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105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-149
_______________________________________________________________________


 
                      BALANCED BUDGET ACT OF 1997

                               ----------                              

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 2015

A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SUBSECTIONS (b)(1) AND 
   (c) OF SECTION 105 OF THE CONCURRENT RESOLUTION ON THE BUDGET FOR 
                            FISCAL YEAR 1998

                             together with

                     ADDITIONAL AND MINORITY VIEWS




 June 24, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed



                       BALANCED BUDGET ACT OF 1997


105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-149
_______________________________________________________________________


                      BALANCED BUDGET ACT OF 1997

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 2015

A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SUBSECTIONS (b)(1) AND 
   (c) OF SECTION 105 OF THE CONCURRENT RESOLUTION ON THE BUDGET FOR 
                            FISCAL YEAR 1998

                             together with

                     ADDITIONAL AND MINORITY VIEWS




 June 24, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


                        COMMITTEE ON THE BUDGET

                     JOHN R. KASICH, Ohio, Chairman
DAVID L. HOBSON, Ohio,               JOHN M. SPRATT, Jr., South 
  Speaker's Designee                     Carolina,
CHRISTOPHER SHAYS, Connecticut         Ranking Minority Member
WALLY HERGER, California             JIM McDERMOTT, Washington,
JIM BUNNING, Kentucky                  Leadership Designee
LAMAR S. SMITH, Texas                ALAN B. MOLLOHAN, West Virginia
DAN MILLER, Florida                  JERRY F. COSTELLO, Illinois
BOB FRANKS, New Jersey               PATSY T. MINK, Hawaii
NICK SMITH, Michigan                 EARL POMEROY, North Dakota
BOB INGLIS, South Carolina           LYNN C. WOOLSEY, California
SUSAN MOLINARI, New York             LUCILLE ROYBAL-ALLARD, California
JIM NUSSLE, Iowa                     LYNN N. RIVERS, Michigan
PETER HOEKSTRA, Michigan             LLOYD DOGGETT, Texas
JOHN SHADEGG, Arizona                BENNIE G. THOMPSON, Mississippi
GEORGE P. RADANOVICH, California     BENJAMIN L. CARDIN, Maryland
CHARLES F. BASS, New Hampshire       DAVID MINGE, Minnesota
MARK W. NEUMANN, Wisconsin           SCOTTY BAESLER, Kentucky
MIKE PARKER, Mississippi             KEN BENTSEN, Texas
BOB EHRLICH, Maryland                JIM DAVIS, Florida
GIL GUTKNECHT, Minnesota             BRAD SHERMAN, California
VAN HILLEARY, Tennessee              ROBERT A. WEYGAND, Rhode Island
KAY GRANGER, Texas                   EVA M. CLAYTON, North Carolina
JOHN E. SUNUNU, New Hampshire
JOSEPH PITTS, Pennsylvania

                           Professional Staff

                     Richard E. May, Staff Director
       Thomas S. Kahn, Minority Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              

                          Legislative Language

                                                                   Page
Title I--Committee on Agriculture................................     2
Title II--Committee on Banking and Financial Services............     5
Title III--Committee on Commerce--NonMedicare....................     6
Title IV--Committee on Commerce--Medicare........................    72
Title V--Committee on Education and the Workforce................   228
Title VI--Committee on Government Reform and Oversight...........   263
Title VII--Committee on Transportation and Infrastructure........   271
Title VIII--Committee on Veterans' Affairs.......................   272
Title IX--Committee on Ways and Means--NonMedicare...............   278
Title X--Committee on Ways and Means--Medicare...................   303

                            Report Language

Introduction.....................................................   495
Title I--Committee on Agriculture................................   505
Title II--Committee on Banking and Financial Services............   524
Title III--Committee on Commerce--NonMedicare....................   529
Title IV--Committee on Commerce--Medicare........................   645
Title V--Committee on Education and the Workforce................   977
Title VI--Committee on Government Reform and Oversight...........  1091
Title VII--Committee on Transportation and Infrastructure........  1125
Title VIII--Committee on Veterans' Affairs.......................  1135
Title IX--Committee on Ways and Means--NonMedicare...............  1197
Title X--Committee on Ways and Means--Medicare...................  1382
Miscellaneous House Report Requirements..........................  1619
Additional and Minority Views....................................  1625



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-149
_______________________________________________________________________


PROVIDING FOR RECONCILIATION PURSUANT TO SUBSECTIONS (B)(1) AND (C) OF 
SECTION 105 OF THE CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 
                                  1998

_______________________________________________________________________


 June 24, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Kasich, from the Committee on the Budget, submitted the following

                              R E P O R T

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                        [To accompany H.R. 2015]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Budget, to whom reconciliation 
recommendations were submitted pursuant to subsections (b)(1) 
and (c) of section 105 of House Concurrent Resolution 84, the 
concurrent resolution on the budget for fiscal year 1998, 
having considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Balanced Budget Act of 1997''.

SEC. 2. TABLE OF CONTENTS.

Title I--Committee on Agriculture.
Title II--Committee on Banking and Financial Services.
Title III--Committee on Commerce--NonMedicare.
Title IV--Committee on Commerce--Medicare.
Title V--Committee on Education and the Workforce.
Title VI--Committee on Government Reform and Oversight.
Title VII--Committee on Transportation and Infrastructure.
Title VIII--Committee on Veterans' Affairs.
Title IX--Committee on Ways and Means--NonMedicare.
Title X--Committee on Ways and Means--Medicare.

                   TITLE I--COMMITTEE ON AGRICULTURE

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 paragraphs (5) and (6) as 
        paragraphs (6) and (7), respectively; and
          (3) by inserting after paragraph (4) the following 
        new paragraph:
          ``(5) 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 
                        preceding June 30.
                          ``(ii) Covered individual.--The term 
                        `covered individual' means a food stamp 
                        recipient, or an individual denied 
                        eligibility for food stamp benefits 
                        solely due to paragraph (2), who--
                                  ``(I) is not eligible for an 
                                exception under paragraph (3);
                                  ``(II) does not reside in an 
                                area covered by a waiver 
                                granted under paragraph (4);
                                  ``(III) is not complying with 
                                subparagraph (A), (B), or (C) 
                                of paragraph (2);
                                  ``(IV) is not in the first 3 
                                months of eligibility under 
                                paragraph (2); and
                                  ``(V) is not receiving 
                                benefits under paragraph (6).
                  ``(B) General rule.--Subject to subparagraphs 
                (C) through (F), a State agency may provide an 
                exemption from the requirements of paragraph 
                (2) for covered individuals.
                  ``(C) Fiscal year 1998.--Subject to 
                subparagraph (E), for fiscal year 1998, 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 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 
                subparagraphs (E) and (F), for fiscal year 1999 
                and each subsequent 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 subparagraph (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 by a 
                significant number from the caseload, as 
                determined by the Secretary.
                  ``(F) Exemption adjustments.--During fiscal 
                year 1999 and each subsequent fiscalyear, the 
Secretary shall increase or decrease the number of individuals who may 
be granted an exemption by a State agency to the extent that the 
average monthly number of exemptions in effect in the State for the 
preceding fiscal year is greater or less than the average monthly 
number of exemptions estimated for the State agency during such 
preceding fiscal year.
                  ``(G) Reporting requirement.--A State agency 
                shall submit such reports to the Secretary as 
                the Secretary determines are necessary to 
                ensure compliance with this paragraph.''.

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--
          (1) by striking paragraph (1) and inserting the 
        following new paragraph:
          ``(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, 
                        $221,000,000;
                          ``(iv) for fiscal year 1999, 
                        $224,000,000;
                          ``(v) for fiscal year 2000, 
                        $226,000,000;
                          ``(vi) for fiscal year 2001, 
                        $228,000,000; and
                          ``(vii) for fiscal year 2002, 
                        $210,000,000.
                  ``(B) Limitations.--The Secretary shall 
                ensure that--
                          ``(i) the funds provided in this 
                        subparagraph shall not be used for food 
                        stamp recipients who receive benefits 
                        under a State program funded under part 
                        A of title IV of the Social Security 
                        Act (42 U.S.C. 601 et seq.); and
                          ``(ii) not less than 75 percent of 
                        the funds provided in this subparagraph 
                        shall be used by a State agency for the 
                        employment and training of food stamp 
                        recipients not excepted by section 
                        6(o)(3).
                  ``(C) 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 changes in each State's 
                        caseload (as defined in section 
                        6(o)(5)(A)) that reflects the 
                        proportion of food stamp recipients who 
                        reside in each State--
                                  ``(I) who are not eligible 
                                for an exception under section 
                                6(o)(3); and
                                  ``(II) who do not reside in 
                                an area subject to the waiver 
                                granted by the Secretary under 
                                section 6(o)(4), if the State 
                                agency does not provide 
                                employment and training 
                                services in the area to food 
                                stamp recipients not excepted 
                                by section 6(o)(3).
                          ``(ii) Reporting requirement.--A 
                        State agency shall submit such reports 
                        to the Secretary as the Secretary 
                        determines are necessary to ensure 
                        compliance with this paragraph.''; and
                  ``(D) Reallocation.--
                          ``(i) Notification.--A State agency 
                        shall promptly notify the Secretary if 
                        the State agency determines that it 
                        will not expend all of the funds 
                        allocated to it under subparagraph (B).
                          ``(ii) Reallocation.--On notification 
                        under clause (i), the Secretary shall 
                        reallocate the funds that the State 
                        agency will not expend as the Secretary 
                        considers appropriate and equitable.
                  ``(E) Minimum allocation.--Notwithstanding 
                subparagraphs (A) through (C), the Secretary 
                shall ensure that each State agency operating 
                an employment and training program shall 
                receive not less than $50,000 for each fiscal 
                year.
                  ``(F) Maintenance of effort.--To receive the 
                additional funding under subparagraph (A), as 
                provided by the amendment made by section 1002 
                of the Balanced Budget Act of 1997, 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 under 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 for fiscal year 1996.'';
          (2) by redesignating paragraphs (2) through (5) as 
        paragraphs (3) through (6), respectively;
          (3) by inserting after paragraph (1) the following 
        new paragraph:
          ``(2) Report to congress on additional funding.--
        Beginning one year after the date of the enactment of 
        this paragraph, the Secretary shall submit an annual 
        report to the Committee on Agriculture of the House of 
        Representatives and the Committee on Agriculture, 
        Nutrition, and Forestry of the Senate regarding whether 
        the additional funding provided under paragraph (1)(A) 
        has been utilized by State agencies to increase the 
        number of work slots in their employment and training 
        programs and workfare for recipients subject to section 
        6(o) in the most efficient and effective manner.''; and
          (4) in paragraph (3) (as so redesignated), by 
        striking ``paragraph (3)'' and inserting ``paragraph 
        (4)''.
  (b) Conforming Amendments.--(1) Subsection 
(b)(1)(B)(iv)(III)(hh) of section 17 of the Food Stamp Act of 
1977 (7 U.S.C. 2026) is amended by striking ``(h)(2), or (h)(3) 
of section 16'' and inserting ``(h)(3), or (h)(4) of section 
16''.
  (2) Subsection (d)(1)(B)(ii) of section 22 of such Act (7 
U.S.C. 2031) is amended by striking ``(h)(2), and (h)(3) of 
section 16'' and inserting ``(h)(3), and (h)(4) of section 
16''.

SEC. 1003. AUTHORIZING USE OF NONGOVERNMENTAL PERSONNEL IN MAKING 
                    DETERMINATIONS OF ELIGIBILITY FOR BENEFITS UNDER 
                    THE FOOD STAMP PROGRAM.

  (a) In General.--Notwithstanding any other provision of law, 
no provision of law shall be construed as preventing any State 
(as defined in section 3(m) of the Food Stamp Act of 1977 (7 
U.S.C. 2012(m))) from allowing eligibility determinations 
described in subsection (b) to be made by an entity that is not 
a State or local government, or by an individual who is not an 
employee of a State or local government, which meets such 
qualifications as the State determines. For purposes of any 
Federal law, such determinations shall be considered to be made 
by the State and by a State agency.
  (b) Eligibility Determinations.--An eligibility determination 
described in this subsection is a determination of eligibility 
of individuals or households to receive benefits under the food 
stamp program as defined in section 3(h) of the Food Stamp Act 
of 1977 (7 U.S.C. 2012(h)).
  (c) Construction.--Nothing in this section shall be construed 
as affecting--
          (1) the conditions for eligibility for benefits 
        (including any conditions relating to income or 
        resources);
          (2) the rights to challenge determinations regarding 
        eligibility or rights to benefits; and
          (3) determinations regarding quality control or error 
        rates.

         TITLE II--COMMITTEE ON BANKING AND FINANCIAL SERVICES

SEC. 2001. TABLE OF CONTENTS.

  The table of contents for this title is as follows:

          TITLE II--COMMITTEE ON BANKING AND FINANCIAL SERVICES

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 Downpayment 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 SUBSTANTIAL OR 
                    MODERATE REHABILITATION PROJECTS ASSISTED UNDER 
                    SECTION 8 RENTAL ASSISTANCE PROGRAM.

  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 
inserting 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 is amended by inserting before the period 
at the end the following: ``, and during fiscal year 1999 and 
thereafter''.

              TITLE III--COMMITTEE ON COMMERCE-NONMEDICARE

        Subtitle A--Nuclear Regulatory Commission Annual Charges

SEC. 3001. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

  Section 6101(a)(3) of the Omnibus Budget Reconciliation Act 
of 1990 (42 U.S.C. 2214(a)(3)) is amended by striking 
``September 30, 1998'' and inserting ``September 30, 2002''.

    Subtitle B--Lease of Excess Strategic Petroleum Reserve Capacity

SEC. 3101. 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:

                   ``USE OF UNDERUTILIZED FACILITIES

  ``Sec. 168. (a) Authority.--Notwithstanding any other 
provision 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 storedunder 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 costs of 
storage and removals of petroleum products, including the cost 
of replacement facilities necessitated as a result of any 
withdrawals.
  ``(c) Access to Stored Oil.--The Secretary shall ensure that 
agreements to store petroleum products for foreign governments 
or their representatives do not affect the ability of the 
United States to withdraw, distribute, or sell petroleum from 
the Strategic Petroleum Reserve in response to an energy 
emergency or to the obligations of the United States under the 
Agreement on an International Energy Program.
  ``(d) Availability of Funds.--Funds collected through the 
leasing of Strategic Petroleum Reserve facilities authorized by 
subsection (a) after September 30, 2002, shall be used by the 
Secretary of Energy without further appropriation for the 
purchase of oil for, and operation and maintenance costs of, 
the Strategic Petroleum Reserve.''.
  (b) Table of Contents Amendment.--The table of contents of 
part B of title I of the Energy Policy and Conservation Act is 
amended by adding at the end the following:

``Sec. 168. Use of underutilized facilities.''.

                     Subtitle C--Sale of DOE Assets

SEC. 3201. SALE OF DOE SURPLUS URANIUM ASSETS.

  (a) In General.--The Secretary of Energy shall, during the 
period fiscal year 1999 through fiscal year 2002, sell 3.2 
million pounds per year of natural and low-enriched uranium 
that the President has determined is not necessary for national 
security needs. Such sales shall be--
          (1) made for delivery after January 1, 1999;
          (2) subject to a determination, for the period fiscal 
        year 1999 through fiscal year 2002, by the Secretary 
        under section 3112(d)(2)(B) of the USEC Privatization 
        Act (42 U.S.C. 2297h-10(d)(2)(B)); and
          (3) made at a price not less than the fair market 
        value of the uranium and in a manner that maximizes 
        proceeds to the Treasury.
The Secretary shall receive the proceeds from such sale in the 
period fiscal year 1999 through fiscal year 2002 and shall 
deposit such proceeds in the General Fund of the Treasury.
  (b) Costs.--The costs of making the sales required by 
subsection (a) shall be covered by the unobligated balances of 
appropriations of the Department of Energy.

                       Subtitle D--Communications

SEC. 3301. SPECTRUM AUCTIONS.

  (a) Extension and Expansion of Auction Authority.--
          (1) Amendments.--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 
        obligations described in paragraph (6)(E), mutually 
        exclusive applications are accepted for any initial 
        license or construction permit which will involve an 
        exclusive use of the electromagnetic spectrum, then the 
        Commission shall grant such 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) that, as the result of the Commission 
                carrying out the obligations described in 
                paragraph (6)(E), are not mutually exclusive;
                  ``(B) for public safety radio services, 
                including private internal radio services used 
                by non-Government entities, that--
                          ``(i) protect the safety of life, 
                        health, or property; and
                          ``(ii) are not made commercially 
                        available to the public;
                  ``(C) for initial licenses or construction 
                permits assigned by the Commission to existing 
                terrestrial broadcast licensees for new 
                terrestrial digital television services; or
                  ``(D) for public telecommunications services, 
                as defined in section 397(14) of the 
                Communications Act of 1934 (47 U.S.C. 397(14)), 
                when the license application is for channels 
                reserved for noncommercial use.'';
                  (B) in paragraph (3)--
                          (i) by inserting after the second 
                        sentence the following new sentence: 
                        ``The Commission shall, directly or by 
                        contract, provide for the design and 
                        conduct (for purposes of testing) of 
                        competitive bidding using a contingent 
                        combinatorial bidding system that 
                        permits prospective bidders to bid on 
                        combinations or groups of licensesin a 
single bid and to enter multiple alternative bids within a single 
bidding round.'';
                          (ii) by striking ``and'' at the end 
                        of subparagraph (C);
                          (iii) by striking the period at the 
                        end of subparagraph (D) and inserting 
                        ``; and''; and
                          (iv) by adding at the end the 
                        following new subparagraph:
                  ``(E) ensuring that, in the scheduling of any 
                competitive bidding under this subsection, an 
                adequate period is allowed--
                          ``(i) before issuance of bidding 
                        rules, to permit notice and comment on 
                        proposed auction procedures; and
                          ``(ii) after issuance of bidding 
                        rules, to ensure that interested 
                        parties have a sufficient time to 
                        develop business plans, assess market 
                        conditions, and evaluate the 
                        availability of equipment for the 
                        relevant services.'';
                  (C) in paragraph (8)--
                          (i) by striking subparagraph (B); and
                          (ii) by redesignating subparagraph 
                        (C) as subparagraph (B);
                  (D) in paragraph (11), by striking ``1998'' 
                and inserting ``2002''; and
                  (E) in paragraph (13)(F), by striking 
                ``September 30, 1998'' and inserting ``the date 
                of enactment of the Balanced Budget Act of 
                1997''.
          (2) Conforming amendment.--Subsection (i) of section 
        309 of the Communications Act of 1934 (47 U.S.C. 
        309(i)) is repealed.
          (3) Effective date.--The amendment made by paragraph 
        (1)(A) shall not apply with respect to any license or 
        permit for which the Federal Communications Commission 
        has accepted mutually exclusive applications on or 
        before the date of enactment of this Act.
  (b) Commission Obligation To Make Additional Spectrum 
Available by Auction.--
          (1) In general.--The Federal Communications 
        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. 309(j)) of 
        licenses for the use of bands of frequencies that--
                  (A) individually span not less than 25 
                megahertz, unless a combination of smaller 
                bands can, notwithstanding the provisions of 
                paragraph (7) of such section, reasonably be 
                expected to produce greater receipts;
                  (B) in the aggregate span not less than 100 
                megahertz;
                  (C) are located below 3 gigahertz;
                  (D) have not, as of the date of enactment of 
                this Act--
                          (i) been designated by Commission 
                        regulation for assignment pursuant to 
                        such section;
                          (ii) been identified by the Secretary 
                        of Commerce pursuant to section 113 of 
                        the National Telecommunications and 
                        Information Administration Organization 
                        Act;
                          (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 in section 3303 
                        of this Act; or
                          (v) been allocated for unlicensed use 
                        pursuant to part 15 of the Commission's 
                        regulations (47 C.F.R. Part 15), if the 
                        competitive bidding for licenses would 
                        interfere with operation of end-user 
                        products permitted under such 
                        regulations; and
                  (E) notwithstanding section 115(b)(1)(B) of 
                the National Telecommunications and Information 
                Administration Organization Act (47 U.S.C. 
                925(b)(1)(B)) or any proposal pursuant to such 
                section, include frequencies at 1,710-1,755 
                megahertz.
          (2) Criteria for reassignment.--In making available 
        bands of frequencies for competitive bidding pursuant 
        to paragraph (1), the Commission shall--
                  (A) seek to promote the most efficient use of 
                the spectrum;
                  (B) take into account the cost to incumbent 
                licensees of relocating existing uses to other 
                bands of frequencies or other means of 
                communication; and
                  (C) comply with the requirements of 
                international agreements concerning spectrum 
                allocations.
          (3) Notification to ntia.--The Commission shall 
        notify the Secretary of Commerce if--
                  (A) the Commission is not able to provide for 
                the effective relocation of incumbent licensees 
                to bands of frequencies that are available to 
                the Commission for assignment; and
                  (B) the Commission has identified bands of 
                frequencies that are--
                          (i) suitable for the relocation of 
                        such licensees; and
                          (ii) allocated for Federal Government 
                        use, but that could be reallocated 
                        pursuant to part B of the National 
                        Telecommunications and Information 
                        Administration Organization Act (as 
                        amended by this Act).
          (4) Protection of Space Research Uses.--The licenses 
        assigned pursuant to paragraph (1) shall require 
        licensees to avoid interference with communications in 
        space research and earth exploration-satellite services 
        authorized under notes 750A and US90 to section 2.106 
        of the regulations of the Federal Communications 
        Commission (47 C.F.R. 2.106) as in effect on the date 
        of enactment of this Act.
  (c) Identification and Reallocation of Frequencies.--The 
National Telecommunications and Information Administration 
Organization Act (47 U.S.C. 901 et seq.) is amended--
          (1) in section 113, by adding at the end the 
        following new subsection:
  ``(f) Additional Reallocation Report.--If the Secretary 
receives a notice from the Commission pursuant to section 
3301(b)(3) of the Balanced Budget Act of 1997, the Secretary 
shall prepare and submit to the President, the Commission, and 
the Congress a report recommending for reallocation for use 
other than by Federal Government stations under section 305 of 
the 1934 Act (47 U.S.C. 305), bands of frequencies that are 
suitable for the uses identified in the Commission's notice. 
The Commission shall, not later than one year after receipt of 
such report, prepare, submit to the President and the Congress, 
and implement, a plan for the immediate allocation and 
assignment of such frequencies under the 1934 Act to incumbent 
licencees described in section 3301(b)(3) of the Balanced 
Budget Act of 1997.''; and
          (2) in section 114(a)(1), by striking ``(a) or 
        (d)(1)'' and inserting ``(a), (d)(1), or (f)''.
  (d) Identification and Reallocation of Auctionable 
Frequencies.--The National Telecommunications and Information 
Administration Organization Act (47 U.S.C. 901 et seq.) is 
amended--
          (1) in section 113(b)--
                  (A) by striking the heading of paragraph (1) 
                and inserting ``Initial reallocation report'';
                  (B) by inserting ``in the first report 
                required by subsection (a)'' after ``recommend 
                for reallocation'' in paragraph (1);
                  (C) by inserting ``or (3)'' after ``paragraph 
                (1)'' each place it appears in paragraph (2); 
                and
                  (D) by inserting after paragraph (2) the 
                following new paragraph:
          ``(3) Second reallocation report.--In 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) individually span not less than 20 
                megahertz, unless a combination of smaller 
                bands can reasonably be expected to produce 
                greater receipts;
                  ``(C) are located below 3 gigahertz; and
                  ``(D) meet the criteria specified in 
                paragraphs (1) through (5) of subsection 
                (a).''; and
          (2) in section 115--
                  (A) in subsection (b), by striking ``the 
                report required by section 113(a)'' and 
                inserting ``the initial reallocation report 
                required by section 113(a)''; and
                  (B) by adding at the end the following new 
                subsection:
  ``(c) Allocation and Assignment of Frequencies Identified in 
the Second Reallocation Report.--With respect to the 
frequencies 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 such 
section, prepare, submit to the President and the Congress, and 
implement, a plan for the immediate allocation and assignment 
under the 1934 Act of all such frequencies in accordance with 
section 309(j) of such Act.''.
  (e) Minimum Recovery for Public Required.--
          (1) Methodology to secure minimum amounts required.--
        In establishing, pursuant to section 309(j)(3) of the 
        Communications Act of 1934 (47 U.S.C. 309(j)(3)), a 
        competitive bidding methodology with respect to the 
        frequencies required to be assigned by competitive 
        bidding under subsection (b) of this section and 
        section 115(c) of the National Telecommunications and 
        Information Administration Organization Act (47 U.S.C. 
        925(c)), the Commission shall establish procedures that 
        are designed to secure winning bids totaling not less 
        than two-thirds of $7,500,000,000.
          (2) Authority.--In establishing such methodology, the 
        Commission is authorized--
                  (A) to partition the total required to be 
                obtained under paragraph (1) among separate 
                competitive bidding proceedings, or among 
                separate bands, regions, or markets;
                  (B) to void any such separated competitive 
                bidding proceeding that fails to obtain the 
                partitioned subtotal that pertains to that 
                proceeding; and
                  (C) to prescribe minimum bids or other 
                bidding requirements to obtain such total or 
                subtotal.
          (3) Licenses withheld.--Notwithstanding any other 
        requirement of this section, or the amendments made by 
        this section, the Commission shall refrain from 
        conducting any competitive biddingpursuant to the 
methodology established pursuant to this subsection unless the 
Commission determines that such methodology will secure winning bids 
totaling not less than two-thirds of $7,500,000,000.
          (4) Authority to rebid at a later time to secure 
        statutory objectives.--Nothing in paragraph (2) or (3) 
        shall preclude or limit the Commission from assigning 
        the frequencies described in paragraph (1) by 
        competitive bidding at such later date (than the date 
        required by this section) as the Commission determines, 
        in its discretion, will better attain the objectives of 
        recovering for the public a fair portion of the value 
        of the public spectrum resource and avoiding unjust 
        enrichment.

SEC. 3302. AUCTION OF RECAPTURED BROADCAST TELEVISION SPECTRUM.

  Section 309(j) of the Communications Act of 1934 (47 U.S.C. 
309(j)) is amended by adding at the end the following new 
paragraph:
          ``(14) Auction of recaptured broadcast television 
        spectrum.--
                  ``(A) Limitations on terms of terrestrial 
                television broadcast licenses.--A television 
                license that authorizes analog television 
                services may not be renewed to authorize such 
                service for a period that extends beyond 
                December 31, 2006. The Commission shall grant 
                by regulation an extension of such date to 
                licensees in a market if the Commission 
                determines that more than 5 percent of 
                households in such market continue to rely 
                exclusively on over-the-air terrestrial analog 
                television signals.
                  ``(B) Spectrum reversion and resale.--
                          ``(i) The Commission shall ensure 
                        that, when the authority to broadcast 
                        analog television services under a 
                        license expires pursuant to 
                        subparagraph (A), each licensee shall 
                        return spectrum according to the 
                        Commission's direction and the 
                        Commission shall reclaim such spectrum.
                          ``(ii) Licensees for new services 
                        occupying spectrum reclaimed pursuant 
                        to clause (i) shall be selected in 
                        accordance with this subsection. The 
                        Commission shall start such selection 
                        process by July 1, 2001, with payment 
                        pursuant to rules established by the 
                        Commission under this subsection.
                  ``(C) Minimum recovery for public required.--
                          ``(i) Methodology to secure minimum 
                        amounts required.--In establishing, 
                        pursuant to section 309(j)(3) of the 
                        Communications Act of 1934 (47 U.S.C. 
                        309(j)(3)), a competitive bidding 
                        methodology with respect to the 
                        frequencies required to be assigned by 
                        competitive bidding under subparagraph 
                        (B) of this paragraph, the Commission 
                        shall establish procedures that are 
                        designed to secure winning bids 
                        totaling not less than two-thirds of 
                        $4,000,000,000.
                          ``(ii) Authority.--In establishing 
                        such methodology, the Commission is 
                        authorized--
                                  ``(I) to partition the total 
                                required to be obtained under 
                                clause (i) among separate 
                                competitive bidding 
                                proceedings, or among separate 
                                bands, regions, or markets;
                                  ``(II) to void any such 
                                separated competitive bidding 
                                proceeding that fails to obtain 
                                the partitioned subtotal that 
                                pertains to that proceeding; 
                                and
                                  ``(III) to prescribe minimum 
                                bids or other bidding 
                                requirements to obtain such 
                                aggregate total.
                          ``(iii) Licenses withheld.--
                        Notwithstanding any other requirement 
                        of this paragraph, the Commission shall 
                        refrain from conducting any competitive 
                        bidding pursuant to the methodology 
                        established pursuant to this 
                        subparagraph unless the Commission 
                        determines that such methodology will 
                        secure winning bids totaling not less 
                        than two-thirds of $4,000,000,000.
                          ``(iv) Authority to rebid at a later 
                        time to secure statutory objectives.--
                        Nothing in clause (ii) or (iii) shall 
                        preclude or limit the Commission from 
                        assigning the frequencies described in 
                        clause (i) by competitive bidding at 
                        such later date (than the date required 
                        by this paragraph) as the Commission 
                        determines, in its discretion, will 
                        better attain the objectives of 
                        recovering for the public a fair 
                        portion of the value of the public 
                        spectrum resource and avoiding unjust 
                        enrichment.
                  ``(D) Certain limitations on qualified 
                bidders prohibited.--In prescribing any 
                regulations relating to the qualification of 
                bidders for spectrum reclaimed pursuant to 
                subparagraph (B)(i), the Commission shall not--
                          ``(i) preclude any party from being a 
                        qualified bidder for spectrum that is 
                        allocated for any use that includes 
                        digital television service on the basis 
                        of--
                                  ``(I) the Commission's 
                                duopoly rule (47 C.F.R. 
                                73.3555(b)); or
                                  ``(II) the Commission's 
                                newspaper cross-ownership rule 
                                (47 C.F.R. 73.3555(d)); or
                          ``(ii) apply either such rule to 
                        preclude such a party that is a 
                        successful bidder in a competitive 
                        bidding for such spectrum from using 
                        such spectrum for digital television 
                        service.
                  ``(E) Definitions.--As used in this 
                paragraph:
                          ``(i) The term `digital television 
                        service' means television service 
                        provided usingdigital technology to 
enhance audio quality and video resolution, as further defined in the 
Memorandum Opinion, Report, and Order of the Commission entitled 
`Advanced Television Systems and Their Impact Upon the Existing 
Television Service', MM Docket No. 87-268 and any subsequent Commission 
proceedings dealing with digital television.
                          ``(ii) The term `analog television 
                        service' means service provided 
                        pursuant to the transmission standards 
                        prescribed by the Commission in section 
                        73.682(a) of its regulation (47 CFR 
                        73.682(a)).''.

SEC. 3303. ALLOCATION AND ASSIGNMENT OF NEW PUBLIC SAFETY AND 
                    COMMERCIAL LICENSES.

  (a) In General.--The Federal Communications Commission shall, 
not later than January 1, 1998, allocate on a national, 
regional, or market basis, from radio spectrum between 746 
megahertz and 806 megahertz--
          (1) 24 megahertz of that spectrum for public safety 
        services according to the terms and conditions 
        established by the Commission, unless the Commission 
        determines that the needs for public safety services 
        can be met in particular areas with allocations of less 
        than 24 megahertz; and
          (2) the remainder of that spectrum for commercial 
        purposes to be assigned by competitive bidding in 
        accordance with section 309(j).
  (b) Assignment.--The Commission shall--
          (1) assign the licenses for public safety created 
        pursuant to subsection (a) no later than March 31, 
        1998; and
          (2) commence competitive bidding for the commercial 
        licenses created pursuant to subsection (a) no later 
        than July 1, 2001.
  (c) Licensing of Unused Frequencies for Public Safety Radio 
Services.--
          (1) Use of unused channels for public safety.--It 
        shall be the policy of the Commission, notwithstanding 
        any other provision of this Act or any other law, to 
        waive whatever licensee eligibility and other 
        requirements (including bidding requirements) are 
        applicable in order to permit the use of unassigned 
        frequencies for public safety purposes by a State or 
        local governmental agency upon a showing that--
                  (A) no other existing satisfactory public 
                safety channel is immediately available to 
                satisfy the requested use;
                  (B) the proposed use is technically feasible 
                without causing harmful interference to 
                existing stations in the frequency band 
                entitled to protection from such interference 
                under the rules of the Commission; and
                  (C) use of the channel for public safety 
                purposes is consistent with other existing 
                public safety channel allocations in the 
                geographic area of proposed use.
          (2) Applicability.--Paragraph (1) shall apply to any 
        application that is pending before the Federal 
        Communications Commission, or that is not finally 
        determined under either section 402 or 405 of the 
        Communications Act of 1934 (47 U.S.C. 402, 405) on May 
        15, 1997, or that is filed after such date.
  (d) Conditions on Licenses.--With respect to public safety 
and commercial licenses granted pursuant to this subsection, 
the Commission shall--
          (1) establish interference limits at the boundaries 
        of the spectrum block and service area;
          (2) establish any additional technical restrictions 
        necessary to protect full-service analog television 
        service and digital television service during a 
        transition to digital television service; and
          (3) permit public safety 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.
  (e) Minimum Recovery for Public Required.--
          (1) Methodology to secure minimum amounts required.--
        In establishing, pursuant to section 309(j)(3) of the 
        Communications Act of 1934 (47 U.S.C. 309(j)(3)), a 
        competitive bidding methodology with respect to the 
        frequencies required to be assigned by competitive 
        bidding under this section, the Commission shall 
        establish procedures that are designed to secure 
        winning bids totaling not less than two-thirds of 
        $1,900,000,000.
          (2) Authority.--In establishing such methodology, the 
        Commission is authorized--
                  (A) to partition the total required to be 
                obtained under paragraph (1) among separate 
                competitive bidding proceedings, or among 
                separate bands, regions, or markets;
                  (B) to void any such separated competitive 
                bidding proceeding that fails to obtain the 
                partitioned subtotal that pertains to that 
                proceeding; and
                  (C) to prescribe minimum bids or other 
                bidding requirements to obtain such total or 
                subtotal.
          (3) Licenses withheld.--Notwithstanding any other 
        requirement of this section, the Commission shall 
        refrain from conducting any competitive bidding 
        pursuant to the methodology established pursuant to 
        this subsection unless the Commission determines that 
        such methodology will secure winning bids totaling not 
        less than two-thirds of $1,900,000,000.
          (4) Authority to rebid at a later time to secure 
        statutory objectives.--Nothing in paragraph (2) or (3) 
        shall preclude or limit the Commission from assigning 
        the frequencies described in paragraph (1) by 
        competitive bidding at such later date (than the date 
        required by this section) as the Commission determines, 
        in its discretion, will better attain the objectives of 
        recovering for the public a fair portion of the value 
        of the public spectrum resource and avoiding unjust 
        enrichment.
  (f) Protection of Qualifying Low-Power Stations.--Prior to 
making any allocation or assignment under this section the 
Commission shall assure that each qualifying low-power 
television station is assigned a frequency below 746 megahertz 
to permit the continued operation of such station.
  (g) Definitions.--For purposes of this section:
          (1) Commission.--The term ``Commission'' means the 
        Federal Communications Commission.
          (2) Digital television service.--The term ``digital 
        television service'' means television service provided 
        using digital technology to enhance audio quality and 
        video resolution, as further defined in the Memorandum 
        Opinion, Report, and Order of the Commission entitled 
        `Advanced Television Systems and Their Impact Upon the 
        Existing Television Service', MM Docket No. 87-268 and 
        any subsequent Commission proceedings dealing with 
        digital television.
          (3) Analog television service.--The term ``analog 
        television service'' means services provided pursuant 
        to the transmission standards prescribed by the 
        Commission in section 73.682(a) of its regulation (47 
        CFR 73.682(a)).
          (4) Public safety services.--The term ``public safety 
        services'' means services--
                  (A) the sole or principal purpose of which is 
                to protect the safety of life, health, or 
                property;
                  (B) that are provided--
                          (i) by State or local government 
                        entities; or
                          (ii) by nongovernmental, private 
                        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.
          (5) Service area.--The term ``service area'' means 
        the geographic area over which a licensee may provide 
        service and is protected from interference.
          (6) Spectrum block.--The term ``spectrum block'' 
        means the range of frequencies over which the apparatus 
        licensed by the Commission is authorized to transmit 
        signals.
          (7) Qualifying low-power television stations.--A 
        station is a qualifying low-power television station 
        if--
                  (A) during the 90 days preceding the date of 
                enactment of this Act--
                          (i) such station broadcast a minimum 
                        of 18 hours per day;
                          (ii) such station broadcast an 
                        average of at least 3 hours per week of 
                        programming that was produced within 
                        the community of license of such 
                        station; and
                          (iii) such station was in compliance 
                        with the requirements applicable to 
                        low-power television stations; or
                  (B) the Commission determines that the public 
                interest, convenience, and necessity would be 
                served by treating the station as a qualifying 
                low-power television station for purposes of 
                this section.

SEC. 3304. INQUIRY REQUIRED.

  The Federal Communications Commission shall, not later than 
July 1, 1997, initiate the inquiry required by section 
309(j)(12) of the Communications Act of 1934 (47 U.S.C. 
309(j)(12)) for the purposes of collecting the information 
required for its report under each of subparagraphs (A) through 
(E) of such section, and shall keep the Congress fully and 
currently informed with respect to the progress of such 
inquiry.

                          Subtitle E--Medicaid

SEC. 3400. TABLE OF CONTENTS OF SUBTITLE; REFERENCES.

  (a) Table of Contents of Subtitle.--The table of contents of 
this subtitle is as follows:
Sec. 3400. Table of contents of subtitle; references.

                      Chapter 1--State Flexibility

                     SUBCHAPTER A--USE OF MANAGED CARE

Sec. 3401. State options to provide benefits through managed care 
          entities.
Sec. 3402. Elimination of 75:25 restriction on risk contracts.
Sec. 3403. Primary care case management services as State option without 
          need for waiver.
Sec. 3404. Change in threshold amount for contracts requiring 
          Secretary's prior approval.
Sec. 3405. Determination of hospital stay.

                     SUBCHAPTER B--PAYMENT METHODOLOGY

Sec. 3411. Flexibility in payment methods for hospital, nursing 
          facility, and ICF/MR services; flexibility for home health.
Sec. 3412. Payment for Federally qualified health center services.
Sec. 3413. Treatment of State taxes imposed on certain hospitals that 
          provide free care.

                         SUBCHAPTER C--ELIGIBILITY

Sec. 3421. State option of continuous eligibility for 12 months; 
          clarification of State option to cover children.
Sec. 3422. Payment of home-health-related medicare part B premium amount 
          for certain low-income individuals.
Sec. 3423. Penalty for fraudulent eligibility.
Sec. 3424. Treatment of certain settlement payments.

    SUBCHAPTER D--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

Sec. 3431. Establishment of PACE program as medicaid State option.
Sec. 3432. Coverage of PACE under the medicare program.
Sec. 3433. Effective date; transition.
Sec. 3434. Study and reports.

                          SUBCHAPTER E--BENEFITS

Sec. 3441. Elimination of requirement to pay for private insurance.
Sec. 3442. Permitting same copayments in health maintenance 
          organizations as in fee-for-service.
Sec. 3443. Physician qualification requirements.
Sec. 3444. Elimination of requirement of prior institutionalization with 
          respect to habilitation services furnished under a waiver for 
          home or community-based services.
Sec. 3445. Benefits for services of physician assistants.
Sec. 3446. Study and report on actuarial value of EPSDT benefit.

                       SUBCHAPTER F--ADMINISTRATION

Sec. 3451. Elimination of duplicative inspection of care requirements 
          for ICFS/MR and mental hospitals.
Sec. 3452. Alternative sanctions for noncompliant ICFS/MR.
Sec. 3453. Modification of MMIS requirements.
Sec. 3454. Facilitating imposition of State alternative remedies on 
          noncompliant nursing facilities.
Sec. 3455. Medically accepted indication.
Sec. 3456. Continuation of State-wide section 1115 medicaid waivers.
Sec. 3457. Authorizing administrative streamlining and privatizing 
          modifications under the medicaid program.
Sec. 3458. Extension of moratorium.

                      Chapter 2--Quality Assurance

Sec. 3461. Requirements to ensure quality of and access to care under 
          managed care plans.
Sec. 3462. Solvency standards for certain health maintenance 
          organizations.
Sec. 3463. Application of prudent layperson standard for emergency 
          medical condition and prohibition of gag rule restrictions.
Sec. 3464. Additional fraud and abuse protections in managed care.
Sec. 3465. Grievances under managed care plans.
Sec. 3466. Standards relating to access to obstetrical and gynecological 
          services under managed care plans.

                       Chapter 3--Federal Payments

Sec. 3471. Reforming disproportionate share payments under State 
          medicaid programs.
Sec. 3472. Additional funding for State emergency health services 
          furnished to undocumented aliens.
  (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this subtitle an amendment 
is expressed in terms of an amendment to or repeal of a section 
or other provision, the reference is considered to be made to 
that section or other provision of the Social Security Act.

                      CHAPTER 1--STATE FLEXIBILITY

                   Subchapter A--Use of Managed Care

SEC. 3401. STATE OPTIONS TO PROVIDE BENEFITS THROUGH MANAGED CARE 
                    ENTITIES.

  (a) In General.--Section 1915(a) (42 U.S.C. 1396n(a)) is 
amended--
          (1) by striking ``or'' at the end of paragraph (1),
          (2) by striking the period at the end of paragraph 
        (2) and inserting ``; or'', and
          (3) by adding at the end the following new paragraph:
          ``(3) requires individuals, other than special needs 
        children (as defined in subsection (i)), eligible for 
        medical assistance for items or services under the 
        State plan to enroll with an entity that provides or 
        arranges for services for enrollees under a contract 
        pursuant to section 1903(m), or with a primary care 
        case manager (as defined in section 1905(t)(2)) (or 
        restricts the number of provider agreements with those 
        entities under the State plan, consistent with quality 
        of care), if--
                  ``(A) the State permits an individual to 
                choose the manager or managed care entity from 
                among the managed care organizations and 
                primary care case providers who meet the 
                requirements of this title;
                  ``(B)(i) individuals are permitted to choose 
                between at least 2 of those entities, or 2 of 
                the managers, or an entity and a manager, each 
                of which has sufficient capacity to provide 
                services to enrollees; or
                  ``(ii) with respect to a rural area--
                          ``(I) individuals who are required to 
                        enroll with a single entity are 
                        afforded the option to obtain covered 
                        services by an alternative provider; 
                        and
                          ``(II) an individual who is offered 
                        no alternative to a single entity or 
                        manager is given a choice between at 
                        least two providers within the entity 
                        or through the manager;
                  ``(C) no individual who is an Indian (as 
                defined in section 4 of the Indian Health Care 
                Improvement Act of 1976) is required to enroll 
                in any entity that is not one of the following 
                (and only if such entity is participating under 
                the plan): the Indian Health Service, an Indian 
                health program operated by an Indian tribe or 
                tribal organization pursuant to a contract, 
                grant, cooperative agreement, or compact with 
                the Indian Health Service pursuant to the 
                Indian Self-Determination Act (25 U.S.C. 450 et 
                seq.), or 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.);
                  ``(D) the State restricts those individuals 
                from changing their enrollment without cause 
                for periods no longer than six months (and 
                permits enrollees to change enrollment for 
                cause at any time);
                  ``(E) the restrictions do not apply to 
                providers of family planning services (as 
                defined in section 1905(a)(4)(C)) and are not 
                conditions for payment of medicare cost sharing 
                pursuant to section 1905(p)(3); and
                  ``(F) prior to establishing an enrollment 
                requirement under this paragraph, the State 
                agency provides for public notice and comment 
                pursuant to requirements established by the 
                Secretary.''.
  (b) Special Needs Children Defined.--Section 1915 (42 U.S.C. 
1396n) is amended by adding at the end the following:
  ``(i) For purposes of subsection (a)(3), the term `special 
needs child' means an individual under 19 years of age who--
          ``(1) is eligible for supplemental security income 
        under title XVI,
          ``(2) is described in section 501(a)(1)(D),
          ``(3) is described in section 1902(e)(3), or
          ``(4) is in foster care or otherwise in an out-of-
        home placement.''.
  (c) Conforming Amendment to Risk-Based Arrangements.--Section 
1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended--
          (1) in paragraph (A)(vi)--
                  (A) by striking ``(I) except as provided 
                under subparagraph (F),''; and
                  (B) by striking all that follows ``to 
                terminate such enrollment'' and inserting ``in 
                accordance with the provisions of subparagraph 
                (F);''; and
          (2) in subparagraph (F)--
                  (A) by striking ``In the case of--'' and all 
                that follows through ``a State plan'' and 
                inserting ``A State plan'', and
                  (B) by striking ``(A)(vi)(I)'' and inserting 
                ``(A)(vi)''.
  (d) Effective Date.--The amendments made by this section take 
effect on the date of the enactment of this Act.

SEC. 3402. ELIMINATION OF 75:25 RESTRICTION ON RISK CONTRACTS.

  (a) 75 Percent Limit on Medicare and Medicaid Enrollment.--
          (1) In general.--Section 1903(m)(2)(A) (42 U.S.C. 
        1396b(m)(2)(A)) is amended by striking clause (ii).
          (2) Conforming amendments.--Section 1903(m)(2) (42 
        U.S.C. 1396b(m)(2)) is amended--
                  (A) by striking subparagraphs (C), (D), and 
                (E); and
                  (B) in subparagraph (G), by striking 
                ``clauses (i) and (ii)'' and inserting ``clause 
                (i)''.
  (b) Effective Date.--The amendments made by subsection (a) 
take effect on the date of the enactment of this Act.

SEC. 3403. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE OPTION 
                    WITHOUT NEED FOR WAIVER.

  (a) Optional Coverage as Part of Medical Assistance.--Section 
1905(a) (42 U.S.C. 1396d(a)) is amended--
          (1) by striking ``and'' at the end of paragraph (24);
          (2) by redesignating paragraph (25) as paragraph (26) 
        and by striking the period at the end of such paragraph 
        and inserting a comma; and
          (3) by inserting after paragraph (24) the following 
        new paragraph:
          ``(25) primary care case management services (as 
        defined in subsection (t)); and''.
  (b) Primary Care Case Management Services Defined.--Section 
1905 (42 U.S.C. 1396d) is amended by adding at the end the 
following new subsection:
  ``(t)(1) The term `primary care case management services' 
means case-management related services (including coordination 
and monitoring of health care services) provided by a primary 
care case manager under a primary care case management 
contract.
  ``(2)(A) The term `primary care case manager' means, with 
respect to a primary care case management contract, a provider 
described in subparagraph (B).
  ``(B) A provider described in this subparagraph is a provider 
that provides primary care case management services under 
contract and is--
          ``(i) a physician, a physician group practice, or an 
        entity employing or having other arrangements with 
        physicians; or
          ``(ii) at State option--
                  ``(I) a nurse practitioner (as described in 
                section 1905(a)(21));
                  ``(II) a certified nurse-midwife (as defined 
                in section 1861(gg)); or
                  ``(III) a physician assistant (as defined in 
                section 1861(aa)(5)).
  ``(3) The term `primary care case management contract' means 
a contract with a State agency under which a primary care case 
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 primary care case manager, and which provides for--
          ``(A) reasonable and adequate hours of operation, 
        including 24-hour availability of information, 
        referral, and treatment with respect to medical 
        emergencies;
          ``(B) restriction of enrollment to individuals 
        residing sufficiently near a service delivery site of 
        the entity to be able to reach that site within a 
        reasonable time using available and affordable modes of 
        transportation;
          ``(C) employment of, or contracts or other 
        arrangements with, sufficient numbers of physicians and 
        other appropriate health care professionals to ensure 
        that services under the contract can be furnished to 
        enrollees promptly and without compromise to quality of 
        care;
          ``(D) a prohibition on discrimination on the basis of 
        health status or requirements for health services in 
        enrollment, disenrollment, or reenrollment of 
        individuals eligible for medical assistance under this 
        title; and
          ``(E) a right for an enrollee to terminate enrollment 
        without cause during the first month of each enrollment 
        period, which period shall not exceed six months in 
        duration, and to terminate enrollment at any time for 
        cause.
  ``(4) For purposes of this subsection, the term `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.''.
  (c) Conforming Amendments.--Section 1902 (42 U.S.C. 1396a) is 
amended--
          (1) in subsection (a)(10)(C)(iv), by striking 
        ``(24)'' and inserting ``(25)'', and
          (2) in subsection (j), by striking ``(25)'' and 
        inserting ``(26)''.
  (d) Effective Date.--The amendments made by this section 
apply to primary care case management services furnished on or 
after October 1, 1997.

SEC. 3404. CHANGE IN THRESHOLD AMOUNT FOR CONTRACTS REQUIRING 
                    SECRETARY'S PRIOR APPROVAL.

  (a) In General.--Section 1903(m)(2)(A)(iii) (42 U.S.C. 
1396b(m)(2)(A)(iii)) is amended by striking ``$100,000'' and 
inserting ``$1,000,000 for 1998 and, for a subsequent year, the 
amount established under this clause for the previous year 
increased by the percentage increase in the consumer price 
index for all urban consumers over the previous year''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply to contracts entered into or renewed on or after 
the date of the enactment of this Act.

SEC. 3405. DETERMINATION OF HOSPITAL STAY.

  (a) In General.--Title XIX, as amended by section 3431(a), is 
amended--
          (1) by redesignating section 1933 as section 1934, 
        and
          (2) by inserting after section 1932 the following new 
        section:

                    ``determination of hospital stay

  ``Sec. 1933. (a) In General.--A Medicaid health plan shall 
cover the length of an inpatient hospital stay under this title 
as determined by the attending physician (or other attending 
health care provider to the extent permitted under State law) 
in consultation with the patient to be medically appropriate.
  ``(b) Construction.--Nothing in this title shall be 
construed--
          ``(1) as requiring the provision of inpatient 
        coverage if the attending physician (or other attending 
        health care provider to the extent permitted under 
        State law) and patient determine that a shorter period 
        of hospital stay is medically appropriate, or
          ``(2) as affecting the application of deductibles and 
        coinsurance.''.
  (b) Effective Date.--The amendments made by subsection (a) 
shall apply to discharges occurring on or after 6 months after 
the date of the enactment of this Act.

                   Subchapter B--Payment Methodology

SEC. 3411. FLEXIBILITY IN PAYMENT METHODS FOR HOSPITAL, NURSING 
                    FACILITY, AND ICF/MR SERVICES; FLEXIBILITY FOR HOME 
                    HEALTH.

  (a) Repeal of Boren Requirements.--Section 1902(a)(13) (42 
U.S.C. 1396a(a)) is amended--
          (1) by amending subparagraphs (A) and (B) to read as 
        follows:
                  ``(A) for a public process for determination 
                of rates of payment under the plan for hospital 
                services, nursing facility services, and 
                services of intermediate care facilities for 
                the mentally retarded under which--
                          ``(i) proposed rates are published, 
                        and providers, beneficiaries and their 
                        representatives, and other concerned 
                        State residents are given a reasonable 
                        opportunity for review and comment on 
                        the proposed rates;
                          ``(ii) final rates are published, 
                        together with justifications, and
                          ``(iii) in the case of hospitals, 
                        take into account (in a manner 
                        consistent with section 1923) the 
                        situation of hospitals which serve a 
                        disproportionate number of low income 
                        patients with special needs;
                  ``(B) that the State shall provide assurances 
                satisfactory to the Secretary that the average 
                level of payments under the plan for nursing 
                facility services (as determined on an 
                aggregate per resident-day basis) and the level 
                of payments under the plan for inpatient 
                hospital services (as determined on an 
                aggregate hospital payment basis) furnished 
                during the 18-month period beginning October 1, 
                1997, is not less than the average level of 
                payments that would be made under the plan 
                during such 18-month period for such respective 
                services (determined on such basis) based on 
                rates or payment basis in effect as of May 1, 
                1997;''; and
          (2) by striking subparagraph (C).
  (b) Repeal of Requirements Relating to Home Health 
Services.--Such section is further amended--
          (1) by adding ``and'' at the end of subparagraph (D),
          (2) by striking ``and'' at the end of subparagraph 
        (E), and
          (3) by striking subparagraph (F).
  (c) Effective Date.--The amendments made by this section 
shall apply to payment for items and services furnished on or 
after the date of the enactment of this Act.

SEC. 3412. PAYMENT FOR CENTER AND CLINIC SERVICES.

  (a) Phase-Out of Payment Based on Reasonable Costs.--Section 
1902(a)(13)(E) (42 U.S.C. 1396a(a)(13)(E)) is amended by 
inserting ``(or 95 percent for services furnished during fiscal 
year 2000, 90 percent for service furnished during fiscal year 
2001, and 85 percent for services furnished during fiscal year 
2002)'' after ``100 percent''.
  (b) Transitional Supplemental Payment for Services Furnished 
Under Certain Managed Care Contracts.--
          (1) In general.--Section 1902(a)(13)(E) is further 
        amended--
                  (A) by inserting ``(i)'' after ``(E)'', and
                  (B) by inserting before the semicolon at the 
                end the following: ``and (ii) in carrying out 
                clause (i) in the case of services furnished by 
                a federally qualified health center or a rural 
                health clinic pursuant to a contract between 
                the center and a health maintenance 
                organization under section 1903(m), for payment 
                by the State of a supplemental payment equal to 
                the amount (if any) by which the amount 
                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 payment that is not less than the level and 
        amount of payment which theentity 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 
        section shall apply to services furnished on or after 
        October 1, 1997.
  (c) End of Transitional Payment Rules.--Effective for 
services furnished on or after October 1, 2002--
          (1) subparagraph (E) of section 1902(a)(13) (42 
        U.S.C. 1396a(a)(13)) is repealed, and
          (2) clause (ix) of section 1903(m)(2)(A) (42 U.S.C. 
        1396b(m)(2)(A)) is repealed.
  (d) Flexibility in Coverage of Non-Freestanding Look-
Alikes.--
          (1) In general.--Section 1905(l)(2)(B)(iii) (42 
        U.S.C. 1396d(l)(2)(B)(iii)) is amended by inserting 
        ``and is not other than an entity that is owned, 
        controlled, or operated by another provider'' after 
        ``such a grant''.
          (2) Effective date.--The amendments made by paragraph 
        (1) shall apply to service furnished on and after the 
        date of the enactment of this Act.
  (e) GAO Report.--By not later than February 1, 2001, the 
Comptroller General shall submit to Congress a report on the 
impact of the amendments made by this section on access to 
health care for medicaid beneficiaries and the uninsured served 
at health centers and rural health clinics and the ability of 
health centers and rural health clinics to become integrated in 
a managed care system.

SEC. 3413. TREATMENT OF STATE TAXES IMPOSED ON CERTAIN HOSPITALS THAT 
                    PROVIDE FREE CARE.

  (a) Exception From Tax Does Not Disqualify as Broad-Based 
Tax.--Section 1903(w)(3) (42 U.S.C. 1396b(w)(3)) is amended--
          (1) in subparagraph (B), by striking ``and (E)'' and 
        inserting ``(E), and (F)'', and
          (2) by adding at the end the following:
  ``(F) In no case shall a tax not qualify as a broad-based 
health care related tax under this paragraph because it does 
not apply to a hospital that is exempt from taxation under 
section 501(c)(3) of the Internal Revenue Code of 1986 and that 
does not accept payment under the State plan under this title 
or under title XVIII.''.
  (b) Reduction in Federal Financial Participation in Case of 
Imposition of Tax.--Section 1903(b) (42 U.S.C. 1396b(b)) is 
amended by adding at the end the following:
  ``(4) Notwithstanding the preceding provisions of this 
section, the amount determined under subsection (a)(1) for any 
State shall be decreased in a quarter by the amount of any 
health care related taxes (described in section 1902(w)(3)(A)) 
that are imposed on a hospital described in subsection 
(w)(3)(F) in that quarter.''.
  (c) Effective Date.--The amendments made by subsection (a) 
shall apply to taxes imposed before, on, or after the date of 
the enactment of this Act and the amendment made by subsection 
(b) shall apply to taxes imposed on or after such date.

                       Subchapter C--Eligibility

SEC. 3421. STATE OPTION OF CONTINUOUS ELIGIBILITY FOR 12 MONTHS; 
                    CLARIFICATION OF STATE OPTION TO COVER CHILDREN.

  (a) Continuous Eligibility Option.--Section 1902(e) (42 
U.S.C. 1396a(e)) is amended by adding at the end the following 
new paragraph:
  ``(12) At the option of the State, the plan may provide that 
an individual who is under an age specified by the State (not 
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(l)(1)(D) (42 U.S.C. 
1396a(l)(1)(D)) is amended by inserting ``(or, at the option of 
a State, after any earlier date)'' after ``children born after 
September 30, 1983''.
  (c) Effective Date.--The amendments made by this section 
shall apply to medical assistance for items and services 
furnished on or after October 1, 1997.

SEC. 3422. PAYMENT OF HOME-HEALTH-RELATED MEDICARE PART B PREMIUM 
                    AMOUNT FOR CERTAIN LOW-INCOME INDIVIDUALS.

  (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 section 1905(p)(4), for 
                making medical assistance available for the 
                portion of medicare cost sharing described in 
                section 1905(p)(3)(A)(ii), that is attributable 
                to the application under section 1839(a)(5) of 
                section 1833(d)(2) for individuals who would be 
                described in clause (iii) but for the fact that 
                their income exceeds 120 percent, but is less 
                than 175 percent, of the official poverty line 
                (referred to in section 1905(p)(2)) for a 
                family of the size involved;''.
  (b) 100 Percent Federal Payment.--The third sentence of 
section 1905(b) (42 U.S.C. 1396d(b)) is amended by inserting 
``and with respect to amounts expended for medical assistance 
described in section 1902(a)(10)(E)(iv) for individuals 
described in such section'' before the period at the end.

SEC. 3423. PENALTY FOR FRAUDULENT ELIGIBILITY.

  Section 1128B(a) (42 U.S.C. 1320a-7b(a)), as amended by 
section 217 of the Health Insurance Portability and 
Accountability Act of 1996, is amended--
          (1) by amending paragraph (6) to read as follows:
          ``(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 disposing of the assets 
        results in the imposition of a period of ineligibility 
        for such assistance under section 1917(c),''; and
          (2) in clause (ii) of the matter following such 
        paragraph, by striking ``failure, or conversion by any 
        other person'' and inserting ``failure, conversion, or 
        provision of counsel or assistance by any other 
        person''.

SEC. 3424. TREATMENT OF CERTAIN SETTLEMENT PAYMENTS.

  Notwithstanding any other provision of law, the payments made 
from any fund established pursuant to the settlement in the 
case of In re Factor VIII or IX Concentrate Blood Products 
Litigation, MDL-986, no. 93-C7452 (N.D. Ill.) 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.

  Subchapter D--Programs of All-inclusive Care for the Elderly (PACE)

SEC. 3431. ESTABLISHMENT OF PACE PROGRAM AS MEDICAID STATE OPTION.

  (a) In General.--Title XIX is amended--
          (1) in section 1905(a) (42 U.S.C. 1396d(a)), as 
        amended by section 3403(a)--
                  (A) by striking ``and'' at the end of 
                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 
        section 1932 to PACE program eligible individuals 
        enrolled under the program under such section; and'';
          (2) by redesignating section 1932 as section 1933; 
        and
          (3) by inserting after section 1931 the following new 
        section:

         ``program of all-inclusive care for the elderly (pace)

  ``Sec. 1932. (a) Option.--
          ``(1) In general.--A State may elect to 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 provision of such benefits.
        A State may limit through its PACE program agreement 
        the number of individuals who may be enrolled in a PACE 
        program under the State plan.
          ``(2) PACE program defined.--For purposes of this 
        section and section 1894, the term `PACE program' means 
        a program of all-inclusive care for the elderly that 
        meets the following requirements:
                  ``(A) Operation.--The entity operating the 
                program is a PACE provider (as defined in 
                paragraph (3)).
                  ``(B) Comprehensive benefits.--The program 
                provides comprehensive health care services to 
                PACE program eligible individuals in accordance 
                with the PACE program 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 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 4014(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 paragraph (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 
        applicable), and regulations promulgated to carry out 
        such sections, between the PACE provider, the 
        Secretary, and a State administering agency for the 
        operation of a PACE program by the provider under such 
        sections.
          ``(5) PACE program eligible individual defined.--For 
        purposes of this section, the term `PACE program 
        eligible individual' means, with respect to a PACE 
        program, an individual 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)(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.
          ``(7) PACE demonstration waiver program defined.--For 
        purposes of this section, the term `PACE demonstration 
        waiver program' means a demonstration program under 
        either of the following sections (as in effect before 
        the date of their repeal):
                  ``(A) Section 603(c) of the Social Security 
                Amendments of 1983 (Public Law 98-21), as 
                extended by section 9220 of the Consolidated 
                Omnibus Budget Reconciliation Act of 1985 
                (Public Law 99-272).
                  ``(B) Section 9412(b) of the Omnibus Budget 
                Reconciliation Act of 1986 (Public Law 99-509).
          ``(8) State administering agency 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 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 promulgated 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 contracts with other 
                entities, at a minimum--
                          ``(i) all items and services covered 
                        under title XVIII (for individuals 
                        enrolled under section 1894) and all 
                        items and services covered under this 
                        title, but without any limitation or 
                        condition as to amount, duration, or 
                        scope and without application of 
                        deductibles, copayments, coinsurance, 
                        or othercost-sharing that would 
otherwise apply under such title or this title, respectively; and
                          ``(ii) all additional items and 
                        services specified in regulations, 
                        based upon those required under the 
                        PACE protocol;
                  ``(B) provide such enrollees access to 
                necessary covered items and services 24 hours 
                per day, every day of the year;
                  ``(C) provide services to such enrollees 
                through a comprehensive, multidisciplinary 
                health and social services delivery system 
                which integrates acute and long-term care 
                services pursuant to regulations; and
                  ``(D) specify the covered items and services 
                that will not be provided directly by the 
                entity, and to arrange for delivery of those 
                items and services through contracts meeting 
                the 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 
                improvement, and procedures implementing such 
                plan, in accordance with regulations, and
                  ``(B) written safeguards of the rights of 
                enrolled participants (including a patient bill 
                of rights and procedures for grievances and 
                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 of whether an 
        individual is a PACE program eligible individual--
                  ``(A) 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.
          ``(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, 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 
        impairment) 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 
                (a)(5)(B) for an individual shall be 
                reevaluated at least once a year.
                  ``(B) Exception.--The requirement of annual 
                reevaluation under subparagraph (A) may be 
                waived during a period in accordance with 
                regulations in those cases where the State 
                administering agency determines that there is 
                no reasonable expectation of improvement or 
                significant change in an individual's condition 
                during the period because of the advanced age, 
                severity of the advanced age, severity of 
                chronic condition, or degree of impairment of 
                functional capacity of the individual involved.
          ``(4) Continuation of eligibility.--An 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.--The enrollment and 
        disenrollment of PACE program eligible individuals in a 
        PACE program shall be pursuant to regulations and the 
        PACE program agreement and shall permit enrollees to 
        voluntarily disenroll without cause at any time.
  ``(d) Payments to PACE Providers on a Capitated Basis.--
          ``(1) In general.--In the case of a PACE provider 
        with a PACE program agreement under this section, 
        except as provided 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 agreement for the year. Such amount shall be an 
        amount, specified under the PACE agreement, which is 
        less than the amount that would otherwise have been 
        made under the State plan if the individuals were not 
        so enrolled and shall be adjusted to take into account 
        the comparative frailty of PACE enrollees and such 
        other factors as the Secretary determines to be 
        appropriate. The payment under this section shall be in 
        addition to any payment made under section 1894 for 
        individuals who are enrolled in a PACE program under 
        such section.
  ``(e) PACE Program Agreement.--
          ``(1) Requirement.--
                  ``(A) In general.--The Secretary, in close 
                cooperation with the State administering 
                agency, shall establish procedures for entering 
                into, extending, and terminating PACE 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 
                                subparagraph for the preceding 
                                year plus 20.
                        Subclause (II) shall apply without 
                        regard to the actual 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)(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 provided under the 
                        agreement);
                          ``(iv) shall require a PACE provider 
                        to meet all applicable State and local 
                        laws and requirements; and
                          ``(v) shall have such additional 
                        terms and conditions as the parties may 
                        agree to, consistent with this section 
                        and regulations.
                  ``(B) Service area overlap.--In designating a 
                service area under a PACE program agreement 
                under subparagraph (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.--
                  ``(A) In general.--Under a PACE program 
                agreement, 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 pertinent 
                        financial, medical, and personnel 
                        records, and
                          ``(iii) make to the Secretary and the 
                        State administering agency reports that 
                        the Secretary finds (in consultation 
                        with State administering agencies) 
                        necessary to monitor the operation, 
                        cost, and effectiveness of the PACE 
                        program under this title and title 
                        XVIII.
                  ``(B) Requirements during trial period.--
                During the first three years of operation of a 
                PACE program (either under this section or 
                under a PACE demonstration waiver program), the 
                PACE provider shall provide such additional 
                data as the Secretary specifies in regulations 
                in order to perform the oversight required 
                under paragraph (4)(A).
          ``(4) Oversight.--
                  ``(A) Annual, close oversight during trial 
                period.--During the trial period (as 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 requirements 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 fiscal soundness;
                          ``(iii) comprehensive assessment of 
                        the provider's capacity to provide all 
                        PACE services to all enrolled 
                        participants;
                          ``(iv) detailed analysis of the 
                        entity's substantial compliance with 
                        all significant requirements of this 
                        section and regulations; and
                          ``(v) any other elements the 
                        Secretary or State agency considers 
                        necessary or appropriate.
                  ``(B) Continuing oversight.--After the trial 
                period, the Secretary (in cooperation with the 
                State administering agency) shall continue to 
                conduct such review of the operation of PACE 
                providers and PACE programs as may be 
                appropriate, taking into account the 
                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 paragraph shall be reported promptly 
                to the PACE provider, 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 
                        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
                                  ``(II) the provider has 
                                failed to comply substantially 
                                with conditions for a program 
                                or provider under this section 
                                or section 1894; and
                          ``(ii) the entity has failed to 
                        develop and successfully initiate, 
                        within 30 days of the date of the 
                        receipt of written notice of such a 
                        determination, and continue 
                        implementation of a plan to correct the 
                        deficiencies.
                  ``(C) Termination and transition 
                procedures.--An entity whose PACE provider 
                agreement is terminated under this paragraph 
                shall implement the transition procedures 
                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 
                regulations, the Secretary (and the State 
                administering agency) may take any or all of 
                the following actions:
                          ``(i) Condition the continuation of 
                        the PACE program agreement upon timely 
                        execution of a corrective action plan.
                          ``(ii) Withhold some or all further 
                        payments under the PACE program 
                        agreement under this section or section 
                        1894 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(f)(2) (or, for periods before January 1, 
                1999, section 1876(i)(6)(B)) or 1903(m)(6)(B) 
                in the case of violations by the provider of 
                the type described in section 1857(f)(1) (or 
                1876(i)(6)(A) for such periods) or 
                1903(m)(6)(A), respectively (in relation to 
                agreements, enrollees, and requirements under 
                section 1894 or this section, respectively).
          ``(7) Procedures for termination or imposition of 
        sanctions.--Under regulations, the provisions of 
        section 1857(g) (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 MedicarePlus organization under 
        part C (or for such periods an eligible organization 
        under section 1876).
          ``(8) Timely consideration of applications for pace 
        program provider status.--In 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 1894.
          ``(2) Use of pace protocol.--
                  ``(A) In general.--In issuing such 
                regulations, the Secretary 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.--The Secretary (in close 
                consultation with State administering agencies) 
                may modify or waive such provisions of the PACE 
                protocol in order to provide for reasonable 
                flexibility in adapting the PACE service 
                delivery model to the needs of particular 
                organizations (such as those in rural areas or 
                those that may determine it appropriate to use 
                non-staff physicians accordingly to State 
                licensing law requirements) under this section 
                and section 1932 where such flexibility is not 
                inconsistent with and would not impair the 
                essential elements, objectives, and 
                requirements of the this section, including--
                          ``(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; and
                          ``(v) the assumption by the provider 
                        over time of full financial risk.
          ``(3) Application of certain additional beneficiary 
        and program protections.--
                  ``(A) In general.--In issuing such 
                regulations and subject 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 section 1903(m) relating to protection of 
                beneficiaries and program integrity as would 
                apply to MedicarePlus organizations under such 
                part C (or for such periods eligible 
                organizations under risk-sharing contracts 
                under section 1876) and to health maintenance 
                organizations under prepaid capitation 
                agreements under section 1903(m).
                  ``(B) Considerations.--In issuing such 
                regulations, the Secretary shall--
                          ``(i) take into account the 
                        differences between populations served 
                        and benefits provided under this 
                        section and under part C of title XVIII 
                        (or, for periods before January 1, 
                        1999, section 1876) and 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 enrollees 
                        who are eligible for benefits under 
                        this title or title XVIII.
  ``(g) Waivers of Requirements.--With respect to carrying out 
a PACE program under this section, the 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(m)(2)(A), insofar as it restricts 
        a PACE provider from receiving prepaid capitation 
        payments.
  ``(h) Demonstration Project for For-Profit Entities.--
          ``(1) In general.--In order to demonstrate the 
        operation of a PACE program by a private, for-profit 
        entity, the Secretary (in close consultation with State 
        administering agencies) shall grant 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 
                subparagraph (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 providers 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 granted under this subsection 
                shall not be counted against the numerical 
                limitation specified in subsection (e)(1)(B).
  ``(i) Post-Eligibility Treatment of Income.--A State may 
provide for post-eligibility treatment of income for 
individuals enrolled in PACE programs under this 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.--
          ``(1) Construction.--Nothing in this section or 
        section 1894 shall be construed as preventing a PACE 
        provider from entering into contracts with other 
        governmental or nongovernmental payers for the care of 
        PACE program eligible individuals who are not eligible 
        for benefits under part A, or enrolled under part B, of 
        title XVIII or eligible for medical assistance under 
        this title.''.
  (b) Conforming Amendments.--
          (1) Section 1902 (42 U.S.C. 1396a), as amended by 
        section 3403(c), is amended--
                  (A) in subsection (a)(10)(C)(iv), by striking 
                ``(25)'' and inserting ``(26)'', and
                  (B) in subsection (j), by striking ``(26)'' 
                and inserting ``(27)''.
          (2) Section 1924(a)(5) (42 U.S.C. 1396r-5(a)(5)) is 
        amended--
                  (A) in the heading, by striking ``from 
                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 
                subsection (a)(7) of section 1932) or under a 
                PACE program under section 1894.''.
          (3) Section 1903(f)(4)(C) (42 U.S.C. 1396b(f)(4)(C)) 
        is amended by inserting ``or who is a PACE program 
        eligible individual enrolled in a PACE program under 
        section 1932,'' after ``section 1902(a)(10)(A),''.

SEC. 3432. COVERAGE OF PACE UNDER THE MEDICARE PROGRAM.

  Title XVIII (42 U.S.C. 1395 et seq.) is amended by inserting 
after section 1894 the following new section:

    ``payments to, and coverage of benefits under, programs of all-
                 inclusive care for the elderly (pace)

  ``Sec. 1894. (a) Receipt of Benefits Through Enrollment in 
PACE Program; Definitions for PACE Program Related Terms.--
          ``(1) Benefits through enrollment in a pace 
        program.--In accordance with this section, in the case 
        of an individual who is entitled to benefits under part 
        A or enrolled under part B and who is a PACE program 
        eligible individual with respect to a PACE program 
        offered by a PACE provider under a PACE program 
        agreement--
                  ``(A) the individual may enroll in the 
                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.
          ``(2) Application of definitions.--The definitions of 
        terms under section 1932(a) shall apply under this 
        section in the same manner as they apply under section 
        1932.
  ``(b) Application of Medicaid Terms and Conditions.--Except 
as provided in this section, the terms and conditions for the 
operation and participation of PACE program eligible 
individuals in PACE programs offered by PACE providers under 
PACE program agreements under section 1932 shall apply for 
purposes of this section.
  ``(c) Payment.--
          ``(1) Adjustment in payment amounts.--In the case of 
        individuals enrolled in a PACE program under this 
        section, the amount of payment under this section shall 
        not be the amount calculated under section 1932(d)(2), 
        but shall be an amount, specified under the PACE 
        agreement, based upon payment rates established for 
        purposes of payment under section 1854 (or, for periods 
        before January 1, 1999, for purposes of risk-sharing 
        contracts under section 1876) and shall be adjusted to 
        take into account the comparative frailty of PACE 
        enrollees and such other factors as the Secretary 
        determines to be appropriate. Such amount under such an 
        agreement shall be computed in a manner so that the 
        total payment level for all PACE program eligible 
        individuals enrolled under a program is less than the 
        projected payment under this title for a comparable 
        population not enrolled under a PACE program.
          ``(2) Form.--The Secretary shall make prospective 
        monthly payments of a capitation amount for each PACE 
        program eligible individual enrolled under this section 
        in the same manner and from the same sources as 
        payments are made to a MedicarePlus organization under 
        section 1854 (or, for periods beginning before January 
        1, 1999, to an eligible organization under a risk-
        sharing contract under section 1876). Such payments 
        shall be subject to adjustment in the manner described 
        in section 1854(a)(2) or section 1876(a)(1)(E), as the 
        case may be.
  ``(d) Waivers of Requirements.--With respect to carrying out 
a PACE program under this section, the 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 
        institutional 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 1861(i), insofar as it imposes a 3-day 
        prior hospitalization requirement for coverage of 
        extended care services.
          ``(5) Sections 1862(a)(1) and 1862(a)(9), insofar as 
        they may prevent payment for PACE program services to 
        individuals enrolled under PACE programs.''.

SEC. 3433. EFFECTIVE DATE; TRANSITION.

  (a) Timely Issuance of Regulations; Effective Date.--The 
Secretary of Health and Human Services shall promulgate 
regulations to carry out this subchapter in a timely manner. 
Such regulations shall be designed so that entities may 
establish and operate PACE programs under sections 1894 and 
1932 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, 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 section 1932(e)(1)(B) 
                of the Social Security Act''; and
                  (B) in paragraph (2)--
                          (i) in subparagraph (A), by striking 
                        ``, including permitting the 
                        organization to assume progressively 
                        (over the initial 3-year period of the 
                        waiver) the full financial risk''; and
                          (ii) in subparagraph (C), by adding 
                        at the end the following: ``In granting 
                        further extensions, an organization 
                        shall not be required to provide for 
                        reporting of information which is only 
                        required because of the demonstration 
                        nature of the project.''.
          (2) Elimination of replication requirement.--
        Subparagraph (B) of paragraph (2) of such section shall 
        not apply to waivers granted under such section after 
        the date of the enactment of this Act.
          (3) Timely consideration of applications.--In 
        considering an application for waivers under such 
        section before the effective date of repeals under 
        subsection (c), subject to the numerical limitation 
        under the amendment made by paragraph (1), the 
        application shall be deemed approved unless the 
        Secretary of Health and Human Services, within 90 days 
        after the date of its submission to the Secretary, 
        either denies such request in writing or informs the 
        applicant in writing 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 additional 
        information, the application shall be deemed approved 
        unless the Secretary, within 90 days of such date, 
        denies such request.
  (c) Priority and Special Consideration in 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 1932 of the Social Security Act--
                  (A) first, to entities that are operating a 
                PACE demonstration waiver program (as defined 
                in section 1932(a)(7) of such Act), and
                  (B) then 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 payment is made on a 
                capitated basis with an understanding that the 
                entity was seeking to become a PACE provider.
          (3) Special consideration.--The Secretary shall give 
        special consideration, in the processing of 
        applications described in paragraph (1) and the 
        awarding of waivers described in paragraph (2), to an 
        entity which as of May 1, 1997 through formal 
        activities (such as entering into contracts for 
        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 paragraphs (2) and (3), 
        the following provisions of law are repealed:
                  (A) Section 603(c) of the Social Security 
                Amendments of 1983 (Public Law 98-21).
                  (B) Section 9220 of the Consolidated Omnibus 
                Budget Reconciliation Act of 1985 (Public Law 
                99-272).
                  (C) Section 9412(b) of the Omnibus Budget 
                Reconciliation Act of 1986 (Public Law 99-509).
          (2) Delay in application.--
                  (A) In general.--Subject to subparagraph (B), 
                the repeals made by paragraph (1) shall not 
                apply to waivers granted before the initial 
                effective date of regulations described in 
                subsection (a).
                  (B) Application to approved waivers.--Such 
                repeals shall apply to waivers granted before 
                such date only after allowing such 
                organizations a transition period (of up to 24 
                months) in order to permit sufficient time for 
                an orderly transition from demonstration 
                project authority to general authority provided 
                under the amendments made by this subchapter.
          (3) State option.--A State may elect to maintain the 
        PACE program which (as of the date of the enactment of 
        this Act) were operating under the authority described 
        in paragraph (1) without electing to use the authority 
        under section 1932 of the Public Health Service Act.

SEC. 3434. STUDY AND REPORTS.

  (a) Study.--
          (1) In general.--The Secretary of Health and Human 
        Services (in close consultation with State 
        administering agencies, as defined in section 
        1932(a)(8) of the Social Security Act) shall conduct a 
        study of the quality and cost of providing PACE program 
        services under the medicare and medicaid programs under 
        the amendments made by this subchapter.
          (2) Study of private, for-profit providers.--Such 
        study shall specifically compare the costs, quality, 
        and access to services by entities that are private, 
        for-profit entities operating under demonstration 
        projects waivers granted under section 1932(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 section 1932(h) of the Social 
                Security Act is fewer than 800 (or such lesser 
                number as the Secretarymay find statistically 
sufficient to make determinations respecting findings described in the 
succeeding subparagraphs).
                  (B) The population enrolled with such 
                entities is less frail than the population 
                enrolled with other PACE providers.
                  (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.
  (c) Information Included in Annual Recommendations.--The 
Medicare Payment 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 section 1894(d) of such 
Act and on the treatment of private, for-profit entities as 
PACE providers.

                         Subchapter E--Benefits

SEC. 3441. ELIMINATION OF REQUIREMENT TO PAY FOR PRIVATE INSURANCE.

  (a) Repeal of State Plan Provision.--Section 1902(a)(25) (42 
U.S.C. 1396a(a)(25)) is amended--
          (1) by striking subparagraph (G); and
          (2) by redesignating subparagraphs (H) and (I) as 
        subparagraphs (G) and (H), respectively.
  (b) Making Provision Optional.--Section 1906 (42 U.S.C. 
1396e) is amended--
          (1) in subsection (a)--
                  (A) by striking ``For purposes of section 
                1902(a)(25)(G) and subject to subsection (d), 
                each'' and inserting ``Each'',
                  (B) in paragraph (1), by striking ``shall'' 
                and inserting ``may'', and
                  (C) in paragraph (2), by striking ``shall'' 
                and inserting ``may''; and
          (2) by striking subsection (d).
  (c) Effective Date.--The amendments made by this section 
shall take effect on the date of the enactment of this Act.

SEC. 3442. PERMITTING SAME COPAYMENTS IN HEALTH MAINTENANCE 
                    ORGANIZATIONS AS IN FEE-FOR-SERVICE.

  (a) In General.--Section 1916(a)(2)(D) (42 U.S.C. 
1396o(a)(2)(D)) is amended by inserting ``(at the option of the 
State)'' after ``section 1905(a)(4)(C), or''.
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply to cost sharing with respect to deductions, cost 
sharing and similar charges imposed for items and services 
furnished on or after the date of the enactment of this Act.

SEC. 3443. PHYSICIAN QUALIFICATION REQUIREMENTS.

  (a) In General.--Section 1903(i) (42 U.S.C. 1396b(i)) is 
amended by striking paragraph (12)
  (b) Effective Date.--The amendment made by subsection (a) 
shall apply to services furnished on or after the date of the 
enactment of this Act.

SEC. 3444. ELIMINATION OF REQUIREMENT OF PRIOR INSTITUTIONALIZATION 
                    WITH RESPECT TO HABILITATION SERVICES FURNISHED 
                    UNDER A WAIVER FOR HOME OR COMMUNITY-BASED 
                    SERVICES.

  (a) In General.--Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) 
is amended, in the matter preceding subparagraph (A), by 
striking ``, with respect to individuals who receive such 
services after discharge from a nursing facility or 
intermediate care facility for the mentally retarded''.
  (b) Effective Date.--The amendment made by subsection (a) 
apply to services furnished on or after October 1, 1997.

SEC. 3445. BENEFITS FOR SERVICES OF PHYSICIAN ASSISTANTS.

  (a) In General.--Section 1905(a) (42 U.S.C. 1396d(a)), as 
amended by sections 3403(a) and 3431(a), is amended--
          (1) by redesignating paragraphs (22) through (27) as 
        paragraphs (23) through (28), and
          (2) by inserting after paragraph (21) the following 
        new paragraph:
          ``(22) services furnished by a physician assistant 
        (as defined in section 1861(aa)(5)) which the assistant 
        is legally authorized to perform under State law and 
        with the supervision of a physician;''.
  (b) Conforming Amendments.--Section 1902 (42 U.S.C. 1396a), 
as amended by sections 3403(c) and 3431(b)(1), is amended--
          (1) in subsection (a)(10)(C)(iv), by striking 
        ``(26)'' and inserting ``(27)'', and
          (2) in subsection (j), by striking ``(27)'' and 
        inserting ``(28)''.

SEC. 3446. STUDY AND REPORT ON ACTUARIAL VALUE OF EPSDT BENEFIT.

  (a) Study.--The Secretary of Health and Human Services shall 
provide for a study on the actuarial value of the provision of 
early and periodic screening, diagnostic, and treatment 
services (as defined in section 1905(r) of the Social Security 
Act (42 U.S.C. 1396d(r))) under the medicaid program under 
title XIX of such Act. Such study shall include an examination 
of the portion of such value that is attributable to paragraph 
(5) of such section and to the second sentence of such section.
  (b) Report.--By not later than 18 months after the date of 
the enactment of this Act, the Secretary shall submit a report 
to Congress on the results of the study under subsection (a).

                      Subchapter F--Administration

SEC. 3451. ELIMINATION OF DUPLICATIVE INSPECTION OF CARE REQUIREMENTS 
                    FOR ICFS/MR AND MENTAL HOSPITALS.

  (a) Mental Hospitals.--Section 1902(a)(26) (42 U.S.C. 
1396a(a)(26)) is amended--
          (1) by striking ``provide--
                  ``(A) with respect to each patient'' and 
                inserting ``provide, with respect to each 
                patient''; and
          (2) by striking subparagraphs (B) and (C).
  (b) ICFS/MR.--Section 1902(a)(31) (42 U.S.C. 1396a(a)(31)) is 
amended--
          (1) by striking ``provide--
                  ``(A) with respect to each patient'' and 
                inserting ``provide, with respect to each 
                patient''; and
          (2) by striking subparagraphs (B) and (C).
  (c) Effective Date.--The amendments made by this section take 
effect on the date of the enactment of this Act.

SEC. 3452. ALTERNATIVE SANCTIONS FOR NONCOMPLIANT ICFS/MR.

  (a) In General.--Section 1902(i)(1)(B) (42 U.S.C. 
1396a(i)(1)(B)) is amended by striking ``provide'' and 
inserting ``establish alternative remedies if the State 
demonstrates to the Secretary's satisfaction that the 
alternative remedies are effective in deterring noncompliance 
and correcting deficiencies, and may provide''.
  (b) Effective Date.--The amendments made by subsection (a) 
takes effect on the date of the enactment of this Act.

SEC. 3453. MODIFICATION OF MMIS REQUIREMENTS.

  (a) In General.--Section 1903(r) (42 U.S.C. 1396b(r)) is 
amended--
          (1) by striking all that precedes paragraph (5) and 
        inserting the following:
  ``(r)(1) In order to receive payments under subsection (a) 
for use of automated data systems in administration of the 
State plan under this title, a State must have in operation 
mechanized claims processing and information retrieval systems 
that meet the requirements of this subsection and that the 
Secretary has found--
          ``(A) is adequate to provide efficient, economical, 
        and effective administration of such State plan;
          ``(B) is compatible with the claims processing and 
        information retrieval systems used in the 
        administration of title XVIII, and for this purpose--
                          ``(i) has a uniform identification 
                        coding system for providers, other 
                        payees, and beneficiaries under this 
                        title or title XVIII;
                          ``(ii) provides liaison between 
                        States and carriers and intermediaries 
                        with agreements under title XVIII to 
                        facilitate timely exchange of 
                        appropriate data; and
                          ``(iii) provides for exchange of data 
                        between the States and the Secretary 
                        with respect to persons sanctioned 
                        under this title or title XVIII;
          ``(C) is capable of providing accurate and timely 
        data;
          ``(D) is complying with the applicable provisions of 
        part C of title XI;
          ``(E) is designed to receive provider claims in 
        standard formats to the extent specified by the 
        Secretary; and
          ``(F) effective for claims filed on or after January 
        1, 1999, provides 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 enrollee 
        encounter data and other information that the Secretary 
        may find necessary).''.
          (2) in paragraph (5)--
                  (A) by striking subparagraph (B);
                  (B) by striking all that precedes clause (i) 
                and inserting the following:
  ``(2) In order to meet the requirements of this 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 paragraphs (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 monitored as a part of the Secretary's review of, 
the State's mechanized claims processing and information 
retrieval system under section 1903(r);''.
  (c) Effective Date.--Except as otherwise specifically 
provided, the amendments made by this section shall take effect 
on January 1, 1998.

SEC. 3454. FACILITATING IMPOSITION OF STATE ALTERNATIVE REMEDIES ON 
                    NONCOMPLIANT NURSING FACILITIES.

  (a) In General.--Section 1919(h)(3)(D) (42 U.S.C. 
1396r(h)(3)(D)) is amended--
          (1) by inserting ``and'' at the end of clause (i);
          (2) by striking ``, and'' at the end of clause (ii) 
        and inserting a period; and
          (3) by striking clause (iii).
  (b) Effective Date.--The amendments made by subsection (a) 
take effect on the date of the enactment of this Act.

SEC. 3455. MEDICALLY ACCEPTED INDICATION.

  Section 1927(g)(1)(B)(i) (42 U.S.C. 1396r-8(g)(1)(B)(i)) is 
amended--
          (1) by striking ``and'' at the end of subclause (II),
          (2) by redesignating subclause (III) as subclause 
        (IV), and
          (3) by inserting after subclause (II) the following:
                                  ``(III) the DRUGDEX 
                                Information System; and''.

SEC. 3456. CONTINUATION OF STATE-WIDE SECTION 1115 MEDICAID WAIVERS.

  (a) In General.--Section 1115 (42 U.S.C. 1315) is amended by 
adding at the end the following new subsection:
  ``(e)(1) The provisions of this subsection shall apply to the 
extension of 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) Not earlier than 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 waivers under subsection (a) with respect to the 
project would otherwise have expired.
  ``(5) The Secretary shall release an evaluation of each such 
project not later than 1 year after the date of receipt of the 
final report.
  ``(6) Subject to paragraphs (4) and (7), the extension of a 
waiver project under this subsection shall be on the same terms 
and conditions (including applicable terms and conditions 
relating to quality and access of services, 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 assure that, in the extension of the project under this 
subsection, such condition continues to be met. In applying the 
previous sentence, the Secretary shall take into account the 
Secretary's best estimate of rates of change in expenditures at 
the time of the 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. 3457. AUTHORIZING ADMINISTRATIVE STREAMLINING AND PRIVATIZING 
                    MODIFICATIONS UNDER THE MEDICAID PROGRAM.

  Section 1902 (42 U.S.C. 1396a) is amended by adding at the 
end the following:
  ``(aa)(1) Notwithstanding any other provision of law, no 
provision of law shall be construed as preventing any State 
from allowing determinations of eligibility to receive medical 
assistance under this title to be made by an entity that is not 
a State or local government, or by an individual who is not an 
employee of a State or local government, which meets such 
qualifications as the State determines. For purposes of any 
Federal law, such determinations shall be considered to be made 
by the State and by a State agency.
  ``(2) Nothing in this subsection shall be construed as 
affecting--
          ``(A) the conditions for eligibility for benefits 
        (including any conditions relating to income or 
        resources); and
          ``(B) the rights to challenge determinations 
        regarding eligibility or rights to benefits; and
          ``(C) determinations regarding quality control or 
        error rates.''.

SEC. 3458. EXTENSION OF MORATORIUM.

  Section 6408(a)(3) of the Omnibus Budget 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''.

                      CHAPTER 2--QUALITY ASSURANCE

SEC. 3461. REQUIREMENTS TO ENSURE QUALITY OF AND ACCESS TO CARE UNDER 
                    MANAGED CARE PLANS.

  (a) State Plan Requirement.--Section 1902(a) (42 U.S.C. 
1396a(a)) is amended--
          (1) in paragraph (62), by striking ``; and'' at the 
        end and inserting a semicolon;
          (2) by striking the period at the end of paragraph 
        (63) and inserting ``; and''; and
          (3) by inserting after paragraph (63) the following 
        new paragraph:
          ``(64) provide, with respect to all contracts 
        described in section 1903(m)(2)(A) with an organization 
        or provider, that--
                  ``(A) the State agency develops and 
                implements a quality assessment and improvement 
                strategy, consistent with standards that the 
                Secretary shall establish, in consultation with 
                the States, and monitor and that do not preempt 
                the application of stricter State standards, 
                which includes--
                          ``(i) standards for access to care so 
                        that covered services are available 
                        within reasonable timeframes and in a 
                        manner that ensures continuity of care 
                        and adequate primary care and, where 
                        applicable, specialized services 
                        capacity, including pediatric 
                        specialized services for special needs 
                        children (as defined in section 
                        1915(i)); and
                          ``(ii) procedures for monitoring and 
                        evaluating the quality and 
                        appropriateness of care and services to 
                        beneficiaries that reflect the full 
                        spectrum of populations enrolled under 
                        the contract and that include--
                                  ``(I) requirements for 
                                provision of quality assurance 
                                data to the State using the 
                                data and information set that 
                                the Secretary shall specify 
                                with respect to entities 
                                contracting under section 1876 
                                or alternative data 
                                requirements approved by the 
                                Secretary;
                                  ``(II) regular and periodic 
                                examination of the scope and 
                                content of the quality 
                                improvement strategy; and
                                  ``(III) other aspects of care 
                                and service directly related to 
                                the improvement of quality of 
                                care (including grievance 
                                procedures and marketing and 
                                information standards); and
                  ``(B) that adequate provision is made, 
                consistent with standards that the Secretary 
                shall specify and monitor, with respect to 
                financial reporting under the contracts.''.
  (b) Deemed Compliance.--Section 1903(m) (42 U.S.C. 1396b(m)) 
is amended by adding at the end the following:
  ``(7) Deemed compliance.--
          ``(A) Medicare organizations.--At the option of a 
        State, the requirements of the previous provisions of 
        this subsection shall not apply with respect to a 
        health maintenance organization if the organization is 
        an eligible organization with a contract in effect 
        under section 1876 or a MedicarePlus organization with 
        a contract in effect under C of title XVIII.
          ``(B) Private accreditation.--
                  ``(i) In general.--At the option of a State, 
                such requirements shall not apply with respect 
                to a health maintenance organization if--
                          ``(I) the organization is accredited 
                        by an organization meeting the 
                        requirements described in subparagraph 
                        (C); and
                          ``(II) the standards and process 
                        under which the organization is 
                        accredited meet such requirements as 
                        are established under clause (ii), 
                        without regard to whether or not the 
                        time requirement of such clause is 
                        satisfied.
                  ``(ii) Standards and process.--Not later than 
                180 days after the date of the enactment of 
                this paragraph, the Secretary shall specify 
                requirements for the standards and process 
                under which a health maintenance organization 
                is accredited by an organization meeting the 
                requirements of subparagraph (C).
          ``(C) Accrediting organization.--An accrediting 
        organization meets the requirements of this 
        subparagraph if the organization--
                  ``(i) is a private, nonprofit organization;
                  ``(ii) exists for the primary purpose of 
                accrediting managed care organizations or 
                health care providers; and
                  ``(iii) is independent of health care 
                providers or associations of health care 
                providers.''.
  (c) Application to Managed Care Entities.--Section 
1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is amended--
          (1) by striking ``and'' at the end of clause (x),
          (2) by striking the period at the end of clause (xi) 
        and inserting ``; and'', and
          (3) by adding at the end the following new clause:
          ``(xii) such contract provides for--
                  ``(I) submitting to the State agency such 
                information as may be necessary to monitor the 
                care delivered to members,
                  ``(II) maintenance of an internal quality 
                assurance program consistent with section 
                1902(a)(64)(A), and meeting standards that the 
                Secretary shall establish in regulations; and
                  ``(III) providing effective procedures for 
                hearing and resolving grievances between the 
                entity and members enrolled with the 
                organization under this subsection.''.
  (d) Application to Primary Care Case Management Contracts.--
Section 1905(t)(3), as added by section 3403(b), is amended--
          (1) by striking ``and'' at the end of subparagraph 
        (D),
  (2) by striking the period at the end of subparagraph (E) and 
inserting ``; and'', and
  (3) by adding at the end the following new subparagraph:
          ``(F) if payment is made to the organization on a 
        prepaid capitated or other risk basis, compliance with 
        the requirements of section 1903(m)(2)(A)(xii) in the 
        same manner such requirements apply to a health 
        maintenance organization under section 
        1903(m)(2)(A).''.
  (e) Effective Date.--The amendments made by this section 
apply to agreements between a State agency and an organization 
entered into or renewed on or after January 1, 1999.

SEC. 3462. SOLVENCY STANDARDS FOR CERTAIN HEALTH MAINTENANCE 
                    ORGANIZATIONS.

  (a) In General.--Section 1903(m)(1) (42 U.S.C. 1396b(m)(1)) 
is amended--
          (1) in subparagraph (A)(ii), by inserting ``, meets 
        the requirements of subparagraph (C)(i) (if 
        applicable),'' after ``provision is satisfactory to the 
        State'', and
          (2) by adding at the end the following:
  ``(C)(i) Subject to clause (ii), a provision meets the 
requirements of this subparagraph for an organization if the 
organization meets solvency standards established by the State 
for private health maintenance organizations or is licensed or 
certified by the State as a risk-bearing 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 hospital services 
        and physicians' services;
          ``(II) the organization 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 and meets 
        solvency standards established by the State for such an 
        organization.
For purposes of subclause (IV), the term `control' means the 
possession, whether direct or indirect, of the power to direct 
or cause the direction of the management and policies of the 
organization through membership, board representation, or an 
ownership interest equal to or greater than 50.1 percent.''
  (b) Effective Date.--The amendments made by subsection (a) 
shall apply to contracts entered into or renewed on or after 
October 1, 1998.
  (c) Transition.--In the case of a health maintenance 
organization that as of the date of the enactment of this Act 
has entered into a contract with a State for the provision of 
medical assistance under title XIX under which the organization 
assumes full financial risk and is receiving capitation 
payments, the amendment made by subsection (a) shall not apply 
to such organization until 3 years after the date of the 
enactment of this Act.

SEC. 3463. APPLICATION OF PRUDENT LAYPERSON STANDARD FOR EMERGENCY 
                    MEDICAL CONDITION AND PROHIBITION OF GAG RULE 
                    RESTRICTIONS.

  Section 1903(m) (42 U.S.C. 1396b(m)) is amended by adding at 
the end the following:
  ``(8)(A)(i) Each contract with a health maintenance 
organization under this subsection shall require the 
organization--
          ``(I) to provide coverage for emergency services (as 
        defined in subparagraph (B)) without regard to prior 
        authorization or the emergency care provider's 
        contractual relationship with the organization, and
          ``(II) to comply with guidelines established under 
        section 1852(d)(2) (respecting coordination of post-
        stabilization care) in the same manner as such 
        guidelines apply to MedicarePlus plans offered under 
        part C of title XVIII.
  ``(B) In subparagraph (A)(i)(I), the term `emergency 
services' means, with respect to an individual enrolled with an 
organization, covered inpatient and outpatient services that--
          ``(i) are furnished by a provider that is qualified 
        to furnish such services under this title, and
          ``(ii) are needed to evaluate or stabilize an 
        emergency medical condition (as defined in subparagraph 
        (C)).
  ``(C) In subparagraph (B)(ii), the term `emergency medical 
condition' means a medical condition manifesting itself by 
acute symptoms of sufficient severity such that a prudent 
layperson, who possesses an average knowledge of health and 
medicine, could reasonably expect the 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.
  ``(9)(A) Subject to subparagraphs (B) and (C), under a 
contract under this subsection a health maintenance 
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 plan, if the professional is 
acting within the lawful scope of practice.
  ``(B) Subparagraph (A) shall not be construed as requiring a 
health maintenance organization 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 enrollees before or during 
        enrollment and to enrollees within 90 days after the 
        date that the organization or plan adopts a change in 
        policy regarding such a counseling or referral service.
  ``(C) Nothing in subparagraph (B) shall be construed to 
affect disclosure requirements under State law or under the 
Employee Retirement Income Security Act of 1974.
  ``(D) For purposes of this paragraph, the term `health care 
professional' means a physician (as defined in section 1861(r)) 
or other health care professional if coverage for the 
professional's services is provided under the contract under 
this subsection 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-language pathologist, 
audiologist, registered or licensed practical nurse (including 
nurse practitioner, clinical nurse specialist, certified 
registered nurse anesthetist, and certified nurse-midwife), 
licensed certified social worker, registered respiratory 
therapist, and certified respiratory therapy technician.''.

SEC. 3464. ADDITIONAL FRAUD AND ABUSE PROTECTIONS IN MANAGED CARE.

  (a) Protection Against Marketing Abuses.--Section 1903(m) (42 
U.S.C. 1396b(m)), as amended by section 3463, is amended--
          (1) in paragraph (2)(A)(viii), by inserting ``and 
        compliance with the requirements of paragraphs (10) and 
        (11)'' after ``of this subsection'', and
          (2) by adding at the end the following:
  ``(10)(A)(i) A health maintenance organization with respect 
to activities under this subsection may not 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 misleading 
        information.
  ``(ii) In the process of reviewing and approving such 
materials, the State shall provide for consultation with a 
medical care advisory committee.
  ``(iii) The State may not enter into or renew a contract with 
a health maintenance organization for the provision of services 
to individuals enrolled under the State plan under this title 
if the State determines that the entity distributed directly or 
through any agent or independent contractor marketing materials 
in violation of clause (i)(II).
  ``(B) A health maintenance organization shall distribute 
marketing materials to the entire service area of such 
organization.
  ``(C) A health maintenance organization, or any agency of 
such organization, may not seek to influence an individual's 
enrollment with the organization in conjunction with the sale 
of any other insurance.
  ``(D) Each health maintenance organization shall comply with 
such procedures and conditions as the Secretary prescribes in 
order to ensure that, before an individual is enrolled with the 
organization under this title, the individual is provided 
accurate oral and written and sufficient information to make an 
informed decision whether or not to enroll.
  ``(E) Each health maintenance organization shall not, 
directly or indirectly, conduct door-to-door, telephonic, or 
other `cold call' marketing of enrollment under this title.''.
  (b) Prohibiting Affiliations With Individuals Debarred by 
Federal Agencies.--Section 1903(m) (42 U.S.C. 1396b(m)), as 
amended by section 3463 and subsection (a), is further amended 
by adding at the end the following:
  ``(11)(A) A health maintenance organization may not 
knowingly--
          ``(i) have a person described in subparagraph (C) as 
        a director, officer, partner, or person with beneficial 
        ownership of more than 5 percent of the organization 
        equity; or
          ``(ii) have an employment, consulting, or other 
        agreement with a person described in such subparagraph 
        for the provision of items and services that are 
        significant and material to the organization's 
        obligations under its contract with the State.
  ``(B) If a State finds that a health maintenance organization 
is not in compliance with clause (i) or (ii) of subparagraph 
(A), the State--
          ``(i) shall notify the Secretary of such 
        noncompliance;
          ``(ii) may continue an existing agreement with the 
        organization unless the Secretary (in consultation with 
        the Inspector General of the Department of Health and 
        Human Services) directs otherwise; and
          ``(iii) may not renew or otherwise extend the 
        duration of an existing agreement with the organization 
        unless the Secretary (in consultation with the 
        Inspector General of the Department of Health and Human 
        Services) provides to the State and to the Congress a 
        written statement describing compelling reasons that 
        exist for renewing or extending the agreement.
  ``(C) A person is described in this subparagraph if such 
person--
          ``(i) is debarred, suspended, or otherwise excluded 
        from participating in procurement activities under the 
        Federal acquisition regulation or from participating in 
        nonprocurement activities under regulations issued 
        pursuant to Executive Order 12549; or
          ``(ii) is an affiliate (within the meaning of the 
        Federal acquisition regulation) of a person described 
        in clause (i).''.
  (c) Application of State Conflict-of-Interest Safeguards.--
Section 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)), as amended by 
section 3461(c), is amended--
          (1) by striking ``and'' at the end of clause (xi),
          (2) by striking the period at the end of clause (xii) 
        and inserting ``; and'', and
          (3) by inserting after clause (xi) the following:
          ``(xiii) the State has in effect conflict-of-interest 
        safeguards with respect to officers and employees of 
        the State with responsibilities relating to contracts 
        with such organizations and to any default enrollment 
        process that are at least as effective as the Federal 
        safeguards provided under section 27 of the Office of 
        Federal Procurement Policy Act (41 U.S.C. 423), against 
        conflicts of interest that apply with respect to 
        Federal procurement officials with comparable 
        responsibilities with respect to such contracts.''.
  (d) Limitation on Availability of FFP for Use of Enrollment 
Brokers.--Section 1903(b) (42 U.S.C. 1396b(b)), as amended by 
section 3413(b), is amended by adding at the end the following:
  ``(5) Amounts expended by a State for the use an enrollment 
broker in marketing health maintenance 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.''.
  (e) Effective Date.--The amendments made by this section 
shall take effect on January 1, 1998.

SEC. 3465. GRIEVANCES UNDER MANAGED CARE PLANS.

  Section 1903(m) (42 U.S.C. 1396b(m)) is amended--
          (1) in paragraph (2)(A), as amended by sections 
        3461(c) and 3464(c),--
                  (A) by striking ``and'' at the end of clause 
                (xii),
                  (B) by striking the period at the end of 
                clause (xiii) and inserting ``; and'', and
                  (C) by inserting after clause (xiii) the 
                following new clause:
          ``(xiv) such contract provides for compliance of the 
        organization with the grievance and appeals 
        requirements described in paragraph (3).''; and
          (2) by inserting after paragraph (2) the following 
        new paragraph:
  ``(3)(A) An eligible organization must provide a meaningful 
and expedited procedure, which includes notice and hearing 
requirements, for resolving grievances between the organization 
(including any entity or individual through which the 
organization provides health care services) and members 
enrolled with the organization under this subsection. Under the 
procedure any member enrolled with the organization may at any 
time file orally or in writing a complaint to resolve 
grievances between the member and the organization before a 
board of appeals established under subparagraph (C).
  ``(B)(i) The organization must provide, in a timely manner, 
such an enrollee a notice of any denial of services in-network 
or denial of payment for out-of-network care or notice of 
termination or reduction of services.
  ``(ii) Such notice shall include the following:
          ``(I) A clear statement of the reason for the denial.
          ``(II) An explanation of the complaint process under 
        subparagraph (C) which is available to the enrollee 
        upon request.
          ``(III) An explanation of all other appeal rights 
        available to all enrollees.
          ``(IV) A description of how to obtain supporting 
        evidence for this hearing, including the patient's 
        medical records from the organization, as well as 
        supporting affidavits from the attending health care 
        providers.
  ``(C)(i) Each eligible organization shall establish a board 
of appeals to hear and make determinations on complaints by 
enrollees under this subsection concerning denials of coverage 
or payment for services (whether in-network or out-of-network) 
and the medical necessity and appropriateness of covered items 
and services.
  ``(ii) A board of appeals of an eligible organization shall 
consist of--
          ``(I) representatives of the organization, including 
        physicians, nonphysicians, administrators, and 
        enrollees;
          ``(II) consumers who are not enrollees; and
          ``(III) providers with expertise in the field of 
        medicine which necessitates treatment.
  ``(iii) A board of appeals shall hear and resolve complaints 
within 30 days after the date the complaint is filed with the 
board.
  ``(D) Nothing in this paragraph may be construed to replace 
or supersede any appeals mechanism otherwise provided for an 
individual entitled to benefits under this title.''.

SEC. 3466. STANDARDS RELATING TO ACCESS TO OBSTETRICAL AND 
                    GYNECOLOGICAL SERVICES UNDER MANAGED CARE PLANS.

  (a) In General.--Section 1903(m)(2)(A) (42 U.S.C. 
1396b(m)(2)(A)), as amended by sections 3461(c), 3464(c), and 
3465(1), is amended--
          (1) by striking ``and'' at the end of clause (xiii),
          (2) by striking the period at the end of clause (xiv) 
        and inserting ``; and'', and
          (3) by inserting after clause (xiv) the following:
          ``(xv) the organization complies with the 
        requirements of paragraph (12).''.
  (b) Requirements.--Section 1903(m) (42 U.S.C. 1396b(m)), as 
amended by sections 3463, 3464(a), and 3464(b), is amended by 
adding at the end the following new paragraph:
  ``(12)(A) If a health maintenance organization, under a 
contract under this subsection, requires or provides for an 
enrollee to designate a participating primary care provider--
          ``(i) the organization shall permit a female enrollee 
        to designate an obstetrician-gynecologist who has 
        agreed to be designated as such, as the enrollee's 
        primary care provider; and
          ``(ii) if such an enrollee has not designated such a 
        provider as a primary care provider, the organization--
                  ``(I) may not require prior authorization by 
                the enrollee's primary care provider or 
                otherwise for coverage of obstetric and 
                gynecologic care provided by a participating 
                obstetrician-gynecologist, or a participating 
                health care professional practicing in 
                collaboration with the obstetrician-
                gynecologist and in accordance with State law, 
                to the extent such care is otherwise covered, 
                and
                  ``(II) shall treat the ordering of other 
                gynecologic care by such a participating 
                physician as the prior authorization of the 
                primary care provider with respect to such care 
                under the contract.
  ``(B) Nothing in subparagraph (A)(ii)(II) shall waive any 
requirements of coverage relating to medical necessity or 
appropriateness with respect to coverage of gynecologic care so 
ordered.''.
  (c) Effective Date.--The amendments made by this section 
shall apply to contracts entered into, renewed, or extended on 
or after January 1, 1998.

                      CHAPTER 3--FEDERAL PAYMENTS

SEC. 3471. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER STATE 
                    MEDICAID PROGRAMS.

  (a) Direct Payment by State.--Subsection (a)(1) of section 
1923 (42 U.S.C. 1396r-4) is amended--
          (1) by striking ``and'' at the end of 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) provides that payment adjustments under 
                the plan under this section for services 
                furnished by a hospital on or after October 1, 
                1997, for individuals entitled to benefits 
                under the plan, and enrolled with an entity 
                described in section 1903(m), under a primary 
                care case management system (described in 
                section 1905(t)), or other managed care plan--
                          ``(i) are made directly to the 
                        hospital by the State, and
                          ``(ii) are not used as part of, and 
                        are disregarded in determining the 
                        amount of, prepaid capitation paid 
                        under the State plan with respect to 
                        those services.''.
  (b) Adjustment to State DSH Allocations.--
          (1) In general.--Subsection (f) of such section is 
        amended--
                  (A) in paragraph (2)(A), by inserting ``and 
                paragraph (5)'' after ``subparagraph (B)'', and
                  (B) by adding at the end the following new 
                paragraph:
          ``(5) Adjustments in dsh allotments.--
                  ``(A) Allotment frozen for states with very 
                low dsh expenditures.--In the case of a State 
                for which its State 1995 DSH spending did not 
                exceed 1 percent of the total amount 
                expenditures made under the State plan under 
                this title for medical assistance during fiscal 
                year 1995 (as reported by the State no later 
                than January 1, 1997, on HCFA Form 64), the DSH 
                allotment for each of fiscal years 1998 through 
                2002 is equal to its State 1995 DSH spending.
                  ``(B) Full reduction for high dsh states.--In 
                the case of a State which was classified under 
                this subsection as a high DSH State for fiscal 
                year 1997, the DSH allotment for each of fiscal 
                years 1998 through 2002 is equal to the State 
                1995 DSH spending reduced by the full reduction 
                percentage (described in subparagraph (D)) for 
                the fiscal year involved.
                  ``(C) Half-reduction for other states.--In 
                the case of a State not described in 
                subparagraph (A) or (B), the DSH allotment for 
                each of fiscal years 1998 through 2002 is equal 
                to the State 1995 DSH spending reduced by \1/2\ 
                of the full reduction percentage for the fiscal 
                year involved.
                  ``(D) Full reduction percentage.--For 
                purposes of this paragraph, the `full reduction 
                percentage' for--
                          ``(i) fiscal year 1998 is 2 percent,
                          ``(ii) fiscal year 1999 is 5 percent,
                          ``(iii) fiscal year 2000 is 20 
                        percent,
                          ``(iv) fiscal year 2001 is 30 
                        percent, and
                          ``(v) fiscal year 2002 is 40 percent.
                  ``(E) Definitions.-- In this paragraph:
                          ``(i) State.--The term `State' means 
                        the 50 States and the District of 
                        Columbia.
                          ``(ii) State 1995 dsh spending.--The 
                        term `State 1995 DSH spending' means, 
                        with respect to a State, the total 
                        amount of payment adjustments made 
                        under subsection (c) under the State 
                        plan during fiscal year 1995 as 
                        reported by the State no later than 
                        January 1, 1997, on HCFA Form 64.''.
          (2) Effective date.--The amendments made by paragraph 
        (1) shall apply to fiscal years beginning with fiscal 
        year 1998.
  (c) Transition Rule.--Effective October 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 October 1, 1997, and 
        before October 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 October 1, 1997, and 
        before October 1, 1999)'' were inserted in such section 
        after ``200 percent''.

SEC. 3472. ADDITIONAL FUNDING FOR STATE EMERGENCY HEALTH SERVICES 
                    FURNISHED TO UNDOCUMENTED ALIENS.

  (a) Total Amount Available for Allotment.--There are 
available for allotments under this section for each of the 5 
fiscal years (beginning with fiscal year 1998) $20,000,000 for 
payments to certain States under this section.
  (b) State Allotment Amount.--
          (1) In general.--The Secretary of Health and Human 
        Services shall compute an allotment for each fiscal 
        year beginning with fiscal year 1998 and ending with 
        fiscal year 2002 for each of the 12 States with the 
        highest number of undocumented aliens. The amount of 
        such allotment for each such State for a fiscal year 
        shall bear the same ratio to the total amount available 
        for allotments under 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 payment during 
        the subsequent fiscal year.
          (2) Determination.--For purposes of paragraph (1), 
        the number of undocumented aliens in a State under this 
        section shall be determined based on estimates of the 
        resident illegal alien population residing in each 
        State prepared by the Statistics 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 Secretary shall pay to each State amounts the State 
demonstrates were paid by the State (or by a political 
subdivision of the State) for emergency health services 
furnished to undocumented aliens.
  (d) State Defined.--For purposes of this section, the term 
``State'' includes the District of Columbia.
  (e) State Entitlement.--This section constitutes budget 
authority in advance of appropriations Acts and represents the 
obligation of the Federal Government to provide for the payment 
to States of amounts provided under subsection (c).

           Subtitle F--Child Health Assistance Program (CHAP)

SEC. 3501. SHORT TITLE OF SUBTITLE; TABLE OF CONTENTS OF SUBTITLE.

  (a) Short Title of Subtitle.--This subtitle may be cited as 
the ``Child Health Assistance Program Act of 1997''.
  (b) Table of Contents of Subtitle.--The table of contents of 
this subtitle is as follows:

Sec. 3501. Short title of subtitle; table of contents.
Sec. 3502. Establishment of Child Health Assistance Program (CHAP).

              ``TITLE XXI--CHILD HEALTH ASSISTANCE PROGRAM

    ``Sec. 2101. Purpose; State child health plans.
    ``Sec. 2102. Contents of State child health plan.
    ``Sec. 2103. Allotments.
    ``Sec. 2104. Payments to States.
    ``Sec. 2105. Process for submission, approval, and amendment of 
              State child health plans.
    ``Sec. 2106. Strategic objectives and performance goals; plan 
              administration.
    ``Sec. 2107. Annual reports; evaluations.
    ``Sec. 2108. Definitions.
Sec. 3503. Optional use of State child health assistance funds for 
          enhanced medicaid match for expanded medicaid eligibility.
Sec. 3504. Medicaid presumptive eligibility for low-income children.

SEC. 3502. ESTABLISHMENT OF CHILD HEALTH ASSISTANCE PROGRAM (CHAP).

  The Social Security Act is amended by adding at the end the 
following new title:

              ``TITLE XXI--CHILD HEALTH ASSISTANCE PROGRAM

``SEC. 2101. PURPOSE; STATE CHILD HEALTH PLANS.

  ``(a) Purpose.--The purpose of this title is to provide funds 
to States to enable them to implement plans to initiate and 
expand the provision of child health care assistance to 
uninsured, low-income children in an effective and efficient 
manner that is coordinated with other sources of coverage for 
children. Such assistance may be provided for obtaining 
creditable health coverage through methods specified in the 
plan, which may include any or all of the following:
          ``(1) Providing benefits under the State's medicaid 
        plan under title XIX.
          ``(2) Obtaining coverage under group health plans or 
        group or individual health insurance coverage.
          ``(3) Direct purchase of services from providers.
          ``(4) Other methods specified under the plan.
  ``(b) State Child Health Plan Required.--A State is not 
eligible for payment under section 2104 unless the State has 
submitted to the Secretary under section 2105 a plan that--
          ``(1) sets forth how the State intends to use the 
        funds provided under this title to provide child health 
        assistance to needy children consistent with the 
        provisions of this title, and
          ``(2) is approved under section 2105.
  ``(c) State Entitlement.--This title constitutes budget 
authority in advance of appropriations Acts and represents the 
obligation of the Federal Government to provide for the payment 
to States of amounts provided under section 2104.
  ``(d) Effective Date.--No State is eligible for payments 
under section 2104 for any calendar quarter beginning before 
October 1, 1997.

``SEC. 2102. CONTENTS OF STATE CHILD HEALTH PLAN.

  ``(a) General Background and Description.--A State child 
health plan shall include a description, consistent with the 
requirements of this title, of--
          ``(1) the extent to which, and manner in which, 
        children in the State, including targeted low-income 
        children and other classes of children classified by 
        income and other relevant factors, currently have 
        creditable health coverage (as defined in section 
        2108(c)(2));
          ``(2) current State efforts to provide or obtain 
        creditable health coverage for uncovered children, 
        including the steps the State is taking to identify and 
        enroll all uncovered children who are eligible to 
        participate in public health insurance programs and 
        health insurance programs that involve public-private 
        partnerships;
          ``(3) how the plan is designed to be coordinated with 
        such efforts to increase coverage of children under 
        creditable health coverage; and
          ``(4) how the plan will comply with subsection 
        (c)(5).
  ``(b) General Description of Eligibility Standards and 
Methodology.--
          ``(1) Eligibility standards.--
                  ``(A) In general.--The plan shall include a 
                description of the standards used to determine 
                the eligibility of targeted low-income children 
                for child health assistance under the plan. 
                Such standards may include (to the extent 
                consistent with this title) those relating to 
                the geographic areas to be served by the plan, 
                age, income and resources (including any 
                standards relating to spenddowns and 
                disposition of resources), residency, 
                disability status, immigration status, access 
                to or coverage under other health coverage, and 
                duration of eligibility. Such standards may not 
                discriminate on the basis of diagnosis.
                  ``(B) Limitations on eligibility standards.--
                Such eligibility standards--
                          ``(i) shall, within any defined group 
                        of covered targeted 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 having a preexisting medical 
                        condition.
          ``(2) Methodology.--The plan shall include a 
        description of methods of establishing and continuing 
        eligibility and enrollment, including a methodology for 
        computing family income that is consistent with the 
        methodology used under section 1902(l)(3)(E).
          ``(3) Eligibility screening; coordination with other 
        health coverage programs.--The plan shall include a 
        description of procedures to be used to ensure--
                  ``(A) through both intake and followup 
                screening, that only targeted low-income 
                children are furnished child health assistance 
                under the State child health plan;
                  ``(B) that children found through the 
                screening to be eligible for medical assistance 
                under the State medicaid plan under title XIX 
                are enrolled for such assistance under such 
                plan;
                  ``(C) that the insurance provided under the 
                State child health plan does not substitute for 
                coverage under group health plans; and
                  ``(D) coordination with other public and 
                private programs providing creditable coverage 
                for low-income children.
          ``(4) Nonentitlement.--Nothing in this title shall be 
        construed as providing an individual with an 
        entitlement to child health assistance under a State 
        child health plan.
  ``(c) Description of Assistance.--
          ``(1) In general.--A State child health plan shall 
        include a description of the child health assistance 
        provided under the plan for targeted low-income 
        children. The child health assistance provided to a 
        targeted low-income child under the plan in the form 
        described in paragraph (2) of section 2101(a) shall 
        include benefits (in an amount, duration, and scope 
        specified under the plan) for at least the following 
        categories of services:
                  ``(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.
        The previous sentence shall not apply to coverage under 
        a group health plan if the benefits under such coverage 
        for individuals under this title are no less than the 
        benefits for other individuals similarly covered under 
        the plan.
          ``(2) Items.--The description shall include the 
        following:
                  ``(A) Cost sharing.--Subject to paragraph 
                (3), the amount (if any) of premiums, 
                deductibles, coinsurance, and other cost 
                sharing imposed.
                  ``(B) Delivery method.--The State's approach 
                to delivery of child health assistance, 
                including a general description of--
                          ``(i) the use (or intended use) of 
                        different delivery methods, which may 
                        include the delivery methods used under 
                        the medicaid plan under title XIX, fee-
                        for-service, managed care arrangements 
                        (such as capitated health care plans, 
                        case management, and case 
                        coordination), direct provision of 
                        health care services (such as through 
                        community health centers and 
                        disproportionate share hospitals), 
                        vouchers, and other delivery methods; 
                        and
                          ``(ii) utilization control systems.
          ``(3) Limitations on cost sharing.--
                  ``(A) No cost sharing on preventive 
                benefits.--The plan may not impose deductibles, 
                coinsurance, or similar cost sharing with 
                respect to benefits for preventive services.
                  ``(B) Sliding scale.--To the extent 
                practicable, any premiums imposed under the 
                plan shall be imposed on a sliding scale 
                related to income and the plan may only vary 
                premiums, deductibles, coinsurance, and other 
                cost sharing based on the family income of 
                targeted low-income children only in a manner 
                that does not favor children from families with 
                higher income over children from families with 
                lower income.
          ``(4) Restriction on application of preexisting 
        condition 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 
                insurance coverage.--If the State child health 
                plan provides for benefits through payment for, 
                or a contract with, a group health plan or 
                group health insurance coverage, the plan may 
                permit the imposition of a preexisting 
                condition exclusion but only insofar as it is 
                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.
          ``(5) Special protection for children with chronic 
        health conditions and special health care needs.--In 
        the case of a child who has a chronic condition, life-
        threatening condition, or combination of conditions 
        that warrants medical specialty care and who is 
        eligible for benefits under the plan with respect to 
        such care, the State child health plan shall assure 
        access to such care, including the use of a medical 
        specialist as a primary care provider.
          ``(6) Secondary payment.--Nothing in this section 
        shall be construed as preventing a State from denying 
        benefits to an individual to the extent such benefits 
        are available to the individual under another public or 
        private health care insurance program.
          ``(7) Treatment of cash payments.--Payments in the 
        form of cash or vouchers provided as child health or 
        other assistance under the State child health plan to 
        parents, guardians or other caretakers of a targeted 
        low-income child are not considered income for purpose 
        of eligibility for, or benefits provided under, any 
        means-tested Federal or Federally-assisted program.
  ``(d) Outreach and Coordination.--A State child health plan 
shall include a description of the procedures to be used by the 
State to accomplish the following:
          ``(1) Outreach.--Outreach to families of 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 
        programs.--Coordination of the administration of the 
        State program under this subtitle with other public and 
        private health insurance programs.

``SEC. 2103. ALLOTMENTS.

  ``(a) Total Allotment.--The total allotment that is available 
under this title for each fiscal year, beginning with fiscal 
year 1998, is $2,880,000,000.
  ``(b) Allotments to 50 States and District of Columbia.--
          ``(1) In general.--Subject to paragraphs (4) and (5), 
        of the total allotment available under 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 
                uncovered low-income children for the fiscal 
                year in the State (as determined under 
                paragraph (2)) and (ii) the State cost factor 
                for that State (established under paragraph 
                (3)); to
                  ``(B) the sum of the products computed under 
                subparagraph (A).
          ``(2) Number of uncovered low-income children.--For 
        the purposes of paragraph (1)(A)(i), the number of 
        uncovered low-income children for a fiscal year in a 
        State is equal to the arithmetic average of the number 
        of low-income children (as defined in section 
        2108(c)(4)) with no health insurance coverage, as 
        reported and defined inthe 3 most recent March 
supplements to the Current Population Survey of the Bureau of the 
Census before the beginning of the fiscal year.
          ``(3) Adjustment for geographic variations in health 
        costs.--
                  ``(A) In general.--For purposes of paragraph 
                (1)(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 annual 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 
                purposes of subparagraph (A), the `annual 
                average wages per employee' for a State, or for 
                all the States, for a fiscal year is equal to 
                the average of the annual wages per employee 
                for the State or for the 50 States and the 
                District of Columbia for employees in the 
                health services industry (SIC code 8000), as 
                reported by the Bureau of Labor Statistics 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 decreased in a pro rata manner 
        (but not below $2,000,000) so that the total of such 
        allotments in a fiscal year does not exceed the amount 
        otherwise provided for allotment under paragraph (1) 
        for that fiscal year.
          ``(5) Offset for expenditures under medicaid 
        presumptive eligibility.--The amount of the allotment 
        otherwise provided to a State under this subsection for 
        a fiscal year shall be reduced by the amount of the 
        payments made to the State under section 1903(a) for 
        calendar quarters during such fiscal year that are 
        attributable to provision of medical assistance to a 
        child during a presumptive eligibility period under 
        section 1920A.
  ``(c) Allotments to Territories.--
          ``(1) In general.--Subject to paragraph (3), of the 
        total allotment under subsection (a) for a fiscal year, 
        the Secretary shall allot 0.5 percent among each of the 
        commonwealths and territories described in paragraph 
        (4) in the same proportion as the 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 
        paragraph for--
                  ``(A) Puerto Rico is 91.6 percent,
                  ``(B) Guam is 3.5 percent,
                  ``(C) Virgin Islands is 2.6 percent,
                  ``(D) American Samoa is 1.2 percent, and
                  ``(E) the Northern Mariana Islands is 1.1 
                percent.
          ``(3) Floor.--In no case shall the amount of the 
        allotment to a commonwealth or territory under 
        paragraph (1) for a fiscal year be less than $100,000. 
        To the extent that the application of the previous 
        sentence results in an increase in the allotment to a 
        commonwealth or territory above the amount otherwise 
        provided, the allotments for the other commonwealths 
        and territories under this subsection for the fiscal 
        year shall be decreased (but not below $100,000) in a 
        pro rata manner so that the total of such allotments 
        does not exceed the total amount otherwise provided for 
        allotment under paragraph (1).
          ``(4) 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) Adjustment for States Using Enhanced Medicaid Match.--
In the case of a State that elects the increased medicaid 
matching option under section 1905(t), the amount of the 
State's allotment under this section shall be reduced by the 
amount of additional payment made under section 1903 that is 
attributable to the increase in the Federal medical assistance 
percentage effected under such option.
  ``(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.

``SEC. 2104. PAYMENTS TO STATES.

  ``(a) In General.--Subject to the succeeding provisions of 
this section, the Secretary shall pay to each State with a 
program approved under this title, from its allotment under 
section 2103 (as may be adjusted under section 2103(d)), an 
amount for each quarter up to 80 percent of expenditures under 
that program in the quarter for--
          ``(1) child health assistance for targeted low-income 
        children;
          ``(2) health services initiatives for improving the 
        health of children (including targeted low-income 
        children and other low-income children);
          ``(3) expenditures for outreach activities as 
        provided in section 2102(d)(1); and
          ``(4) other reasonable costs incurred by the State to 
        administer the plan.
  ``(b) Limitation on Certain Payments for Certain 
Expenditures.--
          ``(1) In general.--Funds provided to a State under 
        this title shall only be used to carry out the purposes 
        of this title.
          ``(2) Limitation on expenditures not used for 
        assistance.--Payment shall not be made under subsection 
        (a) for expenditures for items described in paragraphs 
        (2), (3), or (4) of subsection to the extent the total 
        of such expenditures exceeds 15 percent of total 
        expenditures under the plan for the period involved 
        (including any in such total additional Federal medical 
        assistance payments under section 1903(a)(1) that are 
        attributable to an enhanced State medicaid match under 
        section 1905(t)).
          ``(3) Purchase of family coverage.--The Secretary 
        shall establish rules regarding the extent to which 
        payment may be made under subsection (a)(1) for the 
        purchase of family coverage under a group health plan 
        or health insurance coverage that includes coverage of 
        targeted low-income children. Under such rules such 
        payment may be permitted, notwithstanding that a 
        portion may be considered attributable to purchase of 
        coverage for other family members, if the State 
        demonstrates that purchase of such coverage is cost 
        effective relative to the amounts that the State would 
        have paid to obtain comparable coverage only of the 
        targeted low-income children involved. In making such 
        determination, there shall be taken into account the 
        costs of providing coverage for medical assistance for 
        children with similar actuarial characteristics under 
        section 1902(l).
          ``(4) Denial of payment for reduction of medicaid 
        eligibility standards.--No payment may be made under 
        subsection (a) with respect to child health assistance 
        provided under a State child health plan to a targeted 
        low-income child if the child would be eligible for 
        medical assistance under the State plan under title XIX 
        (as such plan was in effect as of June 1, 1997) but for 
        a change in the income or assets standards or 
        methodology under such plan effected after such date.
          ``(5) Disallowances for excluded providers.--
                  ``(A) In general.--Payment shall not be made 
                to a State under subsection (a) for 
                expenditures for items and services furnished--
                          ``(i) by a provider who was excluded 
                        from participation under title V, 
                        XVIII, or XX or under this title 
                        pursuant to section 1128, 1128A, 1156, 
                        or 1842(j)(2), or
                          ``(ii) under the medical direction or 
                        on the prescription of a physician who 
                        was so excluded, if the provider of the 
                        services knew or had reason to know of 
                        the exclusion.
                  ``(B) Exception for emergency services.--
                Subparagraph (A) shall not apply to emergency 
                items or services, not including hospital 
                emergency room services.
          ``(6) 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 subsection (a).
          ``(7) Treatment of third party liability.--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 service 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 assistance under the plan.
          ``(8) Secondary payer provisions.--Except as 
        otherwise provided by law, no payment shall be made to 
        a State under this section for expenditures for child 
        health assistance provided for a targeted low-income 
        child under its plan to the extent that payment has 
        been made or can reasonably be 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 
        operated 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(d)(2) shall apply.
          ``(9) 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 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--
                          ``(i) if the pregnancy is the result 
                        of an act of rape or incest, or
                          ``(ii) in the case where a woman 
                        suffers from a physical disorder, 
                        illness, or injury that would, as 
                        certified by a physician, place the 
                        woman in danger of death unless an 
                        abortion is performed.
  ``(c) Advance Payment; Retrospective Adjustment.--The 
Secretary may make payments under this section for each quarter 
on the basis of advance estimates of expenditures submitted by 
the State and other investigation the Secretary may find 
necessary, and may reduce or increase thepayments as necessary 
to adjust for any overpayment or underpayment for prior quarters.

``SEC. 2105. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT OF STATE 
                    CHILD HEALTH PLANS.

  ``(a) Initial Plan.--
          ``(1) In general.--As a condition of receiving 
        funding under section 2104, a State shall submit to the 
        Secretary a State child health plan that meets the 
        applicable requirements of this title.
          ``(2) Approval.--Except as the Secretary may provide 
        under subsection (e), a State plan submitted under 
        paragraph (1)--
                  ``(A) shall be approved for purposes of this 
                title, and
                  ``(B) shall be effective beginning with a 
                calendar quarter that is specified in the plan, 
                but in no case earlier than the first calendar 
                quarter that begins at least 60 days after the 
                date the plan is submitted.
  ``(b) Plan Amendments.--
          ``(1) In general.--A State may amend, in whole or in 
        part, its State child health plan at any time through 
        transmittal of a plan amendment.
          ``(2) Approval.--Except as the Secretary may provide 
        under subsection (e), an amendment to a state plan 
        submitted under paragraph (1)--
                  ``(A) shall be approved for purposes of this 
                title, and
                  ``(B) shall be effective as provided in 
                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 
                benefits.--
                          ``(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 or 
                        contemporaneous 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 (C) 
                becomes effective in a State fiscal year may 
                not remain in effect after the end of such 
                fiscal year (or, if later, the end of the 90-
                day period on which it becomes effective) 
                unless the amendment has been transmitted to 
                the Secretary.
  ``(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 financial sanctions against the State on 
        the basis of such disapproval.
  ``(d) Program Operation.--
          ``(1) In general.--The State shall conduct the 
        program in accordance with the plan (and any 
        amendments) approved under subsection (c) and with the 
        requirements of this title.
          ``(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 
substantial noncompliance of the plan with the requirements of 
this title under subsection (d)(2).

``SEC. 2106. STRATEGIC OBJECTIVES AND PERFORMANCE GOALS; PLAN 
                    ADMINISTRATION.

  ``(a) Strategic Objectives and Performance Goals.--
          ``(1) Description.--A State child health plan shall 
        include a description of--
                  ``(A) the strategic objectives,
                  ``(B) the performance goals, and
                  ``(C) the performance measures,
        the State has established for providing child health 
        assistance to targeted low-income children under the 
        plan and otherwise for maximizing health coverage for 
        other low-income children and children generally in the 
        State.
          ``(2) Strategic objectives.--Such plan shall identify 
        specific strategic objectives relating to 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 verifiable 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 Secretary 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 2107(a) and the evaluation required by section 
        2107(b).
          ``(3) Audits.--A State child health plan shall 
        include an assurance that the State will afford the 
        Secretary access to any records or information relating 
        to the plan for the purposes of review or audit.
  ``(c) Program Development Process.--A State child health plan 
shall include a description of the process used to involve the 
public in the design and 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 
following sections in part A of title XI shall apply to States 
under this title in the same manner as they applied to a State 
under title XIX:
          ``(1) Section 1101(a)(1) (relating to definition of 
        State).
          ``(2) Section 1116 (relating to administrative and 
        judicial review), but only insofar as consistent with 
        the provisions of part B.
          ``(3) Section 1124 (relating to disclosure of 
        ownership and related information).
          ``(4) Section 1126 (relating to disclosure of 
        information about certain convicted individuals).
          ``(5) Section 1128B(d) (relating to criminal 
        penalties for certain additional charges).
          ``(6) Section 1132 (relating to periods within which 
        claims must be filed).

``SEC. 2107. ANNUAL REPORTS; EVALUATIONS.

  ``(a) Annual Report.--The State shall--
          ``(1) assess the operation of the State plan under 
        this title in each fiscal year, including the progress 
        made in reducing the number of uncovered low-income 
        children; and
          ``(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 health coverage.;
                  ``(B) A description and analysis 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,
                          ``(ii) the quality of health coverage 
                        provided including the types of 
                        benefits provided,
                          ``(iii) the amount and level (payment 
                        of part or all of the premium) of 
                        assistance provided by the State,
                          ``(iv) the service area of the State 
                        plan,
                          ``(v) the time limits for coverage of 
                        a child under the State plan,
                          ``(vi) the State's choice of health 
                        insurance plans and other methods used 
                        for providing child health assistance , 
                        and
                          ``(vii) the sources of non-Federal 
                        funding used in the State plan;
                  ``(C) an assessment of the effectiveness of 
                other public and private programs in the State 
                in increasing the availability of affordable 
                quality individual 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; and
                  ``(H) any other matters the State and the 
                Secretary consider appropriate.
          ``(2) Report of the secretary.--The Secretary shall 
        submit to the Congress and make available to the public 
        by December 31, 2000, a report based on the evaluations 
        submitted by States under paragraph (1), containing any 
        conclusions and recommendations the Secretary considers 
        appropriate.

``SEC. 2108. DEFINITIONS.

  ``(a) Child Health Assistance.--For purposes of this title, 
the term `child health assistance' means payment of part or all 
of the cost of any of the following, or assistance in the 
purchase, in whole or in part, of health benefit coverage that 
includes any of the following, for targeted low-income children 
(as defined in subsection (b)) as specified under the State 
plan:
          ``(1) Inpatient hospital 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 
        administration of such drugs and biologicals, only if 
        such drugs and biologicals are not furnished for the 
        purpose of causing, or assisting in causing, the death, 
        suicide, euthanasia, or mercy killing of a person.
          ``(7) Over-the-counter medications.
          ``(8) Laboratory and radiological services.
          ``(9) Prenatal care and prepregnancy family planning 
        services and supplies.
          ``(10) Inpatient mental health services, including 
        services furnished in a State-operated mental hospital 
        and including residential or other 24-hour 
        therapeutically planned structured services.
          ``(11) Outpatient mental health services, 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 services, home health aide services, personal 
        care, assistance with activities of daily living, chore 
        services, day care services, respite care services, 
        training for family members, and minor modifications to 
        the home).
          ``(15) Nursing care services (such as nurse 
        practitioner services, nurse midwife services, advanced 
        practice nurse services, private duty nursing care, 
        pediatric nurse services, and respiratory care 
        services) in a home, school, or other setting.
          ``(16) Abortion only if necessary to save the life of 
        the mother or if the pregnancy is the result of an act 
        of rape or incest.
          ``(17) Dental services.
          ``(18) Inpatient substance abuse treatment services 
        and residential substance abuse treatment services.
          ``(19) Outpatient substance abuse treatment services.
          ``(20) Case management services.
          ``(21) Care coordination services.
          ``(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 recognized by State law 
        and only if the service is--
                  ``(A) prescribed by or furnished by a 
                physician or other licensed or registered 
                practitioner within the scope of practice 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 accessibility 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.--The term `targeted low-income 
        child' means a child--
                  ``(A) who has been determined eligible by the 
                State for child health assistance under the 
                State plan;
                  ``(B) whose family income (as determined 
                under the State child health plan)--
                          ``(i) exceeds the medicaid applicable 
                        income level (as defined in paragraph 
                        (2) and expressed as a percentage of 
                        the poverty line), but
                          ``(ii) but does not exceed an income 
                        level that is 75 percentage points 
                        higher (as so expressed) than the 
                        medicaid applicable income level, or, 
                        ifhigher, 133 percent of the poverty 
line for a family of the size involved; and
                  ``(C) who is not found to be eligible for 
                medical assistance 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).
        Such term does not include a child who is an inmate of 
        a public institution.
          ``(2) Medicaid applicable income level.--The term 
        `medicaid applicable income level' means, with respect 
        to a child, the effective income level (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(l)(2) for the age of such child. In applying the 
        previous sentence in the case of a child described in 
        section 1902(l)(2)(D), such level shall be applied 
        taking into account the expanded coverage effected 
        among such children under such section with the passage 
        of time.
  ``(c) Additional Definitions.--For purposes of this title:
          ``(1) Child.--The term `child' means an individual 
        under 19 years of age.
          ``(2) Creditable health coverage.--The term 
        `creditable health coverage' has the meaning given the 
        term `creditable coverage' under section 2701(c) of the 
        Public Health Service Act (42 U.S.C. 300gg(c)) and 
        includes coverage (including the direct provision of 
        services) provided to a targeted low-income child under 
        this title.
          ``(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 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 Community Services Block Grant Act (42 U.S.C. 
        9902(2)), including any revision required by such 
        section.
          ``(6) Preexisting condition exclusion.--The term 
        `preexisting condition exclusion' has the meaning given 
        such term in section 2701(b)(1)(A) of the Public Health 
        Service Act (42 U.S.C. 300gg(b)(1)(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 2105.
          ``(8) Uncovered child.--The term `uncovered child' 
        means a child that does not have creditable health 
        coverage.''.
  (b) Conforming Amendments.--
          (1) Definition of state.--Section 1101(a)(1) is 
        amended--
                  (A) by striking ``and XIX'' and inserting 
                ``XIX, and XXI'', and
                  (B) by striking ``title XIX'' and inserting 
                ``titles XIX and XXI''.

SEC. 3503. OPTIONAL USE OF STATE CHILD HEALTH ASSISTANCE FUNDS FOR 
                    ENHANCED MEDICAID MATCH FOR EXPANDED MEDICAID 
                    ELIGIBILITY.

  (a) Increased FMAP for Medical Assistance for Expanded 
Coverage of Targeted Low-Income Children.--Section 1905 of the 
Social Security Act (42 U.S.C. 1396d) is amended--
          (1) in subsection (b), by adding at the end the 
        following new sentence: ``Notwithstanding the first 
        sentence of this subsection, in the case of a State 
        plan that meets the condition described in subsection 
        (t)(1), with respect to expenditures for medical 
        assistance for optional targeted low-income children 
        described in subsection (t)(2), the Federal medical 
        assistance percentage is equal to the enhanced medical 
        assistance percentage described in subsection 
        (t)(3).''; and
          (2) by adding at the end the following new 
        subsection:
  ``(t)(1) The conditions described in this paragraph for a 
State plan are as follows:
          ``(A) The plan is not applying income and resource 
        standards and methodologies for the purpose of 
        determining eligibility of individuals under section 
        1902(l) that are more restrictive than those applied as 
        of June 1, 1997, for the purpose of determining 
        eligibility of individuals under such section.
          ``(B) The plan provides for such reporting of 
        information about expenditures and payments 
        attributable to the operation of this subsection as the 
        Secretary deems necessary in order to carry out 
        sections 2103(d) and 2104(b)(2).
          ``(C) The amount of the increased payments under 
        section 1903(a) resulting from the application of this 
        subsection does not exceed the total amount of any 
        allotment not otherwise expended by the State under 
        section 2103 for the period involved.
  ``(2) For purposes of subsection (b), the term `optional 
targeted low-income child' means a targeted low-income child 
described in section 2108(b)(1) who would not qualify for 
medical assistance under the State plan under this title based 
on such plan as in effect on June 1, 1997 (taking into account 
the process of individuals aging into eligibility under section 
1902(l)(2)(D)).
  ``(3) The enhanced medical assistance percentage described in 
this paragraph for a State is equal to the Federal medical 
assistance percentage (as defined in the first sentence of 
subsection (b)) for the State increased by a number of 
percentage points equal to 30 percent of the number of 
percentagepoints by which (A) such Federal medical assistance 
percentage for the State, is less than (B) 100 percent.
  ``(4) Notwithstanding any other provision of this title, a 
State plan under this title may impose a limit on the number of 
optional targeted low-income children described in paragraph 
(2).''.
  (b) Effective Date.--The amendments made by this section 
shall apply to medical assistance for items and services 
furnished on or after October 1, 1997.

SEC. 3504. MEDICAID PRESUMPTIVE ELIGIBILITY FOR LOW-INCOME CHILDREN.

  (a) In General.--Title XIX of the Social Security Act is 
amended by inserting after section 1920 the following new 
section:

                 ``presumptive eligibility for children

  ``Sec. 1920A. (a) A State plan approved under section 1902 
may provide for making medical assistance with respect to 
health care items and services covered under the State plan 
available to a child during a presumptive eligibility period.
  ``(b) For purposes of this section:
          ``(1) The term `child' means an individual under 19 
        years of age.
          ``(2) The term `presumptive eligibility period' 
        means, with respect to a child, the period that--
                  ``(A) begins with the date on which a 
                qualified entity determines, on the basis of 
                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 assistance under the State 
                        plan, or
                          ``(ii) in the case of a child on 
                        whose behalf an application is not 
                        filed by the last day of the month 
                        following the month during which the 
                        entity makes the 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 Development 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 type 
                described in paragraph (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 
        preventing 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.
  ``(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 5 working days after the date on which 
        determination is made, and
          ``(B) inform the parent or custodian of the child at 
        the time the determination is made that an application 
        for medical assistance under the State plan is required 
        to be made by not later than the last day of the month 
        following the month during which the determination is 
        made.
  ``(3) In the case of a child who is determined by a qualified 
entity to be presumptively eligible for medical 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 application may be the application used for the receipt 
of medical assistance by individuals described in section 
1902(l)(1).
  ``(d) Notwithstanding any other provision of this title, 
medical assistance for items and services described in 
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) of such 
Act (42 U.S.C. 1396a(a)(47)) is amended by inserting before the 
semicolon at the end the following: ``and provide for making 
medical assistance for items and services described in 
subsection (a) of section 1920A available to children during a 
presumptive eligibility period in accordance with such 
section''.
  (2) Section 1903(u)(1)(D)(v) of such Act (42 U.S.C. 
1396b(u)(1)(D)(v)) of such Act is amended by inserting before 
the period at the end the following: ``or for items and 
services described in subsection (a) of section 1920A provided 
to a child during a presumptive eligibility period under such 
section''.
  (c) Effective Date.--The amendments made by this section 
shall take effect on the date of the enactment of this Act.

               TITLE IV--COMMITTEE ON COMMERCE--MEDICARE

SEC. 4000. AMENDMENTS TO SOCIAL SECURITY ACT AND REFERENCES TO OBRA; 
                    TABLE OF CONTENTS OF TITLE.

  (a) Amendments to Social Security Act.--Except as otherwise 
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 Reconciliation 
Act of 1989 (Public Law 101-239), the Omnibus Budget 
Reconciliation Act of 1990 (Public Law 101-508), and the 
Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66), 
respectively.
  (c) Table of Contents of Title.--The table of contents of 
this title is as follows:
Sec. 4000. Amendments to Social Security Act and references to OBRA; 
          table of contents of title.

                    Subtitle A--MedicarePlus Program

                     Chapter 1--MedicarePlus Program

                    SUBCHAPTER A--MEDICAREPLUS PROGRAM

Sec. 4001. Establishment of MedicarePlus program.

                     ``Part C--MedicarePlus Program

    ``Sec. 1851. Eligibility, election, and enrollment.
    ``Sec. 1852. Benefits and beneficiary protections.
    ``Sec. 1853. Payments to MedicarePlus organizations.
    ``Sec. 1854. Premiums.
    ``Sec. 1855. Organizational and financial requirements for 
              MedicarePlus organizations; provider-sponsored 
              organizations.
    ``Sec. 1856. Establishment of standards.
    ``Sec. 1857. Contracts with MedicarePlus organizations.
    ``Sec. 1859. Definitions; miscellaneous provisions.
Sec. 4002. Transitional rules for current medicare HMO program.
Sec. 4003. Conforming changes in medigap program.

   SUBCHAPTER B--SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS

Sec. 4006. MedicarePlus MSA.

    SUBCHAPTER C--GME, IME, AND DSH PAYMENTS FOR MANAGED CARE ENROLLEES

Sec. 4008. Graduate medical education and indirect medical education 
          payments for managed care enrollees.
Sec. 4009. Disproportionate share hospital payments for managed care 
          enrollees.

              Chapter 2--Integrated Long-term Care Programs

    SUBCHAPTER A--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

Sec. 4011. Reference to coverage of PACE under the medicare program.
Sec. 4012. Reference to establishment of PACE program as medicaid State 
          option.

       SUBCHAPTER B--SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS)

Sec. 4015. Social health maintenance organizations (SHMOs).

                       SUBCHAPTER C--OTHER PROGRAMS

Sec. 4018. Orderly transition of municipal health service demonstration 
          projects.
Sec. 4019. Extension of certain medicare community nursing organization 
          demonstration projects.

             Chapter 3--Medicare Payment Advisory Commission

Sec. 4021. Medicare Payment Advisory Commission.

                     Chapter 4--Medigap Protections

Sec. 4031. Medigap protections.
Sec. 4032. Medicare prepaid competitive pricing demonstration project.

                   Subtitle B--Prevention Initiatives

Sec. 4101. Screening mammography.
Sec. 4102. Screening pap smear and pelvic exams.
Sec. 4103. Prostate cancer screening tests.
Sec. 4104. Coverage of colorectal screening.
Sec. 4105. Diabetes screening tests.
Sec. 4106. Standardization of medicare coverage of bone mass 
          measurements.
Sec. 4107. Vaccines outreach expansion.
Sec. 4108. Study on preventive benefits.

                      Subtitle C--Rural Initiatives

Sec. 4206. Informatics, telemedicine, and education demonstration 
          project.

               Subtitle D--Anti-Fraud and Abuse Provisions

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. Inclusion of toll-free number to report medicare waste, 
          fraud, and abuse in explanation of benefits forms.
Sec. 4304. Liability of medicare carriers and fiscal intermediaries for 
          claims submitted by excluded providers.
Sec. 4305. Exclusion of entity controlled by family member of a 
          sanctioned individual.
Sec. 4306. Imposition of civil money penalties.
Sec. 4307. Disclosure of information and surety bonds.
Sec. 4308. Provision of certain identification numbers.
Sec. 4309. Advisory opinions regarding certain physician self-referral 
          provisions.
Sec. 4310. Nondiscrimination in post-hospital referral to home health 
          agencies.
Sec. 4311. Other fraud and abuse related provisions.

                 Subtitle E--Prospective Payment Systems

                     Chapter 2--Payment Under Part B

     SUBCHAPTER A--PAYMENT FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES

Sec. 4411. Elimination of formula-driven overpayments (FDO) for certain 
          outpatient hospital services.
Sec. 4412. Extension of reductions in payments for costs of hospital 
          outpatient services.
Sec. 4413. Prospective payment system for hospital outpatient department 
          services.

                   SUBCHAPTER B--REHABILITATION SERVICES

Sec. 4421. Rehabilitation agencies and services.
Sec. 4422. Comprehensive outpatient rehabilitation facilities (corf).

                     SUBCHAPTER C--AMBULANCE SERVICES

Sec. 4431. Payments for ambulance services.
Sec. 4432. Demonstration of coverage of ambulance services under 
          medicare through contracts with units of local government.

                 Chapter 3--Payment Under Parts A and B

Sec. 4441. Prospective payment for home health services.

             Subtitle G--Provisions Relating to Part B Only

                     Chapter 1--Physicians' Services

Sec. 4601. Establishment of single conversion factor for 1998.
Sec. 4602. Establishing update to conversion factor to match spending 
          under sustainable growth rate.
Sec. 4603. Replacement of volume performance standard with sustainable 
          growth rate.
Sec. 4604. Payment rules for anesthesia services.
Sec. 4605. Implementation of resource-based physician practice expense.
Sec. 4606. Dissemination of information on high per admission relative 
          values for in-hospital physicians' services.
Sec. 4607. No X-ray required for chiropractic services.
Sec. 4608. Temporary coverage restoration for portable electrocardiogram 
          transportation.

                   Chapter 2--Other Payment Provisions

Sec. 4611. Payments for durable medical equipment.
Sec. 4612. Oxygen and oxygen equipment.
Sec. 4613. Reduction in updates to payment amounts for clinical 
          diagnostic laboratory tests.
Sec. 4614. Simplification in administration of laboratory services 
          benefit.
Sec. 4615. Updates for ambulatory surgical services.
Sec. 4616. Reimbursement for drugs and biologicals.
Sec. 4617. Coverage of oral anti-nausea drugs under chemotherapeutic 
          regimen.
Sec. 4618. Rural health clinic services.
Sec. 4619. Increased medicare reimbursement for nurse practitioners and 
          clinical nurse specialists.
Sec. 4620. Increased medicare reimbursement for physician assistants.
Sec. 4621. Renal dialysis-related services.
Sec. 4622. Payment for cochlear implants as customized durable medical 
          equipment.

                        Chapter 3--Part B Premium

Sec. 4631. Part B premium.

            Subtitle H--Provisions Relating to Parts A and B

       Chapter 1--Provisions Relating to Medicare Secondary Payer

Sec. 4701. Permanent extension and revision of certain secondary payer 
          provisions.
Sec. 4702. Clarification of time and filing limitations.
Sec. 4703. Permitting recovery against third party administrators.

                     Chapter 2--Home Health Services

Sec. 4711. Recapturing savings resulting from temporary freeze on 
          payment increases for home health services.
Sec. 4712. Interim payments for home health services.
Sec. 4713. Clarification of part-time or intermittent nursing care.
Sec. 4714. Study of definition of homebound.
Sec. 4715. Payment based on location where home health service is 
          furnished.
Sec. 4716. Normative standards for home health claims denials,
Sec. 4717. No home health benefits based solely on drawing blood.
Sec. 4718. Making part B primary payor for certain home health services.

           Chapter 3--Baby Boom Generation Medicare Commission

Sec. 4721. Bipartisan Commission on the Effect of the Baby Boom 
          Generation on the Medicare Program.

   Chapter 4--Provisions Relating to Direct Graduate Medical Education

Sec. 4731. Limitation on payment based on number of residents and 
          implementation of rolling average FTE count.
Sec. 4732. Phased-in limitation on hospital overhead and supervisory 
          physician component of direct medical education costs.
Sec. 4733. Permitting payment to non-hospital providers.
Sec. 4734. Incentive payments under plans for voluntary reduction in 
          number of residents.
Sec. 4735. Demonstration project on use of consortia.
Sec. 4736. Recommendations on long-term payment policies regarding 
          financing teaching hospitals and graduate medical education.
Sec. 4737. Medicare special reimbursement rule for certain combined 
          residency programs.

                       Chapter 5--Other Provisions

Sec. 4741. Centers of excellence.
Sec. 4742. Medicare part B special enrollment period and waiver of part 
          B late enrollment penalty and medigap special open enrollment 
          period for certain military retirees and dependents.
Sec. 4743. Competitive bidding for certain items and services.

                  Subtitle I--Medical Liability Reform

                      Chapter 1--General Provisions

Sec. 4801. Federal reform of health care liability actions.
Sec. 4802. Definitions.
Sec. 4803. Effective date.

     Chapter 2--Uniform Standards for Health Care Liability Actions

Sec. 4811. Statute of limitations.
Sec. 4812. Calculation and payment of damages.
Sec. 4813. Alternative dispute resolution.

                    Subtitle A--MedicarePlus Program

                    CHAPTER 1--MEDICAREPLUS PROGRAM

                   Subchapter A--MedicarePlus Program

SEC. 4001. ESTABLISHMENT OF MEDICAREPLUS PROGRAM.

  (a) In General.--Title XVIII is amended by redesignating part 
C as part D and by inserting after part B the following new 
part:

                     ``Part C--MedicarePlus Program

                ``eligibility, election, and enrollment

  ``Sec. 1851. (a) Choice of Medicare Benefits Through 
MedicarePlus Plans.--
          ``(1) In general.--Subject to the provisions of this 
        section, each MedicarePlus eligible individual (as 
        defined in paragraph (3)) is entitled to elect to 
        receive benefits under this title--
                  ``(A) through the medicare fee-for-service 
                program under parts A and B, or
                  ``(B) through enrollment in a MedicarePlus 
                plan under this part.
          ``(2) Types of medicareplus plans that may be 
        available.--A MedicarePlus plan may be any of the 
        following types of plans of health insurance:
                  ``(A) Coordinated care plans.--Coordinated 
                care plans which provide health care services, 
                including health maintenance organization plans 
                and preferred provider organization plans.
                  ``(B) Plans offered by provider-sponsored 
                organization.--A MedicarePlus plan offered by a 
                provider-sponsored organization, as defined in 
                section 1855(e).
                  ``(C) Combination of msa plan and 
                contributions to medicareplus msa.--An MSA 
                plan, as defined in section 1859(b)(2), and a 
                contribution into a MedicarePlus medical 
                savings account (MSA).
          ``(3) MedicarePlus eligible individual.--
                  ``(A) In general.--In this title, subject to 
                subparagraph (B), the term `MedicarePlus 
                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 determined to have end-
                stage renal disease, except that an individual 
                who develops end-stage renal disease while 
                enrolled in a MedicarePlus plan may continue to 
                be enrolled in that plan.
  ``(b) Special Rules.--
          ``(1) Residence requirement.--
                  ``(A) In general.--Except as the Secretary 
                may otherwise provide, an individual is 
                eligible to elect a MedicarePlus plan offered 
                by a MedicarePlus organization only if the 
                organization serves the geographic area in 
                which the individual resides.
                  ``(B) Continuation of enrollment permitted.--
                Pursuant to rules specified by the Secretary, 
                the Secretary shall provide that an individual 
                may continue enrollment in a plan, 
                notwithstanding that the individual no longer 
                resides in the service area of the plan, so 
                long as the plan provides benefits for 
                enrollees located in the area in which the 
                individual resides.
          ``(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)(1)), a qualified disabled and working 
        individual (described in section 1905(s)), an 
        individual described in section 1902(a)(10)(E)(iii), or 
        otherwise entitled to medicare cost-sharing under a 
        State plan under title XIX is not eligible to enroll in 
        an MSA plan.
          ``(4) Coverage under msa plans on a 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 enrollment is the 
                        continuation of such an enrollment in 
                        effect as of such date; or
                          ``(ii) as of any date if the number 
                        of such individuals so enrolled as of 
                        such date has reached 500,000.
                Under rules established by the Secretary, an 
                individual is not eligible to enroll (or 
                continue enrollment) in an MSA plan for a year 
                unless the individual provides assurances 
                satisfactory to the Secretary that the 
                individual will reside in the United States for 
                at least 183 days during the year.
                  ``(B) Evaluation.--The Secretary shall 
                regularly evaluate the impact of permitting 
                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.--
          ``(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 subsection (f).
          ``(2) Coordination through medicareplus 
        organizations.--
                  ``(A) Enrollment.--Such process shall permit 
                an individual who wishes to elect a 
                MedicarePlus plan offered by a MedicarePlus 
                organization to make such election through the 
                filing of an appropriate election form with the 
                organization.
                  ``(B) Disenrollment.--Such process shall 
                permit an individual, who has elected a 
                MedicarePlus plan offered by a MedicarePlus 
                organization and who wishes to terminate such 
                election, to terminate such election through 
                the filing of an appropriate election form with 
                the organization.
          ``(3) Default.--
                  ``(A) Initial election.--
                          ``(i) In general.--Subject to clause 
                        (ii), an individual who fails to make 
                        an election during an initial election 
                        period under subsection (e)(1) is 
                        deemed to have chosen the medicare fee-
                        for-service program option.
                          ``(ii) Seamless continuation of 
                        coverage.--The Secretary may establish 
                        procedures under which an individual 
                        who is enrolled in a health plan (other 
                        than MedicarePlus plan) offered by a 
                        MedicarePlus organization at the time 
                        of the initial election period and who 
                        fails to elect to receive coverage 
                        other than through the organization is 
                        deemed to have elected the MedicarePlus 
                        plan offered by the organization (or, 
                        if the organization 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 election until such 
                time as--
                          ``(i) the individual changes the 
                        election under this section, or
                          ``(ii) a MedicarePlus plan is 
                        discontinued, if the individual had 
                        elected such plan at the time of the 
                        discontinuation.
  ``(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 least 30 
                days before the beginning of each annual, 
                coordinated election period (as defined in 
                subsection (e)(3)(B)), the Secretary shall mail 
                to each MedicarePlus eligible individual 
                residing in an area the following:
                          ``(i) General information.--The 
                        general information described in 
                        paragraph (3).
                          ``(ii) List of plans and comparison 
                        of plan options.--A list identifying 
                        the MedicarePlus plans that are (or 
                        will be) available to residents of the 
                        area and information described in 
                        paragraph (4) concerning such plans. 
                        Such information shall be presented in 
                        a comparative form.
                          ``(iii) MedicarePlus monthly 
                        capitation rate.--The amount of the 
                        monthly MedicarePlus capitation rate 
                        for the area.
                          ``(iv) Additional information.--Any 
                        other information that the Secretary 
                        determines will assist the individual 
                        in making the election under this 
                        section.
                The mailing of such information shall be 
                coordinated with the mailing of any annual 
                notice under section 1804.
                  ``(B) Notification to newly medicareplus 
                eligible individuals.--To the extent 
                practicable, the Secretary shall, not later 
                than 2 months before the beginning of the 
                initial MedicarePlus enrollment period for an 
                individual described in subsection (e)(1), mail 
                to the individual the information described in 
                subparagraph (A).
                  ``(C) Form.--The information 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 MedicarePlus plans and 
                the benefits and monthly premiums (and net 
                monthly 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 fee-for-service program 
                option.--A general description of the benefits 
                covered (and not covered) under the medicare 
                fee-for-service program under parts A and B, 
                including--
                          ``(i) covered items and services,
                          ``(ii) beneficiary cost sharing, such 
                        as deductibles, coinsurance, and 
                        copayment amounts, and
                          ``(iii) any beneficiary liability for 
                        balance billing.
                  ``(B) Part b premium.--The part B premium 
                rates that will be charged for part B coverage.
                  ``(C) Election procedures.--Information and 
                instructions on how to exercise election 
                options under this section.
                  ``(D) Rights.--The general description of 
                procedural rights (including grievance and 
                appeals procedures) of beneficiaries under the 
                medicare fee-for-service program and the 
                MedicarePlus program and right to be protected 
                against discrimination based on health status-
                related factors under section 1852(b).
                  ``(E) Information on medigap and medicare 
                select.--A general description of the benefits, 
                enrollment rights, and other requirements 
                applicable to medicare supplemental policies 
                under section 1882 and provisions relating to 
                medicare select policies described in section 
                1882(t).
                  ``(F) Potential for contract termination.--
                The fact that a MedicarePlus organization may 
                terminate or refuse to renew its contract under 
                this part and the effect the termination or 
                nonrenewal of its contract may have on 
                individuals enrolled with the MedicarePlus plan 
                under this part.
          ``(4) Information comparing plan options.--
        Information under this paragraph, with respect to a 
        MedicarePlus plan for a year, shall include the 
        following:
                  ``(A) Benefits.--The benefits covered (and 
                not covered) under the plan, including--
                          ``(i) covered items and services 
                        beyond those provided under the 
                        medicare fee-for-service program,
                          ``(ii) any beneficiary cost sharing,
                          ``(iii) any maximum limitations on 
                        out-of-pocket expenses,
                          ``(iv) in the case of an MSA plan, 
                        differences in cost sharing under such 
                        a plan compared to under other 
                        MedicarePlus plans,
                          ``(v) the use of provider networks 
                        and the restriction on payments for 
                        services furnished other than by other 
                        through the organization,
                          ``(vi) the organization's coverage of 
                        emergency and urgently needed care,
                          ``(vii) the appeal and grievance 
                        rights of enrollees,
                          ``(viii) number of grievances and 
                        appeals, and information on their 
                        disposition in the aggregate,
                          ``(ix) procedures used by the 
                        organization to control utilization of 
                        services and expenditures, and
                          ``(x) any exclusions in the types of 
                        providers participating in the plan's 
                        network.
                  ``(B) Premiums.--The monthly premium (and net 
                monthly premium), if any, for the plan.
                  ``(C) Service area.--The service area of the 
                plan.
                  ``(D) Quality and performance.--To the extent 
                available, plan quality and performance 
                indicators for the benefits under the plan (and 
                how they compare to such indicators under the 
                medicare fee-for-service program under parts A 
                and B in the area involved), including--
                          ``(i) disenrollment rates for 
                        medicare enrollees electing to receive 
                        benefits through the plan for the 
                        previous 2 years (excluding 
                        disenrollment due to death or moving 
                        outside the plan's service area),
                          ``(ii) information on medicare 
                        enrollee satisfaction,
                          ``(iii) information on health 
                        outcomes, and
                          ``(iv) the recent record regarding 
                        compliance of the plan with 
                        requirements of this part (as 
                        determined by the Secretary).
                  ``(E) Supplemental benefits options.--Whether 
                the organization offering the plan offers 
                optional supplemental benefits and the terms 
                and conditions (including premiums) for such 
                coverage.
          ``(5) Maintaining a toll-free number and internet 
        site.--The Secretary shall maintain a toll-free number 
        for inquiries regarding MedicarePlus options and the 
        operation of this part in all areas in which 
        MedicarePlus plans are offered and an Internet site 
        through which individuals may electronically obtain 
        information on such options and MedicarePlus plans.
          ``(6) Use of nonfederal entities.--The Secretary may 
        enter into contracts with non-Federal entities to carry 
        out activities under this subsection.
          ``(7) Provision of information.--A MedicarePlus 
        organization shall provide the Secretary with such 
        information on the organization and each MedicarePlus 
        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 medicareplus 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 MedicarePlus plans 
        offered in the area in which the individual resides, 
        the individual shall make the election under this 
        section during a period (of a duration and beginning at 
        a time specified by the Secretary) at such time. Such 
        period shall be specified in a manner so that, in the 
        case of an individual who elects a MedicarePlus 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 
        opportunities.--Subject to paragraph (5)--
                  ``(A) Continuous open enrollment and 
                disenrollment through 2000.--At any time during 
                1998, 1999, and 2000, a MedicarePlus eligible 
                individual may change the election under 
                subsection (a)(1).
                  ``(B) Continuous open enrollment and 
                disenrollment for first 6 months during 2001.--
                          ``(i) In general.--Subject to clause 
                        (ii), at any time during the first 6 
                        months of 2001, or, if the individual 
                        first becomes a MedicarePlus eligible 
                        individual during 2001, during the 
                        first 6 months during 2001 in which the 
                        individual is a MedicarePluseligible 
individual may change the election under subsection (a)(1).
                          ``(ii) Limitation of one change per 
                        year.--An individual may exercise the 
                        right under clause (i) only once during 
                        2001. 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 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 2001, or, if the 
                        individual first becomes a MedicarePlus 
                        eligible individual during a year after 
                        2001, during the first 3 months of such 
                        year in which the individual is a 
                        MedicarePlus eligible individual, a 
                        MedicarePlus eligible individual may 
                        change the election under subsection 
                        (a)(1).
                          ``(ii) Limitation of one change per 
                        year.--An individual may exercise the 
                        right under clause (i) only once a 
                        year. 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 paragraph (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, coordinated election 
                period.
                  ``(B) Annual, coordinated election period.--
                For purposes of this section, the term `annual, 
                coordinated election period' means, with 
                respect to a calendar year (beginning with 
                2001), the month of October before such year.
                  ``(C) MedicarePlus health fairs.--In the 
                month of October of each year (beginning with 
                1998), the Secretary shall provide for a 
                nationally coordinated educational and 
                publicity campaign to inform MedicarePlus 
                eligible individuals about MedicarePlus plans 
                and the election process provided under this 
                section.
          ``(4) Special election periods.--Effective as of 
        January 1, 2001, an individual may discontinue an 
        election of a MedicarePlus plan offered by a 
        MedicarePlus organization other than during an annual, 
        coordinated election period and make a new election 
        under this section if--
                  ``(A) the organization's or plan's 
                certification under this part has been 
                terminated or the organization has terminated 
                or otherwise discontinued providing the plan;
                  ``(B) the individual is no longer eligible to 
                elect the plan because of a change in the 
                individual's place of residence 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--
                          ``(i) the organization offering the 
                        plan substantially violated a material 
                        provision of the organization's 
                        contract under this part in relation to 
                        the individual (including the failure 
                        to provide an enrollee on a timely 
                        basis medically necessary care for 
                        which benefits are available under the 
                        plan or the failure to provide such 
                        covered care in accordance with 
                        applicable quality standards); or
                          ``(ii) the organization (or an agent 
                        or other entity acting on the 
                        organization's behalf) materially 
                        misrepresented the plan's provisions in 
                        marketing the plan to the individual; 
                        or
                  ``(D) the individual meets such other 
                exceptional conditions as the Secretary may 
                provide.
          ``(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 months of October 1998 
                        and October 1999; and
                  ``(B) may not discontinue an election of an 
                MSA plan except during the periods described in 
                clause (ii) or (iii) of subparagraph (A) and 
                under paragraph (4).
  ``(f) Effectiveness of Elections and Changes of Elections.--
          ``(1) During initial coverage election period.--An 
        election of coverage made during the initial coverage 
        election period under subsection (e)(1) 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.
          ``(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 change 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 MedicarePlus organization shall provide 
        that at any time during which elections are accepted 
        under this section with respect to a MedicarePlus 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 
        MedicarePlus organization, in relation to a 
        MedicarePlus plan it offers, has a capacity limit and 
        the number of MedicarePlus eligible individuals who 
        elect the plan under this section exceeds the capacity 
        limit, the organization may limit the election of 
        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 enrollees 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 MedicarePlus organization may not for 
                any reason terminate the election of any 
                individual under this section for a 
                MedicarePlus plan it offers.
                  ``(B) Basis for termination of election.--A 
                MedicarePlus organization may terminate an 
                individual's election under this section with 
                respect to a MedicarePlus plan it offers if--
                          ``(i) any net monthly 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 
                        payment of net monthly 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.--
                          ``(i) Terminations for cause.--Any 
                        individual whose election is terminated 
                        under clause (i) or (ii) of 
                        subparagraph (B) is deemed to have 
                        elected the medicare fee-for-service 
                        program option described in subsection 
                        (a)(1)(A).
                          ``(ii) Termination based on plan 
                        termination or service area 
                        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 
                        MedicarePlus plan. Such an individual 
                        who fails to make an election during 
                        such period is deemed to have chosen to 
                        change coverage to the medicare fee-
                        for-service program option described in 
                        subsection (a)(1)(A).
                  ``(D) Organization obligation with respect to 
                election forms.--Pursuant to a contract under 
                section 1857, each MedicarePlus organization 
                receiving an election form under subsection 
                (c)(2) shall transmit to the Secretary (at such 
                time and in such manner as the 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 MedicarePlus 
        organization to (or for the use of) MedicarePlus 
        eligible individuals unless--
                  ``(A) at least 45 days before the date of 
                distribution the organization has submitted the 
                material or form to the Secretary for review, 
                and
                  ``(B) the Secretary has not disapproved the 
                distribution of such material or form.
          ``(2) Review.--The standards established under 
        section 1856 shall include guidelines for the review of 
        all such material or form submitted and under such 
        guidelines the Secretary shall disapprove (or later 
        require the correction of) such material or form if the 
        material or form is materially inaccurate or misleading 
        or otherwise makes a material misrepresentation.
          ``(3) Deemed approval (1-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 MedicarePlus 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 to the 
        extent that such material or form is specific only to 
        an area involved.
          ``(4) Prohibition of certain marketing practices.--
        Each MedicarePlus organization shall conform to fair 
        marketing standards, in relation to MedicarePlus plans 
        offered under this part, included in the standards 
        established under section 1856. Such standards shall 
        include aprohibition against a MedicarePlus 
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 MedicarePlus Plan Option.--
Subject to sections 1852(a)(5), 1857(f)(2), and 1857(g)--
          ``(1) payments under a contract with a MedicarePlus 
        organization under section 1853(a) with respect to an 
        individual electing a MedicarePlus plan offered by the 
        organization shall be instead of the amounts which (in 
        the absence of the contract) would otherwise be payable 
        under parts A and B for items and services furnished to 
        the individual, and
          ``(2) subject to subsections (e) and (f) of section 
        1853, only the MedicarePlus organization shall be 
        entitled to receive payments from the Secretary under 
        this title for services furnished to the individual.

                 ``benefits and beneficiary protections

  ``Sec. 1852. (a) Basic Benefits.--
          ``(1) In general.--Except as provided in section 
        1859(b)(2) for MSA plans, each MedicarePlus plan shall 
        provide to members enrolled under this part, through 
        providers and other persons that meet the applicable 
        requirements of this title and part A of title XI--
                  ``(A) those items and services for which 
                benefits are available under parts A and B to 
                individuals residing in the area served by the 
                plan, and
                  ``(B) additional benefits required under 
                section 1854(f)(1)(A).
          ``(2) Satisfaction of requirement.--A MedicarePlus 
        plan (other than an MSA plan) offered by a MedicarePlus 
        organization satisfies paragraph (1)(A), with respect 
        to benefits for items and services furnished other than 
        through a provider that has a contract with the 
        organization offering the plan, if the plan provides 
        (in addition to any cost sharing provided for under the 
        plan) for at least the total dollar amount of payment 
        for such items and services as would otherwise be 
        authorized under parts A and B (including any balance 
        billing permitted under such parts).
          ``(3) Supplemental benefits.--
                  ``(A) Benefits included subject to 
                secretary's approval.--Each MedicarePlus 
                organization may provide to individuals 
                enrolled under this part (without affording 
                those individuals an option to decline the 
                coverage) supplemental health care benefits 
                that the Secretary may approve. The Secretary 
                shall approve any such supplemental benefits 
                unless the Secretary determines that including 
                such supplemental benefits would substantially 
                discourage enrollment by MedicarePlus eligible 
                individuals with the organization.
                  ``(B) At enrollees' option.--A MedicarePlus 
                organization may provide to individuals 
                enrolled under this part (other than under an 
                MSA plan) supplemental health care benefits 
                that the individuals may elect, at their 
                option, to have covered.
          ``(4) Organization as secondary payer.--
        Notwithstanding any other provision of law, a 
        MedicarePlus organization may (in the case of the 
        provision of items and services to an individual under 
        a MedicarePlus plan under circumstances in which 
        payment under this title is made secondary pursuant to 
        section 1862(b)(2)) charge or authorize the provider of 
        such services to charge, in accordance with the charges 
        allowed under such a law, plan, or policy--
                  ``(A) the insurance carrier, employer, or 
                other entity which under such law, plan, or 
                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 section and the Secretary projects that the 
        determination will result in a significant change in 
        the costs to a MedicarePlus 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 
        MedicarePlus capitation rate under section 1853 
        included in the announcement made at the beginning of 
        such period--
                  ``(A) such determination shall not apply to 
                contracts under this part until the first 
                contract year that begins after the end of such 
                period, and
                  ``(B) if such coverage determination provides 
                for coverage of additional benefits or coverage 
                under additional circumstances, section 1851(i) 
                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,
        unless otherwise required by law.
  ``(b) Antidiscrimination.--
          ``(1) In general.--A MedicarePlus 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 Public Health Service Act.
          ``(2) Construction.--Paragraph (1) shall not be 
        construed as requiring a MedicarePlus organization to 
        enroll individuals who are determined to have end-stage 
        renal disease, except as provided under section 
        1851(a)(3)(B).
  ``(c) Detailed Description of Plan Provisions.--A 
MedicarePlus organization shall disclose, in clear, accurate, 
andstandardized form to each enrollee with a MedicarePlus plan 
offered by the organization under this part at the time of enrollment 
and at least annually thereafter, the following information regarding 
such plan:
          ``(1) Service area.--The plan's service area.
          ``(2) Benefits.--Benefits offered (and not offered) 
        under the plan offered, including information described 
        in section 1851(d)(3)(A) and exclusions from coverage 
        and, if it is an MSA plan, a comparison of benefits 
        under such a plan with benefits under other 
        MedicarePlus plans.
          ``(3) Access.--The number, mix, and distribution of 
        plan providers and any point-of-service option 
        (including the supplemental premium for such option).
          ``(4) Out-of-area coverage.--Out-of-area coverage 
        provided by the plan.
          ``(5) Emergency coverage.--Coverage of emergency 
        services and urgently needed care, including--
                  ``(A) the appropriate use of emergency 
                services, including use of the 911 telephone 
                system or its local equivalent in emergency 
                situations and an explanation of what 
                constitutes an emergency situation;
                  ``(B) the process and procedures of the plan 
                for obtaining emergency services; and
                  ``(C) the locations of (i) emergency 
                departments, and (ii) other settings, in which 
                plan physicians and hospitals provide emergency 
                services and post-stabilization care..
          ``(6) Supplemental benefits.--Supplemental benefits 
        available from the organization offering the plan, 
        including--
                  ``(A) whether the supplemental benefits are 
                optional,
                  ``(B) the supplemental benefits covered, and
                  ``(C) the premium price for the supplemental 
                benefits.
          ``(7) Prior authorization rules.--Rules regarding 
        prior authorization or other review requirements that 
        could result in nonpayment.
          ``(8) Plan grievance and appeals procedures.--Any 
        appeal or grievance rights and procedures.
          ``(9) Quality assurance program.--A description of 
        the organization's quality assurance program under 
        subsection (e).
  ``(d) Access to Services.--
          ``(1) In general.--A MedicarePlus organization 
        offering a MedicarePlus 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 in the opinion 
                of the treating health care provider 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 medically 
                        necessary in the opinion of the 
                        treating health care provider and 
                        immediately required because of an 
                        unforeseen illness, injury, or 
                        condition, and it was not reasonable 
                        given the circumstances to obtain the 
                        services through the organization,
                          ``(ii) the services were renal 
                        dialysis services and were provided 
                        other than 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 established under 
                        paragraph (2);
                  ``(D) the organization provides access to 
                appropriate providers, including credentialed 
                specialists, for treatment and services when 
                such treatment and services are determined to 
                be medically necessary in the professional 
                opinion of the treating health care provider, 
                in consultation with the individual; and
                  ``(E) coverage is provided for emergency 
                services (as defined in paragraph (3)) without 
                regard to prior authorization or the emergency 
                care provider's contractual relationship with 
                the organization.
          ``(2) Guidelines respecting coordination of post-
        stabilization care.--A MedicarePlus plan shall comply 
        with such guidelines as the Secretary may prescribe 
        relating to promoting efficient and timely coordination 
        of appropriate maintenance and post-stabilization care 
        of an enrollee after the enrollee has been determined 
        to be stable under section 1867.
          ``(3) Definition of emergency services.--In this 
        subsection--
                  ``(A) In general.--The term `emergency 
                services' means, with respect to an individual 
                enrolled with an organization, covered 
                inpatient and outpatient services that--
                          ``(i) are furnished by a provider 
                        that is qualified to furnish such 
                        services under this title, and
                          ``(ii) are needed to evaluate or 
                        stabilize an emergency medical 
                        condition (as defined in subparagraph 
                        (B)).
                  ``(B) Emergency medical condition based on 
                prudent layperson.--The term `emergency medical 
                condition' means a medical condition 
                manifesting itself by acute symptoms of 
                sufficient severity such that a prudent 
                layperson, who possesses an average knowledgeof 
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) Determination of hospital length of stay.--
                  ``(A) In general.--A MedicarePlus 
                organization shall cover the length of an 
                inpatient hospital stay under this part as 
                determined by the attending physician (or other 
                attending health care provider to the extent 
                permitted under State law) in consultation with 
                the patient to be medically appropriate.
                  ``(B) Construction.--Nothing in this 
                paragraph shall be construed--
                          ``(i) as requiring the provision of 
                        inpatient coverage if the attending 
                        physician (or other attending health 
                        care provider to the extent permitted 
                        under State law) and patient determine 
                        that a shorter period of hospital stay 
                        is medically appropriate, or
                          ``(ii) as affecting the application 
                        of deductibles and coinsurance.
  ``(e) Quality Assurance Program.--
          ``(1) In general.--Each MedicarePlus organization 
        must have arrangements, consistent with any regulation, 
        for an ongoing quality assurance program for health 
        care services it provides to individuals enrolled with 
        MedicarePlus plans of the organization.
          ``(2) Elements of program.--The quality assurance 
        program shall--
                  ``(A) stress health outcomes and provide for 
                the collection, analysis, and reporting of data 
                (in accordance with a quality measurement 
                system that the Secretary recognizes) that will 
                permit measurement of outcomes and other 
                indices of the quality of MedicarePlus plans 
                and organizations;
                  ``(B) provide for the establishment of 
                written protocols for utilization review, based 
                on current standards of medical practice;
                  ``(C) provide review by physicians and other 
                health care professionals of the process 
                followed in the provision of such health care 
                services;
                  ``(D) monitor and evaluate high volume and 
                high risk services and the care of acute and 
                chronic conditions;
                  ``(E) evaluate the continuity and 
                coordination of care that enrollees receive;
                  ``(F) have mechanisms to detect both 
                underutilization and overutilization of 
                services;
                  ``(G) after identifying areas for 
                improvement, establish or alter practice 
                parameters;
                  ``(H) take action to improve quality and 
                assesses the effectiveness of such action 
                through systematic followup;
                  ``(I) make available information on quality 
                and outcomes measures to facilitate beneficiary 
                comparison and choice of health coverage 
                options (in such form and on such quality and 
                outcomes measures as the Secretary determines 
                to be appropriate);
                  ``(J) be evaluated on an ongoing basis as to 
                its effectiveness;
                  ``(K) include measures of consumer 
                satisfaction; and
                  ``(L) provide the Secretary with such access 
                to information collected as may be appropriate 
                to monitor and ensure the quality of care 
                provided under this part.
          ``(3) External review.--Each MedicarePlus 
        organization shall, for each MedicarePlus 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 furnished by MedicarePlus plans for which 
        payment is made under this title.
          ``(4) Treatment of accreditation.--The Secretary 
        shall provide that a MedicarePlus organization is 
        deemed to meet requirements of paragraphs (1) through 
        (3) of this subsection and subsection (h) (relating to 
        confidentiality and accuracy of enrollee records) if 
        the organization is accredited (and periodically 
        reaccredited) by a private organization under a process 
        that the Secretary has determined assures that the 
        organization, as a condition of accreditation, applies 
        and enforces standards with respect to the requirements 
        involved that are no less stringent than the standards 
        established under section 1856 to carry out the 
        respective requirements.
  ``(f) Coverage Determinations.--
          ``(1) Decisions on nonemergency care.--A MedicarePlus 
        organization shall make determinations regarding 
        authorization requests for nonemergency care on a 
        timely basis, depending on the urgency of the 
        situation. The organization shall provide notice of any 
        coverage denial, which notice shall include a statement 
        of the reasons for the denial and a description of the 
        grievance and appeals processes available.
          ``(2) Reconsiderations.--
                  ``(A) In general.--Subject to subsection 
                (g)(4), a reconsideration of a determination of 
                an organization denying coverage shall be made 
                within 30 days of the date of receipt of 
                medical information, but not later than 60 days 
                after the date of the determination.
                  ``(B) Physician decision on certain 
                reconsiderations.--A reconsideration relating 
                to a determination to deny coverage based on a 
                lack of medicalnecessity shall be made only by 
a physician with appropriate expertise in the field of medicine which 
necessitates treatment who is other than a physician involved in the 
initial determination.
  ``(g) Grievances and Appeals.--
          ``(1) Grievance mechanism.--Each MedicarePlus 
        organization 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 MedicarePlus plans of the 
        organization under this part.
          ``(2) Appeals.--An enrollee with a MedicarePlus plan 
        of a MedicarePlus organization under this part who is 
        dissatisfied by reason of the enrollee's failure to 
        receive any health service to which the enrollee 
        believes the enrollee is entitled and at no greater 
        charge than the enrollee believes the enrollee is 
        required to pay is entitled, if the amount in 
        controversy is $100 or more, to a hearing before the 
        Secretary to the same extent as is 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 notifying the other party, be 
        entitled to judicial review of the Secretary'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 sections 
        205(b) and 205(g) as provided in this paragraph, and in 
        applying section 205(l) thereto, 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.
          ``(3) Independent review of 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.
          ``(4) Expedited determinations and 
        reconsiderations.--
                  ``(A) Receipt of requests.--An enrollee in a 
                MedicarePlus plan may request, either in 
                writing or orally, an expedited determination 
                or reconsideration by the MedicarePlus 
                organization regarding a matter described in 
                paragraph (2). The organization shall also 
                permit the acceptance of such requests by 
                physicians.
                  ``(B) Organization procedures.--
                          ``(i) In general.--The MedicarePlus 
                        organization shall maintain procedures 
                        for expediting organization 
                        determinations and reconsiderations 
                        when, upon request of an enrollee, the 
                        organization determines that the 
                        application of normal time frames for 
                        making 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.
                          ``(ii) Timely response.--In an urgent 
                        case described in clause (i), the 
                        organization shall notify the enrollee 
                        (and the physician involved, as 
                        appropriate) of the determination (or 
                        determination on the reconsideration) 
                        as expeditiously as the enrollee's 
                        health condition requires, but not 
                        later than 72 hours (or 24 hours in the 
                        case of a reconsideration) 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 Secretary may permit in 
                        specified cases.
                          ``(iii) Secretarial report.--The 
                        Secretary shall annually report 
                        publicly on the number and disposition 
                        of denials and appeals within each 
                        MedicarePlus organization, and those 
                        reviewed and resolved by the 
                        independent entities under this 
                        subsection.
  ``(h) Confidentiality and Accuracy of Enrollee Records.--Each 
MedicarePlus organization shall establish procedures--
          ``(1) to safeguard the privacy of individually 
        identifiable enrollee information,
          ``(2) to maintain accurate and timely medical records 
        and other health information for enrollees, and
          ``(3) to assure timely access of enrollees to their 
        medical information.
  ``(i) Information on Advance Directives.--Each MedicarePlus 
organization shall meet the requirement of section 1866(f) 
(relating to maintaining written policies and procedures 
respecting advance directives).
  ``(j) Rules Regarding Physician Participation.--
          ``(1) Procedures.--Each MedicarePlus organization 
        shall establish reasonable procedures relating to the 
        participation (under an agreement between a physician 
        and the organization) of physicians under MedicarePlus 
        plans offered by the organization under this part. Such 
        procedures shall include--
                  ``(A) providing notice of the rules regarding 
                participation,
                  ``(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 presentation of 
                information and views of the physician 
                regarding such decision.
          ``(2) Consultation in medical policies.--A 
        MedicarePlus organization shall consult with physicians 
        who have entered into participation agreements with the 
        organization regarding the organization's medical 
        policy, quality, and medical management procedures.
          ``(3) Prohibiting interference with provider advice 
        to enrollees.--
                  ``(A) In general.--Subject to subparagraphs 
                (B) and (C), a MedicarePlus organization (in 
                relation to an individual enrolled under a 
                MedicarePlus plan offered by the organization 
                under this part) 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 
                plan, if the professional is acting within the 
                lawful scope of practice.
                  ``(B) Conscience protection.--Subparagraph 
                (A) shall not be construed as requiring a 
                MedicarePlus plan to provide, reimburse for, or 
                provide coverage of a counseling or referral 
                service if the MedicarePlus organization 
                offering the plan--
                          ``(i) objects to the provision of 
                        such service on moral or religious 
                        grounds; and
                          ``(ii) in the manner and through the 
                        written instrumentalities such 
                        MedicarePlus organization deems 
                        appropriate, makes available 
                        information on its policies regarding 
                        such service to prospective enrollees 
                        before or during enrollment and to 
                        enrollees within 90 days after the date 
                        that the organization or plan adopts a 
                        change in policy regarding such a 
                        counseling or referral service.
                  ``(C) Construction.--Nothing in subparagraph 
                (B) shall be construed to affect disclosure 
                requirements under State law or under the 
                Employee Retirement Income Security Act of 
                1974.
                  ``(D) Health care professional defined.--For 
                purposes of this paragraph, the term `health 
                care professional' means a physician (as 
                defined in section 1861(r)) or other health 
                care professional if coverage for the 
                professional's services is provided under the 
                MedicarePlus plan 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-language pathologist, audiologist, 
                registered or licensed practical nurse 
                (including nurse practitioner, 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 health care provider incentive 
        plans.--
                  ``(A) In general.--No MedicarePlus 
                organization may operate any health care 
                provider incentive plan (as defined in 
                subparagraph (B)) unless the following 
                requirements are met:
                          ``(i) No specific payment is made 
                        directly or indirectly under the plan 
                        to a health care provider or health 
                        care provider group as an inducement to 
                        reduce or limit medically necessary 
                        services provided with respect to a 
                        specific individual enrolled with the 
                        organization.
                          ``(ii) If the plan places a health 
                        care provider or health care provider 
                        group at substantial financial risk (as 
                        determined by the Secretary) for 
                        services not provided by the health 
                        care provider or health care provider 
                        group, the organization--
                                  ``(I) provides stop-loss 
                                protection for the health care 
                                provider or group that is 
                                adequate and appropriate, based 
                                on standards developed by the 
                                Secretary that take into 
                                account the number of health 
                                care providers placed at such 
                                substantial financial risk in 
                                the group or under the plan and 
                                the number of individuals 
                                enrolled with the organization 
                                who receive services from the 
                                health care provider or group, 
                                and
                                  ``(II) conducts periodic 
                                surveys of both individuals 
                                enrolled and 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 subparagraph.
                  ``(B) Health care provider incentive plan 
                defined.--In this paragraph, the term `health 
                care provider incentive plan' means any 
                compensation arrangement between a MedicarePlus 
                organization and a health care provider or 
                health care provider group that may directly or 
                indirectly have the effect of reducing or 
                limiting services provided with respect to 
                individuals enrolled with the organization 
                under this part.
                  ``(C) Health care provider defined.--For the 
                purposes of this paragraph, the term `health 
                care provider' has the meaning given the term 
                `health care professional' in paragraph (3)(D).
          ``(5) Limitation on provider indemnification.--A 
        MedicarePlus organization may not provide (directly or 
        indirectly) for a provider (or group of providers) to 
        indemnify the organization against any liability 
        resulting from a civil action brought for any damage 
        caused to an enrollee with a MedicarePlus plan of the 
        organization under this part by the organization's 
        denial of medically necessary care.
          ``(6) Limitation on non-compete clause.--A 
        MedicarePlus organization may not (directly or 
        indirectly) seek to enforce any contractual provision 
        which prevents a provider whose contractual obligations 
        to the organization for the provision of services 
        through the organization have ended from joining or 
        forming any competing MedicarePlusorganization that is 
a provider-sponsored organization in the same area.
  ``(k) Treatment of Services Furnished by Certain Providers.--
A physician or other entity (other than a provider of services) 
that does not have a contract establishing payment amounts for 
services furnished to an individual enrolled under this part 
with a MedicarePlus organization shall accept as payment in 
full for covered services under this title that are furnished 
to such an individual the amounts that the physician or other 
entity could collect if the individual were not so enrolled. 
Any penalty or other provision of law that applies to such a 
payment with respect to an individual entitled to benefits 
under this title (but not enrolled with a MedicarePlus 
organization under this part) also applies with respect to an 
individual so enrolled.
  ``(l) Disclosure of Use of DSH and Teaching Hospitals.--Each 
MedicarePlus organization shall provide the Secretary with 
information on--
          ``(1) the extent to which the organization provides 
        inpatient and outpatient hospital benefits under this 
        part--
                  ``(A) through the use of hospitals that are 
                eligible for additional payments under section 
                1886(d)(5)(F)(i) (relating to so-called DSH 
                hospitals), or
                  ``(B) through the use of teaching hospitals 
                that receive payments under section 1886(h); 
                and
          ``(2) the extent to which differences between payment 
        rates to different hospitals reflect the 
        disproportionate share percentage of low-income 
        patients and the presence of medical residency training 
        programs in those hospitals.
  ``(m) Out-of-Network Access.--If an organization offers to 
members enrolled under this section one plan which provides for 
coverage of services covered under parts A and B primarily 
through providers and other persons who are members of a 
network of providers and other persons who have entered into a 
contract with the organization to provide such services, 
nothing in this section shall be construed as preventing the 
organization from offering such members (at the time of 
enrollment) another plan which provides for coverage of such 
items which are not furnished through such network providers.
  ``(n) Non-Preemption of State Law.--A State may establish or 
enforce requirements with respect to beneficiary protections in 
this section, but only if such requirements are more stringent 
than the requirements established under this section.
  ``(o) Nondiscrimination in Selection of Network Health 
Professionals.--
          ``(1) In general.--A MedicarePlus organization 
        offering a MedicarePlus plan offering network coverage 
        shall not discriminate in selecting the members of its 
        health professional network (or in establishing the 
        terms and conditions for membership in such network) on 
        the basis of the race, national origin, gender, age, or 
        disability (other than a disability that impairs the 
        ability of an individual to provide health care 
        services or that may threaten the health of enrollees) 
        of the health professional.
          ``(2) Appropriate range of services.--A MedicarePlus 
        organization shall not deny any health care 
        professionals, based solely on the license or 
        certification as applicable under State law, the 
        ability to participate in providing covered health care 
        services, or be reimbursed or indemnified by a network 
        plan for providing such services under this part.
          ``(3) Definitions.--For purposes of this subsection:
                  ``(A) Network.--The term `network' means, 
                with respect to a MedicarePlus organization 
                offering a MedicarePlus plan, the participating 
                health professionals and providers through whom 
                the organization provides health care items and 
                services to enrollees.
                  ``(B) Network coverage.--The term `network 
                coverage' means a MedicarePlus plan offered by 
                a MedicarePlus organization that provides or 
                arranges for the provision of health care items 
                and services to enrollees through participating 
                health professionals and providers.
                  ``(C) Participating.--The term 
                `participating' means, with respect to a health 
                professional or provider, a health professional 
                or provider that provides health care items and 
                services to enrollees under network coverage 
                under an agreement with the MedicarePlus 
                organization offering the coverage.
  ``(p) Special Rule for Unrestricted Fee-for-Service MSA 
Plans.--Subsections (j)(1) and (k) shall not apply to a 
MedicarePlus organization with respect to an MSA plan it offers 
if the plan does not limit the providers through whom benefits 
may be obtained under the plan.

                ``payments to medicareplus organizations

  ``Sec. 1853. (a) Payments to Organizations.--
          ``(1) Monthly payments.--
                  ``(A) In general.--Under a contract under 
                section 1857 and subject to subsections (e) and 
                (f), the Secretary shall make monthly payments 
                under this section in advance to each 
                MedicarePlus organization, with respect to 
                coverage of an individual under this part in a 
                MedicarePlus payment area for a month, in an 
                amount equal to \1/12\ of the annual 
                MedicarePlus capitation rate (as calculated 
                under subsection (c)) with respect to that 
                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 payment to a MedicarePlus 
                organization with respect to classes of 
                individuals determined to have end-stage renal 
                disease and enrolled in a MedicarePlus plan 
ofthe organization. Such rates of payment shall be actuarially 
equivalent to rates paid to other enrollees in the MedicarePlus payment 
area (or such other area as specified by the Secretary). In accordance 
with regulations, the Secretary shall provide for the application of 
the seventh sentence of section 1881(b)(7) to payments under this 
section covering the provision of renal dialysis treatment in the same 
manner as such sentence applies to composite rate payments described in 
such sentence.
          ``(2) Adjustment to reflect number of enrollees.--
                  ``(A) In general.--The amount of payment 
                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 payment.
                  ``(B) Special rule for certain enrollees.--
                          ``(i) In general.--Subject to clause 
                        (ii), the Secretary 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 MedicarePlus 
                        organization under a plan operated, 
                        sponsored, or 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 information 
                        required to be disclosed under 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 
                October 1, 1999, a report on a method of risk 
                adjustment of payment rates under this section 
                that accounts for variations in per capita 
                costs based on health status. Such report shall 
                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 
                MedicarePlus organizations (and eligible 
                organizations with risk-sharing contracts under 
                section 1876) to submit, for periods beginning 
                on or after January 1, 1998, data regarding 
                inpatient hospital services and other services 
                and other information the Secretary deems 
                necessary.
                  ``(C) Initial implementation.--The Secretary 
                shall first provide for implementation of a 
                risk adjustment methodology that accounts for 
                variations in per capita costs based on health 
                status and other demographic factors for 
                payments by no later than January 1, 2000.
  ``(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 August 1 before the calendar year 
        concerned--
                  ``(A) the annual MedicarePlus capitation rate 
                for each MedicarePlus payment area for the 
                year, and
                  ``(B) the risk and other factors to be used 
                in adjusting such rates under subsection 
                (a)(1)(A) for payments for months in that year.
          ``(2) Advance notice of methodological changes.--At 
        least 45 days before making the announcement under 
        paragraph (1) for a year, the Secretary shall provide 
        for notice to MedicarePlus organizations of proposed 
        changes to be made in the methodology from the 
        methodology and assumptions used in the previous 
        announcement and shall provide such organizations an 
        opportunity to comment on such proposed changes.
          ``(3) Explanation of assumptions.--In each 
        announcement made under paragraph (1), the Secretary 
        shall include an explanation of the assumptions and 
        changes in methodology used in the announcement in 
        sufficient detail so that MedicarePlus organizations 
        can compute monthly adjusted MedicarePlus capitation 
        rates for individuals in each MedicarePlus payment area 
        which is in whole or in part within the service area of 
        such an organization.
  ``(c) Calculation of Annual MedicarePlus Capitation Rates.--
          ``(1) In General.--For purposes of this part, each 
        annual MedicarePlus capitation rate, for a MedicarePlus 
        payment area for a contract year consisting of a 
        calendar year, is equal to the largest of the amounts 
        specified in the following subparagraphs (A), (B), or 
        (C):
                  ``(A) Blended capitation rate.--The sum of--
                          ``(i) area-specific percentage for 
                        the year (as specified under paragraph 
                        (2) for the year) of the annual area-
                        specific MedicarePlus capitation rate 
                        for the year for the MedicarePlus 
                        payment area, as determined under 
                        paragraph (3), and
                          ``(ii) national percentage (as 
                        specified under paragraph (2) for the 
                        year) of the input-price-adjusted 
                        annual national MedicarePlus capitation 
                        rate for the year, as determined under 
                        paragraph (4),
                multiplied by the payment adjustment factors 
                described in subparagraphs (A) and (B) of 
                paragraph (5).
                  ``(B) Minimum amount.--12 multiplied by the 
                following amount:
                          ``(i) For 1998, $350 (but not to 
                        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 payment 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 
                        MedicarePlus growth percentage, 
                        specified under paragraph (6) for that 
                        succeeding year.
                  ``(C) Minimum percentage increase.--
                          ``(i) For 1998, the annual per capita 
                        rate of payment for 1997 determined 
                        under section 1876(a)(1)(C) for the 
                        MedicarePlus payment area.
                          ``(ii) For 1999 and 2000, 101 percent 
                        of the annual MedicarePlus capitation 
                        rate under this paragraph for the area 
                        for the previous year.
                          ``(iii) For a subsequent year, 102 
                        percent of the annual MedicarePlus 
                        capitation rate under this paragraph 
                        for the area for the previous year.
          ``(2) Area-specific and national percentages.--For 
        purposes of paragraph (1)(A)--
                  ``(A) for 1998, the `area-specific 
                percentage' is 90 percent and the `national 
                percentage' is 10 percent,
                  ``(B) for 1999, the `area-specific 
                percentage' is 85 percent and the `national 
                percentage' is 15 percent,
                  ``(C) for 2000, the `area-specific 
                percentage' is 80 percent and the `national 
                percentage' is 20 percent,
                  ``(D) for 2001, the `area-specific 
                percentage' is 75 percent and the `national 
                percentage' is 25 percent, and
                  ``(E) for a year after 2001, the `area-
                specific percentage' is 70 percent and the 
                `national percentage' is 30 percent.
          ``(3) Annual area-specific medicareplus capitation 
        rate.--
                  ``(A) In general.--For purposes of paragraph 
                (1)(A), subject to subparagraph (B), the annual 
                area-specific MedicarePlus capitation rate for 
                a MedicarePlus payment area--
                          ``(i) for 1998 is the annual per 
                        capita rate of payment for 1997 
                        determined under section 1876(a)(1)(C) 
                        for the area, increased by the national 
                        per capita MedicarePlus growth 
                        percentage for 1998 (as defined in 
                        paragraph (6)); or
                          ``(ii) for a subsequent year is the 
                        annual area-specific MedicarePlus 
                        capitation rate for the previous year 
                        determined under this paragraph for the 
                        area, increased by the national per 
                        capita MedicarePlus growth percentage 
                        for such subsequent year.
                  ``(B) Removal of medical education and 
                disproportionate share hospital payments from 
                calculation of adjusted average per capita 
                cost.--
                          ``(i) In general.--In determining the 
                        area-specific MedicarePlus capitation 
                        rate under subparagraph (A), for a year 
                        (beginning with 1998), the annual per 
                        capita rate of payment for 1997 
                        determined under section 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 subparagraph 
                        (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.--The payment 
                adjustments described in this subparagraph are 
                payment adjustments which the Secretary 
                estimates were payable during 1997--
                          ``(i) under section 1886(d)(5)(F) for 
                        hospitals serving a disproportionate 
                        share of low-income patients,
                          ``(ii) for the indirect costs of 
                        medical education under section 
                        1886(d)(5)(B), and
                          ``(iii) for direct graduate medical 
                        education costs under section 1886(h),
                multiplied by a ratio (estimated by the 
                Secretary) of total payments under subsection 
                (h) and section 1858 in 1998 to payments under 
                such subsection and payments under such section 
                in such year for hospitals not reimbursed under 
                section 1814(b)(3).
          ``(4) Input-price-adjusted annual national 
        medicareplus capitation rate.--
                  ``(A) In general.--For purposes of paragraph 
                (1)(A), the input-price-adjusted annual 
                national MedicarePlus capitation rate for a 
                MedicarePlus payment area for a year is equal 
                to the sum, for all the types of medicare 
                services (as classified by the Secretary), of 
                the product (for each such type of service) 
                of--
                          ``(i) the national standardized 
                        annual MedicarePlus capitation rate 
                        (determined under subparagraph (B)) for 
                        the year,
                          ``(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 ofsuch 
services in the area compared to the national average input price of 
such services.
                In applying clause (iii), the Secretary shall, 
                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 
                medicareplus capitation rate.--In subparagraph 
                (A)(i), the `national standardized annual 
                MedicarePlus capitation rate' for a year is 
                equal to--
                          ``(i) the sum (for all MedicarePlus 
                        payment areas) of the product of--
                                  ``(I) the annual area-
                                specific MedicarePlus 
                                capitation rate for that year 
                                for the area under paragraph 
                                (3), and
                                  ``(II) the average number of 
                                medicare beneficiaries residing 
                                in that area in the year, 
                                multiplied 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 paragraph for 1998--
                          ``(i) medicare services shall be 
                        divided into 2 types of services: part 
                        A services and part B services;
                          ``(ii) the proportions described in 
                        subparagraph (A)(ii)--
                                  ``(I) for part A services 
                                shall be the ratio (expressed 
                                as a percentage) of the 
                                national average annual per 
                                capita rate of payment for part 
                                A for 1997 to the total 
                                national average annual per 
                                capita 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 payment rates for relative 
                        hospital wage levels for hospitals 
                        located in the payment area involved;
                          ``(iv) for part B services--
                                  ``(I) 66 percent of payments 
                                attributable to such services 
                                shall be adjusted by the index 
                                of the geographic area factors 
                                under section 1848(e) used to 
                                adjust payment rates for 
                                physicians' services 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 factors.--
        For purposes of paragraph (1)(A)--
                  ``(A) Blended rate payment adjustment 
                factor.--For each year, the Secretary shall 
                compute a blended rate payment adjustment 
                factor such that, not taking into account 
                subparagraphs (B) and (C) of paragraph (1) and 
                the application of the payment adjustment 
                factor described in subparagraph (B) but taking 
                into account paragraph (7), the aggregate of 
                the payments that would be made under this part 
                is equal to the aggregate payments that would 
                have been made under this part (not taking into 
                account such subparagraphs and such other 
                adjustment factor) if the area-specific 
                percentage under paragraph (1) for the year had 
                been 100 percent and the national percentage 
                had been 0 percent.
                  ``(B) Floor-and-minimum-update payment 
                adjustment factor.--For each year, the 
                Secretary shall compute a floor-and-minimum-
                update payment adjustment factor so that, 
                taking into account the application of the 
                blended rate payment adjustment factor under 
                subparagraph (A) and subparagraphs (B) and (C) 
                of paragraph (1) and the application of the 
                adjustment factor under this subparagraph, the 
                aggregate of the payments under this part shall 
                not exceed the aggregate payments that would 
                have been made under this part if subparagraphs 
                (B) and (C) of paragraph (1) did not apply and 
                if the floor-and-minimum-update payment 
                adjustment factor under this subparagraph was 
                1.
          ``(6) National per capita medicareplus growth 
        percentage defined.--
                  ``(A) In general.--In this part, the 
                `national per capita MedicarePlus growth 
                percentage' for a year is the percentage 
                determined by the Secretary, by April 30th 
                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 enrollees, 
                and enrollees with end-stage renal disease. 
                Such percentage shall include an adjustment for 
                over or under projection in the growth 
                percentage for previous years.
                  ``(B) Adjustment.--The number of percentage 
                points specified in this subparagraph is--
                          ``(i) for 1998, 0.5 percentage 
                        points,
                          ``(ii) for 1999, 0.5 percentage 
                        points,
                          ``(iii) for 2000, 0.5 percentage 
                        points,
                          ``(iv) for 2001, 0.5 percentage 
                        points,
                          ``(v) for 2002, 0.5 percentage 
                        points, and
                          ``(vi) for a year after 2002, 0 
                        percentage points.
          ``(7) treatment of areas with highly variable payment 
        rates.--In the case of a MedicarePlus payment area for 
        which the annual per capita rate of payment determined 
        under section 1876(a)(1)(C) for 1997 varies by more 
        than 20 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 enrollees in the area.
  ``(d) MedicarePlus Payment Area Defined.--
          ``(1) In general.--In this part, except as provided 
        in paragraph (3), the term `MedicarePlus payment area' 
        means a county, or equivalent area specified by the 
        Secretary.
          ``(2) Rule for esrd beneficiaries.--In the case of 
        individuals who are determined to have end stage renal 
        disease, the MedicarePlus payment area shall be a State 
        or such other payment area as the Secretary specifies.
          ``(3) Geographic adjustment.--
                  ``(A) In general.--Upon written request of 
                the chief executive officer of a State for a 
                contract year (beginning after 1998) made at 
                least 7 months before the beginning of the 
                year, the Secretary shall make a geographic 
                adjustment to a MedicarePlus payment area in 
                the State otherwise determined under paragraph 
                (1)--
                          ``(i) to a single statewide 
                        MedicarePlus payment area,
                          ``(ii) to the metropolitan based 
                        system described in subparagraph (C), 
                        or
                          ``(iii) to consolidating into a 
                        single MedicarePlus payment area 
                        noncontiguous counties (or equivalent 
                        areas described in paragraph (1)) 
                        within a State.
                Such adjustment shall be effective for payments 
                for months beginning with January of the year 
                following the year in which the request is 
                received.
                  ``(B) Budget neutrality adjustment.--In the 
                case of a State requesting an adjustment under 
                this paragraph, the Secretary shall adjust the 
                payment rates otherwise established under this 
                section for MedicarePlus payment areas in the 
                State in a manner so that the aggregate of the 
                payments under this section in the State shall 
                not exceed the aggregate payments that would 
                have been made under this section for 
                MedicarePlus payment areas in the State in the 
                absence of the adjustment under this paragraph.
                  ``(C) Metropolitan based system.--The 
                metropolitan based system described in this 
                subparagraph is one in which--
                          ``(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 consolidated area within the State, 
                        are treated as a single MedicarePlus 
                        payment area, and
                          ``(ii) all areas in the State that do 
                        not fall within a metropolitan 
                        statistical area are treated as a 
                        single MedicarePlus payment area.
                  ``(D) Areas.--In subparagraph (C), the terms 
                `metropolitan statistical area', `consolidated 
                metropolitan statistical 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 monthly 
        premium for an MSA plan for a MedicarePlus payment area 
        for a year is less than \1/12\ of the annual 
        MedicarePlus capitation rate 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 MedicarePlus MSA established (and, if 
        applicable, designated) by the individual under 
        paragraph (2).
          ``(2) Establishment and designation of medicareplus 
        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 an individual for 
        a month unless the individual--
                  ``(A) has established before the beginning of 
                the month (or by such other deadline as the 
                Secretary may specify) a MedicarePlus MSA (as 
                defined in section 138(b)(2) of the Internal 
                Revenue Code of 1986), and
                  ``(B) if the individual has established more 
                than one such MedicarePlus MSA, has designated 
                one of such accounts as the individual's 
                MedicarePlus MSA for purposes of this part.
        Under rules under this section, such an individual may 
        change the designation of such account under 
        subparagraph (B) for purposes of this part.
          ``(3) Lump sum deposit of medical savings account 
        contribution.--In the case of an individual electing an 
        MSA plan effective beginning with a month in a year, 
        the amount of the contribution to the MedicarePlus MSA 
        on behalf of the individual for that month and all 
        successive months in the year shall be deposited during 
        that first month. In the case of a termination of such 
        an election as of a month before the end of a year, the 
        Secretary shall provide for a procedure for the 
        recovery of deposits attributable to the remaining 
        months in the year.
  ``(f) Payments From Trust Fund.--The payment to a 
MedicarePlus organization under this section for individuals 
enrolled under this part with the organization and payments to 
a MedicarePlus MSA under subsection (e)(1) shall be made from 
the Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund in such proportion 
as the Secretary 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 
payments otherwise payable under this section for October 2001 
shall be paid on the last business day of September 2001.
  ``(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 MedicarePlus plan 
        offered by a MedicarePlus organization--
                  ``(A) payment for such services until the 
                date of the individual's discharge shall be 
                made under this title through the MedicarePlus 
                plan or the medicare fee-for-service program 
                option described in section 1851(a)(1)(A) (as 
                the case may be) elected before the election 
                with such organization,
                  ``(B) the elected organization shall not be 
                financially responsible for payment for such 
                services until the date after the date of the 
                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 
        MedicarePlus organization under this part--
                  ``(A) the organization shall be financially 
                responsible for payment for such services after 
                such date and until the date of the 
                individual's discharge,
                  ``(B) payment for such services during the 
                stay shall not be made under section 1886(d) or 
                by any succeeding MedicarePlus organization, 
                and
                  ``(C) the terminated organization shall not 
                receive any payment with respect to the 
                individual under this part during the period 
                the individual is not enrolled.

                               ``premiums

  ``Sec. 1854. (a) Submission and Charging of Premiums.--
          ``(1) In general.--Subject to paragraph (3), each 
        MedicarePlus organization shall file with the Secretary 
        each year, in a form and manner and at a time specified 
        by the Secretary--
                  ``(A) the amount of the monthly premium for 
                coverage for services under section 1852(a) 
                under each MedicarePlus plan it offers under 
                this part in each MedicarePlus payment area (as 
                defined in section 1853(d)) in which the plan 
                is being offered; and
                  ``(B) the enrollment capacity in relation to 
                the plan in each such area.
          ``(2) Terminology.--In this part--
                  ``(A) the term `monthly premium' means, with 
                respect to a MedicarePlus plan offered by a 
                MedicarePlus organization, the monthly premium 
                filed under paragraph (1), not taking into 
                account the amount of any payment made toward 
                the premium under section 1853; and
                  ``(B) the term `net monthly premium' means, 
                with respect to such a plan and an individual 
                enrolled with the plan, the premium (as defined 
                in subparagraph (A)) for the plan reduced by 
                the amount of payment made toward such premium 
                under section 1853.
  ``(b) Monthly Premium Charged.--The monthly amount of the 
premium charged by a MedicarePlus organization for a 
MedicarePlus plan offered in a MedicarePlus payment area to an 
individual under this part shall be equal to the net monthly 
premium plus any monthly premium charged in accordance with 
subsection (e)(2) for supplemental benefits.
  ``(c) Uniform Premium.--The monthly premium and monthly 
amount charged under subsection (b) of a MedicarePlus 
organization under this part may not vary among individuals who 
reside in the same MedicarePlus payment area.
  ``(d) Terms and Conditions of Imposing Premiums.--Each 
MedicarePlus organization shall permit the payment of net 
monthly premiums on a monthly basis and may terminate election 
of individuals for a MedicarePlus plan for failure to make 
premium payments only in accordance with section 
1851(g)(3)(B)(i). A MedicarePlus organization is not authorized 
to provide for cash or other monetary rebates as an inducement 
for enrollment or otherwise.
  ``(e) Limitation on Enrollee Cost-Sharing.--
          ``(1) For basic and additional benefits.--Except as 
        provided in paragraph (2), in no event may--
                  ``(A) the net monthly premium (multiplied by 
                12) and the actuarial value of the deductibles, 
                coinsurance, and copayments applicable on 
                average to individuals enrolled under this part 
                with a MedicarePlus plan of an organization 
                with respect to required benefits described in 
                section 1852(a)(1) and additional benefits (if 
                any) required under subsection (f)(1) for a 
                year, exceed
                  ``(B) the actuarial value of the deductibles, 
                coinsurance, and copayments that would be 
                applicable on average to individuals entitled 
                to benefits under part A and enrolled under 
                part B if they were not members of a 
                MedicarePlus organization for the year.
          ``(2) For supplemental benefits.--If the MedicarePlus 
        organization provides to its members enrolled under 
        this part supplemental benefits described in section 
        1852(a)(3), the sum of the monthly premium rate 
        (multiplied by 12) charged for such supplemental 
        benefits and the actuarial value of its deductibles, 
        coinsurance, and copayments charged with respect to 
        such benefits may not exceed the adjusted community 
        rate for such benefits (as defined in subsection 
        (f)(4)).
          ``(3) Exception for msa plans.--Paragraphs (1) and 
        (2) do not apply to an MSA plan.
          ``(4) Determination on other basis.--If the Secretary 
        determines that adequate data are not available to 
        determine the actuarial value under paragraph (1)(A) or 
        (2), the Secretary may determine such amount with 
        respect to all individuals in the MedicarePlus payment 
        area, the State, or in the United States, eligible to 
        enroll in the MedicarePlus plan involved under this 
        part or on the basis of other appropriate data.
  ``(f) Requirement for Additional Benefits.--
          ``(1) Requirement.--
                  ``(A) In general.--Each MedicarePlus 
                organization (in relation to a MedicarePlus 
                plan 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 
                individuals such additional benefits (as the 
                organization may specify) in a value which is 
                at least equal to the adjusted excess amount 
                (as defined in subparagraph (C)).
                  ``(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) under the plan for 
                        individuals under this part, as 
                        determined based upon an adjusted 
                        community rate described in paragraph 
                        (4) (as reduced for the actuarial value 
                        of the coinsurance and deductibles 
                        under parts A and B).
                  ``(C) Adjusted excess amount.--For purposes 
                of this paragraph, the `adjusted excess 
                amount', for an organization for a plan, is the 
                excess amount reduced to reflect any amount 
                withheld and reserved for the organization for 
                the year under paragraph (2).
                  ``(D) No application to msa plans.--
                Subparagraph (A) shall not apply to an MSA 
                plan.
                  ``(E) Uniform application.--This paragraph 
                shall be applied uniformly for all enrollees 
                for a plan in a MedicarePlus payment area.
                  ``(F) Construction.--Nothing in this 
                subsection shall be construed as preventing a 
                MedicarePlus organization from providing health 
                care benefits that are in addition to the 
                benefits otherwise required to be provided 
                under this paragraph and from imposing a 
                premium for such additional benefits.
          ``(2) Stabilization fund.--A MedicarePlus 
        organization may provide that a part of the value of an 
        excess amount described in paragraph (1) be withheld 
        and reserved in the Federal Hospital Insurance Trust 
        Fund and in the Federal Supplementary Medical Insurance 
        Trust Fund (in such proportions as the Secretary 
        determines to be appropriate) by the Secretary for 
        subsequent annual contract periods, to the extent 
        required to stabilize and prevent undue fluctuations in 
        the additional benefits offered in those subsequent 
        periods by the organization in accordance with such 
        paragraph. Any of such value of the amount reserved 
        which is not provided as additional benefits described 
        in paragraph (1)(A) to individuals electing the 
        MedicarePlus plan of the organization in accordance 
        with such paragraph prior to the end of such periods, 
        shall revert for the use of such trust funds.
          ``(3) Determination based on insufficient data.--For 
        purposes of this subsection, if the Secretary finds 
        that there is insufficient enrollment experience 
        (including no enrollment experience in the case of a 
        provider-sponsored organization) to determine an 
        average of the capitation payments to be made under 
        this part at the beginning of a contract period, the 
        Secretary may determine such an average based on the 
        enrollment experience of other contracts entered into 
        under this part.
          ``(4) Adjusted community rate.--
                  ``(A) In general.--For purposes of this 
                subsection, subject to subparagraph (B), the 
                term `adjusted community rate' for a service or 
                services means, at the election of a 
                MedicarePlus organization, either--
                          ``(i) the rate of payment for that 
                        service or services which the Secretary 
                        annually determines would apply to an 
                        individual electing a MedicarePlus plan 
                        under this part if the rate of payment 
                        were determined under a `community 
                        rating system' (as defined in section 
                        1302(8) of the Public Health Service 
                        Act, other than subparagraph (C)), or
                          ``(ii) 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 characteristics of the individuals 
                electing coverage under this part and the 
                utilization characteristics of the other 
                enrollees with the plan (or, if the Secretary 
                finds that adequate data are not available to 
                adjust for those differences, the differences 
                between the utilization characteristics of 
                individuals selecting other MedicarePlus 
                coverage, or MedicarePlus eligible individuals 
                in the area, in the State, or in the United 
                States, eligible to elect MedicarePlus coverage 
                under this part and the utilization 
                characteristics of the rest of the population 
                in the area, in the State, or in the United 
                States, respectively).
                  ``(B) Special rule for provider-sponsored 
                organizations.--In the case of a MedicarePlus 
                organization that is a provider-sponsored 
                organization, the adjusted community rate under 
                subparagraph (A) for a MedicarePlus plan of the 
                organization may be computed (in a manner 
                specified by the Secretary) using data in the 
                general commercial marketplace or (during a 
                transition period) based on the costs incurred 
                by the organization in providing such a plan.
  ``(g) Periodic Auditing.--The Secretary shall 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 
MedicarePlus organizations offering MedicarePlus plans under 
this part. The Comptroller General shall monitor auditing 
activities conducted under this subsection.
  ``(h) Prohibition of State Imposition of Premium Taxes.--No 
State may impose a premium tax or similar tax with respect to 
premiums on MedicarePlus plans or the offering of such plans.

     ``organizational and financial requirements for medicareplus 
            organizations; provider-sponsored organizations

  ``Sec. 1855. (a) Organized and Licensed Under State Law.--
          ``(1) In general.--Subject to paragraphs (2) and (3), 
        a MedicarePlus 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 
        MedicarePlus plan.
          ``(2) Special exception for provider-sponsored 
        organizations.--
                  ``(A) In general.--In the case of a provider-
                sponsored organization that seeks to offer a 
                MedicarePlus 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, and
                          ``(ii) the Secretary determines, 
                        based on the application and other 
                        evidence presented to the Secretary, 
                        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.--A ground for approval of 
                such a waiver application 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 the 
                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.--A ground for 
                approval of such a waiver application is that 
                the State has denied such a licensing 
                application and--
                          ``(i) the State has imposed 
                        documentation or information 
                        requirements not related to solvency 
                        requirements that are not generally 
                        applicable to other entities engaged in 
                        substantially similar business, or
                          ``(ii) 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 
                        requirements and standards relating to 
                        solvency) to such organizations that 
                        are not generally applicable to other 
                        entities engaged in substantially 
                        similar business.
                  ``(D) Denial of application based on 
                application of solvency requirements.--A ground 
                for approval of such a waiver application 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 
                        any documentation or information 
                        requirements relating to solvency or 
                        other material requirements, 
                        procedures, or standards relating to 
                        solvency that are different from the 
                        requirements, procedures, and standards 
                        applied by the Secretary under 
                        subsection (d)(2).
                For purposes of this subparagraph, the term 
                `solvency requirements' means requirements 
                relating to solvency and other matters covered 
                under the standards established under section 
                1856(a).
                  ``(E) Treatment of waiver.--Subject to 
                section 1852(m), in the case of a waiver 
                granted under this paragraph for a provider-
                sponsored organization--
                          ``(i) the waiver shall be effective 
                        for a 36-month period, except it may be 
                        renewed based on a subsequent 
                        application filed during the last 6 
                        months of such period,
                          ``(ii) the waiver is conditioned upon 
                        the pendency of the licensure 
                        application during the period the 
                        waiver is in effect, and
                          ``(iii) any provisions of State law 
                        which relate to the licensing of the 
                        organization and which prohibit the 
                        organization from providing coverage 
                        pursuant to a contract under this part 
                        shall be superseded.
                Nothing in this subparagraph shall be construed 
                as limiting the number of times such a waiver 
                may be renewed. Nothing in clause (iii) shall 
                be construed as waiving any provision of State 
                law which relates to quality of care or 
                consumer protection (and does not relate to 
                solvency standards) and which is imposed on a 
                uniform basis and is generally applicable to 
                other entities engaged in substantially similar 
                business.
                  ``(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 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.
          ``(3) Exception if required to offer more than 
        medicareplus plans.--Paragraph (1) shall not apply to a 
        MedicarePlus organization in a State if the State 
        requires the organization, as a condition of licensure, 
        to offer any product or plan other than a MedicarePlus 
        plan.
          ``(4) 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) Prepaid Payment.--A MedicarePlus organization shall be 
compensated (except for premiums, deductibles, coinsurance, and 
copayments) for the provision of health care services to 
enrolled members under the contract under this part by a 
payment which is paid on a periodic basis without regard to the 
date the health care services are provided and which is fixed 
without regard to the frequency, extent, or kind of health care 
service actually provided to a member.
  ``(c) Assumption of Full Financial Risk.--The MedicarePlus 
organization shall assume full financial risk on aprospective 
basis for the provision of the health care services (except, at the 
election of the organization, hospice care) 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 $5,000 in 
        any year,
          ``(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 professionals, health care institutions, or any 
        combination 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 
        professionals or through the institutions.
  ``(d) Certification of Provision Against Risk of Insolvency 
for Unlicensed PSOs.--
          ``(1) In general.--Each MedicarePlus 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 solvency and capital 
        adequacy of the organization.
          ``(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 organization 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 an 
        application not later than 60 days after the date the 
        application has been received.
  ``(e) Provider-Sponsored Organization Defined.--
          ``(1) In general.--In this part, the term `provider-
        sponsored organization' means a public or private 
        entity--
                  ``(A) that is established or organized 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 under this part 
                directly through the provider or affiliated 
                group of providers, and
                  ``(C) with respect to which those affiliated 
                providers that share, directly or indirectly, 
                substantial financial risk with respect to the 
                provision of such items and services 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 (i) the need 
                for such an organization to assume 
                responsibility for a substantial proportion of 
                services in order to assure financial stability 
                and (ii) the practical difficulties in such an 
                organization integrating a very wide range of 
                service providers; and
                  ``(B) may vary such proportion based upon 
                relevant differences among organizations, such 
                as their location in an urban or rural area.
          ``(3) Affiliation.--For purposes of this subsection, 
        a provider 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 with the other,
                  ``(B) both providers are part of a controlled 
                group of corporations under section 1563 of the 
                Internal Revenue Code of 1986, or
                  ``(C) 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 
Provider-Sponsored Organizations.--
          ``(1) Establishment.--
                  ``(A) In general.--The Secretary shall 
                establish, on an expedited basis and using a 
                negotiated rulemaking process under subchapter 
                III of chapter 5 of title 5, United States 
                Code, standards described in section 1855(d)(1) 
                (relating to the financial solvency andcapital 
adequacy of the organization) that entities must meet to qualify as 
provider-sponsored organizations under this part.
                  ``(B) Factors to consider for solvency 
                standards.--In establishing solvency standards 
                under subparagraph (A) for provider-sponsored 
                organizations, the Secretary shall consult with 
                interested parties and shall take into 
                account--
                          ``(i) the delivery system assets of 
                        such an organization and ability of 
                        such an organization to provide 
                        services directly to enrollees through 
                        affiliated providers, and
                          ``(ii) alternative means of 
                        protecting against insolvency, 
                        including reinsurance, unrestricted 
                        surplus, letters of credit, guarantees, 
                        organizational insurance coverage, 
                        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.
                  ``(C) Enrollee protection against 
                insolvency.--Such standards shall include 
                provisions to prevent enrollees from being held 
                liable to any person or entity for the 
                MedicarePlus organization's debts in the event 
                of the organization's insolvency.
          ``(2) Publication of notice.--In carrying out the 
        rulemaking process under this subsection, the 
        Secretary, after consultation with the National 
        Association of Insurance Commissioners, the American 
        Academy of Actuaries, organizations representative of 
        medicare beneficiaries, and other interested parties, 
        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 subsection, 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 one 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 one 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 opportunity 
        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 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 
        regulation other standards (not described in subsection 
        (a)) for MedicarePlus organizations and plans 
        consistent with, and to carry out, this part.
          ``(2) Use of current standards.--Consistent with the 
        requirements of this part, standards established under 
        this subsection shall be based on standards established 
        under section 1876 to carry out analogous provisions of 
        such section. The Secretary shall also consider State 
        model and other standards relating to consumer 
        protection and assuring quality of care.
          ``(3) Use of interim standards.--For the period in 
        which this part is in effect and standards are being 
        developed and established under the preceding 
        provisions of this subsection, the Secretary shall 
        provide by not later than June 1, 1998, for the 
        application of such interim standards (without regard 
        to any requirements for notice and public comment) as 
        may be appropriate to provide for the expedited 
        implementation of this part. Such interim standards 
        shall not apply after the date standards are 
        established under the preceding provisions of this 
        subsection.
          ``(4) Application of new standards to entities with a 
        contract.--In the case of a MedicarePlus organization 
        with a contract in effect under this part at the time 
        standards applicable to the organization under this 
        section are changed, the organization may elect not to 
        have such changes apply to the organization until the 
        end of the current contract year (or, if there is less 
        than 6 months remaining in the contract year, until 1 
        year after the end of the current contract year).
          ``(5) Relation to state laws.--Subject to section 
        1852(m), the standards established under this 
        subsection shall supersede any State law or regulation 
        with respect to MedicarePlus plans which are offered by 
        MedicarePlus organizations under this part to the 
        extent such law or regulation is inconsistent with such 
        standards. The previous sentence shall not be construed 
        as superseding a State law or regulation that is not 
        related to solvency, that is applied on a uniform basis 
        and is generally applicable to other entities engaged 
        in substantially similar business, and that provides 
        consumer protections in addition to, or more stringent 
        than, those provided under the standards under this 
        subsection.

              ``contracts with medicareplus organizations

  ``Sec. 1857. (a) In General.--The Secretary shall not permit 
the election under section 1851 of a MedicarePlus plan offered 
by a MedicarePlus organization under this part, and no payment 
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 one 
MedicarePlus 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 
payment as provided for in this part.
  ``(b) Minimum Enrollment Requirements.--
          ``(1) In general.--Subject to paragraphs (2) and (3), 
        the Secretary may not enter into a contract under this 
        section with a MedicarePlus organization unless the 
        organization has 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, except that 
        the standards under section 1856 may permit the 
        organization to have a lesser number of beneficiaries 
        (but not less than 500 in the case of an organization 
        that is a provider-sponsored organization) if the 
        organization primarily serves individuals residing 
        outside of urbanized areas.
          ``(2) Exception for msa plan.--Paragraph (1) shall 
        not apply with respect to a contract that relates only 
        to an MSA plan.
          ``(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 one 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 
        procedures established under subsection (h), the 
        Secretary may at any time terminate any such contract 
        or may impose the intermediate sanctions described in 
        an applicable paragraph of subsection (g)(3) on the 
        MedicarePlus organization if the Secretary determines 
        that the organization--
                  ``(A) has failed substantially to carry out 
                the contract;
                  ``(B) is carrying out the contract in a 
                manner inconsistent with the efficient and 
                effective administration of this part; or
                  ``(C) no longer substantially meets the 
                applicable conditions of this part.
          ``(3) Effective date of contracts.--The effective 
        date of any contract executed pursuant to this section 
        shall be specified 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 1998 with respect to such coverage.
          ``(4) Previous terminations.--The Secretary may not 
        enter into a contract with a MedicarePlus organization 
        if a previous contract with that organization under 
        this section was terminated at the request of the 
        organization within the preceding five-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 inconsistent with the 
        furtherance of the purpose of this title.
  ``(d) Protections Against Fraud and Beneficiary 
Protections.--
          ``(1) Inspection and audit.--Each contract under this 
        section shall provide that the Secretary, or any person 
        or organization designated by the Secretary--
                  ``(A) shall have the right to inspect or 
                otherwise evaluate (i) the quality, 
                appropriateness, and timeliness of services 
                performed under the contract and (ii) the 
                facilities 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 
                MedicarePlus 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.
          ``(2) 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 obtaining benefits 
        under this title, to each individual enrolled with the 
        organization under this part.
          ``(3) Disclosure.--
                  ``(A) In general.--Each MedicarePlus 
                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 facilities 
                                between the organization and a 
                                party in interest, but not 
                                including salaries paid to 
                                employees for services provided 
                                in the normal course of their 
                                employment 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 MedicarePlus 
                        organization, any person who is 
                        directly or indirectly the beneficial 
                        owner of more than 5 percent of the 
                        equity of the organization, any person 
                        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 MedicarePlus 
                        organization 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 
                MedicarePlus organization shall make the 
                information reported pursuant to subparagraph 
                (A) available to its enrollees upon reasonable 
                request.
          ``(4) Loan information.--The contract shall require 
        the organization to notify the Secretary of loans and 
        other special financial arrangements which are made 
        between the organization 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 appropriate.
          ``(2) Cost-sharing in enrollment-related costs.--The 
        contract with a MedicarePlus organization shall require 
        the payment to the Secretary for the organization's pro 
        rata share (as determined by the Secretary) of the 
        estimated costs to be incurred by the Secretary in 
        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). Such payments are appropriated to defray the 
        costs described in the preceding sentence, to remain 
        available until expended.
          ``(3) Notice to enrollees in case of 
        decertification.--If a contract with a MedicarePlus 
        organization is terminated under this section, the 
        organization shall notify each enrollee with the 
        organization under this part of such termination.
  ``(f) Prompt Payment by MedicarePlus Organization.--
          ``(1) Requirement.--A contract under this part shall 
        require a MedicarePlus organization to provide prompt 
        payment (consistent with the provisions of sections 
        1816(c)(2) and 1842(c)(2)) of claims submitted for 
        services and supplies furnished to individuals pursuant 
        to the contract, if the services or supplies are not 
        furnished under a contract between the organization and 
        the provider or supplier.
          ``(2) Secretary's option to bypass noncomplying 
        organization.--In the case of a MedicarePlus 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 for covered 
        services and supplies furnished to individuals enrolled 
        under this part under the contract. If the Secretary 
        provides for the direct payments, the Secretary shall 
        provide for an appropriate reduction in the amount of 
        payments otherwise made to the organization under this 
        part to reflect the amount of the Secretary's payments 
        (and the Secretary's costs in making the payments).
  ``(g) Intermediate Sanctions.--
          ``(1) In general.--If the Secretary determines that a 
        MedicarePlus organization with a contract under this 
        section--
                  ``(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 net monthly premiums on 
                individuals enrolled under this part in excess 
                of the net monthly premiums permitted;
                  ``(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 
                or history indicates a need for substantial 
                future medical services;
                  ``(E) misrepresents or falsifies information 
                that is furnished--
                          ``(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 requirements 
                of section 1852(j)(3); 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 paragraph (2).
          ``(2) Remedies.--The remedies described in this 
        paragraph are--
                  ``(A) civil money penalties of not more than 
                $25,000 for each determination under paragraph 
                (1) or, with respect to a determination under 
                subparagraph (D) or (E)(i) of such paragraph, 
                of not more than $100,000 for each such 
                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 determination under paragraph 
                (1)(D), $15,000 for each individual 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 Secretary 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 Secretary 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 
        MedicarePlus 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 deficiency 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 procedures by the Secretary under 
                subsection (g) during which the deficiency 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 thatis the 
basis for the determination has been corrected and is not likely to 
recur.
  ``(h) Procedures for Termination.--
          ``(1) In general.--The Secretary may terminate a 
        contract with a MedicarePlus organization under this 
        section in accordance with formal investigation and 
        compliance procedures established by the Secretary 
        under which--
                  ``(A) the Secretary provides the organization 
                with the reasonable opportunity to develop and 
                implement a corrective action plan to correct 
                the deficiencies that were the basis of the 
                Secretary's determination under subsection 
                (c)(2);
                  ``(B) the Secretary shall impose more severe 
                sanctions on an organization that has a history 
                of deficiencies or that has not taken steps to 
                correct deficiencies the Secretary has brought 
                to the organization's attention;
                  ``(C) there are no unreasonable or 
                unnecessary delays between the finding of a 
                deficiency and the imposition of sanctions; and
                  ``(D) 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) Civil money penalties.--The provisions of 
        section 1128A (other than subsections (a) and (b)) 
        shall apply to a civil money penalty under subsection 
        (f) or under paragraph (2) or (3) of subsection (g) in 
        the same manner as they apply to a civil money penalty 
        or proceeding under section 1128A(a).
          ``(3) Exception for imminent and serious risk to 
        health.--Paragraph (1) shall not apply if the Secretary 
        determines that a delay in termination, resulting from 
        compliance with the procedures specified in such 
        paragraph prior to termination, 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 MedicarePlus 
Organizations.--In this part--
          ``(1) MedicarePlus organization.--The term 
        `MedicarePlus 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 
        `provider-sponsored organization' is defined in section 
        1855(e)(1).
  ``(b) Definitions Relating to MedicarePlus Plans.--
          ``(1) MedicarePlus plan.--The term `MedicarePlus 
        plan' means health benefits coverage offered under a 
        policy, contract, or plan by a MedicarePlus 
        organization pursuant to and in accordance with a 
        contract under section 1857.
          ``(2) MSA plan.--
                  ``(A) In general.--The term `MSA plan' means 
                a MedicarePlus 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, coinsurance, or 
                        copayments, if the enrollee had elected 
                        to receive benefits through the 
                        provisions of such parts; and
                          ``(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 
                        amount of such deductible for the 
                        previous contract year under this 
                        subparagraph increased by the national 
                        per capita MedicarePlus 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) MedicarePlus eligible individual.--The term 
        `MedicarePlus eligible individual' is defined in 
        section 1851(a)(3).
          ``(2) MedicarePlus payment area.--The term 
        `MedicarePlus payment area' is defined in section 
        1853(d).
          ``(3) National per capita medicareplus growth 
        percentage.--The `national per capita MedicarePlus 
        growth percentage' is defined in section 1853(c)(6).
          ``(4) Monthly premium; net monthly premium.--The 
        terms `monthly premium' and `net monthly premium' are 
        defined in section 1854(a)(2).
  ``(d) Coordinated Acute and Long-term Care Benefits Under a 
MedicarePlus 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 MedicarePlus 
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 MedicarePlus 
Plans.--
          ``(1) In general.--In the case of a MedicarePlus 
        religious 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) Medicareplus religious fraternal benefit 
        society plan described.--For purposes of this 
        subsection, a MedicarePlus religious fraternal benefit 
        society plan described in this paragraph is a 
        MedicarePlus 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. In developing solvency standards under 
        section 1856, the Secretary shall take into account 
        open contract and assessment features characteristic of 
        fraternal insurance certificates.
          ``(3) Religious fraternal benefit society defined.--
        For purposes of paragraph (2)(A), a `religious 
        fraternal benefit society' described in this section is 
        an organization that--
                  ``(A) is exempt from Federal income taxation 
                under section 501(c)(8) of the Internal Revenue 
                Code of 1986;
                  ``(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 MedicarePlus 
                religious fraternal benefit society plan, 
                health coverage to individuals not entitled to 
                benefits under this title who are members 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 
        Secretary, in the case of individuals enrolled under 
        this part under a MedicarePlus 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 appropriate 
        payment level, taking into account the actuarial 
        characteristics and experience of such individuals.''.
  (b) Report on Coverage of Beneficiaries with End-Stage Renal 
Disease.--The Secretary of Health and Human Services shall 
provide for a study on the feasibility and impact of removing 
the limitation under section 1851(b)(3)(B) of the Social 
Security Act (as inserted by subsection (a)) on eligibility of 
most individuals medically determined to have end-stage renal 
disease to enroll in MedicarePlus plans. By not later than 
October 1, 1998, the Secretary shall submit to Congress a 
report on such study and shall include in the report such 
recommendations regarding removing or restricting the 
limitation as may be appropriate.
  (c) Report on MedicarePlus Teaching Programs and Use of DSH 
and Teaching Hospitals.--Based on the information provided to 
the Secretary of Health and Human Services under section 
1852(k) of the Social Security Act and such information as the 
Secretary may obtain, by not later than October 1, 1999, the 
Secretary shall submit to Congress a report on graduate medical 
education programs operated by MedicarePlus organizations and 
the extent to which MedicarePlus organizations are providing 
for payments to hospitals described in such section.

SEC. 4002. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO PROGRAM.

  (a) Authorizing Transitional Waiver of 50:50 Rule.--Section 
1876(f) (42 U.S.C. 1395mm(f)) is amended--
          (1) in paragraph (2), by striking ``The Secretary'' 
        and inserting ``Subject to paragraph (4), the 
        Secretary'', and
          (2) by adding at the end the following new paragraph:
  ``(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.--Section 1876 (42 U.S.C. 1395mm) is amended 
by adding at the end the following new subsection:
  ``(k)(1) Except as provided in paragraph (3), the Secretary 
shall not enter into, renew, or continue any risk-sharing 
contract under this section with an eligible organization for 
any contract year beginning on or after--
          ``(A) the date standards for MedicarePlus 
        organizations and plans are first established under 
        section 1856 with respect to MedicarePlus organizations 
        that are insurers or health maintenance organizations, 
        or
          ``(B) in the case of such an organization with such a 
        contract in effect as of the date such standards were 
        first established, 1 year after such date.
  ``(2) The Secretary shall not enter into, renew, or continue 
any risk-sharing contract under this section with an eligible 
organization for any contract year beginning on or after 
January 1, 2000.
  ``(3) 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 
issued by not later then July 1, 1998.
  ``(4) 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 
        payment rates under section 1853(a) for the payment 
        rates otherwise established under subsection 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 payment rates otherwise established 
        under subsection (a).
For purposes of carrying out this paragraph for payments for 
months in 1998, the Secretary shall compute, announce, and 
apply the payment rates under section 1853(a) (notwithstanding 
any deadlines specified in such section) in as timely a manner 
as possible and may (to the extent necessary) provide for 
retroactive adjustment in payments made under this section not 
in accordance with such rates.''.
  (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 XVIII 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. 1395c(f)) 
is amended--
          (1) in paragraph (1)--
                  (A) by inserting ``1855(i),'' after 
                ``1833(s),'', and
                  (B) by inserting ``, MedicarePlus 
                organization,'' after ``provider of services''; 
                and
          (2) in paragraph (2)(E), by inserting ``or a 
        MedicarePlus organization'' after ``section 
        1833(a)(1)(A)''.
  (e) Extension of Provider Requirement.--Section 1866(a)(1)(O) 
(42 U.S.C. 1395cc(a)(1)(O)) 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 MedicarePlus 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 section 
        1858)'' 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 XVIII of the 
        Social Security Act is deemed a reference to part D of 
        such title (as in effect after such date).
          (2) Secretarial submission of legislative proposal.--
        Not later than 90 days 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 amendments 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) Use of Interim, Final Regulations.--In order to carry out 
the amendments made by this chapter in a timely manner, the 
Secretary of Health and Human Services may promulgate 
regulations that take effect on an interim basis, after notice 
and pending opportunity for public comment.
  (i) Transition Rule for PSO Enrollment.--In applying 
subsection (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(e)(1) of such Act, as 
inserted by section 4001) 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).

SEC. 4003. CONFORMING CHANGES IN MEDIGAP PROGRAM.

  (a) Conforming Amendments to MedicarePlus 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 
                MedicarePlus 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 MedicarePlus 
                        plan'' after ``(II)'', and
                          (ii) by inserting before the comma at 
                        the end the following: ``or in the case 
                        of an individual electing a 
                        MedicarePlus plan, a medicare 
                        supplemental policy with knowledge that 
                        the policy duplicates health benefits 
                        to which the individual is 
otherwiseentitled under the MedicarePlus 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 MedicarePlus 
        plan)'' after ``health insurance policies''.
          (3) MedicarePlus plans not treated as medicare 
        supplementary policies.--Section 1882(g)(1) (42 U.S.C. 
        1395ss(g)(1)) is amended by inserting ``or a 
        MedicarePlus plan or'' after ``does not include''
  (b) Additional Rules Relating to Individuals Enrolled in MSA 
Plans.--Section 1882 (42 U.S.C. 1395ss) is further amended by 
adding at the end the following new subsection:
  ``(u)(1) 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.
  ``(2) A policy described in this subparagraph is a health 
insurance policy that provides for coverage of expenses that 
are otherwise required to be counted toward meeting the annual 
deductible amount provided under the MSA plan.''.

 Subchapter B--Special Rules for MedicarePlus Medical Savings Accounts

SEC. 4006. MEDICAREPLUS MSA.

  (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to amounts specifically 
excluded from gross income) is amended by redesignating section 
138 as section 139 and by inserting after section 137 the 
following new section:

``SEC. 138. MEDICAREPLUS MSA.

  ``(a) Exclusion.--Gross income shall not include any payment 
to the MedicarePlus MSA of an individual by the Secretary of 
Health and Human Services under part C of title XVIII of the 
Social Security Act.
  ``(b) MedicarePlus MSA.--For purposes of this section, the 
term `MedicarePlus MSA' means a medical savings account (as 
defined in section 220(d))--
          ``(1) which is designated as a MedicarePlus 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 subsection (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)(2) of the Social 
        Security Act.
  ``(c) Special Rules for Distributions.--
          ``(1) Distributions for qualified medical expenses.--
        In applying section 220 to a MedicarePlus 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 medicareplus msa 
        not used for qualified medical expenses if minimum 
        balance not maintained.--
                  ``(A) In general.--The tax imposed by this 
                chapter for any taxable year in which there is 
                a payment or distribution from a MedicarePlus 
                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) of--
                          ``(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 MedicarePlus MSA plan 
                                covering the account holder as 
                                of January 1 of the calendar 
                                year in which the taxable year 
                                begins.
                Section 220(f)(2) shall not apply to any 
                payment or distribution from a MedicarePlus 
                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.
                  ``(C) Special rules.--For purposes of 
                subparagraph (A)--
                          ``(i) all MedicarePlus MSAs of the 
                        account holder shall be treated as 1 
                        account,
                          ``(ii) all payments and distributions 
                        not used exclusively 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 account 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 
        MedicarePlus 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 from a 
        MedicarePlus MSA of an account holder to another 
        MedicarePlus MSA of such account holder.
  ``(d) Special Rules for Treatment of Account After Death of 
Account Holder.--In applying section 220(f)(8)(A) to an account 
which was a MedicarePlus 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 MedicarePlus MSA.
  ``(e) Reports.--In the case of a MedicarePlus MSA, the report 
under section 220(h)--
          ``(1) shall include the fair market value of the 
        assets in such MedicarePlus 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 MedicarePlus 
MSA, and MedicarePlus MSA's shall not be taken into account in 
determining whether the numerical limitations under section 
220(j) are exceeded.''
  (b) Technical Amendments.--
          (1) The last sentence of section 4973(d) of such Code 
        is amended by inserting ``or section 138(c)(3)'' after 
        ``section 220(f)(3)''.
          (2) Subsection (b) of section 220 of such Code is 
        amended 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 
        individual 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.''
          (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. MedicarePlus 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.

  Subchapter C--GME, IME, and DSH Payments for Managed Care Enrollees

SEC. 4008. GRADUATE MEDICAL EDUCATION AND INDIRECT MEDICAL EDUCATION 
                    PAYMENTS FOR MANAGED CARE ENROLLEES.

  (a) Payments to Managed Care Organizations Operating Graduate 
Medical Education Programs.--Section 1853 (as inserted by 
section 4001) is amended by adding at the end the following:
  ``(h) Payments for Direct Costs of Graduate Medical Education 
Programs.--
          ``(1) Additional payment to be made.--Effective 
        January 1, 1998, each contract with a MedicarePlus 
        organization under this section (and each risk-sharing 
        contract with an eligible organization under section 
        1876) shall provide for an additional payment for 
        Medicare's share of allowable direct graduate medical 
        education costs incurred by such an organization for an 
        approved medical residency program.
          ``(2) Allowable costs.--If the organization has an 
        approved medical residency program that incurs all or 
        substantially all of the costs of the program, subject 
        to section 1858(a)(3), the allowable costs for such a 
        program shall equal the national average per resident 
        amount times the number of full-time-equivalent 
        residents in the program in non-hospital settings.
          ``(3) Definitions.--As used in this subsection:
                  ``(A) The terms `approved medical residency 
                program', `direct graduate medical education 
                costs', and `full-time-equivalent residents' 
                have the same meanings as under section 
                1886(h).
                  ``(B) The term `Medicare's share' means, with 
                respect to a MedicarePlus or eligible 
                organization, the ratio of the number of 
                individuals enrolled with the organization 
                under this part (or enrolled under a risk-
                sharing contract under section 1876, 
                respectively) to the total number of 
                individuals enrolled with the organization.
                  ``(C) The term `national average per resident 
                amount' means an amount estimated by the 
                Secretary to equal the weighted average amount 
                that would be paid per full-time-equivalent 
                resident under section 1886(h) for the calendar 
                year (determined separately for primary care 
                residency programs as defined under section 
                1886(h) (including obstetrics and gynecology 
                residency programs) and for other residency 
                programs).''.
  (b) Payments to Hospitals for Direct and Indirect Costs of 
Graduate Medical Education Programs Attributable to Managed 
Care Enrollees.--Part C of title XVIII, as amended by section 
4001, is amended by inserting after section 1857 the following 
new section:

``payments to hospitals for certain costs attributable to managed care 
                               enrollees

  ``Sec. 1858. (a) Costs of Graduate Medical Education.--
          ``(1) In general.--For portions of cost reporting 
        periods occurring on or after January 1, 1998, the 
        Secretary shall provide for an additional payment 
        amount for each subsection (d) hospital (as defined in 
        section1886(d)(1)(B)), each PPS-exempt hospital 
described in clause (i) through (v) of such section, and for each 
hospital reimbursed under a reimbursement system authorized section 
1814(b)(3) that--
                  ``(A) furnishes services to individuals who 
                are enrolled under a risk-sharing contract with 
                an eligible organization under section 1876 and 
                who are entitled to part A and to individuals 
                who are enrolled with a MedicarePlus 
                organization under part C, and
                  ``(B) has an approved medical residency 
                training program.
          ``(2) Payment amount.--
                  ``(A) In general.--Subject to paragraph 
                (3)(B), the amount of the payment under this 
                subsection shall be the sum of--
                          ``(i) the amount determined under 
                        subparagraph (B), and
                          ``(ii) the amount determined under 
                        subparagraph (C).
                Clause (ii) shall not apply in the case of a 
                hospital that is not a PPS-exempt hospital 
                described in clause (i) through (v) of section 
                1886(d)(1)(B),
                  ``(B) Direct amount.--The amount determined 
                under this subparagraph for a period is equal 
                to the product of--
                          ``(i) the aggregate approved amount 
                        (as defined in section 1886(h)(3)(B)) 
                        for that period; and
                          ``(ii) the fraction of the total 
                        number of inpatient-bed-days (as 
                        established by the Secretary) during 
                        the period which are attributable to 
                        individuals described in paragraph (1).
                  ``(C) Indirect amount.--The amount determined 
                under this subparagraph is equal to the product 
                of--
                          ``(i) the amount of the indirect 
                        teaching adjustment factor applicable 
                        to the hospital under section 
                        1886(d)(5)(B); and
                          ``(ii) the product of--
                                  ``(I) the number of 
                                discharges attributable to 
                                individuals described in 
                                paragraph (1), and
                                  ``(II) the estimated average 
                                per discharge amount that would 
                                otherwise have been paid under 
                                section 1886(d)(1)(A) if the 
                                individuals had not been 
                                enrolled as described in such 
                                paragraph.
                  ``(D) Special rule.--The Secretary shall 
                establish rules for the application of 
                subparagraph (B) and for the computation of the 
                amounts described in subparagraph (C)(i)) and 
                subparagraph (C)(ii)(I) to a hospital 
                reimbursed under a reimbursement system 
                authorized under section 1814(b)(3) in a manner 
                similar to the manner of applying such 
                subparagraph and computing such amounts as if 
                the hospital were not reimbursed under such 
                section.
          ``(3) Limitation.--
                  ``(A) Determinations.--At the beginning of 
                each year, the Secretary shall--
                          ``(i) estimate the sum of the amount 
                        of the payments under this subsection 
                        and the payments under section 1853(h), 
                        for services or discharges occurring in 
                        the year, and
                          ``(ii) determine the amount of the 
                        annual payment limit under subparagraph 
                        (C) for such year.
                  ``(B) Imposition of limit.--If the amount 
                estimated under subparagraph (A)(i) for a year 
                exceeds the amount determined under 
                subparagraph (A)(ii) for the year, then the 
                Secretary shall adjust the amounts of the 
                payments described in subparagraph (A)(i) for 
                the year in a pro rata manner so that the total 
                of such payments in the year do not exceed the 
                annual payment limit determined under 
                subparagraph (A)(ii) for that year.
                  ``(C) Annual payment limit.--
                          ``(i) In general.--The annual payment 
                        limit under this subparagraph for a 
                        year is the sum, over all counties or 
                        MedicarePlus payment areas, of the 
                        product of--
                                  ``(I) the annual GME per 
                                capita payment rate (described 
                                in clause (ii)) for the county 
                                or area, and
                                  ``(II) the Secretary's 
                                projection of average 
                                enrollment of individuals 
                                described in paragraph (1) who 
                                are residents of that county or 
                                area, adjusted to reflect the 
                                relative demographic or risk 
                                characteristics of such 
                                enrollees.
                          ``(ii) GME per capita payment rate.--
                        The GME per capita payment rate 
                        described in this clause for a 
                        particular county or MedicarePlus 
                        payment area for a year is the GME 
                        proportion (as specified in clause 
                        (iii)) of the annual MedicarePlus 
                        capitation rate (as calculated under 
                        section 1853(c)) for the county or area 
                        and year involved.
                          ``(iii) GME proportion.--For purposes 
                        of clause (ii), the GME proportion for 
                        a county or area and a year is equal to 
                        the phase-in percentage (specified in 
                        clause (vi)) of the ratio of (I) the 
                        projected GME payment amount for the 
                        county or area (as determined under 
                        clause (v)), to (II) the average per 
                        capita cost for the county or area for 
                        the year (determined under clause 
                        (vi)).
                          ``(iv) Phase-in percentage.--The 
                        phase-in percentage specified in this 
                        clause for--
                                  ``(I) 1998 is 20 percent,
                                  ``(II) 1999 is 40 percent,
                                  ``(III) 2000 is 60 percent,
                                  ``(IV) 2001 is 80 percent, or
                                  ``(V) any subsequent year is 
                                100 percent.
                          ``(v) Projected GME payment amount.--
                        The projected GME payment amount for a 
                        county or area--
                                  ``(I) for 1998, is the amount 
                                included in the per capita rate 
                                of payment for 1997 determined 
                                under section 1876(a)(1)(C) for 
                                the payment adjustments 
                                described in section 
                                1886(d)(5)(B) and section 
                                1886(h) for that county or 
                                area, adjusted by the general 
                                GME update factor (as defined 
                                in clause (vii)) for 1998, or
                                  ``(II) for a subsequent year, 
                                is the projected GME payment 
                                amount for the county or area 
                                for the previous year, adjusted 
                                by the general GME update 
                                factor for such subsequent 
                                year.
The Secretary shall determine the amount described in subclause 
(I) for a county or other area that includes hospitals 
reimbursed under section 1814(b)(3) as though such hospitals 
had not been reimbursed under such section.
                          ``(vi) Average per capita cost.--The 
                        average per capita cost for the county 
                        or area determined under this clause 
                        for--
                                  ``(I) 1998 is the annual per 
                                capita rate of payment for 1997 
                                determined under section 
                                1876(a)(1)(C) for the county or 
                                area, increased by the national 
                                per capita MedicarePlus growth 
                                percentage for 1998 (as defined 
                                in section 1853(c)(6), but 
                                determined without regard to 
                                the adjustment described in 
                                subparagraph (B) of such 
                                section); or
                                  ``(II) a subsequent year is 
                                the average per capita cost 
                                determined under this clause 
                                for the previous year increased 
                                by the national per capita 
                                MedicarePlus growth percentage 
                                for the year involved (as 
                                defined in section 1853(c)(6), 
                                but determined without regard 
                                to the adjustment described in 
                                subparagraph (B) of such 
                                section).
                          ``(vii) General gme update factor.--
                        For purposes of clause (v), the 
                        `general GME update factor' for a year 
                        is equal to the Secretary's estimate of 
                        the national average percentage change 
                        in average per capita payments under 
                        sections 1886(d)(5)(B) and 1886(h) from 
                        the previous year to the year involved. 
                        Such amount takes into account changes 
                        in law and regulation affecting payment 
                        amounts under such sections.''.

SEC. 4009. DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FOR MANAGED CARE 
                    ENROLLEES.

  Section 1858, as inserted by section 4008(b), is further 
amended by adding at the end the following new subsection:
  ``(b) Disproportionate Share Hospital Payments.--
          ``(1) In general.--For portions of cost reporting 
        periods occurring on or after January 1, 1998, the 
        Secretary shall provide for an additional payment 
        amount for each subsection (d) hospital (as defined in 
        section 1886(d)(1)(B)) and for each hospital reimbursed 
        a demonstration project reimbursement system under 
        section 1814(b)(3) that--
                  ``(A) furnishes services to individuals who 
                are enrolled under a risk-sharing contract with 
                an eligible organization under section 1876 and 
                who are entitled to part A and to individuals 
                who are enrolled with a MedicarePlus 
                organization under this part, and
                  ``(B) is (or, if it were not reimbursed under 
                section 1814(b)(3), would qualify as) a 
                disproportionate share hospital described in 
                section 1886(d)(5)(F)(i).
          ``(2) Amount of payment.--Subject to paragraph 
        (3)(B), the amount of the payment under this subsection 
        shall be the product of--
                  ``(A) the amount of the disproportionate 
                share adjustment percentage applicable to the 
                hospital under section 1886(d)(5)(F); and
                  ``(B) the product described in subsection 
                (a)(2)(C)(ii).
        The Secretary shall establish rules for the computation 
        of the amount described in subparagraph (A) for a 
        hospital reimbursed under section 1814(b)(3).
          ``(3) Limit.--
                  ``(A) Determination.--At the beginning of 
                each year, the Secretary shall--
                          ``(i) estimate the sum of the 
                        payments under this subsection for 
                        services or discharges occurring in the 
                        year, and
                          ``(ii) determine the amount of the 
                        annual payment limit under subparagraph 
                        (C)) for such year.
                  ``(B) Imposition of limit.--If the amount 
                estimated under subparagraph (A)(i) for a year 
                exceeds the amount determined under 
                subparagraph (A)(ii) for the year, then the 
                Secretary shall adjust the amounts of the 
                payments under this subsection for the year in 
                a pro rata manner so that the total of such 
                payments in the year do not exceed the annual 
                payment limit determined under subparagraph 
                (A)(ii) for that year.
                  ``(C) Annual payment limit.--The annual 
                payment limit under this subparagraph for a 
                year shall be determined in the same manner as 
                the annual payment limit is determined under 
                clause (i) of subsection (a)(3)(C), except 
                that, for purposes of this clause, any 
                reference in clauses (i) through (vii) of such 
                subsection--
                          ``(i) to a payment adjustment under 
                        subsection (a) is deemed a reference to 
                        a payment adjustment under this 
                        subsection, or
                          ``(ii) to payments or payment 
                        adjustments under section 1886(d)(5)(B) 
                        and 1886(h) isdeemed a reference to 
payments and payment adjustments under section 1886(d)(5)(F).''.

             CHAPTER 2--INTEGRATED LONG-TERM CARE PROGRAMS

  Subchapter A--Programs of All-inclusive Care for the Elderly (PACE)

SEC. 4011. REFERENCE TO COVERAGE OF PACE UNDER THE MEDICARE PROGRAM.

  For provision amending title XVIII of the Social Security Act 
to provide for payments to, and coverage of benefits under, 
Programs of All-inclusive Care for the Elderly (PACE), see 
section 3431.

SEC. 4012. REFERENCE TO ESTABLISHMENT OF PACE PROGRAM AS MEDICAID STATE 
                    OPTION.

  For provision amending title XIX of the Social Security Act 
to establish the PACE program as a medicaid State option, see 
section 3432.

         Subchapter B--Social Health Maintenance Organizations

SEC. 4015. SOCIAL HEALTH MAINTENANCE ORGANIZATIONS (SHMOS).

  (a) Extension of Demonstration Project Authorities.--Section 
4018(b) of the Omnibus Budget Reconciliation Act of 1987 is 
amended--
          (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'' 
and inserting ``36,000''.
  (b) Report on Integration and Transition.--
          (1) In general.--The Secretary of Health and Human 
        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 MedicarePlus 
        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 operating under demonstration project 
        authority under such section.
          (3) Payment policy.--The report shall also include 
        recommendations 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--Other Programs

SEC. 4018. ORDERLY TRANSITION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION 
                    PROJECTS.

  Section 9215 of the Consolidated Omnibus Budget 
Reconciliation Act of 1985, as amended by section 6135 of OBRA-
1989 and section 13557 of OBRA-1993, is further amended--
          (1) by inserting ``(a)'' before ``The Secretary'', 
        and
          (2) by adding at the end the following: ``Subject to 
        subsection (c), the Secretary may further extend such 
        demonstration projects through December 31, 2000, but 
        only with respect to individuals who are enrolled with 
        such projects before January 1, 1998.
  ``(b) The Secretary shall work with each such demonstration 
project to develop a plan, to be submitted to the Committee on 
Ways and Means of the House of Representatives and the 
Committee on Finance of the Senate by March 31, 1998, for the 
orderly transition of demonstration projects and the project 
enrollees 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 MedicarePlus 
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 this Act, 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 enrollees may be minimized.''.

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 
Reconciliation 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--MEDICARE PAYMENT ADVISORY COMMISSION

SEC. 4021. MEDICARE PAYMENT ADVISORY COMMISSION.

  (a) In General.--Title XVIII is amended by inserting after 
section 1804 the following new section:

                 ``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; and
                  ``(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 recommendationsconcerning such policies 
and an examination of issues affecting the medicare program.
          ``(2) Specific topics to be reviewed.--
                  ``(A) Medicareplus program.--Specifically, 
                the Commission shall review, with respect to 
                the MedicarePlus program under part C, the 
                following:
                          ``(i) The methodology for making 
                        payment to plans under such program, 
                        including the making of differential 
                        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 MedicarePlus 
                        organizations and between the 
                        MedicarePlus option and the medicare 
                        fee-for-service option.
                          ``(iv) The development and 
                        implementation of mechanisms to assure 
                        the quality of care for those enrolled 
                        with MedicarePlus organizations.
                          ``(v) The impact of the MedicarePlus 
                        program on access to care for medicare 
                        beneficiaries.
                          ``(vi) The appropriate role for the 
                        medicare program in addressing the 
                        needs of individuals with chronic 
                        illnesses.
                          ``(vii) Other major issues in 
                        implementation and further development 
                        of the MedicarePlus program.
                  ``(B) 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, the 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 payment 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 
        recommendations as the Commission deems appropriate.
          ``(4) Agenda and additional reviews.--The Commission 
        shall consult periodically with the chairmen and 
        ranking minority members of the appropriate committees 
        of Congress regarding the Commission's agenda and 
        progress towards achieving the agenda. The Commission 
        may conduct additional reviews, and 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.--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 11 members appointed by the Comptroller 
        General.
          ``(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 facilities, 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, individuals 
                skilled in the conduct and interpretation of 
                biomedical, health services, and health 
                economics research and expertise in outcomes 
                and effectiveness research and technology 
                assessment. Such membership shall also include 
                representatives 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 bymembers 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 shall be filled in the manner 
                in which the original appointment was made.
          ``(4) Compensation.--While serving on the business of 
        the Commission (including traveltime), a member of the 
        Commission shall be entitled to compensation at the per 
        diem equivalent 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 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.
          ``(6) Meetings.--The Commission shall meet at the 
        call of the Chairman.
  ``(d) Director and Staff; Experts and Consultants.--Subject 
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 
        Director (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 advance, 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 necessary 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 section. Upon request of the Chairman, 
        the head of that department or agency shall furnish 
        that information to the Commission 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, immediately 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 
        appropriated such sums as may be necessary to carry out 
        the provisions of 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.''.
  (b) Abolition of ProPAC and PPRC.--
          (1) Propac.--
                  (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 Commission'' 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 subsection (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-1).
                  (B) Elimination of certain reports.--Section 
                1848 (42 U.S.C. 1395w-4) is amended by striking 
                subparagraph (B) of subsection (f)(1).
                  (C) Conforming amendments.--Section 1848 (42 
                U.S.C. 1395w-4) is amended by striking 
                ``Physician Payment Review Commission'' and 
                inserting ``Medicare Payment Advisory 
                Commission'' each place it appears in 
                subsections (c)(2)(B)(iii), (g)(6)(C), and 
                (g)(7)(C).
  (c) Effective Date; Transition.--
          (1) In general.--The Comptroller General shall first 
        provide 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 Payment 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 
        balances 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 
        submission 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 paragraph:
  ``(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 date of the termination of enrollment described in such 
subparagraph and who submits evidence of the date of 
termination or disenrollment along with the application for 
such medicare supplemental policy.
  ``(B) An individual described in this subparagraph is an 
individual 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 individual.
          ``(ii) The individual is enrolled with a MedicarePlus 
        organization under a MedicarePlus plan under part C, 
        and there are circumstances permitting discontinuance 
        of the individual's election of the plan under section 
        1851(e)(4).
          ``(iii) The individual is enrolled with an eligible 
        organization under a contract under section 1876, a 
        similar organization operating under demonstration 
        project authority, 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 discontinuance of an 
        individual's election of coverage under 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 of coverage under such 
        policy.
          ``(iv) The individual is enrolled under a medicare 
        supplemental 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 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 policy'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 MedicarePlus organization under a 
                MedicarePlus plan under part C, any eligible 
                organization under a contract under section 
                1876, any similar organization operating under 
                demonstration project authority, any 
                organization under an agreement under section 
                1833(a)(1)(A), or any policy described in 
                subsection (t), and
                  ``(III) the subsequent enrollment under 
                subclause (II) is terminated by the enrollee 
                during the first 6 months (or 3 months for 
                terminations occurring on or after January 1, 
                2003) of such enrollment.
          ``(vi) The individual--
                  ``(I) was enrolled under a medicare 
                supplemental policy under this section,
                  ``(II) subsequently terminates such 
                enrollment and enrolls, for the first time, 
                during or after the annual, coordinated 
                election period under section 1851(e)(3)(B) 
                occurring during 2002, with an organization or 
                policy described in clause (v)(II), and
                  ``(III) the subsequent enrollment under 
                subclause (II) is terminated by the enrollee 
                during the next annual, coordinated election 
                period under such section.
  ``(C)(i) Subject to clauses (ii) and (iii), a medicare 
supplemental policy described in this subparagraph has a 
benefit package classified as `A', `B', `C', or `F' under the 
standards established under subsection (p)(2).
  ``(ii) Only for purposes of an individual described in 
subparagraph (B)(v), a medicare supplemental policy described 
in this subparagraph also includes (if available from the same 
issuer) the same medicare supplemental policy referred to in 
such subparagraph in which the individual was most recently 
previously enrolled.
  ``(iii) For purposes of applying 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 comparable 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, 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) of--
          ``(i) at least 6 months, the policy may not exclude 
        benefits based on a pre-existing condition; or
          ``(ii) of 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) Effective Dates.--
          (1) Guaranteed issue.--The amendment made by 
        subsection (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.
  (d) 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 
        compliance 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 Act, the National 
        Association of Insurance 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 regulation 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 modifications 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 of--
                          (i) the date the State changes its 
                        statutes or regulations 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 legislation appropriating 
                        funds) to conform its regulatory 
                        program to the changes made in this 
                        section, but
                          (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 ofthe first 
legislative session of the State legislature that begins on or after 
July 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.

SEC. 4032. MEDICARE PREPAID COMPETITIVE PRICING DEMONSTRATION PROJECT.

  (a) Establishment of Project.--The Secretary of Health and 
Human Services shall provide, beginning not later than 1 year 
after the date of the enactment of this Act, for implementation 
of a project (in this section referred to as the ``project'') 
to demonstrate the application of, and the consequences of 
applying, a market-oriented pricing system for the provision of 
a full range of medicare benefits in a geographic area.
  (b) Research Design Advisory Committee.--
          (1) In general.--Before implementing the project 
        under this section, the Secretary shall appoint a 
        national advisory committee, including independent 
        actuaries and individuals with expertise in competitive 
        health plan pricing, to make recommendations to the 
        Secretary concerning the appropriate research design 
        for implementing the project.
          (2) Initial recommendations.--The committee initially 
        shall submit recommendations respecting the method for 
        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) Advice during implementation.--Upon 
        implementation of the project, the 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.
  (c) Area Selection.--
          (1) In general.--Taking into account the 
        recommendations of the advisory committee submitted 
        under subsection (b), the Secretary shall designate 
        areas in which the project will operate.
          (2) 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 representatives of health plans, providers, 
        and medicare beneficiaries in the area, to advise the 
        Secretary concerning how the project will actually be 
        implemented in the area. Such advice may include advice 
        concerning the marketing and pricing of plans in the 
        area and other salient factors relating.
  (d) Monitoring and Report.--
          (1) Monitoring impact.--Taking into consideration the 
        recommendations of the general advisory committee 
        (appointed under subsection (b)), the Secretary shall 
        closely monitor the impact of projects in areas on the 
        price and quality of, and access to, medicare covered 
        services, choice of health plan, changes in enrollment, 
        and other relevant factors.
          (2) Report.--The Secretary shall periodically report 
        to Congress on the progress under the project under 
        this section.
  (e) Waiver Authority.--The Secretary of Health and Human 
Services may waive such requirements of section 1876 (and such 
requirements of part C of title XVIII, as amended by chapter 
1), of the Social Security Act as may be necessary for the 
purposes of carrying out the project.
  (f) Relationship to Other Authority.--Except pursuant to this 
section the Secretary of Health and Human Services may not 
conduct or continue any medicare demonstration project relating 
to payment of health maintenance organizations, MedicarePlus 
organizations, or similar prepaid managed care entities on the 
basis of a competitive bidding process or pricing system 
described in subsection (a) rather than on the bases described 
in section 1853 or 1876 of the Social Security 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. 1395l(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 screening mammography (as described in 
        section 1861(jj))''.
  (c) Conforming Amendment.--Section 1834(c)(1)(C) of such Act 
(42 U.S.C. 1395m(c)(1)(C)) is amended by striking ``, subject 
to the deductible established under section 1833(b),''.
  (d) Effective Date.--The amendments made by this section 
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'';
          (2) by inserting ``or vaginal'' after ``cervical'' 
        each place it appears;
          (3) by striking ``(nn)'' and inserting ``(nn)(1)'';
          (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 
examination 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 not had a test 
        described in this subsection during each of the 
        preceding 3 years that did not indicate the presence of 
        cervical or vaginal cancer; or
          ``(B) is at high risk of developing cervical or 
        vaginal cancer (as determined pursuant to factors 
        identified by the Secretary).''.
  (b) Waiver of Deductible.--The first sentence of section 
1833(b) (42 U.S.C. 1395l(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 screening 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)(1)(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-4(j)(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 
shall apply to items and services furnished on or after January 
1, 1998.
  (f) Report on Rescreening Pap Smears.--Not later than 6 
months after the date of the enactment of this Act, the 
Secretary of Health and Human Services shall submit to Congress 
a report on the extent to which the use of supplemental 
computer-assisted diagnostic tests consisting of interactive 
automated computer-imaging of an exfoliative cytology test, in 
conjunction with the pap smears, improves the early detection 
of cervical or vaginal cancer and the costs implications for 
coverage of such supplemental tests under the medicare program.

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 
        subsection (oo)); and''; and
          (2) by adding at the end the following new 
        subsection:

                   ``Prostate Cancer Screening Tests

  ``(oo)(1) 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 man over 50 years of age who has not had 
such a test during the preceding year.
  ``(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 2001, 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. 1395l(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 
                subparagraph:
          ``(G) in the case of prostate cancer screening tests 
        (as defined in section 1861(oo)), which are performed 
        more frequently 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 (G) of 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),'' after ``(2)(G)''
  (e) Effective Date.--The amendments made by this section 
shall apply to items and services furnished on or after January 
1, 1998.

SEC. 4104. COVERAGE OF COLORECTAL SCREENING.

  (a) Coverage.--
          (1) In general.--Section 1861 (42 U.S.C. 1395x), as 
        amended 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 subsection (pp)); and''; and
                  (B) by adding at the end the following new 
                subsection:

                  ``Colorectal Cancer Screening Tests

  ``(pp)(1) The term `colorectal cancer screening test' means 
any of the following procedures furnished to an individual for 
the purpose of early detection of colorectal cancer:
          ``(A) Screening fecal-occult blood test.
          ``(B) Screening flexible sigmoidoscopy.
          ``(C) In the case of an individual at high risk for 
        colorectal cancer, screening colonoscopy.
          ``(D) Screening barium enema, if found by the 
        Secretary to be an appropriate alternative to screening 
        flexible sigmoidoscopy under subparagraph (B) or 
        screening colonoscopy under subparagraph (C).
          ``(E) For years beginning after 2002, such other 
        procedures as the Secretary finds appropriate for the 
        purpose of early detection of colorectal cancer, taking 
        into account changes in technology and standards of 
        medical practice, availability, effectiveness, costs, 
        and such other factors as the Secretary considers 
        appropriate.
  ``(2) In paragraph (1)(C), an `individual at high risk for 
colorectal cancer' is an individual who, because of family 
history, prior experience 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 appropriate recognized 
gene markers for colorectal cancer, or other predisposing 
factors, faces a high risk for colorectal cancer.''.
          (2) Deadline for decision on coverage of screening 
        barium enema.--Not later than 2 years after the date of 
        the enactment of this section, the Secretary of Health 
        and Human Services shall issue and publish a 
        determination on the treatment of screening barium 
        enema as a colorectal cancer screening test under 
        section 1861(pp) (as added by subparagraph (B)) as an 
        alternative procedure to a screening flexible 
        sigmoidoscopy or screening colonoscopy.
  (b) Frequency and Payment Limits.--
          (1) In general.--Section 1834 (42 U.S.C. 1395m) is 
        amended by inserting after subsection (c) the following 
        new subsection:
  ``(d) Frequency and Payment Limits for Colorectal Cancer 
Screening Tests.--
          ``(1) Screening fecal-occult blood tests.--
                  ``(A) Payment limit.--In establishing fee 
                schedules under section 1833(h) with respect to 
                colorectal cancer screening tests consisting of 
                screening fecal-occult blood tests, except as 
                provided by the Secretary under paragraph 
                (4)(A), the payment amount established for 
                tests performed--
                          ``(i) in 1998 shall not exceed $5; 
                        and
                          ``(ii) in a subsequent year, shall 
                        not exceed the limit on the payment 
                        amount established under this 
                        subsection for such tests for the 
                        preceding year, adjusted by the 
                        applicable adjustment under section 
                        1833(h) for tests performed in such 
                        year.
                  ``(B) Frequency limit.--Subject to revision 
                by the Secretary under paragraph (4)(B), no 
                payment may be made under this part for 
                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.--The Secretary shall 
                establish a payment amount under section 1848 
                with respect to colorectal cancer screening 
                tests consisting of screening flexible 
                sigmoidoscopies that is consistent with payment 
                amounts under such section for similar or 
                related services, except that such payment 
                amount shall be established without regard to 
                subsection (a)(2)(A) of such section.
                  ``(B) Payment limit.--In the case of 
                screening flexible sigmoidoscopy services--
                          ``(i) the payment amount may not 
                        exceed such amount as the Secretary 
                        specifies, based upon the rates 
                        recognized under this part for 
                        diagnostic flexible sigmoidoscopy 
                        services; and
                          ``(ii) that, in accordance with 
                        regulations, may be performed in an 
                        ambulatory surgical center and for 
                        which the Secretary permits ambulatory 
                        surgical center payments under this 
                        part and that are performed in an 
                        ambulatory surgical center or hospital 
                        outpatient department, the payment 
                        amount under this part may not exceed 
                        the lesser of (I) the payment rate that 
                        wouldapply to such services if they 
were performed in a hospital outpatient department, or (II) the payment 
rate that would apply to such services if they were performed in an 
ambulatory surgical center.
                  ``(C) 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.
                  ``(D) Frequency limit.--Subject to revision 
                by the Secretary under paragraph (4)(B), 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.--The Secretary shall 
                establish a payment amount under section 1848 
                with respect to colorectal cancer screening 
                test consisting of a screening colonoscopy for 
                individuals at high risk for colorectal cancer 
                (as defined in section 1861(pp)(2)) that is 
                consistent with payment amounts under such 
                section for similar or related services, except 
                that such payment amount shall be established 
                without regard to subsection (a)(2)(A) of such 
                section.
                  ``(B) Payment limit.--In the case of 
                screening colonoscopy services--
                          ``(i) the payment amount may not 
                        exceed such amount as the Secretary 
                        specifies, based upon the rates 
                        recognized under this part for 
                        diagnostic colonoscopy services; and
                          ``(ii) that are performed in an 
                        ambulatory surgical center or hospital 
                        outpatient department, the payment 
                        amount under this part may not exceed 
                        the lesser of (I) the payment rate that 
                        would apply to such services if they 
                        were performed in a hospital outpatient 
                        department, or (II) the payment rate 
                        that would apply to such services if 
                        they were performed in an ambulatory 
                        surgical center.
                  ``(C) 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.
                  ``(D) Frequency limit.--Subject to revision 
                by the Secretary under paragraph (4)(B), 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.
          ``(4) Reductions in payment limit and revision of 
        frequency.--
                  ``(A) Reductions in payment limit for 
                screening fecal-occult blood tests.--The 
                Secretary shall review from time to time the 
                appropriateness of the amount of the payment 
                limit established for screening fecal-occult 
                blood tests under paragraph (1)(A). The 
                Secretary may, with respect to tests performed 
                in a year after 2000, reduce the amount of such 
                limit as it applies nationally or in any area 
                to the amount that the Secretary estimates is 
                required to assure that such tests of an 
                appropriate quality are readily and 
                conveniently available during the year.
                  ``(B) Revision of frequency.--
                          ``(i) Review.--The Secretary shall 
                        review periodically the appropriate 
                        frequency for performing colorectal 
                        cancer screening tests based on age and 
                        such other factors as the Secretary 
                        believes to be pertinent.
                          ``(ii) Revision of frequency.--The 
                        Secretary, taking into consideration 
                        the review made under clause (i), may 
                        revise from time to time the frequency 
                        with which such tests may be paid for 
                        under this subsection, but no such 
                        revision shall apply to tests performed 
                        before January 1, 2001.
          ``(5) Limiting charges of nonparticipating 
        physicians.--
                  ``(A) In general.--In the case of a 
                colorectal cancer screening test consisting of 
                a screening flexible sigmoidoscopy or a 
                screening colonoscopy provided to an individual 
                at high risk for colorectal cancer for which 
                payment may be made under this part, if a 
                nonparticipating physician provides the 
                procedure to an individual enrolled under this 
                part, the physician may not charge the 
                individual more than the limiting charge (as 
                defined in section 1848(g)(2)).
                  ``(B) Enforcement.--If a physician or 
                supplier knowing and willfully imposes a charge 
                in violation of subparagraph (A), the Secretary 
                may apply sanctions against such physician or 
                supplier in accordance with section 
                1842(j)(2).''.
          (2) Special rule for screening barium enema.--If the 
        Secretary of Health and Human Services issues a 
        determination under subsection (a)(2) that screening 
        barium enema should be covered as a colorectal cancer 
        screening test under section 1861(pp) (as added by 
        subsection (a)(1)(B)), the Secretary shall establish 
        frequency limits(including revisions of frequency 
limits) for such procedure consistent with the frequency limits for 
other colorectal cancer screening tests under section 1834(d) (as added 
by subsection (b)(1)), and shall establish payment limits (including 
limits on charges of nonparticipating physicians) for such procedure 
consistent with the payment limits under part B of title XVIII for 
diagnostic barium enema procedures.
  (c) Conforming Amendments.--(1) Paragraphs (1)(D) and (2)(D) 
of section 1833(a) (42 U.S.C. 1395l(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. 1395l(h)(1)(A)) is 
amended by striking ``The Secretary'' and inserting ``Subject 
to paragraphs (1) and (4)(A) of section 1834(d), the 
Secretary''.
  (3) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 U.S.C. 
1395w-4(a)(2)(A)) are each amended by inserting after ``a 
service'' the following: ``(other than a colorectal cancer 
screening test consisting of a screening colonoscopy provided 
to an individual at high risk for colorectal cancer or a 
screening flexible sigmoidoscopy)''.
  (4) 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 ``and'' 
                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 
                subparagraph:
          ``(H) in the case of colorectal cancer screening 
        tests, which are performed more frequently than is 
        covered under section 1834(d);''; and
          (B) in paragraph (7), by striking ``or (G)'' and 
        inserting ``(G), or (H)''.
  (d) Effective Date.--The amendments made by this section 
shall apply to items and services furnished on or after January 
1, 1998.

SEC. 4105. DIABETES SCREENING TESTS.

  (a) Coverage of Diabetes Outpatient Self-management Training 
Services.--
          (1) In general.--Section 1861 (42 U.S.C. 1395x), as 
        amended 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)(1) The term `diabetes outpatient self-management 
training services' means educational and training services 
furnished to an individual 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 comprehensive 
plan of care related to the individual's diabetic condition to 
provide the individual with necessary skills and knowledge 
(including skills related to the self-administration of 
injectable drugs) to participate in the management 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 services, 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 physician, or individual or entity, 
        meets quality standards established 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 4102 and 4103, is amended by inserting 
        ``(2)(S),'' before ``(3),''.
          (3) Consultation with organizations in establishing 
        payment amounts for services provided by physicians.--
        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, in determining 
        the relative value for such services under section 
        1848(c)(2) of such Act.
  (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-
testingstrips and blood glucose monitors for individuals with diabetes 
without regard to whether the individual has Type I or Type II diabetes 
or to the individual's use of insulin (as determined under standards 
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 Beneficiaries With 
Diabetes.--
          (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 status of medicare beneficiaries with diabetes 
        mellitus as measured under the outcome measures 
        established under subparagraph (A), the Secretary shall 
        from time to time submit recommendations to Congress 
        regarding modifications to the coverage of services for 
        such beneficiaries under the medicare program.
  (d) Effective Date.--The amendments made by this section 
shall apply to items and services 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), 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'',
                  (C) by redesignating paragraphs (15) and (16) 
                as paragraphs (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:

                        ``Bone Mass Measurement

  ``(rr)(1) 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 
individual' 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 hyperparathyroidism; 
        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, 
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)(1)(B)(ii)(I) (42 U.S.C. 1395aa(a), 1396a(a)(9)(C), 
and 1396n(a)(1)(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) Appropriation.--There are hereby appropriated for each of 
fiscal years 1998 through 2002, $8,000,000 to the Campaign 
described in subsection (a). Of the amount of such 
appropriation in each fiscal year, 60 percent of such 
appropriation shall be payable from the Federal Hospital 
Insurance Trust Fund, and 40 percent shall be payable from the 
Federal Supplementary Medical Insurance Trust Fund under title 
XVIII of the Social Security Act (42 U.S.C. 1395i, 1395t).

SEC. 4108. STUDY ON PREVENTIVE BENEFITS.

  (a) Study.--The Secretary of Health and Human Services shall 
request the National Academy of Sciences, inconjunction with 
the United States Preventive Services Task Force, to analyze the 
expansion or modification of preventive 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 subsection (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 the following 
        preventive benefits:
                  (A) Nutrition therapy, including parenteral 
                and enteral nutrition.
                  (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 may be necessary for the conduct of the 
        analysis by the National Academy of Sciences under this 
        section.

                     Subtitle C--Rural Initiatives

SEC. 4206. INFORMATICS, TELEMEDICINE, AND EDUCATION DEMONSTRATION 
                    PROJECT.

  (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 residents 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 payment for services 
        under the project in accordance 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 
        appropriate care guidelines for individuals with 
        diabetes mellitus through direct telecommunications 
        link with information networks in order to improve 
        patient quality-of-life and reduce overall health care 
        costs.
          (2) Developing a curriculum to train, and providing 
        standards for credentialing and licensure of, 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 monitoring of a patient's 
        medical condition, interventional informatics, and 
        applying individualized, automated care guidelines, 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 telecommunications provider and that meets the 
following requirements:
          (1) The consortium is located in an area with one of 
        the highest concentrations 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 conduct 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 payment 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 thissection 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 management 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 shall 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).
                  (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) Payment of telecommunications 
                        costs (including 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 telecommunications 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.
          (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 recognized costs of the project 
        attributable to such services.
  (e) Reports.--The Secretary shall submit to the Committees on 
Ways and Means and 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 medicare 
beneficiaries to health care services, on reducing the costs of 
such services, and on improving the quality of life of such 
beneficiaries.
  (f) Definitions.--For purposes of this section:
          (1) Interventional informatics.--The term 
        ``interventional 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.

              Subtitle D--Anti-Fraud and Abuse Provisions

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 
subsection (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 and before the date of the 
conviction for which the exclusion is imposed) 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 AGREEMENTS 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) 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 after subparagraph (C) the following 
        new subparagraph:
                  ``(D) has ascertained that the provider has 
                been convicted of a felony under Federal or 
                State law for an offense which the Secretary 
                determines is inconsistent with the best 
                interests of program beneficiaries.''.
  (b) Medicare Part B.--Section 1842 (42 U.S.C. 1395u) is 
amended by adding after subsection (r) the following new 
subsection:
  ``(s) The Secretary may refuse to enter into an agreement 
with a physician or supplier under subsection (h) 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 inconsistent with the best interests of program 
beneficiaries.''.
  (c) Medicaid.--Section 1902(a)(23) (42 U.S.C. 1396(a)) is 
amended--
          (1) by relocating the matter that precedes ``provide 
        that, (A)'' immediately before the semicolon;
          (2) by inserting a semicolon after ``1915'';
          (3) by striking the comma after ``Guam'' and 
        inserting a semicolon; and
          (4) by inserting before the semicolon at the end the 
        following: ``and except that this provision does not 
        require 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''.
  (d) Effective Date.--The amendments made by this section 
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. INCLUSION OF TOLL-FREE NUMBER TO REPORT MEDICARE WASTE, 
                    FRAUD, AND ABUSE IN EXPLANATION OF BENEFITS FORMS.

  (a) In General.--Section 1842(h)(7) (42 U.S.C. 1395u(h)(7)) 
is amended--
          (1) by striking ``and'' at the end of subparagraph 
        (D),
          (2) by striking the period at the end of subparagraph 
        (E), and
          (3) by adding at the end the following new 
        subparagraph:
          ``(E) a toll-free telephone number maintained by the 
        Inspector 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.''.
  (b) Effective Date.--The amendments made by subsection (a) 
shall apply to explanations of benefits provided on or after 
such date (not later than January 1, 1999) as the Secretary of 
Health and Human Services shall provide.

SEC. 4304. LIABILITY OF MEDICARE CARRIERS AND FISCAL INTERMEDIARIES FOR 
                    CLAIMS SUBMITTED BY EXCLUDED PROVIDERS.

  (a) Reimbursement to the Secretary for Amounts Paid to 
Excluded Providers.--
          (1) Requirements for fiscal intermediaries.--
                  (A) In general.--Section 1816 (42 U.S.C. 
                1395h) is amended by adding at the end the 
                following new subsection:
  ``(m) An agreement with an agency or organization under this 
section shall require that such agency or organization 
reimburse the Secretary for any amounts paid by the agency or 
organization for a service under this title which is furnished, 
directed, or prescribed by an individual or entity during any 
period for which the individual or entity is excluded pursuant 
to section 1128, 1128A, or 1156, from participation in the 
program under this title, if the amounts are paid after the 
Secretary notifies the agency or organization of the 
exclusion.''.
                  (B) Conforming amendment.--Subsection (i) of 
                such section is amended by adding at the end 
                the following new paragraph:
  ``(4) Nothing in this subsection shall be construed to 
prohibit reimbursement by an agency or organization under 
subsection (m).''.
          (2) Requirements for carriers.--Section 1842(b)(3) 
        (42 U.S.C. 1395u(b)(3)) is amended--
                  (A) by striking ``and'' at the end of 
                subparagraph (I); and
                  (B) by inserting after subparagraph (I) the 
                following new subparagraph:
          ``(J) will reimburse the Secretary for any amounts 
        paid by the carrier for an item or service under this 
        part which is furnished, directed, or prescribed by an 
        individual or entity during any period for which the 
        individual or entity is excluded pursuant to section 
        1128, 1128A, or 1156, from participation in the program 
        under this title, if the amounts are paid after the 
        Secretary notifies the carrier of the exclusion, and''.
          (3) Medicaid Provision.--Section 1902(a)(39) (42 
        U.S.C. 1396a(a)(39)) is amended by inserting before the 
        semicolon at the end the following: ``, and provide 
        further for reimbursement to the Secretary of any 
        payments made under the plan or any item or service 
        furnished, directed, or prescribed by the excluded 
        individual or entity during such period, after the 
        Secretary notifies the State of such exclusion''.
  (b) Conforming Repeal of Mandatory Payment Rule.--Paragraph 
(2) of section 1862(e) (42 U.S.C. 1395y(e)) is amended to read 
as follows:
  ``(2) No individual or entity may bill (or collect any amount 
from) any individual for any item or service for which payment 
is denied under paragraph (1). No person is liable for payment 
of any amounts billed for such an item or service in violation 
of the previous sentence.''.
  (c) Effective Dates.--The amendments made by this section 
shall apply to contracts and agreements entered into, renewed, 
or extended after the date of the enactment of this Act, but 
only with respect to claims submitted on or after the later of 
January 1, 1998, or the date such entry, renewal, or extension 
becomes effective.

SEC. 4305. EXCLUSION OF ENTITY CONTROLLED BY FAMILY MEMBER OF A 
                    SANCTIONED INDIVIDUAL.

  (a) In General.--Section 1128 (42 U.S.C. 1320a-7) is 
amended--
          (1) in subsection (b)(8)(A)--
                  (A) by striking ``or'' at the end of clause 
                (i), and
                  (B) by striking the dash at the end of clause 
                (ii) 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)(1)) 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 after subsection (i) 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 member' 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 a 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 subsection (a) 
shall take effect on the date that is 45 days after the date of 
the enactment of this Act.

SEC. 4306. 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) by striking ``or'' at the end of paragraph (4);
          (2) by adding ``or'' at the end of paragraph (5); and
          (3) by adding after paragraph (5) the following new 
        paragraph:
          ``(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) Effective Dates.--The amendments made by subsection (a) 
shall apply to arrangements and contracts entered into after 
the date of the enactment of this Act.

SEC. 4307. DISCLOSURE OF INFORMATION AND SURETY BONDS.

  (a) Disclosure of Information and Surety Bond Requirement for 
Suppliers of Durable Medical Equipment.--Section 1834(a) (42 
U.S.C. 1395m(a)) is amended by inserting after paragraph (15) 
the following new paragraph:
          ``(16) Conditions for issuance of provider number.--
        The Secretary shall not provide for the issuance (or 
        renewal) of a provider number for a supplier of durable 
        medical equipment, for purposes of payment under this 
        part for durable medical equipment furnished by the 
        supplier, unless the supplier provides the Secretary on 
        a continuing basis with--
                  ``(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 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 Agencies.--
          (1) In general.--Section 1861(o) (42 U.S.C. 1395x(o)) 
        is amended--
                  (A) in paragraph (7), by inserting ``and 
                including providing the Secretary on a 
                continuing basis with asurety bond in a form 
specified by the Secretary and in an amount that is not less than 
$50,000,'' after ``financial security of the program'', and
                  (B) by adding at the end the following: ``The 
                Secretary may waive the requirement of a bond 
                under paragraph (7) in the case of an agency or 
                organization that provides a comparable surety 
                bond under State law.''.
          (2) Conforming amendments.--Section 1861(v)(1)(H) (42 
        U.S.C. 1395x(v)(1)(H)) is amended--
                  (A) in clause (i), by striking ``the 
                financial security requirement'' and inserting 
                ``the financial security and surety bond 
                requirements''; and
                  (B) in clause (ii), by striking ``the 
                financial security requirement described in 
                subsection (o)(7) applies'' and inserting ``the 
                financial security and surety bond requirements 
                described in subsection (o)(7) apply''.
          (3) Reference to current disclosure requirement.--For 
        provision of current law requiring home health agencies 
        to disclose information on ownership and control 
        interests, see section 1124 of the Social Security Act.
  (c) Authorizing Application of Disclosure and Surety Bond 
Requirements to Ambulance Services and Certain Clinics.--
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, in the Secretary's discretion, may impose the 
requirements of the previous sentence with respect to some or 
all classes of suppliers of ambulance services described in 
section 1861(s)(7) and clinics that furnish medical and other 
health services (other than physicians' services) under this 
part.''.
  (d) Application to Comprehensive Outpatient Rehabilitation 
Facilities (CORFs).--Section 1861(cc)(2) (42 U.S.C. 
1395x(cc)(2)) is amended--
          (1) in subparagraph (I), by inserting before the 
        period at the end the following: ``and providing 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 after and below subparagraph (I) the 
        following:
``The Secretary may waive the requirement of a 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 Secretary may find necessary,'' the following: 
        ``and provides the Secretary, to the extent required by 
        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 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) The amendment made by subsection 
(a) shall apply to suppliers of durable medical equipment with 
respect to such equipment furnished on or after January 1, 
1998.
  (2) The amendments made by subsection (b) shall apply to home 
health agencies with respect to services furnished on or after 
such date. The Secretary of Health and Human Services shall 
modify participation agreements under section 1866(a)(1) of the 
Social Security Act with respect to home health agencies to 
provide for implementation of such amendments on a timely 
basis.
  (3) The amendments made by subsections (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 the date specified in paragraph (1).

SEC. 4308. PROVISION OF CERTAIN IDENTIFICATION NUMBERS.

  (a) Requirements to Disclose Employer Identification Numbers 
(EINS) and Social Security Account Numbers (SSNs).--Section 
1124(a)(1) (42 U.S.C. 1320a-3(a)(1)) is amended by inserting 
before the period at the end the following: ``and supply the 
Secretary with 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 an ownership or control interest (as defined in subsection 
(a)(3)), and any subcontractor in which the entity directly or 
indirectly has a 5 percent or more ownership interest. Use of 
the social security account number under this section shall be 
limited to identity verification and identity matching purposes 
only. The social security account number shall not be disclosed 
to any person or entity other than the Secretary, the Social 
Security Administration, or the Secretary of the Treasury, In 
obtaining the social security account numbers of the disclosing 
entity and other persons described in this section, the 
Secretary shall comply with section 7 of the Privacy Act of 
1974 (5 U.S.C. 552a note)''.
  (b) Other Medicare Providers.--Section 1124A (42 U.S.C. 
1320a-3a) is amended--
          (1) in subsection (a)--
                  (A) by striking ``and'' at the end of 
                paragraph (1);
                  (B) by striking the period at the end of 
                paragraph (2) 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 section 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) 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) is amended--
          (1) by redesignating subsection (c) as subsection 
        (d); and
          (2) by inserting after subsection (b) the following 
        new subsection:
  ``(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 pursuant to 
                section 6109 of the Internal Revenue Code of 
                1986),
        supplied to the Secretary pursuant to subsection (a)(3) 
        or section 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 verification and correction 
        services described in this subsection.''.
  (d) Report.--Before this subsection shall be 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 the amendments made by this 
section. If Congress determines that the Secretary has not 
taken adequate steps to assure the confidentiality of social 
security account numbers to be provided to the Secretary under 
the amendments made by this section, the amendments made by 
this section shall not take effect.
  (e) Effective Dates.--Subject to subsection (d)--
          (1) 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); and
          (2) the amendments made by subsection (b) shall apply 
        to payment for items and services furnished more than 
        90 days after the date of submission of such report.

SEC. 4309. 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.
                  ``(B) Binding as to secretary and parties 
                involved.--Each advisory opinion issued by the 
                Secretary shall be binding as to the Secretary 
                and the party or parties requesting the 
                opinion.
                  ``(C) Application of certain procedures.--The 
                Secretary shall, to the extent practicable, 
                apply the regulations promulgated under section 
                1128D(b)(5) to the issuance of advisory 
                opinions under this paragraph.
                  ``(D) Applicability.--This paragraph shall 
                apply to requests for advisory opinions made 
                during the period described in section 
                1128D(b)(6).''.

SEC. 4310. NONDISCRIMINATION IN POST-HOSPITAL REFERRAL TO HOME HEALTH 
                    AGENCIES.

  (a) Notification of Availability of Home Health Agencies 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 services 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:
          ``(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 home health 
                agency (to whom the individual is referred) in 
                which the hospital has a disclosable financial 
                interest (as specified by the Secretary 
                consistent with section 1866(a)(1)(R)) or which 
                has such an interest in the hospital.''.
  (b) Maintenance and Disclosure of Information on Post-
Hospital Home Health Agencies.--Section 1866(a)(1) (42 U.S.C. 
1395cc(a)(1)) 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:
          ``(S) in the case of a hospital that has a financial 
        interest (as specified by the Secretary in regulations) 
        in a home health agency, or in which such an agency has 
        such a financial interest, or in which another entity 
        has such a financial interest (directly or indirectly) 
        with such hospital and such an agency, 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 provider).''.
  (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 disclosed to the Secretary pursuant to section 
1866(a)(1)(R).''.
  (d) Effective Dates.--
          (1) The amendments made by subsection (a) shall apply 
        to discharges occurring on or after 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 1 year after the 
        date of the enactment of this Act to carry out the 
        amendments made by subsections (b) and (c) and such 
        amendments shall take effect as of such date (on or 
        after the issuance of such regulations) as the 
        Secretary specifies in such regulations.

SEC. 4311. 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''.
  (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 Portability and Accountability 
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 entities 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 program'' 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 
                civilmoney 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) 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.
          (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--Prospective Payment Systems

                    CHAPTER 2--PAYMENT UNDER PART B

   Subchapter A--Payment for Hospital Outpatient Department Services

SEC. 4411. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS (FDO) FOR CERTAIN 
                    OUTPATIENT HOSPITAL SERVICES.

  (a) Elimination of FDO for Ambulatory Surgical Center 
Procedures.--Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 
1395l(i)(3)(B)(i)(II)) is amended--
          (1) by striking ``of 80 percent''; and
          (2) by striking the period at the end and inserting 
        the following: ``, less the amount a provider may 
        charge as described in clause (ii) of section 
        1866(a)(2)(A).''.
  (b) Elimination of FDO for Radiology Services and Diagnostic 
Procedures.--Section 1833(n)(1)(B)(i) (42 U.S.C. 
1395l(n)(1)(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. 4412. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF HOSPITAL 
                    OUTPATIENT SERVICES.

  (a) Reduction in Payments for Capital-Related Costs.--Section 
1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is 
amended by striking ``through 1998'' and inserting ``through 
1999 and during fiscal year 2000 before January 1, 2000''.
  (b) Reduction in Payments for Other Costs.--Section 
1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is 
amended by striking ``through 1998'' and inserting ``through 
1999 and during fiscal year 2000 before January 1, 2000''.

SEC. 4413. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT 
                    DEPARTMENT SERVICES.

  (a) In General.--Section 1833 (42 U.S.C. 1395l) is amended by 
adding at the end the following:
  ``(t) Prospective Payment System for Hospital Outpatient 
Department Services.--
          ``(1) In general.--With respect to hospital 
        outpatient services designated by the Secretary (in 
        this section referred to as `covered OPD services') and 
        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.
          ``(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, 
                adjustments to account for variations in 
                coinsurance payments for procedures with 
                similar resource costs, or adjustments for 
                certain classes of hospitals; and
                  ``(F) the Secretary shall develop a method 
                for controlling 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 total amounts that would be 
                payable from the Trust Fund under this part for 
                covered OPD services in 1999, determined 
                without regard to this subsection, as though 
                the deductible under section 1833(b) did not 
                apply, and as though the coinsurance described 
                in section 1866(a)(2)(A)(ii) (as in effect 
                before the date of the enactment of this 
                subsection) continued to 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 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 25 
                        percent of amount determined under 
                        subparagraph (D)(i).
                          ``(iii) Rules for new services.--The 
                        Secretary shall establish rules for 
                        establishment of an unadjusted 
                        copayment amount for a covered OPD 
                        service not furnished during 1996, 
                        based upon its classification within a 
                        group of such services.
                  ``(C) Calculation of conversion factors.--
                                  ``(I) In general.--The 
                                Secretary shall establish a 
                                1999 conversion factor for 
                                determining the medicare pre-
                                deductible OPD fee payment 
                                amounts for each covered OPD 
                                service (or group of such 
                                services) furnished in 1999. 
                                Such conversion factor shall be 
                                established on the basis of the 
                                weights and frequencies 
                                described in paragraph (2)(C) 
                                and in a manner such that the 
                                sum for all services and groups 
                                of the products (described in 
                                subclause (II) for each such 
                                service or group) equals the 
                                total projected amount 
                                described in subparagraph (A).
                          ``(II) Product described.--The 
                        product described in this subclause, 
                        for a service or group, is the product 
                        of the medicare pre-deductible OPD fee 
                        payment amounts (taking into account 
                        appropriate adjustments described in 
                        paragraphs (2)(D) and (2)(E)) and the 
                        frequencies for such service or group.
                          ``(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 services furnished in the previous 
                        year increased by the OPD payment 
                        increase factor specified under clause 
                        (iii) for the year involved.
                          ``(iii) OPD payment increase 
                        factor.--For purposes of this 
                        subparagraph, the `OPD payment increase 
                        factor' for services furnished in a 
                        year is equal to the sum of--
                                  ``(I) market basket 
                                percentage increase (applicable 
                                under section 
                                1886(b)(3)(B)(iii)) to hospital 
                                discharges occurring during the 
                                fiscal year ending in such 
                                year, and
                                  ``(II) in the case of a 
                                covered OPD service (or group 
                                of such services) furnished in 
                                a year in which the pre-
                                deductible payment percentage 
                                would not exceed 80 percent, 
                                3.5 percentage points, but in 
                                no case greater than such 
                                number of percentage points as 
                                will result in the pre-
                                deductible payment percentage 
                                exceeding 80 percent.
                        In applying the previous sentence for 
                        years beginning with 2000, the 
                        Secretary may substitute forthe market 
basket percentage increase under subclause (I) 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) 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 of--
                          ``(i) the conversion factor 
                        established under subparagraph (C) for 
                        the year, multiplied by the weighting 
                        factor established under paragraph 
                        (2)(C) for the service (or group), to
                          ``(ii) the sum of the amount 
                        determined under clause (i) and the 
                        unadjusted copayment amount determined 
                        under subparagraph (B) for such service 
                        or group.
                  ``(E) 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 of--
                          ``(i) the conversion factor computed 
                        under subparagraph (C) for the year, 
                        and
                          ``(ii) the relative payment weight 
                        (determined under paragraph (2)(C)) for 
                        the 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 and copayment amount.--Add 
                (i) the medicare OPD fee schedule amount 
                (computed under paragraph (3)(E)) for the 
                service or group and year, and (ii) the 
                unadjusted copayment amount (determined under 
                paragraph (3)(B)) for the service or group.
                  ``(B) Subtract applicable deductible.--Reduce 
                the adjusted sum by the amount of the 
                deductible under section 1833(b), to the extent 
                applicable.
                  ``(C) Apply payment proportion to 
                remainder.--Multiply the amount so determined 
                under subparagraph (B) by the pre-deductible 
                payment percentage (as determined under 
                paragraph (3)(D)) for the service or group and 
                year involved.
                  ``(D) Labor-related adjustment.--The amount 
                of payment is the product determined under 
                subparagraph (C) with the labor-related portion 
                of such product adjusted for relative 
                differences in the cost of labor and other 
                factors determined by the Secretary, as 
                computed under paragraph (2)(D).
          ``(5) Copayment amount.--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the copayment amount under 
                this subsection is determined as follows:
                          ``(i) Unadjusted copayment.--Compute 
                        the amount by which the amount 
                        described in paragraph (4)(B) exceeds 
                        the amount of payment determined under 
                        paragraph (4)(C).
                          ``(ii) Labor adjustment.--The 
                        copayment amount is the difference 
                        determined under clause (i) with the 
                        labor-related portion of such 
                        difference adjusted for relative 
                        differences in the cost of labor and 
                        other factors determined by the 
                        Secretary, as computed under paragraphs 
                        (2)(D). The adjustment under this 
                        clause shall be made in a manner that 
                        does not result in any change in the 
                        aggregate copayments made in any year 
                        if the adjustment had not been made.
                  ``(B) Election to offer reduced copayment 
                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 25 percent of the medicare OPD 
                fee schedule amount (computed under paragraph 
                (3)(E)) for the service involved, adjusted for 
                relative differences in the cost of labor and 
                other factors determined by the Secretary, as 
                computed under subparagraphs (D) and (E) of 
                paragraph (2). 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 section 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 paragraph (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 
                Secretary 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 
                expenditures 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 
                subparagraph (2)(F) that the volume of services 
                paid for under this subsection increased beyond 
                amounts established through those 
                methodologies, the Secretary may appropriately 
                adjust the update to the conversion factor 
                otherwise applicable in a subsequent year.
          ``(7) Special rule for ambulance services.--The 
        Secretary shall pay for hospital outpatient services 
        that are ambulance services on the basis described in 
        the matter in subsection (a)(1) preceding subparagraph 
        (A).
          ``(8) Special rules for certain hospitals.--In the 
        case of hospitals described in section 
        1886(d)(1)(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 
        administrative 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 copayment 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 to services furnished on or after January 
                1, 1999.
                  (B) Section 1833(a)(4) (42 U.S.C. 
                13951(a)(4)) is amended by inserting ``or 
                subsection (t)'' before the semicolon.
          (2) Radiology and other diagnostic procedures.--
                  (A) Section 1833(n)(1)(A) (42 U.S.C. 
                1395l(n)(1)(A)) is amended by inserting ``and 
                before January 1, 1999,'' after ``October 1, 
                1988,'' and after ``October 1, 1989,''.
                  (B) Section 1833(a)(2)(E) (42 U.S.C. 
                1395l(a)(2)(E)) is amended by inserting ``or, 
                for services or procedures performed on or 
                after January 1, 1999, (t)'' before the 
                semicolon.
          (3) Other hospital outpatient services.--Section -
        1833(a)(2)(B) (42 U.S.C. 1395l(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 subsection 
                        (t), or''.

                 Subchapter B--Rehabilitation Services

SEC. 4421. REHABILITATION AGENCIES AND SERVICES.

  (a) Payment Based on Fee Schedule.--
          (1) Special payment rules.--Section 1833(a) (42 
        U.S.C. 1395l(a)) is amended--
                  (A) in paragraph (2) in the matter before 
                subparagraph (A), by inserting ``(C),'' before 
                ``(D)'';
                  (B) in paragraph (6), by striking ``and'' at 
                the end;
                  (C) in paragraph (7), by striking the period 
                at the end and inserting ``; and'';
                  (D) by adding at the end the following new 
                paragraph:
          ``(8) in the case of services described in section 
        1832(a)(2)(C) (that are not described in section 
        1832(a)(2)(B)), 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.--
          ``(1) In general.--With respect to outpatient 
        physical therapy services (which includes outpatient 
        speech-language pathology services) and outpatient 
        occupational therapy services for which payment is 
        determined under this subsection, the payment 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 1998 based upon charges or 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 paragraph (4)) for the services,
        less 20 percent of the amount of the charges imposed 
        for such services.
          ``(3) Applicable fee schedule amount.--In this 
        paragraph, the term `applicable fee schedule amount' 
        means, with respect to services furnished in a year, 
        the fee schedule amount established under section 1848 
        for such services furnished during the year or, if 
        there is no such fee schedule amount established for 
        such services, for such comparable services as the 
        Secretary specifies.
          ``(4) Adjusted reasonable costs.--In paragraph (2), 
        the term `adjusted reasonable costs' means reasonable 
        costs determined reduced by--
                  ``(A) 5.8 percent of the reasonable costs for 
                operating costs, and
                  ``(B) 10 percent of the reasonable costs for 
                capital costs.
          ``(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 
        subparagraphs (A) and (B) of section 1842(b)(18) shall 
        apply to therapy 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).''.
  (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 amended 
by section 4401(b), (42 U.S.C. 1395y(a)) is amended--
          (1) by striking ``or'' at the end of paragraph (16);
          (2) by striking the period at the end of paragraph 
        (17) and inserting ``; or''; and
          (3) by inserting after paragraph (17) the following:
          ``(18) 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 under the 
        second sentence of section 1861(g) or 1861(p) 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. 1395l(g)) is amended--
          (1) in the first sentence, by striking ``services 
        described in the second sentence of section 1861(p)'' 
        and inserting ``physical therapy services of the type 
        described in section 1861(p) (regardless of who 
        furnishes the services or whether the services may be 
        covered as physicians' services so long as the services 
        are furnished other than in a hospital setting)'', and
          (2) in the second sentence, by striking ``outpatient 
        occupational therapy services which are described in 
        the second sentence of section 1861(p) through the 
        operation of section 1861(g)'' and inserting 
        ``occupational therapy services (of the type that are 
        described in section 1861(p) through the operation of 
        section 1861(g)), regardless of who furnishes the 
        services or whether the services may be covered as 
        physicians' services so long as the services are 
        furnished other than in a hospital setting''.
  (d) Effective Date.--The amendments made by this section 
apply to services furnished on or after January 1, 1998; except 
that the amendments made by subsection (c) apply to services 
furnished on or after January 1, 1999.

SEC. 4422. COMPREHENSIVE OUTPATIENT REHABILITATION FACILITIES (CORF).

  (a) Payment Based on Fee Schedule.--
          (1) Special payment rules.--Section 1833(a) (42 
        U.S.C. 1395l(a)), as amended by section 4421(a), is 
        amended--
                  (A) in paragraph (3), by striking 
                ``subparagraphs (D) and (E) of section 
                1832(a)(2)'' and inserting ``section 
                1832(a)(2)(E)'';
                  (B) in paragraph (7), by striking ``and'' at 
                the end;
                  (C) in paragraph (8), by striking the period 
                at the end and inserting ``; and'';
                  (D) by adding at the end the following new 
                paragraph:
          ``(9) in the case of services described in section 
        1832(a)(2)(E), the amounts described in section 
        1834(k).''.
          (2) Payment rates.--Section 1834(k) (42 U.S.C. 
        1395m(k)), as added by section 4421(a), is amended--
                  (A) in the heading, by inserting ``and 
                Comprehensive Outpatient Rehabilitation 
                Facility Services'' after ``Therapy Services''; 
                and
                  (B) in paragraph (1), by inserting ``and with 
                respect to comprehensive outpatient 
                rehabilitation facility services'' after 
                ``occupational therapy services''.
  (b) Effective Date.--The amendments made by subsection (a) 
shall apply to services furnished on or after January 1, 1998, 
and to portions of cost reporting periods occurring on or after 
such date.

                    Subchapter C--Ambulance Services

SEC. 4431. PAYMENTS FOR AMBULANCE SERVICES.

  (a) Interim Reductions.--
          (1) Payments determined on reasonable cost basis.--
        Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) 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 a fiscal year (beginning with fiscal year 1998 
        and ending with fiscal year 2002), 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 
        estimated by the Secretary for the 12-month period 
        ending with the midpoint of the fiscal year involved 
        reduced (in the case of each of fiscal years 1998 and 
        1999) by 1 percentage point.''.
          (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 a fiscal year (beginning with 
fiscal year 1998 and ending with fiscal year 2002) may not 
exceed the reasonable charge for such services provided during 
the previous fiscal year after the application of this 
subparagraph, 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 (in the 
case of each of fiscal years 1998 and 1999) by 1 percentage 
point.''.
  (b) Establishment of Prospective Fee Schedule.--
          (1) Payment in accordance with fee schedule.--Section 
        1833(a)(1) (42 U.S.C. 1395l(a)(1)), as amended by 
        section 4619(b)(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 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(l);''.
          (2) Establishment of schedule.--Section 1834 (42 
        U.S.C. 1395m), as amended by section 4421(a)(2), is 
        amended by adding at the end the following new 
        subsection:
  ``(l) Establishment of Fee Schedule for Ambulance Services.--
          ``(1) In general.--The Secretary shall establish a 
        fee schedule for payment for ambulance services under 
        this part through a negotiated rulemaking process 
        described in title 5, United States Code, and in 
        accordance 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 type of 
                services provided;
                  ``(C) consider appropriate regional and 
                operational differences;
                  ``(D) consider adjustments to payment 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 
        Secretary 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 4431 of 
                the Balanced Budget Act of 1997 had not been 
                made; and
                  ``(B) set the payment amounts provided under 
                the fee schedule for services furnished in 2001 
                and each subsequent year at amounts equal to 
                the payment amounts under the fee schedule for 
                service 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.
          ``(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 
        administrative or judicial review under section 1869 or 
        otherwise of the amounts established under the fee 
        schedule forambulance services under this subsection, 
including matters described in paragraph (2).
          ``(6) Restraint on billing.--The provisions of 
        subparagraphs (A) and (B) of section 1842(b)(18) shall 
        apply to ambulance 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) Effective date.--The amendments made by this 
        section apply to ambulance 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 
        contract 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 service 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 Social Security Act, and
                  (B) bills all recipients who receive ALS 
                intercept services from the entity, regardless 
                of whether or not such recipients are medicare 
                beneficiaries.

SEC. 4432. DEMONSTRATION OF COVERAGE OF AMBULANCE SERVICES UNDER 
                    MEDICARE THROUGH CONTRACTS WITH UNITS OF LOCAL 
                    GOVERNMENT.

  (a) Demonstration Project Contracts with Local Governments.--
The Secretary of Health and Human Services shall establish up 
to 3 demonstration projects under which, at the request of a 
county or parish, the Secretary enters into a contract with the 
county or parish under which--
          (1) the county or parish 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 county or 
        parish who are enrolled under such part, except that 
        the county or parish may not enter into the contract 
        unless the contract covers at least 80 percent of the 
        individuals residing in the county or parish who are 
        enrolled under such part;
          (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 
        county or parish 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 
        county or parish under a demonstration project contract 
        under subsection (a) shall be equal to the product of--
                  (A) the Secretary's estimate of the number of 
                individuals covered under the contract for the 
                month; and
                  (B) \1/12\ of the capitated payment rate for 
                the year established under paragraph (2).
          (2) Capitated payment rate defined.--In this 
        subsection, the ``capitated payment 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 county or 
parish may include in a contract under this section such other 
terms as the parties consider appropriate, including--
          (1) covering individuals residing in additional 
        counties or parishes (under arrangements entered into 
        between such counties or parishes and the county or 
        parish involved);
          (2) permitting the county or parish to transport 
        individuals to non-hospital providers if such providers 
        are able to furnish quality services at a lower cost 
        than hospital providers; or
          (3) implementing such other innovations as the county 
        or parish may propose to improve the quality of 
        ambulance services and control the costs of such 
        services.
  (d) Contract Payments in Lieu of Other Benefits.--Payments 
under a contract to a county or parish under this section shall 
be instead of the amounts which (in the absence of the 
contract) would otherwise be payable under partB of title XVIII 
of the Social Security Act for the services covered under the contract 
which are furnished to individuals who reside in the county or parish.
  (e) Report on Effects of Capitated Contracts.--
          (1) Study.--The Secretary shall evaluate the 
        demonstration 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 recommendations 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 3--PAYMENT UNDER PARTS A AND B

SEC. 4441. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

  (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as 
amended by section 4011, is amended by adding at the end the 
following new section:

             ``prospective payment for home health services

  ``Sec. 1895. (a) In General.--Notwithstanding section 
1861(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.
  ``(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 payment amount 
        determined under this subsection and applicable to the 
        services involved. In implementing the system, the 
        Secretary may provide 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 payments 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 continued 
        access to quality services.
          ``(3) Payment basis.--
                  ``(A) Initial basis.--
                          ``(i) In general.--Under such system 
                        the Secretary shall provide for 
                        computation of a standard prospective 
                        payment 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 
adjustmentsprovided under paragraph (4)(A). Under the system, the 
Secretary 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)(1)(L), as those limits 
                        are in effect on September 30, 1999.
                  ``(B) Annual update.--
                          ``(i) In general.--The standard 
                        prospective payment 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.
                          ``(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 (estimated 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 services 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 resulting 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 
                factors.--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 
                factors.--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, 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 1861(m), the 
        claim has information (coded in an appropriate manner) 
        on 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 
        subsection (b)(1);
          ``(2) the definition and application of payment units 
        under subsection (b)(2);
          ``(3) the computation of initial standard prospective 
        payment amounts under subsection (b)(3)(A) (including 
        the reduction described in clause (ii) of such 
        subsection);
          ``(4) the adjustment for outliers under subsection 
        (b)(3)(C);
          ``(5) case mix and area wage adjustments under 
        subsection (b)(4);
          ``(6) any adjustments for outliers under subsection 
        (b)(5); and
          ``(7) the amounts or types of exceptions or 
        adjustments under subsection (b)(7).''.
  (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. 1395l(a)(2)) is amended--
                          (i) by amending subparagraph (A) to 
                        read as follows:
                  ``(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 payment 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:
                  ``(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 determined under section 
                        1861(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 
                payment 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 payment 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 section 
                        4401(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 health 
                                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 
                                arrangement 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)(1)), as 
                        amended by section 4401(b), is amended 
                        by striking ``and section 
                        1842(b)(6)(E)'' and inserting ``, 
                        section 1842(b)(6)(E), and section 
                        1842(b)(6)(F)''.
                  (C) Exclusions from coverage.--Section 
                1862(a) (42 U.S.C. 1395y(a)), as amended by 
                sections 4401(b) and 4421(b), is amended--
                          (i) by striking ``or'' at the end of 
                        paragraph (17);
                          (ii) by striking the period at the 
                        end of paragraph (18) and inserting ``; 
                        or''; and
                          (iii) inserting after paragraph (18) 
                        the following new paragraph:
          ``(19) where such expenses are for home health 
        services furnished to an individual who is under a plan 
        of care of the home health 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.

             Subtitle G--Provisions Relating to Part B Only

                    CHAPTER 1--PHYSICIANS' SERVICES

SEC. 4601. ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 1998.

  (a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) 
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 Secretary'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 G of title X 
                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 subsection (d)(1)(A) and (d)(1)(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 (i)(1)(C), by striking ``conversion 
        factors'' and inserting ``the conversion factor''.

SEC. 4602. 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 factor determined by the 
                Secretary under subsection (c)(2)(B)(ii), the 
                update to the single conversion factor 
                established in paragraph (1)(C) for a year 
                beginning with 1999 is equal to the product 
                of--
                          ``(i) 1 plus the Secretary's estimate 
                        of the percentage 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.
                  ``(B) Update adjustment factor.--For purposes 
                of subparagraph (A)(ii), the `update adjustment 
                factor' for a year is equal to the quotient (as 
                estimated by the Secretary) of--
                          ``(i) the difference between (I) the 
                        sum of the allowed expenditures for 
                        physicians' services (as determined 
                        under subparagraph (C)) during the 
                        period beginning July 1, 1997, and 
                        ending on June 30 of the year involved, 
                        and (II) the sum of the amount of 
                        actual expenditures for physicians' 
                        services furnished during the period 
                        beginning July 1, 1997, and ending on 
                        June 30 of the preceding year; divided 
                        by
                          ``(ii) the actual expenditures for 
                        physicians' services for the 12-month 
                        period ending on June 30 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 
                June 30 of--
                          ``(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 
                economic 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 paragraph 
        (1) shall apply to the update for years beginning with 
        1999.
  (b) Elimination of Report.--Section 1848(d) (42 U.S.C. 1395w-
4(d)) is amended by striking paragraph (2).

SEC. 4603. 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 (beginning with fiscal year 1998) shall be equal 
        to the product of--
                  ``(A) 1 plus the Secretary's estimate of the 
                weighted average percentage increase (divided 
                by 100) in the fees for all physicians' 
                services in the fiscal year involved,
                  ``(B) 1 plus the Secretary's estimate of the 
                percentage change (divided by 100) in the 
                average number of individuals enrolled under 
                this part (other than MedicarePlus plan 
                enrollees) 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 estimated changes in expenditures 
                due to changes in the volume and intensity of 
                physicians' services resulting from changes in 
                the update to the conversion factor under 
                subsection (d)(3),
        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 MedicarePlus plan enrollee.
                  ``(B) MedicarePlus plan enrollee.--The term 
                `MedicarePlus 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 MedicarePlus 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 Amendments.--Section 1848(f) (42 U.S.C. 1395w-
4(f)) is amended--
          (1) in the heading, by striking ``Volume Performance 
        Standard Rates of Increase'' and inserting 
        ``Sustainable Growth Rate''; and
          (2) in paragraph (1)--
                  (A) in the heading, by striking ``volume 
                performance standard rates of increase'' and 
                inserting ``sustainable growth rate'',
                  (B) by striking subparagraphs (A) and (B); 
                and
                  (C) in paragraph (1)(C)--
                          (i) in the heading, by striking 
                        ``performance standard rates of 
                        increase'' and inserting ``sustainable 
                        growth rate'';
                          (ii) in the first sentence, by 
                        striking ``with 1991), the performance 
                        standard rates of increase'' and all 
                        that follows through the first period 
                        and inserting ``with 1999), the 
                        sustainable growth rate for the fiscal 
                        year beginning in that year.''; and
                          (iii) in the second sentence, by 
                        striking ``January 1, 1990, the 
                        performance standard rate of increase 
                        under subparagraph (D) for fiscal year 
                        1990'' and inserting ``January 1, 1999, 
                        the sustainable growth rate for fiscal 
                        year 1999''.

SEC. 4604. PAYMENT RULES FOR ANESTHESIA SERVICES.

  (a) In General.--Section 1848(d)(1) (42 U.S.C. 1395w-
4(d)(1)), as amended by section 4601, is amended--
                  (A) in subparagraph (C), striking ``The 
                single'' and inserting ``Except as provided in 
                subparagraph (D), the single'';
                  (B) by redesignating subparagraph (D) as 
                subparagraph (E); and
                  (C) 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 factor 
                established for other physicians' services, 
                except as adjusted for changes in work, 
                practice expense, or malpractice relative value 
                units. ''.
  (b) Classification of Anesthesia Services.--The first 
sentence of section 1848(j)(1) (42 U.S.C. 1395w-4(j)(1)) is 
amended--
          (1) by striking ``and including anesthesia 
        services''; and
          (2) by inserting before the period the following: 
        ``(including anesthesia services)''.
  (c) Effective Date.--The amendments made by this section 
shall apply to services furnished on or after January 1, 1998.

SEC. 4605. IMPLEMENTATION OF RESOURCE-BASED PHYSICIAN PRACTICE EXPENSE.

  (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) Requirements for Developing New Resource-Based Practice 
Expense Relative Value Units.--
          (1) Development.--For purposes of section 
        1848(c)(2)(C) of the Social Security Act, the Secretary 
        of Health and Human Services shall develop new 
        resource-based relative value units. In developing such 
        units the Secretary shall--
                  (A) utilize, to the maximum extent 
                practicable, generally accepted accounting 
                principles and standards which (i) recognize 
                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, such as the proportion of costs 
                which are direct versus indirect;
                  (B) study whether hospital cost reduction 
                efforts and changing practice patterns may have 
                increased physician practice costs under part B 
                of the medicare program;
                  (C) consider potential adverse effects on 
                patient access under the medicare program; and
                  (D) consult with organizations representing 
                physicians regarding methodology and data to be 
                used, including data for impact projections, in 
                order to ensure that sufficient input has been 
                received by the affected physician community.
          (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 methodology.
          (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 proposed new rule shall 
        include the following:
                  (A) Detailed impact projections which compare 
                new proposed payment amounts on data on actual 
                physician practice expenses.
                  (B) Impact projections for specialties and 
                subspecialties, geographic payment localities, 
                urban versus rural localities, and academic 
                versus nonacademic medical staffs.
                  (C) Impact projections on access to care for 
                medicare patients and physician employment of 
                clinical and administrative staff.

SEC. 4606. DISSEMINATION OF INFORMATION ON HIGH PER DISCHARGE RELATIVE 
                    VALUES FOR IN-HOSPITAL PHYSICIANS' SERVICES.

  (a) Determination and Notice Concerning Hospital-Specific 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
                  (B) whether the hospital-specific relative 
                value is projected 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 medical staffs and carriers.--The 
        Secretary shall notify the medical executive committee 
        of each hospital identifies under paragraph (1)(B) as 
        having an excessive hospital-specific relative value, 
        of the determinations made with respect to the medical 
        staff under paragraph (1).
  (b) Determination of Hospital-Specific Per Discharge Relative 
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 determined under section 
        1848(c)(2) of the Social Security Act) for physicians' 
        services furnished to inpatients of the hospital by the 
        hospital's medical staff (excluding interns and 
        residents) during the second year preceding that 
        calendar year, adjusted for variations in case-mix and 
        disproportionate share status among hospitals (as 
        determined by the Secretary under paragraph (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 
        of--
                  (A) the average per discharge relative value 
                (as determined under section 1848(c)(2) of such 
                Act) for physicians' services furnished to 
                inpatients of the hospital by the hospital's 
                medical staff (excluding interns and residents) 
                during the second year preceding that calendar 
                year, and
                  (B) the equivalent per discharge relative 
                value (as determined under such section) for 
                physicians' services furnished to inpatients of 
                the hospital by interns and residents of the 
                hospital during the second year preceding that 
                calendar year, adjusted for variations in case-
                mix, 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 subparagraphs (F) and (G) of 
        section 1886(d)(5) of the Social Security Act. The 
        adjustment for teaching status or disproportionate 
        share shall not be less than zero.
  (c) Definitions.--For purposes of this section:
          (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. 4607. 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, 1998.
  (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.

SEC. 4608. TEMPORARY COVERAGE RESTORATION FOR PORTABLE 
                    ELECTROCARDIOGRAM TRANSPORTATION.

  (a) In General.--Effective for electrocardiogram tests 
performed during 1998, the Secretary of Health and Human 
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 the 
status code and relative value units established for such 
service as of December 31, 1996.
  (b) Report.--By not later than July 1, 1998, the Comptroller 
General shall submit to Congress a report on the 
appropriateness of continuing such payment.

                  CHAPTER 2--OTHER PAYMENT PROVISIONS

SEC. 4611. 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) by striking ``and'' at the end of 
                subparagraph (A);
                  (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:
                  ``(C) for each of the years 1998 through 
                2002, 0 percentage points; and
                  ``(D) for a subsequent year, the percentage 
                increase in the consumer price index for all 
                urban consumers (U.S. urban average) for the 
                12-month period ending with June of the 
                previous year.''.
          (2) Update for orthotics and prosthetics.--Section 
        1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
                  (A) by striking ``, and'' at the end of 
                clause (iii) 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;''.
  (b) Payment Freeze for Parenteral and Enteral Nutrients, 
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, supplies, and equipment may not exceed the charges 
determined to be reasonable with respect to such nutrients, 
supplies, and equipment during 1995.

SEC. 4612. OXYGEN AND OXYGEN EQUIPMENT.

  Section 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended--
          (1) by striking ``and'' at the end of clause (iii);
          (2) in clause (iv)--
                  (A) by striking ``a subsequent year'' and 
                inserting ``1993, 1994, 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) in each of the years 1998 
                        through 2002, is 80 percent of the 
                        national limited monthly payment rate 
                        computed under subparagraph (B) for the 
                        item for the year; and
                          ``(vi) in a subsequent year, is the 
                        national limited monthly payment rate 
                        computed under subparagraph (B) for the 
                        item for the year.''.

SEC. 4613. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR CLINICAL 
                    DIAGNOSTIC LABORATORY TESTS.

  (a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 
U.S.C. 1395l(h)(2)(A)(ii)(IV)) is amended by inserting ``and 
1998 through 2002'' after ``1995''.
  (b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B) 
(42 U.S.C. 1395l(h)(4)(B)) is amended--
          (1) in clause (vi), by striking ``and'' at the end;
          (2) in clause (vii)--
                  (A) by inserting ``and before January 1, 
                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 72 
        percent of such median.''.

SEC. 4614. SIMPLIFICATION IN ADMINISTRATION OF LABORATORY TESTS.

  (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 payment of claims under part B of 
        title XVIII of the Social Security Act with respect to 
        clinical diagnostic laboratory tests (other than for 
        tests performed in physician offices) furnished on or 
        after such date (not later than January 1, 1999) as the 
        Secretary specifies.
          (2) Designation.--In designating such carriers, the 
        Secretary shall consider, among other criteria--
                  (A) a carrier's timeliness, quality, and 
                experience in claims processing, and
                  (B) a carrier's capacity to conduct 
                electronic data interchange with laboratories 
                and data matches with other carriers.
          (3) Single data resource.--The Secretary may 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 carriers under such part.
          (4) Allocation of claims.--The allocation of claims 
        for clinical diagnostic laboratory tests to particular 
        designated carriers shall be based on whether a carrier 
        serves the geographic area where the laboratory 
        specimen was collected or other method specified by the 
        Secretary.
  (b) Adoption of Uniform Policies for Clinical Laboratory 
Tests.--
          (1) In general.--Not later than July 1, 1998, the 
        Secretary shall first adopt, consistent with paragraph 
        (2), uniform coverage, administration, and payment 
        policies for clinical diagnostic laboratory 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 uniform policies.--
        The policies under paragraph (1) shall be designed to 
        promote uniformity and program integrity and reduce 
        administrative burdens 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) Physicians' obligations regarding 
                documentation requirements and recordkeeping.
                  (C) Procedures for filing claims and for 
                providing remittances by electronic media.
                  (D) The documentation of medical necessity.
                  (E) Limitation on frequency of coverage for 
                the same tests performed on the same 
                individual.
          (3) Changes in carrier requirements pending adoption 
        of uniform policy.--During the period that begins on 
        the date of the enactment of this Act and ends on the 
        date the Secretary first implements uniform policies 
        pursuant to regulations promulgated under this 
        subsection, a carrier under such part may implement 
        changes relating to requirements for the submission of 
        a claim for clinical diagnostic laboratory tests.
          (4) Use of interim regional policies.--After the date 
        the Secretary first implements such uniform 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 services. 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 
        Secretary first designates regional carriers under 
        subsection (a), the Secretary shall establish a process 
        under which designated carriers can collectively 
        develop and implement interim national standards 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 uniform 
        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, regional, or national policies 
        developed under paragraph (4) or (5). Based upon such 
        review, the Secretary may provide for appropriate 
        changes in the uniform policies previously adopted 
        under this subsection.
          (7) Notice.-- Before a carrier implements a change or 
        policy under paragraph (3), (4), or (5), the carrier 
        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 such a carrier, to advise 
with respect to coverage, administration or payment policies 
under part B of title XVIII of the Social Security Act, shall 
include an individual to represent the interest and views of 
independent clinical laboratories and such other laboratories 
as the Secretary deems appropriate. Such individual shall be 
selected by such committee from among nominations submitted by 
national and local organizations that represent independent 
clinical laboratories.

SEC. 4615. UPDATES FOR AMBULATORY SURGICAL SERVICES.

  Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended 
by striking all that follows ``shall be increased'' and 
inserting the following: ``as follows:
          ``(i) For fiscal years 1996 and 1997, 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.
          ``(ii) For each of fiscal years 1998 through 2002 by 
        such percentage increase minus 2.0 percentage points.
          ``(iii) For each succeeding fiscal year by such 
        percentage increase.''.

SEC. 4616. 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) If a physician's, supplier's, or any other person's 
bill or request for payment for services includes a charge for 
a drug 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 amountpayable for the drug or biological is equal to 95 
percent of the average wholesale price.''.
  (b) Effective Date.--The amendments made by subsection (a) 
apply to drugs and biologicals furnished on or after January 1, 
1998.

SEC. 4617. 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, is amended 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, immediately 
                after, or at 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) Payment Levels.--Section 1834 (42 U.S.C. 1395m), as 
amended by sections 4421(a)(2) and 4431(b)(2), is amended by 
adding at the end the following new subsection:
  ``(m) Special Rules for Payment for Oral Anti-Nausea Drugs.--
          ``(1) Limitation on per dose payment basis.--Subject 
        to paragraph (2), the per dose payment basis under this 
        part for oral anti-nausea drugs (as defined in 
        paragraph (3)) administered during a year shall not 
        exceed 90 percent of the average per dose payment basis 
        for the equivalent intravenous anti-emetics 
        administered during the year, as computed based on the 
        payment basis applied during 1996.
          ``(2) Aggregate limit.--The Secretary shall make such 
        adjustment in the coverage of, or payment basis for, 
        oral anti-nausea drugs so that coverage of such drugs 
        under this part does not result in any increase in 
        aggregate payments per capita under this part above the 
        levels of such payments per capita that would otherwise 
        have been made if there were no coverage for such drugs 
        under this part.
          ``(3) Oral anti-nausea drugs defined.--For purposes 
        of this subsection, the term `oral anti-nausea drugs' 
        means drugs for which coverage is provided under this 
        part pursuant to section 1861(s)(2)(P).''.
  (c) Effective Date.--The amendments made by this section 
shall apply to items and services furnished on or after January 
1, 1998.

SEC. 4618. 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. 1395l(f)) preceding 
                paragraph (1) is amended by striking 
                ``independent rural health clinics'' and 
                inserting ``rural health clinics (other than 
                such clinics in rural hospitals with less than 
                50 beds)''.
                  (B) Effective date.--The amendment made by 
                subparagraph (A) applies to services furnished 
                after 1997.
          (2) Technical clarification.--Section 1833(f)(1) (42 
        U.S.C. 1395l(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 improvement program, and 
                appropriate procedures for review of 
                utilization of clinic services, as the 
                Secretary may specify,''.
          (2) Effective date.--The amendment made by paragraph 
        (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 at the end the following: ``, 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''.
          (2) Effective date.--The amendment made by paragraph 
        (1) applies to waiver requests made after 1997.
  (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 
                three-year period, has been designated''; and
                  (B) by striking ``or that is designated'' and 
                inserting ``or designated''.
          (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 services''; 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.--Section 1861(aa)(2) (42 U.S.C. 
        1395x(aa)(2)) is amended in thethird sentence by 
inserting before the period ``if it is determined, in accordance with 
criteria established by the Secretary 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''.
          (4) Effective dates; implementing regulations.--
                  (A) In general.--Except as otherwise 
                provided, the amendments made by the preceding 
                paragraphs take effect on January 1 of the 
                first calendar year beginning at least one 
                month after enactment of this Act.
                  (B) Current rural health clinics.--The 
                amendments made by the preceding paragraphs 
                take effect, with respect to entities that are 
                rural health clinics under title XVIII of the 
                Social Security Act on the date of enactment of 
                this Act, on January 1 of the second calendar 
                year following the calendar year specified in 
                subparagraph (A).
                  (C) Grandfathered clinics.--
                          (i) In general.--The amendment made 
                        by paragraph (3) 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) that shall 
                        take effect no later than January 1 of 
                        the third calendar year beginning at 
                        least one month after enactment of this 
                        Act.

SEC. 4619. 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 furnished by a physician (as defined in subsection 
        (r)(1)) and which are performed by a nurse practitioner 
        or clinical nurse specialist (as defined in subsection 
        (aa)(5)) working in collaboration (as defined in 
        subsection (aa)(6)) with a physician (as defined in 
        subsection (r)(1)) 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 furnished 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) 
        of such Act (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 performed,''; 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 inserting ``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)(1)(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 10401(a), is 
        amended by striking ``through (iii)'' and inserting 
        ``and (ii)''.
  (b) Increased Payment.--
          (1) Fee schedule amount.--Clause (O) of section 
        1833(a)(1) (42 U.S.C. 1395l(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 would otherwise be recognized if 
        performed by a physician who is serving as an assistant 
        at surgery; and''.
          (2) Conforming amendments.--(A) Section 1833(r) (42 
        U.S.C. 1395l(r)) is amended--
                  (i) 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 practitioner or clinical nurse 
                specialist services)'';
                  (ii) by striking paragraph (2);
                  (iii) in paragraph (3), by striking ``section 
                1861(s)(2)(K)(iii)'' and inserting ``section 
                1861(s)(2)(K)(ii)''; and
                  (iv) by redesignating paragraph (3) as 
                paragraph (2).
          (B) Section 1842(b)(12)(A) (42 U.S.C. 
        1395u(b)(12)(A)) is amended, in the matter preceding 
        clause (i), by striking ``clauses (i), (ii), or (iv) of 
        section 1861(s)(2)(K) (relating to physician assistants 
        and nurse practitioners)'' and inserting ``section 
        1861(s)(2)(K)(i) (relating to physician assistants)''.
  (c) Direct Payment for Nurse Practitioners and Clinical Nurse 
Specialists.--
          (1) In general.--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 section1886(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''.
          (2) Conforming amendment.--Section 1842(b)(6)(C) (42 
        U.S.C. 1395u(b)(6)(C)) is amended--
                  (A) by striking ``clauses (i), (ii), or 
                (iv)'' and inserting ``clause (i)''; and
                  (B) by striking ``or nurse practitioner''.
  (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 assistant' and the term 
        `nurse practitioner' mean, for purposes of this title, 
        a physician assistant or nurse practitioner 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 
shall apply with respect to services furnished and supplies 
provided on and after January 1, 1998.

SEC. 4620. 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)) 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.--Paragraph (12) of section 1842(b) (42 
U.S.C. 1395u(b)), as amended by section 4619(b)(2)(B), is 
amended to read as follows:
  ``(12) With respect to services described in section 
1861(s)(2)(K)(i)--
          ``(A) payment under this part may only be made on an 
        assignment-related basis; and
          ``(B) the amounts paid under this part 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 for the same service provided by a 
        physician who is not a specialist; 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 
        would otherwise be recognized if performed by a 
        physician who is serving as an assistant at surgery.''.
  (c) Removal of Restriction on Employment Relationship.--
Section 1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by adding 
at the end the following new sentence: ``For purposes of clause 
(C) of the first sentence of this paragraph, an employment 
relationship may include any independent contractor 
arrangement, and employer status shall be determined 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. 4621. RENAL DIALYSIS-RELATED SERVICES.

  (a) Auditing of Cost Reports.--The Secretary shall audit a 
sample of cost reports of renal dialysis providers for 1995 and 
for each third year thereafter.
  (b) Implementation of Quality Standards.--The Secretary of 
Health and Human Services shall develop and implement, by not 
later than January 1, 1999, a method to measure and report 
quality of renal dialysis services provided under the medicare 
program under title XVIII of the Social Security Act in order 
to reduce payments for inappropriate or low quality care.

SEC. 4622. PAYMENT FOR COCHLEAR IMPLANTS AS CUSTOMIZED DURABLE MEDICAL 
                    EQUIPMENT.

  (a) In General.--Section 1834(h)(1)(E) (42 U.S.C. 
1395m(h)(1)(E)) is amended by adding at the end the following: 
``Payment for cochlear implants shall be made in accordance 
with subsection (a)(4), and, in applying such subsection to 
cochlear implants, carriers shall take into consideration 
technological innovations and data on charges to the extent 
that such charges reflect such innovations.''.
  (b) Effective Date.--The amendment made by subsection (a) 
applies to implants implanted on or after January 1, 1998.

                       CHAPTER 3--PART B PREMIUM

SEC. 4631. PART B PREMIUM.

  (a) In General.--The first, second and third sentences of 
section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are amended to read 
as follows: ``The Secretary, during September of each year, 
shall determine and promulgate a monthly premium rate for the 
succeeding calendar year. That monthly premium rate shall be 
equal to 50 percent of the monthly actuarial rate for enrollees 
age 65 and over, determined according to paragraph (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) by striking subsection (e), and
                  (D) 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)(1)) are each 
        amended by striking ``or 1839(e), as the case may be''.

            Subtitle H--Provisions Relating to Parts A and B

       CHAPTER 1--PROVISIONS RELATING TO MEDICARE SECONDARY PAYER

SEC. 4701. PERMANENT EXTENSION AND REVISION OF CERTAIN SECONDARY PAYER 
                    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)(1)(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)(1)(B)(iv)'' each 
        place it appears and inserting ``1862(b)(1)(B)(iii)''.
  (b) Individuals With End Stage Renal Disease.--
          (1) In general.--Section 1862(b)(1)(C) (42 U.S.C. 
        1395y(b)(1)(C)) is amended--
                  (A) in the first sentence, by striking ``12-
                month'' each place it appears and inserting 
                ``30-month'', and
                  (B) by striking the second sentence.
          (2) Effective date.--The amendments made by paragraph 
        (1) shall apply to items and services furnished on or 
        after the date of the enactment of this Act and with 
        respect to periods beginning on or after the date that 
        is 18 months prior to such date.
  (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(l)(12) of 
        the Internal Revenue Code of 1986 is amended by 
        striking subparagraph (F).

SEC. 4702. 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 
                        payment 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 
                        furnished.''.
  (b) Effective Date.--The amendment made by subsection (a) 
applies to items and services furnished after 1990. The 
previous sentence shall not be construed as permitting any 
waiver of the 3-year-period requirement (imposed by such 
amendment) in the case of items and services furnished more 
than 3 years before the date of the enactment of this Act.

SEC. 4703. PERMITTING RECOVERY AGAINST THIRD PARTY ADMINISTRATORS.

  (a) Permitting Recovery Against Third Party Administrators 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 payment'', 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 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)(1)) 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 benefits 
                was made to the individual.''.
  (c) Effective Date.--The amendments made by this section 
apply to items and services furnished on or after the date of 
the enactment of this Act.

                    CHAPTER 2--HOME HEALTH SERVICES

SEC. 4711. 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)(1)(L) (42 U.S.C. 
1395x(v)(1)(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 reporting 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)(1)(L)(ii) of the Social 
Security Act (42 U.S.C. 1395x(v)(1)(L)(ii)).

SEC. 4712. INTERIM PAYMENTS FOR HOME HEALTH SERVICES.

  (a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(i) (42 
U.S.C. 1395x(v)(1)(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)(1)(L)(iii) (42 U.S.C. 
1395x(v)(1)(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)(1)(L) (42 
U.S.C. 1395x(v)(1)(L)), as amended by section 4711(a), is 
amended by inserting 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 
Secretary 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--
          ``(I) an agency-specific per beneficiary annual 
        limitation calculated based 75 percent on the 
        reasonable costs (including nonroutine medical 
        supplies) for the agency's 12-month cost reporting 
        period ending during 1994, and based 25 percent on the 
        standardized regional average of such costs for the 
        agency's region for cost reporting periods ending 
        during 1994, such costs updated by the home health 
        market basket index; and
          ``(II) 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 reporting periods beginning on or after October 1, 1997, 
the following rules apply:
          ``(I) For new providers and those providers without a 
        12-month cost reporting period ending in calendar year 
        1994, the per beneficiary limitation shall be equal to 
        the median of these limits (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.''.
  (d) Development 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 
program 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. 4713. 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 (combined) 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. 4714. 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 the Congress on the study conducted 
under subsection (a). The report shall include specific 
recommendations on such criteria and methods.

SEC. 4715. 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)(1)(L)(iii) (42 U.S.C. 
1395x(v)(1)(L)(iii)) is amended by striking ``agency is 
located'' and inserting ``service is furnished''.
  (c) Effective Date.--The amendments made by this section 
apply to cost reporting periods beginning on or after October 
1, 1997.

SEC. 4716. NORMATIVE STANDARDS FOR HOME HEALTH CLAIMS DENIALS,

  (a) In General.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), 
as amended by section 4103(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 Services 
may establish a process for notifying a physician in cases in 
which the number of home health service visits furnished under 
the medicare program 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 
apply to services furnished on or after October 1, 1997.

SEC. 4717. 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 (a) 
apply to home health services furnished after the 6-month 
period beginning after the date of enactment of this Act.

SEC. 4718. MAKING PART B PRIMARY PAYOR FOR CERTAIN HOME HEALTH 
                    SERVICES.

  (a) In General.--Section 1833(d) (42 U.S.C. 1395l(d)) is 
amended--
          (1) by striking ``(d) No'' and inserting ``(d)(1) 
        Subject to paragraph (2), no'', and
          (2) by adding at the end the following new paragraph:
  ``(2) Payment shall be made under this part (rather than 
under part A), for an individual entitled to benefits under 
part A, for home health services, other than the first 100 
visits of post-hospital home health services furnished to an 
individual.''.
  (b) Post-hospital Home Health Services.--Section 1861 (42 
U.S.C. 1395x) is amended by adding at the end the following:
  ``(ss) Post-Hospital Home Health Services.--The term `post-
hospital home health services' means home health services 
furnished to an individual under a plan of treatment 
established when the individual was an inpatient of a hospital 
or rural primary care hospital for not less than 3 consecutive 
days before discharge, or during a covered post-hospital 
extended care stay, if home health services are initiated for 
the individual within 30 days after discharge from the 
hospital, rural primary care hospital or extended care 
facility.''.
  (c) Payments Under Part B.--Subparagraph (A) of section 
1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended to read as 
follows:
                  ``(A) with respect to home health services 
                (other than a covered osteoporosis drug (as 
                defined in section 1861(kk)), and to items and 
                services described in section 1861(s)(10)(A), 
                the amounts determined under section 
                1861(v)(1)(L) or section 1893, or, if the 
                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 
                payment 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);''.
  (d) Phase-In of Additional Part B Costs In Determination of 
Part B Monthly Premium.--Section 1839(a) (42 U.S.C. 1395r(a)) 
is amended--
          (1) in paragraph (3) in last the sentence inserted by 
        section 4631(a) of this title, by inserting ``(except 
        as provided in paragraph (5)(B))'' before the period, 
        and
          (2) by adding after paragraph (4) the following:
  ``(5)(A) The Secretary shall, at the time of determining the 
monthly actuarial rate under paragraph (1) for 1998 through 
2003, shall determine a transitional monthly actuarial rate for 
enrollees age 65 and over in the same manner as such rate is 
determined under paragraph (1), except that there shall be 
excluded from such determination an estimate of any benefits 
and administrative costs attributable to home health services 
for which payment would have been made under part A during the 
year but for paragraph (2) of section 1833(d).
  ``(B) The monthly premium for each individual enrolled under 
this part for each month for a year (beginning with 1998 and 
ending with 2003) shall be equal to 50 percent of the monthly 
actuarial rate determined under subparagraph (A) increased by 
the following proportion of the difference between such premium 
and the monthly premium otherwise determined under paragraph 
(3) (without regard to this paragraph):
          ``(i) For a month in 1998, \1/7\.
          ``(ii) For a month in 1999, \2/7\.
          ``(iii) For a month in 2000, \3/7\.
          ``(iv) For a month in 2001, \4/7\.
          ``(v) For a month in 2002, \5/7\.
          ``(vi) For a month in 2003, \6/7\.''.
  (e) Maintaining Appeal Rights for Home Health Services.--
Section 1869(b)(2)(B) (42 U.S.C. 1395ff(b)(2)(B)) is amended by 
inserting ``(or $100 in the case of home health services)'' 
after ``$500''.
  (f) Report.--Not later than October 1, 1999, the Secretary of 
Health and Human Services shall submit a report to the 
Committees on Commerce and Ways and Means of the House of 
Representatives and the Committee on Finance of the Senate on 
the impact on home health utilization and admissions to 
hospitals and skilled nursing facilities of the amendment made 
by subsection (b). The Secretary shall further reexamine and 
submit a report to such Committees on this impact 1 year after 
the full implementation of the prospective payment system for 
home health services into the medicare program, effected under 
the amendments made by section 4441.
  (g) Effective Date.--The amendments made by this section 
apply to services furnished on or after October 1, 1997.

          CHAPTER 3--BABY BOOM GENERATION MEDICARE COMMISSION

SEC. 4721. BIPARTISAN COMMISSION ON THE EFFECT OF THE BABY BOOM 
                    GENERATION ON THE MEDICARE PROGRAM.

  (a) Establishment.--There is established a commission to be 
known as the Bipartisan Commission on the Effect of the Baby 
Boom Generation on the Medicare Program (in this section 
referred to as the ``Commission'').
  (b) Duties.--
          (1) In general.--The Commission shall--
                  (A) examine the financial impact on the 
                medicare program of the significant increase in 
                the number of medicare eligible individuals 
                which will occur beginning approximately during 
                2010 and lasting for approximately 25 years, 
                and
                  (B) make specific recommendations to the 
                Congress respecting a comprehensive approach to 
                preserve the medicare program for the period 
                during which such individuals are eligible for 
                medicare.
          (2) Considerations in making recommendations.--In 
        making its recommendations, the Commission shall 
        consider the following:
                  (A) The amount and sources of Federal funds 
                to finance the medicare program, including the 
                potential use of innovative financing methods.
                  (B) Methods used by other nations to respond 
                to comparable demographic patterns in 
                eligibility for health care benefits for 
                elderly and disabled individuals.
                  (C) Modifying age-based eligibility to 
                correspond to changes in age-based eligibility 
                under the OASDI program.
                  (D) Trends in employment-related health care 
                for retirees, including the use of medical 
                savings accounts and similar financing devices.
                  (E) The role medicare should play in 
                addressing the needs of persons with chronic 
                illness.
  (c) Membership.--
          (1) Appointment.--The Commission shall be composed of 
        15 voting members as follows:
                  (A) The Majority Leader of the Senate shall 
                appoint, after consultation with the minority 
                leader of the Senate, 6 members, of whom not 
                more than 4 may be of the same political party.
                  (B) The Speaker of the House of 
                Representatives shall appoint, after 
                consultation with the minority leader of the 
                House of Representatives, 6 members, of whom 
                not more than 4 may be of the same political 
                party.
                  (C) The 3 ex officio members of the Board of 
                Trustees of the Federal Hospital Insurance 
                Trust Fund and of the Federal Supplementary 
                Medical Insurance Trust Fund who are Cabinet 
                level officials.
          (2) Chairman and vice chairman.--As the first item of 
        business at the Commission's first meeting (described 
        in paragraph (5)(B)), the Commission shall elect a 
        Chairman and Vice Chairman from among its members. The 
        individuals elected as Chairman and Vice Chairman may 
        not be of the same political party and may not have 
        been appointed to the Commission by the same appointing 
        authority.
          (3) Vacancies.--Any vacancy in the membership of the 
        Commission shall be filled in the manner in which the 
        original appointment was made and shall not affect the 
        power of the remaining members to execute the duties of 
        the Commission.
          (4) Quorum.--A quorum shall consist of 8 members of 
        the Commission, except that 4 members may conduct a 
        hearing under subsection (f).
          (5) Meetings.--
                  (A) The Commission shall meet at the call of 
                its Chairman or a majority of its members.
                  (B) The Commission shall hold its first 
                meeting not later than February 1, 1998.
          (6) Compensation and reimbursement of expenses.--
        Members of the Commission are not entitled to receive 
        compensation for service on the Commission. Members may 
        be reimbursed for travel, subsistence, and other 
        necessary expenses incurred in carrying out the duties 
        of the Commission.
  (d) Advisory Panel.--
          (1) In general.--The Chairman, in consultation with 
        the Vice Chairman, may establish a panel (in this 
        section referred to as the ``Advisory Panel'') 
        consisting of health care experts, consumers, 
        providers, and others to advise and assist the members 
        of the Commission in carrying out the duties described 
        in subsection (b). The panel shall have only those 
        powers that the Chairman, in consultation with the Vice 
        Chairman, determines are necessary and appropriate to 
        assist the Commission in carrying out such duties.
          (2) Compensation.--Members of the Advisory Panel are 
        not entitled to receive compensation for service on the 
        Advisory Panel. Subject to the approval of the chairman 
        of the Commission, members may be reimbursed for 
        travel, subsistence, and other necessary expenses 
        incurred in carrying out the duties of the Advisory 
        Panel.
  (e) Staff and Consultants.--
          (1) Staff.--The Commission may appoint and determine 
        the compensation of such staff as may be necessary to 
        carry out the duties of the Commission. Such 
        appointments and compensation may be made without 
        regard to the provisions of title 5, United States 
        Code, that govern appointments in the competitive 
        services, and the provisions of chapter 51 and 
        subchapter III of chapter 53 of such title that relate 
        to classifications and the General Schedule pay rates.
          (2) Consultants.--The Commission may procure such 
        temporary and intermittent services of consultants 
        under section 3109(b) of title 5, United States Code, 
        as the Commission determines to be necessary to carry 
        out the duties of the Commission.
  (f) Powers.--
          (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 determines 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 investigations as the Commission determines 
        to be necessary to carry out its duties.
          (3) Cost estimates by congressional budget office.--
                  (A) Upon the request of the Commission, the 
                Director of the Congressional Budget Office 
                shall provide to 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 additional 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 
providesuch 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 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 Commission.
          (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.
  (g) Report.--Not later than May 1, 1999, the Commission shall 
submit to Congress a report containing its findings and 
recommendations regarding how to protect and preserve the 
medicare program in a financially solvent manner until 2030 
(or, if later, throughout the period of projected solvency of 
the Federal Old-Age and Survivors Insurance Trust Fund). The 
report shall include detailed recommendations for appropriate 
legislative initiatives respecting how to accomplish this 
objective.
  (h) Termination.--The Commission shall terminate 30 days 
after the date of submission of the report required in 
subsection (g).
  (i) 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. 1395i, 1395t).

  CHAPTER 4--PROVISIONS RELATING TO DIRECT GRADUATE MEDICAL EDUCATION

SEC. 4731. LIMITATION ON PAYMENT BASED ON NUMBER OF RESIDENTS AND 
                    IMPLEMENTATION OF 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 for 
                certain fiscal years.--Such rules shall provide 
                that for purposes of a cost reporting period 
                beginning 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 may not exceed the number of 
                full-time equivalent residents with respect to 
                the hospital's most recent cost reporting 
                period ending on or before December 31, 1996.
                  ``(G) Counting interns and residents for fy 
                1998 and subsequent years.--
                          ``(i) FY 1998.--For the hospital's 
                        first cost reporting period beginning 
                        during fiscal year 1998, subject to the 
                        limit described in subparagraph (F), 
                        the total number of full-time 
                        equivalent residents, for determining 
                        the hospital's graduate medical 
                        education payment, shall equal the 
                        average of the full-time equivalent 
                        resident counts for the cost reporting 
                        period and the preceding cost reporting 
                        period.
                          ``(ii) Subsequent years.--For each 
                        subsequent cost reporting period, 
                        subject to the limit described in 
                        subparagraph (F), the total number of 
                        full-time equivalent residents, for 
                        determining the hospital's graduate 
                        medical education payment, shall equal 
                        the average of the actual full-time 
                        equivalent resident counts for the cost 
                        reporting period and preceding two cost 
                        reporting periods.
                          ``(iii) Adjustment for short 
                        periods.--If a hospital's 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 (ii) 
                        are based on the equivalent of full 12-
                        month cost reporting periods.
                          ``(iv) Exclusion of residents in 
                        dentistry.--Residents in an approved 
                        medical residency training program in 
                        dentistry shall not be counted for 
                        purposes of this subparagraph and 
                        subparagraph (F).''.

SEC. 4732. PHASED-IN LIMITATION ON HOSPITAL OVERHEAD AND SUPERVISORY 
                    PHYSICIAN COMPONENT OF DIRECT MEDICAL EDUCATION 
                    COSTS.

  (a) In General.--Section 1886(h)(3) (42 U.S.C. 1395ww(h)(3)) 
is amended--
          (1) in subparagraph (B), by inserting ``subject to 
        subparagraph (D),'' after ``subparagraph (A)'', and
          (2) by adding at the end the following:
                  ``(D) Phased-in limitation on hospital 
                overhead and supervisory physician component.--
                          ``(i) In general.--In the case of a 
                        hospital for which the overhead GME 
                        amount (as defined in clause (ii)) for 
                        the base period exceeds an amount equal 
                        to the 75th percentile of the overhead 
                        GME amounts in such period for all 
                        hospitals (weightedto reflect the full-
time equivalent resident counts for all approved medical residency 
training programs), subject to clause (iv), the hospital's approved FTE 
resident amount (for periods beginning on or after October 1, 1997) 
shall be reduced from the amount otherwise applicable (as previously 
reduced under this subparagraph) by an overhead reduction amount. The 
overhead reduction amount is equal to the lesser of--
                                  ``(I) 20 percent of the 
                                reference reduction amount 
                                (described in clause (iii)) for 
                                the period, or
                                  ``(II) 15 percent of the 
                                hospital's overhead GME amount 
                                for the period (as otherwise 
                                determined before the reduction 
                                provided under this 
                                subparagraph for the period 
                                involved).
                          ``(ii) Overhead gme amount.--For 
                        purposes of this subparagraph, the term 
                        `overhead GME amount' means, for a 
                        hospital for a period, the product of--
                                  ``(I) the percentage of the 
                                hospital's approved FTE 
                                resident amount for the base 
                                period that is not attributable 
                                to resident salaries and fringe 
                                benefits, and
                                  ``(II) the hospital's 
                                approved FTE resident amount 
                                for the period involved.
                          ``(iii) Reference reduction amount.--
                                  ``(I) In general.--The 
                                reference reduction amount 
                                described in this clause for a 
                                hospital for a cost reporting 
                                period is the base difference 
                                (described in subclause (II)) 
                                updated, in a compounded manner 
                                for each period from the base 
                                period to the period involved, 
                                by the update applied for such 
                                period to the hospital's 
                                approved FTE resident amount.
                                  ``(II) Base difference.--The 
                                base difference described in 
                                this subclause for a hospital 
                                is the amount by which the 
                                hospital's overhead GME amount 
                                in the base period exceeded the 
                                75th percentile of such amounts 
                                (as described in clause (i)).
                          ``(iv) Maximum reduction to 75th 
                        percentile.--In no case shall the 
                        reduction under this subparagraph 
                        effected for a hospital for a period 
                        (below the amount that would otherwise 
                        apply for the period if this 
                        subparagraph did not apply for any 
                        period) exceed the reference reduction 
                        amount for the hospital for the period.
                          ``(v) Base period.--For purposes of 
                        this subparagraph, the term `base 
                        period' means the cost reporting period 
                        beginning in fiscal year 1984 or the 
                        period used to establish the hospital's 
                        approved FTE resident amount for 
                        hospitals that did not have approved 
                        residency training programs in fiscal 
                        year 1984.
                          ``(vi) Rules for hospitals initiating 
                        residency training programs.--The 
                        Secretary shall establish rules for the 
                        application of this subparagraph in the 
                        case of a hospital that initiates 
                        medical residency training programs 
                        during or after the base period.''.
  (b) Effective Date.--The amendments made by subsection (a) 
shall apply to per resident payment amounts attributable to 
periods beginning on or after October 1, 1997.

SEC. 4733. PERMITTING PAYMENT TO NON-HOSPITAL PROVIDERS.

  (a) In General.--Section 1886 (42 U.S.C. 1395ww) is amended 
by adding at the end the following:
  ``(k) Payment to Non-Hospital Providers.--
          ``(1) Report.--The Secretary shall submit to 
        Congress, not later than 18 months after the date of 
        the enactment of this subsection, a proposal for 
        payment to qualified non-hospital 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 proposal shall specify the amounts, form, and 
        manner in which such payments will be made and the 
        portion of such payments that will be made from each of 
        the trust funds under this title.
          ``(2) Effectiveness.--Except as otherwise provided in 
        law, the Secretary may implement such proposal for 
        residency years beginning not earlier than 6 months 
        after the date of submittal of the report under 
        paragraph (1).
          ``(3) Qualified non-hospital providers.--For purposes 
        of this subsection, the term `qualified non-hospital 
        provider' 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); and
                  ``(C) such other providers (other than 
                hospitals) as the Secretary determines to be 
                appropriate.''.
  (b) Prohibition on Double Payments; Budget Neutrality 
Adjustment.--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 
                residents and, in the case of residents not 
                included in any such count, the Secretary shall 
                provide for such a reduction in aggregate 
                approved amounts under this subsection as will 
                assure that the application of subsection (k) 
                does not result in any increase in expenditures 
                under this title in excess of those that would 
                have occurred if subsection (k) were not 
                applicable.''.

SEC. 4734. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY REDUCTION IN 
                    NUMBER OF RESIDENTS.

  Section 1886(h) (42 U.S.C. 1395ww(h)) is further 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), 
                the qualifying entity submitting the plan shall 
                be paid an applicable hold harmless percentage 
                (as specified in subparagraph (E)) of the sum 
                of--
                          ``(i) 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 education 
                                training programs of the 
                                qualifying entity 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 reduction 
                                plan; and
                          ``(ii) the amount of the reduction in 
                        payment under 1886(d)(5)(B) (for 
                        hospitals participating in the 
                        qualifying entity) 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 such entity as of June 30, 1997.
                  ``(B) Approval of plan applications.--The 
                Secretary may not approve the application of a 
                qualifying entity unless--
                          ``(i) the application is submitted in 
                        a form and manner specified by the 
                        Secretary and by not later than March 
                        1, 2000,
                          ``(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 whether such reduction will 
                        occur over--
                                  ``(I) a period of not longer 
                                than 5 residency training 
                                years, or
                                  ``(II) a period of 6 
                                residency training years,
                        except that a qualifying entity 
                        described in subparagraph (C)(i)(III) 
                        may not make the election described in 
                        subclause (II); and
                          ``(iv) the Secretary determines that 
                        the application and the entity and such 
                        plan meet such other requirements as 
                        the Secretary specifies in regulations.
                  ``(C) Qualifying entity.--
                          ``(i) In general.--For purposes of 
                        this paragraph, any of the following 
                        may be a qualifying entity:
                                  ``(I) Individual hospitals 
                                operating one or more approved 
                                medical residency training 
                                programs.
                                  ``(II) Subject to clause 
                                (ii), two or more hospitals 
                                that operate such programs and 
                                apply for treatment under this 
                                paragraph as a single 
                                qualifying entity.
                                  ``(III) Subject to clause 
                                (iii), a qualifying consortium 
                                (as described in section 4735 
                                of the Balanced Budget Act of 
                                1997).
                          ``(ii) Additional requirement for 
                        joint programs.--In the case of an 
                        application by a qualifying entity 
                        described in clause (i)(II), the 
                        Secretary may not approve the 
                        application unless the application 
                        represents that the qualifying entity 
                        either--
                                  ``(I) in the case of an 
                                entity that meets the 
                                requirements of clause (v) of 
                                subparagraph (D) will not 
                                reduce the number of full-time 
                                equivalent residents in primary 
                                care during the period of the 
                                plan, or
                                  ``(II) in the case of another 
                                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)(vi).
                          ``(iii) Additional requirement for 
                        consortia.--In the case of an 
                        application by a qualifying entity 
                        described in clause (i)(III), the 
                        Secretary may not approve the 
                        application unless the application 
                        represents that the qualifying 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)(vi).
                  ``(D) Residency reduction requirements.--
                          ``(i) Individual hospital 
                        applicants.--In the case of a 
                        qualifying entity described in 
                        subparagraph (C)(i)(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 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 base number of 
                                residents exceeds 500, but is 
                                less than 750 residents, by 150 
                                residents.
                                  ``(III) Subject to subclause 
                                (IV), if base number of 
                                residents does not exceed 500 
                                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 treatment under 
                                this subclause, by a number 
                                equal to at least 20 percent of 
                                such base number.
                          ``(ii) Joint applicants.--In the case 
                        of a qualifying entity described in 
                        subparagraph (C)(i)(II), 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) Subject to subclause 
                                (II), by a number equal to at 
                                least 25 percent of such base 
                                number.
                                  ``(II) In the case of 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 
                                such base number.
                          ``(iii) Consortia.--In the case of a 
                        qualifying entity described in 
                        subparagraph (C)(i)(III), the number of 
                        full-time equivalent residents in all 
                        the approved medical residency training 
                        programs operated by or through the 
                        entity shall be reduced by a number 
                        equal to at least 20 percent of such 
                        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--
                                  ``(I) the 5th residency 
                                training year in which the 
                                application under subparagraph 
                                (B) is effective, in the case 
                                of an entity making the 
                                election described in 
                                subparagraph (B)(iii)(I), or
                                  ``(II) the 6th such residency 
                                training year, in the case of 
                                an entity making the election 
                                described in subparagraph 
                                (B)(iii)(II).
                          ``(v) Entities providing assurance of 
                        maintenance of primary care 
                        residents.--An entity is described in 
                        this clause if--
                                  ``(I) the base number of 
                                residents for the entity is 
                                less than 750;
                                  ``(II) the number of full-
                                time equivalent residents in 
                                primary care included in the 
                                base number of residents for 
                                the entity is at least 10 
                                percent of such base number; 
                                and
                                  ``(III) the entity represents 
                                in its application under 
                                subparagraph (B) that there 
                                will be no reduction under the 
                                plan in the number of full-time 
                                equivalent residents in primary 
                                care.
                        If a qualifying entity fails to comply 
                        with the representation described in 
                        subclause (III), 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 `base number of 
                        residents' means, with respect to a 
                        qualifying entity 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 cost 
                        reporting period ending before June 30, 
                        1997, or, if less, for anysubsequent 
cost reporting period that ends before the date the entity makes 
application under this paragraph.
                  ``(E) Applicable hold harmless percentage.--
                          ``(i) In general.--For purposes of 
                        subparagraph (A), the `applicable hold 
                        harmless percentage' is the percentages 
                        specified in clause (ii) or clause 
                        (iii), as elected by the qualifying 
                        entity in the application submitted 
                        under subparagraph (B).
                          ``(ii) 5-year reduction plan.--In the 
                        case of an entity making the election 
                        described in subparagraph (B)(iii)(I), 
                        the percentages specified in this 
                        clause are, 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.
                          ``(iii) 6-year reduction plan.--In 
                        the case of an entity making the 
                        election described in subparagraph 
                        (B)(iii)(II), the percentages specified 
                        in this clause are, for the--
                                  ``(I) first residency 
                                training year in which the 
                                reduction plan is in effect, 
                                100 percent,
                                  ``(II) second such year, 95 
                                percent,
                                  ``(III) third such year, 85 
                                percent,
                                  ``(IV) fourth such year, 70 
                                percent,
                                  ``(V) fifth such year, 50 
                                percent, and
                                  ``(VI) sixth such year, 25 
                                percent.
                  ``(F) Penalty for increase in number of 
                residents in subsequent years.--If payments are 
                made under this paragraph to a qualifying 
                entity, if the entity (or any hospital 
                operating as part of the entity) increases the 
                number of full-time equivalent residents above 
                the number of such residents permitted under 
                the reduction plan as of the completion of the 
                plan, then, as specified by the Secretary, the 
                entity is liable for repayment to the Secretary 
                of the total amounts paid under this paragraph 
                to the entity.
                  ``(G) Treatment of rotating residents.--In 
                applying this paragraph, the Secretary shall 
                establish rules regarding the counting of 
                residents who are assigned to institutions 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), 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. The Secretary of 
        Health and Human Services shall take such actions as 
        may be necessary to assure that (in the manner 
        described in subparagraph (A) of such section) in no 
        case shall payments be made under such a project with 
        respect to the first 5 percent reduction in the base 
        number of full-time equivalent residents otherwise used 
        under the project.
          (2) Effective May 27, 1997, the Secretary of Health 
        and 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 provides for additional 
        payments under title XVIII of the Social Security Act 
        in connection with 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 
Secretary of Health and Human Services may first promulgate 
regulations, 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. 4735. 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).
  (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 an approved medical 
        residency training program in a teaching hospital and 
        one or more of the following entities:
                  (A) A school of allopathic medicine or 
                osteopathic medicine.
                  (B) Another teaching hospital, which may be a 
                children's hospital.
                  (C) Another approved medical residency 
                training program.
                  (D) A Federally qualified health center.
                  (E) A medical group practice.
                  (F) A managed care entity.
                  (G) An entity furnishing outpatient services.
                  (I) Such other entity as the Secretary 
                determines to be appropriate.
          (2) The members of the consortium have agreed to 
        participate 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 
        payments made pursuant to this section, the members of 
        the consortium have agreed on a method for allocating 
        the payments 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) 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. 4736. RECOMMENDATIONS ON LONG-TERM PAYMENT POLICIES REGARDING 
                    FINANCING TEACHING HOSPITALS AND GRADUATE MEDICAL 
                    EDUCATION.

  (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 medicare payment policies and other Federal policies 
regarding teaching hospitals and graduate medical education 
should be reformed. Such recommendations shall include 
recommendations regarding each of the following:
          (1) The financing of graduate medical education, 
        including consideration of alternative broad-based 
        sources of funding for such education and models for 
        the distribution of payments under any all-payer 
        financing mechanism.
          (2) The financing of teaching hospitals, including 
        consideration of the difficulties encountered by such 
        hospitals as competition among health care entities 
        increases. Matters considered under this paragraph 
        shall include consideration of the effects on teaching 
        hospitals of the method of financing used for the 
        MedicarePlus program under part C of title XVIII of the 
        Social Security Act.
          (3) Possible methodologies for making payments for 
        graduate medical education and the selection of 
        entities to receive such payments. Matters considered 
        under this paragraph shall include--
                  (A) issues regarding children's hospitals and 
                approved medical residency training programs in 
                pediatrics, and
                  (B) whether and to what extent payments are 
                being made (or should be made) for training in 
                the various nonphysician health professions, 
                including social workers and psychologists.
          (4) Federal policies regarding international medical 
        graduates.
          (5) The dependence of schools of medicine on service-
        generated income.
          (6) 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 any such changes will 
        have significant financial effects on teaching 
        hospitals.
          (7) Methods for promoting an appropriate number, mix, 
        and geographical distribution of health professionals.
  (c) 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 
        medicine;
          (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 
        representative fields of non-physician 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 on the financing of 
        health care.
  (d) Report.--Not later than 2 years after the date of the 
enactment 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. 4737. MEDICARE SPECIAL REIMBURSEMENT RULE FOR CERTAIN COMBINED 
                    RESIDENCY PROGRAMS.

  (a) In General.--Section 1886(h)(5)(G) (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 
                        combined residency programs.--(I) In 
                        the case of a resident enrolled in a 
                        combined medical residency training 
                        program in which all of the individual 
                        programs (that are combined) are for 
                        training a primary care resident (as 
                        defined in subparagraph (H)), the 
                        period of board eligibility shall be 
                        the minimum number 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 
                        program 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 withsuch 
obstetrics and gynecology program are for training a primary care 
resident.''.
  (b) Effective Date.--The amendments made by subsection (a) 
apply to combined medical residency programs for residency 
years beginning on or after July 1, 1998.

                      CHAPTER 5--OTHER PROVISIONS

SEC. 4741. CENTERS OF EXCELLENCE.

  (a) In General.--Title XVIII is amended by inserting after 
section 1888 the following:

                        ``centers of excellence

  ``Sec. 1889. (a) In General.--The Secretary shall use a 
competitive process to contract with specific hospitals or 
other entities for furnishing services related to surgical 
procedures, and for furnishing services (unrelated to surgical 
procedures) to hospital inpatients that the Secretary 
determines to be appropriate. The services may include any 
services covered under this title that the Secretary determines 
to be appropriate, including post-hospital services.
  ``(b) Quality Standards.--
          ``(1) In general.--Only entities that meet quality 
        standards established by the Secretary shall be 
        eligible to contract under this section. Contracting 
        entities shall implement a quality improvement plan 
        approved by the Secretary.
          ``(2) Participation decision based on quality.--
        Subject to subsection (c), the Secretary shall consider 
        quality as the primary factor in selecting hospitals or 
        other entities to enter into contracts under this 
        section.
  ``(c) Payment.--Payment under this section shall be made on 
the basis of negotiated all-inclusive rates. The amount of 
payment made by the Secretary to an entity under this title for 
services covered under a contract shall not exceed the 
aggregate amount of the payments that the Secretary would have 
otherwise made for the services.
  ``(d) Contract Period.--A contract period shall be 3 years 
(subject to renewal), so long as the entity continues to meet 
quality and other contractual standards.
  ``(e) Incentives for Use of Centers.--Entities under a 
contract under this section may furnish additional services (at 
no cost to an individual entitled to benefits under this title) 
or waive cost-sharing, subject to the approval of the 
Secretary.
  ``(f) Limit on Number of Centers.--The Secretary shall limit 
the number of centers in a geographic area to the number needed 
to meet projected demand for contracted services.''.
  (b) Effective Date.--The amendment made by subsection (a) 
applies to services furnished on or after October 1, 1997.

SEC. 4742. MEDICARE PART B SPECIAL ENROLLMENT PERIOD AND WAIVER OF PART 
                    B LATE ENROLLMENT PENALTY AND MEDIGAP SPECIAL OPEN 
                    ENROLLMENT PERIOD FOR CERTAIN MILITARY RETIREES AND 
                    DEPENDENTS.

  (a) Medicare Part B Special Enrollment Period; Waiver of Part 
B Penalty for Late Enrollment.--
          (1) In general.--In the case of any eligible 
        individual (as defined in subsection (c)), the 
        Secretary of Health and Human Services shall provide 
        for a special enrollment period during which the 
        individual may enroll under part B of title XVIII of 
        the Social Security Act. Such period shall be for a 
        period of 6 months and shall begin with the first month 
        that begins at least 45 days after the date of the 
        enactment of this Act.
          (2) Coverage period.--In the case of an eligible 
        individual who enrolls during the special enrollment 
        period provided under paragraph (1), the coverage 
        period under part B of title XVIII of the Social 
        Security Act shall begin on the first day of the month 
        following the month in which the individual enrolls.
          (3) Waiver of part b late enrollment penalty.--In the 
        case of an eligible individual who enrolls during the 
        special enrollment period provided under paragraph (1), 
        there shall be no increase pursuant to section 1839(b) 
        of the Social Security Act in the monthly premium under 
        part B of title XVIII of such Act.
  (b) Medigap Special Open Enrollment Period.--Notwithstanding 
any other provision of law, an issuer of a medicare 
supplemental policy (as defined in section 1882(g) of the 
Social Security Act)--
          (1) may not deny or condition the issuance or 
        effectiveness of a medicare supplemental policy that 
        has a benefit package classified as ``A'', ``B'', 
        ``C'', or ``F'' under the standards established under 
        section 1882(p)(2) of the Social Security Act (42 
        U.S.C. 1395rr(p)(2)); and
          (2) may not discriminate in the pricing of the policy 
        on the basis of the individual's health status, medical 
        condition (including both physical and mental 
        illnesses), claims experience, receipt of health care, 
        medical history, genetic information, evidence of 
        insurability (including conditions arising out of acts 
        of domestic violence), or disability;
in the case of an eligible individual who seeks to enroll (and 
is enrolled) during the 6-month period described in subsection 
(a)(1).
  (c) Eligible Individual Defined.--In this section, the term 
``eligible individual'' means an individual--
          (1) who, as of the date of the enactment of this Act, 
        has attained 65 years of age and was eligible to enroll 
        under part B of title XVIII of the Social Security Act, 
        and
          (2) who at the time the individual first satisfied 
        paragraph (1) or (2) of section 1836 of the Social 
        Security Act--
                  (A) was a covered beneficiary (as defined in 
                section 1072(5) of title 10, United States 
                Code), and
                  (B) did not elect to enroll (or to be deemed 
                enrolled) under section 1837 of the Social 
                Security Act during the individual's initial 
                enrollment period.
The Secretary of Health and Human Services shall consult with 
the Secretary of Defense in the identification of eligible 
individuals.

SEC. 4743. COMPETITIVE BIDDING FOR CERTAIN ITEMS AND SERVICES.

  (a) Establishment of Demonstration.--Not later than 1 year 
after the date of the enactment of this Act, the Secretary of 
Health and Human Services shall establish and operate over a 2-
year period a demonstration project in 2 geographic regions 
selected by the Secretary under which (notwithstanding any 
provision of title XVIII of the Social Security Act to the 
contrary) the amount of payment made under the medicare program 
for a selected item or service furnished in the region shall be 
equal to the price determined pursuant to a competitive bidding 
process which meets the requirements of subsection (b).
  (b) Requirements for Competitive Bidding Process.--The 
competitive bidding process used under the demonstration 
project under this section shall meet such requirements as the 
Secretary may impose to ensure the cost-effective delivery to 
medicare beneficiaries in the project region of items and 
services of high quality.
  (c) Determination of Selected Items or Services.--The 
Secretary shall select items and services to be subject to the 
demonstration project under this section if the Secretary 
determines that the use of competitive bidding with respect to 
the item or service under the project will be appropriate and 
cost-effective. In determining the items or services to be 
selected, the Secretary shall consult with an advisory 
taskforce which includes representatives of providers and 
suppliers of items and services (including small business 
providers and suppliers) in each geographic region in which the 
project will be effective.

                  Subtitle I--Medical Liability Reform

                     CHAPTER 1--GENERAL PROVISIONS

SEC. 4801. FEDERAL REFORM OF HEALTH CARE LIABILITY ACTIONS.

  (a) Applicability.--This subtitle governs any health care 
liability action brought in any State or Federal court, except 
that this subtitle shall not apply to an action for damages 
arising from a vaccine-related injury or death to the extent 
that title XXI of the Public Health Service Act applies to the 
action.
  (b) Preemption.--This subtitle shall preempt any State or 
applicable Federal law to the extent such law is inconsistent 
with the limitations contained in this subtitle. This subtitle 
shall not preempt any State or applicable Federal law that 
provides for defenses or places limitations on a person's 
liability in addition to those contained in this subtitle or 
otherwise imposes greater restrictions than those provided in 
this subtitle.
  (c) Effect on Sovereign Immunity and Choice of Law or 
Venue.--Nothing in subsection (b) shall be construed to--
          (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
          (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
          (3) affect the applicability of any provision of 
        chapter 97 of title 28, United States Code;
          (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a 
        foreign nation; or
          (5) affect the right of any court to transfer venue 
        or to apply the law of a foreign nation or to dismiss a 
        claim of a foreign nation or of a citizen of a foreign 
        nation on the ground of inconvenient forum.
  (d) Amount in Controversy.--In an action to which this 
subtitle applies and which is brought under section 1332 of 
title 28, United States Code, the amount of noneconomic damages 
or punitive damages, and attorneys' fees or costs, shall not be 
included in determining whether the matter in controversy 
exceeds the sum or value of $50,000.
  (e) Federal Court Jurisdiction Not Established on Federal 
Question Grounds.--Nothing in this subtitle shall be construed 
to establish any jurisdiction in the district courts of the 
United States over health care liability actions on the basis 
of section 1331 or 1337 of title 28, United States Code.

SEC. 4802. DEFINITIONS.

  As used in this subtitle:
          (1) Actual damages.--The term ``actual damages'' 
        means damages awarded to pay for economic loss.
          (2) Alternative dispute resolution system; adr.--The 
        term ``alternative dispute resolution system'' or 
        ``ADR'' means a system established under Federal or 
        State law that provides for the resolution of health 
        care liability claims in a manner other than through 
        health care liability actions.
          (3) Claimant.--The term ``claimant'' means any person 
        who brings a health care liability action and any 
        person on whose behalf such an action is brought. If 
        such action is brought through or on behalf of an 
        estate, the term includes the claimant's decedent. If 
        such action is brought through or on behalf of a minor 
        or incompetent, the term includes the claimant's legal 
        guardian.
          (4) Clear and convincing evidence.--The term ``clear 
        and convincing evidence'' is that measure or degree of 
        proof that will produce in the mind of the trier of 
        fact a firm belief or conviction as to the truth of the 
        allegations sought to be established, except that such 
        measure or degree of proof is more than that required 
        under preponderance of the evidence but less than that 
        required for proof beyond a reasonable doubt.
          (5) Collateral source payments.--The term 
        ``collateral source payments'' means any amount paid or 
        reasonably likely to be paid in the future to or on 
        behalf of a claimant, or any service, product, or other 
        benefit provided or reasonably likely to be provided in 
        the future to or on behalf of a claimant, as a result 
        of an injury or wrongful death, pursuant to--
                  (A) any State or Federal health, sickness, 
                income-disability, accident or workers' 
                compensation Act;
                  (B) any health, sickness, income-disability, 
                or accident insurance that provides health 
                benefits or income-disability coverage;
                  (C) any contract or agreement of any group, 
                organization, partnership, or corporation to 
                provide, pay for, or reimburse the cost of 
                medical, hospital, dental, or income disability 
                benefits; and
                  (D) any other publicly or privately funded 
                program.
          (6) Device.--The term ``device'' has the same meaning 
        given such term in section 201(h) of the Federal Food, 
        Drug, and Cosmetic Act (21 U.S.C. 321(h)).
          (7) Drug.--The term ``drug'' has the same meaning 
        given such term in section 201(g)(1) of the Federal 
        Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)).
          (8) Economic loss.--The term ``economic loss'' means 
        any pecuniary loss resulting from harm (including the 
        loss of earnings or other benefits related to 
        employment, medical expense loss, replacement services 
        loss, loss due to death, burial costs, and loss of 
        business or employment opportunities), to the extent 
        recovery for such loss is allowed under applicable 
        State or Federal law.
          (9) Harm.--The term ``harm'' means--
                  (A) any physical injury, illness, or death of 
                the claimant, or
                  (B) any mental anguish or emotional injury to 
                the claimant caused by or causing the claimant 
                physical injury or illness.
          (10) Health care liability action.--The term ``health 
        care liability action'' means a civil action brought in 
        a State or Federal court against a health care 
        provider, an entity which is obligated to provide or 
        pay for health benefits under any health plan 
        (including any person or entity acting under a contract 
        or arrangement to provide or administer any health 
        benefit), or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, in 
        which the claimant alleges a health care liability 
        claim.
          (11) Health care liability claim.--The term ``health 
        care liability claim'' means a claim in which the 
        claimant alleges that harm was caused by the provision 
        of (or the failure to provide) health care services or 
        the use of a medical product, regardless of the theory 
        of liability on which the claim is based.
          (12) Health care provider.--The term ``health care 
        provider'' means any individual, organization, or 
        institution that is engaged in the delivery of health 
        care services in a State and that is required by the 
        laws or regulations of the State to be licensed or 
        certified by the State to engage in the delivery of 
        such services in the State.
          (13) Manufacturer.--The term ``manufacturer'' means--
                  (A) any person who is engaged in a business 
                to produce, create, make, or construct any 
                product (or component part of a product) and 
                who (i) designs or formulates the product (or 
                component part of the product), or (ii) has 
                engaged another person to design or formulate 
                the product (or component part of the product);
                  (B) a product seller, but only with respect 
                to those aspects of a product (or component 
                part of a product) which are created or 
                affected when, before placing the product in 
                the stream of commerce, the product seller 
                produces, creates, makes or constructs and 
                designs, or formulates, or has engaged another 
                person to design or formulate, an aspect of the 
                product (or component part of the product) made 
                by another person; or
                  (C) any product seller not described in 
                subparagraph (B) which holds itself out as a 
                manufacturer to the user of the product.
          (14) Noneconomic damages.--The term ``noneconomic 
        damages'' means damages paid to an individual for pain 
        and suffering, inconvenience, emotional distress, 
        mental anguish, loss of society and companionship, 
        injury to reputation, humiliation, and other 
        subjective, nonpecuniary losses.
          (15) Person.--The term ``person'' means any 
        individual, corporation, company, association, firm, 
        partnership, society, joint stock company, or any other 
        entity, including any governmental entity.
          (16) Product seller.--
                  (A) In general.--The term ``product seller'' 
                means a person who in the course of a business 
                conducted for that purpose--
                          (i) sells, distributes, rents, 
                        leases, prepares, blends, packages, 
                        labels, or otherwise is involved in 
                        placing a product in the stream of 
                        commerce; or
                          (ii) installs, repairs, refurbishes, 
                        reconditions, or maintains the harm-
                        causing aspect of the product.
                  (B) Exclusion.--The term ``product seller'' 
                does not include--
                          (i) a seller or lessor of real 
                        property;
                          (ii) a provider of professional 
                        services in any case in which the sale 
                        or use of a product is incidental to 
                        the transaction and the essence of the 
                        transaction is the furnishing of 
                        judgment, skill, or services; or
                          (iii) any person who--
                                  (I) acts in only a financial 
                                capacity with respect to the 
                                sale of a product; or
                                  (II) leases a product under a 
                                lease arrangement in which the 
                                lessor does not initially 
                                select the leased product and 
                                does not during the lease term 
                                ordinarily control the daily 
                                operations and maintenance of 
                                the product.
          (17) Punitive damages.--The term ``punitive damages'' 
        means damages awarded against any person not to 
        compensate for actual injury suffered, but to punish or 
        deter such person or others from engaging in similar 
        behavior in the future.
          (18) State.--The term ``State'' means each of the 
        several States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
        American Samoa, the Northern Mariana Islands, the Trust 
        Territories of the Pacific Islands, and any other 
        territory or possession of the United States or any 
        political subdivision of any of the foregoing.

SEC. 4803. EFFECTIVE DATE.

  This subtitle will apply to any health care liability action 
brought in a Federal or State court and to any health care 
liability claim subject to an alternative dispute resolution 
system, that is initiated on or after the date of enactment of 
this subtitle.

     CHAPTER 2--UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS

SEC. 4811. STATUTE OF LIMITATIONS.

  (a) General Rule.--Except as provided in subsection (b), a 
health care liability action may be filed not later than 2 
years after the date on which the claimant discovered or, in 
the exercise of reasonable care, should have discovered--
          (1) the harm that is the subject of the action; and
          (2) the cause of the harm.
  (b) Exception.--A person with a legal disability (as 
determined under applicable law) may file a health care 
liability action not later than 2 years after the date on which 
the person ceases to have the legal disability.
  (c) Transitional Provision Relating to Extension of Period 
for Bringing Certain Actions.--If any provision of subsection 
(a) or (b) shortens the period during which a health care 
liability action could be otherwise brought pursuant to another 
provision of law, the claimant may, notwithstanding subsections 
(a) and (b), bring the health care liability action not later 
than 2 years after the date of enactment of this Act.

SEC. 4812. CALCULATION AND PAYMENT OF DAMAGES.

  (a) Treatment of Noneconomic Damages.--
          (1) Limitation on noneconomic damages.--The total 
        amount of noneconomic damages that may be awarded to a 
        claimant for harm which is the subject of a health care 
        liability action may not exceed $250,000, regardless of 
        the number of parties against whom the action is 
        brought or the number of actions brought with respect 
        to the injury.
          (2) Fair share rule for noneconomic damages.--
                  (A) General rule.--In a health care liability 
                action, the liability of each defendant for 
                noneconomic damages shall be several only and 
                shall not be joint.
                  (B) Amount of liability.--
                          (i) In general.--Each defendant shall 
                        be liable only for the amount of 
                        noneconomic damages attributable to the 
                        defendant in direct proportion to the 
                        percentage of responsibility of the 
                        defendant (determined in accordance 
                        with paragraph (2)) for the harm to the 
                        claimant with respect to which the 
                        defendant is liable. The court shall 
                        render a separate judgment against each 
                        defendant in an amount determined 
                        pursuant to the preceding sentence.
                          (ii) Percentage of responsibility.--
                        For purposes of determining the amount 
                        of noneconomic damages attributable to 
                        a defendantunder this section, the 
trier of fact shall determine the percentage of responsibility of each 
person responsible for the claimant's harm, whether or not such person 
is a party to the action.
  (b) Treatment of Punitive Damages.--
          (1) General rule.--Punitive damages may, to the 
        extent permitted by applicable law, be awarded in a 
        health care liability action against a defendant if the 
        claimant establishes by clear and convincing evidence 
        that the harm suffered was result of conduct 
        manifesting a conscious, flagrant indifference to the 
        rights or safety of others.
          (2) Required proportionality.--The amount of punitive 
        damages that may be awarded in a health care liability 
        action shall not exceed 3 times the amount of damages 
        awarded to the claimant for economic loss, or $250,000, 
        whichever is greater. This subsection shall be applied 
        by the court, and application of this subsection shall 
        not be disclosed to the jury.
  (c) Bifurcation at Request of Any Party.--
          (1) In general.--At the request of any party the 
        trier of fact in any action that is subject to this 
        section shall consider in a separate proceeding, held 
        subsequent to the determination of the amount of 
        compensatory damages, whether punitive damages are to 
        be awarded for the harm that is the subject of the 
        action and the amount of the award.
          (2) Inadmissibility of evidence relative only to a 
        claim of punitive damages in a proceeding concerning 
        compensatory damages.--If any party requests a separate 
        proceeding under paragraph (1), in a proceeding to 
        determine whether the claimant may be awarded 
        compensatory damages, any evidence, argument, or 
        contention that is relevant only to the claim of 
        punitive damages, as determined by applicable law, 
        shall be inadmissible.
  (d) Drugs and Devices.--
          (1)(A) Punitive damages shall not be awarded against 
        a manufacturer or product seller of a drug or device 
        which caused the claimant's harm where--
                  (i) such drug or device was subject to 
                premarket approval by the Food and Drug 
                Administration with respect to the safety of 
                the formulation or performance of the aspect of 
                such drug or device which caused the claimant's 
                harm or the adequacy of the packaging or 
                labeling of such drug or device, and such drug 
                or device was approved by the Food and Drug 
                Administration; or
                  (ii) the drug or device is generally 
                recognized as safe and effective pursuant to 
                conditions established by the Food and Drug 
                Administration and applicable regulations, 
                including packaging and labeling regulations.
          (B) Subparagraph (A) shall not apply in any case in 
        which the defendant, before or after premarket approval 
        of a drug or device--
                  (i) intentionally and wrongfully withheld 
                from or misrepresented to the Food and Drug 
                Administration information concerning such drug 
                or device required to be submitted under the 
                Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                301 et seq.) or section 351 of the Public 
                Health Service Act (42 U.S.C. 262) that is 
                material and relevant to the harm suffered by 
                the claimant, or
                  (ii) made an illegal payment to an official 
                or employee of the Food and Drug Administration 
                for the purpose of securing or maintaining 
                approval of such drug or device.
          (2) Packaging.--In a health care liability action 
        which is alleged to relate to the adequacy of the 
        packaging (or labeling relating to such packaging) of a 
        drug which is required to have tamper-resistant 
        packaging under regulations of the Secretary of Health 
        and Human Services (including labeling regulations 
        related to such packaging), the manufacturer of the 
        drug shall not be held liable for punitive damages 
        unless the drug is found by the court by clear and 
        convincing evidence to be substantially out of 
        compliance with such regulations.
  (e) Periodic Payments for Future Losses.--
          (1) General rule.--In any health care liability 
        action in which the damages awarded for future economic 
        and noneconomic loss exceed $50,000, a person shall not 
        be required to pay such damages in a single, lump-sum 
        payment, but shall be permitted to make such payments 
        periodically based on when the damages are found likely 
        to occur, with the amount and schedule of such payments 
        determined by the court.
          (2) Finality of judgment.--The judgment of the court 
        awarding periodic payments under this subsection may 
        not, in the absence of fraud, be reopened at any time 
        to contest, amend, or modify the schedule or amount of 
        the payments.
          (3) Lump-sum settlements.--This subsection shall not 
        be construed to preclude a settlement providing for a 
        single, lump-sum payment.
  (f) Treatment of Collateral Source Payments.--
          (1) Introduction into evidence.--In any health care 
        liability action, any defendant may introduce evidence 
        of collateral source payments. If a defendant elects to 
        introduce such evidence, the claimant may introduce 
        evidence of any amount paid or contributed or 
        reasonably likely to be paid or contributed in the 
        future by or on behalf of the claimant to secure the 
        right to such collateral source payments.
          (2) No subrogation.--No provider of collateral source 
        payments shall recover any amount against the claimant 
        or receive any lien or credit against the claimant's 
        recovery or be equitably or legally subrogated the 
        right of the claimant in a health care liability 
        action. This subsection shall apply to an action that 
        is settled as well as an action that is resolved by a 
        fact finder.

SEC. 4813. ALTERNATIVE DISPUTE RESOLUTION.

  Any ADR used to resolve a health care liability action or 
claim shall contain provisions relating to statute of 
limitations, non-economic damages, joint and several liability, 
punitive damages, collateral source rule, and periodic payments 
which are identical to the provisions relating to such matters 
in this subtitle.

           TITLE V--COMMITTEE ON EDUCATION AND THE WORKFORCE

                      Subtitle A--TANF Block Grant

SEC. 5001. WELFARE-TO-WORK GRANTS.

  (a) Grants to States.--Section 403(a) of the Social Security 
Act (42 U.S.C. 603(a)) is amended by adding at the end the 
following:
          ``(5) Welfare-to-work grants.--
                  ``(A) Formula grants.--
                          ``(i) Entitlement.--A State shall be 
                        entitled to receive from the Secretary 
                        a grant for each fiscal year specified 
                        in subparagraph (H) of this paragraph 
                        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 (as defined in 
                                section 409(a)(7)(B)(i)) and 
                                expenditures described in 
                                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 subparagraph if the 
                        Secretary, after consultation (and the 
                        sharing of any plan or amendment 
                        thereto submitted under this clause) 
                        with the Secretary of Health and Human 
                        Services and the Secretary of Housing 
                        and Urban Development, determines that 
                        the State meets the following 
                        requirements:
                                  ``(I) The State has submitted 
                                to the Secretary (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; and
                                          ``(cc) contains 
                                        evidence that the plan 
                                        was developed through a 
                                        collaborative process 
                                        that, at a minimum, 
                                        included sub-State 
                                        areas.
                                  ``(II) The State has provided 
                                the Secretary with 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)) for 
                                activities described in 
                                subparagraph (C)(i) of this 
                                paragraph.
                                  ``(III) The State has agreed 
                                to negotiate in good faith with 
                                the Secretary of Health and 
                                Human Services with respect to 
                                the substance of any evaluation 
                                under section 413(j), and to 
                                cooperate with the conduct of 
                                any such evaluation.
                                  ``(IV) The State is an 
                                eligible State for the fiscal 
                                year.
                          ``(iii) Allotments to welfare-to-work 
                        states.--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.
                          ``(iv) Available amount.--As used in 
                        clause (iii), the term `available 
                        amount' means, for a fiscal year, 95 
                        percent of--
                                  ``(I) the amount specified in 
                                subparagraph (H) for the fiscal 
                                year; minus
                                  ``(II) the total of the 
                                amounts reserved pursuant to 
                                subparagraphs (F) and (G) for 
                                the fiscal year.
                          ``(v) State percentage.--As used in 
                        clause (iii), the term `State 
                        percentage' means, with respect to a 
                        fiscal year, \1/2\ 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 individuals 
                                        who are adult 
                                        recipients of 
                                        assistance under the 
                                        State program funded 
                                        under this part divided 
                                        by the number of 
                                        individuals in the 
                                        United States who are 
                                        adult recipients of 
                                        assistance under any 
                                        State program funded 
                                        under this part.
                          ``(vi) Distribution of funds within 
                        states.--
                                  ``(I) In general.--A State to 
                                which a grant is made under 
                                this subparagraph shall 
                                distribute not less than 85 
                                percent of the grant funds 
                                among the service delivery 
                                areas in the State, in 
                                accordance with a formula 
                                which--
                                          ``(aa) determines the 
                                        amount to be 
                                        distributed for the 
                                        benefit of a service 
                                        delivery area in 
                                        proportion to the 
                                        number (if any) by 
                                        which the number of 
                                        individuals residing in 
                                        the service delivery 
                                        area with an income 
                                        that is less than the 
                                        poverty line exceeds 5 
                                        percent of the 
                                        population of the 
                                        service delivery area, 
                                        relative to such number 
                                        for the other service 
                                        delivery areas in the 
                                        State, and accords a 
                                        weight of not less than 
                                        50 percent to this 
                                        factor;
                                          ``(bb) may determine 
                                        the amount to be 
                                        distributed for the 
                                        benefit of a service 
                                        delivery area in 
                                        proportion to the 
                                        number of adults 
                                        residing in the service 
                                        delivery area who are 
                                        recipients of 
                                        assistance 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 Opportunity 
                                        Reconciliation Act 
                                        first applied tothe 
State) for at least 30 months (whether or not consecutive) relative to 
the number of such adults residing in the other service delivery areas 
in the State; and
                                          ``(cc) may determine 
                                        the amount to be 
                                        distributed for the 
                                        benefit of a service 
                                        delivery area in 
                                        proportion to the 
                                        number of unemployed 
                                        individuals residing in 
                                        the service delivery 
                                        area relative to the 
                                        number of such 
                                        individuals residing in 
                                        the other service 
                                        delivery areas in the 
                                        State.
                                  ``(II) Special rule.--
                                Notwithstanding subclause (I), 
                                if the formula used pursuant to 
                                subclause (I) would result in 
                                the distribution of less than 
                                $100,000 during a fiscal year 
                                for the benefit of a service 
                                delivery area, then in lieu of 
                                distributing such sum in 
                                accordance with the formula, 
                                such sum shall be available for 
                                distribution under subclause 
                                (III) during the fiscal year.
                                  ``(III) Projects to help 
                                long-term recipients of 
                                assistance into the work 
                                force.--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 
                                subclause by reason of 
                                subclause (II)) 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 amendments made by 
                                section 103(a) of the Personal 
                                Responsibility and Work 
                                Opportunity Reconciliation Act 
                                first applied to the State) 
                                enter the work force.
                          ``(vii) Administration.--
                                  ``(I) In general.--A grant 
                                made under this subparagraph to 
                                a State shall be administered 
                                by the State agency that is 
                                administering, or supervising 
                                the administration of, the 
                                State program funded under this 
                                part, or by another State 
                                agency designated by the 
                                Governor of the State.
                                  ``(II) Spending by private 
                                industry councils.--The private 
                                industry council for a service 
                                delivery area shall have sole 
                                authority, in coordination with 
                                the chief elected official (as 
                                described in section 103(c) of 
                                the Job Training Partnership 
                                Act) of the service delivery 
                                area, to expend the amounts 
                                provided for a service delivery 
                                area under subparagraph 
                                (vi)(I).
                  ``(B) Demonstration projects.--
                          ``(i) In general.--The Secretary, in 
                        consultation with the Secretary of 
                        Health and Human Services and the 
                        Secretary of Housing and Urban 
                        Development, shall make grants in 
                        accordance with this subparagraph among 
                        eligible applicants based on the 
                        likelihood that the applicant can 
                        successfully make long-term placements 
                        of individuals into the work force.
                          ``(ii) Eligible applicants.--As used 
                        in clause (i), the term `eligible 
                        applicant' means a private industry 
                        council or a political subdivision of a 
                        State.
                          ``(iii) Determination of grant 
                        amount.--In determining the amount of a 
                        grant to be made under this 
                        subparagraph for a demonstration 
                        project proposed by an applicant, the 
                        Secretary shall provide the applicant 
                        with an amount sufficient to ensure 
                        that the project has a reasonable 
                        opportunity to be successful, taking 
                        into account the number of long-term 
                        recipients of assistance under a State 
                        program funded under this part, the 
                        level of unemployment, the job 
                        opportunities and job growth, the 
                        poverty rate, and such other factors as 
                        the Secretary deems appropriate, in the 
                        area to be served by the project.
                          ``(iv) Funding.--For grants under 
                        this subparagraph for each fiscal year 
                        specified in subparagraph (H), there 
                        shall be available to the Secretary an 
                        amount equal to the sum of--
                                  ``(I) 5 percent of--
                                          ``(aa) the amount 
                                        specified in 
                                        subparagraph (H) for 
                                        the fiscal year; minus
                                          ``(bb) the total of 
                                        the amounts reserved 
                                        pursuant to 
                                        subparagraphs (F) and 
                                        (G) for the fiscal 
                                        year;
                                  ``(II) any amount available 
                                for grants under this paragraph 
                                for the immediately preceding 
                                fiscal year that has not been 
                                obligated;
                                  ``(III) any amount reserved 
                                pursuant to subparagraph (F) 
                                for the immediately preceding 
                                fiscal year that has not been 
                                obligated; and
                                  ``(IV) any available amount 
                                (as defined in subparagraph 
                                (A)(iv)) for the immediately 
                                preceding fiscal year that has 
                                not been obligated by a State 
                                or sub-State entity.
                        Amounts made available pursuant to this 
                        clause are authorized to remain 
                        available until the end of fiscal year 
                        2001.
                  ``(C) Limitations on use of funds.--
                          ``(i) Allowable activities.--An 
                        entity to which funds are provided 
                        under this paragraph may use the funds 
                        to move into the work force recipients 
                        of assistance under the program funded 
                        under this part of the State in which 
                        the entity is located, by means of any 
                        of the following:
                                  ``(I) Job creation through 
                                public or private sector 
                                employment wage subsidies.
                                  ``(II) On-the-job training.
                                  ``(III) Contracts with job 
                                placement companies or public 
                                job placement programs.
                                  ``(IV) Job vouchers.
                                  ``(V) Job retention or 
                                support services if such 
                                services are not otherwise 
                                available.
                          ``(ii) Required beneficiaries.--An 
                        entity that operates a project with 
                        funds provided under this paragraph 
                        shall expend at least 90 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 theentity is 
located who meet the requirements of any of the following subclauses:
                                  ``(I) The individual has 
                                received assistance under the 
                                State program funded under this 
                                part (whether in effect before 
                                or after the amendments made by 
                                section 103 of the Personal 
                                Responsibility and Work 
                                Opportunity Reconciliation Act 
                                of 1996 first apply to the 
                                State) for at least 30 months 
                                (whether or not consecutive).
                                  ``(II) 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 and 
                                        mathematics.
                                          ``(bb) The individual 
                                        requires substance 
                                        abuse treatment for 
                                        employment.
                                          ``(cc) The individual 
                                        has a poor work 
                                        history.
                                The Secretary shall prescribe 
                                such regulations as may be 
                                necessary to interpret this 
                                subclause.
                                  ``(III) Within 12 months, the 
                                individual will become 
                                ineligible 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) Limitation on applicability 
                        of section 404.--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.
                          ``(iv) Prohibition against provision 
                        of services by private industry 
                        council.--A private industry council 
                        may not directly provide services using 
                        funds provided under this paragraph.
                          ``(v) Prohibition against use of 
                        grant funds for any other fund matching 
                        requirement.--An entity to which funds 
                        are provided under this paragraph shall 
                        not use any part of the funds to 
                        fulfill any obligation of any State, 
                        political subdivision, or private 
                        industry council to contribute funds 
                        under other Federal law.
                          ``(vi) Deadline for expenditure.--An 
                        entity to which funds are provided 
                        under this paragraph shall remit to the 
                        Secretary any part of the funds that 
                        are not expended within 3 years after 
                        the date the funds are so provided.
                  ``(D) Individuals with income less than the 
                poverty line.--For purposes of this paragraph, 
                the number of individuals with an income that 
                is less than the poverty line shall be 
                determined based on the methodology used by the 
                Bureau of the Census to produce and publish 
                intercensal poverty data for 1993 for States 
                and counties.
                  ``(E) Definitions.--As used in this 
                paragraph:
                          ``(i) Private industry council.--The 
                        term `private industry council' means, 
                        with respect to a service delivery 
                        area, the private industry council (or 
                        successor entity) established for the 
                        service delivery area pursuant to the 
                        Job Training Partnership Act.
                          ``(ii) Secretary.--The term 
                        `Secretary' means the Secretary of 
                        Labor, except as otherwise expressly 
                        provided.
                          ``(iii) Service delivery area.--The 
                        term `service delivery area' shall have 
                        the meaning given such term for 
                        purposes of the Job Training 
                        Partnership Act (or successor area).
                  ``(F) Funding for indian tribes.--1 percent 
                of the amount specified in subparagraph (H) for 
                each fiscal year shall be reserved for grants 
                to Indian tribes under section 412(a)(3).
                  ``(G) Evaluations.--0.5 percent of the amount 
                specified in subparagraph (H) for each fiscal 
                year shall be reserved for use by the Secretary 
                of Health and Human Services to carry out 
                section 413(j).
                  ``(H) Funding.--The amount specified in this 
                subparagraph is--
                          ``(i) $750,000,000 for fiscal year 
                        1998;
                          ``(ii) $1,250,000,000 for fiscal year 
                        1999; and
                          ``(iii) $1,000,000,000 for fiscal 
                        year 2000.
                  ``(I) Budget scoring.--Notwithstanding 
                section 457(b)(2) of the Balanced Budget and 
                Emergency Deficit Control Act of 1985, the 
                baseline shall assume that no grant shall be 
                made under this paragraph or under section 
                412(a)(3) after fiscal year 2001.''.
  (b) Grants to Territories.--Section 1108(a) of such Act (42 
U.S.C. 1308(a)) is amended by inserting ``(except section 
403(a)(5))'' after ``title IV''.
  (c) Grants to Indian Tribes.--Section 412(a) of such Act (42 
U.S.C. 612(a)) is amended by adding at the end the following:
          ``(3) Welfare-to-work grants.--
                  ``(A) In general.--The Secretary shall make a 
                grant in accordance with this paragraph to an 
                Indian tribe for each fiscal year specified in 
                section 403(a)(5)(H) for which the Indian tribe 
                is a welfare-to-work tribe, in such amount as 
                the Secretary 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 (in the form of an 
                        addendum to the tribal family 
                        assistance plan, if any, of the Indian 
                        tribe) 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.
                          ``(ii) The Indian tribe has provided 
                        the Secretary 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)) 
                        for activities described in section 
                        403(a)(5)(C)(i).
                          ``(iii) The Indian tribe has agreed 
                        to negotiate in good faith with the 
                        Secretary of Health and Human Services 
                        with respect to the substance of any 
                        evaluation under section 413(j), and to 
                        cooperate with the conduct of any such 
                        evaluation.
                  ``(C) Limitations on use of funds.--Section 
                403(a)(5)(C) 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(a)(5).''.
  (d) Funds Received From Grants To Be Disregarded in Applying 
Durational Limit on Assistance.--Section 408(a)(7) of such Act 
(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 
                assistance from funds provided under section 
                403(a)(5) shall not be considered 
                assistance.''.
  (e) Evaluations.--Section 413 of such Act (42 U.S.C. 613) is 
amended by adding at the end the following:
  ``(j) Evaluation of Welfare-To-Work Programs.--The 
Secretary--
          ``(1) shall, in consultation with the Secretary of 
        Labor, develop a plan to evaluate how grants made under 
        sections 403(a)(5) and 412(a)(3) have been used; and
          ``(2) 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.''.

SEC. 5002. NONDISPLACEMENT.

  Section 407(f) of the Social Security Act (42 U.S.C. 607(f)) 
is amended to read as follows:
  ``(f) Nondisplacement in Work Activities.--
          ``(1) Prohibitions.--
                  ``(A) General prohibition.--A participant in 
                a work activity pursuant to section 403(a)(5) 
                or this section shall not displace (including a 
                partial displacement, such as a reduction in 
                the hours of nonovertime work, wages, or 
                employment benefits) any individual who, as of 
                the date of the participation, is an employee.
                  ``(B) Prohibition on impairment of 
                contracts.--A work activity shall not impair an 
                existing contract for services or collective 
                bargaining agreement, and a work activity that 
                would be inconsistent with the terms of a 
                collective bargaining agreement shall not be 
                undertaken without the written concurrence of 
                the labor organization and employer concerned.
                  ``(C) Other prohibitions.--A participant in a 
                work activity shall not be employed in a job--
                          ``(i) when any other individual is on 
                        layoff from the same or any 
                        substantially equivalent job;
                          ``(ii) when the employer has 
                        terminated the employment of any 
                        regular employee or otherwise reduced 
                        the workforce of the employer with the 
                        intention of filling the vacancy so 
                        created with the participant; or
                          ``(iii) which is created in a 
                        promotional line that will infringe in 
                        any way upon the promotional 
                        opportunities of employed individuals.
          ``(2) Health and safety.--Health and safety standards 
        established under Federal and State law otherwise 
        applicable to working conditions of employees shall be 
        equally applicable to working conditions of 
        participants engaged in a work activity. To the extent 
        that a State workers' compensation law applies, 
        workers' compensation shall be provided to participants 
        on the same basis as the compensation is provided to 
        other individuals in the State in similar employment.
          ``(3) Nondiscrimination.--In addition to the 
        protections provided under the provisions of law 
        specified in section 408(c), an individual may not be 
        discriminated against with respect to participation in 
        work activities by reason of gender.
          ``(4) Grievance procedure.--
                  ``(A) In general.--Each State to which a 
                grant is made under section 403 shall establish 
                and maintain a procedure for grievances or 
                complaints alleging violations of paragraph 
                (1), (2), or (3) from participants and other 
                interested or affected parties. The procedure 
                shall include an opportunity for a hearing and 
                be completed within 60 days after the grievance 
                or complaint is filed.
                  ``(B) Investigation.--
                          ``(i) In general.--The Secretary of 
                        Labor shall investigate an allegation 
                        of a violation of paragraph (1), (2), 
                        or (3) if--
                                  ``(I) a decision relating to 
                                the violation is not reached 
                                within 60 days after the date 
                                of the filing of the grievance 
                                or complaint, and either party 
                                appeals to the Secretary of 
                                Labor; or
                                  ``(II) a decision relating to 
                                the violation is reached within 
                                the 60-day period, and the 
                                party to which the decision is 
                                adverse appeals the decision to 
                                the Secretary of Labor.
                          ``(ii) Additional requirement.--The 
                        Secretary of Labor shall make a final 
                        determination relating to an appeal 
                        made under clause (i) no later than 120 
                        days after receiving the appeal.
                  ``(C) Remedies.--Remedies for violation of 
                paragraph (1), (2), or (3) shall be limited 
                to--
                          ``(i) suspension or termination of 
                        payments under section 403;
                          ``(ii) prohibition of placement of a 
                        participant with an employer that has 
                        violated paragraph (1), (2), or (3);
                          ``(iii) where applicable, 
                        reinstatement of an employee, payment 
                        of lost wages and benefits, and 
                        reestablishment of other relevant 
                        terms, conditions and privileges of 
                        employment; and
                          ``(iv) where appropriate, other 
                        equitable relief.''.

SEC. 5003. CLARIFICATION OF LIMITATION ON NUMBER OF PERSONS WHO MAY BE 
                    TREATED AS ENGAGED IN WORK BY REASON OF 
                    PARTICIPATION IN EDUCATIONAL ACTIVITIES.

  (a) In General.--Section 407(c)(2)(D) of the Social Security 
Act (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 
                participation in educational activities.--For 
                purposes of determining monthly participation 
                rates under paragraphs (1)(B)(i) and (2)(B) of 
                subsection (b), not more than 20 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 
                training, or deemed to be engaged in work for 
                the month by reason of subparagraph (C) of this 
                paragraph.''.
  (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 
Opportunity Reconciliation Act of 1996.

SEC. 5004. COMPENSATION; MAXIMUM REQUIRED HOURS OF WORK ACTIVITIES.

  (a) In General.--Section 407 of the Social Security Act (42 
U.S.C. 607) is amended by adding at the end the following:
  ``(j) Compensation.--A State to which a grant is made under 
section 403 may not require a recipient of assistance under the 
State program funded under this part to participate in a work 
activity described in paragraph (1), (2), or (3) of subsection 
(d) unless the recipient is compensated at the same rates, 
including periodic increases, as trainees or employees who are 
similarly situated in similar occupations by the same employer 
and who have similar training, experience and skills, and such 
rates shall be in accordance with applicable law.
  ``(k) Limitation on Number of Hours Per Month That a 
Recipient of Assistance May Be Required To Participate in On-
the-Job Training, andwith a Public Agency or Nonprofit 
Organization.--
          ``(1) In general.--A State to which a grant is made 
        under section 403 may not require a recipient of 
        assistance under the State program funded under this 
        part to be assigned to on-the-job training, and to a 
        work experience or community service position with a 
        public agency or nonprofit organization during a month 
        for more than the allowable number of hours determined 
        for the month under paragraph (2).
          ``(2) Allowable number of hours.--
                  ``(A) In general.--Subject to subparagraph 
                (B), the allowable number of hours determined 
                for a month under this paragraph is--
                          ``(i) the value of the includible 
                        benefits provided by the State to the 
                        recipient during the month; divided by
                          ``(ii) the minimum wage rate in 
                        effect during the month under section 6 
                        of the Fair Labor Standards Act of 
                        1938.
                  ``(B) State option to take account of certain 
                work activities.--
                          ``(i) In general.--In determining the 
                        allowable number of hours for a month 
                        for a sufficiently employed recipient, 
                        the State may subtract from the 
                        allowable number of hours calculated 
                        under subparagraph (A) the number of 
                        hours during the month for which the 
                        recipient participates in a work 
                        activity described in paragraph (6), 
                        (8), (9), or (11) of subsection (d).
                          ``(ii) Sufficiently employed 
                        recipient.--As used in clause (i), the 
                        term `sufficiently employed recipient' 
                        means, with respect to a month, a 
                        recipient who is employed during the 
                        month for a number of hours that is not 
                        less than--
                                  ``(I) the sum of the dollar 
                                value of any assistance 
                                provided to the recipient 
                                during the month under the 
                                State program funded under this 
                                part, and the dollar value 
                                equivalent of any benefits 
                                provided to the recipient 
                                during the month under the food 
                                stamp program under the Food 
                                Stamp Act of 1977; divided by
                                  ``(II) the minimum wage rate 
                                in effect during the month 
                                under section 6 of the Fair 
                                Labor Standards Act of 1938.
          ``(3) Definition of value of the includible 
        benefits.--As used in paragraph (2)(A), the term `value 
        of the includible benefits' means, with respect to a 
        recipient--
                  ``(A) the dollar value of any assistance 
                under the State program funded under this part;
                  ``(B) the dollar value equivalent of any 
                benefits under the food stamp program under the 
                Food Stamp Act of 1977;
                  ``(C) at the option of the State, the dollar 
                value of benefits under the State plan approved 
                under title XIX, as determined in accordance 
                with paragraph (4);
                  ``(D) at the option of the State, the dollar 
                value of child care assistance; and
                  ``(E) at the option of the State, the dollar 
                value of housing benefits.
          ``(4) Valuation of medicaid benefits.--Annually, the 
        Secretary shall publish a table that specifies the 
        dollar value of the insurance coverage provided under 
        title XIX to a family of each size, which may take 
        account of geographical variations or other factors 
        identified by the Secretary.
          ``(5) Treatment of recipients assigned to certain 
        positions with a public agency or nonprofit 
        organization.--A recipient of assistance under a State 
        program funded under this part who is engaged in work 
        experience or community service with a public agency or 
        nonprofit organization shall not be considered an 
        employee of the public agency or the nonprofit 
        organization.''.
  (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 
Opportunity Reconciliation Act of 1996.

SEC. 5005. PENALTY FOR FAILURE OF STATE TO REDUCE ASSISTANCE FOR 
                    RECIPIENTS REFUSING WITHOUT GOOD CAUSE TO WORK.

  (a) In General.--Section 409(a) of the Social Security Act 
(42 U.S.C. 609(a)) is amended by adding at the end the 
following:
          ``(13) 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 succeeding 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 noncompliance.''.
  (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 
Opportunity Reconciliation Act of 1996.

                 Subtitle B--Higher Education Programs

SEC. 5101. 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) 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) Funds recalled by the Secretary under this subsection 
shall be deposited in the Treasury.
  ``(3) The Secretary shall require each guaranty agency to 
return reserve funds under paragraph (1) based on such agency's 
required share of recalled reserve funds held by guaranty 
agencies as of September 30, 1996. For purposes of this 
paragraph, a guaranty agency's required share of recalled 
reserve funds shall be determined as follows:
          ``(A) The Secretary shall compute each agency's 
        reserve ratio by dividing (i) the amount held in such 
        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 loans for which such agency has 
        an outstanding insurance obligation as of such date.
          ``(B) If the reserve ratio of any agency as computed 
        under subparagraph (A) exceeds 2.0 percent, the 
        agency's required share shall include so much of the 
        amounts held in such agency's reserve fund as exceed a 
        reserve ratio of 2.0 percent.
          ``(C) If any additional amount is required to be 
        recalled under paragraph (1) (after deducting the total 
        of the required shares calculated under subparagraph 
        (B)), the agencies' required shares shall include 
        additional amounts--
                  ``(i) determined by imposing on each such 
                agency an equal percentage reduction in the 
                amount of each agency's reserve fund remaining 
                after deduction of the amount recalled under 
                subparagraph (B); and
                  ``(ii) the total of which equals the 
                additional amount that is required to be 
                recalled under paragraph (1) (after deducting 
                the total of the required shares calculated 
                under subparagraph (B)).
  ``(4) Within 90 days after the beginning of each of fiscal 
years 1998 through 2002, each guaranty agency shall transfer a 
portion of each agency's required share determined under 
paragraph (3) to a restricted account established by the 
guaranty agency that is of a type selected by the guaranty 
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. 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 to assist in meeting the agency's operational expenses 
under this part. In each of fiscal years 1998 through 2002, 
each agency shall transfer its required share to such 
restricted account in 5 equal annual installments, except 
that--
          ``(A) a guarantee agency that has a reserve ratio (as 
        computed under subparagraph (3)(A)) equal to or less 
        than 1.10 percent may transfer its required share to 
        such account in 4 equal installments beginning in 
        fiscal year 1999; and
          ``(B) a guarantee agency may transfer such required 
        share to such account in accordance with such other 
        payment schedules as are approved by the Secretary.
  ``(5) 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 may require the return of the amount of the 
shortage from other reserve funds held by guaranty agencies 
under procedures established by the Secretary.
  ``(6) 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. Notwithstanding any other provision of this part, 
if the Secretary determines that a guaranty agency is not in 
compliance with the requirements of this subsection, such 
agency may not receive any other funds under this part until 
the Secretary determines that such agency is in compliance.
  ``(7) The Secretary 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 this 
subsection through September 30, 2002, and any reserve funds 
otherwise returned under subsection (g)(1) during such period 
shall be treated as amounts recalled under this subsection and 
shall not be available under subsection (g)(4).
  ``(8) For purposes of this subsection, the term `reserve 
funds' when used with respect to a guaranty agency--
          ``(A) includes any cash reserve funds held by the 
        guaranty agency, or held by, or under the control of, 
        any other entity; and
          ``(B) does not include buildings, equipment, or other 
        nonliquid assets.''.
  (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. 5102. REPEAL OF DIRECT LOAN ORIGINATION FEES TO INSTITUTIONS OF 
                    HIGHER 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. 5103. 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) In General.--(1) 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 
        guaranty 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) 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 is issued on or after the date of 
enactment of the Balanced Budget Act of 1997, except that such 
allowances 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. 5104. SECRETARY'S EQUITABLE SHARE OF COLLECTIONS ON CONSOLIDATED 
                    DEFAULTED LOANS.

  Section 428(c)(6)(A) of the Higher Education Act of 1965 (20 
U.S.C. 1078(c)(6)(A)) is amended--
          (1) in the matter preceding clause (i), by striking 
        ``made by the borrower'' and inserting ``made by or on 
        behalf of the borrower, including payments made to 
        discharge loans made under this title to obtain a 
        consolidation loan pursuant to this part or part D,''; 
        and
          (2) in clause (ii), by striking ``(ii) an amount 
        equal to 27 percent of such payments (subject to 
        subparagraph (D) of this paragraph) for costs related'' 
        and inserting the following:
          ``(ii) an amount equal to 27 percent of such payments 
        for covered costs, except that the amount determined 
        under this clause for such covered costs shall be (I) 
        18.5 percent of such payments for defaulted loans 
        consolidated pursuant to this part or part D on or 
        after July 1, 1997; and (II) 18.5 percent of such 
        payments for defaulted loans consolidated pursuant to 
        this part or part D on or after the date of enactment 
        of the Higher Education Amendments of 1992 with respect 
        to any guaranty agency that has, after such date, made 
        deductions from such payments under this clause (ii) in 
        an amount equal to 18.5 percent of such payments.
For purposes of clause (ii) of this subparagraph, the term 
`covered costs' means costs related''.

SEC. 5105. EXTENSION OF STUDENT AID PROGRAMS.

  Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 
et seq.) is amended--
          (1) in section 424(a), by striking ``1998.'' and 
        ``2002.'' and inserting ``2002.'' and ``2006.'', 
        respectively;
          (2) in section 428(a)(5), by striking ``1998,'' and 
        ``2002.'' and inserting ``2002,'' and ``2006.'', 
        respectively; and
          (3) in section 428C(e), by striking ``1998.'' and 
        inserting ``2002.''.

      Subtitle C--Repeal of Smith-Hughes Vocational Education Act

SEC. 5201. REPEAL OF SMITH-HUGHES VOCATIONAL EDUCATION ACT.

  The Act of February 23, 1917 (39 Stat. 929; 20 U.S.C. 11) 
(commonly known as the ``Smith-Hughes Vocational Education 
Act'') is repealed.

   Subtitle D--Expansion of Portability and Health Insurance Coverage

SEC. 5301. SHORT TITLE OF SUBTITLE.

  This subtitle may be cited as the ``Expansion of Portability 
and Health Insurance Coverage Act of 1997''.

SEC. 5302. RULES GOVERNING ASSOCIATION HEALTH PLANS.

  (a) In General.--Subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is amended by adding 
after part 7 the following new part:

           ``Part 8--Rules Governing Association Health Plans

``SEC. 801. ASSOCIATION HEALTH PLANS.

  ``(a) In General.--For purposes of this part, the term 
`association health plan' means a group health plan--
          ``(1) whose sponsor is (or is deemed under this part 
        to be) described in subsection (b), and
          ``(2) under which at least one option of health 
        insurance coverage offered by a health insurance issuer 
        (which may include, among other options, managed care 
        options, point of service options, and preferred 
        provider options) is provided to participants and 
        beneficiaries.
  ``(b) Sponsorship.--The sponsor of a group health plan is 
described in this subsection if such sponsor--
          ``(1) is organized and maintained in good faith, with 
        a constitution and bylaws specifically stating its 
        purpose and providing for periodic meetings on at least 
        an annual basis, as a trade association, an industry 
        association (including a rural electric cooperative 
        association or a rural telephone cooperative 
        association), a professional association, or a chamber 
        of commerce (or similar business group, including a 
        corporation or similar organization that operates on a 
        cooperative basis (within the meaning of section 1381 
        of the Internal Revenue Code of 1986)), for substantial 
        purposes other than that of obtaining or providing 
        medical care,
          ``(2) is established as a permanent entity which 
        receives the active support of its members and collects 
        from its members on a periodic basis dues or payments 
        necessary to maintain eligibility for membership in the 
        sponsor, and
          ``(3) does not condition such dues or payments or 
        coverage under the plan on the basis of health status-
        related factors with respect to the employees of its 
        members (or affiliated members), or the dependents of 
        such employees, and does not condition such dues or 
        payments on the basis of group health plan 
        participation.
Any sponsor consisting of an association of entities which meet 
the requirements of paragraphs (1) and (2) shall be deemed to 
be a sponsor described in this subsection.

``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

  ``(a) In General.--The Secretary shall prescribe by 
regulation a procedure under which, subject to subsection (b), 
the Secretary shall certify association health plans which 
apply for certification as meeting the requirements of this 
part.
  ``(b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), the Secretary shall certify an association 
health plan as meeting the requirements of this part only if 
the Secretary is satisfied that--
          ``(1) such certification--
                  ``(A) is administratively feasible,
                  ``(B) is not adverse to the interests of the 
                individuals covered under the plan, and
                  ``(C) is protective of the rights and 
                benefits of the individuals covered under the 
                plan, and
          ``(2) the applicable requirements of this part are 
        met (or, upon the date on which the plan is to commence 
        operations, will be met) with respect to the plan.
  ``(c) Requirements Applicable to Certified Plans.--An 
association health plan with respect to which certification 
under this part is in effect shall meet the applicable 
requirements of this part, effective on the date of 
certification (or, if later, on the date on which the plan is 
to commence operations).
  ``(d) Requirements for Continued Certification.--The 
Secretary may provide by regulation for continued certification 
under this part, including requirements relating to any 
commencement, by an association health plan which has been 
certified under this part, of a benefit option which does not 
consist of health insurance coverage.
  ``(e) Class Certification for Fully-Insured Plans.--The 
Secretary shall establish a class certification procedure for 
association health plans under which all benefits consist of 
health insurance coverage. Under such procedure, the Secretary 
shall provide for the granting of certification under this part 
to the plans in each class of such association health plans 
upon appropriate filing under such procedure in connection with 
plans in such class and payment of the prescribed fee under 
section 807(a).

``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.

  ``(a) Sponsor.--The requirements of this subsection are met 
with respect to an association health plan if--
          ``(1) the sponsor (together with its immediate 
        predecessor, if any) has met (or is deemed under this 
        part to have met) for a continuous period of not less 
        than 3 years ending with the date of the application 
        for certification under this part, the requirements of 
        paragraphs (1) and (2) of section 801(b), and
          ``(2) the sponsor meets (or is deemed under this part 
        to meet) the requirements of section 801(b)(3).
  ``(b) Board of Trustees.--The requirements of this subsection 
are met with respect to an association health plan if the 
following requirements are met:
          ``(1) Fiscal control.--The plan is operated, pursuant 
        to a trust agreement, by a board of trustees which has 
        complete fiscal control over the plan and which is 
        responsible for all operations of the plan.
          ``(2) Rules of operation and financial controls.--The 
        board of trustees has in effect rules of operation and 
        financial controls, based on a 3-year plan of 
        operation, adequate to carry out the terms of the plan 
        and to meet all requirements of this title applicable 
        to the plan.
          ``(3) Rules governing relationship to participating 
        employers and to contractors.--
                  ``(A) In general.--Except as provided in 
                subparagraph (B), the members of the board of 
                trustees are individuals selected from 
                individuals who are the owners, officers, 
                directors, or employees of the participating 
                employers or who are partners in the 
                participating employers and actively 
                participate in the business.
                  ``(B) Limitation.--
                          ``(i) General rule.--Except as 
                        provided in clauses (ii) and (iii), no 
                        such m