitals. 
(5) Methods for promoting an appropriate number, mix, 
and geographical distribution of health professionals. 
(b) CONSULTATION.—In conducting the study under subsection 
(a), the Commission shall consult with the Council on Graduate 
Medical Education and individuals with expertise in the area of 
graduate medical education, including— 
(1) deans from allopathic and osteopathic schools of medi-
cine; 
(2) chief executive officers (or equivalent administrative 
heads) from academic health centers, integrated health care 
systems, approved medical residency training programs, and 
teaching hospitals that sponsor approved medical residency 
training programs; 
(3) chairs of departments or divisions from allopathic and 
osteopathic schools of medicine, schools of dentistry, and 
approved medical residency training programs in oral surgery; 
(4) individuals with leadership experience from representa-
tive fields of non-physici£in health professionals; 
(5) individuals with substantial experience in the study 
of issues regarding the composition of the health care workforce 
of the United States; and 
(6) individuals with expertise in health care payment poli-
cies. 
(c) REPORT.—^Not later than 2 years after the date of the enact-
ment of this Act, the Commission shall submit to the Congress 
a report providing its recommendations under this section and 
the reasons and justifications for such recommendations. 
SEC. 4630. STUDY OF HOSPITAL OVERHEAD AND SUPERVISORY PHYSI- 42 USC 1395ww 
CIAN COMPONENTS OF DIRECT MEDICAL EDUCATION 
note. 
COSTS. 
(a) IN GENERAL.—^The Secretary of Health and Human Services 
shall conduct a study with respect to— 
(1) variations among hospitals in the hospital overhead 
and supervisory physician components of their direct medical 
education costs taken into account under section 1886(h) of 
the Social Security Act, and 
(2) the reasons for such variations. 
(b) REPORT.—^Not later than 1 year after the date of the enact-
ment of this Act, the Secretary shall report the results of the 
study conducted under subsection (a) to the appropriate committees 
of Congress, including recommendations for legislation reducing 
I l l STAT. 486 
PUBLIC LAW 105-33—AUG. 5, 1997 
variations described in subsection (a) that the Secretary finds 
inappropriate. 
CHAPTER 3—PROVISIONS RELATING TO MEDICARE 
SECONDARY PAYER 
SEC. 4631. PERMANENT EXTENSION AND REVISION OF CERTAIN 
SECONDARY PAYER PROVISIONS. 
(a) APPLICATION TO DISABLED INDIVIDUALS IN LARGE GROUP 
HEALTH PLANS.— 
(1) 
IN 
GENERAL.—Section 
1862(b)(1)(B) 
(42 
U.S.C. 
1395y(b)(l)(B)) is amended— 
(A) in clause (i), by striking "clause (iv)" and inserting 
"clause (iii)"; 
(B) by striking clause (iii); and 
(C) by redesignating clause (iv) as clause (iii). 
(2) CONFORMING AMENDMENTS.—Paragraphs (1) through (3) 
of section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence 
of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by 
striking "1862(b)(l)(B)(iv)" each place it appears and inserting 
"1862(b)(l)(B)(iii)". 
(b) INDIVIDUALS WITH END STAGE RENAL DISEASE.—Section 
1862(b)(1)(C) (42 U.S.C. 1395y(b)(l)(C)) is amended— 
(1) in the last sentence by striking "October 1, 1998" and 
inserting "the date of enactment of the Balanced Budget Act 
of 1997"; and 
Effective date. 
(2) by adding at the end the following: "Effective for items 
and services furnished on or after the date of enactment of 
the Balanced Budget Act of 1997, (with respect to periods 
beginning on or after the date that is 18 months prior to 
such date), clauses (i) and (ii) shall be applied by substituting 
'30-month' for *12-month' each place it appears.". 
(c) IRS-SSA-HCFA DATA MATCH.— 
(1) SOCIAL SECURITY ACT.—Section 1862(b)(5)(C) (42 U.S.C. 
1395y(b)(5)(C)) is amended by striking clause (iii). 
(2) INTERNAL REVENUE CODE.—Section 6103(1)(12) of the 
26 use 6103. 
Internal Revenue Code of 1986 is amended by striking subpara-
graph (F). 
SEC. 4632. CLARIFICATION OF TIME AND FILING LIMITATIONS. 
(a) 
EXTENSION 
OF 
CLAIMS 
FILING 
PERIOD.—Section 
1862(b)(2)(B) (42 U.S.C. 1395y(b)(2)(B)) is amended by adding at 
the end the following new clause: 
"(v) CLAIMS-FILING PERIOD.—Notwithstanding any 
other time limits that may exist for filing a claim 
under an employer group health plan, the United 
States may seek to recover conditional payments in 
accordance with this subparagraph where the request 
for pa3maent is submitted to the entity required or 
responsible under this subsection to pay with respect 
to the item or service (or any portion thereof) under 
a primary plan within the 3-year period beginning 
on the date on which the item or service was fur-
nished.". 
42USCl395y 
(b) EFFECTIVE DATE.—^The amendments made by this section 
note. 
apply to items and services furnished on or after the date of the 
enactment of this Act. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 487 
SEC. 4633. PERMITTING RECOVERY AGAINST THIRD PARTY ADMINIS-
TRATORS. 
(a) PERMITTING RECOVERY AGAINST THIRD PARTY ADMINISTRA-
TORS OF PRIMARY PLANS.—Section 1862(b)(2)(B)(ii) (42 U.S.C. 
1395y(b)(2)(B)(ii)) is amended— 
(1) by striking "under this subsection to pay" and inserting 
"(directly, as a third-party administrator, or otherwise) to make 
pa3nnent"; and 
(2) by adding at the end the following: "The United States 
may not recover from a third-party administrator under this 
clause in cases where the third-party administrator would not 
be able to recover the amount at issue from the employer 
or group health plan and is not employed by or under contract 
with the employer or group health plan at the time the action 
for recovery is initiated by the United States or for whom 
it provides administrative services due to the insolvency or 
bankruptcy of the employer or plan.". 
(b) 
CLARIFICATION 
OF 
BENEFICIARY 
LIABILITY.—Section 
1862(b)(1) (42 U.S.C. 1395y(b)(l)) is amended by adding at the 
end the following new subparagraph: 
"(F) 
LIMITATION 
ON 
BENEFICIARY 
LIABILITY.—^An 
individual who is entitled to benefits under this title and 
is furnished an item or service for which such benefits 
are incorrectly paid is not liable for repayment of such 
benefits under this paragraph unless payment of such bene-
fits was made to the individual.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 42 USC I395y 
apply to items and services furnished on or after the date of the 
"o^. 
enactment of this Act. 
CHAPTER 4—OTHER PROVISIONS 
SEC. 4641. PLACEMENT OF ADVANCE DIRECTIVE IN MEDICAL RECORD. 
(a) 
IN 
GENERAL.—Section 
1866(f)(1)(B) 
(42 
U.S.C. 
1395cc(f)(l)(B)) is amended by striking "in the individual's medical 
record" and inserting "in a prominent part of the individual's cur-
rent medical record". 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 42 use I395cc 
shall apply to provider agreements entered into, renewed, or note, 
extended on or after such date (not later than 1 year after the 
date of the enactment of this Act) as the Secretary of Health 
and Human Services specifies. 
SEC. 4642. INCREASED CERTIFICATION PERIOD FOR CERTAIN ORGAN 
PROCUREMENT ORGANIZATIONS. 
Section 1138(b)(l)(A)(ii) (42 U.S.C. 1320b-8(b)(l)(A)(ii)) is 
amended by striking "two years" and inserting "2 years (4 years 
if the Secretary determines appropriate for an organization on 
the basis of its past practices)". 
SEC. 4643. OFFICE OF THE CHIEF ACTUARY IN THE HEALTH CARE 
FINANCING ADMINISTRATION. 
Section 1117 (42 U.S.C. 1317) is amended— 
(1) in the heading, by inserting "AND CHIEF ACTUARY" after 
"THE ADMINISTRATOR"; 
(2) by inserting "(a)" before "The Administrator"; and 
(3) by adding at the end the following: 
Ill STAT. 488 
PUBLIC LAW 105-33—AUG. 5, 1997 
Establishment. 
Federal Register, 
publication. 
42 u s e 1395WW 
note. 
Federal Register, 
publication. 
42 u s e 1395WW 
note. 
"(b)(1) There is established in the Health Care Financing 
Administration the position of Chief Actuary. The Chief Actuary 
shall be appointed by, and in direct line of authority to, the Adminis-
trator of such Administration. The Chief Actuary shall be appointed 
from among individuals who have demonstrated, by their education 
and experience, superior expertise in the actuarial sciences. The 
Chief Actuary shall exercise such duties as are appropriate for 
the office of the Chief Actuary and in accordance with professional 
standards of actuarial independence. The Chief Actuary may be 
removed only for cause. 
"(2) The Chief Actuary shall be compensated at the highest 
rate of basic pay for the Senior Executive Service under section 
5382(b) of title 5, United States Code.". 
SEC. 4644. CONFORMING AMENDMENTS TO COMPLY WITH CONGRES-
SIONAL REVIEW OF AGENCY RULEMAKING. 
(a) DRG PROSPECTIVE PAYMENT RATE METHODOLOGY.— 
(1) 
IN 
GENERAL.—Section 
1886(d)(6) 
(42 
U.S.C. 
1395ww(d)(6)) is amended by striking "September 1" and insert-
ing "August 1". 
(2) TRANSITION RULE FOR FISCAL YEAR 1998.—^With respect 
to the publication in the Federal Register of the DRG prospec-
tive pa3anent rate methodology under such section for fiscal 
year 1998, the term "60 days" in section 801(a)(3)(A) and section 
802(a) of title 5, United States Code, is deemed to be a reference 
to "30 days". 
(b) HOSPITAL PAYMENT UPDATES.— 
(1) IN GENERAL.—Section 1886(e) (42 U.S.C. 1395ww(e) 
is amended— 
(A) in paragraph (5)(A) by striking "May 1" and insert-
ing "April 1"; and 
(B) in paragraph (5)(B) by striking "September 1" and 
inserting "August 1". 
(2) TRANSITION RULE FOR FISCAL YEAR 1998.—^With respect 
to the publication in the Federal Register of the appropriate 
change factor for inpatient hospital services for discharges in 
fiscal year 
1998 under section 
1886(e)(5)(B) (42 U.S.C. 
1395ww(e)(5)(B)), the term "60 days" in section 801(a)(3)(A) 
and section 802(a) of title 5, United States Code, is deemed 
to be a reference to "30 days". 
(c) APPLICATIONS FOR GEOGRAPHIC RECLASSIFICATION.— 
(1) 
IN GENERAL.—Section 
1886(d)(10)(C) 
(42 
U.S.C. 
1395ww(d)(10)(C)) is amended in clause (ii), by striking "the 
first day of the preceding fiscal year." and inserting "the first 
day of the 13-month period ending on September 30 of the 
preceding fiscal year." 
(2) SPECIAL RULE FOR APPLICATIONS RECEIVED IN FISCAL 
YEAR 1997.—In the case of an application for a change in 
geographic classification under such section for fiscal year 1999, 
the Secretary of Health and Human Services shall shorten 
the deadlines under such section so as to permit completion 
of a final decision by the Secretary by June 15, 1998. 
(d) PHYSICIAN FEE SCHEDULE.—Section 1848(b)(1) (42 U.S.C. 
1395w-4(b)(l)) is amended by striking "Before January 1 of each 
year beginning with 1992" and inserting "Before November 1 of 
the preceding year, for each year beginning with 1998". 
PUBLIC LAW 105-33—AUG. 5, 1997 
Subtitle H—^Medicaid 
111 
STAT. 
489 
CHAPTER 
1—MANAGED CARE 
SEC. 4701. STATE OPTION OF USING MANAGED CABE; CHANGE IN 
TERMINOLOGY. 
(a) USE OF MANAGED CARE GENERALLY.^Title XIX is amended 
by redesignating section 1932 as section 1933 and by inserting 
after section 1931 the following new section: 
"PROVISIONS RELATING TO MANAGED CARE 
"SEC. 1932. (a) STATE OPTION TO USE MANAGED CARE.— 
"(1) USE OF MEDICAID MANAGED CARE ORGANIZATIONS AND 
PRIMARY CARE CASE MANAGERS.— 
"(A) IN GENERAL.—Subject to the succeeding provisions 
of this section, and notwithstanding paragraph (1), (10)(B), 
or (23)(A) of section 1902(a), a State— 
"(i) may require an individual who is eligible for 
medical assistance under the State plan under this 
title to enroll with a managed care entity as a condition 
of receiving such assist£ince (and, with respect to assist-
ance furnished by or under arrangements with such 
entity, to receive such assistance through the entity), 
if— 
"(I) the entity and the contract with the State 
meet the applicable requirements of this section 
and section 1903(m) or section 1905(t), and 
"(II) the requirements 
described 
in the 
succeeding paragraphs of this subsection are met; 
and 
"(ii) may restrict the number of provider agree-
ments with managed care entities under the State 
plan if such restriction does not substantially impair 
access to services. 
"(B) DEFINITION OF MANAGED CARE ENTITY.—In this 
section, the term 'managed care entity' means— 
"(i) a medicaid managed care organization, as 
defined in section 1903(m)(l)(A), that provides or 
arranges for services for enrollees under a contract 
pursuant to section 1903(m); and 
"(ii) a primary care case manager, as defined in 
section 1905(t)(2). 
"(2) SPECIAL RULES.— 
"(A) EXEMPTION OF CERTAIN CHILDREN WITH SPECIAL 
NEEDS.—^A state may not require under paragraph (1) the 
enrollment in a managed care entity of an individual under 
19 years of age who— 
"(i) is eligible for supplemental security income 
under title XVI; 
"(ii) is described in section 501(a)(1)(D); 
"(iii) is described in section 1902(e)(3); 
"(iv) is receiving foster care or adoption assistance 
under part E of title IV; or 
"(v) is in foster care or otherwise in an out-of-
home placement. 
42 use 1396v. 
42 use 1396U-2. 
39-194 O - 97 - 17 : QL 3 Part 1 
I l l STAT. 490 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(B) EXEMPTION OF MEDICARE BENEFICIARIES.—A State 
may not require under paragraph (1) the enrollment in 
a managed care entity of an individual who is a qualified 
medicare beneficiary (as defined in section 1905(p)(l)) or 
an individual otherwise eligible for benefits under title 
XVIIL 
"(C) INDIAN ENROLLMENT.^A State may not require 
under paragraph (1) the enrollment in a managed care 
entity of an individual who is an Indian (as defined in 
section 4(c) of the Indian Health Care Improvement Act 
of 1976 (25 U.S.C. 1603(c)) unless the entity is one of 
the following (and only if such entity is participating under 
the plan): 
"(i) The Indian Health Service. 
"(ii) An Indian health program operated by an 
Indian tribe or tribal organization pursuant to a con-
tract, grant, cooperative agreement, or compact with 
the Indian Health Service pursuant to the Indian Self-
Determination Act (25 U.S.C. 450 et seq.). 
"(iii) An urban Indian health program operated 
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.). 
"(3) CHOICE OF COVERAGE.— 
"(A) IN GENERAL.—^A State must permit an individual 
to choose a managed care entity from not less than two 
such entities that meet the applicable requirements of this 
section, and of section 1903(m) or section 1905(t). 
"(B) STATE OPTION.—^At the option of the State, a State 
shall be considered to meet the requirements of subpara-
graph (A) in the case of an individual residing in a rural 
area, if the State requires the individual to enroll with 
a managed care entity if such entity— 
"(i) permits the individual to receive such assist-
ance through not less than two physicians or case 
managers (to the extent that at least two physicians 
or case managers are available to provide such assist-
ance in the area), and 
(ii) permits the individual to obtain such assistance 
from any other provider in appropriate circumstances 
(as established by the State under regulations of the 
Secretary). 
"(C) TREATMENT OF CERTAIN COUNTY-OPERATED HEALTH 
INSURING ORGANIZATIONS.—^A State shall be considered to 
meet the requirement of subparagraph (A) if— 
"(i) the managed care entity in which the individ-
ual is enrolled is a health-insuring 
organization 
which— 
"(I) first became operational prior to January 
1, 1986, or 
"(II) is described in section 9517(c)(3) of the 
Omnibus Budget Reconciliation Act of 1985 (as 
added by section 4734(2) of the Omnibus Budget 
Reconciliation Act of 1990), and 
"(ii) the individual is given a choice between at 
least two providers within such entity. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 491 
"(4) 
PROCESS FOR ENROLLMENT AND TERMINATION AND 
CHANGE OF ENROLLMENT.—As conditions under paragraph 
(IXA)-
"(A) IN GENERAL.—^The State, enrollment broker (if 
any), and managed care entity shall permit an individual 
eligible for medical assistance under the State plan under 
this title who is enrolled with the entity under this title 
to terminate (or change) such enrollment— 
"(i) for cause at any time (consistent with section 
1903(m)(2)(A)(vi)), and 
"(ii) without cause— 
"(I) during the 90-day period beginning on the 
date the individual receives notice of such enroll-
ment, and 
"(II) at least every 12 months thereafter. 
"(B) NOTICE OF TERMINATION RIGHTS.—^The State shall 
provide for notice to each such individual of the opportunity 
to terminate (or change) enrollment under such conditions. 
Such notice shall be provided at least 60 days before each 
annual enrollment opportunity described in subparagraph 
(A)(ii)(II). 
"(C) ENROLLMENT PRIORITIES.—In carrying out para-
graph (1)(A), the State shall establish a method for 
establishing enrollment priorities in the case of a managed 
care entity that does not have sufficient capacity to enroll 
all such individuals seeking enrollment under which 
individuals already enrolled with the entity are given prior-
ity in continuing enrollment with the entity. 
"(D) DEFAULT ENROLLMENT PROCESS.—In carrying out 
paragraph (1)(A), the State shall establish a default enroll-
ment process— 
"(i) under which any such individual who does 
not enroll with a managed care entity during the 
enrollment period specified by the State shall be 
enrolled by the State with such an entity which has 
not been found to be out of substantial compliance 
with the applicable requirements of this section and 
of section 1903(m) or section 1905(t); and 
"(ii) that takes into consideration— 
"(I) maintaining existing provider-individual 
relationships or relationships with providers that 
have traditionally served beneficiaries under this 
title; and 
"(II) if maintaining such provider relationships 
is not possible, the equitable distribution of such 
individuals among qualified managed care entities 
available to enroll such individuals, consistent with 
the enrollment capacities of the entities. 
"(5) PROVISION OF INFORMATION.— 
"(A) INFORMATION IN EASILY UNDERSTOOD FORM.—^Each 
State, enrollment broker, or managed care entity shall 
provide all enrollment notices and informational and 
instructional materials relating to such an entity under 
this title in a manner and form which may be easily under-
stood by enrollees and potential enrollees of the entity 
who are eligible for medical assistance under the State 
plan under this title. 
Ill STAT. 492 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(B) 
INFORMATION TO 
ENROLLEES AND POTENTIAL 
ENROLLEES.—^Each managed care entity that is a medicaid 
managed care organization shall, upon request, make avail-
able to enrollees and potential enrollees in the organiza-
tion's service area information concerning the following: 
"(i) PROVIDERS.—^The identity, locations, qualifica-
tions, and availability of health care providers that 
participate with the organization. 
"(ii) ENROLLEE RIGHTS AND RESPONSIBILITIES.—^The 
rights and responsibilities of enrollees. 
"(iii) GRIEVANCE AND APPEAL PROCEDURES.—^The 
procedures available to an enrollee and a health care 
provider to challenge or appeal the failure of the 
organization to cover a service. 
"(iv) INFORMATION ON COVERED ITEMS AND SERV-
ICES.—^All items and services that are available to 
enrollees under the contract between the State and 
the organization that are covered either directly or 
through a method of referral and prior authorization. 
Each managed care entity that is a primary care case 
manager shall, upon request, make available to enroll-
ees and potential enrollees in the organization's service 
area the information described in clause (iii). 
"(C) 
COMPARATIVE 
INFORMATION.—^A 
State 
that 
requires individuals to enroll with managed care entities 
under paragraph (1)(A) shall annually (and upon request) 
provide, directly or through the managed care entity, to 
such individuals a list identifying the managed care entities 
that are (or will be) available and information (presented 
in a comparative, chart-like form) relating to the following 
for each such entity offered: 
"(i) 
BENEFITS AND COST-SHARING.—^The benefits 
covered and cost-sharing imposed by the entity. 
"(ii) SERVICE AREA.—^The service area of the entity, 
"(iii) QUALITY AND PERFORMANCE.—To the extent 
available, quality and performance indicators for the 
benefits under the entity. 
"(D) INFORMATION ON BENEFITS NOT COVERED UNDER 
MANAGED 
CARE 
ARRANGEMENT.—A State, 
directly 
or 
through managed care entities, shall, on or before an 
individual enrolls with such an entity under this title, 
inform the enrollee in a written and prominent manner 
of any benefits to which the enrollee may be entitled to 
under this title but which are not made available to the 
enrollee through the entity. Such information shall include 
information on where and how such enrollees may access 
benefits not made available to the enrollee through the 
entity.", 
(b) CHANGE IN TERMINOLOGY.— 
(1) 
IN GENERAL.—Section 
1903(m)(l)(A) 
(42 
U.S.C. 
1396b(m)) is amended— 
(A) by striking 'The term" and all that follows through 
"and—" and inserting "The term 'medicaid managed care 
organization' means a health maintenance organization, 
an eligible organization with a contract under section 1876 
or a Medicare+Choice organization with a contract under 
part C of title XVIII, a provider sponsored organization, 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 493 
or any other public or private organization, which meets 
the requirement of section 1902(w) and—^"; and 
(B) by adding after and below clause (ii) the following: 
"An organization that is a qualified health maintenance organiza-
tion (as defined in section 1310(d) of the Public Health Service 
Act) is deemed to meet the requirements of clauses (i) and (ii).". 
(2) CONFORMING CHANGES IN TERMINOLOGY.—(A) Each of the 
following provisions is amended by striking "health mainte-
nance organization" and inserting "medicaid managed care 
orgEinization": 
(i) Section 1902(a)(23) (42 U.S.C. 1396a(a)(23)). 
(ii) Section 1902(aX57) (42 U.S.C. 1396a(a)(57)). 
(iii) Section 1902(p)(2) (42 U.S.C. 1396a(p)(2)). 
(iv) Section 1902(w)(2)(E) (42 U.S.C. 1396a(w)(2)(E)). 
(v) Section 1903(k) (42 U.S.C. 1396b(k)). 
(vi) In section 1903(m)(l)(B). 
(vii) In subparagraphs (A)(i) and (H)(i) of section 
1903(mX2) (42 U.S.C. 1396b(m)(2)). 
(viii) Section 1903(m)(4)(A) (42 U.S.C. 1396b(m)(4)(A)), 
the first place it appears. 
(ix) 
Section 
1925(b)(4)(D)(iv) 
(42 
U.S.C. 
1396r-
6(b)(4XD)(iv)). 
(x) Section 1927(jXl) (42 U.S.C. 1396r-8(jXl)) is 
amended by striking "***Health Maintenance Organiza-
tions, including those organizations" and inserting "health 
maintenance organizations, including medicaid managed 
care orgEinizations". 
(B) Section 1903(mX2XH) (42 U.S.C. 1396b(mX2XH)) is 
amended, in the matter following clause (iii), by striking "health 
maintenance". 
(C) Clause (viii) of section 1903(wX7)(A) (42 U.S.C. 
1396b(w)(7)(A)) is amended to read as follows: 
"(viii) Services of a medicaid managed 
care 
organization with a contract under section 1903(m).". 
(D) Section 1925(bX4XDXiv) (42 U.S.C. 1396r-6(bX4XDXiv)) 
is amended— 
(i) in the heading, by striking "HMO" and inserting 
"MEDICAID MANAGED CARE ORGANIZATION"; and 
(ii) by inserting "and the applicable requirements of 
section 1932" before the period at the end. 
(c) COMPLIANCE OF CONTRACT WITH NEW REQUIREMENTS.— 
Section 1903(mX2)(A) (42 U.S.C. 1396b(mX2)(A)) is amended— 
(1) by striking "and" at the end of clause (x), 
(2) by striking the period at the end of clause (xi) and 
inserting "; and"; and 
(3) by adding at the end the following: 
"(xi) such contract, and the entity complies with the 
applicable requirements of section 1932.". 
(d) 
CONFORMING AMENDMENTS TO FREEDOM-OF-CHOICE AND 
TERMINATION OF ENROLLMENT REQUIREMENTS.— 
(1) Section 1902(aX23) (42 U.S.C. 1396a(aX23)), as amend-
ed by section 4724(d), is Eimended by striking "and in section 
1915" and inserting ", in section 1915, and in section 1932(a)". 
(2) Section 1903(mX2) (42 U.S.C. 1396b(mX2)) is amend-
ed— 
(A) in paragraph (A)(vi)— 
Ill STAT. 494 
PUBLIC LAW 105-33—AUG. 5, 1997 
(i) by striking "except as provided under subpara-
graph (F),", 
(ii) by striking "without cause" and all that follows 
through "for such termination" and inserting "in 
accordance with section 1932(a)(4);", 
(iii) by inserting "in accordance with such section" 
after "provides for notification"; and 
(B) by striking subparagraph (F). 
SEC. 4702. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE 
OPTION WITHOUT NEED FOR WAIVER. 
(a) IN GENERAL.—Section 1905 (42 U.S.C. 1396d) is amended— 
(1) in subsection (a)— 
(A) by striking "and" at the end of paragraph (24); 
(B) by redesignating paragraph (25) as paragraph (26) 
and by striking the period at the end of such paragraph 
and inserting a comma; and 
(C) by inserting after paragraph (24) the following 
new paragraph: 
"(25) primary care case management services (as defined 
in subsection (t)); and"; and 
(2) by adding at the end the following new subsection: 
"(t)(l) The term 'primary care case management services' means 
case-msinagement related services (including locating, coordinating, 
and monitoring of health care services) provided by a primary 
care case manager under a primary care case management contract. 
"(2) The term 'primary care case manager' means any of the 
following that provides services of the tj^pe described in paragraph 
(1) under a contract referred to in such paragraph: 
"(A) A physician, a physician group practice, or an entity 
emplo3dng or having other arrangements with physicians to 
provide such services. 
"(B) 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 contract' means 
a contract between a primary care case manager and a State 
under which the manager undertakes to locate, coordinate, and 
monitor covered primary care (and such other covered services 
as may be specified under the contract) to all individuals enrolled 
with the manager, and which— 
"(A) provides for reasonable and adequate hours of oper-
ation, including 24-hour availability of information, referral, 
and treatment with respect to medical emergencies; 
"(B) restricts enrollment to individuals residing sufficiently 
near a service delivery site of the manager to be able to reach 
that site within a reasonable time using available and afford-
able modes of transportation; 
"(C) provides for arrangements with, or referrals to, suffi-
cient numbers of physicians and other appropriate health care 
professionals to ensure that services under the contract can 
be furnished to enroUees promptly and without compromise 
to quality of care; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 495 
"(D) prohibits discrimination on the basis of health status 
or requirements for health care services in enrollment, 
disenroUment, or reenroUment of individuals eligible for medi-
cal assistance under this title; 
"(E) provides for a right for an enrollee to terminate enroll-
ment in accordance with section 1932(a)(4); and 
"(F) complies with the other applicable provisions of section 
1932. 
"(4) For purposes of this subsection, the term 'primary care' 
includes all health care services customarily provided in accordance 
with State licensure and certification laws and regulations, and 
all laboratory services customarily provided by or through, a general 
practitioner, family medicine physician, internal medicine physician, 
obstetrician/gynecologist, or pediatrician.". 
(b) CONFORMING AMENDMENTS.— 
(1) APPLICATION OF REENROLLMENT PROVISIONS TO PCCMS.— 
Section 1903(m)(2)(H) (42 U.S.C. 1396b(m)(2)(H)) is amended— 
(A) in clause (i), by inserting before the comma the 
following: "or with a primary care case manager with a 
contract described in section 1905(t)(3)"; and 
(B) by inserting before the period at the end the follow-
ing: "or with the manager described in such clause if the 
manager continues to have a contract described in section 
1905(t)(3) with the State". 
(2) CONFORMING CROSS-REFERENCE.—Section 1902(j) (42 
U.S.C. 1396a(j)) is amended by striking "paragraphs (1) through 
(25)" and inserting "a numbered paragraph of. 
SEC. 4703. ELIMINATION OF 75:25 RESTRICTION ON RISK CONTRACTS. 
(a) 
IN 
GENERAL.—Section 
1903(m)(2)(A) 
(42 
U.S.C. 
1396b(m)(2)(A)) is amended by striking clause (ii). 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amend-
ed— 
(A) by striking subparagraphs (C), (D), and (E); and 
(B) in subparagraph (G), by striking "clauses (i) and 
(ii)" and inserting "clause (i)". 
(2) Section 1925(bX4)(D)(iv) (42 U.S.C. 1396r-6(b)(4)(D)(iv)) 
is amended by striking "less than 50 percent" and all that 
follows up to the period at the end. 
SEC. 4704. INCREASED BENEFICIARY PROTECTIONS. 
(a) IN GENERAL.—Section 1932, as added by section 4701(a), 
is amended by adding at the end the following: 
"(b) BENEFICIARY PROTECTIONS.— 
"(1) SPECIFICATION OF BENEFITS.—Each contract with a 
managed care entity under section 1903(m) or under section 
1905(t)(3) shall specify the benefits the provision (or arrange-
ment) for which the entity is responsible. 
"(2) ASSURING COVERAGE TO EMERGENCY SERVICES.— 
"(A) IN GENERAL.—^Each contract with a medicaid man-
aged care organization under section 1903(m) and each 
contract with a primary care case manager under section 
1905(t)(3) shall require the organization or manager— 
"(i) to provide coverage for emergency services (as 
defined in subparagraph (B)) without regard to prior 
I l l STAT. 496 
PUBLIC LAW 105-33—AUG. 5, 1997 
Applicability. 
authorization or the emergency care provider's contrac-
tual relationship with the organization or manager, 
and 
"(ii) to comply with guidelines established under 
section 1852(d)(2) (respecting coordination of post-sta-
bilization care) in the same manner as such guidelines 
apply to Medicare+Choice plans offered under part C 
of title XVin. 
The requirement under clause (ii) shall first apply 30 days 
after the date of promulgation of the guidelines referred 
to in such clause. 
"(B) EMERGENCY SERVICES DEFINED.—In subparagraph 
(A)(i), the term 'emergency services' means, with respect 
to an individual enrolled with an organization, covered 
inpatient and outpatient services that— 
"(i) are furnished by a provider that is qualified 
to furnish such services under this title, and 
"(ii) are needed to evaluate or stabilize an emer-
gency medical condition (as defined in subparagraph 
(C)). 
"(C) 
EMERGENCY MEDICAL CONDITION DEFINED.—In 
subparagraph (B)(ii), the term 'emergency medical condi-
tion' means a medical condition manifesting itself by acute 
sjrmptoms of sufficient severity (including severe pain) such 
that a prudent lajrperson, who possesses an average knowl-
edge of health and medicine, could reasonably expect the 
absence of immediate medical attention to result in— 
"(i) placing the health of the individual (or, with 
respect to a pregnant woman, the health of the woman 
or her unborn child) in serious jeopardy, 
"(ii) serious impairment to bodily functions, or 
"(iii) serious dysfunction of any bodily organ or 
part. 
"(3) 
PROTECTION 
OF 
ENROLLEE-PROVIDER COMMUNICA-
TIONS.— 
"(A) IN GENERAL.—Subject to subparagraphs (B) and 
(C), under a contract under section 1903(m) a medicaid 
managed care organization (in relation to an individual 
enrolled under the contract) shall not prohibit or otherwise 
restrict a covered health care professional (as defined in 
subparagraph (D)) from advising such an individual who 
is a patient of the professional about the health status 
of the individual or medical care or treatment for the 
individual's condition or disease, regardless of whether 
benefits for such care or treatment are provided under 
the contract, if the professional is acting within the lawful 
scope of practice. 
"(B) CONSTRUCTION.—Subparagraph (A) shall not be 
construed as requiring a medicaid managed care organiza-
tion to provide, reimburse for, or provide coverage of, a 
counseling or referral service if the organization— 
"(i) objects to the provision of such service on moral 
or religious grounds; and 
"(ii) in the manner and through the written 
instrumentalities such organization deems appropriate, 
makes available information on its policies regarding 
such service to prospective enroUees before or during 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 497 
enrollment and to enroUees within 90 days after the 
date that the organization adopts a change in policy 
regarding such a counseling or referral service. 
Nothing in this subparagraph shsdl be construed to affect 
disclosure requirements under State law or under the 
Employee Retirement Income Security Act of 1974. 
"(C) HEALTH CARE PROFESSIONAL DEFINED.—For pur-
poses of this paragraph, the term 'health care professional' 
means a physician (as defined in section 186 l(r)) or other 
health care professional if coverage for the professional's 
services is provided under the contract referred to in 
subparagraph (A) for the services of the professional. Such 
term includes a podiatrist, optometrist, 
chiropractor, 
psychologist, dentist, physician assistant, physical or 
occupational therapist and therapy assistant, speech-lan-
guage pathologist, audiologist, registered or licensed prac-
tical nurse (including nurse practitioner, clinical nurse 
specialist, certified registered nurse anesthetist, and cer-
tified nurse-midwife), licensed certified social worker, reg-
istered respiratory therapist, and certified respiratory ther-
apy technician. 
"(4) GRIEVANCE PROCEDURES.—^Each medicaid managed 
care organization shall establish an internal grievance proce-
dure under which an enroUee who is eligible for medical assist-
ance under the State plan under this title, or a provider on 
behalf of such an enroUee, may challenge the denial of coverage 
of or payment for such assistance. 
"(5) 
DEMONSTRATION OF ADEQUATE CAPACITY AND SERV-
ICES.—^Each medicaid managed care organization shall provide 
the State and the Secretgiry with adequate assurances (in a 
time and manner determined by the Secretary) that the 
organization, with respect to a service area, has the capacity 
to serve the expected enrollment in such service area, including 
assurances that the organization— 
"(A) offers an appropriate range of services and access 
to preventive and primary care services for the population 
expected to be enrolled in such service area, and 
"(B) 
maintains 
a 
sufficient 
number, 
mix, 
and 
geographic distribution of providers of services. 
"(6) PROTECTING ENROLLEES AGAINST LL\BILITY FOR PAY-
MENT.—^Each medicaid managed care organization shall provide 
that an individual eligible for medical assistance under the 
State plan under this title who is enrolled with the organization 
may not be held liable— 
"(A) for the debts of the organization, in the event 
of the organization's insolvency, 
"(B) for services provided to the individual— 
"(i) in the event of the organization failing to 
receive pajnnent from the State for such services; or 
"(ii) in the event of a health care provider with 
a contractual, referral, or other arrangement with the 
organization failing to receive payment from the State 
or the organization for such services, or 
"(C) for payments to a provider that furnishes covered 
services under a contractual, referral, or other arrsingement 
with the organization in excess of the amount that would 
Ill STAT. 498 
PUBLIC LAW 105-33—AUG. 5, 1997 
be owed by the individuEil if the organization had directly 
provided the services. 
"(7) 
ANTIDISCRIMINATION.—A medicaid 
managed 
care 
organization shall not discriminate with respect to participa-
tion, reimbursement, or indemnification as to any provider 
who is acting within the scope of the provider's license or 
certification under applicable State law, solely on the basis 
of such license or certification. This paragraph shall not be 
construed to prohibit an organization from including providers 
only to the extent necessary to meet the needs of the organiza-
tion's enroUees or from establishing any measure designed to 
maintain quality and control costs consistent with the respon-
sibilities of the organization. 
"(8) COMPLIANCE WITH CERTAIN MATERNITY AND MENTAL 
HEALTH 
REQUIREMENTS.—^Each 
medicaid 
managed 
care 
organization shall comply with the requirements of subpart 
2 of part A of title XXVII of the Public Health Service Act 
insofar as such requirements apply and are effective with 
respect to a health insurance issuer that offers group health 
insurance coverage.". 
(b) PROTECTION OF ENROLLEES AGAINST BALANCE BILLING 
THROUGH 
SUBCONTRACTORS.—Section 
1128B(d)(l) (42 U.S.C. 
1320a-7b(d)(l)) is amended by inserting "(or, in the case of services 
provided to an individual enrolled with a medicaid managed care 
organization under title XIX under a contract under section 1903(m) 
or under a contractual, referral, or other arrangement under such 
contract, at a rate in excess of the rate permitted under such 
contract)" before the comma at the end. 
42 use 1396U-2. 
SEC. 4705. QUALITY ASSURANCE STANDARDS. 
(a) IN GENERAL.—Section 1932 is further amended by adding 
at the end the following: 
"(c) QUALITY ASSURANCE STANDARDS.— 
"(1) QUALITY ASSESSMENT AND IMPROVEMENT STRATEGY.— 
"(A) IN GENERAL.—If a State provides for contracts 
with medicaid managed care organizations under section 
1903(m), the State shall develop and implement a quality 
assessment and improvement strategy consistent with this 
paragraph. Such strategy shall include the following: 
"(i) ACCESS STANDARDS.—Standards for access to 
care so that covered services are available within 
reasonable timeframes and in a manner that ensures 
continuity of care £ind adequate primary care and 
specialized services capacity. 
"(ii) 
OTHER 
MEASURES.—Examination of other 
aspects of care and service directly related to the 
improvement of quality of care (including grievance 
procedures and marketing and information standards), 
"(iii) MONITORING PROCEDURES.—Procedures for 
monitoring and evaluating the quality and appropriate-
ness of care and services to enrollees that reflect the 
full spectrum of populations enrolled under the con-
tract and that includes requirements for provision of 
quality assurance data to the State using the data 
and information set that the Secretary has specified 
for use under part C of title XVIII or such zdtemative 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 499 
data as the Secretary approves, in consultation with 
the State. 
"(iv) 
PERIODIC 
REVIEW.—Regular, 
periodic 
examinations of the scope and content of the strategy. 
"(B) 
STANDARDS.—^The 
strategy 
developed 
under 
subparagraph (A) shall be consistent with standards that 
the Secretary first establishes within 1 year after the date 
of the enactment of this section. Such standards shall not 
preempt any State standards that are more stringent than 
such standards. Guidelines relating to quality assurance Applicability, 
that are applied under section 1915(b)(1) shall apply under 
this subsection until the effective date of standards for 
quality assurance established under this subparagraph. 
"(C) MONITORING.—^The Secretary shall monitor the 
development and implementation of strategies 
under 
subparagraph (A). 
"(D) CONSULTATION.—^The Secretary shall conduct 
activities under subparagraphs (B) and (C) in consultation 
with the States. 
"(2) EXTERNAL INDEPENDENT REVIEW OF MANAGED CARE 
ACTIVITIES.— 
"(A) REVIEW OF CONTRACTS.— 
"(i) IN GENERAL.—^Each contract under section 
1903(m) with a medicaid managed care organization 
shall provide for an annual (as appropriate) external 
independent review conducted by a qualified independ-
ent entity of the quality outcomes and timeliness of, 
and access to, the items and services for which the 
organization is responsible under the contract. The 
requirement for such a review shall not apply until 
after the date that the Secretary establishes the identi-
fication method described in clause (ii). 
"(ii) 
QUALIFICATIONS 
OF REVIEWER.—^The Sec-
retary, in consultation with the States, shall establish 
a method for the identification of entities that are 
qualified to conduct reviews under clause (i). 
"(iii) U S E OF PROTOCOLS.^The Secretary, in 
coordination with the National Governors' Association, 
shall contract with an independent quality review 
organization (such as the National Committee for Qual-
ity Assurance) to develop the protocols to be used in 
external independent reviews conducted under this 
paragraph on and after January 1, 1999. 
"(iv) AVAILABILITY OF RESULTS.—^The results of 
each external independent review conducted under this 
subparagraph shall be available to participating health 
care providers, enroUees, and potential enroUees of 
the organization, except that the results may not be 
made available in a manner that discloses the identity 
of any individual patient. 
"(B) NONDUPLICATION OF ACCREDITATION 
. ^ A 
State 
may provide that, in the case of a medicaid managed care 
organization that is accredited by a private independent 
entity (such as those described in section 1852(e)(4)) or 
that has an external review conducted under section 
1852(e)(3), the external review activities conducted under 
subparagraph (A) with respect to the organization shall 
I l l STAT. 500 
PUBLIC LAW 105-33—AUG. 5, 1997 
not be duplicative of review activities conducted as part 
of the accreditation process or the external review con-
ducted under such section. 
"(C) 
DEEMED COMPLIANCE FOR MEDICARE MANAGED 
CARE ORGANIZATIONS,—^At the option of a State, the require-
ments of subparagraph (A) shall not apply with respect 
to a medicaid managed care organization if the organization 
is an eligible organization with a contract in effect under 
section 1876 or a Medicare+Choice organization with a 
contract in effect under C of title XVIII and the organiza-
tion has had a contract in effect under section 1903(m) 
at least during the previous 2-year period. 
(b) INCREASED F F P FOR EXTERNAL QUALITY REVIEW ORGANIZA-
TIONS.—Section 1903(a)(3)(C) (42 U.S.C. 1396b(a)(3)(C)) is amend-
ed— 
(1) by inserting "(i)" after "(C)", and 
(2) by adding at the end the following new clause: 
"(ii) 75 percent of the sums expended with respect 
to costs incurred during such quarter (as found necessary 
by the Secretary for the proper and efficient administration 
of the State plan) as are attributable to the performance 
of independent external reviews conducted under section 
1932(c)(2); and". 
42 use 1396U-2 
(c) STUDIES AND REPORTS.— 
i^ote. 
(1) GAO STUDY AND REPORT ON QUALITY ASSURANCE AND 
ACCREDITATION STANDARDS.— 
(A) STUDY.—The Comptroller General of the United 
States shall conduct a study and analysis of the quality 
assurance programs and accreditation standards applicable 
to managed care entities operating in the private sector, 
or to such entities that operate under contracts under 
the medicare program under title XVIII of the Social Secu-
rity Act (42 U.S.C. 1395 et seq.). Such study shall deter-
mine— 
(i) if such programs and standards include consid-
eration of the accessibility and quality of the health 
care items and services delivered under such contracts 
to low-income individuals; and 
(ii) the appropriateness of applying such programs 
and standards to medicaid managed care organizations 
under section 1932(c) of such Act. 
(B) REPORT.—^The Comptroller General shall submit 
a report to the Committee on Commerce of the House 
of Representatives and the Committee on Finance of the 
Senate on the study conducted under subparagraph (A). 
(2) STUDY AND REPORT ON SERVICES PROVIDED TO INDIVID-
UALS WITH SPECIAL HEALTH CARE NEEDS.— 
(A) STUDY.—^The Secretary of Health and Human Serv-
ices, in consultation with States, managed care organiza-
tions, the National Academy of State Health Policy, rep-
resentatives of beneficiaries with special health care needs, 
experts in specialized health care, and others, shall conduct 
a study concerning safeguards (if any) that may be needed 
to ensure that the health care needs of individuals with 
special health care needs and chronic conditions who are 
enrolled with medicaid managed care organizations are 
adequately met. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 501 
(B) REPORT.—^Not later than 2 years after the date 
of the enactment of this Act, the Secretary shall submit 
to Committees described in paragraph (1)(B) a report on 
such study. 
SEC. 4706. SOLVENCY STANDARDS. 
Section 1903(m)(l) (42 U.S.C. 1396b(mXl)) is amended— 
(1) in subparagraph (A)(ii), by inserting ", meets the 
requirements of subparagraph (C)(i) (if applicable)," after 
"provision is satisfactory to the State", and 
(2) by adding at the end the following: 
"(C)(i) Subject to clause (ii), a provision meets the requirements 
of this subparagraph for an organization if the organization meets 
solvency standards established by the State for private health 
maintenance organizations or is licensed or certified by the State 
as a risk-bearing entity. 
"(ii) Clause (i) shall not apply to an organization if— 
"(I) the organization is not responsible for the provision 
(directly or through arrangements with providers of services) 
of inpatient hospitsil services and physicians' services; 
(II) the orgEinization is a public entity; 
"(III) the solvency of the organization is guaranteed by 
the State; or 
"(IV) the organization is (or is controlled by) one or more 
Federally-qualified health centers 2ind meets solvency stand-
ards established by the State for such an organization. 
For purposes of subclause (IV), the term 'control' meeins the posses-
sion, whether direct or indirect, of the power to direct or cause 
the direction of the management and policies of the organization 
through membership, bosird representation, or an ownership 
interest equal to or greater than 50.1 percent.". 
SEC. 4707. PROTECTIONS AGAINST FRAUD AND ABUSE. 
42 USC 1396u-2. 
(a) IN GENERAL.—Section 1932 (42 U.S.C. 1396v) is further 
amended by adding at the end the following: 
"(d) PROTECTIONS AGAINST FRAUD AND ABUSE.— 
"(1) PROHIBITING AFFILIATIONS WITH INDIVIDUALS DEBARRED 
B
Y FEDERAL AGENCIES.— 
"(A) IN GENERAL.—^A managed care entity may not 
knowingly— 
(i) have a person described in subparagraph (C) 
as a director, officer, partner, or person with beneficial 
ownership of more than 5 percent of the entit/s equity, 
or 
"(ii) have an emplojrment, consulting, or other 
agreement with a person described in such subpara-
graph for the provision of items and services that are 
significant and material to the entity's obligations 
under its contract with the State. 
"(B) EFFECT OF NONCOMPLIANCE.—If a State finds that 
a managed care entity is not in compliance with clause 
(i) or (ii) of subparagraph (A), the State— 
"(i) shall notify the Secretary of such noncompli-
ance; 
"(ii) may continue an existing agreement with the 
entity unless the Secretary (in consultation with the 
Inspector General of the Department of Health and 
Human Services) directs otherwise; and 
I l l STAT. 502 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(iii) may not renew or otherwise extend the dura-
tion of an existing agreement with the entity unless 
the Secretary (in consultation with the Inspector Gren-
eral of the Department of Health and Human Services) 
provides to the State and to Congress a written state-
ment describing compelling reasons that exist for 
renewing or extending the agreement. 
"(C) PERSONS DESCRIBED.—^A person is described in 
this subparagraph if such person— 
"(i) is debarred, suspended, or otherwise excluded 
from participating in procurement activities under the 
Federal Acquisition Regulation or from participating 
in nonprocurement activities under regulations issued 
pursuant to Executive Order No. 12549 or under guide-
lines implementing such order; or 
"(ii) is an affiliate (as defined in such Act) of a 
person described in clause (i). 
"(2) RESTRICTIONS ON MARKETING,— 
"(A) DISTRIBUTION OF MATERIALS.— 
"(i) IN GENERAL.—A managed care entity, with 
respect to activities under this title, may not distribute 
directly or through any agent or independent contractor 
marketing materials within any State— 
"(I) without the prior approval of the State, 
and 
"(II) that contain false or materially mislead-
ing information. 
The requirement of subclause (I) shall not apply with 
respect to a State until such date as the Secretary 
specifies in consultation with such State. 
"(ii) CONSULTATION IN REVIEW OF MARKET MATE-
RIALS.—In the process of reviewing and approving such 
materials, the State shall provide for consultation with 
a medical care advisory committee. 
"(B) SERVICE MARKET.—A managed care entity shall 
distribute marketing materials to the entire service area 
of such entity covered under the contract under section 
1903(m) or section 1903(t)(3). 
"(C) PROHIBITION OF TIE-INS.—^A managed care entity, 
or any agency of such entity, may not seek to influence 
an individual's enrollment with the entity in conjunction 
with the sale of any other insurance. 
"(D) PROHIBITING MARKETING FRAUD.—Each managed 
care entity shall comply with such procedures and condi-
tions as the Secretary prescribes in order to ensure that, 
before an individual is enrolled with the entity, the individ-
ual is provided accurate oral and written information suffi-
cient to make an informed decision whether or not to 
enroll. 
"(E) 
PROHIBITION OF 'COLD-CALL' MARKETING.—^Each 
managed care entity shall not, directly or indirectly, con-
duct door-to-door, telephonic, or other 'cold-call' marketing 
of enrollment under this title. 
"(3) STATE CONFLICT-OF-INTEREST SAFEGUARDS IN MEDICAID 
RISK CONTRACTING.—A medicaid managed care organization 
may not enter into a contract with any State under section 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 503 
1903(m) unless the State has in effect conflict-of-interest safe-
guards with respect to officers and employees of the State 
with responsibilities relating to contracts with such organiza-
tions or to the default enrollment process described in sub-
section (a)(4)(C)(ii) that are at least as effective as the Federal 
safeguards provided under section 27 of the Office of Federal 
Procurement Policy Act (41 U.S.C. 423), against conflicts of 
interest that apply with respect to Federal procurement officials 
with comparable responsibilities with respect to such contracts. 
"(4) USE OF UNIQUE PHYSICIAN IDENTIFIER FOR PARTICIPAT-
ING PHYSICIANS.—^Each medicaid managed care organization 
shall require each physician providing services to enroUees 
eligible for medical assistance under the State plan under this 
title to have a unique identifier in accordance with the system 
established under section 1173(b). 
"(e) SANCTIONS FOR NONCOMPLIANCE.— 
"(1) USE OF INTERMEDIATE SANCTIONS BY THE STATE TO 
ENFORCE REQUIREMENTS.— 
"(A) IN GENERAL.—^A State may not enter into or renew 
a contract under section 1903(m) unless the State has 
established intermediate sanctions, which may include any 
of the types described in paragraph (2), other than the 
termination of a contract with a medicaid managed care 
organization, which the State may impose against a medic-
aid managed care organization with such a contract, if 
the organization— 
"(i) fails substantially to provide medically nec-
essary items and services that are required (under 
law or under such organization's contract with the 
State) to be provided to an enroUee covered under 
the contract; 
"(ii) imposes premiums or charges on enroUees 
in excess of the premiums or charges permitted under 
this title; 
"(iii) acts to discriminate among enroUees on the 
basis of their health status or requirements for health 
care services, including expulsion or refusal to reenroU 
an individusil, except as permitted by this title, or 
engaging in any practice that would reasonably be 
expected to have the effect of denying or discouraging 
enrollment with the organization by eligible individuals 
whose medical condition or history indicates a need 
for substantial future medical services; 
"(iv) misrepresents or falsifies information that is 
furnished— 
"(I) to the Secretary or the State under this 
title; or 
"(II) to an enroUee, potential enroUee, or a 
health care provider under such title; or 
"(v) fails to comply with the applicable require-
ments of section 1903(m)(2)(A)(x). 
The State may also impose such intermediate sanction 
against a managed care entity if the State determines 
that the entity distributed directly or through any agent 
or independent contractor marketing materials in violation 
of subsection (d)(2)(A)(i)(II). 
I l l STAT. 504 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(B) RULE OF CONSTRUCTION.—Clause (i) of subpara-
graph (A) shall not apply to the provision of abortion serv-
ices, except that a State may impose a sanction on any 
medicaid managed care organization that has a contract 
to provide abortion services if the organization does not 
provide such services as provided for under the contract. 
"(2) INTERMEDIATE SANCTIONS.—^The sanctions described in 
this paragraph are as follows: 
"(A) Civil money penalties as follows: 
"(i) Except as provided in clause (ii), (iii), or (iv), 
not more than $25,000 for each determination under 
paragraph (1)(A). 
"(ii) With respect to a determination under clause 
(iii) or (iv)(I) of paragraph (1)(A), not more than 
$100,000 for each such determination. 
"(iii) With respect to a determination under para-
graph (l)(A)(ii), double the excess amount charged in 
violation of such subsection (and the excess amount 
charged shall be deducted from the penalty and 
returned to the individual concerned). 
"(iv) Subject to clause (ii), with respect to a deter-
mination under paragraph (l)(A)(iii), $15,000 for each 
individual not enrolled as a result of a practice 
described in such subsection. 
"(B) The appointment of temporary management— 
"(i) to oversee the operation of the medicaid man-
aged care organization upon a finding by the State 
that there is continued egregious behavior by the 
organization or there is a substantial risk to the health 
of enrollees; or 
"(ii) to assure the health of the organization's 
enrollees, if there is a need for temporary management 
while— 
"(I) there is an orderly termination or reorga-
nization of the organization; or 
"(II) improvements are made to remedy the 
violations found under paragraph (1), 
except 
that 
temporary 
management 
under 
this 
subparagraph may not be terminated until the State 
has determined that the medicaid managed care 
organization has the capability to ensure that the viola-
tions shall not recur. 
"(C) Permitting individuals enrolled with the managed 
care entity to terminate enrollment without cause, and 
notifying such individuals of such right to terminate enroll-
ment. 
"(D) Suspension or default of all enrollment of individ-
uals under this title after the date the Secretary or the 
State notifies the entity of a determination of a violation 
of any requirement of section 1903(m) or this section. 
"(E) Suspension of payment to the entity under this 
title for individuals enrolled after the date the Secretary 
or State notifies the entity of such a determination and 
until the Secretary or State is satisfied that the basis 
for such determination has been corrected and is not likely 
to recur. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 505 
"(3) TREATMENT OF CHRONIC SUBSTANDARD ENTITIES.—In 
the case of a medicaid managed care organization which has 
repeatedly failed to meet the requirements of section 1903(m) 
and this section, the State shall (regardless of what other 
sanctions are provided) impose the sanctions described in sub-
paragraphs (B) and (C) of paragraph (2). 
"(4) AUTHORITY TO TERMINATE CONTRACT.— 
"(A) IN GENERAL.—In the case of a managed care entity 
which has failed to meet the requirements of this part 
or a contract under section 1903(m) or 1905(t)(3), the State 
shall have the authority to terminate such contract with 
the entity and to enroll such entity's enrollees with other 
managed care entities (or to permit such enrollees to receive 
medical assistance under the State plan under this title 
other than through a managed care entity). 
"(B) AVAILABILITY OF HEARING PRIOR TO TERMINATION 
OF CONTRACT.—^A State may not terminate a contract with 
a managed care entity under subparagraph (A) unless the 
entity is provided with a hearing prior to the termination. 
"(C) NOTICE AND RIGHT TO DISENROLL IN CASES OF 
TERMINATION HEARING.—-A State may— 
"(i) notify individuals enrolled with a managed 
care entity which is the subject of a hearing to termi-
nate the entity's contract with the State of the hearing, 
and 
"(ii) in the case of such an entity, permit such 
enrollees to disenroll immediately with the entity with-
out cause. 
"(5) 
OTHER PROTECTIONS FOR MANAGED CARE ENTITIES 
AGAINST SANCTIONS IMPOSED BY STATE.—Before imposing any 
sanction against a managed care entity other than termination 
of the entity's contract, the State shall provide the entity with 
notice and such other due process protections as the State 
may provide, except that a State may not provide a managed 
care entity with a pre-termination hearing before imposing 
the sanction described in paragraph (2)(B).". 
(b) LIMITATION ON AVAILABILITY OF F F P FOR USE OF ENROLL-
MENT BROKERS.—Section 1903(b) (42 U.S.C. 1396b(b)) is amended 
by adding at the end the following: 
"(4) Amounts expended by a State for the use an enrollment 
broker in marketing medicaid managed care organizations and other 
managed care entities to eligible individuals under this title shall 
be considered, for purposes of subsection (a)(7), to be necessary 
for the proper and efficient administration of the State plan but 
only if the following conditions are met with respect to the broker: 
"(A) The broker is independent of any such entity and 
of any health care providers (whether or not any such provider 
participates in the State plan under this title) that provide 
coverage of services in the same State in which the broker 
is conducting enrollment activities. 
"(B) No person who is an owner, employee, consultant, 
or has a contract with the broker either has any direct or 
indirect financial interest with such an entity or health care 
provider or has been excluded from participation in the program 
under this title or title XVIII or debarred by any Federal 
agency, or subject to a civil money penalty under this Act.". 
I l l STAT. 506 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 1396U-2. 
42 use 1396b 
note. 
(c) APPLICATION OF DISCLOSURE REQUIREMENTS TO MANAGED 
CARE ENTiTiES.^ection 1124(a)(2)(A) (42 U.S.C. 1320a-3(a)(2)(A)) 
is £imended by inserting "a managed care entity, as defined in 
section 1932(a)(1)(B)," after "renal disease facility,". 
SEC. 4708. IMPROVED ADMINISTRATION. 
(a) CHANGE IN THRESHOLD AMOUNT FOR CONTRACTS REQUIRING 
SECRETARY'S 
PRIOR 
APPROVAL.—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 consumers over the previous year". 
(b) PERMITTING SAME COPAYMENTS IN HEALTH MAINTENANCE 
ORGANIZATIONS AS IN FEE-FOR-SERVICE.—Section 1916 (42 U.S.C. 
1396o) is amended— 
(1) in subsection (a)(2)(D), by striking "or services fur-
nished" and all that follows through "enrolled,"; £ind 
(2) in subsection (b)(2)(D), by striking "or (at the option" 
and all that follows through "enrolled,". 
(c) ASSURING TIMELINESS OF PROVIDER PAYMENTS.—Section 
1932 is further amended by adding at the end the following: 
"(f) TIMELINESS OF PAYMENT.—A contract under section 1903(m) 
with a medicaid managed care organization shsdl provide that the 
organization shall make payment to health CEire providers for items 
and services which are subject to the contract £ind that are furnished 
to individuals eligible for medical assistance under the State plsui 
under this title who are enrolled with the organization on a timely 
basis consistent with the claims payment procedures described in 
section 1902(a)(37)(A), unless the health care provider and the 
organization agree to an alternate pajrment schedule.". 
(d) CLARIFICATION OF APPLICATION OF F F P DENIAL RULES TO 
PAYMENTS MADE PURSUANT TO MANAGED CARE ENTITIES.—Section 
1903(i) (42 U.S.C. 1396b(i)) is amended by adding at the end the 
following new sentence: "Paragraphs (1), (2), (16), (17), and (18) 
shall apply with respect to items or services furnished and amounts 
expended by or through a managed care entity (as defined in 
section 1932(a)(1)(B)) in the same manner as such paragraphs apply 
to items or services furnished and amounts expended directly by 
the State.". 
SEC. 4709. e-MONTH GUARANTEED EUGIBILITY FOR ALL INDIVIDUALS 
ENROLLED IN MANAGED CARE. 
Section 1902(e)(2) (42 U.S.C. 1396a(e)(2)) is amended— 
(1) by striking "who is enrolled" and all that follows through 
"section 1903(m)(2)(A)" and inserting "who is enrolled with 
a medicaid managed care organization (as defined in section 
1903(m)(l)(A)), with a primary care case manager (as defined 
in section 1905(t)),"; and 
(2) by inserting before the period "or by or through the 
case manager". 
SEC. 4710. EFFECTIVE DATES. 
(a) GENERAL EFFECTIVE DATE.—Except as otherwise provided 
in this chapter and section 4759, the amendments made by this 
chapter shall take effect on the date of the enactment of this 
Act and shall apply to contracts entered into or renewed on or 
after October 1, 1997. 
t.'^?^$Sr~. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 507 
(b) SPECIFIC EFFECTIVE DATES.—Subject to subsection (c) and 
section 4759— 
(1) PCCM OPTION.—The amendments made by section 4702 
shall apply to primary care case management services furnished 
on or after October 1, 1997. 
(2) 75:25 RULE.—^The amendments made by section 4703 
apply to contracts under section 1903(m) of the Social Security 
Act (42 U.S.C. 1396b(m)) on and after June 20, 1997. 
(3) QUALITY STANDARDS.—Section 1932(c)(1) of the Social 
Security Act, as added by section 4705(a), shall take effect 
on January 1, 1999. 
(4) SOLVENCY STANDARDS.— 
(A) IN GENERAL.—^The amendments made by section 
4706 shall apply to contracts entered into or renewed on 
or after October 1, 1998. 
(B) TRANSITION RULE.—In the case of an organization 
that as of the date of the enactment of this Act has entered 
into a contract under section 1903(m) of the Social Security 
Act with a State for the provision of medical assistance 
under title XIX of such Act under which the organization 
assumes full financial risk and is receiving capitation pay-
ments, the amendment made by section 4706 shall not 
apply to such organization until 3 years after the date 
of the enactment of this Act. 
(5) SANCTIONS FOR NONCOMPLIANCE.—Section 1932(e) of 
the Social Security Act, as added by section 4707(a), shall 
apply to contracts entered into or renewed on or after April 
1, 1998. 
(6) LIMITATION ON FFP FOR ENROLLMENT BROKERS.—The 
amendment made by section 4707(b) shall apply to amounts 
expended on or after October 1, 1997. 
(7) 6-MONTH GUARANTEED ELIGIBILITY.—^The amendments 
made by section 4709 shall take effect on October 1, 1997. 
(c) NONAPPLICATION TO WAIVERS.—^Nothing in this chapter (or 
the amendments made by this chapter) shall be construed as affect-
ing the terms and conditions of any waiver, or the authority of 
the Secretary of Health and Human Services with respect to any 
such waiver, under section 1115 or 1915 of the Social Security 
Act (42 U.S.C. 1315,1396n). 
CHAPTER 2—FLEXIBILITY IN PAYMENT OF PROVIDERS 
SEC. 4711. FLEXmiUTY IN PAYMENT METHODS FOR HOSPITAL, NURS-
ING FACHJTY, ICF/MR, AND HOME HEALTH SERVICES. 
(a) REPEAL OF BOREN REQUIREMENTS.—Section 1902(a)(13) (42 
U.S.C. 1396a(a)(13)) is amended— 
(1) by striking all that precedes subparagraph (D) and 
inserting the following: 
"(13) provide— 
"(A) for a public process for determination of rates 
of pa3anent under the plan for hospital services, nursing 
facility services, and services of intermediate care facilities 
for the mentally retarded under which— 
"(i) proposed rates, the methodologies underlying 
the establishment of such rates, and justifications for 
the proposed rates are published. 
I l l STAT. 508 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(ii) providers, beneficiaries and their representa-
tives, and other concerned State residents are given 
a reasonable opportunity for review and comment on 
the proposed rates, methodologies, and justifications, 
"(iii) final rates, the methodologies underlying the 
establishment of such rates, and justifications for such 
final rates are published, and 
"(iv) in the case of hospiteils, such rates take into 
account (in a manner consistent with section 1923) 
the situation of hospitals which serve a disproportion-
ate number of low-income patients with special needs;"; 
(2) by redesignating subparagraphs (D) and (E) as subpara-
graphs (B) and (C), respectively; 
(3) in subparagraph (B), as so redesignated, by adding 
"and" at the end; 
(4) in subparagraph (C), as so redesignated, by striking 
"and" at the end; and 
(5) by striking subparagraph (F). 
42 use 1396a 
(b) STUDY AND REPORT.— 
note. 
(1) STUDY.—^The Secretary of Health and Human Services 
shall study the effect on access to, and the quality of, services 
provided to beneficiaries of the rate-setting methods used by 
States pursuant to section 1902(a)(13)(A) of the Social Security 
Act (42 U.S.C. 1396a(a)(13XA)), as amended by subsection (a). 
(2) REPORT.—^Not later than 4 years after the date of the 
enactment of this Act, the Secretary of Health and Human 
Services shall submit a report to the appropriate committees 
of Congress on the conclusions of the study conducted under 
paragraph (1), together with any recommendations for legisla-
tion as a result of such conclusions, 
(c) CONFORMING AMENDMENTS.— 
(1) Section 1905(o)(3) (42 U.S.C. 1396d(o)(3)) is amended 
by striking "amount described in section 1902(a)(13)(D)" and 
inserting "amount determined in section 1902(a)(13)(B)". 
(2) Section 1923 (42 U.S.C. 1396r-4) is amended, in sub-
sections (a)(1) and (e)(1), by striking "1902(a)(13)(A)" each place 
it appears and inserting "1902(a)(13)(A)(iv)". 
42 use 1396a 
(d) EFFECTIVE DATE.—^This section shall take effect on the 
note. 
date of the enactment of this Act and the amendments made by 
subsections (a) and (c) shall apply to payment for items and services 
furnished on or after October 1,1997. 
SEC. 4712. PAYMENT FOR CENTER AND CLINIC SERVICES. 
(a) PHASE-OUT OF PAYMENT BASED ON REASONABLE COSTS.— 
Section 1902(a)(13)(C) (42 U.S.C. 1396a(a)(13)(C)), as redesignated 
by section 4711(a)(2), is amended by inserting "(or 95 percent for 
services furnished during fiscal year 2000, 90 percent for services 
furnished during fiscal year 2001, 85 percent for services furnished 
during fiscal year 2002, or 70 percent for services furnished during 
fiscal year 2003)" after "100 percent". 
(b) TRANSITIONAL SUPPLEMENTAL PAYMENT FOR SERVICES FUR-
NISHED UNDER CERTAIN MANAGED CARE CONTRACTS.— 
(1) 
IN GENERAL.—Section 
1902(a)(13)(C) 
(42 
U.S.C. 
1396a(a)(13)(C)), as so redesignated, is further amended— 
(A) by inserting "(i)" afl;er "(C)", and 
(B) by inserting before the semicolon at the end the 
following: "and (ii) in carrying out clause (i) in the case 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 509 
42 use 1396a 
note. 
of services furnished by a Federally-qualified health center 
or a rural health clinic pursuant to a contract between 
the center and an organization under section 1903(m), for 
payment to the center or clinic at least quarterly by the 
State of a supplemental paj^ment equal to the amount 
(if any) by which the amount determined under clause 
(i) exceeds the amount of the payments provided under 
such contract". 
(2) CONFORMING AMENDMENT TO MANAGED CARE CONTRACT 
REQUIREMENT.—Clause (ix) of section 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 provision of services with 
a Federally-qualified health center or a rural health clinic, 
that the entity shall provide pa3anent that is not less than 
the level and amount of pa3nnent which the entity would make 
for the services if the services were furnished by a provider 
which is not a Federally-qualified health center or a rural 
health clinic;". 
(3) EFFECTIVE DATE.—^The amendments made by this sub-
section shall apply to services furnished on or after October 
1, 1997. 
(c) END OF TRANSITIONAL PAYMENT RULES.—Effective for serv-
ices furnished on or after October 1, 2003— 
(1) subparagraph (C) of section 1902(a)(13) (42 U.S.C. 
1396a(a)(13)), as so redesignated, 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-FREESTANDING LOOK-
ALIKES 
(1) IN GENERAI..—Section 
1905(l)(2)(B)(iii) (42 U.S.C. 
1396d(l)(2)(B)(iii)) is amended by inserting "including require-
ments of the Secretary that an entity may not be owned, 
controlled, or operated by another entity," after "such a grant,". 
(2) EFFECTIVE DATE.—^The amendment made by paragraph 
(1) shall apply to services furnished on or after the date of 
the enactment of this Act. 
SEC. 4713. ELIMINATION OF OBSTETRICAL AND PEDIATRIC PAYMENT 
RATE REQUIREMENTS. 
(a) IN GENERAL.—Section 1926 (42 U.S.C. 1396r-7) is repealed. 
(b) EFFECTIVE DATE.—^The repeal made by subsection (a) shall 
42 use i396r-7 
apply to services furnished on or after October 1, 1997. 
note. 
SEC. 4714. MEDICAID PAYMENT RATES FOR CERTAIN MEDICARE COST-
SHARING. 
(a) CLARIFICATION REGARDING STATE LIABILITY FOR MEDICARE 
(1) IN GENERAL.—Section 1902(n) (42 U.S.C. 1396a(n)) is 
amended— 
(A) by inserting "(1)" after "(n)", and 
(B) by adding at the end the following: 
"(2) In carrying out paragraph (1), a State is not required 
to provide any payment for any expenses incurred relating to pay-
ment for deductibles, coinsurance, or copayments for medicare cost-
sharing to the extent that payment under title XVIII for the service 
would exceed the payment amount that otherwise would be made 
42 use 1396a 
note. 
Ill STAT. 510 
PUBLIC LAW 105-33—AUG. 5, 1997 
Applicability. 
42 use 1396a 
note. 
under the State plan under this title for such service if provided 
to an eligible recipient other than a medicare beneficiary. 
"(3) In the case in which a State's payment for medicare cost-
sharing for a qualified medicare beneficiary with respect to an 
item or service is reduced or eliminated through the application 
of paragraph (2)— 
"(A) for purposes of applying any limitation under title 
XVIII on the amount that the beneficiary may be billed or 
charged for the service, the amount of pajnnent made under 
title XVIII plus the amount of payment (if any) under the 
State plan shall be considered to be payment in full for the 
service; 
"(B) the beneficiary shall not have any legal liability to 
make payment to a provider or to an organization described 
in section 1903(m)(l)(A) for the service; and 
"(C) any lawful sanction that may be imposed upon a 
provider or such an organization for excess charges under this 
title or title XVIII shall apply to the imposition of any charge 
imposed upon the individual in such case. 
This paragraph shall not be construed as preventing payment of 
any medicare cost-sharing by a medicare supplemental policy or 
an employer retiree health plan on behalf of an individual.". 
(2) CONFORMING CLARIFICATION.—Section 1905(p)(3) (42 
U.S.C. 1396d(p)(3)) is amended by inserting "(subject to section 
1902(n)(2))" ajfter "means". 
(b) LIMITATION ON MEDICARE PROVIDERS.— 
(1) 
PROVIDER 
AGREEMENTS.—Section 
1866(a)(1)(A) (42 
U.S.C. 1395cc(a)(l)(A)) is amended— 
(A) by inserting "(i)" after "(A)", and 
(B) by inserting before the comma at the end the 
following: ", and (ii) not to impose any charge that is 
prohibited under section 1902(n)(3)". 
(2) NONPARTICIPATING PROVIDERS.—Section 1848(g)(3)(A) 
(42 U.S.C. 1395w-4(g)(3)(A)) is amended by inserting before 
the period at the end the following: "and the provisions of 
section 1902(n)(3)(A) apply to further limit permissible charges 
under this section". 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to payment for (and with respect to provider agreements 
with respect to) items and services furnished on or after the date 
of the enactment of this Act. The amendments made by subsection 
(a) shall also apply to pajrment by a State for items and services 
furnished before such date if such pajonent is the subject of a 
law suit that is based on the provisions of sections 1902(n) and 
1905(p) of the Social Security Act and that is pending as of, or 
is initiated after, the date of the enactment of this Act. 
SEC. 4715. TREATMENT OF VETERANS' PENSIONS UNDER MEDICAID. 
(a) POST-ELIGIBILITY TREATMENT.—Section 1902(r)(l) (42 U.S.C. 
1396a(r)(l)) is amended— 
(1) by inserting "(A)" after "(r)(l)", 
(2) by inserting ", the treatment described in subparagraph 
(B) shall apply," after "under such a waiver"; 
(3) by striking "and," and inserting ", and"; and 
(4) by adding at the end the following: 
"(B)(i) In the case of a veteran who does not have a spouse 
or a child, if the veteran— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 511 
"(I) receives, after the veteran has been determined to 
be eligible for medical assistance under the State plan under 
this title, a veteran's pension in excess of $90 per month, 
and 
"(11) resides in a State veterans home with respect to 
which the Secretary of Veterans Affairs makes per diem pay-
ments for nursing home care pursuant to section 1741(a) of 
title 38, United States Code, 
any such pension payment, including any payment made due to 
the need for aid and attendance, or for unreimbursed medical 
expenses, that is in excess of $90 per month shall be counted 
as income only for the purpose of appl3dng such excess payment 
to the State veterans home's cost of providing nursing home care 
to the veteran. 
"(ii) The provisions of clause (i) shall apply with respect to 
a surviving spouse of a veteran who does not have a child in 
the same manner as they apply to a veteran described in such 
clause.". 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply on and after October 1, 1997. 
CHAPTER 3—FEDERAL PAYMENTS TO STATES 
SEC. 4721. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER 
STATE MEDICAID PROGRAMS. 
(a) ADJUSTMENT OF STATE D S H ALLOTMENTS.— 
(1) IN GENERAL.—Section 1923(f) (42 U.S.C. 1396r-4(f)) 
is amended to read as follows: 
"(f) LIMITATION ON FEDERAL FINANCL\L PARTICIPATION.— 
"(1) IN GENERAL.—Payment under section 1903(a) shall 
not be made to a State with respect to any pa3rment adjustment 
made under this section for hospitals in a State for quarters 
in a fiscal year in excess of the disproportionate share hospital 
(in this subsection referred to as 'DSH') allotment for the State 
for the fiscal year, as specified in paragraphs (2) and (3). 
"(2) 
STATE 
DSH ALLOTMENTS FOR FISCAL YEARS 
I998 
THROUGH 2002.—^The DSH allotment for a State for each fiscal 
year during the period beginning with fiscal year 1998 and 
ending with fiscal year 2002 is determined in accordance with 
the following table: 
Applicability. 
42 use 1396a 
note. 
State or District 
Alabama 
Alaska 
Arizona 
Arkansas 
California 
Colorado 
Connecticut 
Delaware 
District of Colum-
bia 
Florida 
Greorgia 
Hawaii 
Idaho 
Illinois 
DSH Allotment (in millions of dollars) 
FY 98 
293 
10 
81 
2 
1,085 
93 
200 
4 
23 
207 
253 
0 
1 
203 
FY 99 
269 
10 
81 
2 
1,068 
85 
194 
4 
23 
203 
248 
0 
1 
199 
FY 00 
248 
10 
81 
2 
986 
79 
164 
4 
23 
197 
241 
0 
1 
193 
FY 01 
246 
9 
81 
2 
931 
74 
160 
4 
23 
188 
228 
0 
1 
182 
FY 02 
246 
9 
81 
2 
877 
74 
160 
4 
23 
160 
215 
0 
1 
172 
I l l STAT. 512 
PUBLIC LAW 105-33—AUG. 5, 1997 
State or District 
Indiana 
Iowa 
Kansas 
Kentucky 
Louisiana 
Maine 
Maryland 
Massachusetts 
Michigan 
Minnesota 
Mississippi 
Missouri 
Montana 
Nebraska 
Nevada 
New Hampshire 
New Jersey 
New Mexico 
New York 
North Carolina 
North Dakota 
Ohio 
Oklahoma 
Oregon 
Pennsylvania 
Rhode Island 
South Carolina 
South Dakota 
Tennessee 
Texas 
Utah 
Vermont 
Virginia 
Washington 
West Virginia 
Wisconsin 
Wyoming 
DSH Allotment (in millions of dollars) 
FY 98 
201 
8 
51 
137 
880 
103 
72 
288 
249 
16 
143 
436 
0.2 
5 
37 
140 
600 
5 
1,512 
278 
1 
382 
16 
20 
529 
62 
313 
1 
0 
979 
3 
18 
70 
174 
64 
7 
0 
FY 99 
197 
8 
49 
134 
795 
99 
70 
282 
244 
16 
141 
423 
0.2 
5 
37 
136 
582 
5 
1,482 
272 
1 
374 
16 
20 
518 
60 
303 
1 
0 
950 
3 
18 
68 
171 
63 
7 
0 
FY 00 
191 
8 
42 
130 
713 
84 
68 
273 
237 
16 
136 
379 
0.2 
5 
37 
130 
515 
5 
1,436 
264 
1 
363 
16 
20 
502 
58 
262 
1 
0 
806 
3 
18 
66 
166 
61 
7 
0 
FY 01 
181 
8 
36 
123 
658 
84 
64 
259 
224 
16 
129 
379 
0.2 
5 
37 
130 
515 
5 
1,361 
250 
1 
344 
16 
20 
476 
55 
262 
1 
0 
765 
3 
18 
63 
157 
58 
7 
0 
FY 02 
171 
8 
33 
116 
631 
84 
61 
244 
212 
16 
122 
379 
0.2 
5 
37 
130 
515 
5 
1,285 
236 
1 
325 
16 
20 
449 
52 
262 
1 
0 
765 
3 
18 
59 
148 
54 
7 
0. 
42 use 1396r-4 
note. 
"(3) STATE DSH ALLOTMENTS FOR FISCAL YEAR 2003 AND 
THEREAFTER.— 
"(A) IN GENERAL.—The DSH allotment for any State 
for fiscal year 2003 and each succeeding fiscal year is 
equal to the DSH allotment for the State for the preceding 
fiscal year under paragraph (2) or this 
paragraph, 
increased, subject to subparagraph (B), by the percentage 
change in the consumer price index for all urban consumers 
(all items; U.S. city average), for the previous fiscal year. 
"(B) LIMITATION.—The DSH allotment for a State shall 
not be increased under subparagraph (A) for a fiscal year 
to the extent that such an increase would result in the 
DSH allotment for the year exceeding the greater o
f
— 
"(i) the DSH allotment for the previous year, or 
"(ii) 12 percent of the total amount of expenditures 
under the State plan for medical assistance during 
the fiscal year. 
"(4) DEFINITION OF STATE,— In this subsection, the term 
'State' means the 50 States and the District of Columbia.". 
(2) EFFECTIVE DATE.—^The amendment made by paragraph 
(1) shall apply to payment adjustments attributable to DSH 
allotments for fiscal years beginning with fiscal year 1998. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 513 
(b) LIMITATION ON PAYMENTS TO INSTITUTIONS FOR MENTAL 
DISEASES.—Section 1923 of the Social Security Act (42 U.S.C. 
1396r-4) is amended by adding at the end the following: 
"(h) LIMITATION ON CERTAIN STATE D S H EXPENDITURES.— 
"(1) IN GENERAL.—Payment under section 1903(a) shall 
not be made to a State with respect to any payment adjustments 
made under this section for quarters in a fiscal year (beginning 
with fiscal year 1998) to institutions for mental diseases or 
other mental health facilities, to the extent the aggregate of 
such adjustments in the fiscal year exceeds the lesser of the 
following: 
"(A) 1995 IMD DSH PAYMENT ADJUSTMENTS.—The total 
State DSH expenditures that are attributable to fiscal year 
1995 for payments to institutions for mental diseases and 
other mental health facilities (based on reporting data 
specified by the State on HCFA Form 64 as mental health 
DSH, and as approved by the Secretary). 
"(B) APPLICABLE PERCENTAGE OF 1995 TOTAL DSH PAY-
MENT ALLOTMENT.—The amount of such pa3anent adjust-
ments which are equal to the applicable percentage of 
the Federal share of payment adjustments made to hos-
pitals in the State under subsection (c) that are attributable 
to the 1995 DSH allotment for the State for payments 
to institutions for mental diseases and other mental health 
facilities (based on reporting data specified by the State 
on HCFA Form 64 as mental health DSH, and as approved 
by the Secretary). 
"(2) APPLICABLE PERCENTAGE.— 
"(A) IN GENERAL.—For purposes of paragraph (1), the 
applicable percentage with respect to— 
"(i) each of fiscal years 1998, 1999, and 2000, is 
the percentage determined under subparagraph (B); 
or 
"(ii) a succeeding fiscal year is the lesser of the 
percentage determined under subparagraph (B) or the 
following percentage: 
"(I) For fiscal year 2001, 50 percent. 
"(II) For fiscal year 2002, 40 percent. 
"(Ill) For each succeeding fiscal year, 33 per-
cent. 
"(B) 1995 PERCENTAGE.—The percentage determined 
under this subparagraph is the ratio (determined as a 
percentage) of— 
"(i) the Federal share of payment adjustments 
made to hospitals in the State under subsection (c) 
that are attributable to the 1995 DSH allotment for 
the State (as reported by the State not later than 
January 1, 1997, on HCFA Form 64, and as approved 
by the Secretary) for payments to institutions for men-
tal diseases and other mental health facilities, to 
"(ii) the State 1995 DSH spending amount. 
"(C) STATE 1995 DSH SPENDING AMOUNT.—^For purposes 
of subparagraph (B)(ii), the 'State 1995 DSH spending 
amount', with respect to a State, is the Federal medical 
assistance percentage (for fiscal year 1995) of the payment 
adjustments made under subsection (c) under the State 
plan that are attributable to the fiscal year 1995 DSH 
I l l STAT. 514 
PUBLIC LAW 105-33—AUG. 5, 1997 
Reports. 
Effective date. 
California. 
42 use 1396r-4 
note. 
allotment for the State (as reported by the State not later 
than January 1, 1997, on HCFA Form 64, and as approved 
by the Secretary).". 
(c) DESCRIPTION OF TARGETING PAYMENTS.—Section 1923(a)(2) 
(42 U.S.C. 1396r-4(a)(2)) is amended by adding at the end the 
following: 
"(D) A State plan under this title shall not be considered 
to meet the requirements of section 1902(a)(13)(A)(iv) (insofar 
as it requires payments to hospitals to take into account the 
situation of hospitals that serve a disproportionate number 
of low-income patients with special needs), as of October 1, 
1998, unless the State has submitted to the Secretary by such 
date a description of the methodology used by the State to 
identify and to make pajrments to disproportionate share hos-
pitals, including children's hospitals, on the basis of the propor-
tion of low-income and medicaid patients served by such hos-
pitals. The State sh£dl provide an annual report to the Secretary 
describing the disproportionate share payments to each such 
disproportionate share hospital.". 
(d) DIRECT PAYMENT BY STATE FOR MANAGED CARE ENROLL-
EES.—Section 1923 (42 U.S.C. 1396r-4) is amended by adding at 
the end the following: 
"(i) REQUIREMENT FOR DIRECT PAYMENT.— 
"(1) IN GENERAL.—No pajonent may be made under section 
1903(a)(1) with respect to a payment adjustment made under 
this section, for services furnished by a hospital on or after 
October 1, 1997, with respect to individuals eligible for medical 
assistance under the State plan who are enrolled with a man-
aged care entity (as defined in section 1932(aXl)(B)) or under 
any other managed care arrangement unless a payment, equal 
to the amount of the pajrment adjustment— 
"(A) is made directly to the hospital by the State; 
and 
"(B) is not used to determine the amount of a prepaid 
capitation pa3rment under the State plan to the entity 
or arrsingement with respect to such individuals. 
"(2) EXCEPTION FOR CURRENT ARRANGEMENTS.—Paragraph 
(1) shall not apply to a payment adjustment provided pursuant 
to a pajrment arrangement in effect on July 1, 1997.". 
(e) 
TRANSITION 
RULE.—^Effective 
July 
1, 
1997, 
section 
1923(g)(2)(A) of the Social Security Act (42 U.S.C. 1396r-4(g)(2)(A)) 
shall be applied to the State of California as though— 
(1) "(or that begins on or after July 1, 1997, and before 
July 1, 1999)" were inserted in such section after "January 
1, 1995,"; and 
(2) "(or 175 percent in the case of a State fiscal year 
that begins on or after July 1, 1997, and before July 1, 1999)" 
were inserted in such section after "200 percent". 
SEC. 4722. TREATMENT OF STATE TAXES IMPOSED ON CERTAIN HOS-
PITALS. 
(a) EXCEPTION FROM TAX DOES NOT DISQUALIFY AS BROAD-
BASED TAX.—Section 1903(w)(3) (42 U.S.C. 1396b(w)(3)) is amend-
ed— 
(1) in subparagraph (B), by striking "and (E)" and inserting 
"(E), and (F)"; and 
(2) by adding at the end the following: 
iHfif^f 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 515 
"(F) In no case shall a tax not qualify as a broad-based health 
care related tax under this paragraph because it does not apply 
to a hospital that is described in section 501(c)(3) of the Internal 
Revenue Code of 1986 and exempt from taxation under section 
501(a) of such Code and that does not accept payment under the 
State plan under this title or under title XVIII.". 
(b) REDUCTION IN FEDERAL FINANCIAL PARTICIPATION IN CASE 
OF IMPOSITION OF TAX.—Section 1903(b) (42 U.S.C. 1396b(b)), as 
amended by section 4707(b), is amended by adding at the end 
the following: 
"(5) 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 hegJth care related 
taxes (described in section 1902(w)(3)(A)) that are imposed on a 
hospital described in subsection (w)(3)(F) in that quarter.". 
(c) WAIVER OF CERTAIN PROVIDER TAX PROVISIONS.—Notwith-
standing any other provision of law, taxes, fees, or assessments, 
as defined in section 1903(w)(3)(A) of the Social Security Act (42 
U.S.C. 1396b(w)(3)(A)), that were collected by the State of New 
York from a health care provider before June 1, 1997, and for 
which a waiver of the provisions of subparagraph (B) or (C) of 
section 1903(w)(3) of such Act has been applied for, or that would, 
but for this subsection require that such a waiver be applied for, 
in accordance with subparagraph (E) of such section, and, (if so 
applied for) upon which action by the Secretary of Health and 
Human Services (including any judicial review of any such proceed-
ing) has not been completed as of July 23, 1997, are deemed 
to be permissible health care related taxes and in compliance with 
the requirements of subparagraphs (B) and (C) of section 1903(w)(3) 
of such Act. 
(d) EFFECTIVE DATE.—^The amendments made by subsection 
42 use I396b 
(a) shall apply to taxes imposed before, on, or after the date of note, 
the enactment of this Act and the amendment made by subsection 
(b) shall apply to taxes imposed on or after such date. 
SEC. 4723. ADDITIONAL FUNDING FOR STATE EMERGENCY HEALTH 8 USC 1611 note. 
SERVICES FURNISHED TO UNDOCUMENTED ALIENS. 
(a) TOTAL AMOUNT AVAILABLE FOR ALLOTMENT.^There are 
available for allotments under this section for each of the 4 consecu-
tive fiscal years (beginning with fiscal year 1998) $25,000,000 for 
pa3anents to certain States under this section. 
(b) STATE ALLOTMENT AMOUNT.— 
(1) IN GENERAL.—The Secretary of Health and Human 
Services shall compute an allotment for each fiscal year begin-
ning with fiscal year 1998 and ending with fiscal year 2001 
for each of the 12 States with the highest number of undocu-
mented aliens. The amount of such allotment for each such 
State for a fiscal year shall bear the same ratio to the total 
amount available for allotments under subsection (a) for the 
fiscal year as the ratio of the number of undocumented aliens 
in the State in the fiscal year bears to the total of such numbers 
for all such States for such fiscal year. The amount of allotment 
to a State provided under this paragraph for a fiscal year 
that is not paid out under subsection (c) shall be available 
for pa3nnent during the subsequent fiscal year. 
(2) DETERMINATION.—^For purposes of paragraph (1), the 
number of undocumented aliens in a State under this section 
I l l STAT. 516 
PUBLIC LAW 105-33—AUG. 5, 1997 
shall be determined based on estimates of the resident illegal 
alien population residing in each State prepared by the Statis-
tics Division of the Immigration and Naturalization Service 
as of October 1992 (or as of such later date if such date 
is at least 1 year before the beginning of the fiscal year 
involved). 
(c) USE OF FUNDS.—^From the allotments made under subsection 
(b), the SecretEiry shall pay to each State amounts the State dem-
onstrates were paid by the State (or by a political subdivision 
of the State) for emergency health services furnished to undocu-
mented aliens. 
(d) STATE DEFINED.—^For purposes of this section, the term 
"State" includes the District of Columbia. 
(e) 
STATE 
ENTITLEMENT.—^This section constitutes 
budget 
authority in advance of appropriations Acts and represents the 
obligation of the Federal Government to provide for the pajrment 
to States of amounts provided under this section. 
SEC. 4724. ELIMINATION OF WASTE, FRAUD, AND ABUSE. 
(a) BAN ON SPENDING FOR NONHEALTH RELATED ITEMS.—Sec-
tion 1903(i) (42 U.S.C. 1396b(i)) is amended— 
(1) in paragraphs (2) and (16), by striking the period at 
the end and inserting "; or"; 
(2) in paragraphs (10)(B), (11), and (13), by adding "or" 
at the end; and 
(3) by inserting after paragraph (16), the following: 
"(17) with respect to any amount expended for roads, 
bridges, stadiums, or any other item or service not covered 
under a State plan under this title.". 
(b) SURETY BOND REQUIREMENT FOR HOME HEALTH AGEN-
CIES 
(1) IN GENERAL.—Section 1903(i) (42 U.S.C. 1396b(i)), as 
amended by subsection (a), is amended— 
(A) in paragraph (17), by striking the period at the 
end and inserting "; or"; and 
(B) by inserting aifter paragraph (17), the following: 
"(18) with respect to any amount expended for home health 
care services provided by an agency or organization unless 
the agency or organization provides the State agency on a 
continuing basis a surety bond in a form specified by the 
Secretary under paragraph (7) of section 186 l(o) and in an 
amount that is not less than $50,000 or such comparable surety 
bond as the Secretary may permit under the last sentence 
of such section.". 
42 use 1396b 
(2) EFFECTIVE DATE.—^The amendments made by paragraph 
note. 
(1) shall apply to home health care services furnished on or 
after January 1, 1998. 
(c) CONFLICT OF INTEREST SAFEGUARDS.— 
(1) 
IN GENERAL.—Section 
1902(a)(4)(C) 
(42 U.S.C. 
1396a(a)(4)(C)) is amended— 
(A) by striking "and (C)" and inserting "(C)"; 
(B) by striking "loced officer or employee" and inserting 
"local officer, employee, or independent contractor"; 
(C) by striking "such an ofHcer or employee" the first 
2 places it appears and inserting "such an officer, employee, 
or contractor"; and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 517 
(D) by inserting before the semicolon the following: 
", and (D) that each State or local officer, employee, or 
independent contractor who is responsible for selecting, 
awarding, or otherwise obtaining items and services under 
the State plan shall be subject to safeguards against con-
flicts of interest that are at least as stringent as the safe-
guards that apply under section 27 of the Office of Federal 
Procurement Policy Act (41 U.S.C. 423) to persons described 
in subsection (a)(2) of such section of that Act". 
(2) EFFECTIVE DATE.—^The amendments made by paragraph 
(1) shall take effect on January 1, 1998. 
(d) AUTHORITY TO REFUSE TO ENTER INTO MEDICAID AGREE-
MENTS WITH INDIVIDUALS OR ENTITIES CONVICTED OF FELONIES.— 
Section 1902(a)(23) (42 U.S.C. 1396(a)) is amended— 
(1) by striking "except as provided in subsection (g) and 
in section 1915 and except in the case of Puerto Rico, the 
Virgin Islands, and Guam,"; and 
(2) by inserting before the semicolon at the end the follow-
ing: ", except as provided in subsection (g) and in section 
1915, except that this paragraph shall not apply in the case 
of Puerto Rico, the Virgin Islands, and Guam, and except that 
nothing in this paragraph shall be construed as requiring a 
State to provide medical assistance for such services furnished 
by a person or entity convicted of a felony under Federal 
or State law for an offense which the State agency determines 
is inconsistent with the best interests of beneficiaries under 
the State plan". 
(e) MONITORING PAYMENTS FOR DUAL ELIGIBLES.—^The Adminis-
trator of the Health Care Financing Administration shall develop 
mechanisms to improve the monitoring of, and to prevent, inappro-
priate payments under the medicaid program under title XIX of 
the Social Security Act (42 U.S.C. 1396 et seq.) in the case of 
individuals who are dually eligible for benefits under such program 
and under the medicare program under title XVIII of such Act 
(42 U.S.C. 1395 et seq.). 
(f) BENEFICIARY AND PROGRAM PROTECTION AGAINST WASTE, 
FRAUD, AND ABUSE.—Section 1902(a) (42 U.S.C. 1396a(a)) is amend-
ed— 
(1) by striking "and" at the end of paragraph (62); 
(2) by striking the period at the end of paragraph (63) 
and inserting "; and"; and 
(3) by inserting after paragraph (63) the following: 
"(64) provide, not later than 1 year after the date of the 
enactment of this paragraph, a mechanism to receive reports 
from beneficiaries and others and compile data concerning 
alleged instances of waste, fraud, and abuse relating to the 
operation of this title;". 
(g) DISCLOSURE OF INFORMATION AND SURETY BOND REQUIRE-
MENT FOR SUPPLIERS OF DURABLE MEDICAL EQUIPMENT.— 
(1) REQUIREMENT.—Section 1902(a) (42 U.S.C. 1396a(a)), 
as amended by subsection (f), is amended— 
(A) by striking "and" at the end of paragraph (63); 
(B) by striking the period at the end of paragraph 
(64) and inserting "; and"; and 
(C) by inserting after paragraph (64) the following: 
"(65) provide that the State shall issue provider numbers 
for all suppliers of medical assistance consisting of durable 
42 u s e 1396a 
note. 
42 u s e 1396a 
note. 
Ill STAT. 518 
PUBLIC LAW 105-33—AUG. 5, 1997 
medical equipment, as defined in section 186l(n), and the State 
shall not issue or renew such a supplier number for any such 
supplier unless— 
"(A)(i) full and complete information as to the identity 
of each person with an ownership or control interest (as 
defined in section 1124(a)(3)) in the supplier or in any 
subcontractor (as defined by the Secretary in regulations) 
in which the supplier directly or indirectly has a 5 percent 
or more ownership interest; and 
"(ii) to the extent determined to be feasible under 
regulations of the Secretary, the name of any disclosing 
entity (as defined in section 1124(a)(2)) with respect to 
which a person with such an ownership or control interest 
in the supplier is a person with such an ownership or 
control interest in the disclosing entity; and 
"(B) a surety bond in a form specified by the Secretary 
under section 1834(a)(16)(B) and in an amount that is 
not less than $50,000 or such comparable surety bond 
as the Secretary may permit under the second sentence 
of such section.". 
42 use 1396a 
(2) EFFECTIVE DATE.—^The amendments made by paragraph 
note. 
(1) shall apply to suppliers of medical assistance consisting 
of durable medical equipment furnished on or after January 
1, 1998. 
SEC. 4725. INCREASED FMAPS. 
42 use 1396(1 
(a) ALASKA.—^Notwithstanding the first sentence of section 
note. 
1905(b) of the Social Security Act (42 U.S.C. 1396d(b)), the Federal 
medical assistance percentage determined under such sentence for 
Alaska shall be 59.8 percent but only with respect to— 
(1) items and services furnished under a State plan under 
title XIX or under a State child health plan under title XXI 
of such Act during fiscal years 1998, 1999, and 2000; 
(2) payments made on a capitation or other risk-basis under 
such titles for coverage occurring during such period; and 
(3) payments under title XIX of such Act attributable to 
DSH allotments for such State determined under section 1923(f) 
of such Act (42 U.S.C. 1396r-4(f)) for such fiscal years. 
(b) DISTRICT OF COLUMBIA.— 
(1) IN GENERAL.—The first sentence of section 1905(b) (42 
U.S.C. 1396d(b)) is amended— 
(A) by striking "and (2)" and inserting ", (2)", and 
(B) by inserting before the period at the end the follow-
ing: ", and (3) for purposes of this title and title XXI, 
the Federal medical assistance percentage for the District 
of Columbia shall be 70 percent". 
42 use 1396d 
(2) EFFECTIVE DATE.—^The amendments made by paragraph 
note. 
(1) shall apply to— 
(A) items and services furnished on or after October 
1, 1997; 
(B) payments made on a capitation or other risk-basis 
for coverage occurring on or Eifter such date; and 
(C) payments attributable to DSH allotments for such 
States determined under section 1923(f) of such Act (42 
U.S.C. 1396r-4(f)) for fiscal years beginning with fiscal 
year 1998. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 519 
SEC. 4726. INCREASE IN PAYMENT LIMITATION FOR TERRITORIES. 
Section 1108 (42 U.S.C. 1308) is amended— 
(1) in subsection (f), by striking "The" and inserting "Sub-
ject to subsection (g), the"; and 
(2) by adding at the end the following: 
"(g) MEDICAID PAYMENTS TO TERRITORIES FOR FISCAL YEAR 
1998 AND THEREAFTER.— 
"(1) FISCAL YEAR 1998.—With respect to fiscal year 1998, 
the amounts otherwise determined for Puerto Rico, the Virgin 
Islands, Guam, the Northern Mariana Islands, and American 
Samoa under subsection (f) for such fiscal year shall be 
increased by the following amounts: 
"(A) For Puerto Rico, $30,000,000. 
"(B) For the Virgin Islands, $750,000. 
"(C) For Guam, $750,000. 
"(D) For the Northern Mariana Islands, $500,000. 
"(E) For American Samoa, $500,000. 
"(2) FISCAL YEAR 1999 AND THEREAFTER.—Notwithstanding 
subsection (f), with respect to fiscal year 1999 and any fiscal 
year thereafter, the totsd amount certified by the Secretary 
under title XDC for payment to— 
"(A) Puerto Rico shall not exceed the sum of the amount 
provided in this subsection for the preceding fiscal year 
increased by the percentage increase in the medical care 
component of the Consumer Price Index for all urban 
consumers (as published by the Bureau of Labor Statistics) 
for the 12-month period ending in March preceding the 
beginning of the fisced year, rounded to the nearest 
$100,000; 
"(B) the Virgin Islands shall not exceed the sum of 
the amount provided in this subsection for the preceding 
fiscal year increased by the percentage increase referred 
to in subparagraph (A), rounded to the nearest $10,000; 
"(C) Guam shall not exceed the sum of the amount 
provided in this subsection for the preceding fiscal year 
increased by the percentage increase referred to in subpara-
graph (A), rounded to the nearest $10,000; 
"(D) the Northern Mariana Islands shall not exceed 
the sum of the amount provided in this subsection for 
the preceding fiscal year increased by the percentage 
increase referred to in subparagraph (A), rounded to the 
nearest $10,000; and 
"(E) American Samoa shall not exceed the sum of the 
amount provided in this subsection for the preceding fiscal 
year increased by the percentage increase referred to in 
subparagraph (A), rounded to the nearest $10,000.". 
CHAPTER 4—ELIGIBILITY 
S E C 4731. STATE OPTION OF CONTINUOUS EUGIBILITY FOR 12 
MONTHS; CI.ARIFICATION 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 provide that 
an individual who is under an age specified by the State (not 
I l l STAT. 520 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 1396v. 
42 use 1396U-3. 
to exceed 19 years of age) and who is determined to be eligible 
for benefits under a State plan approved 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(1)(1)(D) (42 
U.S.C. 
1396a(l)(l)(D)) is amended by inserting "(or, at the option of a 
State, after any earlier date)" after "children bom 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. 4732. PAYMENT OF PART B PREMIUMS. 
(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); and 
(2) by inserting after clause (iii) the following: 
(iv) subject to sections 1933 and 1905(p)(4), for making 
medical assistance available (but only for premiums pay-
able with respect to months during the period beginning 
with Janusiry 1998, and ending with December 2002)— 
"(I) for medicare cost-sharing described in section 
1905(p)(3XA)(ii) for individuals who would be qualified 
medicare beneficiaries described in section 1905(p)(l) 
but for the fact that their income exceeds the income 
level established by the State under section 1905(p)(2) 
and is at least 120 percent, but less than 135 percent, 
of the official poverty line (referred to in such section) 
for a family of the size involved and who are not 
otherwise eligible for medical assistance under the 
State plan, and 
"(II) for the portion of medicare cost-sharing 
described in section 1905(p)(3)(A)(ii) that is attrib-
utable to the operation of the amendments made by 
(and subsection (e)(3) of) section 4611 of the Balanced 
Budget Act of 1997 for individuals who would be 
described in subclause (I) if '135 percent' and '175 
percent' were substituted for '120 percent' and '135 
percent' respectively; and". 
(b) CONFORMING AMENDMENT.—Section 1905(b) (42 U.S.C. 
1396d(b)) is amended by striking 'The term" and inserting "Subject 
to section 1933(d), the term". 
(c) TERMS AND CONDITIONS OF COVERAGE.—^Title XIX (42 U.S.C. 
1395 et seq.), as amended by section 4701(a), is amended by 
redesignating section 1933 as section 1934 and by inserting after 
section 1932 the following new section: 
"STATE COVERAGE OF MEDICARE COST-SHARING FOR ADDITIONAL 
LOW-INCOME MEDICARE BENEFICIARIES 
"SEC. 1933. (a) IN GENERAL.—A State plan under this title 
shall provide, under section 1902(a)(10)(E)(iv) and subject to the 
succeeding provisions of this section and through a plan amend-
ment, for medical assistance for payment of the cost of medicare 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 521 
cost-sharing described in such section on behalf of all individuals 
described in such section (in this section referred to as 'qualifying 
individuals') who are selected to receive such assistance under 
subsection (b). 
"(b) SELECTION OF QUALIFYING INDIVIDUALS.—A State shall 
select qualifying individuals, and provide such individuals with 
assistance, under this section consistent with the following: 
"(1) ALL QUALIFYING INDIVIDUALS MAY APPLY.—The State 
shall permit all qualifying individuals to apply for assistance 
during a calendar year. 
"(2) SELECTION ON FIRST-COME, FIRST-SERVED BASIS.— 
"(A) IN GENERAL.—For each calendar year (beginning 
with 1998), from (and to the extent of) the amount of 
the allocation under subsection (c) for the State for the 
fiscal year ending in such calendar year, the State shall 
select qualifying individuals who apply for the assistance 
in the order in which they apply. 
"(B) CARRYOVER.—^For calendar years after 1998, the 
State shall give preference to individuals who were pro-
vided such assistance (or other assistance described in sec-
tion 1902(a)(10)(E)) in the last month of the previous year 
and who continue to be (or become) qualifying individuals. 
"(3) LIMIT ON NUMBER OF INDIVIDUALS BASED ON ALLOCA-
TION.—^The State shall limit the number of qualifying individ-
uals selected with respect to assistance in a calendar year 
so that the aggregate amount of such assistance provided to 
such individuals in such year is estimated to be equal to (but 
not exceed) the State's allocation under subsection (c) for the 
fiscal year ending in such calendar year. 
"(4) RECEIPT OF ASSISTANCE DURING DURATION OF YEAR.— 
If a qualif3dng individual is selected to receive assistance under 
this section for a month in year, the individual is entitled 
to receive such assistance for the remainder of the year if 
the individual continues to be a qualifjdng individual. The 
fact that an individual is selected to receive assistance under 
this section at any time during a year does not entitle the 
individual to continued assistance for any succeeding year. 
"(c) ALLOCATION.— 
"(1) TOTAL ALLOCATION.—^The total amount available for 
allocation under this section for— 
"(A) fiscal year 1998 is $200,000,000; 
"(B) fiscal year 1999 is $250,000,000; 
"(C) fiscal year 2000 is $300,000,000; 
"(D) fiscal year 2001 is $350,000,000; and 
"(E) fiscal year 2002 is $400,000,000. 
"(2) ALLOCATION TO STATES.—The Secretary shall provide 
for the allocation of the total amount described in paragraph 
(1) for a fiscal year, among the States that executed a plsin 
amendment in accordance with subsection (a), based upon the 
Secretary's estimate of the ratio of— 
"(A) an amount equal to the sum of— 
"(i) twice the total number of individuals described 
in section 1902(a)(10)(E)(iv)(I) in the State, and 
"(ii) the total number of individugJs described in 
section 1902(a)(10)(E)(iv)(II) in the State; to 
"(B) the sum of the amounts computed under subpara-
graph (A) for all eligible States. 
39-194 O - 97 - 18 : QL 3 Part 1 
I l l STAT. 522 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(d) APPLICABLE FMAP.—^With respect to assistance described 
in section 1902(a)(10)(E)(iv) furnished in a State for calendar quar-
ters in a calendar year — 
"(1) to the extent that such assistance does not exceed 
the State's allocation under subsection (c) for the fiscal year 
ending in the calendar year, the Federal medical assistance 
percentage shall be equal to 100 percent; and 
"(2) to the extent that such assistance exceeds such alloca-
tion, the Federal medic£d assistance percentage is 0 percent. 
"(e) LIMITATION ON ENTITLEMENT.—Except as specifically pro-
vided under this section, nothing in this title shall be construed 
as establishing any entitlement of individuals described in section 
1902(a)(10)(E)(iv) to assistance described in such section. 
"(f) COVERAGE OF COSTS THROUGH PART B OF THE MEDICARE 
PROGRAM.—For each fiscal year, the Secretary shall provide for 
the transfer from the Federal Supplementary Medical Insurance 
Trust Fund under section 1841 to the appropriate account in the 
Treasury that provides for payments under section 1903(a) with 
respect to medical assistance provided under this section, of an 
amount equivalent to the total of the amount of payments made 
under such section that is attributable to this section and such 
transfer shall be treated as an expenditure from such Trust Fund 
for purposes of section 1839.". 
SEC. 4733. STATE OPTION TO PERMIT WORKERS WITH DISABILITIES 
TO BUY INTO MEDICAID. 
Section 1902(aX10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)) is 
amended— 
(1) in subclause (XI), by striking "or" at the end; 
(2) in subclause (XII), by adding "or" at the end; and 
(3) by adding at the end the following: 
"(XIII) who are in families whose income is 
less than 250 percent of the income officisJ poverty 
line (as defined by the Office of Management and 
Budget, and revised annually in accordance with 
section 673(2) of the Omnibus Budget Reconcili-
ation Act of 1981) applicable to a family of the 
size involved, and who but for earnings in excess 
of the limit established under section 1905(q)(2)(B), 
would be considered to be receiving supplemental 
security income (subject, notwithstanding section 
1916, to pa5nnent of premiums or other cost-shar-
ing charges (set on a sliding scale based on income) 
that the State may determine);". 
SEC. 4734. PENALTY FOR FRAUDULENT ELIGIBILITY. 
Section 1128B(a) (42 U.S.C. 1320a-7b(a)), as amended by sec-
tion 217 of the Health Insurance Portability and Accountability 
Act of 1996 (Public Law 104-191; 110 Stat. 2008), is amended— 
(1) by striking paragraph (6) and inserting the following: 
"(6) for a fee knowingly and willfully counsels or assists 
an individual to dispose of assets (including by any transfer 
in trust) in order for the individual to become eligible for 
medical assistance under a State plan under title XIX, if dispos-
ing of the assets results in the imposition of a period of ineli-
gibility 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 
PUBLIC LAW 105-33—AUG. 5, 1997 
inserting "failure, conversion, or provision of counsel or assist-
ance by any other person". 
SEC. 4735. TREATMENT OF CERTAIN SETTLEMENT PAYMENTS. 
(a) IN GENERAL.—Notwithstanding any other provision of law, 
the payments described in subsection (b) shall not be considered 
income or resources in determining eligibility for, or the amount 
of benefits under, a State plan of medical assistance approved 
under title XIX of the Social Security Act. 
(b) PAYMENTS DESCRIBED.—The payments described in this sub-
section are— 
(1) pa5nnents made from any fund established pursuant 
to a class settlement in the case of Susan Walker v. Bayer 
Corporation, et al., 96-C-5024 (N.D. 111.); and 
(2) payments made pursuant to a release of all claims 
in a case— 
(A) that is entered into in lieu of the class settlement 
referred to in paragraph (1); and 
(B) that is signed by all affected parties in such case 
on or before the later of— 
(i) December 31, 1997, or 
(ii) the date that is 270 days after the date on 
which such release is first sent to the persons (or 
the legal representative of such persons) to whom the 
payment is to be made. 
CHAPTER 5—BENEFITS 
111 STAT. 523 
SEC. 4741. ELIMWATION OF REQUIREMENT TO PAY FOR PRIVATE 
INSURANCE. 
(a) REPEAL OF STATE PLAN PROVISION.—Section 1902(a)(25) 
(42 U.S.C. 1396a(a)(25)) is amended— 
(1) by striking subparagraph (G); and 
(2) by redesignating subparagraphs (H) and (I) as subpara-
graphs (G) and (H), respectively. 
(b) MAKING PROVISION OPTIONAL.—Section 1906 (42 U.S.C. 
1396e) is amended— 
(1) in subsection (a)— 
(A) by striking "For purposes of section 1902(a)(25)(G) 
and subject to subsection (d), each" £uid inserting "Each"; 
(B) in paragraph (1), by striking "shall" and inserting 
"majr"; and 
(C) in paragraph (2), by striking "shall" and inserting 
"may^'; and 
(2) by striking subsection (d). 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall take effect on the date of the enactment of this Act. 
42 use 1396a 
note. 
SEC. 4742. PHYSICIAN QUALIFICATION REQUIREMENTS. 
(a) IN GENERAL.—Section 1903(i) (42 U.S.C. 1396b(i)) is amend-
ed by striking paragraph (12). 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
42 use I396a 
shall apply to services furnished on or after the date of the enact-
ment of this Act. 
note. 
I l l STAT. 524 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 4743. ELIMINATION OF REQUIREMENT OF PRIOR INSTITUTIONAL-
IZATION WITH RESPECT TO HABILITATION SERVICES 
FLTRNISHED UNDER A WAIVER FOR HOME OR COMMU-
NITY-BASED SERVICES. 
(a) IN GENERAL.—Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) is 
amended, in the matter preceding subparagraph (A), by striking 
", with respect to individuals who receive such services after dis-
charge from a nursing faciUty or intermediate care facility for 
the mentally retarded". 
42 use I396n 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
"ote- 
apply to services furnished on or after October 1, 1997. 
42 use 1396d 
SEC. 4744. STUDY AND REPORT ON EPSDT BENEFIT. 
(a) STUDY.— 
(1) IN GENERAL.—^The Secretary of Health and Human 
Services, in consultation with CJovemors, directors of State 
medicaid programs, the American Academy of Actuaries, and 
representatives 
of 
appropriate 
provider 
and 
beneficiary 
organizations, shall conduct a study of the provision of early 
and periodic screening, diagnostic, and treatment services 
under the medicaid program under title XIX of the Social 
Security Act in accordance with the requirements of section 
1905(r) of such Act (42 U.S.C. 1396d(r)). 
(2) REQUIRED CONTENTS.—^The study conducted under para-
graph (1) shall include examination of the actuarial value of 
the provision of such services under the medicaid program 
and an examination of the portions of such actuarial value 
that are attributable to paragraph (5) of section 1905(r) of 
such Act and to the second sentence of such section. 
(b) REPORT.—^Not later than 12 months after the date of the 
enactment of this Act, the Secretary of Health and Human Services 
shall submit a report to Congress on the results of the study 
conducted under subsection (a). 
CHAPTER 6—ADMINISTRATION AND MISCELLANEOUS 
SEC. 4751. ELIMINATION OF DUPLICATIVE INSPECTION OF CARE 
REQUIREMENTS FOR ICFS/MR AND MENTAL HOSPITALS. 
(a) 
MENTAL 
HOSPITALS.—Section 
1902(a)(26) 
(42 
U.S.C. 
1396a(a)(26)) is amended— 
(1) by striking "provide— 
"(A) with respect to each patient" and inserting "pro-
vide, with respect to each patient"; and 
(2) by striking subparagraphs (B) and (C). 
(b) ICFS/MR.-^ection 1902(a)(31) (42 U.S.C. 1396a(a)(31)) is 
amended— 
(1) by striking "provide— 
"(A) with respect to each patient" and inserting "pro-
vide, with respect to each patient"; and 
(2) by striking subparagraphs (B) and (C). 
42 use 1396a 
(c) EFFECTIVE DATE.—^The amendments made by this section 
note. 
take effect on the date of the enactment of this Act. 
SEC. 4752. ALTERNATIVE SANCTIONS FOR NONCOMPLIANT ICFS/MR. 
(a) 
IN 
GENERAL.—Section 
1902(i)(l)(B) 
(42 
U.S.C. 
1396a(i)(l)(B)) is amended by striking "provide" and inserting 
"establish alternative remedies if the State demonstrates to the 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 525 
Secretary's satisfaction that the alternative remedies are effective 
in deterring noncompHance and correcting deficiencies, and may 
provide". 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 42 use I396a 
takes effect on the date of the enactment of this Act. 
°ote. 
SEC. 4753. MODIFICATION OF MMIS REQUIREMENTS. 
(a) IN GENERAL.—Section 1903(r) (42 U.S.C. 1396b(r)) is amend-
ed— 
(1) by striking all that precedes paragraph (5) and inserting 
the following: 
"(r)(l) In order to receive payments under subsection (a) for 
use of automated data systems in administration of the State plan 
under this title, a State must have in operation mechEinized claims 
processing and information retrieval systems that meet the require-
ments of this subsection and that the Secretary has found— 
"(A) are adequate to provide efficient, economical, and effec-
tive administration of such State plan; 
"(B) are compatible with the claims processing and informa-
tion retrieval systems used in the administration of title XVIII, 
and for this purpose— 
"(i) have a uniform identification coding system 
for providers, other payees, and beneficiaries under 
this title or title XVIII; 
"(ii) provide lisiison between States and carriers 
Eind intermediaries with agreements under title XVIII 
to facilitate timely exchange of appropriate data; and 
"(iii) provide for exchange of data between the 
States and the Secretary with respect to persons sanc-
tioned under this title or title XVIII; 
"(C) are capable of providing accurate and timely data; 
"(D) are compl3dng with the applicable provisions of part 
C of title XI; 
"(E) are designed to receive provider claims in standard 
formats to the extent specified by the Secretary; and 
"(F) effective for claims filed on or after January 1, 1999, 
provide for electronic transmission of claims data in the format 
specified by the Secretary and consistent with the Medicaid 
Statistical Information System (MSIS) (including detailed 
individual enroUee encounter data and other information that 
the Secretary may find necessary)."; 
(2) in paragraph (5)— 
(A) by striking subparagraph (B); 
(B) by striking all that precedes clause (i) and inserting 
the following: 
"(2) In order to meet the requirements of this paragraph, 
mechanized claims processing and information retrieval systems 
must meet the following requirements:"; 
(C) in clause (iii), by striking "under paragraph (6)"; 
and 
(D) by redesignating clauses (i) through (iii) as para-
graphs (A) through (C); and 
(3) by striking paragraphs (6), (7), and (8). 
(b) CONFORMING AMENDMENTS.—Section 1902(a)(25)(A)(ii) (42 
U.S.C. 1396a(a)(25)(A)(ii)) is amended by striking all that follows 
"shall" and inserting the following: "be integrated with, and be 
Ill STAT. 526 
PUBLIC LAW 105-33—AUG. 5, 1997 
monitored as a part of the Secretar^s review of, the State's mecha-
nized claims processing and information retrieval systems required 
under section 1903(r);". 
42 use 1396a 
(c) EFFECTIVE DATE.—^Except as otherwise specifically provided, 
note. 
the amendments made by this section shall take effect on January 
1, 1998. 
SEC. 4754. FACILITATING IMPOSITION OF STATE ALTERNATIVE REM-
EDIES ON NONCOMPLIANT NURSING FACILITIES. 
(a) 
IN 
GENERAL.—Section 
1919(h)(3)(D) 
(42 
U.S.C. 
1396r(h)(3)(D)) is amended— 
(1) by inserting "and" at the end of clause (i); 
(2) by striking ", and" at the end of clause (ii) and inserting 
a period; and 
(3) by striking clause (iii). 
42 use I396r 
(b) EFFECTIVE DATE.—^The amendments made by subsection 
note. 
(a) take effect on the date of the enactment of this Act. 
SEC. 4755. REMOVAL OF NAME FROM NURSE AIDE REGISTRY. 
(a) MEDICARE.—Section 1819(g)(1) (42 U.S.C. 1395i-3(g)(l)) is 
amended— 
(1) by redesignating subparagraph (D) as subparagraph 
(E), and 
(2) by inserting after subparagraph (C) the following: 
"(D) REMOVAL OF NAME FROM NURSE AIDE REGISTRY.— 
Procedures. 
"(i) IN GENERAL.—In the case of a finding of neglect 
under subparagraph (C), the State shall establish a 
procedure to permit a nurse aide to petition the State 
to have his or her name removed from the registry 
upon a determination by the State that— 
"(I) the employment and personal history of 
the nurse aide does not reflect a pattern of abusive 
behavior or neglect; and 
"(II) the neglect involved in the original find-
ing was a singular occurrence. 
"(ii) TIMING OF DETERMINATION.—In no case shall 
a determination on a petition submitted under clause 
(i) be made prior to the expiration of the 1-year period 
beginning on the date on which the name of the peti-
tioner was added to the registry under subparagraph 
(C).". 
(b) MEDICAID.—Section 1919(g)(1) (42 U.S.C. 1396r(g)(l)) is 
amended— 
(1) by redesignating subparagraph (D) as subparagraph 
(E), and 
(2) by inserting after subparagraph (C) the following: 
"(D) REMOVAL OF NAME FROM NURSE AIDE REGISTRY.— 
Procedures. 
"(i) IN GENERAL.—In the case of a finding of neglect 
under subparagraph (C), the State shall establish a 
procedure to permit a nurse aide to petition the State 
to have his or her name removed from the registry 
upon a determination by the State that— 
"(I) the employment and personal history of 
the nurse aide does not reflect a pattern of abusive 
behavior or neglect; and 
"(II) the neglect involved in the original find-
ing was a singular occurrence. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 527 
"(ii) TIMING OF DETERMINATION.—In no case shall 
a determination on a petition submitted under clause 
(i) be made prior to the expiration of the 1-year period 
beginning on the date on which the name of the peti-
tioner was added to the registry under subparagraph 
(c) RETROACTIVE REVIEW.—^The procedures developed by a State 
under the amendments made by subsection (a) and (b) shall permit 
an individual to petition for a review of any finding made by 
a State under section 1819(g)(1)(C) or 1919(g)(1)(C) of the Social 
Security Act (42 U.S.C. 1395i-3(g)(l)(C) or 1396r(g)(l)(C)) after 
January 1, 1995. 
SEC. 4756. MEDICALLY ACCEPTED INDICATION. 
Section 1927(g)(l)(B)(i) (42 U.S.C. 1396r-8(g)(l)(B)(i)) is amend-
ed— 
(1) by striking "and" at the end of subclause (II), 
(2) by redesignating subclause (III) as subclause (IV), and 
(3) by inserting after subclause (II) the following: 
"(III) the DRUGDEX Information 
System; 
and". 
SEC. 4757. CONTINUATION OF STATE-WIDE SECTION 1115 MEDICAID 
WAIVERS. 
(a) IN GENERAL.—Section 1115 (42 U.S.C. 1315) is amended 
by adding at the end the following new subsection: 
"(e)(1) The provisions of this subsection shall apply to the 
extension of any State-wide comprehensive demonstration project 
(in this subsection referred to as 'waiver project') for which a waiver 
of compliance with requirements of title XIX is granted under 
subsection (a). 
"(2) During the 6-month period ending 1 year before the date 
the waiver under subsection (a) with respect to a waiver project 
would otherwise expire, the chief executive officer of the State 
which is operating the project may submit to the Secretary a 
written request for an extension, of up to 3 years, of the project. 
"(3) If the Secretary fails to respond to the request within 
6 months after the date it is submitted, the request is deemed 
to have been granted. 
"(4) If such a request is granted, the deadline for submittal 
of a final report under the waiver project is deemed to have been 
extended until the date that is 1 year after the date the waiver 
project would otherwise have expired. 
"(5) The Secretary shall release an evaluation of each such 
project not later than 1 year after the date of receipt of the final 
report. 
"(6) Subject to paragraphs (4) and (7), the extension of a waiver 
project under this subsection shall be on the same terms and 
conditions (including applicable terms and conditions relating to 
quality and access of services, budget neutrality, data and reporting 
requirements, and special population protections) that applied to 
the project before its extension under this subsection. 
"(7) If an original condition of approval of a waiver project 
was that Federal expenditures under the project not exceed the 
Federal expenditures that would otherwise have been made, the 
Secretary shall take such steps as may be necessary to ensure 
that, in the extension of the project under this subsection, such 
condition continues to be met. In appl3dng the previous sentence. 
42 use 1395i-3 
note. 
AppUcabiUty. 
Evaluation. 
Ill STAT. 528 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 u s e 1315 
note. 
103 Stat. 2267. 
42 u s e 1396a 
note. 
42 u s e 1395eee. 
the Secretary shall take into account the Secretary's best estimate 
of rates of change in expenditures at the time of the extension.", 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
shall apply to demonstration projects initially approved before, on, 
or after the date of the enactment of this Act. 
SEC. 4758. EXTENSION OF MORATOmUM. 
Section 6408(a)(3) of the Omnibus Budget Reconciliation Act 
of 1989, as amended by section 13642 of the Omnibus Budget 
Reconciliation Act of 1993, is amended by striking "December 31, 
1995" and inserting "December 31, 2002". 
SEC. 4759. E X T E N S I O N OF EFFECTIVE DATE FOR STATE LAW AMEND-
MENT. 
In the case of a State plan under title XIX of the Social 
Security Act which the Secretary of Health and Human Services 
determines requires State legislation in order for the plan to meet 
the additional requirements imposed by the amendments made 
by a provision of this subtitle, the State plan shall not be regarded 
as failing to comply with the requirements of such title solely 
on the basis of its failure to meet these additional requirements 
before the first day of the first calendar quarter beginning after 
the close of the first regular session of the State legislature that 
begins after the date of the enactment of this Act. For purposes 
of the previous sentence, in the case of a State that has a 2-
year legislative session, each year of the session is considered 
to be a separate regular session of the State legislature. 
Subtitle I—Programs of All-inclusive Care 
for the Elderly (PACE) 
SEC. 4801. COVERAGE OF PACE UNDER THE MEDICARE PROGRAM. 
Title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) 
is amended by adding at the end the following new section: 
"PAYMENTS TO, AND COVERAGE OF BENEFITS UNDER, PROGRAMS OF 
ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE) 
" S E C 1894. 
(a) RECEIPT OF BENEFITS THROUGH ENROLLMENT 
IN PACE PROGRAM; DEFINITIONS FOR PACE PROGRAM RELATED 
TERMS.— 
"(1) BENEFITS THROUGH ENROLLMENT IN A PACE PROGRAM.— 
In accordance with this section, in the case of an individual 
who is entitled to benefits under part A or enrolled under 
part B and who is a PACE program eligible individual (as 
defined in paragraph (5)) with respect to a PACE program 
offered by a PACE provider under a PACE program agree-
ment— 
"(A) the individual may enroll in the program under 
this section; and 
"(B) so long as the individual is so enrolled and in 
accordance with regulations— 
"(i) the individual shall receive benefits under this 
title solely through such program; and 
"(ii) the PACE provider is entitled to payment 
under and in accordance with this section and such 
agreement for provision of such benefits. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 529 
"(2) PACE PROGRAM DEFINED.—For purposes of this section, 
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 
agreement and regulations under this section. 
"(C) TRANSITION.—In the case of an individual who 
is enrolled under the program under this section and whose 
enrollment ceases for any reason (including that the 
individual no longer qusJifies 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 transitional care through 
appropriate referrals and making the individual's medical 
records available to new providers. 
"(3) PACE PROVIDER DEFINED.— 
"(A) IN GENERAL.—For purposes of this section, the 
term 'PACE provider' means an entity 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 program agreement 
with respect to its operation of a PACE program. 
"(B) TREATMENT OF PRIVATE, FOR-PROFIT PROVIDERS.— 
Clause (i) of subparagraph (A) shall not apply— 
"(i) to entities subject to a demonstration project 
waiver under subsection (h); and 
"(ii) after the date the report under section 4804(b) 
of the Balanced Budget Act of 1997 is submitted, unless 
the Secretary determines that any of the findings 
described in subparagraph (A), (B), (C), or (D) of para-
graph (2) of such section are true. 
"(4) PACE PROGRAM AGREEMENT DEFINED.—For purposes 
of this section, the term 'PACE program agreement' means, 
with respect to a PACE provider, an agreement, consistent 
with this section, section 1934 (if applicable), and regulations 
promulgated to carry out such sections, between the PACE 
provider and the Secretary, or an agreement between the PACE 
provider 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 respect to a PACE program, an individ-
ual who— 
"(A) is 55 years of age or older; 
"(B) subject to subsection (c)(4), is determined 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 
I l l STAT. 530 
PUBLIC LAW 105-33—AUG. 5, 1997 
Contracts. 
"(D) meets such other eUgibility 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 Protocol for the Program of 
All-inclusive Care for the Elderly (PACE), as published by 
On Lok, Inc., as of April 14, 1995, or any successor protocol 
that may be agreed upon between the Secretary and On Lok, 
Inc. 
"(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 Reconcili-
ation Act of 1986 (Public Law 99-509). 
"(8) STATE ADMINISTERING AGENCY DEFINED.—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 agency 
responsible for administration of the State plan under title 
XDC in the State) responsible for administering PACE program 
agreements under this section and section 1934 in the State. 
"(9) TRIAL PERIOD DEFINED.— 
"(A) IN GENERAL.—^For purposes of this section, the 
term 'trial period' means, with respect 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 PREVIOUSLY OPERATING 
PACE DEMONSTRATION WAIVER PROGRAMS.—Each contract 
year (including a year occurring before the effective date 
of this section) during which an entity has operated a 
PACE demonstration waiver program shall be counted 
under subparagraph (A) as a contract year during which 
the entity operated 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 promul-
gated under subsection (f) to carry out this section and section 
1934. 
"(b) SCOPE OF BENEFITS; BENEFICIARY SAFEGUARDS.— 
"(1) IN GENERAL.—^Under a PACE program agreement, a 
PACE provider shall— 
"(A) provide to PACE program eligible individuals 
enrolled with the provider, regardless of source of payment 
and directly or under contracts with other entities, at a 
minimum— 
"(i) all items and services covered under this title 
(for individuals enrolled under this section) and all 
items and services covered under title XIX, but without 
any limitation or condition as to amount, duration. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 531 
or scope and without application of deductibles, copay-
ments, coinsurance, or other cost-sharing that would 
otherwise apply under this title or such title, respec-
tively; and 
"(ii) all additional items and services specified in 
regulations, based upon those required under the 
PACE protocol; 
"(B) provide such enrollees access to necessary covered 
items and services 24 hours per day, every day of the 
year; 
"(C) provide services to such enrollees through a com-
prehensive, 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 requirements of regulations. 
"(2) 
QUALITY 
ASSURANCE; 
PATIENT 
SAFEGUARDS.—^The 
PACE program agreement shall require the PACE provider 
to have in effect at a minimum— 
"(A) a written plan of quality assursmce and improve-
ment, and procedures implementing such plan, in accord-
ance with regulations; and 
"(B) written safeguards of the rights of enrolled partici-
pants (including a patient bill of rights and procedures 
for grievances and appeals) in accordance with regulations 
and with other requirements of this title and Federal and 
State law that are designed for the protection of patients. 
"(c) ELIGIBILITY DETERMINATIONS.— 
"(1) IN GENERAL.—The determination of whether an individ-
ual is a PACE program eligible individual— 
"(A) shall be made under £ind in accordance with the 
PACE program agreement; and 
"(B) who is entitled to medical assistance under title 
XIX, shedl be made (or who is not so entitled, may be 
made) by the State administering agency. 
"(2) CONDITION.—An individual is not a PACE program 
eligible individusJ (with respect to pajnment under this section) 
unless the individual's health status has been determined by 
the Secretary or the State administering agency, in accordance 
with regulations, to be comparable to the health status of 
individuals who have participated in the PACE demonstration 
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, 
instrumental activities of daily living, and cognitive impair-
ment) that are part of a uniform minimum data set collected 
by PACE providers on potential PACE program eligible individ-
uals. 
"(3) ANNUAL ELIGIBILITY RECERTIFICATIONS.— 
"(A) IN GENERAL.—Subject to subparagraph (B), the 
determination described in subsection (a)(5)(B) for an 
individual shall be reevaluated at least annually. 
"(B) EXCEPTION.—The requirement of annual reevalua-
tion under subparagraph (A) may be waived during a period 
in accordance with regulations in those cases where the 
I l l STAT. 532 
PUBLIC LAW 105-33—AUG. 5, 1997 
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 severity of chronic condition, or degree of 
impairment 
of functional 
capacity of the 
individual 
involved. 
"(4) CONTINUATION OF ELIGIBILITY.—^An individual 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 program the individual 
reasonably would be expected to meet such requirement within 
the succeeding 6-month period. 
"(5) ENROLLMENT; DISENROLLMENT.— 
"(A) VOLUNTARY DISENROLLMENT AT ANY TIME.—^The 
enrollment and disenrollment of PACE program eligible 
individuals in a PACE program shall be pursuant to regula-
tions and the PACE program agreement and shall permit 
enrollees to voluntarily disenroll without cause at any time. 
"(B) LIMITATIONS ON DISENROLLMENT.— 
"(i) IN GENERAL.—Regulations promulgated by the 
Secretary under this section and section 1934, and 
the PACE program agreement, shall provide that the 
PACE program may not disenroll a PACE program 
eligible individual except— 
"(I) for nonpayment of premiums (if applicable) 
on a timely basis; or 
"(II) for engaging in disruptive or threatening 
behavior, as defined in such regulations (developed 
in close consultation with State administering 
agencies). 
"(ii) 
No 
DISENROLLMENT 
FOR 
NONCOMPLIANT 
BEHAVIOR.—Except 
as 
allowed 
under 
regulations 
promulgated to carry out clause (i)(II), a PACE pro-
gram may not disenroll a PACE program eligible 
individual on the ground that the individual has 
engaged in noncompliant behavior if such behavior 
is related to a mental or physical condition of the 
individual. For purposes of the preceding sentence, 
the term 'noncompliant behavior' includes repeated 
noncompliance with medical advice and repeated fail-
ure to appear for appointments. 
"(iii) TIMELY REVIEW OF PROPOSED NONVOLUNTARY 
DISENROLLMENT.—A proposed 
disenrollment, 
other 
than a voluntary disenrollment, shall be subject to 
timely review and final determination by the Secretary 
or by the State administering agency (as applicable), 
prior to the proposed disenrollment becoming effective. 
"(d) PAYMENTS TO PACE PROVIDERS ON A CAPITATED BASIS.— 
"(1) IN GENERAL.—In the case of a PACE provider with 
a PACE program agreement under this section, except as pro-
vided in this subsection or by regulations, the Secretary shall 
make prospective monthly payments of a capitation amount 
for each PACE program eligible individual enrolled under the 
agreement under this section in the same manner and from 
the same sources as pa3rments are made to a Medicare+Choice 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 533 
organization under section 1853 (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 
1853(a)(2) or section 1876(a)(1)(E), as the case may be. 
"(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 agree-
ment for the year. Such amount shall be based upon payment 
rates established for purposes of payment under section 1853 
(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 appro-
priate. Such amount under such an agreement shall be com-
puted in a manner so that the total pa3rment level for all 
PACE program eligible individuals enrolled under a program 
is less than the projected payment under this title for a com-
parable population not enrolled under a PACE program. 
"(e) PACE PROGRAM AGREEMENT.— 
"(1) REQUIREMENT.— 
"(A) IN GENERAL.—^The Secretary, in close cooperation Procedures, 
with the State administering agency, shall establish proce-
dures for entering into, extending, and terminating PACE 
program agreements for the operation of PACE programs 
by entities that meet the requirements for a PACE provider 
under this section, section 1934, and regulations. 
"(B) NUMERICAL LIMITATION.— 
"(i) IN GENERAL.—^The Secretary shall not permit 
the number of PACE providers 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 enactment of 
this section; or 
"(II) as of each succeeding anniversary of such 
date, the numerical limitation under this subpara-
graph for the preceding year plus 20. 
Subclause (II) shsdl apply without regard to the actual Applicability, 
number of agreements in effect as of a previous 
anniversary date. 
"(ii) TREATMENT OF CERTAIN PRIVATE, FOR-PROFIT 
PROVIDERS.—^The numerical limitation in clause (i) 
shall not apply to a PACE provider that— 
"(I) is operating under a demonstration project 
waiver under subsection (h); or 
"(II) was operating under such a waiver and 
subsequently qualifies for PACE provider status 
pursuant to subsection (a)(3XB)(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 requirements for 
individuals to qualify as PACE program eligible 
individuals with respect to the program; 
Ill STAT. 534 
PUBLIC LAW 105-33—AUG. 5, 1997 
Records. 
Reports. 
"(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 termination by the Secretary and the State 
administering agency at any time for cause (as pro-
vided under the agreement); 
"(iv) shall require a PACE provider to meet all 
applicable State and local laws and requirements; and 
"(v) shall contain such additional terms and condi-
tions as the parties may agree to, so long as such 
terms and conditions are consistent with this section 
and regulations. 
"(B) SERVICE AREA OVERLAP.—In designating a service 
area under a PACE program agreement under subpara-
graph (A)(i), the Secretary (in consultation with the State 
administering 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; DEVELOPMENT OF OUTCOME MEAS-
URES.— 
"(A) DATA COLLECTION.— 
"(i) IN GENERAL.—Under a PACE program agree-
ment, the PACE provider shall— 
"(I) collect data; 
"(II) maintain, and afford the Secretary and 
the State administering agency access to, the 
records relating to the program, including perti-
nent financial, medical, and personnel records; and 
"(III) make available to the Secretary and the 
State administering agency reports that the Sec-
retary finds (in consultation with State administer-
ing agencies) necessary to monitor the operation, 
cost, and effectiveness of the PACE program under 
this section and section 1934 . 
"(ii) REQUIREMENTS DURING TRIAL PERIOD.—^During 
the first 3 years of operation of a PACE program 
(either under this section or under a PACE demonstra-
tion waiver program), the PACE provider shall provide 
such additional data as the Secretary specifies in regu-
lations in order to perform the oversight required under 
paragraph (4)(A). 
"(B) DEVELOPMENT OF OUTCOME MEASURES.—^Under a 
PACE program agreement, the PACE provider, the Sec-
retary, and the State administering agency shall jointly 
cooperate in the development and implementation of health 
status and quality of life outcome measures with respect 
to PACE program eligible individuals. 
"(4) OVERSIGHT.— 
"(A) 
ANNUAL, 
CLOSE 
OVERSIGHT 
DURING 
TRIAL 
PERIOD.—During the trial period (as defined in subsection 
(a)(9)) with respect to a PACE program operated by a 
PACE provider, the Secretary (in cooperation with the State 
administering agency) shall conduct a comprehensive 
annual review of the operation of the PACE program by 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 535 
the provider in order to assure compliance with the require-
ments of this section and regulations. Such a review shall 
include— 
"(i) an on-site visit to the program site; 
"(ii) comprehensive assessment of a provider's fis-
cal 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 regulations; and 
"(v) any other elements the Secretary or State 
administering agency considers necessary or appro-
priate. 
"(B) CoNTI^fUING OVERSIGHT.—^After the trial period, 
the Secretary (in cooperation with the State administering 
agency) shall continue to conduct such review of the oper-
ation of PACE providers £ind PACE programs as may be 
appropriate, taking into account the performance 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 PubUc 
paragraph shall be reported promptly to the PACE pro- information, 
vider, along with any recommendations for changes to the 
provider's program, and shall be made available to the 
public upon request. 
"(5) TERMINATION OF PACE PROVIDER AGREEMENTS.— 
"(A) IN GENERAL.—Under regulations— 
"(i) the Secretary or a State administering agency 
may terminate a PACE program agreement for cause; 
and 
"(ii) a PACE provider may terminate an agreement 
after appropriate notice to the Secretary, the State 
agency, and enroUees. 
"(B) CAUSES FOR TERMINATION.—In accordance with 
regulations establishing procedures for termination of 
PACE program agreements, the Secretary or a State 
administering agency may terminate a PACE program 
agreement with a PACE provider for, among other reasons, 
the fact that— 
"(i) the Secretary or State administering agency 
determines that— 
"(I) there are significant deficiencies in the 
quality of care provided to enrolled participants; 
or 
"(II) the provider has failed to comply substan-
tially with conditions for a program or provider 
under this section or section 1934; and 
"(ii) the entity has failed to develop and success-
fully initiate, within 30 days of the date of the receipt 
of written notice of such a determination, a plan to 
correct the deficiencies, or has failed to continue 
implementation of such a plan. 
"(C) TERMINATION AND TRANSITION PROCEDURES.^AH 
entity whose PACE provider agreement is terminated 
I l l STAT. 536 
PUBLIC LAW 105-33—AUG. 5, 1997 
Applicability. 
under this paragraph shall implement the transition proce-
dures required 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 
comply with the requirements of this section and regula-
tions, the Secretary (and the State administering agency) 
may take any or all of the following actions: 
"(i) Condition the continuation of the PACE pro-
gram agreement upon timely execution of a corrective 
action plan. 
"(ii) Withhold some or all further pa3nnents under 
the PACE program agreement under this section or 
section 1934 with respect to PACE program services 
furnished by such provider until the deficiencies 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(g)(2) (or, for periods before January 1, 1999, section 
1876(i)(6)(B)) or 1903(m)(5)(B) in the case of violations 
by the provider of the type described in section 1857(g)(1) 
(or section 1876(i)(6)(A) for such periods) or 1903(m)(5)(A), 
respectively (in relation to agreements, enrollees, and 
requirements under this section or section 1934, respec-
tively). 
"(7) PROCEDURES FOR TERMINATION OR IMPOSITION OF SANC-
TIONS.—^Under regulations, the provisions of section 1857(h) 
(or for periods before January 1, 1999, section 1876(i)(9)) shall 
apply to termination 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 Medicare+Choice organization 
under part C (or for such periods an eligible organization under 
section 1876). 
"(8) TIMELY CONSIDERATION OF APPLICATIONS FOR PACE PRO-
GRAM PROVIDER STATUS.—In considering an application for 
PACE provider program status, the application shall be deemed 
approved unless 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 information, 
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 1934. 
"(2) USE OF PACE PROTOCOL.— 
"(A) IN GENERAL.—In issuing such regulations, the Sec-
retary shall, to the extent consistent with the provisions 
of this section, incorporate the requirements applied to 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 537 
PACE demonstration waiver programs under the PACE 
protocol. 
"(B) FLEXIBILITY.—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 nonstaff physicians according to State licensing law 
requirements) under this section and section 1934, the 
Secretary (in close consultation with State administering 
agencies) may modify or waive provisions of the PACE 
protocol so long as any such modification or waiver is 
not inconsistent with and would not impair the essential 
elements, objectives, and requirements of this section, but 
may not modify or waive any of the following provisions: 
"(i) The focus on frail elderly qualifying individuals 
who require the level of care provided in a nursing 
facility. 
"(ii) The delivery of comprehensive, integrated 
acute and long-term care services. 
"(iii) The interdisciplinary team approach to care 
management and service delivery. 
"(iv) Capitated, integrated financing that allows 
the provider to pool payments received from public 
and private programs and individuals. 
"(v) The assumption by the provider of full finan-
cial risk. 
"(3) APPLICATION OF CERTAIN ADDITIONAL BENEFICIARY AND 
PROGRAM PROTECTIONS.— 
"(A) IN GENERAL.—In issuing such regulations and sub-
ject to subparagraph (B), the Secretary may apply with 
respect to PACE programs, providers, and agreements such 
requirements of part C (or, for periods before January 
1, 1999, section 1876) and sections 1903(m) and 1932 relat-
ing to protection of beneficiaries and program integrity 
as would apply to Medicare+Choice organizations under 
part C (or for such periods eligible organizations under 
risk-sharing contracts under section 1876) and to medicaid 
managed care organizations under prepaid capitation 
agreements under section 1903(m). 
"(B) CONSIDERATIONS.—In issuing such regulations, the 
Secretary shall— 
"(i) take into account the differences between popu-
lations served and benefits provided under this section 
and under part C (or, for periods before January 1, 
1999, section 1876) and section 1903(m); 
"(ii) not include any requirement that conflicts 
with carrying out PACE programs under this section; 
and 
"(iii) not include any requirement restricting the 
proportion of enroUees who are eligible for benefits 
under this title or title XIX. 
"(4) CONSTRUCTION.—^Nothing in this subsection shall be 
construed as preventing the Secretary from including in regula-
tions provisions to ensure the health and safety of individuals 
enrolled in a PACE program under this section that are in 
addition to those otherwise provided under paragraphs (2) and 
(3). 
I l l STAT. 538 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(g) WAIVERS OF REQUIREMENTS.—With respect to canning out 
a PACE program under this section, the following requirements 
of this title (and regulations relating to such requirements) are 
waived and shall not apply: 
"(1) Section 1812, insofar as it limits coverage of institu-
tional services. 
"(2) Sections 1813, 1814, 1833, and 1886, insofar as such 
sections relate to rules for payment for benefits. 
"(3) Sections 1814(a)(2)(B), 1814(a)(2)(C), and 1835(a)(2)(A), 
insofar as they limit coverage of extended care services or 
home health services. 
"(4) Section 186 l(i), insofar as it imposes a 3-day prior 
hospitalization requirement for coverage of extended care serv-
ices. 
"(5) Paragraphs (1) Eind (9) of section 1862(a), insofar as 
they may prevent pajmient for PACE program services to 
individuals enrolled under PACE programs. 
"(h) DEMONSTRATION PROJECT FOR FOR-PROFIT ENTITIES.— 
"(1) IN GENERAL.—In order to demonstrate the operation 
of a PACE program by a private, for-profit entity, the Secretary 
(in close consultation with State administering agencies) shall 
gr£int waivers from the requirement under subsection (a)(3) 
that a PACE provider may not be a for-profit, private entity. 
"(2) SIMILAR TERMS AND CONDITIONS.— 
"(A) IN GENERAL.—Except as provided under subpara-
graph (B), and paragraph (1), the terms and conditions 
for operation of a PACE progrgim by a provider under 
this subsection shall be the same as those for PACE provid-
ers that are nonprofit, private organizations. 
"(B) NUMERICAL LIMITATION.—^The number of programs 
for which waivers are granted under this subsection shall 
not exceed 10. Programs with waivers grsinted under this 
subsection shall not be counted against the numerical 
limitation specified in subsection (e)(1)(B). 
"(i) MISCELLANEOUS PROVISIONS.—^Nothing in this section or 
section 1934 shall be construed as preventing a PACE provider 
from entering into contracts with other governmental or nongovern-
mental payers for the care of PACE program eligible individuals 
who are not eligible for benefits under part A, or enrolled under 
part B, or eligible for medicsil assistance under title XIX.". 
SEC. 4802. ESTABLISHMENT OF PACE PROGRAM AS MEDICATO STATE 
OPTION. 
(a) IN GENERAL.—Title XIX is amended— 
(1) in section 1905(a) (42 U.S.C. 1396d(a)), as amended 
by section 4702(a)(1)— 
(A) by striking "and" at the end of paragraph (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 program under sec-
tion 1934 to PACE program eligible individuals enrolled under 
the program under such section; and"; 
(2) by redesignating section 1934, as redesignated by sec-
42 use I396v. 
tion 4732, as section 1935; and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 539 
(3) by inserting after section 1933, as added by such section, 
the following new section: 
"PROGRAM OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE) 
42 USC 1396U-4. 
"SEC. 1934. (a) STATE OPTION.— 
"(1) IN GENERAL.—^A State may elect to provide medical 
assistance under this section with respect to PACE program 
services to PACE program eligible individuals who are eligible 
for medical assistance under the State plan and who are 
enrolled in a PACE program under a PACE program agreement. 
Such individuals need not be eligible for benefits 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 program 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 payment in 
accordance with the PACE program agreement for provi-
sion of such benefits. 
A State may establish a numerical limit on the number of 
individuals who may be enrolled in a PACE program under 
a PACE program agreement. 
"(2) PACE PROGRAM DEFINED.—^For purposes of this section, 
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 
agreement and regulations under this section. 
"(C) TRANSITION.—In the case of an individual who 
is enrolled under the program under this section and whose 
enrollment ceases for any reason (including that 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 transitional care through 
appropriate referrals and making the individual's medical 
records available to new providers. 
"(3) PACE PROVIDER DEFINED.— 
"(A) IN GENERAL.—For purposes of this section, the 
term 'PACE provider' means an entity 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 program agreement 
with respect to its operation of a PACE program. 
"(B) TREATMENT OF PRIVATE, FOR-PROFIT PROVIDERS.— 
Clause (i) of subparagraph (A) shall not apply— 
"(i) to entities subject to a demonstration project 
waiver under subsection (h); and 
"(ii) after the date the report under section 4804(b) 
of the Balanced Budget Act of 1997 is submitted, unless 
the Secretary determines that any of the findings 
I l l STAT. 540 
PUBLIC LAW 105-33—AUG. 5, 1997 
described in subparagraph (A), (B), (C), or (D) of para-
graph (2) of such section are true. 
"(4) PACE PROGRAM AGREEMENT DEFINED.—^For purpOSeS 
of this section, the term 'PACE program agreement' means, 
with respect to a PACE provider, an agreement, consistent 
with this section, section 1894 (if appUcable), and regulations 
promulgated to carry out such sections, among the PACE pro-
vider, 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 respect to a PACE program, an individ-
ual who— 
"(A) is 55 years of age or older; 
"(B) subject to subsection (c)(4), is determined 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)(AXii). 
*(6) PACE PROTOCOL.—For purposes of this section, the 
term TACE protocol' means the Protocol for the Program of 
All-inclusive Care for the Elderly (PACE), as published by 
On Lok, Inc., as of April 14, 1995, or any successor protocol 
that may be agreed upon between the Secretary and On Lok, 
Inc. 
"(7) PACE DEMONSTRATION WAIVER PROGRAM DEFINED.— 
For purposes of this section, the term TACE 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 Reconcili-
ation Act of 1986 (Public Law 99-509). 
"(8) STATE ADMINISTERING AGENCY DEFINED.—^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 agency 
responsible for administration of the State plan under this 
title in the State) responsible for administering PACE program 
agreements under this section and section 1894 in the State. 
"(9) TRIAL PERIOD DEFINED.— 
"(A) IN GENERAL.—^For purposes of this section, the 
term 'trial period' means, with respect 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 PREVIOUSLY OPERATING 
PACE DEMONSTRATION WAIVER PROGRAMS.—Each contract 
year (including a year occurring before the effective date 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 541 
of this section) during which an entity has operated a 
PACE demonstration waiver program shall be counted 
under subparagraph (A) as a contract year during which 
the entity operated 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 promul-
gated under subsection (f) to carry out this section and section 
1894. 
"(b) SCOPE OF BENEFITS; BENEFICIARY SAFEGUARDS.— 
"(1) IN GENERAL.—Under a PACE program agreement, a 
PACE provider shall— 
"(A) provide to PACE program eligible individuals, 
regardless of source of payment and directly or under con-
tracts 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 without 
any limitation or condition as to amount, duration, 
or scope and without application of deductibles, copay-
ments, coinsurance, or other cost-sharing that would 
otherwise apply under such title or this title, respec-
tively; and 
"(ii) all additional items and services specified in 
regulations, based upon those required under the 
PACE protocol; 
"(B) provide such enrollees access to necessary covered 
items and services 24 hours per day, every day of the 
year; 
"(C) provide services to such enrollees through a com-
prehensive, 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 requirements of regulations. 
"(2) 
QUALITY 
ASSURANCE; 
PATIENT 
SAFEGUARDS.—The 
PACE program agreement shall require the PACE provider 
to have in effect at a minimum— 
"(A) a written plan of quality assurance and improve-
ment, and procedures implementing such plan, in accord-
ance with regulations, and 
"(B) written safeguards of the rights of enrolled partici-
pants (including a patient bill of rights and procedures 
for grievances and appeals) in accordance with regulations 
and with other requirements of this title and Federal and 
State law designed for the protection of patients. 
"(c) ELIGIBILITY DETERMINATIONS.— 
"(1) IN GENERAL.—^The determination o
f
— 
"(A) whether an individual is a PACE program eligible 
individual shall be made under and in accordance 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 administering agency. 
I l l STAT. 542 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) CONDITION.—^An individual is not a PACE program 
eligible individual (with respect to payment under this section) 
unless the individual's health status has been determined by 
the Secretary or the State administering agency, in accordance 
with regulations, to be comparable to the health status of 
individuals who have participated in the PACE demonstration 
waiver programs. Such determination sheill be based upon 
information on health status and related indicators (such as 
medical diagnoses and measures of activities of daily living, 
instrumental activities of daily living, and cognitive impair-
ment) that are part of a uniform minimum data set collected 
by PACE providers on potential eligible individuals. 
"(3) ANNUAL ELIGIBILITY RECERTIFICATIONS.— 
"(A) IN GENERAL.—Subject to subparagraph (B), the 
determination described in subsection (aX5)(B) for an 
individual shall be reevaluated at least annually. 
"(B) EXCEPTION.—^The requirement of annual reevsilua-
tion under subparagraph (A) may be waived during a period 
in accordance with regulations in those cases in which 
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 severity of chronic condition, or degree of 
impairment 
of functional 
capacity 
of the 
individual 
involved. 
"(4) CONTINUATION OF ELIGIBILITY.—^An individual 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 program the individual 
reasonably would be expected to meet such requirement within 
the succeeding 6-month period. 
"(5) ENROLLMENT; DISENROLLMENT.— 
"(A) VOLUNTARY DISENROLLMENT AT AISTY TiME.^The 
enrollment and disenrollment of PACE program eligible 
individuals in a PACE program shall be pursuant to regula-
tions and the PACE program agreement and shall permit 
enrollees to voluntarily disenroU without cause at any time. 
"(B) LIMITATIONS ON DISENROLLMENT.— 
"(i) IN GENERAL.—^Regulations promulgated by the 
Secretary under this section and section 1894, and 
the PACE program agreement, shall provide that the 
PACE program may not disenroU a PACE program 
eligible individual except— 
"(I) for nonpayment of premiums (if applicable) 
on a timely basis; or 
"(II) for engaging in disruptive or threatening 
behavior, as defined in such regulations (developed 
in close consultation with State administering 
agencies). 
"(ii) 
No 
DISENROLLMENT 
FOR 
NONCOMPLIANT 
BEHAVIOR.—^Except 
as 
allowed 
under 
regulations 
promulgated to carry out clause (i)(II), a PACE pro-
gram may not disenroU a PACE program eligible 
individual on the ground that the individual has 
engaged in noncompliant behavior if such behavior 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 543 
is related to a mental or physical condition of the 
individual. For purposes of the preceding sentence, 
the term 'noncompliemt behavior' includes repeated 
noncompliance with medical advice and repeated fail-
ure to appear for appointments. 
"(iii) TIMELY REVIEW OF PROPOSED NONVOLUNTARY 
DISENROLLMENT.—A proposed 
disenrollment, 
other 
than a voluntary disenrollment, shall be subject to 
timely review and final determination by the Secretary 
or by the State administering agency (as applicable), 
prior to the proposed disenrollment becoming effective. 
"(d) PAYMENTS TO PACE PROVIDERS ON A CAPITATED BASIS.— 
"(1) IN GENERAL.—In the case of a PACE provider with 
a PACE program agreement under this section, except as pro-
vided in this subsection or by regulations, the State shall make 
prospective monthly payments of a capitation amount for each 
PACE program eligible individual enrolled under the agreement 
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 agree-
ment 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 comparative 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 Procedures, 
with the State administering agency, shall establish proce-
dures for entering into, extending, and terminating PACE 
program agreements for the operation of PACE programs 
by entities that meet the requirements 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 providers 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 enactment of 
this section, or 
"(II) as of each succeeding anniversary of such 
date, the numerical limitation under this subpara-
graph for the preceding year plus 20. 
Subclause (II) shall apply without regard to the actusd Applicability, 
number of agreements in effect as of a previous 
anniversary date. 
"(ii) TREATMENT OF CERTAIN PRIVATE, FOR-PROFIT 
PROVIDERS.—^The numerical limitation in clause (i) 
shall not apply to a PACE provider that— 
"(I) is operating under a demonstration project 
waiver under subsection (h), or 
I l l STAT. 544 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(11) 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 requirements 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 termination by the Secretary and the State 
administering agency at any time for cause (as pro-
vided under the agreement); 
"(iv) shall require a PACE provider to meet all 
applicable State and local laws and requirements; and 
"(v) shall contain such additional terms and condi-
tions as the parties may agree to, so long as such 
terms and conditions are consistent with this section 
and regulations. 
"(B) SERVICE AREA OVERLAP.—In designating a service 
area under a PACE program agreement under subpara-
graph (A)(i), the Secretary (in consultation with the State 
administering 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. 
Records. 
"(3) DATA COLLECTION; DEVELOPMENT OF OUTCOME MEAS-
URES.— 
"(A) DATA COLLECTION.— 
"(i) IN GENERAL.—Under a PACE program agree-
ment, the PACE provider shall— 
"(I) collect data; 
"(II) maintain, and afford the Secretary and 
the State administering agency access to, the 
records relating to the program, including perti-
nent financial, medical, and personnel records; and 
Reports. 
"(Ill) Submit to the Secretary and the State 
administering agency such reports as the Secretary 
finds (in consultation with State administering 
agencies) necessary to monitor the operation, cost, 
and effectiveness of the PACE program. 
"(ii) REQUIREMENTS DURING TRIAL PERIOD,—During 
the first 3 years of operation of a PACE program 
(either under this section or under a PACE demonstra-
tion waiver program), the PACE provider shall provide 
such additional data as the Secretary specifies in regu-
lations in order to perform the oversight required under 
paragraph (4)(A). 
"(B) DEVELOPMENT OF OUTCOME MEASURES.—Under a 
PACE program agreement, the PACE provider, the Sec-
retary, and the State administering agency shall jointly 
cooperate in the development and implementation of health 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 545 
status and quality of life outcome measures with respect 
to PACE program eligible individuals. 
"(4) OVERSIGHT.— 
"(A) 
ANNUAL, 
CLOSE 
OVERSIGHT 
DURING 
TRIAL 
PERIOD.—During the trial period (as defined in subsection 
(a)(9)) with respect to a PACE program operated by a 
PACE provider, the Secretary (in cooperation with the State 
administering agency) shall conduct a comprehensive 
annual review of the operation of the PACE program by 
the provider in order to assure compliance with the require-
ments of this section and regulations. Such a review shall 
include— 
"(i) an onsite visit to the program site; 
"(ii) comprehensive assessment of a provider's fis-
cal 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 regulations; and 
"(v) any other elements the Secretary or the State 
administering agency considers necessary or appro-
priate. 
"(B) CONTINUING ovERSiOHT.^After the trial period, 
the Secretary (in cooperation with the State administering 
agency) shall continue to conduct such review of the oper-
ation of PACE providers and PACE programs as may be 
appropriate, taking into account the performance 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 Public 
paragraph shall be reported promptly to the PACE pro- information, 
vider, along with any recommendations for changes to the 
provider's program, and shall be made available to the 
public upon request. 
"(5) TERMINATION OF PACE PROVIDER AGREEMENTS.— 
"(A) IN GENERAL.—Under regulations— 
"(i) the Secretary or a State administering 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 administering agency, and enrollees. 
"(B) CAUSES FOR TERMINATION.—In accordance with 
regulations establishing procedures for termination of 
PACE program agreements, the Secretary or a State 
administering agency may terminate a PACE program 
agreement with a PACE provider for, among other reasons, 
the fact that— 
"(i) the Secretary or State administering agency 
determines that— 
"(I) there are significant deficiencies in the 
quality of care provided to enrolled participants; 
or 
I l l STAT. 546 
PUBLIC LAW 105-33—AUG. 5, 1997 
Applicability. 
"(11) the provider has failed to comply substan-
tially with conditions for a program or provider 
under this section or section 1894; and 
"(ii) the entity has failed to develop and success-
fully initiate, within 30 days of the date of the receipt 
of written notice of such a determination, a plan to 
correct the deficiencies, or has failed to continue 
implementation of such a plan. 
"(C) TERMINATION AND TRANSITION PRocEDURES.^An 
entity whose PACE provider agreement is terminated 
under this paragraph shall implement the transition proce-
dures required 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 
comply with the requirements of this section and regula-
tions, the Secretary (and the State administering agency) 
may take any or all of the following actions: 
"(i) Condition the continuation of the PACE pro-
gram agreement upon timely execution of a corrective 
action plan. 
"(ii) Withhold some or all further payments under 
the PACE program agreement under this section or 
section 1894 with respect to PACE progrsmi services 
furnished by such provider until the deficiencies 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(g)(2) (or, for periods before January 1, 1999, section 
1876(i)(6)(B)) or 1903(m)(5)(B) in the case of violations 
by the provider of the tjrpe described in section 1857(g)(1) 
(or 1876(i)(6)(A) for such periods) or 1903(m)(5)(A), respec-
tively (in relation to agreements, enrollees, and require-
ments under section 1894 or this section, respectively). 
"(7) PROCEDURES FOR TERMINATION OR IMPOSITION OF SANC-
TIONS.—^Under regulations, the provisions of section 1857(h) 
(or for periods before January 1, 1999, section 1876(i)(9)) shall 
apply to termination and sanctions respecting a PACE program 
agreement and PACE provider under this subsection in the 
same manner as they apply to a termination £md sanctions 
with respect to a contract and a Medicare+Choice organization 
under part C of title XVIII (or for such periods an eligible 
organization under section 1876). 
"(8) TIMELY CONSIDERATION OF APPLICATIONS FOR PACE PRO-
GRAM PROVIDER STATUS.—In considering an application for 
PACE provider program status, the application shall be deemed 
approved unless 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 information, the application shall be deemed 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 547 
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 regulations, the Sec-
retary shall, to the extent consistent with the provisions 
of this section, incorporate the requirements applied to 
PACE demonstration waiver programs under the PACE 
protocol. 
"(B) FLEXIBILITY.—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 nonstaff physicians according to State licensing law 
requirements) under this section and section 1894, the 
Secretary (in close consultation with State administering 
agencies) may modify or waive provisions of the PACE 
protocol so long as any such modification or waiver is 
not inconsistent with and would not impair the essential 
elements, objectives, and requirements of this section, but 
may not modify or waive any of the following provisions: 
"(i) The focus on frail elderly qualifjdng individuals 
who require the level of care provided in a nursing 
facility. 
"(ii) The delivery of comprehensive, integrated 
acute and long-term care services. 
"(iii) The interdisciplinary team approach to care 
management and service delivery. 
"(iv) Capitated, integrated financing that allows 
the provider to pool pajnnents received from public 
and private programs and individuals. 
"(v) The assumption by the provider of full finan-
cial risk. 
"(3) APPLICATION OF CERTAIN ADDITIONAL BENEFICIARY AND 
PROGRAM PROTECTIONS.— 
"(A) IN GENERAL.—In issuing such regulations and sub-
ject to subparagraph (B), the Secretary may apply with 
respect to PACE programs, providers, and agreements such 
requirements of part C of title XVIII (or, for periods before 
January 1, 1999, section 1876) and sections 1903(m) and 
1932 relating to protection of beneficiaries and program 
integrity as would apply to Medicare+Choice organizations 
under such part C (or for such periods eligible organizations 
under risk-sharing contracts under section 1876) and to 
medicaid managed care organizations under prepaid capita-
tion agreements under section 1903(m). 
"(B) CONSIDERATIONS.—In issuing such regulations, the 
Secretary shall— 
"(i) take into account the differences between popu-
lations served and benefits provided under this section 
and under part C of title XVIII (or, for periods before 
January 1, 1999, section 1876) and section 1903(m); 
"(ii) not include any requirement that conflicts 
with carrying out PACE programs under this section; 
and 
I l l STAT. 548 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(iii) not include any requirement restricting the 
proportion of enrollees who are eHgible for benefits 
under this title or title XVIIL 
"(4) CONSTRUCTION.—^Nothing in this subsection shall be 
construed as preventing the Secretary from including in regula-
tions provisions to ensure the health and safety of individuals 
enrolled in a PACE program under this section that are in 
addition to those otherwise provided under paragraphs (2) and 
(3). 
"(g) WAIVERS OF REQUIREMENTS.—With respect to carrying out 
a PACE program under this section, the following requirements 
of this title (and regulations relating to such requirements) shall 
not apply: 
"(1) Section 1902(a)(1), relating to any requirement that 
PACE programs or PACE program services be provided in 
all areas of a State. 
"(2) Section 1902(a)(10), insofar as such section relates 
to comparability of services among different population groups. 
"(3) Sections 1902(a)(23) and 1915(b)(4), relating to freedom 
of choice of providers under a PACE program. 
"(4) Section 1903(mX2)(A), insofar as it restricts a PACE 
provider from receiving prepaid capitation payments. 
"(5) Such other provisions of this title that, as added or 
amended by the Balanced Budget Act of 1997, the Secretary 
determines are inapplicable to carrying out a PACE program 
under this section. 
"(h) DEMONSTRATION PROJECT FOR FOR-PROFIT ENTITIES.— 
"(1) IN GENERAL.—In order to demonstrate the operation 
of a PACE program by a private, for-profit entity, the Secretary 
(in close consultation with State administering agencies) shall 
grant waivers from the requirement under subsection (a)(3) 
that a PACE provider may not be a for-profit, private entity. 
"(2) SIMILAR TERMS AND CONDITIONS.— 
"(A) IN GENERAL.—Except as provided under subpara-
graph (B), and paragraph (1), the terms and conditions 
for operation of a PACE program by a provider under 
this subsection shall be the same as those for PACE provid-
ers that are nonprofit, private organizations. 
"(B) NUMERICAL LIMITATION.—^The number of programs 
for which waivers are graated under this subsection shall 
not exceed 10. Programs with waivers granted under this 
subsection shall not be counted against the numerical 
limitation specified in subsection (eXl)(B). 
"(i) POST-ELIGIBILITY TREATMENT OF INCOME.—A State may 
provide for post-eligibility treatment of income for individuals 
enrolled in PACE programs under this section in the same manner 
as a State treats post-eligibility income for individuals receiving 
services under a waiver under section 1915(c). 
"(j) MISCELLANEOUS PROVISIONS.—^Nothing in this section or 
section 1894 shall be construed as preventing a PACE provider 
from entering into contracts with other governmental or nongovern-
mental payers for the care of PACE program eligible individuals 
who are not eligible for benefits under part A, or enrolled under 
part B, of title XVIII or eligible for medical assistance under this 
title.". 
(b) CONFORMING AMENDMENTS.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 549 
(1) Section 1924(a)(5) (42 U.S.C. 1396r-5(a)(5)) is amend-
ed— 
(A) in the heading, by striking "FROM ORGANIZATIONS 
RECEIVING CERTAIN WAIVERS" and inserting "UNDER PACE 
PROGRAMS"; and 
(B) by striking "from any organization" and all that 
follows and inserting "under a PACE demonstration waiver 
program (as defined in section 1934(a)(7)) or under a PACE 
program under section 1934 or 1894.". 
(2) Section 1903(f)(4)(C) (42 U.S.C. 1396b(f)(4)(C)) is amend-
ed by inserting "or who is a PACE program eligible individual 
enrolled in a PACE program under section 1934," after "section 
1902(a)(10)(A),". 
SEC. 4803. EFFECTIVE DATE; TRANSITIGN. 
42 USC 1395eee 
(a) TIMELY ISSUANCE OF REGULATIONS; EFFECTIVE DATE.—^The ^°^' 
Secretary of Health and Human Services shall promulgate regula-
tions to carry out this subtitle in a timely manner. Such regulations 
shall be designed so that entities may establish and operate PACE 
programs under sections 1894 and 1934 of the Social Security 
Act (as added by sections 4801 and 4802 of this subtitle) for periods 
beginning not later than 1 year after the date of the enactment 
of this Act. 
(b) EXPANSION AND TRANSITION FOR PACE DEMONSTRATION 
PROJECT WAIVERS.— 
(1) EXPANSION IN CURRENT NUMBER AND EXTENSION OF 
DEMONSTRATION PROJECTS.—Section 9412(b) of the Omnibus 
Budget Reconciliation Act of 1986, as amended by section 
4118(g) of the Omnibus Budget Reconciliation Act of 1987, 100 Stat. 2062. 
is amended— 
(A) in paragraph (1), by inserting before the period 
at the end the following: ", except that the Secretary shall 
grant waivers of such requirements to up to the applicable 
numerical limitation specified in sections 1894(e)(1)(B) and 
1934(e)( 1)(B) of the Social Security Act"; and 
(B) in paragraph (2)— 
(i) in subparagraph (A), by striking ", including 
permitting the organization to assume progressively 
(over the initial 3-year period of the waiver) the full 
financial risk"; and 
(ii) in subparagraph (C), by adding at the end 
the following: "In granting further extensions, an 
organization shall not be required to provide for report-
ing of information which is only required because of 
the demonstration nature of the project.". 
(2) ELIMINATION OF REPLICATION REQUIREMENT.—Section 
9412(b)(2)(B) of such Act, as so amended, shall not apply to 
waivers granted under such section after the date of the enact-
ment of this Act. 
(3) TIMELY CONSIDERATION OF APPLICATIONS.—In consider-
ing an application for waivers under such section before the 
effective date of the repeals under subsection (d), subject to 
the numerical limitation under the amendment made by para-
graph (1), the application shall be deemed approved unless 
the Secretary of Health and Human Services, within 90 days 
after the date of its submission to the Secretary, either denies 
such request in writing or informs the applicant in writing 
Ill STAT. 550 
PUBLIC LAW 105-33—AUG. 5, 1997 
with respect to any additional information which is needed 
in order to make a final determination with respect to the 
application. After the date the Secretary receives such addi-
tional information, the application shall be deemed approved 
unless the Secretary, within 90 days of such date, denies such 
request. 
(c) PRIORITY AND SPECIAL CONSIDERATION IN APPLICATION.— 
During the 3-year period beginning on the date of the enactment 
of this Act: 
(1) PROVIDER STATUS.—The Secretary of Health and Human 
Services shall give priority in processing applications of entities 
to qualify as PACE programs under section 1894 or 1934 of 
the Sociad Security Act— 
(A) first, to entities that are operating a PACE dem-
onstration 
waiver 
program 
(as 
defined 
in 
sections 
1894(a)(7) and 1934(a)(7) of such Act); and 
(B) then to entities that have applied to operate such 
a program as of May 1, 1997. 
(2) NEW WAIVERS.—^The Secretary shall give priority, in 
the awarding of additional waivers under section 9412(b) of 
the Omnibus Budget Reconciliation Act of 1986— 
(A) to any entities that have applied for such waivers 
under such section as of May 1, 1997; and 
(B) to any entity that, as of May 1, 1997, has formally 
contracted with a State to provide services for which pay-
ment is made on a capitated basis with an understanding 
that the entity was seeking to become a PACE provider. 
(3) SPECIAL CONSIDERATION.—The Secretary shall give spe-
cial consideration, in the processing of applications described 
in paragraph (1) and the awarding of waivers described in 
paragraph (2), to an entity which as of May 1, 1997, through 
formal activities (such as entering into contracts for feasibility 
studies) has indicated a specific intent to become a PACE 
provider. 
(d) REPEAL OF CURRENT PACE 
DEMONSTRATION PROJECT 
WAIVER AUTHORITY.— 
(1) IN GENERAL.—Subject to paragraph (2), the following 
provisions of law are repealed: 
(A) Section 603(c) of the Social Security Amendments 
97 Stat. 166. 
of 1983 (Public Law 98-21). 
(B) Section 9220 of the Consolidated Omnibus Budget 
100 Stat. 183. 
Reconciliation Act of 1985 (Public Law 99-272). 
(C) Section 9412(b) of the Omnibus Budget Reconcili-
100 Stat. 2062. 
ation Act of 1986 (Public Law 99-509). 
(2) DELAY IN APPLICATION TO CURRENT WAIVERS.— 
(A) IN GENERAL.—Subject to subparagraph (B), in the 
case of waivers granted with respect to a PACE program 
before the initial effective date of regulations described 
in subsection (a), the repeals made by paragraph (1) shall 
not apply until the end of a transition period (of up to 
24 months) that begins on the initial effective date of 
such regulations, and that EQIOWS sufficient time for an 
orderly transition from demonstration project authority to 
general authority provided under the amendments made 
by this subtitle. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 551 
(B) 
STATE OPTION TO SEEK EXTENSION OF CURRENT 
PERIOD.—^A State may elect to maintain the PACE pro-
grams which (as of the date of the enactment of this Act) 
were operating in the State under the authority described 
in paragraph (1) until a date (specified by the State) that 
is not later than 3 years £ifter the initial effective date 
of regulations described in subsection (a). If a State makes 
such an election, the repeals made by paragraph (1) shall 
not apply to the programs until the date so specified, 
but only so long as such programs continue to operate 
under the same terms and conditions as apply to such 
programs as of the date of the enactment of this Act, 
and subparagraph (A) shall not apply to such programs. 
SEC. 4804. STUDY AND REPORTS. 
(a) STUDY.— 
(1) IN GENERAL.—^The Secretary of Health and Human 
Services (in close consultation with State administering agen-
cies, as defined in sections 1894(a)(8) and 1934(a)(8) of the 
Social Security Act) shall conduct a study of the quedity and 
cost of providing PACE program services under the medicare 
and medicaid programs under the amendments made by this 
subtitle. 
(2) STUDY OF PRIVATE, FOR-PROFIT PROVIDERS.—Such study 
shall specifically compare the costs, quality, and access to serv-
ices by entities that sire private, for-profit entities operating 
under demonstration projects waivers granted under sections 
1894(h) and 1934(h) of the Social Security Act with the costs, 
quality, and access to services of other PACE providers. 
(b) REPORT.— 
(1) IN GENERAL.—^Not later than 4 years after the date 
of the enactment of this Act, the Secretary shall provide for 
a report to Congress on the impact of such amendments on 
quality and cost of services. The Secretary shall include in 
such report such recommendations for changes in the operation 
of such amendments as the Secretary deems appropriate. 
(2) TREATMENT OF PRIVATE, FOR-PROFIT PROVIDERS.—The 
report shall include specific findings on whether any of the 
following findings is true: 
(A) The number of covered lives enrolled with entities 
operating under demonstration project waivers under sec-
tions 1894(h) and 1934(h) of the Social Security Act is 
fewer than 800 (or such lesser number as the Secretary 
may find statistically sufficient to make determinations 
respecting findings described in the succeeding subpara-
graphs). 
(B) The population enrolled with such entities is less 
frail than the population enrolled with other PACE provid-
ers. 
(C) Access to or quality of care for individuals enrolled 
with such entities is lower than such access or quality 
for individuals enrolled with other PACE providers. 
(D) The application of such section has resulted in 
an increase in expenditures under the medicare or medicaid 
programs above the expenditures that would have been 
made if such section did not apply. 
42 
use 1395eee 
note. 
42 
use 1395eee 
note. 
I l l STAT. 552 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 1395b-6 
note. 
(c) INFORMATION INCLUDED IN ANNUAL RECOMMENDATIONS.— 
The Medicare Pajntnent Advisory Commission shall include in its 
annual report under section 1805(b)(1)(B) of the Social Security 
Act recommendations on the methodology and level of payments 
made to PACE providers under sections 1894(d) and 1934(d) of 
such Act and on the treatment of private, for-profit entities as 
PACE providers. 
Subtitle J—State Children's Health 
Insurance Program 
CHAPTER l—STATE CHILDREN'S HEALTH INSURANCE 
PROGRAM 
SEC. 4901. ESTABLISHMENT OF PROGRAM. 
(a) ESTABLISHMENT.—^The Social Security Act is amended by 
adding at the end the following new title: 
'TITLE XXI—STATE CHILDREN'S HEALTH INSURANCE 
PROGRAM 
42 use 1397aa. 
"SEC. 2101. PURPOSE; STATE CHILD HEALTH PLANS. 
"(a) PURPOSE.—^The purpose of this title is to provide funds 
to States to enable them to initiate £ind expand the provision 
of child hesdth assistance to uninsured, low-income children in 
an effective and efficient manner that is coordinated with other 
sources of health benefits coverage for children. Such assistance 
shall be provided primarily for obtaining health benefits coverage 
through— 
"(1) obtaining coverage that meets the requirements of 
section 2103, or 
"(2) providing benefits under the State's medicaid plsui 
under title XIX, 
or a combination of both. 
"(b) STATE CHILD HEALTH PLAN REQUIRED.^A State is not 
eligible for payment under section 2105 unless the State has submit-
ted to the Secretary under section 2106 a plan that— 
"(1) sets forth how the State intends to use the funds 
provided under this title to provide child health assistance 
to needy children consistent with the provisions of this title, 
and 
"(2) has been approved under section 2106. 
"(c) STATE ENTITLEMENT.—^This title constitutes budget author-
ity in advance of appropriations Acts and represents the obligation 
of the Federal Government to provide for the payment to States 
of amounts provided under section 2104. 
"(d) EFFECTIVE DATE.—^No State is eligible for payments under 
section 2105 for child health assistance for coverage provided for 
periods beginning before October 1, 1997. 
42USC1397bb. 
"SEC. 2102. GENERAL CONTENTS OF STATE CHILD HEALTH PLAN; 
EUGIBHJTY; OUTREACH. 
"(a) GENERAL BACKGROUND AND DESCRIPTION.—^A State child 
health plan shall include a description, consistent with the require-
ments of this title, of— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 553 
"(1) the extent to which, and manner in which, children 
iii the State, including targeted low-income children and other 
classes of children classified by income and other relevant fac-
tors, currently have creditable health coverage (as defined in 
section 2110(c)(2)); 
"(2) current State efforts to provide or obtain creditable 
health coverage for uncovered children, including the steps 
the State is talking to identify and enroll all uncovered children 
who are eligible to participate in public health insurance pro-
grams and health insurance programs that involve public-pri-
vate partnerships; 
"(3) how the plan is designed to be coordinated with such 
efforts to increase coverage of children under creditable health 
coverage; 
"(4) the child health assistance provided under the plan 
for targeted low-income children, including the proposed meth-
ods of delivery, and utilization control systems; 
"(5) eligibility standsirds consistent with subsection (b); 
"(6) outreach activities consistent with subsection (c); and 
"(7) methods (including monitoring) used— 
"(A) to assure the quality eind appropriateness of care, 
p£irticularly with respect to well-baby care, well-child care, 
and immunizations provided under the plan, and 
"(B) to assure access to covered services, including 
emergency services. 
"(b) 
GENERAL DESCRIPTION OF ELIGIBILITY STANDARDS AND 
METHODOLOGY.— 
"(1) ELIGIBILITY STANDARDS.— 
"(A) IN GENERAL.—^The plan shall include a description 
of the standards used to determine the eligibility of tar-
geted low-income children for child health assistance under 
the plan. Such standards may include (to the extent consist-
ent with this title) those relating to the geographic areas 
to be served by the plan, age, income and resources (includ-
ing any standards relating to spenddowns and disposition 
of resources), residency, disability status (so long as any 
standard relating to such status does not restrict eligi-
bility), access to or coverage under other health coverage, 
and duration of eligibility. Such standards may not 
discriminate on the basis of diagnosis. 
"(B) 
LIMITATIONS ON ELIGIBILITY STANDARDS.—Such 
eligibility standards— 
"(i) shall, within any defined group of covered tar-
geted low-income children, not cover such children with 
higher family income without covering children with 
a lower family income, and 
"(ii) may not deny eligibility based on a child hav-
ing a preexisting medical condition. 
"(2) METHODOLOGY.—^The plan shall include a description 
of methods of establishing and continuing eligibility and enroll-
ment. 
"(3) 
ELIGIBILITY SCREENING; COORDINATION WITH OTHER 
HEALTH COVERAGE PROGRAMS.—The plan shall include a 
description of procedures to be used to ensure— 
"(A) through both intake and foUowup screening, that 
only targeted low-income children are furnished child 
health assistance under the State child health plan; 
39-194 O - 97 - 19 : QL 3 Part 1 
I l l STAT. 554 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(B) that children found through the screening to be 
ehgible for medical assistance under the State medicaid 
plan under title XIX are enrolled for such assistance under 
such plan; 
"(C) that the insurance provided under the State child 
health plan does not substitute for coverage under group 
health plans; 
"(D) the provision of child health assistance to targeted 
low-income children in the State who are Indians (as 
defined in section 4(c) of the Indian Health Care Improve-
ment Act, 25 U.S.C. 1603(c)); and 
"(E) coordination wkh other public and private pro-
grams providing creditable coverage for low-income chil-
dren. 
"(4) NONENTITLEMENT.—^Nothing in this title shall be con-
strued as providing an individual with an entitlement to child 
health assistance under a State child health plan. 
"(c) OUTREACH AND COORDINATION.^A State child health plan 
shall include a description of the procedures to be used by the 
State to accomplish the following: 
"(1) OUTREACH.—Outreach to families of children likely 
to be eligible for child health assistance under the plan or 
under other public or private health coverage programs to 
inform these families of the availability of, and to assist them 
in enrolling their children in, such a program. 
"(2) COORDINATION WITH OTHER HEALTH INSURANCE PRO-
GRAMS.—Coordination of the administration of the State pro-
gram under this title with other public and private hesdth 
insurance programs. 
42USC1397CC. 
'^EC. 2103. COVERAGE REQUIREMENTS FOR CHILDREN'S HEALTH 
INSURANCE. 
"(a) REQUIRED SCOPE OF HEALTH INSURANCE COVERAGE.—^The 
child health assistance provided to a targeted low-income child 
under the plan in the form described in paragraph (1) of section 
2101(a) shall consist, consistent with subsection (cX5), of any of 
the following: 
"(1) BENCHMARK COVERAGE.—^Health benefits coverage that 
is equivalent to the benefits coverage in a benchmark benefit 
package described in subsection (b). 
"(2) BENCHMARK-EQUIVALENT COVERAGE.—^Health benefits 
coverage that meets the following requirements: 
"(A) INCLUSION OF BASIC SERVICES.—^The coverage 
includes benefits for items and services within each of 
the categories of basic services described in subsection 
(cXl). 
"(B) AGGREGATE ACTUARIAL VALUE EQUIVALENT TO 
BENCHMARK PACKAGE.—^The coverage has an aggregate 
actuarial value that is at least actuarially equivalent to 
one of the benchmark benefit packages. 
"(C) 
SUBSTANTIAL ACTUARIAL VALUE FOR ADDITIONAL 
SERVICES INCLUDED IN BENCHMARK PACKAGE.—^With respect 
to each of the categories of additional services described 
in subsection (c)(2) for which coverage is provided under 
the benchmark benefit package used under subparagraph 
(B), the coverage has an actuarial value that is equal 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 555 
to at least 75 percent of the actuarial value of the coverage 
of that category of services in such package. 
"(3) EXISTING COMPREHENSIVE STATE-BASED COVERAGE.— 
Health benefits coverage under an existing comprehensive 
State-based program, described in subsection (d)(1). 
"(4) SECRETARY-APPROVED covERAGE.^Any other health 
benefits coverage that the Secretary determines, upon applica-
tion by a State, provides appropriate coverage for the population 
of targeted low-income children proposed to be provided such 
coverage. 
"(b) BENCHMARK BENEFIT PACKAGES.—The benchmark benefit 
packages are as follows: 
"(1) FEHBP-EQUIVALENT CHILDREN'S HEALTH INSURANCE 
COVERAGE.—^The standard Blue Cross/Blue Shield preferred 
provider option service benefit plan, described in and offered 
under section 8903(1) of title 5, United States Code. 
"(2) STATE EMPLOYEE COVERAGE.—A health benefits cov-
erage plan that is offered and generally available to State 
employees in the State involved. 
"(3) COVERAGE OFFERED THROUGH HMO.—The health insur-
ance coverage plan that— 
"(A) is offered by a health maintenance organization 
(as defined in section 2791(b)(3) of the Public Health Serv-
ice Act), and 
"(B) has the largest insured commercial, non-medicaid 
enrollment of covered lives of such coverage plans offered 
by such a health maintenance organization in the State 
involved. 
"(c) CATEGORIES OF SERVICES; DETERMINATION OF ACTUARL\L 
VALUE OF COVERAGE.— 
"(1) CATEGORIES OF BASIC SERVICES.—For purposes of this 
section, the categories of basic services described in this para-
graph are as follows: 
"(A) Inpatient and outpatient hospital services. 
"(B) Physicians' surgical and medical services. 
"(C) Laboratory and x-ray services. 
"(D) Well-baby and well-child care, including age-
appropriate immunizations. 
"(2) CATEGORIES OF ADDITIONAL SERVICES.—For purposes 
of this section, the categories of additional services described 
in this paragraph are as follows: 
"(A) Coverage of prescription drugs. 
"(B) Mental health services. 
"(C) Vision services. 
"(D) Hearing services. 
"(3) TREATMENT OF OTHER CATEGORIES.—Nothing in this 
subsection shall be construed as preventing a State child health 
plan from providing coverage of benefits that are not within 
a category of services described in paragraph (1) or (2). 
"(4) DETERMINATION OF ACTUARIAL VALUE.—The actuarial 
value of coverage of benchmark benefit packages, coverage 
offered under the State child health plan, and coverage of 
any categories of additional services under benchmark benefit 
packages and under coverage offered by such a plan, shall 
be set forth in an actuarial opinion in an actuarial report 
that has been prepared— 
I l l STAT. 556 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(A) by an individual who is a member of the American 
Academy of Actuaries; 
"(B) using generally accepted actuarial principles and 
methodologies; 
"(C) using a standardized set of utilization and price 
factors; 
"(D) using a standardized population that is represent-
ative of privately insured children of the age of children 
who are expected to be covered under the State child health 
plan; 
"(E) appl3dng the same principles and factors in 
comparing the value of different coverage (or categories 
of services); 
"(F) without taking into account any differences in 
coverage based on the method of delivery or means of 
cost control or utilization used; and 
"(G) taking into account the ability of a State to reduce 
benefits by taking into account the increase in actuarial 
VEilue of benefits coverage offered under the State child 
health plan that results from the limitations on cost sharing 
under such coverage. 
The actuary preparing the opinion shall select and specify 
in the memorandum the standardized set and population to 
be used under subparagraphs (C) and (D). 
"(5) CONSTRUCTION ON PROHIBITED COVERAGE.—^Nothing in 
this section shall be construed as requiring any health benefits 
coverage offered under the plan to provide coverage for items 
or services for which pasnnent is prohibited under this title, 
notwithstanding that any benchmark benefit package includes 
coverage for such an item or service. 
"(d) DESCRIPTION OF EXISTING COMPREHENSIVE STATE-BASED 
COVERAGE.— 
"(1) IN GENERAL.—^A program described in this paragraph 
is a child health coverage program that— 
"(A) includes coverage of a range of benefits; 
"(B) is administered or overseen by the State and 
receives funds from the State; 
"(C) is offered in New York, Florida, or Pennsylvania; 
and 
"(D) was offered as of the date of the enactment of 
this title. 
"(2) MODIFICATIONS.—A State may modify a program 
described in paragraph (1) from time to time so long as it 
continues to meet the requirement of subparagraph (A) and 
does not reduce the actuarial value of the coverage under 
the program below the lower of— 
"(A) the actuarial value of the coverage under the 
program as of the date of the enactment of this title, 
or 
"(B) the actuarial value described in subsection 
(a)(2)(B), 
evaluated as of the time of the modification. 
"(e) COST-SHARING.— 
"(1) DESCRIPTION; GENERAL CONDITIONS.— 
"(A) DESCRIPTION.—^A State child health plan shall 
include a description, consistent with this subsection, of 
the amount (if any) of premiums, deductibles, coinsurance. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 557 
and other cost sharing imposed. Any such charges shall 
be imposed pursuant to a public schedule. 
"(B) PROTECTION FOR LOWER INCOME CHILDREN.—The 
State child health 
plan may only vary 
premiums, 
deductibles, coinsurance, and other cost sharing based on 
the family income of targeted low-income children in a 
manner that does not favor children from families with 
higher income over children from families with lower 
income. 
"(2) No COST SHARING ON BENEFITS FOR PREVENTIVE SERV-
ICES.—^The State child health plan may not impose deductibles, 
coinsurance, or other cost sharing with respect to benefits for 
services within the category of services described in subsection 
(c)(1)(D). 
"(3) LIMITATIONS ON PREMIUMS AND COST-SHARING.— 
"(A) CHILDREN IN FAMILIES WITH INCOME BELOW I50 
PERCENT OF POVERTY LINE.—In the case of a targeted low-
income child whose family income is at or below 150 percent 
of the poverty line, the State child health plan may not 
impose— 
"(i) an enrollment fee, premium, or similar charge 
that exceeds the maximum monthly charge permitted 
consistent with standards established to carry out sec-
tion 1916(b)(1) (with respect to individuals described 
in such section); and 
"(ii) a deductible, cost sharing, or similar charge 
that exceeds an amount that is nominal (as determined 
consistent with regulations referred to in section 
1916(a)(3), with such appropriate adjustment for infla-
tion or other reasons as the Secretary determines to 
be reasonable). 
"(B) OTHER CHILDREN.—For children not described in 
subparagraph (A), subject to paragraphs (1)(B) and (2), 
any premiums, deductibles, cost sharing or similar charges 
imposed under the State child health plan may be imposed 
on a sliding scale related to income, except that the total 
annual aggregate cost-sharing with respect to all targeted 
low-income children in a family under this title may not 
exceed 5 percent of such family's income for the year 
involved. 
"(4) RELATION TO MEDICAID REQUIREMENTS.—Nothing in 
this subsection shall be construed as affecting the rules relating 
to the use of enrollment fees, premiums, deductions, cost shar-
ing, and similar charges in the case of targeted low-income 
children who are provided child health assistance in the form 
of coverage under a medicaid program under section 2101(a)(2). 
"(f) APPLICATION OF CERTAIN REQUIREMENTS.— 
"(1) RESTRICTION ON APPLICATION OF PREEXISTING CONDI-
TION EXCLUSIONS.— 
"(A) IN GENERAL.—Subject to subparagraph (B), the 
State child health plan shall not permit the imposition 
of any preexisting condition exclusion for covered benefits 
under the plan. 
"(B) GROUP HEALTH PLANS AND GROUP HEALTH INSUR-
ANCE COVERAGE.—If the State child health plan provides 
for benefits through payment for, or a contract with, a 
group health plan or group health insurance coverage, the 
I l l STAT. 558 
PUBLIC LAW 105-33—AUG. 5, 1997 
plan may permit the imposition of a preexisting condition 
exclusion but only insofar as it is permitted under the 
applicable provisions of part 7 of subtitle B of title I of 
the Employee Retirement Income Security Act of 1974 and 
title XXVII of the Public Health Service Act. 
"(2) COMPLIANCE WITH OTHER REQUIREMENTS.—Coverage 
offered under this section shedl comply with the requirements 
of subpart 2 of part A of title XXVII of the Public Health 
Service Act insofar as such requirements apply with respect 
to a health insurance issuer that offers group health insurance 
coverage. 
42 use 1397dd. 
•*SEC. 2104. ALLOTMENTS. 
"(a) APPROPRIATION; TOTAL ALLOTMENT.—For the purpose of 
providing allotments to States under this section, there is appro-
priated, out of any money in the Treasury not otherwise appro-
priated— 
"(1) for fiscal year 1998, $4,275,000,000; 
"(2) for fiscal year 1999, $4,275,000,000; 
"(3) for fiscal year 2000, $4,275,000,000; 
"(4) for fiscal year 2001, $4,275,000,000; 
"(5) for fiscal year 2002, $3,150,000,000; 
"(6) for fiscal year 2003, $3,150,000,000; 
"(7) for fiscal year 2004, $3,150,000,000; 
"(8) for fiscal year 2005, $4,050,000,000; 
"(9) for fiscal year 2006, $4,050,000,000; and 
"(10) for fiscal year 2007, $5,000,000,000. 
"(b) ALLOTMENTS TO 50 STATES AND DISTRICT OF COLUMBIA.— 
"(1) IN GENERAL.—Subject to paragraph (4) and subsection 
(d), of the amount available for allotment under subsection 
(a) for a fiscal year, reduced by the amount of allotments 
made under subsection (c) for the fiscal year, the Secretary 
shall allot to each State (other than a State described in such 
subsection) with a State child health plan approved under 
this title the same proportion as the ratio of— 
"(A) the product of (i) the number of children described 
in paragraph (2) for the State for the fiscal year and 
(ii) the State cost factor for that State (established under 
paragraph (3)); to 
"(B) the sum of the products computed under subpara-
graph (A). 
"(2) NUMBER OF CHILDREN.— 
"(A) IN GENERAL.—^The number of children described 
in this paragraph for a State for— 
"(i) each of fiscal years 1998 through 2000 is equal 
to the number of low-income children in the State 
with no health insurance coverage for the fiscal year; 
"(ii) fiscal year 2001 is equal to— 
"(I) 75 percent of the number of low-income 
children in the State for the fiscal year with no 
health insurance coverage, plus 
"(II) 25 percent of the number of low-income 
children in the State for the fiscal year; and 
"(iii) each succeeding fiscal year is equsJ to—-
"(I) 50 percent of the number of low-income 
children in the State for the fiscal year with no 
health insurance coverage, plus 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 559 
"(11) 50 percent of the number of low-income 
children in the State for the fiscal year. 
"(B) DETERMINATION OF NUMBER OF CHILDREN.—For 
purposes of subparagraph (A), a determination of the num-
ber of low-income children (and of such children who have 
no health insurance coverage) for a State for a fiscal year 
shall be made on the basis of the arithmetic average of 
the number of such children, as reported and defined in 
the 3 most recent March supplements to the Current Popu-
lation Survey of the Bureau of the Census before the begin-
ning of the fiscal year. 
"(3) ADJUSTMENT FOR GEOGRAPHIC VARIATIONS IN HEALTH 
COSTS.— 
"(A) IN GENERAL.—For purposes of paragraph (l)(A)(ii), 
the 'State cost factor' for a State for a fiscal year equal 
to the sum of— 
"(i) 0.15, and 
"(ii) 0.85 multiplied by the ratio of— 
"(I) the annugil average wages per employee 
for the State for such year (as determined under 
subparagraph (B)), to 
"(II) the annual average wages per employee 
for the 50 States and the District of Columbia. 
"(B) ANNUAL AVERAGE WAGES PER EMPLOYEE.—For pur-
poses of subparagraph (A), the 'annual average wages per 
employee' for a State, or for all the States, for a fiscal 
year is equal to the average of the annual wages per 
employee for the State or for the 50 States and the District 
of Columbia for employees in the health services industry 
(SIC code 8000), as reported by the Bureau of Labor Statis-
tics of the Department of Labor for each of the most recent 
3 years before the beginning of the fiscal year involved. 
"(4) FLOOR FOR STATES.—Subject to paragraph (5), in no 
case shall the amount of the allotment under this subsection 
for one of the 50 States or the District of Columbia for a 
year be less than $2,000,000. To the extent that the application 
of the previous sentence results in an increase in the allotment 
to a State above the amount otherwise provided, the allotments 
for the other States and the District of Columbia under this 
subsection shall be reduced in a pro rata manner (but not 
below $2,000,000) so that the total of such allotments in a 
fiscal year does not exceed the amount otherwise provided 
for allotment under paragraph (1) for that fiscal year. 
"(c) ALLOTMENTS TO TERRITORIES.— 
"(1) IN GENERAL.—Of the amount available for allotment 
under subsection (a) for a fiscal year, subject to subsection 
(d), the Secretary shall allot 0.25 percent among each of the 
commonwealths and territories described in paragraph (3) in 
the same proportion as the percentage specified in paragraph 
(2) for such commonwealth or territory bears to the sum of 
such percentages for all such commonwealths or territories 
so described. 
"(2) PERCENTAGE.—The percentage specified in this para-
graph for— 
"(A) Puerto Rico is 91.6 percent, 
"(B) Guam is 3.5 percent, 
"(C) Virgin Islands is 2.6 percent, 
I l l STAT. 560 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 1397ee. 
"(D) American Samoa is 1.2 percent, and 
"(E) the Northern Mariana Islands is 1.1 percent. 
"(3) COMMONWEALTHS AND TERRITORIES.^A commonwealth 
or territory described in this paragraph is any of the following 
if it has a State child health plan approved under this title: 
"(A) Puerto Rico. 
"(B) Guam. 
"(C) the Virgin Islands. 
"(D) American Samoa. 
"(E) the Northern Mariana Islands. 
"(d) 
CERTAIN 
MEDICAID 
EXPENDITURES 
COUNTED 
AGAINST 
INDIVIDUAL STATE ALLOTMENTS.—^The amount of the allotment 
otherwise provided to a State under subsection (b) or (c) for a 
fiscal year shall be reduced by the sum of— 
"(1) the amount (if any) of the payments made to that 
State under section 1903(a) for calendar quarters during such 
fiscal year that is attributable to the provision of medical assist-
ance to a child during a presumptive eligibility period under 
section 1920A, and 
"(2) the amount of payments under such section during 
such period that is attributable to the provision of medical 
assistance to a child for which payment is made under section 
1903(a)(1) on the basis of an enhanced FMAP under section 
1905(b). 
"(e) 3-YEAR AVAILABILITY OF AMOUNTS ALLOTTED.—Amounts 
allotted to a State pursuant to this section for a fiscal year shall 
remain available for expenditure by the State through the end 
of the second succeeding fiscal year; except that amounts reallotted 
to a State under subsection (f) shall be available for expenditure 
by the State through the end of the fiscal year in which they 
are reedlotted. 
"(f) 
PROCEDURE FOR REDISTRIBUTION OF UNUSED 
ALLOT-
MENTS.—^The Secretary shall determine an appropriate procedure 
for redistribution of allotments from States that were provided 
allotments under this section for a fiscal year but that do not 
expend all of the amount of such allotments during the period 
in which such allotments are available for expenditure under sub-
section (e), to States that have fully expended the amount of their 
allotments under this section. 
"SEC. 2106. PAYMENTS TO STATES. 
"(a) IN GENERAL.—Subject to the succeeding provisions of this 
section, the Secretary shall pay to each State with a plan approved 
under this title, from its allotment under section 2104 (taking 
into account any adjustment under section 2104(d)), an amount 
for each quarter equal to the enhanced FMAP of expenditures 
in the quarter— 
"(1) for child health assistance under the plan for targeted 
low-income children in the form of providing health benefits 
coverage that meets the requirements of section 2103; and 
"(2) only to the extent permitted consistent with subsection 
icy-
"(A) for payment for other child health assistance for 
targeted low-income children; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 561 
"(B) for expenditures for health services initiatives 
under the plan for improving the health of children (includ-
ing targeted low-income children and other low-income chil-
dren); 
"(C) for expenditures for outreach activities as provided 
in section 2102(c)(1) under the plan; and 
"(D) for other reasonable costs incurred by the State 
to administer the plan. 
"(b) ENHANCED FMAP.—For purposes of subsection (a), the 
'enhanced FMAP', for a State for a fiscal year, is equal to the 
Federal medical assistance percentage (as defined in the first sen-
tence of section 1905(b)) for the State increased by a number of 
percentage points equal to 30 percent of the number of percentage 
points by which (1) such Federal medical assistance percentage 
for the State, is less than (2) 100 percent; but in no case shall 
the enhanced FMAP for a State exceed 85 percent. 
"(c) LIMITATION ON CERTAIN PAYMENTS FOR CERTAIN EXPENDI-
TURES.— 
"(1) GENERAL LIMITATIONS.—^Funds provided to a State 
under this title shall only be used to carry out the purposes 
of this title (as described in section 2101), and any health 
insurance coverage provided with such funds may include cov-
erage of abortion only if necessary to save the life of the 
mother or if the pregnancy is the result of an act of rape 
or incest. 
"(2) LIMITATION ON EXPENDITURES NOT USED FOR MEDICAID 
OR HEALTH INSURANCE ASSISTANCE.— 
"(A) IN GENERAL.—^Except as provided in this para-
graph, payment shall not be made under subsection (a) 
for expenditures for items described in subsection (a) (other 
than paragraph (1)) for a quarter in a fiscal year to the 
extent the total of such expenditures exceeds 10 percent 
ofthesumof— 
"(i) the total Federal payments made under sub-
section (a) for such quarter in the fiscal year, and 
"(ii) the total Federal pajmtients made under sec-
tion 1903(a)(1) based on an enhanced FMAP described 
in section 1905(u)(2) for such quarter. 
"(B) WAIVER AUTHORIZED FOR COST-EFFECTIVE ALTER-
NATIVE.—^The limitation 
under 
subparagraph 
(A) on 
expenditures for items described in subsection (aX2) shall 
not apply to the extent that a State establishes to the 
satisfaction of the Secretary that— 
"(i) coverage provided to targeted low-income chil-
dren through such expenditures meets the require-
ments of section 2103; 
"(ii) the cost of such coverage is not greater, on 
an average per child basis, than the cost of coverage 
that would otherwise be provided under section 2103; 
and 
"(iii) such coverage is provided through the use 
of a community-based health delivery system, such 
as through contracts with health centers receiving 
funds under section 330 of the Public Health Service 
Act or with hospitals such as those that receive dis-
proportionate share payment adjustments under sec-
tion 1886(d)(5)(F) or 1923. 
Ill STAT. 562 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(3) WAIVER FOR PURCHASE OF FAMILY COVERAGE.—Pay-
ment may be made to a State under subsection (a)(1) for the 
purchase of family coverage under a group health plan or 
health insurance coverage that includes coverage of targeted 
low-income children only if the State establishes to the satisfac-
tion of the Secretary that— 
"(A) purchase of such coverage is cost-effective relative 
to the amounts that the State would have paid to obtain 
comparable coverage only of the targeted low-income chil-
dren involved, and 
"(B) such coverage shall not be provided if it would 
otherwise substitute for health insurance coverage that 
would be provided to such children but for the purchase 
of family coverage. 
"(4) 
USE OF NON-FEDERAL FUNDS FOR STATE MATCHING 
REQUIREMENT.—^Amounts provided by the Federal Government, 
or services assisted or subsidized to any significant extent 
by the Federal Government, may not be included in determining 
the amount of non-Federal contributions required under sub-
section (a). 
"(5) OFFSET OF RECEIPTS ATTRIBUTABLE TO PREMIUMS AND 
OTHER COST-SHARING.—For purposes of subsection (a), the 
amount of the expenditures under the plgm shall be reduced 
by the amount of any premiums and other cost-sharing received 
by the State. 
"(6) PREVENTION OF DUPLICATIVE PAYMENTS.— 
"(A) OTHER HEALTH PLANS.—^No payment shall be made 
to a State under this section for expenditures for child 
health assistance provided for a targeted low-income child 
under its plan to the extent that a private insurer (as 
defined by the Secretary by regulation and including a 
group health plan (as defined in section 607(1) of the 
Employee Retirement Income Security Act of 1974), a serv-
ice benefit plan, and a health maintenance organization) 
would have been obligated to provide such assistance but 
for a provision of its insurance contract which has the 
effect of limiting or excluding such obligation because the 
individual is eligible for or is provided child health assist-
ance under the plan. 
"(B) 
OTHER 
FEDERAL GOVERNMENTAL PROGRAMS.— 
Except as otherwise provided by law, no payment shall 
be made to a State under this section for expenditures 
for child health assistance provided for a targeted low-
income child under its plan to the extent that payment 
has been made or can reasonably be expected to be made 
promptly (as determined in accordance with regulations) 
under any other federally operated or financed health care 
insurance program, other than an insurance program oper-
ated or financed by the Indian Health Service, as identified 
by the Secretary. For purposes of this paragraph, rules 
similar to the rules for overpayments under section 
1903(dX2) shall apply. 
"(7) LIMITATION ON PAYMENT FOR ABORTIONS.— 
"(A) IN GENERAL.—^Payment shall not be made to a 
State under this section for any amount expended under 
the State plan to pay for any abortion or to assist in 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 563 
the purchase, in whole or in part, of health benefit coverage 
that includes coverage of abortion. 
"(B) EXCEPTION.—Subparagraph (A) shall not apply 
to an abortion only if necessary to save the life of the 
mother or if the pregnancy is the result of an act of rape 
or incest. 
"(C) RULE OF CONSTRUCTION.—^Nothing in this section 
shall be construed as affecting the expenditure by a State, 
locality, or private person or entity of State, local, or private 
funds (other than funds expended under the State plan) 
for any abortion or for health benefits coverage that 
includes coverage of abortion. 
"(d) MAINTENANCE OF EFFORT.— 
"(1) IN MEDICAID ELIGIBILITY STANDARDS.—No payment may 
be made under subsection (a) with respect to child health 
assistance provided under a State child health plan if the 
State adopts income and resource standards and methodologies 
for purposes of determining a child's eligibility for medical 
assistance under the State plan under title XIX that are more 
restrictive than those applied as of June 1, 1997. 
"(2) 
IN AMOUNTS OF PAYMENT EXPENDED FOR CERTAIN 
STATE-FUNDED HEALTH INSURANCE PROGRAMS FOR CHILDREN.— 
"(A) IN GENERAL.—^The amount of the allotment for 
a State in a fiscal year (beginning with fiscal year 1999) 
shall be reduced by the amount by which— 
"(i) the total of the State children's health insur-
ance expenditures in the preceding fiscal year, is less 
than 
"(ii) the total of such expenditures in fiscal year 
1996. 
"(B) 
STATE CHILDREN'S HEALTH INSURANCE EXPENDI-
TURES.—^The term 
'State children's health 
insurance 
expenditures' means the following: 
"(i) The State share of expenditures under this 
title. 
"(ii) The State share of expenditures under title 
XIX that are attributable to an enhanced FMAP under 
section 1905(u). 
"(iii) State expenditures under health benefits cov-
erage under an existing comprehensive State-based 
program, described section 2103(d). 
"(e) 
ADVANCE PAYMENT; RETROSPECTIVE ADJUSTMENT.—^The 
Secretary may make pajnnents under this section for each quarter 
on the basis of advance estimates of expenditures submitted by 
the State and such other investigation as the Secretary may find 
necessary, and may reduce or increase the pajrments as necessary 
to adjust for any overpayment or underpayment for prior quarters. 
"SEC. 2106. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT 42 USC 1397ff. 
OF STATE CHILD HEALTH PLANS. 
"(a) INITIAL PLAN.— 
"(1) IN GENERAL.—^As a condition of receiving payment 
under section 2105, a State shall submit to the Secretary a 
State child health plan that meets the applicable requirements 
of this title. 
"(2) APPROVAL.—^Except as the Secretary may provide under 
subsection (e), a State plan submitted under paragraph (1)— 
Ill STAT. 564 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(A) shall be approved for purposes of this title, and 
Effective date. 
"(B) shall be effective beginning with a calendar quar-
ter that is specified in the plan, but in no case earlier 
than October 1, 1997. 
"(b) PLAN AMENDMENTS.— 
"(1) IN GENERAL.—^A State may amend, in whole or in 
part, its State child health plan at any time through transmittal 
of a plan amendment. 
"(2) APPROVAL.—Except as the Secretary may provide under 
subsection (e), an amendment to a State plan submitted under 
paragraph (1)— 
"(A) shall be approved for purposes of this title, £ind 
"(B) shall be effective as provided in paragraph (3). 
"(3) EFFECTIVE DATES FOR AMENDMENTS.— 
"(A) IN GENERAL.—Subject to the succeeding provisions 
of this paragraph, an amendment to a State plan shall 
take effect on one or more effective dates specified in the 
amendment. 
"(B) AMENDMENTS RELATING TO ELIGIBILITY OR BENE-
FITS.— 
"(i) NOTICE REQUIREMENT.—^Any plan amendment 
that eliminates or restricts eligibility or benefits under 
the plan may not take effect unless the State certifies 
that it has provided prior public notice of the change, 
in a form and manner provided under applicable State 
law. 
"(ii) TIMELY TRANSMiTTAL.^Any plan amendment 
that eliminates or restricts eligibility or benefits under 
the plan shall not be effective for longer than a 60-
day period unless the amendment has been transmitted 
to the Secretary before the end of such period. 
"(C) OTHER AMENDMENTS.—Any plan amendment that 
is not described in subparagraph (B) and that becomes 
effective in a State fiscal year may not remain in effect 
after the end of such fiscal year (or, if later, the end 
of the 90-day period on which it becomes effective) unless 
the amendment has been transmitted to the Secretary. 
"(c) DISAPPROVAL OF PLANS AND PLAN AMENDMENTS.— 
"(1) PROMPT REVIEW OF PLAN suBMiTTALS.^The Secretary 
shall promptly review State plans and plan amendments 
submitted under this section to determine if they substantially 
comply with the requirements of this title. 
"(2) 90-DAY APPROVAL DEADLINES.—^A State plan or plan 
amendment is considered approved unless the Secretary notifies 
the State in writing, within 90 days after receipt of the plan 
or amendment, that the plan or amendment is disapproved 
(and the reasons for disapproval) or that specified additional 
information is needed. 
"(3) CORRECTION.—In the case of a disapproval of a plan 
or plan amendment, the Secretary shall provide a State with 
a reasonable opportunity for correction before taking financied 
sanctions against the State on the basis of such disapproval. 
"(d) PROGRAM OPERATION.— 
"(1) IN GENERAL.—^The State shall conduct the program 
in accordance with the plan (and any amendments) approved 
under subsection (c) and with the requirements of this title. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 565 
"(2) VIOLATIONS.—^The Secretary shall establish a process 
for enforcing requirements under this title. Such process shall 
provide for the withholding of funds in the case of substantial 
noncompliance with such requirements. In the case of an 
enforcement action against a State under this paragraph, the 
Secretary shall provide a State with a reasonable opportunity 
for correction before taking financial sanctions against the State 
on the basis of such an action. 
"(e) CONTINUED APPROVAL.—An approved State child health 
plan shall continue in effect unless and until the State amends 
the plan under subsection (b) or the Secretary finds, under sub-
section (d), substantial noncompliance of the plan with the require-
ments of this title. 
"SEC. 2107. STRATEGIC OBJECTIVES AND PERFORMANCE GOALS; PLAN 
42 USC 1397gg. 
ADMINISTRATION. 
"(a) STRATEGIC OBJECTIVES AND PERFORMANCE GOALS.— 
"(1) DESCRIPTION.—^A State child health plan shall include 
a description of— 
"(A) the strategic objectives, 
"(B) the performance goals, and 
"(C) the performance measures, 
the State has established for providing child health assistance 
to targeted low-income children under the plan and otherwise 
for maximizing health benefits coverage for other low-income 
children and children generally in the State. 
"(2) STRATEGIC OBJECTIVES.—Such plan shall identify spe-
cific strategic objectives relating to increasing the extent of 
creditable health coverage among targeted low-income children 
and other low-income children. 
"(3) PERFORMANCE GOALS.—Such plan shall specify one 
or more performance goals for each such strategic objective 
so identified. 
"(4) PERFORMANCE MEASURES.—Such plan shall describe 
how performance under the plan will be— 
"(A) measured through objective, independently verifi-
able means, and 
"(B) compared against performance goals, in order to 
determine the State's performance under this title. 
"(b) RECORDS, REPORTS, AUDITS, AND EVALUATION.— 
"(1) DATA COLLECTION, RECORDS, AND REPORTS.—A State 
child health plan shall include an assurance that the State 
will collect the data, maintain the records, and furnish the 
reports to the Secretary, at the times and in the standardized 
format the Secretary may require in order to enable the Sec-
retary to monitor State program administration and compliance 
and to evaluate and compare the effectiveness of State plans 
under this title. 
"(2) STATE ASSESSMENT AND STUDY.—A State child health 
plan shall include a description of the State's plan for the 
annual assessments and reports under section 2108(a) and 
the evaluation required by section 2108(b). 
"(3) AUDITS.—A State child health plan shall include an 
assurance that the State will afford the Secretary access to 
any records or information relating to the plan for the purposes 
of review or audit. 
I l l STAT. 566 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(c) PROGRAM DEVELOPMENT PROCESS.—A State child health 
plan shall include a description of the process used to involve 
the public in the design and implementation of the plan and the 
method for ensuring ongoing public involvement. 
"(d) PROGRAM BUDGET.—A State child health plan shall include 
a description of the budget for the plan. The description shall 
be updated periodically as necessary and shall include details on 
the planned use of funds and the sources of the non-Federal share 
of plan expenditures, including any requirements for cost-sharing 
by beneficiaries. 
"(e) APPLICATION OF CERTAIN GENERAL PROVISIONS.—^The fol-
lowing sections of this Act shall apply to States under this title 
in the same manner as they apply to a State under title XIX: 
"(1) TITLE XIX PROVISIONS.— 
"(A) Section 
1902(a)(4)(C) (relating to conflict of 
"(B) Paragraphs (2), (16), and (17) of section 1903(i) 
(relating to limitations on payment). 
"(C) Section 1903(w) (relating to limitations on provider 
taxes and donations). 
"(2) TITLE XI PROVISIONS.— 
"(A) Section 1115 (relating to waiver authority). 
"(B) Section 1116 (relating to administrative and 
judicial review), but only insofar as consistent with this 
title. 
"(C) Section 1124 (relating to disclosure of ownership 
and related information). 
"(D) Section 1126 (relating to disclosure of information 
about certain convicted individuals). 
"(E) Section 1128A (relating to civil monetary pen-
alties). 
"(F) Section 1128B(d) (relating to criminal penalties 
for certain additional charges). 
"(G) Section 1132 (relating to periods within which 
claims must be filed). 
42 use 1397hh. 
"SEC. 2108. ANNUAL REPORTS; EVALUATIONS. 
"(a) ANNUAL REPORT.—^The State shall— 
"(1) assess the operation of the State plan under this title 
in each fiscal yesir, including the progress made in reducing 
the number of uncovered low-income children; and 
"(2) report to the Secretary, by January 1 following the 
end of the fiscal year, on the result of the assessment. 
"(b) STATE EVALUATIONS.— 
"(1) IN GENERAL.—By March 31, 2000, each State that 
has a State child health plan shall submit to the Secretary 
an evaluation that includes each of the following: 
"(A) An assessment of the effectiveness of the State 
plan in increasing the number of children with creditable 
hesdth coverage. 
"(B) A description and ansilysis of the effectiveness 
of elements of the State plan, including— 
"(i) the characteristics of the children and families 
assisted under the State plan including age of the 
children, family income, and the assisted child's access 
to or coverage by other health insurance prior to the 
State plan and after eligibility for the State plan ends, 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 567 
"(ii) the quality of health coverage provided includ-
ing the types of benefits provided, 
"(iii) the amount and level (including payment of 
part or all of any premium) of assistance provided 
by the State, 
"(iv) the service area of the State plan, 
"(v) the time limits for coverage of a child under 
the State plan, 
"(vi) the State's choice of health benefits coverage 
and other method^s used for providing child health 
assistance, and 
"(vii) the sources of non-Federal funding used in 
the State plan. 
"(C) An assessment of the effectiveness of other public 
and private programs in the State in increasing the avail-
ability of affordable quality individusJ and family health 
insurance for children. 
"(D) A review and assessment of State activities to 
coordinate the plan under this title with other public and 
private programs providing health care and health care 
financing, including medicaid and maternal and child 
health services. 
"(E) An analysis of changes and trends in the State 
that affect the provision of accessible, affordable, quality 
health insurance and health care to children. 
"(F) A description of any plans the State has for 
improving the availability of health insurance and health 
care for children. 
"(G) Recommendations for improving the program 
under this title. 
"(H) Any other matters the State and the Secretary 
consider appropriate. 
"(2) REPORT OF THE SECRETARY.—The Secretary shall sub-
mit to Congress and make available to the public by December 
31, 2001, a report based on the evaluations submitted by States 
under paragraph (1), containing any conclusions and rec-
ommendations the Secretary considers appropriate. 
"SEC. 2109. MISCELLANEOUS PROVISIONS. 
"(a) RELATION TO OTHER LAWS.— 
"(1) HIPAA.—Health benefits coverage provided under sec-
tion 2101(a)(1) (and coverage provided under a waiver under 
section 2105(c)(2)(B)) shall be treated as creditable coverage 
for purposes of part 7 of subtitle B of title II of the Employee 
Retirement Income Security Act of 1974, title XXVII of the 
Public Health Service Act, and subtitle K of the Internal Reve-
nue Code of 1986. 
"(2) ERISA.—^Nothing in this title shall be construed as 
affecting or modifying section 514 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1144) with respect 
to a group health plan (as defined in section 2791(a)(1) of 
the PubUc Health Service Act (42 U.S.C. 300gg-91(a)(1)). 
"SEC. 2110. DEFINITIONS. 
"(a) CHILD HEALTH ASSISTANCE.—For purposes of this title, 
the term 'child health assistance' means payment for part or all 
of the cost of health benefits coverage for targeted low-income 
children that includes any of the following (and includes, in the 
Public 
information. 
42 use 1397ii. 
42 use 1397JJ. 
I l l STAT. 568 
PUBLIC LAW 105-33—AUG. 5, 1997 
case described in section 2105(a)(2)(A), pa5nnent for part or all 
of the cost of providing any of the following), as specified under 
the State plan: 
"(1) Inpatient hospitsd services. 
"(2) Outpatient hospital services. 
"(3) Physician services. 
"(4) Surgical services. 
"(5) Clinic services (including health center services) and 
other ambulatory health care services. 
"(6) Prescription drugs and biologicals and the administra-
tion of such drugs and biologicals, only if such drugs and 
biologicals are not furnished for the purpose of causing, or 
assisting in causing, the death, suicide, euthanasia, or mercy 
killing of a person. 
"(7) Over-the-counter medications. 
"(8) Laboratory and radiologicsd services. 
"(9) Prenatal care and prepregnancy family planning serv-
ices and supplies. 
"(10) Inpatient mental health services, other than services 
described in paragraph (18) but including services furnished 
in a State-operated mental hospital and including residential 
or other 24-hour therapeutically plsmned structured services. 
"(11) Outpatient mental health services, other than services 
described in paragraph (19) but including services furnished 
in a State-operated mental hospital and including community-
based services. 
"(12) Durable medical equipment and other medically-
related or remedial devices (such as prosthetic devices, 
implants, eyeglasses, hearing aids, dental devices, and adaptive 
devices). 
"(13) Disposable medical supplies. 
"(14) Home and community-based health care services and 
related supportive services (such as home health nursing serv-
ices, home health aide services, personal care, assistance with 
activities of daily living, chore services, day care services, res-
pite care services, training for family members, and minor 
modifications to the home). 
"(15) Nursing care services (such as nurse practitioner 
services, nurse midwife services, advanced practice nurse serv-
ices, private duty nursing care, pediatric nurse services, and 
respiratory care services) in a home, school, or other setting. 
"(16) Abortion only if necessary to save the life of the 
mother or if the pregnancy is the result of an act of rape 
or incest. 
"(17) Dental services. 
"(18) Inpatient substance abuse treatment services and 
residential substance abuse treatment services. 
"(19) Outpatient substance abuse treatment services. 
"(20) Case management services. 
"(21) Care coordination services. 
"(22) Physical therapy, occupational therapy, and services 
for individuals with speech, hearing, and language disorders. 
"(23) Hospice care. 
"(24) Any other medical, diagnostic, screening, preventive, 
restorative, remedial, therapeutic, or rehabilitative services 
(whether in a facility, home, school, or other setting) if recog-
nized by State law and only if the service is— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 569 
"(A) prescribed by or furnished by a physician or other 
Hcensed or registered practitioner within the scope of prac-
tice as defined by State law, 
"(B) performed under the general supervision or at 
the direction of a physician, or 
"(C) furnished by a health care facility that is operated 
by a State or local government or is licensed under State 
law and operating within the scope of the license. 
"(25) Premiums for private health care insurance coverage. 
"(26) Medical transportation. 
"(27) Enabling services (such as transportation, translation, 
and outreach services) only if designed to increase the acces-
sibility of primary and preventive health care services for 
eligible low-income individuals. 
"(28) Any other health care services or items specified 
by the Secretary and not excluded under this section. 
"(b) TARGETED LOW-INCOME CHILD DEFINED.—For purposes of 
this title— 
"(1) IN GENERAL.—Subject to paragraph (2), the term 'tar-
geted low-income child' meeins a child— 
"(A) who has been determined eligible by the State 
for child health assistance under the State plan; 
"(B)(i) who is a low-income child, or 
"(ii) is a child whose family income (as determined 
under the State child health plan) exceeds the medicsiid 
applicable income level (as defined in paragraph (4)), but 
does not exceed 50 percentage points above the medicaid 
applicable income level; and 
"(C) who is not found to be eligible for medical assist-
ance under title XIX or covered under a group health 
plan or under health insurance coverage (as such terms 
are defined in section 2791 of the Public Health Service 
Act). 
"(2) CHILDREN EXCLUDED.—Such term does not include— 
"(A) a child who is an inmate of a public institution 
or a patient in an institution for mental diseases; or 
(B) a child who is a member of a family that is 
eligible for health benefits coverage under a State health 
benefits plan on the basis of a family member's employment 
with a public agency in the State. 
"(3) SPECL\L RULE.—A child shall not be considered to 
be described in paragraph (1)(C) notwithstanding that the child 
is covered under a health insurance coverage program that 
has been in operation since before July 1, 1997, and that 
is offered by a State which receives no Federal funds for the 
program's operation. 
"(4) 
MEDICAID 
APPLICABLE 
INCOME 
LEVEL.—^The term 
'medicaid applicable income level' means, with respect to a 
child, the effective income level (expressed as a percent of 
the poverty line) that has been specified under the State plan 
under title XIX (including under a waiver authorized by the 
Secretary or under section 1902(r)(2)), as of June 1, 1997, 
for the child to be eligible for medical assistance under section 
1902(1X2) for the age of such child. 
"(c) ADDITIONAL DEFINITIONS.—^For purposes of this title: 
"(1) CHILD.—^The term 'child' means an individual under 
19 years of age. 
I l l STAT. 570 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) CREDITABLE HEALTH COVERAGE.—The term 'creditable 
health coverage' has the meaning given the term 'creditable 
coverage' under section 2701(c) of the Public Health Service 
Act (42 U.S.C. 300gg(c)) and includes coverage that meets the 
requirements of section 2103 provided to a targeted low-income 
child under this title or under a waiver approved under section 
2105(c)(2)(B) (relating to a direct service waiver). 
"(3) GROUP HEALTH PLAN; HEALTH INSURANCE COVERAGE; 
ETC.—^The terms 'group health plan', 'group health insurance 
coverage', and 'health insurance coverage' have the meanings 
given such terms in section 2191 of the Public Health Service 
Act. 
"(4) LOW-INCOME.—The term 'low-income child' means a 
child whose family income is at or below 200 percent of the 
poverty line for a family of the size involved. 
"(5) POVERTY LINE DEFINED.—-The term 'poverty line' has 
the meaning given such term in section 673(2) of the Commu-
nity Services Block Grant Act (42 U.S.C. 9902(2)), including 
any revision required by such section. 
"(6) 
PREEXISTING 
CONDITION 
EXCLUSION.—^The 
term 
'preexisting condition exclusion' has the meaning given such 
term in section 2701(b)(1)(A) of the Public Health Service Act 
(42 U.S.C. 300gg(b)(l)(A)). 
"(7) STATE CHILD HEALTH PLAN; PLAN,—^Unless the context 
otherwise requires, the terms 'State child health plan' and 
'plan' mean a State child health plan approved under section 
2106. 
"(8) UNCOVERED CHILD.—^The term 'uncovered child' means 
a child that does not have creditable health coverage.". 
(b) CONFORMING AMENDMENTS.— 
42 use 1301. 
(1) DEFINITION OF STATE.—Section 1101(a)(1) is amended— 
(A) by striking "and XIX" and inserting "XIX, and 
XXI", and 
(B) by striking "title XIX" and inserting "titles XIX 
and XXI". 
(2) TREATMENT AS STATE HEALTH CARE PROGRAM.—Section 
1128(h) (42 U.S.C. 1320a-7(h)) is amended by— 
(A) in paragraph (2), by striking "or" at the end; 
(B) in paragraph (3), by striking the period and insert-
ing ", or"; and 
(C) by adding at the end the following: 
"(4) a State child health plan approved under title XXI.". 
CHAPTER 2—EXPANDED COVERAGE OF CHILDREN 
UNDER MEDICAH) 
SEC. 4911. OPTIONAL USE OF STATE CHILD HEALTH ASSISTANCE 
FUNDS 
FOR 
ENHANCED 
MEDICAID 
MATCH FOR 
EXPANDED MEDICAID ELIGIBIUTY. 
(a) INCREASED F M A P FOR MEDICAL ASSISTANCE FOR EXPANDED 
COVERAGE OF TARGETED LOW-INCOME CHILDREN.—Section 1905 of 
the Social Security Act (42 U.S.C. 1396d), as amended by section 
4702(a)(2), is amended— 
(1) in subsection (b), by adding at the end the following 
new sentence: "Notwithstanding the first sentence of this sub-
section, in the case of a State plan that meets the condition 
described in subsection (u)(l), with respect to expenditures 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 571 
described in subsection (u)(2)(A) or subsection (u)(3) the Federal 
medical assistance percentage is equal to the enhanced FMAP 
described in section 2105(b)."; and 
(2) by adding at the end the following new subsection: 
"(u)(l) The conditions described in this paragraph for a State 
plan are as follows: 
"(A) The State is complying with the requirement of section 
2105(d)(1). 
"(B) The plan provides for such reporting of information 
about expenditures and payments attributable to the operation 
of this subsection as the Secretary deems necessary in order 
to carry out paragraph (2) and section 2104(d). 
"(2)(A) For purposes of subsection (b), the 
expenditures 
described in this subparagraph are expenditures for medical assist-
ance for optional targeted low-income children described in subpara-
graph (C), but not in excess, for a State for a fiscal year, of 
the amount described in subparagraph (B) for the State and fiscal 
year. 
"(B) The amount described in this subparagraph, for a State 
for a fiscal year, is the amount of the State's allotment under 
section 2104 (not taking into account reductions under section 
2104(d)(2)) for the fiscal year reduced by the amount of any pay-
ments made under section 2105 to the State from such allotment 
for such fiscal year. 
"(C) For purposes of this paragraph, the term 'optional targeted 
low-income child' mesins a targeted low-income child as defined 
in section 2110(b)(1) who would not qusdify for medical assistance 
under the State plan under this title based on such plan as in 
effect on April 15, 1997 (but taking into account the expansion 
of age of eligibility effected through the operation of section 
1902(1)(2)(D)). 
"(3) For purposes of subsection (b), the expenditures described 
in this subparagraph are expenditures for medical assistance for 
children who are bom before October 1, 1983, and who would 
be described in section 1902(1)(1XD) if they had been bom on 
or after such date, and who are not eligible for such assistance 
under the State plan under this title based on such State plan 
as in effect as of April 15, 1997.". 
(b) ESTABLISHMENT OF OPTIONAL ELIGIBILITY CATEGORY.—Sec-
tion 1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)), as amended 
by section 4733, is amended— 
(1) in subclause (XII), by striking "or" at the end; 
(2) in subclause (XIII), by adding "or" at the end; and 
(3) by adding at the end the following: 
"(XTV) who are optional targeted low-income 
children described in section 1905(u)(2)(C);". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
42 use I396a 
shall apply to medical assistance for items and services furnished 
note. 
on or after October 1, 1997. 
SEC. 4912. MEDICAID PRESUMPTIVE EUGIBILITY FOR LOW-INCOME 
CHILDREN. 
(a) IN GENERAL.—^Title XIX of the Social Security Act is amend-
ed by inserting after section 1920 the following new section: 
Ill STAT. 572 
PUBLIC LAW 105-33—AUG. 5, 1997 
"PRESUMPTIVE ELIGIBILITY FOR CHILDREN 
42 use 
"SEC. 1920A. (a) A State plan approved under section 1902 
I396r-la. 
may provide for making medical assistance with respect to health 
care items and services covered under the State plan available 
to a child during a presumptive eligibility period. 
"(b) For purposes of this section: 
"(1) The term 'child' means an individual under 19 years 
of age. 
"(2) The term 'presumptive eligibility period' means, with 
respect to a child, the period that— 
"(A) begins with the date on which a qualified entity 
determines, on the basis of preliminary information, that 
the family income of the child does not exceed the 
applicable income level of eligibility under the State plan, 
and 
"(B) ends with (and includes) the earlier of— 
"(i) the day on which a determination is made 
with respect to the eligibility of the child for medical 
assistEince under the State plan, or 
"(ii) in the case of a child on whose behalf an 
application is not filed by the last day of the month 
following the month during which the entity makes 
the determination referred to in subparagraph (A), 
such last day. 
"(3)(A) Subject to subparagraph (B), the term 'qualified 
entity* means any entity that— 
"(i)(I) is eligible for payments under a State plan 
approved under this title and provides items and services 
described in subsection (a) or (II) is authorized to determine 
eligibility of a child to participate in a Head Start program 
under the Head Start Act (42 U.S.C. 9821 et seq.), eligibility 
of a child to receive child care services for which financial 
assistance is provided under the Child Care and Develop-
ment Block Grant Act of 1990 (42 U.S.C. 9858 et seq.), 
eligibility of an infant or child to receive assistance under 
the special supplemental nutrition program for women, 
infants, and children (WIC) under section 17 of the Child 
Nutrition Act of 1966 (42 U.S.C. 1786); and 
"(ii) is determined by the State agency to be capable 
of making determinations of the t3T)e described in para-
graph (1)(A). 
"(B) The Secretary may issue regulations further limiting 
those entities that may become qualified entities in order to 
prevent fraud and abuse and for other reasons. 
"(C) Nothing in this section shall be construed as prevent-
ing a State from limiting the classes of entities that may 
become qualified entities, consistent with any limitations 
imposed under subparagraph (B). 
"(c)(1) The State agency shall provide qualified entities with— 
"(A) such forms as are necessary for an application to 
be made on behalf of a child for medical assistance under 
the State plan, and 
"(B) information on how to assist parents, guardians, and 
other persons in completing and filing such forms. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 573 
"(2) A qualified entity that determines under subsection 
(b)(1)(A) that a child is presumptively eligible for medical assistance 
under a State plan shall— 
"(A) notify the State agency of the determination within 
Notification. 
5 working days after the date on which determination is made, 
and 
"(B) inform the parent or custodian of the child at the 
time the determination is made that an application for medical 
assistance under the State plan is required to be made by 
not later th£in the last day of the month following the month 
during which the determination is made. 
"(3) In the case of a child who is determined by a qualified 
entity to be presumptively eligible for medical assistance under 
a State plan, the parent, guardian, or other person shall make 
application on behalf of the child for medical assistance under 
such plan by not later than the last day of the month following 
the month during which the determination is made, which applica-
tion may be the application used for the receipt of medical assistance 
by individuals described in section 1902(1)(1). 
"(d) Notwithstanding any other provision of this title, medical 
assistance for items and services described in subsection (a) that— 
"(1) are furnished to a child— 
"(A) during a presumptive eligibility period, 
"(B) by a entity that is eligible for payments under 
the State plan; and 
"(2) are included in the care and services covered by a 
State plan; 
shall be treated as medical assistance provided by such plan for 
purposes of section 1903.". 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1902(a)(47) (42 U.S.C. 1396a(a)(47)) is amended 
by inserting before the semicolon at the end the following: 
"and provide for making medical assistance for items and serv-
ices described in subsection (a) of section 1920A available to 
children during a presumptive eligibility period in accordance 
with such section". 
(2) Section 1903(u)(l)(D)(v) (42 U.S.C. 1396b(u)(l)(D)(v)) 
is amended by inserting before the period at the end the follow-
ing: "or for items and services described in subsection (a) of 
section 1920A provided to a child during a presumptive eligi-
bility period under such section". 
(c) EFFECTIVE DATE.—^The amendments made by this section 42 use I396a 
shall take effect on the date of the enactment of this Act. 
note. 
SEC. 4913. CONTINUATION OF MEDICAID ELIGIBILITY FOR DISABLED 
CHILDREN WHO LOSE SSI BENEFITS. 
(a) IN GENERAL.—Section 
1902(a)(10)(A)(i)(II) (42 U.S.C. 
1396a(a)(10)(A)(i)(II)) is amended by inserting "(or were being paid 
as of the date of the enactment of section 211(a) of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
(P.L. 104-193)) and would continue to be paid but for the enactment 
of that section" after "title XVI". 
(b) EFFECTIVE DATE.—^The amendment made by subsection (a) 
applies to medical assistance furnished on or after July 1, 1997. 
42 use 1396a 
note. 
I l l STAT. 574 
PUBLIC LAW 105-33—AUG. 5, 1997 
CHAPTER 3—DIABETES GRANT PROGRAMS 
SEC. 4921. SPECIAL DIABETES PROGRAMS FOR CHILDREN WITH TYPE 
I DIABETES. 
Subpart I of part D of title III of the Public Health Service 
Act (42 U.S.C. 254b et seq.) is amended by adding at the end 
the following section: 
42 use 254C-2. 
"SEC. 330B. SPECIAL DIABETES PROGRAMS FOR CHILDREN WITH TYPE 
I DIABETES. 
"(a) TYPE I DIABETES IN CHILDREN.—^The Secretary shall make 
grants for services for the prevention and treatment of type I 
diabetes in children, and for research in innovative approaches 
to such services. Such grants may be made to children's hospitals; 
grantees under section 330 and other federally qualified health 
centers; State and local health departments; and other appropriate 
public or nonprofit private entities. 
"(b) FUNDING.—Notwithstanding section 2104(a) of the Social 
Security Act, from the amounts appropriated in such section for 
each of fiscal years 1998 through 2002, $30,000,000 is hereby trans-
ferred and made available in such fiscal year for grants under 
this section.". 
SEC. 4922. SPECIAL DIABETES PROGRAMS FOR INDIANS. 
Subpart I of part D of title III of the Public Health Service 
Act (42 U.S.C. 254b et seq.), as amended by section 4921, is further 
amended by adding at the end the following section: 
42 use 254C-3. 
"SEC. 330C. SPECIAL DIABETES PROGRAMS FOR INDIANS. 
"(a) IN GENERAL.—^The Secretary shall make grants for provid-
ing services for the prevention and treatment of diabetes in accord-
ance with subsection (b). 
"(b) SERVICES THROUGH INDIAN HEALTH FACILITIES.—For pur-
poses of subsection (a), services under such subsection are provided 
in accordance with this subsection if the services are provided 
through any of the following entities: 
"(1) The Indian Health Service. 
"(2) 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 Indian Self-Determination Act. 
"(3) An urban Indian health program operated 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. 
"(c) FUNDING.—^Notwithstanding section 2104(a) of the Social 
Security Act, from the amounts appropriated in such section for 
each of fiscal years 1998 through 2002, $30,000,000 is hereby trans-
ferred and made available in such fiscal year for grants under 
this section.". 
42 use 1254C-2 
SEC. 4923. REPORT ON DIABETES GRANT PROGRAMS. 
°°**" 
(a) EVALUATION.—The Secretary of Health and Human Services 
shedl conduct an evaluation of the diabetes grant programs estab-
lished under the amendments made by this chapter. 
(b) REPORTS.—^The Secretary shall submit to the appropriate 
committees of Congress— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 575 
(1) an interim report on the evaluation conducted under 
subsection (a) not later than January 1, 2000, and 
(2) a final report on such evaluation not later than Jsinuary 
1, 2002. 
TITLE V—WELFARE AND RELATED 
PROVISIONS 
SEC. 5000. TABLE OF CONTENTS; REFERENCES. 
(a) TABLE OF CONTENTS.—The table of contents of this title 
is as follows: 
Sec. 5000. Table of contents; references. 
Subtitle A—TANF Block Grant 
Sec. 5001. Welfare-to-work grants. 
Sec. 5002. Limitation on amount of Federal funds transferable to title XX pro-
grams. 
Sec. 5003. Limitation on number of persons who may be treated as engaged in 
work by reason of participation in educational activities. 
Sec. 5004. Penalty for failure of State to reduce assistance for recipients refusing 
without good cause to work. 
Subtitle B—Supplemental Security Income 
Sec. 5101. Extension of deadline to perform childhood disability redeterminations. 
Sec. 5102. Fees for Federal administration of State supplementary payments. 
Subtitle C—Child Support Enforcement 
Sec. 5201. Clarification of authority to permit certain redisclosures of wage and 
claim information. 
Subtitle D—^Restricting Welfare and Public Benefits for Aliens 
Sec. 5301. SSI eligibility for aliens receiving SSI on August 22, 1996, and disabled 
aliens lawfully residing in the United States on August 22, 1996. 
Sec. 5302. Extension of eligibility period for refugees and certain other qualified 
aliens from 5 to 7 years for SSI and medicaid; status of Cuban and Hai-
tian entrants. 
Sec. 5303. Exceptions for certain Indians from limitation on eligibility for supple-
mental security income and medicaid benefits. 
Sec. 5304. Exemption from restriction on supplemental security income program 
participation by certain recipients eligible on the basis of very old appli-
cations. 
Sec. 5305. Reinstatement of eligibility for benefits. 
Sec. 5306. Treatment of certain Amerasian immigrants as refugees. 
Sec. 5307. Verification of eligibility for State and local public benefits. 
Sec. 5308. Effective date. 
Subtitle E—^Unemployment Compensation 
Sec. 5401. Clarifying provision relating to base periods. 
Sec. 5402. Increase m Federal unemployment account ceiling. 
Sec. 5403. Special distribution to States from Unemployment Trust Fund. 
Sec. 5404. Interest-free advances to State accounts in Unemplojrment Trust Fund 
restricted to States which meet funding goals. 
Sec. 5405. Exemption of service performed by election workers from the Federal 
unemployment t£ix. 
Sec. 5406. Treatment of certain services performed by inmates. 
Sec. 5407. Exemption of service performed for an elementary or secondary school 
operated primarily for religious purposes from the Federal unemploy-
ment tax. 
Sec. 5408. State program integrity activities for unemployment compensation. 
Subtitle F—^Welfare Reform Technical Corrections 
CHAPTER 1—BLOCK GRANTS FOR TEMPORARY ASSISTANCE TO NEEDY FAMILIES 
Sec. 5501. Eligible States; State plan. 
Sec. 5502. Grants to States. 
Ill STAT. 576 
PUBLIC LAW 105-33—AUG. 5, 1997 
Sec. 5503. Use of grants. 
Sec. 5504. Mandatory work requirements. 
Sec. 5505. Prohibitions; requirements. 
Sec. 5506. Penalties. 
Sec. 5507. Data collection and reporting. 
Sec. 5508. Direct funding and administration by Indian Tribes. 
Sec. 5509. Research, evaJuations, and national studies. 
Sec. 5510. Report on data processing. 
Sec. 5511. Study on alternative outcomes measures. 
Sec. 5512. Limitation on payments to the territories. 
Sec. 5513. Conforming amendments to the Social Security Act. 
Sec. 5514. Other conforming amendments. 
Sec. 5515. Modifications to the job opportunities for certain low-income individuals 
program. 
Sec. 5516. Denial of assistance and benefits for drug-related convictions. 
Sec. 5517. Transition rule. 
Sec. 5518. Effective dates. 
CHAPTER 2—SUPPLEMENTAL SECURITY INCOME 
Sec. 5521. Conforming and technical amendments relating to eligibility restrictions. 
Sec. 5522. Conforming and technical amendments relating to benefits for disabled 
children. 
Sec. 5523. Additional technical amendments to title XVI. 
Sec. 5524. Additional technical amendments relating to title XVI. 
Sec. 5525. Technical amendments relating to drug addicts and alcoholics. 
Sec. 5526. Advisory board personnel. 
Sec. 5527. Timing of delivery of October 1, 2000, SSI benefit payments. 
Sec. 5528. Effective dates. 
CHAPTER 3—CHILD SUPPORT 
Sec. 5531. State obligation to provide child support enforcement services. 
Sec. 5532. Distribution of collected siipport. 
Sec. 5533. Civil penalties relating to State Directory of New Hires. 
Sec. 5534. Federal Parent Locator Service. 
Sec. 5535. Access to registry data for research purposes. 
Sec. 5536. Collection and use of social secvuity numbers for use in child support en-
forcement. 
Sec. 5537. Adoption of uniform State laws. 
Sec. 5538. State laws providing expedited procedures. 
Sec. 5539. Voluntary paternity acknowledgement. 
Sec. 5540. Calculation of paternity establishment percentage. 
Sec. 5541. Means available for provision of technical assistance and operation of 
Federal Parent Locator Service. 
Sec. 5542. Autiiority to collect support from Federal employees. 
Sec. 5543. Definition of support order. 
Sec. 5544. State law authorizing suspension of Ucenses. 
Sec. 5545. International support enforcement. 
Sec. 5546. Child support enforcement for Indian tribes. 
Sec. 5547. Continuation of rules for distribution of support in the case of a title IV-
E chUd. 
Sec. 5548. Good cause in foster care and food stamp cases. 
Sec. 5549. Date of collection of support. 
Sec. 5550. Administrative enforcement in interstate cases. 
Sec. 5551. Work orders for arrearages. 
Sec. 5552. Additional technical State plan amendments. 
Sec. 5553. Federal Case Registry of Child Support Orders. 
Sec. 5554. Full faith and credit for child support orders. 
Sec. 5555. Development costs of automated systems. 
Sec. 5556. Additional technical amendments. 
Sec. 5557. Effective date. 
CHAPTER 4—^RESTRICTING WELFARE AND PUBLIC BENEFITS FOR ALIENS 
SUBCHAPTER A—ELIGIBILITY FOR FEDERAL BENEFITS 
Sec. 5561. Alien eligibility for Federal benefits: limited application to medicare and 
benefits under the Railroad Retirement Act. 
Sec. 5562. Exceptions to benefit limitations: corrections to reference concerning 
aliens whose deportation is withheld. 
Sec. 5563. Veterans exception: appUcation of minimum active duty service require-
ment; extension to unremarried sxurviving spouse; expanded definition of 
veteran. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 577 
Sec. 5564. Notification concerning aliens not lawfully present: correction of termi-
nology. 
Sec. 5565. Freely associated States: contracts and licenses. 
Sec. 5566. Congressional statement regarding benefits for Hmong and other High-
land Lao veterans. 
SUBCHAPTER B—GENERAL PROVISIONS 
Sec. 5571. Determination of treatment of battered aliens as qualified ahens; inclu-
sion of alien child of battered parent as qualified alien. 
Sec. 5572. Verification of eligibility for benefits. 
Sec. 5573. Qualifying quarters: disclosure of quarters of coverage information; cor-
rection to assure that crediting applies to all quarters earned by parents 
before child is 18. 
Sec. 5574. Statutory construction: benefit eligibility limitations applicable only with 
respect to aliens present in the United States. 
SUBCHAPTER C—MISCELLANEOUS CLERICAL AND TECHNICAL AMENDMENTS; EFFECTIVE 
DATE 
Sec. 5581. Correcting miscellaneous clerical and technic£il errors. 
Sec. 5582. Effective date. 
CHAPTER 5—CHILD PROTECTION 
Sec. 5591. Conforming and technical amendments relating to child protection. 
Sec. 5592. Additional technical amendments relating to cmld protection. 
Sec. 5593. Effective date. 
CHAPTER 6—CHILD CARE 
Sec. 5601. Conforming and technical amendments relating to child care. 
Sec. 5602. Additional conforming and technical amendments. 
Sec. 5603. Effective dates. 
CHAPTER 7—ERISA AMENDMENTS RELATING TO MEDICAL CHILD SUPPORT ORDERS 
Sec. 5611. Amendments relating to section 303 of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996. 
Sec. 5612. Amendment relating to section 381 of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996. 
Sec. 5613. Amendments relating to section 382 of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996. 
Subtitle G—^Miscellaneous 
Sec. 5701. Increase in public debt limit. 
Sec. 5702. Authorization of appropriations for enforcement initiatives related to the 
earned income tax credit. 
(b) REFERENCES.—^Except as otherwise expressly 
provided, 
wherever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Social Security Act. 
Subtitle A—TANF Block Grant 
SEC. 5001. WELFARE-TO-WORK GRANTS. 
(a) GRANTS TO STATES.— 
(1) IN GENERAL.—Section 403(a) (42 U.S.C. 603(a)) is 
amended by adding at the end the following: 
"(5) WELFARE-TO-WORK GRANTS.— 
"(A) F O R M U L A GRANTS.— 
"(i) ENTITLEMENT.—A State shall be entitled to 
receive from the Secretary of Labor a grant for each 
fiscal year specified in subparagraph (I) of this para-
graph for which the State is a welfare-to-work State, 
in an amount that does not exceed the lesser of— 
"(I) 2 times the total of the expenditures by 
the State (excluding qualified State expenditures 
I l l STAT. 578 
PUBLIC LAW 105-33—AUG. 5, 1997 
(as defined in section 409(a)(7)(B)(i)) and any 
expenditure described in subclause (I), (II), or (IV) 
of section 409(a)(7)(B)(iv)) during the fiscal year 
for activities described in subparagraph (C)(i) of 
this paragraph; or 
"(II) the allotment of the State under clause 
(iii) of this subparagraph for the fiscal year. 
"(ii) WELFARE-TO-WORK STATE.—A State shall be 
considered a welfare-to-work State for a fiscal year 
for purposes of this paragraph if the Secretary of Labor 
determines that the State meets the following require-
ments: 
"(I) The State has submitted to the Secretary 
of Labor and the Secretary of Health and Human 
Services (in the form of an addendum to the State 
plan submitted under section 402) a plan which— 
"(aa) describes how, consistent with this 
subparagraph, the State will use any funds 
provided under this subparagraph during the 
fiscal year; 
"(bb) specifies the formula to be used 
pursuant to clause (vi) to distribute funds in 
the State, and describes the process by which 
the formula was developed; 
"(cc) contains evidence that the plan was 
developed in consultation and coordination 
with appropriate entitites in sub-State areas; 
"(dd) contains assurances by the Grovemor 
of the State that the private industry council 
(and any alternate agency designated by the 
Grovemor under item (ee)) for a service deliv-
ery area in the State will coordinate the 
expenditure of any funds provided under this 
subparagraph for the benefit of the service 
delivery area with the expenditure of the funds 
provided to the State under section 403(a)(1); 
"^ 
and 
"(ee) if the Governor of the State desires 
to have an agency other than a private indus-
try council administer the funds provided 
under this subparagraph for the benefit of 1 
or more service delivery areas in the State, 
contains an application to the Secretary of 
Labor for a waiver of clause (vii)(I) with 
respect to the area or areas in order to permit 
an alternate agency designated by the Grov-
emor to so administer the funds. 
"(II) The State has provided to the Secretary 
of Labor an estimate of the amount that the State 
intends to expend during the fiscal year (excluding 
expenditures described in section 409(a)(7)(B)(iv) 
(other than subclause (III) thereof)) pursuant to 
this paragraph. 
"(Ill) The State has agreed to negotiate in 
good faith with the Secretary of Health and 
Human Services with respect to the substance and 
funding of any evaluation under section 413(j), 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 579 
and to cooperate with the conduct of any such 
evaluation. 
"(IV) The State is an eUgible State for the 
fiscal year. 
"(V) The State certifies that qualified State 
expenditures 
(within the meaning of section 
409(a)(7)) for the fiscal year will be not less than 
the applicable percentage of historic State expendi-
tures (within the meaning of section 409(a)(7)) with 
respect to the fiscal year. 
"(iii) ALLOTMENTS TO WELFARE-TO-WORK STATES.— 
"(I) IN GENERAL.—Subject to this clause, the 
allotment of a welfare-to-work State for a fiscal 
year shall be the available amount for the fiscal 
year, multiplied by the State percentage for the 
fiscal year. 
"(II) MINIMUM ALLOTMENT.—^The allotment of 
a welfare-to-work State (other than Guam, the 
Virgin Islands, or American Samoa) for a fiscal 
year shall not be less than 0.25 percent of the 
available amount for the fiscal year. 
"(Ill) PRO RATA REDUCTION.—Subject to sub-
clause (II), the Secretary of Labor shall make pro 
rata reductions in the allotments to States under 
this clause for a fiscal year as necessary to ensure 
that the total of the allotments does not exceed 
the available amount for the fiscal year. 
"(iv) AVAILABLE AMOUNT.—As used in this subpara-
graph, the term 'available amount' means, for a fiscal 
year, the sum of— 
"(I) 75 percent of the sum of— 
"(aa) the amount specified in subpara-
graph (I) for the fiscal year, minus the total 
of the Eimounts reserved pursuant to subpara-
graphs (E), (F), (G), and (H) for the fiscal 
year; and 
"(bb) any amount reserved pursuant to 
subparagraph (F) for the immediately preced-
ing fiscal year that has not been obligated; 
and 
"(II) any available amount for the immediately 
preceding fiscal year that has not been obligated 
by a State or sub-State entity. 
"(v) STATE PERCENTAGE.—^As used in clause (iii), 
the term 'State percentage' means, with respect to 
a fiscal year, V
2 of the sum of— 
"(I) the percentage represented by the number 
of individuals in the State whose income is less 
than the poverty line divided by the number of 
such individuals in the United States; and 
"(II) the percentage represented by the number 
of adults who are recipients of assistance under 
the State program funded under this part divided 
by the number of adults in the United States who 
are recipients of assistance under any State pro-
gram funded under this part. 
I l l STAT. 580 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(vi) PROCEDURE FOR DISTRIBUTION OF FUNDS 
WITHIN STATES.— 
"(I) ALLOCATION FORMULA.—^A State to which 
a grant is made under this subparagraph shall 
devise a formula for allocating not less than 85 
percent of the amount of the grant among the 
service delivery areas in the State, which— 
"(aa) determines the amount to be allo-
cated for the benefit of a service delivery area 
in proportion to the number (if any) by which 
the population of the area with an income 
that is less than the poverty line exceeds 7.5 
percent of the total population of the area, 
relative to such number for all such areas 
in the State with such an excess, and accords 
a weight of not less than 50 percent to this 
factor; 
"(bb) may determine the amount to be 
allocated for the benefit of such an area in 
proportion to the number of adults residing 
in the area who have been recipients of assist-
ance under the State program funded under 
this part (whether in effect before or after 
the amendments made by section 103(a) of 
the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 first applied 
to the State) for at least 30 months (whether 
or not consecutive) relative to the number of 
such adults residing in the State; and 
"(cc) may determine the amount to be allo-
cated for the benefit of such an area in propor-
tion to the number of unemployed individuals 
residing in the area relative to the number 
of such individuals residing in the State. 
"(11) DISTRIBUTION OF FUNDS.— 
"(aa) IN GENERAL.—If the amount allo-
cated by the formula to a service delivery area 
is at least $100,000, the State shall distribute 
the amount to the entity administering the 
grant in the area. 
"(bb) SPECIAL RULE.—If the amount allo-
cated by the formula to a service delivery area 
is less than $100,000, the sum shall be avail-
able for distribution in the State under sub-
clause (III) during the fiscal year. 
"(Ill) PROJECTS TO HELP LONG-TERM RECIPI-
ENTS OF ASSISTANCE ENTER UNSUBSIDIZED JOBS.— 
The Governor of a State to which a grant is made 
under this subparagraph may distribute not more 
than 15 percent of the grant funds (plus any 
amount required to be distributed under this sub-
clause by reason of subclause (II)(bb)) to projects 
that appear likely to help long-term recipients of 
assistance under the State program funded under 
this part (whether in effect before or after the 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 581 
amendments made by section 103(a) of the Per-
sonal Responsibility and Work Opportunity Rec-
onciliation Act of 1996 first applied to the State) 
enter unsubsidized employment, 
"(vii) ADMINISTRATION.— 
"(I) PRIVATE INDUSTRY COUNCILS.—The private 
industry council for a service delivery area in a 
State shall have sole authority, in coordination 
with the chief elected official (as described in sec-
tion 103(c) of the Job Training Partnership Act) 
of the area, to expend the amounts distributed 
under clause (vi)(II)(aa) for the benefit of the serv-
ice delivery area, in accordance with the assur-
ances described in clause (ii)(I)(dd) provided by 
the Governor of the State. 
"(11) 
ENFORCEMENT OF COORDINATION OF 
EXPENDITURES WITH OTHER EXPENDITURES UNDER 
THIS PART.—^Notwithstanding subclause (I) of this 
clause, on a determination by the Governor of a 
State that a private industry council (or an alter-
nate agency described in clause (ii)(I)(dd)) has used 
funds provided under this subparagraph in a man-
ner inconsistent with the assurances described in 
clause (ii)(I)(dd)— 
"(aa) the private industry council (or such 
alternate agency) shall remit the funds to the 
Governor; and 
"(bb) the Governor shall apply to the Sec-
retary of Labor for a waiver of subclause (I) 
of this clause with respect to the service deliv-
ery area or areas involved in order to permit 
an alternate agency designated by the Gov-
ernor to administer the funds in accordguace 
with the assurances. 
"(Ill) AUTHORITY TO PERMIT USE OF ALTERNATE 
ADMINISTERING AGENCY.—^The Secretary of Labor 
shall approve an application submitted under 
clause (ii)(I)(ee) or subclause (II)(bb) of this clause 
to waive subclause (I) of this clause with respect 
to 1 or more service delivery areas if the Secretary 
determines that the alternate agency designated 
in the application would improve the effectiveness 
or efficiency of the administration of amounts 
distributed under clause (vi)(II)(aa) for the benefit 
of the area or areas. 
"(viii) DATA TO BE USED IN DETERMINING THE NUM-
BER OF ADULT TANF RECIPIENTS.—For purposes of this 
subparagraph, the number of adult recipients of assist-
ance under a State program funded under this part 
for a fiscal year shall be determined using data for 
the most recent 12-month period for which such data 
is available before the beginning of the fiscal year. 
"(B) COMPETITIVE GRANTS.— 
"(i) IN GENERAL.—^The Secretary of Labor shall 
award grants in accordance with this subparagraph, 
in fiscal years 1998 and 1999, for projects proposed 
by eligible applicants, based on the following: 
Ill STAT. 582 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(I) The effectiveness of the proposal in— 
"(aa) expanding the base of knowledge 
about programs aimed at moving recipients 
of assistance under State programs funded 
under this part who are least job ready into 
unsubsidized employment. 
"(bb) moving recipients 
of 
assistance 
under State programs funded under this part 
who are least job ready into unsubsidized 
emplojmtient; and 
"(cc) moving recipients of assistance under 
State programs funded under this part who 
are least job ready into unsubsidized employ-
ment, even in labor markets that have a short-
age of low-skill jobs. 
"(11) At the discretion of the Secretary of 
Labor, any of the following: 
"(aa) The history of success of the 
applicant in moving individuals with multiple 
barriers into work. 
"(bb) Evidence of the applicant's ability 
to leverage private. State, and local resources. 
"(cc) Use by the applicEint of State and 
local resources beyond those required by 
subparagraph (A). 
"(dd) Plans of the applicant to coordinate 
with other organizations at the local and State 
level. 
"(ee) Use by the applicant of current or 
former recipients of assistance under a State 
program funded under this part as mentors, 
case managers, or service providers. 
"(ii) ELIGIBLE APPLICANTS.—^As used in clause (i), 
the term 'eligible applicant' means a private industry 
council for a service delivery area in a State, a political 
subdivision of a State, or a private entity appljdng 
in conjunction with the private industry council for 
such a service delivery area or with such a political 
subdivision, that submits a proposal developed in con-
sultation with the Grovernor of the State. 
"(iii) 
DETERMINATION 
OF 
GRANT 
AMOUNT.—In 
determining the amount of a grant to be made under 
this subparagraph for a project proposed by an 
applicant, the Secretary of Labor shall provide the 
applicant with an amount sufficient to ensure that 
the project has a reasonable opportunity to be success-
ful, taldng into account the number of long-term recipi-
ents of assistance under a State program funded under 
this part, the level of unemployment, the job opportuni-
ties and job growth, the poverty rate, and such other 
factors as the Secretary of Labor deems appropriate, 
in the area to be served by the project. 
"(iv) 
CONSIDERATION OF NEEDS OF RURAL AREAS 
AND CITIES WITH LARGE CONCENTRATIONS OF POV-
ERTY.—In making grants under this subparagraph, the 
Secretary of Labor shall consider the needs of rural 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 583 
areas and cities with large concentrations of residents 
with an income that is less than the poverty line. 
"(v) FUNDING.—For grants under this subpara-
graph for each fiscal year specified in subparagraph 
(I), there shall be available to the Secretary of Labor 
an 8imount equal to the sum of— 
"(I) 25 percent of the sum of— 
"(aa) the amount specified in subpara-
graph (I) for the fiscal year, minus the total 
of the amounts reserved pursuant to subpara-
graphs (E), (F), (G), and (H) for the fiscal 
year; and 
"(bb) any amount reserved pursuant to 
subparagraph (F) for the immediately preced-
ing fiscal year that has not been obligated; 
and 
"(11) any amount available for grants under 
this subparagraph for the immediately preceding 
fiscal year that has not been obligated. 
"(C) LIMITATIONS ON USE OF FUNDS.— 
"(i) ALLOWABLE ACTiviTiES.^An entity to which 
funds are provided under this paragraph shall use 
the funds to move individuals into and keep individuals 
in lasting unsubsidized emplojnnent by means of any 
of the following: 
"(I) The conduct and administration of commu-
nity service or work experience programs. 
"(II) Job creation through public or private 
sector employment wage subsidies. 
"(Ill) On-the-job training. 
"(IV) Contracts with public or private provid-
ers of readiness, placement, and post-employment 
services. 
"(V) Job vouchers for placement, readiness, 
and postemployment services. 
"(VI) Job retention or support services if such 
services are not otherwise available. 
Contracts or vouchers for job placement services sup-
ported by such funds must require that at least V
a 
of the pa3mient occur after an eligible individual placed 
into the workforce has been in the workforce for 6 
months. 
"(ii) REQUIRED BENEFICIARIES.—An entity that 
operates a project with funds provided under this para-
graph shall expend at least 70 percent of all funds 
provided to the project for the benefit of recipients 
of assistance under the program funded under this 
part of the State in which the entity is located, or 
for the benefit of noncustodial parents of minors whose 
custodial parent is such a recipient, who meet the 
requirements of each of the following subclauses: 
"(I) At least 2 of the following apply to the 
recipient: 
"(aa) The individual has not completed 
secondary school or obtained a certificate of 
general equivalency, and has low skills in 
reading or mathematics. 
Ill STAT. 584 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(bb) The individual requires substance 
abuse treatment for employment. 
"(cc) The individual has a poor work his-
tory. 
"(II) The individual— 
"(aa) has received assistance under the 
State 
program 
funded 
under 
this 
part 
(whether in effect before or after the amend-
ments made by section 103 of the Personal 
Responsibility and Work Opportunity Rec-
onciliation Act of 1996 first apply to the State) 
for at least 30 months (whether or not consecu-
tive); or 
"(bb) within 12 months, will become ineli-
gible for assistance under the State program 
funded 
under this part by reason of a 
durational limit on such assistance, without 
regard to any exemption provided pursuant 
to section 408(a)(7)(C) that may apply to the 
individual, 
"(iii) TARGETING OF INDIVIDUALS WITH CHARACTER-
ISTICS ASSOCIATED WITH LONG-TERM WELFARE DEPEND-
ENCE.—^An entity that operates a project with funds 
provided under this paragraph may expend not more 
than 30 percent of all funds provided to the project 
for programs that provide assistance in a form 
described in clause (i)—-
"(I) to recipients of assistance under the pro-
gram funded under this part of the State in which 
the entity is located who have characteristics asso-
ciated with long-term welfare dependence (such 
as school dropout, teen pregnancy, or poor work 
history), including, at the option of the State, by 
providing assistance in such form as a condition 
of receiving assistance under the State program 
funded under this part; or 
"(II) to individuals— 
"(aa) who are noncustodial parents of 
minors whose custodial parent is such a recipi-
ent; and 
"(bb) who have such characteristics. 
To the extent that the entity does not expend such 
funds in accordance with the preceding sentence, the 
entity shall expend such funds in accordance with 
clause (ii). 
"(iv) AUTHORITY TO PROVIDE WORK-RELATED SERV-
ICES TO INDIVIDUALS WHO HAVE REACHED THE 5 YEAR 
LIMIT.—^An entity that operates a project with funds 
provided under this paragraph may use the funds to 
provide assistance in a form described in clause (i) 
of this subparagraph to, or for the benefit of, individ-
uals who (but for section 408(a)(7)) would be eligible 
for assistance under the program funded under this 
part of the State in which the entity is located. 
"(v) RELATIONSHIP TO OTHER PROVISIONS OF THIS 
PART.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 585 
"(I) RULES GOVERNING USE OF FUNDS.—^The 
rules of section 404, other than subsections (b), 
(f), and (h) of section 404, shall not apply to a 
grant made under this paragraph. 
"(11) 
RULES 
GOVERNING 
PAYMENTS 
TO 
STATES.—^The Secretary of Labor shall carry out 
the functions otherwise assigned by section 405 
to the Secretary of Health and Human Services 
with respect to the grants payable under this para-
graph. 
"(Ill) ADMINISTRATION.—Section 416 shall not 
apply to the programs under this paragraph. 
"(vi) PROHIBITION AGAINST USE OF GRANT FUNDS 
FOR A
I
S
F
Y OTHER FUND MATCHING REQUIREMENT.—^An 
entity to which funds are provided under this para-
graph shall not use any part of the funds, nor any 
part of State expenditures made to match the funds, 
to fulfill any obligation of any State, political subdivi-
sion, or private industry council to contribute funds 
under section 403(b) or 418 or any other provision 
of this Act or other Federal law. 
"(vii) DEADLINE FOR EXPENDITURE.—^An entity to 
which funds are provided under this paragraph shall 
remit to the Secretary of Labor any part of the funds 
that are not expended within 3 years after the date 
the funds are so provided. 
"(viii) REGULATIONS.—Within 90 days after the 
date of the enactment of this paragraph, the Secretary 
of Labor, after consultation with the Secretary of 
Health and Human Services and the Secretary of Hous-
ing £md UrbEin Development, shall prescribe such regu-
lations as may be necessary to implement this para-
graph. 
"(D) DEFINITIONS.— 
"(i) INDIVIDUALS WITH INCOME LESS THAN THE POV-
ERTY LINE.—^For purposes of this paragraph, the num-
ber of individuals with an income that is less than 
the poverty line shall be determined for a fiscal year— 
"(I) based on the methodology used by the 
Bureau of the Census to produce and publish 
intercensal poverty data for States and counties 
(or, in the case of Puerto Rico, the Virgin Islands, 
Guam, and American Samoa, other poverty data 
selected by the Secretary of Labor); and 
"(II) using data for the most recent year for 
which such data is available before the beginning 
of the fiscal year. 
"(ii) PRIVATE INDUSTRY COUNCIL.^AS used in this 
paragraph, the term 'private industry council' means, 
with respect to a service delivery Eirea, the private 
industry council (or successor entity) established for 
the service delivery area pursuant to the Job Training 
Partnership Act. 
"(iii) SERVICE DELIVERY AREA.—^As used in this 
paragraph, the term 'service delivery area' shall have 
the meaning given such term (or the successor to such 
39-194 O - 97 - 20 : QL 3 Part 1 
I l l STAT. 586 
PUBLIC LAW 105-33—AUG. 5, 1997 
term) for purposes of the Job Training Partnership 
Act. 
"(E) 
SET-ASIDE 
FOR 
SUCCESSFUL 
PERFORMANCE 
BONUS.— 
"(i) IN GENERAL.—^The Secretary of Labor shall 
make a grant in accordance with this subparagraph 
to each successful performance State in fiscal year 
2000. 
"(ii) AMOUNT OF GRANT.—^The Secretary of Labor 
shall determine the amount of the grant payable under 
this subparagraph to a successful performance State, 
which shall be based on the score assigned to the 
State under clause (iv)(IXaa) for such prior period as 
the Secretary of Labor deems appropriate. 
"(iii) FORMULA FOR MEASURING STATE PERFORM-
ANCE.—^Not later than 1 year after the date of the 
enactment of this paragraph, the Secretary of Labor, 
in consultation with the Secretary of Health and 
Human Services, the National Grovernors' Association, 
and the American Public Welfare Association, shall 
develop a formula for measuring— 
"(I) the success of States in placing individuals 
in private sector emplojmtient or in any kind of 
emplo5anent, through programs operated with 
funds provided under subparagraph (A); 
"(II) the duration of such placements; 
"(III) any increase in the earnings of such 
individuals; and 
"(IV) such other factors as the Secretary of 
Labor deems appropriate concerning the activities 
of the States with respect to such individuals. 
The formula may take into account general economic 
conditions on a State-by-State basis. 
"(iv) SCORING OF STATE PERFORMANCE; SETTING OF 
PERFORMANCE THRESHOLDS.— 
"(I) IN GENERAL.—The Secretary of Labor 
shall— 
"(aa) use the formula developed under 
clause (iii) to assign a score to each State 
that was a welfare-to-work State for fiscal 
years 1998 and 1999; and 
"(bb) prescribe a performance threshold 
in such a manner so as to ensure that the 
total amount of grants to be made under this 
paragraph equals $100,000,000. 
"(II) AVAILABILITY OF WELFARE-TO-WORK DATA 
SUBMITTED TO THE SECRETARY OF HHS.—^The Sec-
retary of Health and Human Services shall provide 
the Secretary of Labor with the data reported by 
States under this part with respect to programs 
operated with funds provided under subparagraph 
(A). 
"(v) SUCCESSFUL PERFORMANCE STATE DEFINED.— 
As used in this subparagraph, the term 'successful 
performance State' means a State whose score assigned 
pursuant to clause (iv)(I)(aa) equals or exceeds the 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 587 
performance 
threshold 
prescribed 
under 
clause 
(iv)(I)(bb). 
"(vi) SET-ASIDE.—$100,000,000 
of the 
amount 
specified in subparagraph (I) for fiscal year 1999 shall 
be reserved for grants under this subparagraph. 
"(F) FUNDING FOR INDIAN TRIBES.—1 percent of 
the 
amount specified in subparagraph (I) for fiscal year 1998 
and of the amount so specified for fiscal year 1999 shall 
be reserved for grants to IndiEin tribes under section 
412(a)(3). 
"(G) FUNDING FOR EVALUATIONS OF WELFARE-TO-WORK 
PROGRAMS.—0.6 percent of the amount specified in subpara-
graph (I) for fiscal year 1998 and of the amount so specified 
for fiscal year 1999 shall be reserved for use by the Sec-
retary to carry out section 413(j). 
"(H) FUNDING FOR EVALUATION OF ABSTINENCE EDU-
CATION PROGRAMS.— 
"(i) IN GENERAL.—0.2 percent of the amount speci-
fied in subparagraph (I) for fiscal year 1998 and of 
the amount so specified for fiscal year 1999 shall be 
reserved for use by the Secretary to evaluate programs 
under section 510, directly or through grants, contracts, 
or interagency agreements. 
"(ii) AUTHORITY TO USE FUNDS FOR EVALUATIONS 
OF WELFARE-TO-WORK PROGRAMS.^Any SUch a m o u n t 
not required for such evaluations shall be available 
for use by the Secretary to carry out section 413(j). 
"(iii) DEADLINE FOR OUTLAYS.—Outlays from funds 
used pursuant to clause (i) for evaluation of programs 
under section 510 shall not be made after fiscal year 
2001. 
"(I) APPROPRIATIONS.— 
"(i) IN GENERAL.—Out of any money in the Treas-
ury of the United States not otherwise appropriated, 
there are appropriated $1,500,000,000 for each of fiscal 
years 1998 and 1999 for grants under this paragraph. 
"(ii) AVAILABILITY.—^The amounts made available 
pursuant to clause (i) shall remain available for such 
period as is necessary to make the grants provided 
for in this paragraph. 
"(J) WORKER PROTECTIONS.— 
"(i) NONDISPLACEMENT IN WORK ACTIVITIES.— 
"(I) GENERAL PROHIBITION.—Subject to this 
clause, an adult in a family receiving assistance 
attributable to funds provided under this para-
graph may fill a vacant employment position in 
order to engage in a work activity. 
"(II) PROHIBITION AGAINST VIOLATION OF CON-
TRACTS.—^A work activity engaged in under a pro-
gram operated with funds provided under this 
paragraph shall not violate an existing contract 
for services or a collective bargaining agreement, 
and such a work activity that would violate a 
collective bargaining agreement shall not be under-
taken without the written concurrence of the labor 
organization and employer concerned. 
I l l STAT. 588 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(HI) OTHER PROHIBITIONS.—^An adult partici-
pant in a work activity engaged in under a pro-
gram operated with funds provided under this 
paragraph shall not be employed or assigned— 
"(aa) when any other individual is on lay-
off from the same or any substantially equiva-
lent job; 
"(bb) if the employer has terminated the 
emplojonent of any regular employee or other-
wise caused an involuntary reduction in its 
workforce with the intention of filling the 
vacancy so created with the participant; or 
"(cc) if the employer has caused an invol-
untary reduction to less than full time in hours 
of any employee in the same or a substantially 
equivalent job. 
"(ii) HEALTH AND SAFETY.—Health and 
safety 
standards established under Federal and State law 
otherwise applicable to working conditions of employ-
ees shall be equally applicable to working conditions 
of other participants engaged in a work activity under 
a program operated with funds provided under this 
paragraph. 
"(iii) NONDISCRIMINATION.—In addition to the 
protections provided under the provisions of law speci-
fied in section 408(c), £in individual may not be 
discriminated against by reason of gender with respect 
to participation in work activities engaged in under 
a program operated with funds provided under this 
paragraph. 
"(iv) GRIEVANCE PROCEDURE.— 
"(I) IN GENERAL.—Each State to which a grant 
is made under this paragraph shall establish and 
maintain a procedure for grievances or complaints 
from employees alleging violations of clause (i) and 
participants in work activities alleging violations 
of clause (i), (ii), or (iii). 
"(II) HEARING.—^The procedure shall include 
an opportunity for a hearing. 
"(Ill) REMEDIES.—^The procedure shall include 
remedies for violation of clause (i), (ii), or (iii), 
which may continue during the pendency of the 
procedure, and which may include— 
"(aa) suspension or termination of pay-
ments from funds provided under this para-
graph; 
"(bb) prohibition of placement of a partici-
pant with an employer that has violated clause 
(i), (ii), or (iii); 
"(cc) where applicable, reinstatement of 
an employee, payment of lost wages and bene-
fits, and reestablishment of other relevant 
terms, conditions and privileges of employ-
ment; and 
"(dd) where appropriate, other equitable 
relief. 
"(IV) APPEALS.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 589 
"(aa) FILING.—^Not later than 30 days after 
a grievant or complainant receives an adverse 
decision under the procedure 
established 
pursuant to subclause (I), the grievant or 
complainant may appeal the decision to a 
State agency designated by the State which 
shall be independent of the State or local 
agency that is administering the programs 
operated with funds provided under this para-
graph and the State agency administering, or 
supervising the administration of, the State 
program funded under this part. 
"(bb) FINAL DETERMINATION.—^Not later 
than 120 days after the State agency des-
ignated under item (aa) receives a grievance 
or complaint made under the procedure estab-
lished by a State pursuant to subclause (I), 
the State agency shall make a final determina-
tion on the appeal. 
"(v) RULE OF INTERPRETATION.—^This subparagraph 
shall not be construed to affect the authority of a 
State to provide or require workers' compensation. 
"(vi) NONPREEMPTION OF STATE LAW.—^The provi-
sions of this subparagraph shall not be construed to 
preempt £iny provision of State law that affords greater 
protections to employees or to other participants 
engaged in work activities under a program funded 
under this part than is afforded by such provisions 
of this subparagraph.". 
(2) CONFORMING AMENDMENT.—Section 409(a)(7)(B)(iv) of 
such Act (42 U.S.C. 609(a)(7XB)(iv)) is amended to read as 
follows: 
"(iv) EXPENDITURES BY THE STATE.—The term 
'expenditures by the State' does not include— 
"(I) any expenditure from amounts made avail-
able by the Federal Government; 
"(11) any State funds expended for the medic-
aid program under title XIX; 
"(III) any State funds which are used to match 
Federal funds provided under section 403(a)(5); 
or 
"(IV) any State funds which are expended as 
a condition of receiving Federal funds other than 
under this part. 
Notwithstanding subclause (IV) of the preceding sen-
tence, such term includes expenditures by a State for 
child care in a fiscal year to the extent that the total 
amount of the expenditures does not exceed the amount 
of State expenditures in fiscal year 1994 or 1995 
(whichever is the greater) that equal the non-Federal 
share 
for the 
programs 
described 
in 
section 
418(a)(1)(A).". 
(b) GRANTS TO OUTLYING AREAS.—Section 1108(a)(2) (42 U.S.C. 
1308(a)(2)), as amended by section 5512(a) of this Act, is amended 
by inserting "403(a)(5)," after "403(a)(4),". 
(c) GRANTS TO INDIAN TRIBES.—Section 412(a) (42 U.S.C. 612(a)) 
is amended by adding at the end the following: 
I l l STAT. 590 
PUBLIC LAW 105-33—AUG. 5, 1997 
Applicability. 
"(3) WELFARE-TO-WORK GRANTS.— 
"(A) IN GENERAL.—^The Secretary of Labor shall award 
a grant in accordance with this paragraph to an Indian 
tribe for each fiscal year specified in section 403(a)(5)(I) 
for which the Indisin tribe is a welfare-to-work tribe, in 
such amount as the Secretary of Labor deems appropriate, 
subject to subparagraph (B) of this paragraph. 
"(B) WELFARE-TO-WORK TRIBE.—An Indian tribe shall 
be considered a welfare-to-work tribe for a fiscal year for 
purposes of this paragraph if the Indian tribe meets the 
following requirements: 
"(i) The Indian tribe has submitted to the Secretary 
of Labor a plan which describes how, consistent with 
section 403(a)(5), the Indian tribe will use any funds 
provided under this paragraph during the fiscal year. 
If the Indian tribe has a tribal family assistance plan, 
the plan referred to in the preceding sentence shall 
be in the form of an addendum to the tribal family 
assistance plan. 
"(ii) The Indian tribe is operating a program under 
a tribal family assistance plan approved by the Sec-
retary of Health and Human Services, a program 
described in paragraph (2)(C), or an employment pro-
gram funded through other sources under which 
substantial services are provided to recipients of assist-
ance under a program funded under this part. 
"(iii) The Indian tribe has provided the Secretary 
of Labor with an estimate of the amount that the 
Indian tribe intends to expend during the fiscal year 
(excluding tribal expenditures described in section 
409(a)(7)(B)(iv) (other than subclause (III) thereof)) 
pursuant to this paragraph. 
"(iv) The Indian tribe has agreed to negotiate in 
good faith with the Secretary of Health and Human 
Services with respect to the substance and funding 
of any evaluation under section 413(j), and to cooperate 
with the conduct of any such evEduation. 
"(C) LIMITATIONS ON USE OF FUNDS.— 
"(i) IN GENERAL.—Section 403(a)(5XC) shall apply 
to funds provided to Indian tribes under this paragraph 
in the same manner in which such section applies 
to funds provided under section 403(aX5). 
"(ii) WAIVER AUTHORITY.—^The Secretary of Labor 
may waive or modify the application of a provision 
of section 403(a)(5)(C) (other than clause (vii) thereof) 
with respect to an Indian tribe to the extent necessary 
to enable the Indian tribe to operate a more efficient 
or effective program with the funds provided under 
this paragraph. 
"(iii) REGULATIONS.—-Within 90 days after the date 
of the enactment of this paragraph, the Secretary of 
Labor, after consultation with the Secretary of Health 
and Human Services and the Secretary of Housing 
and Urban Development, shall prescribe such regula-
tions as may be necessary to implement this pgira-
graph.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 591 
(d) FUNDS RECEIVED FROM GRANTS TO BE DISREGARDED IN 
APPLYING DURATIONAL LIMIT ON ASSISTANCE.—Section 408(a)(7) (42 
U.S.C. 608(a)(7)) is amended by adding at the end the following: 
"(G) 
INAPPLICABILITY TO WELFARE-TO-WORK GRANTS 
AND ASSISTANCE.—^For purposes of subparagraph (A) of this 
paragraph, a grant made under section 403(a)(5) shall not 
be considered a grant made under section 403, and noncash 
assistance from funds provided under section 403(a)(5) shall 
not be considered assistance.". 
(e) DATA COLLECTION AND REPORTING.—Section 411(a) (42 
U.S.C. 611(a)(1)(A)), as amended by section 5507 of this Act, is 
amended— 
(1) in paragraph (1)(A), by adding at the end the following: 
"(xviii) With respect to families participating in 
a program operated with funds provided under section 
403(a)(5>— 
"(I) 
any 
activity 
described 
in 
section 
403(a)(5)(C)(i) engaged in by a family member; 
"(II) the total amount expended during the 
month on the family member for each such activity; 
"(III) if the family member is engaged in sub-
sidized employment or on-the-job training under 
the program, the wage paid to the family member 
and the amount of any wage subsidy provided 
to the family member from Federal or State funds; 
and 
"(IV) if the participation of a family member 
in the program was ended during a month due 
to the family member obtaining employment, the 
wage of the family member in the employment 
and whether the participation was ended due to 
the family member obtaining unsubsidized employ-
ment, obtaining subsidized employment, receiving 
an increased wage, engaging in a work training 
activity funded under a program funded other than 
under section 403(a)(5), or for other reasons."; 
(2) in paragraph (2), by inserting ", with a separate state-
ment of the percentage of such funds that are used to cover 
administrative costs or overhead incurred for programs oper-
ated with funds provided under section 403(a)(5)" before the 
period; 
(3) in paragraph (3), by inserting ", with a separate state-
ment of the total amount expended by the State during the 
quarter on programs operated with funds provided under sec-
tion 403(a)(5)" before the period; 
(4) in paragraph (4), by inserting ", with a separate state-
ment of the number of such parents who participated in pro-
grams operated with funds provided under section 403(a)(5)" 
before the period; 
(5) in paragraph (6)— 
(A) by striking "and" at the end of subparagraph (A); 
(B) by striking the period at the end of subparagraph 
(B) and inserting "; and"; and 
(C) by adding at the end the following: 
"(C) with respect to families and individuals participat-
ing in a program operated with funds provided under sec-
tion 403(a)(5)— 
I l l STAT. 592 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(i) the total number of such famihes and individ-
uals; and 
"(ii) the number of such families and individuals 
whose participation in such a program was terminated 
during a month,'" and 
(6) in paragraph (7), by inserting ", and shall consult with 
the Secretary of Labor in defining the data elements with 
respect to programs operated with funds provided under section 
403(a)(5)" before the period. 
(f) EVALUATIONS.—Section 413 (42 U.S.C. 613) is amended by 
adding at the end the following: 
"(j) EVALUATION OF WELFARE-TO-WORK PROGRAMS.— 
"(1) EVALUATION.—^The Secretary, in consultation with the 
Secretary of Labor and the Secretary of Housing and Urban 
Development— 
"(A) shall develop a plan to evaluate how grants made 
under sections 403(a)(5) and 412(a)(3) have been used; 
"(B) may evaluate the use of such grants by such 
grantees as the Secretary deems appropriate, in accordance 
with an agreement entered into with the grantees after 
good-faith negotiations; and 
"(C) is urged to include the following outcome measures 
in the plan developed under subparagraph (A): 
"(i) Placements in unsubsidized emplo3anent, and 
placements in unsubsidized employment that last for 
at least 6 months. 
"(ii) Placements in the private and public sectors, 
"(iii) Earnings of individuals who obtain employ-
ment. 
"(iv) Average expenditures per placement. 
"(2) REPORTS TO THE CONGRESS.— 
"(A) IN GENERAL.—Subject to subparagraphs (B) and 
(C), the Secretary, in consultation with the Secretary of 
Labor and the Secretary of Housing and Urban Develop-
ment, shall submit to the Congress reports on the projects 
funded under section 403(a)(5) and 412(a)(3) and on the 
evaluations of the projects. 
"(B) INTERIM REPORT.—^Not later than January 1, 1999, 
the Secretary shall submit an interim report on the matter 
described in subparagraph (A). 
"(C) FINAL REPORT.—Not later than January 1, 2001, 
(or at a later date, if the Secretary informs the Committees 
of the Congress with jurisdiction over the sulyect matter 
of the report) the Secretary shall submit a final report 
on the matter described in subparagraph (A).". 
(g) PENALTIES.— 
(1) PENALTY FOR FAILURE OF STATE TO MAINTAIN HISTORIC 
EFFORT DURING YEAR IN WHICH WELFARE-TO-WORK GRANT IS 
RECEIVED.— 
(A) IN GENERAL.—Section 409(a) (42 U.S.C. 609(a)) is 
amended by adding at the end the following: 
"(13) PENALTY FOR FAILURE OF STATE TO MAINTAIN HISTORIC 
EFFORT DURING YEAR IN WHICH WELFARE-TO-WORK GRANT IS 
RECEIVED.—If a grant is made to a State under section 
403(a)(5)(A) for a fiscal year and paragraph (7) of this sub-
section requires the grant payable to the State under section 
403(a)(1) to be reduced for the immediately succeeding fiscal 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 593 
year, then the Secretary shall reduce the grant payable to 
the State under section 403(a)(1) for such succeeding fiscal 
year by the amount of the grant made to the State under 
section 403(a)(5)(A) for the fiscal year.". 
(B) INAPPLICABILITY OF GOOD CAUSE EXCEPTION.—Sec-
tion 409(b)(2) of such Act (42 U.S.C. 609(b)(2)), as amended 
by section 5506(k) of this Act, is amended by striking 
"or (12)" and inserting "(12), or (13)". 
(C) 
INAPPLICABILITY 
OF 
CORRECTIVE 
COMPLIANCE 
PLAN.—Section 409(c)(4) of such Act (42 U.S.C. 609(c)(4)), 
as amended by section 5506(m) of this Act, is amended 
by striking "or (12)" and inserting "(12), or (13)". 
(2) PENALTY FOR MISUSE OF COMPETITIVE WELFARE-TO-WORK 
FUNDS.—Section 409(a)(1) of such Act (42 U.S.C. 609(a)(1)) is 
amended by adding at the end the following: 
"(C) PENALTY FOR MISUSE OF COMPETITIVE WELFARE-
TO-WORK FUNDS.—If the Secretary of Labor finds that an 
amount paid to an entity under section 403(a)(5)(B) has 
been used in violation of subparagraph (B) or (C) of section 
403(a)(5), the entity shall remit to the Secretary of Labor 
an amount equal to the amount so used.", 
(h) 
CLARIFICATION 
THAT 
SANCTIONS AGAINST 
RECIPIENTS 
UNDER T A N F PROGRAM ARE NOT WAGE REDUCTIONS.— 
(1) IN GENERAL.—Section 408 (42 U.S.C. 608) is amended— 
(A) by redesignating subsections (c) and (d) as sub-
sections (d) and (e), respectively; and 
(B) by inserting after subsection (b) the following: 
"(c) SANCTIONS AGAINST RECIPIENTS NOT CONSIDERED WAGE 
REDUCTIONS.—^A penalty imposed by a State against the family 
of an individual by reason of the failure of the individual to comply 
with a requirement under the State program funded under this 
part shall not be construed to be a reduction in any wage paid 
to the individual.". 
(2) RETROACTIVITY.—^The amendments made by paragraph 
42 USC 608 note. 
(1) shall t£ike effect as if included in the enactment of section 
103(a) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996. 
(i) GAO 
STUDY OF EFFECT OF FAMILY VIOLENCE ON N E E D 
42 use 6X3 note. 
FOR PUBLIC ASSISTANCE.— 
(1) STUDY.—^The Comptroller General shall conduct a study 
of the effect of family violence on the use of public assistance 
programs, and in particular the extent to which family violence 
prolongs or increases the need for public assistance. 
(2) REPORT.—^Within 1 year after the date of the enactment 
of this Act, the Comptroller General shall submit to the 
Committees on Ways and Means and Education and the 
Workforce of the House of Representatives and the Committee 
on Finance of the Senate a report that contains the findings 
of the study required by paragraph (1). 
SEC. 5002. LIMITATION ON AMOUNT OF FEDERAL FUNDS TRANSFER-
ABLE TO TITLE XX PROGRAMS. 
(a) IN GENERAL.—Section 404(d) (42 U.S.C. 604(d)) is amend-
ed— 
(1) in paragraph (1), by striking "A State may" and insert-
ing "Subject to paragraph (2), a State majr"; and 
(2) by amending paragraph (2) to read as follows: 
Ill STAT. 594 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) 
LIMITATION ON AMOUNT TRANSFERABLE TO TITLE XX 
PROGRAMS.—^A State may use not more than 10 percent of 
the amount of any grant made to the State under section 
403(a) for a fiscal year to carry out State programs pursuant 
to title XX.". 
42 use 604 note. 
(b) RETROACTIVITY.—^The amendments made by subsection (a) 
of this section shall take effect as if included in the enactment 
of section 103(a) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996. 
SEC. 5003. UMITATION ON NUMBER OF PERSONS WHO MAY BE TREAT-
ED AS ENGAGED IN WORK BY REASON OF PARTICIPATION 
IN EDUCATIONAL ACTIVITIES. 
(a) IN GENERAL.—Section 407(c)(2)(D) (42 U.S.C. 607(c)(2)(D)) 
is amended to read as follows: 
"(D) 
LIMITATION ON NUMBER OF PERSONS WHO MAY 
BE TREATED AS ENGAGED IN WORK BY REASON OF PARTICIPA-
TION IN EDUCATIONAL ACTIVITIES.—^For purposes of deter-
mining monthly participation rates under 
paragraphs 
(l)(B)(i) and (2)(B) of subsection (b), not more than 30 
percent of the number of individuals in all families and 
in 2-parent families, respectively, in a State who are treated 
as engaged in work for a month may consist of individuals 
who are determined to be engaged in work for the month 
by reason of participation in vocational educational train-
ing, or (if the month is in fiscal year 2000 or thereafter) 
deemed to be engaged in work for the month by reason 
of subparagraph (C) of this paragraph.". 
42 use 607 note. 
(b) RETROACTIVITY.—^The amendment made by subsection (a) 
of this section shall take effect as if included in the enactment 
of section 103(a) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996. 
SEC. 5004. PENALTY FOR FAILURE OF STATE TO REDUCE ASSISTANCE 
FOR RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO 
WORK. 
(a) IN GENERAL.—Section 409(a) (42 U.S.C. 609(a)), as amended 
by section 5001(f)(1)(A) of this Act, is amended by adding at the 
end the following: 
"(14) 
PENALTY FOR FAILURE TO REDUCE ASSISTANCE FOR 
RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO WORK.— 
"(A) IN GENERAL.—^If the Secretary determines that 
a State to which a grant is made under section 403 in 
a fiscal year has violated section 407(e) during the fiscal 
year, the Secretary shall reduce the grant payable to the 
State under section 403(a)(1) for the immediately succeed-
ing fiscal year by an amount equal to not less than 1 
percent and not more than 5 percent of the State family 
assistance grant. 
"(B) 
PENALTY BASED ON SEVERITY OF FAILURE.—^The 
Secretary shall impose reductions under subparagraph (A) 
with respect to a fiscal year based on the degree of non-
compliance.". 
42 use 609 note. 
(b) RETROACTIVITY.—^The amendment made by subsection (a) 
of this section shall take effect as if included in the enactment 
of section 103(a) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996. 
^«*%-.-*-
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 595 
Subtitle B—Supplemental Security Income 
42 use 1382c 
note. 
SEC. 5101. EXTENSION OF DEADLINE TO PERFORM CHILDHOOD 
DISABIUTY REDETERMINATIONS. 
Section 211(d)(2) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (Public Law 104-193; 110 
Stat. 2190) is amended— 
(1) in subparagraph (A)— 
(A) in the 1st sentence, by striking "1 year" and insert-
ing "18 months"; and 
(B) by inserting after the 1st sentence the following: 
"Any redetermination required by the preceding sentence 
that is not performed before the end of the period described 
in the preceding sentence shall be performed as soon as 
is practicable thereafter."; £ind 
(2) in subparagraph (C), by adding at the end the following: 
"Before commencing a redetermination under the 2nd sentence 
Notification. 
of subparagraph (A), in any case in which the individusd 
involved has not already been notified of the provisions of 
this paragraph, the Commissioner of Social Security shall notify 
the individual involved of the provisions of this paragraph.". 
SEC. 5102. FEES FOR FEDERAL ADMINISTRATION OF STATE SUPPLE-
MENTARY PAYMENTS. 
(a) FEE SCHEDULE.— 
(1) OPTIONAL STATE SUPPLEMENTARY PAYMENTS.— 
(A) IN GENERAL.—Section 1616(d)(2)(B) (42 U.S.C. 
1382e(d)(2)(B)) is amended— 
(i) by striking "and" at the end of clause (iii); 
and 
(ii) by striking clause (iv) and inserting the foUow-
"(iv) for fiscal year 1997, $5.00; 
"(v) for fiscal year 1998, $6.20; 
"(vi) for fiscal year 1999, $7.60; 
"(vii) for fiscal year 2000, $7.80; 
"(viii) for fiscal year 2001, $8.10; 
"(ix) for fiscal year 2002, $8.50; and 
"(x) for fiscal year 2003 and each succeeding fiscal year— 
"(I) the applicable rate in the preceding fiscal year, 
increased by the percentage, if any, by which the Consumer 
Price Index for the month of June of the calendar year 
of the increase exceeds the Consumer Price Index for the 
month of June of the calendar year preceding the calendar 
year of the increase, and rounded to the nearest whole 
cent; or 
"(II) such different rate as the Commissioner deter-
mines is appropriate for the State.". 
(B) CONFORMING AMENDMENT.—Section 1616(d)(2)(C) 
of such Act (42 U.S.C. 1382e(d)(2)(C)) is amended by strik-
ing "(B)(iv)" and inserting "(B)(x)(II)". 
(2) MANDATORY STATE SUPPLEMENTARY PAYMENTS.— 
(A) IN GENERAL.—Section 212(b)(3)(B)(ii) of Pubhc Law 
93-66 (42 U.S.C. 1382 note) is amended— 
(i) by striking "and" at the end of subclause (III); 
£ind 
I l l STAT. 596 
PUBLIC LAW 105-33—AUG. 5, 1997 
(ii) by striking subclause (IV) and inserting the 
following: 
"(IV) for fiscal year 1997, $5.00; 
"(V) for fiscal year 1998, $6.20; 
"(VI) for fiscal year 1999, $7.60; 
"(VII) for fiscal year 2000, $7.80; 
"(VIII) for fiscal year 2001, $8.10; 
"(IX) for fiscal year 2002, $8.50; and 
"(X) for fiscal year 2003 and each succeeding fiscal year— 
"(aa) the applicable rate in the preceding fiscal year, 
increased by the percentage, if any, by which the Consumer 
Price Index for the month of June of the calendar year 
of the increase exceeds the Consumer Price Index for the 
month of June of the calendar year preceding the calendar 
year of the increase, and rounded to the nearest whole 
cent; or 
"(bb) such different rate as the Commissioner deter-
mines is appropriate for the State.". 
(B) CONFORMING AMENDMENT.—Section 212(b)(3)(B)(iii) 
of such Act (42 U.S.C. 1382 note) is amended by striking 
"(ii)(IV)" and inserting "(ii)(X)(bb)". 
(b) USE OF NEW FEES TO DEFRAY THE SOCIAL SECURITY 
ADMINISTRATION'S ADMINISTRATIVE EXPENSES.— 
(1) CREDIT TO SPECIAL FUND FOR FISCAL YEAR I998 AND 
SUBSEQUENT YEARS.— 
(A) OPTIONAL STATE SUPPLEMENTARY PAYMENT FEES.— 
Section 1616(d)(4) (42 U.S.C. 1382e(dX4)) is amended to 
read as follows: 
"(4)(A) The first $5 of each administration fee assessed pursuant 
to paragraph (2), upon collection, shall be deposited in the general 
fund of the Treasury of the United States as miscellaneous receipts. 
"(B) That portion of each administration fee in excess of $5, 
and 100 percent of each additional services fee charged pursuant 
to paragraph (3), upon collection for fiscal year 1998 and each 
subsequent fiscal year, shall be credited to a special fund established 
in the Treasury of the United States for State supplementary pay-
ment fees. The amounts so credited, to the extent and in the 
amounts provided in advance in appropriations Acts, shall be avail-
able to defray expenses incurred in carrying out this title and 
related laws. The amounts so credited shall not be scored as receipts 
under section 252 of the Balanced Budget and Emergency Deficit 
Control Act of 1985, and the amounts so credited shall be credited 
as a discretionary offset to discretionary spending to the extent 
that the amounts so credited are made available for expenditure 
in appropriations Acts.". 
(B) 
MANDATORY 
STATE 
SUPPLEMENTARY 
PAYMENT 
FEES.—Section 212(b)(3)(D) of Public Law 93-66 (42 U.S.C. 
1382 note) is amended to read as follows: 
"(D)(i) The first $5 of each administration fee assessed pursuant 
to subparagraph (B), upon collection, shall be deposited in the 
general fund of the Treasury of the United States as miscellaneous 
receipts. 
"(ii) The portion of each administration fee in excess of $5, 
and 100 percent of each additioned services fee charged pursuant 
to subparagraph (C), upon collection for fiscal year 1998 and each 
subsequent fiscal year, shall be credited to a special fund established 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 597 
in the Treasury of the United States for State supplementary pay-
ment fees. The amounts so credited, to the extent and in the 
amounts provided in advance in appropriations Acts, shall be avail-
able to defray expenses incurred in canying out this section and 
title XVI of the Social Security Act and related laws. The amounts 
so credited shall not be scored as receipts under section 252 of 
the Balanced Budget and Emergency Deficit Control Act of 1985, 
and the amounts so credited shall be credited as a discretionary 
offset to discretionary spending to the extent that the amounts 
so credited are made available for expenditure in appropriations 
Acts.". 
(2) LIMITATIONS ON AUTHORIZATION OF APPROPRIATIONS.— 42 use i382e 
From amounts credited pursuant to section 1616(d)(4)(B) of note, 
the Social Security Act and section 212(b)(3)(D)(ii) of Public 
Law 93-66 to the special fund established in the Treasury 
of the United States for State supplementsiry payment fees, 
there is authorized to be appropriated an amount not to exceed 
$35,000,000 for fiscal year 1998, and such sums as may be 
necessary for each fiscal year thereafter. 
Subtitle C—Child Support Enforcement 
SEC. 5201. CLARIFICATION OF AUTHORITY TO PERMIT CERTAIN RE-
DISCLOSURES OF WAGE AND CLAIM INFORMATION. 
Section 303(h)(1)(C) (42 U.S.C. 503(h)(1)(C)) is amended by 
striking "section 453(i)(l) in canying out the child support enforce-
ment program under title INT and inserting "subsections (i)(l), 
(i)(3), and (j) of section 453". 
Subtitle D—^Restricting Welfare and Public 
Benefits for Aliens 
SEC. 5301. SSI ELIGIBILITY FOR ALIENS RECEIVING SSI ON AUGUST 
22, 1996, AND DISABLED ALIENS LAWFULLY RESIDING IN 
THE UNITED STATES ON AUGUST 22,1996. 
(a) SSI ELIGIBILITY FOR ALIENS RECEIVING SSI ON AUGUST 
22, 1996.—Section 402(a)(2) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (8 U.S.C. 1612(a)(2)) is 
amended by adding after subparagraph (D) the following new 
subparagraph: 
"(E) ALIENS RECEIVING SSI ON AUGUST 22, 1996.—With 
respect to eligibility for benefits for the program defined 
in paragraph (3)(A) (relating to the supplemental security 
income program), paragraph (1) shall not apply to an alien 
who is lawfully residing in the United States and who 
was receiving such benefits on August 22, 1996.". 
(b) SSI ELIGIBILITY FOR DISABLED ALIENS LAWFULLY RESIDING 
IN THE UNITED STATES ON AUGUST 22, 1996.—Section 402(a)(2) of 
the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 (8 U.S.C. 1612(a)(2)) is amended by adding at the 
end the following: 
"(F) DISABLED ALIENS LAWFULLY RESIDING IN THE 
UNITED STATES ON AUGUST 22, 1996.—^With respect to eligi-
bility for benefits for the program defined in paragraph 
I l l STAT. 598 
PUBLIC LAW 105-33—AUG. 5, 1997 
(3)(A) (relating to the supplemental security income pro-
gram), paragraph (1) shall not apply to an alien who— 
"(i) was lawfully residing in the United States 
on August 22, 1996; and 
"(ii) is blind or disabled, as defined in section 
1614(a)(2) or 1614(a)(3) of the Social Security Act (42 
U.S.C. 1382c(a)(3)).". 
(c) EXTENSION OF GRANDFATHER PROVISION RELATING TO SSI 
ELIGIBILITY.—Section 402(a)(2)(D)(i) of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1612(a)(2)(D)(i)) is amended— 
(1) in subclause (I), by striking "September 30, 1997," and 
inserting "September 30, 1998,"; and 
(2) in subclause (III), by striking "September 30, 1997," 
and inserting "September 30, 1998". 
SEC. 5302. EXTENSION OF ELIGIBIUTY PERIOD FOR REFUGEES AND 
CERTAIN OTHER QUALIFIED ALIENS FROM 5 TO 7 YEARS 
FOR SSI AND MEDICAID; STATUS OF CUBAN AND HAITIAN 
ENTRANTS. 
(a) SSL—Section 402(a)(2)(A) of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1612(a)(2)(A)) is amended to read as follows: 
"(A) TIME-LIMITED 
EXCEPTION FOR REFUGEES AND 
ASYLEES.— 
"(i) SSI.—^With respect to the specified Federal 
program described in paragraph (3)(A), paragraph (1) 
shall not apply to an alien until 7 years after the 
date— 
"(I) an alien is admitted to the United States 
as a refugee under section 207 of the Immigration 
and Nationality Act; 
"(II) an alien is granted asylum under section 
208 of such Act; 
"(III) an alien's deportation is withheld under 
section 243(h) of such Act; or 
"(IV) an alien is granted status as a Cuban 
and Haitian entrant (as defined in section 501(e) 
of the Refugee Education Assistance Act of 1980). 
"(ii) FOOD STAMPS.—With respect to the specified 
Federal program described in paragraph (3)(B), para-
graph (1) shall not apply to an alien until 5 years 
after the date— 
"(I) an alien is admitted to the United States 
as a refugee under section 207 of the Immigration 
and Nationality Act; 
"(II) an alien is granted asylum under section 
208 of such Act; 
"(III) an alien's deportation is withheld under 
section 243(h) of such Act; or 
"(IV) an alien is granted status as a Cuban 
and Haitian entrant (as defined in section 501(e) 
of the Refugee Education Assistance Act of 1980).". 
(b) MEDICAID.—Section 402(b)(2)(A) of the Personal Responsibil-
ity and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1612(b)(2)(A)) is amended to read as follows: 
''il^-rr^' 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 599 
"(A) 
TIME-LIMITED EXCEPTION FOR REFUGEES AND 
ASYLEES.— 
"(i) MEDICAID.—^With respect to the designated 
Federal program described in paragraph (3)(C), para-
graph (1) shall not apply to an alien until 7 years 
after the date— 
"(I) an alien is admitted to the United States 
as a refugee under section 207 of the Immigration 
and Nationality Act; 
"(II) an alien is granted asylum under section 
208 of such Act; 
"(III) an alien's deportation is withheld under 
section 243(h) of such Act; or 
"(IV) an alien is granted status as a Cuban 
and Haitian entrant (as defined in section 501(e) 
of the Refugee Education Assistance Act of 1980). 
"(ii) 
OTHER DESIGNATED FEDERAL PROGRAMS.— 
With respect to the designated Federal programs under 
paragraph (3) (other than subparagraph (O), para-
graph (1) shall not apply to an alien until 5 years 
after the date— 
"(I) an alien is admitted to the United States 
as a refugee under section 207 of the Immigration 
and Nationality Act; 
"(II) an alien is grsinted asylum under section 
208 of such Act; 
"(III) an alien's deportation is withheld under 
section 243(h) of such Act; or 
"(IV) an alien is granted status as a Cuban 
and Haitian entrant (as defined in section 501(e) 
of the Refugee Education Assistance Act of 1980).". 
(c) STATUS OF CUBAN AND HAITIAN ENTRANTS.— 
(1) FEDERAL MEANS-TESTED PUBLIC BENEFITS.— 
(A) Section 403(b)(1) of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1613(b)(1)) is amended by adding at the end the following 
new subparagraph: 
"(D) An alien who is a Cuban and Haitian entrant 
as defined in section 501(e) of the Refugee Education Assist-
ance Act of 1980.". 
(B) Section 403 of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1613) is amended by striking subsection (d). 
(2) STATE PUBLIC BENEFITS.—Section 412(b)(1) of the Per-
sonal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (8 U.S.C. 1622(b)(1)) is amended by adding at the 
end the following new subparagraph: 
"(D) An alien who is a Cuban and Haitian entrant 
as defined in section 501(e) of the Refugee Education Assist-
ance Act of 1980 until 5 years after the alien is granted 
such status.". 
(3) QUALIFIED ALIEN DEFINED.—Section 431(b) of the Per-
sonal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (8 U.S.C. 1641(b)) is amended— 
(A) in paragraph (5) by striking "or"; 
(B) in paragraph (6) by striking the period and insert-
ing "; or"; and 
I l l STAT. 600 
PUBLIC LAW 105-33—AUG. 5, 1997 
(C) by adding at the end the following new paragraph: 
"(7) an alien who is a Cuban and Haitian entrant (as 
defined in section 501(e) of the Refugee Education Assistance 
Act of 1980).". 
SEC. 5303. EXCEPTIONS FOR CERTAIN INDIANS FROM LIMITATION ON 
EUGIBILITY FOR SUPPLEMENTAL SECURITY INCOME 
AND MEDICAID BENEFITS. 
(a) EXCEPTION FROM LIMITATION ON SSI ELIGIBILITY.—Section 
402(a)(2) of the Personal Responsibility and Work Opportunity Rec-
onciliation Act of 1996 (8 U.S.C. 1612(a)(2)) is amended by adding 
at the end the following: 
"(G) SSI EXCEPTION FOR CERTAIN INDIANS.—With 
respect to eligibility for benefits for the program defined 
in paragraph (3)(A) (relating to the supplemental security 
income program), section 401(a) and paragraph (1) shall 
not apply to any individual— 
"(i) who is an American Indism bom in Canada 
to whom the provisions of section 289 of the Immigra-
tion and Nationality Act (8 U.S.C. 1359) apply; or 
"(ii) who is a member of an Indian tribe (as defined 
in section 4(e) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450b(e))).". 
(b) EXCEPTION FROM LIMITATION ON MEDICAID ELIGIBILITY.— 
Section 402(b)(2) of the Personal Responsibility and Work Oppor-
tunity ReconciHation Act of 1996 (8 U.S.C. 1612(b)(2)) is amended 
by inserting at the end the following: 
"(E) MEDICAID EXCEPTION FOR CERTAIN INDIANS.—With 
respect to eligibility for benefits for the program defined 
in paragraph (3)(C) (relating to the medicaid program), 
section 401(a) and paragraph (1) shall not apply to any 
individual described in subsection (aX2)(G).". 
(c) SSI AND MEDICAID EXCEPTIONS FROM LIMITATION ON ELIGI-
BILITY OF NEW ENTRANTS.—Section 403 of the Personal Responsibil-
ity and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1613) is amended by adding after subsection (c) the following new 
subsection: 
"(d) SSI AND MEDICAID BENEFITS FOR CERTAIN INDIANS.—Not-
withstanding any other provision of law, the limitations under 
section 401(a) and subsection (a) shall not apply to an individual 
described in section 402(a)(2)(G), but only with respect to the pro-
grams specified in subsections (a)(3)(A) and (b)(3)(C) of section 
402.". 
SEC. 5304. EXEMPTION FROM RESTRICTION ON SUPPLEMENTAL SECU-
RITY INCOME PROGRAM PARTICIPATION BY CERTAIN 
RECIPIENTS ELIGIBLE ON THE BASIS OF VERY OLD 
APPUCATIONS. 
Section 402(a)(2) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (8 U.S.C. 1612(a)(2)) is 
amended by adding at the end the following: 
"(H) SSI EXCEPTION FOR CERTAIN RECIPIENTS ON THE 
BASIS OF VERY OLD APPLICATIONS.—^With respect to eligi-
bility for benefits for the program defined in paragraph 
(3)(A) (relating to the supplemental security income pro-
gram), paragraph (1) shall not apply to any individual— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 601 
"(i) who is receiving benefits under such program 
for months after July 1996 on the basis of an appUca-
tion filed before January 1, 1979; and 
"(ii) with respect to whom the Commissioner of 
Socied Security lacks clear and convincing evidence 
that such individual is an alien ineligible for such 
benefits as a result of the application of this section.". 
SEC. 5305. REINSTATEMENT OF ELIGIBILITY FOR BENEFITS. 
(a) FOOD STAMPS.—^The Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 is amended by adding after 
section 435 the following new section: 
"SEC. 436. DERIVATIVE EUGIBIUTY FOR BENEFITS. 
8 USC 1646. 
"Notwithstanding any other provision of law, an alien who 
under the provisions of this title is ineligible for benefits under 
the food stamp program (as defined in section 402(a)(3)(B)) shall 
not be eligible for such benefits because the alien receives benefits 
under the supplemental security income program (as defined in 
section 402(a)(3)(A)).". 
(b) MEDlCAiD.^^ection 402(b)(2) of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1612(b)(2)) is amended by adding at the end the following: 
"(F) MEDICAID EXCEPTION FOR ALIENS RECEIVING SSI.— 
An alien who is receiving benefits under the program 
defined in subsection (a)(3)(A) (relating to the supplemental 
security income program) shall be eligible for medical 
assistance under a State plan under title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) under the same terms 
and conditions that apply to other recipients of benefits 
under the program defined in such subsection.". 
(c) CLERICAL AMENDMENT.—^The table of sections as contained 
in section 2 of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 is amended by adding after the item 
relating to section 435 the following: 
"Sec. 436. Derivative eligibility for benefits.". 
SEC. 5306. TREATMENT OF CERTAIN AMERASIAN IMMIGRANTS AS 
REFUGEES. 
(a) 
FOR PURPOSES OF SSI 
AND FOOD STAMPS.—Section 
402(a)(2)(A) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (8 U.S.C. 1612(aX2XA)) as amended 
by section 5302 is amended— 
(1) in clause (i)— 
(A) by striking "or" at the end of subclause (III); 
(B) by striking the period at the end of subclause 
(IV) and inserting "; or"; and 
(C) by adding at the end the following: 
"(V) an alien is admitted to the United States 
as an Amerasian immigrant pursuant to section 
584 of the Foreign Operations, Export Financing, 
and Related Programs Appropriations Act, 1988 
(as contained in section 101(e) of Public Law 100-
202 and amended by the 9th proviso under MIGRA-
TION AND REFUGEE ASSISTANCE in title II of the 
Foreign Operations, Export Financing, and Related 
i n STAT. 602 
PUBLIC LAW 105-33—AUG. 5, 1997 
Programs Appropriations Act, 1989, Public Law 
100-461, as amended)."; and 
(2) in clause iiih-
(A) by striking "or" at the end of subclause (III); 
(B) by striking the period at the end of subclause 
(IV) and inserting "; or"; and 
(C) by adding at the end the following: 
"(V) an alien is admitted to the United States 
as an Amerasian immigrant as described in clause 
(i)(V).". 
(b) FOR PURPOSES OF T A N F , S S B G , AND MEDICAID.—Section 
402(b)(2)(A) of the Personal Responsibility and Work Opportunity 
Reconcihation Act of 1996 (8 U.S.C. 1612(b)(2)(A)) as amended 
by section 5302 is amended— 
(1) in clause (i)-^ 
(A) by striking "or" at the end of subclause (III); 
(B) by striking the period at the end of subclause 
(IV) and inserting "; or"; and 
(C) by adding at the end the following: 
"(V) an alien admitted to the United States as 
an Amerasian immigrant as described in subsection 
(a)(2)(A)(i)(V) until 5 years after the date of such alien's 
entry into the United States."; and 
(2) in clause (ii)— 
(A) by striking "or" at the end of subclause (III); 
(B) by striking the period at the end of subclause 
(IV) and inserting "; or"; and 
(C) by adding at the end the following: 
"(V) an alien admitted to the United States as 
an Amerasian immigrant as described in subsection 
(a)(2)(A)(i)(V) until 5 years after the date of such alien's 
entry into the United States.". 
(c) FOR PURPOSES OF EXCEPTION FROM 5-YEAR LIMITED ELIGI-
BILITY OF QUALIFIED ALIENS.—Section 403(b)(1) of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
(8 U.S.C. 1613(b)(1)) is amended by adding at the end the following: 
"(E) An alien admitted to the United States as an 
Amerasian 
immigrant 
as 
described 
in 
section 
402(a)(2)(A)(i)(V).". 
(d) FOR PURPOSES OF CERTAIN STATE PROGRAMS.—Section 
412(b)(1) of the Personal Responsibility and Work Opportunity Rec-
onciliation Act of 1996 (8 U.S.C. 1622(b)(1)) is amended by adding 
at the end the following new subparagraph: 
"(E) An alien admitted to the United States as an 
Amerasian 
immigrant 
as 
described 
in 
section 
402(a)(2)(A)(i)(V).". 
SEC. 5307. VERIFICATION OF ELIGIBILITY FOR STATE AND LOCAL PUB-
LIC BENEFITS. 
(a) IN GENERAL.—^The Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 is amended by adding after section 
412 the following new section: 
8 use 1625. 
"SEC. 413. AUTHORIZATION FOR VERIFICATION OF ELIGIBILITY FOR 
STATE AND LOCAL PUBLIC BENEFITS. 
"A State or political subdivision of a State is authorized to 
require an applicant for State and local public benefits (as defined 
in section 411(c)) to provide proof of eligibility.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 603 
(b) CLERICAL AMENDMENT.—^The table of sections as contained 
in section 2 of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 is amended by adding after the item 
relating to section 412 the following: 
"Sec. 413. Authorization for verification of eligibility for state and local public bene-
fits.". 
SEC. 5308. EFFECTIVE DATE. 
8 USC 1612 note. 
Except as otherwise provided, the amendments made by this 
subtitle shall be effective as if included in the enactment of title 
IV of the Personal Responsibility and Work Opportunity Reconcili-
ation Act of 1996. 
Subtitle E—Unemployment Compensation 
SEC. 5401. CLARIFYING PROVISION RELATING TO BASE PERIODS. 
42 USC 503 note. 
(a) IN GENERAL.—No provision of a State law under which 
the base period for such State is defined or otherwise determined 
shall, for purposes of section 303(a)(1) of the Social Security Act 
(42 U.S.C. 503(a)(1)), be considered a provision for a method of 
administration. 
(b) DEFINITIONS.—^For purposes of this section, the terms "State 
law", "base period", and 
State" shall have the meanings given 
them under section 205 of the Federal-State Extended Unemploy-
ment Compensation Act of 1970 (26 U.S.C. 3304 note). 
(c) EFFECTIVE DATE.—^This section shall apply for purposes 
of any period beginning before, on, or after the date of the enactment 
of this Act. 
SEC. 5402. INCREASE IN FEDERAL UNEMPLOYMENT ACCOUNT CEIL-
ING. 
(a) IN GENERAL.—Section 902(aX2) (42 U.S.C. 1102(a)(2)) is 
amended by striking "0.25 percent" and inserting "0.5 percent". 
(b) EFFECTIVE DATE.—^This section and the amendment made 
42 USC 1102 
by this section— 
note. 
(1) shall take effect on October 1, 2001, and 
(2) shall apply to fiscal years beginning on or after that 
date. 
SEC. 5403. SPECIAL DISTRIBUTION TO STATES FROM UNEMPLOYMENT 
TRUST FUND. 
(a) IN GENERAL.—Subsection (a) of section 903 (42 U.S.C. 
1103(a)) is amended by adding at the end the following new para-
graph: 
"(3)(A) Notwithstanding any other provision of this section, 
for purposes of carrying out this subsection with respect to any 
excess amount (referred to in paragraph (1)) remaining in the 
employment security administration account as of the close of fiscal 
year 1999, 2000, or 2001, such amount shall— 
"(i) to the extent of any amounts not in excess of 
$100,000,000, be subject to subparagraph (B), and 
"(ii) to the extent of any amounts in excess of $100,000,000, 
be subject to subparagraph (C). 
"(B) Paragraphs (1) and (2) shall apply with respect to any Applicability. 
amounts described in subparagraph (A)(i), except that— 
"(i) in canying out the provisions of paragraph (2)(B) with 
respect to such amounts (to determine the portion of such 
Ill STAT. 604 
PUBLIC LAW 105-33—AUG. 5, 1997 
amounts which is to be allocated to a State for a succeeding 
fiscal year), the ratio to be applied under such provisions shall 
be the same as the ratio that— 
"(I) the amount of funds to be allocated to such State 
for such fiscal year pursuant to the base allocation formula 
under title III, bears to 
"(II) the total amount of funds to be allocated to all 
States for such fiscal year pursuant to the base allocation 
formula under title III, 
as determined by the Secretary of Labor, and 
"(ii) the amounts allocated to a State pursuant to this 
subparagraph shall be available to such State, subject to the 
last sentence of subsection (c)(2). 
Nothing in this paragraph shall preclude the application of sub-
section (b) with respect to any allocation determined under this 
subparagraph. 
"(C) Any amounts described in clause (ii) of subparagraph (A) 
(remaining in the employment security administration account as 
of the close of any fiscal year specified in such subparagraph) 
shall, as of the beginning of the succeeding fiscal year, accrue 
to the Federal unemployment account, without regard to the limit 
provided in section 902(a).". 
(b) CONFORMING AMENDMENT.—^Paragraph (2) of section 903(c) 
42 use 1103. 
of the Social Security Act is amended by adding at the end, as 
a flush left sentence, the following: 
"Any amount allocated to a State under this section for fiscal 
year 2000, 2001, or 2002 may be used by such State only to 
pay expenses incurred by it for the administration of its unemploy-
ment compensation law, and may be so used by it without regard 
to any of the conditions prescribed in any of the preceding provisions 
of this paragraph.". 
SEC. 6404. INTEREST-FREE ADVANCES TO STATE ACCOUNTS IN 
UNEMPLOYMENT TRUST FUND RESTRICTED TO STATES 
WHICH MEET FUNDING GOALS. 
(a) IN GENERAL.—Paragraph (2) of section 1202(b) (42 U.S.C. 
1322(b)) is amended— 
(1) by striking "and" at the end of subparagraph (A), 
(2) by striking the period at the end of subparagraph (B) 
and inserting ", and", and 
(3) by adding at the end the following new subparagraph: 
"(C) such State meets funding goals, established under 
regulations issued by the Secretary of Labor, relating to the 
accounts of the States in the Unemployment Trust Fund.". 
42 use 1322 
(b) EFFECTIVE DATE.—^The amendments made by this section 
note. 
shall apply to calendar years beginning after the date of the enact-
ment of this Act. 
SEC. 5405. EXEMPTION OF SERVICE PERFORMED BY ELECTION WORK-
ERS FROM THE FEDERAL UNEMPLOYMENT TAX. 
(a) IN GENERAL.—^Paragraph (3) of section 3309(b) of the 
Internal Revenue Code of 1986 (relating to exemption for certain 
26 use 3309. 
services) is amended— 
(1) by striking "or" at the end of subparagraph (D), 
(2) by adding "or" at the end of subparagraph (E), and 
(3) by inserting after subparagraph (E) the following new 
subparagraph: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 605 
"(F) as an election official or election worker if the 
amount of remuneration received by the individual during 
the calendar year for services as an election official or 
election worker is less than $1,000;". 
(b) EFFECTIVE DATE.—^The amendments made by this section 
26 use 3309 
shall apply with respect to service performed after the date of "o^^. 
the enactment of this Act. 
SEC. 5406. TREATMENT OF CERTAIN SERVICES PERFORMED BY 
INMATES. 
(a) IN GENERAL.—Subsection (c) of section 3306 of the Internal 
Revenue Code of 1986 (defining emplojonent) is amended— 
26 USC 3306. 
(1) by striking "or" at the end of paragraph (19), 
(2) by striking the period at the end of paragraph (20) 
and inserting "; or", and 
(3) by adding at the end the following new paragraph: 
"(21) service performed by a person committed to a penal 
institution.". 
(b) EFFECTIVE DATE.—^The amendments made by this section 
26 use 3306 
shall apply with respect to service performed after January 1, note. 
1994. 
SEC. 5407. EXEMPTION OF SERVICE PERFORMED FOR AN ELEMENTARY 
OR SECONDARY SCHOOL OPERATED PRIMARILY FOR 
RELIGIOUS PURPOSES FROM THE FEDERAL UNEMPLOY-
MENT TAX. 
(a) IN GENERAL.—Paragraph (1) of section 3309(b) of the 
Internal Revenue Code of 1986 (relating to exemption for certain 26USe3309. 
services) is amended— 
(1) by striking "or" at the end of subparagraph (A), and 
(2) by inserting before the semicolon at the end the follow-
ing: ", or (C) an elementary or secondary school which is oper-
ated primarily for religious purposes, which is described in 
section 501(c)(3), and which is exempt from tax under section 
501(a)". 
(b) EFFECTIVE DATE.—^The amendments made by this section 
26 use 3309 
shall apply with respect to service performed after the date of note. 
the enactment of this Act. 
SEC. 5408. STATE PROGRAM INTEGRITY ACTIVITIES FOR UNEMPLOY-
MENT COMPENSATION. 
Section 901(c) (42 U.S.C. 1101(c)) is amended by adding at 
the end the following new paragraph: 
"(5)(A) There are authorized to be appropriated out of the Appropriation 
employment security administration account to carry out program authorization, 
integrity activities, in addition to any amounts available under 
paragraph (l)(A)(i)— 
"(i) $89,000,000 for fiscal year 1998; 
"(ii) $91,000,000 for fiscal year 1999; 
"(iii) $93,000,000 fiscal year 2000; 
"(iv) $96,000,000 for fiscal year 2001; and 
"(v) $98,000,000 for fiscal year 2002. 
"(B) In any fiscal year in which a State receives funds appro-
priated pursuant to this paragraph, the State shall expend a propor-
tion of the funds appropriated pursuant to paragraph (l)(A)(i) to 
carry out program integrity activities that is not less than the 
proportion of the funds appropriated under such paragraph that 
I l l STAT. 606 
PUBLIC LAW 105-33—AUG. 5, 1997 
was expended by the State to carry out program integrity activities 
in fiscal year 1997. 
"(C) For purposes of this paragraph, the term 'program integrity 
activities' means initial claims review activities, eligibility review 
activities, benefit payments control activities, and employer liability 
auditing activities.". 
Subtitle F—Welfare Reform Technical 
Corrections 
CHAPTER 1—BLOCK GRANTS FOR TEMPORARY 
ASSISTANCE TO NEEDY FAMILIES 
SEC. 5501. ELIGIBLE STATES; STATE PLAN. 
(a) LATER DEADLINE FOR SUBMISSION OF STATE PLANS.—Section 
402(a) (42 U.S.C. 602(a)) is amended by striking "2-year period 
immediately preceding" and inserting "27-month period ending with 
the close of the 1st quarter of. 
(b) CLARIFICATION OF SCOPE OF WORK PROVISIONS.—Section 
402(a)(l)(A)(ii) (42 U.S.C. 602(a)(l)(A)(ii)) is amended by inserting 
", consistent with section 407(e)(2)" before the period. 
(c) CORRECTION OF CROSS-REFERENCE.—Section 402(a)(l)(A)(v) 
(42 U.S.C. 602(a)(l)(A)(v)) is amended by striking "403(a)(2)(B)" 
and inserting "403(a)(2)(C)(iii)". 
(d) NOTIFICATION OF PLAN AMENDMENTS.—Section 402 (42 
U.S.C. 602) is amended— 
(1) by redesignating subsection (b) as subsection (c) and 
inserting after subsection (a) the following: 
"(b) PLAN AMENDMENTS.—^Within 30 days after a State amends 
a plan submitted pursuant to subsection (a), the State shall notify 
the Secretary of the amendment."; and 
(2) in subsection (c) (as so redesignated), by inserting "or 
plan amendment" after "plan". 
SEC. 5502. GRANTS TO STATES. 
(a) BONUS FOR DECREASE IN ILLEGITIMACY MODIFIED TO TAKE 
ACCOUNT OF CERTAIN TERRITORIES.— 
(1) 
IN 
GENERAL.—Section 
403(a)(2)(B) 
(42 
U.S.C. 
603(a)(2)(B)) is amended to read as follows: 
"(B) AMOUNT OF GRANT.— 
"(i) IN GENERAL.—If, for a bonus year, none of 
the eligible States is Guam, the Virgin Islands, or 
American Samoa, then the amount of the grant shall 
be— 
"(I) $20,000,000 if there are 5 eligible States; 
or 
"(II) $25,000,000 if there are fewer than 5 
eligible States. 
"(ii) 
AMOUNT 
IF 
CERTAIN 
TERRITORIES ARE 
ELIGIBLE.—If, for a bonus year, Guam, the Virgin 
Islands, or American Samoa is an eligible State, then 
the amount of the grant shall be— 
"(I) in the case of such a territory, 25 percent 
of the mandatory ceiling amount (as defined in 
section 1108(c)(4)) with respect to the territory; 
and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 607 
"(II) in the case of a State that is not such 
a territory— 
"(aa) if there are 5 eUgible States other 
than such territories, $20,000,000, minus Vs 
of the total amount of the grants payable 
under this paragraph to such territories for 
the bonus year; or 
"(bb) if there are fewer than 5 such eligible 
States, $25,000,000, or such lesser amount as 
may be necessary to ensure that the total 
amount of grants payable under this para-
f
raph for the bonus year does not exceed 
100,000,000.". 
(2) CERTAIN TERRITORIES TO BE IGNORED IN RANKING OTHER 
STATES.—Section 
403(a)(2)(C)(i)(I)(aa) 
(42 
U.S.C. 
603(a)(2)(C)(i)(I)(aa)) is amended by adding at the end the 
following: "In the case of a State that is not a territory specified 
in subparagraph (B), the comparative magnitude of the decrease 
for the State shall be determined without regard to the mag-
nitude of the corresponding decrease for any such territory.". 
(b) COMPUTATION OF BONUS BASED ON RATIOS OF OUT-OF-
WEDLOCK BIRTHS TO ALL BIRTHS INSTEAD OF NUMBERS OF OUT-
OF-WEDLOCK BIRTHS.—Section 403(a)(2) (42 U.S.C. 603(a)(2)) is 
amended— 
(1) in the paragraph heading, by inserting "RATIO" before 
the period; 
(2) in subparagraph (A), by striking all that follows "bonus 
yesir" and inserting a period; and 
(3) in subparagraph (C)-— 
(A) in clause (i)— 
(i) in subclause (I)(aa)— 
(I) by striking "number of out-of-wedlock 
births that occurred in the State during" and 
inserting "illegitimacy ratio of the State for"; and 
(II) by striking "number of such births that 
occurred during" and inserting "illegitimacy ratio 
of the State for"; and 
(ii) in subclause (II)(aa)— 
(I) by striking "number of out-of-wedlock 
births that occurred in" each place such term 
appears and inserting "illegitimacy ratio of; and 
(II) by striking "calculate the number of out-
of-wedlock births" and inserting "calculate the 
illegitimacy ratio"; and 
(B) by adding at the end the following: 
"(iii) ILLEGITIMACY RATIO.—-The term 'illegitimacy 
ratio' means, with respect to a State and a period— 
"(I) the number of out-of-wedlock births to 
mothers residing in the State that occurred during 
the period; divided by 
"(II) the number of births to mothers residing 
in the State that occurred during the period.". 
(c) USE OF CALENDAR YEAR DATA INSTEAD OF FISCAL YEAR 
DATA IN CALCULATING BONUS FOR DECREASE IN ILLEGITIMACY 
RATIO.—Section 403(a)(2)(C) (42 U.S.C. 603(a)(2)(C)) is amended— 
(1) in clause (i)— 
(A) in subclause (I)(bb)— 
I l l STAT. 608 
PUBLIC LAW 105-33—AUG. 5, 1997 
(i) by striking "the fiscal year" and inserting "the 
calendar year for which the most recent data are avail-
able"; and 
(ii) by striking "fiscal year 1995" and inserting 
"calendar year 1995"; 
(B) in subclause (II), by striking "fiscal" each place 
such term appears and inserting "calendar"; and 
(2) in clause (ii), by striking "fiscal years" and inserting 
"calendar years". 
(d) 
CORRECTION OF HEADING.—Section 403(a)(3)(C)(ii) (42 
U.S.C. 603(a)(3)(C)(ii)) is amended in the heading by striking "i997" 
and inserting "i998". 
(e) CLARIFICATION OF CONTINGENCY FUND PROVISION.—Section 
403(b) (42 U.S.C. 603(b)) is amended— 
(1) in paragraph (6), by striking "(5)" and inserting "(4)"; 
(2) by striking paragraph (4) and redesignating paragraphs 
(5) and (6) as paragraphs (4) and (5), respectively; and 
(3) by inserting after paragraph (5) the following: 
"(6) ANNUAL RECONCILIATION.— 
"(A) IN GENERAL.—Notwithstanding paragraph (3), if 
the Secretary makes a payment to a State under this 
subsection in a fiscal year, then the State shall remit 
to the Secretary, within 1 year after the end of the first 
subsequent period of 3 consecutive months for which the 
State is not a needy State, an amount equal to the amount 
(if any) by which— 
"(i) the total amount paid to the State under para-
graph (3) of this subsection in the fiscal year; exceeds 
"(ii) the product of— 
"(I) the Federal medical assistance percentage 
for the State (as defined in section 1905(b), as 
such section was in effect on September 30, 1995); 
"(II) the State's reimbursable expenditures for 
the fiscal year; and 
"(III) Vi2 times the number of months during 
the fiscal year for which the Secretary made a 
pa3rment to the State under such paragraph (3). 
"(B) DEFINITIONS.—As used in subparagraph (A): 
"(i) 
REIMBURSABLE 
EXPENDITURES.—^The 
term 
'reimbursable expenditures' means, with respect to a 
State and a fiscal year, the amount (if any) by which— 
"(I) countable State expenditures for the fiscal 
year; 
exceeds 
"(II) historic State expenditures (as defined 
in section 409(a)(7)(B)(iii)), excluding any amount 
expended by the State for child care under sub-
section (g) or (i) of section 402 (as in effect during 
fiscal year 1994) for fiscal year 1994. 
"(ii) COUNTABLE STATE EXPENDITURES.—^The term 
'countable expenditures' means, with respect to a State 
and a fiscal year— 
"(I) the qualified 
State expenditures (as 
defined in section 409(a)(7)(B)(i) (other than the 
expenditures described in subclause (I)(bb) of such 
section)) under the State program funded under 
this part for the fiscal year; plus 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 609 
"(11) any amount paid to the State under para-
graph (3) during the fiscal year that is expended 
by the State under the State program funded 
under this part.". 
(f) ADMINISTRATION OF CONTINGENCY FUND TRANSFERRED TO 
THE SECRETARY OF HHS.—Section 403(b)(7) (42 U.S.C. 603(b)(7)) 
is amended to read as follows: 
"(7) STATE DEFINED.—^As used in this subsection, the term 
'State' means each of the 50 States and the District of Colum-
bia.". 
SEC. 5503. USE OF GRANTS. 
Section 404(a)(2) (42 U.S.C. 604(a)(2)) is amended by inserting 
", or (at the option of the State) August 21, 1996" before the 
period. 
SEC. 5504. MANDATORY WORK REQUIREMENTS. 
(a) FAMILY WITH A DISABLED PARENT NOT TREATED AS A 2-
PARENT FAMILY.—Section 407(b)(2) (42 U.S.C. 607(b)(2)) is amended 
by adding at the end the following: 
"(C) FAMILY WITH A DISABLED PARENT NOT TREATED 
AS A 2-PARENT FAMILY.—A family that includes a disabled 
parent shall not be considered a 2-parent family for pur-
poses of subsections (a) and (b) of this section.". 
(b) CORRECTION OF HEADING.—Section 407(bX3) (42 U.S.C. 
607(b)(3)) is amended in the heading by inserting "AND NOT RESULT-
ING FROM CHANGES IN STATE ELIGIBILITY CRITERIA" before the period. 
(c) STATE OPTION TO INCLUDE INDIVIDUALS RECEIVING ASSIST-
ANCE UNDER A TRIBAL WORK PROGRAM IN PARTICIPATION RATE 
CALCULATION.—Section 407(b)(4) (42 U.S.C. 607(b)(4)) is amended— 
(1) in the heading, by inserting "OR TRIBAL WORK PROGRAM" 
before the period; and 
(2) by inserting "or under a tribal work program to which 
funds are provided under this part" before the period. 
(d) SHARING OF 35-HOUR WORK REQUIREMENT BETWEEN PAR-
ENTS IN 2-PARENT FAMILIES.—Section 407(cXl)(B) (42 U.S.C. 
607(cXl)(B)) is amended— 
(1) in clause (i)— 
(A) by striking "is" and inserting "and the other parent 
in the family are"; and 
(B) by inserting "a total of before "at least"; and 
(2) in clause (ii)— 
(A) by striking "individual's spouse is" and inserting 
"individual and the other parent in the family are"; 
(B) by inserting "for a total of at least 55 hours per 
week" before "during the month"; 
(C) by striking *^0" and inserting "50"; and 
(D) by striking "or (7)" and inserting "(6), (7), (8), 
or (12)". 
(e) CLARIFICATION OF EFFORT REQUIRED IN WORK ACTIVITIES.— 
Section 407(cXlXB) (42 U.S.C. 607(cXlXB)) is amended by striking 
"making progress" each place such term appears and inserting 
"participating'. 
(f) ADDITIONAL CONDITION UNDER WHICH 12 WEEKS OF JOB 
SEARCH MAY COUNT AS WORK.—Section 407(cX2)(AXi) (42 U.S.C. 
607(c)(2XA)(i)) is amended by inserting "or the State is a needy 
State (within the meaning of section 403(b)(6))" after "United 
States". 
I l l STAT. 610 
PUBLIC LAW 105-33—AUG. 5, 1997 
(g) CARETAKER RELATIVE OF CHILD UNDER AGE 6 DEEMED 
To B E MEETING WORK REQUIREMENTS IF ENGAGED IN WORK FOR 
20 HOURS PER WEEK.—Section 407(c)(2)(B) (42 U.S.C. 607(c)(2)(B)) 
is amended— 
(1) in the heading, by inserting "OR RELATIVE" afler "PAR-
ENT" each place such term appears; and 
(2) by striking "in a 1-parent family who is the parent" 
and inserting "who is the only parent or caretaker relative 
in the family". 
(h) EXTENSION TO MARRIED TEENS OF RULE THAT RECEIPT 
OF SUFFICIENT EDUCATION IS ENOUGH TO MEET WORK PARTICIPA-
TION REQUIREMENTS.—Section 407(c)(2)(C) (42 U.S.C. 607(c)(2)(C)) 
is amended— 
(1) in the heading, by striking "TEEN HEAD OF HOUSEHOLD" 
and inserting "SINGLE TEEN HEAD OF HOUSEHOLD OR MARRIED 
TEEN"; 
(2) by striking "a single" and inserting "married or a"; 
and 
(3) by striking ", subject to subparagraph (D) of this para-
graph,". 
(i) CLARIFICATION OF NUMBER OF HOURS OF PARTICIPATION 
IN EDUCATION DIRECTLY RELATED TO EMPLOYMENT THAT ARE 
REQUIRED IN ORDER FOR SINGLE TEEN HEAD OF HOUSEHOLD OR 
MARRIED TEEN TO B E DEEMED TO B E ENGAGED IN WORK.—Section 
407(c)(2)(C)(ii) (42 U.S.C. 607(c)(2)(C)(ii)) is amended by striking 
"at least" and all that follows through "subsection" and inserting 
"an average of at least 20 hours per week during the month". 
(j) CLARIFICATION OF REFUSAL T O WORK FOR PURPOSES OF 
WORK PENALTIES FOR INDIVIDUALS.—Section 407(e)(2) (42 U.S.C. 
607(e)(2)) is amended by striking "work" and inserting "engage 
in work required in accordance with this section". 
SEC. 5505. PROHIBITIONS; REQUIREMENTS. 
(a) ELIMINATION OF REDUNDANT LANGUAGE; CLARIFICATION OF 
HOME 
RESIDENCE REQUIREMENT.—Section 408(a)(1) (42 U.S.C. 
608(a)(1)) is amended to read as follows: 
"(1) No 
ASSISTANCE FOR FAMILIES WITHOUT A MINOR 
CHILD.—^A state to which a grant is made under section 403 
shall not use any part of the grant to provide assistance to 
a family, unless the family includes a minor child who resides 
with the family (consistent with paragraph (10)) or a pregnant 
individual.". 
(b) CLARIFICATION OF TERMINOLOGY.—Section 408(a)(3) (42 
U.S.C. 608(a)(3)) is amended— 
(1) by striking "leaves" the 1st, 3rd, and 4th places such 
term appears and inserting "ceases to receive assistance under"; 
and 
(2) by striking "the date the family leaves the program" 
the 2nd place such term appears and inserting "such date". 
(c) ELIMINATION OF SPACE.—Section 408(a)(5)(A)(ii) (42 U.S.C. 
608(a)(5)(A)(ii)) is amended by striking "DESCRIBED.— For" and 
inserting "DESCRIBED.—For". 
(d) CORRECTIONS TO 5-YEAR LIMIT ON ASSISTANCE.— 
(1) CLARIFICATION OF LIMITATION ON HARDSHIP EXEMP-
TION.—Section 408(a)(7)(C)(ii) (42 U.S.C. 608(a)(7)(C)(ii)) is 
amended— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 611 
(A) by striking *The number" and inserting "The aver-
age monthly number"; and 
(B) by inserting "during the fiscal year or the imme-
diately preceding fiscal year (but not both), as the State 
may elect" before the period. 
(2) RESIDENCE EXCEPTION MADE MORE UNIFORM AND EASIER 
TO ADMINISTER.—Section 408(a)(7)(D) (42 U.S.C. 608(a)(7)(D)) 
is amended to read as follows: 
"(D) DISREGARD OF MONTHS OF ASSISTANCE RECEIVED 
BY ADULT WHILE LIVING IN I
N
D
L
U
S
T COUNTRY OR AN ALASKAN 
NATIVE VILLAGE WITH 50 PERCENT UNEMPLOYMENT.— 
"(i) IN GENERAL.—In determining the number of 
months for which an adult has received assistance 
under a State or tribal program funded under this 
part, the State or tribe shall disregard any month 
during which the adult lived in Indian country or an 
Alaskan Native village if the most reliable data avail-
able with respect to the month (or a period including 
the month) indicate that at least 50 percent of the 
adults living in Indian country or in the village were 
not employed. 
"(ii) INDIAN COUNTRY DEFINED.—AS used in clause 
(i), the term 'Indian country' has the meaning given 
such term in section 1151 of title 18, United States 
Code.". 
(e) REINSTATEMENT OF DEEMING AND OTHER RULES APPLICABLE 
TO ALIENS WHO ENTERED THE UNITED STATES UNDER AFFIDAVITS 
OF SUPPORT FORMERLY USED.—Section 408 (42 U.S.C. 608), as 
amended by section 5001(h)(1) of this Act, is amended by striking 
subsection (e) and inserting the following: 
"(e) 
SPECIAL RULES RELATING TO TREATMENT OF CERTAIN 
ALIENS.—^For special rules relating to the treatment of certain 
aliens, see title IV of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996. 
"(f) 
SPECIAL RULES RELATING TO THE TREATMENT OF NON-
213A ALIENS.—^The following rules shall apply if a State elects Applicability, 
to take the income or resources of any sponsor of a non-2 ISA 
alien into account in determining whether the alien is eligible 
for assistance under the State program funded under this part, 
or in determining the amount or tjrpes of such assistance to be 
provided to the alien: 
"(1) DEEMING OF SPONSOR'S INCOME AND RESOURCES.—^For 
a period of 3 years after a non-213A alien enters the United 
States: 
"(A) INCOME DEEMING RULE.—^The income of any spon-
sor of the alien and of any spouse of the sponsor is deemed 
to be income of the alien, to the extent that the total 
amountof the income exceeds the sum of— 
"(i) the lesser of— 
"(I) 20 percent of the total of any amounts 
received by the sponsor or any such spouse in 
the month as wages or salary or as net earnings 
from self-employment, plus the full amount of any 
costs incurred by the sponsor and any such spouse 
in producing self-employment income in such 
month; or 
"(II) $175; 
I l l STAT. 612 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(ii) the cash needs standard established by the 
State for purposes of determining eligibility for assist-
ance under the State program funded under this part 
for a family of the same size and composition as the 
sponsor and any other individuals living in the same 
household as the sponsor who are claimed by the spon-
sor as dependents for purposes of determining the 
sponsor's Federal personal income t£ix liability but 
whose needs are not taken into account in determining 
whether the sponsor's family has met the cash needs 
standard; 
"(iii) any amounts paid by the sponsor or any 
such spouse to individuals not living in the household 
who are claimed by the sponsor as dependents for 
purposes of determining the sponsor's Federal personal 
income tax liability; and 
"(iv) any payments of alimony or child support 
with respect to individuals not living in the household. 
"(B) 
RESOURCE DEEMING RULE.—^The resources of 
a 
sponsor of the alien and of any spouse of the sponsor 
are deemed to be resources of the alien to the extent 
that the aggregate value of the resources exceeds $1,500. 
"(C) 
SPONSORS OF MULTIPLE NON-2I3A ALIENS.—If a 
person is a sponsor of 2 or more non-2 ISA aliens who 
are living in the same home, the income and resources 
of the sponsor and any spouse of the sponsor that would 
be deemed income and resources of any such sdien under 
subparagraph (A) shall be divided into a number of equal 
shares equal to the number of such aliens, and the State 
shall deem the income and resources of each such alien 
to include 1 such share. 
"(2) INELIGIBILITY OF NON-2 I3A ALIENS SPONSORED BY AGEN-
CIES; EXCEPTION.—A non-2 ISA alien whose sponsor is or was 
a public or private agency shall be ineligible for assistance 
under a State program funded under this part, during a period 
of S years after the alien enters the United States, unless 
the State agency administering the program determines that 
the sponsor either no longer exists or has become unable to 
meet the alien's needs. 
"(S) INFORMATION PROVISIONS.— 
"(A) DUTIES OF NON-213A ALIENS.—A non-2 ISA alien, 
as a condition of eligibility for assistance under a State 
program funded under this part during the period of 3 
years after the alien enters the United States, shall be 
required to provide to the State agency administering the 
program— 
"(i) such information and documentation with 
respect to the alien's sponsor as may be necessary 
in order for the State agency to make any determina-
tion required under this subsection, and to obtain any 
cooperation from the sponsor necessary for any such 
determination; and 
"(ii) such information and documentation as the 
State agency may request and which the alien or the 
alien's sponsor provided in support of the alien's 
immigration application. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 613 
"(B) DUTIES OF FEDERAL AGENCIES.—The Secretary Contracts, 
shall enter into agreements with the Secretary of State 
and the Attorney Greneral under which any information 
available to them and required in order to make any deter-
mination under this subsection will be provided by them 
to the Secretary (who may, in turn, make the information 
available, upon request, to a concerned State agency). 
"(4) NON-213A ALIEN DEFlNED.^An alien is a non-2 ISA 
alien for purposes of this subsection if the affidavit of support 
or similar agreement with respect to the alien that was executed 
by the sponsor of the alien's entry into the United States 
was executed other than pursuant to section 2 ISA of the 
Immigration and Nationality Act. 
"(5) INAPPLICABILITY TO ALIEN MINOR SPONSORED BY A PAR-
ENT.—^This subsection shall not apply to an alien who is a 
minor child if the sponsor of the alien or any spouse of the 
sponsor is a parent of the alien. 
"(6) INAPPLICABILITY TO CERTAIN CATEGORIES OF ALIENS.— 
This subsection shall not apply to an alien who is— 
"(A) admitted to the United States as a refugee under 
section 207 of the Immigration and Nationality Act; 
"(B) paroled into the United States under section 
212(d)(5) of such Act for a period of at least 1 year; or 
"(C) granted political asylum by the Attorney General 
under section 208 of such Act.". 
SEC. 5506. PENALTIES. 
(a) STATES GIVEN MORE TIME TO FILE QUARTERLY REPORTS.— 
Section 409(a)(2)(A) (42 U.S.C. 609(aX2)(A)) is amended by striking 
"1 month" and inserting "45 days". 
(b) TREATMENT OF SUPPORT PAYMENTS PASSED THROUGH TO 
FAMILIES 
AS 
QUALIFIED 
STATE 
EXPENDITURES.—Section 
409(a)(7)(B)(i)(I)(aa) (42 U.S.C. 609(a)(7)(B)(i)(I)(aa)) is amended by 
inserting ", including any amount collected by the State as support 
pursuant to a plan approved under part D, on behEilf of a family 
receiving assistance under the State program funded under this 
part, that is distributed to the family under section 457(a)(1)(B) 
and disregarded in determining the eligibility of the family for, 
and the amount of, such assistance" before the period. 
(c) DISREGARD OF EXPENDITURES MADE TO REPLACE PENALTY 
GRANT 
REDUCTIONS.—Section 
409(a)(7)(B)(i) 
(42 
U.S.C. 
609(a)(7)(B)(i)) is amended by redesignating subclause (III) as sub-
clause (IV) and by inserting after subclause (II) the following: 
"(III) EXCLUSION OF AMOUNTS EXPENDED TO 
REPLACE 
PENALTY 
GRANT 
REDUCTIONS.—Such 
term 
does not include any amount expended in order 
to comply with paragraph (12).". 
(d) TREATMENT OF FAMILIES OF CERTAIN ALIENS AS ELIGIBLE 
FAMILIES.—Section 409(a)(7)(B)(i)(IV) (42 U.S.C. 609(a)(7)(B)(i)(IV)), 
as so redesignated by subsection (c) of this section, is amended— 
(1) by striking "and families" and inserting "families"; and 
(2) by striking "Act or section 402" and inserting "Act, 
and families of aliens lawfully present in the United States 
that would be eligible for such assisteince but for the application 
of title IV". 
I l l STAT. 614 
PUBLIC LAW 105-33—AUG. 5, 1997 
(e) 
ELIMINATION 
OF 
MEANINGLESS 
LANGUAGE.—Section 
409(a)(7)(B)(ii) (42 U.S.C. 609(a)(7)(B)(ii)) is amended by striking 
"reduced (if appropriate) in accordance with subparagraph (C)(ii)". 
(D CLARIFICATION OF SOURCE OF DATA TO BE USED IN DETER-
MINING HISTORIC STATE EXPENDITURES.—Section 409(a)(7)(B) (42 
U.S.C. 609(a)(7)(B)) is amended by adding at the end the following: 
"(v) SOURCE OF DATA.—In determining expendi-
tures by a State for fiscal years 1994 and 1995, the 
Secretary shall use information which was reported 
by the State on ACF Form 231 or (in the case of 
expenditures under part F) ACF Form 331, available 
as of the dates specified in clauses (ii) and (iii) of 
section 403(a)(lXD).". 
(g) 
CONFORMING 
TITLE 
I V - A 
PENALTIES 
TO TITLE 
FV-D 
PERFORMANCE-BASED STANDARDS.—Section 409(a)(8) (42 U.S.C. 
609(a)(8)) is amended to read as follows: 
"(8) NONCOMPLIANCE OF STATE CHILD SUPPORT ENFORCE-
MENT PROGRAM WITH REQUIREMENTS OF PART D.— 
"(A) IN GENERAL.—If the Secretary finds, with respect 
to a State's program under part D, in a fiscal year begin-
ning on or after October 1, 1997— 
"(i)(I) on the basis of data submitted by a State 
pursuant to section 454(15)(B), or on the basis of the 
results of a review conducted under section 452(a)(4), 
that the State program failed to achieve the paternity 
establishment 
percentages (as defined 
in 
section 
452(g)(2)), or to meet other performance measures that 
may be established by the Secretary; 
"(II) on the basis of the results of an audit or 
audits conducted under section 452(a)(4)(C)(i) that the 
State data submitted pursuant to section 454(15)(B) 
is incomplete or unreliable; or 
"(III) on the basis of the results of an audit or 
audits conducted under section 452(a)(4)(C) that a 
State failed to substantially comply with 1 or more 
of the requirements of part D; and 
"(ii) that, with respect to the succeeding fiscal 
year— 
"(I) the State failed to take sufficient corrective 
action to achieve the appropriate performance lev-
els or compliance as described in subparagraph 
(A)(i);or 
"(II) the data submitted by the State pursuant 
to section 454(15)(B) is incomplete or unreliable; 
the amounts otherwise payable to the State under this 
part for quarters following the end of such succeeding 
fiscal year, prior to quarters following the end of the first 
quarter throughout which the State program has achieved 
the paternity establishment percentages or other perform-
ance measures as described in subparagraph (A)(i)(I), or 
is in substantial compliance with 1 or more of the require-
ments of part D as described in subparagraph (A)(i)(III), 
as appropriate, shall be reduced by the percentage specified 
in subparagraph (B). 
"(B) AMOUNT OF REDUCTIONS.—The reductions required 
under subparagraph (A) shall be— 
"(i) not less than 1 nor more than 2 percent; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 615 
"(ii) not less than 2 nor more than 3 percent, 
if the finding is the 2nd consecutive finding made 
pursuant to subparagraph (A); or 
"(iii) not less than 3 nor more than 5 percent, 
if the finding is the 3rd or a subsequent consecutive 
such finding. 
"(C) DISREGARD OF NONCOMPLIANCE WHICH IS OF A 
TECHNICAL NATURE.—^For purposes of this section and sec-
tion 452(a)(4), a State determined as a result of an audit— 
"(i) to have failed to have substantially complied 
with 1 or more of the requirements of part D shall 
be determined to have achieved substantial compliance 
only if the Secretary determines that the extent of 
the noncompliance is of a technical nature which does 
not adversely affect the performance of the State's 
program under part D; or 
"(ii) to have submitted incomplete or unreliable 
data pursuant to section 454(15)(B) shall be deter-
mined to have submitted adequate data only if the 
Secretary determines that the extent of the incomplete-
ness or unreliability of the data is of a technical nature 
which does not adversely affect the determination of 
the level of the State's paternity establishment percent-
ages (as defined under section 452(g)(2)) or other 
performance measures that may be established by the 
Secretary.". 
(h) CORRECTION OF REFERENCE TO 5-YEAR LIMIT ON ASSIST-
ANCE.—Section 409(a)(9) (42 U.S.C. 609(a)(9)) is amended by strik-
ing "408(a)(1)(B)" and inserting "408(a)(7)". 
(i) CORRECTION OF ERRORS IN PENALTY FOR FAILURE TO MEET 
MAINTENANCE 
OF EFFORT 
REQUIREMENT 
APPLICABLE 
TO THE 
CONTINGENCY FUND.—Section 409(a)(10) (42 U.S.C. 609(a)(10)) is 
amended— 
(1) by striking "the expenditures under the State program 
funded under this part for the fiscal year (excluding any 
amounts made available by the Federal Government)" and 
inserting "the qualified State expenditures (as defined in para-
graph (7)(B)(i) (other than the expenditures described in sub-
clause (I)(bb) of that paragraph)) under the State program 
funded under this part for the fiscal year"; 
(2) by inserting "excluding any amount expended by the 
State for child care under subsection (g) or (i) of section 402 
(as in effect during fiscal year 1994) for fiscal year 1994," 
after "(as defined in paragraph (7)(B)(iii) of this subsection),"; 
and 
(3) by inserting "that the State has not remitted under 
section 403(b)(6)" before the period. 
(j) PENALTY FOR STATE FAILURE TO EXPEND ADDITIONAL STATE 
FUNDS TO REPLACE GRANT REDUCTIONS.—Section 409(a)(12) (42 
U.S.C. 609(a)(12)) is amended— 
(1) in the heading— 
(A) by striking "FAILURE" and inserting "REQUIRE-
MENT"; and 
(B) by striking "REDUCTIONS" and inserting "REDUC-
TIONS; PENALTY FOR FAILURE TO DO SO"; and 
(2) by adding at the end the following: "If the State fails 
during such succeeding fiscal year to make the expenditure 
Ill STAT. 616 
PUBLIC LAW 105-33—AUG. 5, 1997 
required by the preceding sentence from its own funds, the 
Secretary may reduce the grant payable to the State under 
section 403(a)(1) for the fiscal year that follows such succeeding 
fiscal year by an amount equal to the sum of— 
"(A) not more than 2 percent of the State family assist-
ance grant; and 
"(B) the amount of the expenditure required by the 
preceding sentence.", 
(k) 
ELIMINATION OF CERTAIN REASONABLE CAUSE 
EXCEP-
TIONS.—Section 409(b)(2) (42 U.S.C. 609(b)(2)) is amended by strik-
ing "(7) or (8)" and inserting "(6), (7), (8), (10), or (12)". 
(1) CLARIFICATION OF WHAT IT MEANS TO CORRECT A VIOLA-
TION.—Section 409(c) (42 U.S.C. 609(c)) is amended— 
(1) in each of subparagraphs (A) and (B) of paragraph 
(1), by inserting "or discontinue, as appropriate," after "correct"; 
(2) in paragraph (2)— 
(A) in the heading, by inserting "OR DISCONTINUING" 
after "CORRECTING"; and 
(B) by inserting "or discontinues, as appropriate" after 
"corrects"; and 
- 
(3) in paragraph (3)— 
(A) in the heading, by inserting "OR DISCONTINUE" after 
"CORRECT"; and 
(B) by inserting "or discontinue, as appropriate," before 
"the violation". 
(m) CERTAIN PENALTIES NOT AVOIDABLE THROUGH CORRECTIVE 
COMPLIANCE PLANS.—Section 409(c)(4) (42 U.S.C. 609(c)(4)) is 
amended to read as follows: 
"(4) INAPPLICABILITY TO CERTAIN PENALTIES.—^This sub-
section shall not apply to the imposition of a penalty against 
a State under paragraph (6), (7), (8), (10), or (12) of subsection 
(a).". 
(n) FAILURE TO SATISFY MINIMUM PARTICIPATION RATES.—Sec-
tion 409(a)(3) (42 U.S.C. 609(a)(3)) is amended— 
(1) in subparagraph (A), by striking "not more than"; and 
(2) in subparagraph (C), by inserting before the period 
the following: or if the noncompliance is due to extraordinary 
circumstsmces such as a natural disaster or regional recession. 
Reports. 
The Secretary shall provide a written report to Congress to 
justify any waiver or penalty reduction due to such extraor-
dinary circumstances". 
SEC. 5507. DATA COLLECTION AND REPORTING. 
Section 411(a) (42 U.S.C. 611(a)) is amended— 
(1) in paragraph (1)— 
(A) in subparagraph (A)— 
(i) by striking clause (ii) and inserting the follow-
ing: 
"(ii) Whether a child receiving such assistance or 
an adult in the family is receiving— 
"(I) Federal disability insurance benefits; 
"(II) benefits based on Federal disability sta-
tus; 
"(III) aid under a State plan approved under 
title XIV (as in effect without regard to the amend-
ment made by section 301 of the Social Security 
Amendments of 1972)); 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 617 
"(IV) aid or assistance under a State plan 
approved under title XVI (as in effect without 
regard to such amendment) by reason of being 
permanently and totally disabled; or 
"(V) supplemental security income benefits 
under title XVI (as in effect pursuant to such 
amendment) by reason of disability."; 
(ii) in clause (iv), by striking "youngest child in" 
and inserting "head of'; 
(iii) in each of clauses (vii) and (viii), by striking 
"status" and inserting "level"; and 
(iv) by adding at the end the following: 
"(xvii) With respect to each individual in the family 
who has not attained 20 years of age, whether the 
individual is a parent of a child in the family."; and 
(B) in subparagraph (B)— 
(i) in the heading, by striking "ESTIMATES" and 
inserting "SAMPLES"; and 
(ii) in clause (i), by striking "an estimate which 
is obtained" and inserting "disaggregated case record 
information on a sample of families selected"; and 
(2) by redesignating paragraph (6) as paragraph (7) and 
inserting after paragraph (5) the following: 
"(6) 
REPORT ON FAMILIES RECEIVING ASSISTANCE.—^The 
report required by paragraph (1) for a fiscal quarter shall 
include for each month in the quarter— 
"(A) the number of families and individuals receiving 
assistance under the State program funded under this part 
(including the number of 2-parent and 1-parent families); 
and 
"(B) the total dollar value of such assistance received 
by all families.". 
SEC. 5508. DIRECT FUNDING AND ADMINISTRATION BY INDIAN TRIBES. 
(a) PRORATING OF TRIBAL FAMILY ASSISTANCE GRANTS.—Section 
412(a)(1)(A) (42 U.S.C. 612(a)(1)(A)) is amended by inserting "which 
shall be reduced for a fiscal year, on a pro rata basis for each 
quarter, in the case of a tribal family assistance plan approved 
during a fiscal year for which the plan is to be in effect," before 
"and shall". 
(b) TRIBAL OPTION TO OPERATE WORK ACTIVITIES PROGRAM.— 
Section 412(a)(2)(A) (42 U.S.C. 612(a)(2)(A)) is amended by striking 
'The Secretary" and all that follows through "2002" and inserting 
"For each of fiscal years 1997, 1998, 1999, 2000, 2001, and 2002, 
the Secretary shall pay to each eligible Indian tribe that proposes 
to operate a program described in siibparagraph (C)". 
(c) 
DISCRETION OF TRIBES TO SELECT POPULATION TO BE 
SERVED 
BY 
TRIBAL 
WORK 
ACTIVITIES 
PROGRAM.—Section 
412(a)(2)(C) (42 U.S.C. 612(a)(2)(C)) is amended by striking "mem-
bers of the Indian tribe" and inserting "such population and such 
service area or areas as the tribe specifies". 
(d) REDUCTION OF APPROPRIATION FOR TRIBAL WORK ACTIVITIES 
PROGRAMS.—Section 412(a)(2XD) (42 U.S.C. 612(a)(2)(D)) is amend-
ed by striking "$7,638,474" and inserting "$7,633,287". 
(e) AVAILABILITY OF CORRECTIVE COMPLIANCE PLANS TO INDL\N 
TRIBES.—Section 412(f)(1) (42 U.S.C. 612(f)(1)) is amended by strik-
ing "and (b)" and inserting "(b), and (c)". 
39-194 O - 97 - 21: QL 3 Part 1 
I l l STAT. 618 
PUBLIC LAW 105-33—AUG. 5, 1997 
(f) ELIGIBILITY OF TRIBES FOR FEDERAL LOANS FOR WELFARE 
PROGRAMS.—Section 412 (42 U.S.C. 612) is amended by redesignat-
ing subsections (f), (g), and (h) as subsections (g), (h), and (i), 
respectively, and by inserting after subsection (e) the following: 
Applicability. 
"(f) ELIGIBILITY FOR FEDERAL LOANS.—Section 406 shall apply 
to an Indian tribe with an approved tribal assistance plan in the 
same manner as such section applies to a State, except that section 
406(c) shall be applied by substituting 'section 412(a)' for 'section 
403(a)'.". 
SEC. 5509. RESEARCH, EVALUATIONS, AND NATIONAL STUDIES. 
(a) RESEARCH.— 
(1) METHODS.—Section 413(a) (42 U.S.C. 613(a)) is amend-
ed by inserting ", directly or through grants, contracts, or 
interagency agreements," before "shall conduct". 
(2) CORRECTION OF CROSS REFERENCE.—Section 413(a) (42 
U.S.C. 613(a)) is amended by striking "409" and inserting "407". 
(b) CORRECTION OF ERRONEOUSLY INDENTED PARAGRAPH.—Sec-
tion 413(e)(1) (42 U.S.C. 613(e)(1)) is amended to read as follows: 
"(1) IN GENERAL.—The Secretary shall annually rank States 
to which grants are made under section 403 based on the 
following ranking factors: 
"(A) ABSOLUTE OUT-OF-WEDLOCK RATIOS.—The ratio 
represented by— 
"(i) the total number of out-of-wedlock births in 
families receiving assistance under the State program 
under this part in the State for the most recent year 
for which information is available; over 
"(ii) the total number of births in families receiving 
assistance under the State program under this part 
in the State for the year. 
"(B) NET CHANGES IN THE OUT-OF-WEDLOCK RATIO.— 
The difference between the ratio described in subpsiragraph 
(A) with respect to a State for the most recent year for 
which such information is available and the ratio with 
respect to the State for the immediately preceding year.". 
(c) FUNDING OF PRIOR AUTHORIZED DEMONSTRATIONS.—Section 
413(h)(1)(D) (42 U.S.C. 613(h)(1)(D)) is amended by striking 
"September 30, 1995" and inserting "August 22, 1996". 
(d) CHILD POVERTY REPORTS.— 
(1) 
DELAYED DUE DATE FOR INITIAL REPORT.—Section 
413(i)(l) (42 U.S.C. 613(i)(l)) is amended by striking "90 days 
after the date of the enactment of this part" and inserting 
"May 31, 1998", 
(2) MODIFICATION OF FACTORS TO BE USED IN ESTABLISHING 
METHODOLOGY 
FOR 
USE 
IN 
DETERMINING 
CHILD 
POVERTY 
RATES.—Section 413(i)(5) (42 U.S.C. 613(i)(5)) is amended by 
striking "the county-by-county" and inserting ", to the extent 
available, county-by-county". 
SEC. 5510. REPORT ON DATA PROCESSING, 
Section 106(a)(1) of the Personal Responsibility and Work 
Opportunity ReconciUation Act of 1996 (Public Law 104-193; 110 
Stat. 2164) is amended by striking "(whether in effect before or 
after October 1, 1995)". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 619 
SEC. 
5
5
1
1
. 
STUDY 
ON 
ALTERNATIVE 
OUTCOMES 
MEASURES. 
Section 107(a) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
2164) is amended 
by striking 
"409(a)(7)(C)" and inserting 
42 USC 613 note. 
"408(a)(7)(C)". 
SEC. 5512. LIMITATION ON PAYMENTS TO THE TERRITORIES. 
(a) CERTAIN PAYMENTS TO BE DISREGARDED IN DETERMINING 
LIMITATION.—Section 1108(a) (42 U.S.C. 1308) is amended to read 
as follows: 
"(a) LIMITATION ON TOTAL PAYMENTS TO EACH TERRITORY.— 
"(1) IN GENERAL.—^Notwithstanding any other provision of 
this Act (except for paragraph (2) of this subsection), the total 
amount certified by the Secretary of Health and Human Serv-
ices under titles I, X, XIV, and XVI, under parts A and E 
of title IV, and under subsection (b) of this section, for payment 
to any territory for a fiscal year shall not exceed the ceiling 
amount for the territory for the fiscal year, 
"(2) CERTAIN PAYMENTS DISREGARDED.—^Paragraph (1) of 
this subsection shall be applied without regard to any payment 
made under section 403(a)(2), 403(a)(4), 406, or 413(f).". 
(b) CERTAIN CHILD CARE AND SOCIAL SERVICES EXPENDITURES 
B
Y TERRITORIES TREATED AS I V - A EXPENDITURES FOR PURPOSES 
OF 
MATCHING 
GRANT.—Section 
1108(b)(1)(A) 
(42 
U.S.C. 
1308(b)(1)(A)) is amended by inserting ", including any amount 
paid to the State under part A of title IV that is transferred 
in accordance with section 404(d) and expended under the program 
to which transferred" before the semicolon. 
(c) ELIMINATION OF DUPLICATIVE MAINTENANCE OF EFFORT 
REQUIREMENT.—Section 1108 (42 U.S.C. 1308) is amended by strik-
ing subsection (e). 
SEC. 5513. CONFORMING AMENDMENTS TO THE SOCIAL SECURITY ACT. 
(a) AMENDMENTS TO PART D OF TITLE IV.— 
(1) 
CORRECTIONS 
TO 
DETERMINATION 
OF 
PATERNITY 
ESTABLISHMENT PERCENTAGES.—Section 452 (42 U.S.C. 652) is 
amended— 
(A) in subsection (d)(3)(A), by striking all that follows 
"for purposes of and inserting "section 409(a)(8), to achieve 
the paternity establishment percentages (as defined under 
section 452(g)(2)) and other performance measures that 
may be established by the Secretary, and to submit data 
under section 454(15)(B) that is complete and reliable, and 
to substantially comply with the requirements of this part; 
and"; and 
(B) in subsection (g)(1), by striking "section 403(h)" 
and inserting "section 409(aX8)". 
(2) 
ELIMINATION 
OF 
OBSOLETE 
LANGUAGE.—Section 
108(c)(8)(C) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (Public Law 104-193; 110 
Stat. 2165) is amended by inserting "and all that follows 42USC652. 
through 'the best interests of such child to do so'" before "and 
inserting". 
(3) INSERTION OF LANGUAGE INADVERTENTLY OMITTED.— 
Section 108(c)(13) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (Public Law 104-193; 
I l l STAT. 620 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 656. 
110 Stat. 2166) is amended by inserting "and inserting 'pursu-
ant to section 408(a)(3)'" before the period. 
(4) ELIMINATION OF OBSOLETE CROSS REFERENCE.—Section 
464(a)(1) (42 U.S.C. 664(a)(1)) is amended by striking "section 
402(a)(26)" and inserting "section 408(a)(3)". 
(b) AMENDMENTS TO PART E OF TITLE IV.—Each of the following 
is amended by striking "June 1, 1995" each place such term appears 
and inserting "July 16, 1996": 
(1) Section 472(a) (42 U.S.C. 672(a)). 
(2) Section 472(h) (42 U.S.C. 672(h)). 
(3) Section 473(a)(2) (42 U.S.C. 673(a)(2)). 
(4) Section 473(b) (42 U.S.C. 673(b)). 
SEC. 5514. OTHER CONFORMING AMENDMENTS. 
(a) ELIMINATION OF AMENDMENTS INCLUDED INADVERTENTLY.— 
Section 110(1) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 2173) 
is amended— 
26 use 51,6103, 
(1) by striking paragraphs (1), (4), (5), and (7); 
5402- 
(2) by redesignating paragraphs (2), (3), (6), and (8) as 
6103 6334 7523 
paragraphs (1), (2), (3), and (4), respectively; and 
26 use 6334. 
(3) by adding "and" at the end of paragraph (3), as so 
redesignated. 
(b) CORRECTION OF CITATION.—Section 109(f) of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
7 use 612c note. 
(Public Law 104-193; 110 Stat. 2177) is amended by striking "93-
186" and inserting "93-86". 
42 use 601 
(c) CORRECTION OF INTERNAL 
CROSS 
REFERENCE.—Section 
«<seq. 
103(a)(1) of the Personal Responsibility and Work Opportunity Rec-
onciliation Act of 1996 (Public Law 104-193; 110 Stat. 2112) is 
amended by striking "603(b)(2)" and inserting "603(b)". 
(d) CORRECTION OF REFERENCES.—Section 416 (42 U.S.C. 616) 
is amended by striking "amendment made by section 2103 of the 
Personal 
Responsibility 
and Work 
Opportunity" 
and 
inserting 
"amendments made by section 103 of the Personal 
Responsibility 
and Work Opportunity Reconciliation". 
SEC. 5515. MODIFICATIONS TO THE JOB OPPORTUNITIES FOR CERTAIN 
LOW-INCOME INDIVIDUALS PROGRAM. 
Section 112(5) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
42 use 99i0d. 
2177) is amended in each of subparagraphs (A) and (B) by inserting 
"under" after "funded". 
SEC. 5516. DENIAL OF ASSISTANCE AND BENEFITS FOR DRUG-RELATED 
CONVICTIONS. 
(a) EXTENSION OF CERTAIN REQUIREMENTS COORDINATED WITH 
DELAYED EFFECTIVE DATE FOR SUCCESSOR PROVISIONS.—Section 
115(d)(2) of the Personal Responsibility and Work Opportunity Rec-
21 use 862a. 
onciliation Act of 1996 (Public Law 104-193; 110 Stat. 2181) is 
amended by striking "convictions" and inserting "a conviction if 
the conviction is for conduct". 
(b) IMMEDIATE EFFECTIVENESS OF PROVISIONS RELATING TO 
RESEARCH, EVALUATIONS, AND NATIONAL STUDIES.—Section 116(a) 
of the Personal Responsibility and Work Opportunity Reconciliation 
42 use 601 note. Act of 1996 (Public Law 104-193; 110 Stat. 2181) is amended 
by adding at the end the following: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 621 
"(6) RESEARCH, EVALUATIONS, AND NATIONAL STUDIES.—Sec-
tion 413 of the Social Security Act, as added by the amendment 
made by section 103(a) of this Act, shall take effect on the 
date of the enactment of this Act.". 
SEC. 5517. TRANSITION RULE. 
Section 116 of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
2181) is amended— 
42 USC 601 note. 
(1) in subsection (a)(2), by inserting "(but subject to sub-
section (b)(l)(AXii))" after "this section"; and 
(2) in subsection (b)(l)(A)(ii), by striking "June 30, 1997" 
and inserting "the later of June 30, 1997, or the day before 
the date described in subsection (a)(2)(B) of this section". 
SEC. 5518. EFFECTIVE DATES. 
(a) AMENDMENTS TO PART A OF TITLE IV OF THE SOCDVL SECU- 
42 use 602 note. 
RITY ACT.—^The amendments made by this chapter to a provision 
of part A of title IV of the Social Security Act shall take effect 
as if the amendments had been included in section 103(a) of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 at the time such section became law. 
(b) AMENDMENTS TO PARTS D AND E OF TITLE IV OF THE 42 use 652 note. 
SOCIAL SECURITY ACT.—^The amendments made by section 5513 
of this Act shall take effect as if the amendments had been included 
in section 108 of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 at the time such section 108 became 
law. 
(c) AMENDMENTS TO OTHER AMENDATORY PROVISIONS.—^The 26 use 51 note, 
amendments made by section 5514(a) of this Act shall take effect 
as if the amendments had been included in section 110 of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 at the time such section 110 became law. 
(d) AMENDMENTS TO FREESTANDING PROVISIONS OF THE PER- 21 use 862a 
soNAL RESPONSIBILITY AND WORK OPPORTUNITY RECONCILIATION note-
ACT OF 1996.—^The amendments made by this chapter to a provision 
of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 that have not become part of another statute shall 
take effect as if the amendments had been included in the provision 
at the time the provision became law. 
CHAPTER 2—SUPPLEMENTAL SECURITY INCOME 
SEC. 5521. CONFORMING AND TECHNICAL AMENDMENTS RELATING 
TO ELIGIBILITY RESTRICTIONS. 
(a) DENIAL OF SSI BENEFITS FOR FUGITIVE FELONS AND PROBA-
TION AND PAROLE VIOLATORS.—Section 
1611(e)(6) (42 U.S.C. 
1382(e)(6)) is amended by inserting "and section 1106(c) of this 
Act" after "of 1986". 
(b) TREATMENT OF PRISONERS.—Section 1611(e)(l)(I)(i)(II) (42 
U.S.C. 1382(e)(l)(I)(i)(II)) is amended by striking "inmate of the 
institution" and all that follows through "this subparagraph" and 
inserting "individual who receives in the month preceding the first 
month throughout which such individual is an inmate of the jail, 
prison, penal institution, or correctional facility that furnishes 
information respecting such individual pursuant to subclause (I), 
or is confined in the institution (that so furnishes such information) 
as described in section 202(x)(l)(A)(ii), a benefit under this title 
I l l STAT. 622 
PUBLIC LAW 105-33—AUG. 5, 1997 
for such preceding month, eind who is determined by the Commis-
sioner to be inehgible for benefits under this title by reason of 
confinement based on the information provided by such institution". 
(c) CORRECTION OF REFERENCE.—Section 1611(e)(l)(I)(i)(I) (42 
U.S.C. 1382(e)(l)(I)(i)(I)) is amended by striking "paragraph (1)" 
and inserting "this paragraph". 
SEC. 5522. CONFORMING AND TECHNICAL AMENDMENTS RELATING 
TO BENEFITS FOR DISABLED CHILDREN. 
(a) ELIGIBILITY REDETERMINATIONS AND CONTINUING DISABILITY 
REVIEWS.— 
(1) DISABILITY ELIGIBILITY REDETERMINATIONS REQUIRED 
FOR SSI RECIPIENTS WHO ATTAIN 18 YEARS OF AGE.—Section 
1614(a)(3)(H)(iii) (42 U.S.C. 1382c(a)(3)(H)(iii)) is amended by 
striking subclauses (I) and (II) and all that follows and inserting 
the following: 
"(I) by applying the criteria used in determining initial 
eligibility for individuals who are age 18 or older; and 
"(II) either during the 1-year period beginning on the 
individual's 18th birthday or, in lieu of a continuing disability 
review, whenever the Commissioner determines that an individ-
ual's case is subject to a redetermination under this clause. 
With respect to any redetermination under this clause, paragraph 
(4) shall not apply.". 
(2) CONTINUING DISABILITY REVIEW REQUIRED FOR LOW 
BIRTH WEIGHT BABIES.—Section 1614(a)(3)(H)(iv) (42 U.S.C. 
1382c(a)(3)(H)(iv)) is amended— 
(A) in subclause (I), by striking "Not" and inserting 
"Except as provided in subclause (VI), not"; and 
(B) by adding at the end the following: 
"(VI) Subclause (I) shall not apply in the case of an individual 
described in that subclause who, at the time of the individual's 
initial disability determination, the Commissioner determines has 
an impairment that is not expected to improve within 12 months 
after the birth of that individual, and who the Commissioner sched-
ules for a continuing disability review at a date that is after the 
individusd attains 1 year of age.". 
(b) 
ADDITIONAL 
ACCOUNTABILITY 
REQUIREMENTS.—Section 
1631(a)(2)(F) (42 U.S.C. 1383(a)(2)(F)) is amended— 
(1) in clause (ii)(III)(bb), by striking "the total amount" 
and all that follows through "1613(c)" and inserting "in any 
case in which the individual knowingly misapplies benefits 
from such an account, the Commissioner shall reduce future 
benefits payable to such individual (or to such individual and 
his spouse) by an amount equal to the total amount of such 
benefits so misapplied"; and 
(2) by striking clause (iii) and inserting the following: 
"(iii) The representative payee may deposit into the account 
established under clause (i) any other funds representing past due 
benefits under this title to the eligible individual, provided that 
the amount of such past due benefits is equal to or exceeds the 
maximum monthly benefit payable under this title to an eligible 
individual (including State supplementary pajmtients made by the 
Commissioner pursuant to an agreement under section 1616 or 
section 212(b) of Public Law 93-66).". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 623 
(c) REDUCTION IN CASH BENEFITS PAYABLE TO INSTITUTIONAL-
IZED INDIVIDUALS WHOSE MEDICAL COSTS ARE COVERED BY PRIVATE 
INSURANCE.—Section 1611(e) (42 U.S.C. 1382(e)) is amended— 
(1) in paragraph (1)(B)— 
(A) in the matter preceding clause (i), by striking "hos-
pital, extended care facility, nursing home, or intermediate 
care facility and inserting "medical treatment facility"; 
(B) in clause (ii)— 
(i) in the matter preceding subclause (I), by strik-
ing "hospital, home or"; and 
(ii) in subclause (I), by striking "hospital, home, 
or ; 
(C) in clause (iii), by striking "hospital, home, or"; 
and 
(D) in the matter following clause (iii), by striking 
"hospital, extended care facility, nursing home, or inter-
mediate care facility which is a 'medical institution or 
nursing facility' within the meaning of section 1917(c)" 
and inserting "medical treatment facility that provides 
services described in section 1917(c)(1)(C)"; 
(2) in paragraph (1)(E)— 
(A) in clause (iXH), by striking "hospital, extended 
care facility, nursing home, or intermediate care facility" 
and inserting "medical treatment facility"; and 
(B) in clause (iii), by striking "hospital, extended care 
facility, nursing home, or intermediate care facility" and 
inserting "medical treatment facility"; 
(3) in paragraph (1)(G), in the matter preceding clause 
ay-
(A) by striking "or which is a hospital, extended care 
facility, nursing home, or intermediate care" and inserting 
"or is in a medical treatment"; and 
(B) by inserting "or, in the case of an individual who 
is a child under the age of 18, under any health insurance 
policy issued by a private provider of such insurance" after 
"title XIX"; and 
(4) in paragraph (3)— 
(A) by striking "same hospital, home, or facility" and 
inserting "same medical treatment facility'; and 
(B) by striking "same such hospital, home, or facility" 
and inserting "same such facility". 
(d) CORRECTION OF U.S.C. CITATION.—Section 211(c) of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (Pubhc Law 104-193; 110 Stat. 2189) is amended by striking 
42 USC I382c. 
"1382(a)(4)" and inserting "1382c(a)(4)". 
SEC. 5523. ADDITIONAL TECHNICAL AMENDMENTS TO TITLE XVI. 
Section 1615(d) (42 U.S.C. 1382d(d)) is amended— 
(1) in the first sentence, by inserting a comma after "sub-
section (a)(1)"; and 
(2) in the last sentence, by striking "him" and inserting 
"the Commissioner". 
SEC. 5524. ADDITIONAL TECHNICAL AMENDMENTS RELATING TO 
TITLE XVI. 
• 
Section 1110(a)(3) (42 U.S.C. 1310(a)(3)) is amended— 
I l l STAT. 624 
PUBLIC LAW 105-33—AUG. 5, 1997 
(1) by inserting "(or the Commissioner, with respect to 
any jointly financed cooperative agreement or grant concerning 
title XVI)" after "Secretary" the first place it appears; and 
(2) by inserting "(or the Commissioner, as applicable)" after 
"Secretary" the second place it appears. 
SEC. 5525. TECHNICAL AMENDMENTS RELATING TO DRUG ADDICTS 
ANDALCOHOUCS. 
(a) CLARIFICATION RELATING TO THE EFFECTIVE DATE OF THE 
DENIAL OF SSI 
DISABILITY BENEFITS TO DRUG ADDICTS AND 
ALCOHOLICS.—Section 105(b)(5) of the Contract with America 
42 use 1382 
Advancement Act of 1996 (PubUc Law 104-121; 110 Stat. 853) 
note. 
is amended— 
(1) in subparagraph (A), by striking "by the Commissioner 
of Social Security" and "by the Commissioner"; and 
(2) by redesignating subparagraph (D) as subparagraph 
(F) and by inserting after subparagraph (C) the following new 
subparagraphs: 
"(D) For purposes of this paragraph, an individual's 
claim, with respect to supplemented security income bene-
fits under title XVI of the Social Security Act based on 
disability, which has been denied in whole before the date 
of the enactment of this Act, may not be considered to 
be finally adjudicated before such date if, on or after such 
date— 
"(i) there is pending a request for either adminis-
trative or judicial review with respect to such claim, 
or 
"(ii) there is pending, with respect to such claim, 
a readjudication by the Commissioner of Social Secu-
rity pursuant to relief in a class action or implementa-
tion by the Commissioner of a court remand order. 
"(E) Notwithstanding the provisions of this paragraph, 
with respect to any individual for whom the Commissioner 
does not perform the eligibility redetermination before the 
date prescribed in subparagraph (C), the Commissioner 
shall perform such eligibility redetermination in lieu of 
a continuing disability review whenever the Commissioner 
determines that the individual's eligibility is subject to 
redetermination based on the preceding provisions of this 
paragraph, and the provisions of section 1614(a)(4) of the 
Social Security Act shall not apply to such redetermina-
tion.". 
(b) CORRECTIONS TO EFFECTIVE DATE OF PROVISIONS CONCERN-
ING REPRESENTATIVE PAYEES AND TREATMENT REFERRALS OF SSI 
BENEFICIARIES WHO ARE DRUG ADDICTS AND ALCOHOLICS.—Section 
105(b)(5)(B) of such Act (Public Law 104-121; 110 Stat. 853) is 
amended to read as follows: 
"(B) The amendments made by paragraphs (2) and 
(3) shall take effect on July 1, 1996, with respect to any 
individual— 
"(i) whose claim for benefits is finally adjudicated 
on or after the date of the enactment of this Act, 
or 
"(ii) whose eligibility for benefits is based upon 
an 
eligibility redetermination 
made 
pursuant 
to 
subparagraph (C).". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 625 
(c) REPEAL OF OBSOLETE REPORTING REQUIREMENTS.—Sub-
sections (a)(3)(B) and (b)(3)(B)(ii) of section 201 of the Social Secu-
rity Independence and Program Improvements Act of 1994 (Public 
Law 103-296; 108 Stat. 1497,1504) are repealed. 
42 USC 925 note, 
1382 note. 
SEC. 5526. ADVISORY BOARD PERSONNEL. 
Section 703(i) (42 U.S.C. 903(i)) is amended— 
(1) in the first sentence, by striking ", and three" and 
all that follows through "Board,"; and 
(2) in the last sentence, by striking "clerical". 
SEC. 5527. TIMING OF DELIVERY OF OCTOBER 1, 2000, SSI BENEFIT 
42 USC 909 note. 
PAYMENTS. 
Notwithstanding the provisions of section 708(a) of the Social 
Security Act (42 U.S.C. 908(a)), the day designated for delivery 
of benefit pajonents under title XVI of such Act for October 2000 
shall be the second day of such month. 
SEC. 5528. EFFECTIVE DATES. 
42 USC 903 note. 
(a) IN GENERAL.—Except as provided in this section, the amend-
ments made by this chapter shall take effect as if included in 
the enactment of title II of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (Public Law 104-193; 110 
Stat. 2185). 
(b) SECTION 5524 AMENDMENTS.—The amendments made by 
section 5524 of this Act shall take effect as if included in the 
enactment of the Social Security Independence and Program 
Improvements Act of 1994 (Public Law 103-296; 108 Stat. 1464). 
(c) SECTION 5525 AMENDMENTS.— 
(1) IN GENERAL.—^The amendments made by subsections 
(a) and (b) of section 5525 of this Act shall take effect as 
if included in the enactment of section 105 of the Contract 
with America Advancement Act of 1996 (Public Law 104-121; 
110 Stat. 852 et seq.). 
(2) REPEALS.—^The repeals made by section 5525(c) shall 
take effect on the date of the enactment of this Act. 
(d) SECTION 5526 AMENDMENTS.—^The amendments made by 
section 5526 of this Act shall take effect as if included in the 
enactment of section 108 of the Contract with America Advancement 
Act of 1996 (Pubhc Law 104-121; 110 Stat. 857). 
(e) SECTION 5227.—Section 5227 shall take effect on the date 
of the enactment of this Act. 
CHAPTER 
3—CHILD 
SUPPORT 
SEC. 5531. STATE OBLIGATION TO PROVIDE CHILD SUPPORT ENFORCE-
MENT SERVICES. 
(a) INDIVIDUALS SUBJECT TO FEE FOR CHILD SUPPORT ENFORCE-
MENT SERVICES.—Section 454(6)(B) (42 U.S.C. 654(6)(B)) is amended 
by striking "individuals not receiving assistance under any State 
program funded under part A, which" and inserting "an individual, 
other than an individual receiving assistance under a State program 
funded under part A or E, or under a State plan approved under 
title XIX, or who is required by the State to cooperate with the 
State agency administering the program under this part pursuant 
to subsection (1) or (m) of section 6 of the Food Stamp Act of 
1977, and". 
I l l STAT. 626 
PUBLIC LAW 105-33—AUG. 5, 1997 
(b) CORRECTION OF REFERENCE.—Section 464(a)(2)(A) (42 U.S.C. 
42 use 664. 
654(a)(2)(A)) is amended in the first sentence by striking "section 
454(6)" and inserting "section 454(4)(A)(ii)". 
SEC. 5532. DISTRIBUTION OF COLLECTED SUPPORT. 
(a) CONTINUATION OF ASSIGNMENTS.—Section 457(b) (42 U.S.C. 
657(b)) is amended— 
(1) by striking "which were assigned" and inserting 
"assigned"; and 
(2) by striking "and which were in effect" and all that 
follows and inserting "and in effect on September 30, 1997 
(or such earlier date, on or after August 22, 1996, as the 
State may choose), shall remain assigned after such date.". 
(b) STATE OPTION FOR APPLICABILITY.— 
(1) IN GENERAL.—Section 457(a) (42 U.S.C. 657(a)) is 
amended by adding at the end the following: 
"(6) STATE OPTION FOR APPLICABILITY.—^Notwithstanding 
any other provision of this subsection, a State may elect to 
apply the rules described in clauses (i)(II), (ii)(II), and (v) of 
paragraph (2)(B) to support arrearages collected on and after 
October 1, 1998, and, if the State makes such an election, 
shall apply the provisions of this section, as in effect and 
applied on the day before the date of enactment of section 
302 of the Personal Responsibility and Work Opportunity Act 
of 1996 (Pubhc Law 104-193, 110 Stat. 2200), other than sub-
section (b)(1) (as so in effect), to amounts collected before Octo-
ber 1, 1998.". 
(2) CONFORMING AMENDMENTS.—Section 408(a)(3)(A) (42 
U.S.C. 608(a)(3)(A)) is amended— 
(A) in clause (i), by inserting "(I)" after "(i)"; 
(B) in clause (ii)— 
(i) by striking "(ii)" and inserting "(II)"; and 
(ii) by striking the period and inserting "; or"; 
and 
(C) by adding at the end the following: 
"(ii) if the State elects to distribute collections 
under section 457(a)(6), the date the family ceases 
to receive assistance under the program, if the assign-
ment is executed on or after October 1, 1998.". 
(c) DISTRIBUTION OF COLLECTIONS WITH RESPECT TO FAMILIES 
RECEIVING ASSISTANCE.—Section 457(a)(1) (42 U.S.C. 657(a)(1)) is 
amended by adding at the end the following flush Ismguage: 
"In no event shall the total of the amounts paid to the Federal 
Government and retained by the State exceed the total of 
the amounts that have been paid to the family as assistance 
by the State.". 
(d) FAMILIES UNDER CERTAIN AGREEMENTS.—Section 457(a)(4) 
(42 U.S.C. 657(a)(4)) is amended to read as follows: 
"(4) FAMILIES UNDER CERTAIN AGREEMENTS.—In the case 
of an amount collected for a family in accordance with a 
cooperative agreement under section 454(33), distribute the 
amount so collected pursuant to the terms of the agreement.". 
(e) STUDY AND REPORT.—Section 457(a)(5) (42 U.S.C. 657(a)(5)) 
is amended by striking "1998" and inserting "1999". 
(f) CORRECTIONS OF REFERENCES.—Section 457(a)(2)(B) (42 
U.S.C. 657(a)(2)(B)) is amended— 
(1) in clauses (iXD and (ii)(I)— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 627 
(A) by striking "(other than subsection (b)(1))" each 
place it appears; and 
(B) by inserting "(other than subsection (b)(1) (as so 
in effect))" after "1996" each place it appears; and 
(2) in clause (ii)(II), by striking "paragraph (4)" and insert-
ing "paragraph (5)". 
(g) CORRECTION OF TERRITORIAL MATCH.—Section 457(c)(3)(A) 
(42 U.S.C. 657(c)(3)(A)) is amended by striking "the Federal medical 
assistance percentage (as defined in section 1118)" and inserting 
"75 percent". 
(h) DEFINITIONS.— 
(1) FEDERAL SHARE.—Section 457(c)(2) (42 U.S.C. 657(c)(2)) 
is amended by striking "collected" the second place it appears 
and inserting "distributed". 
(2) FEDERAL MEDICAL ASSISTANCE PERCENTAGE.—Section 
457(c)(3)(B) (42 U.S.C. 657(c)(3)(B)) is amended by striking 
"as in effect on September 30, 1996" and inserting "as such 
section was in effect on September 30, 1995". 
(i) CONFORMING AMENDMENTS.— 
(1) Section 464(a)(2)(A) (42 U.S.C. 664(a)(2)(A)) is amended, 
in the penultimate sentence, by inserting "in accordance with 
section 457" after "owed". 
(2) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is amended 
by striking "457(b)(4) or (d)(3)" and inserting "457". 
SEC. 5533. CIVIL PENALTIES RELATING TO STATE DIRECTORY OF NEW 
HIRES. 
Section 453A (42 U.S.C. 653a) is amended— 
(1) in subsection (d)— 
(A) in the matter preceding paragraph (1), by striking 
"shall be less than" and inserting "shall not exceed"; and 
(B) in paragraph (1), by striking "$25" and inserting 
"$25 per failure to meet the requirements of this section 
with respect to a newly hired employee"; and 
(2) in subsection (g)(2)(B), by striking "extracts" and all 
that follows through "Labor" and inserting "information". 
SEC. 
5534. 
FEDERAL 
PARENT 
LOCATOR 
SERVICE. 
(a) IN GENERAL.—Section 453 (42 U.S.C. 653) is amended— 
(1) in subsection (a)— 
(A) by inserting "(1)" after "(a)"; and 
(B) by striking "to obtain" and all that follows through 
the period and inserting "for the purposes specified in 
paragraphs (2) and (3). 
"(2) For the purpose of establishing parentage, establishing, 
setting the amount of, modifying, or enforcing child support obliga-
tions, the Federal Parent Locator Service shall obtain and transmit 
to any authorized person specified in subsection (c)— 
"(A) information on, or facilitating the discovery of, the 
location of any individual— 
"(i) who is under an obligation to pay child support; 
"(ii) against whom such an obligation is sought; or 
"(iii) to whom such an obligation is owed, 
including the individual's social security number (or numbers), 
most recent address, and the name, address, and employer 
identification number of the individual's employer; 
I l l STAT. 628 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(B) information on the individusd's wages (or other income) 
from, £ind benefits of, employment (including rights to or enroll-
ment in group health care coverage); and 
"(C) information on the type, status, location, and amount 
of any assets of, or debts owed by or to, any such individual. 
"(3) For the purpose of enforcing any Federal or State law 
with respect to the unlawful taking or restraint of a child, or 
making or enforcing a child custody or visitation determination, 
as defined in section 463(d)(1), the Federal Parent Locator Service 
shall be used to obtain and transmit the information specified 
in section 463(c) to the authorized persons specified in section 
463(d)(2)."; 
(2) by striking subsection (b) and inserting the following: 
"(b)(1) Upon request, filed in accordance with subsection (d), 
of any authorized person, as defined in subsection (c) for the 
information described in subsection (a)(2), or of any authorized 
person, as defined in section 463(d)(2) for the information described 
in section 463(c), the Secretary shall, notwithstanding any other 
provision of law, provide through the Federal Parent Locator Service 
such information to such person, if such information— 
"(A) is contained in any files or records maintained by 
the Secretary or by the Department of Health and Human 
Services; or 
"(B) is not contained in such files or records, but can 
be obtained by the Secretary, under the authority conferred 
by subsection (e), from any other department, agency, or 
instrumentality of the United States or of any State, 
£ind is not prohibited from disclosure under paragraph (2). 
"(2) No information shall be disclosed to any person if the 
disclosure of such information would contravene the national policy 
or security interests of the United States or the confidentiality 
of census data. The Secretary shall give priority to requests made 
by any authorized person described in subsection (c)(1). No informa-
tion shall be disclosed to any person if the State has notified 
the Secretary that the State has reasonable evidence of domestic 
violence or child abuse and the disclosure of such information 
could be harmful to the custodial parent or the child of such 
parent, provided that— 
"(A) in response to a request from an authorized person 
(as defined in subsection (c) of this section and section 
463(d)(2)), the Secretary shall advise the authorized person 
that the Secretary has been notified that there is reasonable 
evidence of domestic violence or child abuse and that informa-
tion can only be disclosed to a court or an agent of a court 
pursuant to subparagraph (B); and 
"(B) information may be disclosed to a court or an agent 
of a court described in subsection (c)(2) of this section or section 
463(d)(2)(B), if— 
"(i) upon receipt of information from the Secretary, 
the court determines whether disclosure to any other per-
son of that information could be harmful to the parent 
or the child; and 
"(ii) if the court determines that disclosure of such 
information to any other person could be harmful, the 
court and its agents shall not make any such disclosure. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 629 
"(3) Information received or transmitted pursuant to this section 
shall be subject to the safeguard provisions contained in section 
454(26)."; and 
(3) in subsection (c)— 
(A) in paragraph (1), by striking "or to seek to enforce 
orders providing child custody or visitation rights"; and 
(B) in paragraph (2)— 
(i) by inserting "or to serve as the initiating court 
in an action to seek an order" after "issue an order"; 
and 
(ii) by striking "or to issue an order against a 
resident parent for child custody or visitation rights", 
(b) USE OF THE FEDERAL PARENT LOCATOR SERVICE.—Section 
463 (42 U.S.C. 663) is amended— 
(1) in subsection (a)— 
(A) in the matter preceding paragraph (1)— 
(i) by striking "any State which is aisle and willing 
to do so," and inserting "every State"; and 
(ii) by striking "such State" and inserting "each 
State"; and 
(B) in paragraph (2), by inserting "or visitation" after 
"custody"; 
(2) in subsection (b)(2), by inserting "or visitation" after 
. "custody"; 
(3) in subsection (d)— 
(A) in paragraph (1), by inserting "or visitation" after 
"custody"; and 
(B) in subparagraphs (A) and (B) of paragraph (2), 
by inserting "or visitation" after "custody" each place it 
appears; 
(4) in subsection (f)(2), by inserting "or visitation" sifter 
"custody"; and 
(5) by striking "noncustodial" each place it appears. 
SEC. 5535. ACCESS TO REGISTRY DATA FOR RESEARCH PURPOSES. 
(a) IN GENERAL.—Section 453(j)(5) (42 U.S.C. 653(j)(5)) is 
amended by inserting "data in each component of the Federal 
Parent Locator Service maintained under this section and to" before 
"information". 
(b) CONFORMING AMENDMENTS.—Section 453 (42 U.S.C. 653) 
is amended— 
(1) in subsection (j)(3)(B), by striking "registries" and insert-
ing "components"; and 
(2) in subsection (k)(2), by striking "subsection (j)(3)" and 
inserting "section 453A(g)(2)". 
SEC. 5536. COLLECTION AND USE OF SOCIAL SECURITY NUMBERS FOR 
USE IN CHILD SUPPORT ENFORCEMENT. 
Section 466(a)(13) (42 U.S.C. 666(a)(13)) is amended— 
(1) in subparagraph (A)— 
(A) by striking "commercial"; and 
(B) by inserting "recreationeJ license," after "occupa-
tional license,"; and 
(2) in the matter following subparagraph (C), by inserting 
"to be used on the face of the document while the social security 
number is kept on file at the agency" after "other than the 
social security number". 
I l l STAT. 630 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 5537. ADOPTION OF UNIFORM STATE LAWS. 
Section 466(f) (42 U.S.C. 666(f)) is amended by striking 
"together" and all that follows and inserting "and as in effect 
on August 22, 1996, including any amendments officially adopted 
as of such date by the National Conference of Commissioners on 
Uniform State Laws.". 
SEC. 5538. STATE LAWS PROVIDING EXPEDITED PROCEDURES. 
Section 466(c) (42 U.S.C. 666(c)) is amended— 
(1) in paragraph (1)— 
(A) in subparagraph (E), by inserting ", part E," after 
"part A"; and 
(B) in subparagraph (G), by inserting "any current 
support obligation and" after "to satisfy"; and 
(2) in paragraph (2)(A)— 
(A) in clause (i), by striking "the tribunal and"; and 
(B) in clause (ii>— 
(i) by striking "tribunal may" and inserting "court 
or administrative agency of competent jurisdiction 
shall"; and 
(ii) by striking "filed with the tribunal" and insert-
ing "filed with the State case registry". 
SEC. 5539. VOLUNTARY PATERNITY ACKNOWLEDGEMENT. 
Section 466(a)(5)(C)(i) (42 U.S.C. 666(a)(5)(C)(i)) is amended 
by inserting ", or through the use of video or audio equipment," 
after "orally". 
SEC. 5540. CALCULATION OF PATERNITY ESTABLISHMENT PERCENT-
AGE. 
Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended, in the matter 
following subparagraph (C), by striking "subparagraph (A)" and 
inserting "subparagraphs (A) and (B)". 
SEC. 5541. MEANS AVAILABLE FOR PROVISION OF TECHNICAL ASSIST-
ANCE AND OPERATION OF FEDERAL PARENT LOCATOR 
SERVICE. 
(a) TECHNICAL ASSISTANCE.—Section 452(j) (42 U.S.C. 6520')) 
is amended, in the matter preceding paragraph (1), by striking 
"to cover costs incurred by the Secretar/' and inserting "which 
shall be available for use by the Secretary, either directly or through 
grants, contracts, or interagency agreements,". 
(b) OPERATION OF FEDERAL PARENT LOCATOR SERVICE.— 
(1) MEANS AVAILABLE.—Section 453(o) (42 U.S.C. 653(o)) 
is amended— 
(A) in the heading, by striking "RECOVERY OF COSTS" 
and inserting "USE OF SET-ASIDE FUNDS"; and 
(B) by striking "to cover costs incurred by the Sec-
retary" and inserting "which shall be available for use 
by the Secretary, either directly or through grants, con-
tracts, or interagency agreements,". 
(2) AVAILABILITY OF FUNDS.—Section 453(o) (42 U.S.C. 
653(o)) is amended by adding at the end the following: 
"Amounts appropriated under this subsection for each of fiscal 
years 1997 through 2001 shsdl remain 
available 
until 
expended.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 631 
SEC. 5
5
4
2
. 
AUTHORITY TO COLLECT SUPPORT FROM FEDERAL 
EMPLOYEES. 
(a) RESPONSE TO NOTICE OR PROCESS.—Section 459(c)(2)(C) (42 
U.S.C. 659(c)(2)(C)) is amended by striking "respond to the order, 
process, or interrogatory" and inserting "withhold available sums 
in response to the order or process, or answer the interrogatory". 
(b) MONEYS SUBJECT TO PROCESS.—Section 459(h)(1) (42 U.S.C. 
659(h)(1)) is amended— 
(1) in the matter preceding subparagraph (A) and in 
subparagraph (A)(i), by striking "paid or" each place it appears; 
(2) in subparagraph (A)— 
(A) in clause (ii)(V), by striking "and" at the end; 
(B) in clause (iii)— 
(i) by inserting "or payable" after "paid"; and 
(ii) by striking "but" and inserting "; and"; and 
(C) by inserting after clause (iii), the following: 
"(iv) benefits paid or payable under the Railroad 
Retirement System, but"; and 
(3) in subparagraph (B>— 
(A) in clause (i), by striking "or" at the end; 
(B) in clause (ii), by striking the period and inserting 
"; or"; and 
(C) by adding at the end the following: 
"(iii) of periodic benefits under title 38, United 
States Code, except as provided in subparagraph 
(A)(ii)(V).". 
(c) CONFORMING AMENDMENT.—Section 454(19XB)(ii) (42 U.S.C. 
654(19)(B)(ii)) is amended by striking "section 462(e)" and inserting 
"section 459(i)(5)". 
SEC. 5543. DEFINITION OF SUPPORT ORDER. 
Section 453(p) (42 U.S.C. 653(p)), is amended by striking "a 
child and" and inserting "of. 
SEC. 5544. STATE LAW AUTHORIZING SUSPENSION OF LICENSES. 
Section 466(a)(16) (42 U.S.C. 666(a)(16)) is amended by insert-
ing "and sporting" after "recreational". 
SEC. 5545. INTERNATIONAL SUPPORT ENFORCEMENT. 
Section 454(32)(A) (42 U.S.C. 654(32)(A)) is amended by striking 
"section 459A(d)(2)" and inserting "section 459A(d)". 
SEC. 5546. CHILD SUPPORT ENFORCEMENT FOR INDIAN TRIBES. 
(a) COOPERATIVE AGREEMENTS BY INDIAN TRIBES AND STATES 
FOR CHILD SUPPORT ENFORCEMENT.—Section 454(33) (42 U.S.C. 
654(33)) is amended— 
(1) by striking "and enforce support orders, and" and insert-
ing "or enforce support orders, or"; 
(2) by striking "guidelines established by such tribe or 
organization" and inserting "guidelines established or adopted 
by such tribe or organization"; 
(3) by striking "funding collected" and inserting "collec-
tions"; and 
(4) by striking "such funding" and inserting "such collec-
tions". 
(b) CORRECTION OF SUBSECTION DESIGNATION.—Section 455 (42 
U.S.C. 655) is amended by redesignating subsection (b), as added 
Ill STAT. 632 
PUBLIC LAW 105-33—AUG. 5, 1997 
by section 375(b) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (Public Law 104-193, 110 Stat. 
2256), as subsection (f). 
(c) DIRECT GRANTS TO TRIBES.—Section 455(f) (42 U.S.C. 655(f)), 
as so redesignated by subsection (b) of this section, is amended 
to read as follows: 
"(f) The Secretary may make direct payments under this part 
to an Indian tribe or tribal organization that demonstrates to the 
satisfaction of the Secretary that it has the capacity to operate 
a child support enforcement program meeting the objectives of 
this part, including establishment of paternity, establishment, modi-
fication, and enforcement of support orders, and location of absent 
Regulations. 
parents. The Secretary shall promulgate regulations establishing 
the requirements which must be met by an Indian tribe or tribal 
organization to be eligible for a grant under this subsection.". 
SEC. 5547. CONTINUATION OF RULES FOR DISTRIBUTION OF SUPPORT 
IN THE CASE OF A TITLE IV-E CfflLD. 
Section 457 (42 U.S.C. 657) is amended— 
(1) in subsection (a), in the matter preceding paragraph 
(1), by striking "subsection (e)" and inserting "subsections (e) 
and (0"; and 
(2) by adding at the end the following: 
"(f) Notwithstanding the preceding provisions of this section, 
amounts collected by a State as child support for months in any 
period on behalf of a child for whom a public agency is making 
foster care maintenance payments under part E— 
"(1) shall be retained by the State to the extent necessary 
to reimburse it for the foster care maintenance pajmtients made 
with respect to the child during such period (with appropriate 
reimbursement of the Federal Government to the extent of 
its participation in the financing); 
"(2) shall be paid to the public agency responsible for 
supervising the placement of the child to the extent that the 
amounts collected exceed the foster care maintenance payments 
made with respect to the child during such period but not 
the amounts required by a court or administrative order to 
be paid as support on behalf of the child during such period; 
and the responsible agency may use the payments in the man-
ner it determines will serve the best interests of the child, 
including setting such payments aside for the child's future 
needs or making all or a part thereof available to the person 
responsible for meeting the child's day-to-day needs; and 
"(3) shall be retained by the State, if any portion of the 
amounts collected remains after making the pajmients required 
under paragraphs (1) and (2), to the extent that such portion 
is necessary to reimburse the State 
(with 
appropriate 
reimbursement to the Federal Government to the extent of 
its participation in the financing) for any past foster care 
maintenance payments (or pa3rnients of assistance under the 
State program funded under part A) which were made with 
respect to the child (and with respect to which past collections 
have not previously been retained); 
and any balance shall be paid to the State agency responsible 
for supervising the placement of the child, for use by such agency 
in accordance with paragraph (2).". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 633 
SEC. 5548. GOOD CAUSE IN FOSTER CARE AND FOOD STAMP CASES. 
(a) STATE PLAN.—Section 454(4)(A)(i) (42 U.S.C. 654(4)(A)(i)) 
is amended— 
(1) by striking "or" before "(III)"; and 
(2) by inserting "or (IV) cooperation is required pursuant 
to section 6(1)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(1)( 1))," after "title XIX,". 
(b) CONFORMING AMENDMENTS.—Section 454(29) (42 U.S.C. 
654(29)) is amended— 
(1) in subparagraph (A)— 
(A) in the matter preceding clause (i), by striking "part 
A of this title or the State program under title XIX" and 
inserting "part A, the State program under part E, the 
State program under title XIX, or the food stamp program, 
as defined under section 3(h) of the Food Stamp Act of 
1977 (7 U.S.C. 2012(h)),"; and 
(B) by striking clauses (i) and (ii) and all that follows 
through the semicolon and inserting the following: 
"(i) in the case of the State program funded under 
part A, the State program under part E, or the State 
program under title XIX shall, at the option of the 
State, be defined, taking into account the best interests 
of the child, and applied in each case, by the State 
agency administering such program; and 
"(ii) in the case of the food stamp program, as 
defined under section 3(h) of the Food Stamp Act of 
1977 (7 U.S.C. 2012(h)), shall be defined and applied 
in each case under that program in accordance with 
section 6(1)(2) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(1)(2));"; 
(2) in subparagraph (D), by striking "or the State program 
under title XDC" and inserting "the State program under part 
E, the State program under title XIX, or the food stamp pro-
gram, as defined under section 3(h) of the Food Stamp Act 
of 1977 (7 U.S.C. 2012(h))"; and 
(3) in subparagraph (E), by striking "individual," and all 
that follows through "XIX," and inserting "individual and the 
State agency administering the State program funded under 
part A, the State agency administering the State program 
under part E, the State agency administering the State program 
under title XIX, or the State agency administering the food 
stamp program, as defined under section 3(h) of the Food 
Stamp Act of 1977 (7 U.S.C. 2012(h)),". 
SEC. 5549. DATE OF COLLECTION OF SUPPORT. 
Section 454B(c)(l) (42 U.S.C. 654B(c)(l)) is amended by adding 
42 USC 654b. 
at the end the following: 'The date of collection for amounts collected 
and distributed under this part is the date of receipt by the State 
disbursement unit, except that if current support is withheld by 
an employer in the month when due and is received by the State 
disbursement unit in a month other than the month when due, 
the date of withholding may be deemed to be the date of collection.". 
SEC. 5550, ADMINISTRATIVE ENFORCEMENT IN INTERSTATE CASES. 
(a) PROCEDURES.—Section 466(a)(14) (42 U.S.C. 666(a)(14)) is 
amended to read as follows: 
I l l STAT. 634 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(14) HIGH-VOLUME, AUTOMATED ADMINISTRATIVE ENFORCE-
MENT IN INTERSTATE CASES.— 
"(A) IN GENERAL.—^Procedures under which— 
"(i) the State shall use high-volume automated 
administrative enforcement, to the same extent as used 
for intrastate cases, in response to a request made 
by another State to enforce support orders, and shall 
promptly report the results of such enforcement proce-
dure to the requesting State; 
"(ii) the State may, by electronic or other means, 
transmit to another State a request for assistance in 
enforcing support orders through high-volume, auto-
mated administrative enforcement, which request— 
"(I) shall include such information as will 
enable the State to which the request is transmit-
ted to compare the information about the cases 
to the information in the data bases of the State; 
and 
"(II) shall constitute a certification by the 
requesting State— 
"(aa) of the amount of support under an 
order the pa3anent of which is in arrears; and 
"(bb) that the requesting State has com-
plied with all procedural due process require-
ments applicable to each case; 
"(iii) if the State provides assistance to another 
State pursuant to this paragraph with respect to a 
case, neither State shall consider the case to be trans-
ferred to the caseload of such other State; and 
Records. 
"(iv) the State shall maintain records of— 
"(I) the number of such requests for assistance 
received by the State; 
"(II) the number of cases for which the State 
collected support in response to such a request; 
and 
"(III) the amount of such collected support. 
"(B) 
HIGH-VOLUME 
AUTOMATED 
ADMINISTRATIVE 
ENFORCEMENT.—In this part, the term 'high-volume auto-
mated administrative enforcement' means the use of auto-
matic data processing to search various State data bases, 
including license records, emplo3^ment service data, and 
State new hire registries, to determine whether information 
is available regarding a parent who owes a child support 
obligation.", 
(b) INCENTIVE PAYMENTS.—Section 458(d) (42 U.S.C. 658(d)) 
is amended by inserting ", including amounts collected under section 
466(a)(14)," after "another State". 
SEC. 5551. WORK ORDERS FOR ARREARAGES. 
Section 466(a)(15) (42 U.S.C. 666(a)(15)) is amended to read 
as follows: 
"(15) PROCEDURES TO ENSURE THAT PERSONS OWING OVER-
DUE SUPPORT W
O
R
K OR HAVE A PLAN FOR PAYMENT OF SUCH 
SUPPORT.—^Procedures under which the State has the authority, 
in any case in which an individual owes overdue support with 
respect to a child receiving assistance under a State program 
funded under part A, to issue an order or to request that 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 635 
a court or an administrative process established pursuant to 
State law issue an order that requires the individual to— 
"(A) pay such support in accordance with a plan 
approved by the court, or, at the option of the State, a 
plan approved by the State agency administering the State 
program under this part; or 
"(B) if the individual is subject to such a plan and 
is not incapacitated, participate in such work activities 
(as defined in section 407(d)) as the court, or, at the option 
of the State, the State agency administering the State 
program under this part, deems appropriate.". 
SEC. 5552. ADDITIONAL TECHNICAL STATE PLAN AMENDMENTS. 
Section 454 (42 U.S.C. 654) is amended— 
(1) in paragraph (8)— 
(A) in the matter preceding subparagraph (A)— 
(i) by striking "noncustodial"; and 
(ii) by inserting ", for the purpose of establishing 
parentage, establishing, setting the amount of, modify-
ing, or enforcing child support obligations, or making 
or enforcing a child custody or visitation determination, 
as defined in section 463(d)(1)" after "provide that"; 
(B) in subparagraph (A), by striking the comma and 
inserting a semicolon; 
(C) in subparagraph (B), by striking the semicolon 
and inserting a comma; and 
(D) by inserting after subparagraph (B), the following 
flush language: 
"and shall, subject to the privacy safeguards required under 
paragraph (26), disclose only the information described in sec-
tions 453 and 463 to the authorized persons specified in such 
sections for the purposes specified in such sections;"; 
(2) in paragraph (17)--
(A) by striking "in the case of a State which has" 
and inserting "provide that the State will have"; and 
(B) by inserting "and" after "section 453,"; and 
(3) in paragraph (26)— 
(A) in the matter preceding subparagraph (A), by strik-
ing "will"; 
(B) in subparagraph (A)— 
(i) by inserting ", modify," after "establish", the 
second place it appears; and 
(ii) by inserting ", or to make or enforce a child 
custody determination" after "support"; 
(C) in subparagraph (B)— 
(i) by inserting "or the child" after "1 party"; 
(ii) by inserting "or the child" after "former party"; 
and 
(iii) by striking "and" at the end; 
(D) in subparagraph (C)— 
(i) by inserting "or the child" after "1 party"; 
(ii) by striking "another party" Eind inserting 
"another person"; 
(iii) by inserting "to that person" after "release 
ofthe information"; and 
(iv) by striking "former party" and inserting "party 
or the child"; and 
I l l STAT. 636 
PUBLIC LAW 105-33—AUG. 5, 1997 
(E) by adding at the end the following: 
"(D) in cases in which the prohibitions under subpara-
graphs (B) and (C) apply, the requirement to notify the 
Secretary, for purposes of section 453(b)(2), that the State 
has reasonable evidence of domestic violence or child abuse 
against a party or the child and that the disclosure of 
such information could be harmful to the party or the 
child; and 
Courts. 
"(E) procedures providing that when the Secretary dis-
closes information about a parent or child to a State court 
or an agent of a State court described in section 453(c)(2) 
or 463(d)(2)(B), and advises that court or agent that the 
Secretary has been notified that there is reasonable evi-
dence of domestic violence or child abuse pursuant to sec-
tion 453(b)(2), the court shall determine whether disclosure 
to any other person of information received from the Sec-
retary could be harmful to the parent or child and, if 
the court determines that disclosure to any other person 
could be harmful, the court and its agents shall not make 
any such disclosure;". 
SEC. 5553. FEDERAL CASE REGISTRY OF CHILD SUPPORT ORDERS. 
Section 453(h) (42 U.S.C. 653(h)) is amended— 
(1) in paragraph (1), by inserting "and order" after "with 
respect to each case"; and 
(2) in pEiragraph (2)— 
(A) in the heading, by inserting "AND ORDER" after 
"CASE"; 
(B) by inserting "or an order" after "with respect to 
a case" and 
(C) by inserting "or order" after "and the State or 
States which have the case". 
SEC. 5554. FULL FAITH AND CREDIT FOR CHILD SUPPORT ORDERS. 
Section 1738B(f) of title 28, United States Code, is amended— 
(1) in paragraph (4), by striking "a court may" and all 
that follows and inserting "a court having jurisdiction over 
the parties shall issue a child support order, which must be 
recognized."; and 
(2) in paragraph (5), by inserting "under subsection (d)" 
after "jurisdiction". 
X SEC. 5555. DEVELOPMENT COSTS OF AUTOMATED SYSTEMS. 
\ 
(a) DEFINITION OF STATE.—Section 455(a)(3)(B) (42 U.S.C. 
655(a)(3)(B)) is amended— 
(1) in clause (i)— 
(A) by inserting "or system described in clause (iii)" 
after "each State"; and 
(B) by inserting "or system" after "the State"; and 
(2) by adding at the end the following: 
"(iii) For purposes of clause (i), a system described in this 
clause is a system that has been approved by the Secretary to 
receive enhanced funding pursuant to the Family Support Act of 
1988 (PubHc Law 100-485; 102 Stat. 2343) for the purpose of 
developing a system that meets the requirements of sections 454(16) 
(as in effect on and after September 30, 1995) and 454A, including 
systems that have received funding for such purpose pursuant 
to a waiver under section 1115(a).". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 637 
(b) TEMPORARY LIMITATION ON PAYMENTS.—Section 344(b)(2) 
of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 (42 U.S.C. 655 note) is amended— 
(1) in subparagraph (B)— 
(A) by inserting "or a system described in subparagraph 
(C)" after "to a State"; and 
(B) by inserting "or system" after "for the State"; emd 
(2) in subparagraph (C), by striking "Act," and all that 
follows and inserting "Act, and among systems that have been 
approved by the Secretary to receive enhanced funding pursu-
ant to the Family Support Act of 1988 (Public Law 100-485; 
102 Stat. 2343) for the purpose of developing a system that 
meets the requirements of sections 454(16) (as in effect on 
and after September 30, 1995) and 454A, including systems 
that have received funding for such purpose pursuant to a 
waiver under section 1115(a), which shall take into account— 
"(i) the relative size of such State and system 
caseloads under part D of title IV of the Social Security 
Act; and 
"(ii) the level of automation needed to meet the 
automated data processing requirements of such part.". 
SEC. 5556. ADDITIONAL TECHNICAL AMENDMENTS. 
(a) ELIMINATION OF SURPLUSAGE.—Section 466(c)(lXF) (42 
U.S.C. 666(c)(1)(F)) is amended by striking "of section 466". 
(b) 
CORRECTION 
OF 
AMBIGUOUS 
AMENDMENT.—Section 
344(a)(1)(F) of the Personal Responsibility and Work Opportunity 
ReconciHation Act of 1996 (Public Law 104-193; 110 Stat. 2234) 42USC654. 
is amended by inserting "the first place such term appears" before 
"and all that follows". 
(c) CORRECTION OF ERRONEOUSLY DRAFTED PROVISION.—Section 
215 of the Department of Hesdth and Human Services Appropria-
tions Act, 1997, (as contained in section 101(e) of the Omnibus 
Consolidated Appropriations Act, 1997) is amended to read as fol- 
42 USC 652,653. 
lows: 
"SEC. 215. Sections 452(j) and 453(o) of the Social Security 
Act (42 U.S.C. 652(j) and 653(o)), as amended by section 345 of 
the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 (Public Law 104-193; 110 Stat. 2237) are each amended 
by striking 'section 457(a)' and inserting *a plan approved under 
this part'. Amounts available under such sections 452(j) and 453(o) Effective date, 
shall be calculated as though the amendments made by this section 42 USC 652 note, 
were effective October 1, 1995.". 
(d) ELIMINATION OF SURPLUSAGE.—Section 456(a)(2)(B) (42 
U.S.C. 656(a)(2)(B)) is amended by striking ", and" and inserting 
a period. 
(e) CORRECTION OF DATE.—Section 466(a)(1)(B) (42 U.S.C. 
666(a)(1)(B)) is amended by striking "October 1, 1996" and inserting 
"January 1, 1994". 
SEC. 5557. EFFECTIVE DATE. 
42 USC 608 note. 
(a) IN GENERAL.—Except as provided in subsection (b), the 
amendments made by this chapter shall take effect as if included 
in the enactment of title III of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (Public Law 104-
193; 110 Stat. 2105). 
(b) EXCEPTION.—^The amendments made by section 5532(b)(2) 
of this Act shall take effect as if the amendments had been included 
I l l STAT. 638 
PUBLIC LAW 105-33—AUG. 5, 1997 
in the enactment of section 103(a) of the Personal ResponsibiHty 
and Work Opportunity ReconciHation Act of 1996 (PubHc Law 104-
193; 110 Stat. 2112). 
CHAPTER 4—RESTRICTING WELFARE AND PUBLIC 
BENEFITS FOR ALIENS 
Subchapter A—Eligibility for Federal BeneHts 
SEC. 5561. ALIEN ELIGIBILITY FOR FEDERAL BENEFITS: LIMITED 
APPUCATION TO MEDICARE AND BENEFITS UNDER THE 
RAILROAD RETIREMENT ACT. 
(a) LIMITED APPLICATION TO MEDICARE.—Section 401(b) of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996 (8 U.S.C. 1611(b)) is amended by adding at the end the 
following: 
"(3) Subsection (a) shall not apply to any benefit payable 
under title XVIII of the Social Security Act (relating to the 
medicare program) to an alien who is lawfully present in the 
United States as determined by the Attorney (General and, 
with respect to benefits payable under part A of such title, 
who was authorized to be employed with respect to any wages 
attributable to employment which are counted for purposes 
of eligibility for such benefits.". 
(b) LIMITED APPLICATION TO BENEFITS UNDER THE RAILROAD 
RETIREMENT ACT.—Section 401(b) of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1611(b)) 
(as amended by subsection (a)) is amended by inserting at the 
, end the following: 
"(4) Subsection (a) shall not apply to any benefit payable 
under the Railroad Retirement Act of 1974 or the Railroad 
Unemplojnnent Insurance Act to an alien who is lawfully 
present in the United States as determined by the Attorney 
Greneral or to an alien residing outside the United States.". 
SEC. 5562. EXCEPTIONS TO BENEFIT LIMITATIONS: CORRECTIONS TO 
REFERENCE CONCERNING ALIENS WHOSE DEPORTA-
TION IS WITHHELD. 
Sections 402(a)(2)(A), 402(b)(2)(A), 403(b)(1)(C), 412(b)(1)(C), 
and 431(b)(5) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (8 U.S.C. 1612(a)(2)(A), 1612(b)(2)(A), 
1613(b)(1)(C), 1622(b)(1)(C), and 1641(b)(5)) as amended by this 
Act are each amended by striking "section 243(h) of such Act" 
each place it appears and inserting "section 243(h) of such Act 
(as in effect immediately before the effective date of section 307 
of division C of Public Law 104-208) or section 241(b)(3) of such 
Act (as amended by section 305(a) of division C of Public Law 
104-208)". 
SEC. 5563. VETERANS EXCEPTION: APPLICATION OF MINIMUM ACTIVE 
DUTY 
SERVICE 
REQUIREMENT; 
EXTENSION 
TO 
UNREMARRIED SURVIVING SPOUSE; EXPANDED DEFINI-
TION OF VETERAN. 
(a) APPLICATION OF MINIMUM ACTIVE DUTY SERVICE REQUIRE-
MENT.—Sections 402(a)(2)(C)(i), 402(b)(2)(C)(i), 403(b)(2)(A), and 
412(b)(3)(A) of the Personal Responsibility and Work Opportunity 
ReconciHation Act of 1996 (8 U.S.C. 1612(a)(2)(C)(i), 1612(b)(2)(C)(i), 
1613(b)(2)(A), and 1622(b)(3)(A)) are each amended by inserting 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 639 
"and who fulfills the minimum active-duty service requirements 
of section 5303A(d) of title 38, United States Code" after ^'alienage". 
(b) 
EXCEPTION 
APPLICABLE 
TO 
UNREMARRIED 
SURVIVING 
SPOUSE.—Sections 402(a)(2)(C)(iii), 402(b)(2)(C)(iii), 403(b)(2)(C), 
and 412(bX3)(C) of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (8 U.S.C. 1612(a)(2)(C)(iii), 
1612(b)(2)(C)(iii), 1613(b)(2)(C), and 1622(b)(3)(C)) are each amend-
ed by inserting before the period "or the unremarried surviving 
spouse of an individual described in clause (i) or (ii) who is deceased 
ii the marriage fulfills the requirements of section 1304 of title 
38, United States Code". 
(c) 
EXPANDED 
DEFINITION 
OF 
VETERAN.—Sections 
402(a)(2)(C)(i), 402(b)(2)(C)(i), 403(b)(2)(A), and 412(b)(3)(A) of the 
Personal Responsibility £ind Work Opportunity Reconciliation Act 
of 1996 (8 U.S.C. 1612(a)(2XC)(i), 1612(b)(2)(C)(i), 1613(b)(2)(A), 
and 1622(b)(3)(A)) are each amended by inserting ", 1101, or 1301, 
or as described in section 107" after "section 101". 
SEC. 
5564. NOTIFICATION CONCERNING ALIENS NOT LAWFULLY 
PRESENT: CORRECTION OF TERMINOLOGY. 
Section 1631(e)(9) of the Social Security Act (42 U.S.C. 
1383(e)(9)) and section 27 of the United States Housing Act of 
1937, as added by section 404 of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996, are each amended 
42 USC I437y. 
by striking "unlawfully in the United States" each place it appears 
and inserting "not lawfully present in the United States". 
SEC. 5565. FREELY ASSOCIATED STATES: CONTRACTS AND LICENSES. 
Sections 401(c)(2)(A) and 411(c)(2)(A) of the Personal Respon-
sibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1611(c)(2)(A) and 1621(cX2XA)) are each amended by inserting 
before the semicolon at the end ", or to a citizen of a freely associated 
state, if section 141 of the applicable compact of free association 
approved in Public Law 99-239 or 99-658 (or a successor provision) 
is in effect". 
SEC. 5566. CONGRESSIONAL STATEMENT REGARDING BENEFITS FOR 
HMONG AND OTHER mCHLAND LAO VETERANS. 
(a) FINDINGS.—^The Congress makes the following findings: 
(1) Hmong and other Highland Lao tribal peoples were 
recruited, armed, trained, and funded for military operations 
by the United States Department of Defense, Central Intel-
ligence Agency, Department of State, and Agency for Inter-
national Development to further United States national security 
interests during the Vietnam conflict. 
(2) Hmong and other Highland Lao tribal forces sacrificed 
their own lives and saved the lives of American military person-
nel by rescuing downed American pilots and aircrews and by 
. engaging and successfully fighting North Vietnamese troops. 
(3) Thousands of Hmong and other Highland Lao veterans 
who fought in special guerilla units on behalf of the United 
States during the Vietnam conflict, along with their families, 
have been lawfully admitted to the United States in recent 
years. 
(4) The Personal Responsibility and Work Opportunity Rec-
onciliation Act of 1996 (Public Law 104—193), the new national 
welfare reform law, restricts certain welfare laenefits for nonciti-
zens of the United States and the exceptions for noncitizen 
I l l STAT. 640 
PUBLIC LAW 105-33—AUG. 5, 1997 
veterans of the Armed Forces of the United States do not 
extend to Hmong veterans of the Vietnam conflict era, making 
Hmong veterans and their famihes receiving certain welfare 
benefits subject to restrictions despite their military service 
on behalf of the United States. 
(b) CONGRESSIONAL STATEMENT.—It is the sense of the Congress 
that Hmong and other Highland Lao veterans who fought on behalf 
of the Armed Forces of the United States during the Vietnam 
conflict and have lawfully been admitted to the United States 
for permanent residence should be considered veterans for purposes 
of continuing certain welfare benefits consistent with the exceptions 
provided other noncitizen veterans under the Personal Responsibil-
ity and Work Opportunity Reconciliation Act of 1996. 
Subchapter B—General Provisions 
SEC. 5571. DETERMINATION OF TREATMENT OF BATTERED ALIENS 
AS QUALIFIED ALIENS; INCLUSION OF ALIEN CHILD OF 
BATTERED PARENT AS QUAUFIED ALIEN. 
(a) DETERMINATION OF STATUS BY AGENCY PROVIDING BENE-
FITS.—Section 431 of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (8 U.S.C. 1641) is amended in 
subsections (c)(1)(A) and (c)(2)(A) by striking "Attorney (Jeneral, 
which opinion is not subject to review by any court)" each place 
it appears and inserting "agency providing such benefits)". 
(b) GUIDANCE ISSUED BY ATTORNEY GENERAL.—Section 431(c) 
of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 (8 U.S.C. 1641(c)) is amended by adding at the end 
the following new undesignated paragraph: 
"After consultation with the Secretaries of Health and Human 
Services, Agriculture, and Housing and Urban Development, the 
Commissioner of Social Security, and with the heads of such Federal 
agencies administering benefits as the Attorney General considers 
appropriate, the Attorney General shall issue guidance (in the Attor-
ney General's sole and unreviewable discretion) for purposes of 
this subsection and section 421(f), concerning the meaning of the 
terms 'battery' and 'extreme cruelty', and the standards and meth-
ods to be used for determining whether a substantial connection 
exists between battery or cruelty suffered and an individual's need 
for benefits under a specific Federal, State, or local program.". 
(c) INCLUSION OF ALIEN CHILD OF BATTERED PARENT AS QUALI-
FIED ALIEN.—Section 431(c) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641(c)) is amend-
ed— 
(1) at the end of paragraph (l)(B)(iv) by striking "or"; 
(2) at the end of paragraph (2)(B) by striking the period 
and inserting "; or"; and 
(3) by inserting after paragraph (2)(B) and before the last 
sentence of such subsection the following new paragraph: 
"(3) an alien child who— 
"(A) resides in the same household as a parent who 
has been battered or subjected to extreme cruelty in the 
United States by that parent's spouse or by a member 
of the spouse's family residing in the same household as 
the parent and the spouse consented or acquiesced to such 
battery or cruelty, but only if (in the opinion of the agency 
providing such benefits) there is a substantial connection 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 641 
between such battery or cruelty and the need for the bene-
fits to be provided; and 
"(B) who meets the requirement of subparagraph (B) 
of paragraph (1).". 
(d) INCLUSION OF ALIEN CHILD OF BATTERED PARENT UNDER 
SPECIAL RULE FOR ATTRIBUTION OF INCOME.—Section 421(f)(1)(A) 
of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 (8 U.S.C. 1631(f)(1)(A)) is amended— 
(1) at the end of clause (i) by striking "or"; and 
(2) by striking "and the battery or cruelty described in 
clause (i) or (ii)" and inserting "or (iii) the alien is a child 
whose parent (who resides in the same household as the alien 
child) has been battered or subjected to extreme cruelty in 
the United States by that parent's spouse, or by a member 
of the spouse's family residing in the same household as the 
E
arent and the spouse consented to, or acquiesced in, such 
attery or cruelty, and the battery or cruelty described in 
clause (i), (ii), or (iii)". 
SEC. 5572. VERIFICATION OF EUGIBILITY FOR BENEFITS. 
(a) REGULATIONS AND GUIDANCE.—Section 432(a) of the Per-
sonal Responsibility and Work Opportunity Reconciliation Act of 
1996 (8 U.S.C. 1642(a)) is amended— 
(1) by inserting at the end of paragraph (1) the following: 
"Not later than 90 days after the date of the enactment of 
the Balanced Budget Act of 1997, the Attorney General of 
the United States, after consultation with the Secretary of 
Health and Human Services, shall issue interim verification 
guidance."; and 
(2) by adding after paragraph (2) the following new para-
graph: 
"(3) Not later than 90 days after the date of the enactment 
of the Balanced Budget Act of 1997, the Attorney General shall 
promulgate regulations which set forth the procedures by which 
a State or local government can verify whether an alien applying 
for a State or local public benefit is a qualified alien, a non-
immigrant under the Immigration and Nationality Act, or an alien 
paroled into the United States under section 212(d)(5) of the 
Immigration and Nationality Act for less than 1 year, for purposes 
of determining whether the alien is ineligible for benefits under 
section 411 of this Act.". 
(b) DISCLOSURE OF INFORMATION FOR VERIFICATION.—Section 
384(b) of the Illegal Immigration Reform and Immigrant Respon-
sibility Act of 1996 (division C of Public Law 104-208) is amended 
8 USC 1367. 
by adding after paragraph (4) the following new paragraph: 
"(5) The Attorney General is authorized to disclose informa-
tion, to Federal, State, and local public and private agencies 
providing benefits, to be used solely in making determinations 
of eligibility for benefits pursuant to section 431(c) of the Per-
sonal Responsibility and Work Opportunity Reconciliation Act 
of 1996.". 
SEC. 5573. QUALIFYING QUARTERS: DISCLOSURE OF QUARTERS OF 
COVERAGE INFORMATION; 
CORRECTION 
TO ASSURE 
THAT CREDITING APPLIES TO ALL QUARTERS EARNED 
BY PARENTS BEFORE CHILD IS 18. 
(a) DISCLOSURE OF QUARTERS OF COVERAGE INFORMATION.— 
Section 435 of the Personal Responsibility and Work Opportunity 
I l l STAT. 642 
PUBLIC LAW 105-33—AUG. 5, 1997 
Reconciliation Act of 1996 (8 U.S.C. 1645) is amended by adding 
at the end the following: "Notwithstanding section 6103 of the 
Internal Revenue Code of 1986, the Commissioner of Social Security 
is authorized to disclose quarters of coverage information concerning 
an alien and an alien's spouse or parents to a government agency 
for the purposes of this title.". 
(b) CORRECTION TO ASSURE THAT CREDITING APPLIES TO ALL 
QUARTERS EARNED BY PARENTS BEFORE CHILD IS 18.—Section 
435(1) of the Personal Responsibility and Work Opportunity Rec-
onciliation Act of 1996 (8 U.S.C. 1645(1)) is amended by striking 
"while the alien was under age 18," and inserting "before the 
date on which the alien attains age 18,". 
SEC. 5574. STATUTORY CONSTRUCTION: BENEFIT EUGIBILITY LIMITA-
TIONS APPLICABLE ONLY WITH RESPECT TO ALIENS 
PRESENT IN THE UNITED STATES. 
Section 433 of the Personal Responsibility and Work Oppor-
tunity Reconciliation Act of 1996 (8 U.S.C. 1643) is amended— 
(1) by redesignating subsections (b) £ind (c) as subsections 
(c) and (d); and 
(2) by adding after subsection (a) the following new sub-
section: 
"(b) BENEFIT ELIGIBILITY LIMITATIONS APPLICABLE ONLY WITH 
RESPECT TO ALIENS PRESENT IN THE UNITED STATES.—Notwith-
standing any other provision of this title, the limitations on eligi-
bility for benefits under this title shall not apply to eligibility 
for benefits of aliens who are not residing, or present, in the 
United States with respect to— 
"(1) wages, pensions, annuities, and other earned payments 
to which an alien is entitled resulting from employment by, 
or on behalf of, a Federal, State, or local government agency 
which was not prohibited during the period of such emplo3anent 
or service under section 274A or other applicable provision 
of the Immigration and Nationality Act; or 
"(2) benefits under laws administered by the Secretary 
of Veterans Affairs.". 
Subchapter C—^Miscellaneous Clerical and Technical 
Amendments; Effective Date 
SEC. 5581. CORRECTING MISCELLANEOUS CLERICAL AND TECHNICAL 
ERRORS. 
(a) INFORMATION REPORTING UNDER TITLE IV OF THE SOCL\L 
Effective date. 
SECURITY ACT.—Effective July 1, 1997, section 408 (42 U.S.C. 608), 
as amended by sections 5001(h)(1) and 5505(e) of this Act, is amend-
ed by adding at the end the following new subsection: 
"(g) STATE REQUIRED TO PROVIDE CERTAIN INFORMATION.— 
Each State to which a grant is made under section 403 shgdl, 
at least 4 times annually and upon request of the Immigration 
and Naturalization Service, furnish the Immigration and Natu-
ralization Service with the name and address of, and other identify-
ing information on, any individual who the State knows is not 
lawfully present in the United States.". 
(b) MISCELLANEOUS CLERICAL AND TECHNICAL CORRECTIONS.— 
(1) Section 411(c)(3) of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 643 
1621(c)(3)) is amended by striking "4001(c)" and inserting 
"401(c)". 
(2) Section 422(a) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (8 U.S.C. 1632(a)) is 
amended by striking "benefits (as defined in section 412(c))," 
and inserting "benefits,". 
(3) Section 412(b)(1)(C) of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1622(b)(1)(C)) is amended by striking "with-holding" and insert-
ing "withholding". 
(4) The subtitle heading for subtitle D of title IV of the 
Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 is amended to read as follows: 
"Subtitle D—General Provisions". 
(5) The subtitle heading for subtitle F of title IV of the 
Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 is amended to read as follows: 
"Subtitle F—^Earned Income Credit Denied 
to Unauthorized Employees". 
(6) Section 431(c)(2)(B) of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1641(c)(2)(B)) is amended by striking "clause (ii) of subpara-
graph (A)" and inserting "subparagraph (B) of paragraph (1)", 
(7) Section 431(c)(1)(B) of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1641(c)(1)(B)) is amended— 
(A) in clause (iii) by striking ", or" and inserting "(as 
in effect prior to April 1, 1997),"; and 
(B) by adding after clause (iv) the following new clause: 
"(v) cancellation of removal pursuant to section 
240A(b)(2)ofsuchAct;". 
SEC. 5582. EFFECTIVE DATE. 
8 USC 1367. 
Except as otherwise provided, the amendments made by this 
chapter shall be effective as if included in the enactment of title 
rV of the Personal Responsibility and Work Opportunity Reconcili-
ation Act of 1996. 
CHAPTER 
5—CHILD 
PROTECTION 
SEC. 5591. CONFORMING AND TECHNICAL AMENDMENTS RELATING 
TO CHILD PROTECTION. 
(a) METHODS PERMITTED FOR CONDUCT OF STUDY OF CHILD 
WELFARE.—Section 429A(a) (42 U.S.C. 628b(a)) is amended by 
inserting "(directly, or by grant, contract, or interagency agree-
ment)" after "conduct". 
(b) REDESIGNATION OF PARAGRAPH.—Section 471(a) (42 U.S.C. 
671(a)) is amended— 
(1) by striking "and" at the end of paragraph (17); 
I l l STAT. 644 
PUBLIC LAW 105-33—AUG. 5, 1997 
(2) by striking the period at the end of paragraph (18) 
(as added by section 1808(a) of the Small Business Job Protec-
tion Act of 1996 (Public Law 104-188; 110 Stat. 1903)) and 
inserting "; and"; and 
(3) by redesignating paragraph (18) (as added by section 
505(3) of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
2278)) as paragraph (19). 
SEC. 5592. ADDITIONAL TECHNICAL AMENDMENTS RELATING TO 
CHILD PROTECTION. 
(a) PART B AMENDMENTS.— 
(1) IN GENERAL.—Part B of title IV (42 U.S.C. 620-635) 
is amended— 
42 use 622. 
(A) in section 422(b)— 
(i) by striking the period at the end of the para-
graph (9) (as added by section 554(3) of the Improving 
America's Schools Act of 1994 (Pubhc Law 103-382; 
108 Stat. 4057)) and inserting a semicolon; 
(ii) by redesignating paragraph (10) as paragraph 
(11); and 
(iii) by redesignating paragraph (9), as added by 
section 202(a)(3) of the Social Security Act Amend-
ments of 1994 (Public Law 103-432, 108 Stat. 4453), 
as paragraph (10); 
42 use 624,625. 
(B) in sections 424(b) and 425(a), by striking "422(b)(9)'' 
each place it appears and inserting "422(b)(10)"; and 
(C) by transferring section 429A (as added by section 
503 of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (Public Law 104-193; 110 Stat. 
42 use 628b. 
2277)) to the end of subpart 1. 
(2) CLARIFICATION OF CONFLICTING AMENDMENTS.—Section 
204(a)(2) of the Social Security Act Amendments of 1994 (Public 
42 use 622. 
Law 103-432; 108 Stat. 4456) is amended by inserting "(as 
added by such section 202(a))" before "and inserting". 
(b) PART E AMENDMENTS.—Section 472(d) (42 U.S.C. 672(d)) 
is amended by striking "422(b)(9)" and inserting "422(b)(10)". 
42 use 622 note. 
SEC. 5593. EFFECTIVE DATE. 
The amendments made by this chapter shall take effect as 
if included in the enactment of title V of the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996 (Public Law 104-
193; 110 Stat. 2277). 
CHAPTER 6—CfflLD CARE 
SEC. 5601. CONFORMING AND TECHNICAL AMENDMENTS RELATING 
TO CHILD CARE. 
(a) FUNDING.—Section 418(a) (42 U.S.C. 618(a)) is amended— 
(1) in paragraph (1)— 
(A) in the matter preceding subparagraph (A), by 
inserting "the greater of after "equal to"; 
(B) in subparagraph (A)— 
(i) by striking "the sum of; 
(ii) by striking "amounts expended" and inserting 
"expenditures"; and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 645 
(iii) by striking "section—" and all that follows 
and inserting "subsections (g) and (i) of section 402 
(as in effect before October 1,1995); or"; 
(C) in subparagraph (B)— 
(i) by striking "sections" and inserting "sub-
sections"; and 
(ii) by striking the semicolon at the end and insert-
ing a period; and 
(D) in the matter following subparagraph (B), by strik-
ing "whichever is greater."; and 
(2) in paragraph (2)— 
(A) by striking subparagraph (B) and inserting the 
following: 
"(B) ALLOTMENTS TO STATES.—^The total amount avail-
able for payments to States under this paragraph, as deter-
mined under subparagraph (A), shgJl be allotted among 
the States based on the formula used for determining the 
amount of Federal pajrments to each State under section 
403(n) (as in effect before October 1, 1995)."; 
(B) by striking subparagraph (C) and inserting the 
following: 
"(C) 
FEDERAL 
MATCHING OF STATE EXPENDITURES 
EXCEEDING HISTORICAL EXPENDITURES.—The 
Secretary 
shall pay to each eligible State for a fiscal year an amount 
equal to the lesser of the State's allotment under subpara-
graph (B) or the Federal medical assistance percentage 
for the State for the fiscal year (as defined in section 
1905(b), as such section was in effect on September 30, 
1995) of so much of the State's expenditures for child 
care in that fiscal year as exceed the total amount of 
expenditures by the State (including expenditures from 
amounts made available from Federal fiinds) in fiscal year 
1994 or 1995 (whichever is greater) for the programs 
described in paragraph (1)(A)."; and 
(C) in subparagraph (D)(i>— 
(i) by striking "amounts under any grant awarded" 
and inserting "any amounts allotted"; and 
(ii) by striking "the grant is made" and inserting 
"such amounts are allotted". 
(b) DATA USED TO DETERMINE HISTORIC STATE EXPENDI-
TURES.—Section 418(a) (42 U.S.C. 618(a)) is amended by adding 
at the end the following: 
"(5) DATA USED TO DETERMINE STATE AND FEDERAL SHARES 
OF EXPENDITURES.—In making the determinations concerning 
expenditures required under paragraphs (1) and (2)(C), the 
Secretary shall use information that was reported by the State 
on ACF Form 231 and available as of the applicable dates 
specified in clauses 
(i)(I), (ii), and (iii)(III) of section 
403(a)(1)(D).". 
(c) DEFINITION OF STATE.—Section 418(d) (42 U.S.C. 618(d)) 
is amended by striking "or" and inserting "and". 
SEC. 5602. ADDITIONAL CONFORMING AND TECHNICAL AMENDMENTS. 
The Child Care and Development Block Grant Act of 1990 
(42 U.S.C. 9858 et seq.) is amended— 
(1) in section 658E(c)(2)(E)(ii), by striking "tribal organiza- 42 USC 9858c. 
tion" and inserting "tribal organizations"; 
I l l STAT. 646 
PUBLIC LAW 105-33—AUG. 5, 1997 
42 use 9858i. 
(2) in section 658K(a>— 
(A) in paragraph (1)— 
(i) in subparagraph (B)— 
(I) by striking clause (iv) and inserting the 
following: 
"(iv) whether the head of the family unit is a 
single parent;"; 
(II) in clause (v)— 
(aa) in the matter preceding subclause (I), 
by striking "including the amount obtained 
from (and separately identified)—" and insert-
ing "including—"; and 
(bb) by striking subclause (II) and insert-
ing the following: 
"(II) cash or other assistance under— 
"(aa) the temporary assistance for needy 
families program under part A of title IV of 
the Social Security Act (42 U.S.C. 601 et seq.); 
and 
"(bb) a State program for which State 
spending is counted toward the maintenance 
of effort requirement under section 409(a)(7) 
of the Social 
Security Act (42 U.S.C. 
609(a)(7));"; and 
(III) in clause (x), by striking "week" and 
inserting "month"; and 
(ii) by striking subparagraph (D) and inserting 
the following: 
"(D) USE OF SAMPLES.— 
"(i) AUTHORITY.—A State may comply with the 
requirement to collect the information described in 
subparagraph (B) through the use of disaggregated 
case record information on a sample of families selected 
through the use of scientifically acceptable sampling 
methods approved by the Secretary. 
"(ii) SAMPLING AND OTHER METHODS.—^The Sec-
retary shall provide the States with such case sampling 
plans and data collection procedures as the Secretary 
deems necessary to produce statistically valid samples 
of the information described in subparagraph (B). The 
Secretary may develop and implement procedures for 
verif3dng the quality of data submitted by the States."; 
and 
(B) in paragraph (2)— 
(i) in the heading, by striking "BIANNUAL" and 
inserting "AlSfNUAL"; and 
(ii) by striking "6" and inserting " 12"; 
42 use 9858J. 
(3) in section 658L, by striking "1997" and inserting "1998"; 
42 use 9858m. 
(4) in section 6580(c)(6)(C), by striking "(A)" and inserting 
"(B)"; and 
42 use 9858n. 
(5) in section 658P(13), by striking "or" and inserting "and". 
42 u s e 618 note. 
SEC. 5603. EFFECTIVE DATES. 
(a) IN GENERAL.—Except as provided in subsection (b), this 
chapter and the amendments made by this chapter shall take 
effect as if included in the enactment of title VI of the Personal 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 647 
Responsibility and Work Opportunity Reconciliation Act of 1996 
(Public Law 104-193; 110 Stat. 2278). 
(b) 
EXCEPTIONS.—^The 
amendment 
made 
by 
section 
5601(a)(2)(B) shall take effect on October 1, 1997. 
CHAPTER 7—ERISA AMENDMENTS RELATING TO 
MEDICAL CHILD SUPPORT ORDERS 
SEC. 5611. AMENDMENTS RELATING TO SECTION 303 OF THE PER-
SONAL RESPONSIBILITY AND WORK OPPORTUNITY REC-
ONCILIATION ACT OF 1996. 
(a) 
PRIVACY 
SAFEGUARDS FOR 
MEDICAL 
CHILD 
SUPPORT 
ORDERS.—Section 609(a)(3)(A) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1169(a)(3)(A)) is amended by adding 
at the end the following: "except that, to the extent provided in 
the order, the name and mailing address of an official of a State 
or a political subdivision thereof may be substituted for the mailing 
address of any such alternate recipient,". 
(b) PAYMENT TO STATE OFFICIAL TREATED AS SATISFACTION 
OF PLAN'S OBLIGATION.—Section 609(a) of such Act (29 U.S.C. 
1169(a)) is amended by adding at the end the following new para-
graph: 
"(9) PAYMENT TO STATE OFFICIAL TREATED AS SATISFACTION 
OF PLAN'S OBLIGATION TO MAKE PAYMENT TO ALTERNATE RECIPI-
ENT.—^Pa5nnent of benefits by a group health plan to an official 
of a State or a political subdivision thereof whose name and 
address have been substituted for the name and address of 
an alternate recipient in a qualified medical child support order, 
pursuant to paragraph (3XA), shall be treated, for purposes 
of this title, as payment of benefits to the alternate recipient.". 
(c) EFFECTIVE DATE.—^The amendments made by this section 29USCii69 
shall apply with respect to medical child support orders issued note. 
on or after the date of the enactment of this Act. 
SEC. 5612. AMENDMENT RELATING TO SECTION 381 OF THE PERSONAL 
RESPONSIBILITY AND WORK OPPORTUNITY RECONCILI-
ATION ACT OF 1996. 
(a) CLARIFICATION OF EFFECT OF ADMINISTRATIVE NOTICES.— 
Section 609(a)(2)(B) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1169(a)(2)(B)) is amended by adding at 
the end the following new sentence: "For purposes of tnis subpara-
graph, an administrative notice which is issued pursuant to an 
administrative process referred to in subclause (II) of the preceding 
sentence and which has the effect of an order described in clause 
(i) or (ii) of the preceding sentence shall be treated as such an 
order.". 
(b) EFFECTIVE DATE.—^The amendment made by this section 29USC1169 
shall be effective as if included in the enactment of section 381 note. 
of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 (Public Law 104-193; 110 Stat. 2257). 
SEC. 5613. AMENDMENTS RELATING TO SECTION 382 OF THE PER-
SONAL RESPONSIBILITY AND WORK OPPORTUNITY REC-
ONCILIATION ACT OF 1996. 
(a) 
ELIMINATION OF REQUIREMENT THAT ORDERS SPECIFY 
AFFECTED PLANS.—Section 609(a)(3) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1169(a)(3)) is amended— 
(1) in subparagraph (B), by striking **by the plan"; 
I l l STAT. 648 
PUBLIC LAW 105-33—AUG. 5, 1997 
(2) by adding "and" at the end of subparagraph (B); 
(3) in subparagraph (C), by striking ", and" and inserting 
a period; and 
(4) by striking subparagraph (D). 
(b) 
CLARIFICATION OF APPLICABILITY OF ORDERS.—Section 
609(a)(1) of such Act (29 U.S.C. 1169(a)(1)) is amended by adding 
at the end the following new sentence: "A qualified medical child 
support order with respect to any participant or beneficiary shall 
be deemed to apply to each group health plan which has received 
such order, from which the participant or beneficiary is eligible 
to receive benefits, and with respect to which the requirements 
of paragraph (4) are met.". 
29 use 1169 
(c) EFFECTIVE DATE.—The amendments made by this section 
i^ote. 
shall apply with respect to medical child support orders issued 
on or after the date of the enactment of this Act. 
Subtitle G—^Miscellaneous 
31 use 3101. 
SEC. 5701. INCREASE IN PUBLIC DEBT LIMIT. 
Subsection (b) of section 3101 of title 31, United States Code, 
is amended by striking the dollar amount contained therein and 
inserting "$5,950,000,000,000". 
SEC. 6702. AUTHORIZATION OF APPROPRIATIONS FOR ENFORCEMENT 
INITIATIVES RELATED TO THE EARNED INCOME TAX 
CREDIT. 
In addition to any other funds available therefor, there are 
authorized to be appropriated to the Secretary of the Treasury, 
for improved application of the earned income credit under section 
32 of tne Internal Revenue Code of 1986, not more than— 
(1) $138,000,000 for fiscal year 1998; 
(2) $143,000,000 for fiscal year 1999; 
(3) $144,000,000 for fiscal year 2000; 
(4) $145,000,000 for fiscal year 2001; and 
(5) $146,000,000 for fiscal year 2002. 
TITLE VI—EDUCATION AND RELATED 
PROVISIONS 
Subtitle A—Higher Education 
SEC. 6101. MANAGEMENT AND RECOVERY OF RESERVES. 
(a) AMENDMENT.—Section 422 of the Higher Education Act 
of 1965 (20 U.S.C. 1072) is amended by adding after subsection 
(g) the following new subsection: 
"(h) RECALL OF RESERVES; LIMITATIONS ON USE OF RESERVE 
FUNDS AND ASSETS.— 
"(1) IN GENERAL.—^Notwithstanding any other provision of 
law, the Secretary shall, except as otherwise provided in this 
subsection, recall $1,000,000,000 from the reserve funds held 
by guaranty agencies on September 1, 2002. 
"(2) DEPOSIT.—Funds recalled by the Secretary under this 
subsection shall be deposited in the Treasury. 
"(3) REQUIRED SHARE.—^The Secretary shall require each 
guaranty agency to return reserve funds under paragraph (1) 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 649 
based on the agency's required share of recalled reserve funds 
held by guaranty agencies as of September 30, 1996. For pur-
poses of this paragraph, a guaranty agency's required share 
of recalled reserve funds shall be determined as follows: 
"(A) The Secretary shall compute each guaranty agen-
cy's reserve ratio by dividing (i) the amount held in the 
agency's reserve funds as of September 30, 1996 (but 
reflecting 
later 
accounting 
or 
auditing 
adjustments 
approved by the Secretary), by (ii) the original principal 
amount of all logins for which the agency has an outstand-
ing insurance obligation as of such date, including amounts 
of outstanding loans transferred to the agency from another 
guaranty agency. 
"(B) If the reserve ratio of any guaranty agency as 
computed under subparagraph (A) exceeds 2.0 percent, the 
agency's required share shall include so much of the 
amounts held in the agency's reserve funds as exceed a 
reserve ratio of 2.0 percent. 
"(C) If any additional amount is required to be recalled 
under paragraph (1) (sifter deducting the total of the 
required shares calculated under subparagraph (B)), such 
additional amount shall be obtained by imposing on each 
guaranty agency an equal percentage reduction in the 
amount of the agency's reserve funds remaining sifter 
deduction of the amount recalled under subparagraph (B), 
except that such percentage reduction under this subpara-
graph shall not result in the agency's reserve ratio being 
reduced below 0.58 percent. The equal percentage reduction 
shall be the percentage obtained by dividing— 
"(i) the additional amount required to be recalled 
(after deducting the total of the required shares cal-
culated under subparagraph (B)), by 
"(ii) the total amount of all such agencies' reserve 
funds remaining (after deduction of the required shares 
calculated under such subparagraph). 
"(D) If any additional amount is required to be recalled 
under paragraph (1) (after deducting the total of the 
required shares calculated under subparagraphs (B) and 
(C)), such additional amount shall be obtained by imposing 
on each guaranty agency with a reserve ratio (after deduct-
ing the required shares calculated under such subpara-
graphs) in excess of 0.58 percent an equal percentage reduc-
tion in the amount of the agency's reserve funds remaining 
(after such deduction) that exceed a reserve ratio of 0.58 
percent. The equal percentage reduction shall be the 
percentage obtained by dividing— 
"(i) the additional amount to be recalled under 
paragraph (1) (after deducting the amount recalled 
under subparagraphs (B) and (C)), by 
"(ii) the total amount of all such agencies' reserve 
funds remaining (sifter deduction of the required shares 
calculated under such subparagraphs) that exceed a 
reserve ratio of 0.58 percent. 
"(4) RESTRICTED ACCOUNTS REQUIRED.— 
"(A) IN GENERAL.—Within 90 days after the beginning 
of each of the fiscal years 1998 through 2002, each guaranty 
agency shall transfer a portion of the agency's required 
39-194 O - 97 - 22 . QL 3 Part 1 
I l l STAT. 650 
PUBLIC LAW 105-33—AUG. 5, 1997 
share determined under paragraph (3) to a restricted 
account established by the agency that is of a type selected 
by the agency with the approval of the Secretary. Funds 
transferred to such restricted accounts shall be invested 
in obligations issued or guaranteed by the United States 
or in other similarly low-risk securities. 
"(B) REQUIREMENT.—A guaranty agency shall not use 
the funds in such a restricted account for any purpose 
without the express written permission of the Secretary, 
except that a guaranty agency may use the earnings from 
such restricted account for default reduction activities. 
"(C) INSTALLMENTS.—In each of fiscal years 1998 
through 2002, each guaranty agency shall transfer the 
agency's required share to such restricted account in 5 
equal annual installments, except that— 
"(i) a guaranty agency that has a reserve ratio 
(as computed under subparagraph (3)(A)) equal to or 
less than 1.10 percent may transfer the agency's 
required share to such account in 4 equal installments 
beginning in fiscal year 1999; and 
"(ii) a guaranty agency may transfer such required 
share to such account in accordance with such other 
payment schedules as are approved by the Secretary. 
"(5) SHORTAGE.—If, on September 1, 2002, the total amount 
in the restricted accounts described in paragraph (4) is less 
than the amount the Secretary is required to recall under 
paragraph (1), the Secretary shall require the return of the 
amount of the shortage from other reserve funds held by guar-
anty agencies under procedures established by the Secretary. 
The Secretary shall first attempt to obtain the amount of such 
shortage from each guaranty agency that failed to transfer 
the agenc^s required share to the agency's restricted account 
in accordance with paragraph (4). 
"(6) ENFORCEMENT.— 
"(A) IN GENERAL,—^The Secretary may take such 
reasonable measures, and require such information, as may 
be necessary to ensure that guaranty agencies comply with 
the requirements of this subsection. 
"(B) PROHIBITION.—If the Secretary determines that 
a guaranty agency has failed to transfer to a restricted 
account any portion of the agenc^s required share under 
this subsection, the agency may not receive any other funds 
under this part until the Secretary determines that the 
agency has so transferred the agency's required share. 
"(C) WAIVER.—^The Secretary may waive the require-
ments of subparagraph (B) for a guaranty agency described 
in such subparagraph if the Secretary determines that 
there are extenuating circumstances beyond the control 
of the agency that justify such waiver. 
"(7) LIMITATION.— 
"(A) RESTRICTION ON OTHER AUTHORITY.—The Sec-
retary shall not have any authority to direct a guaranty 
agency to return reserve funds under subsection (g)(1)(A) 
during the period from the date of enactment of the Bal-
anced Budget Act of 1997 through September 30, 2002. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 651 
"(B) USE OF TERMINATION COLLECTIONS.—Any reserve 
funds directed by the Secretary to be returned to the Sec-
retary under subsection (g)(1)(B) during such period that 
do not exceed a guaranty agency's required share of recalled 
reserve funds under paragraph (3)— 
"(i) shall be used to satisfy the agency's required 
share of recalled reserve funds; and 
"(ii) shall be deposited in the restricted account 
established by the agency under paragraph (4), without 
regard to whether such funds exceed the next install-
ment required under such paragraph. 
"(C) USE OF SANCTIONS COLLECTIONS.—Any reserve 
funds directed by the Secretary to be returned to the Sec-
retary under subsection (g)(1)(C) during such period that 
do not exceed a guaranty agency's next installment under 
paragraph (4)— 
"(i) shall be used to satisfy the agency's next 
installment; and 
"(ii) shall be deposited in the restricted account 
established by the agency under paragraph (4). 
"(D) BALANCE AVAILABLE TO SECRETARY.—^Any reserve 
funds directed by the Secretary to be returned to the Sec-
retary under subparagraph (B) or (C) of subsection (g)(1) 
that remain after satisfaction of the requirements of sub-
paragraphs (B) and (C) of this paragraph shall be deposited 
in the Treasury. 
"(8) DEFINITIONS.—For the purposes of this subsection: 
"(A) 
DEFAULT 
REDUCTION 
ACTIVITIES.—^The 
term 
'default reduction activities' means activities to reduce stu-
dent loan defaults that improve, strengthen, and expand 
default prevention activities, such as— 
"(i) establishing a program of partial loan cancella-
tion to reward disadvantaged borrowers for good repay-
ment histories with their lenders; 
"(ii) establishing a financial and debt management 
counseling program for high-risk borrowers that pro-
vides long-term training (beginning prior to the jfirst 
disbursement of the borrower's first student loan and 
continuing through the completion of the borrower's 
program of education or training) in budgeting and 
other aspects of financial management, including debt 
management; 
"(iii) establishing a program of placement counsel-
ing to assist high-risk borrowers in identifying employ-
ment or additional training opportunities; and 
"(iv) developing public service announcements that 
would detail consequences of student loan default and 
provide information regarding a toll-free telephone 
number established by the guaranty agency for use 
by borrowers seeking assistance in avoiding default. 
"(B) RESERVE FUNDS.—^The term 'reserve funds' when 
used with respect to a guaranty agency— 
"(i) includes any reserve funds in cash or liquid 
assets held by the guaranty agency, or held by, or 
under the control of, any other entity; and 
"(ii) does not include buildings, equipment, or other 
nonliquid assets.". 
I l l STAT. 652 
PUBLIC LAW 105-33—AUG. 5, 1997 
(b) CONFORMING AMENDMENT.—Section 428(c)(9)(A) of the 
Higher Education Act of 1965 (20 U.S.C. 1078(c)(9)(A)) is amended— 
(1) in the first sentence, by striking "for the fiscal year 
of the agency that begins in 1993"; and 
(2) by striking the third sentence. 
SEC. 6102. REPEAL OF DIRECT LOAN ORIGINATION FEES TO INSTITU-
TIONS OF IflGHER EDUCATION. 
Section 452 of the Higher Education Act of 1965 (20 U.S.C. 
1087b) is amended— 
(1) by striking subsection (b); and 
(2) by redesignating subsections (c) and (d) as subsections 
(b) and (c), respectively. 
SEC. 6103. FUNDS FOR ADMINISTRATIVE EXPENSES. 
Subsection (a) of section 458 of the Higher Education Act of 
1965 (20 U.S.C. 1087h(a)) is amended to read as follows: 
"(a) ADMINISTRATIVE EXPENSES.— 
"(1) IN GENERAL.—^Each fiscal year, there shall be available 
to the Secretary from funds not otherwise appropriated, funds 
to be obligated for— 
"(A) administrative costs under this part and part B, 
including the costs of the direct student loan programs 
under this part, and 
"(B) administrative cost allowances payable to guar-
anty agencies under part B and calculated in accordance 
with paragraph (2), 
not to exceed (from such funds not otherwise appropriated) 
$532,000,000 in fiscal year 1998, $610,000,000 in fiscal year 
1999, $705,000,000 in fiscal year 2000, $750,000,000 in fiscal 
year 2001, and $750,000,000 in fiscal year 2002. Administrative 
cost allowances under subparagraph (B) of this paragraph shall 
be paid quarterly and used in accordance with section 428(f). 
The Secretary may carry over funds available under this section 
to a subsequent fiscal year. 
"(2) CALCULATION BASIS.—Administrative cost allowances 
payable to guaranty agencies under paragraph (1)(B) shall be 
calculated on the basis of 0.85 percent of the total principal 
amount of loans upon which insurance was issued in excess 
of $8,200,000,000 in fiscal year 1997 and upon which insurance 
is issued on or after October 1, 1997, except that such allow-
ances shall not exceed— 
"(A) $170,000,000 for each of the fiscal years 1998 
and 1999; or 
"(B) $150,000,000 for each of the fiscal years 2000, 
2001, and 2002.". 
SEC. 6104. EXTENSION OF STUDENT AID PROGRAMS. 
Title rV of the Higher Education Act of 1965 (20 U.S.C. 1070 
et seq.) is amended— 
20USC1074. 
(1) in section 424(a), by striking "1998." and "2002." and 
inserting "2002." and "2006.", respectively; 
20USC1078. 
(2) in section 428(a)(5), by striking "1998," and "2002." 
and inserting "2002," and "2006.", respectively; and 
20USC107&-3. 
(3) in section 428C(e), by striking "1998." and inserting 
"2002.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 653 
Subtitle B—^Repeal of Smith-Hughes 
Vocational Education Act 
SEC. 6201. REPEAL OF SMITH-HUGHES VOCATIONAL EDUCATION ACT. 
The Act of February 23, 1917 (39 Stat. 929, chapter 114; 20 
U.S.C. 11 et seq.) (commonly known as the "Smith-Hughes Voca-
tional Education Act"), is repealed. 
TITLE 
VH—CIVIL 
SERVICE 
RETIRE-
MENT AND RELATED PROVISIONS 
SEC. 7001. INCREASED CONTRIBUTIONS TO FEDERAL CIVILIAN 
RETIREMENT SYSTEMS. 
(a) CIVIL SERVICE RETIREMENT SYSTEM.— 
(1) AGENCY CONTRIBUTIONS.— 
5 use 8334 note. 
(A) IN GENERAL.— Notwithstanding section 8334 (a)(1) 
or (kXD of title 5, United States Code, during the period 
beginning on October 1, 1997, through September 30, 2002, 
each employing agency (other than the United States Postal 
Service or the Metropolitan Washington Airports Authority) 
shall contribute— 
(i) 8.51 percent of the basic pay of an employee; 
(ii) 9.01 percent of the basic pay of a congressional 
employee, a law enforcement officer, a member of the 
Capitol police, or a firefighter; and 
(iii) 9.51 percent of the basic pay of a Member 
of Congress, a Court of Federal Claims judge, a United 
States magistrate, a judge of the United States Court 
of Appeals for the Armed Forces, or a bankruptcy 
judge; 
in lieu of the agency contributions otherwise required under 
section 8334(a)(1) of title 5, United States Code. 
(B) APPLICATION.—^For purposes of subparagraph (A) 
and notwithstanding the amendments made by paragraph 
(3), during the period beginning on January 1, 1999 through 
December 31, 2002, with respect to the United States Postal 
Service and the Metropolitan Washington Airports Author-
ity, the agency contribution shall be determined as though 
those amendments had not been made. 
(2) N o REDUCTION IN AGENCY CONTRIBUTIONS BY THE 
5 USC 8334 note. 
POSTAL SERVICE.—Contributions by the Treasury of the United 
States or the United States Postal Service under section 8348 
(g), (h), or (m) of title 5, United States Code— 
(A) shall not be reduced as a result of the amendments 
made under paragraph (3) of this subsection; and 
(B) shall be computed as though such amendments 
had not been enacted. 
(3) 
INDIVIDUAL 
DEDUCTIONS, 
WITHHOLDINGS, 
AND 
DEPOSITS.— 
(A) 
DEDUCTIONS.—^The 
first 
sentence 
of 
section 
8334(a)(1) of title 5, United States Code, is amended to 
read as follows: 'The employing agency shall deduct and 
withhold from the basic pay of an employee. Member, 
Ill STAT. 654 
PUBLIC LAW 105-33—AUG. 5, 1997 
Congressional employee, law enforcement officer, 
fire-
fighter, bankruptcy judge, judge of the United States Court 
of Appeals for the Armed Forces, United States magistrate. 
Court of Federal Claims judge, or member of the Capitol 
Police, as the case may be, the percentage of basic pay 
applicable under subsection (c).". 
(B) DEPOSITS.—The table under section 8334(c) of title 
5, United States Code, is amended— 
(i) in the matter relating to an employee by strik-
ing: 
"7 
After December 31, 1969."; 
and inserting the following: 
"7 
January 1, 1970, to December 31, 
1998. 
7.25 
January 1, 1999, to December 31, 
1999. 
7.4 
January 1, 2000, to December 31, 
2000. 
7.5 
January 1, 2001, to December 31, 
2002. 
7 
After December 31, 2002."; 
(ii) in the matter relating to a Member or employee 
for congressional employee service by striking: 
"1V2 
After December 31, 1969."; 
and inserting the following: 
"7.5 
January 1, 1970, to December 31, 
1998. 
7.75 
January 1, 1999, to December 31, 
1999. 
7.9 
January 1, 2000, to December 31, 
2000. 
8 
January 1, 2001, to December 31, 
2002. 
7.5 
After December 31, 2002."; 
(iii) in the matter relating to a Member for Member 
service by striking: 
"8 
After December 31, 1969."; 
and inserting the following: 
"8 
January 1, 1970, to December 31, 
1998. 
8.25 
January 1, 1999, to December 31, 
1999. 
8.4 
January 1, 2000, to December 31, 
2000. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 655 
8.5 
January 1, 2001, to December 31, 
2002. 
8 
After December 31, 2002."; 
(iv) in the matter relating to a law enforcement 
officer for law enforcement service and firefighter for 
firefighter service by striking: 
"IVi 
Afler December 31, 1974."; 
and inserting the following: 
"7.5 
January 1, 1975, to December 31, 
1998. 
7.75 
January 1, 1999, to December 31, 
1999. 
7.9 
January 1, 2000, to December 31, 
2000. 
8 
January 1, 2001, to December 31, 
2002. 
7.5 
After December 31, 2002."; 
(v) in the matter relating to a bankruptcy judge 
by striking: 
"8 
After December 31, 1983."; 
and inserting the following: 
"8 
January 1, 1984, to December 31, 
1998. 
8.25 
January 1, 1999, to December 31, 
1999. 
8.4 
January 1, 2000, to December 31, 
2000. 
8.5 
January 1, 2001, to December 31, 
2002. 
8 
Afler December 31, 2002."; 
(vi) in the matter relating to a judge of the United 
States Court of Appeals for the Armed Forces for serv-
ice as a judge of that court by striking: 
"8 
On and after the date of the enact-
ment of the Department of Defense 
Authorization Act, 1984."; 
and inserting the following: 
"8 
The date of enactment of the Depart-
ment of Defense Authorization Act, 
1984, to December 31, 1998. 
8.25 
January 1, 1999, to December 31, 
1999. 
8.4 
January 1, 2000, to December 31, 
2000. 
Ill STAT. 656 
PUBLIC LAW 105-33—AUG. 5, 1997 
8.5 
January 1, 2001, to December 31, 
2002. 
8 
After December 31, 2002."; 
(vii) in the matter relating to a United States 
magistrate by striking: 
"8 
After September 30, 1987."; 
and inserting the following: 
"8 
October 1, 1987, to December 31, 
1998. 
8.25 
January 1, 1999, to December 31, 
1999. 
8.4 
January 1, 2000, to December 31, 
2000. 
8.5 
January 1, 2001, to December 31, 
2002. 
8 
After December 31, 2002."; 
(viii) in the matter relating to a Court of Federal 
Claims judge by striking: 
"8 
After September 30, 1988."; 
and insert the following: 
"8 
October 1, 1988, to December 31, 
1998 
8.25 
January 1, 1999, to December 31, 
1999. 
8.4 
January 1, 2000, to December 31, 
2000. 
8.5 
January 1, 2001, to December 31, 
2002. 
8 
After December 31, 2002."; 
and 
(ix) by inserting after the matter relating to a 
Court of Federal Claims judge the following: 
"Member of the Capitol Police 
2.5 
August 1, 1920, to June 
30, 1926. 
3.6 
July 1, 1926, to June 30, 
1942. 
5 
July 1, 1942, to June 30, 
1948. 
6 
July 1, 1948, to October 
31, 1956. 
6.5 
November 1, 1956, to De-
cember 31, 1969. 
7.5 
January 1, 1970, to De-
cember 31, 1998. 
7.75 
January 1, 1999, to De-
cember 31, 1999. 
7.9 
January 1, 2000, to De-
cember 31, 2000. 
8 
January 1, 2001, to De-
cember 31, 2002. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 657 
7.5 
After December 31, 2002.". 
(4) OTHER SERVICE.— 
(A) MILITARY SERVICE.—Section 8334(j) of title 5, 
United States Code, is amended— 
(i) in paragraph (1)(A) by inserting "and subject 
to paragraph (5)," after "Except as provided in subpara-
graph (B),"; and 
(ii) by adding at the end the following new para-
graph: 
"(5) Effective with respect to any period of military service Effective date. 
after December 31, 1998, the percentage of basic pay under section 
204 of title 37 payable under paragraph (1) shall be equal to 
the same percentage as would be applicable under subsection (c) 
of this section for that same period for service as an employee, 
subject to paragraph (1)(B).". 
(B) VOLUNTEER SERVICE.—Section 8334(1) of title 5, 
United States Code, is amended— 
(i) in paragraph (1) by adding at the end the 
following: "This paragraph shall be subject to para-
graph (4)."; and 
(ii) by adding at the end the following new para-
graph: 
"(4) Effective with respect to any period of service after Decem- Effective date. 
ber 31, 1998, the percentage of the readjustment allowance or 
stipend (as the case may be) payable under paragraph (1) shall 
be equal to the same percentage as would be applicable under 
subsection (c) of this section for the same period for service as 
an employee.". 
(b) FEDERAL EMPLOYEES' RETIREMENT SYSTEM.— 
(1) INDIVIDUAL DEDUCTIONS AND WITHHOLDINGS.— 
(A) IN GENERAL.—Section 8422(a) of title 5, United 
States Code, is amended by striking paragraph (2) and 
inserting the following: 
"(2) The percentage to be deducted and withheld from basic 
pay for any pay period shall be equal to— 
"(A) the applicable percentage under paragraph (3), minus 
"(B) the percentage then in effect under section 3101(a) 
of the Internal Revenue Code of 1986 (relating to rate of tax 
for old-age, survivors, and disability insurance). 
"(3) The applicable percentage under this paragraph for civilian 
service shall be as follows: 
"Employee 
Congressional employee 
7 
January 1, 1987, to De-
cember 31, 1998. 
7.25 
January 1, 1999, to De-
cember 31, 1999. 
7.4 
January 1, 2000, to De-
cember 31, 2000. 
7.5 
January 1, 2001, to De-
cember 31, 2002. 
7 
After December 31, 2002. 
7.5 
January 1, 1987, to De-
cember 31, 1998. 
7.75 
January 1, 1999, to De-
cember 31, 1999. 
7.9 
January 1, 2000, to De-
cember 31, 2000. 
8 
January 1, 2001, to De-
cember 31, 2002. 
Ill STAT. 658 
PUBLIC LAW 105-33—AUG. 5, 1997 
7.5 
After December 31, 2002. 
Member 
7.5 
January 1, 1987, to De-
cember 31, 1998. 
7.75 
January 1, 1999, to De-
cember 31, 1999. 
7.9 
January 1, 2000, to De-
cember 31, 2000. 
8 
January 1, 2001, to De-
cember 31, 2002. 
7.5 
After December 31, 2002. 
Law enforcement officer, firefighter, mem- 
7.5 
January 1, 1987, to De-
ber of the Capitol Police, or air traffic 
cember 31, 1998. 
controller. 
7.75 
January 1, 1999, to De-
cember 31, 1999. 
7.9 
January 1, 2000, to De-
cember 31, 2000. 
8 
January 1, 2001, to De-
cember 31, 2002. 
7.5 
Afl«r December 31, 2002.". 
(B) MILITARY SERVICE.—Section 8422(e) of title 5, 
United States Code, is amended— 
(i) in paragraph (1)(A) by inserting "and subject 
to paragraph (6)," after "Except as provided in subpara-
graph (B), ; and 
(ii) by adding at the end the following: 
"(6) The percentage of basic pay under section 204 of title 
37 payable under paragraph (1), with respect to any period of 
military service performed during— 
"(A) January 1, 1999, through December 31, 1999, shall 
be 3.25 percent; 
"(B) January 1, 2000, through December 31, 2000, shall 
be 3.4 percent; and 
"(C) January 1, 2001, through December 31, 2002, shall 
be 3.5 percent.". 
(C) VOLUNTEER SERVICE.—Section 8422(f) of title 5, 
United States Code, is amended— 
(i) in paragraph (1) by adding at the end the 
following: This paragraph shall be subject to para-
graph (4)."; and 
(ii) by adding at the end the following: 
"(4) The percentage of the readjustment allowance or stipend 
(as the case may be) payable under paragraph (1), with respect 
to any period of volunteer service performed during— 
"(A) January 1, 1999, through December 31, 1999, shall 
be 3.25 percent; 
"(B) January 1, 2000, through December 31, 2000, shall 
be 3.4 percent; and 
"(C) January 1, 2001, through December 31, 2002, shall 
be 3.5 percent.". 
5 use 8422 note. 
(2) NO REDUCTION IN AGENCY CONTRIBUTIONS.—Contribu-
tions under section 8423 (a) and (b) of title 5, United States 
Code, shall not be reduced as a result of the amendments 
made under paragraph (1) of this subsection. 
(c) CENTRAL INTELLIGENCE AGENCY RETIREMENT AND DISABIL-
ITY SYSTEM.— 
50 use 2021 
(1) 
AGENCY 
CONTRIBUTIONS.—^Notwithstanding 
section 
note. 
211(a)(2) of the Central Intelligence Agency Retirement Act 
(50 U.S.C. 2021(a)(2)), during the period beginning on October 
1, 1997, through September 30, 2002, the Central Intelligence 
Agency shall contribute 8.51 percent of the basic pay of an 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 659 
employee participating in the Central Intelligence Agency 
Retirement and Disability System in lieu of the agency contribu-
tion otherwise required under section 211(a)(2) of such Act. 
(2) 
INDIVIDUAL 
DEDUCTIONS, 
WITHHOLDINGS, 
AND 
DEPOSITS.—^Notwithstanding section 211(a)(1) of the Central 
Intelligence Agency Retirement Act (50 U.S.C. 2021(a)(1)) 
beginning on January 1, 1999, through December 31, 2002, 
the percentage deducted and withheld from the basic pay of 
an employee participating in the Central Intelligence Agency 
Retirement and Disability System shall be as follows: 
7.25 
January 1, 1999, to December 31, 
1999. 
7.4 
January 1, 2000, to December 31, 
2000. 
7.5 
January 1, 2001, to December 31, 
2002. 
(3) MILITARY SERVICE.—Section 252(h)(1) of the Central 
Intelligence Agency Retirement Act (50 U.S.C. 2082(h)(1)), is 
amended to read as follows: 
"(h)(1)(A) Each participant who has performed military service 
before the date of separation on which entitlement to an annuity 
under this title is based may pay to the Agency an amount equal 
to 7 percent of the amount of basic pay paid under section 204 
of title 37, United States Code, to the participant for each period 
of military service after December 1956; except, the amount to 
be paid for military service performed beginning on January 1, 
1999, through December 31, 2002, shall be as follows: 
"7.25 percent 
January 1, 1999, to December 31, 
of basic pay. 
1999. 
7.4 percent of 
January 1, 2000, to December 31, 
basic pay. 
2000. 
7.5 percent of 
January 1, 2001, to December 31, 
basic pay. 
2002. 
"(B) The amount of such payments shall be based on such 
evidence of basic pay for military service as the participant may 
provide or, if the Director determines sufficient evidence has not 
been provided to adequately determine basic pay for military serv-
ice, such payment shall be based upon estimates of such basic 
pay provided to the Director under paragraph (4).". 
(d) FOREIGN SERVICE RETIREMENT AND DISABILITY SYSTEM.— 
(1) 
AGENCY 
CONTRIBUTIONS.—^Notwithstanding 
section 
805(a) (1) and (2) of the Foreign Service Act of 1980 (22 U.S.C. 
4045(a) (1) and (2)), during the period beginning on October 
1, 1997, through September 30, 2002, each agency employing 
a participant in the Foreign Service Retirement and Disability 
System shall contribute to the Foreign Service Retirement and 
Disability Fund— 
(A) 8.51 percent of the basic pay of each participant 
covered under section 805(a)(1) of such Act participating 
in the Foreign Service Retirement and Disability System; 
and 
22 use 4045 
note. 
Ill STAT. 660 
PUBLIC LAW 105-33—AUG. 5, 1997 
22 use 4045 
note. 
(B) 9.01 percent of the basic pay of each participant 
covered under section 805(a)(2) of such Act participating 
in the Foreign Service Retirement and Disability System; 
in lieu of the agency contribution otherwise required under 
section 805(a) (1) and (2) of such Act. 
(2) 
INDIVIDUAL 
DEDUCTIONS, 
WITHHOLDINGS, 
AND 
DEPOSITS.— 
(A) IN GENERAL.—Notwithstanding section 805(a)(1) of 
the Foreign Service Act of 1980 (22 U.S.C. 4045(a)(1)), 
beginning on January 1, 1999, through December 31, 2002, 
the amount withheld and deducted from the basic pay 
of a participant in the Foreign Service Retirement and 
Disability System shall be as follows: 
22 use 4045 
note. 
7.25 
January 1, 1999, to December 31, 
1999. 
7.4 
January 1, 2000, to December 31, 
2000. 
7.5 
January 1, 2001, to December 31, 
2002. 
(B) FOREIGN SERVICE CRIMINAL INVESTIGATORS/INSPEC-
TORS OF THE OFFICE OF THE INSPECTOR GENERAL, AGENCY 
FOR INTERNATIONAL DEVELOPMENT.—^Notwithstanding sec-
tion 805(a)(2) of the Foreign Service Act of 1980 (22 U.S.C. 
4045(a)(2)), beginning on January 1, 1999, through Decem-
ber 31, 2002, the amount withheld and deducted from 
the basic pay of an eligible Foreign Service criminal inves-
tigator/inspector of the Office of the Inspector General, 
Agency for International Development participating in the 
Foreign Service Retirement and Disability System shall 
be as follows: 
7.75 
January 1, 1999, to December 31, 
1999. 
7.9 
January 1, 2000, to December 31, 
2000. 
8 
January 1, 2001, to December 31, 
2002. 
(C) CONFORMING AMENDMENT.—Section 805(d)(1) of the 
Foreign Service Act of 1980 (22 U.S.C. 4045(d)(1)) is amend-
ed in the table in the matter following subparagraph (B) 
by striking: 
"On and after January 1, 1970 
7"; 
and inserting the following: 
"January 1, 1970, through December 31, 1998, inclu- 
7 
sive. 
January 1, 1999, through December 31, 1999, inclu- 
7.25 
sive. 
January 1, 2000, through December 31, 2000, inclu- 
7.4 
sive. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 661 
January 1, 2001, through December 31, 2002, inclu- 
7.5 
sive. 
After December 31, 2002 
7". 
(D) MILITARY SERVICE.—Section 805(e) of the Foreign 
Service Act of 1980 (22 U.S.C. 4045(e)) is amended— 
(i) in subsection (e)(1) by striking "Each" and 
inserting "Subject to paragraph (5), each"; and 
(ii) by adding after paragraph (4) the following 
new paragraph: 
"(5) Effective with respect to any period of military or naval 
Effective date. 
service after December 31, 1998, the percentage of basic pay under 
section 204 of title 37, United States Code, payable under paragraph 
(1) shall be equal to the same percentage as would be applicable 
under section 8334(c) of title 5, United States Code, for that same 
period for service as an employee.". 
(e) FOREIGN SERVICE PENSION SYSTEM.— 
(1) 
INDIVIDUAL 
DEDUCTIONS AND WITHHOLDINGS 
FROM 
PAY.— 
(A) IN GENERAL.—Section 856(a) of the Foreign Service 
Act of 1980 (22 U.S.C. 4071e(a)) is amended to read as 
follows: 
"(a)(1) The employing agency shall deduct and withhold from 
the basic pay of each participant the applicable percentage of basic 
pay specified in paragraph (2) of this subsection minus the percent-
age then in effect under section 3101(a) of the Internal Revenue 
Code of 1986 (26 U.S.C. 3101(a)) (relating to the rate of tax for 
old age, survivors, and disability insurance). 
"(2) The applicable percentage under this subsection shall be 
as follows: 
"7.5 
Before January 1, 1999. 
7.75 
January 1, 1999, to December 31, 
1999. 
7.9 
January 1, 20C0, to December 31, 
2000. 
8 
January 1, 2001, to December 31, 
2002. 
7.5 
After December 31, 2002.". 
(B) VOLUNTEER SERVICE.—Subsection 854(c) of the For-
eign Service Act of 1980 (22 U.S.C. 4071c(c)) is amended 
to read as follows: 
"(cXl) Credit shall be given under this System to a participant 
for a period of prior satisfactory service as— 
"(A) a volunteer or volunteer leader under the Peace Corps 
Act (22 U.S.C. 2501 et seq.), 
"(B) a volunteer under part A of title VIII of the Economic 
Opportunity Act of 1964, or 
"(C) a full-time volunteer for a period of service of at 
least 1 year's duration under part A, B, or C of title I of 
the Domestic Volunteer Service Act of 1973 (42 U.S.C. 4951 
et seq.), 
if the participant makes a payment to the Fund equal to 3 percent 
of pay received for the volunteer service; except, the amount to 
be paid for volunteer service beginning on January 1, 1999, through 
December 31, 2002, shall be as follows: 
Ill STAT. 662 
PUBLIC LAW 105-33—AUG. 5, 1997 
"3.25 
January 1, 1999, to December 31, 
1999. 
3.4 
January 1, 2000, to December 31, 
2000. 
3.5 
January 1, 2001, to December 31, 
2002. 
Regulations. 
"(2) The amount of such payments shall be determined in 
accordance with regulations of the Secretary of State consistent 
with regulations for making corresponding determinations under 
chapter 83, title 5, United States Code, together with interest 
determined under regulations issued by the Secretary of State.". 
22 use 4071c. 
(2) No REDUCTION IN AGENCY CONTRIBUTIONS.^Agency con-
tributions under section 857 of the Foreign Service Act of 
1980 (22 U.S.C. 407 If) shall not be reduced as a result of 
the amendments made under paragraph (1) of this subsection. 
5 use 8334 note. 
(f) EFFECTIVE DATE.— 
(1) IN GENERAL.—^This section shall take effect on— 
(A) October 1, 1997; or 
(B) if later, the date of enactment of this Act. 
(2) SPECIAL RULE.—If the date of enactment of this Act 
is later than October 1, 1997, then any reference to October 
1, 1997, in subsection (a)(1), (c)(1), or (d)(1) shall be treated 
as a reference to the date of enactment of this Act. 
SEC. 7002. GOVERNMENT CONTRIBUTIONS UNDER THE FEDERAL 
EMPLOYEES HEALTH BENEFITS PROGRAM. 
(a) IN GENERAL.—Section 8906 of title 5, United States Code, 
is amended by striking subsection (a) and all that follows through 
the end of paragraph (1) of subsection (b) and inserting the follow-
ing: 
"(a)(1) Not later than October 1 of each year, the Office of 
Personnel Management shall determine the weighted average of 
the subscription charges that will be in effect during the following 
contract year with respect to— 
"(A) enrollments under this chapter for self alone; and 
"(B) enrollments under this chapter for self and family. 
"(2) In determining each weighted average under paragraph 
(1), the weight to be given to a particular subscription charge 
shall, with respect to each plan (and option) to which it is to 
apply, be commensurate with the number of enroUees enrolled 
in such plan (and option) as of March 31 of the year in which 
the determination is being made. 
"(3) For purposes of paragraph (2), the term 'enroUee' means 
any individusd who, during the contract year for which the weighted 
average is to be used under this section, will be eligible for a 
Government contribution for health benefits. 
"(b)(1) Except as provided in paragraphs (2) and (3), the 
biweekly Government contribution for heedth benefits for an 
employee or annuitant enrolled in a health benefits plan under 
this chapter is adjusted to an amount equal to 72 percent of the 
weighted average under subsection (a)(1) (A) or (B), as applicable. 
For an employee, the adjustment begins on the first day of the 
employee's first pay period of each year. For an annuitant, the 
adjustment begins on the first day of the first period of each 
year for which an annuity payment is made.". 
5 use 8906 note. 
(b) EFFECTIVE DATE.—^This section shall take effect on the 
first day of the contract year that begins in 1999. Nothing in 
this subsection shall prevent the Office of Personnel Management 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 663 
from taking any action, before such first day, which it considers 
necessary in order to ensure the timely implementation of this 
section. 
SEC. 7003. REPEAL OF AUTHORIZATION OF TRANSITIONAL APPRO-
PRIATIONS FOR THE UNITED STATES POSTAL SERVICE. 
(a) REPEAL.— 
(1) IN GENERAL.—Section 2004 of title 39, United States 
Code, is repealed. 
(2) TECHNICAL AND CONFORMING AMENDMENTS.— 
(A) The table of sections for chapter 20 of such title 
is amended by repealing the item relating to section 2004. 
(B) Section 2003(e)(2) of such title is amended by strik-
ing "sections 2401 and 2004" each place it appears and 
inserting "section 2401". 
(b) CLARIFICATION THAT LIABILITIES FORMERLY PAID PURSUANT 
TO SECTION 2004 REMAIN LIABILITIES PAYABLE BY THE POSTAL 
SERVICE.—Section 2003 of title 39, United States Code, is amended 
by adding at the end the following: 
"(h) Liabilities of the former Post Office Department to the 
Employees' Compensation Fund (appropriations for which were 
authorized by former section 2004, as in effect before the effective 
date of this subsection) shall be liabilities of the Postal Service 
payable out of the Fund.". 
(c) EFFECTIVE DATE.— 
39 use 2003 
(1) IN GENERAL.—^This section and the amendments made note, 
by this section shall take effect on the date of the enactment 
of this Act or October 1, 1997, whichever is later. 
(2) PROVISIONS RELATING TO PAYMENTS FOR FISCAL YEAR 
1998.— 
(A) AMOUNTS NOT YET PAID.—^No pajrment may be made 
to the Postal Service Fund, on or after the date of the 
enactment of this Act, pursuant to any appropriation for 
fiscal year 1998 authorized by section 2004 of title 39, 
United States Code (as in effect before the effective date 
of this section). 
(B) AMOUNTS PAID.—If any pa3anent to the Postal Serv-
ice Fund is or has been made pursuant to an appropriation 
for fiscal year 1998 authorized by such section 2004, then, 
an amount equal to the amount of such payment shall 
be paid from such Fund into the Treasury as miscellaneous 
receipts before October 1, 1998. 
TITLE VIII—VETERANS AND RELATED 
MATTERS 
Veterans 
Reconciliation 
Act of 1997. 
SEC. 8001. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This title may be cited as the "Veterans 
38 USC 101 note. 
Reconciliation Act of 1997". 
(b) TABLE OF CONTENTS.—^The table of contents for this title 
is as follows: 
Sec. 8001. Short title; table of contents. 
Subtitle A—Extension of Temporary Authorities 
Sec. 8011. Enhanced loan asset sale authority. 
Sec. 8012. Home loan fees. 
I l l STAT. 664 
PUBLIC LAW 105-33—AUG. 5, 1997 
Sec. 8013. Procedures applicable to liquidation sales on defaulted home loans guar-
anteed by the Department of Veterans Affairs. 
Sec. 8014. Income verification authority. 
Sec. 8015. Limitation on pension for certain recipients of medicaid-covered niu-sing 
home care. 
Subtitle B—Copayments and Medical Care Cost Recovery 
Sec. 8021. Authority to require that certain veterans make copa)mients in exchange 
for receiving health care benefits. 
Sec. 8022. Medical care cost recovery authority. 
Sec. 8023. Department of Veterans Affairs medical-care receipts. 
Subtitle C—Other Matters 
Sec. 8031. Rounding down of cost-of-living adjustments in compensation and DIC 
rates for fiscal years 1998 through 2002. 
Sec. 8032. Increase in amount of home loan fees for the purchase of repossessed 
homes fi-om the Department of Veterans Affairs. 
Sec. 8033. Withholding of payments and benefits. 
Subtitle A—^Extension of Temporary 
Authorities 
SEC. 8011. ENHANCED LOAN ASSET SALE AUTHORITY. 
Section 3720(h)(2) of title 38, United States Code, is amended 
by striking out "December 31, 1997" and inserting in lieu thereof 
"December 31, 2002". 
SEC. 8012. HOME LOAN FEES. 
Section 3729(a) of title 38, United States Code, is amended— 
(1) in paragraph (4), by striking out "October 1, 1998" 
and inserting in lieu thereof "October 1, 2002"; and 
(2) in paragraph (5)(C), by striking out "October 1, 1998" 
and inserting in lieu thereof "October 1, 2002". 
SEC. 8013. PROCEDURES APPUCABLE TO LIQUTOATION SALES ON 
DEFAULTED 
HOME 
LOANS 
GUARANTEED 
BY 
THE 
DEPARTMENT OF VETERANS AFFAHIS. 
Section 3732(c)(ll) of title 38, United States Code, is amended 
by striking out "October 1, 1998" and inserting in lieu thereof 
"October 1, 2002". 
SEC. 8014. INCOME VERIFICATION AUTHORITY. 
Section 5317(g) of title 38, United States Code, is amended 
by striking out "September 30, 1998" and inserting in lieu thereof 
"September 30, 2002". 
SEC. 8015. LIMITATION ON PENSION FOR CERTAIN RECIPIENTS OF 
MEDICAID-COVERED NURSING HOME CARE. 
Section 5503(f)(7) of title 38, United States Code, is amended 
by striking out "September 30, 1998" and inserting in lieu thereof 
"September 30, 2002". 
Subtitle B—Copayments and Medical Care 
Cost Recovery 
SEC. 8021. AUTHORITY TO REQUIRE THAT CERTAIN VETERANS MAKE 
COPAYMENTS IN EXCHANGE FOR RECEIVING HEALTH 
CARE BENEFITS. 
(a) HOSPITAL AND MEDICAL CARE.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 665 
(1) EXTENSION.—Section 1710(f)(2)(B) of title 38, United 
States Code, is amended by inserting "before September 30, 
2002," after "(B)". 
(2) REPEAL OF SUPERSEDED PROVISION.—Section 8013(e) of 
the Omnibus Budget Reconciliation Act of 1990 (38 U.S.C. 
1710 note) is repealed. 
(b) OUTPATIENT MEDICATIONS.—Section 1722A(c) of title 38, 
United States Code, is amended by striking out "September 30, 
1998" and inserting in lieu thereof "September 30, 2002". 
SEC. 8022. MEDICAL CARE COST RECOVERY AUTHORITY. 
Section 1729(a)(2)(E) of title 38, United States Code, is amended 
by striking out "October 1, 1998" and inserting in lieu thereof 
"October 1, 2002". 
SEC. 8023. DEPARTMENT OF VETERANS AFFAIRS 
MEDICAL-CARE 
RECEIPTS. 
(a) ALLOCATION OF RECEIPTS.—(1) Chapter 17 of title 38, United 
States Code, is amended by inserting £ifter section 1729 the follow-
ing new section: 
"§1729A. Department of Veterans Affairs Medical 
Care 
Collections Fund 
"(a) There is in the Treasury a fund to be known as the 
Department of Veterans Affairs Medical Care Collections Fund. 
"(b) Amounts recovered or collected after June 30, 1997, under 
any of the following provisions of law shall be deposited in the 
fiind: 
"(1) Section 1710(f) of this title. 
"(2) Section 1710(g) of this title. 
"(3) Section 1711 of this title. 
"(4) Section 1722A of this title. 
"(5) Section 1729 of this title. 
"(6) Public Law 87-693, popularly known as the 'Federal 
Medical Care Recovery Act' (42 U.S.C. 2651 et seq.), to the 
extent that a recovery or collection under that law is based 
on medical care or services furnished under this chapter. 
"(c)(1) Subject to the provisions of appropriations Acts, amounts 
in the fund shall be available, without fiscal year limitation, to 
the Secretary for the following purposes: 
"(A) Furnishing medical care and services under this chap-
ter, to be available during any fiscal year for the same purposes 
and subject to the same limitations (other than with respect 
to the period of availability for obligation) as apply to amounts 
appropriated from the general fund of the Treasury for that 
fiscal year for medical care. 
"(B) Expenses of the Department for the identification, 
billing, auditing, and collection of amounts owed the United 
States by reason of medical care and services furnished under 
this chapter. 
"(2) Amounts available under paragraph (1) may not be used 
for any purpose other than a purpose set forth in subparagraph 
(A) or (B) of that paragraph. 
"(3)(A) If for fiscal year 1998 the Secretary determines that 
the total amount to be recovered under the provisions of law speci-
fied in subsection (b) will be less than the amount contained in 
the latest Congressional Budget Office baseline estimate (computed 
under section 257 of the Balanced Budget and Emergency Deficit 
I l l STAT. 666 
PUBLIC LAW 105-33—AUG. 5, 1997 
Control Act of 1985) for the amount of such recoveries for fiscal 
year 1998 by at least $25,000,000, the Secretary shall promptly 
certify to the Secretary of the Treasury the amount of the shortfall 
(as estimated by the Secretary) that is in excess of $25,000,000. 
Upon receipt of such a certification, the Secretary of the Treasury 
shall, not later than 30 days after receiving the certification, deposit 
in the fund, from any unobligated amounts in the Treasury, an 
amount equed to the amount certified by the Secretary. 
"(B) If for fisc£d year 1998 a deposit is made under subpara-
graph (A) and the Secretary subsequently determines that the 
actual amount recovered for that fiscal year under the provisions 
of law specified in subsection (b) is greater than the amount esti-
mated by the Secretary that was used for purposes of the certifi-
cation by the Secretary under subparagraph (A), the Secretary 
shall pay into the general fund of the Treasury, from amounts 
available for medical care, an amount equal to the difference 
between the amount actually recovered and the amount so esti-
mated (but not in excess of the amount of the deposit under subpara-
graph (A) pursuant to such certification). 
"(C) If for fiscal year 1998 a deposit is made under subpara-
graph (A) and the Secretary subsequently determines that the 
actual amount recovered for that fiscal year under the provisions 
of law specified in subsection (b) is less than the amount estimated 
by the Secretary that was used for purposes of the certification 
by the Secretary under subparagraph (A), the Secretary shall 
promptly certify to the Secretary of the Treasury the amount of 
the shortfall. Upon receipt of such a certification, the Secretary 
of the Treasury shall, not later than 30 days after receiving the 
certification, deposit in the fund, from any unobligated amounts 
in the Treasury, an amount equal to the amount certified by the 
Secretary. 
"(d)(1) Of the total amount recovered or collected by the Depart-
ment during a fiscal year under the provisions of law referred 
to in subsection (b) and made available from the fund, the Secretary 
shall make available to each designated health care region of the 
Department an amount that bears the same ratio to the total 
amount so made available as the amount recovered or collected 
by such region during that fiscal year under such provisions of 
law bears to such totaJ amount recovered or collected during that 
fiscal year. The Secretary shall make available to each region 
the entirety of the amount specified to be made available to such 
region by the preceding sentence. 
"(2) In this subsection, the term 'designated health care regions 
of the Department' means the geographic areas designated by the 
Secretary for purposes of the management of, and allocation of 
resources for, health care services provided by the Department. 
Reports. 
"(e)(1) The Secretary shall submit to the Committees on Veter-
ans' Affairs of the Senate and House of Representatives quarterly 
reports on the operation of this section for fiscal years 1998, 1999, 
and 2000 and for the first quarter of fiscal year 2001. Each such 
report shall specify the amount collected under each of the provi-
sions specified in subsection (b) during the preceding quarter and 
the amount originally estimated to be collected under each such 
provision during such quarter. 
"(2) A report under paragraph (1) for a quarter shall be submit-
ted not later than 45 days after the end of that quarter. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 667 
"(f) Amounts recovered or collected under the provisions of 
law referred to in subsection (b) shall be treated for the purposes 
of sections 251 and 252 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 (2 U.S.C. 901, 902) as offsets to discre-
tionary appropriations (rather than as offsets to direct spending) 
to the extent that such amounts are made available for expenditure 
in appropriations Acts for the purposes specified in subsection (c).". 
(2) The table of sections at the beginning of such chapter 
is amended by inserting after the item relating to section 1729 
the following new item: 
"1729A. Department of Veterans Affairs Medical Care Collections Fund.". 
(b) CONFORMING AMENDMENTS.—Chapter 17 of such title is 
amended as follows: 
(1) Section 1710(f) is amended by striking out paragraph 
(4) and redesignating paragraph (5) as paragraph (4). 
(2) Section 1710(g) is amended by striking out paragraph 
(4). 
(3) Section 1722A(b) is amended by striking out "Depart-
ment of Veterans Affairs Medical-Care Cost Recovery Fund" 
and inserting in lieu thereof "Department of Veterans Affairs 
Medical Care Collections Fund". 
(4) Section 1729 is amended by striking out subsection 
(g). 
(c) DISPOSITION OF FUNDS IN MEDICAL-CARE COST RECOVERY 38 use i729 
FUND.—^The amount of the unobligated balance remaining in the ™te. 
Department of Vetergins Affairs Medical-Care Cost Recovery Fund 
(established pursuant to section 1729(g)(1) of title 38, United States 
Code) at the close of June 30, 1997, shall be deposited, not later 
than December 31, 1997, in the Treasury as miscellaneous receipts, 
and the Department of Veterans Affairs Medical-Care Cost Recovery 
Fund shall be terminated when the deposit is made. 
(d) DETERMINATION OF AMOUNTS SUBJECT TO RECOVERY.—Sec-
tion 1729 of title 38, United States Code, is amended— 
(1) in subsection (a)(1), by striking out "the reasonable 
cost of" and inserting in lieu thereof "reasonable charges for"; 
and 
(2) in subsection (c)(2)— 
(A) by striking out "the reasonable cost of in the 
first sentence of subpsiragraph (A) and in subparagraph 
(B) and inserting in lieu thereof "reasonable charges for"; 
and 
(B) by striking out "cost" in the second sentence of 
subparagraph (A) and inserting in lieu thereof "charges". 
(e) TECHNICAL AMENDMENT.—Paragraph (2) of section 712(b) 
of title 38, United States Code, is amended— 
(1) by striking out subparagraph (B); and 
(2) by redesignating subparagraph (C) as subparagraph 
(B). 
(f) IMPLEMENTATION.—Not later than January 1, 1999, the Sec- Reports, 
retary of Veterans Affairs shall submit to the Committees on Veter- 
38 USC 1729A 
ans' Affairs of the Senate and House of Representatives a report 
°°^-
on the implementation of this section. The report shall describe 
the collections under each of the provisions specified in section 
1729A(b) of title 38, United States Code, as added by subsection 
(a). Information on such collections shall be shown for each of 
the health service networks (known as Veterans Integrated Service 
Networks) and, to the extent practicable for each fecility within 
Ill STAT. 668 
PUBLIC LAW 105-33—AUG. 5, 1997 
each such network. The Secretary shall include in the report an 
analysis of differences among the networks with respect to (A) 
the market in which the networks operates, (B) the effort expended 
to achieve collections, (C) the efficiency of such effort, and (D) 
any other relevant information. 
38 use 712 note. 
(g) EFFECTIVE DATE.—(1) Except as provided in paragraph (2), 
this section and the amendments made by this section shall take 
effect on October 1, 1997. 
(2) The amendments made by subsection (d) shall take effect 
on the date of the enactment of this Act. 
Subtitle C—Other Matters 
SEC. 8031. ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN 
COMPENSATION AND DIC RATES FOR FISCAL YEARS 1998 
THROUGH 2002. 
(a) COMPENSATION COLAS.—(1) Chapter 11 of title 38, United 
States Code, is amended by inserting after section 1102 the follow-
ing new section: 
*
*
§ 1103. Cost-of-living adjustments 
"(a) In the computation of cost-of-living adjustments for fiscal 
years 1998 through 2002 in the rates of, and dollar limitations 
applicable to, compensation payable under this chapter, such adjust-
ments shall be made by a uniform percentage that is no more 
than the percentage equal to the social security increase for that 
fiscal year, with all increased monthly rates and limitations (other 
than increased rates or limitations equal to a whole dollar amount) 
rounded down to the next lower whole dollar amount. 
"(b) For purposes of this section, the term 'social security 
increase' means the percentage by which benefit amounts payable 
under title II of the Social Security Act (42 U.S.C. 401 et seq.) 
are increased for any fiscal year as a result of a determination 
under section 215(i) of such Act (42 U.S.C. 415(1)).". 
(2) The table of sections at the beginning of such chapter 
is amended by inserting after the item relating to section 1102 
the following new item: 
"1103. Cost-of-living adjustments.". 
(b) DIC COLAS.—(1) Chapter 13 of title 38, United States 
Code, is amended by inserting after section 1302 the following 
new section: 
*
*
§ 1303. Cost-of-living adjustments 
"(a) In the computation of cost-of-living adjustments for fiscal 
years 1998 through 2002 in the rates of dependency and indemnity 
compensation payable under this chapter, such adjustments (except 
as provided in subsection (b)) shall be made by a uniform percentage 
that is no more than the percentage equal to the social security 
increase for that fiscal year, with all increased monthly rates (other 
than increased rates equal to a whole dollar amount) rounded 
down to the next lower whole dollar amount. 
"(b) For purposes of this section, the term 'social security 
increase' means the percentage by which benefit amounts payable 
under title II of the Social Security Act (42 U.S.C. 401 et seq.) 
are increased for any fiscal year as a result of a determination 
under section 215(i) of such Act (42 U.S.C. 415(i)).". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 669 
(2) The table of sections at the beginning of such chapter 
is amended by inserting after the item relating to section 1302 
the following new item: 
"1303. Cost-of-living adjustments.". 
SEC. 
8032. 
INCREASE 
IN 
AMOUNT 
OF 
HOME 
LOAN 
FEES 
FOR 
THE 
PUR-
CHASE OF REPOSSESSED HOMES FROM THE DEPART-
MENT 
OF 
VETERANS 
AFFAIRS. 
Section 3729(a) of title 38, United States Code, is amended— 
(1) in paragraph (2)— 
(A) in subparagraph (A), by striking out "or 3733(a)"; 
(B) in subparagraph (D), by striking out "and" at the 
end; 
(C) in subparagraph (E), by striking out the period 
at the end and inserting in lieu thereof "; and"; and 
(D) by adding at the end the following: 
"(F) in the case of a loan made under section 3733(a) 
of this title, the amount of such fee shall be 2.25 percent 
of the total loan amount."; and 
(2) in paragraph (4), as amended by section 8012(1) of 
this Act, by striking out "or (E)" and inserting in lieu thereof 
"(E), or (F)". 
SEC. 8033. WITHHOLDING OF PAYMENTS AND BENEFITS. 
(a) NOTICE REQUIRED IN LIEU OF CONSENT OR COURT ORDER.— 
Section 3726 of title 38, United States Code, is amended— 
(1) by inserting "(a)" before "No officer"; and 
(2) by striking out "unless" and all that follows and insert-
ing in lieu thereof the following: "unless the Secretary provides 
such veteran or surviving spouse with notice by certified mail 
with return receipt requested of the authority of the Secretary 
to waive the payment of indebtedness under section 5302(b) 
of this title."; and 
(3) by adding at the end the following new subsections: 
"(b) If the Secretary does not waive the entire amount of the 
liability, the Secretary shall then determine whether the veteran 
or surviving spouse should be released from liability under section 
3713(b) of this title. 
"(c) If the Secretary determines that the veteran or surviving 
spouse should not be released from liability, the Secretary shall 
notify the veteran or surviving spouse of that determination and 
provide a notice of the procedure for appealing that determination, 
unless the Secretary has previously made such determination and 
notified the veteran or surviving spouse of the procedure for appeal-
ing the determination.". 
(b) CONFORMING AMENDMENT.—Section 5302(b) of such title 
is amended by inserting "with return receipt requested" after "cer-
tified mail". 
(c) EFFECTIVE DATE.—^The amendments made by this section 38USC3726 
shall apply with respect to any indebtedness to the United States "o**. 
arising pursuant to chapter 37 of title 38, United States Code, 
before, on, or after the date of enactment of this Act. 
I l l STAT. 670 
PUBLIC LAW 105-33—AUG. 5, 1997 
TITLE IX—ASSET SALES, USER FEES, 
AND MISCELLANEOUS PROVISIONS 
SEC. 9000. TABLE OF CONTENTS. 
The table of contents for this title is as follows: 
TITLE IX—ASSET SALES, USER FEES, AND MISCELLANEOUS PROVISIONS 
Sec. 9000. Table of contents. 
Subtitle A—^Asset Sales 
Sec. 9101. Sale of Governors Island, New York. 
Sec. 9102. Sale of air rights. 
Subtitle B—^User Fees 
Sec. 9201. Extension of higher vessel tonnage duties. 
Subtitle C—Miscellaneous Provisions 
Sec. 9301. Temporary Federal share formula adjustment. 
Sec. 9302. Increase in excise taxes on tobacco products. 
Sec. 930o. Lease of excess strategic petroleum reserve capacity. 
Sec. 9304. Identification of limited tax benefits subject to line item veto. 
Sec. 9305. Payment of benefits in appropriate fiscal year. 
Subtitle A— Asset Sales 
SEC. 9101. SALE OF GOVERNORS ISLAND, NEW YORK. 
(a) IN GENERAL.—Notwithstanding any other provision of law, 
the Administrator of General Services shall, no earlier than fiscal 
year 2002, dispose of by sale at fair market value all rights, title, 
and interests of the United States in and to the land of, and 
improvements to, Governors Island, New York. 
(b) RIGHT OF FIRST OFFER.—Before a sale is made under sub-
section (a) to any other parties, the State of New York and the 
city of New York shall be given the right of first offer to purchase 
all or part of Governors Island at fair market value as determined 
by the Administrator of General Services. Not later than 90 days 
after notification by the Administrator of General Services, such 
right may be exercised by either the State of New York or the 
city of New York or by both parties acting jointly. 
(c) PROCEEDS.—Proceeds from the disposal of Governors Island 
under subsection (a) shall be deposited in the general fund of 
the Treasury and credited as miscellaneous receipts. 
40 u s e 811 note. 
SEC. 9102. SALE OF AIR RIGHTS. 
(a) IN GENERAL.—Notwithstsinding any other provision of law, 
the Administrator of Greneral Services shall sell, at fair market 
value and in a manner to be determined by the Administrator, 
the air rights adjacent to Washington Union Station described 
in subsection (b), including air rights conveyed to the Administrator 
under subsection (d). The Administrator shall complete the sale 
by such date as is necessary to ensure that the proceeds from 
the sale will be deposited in accordance with subsection (c). 
(b) DESCRIPTION.—The air rights referred to in subsection (a) 
total approximately 16.5 acres and are depicted on the plat map 
of the District of Columbia as follows: 
(1) Part of lot 172, square 720. 
(2) Part of lots 172 and 823, square 720. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 671 
(3) Part of lot 811, square 717. 
(c) PROCEEDS.—Before September 30, 2002, proceeds from the 
sale of air rights under subsection (a) shall be deposited in the 
general fund of the Treasury and credited as miscellaneous receipts. 
(d) CONVEYANCE OF AMTRAK AIR RIGHTS.— 
(1) GENERAL RULE.—^As a condition of future Federal finan-
cial assistance, Amtrak shall convey to the Administrator of 
General Services on or before December 31, 1997, at no charge, 
all of the air rights of Amtrak described in subsection (b). 
(2) FAILURE TO COMPLY.—If Amtrak does not meet the 
condition established by paragraph (1), Amtrak shall be prohib-
ited from obligating Federal funds after March 1, 1998. 
Subtitle B—^User Fees 
SEC. 9201. EXTENSION OF HIGHER VESSEL TONNAGE DUTIES. 
(a) EXTENSION OF DUTIES.—Section 36 of the Act of August 
5, 1909 (36 Stat. I l l ; 46 U.S.C. App. 121) is amended by striking 
"for fiscal years 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998,^' 
each place it appears and inserting "for fiscal years 1991 through 
2002,". 
(b) 
CONFORMING AMENDMENT.—The Act entitled "An 
Act 
concerning tonnage duties on vessels entering otherwise thsin by 
sea", approved March 8, 1910 (36 Stat. 234; 46 U.S.C. App. 132) 
is amended by striking "for fiscal years 1991, 1991, 1992, 1993, 
1994, 1995, 1996, 1997, 1998," and inserting "for fiscal years 1991 
through 2002,". 
Subtitle C—^Miscellaneous Provisions 
SEC. 9301. TEMPORARY FEDERAL SHARE FORMULA ADJUSTMENT. 
Minnesota. 
The Federal share of the cost of assistance provided under 
the Robert T. Stafford Disaster Relief and Emergency Assistance 
Act (42 U.S.C. 5121 et seq.) for damages suffered in Kittson, Mar-
shall, Polk, Norman, Clay, and Wilkin Counties, Minnesota, as 
a result of the 1997 floods in the Red River Valley in Minnesota 
and North Dakota shall be at least 90 percent. 
SEC. 9302. INCREASE IN EXCISE TAXES ON TOBACCO PRODUCTS. 
(a) CIGARETTES.—Subsection (b) of section 5701 of the Internal 
Revenue Code of 1986 is amended— 
26 USC 5701. 
(1) by striking "$12 per thousand ($10 per thousand on 
cigarettes removed during 1991 or 1992)" in paragraph (1) 
and inserting "$19.50 per thousand ($17 per thousand on ciga-
rettes removed during 2000 or 2001)", and 
(2) by striking "$25.20 per thousand ($21 per thousand 
on cigarettes removed during 1991 or 1992)" in paragraph 
(2) and inserting "$40.95 per thousand ($35.70 per thousand 
on cigarettes removed during 2000 or 2001)". 
(b) CIGARS.—Subsection (a) of section 5701 of such Code is 
amended— 
(1) by striking "$1,125 cents per thousand (93.75 cents 
per thousand on cigars removed during 1991 or 1992)" in para-
graph (1) and inserting "$1,828 cents per thousand ($1,594 
cents per thousand on cigars removed during 2000 or 2001)", 
£ind 
I l l STAT. 672 
PUBLIC LAW 105-33—AUG. 5, 1997 
(2) by striking "equal to" and all that follows in paragraph 
(2) and inserting "equal to 20.719 percent (18.063 percent on 
cigars removed during 2000 or 2001) of the price for which 
sold but not more than $48.75 per thousand ($42.50 per thou-
sand on cigars removed during 2000 or 2001).". 
(c) CIGARETTE PAPERS.—Subsection (c) of section 5701 of such 
Code is amended by striking "0.75 cent (0.625 cent on cigarette 
papers removed during 1991 or 1992)" and inserting "1.22 cents 
(1.06 cents on cigarette papers removed during 2000 or 2001)". 
(d) CIGARETTE TUBES.—Subsection (d) of section 5701 of such 
Code is amended by striking "1.5 cents (1.25 cents on cigarette 
tubes removed during 1991 or 1992)" and inserting "2.44 cents 
(2.13 cents on cigarette tubes removed during 2000 or 2001)". 
(e) SMOKELESS TOBACCO.—Subsection (e) of section 5701 of 
such Code is amended— 
(1) by striking "36 cents (30 cents on snuff removed during 
1991 or 1992)" in paragraph (1) and inserting "58.5 cents (51 
cents on snuff removed during 2000 or 2001)", and 
(2) by striking "12 cents (10 cents on chewing tobacco 
removed during 1991 or 1992)" in paragraph (2) and inserting 
"19.5 cents (17 cents on chewing tobacco removed during 2000 
or 2001)". 
(f) PIPE TOBACCO.—Subsection (f) of section 5701 of such Code 
is amended by striking "67.5 cents (56.25 cents on pipe tobacco 
removed during 1991 or 1992)" and inserting "$1.0969 cents (95.67 
cents on pipe tobacco removed during 2000 or 2001)". 
(g) IMPOSITION OF EXCISE TAX ON MANUFACTURE OR IMPORTA-
TION OF ROLL-YOUR-OWN TOBACCO.— 
(1) IN GENERAL.—Section 5701 of such Code (relating to 
rate of tax) is amended by redesignating subsection (g) as 
subsection (h) and by inserting after subsection (f) the following 
new subsection: 
"(g) RoLL-YouR-OwN 
TOBACCO.—On roll-your-own tobacco, 
manufactured in or imported into the United States, there shall 
be imposed a tax of $1.0969 cents (95.67 cents on roll-your-own 
tobacco removed during 2000 or 2001) per pound (and a propor-
tionate tax at the like rate on all fractional parts of a pound).". 
(2) ROLL-YOUR-OWN TOBACCO.—Section 5702 of such Code 
(relating to definitions) is amended by adding at the end the 
following new subsection: 
"(p) 
RoLL-YouR-OWN 
TOBACCO.—The 
term 
'roll-your-own 
tobacco' means any tobacco which, because of its appearance, tjrpe, 
packaging, or labeling, is suitable for use and likely to be offered 
to, or purchased by, consumers as tobacco for making cigarettes.". 
(3) TECHNICAL AMENDMENTS.— 
(A) Subsection (c) of section 5702 of such Code is 
amended by striking "and pipe tobacco" and inserting "pipe 
tobacco, and roll-your-own tobacco". 
(B) Subsection (d) of section 5702 of such Code is 
amended— 
(i) in the materisJ preceding paragraph (1), by 
striking "or pipe tobacco" and inserting "pipe tobacco, 
or roll-your-own tobacco", and 
(ii) by striking paragraph (1) and inserting the 
following new paragraph: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 673 
"(1) a person who produces cigars, cigarettes, smokeless 
tobacco, pipe tobacco, or roll-your-own tobacco solely for the 
person's own personal consumption or use, and". 
(C) The chapter heading for chapter 52 of such Code 
is amended to read as follows: 
"CHAPTER 52—TOBACCO PRODUCTS AND CIGARETTE 
PAPERS AND TUBES**. 
(D) The table of chapters for subtitle E of such Code 
is amended by striking the item relating to chapter 52 
and inserting the following new item: 
"CHAPTER 52. Tobacco products and cigarette papers and tubes.". 
(h) MODIFICATIONS OF CERTAIN TOBACCO TAX PROVISIONS.— 
(1) EXEMPTION FOR EXPORTED TOBACCO PRODUCTS AND CIGA-
RETTE PAPERS AND TUBES TO APPLY ONLY TO ARTICLES MARKED 
FOR EXPORT.— 
(A) Subsection (b) of section 5704 of such Code is 
amended by adding at the end the following new sentence: 
"Tobacco products and cigarette papers and tubes may 
not be tr£insferred or removed under this subsection unless 
such products or papers and tubes bear such marks, labels, 
or notices as the Secretary shall by regulations prescribe.". 
(B) Section 5761 of such Code is amended by 
redesignating subsections (c) and (d) as subsections (d) 
and (e), respectively, and by inserting after subsection (b) 
the following new subsection: 
"(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE PAPERS AND 
TUBES FOR EXPORT.—Except as provided in subsections (b) and 
(d) of section 5704— 
"(1) every person who sells, relands, or receives within 
the jurisdiction of the United States any tobacco products or 
cigarette papers or tubes which have been labeled or shipped 
for exportation under this chapter, 
"(2) every person who sells or receives such relanded 
tobacco products or cigarette papers or tubes, and 
"(3) every person who aids or abets in such selling, reland-
ing, or receiving, 
shall, in addition to the tax and any other penalty provided in 
this title, be liable for a penalty equal to the greater of $1,000 
or 5 times the amount of the tax imposed by this chapter. All 
tobacco products and cigarette papers and tubes relanded within 
the jurisdiction of the United States, and all vessels, vehicles, 
and aircraft used in such relanding or in removing such products, 
papers, and tubes from the place where relanded, shall be forfeited 
to the United States.". 
(C) Subsection (a) of section 5761 of such Code is 
amended by striking "subsection (b)" and inserting "sub-
section (b) or (c)". 
(D) Subsection (d) of section 5761 of such Code, as 
redesignated by subparagraph (B), is amended by striking 
"The penalty imposed by subsection (b)" and inserting 'The 
penalties imposed by subsections (b) and (c)". 
(E)(i) Subpart F of chapter 52 of such Code is amended 
by adding at the end the following new section: 
Ill STAT. 674 
PUBLIC LAW 105-33—AUG. 5, 1997 
26 u s e 5754. 
"SEC. 
5754. 
RESTRICTION 
ON 
IMPORTATION 
OF 
PREVIOUSLY 
EXPORTED TOBACCO PRODUCTS. 
"(a) IN GENERAL.—^Tobacco products and cigarette papers and 
tubes previously exported from the United States may be imported 
or brought into the United States only as provided in section 
5704(d). For purposes of this section, section 5704(d), section 5761, 
and such other provisions as the Secretary may specify by regula-
tions, references to exportation shall be treated as including a 
reference to shipment to the Commonwealth of Puerto Rico. 
"(b) CROSS REFERENCE.— 
"For penalty for the sale of tobacco products and cigarette papers 
and tubes in the United States which are labeled for export, see sec-
tion 5761(c).''. 
(ii) The table of sections for subpart F of chapter 52 
of such Code is amended by adding at the end the following 
new item: 
"Sec. 5754. Restriction on importation of previously exported tobacco prod-
ucts.". 
(2) IMPORTERS REQUIRED TO BE QUALIFIED.— 
(A) Sections 5712, 5713(a), 5721, 5722, 5762(a)(1), and 
5763 (b) and (c) of such Code are each amended by inserting 
"or importer" after "manufacturer". 
(B) The heading of subsection (b) of section 5763 of 
such Code is amended by inserting "QUALIFIED IMPORTERS," 
after "MANUFACTURERS,". 
(C) The heading for subchapter B of chapter 52 of 
such Code is amended by inserting "and Importers" after 
"Manufacturers". 
(D) The item relating to subchapter B in the table 
of subchapters for chapter 52 of such Code is amended 
by inserting "and importers" after "manufacturers". 
(3) BOOKS OF 25 OR FEWER CIGARETTE PAPERS SUBJECT 
TO TAX.—Subsection (c) of section 5701 of such Code is amended 
by striking "On each book or set of cigEirette papers containing 
more than 25 papers," and inserting "On cigarette papers,". 
(4) STORAGE OF TOBACCO PRODUCTS.—Subsection (k) of sec-
tion 5702 of such Code is amended by inserting "under section 
5704" after "internal revenue bond". 
(5) AUTHORITY TO PRESCRIBE MINIMUM MANUFACTURING 
ACTIVITY REQUIREMENTS.—Section 5712 of such Code is amend-
ed by striking "or" at the end of paragraph (1), by redesignating 
paragraph (2) as paragraph (3), and by inserting after para-
graph (1) the following new paragraph: 
"(2) the activity proposed to be carried out at such premises 
does not meet such minimum capacity or activity requirements 
as the Secretary may prescribe, or". 
26 use 5701 
(i) EFFECTIVE DATE.— 
note. 
(1) IN GENERAL.—^The amendments made by this section 
shall apply to articles removed (as defined in section 5702(k) 
of the Internal Revenue Code of 1986, as amended by this 
section) after December 31, 1999. 
(2) TRANSITIONAL RULE.—^Any person who— 
(A) on the date of the enactment of this Act is engaged 
in business as a manufacturer of roll-your-own tobacco 
or as an importer of tobacco products or cigarette papers 
and tubes, and 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 675 
(B) before January 1, 2000, submits an application 
under subchapter B of chapter 52 of such Code to engage 
in such business, 
may, notwithstanding such subchapter B, continue to engage 
in such business pending final action on such application. Pend-
ing such final action, all provisions of such chapter 52 shall 
apply to such applicant in the same manner and to the same 
extent as if such applicant were a holder of a permit under 
such chapter 52 to engage in such business, 
(j) FLOOR STOCKS TAXES.— 
(1) IMPOSITION OF TAX.—On tobacco products and cigarette 
papers and tubes manufactured in or imported into the United 
States which are removed before any tax increase date, and 
held on such date for sale by any person, there is hereby 
imposed a tax in an amount equal to the excess of— 
(A) the tax which would be imposed under section 
5701 of the Internal Revenue Code of 1986 on the article 
if the article had been removed on such date, over 
(B) the prior tax (if any) imposed under section 5701 
of such Code on such article. 
(2) AUTHORITY TO EXEMPT CIGARETTES HELD IN VENDING 
MACHINES.—^To the extent provided in regulations prescribed 
by the Secretary, no tax shall be imposed by paragraph (1) 
on cigarettes held for retail sale on any tax increase date, 
by any person in any vending machine. If the Secretary provides 
such a benefit with respect to £iny person, the Secretary may 
reduce the $500 amount in paragraph (3) with respect to such 
person. 
(3) CREDIT AGAINST TAX.—^Each person shall be allowed 
as a credit against the taxes imposed by paragraph (1) an 
amount equal to $500. Such credit shall not exceed the amount 
of taxes imposed by paragraph (1) on any tax increase date, 
for which such person is liable. 
(4) LIABILITY FOR TAX AND METHOD OF PAYMENT.— 
(A) LIABILITY FOR TAX.—^A person holding cigarettes 
on any tax increase date, to which any tax imposed by 
paragraph (1) applies shall be liable for such tax. 
(B) METHOD OF PAYMENT.—^The tax imposed by para-
graph (1) shall be paid in such manner as the Secretary 
shall prescribe by regulations. 
(C) TIME FOR PAYMENT.—The tax imposed by para-
graph (1) shall be paid on or before April 1 following 
any tax increase date. 
(5) ARTICLES IN FOREIGN TRADE ZONES.—Notwithstanding 
the Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and 
any other provision of law, any article which is located in 
a foreign trade zone on any tax increase date, shall be subject 
to the tax imposed by paragraph (1) if— 
(A) internal revenue taxes have been determined, or 
customs duties liquidated, with respect to such article 
before such date pursuant to a request made under the 
1st proviso of section 3(a) of such Act, or 
(B) such article is held on such date under the super-
vision of a customs officer pursuant to the 2d proviso 
of such section 3(a). 
(6) DEFINITIONS.—For purposes of this subsection— 
26 use 5701 
note. 
Regulations. 
Regulations. 
I l l STAT. 676 
PUBLIC LAW 105-33—AUG. 5, 1997 
(A) IN GENERAL.—^Terms used in this subsection which 
are also used in section 5702 of the Internal Revenue 
Code of 1986 shall have the respective meanings such 
terms have in such section, as amended by this Act. 
(B) TAX INCREASE DATE.—The term "tax increase date" 
means January 1, 2000, and January 1, 2002. 
(C) SECRETARY.—The term "Secretary" means the Sec-
retary of the Treasury or the Secretary's delegate. 
Applicability. 
(7) CONTROLLED GROUPS.—Rules similar to the rules of 
section 5061(e)(3) of such Code shall apply for purposes of 
this subsection. 
(8) OTHER LAWS APPLICABLE.—All provisions of law, includ-
ing penalties, applicable with respect to the taxes imposed 
by section 5701 of such Code shall, insofar as applicable and 
not inconsistent with the provisions of this subsection, apply 
to the floor stocks taxes imposed by paragraph (1), to the 
same extent as if such taxes were imposed by such section 
5701. The Secretary may treat any person who bore the ulti-
mate burden of the tax imposed by paragraph (1) as the person 
to whom a credit or refund under such provisions may be 
allowed or made. 
SEC. 9
3
0
3
. 
LEASE OF 
EXCESS STRATEGIC PETROLEUM RESERVE 
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: 
42 u s e 6247a. 
"USE OF UNDERUTILIZED FACILITIES 
"SEC. 168. (a) AUTHORITY.—^Notwithstanding any other provi-
sion of this title, the Secretary, by lease or otherwise, for any 
term and under such other conditions as the Secretary considers 
necessary or appropriate, may store in underutilized Strategic 
Petroleum Reserve facilities 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 provisions providing for 
fees to fully compensate the United States for all related costs 
of storage and removals of petroleum products (including the propor-
tionate cost of replacement facilities necessitated as a result of 
any withdrawals) incurred by the United States on behalf of the 
foreign government or its representative. 
(c) ACCESS TO STORED OIL.—The Secretary shall ensure that 
agreements to store petroleum products for foreign governments 
or their representatives do not impair the ability of the United 
States to withdraw, distribute, or sell petroleum products from 
the Strategic Petroleum Reserve in response to an energy emergency 
or to the obligations of the United States under the Agreement 
on an International Energy Program. 
"(d) AVAILABILITY OF FUNDS.—^Funds collected through the leas-
ing of Strategic Petroleum Reserve facilities authorized by sub-
section (a) after September 30, 2007, shall be used by the Secretary 
of Energy without further appropriation for the purchase of petro-
leum products for the Strategic Petroleum Reserve.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 677 
(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.". 
SEC. 9304. roENTIFICATION OF LIMITED TAX BENEFITS SUBJECT TO 
LINE ITEM VETO. 
Section 1021(a)(3) of the Congressional Budget Act of 1974 
shall only apply to 3306(c)(21) of the Internal Revenue Code of 
1986 (as added by section 5406 of this Act). 
SEC. 9305. PAYMENT OF BENEFITS IN APPROPRIATE FISCAL YEAR. 
Section 5120(e) of title 38, United States Code, shall not apply 
to benefit payments otherwise payable on October 1, 2000. 
TITLE X—BUDGET ENFORCEMENT AND B
u
d
g
e
t 
PROCESS PROVISIONS 
Sf^""""^ 
President. 
SEC. 10001. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—^This title may be cited as the "Budget 2 use 900 note. 
Enforcement Act of 1997". 
(b) TABLE OF CONTENTS.—The table of contents for this title 
is as follows: 
Sec. 10001. Short title; table of contents. 
Subtitle A—^Amendments to the Congressional Budget and Impoundment Control 
Act of 1974 
Sec. 10101. Amendment to section 3. 
Sec. 10102. Amendments to section 201. 
Sec. 10103. Amendments to section 202. 
Sec. 10104. Amendment to section 300. 
Sec. 10105. Amendments to section 301. 
Sec. 10106. Amendments to section 302. 
Sec. 10107. Amendments to section 303. 
Sec. 10108. Amendment to section 304. 
Sec. 10109. Amendment to section 305. 
Sec. 10110. Amendments to section 308. 
Sec. 10111. Amendments to section 310. 
Sec. 10112. Amendments to section 311. 
Sec. 10113. Amendment to section 312. 
Sec. 10114. Adjustments. 
Sec. 10115. Effect of adoption of a special order of business in the House of Rep-
resentatives. 
Sec. 10116. Amendment to section 401 and repeal of section 402. 
Sec. 10117. Amendments to title V. 
Sec. 10118. Repeal of title VI. 
Sec. 10119. Amendments to section 904. 
Sec. 10120. Repeal of sections 905 and 906. 
Sec. 10121. Amendments to sections 1022 and 1024. 
Sec. 10122. Amendment to section 1026. 
Sec. 10123. Senate task force on consideration of budget measures. 
Subtitle B—^Amendments to the Balanced Budget and Emergency Deficit Control 
Act of 1985 
Sec. 10201. Purpose. 
Sec. 10202. General statement and definitions. 
Sec. 10203. Enforcing discretionary spending limits. 
Sec. 10204. Violent crime reduction spending. 
Sec. 10205. Enforcing pay-as-you-go. 
Sec. 10206. Reports and orders. 
Sec. 10207. Exempt programs and activities. 
Sec. 10208. General and special sequestration rules. 
Ill STAT. 678 
PUBLIC LAW 105-33—AUG. 5, 1997 
Sec. 10209. The baseline. 
Sec. 10210. Technical correction. 
Sec. 10211. Judicial review. 
Sec. 10212. Effective date. 
Sec. 10213. Reduction of preexisting balances and exclusion of effects of this Act 
from paygo scorecard. 
Subtitle A—^Amendments to the Congres-
sional Budget and Impoundment Control 
Act of 1974 
SEC. 10101. AMENDMENT TO SECTION 3. 
Section 3(9) of the Congressional Budget and Impoundment 
2 use 622. 
Control Act of 1974 is amended to read as follows: 
"(9) The term 'entitlement authority' means— 
"(A) the authority to make pa3niients (including loans 
and grants), the budget authority for which is not provided 
for in advance by appropriation Acts, to any person or 
government if, under the provisions of the law containing 
that authority, the United States is obligated to make 
such payments to persons or governments who meet the 
requirements established by that law; and 
"(B) the food stamp program.". 
SEC. 10102. AMENDMENTS TO SECTION 201. 
(a) TERM OF OFFICE.—^The first sentence of section 201(a)(3) 
2 use 601. 
of the Congressional Budget Act of 1974 is amended to read as 
follows: 'The term of office of the Director shall be 4 years and 
shall expire on January 3 of the year preceding each Presidential 
election. . 
(b) CONFORMING CHANGE.—Section 201(e) of the Congressional 
Budget Act of 1974 is amended by inserting "and" before "the 
Librar}^", by striking "and the Office of Technology Assessment,", 
by inserting "and" before "the Librarian", and by striking ", and 
the Technology Assessment Board". 
(c) REDESIGNATION OF EXECUTED PROVISION.—Section 201 of 
the Congressional Budget Act of 1974 is amended by redesignating 
subsection (g) (relating to revenue estimates) as subsection (f). 
SEC. 10103. AMENDMENTS TO SECTION 202. 
(a) ASSISTANCE TO BUDGET COMMITTEES.—^The first sentence 
2 use 602. 
of section 202(a) of the Congressional Budget Act of 1974 is amended 
by inserting "primary" before "duty". 
(b) ELIMINATION OF EXECUTED PROVISION.—Section 202 of the 
Congressional Budget Act of 1974 is amended by striking subsection 
(e) and by redesignating subsections (f), (g), and (h) as subsections 
(e), (f), and (g), respectively. 
(c) REPORTING REQUIREMENT.—^The first sentence of section 
202(e)(1) of the Congressional Budget Act of 1974 (as redesignated) 
is amended by— 
(1) striking "and" before "(B)"; and 
(2) inserting before the period the following: ", and (C) 
a statement of the levels of budget authority and outlays for 
each program assumed to be extended in the baseline, as pro-
vided in section 257(b)(2)(A) and for excise taxes assumed to 
be extended under section 257(b)(2)(C) of the Balanced Budget 
and Emergency Deficit Control Act of 1985". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 679 
SEC. 10104. AMENDMENT TO SECTION 300. 
(a) TIMETABLE.—^The item relating to February 25 in the time-
table set forth in section 300 of the Congressional Budget Act 
of 1974 is amended by striking "February 25" and inserting "Not 
2 USC 631. 
later than 6 weeks after President submits budget". 
(b) CONFORMING AMENDMENTS.—(1) Clause 4(g) of rule X of 
the Rules of the House of Representatives is amended by striking 
"on or before February 25 of each year" and inserting "not later 
than 6 weeks after the President submits his budget". 
(2) Clause 3(c) of rule XLVIII of the Rules of the House of 
Representatives is amended by striking "On or before March 15 
of each year" and inserting "Within 6 weeks after the President 
submits a budget under section 1105(a) of title 31, United States 
Code" and by striking "section 301(c)" and inserting "section 301(d)". 
SEC. 10105. AMENDMENTS TO SECTION 301. 
(a) TERMS OF BUDGET RESOLUTIONS.—Section 301(a) of the 
Congressional Budget Act of 1974 is amended by striking ", and 2 USC 632. 
planning levels for each of the two ensuing fiscal years," and insert-
ing "and for at least each of the 4 ensuing fiscal years". 
(b) CONTENTS OF BUDGET RESOLUTIONS.—^Paragraphs (1) and 
(4) of section 301(a) of the Congressional Budget Act of 1974 are 
amended by striking ", budget outlays, direct loan obligations, and 
primary loan guarantee commitments" each place it appears and 
inserting "and outlays". 
(c) ADDITIONAL MATTERS.—Section 301(b) of the Congressional 
Budget Act of 1974 is amended by— 
(1) striking paragraph (7) and inserting the following: 
"(7) set forth procedures in the Senate whereby committee 
allocations, aggregates, and other levels can be revised for 
legislation if that legislation would not increase the deficit, 
or would not increase the deficit when taken with other legisla-
tion enacted after the adoption of the resolution, for the first 
fiscsd year or the total period of fiscal years covered by the 
resolution;"; 
(2) in paragraph 8, striking the period and inserting "; 
and"; and 
(3) adding the following new paragraph: 
"(9) set forth direct loan obligation and primary loan 
guarantee commitment levels.". 
(d) VIEWS AND ESTIMATES.—The first sentence of section 301(d) 
of the Congressional Budget Act of 1974 is amended by inserting 
"or at such time as may be requested by the Committee on the 
Budget," after "Code,". 
(e) HEARINGS AND REPORT.—Section 301(e) of the Congressional 
Budget Act of 1974 is amended— 
(1) by striking "In developing" and inserting the following: 
"(1) IN GENERAL.—In developing"; and 
(2) by striking the sentence beginning with 'The report 
accompanying" and all that follows through the end of the 
subsection and inserting the following: 
"(2) REQUIRED CONTENTS OF REPORT.—^The report accom-
panying the resolution shall include— 
"(A) a comparison of the levels of total new budget 
authority, total outlays, total revenues, and the surplus 
or deficit for each fiscal year set forth in the resolution 
Ill STAT. 680 
PUBLIC LAW 105-33—AUG. 5, 1997 
with those requested in the budget submitted by the Presi-
dent; 
"(B) with respect to each major functional category, 
an estimate of total new budget authority and total outlays, 
with the estimates divided between discretionary and 
mandatory amounts; 
"(C) the economic assumptions that underlie each of 
the matters set forth in the resolution and any alternative 
economic assumptions and objectives the committee consid-
ered; 
"(D) information, data, and comparisons indicating the 
manner in which, and the basis on which, the committee 
determined each of the matters set forth in the resolution; 
"(E) the estimated levels of tax expenditures (the tax 
expenditures budget) by major items and functional cat-
egories for the President's budget and in the resolution; 
and 
"(F) allocations described in section 302(a). 
"(3) ADDITIONAL CONTENTS OF REPORT.—The report accom-
panjdng the resolution may include— 
"(A) a statement of any significant changes in the 
proposed levels of Federal assistance to State and local 
governments; 
"(B) an allocation of the level of Federal revenues rec-
ommended in the resolution among the major sources of 
such revenues; 
"(C) information, data, and comparisons on the share 
of total Federal budget outlays and of gross domestic prod-
uct devoted to investment in the budget submitted by the 
President and in the resolution; 
"(D) the assumed levels of budget authority and outlays 
for public buildings, with a division between amounts for 
construction and repair and for rental pa3ntnents; and 
"(E) other matters, relating to the budget and to fiscal 
policy, that the committee deems appropriate.". 
(f) SOCIAL SECURITY CORRECTIONS.—(1) Section 301(i) of the 
2 use 632. 
Congressional Budget Act of 1974 is amended by— 
(A) inserting "SOCIAL SECURITY POINT OF ORDER.—" after 
"(i)"; and 
(B) striking "as reported to the Senate" and inserting "(or 
amendment, motion, or conference report on the resolution)"; 
and 
(2) Section 22 of House Concurrent Resolution 218 (103d Con-
108 Stat. 5092. 
gress) is repealed. 
SEC. 10106. AMENDMENTS TO SECTION 302. 
(a) ALLOCATIONS AND SUBALLOCATIONS.—Section 302 
of 
the 
2 use 633. 
Congressional Budget Act of 1974 is amended by striking sub-
sections (a) and (b) and inserting the following: 
"(a) COMMITTEE SPENDING ALLOCATIONS.— 
"(1) ALLOCATION AMONG COMMITTEES.—^The joint explana-
tory statement accompan3dng a conference report on a concur-
rent resolution on the budget shall include an allocation, 
consistent with the resolution recommended in the conference 
report, of the levels for the first fiscal year of the resolution, 
for at least each of the ensuing 4 fiscal years, and a total 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 681 
for that period of fiscal years (except in the case of the Commit-
tee on Appropriations only for the fiscal year of that resolution) 
of— 
"(A) total new budget authority; and 
"(B) total outlays; 
among each committee of the House of Representatives or the 
Senate that has jurisdiction over legislation providing or creat-
ing such amounts. 
"(2) No DOUBLE COUNTING.—In the House of Representa-
tives, any item allocated to one committee may not be allocated 
to another committee. 
"(3) FURTHER DIVISION OF AMOUNTS.— 
"(A) IN THE SENATE.—In the Senate, the amount allo-
cated to the Committee on Appropriations shall be further 
divided among the categories specified in section 250(c)(4) 
of the Balanced Budget and Emergency Deficit Control 
Act of 1985 and shall not exceed the limits for each category 
set forth in section 251(c) of that Act. 
"(B) IN THE HOUSE.—In the House of Representatives, 
the amounts allocated to each committee for each fiscal 
year, other than the Committee on Appropriations, shall 
be further divided between amounts provided or required 
by law on the date of filing of that conference report and 
amounts not so provided or required. The amounts allocated 
to the Committee on Appropriations shall be further 
divided— 
"(i) between discretionary and mandatory amounts 
or programs, as appropriate; and 
"(ii) consistent with the categories specified in sec-
tion 250(c)(4) of the Balanced Budget and Emergency 
Deficit Control Act of 1985. 
"(4) AMOUNTS NOT ALLOCATED.—In the House of Represent-
atives or the Senate, if a committee receives no allocation 
of new budget authority or outlays, that committee shall be 
deemed to have received an allocation equal to zero for new 
budget authority or outlays. 
"(5) ADJUSTING ALLOCATION OF DISCRETIONARY SPENDING 
IN THE HOUSE OF REPRESENTATIVES.—(A) If a concurrent resolu-
tion on the budget is not adopted by April 15, the chairman 
of the Committee on the Budget of the House of Representatives 
shall submit to the House, as soon as practicable, an allocation 
under paragraph (1) to the Committee on Appropriations 
consistent with the discretionary spending levels in the most 
recently agreed to concurrent resolution on the budget for the 
appropriate fiscal year covered by that resolution. 
"(B) As soon as practicable after an allocation under para-
graph (1) is submitted under this section, the Committee on 
Appropriations shall make sub 
allocations and report those sub-
allocations to the House of Representatives. 
"(b) SUBALLOCATIONS BY APPROPRIATIONS COMMITTEES.—^As 
soon as practicable after a concurrent resolution on the budget 
is agreed to, the Committee on Appropriations of each House (after 
consulting with the Committee on Appropriations of the other 
House) shall suballocate each amount allocated to it for the budget 
year under subsection (a) among its subcommittees. Each Commit-
tee on Appropriations shall promptly report to its House suballoca-
tions made or revised under this subsection. The Committee on 
39-194 O - 97 - 23 : QL 3 Part 1 
I l l STAT. 682 
PUBLIC LAW 105-33—AUG. 5, 1997 
Appropriations of the House of Representatives shall further divide 
among its subcommittees the divisions made under subsection 
(a)(3)(B) and promptly report those divisions to the House.". 
(b) POINT OF ORDER.—Section 302(c) of the Congressional 
2 use 633. 
Budget Act of 1974 is amended to read as follows: 
"(c) POI^^^ OF ORDER.—^After the Committee on Appropriations 
has received an allocation pursuant to subsection (a) for a fiscal 
year, it shall not be in order in the House of Representatives 
or the Senate to consider any bill, joint resolution, amendment, 
motion, or conference report within the jurisdiction of that commit-
tee providing new budget authority for that fiscal year, until that 
committee makes the suballocations required by subsection (b).". 
(c) ENFORCEMENT OF POINT OF ORDER.— 
(1) IN THE HOUSE.—Section 302(f)(1) of the Congressional 
Budget Act of 1974 is amended by— 
(A) striking "providing new budget authority for such 
fiscal year or new entitlement authority effective during 
such fiscal year" and inserting "providing new budget 
authority for any fiscal year"; and 
(B) striking "appropriate allocation made pursuant to 
subsection (b)" and all that follows through "exceeded." 
and inserting "applicable allocation of new budget authority 
made under subsection (a) or (b) for the first fiscal year 
or the total of fiscal years to be exceeded.". 
(2) IN THE SENATE.—Section 302(f)(2) of the Congressional 
Budget Act of 1974 is amended to read as follows: 
"(2) IN THE SENATE.—^After a concurrent resolution on the 
budget is agreed to, it shall not be in order in the Senate 
to consider any bill, joint resolution, amendment, motion, or 
conference report that would cause— 
"(A) in the case of any committee except the Committee 
on Appropriations, the applicable allocation of new budget 
authority or outlays under subsection (a) for the first fiscal 
year or the total of fiscal years to be exceeded; or 
"(B) in the case of the Committee on Appropriations, 
the applicable suballocation of new budget authority or 
outlays under subsection (b) to be exceeded.". 
(d) PAY-AS-YOU-GO EXCEPTION IN THE HOUSE.—Section 302(g) 
of the Congressional Budget Act of 1974 is amended to read as 
follows: 
"(g) PAY-AS-YOU-GO EXCEPTION IN THE HOUSE.— 
"(1) IN GENERAL.—<A) Subsection (0(1) and, after April 
15, section 303(a) shall not apply to any bill or joint resolution, 
as reported, amendment thereto, or conference report thereon 
if, for each fiscal year covered by the most recently agreed 
to concurrent resolution on the budget— 
"(i) the enactment of that bill or resolution as reported; 
"(ii) the adoption and enactment of that amendment; 
or 
"(iii) the enactment of that bill or resolution in the 
form recommended in that conference report, 
would not increase the deficit, and, if the sum of any revenue 
increases provided in legislation already enacted during the 
current session (when added to revenue increases, if any, in 
excess of any outlay increase provided by the legislation pro-
posed for consideration) is at least as great as the sum of 
the amount, if any, by which the aggregate level of Federal 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 683 
revenues should be increased as set forth in that concurrent 
resolution and the amount, if any, by which revenues are 
to be increased pursuant to pay-as-you-go procedures under 
section 301(b)(8), if included in that concurrent resolution. 
"(B) Section 311(a), as that section applies to revenues, 
shall not apply to any bill, joint resolution, amendment thereto, 
or conference report thereon if, for each fiscal year covered 
by the most recently agreed to concurrent resolution on the 
budget— 
"(i) the enactment of that bill or resolution as reported; 
"(ii) the adoption and enactment of that amendment; 
or 
"(iii) the enactment of that bill or resolution in the 
form recommended in that conference report, 
would not increase the deficit, and, if the sum of any outlay 
reductions provided in legislation already enacted during the 
current session (when added to outlay reductions, if any, in 
excess of any revenue reduction provided by the legislation 
proposed for consideration) is at least as great as the sum 
of the amount, if any, by which the aggregate level of Federal 
outlays should be reduced as required by that concurrent resolu-
tion and the amount, if any, by which outlays are to be reduced 
pursuant to pay-as-you-go procedures under section 301(b)(8), 
if included in that concurrent resolution. 
"(2) REVISED ALLOCATIONS.—(A) As soon as practicable after 
Congress agrees to a bill or joint resolution that would have 
been subject to a point of order under subsection (f)(1) but 
for the exception provided in paragraph (1)(A) or would have 
been subject to a point of order under section 311(a) but for 
the exception provided in paragraph (1)(B), the chairman of 
the committee on the Budget of the House of Representatives 
shall file with the House appropriately revised allocations under 
section 302(a) and revised functional levels and budget aggre-
gates to reflect that bill. 
"(B) Such revised allocations, functional levels, and budget 
aggregates shall be considered for the purposes of this Act 
as allocations, functional levels, and budget aggregates con-
tained in the most recently agreed to concurrent resolution 
on the budget.". 
SEC. 10107. AMENDMENTS TO SECTION 303. 
(a) IN GENERAL.—Section 303 of the Congressional Budget Act 
of 1974 is amended to read as follows: 
2 USC 634. 
"CONCURRENT RESOLUTION ON THE BUDGET MUST BE ADOPTED 
BEFORE BUDGET-RELATED LEGISLATION IS CONSIDERED 
"SEC. 303. (a) IN GENERAL.—^Until the concurrent resolution 
on the budget for a fiscal year has been agreed to, it shall not 
be in order in the House of Representatives, with respect to the 
first fiscal year covered by that resolution, or the Senate, with 
respect to any fiscal year covered by that resolution, to consider 
any bill or joint resolution, amendment or motion thereto, or con-
ference report thereon that— 
"(1) first provides new budget authority for that fiscal 
year; 
"(2) first provides an increase or decrease in revenues dur-
ing that fiscal year; 
I l l STAT. 684 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(3) provides an increase or decrease in the public debt 
limit to become effective during that fiscal year; 
"(4) in the Senate only, first provides new entitlement 
authority for that fiscal year; or 
"(5) in the Senate only, first provides for an increase or 
decrease in outlays for that fiscal year. 
"(b) EXCEPTIONS IN THE HOUSE.— In the House of Representa-
tives, subsection (a) does not apply— 
"(1)(A) to any bill or joint resolution, as reported, providing 
advance discretionary new budget authority that first becomes 
available for the first or second fiscal year after the budget 
year; or 
"(B) to any bill or joint resolution, as reported, first increas-
ing or decreasing revenues in a fiscal year following the fiscal 
year to which the concurrent resolution applies; 
"(2) aft;er May 15, to any general appropriation bill or 
amendment thereto; or 
"(3) to any bill or joint resolution unless it is reported 
by a committee. 
"(c) APPLICATION TO APPROPRIATION MEASURES IN THE SEN-
ATE.— 
"(1) IN GENERAL.—^Until the concurrent resolution on the 
budget for a fiscal year has been agreed to and an allocation 
has been made to the Committee on Appropriations of the 
Senate under section 302(a) for that year, it shall not be in 
order in the Senate to consider any appropriation bill or joint 
resolution, amendment or motion thereto, or conference report 
thereon for that year or any subsequent year. 
"(2) EXCEPTION,—Paragraph (1) does not apply to appro-
priations legislation making advance appropriations for the 
first or second fiscal year after the year the sdlocation referred 
to in that paragraph is made.". 
(b) CONFORMING AMENDMENT.—^The item relating to section 
303 in the table of contents set forth in section 1(b) of the Congres-
sional Budget and Impoundment Control Act of 1974 is amended 
to read as follows: 
"Sec. 303. Concurrent resolution on the budget must be adopted before budget-relat-
ed legislation is considered.". 
SEC. 10108. AMENDMENT TO SECTION 304. 
2 use 635. 
Section 304 of the Congressional Budget Act of 1974 is amended 
by— 
(1) striking "(a) IN GENERAL.—"; and 
(2) striking subsection (b). 
SEC. 10109. AMENDMENT TO SECTION 305. 
(a) BUDGET ACT.—Section 305(a)(1) of the Congressional Budget 
2 use 636. 
Act of 1974 is amended to read as follows: 
"(1) When a concurrent resolution on the budget has been 
reported by the Committee on the Budget of the House of 
Representatives and has been referred to the appropriate cgd-
endar of the House, it shall be in order on any day thereafter, 
subject to clause 2(1)(6) of rule XI of the Rules of the House 
of Representatives, to move to proceed to the consideration 
of the concurrent resolution. The motion is highly privileged 
and is not debatable. An amendment to the motion is not 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 685 
in order and it is not in order to move to reconsider the 
vote by which the motion is agreed to or disagreed to.". 
(b) CONFORMING AMENDMENT IN THE HOUSE.—^The first sen-
tence of clause 2(1)(6) of rule XI of the Rules of the House of 
Representatives is amended by striking ", or as provided by section 
305(a)(1)" and all that follows thereafter through "under that sec-
tion)". 
SEC. 10110. AMENDMENTS TO SECTION 308. 
Section 308 of the Congressional Budget Act of 1974 is amend- 
2 USC 639. 
ed— 
(1)(A) in the heading of subsection (a), by striking ", NEW 
SPENDING AUTHORITY, OR NEW CREDIT AUTHORITY,"; 
(B) in subsection (a)(1), by striking subparagraph (B) and 
by redesignating subparagraphs (C) and (D) as subparagraphs 
(B) and (C), respectively; 
(C) in subsection (a)(1)(B) (as redesignated), by striking 
"spending authority" through "commitments" and inserting 
"revenues, or tax expenditures"; and 
(D) in paragraphs (1) and (2) of subsection (a), by striking 
", new spending authority described in section 401(c)(2), or 
new credit authority," each place it appears; 
(2) in subsection (b)(1), by striking ", new spending author-
ity described in section 401(c)(2), or new credit authority,"; 
(3) in subsection (c), by inserting "and" after the semicolon 
at the end of paragraph (3), by striking "; and" at the end 
of paragraph (4) and inserting a period; and by striking para-
graph (5); and 
(4) by inserting "joint" before "resolution" each place it 
appears except when "concurrent", "such", or "reconciliation" 
precedes "resolution" and, in subsection (b)(1), by inserting 
'joint" before "resolutions" each place it appears. 
SEC. 10111. AMENDMENTS TO SECTION 310. 
Section 310(c)(1)(A) of the Congressional Budget Act of 1974 2 USC 641. 
is amended— 
(1) by striking "20 percent" the first place it appears and 
all that follows thereafter through ", and" and inserting the 
following: 
"(I) in the Senate, 20 percent of the total of the 
amounts of the changes such committee was directed 
to make under paragraphs (1) and (2) of such sub-
section; or 
"(II) in the House of Representatives, 20 percent 
of the sum of the absolute value of the changes the 
committee was directed to make under paragraph (1) 
and the absolute value of the changes the committee 
was directed to make under paragraph (2); and"; and 
(2) by striking "20 percent" the second place it appears 
and all that follows thereafter through "; and" and inserting 
the following: 
"(I) in the Senate, 20 percent of the total of the 
amounts of the changes such committee was directed 
to make under paragraphs (1) and (2) of such sub-
section; or 
"(II) in the House of Representatives, 20 percent 
of the sum of the absolute value of the changes the 
committee was directed to make under paragraph (1) 
I l l STAT. 686 
PUBLIC LAW 105-33—AUG. 5, 1997 
and the absolute value of the changes the committee 
was directed to make under paragraph (2); and". 
SEC. 10112. AMENDMENTS TO SECTION 311. 
(a) IN GENERAL.—Section 311 of the Congressionsd Budget Act 
2 use 642. 
of 1974 is amended to read as follows: 
"BUDGET-RELATED LEGISLATION MUST BE WITHIN APPROPRIATE 
LEVELS 
"SEC. 311. (a) ENFORCEMENT OF BUDGET AGGREGATES.— 
"(1) IN THE HOUSE OF REPRESENTATIVES.—Except as pro-
vided by subsection (c), after the Congress has completed action 
on a concurrent resolution on the budget for a fiscal year, 
it shall not be in order in the House of Representatives to 
consider any bill, joint resolution, amendment, motion, or con-
ference report providing new budget authority or reducing reve-
nues, if— 
"(A) the enactment of that bill or resolution as reported; 
"(B) the adoption and enactment of that amendment; 
or 
"(C) the enactment of that bill or resolution in the 
form recommended in that conference report; 
would cause the level of total new budget authority or total 
outlays set forth in the applicable concurrent resolution on 
the budget for the first fiscal year to be exceeded, or would 
cause revenues to be less than the level of total revenues 
set forth in that concurrent resolution for the first fiscal year 
or for the total of that first fiscal year and the ensuing fiscal 
years for which allocations are provided under section 302(a), 
except when a declaration of war by the Congress is in effect. 
"(2) IN THE SENATE.—^After a concurrent resolution on the 
budget is agreed to, it shall not be in order in the Senate 
to consider any bill, joint resolution, amendment, motion, or 
conference report that— 
"(A) would cause the level of total new budget authority 
or total outlays set forth for the first fiscal year in the 
applicable resolution to be exceeded; or 
"(B) would cause revenues to be less than the level 
of total revenues set forth for that first fiscal year or 
for the total of that first fiscal year and the ensuing fiscal 
years in the applicable resolution for which allocations 
are provided under section 302(a). 
"(3) ENFORCEMENT OF SOCIAL SECURITY LEVELS IN THE SEN-
ATE.—^Afler a concurrent resolution on the budget is agreed 
to, it shall not be in order in the Senate to consider any 
bill, joint resolution, amendment, motion, or conference report 
that would cause a decrease in social security surpluses or 
an increase in social security deficits relative to the levels 
set forth in the applicable resolution for the first fiscal year 
or for the total of that fiscal year and the ensuing fiscal years 
for which allocations are provided under section 302(a). 
"(b) SOCIAL SECURITY LEVELS.— 
"(1) IN GENERAL.—^For purposes of subsection (a)(3), social 
security surpluses equal the excess of social security revenues 
over social security outlays in a fiscal year or years with such 
an excess and socisd security deficits equal the excess of social 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 687 
security outlays over social security revenues in a fiscal year 
or years with such an excess. 
"(2) TAX TREATMENT.—For purposes of subsection (a)(3), 
no provision of any legislation involving a change in chapter 
1 of the Internal Revenue Code of 1986 shall be treated as 
affecting the amount of social security revenues or outlays 
unless that provision changes the income tax treatment of 
social security benefits. 
"(c) EXCEPTION IN THE HOUSE OF REPRESENTATIVES.—Sub-
section (a)(1) shall not apply in the House of Representatives to 
any bill, joint resolution, or amendment that provides new budget 
authority for a fiscal year or to any conference report on any 
such bill or resolution, if— 
"(1) the enactment of that bill or resolution as reported; 
"(2) the adoption and enactment of that amendment; or 
"(3) the enactment of that bill or resolution in the form 
recommended in that conference report; 
would not cause the appropriate allocation of new budget authority 
made pursuant to section 302(a) for that fiscal year to be exceeded.". 
(b) TABLE OF CONTENTS.—The table of contents set forth in 
section 1(b) of the Congressional Budget and Impoundment Control 
Act of 1974 is amended by striking the item relating to section 
311 and inserting the following: 
"Sec. 311. Budget-related legislation must be within appropriate levels.". 
SEC. 10113. AMENDMENT TO SECTION 312. 
(a) IN GENERAL.—Section 312 of the Congressional Budget Act 
of 1974 is amended to read as follows: 
2 USC 643. 
"DETERMINATIONS AND POINTS OF ORDER 
"SEC. 312. (a) BUDGET COMMITTEE DETERMINATIONS.—For pur-
poses of this title and title IV, the levels of new budget authority, 
outlays, direct spending, new entitlement authority, and revenues 
for a fiscal year shall be determined on the basis of estimates 
made by the Committee on the Budget of the House of Representa-
tives or the Senate, as applicable. 
"(b) DISCRETIONARY SPENDING POINT OF ORDER IN THE SEN-
ATE,— 
"(1) IN GENERAL.—Except as otherwise provided in this 
subsection, it shall not be in order in the Senate to consider 
any bill or resolution (or amendment, motion, or conference 
report on that bill or resolution) that would exceed any of 
the discretionary spending limits in section 251(c) of the Bal-
anced Budget and Emergency Deficit Control Act of 1985. 
"(2) EXCEPTIONS.—^This subsection shall not apply if a dec-
laration of war by the Congress is in effect or if a joint resolution 
pursuant to section 258 of the Balanced Budget and Emergency 
Deficit Control Act of 1985 has been enacted. 
"(c) MAXIMUM DEFICIT AMOUNT POINT OF ORDER IN THE SEN-
ATE.—It shall not be in order in the Senate to consider any concur-
rent resolution on the budget for a fiscal year, or to consider 
any amendment to that concurrent resolution, or to consider a 
conference report on that concurrent resolution, if— 
"(1) the level of total outlays for the first fiscal year set 
forth in that concurrent resolution or conference report exceeds; 
or 
I l l STAT. 688 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) the adoption of that amendment would result in a 
level of total outlays for that fiscal year that exceeds; 
the recommended level of Federal revenues for that fiscal year, 
by an amount that is greater than the maximum deficit amount, 
if any, specified in the Balanced Budget and Emergency Deficit 
Control Act of 1985 for that fiscal year. 
"(d) TIMING OF POINTS OF ORDER IN THE SENATE.—A point 
of order under this Act may not be raised against a bill, resolution, 
amendment, motion, or conference report while an amendment or 
motion, the adoption of which would remedy the violation of this 
Act, is pending before the Senate. 
"(e) POINTS OF ORDER IN THE SENATE AGAINST AMENDMENTS 
BETWEEN THE HOUSES.—Each provision of this Act that establishes 
a point of order against an amendment also establishes a point 
of order in the Senate against an amendment between the Houses. 
If a point of order under this Act is raised in the Senate against 
an amendment between the Houses and the point of order is sus-
tained, the effect shall be the same as if the Senate had disagreed 
to the amendment. 
"(f) 
EFFECT OF A POINT OF ORDER IN THE SENATE.—In 
the 
Senate, if a point of order under this Act against a bill or resolution 
is sustained, the Presiding Officer shall then recommit the bill 
or resolution to the committee of appropriate jurisdiction for further 
consideration.". 
(b) TECHNICAL AND CONFORMING AMENDMENTS.— 
(1) IN GENERAL.—Section 313 of the Congressional Budget 
2 use 644. 
Act of 1974 is amended— 
(A) by striking "(c) When" and inserting "(d) CON-
FERENCE REPORTS.—^When"; and 
(B) by striking subsection (e) and redesignating sub-
section (d) as subsection (e). 
(2) TABLE OF CONTENTS.—^The item relating to section 312 
in the table of contents set forth in section 1(b) of the Congres-
sional Budget and Impoundment Control Act of 1974 is amend-
ed by striking "Effect of points" and inserting "Determinations 
and points". 
SEC. 10114. ADJUSTMENTS. 
(a) IN GENERAL.—^Title III of the Congressional Budget Act 
of 1974 is amended by adding at the end the following new section: 
"ADJUSTMENTS 
2 use 645. 
"SEC. 314. (a) ADJUSTMENTS.— 
"(1) IN GENERAL.—^After the reporting of a bill or joint 
resolution, the offering of an amendment thereto, or the submis-
sion of a conference report thereon, the chairman of the 
Committee on the Budget of the House of Representatives 
or the Senate shall make the adjustments set forth in para-
graph (2) for the amount of new budget authority in that 
measure (if that measure meets the requirements set forth 
in subsection (b)) and the outlays flowing from that budget 
authority. 
"(2) MATTERS TO BE ADJUSTED.—^The adjustments referred 
to in paragraph (1) are to be made to— 
"(A) the discretionary spending limits, if any, set forth 
in the appropriate concurrent resolution on the budget; 
-\ ,- .'9»^^^^ '-. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 689 
\ 
"(B) the allocations made pursuant to the appropriate 
concurrent resolution on the budget pursuant to section 
302(a); and 
"(C) the budgetary aggregates as set forth in the appro-
priate concurrent resolution on the budget. 
"(b) AMOUNTS OF ADJUSTMENTS.—^The adjustment referred to 
in subsection (a) shall be— 
"(1) an amount provided and designated as an emergency 
requirement pursuant to section 251(b)(2)(A) or 252(e) of the 
Balanced Budget and Emergency Deficit Control Act of 1985; 
"(2) an amount provided for continuing disability reviews 
subject to the limitations in section 251(b)(2)(C) of that Act; 
"(3) for any fiscal year through 2002, an amount provided 
that is the dollar equivalent of the Special Drawing Rights 
with respect to— 
"(A) an increase in the United States quota as part 
of the International Monetary Fund Eleventh General 
Review of Quotas (United States Quota); or 
"(B) any increase in the maximum amount available 
to the Secretary of the Treasury pursuant to section 17 
of the Bretton Woods Agreements Act, as amended from 
time to time (New Arrangements to Borrow); 
"(4) an amount provided not to exceed $1,884,000,000 for 
the period of fiscal years 1998 through 2000 for arrearages 
for international organizations, international peacekeeping, and 
multilateral development banks; or 
"(5) an amount provided for an earned income tax credit 
compliance initiative but not to exceed— 
"(A) with respect to fiscal year 1998, $138,000,000 in 
new budget authority; 
"(B) with respect to fiscal year 1999, $143,000,000 in 
new budget authority; 
"(C) with respect to fiscal year 2000, $144,000,000 in 
new budget authority; 
"(D) with respect to fiscal year 2001, $145,000,000 
in new budget authority; and 
"(E) with respect to fiscal year 2002, $146,000,000 in 
new budget authority. 
"(c) APPLICATION OF ADJUSTMENTS.—^The adjustments made 
pursuant to subsection (a) for legislation shall— 
"(1) apply while that legislation is under consideration; 
"(2) take effect upon the enactment of that legislation; 
and 
"(3) be published in the Congressional Record as soon as 
practicable. 
"(d) 
REPORTING REVISED SUBALLOCATIONS.—Following 
any 
adjustment made under subsection (a), the Committees on Appro-
priations of the Senate and the House of Representatives may 
report appropriately revised suballocations under section 302(b) 
to carry out this section. 
"(e) DEFINITIONS FOR CDRS.—AS used in subsection (b)(2)— 
"(1) the term 'continuing disability reviews' shall have the 
same meaning as provided in section 251(b)(2)(C)(ii) of the 
Balanced Budget and Emergency Deficit Control Act of 1985; 
and 
"(2) the term 'new budget authority' shall have the same 
meaning as the term 'additional new budget authority' and 
Congressional 
Record, 
publication. 
I l l STAT. 690 
PUBLIC LAW 105-33—AUG. 5, 1997 
the term 'outlays' shall have the same meaning as 'additional 
outlays' in that section.". 
(b) TABLE OF Co>rrENTS.—^The table of contents set forth in 
section 1(b) of the Congressional Budget and Impoundment Control 
Act of 1974 is amended by adding after the item relating to section 
313 the following new item: 
"Sec. 314. Adjustments.". 
SEC. 10115. EFFECT OF ADOPTION OF A SPECIAL ORDER OF BUSINESS 
IN THE HOUSE OF REPRESENTATIVES. 
(a) EFFECT OF POINTS OF ORDER.—Title III of the Congressional 
Budget Act of 1974 is amended by adding after section 314 the 
following new section: 
2 u s e 645a. 
"EFFECT OF ADOPTION OF A SPECIAL ORDER OF BUSINESS IN THE 
HOUSE OF REPRESENTATIVES 
"SEC. 315. For purposes of a reported bill or joint resolution 
considered in the House of Representatives pursuant to a special 
order of business, the term 'as reported' in this title or title IV 
shall be considered to refer to the text made in order as an original 
bill or joint resolution for the purpose of amendment or to the 
text on which the previous question is ordered directly to passage, 
as the case may be.". 
(b) CONFORMING AMENDMENT.—^The table of contents set forth 
in section 1(b) of the Congressional Budget and Impoundment Con-
trol Act of 1974 is amended by adding after the item relating 
to section 314 the following new item: 
"Sec. 315. Effect of adoption of a special order of business in the House of Represent-
atives.". 
SEC. 10116. AMENDMENT TO SECTION 401 AND REPEAL OF SECTION 
402. 
(a) SECTION 401.— 
(1) CONTROLS.—Section 401 of the Congressional Budget 
2 use 651. 
Act of 1974 is amended by— 
(A) striking the heading and inserting the following: 
"BUDGET-RELATED LEGISLATION NOT SUBJECT TO APPROPRIATIONS"; 
and 
(B) striking subsection (a) and inserting the following: 
"(a) CONTROLS ON CERTAIN BUDGET-RELATED LEGISLATION NOT 
SUBJECT TO APPROPRIATIONS.—It shall not be in order in either 
the House of Representatives or the Senate to consider any bill 
or joint resolution (in the House of Representatives only, as 
reported), amendment, motion, or conference report that provides— 
"(1) new authority to enter into contracts under which 
the United States is obligated to make outlays; 
"(2) new authority to incur indebtedness (other than indebt-
edness incurred under chapter 31 of title 31 of the United 
States Code) for the repayment of which the United States 
is liable; or 
"(3) new credit authority; 
unless that bill, joint resolution, amendment, motion, or conference 
report also provides that the new authority is to be effective for 
any fiscal year only to the extent or in the amounts provided 
in advance in appropriation Acts.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 691 
(2) POINT OF ORDER.—Section 401(b) of the Congressional 
Budget Act of 1974 is amended— 
2 USC 651. 
(A) by inserting "new" before "entitlement" in the head-
ing; 
(B) by striking paragraph (1) and inserting the follow-
ing: 
"(1) POINT OF ORDER.—It shall not be in order in either 
the House of Representatives or the Senate to consider any 
bill or joint resolution (in the House of Representatives only, 
as reported), amendment, motion, or conference report that 
provides new entitlement authority that is to become effective 
during the current fiscal year."; and 
(C) in paragraph (2)— 
(i) by striking "new spending authority described 
in subsection (c)(2)(C)" and inserting "new entitlement 
authority"; and 
(ii) by striking "of that House" and inserting "of 
the Senate or may then be referred to the Committee 
on Appropriations of the House, as the case may be,". 
(3) DEFINITIONS.—Section 401 of the Congressional Budget 
Act of 1974 is amended by striking subsection (c). 
(4) EXCEPTIONS.—Section 401(d) of the Congressional 
Budget Act of 1974 is amended— 
(A) in paragraph (1), by striking "new spending author-
ity if the budget authority for outlays which result from 
such new spending authority is derived" and inserting "new 
authority described in those subsections if outlays from 
that new authority will flow"; 
(B) by striking paragraph (2) and redesignating para-
graph (3) as paragraph (2); and 
(C) in paragraph (2), as redesignated, by striking "new 
spending authority" and inserting "new authority described 
in those subsections". 
(5) REDESIGNATION.—Subsection (d) of section 401 of the 
Congressional Budget Act of 1974 is redesignated as subsection 
(0. 
(6) CONFORMING AMENDMENTS.—(A) Clause 1(b)(4) of rule 
X of the Rules of the House of Representatives is amended 
to read as follows: 
"(4) The amount of new authority to enter into contracts 
under which the United States is obligated to make outlays, 
the budget authority for which is not provided in advance 
by appropriation Acts; new authority to incur indebtedness 
(other than indebtedness in incurred under chapter 31 of title 
31 of the United States Code) for the repayment of which 
the United States is liable, the budget authority for which 
is not provided in advance by appropriation Acts; new entitle-
ment authority as defined in section 3(9) of the Congressional 
Budget Act of 1974, including bills and resolutions (reported 
by other committees) which provide new entitlement authority 
as defined in section 3(9) of the Congressional Budget Act 
of 1974 and are referred to the committee under clause 4(a); 
authority to forego the collection by the United States of propri-
etary offsetting receipts, the budget authority for which is 
not provided in advance by appropriation Acts to offset such 
foregone receipts; and authority to make payments by the 
United States (including loans, grants, and pa3anents from 
Ill STAT. 692 
PUBLIC LAW 105-33—AUG. 5, 1997 
revolving funds) other thein those covered by this subparagraph, 
the budget authority for which is not provided in advance 
by appropriation Acts.". 
(B) Clause 4(a)(2) of rule X of the Rules of the House 
of Representatives is amended by striking "new spending 
authority described in section 401(c)(2)(C)" and inserting "new 
entitlement authority as defined in section 3(9)" and by striking 
"total amount of new spending authority and inserting "total 
amount of new entitlement authority. 
(C) Clause 2(1)(3) of rule XI of the Rules of the House 
of Representatives is amended by striking "new spending 
authority as described in section 401(c)(2)" and by inserting 
"new entitlement authority as defined in section 3(9) . 
(b) REPEALER OF SECTION 402.—Section 402 of the Congres-
2 use 652. 
sional Budget Act of 1974 is repealed. 
(c) CONFORMING AMENDMENTS.— 
(1) REDESIGNATION.—Sections 403 through 407 of the 
Congressional Budget Act of 1974 are redesignated as sections 
2 use 653-656. 
402 through 406, respectively. 
(2) GAG ANALYSIS.—Section 404 (as redesignated) of the 
2 use 654. 
Congressional Budget Act of 1974 is amended by striking 
"spending authority as described by section 401(c)(2) and which 
provide permanent appropriations," and inserting "mandatory 
spending". 
(3) TABLE OF CONTENTS.—^The table of contents set forth 
in section 1(b) of the Congressional Budget and Impoundment 
Control Act of 1974 is amended by— 
(A) striking the item for section 401 and inserting 
the following: 
"Sec. 401. Budget-related legislation not subject to appropriations."; and 
(B) striking the item relating to section 402 and 
redesignating the items relating to sections 403 through 
407 as the items relating to sections 402 through 406, 
respectively. 
(4) CONFORMING AMENDMENTS.—(A) Clause 2(1)(3) of rule 
XI of the Rules of the House of Representatives is amended 
by striking "section 403" and inserting "section 402". 
(B) Clause 7(d) of rule XIII of the Rules of the House 
of Representatives is amended by striking "section 403" and 
inserting "section 402". 
Loans. 
SEC. 10117. AMENDMENTS TO TITLE V. 
(a) SECTION 502.—Section 502 of the Federal Credit Reform 
2 use 661a. 
Act of 1990 is amended as follows: 
(1) In the second sentence of paragraph (1), insert "and 
financing arrangements that defer payment for more than 90 
days, including the sale of a government asset on credit terms" 
before the period. 
(2) In paragraph (5)(A), insert "or modification thereof 
before the first comma. 
(3) In paragraph (5), strike subparagraphs (B) and (C) 
and insert the following: 
"(B) The cost of a direct loan shall be the net present 
value, at the time when the direct loan is disbursed, of the 
following estimated cash flows: 
"(i) loan disbursements; 
"(ii) repayments of principal; and 
. ^ Vi-,-»._j«*''-^ 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 693 
"(iii) payments of interest and other payments by or 
to the Grovemment over the Hfe of the loan after adjusting 
for estimated defaults, prepa3anents, fees, penalties, and 
other recoveries; 
including the effects of changes in loan terms resulting from 
the exercise by the borrower of an option included in the 
loan contract. 
"(C) The cost of a loan guarantee shall be the net present 
value, at the time when the guaranteed loan is disbursed, 
of the following estimated cash flows: 
"(i) payments by the Grovemment to cover defaults 
and delinquencies, interest subsidies, or other payments; 
and 
"(ii) payments to the Government including origination 
and other fees, penalties and recoveries; 
including the effects of changes in loan terms resulting from 
the exercise by the guaranteed lender of an option included 
in the loan guarantee contract, or by the borrower of an option 
included in the guaranteed loan contract.". 
(4) In paragraph (5), amend subparagraph (D) to read 
as follows: 
"(D) The cost of a modification is the difference between 
the current estimate of the net present value of the remaining 
cash flows under the terms of a direct loan or loan guarantee 
contract, and the current estimate of the net present value 
of the remaining cash flows under the terms of the contract, 
as modified.". 
(5) In paragraph (5)(E), insert "the cash flows of after 
"to". 
(6) In paragraph (5), by adding at the end the following: 
"(F) When funds are obligated for a direct loan or loan 
guarantee, the estimated cost shall be based on the current 
assumptions, adjusted to incorporate the terms of the loan 
contract, for the fiscal year in which the funds are obligated.". 
(7) Redesignate paragraph (9) as paragraph (11) and after 
paragraph (8) add the following new paragraphs: 
"(9) The term 'modification' means any Grovernment action 
that alters the estimated cost of an outstanding direct loan 
(or direct loan obligation) or an outstanding loan guarantee 
(or loan guarantee commitment) from the current estimate 
of cash flows. This includes the sale of loan assets, with or 
without recourse, and the purchase of guaranteed loans. This 
also includes any action resulting from new legislation, or from 
the exercise of administrative discretion under existing law, 
that directly or indirectly alters the estimated cost of outstand-
ing direct loans (or direct loan obligations) or loan guarantees 
(or loan guarantee commitments) such as a change in collection 
procedures. 
"(10) The term 'current' has the same meaning as in section 
250(c)(9) of the Balanced Budget and Emergency Deficit Control 
Act of 1985.". 
(b) SECTION 504.—Section 504 of the Federal Credit Reform 
Act of 1990 is amended as follows: 
2 USC 66lc. 
(1) Amend subsection (b)(1) to read as follows: 
"(1) new budget authority to cover their costs is provided 
in advance in an appropriations Act;". 
Ill STAT. 694 
PUBLIC LAW 105-33—AUG. 5, 1997 
(2) In subsection (b)(2), strike "is enacted" and insert "has 
been provided in advance in an appropriations Act". 
(3) In subsection (c), strike "Subsection (b)" and insert 
"Subsections (b) and (e)". 
^ 
(4) In subsection (d)(1), strike "directly or indirectly alter 
the costs of outstanding direct loans and loan guarantees" 
and insert "modify outstanding direct loans (or direct loan 
obligations) or loan guarantees (or loan guarantee commit-
ments)". 
(5) Amend subsection (e) to read as follows: 
"(e) MODIFICATIONS.—^An outstanding direct loan (or direct loan 
obligation) or loan guarantee (or loan guarantee commitment) shall 
not be modified in a manner that increases its costs unless budget 
authority for the additional cost has been provided in advance 
in an appropriations Act.". 
(c) SECTION 505.—Section 505 of the Federal Credit Reform 
2 use 66ld. 
Act of 1990 is amended as follows: 
(1) In subsection (c), by inserting before the period at 
the end of the second sentence the following: ", except that 
the rate of interest charged by the Secretary on lending to 
financing accounts (including amounts treated as lending to 
financing accounts by the Federal Financing Bank (hereinafter 
in this subsection referred to £is the 'Bank') pursuant to section 
406(b)) and the rate of interest paid to financing accounts 
on uninvested balances in financing accounts shall be the same 
as the rate determined pursuant to section 502(5)(E). For 
guaranteed loans financed by the Bank and treated as direct 
loans by a Federal agency pursuant to section 406(b), any 
fee or interest surcharge (the amount by which the interest 
rate charged exceeds the rate determined pursuant to section 
502(5)(E)) that the Bank charges to a private borrower pursuant 
to section 6(c) of the Federal Financing Bank Act of 1973 
shall be considered a cash flow to the Grovernment for the 
purposes of determining the cost of the direct loan pursuant 
to section 502(5). All such amounts shall be credited to the 
appropriate financing account. The Bank is authorized to 
require reimbursement from a Federal agency to cover the 
administrative expenses of the Bank that are attributable to 
the direct loans financed for that agency. All such payments 
by an agency shall be considered administrative expenses sub-
Applicability, 
ject to section 504(g). This subsection shall apply to transactions 
related to direct loan obligations or loan guarantee commit-
ments made on or after October 1, 1991". 
(2) In subsection (c), by striking "supercede" and inserting 
"supersede". 
(3) By amending subsection (d) to read as follows: 
"(d) AUTHORIZATION FOR LIQUIDATING ACCOUNTS.—(1) Amounts 
in liquidating accounts shall be available only for payments result-
ing from direct loan obligations or loan guarantee commitments 
made prior to October 1, 1991, for— 
"(A) interest payments and principal repayments to the 
Treasury or the Federal Financing Bank for amounts borrowed; 
"(B) disbursements of loans; 
"(C) default and other guarantee claim payments; 
"(D) interest supplement payments; 
' :^ 
-'••~A-,.-!>--
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 695 
"(E) payments for the costs of foreclosing, managing, and 
selling collateral that are capitalized or routinely deducted 
from the proceeds of sales; 
"(F) payments to financing accounts when required for 
modifications; 
"(G) administrative expenses, i
f
— 
"(i) amounts credited to the liquidating account would 
have been available for administrative expenses under a 
provision of law in effect prior to October 1, 1991; and 
"(ii) no direct loan obligation or loan guarantee commit-
ment has been made, or any modification of a direct loan 
or loan guarantee has been made, since September 30, 
1991; or 
"(H) such other pa3rments as are necessary for the liquida-
tion of such direct loan obligations and loan guarantee commit-
ments. 
"(2) Amounts credited to liquidating accounts in any year shall 
be available only for payments required in that year. Any unobli-
gated balances in liquidating accounts at the end of a fiscal year 
shall be transferred to miscellaneous receipts as soon as practicable 
after the end of the fiscal year. 
"(3) If funds in liquidating accounts are insufficient to satisfy 
obligations and commitments of such accounts, there is hereby 
provided permanent, indefinite authority to make any pa3rments 
required to be made on such obligations and commitments.". 
(d) SECTION 506.—Section 506 of the Federal Credit Reform 
Act of 1990 is amended— 
2 USC 66ie. 
(1) by striking "(a) IN GENERAL.—"; 
(2) by striking "(1)" and inserting the following: 
"(a) IN GENERAL.—"; 
(3) by striking "(2) The" and inserting the following: 
"(b) STUDY.—The"; 
(4) by striking "(3)" and inserting the following: 
"(c) ACCESS TO DATA.—"; and 
(5) in subsection (c) (as redesignated) by striking "para-
graph (2)" and inserting "subsection (b)". 
SEC. 10118. REPEAL OF TITLE VI. 
(a) REPEALER.—Title VI of the Congressional Budget Act of 
1974 is repealed. 
2 USC 665 et seq. 
(b) CONFORMING AMENDMENTS.—(1) The items relating to title 
VI of the table of contents set forth in section 1(b) of the Congres-
sional Budget and Impoundment Control Act of 1974 are repealed. 
(2) Clause 4(h) of rule X of the Rules of the House of Representa-
tives is amended by striking "section 302 or section 602 (in the 
case of fiscal years 1991 through 1995)" and inserting "section 
302". 
SEC. 10119. AMENDMENTS TO SECTION 904. 
(a) CONFORMING AMENDMENT.—Section 904(a) of the Congres-
sional Budget Act of 1974 is amended by striking "(except section 
2 USC 621 note. 
905)" and by striking "V, and VI (except section 601(a))" and insert-
ing "and V". 
(b) WAIVERS.—Section 904(c) of the Congressional Budget Act 
of 1974 is amended to read as follows: 
"(c) WAIVERS.— 
"(1) 
PERMANENT.—Sections 
305(b)(2), 
305(c)(4), 306, 
310(d)(2), 313, 904(c), and 904(d) of this Act may be waived 
I l l STAT. 696 
PUBLIC LAW 105-33—AUG. 5, 1997 
or suspended in the Senate only by the affirmative vote of 
three-fifths of the Members, duly chosen and sworn. 
"(2) TEMPORARY.—Sections 301(i), 302(c), 302(f), 310(g), 
311(a), 312(b), and 312(c) of this Act and sections 258(a)(4)(C), 
258A(b)(3)(C)(I), 258B(f)(l), 258B(h)(l), 258(h)(3), 258C(a)(5), 
and 258C(b)(l) of the Balanced Budget and Emergency Deficit 
Control Act of 1985 may be waived or suspended in the Senate 
only by the affirmative vote of three-fifths of the Members, 
duly chosen and sworn.". 
(c) APPEALS.—Section 904(d) of the Congressional Budget Act 
2 use 621 note. 
of 1974 is amended to read as follows: 
"(d) APPEALS.— 
"(1) PROCEDURE.—^Appeals in the Senate from the decisions 
of the Chair relating to any provision of title III or IV or 
section 1017 shall, except as otherwise provided therein, be 
limited to 1 hour, to be equally divided between, and controlled 
by, the mover and the manager of the resolution, concurrent 
resolution, reconciliation bill, or rescission bill, as the case 
may be. 
"(2) PERMANENT.—^An affirmative vote of three-fifths of the 
Members, duly chosen and sworn, shall be required in the 
Senate to sustain an appeal of the ruling of the Chair on 
a point of order raised under sections 305(b)(2), 305(c)(4), 306, 
310(d)(2), 313, 904(c), and 904(d) of this Act. 
"(3) TEMPORARY.—An affirmative vote of three-fifths of the 
Members, duly chosen and sworn, shall be required in the 
Senate to sustain an appeal of the ruling of the Chair on 
a point of order raised under sections 301(i), 302(c), 302(f), 
310(g), 311(a), 312(b), and 312(c) of this Act and sections 
258(a)(4)(C), 258A(b)(3)(C)(I), 258B(f)(l), 258B(h)(l), 258(h)(3), 
258C(a)(5), and 258C(b)(l) of the Balanced Budget and Emer-
gency Deficit Control Act of 1985.". 
(d) EXPIRATION OF SUPERMAJORITY VOTING REQUIREMENTS.— 
Section 904 of the Congressional Budget Act of 1974 is amended 
by adding at the end the following: 
"(e) EXPIRATION OF CERTAIN SUPERMAJORITY VOTING REQUIRE-
MENTS.—Subsections (c)(2) and (d)(3) shall expire on September 
30, 2002.". 
SEC. 10120. REPEAL OF SECTIONS 905 AND 906. 
(a) REPEALER.—Sections 905 and 906 of the Congressional 
2 use 621 note, 
Budget Act of 1974 are repealed. 
632 note. 
(b) CONFORMING AMENDMENTS.—The table of contents set forth 
in section 1(b) of the Congressional Budget and Impoundment Con-
trol Act of 1974 is amended by striking the items relating to 
sections 905 and 906. 
SEC. 10121. AMENDMENTS TO SECTIONS 1022 AND 1024. 
(a) SECTION 1022.—Section 1022(b)(1)(F) of the Congressional 
2 use 691a. 
Budget and Impoundment Control Act of 1974 is amended by strik-
ing "section 601" and inserting "section 251(c) of the Balanced 
Budget and Emergency Deficit Control Act of 1985". 
(b) SECTION 1024.—Section 1024(a)(1)(B) of the Congressional 
2 use 691c. 
Budget and Impoundment Control Act of 1974 is amended by strik-
ing "section 601(a)(2)" and inserting "section 251(c) of the Balanced 
Budget and Emergency Deficit Control Act of 1985". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 697 
SEC. 10122. AMENDMENT TO SECTION 1026. 
Section 
1026(7)(A)(iv) of the Congressional 
Budget and 
Impoundment Control Act of 1974 is amended by striking "; and" 2USC691e. 
and inserting "; or". 
SEC. 10123. SENATE TASK FORCE ON CONSmERATION OF BUDGET 
MEASURES. 
(a) APPOINTMENT OF MEMBERS.—^The Majority Leader and 
Minority Leader of the Senate shall each appoint 3 Senators to 
serve on a bipartisan task force to study the floor procedures 
for the consideration of budget resolutions and reconciliation bills 
in the Senate as provided in sections 305(b) and 310(e) of the 
Congressional Budget Act of 1974. 
(b) REPORT OF THE TASK FORCE.—^The task force shall submit 
its report to the Senate not later than October 8, 1997. 
Subtitle B—^Amendments to the Balanced 
Budget and Emergency Deficit Control 
Act of 1985 
SEC. 10201. PURPOSE. 
2 USC 900 note. 
The purpose of this subtitle is to extend discretionary spending 
limits and pay-as-you-go requirements. 
SEC. 10202. GENERAL STATEMENT AND DEFXNITIONS. 
(a) GENERAL STATEMENT.—Section 250(b) of the Balanced 
Budget and Emergency Deficit Control Act of 1985 is amended 
2 USC 900. 
by striking the first 2 sentences and inserting the following: "This 
part provides for budget enforcement as called for in House Concur-
rent Resolution 84 (105th Congress, 1st session).". 
(b) DEFINITIONS.—Section 250(c) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 is amended— 
(1) in paragraph (1)— 
(A) by striking "(but including" through "amount' "; 
and 
(B) by striking "section 601 of that Act as adjusted 
under sections 251 and 253" and inserting "section 251"; 
(2) by striking paragraph (4) and inserting the following: 
"(4) The term 'category' means the subsets of discretionary 
appropriations in section 251(c). Discretionary appropriations 
in each of the categories shall be those designated in the 
joint explanatory statement accompanjdng the conference report 
on the Balanced Budget Act of 1997. New accounts or activities 
shall be categorized only after consultation with the committees 
on Appropriations and the Budget of the House of Representa-
tives and the Senate and that consultation shall, to the extent 
practicable, include written communication to such committees 
that affords such committees the opportunity to comment before 
official action is taken with respect to new accounts or activi-
ties."; 
(3) by striking paragraph (6) and inserting the following: 
"(6) The term 'budgetary resources' means new budget 
authority, unobligated balances, direct spending authority, and 
obligation limitations."; 
I l l STAT. 698 
PUBLIC LAW 105-33—AUG. 5, 1997 
(4) in paragraph (9), by striking "submission of the fiscal 
year 1992 budget that are not included with a budget submis-
sion" and inserting "that budget submission that are not 
included with it"; 
(5) in paragraph (14), by inserting "first 4" before "fiscal 
years" and by striking "through fiscal year 1995"; 
(6) by striking paragraphs (17) and (20) and by redesignat-
ing paragraphs (18), (19), and (21) as paragraphs (17), (18), 
and (19), respectively; 
(7) in paragraph (17) (as redesignated), by striking "Omni-
bus Budget Reconciliation Act of 1990" and inserting "Balanced 
Budget Act of 1997"; 
(8) in paragraph (18) (as redesignated), by striking all 
after "expenses" and inserting "the Federal deposit insurance 
agencies, and other Federal agencies supervising insured 
depository institutions, resulting from full funding of, and 
continuation of, the deposit insurance guarantee commitment 
in effect under current estimates."; and 
(9) by striking paragraph (19) (as redesignated) and insert-
ing the following: 
"(19) The term 'asset sale' means the sale to the public 
of any asset (except for those assets covered by title V of 
the Congressional Budget Act of 1974), whether physical or 
financial, owned in whole or in part by the United States.". 
SEC. 10203. ENFORCING DISCRETIONARY SPENDING LIMITS. 
(a) EXTENSION THROUGH FISCAL YEAR 2002.—Section 251 of 
2 use 901. 
the Balanced Budget and Emergency Deficit Control Act of 1985 
is amended— 
(1) in the heading of subsection (a), by striking "Fiscal 
Years 1991-1998"; 
(2) in subsection (a)(3), by striking "(h)" both places it 
appears and inserting "(f)"; 
(3) by striking subsection (a)(7) and inserting the following: 
"(7) ESTIMATES.— 
"(A) CBO ESTIMATES.—^As soon as practicable after 
Congress completes action on any discretionary appropria-
tion, CBO, after consultation with the Committees on the 
Budget of the House of Representatives and the Senate, 
shall provide 0MB with an estimate of the amount of 
discretionary new budget authority and outlays for the 
current year (if any) and the budget year provided by 
that legislation. 
Reports. 
"(B) 0MB ESTIMATES AND EXPLANATION OF DIF-
FERENCES.—^Not later than 7 calendar days (excluding 
Saturdays, Sundays, and legal holidays) after the date 
of enactment of any discretionary appropriation, 0MB shall 
transmit a report to the House of Representatives and 
to the Senate containing the CBO estimate of that legisla-
tion, an 0MB estimate of the amount of discretionary new 
budget authority and outlays for the current year (if any) 
and the budget year provided by that legislation, and an 
explanation of any difference between the 2 estimates. 
If during the preparation of the report 0MB determines 
that there is a significant difference between 0MB and 
CBO, 0MB shall consult with the Committees on the 
Budget of the House of Representatives and the Senate 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 699 
regarding that difference and that consultation shall 
include, to extent practicable, written communication to 
those committees that affords such committees the oppor-
tunity to comment before the issuance of the report. 
"(C) ASSUMPTIONS AND GUIDELINES.—0MB estimates 
under this paragraph shall be made using current economic 
and technical assumptions. 0MB shall use the 0MB esti-
mates transmitted to the Congress under this paragraph. 
0MB and CBO shall prepare estimates under this para-
graph in conformance with scorekeeping guidelines deter-
mined after consultation among the House and Senate 
Committees on the Budget, CBO, and 0MB. 
"(D) ANNUAL APPROPRIATIONS.—For purposes of this 
paragraph, amounts provided by annual appropriations 
shall include any new budget authority and outlays for 
the current year (if any) and the budget year in accounts 
for which funding is provided in that legislation that result 
from previously enacted legislation."; 
(4) by striking subsection (b) and inserting the following: 
"(b) ADJUSTMENTS TO DISCRETIONARY SPENDING LIMITS.— 
"(1) PREVIEW REPORT.—When the President submits the 
budget under section 1105 of title 31, United States Code, 
0MB shall calculate and the budget shall include adjustments 
to discretionary spending limits (and those limits as cumula-
tively adjusted) for the budget year and each outyear to reflect 
changes in concepts and definitions. Such changes shall equal 
the baseline levels of new budget authority and outlays using 
up-to-date concepts and definitions minus those levels using 
the concepts and definitions in effect before such changes. Such 
changes may only be made after consultation with the commit-
tees on Appropriations and the Budget of the House of Rep-
resentatives and the Senate and that consultation shall include 
written communication to such committees that affords such 
committees the opportunity to comment before official action 
is taken with respect to such changes 
"(2) SEQUESTRATION REPORTS.—When 0MB submits a 
sequestration report under section 254(e), (f), or (g) for a fiscal 
year, 0MB shall calculate, and the sequestration report and 
subsequent budgets submitted by the President under section 
1105(a) of title 31, United States Code, shall include adjust-
ments to discretionary spending limits (and those limits as 
adjusted) for the fiscal year and each succeeding year through 
2002, as follows: 
"(A) EMERGENCY APPROPRL^TIONS.-If, for any fiscal 
year, appropriations for discretionary accounts are enacted 
that the President designates as emergency requirements 
and that the Congress so designates in statute, the adjust-
ment shall be the total of such appropriations in discre-
tionary accounts designated as emergency requirements 
and the outlays flowing in all fiscal years from such appro-
priations. This subparagraph shall not apply to appropria-
tions to cover agricultural crop disaster assistance. 
"(B) SPECIAL OUTLAY ALLOWANCE.—If, in any fiscal 
year, outlays for a category exceed the discretionary spend-
ing limit for that category but new budget authority does 
not exceed its limit for that category (after application 
of the first step of a sequestration described in subsection 
Ill STAT. 700 
PUBLIC LAW 105-33—AUG. 5, 1997 
(a)(2), if necessary), the adjustment in outlays for a fiscal 
year is the amount of the excess but not to exceed 0.5 
percent of the sum of the adjusted discretionary spending 
limits on outlays for that fiscal year. 
"(C) CONTINUING DISABILITY REVIEWS.—(i) If a bill or 
joint resolution making appropriations for a fiscal year 
is enacted that specifies an amount for continuing disability 
reviews under the heading 'Limitation on Administrative 
Expenses' for the Social Security Administration, the 
adjustments for that fiscal year shall be the additional 
new budget authority provided in that Act for such reviews 
for that fiscal year and the additional outlays flowing from 
such amounts, but shall not exceed— 
"(I) for fiscal year 1998, $290,000,000 in additional 
new budget authority and $338,000,000 in additional 
outlays; 
"(II) for fiscal year 1999, $520,000,000 in additional 
new budget authority and $520,000,000 in additiongJ 
outlays; 
"(III) for fiscal year 2000, $520,000,000 in addi-
tional new budget authority and $520,000,000 in addi-
tional outlays; 
"(IV) for fiscal year 2001, $520,000,000 in addi-
tional new budget authority and $520,000,000 in addi-
tional outlays; and 
"(V) for fiscal year 2002, $520,000,000 in additional 
new budget authority and $520,000,000 in additional 
outlays, 
"(ii) As used in this subparagraph— 
"(I) the term 'continuing disability reviews' means 
reviews or redeterminations as defined under section 
201(g)(1)(A) of the Social Security Act and reviews 
and redeterminations authorized under section 211 of 
the Personal Responsibility and Work Opportunity Rec-
onciliation Act of 1996; 
"(II) the term 'additional new budget authority' 
means the amount provided for a fiscal year, in excess 
of $200,000,000, in an appropriations Act and specified 
to pay for the costs of continuing disability reviews 
under the heading 'Limitation on Administrative 
Expenses' for the Social Security Administration; and 
"(III) the term 'additional outlays' means outlays, 
in excess of $200,000,000 in a fiscal year, flowing from 
the amounts specified for continuing disability reviews 
under the heading 'Limitation on Administrative 
Expenses' for the Social Security Administration, 
including outlays in that fiscal year flowing from 
amounts specified in Acts enacted for prior fiscal years 
(but not before 1996). 
"(D) ALLOWANCE FOR IMP.—If an appropriation bill or 
joint resolution is enacted for a fiscal year through 2002 
that includes an appropriation with respect to clause (i) 
or (ii), the adjustment shall be the amount of budget 
authority in the measure that is the dollar equivalent 
of the Special Drawing Rights with respect to— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 701 
"(i) an increase in the United States quota as 
part of the International Monetary Fund Eleventh Gren-
eral Review of Quotas (United States Quota); or 
"(ii) any increase in the maximum amount avail-
able to the Secretary of the Treasury pursuant to sec-
tion 17 of the Bretton Woods Agreements Act, as 
amended from time to time (New Arrangements to 
Borrow). 
"(E) ALLOWANCE FOR INTERNATIONAL ARREARAGES.— 
"(i) ADJUSTMENTS.—If an appropriation bill or joint 
resolution is enacted for fiscal year 1998, 1999, or 
2000 that includes an appropriation for arrearages for 
international organizations, international peacekeep-
ing, and multilateral development banks for that fiscal 
year, the adjustment shall be the amount of budget 
authority in that measure and the outlays flowing 
in all fiscal years from that budget authority. 
"(ii) LIMITATIONS.—^The total amount of adjust-
ments made pursuant to this subparagraph for the 
period of fiscal years 1998 through 2000 shall not 
exceed $ 1,884,000,000 in budget authority. 
"(F) EITC COMPLIANCE INITIATIVE.—If an appropriation 
bill or joint resolution is enacted for a fiscal year that 
includes an appropriation for an earned income tax credit 
compliance initiative, the adjustment shall be the amount 
of budget authority in that measure for that initiative 
and the outlays flowing in all fiscal years from that budget 
authority, but not to exceed— 
"(i) with respect to fiscal year 1998, $138,000,000 
in new budget authority and $131,000,000 in outlays; 
"(ii) with respect to fiscal year 1999, $143,000,000 
in new budget authority and $143,000,000 in outlays; 
"(iii) with respect to fiscal vear 2000, $144,000,000 
in new budget authority and $144,000,000 in outlays; 
"(iv) with respect to fiscal year 2001, $145,000,000 
in new budget authority and $145,000,000 in outlays; 
and 
"(v) with respect to fiscal year 2002, $146,000,000 
in new budget authority and $146,000,000 in outlays.". 
(b) SHIFTING OF DISCRETIONARY SPENDING LIMITS INTO THE 
BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT OF 
1985.—Section 251 of the Balanced Budget and Emergency Deficit 
Control Act of 1985 is amended by adding at the end the following 
2 USC 901. 
new subsection: 
"(c) DISCRETIONARY SPENDING LIMIT.—^As used in this part, 
the term 'discretionary spending limit' means— 
"(1) with respect to fiscal year 1997, for the discretionary 
category, the current adjusted limits of new budget authority 
and outlays; 
"(2) with respect to fiscal year 1998— 
"(A) for the defense category: $269,000,000,000 in new 
budget authority and $266,823,000,000 in outlays; 
"(B) for the nondefense category: $252,357,000,000 in 
new budget authority and $282,853,000,000 in outlays; and 
"(C) 
for 
the 
violent 
crime 
reduction 
category: 
$5,500,000,000 in new budget authority and $3,592,000,000 
in outlays; 
Ill STAT. 702 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(3) with respect to fiscal year 1999— 
"(A) for the defense category: $271,500,000,000 in new 
budget authority and $266,518,000,000 in outlays; 
"(B) for the nondefense category: $255,699,000,000 in 
new budget authority and $287,850,000,000 in outlays; and 
"(C) for the violent 
crime 
reduction 
category: 
$5,800,000,000 in new budget authority and $4,953,000,000 
in outlays; 
"(4) with respect to fiscal year 2000— 
"(A) for the discretionary category: $532,693,000,000 
in new budget authority and $558,711,000,000 in outlays; 
and 
"(B) for the violent 
crime 
reduction 
category: 
$4,500,000,000 in new budget authority and $5,554,000,000 
in outlays; 
"(5) with respect to fiscal year 2001, for the discretionary 
category: $542,032,000,000 in new budget authority and 
$564,396,000,000 in outlays; and 
"(6) with respect to fiscal year 2002, for the discretionary 
category: $551,074,000,000 in new budget authority and 
$560,799,000,000 in outlays; 
as adjusted in strict conformance with subsection (b).". 
(c) REPEAL OF DUPLICATIVE PROVISIONS.—Sections 201, 202, 
204(b), 206, and 211 of House Concurrent Resolution 84 (105th 
Congress) are repealed. 
SEC. 10204. VIOLENT CRIME REDUCTION SPENDING. 
(a) SEQUESTRATION REGARDING VIOLENT CRIME REDUCTION 
SPENDING.— 
(1) REPEAL.—Section 25 lA of the Balanced Budget and 
2 use 901a. 
Emergency Deficit Control Act of 1985 is repealed. 
(2) TABLE OF CONTENTS.—^The item relating to section 25 lA 
in the table contents set forth in section 250(a) of the Balanced 
2 use 900. 
Budget and Emergency Deficit Control Act of 1985 is repealed. 
(b) CONFORMING AMENDMENT.—Section 310002 of Public Law 
103-322 (42 U.S.C. 14212) is repealed. 
SEC. 10205. ENFORCING PAY-AS-YOU-GO. 
Section 252 of the Balanced Budget and Emergency Deficit 
2 use 902. 
Control Act of 1985 is amended— 
(1) by striking subsections (a) and (b) and inserting the 
following: 
"(a) PURPOSE.—The purpose of this section is to assure that 
any legislation enacted before October 1, 2002, affecting direct 
spending or receipts that increases the deficit will trigger an off*set-
ting sequestration. 
"(b) SEQUESTRATION.— 
"(1) TIMING.—^Not later than 15 calendar days after the 
date Congress adjourns to end a session and on the same 
day as a sequestration (if any) under section 251 or 253, there 
shall be a sequestration to offset the amount of any net deficit 
increase caused by all direct spending and receipts legislation 
enacted before October 1, 2002, as calculated under paragraph 
^ (2). 
"(2) CALCULATION OF DEFICIT INCREASE.—0MB shall cal-
culate the amount of deficit increase or decrease by adding— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 703 
"(A) all 0MB estimates for the budget year of direct 
spending and receipts legislation transmitted under sub-
section (d); 
"(B) the estimated amount of savings in direct spending 
programs applicable to budget year resulting from the prior 
year's sequestration under this section or section 253, if 
any, as published in OMB's final sequestration report for 
that prior year; and 
"(C) any net deficit increase or decrease in the current 
year resulting from all 0MB estimates for the current 
year of direct spending and receipts legislation transmitted 
under subsection (d) that were not reflected in the final 
0MB sequestration report for the current year."; 
(2) by amending subsection (c)(1)(B), by inserting "and 
direct" after "guaranteed"; 
(3) by amending subsection (d) to read as follows: 
"(d) ESTIMATES.— 
"(1) CBO ESTIMATES.—As soon as practicable after Congress 
completes action on any direct spending or receipts legislation, 
CBO shall provide an estimate to 0MB of that legislation. 
"(2) 0MB ESTIMATES.—^Not later than 7 calendar days 
(excluding Saturdays, Sundays, and legal holidays) after the 
date of enactment of any direct spending or receipts legislation, 
0MB shall transmit a report to the House of Representatives 
and to the Senate containing— 
"(A) the CBO estimate of that legislation; 
"(B) an 0MB estimate of that legislation using current 
economic and technical assumptions; and 
"(C) an explanation of any difference between the 2 
estimates. 
"(3) SIGNIFICANT DIFFERENCES.—If during the preparation 
of the report under paragraph (2) 0MB determines that there 
is a significant difference between the 0MB and CBO estimates, 
0MB shall consult with the Committees on the Budget of 
the House of Representatives and the Senate regarding that 
difference and that consultation, to the extent practicable, shall 
include written communication to such committees that affords 
such committees the opportunity to comment before the issu-
ance of that report. 
"(4) SCOPE OF ESTIMATES.—^The estimates under this section 
shall include the amount of change in outlays or receipts for 
the current year (if applicable), the budget year, and each 
outyear excluding any amounts resulting from— 
"(A) full funding of, and continuation of, the deposit 
insurance guarantee commitment in effect under current 
estimates; and 
"(B) emergency provisions as designated under sub-
section (e). 
"(5) SCOREKEEPING GUIDELINES.—0MB and CBO, after con-
sultation with each other and the Committees on the Budget 
of the House of Representatives and the Senate, shall— 
"(A) determine common scorekeeping guidelines; and 
"(B) in conformance with such guidelines, prepare esti-
mates under this section."; and 
(4) in subsection (e), by striking ", for any fiscal year 
from 1991 through 1998," and by striking "through 1995". 
Ill STAT. 704 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 10206. REPORTS AND ORDERS. 
Section 254 of the Balanced Budget and Emergency Deficit 
2 use 904. 
Control Act of 1985 is amended— 
(1) by striking subsection (c) and redesignating subsections 
(d) through (k) as (c) through (j), respectively; 
(2) in subsection (c) (as redesignated), by striking "1998" 
and inserting "2002"; 
(3) in subsection (d) (as redesignated), by striking "(h)" 
and inserting "(f)"; 
(4)(A) in subsection (f)(2)(A) (as redesignated), by striking 
"1998" and inserting "2002"; 
(B) in subsection (f)(3) (as redesignated), by striking 
"through 1998"; and 
(C) by striking subsection (f)(4) (as redesignated) and by 
redesignating paragraphs (5) and (6) of that subsection as para-
graphs (4) and (5), respectively; and 
(5) in subsection (g) (as redesignated), by striking "(g)" 
each place it appears and inserting "(f)". 
SEC. 10207. EXEMPT PROGRAMS AND ACTIVITIES. 
(a) VETERANS PROGRAMS.—Section 255(b) of the Balanced 
2 use 905. 
Budget and Emergency Deficit Control Act of 1985 is amended 
as follows: 
(1) In the item relating to Veterans Insurance and Indem-
nity, strike "Indemnity" and insert "Indemnities". 
(2) In the item relating to Veterans' Canteen Service 
Revolving Fund, strike "Veterans'". 
(3) In the item relating to Benefits under chapter 21 of 
title 38, strike "(36-0137-0-1-702)" and insert "(36-0120-0-
1-701)". 
(4) In the item relating to Veterans' compensation, strike 
"Veterans' compensation" and insert "Compensation". 
(5) In the item relating to Veterans' pensions, strike "Veter-
ans' pensions" and insert "Pensions". 
(6) After the last item, insert the following new items: 
"Benefits under chapter 35 of title 38, United States Code, 
related to educational assistance for survivors and dependents 
of certain veterans with service-connected disabilities (36-0137-
0-1-702); 
"Assistance and services under chapter 31 of title 38, 
United States Code, relating to training and rehabilitation for 
certain veterans with service-connected disabilities (36-0137-
0-1-702); 
"Benefits under subchapters I, II, and III of chapter 37 
of title 38, United States Code, relating to housing loans for 
certain veterans and for the spouses and surviving spouses 
of certain veterans Guaranty and Indemnity Program Account 
(36-1119-0-1-704); 
"Loan Guaranty Program Account (36-1025-0-1-704); and 
"Direct Loan Program Account (36-1024-0-1-704).". 
(b) CERTAIN PROGRAM BASES.—Section 255(f) of the Balanced 
Budget and Emergency Deficit Control Act of 1985 is amended 
to read as follows: 
"(f) OPTIONAL EXEMPTION OF MILITARY PERSONNEL.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 705 
"(1) IN GENERAL.—The President may, with respect to any 
military personnel account, exempt that account from seques-
tration or provide for a lower uniform percentage reduction 
than would otherwise apply. 
"(2) LIMITATION.—^The President may not use the authority 
provided by paragraph (1) unless the President notifies the 
Congress of the manner in which such authority will be exer-
cised on or before the date specified in section 254(a) for the 
budget year.". 
(c) OTHER PROGRAMS AND ACTIVITIES.—(1) Section 255(g)(1)(A) 
of the Balanced Budget Emergency Deficit Control Act of 1985 2USC905. 
is amended as follows: 
(A) After the first item, insert the following new item: 
"Activities financed by voluntary pa3rments to the 
Government for goods or services to be provided for such 
payments;". 
(B) Strike "Thrift Savings Fund (26-8141-0-7-602);". 
(C) In the first item relating to the Bureau of Indisin 
Affairs, insert "Indian land and water claims settlements and" 
after the comma. 
(D) In the second item relating to the Bureau of Indian 
Affairs, strike "miscellaneous" and insert "Miscellaneous" and 
strike ", tribal trust funds". 
(E) Strike "Claims, defense (97-0102-0-1-051);". 
(F) In the item relating to Claims, judgments, and relief 
acts, strike "806" and insert "808". 
(G) Strike "Coinage profit fund (20-5811-0-2-803);". 
(H) Insert "Compact of Free Association (14^0415-0-1-
808);" after the item relating to the Claims, judgments, and 
relief acts. 
(I) Insert "Conservation Reserve Program (12-2319-0-1-
302);" after the item relating to the Compensation of the Presi-
dent. 
(J) In the item relating to the Customs Service, strike 
"852" and insert "806". 
(K) In the item relating to the Comptroller of the Currency, 
insert", Assessment funds (20-8413-0-8-373)" before the semi-
colon. 
(L) Strike "Director of the Office of Thrift Supervision;". 
(M) Strike "Eastern Indian land claims settlement fund 
(14-2202-0-1-806);". 
(N) After the item relating to the Exchange stabilization 
fund, insert the following new items: 
"Farm Credit Administration, Limitation on Adminis-
trative Expenses (78-4131-0-3-351); 
"Farm Credit System Financial Assistance Corpora-
tion, interest payment (20-1850-0-1-908);". 
(O) Strike "Federal Deposit Insurance Corporation;". 
(P) In the first item relating to the Federal Deposit Insur-
ance Corporation, insert "(51-4064-0-3-373)" before the semi-
colon. 
(Q) In the second item relating to the Federal Deposit 
Insurance Corporation, insert "(51-4065-0-3-373)" before the 
semicolon. 
(R) In the third item relating to the Federal Deposit Insur-
ance Corporation, insert "(51-4066-0-3-373)" before the semi-
colon. 
I l l STAT. 706 
PUBLIC LAW 105-33—AUG. 5, 1997 
(S) In the item relating to the Federal Housing Finance 
Board, insert "(95-4039-0-3-371)" before the semicolon. 
(T) In the item relating to the Federal pa5nnent to the 
railroad retirement 
account, strike "account" and 
insert 
"accounts". 
(U) In the item relating to the health professions graduate 
student loan insurance fund, insert "program account" after 
"fund" and strike "(Health Education Assistance Loan Program) 
(75-4305-0-3-553)" and insert "(75-0340-0-1-552)". 
(V) In the item relating to Higher education facilities, strike 
"and insurance". 
(W) In the item relating to Internal revenue collections 
for Puerto Rico, strike "852" and insert "806". 
(X) Amend the item relating to the Panama Canal Commis-
sion to read as follows: 
"Panama Canal Commission, Panama Canal Revolving 
Fund (95-4061-0-3-403);". 
(Y) In the item relating to the Medical facilities guarantee 
and loan fund, strike "(75-4430-0-3-551)" and insert "(75-
9931-0-3-550)". 
(Z) In the first item relating to the National Credit Union 
Administration, insert "operating fund 
(25-4056-0-3-373)" 
before the semicolon. 
(AA) In the second item relating to the National Credit 
Union Administration, strike "central" and insert "Central" and 
insert "(25-4470-0-3-373)" before the semicolon. 
(BB) In the third item relating to the National Credit 
Union Administration, strike "credit" and insert "Credit" and 
insert "(25-4468-0-3-373)" before the semicolon. 
(CC) After the third item relating to the National Credit 
Union Administration, insert the following new item: 
"Office of Thrift Supervision (20-4108-0-3-373);". 
(DD) In the item relating to Payments to health care trust 
funds, strike "572" and insert "571". 
(EE) Strike "Compact of Free Association, economic assist-
ance pursuant to Public Law 99-658 (14-0415-0-1-806);". 
(FF) In the item relating to Payments to social security 
trust funds, strike "571" and insert "651". 
(GrG) Strike "Pa3rments to state and local government fiscal 
assistance trust fund (20-2111-0-1-851);". 
(HH) In the item relating to Payments to the United States 
territories, strike "852" and insert "806". 
(II) Strike "Resolution Funding Corporation;". 
(JJ) In the item relating to the Resolution Trust Corpora-
tion, insert "Revolving Fund (22-4055-0-3-373)" before the 
semicolon. 
(KK) After the item relating to the Tennessee Valley 
Authority funds, insert the following new items: 
"Thrift Savings Fund; 
"United States Enrichment Corporation (95-4054-0-
3-271); 
"Vaccine Injury Compensation (75-0320-0-1-551); 
"Vaccine Injury Compensation Program Trust Fund 
(20-8175-0-7-551);". 
(2) Section 255(g)(1)(B) of the Balanced Budget and Emergency 
2 use 905. 
Deficit Control Act of 1985 is amended as follows: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 707 
(A) Strike "The following budget" and insert 'The following 
Federal retirement and disability". 
(B) In the item relating to Black lung benefits, strike 
"lung benefits" and insert "Lung Disability Trust Fund". 
(C) In the item relating to the Court of Federal Claims 
Court Judges' Retirement Fund, strike "Court of Federal". 
(D) In the item relating to Longshoremen's compensation 
benefits, insert "Special workers compensation expenses," before 
"Longshoremen's". 
(E) In the item relating to Railroad retirement tier II, 
strike "retirement tier IF' and insert "Industry Pension Fund". 
(3) Section 255(g)(2) of the Balanced Budget and Emergency 
Deficit Control Act of 1985 is amended as follows: 
2 USC 905. 
(A) Strike the following items: 
"Agency for International Development, Housing, and 
other credit guarantee programs (72-4340-0-3-151); 
"Agricultural credit insurance fund 
(12-4140-0-1-
351);". 
(B) In the item relating to Check forgery, strike "Check" 
and insert "United States Treasury check". 
(C) Strike "Community development grant loan guarantees 
(86-0162-0-1-451);". 
(D) After the item relating to the United States Treasury 
Check forgery insurance fund, insert the following new item: 
"Credit liquidating accounts;". 
(E) Strike the following items: 
"Credit union share insurance fund (25-4468-0-3-
371);". 
"Economic development revolving fund (13-4406-0-3-
452);". 
"Export-Import Bank of the United States, Limitation 
of program activity (83-4027-0-3-155);". 
"Federal Deposit Insurance Corporation (51-8419-0-
8-371);". 
"Federal Housing Administration fund (86-4070-0-3-
371);". 
"Federal ship financing fund (69-4301-0-3-403);". 
"Federal ship financing fund, fishing vessels (13-4417-
0-3-376);". 
"Government National Mortgage Association, Guaran-
tees of mortgage-backed securities (86-4238-0-3-371);". 
"Health education loans (75-4307-0-3-553);". 
"Indian loan guarantee and insurance fund (14—4410-
0-3-452);". 
"Railroad rehabilitation and improvement financing 
fund (69-4411-0-3-401);". 
"Rural development insurance fund (12-4155-0-3-
452);". 
"Rural electric and telephone revolving fund (12-4230-
8-3-271);". 
"Rural housing insurance fund (12-4141-0-3-371);". 
"Small Business Administration, Business loan and 
investment fund (73-4154-0-3-376);". 
"Small Business Administration, Lease guarantees 
revolving fund (73-4157-0-3-376);". 
I l l STAT. 708 
PUBLIC LAW 105-33—AUG. 5, 1997 
"Small Business Administration, Pollution 
control 
equipment contract guarantee revolving fund (73-4147-
0-3-376);". 
"Small Business Administration, Surety bond guaran-
tees revolving fund (73-4156-0-3-376);". 
"Department of Veterans Affairs Loan guaranty revolv-
ing fund (36-4025-0-3-704);". 
(d) LOW-INCOME PROGRAMS.—Section 255(h) of the Balanced 
2 use 905. 
Budget and Emergency Deficit Control Act of 1985 is amended 
as follows: 
(1) Amend the item relating to Child nutrition to read 
as follows: 
"Child nutrition programs (with the exception of special 
milk programs) (12-3539-0-1-605);". 
(2) After the second item insert the following new items: 
"Temporary assistance for needy families (75-1552-0-1-
609); 
"Contingency fund (75-1522-0-1-609);" 
"Child care entitlement to States (75-1550-0-1-609); 
(3) Amend the item relating to Women, infants, and chil-
dren program to read as follows: 
"Special supplemental 
nutrition program for women, 
infants, and children (WIC) (12-3510-0-1-605);". 
(4) After the last item add the following new item: 
"Family support payments to States (75-1501-0-1-609);". 
(e) IDENTIFICATION OF PROGRAMS.—Section 255(i) of the Bal-
anced Budget £ind Emergency Deficit Control Act of 1985 is amend-
ed to read as follows: 
"(i) IDENTIFICATION OF PROGRAMS.—For purposes of subsections 
(b), (g), and (h), each account is identified by the designated budget 
account identification code number set forth in the Budget of the 
United States Government 1998-Appendix, and an activity within 
an account is designated by the name of the activity and the 
identification code number of the account.". 
(f) OPTIONAL EXEMPTION OF MILITARY PERSONNEL.—Section 
255(h) of the Balanced Budget and Emergency Deficit Control Act 
of 1985 (relating to optional exemption of military personnel) is 
repealed. 
SEC. 10208. GENERAL AND SPECIAL SEQUESTRATION RULES. 
(a) HEADINGS.— 
(1) SECTION.—^The section heading of section 256 of the 
2 use 906. 
Balanced Budget and Emergency Deficit Control Act of 1985 
is amended by striking "EXCEPTIONS, LIMITATIONS, AND SPECIAL 
RULES" and inserting "GENERAL AND SPECIAL SEQUESTRATION 
RULES". 
(2) TABLE OF CONTENTS.—^The item relating to section 256 
in the table contents set forth in section 250(a) of the Balanced 
2 use 900. 
Budget and Emergency Deficit Control Act of 1985 is amended 
to read as follows: 
"SEC. 256. GENERAL AND SPECIAL SEQUESTRATION RULES.". 
(b) AUTOMATIC SPENDING INCREASES.—Section 256(a) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 is 
amended by striking paragraph (1) and redesignating paragraphs 
(2) and (3) as paragraphs (1) and (2), respectively. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 709 
"(b) STUDENT LOANS.—For all student loans under part B or 
D of title IV of the Higher Education Act of 1965 made during 
the period when a sequestration order under section 254 is in 
effect as required by section 252 or 253, origination fees under 
sections 438(c)(2) and 455(c) of that Act shall each be increased 
by 0.50 percentage point.". 
(d) HEALTH CENTERS.—Section 256(e)(1) of the Balanced Budget 
and Emergency Deficit Control Act of 1985 is amended by striking 
the dash and all that follows thereafter and inserting "2 percent.". 
(e) TREATMENT OF FEDERAL ADMINISTRATIVE EXPENSES.—Sec-
tion 256(h) of the Balanced Budget and Emergency Deficit Control 
Act of 1985 is amended— 
(1) in paragraph (2), by striking "joint resolution" and 
inserting "part"; and 
(2) in paragraph (4), by striking subparagraphs (D) and 
(H), by redesignating subparagraphs (E), (F), (G), and (I), as 
subparagraphs (D), (E), (F), andf (G), respectively, and by adding 
at the end the following new subparagraph: 
"(H) Farm Credit Administration.". 
(f) COMMODITY CREDIT CORPORATION.—Section 256(j) of the 
Balanced Budget and Emergency Deficit Control Act of 1985 is 
amended by striking paragraphs (2) through (5) and inserting the 
following: 
"(2) REDUCTION IN PAYMENTS MADE UNDER CONTRACTS.— 
(A) Loan eligibility under smy contract entered into with a 
person by the Commodity Credit Corporation prior to the time 
an order has been issued under section 254 shall not be reduced 
by an order subsequently issued. Subject to subparagraph (B), 
after an order is issued under such section for a fiscal year, 
£iny cash pa3anents for loans or loan deficiencies made by 
the Commodity Credit Corporation shall be subject to reduction 
under the order. 
"(B) Each loan contract entered into with producers or 
producer cooperatives with respect to a particular crop of a 
commodity and subject to reduction under subparagraph (A) 
shall be reduced in accordance with the same terms and condi-
tions. If some, but not all, contracts applicable to a crop of 
a commodity have been entered into prior to the issuance 
of an order under section 254, the order shall provide that 
the necessary reduction in payments under contracts applicable 
to the commodity be uniformly applied to all contracts for 
the next succeeding crop of the commodity, under the authority 
provided in paragraph (3). 
"(3) DELAYED REDUCTION IN OUTLAYS PERMISSIBLE.—Not-
withstanding any other provision of this title, if an order under 
section 254 is issued with respect to a fiscal year, any reduction 
under the order applicable to contracts described in paragraph 
(1) may provide for reductions in outlays for the account 
involved to occur in the fiscal year following the fiscal year 
to which the order applies. 
"(4) UNIFORM PERCENTAGE RATE OF REDUCTION AND OTHER 
LIMITATIONS.—^All reductions described in paragraph (2) which 
are required to be made in connection with an order issued 
under section 254 with respect to a fiscal year shall be made 
so as to ensure that outlays for each program, project, activity, 
or account involved are reduced by a percentage rate that 
is uniform for all such programs, projects, activities, and 
I l l STAT. 710 
PUBLIC LAW 105-33—AUG. 5, 1997 
accounts, and may not be made so as to achieve a percentage 
rate of reduction in any such item exceeding the rate specified 
in the order. 
"(5) DAIRY PROGRAM.—Notwithstanding any other provision 
of this subsection, as the sole means of achieving any reduction 
in outlays under the milk price support program, the Secretary 
of Agriculture shall provide for a reduction to be made in 
the price received by producers for all milk produced in the 
United States and marketed by producers for commercial use. 
That price reduction (measured in cents per hundred weight 
of milk marketed) shall occur under section 201(d)(2)(A) of 
the Agricultural Act of 1949 (7 U.S.C. 1446(d)(2)(A)), shall 
begin on the day any sequestration order is issued under section 
254, and shall not exceed the aggregate amount of the reduction 
in outlays under the milk price support program that otherwise 
would have been achieved by reducing payments for the pur-
chase of milk or the products of milk under this subsection 
during the applicable fiscal year.". 
(g) EFFECTS OF SEQUESTRATION.—Section 256(k) of the Bal-
2 use 906. 
anced Budget and Emergency Deficit Control Act of 1985 is amend-
ed as follows: 
(1) In paragraph (1), strike "other than a trust or special 
fund account" and insert ", except as provided in paragraph 
(5)" before the period. 
(2) Amend paragraph (6) to read as follows: 
"(6) Budgetary resources sequestered in revolving, trust, 
and special fund accounts and offsetting collections sequestered 
in appropriation accounts shall not be available for obligation 
during the fiscal year in which the sequestration occurs, but 
shall be available in subsequent years to the extent otherwise 
provided in law.". 
SEC. 10209. THE BASELINE. 
(a) IN GENERAL.—Section 257 of the Balanced Budget and 
2 use 907. 
Emergency Deficit Control Act of 1985 is amended— 
(1) in subsection (b)(2) by amending subparagraph (A) to 
read as follows: 
"(A)(i) No program established by a law enacted on or 
before the date of enactment of the Balanced Budget Act of 
1997 with estimated 
current year outlays greater 
than 
$50,000,000 shall be assumed to expire in the budget year 
or the outyears. The scoring of new programs with estimated 
outlays greater than $50,000,000 a year shall be based on 
scoring by the Committees on Budget or 0MB, as applicable. 
0MB, CBO, and the Budget Committees shall consult on the 
scoring of such programs where there are differenes between 
CBO and 0MB. 
"(ii) On the expiration of the suspension of a provision 
of law that is suspended under section 171 of Public Law 
104-127 and that authorizes a program with estimated fiscal 
year outlays that are greater than $50,000,000, for purposes 
of clause (i), the program shall be assumed to continue to 
operate in the same manner as the program operated imme-
diately before the expiration of the suspension."; 
(2) by adding the end of subsection (b)(2) the following 
new subparagraph: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 711 
"(D) If any law expires before the budget year or any 
outyear, then any program with estimated current year outlays 
greater than $50,000,000 that operates under that law shall 
be assumed to continue to operate under that law as in effect 
immediately before its expiration."; 
(3) in the second sentence of subsection (c)(5), by striking 
"national product 
fixed-weight 
price index" and inserting 
"domestic product chain-t5TDe price index"; and 
(4) by striking subsection (e) and inserting the following: 
"(e) ASSET SALES.—^Amounts realized from the sale of an asset 
shall not be included in estimates under section 251, 252, or 253 
if that sale would result in a financial cost to the Federal Govern-
ment as determined pursuant to scorekeeping guidelines.". 
(b) PRESIDENT'S BUDGET.—Section 1105(a) of title 31, United 
States Code, is amended by adding at the end the following: 
"(32) a statement of the levels of budget authority and 
outlays for each program assumed to be extended in the base-
line as provided in section 257(b)(2)(A) and for excise taxes 
assumed to be extended under section 257(b)(2)(C) of the Bal-
anced Budget and Emergency Deficit Control Act of 1985.". 
(c) BUDGETARY TREATMENT OF CERTAIN TRUST FUND OPER-
ATIONS.—Section 710 of the Social Security Act (42 U.S.C. 911) 
is amended to read as follows: 
"BUDGETARY TREATMENT OF TRUST FUND OPERATIONS 
"SEC. 710. (a) The receipts and disbursements of the Federal 
Old-Age and Survivors Insurance Trust Fund and the Federal 
Disability Insurance Trust Fund and the taxes imposed under sec-
tions 1401 and 3101 of the Internal Revenue Code of 1986 shall 
not be included in the totals of the budget of the United States 
Government as submitted, by the President or of the congressional 
budget and shall be exempt fi*om any general budget limitation 
imposed by statute on expenditures and net lending (budget outlays) 
of the United States Government. 
"(b) No provision of law enacted after the date of enactment 
of the Balanced Budget and Emergency Deficit Control Act of 1985 
(other than a provision of an appropriation Act that appropriated 
funds authorized under the Social Security Act as in effect on 
the date of the enactment of the Balanced Budget and Emergency 
Deficit control Act of 1985) may provide for payments from the 
general fund of the Treasury to any Trust Fund specified in sub-
section (a) or for payments from any such Trust Fund to the 
general fund of the Treasury.". 
SEC. 10210. TECHNICAL CORRECTION. 
Section 258 of the Balanced Budget and Emergency Deficit 
Control Act of 1985, entitled "Modification of Presidential Order", 
2 USC 908. 
is repealed. 
SEC. 10211. JUDICIAL REVIEW. 
Section 274 of the Balanced Budget and Emergency Deficit 
Control Act of 1985 is amended as follows: 
2 USC 922. 
(1) Strike "252" or "252(b)" each place it occurs and insert 
"254". 
(2) In subsection (d)(1)(A), strike "257(1) to the extent that" 
and insert "256(a) if and at the end insert "or". 
I l l STAT. 712 
PUBLIC LAW 105-33—AUG. 5, 1997 
(3) In subsection (d)(1)(B), strike "new budget" and all 
that follows through "spending authority" and insert "budgetary 
resources" and strike "or" after the comma. 
(4) Strike subsection (d)(1)(C). 
(5) Strike subsection (f) and redesignate subsections (g) 
and (h) as subsections (f) and (g), respectively. 
(6) In subsection (g) (as redesignated), strike "base levels 
of total revenues and total budget outlays, as" and insert "fig-
ures", and strike "251(a)(2)(B) or (c)(2)," and insert "254". 
SEC. 10212. EFFECTIVE DATE. 
(a) EXPIRATION.—Section 275(b) of the Balanced Budget and 
2 use 900 note. 
Emergency Deficit Control Act of 1985 is amended— 
(1) by striking "Part C of this title, section" and inserting 
"Sections 251, 253, 258B, and"; 
(2) by striking "1995" and inserting "2002"; and 
(3) by adding at the end the following new sentence: "The 
remaining sections of part C of this title shall expire September 
30, 2006.". 
(b) EXPIRATION.—Section 14002(c)(3) of the Omnibus Budget 
Reconcihation Act of 1993 (2 U.S.C. 900 note) is repealed. 
2 u s e 902 note. 
SEC. 10213. REDUCTION OF PREEXISTING BALANCES AND EXCLUSION 
OF EFFECTS OF THIS ACT FROM PAYGO SCORECARD. 
Upon the enactment of this Act, the Director of the Office 
of Management and Budget shall— 
(1) reduce any balances of direct spending and receipts 
legislation for any fiscal year under section 252 of the Balanced 
Budget and Emergency Deficit Control Act of 1985 to zero; 
and 
(2) not make any estimates of changes in direct spending 
outlays and receipts under subsection (d) of that section for 
any fiscal year resulting from the enactment of this Act or 
of the Taxpayer Relief Act of 1997. 
National Capital 
T I T L E X I — D I S T R I C T O F 
C O L U M B I A 
anf'""'"" 
R E V I T A L I Z A T I O N 
Self-Govemment 
o?1997^'^^"*^ ^^^ 
SECTION 11000. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This title may be cited as the "National 
Capital Revitalization and Self-Government Improvement Act of 
1997". 
(b) TABLE OF CONTENTS.—The table of contents of this title 
is as follows: 
Sec. 11000. Short title, table of contents. 
Subtitle A—District of Columbia Retirement Funds 
CHAPTER 1—SHORT TITLE; FINDINGS; DEFINITIONS 
Sec. 11001. Short title. 
Sec. 11002. Findings and declaration of policy. 
Sec. 11003. Definitions. 
CHAPTER 2—FEDERAL BENEFIT PAYMENTS UNDER DISTRICT RETIREMENT PROGRAMS 
Sec. 11011. Obligation of Federal government to make benefit payments. 
Sec. 11012. Federal benefit payments described. 
Sec. 11013. Establishment of single annual cost-of-living adjustment under District 
Retirement Program. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 713 
CHAPTER 3—DETERMINATIONS AND REVIEW OF ELIGIBILITY AND PAYMENTS; 
INFORMATION SHARING 
Sec. 11021. Determination of eligibility for and amount of Federal benefit payments 
made by Trustee. 
Sec. 11022. Procedures for resolving claims arising from denied benefit payments. 
Sec. 11023. Transfer of and access to records of District Government. 
Sec. 11024. Federal information sharing for verification of benefit determinations. 
CHAPTER 4—DISTRICT OF COLUMBIA FEDERAL PENSION LIABILITY TRUST FUND 
Sec. 11031. Creation of Trust Fund. 
Sec. 11032. Uses of amounts in Trust Fund. 
Sec. 11033. Transfer of assets and obligations of District Retirement Funds. 
Sec. 11034. Treatment of Trust Fund under certain laws. 
Sec. 11035. Administration through Trustee. 
CHAPTER 5—RESPONSIBILITIES OF DISTRICT GOVERNMENT 
Sec. 11041. Interim administration. 
Sec. 11042. Replacement plan. 
CHAPTER 6—FINANCING O F BENEFIT PAYMENTS AFTER DEPLETION OF TRUST FUND 
Sec. 11051. Creation of Federal Supplemental Fund. 
Sec. 11052. Uses of amounts in Fund. 
Sec. 11053. Determination of annual payment into Federal Supplemental Fund. 
Sec. 11054. Determination of methodolofflr for making payments. 
Sec. 11055. Special requirements upon discontinuation of Trust Fund. 
CHAPTER 7—REPORTS 
Sec. 11061. Annual valuations and reports by enrolled actuary. 
Sec. 11062. Reports by Comptroller General. 
CHAPTER 8—JUDICIAL ENFORCEMENT 
Sec. 11071. Judicial review. 
Sec 11072. Jurisdiction and venue 
Sec. 11073. Statute of limitations. 
Sec. 11074. Treatment of misappropriation of fund amounts as Federal crime. 
CHAPTER 9—MISCELLANEOUS 
Sec. 11081. Coordination between Secretary, Trustee, and District Government. 
Sec. 11082. Study of alternatives for financing Federal obligations. 
Sec. 11083. Issuance of regulations by Secretary. 
Sec. 11084. Effect on Reform Act and other laws. 
Sec. 11085. Reference to new Federal program for retirement of judges of District 
of Columbia courts. 
Sec. 11086. Full faith and credit 
Sec 11087. Severability of provisions. 
Subtitle B—Management Reform Plans 
Sec. 11101. Short title. 
Sec. 11102. Management reform plans for District Government. 
Sec. 11103. Procedures for development of plans. 
Sec. 11104. Implementation of plans 
Sec. 11105. Reform of powers and duties of department heads. 
Sec. 11106. No effect on powers of Financial Responsibility and Management As-
sistance Authority. 
Subtitle C—Criminal Justice 
CHAPTER 1—CORRECTIONS 
Sec. 11201. Bureau of Prisons. 
Sec. 11202. Corrections Trustee 
Sec. 11203. Priority consideration for employees of the District of Columbia. 
Sec. 11204. Amendments related to persons with a mental disease or defect. 
Sec. 11205. Liability for and litigation authority of Corrections Trustee. 
Sec. 11206. Permitting expenditure of funds to carry out certain sewer agreement. 
CH/U'TER 2—SENTENCING 
Sec. 11211. Truth-in-Sentencing Commission. 
Sec. 11212. General duties, powers, and goals of Commission. 
Sec. 11213. Data collection. 
39-194 O - 97 - 24 : QL 3 Part 1 
I l l STAT. 714 
PUBLIC LAW 105-33—AUG. 5, 1997 
Sec. 11214. Enactment of amendments to District of Columbia Code. 
CHAPTER 3—OFFENDER SUPERVISION AND PAROLE 
Sec. 11231. Parole. 
Sec. 11232. Pretrial Services, Defense Services, Parole, Adult Probation and Of-
fender Supervision Trustee. 
Sec. 11233. Offender Supervision, Defender and Courts Services Agency. 
Sec. 11234. Authorization of appropriations. 
CHAPTER 4—DISTRICT O F COLUMBIA COURTS 
SUBCHAPTER A—TRANSFER OF ADMINISTRATION AND FINANCING OF COURTS TO 
FEDERAL GOVERNMENT 
Sec. 11241. Authorization of appropriations. 
Sec. 11242. Administration of courts under District of Columbia Code. 
Sec. 11243. Budgeting and financing requirements for courts under Home Rule Act. 
Sec. 11244. Auditing of accounts of court system. 
Sec. 11245. Miscellaneous budgeting and financing requirements for courts under 
District law. 
Sec. 11246. Other provisions relating to administration of District of Columbia 
courts. 
SUBCHAPTER B^JUDICIAL RETIREMENT PROGRAM 
Sec. 11251. Judicial Retirement and Survivors Annuity Fund. 
Sec. 11252. Termination of current fund and program. 
Sec. 11253. Conforming amendments. 
SUBCHAPTER C—MISCELLANEOUS CONFORMING AND ADMINISTRATIVE PROVISIONS 
Sec. 11261. Treatment of courts under miscellaneous District laws. 
Sec. 11262. Representation of indigents in criminal cases. 
CHAPTER 5—PRETRIAL SERVICES AGENCY AND PUBLIC DEFENDER SERVICE 
Sec. 11271. Amendments affecting Pretrial Services Agency. 
Sec. 11272. Amendments affecting Public Defender Service. 
CHAPTER 6—MISCELLANEOUS PROVISIONS 
Sec. 11281. Technical assistance and research. 
Sec. 11282. Exemption from personnel and budget ceilings for Trustees and related 
agencies. 
Subtitle D—Privatization of Tax Collection and Administration 
Sec. 11301. Findings. 
Sec. 11302. Authorizing Chief Financial Officer to privatize tax administration and 
collection. 
Subtitle E—Financing of District of Columbia Accumulated Deficit 
Sec. 11401. Findings. 
Sec. 11402. Authorization for intermediate-term advances of funds by the Secretary 
of the Treasury to liquidate the accumulated general fund deficit of the 
District of Columbia. 
Sec. 11403. Conforming amendments. 
Sec. 11404. Technical corrections. 
Sec. 11405. Authorization for issuance of general obligation bonds by the District 
of Columbia to finance or refund its accumulated general fund deficit. 
Subtitle F—District of Columbia Bond Financing Improvements 
Sec. 11501. Short title 
Sec. 11502. Findings. 
Sec. 11503. Amendment to Section 462 (relating to contents of borrowing legislation 
and elections on issuing general obligation bonds) 
Sec. 11504. Amendment to Section 466 (relating to public or negotiated sale of gen-
eral obligation bonds). 
Sec. 11505. Amendment to Section 467 (relating to authority to create security in-
terests in District revenues). 
Sec. 11506. Amendment to Section 472 (relating to borrowing in anticipation of rev-
enues). 
Sec. 11507. Addition of new Section 475 (relating to general obligation bond antici-
pation notes). 
Sec. 11508. Amendment to Section 490 (relating to revenue bonds and other obliga-
tions). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 715 
Sec. 11509. Conforming amendment. 
Subtitle G—District of Columbia Government Budget 
Sec. 11601. Elimination of the annual Federal payment to the District of Columbia. 
Sec. 11602. Requirement that the District of Columbia balance its budget in FY 
1998. 
Sec. 11603. Permitting expedited submission and approval of consensus budget and 
financial [jlan. 
Sec. 11604. Increase in maximum amount of permitted District borrowing. 
Subtitle H—Miscellaneous Provisions 
CHAPTER 1—REGULATORY REFORM IN THE DISTRICT OF COLUMBIA 
Sec. 11701. Review and revision of regulations and permit and application proc-
esses. 
Sec. 11702. Repeal of Clean Air CompUance Fee Act of 1994. 
Sec. 11703. Repeal requirement for Congressional authorization of certain mergers 
involving District of Columbia public utility corporations. 
Sec. 11704. Exemption of certain contracts from Council review. 
CHAPTER 2—OTHER MISCELLANEOUS PROVISIONS 
Sec. 11711. Revisions to Financial Responsibility and Management Assistance Act. 
Sec. 11712. Cooperative agreements between Federal agencies and Metropolitan 
Police Department. 
Sec. 11713. Permitting garnishment of wages of officers and employees of District 
of Columbia government. 
Sec. 11714. Permitting excess appropriations by Water and Sewer Authority for 
capital projects. 
Sec. 11715. Requiring certain Federal officials to provide notice before carrying out 
activities affecting real property located in District of Columbia. 
Sec. 11716. Repeal term of deed of conveyance to certain hospital. 
Sec. 11717. Short title of Home Rule Act. 
CHAPTER 3—EFFECTIVE DATE; GENERAL PROVISIONS 
Sec. 11721. Effective date. 
Sec. 11722. Technical assistance. 
Sec. 11723. Liability. 
Subtitle A—District of Columbia 
Retirement Funds 
CHAPTER 1—SHORT TITLE; FINDINGS; DEFINITIONS 
'District of Columbia Retire-
SEC. 11001. SHORT TITLE. 
This subtitle may be cited as the 
ment Protection Act of 1997". 
SEC. 11002. FINDINGS AND DECLARATION OF POLICY. 
(a) FINDINGS.—The Congress finds that— 
(1) State and municipal retirement programs should be 
funded on an actuarially sound basis; 
(2) the retirement programs for the police officers and 
firefighters, 
teachers and judges of the District of Columbia 
had significant unfunded 
liabilities totaling 
approximately 
$1,900,000,000 when the Federal government transferred those 
programs to the District of Columbia, and those liabilities have 
since increased to nearly $4,800,000,000, an increase which 
is almost entirely attributable to the accumulation of interest 
on the value which existed at the time of transfer; 
(3) the District of Columbia has fully met its 
financial 
obligations under the District of Columbia Retirement Reform 
Act of 1979 (Pubhc Law 96-122); 
(4) the growth of the unfunded liabilities of the three 
pension funds listed above did not occur because of any action 
District of 
Columbia 
Retirement 
Protection Act of 
1997. 
I l l STAT. 716 
PUBLIC LAW 105-33—AUG. 5, 1997 
taken or any failure to act that lay within the power of the 
District of Columbia government or the District of Columbia 
Retirement Board; 
(5) the presence of the unfunded pension liability is having 
and will continue to have a negative impact on the District 
of Columbia's credit rating as it is a legal obligation and the 
total unfunded liability exceeds the total General Obligation 
debt of the District, and the costs associated with this liability 
are a contributing cause of the District's ongoing financial 
crisis; 
(6) the obligations of the District associated with these 
pension programs in fiscal year 1997 represents nearly 10 
percent of the District's revenue; 
(7) the annual Federal contribution toward these costs 
under the District of Columbia Retirement Reform Act has 
remained $52,000,000; 
(8) if the unfunded pension liability situation is not 
resolved, in 2004 the District of Columbia would be responsible 
for annual costs exceeding $800,000,000, a figure which would 
be impossible to meet without catastrophic impact on the Dis-
trict government's resources and programs; 
(9) the financial resources of the District of Columbia are 
not adequate to discharge the unfunded liabilities of the retire-
ment programs; and 
(10) the level of benefits and funding of the current retire-
ment programs were authorized by various Acts of Congress, 
(b) POLICY.—It is the policy of this subtitle— 
(1) to relieve the District of Columbia government of the 
responsibility for the unfunded pension liabilities transferred 
to it by the Federal government; 
(2) for the Federal government to assume the legal respon-
sibility for pajdng certain pension benefits (including certain 
unfunded pension liabilities which existed as of the day prior 
to introduction of this legislation) for the retirement plans 
of teachers, police, and firefighters; 
(3) to provide for a responsible Federal system for payment 
of benefits accrued prior to the date of introduction of this 
legislation; and 
(4) to require the establishment of replacement plans by 
the District of Columbia government for the current retirement 
plans for teachers, and police and firefighters. 
SEC. 11003. DEFINITIONS. 
For purposes of this subtitle, the following definitions shall 
apply: 
(1) The term "contract" means the contract under section 
11035 between the Secretary and the Trustee, 
(2) The term "covered District employee" means a teacher 
of the District of Columbia public schools, or a member of 
the Metropolitan Police Force or the Fire Department of the 
District of Columbia, as defined under the District Retirement 
Program. 
(3) The term "District Government" means any entity treat-
ed as part of the District government under section 305(5) 
of the District of Columbia Financial Responsibility and 
Management Assistance Act of 1995, including the District 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 717 
of Columbia Retirement Board (as defined in section 102(5) 
of the Reform Act). 
(4) The term "District Retirement Fund" means the District 
of Columbia Police Officers and Fire Fighters Retirement Fund 
and the District of Columbia Teachers Retirement Fund, as 
defined in the Reform Act. 
(5) The term "District Retirement Program" means any 
of the retirement programs for teachers and members of the 
Metropolitan Police Force and Fire Department, as described 
in section 102(7) of the Reform Act as in effect on the day 
before the freeze date (except as amended by section 11013). 
(6) The term "enrolled actuary" means the enrolled actuary 
engaged by the Trustee under section 11061(a). 
(7) The term "Federal benefit payment" means a pa5rment 
described in section 11012. 
(8) The term "Federal Supplemental Fund" means the Fed-
eral Supplemental District of Columbia Pension Fund created 
under section 11051. 
(9) The term "freeze date" means June 30, 1997. 
(10) The term "person" means an individual, partnership, 
joint venture, corporation, mutual company, joint-stock com-
pany, trust, estate, unincorporated organization, association, 
or employee organization. 
(11) The term "Reform Act" means the District of Columbia 
Retirement Reform Act (Public Law 96-122). 
(12) The term "replacement plan" means the plan described 
in section 11042. 
(13) The term "replacement plan adoption date" means 
the date upon which the legislation establishing the replace-
ment plan becomes effective, or the first day after the expiration 
of the 1-year period which begins on the date of the enactment 
of this Act, whichever occurs first. 
(14) The term "Trust Fund" means the District of Columbia 
Federal Pension Liability Trust Fund established under section 
11031. 
(15) The term "Secretary" means the Secretary of the Treas-
ury or the Secretary's designee. 
(16) The term "Trustee" means the person or persons 
selected by the Secretary under section 11035. 
CHAPTER 2-~FEDERAL BENEFIT PAYMENTS UNDER 
DISTRICT RETIREMENT PROGRAMS 
SEC. 11011. OBLIGATION OF FEDERAL GOVERNMENT TO MAKE BENE-
FIT PAYMENTS. 
(a) IN GENERAL.—In accordance with the provisions of this 
subtitle, the Federal Government shall make Federal benefit pay-
ments associated with the pension plans for police officers, fire-
fighters, and teachers of the District of Columbia. 
(b) No REVERSION OF FEDERAL RESPONSIBILITY TO DISTRICT.— 
At no point after the effective date of this subtitle may the respon-
sibility or any part thereof assigned to the Federal Government 
under subsection (a) for making Federal benefit payments revert 
to the District of Columbia. 
I l l STAT. 718 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 11012. FEDERAL BENEFIT PAYMENTS DESCRIBED. 
(a) IN GENERAL.—Subject to the succeeding provisions of this 
subtitle, a "Federal benefit pa3nnent" is any benefit payment to 
which an individual is entitled under a District Retirement Pro-
gram, in such amount and under such terms and conditions as 
may apply under such Program. 
(b) TREATMENT OF SERVICE OCCURRING AFTER FREEZE DATE.— 
Service after the freeze date shall not be credited for purposes 
of determining the amount of any Federal benefit payment. Nothing 
in this subsection shall be construed to affect the crediting of 
such service for any other purpose under the District Retirement 
Program. 
(c) SPECIAL RULE REGARDING DISABILITY BENEFITS.—^To the 
extent that any portion of a benefit payment to which an individual 
is entitled under a District Retirement Program is based on a 
determination of disability made by the District of Columbia Retire-
ment Board or the Trustee after the freeze date, the Federal benefit 
payment determined with respect to the individual shall be an 
amount equal to the deferred retirement benefit or normal retire-
ment benefit the individual would receive if the individual left 
service on the day before the commencement of disability retirement 
benefits. 
(d) SPECIAL RULE REGARDING CERTAIN DEATH BENEFITS.— 
(1) IN GENERAL.—In the case of a benefit pa3anent to which 
an individual is entitled under a District Retirement Program 
which is payable on the death of a covered District employee 
or former covered District employee and which is not deter-
mined by the length of service of the employee or former 
employee, the Federal benefit payment determined with respect 
to the individual shall be equal to the pre-freeze date percentage 
of the amount otherwise payable. 
(2) PRE-FREEZE DATE PERCENTAGE DEFINED.—^In paragraph 
(1), the "pre-freeze date percentage" with respect to a covered 
District employee or former covered District employee is the 
amount (expressed as a percentage) equal to the quotient of— 
(A) the number of months of the covered District 
employee's or former covered District employee's service 
prior to the freeze date; divided by 
(B) the total number of months of the covered District 
employee's or former covered District employee's service. 
SEC. 11013. E S T A B U S H M E N T OF SINGLE ANNUAL COST-OF-LIVING 
ADJUSTMENT UNDER DISTRICT RETIREMENT PROGRAM. 
(a) PROGRAM FOR POLICE AND FIRE FIGHTERS.—Subsection (m) 
of the Policemen and Firemen's Retirement and Disability Act (DC 
Code, sec. 4-624) is amended— 
(1) in paragraph (2), by striking "the Mayor shall" and 
all that follows and inserting the following: "on January 1 
of each year (or within a reasonable time thereafter), the Mayor 
shall determine the per centum change in the price index 
for the preceding year by determining the difference between 
the index published for December of the preceding year and 
the index published for December of the second preceding 
year."; and 
(2) by amending paragraph (3) to read as follows: 
"(3)(A) If (in accordance with paragraph (2)) the Mayor deter-
mines in a year (beginning with 1999) that the per centum change 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 719 
in the price index for the preceding year indicates a rise in the 
price index, each annuity having a commencing date on or before 
March 1 of the year shall, effective March 1 of the year, be increased 
by an amount equal to— 
"(i) in the case of an annuity having a commencing date 
on or before March 1 of such preceding year, the per centum 
change computed under paragraph (2), adjusted to the nearest 
Vio of 1 per centum; or 
"(ii) in the case of an annuity having a commencing date 
after March 1 of such preceding year, a pro rata increase 
equal to the product of— 
"(I) ^12 of the per centum change computed under 
paragraph (2), multiplied by 
"(II) the number of months (not to exceed 12 months, 
counting any portion of a month as an entire month) for 
which the annuity was payable before the effective date 
of the increase, 
adjusted to the nearest Vio of 1 per centum. 
"(B) On January 1, 1998 (or within a reasonable time there-
after), the Mayor shall determine the per centum change in the 
price index published for December 1997 over the price index pub-
lished for June 1997. If such per centum change indicates a rise 
in the price index, effective March 1, 1998— 
"(i) each annuity having a commencing date on or before 
September 1, 1997, shall be increased by an amount equal 
to such per centum change, adjusted to the nearest Vio of 
1 per centum; and 
"(ii) each annuity having a commencing date after Septem-
ber 1, 1997, and on or before March 1, 1998, shall be increased 
by a pro rata increase equal to the product of— 
"(I) Ve of such per centum change, multiplied by 
"(II) the number of months (not to exceed 6 months, 
counting any portion of a month as an entire month) for 
which the annuity was payable before the effective date 
of the increase, 
adjusted to the nearest Vio of 1 per centum.". 
(b) PROGRAM FOR TEACHERS.—Section 21(b) of the Act entitled 
"An Act for the retirement of public-school teachers in the District 
of Columbia", approved August 7, 1946 (DC Code, sec. 31-1241(b)) 
is amended— 
(1) in paragraph (1), by striking 'The Mayor shall—" and 
all that follows and inserting the following: "On January 1 
of each year (or within a reasonable time thereafter), the Mayor 
shall determine the per centum change in the price index 
for the preceding year by determining the difference between 
the index published for December of the preceding year and 
the index published for December of the second preceding 
year."; and 
(2) by amending paragraph (2) to read as follows: 
"(2)(A) If (in accordance with paragraph (1)) the Mayor deter-
mines in a year (beginning with 1999) that the per centum change 
in the price index for the preceding year indicates a rise in the 
price index, each annuity having a commencing date on or before 
March 1 of the year shall, effective March 1 of the year, be increased 
by an amount equal to— 
"(i) in the case of an annuity having a commencing date 
on or before March 1 of such preceding year, the per centum 
I l l STAT. 720 
PUBLIC LAW 105-33—AUG. 5, 1997 
change computed under paragraph (1), adjusted to the nearest 
Vio of 1 per centum; or 
"(ii) in the case of an annuity having a commencing date 
after March 1 of such preceding year, a pro rata increase 
equal to the product of— 
"(I) Vi2 of the per centum change computed under 
paragraph (1), multipHed by 
"(II) the number of months (not to exceed 12 months, 
counting any portion of a month as an entire month) for 
which the annuity was payable before the effective date 
of the increase, 
adjusted to the nearest Vio of 1 per centum. 
"(B) On January 1, 1998 (or within a reasonable time there-
after), the Mayor shall determine the per centum change in the 
price index published for December 1997 over the price index pub-
lished for June 1997. If such per centum change indicates a rise 
in the price index, effective March 1, 1998— 
"(i) each annuity having a commencing date on or before 
September 1, 1997, shall be increased by an amount equal 
to such per centum change, adjusted to the nearest Vio of 
1 per centum; and 
"(ii) each annuity having a commencing date after Septem-
ber 1, 1997, and on or before March 1, 1998, shall be increased 
by a pro rata increase equal to the product of— 
"(I) Ve of such per centum change, multiplied by 
"(II) the number of months (not to exceed 6 months, 
counting any portion of a month as £in entire month) for 
which the annuity was payable before the effective date 
of the increase, 
adjusted to the nearest Vio of 1 per centum.". 
CHAPTER 3—DETERMINATIONS AND REVIEW OF 
ELIGIBILITY AND PAYMENTS; INFORMATION SHARING 
SEC. 11021. DETERMINATION OF ELIGIBILITY FOR AND AMOUNT OF 
FEDERAL BENEFIT PAYMENTS MADE BY TRUSTEE. 
Notwithstanding any provision of a District Retirement Pro-
gram or any other law, rule, or regulation, the Trustee— 
(1) shall determine whether an individual is eligible to 
receive a Federal benefit pajnnent under this subtitle; 
(2) shall determine the amount and form of an individual's 
Federal benefit payment under this subtitle; and 
(3) may recoup or recover any amounts paid under this 
subtitle as a result of errors or omissions by the Trustee, 
the District Grovemment, or any other person. 
SEC. 11022. PROCEDURES FOR RESOLVING CLAIMS ARISING FROM 
DENIED BENEFIT PAYMENTS. 
(a) REQUIRING NOTICE AND OPPORTUNITY FOR REVIEW.—In 
accordance with procedures approved by the Secretary, the Trustee 
shall provide to any individuaJ whose claim for a Federal benefit 
payment under this subtitle has been denied in whole or in part— 
(1) adequate written notice of such denial, setting forth 
the specific reasons for the denial in a manner calculated 
to be understood by the average participant in the District 
Retirement Program; and 
jjasg^».;V 
-."^ - -
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 721 
(2) a reasonable opportunity for a full and fair review 
of the decision den)ring such claim. 
(b) STANDARD FOR REVIEW,—^Any factual determination made 
by the Trustee shall be presumed correct unless rebutted by clear 
and convincing evidence. The Trustee's interpretation and construc-
tion of the benefit provisions of the District Retirement Program 
and this subtitle shall be entitled to great deference. 
SEC. 11023. TRANSFER OF AND ACCESS TO RECORDS OF DISTRICT 
GOVERNMENT. 
(a) IN GENERAL.—Within 30 days after the Secretary or the 
Trustee requests, the District Government shall furnish copies of 
all records, documents, information, or data the Secretary or the 
Trustee deems necessary to carry out responsibilities under this 
subtitle and the contract. Upon request, the District Grovemment 
shall grant the Secretary or the Trustee direct access to such 
information systems, records, documents, information or data as 
the Secretary or Trustee requires to carry out responsibilities under 
this subtitle or the contract. 
(b) 
REPAYMENT 
BY DISTRICT 
GOVERNMENT.—The 
District 
Grovemment shall reimburse the Trust Fund for all costs, including 
benefit costs, that are attributable to errors or omissions in the 
transferred records that are identified within 3 years after such 
records are transferred. 
SEC. 11024. FEDERAL INFORMATION SHARING FOR VERIFICATION OF 
BENEFIT DETERMINATIONS. 
(a) IN GENERAL.—Except with respect to taxpayer returns and 
return information subject to section 6103 of the Internal Revenue 
Code of 1986, the Secretary may— 
(1) secure directly from any department or agency of the 
United States information necessary to enable the Secretary 
to verify or confirm benefit determinations under this subtitle; 
and 
(2) by regulation authorize the Trustee to review such 
information for purposes of administering this subtitle and 
the contract. 
(b) AMENDMENTS TO INTERNAL REVENUE CODE.—^The Internal 
Revenue Code of 1986 is amended as follows: 
(1) In section 6103(1), as amended by section 1206(a) of 
the Taxpayer Bill of Rights 2, by adding at the end the following 
26 USC 6103. 
new paragraph: 
(16) DISCLOSURE OF RETURN INFORMATION FOR PURPOSES 
OF ADMINISTERING THE 
DISTRICT OF COLUMBIA 
RETIREMENT 
PROTECTION ACT OF 1997.— 
"(A) IN GENERAL.—^Upon written request available 
return information (including such information disclosed 
to the Social Security Administration under paragraph (1) 
or (5) of this subsection), relating to the amount of wage 
income (as defined in section 3121(a) or 3401(a)), the name, 
address, and identifying number assigned under section 
6109, of payors of wage income, taxpayer identity (as 
defined in subsection 6103(b)(6)), and the occupational sta-
tus reflected on any return filed by, or with respect to, 
any individual with respect to whom eligibility for, or the 
correct amount of, benefits under the District of Columbia 
Retirement Protection Act of 1997, is sought to be deter-
mined, shall be disclosed by the Commissioner of Social 
Ill STAT. 722 
PUBLIC LAW 105-33—AUG. 5, 1997 
Security, or to the extent not available from the Social 
Security Administration, by the Secretary, to any duly 
authorized officer or employee of the Department of the 
Treasury, or a Trustee or any designated officer or 
employee of a Trustee (as defined in the District of Colum-
bia Retirement Protection Act of 1997), or any actuary 
engaged by a Trustee under the terms of the District of 
Columbia Retirement Protection Act of 1997, whose official 
duties require such disclosure, solely for the purpose of, 
and to the extent necessary in, determining an individual's 
eligibility for, or the correct amount of, benefits under 
the District of Columbia Retirement Protection Act of 1997. 
"(B) DISCLOSURE FOR USE IN JUDICIAL OR ADMINISTRA-
TIVE PROCEEDINGS.—^Retum information disclosed to any 
person under this paragraph may be disclosed in a judicial 
or administrative proceeding relating to the determination 
of an individual's eligibility for, or the correct amount of, 
benefits under the District of Columbia Retirement Protec-
tion Act of 1997.". 
26 use 6103. 
(2) In section 6103(a)(3), by striking "(6) or (12)" and insert-
ing "(6), (12), or (16)"; 
(3) In section 6103(i)(7)(B)(i), by inserting after "(other 
than an agency referred to in subparagraph (A))" and before 
the word "for" the words "or by a Trustee as defined in the 
District of Columbia Retirement Protection Act of 1997,". 
(4) In section 6103(p)(3)(A), by striking "or (15)" and insert-
ing "(15), or (16)". 
(5) In section 6103(p)(4) in the matter preceding subpara-
graph (A), by striking "or (12)" and inserting "(12), or (16), 
or any other person described in subsection (1)(16)". 
(6) In section 6103(p)(4)(F)(i), by striking "or (9)," and 
inserting "(9), or (16), or any other person described in sub-
section (1)( 16)". 
(7) In section 6103(p)(4)(F) in the matter following clause 
(iii)— 
(A) by inserting after "any such agency, body or 
commission" and before the words "for the General Account-
ing Office" the words ", including an agency or any other 
person described in subsection (1)(16),"; 
(B) by striking "to such agency, body, or commission" 
and inserting "to such agency, body, or commission, includ-
ing an agency or any other person described in subsection 
(1)(16),"; 
(C) by striking "or (12)(B)" and inserting ", (12)(B), 
or (16)"; 
(D) by inserting after the words "any agent," and before 
the words "this paragraph shall" the words "or any person 
including an agent described in subsection (1)(16),"; 
(E) by inserting after the words "such agent" and before 
"(except that" the words "or other person"; and 
(F) by inserting after the words "an agent," and before 
the words "any report" the words "or any person including 
an agent described in subsection (1)(16),". 
26 use 7213. 
(8) In section 7213(a)(2), by striking "or (15)," and inserting 
"(15), or (16)". 
26 use 6103 
(c) CONFIDENTIALITY.—^The Secretary may issue regulations 
note. 
governing the confidentiality of the information obtained pursuant 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 723 
to subsection (a) and the provisions of law amended by subsection 
(b). 
CHAPTER 4—DISTRICT OF COLUMBIA FEDERAL 
PENSION LIABILITY TRUST FUND 
SEC. 11031. CREATION OF TRUST FUND. 
(a) ESTABLISHMENT.—There is established on the books of the 
Treasury the District of Columbia Federal Pension Liability Trust 
Fund, consisting of the assets transferred pursuant to section 11033 
and any income earned on the investment of such assets pursuant 
to subsection (b). 
(b) INVESTMENT OF ASSETS.—^The Trustee may invest the assets 
of the Trust Fund in private securities and any other form of 
investment deemed appropriate by the Secretary. 
SEC. 11032. USES OF AMOUNTS IN TRUST FUND. 
(a) IN GENERAL.—Amounts in the Trust Fund shall be used— 
(1) to make Federal benefit payments under this subtitle; 
(2) subject to subsection (b), to cover the reasonable and 
necessary expenses of administering the Trust Fund under 
the contract entered into pursuant to section 11035(b); and 
(3) for such other purposes as are specified in this subtitle. 
(b) SPECIAL RULES REGARDING ADMINISTRATIVE EXPENSES.— 
(1) 
BUDGETING; 
CERTIFICATION 
AND 
APPROVAL.—The 
administrative expenses of the Trust Fund shall be paid in 
accordance with an annual budget set forth by the Trustee 
which shall be subject to certification and approval by the 
Secretary. 
(2) 
USE OF 
DISTRICT RETIREMENT FUND FOR INTERIM 
ADMINISTRATION.—^The Secretary is authorized to requisition 
from the District Retirement Fund such sums as are necessary 
to administer the Trust Fund until assets are transferred to 
the Trust Fund pursuant to section 11033. 
SEC. 11033. TRANSFER OF ASSETS AND OBLIGATIONS OF DISTRICT 
RETIREMENT FUNDS. 
(a) IN GENERAL.—^As of the replacement plan adoption date, 
all obligations to make Federal benefit payments and all assets 
of the District Retirement Fund as of the replacement plan adoption 
date (except as provided in subsections (b) and (c)) shall be trans-
ferred to the Trust Fund. 
(b) 
DESIGNATION OF ASSETS TO BE RETAINED BY DISTRICT 
RETIREMENT FUND.—^The Secretary shall designate assets with a 
value of $1,275 billion that shall not be transferred from the District 
Retirement Fund under subsection (a). The Secretary's designation 
and valuation of the assets shall be final and binding. 
(c) EXCEPTION FOR CERTAIN EMPLOYEE CONTRIBUTIONS.— 
(1) IN GENERAL.—Subsection (a) shall not apply to assets 
consisting of the District Retirement Fund consisting of any 
employee contributions deducted and withheld after the freeze 
date or any interest thereon (computed at a rate and in a 
manner determined by the Secretary). 
(2) EMPLOYEE CONTRIBUTIONS DEFINED.—In paragraph (1), 
the term "employee contributions" means amounts deducted 
and withheld from the salaries of covered District employees 
and paid to the District Retirement Fund (and, in the case 
of teachers, amounts of additional deposits paid to the District 
I l l STAT. 724 
PUBLIC LAW 105-33—AUG. 5, 1997 
Retirement Fund), pursuant to the District Retirement Pro-
gram. 
(d) RESPONSIBILITIES OF DISTRICT GOVERNMENT.— 
(1) IN GENERAL.—^The transfer of assets from the District 
Retirement Fund under this section shall be made in accordance 
with the direction of the Secretary. The District Government 
shall promptly take all steps, and execute all documents, that 
the Secretary deems necessary to effect the transfer. 
(2) FINAL RECONCILIATION OF ACCOUNTS.—^As soon as prac-
ticable after the replacement plan adoption date, the District 
Government shall furnish the Trustee a final reconciliation 
of accounts in connection with the transfer of assets and obliga-
tions to the Trust Fund. The allocation of assets under this 
section shall be adjusted in accordance with this reconciliation. 
SEC. 11034. TREATMENT OF TRUST FUND UNDER CERTAIN LAWS. 
(a) INTERNAL REVENUE CODE.—For purposes of the Internal 
Revenue Code of 1986— 
(1) the Trust Fund shall be treated as a trust described 
in section 401(a) of the Code which is exempt from taxation 
under section 501(a) of the Code; 
(2) any transfer to or distribution from the Trust Fund 
shall be treated in the same manner as a transfer to or distribu-
tion from a trust described in section 401(a) of the Code; and 
(3) the benefits provided by the Trust Fund shall be treated 
as benefits provided under a governmental plan maintained 
by the District of Columbia. 
(b) ERISA.—For purposes of the Employee Retirement Income 
Security Act of 1974, the benefits provided by the Trust Fund 
shall be treated as benefits provided under a governmental plan 
maintained by the District of Columbia. 
(c) APPLICATION OF CERTAIN FUTURE AMENDMENTS TO INTERNAL 
REVENUE CODE.—To the extent that any provision of subpart A 
of part I of subchapter D of chapter 1 of the Internal Revenue 
Code of 1986 (26 U.S.C. 401 et seq.) is amended after the date 
of the enactment of this Act, such provision as amended shall 
apply to the Trust Fund only to the extent the Secretary determines 
that application of the provision as amended is consistent with 
the administration of this subtitle. 
SEC. 11035. ADMINISTRATION THROUGH TRUSTEE. 
(a) IN GENERAL.—^As soon as practicable after the enactment 
of this subtitle, the Secretary shall select a Trustee to administer 
the Trust Fund and otherwise carry out the responsibilities and 
duties specified in this subtitle in accordance with the contract 
described in subsection (b). 
(b) CONTRACT.—^The Secretary shall enter into a contract with 
the Trustee to provide for the management, investment, control 
and auditing of Trust Fund assets, the making of Federal benefit 
payments under this subtitle from the Trust Fund, and such other 
matters as the Secretary deems appropriate. The Secretary shall 
enforce the provisions of the contract and otherwise monitor the 
administration of the Trust Fund. 
(c) REPORTS.—The Trustee shall report to the Secretary, in 
a form and manner and at such intervals as the Secretary may 
prescribe, on any matters or transactions relating to the Trust 
Fund, including financial matters, as the Secretary may require. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 725 
CHAPTER 5—RESPONSIBILITIES OF DISTRICT 
GOVERNMENT 
SEC. 11041. INTERIM ADMINISTRATION. 
(a) 
ADMINISTRATION OF BENEFITS UNTIL APPOINTMENT OF 
TRUSTEE.—^Notwithstanding chapter 2, after the enactment of this 
subtitle the District Government shall continue to discharge its 
duties and responsibilities under the District Retirement Program 
and the District Retirement Fund (as such duties and responsibil-
ities are modified by this subtitle), including the responsibility 
for Federal benefit pajrments, until such time as the Secretary 
notifies the District Government that the Secretary has directed 
the Trustee to carry out the duties and responsibilities required 
under the contract. 
(b) REIMBURSEMENT FROM TRUST FUND.—^The Trustee shall 
reimburse the District Government for any administrative expenses 
incurred by the District Government in canying out subsection 
(a)— 
(1) if the Trustee finds such expenses to be reasonable 
and necessary; and 
(2) to the extent that the District Government is not 
reimbursed for such expenses from other sources. 
(c) MAKING DISTRICT RETIREMENT FUND WHOLE.—^The District 
Government shall reimburse the District Retirement Fund for any 
benefits paid inconsistent with this subtitle from the District Retire-
ment Fund between the freeze date and the replacement plan 
adoption date. 
SEC. 11042. REPLACEMENT PLAN. 
(a) ADOPTION BY DISTRICT GOVERNMENT.—Not later than one 
year after the date of the enactment of this subtitle, the District 
Government shall adopt a replacement plan for pension benefits 
for covered District employees, effective as of the freeze date. 
(b) REPLACEMENT PLAN IMPOSED IF DISTRICT GOVERNMENT 
FAILS TO ADOPT PLAN.—If the District Government fails to adopt 
a replacement plan within the period prescribed in subsection (a), 
the retirement program applicable to police, firefighters, and teach-
ers under the laws of the District of Columbia in effect as of 
June 1, 1997 (except as otherwise amended by this Act), including 
all requirements of the program regarding benefits, contributions, 
and cost-of-living adjustments, shall be treated as the replacement 
plan for purposes of this subtitle. 
(c) No PAYMENT OF AMOUNTS PAID AS FEDERAL BENEFIT PAY-
MENT.—Notwithstanding any provision of the Reform Act or any 
other law, rule, or regulation, the District Grovernment is not 
required to pay any amount under any replacement plan under 
this subtitle if the amount is paid as a Federal benefit pajonent 
under this subtitle. 
CHAPTER 6—FINANCING OF BENEFIT PAYMENTS AFTER 
DEPLETION OF TRUST FUND 
SEC. 11051. CREATION OF FEDERAL SUPPLEMENTAL FUND. 
(a) ESTABLISHMENT.—^There is established on the books of the 
Treasury the Federal Supplemental District of Columbia Pension 
Fund, which shall be administered by the Secretary and shall 
consist of the following assets: 
I l l STAT. 726 
PUBLIC LAW 105-33—AUG. 5, 1997 
(1) Amounts deposited into such Fund under the provisions 
of this subtitle. 
(2) Any amount otherwise appropriated to such Fund. 
(3) Any income earned on the investment of the assets 
of such Fund pursuant to subsection (b). 
(b) INVESTMENT OF ASSETS.—^The Secretary shall invest such 
portion of the Federal Supplemental Fund as is not in the judgment 
of the Secretary required to meet current withdrawals. Such invest-
ments shall be in public debt securities with maturities suitable 
to the needs of the Federal Supplemental Fund, as determined 
by the Secretary, and bearing interest at rates determined by 
the Secretary, taking into consideration current market yields on 
outstanding marketable obligations of the United States of com-
parable maturities. 
(c) RECORDKEEPING FOR ACTUARIAL STATUS.—^The Secretary 
shall provide for the keeping of such records as are necessary 
for determining the actuarial status of the Federal Supplemental 
Fund. 
SEC. 11052. USES OF AMOUNTS IN FUND. 
Amounts in the Federal Supplemental Fund shall be used 
for the accumulation of funds in order to finance obligations of 
the Federal Government for benefits and necessary administrative 
expenses under the provisions of this subtitle, in accordance with 
the methodology selected by the Secretary under section 11054(b), 
except that pa3rments from the Fund for administrative expenses 
may be made only the extent and in such amounts as are provided 
in advance in appropriations acts. 
SEC. 11053. DETERMINATION OF ANNUAL PAYMENT INTO FEDERAL 
SUPPLEMENTAL FUND. 
(a) IN GENERAL.—^At the end of each applicable fiscal year 
the Secretary shall promptly pay into the Federal Supplemental 
Fund from the General Fund of the Treasury an amount equal 
to the sum of— 
(1) the annual amortization amount for the year (which 
may not be less than zero); and 
(2) the covered administrative expenses for the year. 
(b) DETERMINATION OF AMOUNTS.—^For purposes of this section: 
(1) The "original unfunded liability is the amount that 
is the present value as of the freeze date of future benefits 
payable from the Federal Supplemental Fund. 
(2) The "annual amortization amount" is the amount deter-
mined by the enrolled actuary to be necessary to amortize 
in equal sinnual installments (until fully amortized)— 
(A) the original unfunded liability over a 30-year 
period; 
(B) a net experience gain or loss over a 10-year period; 
and 
(C) any other changes in actuarial liability over a 20-
year period. 
(3) The "covered administrative expenses" are the expenses 
determined by the Secretary (on an annual basis) to be nec-
essary to administer the Federal Supplemental Fund. 
(c) TIMING.—^The first applicable fiscal year under subsection 
(a) is the first fiscal year that ends more than six months after 
the replacement plan adoption date. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 727 
SEC. 11054. DETERMINATION OF METHODOLOGY FOR MAKING PAY-
MENTS. 
(a) NOTICE TO PRESIDENT AND CONGRESS.—^Not later than 18 
months before the time that assets remaining in the Trust Fund 
are projected to be insufficient for making Federal benefit pa3anents 
and covering necessary administrative expenses when due, the Sec-
retary shall so advise the President and the Congress. 
(b) SELECTION OF METHODOLOGY.—Before all available assets 
of the Trust Fund have been depleted, the Secretary shall determine 
whether Federal benefit payments and necessary administrative 
expenses under this subtitle shall be made by one of the following 
methods: 
(1) Continuation of the Trust Fund using pa3rments from 
the Federal Supplemental Fund. 
(2) Discontinuation of the Trust Fund, with payments 
made— 
(A) by direct payment by the Secretary from the Fed-
eral Supplemental Fund; or 
(B) from the Federal Supplemental Fund through 
another department or agency of the United States. 
(c) ARRANGEMENTS BY SECRETARY.—The Secretary shall make 
appropriate arrangements to implement the determinations made 
in this subsection. 
SEC. 11055. SPECIAL REQUIREMENTS UPON DISCONTINUATION 
OF 
TRUST FUND. 
(a) SUCCESSOR TO TRUSTEE.—If the Secretary determines that 
the Trust Fund shall be discontinued after it has been depleted 
of assets, the Secretary shall appoint a successor to the Trustee 
to administer the requirements of this subtitle, with the same 
powers and subject to the same conditions as were applicable to 
the Trustee. 
(b) CONTINUING APPLICATION OF TERMS AND CONDITIONS.— 
The methodology selected by the Secretary under section 11054(b), 
and the payment of benefits pursuant to such methodology, shall 
be subject to the same arrangements, terms, and conditions as 
were applicable under this subtitle to the Trust Fund and the 
benefits paid under the Trust Fund (including provisions relating 
to the treatment of the Trust Fund under certain laws). 
CHAPTER 7—REPORTS 
SEC. 11061. ANNUAL VALUATIONS AND REPORTS BY ENROLLED ACTU-
ARY. 
(a) DETERMINATION OF ACTUARIAL VALUATIONS.—The Trustee 
shall engage an enrolled actuary (as defined in section 7701(a)(35) 
of the Internal Revenue Code of 1986) who is a member of the 
American Academy of Actuaries to shall perform an annual actuar-
ial valuation (in a manner and form determined by the Secretary) 
of the Trust Fund and the Federal Supplemental Fund for obliga-
tions assumed by the Federal Government under this subtitle. 
(b) ANNUAL REPORT ON STATUS OF FUNDS.—^The enrolled actu-
ary shall prepare and submit to the Secretary and the Trustee 
an annual report on the actuarial status of the Trust Fund and 
the Federal Supplemental Fund, and shall include in the report— 
I l l STAT. 728 
PUBLIC LAW 105-33—AUG. 5, 1997 
(1) a projection of when assets in the Trust Fund will 
be insufficient to pay benefits and necessary administrative 
expenses when due; and 
(2) a determination of the annual payment to the Federal 
Supplemental Fund under section 11053. 
SEC. 11062. REPORTS BY COMPTROLJJER GENERAL. 
(a) IN GENERAL.—^The Comptroller General is authorized to 
conduct evaluations of the administration of this subtitle to ensure 
that the Trust Fund and Federal Supplemental Fund are being 
properly administered and shall report the findings of such evalua-
tions to the Secretary and the Congress. 
(b) ACCESS TO INFORMATION.—For the purpose of evaluations 
under subsection (a) the Comptroller General, subject to section 
6103 of the Internal Revenue Code of 1986, shall have access 
to and the right to copy any books, accounts, records, correspondence 
or other pertinent documents that are in the possession of the 
Secretary or the Trustee, or any contractor or subcontractor of 
the Secretary or the Trustee. 
CHAPTER 8-^JUDICIAL ENFORCEMENT 
SEC. 11071. JUDICIAL REVIEW. 
(a) IN GENERAL.—^A civil action may be brought— 
(1) by a participant or beneficiary to enforce or clarify 
rights to benefits from the Trust Fund or Federal Supplemental 
Fund under this subtitle; 
(2) by the Trustee— 
(A) to enforce any claim arising (in whole or in part) 
under this subtitle or the contract; or 
(B) to recover benefits improperly paid from the Trust 
Fund or Federal Supplemental Fund or to clarify a partici-
pant's or beneficia^s rights to benefits from the Trust 
Fund or Federal Supplemental Fund; and 
(3) by the Secretary to enforce any provision of this subtitle 
or the contract. 
(b) TREATMENT OF TRUST FUND.—^The Trust Fund may sue 
and be sued as an entity. 
(c) EXCLUSIVE REMEDY.—This chapter shall be the exclusive 
means for bringing actions against the Trust Fund, the Trustee 
or the Secretary under this subtitle. 
SEC. 11072. JURISDICTION AND VENUE. 
(a) IN GENERAL.—^The United States District Court for the 
District of Columbia shall have exclusive jurisdiction and venue, 
regardless of the amount in controversy, of— 
(1) civil actions brought by participants or beneficiaries 
pursuEint to this subtitle, and 
(2) any other action otherwise arising (in whole or part) 
under this subtitle or the contract. 
(b) REVIEW BY COURT OF APPEALS.—Notwithstanding any other 
provision of law, any order of the United States District Court 
for the District of Columbia issued pursuant to an action described 
in subsection (a) that concerns the validity or enforceability of 
any provision of this subtitle or seeks injunctive relief against 
the Secretary or Trustee under this subtitle shall be reviewable 
only pursuant to a notice of appeal to the United States Court 
of Appeals for the District of Columbia Circuit. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 729 
(c) REVIEW BY SUPREME COURT.—^Notwithstanding any other 
provision of law, review by the Supreme Court of the United States 
of a decision of the Court of Appeals that is issued pursuant 
to subsection (b) may be had only if the petition for relief is 
filed within 20 calendar days after the entry of such decision. 
(d) RESTRICTIONS ON DECLARATORY OR INJUNCTIVE RELIEF.— 
No order of any court granting declaratory or injunctive relief 
against the Secretary or the Trustee shall take effect during the 
pendency of the action before such court, during the time an appeal 
may be taken, or (if an appeal is taken or petition for certiorari 
filed) during the period before the court has entered its final order 
disposing of the action. 
SEC. 11073. STATUTE OF UMITATIONS. 
(a) ACTION FOR BENEFITS.—Any civil action by an individual 
with respect to a Federal benefit payment under this subtitle shall 
be commenced within 180 days of a final benefit determination. 
(b) ACTION FOR BREACH OF CONTRACT OR OTHER VIOLATIONS.— 
Except as provided in subsection (c), any civil action for breach 
of the contract or any other violation of this subtitle shall be 
commenced within the later of— 
(1) six years after the last act that constituted the alleged 
breach or violation or, in the case of an omission, six years 
after the last date on which the alleged breach or violation 
could have been cured; or 
(2) three years after the earliest date on which the plaintiff 
knew or could have reasonably been expected to have known 
of the act or omission on which the action is based. 
(c) SPECIAL RULE FOR ACTIONS AGAINST SECRETARY.—Notwith-
standing subsection (b), any action against the Secretary arising 
(in whole or part) under this subtitle or the contract shall be 
commenced within one year of the events giving rise to the cause 
of action. 
SEC. 11074. TREATMENT OF MISAPPROPRIATION OF FUND AMOUNTS 
AS FEDERAL CRIME. 
The provisions of section 664 of title 18, United States Code 
(relating to theft or embezzlement from employee benefit plans), 
shall apply to the Trust Fund and the Federal Supplemental Fund. 
CHAPTER 9—MISCELLANEOUS 
SEC. 11081. COORDINATION BETWEEN SECRETARY, TRUSTEE, AND DIS-
TRICT GOVERNMENT. 
The Secretary, Trustee, and District Government shall carry 
out responsibilities under this subtitle and under the contract in 
a manner which promotes the cost-effective and efficient administra-
tion of benefit payments under the District Retirement Programs, 
and in a manner which avoids unnecessary interruptions and delays 
in paying individuals the full benefits to which they are entitled 
under such Programs. 
SEC. 11082. STUDY OF ALTERNATIVES FOR FINANCING FEDERAL 
OBLIGATIONS. 
(a) IN GENERAL.—^As soon as practicable after the date of the Contracts. 
enactment of this subtitle, the Secretary shall enter into a contract 
with an independent consultant to conduct a study of actuarial 
alternatives for financing the federal obligations assumed under 
I l l STAT. 730 
PUBLIC LAW 105-33—AUG. 5, 1997 
Records. 
Reports. 
this subtitle, together with an analysis of the impact of each alter-
native on the federal budget. The Secretary and the District CJovern-
ment shall cooperate with the consultant and shall provide direct 
access to such information systems, records, documents, informa-
tion, or data as will enable the consultant to conduct the study. 
(b) DEADLINE.—The contract entered into under subsection (a) 
shall require the consultant to report the results of the study 
not later than 12 months after the date of enactment of this Act. 
(c) 
No 
E F F E C T ON FEDERAL OBLIGATIONS.—Nothing in 
this 
section may be construed to affect any obligation of the Federal 
Government to make payments under this subtitle. 
SEC. 11083. ISSUANCE OF REGULATIONS BY SECRETARY. 
The Secretary is authorized to issue regulations to implement, 
interpret, administer and carry out the purposes of this subtitle, 
and, in the Secretary's discretion, those regulations may have retro-
active effect. 
SEC. 11084. EFFECT ON REFORM ACT AND OTHER LAWS. 
(a) REFORM A C T . — 
(1) I N GENERAL.—This subtitle supersedes any provision 
of the Reform Act inconsistent with this subtitle and the regula-
tions thereunder. 
(2) 
TERMINATION OF PAYMENTS TO DISTRICT RETIREMENT 
FUNDS.—Section 144 of the Reform Act (DC Code, sec. 1-724) 
is amended by adding at the end the following new subsection: 
"(f) Notwithstanding any other provision of this Act, no Federal 
payments may be made to any Fund established by this title for 
any fiscal year after fiscal year 1997.". 
(b) No 
E F F E C T ON TAX TREATMENT O F BENEFITS.—Except 
as 
otherwise specifically provided, nothing in this subtitle may be 
construed to affect the application of any provision of the Internal 
Revenue Code of 1986 to any annuity or other benefit provided 
to or on behalf of any individual, including any disability benefit 
or any portion of a retirement benefit attributable to an individual's 
disability status. 
(c) No 
E F F E C T ON B E N E F I T S FOR PARK POLICE AND SECRET 
SERVICE.—Nothing in this subtitle shall be deemed to alter or 
amend in any way the provisions of existing law (including the 
Reform Act) relating to the program of annuities, other retirement 
benefits, or medical benefits for members and officers, retired mem-
bers and officers, and survivors thereof, of the United States Park 
Police force, the United States Secret Service, or the United States 
Secret Service Uniformed Division. 
SEC. 11085. REFERENCE TO NEW FEDERAL PROGRAM FOR RETIRE-
MENT OF JUDGES OF DISTRICT OF COLUMBIA COURTS. 
For provisions describing the retirement program for judges 
and judicial personnel of the District of Columbia, see subchapter 
B of chapter 4 of subtitle C. 
SEC. 11086. FULL FAITH AND CREDIT. 
Federal obligations for benefits under this subtitle are backed 
by the full faith and credit of the United States. 
SEC. 11087. SEVERABILITY OF PROVISIONS. 
If any provision of this subtitle, or the application of such 
provision to any person or circumstances, shall be held, invalid, 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 731 
the remainder of this subtitle, or the appUcation of such provision 
to persons or circumstances other than those as to which it is 
held invalid, shall not be affected thereby. 
Subtitle B—^Management Reform Plans 
SEC. 11101. SHORT TITLE. 
This subtitle may be cited as the "District of Columbia Manage-
ment Reform Act of 1997". 
SEC. 11102. MANAGEMENT REFORM PLANS FOR DISTRICT GOVERN-
MENT. 
(a) IN GENERAL.—In accordance with the provisions of this 
subtitle, the District of Columbia Financial Responsibility and 
Management Assistance Authority (hereafter in this 
subtitle 
referred to as the "Authorit}^") and the government of the District 
of Columbia shall develop and implement management reform 
plans— 
(1) for each of the departments of the government of the 
District of Columbia described in paragraph (1) of subsection 
(b); and 
(2) for all entities of the government of the District of 
Columbia with respect to the items described in paragraph 
(2) of subsection (b). 
(b) DEPARTMENTS AND ITEMS SUBJECT TO PLANS.— 
(1) DEPARTMENTS DESCRIBED.—^The departments referred 
to in this paragraph are as follows: 
(A) The Department of Administrative Services. 
(B) The Department of Consumer and Regulatory 
Affairs. 
(C) The Department of Corrections. 
(D) The Department of Employment Services. 
(E) The Department of Fire and Emergency Medical 
Services. 
(F) The Department of Housing and Community Devel-
opment. 
(G) The Department of Human Services. 
(H) The Department of Public Works. 
(I) The Public Health Department. 
(2) ITEMS DESCRIBED.—^The items referred to in this para-
graph are as follows: 
(A) Asset management. 
(B) Information resources management. 
(C) Personnel. 
(D) Procurement. 
SEC. 11103. PROCEDURES FOR DEVELOPMENT OF PLANS. 
(a) CONTRACTS WITH CONSULTANTS.—^Not later than 30 days 
after the date of the enactment of this Act (or, at the option 
of the Authority and upon notification to Congress, not later than 
60 days after such date), the Authority shall enter into contracts 
with consultants to develop the management reform plans under 
this subtitle. 
(b) DEADLINE FOR SUBMISSION OF PLANS.—Under a contract 
entered into with the Authority under subsection (a), a consultant 
District of 
Coliunbia 
Management 
Reform Act of 
1997. 
I l l STAT. 732 
PUBLIC LAW 105-33—AUG. 5, 1997 
Notification. 
Notification. 
shall submit a completed management reform plan for the depart-
ment or item involved within 90 days (or, at the option of the 
Authority, within 120 days). 
(c) AUTHORIZATION OF APPROPRIATIONS.—^There are authorized 
to be appropriated to the Authority such sums as may be necessary 
to carry out the contracts entered into under this section. 
SEC. 11104. IMPLEMENTATION OF PLANS. 
(a) ESTABLISHMENT OF MANAGEMENT REFORM TEAMS.—^With 
respect to each management reform plan developed under this 
subtitle, there shall be a management reform team consisting of 
the following: 
(1) The Chair of the Authority (or the Chair's designee). 
(2) The Chair of the Council of the District of Columbia 
(or the Chair's designee). 
(3) The Mayor of the District of Columbia (or the Mayor's 
designee). 
(4) In the case of a management reform plan for a depart-
ment of the government of the District of Columbia, the head 
of the department involved. 
(b) RESPONSIBILITY FOR IMPLEMENTATION OF PLANS.— 
(1) PLANS FOR SPECIFIC DEPARTMENTS.—In the case of a 
management reform plan for a department of the government 
of the District of Columbia, the head of the department involved 
shall take any and all steps within his or her authority to 
implement the terms of the plan, in consultation and coordina-
tion with the other members of the management reform team. 
(2) PLANS FOR ITEMS COVERING ENTIRE DISTRICT GOVERN-
MENT.—In the case of a management reform plan for an item 
described in section 11102(b)(2), each member of the manage-
ment reform team shall take any and all steps within the 
member's authority to implement the terms of the plan, under 
the direction and subject to the instructions of the Chair of 
the Authority (or the Chair's designee). 
(3) REPORT TO AUTHORITY.—In carrying out any of the 
management reform plans under this section, the member of 
the management reform team described in subsection (a)(4) 
shall report to the Authority. 
SEC. 11105. REFORM OF POWERS AND DUTIES OF DEPARTMENT HEADS. 
(a) APPOINTMENT AND REMOVAL.— 
(1) APPOINTMENT.— 
(A) IN GENERAL.—During a control year, the head of 
each department of the government of the District of 
Columbia 
described 
in section 
11102(b)(1) 
shall be 
appointed by the Mayor as follows: 
(i) Prior to appointment, the Authority may submit 
recommendations for the appointment to the Mayor. 
(ii) In consultation with the Authority and the 
Council, the Mayor shall nominate an individual for 
appointment and notify the Council of the nomination, 
(iii) After the expiration of the 7-day period which 
begins on the date the Mayor notifies the Council 
of the nomination under clause (ii), the Mayor shall 
notify the Authority of the nomination. 
(iv) The nomination shall be effective subject to 
approval by a majority vote of the Authority. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 733 
(B) APPOINTMENT BY AUTHORITY IF NO NOMINATION 
MADE WITHIN 30 DAYS.—During a control year, if the Mayor 
fails to nominate an individual to fill a vacancy in the 
position of the head of any of the departments described 
in section 11102(b)(1) during the 30-day period which 
begins on the date the vacancy begins (or during such 
longer period as the Authority may establish, upon notifica-
tion to Congress), the Authority shall appoint an individual 
to fill the vacancy. 
(C) POSITIONS DEEMED VACANT UPON ENACTMENT.— 
For purposes of this paragraph, a vacancy shall be deemed 
to exist in the position of the head of each of the depart-
ments described in section 11102(b)(1) upon the date of 
the enactment of this Act. Nothing in this subparagraph 
shall be deemed to affect any of the powers and duties 
of any individual serving as the head of such a department 
as of such date. 
(2) REMOVAL.—During a control year, the head of any of 
the departments of the government of the District of Columbia 
described in section 11102(b)(1) may be removed by the Author-
ity or by the Mayor with the approval of the Authority. 
(3) CONTROL YEAR DEFINED.—In this subsection, the term 
"control year" has the meaning given such term in section 
305(4) of the District of Columbia Financial Responsibility and 
Management Assistance Act of 1995. 
(b) CONTROL OVER PERSONNEL.— 
(1) IN GENERAL.—Notwithstanding any other provision of 
law and except as provided in paragraph (3), all personnel 
of the departments of the government of the District of Colum-
bia described in section 11102(b)(1) shall be appointed by and 
shall act under the direction and control of the head of the 
department involved. 
(2) REASSIGNMENT OF PERSONNEL.—The head of each of 
the departments described in section 11102(b)(1) may reassign 
any personnel of the department in such manner as the head 
considers appropriate. 
(3) REQUIREMENTS FOR ADVERSE ACTIONS.—The head of 
each of the departments described in section 11102(b)(1) may 
take corrective or adverse action against any personnel of the 
department pursuant to rules (promulgated consistent with 
the publication and comment provisions of the District of 
Columbia Administrative Procedure Act) which— 
(A) provide that adverse actions may only be taken 
for cause; 
(B) define the causes for which a corrective or adverse 
action may be taken; 
(C) require prior written notice of the grounds on which 
the action is proposed to be taken; 
(D) require an opportunity to be heard (which may 
be in writing only) before the action becomes effective, 
unless the head of the department finds that taking action 
prior to the exercise of such opportunity is necessary to 
protect the integrity of government operations, in which 
case a hearing shall be afforded within a reasonable time 
after the action becomes effective; and 
(E) provide that the head of the department shall 
be the final administrative authority with respect to the 
I l l STAT. 734 
PUBLIC LAW 105-33—AUG. 5, 1997 
action, subject to judicial review of the record of the 
administrative proceeding in an action against the District 
of Columbia to be brought only in the Superior Court 
for the District of Columbia. 
SEC. 11106. NO EFFECT ON POWERS OF FINANCIAL RESPONSIBIUTY 
AND MANAGEMENT ASSISTANCE AUTHORITY. 
Nothing in this subtitle may be construed to affect the authority 
of the District of Columbia Financial Responsibility and Manage-
ment Assistance Authority to carry out any of its powers under 
the District of Columbia Financial Responsibility and Management 
Assistance Act of 1995. 
Subtitle C—Criminal Justice 
CHAPTER 1—CORRECTIONS 
SEC. 11201. BUREAU OF PRISONS. 
(a) FELONS SENTENCED PURSUANT TO THE TRUTH-IN-SENTENC-
ING REQUIREMENTS.—Not later than October 1, 2001, any person 
who has been sentenced to incarceration pursuant to the District 
of Columbia Code or the truth-in-sentencing system as described 
in section 11211 shall be designated by the Bureau of Prisons 
to a penal or correctional facility operated or contracted for by 
the Bureau of Prisons, for such term of imprisonment as the court 
may direct. Such persons shall be subject to any law or regulation 
applicable to persons committed for violations of laws of the United 
States consistent with the sentence imposed. 
(b) FELONS SENTENCED PURSUANT TO THE D.C. CODE,—^Not-
withstanding any other provision of law, not later than December 
31, 2001, the Lorton Correctional Complex shall be closed and 
the felony population sentenced pursuant to the District of Columbia 
Code residing at the Lorton Correctional Complex shall be trsins-
ferred to a penal or correctional facility operated or contracted 
for by the Bureau of Prisons. Such persons shall be subject to 
any law or regulation applicable to persons committed for violations 
of laws of the United States consistent with the sentence imposed, 
and the Bureau of Prisons shall be responsible for the custody, 
care, subsistence, education, treatment and training of such persons. 
(c) PRIVATIZATION.— 
(1) TRANSITION OF INMATES FROM LORTON.—^The Bureau 
of Prisons shall house, in private contract facilities— 
(A) at least 2000 District of Columbia sentenced felons 
by December 31, 1999; and 
(B) at least 50 percent of the District of Columbia 
sentenced felony population by September 30, 2003. 
(2) DUTIES OF DEPUTY ATTORNEY GENERAL.—The Deputy 
Attorney General shall— 
(A) be responsible for overseeing Bureau of Prisons 
privatization activities; and 
Reports. 
(B) submit a report to Congress on October 1 of each 
year detailing the progress and status of compliance with 
privatization requirements. 
(3) DUTIES OF ATTORNEY GENERAL.—^The Attorney General 
shall— 
(A) conduct a study of correctional privatization, includ-
ing a review of relevant research and related legal issues. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 735 
and comparative analysis of the cost effectiveness and fea-
sibility of private sector and Federal, State, and local 
governmental operation of prisons and corrections pro-
grams at all security levels; and 
(B) submit a report to Congress no later than one Reports. 
year after the dater of enactment of this Act. 
(d) SITE ACQUISITION AND CONSTRUCTION.—In order to house 
the District of Columbia felony inmate population the Bureau of 
Prisons shall acquire land, construct and build new facilities at 
sites selected by the Bureau of Prisons, or contract for appropriate 
bed space, but no facilities may be built on the grounds of the 
Lorton Reservation. 
(e) NATIONAL CAPITAL PLANNING.—Notwithstanding any other 
provision of law, the requirements of the National Capital Planning 
Act of 1952 (40 U.S.C. 71 et seq.) shall not apply to any actions 
taken by the Bureau of Prisons or its agents or employees. 
(f) DEPARTMENT OF CORRECTIONS AUTHORITY.—The District of 
Columbia Department of Corrections shall remain responsible for 
the custody, care, subsistence, education, treatment, and training 
of any person convicted of a felony offense pursuant to the District 
of Columbia Code and housed at the Lorton Correctional Complex 
until December 31, 2001, or the date on which the last inmate 
housed at the Lorton Correctional Complex is designated by the 
Bureau of Prisons, whichever is earlier. 
(g) LORTON CORRECTIONAL COMPLEX.— 
(1) TRANSFER OF FUNCTIONS.—Notwithstanding any other 
provision of law, to the extent the Bureau of Prisons assumes 
functions of the Department of Corrections under this subtitle, 
the Department is no longer responsible for such functions 
and the provisions of "An Act to create a Department of Correc-
tions in the District of Columbia", approved June 27, 1946 
(D.C. Code 24-441, 442), that apply with respect to such func-
tions are no longer applicable. Except as provided in paragraph 
(2), any property on which the Lorton Correctional Complex 
is located shall be transferred to the Department of the Interior. 
(2) TRANSFER OF LAND.— 
(A) IN GENERAL.— 
(i) FAIRFAX COUNTY WATER AUTHORITY.—150 acres 
of parcel 106-4-001-54 located west of Ox Road (State 
Route 123) on which the Lorton Correctional Complex 
is located shall be transferred, without consideration, 
to the Fairfax County Water Authority of Fairfax, Vir-
ginia. 
(ii) FAIRFAX COUNTY DEPARTMENT OF PARKS AND 
RECREATION.—^Any 
acres of parcel 
106-4-001-54 
located west of Ox Road (State Route 123) on which 
the Lorton Correctional Complex is located not trans-
ferred under clause (i) shall be assigned to the Depart-
ment of the Interior, National Park Service, for convey-
ance to the Fairfax County Department of Parks and 
Recreation for recreational purposes pursuant to the 
section 203(k)(2) of the Federal Property and Adminis-
trative Services Act of 1949 (40 U.S.C. 484(k)(2)). 
(B) CONDITION OF TRANSFER.— 
I l l STAT. 736 
PUBLIC LAW 105-33—AUG. 5, 1997 
(i) WATER SERVICES.—^The United States Govern-
ment shall not transfer any parcels under this para-
graph unless the Fairfax County Water Authority cer-
tifies that it will continue to provide water services 
to the Lorton Correctional Complex at the rate it pro-
vided water services prior to the transfer. 
(ii) RESTRICTION ON TRANSFER.—No Federal agency 
may transfer the property under this paragraph until 
the prospective recipient of the property provides to 
such agency— 
(I) a land description survey suitable for 
transferring property under Virginia law; and 
(II) any necessary surveys to determine the 
presence of any hazardous substances, contami-
nants or pollutants. 
(iii) LORTON CORRECTIONAL COMPLEX.—^The Lorton 
Correctional Complex shall remain available for the 
District of Columbia Department of Corrections to 
house District of Columbia felony inmates until the 
last inmate at the Complex has been designated by 
the Bureau of Prisons or until December 31, 2003, 
whichever is earlier. 
(C) AUTHORIZATION.—^The General Services Adminis-
tration and the National Park Service is authorized to 
expend any funds necessary to ensure that the transfer 
or conveyance under subparagraph (A) complies with all 
applicable environmental and historic preservation laws. 
(3) WATER MAINS.—^Any water mains located on or across 
the Lorton Correctional Complex on the date of the transfers 
under paragraph (2), that are owned by the Fairfax County 
Water Authority and provide water to the public, shall be 
permitted to remain in place, and shall be operated, maintained, 
repaired, and replaced by the Fairfax County Water Authority 
or a successor agency furnishing water to the public in Fairfax 
County or adjacent jurisdictions, but shall not interfere with 
operations of the Lorton Correctional Complex. 
(g) DISTRICT OF COLUMBIA CORRECTIONS INFORMATION COUN-
CIL.— 
(1) ESTABLISHMENT.—-There is estabhshed a council to be 
known as the District of Columbia Correction Information 
Council (hereafter referred to as "Council". 
(2) MEMBERSHIP.—^The Council shall be composed of 3 mem-
bers appointed as follows: 
(A) 2 individuals appointed by the mayor of the District 
of Columbia. 
(B) 1 individual appointed by the Council of the District 
of Columbia. 
(3) COMPENSATION.—Members of the Council may not 
receive pay, allowances, or benefits by reason of their service 
on the Council. 
(4) DUTIES.—The Council shall report to the Director of 
the Bureau of Prisons with advice and information regarding 
matters affecting the District of Columbia sentenced felon popu-
lation. 
(h) TIMING OF INMATE TRANSFERS.—^As soon as practicable after 
the date of the enactment of this Act, the Director of the Bureau 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 737 
of Prisons shall begin the transferring of inmates to Bureau of 
Prison or private contract facilities required by this section. 
SEC. 11202. CORRECTIONS TRUSTEE. 
(a) APPOINTMENT AND REMOVAL OF TRUSTEE.— 
(1) APPOINTMENT.—Pursuant to the Federal Government's 
assumption of responsibility for persons convicted of a felony 
offense under the District of Columbia Code, the Attorney Gen-
eral, in consultation with the Chairman of the District of 
Columbia Financial Responsibility and Management Assistance 
Authority (hereafter in this chapter referred to as the "D.C. 
Control Board"), the Mayor of the District of Columbia, the 
District of Columbia Council, and the District of Columbia 
judiciary, shall select a Corrections Trustee, who shall be an 
independent officer of the government of the District of Colum-
bia, to oversee financial operations of the District of Columbia 
Department of Corrections until the Bureau of Prisons has 
designated all felony offenders sentenced under the District 
of Columbia Code to a penal or correctional facility operated 
or contracted for by the Bureau of Prisons under section 11201. 
(2) REMOVAL.—^The Corrections Trustee may be removed 
by the Mayor with the concurrence of the Attorney General. 
The Attorney General shall have the authority to remove the 
Corrections Trustee for misfeasance or malfeasance in office. 
At the request of the Corrections Trustee, the District of Colum-
bia Financial Responsibility and Management 
Assistance 
Authority may exercise any of its powers and authorities on 
behalf of the Corrections Trustee. 
(b) DUTIES OF TRUSTEE.—Beginning on the date of appointment 
and continuing until the felony population sentenced pursuant to 
the District of Columbia Code residing at the Lorton Correctional 
Complex is transferred to a penal or correctional facility operated 
or contracted for by the Bureau of Prisons, the Corrections Trustee 
shall carry out the following responsibilities (notwithstanding any 
law of the District of Columbia to the contrary): 
(1) Exercise financial oversight over the District of Colum-
bia Department of Corrections and allocate funds as enacted 
in law or as otherwise allocated, including funds for short 
term improvements which are necessary for the safety and 
security of staff, inmates and the community. 
(2) Purchase any necessary goods or services on behalf 
of the District of Columbia Department of Corrections consist-
ent with Federal procurement regulations as they apply to 
the Bureau of Prisons. 
(c) FUNDING.— 
(1) IN GENERAL.—Funds available for the Corrections 
Trustee, staff and all necessary and appropriate operations 
shall be made available to the extent provided in appropriations 
acts to the Corrections Trustee. Funding requests shall be 
proposed by the Corrections Trustee to the President and Con-
gress for each Fiscal Year. 
(2) REIMBURSEMENT TO BUREAU OF PRISONS.—^Upon receipt 
of Federal funds, the Corrections Trustee shall immediately 
provide an advance reimbursement to the Bureau of Prisons 
of all funds identified by the Congress for construction of new 
prisons and major renovations, which shall remain available 
until expended. The Bureau of Prisons shall be responsible 
I l l STAT. 738 
PUBLIC LAW 105-33—AUG. 5, 1997 
and accountable for determining how these funds shall be used 
for renovation and construction, including type, security level, 
and location of new facilities. 
(3) ACCOUNTABILITY AND REPORTS.—The District of Colum-
bia Department of Corrections and the Bureau of Prisons shall 
maintain accountability for funds reimbursed from the Correc-
tions Trustee, and shall provide expense reports by project 
at the request of the Corrections Trustee. 
(d) COMPENSATION AND DETAILEES.—The Corrections Trustee 
shall be compensated at a rate not to exceed the basic pay payable 
for Level IV of the Executive Schedule. The Corrections Trustee 
may appoint and fix the pay of additional staff without regard 
to the provisions of the District of Columbia Code governing appoint-
ments and salaries, without regard to the provisions of title 5, 
United States Code, governing appointments in the competitive 
service, and without regard to the provisions of chapter 51 and 
subchapter III of chapter 53 of title 5, United States Code, relating 
to classification and General Schedule pay rates. Upon request 
of the Corrections Trustee, the head of any Federal department 
or agency may, on a reimbursable or non reimbursable basis, pro-
vide services and detail any personnel of that department or agency 
to the Corrections Trustee to assist in carrying out his duties. 
(e) PROCUREMENT AND JUDICIAL REVIEW.—^The provisions of 
the District of Columbia Code governing procurement shall not 
apply to the Corrections Trustee. The Corrections Trustee may 
seek judicial enforcement of his authority to carry out his duties. 
(f) PRESERVATION OF RETIREMENT AND CERTAIN OTHER RIGHTS 
OF FEDERAL EMPLOYEES WHO BECOME EMPLOYED BY THE CORREC-
TIONS TRUSTEE.— 
(1) IN GENERAL.—^A Federal employee who, within 3 days 
after separating from the Federal Government, is appointed 
Corrections Trustee or becomes employed by the Corrections 
Trustee— 
(A) shall be treated as an employee of the Federal 
Government for purposes of chapters 83, 84, 87, and 89 
of title 5 of the United States Code; and 
(B) if, after serving with the Trustee, such employee 
becomes reemployed by the Federal Government, shall be 
entitled to credit for the full period of such individual's 
service with the Trustee, for purposes of determining the 
applicable leave accrual rate. 
(2) REGULATIONS.—^The Office of Personnel Management 
shall prescribe such regulations as may be necessary to carry 
out this subsection. 
SEC. 11203. PRIORITY CONSIDERATION FOR EMPLOYEES OF THE DIS-
TRICT OF COLUMBIA. 
(a) ESTABLISHMENT.—^As soon as practicable after appointment, 
the Bureau of Prisons, working with the Corrections Trustee, shall 
establish a priority consideration program to facilitate employment 
placement for employees of the District of Columbia Department 
of Corrections who are scheduled to be separated from service 
as a result of closing the Lorton Correctional Complex. 
(b) PROVISIONS.—The priority consideration program shall 
include provisions under which a vacant federal correctional institu-
tion position established as a result of this Act and identified 
for external hiring shall not be filled by the appointment of any 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 739 
individual from outside of the District of Columbia Department 
of Corrections if there is available any interested applicant within 
the District of Columbia Department of Corrections who meets 
all qualification and suitability requirements for Bureau of Prisons 
law enforcement positions, including those related to criminal his-
tory, educational experience and level of functions, drug use, and 
work-related misconduct. The priority consideration program shall 
also include provisions under which an employee described in sub-
section (a) who does not meet the qualification and suitability 
requirements for Bureau of Prisons law enforcement positions shall 
receive priority consideration for other Federal positions, and any 
such employee who is found to be well qualified for such a position 
may be appointed without regard to the provisions of title 5, United 
States Code, governing appointments in the competitive service. 
Such program shall terminate one year after the closing of the Termination 
Lorton Correctional Complex. 
date. 
SEC. 11204. AMENDMENTS RELATED TO PERSONS WITH A MENTAL 
DISEASE OR DEFECT. 
Title 18, United States Code, is gimended as follows: 
(1) Section 4246 is amended— 
(A) in subsection (a) by inserting "in the custody of 
the Bureau of Prisons" after "certifies that a person"; and 
(B) by adding at the end the following new subsection: 
"(h) DEFINITION.—^As used in this chapter the term "State" 
includes the District of Columbia.". 
(2) Section 4247(a) is amended— 
(A) in paragraph (1)(D) by striking "and" after the 
semicolon; 
(B) in paragraph (2) by striking the period and insert-
ing "; and"; and 
(C) by adding at the end the following new paragraph: 
"(3) 'State' includes the District of Columbia.". 
(3) Section 4247(j) of title 18, United States Code, is amend-
ed by striking "This chapter does" and inserting "Sections 4241, 
4242, 4243, and 4244 do". 
SEC. 11205. LIABILITY FOR AND LITIGATION AUTHORITY OF CORREC-
TIONS TRUSTEE. 
(a) LIABILITY.—^The District of Columbia shall defend any civil 
action or proceeding brought in any court or other official Federal, 
state, or municipal forum against the Corrections Trustee, or 
against the District of Columbia or it officers, employees, or agents, 
and shall assume any liability resulting from such an action or 
proceeding, if the action or proceeding arises from— 
(1) an inmate's confinement with the District of Columbia 
Department of Corrections; 
(2) the District of Columbia's operation or management 
of the buildings, facilities, or lands comprising the Lorton prop-
erty; or 
(3) the District of Columbia's operations or activities occur-
ring on any property not specifically transferred to the adminis-
trative control of the Federal Government pursuant to this 
Act. 
(b) LITIGATION.— 
(1) CORPORATION COUNSEL.—Subject to paragraph (2), the 
Corporation Counsel of the District of Columbia shall provide 
litigation services to the Corrections Trustee, except that the 
I l l STAT. 740 
PUBLIC LAW 105-33—AUG. 5, 1997 
Trustee may instead elect, either generally or in relation to 
particular cases or classes of cases, to hire necessary staff 
and personnel or enter into contracts for the provision of litiga-
tion services at the Trustee's expense. 
(2) ATTORNEY GENERAL.— 
(A) IN GENERAL.—Notwithstanding paragraph (1), with 
respect to any litigation involving the Corrections Trustee, 
the Attorney General may— 
(i) direct the litigation of the Trustee, and of the 
District of Columbia on behalf of the Trustee; and 
(ii) provide on a reimbursable or non-reimbursable 
^ 
basis litigation services for the Trustee at the Trustee's 
request or on the Attorney General's own initiative. 
(B) APPROVAL OF SETTLEMENT.—With respect to any 
litigation involving the Corrections Trustee, the Trustee 
may not agree to any settlement involving any form of 
equitable relief without the approval of the Attorney Gen-
Notices, 
eral. The Trustee shall provide to the Attorney General 
Reports. 
such notice and reports concerning litigation as the Attor-
ney General may direct. 
(C) DISCRETION.—Any decision to exercise any author-
ity of the Attorney General under this subsection shall 
be in the sole discretion of the Attorney General and shall 
not be reviewable in any court. 
(c) LIMITATIONS.—^Nothing in this section shall be construed— 
(1) as a waiver of sovereign immunity, or as limiting any 
other defense or immunity that would otherwise be available 
to the United States, the District of Columbia, their agencies, 
officers, employees, or agents; or 
(2) to obligate the District of Columbia to represent or 
indemnify the Corrections Trustee or any officer, employee, 
or agent where the Trustee (or any person employed by or 
acting under the authority of the Trustee) acts beyond the 
scope of his authority. 
SEC. 11206. PERMITTING EXPENDITURE OF FUNDS TO CARRY OUT CER-
TAIN SEWER AGREEMENT. 
Notwithstanding the fourth sentence of section 446 of the Dis-
trict of Columbia Self-Govemment and Grovernmental Reorganiza-
tion Act, the District of Columbia is authorized to obligate or 
expend such funds as may be necessary during a fiscal year (begin-
ning with fiscal year 1997) to carry out the Sewage Delivery System 
and Capacity Purchase Agreement between Fairfax County and 
the District of Columbia with respect to Project Number K00301, 
without regard to the amount appropriated for such purpose in 
the budget of the District of Columbia for the fiscal year. 
CHAPTER 2—SENTENCING 
SEC. 11211. TRUTH IN SENTENCING COMMISSION. 
(a) ESTABLISHMENT.—^There is established as an independent 
agency of the District of Columbia a District of Columbia Truth 
in Sentencing Commission (hereafter in this chapter referred to 
as "the Commission"), which shall consist of 7 voting members. 
The Attorney General, or the Attorney General's designee, shall 
be the chairperson of the Commission and shall have the duty 
to convene meetings of the Commission to ensure that it fulfills 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 741 
its responsibilities under this Act. The members shall serve for 
the life of the Commission and shall be subject to removal only 
for neglect of duty, malfeasance in office, or other good cause 
shown. 
(b) MEMBERSHIP.—The members of the Commission shall have 
knowledge and responsibility with respect to criminal justice mat-
ters. Two members of the Commission shall be judges of the Supe-
rior Court of the District of Columbia, and shall be appointed 
by the chief judge of that court; one member shall be a representa-
tive of the District of Columbia Council and shall be appointed 
by the chairperson or chairperson pro temp of the Council; one 
member shall be a representative of the executive branch of the " 
District of Columbia government with official responsibilities for 
criminal justice matters in the District of Columbia and shall be 
appointed by the Mayor of the District of Columbia; one member 
shall be a representative of the District of Columbia Public Defender 
Service and shall be appointed by the Director of such Service; 
and one member shall be a representative of the United States 
Attorney for the District of Columbia and shall be appointed by 
the United States Attorney. A representative of the Federal Bureau 
of Prisons and a representative of the office of Corporation Counsel 
of the District of Columbia shall each serve as a non-voting, ex 
officio member. 
(c) VACANCY.—Any vacancy in the Commission shall be filled 
in the same manner as the original appointment. Members of 
the Commission shall receive no compensation for their services, 
but shall be reimbursed for travel, subsistence, and other necessary 
expenses incurred in the performance of duties vested in the 
Commission, but not in excess of the maximum amounts authorized 
under section 456 of title 28, United States Code. 
SEC. 11212. GENERAL DUTIES, POWERS, AND GOALS OF COMMISSION. 
(a) RECOMMENDATIONS.—^The Commission shall, within 180 
days after the enactment of this Act, make recommendations to 
the District of Columbia Council for amendments to the District 
of Columbia Code with respect to the sentences to be imposed 
for all felonies committed on or after 3 years after the date of 
enactment of this Act. 
(b) CONTENTS OF RECOMMENDATIONS.—Such recommendations 
shall— 
(1) as to all felonies described in paragraph (h), meet the 
truth in sentencing standards of 20104(a)(1) of the Violent 
Crime Control and Law Enforcement Act of 1994; 
(2) as to all felonies ensure that— 
(A) an offender will have a sentence imposed that— 
(i) reflects the seriousness of the offense and the 
criminal history of the offender; and 
(ii) provides for just punishment, affords adequate 
deterrence to potential future criminal conduct of the 
offender and others, and provides the offender with 
needed educational or vocational training, medical 
care, and other correctional treatment; 
(B) good time shall be calculated pursuant to section 
3624 of title 18, United States Code; and 
(C) an adequate period of supervision will be imposed 
to follow release from the imprisonment. 
I l l STAT. 742 
PUBLIC LAW 105-33—AUG. 5, 1997 
(c) DEATH PENALTY.—The Commission shall not have the power 
to recommend a sentence of death for any offense nor for any 
offense a term of imprisonment less than that prescribed by the 
D.C. Code as a mandatory minimum sentence. 
(d) OTHER FEATURES OF RECOMMENDATIONS.—The Commission 
shall ensure that its recommendations— 
(1) will be neutral as to the race, sex, marital status, 
ethnic origin, religious affiliation, national origin, creed, socio-
economic status, and sexual orientation of offenders; 
(2) will include provisions designed to maximize the 
effectiveness of the drug court of the Superior Court of the 
District of Columbia; and 
(3) will be fully consistent with all other provisions of 
this Act, including provisions relating to the administration 
of probation, parole, and supervised release for District of 
Columbia Code offenders. 
(e) VOTE; TERMINATION.—The recommendations of the Commis-
sion required under subsections (a)-(d) shall be adopted by a vote 
of not less than 6 of the members and when made shall be transmit-
ted forthwith to the District of Columbia Council The Commission 
shall cease to exist 90 days after the transmittal of recommenda-
tions to the Council or on the last date on which timely rec-
ommendations may be made if the Commission is unable to agree 
on such recommendations. 
(f) RECOMMENDATIONS FOR IMPLEMENTATION.—In fulfilling its 
responsibilities, the Commission may adopt by a vote of not less 
than 6 of the members and transmit to the Superior Court of 
the District of Columbia recommended rules and principles for 
determining the sentence to be imposed, including— 
(1) whether to impose a sentence of probation, a term 
of imprisonment and/or a fine, and the amount or length 
thereof, and including intermediate sanctions in appropriate 
cases; and 
(2) whether multiple sentences of terms of imprisonment 
should run concurrently or consecutively. 
(g) POWERS.—^The Commission is authorized— 
(1) to hold hearings and call witnesses that might assist 
the Commission in the exercise of its powers; 
(2) to perform such other functions as may be necessary 
to carry out the purposes of this section; and 
(3) except as otherwise provided, to conduct business, exer-
cise powers, and fulfill duties by the vote of a majority of 
the members present at any meeting. 
(h) FELONIES DESCRIBED.—^The felonies described in this sub-
section are violations of any of the following provisions of law: 
(1) The following provisions relating to arson: 
(A) Section 820 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-401). 
(B) Section 821 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-402). 
(2) The following provisions relating to felony assault: 
(A) Section 803 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-501). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 743 
(B) Section 804 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-502). 
(C) Section 805 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-503). 
(D) Section 806a of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-504.1). 
(E) Section 432 of the Revised Statutes, relating to 
the District of Columbia (DC Code, sec. 22-505). 
(F) Section 807 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-506). 
(3) Section 502 of the District of Columbia Theft and White 
Collar Crimes Act of 1982 (DC Code, sec. 22-722) (relating 
to obstruction of 
justice). 
(4) Section 3 of the Act of February 13, 1885 (chapter 
58; 23 Stat. 303) (DC Code, sec. 22-901) (relating to cruelty 
to children). 
(5) Section 823 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-1801) (relating to first degree bur-
glary). 
(6) Section 812 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2101) (relating to kidnapping). 
(7) The following provisions relating to murder and man-
slaughter: 
(A) Section 798 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2401). 
(B) Section 799 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2402). 
(C) Section 800 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec, 22-2403). 
(D) Section 801 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2404). 
(E) Section 802 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2405). 
(F) Section 802a of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2406). 
(8) Section 8 of the Act of July 15, 1932 (chapter 492; 
47 Stat. 698) (DC Code, sec. 22-2601) (relating to prison 
breach). 
(9) The Act entitled "An Act to prohibit the introduction 
of contraband into the District of Columbia penal institutions," 
approved December 15, 1941 (DC Code, sec. 22-2603). 
(10) Section 810 of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2901) (relating to robbery). 
Ill STAT. 744 
PUBLIC LAW 105-33—AUG. 5, 1997 
(11) Section 811a of the Act entitled "An Act to establish 
a code of law for the District of Columbia," approved March 
3, 1901 (DC Code, sec. 22-2903) (relating to carjacking). 
(12) The Dangerous Weapons Act (DC Code, sec. 22-3201 
et seq.). 
(13) The following provisions relating to sex offenses: 
(A) Section 201 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4102). 
(B) Section 202 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4103). 
(C) Section 203 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4104). 
(D) Section 204 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4105). 
(E) Section 207 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4108). 
(F) Section 208 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4109). 
(G) Section 209 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4110). 
(H) Section 212 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4113). 
(I) Section 213 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4114). 
(J) Section 214 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4115). 
(K) Section 215 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4116). 
(L) Section 217 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4118). 
(M) Section 219 of the Anti-Sexual Abuse Act of 1994 
(DC Code, sec. 22-4120). 
(14) Section 401 of the District of Columbia Uniform Con-
trolled Substances Act of 1981 (D.C. Code, sec. 33-541) (relating 
to recidivist drug offenders), but only in the case of a second 
or subsequent violation. 
SEC. 11213. DATA COLLECTION. 
(a) DATA FOR ATTORNEY GENERAL.—^The Commission, the Supe-
rior Court of the District of Columbia, the District of Columbia 
Department of Corrections, and other agencies as necessary shall 
provide to the Attorney General such data as are requested in 
furtherance of this Act. 
(b) SUPERIOR COURT.—^The Superior Court of the District of 
Columbia, in connection with defendants sentenced in such Court, 
shall provide to the Commission and the Attorney General such 
data as are requested for planning, statistical analysis or projecting 
future prison population levels. 
SEC. 11214. ENACTMENT OF AMENDMENTS TO DISTRICT OF COLUMBIA 
CODE. 
If, within 270 days after the date of the enactment of this 
Act, the Council of the District of Columbia has failed to amend 
the District of Columbia Code to enact in whole the recommenda-
tions of the Commission under this chapter, or if the Commission 
fails to make such recommendations within the deadline established 
under such section, the Attorney General (after consultation with 
the Commission) shall promulgate within 90 days amendments 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 745 
to the District of Columbia Code with respect to the sentences 
to be imposed for all offenses committed on or after 3 years after 
the date of the enactment of this Act. Such amendments shall 
be consistent with the standards of subsections (a) through (d) 
of section 11212. Such amendments shall take effect 30 days after Effective date. 
the Attorney General transmits the recommendations to Congress. 
CHAPTER 3—OFFENDER SUPERVISION AND PAROLE 
SEC. 11231. PAROLE. 
(a) PAROLING JURISDICTION.— 
(1) JURISDICTION OF PAROLE COMMISSION TO GRANT OR DENY 
P
A
R
O
L
E A
N
D TO IMPOSE CONDITIONS.—Not later than one year 
after date of the enactment of this Act, the United States 
Parole Commission shall assume the jurisdiction and authority 
of the Board of Parole of the District of Columbia to grant 
and deny parole, and to impose conditions upon an order of 
parole, in the case of any imprisoned felon who is eligible 
for parole or reparole under the District of Columbia Code. 
The Parole Commission shall have exclusive authority to sunend 
or supplement any regulation interpreting or implementing 
the parole laws of the District of Columbia with respect to 
felons, provided that the Commission adheres to the rulemaking 
procedures set forth in section 4218 of title 18, United States 
Code. 
(2) JURISDICTION OF PAROLE COMMISSION TO REVOKE PAROLE 
O
R M
O
D
I
F
Y CONDITIONS.—On the date in which the District 
of Columbia Offender Supervision, Defender, and Courts Serv-
ices Agency is established under section 11233, the United 
States Parole Commission shall assume any remaining powers, 
duties, and jurisdiction of the Board of Parole of the District 
of Columbia, including jurisdiction to revoke parole and to 
modify the conditions of parole, with respect to felons. 
(3) JURISDICTION OF SUPERIOR COURT.—On the date on 
which the District of Columbia Offender Supervision, Defender, 
and Courts Services Agency is established under section 11233, 
the Superior Court of the District of Columbia shall assume 
the jurisdiction and authority of the Board of Parole of the 
District of Columbia to grant, deny, and revoke parole, and 
to impose and modify conditions of parole, with respect to 
misdemeanants. 
(b) ABOLITION OF THE BOARD OF PAROLE.—On the date on 
whidi the District of Columbia Offender Supervision, Defender, 
and Courts Services Agency is established under section 11233, 
the Board of Parole established in the District of Columbia Board 
of Parole Amendment Act of 1987 shall be abolished. 
(c) RULEMAKING AND LEGISLATIVE RESPONSIBIUTY FOR PAROLE 
MATTERS.—The Parole Commission shall exercise the authority 
vested in it by this section pursuant to the parole laws and regula-
tions of the District of Columbia, except tnat the Council of the 
District of Columbia and the Board of Parole of the District of 
Columbia may not revise any such laws or regulations (as in effect 
on the date of the enactment of this Act) wimout the concurrence 
of the Attorney General. 
(d) INCREASE IN THE AUTHORIZED NUMBER OF UNITED STATES 
PAROLE COMMISSIONERS.—Section 2(c) of the Parole Commission 
39-194 O - 97 - 25: QL 3 Part 1 
I l l STAT. 746 
PUBLIC LAW 105-33—AUG. 5, 1997 
18 use 4201 
Phaseout Act of 1996 (Public Law 104-232) is amended to read 
note. 
as follows: 
"(c) The United States Parole Commission shall have no more 
than five members.". 
SEC. 11232. PRETRIAL SERVICES, DEFENSE SERVICES, PAROLE, ADULT 
PROBATION AND OFFENDER SUPERVISION TRUSTEE. 
(a) APPOINTMENT AND REMOVAL.— 
(1) APPOINTMENT.—^The Attorney General, in consultation 
with the Chairman of the District of Columbia Financial 
Responsibility and Management Assistance Authority (here-
after in this section referred to as the "D.C. Control Board") 
and the Mayor of the District of Columbia, shall appoint a 
Pretrial Services, Defense Services, Parole, Adult Probation 
and Offender Supervision Trustee, who shall be an independent 
officer of the government of the District of Columbia, to effec-
tuate the reorganization and transition of functions and funding 
relating to pretrial services, defense services, parole, adult 
probation and offender supervision. 
(2) REMOVAL.—^The Trustee may be removed by the Mayor 
with the concurrence of the Attorney General. The Attorney 
General shall have the authority to remove the Trustee for 
misfeasance or malfeassuice in office. At the request of the 
Trustee, the District of Columbia Financial Responsibility and 
Management Assistance Authority may exercise any of its pow-
ers and authorities on behalf of the Trustee. 
(b) AUTHORITY.—Beginning on the date of appointment, and 
continuing until the District of Columbia Offender Supervision, 
Defender, and Courts Services Agency is established under section 
11233, the Trustee shall— 
(1) have the authority to exercise all powers and functions 
authorized for the Director of the District of Columbia Offender 
Supervision, Defender and Courts Services Agency; 
(2) have the authority to direct the actions of all agencies 
of the District of Columbia whose functions will be assumed 
by or within the District of Columbia Offender Supervision, 
Defender and Courts Services Agency, and of the Board of 
Parole of the District of Columbia, including the authority 
to discharge or replace any officers or employees of these agen-
cies, except that the Trustee may not direct the conduct of 
particular cases by the District of Columbia Public Defender 
Service; 
(3) exercise financial oversight over all agencies of the 
District of Columbia whose functions will be assumed by or 
within the District of Columbia Offender Supervision, Defender 
and Courts Services Agency, and over the Board of Parole 
of the District of Columbia, and allocate funds to these agencies 
as appropriated by Congress and allocated by the President; 
(4) receive and transmit to the District of Columbia Pretrial 
Services Agency all funds appropriated for such agency; and 
(5) receive and transmit to the District of Columbia Public 
Defender Service all funds appropriated for such agency. 
(c) COMPENSATION.—^The Trustee shall be compensated at a 
rate not to exceed the basic pay payable for Level IV of the Executive 
Schedule. The Trustee may appoint and fix the pay of additional 
staff without regard to the provisions of the District of Columbia 
Code governing appointments and salaries, without regard to the 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 747 
provisions of title 5, United States Code, governing appointments 
in the competitive service, and without regard to the provisions 
of chapter 51 and subchapter III of Chapter 53 of title 5, United 
States Code, relating to classification and General Schedule pay 
rates. Upon request of the Trustee, the head of any Federal depart-
ment or agency may, on a reimbursable or non-reimbursable basis, 
provide services and/or detail any personnel of that department 
or agency to the Trusteeship to assist in carrying out its duties. 
(d) PROCUREMENT AND JUDICIAL REVIEW.—^The provisions of 
the District of Columbia Code governing procurement shall not 
apply to the Trustee. The Trustee may enter into such contracts 
as the Trustee considers appropriate to carry out the Trustee's 
duties. The Trustee may seek judicial enforcement of the Trustee's 
authority to carry out the Trustee's duties. 
(e) PRESERVATION OF RETIREMENT AND CERTAIN OTHER RIGHTS 
OF FEDERAL EMPLOYEE WHO BECOMES THE TRUSTEE OR FEDERAL 
EMPLOYEES WHO BECOME EMPLOYED BY THE TRUSTEE.— 
(1) IN GENERAL.—A Federal employee who, within 3 days 
after separating from the Federal Government, is appointed 
Trustee or becomes employed by the Trustee— 
(A) shall be treated as an employee of the Federal 
Grovemment for purposes of chapters 83, 84, 87, and 89 
of title 5 of the United States Code; and 
(B) if, after serving with the Trustee, such employee 
becomes reemployed by the Federal Government, shall be 
entitled to credit for the full period of such individual's 
service with the Trustee, for purposes of determining the 
applicable leave accrual rate. 
(2) REGULATIONS.—^The Office of Personnel Management 
shall prescribe such regulations as may be necessary to carry 
out this subsection. 
(f) FUNDING.—Funds available for operations of the Trustee 
shall be made available to the extent provided in appropriations 
acts to the Trustee, through the State Justice Institute. Funding 
requests shall be proposed by the Trustee to the President and 
Congress for each Fiscal Year. 
(g) LIABILITY AND LITIGATION AUTHORITY.— 
(1) LIABILITY.—^The District of Columbia shall defend any 
civil action or proceeding brought in any court or other official 
Federal, state, or municipal forum against the Trustee, or 
against the District of Columbia or its officers, employees, 
or agents, and shall assume any liability resulting from such 
an action or proceeding, if the action or proceeding arises from 
the— 
(A) supervision of offenders on probation, parole, or 
supervised release; 
(B) provision of pretrial services by the District of 
Columbia; or 
(C) activities of the District of Columbia Board of 
Parole. 
(2) LITIGATION.— 
(A) CORPORATION COUNSEL.—Subject to subparagraph 
(B), the Corporation Counsel of the District of Columbia 
shall provide litigation services to the Trustee, except that 
the Trustee may instead elect, either generally or in rela-
tion to particular cases or classes of cases, to hire necessary 
I l l STAT. 748 
PUBLIC LAW 105-33—AUG. 5, 1997 
Effective date. 
Termination 
date. 
President. 
staff and personnel or enter into contracts for the provision 
of litigation services at the Trustee's expense. 
(B) ATTORNEY GENERAL.— 
(i) IN GENERAL.—Notwithstanding subparagraph 
(A), with respect to any litigation involving the Trustee, 
the Attorney Greneral may— 
(I) direct the litigation of the Trustee, and 
of the District of Columbia on behalf of the Trustee; 
and 
(II) provide on a 
reimbursable 
or 
non-
reimbursable basis litigation services for 
the 
Trustee at the Trustee's request or on the Attorney 
General's own initiative. 
(ii) APPROVAL OF SETTLEMENT.—^With respect to 
any litigation involving the Trustee, the Trustee may 
not agree to any settlement involving any form of 
equitable relief without the approval of the Attorney 
General. The Trustee shall provide to the Attorney 
General such notice and reports concerning litigation 
as the Attorney Greneral may direct. 
(iii) DISCRETION.—^Any decision to exercise any 
authority of the Attorney General under this paragraph 
shall be in the sole discretion of the Attorney General 
and shall not be reviewable in any court. 
(3) LIMITATIONS.—^Nothing in this section shall be con-
strued— 
(1) as a waiver of sovereign immunity, or as limiting any 
other defense or immunity that would otherwise be available 
to the United States, the District of Columbia, their agencies, 
officers, employees, or agents; or 
(2) to obligate the District of Columbia to represent or 
indemnify the Corrections Trustee or any officer, employee, 
or agent where the Trustee (or any person employed by or 
acting under the authority of the Trustee) acts beyond the 
scope of his authority. 
(h) CERTIFICATION.—^The District of Columbia Offender Super-
vision, Defender, and Courts Services Agency shall assume its 
duties pursuant to section 11233 when, within the period beginning 
one year after the date of the enactment of this subtitle and ending 
three years sifter the date of the enactment of this subtitle, the 
Trustee certifies to the Attorney General and the Attorney General 
concurs that the Agency can carry out the functions described 
in section 11233 and the United States Parole Commission can 
carry out the functions described in section 11231. 
SEC. 11233. OFFENDER SUPERVISION, DEFENDER AND COURTS SERV-
ICES AGENCY. 
(a) ESTABLISHMENT.— There is established within the executive 
branch of the Federal Grovernment the District of Columbia Offender 
Supervision, Defender, and Courts Services Agency (hereafter in 
this section referred to as the "Agency") which shall assumes its 
duties not less than one year or more than three years after the 
enactment of this Act. 
(b) DIRECTOR.— 
(1) APPOINTMENT AND COMPENSATION.—^The Agency shall 
be headed by a Director appointed by the President, by and 
with the advice and consent of the Senate, for a term of six 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 749 
years. The Director shall be compensated at the rate prescribed 
for Level IV of the Executive Schedule, and may be removed 
from office prior to the expiration of term only for neglect 
of duty, malfeasance in office, or other good cause shown. 
(2) POWERS AND DUTIES OF DIRECTOR.—^The Director shall— 
(A) submit annual appropriation requests for the 
Agency to the Office of Management and Budget; 
(B) determine, in consultation with the Chief Judge 
of the United States District Court for the District of 
Columbia, the Chief Judge of the Superior Court of the 
District of Columbia, and the Chairman of the United 
States Parole Commission, uniform supervision and report-
ing practices for the Agency; 
(C) hire and supervise supervision officers and support 
staff for the Agency; 
(D) direct the use of funds made available to the 
Agency; 
(E) enter into such contracts, leases, and cooperative 
agreements as may be necessary for the performance of 
the Agency's functions, including contracts for substance 
abuse and other treatment and rehabilitative programs; 
(F) develop and operate intermediate sanctions pro-
grams for sentenced offenders; and 
(G) arrange for the supervision of District of Columbia 
paroled offenders in jurisdictions outside the District of 
Columbia. 
(c) FUNCTIONS.— 
(1) IN GENERAL.—^The Agency shall provide supervision, 
through qualified supervision officers, for offenders on proba-
tion, parole, and supervised release pursuant to the District 
of Columbia Code. The Agency shall carry out its responsibil-
ities on behalf of the court or agency having jurisdiction over 
the offender being supervised. 
(2) SUPERVISION OF RELEASED OFFENDERS.—The Agency 
shall supervise any offender who is released from imprisonment 
for any term of supervised release imposed by the Superior 
Court of the District of Columbia. Such offender shall be subject 
to the authority of the United States Parole Commission until 
completion of the term of supervised release. The United States 
Parole Commission shall have and exercise the same authority 
as is vested in the United States district courts by paragraphs 
(d) through (i) of section 3583 of title 18, United States Code, 
except that— 
(A) the procedures followed by the Commission in 
exercising such authority shall be those set forth in chapter 
311 of title 18, United States Code; and 
(B) an extension of a term of supervised release under 
subsection (e)(2) of section 3583 may only be ordered by 
the Superior Court upon motion from the Commission. 
(3) SUPERVISION OF PROBATIONERS.—Subject to appropria-
tions and program availability, the Agency shall supervise all 
offenders placed on probation by the Superior Court of the 
District of Columbia. The Agency shall carry out the conditions Reports. 
of release imposed by the Superior Court (including conditions^ 
that probationers undergo training, education, therapy, counsel-
ing, drug testing, or drug treatment), and shall make such 
I l l STAT. 750 
PUBLIC LAW 105-33—AUG. 5, 1997 
reports to the Superior Court with respect to an individual 
on probation as the Superior Court may require. 
Reports. 
(4) SUPERVISION OF DISTRICT OF COLUMBIA PAROLEES.— 
The Agency shall supervise all individuals on parole pursuant 
to the District of Columbia Code. The Agency shall carry out 
the conditions of release imposed by the United States Parole 
Commission or, with respect to a misdemeanant, by the Supe-
rior Court of the District of Columbia, and shall make such 
reports to the Commission or Court with respect to an individ-
ual on parole supervision as the Commission or Court may 
require. 
(d) AUTHORITY OF OFFICERS.—^The supervision officers of the 
Agency shall have and exercise the same powers and authority 
as are granted by law to United States Probation and Pretrial 
Officers. 
(e) PRETRIAL SERVICES AGENCY AND PUBLIC DEFENDER SERV-
ICE.— 
(1) INDEPENDENT ENTITIES.—The District of Columbia Pre-
trial Services Agency established by subchapter I of chapter 
13 title 23, District of Columbia Code, and the District of 
Columbia Public Defender Service established by title III of 
the District of Columbia Court Reform and Criminal Procedure 
Act of 1970 (D.C. Code, sec. 1-2701 et seq.) shall function 
as independent entities within the Agency. 
(2) SUBMISSION ON BEHALF OF PRETRIAL SERVICES.—^The 
Director of the Agency shall submit, on behalf of the District 
of Columbia Pretrial Services Agency and with the approval 
of the Director of the Pretrial Services Agency, an annual 
appropriation request to the Office of Management and Budget. 
Such request shall be separate from the request submitted 
for the Agency. 
(3) SUBMISSION ON BEHALF OF PUBLIC DEFENDER SERVICE.— 
The Director of the Agency shall submit, on behalf of the 
District of Columbia Public Defender Service and with the 
approval of the Director of the Public Defender Service, an 
annual appropriation request to the Office of Management and 
Budget. Such request shall be separate from that submitted 
for the Agency. 
(4) LIABILITY OF DISTRICT OF COLUMBIA.—The District of 
Columbia shall defend any civil action or proceeding brought 
in any court or other official Federal, state, or municipal forum 
against the District of Columbia Pretrial Services Agency, the 
District of Columbia Public Defender Service, or the District 
of Columbia or its officers, employees, or agents, and shall 
assume any liability resulting from such an action or proceed-
ing, if the action or proceeding arises from the activities of 
the District of Columbia Pretrial Services Agency or the District 
of Columbia Public Defender Service prior to the date on which 
the Offender Supervision, Defender and Courts Services Agency 
assumes its duties. 
(5) LITIGATION.— 
(A) CORPORATION COUNSEL.—Subject to subparagraph 
(B), the Corporation Counsel of the District of Columbia 
shall provide litigation services to the District of Columbia 
Pretrial Services Agency and the District of Columbia Pub-
lic Defender Service, except that the District of Columbia 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 751 
Pretrial Services Agency and the District of Columbia Pub-
lic Defender Service may instead elect, either generally 
or in relation to particular cases or classes of cases, to 
hire necessary staff and personnel or enter into contracts 
for the provision of litigation services at such agency's 
expense. 
(B) ATTORNEY GENERAL.— 
(i) IN GENERAL.—Notwithstanding subparagraph 
(A), with respect to any litigation involving the District 
of Columbia Pretrial Services Agency, the Attorney 
General may— 
(I) direct the litigation of the agency, and of 
the District of Columbia on behalf of the agency; 
and 
(II) provide on a 
reimbursable 
or 
non-
reimbursable basis litigation services for the 
agency at the agency's request or on the Attorney 
Greneral's own initiative. 
(ii) APPROVAL OF SETTLEMENT.—^With respect to 
any litigation involving the District of Columbia Pre-
trial Services Agency, the agency may not agree to 
any settlement involving any form of equitable relief 
without the approval of the Attorney Genered. The Notices, 
agency shall provide to the Attorney General such Reports, 
notice and reports concerning litigation as the Attorney 
General may direct. 
(iii) DISCRETION.—Any decision to exercise any 
authority of the Attorney General under this paragraph 
shall be in the sole discretion of the Attorney General 
and shEill not be reviewable in any court. 
SEC. 11234. AUTHORIZATION OF APPROPRIATIONS. 
There are authorized to be appropriated through the State 
Justice Institute in each fiscal year such sums as may be necess£iry 
for the following: 
(1) District of Columbia Pretrial Services Agency. 
(2) District of Columbia Public Defender Service. 
(3) Supervision of offenders on probation, parole, or super-
vised release for offenses under the District of Columbia Code. 
(4) Operation of the parole system for offenders convicted 
of offenses under the District of Columbia Code. 
(5) Operation of the Trusteeship described in section 11232. 
CHAPTER 4—DISTRICT OF COLUMBIA COURTS 
Subchapter A—Transfer of Administration and Financing of 
Courts to Federal Government 
SEC. 11241. AUTHORIZATION OF APPROPRIATIONS. 
(a) AUTHORIZATIONS.—^There are authorized to be appropriated 
through the State Justice Institute in each fiscal year such sums 
as may be necessary for the following: 
(1) The Superior Court of the District of Columbia. 
(2) The District of Columbia Court of Appeals. 
(3) The District of Columbia Court System. 
(b) SUBMISSION TO OMB.—^The Joint Committee on Judicial 
Administration in the District of Columbia shall include in its 
I l l STAT. 752 
PUBLIC LAW 105-33—AUG. 5, 1997 
submissions to the Office of Management and Budget and the 
Congress, the budget and appropriations requests of the Superior 
Court for the District of Columbia, the District of Columbia Court 
of Appeals, £ind the District of Columbia Court System. 
SEC. 11242. ADMINISTRATION OF COURTS UNDER DISTRICT OF COLUM-
BIA CODE. 
(a) 
SUBMISSION OF ANNUAL BUDGET 
REQUESTS BY JOINT 
COMMITTEE ON JUDICIAL ADMINISTRATION.—Section ll-1701(b)(4), 
District of Columbia Code, is amended to read as follows: 
"(4) Submission of the annual budget requests of the Dis-
trict of Columbia Court of Appeals, the Superior Court of the 
District of Columbia, and the District of Columbia Court System 
as the integrated budget of the District of Columbia courts, 
except that such requests may be modified upon the concurrence 
of four of the five members of the Joint Committee.". 
(b) AUDIT OF ACCOUNTS OF COURTS.—Section 11-1723(a)(3), 
District of Columbia Code, is amended to read as follows: 
"(3) The Fiscal Officer shall be responsible for the approval 
of vouchers and the internal auditing of the accounts of the 
courts and shall arrange for an annual independent audit of 
the accounts of the courts.". 
(c) APPOINTMENT AND REMOVAL OF COURT PERSONNEL.—Section 
ll-1725(b) of the District of Columbia Code is amended to read 
as follows: 
"(b) The Executive Officer shall appoint, and may remove, 
the Director of Social Services, the clerks of the courts, the Auditor-
Master, and all other nonjudicial personnel for the courts (other 
than the Register of Wills and personal law clerks and secretaries 
of the judges) as may be necessary, subject to— 
"(1) regulations approved by the Joint Committee; and 
"(2) the approval of the chief judge of the court to which 
the personnel are or will be assigned. 
Appointments and removals of court personnel shall not be subject 
to the laws, rules, and limitations applicable to District of Columbia 
employees.". 
(d) PROCUREMENT OF EQUIPMENT AND SUPPLIES.—Section 11-
1742(b), District of Columbia Code, is amended to read as follows: 
"(b) The Executive Officer shall be responsible for the procure-
ment of necessary equipment, supplies, and services for the courts 
and shall have power, subject to applicable law, to reimburse the 
District of Columbia government for services provided and to con-
tract for such equipment, supplies, and services as may be nec-
essary.". 
(e) BUDGET AND EXPENDITURES.— 
(1) IN GENERAL.—Section 11-1743, District of Columbia 
Code, is amended to read as follows: 
*
*
§ 11-1743. Annual Budget and Expenditures. 
"(a) The Joint Committee shall prepare and submit to the 
Mayor and the Council of the District of Columbia annual estimates 
of the expenditures and appropriations necessary for the mainte-
nance and operations of the District of Columbia courts, and shall 
submit such estimates to Congress and the Director of the Office 
of Management and Budget gSler submitting them to the Mayor 
and the Council. All such estimates shall be included in the budget 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 753 
without revision by the President but subject to the President's 
recommendations. 
"(b) The District of Columbia Courts may make such expendi-
tures as may be necessary to execute efficiently the functions vested 
in the Courts. 
"(c) All expenditures of the Courts shall be allowed and paid 
upon presentation of itemized vouchers signed by the certifying 
officer designated by the Joint Committee. All such expenditures 
shall be paid out of moneys appropriated for purposes of the 
Courts.". 
(2) CLERICAL AMENDMENT.—^The item relating to section 
11-1743 in the table of sections for subchapter III of chapter 
17 of title 11, District of Columbia Code, is amended to read 
as follows: 
"11-1743. Annual budget and expenditures.". 
SEC. 11243. BUDGETING AND FINANCING REQUIREMENTS FOR COURTS 
UNDER HOME RULE ACT. 
(a) BUDGET OF COURTS.—Section 445 of the District of Columbia 
Self-Govemment and Governmental Reorganization Act (DC Code, 
Title 11 App.) is amended to read as follows: 
"SEC. 445. The District of Columbia courts shall prepare and 
annually submit to the Director of the Office of Management and 
Budget, for inclusion in the annual budget, annual estimates of 
the expenditures and appropriations necessary for the maintenance 
and operation of the District of Columbia court system. The courts 
shall submit as part of their budgets both a multiyear plan and 
a multiyear capital improvements plan and shall submit a state-
ment presenting qualitative and quantitative descriptions of court 
activities and the status of efforts to comply with reports of the 
Comptroller General of the United States.". 
(b) FINANCIAL DUTIES OF THE MAYOR.—Section 448(a)(6) of 
such Act (DC Code, sec. 47-31(KaX6)) is amended to read as follows: 
"(6) supervise and be responsible for the levying and collec-
tion of all taxes, special assessments, license fees, and other 
revenues of the District, as required by law, and receive all 
moneys receivable by the District from the Federal Government 
or from any agency or instrumentality of the District, except 
that this paragraph shall not apply to moneys from the District 
of Columbia Courts.". 
(c) FUNDS OF THE DISTRICT.—Section 450 of such Act (DC 
Code, sec. 47-130), is amended to read as follows: 
"SEC. 450. Ilie General Fund of the District shall be composed 
c^ those District revenues which on the effective date of this title 
are paid into the Treasury of the United States and credited either 
to the General Fund of Uie District or its miscellaneous receipts, 
but shall not include any revenues which are applied by law to 
any special fimd existing on the date of enactment of this title. 
The Council may from time to time establish such additional special 
funds as may be necessarjr for the efficient operation of the govern-
ment of the District. All money received by any agency, officer, 
or employee of the District in its or his official capacity shall 
belong to the District government and shall be paid promptly to 
the Mayor for deposit in the appropriate fund, except that sdl 
money received by the District of Columbia Courts shall be depos-
ited in the Treasury of the United States or the Crime Victims 
Fund.". 
I l l STAT. 754 
PUBLIC LAW 105-33—AUG. 5, 1997 
(d) REDUCTIONS IN BUDGETS OF INDEPENDENT AGENCIES.—Sec-
tion 453(c) of such Act (DC Code, sec. 47-304.1(c)) is amended 
to read as follows: 
"(c) Subsection (a) shall not apply to amounts appropriated 
or otherwise made available to the Council or to the District of 
Columbia Financial Responsibility and Management Assistance 
Authority established unaer section 101(a) of the District of Colum-
bia Financial Responsibility and Management Assistance Act of 
1995.". 
(e) TREATMENT OF COURT FEES IN CALCULATION OF LIMITS 
ON DISTRICT BORROWING.—Section 603 of such Act (DC Code, sec. 
47-313) is amended— 
(1) in subsection (b)— 
(A) in paragraph (1)— 
(i) in the first sentence, by striking "less court 
fees, any fees" and inserting "less any fees"; and 
(ii) in the second sentence, by striking "section 
2501 , title 47 of the District of Columbia Code, as 
amended" and inserting "title VI of the District of 
Columbia Revenue Act of 1939"; 
(B) in paragraph (3)(A), by striking "less court fees, 
any fees" and inserting "less any fees"; and 
(2) in subsection (c), by striking the last sentence (relating 
to budget estimates of the District of Columbia courts). 
SEC. 11244. AUDITING OF ACCOUNTS OF COURT SYSTEM. 
(a) POWERS OF DISTRICT OF COLUMBIA AUDITOR.—Section 455 
of the District of Columbia Self-Govemment and Grovemmental 
Reorganization Act (DC Code, sec. 47-117) is amended by adding 
at the end the following new subsection: 
"(g) This section shall not apply to the District of Columbia 
Courts or the accounts and operations thereof.". 
(b) SUBMISSION OF G A O AUDIT REPORTS TO MAYOR AND COUN-
CIL.—Section 715(b) of title 31, United States Code (DC Code, 
sec. 47-118.1(b)), is amended by striking "and the Mayor" and 
inserting "and (other than the audit reports of the District of 
Columbia Courts) the Mayor". 
(c) INDEPENDENT ANNUAL AUDIT.—Section 4 of Public Law 94-
399 (DC Code, sec. 47-119) is amended by adding at the end 
the following new subsection: 
"(d) This section shall not apply to the District of Columbia 
Courts or the financial operations thereof". 
SEC. 11245. MISCELLANEOUS BUDGETING AND FINANCING REQUIRE-
MENTS FOR COURTS UNDER DISTRICT LAW. 
(a) DEPOSIT OF PUBLIC FUNDS.—Section 2(21) of the District 
of Columbia Depository Act of 1977 (DC Code, sec. 47-341(21)) 
is amended by striking "a court, agency" and inserting "an agency". 
(b) REPROGRAMMING OF BUDGET AMOUNTS.—Section 4(h) of D.C. 
Law 3-100 (DC Code, sec. 47-363(h)) is amended by striking "the 
District of Columbia courts,". 
(c) CONTROL OF GRANT FUNDS.—(1) Section 3(1) of D.C. Law 
3-104 (DC Code, sec. 47-382(1)) is amended to read as follows: 
"(1) 'Agency' means the highest organizational structure 
of the District at which budgeting data is aggregated, but 
shall not include the District of Columbia Courts." 
(2) Section 4(b) of D.C. Law 3-104 (DC Code, sec. 47-383(b)) 
is amended to read at follows: 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 755 
"(b) The Trustees of the University of the District of Columbia, 
the Board of Education, and the D.C. General Hospital Commission 
shall submit to the Mayor two copies of the application and com-
pleted approval form, as an advisory notice, concurrent with submit-
ting the application and completed approval form to a grant-making 
agency in accordance with rules and regulations issued pursuant 
to subsection (c) of this section.". 
SEC. 11246. OTHER PROVISIONS RELATING TO ADMINISTRATION OF 
DISTRICT OF COLUMBIA COURTS. 
(a) JUROR FEES.—Section 11-1912(a), District of Columbia 
Code, is amended to read as follows: 
"(a) Notwithstanding section 602(a) of the District of Columbia 
Self-Govemment and Governmental Reorganization Act, grand and 
petit jurors serving in the Superior Court shall receive fees and 
expenses at rates established by the Board of Judges of the Superior 
Court", except that such fees and expenses may not exceed the 
respective rates paid to such jurors in the Federal system.". 
(b) COMPENSATION AND BENEFITS FOR COURT PERSONNEL.— 
(1) IN GENERAL.—Section 11-1726, District of Columbia 
Code, is amended to read as follows: 
"§11-1726. Compensation and beneHts for court personnel. 
"(a) In the case of nonjudicial employees of the District of 
Columbia courts whose compensation is not otherwise fixed by 
this title, the Executive Officer shall fix the rates of compensation 
of such employees without regard to chapter 51 and subchapter 
III of chapter 53 of title 5, United States Code. Any rates so 
established shall be subject to the limitation on pay fixed by 
administrative action in section 5373 of such title. In fixing the 
rates of compensation of nonjudicial employees under this section, 
the Executive Officer may be guided by the rates of compensation 
fixed for employees in the executive and judicial branches of the 
Federal Government or State or local governments occupying the 
same or similar positions or occupjdng positions of similar respon-
sibility, duty, and difficulty. 
"(b)(1) Nonjudicial employees of the District of Columbia courts 
shall be treated as employees of the Federal Government solely 
for purposes of any of the following provisions of title 5, United 
States Code: 
"(A) Subchapter 1 of chapter 81 (relating to compensation 
for work injuries). 
"(B) Chapter 83 (relating to retirement). 
"(C) Chapter 84 (relating to the Federal Employees' Retire-
ment System). 
"(D) Chapter 87 (relating to life insurance). 
"(E) Chapter 89 (relating to health insurance). 
"(2) The employing agency shall make contributions under the 
provisions referred to paragraph (1) at the same rates applicable 
to agencies of the Federal Government. 
"(3) An individual who is a nonjudicial employee of the District 
of Columbia courts on the date of the enactment of the Balanced 
Budget Act of 1997 may make, within 60 days after such date, 
an election under section 8351 or section 8432 of title 5, United 
States Code, to participate in the Thrift Savings Plan for Federal 
employees. 
Ill STAT. 756 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(c)(1) Judicial employees of the District of Columbia courts 
shall be treated as employees of the Federal Government for pur-
poses of any of the following provisions of title 5, United States 
Code: 
"(A) Subchapter 1 of chapter 81 (relating to compensation 
for work injuries). 
"(B) Chapter 87 (relating to life insurance). 
"(C) Chapter 89 (relating to health insurance). 
"(2) The employing agency shall make contributions under the 
provisions referred to paragraph (1) at the same rates applicable 
to agencies of the Federal Grovemment. 
"(3) For purposes of section 8706(b) and section 8901(3)(B) 
of title 5, United States Code, benefits paid from the retirement 
system for judicial employees of the District of Columbia courts 
or from the system providing benefits to survivors of such employees 
shall be considered an annuity. 
"(4) For purposes of section 8901(3)(A) of title 5, United States 
Code, the retirement system for judicial employees of the District 
of Columbia courts shall be considered a retirement system for 
employees of the Crovemment.". 
(2) CLERICAL AMENDMENT.^The table of sections for sub-
chapter II of chapter 15 of title 11, District of Columbia Code, 
is amended by amending the item relating to section 11-1726 
to read as follows: 
"11-1726. Compensation and benefits for court personnel.". 
(3) EFFECTIVE DATE.—^The amendments made by this sub-
section shall apply with respect to all months beginning after 
the date on which the Director of the Office of Personnel 
Management issues regulations to carry out section 11-1726, 
District of Columbia Code (as amended by paragraph (1)). 
(c) RETIREMENT PERIOD FOR EXECUTIVE OFFICER.—Section 11-
1703(d), District of Columbia Code, is amended by striking the 
period at the end and inserting the following: ", except that the 
Executive Officer (if initially hired after October 1, 1997) shall 
be eligible for retirement under subchapter III of chapter 15 when 
the Executive Officer has completed 7 years of service as Executive 
Officer, whether continuous or not.". 
Subchapter B—Judicial Retirement Program 
SEC. 11251. JUDICIAL RETIREMENT AND SURVIVORS ANNUITY FUND. 
(a) ESTABLISHMENT OF FUND.—Section 11-1570, District of 
Columbia Code, is simended to read as follows: 
^§ 11-1570. The District of Columbia Judicial Retirement and 
Survivors Annuity Fund. 
"(a) There is established in the Treasury a fund known as 
the District of Columbia Judicial Retirement and Survivors Annuity 
Fund (hereEifter in this section referred to as the 'Fund'), which 
shall consist of the following assets: 
"(1) Amounts deposited by, or deducted and withheld from 
the salary and retired pay of, a judge under section 1563 
or 1567 of this title, which shall be credited to an individual 
account of the judge. 
"(2) Amounts transferred from the District of Columbia 
Judges' Retirement Fund under section 124(c)(1) of the District 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 757 
of Columbia Retirement Reform Act, as amended by section 
11252 of the Balanced Budget Act of 1997. 
"(3) Amounts deposited under subsection (d). 
"(4) Any return on investment of the assets of the Fund. 
"(b)(1) The Secretary of the Treasury (hereafter in this section 
referred to as the 'Secretary') shall be responsible for the adminis-
tration of the Fund. The Secretary may carry out such responsibil-
ities through an agreement with a Trustee or contractor (who 
may be the Trustee or contractor appointed to carry out responsibil-
ities relating to Federal benefit pajonents under title I of the 
National Capital Revitalization and Self-Government Improvement 
Act of 1997) and an enrolled actuary (as defined in section 
7701(a)(35) of the Internal Revenue Code of 1986) who is a member 
of the American Academy of Actuaries (who may be the enrolled 
actuary engaged under such Act). 
"(2) The chief judges of the District of Columbia Court of 
Appeals and Superior Court of the District of Columbia shall submit 
to the President and the Secretary an annual estimate of the 
expenditures and appropriations necessary for the maintenance 
and operation of the Fund, and such supplemental and deficiency 
estimates as may be required from time to time for the same 
purposes, according to law. 
"(3) The Secretary may cause periodic examinations of the 
Fund to be made by an enrolled actuary (as defined in section 
7701(a)(35) of the Internal Revenue Code of 1986) who is a member 
of the American Academy of Actuaries. 
"(c)(1) Amounts in the Fund are available for the payment 
of judges' retirement pay, annuities, refunds, and allowances under 
this subchapter. 
"(2) Notwithstanding any other provision of District law or 
any other law, rule, or regulation, the Secretary may review benefit 
determinations under this subchapter made prior to the date of 
the enactment of the National Capital Revitalization and Self-
Govemment Improvement Act of 1997, and shall make initial bene-
fit determinations after such date. 
"(d)(1) Subject to the availability of appropriations, there shall 
be deposited in the Fund, not later than the close of each fiscal 
year (beginning with the first fiscal year which ends more than 
6 months after the replacement plan adoption date described in 
section 103(13) of the National Capital Revitalization and Self-
Govemment Improvement Act of 1997), an amount equal to the 
sum of— 
"(A) the normal cost for the year; 
"(B) the annual amortization amount for the year (which 
may not be less than zero); and 
"(C) the covered administrative expenses for the year. 
"(2) For purposes of this subsection: 
"(A) The 'original unfunded liability' is the amount that 
is the present value as of June 30, 1997, of future benefits 
payable from the Fund (net the sum of future normal cost 
and plan assets as of such date). 
"(B) The 'annual amortization amount' is the amount deter-
mined by the enrolled actuary to be necessary to amortize 
in equal annual installments (until fully amortized)— 
"(i) the original unfunded liability over a 30-year 
period; 
I l l STAT. 758 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(ii) a net experience gain or loss over a 10-year period; 
and 
"(iii) any other changes in actuarial liability over a 
20-year period. 
"(C) The 'covered administrative expenses' are the expenses 
determined by the Secretary (on an annusd basis) to be nec-
essary to administer the Fund. 
"(3) Deposits made under this subsection shall be taken from 
sums available for that fiscal year for the payment of the expenses 
of the Court, and shall not be credited to the account of any 
individual. 
"(e) The Secretary shall invest such portion of the Fund as 
is not in the judgment of the Secretary required to meet current 
withdrawals. Such investments shall be in public debt securities 
with maturities suitable to the needs of the Fund, as determined 
by the Secretary, and bearing interest at rates determined by 
the Secretary, taking into consideration current market yields on 
outstanding marketable obligations of the United States of com-
parable maturities. 
"(f) None of the moneys mentioned in this subchapter shall 
be assignable, either in law or in equity, or be subject to execution, 
levy, attachment, garnishment, or other legal process (except to 
the extent permitted pursuant to the District of Columbia Spouse 
Equity Act of 1988). 
"(g) Notwithstanding any other provision of District law, rule, 
or regulation, any civil action brought— 
"(1) by an individual to enforce or clarify rights to benefits 
from the Fund; or 
"(2) by the Secretary— 
"(A) to enforce any claim arising (in whole or in part) 
under this section or any contract entered into to carry 
out this section, 
"(B) to recover benefits improperly paid from the Fund 
or to clarify £in individual's rights to benefits from the 
Fund, or 
"(C) to enforce any provision of this section or any 
contract entered into to carry out this section, 
shall be brought in the United States District Court for the District 
of Columbia.". 
(b) CLERICAL AMENDMENT.—^The table of sections for subchapter 
III of chapter 15 of title 11, District of Columbia Code, is amended 
by amending the item relating to section 11-1570 to read as follows: 
"11-1570. The District of Columbia Judicial Retirement and Survivors Annuity 
Fund.". 
SEC. 11252. TERMINATION OF CURRENT FUND AND PROGRAM. 
(a) TERMINATION OF JUDGES' RETIREMENT FUND.—Section 124 
of the District of Columbia Retirement Reform Act (DC Code, sec. 
1-714) is amended by striking subsection (c) and inserting the 
following: 
"(c)(1) Notwithstanding any other provision of this Act or the 
amendments made by this Act, upon the date the assets of the 
Retirement Fund described in title I of the National Capital Revital-
ization and Self-Grovernment Improvement Act of 1997 are trans-
ferred, the assets of the District of Columbia Judges' Retirement 
Fund established under subsection (a) shall be transferred to the 
District of Columbia Judicial Retirement and Survivors Annuity 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 759 
Fund under section 11-1570, District of Columbia Code, and no 
amounts shall be deposited into the District of Columbia Judges' 
Retirement Fund after the date on which the assets are so trans-
ferred. 
"(2) The District of Columbia Judges' Retirement Fund estab-
lished under subsection (a) shall be continued in the Treasury 
and appropriated for the purposes provided in this Act until such 
time as all amounts in such Fund have been expended or transferred 
to the District of Columbia Judicial Retirement and Survivors Annu-
ity Fund pursuEtQt to paragraph (1). Thereafter any pa3anents of 
retirement pay, annuities, refunds, and allowances for judicial 
personnel of the District of Columbia shall be paid from the District 
of Columbia Judicial Retirement and Survivors Annuity Fund in 
accordance with subchapter III of chapter 15 of title 11, District 
of Columbia Code.". 
(b) REMOVAL OF JUDGES FROM RETIREMENT BOARD.—Section 
121(b)(1)(A) of the District of Columbia Retirement Reform Act 
(DC Code, sec. 1-711(b)(1)(A)) is amended— 
(1) in the matter preceding clause (i), by striking "13" 
and inserting "11"; 
(2) by striking clause (vii); and 
(3) by redesignating clauses (viii) and (ix) as clauses (vii) 
and (viii), 
SEC. 11253. CONFORMING AMENDMENTS. 
(a) TRANSFER OF AUTHORITY OVER FUND TO SECRETARY OF 
TREASURY.—^Title 11, District of Columbia Code, is amended as 
follows: 
(1) In sections 11-1561(8)(C), ll-1562(c), ll-1563(b), 11-
1563(c), ll-1564(d)(6), ll-1564(d)(7), ll-1566(a), and 11-
1570(c), by striking "Commissioner [Mayor]" each place it 
appears and inserting "Secretary of the Treasury". 
(2) In sections 11-1566(b)(2), 11-1567(a), ll-1567(b), by 
striking "Mayor" each place it appears and inserting "Secretary 
of the Treasury". 
(3) In sections 11-1564(d)(2)(A) and 11-1568.1(1)(B), by 
striking "Mayor of the District of Columbia" each place it 
appears and inserting "Secretary of the Treasury. 
(4) In section 11-1563(a), by striking "paid to the Custodian 
of Retirement Funds (as defined in section 102(6) of the District 
of Columbia Retirement Reform Act)" and inserting "paid to 
the Secretary of the Treasury". 
(b) DEFINITION OF FUND.—Section 11-1561(4), District of 
Columbia Code, is amended to read as follows: 
"(4) The term 'fund' means the District of Columbia Judicial 
Retirement and Survivors Annuity Fund established by sections 
11-1570.". 
(c) TREATMENT OF FEDERAL SERVICE OF JUDGES.—Section 11-
1564(d)(4), District of Columbia Code, is amended by striking 
"Judges' Retirement Fund established by section 124(a) of the Dis-
trict of Columbia Retirement Reform Act" and inserting "Judicial 
Retirement and Survivors Annuity Fund under section 11-1570". 
I l l STAT. 760 
PUBLIC LAW 105-33—AUG. 5, 1997 
Subchapter C—Miscellaneous Conforming and 
Administrative Provisions 
SEC. 11261. TREATMENT OF COURTS UNDER MISCELLANEOUS DIS-
TRICT LAWS. 
(a) FINANCIAL RESPONSIBILITY AND MANAGEMENT ASSISTANCE 
ACT.—Paragraph (5) of section 305 of the District of Columbia 
Financial Responsibility and Management Assistance Act of 1995 
(DC Code, sec. 47-393(5)) is amended to read as follows: 
"(5) The term 'District government' means the government 
of the District of Columbia, including any department, agency 
or instrumentality of the government of the District of Colum-
bia; any independent agency of the District of Columbia estab-
lished under part F of title IV of the District of Columbia 
Self-Government and Governmental Reorganization Act or any 
other agency, board, or commission established by the Mayor 
or the Council; the Council of the District of Columbia; and 
any other agency, public authority, or public benefit corporation 
which has the authority to receive monies directly or indirectly 
from the District of Columbia (other than monies received 
from the sale of goods, the provision of services, or the loaning 
of funds to the District of Columbia), except that such term 
does not include the Authority.". 
(b) MERIT PERSONNEL ACT.—(1) Section 201 of the District 
of Columbia Comprehensive Merit Personnel Act of 1978 (DC Code, 
sec. 1-602.1) is amended— 
(A) by striking "(a) Except as provided in subsection (b) 
or unless" and inserting "Unless"; and 
(B) by striking subsection (b). 
(2) Section 301(13) of the District of Columbia Comprehensive 
Merit Personnel Act of 1978 (DC Code, sec. 1-603.1(13)) is amended 
by striking ", the Superior Court of the District of Columbia, and 
the District of Columbia Court of Appeals shall be considered 
independent agencies" and inserting "shall be considered an 
independent agency. 
SEC. 11262. REPRESENTATION OF INDIGENTS IN CRIMINAL CASES. 
(a) BUDGET.—Section 11-2607, District of Columbia Code, is 
amended to read as follows: 
*
*
§ 11-2607. Preparation of Budget. 
"The joint committee shall prepare and include in its annual 
budget requests for the District of Columbia court system estimates 
of the expenditures and appropriations necessary for furnishing 
representation by private attorneys to persons entitled to represen-
tation in accordance with section 2601 of this title.". 
(b) AUTHORIZATION OF APPROPRIATIONS.—Section 11-2608 of 
the District of Columbia Code is amended to read as follows: 
^§ 11-2608. Authorization of appropriations. 
'There are authorized to be appropriated through the State 
Justice Institute such sums as may be necessary to pay for represen-
tation by private attorneys and related services under this chapter. 
When so specified in appropriation Acts, such appropriations shall 
remain available until expended.". 
(c) REPEAL AUTHORITY OF COUNCIL.— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 761 
(1) IN GENERAL.—Section 11-2609, District of Columbia 
Code,, is repealed. 
(2) CLERICAL AMENDMENT.—The table of sections for chap-
ter 26 of title 11, District of Columbia Code, is amended by 
striking the item relating to section 11-2609. 
CHAPTER 5—PRETRIAL SERVICES AGENCY AND PUBLIC 
DEFENDER SERVICE 
SEC. 11271. AMENDMENTS AFFECTING PRETRIAL SERVICES AGENCY. 
(a) IN GENERAL.—Sections 23-1304 through 23-1308 of the 
District of Columbia Code are amended to read as follows: 
"§23-1304. Executive committee; composition; appointmient 
and quali^cations of Director 
"(a) The agency shall be advised by an executive committee 
of seven members, of which four members shall constitute a quorum. 
The Executive Committee shall be composed of the following persons 
or their designees: the Chief Judge of the United States Court 
of Appeals for the District of Columbia Circuit, the Chief Judge 
of the United States District Court for the District of Columbia, 
the Chief Judge of the District of the Columbia Court of Appeals, 
the Chief Judge of the Superior Court of the District of Columbia, 
the United States Attorney for the District of Columbia, the Director 
of the District of Columbia Public Defender Service, and the Director 
of the District of Columbia Offender Supervision, Defender and 
Courts Services Agency. 
"(b) The Chief Judge of the United States Court of Appeals 
for the District of Columbia Circuit and the Chief Judge of the 
United States District Court for the District of Columbia, in con-
sultation with the other members of the executive committee, shall 
appoint a Director of the agency who shall be a member of the 
bar of the District of Columbia. 
"§ 23-1305. Duties of director; compensation 
"(a) The Director of the agency shall be responsible for the 
supervision and execution of the duties of the agency. The Director 
shall be compensated as a member of the Senior Executive Service 
pursuant to subchapter VIII of chapter 53 of title 5, United States 
Code. 
"§ 23-1306. Chief assistant and other agency personnel; com-
pensation 
"The Director shall employ a chief assistant who shall be com-
pensated as a member of the Senior Executive Service pursuant 
to section 5382 of title 5, United States Code. The Director shall 
employ such agency personnel as may be necessary properly to 
conduct the business of the agency. All employees other than the 
chief assistant shall receive compensation that is comparable to 
levels of compensation established for Federal pretrial services 
agencies. 
"§ 23-1307. Annual reports 
"(a) The Director shall each year submit to the executive 
committee and to the Director of the District of Columbia Offender 
Supervision, Defender and Courts Services Agency a report as to 
the Pretrial Services Agency's administration of its responsibilities 
I l l STAT. 762 
PUBLIC LAW 105-33—AUG. 5, 1997 
for the previous fiscal year. The Director shall include in the report 
a statement of financial condition, revenues, and expenses for the 
past fiscal year. 
"§ 23-1308. Appropriation; budget 
"There are authorized to be appropriated through the State 
Justice Institute in each fiscal year such sums as may be necessary 
to carry out the provisions of this subchapter. Funds appropriated 
by Congress for the District of Columbia Pretrial Services Agency 
shall be received by the Director of the District of Columbia Offender 
Supervision, Defender and Courts Services Agency, and shall be 
disbursed by that Director to and on behalf of the District of 
Columbia Pretrial Services Agency. The District of Columbia trial 
Services Agency shall submit to the Director of the District of 
Columbia Offender Supervision, Defender and Courts Services 
Agency at the time and in the form prescribed by that Director, 
reports of its activities and financial position £ind its proposed 
budget.". 
(b) CLERICAL AMENDMENT.—The table of sections for subchapter 
I of chapter 13 of title 23, District of Columbia Code, is amended 
by striking the items relating to sections 23-1304 through 23-
1308 and inserting the following: 
"23-1304. Executive committee; composition; appointment and qualifications of Di-
rector. 
"23-1305. Duties of director; compensation. 
"23-1306. Chief assistant and otner agency personnel; compensation. 
"23-1307. Annual reports. 
"23-1308. Appropriation: budget." 
SEC. 11272. AMENDMENTS AFFECTING PUBLIC DEFENDER SERVICE. 
(a) BOARD OF TRUSTEES.—Section 303(a) of the District of 
Columbia Court Reform and Criminal Procedure Act of 1970 (DC 
Code, sec. l-2703(a)) is amended to read as follows: 
"(a) The Service shall be advised on matters of general policy 
by a Board of Trustees". 
(b) APPOINTMENT OF DIRECTOR AND DEPUTY DIRECTOR.—Section 
304 of such Act (DC Code, sec. 1-2704) is amended to read as 
follows; 
"SEC. 304. DIRECTOR AND DEPUTY DIRECTOR; APPOINTMENT; DUTIES; 
MEMBERSHIP IN BAR REQUIRED. 
"The Chief Judge of the United States Court of Appeals for 
the District of Columbia Circuit and the Chief Judge of the United 
States District Court for the District of Columbia, in consultation 
with the persons described in subparagraphs (B) through (D) of 
section 303(b)(1) and the Board of Trustees, shall appoint a Director 
and Deputy Director of the Service. The Director shall be respon-
sible for the supervision and execution of the duties of the Service. 
The Deputy Director shall assist the Director and shall perform 
such duties as the Director may prescribe. The Director and Deputy 
Director shall be members of the bar of the District of Columbia. 
The Director of the District of Columbia Offender Supervision, 
Defender and Courts Services Agency shall fix the compensation 
of the Director and the Deputy Director, but the compensation 
of the Director shall not exceed the compensation received by the 
United States Attorney for the District of Columbia.". 
(c) ANNUAL REPORT AND AUDIT.—Section 306 of such Act (DC 
Code, sec. 1-2706) is amended— 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 763 
(1) in subsection (a)— 
(A) by striking "Board of Trustees" and inserting 
"Director", and 
(B) by striking "and to the Mayor of the District of 
Columbia" and inserting "to the Director of the District 
of Columbia Offender Supervision, Defender and Courts 
Services Agency, and to the Office of Management and 
Budget"; and 
(2) in subsection (b)— 
(A) by striking "Board of Trustees" and inserting 
"Director"; and 
(B) by striking "the Administrative Office of the United 
States Courts" and inserting "the Director of the District 
of Columbia Offender Supervision, Defender and Courts 
Services Agency". 
(d) APPROPRIATIONS.—Section 307 of such Act (DC Code, sec. 
1-2707) is amended— 
(1) by amending subsection (a) to read as follows: 
"(a) There are authorized to be appropriated through the State 
Justice Institute in each fiscal year such sums as may be necessary 
to carry out the provisions of this chapter. Funds appropriated 
by Congress for the District of Columbia Public Defender Service 
shall be received by the Director of the District of Columbia Offender 
Supervision, Defender and Courts Services Agency, and shall be 
disbursed by that Director to and on behalf of the Service. The Reports. 
Service shall submit to the Director of the District of Columbia 
Offender Supervision, Defender and Courts Services Agency, at 
the time and in the form prescribed by that Director, reports of 
its activities and financial position and its proposed budget."; and 
(2) in subsection (b), by striking "Upon approval of the 
Board of Trustees, the" and inserting *The" . 
CHAPTER 6—MISCELLANEOUS PROVISIONS 
SEC. 11281. TECHNICAL ASSISTANCE AND RESEARCH. 
There are authorized to be appropriated to the National 
Institute of Justice in each fiscal year (beginning with fiscal year 
1998) such sums as may be necessary for the following activities: 
(1) Research and demonstration projects, evaluations, and 
technical assistance to assess and analyze the crime problem 
in the District of Columbia, and to improve the ability of 
the criminal justice and other systems and entities in the 
District of Columbia to prevent, solve, and punish crimes. 
(2) The establishment of a locally-based corporation or 
institute in the District of Columbia supporting research and 
demonstration projects relating to the prevention, solution, or 
punishment of crimes in the District of Columbia, including 
the provision of related technical assistance. 
SEC. 11282. EXEMPTION FROM PERSONNEL AND BUDGET CEILINGS 
FOR TRUSTEES AND RELATED AGENCIES. 
The Trustees described in sections 11202 and 11232 and the 
activities and personnel of, and the funds allocated or otherwise 
available to, the Trustees and the agencies over which the Trustees 
exercise financial oversight pursuant to those sections, shall not 
be subject to any general personnel or budget limitations which 
Appropriation 
authorization. 
I l l STAT. 764 
PUBLIC LAW 105-33—AUG. 5, 1997 
otherwise apply to the District of Columbia government or its 
agencies in any appropriations act. 
Subtitle D—Privatization of Tax Collection 
and Administration 
SEC. 11301. FINDINGS. 
Congress finds as follows: 
(1) The District of Columbia government has historically 
had a poor record of determining and collecting all revenue 
it is due under its revenue code. 
(2) The impact on the District's financial condition of poor 
administration and collection is significant and has contributed 
both to the size of its accumulated operating deficit and to 
the difficulty in balancing the budget going forward. 
(3) More complete collection of taxes would not only 
increase District of Columbia revenues, but would give residents 
and businesses a sense of equity and that all were paying 
their fair share. 
(4) Once District tax processing and collection is com-
petently managed it will be possible for the District government 
to accurately assess the true value of its many taxes and 
determine that some may be reduced or eliminated without 
a significant negative impact on revenues. 
(5) Any reduction or elimination of non-productive or 
counterproductive taxes or taxes which cost more to administer 
than they produce in revenue would significantly improve the 
negative atmosphere surrounding the District of Columbia tax 
system and its enforcement. 
SEC. 11302. AUTHORIZING CHIEF FINANCIAL OFFICER TO PRIVATIZE 
TAX ADMINISTRATION AND COLLECTION. 
The Chief Financial Officer of the District of Columbia may 
enter into contracts with a private entity for the administration 
and collection of taxes of the District of Columbia. 
Subtitle E—Financing of District of 
Columbia Accumulated Deficit 
SEC. 11401. FINDINGS. 
Congress finds as follows: 
(1) The District of Columbia government sold accumulated 
deficit financing bonds in 1991. 
(2) Between 1991 and the end of fiscal year 1997 the 
District of Columbia government is expected to accumulate 
an operating deficit in excess of $500,000,000. 
(3) Requiring the District of Columbia budget for fiscal 
year 1998 to be balanced will ensure that no further addition 
is made to the accumulated operating deficit. 
(4) In every other example of an American city in financial 
crisis, a vital and necessary component of recovery was to 
finance the accumulated operating deficit. 
(5) Carrying forward an accumualted operating deficit of 
more than $500,000,000 has a significant negative impact on 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 765 
the District of Columbia's cash flow and financial condition 
and on its ability to improve its credit rating. 
(6) It is not feasible to carry forward such a debt with 
£in expectation of paying it off gradually from future budget 
surpluses. 
(7) Financing the accumulated deficit would improve the 
District's cash management position and allow more normal 
cash management techniques. 
SEC. 11402. AUTHORIZATION FOR INTERMEDIATE-TERM ADVANCES OF 
FUNDS BY THE SECRETARY OF THE TREASURY TO LIQ-
UIDATE THE ACCUMULATED GENERAL FUND DEFICIT OF 
THE DISTRICT OF COLUMBIA. 
Title VI of the District of Columbia Revenue Act of 1939 (DC 
Code, sec. 47-3401 et seq.) is amended— 
(1) by redesignating sections 602 through 605 as sections 
603 through 606, respectively; and 
(2) by inserting after section 601 the following: 
"SEC. 602. INTERMEDIATE-TERM 
ADVANCES FOR LIQUIDATION OF 
DEFICIT. 
"(a) IN GENERAL.—If the conditions in subsection (b) are satis-
fied, the Secretary shall make an advance of funds from time 
to time, out of any money in the Treasury not otherwise 
appropriated and to the extent provided in advance in annual 
appropriations Acts, for the purpose of assisting the District gov-
ernment in liquidating the outstanding accumulated operating defi-
cit of the general fund of the District government existing as of 
September 30, 1997. 
"(b) 
CONDITIONS 
TO 
MAKING 
ANY 
INTERMEDIATE-TERM 
ADVANCE.—^The Secretary shall make an advsmce under this section 
if— 
"(1) the Mayor delivers to the Secretary the following 
instruments, in form and substsmce satisfactory to the Sec-
retary— 
"(A) a financing agreement in which the Mayor agrees 
to procedures for requisitioning advances; 
"(B) a requisition for an advance under this section; 
and 
"(C) a promissory note evidencing the District govern-
ment's obligation to reimburse the Treasury for the 
requisitioned advance, which note may be a general obliga-
tion bond issued under section 461(a) of the District of 
Columbia 
Self-Govemment 
and 
Governmental 
Reorganization Act by the District government to the 
Secretary if the Secretary determines that such a bond 
is satisfactory; 
"(2) the date on which the requisitioned advance is 
requested to be made is not later than 3 years from the date 
of enactment of the Balanced Budget Act of 1997; 
"(3) the District government delivers to the Secretary— 
"(A) evidence demonstrating to the satisfaction of the 
Secretary that, at the time of the Mayor's requisition for 
an advance, the District government is effectively unable 
to obtain credit in the public credit markets or elsewhere 
in sufficient amounts and on sufficiently reasonable terms 
to meet the District government's need for financing to 
accomplish the purpose described in subsection (a); and 
I l l STAT. 766 
PUBLIC LAW 105-33—AUG. 5, 1997 
Certification. 
"(B) a schedule setting out the anticipated timing and 
amounts of requisitions for advances under this section; 
"(4) the Authority certifies to the Secretary that— 
"(A) there is an approved financial plan and budget 
in effect under the District of Columbia Financial Respon-
sibility and Management Assistance Act of 1995 for the 
fiscal year in which the requisition is to be made; 
"(B) at the time that the Mayor's requisition for an 
advance is delivered to the Secretary, the District govern-
ment is in compliance with the approved financial plan 
and budget; 
"(C) both the receipt of funds from such advance and 
the reimbursement of Treasury for such advance are 
consistent with the approved financial plan and budget 
for the year; 
"(D) such advance will not adversely affect the financial 
stability of the District government; and 
"(E) at the time that the Mayor's requisition for an 
advance is delivered to the Secretary, the District govern-
ment is effectively unable to obtain credit in the public 
credit markets or elsewhere in sufficient amounts and on 
sufficiently reasonable terms to meet the District govern-
ment's need for financing to accomplish the purpose 
described in subsection (a); 
"(5) the Inspector General of the District of Columbia cer-
tifies to the Secretary the information described in subpara-
graphs (A) through (D) of paragraph (4), and in making this 
certification, the Inspector General may rely upon an audit 
conducted by an outside auditor engaged by the Inspector Gen-
eral under section 208(a)(4) of the District of Columbia Procure-
ment Practices Act of 1985 if, after reasonable inquiry, the 
Inspector General concurs in the findings of such audit; 
"(6) the Secretary determines that— 
"(A) there is reasonable assurance of reimbursement 
for the requisitioned advance; and 
"(B) the debt owed by the District government to the 
Treasury on account of the requisitioned advance will not 
be subordinate to any other debt owed by the District 
or to any other claims against the District; and 
"(7) the Secretary receives from such persons as the Sec-
retary determines to be appropriate such additional certifi-
cations and opinions relating to such matters as the Secretary 
determines to be appropriate. 
"(c) AMOUNT OF ANY INTERMEDIATE-TERM ADVANCE.— 
"(1) IN GENERAL.—Except as provided in paragraph (3), 
if the conditions in paragraph (2) are satisfied, each advance 
made under this section shall be in the amount designated 
by the Mayor in the Mayor's requisition for such advance. 
"(2) 
CONDITIONS APPLICABLE TO DESIGNATED AMOUNT.— 
Paragraph (1) applies if— 
"(A) the Mayor certifies that the amount designated 
in the Mayor's requisition for such advance is needed to 
accomplish the purpose described in subsection (a) within 
30 days of the time that the Mayor's requisition is delivered 
to the Secretary; and 
"(B) the Authority concurs in the Mayor's certification 
under subparagraph (A). 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 767 
"(3) MAXIMUM AMOUNT.—^Notwithstanding paragraph (1), 
the aggregate amount of all advances made under this section 
shall not be greater than $300,000,000. 
"(d) MATURITY OF ANY INTERMEDIATE-TERM ADVANCE.— 
"(1) IN GENERAL.—Except as provided in paragraphs (2) 
and (3), each advance made under this section shall mature 
on the date designated by the Mayor in the Mayor's requisition 
for such advance. 
"(2) LATEST PERMISSIBLE MATURITY DATE .^Notwithstand-
ing paragraph (1), the maturity date for any advance made 
under this section shall not be later than 10 years from the 
date on which the first advance under this section is made. 
"(4) SECRETARY'S RIGHT TO REQUIRE EARLY REIMBURSE-
MENT.—Notwithstanding paragraph (1), if the Secretary 
determines, at any time while any advance made under this 
section has not been fully reimbursed, that the District is 
able to obtain credit in the public credit markets or elsewhere 
in sufficient amounts and on sufficiently reasonable terms, 
in the judgment of the Secretary, to refinance all or a portion 
of the unpaid balance of such advance in the public credit 
markets or elsewhere without adversely affecting the financial 
stability of the District government, the Secretary may require 
reimbursement for all or a portion of the unpaid balgince of 
such advance at any time after the Secretary makes the 
determination. 
"(e) INTEREST RATE.—Each advance made under this section 
shall bear interest at an annual rate equal to a rate determined 
by the Secretary at the time that the Secretary makes such advance 
taking into consideration the prevailing yield on outstanding 
marketable obligations of the United States with remaining periods 
to maturity comparable to the repajmient schedule of such advance, 
plus Va of 1 percent. 
"(f) OTHER TERMS AND CONDITIONS.—Each advance made under 
this section shall be on such other terms and conditions, including 
repayment schedule, as the Secretary determines to be appropriate. 
"(g) DEPOSIT OF ADVANCES.^AS provided in section 204(b) of 
the District of Columbia Financial Responsibility and Management 
Assistance Act of 1995, advances made under this section for the 
account of the District government shall be deposited by the Sec-
retary into an escrow account held by the Authority.". 
SEC. 11403. CONFORMING AMENDMENTS. 
(a) AMENDMENT TO SECTION 601.—Section 601 of the District 
of Columbia Revenue Act of 1939 (DC Code, sec. 47-3401) is amend-
ed— 
(1) in subsection (c)(2)(BXi)(IV), by striking "602(b)" and 
inserting "603(b)"; and 
(2) in subsection (d)(2XB)(iii), by striking "602(b)" and 
inserting "603(b)". 
(b) AMENDMENT TO SECTION 604.—Section 604 of the District 
of Columbia Revenue Act of 1939 (DC Code, sec. 47-3401.3) is 
amended— 
(1) in subsection (aX2XA)(i), by striking "602" and inserting 
"603"; and 
(2) in subsection (aX2XB)(i), by striking "602" and inserting 
"603". 
I l l STAT. 768 
PUBLIC LAW 105-33—AUG. 5, 1997 
District of 
Columbia Bond 
Financing 
Improvements 
Act of 1997. 
SEC. 11404. TECHNICAL CORRECTIONS. 
Section 601 of the District of Columbia Revenue Act of 1939 
(DC Code, sec. 47-3401) is amended— 
(1) in subsection (a)(3)(D), by striking "September 30, 1995" 
and inserting "September 30, 1996"; 
(2) in subsection (b)(2)(E), by striking "September 30, 1996" 
and inserting "September 30, 1997"; 
(3) in subsection (c)(2)(BXi), by striking "October 1, 1995" 
and inserting "September 30, 1995"; 
(4) in subsection (d)(2)(B)(iXII), by striking "September 30, 
1997" and inserting "September 30, 1998"; 
(5) in subsection (d)(2XBXii>— 
(A) by striking "September 30, 1995" and inserting 
"October 1, 1995"; and 
(B) by striking "September 30, 1997" and inserting 
"October 1, 1997"; and 
(6) in subsection (dX2XC)(iv), by striking "September 30, 
1997" and inserting "September 30, 1998". 
SEC. 11405. AUTHORIZATION FOR ISSUANCE OF GENERAL OBLIGATION 
BONDS BY THE DISTRICT OF COLUMBIA TO FINANCE OR 
REFUND ITS ACCUMULATED GENERAL FUND DEFICIT. 
Section 461(a) of the District of Columbia Self-Govemment 
and Grovemmental Reorganization Act (DC Code, sec. 47-321(a)) 
is amended— 
(1) in paragraph (1), by inserting "to finance or refund 
the outstanding accumulated operating deficit of the general 
fund of the District of $500,000,000, existing as of September 
30, 1997," after "existing as of September 30,1990,"; and 
(2) in paragraph (2), by inserting "existing as of September 
30, 1990" after ^operating deficit". 
Subtitle F—^District of Columbia Bond 
Financing Improvements 
SEC. 11601. SHORT TITLE. 
This subtitle may be cited as the "District of Columbia Bond 
Financing Improvements Act of 1997". 
SEC. 11S02. FINDINGS. 
Congress finds as follows: 
(1) The bond authorization provision of the District of 
Columhia Self-Grovemment and Grovemmental Reorganization 
Act (commonly known as the "Home Rule Act") have not been 
updated to conform with changes in the municipal securities 
marketplace. 
(2) The Home Rule Act unduly limits the ability of the 
District to take advantage of cost savings, investment 
opportunities, and oliier efficiencies generally available to 
municipal securities issuers. 
(3) Section 461 of the Home Rule Act limits the ability 
of the District government to implement cost-eftective capital 
planning to the extent that it does not permit the District 
access to interim capital financing in anticipation of its periodic 
long-term borrowings. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 769 
(4) Section 462 of the Home Rule Act prevents the re-
programming of unused bond proceeds from dormant projects 
to other pending, authorized, and viable projects. 
(5) Section 466 of the Home Rule Act requires that the 
District undertake competitive bond sales even under cir-
cumstances in which greater efficiencies can be achieved 
through negotiated sales. 
(6) Section 490 of the Home Rule Act does not permit 
the issuance and sale of taxable and tax-exempt bonds for 
the full range of economic development and governmental pur-
poses permitted the States and their political subdivisions. 
SEC. 11503. AMENDMENT TO SECTION 462 (RELATING TO CONTENTS 
OF BORROWING LEGISLATION AND ELECTIONS ON ISSU-
ING GENERAL OBLIGATION BONDS). 
Section 462(a) of the District of Columbia Self-Govemment 
and Crovernmental Reorganization Act (DC Code, sec. 47-322(a)) 
is amended to read as follows: 
"(a) The Council may by act authorize the issuance of general 
obligation bonds for the purposes specified in section 461. Such 
an Act shall contain, at least, provisions— 
"(1) briefly describing the projects or categories of projects 
to be financed by the Act; 
"(2) identifying the act authorizing each such project or 
category of projects; 
(3) setting forth the maximum amount of the principal 
of the indebtedness which may be incurred for the projects 
to be financed; 
"(4) setting forth the maximum rate of interest to be paid 
on such indebtedness; 
"(5) setting forth the maximum allowable maturity for the 
issue and the maximum debt service payable in any year; 
and 
"(6) setting forth, in the event that the Council determines 
in its discretion to submit the question of issuing such bonds 
to a vote of the qualified voters of the District, the manner 
of holding such election, the date of such election, the manner 
of voting for or against the incurring of such indebtedness, 
and the form of ballot to be used at such election.". 
SEC. 11504. AMENDMENT TO SECTION 466 (RELATING TO PUBLIC OR 
NEGOTIATED SALE OF GENERAL OBUGATION BONDS). 
Section 466 of the District of Columbia Self-Govemment and 
Governmental Reorganization Act (DC Code, sec. 47-326) is amend-
ed by striking all after the heading and inserting the following: 
"SEC. 466. General obligation bonds issued under this part 
may be sold at a private sale on a negotiated basis (in such manner 
as the Mayor may determine to be in the public interest), or 
may be sold at public sale upon sealed proposals after publication 
of a notice of such public sale at least once not less than 10 
days prior to the date fixed for sale in a daily newspaper carrying 
municipal bond notices and devoted primarily to financial news 
or to tne subject of State and municipal bonds published in the 
city of New York, New York, and in 1 or more newspapers of 
general circulation published in the District. Such notice of public 
sale shall state, among other things, that no proposal shall be 
considered unless there is deposited with the District as a down 
payment a certified check, cashier's check, or surety for an amount 
I l l STAT. 770 
PUBLIC LAW 105-33—AUG. 5, 1997 
equal to at least 2 percent of the par amount of general obligation 
bonds bid for, and the Mayor shall reserve the right to reject 
any and all bids.". 
SEC. 11505. AMENDMENT TO SECTION 467 (RELATING TO AUTHORITY 
TO CREATE SECURITY INTERESTS IN DISTRICT REVE-
NUES). 
Section 467 of the District of Columbia Self-Govemment and 
Governmental Reorganization Act (D.C. Code Sec. 47-326.1.) is 
amended by striking all after the heading and inserting the follow-
ing: 
"SEC. 467. (a) IN GENERAL.—^An act of the Council authorizing 
the issuance of general obligation bonds or notes under section 
461(a), section 471(a), section 472(a), or section 475(a) may create 
a security interest in any District revenues as additional security 
for the payment of the bonds or notes authorized by such act. 
"(b) CONTENTS OF ACTS.—^Any such act creating a security 
interest in District revenues may contain provisions (which may 
be part of the contract with the holders of such bonds or notes)— 
"(1) describing the particular District revenues which are 
subject to such security interest; 
"(2) creating a reasonably required debt service reserve 
fund or any other special fund; 
"(3) authorizing the Mayor of the District to execute a 
trust indenture securing the bonds or notes; 
"(4) vesting in the trustee under such a trust indenture 
such properties, rights, powers, and duties in trust as may 
be necessary, convenient, or desirable; 
"(5) authorizing the Mayor of the District to enter into 
and amend agreements concerning— 
"(A) the custody, collection, use, disposition, security, 
investment, and pajmient of the proceeds of the bonds 
or notes and the District revenues which are subject to 
such security interest; and 
"(B) the doing of any act (or the refraining from doing 
any act) that the District would have the right to do in 
the absence of such an agreement; 
"(6) prescribing the remedies of the holders of the bonds 
or notes in the event of a default; and 
"(7) authorizing the Mayor to take any other actions in 
connection with the issuance, sale, delivery, security, and pay-
ment of the bonds or notes. 
"(c) TIMING AND PERFECTION OF SECURITY INTERESTS.—^Not-
withstanding article 9 of title 28 of the District of Columbia Code, 
any security interest in District revenues created under subsection 
(a) shall be valid, binding, and perfected from the time such security 
interest is created, with or without the physical delivery of any 
funds or any other property and with or without any further action. 
Such security interest shall be valid, binding, and perfected whether 
or not any statement, document, or instrument relating to such 
security interest is recorded or filed. The lien created by such 
security interest is valid, binding, and perfected with respect to 
any individual or legal entity having claims against the District, 
whether or not such individual or legal entity has notice of such 
lien. 
"(d) OBLIGATIONS AND EXPENDITURES NOT SUBJECT TO APPRO-
PRIATION.—^The fourth sentence of section 446 shall not apply to 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 771 
any obligation or expenditure of any District revenues to secure 
any general obligation bond or note under subsection (a).". 
SEC. 11506. AMENDMENT TO SECTION 472 (RELATmG TO BORROWING 
IN ANTICIPATION OF REVENUES). 
Section 472 of the District of Columbia Self-Govemment and 
Governmental Reorganization Act (DC Code, sec. 47-328) is amend-
ed by striking all after the heading and inserting the following: 
"SEC. 472. (a) IN GENERAL.—In anticipation of the collection 
or receipt of revenues for a fiscal year, the Council may by act 
authorize the issuance of general obligation notes for such fiscal 
year, to be known as revenue anticipation notes. 
"(b) LIMIT ON AGGREGATE NOTES OUTSTANDING.—The total 
amount of all revenue anticipation notes issued under subsection 
(a) outstanding at any time during a fiscal year shall not exceed 
20 percent of the total anticipated revenue of the District for such 
fiscal year, as certified by the Mayor under this subsection. The 
Certification. 
Mayor shall certify, as of a date which occurs not more than 
15 days before each original issuance of such revenue anticipation 
notes, the total anticipated revenue of the District for such fiscal 
year. 
"(c) 
PERMITTED 
OUTSTANDING 
DURATION.—^Any 
revenue 
anticipation note issued under subsection (a) may be renewed. 
Any such note, including any renewal note, shall be due and payable 
not later than the last day of the fiscal year during which the 
note was originally issued. 
"(d) EFFECTIVE DATE OF AUTHORIZATION ACTS; PAYMENTS NOT 
SUBJECT TO APPROPRIATION.— 
"(1) EFFECTIVE DATE.—^Notwithstanding section 602(c)(1), 
any act of the Council authorizing the issuance of revenue 
anticipation notes under subsection (a) shall take effect— 
"(A) if such act is enacted during a control year (as 
defined in section 305(4) of the District of Columbia Finan-
cial Responsibility and Management Assistance Act of 
1995), on the date of approval by the District of Columbia 
Financial 
Responsibility 
and 
Management 
Assistance 
Authority; or 
"(B) if such act is enacted during any other year, 
on the date of enactment of such act. 
"(2) 
PAYMENTS 
NOT SUBJECT TO APPROPRIATION.—^The 
fourth sentence of section 446 shall not apply to any amount 
obligated or expended by the District for the payment of the 
principal of, interest on, or redemption premium for any reve-
nue anticipation note issued under subsection (a).". 
SEC. 11507. ADDITION OF NEW SECTION 475 (RELATING TO GENERAL 
OBLIGATION BOND ANTICIPATION NOTES). 
(a) IN GENERAL.—Subpart 2 of part E of title IV of the District 
of Columbia Self-Govemment and Grovernmental Reorganization 
Act is amended by adding at the end the following new section: 
"BOND ANTICIPATION NOTES 
"SEC. 475. (a) AUTHORIZING ISSUANCE.— 
"(1) IN GENERAL.—In anticipation of the issuance of general 
obligation bonds, the Council may by act authorize the issuance 
of general obligation notes to be Imown as bond anticipation 
notes in accordance with this section. 
I l l STAT. 772 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) PURPOSES; PERMITTING ISSUANCE OF GENERAL OBLIGA-
TION BONDS TO COVER INDEBTEDNESS.—^The proceeds of bond 
anticipation notes issued under this section shall be used for 
the purposes for which general obligation bonds may be issued 
under section 461, and such notes shall constitute indebtedness 
which may be refunded through the issuance of general obliga-
tion bonds under such section. 
"(b) MAXIMUM ANNUAL DEBT SERVICE AMOUNT.—^The Act 
of 
the Council authorizing the issuance of bond anticipation notes 
shall set forth for the bonds anticipated by such notes an estimated 
maximum annual debt service amount based on an estimated sched-
ule of annual principal pajnnents and an estimated schedule of 
annusd interest payments (based on an estimated maximum average 
annual interest rate for such bonds over a period of 30 years 
from the earlier of the date of issuance of the notes or the date 
of original issuance of prior notes in anticipation of those bonds). 
Such estimated maximum annual debt service amount as estimated 
at the time of issuance of the original bond anticipation notes 
shall be included in the calculation required by section 603(b) 
while such notes or renewal notes are outstanding. 
"(c) PERMITTED OUTSTANDING DURATION.—^Any bond anticipa-
tion note, including any renewal note, shall be due and payable 
not later than the last day of the third fiscal year following the 
fiscal year during which the note was originally issued. 
"(d) GENERAL AUTHORITY OF COUNCIL.—If provided for in Act 
of the Council authorizing such an issue of bond anticipation notes, 
bond anticipation notes may be issued in succession, in such 
amounts, at such times, and bearing interest rates within the 
permitted maximum authorized by such Act. 
"(e) EFFECTIVE DATE OF AUTHORIZATION ACTS; PAYMENTS NOT 
SUBJECT TO APPROPRIATION.— 
"(1) EFFECTIVE DATE.—^Notwithstanding section 602(c)(1), 
any act of the Council authorizing the renewal of bond anticipa-
tion notes under subsection (c) or the issuance of general obliga-
tion bonds under section 461(a) to refund any bond anticipation 
notes shall take effect— 
"(A) if such act is enacted during a control year (as 
defined in section 305(4) of the District of Columbia Finan-
cial Responsibility and Management Assistance Act of 
1995), on the date of approval by the District of Columbia 
Financial 
Responsibility 
and 
Management 
Assistance 
Authority; or 
"(B) if such act is enacted during any other year, 
on the date of enactment of such act. 
"(2) PAYMENT NOT SUBJECT TO APPROPRIATION.—^The fourth 
sentence of 446 shall not apply to any amount obligated or 
expended by the District for the pa3mient of the principal of, 
interest on, or redemption premium for any bond anticipation 
note issued under this section.". 
(b) CLERICAL AMENDMENT.—^The table of contents for the Dis-
trict of Columbia Self-Govemment and Grovernmental Reorganiza-
tion Act is amended by adding at the end of the items relating 
to subpart 2 of part E of title IV the following new item: 
"Sec. 475. Bond anticipation notes.". 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 773 
SEC. 11508. AMENDMENT TO SECTION 490 (RELATING TO REVENUE 
BONDS AND OTHER OBLIGATIONS). 
Section 490 of the District of Columbia Self-Govemment and 
Governmental Reorganization Act (DC Code, sec. 47-334), as 
amended by section 2 of the District of Columbia Water £ind Sewer 
Authority Act of 1996, is amended— 
(1) in subsection (a)— 
(A) by amending paragraphs (1) through (3) to read 
as follows: 
"(a)(1) Subject to paragraph (2), the Council may by act or 
by resolution authorize the issuance of taxable and tax-exempt 
revenue bonds, notes, or other obligations to borrow money to 
Ifinance, refinance, or reimburse and to assist in the financing, 
refinancing, or reimbursing of or for capital projects and other 
undertakings by the District or by any District instrumentality, 
or on behalf of any qualified applicant, including capital projects 
or undertakings in the areas of housing; health facilities; transit 
and utility facilities; manufacturing; sports, convention, and enter-
tainment facilities; recreation, tourism and hospitality facilities; 
facilities to house and equip operations of the District government 
or its instrumentalities; public infrastructure development and 
redevelopment; elementary, secondary and college and university 
facilities; educational programs which provide loans for the pajnnent 
of educational expenses for or on behalf of students; facilities used 
to house and equip operations related to the study, development, 
application, or production of innovative commercial or industrial 
technologies and social services; water and sewer facilities (as 
defined in paragraph (5)); pollution control facilities; solid and 
hazardous waste disposal facilities; parking facilities, industrial 
and commercial development; authorized capital expenditures of 
the District; and any other property or project that will, as deter-
mined by the Council, contribute to the health, education, safety, 
or welfare, of, or the creation or preservation of jobs for, residents 
of the District, or to economic development of the District, and 
any facilities or property, real or personal, used in connection with 
or supplementing any of the foregoing; lease-purchase financing 
of any of the foregoing facilities or property; and any costs related 
to the issuance, carrying, security, liquidity or credit enhancement 
of or for revenue bonds, notes, or other obligations, including, 
capitalized interest and reserves, and the costs of bond insurance, 
letters of credit, and guarsinteed investment, forward purchase, 
remarketing, auction, and swap agreements. Any such financing, 
refinancing, or reimbursement may be effected by loans made 
directly or indirectly to any individual or legal entity, by the pur-
chase of any mortgage, note, or other security, or by the purchase, 
lease, or sale of any property. 
"(2) Any revenue bond, note, or other obligation issued under 
paragraph (1) shall be a special obligation of the District and 
shall be a negotiable instrument, whether or not such revenue 
bond, note, or other obligation is a security as defined in section 
28:8-102(l)(a) of title 28 of the District of Columbia Code. 
"(3) Any revenue bond, note, or other obligation issued under 
paragraph (1) shall be paid and secured (as to principal, interest, 
and Einy premium) as provided by the act or resolution of the 
Council authorizing the issuance of such revenue bond, note, or 
other obligation. Any act or resolution of the Council, or any delega-
tion of Council authority under subsection (a)(6), authorizing the 
Ill STAT. 774 
PUBLIC LAW 105-33—AUG. 5, 1997 
issuance of revenue bonds, notes, or other obligations may provide 
for (A) the pajrment of such revenue bonds, notes, or other obliga-
tions from any available revenues, assets, property (including water 
and sewer enterprise fund revenues, assets, or other property in 
the case of bonds, notes, or obligations issued with respect to 
water and sewer facilities), and (B) the securing of such revenue 
bond, note, or other obligation by the mortgage of real property 
or the creation of a security interest in available revenues, assets, 
or other property (including water and sewer enterprise fund reve-
nues, assets, or other property in the case of bonds, notes, or 
obligations issued with respect to water and sewer facilities).", 
(B) by amending paragraph (4)(A) to read as follows: 
"(4)(A) In authorizing the issuance of any revenue bond, 
note, or other obligation under paragraph (1), the Council may 
enter into, or authorize the Mayor to enter into, any agreement 
concerning the acquisition, use, or disposition of any available 
revenues, assets, or property. Any such agreement may create 
a security interest in any available revenues, assets, or prop-
erty, may provide for the custody, collection, security, invest-
ment, and payment of any available revenues (including any 
funds held in trust) for the payment of such revenue bond, 
note, or other obligation, may mortgage any property, may 
provide for the acquisition, construction, maintenance, and dis-
position of the undertaking financed or refinanced using the 
proceeds of such revenue bond, note, or other obligation, and 
may provide for the doing of any act (or the refraining from 
doing of any act) which the District has the right to do in 
the absence of such agreement. Any such agreement may be 
assigned for the benefit of, or made a part of any contract 
with, any holder of such revenue bond, note, or other obligation 
issued under paragraph (1).", and 
(C) by adding at the end the following new paragraph: 
"(6)(A) The Council may by act delegate to any District 
instrumentality the authority of the Council under subsection 
(a)(1) to issue taxable or tax-exempt revenue bonds, notes, 
or other obligations to borrow money for the purposes specified 
in this subsection. For purposes of this paragraph, the Council 
shall specify for what undertakings revenue bonds, notes, or 
other obligations may be issued under each delegation made 
pursuant to this paragraph. Any District instrumentality may 
exercise the authority and the powers incident thereto delegated 
to it by the Council as described in the first sentence of this 
paragraph only in accordance with this paragraph and shall 
be consistent with this paragraph and the terms of the delega-
tion. 
"(B) Revenue bonds, notes, or other obligations issued by 
a District instrumentality under a delegation of authority 
described in subparagraph (A) shall be issued by resolution 
of that instrumentality, and any such resolution shall not be 
considered to be an act of the Council. 
"(C) Nothing in this paragraph shall be construed as 
restricting, impairing, or superseding the authority otherwise 
vested by law in any District instrumentality."; 
(2) by amending subsection (b) to read as follows: 
"(b) No property owned by the United States may be mortgaged 
or made subject to any security interest to secure any revenue 
bond, note, or other obligation issued under subsection (a)(1)."; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 775 
(3) by eimending subsection (c) to read as follows: 
"(c) Any and all such revenue bonds, notes, or other obligations 
issued under subsection (a)(1) shall not be general obligations of 
the District, shall not be a pledge of or involve the faith and 
credit or taxing power of the District (other than with respect 
to any dedicated taxes) and shall not constitute a debt of the 
District, and shall not constitute lending of the public credit for 
private undertakings for purposes of section 602(a)(2)."; 
(4) by amending subsection (f) to read as follows: 
"(f) The fourth sentence of section 446 shall not apply to— 
"(1) any amount (including the amount of any accrued 
interest or premium) obligated or expended from the proceeds 
of the sale of any revenue bond, note, or other obligations 
issued under subsection (a)(1); 
"(2) any amount obligated or expended for the payment 
of the principal of, interest on, or any premium for any revenue 
bond, note, or other obligation issued under subsection (a)(1); 
"(3) any amount obligated or expended pursuant to provi-
sions made to secure any revenue bond, note, or other obliga-
tions issued under subsection (a)(1); and 
"(4) any Eimount obligated or expended pursuant to commit-
ments made in connection with the issuance of revenue bonds, 
notes, or other obligations for repair, maintenance, and capital 
improvements relating to undertakings financed through any 
revenue bond, note, or other obligation issued under subsection 
(a)(1)."; and 
(5) by adding at the end the following new subsections: 
"(i) The revenue bonds, notes, or other obligations issued under 
subsection (a)(1) are not general obligation bonds of the District 
government and shall not be included in determining the aggregate 
amount of all outstanding obligations subject to the limitation speci-
fied in section 603(b). 
"(j) The issuEince of revenue bonds, notes, or other obligations 
by the District where the ultimate obligation to repay such revenue 
bonds, notes, or other obligations is that of one or more non-
governmental persons or entities may be authorized by resolution 
of the Council. The issuance of all other revenue bonds, notes, 
or other obligations by the District shall be authorized by act 
of the Council. 
"(k) During any control period (as defined in section 209 of 
the District of Columbia Financial Responsibility and Management 
Assistance Act of 1995), any act or resolution of the Council 
authorizing the issuance of revenue bonds, notes, or other obliga-
tions under subsection (a)(1) shall be submitted to the District 
of Columbia Finsincial Responsibility and Management Assistance 
Authority for certification in accordance with section 204 of that 
Act. Any certification issued by the Authority during a control 
period shall be effective for purposes of this subsection for revenue 
bonds, notes, or other obligations issued pursuant to such act or 
resolution of the Council whether the revenue bonds, notes, or 
other obligations are issued during or subsequent to that control 
period. 
"(1) The following provisions of law shall not apply with respect 
to property acquired, held, and disposed of by the District in accord-
ance with the terms of any lease-purchase financing authorized 
pursuant to subsection (aXl): 
I l l STAT. 776 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(1) The Act entitled 'An Act authorizing the sale of certain 
real estate in the District of Columbia no longer required for 
public purposes', approved August 5, 1939 (53 Stat. 1211; DC 
Code sec. 9-401 et seq.). 
"(2) Subchapter III of chapter 13 of title 16, District of 
Columbia Code. 
"(3) Any other provision of District of Columbia law that 
prohibits or restricts lease-purchase financing, 
"(m) For purposes of this section, the following definitions shall 
apply: 
'(1) The term 'revenue bonds, notes, or other obligations' 
means special fund bonds, notes, or other obligations (including 
refunding bonds, notes, or other obligations) used to borrow 
money to finance, assist in financing, refinance, or repay, 
restore or reimburse moneys used for purposes referred to 
in subsection (aXl) the principal of and interest, if any, on 
which are to be paid and secured in the manner described 
in this section and which are special obligations and to which 
the full faith and credit of the District of Columbia is not 
pledged. 
"(2) The term 'District instrumentality' means any agency 
or instrumentality (including an independent agency or 
instrumentality), authority, commission, board, department, 
division, office, body, or officer of the District of Columbia 
government duly established by an act of the Council or by 
the laws of the United States, whether established before or 
afi^r the date of enactment of the District of Columbia Bond 
Financinglmprovements Act of 1997. 
"(3) The term 'available revenues' means gross revenues 
and receipts, other than general fund tax receipts, lawfully 
available for the purpose and not otherwise exclusively commit-
ted to another purpose, including enterprise funds, grants, sub-
sidies, contributions, fees, dedicated taxes and fees, investment 
income and proceeds of revenue bonds, notes, or other obliga-
tions issued under this section. 
"(4) The term 'enterprise fund' means a fund or account 
' 
for operations that are financed or operated in a manner similar 
to private business enterprises, or established so that separate 
determinations may more readily be made periodically of reve-
nues earned, expenses incurred, or net income for management 
control, accountability, capital maintenance, public poucy, or 
other purposes. 
"(5) The term 'dedicated taxes and fees' means taxes and 
surtaxes, portions thereof, tax increments, or payments in lieu 
of taxes, and fees that are dedicated pursuant to law to the 
payment of the debt service on revenue bonds, notes, or other 
obligations authorized under this section, the provision and 
maintenance of reserves for that purpose, or the provision 
of working capital for or the maintenance, repair, reconstruction 
or improvement of the undertaking to which the revenue bonds, 
notes, or other obligations relate. 
"(6) The term 'tax increments' means taxes, other than 
the special tax provided for in section 481 and pledged to 
the payment of general obligation indebtedness of the District, 
allocable to the increase in taxable value of real property or 
the increase in sales tax receipts, each from a certain date 
or dates, in prescribed areas, to the extent that such increases 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 777 
are not otherwise exclusively committed to another purpose 
and as further provided for pursuant to an act of the Council.". 
SEC. 11509. CONFORMING AMENDMENT. 
The fourth sentence of section 446 of the District of Columbia 
Self-Govemment and Governmental Reorganization Act (DC Code, 
sec. 47-304) is amended to read as follows: "Except as provided 
in section 467(d), section 471(c), section 472(d)(2), section 475(e)(2), 
section 483(d), and section 490(f), (g), and (h)(3), no amount may 
be obligated or expended by any officer or employee of the District 
of Columbia government unless such amount has been approved 
by Act of Congress, and then only according to such Act.". 
Subtitle G—District of Columbia 
Government Budget 
SEC. 11601. ELIMINATION OF THE ANNUAL FEDERAL PAYMENT TO 
THE DISTRICT OF COLUMBIA-
(a) ELIMINATION OF PAYMENT.— 
(1) IN GENERAL.—Title V of the District of Columbia Self-
Government and Governmental Reorganization Act (DC Code, 
sec. 47-3406 et seq.) is hereby repealed. 
(2) CLERICAL AMENDMENT.—The table of contents of such 
Act is amended by striking the items relating to title V. 
(b) CONFORMING AMENDMENTS.— 
(1) HOME RULE ACT.—^The District of Columbia Self-Govern-
ment and Grovernmental Reorganization Act is amended as 
follows: 
(A) In section 103(10) (DC Code, sec. 1-202(10)), by 
striking "the annual Federal payment to the District 
authorized under title V,". 
(B) In section 483 (DC Code, sec. 47-331.2), by striking 
subsection (c). 
(C) In section 603(c) (DC Code, sec. 47-313(c)), by 
striking the fourth sentence. 
(D) In section 603(f)(1)/(DC Code, sec. 47-313(f)(1)), 
by striking "(other than the |ourth sentence)". 
(2) FINANCIAL RESPONSIBILITY AND MANAGEMENT ASSIST-
ANCE ACT.—^The District of Columbia Financial Responsibility 
and Management Assistance Act of 1995 is amended— 
(A) by striking section 205 (DC Code, sec. 47-392.5); 
and 
(B) in the table of contents for such Act, by striking 
the item relating to section 205. 
(3) PROCUREMENT PRACTICES ACT.—Section 208(a)(2) of the 
District of Columbia Procurement Practices Act of 1985 (DC 
Code, sec. 1-1182.8(a)(2)) is amended— 
(1) by striking subparagraph (B); 
(2) by redesignating subparagraph (C) as subparagraph 
(B); and 
(3) in subparagraph (B), as so redesignated, by striking 
"Amounts deposited in the dedicated fund described in subpara-
graph (B)" and inserting "Amounts appropriated for the Inspec-
tor General". 
39-194 O - 97 - 26 ; QL 3 Part 1 
I l l STAT. 778 
PUBLIC LAW 105-33—AUG. 5, 1997 
(4) DISTRICT OF COLUMBIA REVENUE ACT OF 1939.—The 
District of Columbia Revenue Act of 1939 (DC Code, sec. 47-
3401 et seq.) is amended as follows: 
(A) In section 603(b) (as redesignated by section 
11402)— 
(i) in paragraph (5), by adding "and" at the end; 
(ii) in paragraph (6), by striking "; and" and insert-
ing a period; and 
(iii) by striking paragraph (7). 
(B) In section 603(c) (as redesignated by section 11402), 
by amending subparagraph (C) to read as follows: 
"(C) APPLICABLE LIMIT DEFINED.—In this paragraph, 
the 'applicable limit' for a fiscal year is equal to 15 percent 
of the total anticipated revenues of the District government 
for such fiscal year, as certified by the Mayor at the time 
of the Mayor's requisition for an advance.". 
(C) In section 605(b) (as redesignated by section 
11402)— 
(i) by striking paragraph (1) and redesignating 
paragraphs (2) through (4) as paragraphs (1) through 
(3); 
(ii) in paragraph (1) (as so redesignated), by strik-
ing "OTHER" in the heading; 
(iii) in paragraph (1) (as so redesignated), by strik-
ing "If, after" and all that follows through "the Sec-
retary" and inserting 'The Secretary"; 
(iv) in paragraph (1) (as so redesignated), by strik-
ing "to individuals," and inserting "to individuals 
(including any Federal contribution authorized to be 
appropriated pursuant to section 11601(c)(2) of the Bal-
anced Budget Act of 1997),"; 
(v) in paragraph (2) (as so redesignated), by strik-
ing "paragraphs (1) and (2)" and inserting "paragraph 
(l)";and 
(vi) in paragraph (3) (as so redesignated), by strik-
ing "(1) through (3)" and inserting "(1) and (2)". 
(c) FEDERAL CONTRIBUTION TO OPERATIONS OF GOVERNMENT 
OF NATION'S CAPITAL.— 
(1) FINDINGS.—Congress finds as follows: 
(A) Congress has restricted the overall size of the Dis-
trict of Columbia's economy by limiting the height of build-
ings in the District and imposing other limitations relating 
to the Federal presence in the District. 
(B) Congress has imposed limitations on the District's 
ability to tax income earned in the District of Columbia. 
(C) The unique status of the District of Columbia as 
the seat of the government of the United States imposes 
unusual costs and requirements which are not imposed 
on other jurisdictions and many of which are not directly 
reimbursed by the Federal government. 
(D) These factors play a significant role in causing 
the relative tax burden on District residents to be greater 
than the burden on residents in other jurisdictions in the 
Washington, D.C. metropolitan area and in other cities 
of comparable size. 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 7 7 ^ 
(2) FEDERAL CONTRIBUTION.—^There is authorized to be Appropriation 
appropriated a Federal contribution towards the costs of the authorization, 
operation of the government of the Nation's capital— 
(A) for fiscal year 1998, $190,000,000; and 
(B) for each subsequent fiscal year, such amount as 
may be necessary for such contribution. 
In determining the amount appropriated pursuant to the 
authorization under this paragraph, Congress shall take into 
account the findings described in paragraph (1). 
SEC. 11602. REQUIREMENT THAT THE DISTRICT OF COLUMBIA BAL-
ANCE ITS BUDGET IN FY 1998. 
(a) IN GENERAL.—Section 201(c)(1) of the District of Columbia 
Financial Responsibility and Management Assistance Act of 1995 
is amended— 
(1) in subparagraph (A), by striking "1999" and inserting 
"1998"; and 
(2) in subparagraph (B), by striking "1996, 1997, and 1998," 
and inserting "1996 and 1997,". 
(b) CONFORMING AMENDMENT.—Section 603(f) of the District 
of Columbia Self-Govemment and Governmental Reorganization 
Act (DC Code, sec. 47-313(0) is amended by striking "Act of 1995)— 
" and all that follows through "(2) the Council" and inserting "Act 
of 1995), the Council". 
SEC. 11603. PERMITTING EXPEDITED SUBMISSION AND APPROVAL OF 
CONSENSUS BUDGET AND FINANCIAL PLAN. 
(a) FINDINGS.—Congress finds the following: 
(1) The District of Columbia Financial Responsibility and 
Management Assistance Act (hereafter in this subsection 
referred to as the "Act") was structured as to preserve the 
maximum prerogatives of each branch of elected self-govern-
ment consistent with returning the District of Columbia to 
full financial stability and health. 
(2) The Act was intended to eliminate unnecessary bureau-
cratic barriers and procedures throughout the District govern-
ment, including the budget process. 
(3) Preservation of home rule and self-government are 
consistent with cooperation between elected officisds and the 
Authority in drawing the annual budget and other matters 
affecting the District of Columbia government, and are pref-
erable to achieve greater efficiency, communication among the 
parties, and avoidance of conflict and delay. 
(b) IN GENERAL.—Section 202 of the District of Columbia Finan-
cial Responsibility and Management Assistance Act of 1995 is 
amended by adding at the end the following new subsection: 
"(i) EXPEDITED SUBMISSION AND APPROVAL OF CONSENSUS 
BUDGET AND FINANCIAL PLAN.—^Notwithstanding any other provi-
sion of this section, if the Mayor, the Council, and the Authority 
jointly develop a financial plan and budget for the fiscal year 
which meets the requirements applicable under section 201 and 
which the Mayor, Council, and Authority certify reflects a consensus 
among them— 
"(1) such financial plan and budget shall serve as the 
budget of the District government for the fiscal year adopted 
by the Council under section 446 of the District of Columbia 
Self-Government and Governmental Reorganization Act; and 
I l l STAT. 780 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) the Mayor shall transmit the financial plan and budget 
to the President and Congress under such section.", 
(c) EFFECTIVE DATE.—^The amendment made by subsection (b) 
shall apply with respect to fiscal years beginning with fiscal year 
1998. 
SEC. 11604. INCREASE IN MAXIMUM AMOUNT OF PERMITTED DISTRICT 
BORROWING. 
Section 603(b) of the District of Columbia Self-Grovemment 
and Governmental Reorganization Act (DC Code, sec. 47-313(b)) 
is amended by striking "14 per centum" each place it appears 
in paragraph (1) and paragraph (3) and inserting "17 percent". 
Subtitle H—Miscellaneous Provisions 
CHAPTER 1—REGULATORY REFORM IN THE DISTRICT 
OF COLUMBIA 
SEC. 11701. REVIEW AND REVISION OF REGULATIONS AND PERMIT 
AND APPLICATION PROCESSES. 
(a) REVIEW OF CURRENT REGULATIONS BY AUTHORITY.— 
(1) IN GENERAL.—Not later than 6 months after the date 
of the enactment of this title, the District of Columbia Financial 
Responsibility and Management Assistance Authority shall 
complete a review of regulations of the District of Columbia 
in effect as of the date of the enactment of this title and 
analyze the extent to which such regulations unnecessarily 
and inappropriately impair economic development in the Dis-
trict of Columbia and the financial stability and management 
efficiency of the District of Columbia government. To the great-
est extent possible, such review shall take into account the 
work and recommendations of the Business Regulatory Reform 
Commission pursuant to the Business Regulatory Reform 
Commission Act of 1994 (DC Code, sec. 2-4101 et seq.) and 
other existing and ongoing public and private regulatory reform 
efforts. The Authority shall transmit the findings of its review 
to the Mayor, Council, and Congress. 
(2) REVISION.—Based on the review conducted under para-
graph (1) and taking into account actions by the Council and 
the Executive Branch of the District of Columbia government, 
the Authority shall take such additional actions as it considers 
appropriate to repeal or revise the regulations of the District 
of Columbia, in accordance with (and subject to the terms 
and conditions described in) section 207 of the District of Colum-
bia Financial Responsibility and Management Assistance Act 
of 1995. 
(b) SURVEY AND REVISION OF PERMIT AND APPLICATION PROC-
ESSES.— 
(1) IN GENERAL.—Not later than 6 months after the date 
of the enactment of this title, the Authority shall complete 
a review of the current processes of the District of Columbia 
for obtaining permits and applications of all tjrpes and analyze 
the extent to which such processes and their completion times 
vary from the processes applicable in other jurisdictions. To 
the greatest extent possible, such review shall take into account 
the work and recommendations of the Business Regulatory 
Reform Commission pursuant to the Business Regulatory 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 781 
Reform Commission Act of 1994 (DC Code, sec. 2-4101 et 
seq.) and other existing and ongoing public and private regu-
latory reform efforts. The Authority shall transmit the findings 
of its review to the Mayor, Council, and Congress. 
(2) REVISION.—Based on the review conducted under para-
graph (1) and taking into account actions by the Council and 
the Executive Branch of the District of Columbia government, 
the Authority shall take such additional actions as it considers 
appropriate to repeal or revise the permit and application proc-
esses (and their completion times) of the District of Columbia, 
in accordance with (and subject to the terms and conditions 
described in) section 207 of the District of Columbia Financial 
Responsibility and Management Assistance Act of 1995. In 
carrying out such repeals or revisions, the Authority shall seek 
to ensure that the average time required to obtain a permit 
or application from the District of Columbia is consistent with 
the average time for other similar jurisdictions in the United 
States. 
(c) REPORTS TO CONGRESS.—^Upon the expiration of the 6-month 
period which begins on the date of the enactment of this title 
and on a quarterly basis theresifter, the Authority shall submit 
a report to Congress describing the steps taken to carry out the 
requirements of this section and the effectiveness of the regulatory, 
permit, and application processes of the District of Columbia. 
SEC. 11702. REPEAL OF CLEAN AIR COMPLIANCE FEE ACT OF 1994. 
(a) REPEAL.— 
(1) IN GENERAL.—Effective March 21, 1995, the Clean Air Effective date. 
Compliance Fee Act of 1994 is hereby repealed (DC Code, 
sec. 47-2731 et seq.), except as provided in subsection (b). 
(2) CONFORMING AMENDMENT.—Section 2(b)(2) of the Stable 
and Reliable Source of Revenues for WMATA Act of 1982 (DC 
Code, sec. l-2466(b)(2)) is amended by striking subparagraph 
(H). 
(b) EXCEPTION FOR PROVISIONS EXEMPTING DELIVERY OF NEWS-
PAPERS FROM APPLICATION OF CERTAIN TAXES.—Subsection (a) shall 
not apply to section 14 of the Clean Air Compliance Fee Act of 
1994. 
SEC. 11703. REPEAL REQUIREMENT FOR CONGRESSIONAL AUTHORIZA-
TION OF CERTAIN MERGERS INVOLVING DISTRICT OF 
COLUMBIA PUBLIC UTILITY CORPORATIONS. 
Section 11 of the Act of March 4, 1913 (37 Stat. 1006; DC 
Code, sec. 43-802) is hereby repealed. 
SEC. 11704. EXEMPTION OF CERTAIN CONTRACTS FROM COUNCIL 
REVIEW. 
(a) IN GENERAL.—Section 451 of the District of Columbia Self-
Govemment and Gk)vernmental Reorganization Act (sec. 1-1130, 
D.C. Code) is amended by adding at the end the following new 
subsection: 
"(d) EXEMPTION FOR CERTAIN CONTRACTS.—^The requirements 
of this section shall not apply with respect to any of the following 
contracts: 
"(1) Any contract entered into by the Washington Conven-
tion Center Authority for preconstruction activities, project 
management, design, or construction. 
I l l STAT. 782 
PUBLIC LAW 105-33—AUG. 5, 1997 
"(2) Any contract entered into by the District of Columbia 
Water and Sewer Authority established pursuant to the Water 
and Sewer Authority Establishment and Department of Public 
Works Reorganization Act of 1996, other than contracts for 
the sale or lease of the Blue Plains Wastewater Treatment 
Plant. 
"(3) At the option of the Council, any contract for a highway 
improvement project carried out under title 23, United States 
Code.". 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply with respect to contracts entered into on or after the 
date of the enactment of this title. 
CHAPTER 2—OTHER MISCELLANEOUS PROVISIONS 
SEC. 11711. REVISIONS TO FINANCIAL RESPONSIBILITY AND MANAGE-
MENT ASSISTANCE ACT. 
(a) USE OF INTEREST ON ACCOUNTS OF AUTHORITY FOR BENEFIT 
OF DISTRICT.—Section 106 of the District of Columbia Financial 
Responsibility and Management Assistance Act of 1995 (DC Code, 
sec. 47-391.6) is amended by adding at the end the following 
new subsection: 
"(d) USE OF INTEREST ON ACCOUNTS FOR DISTRICT.— 
"(1) IN GENERAL.—^Notwithstanding any other provision of 
this Act, the Authority may transfer or otherwise expend any 
amounts derived from interest earned on accounts held by 
the Authority on behalf of the District of Columbia for such 
purposes as it considers appropriate to promote the economic 
stability and management efficiency of the District government. 
"(2) 
SPENDING NOT SUBJECT TO APPROPRIATION BY CON-
GRESS.—^Notwithstanding subsection (a)(3), any amounts trans-
ferred or otherwise expended pursuant to paragraph (1) may 
be obligated or expended without approval by Act of Congress.". 
(b) APPOINTMENT OF INSPECTOR GENERAL.—Section 303(e)(1) 
of such Act (DC Code, sec. 1-1182.8 not^) is amended by striking 
"the Authority" and inserting "the Mayor". 
SEC. 11712. COOPERATIVE AGREEMENTS BETWEEN FEDERAL AGEN-
CIES AND METROPOLITAN POLICE DEPARTMENT. 
(a) AGREEMENTS.—Each covered Federal law 
enforcement 
agency may enter into a cooperative agreement with the Metropoli-
tan Police Department of the District of Columbia to assist the 
Department in carrying out crime prevention and law enforcement 
activities in the District of Columbia, including taking appropriate 
action to enforce subsection (e) (except that nothing in such an 
agreement may be construed to grant authority to the United 
States to prosecute violations of subsection (e)). 
(b) CONTENTS OF AGREEMENT.—^An agreement entered into 
between a covered Federal law enforcement agency and the Metro-
politan Police Department pursuant to this section may include 
agreements relating to— 
(1) sending personnel of the agency on patrol in areas 
of the District of Columbia which immediately surround the 
area of the agency's jurisdiction, and granting personnel of 
the agency the power to arrest in such areas; 
(2) sharing and donating equipment and supplies with 
the Metropolitan Police Department; 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 783 
(3) operating on shared radio frequencies with the Metro-
politan Police Department; 
(4) permitting personnel of the agency to carry out process-
ing and papering of suspects they arrest in the District of 
Columbia; and 
(5) such other items as the agency and the Metropolitan 
Police Department may agree to include in the agreement. 
(c) COORDINATION WITH U.S. ATTORNEY'S OFFICE.—^Agreements 
entered into pursuant to this section shall be coordinated in advance 
with the United States Attorney for the District of Columbia. 
(d) 
COVERED 
FEDERAL 
LAW 
ENFORCEMENT 
AGENCIES 
DESCRIBED.—In this section, the term "covered Federal law enforce-
ment agency" means any of the following: 
(1) United States Capitol Police. 
(2) United States Marshals Service. 
(3) Library of Congress Police. 
(4) Bureau of Engraving and Printing Police Force. 
(5) Supreme Court Police. 
(6) Amtrak Police Department, 
(7) Department of Protective Services, United States Holo-
caust Museum. 
(8) Government Printing Office Police. 
(9) United States Park Police. 
(10) Bureau of Alcohol, Tobacco, and Firearms. 
(11) Drug Enforcement Administration. 
(12) Federal Bureau of Investigation. 
(13) Criminsd Investigation Division, Internal Revenue 
Service. 
(14) Department of the Navy Police Division, Naval District 
Washington. 
(15) Naval Criminal Investigative Service. 
(16) 11th Security Police Squadron, Boiling Air Force Base. 
(17) United States Army Military District of Washington. 
(18) United States Customs Service. 
(19) Immigration and Naturalization Service. 
(20) Postal Inspection Service, United States Postal Service. 
(21) Uniformed Division, United States Secret Service. 
(22) United States Secret Service. 
(23) National Zoological Part Police. 
(24) Federal Protective Service, General Services Adminis-
tration, Nationsd Capital Region. 
(25) Defense Protective Service, Department of Defense 
Washington Headquarters Services. 
(26) Office of Protective Services, Smithsonian Institution. 
(27) Office of Protective Services, National Gallery of Art. 
(28) United States Army Criminal Investigation Command, 
Department of the Army Washington District, 3rd Military 
Police Group. 
(29) Marine Corps Law Enforcement. 
(30) Department of State Diplomatic Security. 
(31) United States Coast Guard. 
(32) United States Postal Police. 
(e) CERTAIN PROHIBITED ACTIVITY.—Effective with respect to 
conduct occurring on or after the date of the enactment of this 
title, whoever in the District of Columbia knowingly and willfully 
obstructs any bridge connecting the District of Columbia and the 
Commonwealth of Virginia— 
Ill STAT. 784 
PUBLIC LAW 105-33—AUG. 5, 1997 
(1) shall be fined not less than $1,000 and not more than 
$5,000, and in addition may be imprisoned not more than 
30 days; or 
(2) if applicable, shall be subject to prosecution by the 
District of Columbia under the provisions of District law and 
regulation amended by the Safe Streets Anti-Prostitution 
Amendment Act of 1996 (D.C. Law 11-130). 
SEC. 11713. PERMITTING GARNISHMENT OF WAGES OF OFFICERS AND 
EMPLOYEES OF DISTRICT OF COLUMBIA GOVERNMENT. 
Section 2 of D.C. Law 2-14 (DC Code, sec. 1-516) is amended— 
(1) by striking "After July 25" and inserting "(a) After 
July 25"; and 
(2) by adding at the end the following new subsection: 
"(b) After October 1, 1997, wages salaries, annuities, retirement 
and disability benefits, and other remuneration based upon employ-
ment, or other income owed by, due from, and payable by the 
government of the District of Columbia to any individual shall 
be subject to attachment, garnishment, assignment, or withholding 
in accordance with subchapter III of chapter 5 of title 16 of the 
District of Columbia Code in the same manner and to the same 
extent as if the government of the District of Columbia were a 
private person,". 
SEC. 11714. PERMITTING EXCESS APPROPRIATIONS BY WATER AND 
SEWER AUTHORITY FOR CAPITAL PROJECTS. 
(a) IN GENERAL.—Section 445A of the District of Columbia 
Self-Govemment and Governmental Reorganization Act (DC Code, 
sec. 43-1691), as added by section 4(a) of the District of Columbia 
Water and Sewer Authority Act of 1996, is amended— 
(1) by striking "The District" and inserting "(a) IN GEN-
ERAL.—The District"; and 
(2) by adding at the end the following new subsection: 
"(b) PERMITTING EXPENDITURE OF EXCESS REVENUES FOR CAP-
ITAL 
PROJECTS IN EXCESS OF BUDGET.—Notwithstanding the 
amount appropriated for the District of Columbia Water and Sewer 
Authority for capital projects for a fiscal year, if the revenues 
of the Authority for the year exceed the estimated revenues of 
the Authority provided in the annual budget of the District of 
Columbia for the fiscal year, the Authority may obligate or expend 
an additional amount for capital projects during the year equal 
to the amount of such excess revenues.". 
(b) CONFORMING AMENDMENT.—The fourth sentence of section 
446 of such Act (DC Code, sec. 47-304), as amended by section 
2(c)(2) of the District of Columbia Water and Sewer Authority 
Act of 1996, is amended by striking "in section 467(d)" and inserting 
"in section 445A(b), section 467(d)". 
(c) EFFECTIVE DATE.—^The amendments made by this section 
shall apply with respect to fiscal years beginning on or after October 
1, 1996. 
40 use 138. 
SEC. 11715. REQUIRING CERTAIN FEDERAL OFFICIALS TO PROVIDE 
NOTICE BEFORE CARRYING OUT ACTIVITIES AFFECTING 
REAL PROPERTY LOCATED IN DISTRICT OF COLUMBIA. 
(a) HEADS OF FEDERAL AGENCIES.— 
(1) IN GENERAL.—Except as provided in subsection (d), the 
head of any Federal agency may not carry out any activity 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 785 
that affects real property located in the District of Columbia 
unless— 
(A) not later than 60 days before carrying out such 
activity, the head of the agency provides a notice describing 
such activity and the property affected to the Administrator 
of General Services and the Administrator of General Serv-
ices transmits such notice to the individuals described in 
subsection (c); and 
(B) the head of the agency provides the individuals 
described in subsection (c) with the opportunity to present 
oral or written comments on the activity to a representative 
of the head of the agency before the head of the agency 
carries out the activity. 
(2) FEDERAL AGENCY DEFINED.—In subsection (a), the term 
"Federal agency" means an executive department (as defined 
in section 101 of title 5, United States Code). 
(b) ARCHITECT OF THE CAPITOL.—Except as provided in sub-
section (d), the Architect of the Capitol may not carry out any 
activity that affects real property located in the District of Columbia 
unless— 
(1) not later than 60 days before carrying out such activity, 
the Architect provides a notice describing such activity and 
the property affected to the Committee on Transportation and 
Infrastructure of the House of Representatives and the Commit-
tee on Environment and Public Works of the Senate and such 
Committees transmit such notice to the individuals described 
in subsection (c); and 
(2) the Architect provides the individuals described in sub-
section (c) with the opportunity to present oral or written 
comments on the activity to a representative of the Architect 
before the Architect carries out the activity. 
(c) INDIVIDUALS DESCRIBED.—The individuals described in this 
paragraph (with respect to the activity and the real property 
involved) are the Mayor of the District of Columbia, the Chair 
of the Council of the District of Columbia, and the Chair of the 
Advisory Neighborhood Commission (as established pursuant to 
section 738 of the District of Columbia Self-Government and 
Governmental Reorganization Act) in whose neighborhood such 
property is located. 
(d) EXCEPTION FOR EMERGENCIES.—The head of a Federal 
agency or the Architect of the Capitol may waive the requirements 
of subsection (a) if the head of the agency or the Architect finds 
that compliance with the requirements would jeopardize the public 
safety or the natipnal security interests of the United States, but 
only if the head of the agency or the Architect— 
(1) certifies such finding and the reasons for such finding 
to the individuals described in subsection (c) and to Congress; 
and 
(2) at the earliest time practicable, provides such individ-
uals with the notice described in paragraph (1) of subsection 
(a) or (b) (whichever is applicable) and the opportunity to 
present comments described in paragraph (2) of subsection 
(a)or(b). 
(e) EFFECTIVE DATE.—Section 1 shall apply to activities carried 
out after the expiration of the 60-day period that begins on the 
date of the enactment of this title. 
I l l STAT. 786 
PUBLIC LAW 105-33—AUG. 5, 1997 
SEC. 11716. REPEAL TERM OF DEED OF CONVEYANCE TO CERTAIN 
HOSPITAL. 
Section 2 of the Act of June 6, 1952 (chapter 486; 66 Stat. 
288) (DC Code, sec. 32-121) is hereby repealed. 
SEC. 11717. SHORT TITLE OF HOME RULE ACT. 
(a) IN GENERAL.—Section 101 of the District of Columbia Self-
Govemment and Grovemmental Reorganization Act is amended by 
striking "District of Columbia Self-Govemment and Grovemmental 
Reorganization Act" and inserting "District of Columbia Home Rule 
Act". 
(b) REFERENCES IN LAW.—^Any reference in law or regulation 
to the District of Columbia Self-Govemment and Governmental 
Reorganization Act shall be deemed to be a reference to the District 
of Columbia Home Rule Act. 
CHAPTER 3—EFFECTIVE DATE; GENERAL PROVISIONS 
18 use 4246 
SEC. 11721. EFFECTIVE DATE. 
Except as otherwise provided in this title, the provisions of 
this title shall take effect on the later of October 1, 1997, or 
the day the District of Columbia Financial Responsibility and 
Management Assistance Authority certifies that the financial plan 
and budget for the District government for fiscal year 1998 meet 
the requirements of section 201(c)(1) of the District of Columbia 
Financial Responsibility and Management Assistance Act of 1995, 
as amended by this title. 
SEC. 11722. TECHNICAL ASSISTANCE. 
Any Federal agency (as defined in section 101 of title 31, 
United States Code) may provide, at the discretion of the head 
of the agency, technical assistance to, and training for, personnel 
of the Government of the District of Columbia. Such assistance 
shall be limited to assistance that does not interfere with the 
mission of the agency. The authority provided by this section shall 
expire three years from the date of enactment of this statute. 
SEC. 11723. LIABILITY. 
(a) DISTRICT OF COLUMBIA.—The District of Columbia shall 
defend any civil action or proceeding pending on the effective date 
of this title in any court or other official municipal, state, or federal 
forum against the District of Columbia or its officers, employees, 
or agents, and shall assume any liability resulting from such an 
action or proceeding. 
(b) STATE JUSTICE INSTITUTE.—^The State Justice Institute shall 
not be liable for damages or equitable relief on the basis of the 
activities or operations of any federal or District of Columbia agency 
which receives funds through the State Justice Institute pursuant 
to this title. 
(c) UNITED STATES.—^The United States, its officers, employees, 
and agents, and its agencies shall not— 
(1) be responsible for the payment of any judgments, liabil-
ities or costs resulting from any action or proceeding against 
the District of Columbia or its agencies, officers, employees, 
or agents; 
(2) be subject to liability in any case on the basis of the 
activities of the District of Columbia or its agencies, officers, 
employees, or agents; or 
PUBLIC LAW 105-33—AUG. 5, 1997 
111 STAT. 787 
(3) be subject to liability in any case under section 1979 
of the Revised Statutes (42 U.S.C. 1983). 
(d) LIMITATIONS.—Nothing in this section shall be construed 
as a waiver of sovereign immunity, or as limiting any other defense 
or immunity that would otherwise be available to the United States, 
the District of Columbia, their agencies, officers, employees, or 
agents. 
Approved August 5, 1997. 
LEGISLATIVE HISTORY—H.R. 2015 (S. 947): 
HOUSE REPORTS: Nos. 105-149 (Comm. on the Budget) and 105-217 (Comm. of 
Conference). 
CONGRESSIONAL RECORD, Vol. 143 (1997): 
June 25, considered and passed House; considered and passed Senate, 
amended, in lieu of S. 947. 
July 30, House agreed to conference report. Senate considered conference 
report. 
Jxily 31, Senate agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 33 (1997): 
Aug. 5, Presidential remai'ks and statement. 
Aug. 11, Presidential remarks and special message on line item veto. 
FEDERAL REGISTER, Vol. 62 (1997): 
Aug. 12, Cancellation of item pursuant to Line Item Veto Act.