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106th Congress                                            Rept. 106-220
  1st Session           HOUSE OF REPRESENTATIVES              Part 1   


=======================================================================




 
                WORK INCENTIVES IMPROVEMENT ACT OF 1999
                                _______
                                

                  July 1, 1999.--Ordered to be printed

                                _______
                                

  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                        [To accompany H.R. 1180]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 1180) to amend the Social Security Act to expand the 
availability of health care coverage for working individuals 
with disabilities, to establish a Ticket to Work and Self-
Sufficiency Program in the Social Security Administration to 
provide such individuals with meaningful opportunities to work, 
and for other purposes, having considered the same, report 
favorably thereon with amendments and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     6
Committee Consideration..........................................     7
Rollcall Votes...................................................     7
Committee Oversight Findings.....................................     7
Committee on Government Reform Oversight Findings................     7
New Budget Authority, Entitlement Authority, and Tax Expenditures     7
Committee Cost Estimate..........................................     7
Congressional Budget Office Estimate.............................     7
Federal Mandates Statement.......................................    28
Advisory Committee Statement.....................................    28
Constitutional Authority Statement...............................    28
Applicability to Legislative Branch..............................    28
Section-by-Section Analysis of the Legislation...................    28
Changes in Existing Law Made by the Bill, as Reported............    43

                               Amendment

  The amendments (stated in terms of the page and line numbers 
of the introduced bill) are as follows:
  Page 6, line 22, insert ``, who is at least 16, but less than 
65, years of age,'' after ``income''.
  Page 11, line 19, insert a comma after ``(XVI)''.
  Page 25, after line 20, insert the following new section (and 
conform the table of contents accordingly):

SEC. 105. ELECTION BY DISABLED BENEFICIARIES TO SUSPEND MEDIGAP 
                    INSURANCE WHEN COVERED UNDER A GROUP HEALTH PLAN.

  (a) In General.--Section 1882(q) of the Social Security Act 
(42 U.S.C. 1395ss(q)) is amended--
          (1) in paragraph (5)(C), by inserting ``or paragraph 
        (6)'' after ``this paragraph''; and
          (2) by adding at the end the following new paragraph:
          ``(6) Each medicare supplemental policy shall provide 
        that benefits and premiums under the policy shall be 
        suspended at the request of the policyholder if the 
        policyholder is entitled to benefits under section 
        226(b) and is covered under a group health plan (as 
        defined in section 1862(b)(1)(A)(v)). If such 
        suspension occurs and if the policyholder or 
        certificate holder loses coverage under the group 
        health plan, such policy shall be automatically 
        reinstituted (effective as of the date of such loss of 
        coverage) under terms described in subsection 
        (n)(6)(A)(ii) as of the loss of such coverage if the 
        policyholder provides notice of loss of such coverage 
        within 90 days after the date of such loss.''.
  (b) Effective Date.--The amendments made by subsection (a) 
apply with respect to requests made after the date of the 
enactment of this Act.

                          Purpose and Summary

    H.R. 1180, the Work Incentives Improvement Act of 1999, as 
reported by the Committee on Commerce, provides States the 
option to expand the Medicaid program for workers with 
disabilities, continues Medicare coverage for working 
individuals with disabilities, and establishes a Ticket to Work 
and Self-Sufficiency Program for the purpose of helping 
individuals with disabilities go to work if they so choose.

                  Background and Need for Legislation

    Many persons with disabilities who currently receive 
Federal disability benefits, such as Social Security Disability 
Insurance (SSDI) and Supplemental Security Income (SSI), want 
to work. Less than one half of one percent of SSDI 
beneficiaries and approximately one percent of SSI 
beneficiaries successfully forego disability benefits and 
become self-sufficient. If disabled individuals try to work and 
increase their income, they lose their disability cash benefits 
and, subsequently lose their health care coverage. The threat 
of losing health benefits is a powerful disincentive for 
disabled beneficiaries who want to work.
    The unemployment rate among working-age adults with 
disabilities is nearly 75 percent. Today, more than 7.5 million 
disabled Americans receive cash benefits from SSI and SSDI. 
Disability benefit spending for SSI and SSDI total $73 billion 
a year, making these disability programs the fourth largest 
entitlement expenditure in the Federal government. If only one 
percent--or 75,000--of the 7.5 million disabled adults were to 
become employed, Federal savings in disability benefits would 
total $3.5 billion over the lifetime of the beneficiaries. 
Removing barriers to work is a major benefit to disabled 
Americans in their pursuit of self- sufficiency, and it also 
contributes to preserving the Social Security Trust Fund.
    Both SSDI and SSI are administered by the Social Security 
Administration (SSA). SSDI is an insurance program that 
provides disability benefits based on previous employment. SSDI 
coverage and benefit levels for disabled workers (and their 
dependents) are based on a worker's earnings record in jobs 
covered by the Social Security tax. It is financed out of a 
portion of Social Security payroll taxes, which are accounted 
for through a separate disability insurance (DI) trust fund. 
Generally, workers are insured for SSDI benefits if they have a 
total of at least 20 quarters of coverage during the 40-quarter 
period ending with the quarter in which they became disabled. 
In addition, an initial 5-month ``waiting period'' is required 
before SSDI benefits are paid. The cost of the SSDI program for 
FY 1998 was estimated at $47.7 billion.
    The SSI program is a means-tested (welfare) program 
intended to assure a minimum monthly cash income to low-income 
aged, blind, or disabled individuals with limited resources. 
There is no ``waiting period'' for SSI benefits. The SSI 
program is funded from general revenues of the Treasury. The 
cost of the SSI program for disabled adults was estimated at 
$18.7 billion for FY 1998.
    The definition of disability is identical under the two 
programs. Disability is defined as the inability to engage in 
any ``substantial gainful activity'' by reason of a medically 
determinable physical or mental impairment that is expected to 
last for not less than 12 months, or to result in death. (Both 
programs have separate definitions and requirements for persons 
who are blind.)
    Most SSDI and SSI recipients also are entitled to health 
insurance coverage through Medicare (Title XVIII) and Medicaid 
(Title XIX), respectively. People qualify for Social Security 
and Medicare by virtue of having paid payroll taxes while 
employed. Medicare, Part A (i.e., hospital insurance), provides 
coverage to almost all persons age 65 or over who are entitled 
to benefits under the Old-Age and Survivors Insurance (OASI) 
program. In addition, it provides coverage, after a 24-month 
waiting period, for persons under age 65 who are receiving 
Social Security cash benefits on the basis of disability. In FY 
1998, total outlays of the Medicare program were $190.9 
billion.
    The Medicaid program, which is a Federal-State matching 
entitlement program, provides medical assistance to low-income 
individuals who are aged, blind, disabled, members of families 
with dependent children, and certain other pregnant women and 
children. Medicaid does not provide medical assistance to all 
poor persons. States are required to serve some population 
groups and are permitted to serve others. In FY 1998, total 
outlays of the Medicaid program were $101.2 billion.

Work incentives and disincentives

    Current law provides a number of incentives to permit or 
encourage disabled SSI beneficiaries to work. In the SSI 
program, beneficiaries who return to work despite having severe 
impairments continue to receive cash benefits (under a program 
established by Section 1619(a) of the Social Security Act) as 
long as they meet the SSI income standards. Under the income 
disregard formula in the SSI program, the amount of the 
recipient's monthly cash benefit is gradually reduced as his or 
her earnings increase until the recipient's earnings reduce the 
SSI benefit to zero. At this income level (known as the 
``breakeven point,'' i.e., $1,085 per month in calendar year 
1999), the person would no longer be eligible for SSI benefits.
    Disabled SSI beneficiaries may retain their Medicaid 
eligibility as long as they meet specified requirements 
(pursuant to Section 1619(b)). Eligible persons with annual 
earnings below the State ``threshold'' amounts are guaranteed 
continued Medicaid coverage. Since January 1, 1996, the 
``threshold'' amount has ranged from a low of $12,300 in 
Arizona and the Northern Mariana Islands to a high of $32,643 
in Alaska. Further, if the individual's earnings exceed the 
threshold, SSA can calculate an individualized threshold if the 
person has: impairment-related work expenses, a plan to achieve 
self-support, publicly funded attendant or personal care, or 
Medicaid expenses above the State per capita amount. In effect, 
Medicaid eligibility for a working disabled recipient continues 
until the individual's earnings reach a higher plateau which 
takes into account the person's ability to afford medical care 
as well as normal living expenses.
    In addition, the SSI program does not count certain income 
in determining eligibility and benefits, including a portion of 
earned income for recipients, and excludes income and resources 
for SSI recipients who are participating in a plan for 
achieving self-support (PASS). Moreover, SSI provides continued 
payment of cash benefits while a beneficiary is enrolled in a 
vocational rehabilitation (VR) program.
    The work disincentives in the SSI program are connected to 
the inability of SSI applicants to access the Section 1619 
benefits mentioned above. Individuals are considered disabled 
for purposes of the SSI program if they are unable to engage in 
substantial gainful activity (SGA) due to a medically 
determinable physical or mental impairment which is expected to 
result in death, or which has lasted or can be expected to last 
for at least 12 months. Thus, SSI applicants who earn more than 
$500 per month (i.e., the current substantial gainful activity 
limit) do not meet the program's definition of disability. 
Section 1619 benefits only apply to people actually receiving 
SSI benefits.
    Under current law, disabled Social Security beneficiaries 
are provided a period of time during which they can test their 
ability to work without losing their entitlement to SSDI 
benefits and Medicare Part A benefits.
    For SSDI benefits, this period is essentially limited to 12 
months, consisting of (1) a trial work period during which 
disabled beneficiaries can work and continue to receive SSDI 
benefits for up to 9 months (within a 5-year period) with no 
effect on their SSDI benefits; followed by (2) a 3-month 
``grace'' period, during which the disabled individual 
continues to receive SSDI benefits. After beneficiaries have 
completed the nine-month trial work period, they enter into a 
36-month automatic extended period of eligibility. The first 
three months of the extended period of eligibility is often 
referred to as the SSDI ``grace'' period, mentioned above. 
During the last 33 months of the extended period of 
eligibility, an individual can be automatically reinstated for 
SSDI benefits for any month in which the person's earnings drop 
below the substantial gainful activity limit. After the 36-
month automatic extended period of eligibility, disabled 
persons who are no longer employed would have to reapply for 
SSDI benefits in order to have both SSDI and Medicare benefits 
reinstated.
    For Medicare benefits, this period can be as long as 48 
months but may end sooner if the beneficiary is determined to 
be no longer medically disabled. Individuals who work beyond 
the trial work period and three-month SSDI grace period and who 
are still medically disabled are entitled to Medicare coverage 
for an additional 36 months. At the end of this 48-month 
period, disabled individuals have two years during which they 
can reapply for SSDI and have their Medicare coverage 
reinstated without being subject to the five-month SSDI waiting 
period or the two-year Medicare waiting period.
    Policymakers and advocates for the disabled have long 
argued that SSA's work incentives are complex, difficult to 
understand, and poorly implemented. They contend that some of 
the reasons for the high rate of unemployment among disabled 
beneficiaries include confusing rules, arcane procedures, and 
disincentives built into the Social Security and SSI programs. 
They note surveys that show that most people with disabilities 
who are of working age want to work, and maintain that the 
numerous Federal regulations and program rules have the 
perverse effect of discouraging otherwise qualified and eager 
job seekers with disabilities from seeking employment.
    According to the Social Security Administration (SSA), 
currently less than one-half of one percent of SSDI 
beneficiaries, and about one percent of SSI beneficiaries 
actually leave the disability rolls by returning to work. 
According to a 1998 report by the Social Security Advisory 
Board:

          To a large extent, the small incidence of return to 
        work on the part of disabled beneficiaries reflects the 
        fact that eligibility is restricted to those with 
        impairments which have been found to make them unable 
        to engage in any substantial work activity. By 
        definition, therefore, the disability population is 
        composed of those who appear least capable of 
        employment. Moreover, since eligibility depends upon 
        proving the inability to work, attempted work activity 
        represents a risk of losing both cash and medical 
        benefits. While some of this risk has been moderated by 
        the work incentive features adopted in recent years, it 
        remains true that the initial message the program 
        presents is that the individual must prove that he or 
        she cannot work in order to qualify for benefits. 
        (Social Security Advisory Board, How SSA's Disability 
        Programs Can Be Improved, August 1998, p. 37.)

    Further, the availability of Federal income and health 
insurance benefits for disabled persons, in and of themselves, 
are often cited as a major disincentive to work because 
earnings from employment may mean eventual loss of these 
benefits. An ongoing Rehabilitation Services Administration 
(RSA)-supported longitudinal evaluation of the vocational 
rehabilitation (VR) program evaluated the interaction between 
these disincentives and employment. Former recipients of VR 
services who were not employed were asked what prevented them 
from working. Of those who were receiving SSDI or SSI benefits 
while receiving VR services, half indicated that they would be 
afraid of not being able to regain these income benefits if 
they got, and then lost, a job; almost half indicated that they 
were afraid of losing health care coverage.
    In order to address some of the concerns about the lack of 
health care coverage for persons with disabilities who work, 
the Balanced Budget Act of 1997 (P.L. 105-33; BBA 97), allowed 
States to provide Medicaid coverage to individuals and families 
with income up to 250 percent of the Federal poverty level and 
who, except for earned income, would be eligible for SSI. 
Beneficiaries under this more liberal income limit may ``buy 
into'' Medicaid by paying premium or other cost-sharing charges 
on a sliding fee scale established by the State. This provision 
was intended to allow disabled persons with income from 
earnings to have access to health care through Medicaid, up to 
the specified income ceiling.

                                Hearings

    The Subcommittee on Health and the Environment held a 
hearing on H.R. 1180 on March 23, 1999. The Subcommittee 
received testimony from: The Honorable Rick Lazio, U.S. House 
of Representatives, Second Congressional District, State of New 
York; The Honorable Henry A. Waxman, U.S. House of 
Representatives, 29th Congressional District, State of 
California; The Honorable Anthony A. Williams, Mayor, District 
of Columbia; Ms. Sally Richardson, Director, Center for 
Medicaid and State Operations, Health Care Financing 
Administration; Mr. Jeff Bangsberg, Interim Public Policy 
Director, Courage Center; Mr. Tom Deeley and Mr. Harold Deeley, 
private citizens; Ms. Mary Gennaro, Director of Federal-State 
Relations, National Association of Developmental Disabilities 
Councils; Mr. Alan Bergman, President & CEO, Brain Injury 
Association, Inc.; Mr. Steven R. Cooley, Fellow, American Board 
of Disability Analysts, representing the National Association 
of Rehabilitation Professionals in the Private Sector; Mr. 
Roger Auerbach, Administrator, Oregon Senior and Disabled 
Services; and Mr. Craig Gray, Director of Program Management, 
Services for Independent Living, UNUM Life Insurance Company of 
America.

                        Committee Consideration

    On April 20, 1999, the Subcommittee on Health and 
Environment met in open markup session and approved H.R. 1180, 
the Work Incentives Improvement Act of 1999, for Full Committee 
consideration, amended, by a voice vote. On May 19, 1999, the 
Full Committee met in open markup session and ordered H.R. 1180 
reported to the House, as amended, by a voice vote, a quorum 
being present.

                             Rollcall Votes

    Clause 3(b) of rule XIII of the Rules of the House requires 
the Committee to list the record votes on the motion to report 
legislation and amendments thereto. There were no record votes 
taken in connection with ordering H.R. 1180 reported. No 
amendments were offered to the bill during Full Committee 
consideration. A motion by Mr. Bliley to order H.R. 1180 
reported to the House, amended, was agreed to by a voice vote, 
a quorum being present.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

           Committee on Government Reform Oversight Findings

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimates of budget authority, entitlement authority, 
tax expenditures, and revenues contained in the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 22, 1999.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1180, the Work 
Incentives Improvement Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The principal CBO staff contacts are 
Kathy Ruffing and Jeanne De Sa.
            Sincerely,
                                          Barry B. Anderson
                                    (for Dan L. Crippen, Director).
    Enclosure.

H.R. 1180--Work Incentives Improvement Act of 1999

    Summary: H.R. 1180, the Work Incentives Improvement Act of 
1999, would alter cash and health-care benefits for people with 
disabilities. Title I would provide states with options to 
extend Medicaid coverage to certain disabled workers, enhance 
Medicare for certain former recipients of Social Security 
Disability Insurance (DI), and establish grants and 
demonstration projects for states to assist disabled workers. 
Title II would revamp the system under which people collecting 
benefits for DI and Supplemental Security Income (SSI) receive 
vocational rehabilitation (VR) services and would make it 
easier for working beneficiaries to retain or regain cash 
benefits. Titles III and IV would require several demonstration 
projects, give certain members of the clergy another 
opportunity to enroll in the Social Security system, and 
tighten restrictions on the payment of Social Security benefits 
to prisoners. CBO estimates that the bill would reduce the 
total federal surplus by $0.7 billion over the 2000-2004 
period; of that amount $0.1 billion would represent a reduction 
in the off-budget (Social Security) surplus.
    Section 4 of the Unfunded Mandates Reform Act (UMRA) 
excludes from the application of that act any legislative 
provisions that relate to the Old-Age, Survivors, and 
Disability Insurance program under title II of the Social 
Security Act, including tax provisions in the Internal Revenue 
Code. CBO has determined that the provisions of H.R. 1180 
either fall within that exclusion or contain no 
intergovernmental mandates. Provisions of the bill that are not 
excluded from the application of UMRA contain one-private-
sector mandate; CBO estimates that its cost would be well below 
the threshold specified in UMRA.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1180 on direct spending and revenues 
is summarized in Table 1. The costs of this legislation fall 
within budget functions 550 (Health), 570 (Medicare), 600 
(Income Security), and 650 (Social Security).
    Basis of estimate: For purposes of estimating the budgetary 
effects of H.R. 1180, CBO assumes enactment by September 1999.

Current law

    About 8 million people between the ages of 18 and 64 now 
collect cash benefits under DI, SSI, or both. In both programs, 
applicants must show that they are incapable of substantial 
work in order to be awarded benefits. Nevertheless, the 
programs have several provisions that are meant to smooth 
beneficiaries' return to work. The law permits DI recipients to 
earn unlimited amounts for a nine-month period (known as the 
trial work period, or TWP) and a subsequent three-month grace 
period before suspending benefits. During the three years after 
the TWP--a period known as the extended period of eligibility, 
or EPE--those beneficiaries may automatically return to the DI 
rolls if their earnings sink below substantial gainful activity 
(SGA, now defined in regulation as $700 per month). 
Furthermore, Medicare benefits (for which DI beneficiaries 
qualify after two years on the rolls) also continue for three 
years even if cash benefits are suspended. Medicare coverage 
then stops unless the worker pays a steep premium (up to $309 a 
month in 1999).
    The SSI disability program is restricted to people with low 
income and few resources. Although applicants for SSI benefits 
must meet the same disability criteria as in the DI program, 
the SSI program's subsequent treatment of earnings differs 
somewhat. SSI recipients who work get a reduced benefit 
(essentially, losing $1 of benefits for each $2 of earnings 
over $85 a month) but do not give up their benefit entirely. If 
their earnings top SGA but they are still medically disabled, 
they move into section 1619(a) status (and still collect a 
small cash benefit). If their earnings rise further, they enter 
1619(b) status (where they collect no cash benefit but retain 
Medicaid). If their incomes are too high even for the 1619(b) 
program, they may still enroll in Medicaid if their state 
offers a buy-in program permitted by the Balanced Budget Act of 
1997 (BBA).

                          TABLE 1.--SUMMARY OF ESTIMATED BUDGETARY EFFECTS OF H.R. 1180
----------------------------------------------------------------------------------------------------------------
                                                               By fiscal years, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        1999      2000      2001      2002      2003      2004
----------------------------------------------------------------------------------------------------------------
                                                 DIRECT SPENDING

Spending Under Current Law:
    Old-Age, Survivors, and Disability Insurance       387,451   404,075   422,855   442,719   463,820   486,589
     (OASDI)........................................
    Supplemental Security Income....................    28,179    29,625    31,258    33,005    34,826    36,766
    Medicare \1\....................................   191,815   205,707   219,269   227,239   247,888   265,755
    Medicaid........................................   107,484   116,578   124,841   134,927   146,073   159,094
    Other Health and Human Services.................         0         0         0         0         0         0
                                                     -----------------------------------------------------------
      Total.........................................   714,929   755,985   798,223   837,890   892,607   948,204
                                                     ===========================================================
Proposed Changes:
    Old-Age, Survivors, and Disability Insurance             0         7        15        26        32        29
     (OASDI)........................................
    Supplemental Security Income....................         0        -1        -6        -7        -7       -11
    Medicare \1\....................................         0        12        35        55        75       106
    Medicaid........................................         0        16        18        21        24        27
    Other Health and Human Services.................         0        16        57        82        83        84
                                                     -----------------------------------------------------------
    Total...........................................         0        50       119       177       207       235
                                                     ===========================================================
On-Budget...........................................         0        43       104       151       175       206
Off-Budget (OASDI)..................................         0         7        15        26        32        29
                                                     ===========================================================
Proposed Spending Under H.R. 1180:
    Old-Age, Survivors, and Disability Insurance       387,451   404,082   422,870   442,745   463,582   486,618
     (OASDI)........................................
    Supplemental Security Income....................    28,179    29,624    31,252    32,998    34,819    36,755
    Medicare \1\....................................   191,815   205,719   219,304   227,294   247,963   265,861
    Medicaid........................................   107,484   116,594   124,859   134,948   146,097   159,121
    Other Health and Human Services.................         0        16        57        82        83        84
                                                     -----------------------------------------------------------
      Total.........................................   714,929   756,035   798,342   838,067   892,814   948,439
                                                     ===========================================================
                                                    REVENUES

Proposed Changes:
    On-Budget.......................................         0         1         1         1         1         1
    Off-Budget (OASDI)..............................         0         2         7         9         9         9
                                                     ===========================================================
      Total.........................................         0         3         8        10        10        10
                                                   SURPLUS \2\
Proposed Changes:
    On-Budget.......................................         0       -42      -103      -150      -174      -205
    Off-Budget (OASDI)..............................         0        -5        -7       -17       -23       -20
                                                     -----------------------------------------------------------
      Total.........................................         0       -47      -110      -167      -197      -225
----------------------------------------------------------------------------------------------------------------
\1\ Medicare consists of outlays of the Hospital Insurance and Supplementary Medical Insurance trust fund, less
  premiums.
\2\ A negative number means a reduction in the surplus or an increase in the deficit. A positive number means an
  increase in the surplus or a reduction in the deficit.

Note.--Components may not sum to totals due to rounding.

    Both DI and SSI recipients are evaluated at the time of 
award for their potential to go back to work. Sketchy data 
suggest that a minority are referred to VR providers, chiefly 
state agencies, and only a minority of those referred are 
served. If the beneficiary successfully completes nine months 
of employment at SGA, the VR provider is reimbursed by the 
Social Security Administration (SSA). In 1996, SSA began 
recruiting alternate providers under the Referral System for 
Vocational Rehabilitation Providers (RSVP) program. Candidates 
for this program must first be referred to and rejected by the 
state VR agencies, and the alternate providers face the same 
reimbursement system (that is, a single payment after nine 
months of substantial work). Thus, VR for DI and SSI recipients 
remains fundamentally a state program.
    In both the DI and SSI programs, recipients are reviewed 
periodically to verify that they are still disabled. These 
Continuing Disability Reviews (CDRs) are scheduled according to 
the recipient's perceived likelihood of improvement. If medical 
improvement is deemed possible, the cycle calls for a review 
every three years. (Those beneficiaries thought likely to 
improve are reviewed more often, and those unlikely to improve 
less often.) If the CDR results in a finding that the 
beneficiary is no longer disabled, cash and medical benefits 
stop. A CDR can also be triggered by a report of earnings.

Expanded availability of health care services (title I)

    Title I of H.R. 1180 would increase federal spending by 
about $0.7 billion over the 2000-2004 period and by about $2 
billion over the 2000-2009 period through policies that would 
expand the availability of health care services. It would 
expand existing state options for covering the working disabled 
under Medicaid and would extend Medicare coverage for DI 
recipients who return to work. Title I would also provide 
states with grants to develop infrastructure to assist the 
working disabled and establish demonstration projects for 
states to provide Medicaid benefits to workers with severe 
impairments who are likely to become disabled.
    State Option to Eliminate Income, Resource, and Asset 
Limitations for Medicaid Buy-In. Section 101 of H.R. 1180 would 
amend Medicaid law to allow states the option to raise certain 
income, asset, and resource limitations for workers with 
disabilities who buy into Medicaid. This policy, combined with 
the incentives created by grants and demonstration projects 
(discussed below), would induce some states to expand Medicaid 
to include the working disabled and would marginally increase 
enrollment in those states that would otherwise have expanded 
Medicaid to include this group, resulting in an increase in 
spending of about $100 million over five years (see Table 2).

                                   TABLE 2.--ESTIMATED DIRECT SPENDING AND REVENUE EFFECTS OF H.R. 1180, BY PROVISION
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        By fiscal years, in millions of dollars--
                                                               -----------------------------------------------------------------------------------------
                                                                  2000     2001     2002     2003     2004     2005     2006     2007     2008     2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         TITLE I

State Option to Eliminate Income, Resource and Asset                 15       16       18       20       22       24       26       29       32       35
 Limitations for Medicaid By-in: Medicaid.....................
State Option to Continue Medicaid Buy-in for Participants             1        2        3        4        5        6        8        9       11       13
 Whose DI or SSI Benefits Are Terminated After a CDR: Medicaid
Extension of Medicare with No HI Premium for Former DI               10       29       48       68       95      125      163      195      234      294
 Beneficiaries Who Exhaust Their Current-Law EPE: Medicare....
Grants to states to Provide Infrastructure to Support Working         6        7        7        8        9       10       11       12       13       14
 Individuals with Disabilities: HHS outlays...................
Demonstration Project for States Covering Workers with               10       50       75       75       75       15        0        0        0        0
 Potentially Severe Disabilities: HHS outlays.................

                                                                        TITLE II

Establishment of the Ticket to Work and Self-Sufficiency
 Program:
    Disability insurance......................................        1        2        3        5       -3      -18      -48      -77      -33      -37
    Medicare..................................................    (\1\)    (\1\)    (\1\)    (\1\)        1        1        1       -3      -14      -31
    Supplemental Security Income..............................    (\1\)        1        1        2       -1       -6      -16      -30      -10      -11
                                                               -----------------------------------------------------------------------------------------
      Subtotal (effect on outlays)............................        1        3        4        7       -3      -23      -63     -110      -57      -79
                                                               =========================================================================================
Bar on Work CDRs for Certain DI Beneficiaries With Earnings:
    Disability Insurance......................................        5       15       20       20       20       25       25       25       25       25
    Medicare..................................................        2        6        7        7        8        8        9       10       10       11
                                                               -----------------------------------------------------------------------------------------
      Subtotal (effect on outlays)............................        7       21       27       27       28       33       34       35       35       36
                                                               =========================================================================================
Expedited Reinstatement of DI Benefits Within 60 Months of
 Termination:
    Disability Insurance......................................        0        1        1        1        2        3        3        4        5        6
    Medicare..................................................        0    (\1\)    (\1\)    (\1\)        1        1        1        2        2        3
                                                               -----------------------------------------------------------------------------------------
      Subtotal (effect on outlays)............................        0        1        1        1        3        4        4        6        7        9
                                                               =========================================================================================
                                                                        TITLE III

Permanent Extension of DI Demonstration Project Authority:            3        5        5        5        5        5        5        5        5        5
 Disability Insurance.........................................
$1-for $2 Demonstration Projects:
    Contractor Costs (DI).....................................        0    (\1\)        4        5        6        6        4        4        4        4
    DI Benefit Costs..........................................        0        0        3        8       13       18       19       18       18       18
    Medicare Costs............................................        0        0        0        0        2        4        7        9        9        9
                                                               -----------------------------------------------------------------------------------------
      Subtotal (effect on outlays)............................        0      \1\        7       13       20       28       29       31       31       31
                                                               =========================================================================================
Provisions Affecting Prisoners:
    Payments to Prison Officials (OASDI)......................        2        7        8        9        9       10       10       10       10       10
    Payments to Prison Officials (SSI)........................    (\1\)        1        1        1        1        1        1        1        1        1
    Savings in Benefits (OASDI)...............................       -3      -15      -18      -20      -23      -25      -25      -25      -25      -25
    Savings in Benefits (SSI).................................       -2       -7       -8       -9      -11      -11      -11      -11      -11      -11
                                                               -----------------------------------------------------------------------------------------
      Subtotal (effect on outlays)............................       -3      -15      -17      -20      -24      -25      -25      -25      -25      -25
                                                               =========================================================================================
Open Season for Clergy to Enroll in Social Security:
    Off-Budget (OASDI) Revenues...............................        2        7        9        9        9       10       10       10       10       11
    On-Budget (HI) Revenues...................................        1        2        2        2        2        2        2        2        2        2
    Other On-Budget Revenues..................................    (\1\)       -1       -1       -1       -1       -1       -1       -1       -1       -1
    OASDI Benefits............................................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        1        1        1        1
                                                               -----------------------------------------------------------------------------------------
      Subtotal (effect on total surplus)......................        3        8       10       10       10       10       10       10       11       11
                                                               =========================================================================================
                                                                          TOTAL

Outlays:
    On-Budget.................................................       43      104      151      175      206      178      199      222      277      327
    Off-Budget................................................        7       15       26       32       29       25       -7      -35        9        6
                                                               -----------------------------------------------------------------------------------------
      Total...................................................       50      119      177      207      235      203      192      187      287      334
                                                               =========================================================================================
Revenues:
    On Budget.................................................        1        1        1        1        1        1        1        1        1        1
    Off-Budget................................................        2        7        9        9        9       10       10       10       10       11
                                                               -----------------------------------------------------------------------------------------
      Total...................................................        3        8       10       10       10       11       11       11       11       12
                                                               =========================================================================================
Surplus: \2\
    On-Budget.................................................      -42     -103     -150     -174     -205     -177     -198     -221     -276     -326
    Off-Budget................................................       -5       -7      -17      -23      -20      -15       17       45        1        4
                                                               -----------------------------------------------------------------------------------------
      Total...................................................      -47     -110     -167     -197     -225     -192     -181     -176     -275     -322
                                                               =========================================================================================
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000
\2\ A negative number means a reduction in the surplus or an increase in the deficit. A positive number means an increase in the surplus or a reduction
  in the deficit.

OASDI=Old-Age, Survivors, and Disability Insurance, DI=Disability Insurance, SSI=Supplemental Security Income, CDR=Continuing Disability Review,
  EPE=Extended Period of Eligibility, HI=Hospital Insurance (Medicare Part A), HHS=Department of Health and Human Services.

Notes.--Components may not sum to totals due to rounding.

    Under current law, states have the option of extending 
Medicaid coverage to certain workers with disabilities with 
incomes under 250 percent of poverty. This option was created 
in the Balanced Budget Act of 1997, and to date only one state 
has an approved state plan amendment to implement it. Based on 
discussions with state officials, CBO assumes that states with 
one-quarter of eligible people will develop small expansion 
programs under this option over the next few years. Some of 
those states are likely to use current authority under the 
Medicaid program to disregard some income of people applying 
under this option, thus effectively enrolling persons with 
incomes slightly higher than 250 percent of poverty. Other 
states may develop income cut-offs at or below that level. 
Based on figures from SSA of the number of people who graduate 
from the 1619(b) program due to earnings, CBO calculates that 
about 1,000 working disabled will be enrolled in Medicaid on an 
average annual basis under current law.
    Under H.R. 1180, CBO assumes that about half of the states 
adopting the current-law option would revise their plans to 
raise certain income, asset, and resource limitations beyond 
the 250 percent limit. Taking up the option would allow those 
states access to incentive grants and demonstration funds made 
available under the bill and would relieve states of 
administering complex eligibility determinations in instances 
where states would otherwise have disregarded income. A 
possible effect of H.R. 1180 in those states would be that more 
people would seek out the benefit if states made higher income 
limits explicit. As a result, there would be a small increase 
in the number of people enrolled under that option.
    CBO also assumes that several additional states would 
exercise the option to buy-in the working disabled under H.R. 
1180 to gain access to incentive grants and demonstration funds 
made available under the bill. In total, CBO assumes that 
states with half the potential eligibles would pursue the 
option under H.R. 1180, increasing Medicaid enrollment by about 
2,500 people on an average annual basis.
    The estimated federal share of Medicaid benefits for the 
working disabled population is about $6,500 per capita in 
fiscal year 2000 and about $9,000 per capita in 2004. States 
would incur administrative costs for expanding the program to 
include the working disabled population. Beneficiaries would 
also pay cost-sharing amounting to an estimated 5 percent of 
the total cost of the benefits. The resulting net increase in 
federal spending attributable to this policy would be about 
$100 million over five years and $250 million over 10 years.
    CBO's estimate takes into account a range of assumptions 
about state participation and about the eligibility limits that 
states would establish. Based on discussions with state 
officials developing or implementing policies in this area, CBO 
assumes that states would be likely to proceed cautiously, so 
as to limit financial exposure. If several large states were 
toparticipate in this program, new program enrollment could potentially 
be twice CBO's estimate; conversely, fewer participating states would 
decrease the estimate. If all states were to take up the option and 
have no ability to restrict or limit the benefits to all qualified 
working disabled people meeting the federal definition of disability 
regardless of any income, assets, and resources, federal costs could be 
substantially higher than the estimate. At the same time, states could 
maintain current limits or set eligibility limits to target a narrow 
subset of eligibles, thus resulting in a smaller increase in costs.
    State Option to Continue Medicaid Buy-In for Participants 
Whose DI or SSI Benefits are Terminated After a CDR. Section 
101 would also provide states the option to continue Medicaid 
coverage for persons enrolled under the buy-in option for the 
working disabled if those persons lose SSI or DI due to medical 
improvement, as established at a regularly scheduled CDR, yet 
still have conditions that qualify as a ``severe medically 
determinable impairment.'' Under current law, an estimated 5 
percent of the buy-in population will have medical improvements 
each year that will result in the loss of their disability 
status, and thus eligibility for the Medicaid buy-in. 
Continuing coverage for those people would raise federal 
Medicaid spending by $15 million over five years and $60 
million over 10 years, assuming that most states choosing the 
Medicaid buy-in option under current-law would also take up 
this option.
    Extension of Medicare with No HI Premium to Former DI 
Beneficiaries Who Exhaust Their Current-Law EPE. Section 102 of 
H.R. 1180 would allow graduates of the EPE in the next 10 years 
to continue to receive Medicare benefits indefinitely without 
having to pay any Part A premium. The federal cost of this 
provision is estimated at $10 million in 2000 and about $250 
million over five years.
    About 15,000 people start an EPE each year, and about 6,000 
finish one. The bill would provide Medicare coverage to people 
who otherwise would have lost it at the end of the EPE. CBO 
estimates that an extra 27,000 people would continue to be 
eligible for Medicare in 2004, the fifth year of the provision, 
growing to 60,000 in 2009. CBO assumes that the per capita cost 
for those beneficiaries is about one-half the cost of the 
average disabled beneficiary, reflecting the likelihood that 
they are somewhat healthier than other disabled beneficiaries, 
and the possibility that some beneficiaries would gain 
employer-sponsored insurance and rely on Medicare as a 
secondary payor.
    Grants to States to Provide Infrastructure to Support 
Working Individuals with Disabilities. To states that choose at 
least the first of the two Medicaid buy-in options, section 103 
of the bill would make available grants to develop and 
establish state capacity for providing items and services to 
workers with disabilities. The bill would appropriate $20 
million in 2000, $25 million in 2001, $30 million in 2002, $35 
million in 2003, and $40 million in 2004. The amount would be 
indexed to the consumer price index (CPI-U) through 2010. Each 
state's grant would be limited in each year to 15 percent of 
the estimated total federal and state spending on the more 
costly of the two state options in the bill. Based on CBO's 
estimate of the state option to expand the Medicaid buy-in, the 
limitation would hold spending levels to about $10 million 
annually; five-year costs would be $40 million and 10-year 
costs would be $100 million. Funds not allocated would remain 
available for allocation to states in future years. Funds 
allocated to states would be available until expended.
    Demonstration Project for States Covering Workers with 
Potentially Severe Disabilities. Under section 104 of H.R. 
1180, states electing the first option under section 101 would 
also be eligible for grants to pay for demonstration projects 
that provide Medicaid to working persons with physical or 
mental impairments who could potentially become blind or 
disabled without Medicaid benefits. Those people would be 
ineligible for Medicaid benefits under current law because they 
do not have conditions that meet the DI or SSI definition of 
disability. The bill would appropriate $70 million in 2000, $73 
million in 2001, $77 million in 2002, and $80 million in 2003. 
Funds would remain available until expended, except that no 
payment could be made by the federal government after fiscal 
year 2005. CBO estimates that the cost of the provision would 
total $285 million over the 2000-2004 period.

Ticket to Work and Self-Sufficiency Program and related provisions 
        (title II)

    Ticket to Work and Self-Sufficiency Program. Title II would 
temporarily change the way that VR services are provided to 
recipients of DI and SSI benefits. The budgetary effects of the 
proposed tickets program comprise several components, which are 
detailed in Table 3.

                                TABLE 3.--ESTIMATED EFFECTS ON OUTLAYS OF THE TICKET TO WORK AND SELF-SUFFICIENCY PROGRAM
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        By fiscal years, in millions of dollars--
                                                               -----------------------------------------------------------------------------------------
                                                                  2000     2001     2002     2003     2004     2005     2006     2007     2008     2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    DI BENEFICIARIES

Payments to Program Manager...................................        1        2        1        2        3        3        1    (\1\)        0        0
Milestone Payments to Providers...............................        0    (\1\)        1        6       14       22       26       11    (\1\)    (\1\)
Incentive Payments to Providers...............................        0    (\1\)    (\1\)        3       15       33       59       81       62       49
Partial Repeal of Current VR System...........................        0    (\1\)    (\1\)       -4      -13      -22      -33      -50    (\1\)    (\1\)
Benefits Avoided..............................................        0    (\1\)    (\1\)       -5      -25      -59     -104     -122      -98      -89
Extra Benefits Paid...........................................        0    (\1\)        1        2        3        5        5        3        3        3
                                                               -----------------------------------------------------------------------------------------
      Subtotal, DI............................................        1        2        3        5       -3      -18      -48      -77      -33      -37
Medicare Savings \2\..........................................        0        0    (\1\)    (\1\)        1        1        1       -3      -14      -31
                                                               -----------------------------------------------------------------------------------------
      Total...................................................        1        2        3        5       -2      -16      -46      -79      -47      -68
                                                               =========================================================================================
                                                                    SSI BENEFICIARIES

Payments to Program Manager...................................    (\1\)        1    (\1\)        1        1        1    (\1\)    (\1\)    (\1\)    (\1\)
Milestone Payments to Providers...............................        0    (\1\)        1        3        7       11       13        6    (\1\)    (\1\)
Incentive Payments to Providers...............................        0    (\1\)    (\1\)        1        4        9       15       21       16       13
Partial Repeal of Current VR System...........................        0    (\1\)    (\1\)       -2       -6      -11      -17      -25    (\1\)    (\1\)
Benefits Avoided..............................................        0    (\1\)    (\1\)       -1       -7      -16      -27      -32      -26      -23
Extra Benefits Paid...........................................        0        0        0        0        0        0        0        0        0        0
                                                               -----------------------------------------------------------------------------------------
      Subtotal, SSI...........................................    (\1\)        1        1        2       -1       -6      -16      -30      -10      -11
Medicaid Savings..............................................    (\3\)    (\3\)    (\3\)    (\3\)    (\3\)    (\3\)    (\3\)    (\3\)    (\3\)    (\3\)
                                                               -----------------------------------------------------------------------------------------
      Total...................................................    (\1\)        1        1        2       -1       -6      -16      -30      -10     -11
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.
\2\ These amounts are the Medicare savings that would occur under current law. Title I of the bill would extend Medicare for these beneficiaries.
\3\ CBO assumes that nearly all of the vocational rehabilitation recipients who leave the SSI rolls would continue to get Medicaid coverage through the
  1619(b) program.

DI = Disability Insurance, SSI = Supplemental Security Income.

Notes.--Components may not sum to totals due to rounding.

    The current VR program serves a fraction of DI and SSI 
recipients. Approximately 10 percent to 15 percent of new DI 
and SSI recipients are referred to state VR agencies; although 
SSA does not track what happens to them next, scattered clues 
suggest that about 10 percent of those referred are accepted. 
Recently, SSA has made approximately 650,000 DI awards a year; 
therefore, around 7,000 to 8,000 probably received VR services. 
SSA pays about 6,000 claims per year for VR services provided 
to DI recipients. SSA also pays about 6,000 claims for VR 
services to SSI recipients. Since about 3,000 claims are for 
people who collect benefits under both programs, total claims 
reimbursed are about 9,000 a year.
    Some DI and SSI recipients return to work without the help 
of VR agencies. Research suggests that only 10 percent to 20 
percent of DI recipients ever work after they start collecting 
benefits, and only 2 percent to 3 percent eventually have 
benefits withheld because of earnings. In contrast, SSA 
reimburses claims for VR services for about 1 percent of 
recipients. Thus, for each VR success, one or two other DI 
recipients go back to work and are suspended from the rolls 
without VR.
    H.R. 1180 would revamp the VR system by permitting nearly 
any recipient who desires VR to receive it, by allowing clients 
to choose from a variety of providers in addition to state VR 
agencies, and by stretching out reimbursements to providers for 
up to five years, contingent on their clients' sustained 
absence from the rolls.
    Under H.R. 1180, SSA would issue tickets to DI and SSI 
beneficiaries that they could assign to approved VR providers, 
whether state, private for-profit, or nonprofit. The bill would 
grant wide latitude to SSA in deciding the terms and conditions 
of the tickets; SSA tentatively plans to issue tickets to new 
beneficiaries at the time of award, unless they are deemed 
likely to recover, and to current beneficiaries after a CDR. By 
accepting a ticket, providers--labeled ``networks'' in the 
bill--would agree to supply services, such as training, 
assistive technology, physical therapy, or placement. A program 
manager, selected by SSA, would aid in recruiting providers and 
handling the nuts-and-bolts administration of the program.
    Providers could choose between two forms of reimbursement 
from SSA. One system would be based solely on outcomes; the 
provider would receive 40 percent of the average DI or SSI 
benefit for up to five years, so long as the client stayed off 
the rolls. Some providers fear, though, that they would 
experience acute cash-flow problems under such a system. To 
address that concern, the bill also offers a blended system, 
dubbed the ``milestone-outcome'' system. Under that system, SSA 
would make some payments earlier, but would trim subsequent 
payments to ensure that the overall cost (calculated on a net 
present value basis) did not exceed the cost of a pure outcomes 
system.
    The new program would be phased in gradually but last only 
five years. H.R. 1180 calls for it to start in selected areas a 
year after enactment, and to operate nationwide three years 
after that. The last tickets would be issued five years after 
the start of implementation. Because the program would then end 
unless reauthorized, potential providers may hesitate to 
enlarge their capacity to serve DI and SSI clients.
    CBO estimates that about 7 percent of newly awarded 
beneficiaries would seek VR services if they were readily 
available, versus only about 1 percent who receive them under 
current law. Both the Transitional Employment Demonstration 
(TED, a demonstration conducted in the mid-1980s and confined 
to mentally retarded recipients) and Project Network (a 
demonstration begun in 1992 and open to both DI and SSI 
beneficiaries) suggested that about 5 percent of beneficiaries 
would enroll in VR if given the chance. CBO judged that the 
level of interest ultimately would slightly exceed 5 percent 
for two reasons. First, intake under Project Network developed 
bottlenecks, which may have discouraged some potential 
participants. Second, Project Network barred any recipients who 
were employed or self-employed from enrolling; no such bar 
would be in place under H.R. 1180, however, and those 
recipients would probably be interested in receiving services 
and would be attractive to providers.
    Research suggests that getting VR raises the propensity to 
work, and thus the chances for an earnings-related suspension. 
But raw figures can easily exaggerate the effectiveness of VR. 
The handful of beneficiaries who would sign up for VR are 
probably the most motivated, and many would have worked anyway. 
In fact, CBO assumes that one effect of H.R. 1180 would be to 
enable providers to be reimbursed for providing services for 
many people who would have worked anyway.
    These expected effects can be illustrated by following the 
experiences of one hypothetical cohort of 650,000 new DI 
beneficiaries. Under current law, about 7,800 might be served 
under the state VR programs; 6,100 of them would eventually 
generate a reimbursement by SSA and would be suspended for at 
least a month. Another 8,300 would be suspended due to 
earnings, for at least one month, without any reimbursement to 
VR. Thus, total suspensions would be about 14,400, or about 2 
percent of the cohort, under current law. CBO estimates that, 
if those beneficiaries could freely enroll in VR using a 
``ticket,'' about 7 percent or 47,000 would get VR services. 
Most of those VR clients would work, and many (about 13,400) 
would be suspended for at least one month, an increase of 7,300 
in VR-reimbursed cases. However, CBO estimates that about 5,900 
of those workers would have gone back to work unaided. Thus, 
for this cohort, net suspensions would be about 1,400 higher.
    In estimating H.R. 1180, CBO adjusted those hypothetical 
figures for its caseload projections and timing factors. First, 
CBO projects that the volume of disabled-worker awards 
gradually climbs from 625,000 in 1999 to about 780,000 in 2005. 
That increase reflects the aging ofthe baby-boom generation 
into its high-disability years and the scheduled increases in Social 
Security's normal retirement age. Second, CBO assumed that some extra 
rehabilitations would occur among the nearly 5 million people now on 
the DI rolls, not just among new awards, although current beneficiaries 
are generally poorer candidates for VR than new applicants with more 
recent work experience. Third, CBO adjusted the numbers for the gradual 
phase-in of the new system. Under the bill's schedule, assuming 
enactment by September 1999, the first services would be rendered at a 
handful of sites in fiscal year 2001. If those clients engaged in trial 
work in 2002, the first extra suspensions would occur in 2003. The last 
tickets would be issued in 2005, and the last extra suspensions would 
occur in 2007.
    Specifically, CBO estimates that the number of net 
additional suspensions in DI--that is, suspensions that would 
not occur in the absence of the new program--would equal 500 in 
2003, 2,200 in 2004, and an average of 4,600 annually between 
2005 and 2007. Gross suspensions that involve reimbursement to 
a VR provider would climb gradually from 6,000 to 8,000 a year 
under current law, but would be markedly higher--about 15,000 
in 2007, almost double the current-law estimate--under the 
proposal. And the number of suspensions involving no 
reimbursement to VR would fall.
    CBO also had to make assumptions about recidivism. Many 
studies have documented that DI recipients who leave the rolls 
often return. It is not clear whether recipients of VR services 
are more or less likely to return to the rolls than others; 
some evidence suggests that the extra boost provided by VR 
fades over time. Because H.R. 1180 proposes to pay providers 
for up to five years, but only if the recipient stays off the 
rolls, assumptions about recidivism are critical. Based on a 
variety of sources, CBO assumes that recipients suspended from 
the rolls have about a two-thirds chance of still being 
suspended one year later, about a one-half chance three years 
later (when, technically, their DI entitlement is terminated), 
and a 40 percent chance after five years.
    Effects of the Tickets Program in DI. The budgetary 
consequences of H.R. 1180, from the standpoint of the DI 
program, would consist of seven effects:
     Payments to the program manager. SSA would hire a 
program manager to coordinate issuance of tickets, the 
recruitment of providers, and other tasks. Based on a similar 
arrangement in the RSVP program, CBO assumes that payments to 
the program manager would amount to just a few million dollars 
a year.
     Milestone payments to providers. As explained 
earlier, the bill would give providers a choice between a pure 
outcome-based system (in which providers would get periodic 
payments only during the period of suspension) and a blended 
outcome-milestone system (in which they could get some money 
earlier). CBO assumes that most providers would opt for the 
blended system, which CBO assumes to consist of a $500 payment 
after several months of work and a $1,000 bonus on the date of 
suspension. Placements would be considerably easier for 
providers to achieve than suspension. The first milestone 
payments would be made in 2002 but would be very small. They 
would peak at $26 million in 2006; an estimated $15 million for 
30,000 gross placements, mostly from ticketholders served in 
2005, and another $11 million for 11,000 suspensions, mostly 
from ticketholders served in 2004 (and who spent 2005 in trial 
work).
     Incentive payments to providers. The incentive 
payments would occur over a period of up to five years if the 
beneficiary remained off the rolls. Therefore, they would 
continue throughout CBO's 10-year horizon even though the last 
tickets would be issued in 2005. In the pure outcomes system, 
incentive payments would be 40 percent of average benefits. CBO 
assumes that most providers would opt for the blended payment 
system, under which--in return for getting some earlier 
milestone payments--they would accept incentive payments of 30 
percent. Again, outlays would be very small in the early years. 
Incentive payments would peak at $81 million in 2007. That is 
the year in which the last batch of VR clients, who got their 
tickets in 2005, would be suspended (under the assumption that 
they got services in 2005 and engaged in trial work in 2006). 
By 2007, gross suspensions of ticketholders over the preceding 
five years are assumed to be about 35,000. Some of those would 
have returned to the rolls, but 25,000 would remain suspended. 
Incentive payments would equal 25,000 times 30 percent of the 
previous year's average DI benefit (about $900 a month), or $81 
million. By 2009, under CBO's assumptions about recidivism, 
only 17,000 of those 25,000 would still be off the rolls, and 
the 2,000 who were first suspended in 2003 and 2004 would no 
longer be in the five-year period for incentive payments. Thus, 
incentive payments in that year would be $49 million.
     Partial repeal of current VR system. CBO assumes 
that, under current law, the DI trust fund would reimburse 
about 6,000 claims for VR services at present (at an average 
cost of about $11,000) and about 7,300 in 2007 (at an average 
cost of about $14,000). The new program would partially 
displace the current system for five years. Specifically, if 
tickets were issued in 2001 through 2005, they would partially 
divert clients who would otherwise have generated 
reimbursements to VR providers (at the end of trial work) in 
2003 through 2007. In 2007, $50 million in reduced payments 
would result.
    H.R. 1180 would grant state VR agencies the option of 
remaining in the current reimbursement system--that is, 
charging SSA for the full amount of costs incurred after the 
client has worked for nine months. Because the new program 
would expire after five years, many state agencies might choose 
not to undergo the disruption of a switch.
     Benefits avoided. The various payments to 
providers discussed above all depend on the number of gross 
rehabilitations. The savings in DI benefits, in contrast, 
depend on the number of net or extra rehabilitations. That 
distinction is important: when providers serve clients who 
would have worked and eventually been suspended anyway, they do 
not generate savings in DI benefits.
    Over the 2003-2007 period, CBO estimates that there would 
be a total of 35,000 gross rehabilitations of ticket holders, 
of which only 17,000 would represent extra rehabilitations. 
Under CBO's assumptions about recidivism, about 11,000 of those 
17,000 would still be off the rolls in 2007; at an average 
monthly benefit of about $900, $122 million in savings would 
result. That year marks the peak savings, because no more 
tickets would be issued after 2005. By 2009, the 11,000 would 
have shrunk to 8,000, and $89 million in benefit savings would 
be realized.
     Exta benefits paid. Some people might file for DI 
benefits in order to get VR services. They may even be 
encouraged to do so by prospective providers (for example, by 
an insurance company that helps to run their employer's private 
disability or workers' compensation coverage). For those 
induced filers, the entire benefit cost (for any time they 
spend on the rolls) and the VR cost (if they do eventually get 
suspended) would be a net cost to the DI program.
    To some extent, SSA could minimize this problem by setting 
the terms and conditions under which it would issue tickets--
for example, by denying them to beneficiaries who are expected 
to recover medically. But some such filers might still seep 
through. CBO assumes that a few hundred such filers would be 
attracted to DI during the five years of the tickets program, 
and some would remain on the rolls, leading to extra benefit 
costs of up to $5 million annually.
     Resulting Medicare savings. DI recipients who 
return to work continue to receive Medicare coverage for three 
years after their suspension from DI. By leading to the 
rehabilitation and suspension of more DI recipients, the Ticket 
to Work Self-Sufficiency Act would generate some savings to 
Medicare. DI beneficiaries who are capable of working are 
probably healthier than other beneficiaries, and their per 
capita Medicare costs therefore less than average.
    Under CBO's assumption that the first services would be 
rendered in 2001 and the first resulting suspensions in 2003, 
small Medicare savings would begin in 2006. By 2009, 13,000 
extra suspensions are assumed to have occurred over the 2003-
2006 period (the group for whom the three-year EPE would have 
expired); 5,700 would still be off the rolls; and $35 million 
in Medicare savings would result.
    Although these Medicare savings would result if the Ticket 
to Work and Self-Sufficiency Act were enacted in isolation, 
elsewhere H.R. 1180 proposes to give continued Medicare 
coverage to all beneficiaries who complete an EPE. Therefore, 
these Medicare savings would be rendered moot by the cost 
(shown in title I) of that proposal.
    Small costs--estimated by CBO to be between $1 million and 
$4 million a year--would result from the induced filers who 
remain on DI long enough (two years) to qualify for Medicare.
    Over the 1999-2003 period, CBO estimates a small net cost 
in the DI program from the proposed tickets, mainly because 
there would be few extra rehabilitations but there would be 
some startup costs and small payments to induce filers. Later, 
CBO foresees small net savings, chiefly because the DI benefit 
savings from extra suspensions slightly outweigh the costs of 
paying for VR services rendered by an expanded pool of 
providers.
    Effects of the Tickets Program in SSI. H.R. 1180 would also 
bring SSI participation into the new tickets to work program. 
CBO estimated the effects on the SSI program in a manner 
similar to its estimates for DI. There are a few notable 
differences.
    The number of SSI recipients affected by the bill is 
generally estimated to be only half as many as in DI. Under 
current law, SSA pays for about 9,000 rehabilitations a year--
6,000 in DI and 6,000 in SSI, of which 3,000 are concurrent. 
Under the bill, services rendered by providers to concurrent 
beneficiaries would essentially be compensated under the DI 
rules. Thus, to avoid double-counting concurrent beneficiaries, 
CBO generally assumed only half as many cases in its SSI 
estimates as in the analogous DI estimates.
    Average benefits for disabled SSI beneficiaries are also 
only about half as large as in the DI program--in 2003, for 
example, about $425 in SSI versus $825 in DI. Therefore, all 
payments under the proposed system that are pegged to the 
average benefit, such as theincentive payments to providers, 
would be smaller in SSI. In fact, that provision has aroused concern 
that providers would be less willing to provide services to the SSI 
population. CBO implicitly assumes that providers would serve this 
group, perhaps emphasizing cheaper services with repeated interventions 
if necessary.
    Because SSI is limited to beneficiaries with low income and 
few resources, CBO assumed that there would be few induced 
filers. CBO also assumed that most SSI beneficiaries affected 
by the bill would retain Medicaid coverage through section 
1619(b).
    The upshot of HR. 1180 in the SSI program is a pattern that 
resembles that for DI: small early costs, giving way to small 
savings after 2003.
    Ban on Work CDRs for Certain DI Beneficiaries With 
Earnings. The bill would bar so-called work CDRs if the 
beneficiary has been on the rolls for more than 24 months. Work 
CDRs are triggered by a report of earnings. Beneficiaries would 
still be subject to regularly-scheduled periodic CDRs.
    SSA conducts approximately 80,000 work CDRs a year. CBO 
estimates that about 1,500 people whose entitlement would 
otherwise be terminated would benefit from this provision. 
Assuming that they are, on average, halfway between periodic 
CDRs scheduled at three-year intervals, they would get an extra 
18 months of benefits. When fully effective, the provision is 
expected to lead to annual DI costs of about $25 million and 
Medicare costs of about $10 million.
    Expedited Reinstatement of DI Benefits Within 60 Months of 
Termination. The bill would provide for expedited reinstatement 
of benefits for former DI recipients whose benefits were 
terminated because of earnings in the last 60 months. Under 
current law, those beneficiaries have the usual five-month 
waiting period waived if they seek benefits; but their 
application is judged no differently from one filed by someone 
who has never been on the rolls. H.R. 1180 would alter that by 
stipulating that benefits must be awarded unless SSA can 
demonstrate that the applicant's medical condition has 
improved. H.R. 1180 would also provide for automatic payment of 
up to five months of provisional benefits while the request for 
reinstatement is under consideration. Generally, those 
provisional payments would not be subject to recoupment even if 
the request is ultimately denied. CBO estimates that these 
liberalized procedures would tip the balance in up to a hundred 
cases each year, ultimately costing about $6 million in DI and 
$3 million in Medicare by 2009.
    CBO does not estimate that either of these two provisions 
would lead to additional suspensions from the DI rolls as a 
result of earnings, because there are no firm empirical data on 
which to base such an assumption.

Demonstration projects and studies (title III)

    Permanent Extension of DI Demonstration Project Authority. 
SSA has had the authority to conduct certain research and 
demonstration projects that occasionally require waivers of 
provisions of title II of the Social Security Act. That waiver 
authority expired on June 10, 1996. This bill would extend it 
permanently. This extension would be the fifth since the waiver 
authority was enacted in 1980. This general waiver authority 
should not be confused with the so-called $1-for-$2 
demonstrations in the next section; those demonstrations are 
costlier and longer-lasting than the modest projects that SSA 
would likely conduct on its own initiative.
    When the waiver authority has been in effect, SSA has 
generally spent between $2 million and $4 million annually on 
the affected projects. CBO judges that the proposed extension 
would lead to extra outlays of $3 million in 2000 and $5 
million a year thereafter.
    $1-for-$2 Demonstration Projects. Under current law, after 
completing the TWP and the three-month grace period during 
which earnings are disregarded, a disabled worker gives up his 
or her entire benefit in any month that earnings exceed SGA. 
Both anecdotal and statistical evidence suggest that many 
beneficiaries balk at that, instead quitting work or holding 
their earnings just below the threshold. Some advocates favor, 
instead, cutting benefits by $1 for every $2 of earnings over 
SGA. More modestly, some favor a treatment of earnings more 
like the SSI program's--a cut of $1 in benefits for every $2 of 
earnings over $85 a month.
    Such proposals would probably encourage more people who are 
already on the DI rolls to work. Although fewer beneficiaries 
would be suspended (i.e., have their benefit reduced to zero), 
many might have their benefit substantially reduced. A major 
concern about such proposals, though, is that they would 
encourage an unknown number of people to file for benefits. 
Survey data suggest that there are millions of severely 
impaired people who are nevertheless working and not collecting 
DI. Filing for benefits, and working part-time, might actually 
improve their standards of living. That incentive would be much 
stronger if the DI program liberalized its treatment of 
earnings. The SSA Office of the Actuary in 1994 estimated that 
applying a $1-for-$2 policy for earnings above $500, the 
threshold for SGA at that time, would cost $5 billion in extra 
DI benefits over a five-year period and that setting the 
threshold at $85 would cost $2 billion.
    H.R. 1180 would require SSA to conduct demonstrations to 
test the effects of a $1 reduction in benefits for each $2 of 
earnings. It would require that SSA conduct the demonstrations 
on a wide enough scale, and for a long enough period, to permit 
valid analysis of the results. CBO assumed that, to meet those 
criteria, the demonstrations would have to include perhaps half 
a dozen small states, that the intake of the project would have 
to last three or four years to permit observation of induced 
filers, and that the incentives themselves would have to be 
promised to the beneficiaries for an indefinite period. Because 
the demonstrations would pose formidable issues of design and 
administration, CBO assumes they would not get under way until 
2002. CBO also assumes that the demonstration would be 
conducted in areas with and without the tickets to work and 
self-sufficiency, to enable the effect of the incentives to be 
isolated from the effects of the new VR program. Even a 
relatively small-scale demonstration might thereby apply to 
approximately 2 percent to 3 percent of the nation. Multiplying 
that percentage times the DI benefit costs suggested by the 
SSA's 1994 memo implies that the demonstration would, after 
intake is complete, cost almost $20 million in extra DI 
benefits a year. It would also lead to slightly higher Medicare 
costs, since the induced filers would qualify for Medicare 
after two years on the DI rolls. Finally, CBO assumes that 
running the demonstrations and collecting and analyzing data 
would be handled by an expert contractor, at a cost of several 
million dollars a year. In sum, the $1-for-$2 demonstration 
projects proposed by the bill are estimated to cost $190 
million over the 2002-2009 period.

Technical amendments (title IV)

    Title IV contains technical corrections and clarifications 
to the Social Security Act. Two sections have budgetary 
effects.
    Provisions Affecting Prisoners. H.R. 1180 would tighten 
restrictions on the payment of Social Security benefits to 
prisoners. Current law sets strict limits on the payment of SSI 
benefits to incarcerated people and somewhat milder limits on 
payments of OASDI. SSI recipients who are in prison for a full 
month--regardless of whether they are convicted--have their 
benefits suspended while they are incarcerated. OASDI 
recipients who have been convicted of an offense carrying a 
maximum sentence of one year or more have their benefits 
suspended. Those who are convicted of lesser crimes, and those 
who are in jail awaiting trial, may still collect OASDI 
benefits. Those provisions are enforced chiefly by an exchange 
of computerized data between SSA and the Federal Bureau of 
Prisons, state prisons, and some county jails. Those agreements 
are voluntary and, until recently, involved no payments to the 
institutions.
    The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 changed that arrangement by 
directing SSA to pay institutions for reporting information 
that led to the identification of ineligible SSI recipients. 
The payment is $400 if the institution reports information 
within 30 days of confinement and $200 if the report is made 30 
to 90 days after confinement. The law also exempts matching 
agreements between SSA and correctional institutions from 
certain provisions of the Privacy Act.
    This bill would establish analogous arrangements for the 
OASDI program. It would also drop the requirement that OASDI 
benefits be suspended only if the maximum sentence for the 
offense is one year or more. (A conviction would still be 
required; inmates who are in jail while they await trial could 
continue to collect benefits.) CBO estimated the effects of 
this provision, like its predecessor in the welfare reform lay, 
by analyzing data from several sources that suggest about 4 
percent to 5 percent of prisoners were receiving Social 
Security, SSI benefits, or both before incarceration. Reports 
from SSA's Inspector General showed that some of those 
prisoners were overlooked under matching arrangements either 
because their institution had not signed an agreement, had not 
renewed it promptly, or did not submit data on schedule.
    CBO estimates that, over the 2000-2009 period, the 
provisions would lead to payments of $85 million to 
correctional institutions out of the OASDI trust funds and 
benefit savings of $205 million, for a net saving of $120 
million. CBO also expects that the broader arrangement, by 
doubling the poor of potential payments, would encourage more 
jailers to submit information accurately and promptly and would 
therefore lead to spillover savings in the SSI program 
amounting to about $90 million over the 10-year period.
    Open Season for Clergy to Enroll in Social Security. 
Section 1402(e) of the Internal Revenue Code allows certain 
clergy to exempt the self-employment income from their ministry 
from Social Security and Medicare taxes. Under current law, 
such an exemption is irrevocable.
    Section 403 of H.R. 1180 would allow clergy who have 
received an exemption a two-year opportunity to revoke that 
exemption beginning in calendar year 2000. Similar 
opportunities were offered in 1978 and 1987. Based on those 
experiences, CBO estimates that 3,500 taxpayers would choose to 
revoke their exemptions, and that the average new enrollee 
would have about $20,000 of self-employment income. (There 
would be a slight decrease in income tax revenue, since a 
portion of payroll taxes is deductible for income tax 
purposes.) From 2000 through 2009, off-budget revenues would 
increase by $87 million, and on-budget revenues would increase 
by $10 million.
    Those taxpayers who revoke their exemption will eventually 
receive higher Social Security benefits, but that effect will 
mostly occur in years beyond the 10-year estimation period. CBO 
estimates that outlays will increase by $4 million in the 2000-
2009 period.
    Authorization for State to Permit Annual Wage Reports. H.R. 
1180 would amend the Social Security Act to allow states to 
permit employers of domestic workers to report on such 
employment annually rather than quarterly. State-maintained 
employment histories are used to verify eligibility for certain 
benefits, such as unemployment insurance, Food Stamps, and SSI. 
This change would not affect eligibility requirements. It could 
present an administrative burden to states that choose to allow 
annual reporting, because they would have to research cases 
annually if they suspect domestic employment. CBO expects any 
budgetary effects to be insignificant.
    Spending subject to appropriation: H.R. 1180 would also 
create several new programs or activities to be funded out of 
SSA's annual appropriation (see Table 4).

                                   TABLE 4.--SPENDING SUBJECT TO APPROPRIATION
----------------------------------------------------------------------------------------------------------------
                                                                      By fiscal years, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2000     2001     2002     2003     2004
----------------------------------------------------------------------------------------------------------------
                                         WITH ADJUSTMENTS FOR INFLATION

Work Incentives Advisory Panel:
    Budget authority...............................................        1        1        1        2        2
    Outlays........................................................        1        1        1        2        2
Work Incentives Outreach:
    Budget authority...............................................       23       23       23       23       23
    Outlays........................................................        2       14       23       23       23
State Grants for Work Incentives Assistance:
    Budget authority...............................................        7        7        7        7        8
    Outlays........................................................        3        6        7        7        7
Total:
    Budget authority...............................................       31       32       32       32       32
    Outlays........................................................        7       21       32       32       32

                                        WITHOUT ADJUSTMENTS FOR INFLATION

Work Incentives Advisory Panel:
    Budget authority...............................................        1        1        1        1        1
    Outlays........................................................        1        1        1        1        1
Work Incentives Outreach:
    Budget authority...............................................       23       23       23       23       23
    Outlays........................................................        2       14       23       23       23
State Grants for Work Incentives Assistance:
    Budget authority...............................................        7        7        7        7        7
    Outlays........................................................        3        6        7        7        7
Total:
    Budget authority...............................................       31       31       31       31       31
    Outlays........................................................        7       21       31       31      31
----------------------------------------------------------------------------------------------------------------
Note.--Components may not sum to totals due to rounding.

    Section 201 of H.R. 1180 would create a Work Incentives 
Advisory Panel to advise the Secretaries of Health and Human 
Services (HHS), Labor, and Education, and the Commissioner of 
Social Security on work incentives for the disabled and to 
advise SSA on implementation and evaluation of the Ticket to 
Work program. The panel would consist of 12 members appointed 
by the Commissioner in consultation with the Congress. At least 
five of the members would be current or former SSI or DI 
recipients. H.R. 1180 would permit the panel to hire a director 
and other staff and pay other necessary expenses. CBO estimates 
that the panel would cost between $1 million and $2 million a 
year.
    Section 221 would establish a community-based program to 
disseminate information about work incentives and related 
issues. Grants totaling no more than $23 million a year would 
be awarded competitively to community-based groups. Because 
this would be a brand-new program, CBO assumes that spending 
would be low at first, not reaching $23 million until the third 
year.
    Section 222 would require the Commissioner of Social 
Security to make grants to the protection and advocacy (P&A;) 
system established under part C of title I of the Developmental 
Disabilities Act to assist disabled people to obtain vocational 
rehabilitation or employment. That P&A; system is currently 
funded by the Children and Family Services Program in the 
Department of HHS. The bill would authorize $7 million in 2000 
and such sums as shall be necessary thereafter; CBO assumed 
that funding would remain at about $7 million. Estimated 
outlays would be $3 million in 2000 and $6 million a year 
thereafter.
    Although they do not explicitly call for further 
appropriations, several other provisions of H.R. 1180 would 
affect SSA's workload and thus the pressures on its annual 
appropriation. The Ticket to Work program (section 201) would 
require significant planning and oversight by SSA staff. 
Section 221 would direct SSA to establish a special corps of 
work incentive specialists to deal with questions from 
applicants, beneficiaries, and the community-based 
organizations funded under the same section. Enforcement of the 
tougher restrictions on prisoners in section 402 would require 
SSA staff time, because suspension of benefits occurs only 
after care verification. Partly offsetting these extra costs, 
SSA would no longer be required to do work CDRs under section 
211. CBO estimates that these effects on SSA's workload would, 
on balance, cost the agency between $10 million and $30 million 
in the 2000-2004 period.
    Pay-as-you go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the effects in the current year, the budget year, and the 
succeeding four years are counted.

                             TABLE 5.--SUMMARY OF PAY-AS-YOU-GO EFFECTS OF H.R. 1180
----------------------------------------------------------------------------------------------------------------
                                                          By fiscal years, in millions of dollars--
                                           ---------------------------------------------------------------------
                                             2000   2001   2002   2003   2004   2005   2006   2007   2008   2009
----------------------------------------------------------------------------------------------------------------
Changes in outlays........................     43    104    151    175    206    178    199    222    277    327
Changes in receipts.......................      1      1      1      1      1      1      1      1      1      1
----------------------------------------------------------------------------------------------------------------

    Estimated impact on State, local, and tribal governments: 
Section 4 of the Unfunded Mandates Reform Act (UMRA) excludes 
from the application of that act any legislative provisions 
that relate to the Old-Age, Survivors, and Disability Insurance 
program under title II of the Social Security Act, including 
tax provisions in the Internal Revenue Code. CBO has determined 
that the provisions of H.R. 1180 either fall within that 
exclusion or contain no intergovernmental mandates.
    The bill includes optional programs for states that would 
result in greater state spending if they chose to participate 
as well as additional grants to states for specific programs.
    Title I contains a number of options for states to expand 
their Medicaid program to cover workers with disabilities who 
want to buy into Medicaid and to continue Medicaid coverage for 
individuals who lose their eligibility for DI or SSI following 
a continuing disability review. CBO estimates that state costs 
attributable to these optional expansions during the first five 
years would total about $70 million for the first option and 
about $10 million for the second. States that implement the 
first of these Medicaid options would be eligible for grants to 
develop and operate programs to support working individuals 
with disabilities. CBO estimates that states would receive a 
total of about $40 million during the first fiveyears the 
program is in effect. States would also have the option of charging 
participants premiums or other fees to offset a portion of the costs.
    Title I would also allow states to establish demonstration 
projects that would provide Medicaid to working individuals 
with physical or mental impairments who, without Medicaid, 
could become blind or disabled. CBO estimates that state costs 
attributable to this optional coverage would total $215 million 
over the first five years of implementation.
    Estimated impact on the private sector: Provisions of the 
bill not excluded from consideration by UMRA include one 
private-sector mandate on insurers who provide medigap coverage 
to Medicare beneficiaries who are eligible because of 
disability. It requires such insurers to reinstate coverage 
that disabled beneficiaries had previously suspended because 
they had group health coverage if the beneficiaries lose group 
coverage and request reinstatement within 90 days of that loss. 
Because of restrictions on the premiums that could be charged 
for reinstated coverage, this provision could impose costs that 
insurers might not immediately recover from premiums. However, 
because of the small number of beneficiaries this provision 
would affect, the costs that might be imposed on medigap 
insurers would also be very small--less than $5 million a year 
by 2009.
    Previous CBO estimate: On March 19, 1999, CBO released a 
cost estimate for S. 331, the Work Incentives Improvement Act 
of 1999, as ordered reported by the Senate Committee on Finance 
on March 4, 1999. The major difference between the bills is 
that S. 331 contains several provisions that would increase 
revenues (title V), while H.R. 1180 does not. As a result, CBO 
estimated that S. 331 would add $0.7 billion to the total 
federal surplus over the 2000-2004 period.
    Estimated prepared by: Federal Cost: Kathy Ruffing (DI and 
SSI), Jeanne De Sa and Dorothy Rosenbaum (Medicare and 
Medicaid), and Noah Meyerson (Social Security receipts). Impact 
on State, Local, and Tribal Governments: Leo Lex.) Impact on 
the Private Sector: Sandra Christensen.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    Section 201(f) of the bill establishes the Work Incentives 
Advisory Panel to advise the Commissioner of the Social 
Security Administration, the Secretaries of Health and Human 
Services, Labor, and Education on issues related to work 
incentives programs, planning, and assistance for individuals 
with disabilities. In addition, the Panel would advise the 
Commissioner on implementation of the Ticket to Work and Self-
Sufficiency Program including establishment of phase-in sites, 
research and demonstrations related to the program, and 
development of performance measures. Pursuant to the 
requirements of subsection 5(b) of the Federal Advisory 
Committee Act, the Committee finds that the functions of the 
proposed advisory committee are not and cannot be performed by 
an existing Federal agency or advisory commission or by 
enlarging the mandate of an existing advisory committee.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Sec. 1. Short title; table of contents

    Section 1 provides the short title of the legislation, the 
``Work Incentives Improvement Act of 1999.'' The section also 
contains the table of contents for the bill.

Sec. 2. Findings and purposes

    Section 2(a) sets forth various congressional findings and 
the purposes of the Act.

         TITLE I--EXPANDED AVAILABILITY OF HEALTH CARE SERVICES


Sec. 101. Expanding State options under the Medicaid program for 
        workers with disabilities

    Section 101(a) provides that, for purposes of Medicaid 
eligibility, States would be able to establish more liberal 
income and resource limits than are currently required for 
certain individuals with disabilities. They would have the 
option to establish one or two new Medicaid eligibility 
categories.
    First, States would have the option to cover persons with 
disabilities who would be eligible for SSI, except for earned 
income that exceeds the SSI limits. States may establish limits 
on assets, resources, and earned or unearned income that differ 
from the Federal requirements. This means that income levels 
set by the State could exceed 250 percent of the Federal 
poverty level (as provided by BBA 97) and resources levels 
could exceed $2,000 for individuals, and $3,000 for couples; 
and the $20 exclusion or disregard of monthly unearned income 
could be increased.
    Second, if States provide Medicaid coverage to individuals 
described above, they may also provide coverage to individuals 
with disabilities, aged 16-64, who are employed and who cease 
to be eligible for Medicaid under the option above because 
their medical condition has improved, but who continue to have 
a severe medically determinable impairment. Individuals would 
be considered to be employed if they earn at least the Federal 
minimum wage, and work at least 40 hours per month, or are 
engaged in work that meets reasonable and substantial criteria 
for work hours, wages, or other measures established by the 
State and approved by the Secretary of the Department of Health 
and Human Services (HHS).
    Individuals covered under these options could be required 
by States to ``buy into'' Medicaid coverage by paying premiums 
or other cost-sharing charges on a sliding fee scale based on 
an individual's income as established by the State. The State 
would be required to make premium or other cost-sharing charges 
the same for both these two new optional eligibility groups. In 
addition, a State may require individuals with income above 250 
percent of the Federal poverty level to pay the full premium 
cost.
    Section 101(b) makes conforming amendments.
    Federal funds may be paid to a State for Medicaid coverage 
of these new eligibility groups as long as the State maintains 
the same level of expenditures to assist disabled persons to 
work (other than medical assistance) as in the year prior to 
enactment.
    Section 101(c) provides an effective date that would apply 
to medical assistance for items and services furnished on or 
after October 1, 1999.

Sec. 102. Continuation of Medicare coverage for working individuals 
        with disabilities

    Section 102(a) provides that during the ten-year period 
following enactment of the bill, disabled Social Security 
beneficiaries who engage in substantial gainful activity would 
receive free Medicare Part A coverage. In addition, Medicare 
Part A coverage could continue after the termination of the 
ten-year period for any individual who is enrolled in the 
Medicare Part A program for the month that ends the initial 10-
year period, without requiring the beneficiaries to pay the 
premium.
    Section 102(b) requires the General Accounting Office (GAO) 
to submit a report to Congress no later than 8 years after 
enactment of the bill that would examine the effectiveness and 
cost of extending Medicare Part A coverage to working disabled 
persons without charging them a premium. The report also 
requires GAO to recommend whether the Medicare coverage 
extension should continue beyond the initial 10-year period 
provided under the bill.
    Section 102(c) provides that the effective date for the 
amendments made by this section are required to apply to months 
beginning with the first month that begins after the date of 
enactment.
    Section 102(d) provides that disabled individuals who had 
been enrolled in Medicare Part A, and continue to have a 
disabling physical or mental impairment, but whose entitlement 
to SSDI benefits ended solely because of earnings exceeding the 
substantial gainful activity amount, are required to be treated 
with respect to premium payment obligations under Medicare Part 
A as though such individuals had continued to be entitled to 
SSDI benefits.

Sec. 103. Grants to develop and establish State infrastructures to 
        support working individuals with disabilities

    Section 103(a) requires HHS to award grants to States to 
design, establish, and operate supportive infrastructures that 
provide items and services to support working individuals with 
disabilities, and to conduct outreach campaigns to inform them 
about the infrastructures. States would be eligible for these 
grants under the following conditions: (1) they must provide 
Medicaid coverage to the first proposed eligibility category 
discussed above (i.e., persons whose income exceeds 250 percent 
of the Federal poverty guidelines, and meets resource, assets, 
and earned or unearned income limits set by the State); and (2) 
they must provide personal assistance services to assist 
individuals eligible under the bill to remain employed (that 
is, earn at least the Federal minimum wage and work at least 40 
hours per month, or engage in work that meets criteria for work 
hours, wages, or other measures established by the State and 
approved by HHS). Personal assistance services refers to a 
range of services, provided by one or more persons, to assist 
individuals with a disability perform daily activities on and 
off the job. These services would be designed to increase 
individuals' control in life and ability to perform daily 
activities on or off the job.
    Section 103(b) of the bill requires HHS to develop a 
formula for the award of infrastructure grants. The formula 
would provide special consideration to States that extend 
Medicaid coverage to persons who cease to be eligible for SSI 
because of an improvement in their medical condition, but who 
have a severe medically determinable impairment, and who are 
employed.
    Grant amounts to States would be a minimum of at least 
$500,000 per year. They may be up to a maximum amount of 15 
percent of Federal and State Medicaid expenditures for 
individuals eligible under one or both of the new eligibility 
groups described above, whichever is greater. If insufficient 
funds are appropriated to pay States the minimum grant amount, 
the Secretary of Health and Human Services (the Secretary) 
would be required to pay States a pro rata amount.
    Section 103(c) of the bill provides that funds awarded to a 
State under a grant for a fiscal year are required to remain 
available until expended. Funds not awarded to States in the 
fiscal year for which they are appropriated are required to 
remain available in succeeding fiscal years for awarding by the 
Secretary.
    Section 103(d) of the bill requires States to submit an 
annual report to the Secretary on the use of the grant funds. 
In addition, the report would be required to indicate the 
percent increase in the number of disabled Social Security and 
SSI beneficiaries who receive a ticket to work (as established 
under Title II of the bill) who return to work.
    Section 103(e) of the bill authorizes appropriations in the 
following amounts:
           FY 2000, $20 million;
           FY 2001, $25 million;
           FY 2002, $30 million;
           FY 2003, $35 million;
           FY 2004, $40 million, and
           FY 2005-FY 2010, the amount of 
        appropriations for the preceding fiscal year plus the 
        percent increase in the Consumer Price Index for All 
        Urban Consumers for the preceding fiscal year.
The bill provides that this provision constitutes budget 
authority in advance of appropriations and represents the 
obligation of the Federal government to provide payment of the 
amounts appropriated.
    Section 103(f) requires the Secretary of HHS, in 
consultation with the Work Incentives Advisory Panel 
established by the bill, to submit a recommendation, by October 
1, 2009, to the Committee on Commerce in the House and the 
Committee on Finance in the Senate, on whether the grant 
program should be continued after FY 2010.

Sec. 104. Demonstration of coverage under the Medicaid program of 
        workers with potentially severe disabilities

    Section 104(a) allows States to apply to the Secretary for 
approval of a demonstration project under which a specified 
maximum number of individuals who are workers with a 
potentially severe disability are provided medical assistance 
equal to that provided under Medicaid for disabled persons age 
16-64.
    Section 104(b) defines a ``worker with a potentially severe 
disability'' as an individual, who is employed, age 16-64, and 
who has a specific physical or mental impairment that, as 
defined by the State under the demonstration project, is 
reasonably expected to meet SSI's definition of blindness or 
disability if they did not receive Medicaid services. States' 
definitions can include individuals with a potentially severe 
disability that can be traced to congenital birth defects as 
well as diseases developed in childhood or adulthood.
    For purposes of the demonstration, individuals are 
considered to be employed if they earn at least the Federal 
minimum wage and work at least 40 hours per month, or are 
engaged in work that meets threshold criteria for work hours, 
wages, or other measures as defined by the demonstration 
project and approved by the Secretary.
    Section 104(c) requires the Secretary to approve 
applications for the demonstration projects if the State meets 
the following requirements: (1) the State has elected to 
provide Medicaid coverage to persons who meet the more liberal 
income, resources, assets, and earned and unearned income tests 
as set by the State described in Section 101 of the bill; (2) 
Federal funds are used to supplement State funds used for 
workers with potentially severe disabilities at the time the 
demonstration is approved; and (3) the State conducts an 
independent evaluation of the demonstration program. The bill 
permits the Secretary to approve demonstrations programs that 
operate on a sub-State basis.
    The bill authorizes appropriations of the following 
amounts:
           FY 2000, $70 million;
           FY 2001, $73 million;
           FY 2002, $77 million; and,
           FY 2003, $80 million.
The bill provides that this provision constitutes budget 
authority in advance of appropriations and represents the 
obligation of the Federal government to provide payment of the 
amounts appropriated.
    Payments under this demonstration program could not exceed, 
in the aggregate, $300 million. Payments may be provided to 
States only through FY 2005. The Secretary would be required to 
allocate funds to States based on their applications and the 
availability of funds. Funds awarded to States would equal 
their Federal medical assistance percentage (FMAP) of 
expenditures for medical assistance to workers with a 
potentially severe disability. Funds not allocated to States in 
the fiscal years in which they are appropriated will remain 
available in succeeding fiscal years.
    Section 104(d) of the bill requires the Secretary to submit 
by no later than October 1, 2002, a recommendation to the House 
Commerce and Senate Finance Committees regarding whether the 
demonstration project established under this section should be 
continued after FY 2003.
    Section 104(e) defines a State as having the meaning under 
Medicaid, which includes all 50 States, the District of 
Columbia, Puerto Rico, the Commonwealth of the Northern Mariana 
Islands, Guam, American Samoa, and the Virgin Islands.

Sec. 105. Election by disabled beneficiaries to suspend Medigap 
        insurance when covered under a group health plan

    Section 105(a) requires Medigap supplemental insurance 
plans to provide that benefits and premiums of such plans would 
be suspended at the request of the policyholder if the 
policyholder is entitled to Medicare Part A benefits as a 
disabled individual and is covered under a group health plan 
(offered by an employer with 20 or more employees). If the 
suspension occurs and the policyholder loses coverage under the 
group health plan, the Medigap policy is required to be 
automatically reinstituted (as of the date of the loss of group 
coverage) if the policy holder provides notice of the loss of 
such coverage within 90 days of the date of losing group 
coverage.
    Section 105(b) provides that the effective date for this 
provision is the date of enactment.

  TITLE II--TICKET TO WORK AND SELF-SUFFICIENCY AND RELATED PROVISIONS


            Subtitle A--Ticket to Work and Self-Sufficiency


Sec. 201. Establishment of the Ticket to Work and Self-Sufficiency 
        Program

    Section 201(a) of the bill establishes the Ticket to Work 
and Self-Sufficiency Program under Title XI of the Social 
Security Act. The bill requires the Commissioner of the Social 
Security Administration (SSA) (the Commissioner) to establish 
the program, under which ``tickets to work'' would be provided 
to disabled Social Security and SSI beneficiaries to obtain 
employment services, vocational rehabilitation (VR) services, 
or other support services provided by employment networks. 
Under the ticket system, the Commissioner is authorized to 
issue tickets to work to disabled beneficiaries for 
participation in the program, who would be permitted to assign 
the ticket to any employment network providing services under 
the program and willing to accept the assignment. The 
Commissioner would be required to pay the employment network 
for the services provided to beneficiaries under the payment 
systemsprovided by the bill. Employment networks would be 
prohibited from requesting or receiving compensation from the 
beneficiary.
    The bill provides special rules for State VR agencies 
electing to participate in the program. Services provided by 
State VR agencies participating in the Ticket to Work and Self-
Sufficiency Program would be governed by plans for VR services 
approved under Title I of the Rehabilitation Act of 1973, as 
amended. State VR agencies would not be required to accept 
referrals from employment networks unless they enter into an 
agreement with such employment network that specified the terms 
of reimbursement. If VR agencies elect to participate in the 
program, they may also elect to receive payment under the 
outcome payment system or the outcome milestone payment system 
established by the bill.
    The bill requires the Commissioner to enter into agreements 
with one or more organizations in the private or public sector 
for service as a program manager to assist in administering the 
program. The selection of a program manager is required to be 
through a competitive bidding process, from among organizations 
in the private or public sector with expertise and experience 
in the field of vocational rehabilitation or employment 
services. Program managers would be precluded from direct 
participation in the delivery of employment, vocational 
rehabilitation, or other support services to beneficiaries in 
the area covered by the agreement. The agreements would also 
preclude a program manager from holding a financial interest in 
an employment network or service provider operating in a 
geographic area covered under the manager's agreement. The 
Commissioner is required to terminate agreements with 
employment networks for inadequate performance, provide for 
periodic quality assurance review of employment networks, and 
establish a method for resolving disputes between beneficiaries 
and networks.
    The bill requires program managers to conduct tasks 
appropriate to assist the Commissioner in administering the 
program, including recruiting, and making recommendations for 
selection by the Commissioner, of employment networks for 
service under the program. Program managers would be required 
to facilitate access by beneficiaries to employment networks 
and ensure that beneficiaries would be allowed to change 
employment networks for good cause without being deemed to have 
rejected services under the program. Program managers would be 
required to establish and maintain lists of employment networks 
available to beneficiaries; ensure that adequate services are 
available to beneficiaries throughout the geographic area 
covered under the agreement, including rural areas; monitor 
activities of employment networks; and ensure that sufficient 
employment networks are available and that beneficiaries have 
reasonable access to services, including case management, work 
incentive planning, supported employment, career planning, 
career plan development, vocational assessment, job training, 
placement, follow-up services, and other services as specified 
by the Commissioner.
    The bill requires that employment networks serving under 
the Ticket to Work and Self-Sufficiency Program consist of an 
agency or instrumentality of a State (or political subdivision 
thereof) or a private entity that assumes responsibility for 
the coordination and delivery of services under the program. An 
employment network could also consist of one-stop delivery 
systems established under Title I of the Workforce Investment 
Act of 1998.
    The bill requires employment networks to have substantial 
expertise and experience in providing employment, vocational 
rehabilitation, or other support services for individuals with 
disabilities, and to demonstrate professional and educational 
qualifications in these services. Employment networks must 
ensure that services are provided to beneficiaries pursuant to 
appropriate individual work plans that are developed with 
beneficiaries.
    The bill also requires employment networks to develop and 
implement individual work plans in partnership with 
beneficiaries in a manner that allows the beneficiary the 
opportunity to exercise informed choice in selecting an 
employment goal and specific services needed to achieve that 
employment goal. The bill requires that each individual work 
plan must include: a statement of the vocational goal developed 
with the beneficiary; the services and supports and 
coordination necessary for the beneficiary to accomplish his/
her vocational goal; a statement of any terms and conditions 
related to the provision of such services and supports to the 
beneficiary; a statement regarding the beneficiary's rights and 
responsibilities, including the right to retrieve the ticket to 
work if the beneficiary is dissatisfied with services provided 
by the employment network; and, remedies available to the 
individual, including information on availability of advocacy 
services and assistance in resolving disputes.
    The bill requires payment be made to employment networks 
authorized by the Commissioner under either an outcome payment 
system or an outcome-milestone payment system. Each employment 
network would be required to elect which payment system would 
be used to determine the method of payment for services 
provided to beneficiaries.
    The outcome payment system would provide payment to 
employment networks from funds that would have otherwise been 
paid to SSDI or SSI beneficiaries if they were not working. 
That is, employment networks would be paid up to 40 percent of 
the average monthly benefit for all disabled beneficiaries 
(either SSDI or SSI, whichever applies) in the preceding year, 
for each month (up to 60 months) that cash benefits are not 
being paid to ticket to work recipients who are engaged in 
substantial gainful activity, or who had earnings from work.
    The outcome-milestone payment system is similar to the 
outcome payment system, except that it provides for early 
payment(s) based on the achievement of one or more milestones 
directed towards the goal of permanent employment. The total 
amount payable under the outcome-milestone payment system would 
be less than the total amount payable to a provider that would 
have been payable for an individual under the outcome payment 
system.
    The bill requires the Commissioner to periodically review 
both payment systems, and if necessary, alter the percentages, 
milestones, or payment periods to ensure that employment 
networks have adequate incentives to assist beneficiaries into 
the workforce.
    The bill prohibits the Commissioner from initiating 
continuing disability reviews (CDRs) for beneficiaries who are 
using tickets to work. A CDR is a process in which the 
disability status of current beneficiaries is reviewed to 
determine if they show medical improvement that would make them 
ineligible for benefits under the SSA definition of disability.
    The bill requires that Federal funds to pay employment 
networks are to be made from the Federal OASI (for disabled 
dependents and survivors), or DI trust funds (for disabled 
workers), as appropriate, or from general revenue funds (for 
disabled SSI beneficiaries).
    The bill requires that the Ticket to Work and Self-
Sufficiency Program terminate five years after the Commissioner 
commences implementation of the program. It further provides 
that any individual who has initiated a work plan under the 
program prior to the termination date may use services provided 
under the program, and any employment network that provides 
services to such individual is required to receive payment for 
such services.
    Section 201(b) provides conforming amendments to various 
sections of the Social Security Act, including the repeal of 
the provision that terminates SSDI and SSI cash benefits if a 
beneficiary refuses to accept State VR agency services.
    Section 201(c) requires the effective date for Sections 
201(a) and 201(b) of the bill to be the first month following 1 
year after the date of enactment of the bill.
    Section 201(d) requires that, not later than one year after 
enactment of the Ticket to Work and Self-Sufficiency Program, 
the Commissioner commence the implementation of the program in 
graduated phases at phase-in sites selected by the 
Commissioner. The Commissioner is required to ensure that the 
ability to provide tickets and services to individuals under 
the program exists in every State as soon as practicable on or 
after enactment, but no later than three years after enactment. 
The bill requires the Commissioner to conduct a series of 
evaluations to assess the cost-effectiveness and effects of the 
program. The Commissioner's evaluation reports must be 
transmitted to the House Ways and Means and Senate Finance 
Committees following the close of the third, fifth, and seventh 
fiscal years after the program's effective date, and include a 
detailed evaluation of the program's progress, costs, and 
success.
    Section 201(e) requires the Commissioner to prescribe 
regulations necessary to carry out the Ticket to Work and Self-
Sufficiency Program not later than 1 year after enactment.
    Section 201(f) establishes within the Social Security 
Administration a Work Incentives Advisory Panel consisting of 
experts representing consumers, providers of services, 
employers, and employees. The Panel is required to advise the 
Commissioner, the Secretaries of Health and Human Services, 
Labor, and Education on issues related to work incentives 
programs, planning, and assistance for individuals with 
disabilities. In addition, the Panel is to advise the 
Commissioner on implementation of the Ticket to Work and Self-
Sufficiency Program, including establishment of phase-in sites, 
research and demonstrations related to the program, and 
development of performance measures.

             Subtitle B--Elimination of Work Disincentives


Sec. 211. Work activity standard as a basis for review of an 
        individual's disabled status

    Section 211 of the bill provides that in any case in which 
an individual is entitled to Social Security disability 
benefits and has received Social Security benefits for at least 
two years--(1) the person shall not be the subject of a CDR 
solely because of the person's work activity; (2) no work 
activity by the person may be used as evidence that the person 
is no longer disabled; and (3) no cessation of work activity by 
the person may be used to presume that the person is unable to 
work. The bill clarifies that the individual in question is 
subject to (1) CDRs on a regularly scheduled basis if the CDR 
is not triggered by the person's work activity and (2) 
termination of Social Security benefits if the person has 
earnings that exceed the substantial gainful activity level.

Sec. 212. Expedited reinstatement of disability benefits

    Section 212 provides that the following two groups of 
individuals may request reinstatement of those benefits without 
filing a new disability application: (1) an individual whose 
entitlement to SSDI benefits had been terminated on the basis 
of work activity following completion of an extended period of 
eligibility or (2) an individual whose eligibility for SSI 
benefits (including Section 1619(b) of the Social Security Act) 
had been terminated following suspension of those benefits for 
12 consecutive months because of excess income resulting from 
work activity. The individual must have become unable to 
continue working on the basis of his or her medical condition 
and must file a reinstatement request within the 60-month 
period following the month of such termination.
    While the Commissioner is making a determination of a 
reinstatement request, the individual will be eligible for 
provisional benefits (cash benefits and Medicare or Medicaid, 
as appropriate) for a period of not more than six months. If 
the Commissioner makes a favorable determination, such 
individual's prior entitlement to benefits would be reinstated, 
as would be the prior benefits of his or her dependents who 
continue to meet the entitlement criteria.
    The bill provides an effective date for the amendments made 
by this section of the first day of the thirteenth month after 
the date of enactment.

    Subtitle C--Work Incentives, Planning, Assistance, and Outreach


Sec. 221. Work incentives outreach program

    Section 221 requires the Commissioner of Social Security, 
in consultation with the proposed Work Incentives Advisory 
Panel, to establish a community-based work incentives planning 
and assistance program for the purpose of disseminating 
accurate information to disabled beneficiaries on work 
incentives programs and issues related to such programs.
    The bill directs the Commissioner to establish a 
competitive program of grants, cooperative agreements, or 
contracts to provide benefit planning and assistance, including 
information on the availability of protection and advocacy 
services, to disabled beneficiaries, including persons 
participating in the Ticket to Work and Self-Sufficiency 
Program, the SSI Section 1619 program, and other programs that 
are designed to encourage disabled beneficiaries to work.
    The bill requires the Commissioner to conduct directly, or 
through grants, cooperative agreements, or contracts, ongoing 
outreach efforts to disabled beneficiaries (and their families) 
who are potentially eligible to participate in Federal or State 
work incentive programs that are designed to assist disabled 
beneficiaries to work. The outreach efforts are to include (1) 
preparing and issuing information explaining work incentive 
programs and (2) cooperating with other Federal, State, and 
private agencies and nonprofit organizations that serve 
disabled beneficiaries, and with agencies and organizations 
that focus on vocational rehabilitation and work-related 
training and counseling.
    The bill requires the Commissioner to establish a group of 
trained, accessible, and responsive work incentives specialists 
within SSA who will focus on disability work incentives under 
the Social Security and SSI programs for the purpose of 
dispensing accurate information with respect to inquiries and 
issues relating to work incentives to (1) disabled 
beneficiaries, (2) Social Security and SSI applicants, and (3) 
individuals or entities awarded grants to provide benefits 
planning and assistance or outreach services. Since some 
beneficiaries attempt work without receiving rehabilitation 
services, work incentive information would be available to all 
beneficiaries, not just those participating in the Ticket to 
Work and Self-Sufficiency Program.
    The bill requires the Commissioner to provide (1) training 
for the work incentive specialists and the individuals 
providing benefits planning assistance and (2) technical 
assistance to organizations and entities whose purpose is to 
encourage disabled beneficiaries to return to work.
    The bill specifies responsibilities of the Commissioner 
(mentioned above) are to be coordinated with other public and 
private programs that provide information and assistance 
regarding rehabilitation services and independent living 
supports and benefits planning for disabled beneficiaries, 
including the SSI Section 1619 program, the plan for achieving 
self-support program (PASS), and any other Federal or State 
work incentive programs that are designed to assist disabled 
beneficiaries, including educational agencies that provide 
information and assistance regarding rehabilitation, school-to-
work programs, and transition services programs.
    An application for a grant, cooperative agreement, or 
contract to provide benefits planning and assistance must be 
submitted to the SSA Commissioner. The Commissioner may award a 
grant, cooperative agreement, or contract to a State or a 
private agency or organization, except for SSA field offices 
and the agency administering the Medicaid program or any entity 
that might be subject to a conflict of interest. Eligible 
organizations may include Centers for Independent Living, 
protection and advocacy organizations, and client assistance 
programs (established in accordance with the Rehabilitation Act 
of 1973, as amended); State Developmental Disabilities Councils 
(established in accordance with the Developmental Disabilities 
Assistance and Bill of Rights Act); and State welfare agencies 
(funded under Title IV-A of the Social Security Act).
    Recipients of an award must select individuals to provide 
information, guidance, and planning to disabled beneficiaries 
concerning the (1) availability and interrelationship of any 
Federal or State work incentives programs for which the 
individual may qualify, (2) adequacy of any health benefits 
coverage that may be offered by an employer of the individual 
and the extent to which other health benefits coverage may be 
available to the individual, and (3) availability of protection 
and advocacy services for disabled beneficiaries and how to 
access such services. The Commissioner must ensure that 
information, planning, and assistance provided be available on 
a statewide basis.
    The bill requires the Commissioner of Social Security to 
award a grant, cooperative agreement, or contract to an entity 
based on the percentage of disabled beneficiaries in the State 
who live in the applicant entity's locale. The maximum amount 
permitted for a grant, cooperative agreement, or contract is 
$300,000 and the minimum is $50,000. The bill limits the total 
amount for a fiscal year to $23 million.

Sec. 222. State grants for work incentives assistance to disabled 
        beneficiaries

    Section 222 of the bill authorizes the Commissioner of 
Social Security to award grants to State protection and 
advocacy systems authorized by the Developmental Disabilities 
Assistance and Bill of Rights Act. These grants would be in 
addition to the current program grants. The purpose of the 
grants is to provide information and advice about obtaining 
vocational rehabilitation, employment, advocacy, or other 
services that disabled SSDI or SSI beneficiaries may need to 
secure or regain gainful employment.
    The bill provides that a protection and advocacy system 
must be funded at least at a level the greater of $100,000, or 
one-third of one percent of the appropriation. Grants to 
certain territories would be at least $50,000. The minimum 
payments may be increased to reflect an inflation adjustment in 
certain circumstances. The bill limits appropriations for the 
program to $7 million in FY 2000, and such sums as needed 
thereafter.
    Each protection and advocacy system that receives a grant 
must submit an annual report to the Commissioner of Social 
Security and the Work Incentives Advisory Panel on the services 
provided to individuals by the system.

             TITLE III--DEMONSTRATION PROJECTS AND STUDIES


Sec. 301. Permanent extension of disability insurance program 
        demonstration project authority

    Section 301 permanently extends SSA's Social Security 
demonstration project authority. Section 301 also adds another 
purpose to experiments and demonstration projects. Namely, they 
may be designed to determine the advantages and disadvantages 
of the following: implementing a sliding scale benefit offsets 
procedure using variations in the amount of the offset as a 
proportion of earned income; changing the duration of the 
offset period; revising the method of determining the amount of 
income earned by the beneficiaries; using state-of-the-art 
information technology and electronic funds transfer technology 
to streamline the reporting of data and the implementation of 
the offset; and developing and making available to 
beneficiaries, their families, guardians, and advocates, 
information through the Internet on work incentives and 
assistance so that beneficiaries may make informed decisions 
regarding work.
    The bill also permits the Commissioner to expand the scope 
of the demonstration projects to include applicants as well as 
beneficiaries.

Sec. 302. Demonstration projects providing for reductions in disability 
        insurance benefits based on earnings

    Section 302 requires the Commissioner to conduct 
demonstration projects for the purpose of evaluating a program 
for disabled Social Security beneficiaries under which the 
beneficiary's benefit is reduced $1 for every $2 of earned 
income above an amount specified by the Commissioner. The 
demonstration projects would be conducted at a number of 
localities which the Commissioner determines is sufficient to 
adequately evaluate the appropriateness of national 
implementation of such a program. The demonstration projects 
would identify reductions in Federal expenditures that may 
result from the permanent implementation of such a program.
    The bill requires the demonstration projects to be 
sufficient in scope and scale to determine: (1) the effects, if 
any, of induced entry into the project and reduced exit from 
the project; (2) the extent, if any, to which the project being 
tested is affected by whether it is in operation in a locality 
within an area under the administration of the proposed Ticket 
to Work and Self-Sufficiency Program; and (3) the savings, if 
any, that accrue to the Social Security trust funds, and other 
Federal programs. The Commissioner must take into account 
services provided by the Work Incentives Advisory Panel in 
determining the scope and scale of the demonstration projects.
    Under the bill, the Commissioner also must determine: (1) 
the annual cost (including net cost) of the project and the 
annual cost (including net cost) that would have been incurred 
in the absence of the project; (2) the determinants of return-
to-work activities, including the characteristics of the 
beneficiaries who participate in the project; and (3) the 
employment outcomes, including wages, occupations, benefits, 
and hours worked, of beneficiaries who return to work as a 
result of their participation in the demonstration project.
    The bill permits the Commissioner to evaluate the merits of 
trial work periods and periods of extended eligibility.
    The Commissioner may waive compliance with Title II (Social 
Security) law and the Secretary of HHS may waive compliance 
with the benefit requirements of Title XVIII (Medicare) law, 
insofar as necessary for a thorough evaluation of the 
alternative methods under consideration. The Commissioner is 
required to submit a description of the demonstration project 
along with notification of its pending operation to the House 
Ways and Means and Senate Finance Committees at least 90 days 
before the project is implemented.
    The Commissioner is required to submit to Congress an 
interim report on the progress of the demonstration projects 
not later than two years after the date of enactment, and 
annually thereafter. The Commissioner is required to submit to 
Congress a final report on all of the demonstration projects 
not later than one year after their completion.
    The bill provides that expenditures for the demonstration 
projects are to come from the DI or OASI trust funds, as 
determined appropriate by the Commissioner, and from the 
Hospital Insurance (HI) or Supplementary Medical Insurance 
(SMI) trust funds, as determined appropriate by the HHS 
Secretary, to the extent provided in advance in appropriation 
Acts.

Sec. 303. Studies and reports

    Section 303 requires GAO to undertake three studies. The 
first requires GAO to study existing tax credits and other 
disability-related employment incentives under the Americans 
with Disabilities Act of 1990 and other Federal laws. The study 
must address the extent to which such credits and other 
incentives would encourage employers to hire and retain 
individuals with disabilities. The report must be submitted to 
the House Ways and Means and Senate Finance Committees no later 
than three years after enactment.
    The second study requires GAO to evaluate the coordination 
of the Social Security and SSI programs as it relates to 
disabled individuals entering or leaving concurrent entitlement 
under such programs. The study must address the effectiveness 
of work incentives under these programs with respect to the 
effectiveness of coverage of such disabled Social Security 
beneficiaries. The report must be submitted to the House Ways 
and Means and Senate Finance Committees no later than three 
years after enactment.
    The third study requires GAO to undertake a study of the 
substantial gainful activity level currently applicable to 
disabled Social Security and SSI beneficiaries, and the effect 
of such levels as disincentives for those recipients to return 
to work. The study must address the merits of increasing the 
substantial gainful activity level applicable to such 
beneficiaries and the rationale for not annually indexing that 
level for inflation. The report must be transmitted tothe House 
Ways and Means and Senate Finance Committees no later than two years 
after enactment.
    The bill also directs the Commissioner of Social Security 
to identify all income, assets, and resource disregards under 
Title II (Social Security) and Title XVI (SSI); specify the 
most recent statutory or regulatory change in each disregard 
and recommend whether further statutory or regulatory 
modification is appropriate; and report certain additional 
information and recommendations on disregards related to 
grants, scholarships, or fellowships used in attending any 
educational institution. The report is to be submitted within 
90 days of enactment of the bill to the House Ways and Means 
and Senate Finance Committees.

                     TITLE IV--TECHNICAL AMENDMENTS


Sec. 401. Technical amendments relating to drug addicts and alcoholics

    Section 401 clarifies that the meaning of the term ``final 
adjudication'' includes a pending request for administrative or 
judicial review or a pending readjudication pursuant to a class 
action or court remand. (There has been at least one court case 
construing the meaning of ``final adjudication.'') The bill 
clarifies that if the Commissioner does not perform the 
entitlement redetermination before January 1, 1997, an 
entitlement redetermination must be performed instead of a 
continuing disability review.
    The bill also corrects an anomaly that currently excludes 
all those allowed benefits (due to another impairment) before 
March 29, 1996, and redetermined before July 1, 1996, from the 
requirement that a representative payee be appointed and that 
the recipient be referred for treatment.
    The amendments made by this section are to take effect as 
if included in the enactment of section 105 of P.L. 104-121.

Sec. 402. Treatment of prisoners

    Section 402(a) establishes analogous incentive payment 
provisions to correctional facilities that currently pertain to 
SSI recipients to Social Security beneficiaries (both disabled 
and elderly). This incentive payment program is identical to 
that now operating under the SSI program pursuant to P.L. 104-
193. Under the incentive payment program, the Commissioner is 
to enter into an agreement with State and local correctional 
institutions to provide monthly reports which list the names, 
Social Security numbers, confinement date, dates of birth, and 
other identifying information regarding prisoners who receive 
Social Security benefits. Certain requirements for computer 
matching agreements do not apply. For each eligible individual 
who becomes ineligible as a result, the Commissioner pays the 
institution an amount up to $400 if the information is provided 
within 30 days of incarceration, and up to $200 if the 
information is provided after 30 days but within 90 days.
    The bill reduces payments to correctional institutions by 
50 percent for multiple reports on the same individual who 
receives both SSI and Social Security benefits. Payments made 
to correctional institutions are to be made from OASI or DI 
trust funds, as appropriate.
    The bill expands the categories of institutions eligible to 
enter into agreements with the Commissioner. It provides that 
the Commissioner shall enter into an agreement with any 
interested State or local institution comprising a jail, 
prison, penal institution, or correctional facility, or with 
any other interested State or local institution a purpose of 
which is to confine prisoners.
    The bill also authorizes the Commissioner of Social 
Security to provide, on a reimbursable basis, information 
obtained pursuant to the agreements to any Federal or 
Federally-assisted cash, food, or medical assistance program 
for eligibility purposes.
    The bill provides that the effective date for the 
amendments made by this subsection are required to apply to 
individuals whose period of confinement in an institution 
commences on or after the first day of the fourth month 
beginning after the month of enactment.
    Section 402(b) of the bill prohibits Social Security 
payments to any person convicted of a criminal offense for any 
month throughout which he or she has been an inmate in a jail, 
prison, or other penal institution, or correctional facility.
    The bill provides that the effective date for the 
amendments made by this subsection are required to apply to 
individuals whose period of confinement in an institution 
commences on or after the first day of the fourth month 
beginning after the month of enactment.
    Section 402(c) of the bill provides conforming amendments 
to SSI law to ensure that payments to correctional institutions 
are reduced by 50 percent for multiple reports on the same 
individual who receives both SSI and SSDI benefits. It also 
expands the categories of institutions eligible to enter into 
agreements with the Commissioner.
    The bill provides that the effective date for the 
amendments made by this subsection are required to take effect 
as if included in the enactment of Section 203(a) of P.L. 104-
193.
    Section 402(d) prohibits Social Security payments to sex 
offenders who, on completion of a prison term, remain confined 
in a public institution pursuant to a court finding that they 
continue to be sexually dangerous to others.
    The bill provides that the effective date for the 
amendments made by this subsection are required to apply with 
respect to benefits for months ending after the date of 
enactment.

Sec. 403. Revocation by members of the clergy of exemption from Social 
        Security coverage

    Section 403(a) of the bill provides a two-year ``open 
season,'' beginning January 1, 1999, for members of the clergy 
who want to revoke their exemption from Social Security. The 
decision to join Social Security would be irrevocable. A member 
of the clergy choosing such coverage becomes subject to self-
employment taxes and his or her subsequent earnings are 
credited for Social Security (and Medicare) benefit purposes. 
H.R. 1180 would give clergy a limited opportunity to enroll in 
the Social Security system, similar to those opportunities 
provided by Congress in 1977 and 1986.
    Section 403(b) of the bill provides that the effective date 
for the amendments made by this section are required to apply 
with respect to service performed in taxable years beginning 
after December 31, 1999, and with respect to monthly insurance 
benefits payable under Title II of the Social Security Act on 
the basis of the wages and self-employment income of any 
individual for months in or after the calendar year in which 
such individual's application for revocation is effective.

Sec. 404. Additional technical amendment relating to cooperative 
        research or demonstration projects under titles II and XVI

    Section 404(a) of the bill includes a technical amendment 
that adds the Title II program to a reference regarding ``any 
jointly financed cooperative agreement or grant concerning 
Title XVI.''
    Section 404(b) of the bill provides that the effective date 
for the amendments made by this section are required to take 
effect as if included in the enactment of P.L. 103-296.

Sec. 405. Authorization for State to permit annual wage reports

    Section 405 of the bill provides that in the case of wage 
reports with respect to domestic service employment, a State 
may permit employers that make returns with respect to such 
employment on a calendar year basis to make such reports on an 
annual basis.
    The bill provides that the effective date for the 
amendments made by this section are required to apply to wage 
reports required to be submitted on and after the date of 
enactment.

         Changes in Existing Law Made by the Bill, as Reported

  The bill was referred to this committee for consideration of 
such provisions of the bill as fall within the jurisdiction of 
this committee pursuant to clause 2 of rule XII of the Rules of 
the House of Representatives. In compliance with clause 3(e) of 
rule XIII of the Rules of the House of Representatives, changes 
in existing law made by the bill, as reported by this 
committee, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, existing law in which no change is proposed is shown in 
roman):

SOCIAL SECURITY ACT

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TITLE II--FEDERAL OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE BENEFITS

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               entitlement to hospital insurance benefits

  Sec. 226. (a) * * *
  (b) Every individual who--
          (1) * * *

           *       *       *       *       *       *       *

shall be entitled to hospital insurance benefits under part A 
of title XVIII for each month beginning with the later of (I) 
July 1973 or (II) the twenty-fifth month of his entitlement or 
status as a qualified railroad retirement beneficiary described 
in paragraph (2), and ending (subject to the last sentence of 
this subsection) with the month following the month in which 
notice of termination of such entitlement to benefits or status 
as a qualified railroad retirement beneficiary described in 
paragraph (2) is mailed to him, or if earlier, with the month 
before the month in which he attains age 65. In applying the 
previous sentence in the case of an individual described in 
paragraph (2)(C), the ``twenty-fifth month of his entitlement'' 
refers to the first month after the twenty-fourth month of 
entitlement to specified benefits referred to in paragraph 
(2)(C) and ``notice of termination of such entitlement'' refers 
to a notice that the individual would no longer be determined 
to be entitled to such specified benefits under the conditions 
described in that paragraph. For purposes of this subsection, 
an individual who has had a period of trial work which ended as 
provided in section 222(c)(4)(A), and whose entitlement to 
benefits or status as a qualified railroad retirement 
beneficiary as described in paragraph (2) has subsequently 
terminated, shall be deemed to be entitled to such benefits or 
to occupy such status (notwithstanding the termination of such 
entitlement or status) for the period of consecutive months 
throughout all of which the physical or mental impairment, on 
which such entitlement or status was based, continues, and 
throughout all of which such individual would have been 
entitled to monthly insurance benefits under title II or as a 
qualified railroad retirement beneficiary had such individual 
been unable to engage in substantial gainful activity, but not 
in excess of 24 such months, except as provided in subsection 
(j). In determining when an individual's entitlement or status 
terminates for purposes of the preceding sentence, the term 
``36 months'' in the second sentence of section 223(a)(1), in 
section 202(d)(1)(G)(i), in the last sentence of section 
202(e)(1), and in the last sentence of section 202(f)(1) shall 
be applied as though it read ``15 months''.

           *       *       *       *       *       *       *

  (j) The 24-month limitation on deemed entitlement under the 
third sentence of subsection (b) shall not apply--
          (1) for months occurring during the 10-year period 
        beginning with the first month that begins after the 
        date of enactment of this subsection; and
          (2) for subsequent months, in the case of an 
        individual who was entitled to benefits under 
        subsection (b) as of the last month of such 10-year 
        period and would continue (but for such 24-month 
        limitation) to be so entitled.

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TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

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Part A--Hospital Insurance Benefits for the Aged and Disabled

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HOSPITAL INSURANCE BENEFITS FOR DISABLED INDIVIDUALS WHO HAVE EXHAUSTED 
                           OTHER ENTITLEMENT

  Sec. 1818A. (a) Every individual who--
          (1) has not attained the age of 65;
          (2)(A) has been entitled to benefits under this part 
        under section 226(b), and

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          (C) whose entitlement under section 226(b) ends due 
        [solely] to the individual having earnings that exceed 
        the substantial gainful activity amount (as defined in 
        section 223(d)(4)) or the expiration of the last month 
        of the 10-year period described in section 226(j); and

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Part D--Miscellaneous Provisions

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    certification of medicare supplemental health insurance policies

  Sec. 1882. (a) * * *

           *       *       *       *       *       *       *

  (q) The requirements of this subsection are as follows:
          (1) * * *

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          (5)(A) Each medicare supplemental policy shall 
        provide that benefits and premiums under the policy 
        shall be suspended at the request of the policyholder 
        for the period (not to exceed 24 months) in which the 
        policyholder has applied for and is determined to be 
        entitled to medical assistance under title XIX, but 
        only if the policyholder notifies the issuer of such 
        policy within 90 days after the date the individual 
        becomes entitled to such assistance. If such suspension 
        occurs and if the policyholder or certificate holder 
        loses entitlement to such medical assistance, such 
        policy shall be automatically reinstituted (effective 
        as of the date of termination of such entitlement) 
        under terms described in subsection (n)(6)(A)(ii) as of 
        the termination of such entitlement if the policyholder 
        provides notice of loss of such entitlement within 90 
        days after the date of such loss.

           *       *       *       *       *       *       *

          (C) Any person who issues a medicare supplemental 
        policy and fails to comply with the requirements of 
        this paragraph or paragraph (6) is subject to a civil 
        money penalty of not to exceed $25,000 for each such 
        violation. The provisions of section 1128A (other than 
        the first sentence of subsection (a) and other than 
        subsection (b)) shall apply to a civil money penalty 
        under the previous sentence in the same manner as such 
        provisions apply to a penalty or proceeding under 
        section 1128A(a).
          (6) Each medicare supplemental policy shall provide 
        that benefits and premiums under the policy shall be 
        suspended at the request of the policyholder if the 
        policyholder is entitled to benefits under section 
        226(b) and is covered under a group health plan (as 
        defined in section 1862(b)(1)(A)(v)). If such 
        suspension occurs and if the policyholder or 
        certificate holder loses coverage under the group 
        health plan, such policy shall be automatically 
        reinstituted (effective as of the date of such loss of 
        coverage) under terms described in subsection 
        (n)(6)(A)(ii) as of the loss of such coverage if the 
        policyholder provides notice of loss of such coverage 
        within 90 days after the date of such loss.

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TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

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                   state plans for medical assistance

  Sec. 1902. (a) A State plan for medical assistance must--
          (1) * * *

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          (10) provide--
                  (A) for making medical assistance available, 
                including at least the care and services listed 
                in paragraphs (1) through (5), (17) and (21) of 
                section 1905(a), to--
                          (i) all individuals--
                          (ii) at the option of the State, to 
                        any group or groups of individuals 
                        described in section 1905(a) (or, in 
                        the case of individuals described in 
                        section 1905(a)(i), to any reasonable 
                        categories of such individuals) who are 
                        not individuals described in clause (i) 
                        of this subparagraph but--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (XIII) who are in families 
                                whose income is less than 250 
                                percent of the income official 
                                poverty line (as defined by the 
                                Office of Management and 
                                Budget, and revised annually in 
                                accordance with section 673(2) 
                                of the Omnibus Budget 
                                Reconciliation Act of 1981) 
                                applicable to a family of the 
                                size involved, and who but for 
                                earnings in excess of the limit 
                                established under section 
                                1905(q)(2)(B), would be 
                                considered to be receiving 
                                supplemental security income 
                                (subject, notwithstanding 
                                section 1916, to payment of 
                                premiums or other cost-sharing 
                                charges (set on a sliding scale 
                                based on income) that the State 
                                may determine); [or]
                                  (XIV) who are optional 
                                targeted low-income children 
                                described in section 
                                1905(u)(2)(C);
                                  (XV) who, but for earnings in 
                                excess of the limit established 
                                under section 1905(q)(2)(B), 
                                would be considered to be 
                                receiving supplemental security 
                                income, who is at least 16, but 
                                less than 65, years of age, and 
                                whose assets, resources, and 
                                earned or unearned income (or 
                                both) do not exceed such 
                                limitations (if any) as the 
                                State may establish; or
                                  (XVI) who are employed 
                                individuals with a medically 
                                improved disability described 
                                in section 1905(v)(1) and whose 
                                assets, resources, and earned 
                                or unearned income (or both) do 
                                not exceed such limitations (if 
                                any) as the State may 
                                establish, but only if the 
                                State provides medical 
                                assistance to individuals 
                                described in subclause (XV);

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                           payment to states

  Sec. 1903. (a) * * *

           *       *       *       *       *       *       *

  (f)(1) * * *

           *       *       *       *       *       *       *

  (4) The limitations on payment imposed by the preceding 
provisions of this subsection shall not apply with respect to 
any amount expended by a State as medical assistance for any 
individual described in section 1902(a)(10)(A)(i)(III), 
1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(i)(V), 
1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 
1902(a)(10)(A)(ii)(IX), 1902(a)(10)(A)(ii)(X), 
1902(a)(10)(A)(ii)(XIII), 1902(a)(10)(A)(ii)(XV), 
1902(a)(10)(A)(ii)(XVI), 1905(p)(1), or 1905(u) or for any 
individual--
          (A) * * *

           *       *       *       *       *       *       *

  (i) Payment under the preceding provisions of this section 
shall not be made--
          (1) * * *

           *       *       *       *       *       *       *

          (18) with respect to any amount expended for home 
        health care services provided by an agency or 
        organization unless the agency or organization provides 
        the State agency on a continuing basis a surety bond in 
        a form specified by the Secretary under paragraph (7) 
        of section 1861(o) and in an amount that is not less 
        than $50,000 or such comparable surety bond as the 
        Secretary may permit under the last sentence of such 
        section[.]; or
          (19) with respect to amounts expended for medical 
        assistance provided to an individual described in 
        subclause (XV) or (XVI) of section 1902(a)(10)(A)(ii) 
        for a fiscal year unless the State demonstrates to the 
        satisfaction of the Secretary that the level of State 
        funds expended for such fiscal year for programs to 
        enable working individuals with disabilities to work 
        (other than for such medical assistance) is not less 
        than the level expended for such programs during the 
        most recent State fiscal year ending before the date of 
        enactment of this paragraph.

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                              definitions

  Sec. 1905. For purposes of this title--
  (a) The term ``medical assistance'' means payment of part or 
all of the cost of the following care and services (if provided 
in or after the third month before the month in which the 
recipient makes application for assistance or, in the case of 
medicare cost-sharing with respect to a qualified medicare 
beneficiary described in subsection (p)(1), if provided after 
the month in which the individual becomes such a beneficiary) 
for individuals, and, with respect to physicians' or dentists' 
services, at the option of the State, to individuals (other 
than individuals with respect to whom there is being paid, or 
who are eligible, or would be eligible if they were not in a 
medical institution, to have paid with respect to them a State 
supplementary payment and are eligible for medical assistance 
equal in amount, duration, and scope to the medical assistance 
made available to individuals described in section 
1902(a)(10)(A)) not receiving aid or assistance under any plan 
of the State approved under title I, X, XIV, or XVI, or part A 
of title IV, and with respect to whom supplemental security 
income benefits are not being paid under title XVI, who are--
          (i) * * *

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          (x) individuals described in section 1902(u)(1), [or]
          (xi) individuals described in section 1902(z)(1), or
          (xii) employed individuals with a medically improved 
        disability (as defined in subsection (v)),
but whose income and resources are insufficient to meet all of 
such cost--
          (1) inpatient hospital services (other than services 
        in an institution for mental diseases);

           *       *       *       *       *       *       *

  (v)(1) The term ``employed individual with a medically 
improved disability'' means an individual who--
          (A) is at least 16, but less than 65, years of age;
          (B) is employed (as defined in paragraph (2));
          (C) ceases to be eligible for medical assistance 
        under section 1902(a)(10)(A)(ii)(XV) because the 
        individual, by reason of medical improvement, is 
        determined at the time of a regularly scheduled 
        continuing disability review to no longer be eligible 
        for benefits under section 223(d) or 1614(a)(3); and
          (D) continues to have a severe medically determinable 
        impairment, as determined under regulations of the 
        Secretary.
  (2) For purposes of paragraph (1), an individual is 
considered to be ``employed'' if the individual--
          (A) is earning at least the applicable minimum wage 
        requirement under section 6 of the Fair Labor Standards 
        Act (29 U.S.C. 206) and working at least 40 hours per 
        month; or
          (B) is engaged in a work effort that meets 
        substantial and reasonable threshold criteria for hours 
        of work, wages, or other measures, as defined by the 
        State and approved by the Secretary.

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use of enrollment fees, premiums, deductions, cost sharing, and similar 
                                charges

  Sec. 1916. (a) [The State plan] Subject to subsection (g), 
the State plan shall provide that in the case of individuals 
described in subparagraph (A) or (E)(i) of section 1902(a)(10) 
who are eligible under the plan--
          (1) * * *

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  (g) With respect to individuals provided medical assistance 
only under subclause (XV) or (XVI) of section 
1902(a)(10)(A)(ii), a State may (in a uniform manner for 
individuals described in either such subclause)--
          (1) require such individuals to pay premiums or other 
        cost-sharing charges set on a sliding scale based on 
        income that the State may determine; and
          (2) require payment of 100 percent of such premiums 
        in the case of such an individual who has income that 
        exceeds 250 percent of the income official poverty line 
        (referred to in subsection (c)(1)) applicable to a 
        family of the size involved.

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